DoD's $25.7M Naval Distillate Fuel Contract Awarded to ExxonMobil Amidst Fixed-Price Adjustments

Contract Overview

Contract Amount: $25,692,378 ($25.7M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2014-01-08

End Date: 2014-02-05

Contract Duration: 28 days

Daily Burn Rate: $917.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 21

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8500565093!DISTILLATE,NAVAL

Place of Performance

Location: FAIRFAX, FAIRFAX County, VIRGINIA, 22037

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $25.7 million to EXXON MOBIL CORPORATION for work described as: 8500565093!DISTILLATE,NAVAL Key points: 1. Contract utilized a fixed-price structure with economic price adjustments, potentially exposing the government to fluctuating market prices. 2. The award was made under full and open competition, suggesting a competitive market for naval distillate fuel. 3. A short performance period of 28 days indicates a tactical or immediate need for fuel supply. 4. The contract's value, while significant, needs to be benchmarked against similar fuel procurements to assess value for money. 5. The Defense Logistics Agency's role suggests a strategic importance for fuel availability to military operations. 6. The North American Industry Classification System (NAICS) code 324110 points to the petroleum refining sector.

Value Assessment

Rating: fair

The contract value of $25.7 million for a 28-day delivery period for naval distillate fuel appears substantial. Without specific benchmarks for this type of fuel and delivery timeframe, it is difficult to definitively assess value for money. The use of 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) indicates that the final cost could deviate from the initial award price based on market fluctuations, which introduces a degree of price risk for the government. Comparing this to other similar, short-term fuel procurements by the DoD or other agencies would be necessary for a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'FULL AND OPEN COMPETITION,' indicating that all responsible sources were permitted to submit bids. The presence of 21 bids suggests a robust competitive environment for the supply of naval distillate fuel. A high number of bidders generally leads to more competitive pricing and better terms for the government, as contractors vie for the award. This level of competition is a positive indicator for price discovery and efficient market functioning.

Taxpayer Impact: The extensive competition for this contract likely resulted in a more favorable price for taxpayers compared to a sole-source or limited competition scenario. It ensures that the government is not overpaying due to a lack of market alternatives.

Public Impact

Naval forces operating in the region where the fuel was delivered are the primary beneficiaries, ensuring operational readiness. The contract facilitated the delivery of essential naval distillate fuel, a critical component for maritime operations. The geographic impact is localized to the delivery point specified by the Defense Logistics Agency, supporting specific military installations or fleet movements. Workforce implications are primarily within the petroleum refining and logistics sectors, supporting jobs in fuel production and transportation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost overruns if fuel prices rise significantly.
Short performance duration might indicate a reactive procurement rather than strategic long-term planning.
Reliance on a single large corporation (ExxonMobil) for a critical fuel supply could pose a risk if supply chains are disrupted.

Positive Signals

Awarded under full and open competition, indicating a healthy market and likely competitive pricing.
The Defense Logistics Agency's involvement suggests strategic alignment with national defense needs.
The contract was executed efficiently within a short 28-day window.

Sector Analysis

The petroleum refining industry (NAICS 324110) is a mature and capital-intensive sector. Contracts for fuel supply are common across government agencies, particularly for defense and transportation. The market size for naval distillate fuel is substantial, driven by military and commercial shipping needs. This contract represents a small but critical component of the Defense Logistics Agency's broader fuel procurement strategy, ensuring the availability of specialized fuels for naval operations.

Small Business Impact

There is no indication that this contract included small business set-asides, as it was awarded under full and open competition. Given the nature of petroleum refining and large-scale fuel distribution, it is unlikely that small businesses would be primary bidders for such a large contract. However, ExxonMobil may engage small businesses for subcontracting in areas like transportation or logistics, though this is not specified in the provided data.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for overseeing this contract. As a fixed-price contract with economic price adjustments, DLA would monitor fuel price indices to manage the economic adjustments. The contract's short duration and specific delivery order nature suggest oversight focused on timely and correct delivery. Transparency is generally maintained through contract award databases, and any specific Inspector General investigations would be publicly reported if initiated.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Naval Operations Support Contracts
Petroleum Product Supply Contracts
Fixed-Price Economic Adjustment Contracts

Risk Flags

Economic Price Adjustment Clause Risk
Short Performance Duration
Potential for Market Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.7 million to EXXON MOBIL CORPORATION. 8500565093!DISTILLATE,NAVAL

Who is the contractor on this award?

The obligated recipient is EXXON MOBIL CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $25.7 million.

What is the period of performance?

Start: 2014-01-08. End: 2014-02-05.

What is the historical spending pattern for naval distillate fuel by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) is a primary procurer of fuel for the U.S. military. Historical spending on naval distillate fuel, and fuels in general, can be substantial and fluctuate based on operational tempo, global energy prices, and strategic reserve needs. DLA typically awards numerous contracts for various fuel types across different regions and timeframes. Analyzing DLA's historical spending data, often available through public contract databases like FPDS or USAspending, would reveal trends in contract values, award volumes, and primary suppliers over several fiscal years. This specific $25.7 million award for a 28-day period in 2014 represents a single instance within potentially billions of dollars spent annually on fuel by the DLA to maintain readiness and operational capabilities for all branches of the armed forces.

How does the economic price adjustment clause typically impact the final cost of fuel contracts?

An Economic Price Adjustment (EPA) clause in a fixed-price contract is designed to protect both the contractor and the government from unforeseen fluctuations in the cost of labor or materials. For fuel contracts, EPA clauses are often tied to specific commodity price indices (e.g., West Texas Intermediate crude oil prices, or specific refined product indices). If the index rises above a predetermined baseline, the contract price increases; if it falls, the price decreases. This means the final cost is not fixed at the time of award. For taxpayers, this can mean paying more than initially budgeted if market prices surge, but it also protects against contractors being unable to fulfill the contract due to unexpected cost increases, which could lead to delays or the need for renegotiation at potentially higher prices.

What are the risks associated with a short performance period for a fuel supply contract?

A short performance period, like the 28 days for this naval distillate fuel contract, often indicates an immediate or tactical need rather than a long-term strategic requirement. Risks associated with such short durations include potential for rushed procurements that may not achieve the best possible pricing or terms, increased administrative burden due to frequent re-solicitation, and a potential lack of supply chain resilience if unexpected disruptions occur during that narrow window. It can also signal that the requirement is part of a larger, ongoing program where individual delivery orders are placed as needed, making the overall program risk different from the individual order risk. For taxpayers, the primary risk is ensuring that the urgency does not lead to paying a premium for the fuel.

What is the significance of the Defense Logistics Agency awarding fuel contracts?

The Defense Logistics Agency (DLA) is the primary combat support agency responsible for providing supply chain management services to the U.S. Armed Forces. Awarding fuel contracts, including naval distillate fuel, is a core function critical to maintaining military readiness and operational capability. DLA manages a vast global network to ensure that fuel is available where and when needed, from CONUS bases to forward-deployed forces. Their expertise in energy logistics, market analysis, and contract negotiation aims to secure reliable fuel supplies at the best possible value. Contracts like this one are essential components of DLA's mission to support national defense objectives by ensuring the uninterrupted flow of energy resources.

How does the NAICS code 324110 (Petroleum Refineries) relate to this contract?

The North American Industry Classification System (NAICS) code 324110 specifically identifies establishments primarily engaged in petroleum refining. This includes the process of refining crude oil into various petroleum products, such as gasoline, diesel fuel, jet fuel, and, relevantly, naval distillate fuel. Awarding this contract to ExxonMobil Corporation, a major integrated oil and gas company with significant refining operations, aligns directly with this NAICS code. It signifies that the government is procuring a product manufactured by a petroleum refinery, ensuring it meets the specific technical and quality standards required for naval applications. This classification helps in understanding the industrial sector involved and benchmarking against other procurements within the same industry.

Industry Classification

NAICS: Manufacturing › Petroleum and Coal Products Manufacturing › Petroleum Refineries

Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 21

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: Exxon Mobil Corp (UEI: 001213214)

Address: 3225 GALLOWS RD, FAIRFAX, VA, 22037

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $25,692,378

Exercised Options: $25,692,378

Current Obligation: $25,692,378

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060014D0480

IDV Type: IDC

Timeline