The Fleet Services Division administers the annual contracts for all gasoline and diesel fuel products for City equipment.  The present contract expires next month, so staff requested bids for gasoline and diesel fuel products.

The prices for gasoline and diesel fuel products are based on the OPIS (Oil Pricing Information Service) pricing index. OPIS is a nationwide information system which monitors and reports fuel prices per gallon and fluctuations at each terminal location on a daily basis. Daily fuel pricing will match the OPIS Daily Average Gross Rack price for each product. Since the OPIS/Rack price and Taxes are pre-established, only the “Vendor Markup” figure is used to establish the bid award recommendation. The Vendor Markup includes: Cost of transportation; Vendor overhead costs; blending and additive fees; and the vendor’s margin of profit. The total amount listed is the Vendor Markup per gallon times the estimated annual usage. The City uses about 250,000 gallons and gasoline and 560,000 gallons of diesel fuel per year. 
The Vendor Markup bid is calculated as a plus or minus number in respect to the posted OPIS Daily Average Rack Price.

Fuel vendors have submitted negative numbers for their vendor markup bids. The negative numbers are the amount per gallon the vendor will discount or subtract from the OPIS Daily Average Rack price. The negative bid number is made possible by refineries offering “Terminal Discounts” to distributors who in turn can pass the discounts on to their large volume customers with good payment histories.

The OPIS Daily Average Rack price for Tuesday, September 14, 2010, for each product bid is included in this document for comparison purposes.

The bid award will be for four years with three one-year renewal options.  This is the contract term that the State of Montana uses. 

Staff advertised for sealed bids for Gasoline and Diesel Fuel Products on September 2 and 9, 2010, with a bid opening on September 14, 2010.

The City Council may:
• Approve the bid award for Gasoline and Diesel Fuel Products
• Not approve the bid award for Gasoline and Diesel Fuel Products and advise staff on next steps.

All departments with city equipment budget for fuel expense. Three bids were received September 14, 2010, as outlined in Attachment A. 

Staff recommends that City Council award the gasoline and diesel fuel products contract to Town and Country Supply Association for the next 48 months. The annual bid award amount for Vendor Markup is -$39,425.00. The estimated annual fuel cost calculations, based on OPIS pricing on 9/14/10 is $1,920,738.50. The recommended bid is $8,787.50 less than the second bid.

The recommended bid amount represents additional discounts of $0.0200 per gallon for diesel fuel and $0.0105 for gasoline from the current contract.