DoD spent $737.5M on turbine fuel, with Equilon Enterprises LLC awarded the contract

Contract Overview

Contract Amount: $737,529,791 ($737.5M)

Contractor: Equilon Enterprises LLC

Awarding Agency: Department of Defense

Start Date: 2010-04-23

End Date: 2011-05-31

Contract Duration: 403 days

Daily Burn Rate: $1.8M/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 JP8, JP5

Place of Performance

Location: DEER PARK, HARRIS County, TEXAS, 77536

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $737.5 million to EQUILON ENTERPRISES LLC for work described as: TURBINE FUEL, AVIATION JP8, JP5 Key points: 1. The contract value represents a significant investment in aviation fuel for defense operations. 2. Competition dynamics for this large-scale fuel contract are crucial for ensuring fair pricing. 3. Potential risks include price volatility in the petroleum market and supply chain disruptions. 4. Performance context is tied to the consistent and reliable supply of critical aviation fuel. 5. This spending falls within the energy and logistics sectors supporting military readiness.

Value Assessment

Rating: good

The contract value of $737.5 million for turbine fuel is substantial. Benchmarking against similar large-scale fuel procurements is necessary to fully assess value for money. Given the nature of commodity pricing, economic price adjustments are common, but the base pricing and adjustment mechanisms warrant scrutiny to ensure they align with market trends and prevent excessive cost increases.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. This competitive process is generally expected to drive down prices and encourage efficiency. The number of bidders (27) suggests a healthy level of interest and competition for this significant fuel supply contract.

Taxpayer Impact: Full and open competition for this large fuel contract is beneficial for taxpayers as it increases the likelihood of securing the best possible price and terms, fostering a competitive market that discourages price gouging.

Public Impact

The primary beneficiaries are the Department of Defense and its various branches, ensuring operational readiness. Services delivered include the supply of critical aviation turbine fuel (JP8, JP5). The geographic impact is national, supporting military bases and operations across the United States. Workforce implications are indirect, supporting jobs in the petroleum refining and distribution sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in the volatile global oil market impacting the economic price adjustment clause.
Dependence on a single primary contractor (Equilon Enterprises LLC) for a critical resource, though awarded competitively.
Geopolitical events can disrupt supply chains and affect fuel availability and cost.

Positive Signals

Awarded through full and open competition, suggesting a robust bidding process.
The contract duration and value indicate a significant commitment to securing a vital resource.
The presence of 27 bidders points to a competitive market for aviation fuel supply.

Sector Analysis

This contract falls within the petroleum refining and distribution sector, a critical component of the energy industry that supports transportation and logistics. The market for aviation fuels is influenced by global oil prices, refining capacity, and demand from commercial and military aviation. Comparable spending benchmarks would involve analyzing other large-scale fuel procurements by government agencies and major airlines.

Small Business Impact

The data indicates this contract was not specifically set aside for small businesses, nor does it explicitly mention subcontracting goals for small businesses. Therefore, the direct impact on the small business ecosystem is likely minimal unless Equilon Enterprises LLC voluntarily engages small businesses in its supply chain. Further analysis would be needed to determine any indirect subcontracting opportunities.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA). These agencies are responsible for ensuring compliance with contract terms, monitoring performance, and auditing costs. Transparency is facilitated through contract award databases, though detailed performance metrics may be less publicly accessible.

Related Government Programs

Defense Fuel Supply Center contracts
Aviation Fuel Procurement
Petroleum Product Contracts
Logistics and Transportation Support Contracts

Risk Flags

Potential for price volatility in the petroleum market.
Dependence on specific refinery operations.
Geopolitical risks affecting global oil supply.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $737.5 million to EQUILON ENTERPRISES LLC. TURBINE FUEL, AVIATION JP8, JP5

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 $737.5 million.

What is the period of performance?

Start: 2010-04-23. End: 2011-05-31.

What is the historical spending trend for turbine fuel by the Department of Defense over the last five fiscal years?

Analyzing historical spending trends for turbine fuel by the Department of Defense over the last five fiscal years would provide crucial context for the $737.5 million awarded to Equilon Enterprises LLC. This trend analysis would reveal whether this contract represents an increase, decrease, or stable level of expenditure for this critical resource. It would also help identify any significant fluctuations that might be attributable to changes in operational tempo, fuel price volatility, or shifts in procurement strategies. Understanding these patterns can inform future budget projections and highlight potential areas for cost savings or efficiency improvements in fuel acquisition.

How does the per-unit cost of JP8 and JP5 under this contract compare to market rates at the time of award and currently?

Comparing the per-unit cost of JP8 and JP5 under this contract to prevailing market rates at the time of award and currently is essential for assessing value for money. The contract's 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FP-EPA) clause means the base price is fixed, but adjustments are made based on economic factors, typically related to commodity prices. Benchmarking against indices like the Platts U.S. Gulf Coast Jet Fuel assessment or similar industry benchmarks would reveal if the contract's pricing mechanism effectively captures market fluctuations without unduly burdening the government. Significant deviations from market rates, even with adjustments, could indicate either a favorable or unfavorable deal for the DoD, impacting overall cost-effectiveness.

What specific performance metrics or delivery standards were included in the contract, and how was Equilon Enterprises LLC's performance evaluated?

The contract likely included specific performance metrics and delivery standards related to fuel quality, quantity, on-time delivery, and potentially storage and handling protocols. These would be crucial for ensuring the operational readiness of military aviation assets. Equilon Enterprises LLC's performance would typically be evaluated by contracting officers and quality assurance representatives through mechanisms like Contractor Performance Assessment Reporting System (CPARS) or similar internal DoD tracking systems. These evaluations assess adherence to delivery schedules, product specifications, and any identified deficiencies or successes, providing a basis for future contract awards and performance management.

What is the typical duration and value range for similar full and open competition contracts for aviation turbine fuel awarded by the Defense Logistics Agency?

Contracts for aviation turbine fuel awarded by the Defense Logistics Agency (DLA) under full and open competition typically vary in duration and value based on anticipated demand, market conditions, and strategic sourcing initiatives. While the $737.5 million contract with Equilon Enterprises LLC is substantial, it's important to compare it to historical DLA awards. Similar contracts might range from one to five years in duration, with values potentially spanning hundreds of millions to over a billion dollars. Understanding this range helps contextualize the size and scope of the Equilon contract within the broader landscape of DLA's fuel procurement strategy and its effectiveness in securing vital resources competitively.

Are there any known supply chain risks associated with Equilon Enterprises LLC or the specific refineries producing JP8 and JP5 for this contract?

Assessing supply chain risks associated with Equilon Enterprises LLC and its production of JP8 and JP5 is critical. This involves examining the company's operational stability, its reliance on specific crude oil sources, and the geopolitical stability of regions where its refineries are located. Potential risks could include disruptions due to natural disasters, labor disputes, regulatory changes affecting refinery operations, or international trade tensions impacting crude oil supply or refined product export/import. A thorough risk assessment would involve reviewing Equilon's business continuity plans and any publicly available information regarding its supply chain vulnerabilities.

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: $737,529,791

Exercised Options: $737,529,791

Current Obligation: $737,529,791

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0470

IDV Type: IDC

Timeline