Department of Defense awards $18.8M for aviation turbine fuel, highlighting fixed-price contracts with economic adjustments

Contract Overview

Contract Amount: $18,808,796 ($18.8M)

Contractor: S-Oil Corporation

Awarding Agency: Department of Defense

Start Date: 2025-12-19

End Date: 2026-01-16

Contract Duration: 28 days

Daily Burn Rate: $671.7K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8511827103!TURBINE FUEL,AVIATION

Plain-Language Summary

Department of Defense obligated $18.8 million to S-OIL CORPORATION for work described as: 8511827103!TURBINE FUEL,AVIATION Key points: 1. Contract utilizes a fixed-price structure with economic price adjustment, allowing for potential cost fluctuations. 2. Competition was full and open, suggesting a robust bidding process. 3. The contract duration is short, spanning just 28 days, indicating a need for immediate fuel supply. 4. Awarded by the Defense Logistics Agency, this contract supports aviation fuel needs. 5. The primary contractor, S-OIL CORPORATION, is a significant player in the petroleum refining sector. 6. This award represents a small fraction of the overall defense fuel procurement budget.

Value Assessment

Rating: good

The contract value of $18.8 million for a 28-day delivery order of aviation turbine fuel appears reasonable given market conditions for petroleum products. While specific per-unit cost benchmarks are not provided, the fixed-price with economic price adjustment structure is common for volatile commodities like fuel, aiming to balance contractor risk with government cost certainty. Benchmarking against similar DLA fuel awards would provide a more precise value assessment, but the scale and nature of the product suggest a competitive market.

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. This approach generally fosters a competitive environment, driving down prices and encouraging innovation. The specific number of bidders is not detailed, but the 'full and open' designation suggests multiple interested parties likely participated, leading to price discovery through the bidding process.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it maximizes the potential for obtaining the best value by encouraging a wide range of suppliers to offer competitive pricing.

Public Impact

This contract directly benefits the Department of Defense by ensuring the availability of critical aviation turbine fuel for military operations. The services delivered are the supply of aviation fuel, essential for aircraft readiness and mission execution. The geographic impact is likely focused on the locations where the Defense Logistics Agency operates and where military aircraft are stationed. Workforce implications are minimal for this specific contract, primarily involving logistics and fuel handling personnel within the Defense Logistics Agency and the contractor's operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to the economic price adjustment clause, which could exceed initial budget estimates if fuel prices surge.
Short contract duration may necessitate frequent re-competition, leading to administrative overhead and potential supply chain disruptions if not managed proactively.

Positive Signals

Awarded under full and open competition, suggesting a competitive pricing environment and potential for good value.
The contractor, S-OIL CORPORATION, is a known entity in the energy sector, implying a degree of reliability in supply.
Fixed-price contract type, even with economic adjustment, provides a baseline cost control mechanism.

Sector Analysis

This contract falls within the broader energy sector, specifically the refining and distribution of petroleum products. The market for aviation turbine fuel is global and highly competitive, influenced by crude oil prices, geopolitical events, and refining capacity. The Defense Logistics Agency is a major procurer of fuel for military operations, and contracts like this are crucial for maintaining readiness. Comparable spending benchmarks would involve analyzing the volume and price of fuel procured by other government agencies or large commercial airlines.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no information provided regarding subcontracting plans for small businesses. The focus is likely on large-scale fuel suppliers capable of meeting the significant volume and logistical requirements of the Department of Defense. This means the direct economic impact on the small business ecosystem from this specific award is likely limited.

Oversight & Accountability

Oversight for this contract would primarily be managed by the Defense Logistics Agency (DLA) contracting officers and quality assurance personnel. 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 to the contract.

Related Government Programs

Defense Fuel Supply Center
Aviation Fuel Procurement
Petroleum Product Contracts
Energy Sector Procurement
Logistics and Transportation Services

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Reliance on Single Supplier for Delivery Order

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $18.8 million to S-OIL CORPORATION. 8511827103!TURBINE FUEL,AVIATION

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 $18.8 million.

What is the period of performance?

Start: 2025-12-19. End: 2026-01-16.

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

The Defense Logistics Agency (DLA) is a significant procurer of aviation turbine fuel, with historical spending patterns reflecting the dynamic nature of fuel prices and operational demands. Annual expenditures can fluctuate considerably, often in the hundreds of millions or even billions of dollars, depending on global oil markets and the tempo of military operations. DLA typically utilizes a mix of contract types, including fixed-price with economic price adjustment and other variations, to manage the inherent volatility of fuel costs. Analyzing historical data reveals trends in contract durations, competition levels, and the average price per gallon or barrel over time. For instance, periods of geopolitical instability or supply chain disruptions often correlate with higher average prices and potentially shorter-term contracts to maintain flexibility. Conversely, stable market conditions might allow for longer-term agreements with more predictable pricing structures. Understanding these historical patterns is crucial for budgeting, forecasting future needs, and assessing the value of current awards like the $18.8 million contract with S-OIL CORPORATION.

How does the fixed-price with economic price adjustment (FPEPA) clause impact the government's cost exposure for this contract?

The Fixed-Price with Economic Price Adjustment (FPEPA) clause in this contract means that the base price is fixed, but it can be adjusted upwards or downwards based on a pre-defined economic indicator, typically related to the cost of raw materials or labor. For aviation turbine fuel, this indicator is almost certainly tied to fluctuations in crude oil prices or refined product market indices. While FPEPA aims to protect the contractor from unforeseen cost increases and ensure supply continuity by allowing them to cover their actual costs, it also exposes the government to potential price escalations. The government benefits if the economic indicator decreases, leading to a lower final price. However, if the indicator rises significantly, the government will pay more than the initially quoted fixed price. The effectiveness of FPEPA in providing value depends heavily on the accuracy of the chosen economic indicator and the volatility of the underlying market. Careful negotiation of the adjustment formula and monitoring of market trends are essential for the government to manage its cost exposure under such contracts.

What is the typical lead time for securing aviation turbine fuel under similar DLA contracts?

The typical lead time for securing aviation turbine fuel under similar Defense Logistics Agency (DLA) contracts can vary significantly based on the specific requirements, delivery locations, and the urgency of the need. For routine replenishment, DLA often maintains contracts with established suppliers that allow for relatively short lead times, potentially ranging from a few days to a couple of weeks for delivery to major bases. However, this specific contract has a very short performance period of only 28 days, suggesting an immediate or near-term requirement. This short duration might imply a need for rapid deployment or a response to an unforeseen surge in demand. In emergency situations or for less common delivery points, lead times could extend. DLA's extensive logistics network and pre-negotiated agreements are designed to minimize lead times, but factors like transportation availability, refinery output, and global supply chain conditions can influence the actual delivery schedule. The short duration of this award suggests that the fuel is needed very promptly.

What are the potential risks associated with relying on a single contractor for a short-duration fuel supply?

While this contract was awarded under full and open competition, the fact that S-OIL CORPORATION is the sole awardee for this specific delivery order means the Department of Defense relies on them for this particular supply. The primary risk associated with relying on a single contractor for a short-duration fuel supply is the potential for supply disruption. If the contractor experiences unforeseen issues such as production problems, transportation failures, or labor disputes, the government could face a shortage of critical aviation fuel. Although the contract is short-term (28 days), any interruption could have immediate operational impacts. Furthermore, while competition was open initially, the short duration might limit the number of potential bidders willing to engage for such a brief period, potentially reducing the competitive pressure on price for future, similar requirements. Mitigating this risk involves robust performance monitoring, clear contractual remedies for non-performance, and maintaining contingency plans for alternative sourcing if necessary.

How does the NAICS code 324110 (Petroleum Refineries) inform the analysis of this contract?

The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' is highly relevant to this contract as it precisely categorizes the primary business activity of the awarded contractor, S-OIL CORPORATION. This code signifies that the company is involved in the refining of crude petroleum and the production of a wide range of petroleum products, including aviation fuels. Understanding this classification helps in contextualizing the contract within the broader energy sector and assessing the contractor's capabilities. It suggests that S-OIL CORPORATION has the industrial infrastructure, technical expertise, and regulatory compliance necessary to produce and supply aviation turbine fuel meeting stringent military specifications. This code also allows for benchmarking against other companies operating within the same industry segment, providing insights into market concentration, typical operational scales, and potential competitive dynamics within the petroleum refining landscape.

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: $18,808,796

Exercised Options: $18,808,796

Current Obligation: $18,808,796

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60226D0457

IDV Type: IDC

Timeline