DoD's $55M Water System Contract with American Water Operations: Long-Term Privatization Deal

Contract Overview

Contract Amount: $55,015,693 ($55.0M)

Contractor: American Water Operations and Maintenance, LLC

Awarding Agency: Department of Defense

Start Date: 2007-09-26

End Date: 2058-02-07

Contract Duration: 18,397 days

Daily Burn Rate: $3.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: UTILITY PRIVATIZATION OF THE POTABLE WATER DISTRIBUTION SYSTEM AT SCOTT AFB, IL.

Place of Performance

Location: WALNUT, BUREAU County, ILLINOIS, 61376

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $55.0 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC for work described as: UTILITY PRIVATIZATION OF THE POTABLE WATER DISTRIBUTION SYSTEM AT SCOTT AFB, IL. Key points: 1. The contract is a long-term privatization effort for water distribution at Scott AFB, IL. 2. American Water Operations and Maintenance, LLC holds the contract, awarded under full and open competition. 3. The contract spans nearly 51 years, raising questions about long-term value and flexibility. 4. The sector is Defense, specifically related to base infrastructure and utilities.

Value Assessment

Rating: questionable

The contract's value is spread over an exceptionally long period (nearly 51 years). While the total value is significant, assessing its current value proposition requires careful analysis of inflation, technological changes, and potential future needs. Benchmarking is difficult due to the unique nature of long-term utility privatization.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded using full and open competition, suggesting a competitive bidding process. However, the long duration may have limited the number of potential bidders and the scope of price discovery over the contract's lifespan.

Taxpayer Impact: The long-term nature of this contract means taxpayers are committed to this arrangement for decades. While competition was used initially, the long duration could lead to less favorable pricing over time compared to shorter, more frequent contract cycles.

Public Impact

Ensures a continuous supply of potable water for Scott AFB personnel and operations. Privatization shifts operational and maintenance burdens from the government to the contractor. Long-term commitment raises concerns about adaptability to future infrastructure needs or technological advancements. Potential for cost savings through private sector efficiencies, but also risks of long-term price escalation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Extreme contract duration (nearly 51 years)
Lack of small business participation noted
Potential for price escalation over the long term

Positive Signals

Awarded under full and open competition
Addresses critical base infrastructure need
Potential for private sector efficiencies

Sector Analysis

This contract falls within the Defense sector, specifically concerning base infrastructure and utility management. Long-term utility privatization is a strategy used by various government entities to manage essential services, often benchmarked against public utility costs and private sector service agreements.

Small Business Impact

The data indicates that small business participation was not a factor in this contract (ss: false, sb: false). This suggests the prime contractor is likely a large entity, and there's no explicit indication of subcontracting opportunities for small businesses within this specific award.

Oversight & Accountability

The extensive duration of this contract warrants significant oversight to ensure the contractor is meeting performance standards and that the pricing remains fair over the decades. Regular reviews and performance assessments are crucial for accountability.

Related Government Programs

Water Supply and Irrigation Systems
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Extreme contract duration
No noted small business participation
Potential for long-term price escalation
Limited flexibility for future technological adoption
Vendor lock-in over decades

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $55.0 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC. UTILITY PRIVATIZATION OF THE POTABLE WATER DISTRIBUTION SYSTEM AT SCOTT AFB, IL.

Who is the contractor on this award?

The obligated recipient is AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $55.0 million.

What is the period of performance?

Start: 2007-09-26. End: 2058-02-07.

What is the projected long-term cost-effectiveness of this privatization compared to continued government operation or shorter-term contracts?

Assessing long-term cost-effectiveness is challenging due to the 51-year duration. While privatization can offer efficiencies, the fixed price over such a long period may not account for inflation, technological shifts, or changes in water infrastructure needs. A comparative analysis with public utility models and shorter contract cycles, factoring in risk and flexibility, would be needed for a comprehensive evaluation.

What are the risks associated with locking into a single water utility provider for nearly five decades?

The primary risks include potential price escalation beyond inflation, vendor lock-in limiting future technological adoption, and reduced flexibility to adapt the system to evolving base requirements or environmental regulations. There's also the risk of the contractor's financial stability or operational performance declining over such an extended period, impacting service reliability.

How effectively does this privatization model ensure reliable and high-quality potable water delivery compared to traditional government management?

The effectiveness hinges on the contractor's performance and the oversight mechanisms in place. Privatization can drive efficiency and reliability through private sector expertise and investment. However, the long-term nature requires robust performance metrics and penalties to ensure sustained quality and delivery, mitigating risks associated with long-term service agreements.

Industry Classification

NAICS: Utilities › Water, Sewage and Other Systems › Water Supply and Irrigation Systems

Product/Service Code: UTILITIES AND HOUSEKEEPING › UTILITIES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060003R0036

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: American Water Works Company, Inc.

Address: 1025 LAUREL OAK RD, VOORHEES, NJ, 08043

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $114,566,573

Exercised Options: $114,566,573

Current Obligation: $55,015,693

Actual Outlays: $422,688

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline