DoD's $5M Jet Fuel Contract with Tesoro Refining & Marketing LLC: Fixed Price with Economic Adjustment

Contract Overview

Contract Amount: $50,917,878 ($50.9M)

Contractor: Tesoro Refining & Marketing Company LLC

Awarding Agency: Department of Defense

Start Date: 2010-04-05

End Date: 2011-05-31

Contract Duration: 421 days

Daily Burn Rate: $120.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 27

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: TURBINE FUEL, AVIATION, JET A

Place of Performance

Location: MOORHEAD, CLAY County, MINNESOTA, 56560

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $50.9 million to TESORO REFINING & MARKETING COMPANY LLC for work described as: TURBINE FUEL, AVIATION, JET A Key points: 1. The contract awarded to Tesoro Refining & Marketing Company LLC for aviation turbine fuel (Jet A) was valued at $5,091,787.80. 2. This contract utilized full and open competition, indicating a competitive bidding process. 3. The contract type, Fixed Price with Economic Price Adjustment, aims to mitigate risks associated with fluctuating fuel prices for both parties. 4. The sector is Defense, specifically involving the Defense Logistics Agency procuring fuel for military operations.

Value Assessment

Rating: fair

The contract value of approximately $5.1 million for a 14-month period appears reasonable for bulk aviation fuel procurement. Benchmarking against similar DoD fuel contracts would provide a more precise assessment of value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The use of full and open competition suggests that multiple vendors had the opportunity to bid, promoting price discovery and potentially leading to a more competitive price. The economic price adjustment clause, however, introduces some variability.

Taxpayer Impact: The competitive nature of the award is intended to ensure taxpayer funds are used efficiently, though the economic price adjustment may lead to costs slightly above initial projections if fuel prices rise significantly.

Public Impact

Ensures the availability of critical aviation fuel for Department of Defense operations. Supports the logistics and readiness of military air assets. The economic price adjustment clause protects against extreme market volatility in fuel prices.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to economic price adjustment clause if fuel prices spike.
Dependence on a single supplier for a critical commodity.

Positive Signals

Utilized full and open competition, promoting market fairness.
Contract duration of 421 days provides stable supply.

Sector Analysis

This contract falls within the Defense sector, specifically focusing on fuel procurement, a critical component of military readiness. Spending benchmarks for aviation fuel vary widely based on volume, type, and geographic location, but this appears to be a standard procurement for operational needs.

Small Business Impact

The data does not indicate whether small businesses were involved in this specific contract, either as prime contractors or subcontractors. Further analysis would be needed to determine the extent of small business participation.

Oversight & Accountability

The Defense Logistics Agency is responsible for overseeing this contract, ensuring compliance with terms and conditions. Standard procurement oversight processes are expected to be in place to monitor performance and financial aspects.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Price volatility risk due to economic price adjustment.
Potential for supplier dependency.
Limited contract duration may require re-competition soon.
Lack of specific small business participation data.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.9 million to TESORO REFINING & MARKETING COMPANY LLC. TURBINE FUEL, AVIATION, JET A

Who is the contractor on this award?

The obligated recipient is TESORO REFINING & MARKETING COMPANY LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $50.9 million.

What is the period of performance?

Start: 2010-04-05. End: 2011-05-31.

What was the actual price paid per gallon of Jet A under this contract, considering the economic price adjustment?

The provided data does not include the specific price per gallon or the exact adjustments made due to fluctuating market prices. To determine the final cost per gallon, one would need access to the contract's payment records and the established economic price adjustment formula, comparing it against the base price and market indices during the contract period.

What were the specific market indices or formulas used for the economic price adjustment in this contract?

The contract details specify 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' but do not list the precise indices or formulas. Typically, such adjustments are tied to published fuel price benchmarks (e.g., Platts, EIA data) or a pre-agreed escalation formula. The specific mechanism would be detailed in the contract's clauses.

How did the final cost compare to the initial estimated cost, considering the economic price adjustment?

Without the final payment data and the initial estimated cost, a direct comparison is not possible. The economic price adjustment clause is designed to allow for increases or decreases based on market conditions. The final cost could be higher or lower than initially projected, depending on fuel price trends during the contract's term.

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

Parent Company: Tesoro Corporation (UEI: 008133480)

Address: 19100 RIDGEWOOD PKWY, SAN ANTONIO, TX, 90

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $50,917,878

Exercised Options: $50,917,878

Current Obligation: $50,917,878

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0464

IDV Type: IDC

Timeline