Department of Defense spent $12.1M on diesel fuel, awarded through full and open competition

Contract Overview

Contract Amount: $12,146,967 ($12.1M)

Contractor: Avalon Fuel Limitada

Awarding Agency: Department of Defense

Start Date: 2008-05-30

End Date: 2011-08-31

Contract Duration: 1,188 days

Daily Burn Rate: $10.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: DIESEL FUEL (HIGH SULFUR) PRODUCT

Plain-Language Summary

Department of Defense obligated $12.1 million to AVALON FUEL LIMITADA for work described as: DIESEL FUEL (HIGH SULFUR) PRODUCT Key points: 1. The contract secured a significant volume of diesel fuel, indicating a substantial operational need. 2. Awarded via full and open competition, suggesting a robust market engagement and potential for competitive pricing. 3. The firm fixed-price contract type likely transferred cost risk to the contractor. 4. The duration of the contract (1188 days) suggests a long-term supply requirement. 5. The North American Industry Classification System (NAICS) code 424720 points to a specialized wholesale fuel market. 6. The contract was awarded by the Defense Logistics Agency, a key entity for military supply chain management.

Value Assessment

Rating: good

The total award amount of $12.1 million for diesel fuel over approximately three years appears reasonable given the volume and duration. Benchmarking against similar fuel contracts would provide a more precise value assessment. The firm fixed-price structure suggests the government secured predictable costs, which is a positive indicator of value, assuming the price was 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, meaning all responsible sources were permitted to submit bids. The presence of 5 bidders indicates a healthy level of competition within the market for this specific product. This competitive environment generally leads to better price discovery and potentially lower costs for the government.

Taxpayer Impact: The full and open competition for this diesel fuel contract likely resulted in taxpayer savings by driving down prices through multiple bids. It also ensures that the government is not locked into a single supplier, promoting market efficiency.

Public Impact

Military operations across various branches of the Department of Defense benefit from a reliable supply of diesel fuel. The contract ensures the availability of high-sulfur diesel fuel, a specific grade required for certain types of machinery and vehicles. The geographic impact is likely widespread, supporting logistical needs wherever DoD forces are deployed or stationed. The contract supports the petroleum and petroleum products wholesale distribution sector, contributing to the economic activity of businesses involved in fuel supply.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility in the diesel fuel market over the contract's duration.
Dependence on a specific fuel grade (high sulfur) might limit supplier options in the future.
Logistical challenges in ensuring timely delivery across potentially diverse geographic locations.

Positive Signals

Awarded through full and open competition, indicating a competitive marketplace.
Firm fixed-price contract type provides cost certainty for the government.
Long contract duration suggests a stable and reliable supply chain was established.

Sector Analysis

The petroleum and petroleum products merchant wholesalers sector is critical for the distribution of fuels. This contract falls within the wholesale distribution segment, specifically for diesel fuel. The market size for such fuels is substantial, driven by transportation, industrial, and military demands. Comparable spending benchmarks would involve analyzing other large-scale fuel procurement contracts by government agencies or major commercial entities.

Small Business Impact

There is no indication that this contract included a small business set-aside. The fact that it was awarded under full and open competition with 5 bidders suggests that larger suppliers may have dominated the bidding process. Subcontracting opportunities for small businesses might exist within the supply chain, but are not explicitly detailed in the provided data.

Oversight & Accountability

The contract was subject to standard federal procurement oversight. The firm fixed-price nature of the contract provides a degree of accountability for the contractor to deliver the specified fuel at the agreed-upon price. Transparency is generally maintained through contract databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Fuel Supply Center contracts
Bulk fuel procurement
Petroleum product distribution contracts
Government fuel cards
Military vehicle fuel supply

Risk Flags

Potential for price fluctuations in the fuel market.
Environmental regulations concerning high sulfur fuel content.
Dependence on a specific fuel grade may limit future sourcing options.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.1 million to AVALON FUEL LIMITADA. DIESEL FUEL (HIGH SULFUR) PRODUCT

Who is the contractor on this award?

The obligated recipient is AVALON FUEL LIMITADA.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $12.1 million.

What is the period of performance?

Start: 2008-05-30. End: 2011-08-31.

What was the average price per gallon of diesel fuel under this contract?

The provided data does not include the quantity of diesel fuel purchased (e.g., in gallons), only the total award amount of $12,146,966.61. Without the total volume, it is impossible to calculate the average price per gallon. To determine this, one would need access to the detailed contract line item details or delivery records that specify the quantity procured over the contract's period of performance (May 30, 2008, to August 31, 2011).

How did the pricing of this contract compare to market rates at the time of award?

The data indicates the contract was awarded under 'FULL AND OPEN COMPETITION' with 5 bidders, suggesting a competitive pricing environment. However, to assess if the pricing was favorable compared to market rates, we would need access to historical diesel fuel price indices (e.g., EIA data for high sulfur diesel) for the period between May 2008 and August 2011. Comparing the contract's effective price per unit against these benchmarks would reveal whether the government secured a good deal relative to prevailing market conditions.

What specific risks were associated with procuring high sulfur diesel fuel?

Procuring high sulfur diesel fuel carries specific environmental and operational risks. Environmentally, high sulfur content contributes to greater sulfur dioxide (SO2) emissions, which are regulated due to their role in acid rain and respiratory problems. Operationally, many modern diesel engines and exhaust after-treatment systems (like diesel particulate filters) are designed for ultra-low sulfur diesel (ULSD) and can be damaged or have reduced performance with higher sulfur content fuels. This contract's focus on high sulfur diesel suggests it was intended for older equipment or specific industrial applications where ULSD is not required or compatible.

What is the significance of the Defense Logistics Agency (DLA) awarding this contract?

The Defense Logistics Agency (DLA) is the primary combat support agency responsible for providing mission-critical logistics, including fuel, to the U.S. Armed Forces. Awarding this contract signifies that the DLA was fulfilling its role in ensuring the fuel supply chain for DoD operations. Their involvement suggests adherence to established military fuel procurement standards and logistical coordination to meet the operational demands of the military.

What does the contract type 'FIRM FIXED PRICE' imply about cost management?

A 'FIRM FIXED PRICE' (FFP) contract type means the price is set and not subject to adjustment based on the contractor's cost experience. This shifts the cost risk from the buyer (the government) to the seller (Avalon Fuel Limitada). For the government, this offers budget certainty and predictability. However, it requires the contractor to accurately estimate costs upfront. If the contractor's actual costs exceed the fixed price, their profit margin decreases; conversely, if costs are lower, their profit increases. This structure incentivizes the contractor to manage costs efficiently.

How does the NAICS code 424720 (Petroleum and Petroleum Products Merchant Wholesalers) relate to this contract?

The NAICS code 424720 identifies the primary business activity of the contractor, Avalon Fuel Limitada, as being involved in the wholesale distribution of petroleum products. This means the company likely purchases fuel in large quantities from refineries or terminals and then resells it, potentially adding value through storage, transportation, and breaking bulk. For this contract, it indicates the DoD was sourcing fuel from a distributor rather than directly from a refinery, relying on the wholesaler's established supply chain and logistical capabilities.

Industry Classification

NAICS: Wholesale Trade › Petroleum and Petroleum Products Merchant Wholesalers › Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)

Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060008R0022

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: NUEVA ZONA DE AVIACION, GENERAL HANGAR 19, BOGOTA

Business Categories: Category Business, Foreign Owned, International Organization, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $12,146,967

Exercised Options: $12,146,967

Current Obligation: $12,146,967

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D1254

IDV Type: IDC

Timeline