DoD's $28.7M Turbine Fuel Contract Awarded to Hermes Consolidated LLC Amidst Full and Open Competition

Contract Overview

Contract Amount: $28,754,625 ($28.8M)

Contractor: Hermes Consolidated LLC

Awarding Agency: Department of Defense

Start Date: 2011-12-19

End Date: 2012-09-30

Contract Duration: 286 days

Daily Burn Rate: $100.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 24

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION (JP8)

Place of Performance

Location: NEWCASTLE, WESTON County, WYOMING, 82701

State: Wyoming Government Spending

Plain-Language Summary

Department of Defense obligated $28.8 million to HERMES CONSOLIDATED LLC for work described as: TURBINE FUEL, AVIATION (JP8) Key points: 1. The contract for aviation turbine fuel (JP8) was awarded to Hermes Consolidated LLC for $28.7 million. 2. Full and open competition was utilized, suggesting a competitive bidding process. 3. The contract duration is 286 days, ending September 30, 2012. 4. The award was made by the Defense Logistics Agency for the Department of Defense. 5. The North American Industry Classification System (NAICS) code is 324110 (Petroleum Refineries).

Value Assessment

Rating: fair

The contract's fixed-price with economic price adjustment structure aims to manage fuel price volatility. Benchmarking against similar fuel contracts would be necessary to fully assess pricing fairness, but the base award amount of $28.7M for a 286-day duration provides a starting point.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating multiple bidders likely participated. This method generally promotes competitive pricing and ensures the government receives the best value. The specific number of bids received is not detailed, which limits a deeper analysis of price discovery.

Taxpayer Impact: The use of full and open competition is intended to ensure taxpayer funds are used efficiently by securing competitive pricing for essential aviation fuel.

Public Impact

Ensures the availability of critical aviation fuel for military operations. Supports the Department of Defense's logistical capabilities. The economic price adjustment clause may impact the final cost to taxpayers based on market fluctuations. The contract's fixed-price nature provides some cost certainty, while the adjustment clause offers flexibility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of detailed bid information limits assessment of competitive intensity.
Economic price adjustment introduces potential cost overruns if fuel prices rise significantly.
Contract duration is relatively short, potentially leading to frequent re-solicitation costs.

Positive Signals

Awarded under full and open competition, promoting market fairness.
Addresses a critical need for aviation fuel for defense purposes.
Fixed-price element provides a baseline cost control.

Sector Analysis

The petroleum refining sector is characterized by significant capital investment and global price volatility. Defense Logistics Agency contracts for fuel are crucial for maintaining operational readiness. Benchmarks for fuel procurement vary widely based on type, volume, and delivery location.

Small Business Impact

The data indicates the awardee is Hermes Consolidated LLC. There is no specific information provided regarding small business participation or subcontracting goals within this contract, nor does it appear to be set aside for small businesses.

Oversight & Accountability

The Defense Logistics Agency is responsible for managing the procurement and distribution of fuel for the DoD. Oversight would involve ensuring contract compliance, quality control of the fuel, and adherence to delivery schedules. The fixed-price with economic price adjustment structure requires monitoring of market price indices.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Potential for cost increases due to economic price adjustment.
Limited transparency on the number of bids received.
Short contract duration may lead to administrative inefficiencies.
No indication of small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.8 million to HERMES CONSOLIDATED LLC. TURBINE FUEL, AVIATION (JP8)

Who is the contractor on this award?

The obligated recipient is HERMES CONSOLIDATED LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $28.8 million.

What is the period of performance?

Start: 2011-12-19. End: 2012-09-30.

What was the total number of bids received under the full and open competition, and how did the awarded price compare to the government estimate?

The provided data does not specify the number of bids received for this contract. Without this information, it's impossible to definitively assess the level of competition or how the awarded price of $28.7 million compared to the government's estimate. This lack of detail hinders a thorough evaluation of the price discovery process and potential savings achieved.

How did the economic price adjustment clause impact the final cost of the turbine fuel compared to a fixed-price contract?

The contract utilized a 'Fixed Price with Economic Price Adjustment' (FPEPA) clause. This means the final price could deviate from the initial $28.7 million based on fluctuations in fuel market indices. To assess the impact, one would need to compare the final invoiced amount against what would have been paid under a purely fixed-price contract, considering the actual market price movements during the contract period (December 2011 - September 2012).

What is the typical cost per gallon or barrel for JP8 fuel procured by the DoD, and how does this contract's implied unit cost compare?

Determining the exact implied unit cost requires the total quantity of fuel procured under the $28.7 million award. Assuming a standard barrel of 42 gallons, and without the total volume, a precise comparison is difficult. However, historical data suggests DoD fuel costs can range significantly based on market conditions, delivery location, and contract terms. A detailed analysis would involve calculating the implied unit price and benchmarking it against contemporary market rates and similar DoD fuel contracts.

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: SP060011R0061

Offers Received: 24

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

Evaluated Preference: NONE

Contractor Details

Address: 1600 BROADWAY STE 2300, DENVER, CO, 90

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $28,754,625

Exercised Options: $28,754,625

Current Obligation: $28,754,625

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060012D0543

IDV Type: IDC

Timeline