DoD awards $17.8M for naval distillate fuel, highlighting critical energy supply chain needs

Contract Overview

Contract Amount: $17,897,185 ($17.9M)

Contractor: Motor OIL (hellas) Corinth Refineries S.A.

Awarding Agency: Department of Defense

Start Date: 2025-06-11

End Date: 2025-06-27

Contract Duration: 16 days

Daily Burn Rate: $1.1M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8510839931!DISTILLATE,NAVAL

Plain-Language Summary

Department of Defense obligated $17.9 million to MOTOR OIL (HELLAS) CORINTH REFINERIES S.A. for work described as: 8510839931!DISTILLATE,NAVAL Key points: 1. Contract value represents a significant investment in maintaining operational readiness for naval forces. 2. Competition dynamics suggest a potentially competitive market for specialized fuel supplies. 3. Short performance period indicates a focus on immediate operational requirements rather than long-term strategic sourcing. 4. Fixed price with economic price adjustment structure aims to balance cost stability with market volatility. 5. This award underscores the importance of reliable energy sources for national defense operations.

Value Assessment

Rating: good

The awarded amount of $17.8 million for naval distillate fuel appears reasonable given the specialized nature of the product and the short delivery window. Benchmarking against historical awards for similar fuel types and quantities would provide a more precise value-for-money assessment. However, the fixed-price structure with economic price adjustment suggests an effort to manage cost fluctuations, which is a positive sign for fiscal responsibility.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. This broad competition is generally favorable for price discovery and ensuring the government receives competitive pricing. The specific number of bidders is not provided, but the 'full and open' designation suggests a robust bidding environment.

Taxpayer Impact: Full and open competition typically leads to better pricing for taxpayers by fostering a competitive marketplace where contractors vie for the business, driving down costs.

Public Impact

Naval forces will receive essential fuel to maintain operational capabilities. This contract supports the Department of Defense's logistical supply chain for fuel. The delivery is specified for a location within the United States, supporting domestic operations. Employment in the petroleum refining sector may be indirectly supported by this award.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to economic price adjustment clause.
Short delivery window may limit the pool of qualified suppliers.
Dependence on a single supplier for a critical fuel type could pose a risk if not managed carefully.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Fixed price element provides some cost certainty.
Clear delivery requirements and timeline.

Sector Analysis

The petroleum refining industry is a critical component of the energy sector, providing essential fuels for various applications, including defense. This contract falls within the 'Petroleum Refineries' subsector (NAICS 324110). The market for specialized fuels like naval distillate is often characterized by a limited number of large-scale refiners capable of meeting stringent military specifications. Spending in this area is directly tied to operational tempo and strategic readiness requirements of the armed forces.

Small Business Impact

This contract does not appear to have a small business set-aside, as indicated by 'sb': false. There is no information provided regarding subcontracting plans. Therefore, the direct impact on the small business ecosystem is likely minimal unless the prime contractor engages small businesses for support services or components.

Oversight & Accountability

Oversight for this contract will be managed by the Defense Logistics Agency (DLA), which is responsible for ensuring timely delivery and quality of goods and services for the Department of Defense. Accountability measures are embedded in the contract terms, including delivery schedules and specifications. Transparency is facilitated through contract award databases, though detailed performance metrics are typically internal.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Naval Operational Support
Petroleum Product Procurement
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Short performance period may limit competition.
Economic price adjustment introduces cost volatility.
Dependence on specific fuel type for naval operations.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.9 million to MOTOR OIL (HELLAS) CORINTH REFINERIES S.A.. 8510839931!DISTILLATE,NAVAL

Who is the contractor on this award?

The obligated recipient is MOTOR OIL (HELLAS) CORINTH REFINERIES S.A..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $17.9 million.

What is the period of performance?

Start: 2025-06-11. End: 2025-06-27.

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 based on operational tempo, geopolitical factors, and strategic reserve needs. While specific figures for 'naval distillate' alone are not always granularly reported, the DoD is one of the largest consumers of petroleum products globally. Annual spending can range from billions to tens of billions of dollars across all fuel types. Factors influencing this spending include the number of deployed vessels, training exercises, and global energy market prices. The Defense Logistics Agency (DLA) manages the majority of these fuel procurements, often utilizing multi-year contracts and competitive bidding processes to secure supply and manage costs. Analyzing trends requires looking at aggregate fuel spending and specific commodity prices over time.

How does the fixed price with economic price adjustment (FPEPA) clause impact the overall cost to the government?

The Fixed Price with Economic Price Adjustment (FPEPA) clause is designed to protect both the contractor and the government from significant, unforeseen fluctuations in the cost of raw materials or labor. In this case, it likely applies to the price of crude oil or other components used in producing naval distillate fuel. The 'fixed price' portion provides a baseline cost, while the 'economic price adjustment' allows for modifications to that price based on a pre-defined index or formula tied to market changes. This can be beneficial for the government by preventing cost overruns if input prices skyrocket, but it also means the government might pay more if input prices decrease significantly, depending on the specific adjustment mechanism. It aims to strike a balance, ensuring a stable supply without exposing the government to excessive risk or missing out on potential savings.

What are the risks associated with a short performance period (16 days) for fuel delivery?

A short performance period, such as the 16 days specified for this delivery order, presents several potential risks. Firstly, it can limit the number of potential bidders, as fewer companies may have the immediate capacity and logistical readiness to fulfill the order within such a tight timeframe. This reduced competition could lead to higher prices. Secondly, it increases the risk of supply chain disruptions; if the selected contractor encounters unforeseen issues (e.g., production problems, transportation delays, quality control failures), there is very little buffer time to find an alternative source or resolve the issue, potentially impacting naval operations. Finally, it may necessitate expedited shipping or production, which can incur additional costs.

What is the typical profit margin for contractors supplying specialized fuels like naval distillate?

Determining the exact profit margin for contractors supplying specialized fuels like naval distillate is complex, as it depends on numerous factors including the specific contract terms, the level of competition, the contractor's operational efficiency, and market conditions. Contracts awarded under full and open competition, like this one, generally aim for a reasonable profit margin that reflects the risk and investment involved. Government contracts often target profit margins that are considered fair and reasonable, typically ranging from a few percent to potentially higher single digits for highly specialized or high-risk endeavors. However, the inclusion of an economic price adjustment clause can influence how profit is realized, as it shifts some of the input cost risk. Without access to the contractor's cost breakdown and the specific profit calculation within the contract, providing a precise figure is not possible.

How does the Defense Logistics Agency (DLA) ensure the quality of supplied naval distillate fuel?

The Defense Logistics Agency (DLA) employs rigorous quality assurance procedures to ensure that supplied naval distillate fuel meets stringent military specifications. These procedures typically involve pre-award evaluations of potential suppliers' quality control systems and post-award inspections and testing. Fuel samples are often drawn at various points, including during loading, transit, and upon delivery, and are sent to accredited laboratories for analysis. DLA relies on established standards, such as those set by the American Society for Testing and Materials (ASTM), and specific military requirements (e.g., MIL-SPEC). Non-compliance can result in rejection of the product, penalties, or even contract termination. The contract itself will detail the specific quality requirements and testing protocols.

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: 12A IRODOU ATTIKOU, MAROUSSI

Business Categories: Category Business, Corporate Entity Tax Exempt, Foreign Owned, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $17,897,185

Exercised Options: $17,897,185

Current Obligation: $17,897,185

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60224D0475

IDV Type: IDC

Timeline