Department of Defense awards $41.5M for automotive gasoline, with a significant portion for fuel refinement

Contract Overview

Contract Amount: $41,451,980 ($41.5M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2023-03-27

End Date: 2023-04-30

Contract Duration: 34 days

Daily Burn Rate: $1.2M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: 8509792667!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $41.5 million to OKINAWA IDEMITSU K.K. for work described as: 8509792667!GASOLINE, AUTOMOTIVE Key points: 1. Contract value represents a substantial investment in essential fuel supplies. 2. Competition dynamics suggest a potentially competitive market for fuel procurement. 3. Risk indicators are low given the nature of the commodity and established supplier. 4. Performance context is tied to ensuring operational readiness through fuel availability. 5. Sector positioning places this within the critical energy and logistics support for defense operations.

Value Assessment

Rating: good

The contract value of $41.5 million for automotive gasoline appears reasonable given the scale of defense operations. Benchmarking against similar fuel procurements by the Defense Logistics Agency would provide a more precise value-for-money assessment. However, the firm fixed-price structure generally offers cost certainty.

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 had the opportunity to submit proposals. This level of competition is ideal for price discovery and ensuring the government receives competitive pricing. The specific number of bidders is not provided, but the category suggests a robust bidding process.

Taxpayer Impact: Full and open competition generally leads to better pricing for taxpayers by fostering a competitive environment among suppliers.

Public Impact

Military personnel and operations across various bases will benefit from reliable fuel supply. Services delivered include the provision of automotive gasoline essential for vehicle and equipment operation. Geographic impact is likely concentrated around bases and operational areas served by the Defense Logistics Agency. Workforce implications may include jobs in fuel transportation, storage, and distribution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Positive Signals

Awarded under full and open competition, suggesting a healthy market.
Firm fixed-price contract type provides cost predictability.
Defense Logistics Agency is a key agency for managing such critical supplies.

Sector Analysis

This contract falls within the energy sector, specifically focusing on the procurement of refined petroleum products. The market for automotive gasoline is large and generally stable, though subject to global commodity price fluctuations. This contract represents a portion of the Defense Logistics Agency's broader efforts to ensure energy security and operational readiness for the military.

Small Business Impact

Information regarding small business set-asides or subcontracting is not available for this specific award. Given the nature of large-scale fuel procurement, prime contracts are often awarded to larger entities with the capacity for such operations. Further analysis would be needed to determine if small businesses are involved in the supply chain.

Oversight & Accountability

The Defense Logistics Agency, as the awarding agency, is responsible for oversight of this contract. Standard procurement regulations and contract management processes would apply. Transparency is generally maintained through contract databases, though specific performance monitoring details are not publicly detailed.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Military Vehicle and Equipment Support
Petroleum Product Supply Chain Management

Risk Flags

Potential for price volatility in commodity markets.
Dependence on global supply chains for refined petroleum products.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.5 million to OKINAWA IDEMITSU K.K.. 8509792667!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 $41.5 million.

What is the period of performance?

Start: 2023-03-27. End: 2023-04-30.

What is the historical spending trend for automotive gasoline by the Department of Defense?

Analyzing historical spending on automotive gasoline by the Department of Defense requires access to comprehensive contract databases over several fiscal years. While this specific award is for approximately $41.5 million, understanding the broader trend involves aggregating data from numerous similar contracts. Factors influencing historical spending include operational tempo, fuel price volatility, strategic reserve needs, and shifts in vehicle fleet composition. For instance, periods of increased global conflict or heightened military exercises often correlate with increased demand and, consequently, higher spending. Conversely, fleet modernization towards more fuel-efficient or alternative-fuel vehicles could lead to a gradual decrease in spending on traditional gasoline over the long term. Without specific historical data aggregated for this category, it's challenging to pinpoint precise trends, but it's reasonable to assume consistent, significant spending due to the essential nature of fuel for military operations.

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

To compare the awarded price to market rates, one would need to access historical average gasoline prices (e.g., from the Energy Information Administration or other reputable sources) for the relevant period (March-April 2023) and geographic region relevant to the delivery. The contract value of $41.5 million is for a specific quantity of gasoline, and the unit price is not explicitly stated. If the unit price derived from this contract is significantly higher or lower than the prevailing market rate, it could indicate either exceptional value or potential overpricing. Factors such as bulk purchasing discounts, transportation costs, and specific fuel quality requirements can cause deviations from standard retail or wholesale market prices. A detailed analysis would involve calculating the implied per-gallon cost from the contract and comparing it against benchmark indices for that period.

What are the primary risks associated with this contract and how are they mitigated?

The primary risks associated with this contract revolve around fuel price volatility, supply chain disruptions, and quality control. Fuel prices can fluctuate significantly due to geopolitical events, market speculation, and supply/demand imbalances, potentially impacting the government's cost if not adequately managed through contract terms. Supply chain disruptions, such as transportation issues or refinery problems, could affect timely delivery, impacting military readiness. Quality control is crucial to ensure the gasoline meets stringent military specifications. Mitigation strategies likely include the firm fixed-price contract type, which shifts some price risk to the contractor, robust quality assurance clauses within the contract, and the Defense Logistics Agency's established procedures for vetting suppliers and managing logistics to ensure reliable delivery and adherence to specifications.

What is the track record of OKINAWA IDEMITSU K.K. in fulfilling government contracts, particularly for fuel?

Assessing the track record of OKINAWA IDEMITSU K.K. requires examining their past performance on federal contracts, specifically those involving fuel supply. Information on contractor performance is often available through sources like the Federal Awardee Performance and Integrity Information System (FAPIIS). A review of FAPIIS and other contract databases would reveal any past performance issues, such as delivery delays, quality problems, or disputes. Given that they are a supplier for the Defense Logistics Agency, it suggests a level of established capability and potentially a history of successful contract performance. However, a thorough assessment would involve looking for patterns of positive or negative performance indicators across multiple contracts to gauge their reliability and competence in meeting government requirements.

How does this contract fit into the broader strategy of the Defense Logistics Agency for energy security?

This contract is integral to the Defense Logistics Agency's (DLA) broader strategy for ensuring energy security and operational readiness for the U.S. military. The DLA is responsible for providing the armed forces with the logistical support necessary to maintain their global presence and respond to threats. Secure and reliable access to fuel, such as automotive gasoline, is a fundamental component of this mission. By procuring fuel through competitive contracts like this one, the DLA aims to ensure a steady supply at predictable costs, thereby supporting the day-to-day operations of various military branches and enabling rapid deployment capabilities. This contract contributes to maintaining strategic fuel reserves and supporting contingency operations, underscoring its importance in the DLA's energy security framework.

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: FIRM FIXED PRICE (J)

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: $45,315,010

Exercised Options: $41,451,980

Current Obligation: $41,451,980

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline