DoD spent $137M on aviation fuel, with ExxonMobil securing the contract under full and open competition

Contract Overview

Contract Amount: $137,431,577 ($137.4M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2010-04-23

End Date: 2011-06-15

Contract Duration: 418 days

Daily Burn Rate: $328.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 27

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: TURBINE FUEL, AVIATION, GRADE JP8

Place of Performance

Location: BATON ROUGE, EAST BATON ROUGE County, LOUISIANA, 70821

State: Louisiana Government Spending

Plain-Language Summary

Department of Defense obligated $137.4 million to EXXON MOBIL CORPORATION for work described as: TURBINE FUEL, AVIATION, GRADE JP8 Key points: 1. Contract awarded to a single, large supplier indicates potential for price leverage. 2. Fixed-price with economic price adjustment structure may expose the government to fuel price volatility. 3. Contract duration of 418 days suggests a need for consistent fuel supply. 4. Awarded by the Defense Logistics Agency, a key entity for military supply chain management. 5. The contract falls under the Petroleum Refineries industry code. 6. No small business set-aside was utilized, suggesting a focus on large-scale suppliers.

Value Assessment

Rating: fair

The contract value of $137.4 million for aviation fuel over approximately 13 months appears substantial. Benchmarking this against similar fuel contracts is challenging without more specific data on fuel type, volume, and delivery locations. The 'economic price adjustment' clause introduces a variable that could lead to costs exceeding initial projections if fuel prices rise significantly. While ExxonMobil is a major supplier, the lack of detailed cost breakdowns makes a precise value-for-money assessment difficult.

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 27 bids suggests a competitive process, which should theoretically drive down prices. However, the ultimate award to a single entity, ExxonMobil, warrants further examination to understand if the competition effectively translated into the best possible pricing or if specific factors favored this particular bidder.

Taxpayer Impact: A competitive bidding process for essential military supplies like aviation fuel is generally beneficial for taxpayers, as it encourages multiple suppliers to offer their best prices. This should lead to more cost-effective procurement for the Department of Defense.

Public Impact

Military operations across various branches of the Department of Defense benefit from a reliable supply of aviation fuel. The fuel is critical for maintaining air superiority and logistical support for deployed forces. Geographic impact is likely widespread, supporting air bases and operations domestically and potentially overseas. Workforce implications are indirect, supporting jobs within ExxonMobil and the broader aviation fuel supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to the economic price adjustment clause.
Reliance on a single large contractor for a critical commodity.
Lack of transparency on specific unit pricing and profit margins.

Positive Signals

Awarded through full and open competition with multiple bidders.
ExxonMobil is a well-established and experienced supplier of petroleum products.
Contract supports essential defense logistics and operational readiness.

Sector Analysis

This contract falls within the Petroleum Refineries sector, specifically dealing with the production and distribution of aviation fuel (JP8). The market for aviation fuel is dominated by a few major oil companies, and government contracts represent a significant portion of demand, particularly for military applications. Comparable spending benchmarks would involve analyzing other large-scale government fuel procurements and commercial aviation fuel prices, which can fluctuate based on global oil markets and geopolitical factors.

Small Business Impact

The contract was not set aside for small businesses, and the data indicates no subcontracting requirements were specified. This suggests the procurement was focused on securing a large volume of a specialized product from a major supplier capable of meeting the stringent requirements of the Department of Defense. The absence of small business involvement in this specific contract does not preclude their participation in other defense procurements.

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 Defense Logistics Agency (DLA) would also have oversight responsibilities for ensuring the fuel meets specifications and is delivered as required. Transparency is facilitated through contract award databases, though detailed performance metrics and cost breakdowns may be less publicly accessible.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Department of Defense Aviation Fuel Procurement
JP8 Fuel Supply Contracts
Petroleum Product Procurement by Government Agencies

Risk Flags

Price Volatility Risk (Economic Price Adjustment)
Supplier Dependency Risk
Budget Uncertainty

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $137.4 million to EXXON MOBIL CORPORATION. TURBINE FUEL, AVIATION, GRADE 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 $137.4 million.

What is the period of performance?

Start: 2010-04-23. End: 2011-06-15.

What is ExxonMobil's track record with similar government fuel contracts?

ExxonMobil Corporation has a long history of supplying petroleum products, including aviation fuels, to government agencies. They are a major player in the global energy market and possess the infrastructure and capacity to fulfill large-scale contracts. While specific details on past performance for similar DoD contracts are not provided here, their status as a primary supplier suggests a generally reliable track record. However, like any large contractor, past performance reviews would be crucial for a comprehensive assessment, looking at on-time delivery, quality compliance, and any history of disputes or contract modifications.

How does the awarded price compare to market rates for JP8 fuel during the contract period?

Determining the precise market rate comparison for this contract is complex due to the 'economic price adjustment' (EPA) clause. The base price awarded is subject to change based on fluctuations in the market. To perform a true comparison, one would need to analyze the average market price of JP8 fuel in the relevant delivery regions during the contract's performance period (April 2010 - June 2011) and compare it against the adjusted price paid by the DoD. Publicly available data on historical fuel prices, such as those from the Energy Information Administration (EIA), could be used, but would need to be specific to the grade and location. Without the final adjusted price, a direct comparison is speculative.

What are the primary risks associated with this contract for the government?

The primary risks for the government in this contract revolve around price volatility and supply chain reliability. The 'economic price adjustment' clause means the final cost could exceed the initial estimate if fuel prices surge, impacting budget predictability. While ExxonMobil is a major supplier, any disruption in their production or distribution network, though unlikely, could affect the consistent supply of this critical fuel. Furthermore, relying on a single large contractor, even with competition, can sometimes limit negotiating leverage on future contracts or renewals. Ensuring strict adherence to quality specifications and delivery schedules also remains an ongoing risk.

How effective is the 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type for volatile commodities like aviation fuel?

The FPEPA contract type is often employed for commodities like fuel where prices are subject to significant market fluctuations. It aims to balance risk between the government and the contractor. The contractor is protected from drastic price increases, while the government benefits from a potentially lower initial price compared to a firm fixed price contract. However, the effectiveness hinges on the accuracy of the economic price adjustment formula and the government's ability to manage budget fluctuations. If the formula accurately reflects market movements and the government has contingency funds, it can be effective. If not, it can lead to unexpected cost overruns or the government paying a premium.

What is the historical spending pattern for aviation fuel by the Department of Defense?

The Department of Defense is consistently one of the largest consumers of aviation fuel globally, driven by the extensive needs of the Air Force, Navy, Army, and Marine Corps aviation assets. Historical spending patterns show a significant and ongoing requirement for fuels like JP8, Jet A, and others. Spending levels are heavily influenced by global oil prices, geopolitical events, and the scale of military operations. Annual expenditures often run into the billions of dollars, making fuel a major line item in the defense budget. Contracts for these fuels are typically awarded through competitive processes, often to major energy corporations, and span multiple years to ensure supply continuity.

What is the significance of the contract being awarded by the Defense Logistics Agency (DLA)?

The Defense Logistics Agency (DLA) is the primary combat support agency responsible for providing the U.S. military with logistics, acquisition, and support services. Awarding this aviation fuel contract signifies the DLA's critical role in managing the defense supply chain for essential commodities. DLA manages a vast network of fuel depots and distribution systems worldwide. Their involvement ensures that the procurement process is standardized, meets military specifications, and integrates seamlessly into the broader logistical framework required to support global military operations. This contract represents a core function of DLA's mission to provide ready and responsive support to warfighters.

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: SP060010R0061

Offers Received: 27

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: $137,431,577

Exercised Options: $137,431,577

Current Obligation: $137,431,577

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0463

IDV Type: IDC

Timeline