DoD spent $362.6M on aviation fuel, with Equilon Enterprises LLC awarded the contract

Contract Overview

Contract Amount: $362,618,637 ($362.6M)

Contractor: Equilon Enterprises LLC

Awarding Agency: Department of Defense

Start Date: 2013-06-25

End Date: 2014-06-30

Contract Duration: 370 days

Daily Burn Rate: $980.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 14

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: AVIATION TURBINE FUEL JP8/JAA

Place of Performance

Location: HOUSTON, HARRIS County, TEXAS, 77002

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $362.6 million to EQUILON ENTERPRISES LLC for work described as: AVIATION TURBINE FUEL JP8/JAA Key points: 1. The contract value represents a significant investment in a critical aviation fuel supply. 2. Competition dynamics for this fuel contract are important for ensuring fair pricing. 3. The fixed-price with economic price adjustment structure introduces potential cost volatility. 4. Performance context is crucial to understand the reliability of fuel delivery. 5. This contract positions the Defense Logistics Agency within the broader energy and fuel sector.

Value Assessment

Rating: fair

The total award of $362.6 million for aviation turbine fuel is substantial. Benchmarking this against similar fuel contracts is challenging without more specific details on volume, delivery locations, and contract duration. The economic price adjustment clause introduces a variable that can impact the final cost, making a direct comparison to fixed-price contracts difficult. The contract's value suggests a large-scale procurement, likely for widespread operational needs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The presence of 14 bids suggests a healthy level of interest and competition for this fuel supply contract. This broad competition is generally expected to drive more competitive pricing and better terms for the government.

Taxpayer Impact: Full and open competition typically benefits taxpayers by fostering a marketplace where the most cost-effective offers are likely to be selected, potentially leading to savings compared to less competitive procurement methods.

Public Impact

The Department of Defense is the primary beneficiary, ensuring a consistent supply of critical aviation fuel for its operations. Services delivered include the provision of JP8/JAA aviation turbine fuel. The geographic impact is likely widespread, supporting military aviation activities across various bases and deployment locations. Workforce implications are minimal for the contracting agency but significant for the supplier's operations and logistics.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if fuel prices increase significantly beyond projections.
Reliance on a single primary contractor for such a large volume of fuel could pose supply chain risks.
The specific performance metrics and penalties for non-compliance are not detailed, which could impact accountability.

Positive Signals

Awarded under full and open competition, suggesting a robust bidding process.
The contract value indicates a significant volume of fuel procured, meeting substantial operational demands.
The fixed-price component provides some cost certainty, despite the economic adjustment.

Sector Analysis

This contract falls within the energy and utilities sector, specifically focusing on the procurement of aviation fuel. The market for aviation fuels is dominated by a few large suppliers, and government contracts represent a significant portion of demand. The Defense Logistics Agency (DLA) is a major player in procuring fuel for military operations, often leveraging large-scale contracts to ensure supply chain security and cost-effectiveness. Comparable spending benchmarks would involve analyzing other large fuel contracts awarded by government agencies or major commercial airlines.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, and the prime contractor, Equilon Enterprises LLC, is a large entity. There is no explicit information on subcontracting plans for small businesses within this award. Therefore, the direct impact on the small business ecosystem from this specific prime contract appears limited, though large fuel suppliers may engage small businesses in their broader supply chains.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA) contracting officers and program managers. Accountability measures would be defined in the contract terms, including delivery schedules, quality specifications, and potential penalties for non-performance. Transparency is generally maintained through contract award databases, though specific performance details and audits may not always be publicly accessible. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Military Aviation Operations Support
Petroleum Product Supply Contracts
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment Clause
Potential Supply Chain Vulnerability
Contract Duration and Scope

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $362.6 million to EQUILON ENTERPRISES LLC. AVIATION TURBINE FUEL JP8/JAA

Who is the contractor on this award?

The obligated recipient is EQUILON ENTERPRISES LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $362.6 million.

What is the period of performance?

Start: 2013-06-25. End: 2014-06-30.

What is the historical spending pattern for aviation turbine fuel by the Department of Defense over the last five years?

Historical spending on aviation turbine fuel by the Department of Defense (DoD) has been substantial, reflecting the critical role of air power in military operations. While specific figures fluctuate annually based on operational tempo, global deployments, and fuel market prices, the DoD consistently procures billions of dollars worth of aviation fuels each year. For instance, in fiscal years preceding and following this 2013-2014 contract, annual spending has often ranged between $5 billion and $10 billion, sometimes exceeding these figures during periods of heightened conflict or extensive training exercises. The Defense Logistics Agency (DLA) is the primary entity responsible for managing these procurements, often utilizing large, multi-year contracts similar to the one awarded to Equilon Enterprises LLC to ensure supply chain stability and leverage economies of scale. Analyzing trends reveals a sensitivity to global oil prices and geopolitical events, which can significantly impact the total expenditure.

How does the pricing structure (Fixed Price with Economic Price Adjustment) compare to other DoD fuel contracts?

The Fixed Price with Economic Price Adjustment (FPEPA) pricing structure is common for commodity contracts where input costs are volatile, such as petroleum products. Compared to a simple Fixed Price (FP) contract, FPEPA offers the government some cost certainty by fixing a base price, but it also allows for adjustments based on pre-defined economic indicators, typically linked to market indices for crude oil or refined products. This contrasts with FP contracts, where the price is fixed regardless of market fluctuations, potentially exposing the contractor to significant losses or the government to overpayment if market prices move unexpectedly. Conversely, FP contracts with Economic Price Adjustment (EPA) clauses can be more predictable for the government than cost-plus contracts, which reimburse the contractor for actual costs incurred plus a fee. For the DoD, FPEPA is often chosen for fuel contracts to balance the need for price stability with the reality of fluctuating global energy markets, aiming to secure supply while mitigating extreme price risks for both parties.

What are the key performance indicators (KPIs) typically included in aviation fuel supply contracts for the DoD?

Key Performance Indicators (KPIs) in aviation fuel supply contracts for the DoD are designed to ensure reliable delivery, quality, and adherence to specifications. Common KPIs include on-time delivery rates, ensuring fuel is available at designated locations precisely when needed for flight operations. Fuel quality is paramount, with KPIs often tied to meeting stringent military specifications (e.g., JP8 standards) verified through laboratory testing and certificates of analysis. Volume accuracy, ensuring the correct quantity of fuel is delivered, is another critical KPI. Furthermore, contracts may include KPIs related to safety and environmental compliance during handling and transportation. Performance is often measured against a baseline, with deviations triggering corrective actions or potential penalties. The Defense Contract Management Agency (DCMA) or DLA personnel typically monitor these KPIs throughout the contract period.

What is Equilon Enterprises LLC's track record with the Department of Defense for fuel supply contracts?

Equilon Enterprises LLC, often operating under the Shell brand, has a significant track record of supplying fuels, including to government entities like the Department of Defense. Their history includes numerous contracts for various fuel types, often awarded through competitive bidding processes. While specific performance details for every contract are not always public, Equilon's continued participation and success in winning large federal contracts suggest a generally reliable performance history and the capacity to meet stringent military requirements. Their experience encompasses complex logistics, quality assurance, and navigating the regulatory environment associated with government procurement. However, like any large supplier, past contracts may have involved minor disputes or performance reviews, which are standard in long-term, high-volume agreements. A comprehensive review would involve examining specific contract histories, including any reported issues or commendations.

How does the $362.6 million award compare to the total annual budget for aviation fuel within the DoD?

The $362.6 million award to Equilon Enterprises LLC for aviation turbine fuel represents a significant portion of the DoD's annual fuel budget, but it is not the entirety. The DoD's total annual expenditure on all types of fuel, including aviation, ground, and marine fuels, typically runs into the billions of dollars, often ranging from $5 billion to over $10 billion depending on global market conditions and operational demands. This specific contract, covering a defined period (June 2013 to June 2014), likely represents a substantial procurement for a particular region, type of fuel, or operational need. It's important to note that the DoD procures fuel through numerous contracts simultaneously, covering different fuel types, geographic areas, and timeframes. Therefore, while $362.6 million is a large sum, it is one component within a much larger, complex global fuel supply chain managed by the DoD.

What are the potential risks associated with a sole-source or limited competition award for critical fuel supplies?

While this contract was awarded under full and open competition, understanding the risks of sole-source or limited competition is relevant for context. In sole-source or limited competition scenarios for critical fuel supplies, the primary risks include significantly higher prices due to lack of competitive pressure, potentially reduced quality or service levels as the contractor faces less incentive to excel, and increased vulnerability in the supply chain. A single supplier may have less redundancy or be more susceptible to disruptions (e.g., facility issues, labor strikes, geopolitical events), which could jeopardize national security operations dependent on that fuel. Furthermore, limited competition can stifle innovation and prevent the government from benefiting from new technologies or more efficient supply methods that might be introduced by a broader range of potential bidders. This underscores the importance of maximizing competition whenever feasible for essential procurements.

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

Offers Received: 14

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Shell Deutschland Gmbh (UEI: 423792808)

Address: 910 LOUISIANA ST STE 2, HOUSTON, TX, 90

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $362,618,637

Exercised Options: $362,618,637

Current Obligation: $362,618,637

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060013D0463

IDV Type: IDC

Timeline