Petro Star Inc. awarded $30.2M for Alaska fuel despite limited competition and potential price volatility

Contract Overview

Contract Amount: $30,229,350 ($30.2M)

Contractor: Petro Star Inc.

Awarding Agency: Department of Defense

Start Date: 2011-07-01

End Date: 2015-04-30

Contract Duration: 1,399 days

Daily Burn Rate: $21.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 35

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: COMMERCIAL MARINE GAS OIL AT VARIOUS LOCATIONS IN ALASKA

Place of Performance

Location: DUTCH HARBOR, ALEUTIANS WEST County, ALASKA, 99692

State: Alaska Government Spending

Plain-Language Summary

Department of Defense obligated $30.2 million to PETRO STAR INC. for work described as: COMMERCIAL MARINE GAS OIL AT VARIOUS LOCATIONS IN ALASKA Key points: 1. Contract awarded through full and open competition, but specific details on bidder numbers are not provided. 2. Pricing structure includes economic price adjustment, introducing potential for cost increases beyond initial estimates. 3. Contract duration of 1399 days suggests a long-term need for fuel supply in Alaska. 4. The award to Petro Star Inc. represents a significant portion of the Defense Logistics Agency's spending in this category. 5. Geographic focus on Alaska presents unique logistical challenges and potential for higher operational costs. 6. The contract type, Fixed Price with Economic Price Adjustment, requires careful monitoring to manage cost overruns.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific cost breakdowns or comparable contract data. The total award amount of $30.2 million over approximately 3.8 years suggests an average annual value of around $8 million. The Fixed Price with Economic Price Adjustment (FPEPA) contract type introduces uncertainty in the final cost. While FPEPA can protect contractors from market fluctuations, it can also lead to higher prices for the government if fuel costs rise significantly. Further analysis would require comparing unit prices for fuel against market benchmarks and other government contracts for similar products in the region.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. However, the provided data does not specify the number of bids received. A high number of bids typically suggests robust competition, which can drive down prices. Conversely, a low number of bids, even under full and open competition, might indicate limited market interest or specialized requirements that restrict the bidder pool, potentially leading to less favorable pricing for the government.

Taxpayer Impact: While full and open competition is generally beneficial for taxpayers, the lack of specific bidder numbers prevents a definitive assessment of price discovery. Taxpayers benefit most when competition is robust, leading to lower overall costs.

Public Impact

Military operations in Alaska are supported by the reliable supply of commercial marine gas oil. The contract ensures fuel availability for various Department of Defense activities across different locations in Alaska. This contract contributes to the economic activity within Alaska by procuring essential fuel resources. The successful execution of this contract supports the logistical readiness of U.S. forces operating in the Arctic region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost escalation due to the economic price adjustment clause in the contract.
Limited transparency on the number of bidders received under full and open competition.
Geographic isolation of Alaska may lead to higher transportation and handling costs impacting overall value.
The long contract duration could expose the government to prolonged periods of potentially unfavorable pricing if market conditions shift.

Positive Signals

Awarded through full and open competition, maximizing the potential pool of qualified contractors.
Ensures a critical supply of fuel for essential military operations in a strategically important region.
The contractor, Petro Star Inc., is based in Alaska, potentially offering localized expertise and logistical advantages.

Sector Analysis

The petroleum refining and distribution sector is critical for supporting a wide range of industries, including defense. This contract falls under the petroleum products sub-sector, specifically focusing on fuel for marine vessels. The market for such fuels is often influenced by global commodity prices, geopolitical events, and regional demand. For the Defense Logistics Agency (DLA), securing reliable fuel sources in remote or challenging locations like Alaska is a significant undertaking, often involving specialized logistics and contracts that account for price volatility.

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 or specific benefits for the small business ecosystem stemming from this particular award. The focus was on securing the required fuel supply through the most competitive means available, which in this case, did not involve small business preferences.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA), which is responsible for procuring and distributing supplies for the U.S. military. Accountability measures would include performance monitoring, adherence to delivery schedules, and quality control of the fuel supplied. Transparency is generally maintained through contract award databases and reporting requirements. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Commercial Marine Fuel Procurement
Alaska Regional Logistics Support
Petroleum Products Supply Chain Management
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Potential for price volatility due to Economic Price Adjustment.
Limited transparency on the number of bidders.
Geographic challenges in Alaska may impact delivery costs and reliability.
Long contract duration could expose government to unfavorable market shifts.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $30.2 million to PETRO STAR INC.. COMMERCIAL MARINE GAS OIL AT VARIOUS LOCATIONS IN ALASKA

Who is the contractor on this award?

The obligated recipient is PETRO STAR INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $30.2 million.

What is the period of performance?

Start: 2011-07-01. End: 2015-04-30.

What is Petro Star Inc.'s track record with the Department of Defense and specifically the Defense Logistics Agency?

Petro Star Inc. has a history of contracting with the Department of Defense, particularly for fuel supplies in Alaska. As a regional provider, they are a key player in meeting the logistical needs of military operations in the area. While specific details on the number or value of past contracts are not provided in this dataset, their recurring role suggests a level of established performance and capability. Further investigation into DLA's contract databases and performance reviews would offer a more comprehensive understanding of their track record, including any past issues or commendations related to delivery, quality, or pricing.

How does the unit price of the commercial marine gas oil compare to market rates or similar government contracts?

The provided data does not include the specific unit price for the commercial marine gas oil, making a direct comparison to market rates or similar government contracts impossible. The total award amount of $30.2 million is for a duration of 1399 days, and the quantity of fuel is not specified. To assess value for money, one would need to obtain the contract's schedule of prices and compare the per-gallon or per-barrel cost against benchmarks from the Energy Information Administration (EIA), Department of Energy (DOE) reports, or other DLA contracts for fuel in comparable geographic regions. The economic price adjustment clause also complicates direct comparison, as the final price can fluctuate.

What are the primary risks associated with this contract, and how are they being mitigated?

The primary risks associated with this contract include price volatility due to the economic price adjustment clause, potential supply chain disruptions in remote Alaska locations, and logistical challenges. The economic price adjustment is a mitigation strategy in itself, designed to protect the contractor from market fluctuations, but it transfers some price risk to the government. Mitigation for supply and logistical risks would likely involve stringent performance requirements, delivery schedules, and potentially penalties for non-compliance outlined in the contract. The DLA's oversight and monitoring of fuel markets and contractor performance are crucial for managing these risks.

How effective has the Defense Logistics Agency been in securing competitive pricing for fuel in Alaska through similar contracts?

Assessing the overall effectiveness of DLA in securing competitive pricing for fuel in Alaska requires a broader analysis of their contracting history in the region. This specific contract was awarded under full and open competition, which is a positive indicator. However, without knowing the number of bids received or comparing the final awarded price to benchmarks, it's difficult to definitively state its competitiveness. DLA's strategy often involves leveraging its significant purchasing power and utilizing various contract types to balance cost, reliability, and risk. Analyzing trends in DLA's fuel procurement costs in Alaska over time, and comparing them to national averages or private sector benchmarks, would provide a clearer picture of their effectiveness.

What are the historical spending patterns for commercial marine gas oil by the Department of Defense in Alaska?

Historical spending patterns for commercial marine gas oil by the Department of Defense in Alaska would reveal the frequency, value, and duration of contracts awarded for this specific product in the region. This contract, valued at $30.2 million over approximately 3.8 years, represents a significant but potentially recurring expenditure. Analyzing past awards to Petro Star Inc. and other potential suppliers would indicate whether spending has been consistent, increasing, or decreasing, and whether competition levels have varied. Such analysis is crucial for budget forecasting and identifying potential opportunities for cost savings or strategic sourcing improvements.

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: 35

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Arctic Slope Regional Corporation (UEI: 076637073)

Address: 3900 C ST STE 802, ANCHORAGE, AK, 00

Business Categories: Alaskan Native Corporation Owned Firm, Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Minority Owned Business, Native American Owned Business, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $30,229,350

Exercised Options: $30,229,350

Current Obligation: $30,229,350

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0372

IDV Type: IDC

Timeline