DoD spent $198M on turbine fuels, with Equilon Enterprises LLC securing the contract

Contract Overview

Contract Amount: $198,213,822 ($198.2M)

Contractor: Equilon Enterprises LLC

Awarding Agency: Department of Defense

Start Date: 2010-04-26

End Date: 2011-05-31

Contract Duration: 400 days

Daily Burn Rate: $495.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 27

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUELS, AVIATION JP8

Place of Performance

Location: DEER PARK, HARRIS County, TEXAS, 77536

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $198.2 million to EQUILON ENTERPRISES LLC for work described as: TURBINE FUELS, AVIATION JP8 Key points: 1. Contract value represents a significant investment in aviation fuel for defense operations. 2. The fixed-price with economic price adjustment structure aims to mitigate fuel price volatility. 3. Competition was full and open, suggesting a potentially competitive bidding process. 4. The contract duration of approximately 13 months indicates a short-term supply need. 5. The award was made by the Defense Logistics Agency, a key procurement arm for military supplies. 6. The primary service area is Texas, aligning with the supplier's operational base.

Value Assessment

Rating: fair

The total award of $198.2 million for turbine fuels over a 13-month period suggests a substantial but potentially variable per-unit cost. Without specific volume data, a direct value-for-money assessment is challenging. However, the fixed-price with economic price adjustment (EPA) clause indicates an attempt to manage cost fluctuations inherent in fuel markets. Comparing this to similar large-scale aviation fuel procurements by the DoD would be necessary for a more precise benchmark of its value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, meaning all responsible sources were permitted to submit bids. The presence of 27 bids suggests a robust level of interest and competition for this fuel supply contract. This broad competition is generally expected to drive prices down and encourage efficient service delivery, as contractors vie for the award.

Taxpayer Impact: A competitive bidding process for essential fuels like JP8 is beneficial for taxpayers as it helps ensure the government is not overpaying for critical defense resources.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, ensuring the availability of aviation turbine fuel for its aircraft. The services delivered include the supply of JP8 turbine fuel, essential for military aviation operations. The geographic impact is concentrated in Texas, where the fuel is likely supplied and utilized. Workforce implications are indirect, supporting jobs within the petroleum refining and fuel distribution sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to costs exceeding initial projections if market prices rise significantly.
Reliance on a single contractor for a critical resource like aviation fuel carries inherent supply chain risks.
The fixed-price nature, even with EPA, may not fully insulate the government from extreme market volatility.
The relatively short contract duration might necessitate frequent re-competition, leading to administrative overhead.

Positive Signals

Full and open competition suggests a wide range of potential suppliers were considered, promoting market efficiency.
The Defense Logistics Agency's involvement indicates established procurement processes for defense-related commodities.
The contract's focus on a specific fuel type (JP8) ensures specialized supply chain management.

Sector Analysis

This contract falls within the Petroleum Refineries sector (NAICS 324110), a critical component of the energy industry supporting transportation and industrial needs. The market for aviation fuels is substantial, driven by both commercial and military demand. This specific award represents a significant portion of government spending within this sub-sector, highlighting the DoD's reliance on established energy suppliers for operational readiness. Comparable spending benchmarks would involve analyzing other large-volume fuel contracts awarded by military branches or the DLA.

Small Business Impact

The data indicates this contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned. The award to Equilon Enterprises LLC, a large corporation, suggests that the primary focus was on securing a large volume of a specialized product, likely favoring established large-scale suppliers. This means the direct impact on the small business ecosystem for this specific contract is likely minimal, though downstream effects in fuel distribution could involve smaller entities.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract, utilizing established procurement regulations and contract management procedures. Accountability is typically managed through performance metrics, delivery schedules, and financial audits. Transparency is facilitated by public contract databases, although specific operational details and pricing breakdowns may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Fuel Supply Center Contracts
Aviation Fuel Procurement
JP8 Fuel Contracts
DoD Energy Procurement
Petroleum Product Supply Contracts

Risk Flags

Potential for price volatility due to economic price adjustment clause.
Supply chain disruption risk inherent in fuel procurement.
Short contract duration may lead to increased administrative costs.
Dependence on large corporations may limit small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $198.2 million to EQUILON ENTERPRISES LLC. TURBINE FUELS, AVIATION JP8

Who is the contractor on this award?

The obligated recipient is EQUILON ENTERPRISES LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $198.2 million.

What is the period of performance?

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

What is the historical spending trend for turbine fuels by the Defense Logistics Agency?

Analyzing historical spending for turbine fuels by the Defense Logistics Agency (DLA) reveals a consistent and substantial requirement driven by military aviation operations. Over the years, the DLA has managed numerous contracts for various types of aviation fuels, including JP8, JP5, and Jet A. Spending patterns are influenced by factors such as global fuel prices, geopolitical events affecting supply chains, changes in military operational tempo, and fleet modernization programs. While specific annual figures fluctuate, the overall trend indicates a sustained, multi-billion dollar annual expenditure on aviation fuels to maintain global readiness. The DLA often employs a mix of contract types, including fixed-price with economic price adjustment and fixed-price incentive, to balance cost control with market volatility. Benchmarking current spending against historical averages provides insight into whether recent awards represent cost efficiencies or inflationary pressures.

How does the price per unit for this contract compare to market rates for JP8 fuel during the contract period?

Determining the precise price per unit for this contract requires access to the specific volume of fuel procured and the final adjusted price, which is not fully detailed in the provided data. However, the contract's structure as 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) suggests that the base price was negotiated, with subsequent adjustments tied to a recognized market index for petroleum products. To compare with market rates, one would need to identify the relevant index used for adjustment (e.g., Platts, Argus) and the average market price for JP8 in the specified region (Texas) during the contract period (April 2010 - May 2011). Generally, FPEPA contracts aim to keep the final price close to prevailing market rates, plus a negotiated margin, while providing some stability against extreme fluctuations. Without the final adjusted price and volume, a direct comparison remains speculative, but the contract type implies an intention to align with market conditions.

What are the key performance indicators (KPIs) typically used to evaluate contractors supplying aviation fuel to the DoD?

Key performance indicators (KPIs) for aviation fuel suppliers to the Department of Defense (DoD) typically focus on reliability, quality, timeliness, and cost control. Essential KPIs include on-time delivery rates, ensuring fuel reaches designated locations without disrupting flight schedules. Fuel quality assurance is paramount, measured by adherence to strict military specifications (e.g., MIL-DTL-83133 for JP8) verified through laboratory testing and certification. Inventory management and responsiveness to demand fluctuations are also critical, ensuring sufficient supply is available when needed. Furthermore, compliance with safety and environmental regulations during transport and handling is rigorously monitored. Contractor performance is often tracked through contractor performance assessment reporting (CPAR) systems, which document adherence to contract terms, responsiveness to issues, and overall performance quality, influencing future contract awards.

What is Equilon Enterprises LLC's track record with DoD fuel contracts?

Equilon Enterprises LLC, often operating under the Shell brand, has a significant history of supplying petroleum products, including aviation fuels, to the U.S. military. As a major integrated oil company, they possess the infrastructure and capacity required for large-scale government contracts. Their track record with the DoD likely includes numerous awards for various fuel types across different military branches and agencies, such as the Defense Logistics Agency (DLA). Performance evaluations, often documented in Contractor Performance Assessment Reporting System (CPARS), would detail their success in meeting delivery schedules, maintaining fuel quality, and adhering to contract terms. While specific details of past performance require database searches, Equilon's continued participation in competitive bidding for substantial fuel contracts suggests a generally positive or acceptable performance history with the government.

What is the strategic importance of securing reliable turbine fuel supplies for the Department of Defense?

The strategic importance of securing reliable turbine fuel supplies for the Department of Defense (DoD) cannot be overstated, as it is fundamental to maintaining global military readiness and operational capability. Turbine fuels, such as JP8, are critical for powering a vast array of military aircraft, including fighter jets, bombers, transport planes, and helicopters, which are essential for power projection, rapid response, and logistical support worldwide. Disruptions in fuel supply can severely hamper training exercises, deployment schedules, and combat operations, potentially compromising national security interests. Therefore, the DoD invests heavily in robust supply chain management, diverse sourcing strategies, and strategic stockpiling to ensure uninterrupted access to these vital resources, even in volatile geopolitical environments or during contingency operations.

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: Shell Deutschland Gmbh (UEI: 423792808)

Address: 910 LOUISIANA ST STE 2, HOUSTON, 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: $198,213,822

Exercised Options: $198,213,822

Current Obligation: $198,213,822

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0469

IDV Type: IDC

Timeline