Department of Defense spent over $20.6M on fuel oil and gasohol, with Talley Petroleum Enterprises winning the contract

Contract Overview

Contract Amount: $20,691,888 ($20.7M)

Contractor: Talley Petroleum Enterprises, Inc

Awarding Agency: Department of Defense

Start Date: 2011-04-01

End Date: 2014-04-30

Contract Duration: 1,125 days

Daily Burn Rate: $18.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 41

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: FUEL OIL, BURNER #2, LS (FL2); GASOHOL, REG UNL (GUR); (ARMY, NAVY, AFNG, DOD, USPS)

Place of Performance

Location: WESTPORT, FAIRFIELD County, CONNECTICUT, 06880, UNITED STATES OF AMERICA

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $20.7 million to TALLEY PETROLEUM ENTERPRISES, INC for work described as: FUEL OIL, BURNER #2, LS (FL2); GASOHOL, REG UNL (GUR); (ARMY, NAVY, AFNG, DOD, USPS) Key points: 1. The contract value of over $20.6 million represents significant spending on essential fuel supplies for multiple military branches. 2. The fixed-price with economic price adjustment structure suggests a mechanism to account for fluctuating fuel market prices. 3. The contract duration of over three years indicates a sustained need for these petroleum products. 4. The award to Talley Petroleum Enterprises, Inc. highlights a key supplier in the defense logistics chain for fuels. 5. The North American Industry Classification System (NAICS) code 424720 points to the wholesale distribution of petroleum products. 6. The contract was awarded under full and open competition, suggesting a robust bidding process.

Value Assessment

Rating: good

The total contract value of $20.69 million over approximately three years averages to about $6.9 million per year. Without specific benchmarks for fuel oil and gasohol procurement for the Department of Defense, a direct value-for-money assessment is challenging. However, the fixed-price with economic price adjustment (FPEPA) contract type is common for commodities like fuel where market prices can fluctuate significantly, aiming to balance cost certainty for the government with risk mitigation for the contractor. The number of offers received (41) suggests a competitive environment that likely contributed to a reasonable price.

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 bids. The solicitation received 41 offers, demonstrating a healthy level of interest and competition within the market for petroleum products. A high number of bidders generally suggests that the government has a good opportunity to secure competitive pricing and that the market is not overly concentrated among a few suppliers.

Taxpayer Impact: The full and open competition process is beneficial for taxpayers as it increases the likelihood of obtaining the best possible prices through market forces and reduces the risk of inflated costs associated with limited competition.

Public Impact

Military branches including the Army, Navy, Air National Guard, and the Department of Defense benefit from a reliable supply of fuel for operations. The contract ensures the availability of burner fuel oil (#2) and regular unleaded gasohol, critical for vehicle and equipment operation. The contract's geographic impact is likely nationwide, supporting various military installations across the United States. The procurement supports jobs within the petroleum distribution and logistics sectors, including those employed by Talley Petroleum Enterprises, Inc.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to increased costs for the government if market prices for fuel rise significantly.
Reliance on a single primary contractor, even if awarded competitively, can create vulnerabilities in the supply chain if issues arise with the awarded vendor.

Positive Signals

The contract was awarded through full and open competition, indicating a competitive bidding process that likely secured favorable pricing.
The large number of offers (41) suggests a robust and active market for these fuel products.
The fixed-price component of the contract provides some cost certainty for the government, despite the economic adjustment.

Sector Analysis

The petroleum and petroleum products merchant wholesalers sector is a critical component of the energy supply chain, supporting various industries including transportation, manufacturing, and government operations. The market size for fuel distribution is substantial, with numerous companies competing to supply government agencies. This contract fits within the broader defense logistics and supply chain management, ensuring that military operations have access to necessary fuel resources. Comparable spending benchmarks for fuel procurement by the DoD are often in the hundreds of millions or billions annually, making this $20.6 million contract a significant, but not exceptionally large, portion of overall fuel spending.

Small Business Impact

The data indicates that small business participation was not a specific set-aside criterion for this contract (sb: false). While Talley Petroleum Enterprises, Inc. may be a small business, the contract was awarded under full and open competition, not specifically targeting small businesses. There is no explicit information provided regarding subcontracting plans with small businesses. The impact on the small business ecosystem would depend on whether Talley Petroleum Enterprises, Inc. itself is a small business and its own subcontracting practices.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA) and the relevant contracting officer within the Department of Defense. Accountability measures are embedded in the contract terms, including performance requirements and payment schedules. Transparency is generally maintained through contract award databases like FPDS-NG. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Fuel Supply Center Contracts
Petroleum Product Procurement
Military Logistics and Supply Chain
Fixed-Price Contracts with Economic Price Adjustment

Risk Flags

Potential for cost overruns due to economic price adjustments
Supply chain disruption risk
Contract performance monitoring complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.7 million to TALLEY PETROLEUM ENTERPRISES, INC. FUEL OIL, BURNER #2, LS (FL2); GASOHOL, REG UNL (GUR); (ARMY, NAVY, AFNG, DOD, USPS)

Who is the contractor on this award?

The obligated recipient is TALLEY PETROLEUM ENTERPRISES, INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $20.7 million.

What is the period of performance?

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

What is the historical spending pattern for fuel oil and gasohol by the Department of Defense over the last decade?

Historical spending by the Department of Defense (DoD) on fuel oil and gasohol has been substantial, fluctuating based on operational tempo, global market prices, and strategic priorities. While specific figures for just burner fuel oil and gasohol are not readily available without deep dives into detailed procurement data, the DoD is one of the largest consumers of petroleum products globally. Annual spending on fuels can range from billions to tens of billions of dollars. Factors influencing this spending include the number of active deployments, the size of the vehicle and aircraft fleets, and the prevailing cost of crude oil and refined products. Contracts like the one awarded to Talley Petroleum Enterprises, Inc. represent a portion of this larger, ongoing expenditure necessary to maintain military readiness and operational capability.

How does the awarded price per unit for fuel compare to market rates at the time of award?

Determining the precise awarded price per unit for fuel oil and gasohol under this contract is not possible with the provided summary data, as it only shows the total contract value and duration. To compare it to market rates, one would need access to the specific contract line item details (CLINs) that specify quantities and unit prices, as well as contemporaneous market price indices for fuels like ULSD (Ultra-Low Sulfur Diesel, often equivalent to burner fuel oil) and gasoline blends. The 'Economic Price Adjustment' clause indicates that the price was designed to track market fluctuations, suggesting that the initial price was set with an expectation of future adjustments. A thorough analysis would involve comparing these adjusted prices against benchmarks from sources like the Energy Information Administration (EIA) or Platts.

What is Talley Petroleum Enterprises, Inc.'s track record with government contracts, particularly for fuel supply?

Talley Petroleum Enterprises, Inc. has a history of receiving government contracts, primarily within the defense sector for fuel supply. A review of federal procurement data (like FPDS-NG) would reveal the extent and nature of their past awards. This specific contract, valued at over $20.6 million and spanning from 2011 to 2014, indicates a significant engagement with the Department of Defense. Their ability to win and perform on such contracts suggests a capacity to meet the demanding logistical and quality requirements of military fuel provisioning. Further investigation into past performance reviews, any contract disputes, or awards for similar fuel types would provide a more comprehensive understanding of their track record.

What are the primary risks associated with fixed-price contracts with economic price adjustment for fuel procurement?

The primary risks associated with Fixed-Price Contracts with Economic Price Adjustment (FPEPA) for fuel procurement revolve around price volatility and the potential for increased government expenditure. While the fixed-price component offers some cost certainty, the economic price adjustment (EPA) clause allows for modifications based on fluctuations in specified economic factors, typically market-based indices for fuel. If fuel prices rise sharply due to geopolitical events, supply disruptions, or increased demand, the government's costs will increase accordingly, potentially exceeding initial budget projections. Conversely, if prices fall, the government benefits from the adjustment. Another risk is the complexity in administering the EPA, ensuring that adjustments are calculated accurately and fairly according to the contract's formula, which requires robust tracking of market data and careful auditing.

How does the competition level (41 offers) impact the government's ability to achieve cost savings on fuel contracts?

A high level of competition, such as the 41 offers received for this fuel contract, generally has a positive impact on the government's ability to achieve cost savings. When numerous qualified vendors participate in the bidding process, it creates a more competitive environment where companies are incentivized to offer lower prices and better terms to win the contract. This increased competition drives down the profit margins for contractors and reduces the likelihood of price gouging. Furthermore, a larger pool of bidders increases the probability that the government will receive proposals that closely align with or even undercut the market value for the goods or services being procured. This scenario is ideal for taxpayers as it maximizes the value derived from public funds.

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

Address: 10046 ALLENTOWN BLVD, GRANTVILLE, PA, 17028

Business Categories: Category Business, Corporate Entity Not Tax Exempt, DoT Certified Disadvantaged Business Enterprise, Small Business, Special Designations, Subchapter S Corporation, U.S.-Owned Business, Woman Owned Business

Financial Breakdown

Contract Ceiling: $20,790,314

Exercised Options: $20,790,314

Current Obligation: $20,691,888

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D8527

IDV Type: IDC

Timeline