DoD's $34.3M Naval Distillate Fuel Contract Awarded to Vitol Aviation Co. for Short-Term Delivery

Contract Overview

Contract Amount: $34,395,434 ($34.4M)

Contractor: Vitol Aviation CO

Awarding Agency: Department of Defense

Start Date: 2022-06-10

End Date: 2022-07-01

Contract Duration: 21 days

Daily Burn Rate: $1.6M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8509160812!DISTILLATE,NAVAL

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $34.4 million to VITOL AVIATION CO for work described as: 8509160812!DISTILLATE,NAVAL Key points: 1. Contract awarded through full and open competition, suggesting a competitive pricing environment. 2. Short contract duration (21 days) may indicate urgent or specific operational needs. 3. Fixed Price with Economic Price Adjustment (FPEPA) contract type introduces potential for cost fluctuations. 4. Awarded by the Defense Logistics Agency, a key entity for military supply chain management. 5. The contract falls under the Petroleum Refineries industry, supporting essential fuel supplies. 6. No small business set-aside was utilized, indicating the primary award was not specifically targeted for small businesses.

Value Assessment

Rating: good

The contract value of $34.3 million for a 21-day delivery of naval distillate fuel appears reasonable given the market for specialized fuels. Benchmarking against similar short-term fuel procurements by the DoD would provide a more precise value-for-money assessment. The FPEPA clause allows for adjustments based on market prices, which is standard for fuel contracts but introduces some price volatility risk.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit offers. The specific number of bidders is not provided, but this procurement method generally fosters a competitive environment, which should lead to more favorable pricing for the government. The agency's decision to use full and open competition suggests confidence in the market's ability to meet the requirement.

Taxpayer Impact: Full and open competition typically benefits taxpayers by driving down prices through market forces, ensuring the government receives competitive rates for essential supplies like naval distillate fuel.

Public Impact

Naval forces operating in or requiring fuel in the specified region will benefit from the assured supply of distillate fuel. The primary service delivered is the provision of naval distillate fuel, critical for the operation of naval vessels. The geographic impact is likely concentrated around naval operational areas or ports where the fuel is delivered, with the award notice specifying California (CA) as the state. Workforce implications are minimal for this specific contract, as it primarily involves the supply of a commodity rather than extensive labor services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic Price Adjustment (EPA) clause introduces potential for cost overruns if fuel prices rise significantly.
Short contract duration might necessitate rapid procurement processes, potentially limiting thorough vetting of all options.
Reliance on a single awardee for a critical fuel supply, even for a short period, carries inherent supply chain risk.

Positive Signals

Awarded through full and open competition, indicating a robust and competitive bidding process.
The Defense Logistics Agency's involvement suggests adherence to established procurement and supply chain protocols.
The contract specifies a clear product (naval distillate fuel), minimizing ambiguity in the delivered goods.

Sector Analysis

The petroleum refining sector is a critical component of the energy industry, providing essential fuels for transportation, industry, and defense. The market for specialized fuels like naval distillate is influenced by global oil prices, geopolitical stability, and refining capacity. This contract represents a small but vital segment of the DoD's overall energy procurement strategy, ensuring operational readiness.

Small Business Impact

The contract was not awarded as a small business set-aside, nor does it indicate any specific subcontracting goals for small businesses. This suggests that the primary focus was on securing the required fuel supply through the most competitive means available, rather than specifically promoting small business participation in this particular award.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract. As a fixed-price contract with economic price adjustment, DLA will monitor fuel price indices to manage any adjustments. Transparency is maintained through contract award databases, and any significant issues would likely fall under the purview of the DLA's Inspector General.

Related Government Programs

DoD Fuel Procurement
Defense Logistics Agency Contracts
Naval Operations Support
Petroleum Product Supply Contracts
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Commodity Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.4 million to VITOL AVIATION CO. 8509160812!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 $34.4 million.

What is the period of performance?

Start: 2022-06-10. End: 2022-07-01.

What is the historical spending pattern for naval distillate fuel by the Defense Logistics Agency?

Analyzing historical spending patterns for naval distillate fuel by the Defense Logistics Agency (DLA) requires examining past contract awards over several fiscal years. This would involve looking at the total volume procured, the average price per unit, the number of solicitations issued, and the types of competition utilized (e.g., full and open, sole source). Trends in pricing, volume fluctuations tied to operational tempo or fleet size, and shifts in awarded contractors can reveal insights into market dynamics and DLA's procurement strategies. For instance, a consistent increase in price per gallon over time, especially if not fully explained by market indices, might warrant further investigation into contract terms or competition levels. Conversely, a stable or decreasing price trend, particularly with robust competition, would indicate effective value for money.

How does the price of this contract compare to market rates for naval distillate fuel?

To compare the price of this contract to market rates for naval distillate fuel, one would need access to real-time or historical market data for this specific fuel type. Naval distillate fuel (often similar to NATO F-76) pricing is influenced by crude oil prices, refining costs, and regional supply/demand dynamics. Benchmarking would involve identifying comparable indices or spot market prices around the contract award date (June 10, 2022) and delivery period (June 10-July 1, 2022). Given the contract includes an Economic Price Adjustment (EPA) clause, the initial fixed price might be a baseline, with actual costs potentially varying. Without specific market data for that period and region, a definitive comparison is difficult, but the contract value of approximately $34.3 million for a short duration suggests a significant volume, and the EPA clause is a standard mechanism to reflect market volatility.

What is Vitol Aviation Co.'s track record with the Department of Defense?

Vitol Aviation Co. has a history of receiving contracts from the Department of Defense (DoD) and other federal agencies, primarily for fuel and petroleum products. A review of federal procurement data would reveal the extent and nature of their past awards, including contract values, types of fuel supplied, and performance history. Assessing their track record involves examining factors such as on-time delivery, product quality compliance, and any past performance issues or disputes. Companies like Vitol, operating in the global energy market, often have extensive experience supplying military forces worldwide. Their ability to secure this contract suggests a satisfactory performance history and competitive positioning within the defense fuel supply chain.

What are the potential risks associated with the Economic Price Adjustment (EPA) clause in this contract?

The primary risk associated with the Economic Price Adjustment (EPA) clause in this contract is the potential for cost overruns for the government if fuel prices increase significantly between the time of award and delivery. While EPA clauses are designed to protect both the contractor from losses due to market fluctuations and the government from inflated initial pricing, they introduce uncertainty into the final cost. The specific index or formula used to calculate the adjustment is crucial; if it closely tracks actual market prices, the risk is managed. However, if the index is volatile or the adjustment mechanism is not carefully monitored, the government could end up paying substantially more than initially budgeted. This necessitates diligent oversight by the Defense Logistics Agency to ensure adjustments are fair and accurately reflect market conditions.

How does the short duration of this contract impact its overall significance?

The short duration of this contract (21 days) suggests it was likely intended to fulfill an immediate or short-term operational requirement, rather than a long-term strategic supply need. This could be due to a gap in existing long-term contracts, an unexpected surge in demand, or a specific deployment. While the dollar value ($34.3 million) is substantial for a short period, the contract's limited timeframe means it represents a temporary solution. Its significance lies in ensuring continuous operational readiness for naval assets during that specific window. It may also indicate that the agency is using shorter contracts to test the market or manage inventory more dynamically, potentially leading to more frequent, smaller awards rather than fewer, larger ones.

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: $34,395,434

Exercised Options: $34,395,434

Current Obligation: $34,395,434

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60222D0456

IDV Type: IDC

Timeline