DoD spent $29.4M on aviation turbine fuel, with Vitol Aviation Co. securing the contract

Contract Overview

Contract Amount: $29,403,241 ($29.4M)

Contractor: Vitol Aviation CO

Awarding Agency: Department of Defense

Start Date: 2022-11-22

End Date: 2022-12-14

Contract Duration: 22 days

Daily Burn Rate: $1.3M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: 8509532456!TURBINE FUEL,AVIATION

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $29.4 million to VITOL AVIATION CO for work described as: 8509532456!TURBINE FUEL,AVIATION Key points: 1. The contract value represents a significant expenditure within the aviation fuel sector. 2. Competition dynamics for this contract are crucial for ensuring fair pricing. 3. Risk indicators include potential price volatility in the global fuel market. 4. Performance context is tied to the timely delivery of essential aviation fuel. 5. This contract positions Vitol Aviation within the broader defense logistics supply chain. 6. The fixed-price structure with economic price adjustment introduces some cost variability.

Value Assessment

Rating: good

The contract value of $29.4 million for aviation turbine fuel appears reasonable given the market for such commodities. Benchmarking against similar large-volume fuel procurements by the Defense Logistics Agency (DLA) would provide a more precise value-for-money assessment. The fixed-price with economic price adjustment (FPEPA) clause suggests an attempt to balance cost certainty with market fluctuations, which is a common practice for volatile commodities like fuel.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. The specific number of bidders is not provided, but this competitive approach generally fosters price discovery and encourages contractors to offer their best terms. The DLA's standard practice of utilizing full and open competition for such essential supplies suggests a robust market for aviation turbine fuel.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it drives down prices through market forces, ensuring that the government obtains the best possible value for its spending on critical aviation fuel.

Public Impact

The primary beneficiaries are the Department of Defense (DoD) aviation units requiring reliable fuel supplies. Services delivered include the provision of aviation turbine fuel, essential for flight operations. The geographic impact is centered in California, where the fuel was delivered. Workforce implications are likely minimal for the contracting agency but significant for the contractor's logistics and supply chain operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clause in a volatile fuel market.
Dependence on a single contractor for a critical supply chain component.
Geographic concentration of delivery in California could pose logistical risks if disruptions occur.

Positive Signals

Awarded under full and open competition, suggesting competitive pricing.
Contractor has experience in fuel supply, indicated by their presence in the market.
Fixed-price element provides some cost control for the government.

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 fuel distribution industry, characterized by global supply chains and commodity price volatility. Comparable spending benchmarks would involve analyzing other DLA fuel contracts and major military fuel procurements to assess the scale and pricing of this award within the defense context.

Small Business Impact

There is no indication that this contract involved small business set-asides. Given the scale and nature of aviation fuel procurement, it is typically dominated by large, specialized energy companies. Subcontracting opportunities for small businesses are unlikely to be a significant component of this specific award, though they might exist further down the supply chain for related services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Logistics Agency (DLA), which is responsible for managing and executing fuel procurements for the DoD. Accountability measures are embedded in the contract terms, including delivery schedules and fuel quality specifications. Transparency is facilitated through contract award databases, though detailed performance metrics may not be publicly available.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Fuel Procurement
Department of Defense Supply Chain Management
Petroleum Products Procurement

Risk Flags

Potential for price volatility impacting final cost.
Dependence on global fuel market conditions.
Logistical challenges in fuel delivery.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.4 million to VITOL AVIATION CO. 8509532456!TURBINE FUEL,AVIATION

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 $29.4 million.

What is the period of performance?

Start: 2022-11-22. End: 2022-12-14.

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

Vitol Aviation Co. is a known entity in the global aviation fuel market. While specific details on their entire track record with the DoD are not provided in this data snippet, their ability to win a contract of this magnitude suggests they have a history of meeting government requirements or possess the necessary infrastructure and market position. Further investigation into their past performance ratings, other awarded contracts, and any reported issues with previous DoD fuel deliveries would be necessary for a comprehensive assessment of their track record. This includes examining contract close-out data and any performance feedback available through government contracting portals.

How does the price per gallon for this contract compare to market rates at the time of award?

The provided data does not include the quantity of fuel procured, making it impossible to calculate a per-gallon price for direct comparison. To assess the value for money, one would need the total gallons purchased under the $29.4 million award and compare this to prevailing market prices for aviation turbine fuel (e.g., Jet A-1) in California during November-December 2022. Market indices from sources like the Energy Information Administration (EIA) or Platts could be used. The economic price adjustment (EPA) clause also complicates a simple price comparison, as the final price could vary based on fuel market indices during the contract period.

What are the primary risks associated with this contract, and how are they mitigated?

The primary risks include price volatility in the global oil market, which could lead to higher costs for the government due to the EPA clause, and potential supply chain disruptions (e.g., geopolitical events, refinery issues, transportation problems) affecting delivery. Mitigation strategies likely involve the EPA clause itself, which allows for price adjustments based on market indices, providing some buffer against extreme price swings. The DLA's extensive experience in fuel procurement and established relationships with suppliers also serve as risk mitigation. Furthermore, the contract likely includes clauses for penalties for non-delivery or substandard quality, incentivizing contractor performance.

How effective is the fixed-price with economic price adjustment (FPEPA) structure for managing costs in volatile fuel markets?

The FPEPA structure is a common tool for managing costs in volatile commodity markets like aviation fuel. The 'fixed-price' component provides a baseline cost, while the 'economic price adjustment' allows for predetermined adjustments based on an objective index (e.g., a fuel price index). This aims to protect both the government from excessive price increases and the contractor from significant losses due to market downturns. Its effectiveness hinges on the chosen index accurately reflecting market conditions and the frequency/limits of the adjustments. For taxpayers, it offers a balance: preventing windfall profits for the contractor during price spikes while ensuring a stable supply by not locking in potentially unsustainable fixed prices.

What is the historical spending pattern for aviation turbine fuel by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) is the primary entity responsible for procuring fuel for the U.S. military. Historical spending on aviation turbine fuel has been substantial, often running into billions of dollars annually, reflecting the vast operational needs of the Air Force, Navy, and other branches. Spending fluctuates based on global fuel prices, operational tempo, and strategic inventory levels. Analyzing DLA's annual reports or specific contract award databases would reveal trends in volume, pricing, and key suppliers over time. This $29.4 million award represents a single delivery order, likely part of a larger, ongoing fuel supply program managed by DLA.

What is the significance of the 'Delivery Order' (AW) contract type in this context?

The 'Delivery Order' (AW) designation indicates that this contract is likely a task order or delivery order issued against a larger indefinite-delivery/indefinite-quantity (IDIQ) contract or a basic ordering agreement (BOA). This structure allows the government to procure specific quantities of goods or services as needed, rather than committing to a large, upfront purchase. For aviation fuel, this is practical as consumption varies. It implies that Vitol Aviation Co. was previously awarded a broader contract vehicle, and this $29.4 million represents a specific call for fuel within that framework, likely with defined delivery locations and timelines.

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: $29,403,241

Exercised Options: $29,403,241

Current Obligation: $29,403,241

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60222D0456

IDV Type: IDC

Timeline