DoD awards $49.8M contract for refined petroleum products to Wynnewood Energy Co. LLC

Contract Overview

Contract Amount: $168,997,358 ($169.0M)

Contractor: Wynnewood Energy CO LLC

Awarding Agency: Department of Defense

Start Date: 2012-09-20

End Date: 2014-01-30

Contract Duration: 497 days

Daily Burn Rate: $340.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 27

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: AWARD JP8: 49,860,000 USG FOB ORIGIN WYNNEWOOD, OK BY TANK TRUCK

Place of Performance

Location: DENVER, DENVER County, COLORADO, 80202

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $169.0 million to WYNNEWOOD ENERGY CO LLC for work described as: AWARD JP8: 49,860,000 USG FOB ORIGIN WYNNEWOOD, OK BY TANK TRUCK Key points: 1. Contract awarded for refined petroleum products, indicating a need for fuel supply. 2. The contract was awarded under full and open competition, suggesting a competitive bidding process. 3. The fixed-price with economic price adjustment structure aims to manage fluctuating fuel costs. 4. The duration of the contract is approximately 497 days. 5. The award was made by the Defense Logistics Agency, a key logistics provider for the DoD. 6. The North American Industry Classification System (NAICS) code 324110 points to petroleum refineries.

Value Assessment

Rating: fair

The total award amount is $49,860,000. Without specific details on the quantity of petroleum products or the exact pricing structure, a direct value-for-money assessment is challenging. However, the fixed-price with economic price adjustment (FPEPA) contract type suggests an attempt to balance cost certainty with market volatility. Benchmarking against similar fuel supply contracts would be necessary for a more precise evaluation of value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit a bid. The presence of 27 bids indicates a robust level of competition for this requirement. A higher number of bidders generally suggests a more competitive environment, which can lead to better pricing and terms for the government.

Taxpayer Impact: The strong competition for this contract likely resulted in more favorable pricing for the taxpayer compared to a sole-source or limited competition scenario.

Public Impact

The Department of Defense benefits from a secured supply of refined petroleum products. This contract supports the operational readiness of military forces requiring fuel. The geographic impact is centered around Wynnewood, OK, the origin point for delivery. The contract supports jobs within the petroleum refining sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if market prices rise significantly.
Dependence on a single supplier for a critical commodity like fuel carries inherent supply chain risks.

Positive Signals

Full and open competition suggests a fair and transparent procurement process.
The fixed-price component provides some level of cost control for the government.
The Defense Logistics Agency's involvement indicates established procurement and oversight procedures.

Sector Analysis

This contract falls within the energy sector, specifically the refining of petroleum products. The NAICS code 324110 represents petroleum refineries. The market for refined fuels is substantial, driven by both commercial and governmental demand. Comparable spending benchmarks would involve analyzing other DoD contracts for fuel supply and the general market prices for refined petroleum products.

Small Business Impact

The contract was awarded to Wynnewood Energy Co. LLC, and there is no indication of a small business set-aside. The contract value suggests it is likely a large business award. Subcontracting opportunities for small businesses are not explicitly detailed but could exist within the supply chain for raw materials or services supporting the refinery operations.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract. DLA has established procurement regulations and contract management processes. Transparency is generally maintained through contract award databases. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

DoD Fuel Procurement
Defense Logistics Agency Contracts
Petroleum Supply Chain Management
Fixed-Price Economic Price Adjustment Contracts

Risk Flags

Potential for cost increases due to economic price adjustment.
Supply chain disruption risk for critical fuel commodity.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $169.0 million to WYNNEWOOD ENERGY CO LLC. AWARD JP8: 49,860,000 USG FOB ORIGIN WYNNEWOOD, OK BY TANK TRUCK

Who is the contractor on this award?

The obligated recipient is WYNNEWOOD ENERGY CO LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $169.0 million.

What is the period of performance?

Start: 2012-09-20. End: 2014-01-30.

What is the historical spending pattern for refined petroleum products by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) is a major procurer of fuel for the Department of Defense. Historical spending on refined petroleum products can fluctuate significantly based on global oil prices, geopolitical events, and military operational tempo. DLA typically awards numerous contracts annually for various fuel types, including jet fuel, diesel, and gasoline, to ensure supply chain resilience and meet the diverse needs of military branches. Analyzing DLA's historical spending data, often available through public contract databases, reveals trends in contract values, award types (e.g., fixed-price, cost-plus), and the geographic distribution of suppliers. For instance, periods of increased military deployment or significant price spikes in crude oil would likely correlate with higher aggregate spending on refined fuels. Understanding these patterns is crucial for budgeting and forecasting future fuel requirements.

How does the pricing structure of this contract compare to market benchmarks for petroleum products during the contract period?

This contract utilizes a Fixed Price with Economic Price Adjustment (FPEPA) structure. This means the base price is fixed, but it can be adjusted based on fluctuations in specific economic indicators, typically tied to the cost of raw materials or energy. To compare this to market benchmarks, one would need to examine the average market prices for the specific refined petroleum products procured (e.g., diesel, gasoline) during the contract's performance period (September 20, 2012, to January 30, 2014). Data from sources like the U.S. Energy Information Administration (EIA) or commodity market indices would be relevant. The effectiveness of the FPEPA clause hinges on how well the chosen economic indicators track actual cost changes and whether the adjustments resulted in prices significantly above or below prevailing market rates. Without access to the specific adjustment formula and market data for that period, a precise comparison is difficult, but the intent was to mitigate extreme price volatility for both the government and the contractor.

What are the potential risks associated with a fixed-price contract with economic price adjustment for fuel procurement?

While FPEPA contracts aim to balance risk, they introduce specific considerations. For the government, the primary risk is that the economic price adjustment could lead to higher-than-anticipated costs if fuel prices surge unexpectedly. The effectiveness of the adjustment mechanism is critical; if it doesn't accurately reflect market movements or is poorly defined, the government might overpay. Conversely, the contractor faces the risk that the adjustment might not fully compensate for unforeseen cost increases, especially if the adjustment indices lag behind actual market changes or if there are supply disruptions affecting their costs. Furthermore, the administrative burden of tracking and applying the economic adjustments can be significant. For a commodity as volatile as fuel, the potential for substantial price swings means that the 'fixed' portion of the price might become less relevant over the contract's life, shifting the cost control aspect more towards the adjustment mechanism.

How does the number of bidders (27) impact the government's ability to secure favorable pricing?

A high number of bidders, such as the 27 received for this contract, generally indicates a healthy and competitive market for the goods or services being procured. From the government's perspective, this increased competition is advantageous because it typically drives down prices as contractors vie to win the award. More bidders mean a wider pool of potential suppliers, increasing the likelihood that at least one contractor will offer a highly competitive price. It also reduces the government's reliance on any single supplier, enhancing negotiation leverage. In essence, robust competition allows the government to benefit from market forces, leading to better value for taxpayer dollars. The presence of numerous bids suggests that the solicitation was well-defined and accessible to a broad range of qualified companies.

What is the track record of Wynnewood Energy Co. LLC in fulfilling government contracts, particularly for fuel supply?

Information regarding Wynnewood Energy Co. LLC's specific track record with government contracts, especially for fuel supply, would require a detailed search of federal procurement databases like SAM.gov or FPDS. While this award indicates they were a successful bidder for this Department of Defense contract, it doesn't provide a comprehensive view of their performance history. Key aspects to investigate would include past performance evaluations (if available), any history of contract disputes, timely delivery records, and the types and values of previous government awards. A contractor's ability to consistently meet delivery schedules, quality standards, and pricing commitments is crucial, particularly for essential commodities like fuel. Without further data, it's difficult to definitively assess their track record beyond their success in winning this particular bid.

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: SP060012R0061

Offers Received: 27

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Wynnewood Energy Company, LLC (UEI: 078671056)

Address: 370 17TH ST STE 5300, DENVER, CO, 90

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $168,997,358

Exercised Options: $168,997,358

Current Obligation: $168,997,358

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060012D0483

IDV Type: IDC

Timeline