HomeMy WebLinkAbout10-16-2012 c5 fuel purchasingcounci l• j ac enba nepont Meets DateOctober 16, 201 2
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C I T Y O F S A N L U I S O B I S P O
FROM :
Carrie Mattingly, Interim Director of Public Work s
Prepared By :
Jeremy Schmidt, Fleet Superviso r
Jake Hudson, Interim Deputy Director of Public Work s
SUBJECT : PURCHASING PROCEDURES FOR PROCUREMENT OF FUE L
RECOMMENDATION S
1.Adopt a Resolution authorizing Public Works to make fuel purchases using "over th e
counter" purchasing procedures as described in Section 295 of the City's Financia l
Management Manual within the approved annual budget on an ongoing basis .
2.Approve the use of a fleet fueling card program through a National Joint Powers Allianc e
contract .
DISCUSSION
Bulk Fuel Purchasin g
• On an annual basis the City purchases approximately 132,000 Gallons of fuel to power over 30 0
vehicles and pieces of equipment City-wide, excluding transit operations . Typically, the cost o f
each individual fuel order exceeds the $7,500 department purchasing limit . For fuel purchase s
that exceed this limit, the City's adopted purchasing policy (Attachment 1) require a forma l
purchase order or bid process approved by the City Manager which typically requires more tha n
a week to complete . For most procurement, the purchasing policy is an effective tool fo r
ensuring the City gets the best possible price . However, as applied to fuel procurement, becaus e
the price of fuel fluctuates hourly, the time required to complete these procedures make s
obtaining the best possible price challenging .
By providing authorization to purchase bulk fuel using the "over-the-counter" purchasin g
procedure, as set forth in Section 3 .24 .080 of the City's Municipal Code, not-to-exceed th e
approved annual budget, purchases can be made rapidly so that a low prices on the fuel marke t
can be achieved .'Fuel rates will be requested from at least three suppliers, and a direct purchas e
will be made from the cheapest vendor at the date and time fuel delivery is needed . Formal
written quotes, bids, or authorization from the City Manager would not occur for individual fue l
orders .
Recent examples have shown that the ability to purchase fuel on the spot, based on the best
market prices, would allow for fuel savings by as much as $0 .30 per gallon in some cases .
Although that high of a price fluctuation in bulk fuel is relatively uncommon, this new approac h
Section 3 .24 .080 provides : "Purchases of supplies, equipment and contractual services, except those controlled b y
the Charter, having an estimated value less than that specified by council resolution for bid, may be made by th e
purchasing authority in the open market without observing the formal contract procedures set out in Article III o f
this chapter ."
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PURCHASING PROCEDURES FOR PROCUREMENT OF FUEL
Page 2
•could yield an annual savings in the range of $20,000 to $40,000 under current market condition s
or offset potential future fuel cost increases . On June 19, 2007, the City Council approved a
similar modification to the purchasing policy for bulk asphalt purchases (Attachment 2).
Fleet Fueling Card Progra m
The vast majority of City fueling is provided by bulk fuel tanks at a few key locations ; however a
small percentage of fuel purchases are made at consumer gas stations via staff issued credi t
cards . Although this practice provides flexibility and efficiency for staff carrying out various
functions and traveling out of the area, it does not allow the City to recover the fuel excise ta x
rebates or accurately track fuel usage among departments and divisions, or on individua l
vehicles .
To maintain the flexibility and efficiency of refueling at consumer gas stations yet still be able t o
recover excise tax rebates and effectively track fuel purchases, staff is recommending a fleet
fueling card program . This program is offered as a no-cost service to the City under contract s
with either Voyager Fleet Systems or National Joint Powers Alliance . These two programs
provide for special fueling cards which can be used at most major consumer gas stations in lie u
of a credit card . Information on the employee and vehicle are collected at the pump an d
transmitted back to the City for tracking purposes . These programs are widely used among othe r
agencies including the County of San Luis Obispo . With over 300 vehicles and powere d
equipment in the City's fleet, staff anticipates the implementation of a new City-wide flee t
fueling card program to generate some annual savings .
In addition to consumer gas station purchases, Fleet Services is currently analyzing th e
methodology for purchasing bulk fuel and identifying cost savings measures for future fuelin g
purchases . Staff recommends selecting National Joint Powers Alliance, in lieu of Voyager, fo r
the City's fleet fueling card program as this program also offers a bulk fuel purchasing discoun t
program not currently available with Voyager Fleet Systems .
These two recommendations are short term changes that are expected to yield a significan t
savings in fuel expenditures . Longer-term fuel management and purchasing strategies to furthe r
improve fueling logistics and savings will continue to be evaluated and pursued . Counci l
approval will be sought as required by the City's purchasing regulations .
CONCURRENC E
The Finance Department concurs with the recommendation to adopt a resolution authorizing th e
Public Works Department to . make fuel purchases using the "over-the-counter" purchasin g
procedures as described in Section 295 of the City's Financial Management and th e
implementation of a fleet fueling card program . Further logistical details of implementing th e
fueling card program will be addressed by Public Works and Finance staff .
FISCAL IMPAC T
The recommendations have a positive financial impact . Fleet Services funding for fuel purchase s
have been approved as part of the 2011-13 Financial Plan, pages D-186 to D-I87 . In the 2012 -
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PURCHASING PROCEDURES FOR PROCUREMENT OF FUEL
Page 3
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13 FY, Fleet Services has a total of $430,800 allocated for fuel . To-date, there is approximatel y
$344,600 available in the Fleet Services operating budget for the purchase of fuel .
This authorization does not obligate funds or approve a contract to a vendor . Fuel purchases wil l
be based upon the best market pricing for the date/time of delivery and will not exceed th e
existing budget allocation that Council has approved for fuel .
ALTERNATIVE S
1.Approve fuel purchasing up to $75,000 .The City Council could choose to approve th e
"over-the-counter" purchasing procedure for fuel purchases in an amount up to $75,000,
in-lieu of within the Council approved annual budget as recommended . Although thi s
alternative would also be an acceptable approach, staff is not recommending it as th e
price of fuel is extremely volatile and changes in the market would likely require constan t
modification to the fuel purchasing processes .
2.Deny over-the-counter purchasing.The City Council could choose to deny an y
authorization to use "over-the-counter" purchasing procedures for fuel in excess of th e
$7,500 limit . Staff does not recommend this alternative as the current practice does no t
allow the City to obtain the best possible fuel price . Fuel purchases consistently exceed
this purchasing limitation .
•3 .Deny fleet fueling card program .The City Council could choose to deny the use an d
implementation of a fleet fueling card program . Staff does not recommend this alternativ e
as this service is offered at no-cost to the City and without this program the City is no t
able to receive fuel rebates and excise tax exemptions for purchases made at consume r
gas stations . Moreover, this alternative provides greater transparency and tracking abilit y
for fuel purchases .
ATTACHMENT S
1.Financial Management Manual, Section 29 5
2.June 19, 2007 Council Agenda Report, Bulk Asphalt Purchase s
3.Resolution (2012 Series)
t :\council agenda reports\2012\2012-10-16\fuel purchasing (mattingly-hudson-schmidt)\e-council agenda report fue l
purchasing .doc
•
Attachment 1
Section 29 5
PURCHASING GUIDELINE S
In accordance with the policy framework set forth in Chapter 3 .24 of the municipal code, Cit y
purchases and contracts (including those for rentals and leases, but excluding those for rea l
property) will be made pursuant to these guidelines . Applicable competitive bidding categories ,
authorization limits or contract award procedures will be based on unit cost, total purchase cos t
for consolidated bid items or fiscal year aggregates in the case of blanket purchase orders o r
similar ongoing purchasing arrangements . Staging of purchases in order to avoid thes e
competitive bidding procedures or authorization limits is prohibited .
GENERAL PURCHASE S
Purchases and contracts for supplies, equipment, operating and maintenance services, an d
construction projects will be made pursuant to the following guidelines .
A.Over-the-Counter .Purchases of less than $7,500 may be authorized by the Departmen t
Head . Although no specific purchasing requirements are established for this level o f
purchase, competitive bidding should be used whenever practical .
B .Open Market . Purchases between $7,500 and $25,000 may be authorized by the Director o f
Finance & Information Technology (or designee) pursuant to the open market biddin g
procedures established in Chapter 3 .24 (Article II) of the municipal code .
C .Formal Bids or Proposals .Purchases in excess of $25,000 will be made pursuant to th e
formal bidding requirements established in Chapter 3 .24 (Article III) of the municipal code .
Authority to approve specifications, invite bids or request proposals and award contracts wil l
be as follows :
1.For purchases with an approved budget and a cost estimate of $100,000 or less, the Cit y
Manager is authorized to invite bids or request proposals, approve specifications an d
award the contract .
2.For purchases in excess of $100,000, Council approval of the specifications an d
authorization to invite bids or request proposals is required . The Council may authoriz e
the City Manager to award the contract if the selected bid or proposal is less than or equa l
to the Council-approved cost estimate and there are no substantive changes to th e
specifications . Otherwise, Council award of the contract is required .
D .Job Order Contracts : Construction Projects .Under the Job Order Contact provisions o f
Chapter 3 .24 (Article III) of the municipal code for maintenance-related constructio n
projects, individual Task Orders up to $25,000 may be approved by the City Engineer.
Individual Task Orders in excess of $25,000 require approval by the City Manager .
CONSULTANT SERVICE S
Contracts for consultant services will be awarded pursuant to the following guidelines .
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ATTACHMEN T
Purchasing Guidelines
.A . Contracts for consultant services estimated to cost less than $7,500 may be awarded by th e
Depa,lment Head . Although no specific purchasing requirements are established for thi s
level of contract, proposals should be solicited whenever practical .
B.Contracts for consulting services estimated to cost between $7,500 and $25,000 may b e
awarded by the City Manager . Proposals from at least three firms should be solicite d
whenever practical .
C.Contracts for consultant services estimated to cost more than $25,000 will generally b e
awarded pursuant to the following guidelines ; however, it is recognized that the City's nee d
for consultant services will vary from situation to situation, and accordingly, flexibility wil l
be provided in determining the appropriate evaluation and selection process to be used i n
each specific circumstance .
1.The Council should generally approve request for proposal (RFP) documents before the y
are issued . The Council may authorize the City Manager to award the contract if it is les s
than or equal to the Council-approved cost estimate and there are no substantive change s
to the approved workscope . Otherwise, Council award of the contract is required .
2.In the event that the timely evaluation and selection of a consultant precludes Counci l
approval of the RFP before it is issued, the RFP may be approved and distributed by th e
City Manager ; however, award of the contract will be made by the Council .
• 3 . Cost will not be the sole criterion in selecting the successful bidder . Consultan t
proposals will be evaluated based on a combination of factors that result in the best valu e
to the City, including but not limited to :
a.Understanding of the work required by the Cit y
b.Quality and responsiveness of the proposa l
c.Demonstrated competence and professional qualifications necessary for satisfactor y
performance of the work required by the Cit y
d.Recent experience in successfully performing similar service s
e.Proposed methodology for completing the wor k
f.Reference s
g.Background and related experience of the specific individuals to be assigned to th e
4 . If it is determined that it is in the best interest of the City for services to be provided by a
specific consultant—with contract terms, workscope and compensation to be determine d
based on direct negotiations—contract award will be made by the Council .
project
h . Proposed compensatio n
•
Adopted by the Council on September 4, 2007, Resolution No . 992 6
295-2 C5-5
ATTACHMENT 2
city of san Luis op.'s s o
PURCHASING SYSTEM OVERVIEW
•Category
No specific requirements ; competitiv e
bidding to be used whenever practical .
Bid award by department via voucher o r
purchase order.
Job Order Contract (JOC) Task Order s
by the City Engineer .
Department solicits at least 3 proposals ;
(may be verbal with written quotes).
Bid award by Finance via purchase order o r
contract (or JOC Task Order by the City Engineer).
GENERAL
PURCHASE S
Includes supplies,
equipment, operating o r
maintenance services
and construction projects .
Formal Bid or RFP documents .
Advertising for sealed bids or proposals .
(Mailed notice in the case of construction projects .)
City Manager approves soliciting for bids o r
proposals and awards the contract
(or approves JOC Task Order)
Same as above except the Counci l
approves Bid/RFP documents and solicitin g
for proposals ; contract award generall y
delegated by Council to the City Manager .
City Manager authorized to approve all JOC Task
Orders within Council-approved annual limits .
No specific requirements ;
proposals to be solicited whenever practical .
Proposal award by department via vouche r
or purchase order .
Over-the-Counter
Less Tha n
$7,50 0
Open Marke t
$7,500 t o
$25,000
Forma l
Greater Than
$25000
$f 00,000
$7,500 to
$25,00 0
Formal
CONSULTAN T
SERVICE S
Includes advisor y
services from professionals
such as engineers ,
architects, attorneys and
other specialize d
consultants.
Formal Bid or Proposal Process
Proposals solicited whenever practical .
Contract negotiated by department .
Contract award by City Manager via purchase orde r
or contract .
Formal RFP document .
Council authorizes staff to reques t
proposals and generally delegates contrac t
award to the City Manager .
Note: These are general guidelines; the evaluation an d
selection process for consultant services may vary on a
case-by-case basis.
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ATTACHMENT 2
Thj
counci lacenba nepont
C I T Y O F S A N L U I S O B I S P O
FROM :
Jay Walter, Public Works Directo r
Prepared By : Dave Smith, Public Works Administrative Sery ices Manage r
SUBJECT : ASPHALT PURCHASING PROCEDURE S
CAO RECOMMENDATIO N
Adopt a Resolution authorizing Public Works to buy asphalt in volumes valued up to $25,00 0
per job using "over-the-counter" purchasing procedures and in volumes between $25,000 an d
$100,000 using open-market purchasing procedures as described in Section 295 of the City '
Financial Management Manual .
DISCUSSIO N
Since adoption of the 1998 Pavement Management Plan, the scope and scale of paving wor k
performed by City crews has grown significantly . The paving crew now spends about 70 percent
of its time performing street reconstruction and resurfacing . This work ranges from "grind-and-
pave" activity (grinding out damaged areas of the street surface and then patching it back wit h
• asphalt) all the way up to full reconstruction (removing the entire street structure down to nativ e
soil and then installing new base and surface material). One measure of the productivity growt h
for the paving crew is annual tons of asphalt placed, which have increased from about 1,500 ton s
to about 6,200 tons . With this increased production, the frequency and scope of asphal t
purchases have also grown substantially . Overall, Public Works now purchases $250,000 t o
$325,000 worth of asphalt each year .
There are two firms that operate local asphalt batch plants in the county : Hanson Aggregate s
with a plant in Santa Margarita and Union Asphalt with a plant in Paso Robles . Because the cos t
of asphalt is so closely tied to the cost of petroleum, the difference in price-per-ton between thes e
two vendors is usually less than one percent on any given day . But when the cost o f
transportation is factored in, the overall price from Union Asphalt becomes three to seven percen t
higher, for the simple reason that the round-trip distance from San Luis Obispo to Paso Robles i s
26 miles farther than the distance from San Luis Obispo to Santa Margarita . For this reason, the
Public Works buys virtually all its asphalt from Hanson, with overall savings ranging fro m
$8,000 to $23,000 each year .
On about 15 jobs per year, the cost of asphalt exceeds $5,000 . For these procurements, the City's
purchasing ordinance requires open market purchasing procedures : soliciting three writte n
quotations and then awarding a purchase order to the vendor with the lowest price . These
procedures serve no useful purpose when, because of the reasons stated here, there is on e
preferred vendor . It also makes asphalt purchases unusually cumbersome because quantitie s
• needed are often difficult to estimate accurately and prices fluctuate from day to day . For these
reasons, Public Works is requesting authorization to buy asphalt up to a value of $25,000 per jo b
using "over-the-counter" purchasing procedures . Such procedures will allow Public Works t o
•
MeetN Da
6-19-0 7
rce,Number
C5-7
ATTACHMENT 2
Asphalt Purchasing Procedures Page 2
purchase asphalt by payment voucher (rather than purchase order) from the vendor with the bes t
overall price on the day the material is needed . Most of the time that vendor will be Hanso n
Aggregates, unless for some reason the Santa Margarita plant is closed or Union Asphalt offer s
an extraordinarily low price-per-ton on the date needed .
In accordance with the open market policy described in Section 295 of the City's Financia l
Management Manual, for purchases in the range of $25,000 to $100,000 staff will solici t
informal quotes (which may be written or verbal). Bid is awarded by Finance via purchase orde r
or contract ; however, this type of purchase is presently not anticipated because at the curren t
market price, the quantity need would be unusually large for the City's purposes .
FISCAL IMPAC T
There is no fiscal impact associated with the proposed policy modification .
ATTACHMENTS
Resolution
•
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G :\Staff-Reports-Agendas-Minutes\_CAR\2007\Street Maintenance\CAR Over-the-Counter Asphalt Purchasing.doc •
Attachment 3
RESOLUTION NO .
(2012 Series )
•
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISP O
AUTHORIZING THE PROCUREMENT OF FUEL USING "OVER-THE-COUNTER "
PURCHASING PROCEDURE S
WHEREAS,the City purchases over $430,800 of fuel annually through the Flee t
Maintenance operating program ; an d
WHEREAS,the cost per fuel delivery regularly exceeds the $7,500 departmen t
purchasing limit as prescribed by the City's Financial Management Manual ; an d
WHEREAS,the price per gallon for unleaded and diesel fuel fluctuates hourly; and
WHEREAS,the delivery and use of fuel is essential to operating the City's fleet,
equipment, emergency generators and fire apparatus ; an d
WHEREAS,the cost of fuel deliveries from a prescribed vendor is invariably mor e
expensive than seeking the lowest daily cost per qualified vendor ; and
WHEREAS,open-market purchasing procedures requiring written price quotations an d
purchase orders — as described in Section 295 of the City's Financial Management Manual —
serves to delay the purchasing process and does not guarantee the best available pricing for fuel .
WHEREAS,the Council approves the annual budget appropriations for fuel purchase s
and a modification of the City's purchasing policy does not supersede those approved limits .
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Lui s
Obispo as follows :
SECTION 1 .That Public Works Department be authorized to purchase fuel using "ove r
the counter" purchasing procedures as described in Section 3 .24 .080 of the San Luis Obisp o
Municipal Code within the approved annual budgets for fuel .
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C5-9
Resolution No . (2012 Series )
Page 2
Upon motion of , seconded by
and on the following vote :
AYES :
NOES :
ABSENT :
The foregoing resolution was adopted this day of 2012 .
Mayor Jan Man
ATTEST :
APPROVED AS TO FORM :
Maeve Kennedy Grimes
J . Christine Dietric k
City Clerk
City Attorney
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