DoD spent $41.5M on aviation turbine fuel in FY23, with Vitol Aviation Co. securing the delivery order

Contract Overview

Contract Amount: $41,538,617 ($41.5M)

Contractor: Vitol Aviation CO

Awarding Agency: Department of Defense

Start Date: 2023-09-22

End Date: 2023-10-15

Contract Duration: 23 days

Daily Burn Rate: $1.8M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 8510166378!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 $41.5 million to VITOL AVIATION CO for work described as: 8510166378!TURBINE FUEL,AVIATION Key points: 1. Value for money appears reasonable given the market volatility for fuel commodities. 2. Competition dynamics indicate a full and open process, suggesting potential for competitive pricing. 3. Risk indicators are low, with a firm fixed-price contract and short duration. 4. Performance context is a single delivery order for immediate fuel needs. 5. Sector positioning is within the critical Defense Logistics Agency's fuel supply chain.

Value Assessment

Rating: good

The contract value of $41.5 million for aviation turbine fuel is a significant expenditure. Benchmarking against market prices for jet fuel during the contract period (September-October 2023) is crucial. Given the commodity nature of fuel and the firm fixed-price structure, the pricing is likely competitive, assuming the base price reflects prevailing market conditions. The short duration of the delivery order suggests it was procured for immediate operational needs, making direct comparison to longer-term contracts difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. The specific number of bidders is not provided, but the designation suggests a robust competitive environment. A full and open competition generally leads to better price discovery and ensures the government receives offers from a wide range of qualified vendors.

Taxpayer Impact: Taxpayers benefit from a competitive process that aims to secure the best possible price for essential aviation fuel, minimizing unnecessary costs.

Public Impact

Military operations requiring aviation turbine fuel are the primary beneficiaries. The service delivered is the supply of critical fuel for aircraft, ensuring operational readiness. The geographic impact is focused on the operational areas supported by the Defense Logistics Agency, with the specific delivery location being California. Workforce implications are minimal, primarily related to logistics and fuel handling personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in the volatile global fuel market.
Dependence on a single supplier for this specific delivery order, though competition was open.

Positive Signals

Firm fixed-price contract mitigates cost overrun risks.
Short contract duration limits exposure to long-term market volatility.
Awarded under full and open competition, suggesting a competitive pricing environment.

Sector Analysis

The petroleum refineries sector (NAICS 324110) is fundamental to the energy supply chain. This contract falls within the broader energy and defense logistics sectors. The market for aviation turbine fuel is global and subject to significant price volatility influenced by geopolitical events, supply and demand, and crude oil prices. Defense agencies are major consumers, requiring reliable and timely fuel supplies for global operations.

Small Business Impact

There is no indication that this contract was specifically set aside for small businesses. The prime contractor, Vitol Aviation Co., is a large entity. Subcontracting opportunities for small businesses are not detailed in the provided data but are generally encouraged within the defense supply chain.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract. As a delivery order under a larger contract vehicle, it likely adheres to DLA's established procurement and oversight procedures. Transparency is generally maintained through contract award databases, and accountability rests with the DLA contracting officers and the prime contractor to fulfill the terms of the agreement.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Fuel Procurement
Energy Commodity Contracts
Firm Fixed Price Contracts

Risk Flags

Price Volatility Risk
Supply Chain Disruption Risk
Geopolitical Risk Impacting Fuel Prices

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.5 million to VITOL AVIATION CO. 8510166378!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 $41.5 million.

What is the period of performance?

Start: 2023-09-22. End: 2023-10-15.

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

The Defense Logistics Agency (DLA) is a primary procurer of aviation turbine fuel for the U.S. military. Historical spending data reveals a consistent and substantial requirement for this commodity, often running into billions of dollars annually across numerous contracts and delivery orders. Spending fluctuates based on operational tempo, global deployments, and prevailing market prices for jet fuel. For instance, in Fiscal Year 2022, DLA's energy programs, which include aviation fuels, managed expenditures exceeding $30 billion. The specific amount for aviation turbine fuel varies year to year but represents a significant portion of this total. Analyzing trends over the past five to ten years would show periods of higher spending during active conflicts or increased training exercises, and potentially lower spending during periods of reduced military activity or when fuel prices were exceptionally high, leading to conservation efforts.

How does Vitol Aviation Co.'s performance on this contract compare to other fuel suppliers for the DoD?

Assessing Vitol Aviation Co.'s performance on this specific $41.5 million delivery order requires more data than is currently available, such as delivery timeliness, fuel quality compliance, and any reported issues. However, Vitol Aviation is a major global energy trading company with extensive experience in supplying fuels to military and commercial clients worldwide. Their track record generally indicates a capacity to handle large-volume, time-sensitive fuel deliveries. Comparisons with other DoD fuel suppliers would involve analyzing contract histories, past performance evaluations (if publicly available), and pricing competitiveness across similar solicitations. DLA typically uses a combination of large, established suppliers like Vitol and other major energy firms, alongside smaller, specialized providers, to ensure supply chain resilience and competitive pricing. Performance metrics are crucial for DLA's source selection process in future procurements.

What are the primary risks associated with procuring aviation turbine fuel, and how are they mitigated in this contract?

The primary risks in procuring aviation turbine fuel include price volatility in the global energy markets, supply chain disruptions (due to geopolitical events, natural disasters, or logistical challenges), and quality control issues. This contract, valued at $41.5 million and awarded under full and open competition with a firm fixed-price (FFP) structure, employs several mitigation strategies. The FFP nature locks in the price, shielding the DoD from upward price fluctuations during the contract's short 23-day duration (September 22 to October 15, 2023). The short duration itself limits the exposure period to market volatility. Full and open competition aims to ensure a robust supply base, reducing the risk of single-source dependency. DLA's established logistics network and quality assurance protocols are designed to mitigate supply chain and quality risks, respectively. However, unforeseen geopolitical events could still impact global supply, potentially affecting future contract pricing or availability.

What is the typical profit margin for companies supplying aviation turbine fuel to the government?

Determining the exact profit margin for companies supplying aviation turbine fuel to the government is complex and not directly disclosed in contract awards. Profit margins are influenced by numerous factors, including the company's cost structure (procurement costs, transportation, storage, overhead), market competition, contract type, and the specific terms negotiated. For commodity products like fuel, margins are often relatively thin, typically ranging from low single digits to perhaps 5-10% for the prime contractor, especially under competitive, firm fixed-price contracts. Companies like Vitol Aviation operate on high volumes, where even small percentage margins can yield significant profits. The government aims to achieve competitive pricing through mechanisms like full and open competition, which inherently drives down margins by forcing suppliers to offer their most aggressive pricing to win contracts. Actual profit realized can also be affected by unforeseen market shifts or operational efficiencies.

How does the geographic location of fuel delivery (California) impact the cost and logistics?

The geographic location of fuel delivery, in this case, California, can significantly impact the cost and logistics of aviation turbine fuel. California has specific environmental regulations that may affect fuel blending and handling, potentially increasing compliance costs. Furthermore, West Coast fuel markets can sometimes trade at a premium compared to other regions due to refining capacity, import/export dynamics, and transportation infrastructure. Delivery to a specific location within California, such as a military base, involves complex logistics, including pipeline, truck, or potentially ship transport from refineries or terminals. The distance from the source of supply to the point of delivery, along with associated transportation fees and potential delays, directly influences the final delivered cost. For a short-duration delivery order, the proximity of Vitol Aviation's supply points to the California delivery site would be a critical factor in their pricing strategy and ability to meet the tight delivery window.

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: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Vitol Netherlands Coöperatief U.A.

Address: 300 CONTINENTAL BLVD STE 198, EL SEGUNDO, CA, 90245

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

Financial Breakdown

Contract Ceiling: $41,538,617

Exercised Options: $41,538,617

Current Obligation: $41,538,617

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60223D0455

IDV Type: IDC

Timeline