DoD's $43M gasoline contract awarded to OKINAWA IDEMITSU K.K. for 63 days

Contract Overview

Contract Amount: $43,014,345 ($43.0M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2024-03-29

End Date: 2024-05-31

Contract Duration: 63 days

Daily Burn Rate: $682.8K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8510541976!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $43.0 million to OKINAWA IDEMITSU K.K. for work described as: 8510541976!GASOLINE, AUTOMOTIVE Key points: 1. Contract value appears reasonable given the short duration and market for fuel. 2. Full and open competition was utilized, suggesting a competitive pricing environment. 3. Risk indicators are low due to the commodity nature of the product and short term. 4. Performance context is limited by the short delivery period. 5. Sector positioning is within the Defense Logistics Agency's broad procurement of essential fuels.

Value Assessment

Rating: good

The contract value of $43 million for a 63-day period suggests a daily burn rate of approximately $682,767. This is a significant amount, but for bulk fuel procurement, especially in a potentially high-demand operational area, it may be within expected ranges. Without specific volume data or comparable recent contracts for this exact location and fuel type, a precise benchmark is difficult. However, the fixed-price with economic price adjustment structure indicates an attempt to manage price volatility for a commodity.

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 bids. This method generally fosters a competitive environment, which should theoretically lead to more favorable pricing for the government. The specific number of bidders is not provided, but the use of this procurement method is a positive sign for price discovery and value.

Taxpayer Impact: Taxpayers benefit from the potential for competitive pricing achieved through a broad solicitation, ensuring that the government is not overpaying for essential fuel supplies.

Public Impact

Military operations in Okinawa are supported by the reliable supply of automotive gasoline. The contract ensures the availability of a critical fuel resource for defense logistics. Geographic impact is concentrated on the U.S. military installations and operations in Okinawa. Workforce implications are minimal, primarily related to the logistics and delivery of the fuel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Positive Signals

Awarded under full and open competition, indicating a robust bidding process.
Fixed Price with Economic Price Adjustment (FPEPA) contract type helps manage commodity price fluctuations.
Short duration (63 days) limits long-term exposure to market volatility.
Awarded by the Defense Logistics Agency, a primary agency for procuring common goods and services for the military.

Sector Analysis

The petroleum refineries sector is a critical component of the energy industry, providing essential fuels for transportation, industry, and defense. The Defense Logistics Agency (DLA) is a major consumer of petroleum products, procuring vast quantities to support global military operations. This contract for automotive gasoline in Okinawa falls within the DLA's mission to provide logistics support to the armed forces. Market prices for gasoline are subject to global oil prices, refining capacity, and regional demand, making economic price adjustment clauses common in such contracts.

Small Business Impact

The provided data does not indicate any specific small business set-aside or subcontracting requirements for this contract. Given the nature of bulk fuel procurement and the likely scale of the prime contractor, the direct impact on small businesses may be limited unless they are involved as subcontractors in the supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Logistics Agency's contracting officer and quality assurance representatives. The fixed-price nature with economic price adjustment provides some cost control, while the short duration limits the period for potential performance issues. Transparency is generally maintained through contract award databases, though specific performance metrics are not detailed here.

Related Government Programs

Defense Logistics Agency Fuel Procurement
DoD Automotive Gasoline Contracts
Asia-Pacific Defense Logistics
Petroleum Product Supply Contracts

Risk Flags

Potential for price volatility due to commodity nature of gasoline.
Supply chain risks in a geographically distant location.
Dependence on economic price adjustment index accuracy.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.0 million to OKINAWA IDEMITSU K.K.. 8510541976!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 $43.0 million.

What is the period of performance?

Start: 2024-03-29. End: 2024-05-31.

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 contract databases beyond the scope of this single award. However, the Defense Logistics Agency (DLA) is the primary entity responsible for procuring fuel for DoD operations globally. Past awards would likely show a pattern of recurring contracts for fuel supplies in strategic locations like Okinawa, with values fluctuating based on market prices, demand, and contract duration. The use of full and open competition suggests a consistent approach to sourcing these essential commodities. Without specific historical data, it's difficult to pinpoint exact trends, but the recurring need for fuel in such a significant military presence implies consistent, substantial spending over time.

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

Determining the exact price per unit and comparing it to market rates is challenging without knowing the specific volume of gasoline procured under this $43 million contract. The contract type, Fixed Price with Economic Price Adjustment (FPEPA), means the base price is subject to change based on an index, making a direct comparison difficult without the adjustment details. Market rates for automotive gasoline in Okinawa can fluctuate based on global oil prices, local taxes, refining costs, and distribution expenses. To perform a true benchmark, one would need the total gallons purchased and the applicable economic price adjustment index for the period of performance (March 29, 2024, to May 31, 2024). Generally, FPEPA contracts aim to provide a fair price to both parties by reflecting market realities.

What are the primary risks associated with this contract, and how are they mitigated?

The primary risks associated with this contract are related to fuel price volatility and supply chain disruptions. Given that it's a commodity, global oil market fluctuations can significantly impact costs, even with an economic price adjustment clause. Supply chain risks include potential disruptions in refining, shipping, or local distribution networks in Okinawa, which could affect delivery schedules. Mitigation strategies include the FPEPA clause, which allows for price adjustments based on established indices, providing a degree of cost predictability. The short contract duration (63 days) also limits the government's exposure to prolonged market volatility or sustained supply issues. Furthermore, the Defense Logistics Agency's experience in managing global fuel contracts and its established relationships with suppliers help mitigate risks.

What is the track record of OKINAWA IDEMITSU K.K. in fulfilling similar government contracts?

Information regarding the specific track record of OKINAWA IDEMITSU K.K. in fulfilling similar government contracts is not detailed in the provided data. However, IDEMITSU KOSAN CO., LTD. (the parent company) is a major Japanese petroleum company with extensive experience in refining, marketing, and distributing petroleum products. Government contracts for fuel are typically awarded to established companies with proven logistical capabilities and financial stability. To assess their specific track record with the U.S. government, one would need to consult federal procurement databases (like SAM.gov or FPDS) for past awards and performance reviews. Given the award by the Department of Defense, it suggests they met the necessary qualifications and demonstrated capability.

How does the competition level for this contract (full and open) typically influence pricing and value for the taxpayer?

A full and open competition process generally leads to better pricing and value for taxpayers. By allowing all responsible sources to bid, the government maximizes the pool of potential offerors, increasing the likelihood of receiving competitive bids. This heightened competition pressures bidders to offer their best prices and terms to win the contract. Consequently, taxpayers benefit from potentially lower costs compared to sole-source or limited competition scenarios where the government may have less leverage. The process also enhances transparency and fairness in government spending. For a commodity like gasoline, where differentiation is minimal, competitive bidding is particularly effective in driving down costs.

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: $43,014,345

Exercised Options: $43,014,345

Current Obligation: $43,014,345

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline