DoD's $39.4M Naval Distillate Contract Awarded to Vitol Aviation Amidst Fixed Price Adjustments
Contract Overview
Contract Amount: $39,421,214 ($39.4M)
Contractor: Vitol Aviation CO
Awarding Agency: Department of Defense
Start Date: 2022-03-16
End Date: 2022-04-04
Contract Duration: 19 days
Daily Burn Rate: $2.1M/day
Competition Type: FULL AND OPEN COMPETITION
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Defense
Official Description: 8508948423!DISTILLATE,NAVAL
Place of Performance
Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245
Plain-Language Summary
Department of Defense obligated $39.4 million to VITOL AVIATION CO for work described as: 8508948423!DISTILLATE,NAVAL Key points: 1. The contract value is substantial at $39.4 million, indicating significant demand for naval distillate. 2. Vitol Aviation secured this award, highlighting their competitive position in the aviation fuel supply chain. 3. The fixed-price with economic price adjustment structure introduces potential cost volatility for taxpayers. 4. This procurement falls within the Petroleum Refineries sector, crucial for defense operations.
Value Assessment
Rating: good
The contract value of $39.4 million appears reasonable for a large volume of naval distillate. Benchmarking against similar large-scale fuel procurements would provide a clearer picture of its cost-effectiveness.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The award was made under full and open competition, suggesting a robust price discovery process. The fixed-price with economic price adjustment mechanism, however, could lead to increased costs if market prices for fuel surge.
Taxpayer Impact: The use of economic price adjustments introduces a risk of higher-than-anticipated costs for taxpayers, especially in volatile fuel markets.
Public Impact
Ensures critical fuel supply for naval operations. Potential for price fluctuations impacts budget predictability. Supports the defense industrial base for fuel supply.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic price adjustment clause may increase final cost.
- Short contract duration (19 days) could limit long-term supply stability.
- No small business participation noted.
Positive Signals
- Awarded under full and open competition.
- Addresses a critical defense need for fuel.
Sector Analysis
This procurement is within the Petroleum Refineries sector, specifically for naval distillate. Spending in this sector is vital for national security and can be subject to global commodity price fluctuations.
Small Business Impact
The data indicates no small business participation in this contract. Larger fuel suppliers often dominate these types of high-volume procurements, potentially limiting opportunities for smaller businesses.
Oversight & Accountability
The Defense Logistics Agency's oversight is crucial for managing the economic price adjustment clause and ensuring fair pricing throughout the contract period. Tracking the final expenditure against initial estimates will be key.
Related Government Programs
- Petroleum Refineries
- Department of Defense Contracting
- Defense Logistics Agency Programs
Risk Flags
- Economic Price Adjustment (EPA) risk
- Short contract duration
- Lack of small business participation
- Potential for market price volatility impacting cost
Tags
petroleum-refineries, department-of-defense, ca, delivery-order, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $39.4 million to VITOL AVIATION CO. 8508948423!DISTILLATE,NAVAL
Who is the contractor on this award?
The obligated recipient is VITOL AVIATION CO.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $39.4 million.
What is the period of performance?
Start: 2022-03-16. End: 2022-04-04.
What is the projected impact of the economic price adjustment on the final contract cost given current market volatility?
The economic price adjustment (EPA) clause allows for price changes based on market indices, typically tied to crude oil or refined product prices. Given the inherent volatility in global energy markets, the final cost could significantly exceed the initial estimated value. A detailed analysis of the specific EPA formula and current market forecasts is needed to quantify this risk accurately.
How does the short contract duration of 19 days affect the overall risk and potential for future supply chain disruptions?
A 19-day contract duration suggests a short-term, immediate need rather than a long-term strategic supply agreement. This short window increases the risk of supply chain disruption if the awarded vendor faces unforeseen issues. It also necessitates frequent re-procurement cycles, potentially leading to higher administrative costs and less favorable pricing over time.
What measures are in place to ensure the 'full and open competition' process effectively drives down costs for this essential defense commodity?
Full and open competition aims to maximize the number of bidders, thereby fostering price competition. For essential commodities like naval distillate, the Defense Logistics Agency likely uses pre-qualification criteria and detailed performance specifications to ensure a level playing field. However, the effectiveness in driving down costs can be influenced by market concentration and the complexity of fuel logistics.
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
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Parent Company: Vitol Inc.
Address: 300 CONTINENTAL BLVD STE 198, EL SEGUNDO, CA, 90245
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Not Designated a Small Business, Special Designations
Financial Breakdown
Contract Ceiling: $39,421,214
Exercised Options: $39,421,214
Current Obligation: $39,421,214
Contract Characteristics
Commercial Item: COMMERCIAL ITEM
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SPE60222D0456
IDV Type: IDC
Timeline
Start Date: 2022-03-16
Current End Date: 2022-04-04
Potential End Date: 2022-04-04 00:00:00
Last Modified: 2023-01-05
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