DoD spent $200M on aviation fuel, with PAR HAWAII REFINING LLC securing the contract

Contract Overview

Contract Amount: $200,133,943 ($200.1M)

Contractor: PAR Hawaii Refining LLC

Awarding Agency: Department of Defense

Start Date: 2008-09-18

End Date: 2009-10-30

Contract Duration: 407 days

Daily Burn Rate: $491.7K/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: KAPOLEI, HONOLULU County, HAWAII, 96707

State: Hawaii Government Spending

Plain-Language Summary

Department of Defense obligated $200.1 million to PAR HAWAII REFINING LLC for work described as: TURBINE FUEL, AVIATION, JP8 Key points: 1. The contract value represents a significant expenditure for aviation fuel procurement. 2. Full and open competition was utilized, suggesting a potentially competitive bidding process. 3. The fixed-price with economic price adjustment structure introduces some cost volatility. 4. The contract duration was relatively short, indicating a need for ongoing fuel supply. 5. The geographic location of the awardee in Hawaii may influence logistics and delivery costs. 6. The award was made under a 'Defense' sector, highlighting its strategic importance.

Value Assessment

Rating: fair

The total award of $200,133,943.3 for aviation fuel over approximately 13 months suggests a substantial but not necessarily excessive unit cost given market fluctuations. Benchmarking against similar large-scale fuel procurements would be necessary for a definitive value assessment. The economic price adjustment clause introduces a variable that could impact the final cost beyond initial projections, making direct comparison challenging without analyzing the adjustment mechanism and historical fuel price trends.

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. With 16 bids received, the competition level appears robust, which typically fosters price discovery and can lead to more favorable pricing for the government. The presence of multiple bidders suggests a healthy market for aviation fuel suppliers capable of meeting the Department of Defense's requirements.

Taxpayer Impact: A competitive bidding process for essential resources like aviation fuel generally benefits taxpayers by driving down costs and ensuring fair market value is obtained.

Public Impact

The primary beneficiaries are the Department of Defense's aviation operations, ensuring readiness and mission capability. The service delivered is the supply of critical JP8 aviation fuel. The geographic impact is primarily focused on military installations in and around Hawaii. Workforce implications are indirect, related to the fuel supply chain and logistics operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment introduces potential for cost overruns if fuel prices spike significantly.
Reliance on a single awardee for a large volume of fuel in a specific region could pose supply chain risks.
The fixed-price nature, even with adjustments, requires careful monitoring of market conditions.

Positive Signals

Awarded through full and open competition, indicating a broad market engagement.
Multiple bids received (16) suggest a competitive environment at the time of award.
The contract addresses a critical operational need for the Department of Defense.

Sector Analysis

The aviation fuel market is a critical component of the energy sector, directly supporting transportation and defense operations. This contract falls within the petroleum refining and distribution sub-sector. The global market for aviation fuel is substantial, driven by commercial airlines and military demand. Comparable spending benchmarks would involve analyzing other large military fuel contracts and commercial jet fuel prices, which are subject to significant volatility based on geopolitical events and supply/demand dynamics.

Small Business Impact

This contract does not appear to have involved small business set-asides, as indicated by 'sb': false. The prime contractor, PAR HAWAII REFINING LLC, is a large business. There is no explicit information provided regarding subcontracting plans or their impact on the small business ecosystem for this specific award. Future analysis could explore if any subcontracting opportunities were directed towards small businesses.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management regulations. Accountability measures are inherent in the fixed-price with economic price adjustment structure, requiring adherence to delivery schedules and quality standards. Transparency is facilitated by the contract award data being publicly available. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Fuel Supply Center Contracts
Aviation Turbine Fuel Procurement
JP8 Fuel Contracts
Department of Defense Energy Contracts
Petroleum Product Procurement

Risk Flags

Potential for price volatility due to economic price adjustment clause.
Supply chain risk associated with a single awardee in a geographically constrained area.
Need for ongoing market analysis to benchmark fuel prices effectively.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $200.1 million to PAR HAWAII REFINING LLC. TURBINE FUEL, AVIATION, JP8

Who is the contractor on this award?

The obligated recipient is PAR HAWAII REFINING LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $200.1 million.

What is the period of performance?

Start: 2008-09-18. End: 2009-10-30.

What is the historical spending pattern for aviation fuel by the Department of Defense, and how does this award compare?

The Department of Defense is a massive consumer of aviation fuel, with annual spending often in the billions of dollars across various contracts and regions. This $200 million award represents a significant, but not unprecedented, expenditure for a specific period and geographic area. Historical data reveals consistent, high-volume procurement needs driven by global military operations. Analyzing trends over the past decade would show fluctuations tied to operational tempo, fuel price volatility, and strategic shifts. This particular award, covering roughly 13 months, fits within the typical scale of major fuel supply contracts necessary to maintain readiness. Without access to granular historical data for this specific fuel type (JP8) and region, a precise comparison is difficult, but the magnitude aligns with the DoD's substantial and ongoing requirements for aviation fuel.

How did the economic price adjustment (EPA) clause impact the final cost of this contract compared to a fixed-price contract?

The economic price adjustment (EPA) clause in this contract allowed for modifications to the price based on fluctuations in specific economic factors, likely related to the cost of crude oil and refining processes for JP8 aviation fuel. If fuel prices increased significantly during the contract period (September 2008 - October 2009), the EPA would have resulted in a higher final cost than a strict fixed-price contract. Conversely, if prices decreased, the government might have benefited, though EPAs are typically structured to protect the contractor from unforeseen cost increases. Without the specific EPA formula and historical price data for the contract period, it's impossible to quantify the exact impact. However, the inclusion of an EPA suggests an expectation of market volatility, and it likely led to a final cost that more closely reflected the prevailing market conditions than a fixed-price agreement would have.

What are the risks associated with relying on a single supplier for a large volume of aviation fuel in a specific geographic region like Hawaii?

Relying on a single supplier, even one with a strong track record, for a critical commodity like aviation fuel in a geographically isolated region such as Hawaii presents several risks. Supply chain disruptions are a primary concern; natural disasters (hurricanes, tsunamis), logistical failures, or unforeseen operational issues at the supplier's refinery could halt fuel delivery, severely impacting military aviation readiness. Furthermore, a sole supplier may have less incentive to offer competitive pricing or exceptional service once the contract is secured, potentially leading to less favorable terms in future procurements. Dependence also creates vulnerability to the supplier's financial stability or strategic business decisions. While full and open competition was used for this award, the long-term reliance on one entity for sustained supply in Hawaii warrants careful monitoring and contingency planning.

How does the 'Defense Logistics Agency' (DLA) typically manage fuel procurement contracts of this magnitude?

The Defense Logistics Agency (DLA) is the primary organization responsible for procuring and supplying fuel for the U.S. military. For contracts of this magnitude, DLA typically employs a rigorous process involving market research, solicitation development, competitive bidding, and contract administration. They leverage expertise in energy markets, logistics, and contracting to ensure reliable and cost-effective fuel delivery. DLA often uses various contract types, including fixed-price with economic price adjustment, to balance cost certainty with market volatility. Their management includes monitoring supplier performance, ensuring quality standards are met, and managing delivery schedules across global operations. The scale of this $200 million award indicates it was a significant undertaking, managed under DLA's established protocols for strategic resource acquisition.

What does the number of bids (16) suggest about the competitiveness of the aviation fuel market serving the Department of Defense in 2008?

Receiving 16 bids for this aviation fuel contract in 2008 suggests a highly competitive market environment for suppliers serving the Department of Defense. This number indicates that multiple companies possessed the capability, capacity, and interest to compete for a large-scale government fuel contract. A robust number of bidders generally translates to better price discovery, as competition forces suppliers to offer their most competitive terms to win the award. It also implies that the barriers to entry for qualified fuel suppliers were not prohibitively high, or that existing players were actively seeking government contracts. This level of competition is favorable for the government, as it increases the likelihood of securing the fuel at a reasonable cost and ensures a broader base of potential suppliers for future needs.

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: Tesoro Corporation (UEI: 008133480)

Address: 91-325 KOMOHANA STREET, KAPOLEI, HI, 90

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $200,133,943

Exercised Options: $200,133,943

Current Obligation: $200,133,943

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060008D0512

IDV Type: IDC

Timeline