DoD's $97.8M contract for aviation fuel awarded to U.S. Oil Trading LLC, with 10 bids received

Contract Overview

Contract Amount: $97,849,700 ($97.8M)

Contractor: U.S. OIL Trading LLC

Awarding Agency: Department of Defense

Start Date: 2012-05-25

End Date: 2013-05-31

Contract Duration: 371 days

Daily Burn Rate: $263.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 10

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: TURBINE FUEL, AVIATION JP8 (3,340,000 USG) FOB ORIGIN TANK TRUCK AND JAA (35,000,000 USG) FOB ORIGIN PIPELINE EX TACOMA, WA.

Place of Performance

Location: TACOMA, PIERCE County, WASHINGTON, 98421

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $97.8 million to U.S. OIL TRADING LLC for work described as: TURBINE FUEL, AVIATION JP8 (3,340,000 USG) FOB ORIGIN TANK TRUCK AND JAA (35,000,000 USG) FOB ORIGIN PIPELINE EX TACOMA, WA. Key points: 1. The contract value of $97.8M for aviation fuel represents a significant expenditure for the Defense Logistics Agency. 2. Competition dynamics indicate a healthy market with 10 bids, suggesting potential for competitive pricing. 3. The fixed-price with economic price adjustment contract type introduces some risk related to fuel price volatility. 4. Performance context is crucial, as reliable fuel supply is critical for military aviation operations. 5. This contract falls within the broader energy and defense logistics sectors, supporting essential military readiness. 6. The geographic scope covers fuel delivery via tank truck and pipeline, indicating logistical complexity.

Value Assessment

Rating: good

Benchmarking the value of this contract is challenging without specific per-gallon pricing and market conditions at the time of award. However, the significant volume of fuel procured suggests the agency sought to leverage economies of scale. The fixed-price with economic price adjustment structure aims to balance cost certainty with market fluctuations, which is a common approach for commodity contracts of this nature. The number of bids received (10) suggests a competitive environment that likely contributed to a reasonable price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, with 10 bids received. This indicates a robust bidding process where multiple qualified vendors had the opportunity to compete. A higher number of bidders generally leads to more competitive pricing and a wider selection of potential suppliers, which is beneficial for the government.

Taxpayer Impact: The extensive competition for this fuel contract likely resulted in taxpayer savings by driving down the price per gallon compared to a less competitive scenario. It ensures that the government is not overpaying for essential aviation fuel.

Public Impact

The primary beneficiaries are U.S. military aviation units requiring JP8 fuel for operational readiness. The contract ensures the continuous supply of critical aviation fuel, supporting flight missions. The geographic impact includes delivery points via tank truck and pipeline, likely serving military bases in Washington state and potentially broader regions. Workforce implications are indirect, supporting jobs in fuel transportation, storage, and logistics.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost overruns if fuel prices spike significantly.
Reliance on a single awardee for a large volume of fuel could pose supply chain risks if the contractor faces disruptions.
The duration of the contract (371 days) requires ongoing monitoring to ensure performance and adherence to terms.

Positive Signals

Awarded under full and open competition, indicating a competitive bidding process.
Multiple bidders (10) suggest a healthy market and potential for favorable pricing.
The contract specifies delivery methods (tank truck, pipeline) that can offer flexibility and efficiency.
The Defense Logistics Agency's involvement suggests established procurement processes for essential commodities.

Sector Analysis

This contract operates within the energy sector, specifically the petroleum refining and distribution industry. The market for aviation fuel is characterized by global supply chains, price volatility influenced by geopolitical events, and significant logistical requirements. The Defense Logistics Agency is a major procurer of fuel for military operations, and contracts like this are essential for maintaining readiness. Comparable spending benchmarks would involve analyzing other large-volume fuel procurements by government agencies or major commercial airlines.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). The prime contractor, U.S. Oil Trading LLC, is likely a larger entity. There is no explicit information on subcontracting plans for small businesses within this award. Therefore, the direct impact on the small business ecosystem appears minimal, though indirect benefits could arise if the prime contractor utilizes small businesses for ancillary services.

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 delivery schedules and fuel quality specifications. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Supply Contracts
Petroleum Product Procurement
Military Readiness Support Contracts

Risk Flags

Potential for price volatility due to economic price adjustment clause.
Supply chain disruption risk for critical fuel commodity.
Logistical complexity of delivery via tank truck and pipeline.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $97.8 million to U.S. OIL TRADING LLC. TURBINE FUEL, AVIATION JP8 (3,340,000 USG) FOB ORIGIN TANK TRUCK AND JAA (35,000,000 USG) FOB ORIGIN PIPELINE EX TACOMA, WA.

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 $97.8 million.

What is the period of performance?

Start: 2012-05-25. End: 2013-05-31.

What is the historical spending pattern for aviation fuel by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) is the primary entity responsible for procuring fuel for the Department of Defense. Historical spending on aviation fuel has been substantial, often running into billions of dollars annually, reflecting the extensive operational needs of the military. DLA manages a complex global supply chain to ensure fuel availability at numerous locations worldwide. Analyzing past DLA fuel contracts reveals trends in pricing, supplier diversification, and the evolution of contract types used to manage market volatility. For instance, prior to 2012, there might have been different pricing mechanisms or a greater reliance on specific suppliers. The agency continuously adapts its procurement strategies to optimize costs and ensure supply chain resilience, often through competitive bidding processes similar to the one used for this specific contract.

How does the per-gallon price of this contract compare to market rates at the time of award?

Determining the exact per-gallon price and comparing it to market rates at the time of award (May 2012 - May 2013) requires access to the specific economic price adjustment formula and prevailing market indices (like Platts or OPIS) used in the contract. The contract value of $97.8 million for 3,375,000 gallons (3,340,000 USG + 35,000,000 USG, assuming the latter is a typo and should be 35,000 USG or the total is much higher) suggests an average price range. However, the 'FOB ORIGIN' and 'FOB ORIGIN PIPELINE' terms indicate delivery costs are separate or factored into the pipeline rate. Without the specific pricing formula and market data for JP8 fuel in Tacoma, WA, and FOB origin tank truck during that period, a precise comparison is not feasible. Generally, government contracts aim for competitive pricing, but factors like delivery logistics, volume, and contract type (fixed-price with EPA) influence the final rate.

What are the key risks associated with a Fixed Price with Economic Price Adjustment (FPEPA) contract for fuel?

A Fixed Price with Economic Price Adjustment (FPEPA) contract for fuel, like the one awarded to U.S. Oil Trading LLC, carries specific risks for both the government and the contractor. For the government, the primary risk is potential cost escalation. If market prices for crude oil or refined products increase significantly beyond projections, the economic price adjustment clause will allow the contractor to pass these increased costs onto the government, potentially exceeding the initially anticipated budget. This can lead to budget overruns and reduced purchasing power. Conversely, if prices decrease, the adjustment mechanism may not fully reflect the savings. For the contractor, the risk lies in adverse price movements that are not fully compensated by the adjustment formula, or in administrative burdens associated with tracking and justifying price changes. Effective oversight and clear, objective price adjustment indices are crucial to mitigate these risks.

What is the track record of U.S. Oil Trading LLC in fulfilling government fuel contracts?

U.S. Oil Trading LLC has a history of engaging in government fuel contracts. Publicly available data indicates they have been awarded contracts by various federal agencies, including the Department of Defense, for the supply of petroleum products. Assessing their specific track record for this particular contract (awarded in 2012) would involve reviewing performance reports, any documented issues related to delivery, quality, or pricing adjustments, and their overall compliance history. Generally, companies that consistently win large-volume fuel contracts with agencies like the DLA have demonstrated capabilities in logistics, supply chain management, and adherence to contract terms. However, a detailed review of past performance evaluations and any disputes or corrective actions would be necessary for a comprehensive assessment.

How does the volume of fuel procured in this contract compare to typical military aviation fuel needs?

This contract covers approximately 3.375 million gallons of aviation fuel (JP8). The typical daily consumption of aviation fuel by the U.S. military can vary significantly based on operational tempo, training exercises, and global deployments. During periods of high activity, such as major conflicts or extensive training exercises, daily consumption can reach millions of gallons across all branches. For a single contract covering a period of roughly one year (May 2012 - May 2013), this volume represents a substantial, but not extraordinary, procurement. It likely serves a specific region or a set of bases, ensuring consistent supply for routine operations and readiness. Larger contingency operations or global fuel requirements would necessitate much larger, often multi-year, indefinite-delivery/indefinite-quantity (IDIQ) contracts.

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: SP060011R0161

Offers Received: 10

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: $97,849,700

Exercised Options: $97,849,700

Current Obligation: $97,849,700

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060012D0465

IDV Type: IDC

Timeline