HomeMy WebLinkAboutTR-31-86 TORN OF NEWCASTLE
r � REPORT File
Res. �' - -
_-__ By-Law #
MEETING: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE MEETING
DATE: May 5, 1986
REPORT #: TR-31-86 FILE #:
SUB.ECT: TENDER NO. T85-21 , PETROLEUM PRODUCTS
RECOMMENDATIONS:
It is respectfully recommended that the General Purpose and Administration Committee
recommend to Council the following :
1 . That this report be received; and
2. That Tender No. T85-21 , Petroleum Products be cancelled; and
3. That a new Tender, to expire December 31 , 1986, be called for
Petroleum Products.
BACKGROUND AND COMMENT:
On December 16, 1985, Council approved the award of Tender No. T85-21 , Petroleum Products ,
to Esso Petroleum Canada , Don Mills , Ontario.
In the past, under a regulated industry, posted prices moved approximately twice a year.
Coupled with the fact that the posted prices did not accurately reflect actual market
prices, large discounts were put in place. Esso Petroleum Canada 's bid was as follows :
LEADED GASOLINE
Posted Tank Wagon Price .3920/litre
Less Firm Discount .0750/litre
Net Price .3170/litre
Provincial Road Tax .0800/litre
Total Unit Price .3970/litre
UNLEADED GASOLINE
Posted Tank Wagon Price .4130/litre
Less Firm Discount .0640/litre
Net Price .3490/litre
Provincial Road Tax .0840/litre
Total Unit Price .4330/litre
Page - 2 -
TR-31-86
TENDER NO. T85-21 , PETROLEUM PRODUCTS
DIESEL FUEL
Posted Tank Wagon Price .3920/litre
Less Firm Discount .0850/litre
Net Price .3070/litre
Provincial Road Tax .0930/litre
Total Unit Price .4000/litre
Under a deregulated industry, posted tank wagon prices does reflect the current market
prices which have a tendency to fluctuate more rapidly.
Due to the steady decline in oil prices over the past couple of months , if Esso Petroleum
Canada were to continue selling gasoline under the tendered pricing schedule, they would
be operating at a substantial loss. It is for this reason that Esso Petroleum Canada
has requested either
a) the present pricing schedule be waived , and they will grant either
the tendered prices or the current agency delivered price minus
a volume discount (approx. .01¢) , whichever is lower. The volume
discount is derived by a sliding scale and is consistent throughout
Esso's channel .
OR
b) That the present tender be cancelled and recalled.
See attached letter from Esso Petroleum Canada , marked as "Attachment A".
Paragraph 17 of the Purchasing By-Law reads as follows :
"If the successful bidder fails to execute the contract or fails to meet
any of the requirements of the contract within the prescribed time, the
tender may be awarded to the next lowest bidder(s) or cancelled."
As the successful bidder has failed to meet all of the contract requirements in that
they are no longer willing to comply with the tendered pricing schedule, staff recommends
that the tender be cancelled and recalled.
Staff also recommends that the new tender be based on "net prices" rather than large
discounts associated with unrealistic posted tank wagon prices. It is also recommended
that the new tender expire December 31 , 1986 which is when the original tender would
have expired. This time period would give us a better indication of market conditions
in the oil industry.
Page - 3 -
TR-31-86
TENDER NO. T85-21 , PETROLEUM PRODUCTS
Due to the flucuating oil price in the market, staff feels that above recommendations
would be in the best interest of The Town of Newcastle.
Respectfully submitted ,
J.R. Blan hard,
Treasur
G.J. Ough, P. Eng. ,
Director of Public Works.
/hjm
Attachment
ATTACHMENT "A" 30
l
F, S S 0 1' E T R O L, E U M C A N A D A
A 1)iuision n(Imperial Oil Limited
I DUNCAN MILL ROAD
DON MILLS,ONTARIO M313 IZ2
MARKETING DEPARTMENT
ONTARIO REGION
April 24, 1986
Ms. Lou Anne Dirkett,
Corporation of the Town of Newcastle,
Newcastle, Ontario.
Dear Lou Anne:
Further to our discussion April 15, 1986, please be advised Esso suggests the
following options re the tender for your fuel requirements:
(1) E.P.C. will grant the tendered prices or the current agency delivered
price minus a volume discount, whichever is lower. The volume discount
is derived by a sliding scale and is consistent throughout Esso' s
channel . In the past, under a regulated industry, posted prices moved
approximately twice a year. Coupled with the fact that posted prices did
not accurately reflect actual market prices, large discounts were put in
place.
Under a deregulated industry, Esso's new posted price reflects current
market prices which will have a tendency to fluctuate more rapidly due to
both market conditions within your immediate area and world market prices.
(2) Should Council not accept option number one, we suggest the Town
retender for its fuel requirements. We suggest a tender driven by net
price without taxes rather than large discounts associated with
unrealistic posted prices should form the basis for your decision to
accept a bid to meet your fuel requirements.
I look forward to hearing from you regarding this matter.
Yours truly,
1
Rick Matthews,
Senior Retail Representative -
Peterborough South
RM/sm
9zr.AA