DoD's $34.9M aviation turbine fuel contract awarded to Valero Marketing and Supply Co. for 20 days

Contract Overview

Contract Amount: $34,759,402 ($34.8M)

Contractor: Valero Marketing and Supply CO

Awarding Agency: Department of Defense

Start Date: 2025-06-30

End Date: 2025-07-20

Contract Duration: 20 days

Daily Burn Rate: $1.7M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8511473770!TURBINE FUEL,AVIATION

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78249

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $34.8 million to VALERO MARKETING AND SUPPLY CO for work described as: 8511473770!TURBINE FUEL,AVIATION Key points: 1. Contract value appears reasonable given the short duration and market volatility for fuel. 2. Full and open competition suggests a competitive pricing environment. 3. Short contract duration (20 days) may indicate a need for immediate supply or a bridge contract. 4. Fixed Price with Economic Price Adjustment (FP-EPA) contract type is common for volatile commodities like fuel. 5. The Defense Logistics Agency (DLA) is a major procurer of fuel for military operations. 6. Contract awarded to a single vendor, Valero, despite open competition, warrants further investigation into bidding dynamics.

Value Assessment

Rating: good

The contract's value of $34.9 million for a 20-day delivery period for aviation turbine fuel is substantial. While specific per-gallon pricing is not provided, the total award suggests a significant volume. Comparing this to typical fuel spot prices and the fixed-price with economic price adjustment clause, the overall value seems aligned with market conditions for such a critical and volatile commodity. The Defense Logistics Agency (DLA) often procures large quantities of fuel, and their established procurement processes aim for value, though the short duration might imply a premium for rapid availability.

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 fact that a single award was made to Valero Marketing and Supply Co. suggests that, despite the open competition, Valero's offer was the most advantageous to the government. Further analysis would be needed to determine the number of bids received and the specific evaluation criteria that led to this single award.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can drive down prices. However, when only one bid is ultimately selected, it raises questions about the breadth of the competition and whether taxpayers received the best possible pricing.

Public Impact

Military aviation units operating within the specified delivery region will benefit from a secure supply of aviation turbine fuel. The contract ensures the operational readiness of aircraft requiring this specific fuel type. Geographic impact is likely concentrated around military airfields and bases where the fuel is delivered. Workforce implications are minimal for this specific contract, primarily involving logistics and delivery personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the FP-EPA clause, which could increase costs if market prices surge unexpectedly.
Reliance on a single awardee for a critical fuel supply, even after open competition, could pose a risk if unforeseen issues arise with the contractor.
Short contract duration may indicate a reactive procurement rather than strategic long-term planning, potentially leading to less favorable pricing.

Positive Signals

Awarded under full and open competition, suggesting a robust process to solicit offers.
Contract awarded to Valero Marketing and Supply Co., a known entity in the fuel market, implying a degree of reliability.
The Defense Logistics Agency has extensive experience in managing fuel procurements, indicating established oversight capabilities.

Sector Analysis

The aviation turbine fuel market is a critical component of the energy sector, directly supporting aerospace and defense operations. This contract falls within the broader petroleum refining and distribution industry. The global market for jet fuel is substantial, with significant price fluctuations driven by crude oil costs, geopolitical events, and demand. Defense Logistics Agency (DLA) spending on fuel is a major category within federal procurement, often benchmarked against commercial aviation fuel prices and adjusted for military-specific delivery requirements and logistical complexities.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the nature of aviation turbine fuel supply and the scale of this award, it is unlikely that small businesses would be primary awardees. Subcontracting opportunities for small businesses may exist in areas such as transportation and logistics, but this is not explicitly detailed in the provided data.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract. As a major contracting agency, DLA has established procedures for contract administration, performance monitoring, and dispute resolution. Transparency is generally maintained through public contract databases, although specific performance metrics and detailed pricing breakdowns may not always be publicly accessible. Inspector General oversight would apply to ensure compliance and prevent fraud, waste, and abuse.

Related Government Programs

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

Risk Flags

Short contract duration
Single award despite full and open competition
Reliance on FP-EPA clause for volatile commodity

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.8 million to VALERO MARKETING AND SUPPLY CO. 8511473770!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 $34.8 million.

What is the period of performance?

Start: 2025-06-30. End: 2025-07-20.

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

The Defense Logistics Agency (DLA) is the primary agency responsible for procuring fuel for the Department of Defense. Historical spending on aviation turbine fuel by DLA has been substantial, often running into billions of dollars annually. This spending fluctuates based on operational tempo, global energy prices, and strategic inventory management. DLA utilizes various contract types, including fixed-price with economic price adjustment (FP-EPA) and other variations, to manage the inherent price volatility of petroleum products. Analyzing past spending data reveals trends in volume, average price per gallon, and the distribution of awards among different fuel suppliers and geographic regions. For instance, periods of heightened military activity or significant disruptions in global oil supply chains have historically correlated with increased DLA fuel expenditures. Benchmarking current contract values against these historical averages provides crucial context for assessing value for money.

How does the price per gallon for this contract compare to commercial aviation fuel prices?

Determining the exact price per gallon for this specific contract is challenging without access to the detailed economic price adjustment (EPA) formula and the base price. However, the contract's total award of $34.9 million over a 20-day period suggests a significant volume. Commercial aviation fuel prices, often referred to as jet fuel prices, vary widely based on location, supplier, and market conditions. These prices are typically quoted per gallon or per barrel. The FP-EPA clause in this DoD contract means the final price will be tied to an index, likely reflecting market fluctuations. While DLA aims to secure competitive pricing, military fuel procurement often includes costs associated with specialized delivery, storage, and logistical support that may differ from commercial transactions. Therefore, a direct comparison requires careful consideration of these additional factors and the specific index used in the EPA.

What are the primary risks associated with a Fixed Price with Economic Price Adjustment (FP-EPA) contract for fuel?

The primary risk associated with a Fixed Price with Economic Price Adjustment (FP-EPA) contract for fuel lies in price volatility. While the fixed-price component provides some cost certainty, the economic price adjustment allows the contractor to pass on increases in the cost of raw materials (like crude oil) or other specified economic factors. This means the government's final cost is not fully known at the time of award and can increase significantly if market prices surge. For the contractor, the risk is mitigated as they are protected against cost increases. For the government, the risk is that the final expenditure could exceed initial budget projections, potentially impacting other programs. Effective management of FP-EPA contracts requires robust monitoring of the index used for adjustments and clear contract terms to prevent excessive price escalations.

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

Valero Marketing and Supply Co. is a major player in the energy sector and has a significant history of supplying fuel to government entities, including the Department of Defense. They are known for their extensive refining and distribution network. Government contract databases often show Valero as an awardee for various fuel types across different agencies. Their track record typically includes fulfilling large-volume contracts, often under competitive bidding processes. While specific performance details for every contract are not always public, their continued participation and success in winning government fuel solicitations suggest a generally reliable performance history. However, as with any large contractor, it is prudent to review any past performance issues or disputes that may have arisen on previous government contracts.

What are the implications of awarding a short-duration contract (20 days) for a critical commodity like aviation fuel?

Awarding a short-duration contract, such as this 20-day delivery order for aviation turbine fuel, often implies an immediate or urgent need for supply. This could be due to several factors: a gap in existing long-term contracts, unexpected surges in operational demand, or a need for a bridge to a subsequent, longer-term procurement. The implications include potentially higher per-unit costs, as contractors may factor in premiums for expedited or short-notice fulfillment. It also suggests less opportunity for strategic sourcing or leveraging economies of scale that longer-term contracts might offer. For the government, it necessitates rapid procurement processes and close monitoring to ensure continuity of supply without disruption. The short timeframe also limits the ability to fully assess contractor performance over an extended period before potentially needing to re-compete.

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: $34,759,402

Exercised Options: $34,759,402

Current Obligation: $34,759,402

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60225D0475

IDV Type: IDC

Timeline