City Council
Report
City Council Meeting: September 30, 2025
Agenda Item: 4.F
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To: Mayor and City Council
From: Matthew Hallock, Fire Chief, Fire Department
Rick Valte, Public Works Director, Public Works Department Subject: Authorization for Procurement Manager to Issue Purchase Orders to AAA Oil, Inc. for Purchase and Delivery of Diesel Fuel for the Public Works and Fire Departments
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of no possibility of significant effect pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) Guidelines; and
2. Authorize the Procurement Manager to issue purchase orders with AAA Oil, Inc. under County of Los Angeles Master Agreement MA-IS-2240008-9 for the purchase and delivery of diesel fuel for the Public Works and Fire Departments.
This recommended award is made as an exception to the competitive bidding process pursuant to Section 2.24.250(c), (i).
Summary
Since mid-2023, the City of Santa Monica has purchased renewable diesel fuel for the Public Works Department, Fleet Division, and the Fire Department under the State of California Contract No. 1-23-91-31C, utilizing AAA Oil, Inc. in the Los Angeles County area. In June 2025, the City was informed that renewable diesel fuel will no longer be available for purchase under the State of California contract. Faced with an immediate disruption to City services, the City utilized emergency authority in Santa Monica Municipal Code Sections 2.24.240 and 2.24.250 to purchase diesel fuel under the County of Los Angeles Master Agreement MA-IS-2240008-9. This staff report fulfills the notification requirement in Section 2.24.240. Staff recommends the issuance of purchase orders utilizing the County of Los Angeles Master Agreement and anticipates 2 of 4
undergoing a competitive bidding process in the near future to secure a long-term diesel fuel contract.
Discussion
The City has used renewable diesel fuel since May 2017. A total of 100 City vehicles and pieces of equipment (approximately 67 in Public Works and 33 in the Fire Department) are powered with renewable diesel fuel. This includes heavy duty Fire apparatus, medium duty Fire Station Utility and command vehicles, crane trucks, backhoe loaders, tractors, and asphalt rollers.
Renewable diesel fuel sold in California is derived from waste animal fat from the food processing industry and from waste fat from the fish processing industry. In February 2023, the State of California solicited bids for the purchase and delivery of renewable diesel fuel. The State’s three-year contract expires on May 2, 2026, with the option for two one-year extensions, which could extend the contract through May 2, 2028. The State’s procurement process allows local municipalities to use contract no. 1-23-91-31C for the purchase of renewable diesel fuel. Therefore, on May 23, 2023, the City Council authorized the issuance of purchase orders with AAA Oil, Inc. utilizing the State of California Contract No. 1-23-91-31C. The authorized total not to exceed amount over the five-year period was $2,024,418.
At the end of June 2025, the supplier that was approved for use on the State contract is no longer producing renewable diesel fuel and there are no other suppliers in the area that meet the State product specifications. The State specifications are extremely stringent because State vehicles travel between very warm and very cold climates, and the diesel fuel must be acceptable for that wide climate range. Under the authority of Section 2.24.240(d)(3) of the Santa Monica Municipal Code, the loss of the diesel fuel supplier constitutes an “urgent, unforeseen event that threatens life, property, or the general public health, safety, and welfare.” Thus an emergency exists such that the Procurement Manager authorized the Public Works and Fire Departments to purchase diesel fuel under a new contract, as an exception to the competitive process under Section 2.24.250 (c) and (i). This staff report satisfies the requirement in Section
2.24.240(c), where staff shall inform the City Council of the “emergency circumstances under which the purchase or contract was made.”
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The only available option, given the immediate need for diesel fuel, is to utilize the County of Los Angeles Master Agreement MA-IS-2240008-9, which is effective from August 16, 2021, through August 16, 2026, including extensions. AAA Oil, Inc. will continue to deliver renewable diesel fuel under the County contract. Because the State posts pricing daily, while the County of Los Angeles posts pricing weekly, there is no clear way to determine whether the prices under the County Master Agreement are noticeably different than under the State contract. Additionally, the diesel fuel market fluctuates daily. While the total contract amount remains unchanged at $2,024,418, that amount assumed the completion of the State contract through May 2, 2028. With the County of Los Angeles Master Agreement set to expire August 16, 2026, staff expects total purchases to remain well under agreement’s not to exceed amount. Despite this change from the State of California contract to the County of Los Angeles Master Agreement, the current FY 2025-26 purchase orders issued to AAA Oil, Inc. will remain in effect.
Staff anticipates undergoing a competitive bidding process in the fall of 2025 to secure a long-term diesel fuel contract.
Environmental Review
This notification to Council of the contract change and issuance of new purchase orders referencing the new contract is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) (Common Sense Exemption) of the CEQA Guidelines, which states that CEQA does not apply “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.”
Past Council Actions
Meeting Date Description
05/23/2023 Authorization to Issue Purchase Orders to AAA Oil, Inc. for the Purchase and Delivery of Renewable Diesel Fuel
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended action. Funds are included in the FY 2025-27 Adopted Biennial Budget in 4 of 4
the Vehicle Management Fund and General Fund. Future year funding is contingent on Council budget approval.
Prepared By: Jonathan Tang, Principal Administrative Analyst Approved Forwarded to Council