DoD's $63.6M fuel contract for Southeast US saw 27 bids, but price adjustments raise value concerns

Contract Overview

Contract Amount: $63,627,504 ($63.6M)

Contractor: Petroleum Traders Corp

Awarding Agency: Department of Defense

Start Date: 2013-10-01

End Date: 2016-10-31

Contract Duration: 1,126 days

Daily Burn Rate: $56.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 27

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: ULTRA LOW SULFUR DIESEL, GASOLINE, BIODIESEL AND ETHANOL DELIVERED TO VARIOUS INSTALLATIONS AND FEDERAL CIVILIAN ACTIVITIES IN THE SOUTHEAST US.

Place of Performance

Location: FORT WAYNE, ALLEN County, INDIANA, 46804

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $63.6 million to PETROLEUM TRADERS CORP for work described as: ULTRA LOW SULFUR DIESEL, GASOLINE, BIODIESEL AND ETHANOL DELIVERED TO VARIOUS INSTALLATIONS AND FEDERAL CIVILIAN ACTIVITIES IN THE SOUTHEAST US. Key points: 1. Contract awarded to Petroleum Traders Corp for fuel delivery across the Southeast US. 2. The contract utilized full and open competition, attracting a significant number of bids. 3. Economic price adjustment clauses introduce potential for cost escalation beyond initial estimates. 4. The contract duration spans over three years, indicating a substantial commitment. 5. Analysis of unit pricing and comparison to market benchmarks is crucial for value assessment. 6. The Defense Logistics Agency managed this procurement, highlighting its role in fuel supply chain management.

Value Assessment

Rating: fair

The contract's total value of $63.6 million over three years suggests a significant volume of fuel procurement. However, the inclusion of economic price adjustment (EPA) clauses warrants careful scrutiny. While EPA clauses can protect contractors from volatile market conditions, they also introduce uncertainty for the government regarding the final cost. Benchmarking the initial awarded prices against historical fuel prices and similar contracts from the Defense Logistics Agency (DLA) would be necessary to determine if the government secured competitive pricing, especially considering the potential for price increases.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, which is a positive indicator for price discovery. The presence of 27 bids suggests a robust market response and a competitive environment. A high number of bidders typically pressures prices downward and encourages more favorable terms for the government. The specific details of the bidding process and the range of prices submitted would provide further insight into the effectiveness of the competition in achieving the best value.

Taxpayer Impact: The extensive competition for this fuel contract likely resulted in a more favorable price for taxpayers compared to a sole-source or limited competition scenario. This broad participation helps ensure that taxpayer funds are used efficiently by driving down costs through market forces.

Public Impact

Military installations and federal civilian activities in the Southeast US benefit from a reliable supply of essential fuels. The contract ensures operational readiness for various government functions requiring fuel. Geographic impact is concentrated in the Southeast US, supporting regional federal operations. The contract supports the broader energy sector through the procurement of petroleum products.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses introduce uncertainty regarding the final cost to taxpayers.
Lack of specific unit cost data makes direct value-for-money assessment challenging without further benchmarking.
The long contract duration could expose the government to prolonged periods of potentially unfavorable pricing if market conditions shift significantly.

Positive Signals

Awarded under full and open competition, indicating a competitive bidding process.
A high number of bidders (27) suggests strong market interest and potential for competitive pricing.
The contract supports critical federal operations by ensuring fuel availability.

Sector Analysis

The petroleum refining and distribution sector is a critical component of the national infrastructure, supporting both commercial and government operations. This contract falls within the broader energy sector, specifically focusing on the supply of refined petroleum products. The market for such fuels is subject to global commodity prices and geopolitical factors. Comparable spending benchmarks would involve analyzing other DLA fuel contracts or similar large-scale energy procurements by federal agencies to assess cost-effectiveness.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions or subcontracting requirements for this contract. Therefore, the direct impact on the small business ecosystem is not explicitly detailed. However, large prime contractors often engage small businesses for support services, which could indirectly benefit them.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract, ensuring compliance with terms and conditions. Standard government contracting oversight mechanisms, including performance monitoring and payment reviews, would be in place. Transparency is generally maintained through contract award databases, though detailed performance metrics and specific oversight activities may not be publicly disclosed.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Southeast US Federal Fuel Procurement
Petroleum Product Supply Contracts
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment Clauses
Potential for Cost Overruns
Lack of Specific Unit Cost Data for Benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $63.6 million to PETROLEUM TRADERS CORP. ULTRA LOW SULFUR DIESEL, GASOLINE, BIODIESEL AND ETHANOL DELIVERED TO VARIOUS INSTALLATIONS AND FEDERAL CIVILIAN ACTIVITIES IN THE SOUTHEAST US.

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 $63.6 million.

What is the period of performance?

Start: 2013-10-01. End: 2016-10-31.

What was the historical spending pattern for this type of fuel procurement by the Defense Logistics Agency in the Southeast US prior to this contract?

Analyzing historical spending for similar fuel procurements by the Defense Logistics Agency (DLA) in the Southeast US prior to this contract (2013-2016) would provide crucial context for evaluating the current contract's value. This would involve examining contract award databases for previous fuel supply agreements, noting their duration, total value, number of bidders, and pricing structures. Understanding past price trends, the impact of economic price adjustments in prior contracts, and the typical number of bidders for such requirements would help determine if the $63.6 million awarded amount is consistent with historical norms or represents an increase or decrease. This historical perspective is vital for identifying potential anomalies, assessing the effectiveness of competition over time, and understanding the baseline against which the current contract's performance should be measured.

How did the economic price adjustment (EPA) clauses in this contract function, and what was the actual price variance experienced by the government?

The economic price adjustment (EPA) clauses in this contract allowed for modifications to the base price based on fluctuations in specified economic indicators, likely related to fuel market indices. These clauses are designed to protect both the contractor from unforeseen cost increases and the government from paying excessively if market prices fall. To assess the actual price variance, one would need to examine contract modification records and payment histories. This would reveal how often the price was adjusted, the magnitude of those adjustments (both increases and decreases), and the final effective price paid by the government for the fuel. Without this detailed post-award data, it is difficult to definitively state whether the EPA clauses ultimately benefited or harmed the government's financial interests in this specific contract.

What was the average unit price paid for the fuels under this contract, and how does it compare to market benchmarks at the time of delivery?

Determining the average unit price paid for the fuels under this contract requires access to detailed delivery and payment records, which are not fully available in the provided summary data. If such data were accessible, the average unit price could be calculated by dividing the total amount paid for each fuel type (e.g., diesel, gasoline, biodiesel, ethanol) by the quantity delivered. This calculated average unit price would then need to be compared against relevant market benchmarks. These benchmarks could include published indices for wholesale fuel prices in the Southeast US (e.g., EIA data), prices from comparable federal contracts awarded around the same period, or commercial bulk fuel pricing. A significant deviation from market benchmarks, especially if the EPA clauses led to prices consistently above market rates, would indicate potential value concerns for the government.

What is the track record of Petroleum Traders Corp in fulfilling similar large-scale fuel supply contracts for the Department of Defense or other federal agencies?

Assessing the track record of Petroleum Traders Corp (PTC) in fulfilling similar large-scale fuel supply contracts is crucial for understanding their reliability and performance history. This would involve reviewing past contract awards to PTC from the Department of Defense (DoD) and other federal agencies, focusing on contracts for petroleum products. Key performance indicators to examine would include on-time delivery rates, quality compliance, responsiveness to issues, and any history of contract disputes, terminations, or penalties. Information on their financial stability and capacity to manage large volumes of fuel would also be relevant. A positive track record with previous, comparable contracts would suggest a lower performance risk for this current award, while a history of issues might raise concerns about PTC's ability to meet the demands of this $63.6 million contract effectively.

How does the number of bidders (27) on this contract compare to the average number of bids received for similar fuel procurements by the Defense Logistics Agency?

Comparing the 27 bids received for this fuel contract to the average number of bids for similar procurements by the Defense Logistics Agency (DLA) provides insight into the level of competition. If the average for comparable DLA fuel contracts is significantly lower, it suggests that this particular solicitation was highly attractive to the market, potentially due to favorable terms, market conditions, or the strategic importance of the requirement. Conversely, if 27 bids is typical or even low, it might indicate that the market for such services is generally robust. A higher number of bids generally correlates with better price competition and a greater likelihood of the government securing favorable terms, thus enhancing value for taxpayers. Analyzing this metric against historical DLA data helps contextualize the competitive landscape for this specific award.

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: 27

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

Evaluated Preference: NONE

Contractor Details

Address: 7120 POINTE INVERNESS WAY, FORT WAYNE, IN, 03

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

Financial Breakdown

Contract Ceiling: $63,627,504

Exercised Options: $63,627,504

Current Obligation: $63,627,504

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060013D8523

IDV Type: IDC

Timeline