DoD awards $15.9M for naval distillate fuel, highlighting fixed-price contracts with economic adjustments

Contract Overview

Contract Amount: $15,947,994 ($15.9M)

Contractor: S-Oil Corporation

Awarding Agency: Department of Defense

Start Date: 2025-09-12

End Date: 2025-10-05

Contract Duration: 23 days

Daily Burn Rate: $693.4K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8511638074!DISTILLATE,NAVAL

Plain-Language Summary

Department of Defense obligated $15.9 million to S-OIL CORPORATION for work described as: 8511638074!DISTILLATE,NAVAL Key points: 1. Contract utilizes a fixed-price structure with economic price adjustments, potentially mitigating risks associated with fuel price volatility. 2. Competition was full and open, suggesting a robust market for this type of fuel supply. 3. The contract duration is relatively short (23 days), indicating a focus on immediate or short-term supply needs. 4. Awarded by the Defense Logistics Agency, this contract supports the broader mission of military readiness and fuel provisioning. 5. The North American Industry Classification System (NAICS) code 324110 points to the petroleum refining sector. 6. The contract type (Delivery Order) suggests it's part of a larger indefinite-delivery/indefinite-quantity (IDIQ) contract or a similar framework.

Value Assessment

Rating: good

The awarded amount of $15.9 million for a short-term supply of naval distillate fuel appears reasonable given market conditions for refined petroleum products. Benchmarking against similar DLA fuel awards would provide a more precise value assessment. The inclusion of economic price adjustments aims to ensure fair pricing for both the government and the contractor under fluctuating market conditions, which is a common and often necessary practice for fuel procurement.

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 specific number of bidders is not provided, but the designation suggests a competitive environment. Full and open competition is generally expected to drive better pricing and terms for the government by allowing a wide range of suppliers to participate.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it maximizes the potential for cost savings through a wider pool of offers and encourages market efficiencies.

Public Impact

Naval forces operating in the specified region will benefit from a reliable supply of essential fuel. The contract ensures the availability of naval distillate fuel, critical for the operational readiness of maritime assets. Geographic impact is localized to areas where naval operations requiring this specific fuel type are conducted. Workforce implications are primarily within the petroleum refining and logistics sectors, supporting jobs in fuel production and distribution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clauses if market prices rise significantly.
Short contract duration may necessitate frequent re-competition, leading to administrative overhead.
Dependence on a single supplier (S-OIL CORPORATION) for this specific delivery order, though the overall contract vehicle may have more competition.

Positive Signals

Fixed-price contract with economic price adjustment helps manage budget certainty while allowing for market fluctuations.
Full and open competition suggests a healthy market and potential for competitive pricing.
Award to a known entity (S-OIL CORPORATION) may indicate a track record of performance.
Clear delivery dates and order period provide defined expectations for supply.

Sector Analysis

This contract falls within the petroleum refining industry, a critical component of the energy sector. The market for refined fuels, particularly for military applications, is influenced by global oil prices, geopolitical stability, and refining capacity. Comparable spending benchmarks would involve analyzing other fuel procurement contracts by the Department of Defense and other government agencies, considering factors like fuel type, volume, and delivery location.

Small Business Impact

There is no indication that this contract includes a small business set-aside. Given the nature of petroleum refining and large-scale fuel supply, it is likely that the primary awardee is a large business. Subcontracting opportunities for small businesses might exist in areas such as transportation, logistics, or specialized support services, but these are not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA) contracting officers and quality assurance representatives. Accountability measures are embedded in the contract terms, including delivery schedules and fuel specifications. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

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

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Potential for Price Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $15.9 million to S-OIL CORPORATION. 8511638074!DISTILLATE,NAVAL

Who is the contractor on this award?

The obligated recipient is S-OIL CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $15.9 million.

What is the period of performance?

Start: 2025-09-12. End: 2025-10-05.

What is the historical spending pattern for naval distillate fuel by the Defense Logistics Agency?

Historical spending data for naval distillate fuel by the Defense Logistics Agency (DLA) reveals a consistent need for this critical resource to support naval operations. DLA procures vast quantities of fuel annually through various contract vehicles, often utilizing full and open competition to ensure competitive pricing. Spending levels can fluctuate based on geopolitical events, operational tempo, and global energy market dynamics. For instance, periods of increased military deployment or supply chain disruptions in the energy sector can lead to higher procurement costs and volumes. Analyzing DLA's historical contract awards for similar fuel types (e.g., JP-5, diesel fuel marine) and contract durations can provide context for the current $15.9 million award, helping to identify trends in pricing, competition, and supplier base over time. This historical perspective is crucial for assessing the value and appropriateness of current spending.

How does the fixed-price with economic price adjustment (FPEPA) clause typically impact contractor pricing and government risk?

The Fixed-Price with Economic Price Adjustment (FPEPA) clause is designed to balance cost certainty for the government with protection for the contractor against significant, unforeseen market fluctuations, particularly in volatile commodity markets like fuel. For contractors, the FPEPA clause reduces the risk of incurring losses due to sharp increases in input costs (e.g., crude oil prices, refining costs). This can lead to more competitive initial bids compared to a firm fixed-price contract, as contractors do not need to build in as large a contingency for price volatility. For the government, while the FPEPA clause introduces the possibility of price increases, it also ensures a stable supply by keeping suppliers engaged and willing to perform. It prevents situations where contractors might default or seek costly contract modifications due to market shocks. The effectiveness of FPEPA hinges on the specific economic price adjustment formula used, which should be clearly defined and tied to objective market indicators to prevent excessive price escalations and maintain fairness.

What is S-OIL CORPORATION's track record with the Department of Defense?

S-OIL CORPORATION is a significant player in the global energy market, primarily involved in refining petroleum products. While specific details of their contract history with the Department of Defense (DoD) are not fully detailed in the provided data, their involvement in supplying naval distillate fuel suggests they are an established supplier capable of meeting military specifications and logistical requirements. Companies of this scale often engage in numerous government contracts, including fuel supply agreements, over extended periods. A comprehensive review of S-OIL's performance on past DoD contracts, including on-time delivery, quality compliance, and adherence to contract terms, would be necessary to fully assess their track record. Their ability to secure this delivery order under full and open competition implies they meet the necessary qualifications and have likely demonstrated satisfactory performance in prior engagements or possess the capacity to do so.

How does the NAICS code 324110 (Petroleum Refineries) relate to the broader energy sector and government procurement?

The North American Industry Classification System (NAICS) code 324110 specifically identifies establishments primarily engaged in refining petroleum and producing a wide range of petroleum products, including fuels like naval distillate. This sector is a cornerstone of the broader energy industry, providing essential energy commodities that power transportation, industry, and military operations. For government procurement, understanding the NAICS code is crucial for identifying relevant industries and potential contractors. The Department of Defense, as a major energy consumer, frequently procures products falling under this classification. Contracts awarded to companies within the 324110 NAICS code represent significant government spending, supporting national energy security and operational readiness. The characteristics of this industry, such as capital intensity, global market influences, and regulatory oversight, shape the nature of government contracts within it.

What are the potential risks associated with a short contract duration (23 days) for fuel supply?

A short contract duration, such as the 23 days for this naval distillate fuel delivery order, presents several potential risks. Firstly, it necessitates frequent re-competition or renewal processes, which can increase administrative burden and costs for the contracting agency (Defense Logistics Agency). This also means less opportunity to establish long-term supplier relationships, which can sometimes lead to better pricing and service through economies of scale or performance incentives. Secondly, a short duration might limit the contractor's ability to optimize their supply chain or production schedules for this specific order, potentially leading to less competitive pricing if they cannot achieve efficiencies. Lastly, if the need for the fuel is ongoing, a short contract duration increases the risk of supply interruption if a new contract is not awarded or executed seamlessly before the current one expires. This could impact operational readiness for the end-users.

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: 192, BAEKBEOM-RO, SEOUL

Business Categories: Category Business, Foreign Owned, International Organization, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $15,947,994

Exercised Options: $15,947,994

Current Obligation: $15,947,994

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60225D0459

IDV Type: IDC

Timeline