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SR-1000-001-07 (2) TRANS:MAINT:JC:PB\F:TRANS\ADMIN\COUNCIL\WORD\ARCOFUEL Council Meeting: January 11, 2000 Santa Monica, California TO: Mayor and City Council FROM: City Staff SUBJECT: Authorize the City Manager to Negotiate and Execute a Sole Source Contract with ARCO Products Company to Furnish and Deliver ARCO EC-Diesel Test Fuel. Introduction This report recommends that the City Manager be authorized to execute a one- year sole-source contract with ARCO Products Company (ARCO) to furnish and deliver ARCO EC-Diesel (EC-D) low sulfur diesel test fuel. The EC-D fuel will be used in 20 of the Transportation Department’s diesel buses to test and verify reductions in particulate and nitrogen oxide emissions. Background The Transportation Department operates 166 diesel buses. In keeping with the City’s policy to purchase alternatively fueled vehicles, in November 1999, the City Council approved the first purchase of 37 low emission, liquefied natural gas (LNG) powered 40-foot buses. These buses are scheduled to arrive the first quarter of 2001. Until the entire diesel bus fleet has been replaced with alternatively fueled buses, diesel buses must be used, yet staff will endeavor to make use of technological advances to ensure buses produce the lowest level of emissions possible. 1 Arco has developed a decisively cleaner diesel fuel called EC Diesel (EC-D), which has resulted in a 15% reduction in particulate matter emissions and a 5% reduction in nitrogen oxide emissions, without reducing fuel economy. This low sulfur fuel has a sulfur content level of less than 10 parts per million (PPM), as compared to the sulfur content of the diesel fuel currently allowed in California (CARB diesel), which has a sulfur content almost 12-times greater, or 120 PPM. According to studies and air quality regulators, the lower the sulfur content the greater the benefit in reducing air pollution and harmful emissions. ARCO has requested that the Big Blue Bus participate in a year-long demonstration program of the EC-D fuel using 20 of our buses. Ten buses will use the EC-D fuel only, and ten will use the EC-D diesel fuel and be equipped with advanced technology mufflers called Passive Regenerating Particulate Filters (DPF). These mufflers are expected to reduce emissions even farther, to a level equivalent to that of natural gas powered buses. The manufacturers of the DPF after-treatment devices will furnish those devices to ARCO, who will provide them to the Big Blue Bus at no cost to the City. ARCO will furnish the fuel to the City at the same cost we pay for our regular CARB diesel fuel. ARCO will also furnish the fuel tanks for the storage of the fuel. It is estimated that a maximum of 257,000 gallons of EC-D diesel will be needed to operate the 20 buses for the one-year test period. 2 Ordinance Number 1743 (CCS), Section 5, paragraph 2.24.080 (1) of the Santa Monica Municipal Code allows exception to competitive bidding when products are purchased from a sole provider. Budget/Financial Impact The total cost to procure the EC-D fuel is estimated to be $257,000. Fiscal Year 1999-2000 appropriation authority for this purchase exists in the Transportation Department fuel account number 41654.522911. No additional funds are required to purchase the EC-D fuel. As the test fuel is used, it will be expensed against available FY 1999-2000 appropriation authority. For the period of July 1, 2000 through June 30, 2001, appropriation authority will be requested in the FY 2000-2001 budget. Recommendation City staff recommends that the City Council authorize the City Manager to negotiate and execute a contract with ARCO Products Company to furnish and deliver 257,000 gallons of ARCO EC-D diesel test fuel at a cost not to exceed $257,000. Prepared by: John Catoe, Director of Transportation Pat Butters, Maintenance Manager 3