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July, 2010 Nationwide Aggregated Purchase of Motor Fuel for State and Local Governments …true Aggregation – your added volume makes a difference!

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Presentation on theme: "July, 2010 Nationwide Aggregated Purchase of Motor Fuel for State and Local Governments …true Aggregation – your added volume makes a difference!"— Presentation transcript:

1 July, 2010 Nationwide Aggregated Purchase of Motor Fuel for State and Local Governments …true Aggregation – your added volume makes a difference!

2 State and Local governments have enormous buying power And now, DEPO’s Aggregated Buying Platform enables you to leverage 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:

3 Collaborative buying Typically difficult to organize, especially across borders D EPO 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 D EPO platform Maintain your own specs/requirements Your documents and specs govern your bids You cede no discretion or control to D EPO 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 built into their bids Collaborative Buying Saves Money:

4 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:

5 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:

6 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:

7 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:

8 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 tanks Special instructions for trucking/delivery Comprehensive, yet Flexible:

9 Fuel Pricing for periodic deliveries on bundled bid basis 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

10 Fuel Pricing for Unbundled bidding (allows each participant in supply chain to do what it is best qualified to do) Typical Index-based Pricing-cont’d: Per Gallon for Unbundled Bids Sale of Fuel (only)Delivery of Fuel (only ) Indexn.a. ± Differentialn.a. + Freight charges + Other charges = Rack Price= Delivery Charges

11 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?

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