DoD's $41.6M Gasoline Contract with Okinawa Idemitsu K.K. Faces Scrutiny Amidst Fixed Price with EPA

Contract Overview

Contract Amount: $41,604,993 ($41.6M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2022-06-20

End Date: 2022-07-31

Contract Duration: 41 days

Daily Burn Rate: $1.0M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8509181812!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $41.6 million to OKINAWA IDEMITSU K.K. for work described as: 8509181812!GASOLINE, AUTOMOTIVE Key points: 1. Contract awarded to Okinawa Idemitsu K.K. for automotive gasoline. 2. Utilizes a Fixed Price with Economic Price Adjustment (EPA) contract type. 3. Full and open competition was conducted. 4. Potential for price volatility due to EPA clause. 5. Sector is Petroleum Refineries, with NAICS code 324110.

Value Assessment

Rating: fair

The contract value of $41.6M for gasoline over approximately 41 days appears high. Benchmarking against similar fuel contracts is necessary to determine if the pricing is competitive, especially considering the EPA clause which can lead to increased costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting a competitive bidding process. However, the Fixed Price with Economic Price Adjustment (EPA) clause introduces uncertainty in the final price, potentially impacting price discovery and taxpayer value.

Taxpayer Impact: The EPA clause introduces risk of increased costs for taxpayers if fuel prices rise significantly during the contract period.

Public Impact

Ensures fuel supply for Department of Defense operations in Okinawa. Potential for fluctuating fuel costs impacting overall defense budget. Supports the petroleum refining sector through government procurement.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic Price Adjustment (EPA) clause introduces cost uncertainty.
Short contract duration may indicate urgent need or limited availability.
Lack of small business participation noted (sb: false).

Positive Signals

Awarded through full and open competition.
Ensures critical fuel supply for military operations.

Sector Analysis

The petroleum refining sector is critical for energy supply, particularly for military operations. Government contracts in this sector often involve complex pricing mechanisms like EPA due to volatile commodity prices. Benchmarks for similar fuel procurements are essential for evaluating cost-effectiveness.

Small Business Impact

The data indicates no specific set-aside for small businesses (sb: false). While this contract is large and may not be suitable for small businesses, the agency should ensure small business participation is considered in other relevant procurements within the sector.

Oversight & Accountability

The use of an EPA clause warrants close monitoring by oversight bodies to ensure prices remain reasonable and do not excessively burden taxpayers. Regular reviews of market prices against adjusted contract prices are crucial for accountability.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Economic Price Adjustment (EPA) clause may lead to cost overruns.
Short contract duration could indicate potential supply chain issues or urgent needs.
Lack of small business participation.
High contract value for a short period requires justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.6 million to OKINAWA IDEMITSU K.K.. 8509181812!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 $41.6 million.

What is the period of performance?

Start: 2022-06-20. End: 2022-07-31.

What is the historical price trend for automotive gasoline in the Okinawa region during the contract period, and how does the EPA adjustment compare to market fluctuations?

Analyzing historical gasoline prices in Okinawa during the contract period (June-July 2022) is crucial. The EPA clause allows for price adjustments based on specific indices. Comparing these adjustments to actual market price movements will reveal if the contract effectively passed on cost savings or exposed taxpayers to unnecessary risk during periods of price volatility.

What specific economic factors are included in the EPA clause, and what is the mechanism for price adjustment to ensure fair pricing?

The EPA clause likely incorporates specific indices related to crude oil prices, refining costs, and transportation. The mechanism for adjustment needs to be clearly defined, detailing how changes in these indices translate into price modifications for the gasoline. This ensures transparency and allows for verification that adjustments are tied to legitimate market shifts.

Given the full and open competition, were there any other bidders, and what were their proposed prices or pricing structures?

Understanding the competitive landscape is vital. Even with full and open competition, knowing the number of bidders and their proposed pricing structures provides context for the awarded contract's terms. This information helps assess whether the chosen bidder offered the best value and if the EPA clause was a significant factor in bid selection.

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: $41,604,993

Exercised Options: $41,604,993

Current Obligation: $41,604,993

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline