DoD's $60.5M gasoline contract awarded to OKINAWA IDEMITSU K.K. for April 2022 delivery

Contract Overview

Contract Amount: $60,539,452 ($60.5M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2022-03-01

End Date: 2022-04-30

Contract Duration: 60 days

Daily Burn Rate: $1.0M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8508913784!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $60.5 million to OKINAWA IDEMITSU K.K. for work described as: 8508913784!GASOLINE, AUTOMOTIVE Key points: 1. Contract value represents a significant portion of annual fuel procurement for the specified region. 2. Competition dynamics suggest a potentially competitive bidding environment for this fuel supply. 3. Economic price adjustment clause introduces potential for cost fluctuations beyond initial estimates. 4. Performance period is short, indicating a tactical or short-term supply need. 5. Contract falls within the petroleum refineries sector, crucial for military logistics. 6. Fixed-price contract with economic price adjustment aims to balance cost certainty with market volatility.

Value Assessment

Rating: fair

The contract value of $60.5 million for a single month's delivery of automotive gasoline appears substantial. Benchmarking against similar fuel contracts is challenging without more specific volume data. However, the fixed-price with economic price adjustment structure suggests an attempt to manage risk for both the government and the contractor in a volatile market. The short performance period might indicate a specific operational need rather than a long-term strategic supply agreement.

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 were likely solicited. The specific number of bidders is not provided, but this procurement method generally fosters price discovery and encourages competitive pricing. The Defense Logistics Agency's use of full and open competition for fuel supplies suggests a mature market with available suppliers.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically leads to more competitive pricing and a wider selection of qualified vendors, potentially reducing overall expenditure.

Public Impact

Military operations in the Okinawa region are supported by the reliable supply of automotive gasoline. The contract ensures the availability of a critical fuel commodity for Department of Defense vehicles. Geographic impact is localized to the Okinawa prefecture, supporting regional military readiness. Workforce implications are likely related to the logistics and distribution of fuel, potentially involving local labor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to costs exceeding initial projections if fuel prices rise significantly.
Short performance duration may necessitate frequent re-competition, increasing administrative burden and potential for supply disruption.
Reliance on a single contractor for a critical commodity in a specific region poses a potential supply chain risk.

Positive Signals

Awarded through full and open competition, suggesting a competitive pricing environment.
Fixed-price element provides some cost control, despite the economic price adjustment.
Contract supports essential military logistics and readiness in a key operational area.

Sector Analysis

This contract falls within the petroleum refineries and fuel distribution sector, a critical component of the energy industry supporting national defense. The market for automotive gasoline is generally large and competitive, though specific regional supply chains can be influenced by geopolitical factors and logistical constraints. The Department of Defense is a significant consumer of fuel, and contracts like this are essential for maintaining operational capabilities.

Small Business Impact

Information regarding small business set-asides or subcontracting plans is not available for this specific contract. Given the large dollar value and the nature of fuel procurement, it is possible that larger, specialized fuel suppliers are the primary participants. Further analysis would be needed to determine if small businesses have opportunities within the supply chain or distribution network.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract, ensuring compliance with terms and conditions. Accountability is maintained through performance monitoring and adherence to the contract's fixed-price with economic price adjustment structure. Transparency is generally facilitated by the Federal Procurement Data System (FPDS), which reports contract awards.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Department of Defense Automotive Fuel Contracts
Petroleum Product Supply Contracts
Fixed-Price Contracts with Economic Price Adjustment

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Potential Supply Chain Concentration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $60.5 million to OKINAWA IDEMITSU K.K.. 8508913784!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 $60.5 million.

What is the period of performance?

Start: 2022-03-01. End: 2022-04-30.

What is the typical price per gallon for automotive gasoline under similar DoD contracts in the Okinawa region?

Determining the precise price per gallon is complex without the exact volume of gasoline procured under this $60.5 million contract. However, based on general market prices for automotive gasoline in early 2022 and considering potential logistical premiums for delivery to Okinawa, the price per gallon could range significantly. For context, average US Gulf Coast wholesale prices for regular gasoline were around $2.50-$3.00 per gallon in early 2022. Delivery to a remote location like Okinawa, coupled with military-specific quality requirements and the fixed-price with economic price adjustment clause, could push the effective price per gallon considerably higher, potentially into the $4-$6 range or more, depending on the specific terms and market conditions at the time of delivery.

How does the economic price adjustment (EPA) clause typically function in fuel contracts, and what are its implications for cost certainty?

An Economic Price Adjustment (EPA) clause in a fuel contract allows for modifications to the contract price based on fluctuations in specific economic indicators, such as published fuel indices or commodity prices. For this contract, it likely means the price per gallon can increase or decrease based on a pre-defined benchmark for automotive gasoline. While this protects the contractor from unexpected market downturns and the government from potentially inflated fixed prices if market conditions improve, it reduces cost certainty for the government. The final cost could be higher or lower than initially projected, making budget forecasting more challenging. The specific index and adjustment formula outlined in the contract are crucial for understanding the potential financial impact.

What is the historical spending pattern for automotive gasoline by the Department of Defense in the Okinawa region?

Historical spending data for automotive gasoline by the Department of Defense in the Okinawa region would reveal trends in demand, pricing, and contractor awards over time. Without access to specific historical DLA procurement data for Okinawa, a precise analysis is not possible. However, consistent military presence in Okinawa suggests a sustained requirement for fuel. Annual spending could fluctuate based on operational tempo, fuel price volatility, and the number of contracts awarded. Examining past contract values, durations, and awarded vendors would provide insights into market stability, potential price trends, and the typical competitive landscape for fuel supply in this strategic location.

What are the risks associated with a short-duration contract (60 days) for critical fuel supply?

Short-duration contracts, like this 60-day award, for critical supplies such as automotive gasoline present several risks. Firstly, they necessitate frequent re-competition, which increases administrative overhead and the potential for gaps in supply if a new contract is not awarded seamlessly. Secondly, contractors may be less inclined to invest in long-term efficiency or offer the most competitive pricing for such short commitments, potentially leading to higher per-unit costs. Thirdly, it can limit the pool of potential bidders to those who can mobilize quickly and are willing to engage for a brief period, potentially reducing overall competition. Finally, it may indicate a reactive procurement strategy rather than proactive, long-term supply chain planning.

What is the track record of OKINAWA IDEMITSU K.K. as a government contractor, particularly for fuel supply?

Information on OKINAWA IDEMITSU K.K.'s specific track record as a government contractor, especially for fuel supply, is not detailed in the provided data. To assess their reliability and performance, one would need to review their past contract history with the DoD and other federal agencies. This would include examining on-time delivery rates, quality of products supplied, any past performance issues or disputes, and their experience with similar large-scale fuel procurements. A positive track record would indicate a lower risk for this contract, while a history of issues might raise concerns about potential performance problems.

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: $60,539,452

Exercised Options: $60,539,452

Current Obligation: $60,539,452

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline