DoD's $260M aviation fuel contract awarded to Equilon Enterprises LLC shows strong competition and fair pricing

Contract Overview

Contract Amount: $260,361,374 ($260.4M)

Contractor: Equilon Enterprises LLC

Awarding Agency: Department of Defense

Start Date: 2011-09-30

End Date: 2012-06-29

Contract Duration: 273 days

Daily Burn Rate: $953.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 14

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: AVIATION TURBINE FUEL (JP8)

Place of Performance

Location: HOUSTON, HARRIS County, TEXAS, 77002

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $260.4 million to EQUILON ENTERPRISES LLC for work described as: AVIATION TURBINE FUEL (JP8) Key points: 1. The contract demonstrates a competitive bidding process, suggesting favorable pricing for the government. 2. Fixed-price contracts with economic price adjustments can offer cost certainty while accounting for market fluctuations. 3. The duration of the contract (273 days) is relatively short, indicating a focus on immediate supply needs. 4. Awarded by the Defense Logistics Agency, this contract supports critical aviation fuel requirements for the DoD. 5. The North American Industry Classification System (NAICS) code 324110 points to the petroleum refining sector. 6. The contract's value is significant, reflecting the substantial demand for aviation fuel in military operations.

Value Assessment

Rating: good

The contract value of approximately $260 million for aviation turbine fuel (JP8) appears reasonable given the scale of military operations. While specific benchmark data for this exact fuel type and duration is not provided, the presence of 14 bids suggests a competitive market where pricing is likely scrutinized. The fixed-price with economic price adjustment structure aims to balance cost control with market volatility, which is a common and generally accepted approach for commodity-based contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with 14 bids received. This high level of competition is a positive indicator, suggesting that multiple suppliers were aware of and able to bid on the requirement. A robust bidding process typically leads to better price discovery and can result in more favorable terms for the government.

Taxpayer Impact: The extensive competition for this aviation fuel contract likely resulted in taxpayer savings by driving down the price through a competitive bidding environment.

Public Impact

Military aviation units across the Department of Defense benefit from a reliable supply of JP8 fuel. The contract ensures the operational readiness of aircraft fleets, supporting national defense missions. The fuel is likely distributed to various military bases and operational theaters requiring aviation support. The contract supports jobs within the petroleum refining and fuel distribution industries.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to economic price adjustment clause, though mitigated by competition.
Dependence on a single awardee for a critical commodity, though competition was robust during award.

Positive Signals

Awarded under full and open competition, indicating a healthy market and potential for cost savings.
Multiple bidders (14) suggest strong market interest and a competitive environment.
Fixed-price contract structure provides some cost predictability.
Awarded to Equilon Enterprises LLC, a known entity in the energy sector.

Sector Analysis

The petroleum refining industry (NAICS 324110) is a critical sector for both commercial and government operations, providing essential fuels. The market for aviation turbine fuel is substantial, driven by the needs of airlines and military forces globally. This contract represents a significant portion of government spending within this specific fuel commodity, highlighting the DoD's reliance on established refiners for its operational requirements. Benchmarking against other large-scale fuel procurements would provide further context on the efficiency of this award.

Small Business Impact

The data indicates this contract was not set aside for small businesses, nor does it explicitly mention subcontracting requirements for small businesses. Given the nature of petroleum refining and large-scale fuel supply, it is common for such contracts to be awarded to larger prime contractors. Further analysis would be needed to determine if small businesses are involved in the supply chain or distribution network.

Oversight & Accountability

The contract was awarded by the Defense Logistics Agency (DLA), which has established oversight mechanisms for procurement and contract management. The fixed-price nature of the contract, even with an economic price adjustment, provides a degree of accountability. Transparency is generally maintained through federal procurement databases. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Contracts
Petroleum Product Procurement
DoD Operational Support Contracts

Risk Flags

Price Volatility Risk (mitigated by EPA)
Supply Chain Disruption Risk
Quality Assurance Requirements

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $260.4 million to EQUILON ENTERPRISES LLC. AVIATION TURBINE FUEL (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 $260.4 million.

What is the period of performance?

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

What is the historical spending pattern for aviation turbine fuel (JP8) by the Department of Defense?

The Department of Defense is a significant consumer of aviation turbine fuel, including JP8. Historical spending data reveals consistent and substantial annual expenditures to ensure the operational readiness of its vast aircraft fleet. For instance, in fiscal years preceding and following this 2011-2012 contract, the DoD has consistently allocated hundreds of millions, and often billions, of dollars towards fuel procurement. This spending fluctuates based on global operational tempo, geopolitical events, and fuel market prices. Analyzing trends over multiple years shows the DoD's ongoing commitment to securing reliable fuel sources, often through large-scale, competitively awarded contracts similar to the one awarded to Equilon Enterprises LLC. The Defense Logistics Agency (DLA) is the primary entity responsible for managing these complex fuel supply chains.

How does the pricing of this contract compare to similar aviation fuel contracts awarded by the DoD?

Direct price-per-gallon comparisons are challenging without access to the specific unit prices within this contract and comparable contracts, as well as delivery locations and specific fuel grades. However, the fact that this $260 million contract received 14 bids under full and open competition suggests that the pricing was likely competitive. Government contract databases and reports from the Government Accountability Office (GAO) or the DoD's own Inspector General sometimes highlight pricing anomalies or successes in competitive bidding. Generally, contracts with numerous bidders tend to yield prices closer to market rates. The economic price adjustment (EPA) clause allows for adjustments based on market indices, meaning the final price paid could vary. Without specific unit cost data, a definitive comparison is difficult, but the competitive award process is a strong indicator of a fair market price at the time of award.

What are the primary risks associated with a contract for aviation turbine fuel?

The primary risks associated with aviation turbine fuel contracts include price volatility due to fluctuations in global oil markets, supply chain disruptions (e.g., geopolitical instability, natural disasters affecting refineries or transport), quality control issues ensuring the fuel meets stringent military specifications, and logistical challenges in delivering fuel to diverse and sometimes remote operational locations. The economic price adjustment (EPA) clause in this contract aims to mitigate price volatility risk for both the government and the contractor. However, ensuring consistent quality and reliable delivery remains paramount. The Defense Logistics Agency (DLA) manages these risks through robust supplier vetting, quality assurance protocols, and contingency planning for supply chain disruptions.

What is the track record of Equilon Enterprises LLC as a government contractor, particularly for fuel supply?

Equilon Enterprises LLC, often operating under the Shell brand, has a significant history as a government contractor, particularly in the energy and fuel sectors. They have been awarded numerous contracts by various federal agencies, including the Department of Defense, for the supply of various petroleum products, including aviation fuels. Their track record generally indicates experience in handling large-volume fuel procurements and meeting the demanding logistical and quality requirements of military operations. While specific performance metrics for every contract are not publicly detailed, their repeated awards suggest a satisfactory performance history in fulfilling government needs for fuel supply. It's advisable to consult contract award databases for a comprehensive view of their past performance and contract values.

How does the duration and value of this contract align with typical DoD aviation fuel procurements?

This contract, with a duration of approximately 273 days (roughly 9 months) and a value of $260 million, represents a significant but relatively short-term procurement for aviation fuel. DoD aviation fuel needs are often met through a combination of longer-term strategic contracts and shorter-term tactical procurements to manage market fluctuations and operational demands. A 9-month duration is not uncommon for specific supply needs or during periods of contract re-competition. The substantial value reflects the high consumption rates of military aviation. Typical procurements can range from shorter durations for immediate needs to multi-year contracts with options, depending on strategic planning and market conditions. The DLA often uses a mix of contract types and durations to ensure a steady and cost-effective fuel supply.

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: 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: $260,361,374

Exercised Options: $260,361,374

Current Obligation: $260,361,374

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0524

IDV Type: IDC

Timeline