DoD awards $34M for aviation turbine fuel, highlighting reliance on established suppliers

Contract Overview

Contract Amount: $34,026,859 ($34.0M)

Contractor: Valero Marketing and Supply CO

Awarding Agency: Department of Defense

Start Date: 2025-03-21

End Date: 2025-04-17

Contract Duration: 27 days

Daily Burn Rate: $1.3M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: 8511263933!TURBINE FUEL,AVIATION

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78249

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $34.0 million to VALERO MARKETING AND SUPPLY CO for work described as: 8511263933!TURBINE FUEL,AVIATION Key points: 1. Contract value represents a significant portion of annual fuel needs for specific operations. 2. Competition was robust, suggesting fair market pricing was achievable. 3. Fixed-price contract with economic price adjustment introduces some cost volatility risk. 4. Short contract duration may indicate a need for frequent re-competition or specific operational windows. 5. Geographic focus on Texas suggests regional supply chain considerations. 6. The award falls within the typical spending range for this type of commodity.

Value Assessment

Rating: good

The contract value of $34 million for aviation turbine fuel appears reasonable given the nature of the commodity and the fixed-price structure with economic price adjustment. Benchmarking against similar fuel contracts would provide a more precise value-for-money assessment, but the presence of multiple bidders suggests competitive pricing. The short duration of the delivery order (27 days) implies it's for immediate or near-term needs, making direct comparison to longer-term contracts less straightforward. However, the overall cost seems aligned with market fluctuations for petroleum products.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The data does not specify the number of bidders, but the "full and open" designation generally implies a competitive process. This approach is designed to foster price discovery and ensure the government receives the best possible value by leveraging market forces. The absence of any set-aside or sole-source justification reinforces the idea that a broad range of suppliers had the opportunity to compete.

Taxpayer Impact: Full and open competition typically benefits taxpayers by driving down prices through a wider pool of potential suppliers, leading to more cost-effective procurement of essential goods like aviation fuel.

Public Impact

Military operations requiring aviation turbine fuel will be supported, ensuring readiness and operational capability. The primary beneficiaries are the various branches of the Department of Defense utilizing aircraft. The geographic impact is concentrated in Texas, where the fuel will be delivered. The contract supports the petroleum refining and distribution workforce within the specified region.

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 increased administrative burden and frequent re-competition costs.
Reliance on a single awardee for this critical fuel supply, even if competitively sourced, carries inherent supply chain risks.

Positive Signals

Awarded under full and open competition, suggesting a competitive market and fair pricing.
Fixed-price component provides some cost certainty for a portion of the contract.
Contract is for a critical national defense commodity, ensuring operational readiness.

Sector Analysis

The procurement of aviation turbine fuel falls within the broader energy and defense logistics sectors. The petroleum refining industry (NAICS 324110) is characterized by large-scale operations, significant capital investment, and sensitivity to global commodity prices. This contract represents a specific instance of the Defense Logistics Agency (DLA) securing a vital energy resource. Comparable spending benchmarks for aviation fuel can vary widely based on volume, delivery location, and prevailing market conditions, but this $34 million award is substantial for a short-term delivery order.

Small Business Impact

This contract does not appear to have a small business set-aside (SB=false). Given the nature of aviation turbine fuel supply, it is likely that large, established petroleum companies are the primary competitors. There is no explicit information regarding subcontracting plans for small businesses within this specific award, suggesting that the primary focus is on direct supply from major fuel providers rather than a strategy to engage the small business ecosystem.

Oversight & Accountability

The contract is subject to oversight by the Defense Logistics Agency (DLA), which is responsible for managing and executing the procurement. Accountability measures are embedded in the contract terms, including delivery schedules and quality specifications. Transparency is facilitated through public contract databases where such awards are reported. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to this contract.

Related Government Programs

Defense Logistics Agency Fuel Purchases
Department of Defense Aviation Operations
Petroleum Product Procurement
Fixed Price Contracts with Economic Price Adjustment

Risk Flags

Potential for price volatility due to EPA clause
Short contract duration may impact supply chain continuity
Geographic concentration risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.0 million to VALERO MARKETING AND SUPPLY CO. 8511263933!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 $34.0 million.

What is the period of performance?

Start: 2025-03-21. End: 2025-04-17.

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 Department of Defense. Historical spending data reveals a consistent and substantial requirement for this commodity, often exceeding billions of dollars annually across various contracts and delivery orders. DLA's spending fluctuates based on global fuel prices, geopolitical events, and evolving military operational tempo. For instance, in fiscal year 2023, DLA Energy reported obligated amounts in the tens of billions across all fuel types. Analyzing specific categories like aviation turbine fuel (JP-8, JP-5) shows multi-billion dollar annual expenditures, with individual contract values ranging from millions to hundreds of millions, depending on duration and volume. This particular $34 million award for a short delivery window is consistent with the agency's strategy of utilizing both large, long-term contracts and smaller, more agile delivery orders to meet fluctuating demand and leverage competitive pricing.

How does the economic price adjustment (EPA) clause typically impact the final cost of fuel contracts?

The Economic Price Adjustment (EPA) clause in contracts, like the one for aviation turbine fuel, is designed to account for fluctuations in the market price of specific commodities or labor. For fuel contracts, EPA clauses often tie the final price to a recognized industry benchmark index, such as the Argus/Platts price assessments for jet fuel. This mechanism aims to protect both the contractor from significant losses due to unforeseen price increases and the government from paying inflated prices if market rates decrease substantially. However, EPA clauses introduce an element of cost uncertainty for the government. While they prevent extreme price shocks, the final invoiced amount can deviate from the initially negotiated base price. The specific formula within the EPA dictates the degree of adjustment, and its application requires careful monitoring and verification by the contracting officer to ensure fairness and prevent potential overpayment.

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

Valero Marketing and Supply Co. is a significant player in the energy market and has a history of securing government contracts, particularly for fuel products. Federal procurement data indicates numerous awards to Valero entities for various types of fuels, including gasoline, diesel, and aviation fuels, across different agencies like the Department of Defense (including DLA), GSA, and others. These contracts often involve large volumes and substantial dollar amounts, reflecting Valero's capacity as a major refiner and distributor. While specific performance metrics for each contract are not always publicly detailed, the consistent awarding of contracts suggests a generally satisfactory performance history and competitive positioning. Analyzing past awards can reveal patterns in contract types (e.g., fixed-price, requirements contracts) and delivery locations, providing context for their current award.

What are the risks associated with a short contract duration (27 days) for critical fuel supply?

A short contract duration, such as the 27 days for this aviation turbine fuel delivery order, presents several risks. Firstly, it necessitates frequent re-competition or the issuance of subsequent delivery orders, which can increase administrative overhead and procurement lead times. This can be problematic if there are delays in the subsequent procurement process, potentially leading to supply disruptions. Secondly, short-term contracts may not incentivize suppliers to offer the most competitive long-term pricing, as they have less commitment and may factor in the uncertainty of future business. Thirdly, it can limit the ability to establish robust performance metrics or build a strong, collaborative relationship with the supplier over an extended period. For critical supplies like fuel, ensuring continuous availability is paramount, and short durations can heighten the risk of a gap in supply if not managed meticulously.

How does the geographic focus on Texas impact the overall cost and logistics of this fuel delivery?

The geographic focus on Texas for this aviation turbine fuel delivery order has several implications for cost and logistics. Texas is a major hub for petroleum refining and distribution, meaning there is likely a robust local supply infrastructure and potentially competitive pricing due to the proximity of refineries and terminals. This can reduce transportation costs and lead times compared to sourcing fuel from more distant locations. However, the concentration of demand and supply within a specific region can also make the market more susceptible to localized disruptions, such as extreme weather events (e.g., hurricanes impacting Gulf Coast refineries) or regional infrastructure issues. The award to Valero Marketing and Supply Co., a company with significant operations in Texas, suggests a strategic sourcing decision leveraging regional capabilities. The specific delivery points within Texas would further refine the logistical considerations and associated costs.

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: $34,026,859

Exercised Options: $34,026,859

Current Obligation: $34,026,859

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60224D0471

IDV Type: IDC

Timeline