DoD's $104M Turbine Fuel Contract Awarded to Petro Star Inc. Amidst Full and Open Competition

Contract Overview

Contract Amount: $104,438,609 ($104.4M)

Contractor: Petro Star Inc.

Awarding Agency: Department of Defense

Start Date: 2010-12-17

End Date: 2011-10-31

Contract Duration: 318 days

Daily Burn Rate: $328.4K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 20

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: TURBINE FUEL, AVIATION (JP8); TURBINE FUEL, AVIATION (JP4)

Place of Performance

Location: VALDEZ, VALDEZ-CORDOVA County, ALASKA, 99686

State: Alaska Government Spending

Plain-Language Summary

Department of Defense obligated $104.4 million to PETRO STAR INC. for work described as: TURBINE FUEL, AVIATION (JP8); TURBINE FUEL, AVIATION (JP4) Key points: 1. The Department of Defense awarded a significant contract for aviation turbine fuel. 2. Petro Star Inc. secured the contract under a full and open competition framework. 3. The contract's fixed-price with economic price adjustment structure introduces potential cost volatility. 4. The sector involves critical defense logistics and petroleum supply chains.

Value Assessment

Rating: good

The contract value of $104.4 million for aviation turbine fuel appears reasonable given the market for such commodities. Benchmarking against similar fuel contracts would provide a more precise assessment, but the scale suggests a competitive pricing environment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'Full and Open Competition After Exclusion of Sources,' indicating a competitive process was utilized. This method generally promotes price discovery and ensures fair market value is obtained.

Taxpayer Impact: The competitive nature of the award suggests taxpayers are likely receiving fair value for the fuel procured, minimizing the risk of overpayment.

Public Impact

Ensures critical fuel supply for military aviation operations. Supports national defense readiness through reliable logistics. Impacts the broader aviation fuel market and related industries. Potential for price fluctuations due to economic price adjustment clauses.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment may lead to cost overruns.
Dependence on a single supplier for a critical resource.
Geographic concentration of award in Alaska could pose logistical risks.

Positive Signals

Awarded through full and open competition.
Supports essential defense logistics.
Fixed-price component provides some cost certainty.

Sector Analysis

This contract falls within the energy and defense logistics sectors, specifically concerning the procurement of aviation fuel. Spending benchmarks for such fuels can vary significantly based on global market prices and geopolitical factors.

Small Business Impact

The data indicates that small businesses were not directly awarded this contract, as Petro Star Inc. is likely a larger entity. Further analysis would be needed to determine if small businesses participated as subcontractors.

Oversight & Accountability

The contract was awarded by the Defense Logistics Agency, a key component of the DoD's supply chain. Oversight would focus on contract performance, adherence to economic price adjustment terms, and ensuring fuel quality and timely delivery.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Potential for cost increases due to economic price adjustment.
Geographic concentration of supplier operations in Alaska.
Dependence on a single awardee for critical fuel supply.
Limited transparency on the justification for excluding other sources.
Potential for supply chain disruptions in remote locations.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $104.4 million to PETRO STAR INC.. TURBINE FUEL, AVIATION (JP8); TURBINE FUEL, AVIATION (JP4)

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 $104.4 million.

What is the period of performance?

Start: 2010-12-17. End: 2011-10-31.

What is the historical price trend for JP8 and JP4 fuels, and how might the economic price adjustment clause impact the final cost compared to fixed-price contracts?

Historical price trends for JP8 and JP4 are influenced by crude oil prices, refining costs, and geopolitical events. The economic price adjustment (EPA) clause allows for price changes based on specified indices, typically tied to fuel market fluctuations. While EPA can protect suppliers from unexpected cost increases, it exposes the government to potential price hikes, making the final cost unpredictable compared to a firm fixed-price contract. Analyzing the specific indices and historical volatility of those indices is crucial to estimate the potential impact.

What are the specific risks associated with relying on Petro Star Inc. for a significant portion of the DoD's aviation fuel needs, particularly given its location in Alaska?

Reliance on Petro Star Inc., especially with operations concentrated in Alaska, presents several risks. These include potential supply chain disruptions due to the region's harsh climate, limited transportation infrastructure, and susceptibility to natural disasters. Furthermore, a single-source dependency, even within a competitive award, can reduce leverage in future negotiations and create vulnerabilities if the supplier faces financial or operational difficulties. The 'Exclusion of Sources' aspect of the competition also warrants scrutiny to ensure it didn't unduly limit potential bidders.

How effectively does the 'Full and Open Competition After Exclusion of Sources' mechanism ensure optimal value and prevent potential collusion or market manipulation in the aviation fuel sector?

This procurement method aims to balance competition with specific source exclusions, often for national security or logistical reasons. While 'Full and Open' generally promotes value, the 'Exclusion of Sources' can limit the bidder pool, potentially reducing competitive pressure and price discovery. The effectiveness hinges on the justification for exclusion and whether sufficient competition remains among the eligible sources. Regular market analysis and post-award reviews are essential to ensure this mechanism doesn't inadvertently lead to higher costs or reduced innovation.

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 AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060010R0161

Offers Received: 20

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: $104,438,609

Exercised Options: $104,438,609

Current Obligation: $104,438,609

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0453

IDV Type: IDC

Timeline