DoD's $29.6M Naval Distillate Fuel Contract Awarded to ExxonMobil Amidst Economic Price Adjustments

Contract Overview

Contract Amount: $29,516,556 ($29.5M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2014-06-26

End Date: 2014-07-18

Contract Duration: 22 days

Daily Burn Rate: $1.3M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 14

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8501094093!DISTILLATE,NAVAL

Place of Performance

Location: FAIRFAX, FAIRFAX County, VIRGINIA, 22037

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $29.5 million to EXXON MOBIL CORPORATION for work described as: 8501094093!DISTILLATE,NAVAL Key points: 1. Contract value represents a significant portion of the fiscal year's fuel procurement. 2. Awarded under full and open competition, suggesting a competitive market for fuel supplies. 3. The fixed-price with economic price adjustment (FPEPA) structure introduces potential cost volatility. 4. Performance period is relatively short, indicating a focus on immediate supply needs. 5. ExxonMobil's established presence in the energy sector suggests a reliable supplier. 6. The contract falls within the petroleum refineries industry classification.

Value Assessment

Rating: good

The contract value of $29.6 million for naval distillate fuel appears reasonable given the market for refined petroleum products. Benchmarking against similar fuel procurements by the Defense Logistics Agency (DLA) would provide a more precise value-for-money assessment. The inclusion of economic price adjustments, while standard for long-term fuel contracts, introduces a variable that could increase the final cost beyond the initial award amount. However, the fixed-price component provides a baseline cost control.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited and evaluated. The presence of a competitive bidding process generally leads to more favorable pricing for the government. The number of bidders (14) suggests a healthy level of interest and competition within the market for naval distillate fuel.

Taxpayer Impact: Full and open competition ensures that taxpayers benefit from the most competitive pricing available, as multiple companies vie for the contract. This process helps to prevent inflated costs and promotes efficient use of public funds.

Public Impact

Naval forces benefit from a consistent and reliable supply of essential fuel for operations. The contract supports the Defense Logistics Agency's mission to provide logistical support to the U.S. military. Geographic impact is likely national, given the DLA's role in supplying military installations across the country. The contract supports jobs within the petroleum refining and distribution sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if fuel prices rise significantly.
Dependence on a single supplier for a critical commodity like fuel carries inherent supply chain risks.
The short duration of the contract may necessitate frequent re-competition, leading to administrative overhead.

Positive Signals

Awarded through full and open competition, indicating a robust market and competitive pricing.
Contractor (ExxonMobil) is a major, established player in the energy market, suggesting reliability.
The contract supports a critical national defense function, ensuring operational readiness.

Sector Analysis

This contract falls within the Petroleum Refineries (NAICS 324110) sector, which involves the processing of crude oil into a wide range of petroleum products, including fuels. The market for refined fuels is large and subject to global commodity prices, geopolitical events, and refining capacity. The Department of Defense is a significant consumer of petroleum products, and contracts like this are crucial for maintaining operational readiness. Comparable spending benchmarks would involve analyzing other DLA fuel procurements and the overall federal spending on fuel.

Small Business Impact

This contract was awarded under full and open competition and does not indicate any specific small business set-aside provisions. While ExxonMobil is a large corporation, the nature of petroleum refining and distribution often involves complex supply chains where smaller businesses might participate as subcontractors for transportation or specialized services. However, without specific subcontracting plans or set-aside goals, the direct impact on the small business ecosystem is not explicitly detailed in this award.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract. As a fixed-price contract with economic price adjustments, DLA contracting officers would monitor fuel price indices to ensure adjustments are applied correctly according to the contract terms. Transparency is generally maintained through contract award databases like FPDS. The DLA has an Inspector General's office that can investigate allegations of fraud, waste, or abuse related to contract performance.

Related Government Programs

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

Risk Flags

Potential for price volatility due to Economic Price Adjustment clause.
Supply chain disruption risk inherent in reliance on large-scale fuel procurement.
Short contract duration may lead to administrative inefficiencies from frequent re-competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.5 million to EXXON MOBIL CORPORATION. 8501094093!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 $29.5 million.

What is the period of performance?

Start: 2014-06-26. End: 2014-07-18.

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

Analyzing historical spending data for naval distillate fuel by the Defense Logistics Agency (DLA) is crucial for understanding long-term trends and budget predictability. While specific historical figures for this exact contract line item are not provided in the abbreviated data, DLA's overall fuel procurement budget fluctuates based on global oil prices, geopolitical events, and military operational tempo. For instance, periods of increased global demand or supply disruptions (like those seen in recent years) can drive up costs significantly. DLA typically manages a vast portfolio of fuel contracts across various types and regions, aiming to secure competitive pricing through mechanisms like full and open competition. Understanding past spending patterns allows for better forecasting, identification of potential cost-saving opportunities, and assessment of whether current contract values align with historical norms or represent significant deviations.

How does the economic price adjustment (EPA) clause typically function in fuel contracts, and what are its implications for cost certainty?

The Economic Price Adjustment (EPA) clause in fuel contracts is designed to account for fluctuations in the market price of petroleum products. It typically links the contract price to a specific, recognized market index (e.g., a Department of Energy or industry-standard price for a particular grade of fuel). When the index price changes, the contract price is adjusted accordingly, either upwards or downwards. For the government, this provides a mechanism to ensure a stable supply even when market prices are volatile, preventing contractors from being unduly penalized by price spikes. However, it also introduces cost uncertainty for the government, as the final expenditure can exceed the initially estimated award amount if market prices rise significantly. Conversely, if prices fall, the government benefits from lower costs. The effectiveness of an EPA clause hinges on the careful selection of the index and the frequency of adjustments, aiming to balance fairness to the contractor with fiscal responsibility for the taxpayer.

What is ExxonMobil's track record with the Defense Logistics Agency for fuel supply contracts?

ExxonMobil, as a major integrated oil and gas company, has a long-standing relationship with government agencies, including the Department of Defense and its various components like the Defense Logistics Agency (DLA), for the supply of petroleum products. Their track record typically involves fulfilling large-scale fuel requirements for military operations, often through competitive bidding processes. DLA relies on established energy providers to ensure consistent and reliable fuel delivery to military installations worldwide. While specific performance metrics for every contract are not publicly detailed in summary data, ExxonMobil's continued participation in DLA solicitations and its capacity to meet stringent military specifications suggest a generally positive performance history. However, like any large contractor, there may have been instances of performance issues or disputes on specific contracts, which would be documented within DLA's internal contract management systems.

How does the 'Delivery Order' (AW) contract type differ from other contract types and what are its implications?

A 'Delivery Order' (AW) is not a contract type in itself, but rather a mechanism used under an existing indefinite-delivery, indefinite-quantity (IDIQ) contract or a similar multiple-award contract. The abbreviated data indicates this is a 'Delivery Order' issued against a larger contract, likely one that allows for multiple orders over a period. This means the $29.6 million is for a specific delivery or set of deliveries, not necessarily the total value of the underlying contract. IDIQ contracts are common for supplies and services that are needed periodically but in unpredictable quantities. The implication is that the government has established a framework agreement with one or more contractors, and then issues individual delivery orders as needs arise. This provides flexibility for the government and allows contractors to plan for potential work. The 'Delivery Order' itself would specify the exact quantity, delivery location, and price for that particular order, based on the terms established in the parent contract.

What is the significance of the 'Petroleum Refineries' (NAICS 324110) classification for this contract?

The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' signifies that the primary business activity of the contractor, ExxonMobil Corporation in this instance, is the refining of crude petroleum and the production of a wide array of petroleum products. This includes gasoline, diesel fuel, jet fuel, heating oil, and lubricants. For this specific contract, it means the fuel being supplied is likely sourced directly from or processed through ExxonMobil's refining operations. This classification is important for understanding the supply chain, the contractor's core competencies, and the industry context. It places the contract within a sector characterized by large capital investments, complex processes, global commodity pricing, and significant regulatory oversight. The classification helps in benchmarking against other contracts within the same industry and assessing the contractor's position in the market.

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: 14

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

Evaluated Preference: NONE

Contractor Details

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: $29,516,556

Exercised Options: $29,516,556

Current Obligation: $29,516,556

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060013D0474

IDV Type: IDC

Timeline