DoD's $144.6M JP8 Turbine Fuel Contract Awarded to Equilon Enterprises LLC

Contract Overview

Contract Amount: $144,631,850 ($144.6M)

Contractor: Equilon Enterprises LLC

Awarding Agency: Department of Defense

Start Date: 2011-05-12

End Date: 2012-03-30

Contract Duration: 323 days

Daily Burn Rate: $447.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 25

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: THIS CONTRACT IS A SUPPLEMENTAL CONTRACT AND THE FULL SOLICITATION NUMBER IS SP0600-10-R-0061-0001 TURBINE FUEL, AVIATION JP8

Place of Performance

Location: HOUSTON, HARRIS County, TEXAS, 77002

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $144.6 million to EQUILON ENTERPRISES LLC for work described as: THIS CONTRACT IS A SUPPLEMENTAL CONTRACT AND THE FULL SOLICITATION NUMBER IS SP0600-10-R-0061-0001 TURBINE FUEL, AVIATION JP8 Key points: 1. Contract value represents a significant investment in aviation fuel for defense operations. 2. Full and open competition suggests a potentially competitive bidding environment. 3. Fixed-price with economic price adjustment contract type introduces some price volatility risk. 4. Contract duration of 323 days indicates a medium-term supply need. 5. The award to Equilon Enterprises LLC highlights a key supplier in the defense logistics chain. 6. Geographic focus on Texas (TX) for this specific award.

Value Assessment

Rating: good

The contract value of $144.6 million for aviation turbine fuel (JP8) appears substantial, reflecting the critical nature of fuel supply for military operations. Benchmarking against similar large-scale fuel procurements would be necessary for a precise value-for-money assessment. However, the fixed-price with economic price adjustment (EPA) structure allows for some cost fluctuations, which can be a double-edged sword: protecting the government from extreme price spikes while allowing the contractor to adjust for market changes. The absence of specific performance metrics in the provided data makes a direct comparison of efficiency difficult.

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 bids. The data does not specify the number of bidders, but this procurement method generally fosters a competitive environment, which is intended to drive down prices and improve terms for the government. The Defense Logistics Agency's use of this approach suggests they sought the best possible value through a broad solicitation.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it maximizes the potential for cost savings through a wider pool of bidders vying for the contract.

Public Impact

Military aviation units requiring JP8 turbine fuel for operational readiness. Ensures the continuous supply of a critical fuel type for defense missions. Potential impact on the regional economy in Texas due to fuel sourcing and distribution. Supports the logistical backbone of the Department of Defense's aviation capabilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic Price Adjustment (EPA) clause introduces potential for cost increases beyond initial fixed price.
Contract duration is relatively short (323 days), requiring subsequent procurements and potential for recurring administrative burden.
Reliance on a single awardee for a critical commodity like JP8 could pose supply chain risks if not managed proactively.

Positive Signals

Awarded under full and open competition, suggesting a robust and potentially cost-effective procurement process.
Contract addresses a fundamental and ongoing need for aviation fuel, ensuring operational continuity.
The fixed-price component provides a baseline cost control measure.

Sector Analysis

The petroleum refineries sector (NAICS 324110) is crucial for national security, providing essential fuels for military and civilian operations. The market for aviation turbine fuel is large and complex, influenced by global oil prices, refining capacity, and geopolitical factors. This contract fits within the broader defense logistics and energy supply chain, where consistent and reliable fuel provision is paramount. Comparable spending benchmarks would likely involve other large-scale fuel contracts awarded by the DoD or other government agencies for similar fuel types.

Small Business Impact

The provided 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 small businesses stemming from a set-aside provision. The primary contractor, Equilon Enterprises LLC, is likely a large entity, and any subcontracting would be at their discretion based on operational needs.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Logistics Agency (DLA) and potentially the Department of Defense's Inspector General. Mechanisms likely include contract performance monitoring, financial audits, and compliance checks to ensure delivery of specified fuel quality and quantity. Transparency is generally maintained through contract award databases, though specific performance details might be sensitive.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Supply Contracts
JP8 Fuel Contracts
Department of Defense Energy Contracts

Risk Flags

Potential for price increases due to Economic Price Adjustment (EPA) clause.
Contract duration is relatively short, requiring ongoing procurement efforts.
Dependence on a single supplier for a critical fuel type.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $144.6 million to EQUILON ENTERPRISES LLC. THIS CONTRACT IS A SUPPLEMENTAL CONTRACT AND THE FULL SOLICITATION NUMBER IS SP0600-10-R-0061-0001 TURBINE FUEL, AVIATION JP8

Who is the contractor on this award?

The obligated recipient is EQUILON ENTERPRISES LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $144.6 million.

What is the period of performance?

Start: 2011-05-12. End: 2012-03-30.

What is Equilon Enterprises LLC's track record with the Department of Defense, particularly in fuel supply contracts?

Equilon Enterprises LLC, often operating under the Shell brand, has a history of supplying fuels to various government entities, including the Department of Defense. While this specific contract is for $144.6 million, their broader experience likely encompasses numerous fuel supply agreements over the years. Analyzing past performance data, including on-time delivery rates, quality compliance, and any past disputes or contract modifications, would provide a more comprehensive view of their reliability and capability in fulfilling large-scale defense fuel requirements. Their established presence in the energy market suggests a capacity to handle such significant contracts, but specific DoD performance history is key to a full assessment.

How does the awarded price compare to market rates for JP8 fuel during the contract period?

Determining the precise value-for-money requires comparing the awarded price against prevailing market rates for JP8 fuel between May 2011 and March 2012. The contract's 'Fixed Price with Economic Price Adjustment' (EPA) clause complicates a simple comparison, as the final price would have varied based on market fluctuations. To assess value, one would need to analyze the base fixed price and the EPA formula against average spot prices or benchmark indices for JP8 during the contract's term. Without access to the specific EPA formula and detailed market data for that period, a definitive benchmark is challenging. However, the full and open competition suggests an effort to secure competitive pricing.

What are the primary risks associated with a Fixed Price with Economic Price Adjustment (EPA) contract for aviation fuel?

The primary risk with a Fixed Price with EPA contract for aviation fuel lies in price volatility. While the fixed-price component offers a baseline cost, the EPA allows for adjustments based on market indices, primarily related to crude oil prices. This means the government could end up paying significantly more than initially anticipated if fuel prices surge unexpectedly. Conversely, the contractor bears the risk if prices fall substantially below the adjusted level. For the government, the risk is budget uncertainty and potential overspending. Effective risk mitigation involves a well-defined EPA formula that accurately reflects market changes without excessive volatility and robust monitoring of market trends.

What is the strategic importance of this contract for the Defense Logistics Agency (DLA)?

This contract is strategically important for the DLA as it ensures the reliable supply of JP8, a critical fuel for a wide range of military aviation assets, including jet fighters, bombers, and transport aircraft. Maintaining a steady supply chain for such essential commodities is a core mission of the DLA, enabling the DoD to maintain operational readiness and respond to global security requirements. Awarding this contract under full and open competition likely aimed to secure this vital resource efficiently, supporting the DLA's role as the primary logistics provider for the armed forces and ensuring that aviation units have the fuel necessary for training and deployment.

How does the geographic location of the award (Texas) influence the logistics and cost of fuel delivery?

Awarding the contract with a specified location in Texas (TX) suggests that the delivery or primary distribution point for this JP8 fuel is likely within or near the state. Texas is a major hub for the oil and gas industry, including refining and petrochemicals, which could offer logistical advantages and potentially competitive pricing due to proximity to production and refining facilities. However, the ultimate destination of the fuel for military use would determine the full extent of transportation costs. If the fuel is primarily used within Texas or nearby bases, the location is advantageous. If it needs to be shipped globally, the Texas origin point becomes just one factor in a larger, more complex transportation network.

What are the potential implications of this contract on the broader aviation fuel market?

A single contract of this magnitude ($144.6 million) awarded to a major supplier like Equilon Enterprises LLC (Shell) can have localized impacts on the aviation fuel market, particularly within the region of award or distribution. It signals significant demand from a major consumer (DoD) and can influence regional supply dynamics and pricing. While it might not drastically alter global market trends, it represents a substantial commitment that could affect the availability of JP8 for other commercial or government buyers in the short term, especially if supply chains are constrained. The competitive nature of the award, however, suggests that the market had sufficient capacity to meet this demand.

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: SP060010R0061

Offers Received: 25

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Shell Deutschland Gmbh (UEI: 423792808)

Address: 910 LOUISIANA ST STE 2, HOUSTON, TX, 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: $144,631,850

Exercised Options: $144,631,850

Current Obligation: $144,631,850

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0478

IDV Type: IDC

Timeline