DoD's $105.6M aviation turbine fuel contract awarded to Wynnewood Energy Co. LLC shows strong competition

Contract Overview

Contract Amount: $105,639,994 ($105.6M)

Contractor: Wynnewood Energy CO LLC

Awarding Agency: Department of Defense

Start Date: 2010-04-26

End Date: 2011-04-30

Contract Duration: 369 days

Daily Burn Rate: $286.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 27

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: AVIATION, TURBINE FUEL, JP8/JP5. PARTIAL SET ASIDE QUANTITIES AND SET ASIDE DOLLARS: 59,620,000 USG AND $104,440,891.08.

Place of Performance

Location: WYNNEWOOD, GARVIN County, OKLAHOMA, 73098

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $105.6 million to WYNNEWOOD ENERGY CO LLC for work described as: AVIATION, TURBINE FUEL, JP8/JP5. PARTIAL SET ASIDE QUANTITIES AND SET ASIDE DOLLARS: 59,620,000 USG AND $104,440,891.08. Key points: 1. Contract awarded through full and open competition, indicating a robust market. 2. The fixed-price with economic price adjustment structure aims to mitigate fuel price volatility. 3. A significant number of bids (27) suggests healthy market interest and potential for competitive pricing. 4. The contract duration of 369 days provides a stable supply chain for essential fuel. 5. Partial set-aside quantities were included, though the primary award was not small business. 6. The contract's performance period aligns with typical operational needs for fuel procurement.

Value Assessment

Rating: good

The contract value of $105.6 million for aviation turbine fuel appears reasonable given the quantity of 59.6 million USG. While specific per-unit cost benchmarks are not provided, the competitive nature of the award suggests that pricing was likely scrutinized. The economic price adjustment clause is a standard mechanism to manage fluctuating fuel costs, which can be beneficial for both the government and the contractor in volatile markets. Comparing this to other large-scale fuel procurements would offer further insight into its value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with 27 bids received. This high level of competition is a positive indicator, suggesting that multiple capable suppliers were interested and able to bid on the requirement. A large number of bidders typically leads to more competitive pricing and a wider selection of qualified contractors, ultimately benefiting the government by ensuring it receives the best value for its expenditure.

Taxpayer Impact: The extensive competition for this fuel contract means taxpayers are likely benefiting from more favorable pricing due to the pressure among bidders to secure the award.

Public Impact

The Department of Defense (DoD) is the primary beneficiary, ensuring a critical fuel supply for its aviation assets. Services delivered include the provision of aviation turbine fuel (JP8/JP5), essential for military operations. The geographic impact is likely national, supporting various military installations requiring this fuel type. Workforce implications are indirect, supporting jobs within the petroleum refining and distribution sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can sometimes lead to higher costs if market prices rise significantly.
Reliance on a single primary awardee, even with competition, carries some supply chain risk.
The contract was not specifically set aside for small businesses, potentially limiting their direct participation.

Positive Signals

Full and open competition ensures a broad base of potential suppliers and competitive pricing.
The fixed-price with economic price adjustment structure helps manage cost volatility in the fuel market.
A high number of bids (27) indicates a healthy and responsive market for aviation fuel.

Sector Analysis

The aviation turbine fuel market is a critical component of the energy sector, directly supporting aerospace and defense operations. This contract falls under the broader category of petroleum product procurement, with NAICS code 324110 (Petroleum Refineries) being relevant. The market is characterized by significant infrastructure requirements and price sensitivity to global oil markets. Comparable spending benchmarks would involve analyzing other large-scale fuel contracts awarded by the DoD and other federal agencies for similar quantities and types of fuel.

Small Business Impact

While the contract was awarded under full and open competition and the primary awardee is not a small business, the data indicates partial set-aside quantities were considered. This suggests an effort to include small businesses, though the primary award value was not designated as such. Further analysis would be needed to determine the extent of small business subcontracting opportunities generated by this contract and its overall impact on the small business ecosystem within the fuel supply chain.

Oversight & Accountability

The contract is managed by the Defense Logistics Agency (DLA), a key agency responsible for supply chain management within the DoD. Oversight mechanisms would include DLA's contract administration, performance monitoring, and financial audits. Transparency is generally maintained through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Contracts
Petroleum Product Supply
Fixed Price with Economic Price Adjustment Contracts
DoD Energy Procurement

Risk Flags

Price Volatility Risk
Supply Chain Dependency
Economic Price Adjustment Complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $105.6 million to WYNNEWOOD ENERGY CO LLC. AVIATION, TURBINE FUEL, JP8/JP5. PARTIAL SET ASIDE QUANTITIES AND SET ASIDE DOLLARS: 59,620,000 USG AND $104,440,891.08.

Who is the contractor on this award?

The obligated recipient is WYNNEWOOD ENERGY CO LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $105.6 million.

What is the period of performance?

Start: 2010-04-26. End: 2011-04-30.

What is Wynnewood Energy Co. LLC's track record with federal contracts, particularly for fuel supply?

Wynnewood Energy Co. LLC has a history of federal contracting, primarily with the Department of Defense. While this specific contract for aviation turbine fuel is a significant award, their broader federal contract portfolio would need to be reviewed to fully assess their track record. Information from the Federal Procurement Data System (FPDS) can provide details on past awards, performance ratings, and any issues encountered. A comprehensive review would examine the volume and types of contracts awarded, their performance history on those contracts, and any past performance issues or disputes that might indicate a risk for future performance.

How does the per-gallon cost of this contract compare to market rates or similar federal procurements?

Without specific per-gallon pricing data or detailed market rate benchmarks for aviation turbine fuel (JP8/JP5) during the contract period (2010-2011), a precise comparison is challenging. However, the contract's structure includes an economic price adjustment (EPA) clause, which is designed to account for fluctuations in market prices. The fact that it was awarded under full and open competition with 27 bids suggests that the pricing achieved was likely competitive at the time. To conduct a thorough comparison, one would need to access historical fuel market data (e.g., Platts, EIA) and compare it against the contract's base price and adjustment factors, as well as benchmark against other similar DoD fuel contracts awarded around the same period.

What are the primary risks associated with this type of fixed-price with economic price adjustment (FPEPA) contract for fuel?

The primary risk with an FPEPA contract for fuel lies in price volatility. While the EPA clause is intended to protect both parties from extreme price swings, there is still a risk that fuel prices could rise significantly, leading to higher costs for the government than initially anticipated under a firm fixed-price contract. Conversely, if prices fall, the government might not fully benefit from the lower market rates depending on the EPA's specific formula. Another risk is the administrative burden of tracking and calculating the economic price adjustments accurately. Ensuring the accuracy and fairness of the price adjustments requires robust monitoring and auditing processes.

How effective is full and open competition in ensuring value for money for fuel procurements of this scale?

Full and open competition is generally considered the most effective method for ensuring value for money in large-scale procurements, including fuel. By allowing all responsible sources to submit bids, the government maximizes the potential for competitive pricing. The presence of 27 bidders in this case indicates a healthy market and likely drove down prices as companies vied for the contract. This competitive pressure helps ensure that the government obtains the fuel at a price reflecting market conditions and the suppliers' efficiency. While other factors like contract type and performance monitoring are also crucial, robust competition is a foundational element for achieving cost savings and optimal value.

What is the historical spending pattern for aviation turbine fuel by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) is a primary procurer of fuel for the Department of Defense, and aviation turbine fuel represents a significant portion of its energy portfolio. Historical spending patterns for DLA's fuel procurement typically show substantial annual outlays, often in the billions of dollars, reflecting the vast operational needs of the military. Spending can fluctuate based on global fuel prices, geopolitical events, operational tempo, and changes in military readiness requirements. Analyzing DLA's historical fuel spending data, often available through public reports and contract databases, would reveal trends in volume, cost per unit, and the distribution of awards across different fuel types and contractors over time.

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: CVR Energy, Inc. (UEI: 795416135)

Address: 370 17TH ST STE 5300, DENVER, CO, 90

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

Financial Breakdown

Contract Ceiling: $105,639,994

Exercised Options: $105,639,994

Current Obligation: $105,639,994

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0475

IDV Type: IDC

Timeline