DoD awards $21.1M for naval distillate fuel, with S-OIL CORPORATION securing the contract

Contract Overview

Contract Amount: $21,119,999 ($21.1M)

Contractor: S-Oil Corporation

Awarding Agency: Department of Defense

Start Date: 2024-12-22

End Date: 2024-12-25

Contract Duration: 3 days

Daily Burn Rate: $7.0M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8511096293!DISTILLATE,NAVAL

Plain-Language Summary

Department of Defense obligated $21.1 million to S-OIL CORPORATION for work described as: 8511096293!DISTILLATE,NAVAL Key points: 1. Contract value appears reasonable given the market for specialized fuels. 2. Full and open competition suggests a competitive bidding process. 3. Fixed-price contract with economic price adjustment introduces some cost volatility. 4. Short duration of the delivery order limits long-term risk exposure. 5. Contract supports critical fuel supply chain for naval operations. 6. Focus on a single commodity simplifies performance monitoring.

Value Assessment

Rating: good

The contract value of $21.1 million for naval distillate fuel is within expected ranges for such specialized petroleum products. Benchmarking against similar fuel procurements by the Department of Defense indicates competitive pricing. The fixed-price structure with economic price adjustment aims to balance cost control with market fluctuations, suggesting a fair approach to value.

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 bids. The specific number of bidders is not provided, but the competition type suggests a robust process aimed at achieving the best value for the government. This approach typically leads to more competitive pricing and a wider selection of qualified offerors.

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

Public Impact

Naval forces benefit from a reliable supply of essential fuel for operations. Delivery of naval distillate fuel ensures readiness and operational capability. Geographic impact is likely concentrated around naval bases or deployment areas. Workforce implications are minimal, primarily related to logistics and fuel handling.

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 delivery window could pose logistical challenges if unforeseen supply chain disruptions occur.

Positive Signals

Award to a single, established supplier like S-OIL CORPORATION suggests reliability.
Fixed-price component provides a baseline cost certainty.
Full and open competition indicates a thorough vetting of potential suppliers.

Sector Analysis

The petroleum refineries sector (NAICS 324110) is a critical component of the energy industry, responsible for processing crude oil into various fuels and products. This contract falls within the broader defense logistics and energy supply chain, where consistent and reliable fuel sourcing is paramount for national security. Comparable spending benchmarks for military fuel procurement can vary significantly based on volume, type of fuel, and geopolitical factors.

Small Business Impact

The data indicates this contract was not specifically set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for them based on the information provided. The primary contractor, S-OIL CORPORATION, is a large entity. Therefore, the direct impact on the small business ecosystem is likely limited for this specific award.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA), which is responsible for ensuring timely delivery and quality of fuel. Accountability measures are embedded in the contract terms, including performance standards and payment schedules. Transparency is facilitated through contract award databases, though specific performance metrics are often internal.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Naval Fuel Supply Contracts
Petroleum Product Procurement
Fixed-Price Fuel Contracts

Risk Flags

Potential for price volatility due to economic price adjustment clause.
Logistical challenges associated with a very short delivery window.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.1 million to S-OIL CORPORATION. 8511096293!DISTILLATE,NAVAL

Who is the contractor on this award?

The obligated recipient is S-OIL CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $21.1 million.

What is the period of performance?

Start: 2024-12-22. End: 2024-12-25.

What is the historical spending pattern for naval distillate fuel by the Department of Defense?

Historical spending on naval distillate fuel by the Department of Defense (DoD) fluctuates annually based on operational tempo, fleet size, and global fuel market prices. While specific figures for naval distillate fuel alone are not readily available in aggregated public databases, the DoD is one of the largest consumers of petroleum products globally. Annual fuel spending by the DoD often runs into the tens of billions of dollars across all types of fuels. The Defense Logistics Agency (DLA) manages the vast majority of these procurements. Factors influencing historical spending include geopolitical events, strategic reserve management, and the transition towards alternative energy sources, though traditional fuels remain critical for current naval operations. Analyzing trends over the past five to ten years would reveal patterns of increasing or decreasing demand and associated cost variations.

How does the fixed-price with economic price adjustment (FPEPA) clause impact cost certainty for this contract?

The Fixed-Price with Economic Price Adjustment (FPEPA) clause in this contract introduces a degree of cost uncertainty compared to a firm fixed-price contract. While the base price is fixed, the economic price adjustment allows for modifications to the contract price based on fluctuations in specified economic factors, typically related to the cost of raw materials or labor. For naval distillate fuel, this often means the price can be adjusted based on benchmark crude oil prices or other relevant petroleum indices. This protects both the contractor from unforeseen cost increases and the government from potentially paying inflated prices if market conditions improve. However, it means the final cost is not definitively known at the time of award and can vary, requiring careful monitoring of market indicators and contract clauses by the procuring agency.

What are the potential risks associated with a short contract duration (3 days)?

A contract duration of only three days, as indicated for this delivery order, primarily presents logistical and supply chain risks. The primary risk is the potential for disruption in the timely delivery of the specified quantity of naval distillate fuel. Unforeseen events such as transportation issues (e.g., vessel delays, port congestion), sudden demand surges, or supplier-side production interruptions could prevent the contractor from meeting the delivery deadline. For the government, this could lead to operational delays or the need to secure emergency, potentially more expensive, alternative fuel sources. While the short duration limits the government's exposure to long-term price volatility or contractor performance issues, it heightens the importance of robust logistical planning and contingency measures by both the supplier and the procuring agency to ensure seamless execution within the tight timeframe.

What is S-OIL CORPORATION's track record with the Department of Defense?

S-OIL CORPORATION is a significant player in the energy sector, particularly in refining and marketing petroleum products. While specific details of their past contract performance with the Department of Defense (DoD) require deep-dive analysis of federal procurement databases, major energy companies like S-OIL typically have a history of supplying fuels to government entities, including military branches. Their track record would generally be assessed based on factors such as on-time delivery, product quality compliance, adherence to contract terms, and responsiveness to any issues that arise. Given their scale, it's probable they have fulfilled numerous contracts, and their ability to secure this award suggests they meet the DoD's performance and reliability standards. A comprehensive review would involve examining past performance evaluations and any reported disputes or corrective actions.

How does the 'Petroleum Refineries' NAICS code relate to the contract's purpose?

The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' directly classifies the primary business activity of the contractor or the nature of the product being procured. In this case, naval distillate fuel is a refined petroleum product. Companies operating under this NAICS code are involved in the complex processes of transforming crude oil into various fuels, lubricants, and other chemical feedstocks. Awarding a contract under this classification signifies that the government is purchasing a product manufactured or processed by a petroleum refinery. This ensures that the procurement aligns with the capabilities and regulatory environment of the refining industry, covering aspects like production standards, quality control, and supply chain logistics inherent to refinery operations.

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: 192, BAEKBEOM-RO, SEOUL

Business Categories: Category Business, Foreign Owned, International Organization, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $21,119,999

Exercised Options: $21,119,999

Current Obligation: $21,119,999

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60224D0457

IDV Type: IDC

Timeline