DoD's $237.7M JP5/JP8/F76 Fuel Contract Awarded to Par Hawaii Refining LLC

Contract Overview

Contract Amount: $237,706,418 ($237.7M)

Contractor: PAR Hawaii Refining LLC

Awarding Agency: Department of Defense

Start Date: 2010-12-17

End Date: 2011-10-30

Contract Duration: 317 days

Daily Burn Rate: $749.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 20

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION JP5; TURBINE FUEL JP8; NAVAL DISTILLATE FUEL F76 OF SOLICITATION SP0600-10-R-0161.

Place of Performance

Location: KAPOLEI, HONOLULU County, HAWAII, 96707

State: Hawaii Government Spending

Plain-Language Summary

Department of Defense obligated $237.7 million to PAR HAWAII REFINING LLC for work described as: TURBINE FUEL, AVIATION JP5; TURBINE FUEL JP8; NAVAL DISTILLATE FUEL F76 OF SOLICITATION SP0600-10-R-0161. Key points: 1. The contract covers critical aviation and naval fuels, essential for military operations. 2. Par Hawaii Refining LLC, a single entity, secured the award. 3. The contract's fixed-price with economic price adjustment structure carries potential cost escalation risks. 4. Spending falls within the broad 'Petroleum Refineries' sector, with significant government reliance on fuel suppliers.

Value Assessment

Rating: good

The award amount of $237.7M for a one-year contract appears substantial, but without specific per-gallon benchmarks or historical data for these specialized fuels, a precise value assessment is difficult. The fixed-price with economic price adjustment (FPEPA) clause introduces variability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting a competitive bidding process. However, the award to a single entity, Par Hawaii Refining LLC, indicates they were the most advantageous offeror based on the evaluation criteria.

Taxpayer Impact: The competitive nature of the award aims to secure the best possible price for taxpayers, though the economic price adjustment clause could lead to increased costs if market prices for fuel rise significantly.

Public Impact

Ensures consistent supply of critical fuels for Department of Defense operations in the Pacific region. Supports a key industry player in Hawaii's refining sector. Potential for price fluctuations due to the economic price adjustment clause impacts budget predictability.

Waste & Efficiency Indicators

Waste Risk Score: 75 / 10

Warning Flags

Economic price adjustment clause may lead to cost overruns.
Single awardee concentration risk.
Short contract duration (less than a year) may limit long-term price stability.

Positive Signals

Awarded under full and open competition.
Ensures supply of critical national defense resources.
Supports a domestic refiner.

Sector Analysis

This contract falls under the Petroleum Refineries (NAICS 324110) sector. Government spending on fuel is a consistent and significant expenditure, particularly for defense agencies requiring specialized fuels like JP5, JP8, and F76.

Small Business Impact

The data indicates this contract was not set aside for small businesses and was awarded to Par Hawaii Refining LLC, a large refiner. There is no indication of small business participation in this specific award.

Oversight & Accountability

The Department of Defense, through the Defense Logistics Agency, managed this procurement. Standard oversight mechanisms for contract performance and financial reporting would apply. The fixed-price with economic price adjustment requires careful monitoring of market indices.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Potential for cost escalation due to economic price adjustment.
Single awardee concentration risk.
Dependence on a specific geographic location (Hawaii) for supply.
Short contract duration may not leverage long-term price stability.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $237.7 million to PAR HAWAII REFINING LLC. TURBINE FUEL, AVIATION JP5; TURBINE FUEL JP8; NAVAL DISTILLATE FUEL F76 OF SOLICITATION SP0600-10-R-0161.

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 $237.7 million.

What is the period of performance?

Start: 2010-12-17. End: 2011-10-30.

What is the historical price trend for JP5, JP8, and F76 fuels, and how has the economic price adjustment clause impacted costs on similar contracts?

Analyzing historical price trends for these specialized military fuels is crucial. The economic price adjustment (EPA) clause allows for price changes based on specified market indices, typically tied to crude oil prices or other relevant benchmarks. On similar contracts, EPA clauses can lead to significant cost increases during periods of high market volatility, potentially exceeding initial budget estimates and impacting overall value for the government if not carefully managed and monitored.

What are the specific risks associated with relying on a single supplier, Par Hawaii Refining LLC, for these critical fuels in the Pacific region?

Sole reliance on Par Hawaii Refining LLC presents supply chain risks, including potential disruptions due to refinery issues, natural disasters affecting Hawaii, or geopolitical events impacting feedstock availability. If the sole supplier faces operational challenges, the Department of Defense could experience fuel shortages, impacting readiness and operational capabilities. This concentration risk necessitates robust contingency planning and potentially exploring alternative sourcing strategies.

How effectively does the fixed-price with economic price adjustment structure balance cost control with ensuring adequate supply of these specialized fuels?

The FPEPA structure attempts to balance cost control by setting a base price while allowing for market fluctuations, aiming to ensure supply availability. However, its effectiveness hinges on the chosen indices and the volatility of the fuel market. If market prices rise sharply, the government may end up paying significantly more than initially anticipated, potentially undermining cost control. Conversely, if prices fall, the government benefits from the adjustment. Effective management requires diligent tracking of indices and negotiation.

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: SP060010R0161

Offers Received: 20

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: $237,706,418

Exercised Options: $237,706,418

Current Obligation: $237,706,418

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0454

IDV Type: IDC

Timeline