DoD awards $73M contract for fuel to U.S. Oil Trading LLC, covering 27M gallons for McChord AFB

Contract Overview

Contract Amount: $72,957,925 ($73.0M)

Contractor: U.S. OIL Trading LLC

Awarding Agency: Department of Defense

Start Date: 2010-12-17

End Date: 2011-10-30

Contract Duration: 317 days

Daily Burn Rate: $230.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 20

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: CLIN 0101, JAA, DESTINATION PIPELINE TO MCCHORD AFB FOR 27,000,000 USG. CLIN 0201, JP8, ORIGIN TANK TRUCK FOR 8,029,800 USG. SHIPPING POINT: TACOMA, WA

Place of Performance

Location: TACOMA, PIERCE County, WASHINGTON, 98421

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $73.0 million to U.S. OIL TRADING LLC for work described as: CLIN 0101, JAA, DESTINATION PIPELINE TO MCCHORD AFB FOR 27,000,000 USG. CLIN 0201, JP8, ORIGIN TANK TRUCK FOR 8,029,800 USG. SHIPPING POINT: TACOMA, WA Key points: 1. Contract value of $72.96M for fuel delivery. 2. Competition was full and open, indicating market availability. 3. Risk is moderate due to fuel price volatility and fixed-price with economic adjustment terms. 4. Sector is Defense Logistics, a critical but often high-cost area.

Value Assessment

Rating: fair

The contract's fixed-price with economic price adjustment (FPEPA) structure aims to balance cost certainty with market fluctuations. However, FPEPA can lead to higher initial bids to account for potential price increases, making direct comparison difficult without detailed economic index data.

Cost Per Unit: $2.69 per gallon (estimated)

Competition Analysis

Competition Level: full-and-open

Full and open competition was utilized, suggesting multiple capable suppliers could bid. This method generally promotes price discovery and competitive pricing, though the FPEPA clause introduces complexity in assessing the final price.

Taxpayer Impact: Taxpayers benefit from competitive bidding but are exposed to fuel price volatility through the economic price adjustment clause.

Public Impact

Ensures critical fuel supply for military operations at McChord AFB. Supports the Defense Logistics Agency's mission to provide logistical support. Potential for price fluctuations impacts budget predictability for the DoD. Contract awarded to a single vendor, U.S. Oil Trading LLC.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces cost uncertainty.
Fixed-price contract type can lead to higher initial bids.
No small business participation noted.

Positive Signals

Full and open competition utilized.
Contract supports essential military fuel needs.
Clear delivery destination and quantity specified.

Sector Analysis

This contract falls within the Petroleum Refineries sector, specifically supporting the Defense Logistics Agency's critical role in supplying fuel to military installations. Spending benchmarks in this sector are highly sensitive to global oil prices and geopolitical events.

Small Business Impact

The contract data indicates that small businesses were not directly involved in this award, as the 'sb' field is false. Larger contracts for commodities like fuel often favor established, larger suppliers capable of meeting significant volume and logistical demands.

Oversight & Accountability

The contract was awarded under full and open competition, suggesting a standard procurement process. Oversight would focus on delivery verification, adherence to economic price adjustment calculations, and overall contract performance by the Defense Logistics Agency.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Potential for cost overruns due to economic price adjustment.
Lack of small business participation.
Dependence on a single supplier for a critical commodity.
Contract duration (317 days) is relatively short, requiring frequent re-procurement.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $73.0 million to U.S. OIL TRADING LLC. CLIN 0101, JAA, DESTINATION PIPELINE TO MCCHORD AFB FOR 27,000,000 USG. CLIN 0201, JP8, ORIGIN TANK TRUCK FOR 8,029,800 USG. SHIPPING POINT: TACOMA, WA

Who is the contractor on this award?

The obligated recipient is U.S. OIL TRADING LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $73.0 million.

What is the period of performance?

Start: 2010-12-17. End: 2011-10-30.

What was the total volume of fuel procured under this contract, and how does it compare to typical annual fuel needs for McChord AFB?

The contract specifies procurement for 27,000,000 USG (gallons) for CLIN 0101 and 8,029,800 USG for CLIN 0201, totaling approximately 35 million gallons. This volume is substantial and likely covers a significant portion, if not all, of McChord AFB's annual operational fuel requirements, reflecting the base's strategic importance.

How did the economic price adjustment clause impact the final cost to the government compared to a fixed-price contract without such adjustments?

The economic price adjustment (EPA) clause allows for modifications to the contract price based on fluctuations in specified economic indicators, typically related to fuel commodity prices. Without EPA, the government would have paid a fixed price, potentially higher initially to cover vendor risk, or lower if market prices dropped significantly. The EPA aims to share this risk, but the final cost depends entirely on market movements during the contract period.

What is the typical profit margin for fuel suppliers like U.S. Oil Trading LLC in government contracts, and how does the FPEPA structure affect this?

Profit margins for fuel suppliers can vary widely based on market conditions, competition, and contract specifics. For FPEPA contracts, suppliers often build in a base profit margin while the EPA clause mitigates risks associated with input cost volatility. This structure can provide a more stable profit environment compared to pure fixed-price contracts, especially in volatile commodity markets.

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

Solicitation ID: SP060010R0161

Offers Received: 20

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

Evaluated Preference: NONE

Contractor Details

Address: 3001 MARSHALL AVE, TACOMA, WA, 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: $72,957,925

Exercised Options: $72,957,925

Current Obligation: $72,957,925

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0463

IDV Type: IDC

Timeline