DoD spent $50.6M on fuel, with Brad Hall & Associates winning a fixed-price contract with economic adjustments

Contract Overview

Contract Amount: $50,598,104 ($50.6M)

Contractor: Brad Hall & Associates, Inc.

Awarding Agency: Department of Defense

Start Date: 2010-10-01

End Date: 2013-09-30

Contract Duration: 1,095 days

Daily Burn Rate: $46.2K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 33

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: GASOHOL, REGULAR UNLEADED (GUR), GASOLINE, REGULAR UNLEADED (MUR), RED-DYED DIESEL ULSD, #1 GRADE (DSS), FUEL ETHANOL (E85)(E8), AND DIESEL FUEL ULSD, #2 GRADE (DS2)

Place of Performance

Location: IDAHO FALLS, BONNEVILLE County, IDAHO, 83401

State: Idaho Government Spending

Plain-Language Summary

Department of Defense obligated $50.6 million to BRAD HALL & ASSOCIATES, INC. for work described as: GASOHOL, REGULAR UNLEADED (GUR), GASOLINE, REGULAR UNLEADED (MUR), RED-DYED DIESEL ULSD, #1 GRADE (DSS), FUEL ETHANOL (E85)(E8), AND DIESEL FUEL ULSD, #2 GRADE (DS2) Key points: 1. Contract value of $50.6M over 3 years indicates significant fuel procurement for DoD. 2. Fixed Price with Economic Price Adjustment (FPEPA) contract type suggests potential for price volatility. 3. Competition after exclusion of sources implies a specific justification was needed for vendor selection. 4. The contract's duration of 1095 days (3 years) provides a stable but potentially long-term commitment. 5. Award to Brad Hall & Associates, Inc. for petroleum products highlights a specialized market niche. 6. The North American Industry Classification System (NAICS) code 424720 points to wholesale distribution of petroleum products.

Value Assessment

Rating: fair

The total award of $50.6 million over three years for fuel procurement appears substantial. Without specific benchmarks for fuel prices during the contract period or details on the economic price adjustment mechanism, a precise value-for-money assessment is challenging. However, the FPEPA contract type introduces risk, as fuel prices can fluctuate significantly, potentially leading to costs exceeding initial projections if not managed carefully. Comparing this to similar fuel contracts awarded by the Defense Logistics Agency (DLA) would be necessary for a more robust evaluation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This indicates that while the intent was competition, specific circumstances led to excluding certain potential bidders. The exact reasons for this exclusion are not detailed, but it suggests that only a limited number of qualified sources were considered or able to meet the specific requirements. This approach can sometimes lead to less competitive pricing compared to unrestricted full and open competition.

Taxpayer Impact: The exclusion of sources may limit the number of competitive bids received, potentially resulting in higher prices for taxpayers than if all eligible vendors had been allowed to compete.

Public Impact

Military operations and readiness are supported through the consistent supply of fuel. Personnel and equipment across various DoD installations benefit from reliable fuel access. The contract supports the logistics and supply chain infrastructure critical for national defense. Economic activity is generated for the awarded contractor and potentially their suppliers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the economic price adjustment clause in a volatile fuel market.
Limited competition due to 'exclusion of sources' may have resulted in a higher price than a fully open competition.
Contract duration of three years locks in a vendor, potentially missing out on better market prices if they emerge.
Dependence on a single contractor for a critical commodity like fuel can pose supply chain risks.

Positive Signals

Award to a specific company suggests they met stringent requirements for fuel supply.
The contract provides a predictable fuel supply, essential for DoD's operational continuity.
Fixed-price element provides some cost certainty, despite the economic adjustment.

Sector Analysis

The petroleum and petroleum products wholesale sector is critical for supplying energy to various industries, including government and defense. The Defense Logistics Agency (DLA) is a major procurer of fuel, managing complex supply chains to ensure military readiness. This contract fits within the broader market for fuel distribution, where pricing is influenced by global commodity markets, transportation costs, and regulatory environments. Benchmarks for fuel procurement by government agencies often focus on price per gallon or barrel, adjusted for type and delivery location.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses in the provided data. This suggests that the primary award went to a larger entity, and the impact on the small business ecosystem for this specific contract is likely minimal unless the prime contractor engages small businesses in their 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), ensuring compliance with contract terms and financial accountability. The Defense Logistics Agency (DLA) would also maintain oversight of the contract's performance and adherence to delivery schedules. Transparency is generally maintained through contract databases like FPDS, though specific performance metrics and audit details may not be publicly available.

Related Government Programs

Defense Logistics Agency Fuel Contracts
DoD Energy Procurement
Government Fuel Purchasing
Petroleum Product Wholesale Distribution

Risk Flags

Potential for cost escalation due to economic price adjustment.
Limited competition may impact price efficiency.
Contract duration may not align with optimal market price fluctuations.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.6 million to BRAD HALL & ASSOCIATES, INC.. GASOHOL, REGULAR UNLEADED (GUR), GASOLINE, REGULAR UNLEADED (MUR), RED-DYED DIESEL ULSD, #1 GRADE (DSS), FUEL ETHANOL (E85)(E8), AND DIESEL FUEL ULSD, #2 GRADE (DS2)

Who is the contractor on this award?

The obligated recipient is BRAD HALL & ASSOCIATES, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $50.6 million.

What is the period of performance?

Start: 2010-10-01. End: 2013-09-30.

What was the specific justification for excluding sources in this 'Full and Open Competition After Exclusion of Sources' award?

The provided data does not specify the exact justification for excluding sources. Typically, such a designation implies that the agency determined that only one or a limited number of responsible sources were capable of meeting the agency's needs, or that full and open competition was not in the best interest of the Government due to specific circumstances. This could be due to unique technical requirements, proprietary technology, or urgent needs that only a particular contractor could fulfill within the required timeframe. Without further documentation from the Defense Logistics Agency (DLA), the precise reasons remain unknown, but it suggests a deviation from standard competitive bidding processes.

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

The economic price adjustment (EPA) clause in this contract allows for modifications to the contract price based on fluctuations in specific economic factors, such as the cost of raw materials (fuel prices), labor, or transportation. In a volatile market for petroleum products, an EPA can protect both the contractor from losses due to unforeseen cost increases and the government from paying excessively inflated prices if market conditions improve. However, it introduces uncertainty in the final cost. If fuel prices rose significantly during the contract period, the total expenditure of $50.6 million could have been higher than if it were a firm fixed-price contract, assuming prices remained stable or decreased. Conversely, if prices fell, the government might have paid more than necessary.

What is the typical profit margin for petroleum product wholesalers serving the Department of Defense?

Determining the typical profit margin for petroleum product wholesalers serving the Department of Defense (DoD) is complex and not directly derivable from the contract data alone. Profit margins in this sector are influenced by numerous factors, including the volume of sales, efficiency of operations, transportation logistics, market competition, and the specific terms of the contract (e.g., fixed-price vs. cost-plus). While the contract value is $50.6 million, this represents the total revenue, not profit. Profit margins for wholesale fuel distributors can vary widely, often ranging from 1-5% net profit on revenue, but this can be higher or lower depending on the specific market conditions and the value-added services provided. The 'Fixed Price with Economic Price Adjustment' structure suggests the contractor aims to cover costs and achieve a reasonable profit while managing market risks.

How does the Defense Logistics Agency (DLA) benchmark fuel prices for contracts like this?

The Defense Logistics Agency (DLA) typically benchmarks fuel prices by referencing established market indices and published price lists for various fuel types. For instance, they might use indices like the Argus Media or Platts assessments for different fuel grades and regions. The DLA also maintains historical pricing data and conducts market research to understand prevailing commercial rates. For contracts with Economic Price Adjustment (EPA), the benchmark is often tied to specific indices outlined in the contract itself, allowing for adjustments based on market movements. The agency aims to secure fuel at competitive prices that reflect market conditions while ensuring supply reliability for military operations.

What is the significance of the NAICS code 424720 for this contract?

The North American Industry Classification System (NAICS) code 424720 signifies 'Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals).' This classification indicates that the contractor, Brad Hall & Associates, Inc., operates as a wholesale distributor of fuels and related products, but not necessarily as a primary producer or a retail fuel station. This means their role likely involves procuring large quantities of fuel from refineries or terminals and then distributing it to end-users, such as the Department of Defense. This code helps categorize the business activity and understand its position within the broader energy supply chain, focusing on the distribution and wholesale aspect rather than direct extraction or retail sales.

Industry Classification

NAICS: Wholesale Trade › Petroleum and Petroleum Products Merchant Wholesalers › Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)

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: SP060010R0214

Offers Received: 33

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

Evaluated Preference: NONE

Contractor Details

Address: 280 S HOLMES AVE, IDAHO FALLS, ID, 02

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

Financial Breakdown

Contract Ceiling: $68,361,183

Exercised Options: $68,361,183

Current Obligation: $50,598,104

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D8506

IDV Type: IDC

Timeline