Director of Finance & Administrative Services

Transcription

1 TO: FROM: The Chairman and Members of the Committee of the Whole Brian Horton Director of Finance & Administrative Services MEETING DATE: November 13, 2001 SUBJECT: Report FAFS Extension of Contract to Supply and Deliver Gasoline, Clear Diesel (Original Tender T-21-99) PURPOSE A report to propose extending the contract term, originally awarded through Tender T-21-99, for the supply and delivery of gasoline and diesel fuel for one additional year. RECOMMENDATION a) That the contract for the supply and delivery of gasoline and diesel fuel to the City of Peterborough, that was awarded to Peterborough Fuel and Transfer (Kelly=s Fuel) through Tender T and Report FA99-017, be extended for one additional year, from November 15, 2001 to November 14, BUDGET AND FINANCIAL IMPLICATIONS

2 Page 2 Approximately 303,900 L of gasoline and 1,464,300 L of diesel fuel are purchased by the City of Peterborough over a one year period which makes the annual value of the fuel purchased about $1,071,000. No coloured diesel fuel was purchased over the term of the current contract with Kelly=s Fuel. The cost of the fuel is included in the vehicle budgets for various departments such as Public Works, Transit, Fire and Police. A breakdown of the estimated annual value of the contract is shown in Table 1: Table 1 - Estimated Annual Value of Fuel Supply and Delivery Contract Gasoline Clear Diesel Total City Annual Quantity 303,900 1,464,300 1,768,200 Kelly=s Average Price (Nov/00 - Oct/01) Total Average Annual Contract Value $ $ $195,651 $875,651 $1,071,302 The graphs attached to this Report, in Appendix I, illustrate the cost of gasoline and diesel fuel to the City, by month, since the beginning of the contract. Actual costs for the proposed contract extension period would fluctuate depending on the variable cost of fuel and on the actual quantities of fuel purchased by the City. BACKGROUND

3 Page 3 Council Reference On November 1, 1999, Council approved Report FA (attached), which recommended the awarding of the contract for the supply and delivery of gasoline, clear diesel and coloured diesel fuel to Kelly=s Fuel. An agreement with the Contractor, for a term of two years, was signed on November 15, 1999 and reflected the terms of Tender T The current contract is co-operative and covers locations within the City, Trent University, the Peterborough Utilities Services, the County of Peterborough and some of its townships and also the City of Kawartha Lakes. As stated in both Report FA and the Contractor Agreement, the City has the option of extending the term of the agreement by one year, subject to Council approval and the establishment of satisfactory pricing between the City and the successful bidder. Kelly=s Fuel has offered to extend the contract at the same terms that are contained in the original Agreement and this Report recommends awarding this extension. If this recommendation is approved, the City would have to execute another tender before the contract terminated on November 14, Companies Submitting Tenders in 1999 Two companies, Kelly=s Fuel and Petro-Canada, submitted complete tenders in the format required for Tender T Kelly=s Fuel Acost plus@ prices for both gasoline and diesel were slightly lower than Petro-Canada=s. Pricing and Market Conditions Under the current agreement with Kelly=s Fuel, the cost per Litre of fuel is calculated by adding a markup of $ to the total per Litre cost to the Contractor. For example, the per Litre cost to the City of Clear Diesel on October 27 th, 2001 was calculated in the following manner: Table 2 - Calculation of /L Cost of Fuel to the City of Peterborough

4 Page 4 /L Cost to Kelly Before GST (Variable) Markup Component Total Price (Before GST) GST Total Price (incl. GST) Regular Unleaded Gasoline $ $ $ $ $ Clear Diesel $ $ $ $ $ The City recovers 57.14% of GST paid through input tax credits, which reduced the net cost of gasoline and diesel, as at October 27 th, 2001, to $ and $ respectively. There continues to be a great deal of volatility in the pricing of fuel. Charts 1 and 2 graphically illustrate the level of fluctuation that we have witnessed in the price of both gasoline and diesel over the last two years. Chart 1 - Gasoline Price Trends Chart 2 - Diesel Price Trends

5 Page 5 As was the case in November of 1999, staff believe that suppliers will be reluctant to offer fixed prices given current market conditions. If guaranteed prices were quoted, they would undoubtedly include a risk premium to protect fuel suppliers against future price increases. After the events of September 11 th, 2001, amid fears of an escalated conflict in the Middle East and given recent statements from OPEC that they will soon be cutting production to boost the price of crude, the fixed price premium would surely be high. While it would be advantageous to limit the variability in our fuel cost, we believe that this predictability would come at too high a cost and would actually increase our financial risk by locking the City of Peterborough in to a much higher per L cost of fuel. Respectfully submitted, Brian W. Horton Director of Finance and Administrative Services Contact Name Name: Brian Horton Title: Director of Finance & Administrative Services Division: Department: Finance & Administrative Services Phone: Ext 1863 Fax Internet address: bhorton@city.peterborough.on.ca

6 Page 6 Appendix I - Total Value of Fuel Purchased From Kelly=s Fuel (Nov/99 - Oct/01)