DOD awards $40.3M for automotive gasoline, with a short performance period

Contract Overview

Contract Amount: $40,360,651 ($40.4M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2023-03-24

End Date: 2023-04-30

Contract Duration: 37 days

Daily Burn Rate: $1.1M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8509787169!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $40.4 million to OKINAWA IDEMITSU K.K. for work described as: 8509787169!GASOLINE, AUTOMOTIVE Key points: 1. Contract value appears reasonable given the short duration and market for fuel. 2. Full and open competition suggests a healthy market for fuel suppliers. 3. Fixed price with economic price adjustment introduces some cost volatility. 4. Short performance period may indicate urgent or temporary needs. 5. Contractor has experience in the petroleum industry. 6. Geographic focus on Okinawa, Japan, suggests support for overseas operations.

Value Assessment

Rating: good

The contract value of $40.3 million for automotive gasoline is within a reasonable range for bulk fuel procurement, especially considering the short performance period of approximately one month. Benchmarking against similar fuel contracts for military installations, particularly in overseas locations, would provide a more precise value assessment. However, the fixed-price structure with economic price adjustment suggests that while the base price is set, fluctuations in fuel markets could impact the final cost.

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 approach generally fosters competitive pricing and allows the government to select the most advantageous offer. The presence of multiple potential suppliers for automotive gasoline in the Okinawa region suggests a robust market, which is beneficial for price discovery and ensuring the government receives competitive rates.

Taxpayer Impact: Full and open competition is the most taxpayer-friendly approach, as it maximizes the chances of obtaining the lowest possible price through a bidding process.

Public Impact

Military personnel and operations in Okinawa, Japan, will benefit from the reliable supply of automotive gasoline. The contract ensures the availability of fuel for vehicles and equipment essential for mission readiness. The geographic impact is localized to U.S. military bases and facilities on Okinawa. Workforce implications are minimal, primarily related to the logistics and delivery of fuel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost overruns if fuel prices spike significantly.
Short contract duration may necessitate a rapid re-competition process, potentially leading to higher administrative costs or less favorable terms in subsequent awards.

Positive Signals

Awarded under full and open competition, suggesting a competitive market and potential for good pricing.
Contractor is an established entity in the petroleum industry, implying operational capability.
Fixed price component provides a baseline cost certainty.

Sector Analysis

The petroleum refining and distribution sector is critical for supporting global military operations. This contract falls within the broader energy and logistics sector, specifically focusing on the supply of refined petroleum products. The market for automotive gasoline is generally competitive, though pricing can be influenced by global crude oil prices, refining capacity, and regional demand. Comparable spending benchmarks for fuel procurement at overseas military installations would be necessary for a detailed sector analysis.

Small Business Impact

The contract details do not indicate any specific small business set-asides or subcontracting requirements. Given the nature of bulk fuel procurement and the likely scale of operations, it is probable that larger, established fuel suppliers were the primary bidders. Further analysis would be needed to determine if any subcontracting opportunities for small businesses exist within the supply chain.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA), which is responsible for procuring fuel for the Department of Defense. Accountability measures would include performance monitoring, delivery verification, and adherence to contract terms. Transparency is generally maintained through contract award databases, though specific operational details may be sensitive.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Overseas Military Base Support Contracts
Automotive Fuel Supply Contracts

Risk Flags

Price Volatility Risk due to Economic Price Adjustment
Short Performance Period may indicate urgent or temporary need, requiring rapid follow-on procurement
Potential for higher administrative costs due to frequent re-competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.4 million to OKINAWA IDEMITSU K.K.. 8509787169!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 $40.4 million.

What is the period of performance?

Start: 2023-03-24. End: 2023-04-30.

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

Information regarding OKINAWA IDEMITSU K.K.'s specific track record with the Department of Defense or other government agencies is not detailed in the provided data. However, as a company operating in the petroleum industry, it is likely to have experience in fuel distribution and logistics. A comprehensive review would involve examining past performance evaluations, any prior government contracts held by the company, and their history of meeting delivery schedules and quality standards. Without this specific data, it's difficult to definitively assess their past performance in a government contracting context.

How does the awarded price compare to market rates for automotive gasoline in Okinawa during the contract period?

The provided data does not include the specific unit price or the total price per gallon, making a direct comparison to market rates challenging. The total award amount of $40.3 million is for the entire contract, which spans a short period. To assess value for money, one would need to know the quantity of gasoline procured and compare the resulting per-gallon price against prevailing market prices in Okinawa during March-April 2023. Factors such as delivery costs, taxes, and the economic price adjustment clause would also influence the final comparison. Benchmarking against other DOD fuel contracts in similar geographic regions could offer a proxy for value.

What are the primary risks associated with a fixed-price contract with economic price adjustment for fuel procurement?

The primary risk associated with a fixed-price contract with economic price adjustment (FP-EPA) for fuel procurement is price volatility. While the fixed-price component offers some cost certainty, the economic price adjustment clause allows for changes based on fluctuations in underlying commodity prices (e.g., crude oil). If fuel prices increase significantly during the contract period, the government could end up paying substantially more than initially anticipated, potentially exceeding budget allocations. Conversely, if prices decrease, the government benefits from the adjustment. Managing this risk requires careful monitoring of market trends and potentially negotiating caps on price adjustments.

What is the strategic importance of securing automotive gasoline supply in Okinawa for the Department of Defense?

Okinawa is a critical strategic location for U.S. military operations in the Indo-Pacific region, hosting a significant number of U.S. bases and personnel. Ensuring a consistent and reliable supply of automotive gasoline is essential for the day-to-day functioning of these forces, supporting everything from troop movements and logistical operations to emergency response. Disruptions in fuel supply could severely hamper mission readiness and operational capabilities. Therefore, securing this supply through contracts like this one is vital for maintaining the U.S. military's presence and effectiveness in a key geopolitical area.

How does the short performance period (37 days) impact the overall value and risk of this contract?

A short performance period of 37 days suggests that this contract likely addresses an immediate or temporary need, such as bridging a gap between longer-term contracts, covering unexpected surges in demand, or fulfilling a specific, short-term operational requirement. From a value perspective, the total award amount is spread over a very brief period, which might make the per-diem cost appear high if not contextualized by the total quantity procured. From a risk perspective, the short duration reduces the exposure to long-term market fluctuations but necessitates a swift procurement process. It also means that the government will soon need to re-compete or establish a new contract, potentially incurring repeated administrative costs and facing renewed market uncertainties.

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: $40,360,651

Exercised Options: $40,360,651

Current Obligation: $40,360,651

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline