Suburban firm wins $150 million contract to provide diesel fuel for CTA

The CTA board this month approved a huge $150 million contract for diesel fuel that went unreported, as far as I can tell. So the Tattler is here to give you the 411 on what happened.

The CTA on March 10 awarded the $150 million contract to Hartney Fuel Oil Co. The Forest View-based firm in Chicago's west suburbs will provide ultra low sulfur diesel fuel for 18 months under the not-to-exceed price negotiated in the contract. Hartney also had won the prior contract for fuel.

The contract was competitively bid and the CTA chose "the lowest responsive and responsible bidder," according to a spokesperson. She also explained how a commodity whose price changes all the time can be competitively bid:

"The competitive portion of diesel fuel contract is a fixed price that is called the differential. This is the distributor's profit margin, trucking fees, insurance, office overhead, etc. As CTA is a major purchaser of diesel fuel, bids are highly competitive with respect to the differential since this is the key price element for which bids are evaluated. The CTA pays its fuel provider market price, which fluctuates according to Chicago wholesale or rack prices, plus taxes and the differential."

During the week of March 8 to 14, the price per gallon for diesel fuel was $2.5294.

When I asked whether the CTA would issue a press release about this big for diesel fuel, I was told: "Although it is a large purchase, that's because it is a fuel contract and the nature of our business is that we use a lot of fuel. For context, the previous contract was for $300 million. This contract is for smaller amount because it is for a shorter term."

The CTA noted in a December press release on the 2010 budget how it manages fuel costs:

"The CTA actively manages its fuel costs through the use of hedging
mechanisms. The decrease in the per gallon costs, combined with hedging
and lower usage will allow CTA to reduce its fuel costs by $35.3 million
from 2009. Fuel hedging alone will save CTA $6.7 million in 2010."

So, that's probably more than you ever wanted to know about how the CTA buys its fuel, but at least you know now!

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  • "Hartney also had won the prior contract for fuel."

    So, was it Hartney Fuel Oil Company that had the prior contract to supply the CTA for over $4.50 a gallon through December 2009, when diesel was maybe $2.50 a gallon through that time (note the Feb. 2010 Financial Report noting that fuel cost suddenly dropped 45% since last year)?

    At a 90% markup, Hartney or whoever had the last contract should have been bidding 39 cents a gallon this time around.

    So, sure CTA isn't going to issue a press release about that. In fact, instead of aping the omnipresent spokeswoman, somebody should actually do an investigation of CTA contracting practices in this area, as I suggested about 8 or 9 months ago.

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