DoD spent $33.5M on aviation fuel, with Sinclair Oil Corporation awarded the contract

Contract Overview

Contract Amount: $33,513,547 ($33.5M)

Contractor: Sinclair OIL Corporation

Awarding Agency: Department of Defense

Start Date: 2009-08-13

End Date: 2010-10-30

Contract Duration: 443 days

Daily Burn Rate: $75.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 19

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION, JP8

Place of Performance

Location: SINCLAIR, CARBON County, WYOMING, 82334

State: Wyoming Government Spending

Plain-Language Summary

Department of Defense obligated $33.5 million to SINCLAIR OIL CORPORATION for work described as: TURBINE FUEL, AVIATION, JP8 Key points: 1. The contract value represents a significant investment in aviation fuel for defense operations. 2. Competition dynamics for this fuel contract are crucial for ensuring competitive pricing. 3. Potential risks include price volatility in the petroleum market and supply chain disruptions. 4. Performance context is tied to the reliable supply of a critical aviation component. 5. This contract positions the Defense Logistics Agency as a major consumer in the aviation fuel sector.

Value Assessment

Rating: fair

The contract value of $33.5 million for aviation fuel is substantial. Benchmarking this against similar fuel contracts is challenging without more specific data on fuel type, volume, and delivery locations. The fixed-price with economic price adjustment (EPA) structure suggests an attempt to balance cost certainty with market fluctuations, but the effectiveness of the EPA in controlling costs needs careful monitoring. The award to Sinclair Oil Corporation indicates a competitive selection process, but the ultimate value-for-money depends on the final price paid relative to market conditions throughout the contract period.

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 19 bidders participating, the level of competition appears robust. A high number of bidders generally suggests a healthy market and can lead to more competitive pricing as contractors vie for the award. This broad competition is a positive sign for price discovery and potentially achieving a fair market price for the aviation fuel.

Taxpayer Impact: The extensive competition for this fuel contract is beneficial for taxpayers, as it likely drove down the final price compared to a sole-source or limited competition scenario. This ensures that defense resources are used more efficiently.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, ensuring operational readiness of its aviation assets. The service delivered is the provision of critical aviation fuel (JP8), essential for flight operations. The geographic impact is likely widespread, supporting military bases and operations across various regions where the fuel is needed. Workforce implications include support for jobs within Sinclair Oil Corporation and potentially related logistics and transportation sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if not carefully managed against market indices.
Dependence on a single supplier for a critical commodity like aviation fuel carries inherent supply chain risks.
The duration of the contract (443 days) might not fully align with long-term fuel price hedging strategies.

Positive Signals

Awarded under full and open competition with 19 bidders, indicating a competitive market.
The fixed-price with economic price adjustment structure attempts to mitigate extreme price volatility.
Sinclair Oil Corporation's established presence in the petroleum industry suggests a capacity to meet demand.

Sector Analysis

The aviation fuel market is a critical segment of the broader energy and defense industrial base. This contract falls within the petroleum refining and distribution sector, specifically serving the high-demand niche of military aviation. The market is characterized by significant infrastructure requirements, regulatory oversight, and sensitivity to global oil prices. Comparable spending benchmarks would involve analyzing other large-scale military fuel procurements, which often run into tens or hundreds of millions of dollars annually, depending on the branch of service and operational tempo.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications specifically mandated for small businesses through a set-aside program. The primary contractor, Sinclair Oil Corporation, is a large entity. The impact on the small business ecosystem would be indirect, potentially through opportunities for smaller suppliers in the fuel distribution or transportation network, but this is not explicitly detailed in the award information.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and administrative contracting officer within the Defense Logistics Agency (DLA). Accountability measures are embedded in the contract terms, including delivery schedules, quality specifications, and pricing adjustments. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract's execution.

Related Government Programs

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

Risk Flags

Price Volatility Risk
Supply Chain Disruption Risk
Contract Type Risk (EPA effectiveness)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.5 million to SINCLAIR OIL CORPORATION. TURBINE FUEL, AVIATION, JP8

Who is the contractor on this award?

The obligated recipient is SINCLAIR OIL CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $33.5 million.

What is the period of performance?

Start: 2009-08-13. End: 2010-10-30.

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

Analyzing historical spending patterns for aviation fuel by the Department of Defense (DoD) reveals a consistent and substantial requirement driven by global military operations and training exercises. While specific figures fluctuate annually based on geopolitical events, operational tempo, and fuel price volatility, the DoD consistently procures billions of dollars worth of aviation fuels each fiscal year. For instance, in recent years, total military fuel spending, including aviation fuels, has often exceeded $10 billion annually. The Defense Logistics Agency (DLA) Energy is the primary entity responsible for these procurements, managing complex supply chains that span the globe. Trends often show a slight increase in spending during periods of heightened military activity and a decrease during drawdowns. Factors like the increasing efficiency of newer aircraft and shifts towards alternative fuels can influence long-term spending trajectories, but the immediate demand for traditional jet fuels remains robust.

How does the price adjustment mechanism (EPA) in this contract compare to standard industry practices for fuel procurement?

The Economic Price Adjustment (EPA) clause in this contract is a common mechanism used in long-term supply agreements, particularly for commodities like fuel where prices are subject to market fluctuations. Standard industry practice often involves linking the price adjustment to a recognized benchmark index, such as the U.S. Gulf Coast Average Jet Fuel price or a similar Platts assessment. The effectiveness and fairness of an EPA depend heavily on the specific index chosen, the frequency of adjustments (e.g., monthly, quarterly), and any caps or floors implemented. In government contracts, the goal is to protect both the contractor from significant losses due to unforeseen price spikes and the government from excessive costs. The specific EPA terms in this Sinclair Oil contract would need to be reviewed to determine if they align with best practices, ensuring transparency and preventing undue profit or loss for either party.

What is Sinclair Oil Corporation's track record in fulfilling large-scale government fuel contracts?

Sinclair Oil Corporation has a long history in the petroleum industry, involved in refining and marketing. While specific details on their track record with large-scale government fuel contracts require deeper database analysis, their participation and award in this significant DoD contract suggest they possess the capacity and qualifications to meet such demands. Government contracts, especially for critical supplies like aviation fuel, undergo rigorous vetting processes. Companies awarded these contracts typically demonstrate financial stability, robust logistical capabilities, and adherence to stringent quality and delivery standards. Further investigation into Sinclair's past performance ratings, any past disputes or contract terminations, and the volume and types of previous government awards would provide a more comprehensive picture of their reliability in this sector.

What are the potential risks associated with relying on a single supplier for a critical commodity like JP8 fuel?

Relying on a single supplier for a critical commodity like JP8 aviation fuel introduces several significant risks. Foremost is the risk of supply chain disruption. Any issue affecting the supplier's production, refining capacity, or transportation network—whether due to natural disasters, labor strikes, geopolitical instability, or internal operational failures—could directly impact the availability of fuel for military operations. This could lead to mission delays, cancellations, and significant readiness issues. Furthermore, a sole supplier may have increased leverage in price negotiations, potentially leading to higher costs for the government over time, even with price adjustment clauses. Dependence also limits the government's ability to quickly pivot to alternative suppliers or negotiate more favorable terms if market conditions change. While this contract had multiple bidders, the actual delivery might be concentrated, requiring careful monitoring.

How does the contract type (Fixed Price with Economic Price Adjustment) influence cost control and contractor performance?

The Fixed Price with Economic Price Adjustment (EPA) contract type attempts to strike a balance between cost certainty and flexibility. In a standard Fixed Price contract, the contractor bears all the risk of cost overruns. With an EPA, the contract price is adjusted based on fluctuations in specified economic factors, typically commodity prices like fuel. This shifts some of the price risk from the contractor to the government, particularly for volatile commodities. For cost control, the effectiveness hinges on the chosen index and adjustment formula; a well-defined EPA tied to a reliable market benchmark can help ensure the government pays a fair market price, preventing excessive profits for the contractor during price surges and avoiding losses for the contractor during price drops. For contractor performance, the fixed-price element still incentivizes efficiency, as the contractor aims to perform the work within the adjusted price, while the EPA mitigates the risk of being unable to fulfill the contract due to uncontrollable market swings.

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: SP060009R0161

Offers Received: 19

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

Evaluated Preference: NONE

Contractor Details

Address: 550 E SOUTH TEMPLE, SALT LAKE CITY, UT, 90

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

Financial Breakdown

Contract Ceiling: $33,513,547

Exercised Options: $33,513,547

Current Obligation: $33,513,547

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060009D0503

IDV Type: IDC

Timeline