DOD's $48.9M Gasoline Contract with OKINAWA IDEMITSU K.K. Faces Scrutiny for Price Adjustments
Contract Overview
Contract Amount: $48,930,625 ($48.9M)
Contractor: Okinawa Idemitsu K.K.
Awarding Agency: Department of Defense
Start Date: 2023-09-25
End Date: 2023-10-31
Contract Duration: 36 days
Daily Burn Rate: $1.4M/day
Competition Type: FULL AND OPEN COMPETITION
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Other
Official Description: 8510171848!GASOLINE, AUTOMOTIVE
Plain-Language Summary
Department of Defense obligated $48.9 million to OKINAWA IDEMITSU K.K. for work described as: 8510171848!GASOLINE, AUTOMOTIVE Key points: 1. The contract awarded to OKINAWA IDEMITSU K.K. for automotive gasoline totals $48.9 million. 2. Full and open competition was utilized, suggesting a competitive bidding process. 3. The contract type, Fixed Price with Economic Price Adjustment, introduces potential price volatility. 4. The Defense Logistics Agency is the awarding agency, indicating a focus on military fuel supply.
Value Assessment
Rating: fair
The contract uses Fixed Price with Economic Price Adjustment, which can lead to costs exceeding initial estimates if fuel prices rise significantly. Benchmarking against similar fuel contracts is difficult without specific economic adjustment clauses.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, which typically drives competitive pricing. However, the economic price adjustment clause may mitigate some of the initial price discovery benefits.
Taxpayer Impact: Taxpayer funds are exposed to potential price increases due to market fluctuations in gasoline prices, as allowed by the economic price adjustment.
Public Impact
Ensures fuel availability for Department of Defense operations in Okinawa. Potential for increased costs to taxpayers if global oil prices surge. Supports a key supplier in the region for essential military resources.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic price adjustment clause introduces cost uncertainty.
- Short contract duration may limit long-term price stability.
- No small business participation noted.
Positive Signals
- Awarded through full and open competition.
- Addresses a critical logistical need for the DOD.
Sector Analysis
This contract falls under the Petroleum Refineries sector (NAICS 324110). Spending on fuel and lubricants for the Department of Defense is substantial, with prices heavily influenced by global commodity markets and geopolitical factors.
Small Business Impact
The data indicates no small business participation in this contract. This is common for large-scale fuel supply contracts that often require significant infrastructure and established supply chains typically held by larger corporations.
Oversight & Accountability
The use of full and open competition suggests a degree of oversight in the procurement process. However, the economic price adjustment clause warrants monitoring to ensure fair pricing and prevent excessive cost overruns.
Related Government Programs
- Petroleum Refineries
- Department of Defense Contracting
- Defense Logistics Agency Programs
Risk Flags
- Potential for cost overruns due to economic price adjustment.
- Lack of transparency regarding the specific price adjustment mechanism.
- Short contract duration may not reflect long-term market stability.
- No small business participation.
Tags
petroleum-refineries, department-of-defense, delivery-order, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $48.9 million to OKINAWA IDEMITSU K.K.. 8510171848!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 $48.9 million.
What is the period of performance?
Start: 2023-09-25. End: 2023-10-31.
What is the specific formula or index used for the economic price adjustment, and what is the historical volatility of that index?
The specific formula or index for the economic price adjustment is not detailed in the provided data. Understanding this mechanism is crucial for assessing the true cost risk. Historical volatility of the relevant oil or gasoline price index would provide insight into the potential range of price fluctuations and the ultimate impact on taxpayer expenditure.
How does the benchmark price for gasoline in Okinawa compare to other DOD fuel contracts or commercial rates in the region?
Without access to specific benchmark data or commercial rates for gasoline in Okinawa during the contract period, a direct comparison is not possible. Analyzing the base price against other DOD contracts or regional commercial prices would help determine if the initial fixed price was competitive and if the economic price adjustment is likely to lead to significantly higher costs.
What is the historical performance and reliability of OKINAWA IDEMITSU K.K. in fulfilling similar defense contracts?
Information on the historical performance and reliability of OKINAWA IDEMITSU K.K. for similar defense contracts is not provided. Assessing their track record, including on-time delivery, quality of product, and responsiveness to contract terms, is essential for evaluating the overall effectiveness and risk associated with this award.
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
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: $48,930,625
Exercised Options: $48,930,625
Current Obligation: $48,930,625
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SPE60521D1004
IDV Type: IDC
Timeline
Start Date: 2023-09-25
Current End Date: 2023-10-31
Potential End Date: 2023-10-31 00:00:00
Last Modified: 2024-06-13
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