DoD Awards $67.2M Contract to HESS CORPORATION for Petroleum Products
Contract Overview
Contract Amount: $67,215,753 ($67.2M)
Contractor: Hess Corporation
Awarding Agency: Department of Defense
Start Date: 2011-04-01
End Date: 2012-02-29
Contract Duration: 334 days
Daily Burn Rate: $201.2K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 41
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Energy
Official Description: NEW CONTRACT AWARD
Place of Performance
Location: WESTPORT, FAIRFIELD County, CONNECTICUT, 06880
Plain-Language Summary
Department of Defense obligated $67.2 million to HESS CORPORATION for work described as: NEW CONTRACT AWARD Key points: 1. Contract awarded to HESS CORPORATION for petroleum products. 2. Full and open competition was utilized. 3. The contract has a fixed price with economic price adjustment. 4. The contract duration is 334 days.
Value Assessment
Rating: fair
The contract value of $67.2M for a 334-day duration appears within a reasonable range for petroleum products, though specific per-unit pricing is not detailed. Benchmarking against similar DoD contracts for bulk fuel would provide a clearer assessment.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, suggesting a robust price discovery process. This method typically leads to competitive pricing as multiple vendors have the opportunity to bid.
Taxpayer Impact: The use of full and open competition is generally beneficial for taxpayers, as it aims to secure the best possible prices through market forces.
Public Impact
Ensures supply of essential petroleum products for military operations. Supports the Defense Logistics Agency's mission to provide logistical support. Potential for price fluctuations due to economic price adjustment clause.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic price adjustment may lead to cost overruns.
- Contract duration is relatively short, potentially requiring re-competition soon.
Positive Signals
- Awarded under full and open competition.
- Supports critical defense logistics.
Sector Analysis
The petroleum and petroleum products wholesale sector is critical for national defense, ensuring fuel availability for military operations. Spending benchmarks vary significantly based on global oil prices and contract specifics.
Small Business Impact
This contract was not awarded to a small business. Analysis of small business participation in the petroleum wholesale sector is limited for this specific award.
Oversight & Accountability
The contract falls under the purview of the Defense Logistics Agency, which has established oversight mechanisms for procurement. Accountability is maintained through contract performance monitoring and reporting requirements.
Related Government Programs
- Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals)
- Department of Defense Contracting
- Defense Logistics Agency Programs
Risk Flags
- Potential for cost increases due to economic price adjustment.
- Short contract duration may lead to frequent re-competition costs.
- No small business participation noted.
- Lack of detailed per-unit cost data for benchmarking.
Tags
petroleum-and-petroleum-products-merchan, department-of-defense, ct, do, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $67.2 million to HESS CORPORATION. NEW CONTRACT AWARD
Who is the contractor on this award?
The obligated recipient is HESS CORPORATION.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $67.2 million.
What is the period of performance?
Start: 2011-04-01. End: 2012-02-29.
What is the specific impact of the economic price adjustment clause on the final cost to taxpayers?
The economic price adjustment (EPA) clause allows for changes in contract price based on fluctuations in specific economic factors, such as the cost of raw materials or labor. For petroleum products, this often ties to market indices for crude oil and refined products. While intended to protect both the contractor from unforeseen cost increases and the government from inflated initial bids, the exact impact on the final cost depends on the volatility of these indices during the contract period. Without detailed tracking of the EPA's application, the precise taxpayer impact remains uncertain but could lead to costs higher than a fixed-price contract if market prices rise significantly.
How does the fixed-price nature with EPA compare to other contract types for petroleum procurement in terms of risk?
A fixed-price contract with economic price adjustment (FPEPA) shares some risk with the government compared to a firm fixed-price (FFP) contract. Under FFP, the contractor bears all cost risk. With FPEPA, the government assumes some risk related to price fluctuations tied to the EPA's index. However, it offers more cost certainty than a cost-plus contract. For volatile commodities like petroleum, FPEPA can be a reasonable compromise, balancing cost control with the need to account for market realities and ensure contractor viability.
What is the effectiveness of using full and open competition for this type of petroleum contract?
Using full and open competition for petroleum contracts is generally effective in promoting price discovery and achieving competitive pricing. It allows multiple qualified vendors to bid, fostering a market-driven environment. This approach is effective in ensuring the government receives fair market value, provided the solicitation is well-defined and the market has sufficient capable suppliers. For essential commodities like petroleum, this method is crucial for maximizing value and ensuring supply chain resilience.
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
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Solicitation ID: SP060010R0228
Offers Received: 41
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Address: 1 HESS PLZ, WOODBRIDGE, NJ, 06
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: $67,215,753
Exercised Options: $67,215,753
Current Obligation: $67,215,753
Contract Characteristics
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SP060011D8540
IDV Type: IDC
Timeline
Start Date: 2011-04-01
Current End Date: 2012-02-29
Potential End Date: 2012-02-29 00:00:00
Last Modified: 2012-03-28
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