DoD spent $22.1M on gaseous nitrogen, with Air Liquide Industrial U.S. LP as the sole provider

Contract Overview

Contract Amount: $22,096,072 ($22.1M)

Contractor: AIR Liquide Industrial U.S. LP

Awarding Agency: Department of Defense

Start Date: 2008-10-23

End Date: 2013-12-31

Contract Duration: 1,895 days

Daily Burn Rate: $11.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: GASEOUS NITROGEN, TYPE I, GRADE B

Place of Performance

Location: HOUSTON, HARRIS County, TEXAS, 77056

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $22.1 million to AIR LIQUIDE INDUSTRIAL U.S. LP for work described as: GASEOUS NITROGEN, TYPE I, GRADE B Key points: 1. The contract awarded to Air Liquide Industrial U.S. LP for gaseous nitrogen represents a significant expenditure for the Defense Logistics Agency. 2. The lack of competition for this contract raises questions about potential price inflation and the absence of market-driven cost efficiencies. 3. The duration of the contract (over 5 years) suggests a long-term need for this specific industrial gas. 4. The fixed-price nature of the contract provides some cost certainty, but without competition, the baseline price is less transparent. 5. The contract's performance is tied to the supply of a critical industrial gas, essential for various defense operations. 6. The sole-source award indicates potential barriers to entry or a specific technical requirement met only by this contractor.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of industrial gas supply. Without competitive bids, it's difficult to ascertain if the $22.1 million price tag represents a fair market value. The absence of comparable contracts with open competition makes it hard to assess if the pricing is optimized. However, the fixed-price contract type offers some predictability in spending.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Air Liquide Industrial U.S. LP, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. The lack of competition limits the government's ability to leverage market forces to secure the best possible price and terms.

Taxpayer Impact: Taxpayers may have paid a premium for gaseous nitrogen due to the absence of competitive pressure. The government missed an opportunity to explore potentially lower costs through a more open bidding process.

Public Impact

Military operations and readiness are supported through the reliable supply of gaseous nitrogen. The contract ensures the availability of a critical industrial gas for various defense logistics functions. The primary beneficiaries are the Department of Defense and its various branches relying on this supply. The geographic impact is primarily within Texas, where the contractor is located, but the supply chain likely supports broader defense installations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce transparency in pricing and value.
Long contract duration without re-competition limits future cost-saving opportunities.

Positive Signals

Ensures a consistent and reliable supply of a critical industrial gas.
Fixed-price contract provides budget certainty for the awarded amount.
Contract addresses a specific, potentially specialized, need within the defense sector.

Sector Analysis

The industrial gas manufacturing sector is characterized by significant capital investment and specialized production processes. Companies like Air Liquide operate in a market that can have high barriers to entry due to technical expertise and infrastructure requirements. While this contract falls under industrial gas manufacturing, the specific application for defense logistics might involve unique purity or delivery specifications. Comparable spending benchmarks are difficult to establish without more specific details on the grade and volume of gaseous nitrogen required.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information suggesting significant subcontracting opportunities for small businesses. The award to a large industrial gas supplier indicates that the primary focus was on securing the required product rather than promoting small business participation. The impact on the small business ecosystem is likely minimal for this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for ensuring compliance with contract terms and financial accountability. Transparency is limited by the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Logistics Agency Procurement
Industrial Gas Supply Contracts
Department of Defense Supply Chain Management

Risk Flags

Sole-source award
Lack of competition
Potential for price overruns
Long-term commitment without re-evaluation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $22.1 million to AIR LIQUIDE INDUSTRIAL U.S. LP. GASEOUS NITROGEN, TYPE I, GRADE B

Who is the contractor on this award?

The obligated recipient is AIR LIQUIDE INDUSTRIAL U.S. LP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $22.1 million.

What is the period of performance?

Start: 2008-10-23. End: 2013-12-31.

What specific defense applications require Gaseous Nitrogen, Type I, Grade B, and why was it procured solely from Air Liquide Industrial U.S. LP?

Gaseous Nitrogen, Type I, Grade B, is a high-purity industrial gas with various applications in the defense sector. These can include inerting atmospheres for sensitive equipment, purging systems, cryogenics for cooling, and potentially in certain manufacturing or maintenance processes. The sole-source award to Air Liquide Industrial U.S. LP suggests that either this specific grade and type of nitrogen, or the required delivery and logistical capabilities, were perceived to be uniquely met by this contractor at the time of award. Factors such as specialized production facilities, existing infrastructure, or specific purity certifications required by the Defense Logistics Agency (DLA) could have contributed to this determination. Without further documentation on the justification for the sole-source award, it remains speculative, but it implies a lack of readily available alternatives meeting the stringent requirements.

How does the $22.1 million contract value compare to historical spending on gaseous nitrogen by the Department of Defense?

Comparing the $22.1 million contract value to historical spending on gaseous nitrogen by the Department of Defense (DoD) requires access to comprehensive historical procurement data. This single contract, spanning from October 2008 to December 2013 (approximately 5 years), represents an average annual expenditure of roughly $4.4 million. To provide a meaningful comparison, one would need to analyze the total DoD spending on gaseous nitrogen across all contracts and agencies over similar or extended periods. This would involve identifying all relevant contracts, their values, durations, and the specific grades and types of nitrogen procured. Without this broader dataset, it's impossible to definitively state whether $22.1 million is high, low, or average relative to the DoD's overall historical investment in this commodity.

What are the potential risks associated with a sole-source contract for a critical industrial gas like gaseous nitrogen?

Sole-source contracts for critical industrial gases like gaseous nitrogen present several potential risks. Foremost is the risk of paying inflated prices due to the absence of competitive bidding. Without competing offers, the contractor has less incentive to offer the most cost-effective solution. There's also a risk of reduced innovation and service quality, as the contractor may face less pressure to improve processes or offerings. Furthermore, reliance on a single supplier can create supply chain vulnerabilities; if the sole provider experiences production issues, delivery disruptions, or financial instability, the government's operations could be severely impacted. This lack of alternative sourcing also limits the government's flexibility to adapt to changing needs or market conditions.

What performance metrics or quality assurance measures were likely in place for this contract to ensure the Gaseous Nitrogen met Type I, Grade B specifications?

For a contract specifying Gaseous Nitrogen, Type I, Grade B, stringent performance metrics and quality assurance (QA) measures would be essential. The 'Type I, Grade B' designation itself implies specific purity levels and acceptable impurity limits, which would be detailed in the contract's specifications. Quality assurance likely involved regular testing and certification of the nitrogen supplied, potentially through third-party laboratories or the contractor's own accredited facilities, with results submitted to the Defense Logistics Agency (DLA). Performance metrics would focus on timely delivery, consistency of product quality across batches, and adherence to any specific handling or storage requirements. The contract likely included clauses for non-conformance, allowing the DLA to reject substandard product and potentially seek remedies or alternative sourcing if quality issues persisted.

Given the contract's end date in late 2013, what has been the subsequent procurement strategy for this type of gaseous nitrogen by the Defense Logistics Agency?

To determine the subsequent procurement strategy for Gaseous Nitrogen, Type I, Grade B, by the Defense Logistics Agency (DLA) after the contract's expiration in December 2013, a review of subsequent contract awards is necessary. This would involve searching federal procurement databases (like FPDS or SAM.gov) for contracts issued by the DLA for gaseous nitrogen, specifically looking for Type I, Grade B, or equivalent specifications, awarded from late 2013 onwards. It would be important to ascertain if the DLA re-competed the requirement, potentially leading to awards to different vendors or Air Liquide under new terms. Alternatively, the DLA might have consolidated requirements, changed specifications, or found alternative solutions. Understanding the post-2013 strategy would reveal whether the DLA addressed the sole-source nature of the previous contract and sought greater competition or cost efficiencies.

Industry Classification

NAICS: Manufacturing › Basic Chemical Manufacturing › Industrial Gas Manufacturing

Product/Service Code: CHEMICALS AND CHEMICAL PRODUCTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: SP060008R0309

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Red-D-Arc Inc (UEI: 275260909)

Address: 2700 POST OAK BLVD STE 1800, HOUSTON, TX, 90

Business Categories: Category Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $22,096,072

Exercised Options: $22,096,072

Current Obligation: $22,096,072

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D1531

IDV Type: IDC

Timeline