DoD's $98M petroleum contract to Global Companies LLC shows fair value despite limited competition

Contract Overview

Contract Amount: $97,955,696 ($98.0M)

Contractor: Global Companies LLC

Awarding Agency: Department of Defense

Start Date: 2011-04-01

End Date: 2014-04-30

Contract Duration: 1,125 days

Daily Burn Rate: $87.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 41

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: ULSD (DS2); RED-DYED ULSD #2 GRADE (DSS); FUEL OIL, BURNER #2, LS (FL2); FUEL OIL, BURNER #4 (FS4); FUEL OIL, BURNER #6 (FS6); GASOHOL, REG UNL (GUR); RFG REGULAR UNLEADED (MRR) (AFNG, ARMY, DA, DHS, DI, DOD, DOE, EPA, GSA, NAVY, USAF, USCG, USPS, VA)

Place of Performance

Location: WALTHAM, MIDDLESEX County, MASSACHUSETTS, 02454

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $98.0 million to GLOBAL COMPANIES LLC for work described as: ULSD (DS2); RED-DYED ULSD #2 GRADE (DSS); FUEL OIL, BURNER #2, LS (FL2); FUEL OIL, BURNER #4 (FS4); FUEL OIL, BURNER #6 (FS6); GASOHOL, REG UNL (GUR); RFG REGULAR UNLEADED (MRR) (AFNG, ARMY, DA, DHS, DI, DOD, DOE, EPA, GSA, NAVY, USAF, USCG, USPS, VA) Key points: 1. The contract's fixed-price with economic price adjustment structure aims to mitigate fuel price volatility. 2. While competition was full and open, only one bid was received, raising questions about market engagement. 3. The awarded price of $87.1M represents a reasonable benchmark against the total contract value. 4. Performance was rated 'satisfactory' by the agency, indicating operational success. 5. The contract falls within the broad 'Petroleum and Petroleum Products Merchant Wholesalers' sector. 6. No small business set-aside was utilized, but subcontracting opportunities may exist. 7. The contract duration of 1125 days suggests a need for consistent fuel supply. 8. Economic price adjustments are a key feature, reflecting market fluctuations in fuel costs.

Value Assessment

Rating: good

The awarded value of $87.1 million for this contract appears reasonable when compared to the total contract ceiling of $97.9 million. The fixed-price with economic price adjustment (EPA) pricing mechanism is standard for fuel contracts, allowing for adjustments based on market indices, which helps manage risk for both parties. While specific benchmark data for similar large-scale petroleum procurements by the DoD is not readily available, the agency's 'satisfactory' performance rating suggests the pricing was acceptable for the services rendered.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition. However, only one bid was received, which is a point of concern. A single bid can indicate potential issues with market research, solicitation timing, or contractor interest. While the process was technically open, the lack of multiple bidders limits the government's ability to leverage competitive pressure to drive down prices and ensure the best possible value.

Taxpayer Impact: A single bid limits the government's ability to negotiate favorable terms and potentially pay higher prices than if multiple competitive offers were available. This can result in less efficient use of taxpayer funds.

Public Impact

Military operations across various branches of the Department of Defense (DoD) benefit from a reliable fuel supply. The contract ensures the availability of essential fuels like ULSD, RED-DYED ULSD, and FUEL OIL. Geographic impact is broad, supporting DoD installations and operations potentially worldwide, though specific locations are not detailed. The contract supports the logistics and supply chain workforce involved in fuel procurement and distribution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition with only one bid received raises concerns about market engagement and potential price inflation.
The fixed-price with economic price adjustment (EPA) structure, while standard, can lead to cost increases if fuel prices rise significantly.
Lack of specific performance metrics beyond 'satisfactory' makes it difficult to assess the full extent of contractor efficiency.
The contract's broad scope could mask inefficiencies if not closely monitored for specific fuel types and delivery points.

Positive Signals

The contract was awarded under full and open competition, adhering to procurement regulations.
The 'satisfactory' performance rating indicates the contractor met the agency's operational needs.
The use of EPA helps manage price volatility inherent in the petroleum market.
The contract value is substantial, suggesting it meets a significant and ongoing demand for fuel.

Sector Analysis

This contract operates within the petroleum and petroleum products wholesale sector, specifically focusing on fuel supply for government entities. The market for bulk fuel is characterized by global commodity pricing, significant logistical challenges, and a relatively concentrated number of large suppliers. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of government contracts and fluctuating fuel prices, but the DoD is a major consumer of petroleum products, making such contracts critical for national defense readiness.

Small Business Impact

This contract did not include a small business set-aside, nor is there an indication that Global Companies LLC is a small business. As the contract was awarded to a large entity, the primary impact on small businesses would be through potential subcontracting opportunities. However, the details of subcontracting plans or actual awards are not provided in this summary, making it difficult to assess the extent of small business participation.

Oversight & Accountability

The contract falls under the purview of the Department of Defense and its respective Inspector General for oversight. Accountability is primarily managed through the contract's performance clauses and the agency's monitoring of delivery and quality. Transparency is facilitated by the public nature of contract awards, although detailed operational performance data is typically internal. The fixed-price with EPA structure requires diligent monitoring of market price indices to ensure fair adjustments.

Related Government Programs

Defense Fuel Supply Center contracts
General Services Administration (GSA) Federal Supply Schedule contracts for fuel
Department of Energy fuel procurement programs
Military Sealift Command fuel contracts

Risk Flags

Limited competition (1 bid)
Potential for price increases due to EPA clause
Reliance on global commodity markets
Logistical complexity of fuel delivery

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $98.0 million to GLOBAL COMPANIES LLC. ULSD (DS2); RED-DYED ULSD #2 GRADE (DSS); FUEL OIL, BURNER #2, LS (FL2); FUEL OIL, BURNER #4 (FS4); FUEL OIL, BURNER #6 (FS6); GASOHOL, REG UNL (GUR); RFG REGULAR UNLEADED (MRR) (AFNG, ARMY, DA, DHS, DI, DOD, DOE, EPA, GSA, NAVY, USAF, USCG, USPS, VA)

Who is the contractor on this award?

The obligated recipient is GLOBAL COMPANIES LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $98.0 million.

What is the period of performance?

Start: 2011-04-01. End: 2014-04-30.

What is the track record of Global Companies LLC in fulfilling federal contracts, particularly for fuel supply?

Global Companies LLC has a history of receiving federal contracts, primarily with the Department of Defense and the Defense Logistics Agency, for the supply of various petroleum products. Data indicates they have been awarded numerous contracts over the years, often through competitive processes, though the number of bids can vary. Their performance ratings on past contracts have generally been satisfactory, suggesting they are capable of meeting the logistical and quality requirements of fuel delivery. However, a thorough review would involve examining specific contract performance reports, any past disputes or penalties, and their overall financial stability to fully assess their reliability as a federal contractor.

How does the awarded price of $87.1 million compare to market rates for similar fuel types during the contract period?

Benchmarking the awarded price against market rates requires access to historical fuel price data (e.g., Platts, EIA reports) for the specific contract period (April 2011 - April 2014) and geographic regions relevant to the DoD's fuel needs. The contract utilizes an Economic Price Adjustment (EPA) clause, meaning the final cost would fluctuate based on established indices. Without access to these specific indices and the volume of each fuel type procured, a precise comparison is challenging. However, the total ceiling of $97.9 million suggests the government anticipated potential price increases. The fact that the contract was awarded suggests the initial pricing was deemed competitive at the time of solicitation, but the EPA's impact would determine the ultimate value for money.

What are the primary risks associated with this type of fixed-price contract with economic price adjustment for fuel?

The primary risks for the government in a fixed-price contract with EPA for fuel involve price volatility. While the EPA is designed to protect both parties from extreme market fluctuations, significant upward swings in global oil and refined product prices can lead to substantial cost increases for the government, potentially exceeding initial budget estimates. Conversely, if prices fall sharply, the EPA might not fully capture the savings. Operational risks include potential supply disruptions due to geopolitical events, natural disasters, or logistical failures, which could impact military readiness. Contractor performance risks, such as delivery delays or quality issues, are also present, although mitigated by performance clauses and the agency's oversight.

What was the total federal spending on petroleum products by the Department of Defense in the years surrounding this contract (2011-2014)?

Federal spending on petroleum products by the Department of Defense (DoD) during the period of this contract (2011-2014) was substantial, reflecting the military's extensive operational needs. While precise aggregate figures for 'petroleum products' can vary based on categorization, the DoD is consistently one of the largest federal consumers. For context, in fiscal year 2014 alone, the DoD's energy expenditures were reported to be in the tens of billions of dollars, with a significant portion allocated to fuels for transportation, aviation, and heating. Contracts like the one awarded to Global Companies LLC, valued at nearly $98 million, represent a fraction of this overall spending but are critical for maintaining fuel supply chains.

How does the 'satisfactory' performance rating translate into tangible outcomes for the DoD?

A 'satisfactory' performance rating indicates that Global Companies LLC met the essential requirements outlined in the contract. For the DoD, this translates to the timely and adequate delivery of specified fuel types to designated locations, ensuring that military operations, training exercises, and installations were not hindered by fuel shortages. It implies that the fuel met quality standards and that the contractor adhered to delivery schedules and logistical protocols. While 'satisfactory' suggests requirements were met, it does not necessarily imply exceptional performance or exceeding expectations, which might be indicated by ratings like 'highly satisfactory' or 'exceptional'.

What is the significance of the NAICS code 424720 (Petroleum and Petroleum Products Merchant Wholesalers) in understanding this contract?

The NAICS code 424720 signifies that the primary business activity of the contractor, Global Companies LLC in this instance, is wholesale distribution of petroleum and petroleum products. This includes activities like bulk storage, distribution, and sales to other businesses or government entities, rather than direct retail sales to consumers. For this DoD contract, it means the company is acting as a crucial intermediary in the fuel supply chain, procuring large quantities of fuel and ensuring its delivery to military facilities. Understanding this code helps contextualize the contract within the broader energy market and highlights the logistical and supply chain management aspects involved.

Industry Classification

NAICS: Wholesale Trade › Petroleum and Petroleum Products Merchant Wholesalers › Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)

Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060010R0228

Offers Received: 41

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Global Partners LP (UEI: 602580867)

Address: 800 SOUTH ST, WALTHAM, MA, 05

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

Financial Breakdown

Contract Ceiling: $99,911,685

Exercised Options: $99,911,685

Current Obligation: $97,955,696

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D8523

IDV Type: IDC

Timeline