DoD awards ExxonMobil $42.9M contract for JP5 fuel delivery, highlighting fixed-price with economic adjustment terms

Contract Overview

Contract Amount: $42,886,355 ($42.9M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2012-06-05

End Date: 2013-07-30

Contract Duration: 420 days

Daily Burn Rate: $102.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 10

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: THIS CONTRACT IS FOR THE DELIVERY OF JP5 TO VARIOUS LOCATIONS.

Plain-Language Summary

Department of Defense obligated $42.9 million to EXXON MOBIL CORPORATION for work described as: THIS CONTRACT IS FOR THE DELIVERY OF JP5 TO VARIOUS LOCATIONS. Key points: 1. Contract utilizes a fixed-price structure with economic price adjustments, allowing for fluctuations in fuel costs. 2. Awarded to ExxonMobil Corporation, a major player in the energy sector, indicating established supplier relationships. 3. The contract duration of 420 days suggests a medium-term operational need for fuel supply. 4. Full and open competition was utilized, implying a broad search for qualified bidders. 5. The contract's value falls within a typical range for large-scale fuel procurement for defense operations. 6. Economic price adjustments introduce a degree of cost uncertainty, necessitating careful monitoring of market prices.

Value Assessment

Rating: good

The contract value of $42.9 million for a 420-day period for JP5 fuel delivery appears reasonable given the scale of military operations. Benchmarking against similar fuel contracts awarded by the Defense Logistics Agency (DLA) would provide a more precise value-for-money assessment. The fixed-price with economic price adjustment (FP-EPA) contract type aims to balance cost certainty for the government with protection against volatile market prices for the contractor.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that the solicitation was made available to all responsible sources. The presence of 10 bidders suggests a competitive environment, which typically drives better pricing and terms for the government. The agency's decision to use full and open competition is a positive indicator of seeking the best value.

Taxpayer Impact: Full and open competition generally leads to more favorable pricing for taxpayers by encouraging a wider range of suppliers to bid, thereby driving down costs through market forces.

Public Impact

The primary beneficiaries are the Department of Defense (DoD) and its various operational units requiring JP5 fuel. Services delivered include the supply of aviation fuel essential for military aircraft operations. The geographic impact is likely widespread, covering various DoD locations that utilize JP5. Workforce implications are minimal for the contracting agency, but the contract supports jobs within ExxonMobil's fuel supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to economic price adjustment clauses if fuel prices escalate significantly.
Reliance on a single large corporation for a critical fuel supply could pose a risk if supply chain disruptions occur.

Positive Signals

Award to a well-established and experienced fuel supplier like ExxonMobil suggests reliability.
Full and open competition indicates a robust process for selecting the most capable and cost-effective provider.
The fixed-price component provides a baseline cost control measure.

Sector Analysis

The petroleum refining and distribution sector is critical for supporting national defense and transportation infrastructure. This contract falls under the broader energy sector, specifically focusing on the supply of aviation fuel. The market for military fuel procurement is often dominated by a few large, established energy companies due to the scale and logistical requirements. Comparable spending benchmarks for aviation fuel procurement by the DoD can vary significantly based on volume, duration, and geographic delivery points.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no information provided regarding subcontracting plans specifically for small businesses. The award to a large corporation like ExxonMobil suggests that the primary contract is not structured to directly benefit the small business ecosystem, although indirect benefits could arise through their supply chain.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA), which is responsible for procuring and distributing fuel for the DoD. Accountability measures are embedded in the contract terms, including delivery schedules and fuel quality specifications. Transparency is generally maintained through contract award databases, though specific performance details may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Contracts
Department of Defense Energy Contracts
Petroleum Product Supply Contracts

Risk Flags

Price Volatility Risk
Supply Chain Dependency
Contract Administration Complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.9 million to EXXON MOBIL CORPORATION. THIS CONTRACT IS FOR THE DELIVERY OF JP5 TO VARIOUS LOCATIONS.

Who is the contractor on this award?

The obligated recipient is EXXON MOBIL CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $42.9 million.

What is the period of performance?

Start: 2012-06-05. End: 2013-07-30.

What is the historical spending pattern for JP5 fuel by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) is the primary entity responsible for procuring and distributing fuel for the U.S. military. Historical spending on JP5 fuel by the DLA has been substantial, often running into billions of dollars annually, reflecting the critical role of aviation in defense operations. Spending fluctuates based on global military posture, operational tempo, and prevailing market prices for petroleum products. The DLA manages a complex global supply chain, utilizing various contract types and competition strategies to ensure reliable fuel delivery to numerous installations worldwide. Analyzing specific historical data for JP5 would reveal trends in contract values, durations, and the number of awarded contracts over time, providing context for the $42.9 million award to ExxonMobil.

How does the economic price adjustment (EPA) clause typically function in fuel contracts?

An Economic Price Adjustment (EPA) clause in a fixed-price contract allows for adjustments to the contract price based on fluctuations in specified economic factors, most commonly commodity prices or labor rates. In the context of fuel contracts like this one for JP5, the EPA clause is designed to protect both the government and the contractor from significant market volatility. If the price of crude oil or refined fuels increases beyond a certain baseline, the contract price can be adjusted upwards, compensating the contractor. Conversely, if prices decrease, the contract price may be adjusted downwards, benefiting the government. The specific formula and indices used for adjustment are critical and are negotiated during the contract award process. This mechanism aims to maintain a stable supply by mitigating the financial risks associated with unpredictable market swings.

What is ExxonMobil's track record in supplying fuel to the Department of Defense?

ExxonMobil Corporation, as one of the world's largest publicly traded international oil and gas companies, has a significant and long-standing track record of supplying fuel products, including aviation fuels like JP5, to government entities, including the Department of Defense (DoD). Their extensive global infrastructure, refining capabilities, and logistical expertise position them as a key supplier for military operations. The DoD frequently awards contracts to major energy companies like ExxonMobil for fuel procurement due to their capacity to meet large-scale, often urgent, demands. While specific contract performance details are not publicly itemized here, ExxonMobil's consistent presence in the federal contracting space for fuel indicates a generally accepted capability to meet the stringent requirements of military fuel supply.

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

The primary risk associated with a Fixed-Price with Economic Price Adjustment (FP-EPA) contract for fuel lies in the potential for cost volatility. While the EPA clause is intended to mitigate extreme price swings, it introduces a degree of uncertainty regarding the final cost to the government. If market prices for crude oil or refined fuels rise sharply and unexpectedly, the government could end up paying significantly more than initially budgeted. Conversely, a steep decline in prices might not be fully passed on if the EPA formula is not sufficiently sensitive or if there are caps. Another risk involves the complexity of administering the EPA clause, requiring careful monitoring of market indices and accurate calculation of price adjustments. This can increase administrative burden and the potential for disputes over price calculations.

How does the number of bidders impact the final price for fuel contracts?

A higher number of bidders in a competitive procurement process, such as the 10 bidders for this JP5 fuel contract, generally leads to more competitive pricing. When multiple qualified suppliers vie for a contract, they are incentivized to offer their best possible prices and terms to win the award. This increased competition drives down the profit margins for the contractors and can result in lower overall costs for the government. Conversely, a low number of bidders, or a sole-source award, often indicates less competition and can lead to higher prices as the contractor faces less pressure to be cost-competitive. The fact that this contract was awarded under full and open competition with 10 bidders suggests a healthy competitive environment that likely benefited the taxpayer.

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: SP060012R0033

Offers Received: 10

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

Evaluated Preference: NONE

Contractor Details

Address: 3225 GALLOWS RD, FAIRFAX, VA, 11

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: $42,886,355

Exercised Options: $42,886,355

Current Obligation: $42,886,355

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060012D0486

IDV Type: IDC

Timeline