Petroleum products contract awarded to PETROLEUM TRADERS CORP for over $86 million by the Department of Defense
Contract Overview
Contract Amount: $86,547,780 ($86.5M)
Contractor: Petroleum Traders Corp
Awarding Agency: Department of Defense
Start Date: 2007-10-01
End Date: 2012-03-16
Contract Duration: 1,628 days
Daily Burn Rate: $53.2K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 33
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Other
Official Description: PETROLEUM
Place of Performance
Location: FORT WAYNE, ALLEN County, INDIANA, 46804
State: Indiana Government Spending
Plain-Language Summary
Department of Defense obligated $86.5 million to PETROLEUM TRADERS CORP for work described as: PETROLEUM Key points: 1. Contract value of $86.5 million for petroleum products suggests significant demand. 2. Awarded under full and open competition, indicating a broad market solicitation. 3. Contract duration of 1628 days (approx. 4.5 years) points to long-term supply needs. 4. The fixed-price with economic price adjustment (EPA) structure aims to mitigate market volatility. 5. Awarded by the Defense Logistics Agency, a key entity for military supply chain management. 6. The North American Industry Classification System (NAICS) code 424720 identifies the specific wholesale trade sector for petroleum products.
Value Assessment
Rating: good
The contract value of $86.5 million for petroleum products appears substantial, reflecting the significant logistical needs of the Department of Defense. Benchmarking this against similar large-scale fuel supply contracts would provide a clearer picture of value for money. The fixed-price with economic price adjustment (EPA) clause is a common mechanism to manage fluctuating fuel costs, suggesting a reasonable approach to pricing risk. Without specific per-unit cost data or comparisons to market rates at the time of award, a definitive value assessment is challenging, but the scale indicates a significant procurement.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under 'full and open competition,' meaning all responsible sources were permitted to submit bids. This approach typically fosters a competitive environment, potentially leading to better pricing and terms for the government. The presence of 33 bids indicates a robust level of interest and participation from the market, suggesting that the solicitation was attractive and the requirements were well-defined. A high number of bidders generally supports the notion that the government received competitive offers.
Taxpayer Impact: A full and open competition with 33 bidders suggests that taxpayers benefited from a wide range of offers, likely driving down costs and ensuring a competitive price for essential petroleum products.
Public Impact
The Department of Defense is the primary beneficiary, ensuring a consistent supply of petroleum products for its operations. The contract supports the wholesale distribution of petroleum products, a critical component of the energy sector. Geographic impact is likely widespread, given the nature of military operations and fuel distribution networks. Workforce implications may include jobs in logistics, transportation, and petroleum handling associated with the contractor and its suppliers.
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 market prices surge significantly.
- Dependence on a single contractor for a critical resource like petroleum carries inherent supply chain risks.
- Ensuring consistent quality and timely delivery of petroleum products across diverse operational environments can be challenging.
Positive Signals
- Awarded under full and open competition with a substantial number of bidders (33), indicating strong market interest and competitive pricing.
- The fixed-price with EPA structure is a standard method for managing fuel cost fluctuations in long-term contracts.
- The Defense Logistics Agency's involvement suggests established procurement processes and oversight for critical supplies.
Sector Analysis
This contract falls within the Petroleum and Petroleum Products Merchant Wholesalers sector, specifically NAICS code 424720. This industry is characterized by the distribution and wholesale trade of fuels and related products. The market size for petroleum products is vast, driven by global energy demand. This contract represents a significant procurement within the government's energy supply chain, likely supporting military readiness and operations. Comparable spending benchmarks would involve analyzing other large government fuel contracts or major commercial fuel supply agreements.
Small Business Impact
The data indicates that small business participation was not a specific set-aside for this contract (sb: false). While the primary awardee is PETROLEUM TRADERS CORP, the extent of small business subcontracting is not detailed here. Large contracts like this can sometimes offer opportunities for small businesses in specialized roles within the supply chain, but without specific subcontracting plans or reporting, the direct impact on the small business ecosystem is unclear. Further investigation into subcontracting reports would be necessary to assess this.
Oversight & Accountability
Oversight for this contract would primarily reside with the contracting officers and program managers within the Defense Logistics Agency (DLA) and the Department of Defense. Accountability measures are typically embedded in the contract terms, including performance standards, delivery schedules, and quality requirements. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.
Related Government Programs
- Defense Fuel Support Center
- Military Petroleum Supply
- Government Fuel Contracts
- Energy Logistics
- Defense Supply Chain Management
Risk Flags
- Price Volatility Risk
- Supply Chain Dependency
- Quality Assurance Challenges
Tags
sector-other, agency-department-of-defense, agency-defense-logistics-agency, contract-type-fixed-price-with-economic-price-adjustment, competition-full-and-open, size-category-large, product-petroleum, geography-indiana, naics-424720
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $86.5 million to PETROLEUM TRADERS CORP. PETROLEUM
Who is the contractor on this award?
The obligated recipient is PETROLEUM TRADERS CORP.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $86.5 million.
What is the period of performance?
Start: 2007-10-01. End: 2012-03-16.
What is the track record of PETROLEUM TRADERS CORP in fulfilling government contracts, particularly for petroleum products?
PETROLEUM TRADERS CORP has a history of receiving government contracts, including those for petroleum products. Analyzing their past performance on similar awards, such as delivery timeliness, quality compliance, and adherence to contract terms, is crucial. Data from contract databases can reveal the volume and types of contracts they have held, as well as any performance issues or awards. A review of their contract history would indicate their experience and reliability in serving government needs, especially for critical commodities like fuel. Understanding their capacity and past successes or failures in fulfilling large-scale government fuel requirements provides insight into their suitability for current and future awards.
How does the awarded price per unit compare to market rates for petroleum products during the contract period?
Determining the precise per-unit cost comparison requires access to the specific pricing details within the contract and contemporaneous market data for petroleum products. The contract uses an 'economic price adjustment' (EPA) clause, which means the price per unit would fluctuate based on a pre-defined index or formula tied to market prices. To assess value, one would need to compare the actual prices paid under the EPA to benchmark market prices (e.g., spot prices, futures contracts, or average wholesale prices) for the specific types of petroleum products procured and during the contract's performance period. Without this granular data, it's difficult to definitively state if the government received a favorable price, though the EPA mechanism is designed to reflect market conditions.
What are the primary risks associated with this contract, and how are they being mitigated?
Key risks include price volatility of petroleum products, supply chain disruptions, and potential quality control issues. The economic price adjustment (EPA) clause in the contract is a primary mitigation strategy for price volatility, allowing prices to adjust with market fluctuations. Supply chain risks are managed through the Defense Logistics Agency's (DLA) established logistics and distribution networks, and potentially through contingency planning. Quality control is typically addressed through stringent contract specifications and inspection protocols. The large number of bidders (33) also suggests a competitive market that can help mitigate risks by providing alternative sources if needed, though the contract is awarded to a single entity.
How effective has the Defense Logistics Agency been in managing similar large-scale fuel procurement contracts?
The Defense Logistics Agency (DLA) is a primary agency responsible for managing the global supply chain for the U.S. military, including fuel. DLA has extensive experience and established processes for procuring and distributing vast quantities of petroleum products worldwide. Their effectiveness is generally considered high, given the critical nature of their mission and their long history of supporting military operations. Performance metrics for DLA often focus on delivery reliability, cost-effectiveness, and responsiveness to operational demands. While specific contract performance can vary, DLA's overall track record in fuel procurement is robust, underpinned by sophisticated logistics and risk management strategies.
What has been the historical spending trend for petroleum products by the Department of Defense over the last decade?
Historical spending by the Department of Defense (DoD) on petroleum products has been substantial and subject to fluctuations influenced by global oil prices, geopolitical events, and military operational tempo. Over the last decade, the DoD has consistently been one of the largest government consumers of fuel. Annual spending can range from billions to tens of billions of dollars, depending on these factors. While this specific contract represents a portion of that spending, a broader analysis would involve aggregating data from numerous fuel contracts across different branches and agencies within the DoD. Trends often show increased spending during periods of heightened military activity or significant oil price spikes.
What is the significance of the 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' contract type for this petroleum procurement?
The 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) contract type is particularly relevant for commodities like petroleum where prices are highly volatile. It establishes a base fixed price but includes a mechanism to adjust that price based on fluctuations in specified economic factors, typically market indices for crude oil or refined products. This structure aims to protect both the contractor from significant losses due to unforeseen price increases and the government from paying excessively inflated prices if market conditions were to decrease substantially. It balances the need for price stability with the reality of market volatility, making it a common choice for long-term fuel supply contracts.
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: SP060007R0201
Offers Received: 33
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Address: 7120 POINTE INVERNESS WY, FORT WAYNE, IN, 03
Business Categories: Category Business, Small Business, Veteran Owned Business
Financial Breakdown
Contract Ceiling: $86,547,780
Exercised Options: $86,547,780
Current Obligation: $86,547,780
Contract Characteristics
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SP060007D8515
IDV Type: IDC
Timeline
Start Date: 2007-10-01
Current End Date: 2012-03-16
Potential End Date: 2012-03-16 00:00:00
Last Modified: 2012-03-22
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