DoD awards $35.9M for aviation turbine fuel, with Valero Marketing and Supply Co. securing the delivery order

Contract Overview

Contract Amount: $35,899,259 ($35.9M)

Contractor: Valero Marketing and Supply CO

Awarding Agency: Department of Defense

Start Date: 2024-12-17

End Date: 2025-02-02

Contract Duration: 47 days

Daily Burn Rate: $763.8K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8511083573!TURBINE FUEL,AVIATION

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78249

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $35.9 million to VALERO MARKETING AND SUPPLY CO for work described as: 8511083573!TURBINE FUEL,AVIATION Key points: 1. The contract value represents a significant portion of annual spending for aviation fuel within the Defense Logistics Agency. 2. Competition dynamics for this contract are crucial for ensuring competitive pricing in a volatile fuel market. 3. Risk indicators include potential price fluctuations and supply chain disruptions inherent in the petroleum industry. 4. Performance context is tied to the timely delivery of critical fuel for military aviation operations. 5. This contract positions Valero as a key supplier within the defense sector's energy needs. 6. The fixed-price structure with economic price adjustment aims to mitigate some market volatility for both parties.

Value Assessment

Rating: good

The awarded amount of $35.9 million for aviation turbine fuel appears reasonable given the current market conditions and the fixed-price with economic price adjustment structure. Benchmarking against similar delivery orders for aviation fuel from the Defense Logistics Agency would provide a more precise value-for-money assessment. However, the contract's duration of approximately 47 days suggests a focused procurement for immediate needs, which can sometimes command a premium compared to longer-term, larger-volume contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The specific number of bidders is not provided, but the 'full and open' designation suggests a robust competitive process. This level of competition is generally expected to drive down prices and encourage innovation as contractors vie for the award.

Taxpayer Impact: Taxpayers benefit from full and open competition as it typically leads to more favorable pricing and ensures that the government is not overpaying for essential goods like aviation fuel.

Public Impact

Military aviation units within the Department of Defense are the primary beneficiaries, receiving essential fuel for operational readiness. The service delivered is the supply of aviation turbine fuel, critical for aircraft propulsion. The geographic impact is primarily within Texas, where the contractor is based, and potentially at various military installations requiring fuel delivery. Workforce implications include support for jobs in petroleum refining, logistics, and transportation sectors associated with Valero Marketing and Supply Co.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the economic price adjustment clause, which could increase costs if fuel prices surge.
Dependence on a single contractor for a critical supply item, raising concerns about supply chain resilience.
The short duration of the delivery order might indicate a reactive procurement, potentially missing opportunities for longer-term cost savings.

Positive Signals

Awarded under full and open competition, suggesting a competitive pricing environment.
The contractor, Valero Marketing and Supply Co., is a known entity in the fuel market, implying established operational capabilities.
The fixed-price component provides a baseline cost certainty, with adjustments managed through a defined economic mechanism.

Sector Analysis

The aviation turbine fuel market is a significant segment within the broader energy and petroleum industry. This contract falls under the North American Industry Classification System (NAICS) code 324110 (Petroleum Refineries). Spending on aviation fuel for defense purposes is a recurring necessity, with annual outlays often in the billions of dollars across various agencies. This specific contract, valued at $35.9 million, represents a portion of the Defense Logistics Agency's efforts to ensure fuel availability for military operations.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit mention of subcontracting requirements for small businesses within the provided data. Therefore, the direct impact on the small business ecosystem from this specific award is likely minimal, though Valero may engage small businesses in its broader supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), ensuring compliance with contract terms and financial regulations. The Defense Logistics Agency's contracting officers are responsible for overall contract administration. Transparency is facilitated through contract databases like FPDS, where such awards are reported. Inspector General (IG) investigations could be initiated if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Fuel Procurement
Petroleum Product Supply
Fixed Price with Economic Price Adjustment Contracts
Department of Defense Energy Spending

Risk Flags

Price Volatility Risk
Supply Chain Disruption Risk
Short-Term Procurement Strategy
Economic Price Adjustment Clause Impact

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $35.9 million to VALERO MARKETING AND SUPPLY CO. 8511083573!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 $35.9 million.

What is the period of performance?

Start: 2024-12-17. End: 2025-02-02.

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

Valero Marketing and Supply Co. has a history of supplying fuel products to the Department of Defense. Analyzing past awards, including their values, competition levels, and performance history, would provide insight into their reliability and pricing competitiveness. For instance, reviewing previous delivery orders for aviation turbine fuel or other petroleum products awarded to Valero by the DLA or other DoD components can reveal patterns in contract types, durations, and any reported issues. A consistent record of successful performance and adherence to delivery schedules would indicate a lower risk associated with this current award. Conversely, any history of contract disputes, late deliveries, or quality issues would warrant closer scrutiny of their current performance capabilities and the oversight applied to this contract.

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

Determining the exact price per gallon requires dividing the total award amount ($35.9 million) by the total quantity of fuel procured, which is not explicitly provided in the data. However, the contract type, 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT,' suggests that the base price is set, but it can fluctuate based on an agreed-upon economic index. To benchmark the value, one would compare this adjusted price against prevailing market rates reported by industry sources (e.g., Platts, EIA) for aviation turbine fuel (Jet A or JP-8, depending on specification) in the relevant geographic region (Texas) during the contract's performance period (December 2024 - February 2025). If the adjusted price consistently exceeds market benchmarks, it could indicate a less favorable value for the government. Conversely, prices at or below market rates would suggest good value.

What are the primary risks associated with this specific delivery order for aviation turbine fuel?

The primary risks associated with this delivery order include price volatility, supply chain disruptions, and potential performance issues. The 'economic price adjustment' clause, while intended to manage price fluctuations, can still lead to higher costs if market prices for crude oil and refined fuels surge unexpectedly. Supply chain risks are inherent in the petroleum industry; geopolitical events, refinery issues, or transportation bottlenecks could impact the timely availability of fuel. Furthermore, while Valero is an established supplier, any operational challenges on their end, such as logistical failures or quality control lapses, could lead to delivery delays or substandard fuel, impacting military readiness. The short duration of the order also presents a risk of needing to re-compete or extend rapidly if demand continues beyond the specified period.

How effective is the 'full and open competition' process in ensuring competitive pricing for aviation turbine fuel for the DoD?

The 'full and open competition' process is generally considered the most effective method for ensuring competitive pricing for goods and services, including aviation turbine fuel. By allowing all responsible sources to submit bids, it maximizes the number of potential offerors, thereby increasing the likelihood of receiving competitive proposals. This process drives down prices as contractors strive to offer the best value to win the contract. For aviation turbine fuel, where market prices can be volatile, robust competition helps ensure that the government secures fuel at rates that reflect current market conditions rather than inflated prices due to limited supplier options. The Defense Logistics Agency (DLA) relies heavily on this approach to manage its vast fuel procurement needs efficiently and cost-effectively.

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

The Defense Logistics Agency (DLA) is the primary agency responsible for procuring fuel for the U.S. military, including aviation turbine fuel. Historical spending data reveals a consistent and substantial annual expenditure, often running into billions of dollars, to meet the global fuel demands of all military branches. Spending levels can fluctuate based on operational tempo, geopolitical events influencing global oil prices, and strategic inventory management. While specific year-over-year figures for aviation turbine fuel alone are complex to isolate without detailed DLA reports, the overall trend indicates a critical and continuous requirement. The DLA employs various contracting strategies, including long-term agreements and individual delivery orders like this one, to ensure supply chain resilience and cost efficiency across its extensive fuel portfolio.

What are the implications of the 'delivery order' contract type for long-term fuel supply strategy?

A 'delivery order' is typically issued against an existing indefinite-delivery, indefinite-quantity (IDIQ) contract or a similar basic ordering agreement. This specific award, valued at $35.9 million and with a short duration (approx. 47 days), suggests it's for immediate or near-term needs rather than a long-term strategic supply commitment. While delivery orders provide flexibility to acquire goods as needed, relying heavily on them for critical, ongoing supplies like aviation fuel can lead to less predictable pricing and potentially higher overall costs compared to longer-term, fixed-quantity contracts. It also necessitates continuous monitoring and potential re-competition to ensure sustained supply. For a long-term strategy, agencies often prefer larger, multi-year contracts with options to secure more stable pricing and guaranteed supply volumes.

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: $35,899,259

Exercised Options: $35,899,259

Current Obligation: $35,899,259

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60224D0471

IDV Type: IDC

Timeline