DoD's $31.2M Petroleum Contract with Fannon Petroleum Services Raises Questions on Value and Competition
Contract Overview
Contract Amount: $31,232,046 ($31.2M)
Contractor: Fannon Petroleum Services, Inc.
Awarding Agency: Department of Defense
Start Date: 2005-11-04
End Date: 2010-08-30
Contract Duration: 1,760 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: Other
Official Description: 200611!001036!97AS!SP0600!DEFENSE ENERGY SUPPORT CENTER !SP060005D4054 !A!N! !N!B001 !02 !20051104!20100731!003255833!003255833!003255833!N!FANNON PETROLEUM SERVICES, INC!1200 DUKE ST !ALEXANDRIA !VA!22314!50000!001!11!WASHINGTON !DISTRICT OF COLUMBIA !D.C. !+000000533959!N!Y!000000000000!9130!LIQUID PROPELLANTS & FUEL, PETROLEUM BASE !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!N!N! ! !C! !A!A!000!A!B!N! ! ! ! ! ! !0001! !
Place of Performance
Location: ALEXANDRIA, ALEXANDRIA (CITY) County, VIRGINIA, 22313
State: Virginia Government Spending
Plain-Language Summary
Department of Defense obligated $31.2 million to FANNON PETROLEUM SERVICES, INC. for work described as: 200611!001036!97AS!SP0600!DEFENSE ENERGY SUPPORT CENTER !SP060005D4054 !A!N! !N!B001 !02 !20051104!20100731!003255833!003255833!003255833!N!FANNON PETROLEUM SERVICES, INC!1200 DUKE ST !ALEXANDRIA !VA!22314!50000!001!11!WASHINGTON !DIST… Key points: 1. The contract awarded to Fannon Petroleum Services, Inc. for liquid propellants and fuel totals over $31 million. 2. Awarded under 'Full and Open Competition', the contract's pricing and value require further scrutiny given the duration and fixed-price with economic adjustment terms. 3. The sector is Petroleum and Petroleum Products Merchant Wholesalers, a market with established players, making the limited small business participation notable. 4. Potential risks include price volatility due to economic adjustments and the long contract duration, impacting overall taxpayer value.
Value Assessment
Rating: questionable
The contract's total value of $31.2 million over nearly five years suggests a significant expenditure. Without specific per-unit cost data or benchmarks for similar petroleum products, it's difficult to definitively assess value for money. The fixed-price with economic price adjustment structure introduces uncertainty.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under 'Full and Open Competition'. However, the specific details of the bidding process and how price discovery was achieved are not detailed. The long duration and economic price adjustment clause may have influenced competitive bidding.
Taxpayer Impact: The significant contract value and the use of economic price adjustments warrant close monitoring to ensure taxpayers receive fair value and are protected from undue price increases.
Public Impact
Taxpayers are funding a substantial contract for essential petroleum products over an extended period. The long-term nature of the contract could lead to price fluctuations impacting the final cost. The lack of readily available per-unit cost data makes it challenging for the public to assess the fairness of the pricing. The contract supports a critical defense supply chain, ensuring operational readiness.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Lack of specific per-unit cost data for value assessment.
- Economic price adjustment clause introduces potential cost overruns.
- Long contract duration (nearly 5 years) increases exposure to market volatility.
- Limited small business participation noted.
Positive Signals
- Awarded under Full and Open Competition.
- Contract supports critical Defense Logistics Agency needs.
- Established vendor with a history of performance.
Sector Analysis
This contract falls within the Petroleum and Petroleum Products Merchant Wholesalers sector. Spending in this sector is subject to global commodity prices and geopolitical factors. Defense contracts for fuel are critical for operational readiness and often involve large sums.
Small Business Impact
The data indicates this contract was not awarded to a small business (sb: false). Further analysis would be needed to determine if small business set-asides were considered or if subcontracting opportunities were mandated.
Oversight & Accountability
The contract was awarded by the Department of Defense through the Defense Logistics Agency. Oversight would typically involve contract performance monitoring, financial audits, and compliance checks to ensure adherence to terms and conditions.
Related Government Programs
- Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)
- Department of Defense Contracting
- Defense Logistics Agency Programs
Risk Flags
- Potential for cost overruns due to economic price adjustments.
- Lack of transparency in per-unit cost benchmarks.
- Long contract duration increases exposure to market volatility.
- Limited information on the competitive bidding process details.
- No small business participation noted.
Tags
petroleum-and-petroleum-products-merchan, department-of-defense, va, do, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $31.2 million to FANNON PETROLEUM SERVICES, INC.. 200611!001036!97AS!SP0600!DEFENSE ENERGY SUPPORT CENTER !SP060005D4054 !A!N! !N!B001 !02 !20051104!20100731!003255833!003255833!003255833!N!FANNON PETROLEUM SERVICES, INC!1200 DUKE ST !ALEXANDRIA !VA!22314!50000!001!11!WASHINGTON !DISTRICT OF COLUMBIA !D.C. !+000000533959!N!Y!000000000000!9130!LIQUID PROPELLANTS & FUEL, PETROLEUM BASE !A8A!PETROLEUM !000 !NOT DISCERNABLE !424720!E! !3!A!S!B! ! !999
Who is the contractor on this award?
The obligated recipient is FANNON PETROLEUM SERVICES, INC..
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $31.2 million.
What is the period of performance?
Start: 2005-11-04. End: 2010-08-30.
How does the final price paid compare to market rates at the time of delivery, considering the economic price adjustments?
Assessing the final price against market rates requires access to historical pricing data for the specific petroleum products covered by the contract and the indices used for economic adjustments. Without this granular data, it's difficult to determine if the adjustments resulted in prices above or below prevailing market conditions, directly impacting the value realized by the Department of Defense and, consequently, the taxpayer.
What specific factors led to the 'Full and Open Competition' designation, and were there any barriers to entry for potential competitors?
The 'Full and Open Competition' designation implies that all responsible sources were permitted to submit a bid. However, the specific requirements of the solicitation, such as technical specifications for liquid propellants, delivery logistics, and required certifications, could have inadvertently limited the pool of eligible bidders. Further investigation into the solicitation details and any pre-bid conferences would clarify potential barriers.
What is the projected taxpayer impact if fuel prices significantly increase during the contract's duration due to the economic price adjustment clause?
The economic price adjustment clause allows for contract price modifications based on fluctuations in specific economic indicators, typically related to fuel costs. If these indicators rise sharply, the total cost of the contract could exceed the initial $31.2 million estimate. This poses a direct financial risk to taxpayers, as the final expenditure could be substantially higher than initially budgeted, necessitating potential budget adjustments or reallocation of funds.
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: 43
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Address: 1200 DUKE ST, ALEXANDRIA, VA, 08
Business Categories: Category Business, Small Business
Financial Breakdown
Contract Ceiling: $31,232,046
Exercised Options: $31,232,046
Current Obligation: $31,232,046
Contract Characteristics
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SP060005D4054
IDV Type: IDC
Timeline
Start Date: 2005-11-04
Current End Date: 2010-08-30
Potential End Date: 2010-08-30 00:00:00
Last Modified: 2009-03-20
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