DoD spent $354.6M on turbine fuel (JP8) from Exxon Mobil, awarded via full and open competition

Contract Overview

Contract Amount: $354,571,556 ($354.6M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2009-03-24

End Date: 2010-04-30

Contract Duration: 402 days

Daily Burn Rate: $882.0K/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: BATON ROUGE, EAST BATON ROUGE County, LOUISIANA, 70821

State: Louisiana Government Spending

Plain-Language Summary

Department of Defense obligated $354.6 million to EXXON MOBIL CORPORATION for work described as: TURBINE FUEL, JP8 Key points: 1. Contract awarded at a fixed price with economic price adjustment, indicating potential for cost fluctuations. 2. The contract duration of 402 days suggests a medium-term supply need. 3. Awarded by the Defense Logistics Agency, a key entity for military supply chain management. 4. The North American Industry Classification System (NAICS) code 324110 points to petroleum refining activities. 5. The contract was awarded under the 'DO' rating, signifying national defense importance. 6. The base year award value was $882,019, with the total award value reaching $354.6M.

Value Assessment

Rating: fair

The total award value of $354.6M for turbine fuel over approximately 13 months is substantial. Without specific unit pricing benchmarks or comparison to similar contracts for JP8 fuel during the 2009-2010 period, a precise value-for-money assessment is challenging. The economic price adjustment clause introduces variability, making it difficult to ascertain the final cost relative to market fluctuations. However, the fixed-price component suggests an attempt to control some costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded through full and open competition, indicating that multiple bidders were likely solicited. The presence of 26 bids suggests a competitive marketplace for this type of fuel. A robust competition generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: The full and open competition process is beneficial for taxpayers as it maximizes the chances of securing the best possible price and terms for essential fuel supplies.

Public Impact

The Department of Defense benefits from a reliable supply of JP8 turbine fuel, critical for aviation and other operations. This contract ensures the operational readiness of military assets requiring JP8 fuel. The geographic impact is likely widespread, supporting military installations and operations across various regions. The contract supports the petroleum refining industry and associated logistics workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to costs exceeding initial projections if fuel prices rise significantly.
Reliance on a single primary contractor (Exxon Mobil) for a large volume of fuel could pose supply chain risks if not managed carefully.
The fixed-price component might not fully capture market volatility, potentially leading to suboptimal pricing if market prices decrease substantially.

Positive Signals

Awarded through full and open competition, suggesting a competitive pricing environment.
The 'DO' rating indicates the critical nature of this fuel supply for national defense.
The Defense Logistics Agency's involvement suggests established procurement and oversight processes.

Sector Analysis

The petroleum refining sector is a mature industry critical to energy supply. This contract falls under the 'Petroleum Refineries' category (NAICS 324110). Spending on aviation and turbine fuels by the DoD is a significant component of the defense budget, reflecting the operational demands of military aviation. Comparable spending benchmarks would involve analyzing other large-scale fuel procurements by military branches or government agencies for similar fuel types.

Small Business Impact

There is no indication that this contract included small business set-asides. Given the nature of large-scale fuel procurement and the primary contractor, it is unlikely that significant subcontracting opportunities for small businesses were mandated or a primary focus of this specific award. The focus appears to be on securing a large volume of a critical commodity from a major supplier.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract, ensuring compliance with terms and conditions. Accountability measures would include performance monitoring, delivery verification, and financial audits. Transparency is facilitated through contract award databases, though detailed operational performance data may be restricted. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Fuel Supply Center Contracts
JP5 Jet Fuel Procurement
Military Aviation Fuel Contracts
Petroleum Product Procurement by DoD

Risk Flags

Potential for price volatility due to Economic Price Adjustment clause.
Supply chain disruption risk associated with reliance on a single primary supplier.
Need for robust monitoring of fuel quality and delivery performance.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $354.6 million to EXXON MOBIL CORPORATION. TURBINE FUEL, JP8

Who is the contractor on this award?

The obligated recipient is EXXON MOBIL CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $354.6 million.

What is the period of performance?

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

What was the average price per gallon of JP8 fuel under this contract, and how does it compare to market rates during the contract period?

To determine the average price per gallon, we would need the total volume of fuel delivered. Assuming a standard barrel of 42 gallons, and given the total award of $354,571,555.8, we can estimate a price range. However, without the exact quantity delivered, a precise per-gallon cost cannot be calculated. Furthermore, the economic price adjustment (EPA) clause means the price per gallon likely varied throughout the contract period based on market indices. To compare with market rates, we would need to access historical average prices for JP8 fuel (e.g., from the Energy Information Administration or Platts) for the period March 24, 2009, to April 30, 2010, and attempt to match the EPA's adjustment factors. The base award of $882,019 suggests an initial smaller purchase, with the bulk of the $354.6M representing potential future deliveries subject to EPA adjustments.

What specific economic factors were used to adjust the price under the Economic Price Adjustment (EPA) clause?

The specific economic factors used for price adjustment under the EPA clause are typically detailed within the contract's terms and conditions. For petroleum products like JP8, these adjustments are commonly tied to established industry price indices, such as those published by the Department of Energy (DOE) or commercial entities like Platts. These indices often reflect changes in crude oil prices, refining costs, transportation, and other market dynamics. The contract would specify which index or indices are used and the formula for calculating the price adjustment, ensuring that both the government and the contractor share the risk and benefit of market fluctuations in a predefined manner.

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

A higher number of bidders, such as the 26 received for this contract, generally indicates a more competitive market. In a competitive environment, contractors are incentivized to offer more favorable pricing to secure the award. This increased competition typically leads to downward pressure on prices, allowing the government to potentially achieve better value. Contracts with fewer bidders might offer less price competition, potentially resulting in higher costs for the government as the contractor faces less pressure to minimize their bid price.

What is the significance of the 'DO' contract award rating, and what does it imply about the priority of this fuel supply?

The 'DO' rating signifies that this contract is related to national defense and has priority over unrated contracts. This means that the contractor, Exxon Mobil Corporation, is obligated to accept and fulfill this order in preference to others, ensuring the timely delivery of JP8 turbine fuel to the Department of Defense. This priority is crucial for maintaining military operational readiness, especially during times of heightened geopolitical activity or national emergency, underscoring the critical importance of this fuel supply for defense missions.

What is the typical duration for contracts of this nature (large-volume fuel supply), and how does this contract's duration compare?

Large-volume fuel supply contracts can vary significantly in duration, often ranging from one to five years, depending on the strategic needs and market stability. This contract, with a duration of 402 days (approximately 13 months), falls on the shorter end of medium-term contracts. Shorter durations might be chosen to allow for more frequent re-evaluation of market conditions and pricing, or to align with specific operational planning cycles. Longer-term contracts might offer more price stability but carry greater risk if market conditions change unfavorably.

How does the Defense Logistics Agency (DLA) typically manage and oversee large fuel procurement contracts like this one?

The Defense Logistics Agency (DLA) manages large fuel procurement contracts through established supply chain and contracting processes. Oversight typically involves rigorous performance monitoring, including tracking delivery schedules, quality control of the fuel, and verifying compliance with contract terms. Financial oversight includes auditing invoices and ensuring payments align with contract provisions and economic price adjustments. DLA often utilizes robust IT systems for inventory management and demand forecasting. They also engage in market analysis to ensure competitive pricing and may conduct periodic reviews of contractor performance to mitigate risks and ensure mission support.

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

Address: 3225 GALLOWS RD, FAIRFAX, VA, 11

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

Financial Breakdown

Contract Ceiling: $354,571,556

Exercised Options: $354,571,556

Current Obligation: $354,571,556

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060009D0471

IDV Type: IDC

Timeline