DoD's $26M Fuel Storage Contract with NuStar Terminals Raises Questions on Value and Competition
Contract Overview
Contract Amount: $25,990,650 ($26.0M)
Contractor: Nustar Terminals Operations Partnership L.P.
Awarding Agency: Department of Defense
Start Date: 2013-07-12
End Date: 2023-09-06
Contract Duration: 3,708 days
Daily Burn Rate: $7.0K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: FIRM FIXED PRICE
Sector: Other
Official Description: COCO STORAGE SERVICES THAT CONSISTS OF RECEIVING, STORING, PROTECTING AND SHIPPING FUEL BY FULLY LOADED OCEAN TANKER/BARGES VIA THE OLYMPIC PIPELINE SYSTEM. TOTAL ANNUAL THROUGHPUT QUANTITY IS 1,025,000 BARRELS. THE CONTRACT PERFORMANCE PERIOD IS FOR FIVE (5) YEARS WITH ONE FIVE (5) YEAR OPTION.
Place of Performance
Location: SAN ANTONIO, BEXAR County, TEXAS, 78248
State: Texas Government Spending
Plain-Language Summary
Department of Defense obligated $26.0 million to NUSTAR TERMINALS OPERATIONS PARTNERSHIP L.P. for work described as: COCO STORAGE SERVICES THAT CONSISTS OF RECEIVING, STORING, PROTECTING AND SHIPPING FUEL BY FULLY LOADED OCEAN TANKER/BARGES VIA THE OLYMPIC PIPELINE SYSTEM. TOTAL ANNUAL THROUGHPUT QUANTITY IS 1,025,000 BARRELS. THE CONTRACT PERFORMANCE PERIOD IS FOR FIVE (5) YEARS WITH ONE FI… Key points: 1. The contract for fuel storage and handling services has a total value of $25.99 million over a potential 10-year period. 2. NuStar Terminals Operations Partnership L.P. is the sole awardee under a full and open competition. 3. The contract's firm fixed price structure and long duration warrant scrutiny for potential cost overruns and market shifts. 4. The sector is critical for national defense logistics, highlighting the importance of efficient and cost-effective operations.
Value Assessment
Rating: fair
The contract's firm fixed price structure over a 10-year period may not fully reflect potential market fluctuations or efficiencies gained over time. Benchmarking against similar logistics and storage contracts is needed to assess if the $2.6M annual average is competitive.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
Despite being awarded under full and open competition, the long-term nature of the contract (up to 10 years) could limit future price discovery and potentially lock in less competitive rates if market conditions change significantly.
Taxpayer Impact: Taxpayers are exposed to potential overpayment if the fixed price does not adapt to market efficiencies or if the volume throughput is less than anticipated over the contract's extended term.
Public Impact
Ensures critical fuel supply chain resilience for Department of Defense operations. Supports national security by maintaining readiness through reliable fuel storage and distribution. The long-term commitment could impact the agency's ability to leverage newer, potentially more cost-effective technologies or providers in the future.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Long-term fixed-price contract may not capture market efficiencies.
- Lack of specific performance metrics for storage and handling.
- Potential for price escalation beyond market norms over 10 years.
Positive Signals
- Awarded through full and open competition.
- Ensures critical fuel logistics for defense.
- Firm fixed price provides budget certainty.
Sector Analysis
This contract falls within the 'Other Warehousing and Storage' sector, crucial for supporting the Defense Logistics Agency's mission. Benchmarks for similar long-term storage contracts in the energy and logistics sectors are essential for evaluating cost-effectiveness.
Small Business Impact
The data indicates that small businesses were not directly involved in this specific contract award, as the prime contractor is NuStar Terminals Operations Partnership L.P. Further analysis would be needed to determine if small businesses are involved as subcontractors.
Oversight & Accountability
The contract's duration and fixed-price nature necessitate robust oversight to ensure NuStar Terminals is meeting performance standards and that the pricing remains fair throughout the contract term. Regular performance reviews and audits are crucial.
Related Government Programs
- Other Warehousing and Storage
- Department of Defense Contracting
- Defense Logistics Agency Programs
Risk Flags
- Long contract duration (10 years) may reduce flexibility.
- Firm fixed price might not reflect evolving market conditions.
- Potential for contractor to underinvest in service quality over time.
- Lack of detailed performance metrics in summary data.
- Sole awardee, even if from full competition, warrants continued monitoring.
Tags
other-warehousing-and-storage, department-of-defense, tx, definitive-contract, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $26.0 million to NUSTAR TERMINALS OPERATIONS PARTNERSHIP L.P.. COCO STORAGE SERVICES THAT CONSISTS OF RECEIVING, STORING, PROTECTING AND SHIPPING FUEL BY FULLY LOADED OCEAN TANKER/BARGES VIA THE OLYMPIC PIPELINE SYSTEM. TOTAL ANNUAL THROUGHPUT QUANTITY IS 1,025,000 BARRELS. THE CONTRACT PERFORMANCE PERIOD IS FOR FIVE (5) YEARS WITH ONE FIVE (5) YEAR OPTION.
Who is the contractor on this award?
The obligated recipient is NUSTAR TERMINALS OPERATIONS PARTNERSHIP L.P..
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $26.0 million.
What is the period of performance?
Start: 2013-07-12. End: 2023-09-06.
What is the benchmark cost per barrel for similar fuel storage and handling services in the region or industry?
Benchmarking the cost per barrel for fuel storage and handling is crucial for assessing value. Without specific industry data for this region and service type, it's difficult to definitively state if NuStar's pricing is optimal. However, comparing it to publicly available rates for similar terminal operations or logistics contracts could reveal if the $2.6M annual cost aligns with market expectations for 1.025 million barrels throughput.
How does the firm fixed price structure mitigate risks associated with fluctuating fuel prices or storage demands over a 10-year period?
A firm fixed price contract provides budget certainty for the government, shielding it from increases in NuStar's operational costs. However, it shifts the risk of cost overruns to the contractor. If fuel prices or storage demands fluctuate significantly, NuStar bears the brunt, potentially impacting their willingness or ability to maintain service quality long-term, or leading them to build significant contingency into the initial price.
What mechanisms are in place to ensure NuStar Terminals maintains high standards of fuel protection and timely shipping throughout the contract's duration?
The contract specifies receiving, storing, protecting, and shipping fuel, implying performance standards. However, the provided data lacks detail on specific Key Performance Indicators (KPIs) or service level agreements (SLAs). Robust oversight, regular inspections, and clear reporting requirements are essential to ensure NuStar consistently meets the required standards for fuel integrity and efficient logistics over the potential 10-year term.
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
Solicitation ID: SP060012R0534
Offers Received: 2
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Parent Company: Nustar Energy LP
Address: 2330 N LOOP 1604 W, SAN ANTONIO, TX, 78248
Business Categories: Category Business, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $63,535,878
Exercised Options: $50,607,863
Current Obligation: $25,990,650
Actual Outlays: $4,850,954
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES
Cost or Pricing Data: NO
Timeline
Start Date: 2013-07-12
Current End Date: 2023-09-06
Potential End Date: 2023-09-06 00:00:00
Last Modified: 2025-04-22
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