DoD awards $33.6M contract for petroleum products to ExxonMobil, highlighting fixed-price with economic adjustment terms
Contract Overview
Contract Amount: $33,626,026 ($33.6M)
Contractor: Exxon Mobil Corporation
Awarding Agency: Department of Defense
Start Date: 2011-01-25
End Date: 2011-05-31
Contract Duration: 126 days
Daily Burn Rate: $266.9K/day
Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES
Number of Offers Received: 2
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Other
Official Description: URGENT AND COMPELLING SUPPLEMENTAL CONTRACT AWARD AGAINST SOLICITATION SP0600-10-R-0061-0002. AWARD OF 14,000,000 USG FOB ORIGIN DELIVERY EX BATON ROUGE, LA.
Place of Performance
Location: BAYTOWN, HARRIS County, TEXAS, 77520
State: Texas Government Spending
Plain-Language Summary
Department of Defense obligated $33.6 million to EXXON MOBIL CORPORATION for work described as: URGENT AND COMPELLING SUPPLEMENTAL CONTRACT AWARD AGAINST SOLICITATION SP0600-10-R-0061-0002. AWARD OF 14,000,000 USG FOB ORIGIN DELIVERY EX BATON ROUGE, LA. Key points: 1. Contract utilizes a fixed-price structure with economic price adjustment, allowing for potential cost fluctuations. 2. Awarded under full and open competition after exclusion of sources, indicating a competitive process. 3. Delivery is FOB Origin from Baton Rouge, LA, impacting logistics and cost allocation. 4. The contract duration is 126 days, suggesting a short-term need for petroleum products. 5. ExxonMobil Corporation, a major energy player, secured this significant award. 6. The contract value of $33.6M represents a substantial investment in fuel supply.
Value Assessment
Rating: good
The contract value of $33.6 million for petroleum products appears reasonable given the quantity and delivery terms. While specific unit pricing isn't provided, the fixed-price with economic adjustment structure is common for commodities like fuel, allowing for market volatility. Benchmarking against similar DLA fuel contracts would provide a more precise value assessment, but the award seems aligned with typical procurement practices for such goods.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
This contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This suggests that while the competition was intended to be broad, specific sources may have been excluded for reasons not detailed in the provided data. The presence of 'full and open' indicates that multiple bidders were likely considered, which generally promotes competitive pricing and value for the government.
Taxpayer Impact: The competitive nature of this award, despite potential source exclusions, suggests that taxpayers likely benefited from a price discovery process that aimed to secure the best value for the required petroleum products.
Public Impact
The Department of Defense benefits from a secured supply of essential petroleum products. The contract supports military readiness and operational capabilities by ensuring fuel availability. Delivery from Baton Rouge, LA, impacts regional logistics and potentially local economic activity. The workforce implications are primarily within ExxonMobil's operations and logistics network.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic price adjustment clause introduces potential for cost overruns if market prices surge significantly.
- Exclusion of sources, even within a full and open framework, warrants scrutiny to ensure fairness and optimal competition.
- Short contract duration may indicate a reactive procurement or a specific, time-bound operational need, requiring careful planning for follow-on requirements.
Positive Signals
- Award to a major, established supplier like ExxonMobil suggests reliability and capacity to meet demand.
- Full and open competition, even with exclusions, generally leads to better price discovery and value.
- Fixed-price element provides a baseline cost control, with adjustments managed through a defined economic mechanism.
Sector Analysis
The petroleum refining sector (NAICS 324110) is critical for national security and economic stability, providing essential fuels for military operations and civilian infrastructure. This contract falls within the Defense Logistics Agency's (DLA) broad mandate to supply the U.S. military with a wide range of goods, including fuel. Spending in this sector is often subject to market volatility and geopolitical factors, making contract structures like fixed-price with economic adjustment common to mitigate risk for both parties.
Small Business Impact
The provided data indicates that small business participation (ss: false, sb: false) was not a primary consideration or requirement for this specific contract award. There is no indication of small business set-asides or subcontracting plans. This suggests the contract was awarded based on capability and price, likely favoring large, established entities with the capacity to fulfill such a large-scale petroleum supply requirement.
Oversight & Accountability
Oversight for this contract would primarily fall under the Department of Defense and the Defense Logistics Agency. Accountability measures are embedded in the contract terms, including delivery specifications and pricing adjustments. Transparency is facilitated through contract award databases, though specific details of the 'exclusion of sources' within the 'full and open' competition would require further investigation. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.
Related Government Programs
- Defense Logistics Agency Fuel Contracts
- Department of Defense Petroleum Procurement
- Fixed-Price with Economic Adjustment Contracts
- Petroleum Product Supply Chain Management
Risk Flags
- Potential for price volatility due to economic price adjustment clause.
- Lack of transparency regarding specific source exclusions in competition.
- Short contract duration may necessitate rapid follow-on procurements.
Tags
defense, department-of-defense, defense-logistics-agency, petroleum-products, fixed-price-economic-adjustment, full-and-open-competition, exxonmobil-corporation, baton-rouge, louisiana, fuel-supply, commodity-procurement, short-term-contract
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $33.6 million to EXXON MOBIL CORPORATION. URGENT AND COMPELLING SUPPLEMENTAL CONTRACT AWARD AGAINST SOLICITATION SP0600-10-R-0061-0002. AWARD OF 14,000,000 USG FOB ORIGIN DELIVERY EX BATON ROUGE, LA.
Who is the contractor on this award?
The obligated recipient is EXXON MOBIL CORPORATION.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $33.6 million.
What is the period of performance?
Start: 2011-01-25. End: 2011-05-31.
What was the specific rationale for excluding certain sources under the 'Full and Open Competition After Exclusion of Sources' designation?
The provided data does not specify the exact reasons for excluding certain sources. This designation typically implies that while the solicitation was broadly advertised, specific potential bidders were disqualified or not considered due to factors such as failure to meet minimum qualifications, past performance issues, or specific security requirements. A deeper review of the solicitation documents and award justification would be necessary to understand the precise exclusions and ensure they were fair and justified, ultimately impacting the level of competition and potential value for taxpayers.
How does the 'Economic Price Adjustment' clause typically function for petroleum contracts, and what are the potential risks to the government?
The Economic Price Adjustment (EPA) clause in petroleum contracts allows for modifications to the contract price based on fluctuations in specified market indices or commodity prices (e.g., West Texas Intermediate crude oil). This mechanism aims to protect both the contractor from unforeseen cost increases and the government from paying inflated prices if market conditions stabilize or decrease. The primary risk to the government is that the price could increase significantly if market conditions are unfavorable, potentially exceeding the initially anticipated fixed price. Careful selection of the index and clear definition of adjustment formulas are crucial to mitigate this risk.
What is the typical market size and competitive landscape for petroleum products procured by the Defense Logistics Agency?
The Defense Logistics Agency (DLA) is a massive procurer of petroleum products, essential for global military operations. The market is dominated by a few large, integrated oil companies and major fuel distributors capable of meeting the stringent requirements for quality, quantity, and delivery logistics. While competition exists, it is often concentrated among these major players due to the scale and specialized nature of military fuel needs. The DLA actively manages this landscape through various contracting strategies to ensure supply chain resilience and cost-effectiveness.
Can we compare the unit price of this award to historical DLA fuel contracts to assess value for money?
Direct unit price comparison is challenging without knowing the exact quantity of fuel purchased and the specific type of petroleum product. The award amount of $33.6 million is for 14,000,000 USG FOB Origin. This equates to approximately $2.40 per gallon ($33,626,026.14 / 14,000,000 gallons). Benchmarking this against historical DLA fuel contracts for similar products and delivery terms would be necessary to definitively assess value for money. Factors like market conditions at the time of award, specific fuel grade, and delivery location significantly influence pricing.
What are the implications of the 'FOB Origin' delivery term for this contract?
The 'FOB Origin' (Free On Board Origin) delivery term means that the seller (ExxonMobil) is responsible for the cost and risk of delivering the petroleum products to the specified origin point, which is Baton Rouge, LA. Once the fuel is loaded onto the carrier at the origin, the risk and cost of transportation to the final destination (implied to be a DoD facility) transfer to the buyer (Department of Defense). This term generally places more logistical responsibility and initial cost on the seller up to the point of origin.
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: SP060010R0061
Offers Received: 2
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Address: 3225 GALLOWS RD, FAIRFAX, VA, 11
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $33,626,026
Exercised Options: $33,626,026
Current Obligation: $33,626,026
Contract Characteristics
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SP060011D0475
IDV Type: IDC
Timeline
Start Date: 2011-01-25
Current End Date: 2011-05-31
Potential End Date: 2011-05-31 00:00:00
Last Modified: 2011-09-14
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