DoD spent $55M on marine gas oil, with 13 bids received under full and open competition

Contract Overview

Contract Amount: $55,051,708 ($55.1M)

Contractor: GT Global Services S.A.

Awarding Agency: Department of Defense

Start Date: 2013-10-01

End Date: 2017-10-31

Contract Duration: 1,491 days

Daily Burn Rate: $36.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 13

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

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

Plain-Language Summary

Department of Defense obligated $55.1 million to GT GLOBAL SERVICES S.A. for work described as: MARINE GAS OIL (MGO) - DIRECT DELIVERY SHIPS' BUNKERS Key points: 1. Contract awarded for a critical fuel commodity supporting naval operations. 2. The fixed-price with economic price adjustment structure aims to mitigate fuel price volatility. 3. A substantial number of bids (13) suggests a competitive market for this fuel type. 4. The contract duration of nearly five years indicates a long-term need for these services. 5. Analysis of unit pricing against market benchmarks is crucial for assessing value. 6. The Defense Logistics Agency's role highlights its importance in global fuel supply chains.

Value Assessment

Rating: good

The total award amount of $55 million over approximately four years for Marine Gas Oil (MGO) appears reasonable given the nature of fuel procurement for defense purposes. While specific unit price comparisons are not provided, the presence of 13 bidders in a full and open competition suggests that pricing was likely competitive. The economic price adjustment clause is a standard mechanism to account for market fluctuations in volatile commodity markets like petroleum, which can protect both the government and the contractor from extreme price swings. Benchmarking against similar MGO contracts awarded by the DLA or other military branches would provide a more precise assessment of value for money.

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 solicitation attracted 13 distinct bids, which is a healthy number and suggests a robust competitive environment for the supply of Marine Gas Oil. A higher number of bidders generally leads to more competitive pricing and a greater likelihood of the government securing favorable terms. The DLA's approach here likely ensured they received a wide range of offers, allowing for thorough evaluation and selection of the best value.

Taxpayer Impact: The extensive competition for this contract is beneficial for taxpayers as it likely drove down prices and ensured the government obtained the fuel at a fair market rate, maximizing the value of taxpayer dollars.

Public Impact

Naval forces operating globally benefit from a reliable supply of Marine Gas Oil. The contract ensures the availability of a critical fuel for ship propulsion and power generation. Geographic impact is global, supporting DoD operations wherever its fleet is deployed. The contract supports the logistics and supply chain workforce involved in fuel distribution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if fuel prices escalate significantly beyond projections.
Reliance on a single contractor for a critical commodity could pose supply chain risks if not managed diligently.
Ensuring consistent quality and timely delivery across potentially diverse operational environments requires robust oversight.

Positive Signals

Full and open competition indicates a healthy market and likely competitive pricing.
The fixed-price nature, even with adjustments, provides a baseline cost structure.
Awarding to GT Global Services S.A. suggests they met technical and performance requirements.
The contract's duration implies a stable, long-term relationship for a critical need.

Sector Analysis

The procurement of Marine Gas Oil falls within the broader energy sector, specifically the downstream petroleum products market. This market is characterized by global supply chains, price volatility influenced by geopolitical events and economic demand, and significant logistical challenges. The Defense Logistics Agency (DLA) is a major player in this space, responsible for procuring and distributing a vast array of fuels to support military operations worldwide. Comparable spending benchmarks would involve analyzing other large-scale fuel contracts awarded by the DLA or international defense organizations for similar products, considering factors like volume, delivery locations, and contract terms.

Small Business Impact

This contract does not appear to have a specific small business set-aside component, as indicated by 'sb': false. The award was made under full and open competition. However, the prime contractor, GT Global Services S.A., may engage small businesses for subcontracting opportunities related to logistics, transportation, or specialized services. The impact on the small business ecosystem would depend on the extent to which GT Global Services S.A. utilizes subcontracting and whether those opportunities are accessible to small businesses.

Oversight & Accountability

Oversight for this contract would primarily reside with the Defense Logistics Agency (DLA), which is responsible for managing and administering fuel contracts. Accountability measures are embedded within the contract terms, including performance standards, delivery schedules, and quality specifications. Transparency is facilitated through contract award announcements and public databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Fuel Supply Center Contracts
Marine Bunker Fuel Procurement
DoD Energy Logistics
Global Fuel Distribution Contracts

Risk Flags

Price Volatility Risk
Supply Chain Disruption
Contractor Performance Monitoring

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $55.1 million to GT GLOBAL SERVICES S.A.. MARINE GAS OIL (MGO) - DIRECT DELIVERY SHIPS' BUNKERS

Who is the contractor on this award?

The obligated recipient is GT GLOBAL SERVICES S.A..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $55.1 million.

What is the period of performance?

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

What is the historical spending trend for Marine Gas Oil by the Department of Defense over the last five fiscal years?

Analyzing historical spending trends for Marine Gas Oil (MGO) by the Department of Defense (DoD) requires accessing comprehensive procurement data. While specific figures for MGO alone are not readily available in summary form, the DoD's overall expenditure on fuels is substantial and fluctuates based on operational tempo, global deployments, and prevailing market prices. The DLA, as the primary fuel procurement agency, manages numerous contracts for various fuel types. Historically, MGO spending has been influenced by the Navy's operational requirements. In recent years, factors such as increased naval presence in strategic regions and shifts in energy markets have likely impacted MGO procurement volumes and costs. A detailed analysis would involve aggregating data from multiple contracts awarded by the DLA and other service branches for MGO, accounting for variations in contract duration, quantity, and economic price adjustments. This would reveal patterns in demand, identify periods of significant price volatility, and highlight the overall financial commitment to securing this critical fuel.

How does the unit price of MGO in this contract compare to market benchmarks or similar DoD contracts awarded around the same period?

A precise comparison of the unit price of Marine Gas Oil (MGO) in this $55 million contract to market benchmarks or similar DoD contracts requires access to the specific unit pricing data within the contract and contemporaneous market reports. The contract's structure includes an economic price adjustment (EPA) clause, meaning the final unit price varied over the contract's lifespan (October 2013 - October 2017) based on fluctuating market conditions. To perform a robust comparison, one would need to: 1. Extract the base unit price and the EPA formula from the contract documents. 2. Obtain historical MGO price data from reputable sources (e.g., Platts, Argus Media) for the relevant delivery regions and time periods. 3. Calculate the effective unit prices paid under the contract for representative periods. 4. Compare these calculated prices against the market benchmarks and potentially against unit prices from other DLA or DoD MGO contracts awarded concurrently. Without this granular data, a definitive assessment of value for money is challenging. However, the presence of 13 bidders in a full and open competition suggests that the initial pricing was likely competitive, and the EPA mechanism is designed to reflect market realities.

What are the primary risks associated with relying on GT Global Services S.A. for a critical fuel supply, and how are they mitigated?

The primary risks associated with relying on GT Global Services S.A. for Marine Gas Oil (MGO) supply include potential disruptions in delivery due to the contractor's financial stability, operational capacity, or geopolitical factors affecting their supply chain. There's also a risk related to quality control, ensuring the MGO consistently meets stringent military specifications. Furthermore, dependence on a single primary source, even with multiple bids initially, can reduce leverage if market conditions change unfavorably. Mitigation strategies typically employed by the Defense Logistics Agency (DLA) include rigorous vetting of contractors' financial health and performance history prior to award, establishing clear performance standards and penalties within the contract, requiring robust quality assurance plans from the contractor, and maintaining contingency plans for alternative sourcing or emergency supply. The economic price adjustment clause also serves to mitigate the risk of extreme price volatility for both parties. Regular performance reviews and open communication channels help in proactively addressing any emerging issues.

What is the significance of the 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' contract type for this MGO procurement?

The 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) contract type is significant for this Marine Gas Oil (MGO) procurement because it addresses the inherent volatility of petroleum product prices. In a standard Fixed Price (FP) contract, the government would pay a set price regardless of market fluctuations, exposing it to potential overpayment if prices fall or the contractor to losses if prices rise significantly. Conversely, a Cost Plus (CP) contract could lead to uncontrolled spending. FPEPA strikes a balance: it establishes a base price but includes a mechanism (the economic price adjustment) to automatically adjust the price based on a pre-defined index or formula tied to market prices of crude oil or refined products. This protects the government from excessive price increases while ensuring the contractor remains willing to supply the fuel by allowing them to recoup legitimate cost increases. For MGO, a commodity subject to global market forces, this contract type is crucial for achieving a fair price and ensuring a stable supply chain over the contract's duration.

How does the number of bidders (13) in this full and open competition reflect the market competitiveness for ship bunker fuels?

The fact that 13 bids were received for this Marine Gas Oil (MGO) contract under full and open competition suggests a relatively healthy and competitive market for ship bunker fuels, at least within the operational regions served by this contract. A higher number of bidders generally indicates that multiple suppliers are capable of meeting the government's requirements (volume, quality, delivery locations) and are willing to compete for the business. This level of competition typically leads to more favorable pricing for the buyer, as suppliers must offer competitive terms to win the contract. It also suggests that the barriers to entry for supplying MGO to the DoD are not prohibitively high for established players in the global fuel market. However, the true measure of competition also depends on the diversity of the bidders (e.g., were they all major international players, or did it include smaller regional suppliers?) and the specific geographic scope of the requirement.

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: AVENIDA SAMUEL LEWIS Y CALLE 53, MEZZANINNE OMEGA BLG, PANAMA

Business Categories: Category Business, Corporate Entity Tax Exempt, Foreign Owned, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $55,051,708

Exercised Options: $55,051,708

Current Obligation: $55,051,708

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060013D0352

IDV Type: IDC

Timeline