DOD's $43.7M Automotive Gasoline Contract Awarded to OKINAWA IDEMITSU K.K. for Okinawa Region

Contract Overview

Contract Amount: $43,296,667 ($43.3M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2022-09-13

End Date: 2022-10-31

Contract Duration: 48 days

Daily Burn Rate: $902.0K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8509385688!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $43.3 million to OKINAWA IDEMITSU K.K. for work described as: 8509385688!GASOLINE, AUTOMOTIVE Key points: 1. Contract value represents a significant investment in fuel supply for military operations. 2. Full and open competition suggests a potentially competitive bidding environment. 3. Fixed price with economic price adjustment introduces some cost fluctuation risk. 4. Short contract duration (48 days) indicates a specific, immediate need. 5. Awardee's specialization in petroleum refining aligns with contract requirements. 6. Geographic focus on Okinawa highlights strategic logistical considerations.

Value Assessment

Rating: good

The contract value of $43.7 million for automotive gasoline over a short period appears reasonable given the strategic importance of fuel supply in Okinawa. Benchmarking against similar fuel contracts for overseas military bases is challenging due to unique logistical costs and security requirements. However, the fixed-price structure with economic price adjustment suggests an attempt to balance cost certainty with market volatility. The award to a single entity for this specific delivery order implies a focused procurement strategy.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. While the number of bidders is not specified, this procurement method generally fosters price discovery and encourages competitive pricing. The Defense Logistics Agency's use of this approach suggests confidence in the market's ability to meet the requirement efficiently.

Taxpayer Impact: Taxpayers benefit from the potential for lower prices due to a competitive bidding process, ensuring that defense fuel needs are met cost-effectively.

Public Impact

Military personnel and operations in Okinawa benefit from a reliable supply of automotive gasoline. The contract supports the logistical readiness of U.S. forces stationed in the Indo-Pacific region. Local economies in Okinawa may see indirect benefits through fuel distribution and related services. Ensures the operational capability of vehicles and equipment essential for defense missions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clause.
Dependence on a single supplier for a critical resource in a strategic location.
Geopolitical factors affecting fuel supply chains in the Indo-Pacific region.

Positive Signals

Awarded through full and open competition, suggesting market responsiveness.
Contractor's specialization in petroleum refining indicates relevant expertise.
Short duration suggests a focused and potentially efficient delivery.

Sector Analysis

The petroleum refining and distribution sector is critical for national security, providing essential fuels for military operations globally. This contract falls within the broader energy and logistics sector, supporting the Department of Defense's vast supply chain. The market for military fuel procurement is often characterized by long-term agreements and strategic sourcing, with significant emphasis on reliability and security of supply, especially in overseas locations like Okinawa.

Small Business Impact

The contract data does not indicate any specific small business set-aside provisions. Given the nature and scale of fuel procurement for military operations, it is unlikely that small businesses would be the primary awardees for such a large contract. Subcontracting opportunities for small businesses may exist in ancillary services, but are not explicitly detailed in this award information.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for overseeing this contract, ensuring compliance with terms and conditions. DLA has established oversight mechanisms for its supply contracts, including performance monitoring and quality assurance. Transparency is generally maintained through contract award databases, though specific performance metrics and detailed oversight reports may not be publicly available.

Related Government Programs

Defense Fuel Support Center Contracts
Overseas Military Base Fueling Contracts
Petroleum Product Procurement
Fixed-Price Economic Adjustment Contracts

Risk Flags

Potential for price volatility due to EPA clause.
Dependence on a single supplier for critical fuel in a strategic location.
Geopolitical risks impacting global fuel supply chains.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.3 million to OKINAWA IDEMITSU K.K.. 8509385688!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 $43.3 million.

What is the period of performance?

Start: 2022-09-13. End: 2022-10-31.

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

Analyzing historical spending for automotive gasoline in Okinawa by the Department of Defense requires access to detailed procurement data over multiple fiscal years. Typically, such contracts are awarded periodically to ensure a consistent supply. Factors influencing historical spending include the number of personnel stationed, operational tempo, vehicle fleet size, and prevailing market prices for fuel. The Defense Logistics Agency (DLA) manages these procurements, and their spending can fluctuate based on geopolitical conditions, base realignments, and changes in fuel efficiency of military equipment. Without specific historical data, it's difficult to provide precise figures, but consistent investment in fuel supply for strategic locations like Okinawa is a recurring theme in defense budgets.

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 ($43.7 million for the contract period) to market rates for automotive gasoline in Okinawa requires access to real-time, localized fuel pricing data for the specified period (September-October 2022). The contract includes an economic price adjustment (EPA) clause, which allows for price changes based on fluctuations in specified indices, typically related to crude oil or refined product prices. While the EPA aims to reflect market conditions, the base fixed price and the specific EPA formula dictate the final cost. Benchmarking would involve comparing the effective per-gallon price, considering the EPA, against published wholesale or retail fuel prices in Okinawa during that timeframe, adjusted for bulk purchasing and delivery logistics specific to military contracts.

What are the specific risks associated with the economic price adjustment (EPA) 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 the EPA is intended to protect both the contractor from unforeseen market volatility and the government from excessively high fixed prices, it introduces the possibility of price increases beyond initial projections. If global oil prices or refining costs surge significantly during the contract period, the government could end up paying more than initially budgeted. Conversely, if prices fall, the EPA might limit the extent to which the government benefits from those lower prices compared to a purely fixed-price contract without adjustment. The specific indices and adjustment formula within the EPA are crucial for quantifying this risk.

What is the track record of OKINAWA IDEMITSU K.K. in supplying fuel to the Department of Defense or other government agencies?

OKINAWA IDEMITSU K.K. is a subsidiary of Idemitsu Kosan Co., Ltd., a major Japanese petroleum company. Information regarding their specific track record in supplying fuel directly to the Department of Defense or other U.S. government agencies is not readily available in public contract databases for this specific entity. However, Idemitsu Kosan and its affiliates have extensive experience in petroleum refining, distribution, and retail operations globally, including in the Asia-Pacific region. Their established infrastructure and market presence suggest a capability to fulfill large-scale fuel supply contracts. Further due diligence would be required to ascertain their specific past performance on U.S. government contracts, particularly those involving military logistics.

How does the competition level (full and open) typically impact the final price for fuel contracts of this magnitude?

A 'full and open competition' procurement strategy generally leads to a more competitive bidding environment, which tends to drive down prices for the government. When multiple qualified bidders are encouraged to submit proposals, they are incentivized to offer their most competitive pricing to win the contract. For a contract of this magnitude ($43.7 million), the presence of several bidders could result in significant cost savings compared to a sole-source or limited competition scenario. The specific impact on price depends on the number of bids received, the technical and price proposals submitted, and the negotiation process. However, the principle remains that broader competition typically enhances price discovery and offers better value for taxpayer money.

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: $43,296,667

Exercised Options: $43,296,667

Current Obligation: $43,296,667

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline