DoD's $186M Turbine Fuel Contract Awarded to ExxonMobil Amidst Full and Open Competition

Contract Overview

Contract Amount: $186,230,508 ($186.2M)

Contractor: Exxon Mobil Corporation

Awarding Agency: Department of Defense

Start Date: 2011-12-20

End Date: 2012-09-30

Contract Duration: 285 days

Daily Burn Rate: $653.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 24

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: INLAND EAST GULF CONTRACT FOR TURBINE FUEL, AVIATION JP8/JAA.

Place of Performance

Location: FAIRFAX, FAIRFAX County, VIRGINIA, 22037

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $186.2 million to EXXON MOBIL CORPORATION for work described as: INLAND EAST GULF CONTRACT FOR TURBINE FUEL, AVIATION JP8/JAA. Key points: 1. The contract represents a significant expenditure for aviation fuel, highlighting the DoD's reliance on large fuel suppliers. 2. Full and open competition was utilized, suggesting a potentially competitive bidding process for this substantial award. 3. The fixed-price with economic price adjustment structure introduces some cost volatility risk, though it aims to balance market fluctuations. 4. The contract duration of 285 days indicates a short-term supply need, potentially for specific operations or inventory management. 5. ExxonMobil's established presence in the energy sector positions them as a key supplier for government fuel requirements. 6. The award value of over $186 million underscores the scale of logistical support required for military aviation.

Value Assessment

Rating: good

The contract value of $186.2 million for approximately 9 months of aviation fuel supply appears within a reasonable range for a large government procurement of this nature. Benchmarking against similar large-scale 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 (EPA) clause is common in fuel contracts to account for market volatility, but it introduces a degree of uncertainty in the final cost compared to a firm fixed price. Without specific per-unit pricing data or detailed cost breakdowns, a definitive assessment of cost-effectiveness is challenging, but the competitive award process suggests an effort to secure favorable pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of 24 bids suggests a robust competitive environment for this fuel supply requirement. A high number of bidders generally leads to better price discovery and can drive down costs for the government. The specific details of the bidding process, such as the number of responsive bids and the range of pricing submitted, would further illuminate the effectiveness of the competition.

Taxpayer Impact: The use of full and open competition with 24 bidders is beneficial for taxpayers as it likely resulted in more competitive pricing and a wider selection of qualified suppliers, maximizing the value obtained for the allocated funds.

Public Impact

Military aviation units across various branches of the Department of Defense benefit from the reliable supply of JP8/JAA turbine fuel. The contract ensures the operational readiness of aircraft requiring this specific type of aviation fuel. The geographic impact is likely widespread, supporting flight operations at numerous military installations where this fuel is needed. The contract supports the broader energy sector workforce involved in the refining, transportation, and distribution of petroleum products.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to costs exceeding initial projections if fuel prices rise significantly.
Reliance on a single large contractor for a critical commodity like aviation fuel can pose supply chain risks.
The fixed-price nature, even with EPA, may not fully shield the government from extreme market price spikes.

Positive Signals

Awarded through full and open competition, indicating a broad market engagement and potential for competitive pricing.
The contractor, ExxonMobil, is a major player with extensive experience in fuel supply, suggesting reliability.
The contract specifies a clear product (JP8/JAA turbine fuel), reducing ambiguity in service delivery.

Sector Analysis

The petroleum refineries sector (NAICS 324110) is critical for producing fuels essential for transportation and industrial operations. The market for aviation fuels, particularly for military applications, is substantial, driven by defense logistics needs. This contract fits within the broader category of government procurement of essential commodities, where large energy companies often compete. Comparable spending benchmarks would involve analyzing other DLA fuel contracts and major military fuel procurements to gauge the scale and pricing efficiency of this award.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The award to a major corporation like ExxonMobil suggests that the primary focus was on large-scale supply capabilities. There is no explicit information provided regarding subcontracting plans with small businesses. Without such details, it is difficult to assess the direct impact on the small business ecosystem, though large prime contracts can sometimes indirectly benefit small businesses through their supply chains.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for monitoring performance, compliance, and financial aspects. The Defense Logistics Agency (DLA) as the awarding agency also maintains oversight responsibilities. Transparency is facilitated through contract award databases like FPDS. Inspector General (IG) investigations could be initiated if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Turbine Fuel Procurement
JP8 Fuel Supply
Fixed Price with Economic Price Adjustment Contracts
Department of Defense Energy Procurement

Risk Flags

Potential for price volatility due to EPA clause
Concentration of supply risk with a single large contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $186.2 million to EXXON MOBIL CORPORATION. INLAND EAST GULF CONTRACT FOR TURBINE FUEL, AVIATION JP8/JAA.

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 $186.2 million.

What is the period of performance?

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

What is ExxonMobil's track record with similar government fuel contracts?

ExxonMobil Corporation has a long history of supplying fuels, including aviation fuels like JP8, to government agencies, particularly the Department of Defense. They are a major global energy company with significant refining and distribution capabilities. Their track record typically includes numerous large-scale contracts for various fuel types, often awarded through competitive bidding processes. While specific performance metrics for past contracts are not detailed here, their continued success in securing substantial government awards suggests a generally reliable performance history. However, like any large contractor, there may have been instances of performance issues or disputes on specific contracts, which would require a deeper dive into contract performance databases and agency records for a comprehensive assessment.

How does the per-unit cost of this contract compare to market rates for JP8/JAA fuel during the contract period?

Determining the exact per-unit cost and comparing it to market rates is challenging without access to the specific pricing details within the contract and real-time market data for JP8/JAA fuel during the award period (late 2011 to late 2012). The contract uses an 'Economic Price Adjustment' (EPA) clause, which means the price per unit could fluctuate based on an index or formula tied to market prices. This structure aims to align the contract price with market conditions. To perform a true comparison, one would need to: 1) Extract the base price and EPA formula from the contract documents. 2) Obtain historical Platts or other industry-standard market price data for JP8/JAA fuel in the relevant geographic regions during the contract's performance period. 3) Calculate the effective per-unit cost under the EPA for different points in time. Without this granular data, a precise benchmark is not feasible based solely on the provided summary information.

What are the primary risks associated with the 'Fixed Price with Economic Price Adjustment' (EPA) contract type for aviation fuel?

The primary risk associated with a Fixed Price with Economic Price Adjustment (EPA) contract for aviation fuel is cost uncertainty for the government. While it protects the contractor from significant market downturns and aims to ensure supply by reflecting market realities, it means the final cost to the government can exceed the initial estimated price if fuel prices rise substantially. The EPA clause typically ties price adjustments to a specific index (e.g., a Department of Energy price index for jet fuel). If this index experiences sharp increases, the government's expenditure will escalate accordingly. Conversely, if prices fall, the government benefits from lower costs. Another risk is the administrative burden of tracking and verifying price adjustments according to the agreed-upon index and formula, ensuring that the adjustments are calculated correctly and fairly.

How does the scale of this $186 million contract compare to typical annual DoD spending on aviation fuels?

This $186 million contract represents a significant, albeit potentially short-term, procurement of aviation fuel. The Department of Defense is the largest consumer of fuel globally, with annual spending on all types of fuels often running into the tens of billions of dollars. Aviation fuels (like JP8, JP5, Jet A, etc.) constitute a substantial portion of this total. A single contract of this magnitude, awarded over a period of roughly 9 months, suggests it could be a major regional supply award or cover a specific surge requirement. However, it is likely one of many such contracts awarded throughout the year to meet the DoD's vast and continuous demand for aviation fuel across global operations. To contextualize it further, one would need to examine the DoD's overall annual budget allocation for fuel and the distribution of that spending across various contract types and durations.

What are the implications of awarding this contract to ExxonMobil, a single large entity, for market competition and supply chain resilience?

Awarding a contract of this size to a single large entity like ExxonMobil has mixed implications. On the positive side, major energy companies possess the infrastructure, capital, and expertise to reliably supply vast quantities of critical fuels like JP8/JAA, potentially enhancing supply chain resilience through their established global networks. Their scale can also lead to efficiencies. However, concentrating such a large award with one prime contractor can reduce opportunities for smaller, specialized fuel suppliers and potentially limit long-term market competition if such large awards become the norm. It also concentrates risk; a disruption at ExxonMobil (e.g., refinery issues, labor disputes, geopolitical events affecting their operations) could have a more significant impact on the DoD's fuel supply than if the requirement were distributed among multiple smaller contractors. The fact that it was awarded under 'full and open competition' suggests that other large players likely bid, but the ultimate award to one entity is a strategic choice based on best value.

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: 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: $186,230,508

Exercised Options: $186,230,508

Current Obligation: $186,230,508

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060012D0539

IDV Type: IDC

Timeline