DoD's $78.5M contract for fuel storage tank replacement at Kwajalein Atoll awarded to Arkel International, L.L.C

Contract Overview

Contract Amount: $78,532,065 ($78.5M)

Contractor: Arkel International, L.L.C.

Awarding Agency: Department of Defense

Start Date: 2017-09-29

End Date: 2027-09-02

Contract Duration: 3,625 days

Daily Burn Rate: $21.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: IGF::OT::IGF REPLACE FUEL STORAGE TANKS, DEFENSE FUEL SUPPLY CENTER, KWAJALEIN ATOLL, MARSHALL ISLANDS

Place of Performance

Location: MARSHALL ISLANDS, 96555

Plain-Language Summary

Department of Defense obligated $78.5 million to ARKEL INTERNATIONAL, L.L.C. for work described as: IGF::OT::IGF REPLACE FUEL STORAGE TANKS, DEFENSE FUEL SUPPLY CENTER, KWAJALEIN ATOLL, MARSHALL ISLANDS Key points: 1. Contract value of $78.5 million for fuel storage tank replacement. 2. Awarded to Arkel International, L.L.C. under a firm-fixed-price definitive contract. 3. Project duration is approximately 10 years, from September 2017 to September 2027. 4. Competition was full and open, with 3 bidders. 5. The contract is for construction of oil and gas pipeline and related structures. 6. The project is located in the Marshall Islands, specifically Kwajalein Atoll. 7. No small business set-aside or subcontracting was indicated.

Value Assessment

Rating: fair

The contract value of $78.5 million for replacing fuel storage tanks appears substantial. Benchmarking this against similar projects for fuel infrastructure replacement in remote or challenging locations is difficult without more specific project details. The firm-fixed-price structure suggests the government has transferred some cost risk to the contractor, which can be beneficial if the contractor manages costs effectively. However, the long duration of the contract could lead to cost escalations if not managed carefully.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. Three bidders participated in the competition. A higher number of bidders generally suggests a more competitive environment, which can lead to better pricing for the government. The fact that three bids were received suggests some level of interest and competition for this specialized construction project.

Taxpayer Impact: The full and open competition with multiple bidders is positive for taxpayers, as it increases the likelihood of receiving a fair market price and encourages cost efficiency from the awarded contractor.

Public Impact

The primary beneficiaries are the U.S. Department of Defense and its personnel stationed at Kwajalein Atoll, ensuring reliable fuel supply. The services delivered include the construction of new fuel storage tanks and potentially related pipeline infrastructure. The geographic impact is localized to Kwajalein Atoll in the Marshall Islands, a critical strategic location for U.S. military operations. Workforce implications may include employment opportunities for construction workers and specialists, both locally and potentially brought in for the project.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (approx. 10 years) could present risks for cost control and technological obsolescence.
Remote location of Kwajalein Atoll may introduce logistical challenges and increase costs.
Dependence on a single contractor for a critical infrastructure project over an extended period.

Positive Signals

Firm-fixed-price contract shifts cost overrun risk to the contractor.
Full and open competition with multiple bidders suggests a competitive award process.
Award to a single contractor for a large project can lead to economies of scale and focused execution.

Sector Analysis

This contract falls within the construction sector, specifically related to oil and gas infrastructure. The market for specialized fuel storage construction, particularly in remote or strategic locations like military bases, is niche. Comparable spending benchmarks would depend heavily on the specific type and capacity of the tanks, as well as the logistical complexities of the site. Defense spending on infrastructure is a significant portion of the overall defense budget, with projects often involving long-term planning and execution.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses arising from a set-aside provision. The prime contractor, Arkel International, L.L.C., would be responsible for managing the entire project scope. Any subcontracting would be at their discretion, and there's no explicit requirement noted here to engage small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and project management offices. The firm-fixed-price nature of the contract implies that the contractor bears the primary responsibility for cost control. Transparency would be facilitated through contract reporting mechanisms and potentially through the Defense Contract Audit Agency (DCAA) if audits are required. The Inspector General of the Department of Defense would have jurisdiction for investigating fraud, waste, or abuse related to this contract.

Related Government Programs

Defense Fuel Supply Center Contracts
Military Base Infrastructure Projects
Fuel Storage Tank Construction
Pacific Area Military Construction

Risk Flags

Long-term contract duration
Remote project location
Critical infrastructure replacement

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $78.5 million to ARKEL INTERNATIONAL, L.L.C.. IGF::OT::IGF REPLACE FUEL STORAGE TANKS, DEFENSE FUEL SUPPLY CENTER, KWAJALEIN ATOLL, MARSHALL ISLANDS

Who is the contractor on this award?

The obligated recipient is ARKEL INTERNATIONAL, L.L.C..

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $78.5 million.

What is the period of performance?

Start: 2017-09-29. End: 2027-09-02.

What is the track record of Arkel International, L.L.C. in performing similar large-scale fuel infrastructure projects for the Department of Defense?

Assessing Arkel International, L.L.C.'s track record requires a review of their past performance on Department of Defense contracts, particularly those involving fuel storage facilities and construction in challenging environments. Information on past performance, including any instances of cost overruns, schedule delays, or quality issues, would be crucial. A review of contract databases and performance reports (if publicly available) would provide insights into their reliability and capability to execute a project of this magnitude and duration. Without specific past performance data, it's difficult to definitively assess their suitability beyond the fact they were selected through a competitive process.

How does the awarded price of $78.5 million compare to similar fuel storage tank replacement projects in comparable geographic or operational contexts?

Benchmarking the $78.5 million contract value is challenging without detailed specifications of the tanks (capacity, material, design) and the precise scope of work, including any associated pipeline or site preparation. However, projects involving large-scale fuel storage infrastructure, especially in remote locations like Kwajalein Atoll, are inherently costly due to logistics, specialized labor, and stringent safety/environmental requirements. A comparison would ideally involve projects of similar scale and complexity undertaken by other government agencies or in the private sector in comparable remote or strategic locations. The firm-fixed-price nature suggests the contractor has factored these complexities into their bid.

What are the primary risks associated with a 10-year contract for fuel storage tank replacement, and how are they being mitigated?

The primary risks associated with a 10-year contract for fuel storage tank replacement include potential cost escalation beyond initial projections (despite the fixed-price nature, scope changes or unforeseen conditions can arise), technological obsolescence of materials or construction methods over the decade, and contractor performance degradation or financial instability. Mitigation strategies typically involve robust contract management, clear change order procedures, performance monitoring, and potentially periodic reviews or contract modifications if allowed. The firm-fixed-price structure places the onus on the contractor to manage these risks, but the government must maintain vigilant oversight to ensure compliance and address any emergent issues promptly.

What is the strategic importance of Kwajalein Atoll for the Department of Defense, and how does this contract support that mission?

Kwajalein Atoll serves as a critical U.S. military installation in the Pacific, hosting the Reagan Test Site and providing vital logistical and operational support for various defense missions in the region. Reliable fuel storage and supply are fundamental to maintaining the operational readiness and effectiveness of forces stationed there and conducting exercises. This contract, by ensuring the replacement and modernization of aging fuel storage infrastructure, directly supports the long-term sustainability and security of U.S. military operations and strategic presence in the Indo-Pacific theater.

Given the 'full and open competition' and three bidders, what does this imply about the market for specialized fuel storage construction services?

The fact that this contract was awarded under 'full and open competition' with three bidders suggests that the market for specialized fuel storage construction services, particularly for defense applications in remote locations, is not overly saturated but does possess a degree of competition. Three bidders indicate that there are multiple capable firms interested in and able to undertake such projects. This level of competition is generally considered healthy, providing the government with options and encouraging competitive pricing, while also signaling that the number of firms with the requisite expertise and security clearances might be limited.

What are the potential environmental considerations or impacts related to replacing fuel storage tanks at Kwajalein Atoll?

Replacing fuel storage tanks, especially in an environmentally sensitive location like Kwajalein Atoll, involves significant environmental considerations. These include the safe removal and disposal of old tanks, prevention of leaks or spills during the replacement process, and ensuring the new tanks meet all current environmental regulations for containment and safety. The project would likely require detailed environmental impact assessments, adherence to strict protocols for hazardous material handling, and potentially measures to protect the surrounding marine and terrestrial ecosystems. Compliance with both U.S. environmental standards and local regulations in the Marshall Islands would be paramount.

Industry Classification

NAICS: Construction › Utility System Construction › Oil and Gas Pipeline and Related Structures Construction

Product/Service Code: MAINT, REPAIR, ALTER REAL PROPERTY › MAINT, ALTER, REPAIR NONBUILDINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SEALED BID

Solicitation ID: W9128A17B0001

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1055 CONVENTION ST, BATON ROUGE, LA, 70802

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $78,532,065

Exercised Options: $78,532,065

Current Obligation: $78,532,065

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline