Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Vancouver City Council

FROM:

General Manager, Engineering Services in consultation with
General Manager, Board of Parks and Recreation

SUBJECT:

Fuel System Funding

 

RECOMMENDATION

POLICY

On July 28, 1998, Council approved the "Replacement of the City's Fleet Management and Fuel Dispensing Systems" which included $300,000 for the replacement of the fueldispensing systems. The costs were to be repaid by a fuel surcharge over a five year period.

The City's Mission Statement speaks of a City which cares about its environment. The associated objectives include the "protection and improvement of the environment".

SUMMARY

The current fuel management system used by the City and the Park Board has exceeded its useful service life and does not meet the needs of the fuelling operations. Funding was approved in 1998 for the replacement of the fuel dispensing system, and a Request for Proposals (RFP) was issued. During the evaluation of the proposals, mandatory environmental upgrades and additional system requirements were identified by staff that exceed the original scope of work and the approved $300,000 funding for this project. The provision of internal fuelling is less expensive than using external private facilities and, therefore, Recommendations A, B, and C are provided to enable the City to continue with a corporate fuel system.

The mandatory upgrading identified in this report was triggered by recently completed renovations to the building adjacent to the Manitoba fuel station. The mandatory upgrades are required for the fuel station to comply with Fire By-law regulations and to minimize environmental risks. These upgrades include the addition of tank level sensing equipment, and are contained in Recommendation A.

Recommendation B enables the Park Board fuelling sites to remain part of the corporate fuel operation by approving the installation of the new system at four Park Board locations. These sites were not anticipated as part of the original scope of work; they should be included however, because they house equipment that is not practical to move to one of the centralized fuelling locations, such as lawn movers and tractors.

And finally, staff identified that there would be several operational benefits to the management of the fleet and fuel distribution systems if a cardless fuel management system was implemented as outlined in Recommendation C. A cardless system would allow for more efficient fuel dispensing and management, and create better security and control of the City's fuel. These improvements would result in savings of approximately $180,000 annually. Using the savings from Recommendation C, the payback period for the fuel management system (Recommendation B and C) would be about 5.8 years. This is calculated using a conservative model that does not include external benefits.

PURPOSE

The purpose of this report is to request Council approval to adjust the scope of work andfunding for the replacement of the City's fuel system. This includes environmental and Fire By-law required upgrades to the Manitoba fuel stations, replacement of the existing Park Board fuelling equipment, and the use of cardless technology for fuel authorization.

BACKGROUND

The City and Park Board operate seven major fuelling locations. These sites provide fuelling services for the fleet at three City sites and at four Park Board yards. In addition to providing fuel to the City fleet, these stations provide a mechanism for obtaining vehicle odometer readings required for the preventative maintenance program, and provide a strategic reserve of fuel in the event of an emergency.

On July 28, 1998, Council approved funding for the replacement of the existing City fuel system as it has reached the end of its service life. At that time, the fuel system was proposed to be replaced at the City sites with a card-lock system, at a budget price of $300,000. During the evaluation of RFP No. PS00007, staff identified mandatory Fire By-law and environmental upgrades, and additional system requirements that were not included as part of the original scope of work.

DISCUSSION

The City and Park Board fuel stations provide fuel services to most of the 3500 units in the City and Park Board fleet. These stations play a vital part in obtaining odometer readings that are used to schedule the fleet's preventative maintenance program, and will be the City's primary source of fuel in the event of an emergency.

Mandatory Upgrading
Recent building renovations at the Manitoba fuel station triggered the need for further upgrades to the fuel system to meet the Fire By-law requirements. A leak monitoring system is required to be installed to provide an early warning should any fuel leakage occur. Recommendation A includes an automatic tank level system that will be configured to monitor the tanks for leaks and will alert staff to potential problems. It was also identified that the installation of an automatic tank level system will provide several administrative benefits to the City. The system will allow the remote monitoring of tank inventory levels. Inventory levels can be accessed by the fuel management software, and this will provide ready access to daily inventory auditing as required by regulations. Furthermore, the accuracy of fuel deliveries can be verified to ensure that deliveries are billed accurately to the City. The City will be required to tender for these upgrades.

It was also identified that installation of under-pump containment sumps would be required. These sumps would contain any fuel losses within the pumps and prevent contamination in the event of a leak in the pump.

Addition of Park Board Sites
The Park Board currently has three fuelling locations on the existing City fuel management system. In order to remain compatible with the new corporate fuel system, these sites are required to be upgraded to the new fuel management system. The Park Board is also proposing to add the Sunset Nursery fuelling site to the corporate fuel management system. These four sites handle the majority of the Park Board fuelling transactions. Inclusion in the corporate system is required for compatibility with the fleet management system, for improved odometer data recording for preventative maintenance planning, and for improved inventory control and security. These sites were not anticipated in the original scope of work because they did not require replacement at that time. These Park Board sites should be added so the Park Board can remain part of the corporate fuel operation.

Cardless System
The primary functions of the fuel management system are to limit fuelling at City fuel stations to authorized vehicles, to accurately track fuel consumption for each vehicle, and to obtain accurate vehicle odometer readings for use in the fleet management system for preventative maintenance programs. Traditional cardlock systems require human input and therefore the data obtained is subject to occasional errors. A cardless authorizing system would eliminate the potential for errors, improve accuracy, and strengthen security.

A cardless fuel management system operates by transmitting vehicle identification and odometer data from an on-board computer through an antenna on the vehicle to a receiver on the fuel hose. The information is then validated in the fuel management system, and authorized fuelling can proceed immediately. With a card system, the driver must go to a station, swipe the vehicle's fuel card, input the odometer reading, and then return to the pump before fuelling can begin. Authorizing a transaction with a card system takes significantly longer than with a cardless system, and the opportunity for error is much greater.

Cardless fuel systems also limit the possibility of fuel losses. Fuelling is only permitted while the vehicle antenna and pump receiver are within close contact. Once the pump hose is removed from the fuel filler, the fuelling transaction is terminated. This prevents fuel from being pumped into unauthorized vehicles, and it will prevent accidental pumping of fuel when the nozzle is not inserted in the fuel filler. With a card system, once the transaction is authorized, fuel can be dispensed at any time into any vehicle.

Staff have evaluated the cardless fuel system, including demonstrations and site visits, and recommend this system over a traditional card-based system. A cardless fuel system has been successfully used by the Coast Mountain Bus Company (Translink) for the last six years. Improvements in transaction accuracy will benefit the City in improved inventory accounting, improved vehicle tracking, and improved maintenance scheduling. This system will be installed at the major fuelling sites and on our two mobile fuel trucks.

ALTERNATIVES

Staff examined alternatives to the proposed fuel system, including mobile fuel delivery services, fuelling at outside public stations and alternate fuel management systems. Compared to the cardless fuel management system, these alternatives have several key disadvantages.

Mobile fuelling services would only provide diesel fuelling. Gasoline, propane, and natural gas fuelled units could not be serviced by these providers. The cost of this service is approximately $0.23 per litre more than the City's fuel station costs. In addition, there would be increased administrative costs in entering fuel and odometer data into the fleet management and billing systems. These costs could be up to an additional $0.05 per litre.

Fuelling at outside public fuel stations was also investigated by staff. There are several key administrative and security disadvantages. There would be increased administration in monitoring fuel usage and verifying fuel purchases against the invoiced amounts. Also, new mechanisms would be required to collect odometer readings for the preventative maintenance program since this data cannot be tracked reliably at most stations. Manual entry of the odometer data from manual sheets would be required. Furthermore, this system would be more open to errors and possible abuse. Drivers could also fuel with more expensive high octane fuels ($0.06 to $0.12 per litre more, 8% - 16% premium) that are not required. Marked fuel (off-road fuel that has lower excise taxes) is generally not available at outside stations. Not utilizing marked fuel would increase the cost of fuel for off-road units by $20,000. Based on February prices, the total cost for outside self serve fuelling, including administration costs, would be up to 8% more expensive than the City's current full serve fuelling operations. A more complete comparison of inside versus outside fuel service costs is included in Appendix A.

Staff also reviewed cardlock based fuel management systems which are less expensive than cardless type systems, but are not as secure. With cardlock systems, there are still opportunities for error and abuse. Once the system is authorized by the operator, fuel can be dispensed into any vehicle or container. The odometer reading is also subject to input error from the operator. Furthermore, cardlock systems lack many of the administrative benefits of a cardless system. The additional cost for the cardless system is approximately $600,000, including site hardware, vehicle hardware and installation. The direct annual savings for the cardless system are $180,000, with a payback period of 3.3 years. In addition, there are additional fuelling and maintenance efficiencies that the City would gain with a cardless system.

A final consideration was that the City fuel stations will be the main source of fuel for City equipment in the event of an emergency or disaster. Having a reserve of on-site fuel ensures that the City has access to fuel for emergency operations. Access to fuel from commercial vendors can not be guarranteed during an emergency or disaster.

FINANCIAL IMPLICATIONS

It is recommended that funding be approved to tender for the supply and installation of a tank level system and associated upgrades to the fuel tank containment systems as required to comply with the Fire By-law. The estimated cost will be $200,000. Funding is recommended to be provided from the Capital Financing Fund in the form of a loan repayable over a five year period.

Fuel management site hardware and installation costs for the four Park Board fuelling sites will cost approximately $115,000 including taxes. Staff recommend that funding for the Park Board upgrading be provided from Park Board capital funding.

Funding of $300,000, including contingencies, has been previously approved for the replacement of the fuel systems at three City fuelling sites. The site hardware and

installation costs for the three City fuelling sites, the site hardware for the cardless system, and the additional system installation on two fuel trucks will cost approximately $350,000. Additional funding of $50,000 for the fuel truck and cardless authorizing system components is required from the Capital Financing Fund as outlined in Recommendation C. The total system costs will be repaid through identified savings at City fuelling sites for a five year period.

The required vehicle hardware and installation for the cardless fuel management system will cost approximately $450,000: $250,000 for fuel system vehicle hardware, and $200,000 for installation supplies and labour. For new vehicles, the hardware will be installed by City staff as part of the new vehicle outfitting process and the costs will be included in the vehicle outfitting capitalization. For existing units, a retrofit program will take place over the 24 months following the award of the RFP by City staff, to coincide with regular preventative maintenance work. The costs of the retrofit will be charged to the Truck Plant Account and capitalized against the individual vehicles. Savings from this system will offset the associated costs.

The total proposed fuel management system cost, excluding mandatory upgrades ($200,000) but including Park Board site installations and implementation of a cardless authorizing system, is approximately $915,000. A summary of the funding is outlined below:

Staff have identified approximately $180,000 in direct annual savings to the City if the new fuel system is installed with the cardless authorization system. Fuel efficiency savings are expected to be realized in the second year. These savings would be redirected annually to repay the loans from the Capital Financing Fund and to offset the capital cost of installing the new vehicle equipment. The payback period for this system will be about 5.8 years using a conservative model that only includes direct savings and does not include external benefits.

The installation of the tank level system will provide the City with early warning of any potential problems with our underground storage tanks, and therefore significantly limit our potential environmental liabilities. If external benefits are included, such as improved vehicle operator efficiencies and reduced environmental risk, the payback period is reduced by at least half.

The existing City fuel management system has been in use since 1989. It is expected that the new system will have a useful service life of at least 15 years.

PERSONNEL IMPLICATIONS

Due to the reductions in fuelling time requirements, two fuel attendant positions will no longer be required at the City fuelling sites. The staff reduction will be done through attrition. TheUnion has been consulted on this issue.

CONCLUSIONS

Upgrading the fuel tanks to include remote level monitoring will improve inventory management, will help to detect potential fuel losses before environmental damage can occur, and is required to bring the stations up to current code requirements. Implementing a cardless fuel management system will improve the City's fuelling operations. Improvements to fuel and odometer tracking will improve the preventative maintenance program's operation and will decrease overall maintenance costs to the City.

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COV to Retail Price Comparison Appendix A

Pricing as of February 6, 2001
Costs in $/Litre

Category COV Cost Retail Cost

Fuel Cost +

Administration

Net Fuel Cost with Administration

Cost of Providing "Full Service" (Current COV Service Levels)

Total Fuel Costs including "Full Service"

+Fuel Costs - COV Price before GST Discount, Retail Price adjusted for volume discounts

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