DoD spent $104M on turbine fuel (JP8) from Tesoro Refining & Marketing LLC, awarded via full and open competition

Contract Overview

Contract Amount: $104,419,387 ($104.4M)

Contractor: Tesoro Refining & Marketing Company LLC

Awarding Agency: Department of Defense

Start Date: 2009-03-24

End Date: 2010-04-30

Contract Duration: 402 days

Daily Burn Rate: $259.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 26

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, JP8

Place of Performance

Location: MANDAN, MORTON County, NORTH DAKOTA, 58554

State: North Dakota Government Spending

Plain-Language Summary

Department of Defense obligated $104.4 million to TESORO REFINING & MARKETING COMPANY LLC for work described as: TURBINE FUEL, JP8 Key points: 1. The contract value of $104.4 million for turbine fuel represents a significant expenditure within the Defense Logistics Agency's fuel procurement. 2. Competition dynamics indicate a full and open approach, suggesting potential for competitive pricing, though specific bidder numbers are not detailed. 3. Risk indicators include the fixed-price with economic price adjustment structure, which can expose the government to price fluctuations. 4. Performance context is limited to the duration of the contract (402 days) and the specific fuel type (JP8). 5. Sector positioning places this contract within the broader energy and defense logistics sectors, crucial for military operations.

Value Assessment

Rating: fair

The contract value of $104.4 million for JP8 turbine fuel over approximately one year appears substantial. Benchmarking against similar fuel procurements by the DoD or other federal agencies would be necessary to definitively assess value for money. The economic price adjustment clause introduces a variable that could impact the final cost compared to a firm fixed price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. While the number of bids received (26) is provided, the specific details of the bidding process and the range of prices offered are not available. A higher number of bidders generally suggests a more competitive environment, which can lead to better price discovery.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it maximizes the potential for obtaining the best possible price through a wide range of offers.

Public Impact

This contract directly supports the operational readiness of Department of Defense (DoD) aircraft and ground vehicles requiring JP8 turbine fuel. The primary beneficiaries are military units and personnel who rely on a consistent and available supply of fuel for their missions. Geographic impact is concentrated in North Dakota, where the supplier is located, and wherever DoD assets requiring this fuel are deployed. Workforce implications are primarily within the petroleum refining and distribution sector, supporting jobs at Tesoro Refining & Marketing Company LLC and related logistics.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause may lead to costs exceeding initial projections if fuel prices rise significantly.
Reliance on a single contractor for a critical fuel type could pose supply chain risks if not managed proactively.
Limited performance details provided make it difficult to assess the contractor's historical performance on this specific contract.

Positive Signals

Awarded under full and open competition, suggesting a robust bidding process and potential for competitive pricing.
A significant number of bids (26) indicates a healthy level of interest and participation from potential suppliers.
The contract specifies a critical fuel type (JP8), highlighting its importance for military operations and the DoD's commitment to securing necessary resources.

Sector Analysis

This contract falls within the petroleum refining and distribution sector, a critical component of the energy industry that supports national security. The market for military fuels is often characterized by long-term contracts and specific product requirements. Comparable spending benchmarks would involve analyzing other large-volume fuel procurements by the DoD and other government agencies, considering factors like fuel type, delivery location, and contract duration.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb: false) and does not appear to have specific subcontracting requirements mentioned (ss: false). Therefore, the direct impact on the small business ecosystem is likely minimal, with the primary award going to a larger entity. There is no indication of specific efforts to engage small businesses in this particular procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of 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 facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Fuel Supply Center (DFSC) procurements
JP8 Fuel Contracts
Petroleum Product Procurement
DoD Energy Contracts
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment Clause
Volatile Fuel Market Exposure
Potential for Cost Overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $104.4 million to TESORO REFINING & MARKETING COMPANY LLC. TURBINE FUEL, JP8

Who is the contractor on this award?

The obligated recipient is TESORO REFINING & MARKETING COMPANY LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $104.4 million.

What is the period of performance?

Start: 2009-03-24. End: 2010-04-30.

What is the historical spending pattern for JP8 turbine fuel by the Defense Logistics Agency?

Analyzing the historical spending patterns for JP8 turbine fuel by the Defense Logistics Agency (DLA) requires accessing comprehensive contract databases over several fiscal years. DLA is a primary procurer of fuel for the DoD, and JP8 is a standard aviation and diesel fuel. Historical data would likely show significant and consistent annual expenditures, fluctuating based on operational tempo, global fuel prices, and strategic reserve needs. Examining trends would reveal if spending has increased or decreased, and whether this is attributable to changes in demand, pricing, or shifts in procurement strategies. For instance, periods of heightened military activity or significant global oil price volatility would likely correlate with higher spending. Understanding these patterns is crucial for budget forecasting and identifying potential cost-saving opportunities through strategic sourcing or negotiation.

How does the price of JP8 under this contract compare to market rates at the time of award?

To compare the price of JP8 under this contract to market rates at the time of award (March 2009 - April 2010), one would need to consult historical fuel price indices and Platts assessments for jet fuel or diesel in the relevant region (likely North Dakota or a major distribution hub). The contract's 'Economic Price Adjustment' (EPA) clause complicates a direct comparison, as the final price would have varied. However, the base price and the EPA formula can be analyzed against prevailing market prices. For example, if the base price was significantly above market averages, or if the EPA formula allowed for excessive upward adjustments compared to market movements, it would indicate a potential lack of value. Conversely, if the base price was competitive and the EPA tracked market fluctuations closely, it suggests a fair arrangement. Without the specific base price and EPA details, a definitive comparison is challenging, but the number of bidders (26) suggests a competitive environment that should have driven a reasonable base price.

What is Tesoro Refining & Marketing Company LLC's track record with DoD fuel contracts?

Tesoro Refining & Marketing Company LLC (now Marathon Petroleum Corporation) has a history of supplying petroleum products, including fuels, to various government entities, including the Department of Defense. Their track record with DoD fuel contracts would involve reviewing past awards, contract performance evaluations (if publicly available), and any reported issues such as delivery delays, quality disputes, or contract disputes. As a major refiner, Tesoro possesses the infrastructure and capacity to fulfill large-scale fuel requirements. Examining their performance on similar contracts, particularly those involving JP8 or other military-grade fuels, would provide insight into their reliability, pricing competitiveness, and adherence to contractual obligations. A review of contract databases and any available performance metrics would be necessary to fully assess their track record.

What are the potential risks associated with the 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type for fuel procurement?

The 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type for fuel procurement carries specific risks for the government. While it aims to protect both parties from unforeseen price fluctuations in volatile markets, the primary risk to the government is paying a higher final price than initially anticipated if market prices increase significantly. The EPA clause allows for adjustments based on an index or formula, which, if not carefully structured, can lead to substantial cost overruns. For the contractor, the risk is that if market prices decrease, the EPA might not fully compensate them, potentially leading to reduced profit margins or disputes. Effective management of FPEPA contracts requires robust monitoring of the price index used for adjustments and clear understanding of the formula to ensure fairness and prevent excessive government expenditure. The number of bidders (26) suggests that contractors were willing to accept the risks and potential rewards associated with this contract type.

How does the duration of this contract (402 days) align with typical DoD fuel supply contracts?

The duration of this contract, approximately 402 days (about 13 months), is relatively standard for many federal supply contracts, including those for petroleum products. DoD fuel supply contracts can vary significantly in length, ranging from short-term spot buys to multi-year agreements with options. Contracts of around one year are common for fuels, allowing for flexibility in adapting to changing market conditions, operational needs, and budget cycles. Longer-term contracts might offer greater price stability but also tie the government to specific terms for extended periods. Shorter durations allow for more frequent re-competition, potentially capturing better pricing or adapting to new supplier capabilities. The 402-day term suggests a balance, providing a reasonable period of supply while allowing for periodic reassessment of the market and contractor performance.

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: Tesoro Corporation (UEI: 008133480)

Address: 300 CONCORD PLAZA DR, SAN ANTONIO, 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: $104,419,387

Exercised Options: $104,419,387

Current Obligation: $104,419,387

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060009D0468

IDV Type: IDC

Timeline