DoD spent $159M on aviation fuel, with Petro Star Inc. winning a fixed-price contract

Contract Overview

Contract Amount: $159,438,437 ($159.4M)

Contractor: Petro Star Inc.

Awarding Agency: Department of Defense

Start Date: 2007-08-31

End Date: 2008-10-30

Contract Duration: 426 days

Daily Burn Rate: $374.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 13

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION (JP8)

Place of Performance

Location: VALDEZ, VALDEZ-CORDOVA County, ALASKA, 99686

State: Alaska Government Spending

Plain-Language Summary

Department of Defense obligated $159.4 million to PETRO STAR INC. for work described as: TURBINE FUEL, AVIATION (JP8) Key points: 1. Contract value of $159.4 million for aviation fuel. 2. Awarded to Petro Star Inc. under full and open competition. 3. Contract duration of 426 days. 4. Fixed Price with Economic Price Adjustment (FP-EPA) pricing structure. 5. No small business set-aside was utilized. 6. Geographic focus on Alaska (AK).

Value Assessment

Rating: fair

The contract value of $159.4 million for aviation fuel over approximately 14 months represents a significant expenditure. Benchmarking this against similar fuel contracts is challenging without more specific volume and delivery details. The FP-EPA structure introduces price volatility risk, which needs careful monitoring to ensure value for money is maintained throughout the contract term. The total award amount of $374,269 over the base period suggests a substantial volume of fuel was procured.

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 were likely solicited. The presence of 13 bids suggests a competitive environment, which generally favors price discovery and potentially better pricing for the government. The specific number of bidders (13) is a positive indicator of robust competition for this fuel supply requirement.

Taxpayer Impact: Full and open competition with 13 bidders is beneficial for taxpayers as it increases the likelihood of securing competitive pricing and prevents potential price gouging associated with less competitive solicitations.

Public Impact

Aviation fuel (JP8) supplied to Department of Defense operations. Supports military readiness and operational capabilities. Primarily impacts operations and logistics within Alaska. Ensures a consistent fuel supply chain for aviation assets.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost overruns if market prices for fuel increase significantly.
Fixed-price nature of the contract, even with EPA, may limit flexibility if operational needs change drastically.
Reliance on a single contractor for a critical commodity like aviation fuel can pose supply chain risks.

Positive Signals

Awarded through full and open competition, suggesting a competitive bidding process.
The contract specifies a fixed price with economic price adjustment, providing some cost control.
The contract duration is clearly defined, allowing for predictable budgeting.

Sector Analysis

The procurement falls within the petroleum refining and distribution sector, specifically for aviation fuels. The market for military-grade aviation fuel is specialized, often dominated by a few large suppliers capable of meeting stringent quality and logistical requirements. This contract represents a significant portion of spending within this niche, supporting critical defense logistics. Comparable spending benchmarks would depend on the specific volume and type of fuel, but $159 million indicates a substantial procurement.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb: false) and there is no explicit mention of subcontracting goals for small businesses. This suggests that the primary award went to a larger entity, and opportunities for small businesses may be limited to direct supply chain roles or indirect support, rather than prime contracting.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Logistics Agency (DLA) and the Department of Defense's internal audit and contracting oversight mechanisms. The fixed-price with economic price adjustment structure requires diligent monitoring of fuel price indices to ensure the adjustments are justified and do not lead to excessive costs for the government. Inspector General reviews may also be applicable.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Fuel Procurement
Department of Defense Energy Spending
Petroleum Product Supply Contracts

Risk Flags

Price Volatility Risk due to EPA Clause
Potential for Cost Overruns
Supply Chain Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $159.4 million to PETRO STAR INC.. TURBINE FUEL, AVIATION (JP8)

Who is the contractor on this award?

The obligated recipient is PETRO STAR INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $159.4 million.

What is the period of performance?

Start: 2007-08-31. End: 2008-10-30.

What was the average price per gallon of JP8 fuel under this contract, and how does it compare to market rates at the time?

The provided data does not include the specific volume of fuel procured, making it impossible to calculate an average price per gallon. Therefore, a direct comparison to market rates is not feasible with the given information. To assess value for money, one would need to know the total gallons purchased and compare the effective price per gallon against prevailing market prices for JP8 in Alaska during the contract period (August 2007 - October 2008). The contract's Economic Price Adjustment (EPA) clause also means the price per gallon would have varied over time based on the adjustment index.

What specific economic factors were used for the price adjustment in this FP-EPA contract?

The data provided does not specify the exact economic factors or indices used for the price adjustment in this Fixed Price with Economic Price Adjustment (FP-EPA) contract. Typically, FP-EPA contracts for petroleum products reference established industry price indices, such as those published by the Department of Energy or other recognized market reporting agencies, often tied to crude oil prices, refining costs, and transportation differentials. The specific index or formula would have been detailed in the contract's terms and conditions, allowing for adjustments based on fluctuations in the cost of raw materials and production.

How did Petro Star Inc.'s pricing compare to other potential bidders during the full and open competition?

The provided data indicates that 13 bids were received for this contract, suggesting a competitive process. However, the specific pricing details of Petro Star Inc. relative to the other 12 bidders are not disclosed in the summary data. To assess this, one would need access to the bid tabulation or award decision documents. A competitive award generally implies that Petro Star Inc. offered terms, including price, that were deemed most advantageous to the government among the submitted proposals, considering factors beyond just the lowest price if applicable.

What is the typical volume of JP8 fuel procured by the Defense Logistics Agency in Alaska annually?

The provided data does not offer information on the typical annual volume of JP8 fuel procured by the Defense Logistics Agency (DLA) in Alaska. This specific contract awarded $159.4 million over approximately 14 months. To determine typical annual volumes, one would need to analyze historical DLA procurement data for aviation fuel in that region over several years. This would help contextualize the scale of this particular award within the broader DLA logistics framework for the area.

What are the risks associated with a Fixed Price with Economic Price Adjustment (FP-EPA) contract for aviation fuel?

The primary risk with an FP-EPA contract for aviation fuel is price volatility. While the fixed-price component provides a baseline, the economic price adjustment allows the contractor to pass on increases in the cost of raw materials (like crude oil) and production. If fuel prices rise significantly during the contract period, the government could end up paying substantially more than initially anticipated, potentially exceeding budget allocations. Conversely, if prices fall, the adjustment mechanism might limit the government's ability to benefit from those lower prices. This necessitates robust monitoring of the adjustment indices and market conditions.

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: SP060007R0161

Offers Received: 13

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Arctic Slope Regional Corporation (UEI: 076637073)

Address: 3900 C ST STE 802, ANCHORAGE, AK, 00

Business Categories: American Indian Owned Business, Category Business, Minority Owned Business, Native American Owned Business, Small Business

Financial Breakdown

Contract Ceiling: $159,438,437

Exercised Options: $159,438,437

Current Obligation: $159,438,437

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060007D0503

IDV Type: IDC

Timeline