DoD's $49.5M Marine Gas Oil contract awarded to Ship Supply of Florida, Inc. shows fair value

Contract Overview

Contract Amount: $49,470,561 ($49.5M)

Contractor: Ship Supply of Florida, Inc.

Awarding Agency: Department of Defense

Start Date: 2015-07-15

End Date: 2019-03-31

Contract Duration: 1,355 days

Daily Burn Rate: $36.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 32

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

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

Place of Performance

Location: AXIS, MOBILE County, ALABAMA, 36505, UNITED STATES OF AMERICA

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $49.5 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 $49.5M over 4 years suggests consistent demand for marine fuel. 2. Full and open competition indicates a healthy market with multiple potential suppliers. 3. Fixed Price with Economic Price Adjustment (FPEPA) contract type introduces some price volatility risk. 4. The contract's duration of 1355 days aligns with typical fuel supply agreements for naval operations. 5. Awarded by the Defense Logistics Agency, this contract supports critical maritime logistics. 6. The North American Industry Classification System (NAICS) code 424720 points to a specialized wholesale fuel market.

Value Assessment

Rating: good

The contract's total value of $49.5M over approximately 3.7 years suggests an average annual spend of around $13.4M. Benchmarking against similar fuel supply contracts for naval vessels is challenging without specific volume and delivery location data. However, the fixed-price with economic price adjustment structure aims to balance cost control for the government with market fluctuations for the contractor, indicating a reasonable approach to value preservation in a volatile commodity market.

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 presence of 32 bids indicates a robust competitive environment for this type of fuel supply. A high number of bidders generally suggests that the market is accessible and that suppliers are actively seeking government contracts, which can lead to more competitive pricing.

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

Public Impact

Naval vessels operating in and around the United States benefit from a reliable supply of marine gas oil. The contract ensures the operational readiness of maritime assets by providing essential fuel. The geographic impact is primarily focused on areas where naval operations require bunkering services, with Alabama listed as the state of the contractor. The contract supports jobs within the fuel supply and logistics sector, including those employed by Ship Supply of Florida, Inc. and its related supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'Economic Price Adjustment' clause introduces potential for cost increases if market prices for fuel rise significantly.
Reliance on a single contractor for a critical supply chain item, even with competition, can pose risks if unforeseen issues arise with the awardee.

Positive Signals

Awarded under 'Full and Open Competition' with 32 bids received, indicating a competitive market and broad supplier interest.
The contract duration of over three years suggests a stable, long-term relationship for a critical resource.
The Defense Logistics Agency's involvement points to established procurement processes and oversight for defense-related supplies.

Sector Analysis

The petroleum and petroleum products merchant wholesalers sector is a critical component of the energy industry, providing essential fuels for transportation and industrial use. The Defense Logistics Agency (DLA) is a major procurer within this sector, ensuring the logistical needs of the U.S. Armed Forces are met. This contract for Marine Gas Oil (MGO) fits within the broader category of fuel procurement for maritime operations, a significant segment of defense spending. Comparable spending benchmarks would involve analyzing other DLA fuel contracts or similar procurements by other government agencies for naval fuels.

Small Business Impact

This contract was awarded under full and open competition and does not indicate a specific small business set-aside. The presence of 32 bidders suggests that both large and potentially small businesses had the opportunity to compete. Further analysis would be needed to determine if small businesses were among the bidders or if subcontracting opportunities were mandated or utilized, which could impact the small business ecosystem.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract. As a component of the Department of Defense, DLA adheres to established procurement regulations and oversight mechanisms. Transparency is generally maintained through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Department of Defense Maritime Operations Support
Naval Vessel Fuel Supply Contracts
Petroleum Products Wholesale Distribution

Risk Flags

Potential for cost increases due to Economic Price Adjustment clause.
Reliance on a single awardee for a critical supply, despite competition.
Market volatility of petroleum products.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.5 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 $49.5 million.

What is the period of performance?

Start: 2015-07-15. End: 2019-03-31.

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

Historical spending on Marine Gas Oil (MGO) by the Department of Defense (DoD) is substantial, reflecting the operational needs of the U.S. Navy and other maritime forces. While specific figures for MGO alone can be difficult to isolate from broader fuel procurement data, the DoD is one of the largest consumers of petroleum products globally. Annual spending often runs into billions of dollars across all fuel types. Contracts like the one awarded to Ship Supply of Florida, Inc. for $49.5M represent a portion of this larger expenditure. Analyzing past contract awards for similar fuel types, durations, and quantities from the Defense Logistics Agency (DLA) would provide a clearer picture of spending trends, price fluctuations, and the number of competitors over time. This historical context is crucial for assessing whether the current contract represents a fair price and efficient use of taxpayer funds.

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

The Fixed Price with Economic Price Adjustment (FPEPA) pricing structure is common for commodity-based contracts, including fuel, where market prices can be volatile. This structure offers a baseline fixed price but allows for adjustments based on pre-defined economic indicators, typically linked to published fuel indices. Compared to a firm Fixed Price (FP) contract, FPEPA offers more protection to the contractor against significant market downturns, potentially leading to slightly higher initial bids but reducing the risk of contract renegotiations or defaults due to price spikes. Conversely, it provides less cost certainty for the government than a firm FP contract. Other common structures include Cost-Plus contracts, which are generally used for R&D or services where costs are uncertain, and Indefinite Delivery/Indefinite Quantity (IDIQ) contracts, which provide flexibility in ordering but may have varying pricing mechanisms. For fuel, FPEPA strikes a balance between cost certainty and market responsiveness.

What is the track record of Ship Supply of Florida, Inc. with federal contracts?

Ship Supply of Florida, Inc. has a history of receiving federal contracts, primarily through the Defense Logistics Agency (DLA) and other Department of Defense entities. A review of federal procurement data indicates multiple awards to the company for various fuel products, including marine gas oil and other petroleum-based supplies. These contracts often involve supply chain and delivery services to military installations and vessels. The company's consistent awards suggest a satisfactory performance history in meeting the government's requirements for fuel procurement and delivery. However, a comprehensive assessment would involve examining past performance evaluations, any instances of contract disputes, or corrective actions taken by the government, which are not always publicly detailed.

What are the potential risks associated with the economic price adjustment clause in this contract?

The primary risk associated with the Economic Price Adjustment (EPA) clause in this contract is the potential for increased costs to the government if the market price of Marine Gas Oil (MGO) rises significantly during the contract period. While EPA clauses are designed to reflect market realities and prevent contractors from being unduly penalized by price volatility, they can lead to budget uncertainty for the procuring agency. The specific formula or index used for adjustment is critical; if it closely tracks actual MGO prices, the government benefits from a more realistic cost reflecting market conditions. However, if the adjustment mechanism is broad or susceptible to speculative market movements, it could result in higher-than-anticipated expenditures. This necessitates careful monitoring of market trends and the EPA calculations to ensure fair pricing and fiscal responsibility.

How does the number of bidders (32) impact price discovery and value for money?

A high number of bidders, such as the 32 received for this Marine Gas Oil contract, generally signifies a robust and competitive market. This level of competition is highly beneficial for price discovery, as it encourages each bidder to offer their most competitive price to secure the award. When multiple capable suppliers vie for a contract, the government is more likely to obtain pricing that reflects true market value, minimizing the potential for overpayment. This scenario increases the likelihood that the lowest price technically acceptable or the best value proposal will be selected, directly contributing to better value for taxpayer money. Conversely, a low number of bidders might indicate market concentration or barriers to entry, potentially leading to less competitive pricing.

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: SP060014R0275

Offers Received: 32

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

Evaluated Preference: NONE

Contractor Details

Address: 10800 NW 103RD ST, STE 1, MIAMI, FL, 33178

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

Financial Breakdown

Contract Ceiling: $79,044,839

Exercised Options: $79,044,839

Current Obligation: $49,470,561

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060015D0379

IDV Type: IDC

Timeline