DoD's $97M JP8 Fuel Purchase: Placid Refining Dominates Small Business Set-Aside, Raising Competition Concerns

Contract Overview

Contract Amount: $107,358,952 ($107.4M)

Contractor: Placid Refining Company LLC

Awarding Agency: Department of Defense

Start Date: 2010-04-26

End Date: 2011-05-31

Contract Duration: 400 days

Daily Burn Rate: $268.4K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 27

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: TURBINE FUEL, AVIATION JP8 SMALL BUSINESS SET-ASIDE QUANTITY 40,440,000 USG OF 46,456,000 USG IS AT PLACID'S OWN PRICE OF $1.728350 UNDER THE SMALL BUSINESS SET-ASIDE PROGRAM TOTALING $69,894,474.00. OTHER SET-ASIDE QUANTITIES INCLUDE 4,230,000 USG AT $1.685973 = $7,131,665.79; 2,700,000 USG AT $1.696821 = $4,581,416.70 AND 9,000,000 USG AT $1.706384 = $15,357,456.00. THE OVERALL SET-ASIDE TOTAL IS $96,965,012.49.

Place of Performance

Location: PORT ALLEN, WEST BATON ROUGE County, LOUISIANA, 70767

State: Louisiana Government Spending

Plain-Language Summary

Department of Defense obligated $107.4 million to PLACID REFINING COMPANY LLC for work described as: TURBINE FUEL, AVIATION JP8 SMALL BUSINESS SET-ASIDE QUANTITY 40,440,000 USG OF 46,456,000 USG IS AT PLACID'S OWN PRICE OF $1.728350 UNDER THE SMALL BUSINESS SET-ASIDE PROGRAM TOTALING $69,894,474.00. OTHER SET-ASIDE QUANTITIES INCLUDE 4,230,000 USG AT $1.685973 = $7,131,665.79;… Key points: 1. Significant portion of aviation fuel procured through small business set-asides, potentially limiting broader competition. 2. Placid Refining Company LLC secured the largest share, indicating strong market presence within this segment. 3. Fixed Price with Economic Price Adjustment contract type introduces potential for cost fluctuations. 4. Sector focus on Petroleum Refineries (NAICS 324110) highlights critical energy infrastructure support.

Value Assessment

Rating: fair

The average price per gallon across all set-aside quantities is approximately $1.71. While specific benchmarks for JP8 fuel are not provided, this price should be compared against market rates for similar aviation fuel contracts to assess value.

Cost Per Unit: $1.71 (average across set-asides)

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES,' indicating a limited competition approach. This method, combined with set-asides, may restrict the number of eligible bidders and impact price discovery.

Taxpayer Impact: Taxpayer funds are utilized for this procurement. The limited competition and economic price adjustment clauses warrant scrutiny to ensure cost-effectiveness and prevent potential overspending.

Public Impact

Ensures supply of critical aviation fuel (JP8) for Department of Defense operations. Supports small businesses through set-aside programs, aligning with federal procurement goals. Potential for price volatility due to economic price adjustment clauses. Geographic concentration of awarded contracts in Louisiana.

Waste & Efficiency Indicators

Waste Risk Score: 70 / 10

Warning Flags

Limited competition due to set-aside structure.
Economic price adjustment introduces cost uncertainty.
Dominance of a single contractor (Placid Refining) in the set-aside portion.

Positive Signals

Procurement supports critical national defense needs.
Utilizes small business set-aside program as intended.
Established contract with a known supplier.

Sector Analysis

This procurement falls within the Petroleum Refineries sector (NAICS 324110), crucial for national defense and energy security. Spending benchmarks for aviation fuel can vary significantly based on market conditions, crude oil prices, and geopolitical factors.

Small Business Impact

The contract heavily relies on small business set-asides, with a substantial portion of the total quantity allocated to these programs. This approach aims to support small businesses but raises questions about the overall competitiveness and potential for price optimization.

Oversight & Accountability

The contract was awarded by the Defense Logistics Agency, a key component of DoD's supply chain. Oversight should focus on the execution of the economic price adjustment clause and the ongoing effectiveness of the small business set-aside strategy.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Limited competition due to set-aside strategy.
Potential for price escalation via Economic Price Adjustment.
Concentration of awards to a single small business entity.
Lack of clear justification for source exclusion in competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $107.4 million to PLACID REFINING COMPANY LLC. TURBINE FUEL, AVIATION JP8 SMALL BUSINESS SET-ASIDE QUANTITY 40,440,000 USG OF 46,456,000 USG IS AT PLACID'S OWN PRICE OF $1.728350 UNDER THE SMALL BUSINESS SET-ASIDE PROGRAM TOTALING $69,894,474.00. OTHER SET-ASIDE QUANTITIES INCLUDE 4,230,000 USG AT $1.685973 = $7,131,665.79; 2,700,000 USG AT $1.696821 = $4,581,416.70 AND 9,000,000 USG AT $1.706384 = $15,357,456.00. THE OVERALL SET-ASIDE TOTAL IS $96,965,012.49.

Who is the contractor on this award?

The obligated recipient is PLACID REFINING 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 $107.4 million.

What is the period of performance?

Start: 2010-04-26. End: 2011-05-31.

How does the average price of $1.71 per gallon for JP8 fuel compare to prevailing market rates for similar aviation fuels during the contract period?

A comprehensive comparison requires access to historical market data for JP8 and comparable aviation fuels. Factors like crude oil prices, refining costs, and regional supply/demand dynamics influence market rates. Without this data, it's difficult to definitively assess if $1.71 represents a competitive price, though the economic price adjustment suggests potential for upward movement.

What specific criteria were used to justify the exclusion of sources in the 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' award, and did this exclusion limit potential cost savings?

The justification for excluding sources typically involves specific technical requirements, past performance, or unique capabilities. If the exclusion was overly restrictive or not adequately justified, it could have limited the pool of bidders, potentially leading to higher prices than might have been achieved under broader competition. A review of the source selection documentation is necessary.

What is the potential financial exposure to taxpayers given the 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' contract type and the significant quantity procured?

The 'Economic Price Adjustment' (EPA) clause allows for price changes based on specified economic factors, such as fluctuations in the cost of raw materials or labor. The total potential financial exposure is the contracted quantity multiplied by the maximum possible price per gallon under the EPA. This necessitates careful monitoring of the index used for adjustment to mitigate excessive cost increases.

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 AFTER EXCLUSION OF SOURCES

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: 1940 LA HWY 1 N, PORT ALLEN, LA, 06

Business Categories: Category Business, Limited Liability Corporation, Manufacturer of Goods, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $107,358,952

Exercised Options: $107,358,952

Current Obligation: $107,358,952

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0468

IDV Type: IDC

Timeline