DoD's $44.5M Gasoline Contract with Okinawa Idemitsu K.K. Faces Scrutiny Amidst Fixed Price Adjustments
Contract Overview
Contract Amount: $44,524,985 ($44.5M)
Contractor: Okinawa Idemitsu K.K.
Awarding Agency: Department of Defense
Start Date: 2021-09-26
End Date: 2021-10-31
Contract Duration: 35 days
Daily Burn Rate: $1.3M/day
Competition Type: FULL AND OPEN COMPETITION
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Other
Official Description: 8508562861!GASOLINE, AUTOMOTIVE
Plain-Language Summary
Department of Defense obligated $44.5 million to OKINAWA IDEMITSU K.K. for work described as: 8508562861!GASOLINE, AUTOMOTIVE Key points: 1. The contract awarded to Okinawa Idemitsu K.K. for automotive gasoline represents a significant expenditure within the Defense Logistics Agency's fuel procurement. 2. Full and open competition was utilized, suggesting a potentially competitive bidding process, but the fixed-price with economic price adjustment (EPA) structure warrants close monitoring. 3. The short duration of 35 days for the delivery order may indicate a tactical or immediate need, but limits long-term price trend analysis. 4. The lack of small business participation is noted, with the contract not being set aside for small businesses.
Value Assessment
Rating: fair
The contract's fixed price with economic price adjustment introduces variability. Benchmarking against similar fuel contracts is challenging due to fluctuating market prices and the specific EPA clauses.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, which typically fosters competitive pricing. However, the economic price adjustment clause can mitigate the benefits of initial price discovery if market prices rise significantly.
Taxpayer Impact: Taxpayer funds are exposed to market volatility through the economic price adjustment clause, potentially increasing the final cost beyond the initial fixed price.
Public Impact
Ensures fuel availability for Department of Defense operations in Okinawa. Potential for increased costs to taxpayers due to fluctuating gasoline prices. Limited visibility into the long-term cost-effectiveness of this specific contract structure. Highlights the reliance on specific vendors for critical fuel supplies in overseas locations.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic Price Adjustment (EPA) clause introduces cost uncertainty.
- No small business participation.
- Short contract duration limits long-term analysis.
Positive Signals
- Awarded under full and open competition.
- Supports critical DoD operational needs.
Sector Analysis
This contract falls under the petroleum refineries sector, specifically for automotive gasoline. Defense Logistics Agency (DLA) is a major procurer of fuel, and spending in this area is subject to global oil market fluctuations and geopolitical factors.
Small Business Impact
The contract was not set aside for small businesses, and no small business participation is indicated. This suggests that the primary award went to a larger entity, potentially due to specialized requirements or market dynamics.
Oversight & Accountability
The use of a fixed-price contract with economic price adjustment requires diligent oversight to ensure that price adjustments are justified and align with market trends, preventing potential overspending.
Related Government Programs
- Petroleum Refineries
- Department of Defense Contracting
- Defense Logistics Agency Programs
Risk Flags
- Potential for cost overruns due to EPA.
- Lack of small business participation.
- Short contract duration limits long-term cost analysis.
- Dependence on a single vendor for a critical commodity in a specific region.
Tags
petroleum-refineries, department-of-defense, delivery-order, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $44.5 million to OKINAWA IDEMITSU K.K.. 8508562861!GASOLINE, AUTOMOTIVE
Who is the contractor on this award?
The obligated recipient is OKINAWA IDEMITSU K.K..
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $44.5 million.
What is the period of performance?
Start: 2021-09-26. End: 2021-10-31.
What was the average price per gallon under this contract, considering the economic price adjustments?
Calculating the precise average price per gallon is difficult without the specific price adjustment data tied to the contract's duration and market fluctuations. The initial fixed price was $44,524,985.29 for an unspecified quantity over 35 days. The economic price adjustment clause allows for changes based on market indices, meaning the final cost per gallon could vary significantly from the initial estimate.
What are the primary risks associated with the economic price adjustment (EPA) clause in this contract?
The primary risk of the EPA clause is cost escalation. If global or regional gasoline prices surge during the contract period, the final cost to the DoD could significantly exceed the initially anticipated fixed price. This uncertainty makes budget forecasting more challenging and exposes taxpayers to market volatility.
How effective was the full and open competition in achieving the best value for this gasoline procurement?
While full and open competition is designed to foster the best value, the effectiveness in this case is partially obscured by the EPA clause. It suggests multiple bidders were considered, likely driving a competitive initial price. However, the true value realization depends on how well the EPA mechanism tracks actual market costs without undue inflation.
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: Idemitsu Kosan CO.,Ltd.
Address: 843-2, WAUKE, NAKAGUSUKUSON, NAKAGAMI-GUN
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Not Designated a Small Business, Special Designations
Financial Breakdown
Contract Ceiling: $44,524,985
Exercised Options: $44,524,985
Current Obligation: $44,524,985
Contract Characteristics
Commercial Item: COMMERCIAL ITEM
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SPE60521D1004
IDV Type: IDC
Timeline
Start Date: 2021-09-26
Current End Date: 2021-10-31
Potential End Date: 2021-10-31 00:00:00
Last Modified: 2024-06-13
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