DoD spent over $1.1B on aviation fuel, with BP Products North America Inc. securing the contract

Contract Overview

Contract Amount: $1,129,627,552 ($1.1B)

Contractor: BP Products North America Inc.

Awarding Agency: Department of Defense

Start Date: 2008-09-19

End Date: 2009-10-30

Contract Duration: 406 days

Daily Burn Rate: $2.8M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 16

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: TURBINE FUEL, AVIATION, JP8

Place of Performance

Location: FERNDALE, WHATCOM County, WASHINGTON, 98248

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $1.13 billion to BP PRODUCTS NORTH AMERICA INC. for work described as: TURBINE FUEL, AVIATION, JP8 Key points: 1. Contract value significantly exceeds typical fuel procurement, suggesting large-scale or long-term demand. 2. Sole awardee indicates potential lack of robust competition or specific supplier qualifications. 3. Fixed-price with economic price adjustment (EPA) introduces risk of cost overruns due to market volatility. 4. Contract duration of 406 days is relatively short for such a high-value fuel supply. 5. Awarded under 'Other Direct Costs' (ODC) suggests it might be part of a larger project or service.

Value Assessment

Rating: fair

The total award of over $1.1 billion for aviation fuel is substantial. Benchmarking this against similar fuel contracts is difficult without more specific details on the type of fuel, delivery locations, and contract duration. The fixed-price with economic price adjustment (EPA) clause introduces a degree of uncertainty in the final cost, as fuel prices can fluctuate significantly. While the price per unit isn't provided, the sheer volume suggests a need for careful cost management and oversight to ensure value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, with 16 bids received. This indicates a competitive marketplace for aviation fuel. However, the fact that only one award was made suggests that either BP Products North America Inc. offered the most advantageous proposal based on price, technical factors, or other evaluation criteria, or that the contract was structured in a way that favored a single supplier.

Taxpayer Impact: A competitive bidding process is generally favorable for taxpayers, as it should drive down prices. The presence of 16 bidders suggests that taxpayers likely benefited from competitive pricing, even with the EPA clause.

Public Impact

The Department of Defense is the primary beneficiary, ensuring a supply of critical aviation fuel for its operations. This contract supports military aviation readiness and operational capabilities. The geographic impact is likely widespread, covering multiple military installations requiring aviation fuel. Workforce implications include logistics personnel for fuel handling and distribution, as well as administrative staff managing the contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause exposes the government to potential cost increases due to market volatility.
Lack of specific performance metrics or quality standards in the provided data makes it hard to assess performance.
The short contract duration for such a large sum might indicate a need for frequent re-competition, potentially increasing administrative burden.

Positive Signals

Awarded under full and open competition with 16 bids suggests a healthy market and potential for competitive pricing.
The contractor, BP Products North America Inc., is a major player in the energy sector, implying experience and capacity.
The contract is for a critical national security resource, ensuring operational readiness for the DoD.

Sector Analysis

The aviation fuel market is a significant segment of the broader petroleum refining and distribution industry. This contract falls under the North American Industry Classification System (NAICS) code 324110 (Petroleum Refineries). The market is characterized by large, established players and is sensitive to global oil prices and geopolitical events. Federal spending on aviation fuel is substantial, driven by the operational needs of the Department of Defense and other agencies.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, nor does it explicitly mention subcontracting requirements for small businesses. Given the scale and nature of aviation fuel procurement, it is likely that prime contractors are large corporations. The absence of small business participation in the prime contract suggests limited direct opportunities for small businesses in this specific award, though they might be involved further down the supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for ensuring compliance with contract terms, pricing, and performance. The Department of Defense's Inspector General would also have jurisdiction to investigate any potential fraud, waste, or abuse. Transparency is facilitated through contract databases like FPDS, though detailed performance reports may be internal.

Related Government Programs

JP-8 Fuel Procurement
Defense Fuel Supply Center Contracts
Aviation Turbine Fuel Contracts
Department of Defense Energy Procurement
Petroleum Product Supply Contracts

Risk Flags

Potential for cost overruns due to EPA clause
Supply chain disruption risk with a single awardee
Lack of detailed performance metrics in public data
Volatility in fuel markets impacting final cost

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.13 billion to BP PRODUCTS NORTH AMERICA INC.. TURBINE FUEL, AVIATION, JP8

Who is the contractor on this award?

The obligated recipient is BP PRODUCTS NORTH AMERICA INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $1.13 billion.

What is the period of performance?

Start: 2008-09-19. End: 2009-10-30.

What is the historical spending trend for aviation fuel by the Department of Defense over the last five years?

Historical spending data for aviation fuel by the Department of Defense (DoD) reveals a consistent and substantial requirement. While specific figures fluctuate annually based on operational tempo, global events, and fuel price variations, the DoD consistently procures billions of dollars worth of aviation fuels each fiscal year. For instance, in recent years, annual spending has often ranged between $5 billion and $10 billion across various fuel types like JP-8, JP-5, and F-24. This particular contract, valued at over $1.1 billion, represents a significant portion of annual spending for a single award, highlighting the scale of individual procurement actions. Factors influencing these trends include deployment levels, training exercises, and the overall strategic posture of the military.

How does the price per gallon for this contract compare to market rates at the time of award?

Determining the exact price per gallon for this specific contract is challenging without access to the detailed award documents, as only the total award amount and duration are provided. However, the contract type, 'Fixed Price with Economic Price Adjustment' (EPA), indicates that the base price was set, but subject to change based on an agreed-upon index or formula reflecting market fluctuations in crude oil and refined product prices. To compare effectively, one would need to know the base price negotiated and the relevant market indices (e.g., Platts, Argus) applicable during the contract period (September 2008 - October 2009). This period saw significant oil price volatility, including a peak in mid-2008 followed by a sharp decline. Without the specific EPA formula and base price, a direct comparison to average market rates is speculative, but the EPA mechanism itself suggests an effort to balance price risk between the government and the contractor.

What are the specific risks associated with the 'Fixed Price with Economic Price Adjustment' (EPA) clause in this contract?

The primary risk associated with the Fixed Price with Economic Price Adjustment (EPA) clause is the potential for cost escalation beyond the initially anticipated fixed price. While the 'fixed price' component provides a baseline, the 'economic price adjustment' allows the contractor to pass on increases in certain costs, typically related to raw material prices (like crude oil for fuel) or labor. For the government, this means the final cost is not definitively known at the time of award and could exceed budget projections if market prices rise significantly. Conversely, the contractor bears the risk if prices fall substantially below the adjusted level, though the EPA mechanism is usually designed to mitigate this. For this specific contract, awarded during a period of high oil price volatility, the EPA clause likely played a crucial role in making the award feasible but also introduced uncertainty regarding the ultimate expenditure.

What is BP Products North America Inc.'s track record in supplying aviation fuel to the Department of Defense?

BP Products North America Inc. has a significant history of supplying petroleum products, including aviation fuels, to the Department of Defense and other government agencies. As a major integrated oil company, BP possesses the infrastructure, refining capacity, and logistical capabilities necessary for large-scale fuel distribution. Publicly available contract data indicates numerous awards to BP for various fuel types across different military branches and agencies over many years. While this specific $1.1 billion contract is a notable example, BP's broader track record suggests substantial experience in meeting the demanding requirements of military fuel supply, including adherence to strict quality specifications and delivery schedules. However, like any large supplier, they may have faced performance issues or disputes on specific contracts, which would typically be detailed in internal DoD performance evaluations.

How does the number of bidders (16) in this full and open competition impact the perceived value for money?

A robust number of bidders, such as the 16 received for this aviation fuel contract, generally enhances the perception of value for money. A larger pool of competitors increases the likelihood that the government receives the most advantageous offer, balancing price, technical merit, and other factors. It suggests that the market is accessible and that potential suppliers were aware of and interested in the opportunity. For taxpayers, this competitive dynamic typically leads to lower prices than would be expected in a sole-source or limited-competition scenario. While the EPA clause introduces price uncertainty, the initial competitive bidding process should have established a reasonable baseline price, and the presence of multiple bidders provides leverage for the government during negotiations and contract administration to manage costs effectively.

What are the potential performance risks associated with a single award for such a large volume of aviation fuel?

A single award for a large volume of aviation fuel, even under full and open competition, carries inherent performance risks. If the sole awardee, BP Products North America Inc., experiences production issues, logistical disruptions (e.g., transportation problems, refinery outages), or financial difficulties, the supply chain for the Department of Defense could be severely impacted. This could lead to shortages, operational delays, and potentially higher costs if emergency sourcing is required. While the contract likely includes remedies for non-performance, the scale of this award means that any disruption would be significant. The government might mitigate this by requiring robust contingency plans from the contractor, maintaining strategic fuel reserves, and closely monitoring the contractor's operational stability throughout the contract period.

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

Solicitation ID: SP060008R0161

Offers Received: 16

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: BP P.L.C. (UEI: 210042669)

Address: 6 CENTERPOINTE DR, LA PALMA, CA, 45

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $1,129,627,552

Exercised Options: $1,129,627,552

Current Obligation: $1,129,627,552

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D0508

IDV Type: IDC

Timeline