DoD's $73.6M gasoline contract awarded to OKINAWA IDEMITSU K.K. for fuel delivery

Contract Overview

Contract Amount: $73,925,677 ($73.9M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2022-03-13

End Date: 2022-04-30

Contract Duration: 48 days

Daily Burn Rate: $1.5M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8508939626!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $73.9 million to OKINAWA IDEMITSU K.K. for work described as: 8508939626!GASOLINE, AUTOMOTIVE Key points: 1. Contract value represents a significant investment in fuel supply chain resilience. 2. Competition dynamics suggest a robust market for automotive gasoline in the region. 3. Potential risks include price volatility due to economic price adjustment clauses. 4. Performance context is critical for ensuring timely fuel delivery to military operations. 5. Sector positioning highlights the Defense Logistics Agency's role in strategic resource management.

Value Assessment

Rating: good

The contract value of $73.6 million for automotive gasoline appears reasonable given the scale of military operations it supports. Benchmarking against similar fuel supply contracts for the Department of Defense would provide a more precise value-for-money assessment. The fixed-price with economic price adjustment (FPEPA) structure aims to balance cost certainty with market fluctuations, which is a common approach for commodity-based contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified vendors had the opportunity to bid. The specific number of bidders is not provided, but the designation suggests a competitive environment. This level of competition is generally expected to drive favorable pricing and ensure that the government receives the best value.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it encourages a wider range of suppliers to participate, potentially leading to lower prices and more innovative solutions.

Public Impact

Military personnel and operations in Okinawa benefit from a reliable supply of automotive gasoline. The contract ensures the operational readiness of vehicles and equipment essential for defense missions. Geographic impact is concentrated in Okinawa, Japan, supporting U.S. military installations there. Workforce implications may include employment opportunities for personnel involved in fuel logistics and delivery.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if fuel prices increase significantly.
Dependence on a single supplier for a critical commodity like gasoline carries inherent supply chain risks.
The short duration of the delivery order (March-April 2022) may necessitate frequent re-competition or extensions, adding administrative burden.

Positive Signals

Awarding to a known entity like OKINAWA IDEMITSU K.K. suggests a potentially reliable supplier with established infrastructure.
Full and open competition indicates a healthy market and potential for competitive pricing.
The contract's focus on a specific, critical commodity ensures essential operational needs are met.

Sector Analysis

The petroleum refineries sector is vital for national security, providing essential fuels for military operations. This contract falls within the broader energy and logistics sector, where government procurement plays a significant role in ensuring stable supply chains. Comparable spending benchmarks for fuel procurement by the Department of Defense are substantial, reflecting the continuous demand for these resources across global operations.

Small Business Impact

There is no indication that this contract included small business set-asides. Given the nature of large-scale fuel procurement and the specific industry involved, it is less common for such contracts to be exclusively set aside for small businesses. Subcontracting opportunities for small businesses may exist within the broader logistics and support services related to fuel delivery, but this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA) and the Defense Logistics Agency (DLA) contracting officers. Accountability measures are embedded in the contract terms, including delivery schedules and quality specifications. Transparency is generally maintained through contract award databases, though specific performance metrics and oversight reports may not always be publicly accessible.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Department of Defense Automotive Fuel Contracts
Okinawa Military Base Support Services
Petroleum Product Supply Contracts

Risk Flags

Price Volatility Risk
Supply Chain Disruption Risk
Contract Performance Monitoring

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $73.9 million to OKINAWA IDEMITSU K.K.. 8508939626!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 $73.9 million.

What is the period of performance?

Start: 2022-03-13. End: 2022-04-30.

What is the historical spending pattern for automotive gasoline by the Defense Logistics Agency in Okinawa?

Historical spending data for automotive gasoline by the Defense Logistics Agency (DLA) in Okinawa reveals a consistent requirement for fuel to support military operations. While specific figures for every year are not readily available in this dataset, the recurring nature of such contracts indicates a sustained demand. DLA's mission includes providing logistical support, including fuel, to all branches of the U.S. military. The total obligated amount for this specific contract is $73,608,766.64, awarded in March 2022. Analyzing past awards for similar delivery orders or base contracts would provide a clearer picture of the annual expenditure trends and the DLA's long-term investment in fuel security for the region. Fluctuations in spending could be attributed to changes in operational tempo, fuel price volatility, and contract vehicle adjustments.

How does the pricing of this contract compare to market rates for automotive gasoline in Okinawa during the contract period?

Directly comparing the per-unit cost of gasoline in this contract to prevailing market rates in Okinawa during March-April 2022 is challenging without access to the specific economic price adjustment formula and the base price set at the time of award. However, the contract utilizes a 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) clause. This suggests that the base price was negotiated, and then adjusted based on a pre-defined economic index or formula, likely tied to global or regional fuel market benchmarks. The 'full and open competition' award method implies that the initial pricing was competitive. To assess true value, one would need to compare the final invoiced price per gallon against the average spot market price for similar grade gasoline in Okinawa during the delivery period, factoring in any agreed-upon margins or adjustments.

What are the key performance indicators (KPIs) used to evaluate the contractor's performance under this delivery order?

Key performance indicators (KPIs) for this delivery order would primarily focus on the timely and accurate delivery of automotive gasoline meeting specified quality standards. Essential KPIs likely include on-time delivery rates, adherence to delivery schedules and locations, fuel quality compliance (e.g., octane rating, absence of contaminants), and accurate invoicing. The contract's short duration (March 13, 2022, to April 30, 2022) emphasizes the importance of immediate operational effectiveness. Performance would be monitored by the contracting officer's representative (COR) or designated personnel at the receiving DLA facility. Failure to meet these KPIs could result in contract penalties, reduced future opportunities, or termination, as stipulated in the contract terms.

What is the track record of OKINAWA IDEMITSU K.K. in fulfilling government fuel supply contracts?

OKINAWA IDEMITSU K.K. has a history of fulfilling fuel supply contracts, particularly within the Asia-Pacific region, including support for U.S. military installations. As a significant player in the petroleum industry, the company possesses the infrastructure and experience necessary for large-scale fuel distribution. While specific details on past performance metrics for government contracts are not provided here, their continued engagement in bidding for and winning such contracts suggests a generally satisfactory track record. Government agencies typically conduct pre-award evaluations of contractor past performance, which would have informed the decision to award this delivery order. Any significant performance issues on prior contracts could have precluded them from this award.

What are the potential risks associated with the economic price adjustment clause in this contract?

The primary risk associated with the economic price adjustment (EPA) clause in this fixed-price contract is cost uncertainty for the government. While EPA is designed to protect both parties from extreme market fluctuations, it introduces variability. If global or regional oil prices surge significantly during the contract period, the government could end up paying substantially more than initially projected based on the base price. Conversely, if prices fall, the government benefits from the adjustment. The specific index or formula used for adjustment is critical; a volatile index could lead to unpredictable cost increases. This necessitates careful monitoring of market trends and the EPA mechanism by the contracting agency to manage budgetary implications effectively.

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: $73,925,677

Exercised Options: $73,925,677

Current Obligation: $73,925,677

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline