DoD's $30M petroleum contract awarded to Petroleum Traders Corp. shows fair value despite limited competition

Contract Overview

Contract Amount: $30,067,319 ($30.1M)

Contractor: Petroleum Traders Corp

Awarding Agency: Department of Defense

Start Date: 2012-06-01

End Date: 2015-06-30

Contract Duration: 1,124 days

Daily Burn Rate: $26.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 43

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: BDI, DS1, DS2, E85, FL2, GUR, MRR, TXU

Place of Performance

Location: FORT WAYNE, ALLEN County, INDIANA, 46804, UNITED STATES OF AMERICA

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $30.1 million to PETROLEUM TRADERS CORP for work described as: BDI, DS1, DS2, E85, FL2, GUR, MRR, TXU Key points: 1. The contract's fixed-price with economic price adjustment structure offers some cost certainty while allowing for market fluctuations. 2. Awarded under full and open competition, the contract saw 43 bids, indicating a healthy level of market interest. 3. The contract's duration of 1124 days suggests a need for sustained supply, typical for logistical operations. 4. The fixed-price nature, even with adjustments, aims to control costs for the Department of Defense. 5. The contract's value is moderate within the context of large-scale defense logistics. 6. The economic price adjustment clause is a key risk indicator, potentially increasing final costs based on market volatility.

Value Assessment

Rating: good

The contract's total value of approximately $30 million over three years suggests a moderate per-year spend. While specific benchmarking data for this exact petroleum product and delivery scope is not provided, the presence of 43 bids indicates a competitive environment that likely drove pricing towards market rates. The fixed-price with economic price adjustment (FPEPA) contract type is common for commodities where input costs can fluctuate significantly, aiming to balance risk between the government and the contractor.

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 bids. The high number of 43 bids received suggests robust market interest and a competitive landscape for this petroleum supply requirement. This level of competition is generally favorable for price discovery and achieving competitive pricing for the government.

Taxpayer Impact: A high number of bidders ensures that taxpayer dollars are likely being used efficiently, as contractors compete to offer the best price and terms.

Public Impact

This contract directly supports the Department of Defense's logistical operations by ensuring a steady supply of petroleum products. The primary beneficiaries are military personnel and operations that rely on fuel for transportation and equipment. The geographic impact is likely national, given the Defense Logistics Agency's role in supplying forces across various locations. The contract supports jobs within the petroleum refining and distribution sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost overruns if fuel prices spike unexpectedly.
Reliance on a single contractor for a critical commodity could pose supply chain risks if not managed proactively.
The fixed-price nature, even with adjustments, requires careful monitoring to ensure the government is not overpaying for fluctuating market conditions.

Positive Signals

Awarded under full and open competition with a significant number of bidders, indicating a competitive market.
The contract duration suggests a stable, long-term relationship that can foster efficiency.
The fixed-price component provides a baseline cost control measure.

Sector Analysis

The petroleum refining industry is a large and critical sector, essential for powering transportation, industry, and defense. This contract falls within the NAICS code 324110 (Petroleum Refineries). Spending in this sector by the government is substantial, particularly for defense logistics, ensuring operational readiness. Benchmarking this specific contract's value against broader industry spending requires detailed market analysis of petroleum commodity prices and distribution costs.

Small Business Impact

The provided data indicates that small business participation was not a specific set-aside criterion for this contract (sb: false). There is no explicit information on subcontracting plans for small businesses. Therefore, the direct impact on the small business ecosystem from this particular award is likely minimal unless the prime contractor voluntarily engages small businesses in its supply chain.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), ensuring compliance with contract terms and financial accountability. The Defense Logistics Agency (DLA) would also maintain oversight of the supply chain's effectiveness. Transparency is facilitated through contract award databases, though detailed performance metrics may not always be publicly available.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Department of Defense Petroleum Procurement
Fixed Price Contracts with Economic Price Adjustment
Petroleum Product Supply Contracts

Risk Flags

Economic Price Adjustment Clause
Potential for Price Volatility
Supply Chain Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $30.1 million to PETROLEUM TRADERS CORP. BDI, DS1, DS2, E85, FL2, GUR, MRR, TXU

Who is the contractor on this award?

The obligated recipient is PETROLEUM TRADERS CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $30.1 million.

What is the period of performance?

Start: 2012-06-01. End: 2015-06-30.

What is the historical spending pattern for petroleum products by the Department of Defense?

The Department of Defense is one of the largest consumers of petroleum products globally, essential for its vast operational footprint. Historical spending patterns reveal a consistent and significant allocation of funds towards fuel procurement to support military readiness, training, and deployment. This spending fluctuates based on geopolitical events, operational tempo, and global oil prices. The Defense Logistics Agency (DLA) manages the majority of these procurements, often through large-scale, multi-year contracts similar to the one awarded to Petroleum Traders Corp. Analyzing historical data shows a trend towards longer-term contracts to secure supply and manage price volatility, often utilizing economic price adjustment clauses to account for market fluctuations. The total annual spend can range in the billions of dollars, making fuel a critical and substantial line item in the defense budget.

How does the pricing of this contract compare to similar petroleum contracts awarded by the government?

Directly comparing the pricing of this $30 million contract to 'similar' petroleum contracts is challenging without access to specific unit prices, delivery locations, and the exact type of petroleum product. However, the contract's structure (Fixed Price with Economic Price Adjustment) is common for commodity-based procurements where market volatility is a significant factor. The presence of 43 bids suggests competitive pricing was sought and likely achieved, as a higher number of bidders generally leads to more favorable terms for the government. To perform a robust comparison, one would need to benchmark the economic price adjustment formula against historical fuel price indices and compare the base fixed price against prevailing market rates at the time of award for comparable grades and delivery terms.

What are the primary risks associated with this type of petroleum supply contract?

The primary risks associated with this Fixed Price with Economic Price Adjustment (FPEPA) petroleum supply contract include price volatility and supply chain disruptions. The economic price adjustment clause, while necessary to account for market fluctuations, exposes the government to potential cost increases if global petroleum prices rise significantly. This can lead to budget overruns if not adequately managed or hedged. Another risk is supply chain disruption, which could stem from geopolitical instability, natural disasters affecting production or transport, or issues with the contractor's operational capacity. Ensuring the contractor has robust contingency plans and diverse sourcing is crucial to mitigate these risks. Furthermore, the fixed-price component requires careful monitoring to ensure that the base price remains competitive and does not include excessive risk premiums.

What is the track record of Petroleum Traders Corp. in fulfilling government contracts?

Petroleum Traders Corp. has a history of engaging in government contracts, particularly within the energy and logistics sectors. While specific performance details for every contract are not always publicly detailed, their continued participation in competitive bidding processes suggests a satisfactory track record. Government contract databases often list awards and basic performance information. For a comprehensive assessment of their track record, one would need to review past performance evaluations, any reported contract disputes or terminations, and their history of on-time delivery and quality compliance across various federal agencies. Their ability to secure this $30 million Department of Defense contract indicates they met the necessary qualifications and demonstrated capability to fulfill such requirements.

How does the competition level (43 bidders) impact the value for money achieved in this contract?

The competition level of 43 bidders for this petroleum supply contract is a strong positive indicator for achieving value for money. A large number of bidders typically intensifies competition, driving down prices as companies vie for the award. This scenario allows the government to select the most cost-effective offer that meets all technical and performance requirements. It reduces the likelihood of paying inflated prices due to a lack of market alternatives. Furthermore, a competitive environment encourages contractors to be more efficient and responsive throughout the contract performance period, as they are aware that future contract opportunities may depend on their current performance. This high level of engagement suggests that the market is robust and capable of meeting the government's needs at competitive rates.

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: SP060012R0202

Offers Received: 43

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

Evaluated Preference: NONE

Contractor Details

Address: 7120 POINTE INVERNESS WAY, FORT WAYNE, IN, 46804

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Small Business, Special Designations, U.S.-Owned Business, Veteran Owned Business

Financial Breakdown

Contract Ceiling: $30,067,319

Exercised Options: $30,067,319

Current Obligation: $30,067,319

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060012D4520

IDV Type: IDC

Timeline