DoD's $139M petroleum refining contract awarded to Placid Refining Company LLC shows fair value with 23 bidders

Contract Overview

Contract Amount: $139,240,854 ($139.2M)

Contractor: Placid Refining Company LLC

Awarding Agency: Department of Defense

Start Date: 2008-03-31

End Date: 2009-04-30

Contract Duration: 395 days

Daily Burn Rate: $352.5K/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: PORT ALLEN, WEST BATON ROUGE County, LOUISIANA, 70767

State: Louisiana Government Spending

Plain-Language Summary

Department of Defense obligated $139.2 million to PLACID REFINING COMPANY LLC for work described as: JP8 Key points: 1. The contract achieved a competitive outcome with 23 bids, suggesting a healthy market for petroleum refining services. 2. Pricing appears reasonable given the fixed-price with economic price adjustment structure, common in volatile commodity markets. 3. The duration of the contract (395 days) is standard for this type of supply agreement. 4. Performance context is limited without specific delivery or quality metrics, but the agency's award indicates initial satisfaction. 5. This contract falls within the broader Defense Logistics Agency's mission to supply fuel and energy to military operations. 6. The absence of small business set-aside flags indicates this was likely a large-scale requirement not specifically targeted for smaller enterprises.

Value Assessment

Rating: good

While specific performance metrics are not detailed, the award to Placid Refining Company LLC for $139.2 million suggests a competitive market price was achieved. The contract type, Fixed Price with Economic Price Adjustment (FP-EPA), is typical for fuel contracts where market fluctuations are expected. Benchmarking against similar petroleum refining contracts is difficult without more granular data on product specifications and delivery locations, but the presence of 23 bids indicates a robust competition that likely drove a fair price.

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 is a strong indicator of a competitive marketplace for petroleum refining services. The extensive competition likely contributed to price discovery and ensured that the Department of Defense received a competitive offer. The agency's selection process, given this level of engagement, suggests a thorough evaluation of proposals.

Taxpayer Impact: The robust competition in this procurement is beneficial for taxpayers as it likely resulted in a more favorable price than a less competitive or sole-source award would have. It demonstrates that government funds are being used efficiently by leveraging market forces.

Public Impact

The primary beneficiaries are the Department of Defense, receiving essential petroleum products for its operations. The contract ensures the supply of refined petroleum products, critical for military readiness and logistical support. The geographic impact is centered around the delivery locations specified in the contract, likely supporting military installations. Workforce implications include employment at Placid Refining Company LLC's facilities and potentially in related transportation and logistics sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the Economic Price Adjustment (EPA) clause, which could increase final costs if market prices surge.
Dependence on a single contractor for a critical supply chain item, posing a risk if the contractor faces operational disruptions.
Limited transparency on specific performance metrics and quality control measures post-award.

Positive Signals

Awarded under full and open competition, indicating a competitive process that likely secured a fair market price.
The high number of bidders (23) suggests a healthy and accessible market for this type of service.
The contract type (FP-EPA) is standard for fuel procurement, acknowledging and managing market risks inherent in commodity pricing.

Sector Analysis

The petroleum refining sector is a critical component of the energy industry, providing essential fuels and products. This contract falls under the North American Industry Classification System (NAICS) code 324110 (Petroleum Refineries). The Defense Logistics Agency (DLA) is a major procurer of fuel, and contracts like this are vital for maintaining military operational capabilities. Spending in this sector by the government is substantial, driven by the continuous need for fuel across all branches of the armed forces.

Small Business Impact

This contract was not set aside for small businesses, as indicated by 'sb: false'. The value and nature of petroleum refining services typically involve large-scale operations that may not be suitable for small business participation without specific subcontracting provisions. There is no explicit information provided regarding subcontracting plans, so the direct impact on the small business ecosystem is likely minimal unless Placid Refining Company LLC voluntarily engages small businesses.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), ensuring compliance with contract terms and financial accountability. The contract's fixed-price nature with economic price adjustments requires monitoring of market indices to ensure fair adjustments. Transparency is generally maintained through contract award databases, though detailed performance reports are often internal.

Related Government Programs

Defense Fuel Supply Center contracts
Petroleum product procurement
Military logistics and supply chain
Energy sector contracts

Risk Flags

Potential for price escalation due to economic price adjustment clause.
Dependence on a single supplier for critical fuel resources.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $139.2 million to PLACID REFINING COMPANY LLC. JP8

Who is the contractor on this award?

The obligated recipient is PLACID REFINING 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 $139.2 million.

What is the period of performance?

Start: 2008-03-31. End: 2009-04-30.

What is the historical spending pattern for petroleum refining services by the Department of Defense?

The Department of Defense (DoD) is a significant consumer of petroleum products, with historical spending in this category often running into billions of dollars annually. This spending fluctuates based on global oil prices, geopolitical events, and the operational tempo of military forces. Contracts for refining services, like the one awarded to Placid Refining Company LLC, are part of a larger strategy to ensure a stable and secure supply of fuel. Analyzing historical data from sources like USAspending.gov reveals consistent, substantial investment in fuel procurement across various agencies, with the Defense Logistics Agency (DLA) being a primary entity responsible for these acquisitions. Trends often show increased spending during periods of heightened military activity or significant price increases in crude oil markets.

How does the awarded price compare to market rates for similar petroleum refining contracts?

Determining the precise market rate comparison for this $139.2 million contract is challenging without specific details on the refined products, volumes, delivery locations, and the exact period of performance relative to market conditions. However, the contract type, Fixed Price with Economic Price Adjustment (FP-EPA), suggests that the base price was negotiated with an understanding of potential market fluctuations. The fact that 23 bids were received indicates a competitive environment, which generally pushes prices towards market equilibrium. If the economic price adjustment mechanism was triggered significantly, the final cost could deviate from the initial award value. Benchmarking would require access to detailed bid data and prevailing market indices (like NYMEX futures) during the contract's execution period.

What are the key performance indicators (KPIs) typically associated with petroleum refining contracts for the DoD?

Key performance indicators (KPIs) for petroleum refining contracts awarded by the Department of Defense (DoD) typically focus on product quality, delivery timeliness, and supply reliability. For refined products, specifications often align with military standards (e.g., MIL-SPEC) to ensure compatibility with military equipment. Timeliness of delivery is critical for maintaining operational readiness, so on-time delivery rates are closely monitored. Supply reliability ensures that fuel is available when and where needed, minimizing disruptions to military operations. While specific KPIs for the Placid Refining Company LLC contract are not detailed in the provided data, these are standard metrics that the Defense Logistics Agency (DLA) would likely track to ensure contract performance and value.

What is the track record of Placid Refining Company LLC in fulfilling government contracts?

Placid Refining Company LLC has a history of engaging with government contracts, particularly within the defense sector for fuel supply. While the provided data points to a specific award from the Department of Defense, a comprehensive assessment of their track record would involve reviewing their performance on past contracts, including any instances of contract modifications, disputes, or awards for exceptional performance. Information from federal procurement databases and contract award histories can shed light on their reliability, adherence to specifications, and overall performance. Without access to detailed past performance reviews or contract histories beyond this single award, it's difficult to provide a definitive assessment of their broader track record.

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

The primary risk associated with a Fixed Price with Economic Price Adjustment (FP-EPA) contract for petroleum is price volatility. While the FP-EPA structure aims to protect both the contractor and the government from extreme market fluctuations, there is still a risk that the economic price adjustment could lead to significantly higher costs than initially anticipated if crude oil or refined product prices surge unexpectedly. For the government, this means potential budget overruns. For the contractor, it means managing the risk of price increases that might not be fully covered by the adjustment. Effective oversight involves closely monitoring the indices used for price adjustments to ensure they accurately reflect market conditions and that the adjustments are applied correctly according to the contract terms.

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: 1940 LA HWY 1 N, PORT ALLEN, LA, 06

Business Categories: Category Business, Manufacturer of Goods, Small Business

Financial Breakdown

Contract Ceiling: $139,240,854

Exercised Options: $139,240,854

Current Obligation: $139,240,854

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D0481

IDV Type: IDC

Timeline