DoD's $28.8M aviation turbine fuel contract awarded to Valero Marketing and Supply Co. for Texas delivery

Contract Overview

Contract Amount: $28,477,775 ($28.5M)

Contractor: Valero Marketing and Supply CO

Awarding Agency: Department of Defense

Start Date: 2024-06-09

End Date: 2024-06-27

Contract Duration: 18 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: 8510685339!TURBINE FUEL,AVIATION

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78249

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $28.5 million to VALERO MARKETING AND SUPPLY CO for work described as: 8510685339!TURBINE FUEL,AVIATION Key points: 1. Contract value appears reasonable given market fluctuations for aviation fuel. 2. Competition was full and open, suggesting a competitive pricing environment. 3. Fixed Price with Economic Price Adjustment contract type introduces some price volatility risk. 4. Short contract duration (18 days) limits long-term price exposure. 5. Delivery concentrated in Texas, a key hub for aviation fuel. 6. Contractor has a significant presence in fuel marketing and supply.

Value Assessment

Rating: good

The contract value of $28.8 million for 18 days of aviation turbine fuel delivery is substantial. Benchmarking against similar fuel contracts is challenging due to volatile market prices and specific delivery requirements. However, the fixed-price component with economic price adjustment suggests an attempt to balance cost certainty with market realities. The award to a major supplier like Valero indicates a competitive bid process likely secured a fair market price at the time of award.

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 invited to submit proposals. The specific number of bidders is not provided, but the 'full and open' designation generally suggests a robust competitive process. This approach is designed to foster price discovery and ensure the government receives competitive pricing by allowing all qualified sources to participate.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically drives down prices through market forces, ensuring that government funds are used efficiently and effectively.

Public Impact

Aviation fuel is delivered to support Department of Defense operations, ensuring readiness and operational capability. The services directly benefit military aviation units operating within or transiting through Texas. Geographic impact is concentrated in Texas, a state with significant military installations and air traffic. Workforce implications are minimal for this specific contract, primarily involving logistics and fuel handling by the contractor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost overruns if fuel prices spike unexpectedly.
Short contract duration may lead to frequent re-solicitation and administrative overhead.
Concentration of delivery in a single state could pose supply chain risks if local disruptions occur.

Positive Signals

Award to a well-established supplier like Valero suggests reliability and established supply chains.
Full and open competition indicates a commitment to achieving best value through market forces.
Fixed price component provides some level of cost control against market volatility.

Sector Analysis

The petroleum refining and marketing sector is critical for national security, providing essential fuels for military and civilian operations. The market is characterized by global supply and demand dynamics, geopolitical influences, and significant price volatility. This contract fits within the broader category of defense logistics and sustainment, ensuring the availability of critical aviation fuel. Comparable spending benchmarks are difficult to establish precisely due to the fluctuating nature of fuel prices and specific contract terms.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. The award was made under full and open competition. There is no explicit information regarding subcontracting plans for small businesses. Therefore, the direct impact on the small business ecosystem for this specific award is likely limited, though Valero may engage small businesses in its broader supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Logistics Agency (DLA), which is responsible for managing and overseeing fuel procurements for the Department of Defense. Accountability measures are embedded in the contract terms, including delivery specifications and pricing adjustments. Transparency is generally maintained through contract award databases, though specific performance metrics may not be publicly disclosed. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Contracts
Department of Defense Energy Procurement
Petroleum Product Supply Contracts

Risk Flags

Price Volatility Risk
Supply Chain Disruption Risk
Short Contract Duration Administrative Burden

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.5 million to VALERO MARKETING AND SUPPLY CO. 8510685339!TURBINE FUEL,AVIATION

Who is the contractor on this award?

The obligated recipient is VALERO MARKETING AND SUPPLY CO.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $28.5 million.

What is the period of performance?

Start: 2024-06-09. End: 2024-06-27.

What is Valero Marketing and Supply Co.'s track record with the Department of Defense for fuel supply contracts?

Valero Marketing and Supply Co. is a major player in the energy sector with a significant history of supplying petroleum products, including aviation fuel, to various government agencies. While specific details on all past DoD contracts are not provided in this data snippet, their established presence in the market suggests they have experience fulfilling large-scale government requirements. Their ability to secure this contract under full and open competition implies a competitive pricing strategy and a demonstrated capacity to meet DoD's logistical and quality standards. Further analysis would involve reviewing historical contract awards, performance reviews, and any past issues or disputes with the DoD or other federal agencies to fully assess their track record.

How does the awarded price compare to market rates for aviation turbine fuel during the contract period?

The provided data does not include the specific unit price awarded, only the total contract value ($28.8 million) and duration (18 days). To compare this to market rates, one would need to know the exact quantity of fuel procured and the average market price per gallon or barrel of aviation turbine fuel (e.g., Jet A-1) during the contract's delivery period (June 9-27, 2024). Market prices for aviation fuel are highly volatile, influenced by crude oil prices, refining capacity, geopolitical events, and seasonal demand. The contract's 'Fixed Price with Economic Price Adjustment' (FP-EPA) clause indicates that the price is not entirely fixed and can fluctuate based on an index or formula tied to market conditions. Without the specific unit price and quantity, a direct comparison to market benchmarks is not possible from this data alone.

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

The primary risks associated with this contract include price volatility due to the Economic Price Adjustment (EPA) clause, potential supply chain disruptions, and the short duration leading to potential administrative burden. The EPA clause, while allowing for market fluctuations, introduces uncertainty in final costs for the government. Supply chain disruptions could arise from refinery issues, transportation problems, or geopolitical events impacting fuel availability. The short duration might necessitate frequent re-competition, increasing administrative costs and potentially leading to less favorable pricing if market conditions are unfavorable during subsequent solicitations. Mitigation strategies include the fixed-price component of the FP-EPA contract, which provides some cost ceiling, Valero's established market position suggesting supply reliability, and the DLA's expertise in managing fuel contracts and contingency planning.

How effective is the 'full and open competition' strategy in ensuring value for this specific aviation fuel procurement?

The 'full and open competition' strategy is generally considered highly effective in ensuring value for commodity procurements like aviation fuel, especially when dealing with a volatile market. By allowing all responsible sources to bid, it maximizes the pool of potential suppliers, thereby increasing the likelihood of receiving competitive offers. This competitive pressure incentivizes bidders, like Valero, to offer their best pricing and terms. For aviation fuel, where market prices can fluctuate significantly, open competition helps the government capture favorable pricing windows. The effectiveness is further supported by the DLA's role as a major fuel purchaser, which gives them leverage in negotiations and a deep understanding of market dynamics. The ultimate value is realized through the price achieved relative to prevailing market conditions at the time of award.

What is the historical spending pattern for aviation turbine fuel by the Department of Defense, and how does this contract fit?

The Department of Defense is one of the largest consumers of petroleum products globally, including significant quantities of aviation turbine fuel to support its vast air operations. Historical spending patterns show consistent, substantial investments in fuel to maintain readiness across all branches. This $28.8 million contract for a short delivery period represents a tactical procurement, likely fulfilling immediate or short-term operational needs within a specific region (Texas). It is part of a larger, ongoing expenditure on fuel that fluctuates based on operational tempo, global market prices, and strategic requirements. Analyzing historical spending would reveal trends in contract values, pricing mechanisms (fixed vs. variable), and the mix of suppliers used, providing context for the current award's scale and terms.

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: Valero Energy Corporation

Address: 1 VALERO WAY, SAN ANTONIO, TX, 78249

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

Financial Breakdown

Contract Ceiling: $28,477,775

Exercised Options: $28,477,775

Current Obligation: $28,477,775

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60223D0473

IDV Type: IDC

Timeline