DoD's $99.5M aviation fuel contract to ExxonMobil raises questions on competition and value

Contract Overview

Contract Amount: $99,520,398 ($99.5M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2010-08-01

End Date: 2012-04-30

Contract Duration: 638 days

Daily Burn Rate: $156.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: PRODUCT: TURBINE FUEL, AVIATION JP5 TO DFSP AUGUSTA AND NAS SIGONELLA. QUANTITY: 45,800,000 USG (33,300,000 BASE PERIOD; 12,500,000 6 MONTH OPTION). BASE PERIOD: AUGUST 1, 2010 - OCTOBER 31, 2011. 6 MONTH OPTION: NOVEMBER 1, 2011 - APRIL 30, 2012

Plain-Language Summary

Department of Defense obligated $99.5 million to EXXON MOBIL CORPORATION for work described as: PRODUCT: TURBINE FUEL, AVIATION JP5 TO DFSP AUGUSTA AND NAS SIGONELLA. QUANTITY: 45,800,000 USG (33,300,000 BASE PERIOD; 12,500,000 6 MONTH OPTION). BASE PERIOD: AUGUST 1, 2010 - OCTOBER 31, 2011. 6 MONTH OPTION: NOVEMBER 1, 2011 - APRIL 30, 2012 Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant quantity of aviation fuel procured over a 20-month period. 3. Fixed-price contract with economic price adjustment introduces risk of cost overruns. 4. Awarded by the Defense Logistics Agency, a key logistics provider for the military. 5. Contract duration of over 1.5 years suggests a sustained need for aviation fuel. 6. No small business set-aside noted, indicating potential missed opportunities for smaller enterprises.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and the inclusion of economic price adjustments, which can obscure true cost. Without competitive bids, it's challenging to ascertain if ExxonMobil's pricing reflects fair market value for 45.8 million gallons of JP5 fuel. The fixed-price with economic price adjustment (FPEPA) contract type introduces volatility, as fuel prices can fluctuate significantly, potentially leading to costs exceeding initial projections. Further analysis would require access to historical fuel pricing data and comparable sole-source awards for similar quantities and durations.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, meaning only one vendor, ExxonMobil Corporation, was solicited. This sole-source approach bypasses the competitive bidding process, which typically drives down prices and encourages innovation. While sole-source awards can be justified under specific circumstances (e.g., urgent need, unique capabilities), the lack of competition here raises concerns about whether the government secured the best possible price and terms. The absence of multiple bidders means there was no market pressure to optimize the offering.

Taxpayer Impact: Taxpayers may have paid a premium for this aviation fuel due to the lack of competition. Without a competitive process, there is less assurance that the price reflects the lowest cost achievable in the market.

Public Impact

Military operations at DFSP Augusta and NAS Sigonella are supported by the consistent supply of aviation fuel. Aviation units within the Department of Defense benefit from the availability of JP5 fuel for aircraft. The contract ensures the readiness and operational capability of air assets stationed at or transiting through these locations. Logistics and supply chain personnel within the Defense Logistics Agency manage the procurement and distribution of this critical fuel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially leads to higher costs for taxpayers.
Economic price adjustment clause introduces uncertainty and risk of cost escalation.
Lack of transparency in the procurement process due to non-competitive award.
Potential for contractor to leverage sole-source position for less favorable terms.
No indication of small business participation or subcontracting opportunities.

Positive Signals

Ensures a critical fuel supply for essential military aviation operations.
Awarded to a well-established supplier with a track record in fuel provision.
Contract duration provides stability for planning and resource allocation.
Defense Logistics Agency's expertise in managing fuel contracts.

Sector Analysis

The aviation fuel market is a critical component of the energy sector, directly supporting transportation and defense. This contract falls under the broader category of petroleum product procurement, with JP5 being a specialized jet fuel. The global market for jet fuel is substantial, influenced by crude oil prices, geopolitical stability, and demand from commercial and military aviation. Benchmarking this contract's value is challenging without specific market data for JP5 at the specified locations and timeframes, especially given the sole-source nature of the award.

Small Business Impact

This contract does not appear to have a small business set-aside, nor is there any indication of subcontracting requirements for small businesses. The award to a large corporation like ExxonMobil suggests that opportunities for small businesses in this specific procurement were either not pursued or not feasible. This could represent a missed opportunity to foster small business participation in the defense supply chain for critical resources.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Logistics Agency (DLA) and potentially the Department of Defense's Inspector General. DLA is responsible for contract administration and ensuring compliance with terms and conditions. The Inspector General's office may conduct audits or investigations into the procurement process, pricing, and performance, particularly given the sole-source nature of the award. Transparency is limited due to the lack of a competitive bidding process, making public oversight more challenging.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Fuel Procurement
JP5 Fuel Supply
Department of Defense Energy Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Economic price adjustment clause
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $99.5 million to EXXON MOBIL CORPORATION. PRODUCT: TURBINE FUEL, AVIATION JP5 TO DFSP AUGUSTA AND NAS SIGONELLA. QUANTITY: 45,800,000 USG (33,300,000 BASE PERIOD; 12,500,000 6 MONTH OPTION). BASE PERIOD: AUGUST 1, 2010 - OCTOBER 31, 2011. 6 MONTH OPTION: NOVEMBER 1, 2011 - APRIL 30, 2012

Who is the contractor on this award?

The obligated recipient is EXXON MOBIL CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $99.5 million.

What is the period of performance?

Start: 2010-08-01. End: 2012-04-30.

What is the historical spending pattern for aviation fuel by the Defense Logistics Agency at DFSP Augusta and NAS Sigonella?

Analyzing historical spending patterns for aviation fuel by the Defense Logistics Agency (DLA) at DFSP Augusta and NAS Sigonella is crucial for context. While specific historical data for these exact locations and fuel types is not provided in the current data, DLA consistently procures vast quantities of fuel globally. Their spending is subject to market fluctuations, geopolitical events, and evolving military operational tempo. Examining past contracts, including their award mechanisms (competed vs. sole-source), quantities, prices, and durations, would reveal trends in DLA's fuel acquisition strategies. A history of sole-source awards for similar fuel types at these locations might indicate persistent supply chain challenges or specific justifications, whereas a shift towards competitive bidding could signal efforts to improve cost-efficiency. Understanding these patterns helps assess whether the $99.5 million awarded to ExxonMobil aligns with or deviates from established spending norms and whether the current procurement represents a fair value compared to historical acquisitions.

How does the unit price of this contract compare to market rates for JP5 fuel during the contract period?

Determining the precise unit price for this contract is complex due to the 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) clause. The base price is fixed, but it is subject to adjustments based on an economic index, typically reflecting changes in market prices for crude oil and refining costs. Without the specific adjustment formula and the actual price adjustments applied throughout the contract's duration (August 1, 2010 - April 30, 2012), a direct comparison to market rates is difficult. However, the base award amount of $99,520,398.40 for 45,800,000 USG suggests an average base price of approximately $2.17 per gallon. To assess value, this base price would need to be compared against prevailing market prices for JP5 fuel during the contract period, considering regional variations and bulk purchase discounts. Furthermore, the impact of the economic price adjustments on the final cost would need to be factored in, as the actual average price per gallon could be significantly higher or lower than the initial base rate.

What are the risks associated with a sole-source award for a commodity like aviation fuel?

Sole-source awards for commodities like aviation fuel carry several significant risks. Primarily, the absence of competition means the government loses the primary mechanism for ensuring the best possible price. The awarded contractor, ExxonMobil in this case, faces no direct pressure from competitors to offer lower prices or better terms, potentially leading to inflated costs for taxpayers. There's also a reduced incentive for the contractor to be highly efficient or innovative, as their market position is secured. Furthermore, transparency is diminished, making it harder for oversight bodies and the public to verify that the government is receiving fair value. In the long term, reliance on sole-source contracts can weaken the overall market by discouraging new entrants and reducing competitive dynamics, potentially leading to less resilient supply chains.

What is ExxonMobil's track record in supplying aviation fuel to the Department of Defense?

ExxonMobil Corporation is a major global energy company with a significant history of supplying petroleum products, including aviation fuels, to various government entities, including the Department of Defense (DoD). They possess extensive refining capabilities and a well-established distribution network, which are critical for meeting the demanding logistical requirements of military operations. Their track record likely includes numerous contracts, both competed and sole-source, for various fuel types across different military branches and geographic locations. While specific performance details for every contract are not publicly available, their continued role as a supplier suggests a generally satisfactory performance history in terms of product quality, delivery reliability, and capacity to meet DoD specifications. However, the nature of sole-source awards, like the one detailed here, warrants scrutiny regardless of the contractor's general reputation.

What are the potential implications of the economic price adjustment (EPA) clause on the total contract cost?

The Economic Price Adjustment (EPA) clause in this fixed-price contract introduces a significant variable that can substantially impact the total cost. An EPA is designed to protect both the contractor and the government from unforeseen price fluctuations in key input costs, such as crude oil prices, labor, or transportation. In this case, the price of JP5 aviation fuel is subject to change based on market indices. If fuel prices rise significantly during the contract period (August 1, 2010 - April 30, 2012), the EPA would allow ExxonMobil to increase the price, potentially leading to a total expenditure well above the initial $99.5 million estimate. Conversely, if prices fall, the EPA could result in a lower final cost. The risk lies in the potential for substantial cost overruns if market conditions are volatile and unfavorable to the government, especially when coupled with a sole-source award where the government has limited leverage to negotiate the terms of the adjustment.

Industry Classification

NAICS: Manufacturing › Petroleum and Coal Products Manufacturing › Petroleum Refineries

Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: SP060010R0033

Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Address: 3225 GALLOWS RD, FAIRFAX, VA, 11

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $99,520,398

Exercised Options: $99,520,398

Current Obligation: $99,520,398

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0487

IDV Type: IDC

Timeline