DoD awards $212M petroleum contract to Exxon Mobil, raising value-for-money questions

Contract Overview

Contract Amount: $212,234,395 ($212.2M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2006-04-27

End Date: 2010-07-31

Contract Duration: 1,556 days

Daily Burn Rate: $136.4K/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 $212.2 million to EXXON MOBIL CORPORATION for work described as: Key points: 1. Contract awarded through full and open competition, suggesting a potentially competitive bidding process. 2. Fixed-price contract with economic price adjustment introduces risk of cost overruns due to market fluctuations. 3. Long contract duration of 1556 days may not reflect current market conditions or evolving needs. 4. The award to a single large corporation warrants scrutiny regarding potential price advantages for smaller suppliers. 5. Lack of specific performance metrics makes it difficult to assess contractor efficiency and effectiveness. 6. The petroleum products sector is subject to significant price volatility, impacting the contract's overall value.

Value Assessment

Rating: questionable

The contract's total value of $212 million over approximately four years for petroleum products requires careful benchmarking. Without specific unit pricing or comparison to similar solicitations from the Defense Logistics Agency (DLA), it is challenging to definitively assess value for money. The inclusion of economic price adjustment clauses can obscure true cost efficiency, as the final price is subject to market forces. However, the sheer scale of the award suggests potential for economies of scale, which could translate to better pricing if managed effectively.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. With four bidders identified, this suggests a degree of competition. However, the specific details of the bidding process, including the number of responsive bids and the spread of pricing, are not provided. A robust competitive environment typically leads to better price discovery and more favorable terms for the government.

Taxpayer Impact: Full and open competition is generally beneficial for taxpayers as it aims to secure the best possible prices through market forces. The presence of multiple bidders suggests that taxpayer funds are being utilized in a manner that seeks competitive advantage.

Public Impact

Military operations and readiness are supported through the reliable supply of petroleum products. The contract ensures the availability of essential fuels for various Department of Defense (DoD) assets. Geographic impact is likely widespread, supporting DoD activities across different regions. Workforce implications may include logistics personnel involved in the distribution and management of these petroleum products.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces uncertainty in final costs.
Long contract duration may not align with current market efficiencies.
Award to a single large entity could limit opportunities for smaller, specialized suppliers.
Lack of detailed performance metrics hinders objective assessment of contractor performance.

Positive Signals

Awarded through full and open competition, maximizing potential bidder pool.
Contracting with a major, established supplier like Exxon Mobil suggests a focus on reliability and supply chain security.
The scale of the contract may leverage economies of scale for cost efficiencies.

Sector Analysis

The petroleum and petroleum products wholesale sector is a critical component of the energy industry, characterized by significant global price volatility and complex supply chains. This contract falls within the 'Petroleum and Petroleum Products Merchant Wholesalers' category (NAICS 424720). Spending in this sector by the federal government is substantial, driven by the logistical needs of agencies like the Department of Defense. Benchmarking this contract's value would ideally involve comparing its unit prices and overall cost structure against other large-scale government fuel procurements and prevailing market rates.

Small Business Impact

The contract does not indicate any specific small business set-aside provisions, and the award to Exxon Mobil Corporation, a large business, suggests it was not primarily aimed at small business participation. While large prime contracts can sometimes lead to subcontracting opportunities for small businesses, there is no explicit information here to confirm such benefits. The absence of set-aside requirements means that the primary competition was likely among larger entities, potentially limiting direct opportunities for small businesses in this specific procurement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Logistics Agency (DLA), which is responsible for ensuring the contractor meets the terms and conditions of the agreement. Accountability measures would be tied to delivery schedules, product quality, and adherence to pricing adjustments as stipulated in the contract. Transparency is facilitated through contract award databases, but detailed performance reports and audit findings are not publicly accessible. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Fuel Support Center contracts
DoD Energy Procurement
Petroleum Product Supply Contracts
Logistics and Transportation Services

Risk Flags

Economic Price Adjustment Clause
Long Contract Duration
Commodity Price Volatility
Potential Lack of Competition at Subcontract Level

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $212.2 million to EXXON MOBIL CORPORATION. See the official description on USAspending.

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 $212.2 million.

What is the period of performance?

Start: 2006-04-27. End: 2010-07-31.

What is the historical spending pattern for petroleum products by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) has consistently been a major procurer of petroleum products to support military operations globally. Historical spending data reveals a significant and ongoing requirement for fuels, lubricants, and related products. Annual expenditures can fluctuate based on geopolitical events, operational tempo, and global market prices for crude oil and refined products. For instance, periods of heightened military activity or significant price spikes in the commodity markets would naturally lead to increased spending. The DLA manages a complex global supply chain, and its spending reflects the vast logistical needs of the U.S. armed forces across all branches and theaters of operation. Analyzing trends over the past decade would show a substantial, multi-billion dollar commitment to ensuring fuel availability, with individual contract values varying widely based on duration, quantity, and specific product requirements.

How does the economic price adjustment (EPA) clause typically impact contract costs for petroleum products?

An Economic Price Adjustment (EPA) clause in a contract for petroleum products is designed to protect both the government and the contractor from significant price fluctuations in the underlying commodity markets. For the contractor, it ensures that they can cover their costs if market prices rise unexpectedly, preventing potential losses or contract defaults. For the government, it aims to provide a stable supply by keeping contractors engaged, even during volatile periods. However, EPAs can introduce uncertainty regarding the final cost to the government. The specific formula or index used to calculate the adjustment is crucial. If the index is closely tied to market benchmarks, the government benefits from price decreases but is also exposed to price increases. This contrasts with fixed-price contracts, where the price is set upfront. The effectiveness of an EPA in delivering value for money depends heavily on the fairness of the adjustment mechanism and the contractor's ability to manage their own procurement costs efficiently.

What is Exxon Mobil's track record in supplying petroleum products to the U.S. military?

Exxon Mobil Corporation, through its various subsidiaries and divisions, has a long-standing history of supplying petroleum products to the U.S. military and other government agencies. As one of the world's largest integrated energy companies, it possesses the infrastructure, logistical capabilities, and production capacity to meet the demanding requirements of military procurement. Their track record includes numerous contracts for fuel supply, often awarded through competitive bidding processes. While specific performance details on individual contracts are not always publicly available, their continued participation and success in securing large government contracts suggest a generally reliable performance history. However, like any major supplier, there may have been instances of contract disputes, performance issues, or regulatory scrutiny over the years, which would be detailed in more in-depth contract performance databases or agency records.

Are there alternative suppliers or contract vehicles that could offer better value for these petroleum products?

The availability of alternative suppliers and contract vehicles for petroleum products is a key consideration for ensuring value for money. The federal government utilizes various mechanisms, including General Services Administration (GSA) schedules, other agency-specific IDIQ (Indefinite Delivery/Indefinite Quantity) contracts, and direct solicitations like the one awarded to Exxon Mobil. The existence of multiple large energy companies and specialized fuel distributors suggests a competitive market. The DLA, in particular, manages extensive fuel supply chains and likely has multiple contract vehicles and strategic sourcing initiatives in place. To assess if better value could be achieved, one would need to compare the pricing, terms, and delivery capabilities across different contract types and suppliers. Factors such as geographic coverage, product specialization, and the ability to leverage different types of competition (e.g., set-asides, smaller IDIQs) are important.

What are the potential risks associated with a long-duration contract for a volatile commodity like petroleum?

Long-duration contracts for volatile commodities like petroleum present several risks. Firstly, market prices for crude oil and refined products can fluctuate dramatically over extended periods, making it difficult to forecast the total cost accurately. If the contract includes an economic price adjustment (EPA) clause, the government is exposed to upward price movements, potentially leading to costs significantly higher than initially anticipated. Conversely, if the EPA is structured unfavorably, contractors might be disincentivized if prices fall substantially. Secondly, technology and operational needs can evolve. A contract spanning several years might lock the government into using specific types of fuel or delivery methods that become less efficient or outdated. Finally, a long commitment to a single supplier or contract vehicle can reduce flexibility and the opportunity to capitalize on new market entrants or more competitive pricing that may emerge during the contract term.

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: SEALED BID

Offers Received: 4

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

Evaluated Preference: NONE

Contractor Details

Address: 3225 GALLOWS RD, FAIRFAX, VA, 11

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $212,234,395

Exercised Options: $212,234,395

Current Obligation: $212,234,395

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060006D1256

IDV Type: IDC

Timeline