Defense Energy Support Center

1
Defense Energy Support Center

• Pacific Energy and Petroleum Conference
• CAPT Stu Funk
• October 2002

2
Agenda

• DESC Overview
• Business Metrics
• Meeting the Challenges
• New Mission Areas
• Change

3
Our Visionto be the Warfighters Choicefor
total energy solutions
Deliveries
Contracts Delivery Orders
Requirements
Defense Energy Support Center Ft Belvoir, VA
Forces pay for fuel when they use it!
4
DESC Mission

• Logistics worldwide bulk fuel to U.S. military
  forces
• On-base fuel and total energy support
• Off-base fuel support to deployed forces (and
  allies)
• Management of government fuel facilities,
  worldwide
• Missile Fuels new mission as of 1 October 2001
• Installation energy support
• Natural gas purchasing and support to U.S.
  installations
• Coal acquisition, testing, and delivery
• Competitive electricity purchasing
• Support for Utility System Privatization
• Energy Saving Performance Contract Support
• Management information providing critical
  support at all levels

5
Evolution of DESC
1942 Army/Navy Petroleum Board
1945 Joint Army/Navy Petroleum Purchasing Agency
1957 Military Petroleum Supply Agency
1948 Armed Services Petroleum Purchasing Agency
1962 Defense Petroleum Supply Center
1964 Defense Fuel Supply Center
1973 Inventory management (Wholesale)
1993 Retail mgt starts
Missile Fuels Oct 2001
2001 Retail complete
1998
Defense Energy Support Center
QA
6
Breadth/Depth of Current Responsibilities

• Acquisition, inventory management distribution
  to final consumer
• Market knowledge
• Facilities management
• Status of inventory and other mission-critical
  data, worldwide
• Technical, contracting related services
• Financial management

7
Global Organization
Approximately 750 military and civilians worldwide
8
DESC Organization
DESC-D DESC-DD
FAS PMO
Staff Functions
DO
DC
CRM
DESC-B
DESC-A
DESC-DCI
DESC-DCH
Regions Americas Europe Middle East Pacific
DESC-F
DESC-E
DESC-DCP
DESC-DCB
DESC-P
DESC-M
9
Customer Segmentationbased on type of need
Customers for and consumers of information
Customers for and consumers of fuel
CONUS and Contingencies
Overseas and Contingencies
Service HQ
CINC
Claimant/MA(J)COM (or supporting CINC, e.g.
TRANSCOM)
OSD
Component
Operational Unit Petroleum Company/ Organization
Base civil engineer or PWC (Installation energy)
Operational Units Petroleum org/Ship/Acft
DLA
DESC
DCST
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Customer Driven Supply Chain
Military Services
Military Services
Ships
SCHEDULE
VALIDATION
Regions
DESC
Contracts

• Requirementspush system based on demands
• No requisitioning for bulk
• Bulk DeliveryDESC Direct
• Commercial Direct Delivery Customer Direct

Note Into-Plane, air operations support from
commercial airports is a form of customer direct
11
DESC FY 2001 Estimated Contract Purchases of
Product
Mobility Fuels 3.7 Billion
Heating Oils 129.6 Million
Special Mission Needs (Into-Plane,
Bunkers) 306.2 Million
Total 4.8 Billion
Electricity 47.0 Million
Coal 41.6 Million
Natural Gas 229.6 Million
Special Acquisitions (Storage, Alongside
Refueling, Testing) 301.9 Million
Note Excludes 400 million in Transportation
12
STANDARD PRICE vs ACTUAL COST
DESC Standard Price
Per Barrel
FY 2003 STANDARD PRICE
13
DESC Organization
DESC-D DESC-DD
FAS PMO
Staff Functions
DO
DC
CRM
DESC-B
DESC-A
DESC-DCI
DESC-DCH
Regions Americas Europe Middle East Pacific
DESC-F
DESC-E
DESC-DCP
DESC-DCB
DESC-P
DESC-M
14
Installation Energy

• Natural Gas
• Centralized procurement of direct supply natural
  gas for Military Installations and Federal
  Civilian Agencies throughout the continental U.S.
  
• Electricity
• Competitive acquisition of Retail Open Access for
  Department of Defense and Federal Civilian
  agencies in states that have implemented
  deregulation.
• Coal
• Procurement of coal, testing and delivery for DoD
  and Federal Civilian Agencies within CONUS.

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DoD Natural Gas Program
DoD Natural Gas Cost Avoidance FY 01 20.4M
DoD Customers Under Contract
Natural Gas Cost Avoidance
FY91-00 FY01
Total Army 82.8 10.7 93.5 DON
74.0 2.7 76.7 Air Force 58.5
(.3) 58.2 Other DoD 7.1
.8 7.9 Total 291.0 20.4
311.4
of DoD Participants
Non- DoD 68.6 6.5 75.1
Army 68 Air Force 44 DON 54
Other DoD 14
Non- DoD 65
Number of customers on contract
after evaluation of utility tariff
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DESCs CompetitiveElectricity Program
Cost Avoidance
Customers
FY99 FY00 FY 01 TOTAL
Reserves Navy Army
Air Force ANG
Other DoD DOE Fed
Civ
169 93 19 05 03 03 11 11
CA .7M 1.3M 1.5M 3.5M
PA/NJ .2M .9M .15M 1.25M
MD .2M .32M
.52M
ME .006M .17M .18M
DC .1M
.1M
TOTAL .9M 2.5M 2.2M 5.6M
TOTAL 314
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DoD Coal Program
100 AWARDED TO SMALL BUSINESS FIRMS
Major political football from 1961 to 1990
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DESC Organization
DESC-D DESC-DD
FAS PMO
Staff Functions
DO
DC
CRM
DESC-B
DESC-A
DESC-DCI
DESC-DCH
Regions Americas Europe Middle East Pacific
DESC-F
DESC-E
DESC-DCP
DESC-DCB
DESC-P
DESC-M
19
Defense Reform Background
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OSD Revised Guidance for Utilities Privatization

• Revised guidance for Utilities Privatization to
  be issued by OSD in July 2002
• Coordinated through Service Secretaries and
  Director DLA
• Guidance includes
• Utility Privatization completion date changed to
  September 2005
• Standardization of Economic Analysis Processes
• Defines minimum conveyance
• Provides methods to protect DoDs interests
• Implements FAR deviation for allowing interest
  expense
• Encourages competition

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Actions to Date

• DESC granted contracting authority for 492 DoD
  utility systems privatization efforts
• 272 have been assigned to solicitations
• Issued 30 solicitations (272 systems)
• 29 solicitations/systems closed and are in offer
  evaluation/ negotiation phase
• 1 solicitations/systems scheduled to close by
  August 2002
• Contracts awarded (natural gas systems)
• Fort Detrick- 1.4 million cost avoidance over
  50-year
• life-cycle cost analysis (LCCA)
• Bolling AFB - 800K cost avoidance over 50-year
  LCCA
• Minneapolis-St Paul - 77K cost avoidance over
  50-year LCCA
• Potential awards awaiting Congressional
  notification - 8
• Potential 4th Quarter FY02 Awards - 27

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DESCs ESPC Program

• ESPC program developed at ACSIM request
• Based on MDW ESPC success
• DESC explored partnerships with other Agencies
• Plenty of Headroom on existing umbrella
  contracts
• Industry wants task orders, not more umbrella
  contracts
• DESC signed MOU with DOE
• Gives DESC full contracting authority
• DOE provides technical support

Energy Savings Performance Contract - Contractor
invests in energy savings and is paid from
savings achieved
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DESC Organization
DESC-D DESC-DD
FAS PMO
Staff Functions
DO
DC
CRM
DESC-B
DESC-A
DESC-DCI
DESC-DCH
Regions Americas Europe Middle East Pacific
DESC-F
DESC-E
DESC-DCP
DESC-DCB
DESC-P
DESC-M
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Product Line OverviewThree Categories

• Propellants
• Hypergols
• Hydrazine 7 grades
• N204 Oxidizer
• Liquids
• Priming Fluid (PF-1)
• RP-1
• Isopropyl Alcohol (IPA)
• Hydrogen Peroxide (H2O2)
• Inhibited Red Fuming Nitric
• Acid (IRFNA)
• JP-10
• Cryogenics
• Liquid Oxygen (LOX)
• Liquid Hydrogen (LH2)

• Non Propellant Cryogenics
• Liquid Nitrogen (LN)
• Liquid Air
• Liquid Helium
• Gases
• Nitrogen
• Argon
• Helium
• Hydrogen
• Gaseous Deuterium (D2)
• Nitrogen Trifluoride (NF3)
• Fluorine
• Xenon
• Krypton
• Neon

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CBU Snapshot

• Mission Manage the total supply chain and serve
  as DoD IMM for all missile fuels products and
  services primarily used by space and launch
  customers
• 92 total NSNs
• All support DoD programs and weapons systems
• Plus NASA Space Program
• 146 contracts
• 128 suppliers
• Event based program
• DLA-owned inventory in 19 Controlled Storage
  Points (CSP)
• Plus, Direct Vendor Delivery, where feasible
• 500 to 2500 deliveries per month
• Manpower
• 50 Civilian - 0 Military

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Missile Fuels Direct Warfighter Support

• USAF Titan, Delta and Atlas - and commercial
  follow-on the EELV (currently Lockheed Martin
  only)
• F-16 EPU
• F-15/F-16 Air Intercept Missile, Avenger,
  Sidewinder
• All Cruise missiles Navy Tomahawk, Harpoon,
  USAFs ALCM/ACM
• AIM9 and Stinger Missiles
• US Army 37C Drone and Lance Missiles
• Fiber Optics Guided Missile (RD)
• All Wind Tunnels
• All DoD Laser Programs
• All Space-Based Weapons (RD)

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Meeting Challenges

• The Alphabet Soup of Change

ABC
DRRS
CRM
CM
EA
QA
FEA/RIK
FAS
BSC
ADC/SDC
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Conclusion

• This time of change is

• Challenging
• Fun
• Important