DoD spent $130M on jet fuel, with BP Products North America Inc. winning a fixed-price contract

Contract Overview

Contract Amount: $129,888,440 ($129.9M)

Contractor: BP Products North America Inc.

Awarding Agency: Department of Defense

Start Date: 2010-04-06

End Date: 2011-04-30

Contract Duration: 389 days

Daily Burn Rate: $333.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 27

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION, JET A (JAA)

Place of Performance

Location: BAYTOWN, HARRIS County, TEXAS, 77520

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $129.9 million to BP PRODUCTS NORTH AMERICA INC. for work described as: TURBINE FUEL, AVIATION, JET A (JAA) Key points: 1. Contract value of $130M indicates significant demand for aviation fuel within the Department of Defense. 2. The fixed-price with economic price adjustment structure aims to balance cost certainty with market volatility. 3. A single award to BP Products North America Inc. warrants scrutiny regarding competition and potential price impacts. 4. The contract duration of 389 days suggests a need for consistent, reliable fuel supply. 5. The North American Industry Classification System (NAICS) code 324110 points to petroleum refining as the core industry. 6. The contract's geographic focus on Texas (st: TX) highlights a key operational hub for fuel distribution.

Value Assessment

Rating: fair

The total award amount of $129.9 million for jet fuel over approximately 13 months represents a substantial expenditure. Benchmarking this against similar large-scale aviation fuel contracts is challenging without more specific volume data. However, the fixed-price with economic price adjustment (FPEPA) contract type suggests an attempt to manage price fluctuations, which can be beneficial in volatile fuel markets. The absence of detailed cost breakdowns makes a precise value-for-money assessment difficult, but the scale implies a critical operational need.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. However, the award went to a single entity, BP Products North America Inc. The number of bidders is not explicitly stated in the provided data (no: 27 is likely the number of contract actions, not bidders). A single award from a full and open competition could suggest that only one bidder met all requirements, or that the winning bid was significantly more advantageous. Further investigation into the bidding process would clarify the level of competition achieved.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to drive down prices through market forces. However, a single award from such a process might indicate that the expected price competition did not fully materialize, potentially leading to a higher-than-optimal price for taxpayers.

Public Impact

The primary beneficiaries are the various branches of the Department of Defense requiring aviation fuel for aircraft operations. The services delivered include the supply of Jet A (JAA) aviation fuel, critical for military readiness and logistical support. The contract's geographic focus on Texas (st: TX) suggests a significant impact on fuel supply chains and distribution within that region. Workforce implications may include roles in fuel logistics, transportation, and quality control, both within the government and for the contractor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clause in a volatile market.
Reliance on a single supplier for a critical commodity could pose supply chain risks.
Limited transparency on the specific volume of fuel procured makes precise cost-per-unit analysis difficult.

Positive Signals

Awarded under full and open competition, suggesting an effort to maximize market participation.
Fixed-price element provides some cost control, despite the economic price adjustment.
Contract addresses a critical operational need for the Department of Defense, ensuring mission readiness.

Sector Analysis

The petroleum refining sector (NAICS 324110) is a cornerstone of the energy industry, responsible for processing crude oil into various fuels, including aviation gasoline and jet fuel. The market for aviation fuels is substantial, driven by both commercial and military demand. This contract represents a significant portion of government spending within this sector, highlighting the DoD's reliance on refined petroleum products. Comparable spending benchmarks would involve analyzing other large-scale government fuel procurements or major commercial airline fuel contracts.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (sb: false). Consequently, there are no direct subcontracting implications for small businesses stemming from a small business set-aside. The primary contractor, BP Products North America Inc., is a large corporation, and its engagement does not inherently create opportunities for small business participation unless specified in subcontracting plans not detailed here. The impact on the small business ecosystem is likely minimal for this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), ensuring compliance with contract terms and financial regulations. The contract type (FPEPA) necessitates monitoring of economic indicators that influence fuel prices. Transparency is generally maintained through contract award databases and reporting requirements. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Fuel Procurement
Aviation Fuel Supply Contracts
Petroleum Product Procurement
Fixed-Price Contracts with Economic Price Adjustment

Risk Flags

Single award from full and open competition
Economic Price Adjustment clause in volatile market
Reliance on a single supplier for critical commodity

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $129.9 million to BP PRODUCTS NORTH AMERICA INC.. TURBINE FUEL, AVIATION, JET A (JAA)

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 $129.9 million.

What is the period of performance?

Start: 2010-04-06. End: 2011-04-30.

What is the historical spending pattern for aviation fuel by the Department of Defense?

Historical spending on aviation fuel by the Department of Defense (DoD) is substantial and fluctuates based on operational tempo, global events, and fuel market prices. While this specific contract awarded $129.9 million in 2010-2011, the DoD's overall annual expenditure on aviation fuels can range in the billions of dollars. Factors influencing this spending include the number of aircraft in operation, deployment locations, and the price per gallon of jet fuel. Analyzing past contracts reveals trends in contract types (fixed-price vs. cost-plus), competition levels, and dominant suppliers. For instance, periods of increased military activity often correlate with higher fuel consumption and potentially larger contract values. The DoD also engages in long-term strategic sourcing and hedging strategies to mitigate price volatility, impacting overall spending patterns.

How does the price of Jet A fuel under this contract compare to market rates at the time of award?

Determining the precise price comparison of Jet A fuel under this contract to prevailing market rates at the time of award (2010-2011) requires access to detailed contract line item pricing and historical market data for Jet A (JAA) in Texas. The contract's 'Fixed Price with Economic Price Adjustment' (FPEPA) clause complicates a direct comparison, as the final price is subject to adjustments based on an index or formula tied to market conditions. While the award value is $129.9 million, the actual price per gallon paid would depend on the volume procured and the specific economic adjustments applied. Generally, government contracts aim to secure prices at or below market rates, especially when awarded through full and open competition. However, the FPEPA structure suggests a need to accommodate market volatility, which could lead to prices fluctuating around the market average over the contract's life.

What is BP Products North America Inc.'s track record with large federal fuel contracts?

BP Products North America Inc. has a significant track record of securing and performing on large federal contracts, particularly for fuel supplies. As a major integrated oil company, BP possesses the infrastructure and capacity to meet the demands of government agencies like the Department of Defense. Their history includes numerous awards for various fuel types, including aviation fuels, across different military branches and agencies. While specific details of past performance metrics (e.g., on-time delivery, quality compliance) for all contracts are not publicly detailed in this summary, their consistent participation and awards in competitive bidding processes suggest a generally reliable performance history. However, like any large corporation, they may have faced scrutiny or challenges on specific contracts, which would be detailed in contract performance databases and agency reports.

What are the potential risks associated with a single award contract for critical fuel supplies?

A single award contract for critical fuel supplies, even if awarded under full and open competition, carries inherent risks. Firstly, it reduces the competitive pressure that typically drives down prices, potentially leading to higher costs for the government compared to a multi-bidder scenario. Secondly, it creates a dependency on a single supplier. Any disruption in the supplier's operations—due to geopolitical issues, natural disasters, labor disputes, or financial instability—could severely impact the government's ability to procure essential fuel, jeopardizing operational readiness. Thirdly, a single award might indicate that fewer companies were willing or able to bid, potentially signaling underlying market issues or overly restrictive solicitation requirements. This dependency necessitates robust monitoring and contingency planning by the procuring agency.

How does the contract duration of 389 days impact the overall value and risk?

The contract duration of 389 days (approximately 13 months) is a standard term for many supply contracts, balancing the need for sustained supply with flexibility. For value, this duration allows for economies of scale in procurement and delivery, potentially leading to a more stable per-unit cost over the period compared to numerous short-term contracts. It also reduces administrative burden associated with frequent re-solicitation. From a risk perspective, a duration of just over a year exposes the contract to moderate market volatility. While the FPEPA clause aims to mitigate price risk, significant unforeseen price spikes within this timeframe could still impact the budget. Longer durations might offer more price stability but also lock the government into potentially unfavorable terms if market conditions change drastically. Shorter durations increase administrative costs and may not capture volume discounts.

What is the significance of the NAICS code 324110 (Petroleum Refineries) in understanding this contract?

The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' is highly significant as it defines the primary industry sector of the contractor and the nature of the product being procured. This code indicates that the fuel supplied is likely produced or significantly processed by a refinery. This has implications for the supply chain, quality control, and potential environmental considerations associated with fuel production. Understanding this classification helps in benchmarking the contract against other procurements within the energy and manufacturing sectors. It also suggests that the contractor possesses the specialized facilities and expertise required for large-scale fuel refining and distribution, which is critical for meeting the stringent specifications of aviation fuels like Jet A.

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: SP060010R0061

Offers Received: 27

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

Evaluated Preference: NONE

Contractor Details

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

Address: 28301 FERRY ROAD, WARRENVILLE, IL, 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: $129,888,440

Exercised Options: $129,888,440

Current Obligation: $129,888,440

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D0474

IDV Type: IDC

Timeline