DoD awards $35.2M for aviation turbine fuel, highlighting reliance on established suppliers

Contract Overview

Contract Amount: $35,229,809 ($35.2M)

Contractor: Valero Marketing and Supply CO

Awarding Agency: Department of Defense

Start Date: 2024-12-06

End Date: 2024-12-27

Contract Duration: 21 days

Daily Burn Rate: $1.7M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8511059898!TURBINE FUEL,AVIATION

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78249

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $35.2 million to VALERO MARKETING AND SUPPLY CO for work described as: 8511059898!TURBINE FUEL,AVIATION Key points: 1. Contract value represents a significant portion of annual fuel needs for specific aviation assets. 2. Competition was robust, suggesting fair market pricing was achieved. 3. Short performance period indicates a focus on immediate supply needs rather than long-term strategic sourcing. 4. Fixed-price contract with economic price adjustment offers some protection against market volatility. 5. Geographic concentration in Texas suggests regional supply chain considerations. 6. No small business set-aside indicates a focus on large-scale suppliers for this commodity.

Value Assessment

Rating: good

The awarded amount of $35.2 million for aviation turbine fuel appears reasonable given the commodity's market fluctuations and the fixed-price with economic price adjustment structure. Benchmarking against similar fuel contracts awarded by the Defense Logistics Agency (DLA) would provide a clearer picture of value for money. However, the short duration of the delivery order suggests a tactical purchase, which can sometimes command higher per-unit costs than longer-term agreements. The absence of specific performance metrics makes a definitive value assessment challenging without further data.

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 bids received is not provided, but the designation suggests a competitive process that allowed any qualified vendor to participate. This level of competition is generally expected to drive prices toward market rates and encourage efficient service delivery.

Taxpayer Impact: Full and open competition ensures that taxpayers benefit from the most competitive pricing available for this essential aviation fuel, preventing potential overcharges that could arise from a less competitive process.

Public Impact

Military aviation units requiring turbine fuel for operational readiness are the primary beneficiaries. Ensures the availability of critical fuel supplies for aircraft operations. The contract's impact is primarily concentrated within Texas, where the fuel is sourced. Supports the logistics and supply chain workforce involved in fuel distribution and handling.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clause if market prices surge.
Short delivery window may limit flexibility in case of unforeseen operational demands.
Dependence on a single supplier for this specific delivery order, despite open competition.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Fixed-price element provides some cost certainty.
Short performance period minimizes long-term financial commitment risk.
Supplier is an established entity in fuel marketing and supply.

Sector Analysis

The aviation turbine fuel market is a critical segment of the broader energy and petroleum refining sector. This contract falls under the Petroleum Refineries (NAICS 324110) industry code. The Department of Defense is a major consumer of such fuels, and contracts like this are essential for maintaining operational capabilities. Spending benchmarks for aviation fuel can vary significantly based on geopolitical events, global supply, and demand dynamics, but consistent procurement by agencies like the DLA indicates a stable, albeit volatile, market.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses. This suggests that the procurement focused on large-scale suppliers capable of meeting the significant volume and logistical demands for aviation turbine fuel. Consequently, the direct impact on the small business ecosystem for this specific award is likely minimal, though larger prime contractors may engage small businesses in their broader supply chains.

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 established DLA procurement policies and procedures. Transparency is generally maintained through contract award databases. Inspector General oversight would apply if any fraud, waste, or abuse were suspected during the performance or award process.

Related Government Programs

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

Risk Flags

Economic Price Adjustment Clause
Short Performance Period
Commodity Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $35.2 million to VALERO MARKETING AND SUPPLY CO. 8511059898!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 $35.2 million.

What is the period of performance?

Start: 2024-12-06. End: 2024-12-27.

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

The Department of Defense (DoD) is one of the largest consumers of aviation turbine fuel globally. Historical spending data reveals a consistent and substantial requirement for this commodity to support global military operations. For instance, DLA alone procures billions of dollars worth of fuel annually. This specific award of $35.2 million for a 21-day delivery period represents a tactical procurement. While significant in its own right, it is a component of a much larger, ongoing expenditure. Analyzing year-over-year spending trends, average contract values, and the number of competitive solicitations would provide a clearer context for this award's place within the DoD's overall fuel budget and procurement strategy. Fluctuations in global oil prices and geopolitical events significantly influence these historical patterns and the value of individual awards.

How does the economic price adjustment (EPA) clause typically function in fuel contracts, and what are the potential risks and benefits for the government?

An Economic Price Adjustment (EPA) clause in a fuel contract allows for the contract price to be modified based on fluctuations in specific economic indicators, most commonly published market prices for the commodity (e.g., jet fuel indices). For the government, the benefit is that it can secure supply even when market volatility is high, as the contractor is protected against significant losses. The risk is that the government may end up paying more than a fixed price if market prices increase substantially. Conversely, if prices decrease, the EPA might lead to a lower price for the government. The specific indices and adjustment formulas outlined in the contract are crucial for understanding the precise impact. This clause helps ensure supply continuity by mitigating the contractor's price risk, which can sometimes lead to more competitive initial bids compared to a purely fixed-price contract in volatile markets.

What is Valero Marketing and Supply Co.'s track record with government contracts, particularly for fuel procurement?

Valero Marketing and Supply Co. is a major player in the energy sector and has a significant history of engaging with government contracts, including those for fuel. As a large refiner and marketer, they possess the infrastructure and capacity to meet substantial government demands. A review of federal procurement databases would likely show numerous awards to Valero for various fuel types across different agencies, including the Department of Defense. Their track record typically involves large-volume procurements, often under competitive bidding processes. While specific performance metrics for past contracts would require deeper analysis, their continued presence as a bidder and awardee suggests a generally reliable performance history in fulfilling government fuel requirements. Assessing past contract performance, including any disputes or terminations, would offer a more granular view.

What are the implications of awarding aviation turbine fuel under a 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type versus a firm fixed price (FFP)?

Awarding aviation turbine fuel under a Fixed Price with Economic Price Adjustment (FPEPA) contract type, as seen here, differs significantly from a Firm Fixed Price (FFP) contract. In an FFP contract, the price is set and remains constant regardless of market fluctuations, placing all price risk on the contractor. This can lead to higher initial bids to account for potential price increases. With FPEPA, the price is adjusted based on a pre-defined economic index (e.g., market price of fuel). This shifts some of the price risk to the government but can result in lower initial bids and ensures that the contractor remains willing to supply during periods of high market volatility. For the government, FPEPA offers a balance: it helps secure supply and potentially lower costs if prices fall, but exposes it to increased costs if prices rise. The specific EPA formula is critical in determining the actual cost impact.

Given the short duration (21 days) of this delivery order, what does this suggest about the agency's procurement strategy for aviation turbine fuel?

The short 21-day performance period for this aviation turbine fuel delivery order suggests a strategy focused on meeting immediate or near-term operational needs rather than long-term strategic inventory management or bulk purchasing. This could indicate several things: the agency may have existing longer-term contracts or indefinite-delivery/indefinite-quantity (IDIQ) vehicles that cover the bulk of their needs, and this is a supplemental or emergency order. Alternatively, it might reflect uncertainty in future demand, a desire to take advantage of current market conditions for a short period, or simply a need to replenish stocks quickly. Such short-term orders can sometimes be less cost-effective per unit compared to larger, longer-duration contracts due to less opportunity for economies of scale and potentially higher administrative overhead per unit of fuel procured.

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: $35,229,809

Exercised Options: $35,229,809

Current Obligation: $35,229,809

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60224D0471

IDV Type: IDC

Timeline