Staff Report #7
March 27, 2024
To All Commissioners
Re: Contract Extension – Diesel Fuel
Recommendation
That the Commission:
- ACCEPT the rates and two-year contract extension presented by Suncor for the supply and delivery of diesel fuel for the period May 1, 2024 through April 30, 2026; and
- DIRECT administration to finalize contract extension details with Suncor.
Background
The current contract in place with Suncor was the result of a request for tender that was approved by the Commission and awarded in March 2019. The contract was a five-year term for the period of May 1, 2019 through April 30, 2024, and included an option for two, one-year extensions if mutually agreed upon by both parties.
With the expiry date approaching, administration began discussions with Suncor in late 2023 to gauge their interest in extending the current contract. Suncor expressed interest in an extension and responded with pricing and proposed a two-year extension, covering the period of May 1, 2024 through April 30, 2026.
To summarize Suncor’s submission, the current diesel fuel rack rate discount has increased from $0.0475 to $0.0805 per litre, with transportation rates held constant with those in the current contract ($0.0034 and $0.0055 for Highbury and Wonderland respectively). It is worth noting that expenditures for fuel, labour, capital costs and insurance, which make up the bulk of the cost to transport the fuel to London Transit, would have had significant inflationary pressures over the last five years. Suncor holding these fixed indicates a strong desire to retain the contract.
The following table provides a summary of the price breakdown and resulting savings based on projected consumption:
Location |
Rack Rate Discount (Current) | Proposed Discount off Rack Price $/L | Savings due to $0.033 increase in rack rate discount | Delivery Price $/L (no change) |
| Highbury | $0.0475 | $ 0.0805 | $ 480,000 | $0.0034 |
| Wonderland | $0.0475 | $ 0.0805 | $ 95,000 | $0.0055 |
Given the pricing for the two-year period represents a significant reduction from current rates, administration is recommending an extension for the additional two years. Subsequent to this extension, a request for tender will be issued in late 2025 to be in place for May 1, 2026.
Diesel fuel costs in 2024 are budgeted to account for approximately 10.9% of the Commission’s annual conventional operating budget totaling $10.6 million.
EMOP Participation
London Transit acts as the calling agent on behalf of all EMOP members (Elgin Middlesex Oxford Purchasing Cooperative) for the purchase of all fuels. There are 19 participating EMOP members, including the City of London and many neighbouring municipalities, covering over 70 locations with usage of approximately 13,000,000 litres of diesel fuel and 3,000,000 litres of gasoline. The contract includes five different fuel products, with London Transit consuming #2 clear USLD, which accounts for approximately 60% of EMOP’s diesel fuel requirements.
All members of EMOP have been provided with the pricing details submitted by Suncor so they can determine whether to extend or go to market, noting the prices provided to each entity are contingent on LTC extending the contract.
Recommended by:
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager