Staff Report #7
March 27, 2019
To All Commissioners
Re: Contract Award – Diesel Fuel
That the Commission:
(i) ACCEPT the low cost bid from Suncor for the supply and delivery of diesel fuel as specified in a related request for tender call; and
(ii) DIRECT administration to finalize contract details with Suncor in consultation with the Commission’s legal counsel, noting the contract will be in keeping with the tender submission.
The current contract for the provision of diesel fuel with Dowler-Karn was awarded through the Elgin Middlesex, Oxford Purchasing Co-operative (EMOP) in May of 2014. The contract provided for an initial three year term, with an option for two single year extensions which were exercised. The second one-year extension expires on April 30, 2019. Dowler-Karn has held the contract since May 2012.
LTC Administration, acting as the calling agent for this tender, issued a tender call for the supply of fuel for the EMOP group for a five year period May 1, 2019 to April 30, 2024. There are 15 participating members of EMOP constituting nearly 14,000,000 litres of diesel fuel and over 2,000,000 litres of gasoline. LTC accounts for 62% of the diesel fuel requirements. All bidders were asked to use a published London Rack Price and offer a discount from that price plus a transportation charge for each participating location and to specify whether the pricing would be based on a weekly average or spot buy.
The request for tender was issued and processed in accordance with established procedures. The term of the contract is for five years commencing May 1, 2019 and expiring April 30, 2024 with two one-year renewal options available upon mutual agreement of all parties.
Six compliant bids were received, the summary particulars of which are as follows:
|Bidder||Discount Off Rack Rate||Delivery Price (Highbury)||Delivery Price (Wonderland)||Pricing Adjustment Timeframe||Annual Savings vs. Current Cont.|
|4Refuel||$ (0.0450)||$ 0.0100||$ 0.0100||Daily / Spot||$ 115,700|
|Canada Clean||$ (0.0450)||$ 0.0040||$ 0.0040||Daily / Spot||$ 167,800|
|Dowler-Karn||$ (0.0420)||$ 0.0030||$ 0.0050||Daily / Spot||$ 147,600|
|Parkland Fuel||$ (0.0440)||$ 0.0110||$ 0.0150||Daily / Spot||$ 92,700|
|Suncor||$ (0.0475)||$ 0.0034||$ 0.0055||Daily / Spot||$ 191,600|
|UPI Energy||$ (0.0280)||$ 0.0030||$ 0.0030||Daily / Spot||$ 28,900|
The current contract pricing provides a discount off rack rate of $0.025 per litre with offsetting charges of $0.003 and $0.005 per litre for delivery to the Higbury and Wonderland locations respectively. As noted in the above table, trends in the market place are presenting an improvement in the fuel price discount with all submissions providing a greater discount than what is currently in place. Delivery charges appear to have remained somewhat consistent.
Suncor was the low cost bid with an estimated annual savings of $191,600 vs. the current contract’s prices. The current provider’s submission, Dowler-Karn, had estimated annual savings of $147,600, a shortfall of $44,000 annually or $220,000 over the term of the contract as compared to the Suncor bid.
Diesel fuel costs in 2019 are budgeted to account for approximately 11.4% of the Commission’s annual conventional operating budget (totaling $8.5 million).
All members of EMOP will be provided with the necessary analysis of the bids received in order to determine whether to participate in the contract on a going forward basis. At the time of writing this report, the decisions of the remainder of the group are not known.
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager