DoD's $31.4M aviation turbine fuel contract awarded to BP Products North America Inc. for Illinois delivery

Contract Overview

Contract Amount: $31,741,999 ($31.7M)

Contractor: BP Products North America Inc.

Awarding Agency: Department of Defense

Start Date: 2023-03-03

End Date: 2023-03-25

Contract Duration: 22 days

Daily Burn Rate: $1.4M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: 8509740775!TURBINE FUEL,AVIATION

Place of Performance

Location: CHICAGO, COOK County, ILLINOIS, 60606

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $31.7 million to BP PRODUCTS NORTH AMERICA INC. for work described as: 8509740775!TURBINE FUEL,AVIATION Key points: 1. Contract value represents a significant portion of annual fuel needs for specific military operations. 2. Competition dynamics suggest a potentially competitive bidding process for fuel supply. 3. Economic price adjustment clause introduces potential for cost fluctuations based on market conditions. 4. Short contract duration indicates a tactical or short-term supply need. 5. Single delivery order suggests a specific, immediate requirement rather than an ongoing supply agreement. 6. Focus on a single state (Illinois) points to localized logistical support.

Value Assessment

Rating: good

The contract value of $31.4 million for aviation turbine fuel appears reasonable given the scale of military operations it likely supports. Benchmarking against similar fuel contracts is challenging without specific volume and grade details, but the fixed-price with economic price adjustment structure is common in the volatile fuel market. The price is likely competitive due to the full and open competition, though the final cost will be influenced by market fluctuations.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. This broad competition is generally favorable for price discovery and ensuring the government receives competitive pricing. The specific number of bidders is not provided, but the designation suggests a robust process was intended.

Taxpayer Impact: Full and open competition generally leads to better value for taxpayers by driving down prices through multiple offers. It ensures that the government is not locked into a single provider, promoting efficiency and cost savings.

Public Impact

Military aviation units operating within or requiring fuel support in Illinois will benefit from this contract. The contract ensures the availability of critical aviation turbine fuel for national defense readiness. Geographic impact is concentrated in Illinois, supporting local refueling operations. Workforce implications are likely minimal for this specific contract, primarily involving logistics and fuel handling personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to costs exceeding initial projections if fuel prices surge.
Short duration might necessitate rapid re-competition or extensions, potentially impacting supply chain stability.
Reliance on a single delivery order could indicate a lack of long-term strategic fuel planning.

Positive Signals

Awarded through full and open competition, suggesting a competitive pricing environment.
Fixed-price component provides some cost certainty for the base amount.
Contract awarded to a major fuel supplier, indicating reliability in terms of product availability.

Sector Analysis

The petroleum refineries sector (NAICS 324110) is critical for supplying fuels to various industries, including defense. The market for aviation turbine fuel is substantial, driven by commercial airlines and military operations. This contract fits within the broader defense logistics and energy supply chain, ensuring operational readiness. Comparable spending benchmarks for military fuel procurement vary widely based on volume, grade, and delivery location.

Small Business Impact

There is no indication that this contract involved small business set-asides or significant subcontracting opportunities for small businesses. The award to a major corporation like BP Products North America Inc. suggests the primary focus was on large-scale fuel supply capabilities rather than small business participation.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Logistics Agency (DLA), which manages fuel procurement for the DoD. Accountability measures are embedded in the contract terms, including delivery specifications and pricing adjustments. Transparency is facilitated through contract award databases, though specific performance metrics are not publicly detailed.

Related Government Programs

Defense Logistics Agency Fuel Contracts
Aviation Fuel Procurement
Department of Defense Energy Supply

Risk Flags

Price Volatility Risk
Supply Chain Disruption Risk
Logistical Execution Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.7 million to BP PRODUCTS NORTH AMERICA INC.. 8509740775!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 $31.7 million.

What is the period of performance?

Start: 2023-03-03. End: 2023-03-25.

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, with annual spending often reaching billions of dollars. Historical data indicates consistent, high-volume procurement to support global military operations. Spending fluctuates based on geopolitical events, operational tempo, and global fuel market prices. For instance, in fiscal year 2022, DLA Energy reported obligated amounts in the tens of billions across various fuel types, including significant allocations for aviation fuels. The specific amount for aviation turbine fuel can vary year-to-year, but it consistently represents a substantial portion of the agency's energy budget. This particular $31.4 million contract is a single delivery order, suggesting it is part of a larger, ongoing procurement strategy rather than an isolated expenditure.

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

Directly comparing the price of this specific contract to prevailing market rates is complex without knowing the exact grade of aviation turbine fuel (e.g., JP-8, Jet A-1) and the precise delivery location's associated costs. However, the contract includes an 'Economic Price Adjustment' (EPA) clause, which means the final price paid will fluctuate with market indices. The base price, before EPA adjustments, is what would be benchmarked. Given that the contract was awarded under 'Full and Open Competition,' it suggests that the initial pricing was competitive. To perform a true comparison, one would need to track the relevant Platts or other industry fuel price assessments for the contract period and location, and then apply the EPA formula stipulated in the contract.

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

The primary risks associated with this aviation turbine fuel contract include price volatility due to the economic price adjustment clause, potential supply chain disruptions (though less likely with a major supplier like BP), and logistical challenges in ensuring timely delivery to the specified location in Illinois. Geopolitical events, refinery issues, or transportation bottlenecks can impact fuel availability and price. Furthermore, the short duration of the contract (22 days) implies a need for rapid execution and could pose a risk if unforeseen circumstances delay delivery or require an immediate, potentially more expensive, re-procurement.

What is the track record of BP Products North America Inc. in supplying fuel to the Department of Defense?

BP Products North America Inc. has a significant track record of supplying petroleum products, including aviation fuels, to the Department of Defense and other government agencies. As a major integrated oil company, BP has extensive refining, distribution, and logistics capabilities essential for meeting military fuel requirements. They are frequently awarded contracts through competitive bidding processes. While specific performance details for individual contracts are not always public, their consistent participation in large-scale government fuel solicitations indicates a capacity to meet the demanding specifications and delivery schedules required by the DoD. Their involvement in this $31.4 million contract aligns with their established role as a key energy supplier to the federal government.

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 introduces a degree of cost uncertainty for this contract. While a base fixed price is established, the EPA component allows for adjustments based on fluctuations in specified market-based indices, typically related to crude oil or refined product prices. This protects both the contractor from significant market downturns and the government from excessive price hikes if the market surges. For this $31.4 million contract, it means the final amount paid could be higher or lower than the initial fixed price component, depending on the trajectory of fuel prices during the contract period (March 3-25, 2023). This structure is common for commodities like fuel where price volatility is inherent.

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: $31,741,999

Exercised Options: $31,741,999

Current Obligation: $31,741,999

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60222D0499

IDV Type: IDC

Timeline