DoD awards $850M+ for automotive gasoline, with a single delivery order valued at $57.6M

Contract Overview

Contract Amount: $57,558,098 ($57.6M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2023-05-01

End Date: 2023-05-31

Contract Duration: 30 days

Daily Burn Rate: $1.9M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: 8507772750!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $57.6 million to OKINAWA IDEMITSU K.K. for work described as: 8507772750!GASOLINE, AUTOMOTIVE Key points: 1. The contract focuses on a critical fuel commodity, indicating consistent demand for operational readiness. 2. A single delivery order represents a small fraction of the overall contract value, suggesting potential for future taskings. 3. The fixed-price contract type offers cost certainty for the government, mitigating risk of price escalation. 4. Competition was full and open, which typically fosters better pricing and wider vendor participation. 5. The short duration of the delivery order (30 days) points to immediate operational needs rather than long-term supply agreements. 6. The awardee, OKINAWA IDEMITSU K.K., is likely a significant player in the regional fuel market.

Value Assessment

Rating: good

The total contract value of over $850 million is substantial, reflecting the scale of fuel procurement for military operations. The awarded delivery order of $57.6 million represents a specific, immediate need. Benchmarking this against similar large-scale fuel contracts is challenging without more granular data on volume and delivery terms, but the fixed-price nature suggests a degree of value control. The contract's primary purpose is to ensure the availability of essential automotive gasoline, a core operational requirement.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified vendors had the opportunity to bid. This approach is generally preferred as it maximizes the potential for competitive pricing and innovation. The specific number of bidders is not provided, but the open competition suggests a healthy market for this type of fuel supply.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it drives down prices through market forces, ensuring the government obtains the best possible value for its spending on essential fuels.

Public Impact

Military operations in the Okinawa region are directly supported by the reliable supply of automotive gasoline. The contract ensures the readiness and operational capability of Department of Defense vehicles and equipment. This spending supports the logistics and supply chain infrastructure necessary for national defense. The availability of fuel impacts personnel mobility and mission execution within the specified geographic area.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price fluctuations in the global oil market impacting future delivery orders.
Geopolitical instability in the region could disrupt fuel supply chains.
Dependence on a single awardee for a critical commodity requires robust performance monitoring.

Positive Signals

Awarded under full and open competition, suggesting competitive pricing.
Fixed-price contract type provides cost predictability.
Ensures availability of a critical operational resource for the DoD.
Awardee likely has established infrastructure for fuel distribution in the region.

Sector Analysis

The petroleum refining and distribution sector is a critical component of the global economy and essential for military operations. This contract falls within the broader energy and logistics sectors. The market for military fuel procurement is often characterized by large, long-term contracts due to the scale and consistency of demand. Comparable spending benchmarks would likely involve other major fuel supply contracts awarded by defense agencies to large energy corporations.

Small Business Impact

Information regarding small business participation, set-asides, or subcontracting plans is not detailed in the provided data. Given the scale and nature of the contract (large volume fuel supply), it is likely that the primary awardee is a large corporation, and any small business involvement would be through subcontracting, the details of which are not specified here.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA), which is responsible for providing logistical support to the U.S. Armed Forces. Mechanisms likely include performance monitoring, quality assurance checks, and financial audits. Transparency is generally maintained through contract award databases, though specific delivery order details might be less public.

Related Government Programs

Defense Logistics Agency Fuel Contracts
DoD Operational Support Contracts
Asia-Pacific Region Military Logistics
Automotive Gasoline Supply Contracts

Risk Flags

Potential supply chain disruption
Geopolitical risk in the region
Price volatility of petroleum products

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $57.6 million to OKINAWA IDEMITSU K.K.. 8507772750!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 $57.6 million.

What is the period of performance?

Start: 2023-05-01. End: 2023-05-31.

What is the historical spending pattern for automotive gasoline by the Defense Logistics Agency in the Okinawa region?

Analyzing historical spending patterns for automotive gasoline by the Defense Logistics Agency (DLA) in the Okinawa region requires access to historical contract data. Typically, DLA manages significant fuel contracts to support its global operations. Spending can fluctuate based on operational tempo, fuel price volatility, and changes in strategic posture. Without specific historical data for this contract vehicle or similar ones in Okinawa, it's difficult to provide precise figures. However, it's reasonable to assume consistent, substantial spending given the ongoing military presence and operational requirements in the region. Past awards would likely show similar large-scale contracts, potentially with different awardees or contract types over time, reflecting market dynamics and competitive bidding outcomes.

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

Determining the precise price per gallon requires dividing the delivery order value ($57,558,098) by the quantity of gasoline procured, which is not provided in the data. However, we can infer potential value by comparing it to general market indicators. Automotive gasoline prices are subject to global crude oil prices, refining costs, transportation, and local taxes/margins. For Okinawa, prices might differ from mainland Japan or the US due to logistical factors and local market conditions. If the contract was awarded under full and open competition, it suggests the price achieved was competitive within the market. A detailed analysis would involve obtaining the exact quantity and comparing the derived price per gallon against Platts or other industry benchmarks for military or commercial fuel sales in Okinawa during May 2023.

What are the key performance indicators (KPIs) used to evaluate the performance of OKINAWA IDEMITSU K.K. under this contract?

Key Performance Indicators (KPIs) for a fuel supply contract like this typically focus on reliability, quality, and timeliness. For OKINAWA IDEMITSU K.K., common KPIs would likely include on-time delivery rates to designated military facilities, adherence to fuel quality specifications (e.g., octane rating, purity standards), accuracy of delivery volumes, and responsiveness to any urgent requests or changes in demand. The contract itself would stipulate specific metrics and acceptable performance thresholds. Failure to meet these KPIs could result in penalties or impact future contract awards. The Defense Logistics Agency (DLA) would have quality assurance personnel to monitor these aspects throughout the delivery period.

What is the risk profile associated with relying on a single awardee for such a critical commodity in a potentially sensitive geographic location?

Relying on a single awardee, even if competitively selected, introduces several risks. The primary risk is supply disruption due to unforeseen events affecting the awardee, such as operational failures, financial instability, labor disputes, or natural disasters impacting their facilities or supply chain. In a sensitive geographic location like Okinawa, geopolitical tensions or regional instability could exacerbate these risks. Furthermore, a lack of ongoing competition for subsequent delivery orders under the same contract could potentially lead to less favorable pricing over time if market conditions change. Mitigation strategies often include robust contract monitoring, maintaining contingency plans, and potentially fostering relationships with alternative suppliers where feasible.

How does this contract align with the Department of Defense's broader energy security and sustainability goals?

This contract primarily addresses the immediate operational energy needs of the DoD, focusing on the reliable supply of conventional automotive gasoline. While essential for current mission readiness, its direct alignment with broader energy security and sustainability goals, such as transitioning to alternative fuels or reducing carbon emissions, is limited. DoD's long-term strategy often includes diversifying energy sources and increasing the use of renewable energy and biofuels. Contracts for traditional fossil fuels like this are necessary for existing platforms but represent the baseline requirement that needs to be balanced with investments in future energy solutions. The efficiency of fuel delivery and logistics, however, can contribute indirectly to sustainability efforts.

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: $57,558,098

Exercised Options: $57,558,098

Current Obligation: $57,558,098

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline