Department of Defense awards $33.3M for automotive gasoline, with a significant portion allocated to a single delivery order

Contract Overview

Contract Amount: $33,295,378 ($33.3M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2024-06-26

End Date: 2024-09-30

Contract Duration: 96 days

Daily Burn Rate: $346.8K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: 8510719158!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $33.3 million to OKINAWA IDEMITSU K.K. for work described as: 8510719158!GASOLINE, AUTOMOTIVE Key points: 1. The contract's value is driven by a large delivery order, indicating a substantial immediate need for automotive gasoline. 2. Competition dynamics appear robust, with the contract awarded under 'FULL AND OPEN COMPETITION'. 3. The fixed-price structure with economic price adjustment suggests potential for cost fluctuations based on market conditions. 4. Performance is tied to a relatively short duration, implying a focus on immediate supply needs. 5. The contract falls within the Petroleum Refineries sector, a critical component of the energy supply chain. 6. The absence of small business set-aside flags suggests the primary contractor is likely a larger entity.

Value Assessment

Rating: good

The total contract value of $33.3 million is primarily represented by a single delivery order of $34.7 million, which is unusual and warrants further investigation into the allocation of funds. Benchmarking against similar contracts for automotive gasoline is challenging without more granular data on volume and specific product grades. However, the fixed-price with economic price adjustment (FPEPA) structure is common for fuel contracts to account for market volatility.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple bidders were likely considered. This level of competition is generally favorable for price discovery and ensuring the government receives competitive pricing. The specific number of bidders is not provided, but the designation implies a broad solicitation.

Taxpayer Impact: Full and open competition generally leads to better value for taxpayers by fostering a competitive environment that drives down prices and encourages innovation among potential suppliers.

Public Impact

Military personnel and operations in Okinawa, Japan, will benefit from a reliable supply of automotive gasoline. The contract ensures the availability of essential fuel for transportation and logistical support for Department of Defense activities. The geographic impact is localized to Okinawa, Japan, where the Defense Logistics Agency operates. Workforce implications are primarily related to the logistics and distribution of fuel, potentially involving local labor for handling and transportation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The significant value of a single delivery order ($34.7M) compared to the total contract value ($33.3M) suggests a potential data anomaly or a highly concentrated procurement event that needs clarification.
The fixed-price with economic price adjustment (FPEPA) contract type introduces price volatility risk, which could lead to higher-than-anticipated costs if fuel prices surge significantly during the contract period.

Positive Signals

Awarding under full and open competition indicates a robust market and a competitive bidding process, likely resulting in favorable pricing.
The contract's clear objective of supplying automotive gasoline to a specific geographic location (Okinawa) suggests a well-defined requirement and focused procurement.
The relatively short performance period (96 days for the delivery order) indicates a focus on meeting immediate operational needs efficiently.

Sector Analysis

This contract falls within the energy sector, specifically focusing on the procurement of refined petroleum products. The market for automotive gasoline is large and highly competitive globally, with significant price fluctuations driven by geopolitical events, supply and demand, and refining capacity. The Defense Logistics Agency (DLA) is a major procurer of fuel for military operations worldwide, and contracts like this are essential for maintaining readiness and operational capabilities. Comparable spending benchmarks for bulk fuel procurement can vary widely based on volume, grade, location, and prevailing market conditions.

Small Business Impact

The contract does not indicate any small business set-aside provisions (ss: false, sb: false). This suggests that the procurement was not specifically targeted towards small businesses, and the primary awardee is likely a larger entity capable of meeting the substantial fuel supply requirements. There is no explicit information on subcontracting plans, but given the nature of fuel distribution, it is possible that smaller, specialized logistics or transportation firms could be involved as subcontractors, though this is not a requirement of the contract.

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 Department of Defense. Accountability measures are embedded in the contract terms, including delivery schedules, quality specifications, and pricing adjustments. Transparency is generally maintained through contract award databases and reporting requirements. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Department of Defense Energy Supply
Automotive Gasoline Contracts
Petroleum Product Procurement

Risk Flags

Potential data anomaly in contract/delivery order value reporting.
Price volatility risk due to FPEPA clause.
Concentration of risk in a single large delivery order.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.3 million to OKINAWA IDEMITSU K.K.. 8510719158!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 $33.3 million.

What is the period of performance?

Start: 2024-06-26. End: 2024-09-30.

What is the primary reason for the discrepancy between the total contract value ($33.3M) and the value of the single delivery order ($34.7M)?

The discrepancy where the single delivery order value ($34.7M) exceeds the total contract value ($33.3M) is highly unusual and suggests a potential data entry error or a misunderstanding of how the values are reported. Typically, a delivery order's value would be a component of the overall contract value. It's possible that the 'total contract value' represents an initial estimate or ceiling, and the 'awarded value' for the delivery order reflects the actual executed amount for that specific order, which might be higher due to market price adjustments or additional quantities. Alternatively, there could be other, smaller delivery orders not explicitly detailed here that sum up to the total contract value, with this one being the largest. Further clarification from the source data or contracting agency would be needed to definitively resolve this anomaly.

How does the 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) clause impact the final cost of the automotive gasoline?

The FPEPA clause in this contract means that the base price of the automotive gasoline is fixed, but it can be adjusted upwards or downwards based on a pre-defined economic index or formula. This is commonly used for commodities like fuel, where market prices can fluctuate significantly. The 'economic price adjustment' mechanism is designed to protect both the government from excessive price increases and the contractor from losses due to unforeseen market volatility. The specific formula or index used for adjustment would be detailed in the contract's terms and conditions. This clause introduces an element of uncertainty regarding the final expenditure, as the actual cost will depend on the prevailing market prices of gasoline during the contract period.

What are the potential risks associated with awarding a significant portion of the contract value through a single delivery order?

Awarding a substantial portion of the contract value through a single, large delivery order can concentrate risk. If this delivery order represents a critical and immediate need, any disruption in supply from the contractor (e.g., production issues, transportation problems, quality control failures) could have a significant impact on the Department of Defense's operations in Okinawa. It also implies a high reliance on a single source for a large volume of fuel at a specific time. While the contract was competed, the execution through one large order might limit flexibility if needs change or if alternative suppliers become more cost-effective mid-contract. The government is largely committed to this specific order's execution.

What is the typical performance period for fuel delivery contracts of this nature, and how does the 96-day duration compare?

Fuel delivery contracts can vary widely in their performance periods, ranging from short-term, immediate needs to longer-term supply agreements. A 96-day duration for a delivery order, as indicated here, is relatively short. This suggests that the contract is intended to fulfill a specific, time-bound requirement for automotive gasoline, likely related to operational tempo or inventory replenishment rather than a continuous, long-term supply. Shorter durations can be advantageous for the government as they allow for more frequent re-competition and adaptation to changing market conditions or requirements. However, for sustained operations, multiple short-term contracts or a longer-term contract with phased deliveries would be necessary.

Given the 'FULL AND OPEN COMPETITION' award, what does this imply about the contractor's track record and capabilities?

An award under 'FULL AND OPEN COMPETITION' generally implies that the contractor, OKINAWA IDEMITSU K.K., demonstrated the capability to meet the government's requirements and offered a competitive price. For a contract involving the supply of automotive gasoline, this suggests the contractor has the necessary infrastructure for fuel sourcing, storage, and delivery, particularly in the specified geographic region (Okinawa). While the data doesn't provide specific details on past performance ratings, winning a competed contract indicates they were deemed technically acceptable and offered the best value among eligible bidders. Their ability to secure this contract suggests a solid track record in the fuel supply industry and a capacity to handle large-volume procurements.

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: $33,295,378

Exercised Options: $33,295,378

Current Obligation: $33,295,378

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline