City Council Report

City Council Meeting: May 10, 2011

Agenda Item: 3-I

To: Mayor and City Council

From: Stephanie Negriff, Director of Transit Services

Subject: Increase Purchase Order for Biodiesel Fuel

Recommended Action

Staff recommends that City Council authorize an increase to the purchase orders issued to General Petroleum Corporation, a California–based company, to supply and deliver biodiesel fuel blends in the amount of $600,000 for a new total of $2,650,131.

Executive Summary

On June 8, 2010, City Council authorized the City Manager to exercise the first one-year renewal option offered by General Petroleum Corporation to supply and deliver biodiesel fuel blends to the Big Blue Bus and Public Works Fleet Management Division, during the period July 1, 2010 through June 30, 2011 in the amount of $2,050,131. The biodiesel costs increased due to higher crude oil prices. Staff recommends that the City Council authorize an increase of $600,000 to purchase order numbers 17795-OF (Fleet Management) and 17796-OF (Big Blue Bus) to pay for invoices through June 30, 2011 for a new total of $2,650,131.

Background

On January 19, 2010, City Council considered the award of Bid No. 2984 to General Petroleum Corporation for the purchase of biodiesel fuel through June 30, 2010 with four additional one-year renewal options. At that meeting, City Council awarded Bid No. 2984 to General Petroleum Corporation for the purchase of biodiesel fuel through June 30, 2010 and requested that staff return to Council annually to renew this purchase order to ensure that the selected firm is reflective of the City’s sustainability goal.

On June 8, 2010, City Council authorized staff to exercise the first year renewal option offered by General Petroleum Corporation to supply and deliver biodiesel fuel blends to the Big Blue Bus and the Fleet Management Division during the period July 1, 2010 through June 30, 2011 in an estimated amount of $2,050,131.

Discussion

Market rates for biodiesel fuel are rising significantly. In the past ten months the cost of a gallon of biodiesel fuel has risen by 43%. As the biodiesel market continues to evolve, additional suppliers or producers of large amounts of biodiesel have become available. In April 2011, staff solicited bids for the purchase of biodiesel fuel. This bid is scheduled to close on April 27, 2011 and staff will return to Council in June 2011 to recommend the award of a bid to the best bidder.

Financial Impacts & Budget Actions

An increase of $600,000 to the purchase orders issued to General Petroleum bring the total purchase order amounts to $2,650,131. Funds are available in the adopted budget FY 2010-11 in the following line items:

· Fleet: $100,000 in account 54554.522910, “Vehicles-Fuels/Lubrication.”

· BBB: $490,000 in account 41654.522911, “Fuel-Revenue Vehicles.”

· BBB: $10,000 in account 41654.522840, 60W, “Fuel & Oil Taxes.”

Prepared by: Ralph Merced, Transit Maintenance Manager

Approved:	Forwarded to Council:
Stephanie Negriff Director of Transit Services	Rod Gould City Manager