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.




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