DoD's $26.7M JP8 Turbine Fuel Contract Awarded to Hermes Consolidated LLC Amidst Full and Open Competition

Contract Overview

Contract Amount: $29,070,000 ($29.1M)

Contractor: Hermes Consolidated LLC

Awarding Agency: Department of Defense

Start Date: 2010-04-23

End Date: 2011-04-30

Contract Duration: 372 days

Daily Burn Rate: $78.1K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 27

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION, JP8, SET-ASIDE QUANTITY IS 14,040,000 USG, AND THE SET-ASIDE DOLLAR VALUE IS $26,676,000.00

Place of Performance

Location: NEWCASTLE, WESTON County, WYOMING, 82701

State: Wyoming Government Spending

Plain-Language Summary

Department of Defense obligated $29.1 million to HERMES CONSOLIDATED LLC for work described as: TURBINE FUEL, AVIATION, JP8, SET-ASIDE QUANTITY IS 14,040,000 USG, AND THE SET-ASIDE DOLLAR VALUE IS $26,676,000.00 Key points: 1. The contract for aviation turbine fuel (JP8) is valued at $26.7 million for 14.04 million US gallons. 2. Awarded to Hermes Consolidated LLC, the contract falls under full and open competition after exclusion of sources. 3. The fixed-price contract with economic price adjustment suggests potential for cost fluctuations based on market conditions. 4. The petroleum refineries sector (NAICS 324110) is critical for military aviation fuel supply.

Value Assessment

Rating: fair

The awarded price of approximately $1.90 per gallon for JP8 is within a reasonable range for bulk aviation fuel, though economic price adjustment clauses can lead to variations. Benchmarking against similar DoD fuel contracts would provide a clearer picture of value.

Cost Per Unit: $1.90

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'Full and Open Competition After Exclusion of Sources,' indicating that while competition was sought, specific sources may have been excluded prior to the final award. This method aims for competitive pricing but the exclusion criteria warrant scrutiny.

Taxpayer Impact: The competitive nature of the award is intended to secure fair market prices, minimizing unnecessary taxpayer expenditure on essential aviation fuel.

Public Impact

Ensures a consistent supply of critical JP8 fuel for military aviation operations. Supports the Defense Logistics Agency's mission to provide logistical support to the U.S. Armed Forces. The economic price adjustment clause may impact the final cost to taxpayers based on fuel market volatility. The set-aside quantity of 14.04 million gallons highlights the significant demand for this specific fuel type.

Waste & Efficiency Indicators

Waste Risk Score: 78 / 10

Warning Flags

Economic price adjustment clause introduces cost uncertainty.
Exclusion of sources in competition method requires further understanding.
Fixed-price contract type can be sensitive to market fluctuations.

Positive Signals

Full and open competition aims for best value.
Award to a single vendor for a critical commodity.
Clear set-aside quantity and dollar value.

Sector Analysis

This contract operates within the petroleum refining sector, specifically supplying aviation fuel. Spending benchmarks in this sector are highly dependent on global oil prices and geopolitical factors, making direct comparisons challenging without detailed market analysis.

Small Business Impact

The data indicates this contract was not set-aside for small businesses (sb: false). Therefore, small businesses were likely not the primary focus of this specific procurement, though they may participate as subcontractors.

Oversight & Accountability

The Defense Logistics Agency is responsible for this procurement, which falls under the Department of Defense's broader oversight. The 'Full and Open Competition After Exclusion of Sources' method suggests a defined process was followed, but the rationale for exclusions would be subject to internal review.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Potential for price increases due to Economic Price Adjustment.
Competition method involved exclusion of sources, requiring further justification.
Reliance on a single vendor for a critical fuel supply.
Contract duration of 372 days may not cover long-term price stability needs.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.1 million to HERMES CONSOLIDATED LLC. TURBINE FUEL, AVIATION, JP8, SET-ASIDE QUANTITY IS 14,040,000 USG, AND THE SET-ASIDE DOLLAR VALUE IS $26,676,000.00

Who is the contractor on this award?

The obligated recipient is HERMES CONSOLIDATED LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $29.1 million.

What is the period of performance?

Start: 2010-04-23. End: 2011-04-30.

What was the specific rationale for excluding certain sources prior to the full and open competition, and how did this impact the final price?

The rationale for excluding specific sources prior to full and open competition is not detailed in the provided data. Typically, such exclusions might be based on technical qualifications, past performance, or specific security requirements. Understanding this rationale is crucial to assess if it limited competition unduly and potentially inflated the price, or if it was a necessary step to ensure contract performance and national security.

How does the economic price adjustment (EPA) clause typically affect the final cost of JP8 fuel compared to fixed-price contracts without EPA?

The economic price adjustment clause allows for adjustments to the contract price based on fluctuations in specific economic factors, such as the cost of raw materials or labor. For JP8 fuel, this means the final price paid by the government can increase or decrease from the initial fixed price, reflecting changes in the global oil market. This contrasts with a pure fixed-price contract, where the price remains constant regardless of market shifts, potentially offering more cost certainty but also exposing the contractor to greater risk if costs rise significantly.

What is the typical performance risk associated with supplying bulk aviation fuel like JP8 under a fixed-price contract with EPA?

The performance risk for supplying bulk aviation fuel under a fixed-price contract with EPA is generally moderate. The primary risks involve ensuring timely delivery of the correct fuel specification and maintaining adequate supply chain logistics. The EPA mitigates the contractor's financial risk from fuel price volatility, shifting some of that risk to the government. However, risks related to transportation disruptions, quality control failures, or unforeseen geopolitical events impacting fuel availability still exist.

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 AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060010R0061

Offers Received: 27

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

Evaluated Preference: NONE

Contractor Details

Address: 1600 BROADWAY STE 2300, DENVER, CO, 90

Business Categories: Category Business, Small Business, Special Designations, Subchapter S Corporation, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $29,070,000

Exercised Options: $29,070,000

Current Obligation: $29,070,000

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0467

IDV Type: IDC

Timeline