Department of Defense awards $39.1M for automotive gasoline, with delivery expected within 35 days

Contract Overview

Contract Amount: $39,112,731 ($39.1M)

Contractor: Okinawa Idemitsu K.K.

Awarding Agency: Department of Defense

Start Date: 2024-09-26

End Date: 2024-10-31

Contract Duration: 35 days

Daily Burn Rate: $1.1M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8510924030!GASOLINE, AUTOMOTIVE

Plain-Language Summary

Department of Defense obligated $39.1 million to OKINAWA IDEMITSU K.K. for work described as: 8510924030!GASOLINE, AUTOMOTIVE Key points: 1. Contract awarded through full and open competition, suggesting a competitive market for fuel supply. 2. Fixed-price contract with economic price adjustment indicates potential for price fluctuations based on market conditions. 3. Short performance period of 35 days suggests a need for immediate or short-term fuel supply. 4. Awarded by the Defense Logistics Agency, a key entity for procuring goods and services for the military. 5. The contract value is significant, reflecting the substantial logistical needs of the Department of Defense. 6. No small business set-aside was utilized, indicating the primary award went to a larger entity.

Value Assessment

Rating: good

The contract value of $39.1 million for automotive gasoline over a 35-day period appears reasonable given the scale of military operations. Benchmarking against similar fuel contracts for the Department of Defense would provide a more precise value-for-money assessment. The fixed-price with economic price adjustment structure allows for market volatility, which is common in the energy sector. The specific unit pricing is not detailed here, but the overall award suggests a competitive bid process likely yielded a fair market price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit bids. This approach typically fosters a robust bidding environment, encouraging multiple vendors to offer their best pricing and terms. The specific number of bidders is not provided, but the designation implies that the Defense Logistics Agency sought the most advantageous offer through a broad solicitation, which should translate to competitive pricing for the government.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs through market forces, ensuring the government receives competitive pricing and a wider range of potential suppliers.

Public Impact

Military personnel and operations in the Okinawa region will benefit from a reliable supply of automotive gasoline. The primary service delivered is the provision of essential fuel for vehicles and equipment. The geographic impact is localized to Okinawa, Japan, where the fuel is to be delivered. Workforce implications are likely minimal for this specific contract, primarily involving logistics and delivery personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to the economic price adjustment clause in a volatile energy market.
Dependence on a single supplier for a critical resource during the contract period.
Geopolitical factors affecting fuel supply chains could impact delivery or cost.

Positive Signals

Awarded through full and open competition, indicating a competitive procurement process.
The Defense Logistics Agency has a strong track record in managing complex supply chains.
The fixed-price element provides some cost certainty, despite the economic adjustment.

Sector Analysis

The automotive gasoline market is a critical component of the global energy sector, with significant demand from transportation and industrial users. Government procurement of fuel, especially for overseas operations, is a substantial segment. The Defense Logistics Agency plays a vital role in ensuring the military's energy needs are met, often through large-scale contracts that reflect global commodity prices and logistical complexities. This contract fits within the broader category of energy procurement for defense purposes.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses. The award was made to OKINAWA IDEMITSU K.K., which is likely a larger entity capable of fulfilling the significant fuel requirements. This means the direct economic benefits to the small business ecosystem from this specific award are likely limited.

Oversight & Accountability

The Defense Logistics Agency (DLA) is responsible for the oversight of this contract, ensuring compliance with terms and conditions. Accountability is maintained through performance monitoring and adherence to the contract's delivery schedule and specifications. Transparency is generally facilitated through public contract databases where such awards are reported. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Department of Defense Energy Procurement
Automotive Gasoline Supply Contracts
Overseas Military Fuel Operations

Risk Flags

Economic Price Adjustment Clause
Short Performance Period
Overseas Logistics Complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $39.1 million to OKINAWA IDEMITSU K.K.. 8510924030!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 $39.1 million.

What is the period of performance?

Start: 2024-09-26. End: 2024-10-31.

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 Okinawa requires access to detailed procurement data over multiple fiscal years. Typically, such spending would fluctuate based on operational tempo, troop presence, and prevailing fuel market prices. The Defense Logistics Agency (DLA) manages these procurements, and their records would indicate the volume and value of gasoline purchased. Without specific historical data, it's difficult to provide exact figures, but consistent demand is expected due to ongoing military operations. The current award of $39.1 million for a short duration suggests a significant, potentially recurring, need for fuel in the region.

How does the unit price of gasoline in this contract compare to market rates or similar government contracts?

Determining the precise unit price requires dividing the total award amount by the estimated quantity of gasoline. This information is not directly provided in the summary data. However, the contract's 'Fixed Price with Economic Price Adjustment' (FPEPA) clause indicates that the base price is subject to change based on an established economic index, likely related to crude oil or refined product prices. To compare, one would need to know the base price at the time of award and the relevant index. Generally, FPEPA contracts aim to balance cost certainty for the government with the contractor's need to manage fluctuating input costs. A comparison would involve looking at DLA's historical average prices for similar fuel types in the same geographic region or benchmarked against commercial bulk fuel prices in Japan.

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

The primary risks for this contract include potential price volatility due to the economic price adjustment clause, supply chain disruptions affecting delivery, and ensuring the quality of the gasoline meets military specifications. Price volatility is inherent in fuel contracts and is managed by the FPEPA mechanism, which links price changes to a recognized index, providing a degree of predictability. Supply chain risks, especially in overseas locations like Okinawa, are mitigated through the Defense Logistics Agency's extensive experience in global logistics and contingency planning. Quality assurance measures, including testing and inspection protocols, are standard to ensure the fuel meets stringent military requirements. The short performance period also limits the exposure to long-term market fluctuations.

What is the track record of OKINAWA IDEMITSU K.K. as a government contractor, particularly for fuel supply?

OKINAWA IDEMITSU K.K. is likely a subsidiary or affiliate of Idemitsu Kosan Co., Ltd., a major Japanese petroleum company. Idemitsu has a long history in the energy sector and is known for its refining and marketing operations. As a government contractor, their track record would be assessed by the Defense Logistics Agency based on past performance, including on-time delivery, quality of products, and adherence to contract terms. While specific details of their past government contracts are not provided here, large energy companies often hold numerous contracts with various government agencies, including the Department of Defense, for fuel supply both domestically and internationally. Their established presence in Okinawa suggests a capability to serve military installations in the region.

How does the competition level (full and open) typically impact the final price paid by the government for such fuel contracts?

Full and open competition is designed to maximize the number of potential bidders, thereby increasing the likelihood of receiving competitive offers. When multiple qualified vendors vie for a contract, they are incentivized to offer their most favorable pricing and terms to win the award. This dynamic generally leads to lower prices for the government compared to sole-source or limited competition scenarios. For fuel contracts, where market prices can be volatile, a competitive bidding process helps ensure that the government is not overpaying due to a lack of market alternatives. The Defense Logistics Agency leverages this approach to achieve best value for taxpayer dollars.

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: $39,112,731

Exercised Options: $39,112,731

Current Obligation: $39,112,731

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60521D1004

IDV Type: IDC

Timeline