DoD awards $36.8M for automotive gasoline, with potential for price adjustments

Contract Overview

Contract Amount: $36,738,420 ($36.7M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2024-06-10

End Date: 2024-07-31

Contract Duration: 51 days

Daily Burn Rate: $720.4K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8510685701!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $36.7 million to OKINAWA IDEMITSU K.K. for work described as: 8510685701!GASOLINE, AUTOMOTIVE Key points: 1. Contract value represents a significant portion of the fiscal year's fuel procurement. 2. Fixed-price contract with economic price adjustment introduces potential for cost fluctuations. 3. Competition was full and open, suggesting a competitive bidding process. 4. Contract duration is relatively short, indicating a need for immediate fuel supply. 5. The primary contractor, OKINAWA IDEMITSU K.K., is a key player in regional fuel supply. 6. This award falls under the broader category of petroleum product procurement for military operations.

Value Assessment

Rating: good

The contract value of $36.8 million for automotive gasoline appears reasonable given the scale of military operations in the region. Benchmarking against similar fuel supply contracts for the Department of Defense would provide a more precise value-for-money assessment. The inclusion of an economic price adjustment clause, while common for fuel contracts, introduces a variable that could increase the final cost beyond the initial award amount.

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 approach generally fosters a competitive environment, which can lead to better pricing and terms for the government. The specific number of bidders is not provided, but the 'full and open' designation suggests a robust competition.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it is expected to drive down costs through market forces, ensuring the government obtains the best possible value for its spending on essential supplies like gasoline.

Public Impact

Military personnel and operations in the Okinawa region will benefit from a reliable supply of automotive gasoline. The contract ensures the availability of fuel critical for vehicle readiness and logistical support. Geographic impact is concentrated in Okinawa, Japan, supporting U.S. military installations there. Workforce implications are likely minimal for the government, with the primary labor impact on the contractor's operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to costs exceeding initial projections.
Reliance on a single delivery order for a significant fuel requirement may pose supply chain risks if not managed proactively.
Geopolitical factors in the region could potentially impact fuel availability or pricing.

Positive Signals

Awarded under full and open competition, suggesting competitive pricing.
Contractor is an established entity in the fuel supply market.
Clear delivery period specified, allowing for focused execution.

Sector Analysis

This contract falls within the broader energy sector, specifically focusing on the procurement of refined petroleum products. The market for military fuel supply is often characterized by long-term relationships and strategic sourcing due to the critical nature of the commodity. Comparable spending benchmarks would involve analyzing other fuel supply contracts awarded by the Department of Defense to various military branches and installations globally.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the nature of large-scale fuel procurement, it is common for such contracts to be awarded to larger, established companies with the capacity and infrastructure to meet the demand. Subcontracting opportunities for small businesses are not explicitly detailed but could potentially exist in areas like transportation or logistics support, depending on the prime contractor's strategy.

Oversight & Accountability

Oversight for this contract will likely be managed by the Defense Logistics Agency (DLA), which is responsible for procuring and supplying fuel to the U.S. military. Accountability measures are embedded in the contract terms, including delivery schedules and quality specifications. Transparency is facilitated through contract award databases, though specific performance metrics and detailed oversight reports may not be publicly available.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Military Fuel Supply Contracts
Petroleum Product Procurement
Fixed Price Contracts with Economic Price Adjustment

Risk Flags

Potential for cost overruns due to Economic Price Adjustment
Supply chain vulnerability with a single large delivery order

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.7 million to OKINAWA IDEMITSU K.K.. 8510685701!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 $36.7 million.

What is the period of performance?

Start: 2024-06-10. End: 2024-07-31.

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

Analyzing historical spending for automotive gasoline by the Department of Defense in the Okinawa region requires access to detailed procurement data over several fiscal years. Such data would reveal trends in contract values, the number of awards, and the primary contractors utilized. Without specific historical data, it's difficult to ascertain if the current $36.8 million award represents an increase, decrease, or stable level of spending compared to previous periods. Factors influencing historical spending could include changes in military operational tempo, fuel price volatility, and shifts in procurement strategies. A comprehensive review would likely involve examining DLA's procurement records for fuel in that specific geographic area to identify patterns and potential anomalies.

How does the economic price adjustment (EPA) clause typically function in fuel contracts, and what are its potential implications for this specific award?

An Economic Price Adjustment (EPA) clause in a fuel contract is designed to account for fluctuations in market prices of key commodities, such as crude oil or specific refined products. It typically links the contract price to an established index or formula, allowing for upward or downward adjustments based on market movements. For this $36.8 million award, the EPA clause means the final cost paid by the Department of Defense could be higher or lower than the initial $36.8 million, depending on how fuel prices evolve between the contract award and delivery. This mechanism aims to protect both the contractor from significant losses due to unforeseen price spikes and the government from paying inflated prices if market conditions improve. The specific formula or index used in the EPA clause is critical for understanding the potential range of cost variations.

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 significant entity in the energy sector, particularly in the Asia-Pacific region. While specific details of its past performance with the U.S. military are not provided in this data, its role as a supplier suggests it has the capacity and likely has experience meeting the demanding requirements of large organizations. Companies involved in fuel supply for military operations typically undergo rigorous vetting processes. To fully assess their track record, one would examine past contract performance evaluations (e.g., CPARS), any history of contract disputes or terminations, and their overall market reputation for reliability and quality. Their presence in Okinawa suggests a strategic positioning to serve U.S. forces in that key location.

What are the potential risks associated with a single delivery order for a large quantity of automotive gasoline?

A single delivery order for a substantial amount of automotive gasoline, as implied by the $36.8 million award, carries inherent risks. The primary risk is supply chain disruption; if the contractor faces unforeseen issues such as production problems, transportation delays, or geopolitical events affecting fuel availability, the military's operational readiness could be compromised. Another risk relates to price volatility; if market prices surge significantly after the order is placed but before delivery, the economic price adjustment clause could lead to a substantially higher final cost. Furthermore, relying on a single order might limit the government's flexibility to adapt to changing demand or to capitalize on more favorable market conditions that might arise if multiple, smaller orders were placed over time.

How does the 'Petroleum Refineries' NAICS code (324110) relate to the actual product being procured (automotive gasoline)?

The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' accurately categorizes the industry involved in the production of automotive gasoline. Petroleum refineries are facilities where crude oil is processed and transformed into various refined products, including gasoline, diesel fuel, jet fuel, and other petrochemicals. Therefore, a contract for automotive gasoline, even if it's a delivery order rather than a direct refinery output purchase, is fundamentally linked to the output and capabilities of petroleum refineries. The NAICS code signifies the industrial sector responsible for manufacturing the product, ensuring that the procurement aligns with the capabilities of companies operating within that specific sector.

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: $36,738,420

Exercised Options: $36,738,420

Current Obligation: $36,738,420

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline