DoD's $47.4M gasoline contract awarded to OKINAWA IDEMITSU K.K. for a 30-day delivery order

Contract Overview

Contract Amount: $47,327,471 ($47.3M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2022-12-01

End Date: 2022-12-31

Contract Duration: 30 days

Daily Burn Rate: $1.6M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8509560561!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $47.3 million to OKINAWA IDEMITSU K.K. for work described as: 8509560561!GASOLINE, AUTOMOTIVE Key points: 1. Contract value represents a significant expenditure for a short-duration fuel supply. 2. The fixed-price with economic price adjustment structure may expose the government to fluctuating fuel costs. 3. Sole reliance on one supplier for this critical commodity could pose supply chain risks. 4. Performance is limited to a single month, suggesting a tactical or emergency procurement. 5. The contract falls under the Petroleum Refineries NAICS code, indicating a focus on fuel production and distribution. 6. The award was made under full and open competition, suggesting a competitive market for this product.

Value Assessment

Rating: fair

The contract value of $47.4 million for a single 30-day delivery order of automotive gasoline appears high, especially considering the short duration. Without comparable data for similar short-term fuel procurements in the Okinawa region, it's difficult to definitively benchmark value. However, the fixed-price with economic price adjustment clause introduces potential for cost overruns if fuel prices increase significantly during the contract period. The government's ability to secure favorable pricing under these conditions warrants scrutiny.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely solicited and considered. This competitive process is generally expected to yield fair market prices. The specific number of bidders is not provided, but the 'full and open' designation suggests a robust bidding environment for this type of fuel supply.

Taxpayer Impact: A competitive award process helps ensure that taxpayer dollars are used efficiently by driving down prices through market forces.

Public Impact

This contract directly supports the Department of Defense's operational readiness by ensuring the availability of essential fuel for vehicles and equipment. The primary beneficiaries are military personnel and operations in the Okinawa region, enabling continued mission execution. The geographic impact is localized to Okinawa, Japan, where the fuel is to be delivered. While not directly creating new jobs, the contract sustains existing roles within the fuel supply chain and military logistics operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the economic price adjustment clause.
Short contract duration may indicate a lack of long-term strategic planning or an emergency situation.
Dependence on a single supplier for a critical commodity could lead to supply disruptions.

Positive Signals

Awarded through full and open competition, suggesting a competitive market.
Clear delivery period (30 days) provides defined performance expectations.
Fixed-price component offers some cost certainty, albeit with adjustments.

Sector Analysis

The petroleum refining industry is a critical global sector, essential for providing fuels and other products. The market size for automotive gasoline is vast, with significant government procurement activity to support military operations worldwide. This contract fits within the broader defense logistics and fuel supply chain, where agencies like the Defense Logistics Agency manage complex global distribution networks. Comparable spending benchmarks would typically involve analyzing other fuel contracts awarded by the DoD or other federal agencies in similar geographic regions.

Small Business Impact

There is no indication that this contract included small business set-asides. Given the nature of large-scale fuel procurement and the specific contractor, it is unlikely that significant subcontracting opportunities for small businesses were a primary focus of this particular award. The impact on the small business ecosystem is likely minimal for this specific contract.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Logistics Agency (DLA) contracting officers and potentially the Department of Defense Inspector General. Accountability measures would include performance monitoring against delivery requirements and adherence to the contract terms, including the economic price adjustment provisions. Transparency is generally maintained through contract award databases, though specific performance details may be limited.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Department of Defense Automotive Fuel Contracts
Global Fuel Supply Chain Management
Fixed-Price with Economic Price Adjustment Contracts

Risk Flags

Potential for price escalation due to economic price adjustment.
Short contract duration may indicate tactical or emergency need, requiring further context.
Single-vendor award for delivery period warrants review of supply chain resilience.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $47.3 million to OKINAWA IDEMITSU K.K.. 8509560561!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 $47.3 million.

What is the period of performance?

Start: 2022-12-01. End: 2022-12-31.

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

Analyzing historical spending for automotive gasoline by the Department of Defense in the Okinawa region is crucial for contextualizing the current $47.4 million award. Without specific historical data, it's challenging to determine if this amount represents an increase, decrease, or is consistent with past expenditures. Factors such as geopolitical stability, military operational tempo, and fluctuations in global oil prices can significantly influence historical spending. A trend analysis over several fiscal years would reveal patterns in contract values, durations, and awarded contractors, providing insights into the predictability and scale of fuel needs in the region. This historical perspective is vital for assessing whether the current contract represents a standard procurement or an anomaly requiring further investigation into its justification and value.

How does the fixed-price with economic price adjustment (FPEPA) clause impact the government's cost exposure for this gasoline contract?

The Fixed-Price with Economic Price Adjustment (FPEPA) clause in this $47.4 million gasoline contract introduces a degree of cost uncertainty for the government. While the 'fixed-price' component provides a baseline, the 'economic price adjustment' allows the contract price to fluctuate based on predefined economic factors, typically related to market indices for fuel or raw materials. This means that if the cost of crude oil or refining processes increases during the 30-day contract period, the final price paid by the Department of Defense could be higher than initially anticipated. Conversely, if prices decrease, the government could benefit. The government's cost exposure is therefore directly tied to market volatility. Effective oversight would involve closely monitoring the indices used for adjustment and ensuring that the contractor's claims for price increases are substantiated and align with the contract's specific terms.

What are the potential risks associated with awarding a 30-day fuel supply contract to a single vendor?

Awarding a 30-day fuel supply contract to a single vendor, such as OKINAWA IDEMITSU K.K. for $47.4 million, carries several potential risks. Firstly, there's a risk of supply disruption if the sole vendor experiences operational issues, natural disasters, or geopolitical challenges affecting their ability to deliver. Secondly, the lack of competition for subsequent periods, if this is a recurring need, could lead to higher prices in future solicitations. Thirdly, over-reliance on one supplier can reduce the government's leverage in negotiating terms and prices. While full and open competition was used for this specific award, the short duration and single-vendor nature for the delivery period itself warrants consideration of contingency plans and the potential need for diversifying suppliers in the future to ensure consistent and cost-effective fuel availability.

How does this contract align with the Defense Logistics Agency's broader mission for fuel procurement and supply chain management?

This $47.4 million contract for automotive gasoline aligns with the Defense Logistics Agency's (DLA) core mission of providing logistical support, including fuel, to the U.S. military. The DLA is responsible for procuring and delivering a vast range of fuels globally, ensuring operational readiness. Awarding this contract, even for a short 30-day period, demonstrates the DLA's role in meeting immediate fuel demands in critical regions like Okinawa. The use of 'full and open competition' reflects the DLA's commitment to leveraging market forces for efficient procurement. However, the specifics of the contract, such as the FPEPA clause and the single-vendor award for the delivery period, would be evaluated internally by the DLA to ensure they meet strategic supply chain objectives, risk mitigation strategies, and cost-effectiveness goals for sustained operations.

What is the significance of the NAICS code 324110 (Petroleum Refineries) in the context of this contract?

The assignment of North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' to this $47.4 million contract signifies that the primary business activity of the awarded contractor, OKINAWA IDEMITSU K.K., is related to the refining of petroleum into various products, including automotive gasoline. This code helps categorize the contract within the broader industrial landscape and informs statistical analysis of federal spending. For the Department of Defense, selecting a contractor under this NAICS code suggests a focus on sourcing fuel from entities directly involved in its production or primary distribution, potentially ensuring a more direct and reliable supply chain compared to sourcing from intermediaries. It indicates the government is procuring a refined product from a core industry player.

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: $47,327,471

Exercised Options: $47,327,471

Current Obligation: $47,327,471

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline