Agenda item

Supply of diesel and associated lubricants - key decision

Report of Corporate Director of Resident Services


Shane Staley, Fleet Manager, presented the report and stated the following:


·  Fleet Services currently use the ESPO framework, which is a ‘direct award’ process for the provision of diesel and other lubricants. This contract is due to expire 30 August 2022 and the report seeks approval for the Council to go out to ‘mini competition’ by using the Crown Commercial Services (CCS) framework agreement and award a contract to one supplier to purchase fuels.


·  There is significant volatility in the fuel market at the moment and the proposed arrangement would allow greater flexibility and will secure more competitive prices for fuels.


·  Despite the ongoing electrification of Nottingham City Council’s fleet, diesel is still essential for running 49% of the fleet including refuse collection vehicles, sweepers and minibuses.


In response to questions it was confirmed that an option to use fuel cards would be held in reserve to be used if required but this would mean paying forecourt prices for fuel and presented issues with larger vehicles such as refuse trucks accessing the pumps.


Resolved to


(1)  approve going out to 'Mini Competition' and award a contract to one provider via the Crown Commercial Services (CCS) framework agreement. The contract will be awarded for an initial 2-year period with an option to extend it by 1+1 years


(2)  approve spend of £9,600,000 for fuel and lubricant supply for the NCC vehicle and plant fleet


(3)  delegate authority to the Director of Neighbourhood Services to award the necessary contract(s) to the chosen supplier under the new framework.


Reasons for recommendations


(1)  To ensure the provision of the services which are compliant with UK Procurement legislation and the Council’s procurement rules.


(2)  To enable the Council to access market competitive prices throughout the purchasing period through the aggregated purchasing power of the awarding Framework.


(3)  To ensure commercial and financial risks to the Council are mitigated by the Framework Terms and Conditions.


(4)  The framework lists approved suppliers chosen through a qualitative and pricing competition which Nottingham City Council is permitted to access as a Contracting Authority.


(5)  Continued use of frameworks means that the investigation into the most competitive suppliers and price of fuel is undertaken on behalf of Nottingham Council.


Other options considered


(1)  The Council could choose to undertake a full competitive tendering process for the provision of automotive fuel and oil. This has been discounted for the following reasons: - A full competitive tender will take around 9 months to complete meaning any new arrangements are unlikely to be in place before August 2022 when the current contract ends. Furthermore, the relatively low volumes of fuel and oil purchased by the Council, when compared to the terms of the framework agreement, means that any tendered prices may not reflect best value because similar economies of scale may not be achieved. A full competitive tender would increase the procurement costs without, as noted above, providing best value for the Council.


(2)  CCS has an open framework for the provision of Fuel Cards that the Council could utilise going forward. The framework operates with a number of national suppliers including well-known forecourt names such as BP & Shell. The Council would be charged at pump prices per litre via the card transaction. Each card will be required to be assigned to a vehicle to reduce the risk of fraudulent purchases and would require fuel only transactions. Dependant on the annual volume of fuel purchased a rebate will be applied retrospectively to reduce the overall cost to the Council. This option requires strict management controls to be in place to ensure compliance and spend. In order to achieve a similar pricing structure when compared to the expected unit prices achieved under from bulk fuel framework the Council will be required to use a large volume of fuel (a likely outcome) and pay by direct debit, which will increase cash flow pressures, when compared to the bulk fuel framework that operates on a credit basis. Although this option carries a number of operational and compliance risks, as described above, it may provide some flexibility going forward because of the Council’s Carbon Neutral (CN28) programme of change. Unlike the bulk fuel framework, the Council is not required to maintain the local depot infrastructure for vehicle fuelling which does incur additional overhead costs. Given that the direct provision of fleet may change as new models of service delivery changes because of CN28 these costs may start to become disproportionately high. The table in section 2.5 helps show how proportionate the financial and operational risk associated with this option will be for the main service users given the current usage profile. At this stage, this option is not considered to be the preferred route to market. However, this option should remain ‘under review’ as the demand for direct fuel provision may change as an outcome of the CN28 programme.


(3)  No Action Taken – The Council would still require the provision of Automotive Fuel and Oil therefore individuals would need to either purchase via high street forecourts which would be both expensive and administratively burdensome or be obliged to operate under any supplier’s standard terms and conditions and price banding which would not provide best value. In addition, this would be non-compliant with the Councils procurement rules and UK Procurement Legislation as the service value dictates that a full, robust and complaint process would be required. After evaluation, the recommended option would be to market test the provision of the service using the established CCS Framework Agreement and award an initial two-year contract. This would provide a period for continuity of service provision as the Council continues to implement the CN28 vision and ensure that new commercial entities have a period of stability and to assess their individual requirements prior to seeking their own competitive procurement process. This option also balances the need to deliver a value for money service alongside managing the procurement and commercial risks.

Supporting documents: