A7 ADMINISTRATIVE REPORT Date: January 24, 1997 File No.: CREP069.wpd CC File 1801-1 TO: Vancouver City Council FROM: Manager of Purchasing Services SUBJECT: Co-operative Purchasing of Gasoline and Diesel Fuels RECOMMENDATION A. THAT, as a member of the negotiating team for the 1997 Co-operative Fuels RFP, the Manager of Purchasing Services be authorized to (1) accept on behalf of the City of Vancouver the proposal (excluding those with futures-based formulae ) that will provide the City with the lowest overall cost, and (2) execute the contract subject to the approval of the contract documents by the Director of Legal Services. and further, B. THAT the Manager of Purchasing Services report back to Council following the award of the contract. COMMENTS OF GENERAL MANAGER The General Manager of Corporate Services RECOMMENDS approval of A and B. COUNCIL POLICY The policy of Council is to award contracts for the purchase of equipment, supplies and services that will give the highest value based on quality, service and price. - 2 - On March 4, 1980, City Council authorized co-operative purchasing when benefits to the City are indicated . Contracts with a value over $300,000 are referred to Council for approval. BACKGROUND The City has a contract with Shell Canada Products Ltd. to supply and deliver gasoline and diesel fuels. This contract which expires on February 28, 1997 has provision for two 12-month extensions by mutual agreement between the City and the contractor. To facilitate the City's participation and the 1997 Co-operative Fuels RFP, the current contract has been extended until May 31, 1997. DISCUSSION The City of Vancouver annually purchases 6 million litres of diesel and gasoline fuel for a total annual cost, including delivery and taxes, of almost $3 million. The City has been invited to join the North Shore Co-operative Purchasing Group (i.e. cities of Burnaby, North Vancouver and West Vancouver, and the District of North Vancouver) and several other British Columbia municipalities in a multi-municipality Request for Proposal (RFP) for gasoline and diesel fuel for 1997 with a proposed one-year extension. If Vancouver were to join, the combined volume of this co-operative purchasing group is about 18 million litres (three times the City of Vancouver volume) and should give sufficient leverage for all participants to obtain better prices than the City of Vancouver could obtain above. The co-operative purchasing group has agreed to include all of the City of Vancouver s standard conditions in the RFP. Consequently, the Manager of Purchasing Services agreed that the City would participate. All purchasing agents involved (other than the City of Vancouver s) in this RFP have been delegated by their Councils to negotiate with the shortlisted Vendors, make the award and execute the contract documents. To facilitate negotiations and maximize the Co-operative group's leverage, it is desirable that the City of Vancouver s Manager of Purchasing Services be given similar authority. Negotiations will be focused on the pricing formulae and delivery points. - 3 - It is proposed that, for the 1997 Co-operative Fuels RFP, Council authorize the Manager of Purchasing Services to accept the proposal (excluding those with futures-based formulae) that will provide the City with the lowest overall cost; and further, that the Manager of Purchasing Services be authorized to execute the contract subject to the approval of the contract documents by the Director of Legal Services. If Council wishes to reserve final approval to itself, the City of Vancouver will still be able to participate in the 1997 Co-operative Fuels RFP. However, the negotiating team would lose significant leverage as the negotiating team could not assure the shortlisted Vendors, during negotiations, that the award would include the City s 6 million litres. That would probably result in less than optimal prices. * * * * *