DoD's $297M Fort Hood water privatization contract shows long-term commitment with potential value-for-money concerns

Contract Overview

Contract Amount: $297,309,390 ($297.3M)

Contractor: American Water Operations and Maintenance, LLC

Awarding Agency: Department of Defense

Start Date: 2008-09-10

End Date: 2058-01-08

Contract Duration: 18,017 days

Daily Burn Rate: $16.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: UTILITY SERVICE CONTRACT FOR PRIVATIZATION OF THE WATER AND WASTEWATER UTILITY SYSTEM INFRASTRUCTURE AT FORT HOOD, TEXAS

Place of Performance

Location: FORT HOOD, BELL County, TEXAS, 76544

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $297.3 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC for work described as: UTILITY SERVICE CONTRACT FOR PRIVATIZATION OF THE WATER AND WASTEWATER UTILITY SYSTEM INFRASTRUCTURE AT FORT HOOD, TEXAS Key points: 1. The contract's extended duration (over 18,000 days) suggests a long-term strategy for utility management. 2. A single awardee indicates a concentrated market for this specific type of privatization service. 3. The firm-fixed-price structure aims to transfer risk to the contractor but requires careful monitoring of performance. 4. The absence of small business set-asides may limit opportunities for smaller firms in this sector. 5. Performance context is crucial given the critical nature of water and wastewater services for military operations. 6. This contract represents a significant investment in privatizing essential infrastructure at a major military installation.

Value Assessment

Rating: fair

The contract's total value of $297 million over its extended period suggests a substantial investment. Benchmarking the per-unit cost of water and wastewater services against similar privatized military installations or municipal utilities would be necessary for a comprehensive value assessment. The long duration, while potentially offering stability, also carries the risk of escalating costs if not managed effectively and could lock the government into a potentially suboptimal price over decades. Without detailed performance metrics and cost breakdowns, it is difficult to definitively assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. However, the fact that only one award was made suggests that either the market for this specialized service is limited, or American Water Operations and Maintenance, LLC was uniquely qualified or competitive. The level of competition at the bid stage is a positive indicator, but the single award warrants further investigation into the bidding process and the number of actual proposals received.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it encourages competitive pricing. However, a single award from this process might suggest limited market interest or contractor capability, which could impact long-term price competitiveness.

Public Impact

The primary beneficiaries are the residents and operations at Fort Hood, Texas, ensuring reliable water and wastewater services. The contract delivers essential utility services, including water supply and wastewater treatment, critical for the base's functionality. The geographic impact is localized to Fort Hood, Texas, a major United States Army installation. Workforce implications may include the transfer of existing utility personnel to the contractor or the creation of new jobs by the contractor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (over 40 years) increases the risk of price escalation and potential for contractor lock-in.
Lack of transparency on specific performance metrics and cost breakdowns makes independent value assessment challenging.
The critical nature of water services means any service disruption could have significant operational impacts on the base.
Limited competition indicated by a single award could lead to reduced leverage in future contract negotiations or modifications.

Positive Signals

Firm-fixed-price contract structure shifts performance risk to the contractor.
Full and open competition at award suggests an attempt to secure competitive pricing initially.
Long-term contract provides stability and predictability for essential utility services at a large military installation.
Awardee is a specialized utility operator, suggesting relevant expertise in managing such infrastructure.

Sector Analysis

This contract falls within the Utilities and Energy Services sector, specifically focusing on water and wastewater infrastructure privatization. The market for privatizing public utilities, particularly for large government installations, is specialized. Comparable spending benchmarks would involve analyzing other Department of Defense or federal agency contracts for privatized utility systems, as well as large municipal water system outsourcing agreements. The scale of this contract is significant, reflecting the extensive infrastructure at a major base like Fort Hood.

Small Business Impact

This contract does not appear to include specific small business set-asides, nor is there information indicating significant subcontracting opportunities for small businesses. The privatization of large-scale utility infrastructure is typically handled by specialized, larger firms. This suggests that the direct impact on the small business ecosystem for this specific contract may be minimal, unless the prime contractor actively engages small businesses for ancillary services.

Oversight & Accountability

Oversight for this contract would likely be managed by the Defense Logistics Agency (DLA) or relevant Army installation contracting command. Accountability measures are embedded in the firm-fixed-price contract terms, requiring the contractor to meet service level agreements. Transparency is often limited in such long-term privatization contracts, with performance data typically reported to the contracting officer. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Privatized Utility Services Contracts
Department of Defense Infrastructure Management
Military Base Operations Support
Water and Wastewater Management Contracts
Long-Term Service Agreements

Risk Flags

Long-term contract duration
Single awardee
Critical infrastructure service

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $297.3 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC. UTILITY SERVICE CONTRACT FOR PRIVATIZATION OF THE WATER AND WASTEWATER UTILITY SYSTEM INFRASTRUCTURE AT FORT HOOD, TEXAS

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 $297.3 million.

What is the period of performance?

Start: 2008-09-10. End: 2058-01-08.

What is the historical spending trend for utility services at Fort Hood prior to this privatization contract?

Historical spending data for utility services at Fort Hood prior to this privatization contract is not directly available in the provided data. However, the initiation of a long-term privatization contract valued at approximately $297 million suggests a strategic shift from direct government provision or previous, potentially shorter-term, service contracts. Understanding past expenditures would require accessing historical budget documents and service contracts managed by the Department of the Army or installation commands responsible for Fort Hood's operations before September 10, 2008. Such analysis would help determine if privatization has led to cost savings or increased expenses over the contract's lifespan compared to the previous model.

How does the per-unit cost of water and wastewater services under this contract compare to similar privatized military bases?

A direct comparison of per-unit costs for water and wastewater services under this contract to similar privatized military bases is challenging without specific, granular data on the contract's unit pricing and detailed operational costs. The provided data only offers the total contract value and duration. To perform such a benchmark, one would need to identify comparable privatized utility contracts at other large military installations, gather their respective unit costs (e.g., cost per gallon of water, cost per thousand gallons treated), and account for differences in infrastructure, service scope, and regional economic factors. Generally, privatization aims for efficiency, but actual cost savings can vary significantly based on contract structure, competition, and oversight.

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

The provided contract abstract does not detail the specific Key Performance Indicators (KPIs) or Service Level Agreements (SLAs) that govern the performance of American Water Operations and Maintenance, LLC. However, for a critical utility service like water and wastewater management, typical KPIs would likely include water quality standards (e.g., meeting EPA or DoD drinking water regulations), system uptime and reliability, response times for service interruptions or emergencies, wastewater treatment effectiveness, and infrastructure maintenance schedules. The firm-fixed-price nature of the contract implies that the contractor is financially incentivized to meet these performance standards, with potential penalties for non-compliance.

What is the track record of American Water Operations and Maintenance, LLC in managing similar large-scale utility privatization contracts?

American Water Operations and Maintenance, LLC, as part of American Water Works Company, Inc., is a major utility company with extensive experience in operating and maintaining water and wastewater systems. They manage numerous municipal and industrial water systems across the United States. Their track record in managing large-scale utility privatization contracts, particularly for federal installations, would involve reviewing their performance history, any past contract disputes or awards, and their capacity to handle the scale and complexity of infrastructure at a major military base like Fort Hood. A thorough assessment would require examining public records, company reports, and potentially client feedback.

What are the potential risks associated with the extremely long contract duration (over 40 years)?

The primary risks associated with the extremely long contract duration of over 40 years (18,017 days) include: 1) Price Escalation: The fixed-price nature might not adequately account for inflation, technological advancements, or unforeseen operational costs over such a long period, potentially leading to requests for price adjustments or suboptimal value. 2) Contractor Lock-in: The government may become dependent on the incumbent contractor, reducing leverage for renegotiation or switching providers if performance declines or better alternatives emerge. 3) Technological Obsolescence: Infrastructure and operational methods may become outdated, requiring significant reinvestment not fully anticipated in the original contract. 4) Shifting Requirements: The military's needs or regulatory environments could change drastically over four decades, making the original contract terms less relevant or requiring costly modifications.

How does the privatization of water and wastewater systems at Fort Hood align with broader trends in federal infrastructure management?

The privatization of water and wastewater systems at Fort Hood aligns with a broader trend observed across federal agencies, including the Department of Defense, towards outsourcing non-core functions and leveraging private sector expertise and capital for infrastructure management. This approach is often driven by perceived efficiencies, cost savings, and the ability to transfer operational risks to specialized companies. The military, in particular, has utilized Public-Private Partnerships (P3s) and privatization initiatives to modernize aging infrastructure, improve service delivery, and free up government resources for core mission activities. This contract exemplifies a long-term strategy to ensure the reliable provision of essential services through private sector involvement.

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

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: American Water Works Company, Inc.

Address: 1 WATER ST, CAMDEN, NJ, 08102

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $805,602,144

Exercised Options: $805,602,144

Current Obligation: $297,309,390

Actual Outlays: $18,181,920

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline