DoD's $64M aviation fuel contract awarded to Tesoro Refining & Marketing Company LLC

Contract Overview

Contract Amount: $64,098,337 ($64.1M)

Contractor: Tesoro Refining & Marketing Company LLC

Awarding Agency: Department of Defense

Start Date: 2011-05-13

End Date: 2012-03-01

Contract Duration: 293 days

Daily Burn Rate: $218.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 25

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION, GRADE JP-8 AND JET FUEL, TYPE A (JAA). THIS WAS AWARDED UNDER SUPPLEMENTAL SOLICITATION SP0600-10-R-0061-0001.

Place of Performance

Location: MANDAN, MORTON County, NORTH DAKOTA, 58554

State: North Dakota Government Spending

Plain-Language Summary

Department of Defense obligated $64.1 million to TESORO REFINING & MARKETING COMPANY LLC for work described as: TURBINE FUEL, AVIATION, GRADE JP-8 AND JET FUEL, TYPE A (JAA). THIS WAS AWARDED UNDER SUPPLEMENTAL SOLICITATION SP0600-10-R-0061-0001. Key points: 1. Contract awarded via full and open competition, suggesting a competitive bidding process. 2. Fixed-price contract with economic price adjustment introduces potential for cost fluctuations. 3. Contract duration of 293 days indicates a short-term supply need. 4. Awarded by the Defense Logistics Agency, a key procurement arm for military supplies. 5. The North Dakota location of the contractor may influence logistical considerations. 6. This contract falls under the Petroleum Refineries industry classification.

Value Assessment

Rating: fair

The total award amount of $64,009,837.96 for aviation fuel over approximately 10 months suggests a significant but potentially variable cost. Without specific unit pricing or comparison to market benchmarks at the time of award, a precise value-for-money assessment is challenging. The economic price adjustment clause introduces a risk of cost escalation beyond initial projections, which warrants careful monitoring. Comparing this to similar large-scale aviation fuel procurements by the DoD would provide better context for its cost-effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under a supplemental solicitation (SP0600-10-R-0061-0001), indicating a competitive process was utilized. The 'full and open competition' designation suggests that all responsible sources were permitted to submit bids. The number of bidders (25) is a positive indicator of robust competition, which typically drives down prices and encourages better terms for the government. This level of competition is generally favorable for price discovery.

Taxpayer Impact: A competitive award process like this generally benefits taxpayers by ensuring the government receives competitive pricing and avoids potential overpayment associated with less competitive or sole-source contracts.

Public Impact

The primary beneficiaries are the U.S. Department of Defense and its aviation units, ensuring a supply of critical fuel. Services delivered include the provision of Grade JP-8 and Jet Fuel Type A (JAA). The geographic impact is likely concentrated around military airfields and operational areas where this fuel is required. Workforce implications are minimal for the government, but the contractor will utilize its refining and distribution workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to costs exceeding initial estimates if fuel prices rise significantly.
Short contract duration may necessitate frequent re-competition, leading to potential administrative overhead and supply chain disruptions if not managed proactively.
Reliance on a single contractor for this volume of fuel, even if competitively awarded, carries inherent supply chain risk.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
A significant number of bidders (25) suggests healthy market interest and competitive pressure.
The Defense Logistics Agency's involvement suggests established procurement processes and oversight.

Sector Analysis

This contract falls within the Petroleum Refineries (NAICS 324110) sector, which is crucial for national security and economic stability. The market for aviation fuels is large and complex, influenced by global oil prices, refining capacity, and geopolitical factors. This specific contract represents a portion of the DoD's overall energy procurement, a significant category of federal spending. Comparable spending benchmarks would involve analyzing other large-volume aviation fuel contracts awarded by military branches or government agencies.

Small Business Impact

The contract was not set aside for small businesses (SB: false). Given the scale and nature of aviation fuel supply, it is unlikely that small businesses would be primary bidders or subcontractors in this specific instance. The focus is on large-scale refining and distribution capabilities.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract, utilizing established procurement regulations and contract management procedures. Accountability is maintained through contract terms, performance metrics, and payment processes. Transparency is facilitated by the public nature of contract awards, though specific performance details may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Supply Contracts
Department of Defense Energy Procurement
JP-8 Fuel Contracts
Jet Fuel Contracts

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Potential Fuel Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $64.1 million to TESORO REFINING & MARKETING COMPANY LLC. TURBINE FUEL, AVIATION, GRADE JP-8 AND JET FUEL, TYPE A (JAA). THIS WAS AWARDED UNDER SUPPLEMENTAL SOLICITATION SP0600-10-R-0061-0001.

Who is the contractor on this award?

The obligated recipient is TESORO REFINING & MARKETING COMPANY LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $64.1 million.

What is the period of performance?

Start: 2011-05-13. End: 2012-03-01.

What was the historical spending pattern for this specific type of aviation fuel by the Defense Logistics Agency prior to this award?

Analyzing historical spending for JP-8 and Jet Fuel Type A by the DLA prior to May 2011 would require access to historical procurement databases. However, it's reasonable to assume that the DLA has consistently procured significant volumes of these fuels to support military aviation operations. The volume and value of such contracts can fluctuate based on operational tempo, global fuel prices, and strategic inventory levels. Understanding past spending would provide context for the $64 million award, indicating whether it represents a typical, increased, or decreased level of expenditure for this category of fuel.

How did Tesoro Refining & Marketing Company LLC's pricing compare to other bidders in this 'full and open competition' scenario?

While the award indicates Tesoro was selected, the specific pricing details relative to the 25 other bidders are not publicly available in this summary. 'Full and open competition' implies that bids were evaluated based on factors including price, technical capability, and other criteria outlined in the solicitation. Tesoro's winning bid was presumably the most advantageous to the government based on these factors. To assess comparative pricing, one would need access to the bid tabulation or a detailed contract award justification, which typically remains internal to the agency unless specific disclosure rules apply.

What are the specific risks associated with the 'economic price adjustment' (EPA) clause in this contract?

The Economic Price Adjustment (EPA) clause in this fixed-price contract allows for adjustments to the contract price based on fluctuations in specific economic factors, in this case, likely related to the cost of crude oil or refined petroleum products. The primary risk for the government is that fuel prices could increase significantly during the contract period, leading to higher-than-anticipated expenditures. This erodes the predictability of costs. For the contractor, the risk is mitigated, as they are protected from adverse market movements. Effective management of an EPA clause requires robust market monitoring and potentially negotiation of caps or specific indices to control cost volatility.

What is the typical performance track record of Tesoro Refining & Marketing Company LLC with similar government fuel contracts?

Tesoro Refining & Marketing Company LLC, now part of Marathon Petroleum Corporation, has a history of supplying fuels. Assessing their track record specifically with government fuel contracts would involve reviewing past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS) and any history of contract disputes or terminations. Generally, large refiners like Tesoro are experienced in large-scale fuel production and distribution. However, performance can vary, and a detailed review of their past government contract history would be necessary to fully evaluate their reliability for this specific aviation fuel requirement.

How does the contract duration of 293 days impact the overall value and risk for the government?

A contract duration of 293 days (approximately 9.6 months) is relatively short for a large-volume fuel supply contract. This short duration can impact value by potentially limiting the ability to negotiate long-term price stability or achieve economies of scale that might be available in longer-term agreements. From a risk perspective, it necessitates more frequent procurement cycles, increasing administrative burden and the potential for supply gaps if follow-on contracts are delayed. However, it also offers flexibility to adapt to changing market conditions or operational needs more quickly than a multi-year contract.

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: Tesoro Corporation (UEI: 008133480)

Address: 19100 RIDGEWOOD PKWY, SAN ANTONIO, 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: $64,098,337

Exercised Options: $64,098,337

Current Obligation: $64,098,337

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0494

IDV Type: IDC

Timeline