Morgan Stanley Capital Group Inc. awarded $12.1M contract for Northeast Heating Oil Reserve storage
Contract Overview
Contract Amount: $12,065,778 ($12.1M)
Contractor: Morgan Stanley Capital Group Inc.
Awarding Agency: Department of Energy
Start Date: 2007-10-01
End Date: 2011-09-30
Contract Duration: 1,460 days
Daily Burn Rate: $8.3K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 3
Pricing Type: FIRM FIXED PRICE
Sector: Energy
Official Description: STORAGE OF NORTHEAST HEATING OIL RESERVE
Place of Performance
Location: NEW HAVEN, NEW HAVEN County, CONNECTICUT, 06510
Plain-Language Summary
Department of Energy obligated $12.1 million to MORGAN STANLEY CAPITAL GROUP INC. for work described as: STORAGE OF NORTHEAST HEATING OIL RESERVE Key points: 1. Contract value represents a significant investment in national energy security infrastructure. 2. Full and open competition suggests a potentially competitive bidding process. 3. Fixed-price contract type may offer cost certainty for the government. 4. Contract duration of four years indicates a long-term need for storage services. 5. The award to a major financial institution highlights the intersection of energy logistics and finance. 6. Geographic focus on Connecticut for storage is critical for regional energy supply.
Value Assessment
Rating: good
The contract value of $12.1 million over four years for storing heating oil is difficult to benchmark without specific per-unit storage costs or market rates for similar facilities in the Northeast. However, the firm fixed-price structure suggests the government aimed for predictable costs. Given the strategic importance of the Northeast Heating Oil Reserve, the pricing is likely assessed against national security needs rather than purely commercial market rates. Further analysis would require understanding the volume of oil stored and the specific services provided.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. With three bidders participating, the competition level appears moderate. This suggests that while multiple entities were interested, the market for this specialized service might be somewhat concentrated. The presence of multiple bidders generally supports price discovery and can lead to more favorable pricing for the government compared to sole-source or limited competition scenarios.
Taxpayer Impact: A competitive bidding process helps ensure that taxpayer dollars are used efficiently by driving down costs through market forces. The moderate number of bidders suggests a reasonable level of competition, likely preventing excessive pricing.
Public Impact
Benefits the Department of Energy in maintaining strategic energy reserves. Ensures the availability of heating oil for the Northeast region during emergencies. Supports regional energy security and economic stability in Connecticut and surrounding states. Indirectly impacts consumers in the Northeast by mitigating potential price spikes due to supply disruptions. Maintains operational readiness of critical national energy infrastructure.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Potential for price volatility in the broader energy market impacting storage costs.
- Dependence on a single contractor for a critical national security asset.
- Geopolitical events could affect the supply and demand of heating oil, indirectly impacting reserve management.
Positive Signals
- Awarded through full and open competition, indicating a robust selection process.
- Firm fixed-price contract provides cost certainty for the government.
- Long-term contract duration suggests a stable and ongoing need for the service.
- Strategic location of storage in Connecticut is vital for regional energy security.
Sector Analysis
The energy storage sector is critical for national security and market stability, particularly for commodities like heating oil. This contract falls within the broader warehousing and storage industry, specifically serving the energy sector's need for strategic reserves. The market for specialized energy storage, especially for government reserves, is often characterized by high barriers to entry due to infrastructure requirements and regulatory compliance. Comparable spending benchmarks are difficult to ascertain without detailed cost breakdowns, but the scale of the Northeast Heating Oil Reserve suggests a significant operational footprint.
Small Business Impact
This contract does not appear to have a specific small business set-aside. Given the nature of storing large quantities of heating oil and managing a strategic reserve, the services likely require significant infrastructure and specialized expertise, which may favor larger, established companies. There is no explicit information regarding subcontracting plans for small businesses within this award notice.
Oversight & Accountability
Oversight for this contract would primarily fall under the Department of Energy's contracting and program management offices. As a firm fixed-price contract, the primary accountability measure is the successful delivery of the contracted storage services as specified. Transparency is generally maintained through contract award notices and public reporting mechanisms. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.
Related Government Programs
- Strategic Petroleum Reserve
- Northeast Home Heating Oil Reserve
- Energy Infrastructure Security Contracts
- Commodity Storage Contracts
Risk Flags
- Potential for market volatility impacting commodity prices.
- Reliance on a single contractor for critical infrastructure.
- Geographic concentration of storage facilities.
Tags
energy, storage, heating-oil, northeast, connecticut, department-of-energy, firm-fixed-price, full-and-open-competition, strategic-reserve, commodity-storage
Frequently Asked Questions
What is this federal contract paying for?
Department of Energy awarded $12.1 million to MORGAN STANLEY CAPITAL GROUP INC.. STORAGE OF NORTHEAST HEATING OIL RESERVE
Who is the contractor on this award?
The obligated recipient is MORGAN STANLEY CAPITAL GROUP INC..
Which agency awarded this contract?
Awarding agency: Department of Energy (Department of Energy).
What is the total obligated amount?
The obligated amount is $12.1 million.
What is the period of performance?
Start: 2007-10-01. End: 2011-09-30.
What is the historical spending trend for the Northeast Heating Oil Reserve storage contracts?
Historical spending data for the Northeast Heating Oil Reserve (NEHOR) storage contracts prior to this award is not readily available in the provided data snippet. However, the Department of Energy manages various strategic energy reserves, and spending on their maintenance and operation can fluctuate based on market conditions, geopolitical events, and government policy priorities. Analyzing past contracts for NEHOR, if available, would reveal trends in contract duration, value, and the number of bidders, providing context for the current $12.1 million award. It's important to note that the NEHOR itself was established in response to specific market vulnerabilities, suggesting that its funding and operational needs are tied to broader energy security concerns.
How does the per-unit cost of storing heating oil under this contract compare to commercial storage rates?
A direct comparison of the per-unit cost of storing heating oil under this contract to commercial storage rates is not possible with the provided data. The contract value of $12.1 million is for the entire duration (four years) and likely encompasses more than just physical storage space; it may include security, maintenance, and logistical services related to the Northeast Heating Oil Reserve. Commercial storage rates vary significantly based on location, volume, duration, and the specific services offered. Without knowing the exact volume of oil stored and the detailed service breakdown, benchmarking against commercial rates is speculative. However, government contracts for strategic assets often involve different cost structures and priorities than purely commercial operations.
What is Morgan Stanley Capital Group Inc.'s track record with government energy contracts?
Morgan Stanley Capital Group Inc. (MSCG) is a subsidiary of Morgan Stanley, a major global financial services firm. While MSCG is primarily known for its financial trading and commodity operations, it has engaged in various energy-related activities, including the storage and trading of commodities. Information on MSCG's specific track record with government energy contracts, particularly those involving physical storage of strategic reserves, is not detailed in the provided award notice. A comprehensive assessment would require reviewing other federal contract databases and Morgan Stanley's public filings to identify past performance, contract values, and any relevant government engagements in the energy sector.
What are the key performance indicators (KPIs) for this storage contract?
The provided data does not specify the key performance indicators (KPIs) for this contract. However, for a contract involving the storage of a strategic heating oil reserve, typical KPIs would likely include: 1) Maintaining the specified quantity and quality of stored heating oil, ensuring it remains within operational parameters. 2) Ensuring the security of the storage facility and the oil inventory against theft or damage. 3) Adherence to environmental and safety regulations. 4) Timeliness and effectiveness of any required product rotation or testing. 5) Responsiveness to directives from the Department of Energy, especially in emergency situations. The firm fixed-price nature suggests that meeting these performance standards is crucial for the contractor to receive full payment.
What is the strategic importance of the Northeast Heating Oil Reserve?
The Northeast Heating Oil Reserve (NEHOR) is a critical component of U.S. energy security, particularly for the Northeast region, which relies heavily on heating oil during winter months. Its strategic importance lies in its ability to mitigate supply disruptions and price volatility caused by events such as hurricanes, pipeline failures, or geopolitical tensions affecting global energy markets. By maintaining a reserve of heating oil, the government can ensure a stable supply to consumers and businesses, preventing severe economic and social impacts during periods of scarcity. This contract ensures the physical storage and readiness of a portion of that reserve.
How does the competition level (3 bidders) impact the value for taxpayers?
A competition level with three bidders suggests a moderate degree of market interest and potential for price competition. While more bidders generally lead to lower prices, three bidders indicate that the market for this specialized service is not overly concentrated, nor is it so broad that significant price discovery is guaranteed. This level of competition likely resulted in a price that is reasonably competitive, preventing the government from overpaying compared to a sole-source or limited competition scenario. However, it also means that the potential for further cost savings through increased competition might have been missed.
Industry Classification
NAICS: Transportation and Warehousing › Warehousing and Storage › Other Warehousing and Storage
Product/Service Code: LEASE/RENT FACILITIES › LEASE/RENTAL OF BUILDINGS
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Offers Received: 3
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Parent Company: Morgan Stanley (UEI: 101147130)
Address: 1585 BROADWAY, NEW YORK, NY, 90
Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $12,065,778
Exercised Options: $12,065,778
Current Obligation: $12,065,778
Timeline
Start Date: 2007-10-01
Current End Date: 2011-09-30
Potential End Date: 2011-09-30 00:00:00
Last Modified: 2012-01-11
Other Department of Energy Contracts
- Federal Contract — $48.1B (Lockheed Martin Corp)
- ,Ct::igf Contract Award De-Na0003525 to the National Technology&engineering Solutions of Sandia, LLC (ntess) for the Management and Operation of the Department of Energy, National Nuclear Security Administration's Sandia National Laboratories (SNL) — $41.7B (National Technology & Engineering Solutions of Sandia, LLC)
- Management and Operation of the OAK Ridge National Laboratory — $40.8B (Ut-Battelle LLC)
- TAS::89 0240::TAS This Performance-Based Management Contract (pbmc) IS for the Management and Operation of the Lawrence Livermore National Laboratory (llnl). the Contractor Shall, in Accordance With the Provisions of This Contract, Accomplish the Missions and Programs Assigned by the U.S. Department of Energy (DOE) and Manage and Operate the Laboratory. the Laboratory IS ONE of Does Office of Defense Program Multi-Program Laboratories. the Laboratory IS a Federally Funded Research and Development Institution (established in Accordance With the Federal Acquisition Regulation (FAR) Part 35 and Operated Under This Management and Operating (M&O) Contract, AS Defined in FAR 17.6 and Dear 917.6 — $40.8B (Lawrence Livermore National Security, LLC)
- M&O of Lanl BR of U of CA — $35.3B (Regents of the University of California, the)