DoD spent $1.47B on aviation fuel, with Equilon Enterprises LLC securing the largest share

Contract Overview

Contract Amount: $1,465,362,755 ($1.5B)

Contractor: Equilon Enterprises LLC

Awarding Agency: Department of Defense

Start Date: 2009-03-24

End Date: 2010-05-25

Contract Duration: 427 days

Daily Burn Rate: $3.4M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 26

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: TURBINE FUEL, AVIATION (JP8/JP5)

Place of Performance

Location: DEER PARK, HARRIS County, TEXAS, 77536

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $1.47 billion to EQUILON ENTERPRISES LLC for work described as: TURBINE FUEL, AVIATION (JP8/JP5) Key points: 1. The contract represents a significant portion of the Defense Logistics Agency's spending on aviation fuel. 2. Competition dynamics for this contract are crucial for ensuring competitive pricing in a critical commodity. 3. The fixed-price with economic price adjustment structure introduces potential cost volatility. 4. Performance context is vital to understand if the fuel met stringent military specifications. 5. This contract positions Equilon Enterprises LLC as a key supplier within the defense fuel sector.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific unit price data and comparison to market fluctuations during the contract period. The total award amount of $1.47 billion indicates a substantial procurement. However, the fixed-price with economic price adjustment (EPA) clause suggests that the final cost could deviate from the initial estimate based on market conditions, making a direct value-for-money assessment difficult without detailed cost breakdowns and market analysis.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. This level of competition is generally positive for price discovery and can lead to more favorable terms for the government. The number of bids received (26) further supports the notion of a competitive environment, suggesting that the government had a range of options to choose from.

Taxpayer Impact: A competitive bidding process for essential resources like aviation fuel helps ensure that taxpayer dollars are used efficiently by driving down prices and encouraging cost-effective solutions.

Public Impact

Military operations across various branches of the U.S. Armed Forces benefit from the reliable supply of aviation fuel. The contract ensures the availability of JP8/JP5 fuel, critical for aircraft readiness and mission execution. The geographic impact is nationwide, supporting air bases and deployed forces. Workforce implications include jobs in fuel production, transportation, and logistics, both within the contractor's organization and supporting industries.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if market prices increase significantly.
Dependence on a single large supplier for a critical commodity like aviation fuel could pose supply chain risks.
Ensuring consistent quality and timely delivery of fuel across diverse operational environments presents logistical challenges.

Positive Signals

Awarded under full and open competition, suggesting a robust bidding process.
A significant number of bids (26) indicates a healthy market for this product.
The contract duration (427 days) allowed for sustained supply, crucial for operational continuity.

Sector Analysis

The aviation fuel market is a critical component of the broader energy and defense sectors. This contract falls under the petroleum refineries industry (NAICS 324110). The U.S. Department of Defense is a major consumer of petroleum products, and contracts for aviation fuel are essential for maintaining military readiness. Comparable spending benchmarks would involve analyzing other large-scale aviation fuel procurements by the DoD and other government agencies, as well as private sector fuel contracts.

Small Business Impact

The data indicates that this contract was not specifically set aside for small businesses, nor does it appear to have a small business subcontracting component explicitly detailed in the provided summary. The primary contractor, Equilon Enterprises LLC, is a large entity. Further investigation would be needed to determine if any subcontracting opportunities were directed towards small businesses within the broader supply chain for fuel production or distribution.

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, quality standards, and financial accountability. Transparency is generally maintained through contract award databases like FPDS. Inspector General (IG) jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Fuel Supply Center Contracts
Aviation Turbine Fuel Procurement
JP8 Fuel Contracts
Petroleum Product Procurement by DoD
Energy Sector Contracts for Defense

Risk Flags

Potential for price volatility due to Economic Price Adjustment clause.
Supply chain vulnerability for critical aviation fuel.
Ensuring consistent fuel quality meets stringent military standards.
Logistical complexities in timely delivery across diverse operational areas.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.47 billion to EQUILON ENTERPRISES LLC. TURBINE FUEL, AVIATION (JP8/JP5)

Who is the contractor on this award?

The obligated recipient is EQUILON ENTERPRISES LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $1.47 billion.

What is the period of performance?

Start: 2009-03-24. End: 2010-05-25.

What was the average price per gallon of JP8/JP5 fuel under this contract, and how did it compare to prevailing market prices during the contract period?

The provided data does not include the specific price per gallon or detailed economic price adjustments, making a direct comparison to market prices impossible. The total award of $1.47 billion over 427 days suggests an average expenditure of approximately $3.44 million per day. To determine the price per gallon, the total volume procured would be necessary. Without this, and without access to market indices for JP8/JP5 during 2009-2010, a precise benchmark cannot be established. However, the 'Economic Price Adjustment' clause indicates that the price was subject to change based on market fluctuations, implying that the government aimed to mitigate extreme price volatility while still benefiting from competitive initial bids.

What is the track record of Equilon Enterprises LLC in supplying aviation fuel to the Department of Defense, and have there been any past performance issues?

Equilon Enterprises LLC, often associated with Shell Oil Company, has a history of supplying petroleum products, including aviation fuels, to government entities. While specific past performance issues related to this particular $1.47 billion contract are not detailed in the summary data, large-scale fuel contracts can be subject to scrutiny regarding delivery reliability, quality control, and adherence to pricing adjustments. A comprehensive review would involve examining past performance evaluations, any contract disputes, or corrective actions associated with Equilon's prior DoD contracts. Generally, major fuel suppliers are expected to meet stringent military specifications and delivery schedules.

How did the number of bidders (26) for this contract influence the final negotiated price compared to contracts with fewer bidders?

A higher number of bidders, such as the 26 received for this contract, typically indicates a more competitive market. In theory, increased competition should lead to lower prices for the government as contractors vie to win the award. The presence of numerous potential suppliers puts downward pressure on profit margins and encourages more aggressive pricing strategies. While the 'Fixed Price with Economic Price Adjustment' structure introduces complexity, a robust competition phase is a key factor in establishing a favorable base price and ensuring that the economic adjustments are applied to a competitively determined starting point, ultimately benefiting taxpayers.

What were the primary risks associated with this large aviation fuel procurement, and how were they mitigated?

Key risks in a contract of this magnitude include price volatility due to market fluctuations (mitigated by the EPA clause, though this also introduces risk), supply chain disruptions (potentially mitigated by robust logistics planning and multiple sourcing options within Equilon's network), quality control issues (addressed through stringent military specifications and inspection protocols), and delivery timeliness (managed through performance metrics and potential penalties). The fixed-price nature of the base contract provides some cost certainty, but the EPA requires careful monitoring of market indices to ensure fair pricing. The sheer volume also presents logistical challenges in storage and distribution.

How does this contract's total value compare to historical or projected spending on aviation fuel by the Department of Defense?

The $1.47 billion award for aviation fuel over approximately 14 months is a substantial procurement. To contextualize this, one would need to compare it against the DoD's overall annual budget for fuel, historical spending trends for JP8/JP5, and the number of contracts awarded for similar products during that period (2009-2010). The DoD is one of the largest consumers of fuel globally, and its spending on aviation fuel can fluctuate based on operational tempo, global events, and fuel prices. This single contract represents a significant portion of the DoD's fuel acquisition strategy, highlighting the importance of efficient procurement processes for such critical resources.

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

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060009R0061

Offers Received: 26

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Shell Deutschland Gmbh (UEI: 423792808)

Address: 910 LOUISIANA ST, HOUSTON, TX, 90

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

Financial Breakdown

Contract Ceiling: $1,465,362,755

Exercised Options: $1,465,362,755

Current Obligation: $1,465,362,755

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060009D0465

IDV Type: IDC

Timeline