Vermont Legislative Joint Fiscal Office
One Baldwin Street  Montpelier, VT 05633-5701  (802) 828-2295  Fax: (802) 828-2483
ISSUE BRIEF
Date: July 1, 2015
Prepared by: Aidan Davis
Preliminary Review of Bulk Fuel Purchasing
The State Contract
The Department of Buildings and General Services administer the state contract for bulk fuel. BGS works
directly with vendors to offer 1 to 2 year contracts for statewide fuel commodities–offering fuel to state
agencies and departments, municipalities, political subdivisions, nonprofits, state colleges, universities, etc.
BGS does not have a “master” list of entities using the state purchasing contract.
The state contract pricing structure is developed by a set process, calculated based upon weekly rack prices and
the contractor’s mark-up.1 Prices vary based upon weekly rack pricing rates and determinations based upon
location and size of delivery. For example, using state contract data, pricing for #2 fuel oil in Montpelier varied
in the following manner in the last three weeks of May:2
#2 Fuel Oil, Montpelier
week of 5/31/15
week of 5/24/15
week of 5/17/15
Motor Transport
$2.0334
$2.1309
$2.1894
Tank Wagon
$2.1521
$2.2496
$2.3081
The state’s standard RFP format for soliciting bids for fuel requirements incorporates both index-based and
fixed-pricing, however, vendors have rarely submitted the fixed-priced option; product volatility continually
being cited for their reluctance to submit bids in that area. To date, the index-based pricing, coupled with both
incremental (small Tank Wagon) and volume delivery (large Motor Transport), has been the strategy BGS feels
best leverages and supports the state’s interests. The pricing proposals received by BGS show the impact these
two delivery platforms have on pricing (Vendor markup component). The Montpelier table information (shown
above) reflects this volume differential.
Usage by State Entities
In an exploration of how well-known or how well-used the state contract is for bulk fuel and gas purchasing, the
Joint Fiscal Office spoke with and reviewed information from a range of state and non-state entities, including:
Vermont municipalities and the Vermont League of Cities and Towns (see Appendix A); Vermont school
districts and the Vermont Superintendents Association (see Appendix B); and UVM and the Vermont State
Colleges (see Appendix C). Of those, only UVM and two municipalities confirmed that they use the state
contract. As a result, we learned that the state contact for bulk fuel and gas purchasing is in many cases wellknown, with the exception of the municipal community, but not necessarily well-utilized.
Cost Comparison
Our review of a limited sample of data received from these entities offers no clear indication that the state
contract prices offer savings or that they are prohibitively high. Rough cost estimates for prices under the state
contract come in at a range both above and below that of independent purchases, depending on the specific fuel
1
http://bgs.vermont.gov/purchasing/fuel/pricecalc
http://bgs.vermont.gov/purchasing/fuel See “Weekly Rack Pricing” and “Contractor Markup” under
“Current Contract Information 2014-2015 – Effective September 1, 2014”
2
VT LEG #310205 v.1
and timing. The variable nature of the state contract is dependent on market conditions. However, different
entities have different needs; some of the entities we have contacted prefer a more stable, fixed-price approach.
Yet, fixed-priced purchasing has risks when volatility is high.
Many entities shared reasons for choosing not to use the state contract for fuel purchases. Reasons cited include:
 A preference to issue system-wide RFPs and make purchase decisions based upon the quotes received.
 The ability to secure good prices locally. There’s a preference to use local vendors and “buy local”.
 Outside providers, including the Competitive Energy Services of Maine3 or other local options, have
offered prices that beat what the state contract is able to offer. In other instances entities have found the
state price for their locale to be less than ideal.
 State contract prices are variable. The school districts and municipalities reported that a fixed price, as
opposed to the risk of the state’s variable pricing, is important for budgeting purposes.
 The state contract does not cover all fuel types (such as wood chips, for example).
 A number of municipalities are unaware of the state contract as a purchasing option.
Purchasing Approaches of Nearby States
In reviewing the purchasing experience in nearby states, the JFO found that while Connecticut, Maine,
Massachusetts, New Hampshire, and New York all have bid-based state contracts for bulk fuel purchases, their
processes differ.
 Connecticut has rolled all of its contracts for heating oil, gasoline, and diesel into one contract that
operates on a daily variable rate with the option to switch to fixed-price if they so choose. The state’s
contracts are required to be used by executive branch agencies, and are available to and used by state
universities, colleges, judicial and legislative branches, and towns and municipalities.
 Maine engages solely in fixed-price contracts focused on the purchasing of gasoline and diesel. The
state’s fuel contracts are only available to state agencies and are used solely by those that have holding
tanks on their properties.
 Massachusetts purchases a larger range of fuels and offers both fixed-price and mark-up options. The
state’s contracts are available to state agencies, as required by law, and are now being used by an
increasing number of cities and towns.
 New Hampshire, like Massachusetts, purchases a larger range of fuels and offers both fixed-price and
indexed-priced options. The state’s contracts are available to all state agencies, as required by law, and
are also available to municipalities, political subdivisions, state colleges and universities.
 New York has regional contracts based on the market and commodity price indexes for a range of fuel.
The state’s contracts are required to be used by executive branch agencies, and are available to and used
by state universities, colleges, local governments, school districts, and nonprofits. New York is currently
considering a triggering program for fuel contracts as a means of price protection. This system would
allow them to hedge or “lock in” a price for fuels or smooth out their exposure to changing prices. As a
result of this system, they could avoid potential price volatility in favor of price stability.
Every few years BGS reviews the fuel buying practices of other states. This year, they have not closed the book
on fixed-pricing, and are in conversations with Maine about their bidding practices to determine if or how
pricing routines and structures should be considered. Although Maine has yet not determined their course of
action for the year, BGS has asked for a copy of the state’s RFP so that they may take a longer and more indepth look at how Maine conducts their bidding process for fuels.
3
The Competitive Energy Services of Maine, LLC, also known as “CES”, provides strategic energy consulting services to
commercial, industrial, governmental and institutional customers. CES shared information on their 21 Vermont clients, but asked that
we not redistribute the information. The list includes municipalities, school districts, and supervisory unions.
VT LEG #310205 v.1
A number of differences, including dissimilar population densities and bulk fuel needs, should be taken into
consideration when making comparisons between Vermont and these neighboring states. The cost of alternative
purchasing options would be dependent on individual contract agreements.
Policy Recommendations
 Increase visibility of state purchasing contracts and educate entities on their available options. Many
municipalities seem to be interested in the possibility of contracting with the state, but were unaware
that the option was available to them.
 Continue to explore the cost and feasibility of an alternative or additional fixed-priced contract option,
as found in Massachusetts and New Hampshire. While it has its limitations, a fixed-priced contract is the
desired option for a number of entities, including school districts.
VT LEG #310205 v.1
APPENDIX A
The Vermont League of Cities and Towns reached out to municipalities to ask if they have used the state
contract to purchase bulk fuel, and if not the reason(s) why. That inquiry resulted in the following 47 responses.
Of those, only two municipalities – Hartland and Weybridge – reported to use the state contract. Roughly 40
percent of the respondents said that they were unaware of the option to use the state contract.
Municipality
Baltimore
Barnard
Bennington
Bethel
Braintree
Brattleboro
Brighton
Bristol
Cabot
Calais
Dover
East Haven
Fair Haven
Fairlee
Fayston
Georgia
Guilford
Hardwick
Hartland
Johnson
Kirby
Ludlow
Montpelier
Response
No. We did not know about it. We will look into it now.
No. Were not aware of option. Will take a look. We get a good price locally.
No. We have very good contracts with local vendors.
No. Try to get good price locally.
No. We did not know about it. We will look into it now.
Brattleboro has traditionally issued a RFQ with the WSESU for a fixed price quote for a defined volume of
prepaid #2 fuel oil. The State contracts are based on variable pricing on a weekly basis which adds an
additional element of risk which the Town seeks to avoid.
No. No real reason. We have looked into using state contracts but there are logistical problems. Who would
deliver to Island Pond?
No. We put out to local vendors.
Did not know about state contracts. I contacted them about the fuel and also water for the water cooler and
k-cups.
No.
No. We did not know about the state contract. Our usual contractor is on the list but there is no price on his
contract. We will definitely follow up.
No. We did not know about it. We will look into it now.
No. We go out to bid. Last year’s one-time “dump” for the municipal building (10,000 gallon tank) was
$3.02/gallon (#2 fuel oil). Monthly fills at the highway garage was $3.20/gal.
No. We did not know about it. We will look into it now.
No. The Town of Fayston has not used the state contract in over 20 years We've had pretty good success
negotiating with our local providers (Gillespie and Bourne). So, I guess, the reason is we haven't been
persuaded to change vendors/supply chain. This is NOT to say that we won't consider another shot at it w/
the state.
No. Our provider is not on it.
No. We will look into it now.
No. Did not know about the state contract. Will include them in the bid this year.
Yes, we have used the state contract for years now.
No. Did not use the state bid. We went out for bid on our own.
No. We did not know about it. We will look into it now.
I have used the State in the past but the last couple of years it has been advantageous to fix #2 and propane. I
have also been able to negotiate a slightly better “adder” on the USD.
At the DPW garage, where our fuel service area is located and where we can accommodate tractor trailer
tanker deliveries, we use the state contract for comparison shopping. For the last couple of years, SB Collins
has beaten the state contract prices including this year Highlands holding the state contract for unleaded fuel.
Also @ the DPW garage, we purchase #2 fuel oil from the state contract due to the better deals with a tractor
trailer bulk delivery. Regarding the rest of the municipal facilities including both treatment plants and fuel for
the City Hall boilers that run the city’s “mini” district heat plant, we utilize the services of Competitive Energy
Solutions (CES) to monitor the market for us and to secure lock-in pricing of #2 fuel oil & propane. Before we
renewed our contract with CES, we compared with the state contract and found it to be a better service in
terms of pricing & reliability. All of these municipal sites can only take delivery via the pony trucks so this is a
VT LEG #310205 v.1
Moretown
Mount Holly
Peacham
Pittsford
Readsboro
Richmond
Roxbury
Rutland Town
Ryegate
Sheffield
St. George
Sharon
Springfield
Stowe
Sunderland
Swanton Village
Vernon
Waterbury
West Fairlee
Weston
Weybridge
Whitingham
Williston
Wilmington
factor as well.
No. We have a good agreement with our supplier with an “adder per gallon”, added to their actual cost. We
do use the state contract for salt, tires, equipment but often the state pays more than what we can get
otherwise.
We have not looked into it but we like to have a local person to call for service, and that is easier when the
fuel is purchased from the same provider.
We did not realize we could use the state contract for heating fuel or anything other than salt.
No. Were not aware that there was a state contract.
No. We are on Massachusetts border and if vendor is up north, transportation costs make it too expensive.
Sometimes a town’s tank is too small to take a whole load and then contractor makes multiple trips and so the
price goes way up. Also, if you buy say “Acme soap”, you need the Acme soap dispenser and the contract is
good for only one year, so next year you need John’s soap dispenser. Same thing with fuel.
No. have not for many years. We “buy local”. Patterson Fuels for heating oil and diesel and now propane.
Most town facilities are now on natural gas.
Roxbury does not use the state contract for heating fuel. Our supplier has always given us a good rate and
lately we have been pre-buying so the rate is even better. We like to keep our business local.
No.
We never heard of this program but would love to hear more. We think we are getting a good deal.
No. We did not know about it. We will look into it now.
No. We did not know about it. We will look into it now.
No. We did not know about it. We will look into it now.
No. We did not know about it. We will look into it now. We joint purchase with school for 175,000 gallons per
season, which gives us good purchasing power.
No. We used it for vehicles but never thought of it for fuel oil. Sometimes it is too difficult because specs don’t
line up and it is not the best price.
We entered into a pre-purchase agreement for propane to ensure we could get the lowest rate possible and
lock it in.
No local vendors are on the list.
No. We didn’t know we could. We will use the list for comparison purposes, often find that the state bid on
items is higher than you could get going directly to the same vendor.
No. We generally don’t think of looking to the state when buying commodities.
No. Local vendor underbids anything we ever investigate. $1.75/gallon for propane last year!
Not as far as we know in the recent past.
Yes. We do use the state contract.
No. We did not know about it. We will look into it now.
No. All buildings are connected to gas line and use natural gas for heating.
Wilmington does not use the State contracts for bulk purchases. We purchase our heating fuel, and diesel
(summer and winter blends) locally at Guy Nido, Inc. They search daily for the best price and when they feel
they have a good price for the upcoming season they notify the local towns and we commit (or not) to the
price, which they lock in that day. It’s quick and responsive to the fuel market and has provided us with great
prices over the past few years. (We just locked in for the upcoming season last week at a price almost $1 lower
than last year.)
VT LEG #310205 v.1
APPENDIX B
According to the Vermont Superintendents Association, each school district takes an individual approach to
their fuel purchases. This issue was discussed at the Facility Maintenance Association meeting on Friday, May
29th. Of the school districts in attendance, none claim to use the state contract. Reasons included:
1. The state contract doesn't have a fixed price; they need a fixed price for budgeting.
2. They use Competitive Energy Services to get the best price and beat the state contract.
Below are some prices that CES was able to secure for schools (names of schools were removed by VSA due to
possible confidentiality issues). Because school names were removed, we were unable to make a direct
comparison to the state price.
Commodity
Supplier
#2
Irving
#2
Price
Gallons
Date
VT: $2.305
14,117
3/20/2015
Dead River
$2.38
5,000
3/27/2015
#2
Dead River
$2.38
12,000
3/27/2015
#2
Dead River
$2.44
2,000
2/25/2015
#2
Dead River
$2.33
85,000
2/11/2015
#2
Dead River
$2.47
35,550
2/13/2015
#2
Burke
$2.29
100,000
12/24/2014
#2
Burke
$2.63
48,450
12/5/2014
#2
Burke
$2.63
59,800
12/5/2014
#2
Burke
$2.06
50,000
11/24/2014
#2
Burke
$2.29
20,500
12/26/2014
#2
Champlain Valley
#2
Dead River
$2.19 and $2.33
$2.44
2/5/2015
6,500
2/13/2015
VT LEG #310205 v.1
APPENDIX C
Vermont Colleges and Universities, Bulk Fuel Purchasing
Entity
University of Vermont (UVM)
Uses State Contract
Yes
Vermont Law School
Castleton State College
No
No
Vermont Technical College
No
Lyndon State College
Johnson State College
No
No
Notes
Has an MOU with SB Collins, the vendor awarded the state
contract, contract #13641. They use #2 fuel and used to also
use #6 fuel.
For the past few years the state colleges issued system-wide
RFPs and made decisions on purchases based upon the quotes
they received back. Given the geographic disparities of the
four campuses (Lyndon, Johnson, VT Tech, and Castleton),
most of the campuses use different local vendors.
They engage different providers for each of the fuels they
purchase.
The state contract price is variable and the college requires
greater certainty in its pricing.
VT LEG #310205 v.1