City Council
Report
City Council Meeting: May 12, 2026
Agenda Item: 4.J
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To: Mayor and City Council
From: Matthew Hallock, Fire Chief, Fire Department
Christopher Dishlip, Director of Public Works, Public Works Department Subject: Award RFB #4511 to AAA Oil Inc., dba California Fuels and Lubricants, for Purchase and Delivery of Renewable Diesel Fuel for the Public Works and Fire Departments
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of categorical exemption pursuant to Section 15301 (Existing Facilities) of the California Environmental Quality Act (CEQA) Guidelines;
2. Award Bid #4511 to AAA Oil, Inc. dba California Fuels and Lubricants for the purchase and delivery of diesel fuel for the Public Works and Fire Departments; and
3. Authorize the City Manager to execute an agreement with AAA Oil, Inc. dba California Fuels and Lubricants for a total amount not to exceed $2,797,154 over a five-year period, with future year funding contingent on Council budget approval.
Summary
From mid-2023 until June 2025, the City of Santa Monica (City) 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. From June 2025, renewable diesel fuel has been purchased under the Los Angeles County Contract No.
MA-IS-2240008-9. With the pending expiration of the Los Angeles County Contract on August 16, 2026, the Public Works and Fire Departments issued a formal bid #4511 to secure a long-term contract for diesel fuel. Staff recommends awarding bid #4511 to AAA Oil, Inc., dba California Fuels and Lubricants, to secure a contract in an amount 2 of 5
not to exceed $2,797,154 over a five-year period beginning in FY 2026-27. Both the Public Works and Fire Departments will utilize this contract to purchase diesel fuel.
Discussion
The City has used renewable diesel fuel since May 2017. There are just over 100 City vehicles and pieces of equipment (approximately 67 in Public Works and 38 in the Fire Department) that are powered with renewable diesel fuel. This includes heavy-duty Fire apparatus, medium-duty Fire Station Utility and command vehicles, ambulances, crane trucks, backhoe loaders, tractors, and asphalt rollers.
Renewable diesel fuel sold in California (RD99), produced under the State’s Low Carbon Fuel Standard, is derived from waste animal fat from the food processing industry and from waste fat from the fish processing industry. It is processed to be chemically the same as petroleum diesel and can be used as a replacement fuel or blended with any amount of petroleum diesel. While RD99 is more expensive than petroleum diesel (sold in California as Ultra-Low Sulfur Diesel or ULSD), it produces lower greenhouse gas emissions and particulate matter than ULSD. The City’s vehicles and equipment are designed to utilize either RD99 or ULSD interchangeably.
The City currently obtains renewable diesel fuel under Los Angeles County contract MA-IS-2240008-9, which is effective through August 16, 2026. This was authorized as an emergency procurement as the City previously utilized the State of California contract no. 1-23-91-31C, which became unavailable to the City in June 2025 when the State no longer provided renewable diesel fuel under that contract. Shortly thereafter, the City sought to secure a long-term diesel contract utilizing its own competitive solicitation process.
Vendor Selection
Bidder Recommendation
Best Bidder AAA Oil, Inc. dba California Fuels and Lubricants Evaluation Criteria Price; qualifications; references.
Municipal Code SMMC 2.24.180
Submittals Received*
AAA Oil, Inc. $0.3622 per gallon – Ultra-Low Sulfur Diesel (ULSD) $0.4608 per gallon – Renewable Diesel (RD99)
M.O. Dion and Sons $0.20 per gallon – ULSD
$0.20 per gallon – RD99
SC Commercial, LLC $0.70 per gallon – ULSD
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* The price per gallon represents freight, margin, and all supplier charges above the Oil Price Information Service (OPIS) Los Angeles Daily Rack Average for the calendar day. Taxes and fees are not included in this per-gallon differential.
Bid Data
Date Posted Posted On
Advertise In
(City Charter & SMMC)
Vendors
Downloaded
Date Publicly
Opened
01/28/2026 City's Online
Bidding Site
Santa Monica Daily Press 24 03/2/2026
Best Bidder Justification
The evaluation committee reviewed the vendor qualifications and conducted reference checks, and determined that the best bidder was AAA Oil, Inc. The evaluation committee determined that M.O. Dion did not meet the qualifications stated in the bid, while SC Commercial had the highest cost. Therefore, with AAA Oil’s next lowest cost and its history of reliable service to neighboring fire departments and cities, the evaluation committee recommends awarding to AAA Oil.
Staff notes that the value of this contract has been increased due to the closure of the Strait of Hormuz and the resulting geopolitical crises what has caused historic oil supply and price volatility since February 28, 2026. According to the American Automobile Association, the average price of petroleum diesel in the Los Angeles-Long Beach area was $5.588 per gallon in March 2026, reaching a high of $7.818 per gallon as of April 6, 2026. Staff assumed an average of $7.82 per gallon throughout the five-year contract term. The cost of renewable diesel is higher than petroleum diesel due to low manufacturing volumes and other factors, and staff has incorporated the higher price into the contract.
Environmental Review
The contract award for renewable diesel fuel is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 (Existing Facilities) of the CEQA Guidelines. Section 15301 exempts Class 1 (Existing Facilities) projects from CEQA which include the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of existing or former use. The contract for renewable diesel fuel would not result in any modifications $0.70 per gallon – RD99
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to existing fueling facilities and would not expand or materially change existing fueling operations or increase the fleet of vehicles or equipment using diesel fuel. Therefore, the project is categorically exempt as set forth in Section 15301 of the CEQA Guidelines.
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the Vehicle Management Fund and the General Fund to award a contract with AAA Oil, Inc. dba California Fuels and Lubricants for the purchase and delivery of renewable diesel fuel. While there is no financial impact or budget action necessary as a result of the recommended action in FY 2025-26, this contract request will apply to rendered services beginning in FY 2026-27. Funds have been included in the FY 2026-27 Budget Plan which was approved by Council in the FY 2025-27 Adopted Biennial Budget.
Contract Request
Fund
FY 2026-27
Request
Amount
Future Years
Amount Department Account # Total Contract Amount
General $273,700 $1,094,800 01190001.521810 $1,368,500
Vehicle
Management $285,731 $1,142,923 70500001.521813 $1,428,654 Total $2,797,154
Future year funding is contingent on Council budget approval.
Prepared By: Jonathan Tang, Principal Administrative Analyst Approved Forwarded to Council
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Attachments:
A. AAA Levine Act 5-06-26
B. AAA Oaks 2-24-26