DoD spent $8.1M on aviation turbine fuel, with Equilon Enterprises LLC awarded the contract

Contract Overview

Contract Amount: $80,811,696 ($80.8M)

Contractor: Equilon Enterprises LLC

Awarding Agency: Department of Defense

Start Date: 2010-09-30

End Date: 2011-01-30

Contract Duration: 122 days

Daily Burn Rate: $662.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 13

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL AVIATION, JP8

Place of Performance

Location: HOUSTON, HARRIS County, TEXAS, 77002

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $80.8 million to EQUILON ENTERPRISES LLC for work described as: TURBINE FUEL AVIATION, JP8 Key points: 1. The contract value of $8.1 million for aviation turbine fuel represents a significant expenditure for the Defense Logistics Agency. 2. Competition dynamics for this fuel contract are crucial for ensuring competitive pricing and value for taxpayer dollars. 3. The fixed-price with economic price adjustment (EPA) structure introduces potential cost volatility, requiring careful monitoring. 4. The contract duration of 122 days suggests a short-term need for fuel, possibly for specific operations or inventory replenishment. 5. The award to Equilon Enterprises LLC highlights a key supplier within the petroleum refining sector for defense needs. 6. Geographic location in Texas (TX) may indicate a regional supply chain focus for this particular fuel purchase.

Value Assessment

Rating: fair

The contract value of $8.1 million for aviation turbine fuel is a substantial amount. Benchmarking this against similar fuel procurements by the Defense Logistics Agency or other military branches would be necessary to assess value for money. The fixed-price with economic price adjustment (EPA) clause introduces a degree of uncertainty in the final cost, as market fluctuations in fuel prices can impact the total expenditure beyond the initial fixed price. Without specific performance metrics or detailed cost breakdowns, a definitive value assessment is challenging, but the scale suggests a need for rigorous oversight.

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 solicited. The presence of 13 bids suggests a healthy level of interest and competition for this fuel supply contract. This broad competition is generally expected to drive more favorable pricing and terms for the government, as contractors vie to win the award. The number of bidders provides a positive signal regarding the accessibility of this market to various suppliers.

Taxpayer Impact: A full and open competition with 13 bidders is beneficial for taxpayers as it increases the likelihood of securing the best possible price and terms for the aviation fuel, minimizing potential overspending.

Public Impact

Military operations and readiness are directly supported by the consistent supply of aviation turbine fuel. The Department of Defense, specifically the Defense Logistics Agency, benefits from a secured fuel source. The contract supports the petroleum refining industry, contributing to economic activity and employment within that sector. Personnel involved in aviation logistics and fuel management are impacted by the contract's execution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The economic price adjustment (EPA) clause introduces risk of cost overruns if fuel prices escalate significantly.
Short contract duration (122 days) may lead to frequent re-procurement efforts and potential supply chain disruptions if not managed proactively.

Positive Signals

Awarded under full and open competition, suggesting a competitive bidding process that likely secured favorable terms.
A significant number of bids (13) indicates a robust market and potential for competitive pricing.
The contract is with Equilon Enterprises LLC, a known entity in the fuel supply sector.

Sector Analysis

The procurement of aviation turbine fuel falls under the broader energy and defense logistics sectors. The petroleum refining industry is a critical component of the national infrastructure, providing essential fuels for both civilian and military applications. The market for aviation fuels is influenced by global oil prices, geopolitical factors, and demand from commercial airlines and military forces. This contract represents a specific instance of the Defense Logistics Agency securing a vital resource within this dynamic market.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses stemming from a set-aside provision. The primary focus of this contract appears to be on large-scale fuel supply, likely sourced from major petroleum companies.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Logistics Agency's contracting officers and program managers. Accountability measures would include performance monitoring against contract terms, quality checks of the fuel supplied, and adherence to delivery schedules. Transparency is generally maintained through contract award databases, though specific operational details might be sensitive. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Fuel Procurements
Aviation Turbine Fuel Contracts
Petroleum Product Supply Contracts
Fixed-Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment (EPA) Clause Risk
Short Contract Duration
Potential for Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $80.8 million to EQUILON ENTERPRISES LLC. TURBINE FUEL 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 $80.8 million.

What is the period of performance?

Start: 2010-09-30. End: 2011-01-30.

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

Historical spending data for aviation turbine fuel by the Defense Logistics Agency (DLA) would reveal trends in volume, cost, and supplier relationships over time. Analyzing this would involve examining past contract awards, noting fluctuations in annual expenditures, and identifying any shifts in primary suppliers or contract types. For instance, a review might show an increase in spending during periods of heightened military activity or a decrease due to efficiency improvements or changes in fuel types. Understanding these patterns is crucial for budget forecasting, identifying potential cost-saving opportunities, and assessing the long-term reliance on specific fuel sources and contractors. Without access to a comprehensive historical database, specific figures cannot be provided, but such an analysis is fundamental to strategic resource management within the DLA.

How does the price per gallon for this contract compare to market rates at the time of award?

To compare the price per gallon for this contract to market rates at the time of award (approximately late 2010), one would need to access historical fuel price indices for JP8 or similar aviation turbine fuels. Market data from sources like the Energy Information Administration (EIA) or specialized commodity price trackers could provide benchmark prices. The contract's 'economic price adjustment' (EPA) clause complicates a direct comparison, as the final price could vary. However, the initial fixed price component, or the price calculated using the EPA formula at the time of award, would be the basis for comparison. If the awarded price was significantly higher than prevailing market rates, it could indicate less competitive bidding, specific logistical requirements, or a less favorable contract structure. Conversely, a price at or below market rates would suggest effective competition and value for money.

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

Equilon Enterprises LLC, often operating under the Shell brand, has a significant history of supplying fuels, including to government entities. Assessing their track record with defense fuel contracts would involve reviewing past awards, performance evaluations, and any reported issues or disputes. A positive track record would include consistent on-time delivery, adherence to quality specifications, and competitive pricing across multiple contracts. Conversely, a negative track record might involve delivery failures, quality non-compliance, or significant cost overruns. Information on their past performance can often be found in federal procurement databases and through agency performance assessment systems. Their ability to secure this $8.1 million contract suggests a demonstrated capability and potentially a favorable past performance record with the Defense Logistics Agency or other military branches.

What are the potential risks associated with the 'Fixed Price with Economic Price Adjustment' (EPA) contract type for this fuel purchase?

The 'Fixed Price with Economic Price Adjustment' (EPA) contract type for aviation turbine fuel introduces specific risks, primarily related to price volatility. While a fixed price component provides some cost certainty, the EPA allows for adjustments based on fluctuations in an underlying economic indicator, typically fuel market prices. The primary risk for the government is potential cost escalation if fuel prices rise significantly between the time of award and delivery. This can lead to expenditures exceeding initial budget projections. For the contractor, the risk lies in potential price decreases, although the EPA is designed to mitigate this. Effective management of an EPA contract requires robust monitoring of market indices and clear communication between the contracting parties to ensure fair adjustments and prevent disputes. The government must be prepared for potentially higher costs than initially anticipated if market conditions are unfavorable.

How does the geographic location of the award (Texas) impact the logistics and cost of fuel delivery?

The award to a contractor with operations in Texas (TX) for aviation turbine fuel has several implications for logistics and cost. Texas is a major hub for oil and gas production and refining, which can offer advantages in terms of proximity to supply sources and potentially lower transportation costs for the fuel itself. However, the specific delivery locations for the fuel are critical. If the fuel is needed at military bases within Texas or nearby states, the location could streamline delivery. If the fuel is required at distant bases, the Texas location might necessitate longer-haul transportation, potentially increasing costs. The presence of refineries in Texas suggests a competitive local market, which could contribute to favorable pricing. Ultimately, the impact depends on the final destination of the fuel and the specific distribution network utilized by Equilon Enterprises LLC.

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

Offers Received: 13

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: $80,811,696

Exercised Options: $80,811,696

Current Obligation: $80,811,696

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0499

IDV Type: IDC

Timeline