DoD's $13.2M Jet Fuel Contract with Petro Air Corp Faces Scrutiny Over Pricing and Competition
Contract Overview
Contract Amount: $13,256,751 ($13.3M)
Contractor: Petro AIR, Corp
Awarding Agency: Department of Defense
Start Date: 2009-04-01
End Date: 2012-04-30
Contract Duration: 1,125 days
Daily Burn Rate: $11.8K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 8
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Other
Official Description: JET FUEL
Place of Performance
Location: AGUADILLA, AGUADILLA County, PUERTO RICO, 00603, UNITED STATES OF AMERICA
Plain-Language Summary
Department of Defense obligated $13.3 million to PETRO AIR, CORP for work described as: JET FUEL Key points: 1. The contract awarded to Petro Air, Corp for jet fuel represents a significant expenditure within the petroleum products wholesale sector. 2. Limited small business participation was noted, with the contract not specifically set aside for small businesses. 3. The fixed-price contract with economic price adjustment introduces potential risk related to fuel price volatility. 4. The Defense Logistics Agency's procurement of jet fuel is critical for military operations, impacting readiness and operational costs.
Value Assessment
Rating: questionable
The contract's total award value of $13.2 million for jet fuel requires further analysis against market benchmarks. Without specific per-unit cost data, it's difficult to definitively assess if the pricing was competitive, especially given the economic price adjustment clause.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, suggesting a robust price discovery process. However, the specific details of the bidding and evaluation are not provided, making it hard to confirm if the lowest price technically qualified offer was selected.
Taxpayer Impact: The use of economic price adjustments can lead to higher taxpayer costs if fuel prices increase significantly over the contract period.
Public Impact
Taxpayers may face increased costs due to the economic price adjustment clause in the jet fuel contract. The Department of Defense's reliance on a single supplier for a critical commodity like jet fuel raises concerns about supply chain resilience. The lack of specific small business set-aside could limit opportunities for smaller enterprises in this sector.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic price adjustment clause may inflate costs.
- Limited small business participation.
- Potential for price volatility impacting taxpayer burden.
Positive Signals
- Awarded under full and open competition.
- Contract supports critical defense logistics.
Sector Analysis
The procurement falls under the Petroleum and Petroleum Products Merchant Wholesalers sector. Spending in this area is directly tied to operational tempo and fuel price fluctuations, making it a sensitive area for budget management.
Small Business Impact
The contract was not set aside for small businesses, and the data indicates no small business participation. This suggests that larger corporations dominated the bidding process for this significant fuel supply contract.
Oversight & Accountability
The Defense Logistics Agency is responsible for procuring fuel for the DoD. Oversight would typically involve ensuring compliance with procurement regulations, fair pricing, and timely delivery, especially given the economic price adjustment.
Related Government Programs
- Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)
- Department of Defense Contracting
- Defense Logistics Agency Programs
Risk Flags
- Potential for cost overruns due to economic price adjustment.
- Lack of small business participation.
- Dependence on a single contractor for a critical resource.
- Limited transparency on specific pricing benchmarks.
Tags
petroleum-and-petroleum-products-merchan, department-of-defense, pr, do, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $13.3 million to PETRO AIR, CORP. JET FUEL
Who is the contractor on this award?
The obligated recipient is PETRO AIR, CORP.
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: 2009-04-01. End: 2012-04-30.
What was the average per-gallon price paid under this contract, and how does it compare to market rates at the time of award and during the contract period?
The provided data does not include the average per-gallon price or specific volume purchased. To assess value, this information is crucial. Comparing it to prevailing market rates for jet fuel during the contract's duration (2009-2012) would reveal if the economic price adjustment clause resulted in favorable or unfavorable pricing for the government.
What specific risks were identified regarding the economic price adjustment (EPA) clause, and were mitigation strategies implemented by the Defense Logistics Agency?
The primary risk of an EPA clause is cost escalation if fuel prices rise unexpectedly. Mitigation might involve setting caps on price adjustments, requiring detailed justification for price changes, or negotiating specific indices for adjustment. Without further documentation, it's unclear what specific risks were assessed or if proactive mitigation measures were taken.
How effectively did the full and open competition process ensure the best value for the taxpayer, considering the contract's duration and the EPA clause?
While full and open competition is a strong indicator of potential best value, the EPA clause introduces uncertainty. The effectiveness hinges on the specific terms of the adjustment and the competitive landscape at the time of bidding. If multiple capable bidders competed, it likely drove a competitive base price, but the EPA's impact over 1125 days remains a key factor in overall taxpayer value.
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
Offers Received: 8
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Address: RD 110 KM 3.7 BO. ARENALES, AGUADILLA, PR, 00603
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Hispanic American Owned Business, Minority Owned Business, Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $13,256,751
Exercised Options: $13,256,751
Current Obligation: $13,256,751
Contract Characteristics
Multi-Year Contract: Yes
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SP060009D1006
IDV Type: IDC
Timeline
Start Date: 2009-04-01
Current End Date: 2012-04-30
Potential End Date: 2012-04-30 00:00:00
Last Modified: 2015-11-17
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