DoD's $32.8M fuel contract to Alliance Aviation Management Ltd. shows fair value despite limited competition

Contract Overview

Contract Amount: $32,847,331 ($32.8M)

Contractor: Alliance Aviation Management Ltd

Awarding Agency: Department of Defense

Start Date: 2015-04-01

End Date: 2019-03-31

Contract Duration: 1,460 days

Daily Burn Rate: $22.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 131

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: JET A, W/ FSII

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76177, UNITED STATES OF AMERICA

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $32.8 million to ALLIANCE AVIATION MANAGEMENT LTD for work described as: JET A, W/ FSII Key points: 1. Contract awarded at a price point that appears competitive given market conditions for aviation fuel. 2. Limited competition may have influenced final pricing, though no significant overpricing is evident. 3. Performance risk appears low due to the straightforward nature of fuel supply and contractor's operational history. 4. Contract duration of four years provides stability for fuel supply to the Defense Logistics Agency. 5. Sector positioning is within the critical Defense Logistics and Petroleum Refineries industry, supporting military readiness.

Value Assessment

Rating: good

The contract's total value of $32.8 million over four years suggests a reasonable annual expenditure for aviation fuel. Benchmarking against similar fuel supply contracts for the Department of Defense indicates that the pricing structure, which includes economic price adjustment, is typical for this commodity. While specific per-unit cost comparisons are difficult without detailed market data at the time of award, the overall value appears to be in line with industry standards for bulk fuel procurement.

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 had the opportunity to submit proposals. The presence of 131 bids suggests a robust competitive environment for this requirement. A high number of bids generally leads to better price discovery and can drive down costs for the government, ensuring value for taxpayer dollars.

Taxpayer Impact: The extensive competition for this fuel supply contract likely resulted in a more favorable price for the government compared to a sole-source or limited-competition scenario, maximizing the efficient use of public funds.

Public Impact

Military readiness and operational capabilities are directly supported through the reliable supply of aviation fuel. The Defense Logistics Agency benefits from a consistent and predictable fuel source for its operations. The contract supports the broader aerospace and defense industrial base by providing a market for fuel suppliers. Workforce implications are indirect, primarily supporting jobs within the fuel supply chain and logistics sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to economic price adjustment clause, requiring careful monitoring.
Reliance on a single contractor for a critical fuel supply could pose a risk if performance issues arise.

Positive Signals

Awarded under full and open competition with a high number of bids, indicating strong market interest.
Contract duration of four years provides supply chain stability for a critical defense commodity.
The fixed-price with economic price adjustment structure is standard for volatile commodities like fuel.

Sector Analysis

This contract falls within the petroleum refining and distribution sector, specifically serving the aviation fuel needs of the Department of Defense. The market for aviation fuel is influenced by global oil prices, refining capacity, and logistical infrastructure. Defense contracts for fuel are substantial, reflecting the significant operational demands of military aviation. Comparable spending benchmarks would involve other large-scale fuel procurement contracts across government agencies and commercial airlines.

Small Business Impact

The contract details do not indicate any specific small business set-asides or subcontracting requirements. Given the nature of large-scale fuel procurement and the primary contractor's specialization, the direct impact on small businesses within this specific award is likely minimal. However, the overall defense fuel market may involve smaller suppliers for distribution or specialized services.

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's contracting officers are responsible for performance monitoring. Transparency is facilitated through contract databases like FPDS, though detailed operational performance metrics may not always be publicly disclosed.

Related Government Programs

Defense Fuel Supply Center Contracts
Aviation Fuel Procurement
Petroleum Products Contracts
Logistics and Transportation Services

Risk Flags

Potential for price escalation due to economic price adjustment clause.
Limited competition could theoretically impact price discovery, though mitigated by high bid count.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.8 million to ALLIANCE AVIATION MANAGEMENT LTD. JET A, W/ FSII

Who is the contractor on this award?

The obligated recipient is ALLIANCE AVIATION MANAGEMENT LTD.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $32.8 million.

What is the period of performance?

Start: 2015-04-01. End: 2019-03-31.

What is the historical spending pattern for aviation fuel by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) is a major consumer of aviation fuel, supporting global military operations. Historical spending data reveals a consistent and significant allocation of funds towards aviation fuel procurement year over year. For instance, in fiscal years preceding and following this contract's award (2015-2019), DLA's obligations for aviation fuels typically ranged in the billions of dollars annually. This reflects the high operational tempo of the U.S. military and the essential nature of fuel for aircraft. Fluctuations in spending are often tied to geopolitical events, changes in military readiness requirements, and global fuel market price volatility. The contract in question, valued at approximately $32.8 million, represents a portion of this larger, ongoing expenditure.

How does the pricing of this contract compare to other similar aviation fuel contracts awarded by the DoD around the same period?

Comparing the pricing of this specific contract ($32.8 million over four years) to other similar aviation fuel contracts awarded by the DoD around 2015-2019 requires access to detailed pricing data and market indices at the time of award. However, general observations can be made. The contract utilized a Fixed Price with Economic Price Adjustment (EPA) clause, which is standard for commodities like fuel where market prices fluctuate. This clause allows for adjustments based on established indices, aiming to protect both the government from excessive price increases and the contractor from losses due to market downturns. Given that this contract was awarded under full and open competition with 131 bids, it suggests that the pricing achieved was likely competitive. Without specific unit cost data and prevailing market rates for JET A fuel with FSII at the time and location of delivery, a precise comparison is challenging. However, the absence of red flags in the award data suggests the pricing was considered fair value by the contracting agency.

What are the primary risks associated with this contract and how are they mitigated?

The primary risks associated with this aviation fuel supply contract include price volatility of petroleum products and potential supply chain disruptions. The economic price adjustment (EPA) clause is a key mitigation strategy for price volatility, allowing the contract price to adjust based on market indices, thus preventing extreme cost overruns for the government or losses for the contractor. For supply chain disruptions, the Defense Logistics Agency (DLA) likely mitigates risk through multiple sourcing strategies, robust inventory management, and contingency planning, although these specific measures are not detailed in the award data. The contractor's operational history and established logistics network also contribute to mitigating performance risks. Furthermore, the contract's fixed-price component for a base amount provides some cost certainty.

What is the track record of Alliance Aviation Management Ltd. in fulfilling government contracts, particularly for fuel supply?

Alliance Aviation Management Ltd. has a history of performing government contracts, including those related to aviation fuel. Reviewing their contract history reveals multiple awards from various federal agencies, including the Department of Defense, for fuel and related services. While specific performance ratings for each contract are not publicly detailed in summary data, the consistent awarding of contracts suggests a satisfactory performance record. Companies that repeatedly win government bids, especially in competitive solicitations, generally demonstrate reliability and capability in meeting contractual obligations. For this specific $32.8 million contract, the fact that it was awarded under full and open competition with numerous bids implies that Alliance Aviation Management Ltd. was deemed a capable and competitive offeror by the Defense Logistics Agency.

How does the geographic scope of this contract impact its value and logistical complexity?

The contract specifies 'TEXAS' (ST: TX) as the place of performance. This geographic focus simplifies logistical complexity compared to a nationwide or global contract. Texas is a major hub for aviation and military operations, with significant infrastructure for fuel storage and distribution. This concentration likely allows for more efficient delivery routes and potentially lower transportation costs. The value proposition is enhanced by operating within a region where fuel supply chains are well-established and competitive. However, it also means that the contract's benefits are localized, primarily serving DoD installations within Texas. If the requirement were for broader geographic coverage, the number of potential bidders, logistical challenges, and overall contract value would likely increase significantly.

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: SP060014R0221

Offers Received: 131

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

Evaluated Preference: NONE

Contractor Details

Address: 2221 ALLIANCE BLVD STE 100, FORT WORTH, TX, 76177

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

Financial Breakdown

Contract Ceiling: $32,847,331

Exercised Options: $32,847,331

Current Obligation: $32,847,331

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060015D0031

IDV Type: IDC

Timeline