DoD spent $240.5M on aviation fuel (JP8) in FY07-08, with ConocoPhillips Company as the primary awardee

Contract Overview

Contract Amount: $240,522,649 ($240.5M)

Contractor: Conocophillips Company

Awarding Agency: Department of Defense

Start Date: 2007-03-22

End Date: 2008-04-30

Contract Duration: 405 days

Daily Burn Rate: $593.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 21

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: TURBINE FUEL, AVIATION (JP8)

Place of Performance

Location: BARTLESVILLE, WASHINGTON County, OKLAHOMA, 74005

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $240.5 million to CONOCOPHILLIPS COMPANY for work described as: TURBINE FUEL, AVIATION (JP8) Key points: 1. The contract utilized a fixed-price structure with economic price adjustment, allowing for fluctuations in fuel costs. 2. Awarded under full and open competition, indicating a broad market solicitation. 3. The contract duration was 405 days, suggesting a relatively short-term supply need. 4. The primary awardee, ConocoPhillips Company, is a major player in the energy sector. 5. The contract was awarded by the Defense Logistics Agency, a key procurement arm for the DoD. 6. The North American Industry Classification System (NAICS) code 324110 points to petroleum refineries as the relevant industry.

Value Assessment

Rating: good

The total award value of $240.5 million for aviation fuel over approximately 13 months appears reasonable given the scale of military operations. Benchmarking against similar large-scale fuel procurements by the DoD would provide a more precise value-for-money assessment. The fixed-price with economic price adjustment (EPA) clause is standard for volatile commodities like fuel, aiming to balance cost certainty for the government with protection against market swings for the contractor.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that the Defense Logistics Agency actively sought bids from all responsible sources. The presence of 21 offers indicates a robust competitive environment. A high number of bidders generally supports price discovery and can lead to more favorable pricing for the government, as contractors vie for the award.

Taxpayer Impact: The extensive competition for this aviation fuel contract likely resulted in taxpayer savings by driving down the price compared to a sole-source or limited competition scenario.

Public Impact

Military aviation units across various branches of the Department of Defense benefit from the reliable supply of JP8 fuel. The contract ensures the operational readiness of aircraft, supporting national defense missions. The geographic impact is likely widespread, covering bases and operational theaters where DoD aircraft are deployed. The contract supports jobs within the petroleum refining and distribution sectors, including those employed by ConocoPhillips Company and its supply chain partners.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the economic price adjustment clause, which could increase costs if fuel prices surge unexpectedly.
Dependence on a single primary awardee (ConocoPhillips Company) for a critical commodity, although competition was broad during the award phase.

Positive Signals

Awarded under full and open competition, suggesting a competitive process that likely secured favorable pricing.
The Defense Logistics Agency's involvement indicates adherence to established procurement protocols for critical supplies.
The fixed-price with EPA structure is a common and accepted method for managing risk in volatile commodity markets.

Sector Analysis

This contract falls within the energy sector, specifically the downstream petroleum refining and distribution segment. The market for aviation fuels like JP8 is characterized by large, integrated oil companies and specialized fuel suppliers. The DoD is a significant consumer of petroleum products, and contracts of this magnitude are crucial for maintaining operational capabilities. Comparable spending benchmarks would involve analyzing other large-scale military fuel procurements, both domestically and internationally.

Small Business Impact

The data indicates this contract was not set aside for small businesses, and the primary awardee, ConocoPhillips Company, is a large corporation. There is no explicit information on subcontracting plans for small businesses within this specific award. Large defense contracts can sometimes create opportunities for small businesses in the supply chain, but this contract's structure doesn't guarantee it.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract, ensuring compliance with terms and conditions. Accountability is managed through contract performance monitoring and payment processes. Transparency is facilitated by the public availability of contract award data. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

JP5 Jet Fuel Procurement
Defense Fuel Supply Center Contracts
Aviation Turbine Fuel Contracts
DoD Energy Procurement
Petroleum Product Supply Contracts

Risk Flags

Price Volatility Risk
Supply Chain Disruption Risk
Contract Administration Complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $240.5 million to CONOCOPHILLIPS COMPANY. TURBINE FUEL, AVIATION (JP8)

Who is the contractor on this award?

The obligated recipient is CONOCOPHILLIPS COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $240.5 million.

What is the period of performance?

Start: 2007-03-22. End: 2008-04-30.

What is ConocoPhillips Company's track record with the Department of Defense for fuel supply contracts?

ConocoPhillips Company has a significant history of supplying fuel to the Department of Defense. As a major integrated energy company, it possesses the infrastructure and capacity to meet large-scale military fuel demands. Reviewing historical contract awards from the Defense Logistics Agency (DLA) and other DoD components would reveal the extent and nature of their past performance. This includes examining contract values, delivery performance, and any instances of disputes or contract modifications. A consistent record of successful contract fulfillment, particularly for critical fuels like JP8, suggests reliability. Conversely, any past issues, such as delivery failures, quality problems, or significant cost overruns, would warrant closer scrutiny for future awards.

How does the $240.5 million award value compare to similar aviation fuel contracts awarded by the DoD?

The $240.5 million award value for JP8 aviation fuel over approximately 13 months (March 2007 - April 2008) represents a substantial procurement. To benchmark this value, one would need to compare it against other large-volume aviation fuel contracts awarded by the Defense Logistics Agency (DLA) or other military branches during a similar timeframe. Factors such as the quantity of fuel, delivery locations, market conditions at the time of award, and contract type (e.g., fixed-price vs. cost-plus) significantly influence total award values. For instance, a contract for a longer duration or covering a broader geographic area would naturally have a higher total value. Analyzing the per-gallon price, if derivable, would offer a more direct comparison of unit cost efficiency across different contracts.

What are the primary risks associated with a fixed-price contract with economic price adjustment for aviation fuel?

The primary risks associated with a fixed-price contract with economic price adjustment (EPA) for aviation fuel revolve around price volatility and the complexity of the adjustment mechanism. While the fixed-price component provides a baseline cost certainty, the EPA clause exposes the government to potential cost increases if underlying commodity prices (like crude oil) rise significantly. The contractor is protected from market downturns, but the government bears the risk of price escalation. Accurately forecasting and managing these price adjustments requires robust market analysis and clear, auditable adjustment formulas. Disputes can arise if the calculation of the economic adjustment is contested. Furthermore, the administrative burden of tracking and verifying price adjustments adds to the contract management overhead.

How effective is full and open competition in ensuring value for money for critical fuel supplies like JP8?

Full and open competition is generally considered the most effective method for ensuring value for money in the procurement of critical supplies like JP8 aviation fuel. By soliciting bids from all responsible sources, the government maximizes the pool of potential suppliers, thereby increasing the likelihood of receiving competitive pricing. The presence of numerous bidders, as indicated by the 21 offers on this contract, intensifies this competitive pressure. This process allows the government to leverage market forces to obtain the best possible price and terms. While other factors like contractor performance and technical specifications are crucial, a robust competitive environment is a foundational element for achieving cost efficiency and preventing potential overpricing that could occur under less competitive award methods.

What are the historical spending patterns for aviation fuel within the Department of Defense?

Historical spending patterns for aviation fuel within the Department of Defense show a consistent and substantial requirement driven by global operational tempo and fleet size. Annual expenditures typically run into billions of dollars, reflecting the high consumption rates of jet fuels like JP8. Spending levels can fluctuate based on geopolitical events, deployment requirements, and fluctuations in global oil prices, which directly impact the cost of fuel. The Defense Logistics Agency (DLA) is the primary entity responsible for procuring and managing these fuel supplies, consolidating requirements across various military branches. Analysis of past spending data reveals trends in contract types utilized, dominant awardees, and the impact of market volatility on overall costs.

Industry Classification

NAICS: Manufacturing › Petroleum and Coal Products Manufacturing › Petroleum Refineries

Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060007R0061

Offers Received: 21

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Conocophillips (UEI: 118819478)

Address: 930 PHILLIPS BLDG, BARTLESVILLE, OK, 02

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $240,522,649

Exercised Options: $240,522,649

Current Obligation: $240,522,649

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060007D0466

IDV Type: IDC

Timeline