HomeMy WebLinkAboutIR 8474 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8474
To the Mayor and Members of the City Council March 4, 2003
Page 1 of 2
SUBJECT: M&C **P-9751, PURCHASE OF BULK CHLORINE
V
ax FROM ALTIVIA FOR THE WATER DEPARTMENT
lot$
In the Pre-Council meeting of February 18, staff was asked why the City would wish to
continue doing business with a firm that had cancelled an agreement with the City.
As background, on M&C P-9483, dated October 30, 2001, Altivia was awarded a contract for
bulk liquid chlorine at a price of $136.89 per liquid ton.
In the Spring of 2002, worldwide market demand caused a sharp escalation of chlorine market
prices. Of the 23 bulk chlorine producers in the United States, 22 raised their wholesale
prices by an amount of $50 per ton. The remaining producer increased its' wholesale price by
$150 per ton. Altivia was supplied by one of the 22 that increased their wholesale price by
$50 per ton. According to government producer cost index reports investigated at the time by
the Purchasing Division, the increase in the wholesale cost negated any profit available to
Altivia, producing a financial loss on each contract delivery. Later in the Spring, the same 22
wholesale producers raised wholesale prices an additional $100 per ton. Altivia's wholesale
cost increased by this same amount.
Altivia continued to honor the contract price and sold chlorine to the City for approximately one
month. During this brief period, Altivia absorbed the wholesale cost increase and resultant
financial loss. In late April, Altivia announced to the City that the City's cost would be
increased to cover the wholesale price increase of $150 per liquid ton. The City's price would
have jumped From $136.89 to $286.89 per ton. The Purchasing Division responded by
informing Altivia that the price increase was not acceptable. Altivia then exercised their right
under the City's Standard Terms and Conditions to cancel the agreement, citing losses
incurred with each sale.
To provide an uninterrupted supply of chlorine to the Water Department after the agreement
was cancelled, the Purchasing Division conducted spot bid buying each time the Water
Department required the chemical. During this same time frame, Purchasing prepared a new
Invitation to Bid for bulk liquid chlorine.
During the period of spot purchases lasting approximately four months, Altivia was usually the
low bidder on requests for spot quotations. The City purchased a grand total of $200,862.03
of bulk chlorine from Altivia during this time. $131,842.08 of the total $200,862.03 was ratified
by the City Council on M&C **P-9681 dated October 1, 2002. Subsequent spot market
purchases not documented at the time M&C **P-9681 was approved amounted to an
additional $69,019.95. This is the amount owed to Altivia as reflected in M&C **P-9751,
currently under consideration by the City Council. Worth noting perhaps is that a competing
firm and current City contractor for chlorine, DPC Indus-tries, was awarded spot bids
amounting to $24,064.00 during this same time.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8474
To the Mayor and Members of the City Council March 4, 2003
Page 2 of 2
SUBJECT: M&C **P-9751, PURCHASE OF BULK CHLORINE
fS13 FROM ALTIVIA FOR THE WATER DEPARTMENT
Staff feels that Altivia acted in good faith for as long as it could absorb the losses caused by
the wholesale price increases. As noted above, during the period of spot bidding, Altivia won
the majority of spot bid purchases.
As a result of the new bid issued by the Purchasing Division, DPC Industries was awarded the
current chlorine contract (M&C **P-9681) at $248.80 per ton with an escalation/de-escalation
clause tied to the chlorine producers index.
In conclusion, the City is no longer doing business with Altivia. The new vendor is DPC
Industries. However, the City still owes Altivia $69,019.95 from previous spot bid purchases.
It is reco ended hat City Council approve M&C **P-9751 as written.
F,4 /Gary Ja son
-7 city anager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS