REPORT TO COUNCIL
SUBJECT
Title
Award of Contracts for the Purchase of Vehicle Fuel Based on Cooperative Reverse Auction (F15-44)
Report
REPORT IN BRIEF
Approval is requested to award three-year contracts, not to exceed budgeted amounts, to Valley Oil Company, Southern Counties Oil Company dba SC Fuels (SC Fuels), Golden Gate Petroleum, and Mansfield Oil Company for unleaded and diesel fuel, and to authorized the City Manager to renew the contracts for two additional one-year periods if pricing and service remain acceptable to the City. The total cost over the three year period is not anticipated to exceed $2.6 million, based on current operating budget assumptions.
ENVIRONMENTAL REVIEW
N/A
BACKGROUND AND DISCUSSION
Most of the City's fleet of vehicles is powered by diesel and unleaded gasoline. The fuel is stored in underground tanks at various locations in the City and is monitored by Central Stores staff. The City's current contracts for fuel were awarded as a result of the County of Santa Clara's cooperative, multi-agency bid solicitation in November, 2009, the contract period for which expires January 31, 2015. In August 2014 the City of Sunnyvale accepted the County's invitation to again participate in a cooperative purchase solicitation for delivery of bulk fuel.
The County of Santa Clara's procurement method for fuel was through online reverse auctions conducted by BidSync, one of the leading providers of online auction services. This type of auction takes place in real time, and both the buyer and seller can see each bid as it is placed. Auctions are commonly scheduled for one half hour; if a last minute bid is received, the auction is automatically extended for an additional five minutes to allow thoughtful reaction by other bidders. Participating agencies included the Counties of Santa Clara and Alameda, the Santa Clara County Fire Department, the Alameda-Contra Costa Transit District, the East Bay Regional Park District, and the Cities of Belmont, Gilroy, Oakland, Pleasanton, San Leandro, Santa Clara, and Sunnyvale. The combined estimated purchase volume is 3,802,643 gallons of unleaded gasoline and 6,164,041 gallons of diesel fuel.
The reverse auction for unleaded gasoline was held on October 27, 2014. The base price for each lot is the Oil Price Information Service (OPIS) San Jose Daily Contract Average Rack benchmark price. This price is the average of all supplier prices in the San Jose fuel market, taken at a specified time each day. The low bidders for the City's unleaded gasoline requirements were Valley Oil Company for lots of up to 1,500 gallons (per delivery) with a bid of $0.1889 above Oil Price Information Service (OPIS) San Jose, and for lots of up to 6,000 gallons (per delivery) with a bid of $0.045 above OPIS San Jose; and SC Fuels for lots of 6,001 gallons or more (per delivery) with a bid of $0.0373 below OPIS San Jose. Bid results are shown in Attachment 1.
The reverse auction for diesel fuel was held on October 28, 2014. The low bidders for the City's diesel fuel requirements were Golden Gate Petroleum for lots of up to 1,500 gallons (per delivery) with a bid of $0.17 above OPIS San Jose and for lots of up to 6,000 gallons (per delivery) with a bid of $0.075 above OPIS San Jose; and Mansfield Oil Company for lots of 6,001 gallons or more (per delivery) with a bid of $0.0004 below OPIS San Jose. Bid results are shown in Attachment 2.
For bidding purposes, a base price of $3.00 per gallon was used for uniformity to enable fair comparisons among bids (the bid results shown in Attachments 1 and 2 show dollar values above and below $3.00, depending on order quantity). However, the City will pay the bid prices above or below the OPIS San Jose Average Rack price on the day the fuel is ordered. For example, if the OPIS Rack price for unleaded fuel is $2.90 per gallon at the time of order, and the City orders more than 6,001 gallons from SC Fuels (whose low bid was $0.0373 below OPIS for this quantity), then the per gallon pricing would be $2.8627.
FISCAL IMPACT
In Fiscal Year 2014/2015, approximately $854,000 is budgeted for the purchase of vehicle fuel in Department of Public Works Operating Program 763 (Provision of Vehicles and Motorized Equipment). Anticipated increases of 2% and 3% for the following two fiscal years are included in the operating budget. Consistent with the planned budget, the overall total of the three-year agreements is not anticipated to exceed $2.6 million, as follows:
A primary contract for unleaded fuel will be established with SC Fuels at approximately $1.6 million over the three-year period. A backup contract will be established with Valley Oil in the approximate amount of $200,000. Contracts for diesel fuel will be established with Golden Gate Petroleum and Mansfield Oil Company in approximate equal amounts of $400,000. Based on actual usage, these estimated amounts may be modified up or down per contract during the contract period within the overall budget.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City's official-notice bulletin board outside City Hall, at the Sunnyvale Senior Center, Community Center and Department of Public Safety; and by making the agenda and report available at the Sunnyvale Public Library, the Office of the City Clerk and on the City's website.
RECOMMENDATION
Recommendation
1) Award three-year contracts based upon the County of Santa Clara's cooperative reverse auction bid to Valley Oil Company and SC Fuels for unleaded gasoline, and to Golden Gate Petroleum and Mansfield Oil Company for diesel fuel, in substantially the same form as the draft blanket purchase orders attached to the report, not to exceed budgeted amounts; and 2) Authorize the City Manager to renew the contracts for two additional one-year periods, not to exceed budgeted amounts, provided that pricing and service remain acceptable to the City.
Staff
Prepared by: Pete Gonda, Purchasing Officer
Reviewed by: Grace K. Leung, Director, Finance
Reviewed by: Robert A. Walker, Assistant City Manager
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Bid Results for Unleaded Gasoline
2. Bid Results for Diesel Fuel
3. Draft Blanket Purchase Order to Valley Oil Company
4. Draft Blanket Purchase Order to SC Fuels
5. Draft Blanket Purchase Order to Golden Gate Petroleum
6. Draft Blanket Purchase Order to Mansfield Oil Company