(click to view full)
Fuel is a big issue to the US military.
While there are some contracts issued throughout the year, the US military typically issues large sets of contracts over concentrated periods. In March 2006, for instance, DID covered over $3 billion in contracts issued within a week. The Defense Energy Support Center estimates that the US military paid more than $10 billion for over 130 million barrels of fuel in 2006, compared to $6.7 billion for 144.8 million barrels in 2004. No wonder energy conservation is on the Pentagon’s agenda, while DARPA researches alternative fuels for B-52 bombers.
It would appear to be that time of year again. Here are all of the American military’s fuel contracts for March 2009, along with descriptions of key fuel types and explanations of the contract language. The final tally was $5,693,595,745 – plus any economic price adjustments, a term we explain below.
Key Fuel Types
The March 2007 contracts aren’t specific, but “fuel” can encompass a number of different products. Here are some of the key fuel types involved, beyond contracts for straight diesel fuel. Information in this section is taken from the US Coast Guard’s Propulsion Fuel Guide, and the US Army Center for Health Promotion and Preventive Medicine [both are PDFs].
JP-5 (also known as F-44) & JP-8. is procured to MIL-DTL-5624T. JP-5 is a very clean burning fuel with very strict quality requirements – especially its limit of water and particulate content. Gas turbine maintenance (particularly when associated with combustor cans) is reduced when burning JP-5. It is used in US Navy aircraft, and has a high flash point, which means it doesn’t vaporize until it reaches about 130 degrees Fahrenheit or so. This makes it ideally suited for storage aboard ships where low flammability is desired. JP-5 is also inherently stable; it does not form oxygenated sludge, and because it’s an aviation fuel it includes a Fuel System Icing Inhibitor (FSII) additive. The downsides are threefold. JP-5 tends to be more expensive. Its energy content is lower than F-76 type fuel, which means lower mileage efficiency; and it may have lower viscosity and/or lubricity characteristics, which can cause extra wear in diesel engine injection pumps.
JP-8 contains even less benzene than JP-5, which makes it thicker. It is used by the US Army and Air Force. Its base is actually the same as commercial jet fuel (Jet Fuel A), but it has different additives. If you see a contract referring only to “jet fuel” other non-specific term along those lines, it’s very likely to be JP-8. This fuel has also been used in many US Army vehicles under the Single Fuel Concept; a March-April 2005 Army Logistician article noted some of the successes and difficulties involved. Shipboard fire safety concerns have prevented carrier-based aircraft from making the switch to JP-8.
F-76 is procured to MIL-F-16884J. It is suitable for use in both gas turbines and diesel engines. F-76 burned in Paxman engines however, must have a minimum Cetane Number of 45 (the F-76 specification allows a minimum Cetane Number of 42). It has numerous and very strict quality requirements – including a rigorous storage stability test. Because no commercial fuel products come with a similar storage stability “guarantee,” all commercial fuel must be periodically rotated onboard ship so that it’s consumed before any stability problems can arise. F-76 is generally found on Naval bases or oiler ships only.
Contract Type Explanations
Competitions of this sort generally work by having the government put the contract out to bid, receiving bids, and then using those prices plus any other evaluation criteria deemed important (delivery reliability, small/minority business quotas, et. al.) via a points system in order to assess how large a share of the available funds goes to each bidder (if any).
Unless otherwise noted, all contracts below are “fixed price with economic price adjustment” contracts. “economic price adjustment” contracts will compensate vendors if the prices of their inputs rise. These adjustments can be based on a set agreed price, or on actual prices or costs indexes of labor or material – see clause 16.203 at this link for more, including when to use such contracts and when not to.
For instance, the government signs an oil contract with Company A at a fixed price, but with economic price adjustment. If oil prices later go through the roof, Company A doesn’t have to go bankrupt supplying that oil because there’s an agreed formula under which the government will pay extra as a function of the rise in commodity prices.
Here’s the key with respect to fuels: the military absolutely needs security of supply, but doesn’t want to pay more than it has to. Suppliers need a hedge against risk. If the government didn’t do this in areas like its fuel contracts, (a) all firms would pad their bids to cover price fluctuation risks, and the government would end up paying far more; and (b) many firms would be far less inclined to bid for long government contracts, because their size would represent too much risk. This would create security of supply issues, reduce the number of bidders overall, and pretty much eliminate small business bidders in this area. A structural lack of competition like this also tends to leads to higher prices, over and above any increases in risk premiums.
Contracts listed as “IDIQ” are also indefinite delivery/ indefinite quantity contracts, bought as needed in appropriate quantities up to the limit of funds. In practice, all of these contracts should be IDIQ contracts; some were not explicitly listed as such, however, and so we’ve made the distinction.
The March 2009 Contracts
(click to view full)
The Defense Energy Support Center (DESC) in Fort Belvoir, VA manages these contracts.
March 27/09: Small business qualifier Flightline Group Inc, DBA(Doing Business As) Flightline Tallahassee in Tallahassee, FL, received a maximum $5.8 million fixed-price with economic price adjustment contract for jet fuel, to supply the US Army, Navy, Air Force and Marine Corps. There was originally 1 proposal solicited with 1 response. The contract will run until March 31/13 (SP0600-09-D-0056).
March 24/09: HUB Zone Small business qualifier Petromax Refining Co., LLC in Bay City, TX won a maximum $538.6 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0061).
March 24/09: Husky Marketing and Supply Co. in Dublin, OH won a maximum $178.8 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. Other location of performance is in Lima Ohio. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0464).
March 24/09: Equilon Enterprises in Houston, TX won a maximum $1.51 billion fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0465).
March 24/09: ConocoPhillips in Bartlesville, OK won a maximum $434 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. Work will also be performed in OK, KS, and CO. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0466).
March 24/09: Calumet Sales Co., Inc. in Indianapolis, IN won a maximum $280.8 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. Work will also be performed in Louisiana. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0467).
March 24/09: Tesoro Refining and Marketing Co. in San Antonio, TX won a maximum $104.3 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. Work will also be performed in ND and MN There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0468).
March 24/09: Hunt Refining Co. in Tuscaloosa, AL won a maximum $112.3 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0469).
March 24/09: Equilon Enterprises in Houston, TX won a maximum $494.7 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. Work will also be performed in Mobile, AL. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0470).
March 24/09: ExxonMobile Fuels Marketing Co. in Fairfax, VA won a maximum $354.6 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. Work will also be performed in Louisiana. There were originally 68 proposals web-solicited, with 26 responses. Contract funds will expire at the end of the current fiscal year. The contract will run until March 31/10 (SP0600-09-D-0471).
March 24/09: Small business qualifier Placid Refining Co., LLC in Port Allen, LA won a maximum $268.6 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0473).
March 24/09: Alon USA, L.P. in Dallas, TX won a maximum $121.9 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0476).
March 24/09: HUB Zone Small business qualifier AGE Refining, Inc., San Antonio, Texas won a maximum $186,741,311 fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0477).
March 24/09: Small business qualifier Gary-Williams Energy Corp. in Denver, CO won a maximum $213.5 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0478).
March 24/09: Delek Refining, Ltd. in Tyler, TX won a maximum $162.2 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0479).
March 24/09: 09Small business qualifier Valero Marketing & Supply Co. in San Antonio, TX won a maximum $540.3 million fixed-price with economic price adjustment, IDIQ contract for fuel, to supply the Defense Energy Support Center. There were originally 68 proposals web-solicited, with 26 responses. The contract will run until Apr 30/10 (SP0600-09-D-0480).
March 20/09: Small business qualifier Rick Aviation, Inc. in Newport News, VA won a maximum $11.7 million fixed-price with economic price adjustment contract for fuel, to supply the US Army, Navy, Air Force, Marine Corps and Federal Civilian Agencies. There were originally 131 proposals solicited with 96 responses. The contract will run until April 30/13 (SP0600-09-D-0107).
March 19/09: Mercury Air Center, Inc., DBA(Doing Business As) Atlantic Aviation in Charleston, SC won a maximum $8.4 million fixed-price with economic price adjustment, into-plane contract for fuel, to supply the Army, Navy, Air Force, Marine Corps and Federal Civilian Agencies. There were originally 2 proposals solicited with 2 responses. The contract will run until March 31/13 (SP0600-09-D-0098).
March 18/09: Small business qualifier Hermes Consolidated Inc., DBA(Doing Business As) Wyoming Refining Co. in Denver, CO won a maximum $72.6 million fixed-price with economic price adjustment, partial set aside, IDIQ contract for aviation fuel, to supply the Defense Energy Support Center. Work will also be performed in Wyoming. There were originally 68 proposals solicited with 26 responses. Contract funds will expire at the end of the current fiscal year, but the contract will run until March 31/10 (SP0600-09-D-0472).
March 18/09: Irving Oil Terminal Inc. in Portsmouth, NH won a maximum $60.7 million fixed-price with economic price adjustment, IDIQ contract for aviation fuel, to supply the Defense Energy Support Center. There were originally 48 proposals solicited with 23 responses. Contract funds will not expire at the end of the current fiscal year. The contract will run until April 30, 2010 (SP0600-09-D-0474).
March 9/09: Signature Flight Support Corp. in Miami, FL won a maximum $11.1 million fixed-price with economic price adjustment contract for fuel delivery to the US Army, Navy, Air Force, Marine Corps and federal civilian agencies. There was 1 proposal originally solicited, with 3 responses. Contract funds will expire at the end of the current fiscal year, but the contract will run until March 31/13 (SP0600-09-D-0067).
March 6/09: Small business qualifier Petro Air in Aguadilla, Puerto Rico won a maximum $13.3 million fixed-price with economic price adjustment contract for fuel, to supply the USAF. The proposal was originally solicited on FedBizOps with 8 responses. The contract will run until March 31/12 (SP0600-09-D-1006).
March 6/09: Total Petroleum Puerto Rico Corp. in San Juan, Puerto Rico won a maximum $12.7 million fixed-price with economic price adjustment contract for fuel for the US Army, Navy, Air Force, Coast Guard and federal civilian agencies. The proposal was originally solicited on FedBizOps with 8 responses. The contract will run until March 31/12 (SP0600-09-D-1008).
March 2/09: The County of Augusta-Richmond, DBA(Doing Business As) Bush Field Airport in Augusta, GA, received a maximum $6.6 million fixed-price with economic price adjustment contract for jet fuel for the US Army, Navy, Air Force, Marine Corps and federal civilian agencies. There was originally 1 proposal solicited with 1 response. The contract will run until March 31, 2013 (SP0600-09-D-0045).