DoD's $49M Petroleum Refinery Contract Awarded to Tesoro Refining & Marketing LLC

Contract Overview

Contract Amount: $48,995,728 ($49.0M)

Contractor: Tesoro Refining & Marketing Company LLC

Awarding Agency: Department of Defense

Start Date: 2008-03-28

End Date: 2009-04-30

Contract Duration: 398 days

Daily Burn Rate: $123.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 23

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: JP8

Place of Performance

Location: MOORHEAD, CLAY County, MINNESOTA, 56560

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $49.0 million to TESORO REFINING & MARKETING COMPANY LLC for work described as: JP8 Key points: 1. Contract value of $48.99M for petroleum refining services. 2. Awarded under full and open competition, indicating a competitive bidding process. 3. Potential risk associated with fixed-price contracts with economic price adjustment clauses. 4. Sector is Petroleum Refineries (NAICS 324110).

Value Assessment

Rating: fair

The contract value of $48.99M for petroleum refining services appears within a reasonable range for the industry. However, without specific benchmarks for similar refinery contracts of this duration and scope, a precise valuation is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded through full and open competition, suggesting that multiple bidders had the opportunity to compete. This method generally promotes price discovery and can lead to more competitive pricing.

Taxpayer Impact: The use of full and open competition is generally beneficial for taxpayers as it aims to secure the best value through market forces.

Public Impact

Ensures supply of refined petroleum products for defense operations. Supports the energy sector and related industries. Potential impact on fuel prices due to economic price adjustment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause may lead to cost overruns if fuel prices rise significantly.
Contract duration of 398 days might be subject to unforeseen market fluctuations.
Lack of small business participation noted.

Positive Signals

Awarded through full and open competition, promoting market efficiency.
Contract addresses a critical need for defense logistics.

Sector Analysis

The petroleum refining sector is capital-intensive and subject to global commodity price fluctuations. This contract falls within the Defense Logistics Agency's purview for ensuring fuel supply chains.

Small Business Impact

The data indicates no small business participation in this contract. This suggests that the prime contractor is a large business, and opportunities for small businesses may have been limited or non-existent for this specific award.

Oversight & Accountability

The Department of Defense, through the Defense Logistics Agency, is responsible for overseeing this contract. Standard oversight mechanisms would apply to ensure performance and compliance with contract terms.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Economic Price Adjustment (EPA) clause introduces cost escalation risk.
Contract duration may expose it to significant market volatility.
No small business participation noted.
Potential for price increases due to fluctuating crude oil prices.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.0 million to TESORO REFINING & MARKETING COMPANY LLC. 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 $49.0 million.

What is the period of performance?

Start: 2008-03-28. End: 2009-04-30.

What is the typical profit margin for petroleum refining contracts of this size and duration awarded under full and open competition?

Profit margins in the petroleum refining industry can vary significantly based on market conditions, operational efficiency, and contract specifics. For contracts awarded under full and open competition, margins are typically constrained by market pressures. While precise figures are proprietary, industry averages for similar fixed-price contracts might range from 5-15%, but this specific contract's economic price adjustment clause could influence the realized profit.

What are the primary risks associated with the economic price adjustment (EPA) clause in this contract?

The primary risk of an EPA clause is that it allows the contractor's price to increase if certain economic factors, such as the cost of raw materials (crude oil) or labor, rise. For the government, this means potential cost overruns beyond the initially anticipated fixed price, especially in volatile commodity markets. For taxpayers, it translates to higher overall spending if price escalations are significant.

How effectively does full and open competition ensure optimal value for taxpayer dollars in the petroleum refining sector?

Full and open competition is designed to maximize value by encouraging multiple bidders to offer their best prices and terms. In the petroleum refining sector, this can lead to competitive pricing. However, the effectiveness is also dependent on the complexity of the service, the stability of input costs, and the specific evaluation criteria used by the agency. The EPA clause here introduces a variable that could temper the cost-saving benefits.

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: SP060008R0061

Offers Received: 23

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Tesoro Corporation (UEI: 008133480)

Address: 19100 RIDGEWOOD PKWY, SAN ANTONIO, TX, 90

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $48,995,728

Exercised Options: $48,995,728

Current Obligation: $48,995,728

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D0466

IDV Type: IDC

Timeline