While the DSTA team was establishing an aviation fuel contract to support the Republic of Singapore Air Force’s overseas training in 2012, fuel prices were significantly higher than in previous exercises. This increase was reportedly due to the different economic and operational environment, which included factors such as rising labour costs, reduced subsidies for transportation fuel, as well as changes in the availability and proximity of fuel tanks to the training areas.

The unit price of aviation fuel consists of a base price pegged to a published fuel price index, which is market dependent, and a service fee levied by the industry partner who is the sole source in the market. Instead of accepting a fixed service fee which has factored in future price adjustment, DSTA proposed a different solution. The team’s idea was to compute the service fee based on local price indices for labour, transportation, and logistics.

With the DSTA team’s different price computation, the SAF achieved cost savings of up to nine per cent in the service fee, which is significantly lower than the price offered in the tender.