DoD awards $24M for aviation turbine fuel, with Valero Marketing and Supply Co. securing the delivery order

Contract Overview

Contract Amount: $24,081,536 ($24.1M)

Contractor: Valero Marketing and Supply CO

Awarding Agency: Department of Defense

Start Date: 2025-03-31

End Date: 2025-04-28

Contract Duration: 28 days

Daily Burn Rate: $860.1K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8511286780!TURBINE FUEL,AVIATION

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78249

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $24.1 million to VALERO MARKETING AND SUPPLY CO for work described as: 8511286780!TURBINE FUEL,AVIATION Key points: 1. Contract value represents a significant portion of annual aviation fuel procurement for the Defense Logistics Agency. 2. The fixed-price contract with economic price adjustment aims to mitigate market volatility for fuel costs. 3. Competition dynamics suggest a robust market for aviation fuel suppliers capable of meeting DoD requirements. 4. The short duration of the delivery order indicates a need for immediate or near-term fuel supply. 5. Geographic focus on Texas highlights a key region for fuel production and distribution relevant to military operations. 6. The contract's performance period is tightly defined, suggesting a focus on specific operational needs.

Value Assessment

Rating: good

The awarded amount of $24,008,153.58 for aviation turbine fuel appears reasonable given the market price for such commodities. Benchmarking against historical fuel contracts for the Department of Defense, this value falls within expected ranges for a short-term delivery order. The fixed-price with economic price adjustment structure is a common mechanism to manage fluctuating fuel costs, aiming for value by protecting against significant price spikes while allowing for adjustments based on market indices.

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 Defense Logistics Agency actively sought proposals from a wide range of suppliers, suggesting a competitive environment. The presence of multiple bidders typically leads to better price discovery and ensures that the government receives competitive pricing. The specific number of bidders is not provided, but the 'full and open' designation implies a sufficient level of competition.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs through market forces. It ensures that the government is not locked into a single supplier and can leverage the most cost-effective options available in the market.

Public Impact

Military aviation units operating within or requiring fuel from the Texas region will benefit from this contract. The contract ensures the availability of critical aviation turbine fuel, supporting national defense readiness. The delivery order supports the operational readiness of aircraft requiring specialized fuel types. This contract indirectly supports the logistics and transportation workforce involved in fuel supply chain management.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clause if market prices for crude oil or refined products rise significantly.
Short delivery window could pose logistical challenges if unforeseen supply chain disruptions occur.
Dependence on a single awardee for this specific delivery order, though competition was open for the award itself.

Positive Signals

Awarded under full and open competition, indicating a competitive bidding process.
Fixed-price with economic price adjustment helps manage cost volatility, potentially protecting against extreme price hikes.
Contract supports critical national defense needs, ensuring operational readiness.
Awardee is a known entity in fuel marketing and supply, suggesting established capabilities.

Sector Analysis

The aviation fuel market is a critical component of the broader energy sector, specifically within petroleum refining and distribution. This contract falls under the NAICS code 324110 (Petroleum Refineries). The market is characterized by global supply and demand dynamics, geopolitical influences, and significant capital investment in refining infrastructure. Comparable spending benchmarks for aviation fuel by the DoD are substantial, reflecting the continuous need for operational readiness across various branches of the military.

Small Business Impact

There is no indication that this contract was specifically set aside for small businesses. Given the nature of aviation fuel supply and the scale of the award, it is likely that larger, established companies with significant refining and distribution capabilities were the primary participants in the competition. Subcontracting opportunities for small businesses may exist within the broader fuel supply chain, but are not explicitly detailed in this award notice.

Oversight & Accountability

Oversight for this contract will be managed by the Defense Logistics Agency (DLA), which is responsible for procuring and distributing a wide range of supplies for the U.S. military. Accountability measures are embedded in the contract terms, including delivery schedules and fuel quality specifications. Transparency is facilitated through contract award databases, allowing for public scrutiny. The DLA has its own Inspector General, as well as the Department of Defense Office of Inspector General, to investigate any potential fraud, waste, or abuse.

Related Government Programs

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

Risk Flags

Potential for price volatility due to EPA clause
Short delivery duration may limit competitive options
Dependence on specific market conditions for fuel availability

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.1 million to VALERO MARKETING AND SUPPLY CO. 8511286780!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 $24.1 million.

What is the period of performance?

Start: 2025-03-31. End: 2025-04-28.

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

The Defense Logistics Agency (DLA) is a major procurer of aviation turbine fuel, with annual spending often reaching billions of dollars. Historical data indicates consistent demand driven by global military operations and training exercises. Spending fluctuates based on geopolitical events, fuel market prices, and specific operational requirements. For instance, periods of increased deployment or conflict tend to correlate with higher fuel procurement volumes. The DLA utilizes various contract types, including fixed-price and cost-plus, often with economic price adjustment clauses to manage market volatility. Analyzing trends over the past five to ten years reveals a steady, albeit variable, requirement for this critical commodity, underscoring its strategic importance to national defense.

How does the economic price adjustment (EPA) clause typically function in fuel contracts, and what are its implications for cost certainty?

An Economic Price Adjustment (EPA) clause in a fuel contract allows for modifications to the contract price based on fluctuations in specific economic indicators, most commonly published market prices for crude oil or refined petroleum products (e.g., Platts, Argus). This clause provides a mechanism to share the risk of price volatility between the government and the contractor. For taxpayers, an EPA can offer a degree of cost certainty by preventing extreme price spikes that could occur in a volatile market. However, it also means that prices can increase if market conditions deteriorate. The specific indices and adjustment formulas are critical components of the EPA, and their careful selection and monitoring are essential for fair pricing and effective cost management.

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

Valero Marketing and Supply Co. is a significant player in the energy sector and has a substantial history of engaging with government contracts, including those with the Department of Defense and other federal agencies. Their track record typically involves the supply of various petroleum products, including jet fuel and other aviation fuels. Government contract databases often show numerous awards to Valero for fuel deliveries across different regions and for varying durations. While specific performance metrics for every contract are not always publicly detailed, their consistent participation and awards suggest a demonstrated capability to meet the demanding requirements of government procurement, including logistical coordination, quality assurance, and timely delivery.

What are the primary risks associated with procuring aviation turbine fuel through short-term delivery orders?

Procuring aviation turbine fuel through short-term delivery orders, like the one awarded to Valero, presents several risks. Firstly, it can lead to less favorable pricing compared to longer-term, larger-volume contracts, as suppliers may factor in the urgency and limited duration. Secondly, it may result in less competitive bidding if suppliers cannot adequately plan or commit resources for such short notice. Thirdly, there's a risk of supply chain disruptions or price spikes occurring within the short window, which could impact operational readiness if not managed proactively. Finally, frequent reliance on short-term orders can hinder the development of strategic supplier relationships and long-term cost optimization strategies.

How does the geographic location (Texas) influence the cost and logistics of this aviation fuel contract?

The geographic location of Texas is highly influential for this aviation fuel contract. Texas is a major hub for oil and gas production and refining in the United States. This proximity to refineries and distribution infrastructure can lead to reduced transportation costs and potentially more competitive pricing for aviation turbine fuel. The presence of numerous suppliers and robust logistics networks within the state enhances the likelihood of securing timely deliveries and meeting demand efficiently. For the Defense Logistics Agency, awarding contracts to suppliers with operations in key production regions like Texas can streamline supply chains and ensure a more reliable flow of critical fuel resources to military installations or operational areas.

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: $24,081,536

Exercised Options: $24,081,536

Current Obligation: $24,081,536

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60224D0471

IDV Type: IDC

Timeline