DoD's $10.2M petroleum contract awarded to GLOBAL COMPANIES LLC shows potential for price volatility

Contract Overview

Contract Amount: $10,254,675 ($10.3M)

Contractor: Global Companies LLC

Awarding Agency: Department of Defense

Start Date: 2006-01-28

End Date: 2011-04-30

Contract Duration: 1,918 days

Daily Burn Rate: $5.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 45

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Place of Performance

Location: WALTHAM, MIDDLESEX County, MASSACHUSETTS, 02453

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $10.3 million to GLOBAL COMPANIES LLC for work described as: Key points: 1. Contract awarded under full and open competition, suggesting a competitive market. 2. The contract's duration of 1918 days (over 5 years) introduces significant risk due to potential market fluctuations. 3. Economic price adjustment clause indicates a mechanism to account for changing petroleum prices. 4. The North American Industry Classification System (NAICS) code 424720 points to wholesale distribution of petroleum products. 5. Awarded by the Defense Logistics Agency, this contract supports critical fuel supply chains. 6. The contract's fixed-price with economic price adjustment structure aims to balance cost certainty with market realities.

Value Assessment

Rating: fair

Benchmarking the value of this $10.2 million contract is challenging without specific performance data or comparable contract details. However, the fixed-price with economic price adjustment (FPEPA) structure suggests an attempt to manage risk for both parties. The large number of modifications (45) could indicate scope creep or complex execution, potentially impacting overall value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to compete. This generally promotes price discovery and can lead to more competitive pricing. The fact that it was competed suggests that the market for petroleum products is sufficiently robust to support multiple suppliers.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it is expected to drive down prices through market forces.

Public Impact

Military readiness: Ensures a consistent supply of petroleum products for Department of Defense operations. Logistics and supply chain: Supports the Defense Logistics Agency's mission to provide worldwide logistics support. Economic impact: Supports jobs within the petroleum distribution sector, particularly for GLOBAL COMPANIES LLC. Geographic reach: Petroleum products are likely distributed to various military installations, potentially globally.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the nature of petroleum markets.
The significant number of modifications (45) may indicate contract inefficiencies or evolving requirements.
Long contract duration (1918 days) increases exposure to market fluctuations and potential performance issues.

Positive Signals

Awarded through full and open competition, suggesting a competitive process.
The economic price adjustment clause provides a mechanism to adapt to market changes.
The contract supports critical defense logistics operations.

Sector Analysis

The petroleum and petroleum products merchant wholesalers sector is a critical component of the energy supply chain, supporting both commercial and government needs. This contract falls within the wholesale distribution segment, focusing on the movement and sale of fuel products. The market is characterized by global supply and demand dynamics, geopolitical influences, and significant price volatility. Comparable spending benchmarks would typically involve other large-scale fuel supply contracts for government agencies or major commercial entities.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses arising from a set-aside provision. However, GLOBAL COMPANIES LLC, as a large prime contractor, may engage small businesses as subcontractors for various support services or specialized components, though this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA) and the Department of Defense (DoD). Mechanisms likely include contract performance reviews, financial audits, and potentially oversight from the DoD Inspector General's office, especially concerning the economic price adjustment clauses and any modifications. Transparency would be facilitated through contract award databases and reporting requirements.

Related Government Programs

Defense Fuel Support Center contracts
Petroleum product procurement
Logistics and supply chain management contracts
Fixed-price with economic price adjustment contracts

Risk Flags

Price Volatility Risk
Contract Modification Frequency
Long-Term Supply Chain Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $10.3 million to GLOBAL COMPANIES LLC. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is GLOBAL COMPANIES LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $10.3 million.

What is the period of performance?

Start: 2006-01-28. End: 2011-04-30.

What was the historical spending pattern for petroleum products by the Defense Logistics Agency prior to this contract?

Analyzing historical spending patterns for petroleum products by the Defense Logistics Agency (DLA) prior to this contract (awarded 2006) would involve examining DLA's procurement data for similar goods and services over several preceding years. This would help establish a baseline for typical expenditure levels, identify any trends in volume or cost, and understand the agency's reliance on specific types of fuel. Without access to that specific historical data, it's difficult to provide precise figures. However, it's reasonable to assume that the DLA consistently procures significant quantities of petroleum products to support global military operations, with spending levels likely influenced by geopolitical events, operational tempo, and fluctuations in global oil prices.

How did the economic price adjustment (EPA) clause impact the final cost of the contract compared to a fixed-price contract?

The economic price adjustment (EPA) clause in this contract allowed for modifications to the contract price based on fluctuations in the market price of petroleum products. This means the final cost could have deviated from the initial estimated price. If petroleum prices increased significantly during the contract period (2006-2011), the EPA would likely have resulted in a higher final cost than a strict fixed-price contract. Conversely, if prices decreased, the EPA could have led to a lower final cost. The effectiveness of the EPA in protecting the government from excessive price increases, while ensuring the contractor could cover costs and remain profitable, is a key aspect of its value. The 45 modifications suggest that price adjustments, among other potential changes, were frequent.

What is the typical profit margin for GLOBAL COMPANIES LLC on contracts of this nature?

Determining the precise profit margin for GLOBAL COMPANIES LLC on this specific $10.2 million contract is not possible with the provided data. Profit margins in the defense contracting and petroleum distribution sectors can vary widely based on market competition, contract type, operational efficiencies, and the specific risks undertaken. Contracts with economic price adjustment clauses, while offering some cost protection, also introduce complexities in pricing and financial management. Industry benchmarks for wholesale petroleum distribution can range, but typically aim for single-digit to low double-digit profit margins. Without access to the contractor's financial statements or detailed contract pricing structures, any estimation of profit margin would be speculative.

What were the key performance indicators (KPIs) used to evaluate GLOBAL COMPANIES LLC's performance under this contract?

Key Performance Indicators (KPIs) for a petroleum supply contract like this would typically focus on delivery timeliness, product quality, order fulfillment accuracy, and responsiveness to demand fluctuations. For the Defense Logistics Agency (DLA), ensuring uninterrupted fuel supply to military installations is paramount. Therefore, KPIs would likely include metrics such as on-time delivery rates (e.g., meeting specified delivery windows), adherence to fuel specifications (e.g., meeting quality standards for various fuel types), and the contractor's ability to manage inventory and respond to urgent requests. Performance would also be assessed based on compliance with contract terms, including reporting requirements and safety standards.

How does the NAICS code 424720 (Petroleum and Petroleum Products Merchant Wholesalers) align with the services provided under this defense contract?

The North American Industry Classification System (NAICS) code 424720, 'Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals),' accurately describes the core business activity relevant to this defense contract. This code signifies companies engaged in the wholesale distribution of fuels and related products, acting as intermediaries between producers and end-users. For the Department of Defense, this means GLOBAL COMPANIES LLC is responsible for procuring, storing (potentially), and delivering petroleum products to various military facilities or operational sites. The 'except Bulk Stations and Terminals' part of the code might imply a focus on distribution logistics rather than large-scale storage infrastructure, emphasizing the movement 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

Solicitation ID: SP060005R0037

Offers Received: 45

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Global Partners LP (UEI: 602580867)

Address: 800 SOUTH ST, WALTHAM, MA, 05

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Nonprofit Organization, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $10,254,675

Exercised Options: $10,254,675

Current Obligation: $10,254,675

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060006D8526

IDV Type: IDC

Timeline