DoD awards $45M for Turbine Fuel Aviation (JP8) to HD Hyundai Oilbank under full and open competition
Contract Overview
Contract Amount: $45,058,992 ($45.1M)
Contractor: HD Hyundai Oilbank CO., Ltd
Awarding Agency: Department of Defense
Start Date: 2011-12-16
End Date: 2013-01-30
Contract Duration: 411 days
Daily Burn Rate: $109.6K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 16
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Defense
Official Description: TURBINE FUEL AVIATION (JP8)
Plain-Language Summary
Department of Defense obligated $45.1 million to HD HYUNDAI OILBANK CO., LTD for work described as: TURBINE FUEL AVIATION (JP8) Key points: 1. Significant contract value of $45M for aviation fuel. 2. HD Hyundai Oilbank is a key supplier in this market. 3. Fixed Price with Economic Price Adjustment (FPEPA) introduces price volatility risk. 4. Defense sector reliance on specialized fuels.
Value Assessment
Rating: fair
The contract's fixed price with economic price adjustment introduces potential for cost overruns if fuel prices rise significantly. Benchmarking against similar fuel contracts is difficult without specific price adjustment clauses.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
Full and open competition was utilized, suggesting a competitive bidding process. However, the FPEPA clause may limit true price discovery by allowing adjustments based on market fluctuations.
Taxpayer Impact: Taxpayers are exposed to potential price increases due to the economic price adjustment clause, though competition should mitigate excessive pricing.
Public Impact
Ensures supply of critical aviation fuel for military operations. Potential for increased costs for taxpayers if fuel prices escalate. Supports a major global oil producer, impacting international energy markets.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic price adjustment clause can lead to cost overruns.
- Dependence on a single supplier for a critical commodity.
- Geopolitical risks affecting global fuel prices.
Positive Signals
- Full and open competition utilized.
- Established supplier with proven track record.
Sector Analysis
The defense sector heavily relies on specialized fuels like JP8 for aviation. Spending benchmarks for such contracts can vary widely based on global oil prices and geopolitical factors.
Small Business Impact
This contract does not appear to involve small businesses directly, as the award is to a large corporation. Opportunities for small businesses may exist further down the supply chain.
Oversight & Accountability
The use of FPEPA requires careful monitoring by the Defense Logistics Agency to ensure price adjustments are justified and do not lead to undue profit.
Related Government Programs
- Petroleum Refineries
- Department of Defense Contracting
- Defense Logistics Agency Programs
Risk Flags
- Economic Price Adjustment (EPA) clause introduces cost uncertainty.
- Potential for price volatility in the global fuel market.
- Dependence on a single supplier for a critical resource.
- Geopolitical instability impacting fuel supply chains.
Tags
petroleum-refineries, department-of-defense, do, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $45.1 million to HD HYUNDAI OILBANK CO., LTD. TURBINE FUEL AVIATION (JP8)
Who is the contractor on this award?
The obligated recipient is HD HYUNDAI OILBANK CO., LTD.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $45.1 million.
What is the period of performance?
Start: 2011-12-16. End: 2013-01-30.
What is the historical price trend for JP8 fuel during the contract period, and how did the economic price adjustment clause impact the final cost?
Analyzing the historical price trend of JP8 fuel during the contract period (2011-2013) is crucial. The economic price adjustment clause would have allowed the contract price to fluctuate with market conditions. Understanding the specific formula used for adjustment and comparing the final paid price against a baseline fixed price would reveal the true cost impact on taxpayers and the effectiveness of the FPEPA in hedging against extreme price volatility.
What were the key factors considered during the full and open competition that led to the selection of HD Hyundai Oilbank, and were there any other bidders?
During the full and open competition, factors such as price, technical capability, delivery timelines, and past performance were likely evaluated. The selection of HD Hyundai Oilbank suggests they met or exceeded the requirements and offered the most advantageous proposal. Information on other bidders and their specific proposals would provide a clearer picture of the competitive landscape and the extent to which price discovery was achieved.
How does the reliance on fixed-price contracts with economic price adjustments for critical fuels like JP8 align with long-term cost-efficiency goals for the Department of Defense?
Reliance on FPEPA contracts for critical fuels like JP8 presents a trade-off between ensuring supply availability and managing cost volatility. While FPEPA can protect suppliers from market swings, it exposes the DoD to potential price increases. Long-term cost-efficiency might be better served by exploring alternative fuel sources, longer-term fixed-price agreements with robust hedging strategies, or strategic stockpiling to mitigate the impact of fluctuating global energy markets.
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: SP060010R0077
Offers Received: 16
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Parent Company: Hyundai Heavy Industries CO., Ltd. (UEI: 687738591)
Address: 640-6 DAEJOOK-RI, DAESAN-EUP, SOSAN
Business Categories: Category Business, Corporate Entity Tax Exempt, Foreign Owned, Not Designated a Small Business, Special Designations
Financial Breakdown
Contract Ceiling: $45,058,992
Exercised Options: $45,058,992
Current Obligation: $45,058,992
Contract Characteristics
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SP060012D0451
IDV Type: IDC
Timeline
Start Date: 2011-12-16
Current End Date: 2013-01-30
Potential End Date: 2013-01-30 00:00:00
Last Modified: 2015-11-18
More Contracts from HD Hyundai Oilbank CO., Ltd
- Awarded 18,000,000 USG of JP8 — $55.4M (Department of Defense)
- JP8 — $32.6M (Department of Defense)
- Turbine Fuel, Aviation JP8 — $24.0M (Department of Defense)
Other Department of Defense Contracts
- Federal Contract — $51.3B (Humana Government Business Inc)
- Lrip LOT 12 Advance Acquisition Contract — $35.1B (Lockheed Martin Corporation)
- SSN 802 and 803 Long Lead Time Material — $34.7B (Electric Boat Corporation)
- 200204!008532!1700!AF600 !naval AIR Systems Command !N0001902C3002 !A!N! !N! !20011026!20120430!008016958!008016958!834951691!n!lockheed Martin Corporation !lockheed Blvd !fort Worth !tx!76108!27000!439!48!fort Worth !tarrant !texas !+000026000000!n!n!018981928201!ac15!rdte/Aircraft-Eng/Manuf Develop !a1a!airframes and Spares !2ama!jast/Jsf !336411!E! !3! ! ! ! ! !99990909!B! ! !A! !a!n!r!2!002!n!1a!a!n!z! ! !N!C!N! ! ! !a!a!a!a!000!a!c!n! ! ! !Y! !N00019!0001! — $34.2B (Lockheed Martin Corporation)
- KC-X Modernization Program — $32.0B (THE Boeing Company)