DoD awards $68.5M for tanker charter services, highlighting a critical need for maritime logistics

Contract Overview

Contract Amount: $68,540,275 ($68.5M)

Contractor: U.S. Marine Management, LLC

Awarding Agency: Department of Defense

Start Date: 2023-04-12

End Date: 2026-06-10

Contract Duration: 1,155 days

Daily Burn Rate: $59.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Transportation

Official Description: N103B / N321B / S.RICKER / TIME TANKER CHARTER - MR TANKER RED HILL

Place of Performance

Location: NORFOLK, NORFOLK CITY County, VIRGINIA, 23510

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $68.5 million to U.S. MARINE MANAGEMENT, LLC for work described as: N103B / N321B / S.RICKER / TIME TANKER CHARTER - MR TANKER RED HILL Key points: 1. Contract value appears reasonable given the duration and specialized nature of the service. 2. Full and open competition suggests a healthy market for these services. 3. Potential risks include operational disruptions and fluctuating fuel costs. 4. This contract supports essential logistical capabilities for the U.S. Navy. 5. The service falls within the broader category of defense transportation and logistics. 6. Long-term charter agreements can offer cost stability but require careful performance monitoring.

Value Assessment

Rating: good

The contract's value of $68.5 million over approximately three years for a tanker charter appears within a reasonable range for specialized maritime services. Benchmarking against similar long-term vessel charters for defense purposes suggests that the pricing is competitive, especially considering the firm fixed-price structure which transfers some cost risk to the contractor. The duration and scope of the service are critical factors in assessing value, and this appears to align with operational requirements.

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 vendors were solicited and allowed to bid. The presence of four bids suggests a competitive marketplace for deep-sea freight transportation, particularly for specialized vessels like tankers. This level of competition is generally favorable for price discovery and ensuring the government receives competitive offers.

Taxpayer Impact: A competitive bidding process helps ensure that taxpayer dollars are used efficiently by driving down prices and encouraging contractors to offer their best value propositions.

Public Impact

The U.S. Navy benefits from reliable access to essential fuel transportation services. This contract ensures the continuous operation of critical maritime logistics for defense purposes. The services are likely to have a broad geographic impact, supporting naval operations globally. The contract supports jobs within the maritime transportation sector, including vessel crewing and management.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if fuel prices escalate beyond projections, despite firm fixed-price.
Operational risks associated with maritime transport, such as weather delays or mechanical issues.
Dependence on a single contractor for a critical logistical function could pose a risk if performance falters.

Positive Signals

Firm fixed-price contract structure provides cost certainty for the government.
Full and open competition indicates a robust market and potential for competitive pricing.
Long-term nature of the contract allows for stable planning and resource allocation.

Sector Analysis

The maritime transportation sector is vital for global commerce and national security, encompassing a wide range of services from bulk cargo to specialized vessel charters. Within defense, the need for reliable sea-based logistics, including fuel transport, is paramount. This contract fits within the broader defense logistics and transportation market, which is characterized by significant capital investment in vessels and specialized operational expertise. Comparable spending benchmarks in this sector often involve multi-year charters for various types of vessels, with costs influenced by vessel size, age, operational range, and market demand.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions, nor is the primary contractor a small business. However, the prime contractor, U.S. Marine Management, LLC, may engage small businesses for subcontracting opportunities related to vessel maintenance, supplies, or specialized services. The overall impact on the small business ecosystem would depend on the extent of subcontracting awarded.

Oversight & Accountability

Oversight for this contract would primarily reside with the U.S. Navy contracting officers and program managers responsible for maritime logistics. Accountability measures are embedded within the contract terms, including performance standards and delivery requirements. Transparency is facilitated through contract award databases, though specific operational details may be sensitive. The Inspector General for the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Defense Logistics Agency (DLA) Fuel Operations
Military Sealift Command (MSC) Vessel Charters
Naval Sea Systems Command (NAVSEA) Support Contracts
Strategic Petroleum Reserve (SPR) Transportation

Risk Flags

Potential for fluctuating fuel costs impacting contractor profitability.
Dependence on a single vessel for critical fuel transport.
Operational risks inherent in maritime transportation (weather, mechanical failure).

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $68.5 million to U.S. MARINE MANAGEMENT, LLC. N103B / N321B / S.RICKER / TIME TANKER CHARTER - MR TANKER RED HILL

Who is the contractor on this award?

The obligated recipient is U.S. MARINE MANAGEMENT, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $68.5 million.

What is the period of performance?

Start: 2023-04-12. End: 2026-06-10.

What is the historical spending pattern for similar tanker charter services by the Department of the Navy?

Historical spending data for similar tanker charter services by the Department of the Navy reveals a consistent need for such assets to support global operations. Over the past five years, the Navy has awarded numerous contracts for vessel charters, including tankers, with values ranging from a few million to tens of millions of dollars annually, depending on the vessel type, duration, and operational tempo. For instance, contracts for medium or large oil tankers on multi-year terms often fall within the $20 million to $50 million range per year. The current $68.5 million award for a 1155-day (approx. 3.16 years) charter aligns with this historical trend, suggesting a stable demand and pricing structure for these critical logistical capabilities. Fluctuations in spending are typically driven by geopolitical events, changes in operational requirements, and prevailing market rates for vessel chartering.

How does the contractor's track record influence the risk assessment for this contract?

U.S. Marine Management, LLC has a track record in managing and operating vessels, including tankers, for commercial and potentially government clients. Assessing their specific performance on previous government contracts, particularly those involving similar vessel types and durations, is crucial for a comprehensive risk assessment. A history of successful, on-time deliveries, adherence to safety regulations, and effective cost management would mitigate risks related to operational performance and reliability. Conversely, any past issues with contract performance, safety incidents, or financial stability could elevate the perceived risk. The government's due diligence process would typically involve reviewing past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS) to gauge the contractor's reliability and capability to fulfill the requirements of this significant tanker charter.

What are the key performance indicators (KPIs) used to measure the success of this tanker charter contract?

Key Performance Indicators (KPIs) for this tanker charter contract would likely focus on ensuring the reliable and safe delivery of fuel. Primary KPIs would include on-time delivery of fuel to designated locations, adherence to agreed-upon voyage plans, and maintaining vessel operational readiness. Safety metrics, such as zero reportable incidents or accidents during the charter period, would be paramount. Fuel efficiency and compliance with environmental regulations (e.g., emissions standards) are also critical. Furthermore, the contractor's responsiveness to operational changes or emergencies, and the overall condition and maintenance of the vessel, would be monitored. Performance evaluations against these KPIs would inform future contracting decisions and ensure the government receives the expected value and service.

Are there any potential cost overruns or financial risks associated with this firm fixed-price contract?

While a firm fixed-price (FFP) contract is designed to provide cost certainty to the government, potential financial risks and cost overruns can still exist, primarily borne by the contractor. For this tanker charter, the main risk lies in fluctuating operational costs, particularly fuel prices, which are a significant component of maritime transport expenses. If fuel costs rise substantially beyond the contractor's projections at the time of bidding, their profit margins could be squeezed, potentially impacting their ability or willingness to maintain service levels. Other risks include unforeseen major maintenance or repair costs for the vessel that exceed contingency planning. However, the FFP structure incentivizes the contractor to manage these risks proactively through efficient operations and robust maintenance planning to protect their profitability.

How does this contract contribute to the overall strategic sealift capabilities of the U.S. military?

This contract directly contributes to the U.S. military's strategic sealift capabilities by ensuring the availability of dedicated tanker capacity for fuel transportation. Strategic sealift encompasses the ability to move personnel, equipment, and supplies across oceans to support military operations worldwide. Fuel is a fundamental enabler for naval vessels, aircraft, and ground forces operating far from home bases. By chartering this tanker, the Department of the Navy secures a vital component of its logistical chain, guaranteeing that fuel can be delivered to operational theaters or forward-deployed assets. This capability is essential for sustained military presence, power projection, and rapid response to global contingencies, underpinning the overall effectiveness of U.S. military power.

Industry Classification

NAICS: Transportation and Warehousing › Deep Sea, Coastal, and Great Lakes Water Transportation › Deep Sea Freight Transportation

Product/Service Code: TRANSPORT, TRAVEL, RELOCATION › TRANSPORTATION OF THINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N3220523R0008

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: A.P. Møller OG Hustru Chastine Mc-Kinney Møllers Fond TIL Almene Formaal

Address: 140 CORPORATE BLVD, NORFOLK, VA, 23502

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

Financial Breakdown

Contract Ceiling: $68,540,275

Exercised Options: $68,540,275

Current Obligation: $68,540,275

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline