Bulk Fuel Pricing: DOD Needs to Reevaluate Its Approach to Better Manage the Effect of Market Fluctuations

Why GAO Did This Study. DOD purchases bulk fuel and sells it to customers, including the military services. Each fiscal year, DOD sets a standard price for budgeting purposes, endeavoring to closely approximate the price it will pay when it buys the fuel almost a year later. If this price is different than the standard price, DOD may need to take actions to manage its working capital funds funds used to purchase fuel and other commodities that are reimbursed through sales. Senate Report 113-44, accompanying a bill for the National Defense Authorization Act for FY 2014, mandated GAO to review DOD s approach for establishing its bulk fuel pricing. This report discusses, among other things, (1) how estimated bulk fuel costs have compared to actual costs since FY 2009 and the factors that have contributed to any differences; and (2) the extent to which DOD has considered options for adjusting its approach to estimating bulk fuel costs and managing working capital funds in light of any differences between estimated and actual fuel costs. GAO compared estimated and actual fuel costs for FY 2009 through 2013 and analyzed DOD actions to manage working capital funds. What GAO Recommends. GAO recommends that DOD reevaluate its approach for estimating the components of the standard price and document the rationale for its assumptions. DOD agreed with the first recommendation and partially agreed with the second stating there is a closely-monitored, formal process. GAO continues to believe the recommendation remains valid as discussed in the report.
Report to Congressional Committees.