DoD's $36M Gasoline Contract with Okinawa Idemitsu K.K. Faces Scrutiny Amidst Full and Open Competition

Contract Overview

Contract Amount: $36,073,630 ($36.1M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2022-09-27

End Date: 2022-10-31

Contract Duration: 34 days

Daily Burn Rate: $1.1M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8509429538!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $36.1 million to OKINAWA IDEMITSU K.K. for work described as: 8509429538!GASOLINE, AUTOMOTIVE Key points: 1. The contract awarded to Okinawa Idemitsu K.K. for automotive gasoline represents a significant expenditure within the Defense Logistics Agency. 2. While categorized under 'Full and Open Competition', the specific market dynamics for fuel in Okinawa warrant closer examination. 3. Potential risks include price volatility due to economic price adjustment clauses and geopolitical factors affecting fuel supply. 4. The petroleum refineries sector is critical for military operations, making reliable sourcing a key concern.

Value Assessment

Rating: fair

The contract's fixed price with economic price adjustment makes direct comparison difficult. However, the benchmark of $106,098,900 (likely a total contract value or a significant portion) suggests a substantial investment for the delivered fuel.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating multiple bidders were theoretically allowed. However, the specific geographic location and specialized nature of fuel supply in Okinawa might limit the practical number of viable competitors, potentially impacting price discovery.

Taxpayer Impact: Taxpayer funds are being used for essential fuel supplies. While competition aims for best value, the economic price adjustment clause introduces uncertainty in the final cost.

Public Impact

Ensures fuel availability for Department of Defense operations in the Okinawa region. Supports critical logistical functions for military readiness. Potential for price fluctuations impacts budget predictability for the agency. Highlights the reliance on specific suppliers in strategic overseas locations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic Price Adjustment (EPA) clause can lead to cost overruns.
Limited competition due to geographic constraints.
Dependence on a single supplier for a critical commodity.

Positive Signals

Awarded under Full and Open Competition.
Ensures supply for critical DoD operations.

Sector Analysis

The procurement falls within the petroleum refineries sector, specifically for automotive gasoline. Spending benchmarks in this sector are highly variable, influenced by global oil prices, refining capacity, and regional demand. Defense contracts for fuel are essential but subject to market volatility.

Small Business Impact

This contract does not appear to directly involve small businesses as prime contractors. The nature of large-scale fuel supply contracts often favors established, larger entities with specialized infrastructure and global reach.

Oversight & Accountability

The use of 'Full and Open Competition' suggests adherence to standard procurement procedures. However, oversight should focus on the execution of the economic price adjustment clause and the actual competitive landscape within Okinawa.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Potential for cost overruns due to EPA.
Limited effective competition in a specific geographic market.
Dependence on a single supplier for a critical resource.
Geopolitical risks impacting fuel supply chain.
Lack of transparency in the competitive bidding process for this specific award.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.1 million to OKINAWA IDEMITSU K.K.. 8509429538!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 $36.1 million.

What is the period of performance?

Start: 2022-09-27. End: 2022-10-31.

What was the basis for selecting Okinawa Idemitsu K.K. given the 'Full and Open Competition' designation, and were there other qualified bidders?

The selection process under 'Full and Open Competition' typically involves evaluating proposals against predefined criteria. While the designation implies broad solicitation, the specific market conditions in Okinawa may have resulted in limited actual bids. Further investigation into the bidding process and the number of responsive offers would clarify the extent of competition and the rationale behind the award to Okinawa Idemitsu K.K.

How does the economic price adjustment clause impact the final cost and budget predictability for this gasoline contract?

The economic price adjustment (EPA) clause allows for modifications to the contract price based on fluctuations in specified economic factors, such as fuel market indices. This introduces uncertainty into the final cost, making precise budget forecasting challenging. While it can protect the contractor from unforeseen cost increases, it also exposes the government to potential price hikes beyond initial projections.

What are the primary risks associated with relying on a single supplier for automotive gasoline in a strategic overseas location like Okinawa?

Relying on a single supplier in a strategic overseas location presents significant risks, including supply chain disruptions due to geopolitical events, natural disasters, or the supplier's operational issues. This dependence can lead to price gouging if competition is limited and can jeopardize mission readiness if fuel supply is interrupted. Ensuring robust contingency plans and exploring alternative sourcing options are crucial.

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: $36,073,630

Exercised Options: $36,073,630

Current Obligation: $36,073,630

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline