DoD spent over $511M on aviation fuel, with BP West Coast Products LLC securing the contract

Contract Overview

Contract Amount: $511,800,313 ($511.8M)

Contractor: BP West Coast Products LLC

Awarding Agency: Department of Defense

Start Date: 2009-08-13

End Date: 2010-11-13

Contract Duration: 457 days

Daily Burn Rate: $1.1M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 19

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION, JP8

Place of Performance

Location: LA PALMA, ORANGE County, CALIFORNIA, 90623

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $511.8 million to BP WEST COAST PRODUCTS LLC for work described as: TURBINE FUEL, AVIATION, JP8 Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract duration of 457 days indicates a medium-term supply need. 3. Awarded to a single vendor, BP West Coast Products LLC, for a significant dollar amount. 4. The contract type, Fixed Price with Economic Price Adjustment, aims to balance cost certainty with market fluctuations. 5. The North American Industry Classification System (NAICS) code 324110 points to petroleum refining as the core industry. 6. The contract was awarded under the 'Defense' sector, specifically by the Defense Logistics Agency. 7. The contract was awarded in California, indicating a specific geographic focus for delivery or operations.

Value Assessment

Rating: fair

The total award of over $511 million for aviation fuel is substantial. Benchmarking this against similar fuel contracts is challenging without more specific details on fuel type, volume, and delivery locations. The economic price adjustment clause introduces variability, making a direct value assessment difficult without analyzing the price fluctuations during the contract period. However, the scale of the award suggests a significant procurement need by the Department of Defense.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit bids. The presence of 19 bids indicates a robust level of competition for this aviation fuel supply contract. A higher number of bidders generally contributes to better price discovery and potentially more favorable pricing for the government.

Taxpayer Impact: The strong competition suggests that taxpayer dollars were likely used efficiently, as multiple companies vied to offer the best terms for this significant fuel requirement.

Public Impact

The primary beneficiaries are the various branches of the Department of Defense requiring aviation fuel for their operations. The service delivered is the supply of aviation fuel (JP8), critical for military aircraft. The geographic impact is centered around California, where the contract was awarded, likely implying delivery points or operational bases within the state. Workforce implications are indirect, primarily supporting the logistics and supply chain operations for fuel distribution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to costs exceeding initial estimates if market prices rise significantly.
Reliance on a single awardee for such a large volume of critical fuel could pose supply chain risks.
The fixed-price nature, even with adjustments, requires careful monitoring to ensure fair pricing.
The contract's duration might not align perfectly with fluctuating fuel demands, potentially leading to over or under-supply issues.

Positive Signals

Awarded through full and open competition, maximizing the potential for competitive pricing.
A large number of bidders (19) indicates a healthy market and strong interest in serving the DoD.
The contract type (Fixed Price with EPA) attempts to mitigate extreme price volatility for both parties.
The Defense Logistics Agency is experienced in managing large-scale fuel procurements.

Sector Analysis

The petroleum refining sector is a critical component of the energy industry, providing essential fuels for transportation and industrial use. The market for aviation fuel is substantial, driven by commercial airlines, military operations, and general aviation. This contract represents a significant procurement within the defense segment of the aviation fuel market, highlighting the government's role as a major consumer. Comparable spending benchmarks would typically involve analyzing historical DoD fuel purchases and broader market prices for JP8.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb: false). There is no explicit information on subcontracting plans for small businesses. Given the nature of fuel supply and distribution, it is possible that larger prime contractors may engage small businesses for logistical support or specialized services, but this is not detailed in the provided data.

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. The Defense Logistics Agency (DLA) would also maintain oversight of the overall program. Transparency is facilitated through contract award databases, though detailed performance metrics and audit reports may not always be publicly accessible.

Related Government Programs

Defense Fuel Supply Center
Aviation Fuel Procurement
Petroleum Product Contracts
DoD Energy Procurement
Logistics and Supply Chain Management

Risk Flags

Potential for price volatility due to Economic Price Adjustment clause.
Single awardee dependency for critical fuel supply.
Geographic concentration of awardee operations (California).

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $511.8 million to BP WEST COAST PRODUCTS LLC. TURBINE FUEL, AVIATION, JP8

Who is the contractor on this award?

The obligated recipient is BP WEST COAST PRODUCTS LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $511.8 million.

What is the period of performance?

Start: 2009-08-13. End: 2010-11-13.

What was the historical spending pattern for aviation fuel by the Defense Logistics Agency prior to this contract?

Analyzing historical spending patterns for aviation fuel by the Defense Logistics Agency (DLA) prior to August 2009 would require access to DLA's procurement databases or historical budget reports. Generally, the DLA manages a vast and consistent demand for various fuel types, including JP8, to support global military operations. Spending levels fluctuate based on geopolitical events, operational tempo, and fuel market prices. Prior to this specific $511 million contract, DLA would have likely awarded numerous contracts, potentially of varying sizes and durations, to different suppliers to meet its ongoing fuel requirements. Understanding these patterns would involve looking at the volume of fuel procured, the average price per gallon over time, and the number and types of contractors involved in previous solicitations. Without specific historical data, it's presumed that DLA maintained a steady procurement process to ensure fuel availability for the armed forces.

How does the price adjustment clause in this contract typically affect the final cost compared to a fixed-price contract?

The economic price adjustment (EPA) clause in this contract allows for modifications to the contract price based on fluctuations in specified market indices or costs, such as the price of crude oil or refined petroleum products. In a standard fixed-price contract, the price is set at the time of award and remains constant regardless of market changes. With an EPA, if the cost of producing or acquiring the fuel increases, the contractor can request an upward adjustment to the price, and conversely, if costs decrease, the price may be adjusted downward. This can lead to a final cost that is higher or lower than what a fixed-price contract might have yielded. For the government, an EPA introduces uncertainty in the final expenditure, making budgeting more complex. However, it can also be beneficial by ensuring a stable supply during periods of high market volatility, as contractors are less likely to face prohibitive losses that could disrupt delivery. The effectiveness of an EPA hinges on the accuracy of the chosen index and the negotiation of reasonable adjustment formulas.

What are the potential risks associated with relying on BP West Coast Products LLC for such a large volume of aviation fuel?

Relying on a single contractor, BP West Coast Products LLC, for over $511 million worth of aviation fuel presents several potential risks. Firstly, there's a supply chain risk: any disruption to BP's operations, whether due to natural disasters, labor disputes, geopolitical issues affecting their supply sources, or internal logistical failures, could directly impact the Department of Defense's fuel availability. Secondly, a lack of ongoing competition during the contract's term (August 2009 - November 2010) could reduce the government's leverage in negotiating future contracts or addressing performance issues. While the initial award was competitive, the single-award nature for the duration means the government is dependent on this one entity. Thirdly, there's a performance risk; if BP West Coast Products LLC underperforms in terms of delivery timeliness, fuel quality, or customer service, the government has limited immediate alternatives without potentially incurring significant costs or delays to re-compete. Finally, market power concentration could theoretically lead to less favorable pricing in subsequent contract periods if BP becomes the dominant supplier in the region.

How does the NAICS code 324110 (Petroleum Refineries) align with the procurement of aviation fuel?

The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' directly aligns with the procurement of aviation fuel. Petroleum refineries are facilities where crude oil is processed and refined into a variety of products, including gasoline, diesel fuel, heating oil, and importantly, aviation fuels like Jet A and JP8 (a military-grade kerosene-based jet fuel). Companies operating under this NAICS code are involved in the primary production and supply of these refined petroleum products. Therefore, a contract for aviation fuel awarded to a company classified under NAICS 324110 signifies that the procurement is sourcing fuel directly or indirectly from a refining entity, which is a fundamental part of the fuel supply chain. This code confirms the nature of the contractor's business and its capability to produce or distribute the specified fuel.

What does the contract award type 'DO' signify in the context of this procurement?

The contract award type 'DO' typically signifies a 'Defense Order' under the authority of the Defense Production Act (DPA). The DPA grants the President the authority to promote the national defense by meeting the needs of the U.S. military and ensuring the availability of critical resources. When a contract is designated with 'DO,' it means the procurement is prioritized to ensure timely delivery of goods or services essential for national defense. This designation can allow the contractor to receive preferential treatment in obtaining necessary materials, components, or services from subcontractors. In the context of this $511 million aviation fuel contract, the 'DO' designation underscores the critical nature of aviation fuel for military operations and ensures that BP West Coast Products LLC receives the necessary support to fulfill this vital supply requirement for the Department of Defense.

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

Parent Company: BP P.L.C. (UEI: 210042669)

Address: 6 CENTERPOINTE DR, LA PALMA, CA, 45

Business Categories: Category Business, Limited Liability Corporation, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $511,800,313

Exercised Options: $511,800,313

Current Obligation: $511,800,313

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060009D0512

IDV Type: IDC

Timeline