DoD's $495.6M fuel contract awarded to BP West Coast Products LLC for JP8 and F76

Contract Overview

Contract Amount: $495,580,377 ($495.6M)

Contractor: BP West Coast Products LLC

Awarding Agency: Department of Defense

Start Date: 2011-09-30

End Date: 2012-06-29

Contract Duration: 273 days

Daily Burn Rate: $1.8M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 14

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: 25,493,000 USG OF F76, FOB ORIGIN TANKER EX CHERRY POINT, WA 105,334,000 USG OF JP8, FOB ORIGIN TANKER EX CHERRY POINT, WA

Place of Performance

Location: FERNDALE, WHATCOM County, WASHINGTON, 98248

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $495.6 million to BP WEST COAST PRODUCTS LLC for work described as: 25,493,000 USG OF F76, FOB ORIGIN TANKER EX CHERRY POINT, WA 105,334,000 USG OF JP8, FOB ORIGIN TANKER EX CHERRY POINT, WA Key points: 1. Contract value of $495.6M for fuel delivery over 273 days. 2. Awarded under full and open competition, indicating broad market engagement. 3. Fixed Price with Economic Price Adjustment (FPEPA) contract type introduces price volatility risk. 4. Contract performance period is relatively short, suggesting a tactical or short-term need. 5. Geographic focus on Cherry Point, WA, for tanker fuel delivery. 6. No small business set-aside, indicating large prime contractor engagement.

Value Assessment

Rating: fair

The total contract value of $495.6 million for approximately 130 million gallons of fuel over 273 days suggests a per-gallon cost in the range of $3.81. This price point needs to be benchmarked against prevailing market rates for JP8 and F76 during the contract period (late 2011 to mid-2012). The FPEPA clause introduces uncertainty in the final cost, making a definitive value-for-money assessment challenging without detailed economic adjustment data. Compared to similar fuel contracts, the price appears within a plausible range, but the economic adjustment mechanism warrants scrutiny for potential overpayment if market prices decreased.

Cost Per Unit: Approximately $3.81 per gallon (based on total value and volume), subject to economic price adjustments.

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, with 14 offers received. This indicates a robust competitive environment for this fuel supply requirement. A high number of bidders generally suggests that the government is likely to achieve competitive pricing, as multiple companies vie for the award. The solicitation likely allowed for broad participation from qualified fuel suppliers.

Taxpayer Impact: The full and open competition with 14 bidders is beneficial for taxpayers as it likely drove down prices and ensured the government received competitive offers for this significant fuel purchase.

Public Impact

Benefits the Department of Defense by ensuring a supply of critical aviation and diesel fuels. Services delivered include the bulk delivery of JP8 and F76 fuels via tanker to Cherry Point, WA. Geographic impact is concentrated in Washington state, specifically supporting operations at or near Cherry Point. Workforce implications are primarily within the fuel supply chain and logistics sectors, supporting BP West Coast Products LLC's operations and potentially related transportation services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic Price Adjustment (EPA) clause introduces potential for cost overruns if market prices fluctuate unfavorably.
Short contract duration (273 days) may indicate a need for frequent re-competition, leading to administrative overhead.
Reliance on a single prime contractor (BP West Coast Products LLC) for a large volume of fuel could pose supply chain risks if not managed effectively.

Positive Signals

Awarded under full and open competition with 14 offers, suggesting strong market interest and competitive pricing.
Contract specifies fixed price with economic price adjustment, which can protect against unexpected market price spikes.
Clear definition of fuel types (JP8, F76) and delivery location (Cherry Point, WA) reduces ambiguity.

Sector Analysis

The petroleum refineries sector (NAICS 324110) is critical for national security and economic stability, providing essential fuels for military operations and civilian infrastructure. The Defense Logistics Agency (DLA) is a major procurer of fuels, managing a complex global supply chain. This contract represents a significant portion of DLA's spending within the fuel distribution and supply sub-sector, ensuring readiness for military aviation and ground forces. Comparable spending benchmarks would involve analyzing other DLA fuel contracts for similar volumes and fuel types across different regions and time periods.

Small Business Impact

This contract was not set aside for small businesses and was awarded to a large prime contractor, BP West Coast Products LLC. There is no explicit information provided regarding subcontracting plans for small businesses. The absence of a small business set-aside suggests that the primary focus was on securing the large volume of fuel required through the most competitive means available, likely involving large-scale fuel suppliers and distributors.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for ensuring contractor performance, compliance, and accurate billing. The Defense Logistics Agency (DLA) Contracting Office would manage the contract administration. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Fuel Contracts
JP8 Fuel Procurement
F76 Fuel Procurement
Petroleum Product Supply Contracts
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Single Prime Contractor for Large Volume

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $495.6 million to BP WEST COAST PRODUCTS LLC. 25,493,000 USG OF F76, FOB ORIGIN TANKER EX CHERRY POINT, WA 105,334,000 USG OF JP8, FOB ORIGIN TANKER EX CHERRY POINT, WA

Who is the contractor on this award?

The obligated recipient is BP WEST COAST PRODUCTS LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $495.6 million.

What is the period of performance?

Start: 2011-09-30. End: 2012-06-29.

What was the historical spending pattern for JP8 and F76 fuel by the Defense Logistics Agency in the Washington state region prior to this contract?

Analyzing historical spending patterns for JP8 and F76 fuel by the Defense Logistics Agency (DLA) in the Washington state region prior to September 2011 would provide crucial context for this $495.6 million contract. Without specific historical data, it's difficult to ascertain if this award represents an increase or decrease in demand, or if it aligns with established procurement volumes. Typically, DLA manages fuel contracts on a regional and global basis, often using competitive bidding processes similar to the one employed here. Historical data would reveal average prices paid, typical contract durations, and the number of bidders in previous solicitations. This information is vital for assessing whether the current contract's pricing, competition level, and duration are consistent with past performance or represent a significant deviation that might warrant further investigation into market conditions or strategic shifts in fuel procurement.

How did the economic price adjustment (EPA) clause impact the final cost of this contract compared to a firm-fixed-price award?

The Economic Price Adjustment (EPA) clause in this contract allows for modifications to the contract price based on fluctuations in specified economic factors, typically related to the cost of raw materials or labor. For this fuel contract, the EPA likely tied adjustments to the price of crude oil or refined petroleum products. If market prices for these commodities increased significantly during the contract period (September 2011 - June 2012), the final cost to the government would have been higher than under a firm-fixed-price (FFP) contract. Conversely, if prices decreased, the EPA could have resulted in a lower final cost. Without access to the specific indices used for adjustment and the actual price changes, it's impossible to quantify the exact impact. However, EPA clauses are generally intended to protect both the contractor from unforeseen cost increases and the government from potentially inflated prices in an FFP contract if market conditions change drastically. The risk for the government lies in unfavorable price movements, potentially leading to a higher total expenditure than initially budgeted or anticipated under an FFP.

What is the typical profit margin for fuel suppliers like BP West Coast Products LLC on large government contracts?

Determining the precise profit margin for BP West Coast Products LLC on this specific $495.6 million contract is challenging without access to detailed financial disclosures or audit reports. However, industry benchmarks for large-scale fuel distribution and supply contracts suggest that profit margins can vary significantly based on factors such as competition level, contract type, operational efficiencies, and market conditions. For contracts awarded under full and open competition with multiple bidders, profit margins are generally expected to be more constrained as contractors bid more aggressively to win the award. Contracts with Economic Price Adjustment clauses might allow for slightly different margin expectations compared to firm-fixed-price contracts. Historically, profit margins for large commodity suppliers in competitive markets might range from low single digits to potentially 5-10% on revenue, though this can fluctuate. Government audits and contract reviews aim to ensure that profits remain fair and reasonable, preventing excessive charges.

How does the geographic concentration of this contract in Washington state align with broader DoD fuel distribution strategies?

The geographic concentration of this contract in Washington state, specifically for tanker delivery to Cherry Point, aligns with the Department of Defense's (DoD) strategy of maintaining robust and geographically dispersed fuel supply chains to support military installations and operations. Cherry Point is a significant Marine Corps Air Station, necessitating a reliable and proximate source of aviation and diesel fuels. DoD fuel procurement strategies often involve regional contracts to ensure timely delivery and reduce transportation costs and risks associated with long-haul logistics. Awarding contracts like this one to suppliers capable of serving key bases ensures operational readiness. Broader DoD strategies emphasize redundancy and resilience in fuel supply, meaning that while this contract serves a specific regional need, it is part of a larger network designed to meet fuel demands across various theaters and installations, potentially involving multiple suppliers and delivery methods.

What are the potential risks associated with relying on a single prime contractor for such a large volume of fuel over a defined period?

Relying on a single prime contractor, BP West Coast Products LLC, for approximately 105 million gallons of JP8 and F76 fuel carries several potential risks. The primary risk is supply chain disruption. Any unforeseen event impacting BP West Coast Products LLC's ability to deliver – such as refinery issues, transportation problems (e.g., tanker availability, port congestion), labor disputes, or geopolitical events affecting their supply sources – could lead to critical fuel shortages for military operations in the region. Another risk is reduced leverage for the government if the contractor faces difficulties. While the contract has an EPA clause, significant disruptions might necessitate renegotiations or emergency procurement actions, potentially at higher costs. Furthermore, a lack of ongoing competition during the contract's performance period could reduce incentives for optimal performance or cost efficiency compared to a scenario with multiple active suppliers.

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: SP060011R0708

Offers Received: 14

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

Evaluated Preference: NONE

Contractor Details

Parent Company: BP P.L.C. (UEI: 210042669)

Address: 6 CENTERPOINTE DR, LA PALMA, CA, 45

Business Categories: Category Business, Limited Liability Corporation, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $495,580,377

Exercised Options: $495,580,377

Current Obligation: $495,580,377

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0520

IDV Type: IDC

Timeline