DoD's $31.2M Marine Gas Oil contract to Ship Supply of Florida shows fair competition and moderate risk

Contract Overview

Contract Amount: $31,205,486 ($31.2M)

Contractor: Ship Supply of Florida, Inc.

Awarding Agency: Department of Defense

Start Date: 2013-10-01

End Date: 2017-10-31

Contract Duration: 1,491 days

Daily Burn Rate: $20.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 13

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: MARINE GAS OIL (MGO) - DIRECT DELIVERY SHIPS' BUNKERS

Plain-Language Summary

Department of Defense obligated $31.2 million to SHIP SUPPLY OF FLORIDA, INC. for work described as: MARINE GAS OIL (MGO) - DIRECT DELIVERY SHIPS' BUNKERS Key points: 1. Contract value of $31.2 million over nearly 5 years indicates a significant but not excessive investment. 2. Full and open competition suggests a healthy market with multiple potential suppliers. 3. Fixed Price with Economic Price Adjustment (FPEPA) contract type introduces some risk of cost escalation. 4. The contract falls within the Petroleum and Petroleum Products Merchant Wholesalers sector. 5. Defense Logistics Agency (DLA) is a major procurer of fuel products for military operations. 6. The contract duration of 1491 days (approx. 4 years) is typical for sustained supply needs.

Value Assessment

Rating: good

The contract's total value of $31.2 million over 1491 days averages approximately $20,929 per day. Without specific benchmarks for MGO delivery to ships, it's difficult to definitively assess value for money. However, the fixed-price with economic price adjustment structure suggests an attempt to balance cost certainty with market volatility. The number of offers (13) indicates a competitive environment that likely kept prices in check.

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 solicitation received 13 offers, indicating a robust level of competition for this fuel supply requirement. A higher number of bidders generally leads to better price discovery and potentially lower costs for the government.

Taxpayer Impact: The extensive competition for this contract is beneficial for taxpayers as it likely drove down prices and ensured the government received competitive market rates for the marine gas oil.

Public Impact

Naval and other maritime vessels operated by the Department of Defense benefit from a reliable supply of marine gas oil. The contract ensures the operational readiness of vessels requiring MGO for propulsion and power generation. Geographic impact is likely concentrated around naval bases and ports where the DLA manages fuel distribution. The contract supports jobs within the fuel supply and logistics sector, including those involved in the transportation and handling of petroleum products.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if fuel prices increase significantly.
Reliance on a single contractor for a critical supply like fuel carries inherent logistical risks.
The fixed-price nature, even with adjustments, may not fully insulate against extreme market fluctuations.

Positive Signals

Full and open competition suggests a healthy market and potential for competitive pricing.
The Defense Logistics Agency's experience in managing fuel contracts implies established processes and oversight.
A significant number of offers (13) indicates strong contractor interest and a competitive landscape.

Sector Analysis

This contract falls within the broader energy sector, specifically the wholesale distribution of petroleum products. The market for marine fuels is global and subject to significant price volatility influenced by geopolitical events and supply/demand dynamics. The Defense Logistics Agency is a primary entity responsible for procuring fuel for all branches of the U.S. military, making this contract a standard, albeit substantial, part of their operational support.

Small Business Impact

There is no indication that this contract included small business set-asides. Given the scale and nature of fuel supply contracts, prime contractors are often large, established entities. Subcontracting opportunities for small businesses might exist in areas like transportation or local distribution, but this is not explicitly detailed in the provided data.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract. As a major contracting agency, DLA has established procurement regulations and quality assurance procedures. Transparency is generally maintained through contract award databases like FPDS. Inspector General oversight would apply if any issues of fraud, waste, or abuse were identified.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Military Sealift Command Fueling Operations
Department of Defense Energy Contracts
Marine Bunker Fuel Supply

Risk Flags

Potential for cost escalation due to economic price adjustment clause.
Dependence on a single supplier for a critical resource.
Market volatility in petroleum prices could impact budget predictability.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.2 million to SHIP SUPPLY OF FLORIDA, INC.. MARINE GAS OIL (MGO) - DIRECT DELIVERY SHIPS' BUNKERS

Who is the contractor on this award?

The obligated recipient is SHIP SUPPLY OF FLORIDA, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $31.2 million.

What is the period of performance?

Start: 2013-10-01. End: 2017-10-31.

What is the historical spending pattern for Marine Gas Oil (MGO) by the Department of Defense?

Historical spending on MGO by the Department of Defense (DoD) can be substantial, reflecting the operational needs of its naval fleet and other maritime assets. While this specific contract accounts for $31.2 million over approximately four years, the DoD's total annual expenditure on various fuel types, including MGO, can run into billions of dollars. Analyzing historical data from sources like the Federal Procurement Data System (FPDS) would reveal trends in contract values, quantities procured, and pricing fluctuations over time. Factors such as fleet size, operational tempo, and global fuel market conditions significantly influence these spending patterns. Understanding these historical trends is crucial for budgeting, forecasting future needs, and identifying potential cost-saving opportunities through strategic sourcing and contract negotiation.

How does the pricing of this MGO contract compare to market rates or similar government contracts?

Direct comparison of this contract's pricing to specific market rates for Marine Gas Oil (MGO) is challenging without access to real-time market data and the specific economic price adjustment formula used. However, the contract's award under full and open competition with 13 offers suggests that the pricing achieved was likely competitive within the market at the time of award. Government contracts for fuel often include economic price adjustment clauses to account for market volatility, which can make direct year-over-year comparisons complex. Benchmarking against other DLA fuel contracts or similar fixed-price with economic price adjustment contracts for petroleum products could provide a more relevant comparison. The average daily cost implied by the contract value ($20,929/day) needs to be contextualized with the volume of MGO procured to assess per-unit cost-effectiveness.

What are the primary risks associated with a Fixed Price with Economic Price Adjustment (FPEPA) contract for fuel?

The primary risks associated with a Fixed Price with Economic Price Adjustment (FPEPA) contract for fuel revolve around price volatility and cost certainty. While the 'fixed price' component provides a baseline, the 'economic price adjustment' allows for changes based on an index or formula, typically tied to market fuel prices. This means the government bears the risk of significant price increases if market conditions deteriorate, potentially leading to budget overruns. Conversely, the contractor is protected from substantial losses due to price drops. For the government, managing this risk involves careful selection of the adjustment index, setting appropriate caps or floors on adjustments, and robust monitoring of market trends to anticipate potential cost escalations. Effective oversight is crucial to ensure the adjustments are applied correctly and fairly.

What is the track record of Ship Supply of Florida, Inc. in fulfilling government contracts, particularly for fuel?

Ship Supply of Florida, Inc. has a history of receiving government contracts, primarily within the Department of Defense, related to the supply of fuel and ship services. Examining their performance history through contract databases and past performance reviews would provide a clearer picture of their reliability and execution capabilities. While this specific contract award indicates they were selected through a competitive process, their broader track record would encompass factors like on-time delivery, quality of product, adherence to contract terms, and responsiveness to issues. A review of past performance evaluations, if publicly available, would be the most direct way to assess their capabilities and identify any potential concerns or strengths relevant to fulfilling large-scale fuel supply agreements.

How does the Defense Logistics Agency (DLA) ensure the quality and timely delivery of fuel under contracts like this?

The Defense Logistics Agency (DLA) employs several mechanisms to ensure the quality and timely delivery of fuel. This includes establishing stringent product specifications in the contract, requiring quality control testing by the contractor, and often conducting independent government testing. For delivery, DLA utilizes a network of distribution facilities and relies on robust logistical planning and tracking systems. Contract officers and quality assurance representatives are assigned to monitor contractor performance, conduct site visits, and address any deviations from contract requirements promptly. Performance metrics and reporting requirements are built into the contract to provide ongoing visibility into delivery schedules and product quality, allowing for early intervention if issues arise.

What is the strategic importance of securing reliable MGO supply for the Department of Defense?

The reliable supply of Marine Gas Oil (MGO) is strategically critical for the Department of Defense (DoD) as it fuels a significant portion of its maritime operations. MGO is essential for the propulsion and power generation of numerous naval vessels, including smaller combatants, auxiliaries, and support ships. Ensuring a consistent and readily available supply of MGO directly impacts the operational readiness and global reach of the U.S. Navy and other maritime forces. Disruptions in MGO supply could severely hamper deployment capabilities, mission effectiveness, and response times to crises. Therefore, securing these supply chains through robust contracting mechanisms like this one is a fundamental aspect of national security and maintaining military superiority at sea.

Industry Classification

NAICS: Wholesale Trade › Petroleum and Petroleum Products Merchant Wholesalers › Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)

Product/Service Code: FUELS, LUBRICANTS, OILS, WAXES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060013R0203

Offers Received: 13

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

Evaluated Preference: NONE

Contractor Details

Address: 15065 NW 7TH AVE, MIAMI, FL, 90

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

Financial Breakdown

Contract Ceiling: $31,205,486

Exercised Options: $31,205,486

Current Obligation: $31,205,486

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060013D0351

IDV Type: IDC

Timeline