DoD's $20.3M contract for fuel services awarded to KPI Oceanconnect Inc. shows fair value

Contract Overview

Contract Amount: $20,291,079 ($20.3M)

Contractor: KPI Oceanconnect Inc

Awarding Agency: Department of Defense

Start Date: 2011-04-01

End Date: 2015-04-30

Contract Duration: 1,490 days

Daily Burn Rate: $13.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: COMMERCIAL MGO IN CHARLESTON SC AND NORFOLK,VA

Place of Performance

Location: NORFOLK, NORFOLK (CITY) County, VIRGINIA, 23511

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $20.3 million to KPI OCEANCONNECT INC for work described as: COMMERCIAL MGO IN CHARLESTON SC AND NORFOLK,VA Key points: 1. The contract was awarded under full and open competition, suggesting a competitive pricing environment. 2. The fixed-price structure with economic price adjustment aims to mitigate fuel price volatility. 3. The duration of the contract (1490 days) indicates a long-term need for these services. 4. The award was made by the Defense Logistics Agency, a key provider of logistics support. 5. The contract's value is moderate within the context of fuel procurement for military operations.

Value Assessment

Rating: good

The contract value of approximately $20.3 million over four years for fuel services appears reasonable when benchmarked against similar large-scale fuel supply contracts for military installations. The fixed-price with economic price adjustment (EPA) clause is a standard mechanism to account for market fluctuations in fuel prices, which can help ensure predictable costs for the government while allowing the contractor to manage inherent market risks. Without specific per-unit pricing data or detailed cost breakdowns, a definitive value-for-money assessment is challenging, but the competitive award process suggests a fair market price was likely achieved.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded through full and open competition, indicating that all responsible sources were permitted to submit offers. The presence of 5 bids suggests a healthy level of competition for this requirement. A competitive process generally leads to better price discovery and can drive down costs for the government by encouraging bidders to offer their most competitive terms.

Taxpayer Impact: Taxpayers benefit from a competitive award process as it is more likely to result in a fair market price, preventing overpayment and ensuring that government funds are used efficiently.

Public Impact

This contract directly supports the operational readiness of Department of Defense (DoD) assets by ensuring the availability of fuel. The services provided are critical for the functioning of naval and other military operations in the Charleston, SC, and Norfolk, VA regions. The contract ensures a steady supply chain for a vital commodity, underpinning military logistics. While not directly creating new jobs, it sustains employment within the fuel supply and logistics sector supporting defense needs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to the economic price adjustment clause if fuel markets experience significant upward volatility.
Dependence on a single contractor for a critical resource could pose a risk if supply chain disruptions occur.
The fixed-price nature, even with EPA, may not fully shield the government from all cost escalations in extreme market conditions.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process and likely competitive pricing.
The Defense Logistics Agency's involvement suggests experienced oversight and management of fuel procurement.
The contract's duration provides stability and predictability for fuel supply to the specified military locations.

Sector Analysis

The fuel procurement sector for defense is a critical component of national security logistics. The Defense Logistics Agency (DLA) is a primary entity responsible for managing such contracts, ensuring that military branches have access to necessary fuel supplies globally. This contract, valued at over $20 million, falls within the typical range for regional fuel supply agreements supporting naval and other military installations. The industry is characterized by large, established energy companies and specialized fuel distributors capable of meeting stringent military specifications and delivery requirements.

Small Business Impact

This contract does not appear to have a specific small business set-aside. The nature of large-scale fuel procurement often favors larger, established companies with the infrastructure and capacity to meet significant demand. There is no explicit information provided regarding subcontracting opportunities for small businesses, which would typically be a focus for larger prime contractors to meet broader federal goals.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract. As a major contracting agency within the DoD, DLA has established procurement regulations and oversight mechanisms to ensure compliance and accountability. Transparency is generally maintained through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Department of Defense Energy Procurement
Military Fuel Supply Chain Management
Petroleum Refineries Services Contracts

Risk Flags

Potential for price volatility due to EPA clause
Dependence on single contractor for critical fuel supply

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.3 million to KPI OCEANCONNECT INC. COMMERCIAL MGO IN CHARLESTON SC AND NORFOLK,VA

Who is the contractor on this award?

The obligated recipient is KPI OCEANCONNECT INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $20.3 million.

What is the period of performance?

Start: 2011-04-01. End: 2015-04-30.

What is the historical spending pattern for similar fuel supply contracts by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) consistently awards significant contracts for fuel supply to support military operations. Historical data indicates that DLA procures billions of dollars worth of fuel annually across various types (e.g., jet fuel, diesel, gasoline) and regions. Spending patterns vary based on geopolitical events, military deployment levels, and fluctuating global energy prices. For instance, contracts in high-operational tempo periods or regions tend to be larger and more frequent. The average contract value for regional fuel supply can range from millions to tens of millions of dollars, similar to this $20.3 million award, depending on the volume, duration, and specific fuel types required. Benchmarking this contract against historical DLA fuel awards suggests it is within a typical range for supporting major naval installations in the specified geographic areas.

How does the pricing structure (Fixed Price with Economic Price Adjustment) compare to other DoD fuel contracts?

The Fixed Price with Economic Price Adjustment (EPA) pricing structure is a common and often preferred method for procuring commodities like fuel, especially for longer-term contracts. This structure aims to balance cost certainty for the government with the contractor's need to manage market volatility. The fixed portion covers the base cost, while the EPA clause allows for adjustments based on a pre-defined index (e.g., a fuel price index), mitigating risks associated with significant market fluctuations. Many DoD fuel contracts utilize EPA clauses to ensure a stable supply without exposing the government to excessive price increases or the contractor to unsustainable losses. While some contracts might be pure fixed-price (less common for volatile commodities) or cost-plus, EPA is a standard approach for ensuring value and supply continuity in fuel procurement.

What are the key performance indicators (KPIs) typically monitored for fuel supply contracts of this nature?

Key Performance Indicators (KPIs) for fuel supply contracts like this one typically focus on reliability, quality, and timeliness. Essential KPIs include: On-Time Delivery Rate (ensuring fuel is delivered precisely when and where needed to avoid operational disruptions), Fuel Quality Compliance (verifying that the delivered fuel meets all military specifications), Inventory Management (for contracts involving storage, ensuring adequate levels are maintained), and Accuracy of Invoicing (ensuring billing aligns with deliveries and contract terms). For contracts with Economic Price Adjustment (EPA), monitoring the accuracy and appropriateness of the price adjustments based on the agreed-upon index is also crucial. Performance is often evaluated through contractor performance assessment reporting systems.

What is the track record of KPI Oceanconnect Inc. in fulfilling similar government contracts?

KPI Oceanconnect Inc. has a history of engaging in fuel supply contracts, including those with government entities. While specific details on their performance for all past contracts require deeper database analysis, their ability to win a competitive bid for a Department of Defense contract suggests they possess the necessary qualifications, capacity, and financial stability. Government contracting performance is often tracked through systems like the Contractor Performance Assessment Reporting System (CPARS). A review of CPARS data, if available, would provide detailed insights into their past performance regarding delivery, quality, cost control, and overall customer satisfaction on previous government awards. Their continued participation in bidding processes indicates a level of established capability.

How does the geographic scope (Charleston SC and Norfolk VA) influence the contract's value and logistics?

The specified geographic scope, encompassing Charleston, South Carolina, and Norfolk, Virginia, is significant because these are major naval hubs. This concentration of military activity implies a substantial and consistent demand for fuel. The proximity of these locations to each other may allow for logistical efficiencies in distribution and delivery, potentially reducing transportation costs compared to serving more disparate locations. However, serving multiple high-demand ports also requires robust supply chain management and potentially multiple delivery points or storage facilities. The value of the contract reflects the scale of operations at these bases and the strategic importance of ensuring uninterrupted fuel supply to naval fleets and associated infrastructure in the Atlantic region.

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: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 5

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

Evaluated Preference: NONE

Contractor Details

Address: 128 BROAD ST 2ND FL, RED BANK, NJ, 90

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

Financial Breakdown

Contract Ceiling: $20,291,079

Exercised Options: $20,291,079

Current Obligation: $20,291,079

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0365

IDV Type: IDC

Timeline