DoD's $64.6M JP8 Turbine Fuel Contract Awarded to ExxonMobil Amidst Fixed-Price Adjustments

Contract Overview

Contract Amount: $64,590,495 ($64.6M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2008-03-28

End Date: 2008-05-21

Contract Duration: 54 days

Daily Burn Rate: $1.2M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 23

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: TURBINE FUEL, AVIATION (JP8)

Place of Performance

Location: BAYTOWN, HARRIS County, TEXAS, 77520

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $64.6 million to EXXON MOBIL CORPORATION for work described as: TURBINE FUEL, AVIATION (JP8) Key points: 1. Contract awarded under fixed-price with economic price adjustment terms, potentially exposing the government to price fluctuations. 2. The contract was competed fully and openly, suggesting a competitive bidding process. 3. A significant number of bids (23) were received, indicating broad market interest. 4. The contract duration of 54 days is relatively short, suggesting a tactical or immediate need. 5. The award was made by the Defense Logistics Agency, a key procurement arm for military supplies. 6. The North American Industry Classification System (NAICS) code 324110 points to petroleum refining activities.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging without more granular data on fuel prices during the award period and comparable contract volumes. The fixed-price with economic price adjustment (FP-EPA) structure introduces variability, making direct value-for-money assessment difficult compared to a firm fixed-price contract. However, the presence of 23 bids suggests that the pricing, while subject to adjustment, was likely competitive at the time of award.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with 23 bids received. This high number of bidders generally indicates a healthy competitive environment, which should theoretically lead to more favorable pricing for the government. The agency's decision to pursue full and open competition suggests they sought the widest possible market participation to ensure the best value.

Taxpayer Impact: A robust competition with numerous bidders typically benefits taxpayers by driving down prices and encouraging efficiency among suppliers. The government secured multiple offers, increasing the likelihood of obtaining a competitive price for the essential JP8 fuel.

Public Impact

The Department of Defense benefits from a reliable supply of JP8 turbine fuel, critical for aviation operations. This contract ensures the availability of a key energy commodity for military aircraft. The geographic impact is primarily within Texas, where the contractor is based. The contract supports the broader defense logistics infrastructure, ensuring operational readiness.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to costs exceeding initial estimates if market prices rise significantly.
Reliance on a single contractor, even if awarded competitively, can pose supply chain risks if disruptions occur.

Positive Signals

Full and open competition with a high number of bidders (23) suggests a competitive award process.
Award by the Defense Logistics Agency indicates procurement through an experienced entity focused on supply chain efficiency.

Sector Analysis

This contract falls within the petroleum refining sector (NAICS 324110), specifically dealing with aviation fuels like JP8. The market for military-grade fuels is a specialized segment of the broader energy industry, often characterized by long-term supply agreements and stringent quality requirements. Comparable spending benchmarks would involve analyzing other DLA fuel procurements or similar contracts awarded by defense agencies for aviation fuel.

Small Business Impact

The data indicates that small business participation was not a specific set-aside for this contract (ss: false, sb: false). While ExxonMobil is a large corporation, the analysis does not provide information on subcontracting opportunities for small businesses within this specific award. Further investigation into subcontracting plans would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract, ensuring compliance with terms and conditions. As a component of the Department of Defense, DLA is subject to various federal acquisition regulations and oversight mechanisms. Transparency is generally maintained through contract databases like FPDS, though specific performance monitoring details are not provided here. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Fuel Supply Center Contracts
Aviation Fuel Procurement
Petroleum Product Contracts
Fixed-Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment Clause Risk
Short Contract Duration
Potential for Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $64.6 million to EXXON MOBIL CORPORATION. TURBINE FUEL, AVIATION (JP8)

Who is the contractor on this award?

The obligated recipient is EXXON MOBIL CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $64.6 million.

What is the period of performance?

Start: 2008-03-28. End: 2008-05-21.

What was the specific economic price adjustment formula used in this contract, and how did it impact the final cost?

The provided data does not specify the exact economic price adjustment (EPA) formula used in this contract. Typically, FP-EPA contracts link price changes to a specific index or market indicator (e.g., a published fuel price index). Without knowing the formula and the market fluctuations during the contract period (March 28, 2008, to May 21, 2008), it's impossible to determine the precise impact on the final cost. However, EPA clauses are designed to protect both the contractor from unforeseen cost increases and the government from paying excessive premiums if market prices fall. The effectiveness of the EPA in this instance would depend on the volatility of JP8 prices during those 54 days and the fairness of the chosen adjustment mechanism.

How does the number of bids (23) compare to typical competition levels for similar aviation fuel contracts awarded by the DLA?

Receiving 23 bids for this aviation fuel contract is generally considered a strong indicator of robust competition. For commodity-like procurements such as fuel, especially when awarded under full and open competition, a higher number of bids usually suggests a competitive market with multiple capable suppliers. While specific historical averages for DLA's JP8 contracts are not provided, 23 bids would typically be viewed favorably, implying that the DLA effectively reached a broad segment of the market and likely received competitive pricing proposals. This level of competition reduces the risk of contractor overpricing and enhances the government's negotiating position.

What is the typical contract duration for JP8 fuel procurements by the DLA, and how does this 54-day contract compare?

The duration of this specific contract is 54 days, which is relatively short for a fuel supply agreement. DLA often procures fuel through longer-term contracts, sometimes spanning multiple years with options, to ensure sustained supply and potentially achieve better economies of scale. Short-duration contracts like this one might be used for immediate, tactical needs, specific operational surges, or as bridge contracts while a larger, longer-term procurement is being finalized. Without more context on the specific requirement that led to this short-term award, it's difficult to definitively assess its strategic fit, but it suggests a focused, time-bound need rather than a sustained, long-term supply arrangement.

What are the potential risks associated with a Fixed Price with Economic Price Adjustment (FP-EPA) contract for fuel, compared to a Firm Fixed Price (FFP) contract?

FP-EPA contracts introduce a degree of cost uncertainty for the government compared to Firm Fixed Price (FFP) contracts. With FFP, the price is set and remains constant regardless of market fluctuations, placing the cost risk on the contractor. In an FP-EPA contract, the price can be adjusted based on pre-defined economic factors, such as changes in the cost of raw materials or labor. For fuel, this means the government is exposed to potential price increases if market conditions worsen during the contract period. While EPA clauses can protect contractors from unexpected cost hikes and ensure supply continuity, they can also lead to higher final costs for the government if prices rise significantly. The benefit is that it can facilitate competition by mitigating risk for bidders in volatile markets.

Can the contractor, ExxonMobil, be considered a sole source or did this contract involve significant competition?

This contract was awarded under 'FULL AND OPEN COMPETITION,' and the data indicates 23 bids were received. This clearly demonstrates that ExxonMobil was not a sole source provider for this requirement. The high number of bids signifies a competitive environment where multiple companies vied for the contract. Therefore, the award to ExxonMobil was the result of a competitive process, not a situation where they were the only available supplier.

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

Address: 3225 GALLOWS RD, FAIRFAX, VA, 11

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

Financial Breakdown

Contract Ceiling: $64,590,495

Exercised Options: $64,590,495

Current Obligation: $64,590,495

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D0472

IDV Type: IDC

Timeline