DoD's $44.1M Gasoline Contract with OKINAWA IDEMITSU K.K. Faces Scrutiny Over Pricing and Competition
Contract Overview
Contract Amount: $44,154,027 ($44.2M)
Contractor: Okinawa Idemitsu K.K.
Awarding Agency: Department of Defense
Start Date: 2024-03-07
End Date: 2024-04-30
Contract Duration: 54 days
Daily Burn Rate: $817.7K/day
Competition Type: FULL AND OPEN COMPETITION
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Energy
Official Description: 8510494532!GASOLINE, AUTOMOTIVE
Plain-Language Summary
Department of Defense obligated $44.2 million to OKINAWA IDEMITSU K.K. for work described as: 8510494532!GASOLINE, AUTOMOTIVE Key points: 1. The contract awarded to OKINAWA IDEMITSU K.K. for automotive gasoline represents a significant expenditure. 2. Full and open competition was utilized, but the effectiveness of price discovery needs further examination. 3. Potential risks include price volatility due to economic price adjustment clauses. 4. The sector is critical for military operations, making reliable fuel supply a key concern.
Value Assessment
Rating: fair
The contract's fixed price with economic price adjustment introduces uncertainty in the final cost. Benchmarking against similar fuel contracts is necessary to assess if the base price and adjustment mechanisms are competitive.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, suggesting a broad search for suppliers. However, the use of economic price adjustment may limit the effectiveness of price discovery by allowing for cost fluctuations.
Taxpayer Impact: Taxpayer funds are exposed to potential price increases through the economic price adjustment clause, impacting the overall value for money.
Public Impact
Ensures fuel availability for Department of Defense operations in Okinawa. Potential for fluctuating costs impacts budget predictability for the agency. Supports the petroleum refining industry through government procurement.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic price adjustment clause introduces cost uncertainty.
- Limited duration of the contract may not reflect long-term needs.
- No small business participation noted.
Positive Signals
- Awarded under full and open competition.
- Critical supply for defense operations.
Sector Analysis
This contract falls within the energy sector, specifically the procurement of refined petroleum products. Defense Logistics Agency benchmarks for fuel procurement are essential to evaluate the competitiveness of this award.
Small Business Impact
The data indicates no small business participation in this contract. Further analysis is needed to determine if opportunities were missed or if the nature of the procurement inherently excluded small businesses.
Oversight & Accountability
Oversight is crucial to monitor the economic price adjustment and ensure the government is not overpaying for gasoline. The Defense Logistics Agency should actively track market fluctuations against the contract's terms.
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 small business participation.
- Limited contract duration may lead to frequent re-procurement.
- Geographic concentration of supplier may pose supply chain risk.
Tags
petroleum-refineries, department-of-defense, delivery-order, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $44.2 million to OKINAWA IDEMITSU K.K.. 8510494532!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 $44.2 million.
What is the period of performance?
Start: 2024-03-07. End: 2024-04-30.
What is the benchmark price for automotive gasoline in the Okinawa region during the contract period, and how does the fixed price component compare?
Determining the benchmark price requires accessing regional fuel market data for the specified period. Comparing the fixed price component of this contract against that benchmark would reveal if the initial pricing was competitive. The economic price adjustment clause then dictates how subsequent price changes are managed, necessitating a separate analysis of its impact on the total cost.
How effectively did the full and open competition process mitigate risks associated with the economic price adjustment clause?
While full and open competition aims to secure the best value, the economic price adjustment clause introduces inherent risk regardless of the competition method. The effectiveness lies in how well the solicitation defined the adjustment parameters and how bidders responded. A thorough review of bid submissions and the final contract terms is needed to assess if the competition adequately addressed potential price volatility.
What is the projected taxpayer impact considering the potential for price increases due to the economic price adjustment?
The taxpayer impact is directly tied to the volatility of gasoline prices and the specific formula used in the economic price adjustment. If fuel prices rise significantly during the contract period, the total expenditure could exceed initial projections, placing a greater burden on taxpayers. Conversely, stable or falling prices would minimize this impact.
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: $44,154,027
Exercised Options: $44,154,027
Current Obligation: $44,154,027
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SPE60521D1004
IDV Type: IDC
Timeline
Start Date: 2024-03-07
Current End Date: 2024-04-30
Potential End Date: 2024-04-30 00:00:00
Last Modified: 2024-06-13
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