Department of the Army awards $12.5M contract for electricity supply to Yongsan Area, South Korea

Contract Overview

Contract Amount: $12,509,300 ($12.5M)

Contractor: Korea Electric Power Corp

Awarding Agency: Department of Defense

Start Date: 2007-11-28

End Date: 2008-09-30

Contract Duration: 307 days

Daily Burn Rate: $40.7K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE

Sector: Other

Official Description: ELECTRICITY POWER SUPPLY FOR AREA II(YONGSAN AREA)

Plain-Language Summary

Department of Defense obligated $12.5 million to KOREA ELECTRIC POWER CORP for work described as: ELECTRICITY POWER SUPPLY FOR AREA II(YONGSAN AREA) Key points: 1. Contract value of $12.5M for a 10-month period suggests a significant but potentially variable monthly cost. 2. Sole-source award raises questions about competition and potential for overpayment. 3. Limited contract duration may indicate a need for ongoing, potentially re-competed services. 4. The nature of bulk electricity supply suggests a critical infrastructure requirement. 5. Award to Korea Electric Power Corp. indicates reliance on local utility providers in overseas locations. 6. Fixed-price contract type offers some cost certainty but may not fully capture fluctuating energy market prices.

Value Assessment

Rating: fair

The contract value of $12.5 million for a 307-day period averages approximately $40,747 per day. Without specific details on the quantity of electricity supplied or the pricing structure, a direct comparison to similar contracts is challenging. However, the daily cost appears substantial, and the lack of competitive bidding makes it difficult to assess if this represents a value-for-money outcome. Benchmarking against commercial electricity rates in South Korea would be necessary for a more precise valuation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not openly competed. This typically occurs when only one vendor can provide the required goods or services, often due to unique capabilities, geographic necessity, or urgent requirements. The lack of competition limits the government's ability to solicit multiple bids and negotiate the best possible price, potentially leading to higher costs for taxpayers.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the most competitive pricing available, as there was no opportunity for multiple vendors to bid and drive down costs through competition.

Public Impact

Military personnel and their families stationed in Yongsan Area, South Korea, benefit from reliable electricity. Essential base operations, including housing, command facilities, and support services, are sustained. The contract ensures the continuity of power for a critical U.S. military installation in a foreign country. Local workforce implications are minimal as the service is provided by a national utility company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Lack of detailed performance metrics makes it difficult to assess service quality and efficiency.
Contract duration is relatively short, suggesting potential for frequent re-competition and associated administrative burden.

Positive Signals

Ensures critical infrastructure (electricity) is provided to a key overseas military installation.
Fixed-price contract offers some level of cost predictability for the government.
Award to a national utility provider likely ensures reliable service delivery.

Sector Analysis

The defense sector relies heavily on utility services, including electricity, to maintain operational readiness for bases worldwide. This contract falls under the broader category of base support services, which are essential for the functioning of military installations. The market for bulk electricity supply is typically dominated by national or regional utility providers, especially in overseas locations where establishing alternative power sources can be complex and costly. Benchmarking would involve comparing the per-unit cost of electricity against rates charged by similar national utilities to government entities or large commercial consumers in comparable regions.

Small Business Impact

There is no indication that this contract included a small business set-aside. As the award was made to Korea Electric Power Corp., a large national utility, it is unlikely that small businesses were directly involved as prime contractors. Subcontracting opportunities for small businesses are not specified but would typically be limited in a contract for bulk electricity supply from a national provider.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and facility management divisions responsible for the Yongsan Area. Accountability measures would be tied to the terms of the fixed-price contract, ensuring delivery of the specified amount of electricity. Transparency is limited due to the sole-source nature and the lack of publicly available detailed performance data. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Base Operations Support Services
Utility Services Contracts
Overseas Military Construction and Facilities

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.5 million to KOREA ELECTRIC POWER CORP. ELECTRICITY POWER SUPPLY FOR AREA II(YONGSAN AREA)

Who is the contractor on this award?

The obligated recipient is KOREA ELECTRIC POWER CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $12.5 million.

What is the period of performance?

Start: 2007-11-28. End: 2008-09-30.

What is the historical spending pattern for electricity supply at Yongsan Area?

Historical spending data for electricity supply at Yongsan Area prior to this $12.5 million contract is not readily available in the provided data. However, the nature of utility services suggests that there would likely be recurring contracts for power. Understanding past contract values, durations, and competition levels would provide crucial context for assessing the current award's value and necessity. Without this historical perspective, it's difficult to determine if this $12.5 million represents an increase, decrease, or stable level of spending for this essential service over time. Further investigation into the Army's contracting history for this specific location would be required.

How does the daily cost of this contract compare to commercial electricity rates in South Korea?

The daily cost for this contract averages approximately $40,747 ($12.5M / 307 days). To benchmark this against commercial rates in South Korea, one would need to compare it to the price per kilowatt-hour (kWh) charged by Korea Electric Power Corporation (KEPCO) to large commercial or industrial consumers. KEPCO's rates vary based on consumption tiers, time of use, and contract terms. Without knowing the exact kWh supplied under this contract, a direct comparison is difficult. However, if this daily cost translates to a significantly higher per-kWh rate than standard commercial tariffs, it could indicate a lack of cost-effectiveness, especially given the sole-source nature of the award.

What are the specific risks associated with a sole-source award for essential utility services?

The primary risk of a sole-source award for essential utility services like electricity is the potential for inflated pricing due to the absence of competitive pressure. Taxpayers may end up paying more than necessary because the government cannot leverage multiple bids to secure the best possible rate. Additionally, sole-source contracts can sometimes indicate a lack of proactive planning or market research to identify potential alternative providers or competitive solutions. This can lead to a reliance on a single vendor, potentially creating vulnerabilities if that vendor experiences service disruptions or decides to significantly increase prices in future contract negotiations.

What performance metrics are typically included in contracts for bulk electricity supply?

Contracts for bulk electricity supply typically include performance metrics focused on reliability, availability, and power quality. Reliability might be measured by the frequency and duration of power outages (e.g., maximum allowable outage minutes per year). Availability ensures that power is consistently supplied as contracted. Power quality metrics could include voltage stability, frequency regulation, and harmonic distortion limits. For a fixed-price contract like this, the emphasis might be more on ensuring the delivery of a specified quantity or capacity of power, with penalties or incentives tied to meeting agreed-upon service levels or outage thresholds. The specific metrics would be detailed in the contract's Performance Work Statement (PWS).

Could this contract have been competed, and if so, what would be the benefits?

Whether this contract could have been competed depends on the specific circumstances at the time of award, such as the availability of alternative electricity providers in the Yongsan Area and the urgency of the requirement. If alternative providers existed, a competitive bidding process would likely have yielded a lower price for taxpayers, encouraged innovation in service delivery, and provided greater assurance of reliable supply through multiple sources. Competition allows the government to explore different pricing structures, service level agreements, and potentially identify more cost-effective solutions than relying on a single, incumbent provider, especially if that provider is a government-mandated utility.

Industry Classification

NAICS: Utilities › Electric Power Generation, Transmission and Distribution › Electric Bulk Power Transmission and Control

Product/Service Code: ARCHITECT/ENGINEER SERVICES › ARCH-ENG SVCS - CONSTRUCTION

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 87 SAMSUNG DONG GANGNAM G, SEOUL

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $12,509,300

Exercised Options: $12,509,300

Current Obligation: $12,509,300

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: DAJB0370D6017

IDV Type: IDC

Timeline