HomeMy WebLinkAbout5H Gas Purchase Through MN Coop o� p � O �P
ti �
v � 4646 Dakota Street SE
Prior Lake. MN 55372
`�INx�so��'
CITY COUNCIL AGENDA REPORT
MEETING DATE: SEPTEMBER 23, 2013
AGENDA #: 5H
PREPARED BY: KATY GEHLER, PUBLIC WORKS DIRECTOR
PRESENTED BY: KATY GEHLER
AGENDA ITEM: CONSIDER APPROVAL OF RESOLUTION APPROVING THE EXPENDITURE
OF UP TO $80,000 TO PURCHASE UNLEADED GASOLINE THROUGH THE
STATE OF MINNESOTA COOPERATIVE PURCHASING VENTURE
DISCUSSION: Introduction
The purpose of this agenda item is to seek approval from the City Council author-
izing the expenditure of up to $80,000 to purchase 28,000 gallons of unleaded
gasoline through the State of Minnesota Cooperative Purchasing Venture (CPV)
identified in the 2014 budget documents.
Histor
As part of the construction of the Maintenance Facility in 1996, two 6000 gallon
tanks were installed to allow the City to purchase and store bulk quantities of fuel
and gasoline. Buying bulk quantities allows the City to most economically acquire
fuel therefore all city owned vehicles and equipment utilize this site for fueling.
The City average use over the last four years is approximately 34,000 gallons of
diesel fuel and 33,000 gallons of unleaded gasoline.
Historically fuel has been purchased through the standard quoting process each
time the tanks reach the low level alarms. Through this method the City averaged
$3.18 per gallon for both diesel and unleaded fuel.
Current Circumstances
The State of Minnesota Cooperative Purchasing Venture annually enters into a
contract with a vendor to supply cooperative members with fuel. This cooperative
with the state is the same partnership the City obtains salt for winter maintenance.
Staff completed a comparison of costs between the state bid pricing and the spot
pricing method we have been utilizing. The 2013 state bid price for unleaded fuel
was $2.77 per gallon compared to the City's average cost of $3.18. The 2013
state bid price for diesel varied from $3.18-$3.22 depending on the blend com-
pared to the City's average cost of $3.18.
Based on a comparison of historical costs, it is recommended that the City enter
into the CPV for the purchase of unleaded fuel. Assuming a similar annual in-
crease in cost, it is estimated that the use of the state bid can save approximately
$9,500 in fuel costs.
Currently there are 45 City, County, and educational entities that are members of
this CPV for fuel purchasing. Each October CPV members submit the quantity of
fuel they will commit to purchase for the following year. Members must use 100%
of the quantity submitted in the month they commit to purchase. These quantities
are compiled by the state and let for bid in November. Fuel must be used from
Feb.1, 2014 through Jan. 31, 2015.
Conclusion
Staff is recommending joining the Cooperative Purchasing Venture as a cost sav-
ings measure.
ISSUES: The CPV offers the City an estimated 9% reduction in unleaded gasoline costs.
However, there are two aspects of the contracting process to be aware of:
1. The City is required to commit to a quantity of fuel to purchase prior to the price
being set. Although there is inherit risk in this method, historical unleaded pric-
ing through the CPV have been less than the average spot prices the City has
obtained.
2. The City must submit our requested gallons on a monthly basis AND receive
100% of the committed quantity in that month. Due to this limitation staff has
completed an analysis of the usage each month and will request about 85% of
our historical usage to ensure we don't over commit.
FINANCIAL This Cooperative Purchasing Venture is cost effective for city taxpayers potentially
IMPACT: saving $9,500. The State Legislature places a high priority on cities combining
their resources to accomplish day-to-day responsibilities. This is an excellent ex-
ample of this practice.
ALTERNATIVES: 1. Adopt the resolution authorizing the Public Works Director to sign the annual
Contract between the City of Prior Lake and the Minnesota Cooperative Pur-
chasing Venture as part of the consent agenda.
2. Table this agenda item for a specific reason.
3. Deny this agenda item for a specific reason and provide staff with direction.
RECOMMENDED Alternative #1
MOTION:
2
O � PRlp�
H �
U �
4646 Dakota Street SE
,�IN�so'��' Prior Lake, MN 55372
RESOLUTION 13-xxx
A RESOLUTION APPROVING THE EXPENDITURE OF UP TO $80,000 TO PURCHASE UNLEADED
GASOLINE THROUGH THE STATE OF MINNESOTA COOPERATIVE PURCHASING VENTURE
Motion By: Second By:
WHEREAS, Each year the City Council adopts an Operating Budget including a projected amount for the
cost of fuel; and
WHEREAS, The purchase of fuel is necessary to keep the City's fleet operational; and
WHEREAS, Cooperative purchasing will reduce the cost of products to residents of Prior Lake; and
WHEREAS, Signing the Cooperative Purchasing Venture for unleaded gasoline will help maintain a fiscal
responsible budget.
NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE,
MINNESOTA as follows:
1. The recitals set forth above are incorporated herein.
2. The City Council authorizes the Public Works Director to submit a quantity of 28,000 gallons of
unleaded gasoline for 2014 to be purchasetl through the Cooperative Purchasing Venture.
3. Purchases through the Cooperative Purchasing Venture shall be paid from the Central Garage Budget
and allocated to departmental budgets based on actual usage.
PASSED AND ADOPTED THIS 23rd DAY OF September 2013.
YES NO
Hedber Hedber
Keene Keene
McGuire McGuire
Morton Morton
Souku Souku
Frank Boyles, City Manager