DoD spent $37.4M on aviation turbine fuel via a fixed-price contract with economic price adjustment

Contract Overview

Contract Amount: $37,386,637 ($37.4M)

Contractor: Qatarenergy

Awarding Agency: Department of Defense

Start Date: 2022-09-26

End Date: 2022-10-13

Contract Duration: 17 days

Daily Burn Rate: $2.2M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: 8509426058!TURBINE FUEL,AVIATION

Plain-Language Summary

Department of Defense obligated $37.4 million to QATARENERGY for work described as: 8509426058!TURBINE FUEL,AVIATION Key points: 1. Contract value represents a significant investment in aviation fuel for defense operations. 2. The fixed-price with economic price adjustment structure aims to mitigate fuel price volatility. 3. Competition dynamics for this contract are crucial for ensuring fair market pricing. 4. Performance risk is moderate, given the nature of fuel supply and delivery. 5. This contract positions the Defense Logistics Agency as a key procurer of aviation fuel. 6. The short duration suggests a need for immediate or recurring fuel supply.

Value Assessment

Rating: good

The contract value of $37.4 million for aviation turbine fuel is substantial. While direct comparisons are difficult without knowing the specific grade and delivery locations, the fixed-price with economic price adjustment (FPEPA) mechanism is a common approach to manage fluctuating commodity prices in long-term or high-volume fuel contracts. This structure aims to provide cost certainty for the government while allowing for adjustments based on market indices, which can be beneficial in volatile energy markets. The value appears reasonable for a large-scale fuel procurement by a major defense agency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. This approach generally fosters a competitive environment, encouraging multiple bidders to offer their best pricing and terms. The fact that it was competed fully suggests that the market for aviation turbine fuel is sufficiently robust to support multiple suppliers and that the agency sought to leverage this competition to achieve favorable pricing and terms.

Taxpayer Impact: Full and open competition is the most advantageous for taxpayers as it maximizes the potential for cost savings through a wider range of bids and encourages market efficiencies.

Public Impact

The primary beneficiaries are the military branches relying on aviation turbine fuel for operational readiness and mission execution. This contract ensures the supply of critical aviation fuel, supporting flight operations and logistical support. The geographic impact is likely global, given the nature of military deployments, though specific delivery points are not detailed. Workforce implications are indirect, supporting jobs in the energy sector, logistics, and defense support services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clauses if market prices surge.
Dependence on a single supplier for a critical commodity could pose supply chain risks if not managed.
Short contract duration might lead to frequent re-competition and associated administrative overhead.

Positive Signals

Full and open competition suggests a healthy market and potential for competitive pricing.
The use of FPEPA can protect against unexpected market price spikes, offering some cost stability.
Awarding to a known entity like QATAR ENERGY may indicate established supply chain reliability for this fuel type.

Sector Analysis

The aviation turbine fuel market is a critical segment of the broader energy and defense logistics sectors. This contract falls under the petroleum refineries and petroleum product manufacturing industry (NAICS 324110). The global market for jet fuel is substantial, driven by both commercial aviation and significant defense requirements. Defense spending on fuel is a consistent and large component of military operational budgets, essential for maintaining global reach and readiness. Benchmarks for fuel pricing are typically tied to global commodity indices like Brent or WTI crude, with added premiums for refining, transportation, and specific product grades.

Small Business Impact

There is no indication that this contract included small business set-asides. Given the scale and nature of aviation turbine fuel procurement, it is likely that the primary suppliers are large, established energy companies. Subcontracting opportunities for small businesses might exist in areas such as transportation, logistics, or specialized support services, but these are not explicitly detailed in the provided data. The direct impact on the small business ecosystem for fuel supply itself is likely minimal.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for monitoring performance, costs, and compliance. The Defense Logistics Agency (DLA) itself has internal oversight mechanisms for its procurement activities. Transparency is generally maintained through contract award databases like FPDS. Inspector General investigations could be initiated if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Supply Contracts
Fixed Price with Economic Price Adjustment Contracts
Petroleum Product Procurement
Military Operational Support Contracts

Risk Flags

Price Volatility Risk
Supply Chain Disruption Risk
Performance Specification Compliance
Delivery Schedule Adherence

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $37.4 million to QATARENERGY. 8509426058!TURBINE FUEL,AVIATION

Who is the contractor on this award?

The obligated recipient is QATARENERGY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $37.4 million.

What is the period of performance?

Start: 2022-09-26. End: 2022-10-13.

What is the historical spending trend for aviation turbine fuel by the Department of Defense?

Historical spending on aviation turbine fuel by the Department of Defense (DoD) has been substantial and relatively consistent, reflecting the continuous need for fuel to support global military operations. While specific figures fluctuate year-to-year based on operational tempo, geopolitical events, and global fuel prices, the DoD consistently ranks as one of the largest consumers of petroleum products worldwide. For instance, in fiscal year 2022, the DoD reported consuming approximately 70 million barrels of fuel, with a significant portion being aviation fuel. Annual spending often runs into the tens of billions of dollars across all fuel types. Analyzing trends requires looking at aggregated data over several years, considering factors like the FPEPA clauses which adjust costs based on market conditions, and the increasing emphasis on energy efficiency and alternative fuels.

How does the pricing of this contract compare to similar aviation turbine fuel contracts awarded by the DoD?

Directly comparing the price per unit for this specific $37.4 million contract is challenging without knowing the exact grade of aviation turbine fuel (e.g., JP-8, JP-5), the delivery locations, and the specific market conditions at the time of award (September 2022). However, the contract's structure, Fixed Price with Economic Price Adjustment (FPEPA), is designed to manage price volatility. In September 2022, global oil prices were elevated due to geopolitical factors. The 'economic price adjustment' component would allow for increases or decreases based on established indices, meaning the initial fixed price might not be the final price paid. To benchmark, one would need to compare the effective price per gallon or barrel paid under this contract, after adjustments, against other FPEPA contracts for similar fuel types awarded around the same period by the Defense Logistics Agency (DLA) or other DoD components.

What are the primary risks associated with this aviation turbine fuel contract?

The primary risks associated with this aviation turbine fuel contract include price volatility, supply chain disruptions, and performance issues. The 'economic price adjustment' clause, while intended to mitigate risk, still exposes the government to potential price increases if market indices rise significantly. Supply chain risks are inherent in fuel procurement; geopolitical instability, natural disasters, or logistical challenges could disrupt delivery. Performance risks involve ensuring the fuel meets stringent military specifications and is delivered on time and at the correct locations. Given the short duration (17 days), the risk of immediate supply interruption is also a concern if the supplier faces unforeseen operational issues. The reliance on a single awardee, even if competitively sourced, carries some level of dependency.

What is the track record of QATAR ENERGY as a supplier to the Department of Defense?

QATAR ENERGY (formerly Qatar Petroleum) is a major global energy company. While specific details of their historical contract awards with the U.S. Department of Defense might require deep dives into federal procurement databases, major international energy firms are often involved in supplying fuel to military operations, particularly in regions where they have established infrastructure or production capabilities. Their track record would likely be characterized by large-scale commodity supply agreements. For the DoD, assessing their track record would involve reviewing past performance evaluations, on-time delivery rates, quality compliance, and any history of disputes or contract modifications on similar fuel supply contracts. Given the scale of QATAR ENERGY, they are generally considered a reliable, albeit large, supplier in the global energy market.

How does the competition level (full and open) impact the value for taxpayers on this contract?

A 'full and open competition' award is generally the most beneficial for taxpayers because it maximizes the pool of potential bidders, thereby increasing the likelihood of receiving competitive pricing. When multiple qualified companies vie for a contract, they are incentivized to offer their lowest possible prices and most favorable terms to win the award. This competitive pressure helps drive down costs and ensures that the government is not overpaying for goods or services. In the context of this $37.4 million aviation turbine fuel contract, full and open competition suggests that the Defense Logistics Agency sought to leverage market forces to secure the best possible value, minimizing the risk of paying inflated prices and maximizing the efficient use of taxpayer funds.

What are the implications of the 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type for cost certainty?

The 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type offers a balance between price certainty and flexibility for both the government and the contractor, particularly for goods whose costs are subject to market fluctuations, like fuel. The 'fixed price' component provides a baseline cost, while the 'economic price adjustment' allows for modifications based on a pre-defined index (e.g., a petroleum price index). This means the final price paid can deviate from the initial fixed price. For taxpayers, this offers some cost certainty by establishing a base, but it also means the final cost is not entirely fixed and could increase if market prices rise. It's generally considered less risky than a purely cost-plus contract but offers less price certainty than a firm fixed-price contract, aiming to prevent windfall profits for the contractor or undue losses due to market volatility.

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

Address: WORLD TRADE CENTER, AL DAFNA AREA, DOHA

Business Categories: Category Business, Foreign Owned, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $37,386,637

Exercised Options: $37,386,637

Current Obligation: $37,386,637

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60222D0454

IDV Type: IDC

Timeline