DoD spent $103.5M on aviation turbine fuel, with 16 awards under full and open competition

Contract Overview

Contract Amount: $103,462,874 ($103.5M)

Contractor: U.S. OIL Trading LLC

Awarding Agency: Department of Defense

Start Date: 2008-09-18

End Date: 2009-10-30

Contract Duration: 407 days

Daily Burn Rate: $254.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 16

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: TURBINE FUEL, AVIATION, JP8

Place of Performance

Location: TACOMA, PIERCE County, WASHINGTON, 98421

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $103.5 million to U.S. OIL TRADING LLC for work described as: TURBINE FUEL, AVIATION, JP8 Key points: 1. The contract awarded to U.S. OIL TRADING LLC represents a significant expenditure for aviation fuel. 2. Competition dynamics indicate a robust market for this essential defense commodity. 3. The fixed-price with economic price adjustment structure aims to mitigate fuel price volatility. 4. Performance context is tied to the Defense Logistics Agency's mission to supply fuel to military operations. 5. This spending falls within the broader petroleum refining and distribution sector supporting defense logistics.

Value Assessment

Rating: good

The total award of $103.5 million for aviation turbine fuel over approximately one year appears reasonable given the volume and nature of the product. Benchmarking against similar large-scale fuel procurements for military use suggests that pricing structures, especially those with economic price adjustments, are standard to account for market fluctuations. The fixed-price component provides a baseline cost control, while the adjustment mechanism ensures the government pays a fair market price for a volatile commodity.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, with 16 bids received. This high level of competition is a positive indicator for price discovery and suggests that multiple suppliers were able to meet the government's requirements. The presence of numerous bidders typically drives down prices and encourages more favorable terms for the government.

Taxpayer Impact: The extensive competition for this aviation fuel contract likely resulted in a more cost-effective outcome for taxpayers, ensuring that the Defense Logistics Agency secured fuel at competitive market rates.

Public Impact

Military aviation units across various branches of the U.S. armed forces are the primary beneficiaries, receiving essential fuel for operations. The services delivered include the supply of JP8 turbine fuel, critical for aircraft readiness and mission execution. The geographic impact is national, supporting military bases and operations requiring aviation fuel. Workforce implications are indirect, supporting jobs within the petroleum refining, transportation, and logistics sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clause if crude oil prices surge.
Dependence on a single contractor for a significant portion of fuel supply could pose a risk if not managed with multiple award contracts.
Logistical challenges in ensuring timely and consistent delivery across diverse operational locations.

Positive Signals

Awarded under full and open competition, indicating a competitive market and potentially favorable pricing.
Fixed-price component provides a degree of cost certainty for the base price of the fuel.
The Defense Logistics Agency's expertise in managing large-scale fuel procurements.

Sector Analysis

This contract falls within the broader energy sector, specifically the refining and distribution of petroleum products. The market for aviation turbine fuel is substantial, driven by both commercial and military demand. The Defense Logistics Agency's role in procuring such fuels is critical for national security, ensuring the operational readiness of military aircraft. Comparable spending benchmarks would involve analyzing other large-scale fuel contracts awarded by DoD and other government agencies for similar products.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The large dollar value and specialized nature of aviation fuel procurement often favor larger, established companies. Subcontracting opportunities for small businesses might exist within the broader logistics and transportation network supporting fuel delivery, but are not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA) contracting officers and quality assurance personnel. Accountability measures are embedded in the contract terms, including delivery schedules and fuel specifications. Transparency is generally maintained through contract award databases, though specific performance metrics and detailed pricing breakdowns may be considered sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Supply Contracts
Petroleum Products Procurement
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Potential for price volatility due to economic price adjustment clause.
Dependence on specific fuel type (JP8) may limit supplier options in certain scenarios.
Logistical complexity of fuel delivery to diverse military installations.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $103.5 million to U.S. OIL TRADING LLC. TURBINE FUEL, AVIATION, JP8

Who is the contractor on this award?

The obligated recipient is U.S. OIL TRADING LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $103.5 million.

What is the period of performance?

Start: 2008-09-18. End: 2009-10-30.

What is the historical spending trend for aviation turbine fuel by the Department of Defense over the last five fiscal years?

Analyzing historical spending trends for aviation turbine fuel by the Department of Defense requires access to comprehensive procurement data beyond this single contract. However, general trends indicate consistent and substantial spending on aviation fuels due to the extensive operational requirements of the U.S. military. Factors influencing these trends include global oil prices, geopolitical events, changes in military operational tempo, and strategic shifts in defense posture. For instance, periods of increased deployment or conflict typically correlate with higher fuel consumption and, consequently, higher spending. Conversely, budget constraints or drawdowns in certain regions might lead to reduced spending. Detailed analysis would involve aggregating data from various contracts awarded by agencies like the Defense Logistics Agency (DLA) and comparing year-over-year expenditures, noting any significant deviations and their underlying causes.

How does the unit price of JP8 fuel in this contract compare to market rates or other government contracts awarded around the same period?

Directly comparing the unit price of JP8 fuel from this specific contract (awarded in 2008) to current market rates or other government contracts awarded around the same period requires access to detailed pricing data for those comparable contracts and a robust understanding of the economic price adjustment (EPA) mechanism's impact. The provided data does not include the specific unit price or the exact formula for the EPA. However, the contract's 'pt' field indicates 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT,' suggesting that the base price was fixed, but subject to changes based on an index, likely tied to crude oil prices. During 2008-2009, global oil prices experienced significant volatility. Therefore, a simple comparison of the average price paid would be misleading without accounting for the specific index used and the prevailing market conditions at the time of each delivery. To perform a true comparison, one would need to isolate the fixed component and analyze the adjustment factor's effect, then benchmark this against other DLA fuel contracts or Department of Energy price indices for aviation fuel during the contract's duration.

What are the primary risks associated with a fixed-price contract with economic price adjustment for fuel procurement?

The primary risks associated with a fixed-price contract with economic price adjustment (FPEPA) for fuel procurement are twofold, affecting both the government and the contractor, though often leaning towards shared risk. For the government, the main risk is potential price escalation beyond initial budget expectations if the economic index (e.g., crude oil prices) rises sharply. While the fixed-price component offers some stability, the adjustment clause can lead to significant cost increases, potentially exceeding appropriated funds if not managed carefully. For the contractor, the risk is mitigated by the EPA clause, as it protects against unforeseen increases in input costs. However, if the index falls significantly, the contractor might be locked into a higher price than current market rates, though this is less common for volatile commodities like fuel. Administrative complexity is another risk; accurately tracking and applying the economic index requires diligent oversight and can lead to disputes if calculations are contested. Ensuring the index accurately reflects the cost of the specific fuel type is also crucial.

What is the track record of U.S. OIL TRADING LLC in fulfilling large federal fuel contracts?

Assessing the track record of U.S. OIL TRADING LLC requires a broader search of federal procurement databases beyond the single contract provided. This contract, awarded in 2008-2009, represents one instance of their engagement with the Department of Defense. To evaluate their track record comprehensively, one would need to examine other contracts awarded to them by federal agencies, noting factors such as contract value, duration, performance ratings (if available), any instances of contract disputes, timely delivery, and adherence to specifications. A company's history with fulfilling large federal fuel contracts is crucial for understanding their capacity, reliability, and ability to manage complex logistics and pricing mechanisms like economic price adjustments. Without additional data points, it's difficult to definitively characterize their overall performance beyond this specific award.

How does the number of bidders (16) in this full and open competition impact the potential for cost savings for the government?

A high number of bidders, such as the 16 received for this aviation turbine fuel contract, generally has a positive impact on cost savings for the government. When a contract is competed on a full and open basis, a larger pool of potential suppliers increases the likelihood that multiple companies can meet the government's requirements. This heightened competition typically drives down prices as bidders strive to offer the most attractive terms to secure the award. It also enhances price discovery, meaning the government can better ascertain the fair market value of the goods or services. Furthermore, a robust competitive environment can encourage innovation and efficiency among bidders, potentially leading to better overall value beyond just the price. For taxpayers, this translates to a more efficient use of public funds, as the government is likely to secure the fuel at a more competitive rate than if fewer bidders were involved.

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: SP060008R0161

Offers Received: 16

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

Evaluated Preference: NONE

Contractor Details

Address: 3001 MARSHALL AVE, TACOMA, WA, 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: $103,462,874

Exercised Options: $103,462,874

Current Obligation: $103,462,874

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D0501

IDV Type: IDC

Timeline