DoD's $33.8M aviation turbine fuel contract awarded to BP Products North America Inc. for a 20-day period

Contract Overview

Contract Amount: $33,858,720 ($33.9M)

Contractor: BP Products North America Inc.

Awarding Agency: Department of Defense

Start Date: 2023-09-25

End Date: 2023-10-15

Contract Duration: 20 days

Daily Burn Rate: $1.7M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: 8510170773!TURBINE FUEL,AVIATION

Place of Performance

Location: CHICAGO, COOK County, ILLINOIS, 60606

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $33.9 million to BP PRODUCTS NORTH AMERICA INC. for work described as: 8510170773!TURBINE FUEL,AVIATION Key points: 1. Contract awarded via full and open competition, suggesting a competitive bidding process. 2. Fixed Price with Economic Price Adjustment (FPEPA) contract type introduces potential for price fluctuations. 3. Short contract duration of 20 days may indicate urgent or specific operational needs. 4. Awarded by the Defense Logistics Agency, a key entity for military supply chain management. 5. The contract falls under the Petroleum Refineries industry, crucial for fuel supply. 6. No small business set-aside was utilized, indicating the primary award was not specifically targeted for small businesses.

Value Assessment

Rating: fair

The contract value of $33.8 million for a 20-day delivery period for aviation turbine fuel appears substantial. Benchmarking this against similar short-term fuel supply contracts is challenging due to the specific nature of aviation fuel and potential market volatility. The FPEPA clause introduces a variable cost component, making a direct value-for-money assessment difficult without analyzing the economic price adjustment mechanism and its impact on the final cost.

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. The number of bidders is not specified, but this method generally promotes price discovery and allows the government to select the most advantageous offer. The open nature of the competition suggests that the government sought competitive pricing and terms.

Taxpayer Impact: A full and open competition aims to secure the best possible pricing for taxpayers by allowing a wide range of suppliers to compete, potentially driving down costs through market forces.

Public Impact

The primary beneficiaries are the Department of Defense operations requiring aviation turbine fuel. Services delivered include the supply of critical fuel for aircraft operations. The geographic impact is focused on Illinois, as indicated by the 'IL' and 'ILLINOIS' fields, likely where the fuel will be delivered or sourced. Workforce implications are likely within the petroleum supply and logistics sectors, supporting the delivery of this fuel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The Fixed Price with Economic Price Adjustment (FPEPA) clause introduces price volatility risk.
Short contract duration may lead to higher per-unit costs compared to longer-term agreements.
Lack of specific competition details (number of bidders) limits a full assessment of price competitiveness.

Positive Signals

Awarded through full and open competition, suggesting a robust bidding process.
The Defense Logistics Agency's involvement indicates adherence to established procurement procedures.
Contracting for essential aviation fuel ensures operational readiness for military forces.

Sector Analysis

This contract falls within the Petroleum Refineries sector, specifically dealing with aviation fuels. The North American Industry Classification System (NAICS) code 324110, 'Petroleum Refineries,' covers establishments primarily engaged in refining petroleum. The market for aviation fuel is critical for both commercial and military aviation, with prices often influenced by global oil markets and geopolitical factors. Comparable spending benchmarks would typically involve analyzing historical fuel purchases by the DoD and other government agencies, as well as market prices for jet fuel.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the primary award was made to a large business entity, BP Products North America Inc. There is no explicit information on subcontracting plans for small businesses within this specific award. The absence of a small business set-aside means that opportunities for small businesses to directly participate in this particular contract are limited unless they are part of the supply chain for the prime contractor.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA) contracting officers and program managers. Accountability measures are embedded in the contract terms, including performance standards and payment clauses. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

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

Risk Flags

Price Volatility Risk (FPEPA)
Short Contract Duration
Potential for Reduced Competition
Dependence on Global Oil Markets

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.9 million to BP PRODUCTS NORTH AMERICA INC.. 8510170773!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 $33.9 million.

What is the period of performance?

Start: 2023-09-25. End: 2023-10-15.

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

The Defense Logistics Agency (DLA) is a significant procurer of aviation turbine fuel, essential for military operations. Historical spending patterns reveal consistent, substantial investments in this category to ensure global readiness. DLA's fuel procurement often involves complex, multi-year contracts, sometimes utilizing various pricing mechanisms like fixed-price, cost-plus, or economic price adjustments to manage market volatility. Annual spending can fluctuate based on operational tempo, global events, and fuel market dynamics. Analyzing DLA's historical data, often available through public contract databases, shows billions of dollars allocated annually to fuel procurement, with aviation turbine fuel being a major component. This specific contract, valued at $33.8 million over 20 days, represents a short-term, high-value acquisition within a broader, ongoing fuel supply strategy.

How does the Fixed Price with Economic Price Adjustment (FPEPA) clause typically impact the final cost of fuel contracts?

The Fixed Price with Economic Price Adjustment (FPEPA) clause in fuel contracts is designed to allow for adjustments to the base price based on fluctuations in specific economic indicators, such as the price of crude oil or refined petroleum products. This mechanism aims to protect both the government and the contractor from extreme market volatility. For the government, it can prevent overpayment if prices fall significantly below the initial fixed price, but it also exposes them to potential cost increases if market prices rise. For the contractor, it provides a degree of certainty against losses due to rising input costs, while limiting windfall profits if prices drop. The specific economic indicators and the formula for adjustment are critical components of the FPEPA clause and determine the extent to which the final cost deviates from the initial fixed price. In this $33.8 million contract, the FPEPA clause means the final invoiced amount could be higher or lower than the initial price, depending on market movements during the 20-day delivery period.

What are the risks associated with a short contract duration (20 days) for fuel supply?

Short contract durations, such as the 20 days for this $33.8 million aviation turbine fuel award, can present several risks. Firstly, they often lead to higher per-unit costs because contractors may factor in mobilization, demobilization, and administrative overhead for a brief period, which is less amortized than over a longer term. Secondly, short-term contracts can indicate urgent or unforeseen needs, potentially suggesting a lack of long-term planning or a reactive procurement strategy, which might not be the most cost-effective approach. Thirdly, they can limit the pool of potential bidders, as some suppliers may prefer longer-term commitments for operational stability and predictable revenue. This can reduce competition, potentially leading to less favorable pricing for the government. Finally, frequent re-competition for essential supplies can increase administrative burden and introduce supply chain uncertainties if a new contractor is not readily available or needs time to ramp up.

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

BP Products North America Inc. has a significant history of supplying fuel products to government entities, including the Department of Defense and other federal agencies. Their track record typically involves large-scale contracts for various types of fuels, often awarded through competitive bidding processes. As a major global energy company, BP possesses the infrastructure and capacity to meet substantial government demands. Reviews of past contract awards indicate their frequent participation and success in securing fuel supply agreements. While specific performance metrics for individual contracts are not always publicly detailed, their continued presence as a bidder and awardee suggests a generally reliable performance history in fulfilling government requirements for fuel products. Their experience often includes navigating complex logistical challenges and regulatory compliance inherent in government contracting.

How does the 'Petroleum Refineries' NAICS code (324110) relate to the supply of aviation turbine fuel?

The NAICS code 324110, 'Petroleum Refineries,' directly relates to the supply of aviation turbine fuel because refineries are the primary facilities where crude oil is processed into various petroleum products, including jet fuel (aviation turbine fuel). These refineries undertake complex distillation and treatment processes to produce fuels that meet stringent aviation specifications regarding performance, safety, and environmental standards. Companies operating under this NAICS code are involved in the manufacturing and initial distribution of these fuels. While the Defense Logistics Agency (DLA) might contract with distributors or resellers, the ultimate source of the aviation turbine fuel is typically a petroleum refinery. Therefore, this classification accurately places the nature of the product being procured within the industrial context of petroleum refining.

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: $33,858,720

Exercised Options: $33,858,720

Current Obligation: $33,858,720

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE60223D0461

IDV Type: IDC

Timeline