DOE awards $20.5M contract for Northeast Heating Oil Reserve storage to HESS CORPORATION
Contract Overview
Contract Amount: $20,498,647 ($20.5M)
Contractor: Hess Corporation
Awarding Agency: Department of Energy
Start Date: 2007-10-01
End Date: 2011-09-30
Contract Duration: 1,460 days
Daily Burn Rate: $14.0K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 3
Pricing Type: FIRM FIXED PRICE
Sector: Other
Official Description: STORAGE OF NORTHEAST HEATING OIL RESERVE
Place of Performance
Location: WOODBRIDGE, MIDDLESEX County, NEW JERSEY, 07095
Plain-Language Summary
Department of Energy obligated $20.5 million to HESS CORPORATION for work described as: STORAGE OF NORTHEAST HEATING OIL RESERVE Key points: 1. Contract value appears reasonable for a multi-year storage service. 2. Full and open competition suggests a competitive bidding process. 3. Contract duration of 4 years provides stability for service provision. 4. Fixed-price contract shifts risk to the contractor. 5. Geographic location in New Jersey is strategic for the reserve. 6. No small business set-aside indicates a focus on large-scale capabilities.
Value Assessment
Rating: good
The contract value of $20.5 million over four years for storing the Northeast Heating Oil Reserve seems within a reasonable range for such a critical national asset. Benchmarking against similar large-scale storage contracts is difficult without more specific details on capacity and service level agreements. However, the firm fixed-price nature of the contract suggests that the contractor, HESS CORPORATION, bears the primary financial risk for cost overruns, which is generally favorable for the government.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The presence of 3 bidders suggests a moderate level of competition for this specialized service. A competitive process like this is expected to drive prices down and ensure the government receives the best value for its investment.
Taxpayer Impact: Taxpayers benefit from a competitive process that aims to secure storage services at the most economical price, preventing potential overpayment that could occur with less competitive or sole-source awards.
Public Impact
The primary beneficiaries are the residents and businesses in the Northeast region who rely on the strategic petroleum reserve for energy security. The service delivered is the secure and reliable storage of a critical national energy asset. The geographic impact is focused on New Jersey, where the storage facility is located. There are no direct workforce implications mentioned, but the contract supports the operational capacity of the energy infrastructure.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Potential for price increases in future contract renewals if competition diminishes.
- Dependence on a single contractor for a critical national security asset.
Positive Signals
- Firm fixed-price contract structure limits cost uncertainty for the government.
- Full and open competition suggests a robust market for these services.
- Long-term contract provides stability for the reserve's operational continuity.
Sector Analysis
This contract falls within the broader energy logistics and storage sector. The market for specialized petroleum storage, particularly for strategic reserves, is relatively niche, often dominated by established energy companies with the necessary infrastructure and security protocols. The value of this contract, while significant, represents a small portion of overall federal spending on energy infrastructure and security.
Small Business Impact
The contract was not set aside for small businesses, which is typical for large-scale infrastructure and logistics contracts requiring specialized capabilities and significant capital investment. There is no indication of subcontracting requirements for small businesses in the provided data, suggesting that the primary focus was on securing the most capable prime contractor.
Oversight & Accountability
Oversight for this contract would typically be managed by the Department of Energy's contracting officers and program managers. Accountability is ensured through the firm fixed-price structure, which incentivizes the contractor to meet performance standards within the agreed budget. Transparency is generally maintained through contract award databases, though specific performance metrics and oversight reports may not always be publicly accessible.
Related Government Programs
- Strategic Petroleum Reserve
- National Energy Infrastructure Security
- Petroleum Product Storage and Logistics
Risk Flags
- Contract duration is significant, requiring sustained oversight.
- Reliance on a single contractor for a critical national asset.
- Potential for market concentration in specialized storage services.
Tags
energy, storage, department-of-energy, northeast-heating-oil-reserve, hess-corporation, firm-fixed-price, full-and-open-competition, new-jersey, warehousing-and-storage, national-security
Frequently Asked Questions
What is this federal contract paying for?
Department of Energy awarded $20.5 million to HESS CORPORATION. STORAGE OF NORTHEAST HEATING OIL RESERVE
Who is the contractor on this award?
The obligated recipient is HESS CORPORATION.
Which agency awarded this contract?
Awarding agency: Department of Energy (Department of Energy).
What is the total obligated amount?
The obligated amount is $20.5 million.
What is the period of performance?
Start: 2007-10-01. End: 2011-09-30.
What is HESS CORPORATION's track record with government contracts, particularly in energy storage or logistics?
HESS CORPORATION has a significant history as a major energy company involved in exploration, production, and refining. While specific details on their government contract performance are not provided in this data snippet, their established presence in the energy sector suggests they possess the operational expertise and infrastructure necessary for managing large-scale storage facilities. A deeper dive into federal procurement databases (like SAM.gov or FPDS) would reveal their past performance ratings, any past performance issues, and the types of contracts they have held with various government agencies. This would provide a more comprehensive understanding of their reliability and capability in fulfilling government requirements.
How does the $20.5 million contract value compare to similar federal contracts for storing strategic petroleum reserves?
Direct comparison of the $20.5 million contract value is challenging without knowing the exact volume of oil stored, the duration of storage, and the specific services included (e.g., security, maintenance, testing). However, the value appears reasonable for a four-year contract covering the storage of a significant portion of the Northeast Heating Oil Reserve. The Strategic Petroleum Reserve (SPR) has various storage contracts, and their costs can fluctuate based on market conditions, facility type, and location. For context, the Department of Energy has awarded contracts for SPR storage that can range from tens to hundreds of millions of dollars over multiple years, depending on the scale and complexity of the storage needs. This contract's value suggests a substantial but not exceptionally high cost for the service provided.
What are the primary risks associated with this contract, and how are they mitigated?
The primary risks include potential disruptions to the supply chain or facility operations (e.g., due to natural disasters, technical failures, or security breaches), and the risk of price escalation in future contract renewals if competition is limited. Mitigation strategies are embedded in the contract: the firm fixed-price structure shifts cost overrun risks to HESS CORPORATION. The full and open competition process aims to ensure a competitive market for future renewals, potentially keeping prices in check. Furthermore, the Department of Energy would have oversight mechanisms, performance standards, and contingency plans in place to address operational disruptions and ensure the integrity of the reserve.
How effective is the 'full and open competition' approach in ensuring value for money for taxpayers in this specific contract?
The 'full and open competition' approach is generally considered the most effective method for ensuring value for money for taxpayers. By allowing all responsible sources to submit bids, it fosters a competitive environment where contractors are incentivized to offer their best prices and most efficient services to win the contract. In this case, with 3 bidders, there was a reasonable level of competition, which likely contributed to a fair market price for the storage services. This contrasts with sole-source or limited competition scenarios, which can lead to higher costs due to a lack of price pressure.
What are the historical spending patterns for the Northeast Heating Oil Reserve storage, and how does this contract fit in?
Historical spending data for the Northeast Heating Oil Reserve storage is not provided in this snippet. However, the Department of Energy manages various energy reserves, and contracts for their storage are recurring needs. This $20.5 million contract, spanning from 2007 to 2011, represents a specific period of expenditure for maintaining this reserve. Analyzing past contracts for this reserve would reveal trends in pricing, contractor selection, and contract durations, allowing for a comparison to assess if spending has been consistent, increasing, or decreasing over time, and whether this particular award aligns with historical cost structures.
Industry Classification
NAICS: Transportation and Warehousing › Warehousing and Storage › Other Warehousing and Storage
Product/Service Code: LEASE/RENT FACILITIES › LEASE/RENTAL OF BUILDINGS
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Offers Received: 3
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Address: 1 HESS PLAZA, WOODBRIDGE, NJ, 06
Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $20,498,647
Exercised Options: $20,498,647
Current Obligation: $20,498,647
Timeline
Start Date: 2007-10-01
Current End Date: 2011-09-30
Potential End Date: 2011-09-30 00:00:00
Last Modified: 2012-01-21
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