Defense logistics agency issue - KMI Media Group

As a primary level field activity of the Defense Logistics Agency,
DLA Energy is the agency’s fuel supplier, providing the Department of
Defense and other government agencies with comprehensive energy
solutions in the most effective and efficient manner possible. DLA
Energy provides a host of ground, marine and aviation fuels as well
as space and missile propellants, chemicals and gases, utility fuels and
electricity. In addition, DLA Energy is the DoD’s center of expertise for
alternative fuels and renewable energy and serves as the executive agent
for DoD’s bulk petroleum supply chain.
DLA Energy bought the equivalent of approximately 144 million
barrels of fuel, energy and power, worth about $20 billion in the last
fiscal year. That total included petroleum products for aircraft and
ships; diesel fuel and gasoline for vehicles; heating oil, natural gas, coal
and electricity for installations; aerospace fuels and products for the
National Aeronautics and Space Administration (NASA), DoD, and the
commercial space launch programs; and small quantities of alternative
fuels for the military services’ testing and certification programs.
Although the military services are occasionally granted local purchase
authority to buy fuels in unique circumstances, DLA Energy buys
more than 99 percent of fuels used by the U.S. military. “By purchasing
our customer’s requirements in aggregate we get buying power,”
explained Director of Supplier Operations Mark Iden. “Rather than
having each military service buy its own fuel requirements independently
with its own acquisition office and service-specific contracting
methods, we provide the overall DoD purchasing leverage, do it in a
consistent manner, and generally issue solicitations for our recurring
buys on set schedules that industry has grown accustomed to over the
years.”
Iden noted that “for the bulk petroleum products, we generally
buy the products from the producers and manage the supply chain
end to end.” DLA Energy does not own the assets that distribute
these petroleum products throughout the supply chain. DLA Energy
arranges transportation via U.S. Transportation Command activities,
the Military Sealift Command and the Military Surface Deployment
and Distribution Command. But DLA Energy is responsible for ensuring
the on-time delivery of these products to their end-use customers.
Iden also noted that DLA Energy owns the bulk fuel products generally
up to the point of sale to their customer, which typically takes place at
the wing of the aircraft or into the piece of equipment being refueled.
14 | MLF 6.5
fueL By the BiLLions of gaLLons.
By henry canaday
mLf correspondent
Tied in with this fuel-ownership role is DLA Energy’s responsibility to
fund the sustainment, restoration and modernization requirements for
the military services’ fuel storage and distribution systems that contain
this DLA-owned fuel.
For bulk purchases of conventional fuels like JP8 aviation turbine
fuel, JP5 naval aviation turbine fuel and F76 ship propulsion fuel, DLA
Energy obtains requirements from their customers and then puts out
a request for proposal, explained Research and Development Strategic
Energy Analyst Jeanne Binder. “Our bulk petroleum business unit then
receives the bids and evaluates them, seeking the lowest total cost to
the government,” Binder said. Then an indefinite delivery/indefinite
quantity award is made for a one-year delivery period, with an estimated
quantity and a guaranteed lift of 75 percent of this volume. The initial
price is adjusted weekly or even daily based on changes in commercial
fuel indexes.
Other purchases of conventional fuels, for example of the diesel fuel,
gasoline or heating oil handled by DLA Energy’s Direct Delivery Fuels
business unit, are conducted in a similar fashion, except that these
can result in multi-year requirements contracts with up to five-year
delivery periods. All RFPs are posted on the Federal Business Opportunities
website. The vast majority of purchases, for both bulk petroleum
products and for the direct delivery products, are competitive, and all
acquisitions comply with both Federal Acquisition Regulations and
Defense Federal Acquisition Regulation Supplement, noted Iden.
DLA Energy bulk fuel purchases are also subject to small business
set-aside rules. DLA Energy is currently working with the Small Business
Administration to consider an increase in the size definition of
small refineries. “Over the years, the number of small refineries has
diminished as these refineries have been bought out or have merged
or consolidated with other firms, thereby losing their current small
business status,” Iden explained. “A revised small refinery size determination
could help us increase the number of potential small business
participants in our key bulk petroleum acquisition programs.”
DLA Energy is also actively engaged with the military services in
support of their current efforts to test and certify a number of new
alternative fuels. Binder said the major difference for purchases of the
new brand of alternative fuels is that these are generally for a small
quantity specifically requested by the military services for testing and
certification purposes. The quantities requested range from a couple
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