DoD awards $92.5M for aviation fuel, with 25 bids received under full and open competition

Contract Overview

Contract Amount: $92,539,802 ($92.5M)

Contractor: Wynnewood Energy CO LLC

Awarding Agency: Department of Defense

Start Date: 2011-05-09

End Date: 2012-03-01

Contract Duration: 297 days

Daily Burn Rate: $311.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 25

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: CONTRACT AWARDED UNDER SUPPLEMENTAL SOLICITATION (SP0600-10-R-0061-0001) FOR AVIATION TURBINE, JP8/JP5, FOB ORIGIN TT EX. WYNNEWOOD, OK PARTIAL SMALL BUSINESS SET-ASIDE: 17,955,000 USG

Place of Performance

Location: WYNNEWOOD, GARVIN County, OKLAHOMA, 73098

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $92.5 million to WYNNEWOOD ENERGY CO LLC for work described as: CONTRACT AWARDED UNDER SUPPLEMENTAL SOLICITATION (SP0600-10-R-0061-0001) FOR AVIATION TURBINE, JP8/JP5, FOB ORIGIN TT EX. WYNNEWOOD, OK PARTIAL SMALL BUSINESS SET-ASIDE: 17,955,000 USG Key points: 1. The contract value represents a significant investment in aviation fuel supply chain resilience. 2. A robust competition with 25 bidders suggests a healthy market for this type of fuel. 3. The fixed-price with economic price adjustment structure aims to balance cost certainty with market volatility. 4. The award was made under a supplemental solicitation, indicating a need for existing contract vehicles. 5. The geographic focus on Oklahoma for origin delivery highlights regional supply capabilities. 6. The contract duration of 297 days suggests a medium-term supply requirement.

Value Assessment

Rating: good

The award of $92.5 million for aviation turbine fuel appears reasonable given the quantity and market conditions. While specific per-unit cost benchmarks are not provided, the presence of 25 bidders suggests competitive pricing was achieved. The fixed-price with economic price adjustment (FPEPA) contract type is standard for fuel procurement, allowing for adjustments based on market fluctuations, which can protect both the government and the contractor from extreme price swings. Comparing this to similar large-volume fuel contracts, the value seems aligned with industry standards for bulk fuel acquisition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with 25 bids received. This high level of competition is a positive indicator, suggesting that multiple capable suppliers were able to participate. A large number of bidders typically leads to more competitive pricing as contractors vie for the award. The solicitation process likely allowed for a thorough evaluation of technical capabilities and price proposals, ensuring the government secured a capable supplier at a favorable price point.

Taxpayer Impact: The extensive competition for this aviation fuel contract is beneficial for taxpayers as it likely drove down the final award price. It also signals a healthy and accessible market for fuel suppliers, encouraging broader participation and potentially leading to more cost-effective procurement in the future.

Public Impact

The Department of Defense (DoD) benefits through the reliable supply of critical aviation fuel for its operations. Aviation turbine fuel is delivered, supporting military aircraft readiness and mission capabilities. The geographic impact is centered around Oklahoma, where the fuel is sourced (FOB Origin). The contract supports jobs within the petroleum refining and fuel distribution sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The fixed-price with economic price adjustment (FPEPA) contract type introduces potential for cost increases if market prices for fuel rise significantly.
Reliance on a single geographic origin (Wynnewood, OK) could pose a risk if local supply is disrupted.
The contract duration is relatively short (297 days), requiring subsequent procurements and potential market volatility during those periods.

Positive Signals

The award was made under a supplemental solicitation, indicating the use of established contract vehicles which can streamline procurement.
The high number of bidders (25) suggests a competitive market and likely resulted in a favorable price for the government.
The contract specifies delivery terms (FOB Origin), providing clarity on responsibilities and costs.
The award supports the Defense Logistics Agency's mission to provide logistical support to the armed forces.

Sector Analysis

The petroleum refining industry is a critical component of the energy sector, providing essential fuels for transportation and industrial use. This contract falls within the NAICS code 324110 (Petroleum Refineries). The market for aviation fuels is substantial, driven by both commercial and military demand. Government procurement of such fuels is significant, often leveraging existing refining capacities and distribution networks. Comparable spending benchmarks would involve analyzing other large-volume fuel contracts awarded by the DoD or other federal agencies to ensure competitive pricing and value.

Small Business Impact

The data indicates this contract was awarded under a supplemental solicitation and does not explicitly state a small business set-aside or subcontracting goals. While the primary award may not have been set aside, the nature of fuel supply chains often involves opportunities for small businesses in logistics, transportation, and related services. Further analysis would be needed to determine if small business subcontracting plans were a requirement or if small businesses participated as prime contractors under this specific solicitation.

Oversight & Accountability

Oversight for this contract would primarily reside with the Defense Logistics Agency (DLA), which is responsible for procuring and distributing fuel for the DoD. Accountability measures are embedded in the contract terms, including delivery schedules, quality specifications, and payment terms. Transparency is facilitated through contract award databases like FPDS-NG. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency Fuel Procurement
JP-8/JP-5 Fuel Contracts
Aviation Turbine Fuel Supply
Petroleum Product Procurement
Fixed-Price Economic Price Adjustment Contracts

Risk Flags

Potential for price increases due to economic price adjustment clause.
Supply chain disruption risk if origin location faces issues.
Short contract duration necessitates future procurements.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $92.5 million to WYNNEWOOD ENERGY CO LLC. CONTRACT AWARDED UNDER SUPPLEMENTAL SOLICITATION (SP0600-10-R-0061-0001) FOR AVIATION TURBINE, JP8/JP5, FOB ORIGIN TT EX. WYNNEWOOD, OK PARTIAL SMALL BUSINESS SET-ASIDE: 17,955,000 USG

Who is the contractor on this award?

The obligated recipient is WYNNEWOOD ENERGY CO LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $92.5 million.

What is the period of performance?

Start: 2011-05-09. End: 2012-03-01.

What is the historical spending pattern for aviation turbine fuel by the Department of Defense?

The Department of Defense is a major consumer of aviation turbine fuel, with annual spending often reaching billions of dollars. Historical data from sources like the Federal Procurement Data System (FPDS) reveals consistent and substantial investments in this category to support global military operations. Spending fluctuates based on operational tempo, geopolitical events, and fuel market prices. For instance, during periods of heightened conflict or increased training exercises, demand and subsequent spending tend to rise. Conversely, periods of reduced military activity or strategic shifts can lead to decreased procurement. The DoD often utilizes a mix of contract types, including fixed-price and cost-plus, with economic price adjustments being common to manage market volatility. Analyzing trends over the past decade shows a general upward pressure on fuel costs, influenced by global energy markets and supply chain dynamics, making efficient procurement strategies crucial.

How does the per-gallon cost of this contract compare to market rates at the time of award?

Determining the exact per-gallon cost requires dividing the total award amount ($92,539,801.59) by the quantity of fuel (17,955,000 USG). This yields approximately $5.16 per gallon. Benchmarking this against market rates for JP-8/JP-5 fuel around May 2011 (the award date) is complex without access to real-time historical spot market data for that specific grade and region. However, general energy market indicators from that period suggest crude oil prices were elevated, which would translate to higher refined product costs. Industry reports and historical price indices for jet fuel around that time indicate prices were generally in the $3 to $4 per gallon range, though significant regional and grade variations exist. The $5.16 per gallon figure might reflect bulk purchasing, delivery costs, and the economic price adjustment provisions, which could account for some of the difference compared to simpler spot market prices.

What are the potential risks associated with a fixed-price with economic price adjustment (FPEPA) contract for fuel?

The primary risk with an FPEPA contract for fuel is the potential for cost overruns if market prices increase significantly beyond initial projections. While the economic price adjustment (EPA) clause is designed to protect both parties from extreme price volatility, it means the government's final cost is not fixed. If fuel prices surge due to geopolitical events, supply disruptions, or increased global demand, the government will pay more than the initially anticipated fixed price. Conversely, if prices fall, the government benefits from the adjustment. Another risk is the complexity of administering the EPA clause, requiring accurate tracking of market indices and timely adjustments. This can lead to administrative burdens and potential disputes over the correct application of the adjustment formula. Ensuring the chosen index accurately reflects the cost drivers for the specific fuel type is also critical.

What is the track record of Wynnewood Energy Co LLC in supplying fuel to the government?

Wynnewood Energy Co LLC was awarded this contract in May 2011. To assess their track record, one would need to examine their contract history within the Federal Procurement Data System (FPDS) or similar databases. This would involve looking at previous awards, contract performance evaluations (if available), and any history of contract modifications, disputes, or terminations. Without specific data on Wynnewood Energy Co LLC's prior performance with the government, it's difficult to provide a detailed assessment of their reliability, quality of service, or pricing competitiveness in past engagements. A comprehensive review would involve searching for awards across different agencies and contract types to build a complete picture of their government contracting experience.

How does the number of bidders (25) impact the value for money in this contract?

A high number of bidders, such as the 25 received for this aviation fuel contract, generally indicates a competitive marketplace and is a strong positive signal for achieving value for money. When numerous capable suppliers submit proposals, they are incentivized to offer competitive pricing and favorable terms to win the contract. This level of competition reduces the likelihood of the government overpaying and increases the probability of selecting a supplier that offers the best combination of price, quality, and performance. It suggests that the solicitation was well-structured, accessible to a wide range of potential bidders, and that the market has sufficient capacity to meet the government's needs. Therefore, 25 bidders strongly suggests that the government secured a good price and favorable terms, maximizing taxpayer value.

What is the significance of this contract being awarded under a supplemental solicitation?

Awarding a contract under a supplemental solicitation (like SP0600-10-R-0061-0001) typically means that the government is leveraging an existing contract vehicle or a previously established solicitation process to fulfill a need. This can indicate several things: the original solicitation may have been for a broader requirement or a longer-term program, and this is an add-on or modification; or, it could be a way to expedite procurement by using a pre-vetted process rather than starting a completely new solicitation from scratch. For taxpayers, using existing vehicles can sometimes lead to faster delivery and potentially lower administrative costs associated with the procurement process itself, as much of the foundational work (like vetting potential contractors or establishing terms) may have already been completed. It suggests a need that arose or was refined after the initial solicitation period.

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: CVR Energy, Inc. (UEI: 795416135)

Address: 370 17TH ST STE 5300, DENVER, CO, 90

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $92,539,802

Exercised Options: $92,539,802

Current Obligation: $92,539,802

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0487

IDV Type: IDC

Timeline