Placentia City Council
AGENDA REPORT
TO: CITY COUNCIL
VIA: CITY ADMINISTRATOR
FROM: DEPUTY CITY ADMINISTRATOR / PUBLIC SERVICES & INFRASTRUCTURE DATE: JUNE 6, 2023
SUBJECT: AMENDMENT NO. 2 TO BULK SERVICES AGREEMENT WITH NICKEY
PETROLEUM COMPANY FOR BULK FUEL DELIVERY SERVICES
FISCAL
IMPACT: EXPENSE: $ 370,000 REVISED AGREEMENT AMOUNT
BUDGET $ 367,000 FISCAL YEAR 2022-23 BUDGET
$ 287,450 GENERAL FUND (103658-6345)
$ 79,550 GENERAL FUND/AARPA (105213-680)
SUMMARY:
In February 2014, the City Council awarded a Bulk Fuel Services Agreement (Agreement) to Nickey Petroleum Company ("Nickey Petroleum") to provide bulk fuel delivery services to the City.
The Agreement with Nickey Petroleum is for an annual -not -to -exceed amount of $300,000 for a term of five (5) years with the option for a one (1) five-year extension based on contractor performance and the discretion of the City. As part of this approval, the City Administrator was also authorized to approve the contract term extension. In 2019, the City executed Amendment No. 1 under the City Administrator's approval authority to extend the Agreement with Nickey Petroleum for an additional five-year period ending on February 18, 2024. Staff is now recommending an agreement amendment to increase the contract not -to -exceed amount by $70,000 to provide sufficient spending authority through the end of the contract. This will allow the City to have contractual authority for additional expenditures as a result of higher fuel prices and fuel consumption than previous years.
RECOMMENDATION:
It is recommended that the City Council take the following actions:
1. Approve Amendment No. 2 to the Bulk Fuel Services Agreement with Nickey Petroleum, Company, for bulk fuel delivery services increasing the annual contract not -to -exceed amount by $70,000; and
2. Authorize the City Administrator to approve contract change orders up to 10% of the annual -not -to -exceed contract amount; and
3. Authorize the City Administrator and/or his designee to execute all necessary documents, in a form approved by the City Attorney.
1.d.
June 6, 2023
City Council Agenda
June 6, 2023
STRATEGIC PLAN STATEMENT:
There is no specific Strategic Plan Goal or Objective associated with this Council action.
DISCUSSION:
The City operates a fueling site at the City Corporation Yard to provide fuel for the City's fleet consisting of 120 vehicles and 6 heavy-duty equipment. This fueling site consists of two (2) fueling stations and two (2) underground storage tanks with a capacity of 10,000 gallons each. The City procures unleaded fuel and diesel fuel for the fueling site from Nickey Petroleum Company ("Nickey Petroleum") through a Bulk Fuel Services Agreement (Agreement). The delivery schedule varies, but generally cycles every 5-8 weeks when tank volumes reach 75% full, or upon request by City staff. The City adheres to a 75% tank volume fuel reserve policy to ensure adequate fuel inventory at all times and preparedness in the event of a natural disaster.
The City has been using Nickey Petroleum since 1999 to purchase bulk fuel for the City's fleet. In December 2013, the City issued a Request for Bids to solicit competitive proposals from bulk fuel providers. On February 19, 2014, the City Council approved the existing Agreement with Nickey Petroleum. As part of this approval, the City Administrator was also authorized to approve one (1) five-year extension based on the contractor's performance. In 2019, the City executed Amendment No. 1 under the City Administrator's approval authority to extend the Agreement with Nickey Petroleum for an additional five-year period ending on February 18, 2024. Prior to the end of the contract term, Staff will solicit proposals for these services.
Staff is recommending approval of an agreement amendment (Attachment 2) to increase the annual not -to -exceed contract amount by $70,000 to provide sufficient spending authority through the end of the contract. For fiscal year 2022-23, the City has reached the contract spending authority due to an increase in fuel consumption and fuel pricing. Since February 2023, the City has increased its monthly consumption of diesel fuel by approximately 4,950 gallons per month.
This increase is a result of the operation of two (2) temporary power generators, 24 hours a day at the City Corporation Yard to support the construction of the new Placentia Public Safety Center.
Due to the required electrical utility work for the project, the electrical power for the City Corporation Yard and CNG Station has been temporarily shut off. Currently, electrical power to the City Corporation Yard and CNG Station is being provided by the two (2) temporary power generators, which require daily refueling of diesel fuel. The additional expenditures for diesel fuel are being absorbed through the Public Safety Center's project budget.
In addition, fuel pricing has increased by approximately by a $1.20/gallon when compared to Fiscal Year (FY) 2020-21. The table on the next page provides a historical overview of the City's fuel consumption and costs for the past three fiscal years including the current fiscal year.
City Council Agenda
June 6, 2023
Fiscal Year
Number of Gallons Total Spent
FY 2022-23
(July — April)
Total: 79,047
Gas: 52,669
Diesel: 26,298
Lubricants: 80
$310,206
FY 2021-22
Total: 64,022
Gas: 56,224
Diesel: 7,798
$288,835
FY 2020-21
Total: 64,080
Gas: 48,727
Diesel: 15,353
$175,309
For the remainder of FY 2022-23, Staff is forecasting $56,000 in additional fuel costs for a total of $367,000. In FY 2023-24, the City will need to continue using the generators at the City Corporation Yard for an additional three months resulting in approximately $54,000 additional expenditures beyond normal fleet operations. Staff is forecasting $359,000 in fuel costs in the proposed FY 2023-24 Budget. Given the fluctuation of fuel prices over the past two years and the potential for an unforeseen increase in fuel consumption, Staff is recommending an increase of the annual contract -not -to -exceed amount to the Agreement with Nickey Petroleum from $300,000 to $370,000. If approved, this recommended action will provide sufficient contractual authority for continuing expenditures in the current fiscal year and greater flexibility to meet the City's future fuel needs.
FISCAL IMPACT:
Staff is recommending an increase of the annual contract -not -to -exceed amount to the Agreement with Nickey Petroleum from $300,000 to $370,000 for continuing expenditures in the current fiscal year and to provide greater flexibility to meet the City's future fuel needs. The year-end estimate of fuel expenditures for FY 2022-23 is $367,000. There are sufficient funds in the FY 2022-23 Operating and CIP budgets to cover this expense. The proposed FY 2023-24 Budget includes an appropriation of $305,000 in fuel expenditures in the operating budget and $54,000 in the FY 2023-24 CIP Budget for the fuel costs associated with the Placentia Public Safety Center project. In the event there are additional appropriations required for fuel costs, a request will be presented to the City Council for consideration and/or Staff will utilize available budget savings to cover the City's fuel needs. As such there are sufficient funds available for the recommended actions.
Prep id, by:
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Joel Cardenas
Public Works Superintendent
Reviewed and approved:
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JenniferLampman
Director of Finance
City Council Agenda
June 6, 2023
Reviewed and approved:
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Luis Estevez
Deputy City Administrator
Reviewed and approved:
Damien RTArrula
City Administrator
Attachment:
Amendment No. 2 to Bulk Fuel Services Agreement with Nickey Petroleum Company