BP still a top supplier to U.S. military

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- BP is still among the biggest suppliers of fuel to the U.S. military, and the Defense Department has no plans to stop awarding the company lucrative contracts.

As of last week, BP has been awarded 17 contracts valued at just under $1 billion, the Defense Logistics Agency (DLA) said. That makes BP the third-largest supplier of fuel to the armed services so far this fiscal year.

In fiscal 2009, the DLA granted BP a total of 26 contracts valued at $2.2 billion, or nearly 12% of overall fuel purchases, making it the military's largest fuel supplier that year.

Mimi Schirmacher, a spokeswoman for the DLA, said the agency currently has no plans to replace BP as a supplier.

"BP participates in multiple DLA programs," she said. "Since no debarment or suspension actions are in effect, they are currently eligible for contract awards according to the Federal Acquisition Regulation."

In fact, BP has already received one small contract since the April 20 explosion on the Deepwater Horizon killed 11 workers and led to a catastrophic oil spill in the Gulf of Mexico. On May 17, the DLA awarded BP a contract worth $342,854 over four years to supply jet fuel to a regional airport in Oregon.

Schirmacher said the DLA is currently considering bids for bulk fuel contracts from companies including BP, but the agency can take into account "all relevant facts" when deciding which supplier to use.

While many federal agencies have the power to bar or suspend companies from receiving government contracts, the authority is rarely used against large companies such as BP, said Neil Gordon, a contract and misconduct investigator at the Project on Government Oversight.

"Debarment authority is mostly used for smaller companies and individual contractors," he said. "It's very rarely used against bigger players like BP."

However, the Environmental Protection Agency has used its debarment authority to prevent two particular BP facilities from receiving federally funded contracts.

The EPA barred BP's Texas City Refinery last year for violations of clean air and water acts following an explosion in 2005 that killed 15 workers and injured several more. The agency took similar measures against a BP facility in Alaska in 2008.

An EPA spokeswoman said the agency is closely monitoring the investigations into the circumstances leading to the explosion and spill in the Gulf of Mexico. "EPA will weigh its options under our debarment authority and take appropriate actions," the spokeswoman said.

The EPA had been in talks with BP to lift the existing bans, but the agency has temporarily called them off, pending the outcome of an independent probe into the Gulf spill.

BP spokesman Darren Beaudo declined to provide details on the company's government contracts, and would not comment on any possible debarment.

"It's too early to speculate about any actions as a result of any investigations," he said.

Even if the EPA or another agency decides to bar BP as a result of the current spill, the effect may be minimal. That's because debarment authority typically applies only to individual facilities, and is not usually a company-wide action.

In addition, agencies have a lot of latitude in how they enforce the sanctions and past debarments have been successfully repealed by company lawyers.

"It's not a very ironclad procedure," said Gordon. "There are always exceptions or waivers." To top of page

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