DoD's $23.7M natural gas contract awarded to Constellation Energy Gas Choice, LLC shows fair value
Contract Overview
Contract Amount: $23,755,574 ($23.8M)
Contractor: Constellation Energy GAS Choice, LLC
Awarding Agency: Department of Defense
Start Date: 2008-10-01
End Date: 2010-09-30
Contract Duration: 729 days
Daily Burn Rate: $32.6K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 37
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Energy
Official Description: DIRECT SUPPLY NATURAL GAS
Place of Performance
Location: STAMFORD, FAIRFIELD County, CONNECTICUT, 06901
Plain-Language Summary
Department of Defense obligated $23.8 million to CONSTELLATION ENERGY GAS CHOICE, LLC for work described as: DIRECT SUPPLY NATURAL GAS Key points: 1. Contract value appears reasonable given market conditions and duration. 2. Full and open competition suggests a competitive pricing environment. 3. Fixed-price with economic price adjustment structure carries some risk. 4. Contract duration of 729 days provides stability for energy supply. 5. Awarded by Defense Logistics Agency, supporting critical military operations. 6. Geographic focus on Connecticut for natural gas supply.
Value Assessment
Rating: good
The contract's total value of $23.76 million over approximately two years suggests a benchmark price of roughly $11.88 million per year. This appears to be within a reasonable range for large-scale natural gas procurement for a federal agency, especially considering the fixed-price with economic price adjustment structure which allows for market fluctuations. Without specific per-unit cost data or direct comparisons to identical contracts, a precise value-for-money assessment is challenging, but the competitive award process lends confidence to the pricing.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of 37 bids suggests a robust and competitive marketplace for natural gas supply to the Defense Logistics Agency. This level of competition is generally favorable for price discovery and achieving market-based pricing, reducing the likelihood of inflated costs.
Taxpayer Impact: A high number of bidders in a full and open competition typically translates to better value for taxpayers by driving down prices through competitive pressure.
Public Impact
Provides essential natural gas to support Department of Defense operations in Connecticut. Ensures reliable energy supply for military installations and personnel. Contributes to the stability of energy infrastructure in the region. Supports the broader energy sector through procurement.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic price adjustment clause introduces potential for cost overruns if market prices rise significantly.
- Contract duration of two years may not fully capture long-term energy market trends.
- Reliance on a single supplier for a critical commodity like natural gas carries inherent supply chain risks.
Positive Signals
- Awarded through full and open competition, indicating a competitive bidding process.
- Multiple bids received (37) suggest a healthy market and potential for favorable pricing.
- Fixed-price component provides some cost certainty.
- Contract supports critical national defense functions.
Sector Analysis
The energy sector, specifically natural gas procurement, is a critical component of federal operations. This contract falls within the broader category of utility services and energy supply, which are essential for maintaining government infrastructure and operational readiness. The market for natural gas is influenced by global supply and demand, geopolitical factors, and regulatory environments. Federal agencies are significant consumers of energy, and their procurement strategies can impact market dynamics.
Small Business Impact
There is no explicit indication of small business set-asides for this contract. Given the nature of natural gas supply and the scale of the award, it is likely that larger energy providers were the primary bidders. Subcontracting opportunities for small businesses may exist in related services such as logistics, maintenance, or administrative support, but these are not detailed in the provided data.
Oversight & Accountability
Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), ensuring compliance with contract terms and financial accountability. The Defense Logistics Agency (DLA) is responsible for the overall program management and performance monitoring. Transparency is generally maintained through contract award databases and reporting requirements, though specific performance metrics are not detailed here.
Related Government Programs
- Defense Logistics Agency Energy Contracts
- Department of Defense Utility Services
- Federal Natural Gas Procurement
- Energy Supply for Military Installations
Risk Flags
- Price Volatility Risk (due to FP-EPA)
- Supply Chain Disruption Risk
- Contractor Performance Risk
Tags
energy, natural-gas, defense, department-of-defense, defense-logistics-agency, fixed-price-economic-price-adjustment, full-and-open-competition, connecticut, utility-services, crude-petroleum-and-natural-gas-extraction
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $23.8 million to CONSTELLATION ENERGY GAS CHOICE, LLC. DIRECT SUPPLY NATURAL GAS
Who is the contractor on this award?
The obligated recipient is CONSTELLATION ENERGY GAS CHOICE, LLC.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Logistics Agency).
What is the total obligated amount?
The obligated amount is $23.8 million.
What is the period of performance?
Start: 2008-10-01. End: 2010-09-30.
What was the specific unit price of natural gas under this contract, and how does it compare to prevailing market rates at the time of award?
The provided data does not include specific unit pricing for natural gas. The total award amount of $23,755,574.39 over 729 days (approximately 2 years) suggests an average annual expenditure of roughly $11.88 million. To benchmark this against market rates, one would need to know the volume of natural gas procured and compare the implied per-unit cost (e.g., per MMBtu) to indices like the Henry Hub spot price or futures contracts during the contract period (October 2008 - September 2010). The economic price adjustment clause indicates that the final unit cost would have varied with market conditions, making a single comparison difficult.
What was the track record of Constellation Energy Gas Choice, LLC in fulfilling federal contracts prior to this award?
Information regarding Constellation Energy Gas Choice, LLC's specific track record with federal contracts prior to October 2008 is not detailed in the provided data. However, as a significant energy provider, it is likely they had experience with large-scale commercial and potentially government contracts. A comprehensive assessment would require reviewing their past performance ratings, any past performance issues, and their history with similar energy procurement contracts awarded by federal agencies. The award itself suggests they met the necessary qualifications and demonstrated capability to fulfill this requirement.
How did the 'fixed price with economic price adjustment' (FP-EPA) pricing structure impact the final cost compared to a firm fixed price contract?
The FP-EPA structure means that the base price was fixed, but it could be adjusted based on pre-defined economic factors, typically related to the cost of the commodity (natural gas). If natural gas prices increased significantly during the contract period, the government would pay more than the initial fixed price. Conversely, if prices decreased, the price paid would also decrease. This structure offers some cost certainty compared to a fully variable contract but carries more risk of price escalation than a firm fixed-price contract, which would lock in the price regardless of market fluctuations. The actual cost impact depends entirely on the volatility of natural gas prices between October 2008 and September 2010.
What were the primary performance metrics used to evaluate the success of this natural gas supply contract?
The provided data does not specify the performance metrics for this contract. Typically, for utility and energy supply contracts, key performance indicators (KPIs) would include reliability of delivery (e.g., minimizing service interruptions), adherence to delivery schedules, accuracy of billing, responsiveness to inquiries or issues, and compliance with all contract terms and conditions, including safety and environmental regulations. The Defense Logistics Agency would have established specific metrics and reporting requirements to ensure the consistent and reliable supply of natural gas to DoD facilities.
What is the historical spending trend for natural gas procurement by the Defense Logistics Agency or the Department of Defense in Connecticut?
The provided data only details this specific contract from 2008-2010. To understand historical spending trends, one would need to analyze DLA's procurement data for natural gas in Connecticut over a longer period, including contracts awarded before and after this one. This would involve looking at annual spending, the number and value of contracts awarded, the types of contract vehicles used (e.g., competitive vs. sole-source), and the primary contractors. Such an analysis would reveal patterns in demand, pricing fluctuations, and shifts in procurement strategies over time.
Were there any significant risks identified during the solicitation or award process for this contract, and how were they mitigated?
The data indicates the contract was awarded under 'full and open competition' with 37 bids, suggesting a competitive environment that generally mitigates risks related to price and availability. However, the 'fixed price with economic price adjustment' clause inherently carries a risk of price escalation if market conditions change unfavorably. Other potential risks could include supply chain disruptions, contractor performance issues, or regulatory changes affecting natural gas. Mitigation strategies would typically involve robust contract language, performance monitoring, contingency planning by the DLA, and potentially requiring performance bonds from the contractor.
Industry Classification
NAICS: Mining, Quarrying, and Oil and Gas Extraction › Oil and Gas Extraction › Crude Petroleum and Natural Gas Extraction
Product/Service Code: CHEMICALS AND CHEMICAL PRODUCTS
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Solicitation ID: SP060008R0401
Offers Received: 37
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Parent Company: Mxenergy Holdings Inc. (UEI: 796653470)
Address: 595 SUMMER ST, STE 300, STAMFORD, CT, 04
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Small Business
Financial Breakdown
Contract Ceiling: $23,755,574
Exercised Options: $23,755,574
Current Obligation: $23,755,574
Contract Characteristics
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: SP060008D7516
IDV Type: IDC
Timeline
Start Date: 2008-10-01
Current End Date: 2010-09-30
Potential End Date: 2010-09-30 00:00:00
Last Modified: 2010-10-19
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