DoD spent $158.7M on aviation fuel, with Petro Star Inc. securing the contract

Contract Overview

Contract Amount: $158,708,783 ($158.7M)

Contractor: Petro Star Inc.

Awarding Agency: Department of Defense

Start Date: 2008-09-19

End Date: 2009-10-30

Contract Duration: 406 days

Daily Burn Rate: $390.9K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

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: ANCHORAGE, ANCHORAGE County, ALASKA, 99503

State: Alaska Government Spending

Plain-Language Summary

Department of Defense obligated $158.7 million to PETRO STAR INC. for work described as: TURBINE FUEL, AVIATION, JP8 Key points: 1. The contract value represents a significant investment in aviation fuel for defense operations. 2. Competition dynamics for this contract involved exclusion of sources, potentially impacting price discovery. 3. The fixed-price with economic price adjustment structure introduces potential cost volatility. 4. Performance context is critical given the essential nature of aviation fuel for military readiness. 5. This spending falls within the broader energy and logistics sector supporting defense.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific unit pricing and market comparisons for JP8 aviation fuel during the contract period (2008-2009). The total award of $158.7 million is substantial, but its value-for-money depends heavily on prevailing market conditions and the specific delivery requirements. The fixed-price with economic price adjustment (FPEPA) clause suggests an attempt to balance cost certainty with market fluctuations, but can lead to higher overall costs if fuel prices rise significantly.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This indicates that while the competition was intended to be broad, certain sources were intentionally excluded. The specific reasons for exclusion are not detailed here, but this approach can limit the number of potential bidders and may affect the competitiveness of the pricing. Without knowing the number of bidders or the rationale for exclusions, it's difficult to definitively assess the level of competition.

Taxpayer Impact: The exclusion of sources, even within a full and open framework, may have limited the potential for the most competitive pricing, potentially resulting in higher costs for taxpayers compared to a truly unrestricted competition.

Public Impact

The primary beneficiaries are the Department of Defense and its aviation units, ensuring access to critical fuel for operations. Services delivered include the supply of JP8 aviation fuel, essential for aircraft maintenance and flight readiness. The geographic impact is focused on Alaska (st: AK, sn: ALASKA), indicating a strategic supply chain point. Workforce implications are indirect, supporting jobs in fuel refining, logistics, and military aviation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces risk of cost overruns if fuel prices escalate.
Exclusion of sources may have limited competitive pressure, potentially leading to less favorable pricing.
Contract duration of over a year (406 days) exposes the government to extended market volatility.
Reliance on a single primary contractor (Petro Star Inc.) for a critical commodity in a specific region.

Positive Signals

Awarded under a 'Full and Open Competition' framework, suggesting an effort to solicit offers broadly.
Fixed-price element provides some cost control, despite the economic adjustment.
Contract addresses a critical operational need for the Department of Defense.

Sector Analysis

The petroleum refining industry (NAICS 324110) is a foundational sector providing essential fuels for transportation and industrial use. The market for aviation fuel is highly specialized, with significant barriers to entry due to infrastructure and regulatory requirements. Defense contracts for such commodities represent a stable, albeit cyclical, demand stream. Comparable spending benchmarks would involve analyzing other large-scale aviation fuel procurements by military branches or government agencies, considering volume, grade, and delivery location.

Small Business Impact

This contract does not appear to have a small business set-aside (sb: false). There is no explicit information regarding subcontracting plans for small businesses. The scale of this procurement likely involves large-scale industrial operations, making direct set-asides less common. However, the ecosystem around fuel supply and logistics may offer opportunities for smaller firms in supporting roles, though this contract's structure doesn't prioritize them.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the relevant contracting officer within the Defense Logistics Agency (DLA). Accountability measures are embedded in the contract terms, including delivery schedules and fuel quality specifications. Transparency is facilitated through contract databases like FPDS, though detailed performance reports or IG investigations related to this specific award are not provided here. The Inspector General's office for the Department of Defense would have jurisdiction over fraud, waste, or abuse.

Related Government Programs

Defense Fuel Supply Center contracts
Aviation Turbine Fuel procurements
JP8 Fuel Supply Contracts
Department of Defense Energy Contracts
Alaska Regional Fuel Contracts

Risk Flags

Potential for cost overruns due to Economic Price Adjustment
Limited competition due to source exclusion
Geographic concentration of supply risk in Alaska
Dependence on a single primary contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $158.7 million to PETRO STAR INC.. TURBINE FUEL, AVIATION, JP8

Who is the contractor on this award?

The obligated recipient is PETRO STAR INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $158.7 million.

What is the period of performance?

Start: 2008-09-19. End: 2009-10-30.

What was the specific rationale for excluding certain sources in this 'Full and Open Competition After Exclusion of Sources' award?

The provided data does not specify the exact reasons for excluding certain sources. Typically, exclusions in 'Full and Open Competition After Exclusion of Sources' might stem from national security concerns, proprietary technology, unique capabilities, or prior performance issues with specific vendors. Without further documentation or agency explanations, it's impossible to determine the precise justification. This lack of transparency can raise questions about whether the exclusion limited competition unnecessarily and potentially increased costs for the government. Further investigation into the solicitation documents or agency justifications would be required to understand the rationale.

How did the economic price adjustment (EPA) clause impact the final cost of the fuel compared to a fixed-price contract?

The economic price adjustment (EPA) clause in this contract allowed for modifications to the price based on fluctuations in specific economic factors, likely related to the cost of crude oil and refining processes for JP8 fuel. During the contract period (2008-2009), global oil prices experienced significant volatility. If fuel prices increased substantially during this time, the EPA clause would have resulted in a higher final cost for the Department of Defense than a strict fixed-price contract might have. Conversely, if prices decreased, the EPA could have led to lower costs. Without access to the specific price adjustments made under the EPA and a comparison to what a fixed price might have been, the precise impact on the final $158.7 million expenditure cannot be quantified, but it introduces a layer of cost uncertainty.

What is Petro Star Inc.'s track record with large federal fuel supply contracts, particularly for the Department of Defense?

Petro Star Inc. has a history of securing federal contracts, particularly for fuel supply in Alaska. As a subsidiary of Arctic Slope Regional Corporation, it plays a significant role in the Alaskan energy market. While this $158.7 million contract is substantial, Petro Star has likely been involved in numerous other fuel supply agreements with various government entities, including the military, given its strategic location and capabilities. Assessing their overall track record would involve reviewing past performance evaluations, any documented disputes or contract terminations, and the consistency of their pricing and delivery reliability across multiple awards. Their continued success in winning bids suggests a generally positive performance history, but a comprehensive review would require deeper data analysis.

How does this contract's value compare to other large aviation fuel procurements by the DoD or other federal agencies?

The $158.7 million award for aviation fuel is a significant sum, indicative of large-scale, long-term supply needs. To benchmark it effectively, comparisons should be made with other contracts for similar fuel types (e.g., JP5, Jet A-1) and quantities, especially those awarded during the same period (late 2008 to late 2009) to account for market conditions. Contracts awarded to other major fuel suppliers by agencies like the Defense Logistics Agency (DLA) or the General Services Administration (GSA) would provide relevant context. Factors like geographic delivery points (e.g., remote bases vs. major hubs), contract duration, and competition levels also influence price. Without specific comparable contract data, it's difficult to definitively state if this represents exceptionally high or low spending, but it aligns with the substantial requirements of military aviation logistics.

What are the potential risks associated with relying on Petro Star Inc. for a critical fuel supply in Alaska?

Potential risks associated with relying on Petro Star Inc. for critical fuel supply in Alaska include logistical challenges inherent to the region, such as extreme weather impacting transportation and delivery, and the potential for supply chain disruptions. Dependence on a single primary contractor, even with competition in the award process, carries inherent risks if that contractor faces operational issues, financial difficulties, or unforeseen events. Furthermore, the economic price adjustment clause introduces price volatility risk. Given Alaska's unique operating environment and Petro Star's significant role, any disruption could have a pronounced impact on military readiness in the region. Mitigation strategies likely involve robust contract oversight, contingency planning, and potentially maintaining alternative supply options.

What historical spending trends exist for aviation fuel within the Department of Defense, and how does this contract fit?

The Department of Defense is consistently one of the largest consumers of petroleum products globally, including vast quantities of aviation fuel. Historical spending trends show a persistent and substantial requirement for fuels like JP8 to support global operations, training, and readiness. This $158.7 million contract, awarded in 2008, fits within this pattern of significant, ongoing investment in aviation fuel. Annual spending on such fuels often runs into the billions of dollars across all branches. Factors influencing trends include geopolitical events, operational tempo, aircraft modernization, and energy market prices. This specific award reflects a regionalized, yet substantial, component of the DoD's overall fuel procurement strategy.

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 AFTER EXCLUSION OF SOURCES

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

Parent Company: Arctic Slope Regional Corporation (UEI: 076637073)

Address: 3900 C ST STE 802, ANCHORAGE, AK, 00

Business Categories: Alaskan Native Corporation Owned Firm, Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Minority Owned Business, Native American Owned Business, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $158,708,783

Exercised Options: $158,708,783

Current Obligation: $158,708,783

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D0507

IDV Type: IDC

Timeline