DoD awards $277.6M contract for aviation and naval fuels to Par Hawaii Refining LLC

Contract Overview

Contract Amount: $277,550,351 ($277.6M)

Contractor: PAR Hawaii Refining LLC

Awarding Agency: Department of Defense

Start Date: 2012-05-25

End Date: 2013-03-31

Contract Duration: 310 days

Daily Burn Rate: $895.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 10

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: TURBINE FUEL, AVIATION JP8 (78,550,000 USG), JP5 (7,170,000 USG) AND NAVAL DISTILLATE, F76 (31,687,500 USG) FOB ORIGIN PIPELINE EX KAPOLEI, HI.

Place of Performance

Location: KAPOLEI, HONOLULU County, HAWAII, 96707

State: Hawaii Government Spending

Plain-Language Summary

Department of Defense obligated $277.6 million to PAR HAWAII REFINING LLC for work described as: TURBINE FUEL, AVIATION JP8 (78,550,000 USG), JP5 (7,170,000 USG) AND NAVAL DISTILLATE, F76 (31,687,500 USG) FOB ORIGIN PIPELINE EX KAPOLEI, HI. Key points: 1. The contract covers significant volumes of JP8, JP5, and F76 fuels. 2. Competition was full and open, suggesting a competitive pricing environment. 3. The contract type, Fixed Price with Economic Price Adjustment, introduces some risk. 4. The Defense Logistics Agency is the awarding agency, indicating a focus on military readiness.

Value Assessment

Rating: good

The contract value of $277.6 million for over 117 million gallons of fuel suggests a per-gallon cost of approximately $2.37. This is within a reasonable range for bulk fuel purchases, especially considering the logistical complexities of delivery.

Cost Per Unit: $2.37 per gallon (estimated)

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which typically drives competitive pricing. The fixed-price with economic price adjustment structure allows for some fluctuation based on market conditions, but the initial award price is expected to be competitive.

Taxpayer Impact: The use of full and open competition is beneficial for taxpayers, as it aims to secure the best possible prices for essential fuel supplies for the Department of Defense.

Public Impact

Ensures critical fuel supply for military operations in Hawaii and potentially the Pacific region. Supports national security by maintaining readiness of aviation and naval assets. Impacts the regional fuel market and logistics infrastructure in Hawaii.

Waste & Efficiency Indicators

Waste Risk Score: 89 / 10

Warning Flags

Economic price adjustment clause may lead to cost overruns if fuel prices spike significantly.
Geographic concentration of supplier (Hawaii) could pose supply chain risks.

Positive Signals

Full and open competition likely secured a competitive base price.
Contract supports essential defense logistics and readiness.
Fixed-price element provides some cost certainty.

Sector Analysis

This contract falls within the petroleum refining and distribution sector, crucial for energy supply chains. Defense contracts for fuel are significant, often benchmarked against commercial market prices and global commodity trends.

Small Business Impact

The data indicates the award went to Par Hawaii Refining LLC, a large refiner. There is no explicit indication of small business participation in this specific award, which is common for large-scale fuel procurement contracts.

Oversight & Accountability

The Defense Logistics Agency is responsible for managing this contract, ensuring timely delivery and adherence to specifications. Oversight would focus on fuel quality, delivery schedules, and price adjustments.

Related Government Programs

Petroleum Refineries
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Economic Price Adjustment (EPA) clause introduces price volatility risk.
Sole-source refinery location in Hawaii may present logistical challenges and supply chain risks.
Dependence on a single supplier for a large volume of critical fuel.
Contract duration (310 days) is relatively short, requiring frequent re-procurement.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $277.6 million to PAR HAWAII REFINING LLC. TURBINE FUEL, AVIATION JP8 (78,550,000 USG), JP5 (7,170,000 USG) AND NAVAL DISTILLATE, F76 (31,687,500 USG) FOB ORIGIN PIPELINE EX KAPOLEI, HI.

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 $277.6 million.

What is the period of performance?

Start: 2012-05-25. End: 2013-03-31.

What is the historical pricing trend for JP8, JP5, and F76 fuels under similar contracts awarded by the DLA?

Analyzing historical pricing data for these specific fuel types under similar DLA contracts would provide a more robust benchmark. Factors like contract duration, volume, delivery locations, and economic price adjustment clauses significantly influence pricing. Comparing this contract's estimated per-unit cost against historical averages, adjusted for market conditions at the time of award, would reveal if the $2.37/gallon estimate represents a favorable or unfavorable price point for the government.

What are the specific triggers and caps for the economic price adjustment (EPA) clause in this contract?

The economic price adjustment clause's specifics are critical for assessing risk. Understanding the benchmark indices used (e.g., West Texas Intermediate crude oil prices, specific fuel market indices) and the formula for adjustment is key. Caps or floors on the EPA would limit potential cost increases or decreases. Without these details, it's difficult to quantify the precise financial risk to taxpayers if market prices deviate significantly from the initial award assumptions.

How does the geographic location of the supplier (Hawaii) impact delivery costs and potential supply chain vulnerabilities?

The sole-source refinery location in Hawaii significantly impacts logistics. While FOB origin pipeline simplifies initial delivery, the isolation of the islands can increase vulnerability to disruptions (e.g., natural disasters, shipping issues). Delivery costs to potential forward operating bases from Hawaii are factored into the overall price. Assessing alternative sourcing options or contingency plans for fuel supply in the region would highlight potential risks and the effectiveness of this contract's strategy.

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: SP060011R0161

Offers Received: 10

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: $277,550,351

Exercised Options: $277,550,351

Current Obligation: $277,550,351

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060012D0552

IDV Type: IDC

Timeline