DoD spent $29.6M on aviation turbine fuel, with BP Products North America Inc. securing the contract

Contract Overview

Contract Amount: $29,599,906 ($29.6M)

Contractor: BP Products North America Inc.

Awarding Agency: Department of Defense

Start Date: 2018-03-16

End Date: 2018-04-07

Contract Duration: 22 days

Daily Burn Rate: $1.3M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Energy

Official Description: 8505306832!TURBINE FUEL,AVIATION

Place of Performance

Location: CHICAGO, COOK County, ILLINOIS, 60606

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $29.6 million to BP PRODUCTS NORTH AMERICA INC. for work described as: 8505306832!TURBINE FUEL,AVIATION Key points: 1. Value for money appears reasonable given the market for aviation fuel. 2. The contract was awarded under full and open competition, suggesting a competitive market. 3. Risk indicators are low due to the commodity nature of the product and established supplier. 4. Performance context is a short-term delivery order, indicating immediate operational needs. 5. Sector positioning is within the energy and defense logistics sectors. 6. The contract was a delivery order against an existing contract, suggesting a streamlined process.

Value Assessment

Rating: good

The contract value of $29.6 million for aviation turbine fuel is within expected ranges for such a commodity. Benchmarking against similar fuel contracts would provide a more precise value-for-money assessment, but the firm fixed-price structure generally offers cost certainty. The short duration of the delivery order suggests it was for immediate needs, making direct price comparisons to longer-term contracts less relevant.

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 had the opportunity to submit proposals. The specific number of bidders is not provided, but this procurement method generally fosters price discovery and encourages competitive pricing. The use of full and open competition suggests that the Defense Logistics Agency sought the best value from a broad range of potential suppliers.

Taxpayer Impact: Taxpayers benefit from the competitive pricing that full and open competition typically generates, ensuring that the government is not overpaying for essential aviation fuel.

Public Impact

The primary beneficiaries are military aviation units within the Department of Defense requiring fuel for aircraft operations. The service delivered is the supply of aviation turbine fuel, critical for maintaining flight readiness. The geographic impact is likely concentrated around the delivery location specified in Illinois, supporting regional military installations. Workforce implications are minimal, as this is a supply contract rather than a service requiring significant labor input from the contractor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility in the global oil market impacting fuel costs.
Dependence on a single supplier for this specific delivery order, though competition was open.

Positive Signals

Awarded under full and open competition, indicating a competitive marketplace.
Firm fixed-price contract provides cost certainty for the government.
Short duration delivery order suggests efficient response to immediate needs.

Sector Analysis

The energy sector, specifically petroleum refining and distribution, is crucial for national defense. Aviation turbine fuel is a specialized product with a significant market. This contract fits within the broader category of fuel procurement for military operations, a consistent area of government spending. Comparable spending benchmarks for aviation fuel can vary widely based on volume, delivery location, and market conditions.

Small Business Impact

There is no indication that this contract involved small business set-asides, as it was awarded under full and open competition. The prime contractor, BP Products North America Inc., is a large corporation. Subcontracting opportunities for small businesses are not explicitly detailed but are unlikely to be a primary focus for a direct fuel supply contract of this nature.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Logistics Agency's contract management and quality assurance personnel. Accountability measures are inherent in the firm fixed-price contract type, requiring delivery of specified fuel. Transparency is facilitated by the contract award being made under full and open competition, with data publicly available.

Related Government Programs

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

Risk Flags

Potential for price volatility
Supply chain disruption risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.6 million to BP PRODUCTS NORTH AMERICA INC.. 8505306832!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 $29.6 million.

What is the period of performance?

Start: 2018-03-16. End: 2018-04-07.

What is the historical spending pattern for aviation turbine fuel by the Defense Logistics Agency?

The Defense Logistics Agency (DLA) is a major procurer of aviation turbine fuel, consistently spending billions of dollars annually to support global military operations. Historical data indicates significant and recurring expenditures, reflecting the continuous demand for fuel across various branches of the U.S. military. For instance, in fiscal year 2022, DLA Energy reported obligated amounts in the tens of billions across various fuel categories, including jet fuel. The specific amount for aviation turbine fuel fluctuates based on operational tempo, global events, and prevailing market prices. Analyzing DLA's historical spending reveals a strategic reliance on a stable supply chain for this critical commodity, often utilizing large-scale contracts awarded through competitive bidding processes to ensure both availability and cost-effectiveness.

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

Determining the precise price comparison requires access to specific market data for aviation turbine fuel (JP-8 or equivalent) in Illinois during March 2018. However, the contract was awarded under a firm fixed-price structure via full and open competition, suggesting that BP Products North America Inc. offered a price deemed competitive by the Defense Logistics Agency. General market trends for crude oil and refined products during early 2018 were influenced by global supply and demand dynamics, geopolitical factors, and refinery operational levels. Without specific benchmark indices (e.g., Platts assessments for jet fuel in the relevant region and period), a direct comparison is challenging. Nonetheless, the competitive bidding process implies the price was considered fair and reasonable at the time of award, reflecting prevailing market conditions and the supplier's cost structure.

What are the primary risks associated with this type of fuel supply contract?

The primary risks associated with this aviation turbine fuel supply contract include price volatility, supply chain disruptions, and quality control issues. Given that fuel prices are tied to global commodity markets, significant price fluctuations can occur between the contract award and delivery, potentially impacting the government's budget if not adequately managed through contract terms. Supply chain disruptions, stemming from geopolitical instability, natural disasters, or transportation issues, could lead to delivery delays and affect military readiness. Furthermore, ensuring the consistent quality and specification compliance of aviation fuel is paramount to prevent engine damage and ensure flight safety; any deviation poses a significant risk. The firm fixed-price nature of this contract mitigates some price risk for the government, but the contractor bears that risk.

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

BP Products North America Inc. has a substantial track record as a government contractor, frequently awarded contracts for various petroleum products, including aviation fuels, to support military and other federal agency operations. As a major global energy company, BP possesses extensive infrastructure and experience in fuel production, refining, and distribution. Their history with government contracts typically involves large-volume procurements managed by agencies like the Defense Logistics Agency (DLA). While specific performance metrics for every contract are not always publicly detailed, their continued success in winning competitive bids suggests a generally reliable performance history. However, like any large corporation, they may have faced past performance issues or disputes on specific contracts, which would be documented in government performance databases if significant.

How does this contract's value compare to other aviation fuel contracts awarded by the DoD?

The $29.6 million value of this specific delivery order for aviation turbine fuel is moderate when compared to the overall scale of aviation fuel procurement by the Department of Defense (DoD). The DoD, through entities like the Defense Logistics Agency (DLA), awards numerous fuel contracts, ranging from smaller, localized delivery orders to massive, multi-year global contracts worth billions of dollars. This particular contract, awarded in March 2018 with a duration of 22 days, represents a short-term, specific need, likely for a particular base or operation in Illinois. Larger contracts often encompass broader geographic areas, longer durations, and higher volumes, leading to significantly higher total dollar values. Therefore, while $29.6 million is a substantial sum, it is likely one of many such orders placed to meet the DoD's vast and continuous demand for aviation fuel.

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, Foreign Owned, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $29,642,520

Exercised Options: $29,599,906

Current Obligation: $29,599,906

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60218D0451

IDV Type: IDC

Timeline