DoD spent $13.3M on Avgas for Iraq, raising questions about value and competition

Contract Overview

Contract Amount: $13,301,923 ($13.3M)

Contractor: Petrol Ofisi Anonim Sirketi

Awarding Agency: Department of Defense

Start Date: 2009-01-16

End Date: 2011-08-31

Contract Duration: 957 days

Daily Burn Rate: $13.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: DELIVERY OF AVGAS, NSN 9130-01-531-4426, TO VARIOUS LOCATIONS IN IRAQ

Plain-Language Summary

Department of Defense obligated $13.3 million to PETROL OFISI ANONIM SIRKETI for work described as: DELIVERY OF AVGAS, NSN 9130-01-531-4426, TO VARIOUS LOCATIONS IN IRAQ Key points: 1. The contract for Avgas delivery to Iraq appears to have been awarded at a premium compared to market rates. 2. Limited competition dynamics may have influenced the final price, despite being advertised as full and open. 3. The fixed-price with economic price adjustment structure introduces potential for cost overruns. 4. Performance context is limited, but the duration and value suggest a significant logistical undertaking. 5. This contract falls within the broader category of petroleum products for defense logistics. 6. The absence of small business involvement warrants further investigation into subcontracting opportunities.

Value Assessment

Rating: questionable

The contract value of $13.3 million for Avgas delivery to Iraq over approximately 32 months suggests a significant expenditure. Benchmarking against typical per-gallon costs for aviation fuel, especially in a deployed environment, is crucial. Without specific volume data, a precise per-unit cost comparison is difficult, but the overall award amount warrants scrutiny for potential overpricing, particularly given the fixed-price with economic price adjustment clause which can lead to higher costs than anticipated.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was advertised as full and open competition, with 5 bids received. While this indicates some level of market engagement, the number of bidders is on the lower side for a contract of this value and duration. It is unclear if the solicitation effectively reached all potential suppliers or if specific barriers to entry existed. Further analysis would be needed to determine if the competition was robust enough to ensure optimal price discovery.

Taxpayer Impact: A limited number of bidders, even in a full and open competition, can potentially lead to higher prices for taxpayers if it doesn't drive down costs through aggressive bidding.

Public Impact

Military operations in Iraq benefited from the consistent supply of aviation fuel. The contract supported the logistical needs of the Department of Defense in a critical operational theater. The primary beneficiaries were the military units relying on aircraft for transport, reconnaissance, and combat support. Geographic impact was concentrated in Iraq, requiring complex delivery and storage solutions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to economic price adjustment clause.
Limited number of bidders may indicate insufficient market reach or barriers to entry.
Lack of transparency regarding specific delivery locations and volumes makes value assessment challenging.

Positive Signals

Contract was awarded under full and open competition, theoretically maximizing potential bidders.
Multiple bids were received, suggesting some level of market interest.
The contract fulfilled a critical operational requirement for the Department of Defense.

Sector Analysis

This contract falls within the broader petroleum and petroleum products merchant wholesalers sector, specifically focusing on aviation fuel (Avgas). The market for military-grade aviation fuel is specialized, often involving a limited number of large suppliers capable of meeting stringent quality and logistical requirements, especially in austere environments like Iraq. Comparable spending benchmarks would involve analyzing other DoD contracts for fuel procurement in similar operational theaters or for similar aircraft types.

Small Business Impact

The contract data indicates that small business participation was not a specific set-aside. Given the nature of fuel supply and logistics, it is possible that larger prime contractors were better positioned to fulfill the requirements. An analysis of subcontracting plans, if available, would be necessary to determine if small businesses were involved in supporting this contract.

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 monitoring performance, costs, and compliance. The Inspector General of the Department of Defense would also have jurisdiction for investigating any potential fraud, waste, or abuse. Transparency is facilitated through contract databases like FPDS, but detailed operational performance data is often classified or not publicly disclosed.

Related Government Programs

Defense Fuel Supply Center Contracts
Aviation Fuel Procurement
Logistics Support Contracts
Middle East Operations Support

Risk Flags

Potential for cost overruns due to EPA clause
Limited competition despite 'full and open' status
Lack of transparency on specific performance metrics
Geopolitical risks associated with delivery location

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.3 million to PETROL OFISI ANONIM SIRKETI. DELIVERY OF AVGAS, NSN 9130-01-531-4426, TO VARIOUS LOCATIONS IN IRAQ

Who is the contractor on this award?

The obligated recipient is PETROL OFISI ANONIM SIRKETI.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $13.3 million.

What is the period of performance?

Start: 2009-01-16. End: 2011-08-31.

What was the average price per gallon of Avgas under this contract, and how does it compare to market rates at the time?

Determining the exact average price per gallon is challenging without the total volume of Avgas delivered. The contract value is $13,301,923.24. The contract type is Fixed Price with Economic Price Adjustment (FPEPA), which means the price could fluctuate based on an index. To compare with market rates, we would need to know the specific index used for adjustment and the prevailing market prices for Avgas in the region during the contract period (January 2009 - August 2011). Typically, fuel prices in conflict zones are higher due to increased logistical costs and risk premiums. Without the volume, a direct per-gallon comparison to commercial rates is speculative, but the overall $13.3 million expenditure for a two-year supply in Iraq suggests a substantial cost.

How did the economic price adjustment (EPA) clause impact the final cost compared to a fixed-price contract?

The Economic Price Adjustment (EPA) clause in this contract allows for modifications to the base price based on fluctuations in specified economic factors, such as the cost of raw materials or transportation. For this Avgas contract, the EPA likely aimed to protect the contractor from unforeseen increases in fuel commodity prices or delivery costs in Iraq. While intended to ensure supply continuity, EPA clauses can lead to higher final costs for the government if market prices rise significantly above the initial fixed price. Without access to the specific EPA formula and the price adjustments made during the contract's life, it's impossible to quantify the exact impact, but it introduces a risk of cost escalation beyond the initially anticipated fixed price.

What were the specific risks associated with delivering Avgas to Iraq during the contract period?

Delivering Avgas to Iraq between 2009 and 2011 involved significant risks. These included: 1. **Security Risks:** The volatile security environment posed threats to transportation routes, personnel, and storage facilities, potentially leading to delays, damage, or loss of fuel. 2. **Logistical Challenges:** Establishing and maintaining a reliable supply chain in a theater of operations, often involving long distances and potentially inadequate infrastructure, presented considerable logistical hurdles. 3. **Quality Control:** Ensuring the Avgas met stringent military specifications (e.g., MIL-DTL-8785C) throughout the supply chain, from production to final delivery, was critical and complex. 4. **Price Volatility:** Global oil prices and regional instability could impact fuel costs, making the EPA clause necessary but also introducing financial uncertainty.

What is the typical volume of Avgas procured by the DoD for similar operations?

Determining the 'typical' volume of Avgas procured by the DoD for similar operations is difficult without more specific contract details or program information. Avgas consumption varies greatly depending on the types and numbers of aircraft deployed, their mission profiles, and the duration of operations. For instance, a sustained presence of helicopters or light fixed-wing aircraft in a theater like Iraq would require significant fuel volumes. This $13.3 million contract, awarded over approximately 957 days (about 2.6 years), suggests a consistent, albeit not necessarily massive, daily or monthly requirement. Benchmarking would require comparing this to other fuel contracts for specific units or bases.

How does the 'Petroleum and Petroleum Products Merchant Wholesalers' NAICS code apply to this specific contract?

The North American Industry Classification System (NAICS) code 424720, 'Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals),' applies because the contractor, Petrol Ofisi Anonim Şirketi, is acting as a wholesaler and distributor of petroleum products. In this context, Avgas is the specific petroleum product being supplied. The 'merchant wholesaler' designation indicates that the company is engaged in the business of buying and selling goods on its own account, rather than acting purely as an agent or broker. The exclusion of 'Bulk Stations and Terminals' suggests the focus is on the distribution and sale of the product itself, rather than the operation of large-scale storage and transfer facilities, although some level of logistical capability is implied for delivery.

Industry Classification

NAICS: Wholesale Trade › Petroleum and Petroleum Products Merchant Wholesalers › Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)

Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060008R0225

Offers Received: 5

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Adilbey Holding a S (UEI: 367118192)

Address: ESKI BUYUKDERE CADDESI NO: 37, ISTANBUL

Business Categories: Category Business, Foreign Owned, International Organization, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $13,301,923

Exercised Options: $13,301,923

Current Obligation: $13,301,923

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060009D1002

IDV Type: IDC

Timeline