DoD's $41.2M gasoline contract awarded to OKINAWA IDEMITSU K.K. for a 34-day period

Contract Overview

Contract Amount: $41,542,771 ($41.5M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2023-06-27

End Date: 2023-07-31

Contract Duration: 34 days

Daily Burn Rate: $1.2M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8509981278!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $41.5 million to OKINAWA IDEMITSU K.K. for work described as: 8509981278!GASOLINE, AUTOMOTIVE Key points: 1. The contract's short duration suggests a tactical need rather than a long-term strategic acquisition. 2. Economic price adjustment clause introduces potential for cost fluctuations beyond initial estimates. 3. Awarded under full and open competition, indicating a broad market search. 4. The single delivery order structure points to a specific, immediate requirement. 5. Limited performance period may reduce long-term contractor performance risks. 6. Sector positioning within Petroleum Refineries (NAICS 324110) is highly specialized.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its short duration and specific nature as a delivery order for automotive gasoline. The fixed price with economic price adjustment (EPA) introduces variability. Without comparable delivery orders for similar quantities and locations, a precise value-for-money assessment is difficult. However, the competitive award process suggests a reasonable effort to secure market pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple potential bidders were solicited. The specific number of bidders is not provided, but the designation implies a robust competitive process. This level of competition is generally expected to drive prices toward market rates and encourage efficiency from the awarded contractor.

Taxpayer Impact: Taxpayers benefit from the potential for competitive pricing, as multiple firms likely vied for this award. The open competition reduces the risk of overpayment compared to sole-source or limited competition scenarios.

Public Impact

Military operations in the Okinawa region are the primary beneficiaries, ensuring fuel availability for vehicles. The service delivered is the provision of automotive gasoline. Geographic impact is localized to Okinawa, Japan. Workforce implications are minimal, likely involving logistics and delivery personnel for the contractor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to costs exceeding initial projections.
Short contract duration may limit opportunities for long-term performance evaluation.
Reliance on a single delivery order might indicate a reactive procurement rather than planned strategic sourcing.

Positive Signals

Awarded through full and open competition, suggesting a fair and competitive pricing environment.
The contract specifies a clear product (automotive gasoline) and delivery location.
Fixed price component provides some cost certainty, despite the EPA.

Sector Analysis

This contract falls within the Petroleum Refineries sector, specifically related to the distribution and sale of refined petroleum products. The market for automotive fuels is large and globally interconnected, with significant government procurement activity to support overseas operations. This contract represents a small slice of the overall defense fuel supply chain, which relies on a complex network of suppliers and logistics.

Small Business Impact

There is no indication that this contract included small business set-asides. Given the nature of petroleum refining and distribution, it is likely that larger, established companies with specialized infrastructure and global reach are the primary participants in such procurements. Subcontracting opportunities for small businesses are not explicitly detailed but could potentially exist in ancillary services if utilized by the prime contractor.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Logistics Agency (DLA), which manages fuel procurement for the Department of Defense. Accountability measures are inherent in the contract terms, including delivery specifications and pricing adjustments. Transparency is facilitated by the contract award data being publicly available, though detailed operational oversight specifics are not provided.

Related Government Programs

Defense Fuel Support Center Contracts
Overseas Fuel Procurement
Automotive Gasoline Supply Contracts
Department of Defense Logistics Contracts

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Single Delivery Order

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.5 million to OKINAWA IDEMITSU K.K.. 8509981278!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: 2023-06-27. End: 2023-07-31.

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

Analyzing historical spending for automotive gasoline in Okinawa by the Department of Defense requires access to detailed procurement databases beyond this single award. However, general trends indicate consistent demand for fuel to support military installations and operations in the region. Spending can fluctuate based on operational tempo, vehicle fleet size, and prevailing market prices for petroleum products. The Defense Logistics Agency (DLA) is the primary entity responsible for managing these fuel contracts, often utilizing a mix of competitive bidding and long-term agreements to ensure supply chain resilience and cost-effectiveness. Without specific historical data for this location and fuel type, it's difficult to establish a precise pattern, but consistent, significant expenditure is expected.

How does the economic price adjustment (EPA) clause typically function in fuel contracts, and what are its implications for cost certainty?

An Economic Price Adjustment (EPA) clause in a fuel contract is designed to allow for modifications to the contract price based on fluctuations in specific economic indicators, such as the cost of raw materials (crude oil), transportation, or labor. For gasoline contracts, EPA clauses often tie price changes to published indices for refined petroleum products or crude oil. This mechanism aims to protect both the contractor from unforeseen cost increases and the government from paying excessively high prices if market conditions improve. However, EPA clauses introduce an element of cost uncertainty for the government, as the final price is not fixed at the time of award. The specific indices and adjustment formulas outlined in the contract are crucial for understanding the potential range of price variations and managing budget predictability.

What is the typical duration and value range for similar delivery orders of automotive gasoline for overseas military bases?

Delivery orders for automotive gasoline to overseas military bases can vary significantly in duration and value, depending on the specific needs of the installation, the quantity required, and the prevailing market conditions. Short-term delivery orders, like the one awarded to OKINAWA IDEMITSU K.K. (34 days), are often used to meet immediate or unexpected fuel demands, or as part of a larger, more complex fuel supply contract. Values can range from tens of thousands to millions of dollars, influenced by factors such as the volume of fuel ordered, the distance from supply sources, and any associated logistical costs. Longer-term contracts might span several years and involve substantial cumulative values to ensure a stable and predictable fuel supply chain for sustained military operations.

What are the potential risks associated with relying on a single delivery order for a critical commodity like gasoline?

Relying on a single delivery order for a critical commodity like gasoline, especially for overseas operations, presents several potential risks. Firstly, it may indicate a lack of robust inventory management or forecasting, potentially leading to supply disruptions if the single order is insufficient or delayed. Secondly, if this order is the sole source for a specific period, any issues with the contractor's ability to fulfill the order (e.g., logistical problems, quality control issues, or unforeseen events affecting the contractor) could directly impact military readiness. Thirdly, a single, potentially large, delivery order might not leverage the full benefits of sustained competition or long-term supply agreements, potentially leading to less favorable pricing over time compared to a more strategically planned procurement approach.

What is the track record of OKINAWA IDEMITSU K.K. as a government contractor, particularly for fuel supplies?

Information regarding the specific track record of OKINAWA IDEMITSU K.K. as a government contractor, particularly for fuel supplies, is not detailed in the provided data. To assess their track record, one would typically examine past contract awards, performance evaluations (if available), and any history of disputes or contract terminations. Companies involved in petroleum refining and distribution often have extensive experience supplying fuel to various entities, including government agencies. A thorough review would involve searching federal procurement databases (like FPDS or SAM.gov) for previous awards, payment history, and any reported performance issues or commendations to gauge their reliability and experience in fulfilling government requirements.

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: $41,542,771

Exercised Options: $41,542,771

Current Obligation: $41,542,771

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline