DoD's $13.1M natural gas contract awarded to ONEOK for Oklahoma delivery

Contract Overview

Contract Amount: $13,141,000 ($13.1M)

Contractor: Oneok Energy Marketing and Trading Company, II

Awarding Agency: Department of Defense

Start Date: 2008-10-01

End Date: 2010-09-30

Contract Duration: 729 days

Daily Burn Rate: $18.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 37

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: FIRM FIZED PRICE NATURAL GAS

Place of Performance

Location: FORT SILL, COMANCHE County, OKLAHOMA, 73503

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $13.1 million to ONEOK ENERGY MARKETING AND TRADING COMPANY, II for work described as: FIRM FIZED PRICE NATURAL GAS Key points: 1. Contract value of $13.1 million over two years suggests significant energy needs. 2. Awarded under full and open competition, indicating a competitive bidding process. 3. Fixed-price contract with economic price adjustment introduces potential cost volatility. 4. Contract duration of 729 days implies a stable, long-term supply requirement. 5. Geographic focus on Oklahoma aligns with regional energy production and consumption patterns. 6. Contractor ONEOK is a major player in the energy marketing and trading sector.

Value Assessment

Rating: fair

The contract value of $13.1 million for a two-year period averages approximately $6.55 million per year. Benchmarking this against similar federal energy supply contracts is challenging without more specific details on volume and delivery terms. However, the fixed-price structure with economic price adjustment suggests a balance between cost certainty and market responsiveness. The number of bids received (37) indicates a healthy level of interest, which can contribute to better pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, with 37 bids received. This high number of bidders suggests a robust and competitive marketplace for natural gas supply to the specified region. The extensive competition likely drove down prices and ensured a fair market value was obtained for the government.

Taxpayer Impact: The broad competition for this contract is beneficial for taxpayers, as it increases the likelihood of securing natural gas at a competitive price, minimizing unnecessary expenditure.

Public Impact

The Department of Defense benefits from a secured supply of natural gas for its operations. Services delivered include the provision of natural gas, essential for heating, power generation, and other operational needs. Geographic impact is concentrated in Oklahoma, supporting military installations within the state. Workforce implications are indirect, primarily supporting jobs within the natural gas extraction and distribution industries.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost overruns if market prices surge unexpectedly.
Contract duration of two years may not fully capture long-term market fluctuations.
Reliance on a single contractor for a critical resource like natural gas carries inherent supply chain risks.

Positive Signals

Awarded under full and open competition, ensuring a competitive bidding process.
High number of bids (37) indicates a robust market and potential for favorable pricing.
Fixed-price component provides a baseline cost certainty for a portion of the contract.

Sector Analysis

The energy sector, specifically natural gas supply, is a critical component of national infrastructure. Federal agencies, particularly the Department of Defense, are significant consumers of energy. This contract fits within the broader landscape of federal energy procurement, which aims to ensure reliable and cost-effective energy for military operations. Comparable spending benchmarks would depend on the specific volume and delivery requirements, but the $13.1 million value over two years suggests a substantial, ongoing need.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions. Given the nature of natural gas marketing and trading, the primary contractor is likely a large entity. There is no explicit information regarding subcontracting plans with small businesses, but the scale of such a contract typically involves large-scale infrastructure and logistics, which may limit direct subcontracting opportunities for smaller firms.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA). Accountability measures would include adherence to delivery schedules, quality standards, and pricing terms. Transparency is facilitated through contract award databases, though detailed operational oversight specifics are generally not public.

Related Government Programs

Defense Energy Support Center contracts
Federal energy procurement
Natural gas supply agreements
Department of Defense operational support

Risk Flags

Economic Price Adjustment Clause
Supply Chain Vulnerability
Market Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.1 million to ONEOK ENERGY MARKETING AND TRADING COMPANY, II. FIRM FIZED PRICE NATURAL GAS

Who is the contractor on this award?

The obligated recipient is ONEOK ENERGY MARKETING AND TRADING COMPANY, II.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $13.1 million.

What is the period of performance?

Start: 2008-10-01. End: 2010-09-30.

What is the historical spending pattern for natural gas by the Defense Logistics Agency in Oklahoma?

Analyzing historical spending for natural gas by the Defense Logistics Agency (DLA) in Oklahoma requires access to detailed procurement data over multiple fiscal years. Without specific historical data, it's difficult to establish a precise spending pattern. However, federal agencies like the DLA typically procure energy resources through competitive bidding processes to meet operational demands. The current contract's value of $13.1 million over two years suggests a significant and consistent requirement. Trends in federal energy spending are often influenced by geopolitical events, energy market volatility, and shifts in military operational tempo. A comprehensive review would involve examining past DLA contracts for similar services in the region, noting any fluctuations in awarded amounts, contract types (fixed-price vs. cost-reimbursable), and the number of bidders over time to identify any discernible patterns or anomalies.

How does the fixed-price with economic price adjustment (FPEPA) clause impact the risk for the government and the contractor?

The Fixed-Price with Economic Price Adjustment (FPEPA) clause introduces a shared risk between the government and the contractor regarding fluctuations in market prices. For the government, the fixed-price component offers a degree of cost certainty, protecting against minor price increases. However, the economic price adjustment allows for increases if specific economic indicators (like fuel costs or inflation indices) rise, potentially leading to higher overall costs than a pure fixed-price contract. For the contractor, the FPEPA clause provides protection against significant market downturns that could erode profit margins, while the fixed-price element ensures a baseline profit. The risk is that if market prices rise substantially, the government bears the increased cost. Conversely, if prices fall significantly, the contractor might be locked into a higher price than the current market, though the adjustment mechanism aims to mitigate this. The specific indices used for adjustment are crucial in determining the actual risk exposure.

What is ONEOK's track record with federal government contracts, particularly for energy supply?

ONEOK Energy Marketing and Trading Company, II, as a significant player in the energy sector, likely has a history of engaging with federal government contracts. To assess their track record, one would need to examine federal procurement databases for past awards to ONEOK. Key aspects to review include the types of contracts awarded (e.g., fuel supply, pipeline services), their performance history on those contracts (on-time delivery, quality compliance), any instances of contract disputes or terminations, and the overall value of contracts held. A positive track record would involve consistent performance, adherence to contract terms, and competitive pricing. Conversely, any history of performance issues or significant disputes would raise concerns. Without specific data on ONEOK's past federal contracts, a definitive assessment is not possible, but their presence as a bidder on this DoD contract suggests they are an established entity capable of meeting federal requirements.

How does the number of bids (37) compare to typical competition levels for similar federal energy contracts?

Receiving 37 bids for a federal energy contract, such as this natural gas supply agreement, generally indicates a high level of competition. Typical competition levels can vary significantly based on the specific commodity, geographic region, contract duration, and complexity. For large-scale, standardized commodities like natural gas in a producing region like Oklahoma, a higher number of bids is more probable. In contrast, highly specialized services or niche markets might see far fewer bidders. A benchmark comparison would involve analyzing the average number of bids received for similar DLA or DoD energy contracts over the past several years. If the average is, for example, 5-10 bids, then 37 represents exceptionally strong competition. This high level of interest suggests that the market is robust, the contract requirements were clear and accessible, and the potential for profit was attractive to multiple suppliers, which is generally favorable for price discovery and taxpayer value.

What are the potential risks associated with the 'Crude Petroleum and Natural Gas Extraction' North American Industry Classification System (NAICS) code for this contract?

The NAICS code 'Crude Petroleum and Natural Gas Extraction' (211111) primarily describes the activities of companies that operate oil and gas well platforms, including exploration, drilling, and extraction. While ONEOK is involved in energy marketing and trading, their classification under this code might relate to their upstream activities or the nature of the commodity being supplied. Potential risks associated with this sector include price volatility driven by global supply and demand, geopolitical instability affecting supply chains, environmental regulations and risks (e.g., spills, emissions), and the cyclical nature of commodity markets. For a federal contract, risks could manifest as supply disruptions due to extreme weather events impacting extraction or transportation, sudden price spikes affecting the economic price adjustment, or increased regulatory scrutiny impacting operational costs. The government's exposure to these risks is managed through contract terms like the FPEPA clause and by ensuring the contractor has robust risk mitigation strategies in place.

Industry Classification

NAICS: Mining, Quarrying, and Oil and Gas Extraction › Oil and Gas Extraction › Crude Petroleum and Natural Gas Extraction

Product/Service Code: CHEMICALS AND CHEMICAL PRODUCTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060008R0401

Offers Received: 37

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Oneok, Inc. (UEI: 007907827)

Address: 3706 SW TOPEKA BLVD, TOPEKA, KS, 02

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $13,141,000

Exercised Options: $13,141,000

Current Obligation: $13,141,000

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D7505

IDV Type: IDC

Timeline