National IPA Fuel Agreement

awarded by:City of Fort Worth, TX

Fuel Cost Management

• Large expense category for most agencies

• Frustrating to manage due to factors beyond our control– Usage cannot be meaningfully reduced (police, fire,

water services)– Prices established via commodity markets with

inherent volatility

• Fuel cost management is therefore dependent on effective contract price management

Evolution of Fort Worth Fuel Consortium Contract

• Grown to utilization by 30 agencies in Fort Worth area, with consistent inquiries from new agencies

• Resource constraints limit Fort Worth’s ability to recruit new agencies to participate

• Fort Worth contract has been model for other local consortiums

• Opportunity to expand to national availability– No other fuel contract available for public agencies

nationally– Suppliers have increased capability to serve national

group– 2008 volatility in fuel prices exposed many

weaknesses in price management strategies

National IPA

• Cooperative purchasing organization dedicated to public agencies

• Focused on helping agencies reduce procurement costs by leveraging group volume

• Cooperative contracts publicly solicited and awarded by a Principal Procurement Agency, and made available for use by any Participating Agency

• Public agencies may utilize any agreement in the National IPA portfolio by simply registering with National IPA– NO MINIMUM REQUIREMENTS– NON EXCLUSIVE– NO FEES

Types of Public Agencies That May Participate

• States• Cities/Municipalities/Counties• Public/Private Education Institutions & Systems• Airports/Mass Transit• Utilities (Gas, Electric, Water/Sewer)• Government/Education Healthcare Entities• Non-Profits• Any agency that exists for public benefit

National IPA Fuel Contract – Terms and Availability

• Fuel products available– Unleaded

• All octane levels• Conventional or reformulated, as dictated by EPA

requirements and seasonality• Ethanol blends

– Diesel• All grades• Clear or Red-dyed• Biodiesel blends

• Contract covers bulk fuel purchases only• Contract does not include aviation or jet fuels

National IPA Fuel Contract – Terms and Availability

• Available to public agencies in all 48 contiguous United States

• Each agency is responsible for their own purchases, and must meet credit terms of Supplier

• Payment terms are net-10 days from date of delivery

• Effective November 2009 through November 2010, with four, one-year renewal options

• Deliveries subject to testing to ensure compliance with specifications

• Awarded to two suppliers– Martin Eagle Oil Company – Available to agencies in

Texas– TAC Energy – Available to agencies in all states

National IPA Fuel Contract – Pricing Structure

• Fuel prices based on formula: Benchmark Index

+ Market Differential+ Freight+ Taxes (if applicable)= Delivered Price

• Taxes – determination of tax exempt status determined by each agency, and all taxes, credits, and refunds are a direct pass-through to the agency

National IPA Fuel Contract – Pricing Structure

• Benchmark Index– Establishes a verifiable baseline price per gallon based

on the date of delivery– Published daily by the Oil Price Information Service

(OPIS)– Participating Agencies must choose from one of two

Benchmark Indexes to become their basis for all fuel pricing under the agreement

– Decision to be based on most effective pricing strategy for each agency

– Must make benchmark index decision prior to implementing the contract

– Agencies able to switch benchmark index only during annual contract renewal

National IPA Fuel Contract – Pricing Structure

• Benchmark Index – continued– OPIS Net Contract Unbranded Low

• The lowest daily contract pricing posted with OPIS among all suppliers in a Rack City for unbranded product only

• Available through TAC Energy

OR

– OPIS Net Contract Average• The average of all contract prices posted with OPIS,

among all suppliers in a given Rack City, including branded and unbranded fuel products

• Available through Martin Eagle or TAC Energy

National IPA Fuel Contract – Pricing Structure

• Market Differential– The mark-up, added to or subtracted from the

benchmark index, for a given fuel product at a given delivery size

– This includes all costs and profit for the supplier excluding freight and taxes

– Market differentials are fixed for the term of the contract

– Market Differentials are specific to a supplier for a given fuel product in a given Rack City

– Market differentials are specified on a contract spreadsheet and may be referenced by each agency

• Freight– Freight charges are direct pass-through costs from the

supplier to the agency (no profit recognized)– Freight charges are specific to a given fuel product

(unleaded or diesel) and delivery size– Freight charges are based on mileage from fuel

terminal to the agency storage facility– Deliveries to be made via common carrier from

terminals to storage facilities– Freight rate tables are contract documents available

for agency reference

National IPA Fuel Contract – Pricing Structure

Implementation Plan

S = Sign Up

A = Analyze

V = Value Confirmed

E = Establish Account

S- Sign Up

• Sign up to participate with National IPA – www.nationalipa.org

A - Analyze

• Review your current fuel agreement– Current contract commitment– Current benchmark index used for pricing– Current supplier mark-up– Current transportation costs– Obtain copies of current invoices for each fuel product

purchased (including freight and taxes)– Obtain list of physical addresses for all storage tanks

• Review terms of National IPA fuel agreement– Available online at www.nationalipa.org– Discuss agreement with your National IPA

representative

V – Value Confirmed

• Request historical analysis to be done– Contact your National IPA Representative

or – National IPA Customer Relations at

info@nationalipa.org

“Spot-checking” pricing for individual days not recommended due to averages, daily volatility, historical trends in each Rack City and other factors

E – Establish Account

• Contact the supplier to establish an account– Provide FEIN– Provide invoicing requirements– Establish delivery schedule and contacts

SAVE with National IPA!

Contacts

National IPA Customer Relations(866) 408-3077

info@nationalipa.org

www.nationalipa.org