Defense Logistics Agency awarded $31.5M for fuel oils, with Naughton Energy Corp. as the contractor

Contract Overview

Contract Amount: $31,484,440 ($31.5M)

Contractor: Naughton Energy Corp

Awarding Agency: Department of Defense

Start Date: 2005-09-12

End Date: 2010-07-31

Contract Duration: 1,783 days

Daily Burn Rate: $17.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 43

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 200611!001041!97AS!SP0600!DEFENSE ENERGY SUPPORT CENTER !SP060005D4042 !A!N! !N!B001 !02 !20051108!20100731!051637932!051637932!051637932!N!NAUGHTON ENERGY CORPORATION !RR 940 !POCONO PINES !PA!18350!72450!031!24!SILVER SPRING !MONTGOMERY !MARYLAND !+000001900151!N!Y!000000000000!9140!FUEL OILS !A8A!PETROLEUM !000 !NOT DISCERNABLE !424720!E! !3!A!S!B! ! !99990909!B! ! !A! !A!N!K!2!043!B! !Z!N!Z! ! !Y!B!Y!N! ! !C! !A!A!000!A!B!N! ! ! ! ! ! !0001! !

Place of Performance

Location: POCONO PINES, MONROE County, PENNSYLVANIA, 18350

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $31.5 million to NAUGHTON ENERGY CORP for work described as: 200611!001041!97AS!SP0600!DEFENSE ENERGY SUPPORT CENTER !SP060005D4042 !A!N! !N!B001 !02 !20051108!20100731!051637932!051637932!051637932!N!NAUGHTON ENERGY CORPORATION !RR 940 !POCONO PINES !PA!18350!72450!031!24!SILVER SPRING !MONT… Key points: 1. Contract value of $31.5M over 5 years suggests significant demand for fuel oils. 2. Fixed Price with Economic Price Adjustment contract type indicates potential for cost fluctuations. 3. The contract was awarded under full and open competition, implying a competitive bidding process. 4. The contractor, Naughton Energy Corporation, has a significant contract history with the agency. 5. The geographic focus is Pennsylvania, suggesting regional supply chain importance. 6. The product service code (PSC) is not specified, limiting detailed analysis of the specific fuel oils.

Value Assessment

Rating: fair

The contract value of $31.5 million over approximately five years averages to about $6.3 million annually. Without specific details on the quantity and type of fuel oils procured, a direct comparison to similar contracts is challenging. However, the fixed-price with economic price adjustment structure suggests that the agency is attempting to balance cost certainty with the need to account for market volatility in fuel prices. The total award amount appears substantial, reflecting a significant procurement for the Defense Energy Support Center.

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 43 bids suggests a robust level of competition for this requirement. A high number of bidders generally leads to better price discovery and can result in more favorable pricing for the government, as contractors vie to win the award.

Taxpayer Impact: The extensive competition for this fuel oil contract likely resulted in taxpayer savings by driving down the price compared to a less competitive scenario.

Public Impact

The primary beneficiaries are the Department of Defense entities relying on fuel oils for operational needs. The contract ensures the supply of fuel oils, critical for various military operations and installations. The geographic impact is centered around Pennsylvania, where the contractor is located, and potentially extends to military bases or facilities that receive these fuel supplies. Workforce implications may include employment opportunities at Naughton Energy Corporation and its suppliers within Pennsylvania and potentially other regions where fuel is sourced or distributed.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'Fixed Price with Economic Price Adjustment' clause introduces uncertainty regarding the final cost to taxpayers if fuel prices rise significantly.
Lack of specific details on the type and grade of fuel oils procured makes it difficult to assess if the most cost-effective options were selected.
The duration of the contract (over 4 years) means potential for prolonged exposure to market price fluctuations.

Positive Signals

Awarded under 'Full and Open Competition' with 43 bids indicates a healthy and competitive market for this procurement.
The contractor, Naughton Energy Corporation, has a history with the agency, suggesting a degree of established performance and familiarity.
The contract ensures a critical supply of fuel for defense operations, contributing to mission readiness.

Sector Analysis

The petroleum and petroleum products wholesale sector is a critical component of the energy supply chain, supporting numerous industries, including defense. This contract falls within the broader category of energy procurement for government operations. Comparable spending benchmarks for fuel oils can vary widely based on volume, type, and market conditions. However, a $31.5 million award over five years for fuel oils suggests a significant, ongoing requirement for a substantial quantity of these products.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements specifically targeting small businesses. The award to Naughton Energy Corporation, a known entity in the energy sector, suggests it is likely a larger business. This means the direct economic impact on the small business ecosystem from this specific contract award is likely minimal, though indirect benefits could arise if small businesses are part of Naughton's broader supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Logistics Agency (DLA) and the Defense Contract Management Agency (DCMA). These agencies are responsible for ensuring contract compliance, monitoring performance, and verifying that the contractor meets the terms and conditions. Transparency is facilitated through contract databases like FPDS, which record award details. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Energy Support Center (DESC) Fuel Contracts
DLA Energy Procurement
Petroleum Product Supply Contracts
Fixed Price with Economic Price Adjustment Contracts
Department of Defense Fuel Procurement

Risk Flags

Potential for cost overruns due to Economic Price Adjustment clause.
Lack of specific fuel oil grade details limits precise value assessment.
Geographic concentration of contractor may impact delivery efficiency to distant locations.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.5 million to NAUGHTON ENERGY CORP. 200611!001041!97AS!SP0600!DEFENSE ENERGY SUPPORT CENTER !SP060005D4042 !A!N! !N!B001 !02 !20051108!20100731!051637932!051637932!051637932!N!NAUGHTON ENERGY CORPORATION !RR 940 !POCONO PINES !PA!18350!72450!031!24!SILVER SPRING !MONTGOMERY !MARYLAND !+000001900151!N!Y!000000000000!9140!FUEL OILS !A8A!PETROLEUM !000 !NOT DISCERNABLE !424720!E! !3!A!S!B! ! !999

Who is the contractor on this award?

The obligated recipient is NAUGHTON ENERGY CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $31.5 million.

What is the period of performance?

Start: 2005-09-12. End: 2010-07-31.

What is the specific type and grade of fuel oils procured under this contract, and how does this compare to standard military specifications?

The provided data indicates the National Stock Number (NSN) '424720' and the description 'FUEL OILS'. However, it does not specify the exact grade (e.g., JP-8, diesel fuel) or specific military specifications (e.g., MIL-DTL-83133 for JP-8). The 'Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)' industry code (NAICS 424720) further suggests a broad category. To fully assess value, understanding the precise fuel type is crucial, as different grades have distinct pricing and performance characteristics critical for military operations. Without this detail, it's difficult to benchmark against specific market rates for particular fuel types.

How does the average annual spending of approximately $6.3 million compare to historical spending on fuel oils by the Defense Energy Support Center?

The total award of $31,484,440.28 over a period of 1783 days (approximately 4.88 years) results in an average annual spending of roughly $6.45 million. To compare this to historical spending, one would need access to historical contract data for fuel oils procured by the Defense Energy Support Center (DESC) or its successor, DLA Energy. Analyzing past awards for similar quantities and types of fuel oils would reveal whether this contract represents an increase, decrease, or stable level of expenditure. Factors such as geopolitical events, changes in military readiness levels, and fluctuations in global oil prices would influence historical spending patterns and provide context for the current award's magnitude.

What is the track record of Naughton Energy Corporation in fulfilling similar defense contracts, particularly regarding on-time delivery and quality?

Naughton Energy Corporation has a history of receiving contracts from the Defense Logistics Agency (DLA), as indicated by this award. To assess their track record, a deeper dive into past performance evaluations, contract completion reports, and any documented instances of disputes, penalties, or contract terminations would be necessary. Information on past performance is often available through government performance assessment systems (e.g., Contractor Performance Assessment Reporting System - CPARS), though this data is not directly provided here. A positive track record in delivering fuel oils on time and meeting quality specifications would reduce performance risk for this current contract.

What are the potential risks associated with the 'Economic Price Adjustment' clause in this contract, and how are they mitigated?

The primary risk of an Economic Price Adjustment (EPA) clause is that the final cost to the government could exceed initial projections if market prices for fuel oils increase significantly during the contract period. This clause aims to protect the contractor from unforeseen cost increases, but it shifts some of that risk to the government. Mitigation strategies typically involve establishing clear indices or benchmarks for price adjustments (e.g., based on specific fuel market reports), setting caps or floors on the adjustment amounts, and requiring the contractor to provide documentation supporting any price change requests. The effectiveness of these mitigations depends on the specific language of the EPA clause within the contract.

Given the 'Full and Open Competition' and 43 bids, what does this imply about the competitiveness of the fuel oil market for defense procurements?

The fact that 43 bids were received for this fuel oils contract strongly suggests a highly competitive market for this type of defense procurement. A large number of bidders typically indicates that multiple companies are capable of meeting the government's requirements and are actively seeking such contracts. This level of competition is generally favorable for the government, as it tends to drive down prices and encourage innovation among bidders. It implies that the barriers to entry for supplying fuel oils to the military are not excessively high for qualified firms, and that the market is sufficiently robust to support multiple suppliers.

What is the significance of the contractor being located in Pennsylvania (POCONO PINES, PA) for the delivery of fuel oils to defense installations?

The contractor's location in Pocono Pines, Pennsylvania, is significant primarily in terms of logistics and potential delivery costs. If the primary defense installations requiring these fuel oils are located within or near Pennsylvania, this location could offer logistical advantages, potentially reducing transportation costs and lead times. However, if the fuel oils are needed at installations far from Pennsylvania, the contractor would incur higher transportation costs, which could be reflected in their pricing, even with an EPA clause. The geographic proximity of the supplier to the point of consumption is a key factor in supply chain efficiency for bulk commodities like fuel oils.

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

Solicitation ID: SP060005R0031

Offers Received: 43

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

Evaluated Preference: NONE

Contractor Details

Address: RR 940, POCONO PINES, PA, 08

Business Categories: Category Business, Small Business, Woman Owned Business

Financial Breakdown

Contract Ceiling: $31,484,440

Exercised Options: $31,484,440

Current Obligation: $31,484,440

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060005D4042

IDV Type: IDC

Timeline