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July 01, 2008  |   Comments (0)   |   Post a comment

All's fair in love and fuel

by Frank Di Giacomo, Publisher


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Around this time last year in my column, I noted my surprise that the price of gasoline had risen above $3 a gallon. Well, that seems like a bargain today, as a gallon of gas has exceeded $4 in many areas.

And, as you know, the cost of diesel is even more alarming. As of this writing, in early June, the average diesel price in California was $5.03 for one measly gallon. That’s an increase of more than $2 — approximately 70 percent — from the same week in 2007.

A year from now, hopefully the tide will have turned and I won’t even think about mentioning fuel prices here. But I wouldn’t count on that.

Challenging times
In our annual Contractor Survey (pg. 20 in this issue), we asked contractors what their top challenge is. By a large margin, fuel costs was the most frequently cited response. That sentiment was also voiced in our Q&A with Barry Stock, the president of the National School Transportation Association (NSTA). “Right now and for the foreseeable future, fuel is undoubtedly the top issue” for school bus contractors, Stock said.

While many motorists can compensate for the elevated price of fuel by driving their cars less and bicycling or walking more, school bus operators don’t have those kinds of options.

But Stock mentioned a few strategies that have helped on this front, such as eliminating unnecessary idling and maximizing route efficiency. Another approach that is helping in some cases, as Stock noted, is fuel adjustment clauses.

Depending on how they’re written, fuel adjustment clauses can facilitate fairness for both the contractor and the district, since the cost of fuel may increase or decrease from the base price in the contract.

For those who are interested in what one of these clauses might look like, I’ve included an excerpt of a sample below, courtesy of NSTA. The association has several other samples — which were taken from actual district contracts — in an outsourcing toolkit that’s available for free to members and for purchase to non-members. For more information on the toolkit, call NSTA at (800) 222-6782 or go to www.yellowbuses.org.

Sample clause
“The contractor is responsible for consistently purchasing fuel at the lowest cost possible. District will verify the cost of diesel fuel by contacting local venders for price quotations from time to time during the term of the contract. If it is determined that the contractor has failed to purchase fuel at the lowest price, the low price determined by the district will be the basis for price adjustment.

“If the cost of fuel increases or decreases by more than 5 percent over or under the predetermined price, the contract will be adjusted. If the cost of diesel fuel is higher than $_____ in any month of the contract, the district will compensate the contractor for the increased cost per gallon. If the cost of diesel fuel is lower than $_____ in any month of the contract, the contractor will compensate the district for the decreased cost per gallon.”

 


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