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Bulk Fuel Pricing: DOD Needs to Take Additional Actions to Establish a More Reliable Methodology

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Congressional rept.

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Each fiscal year, the Office of the Under Secretary of Defense Comptroller, in coordination with the Defense Logistics Agency, sets a standard price per barrel that the Department of Defense DOD will charge for fuel, which the military services and other fuel customers use in developing their annual budget requests. In setting this standard price, DOD endeavors to closely approximate the actual price it will pay for the fuel during the year of budget execution. However, due to the timing of DOD s budget process, the department establishes the standard price almost a year in advance of when it begins to actually purchase the fuel at the current market rate.1 Historically, DOD has used economic assumptions data provided by the Office of Management and Budget OMB to establish the standard price. In July 2015, we notified you that, in response to a provision in the Senate committee report accompanying its version of the National Defense Authorization Act for Fiscal Year 2016, we would be reviewing DOD s and the military services approaches to estimating fuel consumption and related costs in annual budget requests.2 Based on information we collected as part of that ongoing review, we understand that the department is currently considering methodologies for setting the standard fuel price for fiscal year 2017. Because an official with the Office of the Under Secretary of Defense Comptroller who oversees DOD s bulk fuel program told us that the department expects to finalize its methodology and determine the standard price by December 2015 for inclusion in the department s fiscal year 2017 budget request, we are sending this report to share timely observations based on our ongoing review, specifically regarding the extent to which DOD adjusted its methodology for determining the standard price used in developing the fiscal year 2016 budget request.

Subject Categories:

  • Economics and Cost Analysis
  • Logistics, Military Facilities and Supplies
  • Fuels

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