DoD's $341M Fort Meade water privatization contract shows long-term commitment with potential value concerns

Contract Overview

Contract Amount: $341,051,394 ($341.1M)

Contractor: American Water Operations and Maintenance, LLC

Awarding Agency: Department of Defense

Start Date: 2009-09-30

End Date: 2060-07-31

Contract Duration: 18,567 days

Daily Burn Rate: $18.4K/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 MEADE, MARYLAND.

Place of Performance

Location: FORT GEORGE G MEADE, ANNE ARUNDEL County, MARYLAND, 20755

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $341.1 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 MEADE, MARYLAND. Key points: 1. Long-term contract duration (2009-2060) suggests a strategic, enduring need for utility services. 2. The contract's firm fixed-price structure aims to provide cost certainty for the government. 3. Sole contractor for an extended period may limit opportunities for competitive re-evaluation. 4. Performance context is critical given the essential nature of water and wastewater services. 5. Sector positioning is within defense infrastructure, a vital but often overlooked area. 6. The absence of small business set-asides indicates a focus on large-scale service providers.

Value Assessment

Rating: fair

The contract's total value of $341 million over its extended period suggests a significant investment. Benchmarking this against similar long-term utility privatization contracts is challenging due to the unique nature of military installations. The firm fixed-price type provides predictability, but the long duration means the initial pricing assumptions may not reflect current market conditions or technological advancements. A detailed review of the contract's escalation clauses and performance metrics would be necessary to fully assess value for money over its lifespan.

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, with only two bids received, the level of competition may have been limited. This could potentially impact price discovery and the government's ability to secure the most favorable terms. The long-term nature of the contract might also deter some potential bidders who are unwilling or unable to commit to such an extended service period.

Taxpayer Impact: While full and open competition is a positive signal, the low number of bids warrants scrutiny to ensure taxpayers received competitive pricing. The long duration means any inefficiencies in the bidding process could have prolonged financial implications.

Public Impact

Serves the essential water and wastewater needs of Fort Meade, Maryland, ensuring operational readiness. Benefits military personnel, their families, and civilian employees residing and working at the installation. Provides a stable and reliable utility service, crucial for the daily functioning of the base. Impacts the local Maryland economy through the provision of essential services and potential employment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (51 years) raises concerns about potential price escalation and inflexibility.
Limited competition (2 bids) may have resulted in a less competitive price than a more robust bidding process.
Firm fixed-price contracts over long periods can become disadvantageous if market conditions change significantly.
Lack of transparency on specific performance metrics and their impact on pricing.

Positive Signals

Awarded through full and open competition, suggesting an effort to maximize bidder participation.
Firm fixed-price contract provides budget certainty for the Department of Defense.
Long-term commitment ensures continuity of essential utility services for a critical military installation.

Sector Analysis

This contract falls within the Utilities and Energy Services sector, specifically focusing on water and wastewater infrastructure. The privatization of utility systems on military bases is a common strategy to leverage private sector expertise and potentially reduce government operational burdens. The market for such services is characterized by long-term contracts, significant capital investment requirements, and regulatory oversight. Comparable spending benchmarks would typically involve other military base privatizations or large municipal utility outsourcing agreements.

Small Business Impact

The contract data indicates that small business participation was not a specific set-aside requirement (ss: false, sb: false). This is common for large-scale infrastructure and utility service contracts that require substantial capital, specialized expertise, and long-term commitment, often favoring larger, established firms. Subcontracting opportunities for small businesses may exist within the prime contractor's operations, but these are not explicitly detailed in the provided data. The overall impact on the small business ecosystem is likely indirect, focusing on the operational needs of the prime contractor rather than direct set-aside goals.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and the Defense Logistics Agency. Accountability measures are typically embedded within the contract's performance standards and service level agreements. Transparency is often managed through contract reporting requirements and potential audits. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract's execution.

Related Government Programs

Military Base Privatization Programs
Public-Private Partnerships for Infrastructure
Defense Logistics Agency Contracts
Water and Wastewater Utility Management

Risk Flags

Long contract duration
Limited competition
Potential for price escalation
Technological obsolescence risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $341.1 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC. UTILITY SERVICE CONTRACT FOR PRIVATIZATION OF THE WATER AND WASTEWATER UTILITY SYSTEM INFRASTRUCTURE AT FORT MEADE, MARYLAND.

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 $341.1 million.

What is the period of performance?

Start: 2009-09-30. End: 2060-07-31.

What is the historical spending trend for this specific contract since its inception?

The contract was awarded on September 30, 2009, with an estimated completion date of July 31, 2060, and a total value of $341,051,393.87. As this is a long-term contract with a firm fixed-price structure, annual spending would be dictated by the pre-negotiated payment schedule rather than fluctuating market rates. To determine the exact historical spending, one would need access to the contract's payment records and annual funding allocations. However, given the total value and duration, the annual expenditure is likely substantial, averaging around $6.6 million per year if spread evenly. The firm fixed-price nature suggests that the government's financial commitment is largely predetermined, barring any contract modifications or exercise of options.

How does the per-unit cost of water and wastewater services compare to similar contracts at other military installations?

Directly comparing per-unit costs for water and wastewater services under this contract to other military installations is challenging without detailed, standardized metrics. The provided data does not include specific per-unit cost breakdowns (e.g., cost per gallon of water, cost per gallon of wastewater treated). Furthermore, privatization contracts often bundle various services, making direct comparisons difficult. Factors such as the age and complexity of the infrastructure at Fort Meade, local environmental regulations, and the specific terms negotiated in the contract (including profit margins and overhead) would influence the pricing. A comprehensive analysis would require access to detailed operational data from both this contract and comparable contracts at other bases, normalized for differences in service scope and local conditions.

What are the key performance indicators (KPIs) and service level agreements (SLAs) associated with this contract?

The provided contract data does not explicitly list the Key Performance Indicators (KPIs) or Service Level Agreements (SLAs) for this utility service contract. However, for a contract of this nature, typical KPIs and SLAs would focus on the reliability and quality of water supply (e.g., water pressure, water quality compliance with EPA standards), the efficiency and compliance of wastewater treatment (e.g., effluent quality meeting discharge permits), response times for service interruptions or emergencies, and the overall maintenance and operational status of the utility infrastructure. Performance against these metrics would likely influence contractor payment and potentially trigger remedies for non-performance, although the firm fixed-price nature might limit direct financial penalties unless specified in the contract.

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

American Water Operations and Maintenance, LLC, is a subsidiary of American Water Works Company, Inc., a large publicly traded company with extensive experience in operating and maintaining water and wastewater systems across the United States. They manage numerous municipal and industrial water systems, as well as utility privatization projects for various government entities, including military bases. Their track record generally involves managing complex infrastructure, ensuring regulatory compliance, and providing reliable service. Specific details regarding their performance on long-term privatization contracts, including any past disputes, performance issues, or notable successes, would require a deeper dive into company reports, government contract databases, and potentially news archives.

What are the potential risks associated with a 51-year contract for utility services?

A 51-year contract for utility services presents several potential risks. Firstly, the long duration increases the risk of price escalation beyond initial projections, especially if escalation clauses are not tightly controlled or if market conditions change dramatically. Secondly, technological advancements in water and wastewater management could render the current infrastructure or operational methods obsolete, requiring costly upgrades or modifications not fully accounted for in the original contract. Thirdly, there's a risk of contractor complacency or reduced efficiency over such an extended period, potentially leading to service degradation if oversight is not rigorous. Lastly, unforeseen environmental regulations or geopolitical events could impact operational costs and service delivery, creating financial or operational strain for either the government or the contractor.

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: 1025 LAUREL OAK RD, VOORHEES, NJ, 08043

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

Financial Breakdown

Contract Ceiling: $943,911,083

Exercised Options: $943,911,083

Current Obligation: $341,051,394

Actual Outlays: $17,422,858

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline