DoD's $46M gasoline contract awarded to OKINAWA IDEMITSU K.K. amid full and open competition

Contract Overview

Contract Amount: $46,066,584 ($46.1M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2024-03-06

End Date: 2024-04-30

Contract Duration: 55 days

Daily Burn Rate: $837.6K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8510488686!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $46.1 million to OKINAWA IDEMITSU K.K. for work described as: 8510488686!GASOLINE, AUTOMOTIVE Key points: 1. Contract value represents a significant portion of the fiscal year's fuel needs for the specified region. 2. Full and open competition suggests a potentially competitive pricing environment. 3. Fixed Price with Economic Price Adjustment (FPEPA) contract type introduces price volatility risk. 4. Short contract duration (55 days) may indicate a need for immediate supply or a bridge contract. 5. The awardee's specialization in petroleum refining aligns with the contract's product requirement. 6. The contract falls under the broad category of petroleum product supply, crucial for logistical operations.

Value Assessment

Rating: fair

The contract value of approximately $46 million for a 55-day period suggests a high daily burn rate. Benchmarking against similar fuel supply contracts requires detailed analysis of volume, delivery locations, and market conditions at the time of award. The FPEPA clause introduces uncertainty in the final cost, making direct value comparison challenging without understanding the economic adjustments applied. The award to a single entity, OKINAWA IDEMITSU K.K., warrants scrutiny to ensure the price reflects competitive market forces.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. The number of bidders is not specified, but this procurement method generally fosters a competitive environment, which should theoretically lead to better price discovery and value for the government. The Defense Logistics Agency's adherence to full and open competition is a positive indicator for market-based pricing.

Taxpayer Impact: Full and open competition is intended to ensure that taxpayer dollars are used efficiently by promoting a marketplace where multiple vendors vie for the contract, driving down costs.

Public Impact

Military operations in the Okinawa region will benefit from a reliable supply of automotive gasoline. The contract ensures the availability of essential fuel for logistical and operational readiness. Geographic impact is concentrated in Okinawa, Japan, supporting U.S. Forces stationed there. Workforce implications are likely minimal for the government, but the contractor will utilize its existing workforce for supply and delivery.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to costs exceeding initial estimates.
Short contract duration may necessitate rapid re-competition or extensions, potentially impacting stability.
Reliance on a single supplier for a critical commodity like fuel carries inherent supply chain risk.

Positive Signals

Awarded under full and open competition, suggesting a robust bidding process.
Contractor's specialization in petroleum refining indicates relevant expertise.
Clear product specification (GASOLINE, AUTOMOTIVE) minimizes ambiguity.

Sector Analysis

This contract falls within the energy sector, specifically the supply of refined petroleum products. The market for military fuel procurement is often characterized by long-term agreements and strategic sourcing, with significant players in the global energy market. Benchmarking this contract's value would require comparing it to other fuel supply contracts in similar geographic regions and for comparable volumes, considering fluctuations in global oil prices and logistical costs.

Small Business Impact

The provided data does not indicate any small business set-aside provisions for this contract, nor does it specify subcontracting goals for small businesses. Given the nature of large-scale fuel procurement and the likely scale of the awardee, it is probable that this contract is not specifically targeted towards small businesses. Further analysis would be needed to determine if any subcontracting opportunities exist within the supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Logistics Agency (DLA), which is responsible for managing the procurement and supply of fuel for the Department of Defense. Accountability measures would include performance monitoring, adherence to delivery schedules, and quality control of the fuel supplied. Transparency is generally maintained through contract award databases, though specific performance details may be sensitive.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Automotive Gasoline Procurement
DoD Energy Supply Chain
Asia-Pacific Fuel Markets

Risk Flags

Price Volatility Risk (FPEPA)
Supply Chain Disruption Risk (Geographic Concentration)
Potential for Cost Overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $46.1 million to OKINAWA IDEMITSU K.K.. 8510488686!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 $46.1 million.

What is the period of performance?

Start: 2024-03-06. End: 2024-04-30.

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

Analyzing historical spending for automotive gasoline in the Okinawa region by the Department of Defense requires accessing past contract awards and expenditure data. Typically, such data would reveal trends in contract values, awardees, and contract types over several fiscal years. Factors influencing these patterns include changes in fuel consumption, geopolitical stability, fluctuations in global energy prices, and shifts in military presence or operational tempo. Without specific historical data, it's difficult to provide precise figures, but consistent demand for fuel in a major operational theater like Okinawa suggests recurring procurement activities, likely involving competitive bidding processes to secure supply at favorable terms.

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

Determining the precise price per unit and comparing it to market rates for automotive gasoline in Okinawa during the contract period (March 6, 2024 - April 30, 2024) is challenging without access to the specific unit price and the economic price adjustment details. Market rates would be influenced by local retail prices, wholesale fuel costs, import duties, and transportation expenses. The contract's Fixed Price with Economic Price Adjustment (FPEPA) clause means the final price could deviate from the initial estimate based on market indices. A thorough comparison would involve obtaining the contract's specific volume and total price, calculating the effective unit price, and then cross-referencing this with prevailing wholesale and retail gasoline prices in Okinawa during that timeframe, accounting for any applicable taxes or fees.

What is the track record of OKINAWA IDEMITSU K.K. in supplying fuel to the U.S. military or other government agencies?

OKINAWA IDEMITSU K.K. is a subsidiary of Idemitsu Kosan Co., Ltd., a major Japanese petroleum company. Its track record in supplying fuel to the U.S. military or other government agencies, particularly within Japan, is likely extensive given the strategic importance of fuel supply chains in the region. Companies of this scale typically have established relationships and experience fulfilling government contracts, adhering to stringent quality and delivery standards. Verifying specific past performance would involve reviewing contract databases (like SAM.gov or FPDS) for previous awards to this entity or its parent company for similar fuel supply services to the Department of Defense or other federal agencies. Past performance evaluations, if publicly available, would offer insights into their reliability and compliance.

What are the potential risks associated with the Fixed Price with Economic Price Adjustment (FPEPA) contract type for this gasoline procurement?

The primary risk associated with an FPEPA contract for gasoline procurement is price volatility. While the fixed price component provides a baseline, the economic price adjustment allows the contractor to pass on increases in fuel costs due to market fluctuations (e.g., changes in crude oil prices, refining costs, or currency exchange rates). This means the final cost to the government could be significantly higher than initially budgeted if fuel prices rise substantially during the contract period. Conversely, the government might benefit if prices fall, but the uncertainty makes budget forecasting more difficult. Managing this risk requires careful monitoring of market indices used for adjustments and potentially negotiating caps on price increases.

How does the geographic concentration of this contract (Okinawa) impact supply chain resilience and potential vulnerabilities?

The geographic concentration of this contract in Okinawa presents specific supply chain resilience considerations. Okinawa is an island, meaning fuel must be imported, potentially increasing lead times and transportation costs. Its strategic location also means it could be subject to geopolitical tensions or natural disasters (like typhoons) that could disrupt supply lines. Reliance on a single supplier, even a large one like Idemitsu, for a critical commodity in such a location necessitates robust contingency planning by the Defense Logistics Agency. This includes maintaining strategic reserves, diversifying transportation options, and having pre-established relationships with alternative suppliers or methods for emergency resupply to mitigate potential vulnerabilities.

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: $46,066,584

Exercised Options: $46,066,584

Current Obligation: $46,066,584

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline