Fuel Costs Update

Another story from the BCCT today about the fuel costs and how waiting things out worked for Centennial and Central Bucks while the other districts are paying higher prices.

It was a gamble. We all know that. This time it paid off. Prudent and responsible business management goes with the better solution: lock in the savings on a cooperative rate.

I'm told that a member of the school board had a problem understanding that Wednesday night. That person understood that locking in is great and if the price goes higher, the district "wins" by paying the lower locked in rate. But they did not understand the reverse of that premise. They wanted a guarantee that if the price drops, the district would still "win" by receiving the new, lower rate from the oil supplier.

Free enterprise doesn't work that way.

I also make that point to the BCCT editorial board. Their "thumbs up" award to these two school districts is dubiously earned. The districts rolled the dice and came up on top this time. Would they have earned a "thumbs down" for lack of planning had the prices continued to rise? The Centennial/CB gamble was not a prudent course of action. Even the Emperor says he will not gamble with public money.

Districts’ wait pays off with savings on fuel
The volatile cost of diesel fuel drove most districts to buy sooner instead of risking higher costs later.
By MANASEE WAGH

In an economy that has people second-guessing tomorrow’s prices for commodities, two Bucks school districts got a lucky deal on diesel fuel for school buses.

Centennial and Central Bucks stuck it out several weeks longer than 13 other Bucks districts and educational institutions, seeking a less expensive fuel supply over the next 15 months.

The gamble worked.

Now the two districts will be paying about a dollar less per gallon than the rest of the Bucks County Intermediate Unit No. 22 Cooperative Purchasing Group — a savings of hundreds of thousands of dollars. Most districts chose to lock in the fixed price of $4.33 per gallon in early summer with Sunoco Inc., the lowest of several bidders.

Sandy Homel, Centennial School District’s acting superintendent, compared bidding on volatile fuel prices these days to a crapshoot.

“That particular day they were bidding the price was up very high and it appeared it would just be escalating. A bit of a risk was involved. Are you going to have the good fortune that it would come down?” she said.

The other districts preferred to lock in a fixed price because of budgetary concerns and a fear that the price would keep rising, said Wendy Macauley, the business administrator at the IU. Each could opt for either the fixed price or a floating price, which entailed locking in a price at a later date.

At the time, projections said oil prices would skyrocket this time of year.

Lasher, Centennial’s facilities director, advised waiting to see if the price of diesel would go down, an option that Central Bucks also liked. It was a risk, because if the price had increased, the two districts would have ended up paying more.

The newspaper was unable to reach Lasher for comment because he is on vacation.

Now the price Centennial and Central Bucks will get is $3.28 per gallon for deliveries of 6,000 gallons or more, from Oct. 1 until June 30. From July 1 through Dec. 31, 2009, they will pay $3.37 per gallon.

“[Lasher] did the right thing,” Homel said. “I guess you’d say it’s intuition and having the courage to take the risk and know that it’ll be supported.”

Centennial uses close to a quarter of a million gallons of fuel per year and operates approximately 100 school buses. That would be a savings of $250,000 over what the district would pay in the consortium pact.

Waiting was worth it for Central Bucks too, which has 235 school buses.

Morrisville and Bristol Borough did not join the diesel fuel bid at the IU because neither has daily bus service.

The IU’s Cooperative Purchasing Group is a consortium of county districts that commonly join together to get lower rates on a variety of school necessities, from paper to nursing supplies. Usually it’s a cost-saving system because items are bought in bulk.

“Whenever the opportunity presents itself, we like to join forces. Generally speaking, everybody is going to get a better deal. On this particular bid, given the pricing, we didn’t feel it was a good choice,” said Tom McCambridge, director of finance for Central Bucks School District.

Individual school systems made what they judged to be the best decision at the time, said Joseph Paradise, Neshaminy School District’s business administrator. His district got stuck with the higher price.

“It’s a major risk to wait,” he said. “Sometimes you win and sometimes you lose. Most times in the past we’ve won. Nobody knows what’s happening with fuel and oil today.”

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THUMBS UP -- To Centennial and Central Bucks school district officials for shopping around and coming up with a better deal for diesel fuel than they would have paid as part of a county consortium.

The Bucks County Intermediate Unit No. 22 Cooperative Purchasing Group early this summer inked a deal that will cost all but two of the county’s 15 school districts $4.33 per gallon of school bus diesel. Central Bucks and Centennial decided to wait and see what would happen. By July prices began to fall, and the two districts recently got contracts for $3.28 a gallon through June 30, 2009 and $3.37 a gallon from July 1, 2009 through the end of next year.

By prudently shopping around, Centennial and Central Bucks officials will save taxpayers hundreds of thousands of dollars.