Fort A.P. Hill water and wastewater utility privatization contract valued at $83.3M over 50 years

Contract Overview

Contract Amount: $83,331,670 ($83.3M)

Contractor: American Water Operations and Maintenance, LLC

Awarding Agency: Department of Defense

Start Date: 2007-09-14

End Date: 2057-12-21

Contract Duration: 18,361 days

Daily Burn Rate: $4.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: UTILITY PRIVATIZATION OF THE WATER DISTRIBUTION AND WASTEWATER COLLECTION SYSTEM AT FORT A.P. HILL, VIRGINIA. SERVICES INCLUDE OPERATIONS & MAINTENANCE, RENEWALS & REPLACEMENTS, AND PERFORMANCE OF INITIAL CAPITAL UPGRADES TO THE WATER AND WASTEWATER SYSTEMS.

Place of Performance

Location: FORT A P HILL, CAROLINE County, VIRGINIA, 22427

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $83.3 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC for work described as: UTILITY PRIVATIZATION OF THE WATER DISTRIBUTION AND WASTEWATER COLLECTION SYSTEM AT FORT A.P. HILL, VIRGINIA. SERVICES INCLUDE OPERATIONS & MAINTENANCE, RENEWALS & REPLACEMENTS, AND PERFORMANCE OF INITIAL CAPITAL UPGRADES TO THE WATER AND WASTEWATER SYSTEMS. Key points: 1. Long-term contract structure suggests a focus on sustained operations and capital investment. 2. The contract spans over five decades, indicating a strategic approach to infrastructure management. 3. Performance-based elements may drive efficiency and quality in water and wastewater services. 4. The fixed-price contract type shifts performance risk to the contractor. 5. The scale of this privatization suggests significant infrastructure modernization is planned. 6. The contractor, American Water Operations and Maintenance, LLC, is a major player in utility services.

Value Assessment

Rating: good

The contract's total value of $83.3 million over approximately 50 years averages to about $1.67 million per year. This appears reasonable for comprehensive water and wastewater system operations, maintenance, and capital upgrades for a military installation. Benchmarking against similar large-scale utility privatization contracts for federal facilities would provide a more precise value assessment, but the long-term nature suggests a strategic investment rather than a short-term operational cost.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. This competitive process is expected to foster price discovery and ensure the government receives competitive pricing for the services. The presence of four bidders (as indicated by 'no': 4) suggests a healthy level of interest and competition for this significant utility privatization effort.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs through market forces and encouraging innovative solutions from a wider pool of potential providers.

Public Impact

Military personnel and their families residing at Fort A.P. Hill will benefit from reliable water and wastewater services. The contract ensures the operation, maintenance, and modernization of critical water distribution and wastewater collection infrastructure. The geographic impact is localized to Fort A.P. Hill, Virginia, ensuring essential services for the base. The contract supports jobs related to utility operations, maintenance, and capital improvement projects.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term commitment (50 years) could lead to contractor complacency if not managed with rigorous oversight.
Reliance on a single contractor for essential services over such an extended period poses a risk if the contractor's performance degrades.
Potential for scope creep or unforeseen cost increases during capital upgrade phases if not tightly managed.

Positive Signals

The privatization model aims to leverage private sector expertise and efficiency for utility management.
Performance-based aspects of the contract can incentivize high-quality service delivery.
The long duration allows for significant capital investments and infrastructure improvements that might be difficult to fund through traditional appropriations.

Sector Analysis

This contract falls within the Utilities and Infrastructure Management sector, specifically focusing on water and wastewater systems. The privatization of military base utilities is a strategy employed by the Department of Defense to improve service delivery and manage aging infrastructure. The market for utility management services is substantial, with many private firms specializing in operations, maintenance, and capital upgrades. This contract represents a significant, long-term commitment within this specialized niche.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a large-scale utility privatization requiring extensive expertise and capital, it is unlikely that small businesses would be primary awardees, though they may participate as subcontractors to the prime contractor, American Water Operations and Maintenance, LLC. Further analysis would be needed to determine the extent of small business subcontracting opportunities.

Oversight & Accountability

Oversight for this contract would likely be managed by the Defense Logistics Agency (DLA) or the relevant contracting command at Fort A.P. Hill. Mechanisms would include regular performance reviews, audits, and adherence to service level agreements outlined in the contract. Transparency is generally maintained through contract reporting requirements, though specific public-facing dashboards for utility performance may vary. The Inspector General's office would have jurisdiction over any allegations of fraud, waste, or abuse.

Related Government Programs

Military Base Operations Support
Public-Private Partnerships for Infrastructure
Water and Wastewater System Management
Federal Utility Services Contracts

Risk Flags

Long-term contract duration
Potential for contractor performance degradation over time
Reliance on private sector for essential infrastructure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $83.3 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC. UTILITY PRIVATIZATION OF THE WATER DISTRIBUTION AND WASTEWATER COLLECTION SYSTEM AT FORT A.P. HILL, VIRGINIA. SERVICES INCLUDE OPERATIONS & MAINTENANCE, RENEWALS & REPLACEMENTS, AND PERFORMANCE OF INITIAL CAPITAL UPGRADES TO THE WATER AND WASTEWATER SYSTEMS.

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 $83.3 million.

What is the period of performance?

Start: 2007-09-14. End: 2057-12-21.

What is the historical spending pattern for utility services at Fort A.P. Hill prior to this privatization contract?

Historical spending data for utility services at Fort A.P. Hill prior to the 2007 contract award (effective 2007-09-14) is not directly provided in the given data. However, the initiation of a 50-year privatization contract valued at $83.3 million suggests that previous in-house operations or shorter-term contracts were likely less cost-effective or lacked the necessary capital investment for modernization. Federal agencies often pursue privatization to address deferred maintenance and achieve economies of scale. Understanding the prior spending would require accessing historical budget documents and service contracts for the base's water and wastewater systems, which are typically managed through annual appropriations or specific service agreements.

How does the annual cost of this contract compare to the estimated cost of government operation and maintenance?

The total contract value is $83.3 million over approximately 18,361 days (from 2007-09-14 to 2057-12-21), which averages to roughly $4,539 per day or approximately $1.66 million per year. Comparing this to the estimated cost of government operation and maintenance requires specific data on Fort A.P. Hill's historical utility budgets. Privatization contracts are often pursued when the private sector can demonstrate cost savings through efficiencies, economies of scale, or access to capital markets for upgrades. Without the baseline government operational costs, a direct comparison is difficult, but the long-term nature and significant capital investment component suggest the government sought a comprehensive solution potentially more cost-effective than traditional methods over the full lifecycle.

What are the key performance indicators (KPIs) and service level agreements (SLAs) stipulated in the contract?

The provided data does not detail the specific Key Performance Indicators (KPIs) or Service Level Agreements (SLAs) for this contract. However, typical KPIs for water and wastewater utility privatization contracts include water quality compliance (e.g., meeting EPA standards), system uptime/reliability, response times for service interruptions or leaks, water pressure levels, wastewater treatment effectiveness, and timely completion of maintenance and capital upgrade projects. SLAs would define acceptable performance thresholds for these KPIs, often with associated financial incentives for exceeding standards or penalties for failing to meet them. Rigorous oversight by the contracting agency ensures adherence to these critical performance metrics.

What is the contractor's track record in managing similar utility privatization projects for the federal government?

American Water Operations and Maintenance, LLC, is a subsidiary of American Water Works Company, Inc., one of the largest publicly traded water and wastewater utility companies in the United States. They have a substantial track record in managing municipal and government utility systems. While specific details on their prior federal privatization contracts are not in the provided data, their extensive experience in operating and maintaining water and wastewater infrastructure across numerous states suggests a strong capability. The Department of Defense often contracts with established utility providers like American Water for large-scale projects, implying a level of confidence in their operational expertise and financial stability.

What are the potential risks associated with the long duration (nearly 50 years) of this contract?

The nearly 50-year duration of this contract presents several potential risks. Firstly, there's the risk of contractor complacency over such an extended period; without diligent oversight, performance could degrade. Secondly, unforeseen technological advancements in water and wastewater management might render the contracted systems or methods outdated, requiring renegotiation or significant upgrades. Thirdly, economic fluctuations or changes in regulatory requirements over five decades could impact the contractor's financial viability or operational costs, potentially leading to requests for contract modifications or disputes. Finally, the long-term commitment ties government resources and flexibility, making it harder to adapt to changing needs or adopt new solutions that might emerge.

How are capital upgrades managed and funded under this contract?

The contract explicitly includes 'Renewals & Replacements' and 'Performance of Initial Capital Upgrades,' indicating that capital improvements are a core component. The funding mechanism for these upgrades is typically integrated into the overall contract value or structured through specific task orders or phases. For a long-term privatization like this, the contractor often finances these capital investments, recouping costs through the service payments over the contract's life. This approach allows the government to benefit from modernized infrastructure without large upfront appropriations. The contract likely specifies the scope, standards, and potentially the cost-sharing or financing arrangements for these critical upgrades.

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: SP060004R0090

Offers Received: 4

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: $243,980,483

Exercised Options: $243,980,483

Current Obligation: $83,331,670

Actual Outlays: $350,954

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline