DoD's $56M aviation turbine fuel contract awarded to BP, highlighting fixed-price with economic adjustment terms

Contract Overview

Contract Amount: $56,217,525 ($56.2M)

Contractor: BP Products North America Inc.

Awarding Agency: Department of Defense

Start Date: 2022-09-16

End Date: 2022-10-09

Contract Duration: 23 days

Daily Burn Rate: $2.4M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8509403337!TURBINE FUEL,AVIATION

Place of Performance

Location: CHICAGO, COOK County, ILLINOIS, 60606

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $56.2 million to BP PRODUCTS NORTH AMERICA INC. for work described as: 8509403337!TURBINE FUEL,AVIATION Key points: 1. Contract value of $56.2 million for aviation turbine fuel. 2. Awarded to BP Products North America Inc. under full and open competition. 3. Fixed Price with Economic Price Adjustment (FPEPA) contract type indicates potential for price fluctuations. 4. Short performance period of 23 days suggests a specific, immediate need. 5. Defense Logistics Agency (DLA) is the contracting agency, a major fuel procurer. 6. The North American Industry Classification System (NAICS) code 324110 points to petroleum refineries. 7. No small business set-aside was utilized for this procurement.

Value Assessment

Rating: fair

The contract value of $56.2 million for a 23-day delivery period appears substantial, but without specific volume or unit price benchmarks, a direct value-for-money assessment is challenging. The FPEPA pricing structure introduces variability, making it difficult to compare against fixed-price contracts. However, given the nature of fuel commodities, price adjustments are often market-driven and may reflect legitimate cost changes.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to submit proposals. The specific number of bidders is not provided, but this method generally fosters competitive pricing. The use of FPEPA pricing, however, can sometimes temper the price competition compared to pure fixed-price awards, as bidders account for potential cost escalations.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to secure the best possible prices through a wide range of offers. The FPEPA clause, while necessary for volatile commodities, means taxpayers are exposed to market price swings.

Public Impact

Military operations relying on aviation turbine fuel are the primary beneficiaries. Ensures the availability of critical fuel for aircraft, supporting national defense readiness. The contract's geographic impact is likely concentrated around DLA distribution points and military airfields. Supports the petroleum refining and distribution workforce involved in fulfilling the contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost overruns if fuel prices spike significantly.
Short contract duration may indicate a reactive procurement rather than strategic long-term planning.
Lack of specific details on competition level (number of bidders) limits assessment of price discovery effectiveness.

Positive Signals

Awarded through full and open competition, maximizing potential bidder pool.
BP Products North America Inc. is a major supplier, suggesting established supply chain capabilities.
Contract addresses a critical need for aviation fuel, ensuring operational continuity.

Sector Analysis

The petroleum refining industry (NAICS 324110) is a mature sector characterized by large-scale operations and significant capital investment. This contract falls within the broader energy sector, specifically focusing on the supply of refined petroleum products. Government fuel procurement is a substantial market, with agencies like the DLA playing a critical role in ensuring supply chain security for defense operations. Benchmarks for fuel pricing are typically tied to global commodity markets.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned. The award to a large corporation like BP Products North America Inc. suggests that the primary focus was on large-scale supply capabilities rather than small business participation. This may limit opportunities for small businesses within the direct fulfillment of this specific contract.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for ensuring compliance with contract terms and financial accountability. The Defense Logistics Agency (DLA) also has internal oversight mechanisms for its procurements. Transparency is facilitated through contract databases like FPDS, though detailed performance metrics are not always publicly available.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Fuel Procurement
Petroleum Product Supply Contracts
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment Clause
Short Contract Duration
Potential for Limited Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $56.2 million to BP PRODUCTS NORTH AMERICA INC.. 8509403337!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 $56.2 million.

What is the period of performance?

Start: 2022-09-16. End: 2022-10-09.

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

The Defense Logistics Agency (DLA) is a primary procurer of fuel for the Department of Defense. Historical spending data reveals a consistent and substantial investment in aviation turbine fuel over multiple fiscal years. For instance, DLA's fuel spending often runs into billions of dollars annually, encompassing various types of fuels and delivery methods. The specific amount for aviation turbine fuel fluctuates based on operational tempo, global market prices, and strategic stockpiling efforts. Analyzing past FPDS data shows that DLA procures significant quantities through both competitive and non-competitive awards, with a mix of contract types including fixed-price and cost-reimbursement, often adjusted for economic factors. This particular $56.2 million award represents a fraction of the total annual fuel expenditure, likely fulfilling a specific regional or operational requirement during its short performance window.

How does the fixed-price with economic price adjustment (FPEPA) clause impact cost certainty for this contract?

The Fixed Price with Economic Price Adjustment (FPEPA) clause in this contract introduces a degree of cost uncertainty compared to a firm fixed-price contract. While the base price is fixed, the FPEPA allows for adjustments based on pre-defined economic factors, typically linked to fluctuations in the cost of raw materials or labor. For aviation turbine fuel, this usually means the price can increase or decrease in line with global oil market benchmarks. This protects the contractor from unforeseen cost escalations that could otherwise lead to contract non-performance or costly renegotiations. However, it also means the government's final cost is not precisely known at the time of award and is subject to market volatility. The specific formula or index used for adjustment is critical in determining the extent of this variability and the ultimate cost to the taxpayer.

What is BP Products North America Inc.'s track record with large federal fuel contracts?

BP Products North America Inc. has a significant track record of securing and performing large federal fuel contracts, particularly with agencies like the Defense Logistics Agency (DLA). As a major integrated oil company, BP possesses the infrastructure, refining capacity, and distribution networks necessary to meet the demanding requirements of military fuel supply. Historical data from contract databases indicates numerous awards to BP for various petroleum products, including aviation fuels, diesel, and gasoline, often valued in the tens or hundreds of millions of dollars. Their experience spans different contract types and competition levels. While specific performance metrics for individual contracts are not always public, their consistent presence as a prime contractor suggests a generally reliable performance history in fulfilling these critical supply needs for the government.

What are the risks associated with a short contract duration like 23 days?

A contract duration of only 23 days, as seen in this award, typically signifies a requirement for immediate or short-term supply, often to cover unexpected shortfalls, bridge gaps between longer-term contracts, or fulfill urgent operational needs. The primary risk associated with such a short duration is the potential for a lack of robust competition. Contractors may be less inclined to invest significant resources in bidding or preparing for a contract that offers such a limited period of performance and revenue. This can lead to fewer bids and potentially higher prices than might be achieved in a longer-term procurement. Additionally, it may indicate reactive rather than proactive procurement planning, which can sometimes result in less favorable terms or higher costs due to urgency.

How does the 'Petroleum Refineries' NAICS code influence the understanding of this contract?

The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' provides crucial context for this contract. It signifies that the primary business activity of the awarded contractor, BP Products North America Inc., is the refining of crude petroleum into various products, including aviation turbine fuel. This classification helps in understanding the supply chain: the fuel is likely sourced from or produced at a refinery. It also allows for benchmarking against industry standards and market data specific to petroleum refining. When analyzing competition and pricing, knowing the NAICS code helps identify potential competitors within the refining sector and understand the typical cost structures and market dynamics inherent to this industry, such as feedstock costs and refining margins.

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: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: BP P.L.C.

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $56,217,525

Exercised Options: $56,217,525

Current Obligation: $56,217,525

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60222D0480

IDV Type: IDC

Timeline