DoD spent $45.3M on fuel in 7 days, with Valero Marketing and Supply Co. securing the delivery order

Contract Overview

Contract Amount: $45,297,847 ($45.3M)

Contractor: Valero Marketing and Supply CO

Awarding Agency: Department of Defense

Start Date: 2020-09-15

End Date: 2020-09-22

Contract Duration: 7 days

Daily Burn Rate: $6.5M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 14042700 USG OF TURBINE FUEL, AVIATION (JP8) 11618127 USG OF ULSD (EN590)

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78249

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $45.3 million to VALERO MARKETING AND SUPPLY CO for work described as: 14042700 USG OF TURBINE FUEL, AVIATION (JP8) 11618127 USG OF ULSD (EN590) Key points: 1. The contract represents a significant, albeit short-term, expenditure on critical aviation and diesel fuel. 2. The fixed-price with economic price adjustment structure suggests potential for cost fluctuations based on market conditions. 3. The rapid delivery order timeline indicates an urgent need for fuel supply. 4. The contract was awarded under full and open competition, implying a broad market solicitation. 5. The total value of the contract, while substantial, needs to be viewed in the context of the short duration. 6. The specific fuel types (JP8 and EN590) highlight the logistical demands of military operations.

Value Assessment

Rating: fair

The contract value of $45.3 million for a 7-day delivery period is substantial. Benchmarking this against similar short-term fuel procurements is challenging due to the specific nature of the request and the short timeframe. The fixed-price with economic price adjustment clause introduces variability, making a direct value-for-money assessment difficult without understanding the market price fluctuations during the period. However, the rapid fulfillment suggests a critical need was met.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that the solicitation was made available to all responsible sources. The data does not specify the number of bids received, but the designation suggests a competitive process was intended. This level of competition is generally favorable for price discovery and potentially achieving better pricing for the government.

Taxpayer Impact: A full and open competition process allows for a wider range of suppliers to bid, which can lead to more competitive pricing and better value for taxpayer dollars.

Public Impact

The primary beneficiaries are the Department of Defense and its aviation and ground units requiring JP8 and ULSD fuel. The services delivered are the supply of critical turbine fuel (JP8) and ultra-low sulfur diesel (EN590). The geographic impact is concentrated in Texas, where the delivery order was fulfilled. Workforce implications are minimal for this specific short-term delivery order, primarily impacting logistics and fuel handling personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces uncertainty in final cost.
Short duration may not reflect long-term market pricing trends.
Lack of detail on number of bidders limits assessment of competitive intensity.

Positive Signals

Awarded under full and open competition, suggesting broad market access.
Rapid fulfillment of a critical fuel need.
Contract supports essential military operational requirements.

Sector Analysis

The petroleum refining and fuel distribution sector is critical for national security and economic stability. This contract falls under the broader energy sector, specifically focusing on the supply of refined petroleum products. The market for aviation and diesel fuels is subject to global commodity prices and geopolitical factors. The Department of Defense is a significant consumer of fuel, and contracts like this are essential for maintaining operational readiness.

Small Business Impact

The contract was not set aside for small businesses, and the data does not indicate any subcontracting plans. This suggests that the primary awardee, Valero Marketing and Supply Co., is a large business. The lack of small business involvement in this specific transaction does not necessarily reflect the broader impact on the small business ecosystem within the fuel supply chain, but it means no direct set-aside benefits were applied here.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Logistics Agency (DLA). Accountability measures would include adherence to delivery schedules, fuel quality standards, and pricing as per the contract terms. Transparency is facilitated through contract award databases, though specific performance metrics and detailed pricing breakdowns may not always be publicly available.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Fuel Procurement
Diesel Fuel Procurement
Department of Defense Energy Contracts

Risk Flags

Potential for price volatility due to economic price adjustment.
Short contract duration may mask longer-term market trends.
Lack of detail on number of bidders limits competition assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.3 million to VALERO MARKETING AND SUPPLY CO. 14042700 USG OF TURBINE FUEL, AVIATION (JP8) 11618127 USG OF ULSD (EN590)

Who is the contractor on this award?

The obligated recipient is VALERO MARKETING AND SUPPLY CO.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $45.3 million.

What is the period of performance?

Start: 2020-09-15. End: 2020-09-22.

What is Valero Marketing and Supply Co.'s track record with the Department of Defense for fuel supply contracts?

Valero Marketing and Supply Co. has a history of securing contracts with the Department of Defense for fuel. While this specific data point highlights a $45.3 million delivery order for turbine and diesel fuel over seven days in September 2020, their broader engagement likely includes numerous other fuel supply agreements. Analyzing their complete contract history would reveal patterns in contract types (e.g., fixed-price, cost-plus), competition levels, and performance history across different military branches and agencies. A deeper dive would assess their reliability, responsiveness to urgent requirements, and consistency in meeting quality and delivery specifications, which are crucial for military operations.

How does the $45.3 million expenditure for 7 days of fuel compare to typical DoD fuel spending?

The $45.3 million expenditure for a 7-day period represents a significant daily burn rate of approximately $6.47 million per day for aviation and diesel fuel. This figure is substantial for such a short duration and suggests a critical, possibly emergency, resupply or a concentrated operational need. Typical DoD fuel spending is spread across various fuel types, geographic locations, and longer contract durations. While this specific short-term contract value is high on a per-day basis, it needs to be contextualized against the DoD's overall annual fuel budget, which runs into billions of dollars. Without more data on the specific operational context or the volume of fuel procured, it's difficult to definitively label this as 'high' or 'low' relative to all DoD fuel expenditures, but it clearly indicates a high-priority, immediate requirement.

What are the primary risks associated with a fixed-price contract with economic price adjustment for fuel?

The primary risk associated with a fixed-price contract with economic price adjustment (FPEPA) for fuel lies in cost volatility. While the fixed-price component provides a baseline, the economic price adjustment clause allows for changes based on fluctuations in market prices (e.g., crude oil, refining costs). For the government, the risk is that fuel prices could increase significantly during the contract period, leading to higher-than-anticipated expenditures, potentially exceeding initial budget allocations. Conversely, if prices decrease, the government might not fully benefit from the lower market rates depending on the specific adjustment formula. For the contractor, the risk is that price increases might not be fully compensated if the adjustment mechanism is capped or lags behind actual cost increases. This structure aims to balance risk but introduces uncertainty in final costs.

What does the 'full and open competition' designation imply about the pricing and efficiency of this contract?

The 'full and open competition' designation implies that the contract was solicited broadly, allowing any responsible source to submit a bid. This process is generally expected to foster price competition, leading to more efficient pricing for the government. When multiple bidders vie for a contract, they are incentivized to offer competitive prices to win the award. Therefore, this designation suggests that the government likely received competitive bids and selected the offer that represented the best value, which could include price, technical factors, and delivery timelines. While it doesn't guarantee the absolute lowest price, it increases the likelihood that the price achieved is a fair market price resulting from a competitive process, rather than a price determined through limited negotiation or sole-source justification.

How does the short duration (7 days) of this delivery order impact the assessment of its value and performance?

The extremely short duration of 7 days for this delivery order significantly impacts the assessment of its value and performance. It suggests an urgent, immediate need for fuel, likely to support ongoing operations or replenish critical reserves. For value assessment, it means the $45.3 million figure represents a very high daily expenditure rate, making direct comparison to longer-term contracts difficult. The focus shifts from long-term cost-effectiveness to immediate operational necessity. Performance assessment would primarily center on the contractor's ability to meet the delivery deadline and fuel specifications precisely within that tight window. Any delays or quality issues would have immediate and potentially severe operational consequences. The short timeframe also limits the opportunity for extensive price negotiation or market exploration, emphasizing rapid fulfillment over protracted deal-making.

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: SP060220R0700

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Valero Energy Corporation

Address: 1 VALERO WAY, SAN ANTONIO, TX, 78249

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

Financial Breakdown

Contract Ceiling: $45,297,847

Exercised Options: $45,297,847

Current Obligation: $45,297,847

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060220D0649

IDV Type: IDC

Timeline