Township Saves $15K With Cooperative Fuel Purchase

Public Works Director Kevin Costello and Finance Director Shannon Drosnock have found a way to save $15,000 a year in fuel costs – join the party.

Supervisors Monday night approved purchasing gasoline, diesel, #2 heating oil and kerosene from an 18-month cooperative purchasing contract awarded to Riggins Inc., of New Jersey, through the Southeastern Pennsylvania Counties Cooperative Purchasing Board.

“One of my favorite things is any kind of cost savings for the township,” said Costello. “This year, there is a cost savings opportunity to the township to purchase petroleum products from the cooperative purchase contract.”

Costello said a cost savings analysis resulted in $10,500 per year on gasoline and $2,500 per year on diesel fuel.

Furthermore, an additional $2,000 in savings was found by moving from 89 Octane to 87 Octane gasoline for police department vehicles.

“The combined total cost savings represents about a 13 percent reduction in fuel costs from 2011,” said Costello.

Montgomery Township usually buys its fuel from Riggins Inc. Now, cost savings were possible by buying in bulk rather than individually.

“How’s that possible?” asked supervisor Mike Fox. “Gas prices are much higher this year than last year.”

Costello said the bidding process this year would be done on a floating price versus wholesale prices.

“The rate of gasoline/diesel is always a floating rate, and the way we did it previously was a cost differential,” Costello said. “If the cost of gas at the wholesale price was $3, our differential would make it $3.15 a gallon. We are still at a floating price, but bidding it this way, we are bidding the posted low price plus the delivery charge. When we took the price and added the delivery charge and did the cost analysis, it was a lot cheaper obviously because of volume.”

Township Manager Larry Gregan said the consortium was able to negotiate a much better price for the township on an individual basis.

“We use about 36,000 gallons of fuel a year. Riggins, through the contract, delivers one million gallons of fuel a day,” Costello said. “We are actually get a cost savings by buying through the consortium.”

Costello said he was made aware of the purchasing cooperative through the Montgomery County Public Works Association.

“We were continually talking about asphalt pricing and cooperative purchasing as one of the ways to save money. A few townships were jumping on board with it. When the contract became effective in January, I talked to Riggins and was told it was a matter of the board passing a resolution,” Costello said.

Fox asked if the township was concerned about the rising price of gasoline and what that may do to asphalt costs.

“Is there something in the contract that covers us from the normal amount of increase in gas prices?” asked Fox.

Costello said everybody was at mercy with posted gas prices. Asphalt prices, he said, are done through the Asphalt Price Index since the township is utilizing Liquid Fuel Funds.

Gregan said the index is published monthly, and establishes the price of asphalt used in blacktop purchased in the following months.

“There is a formula within PennDOT regulations that determines how that asphalt increase affects the price of blacktop, depending on how the fuel prices are this summer,” Gregan said. “When we have a fixed price bid … we could see an increase.”