DoD spent $176M on aviation fuel, with ConocoPhillips securing the contract

Contract Overview

Contract Amount: $176,144,172 ($176.1M)

Contractor: Conocophillips Company

Awarding Agency: Department of Defense

Start Date: 2010-04-26

End Date: 2011-05-31

Contract Duration: 400 days

Daily Burn Rate: $440.4K/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 FUEL, AVIATION, GRADE JP8

Place of Performance

Location: PONCA CITY, KAY County, OKLAHOMA, 74601

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $176.1 million to CONOCOPHILLIPS COMPANY for work described as: TURBINE FUEL, AVIATION, GRADE JP8 Key points: 1. The contract value represents a significant portion of the agency's fuel procurement. 2. Competition dynamics for this large fuel contract are crucial for price discovery. 3. Economic price adjustment clauses introduce potential cost volatility. 4. The fixed-price structure aims to control costs, but adjustments add risk. 5. The contract duration of 400 days suggests a steady demand for aviation fuel. 6. The Defense Logistics Agency's role highlights the strategic importance of fuel supply.

Value Assessment

Rating: good

The awarded amount of $176.1 million for aviation fuel appears substantial, reflecting the scale of military aviation operations. Benchmarking this against similar large-scale fuel procurements by the Department of Defense would provide a clearer picture of value for money. The fixed-price with economic price adjustment (FPEPA) contract type suggests an attempt to balance cost certainty with market fluctuations, which is common in commodity-based contracts. However, the effectiveness of this balance depends heavily on the specific adjustment mechanisms and market volatility during the contract period.

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 had the opportunity to submit proposals. With 27 bids received, this suggests a robust competitive environment for aviation fuel supply. A high number of bidders generally leads to more competitive pricing and better value for the government. The agency's ability to attract numerous offers is a positive sign for price discovery and efficient resource allocation.

Taxpayer Impact: Taxpayers benefit from the competitive bidding process, which is expected to drive down prices and ensure the government receives the best possible value for its aviation fuel purchases.

Public Impact

Military aviation units across various branches of the Department of Defense are the primary beneficiaries, receiving essential fuel for operations. The contract ensures the continuous supply of Grade JP-8 aviation fuel, critical for aircraft readiness and mission execution. The geographic impact is likely widespread, supporting military bases and operations domestically and potentially overseas where refueling is required. The contract supports jobs within the petroleum refining and distribution sectors, contributing to the broader energy industry workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to unpredictable cost increases if fuel prices spike significantly.
Reliance on a single supplier, even if competitively selected, can pose supply chain risks.
The fixed-price component may not fully account for unforeseen market volatility, potentially impacting contractor margins or leading to disputes.

Positive Signals

Awarded under full and open competition with 27 bids, indicating a healthy market and competitive pricing.
The fixed-price element provides a baseline cost control measure.
The contract is managed by the Defense Logistics Agency, a specialized agency focused on efficient procurement and supply chain management.

Sector Analysis

The petroleum refining industry is a critical sector supporting national defense and economic activity. This contract falls under the broader category of fuel supply and distribution, a mature market with established players. The size of this award, over $176 million, signifies a major procurement within the sector, likely involving large-scale refining and logistical capabilities. Comparable spending benchmarks would involve analyzing other large government fuel contracts and commercial fuel market prices.

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. Given the scale and nature of aviation fuel supply, it is likely that prime contracting opportunities are dominated by large, established petroleum companies. However, there may be indirect opportunities for small businesses in logistics, transportation, or related support services, though these are not detailed in the provided data.

Oversight & Accountability

The contract is managed by the Defense Logistics Agency (DLA), which has established oversight mechanisms for procurement and supply chain management. The DLA typically employs quality assurance personnel and performance monitoring to ensure contract compliance. Inspector General oversight would apply to investigations of fraud, waste, or abuse related to this contract. Transparency is generally maintained through contract award databases, though specific performance details may be sensitive.

Related Government Programs

Defense Fuel Supply Center contracts
Aviation Turbine Fuel procurements
Petroleum product supply contracts
Department of Defense energy procurements

Risk Flags

Potential for price volatility due to economic price adjustment clause.
Supply chain disruption risk inherent in large commodity contracts.
Dependence on a single awarded contractor for a critical resource.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $176.1 million to CONOCOPHILLIPS COMPANY. TURBINE FUEL, AVIATION, GRADE JP8

Who is the contractor on this award?

The obligated recipient is CONOCOPHILLIPS COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $176.1 million.

What is the period of performance?

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

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

Analyzing historical spending trends for aviation fuel by the Department of Defense reveals significant and consistent expenditure, driven by ongoing military operations and readiness requirements. While specific figures fluctuate annually based on global events, fuel prices, and operational tempo, the overall demand remains robust. For instance, in fiscal years preceding and following this 2010-2011 contract, the DoD has consistently allocated hundreds of millions, often exceeding a billion dollars annually, towards various types of aviation fuels, including JP-8. This sustained high level of spending underscores the critical nature of fuel as a strategic resource for maintaining air superiority and global reach. Factors influencing these trends include geopolitical stability, the deployment status of air assets, and advancements in fuel efficiency technologies, though the latter's impact is often offset by increased operational tempo or the introduction of new, fuel-intensive aircraft.

How does the price per gallon for JP-8 fuel in this contract compare to the market average during the contract period?

Determining the precise price per gallon from the provided data ($176,144,172 total award, 400-day duration, 27 bids) is challenging without knowing the exact quantity of fuel procured. However, we can infer potential value by considering the contract type (Fixed Price with Economic Price Adjustment - FPEPA) and the competitive landscape (27 bids). FPEPA contracts aim to mitigate risks associated with volatile commodity prices by allowing for adjustments based on established indices. During 2010-2011, global oil prices experienced significant fluctuations. A competitive bid process with 27 offers suggests that ConocoPhillips likely submitted a price that was competitive at the time of award, factoring in anticipated market conditions and the adjustment mechanisms. To perform a true comparison, one would need to access historical market price data for JP-8 (e.g., Platts or EIA data) for the specific delivery locations and timeframes covered by the contract and divide the total contract value by the total gallons purchased.

What are the specific risks associated with the 'Economic Price Adjustment' clause in this contract?

The primary risk associated with the Economic Price Adjustment (EPA) clause in this contract is cost uncertainty for the government. While intended to protect the contractor from unforeseen market price increases (and potentially offer savings if prices fall), EPA clauses can lead to significant budget overruns if fuel prices escalate rapidly and substantially. The specific risk depends heavily on the benchmark index used for adjustment (e.g., a specific commodity price, a government-published index) and the formula applied. If the index is volatile or the formula allows for large swings, the final cost could deviate significantly from the initial fixed-price component. For taxpayers, this means the actual expenditure could be higher than initially budgeted, potentially impacting other program funding. Conversely, if prices decrease, the government might benefit, but the inherent unpredictability remains a risk factor for financial planning and resource allocation.

What is ConocoPhillips Company's track record with large federal fuel supply contracts?

ConocoPhillips Company, a major integrated energy company, has a substantial track record of supplying fuel products, including aviation fuels, to government entities, particularly the Department of Defense. Their extensive infrastructure, refining capacity, and established distribution networks position them as a key player in fulfilling large-scale government fuel requirements. Historically, companies of this size often participate in and win significant federal contracts awarded through competitive bidding processes. While specific contract performance details (e.g., on-time delivery rates, quality compliance, dispute history) for every single award are not publicly itemized in aggregate, their continued participation and success in winning bids for critical supplies like aviation fuel suggest a generally reliable performance history. Government contract databases and agency performance reviews would offer more granular insights into their specific track record on contracts like this one.

How does the number of bidders (27) impact the potential value for money in this contract?

A high number of bidders, such as the 27 received for this aviation fuel contract, generally signals a healthy and competitive market. From a value-for-money perspective, this is highly positive for the government and taxpayers. Intense competition typically drives down prices as bidders strive to offer the most attractive terms to secure the award. It also increases the likelihood that the government will receive proposals reflecting efficient operations and potentially innovative solutions. Furthermore, a large pool of bidders reduces the government's reliance on any single supplier, mitigating risks associated with market concentration. For taxpayers, this means the funds allocated for aviation fuel are more likely to be spent efficiently, securing the necessary resources at a price that reflects true market value rather than being inflated due to limited supplier options.

What is the typical duration for large aviation fuel supply contracts, and how does this contract's duration compare?

The duration of large aviation fuel supply contracts can vary significantly based on factors such as anticipated demand stability, inventory management strategies, and the contracting agency's procurement policies. Contracts can range from short-term (less than a year) to multi-year agreements, often with options for extension. A duration of approximately 400 days (roughly 13 months) for this specific contract is relatively standard for a significant, ongoing supply requirement. It provides a reasonable period for the contractor to manage supply chains and for the agency to ensure consistent fuel availability without committing to excessively long terms that might lock in unfavorable prices or prevent adaptation to changing needs. Compared to potentially shorter, tactical fuel buys or longer strategic partnerships, this duration strikes a balance, offering continuity while allowing for periodic re-evaluation of market conditions and supplier performance.

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: Conocophillips (UEI: 118819478)

Address: 930 PHILLIPS BLDG, BARTLESVILLE, OK, 02

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Federally Funded Research and Development Corp, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $176,144,172

Exercised Options: $176,144,172

Current Obligation: $176,144,172

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0478

IDV Type: IDC

Timeline