DoD spent $21.7M on petroleum products via full and open competition, with 4 bidders
Contract Overview
Contract Amount: $21,679,783 ($21.7M)
Contractor: Avinoil S.A.
Awarding Agency: Department of Defense
Start Date: 2005-05-19
End Date: 2010-08-31
Contract Duration: 1,930 days
Daily Burn Rate: $11.2K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 4
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Other
Plain-Language Summary
Department of Defense obligated $21.7 million to AVINOIL S.A. for work described as: Key points: 1. Contract awarded for petroleum products, indicating a need for fuel supply chain support. 2. The contract utilized fixed-price with economic price adjustment, allowing for market fluctuations. 3. Competition was robust with 4 bidders, suggesting a healthy market for these products. 4. The duration of the contract was 1930 days, indicating a long-term supply need. 5. The award was made by the Defense Logistics Agency, a key logistics provider for the DoD. 6. The North American Industry Classification System (NAICS) code points to wholesale petroleum distribution.
Value Assessment
Rating: fair
Benchmarking the value of this contract is challenging without specific unit pricing or comparison to contemporary market rates for petroleum products. The fixed-price with economic price adjustment structure suggests an attempt to balance cost certainty with market volatility. However, the total value of $21.7 million over approximately five years indicates a significant expenditure that warrants scrutiny for efficiency and cost-effectiveness against alternative fuel sourcing or procurement strategies.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
This contract was awarded under full and open competition, with four distinct bidders participating. This level of competition is generally positive, suggesting that multiple suppliers were capable and willing to bid on the requirement. The presence of four bidders likely contributed to price discovery and may have helped secure a more competitive price than a sole-source or limited competition scenario.
Taxpayer Impact: The full and open competition with multiple bidders is beneficial for taxpayers as it increases the likelihood of receiving a fair market price and encourages efficiency among potential suppliers.
Public Impact
Military operations and readiness are supported through the reliable supply of petroleum products. Personnel and equipment across various DoD installations benefit from this fuel provision. The contract supports the broader energy and logistics sectors by engaging wholesale petroleum distributors. Geographic impact is likely widespread, covering areas where DoD operations require fuel.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic price adjustment clauses can lead to cost overruns if not carefully managed against market trends.
- Long contract durations (1930 days) may reduce flexibility to adapt to changing fuel technologies or geopolitical supply disruptions.
Positive Signals
- Full and open competition with four bidders suggests a competitive market and potential for cost savings.
- Award by the Defense Logistics Agency indicates procurement through an experienced and specialized agency.
Sector Analysis
The petroleum and petroleum products wholesale sector is critical for national defense and economic stability, providing essential fuels for transportation, industry, and military operations. The Defense Logistics Agency (DLA) is a major procurer within this sector, managing complex supply chains to ensure readiness. Spending in this area is subject to global commodity prices and geopolitical factors, making economic price adjustment clauses common. This contract represents a portion of the DoD's overall energy expenditure, which is a significant component of its operational budget.
Small Business Impact
There is no indication that this contract included specific small business set-asides. Given the nature of wholesale petroleum distribution, it is possible that larger, established companies dominate this market segment. Further analysis would be needed to determine if subcontracting opportunities were available to small businesses within the supply chain.
Oversight & Accountability
The contract was awarded by the Defense Logistics Agency, which has established oversight mechanisms for its procurement processes. The use of fixed-price contracts with economic price adjustments requires monitoring of market indices to ensure fair pricing. Transparency is generally maintained through contract award databases, though specific performance metrics and audits would be detailed in internal DLA documentation.
Related Government Programs
- Defense Fuel Support Center Contracts
- DoD Energy Procurement
- Petroleum Product Supply Contracts
- Logistics and Transportation Services
Risk Flags
- Potential for cost escalation due to economic price adjustment clause.
- Long contract duration may limit adaptability to market changes or technological advancements.
Tags
defense, department-of-defense, defense-logistics-agency, petroleum-products, wholesale-trade, full-and-open-competition, fixed-price-economic-price-adjustment, long-term-contract, fuel-supply, logistics
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $21.7 million to AVINOIL S.A.. See the official description on USAspending.
Who is the contractor on this award?
The obligated recipient is AVINOIL S.A..
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $21.7 million.
What is the period of performance?
Start: 2005-05-19. End: 2010-08-31.
What was the average price per unit of petroleum products under this contract?
The provided data does not include specific unit pricing information for the petroleum products procured under this contract. The total award amount was $21,679,783 over a period of 1930 days. To determine the average price per unit, we would need details on the quantity of each petroleum product purchased (e.g., gallons, barrels) and the specific pricing for each transaction. The contract type, Fixed Price with Economic Price Adjustment (FPEPA), suggests that the base price could fluctuate based on established economic indices, making a single average price per unit potentially misleading without further context on the volume and timing of purchases.
How does the number of bidders (4) compare to similar petroleum product contracts awarded by the DLA?
A competition level of four bidders for a petroleum product contract awarded by the Defense Logistics Agency (DLA) generally indicates a healthy and competitive market. While the ideal number of bidders can vary based on the complexity and size of the requirement, four bidders suggest that multiple firms were capable of meeting the solicitation's requirements. Benchmarking against similar DLA contracts for petroleum products would reveal if this number is typical, high, or low. Generally, more bidders tend to drive down prices and increase the likelihood of innovative solutions. However, the specific nature of petroleum supply chains, which can involve significant infrastructure and regulatory hurdles, might influence the number of viable bidders.
What are the primary risks associated with a Fixed Price with Economic Price Adjustment (FPEPA) contract for petroleum products?
The primary risks associated with an FPEPA contract for petroleum products revolve around cost volatility and potential for overpayment. While the economic price adjustment is designed to account for fluctuations in the market price of oil and related commodities, it can lead to higher costs for the government if market prices rise significantly above the initial fixed price. Conversely, if prices fall, the government might not fully benefit from the lower market rates depending on the specific adjustment formula. Another risk is the administrative burden of tracking and verifying the economic indices used for adjustments. For the contractor, the risk is mitigated by the adjustment clause, potentially leading to less incentive for aggressive cost control compared to a firm fixed-price contract.
What is the historical spending trend for petroleum products by the Defense Logistics Agency?
Historical spending data for petroleum products by the Defense Logistics Agency (DLA) typically shows substantial and consistent expenditure due to the military's continuous need for fuel. DLA is a primary entity responsible for procuring and distributing fuel to all branches of the U.S. military. Annual spending can fluctuate based on global oil prices, geopolitical events impacting supply, and changes in military operational tempo. While this specific contract represents $21.7 million over approximately five years, DLA's total annual fuel spending often runs into the billions of dollars. Analyzing trends requires examining DLA's annual reports and historical contract award databases to identify patterns in volume, price, and sourcing over extended periods.
What is the significance of the NAICS code '424720' in the context of this contract?
The North American Industry Classification System (NAICS) code 424720, 'Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals),' signifies that the contractor, AVINOIL S.A., operates as a wholesale distributor of petroleum products. This means the company is involved in the sale and distribution of fuels and related products to other businesses (like the DoD) rather than directly to end consumers. It indicates that the procurement is focused on the supply chain management and distribution aspects of petroleum products, likely involving bulk purchasing and delivery logistics, rather than the refining or retail sale of fuel.
Industry Classification
NAICS: Wholesale Trade › Petroleum and Petroleum Products Merchant Wholesalers › Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)
Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Offers Received: 4
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Address: 12A, IRODOU ATTIKOU STR, MAROUSSI
Business Categories: Category Business, Not Designated a Small Business
Financial Breakdown
Contract Ceiling: $21,679,783
Current Obligation: $21,679,783
Contract Characteristics
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SP060005D1016
IDV Type: IDC
Timeline
Start Date: 2005-05-19
Current End Date: 2010-08-31
Potential End Date: 2010-08-31 00:00:00
Last Modified: 2010-10-20
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