DoD spent $58.5M on naval distillate fuel, with Exxon Mobil securing the contract

Contract Overview

Contract Amount: $58,492,333 ($58.5M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2009-08-13

End Date: 2010-10-30

Contract Duration: 443 days

Daily Burn Rate: $132.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 19

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: FUEL, NAVAL DISTILLATE, F76

Place of Performance

Location: TORRANCE, LOS ANGELES County, CALIFORNIA, 90504

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $58.5 million to EXXON MOBIL CORPORATION for work described as: FUEL, NAVAL DISTILLATE, F76 Key points: 1. Contract value represents a significant investment in essential military fuel supply. 2. Full and open competition suggests a potentially competitive pricing environment. 3. Fixed-price with economic price adjustment contract type introduces some cost volatility. 4. Contract duration of 443 days indicates a medium-term supply need. 5. Awarded by the Defense Logistics Agency, highlighting its role in strategic resource management. 6. The contract falls under the Petroleum Refineries industry code. 7. Geographic focus on California for delivery implies regional logistical considerations.

Value Assessment

Rating: good

The contract value of $58.5 million for naval distillate fuel appears reasonable given the scale of military operations. Benchmarking against similar fuel supply contracts would provide a more precise value-for-money assessment. The fixed-price with economic price adjustment (FPEPA) structure allows for market fluctuations, which can be beneficial for both parties but introduces some risk of cost overruns if fuel prices rise significantly.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of 19 bids suggests a robust competitive landscape for this fuel supply requirement. A high number of bidders generally leads to more competitive pricing and a greater likelihood of the government securing favorable terms.

Taxpayer Impact: Taxpayers benefit from the competitive bidding process, which aims to drive down costs and ensure the government receives the best possible price for this critical fuel.

Public Impact

Naval forces and other Department of Defense entities benefit from a reliable supply of F76 fuel. Essential operational capabilities for naval vessels and potentially other military equipment are maintained. The primary geographic impact is within California, where the fuel is delivered. The contract supports jobs within the petroleum refining and distribution sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost increases beyond initial fixed price.
Contract duration, while substantial, may require follow-on contracts for long-term supply continuity.
Reliance on a single primary contractor (Exxon Mobil) for this award, though competition was broad.

Positive Signals

Awarded through full and open competition, indicating a healthy market.
Multiple bidders (19) suggest strong interest and potential for competitive pricing.
Contract supports a critical national defense need.

Sector Analysis

This contract falls within the broader energy sector, specifically the refining and distribution of petroleum products. The market for naval distillate fuel is specialized, serving military requirements. Comparable spending benchmarks would involve analyzing other large-scale fuel procurement contracts by the DoD or other government agencies. The NAICS code 324110 (Petroleum Refineries) indicates the primary industry classification.

Small Business Impact

The data indicates this contract was not set aside for small businesses, and the prime contractor is a large corporation. There is no explicit information on subcontracting plans for small businesses within this award. Therefore, the direct impact on the small business ecosystem from this specific prime contract appears limited, though downstream effects in the supply chain are possible.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), ensuring compliance with terms and conditions. The Defense Logistics Agency (DLA) is responsible for overall program management. Transparency is facilitated through contract award databases like FPDS. Inspector General investigations could be initiated if fraud, waste, or abuse is suspected.

Related Government Programs

DoD Fuel Procurement
Defense Logistics Agency Contracts
Petroleum Product Supply Contracts
Naval Operations Support
Fixed-Price with Economic Price Adjustment Contracts

Risk Flags

Potential for cost overruns due to economic price adjustment clause.
Reliance on a single awardee for a critical supply chain item.
Geographic concentration of delivery in California.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $58.5 million to EXXON MOBIL CORPORATION. FUEL, NAVAL DISTILLATE, F76

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 $58.5 million.

What is the period of performance?

Start: 2009-08-13. End: 2010-10-30.

What is Exxon Mobil's track record with similar DoD fuel contracts?

Exxon Mobil Corporation has a long history of supplying fuel to the U.S. military. Analyzing their past performance on similar contracts, particularly those involving naval distillate fuel (F76) and awarded by the Defense Logistics Agency (DLA), would reveal their reliability, pricing competitiveness, and adherence to contract terms. Past awards, delivery performance metrics, and any documented disputes or contract modifications would provide valuable insights into their capabilities and potential risks associated with this current award. A review of their performance on contracts with similar pricing structures (e.g., FPEPA) would also be pertinent.

How does the awarded price compare to market rates for naval distillate fuel during the contract period?

To assess the value for money, the awarded price of $58.5 million needs to be benchmarked against prevailing market rates for naval distillate fuel (F76) between August 2009 and October 2010. This would involve examining industry price indices, spot market prices, and prices from other government or commercial contracts for similar fuel types and quantities during that timeframe. The economic price adjustment (EPA) clause complicates a direct comparison, as the final price could deviate from the initial fixed component. Understanding the EPA's formula and the underlying indices used is crucial for a comprehensive value assessment.

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

The primary risk with a Fixed Price with Economic Price Adjustment (FPEPA) contract for fuel is cost volatility. While the fixed portion provides some cost certainty, the economic price adjustment allows the price to fluctuate based on an index or formula tied to market conditions. If fuel prices rise significantly during the contract period, the total cost to the government could exceed initial projections, potentially leading to budget overruns. Conversely, if prices fall, the government might pay more than the prevailing market rate at the time of delivery. Managing this risk requires careful monitoring of the adjustment index and potentially negotiating caps on price increases.

How effective was the 'full and open competition' in ensuring competitive pricing for this specific contract?

The fact that this contract was awarded under 'full and open competition' with 19 bidders is a strong indicator that the process was effective in fostering competition. A large number of bids generally suggests that the market was accessible and that multiple capable suppliers were interested. This competitive environment typically pressures bidders to offer more favorable pricing and terms to secure the award. While the final price achieved is the ultimate measure, the high number of bids suggests a solid foundation for achieving competitive value for the taxpayer.

What is the historical spending trend for naval distillate fuel by the Department of Defense?

Historical spending on naval distillate fuel by the Department of Defense (DoD) is substantial and fluctuates based on operational tempo, fleet size, and global geopolitical factors. Analyzing multi-year spending data from agencies like the Defense Logistics Agency (DLA) would reveal trends, peak spending periods, and the average cost per gallon or barrel. Understanding these historical patterns helps contextualize the $58.5 million award, indicating whether it represents a typical, above-average, or below-average expenditure for a contract of this nature and duration. It also informs future budget planning and identifies potential areas for cost-saving initiatives.

What are the implications of awarding this contract to Exxon Mobil Corporation in terms of market concentration?

Awarding a significant fuel contract like this to a major player like Exxon Mobil Corporation has implications for market concentration within the defense fuel supply chain. While competition was broad for this specific award, the repeated awarding of large contracts to major oil companies can contribute to a concentrated market structure. This concentration could potentially limit future competition if smaller or regional suppliers find it difficult to compete against established giants. Monitoring the distribution of contract awards across various suppliers over time is important to ensure a healthy and competitive market.

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: SP060009R0161

Offers Received: 19

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: $58,492,333

Exercised Options: $58,492,333

Current Obligation: $58,492,333

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060009D0509

IDV Type: IDC

Timeline