DoD spent over $25M on petroleum products, with River City Petroleum Inc. securing the contract

Contract Overview

Contract Amount: $25,088,601 ($25.1M)

Contractor: River City Petroleum, Inc.

Awarding Agency: Department of Defense

Start Date: 2005-04-05

End Date: 2009-09-30

Contract Duration: 1,639 days

Daily Burn Rate: $15.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 33

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 200611!002667!97AS!SP0600!DEFENSE ENERGY SUPPORT CENTER !SP060005D4538 !A!N! !N!B001 !06 !20060214!20090831!051134112!051134112!051134112!N!RIVER CITY PETROLEUM INC !840 DELTA LN !WEST SACRAMENT !CA!95691!84816!113!06!WEST SACRAMENTO !YOLO !CALIFORNIA!+000000022002!N!N!000000000000!9130!LIQUID PROPELLANTS & FUEL, PETROLEUM BASE !A8A!PETROLEUM !000 !NOT DISCERNABLE !424720!E! !3!A!S!B! ! !99990909!B! ! !A! !A!U!K!2!033!B! !Z!N!Z! ! !Y!B!N!N! ! !D! !A!A!000!A!B!N! ! ! ! ! ! !0001! !

Place of Performance

Location: WEST SACRAMENTO, YOLO County, CALIFORNIA, 95691

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $25.1 million to RIVER CITY PETROLEUM, INC. for work described as: 200611!002667!97AS!SP0600!DEFENSE ENERGY SUPPORT CENTER !SP060005D4538 !A!N! !N!B001 !06 !20060214!20090831!051134112!051134112!051134112!N!RIVER CITY PETROLEUM INC !840 DELTA LN !WEST SACRAMENT !CA!95691!84816!113!06!WEST SACRAMENTO !YOLO… Key points: 1. Contract value of $25.09M for petroleum products indicates significant spending in this sector. 2. The contract was awarded through full and open competition, suggesting a competitive bidding process. 3. A fixed-price contract with economic price adjustment introduces potential cost fluctuations. 4. The contract duration of over 4 years suggests a long-term need for these petroleum products. 5. The award to River City Petroleum Inc. highlights a key supplier within the defense energy sector. 6. The North American Industry Classification System (NAICS) code 424720 points to wholesale distribution of petroleum products.

Value Assessment

Rating: fair

The contract value of $25,088,600.96 for petroleum products over approximately four years appears reasonable given the nature of fuel procurement for defense purposes. Benchmarking against similar contracts for bulk petroleum products would provide a more precise value-for-money assessment. The fixed-price with economic price adjustment (FP-EPA) structure introduces some risk of cost escalation, which needs to be monitored.

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 data shows 33 offers were received, suggesting a robust competitive environment. A high number of bidders generally leads to better price discovery and potentially lower prices for the government.

Taxpayer Impact: The extensive competition for this petroleum products contract is beneficial for taxpayers, as it likely drove down the final price and ensured the government received competitive terms.

Public Impact

The Department of Defense is the primary beneficiary, receiving essential petroleum products for its operations. The contract ensures the supply of liquid propellants and fuel, critical for military readiness. The geographic impact is primarily within California, where the contractor is located, but the fuel's end-use could be widespread. The contract supports jobs within the petroleum distribution and logistics sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if market prices for petroleum increase significantly.
The long contract duration (over 4 years) may not always reflect the most current market pricing or technological advancements.
Reliance on a single primary contractor, even if awarded competitively, can create vulnerabilities in the supply chain.

Positive Signals

Awarded through full and open competition, maximizing potential for competitive pricing.
The fixed-price component provides a baseline cost certainty.
The contractor, River City Petroleum Inc., is established in the petroleum wholesale industry.

Sector Analysis

The petroleum wholesale industry is a critical component of the energy sector, providing essential fuels and lubricants to various industries, including defense. The market is characterized by significant price volatility influenced by global supply and demand, geopolitical events, and refining capacities. This contract fits within the broader category of defense logistics and supply chain management, ensuring operational readiness.

Small Business Impact

This contract was not specifically set aside for small businesses, and the data indicates the prime contractor is River City Petroleum Inc., which is not explicitly identified as a small business in this context. There is no direct information on subcontracting plans for small businesses within this data snippet, suggesting potential missed opportunities for small business participation.

Oversight & Accountability

The contract was awarded by the Defense Logistics Agency (DLA), which has established oversight mechanisms for its procurement processes. The fixed-price with economic price adjustment (FP-EPA) contract type requires careful monitoring of price changes to ensure fairness and prevent excessive costs. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Department of Defense Energy Contracts
Petroleum Product Supply Chain Management
Fixed-Price Economic Price Adjustment Contracts

Risk Flags

Potential for cost escalation due to economic price adjustment clause.
Contract duration may not align with optimal market timing.
Limited visibility into small business subcontracting.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.1 million to RIVER CITY PETROLEUM, INC.. 200611!002667!97AS!SP0600!DEFENSE ENERGY SUPPORT CENTER !SP060005D4538 !A!N! !N!B001 !06 !20060214!20090831!051134112!051134112!051134112!N!RIVER CITY PETROLEUM INC !840 DELTA LN !WEST SACRAMENT !CA!95691!84816!113!06!WEST SACRAMENTO !YOLO !CALIFORNIA!+000000022002!N!N!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 RIVER CITY PETROLEUM, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $25.1 million.

What is the period of performance?

Start: 2005-04-05. End: 2009-09-30.

What is the historical spending pattern for petroleum products by the Department of Defense?

The Department of Defense is one of the largest consumers of petroleum products globally, essential for fueling aircraft, vehicles, and naval vessels, as well as for heating and other operational needs. Historical spending data reveals consistent and substantial investment in these products, often in the tens of billions of dollars annually. This spending is influenced by global oil prices, geopolitical stability, and the scale of military operations. Contracts are typically awarded through competitive bidding processes, though the complexity of fuel logistics and the need for secure supply chains can sometimes lead to sole-source or limited competition awards. The Defense Logistics Agency (DLA) is the primary entity responsible for managing these fuel procurements, aiming to ensure cost-effectiveness and reliable delivery to military installations worldwide.

How does the pricing structure of this contract compare to market rates for petroleum products during the contract period?

This contract utilized a Fixed Price with Economic Price Adjustment (FP-EPA) structure. This means the base price was fixed, but adjustments were allowed based on fluctuations in specific economic indicators, often tied to the cost of raw materials like crude oil. To assess market rate comparison, one would need to analyze the average market prices for the specific types of petroleum products procured (e.g., jet fuel, diesel) during the contract period (February 2006 to August 2009) and compare them against the adjusted prices paid under this contract. The period included significant oil price volatility, including a peak in 2008 followed by a sharp decline. Without access to the specific economic indicators used for adjustment and detailed market price data for the exact products and delivery locations, a precise comparison is difficult. However, FP-EPA contracts aim to balance price risk between the government and the contractor, especially in volatile commodity markets.

What are the potential risks associated with a Fixed Price with Economic Price Adjustment (FP-EPA) contract for petroleum products?

FP-EPA contracts for petroleum products carry several risks. Firstly, the economic price adjustment component means the final cost is not entirely fixed, exposing the government to potential cost increases if market prices for crude oil or refined products rise significantly. This was particularly relevant during the contract period (2006-2009) which saw extreme oil price volatility. Secondly, the accuracy and fairness of the economic price adjustment formula are critical; if the formula does not accurately reflect actual cost changes, either the government or the contractor could be disadvantaged. Thirdly, managing and auditing the price adjustments requires robust oversight from the contracting agency to ensure compliance and prevent overpayment. Finally, while FP-EPA aims to mitigate risk for both parties compared to a purely fixed-price contract in a volatile market, it still requires careful monitoring to ensure value for money is achieved.

What is River City Petroleum Inc.'s track record with government contracts, particularly with the Department of Defense?

River City Petroleum Inc. has a history of receiving government contracts, primarily related to the supply of petroleum products. Data indicates they have been awarded multiple contracts, including this significant one with the Defense Logistics Agency (DLA). Their involvement suggests a capacity to meet the demanding requirements of government procurement, including logistical capabilities and adherence to contract terms. A deeper analysis would involve examining the volume and value of all contracts awarded to the company, their performance ratings on past contracts (if available), and any history of contract disputes or terminations. However, their repeated success in securing DLA contracts points towards a generally acceptable performance record within this specific niche.

How does the number of bidders (33) impact the potential value for money achieved in this contract?

A high number of bidders, such as the 33 offers received for this contract, is generally a strong indicator of robust competition and significantly enhances the potential for achieving good value for money. When multiple companies compete for a contract, they are incentivized to offer their most competitive pricing and terms to win the award. This competitive pressure typically drives down prices, improves the quality of goods or services offered, and encourages innovation. For taxpayers, a higher number of bidders means the government is more likely to secure the petroleum products at a price that reflects true market value, rather than paying a premium due to limited options. It also reduces the risk of contractor collusion and ensures a wider pool of potential suppliers is considered.

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: 33

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

Evaluated Preference: NONE

Contractor Details

Address: 840 DELTA LN, WEST SACRAMENT, CA

Business Categories: Category Business, Small Business

Financial Breakdown

Contract Ceiling: $25,088,601

Exercised Options: $25,088,601

Current Obligation: $25,088,601

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060005D4538

IDV Type: IDC

Timeline