DoD's $50M gasoline contract awarded to OKINAWA IDEMITSU K.K. for fuel supply

Contract Overview

Contract Amount: $52,204,450 ($52.2M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2022-03-21

End Date: 2022-04-30

Contract Duration: 40 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: 8508963146!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $52.2 million to OKINAWA IDEMITSU K.K. for work described as: 8508963146!GASOLINE, AUTOMOTIVE Key points: 1. Contract value represents a significant portion of the agency's fuel procurement. 2. Competition dynamics suggest a potentially competitive bidding process for this fuel supply. 3. Fixed Price with Economic Price Adjustment (FPEPA) contract type introduces price volatility. 4. Short contract duration may indicate a need for immediate fuel supply or a pilot program. 5. The contract falls within the petroleum refineries sector, crucial for energy supply. 6. Awarded by the Defense Logistics Agency, highlighting its role in supporting military operations.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific unit pricing data and market comparisons for automotive gasoline in the Okinawa region during the contract period. The fixed price with economic price adjustment suggests potential for cost fluctuations. However, the total award amount of $50.12 million for a 40-day period indicates a substantial daily expenditure, necessitating careful monitoring of fuel prices.

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. This competitive approach is generally favorable for price discovery and ensuring the government receives competitive pricing. The specific number of bidders is not provided, but the designation suggests a robust process was followed.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down prices through market forces, leading to more cost-effective procurement of essential goods like fuel.

Public Impact

Military personnel and operations in the Okinawa region benefit from a reliable supply of automotive gasoline. The contract ensures the availability of fuel for vehicles and equipment essential for defense readiness. Geographic impact is localized to Okinawa, Japan, supporting U.S. military installations. 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 introduces potential for cost overruns if fuel prices surge unexpectedly.
Reliance on a single awardee for a critical resource like fuel in a specific region carries inherent supply chain risks.
Limited contract duration might necessitate frequent re-competition, leading to administrative overhead and potential supply gaps if not managed efficiently.

Positive Signals

Awarded through full and open competition, suggesting a competitive process that likely secured favorable terms.
The Defense Logistics Agency's involvement indicates adherence to established procurement protocols for essential supplies.
The contract specifies a fixed price with economic price adjustment, providing some cost certainty while allowing for market fluctuations.

Sector Analysis

This contract falls within the petroleum refineries sector, specifically focusing on the distribution and supply of automotive gasoline. The market for military fuel procurement is often characterized by long-term agreements and strategic sourcing to ensure operational readiness. While specific market size data for fuel supply in Okinawa is not readily available, the Department of Defense is a major consumer of petroleum products globally, with significant annual spending in this category.

Small Business Impact

The provided data does not indicate any small business set-aside or subcontracting requirements for this contract. As a large-value fuel supply contract, it is likely that the primary awardee is a major fuel supplier, and subcontracting opportunities for small businesses would depend on the specific operational needs and the prime contractor's strategy.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the Defense Contract Management Agency (DCMA) within the Department of Defense. Accountability measures are embedded in the contract terms, including performance standards and the economic price adjustment clause. Transparency is facilitated through contract databases like FPDS, where award details are recorded. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Fuel Supply Center
Military Construction
Base Operations Support
Logistics and Transportation Services

Risk Flags

Price Volatility Risk (due to EPA clause)
Supply Chain Disruption Risk
Short-Term Requirement Uncertainty

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.2 million to OKINAWA IDEMITSU K.K.. 8508963146!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 $52.2 million.

What is the period of performance?

Start: 2022-03-21. End: 2022-04-30.

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

Analyzing historical spending for automotive gasoline in Okinawa requires accessing detailed procurement data over multiple fiscal years. The Defense Logistics Agency (DLA) is responsible for managing fuel supplies for the DoD, and their spending can fluctuate based on operational tempo, fuel price volatility, and contract renewals. Without specific historical data for this region and commodity, it's difficult to establish a precise pattern. However, consistent military presence in Okinawa suggests a continuous need for fuel, implying regular procurement activities. Trends in global oil prices and geopolitical factors can significantly influence historical spending levels. Future analysis should focus on DLA's specific contracts awarded in the Okinawa region for automotive gasoline to identify trends in volume, pricing, and contractor awards.

How does the awarded price compare to market rates for automotive gasoline in Okinawa during the contract period?

Determining the precise comparison of the awarded price to market rates for automotive gasoline in Okinawa during the contract period (March 21, 2022 - April 30, 2022) is complex without access to the specific economic price adjustment (EPA) formula and prevailing market indices used. The contract is a Fixed Price with Economic Price Adjustment (FPEPA), meaning the base price is subject to change based on an agreed-upon index. To assess value, one would need to: 1. Obtain the base fixed price component of the contract. 2. Identify the specific economic index(es) used for adjustment (e.g., Platts, Argus, or a government-published index). 3. Track the value of that index during the contract period. 4. Apply the EPA formula to the base price to derive the actual price paid. 5. Compare this derived price to publicly available or commercially sourced gasoline prices in Okinawa for the same period. Given the short duration and specific nature of military fuel contracts, direct public comparisons can be difficult, but significant deviations from general market trends would warrant further investigation.

What are the potential risks associated with the 'Fixed Price with Economic Price Adjustment' contract type for this gasoline procurement?

The 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type for gasoline procurement introduces several potential risks. Primarily, it exposes the government to price volatility. While the fixed component provides some cost certainty, the economic price adjustment allows the contractor to pass on increases in fuel costs, potentially leading to higher-than-anticipated expenditures for the government if market prices rise significantly. This can complicate budget forecasting and may result in the government paying more than if a firm fixed price had been negotiated, especially if market conditions are volatile. Conversely, if prices fall, the government might not fully benefit from the decrease depending on the specific EPA clause. Effective risk management requires robust monitoring of the economic indices used for adjustment and potentially negotiating caps on price increases.

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

OKINAWA IDEMITSU K.K. is a subsidiary of Idemitsu Kosan Co., Ltd., a major Japanese petroleum company. As a contractor, its track record with the U.S. government, particularly the Department of Defense, would likely involve supplying fuel and related petroleum products in the Asia-Pacific region. Assessing their specific track record requires reviewing their past contract awards, performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS), and any history of disputes or corrective actions. Given the nature of the industry, large petroleum companies often have established relationships with military entities for fuel supply. A detailed review of their federal contract history would reveal the volume and types of contracts awarded, their performance ratings, and their experience with similar FPEPA contracts and delivery requirements in overseas locations.

How does the contract's duration of 40 days impact the overall value and risk for the government?

The extremely short duration of 40 days for this contract (March 21, 2022 - April 30, 2022) significantly impacts its value and risk profile. From a value perspective, it suggests this might be an urgent, short-term requirement, a bridge contract pending a longer-term award, or a specific operational need. This short timeframe may limit the ability of contractors to offer significant volume discounts or long-term price stability. From a risk perspective, it necessitates rapid procurement processes, potentially increasing administrative burden and the chance of rushed decisions. It also means the government will soon need to re-compete or extend the requirement, creating potential for supply continuity issues if not managed proactively. The short duration also limits the impact of long-term market fluctuations but concentrates risk within the specified 40-day window.

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: $52,204,450

Exercised Options: $52,204,450

Current Obligation: $52,204,450

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline