DoD spent $132.7M on aviation fuel, with Petro Star Inc. securing the contract

Contract Overview

Contract Amount: $132,694,236 ($132.7M)

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: $326.8K/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 $132.7 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 indicate a full and open process after source exclusion, suggesting a deliberate procurement strategy. 3. The fixed-price with economic price adjustment structure introduces potential cost volatility. 4. Performance duration of 406 days requires sustained logistical support. 5. The contract falls under the Petroleum Refineries NAICS code, highlighting the industrial sector involved. 6. Geographic focus on Alaska (AK) suggests specific operational needs or logistical advantages in the region.

Value Assessment

Rating: fair

Benchmarking the $132.7 million contract for aviation fuel is challenging without specific unit pricing or comparison to similar large-scale fuel procurements. The fixed-price with economic price adjustment (FPEPA) contract type introduces a degree of uncertainty in the final cost, as fuel prices can fluctuate significantly. While the total award amount is substantial, its value-for-money assessment depends heavily on the prevailing market rates for JP8 fuel during the contract period and the efficiency of Petro Star Inc.'s supply chain in Alaska.

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, specific sources were excluded, possibly due to specialized capabilities or existing relationships. The number of bidders is not explicitly stated, but the 'after exclusion of sources' clause suggests a more controlled competitive environment than a purely open solicitation. This approach might be used to ensure specific technical requirements are met or to leverage existing infrastructure.

Taxpayer Impact: The exclusion of certain sources could potentially limit the number of competitive bids, which might impact the government's ability to secure the lowest possible price. However, if the excluded sources were not viable alternatives, the remaining competition could still yield a fair price.

Public Impact

Military aviation units operating in or transiting through Alaska benefit from a reliable supply of JP8 fuel. The contract ensures the operational readiness of aircraft critical for defense missions in the region. The geographic impact is concentrated in Alaska, supporting logistical operations and potentially local fuel infrastructure. Workforce implications include employment at Petro Star Inc. facilities involved in fuel refining, storage, and transportation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces risk of cost overruns if fuel prices spike.
Limited competition after source exclusion may have reduced the potential for lower pricing.
Contract duration of over a year requires careful monitoring of performance and market conditions.

Positive Signals

Award to Petro Star Inc. suggests a capable supplier for this critical commodity.
Full and open competition (even with exclusions) aims for a degree of market-based pricing.
Fixed-price element provides some cost certainty compared to cost-plus contracts.

Sector Analysis

This contract falls within the energy sector, specifically focusing on the supply of aviation fuel (JP8). The market for military-grade fuels is specialized, often dominated by a few large suppliers capable of meeting stringent quality and logistical requirements. The Defense Logistics Agency (DLA) is a major procurer of fuel for the DoD. Comparable spending benchmarks would involve analyzing other large-volume fuel contracts awarded by DLA or other military branches for similar operational theaters.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses in the provided data. Petro Star Inc. is likely a large business. This means the direct economic benefit to the small business ecosystem from this specific contract award is minimal, unless Petro Star Inc. voluntarily engages small businesses in its supply chain.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA) and the contracting officer at the Defense Logistics Agency. Accountability measures are embedded in the contract terms, including performance standards and the economic price adjustment clause. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Fuel Supply Center
Aviation Turbine Fuel Procurement
JP8 Fuel Contracts
Petroleum Product Supply Contracts

Risk Flags

Economic Price Adjustment Clause
Limited Competition
Geographic Concentration (Alaska)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $132.7 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 $132.7 million.

What is the period of performance?

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

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

Petro Star Inc. has a history of securing contracts with the Department of Defense, particularly for fuel supply in Alaska. Their involvement in this $132.7 million contract for aviation fuel (JP8) indicates a significant, established relationship. Analyzing past awards reveals their capacity to meet the demanding logistical and quality requirements of military fuel procurement. While this specific award is for a fixed period, their continued success in obtaining such contracts suggests a consistent ability to perform and compete effectively within the defense fuel supply chain. Further investigation into past performance reviews and any disputes or contract modifications would provide a more comprehensive understanding of their reliability and overall track record.

How does the $132.7 million award compare to historical spending on aviation fuel by the DoD in Alaska?

Comparing the $132.7 million award to historical spending requires access to detailed historical procurement data for aviation fuel specifically within Alaska. However, as a single award for a period of approximately 13 months (September 2008 to October 2009), it represents a substantial commitment. The average annual spending on aviation fuel in Alaska by the DoD would likely be in a similar range, potentially higher or lower depending on operational tempo and the number of contracts awarded. Factors such as the specific type of aircraft supported, the number of bases utilizing the fuel, and any strategic reserve requirements would influence the total historical expenditure. This contract's value suggests a significant and ongoing need for aviation fuel to support military operations in the region.

What are the primary risks associated with the 'Fixed Price with Economic Price Adjustment' contract type for aviation fuel?

The primary risk associated with the 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type for aviation fuel is cost volatility. While the fixed-price component offers some baseline cost certainty, the economic price adjustment allows the contractor (Petro Star Inc.) to pass on increases in the cost of raw materials (crude oil) and other specified economic factors to the government. This means the final cost of the fuel could be significantly higher than initially projected if market prices for crude oil or refining costs escalate during the contract period. For the government, this introduces budget uncertainty and the potential for cost overruns. Conversely, if prices decrease, the government benefits from a lower final price, but the primary risk lies in upward price fluctuations.

How effective is 'Full and Open Competition After Exclusion of Sources' in ensuring competitive pricing for specialized fuels like JP8?

The effectiveness of 'Full and Open Competition After Exclusion of Sources' in ensuring competitive pricing for specialized fuels like JP8 is nuanced. On one hand, it aims to broaden competition beyond a sole-source scenario, allowing multiple qualified bidders to submit proposals. This inherently introduces competitive pressure. However, the 'exclusion of sources' clause signifies that certain potential bidders were deliberately removed from the pool. The rationale for exclusion could range from unmet technical qualifications to strategic sourcing decisions. If the excluded sources were significant competitors, the remaining pool might be smaller, potentially leading to less aggressive pricing. The effectiveness hinges on whether the remaining bidders offer sufficient competition to drive prices down while still meeting the specialized requirements of JP8 fuel procurement.

What are the potential performance challenges for Petro Star Inc. in supplying fuel to remote Alaskan locations?

Supplying aviation fuel to remote Alaskan locations presents several potential performance challenges for Petro Star Inc. These include extreme weather conditions that can disrupt transportation and storage, limited infrastructure (such as ports, roads, and pipelines) in remote areas, and the high cost of logistics and transportation over vast distances. Maintaining fuel quality standards under varying environmental conditions and ensuring timely delivery to meet operational tempo are critical. Petro Star Inc. must have robust contingency plans to address potential supply chain disruptions caused by weather, equipment failure, or other unforeseen events. Their success relies on sophisticated logistical planning, reliable infrastructure, and potentially specialized transportation assets suited for the Alaskan environment.

What is the typical profit margin for contractors supplying aviation fuel under large DoD contracts?

Determining the typical profit margin for contractors supplying aviation fuel under large DoD contracts is complex, as it is influenced by numerous factors including contract type, competition level, operational risks, and the specific contractor's cost structure. For fixed-price contracts, profit is built into the price, while for cost-reimbursement contracts, profit is a separate element. In FPEPA contracts like this one, the profit margin is embedded within the base price and is subject to adjustments via the economic price escalation. Generally, profit margins in the defense contracting sector, especially for essential commodities like fuel where competition can be fierce and margins are often scrutinized, might range from low single digits to potentially 10-15% in favorable circumstances. However, without access to Petro Star Inc.'s specific cost breakdown and profit calculation for this contract, providing an exact figure is speculative.

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: $132,694,236

Exercised Options: $132,694,236

Current Obligation: $132,694,236

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D507S

IDV Type: IDC

Timeline