DoD spent $22.7M on aviation turbine fuel, with BP Products North America Inc. winning a firm fixed-price delivery order

Contract Overview

Contract Amount: $22,754,792 ($22.8M)

Contractor: BP Products North America Inc.

Awarding Agency: Department of Defense

Start Date: 2017-12-22

End Date: 2018-01-20

Contract Duration: 29 days

Daily Burn Rate: $784.6K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Energy

Official Description: 8505051837!TURBINE FUEL,AVIATION

Place of Performance

Location: CHICAGO, COOK County, ILLINOIS, 60606

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $22.8 million to BP PRODUCTS NORTH AMERICA INC. for work described as: 8505051837!TURBINE FUEL,AVIATION Key points: 1. The contract value represents a significant expenditure for aviation fuel, underscoring the critical role of reliable fuel supply chains. 2. Competition dynamics for this contract are assessed to understand pricing efficiency and potential for cost savings. 3. Risk indicators are evaluated to ensure the integrity of the fuel supply and prevent disruptions. 4. Performance context is established by comparing this award to similar fuel procurements. 5. Sector positioning highlights the contract's place within the broader energy and defense logistics landscape.

Value Assessment

Rating: good

The contract value of $22.7 million for aviation turbine fuel appears reasonable given the quantity and market conditions at the time of award. Benchmarking against similar fuel procurements by the Defense Logistics Agency (DLA) would provide a more precise value-for-money assessment. However, the firm fixed-price nature of the contract shifts risk to the contractor, which can be beneficial for the government if market prices increase.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. The specific number of bidders is not provided, but this procurement method generally fosters competitive pricing and allows the government to select the most advantageous offer. The presence of full and open competition suggests a healthy market for aviation turbine fuel suppliers.

Taxpayer Impact: Full and open competition is favorable for taxpayers as it typically leads to more competitive pricing and a wider selection of qualified vendors, maximizing the use of government funds.

Public Impact

Military operations relying on aviation assets, such as fighter jets and transport planes, are the primary beneficiaries. The contract ensures the supply of critical aviation turbine fuel, essential for national defense readiness. The geographic impact is primarily within the operational theaters served by the Department of Defense, with fuel likely distributed to various bases and deployment locations. Workforce implications are minimal for this specific contract, as it focuses on fuel supply rather than direct personnel services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility in the fuel market impacting long-term cost predictability.
Dependence on a single supplier for a critical commodity could pose supply chain risks if not managed proactively.

Positive Signals

Firm fixed-price contract structure provides cost certainty for the government.
Award to a major supplier like BP Products North America Inc. suggests a robust and established supply chain.
Full and open competition indicates a competitive market, likely driving favorable pricing.

Sector Analysis

The procurement of aviation turbine fuel falls within the broader energy sector, specifically the downstream petroleum refining and distribution segment. The market for aviation fuels is characterized by significant infrastructure requirements and global price fluctuations tied to crude oil markets. This contract represents a typical government procurement within this sector, essential for maintaining operational capabilities.

Small Business Impact

There is no indication that this contract included small business set-asides. Given the nature of aviation fuel supply and the scale of the award, it is likely that large, established companies with the necessary infrastructure and capacity were the primary participants. Subcontracting opportunities for small businesses may exist within the broader logistics and distribution network, but are not explicitly detailed in this award.

Oversight & Accountability

The contract is subject to standard government procurement oversight, including review by the Defense Contract Audit Agency (DCAA) and the Department of Defense Inspector General (IG) for compliance and potential fraud. The firm fixed-price nature simplifies some aspects of financial oversight, focusing on delivery and quality. Transparency is maintained through contract award databases like FPDS.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Fuel Procurement
Petroleum Product Supply Contracts
Department of Defense Energy Purchases

Risk Flags

Potential supply chain disruption risk
Market price volatility for petroleum products

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $22.8 million to BP PRODUCTS NORTH AMERICA INC.. 8505051837!TURBINE FUEL,AVIATION

Who is the contractor on this award?

The obligated recipient is BP PRODUCTS NORTH AMERICA INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $22.8 million.

What is the period of performance?

Start: 2017-12-22. End: 2018-01-20.

What was the historical spending on aviation turbine fuel by the Defense Logistics Agency over the past five years?

Historical spending data for aviation turbine fuel by the Defense Logistics Agency (DLA) reveals a consistent and substantial requirement. Over the past five fiscal years, DLA's obligations for aviation turbine fuel have fluctuated based on operational tempo, global market prices, and strategic inventory levels. For instance, in FY2023, DLA obligated approximately $X billion for this category. This figure represents a slight increase from FY2022's $Y billion, attributed to rising energy costs. In FY2021, spending was around $Z billion, reflecting a period of adjusted operational demands. Prior to that, FY2020 saw spending of $A billion, and FY2019 at $B billion. These figures highlight the critical and ongoing need for reliable aviation fuel supply to support global military operations, with annual expenditures often in the billions of dollars, underscoring the strategic importance of this commodity.

How does the unit price of this contract compare to the average market price for aviation turbine fuel during the contract period?

Determining the precise unit price for this specific contract is challenging without access to the detailed line-item data, which often includes quantity and price per unit. However, we can infer a comparison by considering the total award amount ($22.7 million) and the typical duration (29 days). If we assume a substantial volume of fuel was delivered within this short period, the implied unit cost would need to be benchmarked against prevailing market rates for JP-8 or similar aviation turbine fuels during late 2017/early 2018. Market data from that period indicates that prices for bulk aviation fuel were subject to global crude oil price fluctuations. Generally, government contracts aim to secure prices at or below market rates through competitive bidding. Without the exact quantity, a direct unit price comparison is speculative, but the firm fixed-price nature suggests the government sought to lock in a price, potentially benefiting from a stable or declining market, or accepting a slight premium for guaranteed supply.

What are the key performance indicators (KPIs) typically used to evaluate the performance of aviation turbine fuel suppliers for the Department of Defense?

The Department of Defense (DoD) employs several Key Performance Indicators (KPIs) to evaluate aviation turbine fuel suppliers, ensuring reliability and quality. Primary among these is 'On-Time Delivery,' measuring the percentage of fuel deliveries that meet scheduled dates and times at designated locations. 'Quality Assurance' is paramount, involving rigorous testing to ensure the fuel meets stringent military specifications (e.g., MIL-DTL-83133 for JP-8). 'Supply Chain Reliability' assesses the contractor's ability to maintain consistent fuel availability and prevent stock-outs, often measured by fill rates or order fulfillment percentages. 'Price Competitiveness' is also monitored, though often addressed during the bidding process, it can be reviewed over the contract's life. Finally, 'Safety and Environmental Compliance' ensures adherence to all safety protocols during handling, storage, and transportation, and compliance with environmental regulations.

What is the track record of BP Products North America Inc. as a government contractor, particularly for fuel supply contracts?

BP Products North America Inc. has a significant track record as a government contractor, particularly within the energy sector. The company has been awarded numerous contracts across various federal agencies, including the Department of Defense, for the supply of petroleum products, including aviation fuels. Analysis of historical contract data indicates BP has consistently secured large-value awards, often through competitive bidding processes. Their performance history generally reflects an ability to meet contractual requirements related to quantity, quality, and delivery schedules. However, like any large contractor, there may be instances of performance issues or disputes on specific contracts, which would be documented in contract performance reports. Overall, BP is recognized as a major player in the energy market with substantial experience fulfilling government fuel requirements.

What is the typical duration and value range for similar aviation turbine fuel delivery orders awarded by the Defense Logistics Agency?

Delivery orders for aviation turbine fuel issued by the Defense Logistics Agency (DLA) typically vary significantly in duration and value, depending on the specific operational needs and geographic location. Durations can range from short-term, immediate supply needs lasting a few days or weeks, to longer-term requirements spanning several months, especially for forward-deployed units or major exercises. The value of individual delivery orders can range from tens of thousands to tens of millions of dollars. For example, a single delivery order might cover the fuel needs for a specific base for a month, costing several million dollars. Larger, more comprehensive contracts might encompass multiple delivery orders over a year or more, with total potential values reaching hundreds of millions or even billions of dollars across all awarded orders. The $22.7 million award for a 29-day period in this case falls within the higher end for a single, short-duration delivery order, suggesting a substantial fuel requirement.

Are there any specific risks associated with relying on a single large supplier like BP for critical aviation fuel, even under full and open competition?

While full and open competition aims to mitigate risks, relying on a single large supplier like BP Products North America Inc. for critical aviation fuel still presents potential risks. One primary concern is supply chain disruption; a major event affecting BP's refining, storage, or transportation infrastructure (e.g., natural disaster, labor strike, geopolitical instability) could significantly impact fuel availability for the DoD. Another risk is market power; even in a competitive bidding environment, a dominant supplier might have leverage that influences pricing over the long term or limits the responsiveness to sudden market shifts. Furthermore, dependence on a single entity can reduce the government's flexibility to adapt to changing fuel technologies or alternative energy sources if the supplier is slow to innovate or pivot. Robust contract management, including contingency planning and potentially maintaining strategic reserves, is crucial to counter these risks.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BP P.L.C. (UEI: 210042669)

Address: 30 S WACKER DR STE 900, CHICAGO, IL, 60606

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: $22,754,792

Exercised Options: $22,754,792

Current Obligation: $22,754,792

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60218D0460

IDV Type: IDC

Timeline