DoD's $38.6M Sinclair Oil contract for petroleum refineries shows fair value with 20 bids

Contract Overview

Contract Amount: $38,613,275 ($38.6M)

Contractor: Sinclair OIL Corporation

Awarding Agency: Department of Defense

Start Date: 2010-12-17

End Date: 2011-10-31

Contract Duration: 318 days

Daily Burn Rate: $121.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 20

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: JP8

Place of Performance

Location: SALT LAKE CITY, SALT LAKE County, UTAH, 84102

State: Utah Government Spending

Plain-Language Summary

Department of Defense obligated $38.6 million to SINCLAIR OIL CORPORATION for work described as: JP8 Key points: 1. Contract awarded at a competitive price point, indicating good value for taxpayer dollars. 2. Strong competition with 20 bidders suggests a healthy market for petroleum refining services. 3. Fixed Price with Economic Price Adjustment (EPA) contract type introduces some cost fluctuation risk. 4. Contract duration of 318 days is relatively short, suggesting a focused scope of work. 5. Awarded to a single entity, Sinclair Oil Corporation, for specialized petroleum refining. 6. Geographic focus on Utah (UT) for this specific award.

Value Assessment

Rating: good

The contract's value of $38.6 million appears reasonable given the nature of petroleum refining services. Benchmarking against similar contracts for refinery operations or fuel supply would provide a more precise assessment, but the presence of 20 bids suggests competitive pricing. The fixed-price structure with economic price adjustment indicates an effort to balance cost certainty with market volatility.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, with 20 bids received. This high level of competition is a positive indicator, suggesting that the solicitation was widely disseminated and that multiple capable vendors were interested. A robust bidding process generally leads to better price discovery and ensures that the government secures services at a market-driven rate.

Taxpayer Impact: The extensive competition in this procurement process is beneficial for taxpayers, as it likely drove down prices and ensured the government received the best possible value for its investment in petroleum refining services.

Public Impact

The Department of Defense benefits from a reliable supply of refined petroleum products. Services delivered include the refining of petroleum, crucial for military operations and fuel availability. Geographic impact is concentrated in Utah, where the refining activities or fuel distribution likely occur. Workforce implications include employment opportunities within the petroleum refining sector in Utah.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if market prices for crude oil or refining inputs increase significantly.
Reliance on a single contractor for this specific award, despite open competition, concentrates execution risk.
The fixed-price nature, even with EPA, may not fully insulate the government from all price volatility.

Positive Signals

Full and open competition with 20 bidders indicates a robust and accessible market.
The award to a known entity like Sinclair Oil Corporation suggests a degree of contractor reliability.
The contract's specific scope and duration suggest a well-defined requirement, reducing ambiguity.

Sector Analysis

The petroleum refining sector is a critical component of the energy industry, transforming crude oil into usable fuels and other products. This contract falls within the broader energy and defense logistics sectors. Market size for petroleum refining is substantial, driven by both civilian and military demand. Comparable spending benchmarks would involve analyzing other DoD contracts for fuel supply, refining services, or related energy procurements.

Small Business Impact

This contract does not appear to have a small business set-aside (sb: false). There is no explicit information regarding subcontracting plans for small businesses. The award to a large corporation like Sinclair Oil Corporation suggests that the primary focus was on large-scale refining capabilities rather than small business participation.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA), responsible for providing logistics support to the U.S. Armed Forces. Accountability measures would be embedded in the contract terms, including performance standards and payment schedules. Transparency is facilitated through contract databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Fuel Supply Center contracts
Petroleum product procurement
Energy sector contracts
Fixed-price with economic adjustment contracts

Risk Flags

Potential for cost increases due to Economic Price Adjustment (EPA) clause.
Concentration of execution risk with a single prime contractor.
Lack of explicit small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.6 million to SINCLAIR OIL CORPORATION. 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 $38.6 million.

What is the period of performance?

Start: 2010-12-17. End: 2011-10-31.

What is Sinclair Oil Corporation's track record with the Department of Defense for similar petroleum refining contracts?

Sinclair Oil Corporation has a history of receiving contracts from the Department of Defense, particularly through the Defense Logistics Agency (DLA). While this specific contract (JP8) for petroleum refining in Utah is a notable award, their broader engagement with DoD likely includes various fuel supply and related services. Analyzing past performance data, including any reported issues or successes on previous DoD contracts, would provide a clearer picture of their reliability and capability in fulfilling defense requirements. Information on contract modifications, timely delivery, and quality of products/services on prior awards would be crucial for a comprehensive assessment of their track record.

How does the awarded price of $38.6 million compare to market rates for petroleum refining services during the contract period?

Determining the precise market rate for petroleum refining services during the contract period (2010-2011) requires access to historical industry pricing data, which is not publicly available in detail. However, the fact that 20 bids were received under full and open competition suggests that the market was competitive. The 'Fixed Price with Economic Price Adjustment' (EPA) clause indicates that the base price was set, but adjustments were allowed based on fluctuations in the cost of raw materials or other economic factors. Without specific benchmark data for refining capacity or output during that timeframe, a direct comparison is difficult. The competitive bidding process itself serves as an indicator that the awarded price was likely within a reasonable market range at the time of award.

What are the primary risks associated with the 'Fixed Price with Economic Price Adjustment' (EPA) contract type for this petroleum refining service?

The primary risk associated with a Fixed Price with Economic Price Adjustment (EPA) contract for petroleum refining lies in cost volatility. While the fixed price component provides a baseline cost, the EPA allows for adjustments based on changes in economic factors, most notably the price of crude oil and other inputs. If the cost of these inputs rises significantly during the contract period, the total cost to the government could exceed initial projections, potentially leading to budget overruns. Conversely, if input costs decrease, the government might benefit from lower prices. The government bears the risk of price increases, while the contractor is protected against significant market fluctuations, shifting some of the financial uncertainty.

What is the estimated impact of this contract on the small business ecosystem in Utah?

Given that this contract was awarded under full and open competition and the prime contractor is Sinclair Oil Corporation, a large entity, the direct impact on the small business ecosystem in Utah is likely minimal. There is no indication of a small business set-aside or specific subcontracting goals for small businesses within the provided data. While Sinclair Oil Corporation may utilize local small businesses for support services or supplies indirectly, the contract itself does not appear designed to directly stimulate small business growth or participation in the petroleum refining sector. Further investigation into subcontracting plans would be needed for a definitive assessment.

How does the geographic focus on Utah influence the overall strategy and cost-effectiveness of this DoD petroleum contract?

The geographic focus on Utah (UT) for this specific petroleum refining contract suggests a localized requirement, potentially related to military installations or fuel depots within or near the state. This focus can enhance cost-effectiveness by reducing transportation costs and ensuring timely delivery of refined products to the intended end-users. By concentrating the award in a specific region, the Defense Logistics Agency (DLA) can streamline logistical operations and potentially leverage existing infrastructure. However, it also means that the competitive pool might be more limited compared to a national solicitation, although the 20 bids received indicate sufficient interest. The strategy likely aims to meet a specific regional demand efficiently.

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

Offers Received: 20

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: $38,613,275

Exercised Options: $38,613,275

Current Obligation: $38,613,275

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060011D0457

IDV Type: IDC

Timeline