July, 2010www.depo.org

Nationwide Aggregated Nationwide Aggregated Purchase of Motor FuelPurchase of Motor Fuel

for State and Local for State and Local GovernmentsGovernments

…true Aggregation – your added volume makes a difference!

State and Local governments have enormous buying power      

And now, DEPO’s Aggregated Buying Platform enables you toleverage that buying power

Use the same refined, sophisticated and precision tools as the private sector

        Ease of use - No new software or learning curve to join a pooled

purchase

No “Buying Coop” to join; no membership dues; no buyer participation fees

True aggregated purchasing means your additional volume should improve the pricing for all participants

       

Leverage your Buying Power:Leverage your Buying Power:

Collaborative buying Typically difficult to organize, especially across borders DEPO takes the work out of organizing aggregated or collaborative

purchasing, makes it easy, straight-forward and rewarding

Your existing IFB and underlying documentation Upload your detailed documents or easily build your IFB on the

DEPO platform Maintain your own specs/requirements Your documents and specs govern your bids You cede no discretion or control to DEPO or any other party

         Easy to use, money saving and no cost to buyers

Ensures more suppliers, and improved, tighter bids from suppliers Tighter bids mean fewer hedge factors (markups) built into their bids

       

Collaborative Buying Saves Collaborative Buying Saves Money:Money:

Typically, motor fuel represents a major expenditure for SLGs

Major expenditures present significant savings opportunities

Most SLGs/transit agencies are in the middle of existing fuel contracts, but you can still save money by using the DEPO platform

Your existing contracts are normally not guaranteed-purchase contracts

If you participate in a motor fuel pool and receive better pricing, you can, typically, order off a new contract without penalty under your old

contract

Your existing contract vendor will, most likely, bid on the new contract in order to have the opportunity to capture all or a portion of the larger fuel pool volume

       

Motor Fuel Purchasing:Motor Fuel Purchasing:

Fully compliant with all known competitive bid laws, practices and procedures

Entire process modeled after familiar sealed bid approach      

You do not contract with DEPO, hire us or pay us a fee       

You do not cede any discretion to DEPO or any other party

You evaluate your own bids and accept or reject them as you have in the past

If you award a contract, that contract is solely between the supplier or suppliers you chose and your entity

       

Sealed Bid Approach:Sealed Bid Approach:

Multi-year contracts and your required renewal options      

Whether you want to continue receiving Bundled bids Fuel purchase and delivery from same vendor Traditional method of purchase

        Or, whether you want to permit Unbundled bids

Permits vendors to bid on sale of fuel, delivery of fuel or combination of both

Attract more fuel suppliers (including, possibly, refiners), more fuel delivery companies (often MBE/WBE or locally-owned)

More vendors encourages more competition More competition leads to improved pricing and greater savings Could lead to more aggressive bidding since each party is

enabled to address what it is best equipped to do

       

You Decide:You Decide:

Whether you want to continue purchasing fuel in the proven and accepted traditional unguaranteed purchase manner

       Or whether you want to guarantee a portion of your

requirements for Improved pricing on this portion of your purchases

Improved hierarchy positioning in the event of fuel shortages and allocation due to weather, plant shut downs, etc.

We sometimes recommend placing 50%-70% of your last year’s volume in the Guaranteed Purchase Pool and 100% in the

Unguaranteed Purchase Pool to compare bid pricing

Whether you require supplier local storage or some similar requirements

       

You can also specify:You can also specify:

Select your specific Fuels and Quantities From among 460, including diesel, biodiesel, gasoline, natural gas,

jet and aviation fuels

Your Contract terms Start Date (may be several months in the future) Renewal Option requirements Include or exclude State and/or Federal taxes (and amounts)

Your Pricing mechanism

Choose index (OPIS, Platts, Argus) Non-hedgeable indices if you do not plan to hedge Hedgeable indices if you plan to hedge now or in the future  

Your Delivery requirements Storage tank locations

Number, size and type of tanksSpecial instructions for trucking/delivery

       

Comprehensive, yet Flexible:Comprehensive, yet Flexible:

      Fuel Pricing for periodic deliveries on bundled bid basis

       

       

Typical Index-based Pricing:Typical Index-based Pricing:

Per Gallon for Bundled Bids

Index (your selected index – OPIS, Platts, Argus)

± Supplier fixed differential (Increasing volume should reduce this price differential)

+ Freight

+ Other charges (other per gallon charges and truckload or per hour charges)

= Delivered Pricing

    Fuel Pricing for Unbundled bidding (allows each participant in

supply chain to do what it is best qualified to do)

       

       

Typical Index-based Pricing-Typical Index-based Pricing-cont’d:cont’d:

Per Gallon for Unbundled Bids

Sale of Fuel (only) Delivery of Fuel (only)

Index n.a.

± Differential n.a.

n.a. + Freight charges

+ Other charges + Other charges

= Rack Price = Delivery Charges

What does hedging do -- Hedging is a means of stabilizing prices to better permit operating against a budget

       Hedging should not be viewed as a means of saving money – for

savings, look to collaborative/aggregated buying       

Is hedging speculating? Most view hedging as a means for removing speculation for buyers. Some say playing everyday price volatility is speculation

Need help determining whether hedging is suitable for you and in formulating your hedging strategy – we can help

Bulk fuel buyer of 2.5 million gallons (or more) annually needed for hedging

       

Is Hedging Desirable?Is Hedging Desirable?