Department of Defense awards $36.4M for automotive gasoline, with a significant portion allocated to Okinawa Idemitsu K.K

Contract Overview

Contract Amount: $36,460,184 ($36.5M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2023-12-24

End Date: 2024-01-31

Contract Duration: 38 days

Daily Burn Rate: $959.5K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8510353431!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $36.5 million to OKINAWA IDEMITSU K.K. for work described as: 8510353431!GASOLINE, AUTOMOTIVE Key points: 1. The contract value of $36.4 million represents a substantial investment in fuel supply for military operations. 2. The fixed-price contract with economic price adjustment suggests a mechanism to manage fluctuating fuel costs. 3. The relatively short duration of 38 days indicates a specific, short-term need for these fuel supplies. 4. The primary contractor, Okinawa Idemitsu K.K., is a key player in the regional fuel market. 5. The contract's focus on automotive gasoline highlights its direct impact on vehicle readiness and operational mobility. 6. The absence of small business set-asides means opportunities for smaller enterprises in this specific award are limited.

Value Assessment

Rating: good

Benchmarking the value of this contract requires specific data on automotive gasoline prices in the Okinawa region during the contract period. However, the award amount of $36.4 million for a 38-day delivery period suggests a significant volume of fuel. The fixed-price with economic price adjustment structure is common for commodities like fuel, aiming to balance cost certainty for the government with protection against market volatility for the contractor. Without direct comparisons to similar DoD fuel contracts in the region or detailed cost breakdowns, a precise value-for-money assessment is challenging, but the competitive award process (detailed below) implies a degree of price efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. This approach generally fosters a competitive environment, encouraging multiple bidders to present their best pricing and terms. The specific number of bidders is not provided, but the full and open nature suggests a robust competition that likely drove down costs compared to a sole-source or limited competition scenario.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it maximizes the potential for obtaining the best possible price for goods and services, ensuring that government funds are used efficiently.

Public Impact

Military personnel and operations in the Okinawa region benefit from the reliable supply of automotive gasoline. The contract ensures the operational readiness of vehicles essential for defense logistics and support functions. The geographic impact is concentrated in Okinawa, Japan, supporting U.S. military installations there. The contract supports the workforce involved in fuel distribution and handling within the specified region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clause if market prices surge significantly.
Dependence on a single primary contractor for a critical fuel supply could pose a risk if unforeseen issues arise with Okinawa Idemitsu K.K.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing was achieved.
The fixed-price component provides some cost certainty for the government.
The contract supports essential operational needs for the Department of Defense in a key strategic location.

Sector Analysis

The market for automotive gasoline is a mature global commodity market. This contract falls within the broader energy sector, specifically focusing on refined petroleum products. The Department of Defense is a significant consumer of fuel globally, and contracts like this are crucial for maintaining operational readiness. Comparable spending benchmarks would involve analyzing other DoD fuel procurements in similar geographic regions or for similar quantities, as well as general market prices for automotive gasoline.

Small Business Impact

The data indicates that small business participation was not a specific set-aside for this particular award, as 'ss' is false and 'sb' is false. This suggests that the primary contract was not specifically targeted towards small businesses. However, the prime contractor, Okinawa Idemitsu K.K., may engage small businesses for subcontracting opportunities related to fuel delivery, storage, or related services, though this is not explicitly detailed in the provided data. The impact on the small business ecosystem would depend on whether subcontracting opportunities are pursued.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA), which is responsible for procuring and distributing fuel for the DoD. Accountability measures would include performance monitoring against delivery schedules and quality specifications. Transparency is generally maintained through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency Fuel Procurement
DoD Operational Support Contracts
Asia-Pacific Region Military Logistics

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Single Primary Contractor Focus

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.5 million to OKINAWA IDEMITSU K.K.. 8510353431!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 $36.5 million.

What is the period of performance?

Start: 2023-12-24. End: 2024-01-31.

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

Analyzing historical spending requires access to comprehensive contract databases over multiple fiscal years. Without that specific data, it's difficult to provide precise figures. However, the Department of Defense consistently procures significant volumes of fuel globally to support its operations. In regions with a substantial military presence like Okinawa, consistent and substantial spending on fuel, including automotive gasoline, is expected. Factors influencing historical spending include troop levels, operational tempo, vehicle fleet size, and prevailing fuel market prices. The current award of $36.4 million for a short duration suggests a significant, potentially recurring, need that has likely been met through similar, though perhaps varying in value and duration, contracts in the past.

How does the pricing structure (Fixed Price with Economic Price Adjustment) compare to other DoD fuel contracts?

The Fixed Price with Economic Price Adjustment (FPEPA) structure is a common and often necessary pricing model for commodity contracts, especially those involving volatile global markets like petroleum. For the DoD, FPEPA is frequently used for fuel procurements to balance the need for cost predictability with the reality of market fluctuations. Compared to purely Fixed Price (FP) contracts, FPEPA offers more flexibility to the contractor, which can lead to more competitive initial bids, but introduces the risk of price increases for the government. Conversely, it's less risky for the government than Cost Plus contracts. The specific economic price adjustment formula used in this contract (tied to an index or benchmark) would determine the extent of potential price changes and how it compares to other similar contracts.

What is the track record of Okinawa Idemitsu K.K. as a DoD contractor, particularly for fuel supply?

Okinawa Idemitsu K.K. is a significant entity in the fuel distribution sector in Okinawa. As a subsidiary of Idemitsu Kosan, a major Japanese oil company, it possesses substantial infrastructure and experience. While specific details of its past performance on DoD contracts are not provided in the abbreviated data, companies of this scale and with this type of product offering are frequently awarded contracts to supply fuel to military installations in their operating regions. Their track record would likely be assessed by the Defense Logistics Agency (DLA) based on past delivery performance, quality compliance, and adherence to contract terms. Generally, the DoD vets potential contractors, and recurring awards suggest a satisfactory performance history.

What are the potential risks associated with a short-duration contract for a critical commodity like gasoline?

Short-duration contracts, like this 38-day award, for critical commodities such as automotive gasoline can present specific risks. One primary risk is the potential for supply chain disruptions if the contract is not renewed or if the awarded contractor faces unforeseen operational issues. This could lead to immediate shortages impacting military readiness. Another risk is the potential for less competitive pricing; contractors might inflate prices for short-term needs, knowing the government will likely need to procure again soon. Furthermore, managing multiple short-term contracts can increase administrative burden and reduce opportunities for long-term strategic sourcing and relationship building with suppliers, potentially leading to less favorable overall terms over time.

How does the 'Petroleum Refineries' NAICS code (324110) inform the analysis of this contract?

The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' indicates the primary business activity of the entities involved in the production of the goods or services procured. In this case, it suggests that the automotive gasoline supplied under this contract originates from or is closely associated with refinery operations. This code helps categorize the contract within the industrial landscape, signifying that the procurement is directly linked to the output of the refining sector. It aids in understanding the supply chain, potential market dynamics, and the types of companies that would typically bid on such a contract, focusing on those involved in the manufacturing and primary distribution of refined petroleum products.

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: $36,460,184

Exercised Options: $36,460,184

Current Obligation: $36,460,184

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline