DoD's $76M Gasoline Contract with Okinawa Idemitsu K.K. Faces Scrutiny Amidst Economic Price Adjustments

Contract Overview

Contract Amount: $76,187,336 ($76.2M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2022-06-15

End Date: 2022-07-30

Contract Duration: 45 days

Daily Burn Rate: $1.7M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8509170425!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $76.2 million to OKINAWA IDEMITSU K.K. for work described as: 8509170425!GASOLINE, AUTOMOTIVE Key points: 1. Significant contract value of $76.19 million for automotive gasoline. 2. Competition was full and open, suggesting potential for competitive pricing. 3. Risk associated with fixed-price contracts with economic price adjustments (EPAs) can lead to cost overruns. 4. Spending falls within the Petroleum Refineries (NAICS 324110) sector.

Value Assessment

Rating: fair

The contract's fixed-price with economic price adjustment structure introduces uncertainty in final costs. Benchmarking against similar EPA contracts for fuel is necessary to assess if the price adjustments are reasonable and reflect market fluctuations accurately.

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 inclusion of economic price adjustments can mitigate some of the initial price discovery benefits by allowing for post-award cost increases.

Taxpayer Impact: Taxpayer funds are exposed to potential price increases due to economic adjustments, impacting the overall value for money.

Public Impact

Ensures fuel supply for Department of Defense operations in Okinawa. Potential for increased costs to taxpayers due to fluctuating fuel prices. Supports a major supplier in the region, potentially impacting local economies. Transparency in EPA calculations is crucial for public trust.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic Price Adjustment (EPA) clause can lead to cost uncertainty.
Short contract duration (45 days) may limit long-term price stability.
No small business participation noted.

Positive Signals

Awarded under full and open competition.
Addresses a critical logistical need for the DoD.

Sector Analysis

This contract falls under the Petroleum Refineries sector, specifically for automotive gasoline. Spending benchmarks for fuel procurement can vary significantly based on geopolitical factors, market demand, and contract terms like EPAs.

Small Business Impact

The data indicates no small business participation in this contract. Given the scale and nature of fuel supply contracts, opportunities for small businesses may be limited or not actively pursued in this specific procurement.

Oversight & Accountability

Oversight is needed to ensure the economic price adjustment mechanism is applied fairly and transparently, preventing excessive cost increases. The Defense Logistics Agency is responsible for managing this contract and ensuring accountability.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Economic Price Adjustment (EPA) clause introduces cost uncertainty.
Lack of small business participation.
Short contract duration may not reflect long-term market stability.
Potential for price volatility in the fuel market.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $76.2 million to OKINAWA IDEMITSU K.K.. 8509170425!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 $76.2 million.

What is the period of performance?

Start: 2022-06-15. End: 2022-07-30.

What is the historical trend of gasoline prices in Okinawa during the contract period, and how do they compare to the price adjustments made under this contract?

Analyzing historical gasoline price data for Okinawa during the contract's 45-day period is crucial. Comparing this trend against the specific economic price adjustments applied by Okinawa Idemitsu K.K. will reveal if the adjustments accurately reflected market fluctuations or if they potentially inflated costs beyond reasonable expectations. This comparison is key to assessing the contract's value for money.

What are the specific triggers and formulas used for the economic price adjustments in this contract, and how do they mitigate or exacerbate price risk?

The specific triggers and formulas for economic price adjustments (EPAs) are critical to understanding the price risk. If EPAs are tied to volatile market indices or allow for broad adjustments, they can significantly exacerbate price risk for the government, leading to unpredictable costs. Conversely, well-defined EPAs linked to specific, verifiable cost components can offer a degree of protection against extreme market swings while still allowing for fair compensation.

How does the unit price of gasoline under this contract compare to similar fuel procurements by the DoD in other regions or by other government agencies?

Benchmarking the unit price of gasoline against comparable contracts is essential for evaluating effectiveness. Comparing this contract's pricing, especially considering the EPA clause, with similar fuel procurements by the DoD in other geographic locations or by different federal agencies can highlight potential cost efficiencies or inefficiencies. Significant deviations may indicate issues with pricing strategy, competition, or market conditions.

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: $76,187,336

Exercised Options: $76,187,336

Current Obligation: $76,187,336

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline