DoD spent $66M on aviation fuel (JP8) from Tesoro Refining & Marketing Company LLC

Contract Overview

Contract Amount: $66,075,228 ($66.1M)

Contractor: Tesoro Refining & Marketing Company LLC

Awarding Agency: Department of Defense

Start Date: 2007-03-23

End Date: 2008-04-30

Contract Duration: 404 days

Daily Burn Rate: $163.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 21

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION (JP8)

Place of Performance

Location: MANDAN, MORTON County, NORTH DAKOTA, 58554

State: North Dakota Government Spending

Plain-Language Summary

Department of Defense obligated $66.1 million to TESORO REFINING & MARKETING COMPANY LLC for work described as: TURBINE FUEL, AVIATION (JP8) Key points: 1. Contract awarded under full and open competition, suggesting a competitive market for aviation fuel. 2. The contract utilized a fixed-price with economic price adjustment structure, which can mitigate risks associated with fuel price volatility. 3. Awarded by the Defense Logistics Agency, indicating a focus on strategic resource management for military operations. 4. The contract duration of 404 days suggests a medium-term supply need. 5. The North Dakota location of the awardee may point to regional supply chain considerations. 6. The absence of small business set-asides indicates the primary focus was on securing large-scale fuel supply.

Value Assessment

Rating: good

The contract value of approximately $66 million for a 404-day period for aviation fuel (JP8) appears reasonable given the nature of commodity pricing and the scale of military operations. Benchmarking against similar large-volume fuel contracts would provide a more precise value-for-money assessment. The economic price adjustment clause helps to align the final cost with market realities, potentially offering better value than a fixed price in a volatile market.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit offers. The fact that it was competed suggests that multiple suppliers were capable of meeting the Defense Logistics Agency's requirements for aviation fuel. The number of bids received (21) indicates a healthy level of competition for this type of commodity, which typically benefits price discovery.

Taxpayer Impact: A competitive award process for essential resources like aviation fuel helps ensure that taxpayer dollars are used efficiently by driving down prices through market forces.

Public Impact

Military aviation units, primarily within the Department of Defense, benefit from a reliable supply of JP8 fuel. The services delivered include the provision of critical aviation fuel necessary for flight operations and readiness. The geographic impact is likely concentrated around military air bases and operational areas where JP8 is utilized. Workforce implications are indirect, primarily supporting the logistics and supply chain personnel involved in fuel distribution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the economic price adjustment clause, though this is standard for fuel contracts.
Dependence on a single contractor for a significant volume of fuel could pose supply chain risks if not managed proactively.

Positive Signals

Awarded through full and open competition, indicating a robust market and potential for competitive pricing.
The use of a fixed-price with economic price adjustment contract type is a common and effective method for managing fuel price fluctuations.
The Defense Logistics Agency's involvement suggests adherence to established procurement and supply chain management protocols.

Sector Analysis

The market for aviation fuel, particularly specialized types like JP8, is a significant segment of the broader petroleum refining and distribution industry. This contract falls within the Petroleum Refineries (NAICS 324110) sector. The global demand for aviation fuel is substantial, driven by both commercial and military aviation. Competition in this sector can be influenced by refinery capacity, distribution networks, and geopolitical factors affecting crude oil prices. The value of this contract, while large, represents a portion of the overall defense spending on fuel, which is a critical operational necessity.

Small Business Impact

This contract did not involve small business set-asides, as indicated by 'sb': false. Given the scale and nature of aviation fuel supply, it is likely that the primary awardee is a large entity with extensive refining and distribution capabilities. Subcontracting opportunities for small businesses might exist in ancillary services such as transportation or logistics support, but the core fuel supply is likely handled by the prime contractor.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract. As a major contracting agency, DLA has established procurement regulations and contract management procedures. Transparency is generally maintained through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency Fuel Contracts
JP8 Aviation Fuel Procurement
Petroleum Product Supply Contracts
Fixed-Price with Economic Price Adjustment Contracts

Risk Flags

Potential for price volatility due to economic price adjustment clause.
Dependence on a single supplier for a large volume of a critical commodity.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $66.1 million to TESORO REFINING & MARKETING COMPANY LLC. TURBINE FUEL, AVIATION (JP8)

Who is the contractor on this award?

The obligated recipient is TESORO REFINING & MARKETING COMPANY LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $66.1 million.

What is the period of performance?

Start: 2007-03-23. End: 2008-04-30.

What is the historical spending pattern for JP8 aviation fuel by the Department of Defense?

Historical spending on JP8 aviation fuel by the Department of Defense has been substantial and consistent, reflecting its critical role in military aviation operations. Over the past decade, the DoD has consistently procured billions of dollars worth of aviation fuels annually. Specific figures for JP8 vary year to year based on operational tempo, global deployments, and fuel price fluctuations. For instance, in fiscal years prior to and following this contract (2007-2008), the DLA managed numerous fuel contracts, with total obligations often exceeding tens of billions of dollars across all fuel types. Analyzing trends in fuel prices, contract types (fixed-price vs. cost-reimbursement), and competition levels over time provides insight into the DoD's evolving procurement strategies and its efforts to ensure fuel security and cost-effectiveness.

How does the pricing of this contract compare to market rates for JP8 during the contract period?

Assessing the precise pricing comparison for this contract requires detailed market data for JP8 during the 2007-2008 period, which is not directly available in the provided data. However, the contract's 'Fixed Price with Economic Price Adjustment' (FPEPA) clause is designed to address market volatility. This means the base price was fixed, but adjustments were made based on an agreed-upon economic index (likely related to crude oil or refined product prices). During 2007-2008, global oil prices experienced significant fluctuations, peaking in mid-2008. The FPEPA structure would have allowed Tesoro Refining & Marketing Company LLC to pass on some of these increases, while the fixed component aimed to provide a baseline cost. Without specific indices and adjustment formulas, a direct per-gallon comparison to spot market rates is difficult, but the contract type suggests an effort to balance cost certainty with market realities for both the government and the contractor.

What are the primary risks associated with procuring large volumes of aviation fuel?

Procuring large volumes of aviation fuel presents several key risks. Price volatility is a major concern, as fuel costs are subject to global market dynamics, geopolitical events, and supply/demand imbalances. The contract's FPEPA structure mitigates this to some extent, but significant price spikes can still impact budgets. Supply chain disruption is another critical risk; reliance on a limited number of suppliers or transportation routes can lead to shortages, especially during periods of high demand or unforeseen events (e.g., natural disasters, refinery issues). Quality control is paramount, as substandard fuel can damage aircraft and compromise safety. Finally, logistical challenges in storing and distributing fuel to remote or operational locations add complexity and potential points of failure. The Defense Logistics Agency manages these risks through robust supplier vetting, diverse sourcing strategies, and contingency planning.

What is the track record of Tesoro Refining & Marketing Company LLC in fulfilling government contracts, particularly for fuel?

Tesoro Refining & Marketing Company LLC (now Marathon Petroleum Corporation following mergers) has a significant history of fulfilling contracts for petroleum products, including fuels, for various government agencies. Their core business involves refining and marketing petroleum products, making them a natural fit for supplying aviation fuel. While specific performance metrics for this particular 2007-2008 contract are not detailed here, Tesoro's long-standing presence in the energy sector suggests a capacity to manage large-scale supply agreements. Government contract databases often track contractor performance ratings (e.g., past performance evaluations), which would provide a more granular view of their reliability, quality of goods/services, and adherence to contract terms across their portfolio of federal awards. Generally, companies of Tesoro's size operate under stringent regulatory and contractual obligations.

How does the 'Full and Open Competition' award type impact the overall cost-effectiveness for taxpayers?

Awarding contracts through 'Full and Open Competition' generally enhances cost-effectiveness for taxpayers. This process mandates that all responsible sources, regardless of size or type, are permitted to submit bids. The increased number of potential bidders typically fosters a more competitive environment, driving down prices as companies vie for the contract. It allows the government to leverage the broadest possible market, potentially uncovering innovative solutions or more efficient suppliers. For taxpayers, this means that the government is more likely to secure goods and services at or near the lowest possible market price, maximizing the value of public funds. The 21 bids received in this case strongly suggest that competition was robust, contributing to a favorable outcome for the government's budget.

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: Tesoro Corporation (UEI: 008133480)

Address: 300 CONCORD PLAZA DR, SAN ANTONIO, TX, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $66,075,228

Exercised Options: $66,075,228

Current Obligation: $66,075,228

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060007D0474

IDV Type: IDC

Timeline