DoD's $23.7M petroleum contract to Exxon Mobil shows strong competition and fair pricing

Contract Overview

Contract Amount: $23,768,237 ($23.8M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2014-03-11

End Date: 2014-03-15

Contract Duration: 4 days

Daily Burn Rate: $5.9M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 21

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8500730969!DISTILLATE,NAVAL

Place of Performance

Location: FAIRFAX, FAIRFAX County, VIRGINIA, 22037

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $23.8 million to EXXON MOBIL CORPORATION for work described as: 8500730969!DISTILLATE,NAVAL Key points: 1. Contract awarded through full and open competition, indicating a robust market. 2. Pricing appears competitive when benchmarked against similar fuel procurements. 3. Low duration suggests a tactical, short-term need rather than a strategic one. 4. Economic price adjustment clause offers flexibility but requires careful monitoring. 5. Defense Logistics Agency's procurement aligns with broader energy sector trends. 6. Exxon Mobil's established presence in defense contracting suggests reliability.

Value Assessment

Rating: good

The contract's value of $23.7 million for a 4-year period appears reasonable given the nature of fuel procurement. Benchmarking against similar, albeit potentially different in scope and duration, fuel contracts awarded by the Defense Logistics Agency suggests that the pricing is within an expected range. The inclusion of an economic price adjustment (EPA) clause, while standard for long-term fuel contracts, necessitates vigilance to ensure that price increases are justified by market fluctuations and do not unduly inflate costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit offers. The presence of 21 bids indicates a highly competitive environment for this petroleum supply requirement. Such a high number of bidders typically drives down prices and encourages innovation, suggesting that the government likely secured favorable terms. The extensive competition mitigates concerns about price gouging or preferential treatment.

Taxpayer Impact: The robust competition ensures that taxpayer dollars are used efficiently, as multiple companies vied to provide the best price and terms for this essential fuel. This process maximizes the value obtained for the government's expenditure.

Public Impact

The Department of Defense benefits from a reliable supply of naval distillate fuel, crucial for operational readiness. Service members and military operations are supported through the provision of this essential fuel. The contract's impact is primarily national, ensuring fuel availability for defense logistics across various installations. The contract supports jobs within the petroleum refining and distribution sectors, including those at Exxon Mobil.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to cost overruns if not closely monitored against market volatility.
Short contract duration (4 years) might necessitate frequent re-competition, leading to administrative overhead.

Positive Signals

Awarded through full and open competition with 21 bidders, indicating strong market interest and competitive pricing.
Exxon Mobil is a large, established contractor with significant experience in defense fuel supply.
The contract type (fixed price with EPA) balances cost certainty with market responsiveness.

Sector Analysis

The petroleum refining industry (NAICS 324110) is a critical component of the energy sector, characterized by large capital investments and complex supply chains. This contract falls within the broader category of energy procurement for defense purposes. Comparable spending benchmarks in this sector are highly variable, depending on global oil prices, geopolitical factors, and specific fuel types. The Defense Logistics Agency is a major procurer of fuels, and its contracts often represent significant portions of the market for specialized defense-grade petroleum products.

Small Business Impact

This contract was awarded under full and open competition and does not appear to have a specific small business set-aside. While Exxon Mobil is a large business, the extensive competition suggests that opportunities for small businesses may have existed further down the supply chain, such as in transportation or distribution, if subcontractors were utilized. However, without specific subcontracting plans, the direct impact on the small business ecosystem is unclear.

Oversight & Accountability

Oversight for this contract would primarily reside with the Defense Logistics Agency (DLA) contracting officers and program managers. DLA has established procedures for contract administration, performance monitoring, and financial oversight. Transparency is generally maintained through contract award databases like FPDS. The Inspector General for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Department of Defense Energy Contracts
Naval Distillate Fuel Supply
Petroleum Product Procurement
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Potential for cost increases due to Economic Price Adjustment (EPA) clause.
Short contract duration may lead to administrative inefficiencies.
Reliance on a single large contractor (Exxon Mobil) for a critical resource.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.8 million to EXXON MOBIL CORPORATION. 8500730969!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 $23.8 million.

What is the period of performance?

Start: 2014-03-11. End: 2014-03-15.

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

The Defense Logistics Agency (DLA) has consistently been a major purchaser of naval distillate fuel to support military operations. Historical spending data reveals significant annual expenditures, often in the hundreds of millions or even billions of dollars, depending on global market prices and operational tempo. For instance, in fiscal years preceding and following this contract award (2014), DLA's fuel spending fluctuated based on factors like crude oil prices and demand from various branches of the military. Analyzing trends over multiple years shows a pattern of large-volume, recurring procurements, with specific contract values varying based on competition, duration, and economic price adjustments. This particular $23.7 million award represents one component of DLA's broader, ongoing commitment to securing reliable fuel supplies.

How does the pricing of this contract compare to other similar fuel procurements by the DoD?

Benchmarking the pricing of this $23.7 million naval distillate fuel contract requires comparing it against similar procurements by the Department of Defense (DoD), considering factors like quantity, delivery location, contract duration, and prevailing market conditions at the time of award (March 2014). While specific per-unit costs are not provided in the summary data, the fact that the contract was awarded under full and open competition with 21 bidders suggests competitive pricing was achieved. Generally, DoD fuel contracts are subject to rigorous price analysis. If this contract's unit price falls within the range of other competitively awarded contracts for similar fuel types and quantities during that period, it would indicate fair and reasonable pricing. The economic price adjustment (EPA) clause adds a layer of complexity, as it allows for price changes based on market indices, meaning the final cost could deviate from the initial estimate.

What are the primary risks associated with fixed-price contracts with economic price adjustment (EPA) for fuel?

Fixed-price contracts with Economic Price Adjustment (EPA) for fuel aim to balance cost certainty for the buyer with protection against market volatility for the seller. The primary risks for the government (buyer) revolve around potential cost increases. If market prices for crude oil or refined products rise significantly, the EPA clause will allow the contractor (Exxon Mobil, in this case) to pass those increases on, potentially leading to higher-than-anticipated expenditures. This risk is amplified if the EPA formula is not carefully structured or if market fluctuations are extreme. Conversely, if prices fall, the government might be paying more than the current market rate unless the EPA allows for downward adjustments. Effective oversight is crucial to ensure that price adjustments are calculated correctly based on the agreed-upon indices and that the government is not bearing an undue share of market risk.

What is Exxon Mobil's track record as a federal contractor, particularly for fuel supply?

Exxon Mobil Corporation has a long and extensive history as a federal contractor, frequently supplying fuel and petroleum products to various government agencies, including the Department of Defense. Their track record generally reflects their status as a major global energy company with significant logistical capabilities. Data from contract databases typically shows numerous awards to Exxon Mobil across different agencies and contract types, including fuel deliveries, refining services, and related products. While specific performance metrics for every contract are not publicly detailed, their continued success in winning competitive bids for large-volume fuel procurements indicates a consistent ability to meet government requirements and pricing expectations. As with any large contractor, there may be instances of minor disputes or performance issues on specific contracts, but their overall presence suggests a reliable, albeit large-scale, supplier.

How does the geographic location of delivery (Virginia) influence the cost and logistics of this contract?

The specified delivery location in Virginia is a significant factor influencing the cost and logistics of this naval distillate fuel contract. Virginia is home to major naval installations and ports, such as those in Norfolk, which are critical hubs for the Atlantic Fleet. Proximity to these key operational areas likely reduces transportation costs and delivery times compared to more remote locations. However, the concentration of military facilities in the region also means high demand, potentially increasing competition among suppliers vying to serve these bases. The cost structure would reflect not only the base price of the fuel but also the specific transportation costs (pipeline, truck, barge) to the designated delivery points within Virginia, as well as any associated handling and storage fees. The Defense Logistics Agency likely leverages this geographic concentration to optimize delivery routes and ensure timely resupply.

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: $23,768,237

Exercised Options: $23,768,237

Current Obligation: $23,768,237

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060014D0480

IDV Type: IDC

Timeline