AGENDA REPORT
Meeting Date: April 26, 2022
Item Number:
To: Honorable Mayor & City Council
From: Michael Hensley, Deputy Director of Public Works, Operations Craig Crowder, Fleet & Facilities Manager
Subject: A. APPROVAL OF AN APPROPRIATION FROM THE GENERAL
FUND AND A CHANGE PURCHASE ORDER FOR FISCAL
YEAR 2021/22 TO CLEAN ENERGY RENEWABLE FUELS, LLC
IN THE AMOUNT OF $70,000 FOR A NOT-TO-EXCEED TOTAL
OF $150,000 FOR SUPPLY OF RENEWABLE NATURAL GAS
B. APPROVAL OF AN APPROPRIATION FROM THE GENERAL
FUND AND A CHANGE PURCHASE ORDER FOR FISCAL
YEAR 2021/22 TO GENUINE PARTS COMPANY DBA NAPA
AUTO PARTS IN THE AMOUNT OF $200,000 FOR A NOT-TO- EXCEED TOTAL OF $570,000 FOR SUPPLY OF FLEET PARTS Attachments: 1. Agenda Report, Clean Energy Renewables (Without Attachments)
2. Agenda Report, Genuine Parts Company
RECOMMENDATION
Staff recommends that City Council move to: (1) approve an appropriation for $70,000 from the General Fund and a change purchase order for a not-to-exceed total of $150,000 to Clean Energy Renewable Fuels for supply of renewable natural gas, and (2) approve an appropriation for $200,000 from the General Fund and a change purchase order for a not-to-exceed total of $570,000 to Genuine Parts Company dba NAPA for supply of fleet parts as specified above.
INTRODUCTION
The City’s Fleet Services program procures, maintains and fuels City fleet vehicles and equipment used by staff to deliver services to the community. Fleet Services uses vendors to provide clean renewable fuel and automotive parts, which helps keep fleet vehicles and
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Meeting Date: April 26, 2022
equipment available for use by City staff. This request is to ensure that sufficient funding and purchase order amounts are available to purchase clean renewable fuels and automotive parts for the remainder of Fiscal Year 2021/22.
DISCUSSION
Clean Energy Renewable Fuels
Since 2012, the City has operated its own Compressed Natural Gas (CNG) fueling station.
This station allows the City to comply with the Southern California Air Quality Management District (SCAQMD) rules that require use of alternative fuel in heavy-duty vehicles operating in the Los Angeles basin. Having a station onsite also allows the City to minimize mobile source emissions from on-road vehicles and reduce the use of nonrenewable polluting transportation fuels, in support of the Beverly Hills Sustainable City Plan. The City’s vehicle fueling operations are eligible to generate Low Carbon Fuel Standard (LCFS) credits from the use of (1) conventional natural gas, also known as, fossil natural gas, which is classified as “Fossil CNG” and (2) renewable natural gas (RNG) derived from organic feedstock including landfills and anaerobic digestion of food, agriculture and wastewater treatment. In April of 2018 (Attachment 1), City Council approved a contract with Clean Energy Renewables to provide two unique services to the City: (1) Renewable Natural Gas (RNG) fuel supply and (2) LCFS credit management.
As previously noted the use of RNG generates incremental environmental credits at a CNG station and provides a substantially lower carbon fuel as compared to Fossil CNG.
The pandemic and global conflict have caused some high volatility in the RNG market and frequent market value changes. For example, the per-unit cost of RNG rose from $4.63 in August 2021, to $9.85 in February 2022. This represents a 113% increase over the seven-month period. Due to these increases, the Fleet Services program finds its fuel supply budget in need of additional funding to continue the purchase of RNG through Clean Energy Renewables for the remainder of the fiscal year. There is also a significant increase in the cost of unleaded and diesel fuels due to issues stemming from the pandemic and global conflict. All of these factors have led to a budget shortfall this fiscal year for RNG purchases. Staff anticipates the escalated pricing and market volatility to continue into at least next fiscal year. Staff submitted a budget enhancement request to address anticipated future funding shortages in the Fuel Inventory budget. Staff will be bringing an amendment for the unleaded and diesel fuel contract and a request for additional funding at a future City Council meeting, as pricing for this commodity has increased significantly as well.
Fleet Parts Support
In prior years, the Fleet Services program relied on the Public Works Central Stores program to order, receive and distribute an inventory of parts used by fleet mechanics to maintain City vehicles and equipment. Prior to February 2021, Central Stores was comprised of two Central Stores Specialists and one Central Stores Supervisor. The Fleet Services operation required one of the two full-time Central Stores Specialist positions and a portion of the Central Stores Supervisor’s time to manage Fleet Services inventory.
This left one Central Stores Specialist to support the Water Utility and limited or no support for the other Public Works programs including; Facilities, Stormwater, Wastewater, Park Operations, Street Maintenance, Traffic Lights and Signals, Parking Services and Parking Meters. Managers and supervisors of these programs order and manage their own inventory with as-needed support from Central Stores. Staff is working to expand the level of support to the other Public Works programs. During the pandemic, one of the two Meeting Date: April 26, 2022
Central Stores Specialists took the early retirement incentive, which left one Central Stores Specialist supporting Fleet and no Specialists to support the Water Utility and other areas.
Staff decided that identifying an alternative way to support Fleet Services would be the most appropriate way to address the loss of staff. Staff negotiated inventory support with Genuine Parts Company AKA NAPA Integrated Business Solutions (IBS). In June of 2021 (Attachment 2), City Council approved a contract with Genuine Parts Company (NAPA IBS) to provide fleet parts support for the City’s Fleet Services program. This freed up the one remaining Central Stores Specialist to help the Supervisor with other Central Stores related responsibilities.
Genuine Parts Company dba Napa Auto Parts (NAPA) is a national supplier of fleet parts and operates NAPA stores at non-NAPA locations to provide inventory management services to agencies through their integrated business solutions program. Because of NAPA’s national presence and purchasing power, they are able to offer some parts and supplies at lower prices than the City can procure alone. Staff anticipated savings on some aftermarket parts due to NAPA’s sourcing capabilities. NAPA has shown they can also locate and deliver parts in a timely manner and find aftermarket and hard to find parts when necessary. In addition, NAPA provides staff to operate the onsite store, ensuring that someone is always onsite to assist the fleet mechanics. NAPA does not sell parts to customers outside of the agencies they are supporting.
When the fleet parts support was in-house, the staffing costs were in the salary and benefits budget line items. The staffing costs for NAPA are included in the contract line item and salary savings are not available to offset this cost since one Central Stores Specialist position was eliminated from the budget, per program requirements. The contract also includes management and accounting fees and a 10% markup on all parts sold to the City. In addition, parts costs have increased due to increased costs of raw materials, numerous supply chain challenges and increased shipping costs due to fuel price increases. Staff anticipated that an appropriation would be necessary to fund the NAPA program but waited until later in the fiscal year to have a more accurate estimate on how much funding the operation needed before coming before City Council. The Fleet Services program finds its fleet inventory budget in need of additional funds to cover the NAPA IBS invoices for the remainder of the fiscal year. Fleet Services submitted a budget enhancement to fund the NAPA agreement in future fiscal years. The NAPA agreement is for three years with the option to renew, if the City wishes to continue the service.
FISCAL IMPACT
The City has generated additional revenue using RNG. The City has credits in the past averaging approximately $53,000 and continues to apply for and receive credits based upon the IRS continuing to extend these credit options. This amount helps offset money the City spends on average each year in fuel for its CNG-powered vehicles. This revenue amount will not be enough to offset the appropriation amount requested.
There are currently not enough funds in the Automotive Inventory and Fuel Inventory budgets to pay for services for the remainder of the fiscal year. The appropriations from the Vehicle Fund in the amounts of $70,000 for renewable natural gas and $200,000 for Meeting Date: April 26, 2022
parts inventory would support the current Fiscal Year 2021/22 Fuel Inventory and Automotive Inventory budgets in which the purchase orders for Clean Energy Renewables and Genuine Parts Company dba NAPA are encumbered.
Jeff Muir, Director of FinanceShana Epstein, Director of Public Works Finance Approval Approved By
Attachment 1
AGENDA REPORT
Meeting Date: April 24, 2018
Item Number: D-11
To: Honorable Mayor & City Council
From: Craig Crowder, Fleet Manager
Subject: APPROVAL OF AN AGREEMENT BETWEEN THE CITY OF
BEVERLY HILLS AND CLEAN ENERGY RENEWABLE FUELS, LLC
FOR SUPPLY OF RENEWABLE NATURAL GAS (RNG) AND LOW
CARBON FUEL STANDARD (LCFS) CREDIT MANAGEMENT; AND
APPROVAL OF A PURCHASE ORDER IN THE NOT-TO-EXCEED
AMOUNT OF $65,000 TO CLEAN ENERGY RENEWABLE FUELS,
LLC FOR SUPPLY OF RNG AND LCFS CREDIT MANAGEMENT
Attachments: 1. City of Norwalk RFP No. 17-505
2. City of Norwalk Council Agenda Report April 18, 2017
3. City of Norwalk RNG Contract July 21, 2017
4. Clean Energy Renewables Letter of Piggy-Back
5. Clean Energy Renewables LCFS & RNG Proposal
6. Clean Energy Renewables LCFS & RNG Contract Proposal
7. Clean Energy Renewables Natural Gas Provider Contract Proposal
RECOMMENDATION
Staff recommends that City Council (1) find that the conformance with the bidding procedures in the Municipal Code would be contrary to the best interests of the City, (2) waive the bidding requirements as the City is utilizing the City of Norwalk procurement contract, (3) move to approve a contract with Clean Energy Renewable Fuels, LLC for supply of Renewable Natural Gas (RNG) and Low Carbon Fuel Standard (LCFS) Credit Management, and (4) approve a purchase order in the not-to-exceed amount of $65,000 to Clean Energy Renewable Fuels, LLC for supply of RNG and LCFS Credit Management.
Meeting Date: April 24, 2018
DISCUSSION
This report provides information on the Department's plan to collaborate with Clean Energy Renewable Fuels, LLC to provide two unique services to the City: (1) Renewable Natural Gas (RNG) fuel supply and (2) Low Carbon Fuel Standard (LCFS) credit management for a five-year contract term. Since 2012, the City has operated its own Compressed Natural Gas (CNG) fueling station. This station allows us to comply with the Southern California Air Quality Management District (SCAQMD) rules that require use of alternative fuel in heavy-duty vehicles operating in the Los Angeles basin and to minimize mobile source emissions from on-road vehicles and reduce the use of nonrenewable polluting transportation fuels, in support of the Beverly Hills Sustainable City Plan.
LCFS Program
The LCFS program regulates transportation fuel providers, requiring a 10% reduction in carbon intensity of fuels sold by 2020 and an 80% reduction by 2050. Importers or producers of gasoline and diesel are required to purchase credits based on the carbon intensity of the overall transportation fuel use in California. Because of the importer and producer deficit, producers of fuel with a carbon intensity lower than gasoline or diesel are able to generate credits that can be sold to these importers or producers.
The City's vehicle fueling operations are eligible to generate LCFS credits from the use of (1) conventional natural gas also known as fossil natural gas, which is classified as "Fossil CNG" and (2) renewable natural gas (RNG) derived from organic feedstocks including landfills and anaerobic digestion of food, agriculture and wastewater treatment.
An outside vendor can provide the City with a comprehensive LCFS credit management solution on its Fossil CNG that includes: Opting-in the City of Beverly Hills as a regulated party, management of the City's LCFS account, reporting to the California Air Resource Board (CARB) quarterly on CNG usage at the station, submission of annual reports, sale of credits at competitive prices generated during the quarter and assuming audit/compliance liability for all transactions generated under this program. The City would receive a percentage share of the LCFS and Renewable Identification Number (RIN) credits.
RNG Fuel Supply
As previously noted, the use of RNG generates incremental environmental credits at a CNG station and provides a substantially lower carbon fuel as compared to Fossil CNG.
The City can generate additional revenue using RNG and can claim the environmental benefit of fueling with 100% RNG. This is an important sustainability message that can be shared with residents and the general public. Based on an estimated 110,000 gasoline gallon equivalents (GGEs) of annual fuel consumed at the City's CNG station, the City is anticipated to generate over $26,600 in annual RNG credit revenue. This amount would help to offset the $65,000 that the City spends on average each year in fuel for its CNG-powered vehicles. Currently the City receives its natural gas for the compressing station through existing Southern California Gas infrastructure. Clean Energy Renewable Fuels, LLC would supply the City with RNG through existing infrastructure with no modifications necessary. The RNG product delivers a 100% sustainable transportation fuel product while reducing greenhouse gas emissions (GHG).
After careful evaluation of various purchasing options and pricing, staff determined that it is in the best interest of the City not to proceed with its own bid process but to instead utilize the bid process of the City of Norwalk Purchasing Division Bid No. 17-505
Meeting Date: April 24, 2018
(Attachment 1 ). Staff determined that using the City of Norwalk procurement resources, manpower and purchasing power gives the City the best pricing opportunity. Clean energy Renewable Fuels, LLC intends to extend the same terms, conditions and prices that are stipulated in the City of Norwalk 5-year RNG procurement contract (Attachment 3), which commenced on July 21, 2017, to the City of Beverly Hills. In order to ensure the City has continued and uninterrupted access to necessary renewable natural gas transportation fuel, staff recommends approval of the contract with Clean Energy Renewable Fuels, LLC and subsequent purchase order to Clean Energy Renewable Fuels, LLC.
FISCAL IMPACT
Funding for this purchase is included in the Fiscal Year 2017/18 City Council-approved Department budget. Renewable Natural Gas purchases are projected to total $65,000 annually with an offset of $26,600 in annual RNG credit revenue.
Program # I Description of Fund Source
49010001 - 720900 I Fuel Inventory - Petroleum Products Amount
$65,000.00
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Attachment 2
AGENDA REPORT
Meeting Date: June 1, 2021
Item Number:
To: Honorable Mayor & City Council
From: Michael Hensley, Public Works Manager
Craig Crowder, Fleet and Facilities Manager
Subject: AUTHORIZE THE CITY MANAGER TO NEGOTIATE AND
EXECUTE A LEASE BY AND BETWEEN THE CITY OF BEVERLY
HILLS AND GENUINE MOTOR PARTS COMPANY DBA NAPA
AUTO PARTS AT 345 FOOTHILL ROAD; AND
AUTHORIZE THE CITY MANAGER OR DESIGNEE TO EXECUTE
ALL PURCHASE ORDERS AND CHANGE PURCHASE ORDERS
TO GENUINE PARTS COMPANY DBA NAPA AUTO PARTS
THROUGHOUT THE TERM OF THE LEASE
Attachments: None
RECOMMENDATION
Staff recommends that City Council move to authorize the City Manager to negotiate and execute a lease by and between the City of Beverly Hills and Genuine Motor Parts Company DBA NAPA Auto Parts for use of a portion of the City’s Fleet Services Center and for City fleet inventory management services. Staff also recommends City Council move to authorize the City Manager or designee to approve all purchase orders and change purchase orders to Genuine Motor Company DBA NAPA Auto Parts for the duration of the agreement.
FISCAL IMPACT
The projected cost to operate the onsite NAPA store at an estimated $500,000 in fleet parts annually is $152,578. This cost includes fixed costs of $83,060 for one on-site manager and $14,568 for miscellaneous costs such as a printer, server and insurance and variable costs of $50,000 for the management fee charge on top of sales (at $500,000 times 10%) and $4,950 for accounting support. Staff anticipates the lower cost of parts from NAPA’s purchasing power to offset some of the fixed costs listed above. Funding for this program will come from the Public Works Department’s operating budget.
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Meeting Date: June 1, 2021
INTRODUCTION
Fleet Services relies on the Central Stores program to order, receive and distribute an inventory of parts to assist the fleet mechanics in their maintenance responsibilities.
Central Stores provides one full time Central Stores Specialist (FTE) and a portion of the Central Stores Supervisor’s time to manage the inventory for Fleet Services. However, staffing shortages resulting from the early retirement programs and a need for Central Stores to increase service levels to the rest of the Department have negatively impacted the level of support provided to Fleet Services. Public Works staff explored options to address the loss of staff, the need to expand Central Stores support and the desire to identify cost savings. Outsourcing fleet inventory management ended up being the best option to address all areas of need while helping to ensure Fleet Services continues to receive the inventory support needed to operate at a high level. Outsourcing this function will not affect the Infor Asset Management System (“Infor”) inventory implementation because Fleet Services uses a separate inventory system. Outsourcing would also provide the one dedicated person that Fleet Services requires for support. Public Works and Human Resources staff worked collaboratively with the City’s Municipal Employee Association (MEA) to allow contracted services with a vendor to provide Fleet Services inventory management prior to bringing this item to City Council. BACKGROUND
The City’s fleet is comprised of four hundred forty-five (445) vehicles and pieces of equipment that serve the Police, Fire, Community Services, Information Technology and Public Works Departments. The City’s fleet is maintained by the Fleet Services Bureau (Fleet Services), which consists of a Supervisor, two (2) Lead Equipment Mechanics and four (4) Equipment Mechanics. These staff members rely on parts and materials being available to keep the City’s fleet operational and safe for staff and the community.
Currently, this service is provided by a combination of Central Stores staff and fleet equipment mechanics.
Outsourcing fleet inventory management will accomplish three things. It will help offset the loss of Central Stores and support staff to voluntary separation, help remaining Central Stores staff expand support to the rest of the Public Works Department and potentially save money by leveraging the purchasing power of a national fleet parts supplier.
Increased Service Levels
Public Works is in the process of implementing the Infor inventory management module to help enhance inventory management capabilities. Fleet Services uses the FASTER asset management system and is not included in Infor implementation. Central Stores is also expanding service to cover additional programs within Public Works. Expansion will ensure adequate inventory controls are in place and help to gain efficiencies and cost savings through centralized purchasing and inventory management. In the past, only Water, Fleet and Facilities programs received Central Stores support; other programs within Public Works managed their own inventory ordering and storage. Programs included in the expansion are Wastewater, Stormwater, Environmental Maintenance, Solid Waste, Street Maintenance, Lights and Signals and Park Operations. This additional level of support from Central Stores will allow staff within these programs to focus more Meeting Date: June 1, 2021
on operations and less on ordering and managing inventory. Outsourcing the fleet inventory will free up Central Stores staff to expand support to these other programs.
The Central Stores program also became more involved in assisting with emergency response during the recent activations of the City’s Emergency Operations Center (EOC) and COVID-19 pandemic. Central Stores staff sourced, received and distributed personal protective equipment (PPE) for COVID-19 mitigation and materials and supplies used by staff during protest and demonstration response. Current staffing levels make it difficult to provide a high level of service, particularly when combined with support for the Fleet Services program and regular duties. Outsourcing fleet inventory management will ensure that the fleet operation has the proper support, especially during emergencies, while freeing up remaining staff to support the management of supplies and materials for other departments responding to the emergency.
Staff Reductions
Prior to the pandemic, the Central Stores program consisted of two (2) Central Stores Specialists (Specialist) and one (1) Central Stores Supervisor. In the past, one Specialist was assigned to Fleet Services and the other Specialist would receive and distribute parts at the warehouse. One of the Specialists recently retired using the CalPERS Early Retirement program, which left the operation with just one Specialist and one Supervisor. This severely affected the ability to provide consistent support to the Fleet Services operation and expand service to all of Public Works. Staff is working to create a warehouse worker position to assist Central Stores. This additional position will not provide enough resources to keep fleet inventory management in-house but will help with the expansion of service to the remainder of Public Works. Due to staffing constraints, Fleet Mechanics often need to order and retrieve their own parts when Central Stores staff are unavailable. This takes time away from performing maintenance on City fleet vehicles and equipment. Fleet Services lost an equipment mechanic to voluntary separation so freeing up mechanics’ time is critical to ensure enough hours are available to perform the necessary maintenance on City fleet. Fleet Services also relies on a large number of purchase orders and contracts for parts and supplies. This work is done by Central Stores and Public Works administrative staff with help from Finance purchasing and accounts payable staff. Public Works lost three of the four members of the administrative team who provided this support to voluntary separation. Work done by this team includes preparing quotes and procurement packages, drafting contracts, establishing purchase orders, reviewing and maintaining certificates of insurance, setting up new vendors and following up on vendor issues. Outsourcing fleet inventory would greatly reduce the amount of administrative work tied to Fleet Services and free up the remaining staff to absorb some of the other work done by the staff who left through voluntary separation. Finance accounts payable and purchasing staff will also benefit, as they will not need to enter thousands of Fleet Services invoices and create dozens of separate requisitions for parts and materials. Competitive Pricing Central Stores works in tandem with Fleet Services to find the best pricing for parts and materials used to keep the City’s fleet vehicles operational. Staff receives quotes for parts and chooses the vendor with the best pricing that can deliver quality parts in a timely manner. While the City receives good pricing, larger agencies may receive more favorable Meeting Date: June 1, 2021
pricing through economies of scale. Partnering with a large national parts vendor is likely to provide cost savings through use of their vast purchasing power.
DISCUSSION
Public Works is a member of the Sourcewell cooperative purchasing group and found a vendor that provides fleet inventory management at a reasonable price through a national contract with Genuine Motor Parts Company dba Napa Auto Parts (NAPA). NAPA is a national supplier of fleet parts and operates NAPA stores at non-NAPA locations to provide inventory management services to agencies through their integrated business solutions program. Because of NAPA’s national presence and purchasing power, they are able to offer some parts and supplies at lower prices than the City can procure alone. Staff anticipates savings on some aftermarket parts due to NAPA’s sourcing capabilities.
NAPA can also locate and deliver parts in a timely manner and find aftermarket and hard to find parts when necessary. In addition, NAPA provides staff to operate the onsite store, ensuring that someone is always onsite to assist the fleet mechanics. NAPA does not sell parts to customers outside of the agency they are supporting. Therefore, the City will be the only recipient of these services if City Council authorizes the City Manager to negotiate and execute the agreement.
Because this is a Sourcewell agreement, the City was able to get pricing that may not have been obtainable in a City-led bid process. NAPA provides the same pricing that they give larger cities they support including New York City and Chicago, which have much larger fleet operations. NAPA charges a 10% management fee on the cost of parts used to make the operation a profit generator. The proposed agreement also includes the cost for one (1) onsite staff, miscellaneous fees to cover administrative costs like equipment, software and insurance and an accounting fee. The management fee and accounting fees are variable costs based on the cost of parts purchased. Fleet Services averages approximately $500,000 in parts and materials per year. Cost details are included in the Fiscal Impact section of this report. The NAPA “store” will operate out of the current fleet parts room. A NAPA employee will be onsite to order, stock and distribute parts based on what Fleet Services requires for maintenance and repairs. The store will operate on similar business hours to Fleet Services to ensure that fleet mechanics can get the parts needed to complete work. NAPA staff is available outside of business hours, if needed. NAPA will distribute all existing City fleet parts and materials at no charge before replacing with NAPA-issued parts. The City is only charged for parts that are distributed to fleet staff. NAPA will track inventory using their own TAMS fleet inventory management system and will also enter all parts data into the City’s FASTER parts inventory management system so staff can continue to assign parts to work orders and track maintenance costs. Since the agreement provides workspace for a NAPA employee and storage space for NAPA’s inventory – which does not become City property until the parts are ordered by the City – the agreement is structured as a lease. Appropriate lease provisions have been reviewed by Real Estate Management staff in the Policy & Management Department and the City Attorney’s Office. However, NAPA will not pay rent and the City will remain responsible for all aspects of maintenance. City staff will be able to pass through NAPA’s premises to access other parts of the building as necessary, however NAPA will keep its operation and inventory secure and separate from the City’s operation (until the City Meeting Date: June 1, 2021
orders a part). In addition to standard commercial general liability insurance provisions, the lease requires NAPA to maintain all risk insurance covering all of NAPA’s inventory at no less than 100% of the full replacement cost. The lease agreement also contains the service agreement terms dictated by the Sourcewell agreement with some minor changes requested by City staff. The monthly cost of the lease for NAPA is services rendered, however, there is language for addressing any damages to property by NAPA while using the space. The lease will last as long as services are rendered by NAPA. Lastly, the terms included in the Sourcewell contract will be offered to the City for the life of this agreement should NAPA lose the national Sourcewell contract.
Shana Epstein, Director of Public Works
Approved By