DoD awards $29.76M contract for petroleum products, with $52.76M in potential modifications

Contract Overview

Contract Amount: $52,761,150 ($52.8M)

Contractor: U.S. OIL Trading LLC

Awarding Agency: Department of Defense

Start Date: 2011-09-30

End Date: 2012-06-29

Contract Duration: 273 days

Daily Burn Rate: $193.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 14

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: CONTRACT AWARD CLIN 0101. TOTAL ESTIMATED CONTRACT VALUE IS $29,762,700.00

Place of Performance

Location: TACOMA, PIERCE County, WASHINGTON, 98421

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $52.8 million to U.S. OIL TRADING LLC for work described as: CONTRACT AWARD CLIN 0101. TOTAL ESTIMATED CONTRACT VALUE IS $29,762,700.00 Key points: 1. Contract value indicates significant demand for petroleum products. 2. Fixed-price with economic price adjustment suggests potential for cost fluctuations. 3. Full and open competition aims for best value and competitive pricing. 4. Contract duration of 273 days points to short-term supply needs. 5. Awarding agency is the Defense Logistics Agency, a key logistics provider. 6. Contract type suggests a need to account for market price volatility.

Value Assessment

Rating: fair

The total estimated contract value is $29,762,700.00, with potential modifications reaching $52,761,150.00. Benchmarking this against similar petroleum supply contracts is challenging without more specific product details. However, the significant potential increase suggests that market price fluctuations or quantity adjustments are anticipated. The fixed-price with economic price adjustment structure aims to balance cost certainty for the government with the contractor's need to manage volatile commodity prices.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. The presence of 14 bidders (no is 14) suggests a healthy level of competition for this petroleum supply requirement. A competitive bidding process generally leads to better price discovery and potentially lower costs for the government compared to sole-source or limited competition awards.

Taxpayer Impact: The robust competition for this contract is beneficial for taxpayers, as it likely drove down prices and ensured the government received competitive offers for essential petroleum products.

Public Impact

This contract directly supports U.S. military operations by ensuring the availability of critical petroleum products. The services delivered are the supply of refined petroleum products, essential for fueling vehicles, aircraft, and equipment. The geographic impact is likely widespread, supporting military installations and operations within the contractor's delivery area. Workforce implications include employment within the petroleum refining and logistics sectors, supporting the contractor's operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces uncertainty in final costs.
Reliance on a single contractor for a critical commodity like fuel carries inherent supply chain risks.
The large potential modification value warrants close monitoring to ensure funds are used appropriately.

Positive Signals

Full and open competition suggests a competitive market for these products.
The Defense Logistics Agency's involvement indicates established procurement processes for defense needs.
The fixed-price component provides some cost control despite the economic adjustment.

Sector Analysis

The petroleum refining industry is a large and complex sector critical to national infrastructure and defense. This contract falls under the 'Petroleum Refineries' (NAICS 324110) category. The market is characterized by global supply and demand dynamics, significant capital investment, and regulatory oversight. Comparable spending benchmarks would depend on the specific type and volume of petroleum products procured, but defense logistics often represent a substantial portion of government fuel consumption.

Small Business Impact

The contract details do not indicate any specific small business set-aside provisions (sb is false). Given the nature of petroleum refining and large-scale supply, it is common for such contracts to be awarded to larger, established companies. There is no explicit information on subcontracting plans for small businesses, but the scale of the award suggests potential opportunities for smaller firms within the supply chain if the prime contractor utilizes them.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Logistics Agency (DLA) contracting officers and program managers. Accountability measures are embedded in the contract terms, including performance standards and payment clauses. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Fuel Supply Center contracts
Military petroleum procurement
DLA energy contracts
Refined petroleum product supply agreements

Risk Flags

Potential for significant cost overruns due to economic price adjustment.
Supply chain vulnerability for a critical commodity.
Need for close monitoring of contract modifications.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.8 million to U.S. OIL TRADING LLC. CONTRACT AWARD CLIN 0101. TOTAL ESTIMATED CONTRACT VALUE IS $29,762,700.00

Who is the contractor on this award?

The obligated recipient is U.S. OIL TRADING LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $52.8 million.

What is the period of performance?

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

What is the historical spending pattern for petroleum products by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) is a primary procurer of fuel for the U.S. military. Historical spending on petroleum products by DLA has been substantial, often running into billions of dollars annually. This spending fluctuates based on global oil prices, geopolitical events, and military operational tempo. For example, in fiscal years prior to and following this award, DLA's fuel spending has consistently been a significant portion of its overall budget, reflecting the critical role of fuel in sustaining military readiness and global operations. Analyzing trends over multiple years would reveal patterns related to contract types, competition levels, and the impact of economic price adjustments on total outlays.

How does the economic price adjustment (EPA) clause typically impact the final cost of petroleum contracts?

The Economic Price Adjustment (EPA) clause in petroleum contracts is designed to account for fluctuations in the market price of crude oil and refined products. It allows for adjustments to the contract price based on a pre-defined index or formula, typically tied to published market prices. While this protects the contractor from significant losses due to price volatility, it also introduces uncertainty for the government regarding the final cost. The impact on the final cost can be substantial, especially during periods of high market volatility. For this specific contract, the potential modification value of $52.76M compared to the initial estimated value of $29.76M suggests that EPA could significantly increase the total expenditure, depending on market movements during the contract period.

What are the typical risks associated with procuring petroleum products for the Department of Defense?

Procuring petroleum products for the Department of Defense (DoD) involves several key risks. Market volatility is a primary concern, as global oil prices can fluctuate rapidly due to geopolitical events, supply disruptions, or changes in demand, impacting costs. Supply chain disruptions, whether from natural disasters, political instability in producing regions, or logistical challenges, can threaten the consistent availability of fuel, which is critical for military operations. Furthermore, the sheer volume and strategic importance of fuel make it a target for cyberattacks or physical sabotage. Ensuring compliance with environmental regulations and managing the logistics of delivery to diverse and sometimes remote locations also present ongoing challenges.

What is the significance of the Defense Logistics Agency (DLA) awarding this contract?

The Defense Logistics Agency (DLA) is the primary combat support agency responsible for providing mission-critical logistics, including fuel, to the U.S. military. When DLA awards a contract for petroleum products, it signifies a direct support role for military readiness and operations. DLA manages a complex global supply chain to ensure that fuel is available where and when needed. Their involvement in awarding this contract indicates that the procured petroleum products are essential for sustaining military forces, whether for domestic operations, training exercises, or deployments abroad. DLA's expertise in fuel procurement and distribution ensures that these critical supplies are managed efficiently and effectively.

How does 'full and open competition' benefit the government in contracts like this?

Full and open competition is the preferred method for federal contract awards because it maximizes the potential for obtaining the best value for the government. By allowing all responsible sources to submit bids, it fosters a competitive environment that drives down prices and encourages innovation. For petroleum products, where market prices can be volatile, competition helps ensure that the government is not overpaying. The presence of multiple bidders, as indicated by the 14 offers received for this contract, suggests that the market is robust and that the government has a strong negotiating position. This process enhances transparency and accountability, reducing the likelihood of favorit-ism or non-competitive pricing.

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

Address: 3001 MARSHALL AVE, TACOMA, WA, 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: $52,761,150

Exercised Options: $52,761,150

Current Obligation: $52,761,150

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0521

IDV Type: IDC

Timeline