DoD awards $63.5M for 18.9M gallons of jet fuel, with 69% set aside

Contract Overview

Contract Amount: $63,531,215 ($63.5M)

Contractor: Placid Refining Company LLC

Awarding Agency: Department of Defense

Start Date: 2011-12-20

End Date: 2012-09-30

Contract Duration: 285 days

Daily Burn Rate: $222.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 24

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 1,369,000 USF OF CLIN 0101 (JP8) AND 11,700,000 USG OF CLIN 0201 (JP5) ARE SET-ASIDE QUANTITIES. TOTAL SET-ASIDE VOLUMEJ IS 13,069,000 USG OF TOTAL AWARD QUANTITY 18,900,000 USG.

Place of Performance

Location: PORT ALLEN, WEST BATON ROUGE County, LOUISIANA, 70767

State: Louisiana Government Spending

Plain-Language Summary

Department of Defense obligated $63.5 million to PLACID REFINING COMPANY LLC for work described as: 1,369,000 USF OF CLIN 0101 (JP8) AND 11,700,000 USG OF CLIN 0201 (JP5) ARE SET-ASIDE QUANTITIES. TOTAL SET-ASIDE VOLUMEJ IS 13,069,000 USG OF TOTAL AWARD QUANTITY 18,900,000 USG. Key points: 1. Significant portion of fuel (69%) is set-aside, potentially limiting broader competition. 2. Fixed Price with Economic Price Adjustment contract type introduces cost volatility risk. 3. Award to Placid Refining Company LLC, a single entity, warrants scrutiny of price discovery. 4. Defense Logistics Agency's procurement supports critical fuel needs for military operations.

Value Assessment

Rating: fair

The contract value of $63.5M for 18.9M gallons of fuel averages to approximately $3.36 per gallon. This price needs to be benchmarked against current market rates for JP8 and JP5, considering the economic price adjustment clause.

Cost Per Unit: $3.36

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is generally positive for price discovery. However, the set-aside quantities for specific entities might influence the final pricing and overall market participation.

Taxpayer Impact: Taxpayers are exposed to potential price increases due to the economic price adjustment clause, though the initial competition aims for a fair market price.

Public Impact

Ensures availability of critical jet fuel for Department of Defense operations. Supports a specific refining company, potentially impacting regional fuel supply dynamics. The set-aside quantities may benefit certain suppliers but could limit broader market access. Economic price adjustments introduce uncertainty in the final cost to the government.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces cost uncertainty.
Set-aside quantities may limit competition.
Single awardee for a large volume of fuel.

Positive Signals

Awarded under full and open competition.
Supports critical national defense fuel requirements.

Sector Analysis

This procurement falls under the Petroleum Refineries sector (NAICS 324110). Spending in this sector is crucial for national security and energy independence. Benchmarks for fuel contracts vary significantly based on market conditions, type of fuel, and contract terms.

Small Business Impact

The data indicates this contract was not set aside for small businesses (SB: false). Therefore, small businesses were not specifically targeted or prioritized in this procurement action.

Oversight & Accountability

The Department of Defense, through the Defense Logistics Agency, is responsible for this procurement. Oversight would involve monitoring contract performance, adherence to terms, and managing the economic price adjustment mechanism to ensure fair pricing.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Potential for cost overruns due to economic price adjustment.
Limited competition due to set-aside quantities.
Reliance on a single supplier for a significant fuel volume.
Lack of small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $63.5 million to PLACID REFINING COMPANY LLC. 1,369,000 USF OF CLIN 0101 (JP8) AND 11,700,000 USG OF CLIN 0201 (JP5) ARE SET-ASIDE QUANTITIES. TOTAL SET-ASIDE VOLUMEJ IS 13,069,000 USG OF TOTAL AWARD QUANTITY 18,900,000 USG.

Who is the contractor on this award?

The obligated recipient is PLACID REFINING COMPANY LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $63.5 million.

What is the period of performance?

Start: 2011-12-20. End: 2012-09-30.

What is the historical price trend for JP8 and JP5 fuel, and how does the economic price adjustment clause protect against extreme market volatility?

Analyzing historical price trends for JP8 and JP5 is crucial to understanding the baseline for this contract. The economic price adjustment clause is designed to mitigate significant fluctuations in the cost of raw materials (like crude oil) and refining processes. However, the specific formula and caps within the clause determine the extent of protection for both the government and the contractor against extreme market volatility.

What is the rationale behind the specific set-aside quantities, and how were these quantities determined to be in the government's best interest?

The rationale behind specific set-aside quantities typically relates to ensuring a certain level of participation from specific types of businesses or to secure supply from particular geographic regions or facilities. For this contract, understanding the justification for the 13.069 million USG set-aside volume is key. This could be tied to ensuring capacity at a specific refinery or meeting strategic fuel reserve requirements.

How does the fixed-price nature of the contract, combined with economic price adjustments, impact the government's ability to forecast and control its fuel budget?

While the contract has a fixed price component, the economic price adjustment (EPA) clause introduces variability, making precise budget forecasting challenging. The government's ability to control the budget depends heavily on the EPA's formula and any established limits. Without clear caps or predictable market movements, the final expenditure could deviate significantly from the initial award value, impacting fiscal planning.

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: SP060011R0061

Offers Received: 24

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

Evaluated Preference: NONE

Contractor Details

Address: 1940 LA HWY 1 N, PORT ALLEN, LA, 06

Business Categories: Category Business, Limited Liability Corporation, Manufacturer of Goods, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $63,531,215

Exercised Options: $63,531,215

Current Obligation: $63,531,215

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060012D0538

IDV Type: IDC

Timeline