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Sanctions Against BP Won’t Impede U.S. Military

Nov. 30, 2012 - 03:02PM   |  
By MARCUS WEISGERBER   |   Comments
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The U.S. government’s suspension of contracts to oil supplier BP is not expected to hinder U.S. military operations even though the company provides the Defense Department 10 percent of its fuel.

Fuel purchased from BP is used in a diverse group of military equipment, including tanks, trucks, planes and ships.

“My understanding … is that we don’t see any harm perpetually,” said Brett Lambert, deputy assistant secretary of defense for manufacturing and industrial base policy, in a Nov. 29 interview.

“It goes back to the argument that this is a global marketplace,” he said. “So there are plenty of providers that are out there on which to draw upon.”

The Defense Logistics Agency (DLA), the arm of the Pentagon that purchases most of its fuel, uses a competitive acquisition process. The agency anticipates receiving offers from other suppliers while BP is prevented from filling future requirements, Mimi Schirmacher, a spokeswoman for DLA, said in an email.

Last week, the Environmental Protection Agency temporarily suspended BP from being awarded new government contracts. The government is punishing BP for its “lack of business integrity” surrounding the Deepwater Horizon disaster in the Gulf of Mexico in 2010.

Last month, BP pleaded guilty to numerous counts of misconduct or neglect stemming from the disaster in which an estimated 4.9 million barrels of oil were spilled and 11 people were killed when an oil rig exploded. The company also agreed to pay $4.5 billion in fines stemming from the incident, which is considered the largest environmental disaster in U.S. history.

The suspension of BP does not impact government contracts already in place.

Currently, DLA has 17 contracts with companies named in the EPA suspension, according to Schirmacher. The value of all current BP or affiliate contracts at the time of the suspension is approximately $2.3 billion.

In fiscal 2012, DLA Energy purchased about 121 million barrels of fuel. Of that, about 10 percent was purchased from BP.

In 2011, DLA awarded 22 contracts to BP in 2011, totaling $1.4 billion, according Schirmacher. That year, oil bought from BP accounted for 10.35 percent of DoD’s total fuel purchases. In 2010, DLA awarded 20 contracts to BP or its affiliates valued at about $1 billion.

DLA purchases fuel through a competitive acquisition process, with awards going to the lowest priced, technically acceptable bid. Some contracts are year-to-year while others are for as many as four years.

The large bulk petroleum purchases are recompeted each year and are for a period of 12 months with a 30-day carryover, Schirmacher said. Smaller awards, such as for a specific military installation, are recompeted every four years.

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Zachary Fryer-Biggs contributed to this report.

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