As a “Best Business Practice,” this bid was prepared for our district to establish a contract with a fuel vendor who can provide fuel and fixed fees for fuel at a low cost and guarantee delivery during upcoming hurricane season. Historically, the average price of diesel fuel has been lower than the average price of gasoline. However, this is not always the case. In some winters where the demand for distillate heating oil is high, the price of diesel fuel has risen above the gasoline price. Since September 2004, the price of diesel fuel has been generally higher than the price of regular gasoline all year round for several reasons. Worldwide demand for diesel fuel and other distillate fuel oils has been increasing steadily, with strong demand in China, Europe, and the United States putting more pressure on the tight global refining capacity. In the United States, the transition to ultra-low-sulfur diesel fuel has affected diesel fuel production and distribution costs. Also, the federal excise tax on diesel fuel is 6 cents higher per gallon (24.4 cents per gallon) than the tax on gasoline.

A fixed fuel contract is based on a New York Mercantile Exchange fuel settlement price. A unit price (per delivered gallon) will then be computed, based on the fixed price differential and applicable New York Mercantile Exchange fuel settlement price. Fixed fees are then added to the price of fuel. With the uncertainty of fuel prices, this contract will allow our district to utilize floating fuel prices as published weekly by the Oil Price Indicator Service (OPIS), or fixed fuel prices as reported by the New York Mercantile Exchange. A five cent (.05) difference in fuel price per gallon equates to approximately $145,000 savings to the district per month. Our team will monitor the fluctuation daily of fuel prices and recommend to the Superintendent the optimal time to establish a fixed fuel price.

This contract may be renewed for four additional one-year periods provided all terms and conditions remain unchanged and in full force and effect. This option to renew requires the mutual agreement of both parties. Refusal by either party to exercise this option to renew will require this contract to expire on the original or mutually agreed date. The Superintendent is authorized to approve the renewal agreement, per the terms of the specifications.

* Align financial resources to support the district’s strategic goals, * Demonstrate best financial practices

These items are, or will be, included in the General Fund Budget in an amount not to exceed $10,000,000. The reduction in fixed fees for fuel could result in a cost savings between $135,000 and $490,000.

Contract administration or evaluation is performed by the Project Manager (end user) and Purchasing Agent, who function as a team. Reviews are conducted face to face, typically quarterly, or by utilizing an online vendor performance report. Prior to soliciting a new contract, the Contract Administration team must first give consideration to the specifications and supporting data of the expiring contract.