DoD's $54.8M gasoline contract awarded to OKINAWA IDEMITSU K.K. shows strong competition

Contract Overview

Contract Amount: $54,792,201 ($54.8M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2022-03-31

End Date: 2022-05-31

Contract Duration: 61 days

Daily Burn Rate: $898.2K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8508991125!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $54.8 million to OKINAWA IDEMITSU K.K. for work described as: 8508991125!GASOLINE, AUTOMOTIVE Key points: 1. Contract awarded through full and open competition, indicating a healthy market. 2. Fixed Price with Economic Price Adjustment (FPEPA) contract type allows for price fluctuations. 3. Short contract duration of 61 days suggests a tactical or short-term need. 4. The contract value is significant for a short-term fuel supply. 5. No small business set-aside was utilized, but subcontracting opportunities may exist. 6. Oversight is likely managed by the Defense Logistics Agency (DLA) for fuel procurement.

Value Assessment

Rating: good

The contract value of $54.8 million for a two-month period is substantial, suggesting a large volume of fuel is required. Benchmarking against similar fuel contracts is difficult without more specific details on volume and delivery locations. However, the fixed-price with economic price adjustment structure is common for commodities like gasoline, aiming to balance cost certainty with market volatility. The awarded price appears to be within a reasonable range given the market conditions at the time of award, though a detailed cost analysis would be needed for a definitive assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit offers. The specific number of bidders is not provided, but the designation implies a competitive process that likely resulted in a fair market price. This approach generally benefits the government by fostering a competitive environment that can drive down costs and encourage innovation.

Taxpayer Impact: Taxpayers benefit from a competitive bidding process that aims to secure the best possible price for essential fuel supplies, minimizing the risk of overpayment.

Public Impact

Military operations in the Okinawa region are supported by the reliable supply of automotive gasoline. Ensures operational readiness for Department of Defense assets stationed or operating in Japan. Supports the logistical needs of the U.S. Forces Japan. Indirectly supports the local economy through fuel distribution and related services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost increases beyond initial projections.
Short contract duration may lead to frequent re-competition and associated administrative burden.
Reliance on a single supplier for a critical commodity like fuel carries inherent supply chain risks.

Positive Signals

Awarded through full and open competition, suggesting robust market engagement.
Fixed-price element provides some cost control despite economic adjustments.
Defense Logistics Agency's expertise in fuel procurement likely ensures efficient execution.

Sector Analysis

The petroleum refineries sector is critical for national security, providing essential fuels for military operations. This contract falls within the broader energy and defense logistics sectors. The market for aviation and automotive fuels is global and subject to significant price volatility, influenced by geopolitical events and supply/demand dynamics. The Defense Logistics Agency (DLA) is a primary procurer of fuel for the DoD, managing a complex global supply chain.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of specific subcontracting requirements for small businesses in the provided data. This suggests that the primary contractor, OKINAWA IDEMITSU K.K., is likely a large entity capable of fulfilling the entire requirement. Further investigation into DLA's subcontracting plans and goals for fuel procurements would be necessary to assess the impact on the small business ecosystem.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract, leveraging its extensive experience in managing fuel procurements worldwide. Accountability is maintained through contract performance monitoring, delivery verification, and financial audits. Transparency is facilitated by the Federal Procurement Data System (FPDS), which reports contract awards. Inspector General oversight would apply if any irregularities or fraud were suspected.

Related Government Programs

Defense Logistics Agency Fuel Procurement
DoD Automotive Gasoline Contracts
Asia-Pacific Fuel Supply Contracts
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Potential for price volatility due to Economic Price Adjustment clause.
Short contract duration may indicate a temporary need or require frequent re-competition.
Lack of specific volume data makes precise value benchmarking difficult.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $54.8 million to OKINAWA IDEMITSU K.K.. 8508991125!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 $54.8 million.

What is the period of performance?

Start: 2022-03-31. End: 2022-05-31.

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 the Okinawa region by the Department of Defense requires accessing detailed contract databases over several fiscal years. Typically, the DoD procures fuel through the Defense Logistics Agency (DLA) Energy. Spending patterns can fluctuate based on military operational tempo, troop levels, and prevailing market prices. Contracts are often awarded through competitive bidding, with durations varying from short-term delivery orders to longer-term agreements. The specific value of $54.8 million for a 61-day period suggests a significant demand, possibly linked to exercises or a surge in operational requirements. Without access to historical FPDS data filtered for this specific location and fuel type, a precise historical trend cannot be established, but it is reasonable to assume consistent, albeit variable, demand for fuel in this strategic location.

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

Determining the exact price per gallon requires dividing the total contract value ($54,800,000) by the total volume of gasoline procured. The total volume is not explicitly stated in the provided data. However, we can infer a potential range. If we assume a typical market price for automotive gasoline in Japan during early 2022 (e.g., around $3.00-$4.00 per gallon, subject to fluctuations), the total volume would be between 13.7 million and 18.3 million gallons. The contract's 'Economic Price Adjustment' clause indicates that the final price per gallon would be tied to a specific index or formula, allowing for adjustments based on market conditions. To benchmark accurately, one would need to compare the contract's specific pricing formula and the resulting average price per gallon against published Platts or other industry benchmarks for the relevant period and location.

What are the specific risks associated with a Fixed Price with Economic Price Adjustment (FPEPA) contract for gasoline?

The primary risk with an FPEPA contract for gasoline lies in the potential for cost overruns due to market volatility. While the 'Fixed Price' component offers some initial cost certainty, the 'Economic Price Adjustment' allows the contractor to pass on increases in the cost of raw materials (crude oil) and other economic factors (e.g., transportation, refining costs) to the government. This means the final cost to the government could be significantly higher than initially anticipated if fuel prices surge unexpectedly. Conversely, if prices fall, the government might not fully benefit from the decrease depending on the specific adjustment formula. This structure shifts some of the price risk to the buyer, necessitating careful monitoring of market trends and the contract's adjustment mechanism.

What is the track record of OKINAWA IDEMITSU K.K. in supplying fuel to the U.S. military?

OKINAWA IDEMITSU K.K. is a subsidiary of Idemitsu Kosan Co., Ltd., a major Japanese petroleum company. While specific contract details for this particular award are limited in the provided data, Idemitsu has a long history of operations in Japan and Asia, including supplying fuel to various commercial and potentially governmental entities. Its established infrastructure and experience in the region suggest a capability to meet large-scale fuel demands. To fully assess their track record with the U.S. military, one would need to review past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS) and identify previous contracts awarded to them by the Department of Defense or other government agencies for fuel supply, particularly in the Pacific theater.

What are the implications of the short contract duration (61 days) for future fuel supply in Okinawa?

A short contract duration of 61 days for a significant fuel requirement like this suggests it might be fulfilling an immediate or temporary need, such as supporting specific military exercises, a temporary surge in operations, or bridging a gap between longer-term contracts. This short timeframe implies that the Defense Logistics Agency (DLA) will likely need to re-compete the requirement soon. Frequent re-competitions can increase administrative costs and potentially lead to less favorable pricing if market conditions change or if fewer bidders participate each time. It also means less stability for the supplier. For the DoD, it ensures flexibility to adapt to changing needs but requires continuous contract management effort.

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: $54,792,201

Exercised Options: $54,792,201

Current Obligation: $54,792,201

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline