DoD's $111.6M water privatization contract with American Water Operations and Maintenance, LLC, runs through 2064

Contract Overview

Contract Amount: $111,619,073 ($111.6M)

Contractor: American Water Operations and Maintenance, LLC

Awarding Agency: Department of Defense

Start Date: 2014-01-09

End Date: 2064-08-31

Contract Duration: 18,497 days

Daily Burn Rate: $6.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: IGF::OT::IGF CT - PRIVATIZATION OF THE WATER&WASTE WATER AT HILL AIR FORCE BASE, UTAH

Place of Performance

Location: HILL AFB, DAVIS County, UTAH, 84056

State: Utah Government Spending

Plain-Language Summary

Department of Defense obligated $111.6 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC for work described as: IGF::OT::IGF CT - PRIVATIZATION OF THE WATER&WASTE WATER AT HILL AIR FORCE BASE, UTAH Key points: 1. This long-term contract for water and wastewater services at Hill Air Force Base represents a significant privatization effort. 2. The fixed-price structure with economic price adjustment aims to mitigate inflation risks over the multi-decade term. 3. The contract's extended duration raises questions about long-term value and adaptability to future technological or regulatory changes. 4. Competition dynamics for such long-term, specialized infrastructure contracts can be limited, potentially impacting price discovery. 5. Performance will be closely monitored to ensure service delivery meets military operational needs and environmental standards. 6. The contract's success hinges on effective management of the public-private partnership and robust oversight.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its long duration and specialized nature. While the fixed-price with economic price adjustment (FPEPA) contract type aims to provide cost certainty, the extended period to 2064 means potential for significant price escalation. Comparing it to similar long-term water infrastructure privatization contracts would be necessary for a comprehensive value assessment. The initial award amount of over $111 million suggests a substantial investment, and ongoing performance reviews will be critical to determine if the value proposition holds over time.

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 had the opportunity to submit proposals. This approach is generally favorable for price discovery and ensuring a competitive market. However, the specialized nature of privatizing water and wastewater systems for a military installation may limit the pool of qualified bidders, even within a full and open competition framework. The number of bidders and the specifics of the evaluation process would provide further insight into the competitive intensity.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it encourages multiple companies to bid, driving down costs and potentially leading to better service terms. This maximizes the chances of securing the most cost-effective solution for the government.

Public Impact

Provides essential water and wastewater services to support the operations and personnel at Hill Air Force Base, Utah. Ensures the reliable supply of potable water and the effective treatment of wastewater, critical for public health and environmental compliance. Supports the ongoing mission readiness of a major military installation. The contract likely involves local workforce employment for operations and maintenance, contributing to the regional economy.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The extremely long contract duration (over 50 years) presents a significant risk of the government being locked into potentially outdated technology or unfavorable pricing if market conditions or needs change drastically.
Economic price adjustments, while necessary for long-term contracts, can lead to cost increases that may exceed initial projections, impacting the overall value for money.
Reliance on a single private entity for such a critical utility infrastructure for an extended period could create dependency and reduce future flexibility for the base.
Ensuring consistent and high-quality service delivery over such a long timeframe requires robust and continuous oversight mechanisms.

Positive Signals

The use of full and open competition at the outset suggests a competitive award process, potentially leading to favorable initial terms.
The fixed-price component of the contract provides a degree of cost certainty for the base operating budget, with adjustments for specific economic factors.
Privatization can potentially bring private sector efficiencies and expertise in managing complex utility systems.
The long-term nature of the contract allows for stable planning and investment in infrastructure maintenance and upgrades by the contractor.

Sector Analysis

This contract falls within the Utilities and Energy Services sector, specifically focusing on water and wastewater management. The privatization of public utilities, including water systems, is a growing trend, driven by potential cost savings and efficiency gains. The market for such services involves specialized engineering, operations, and maintenance firms. Comparable benchmarks would involve analyzing other long-term water utility management contracts, both within the federal government and in the municipal sector, considering factors like system size, complexity, and regulatory environment.

Small Business Impact

Information regarding small business set-asides or subcontracting plans was not explicitly detailed in the provided data. However, for a contract of this magnitude and specialized nature, it is common for prime contractors to engage subcontractors for various support services. Analysis would be needed to determine if specific provisions were made to include small businesses in the subcontracting chain, thereby contributing to the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting activity (Defense Logistics Agency) and the requiring activity (Hill Air Force Base). Mechanisms would include regular performance reviews, audits, and potentially the establishment of a joint government-contractor oversight committee. Transparency would be facilitated through contract reporting requirements and public contract databases. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

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

Risk Flags

Long-term contract duration
Potential for cost escalation due to economic price adjustments
Dependency on a single contractor for critical infrastructure
Risk of technological obsolescence over the contract term

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $111.6 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC. IGF::OT::IGF CT - PRIVATIZATION OF THE WATER&WASTE WATER AT HILL AIR FORCE BASE, UTAH

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 $111.6 million.

What is the period of performance?

Start: 2014-01-09. End: 2064-08-31.

What is the historical spending pattern for water and wastewater services at Hill Air Force Base prior to this privatization contract?

Prior to this privatization contract, spending on water and wastewater services at Hill Air Force Base would have been managed through traditional government appropriations and contracts. Detailed historical spending data would likely reside within the Air Force's financial management systems for the base. Analyzing this data would involve looking at annual expenditures for utility operations, maintenance, repairs, and capital improvements related to water and wastewater infrastructure. Comparing these historical costs to the projected costs under the current privatization contract, adjusted for inflation and scope changes, is crucial for assessing the long-term value proposition and determining if privatization has indeed yielded cost savings or efficiencies.

How does the pricing structure (Fixed Price with Economic Price Adjustment) compare to industry standards for similar long-term utility privatization contracts?

The Fixed Price with Economic Price Adjustment (FPEPA) structure is common for long-term infrastructure and service contracts where input costs (like labor, energy, chemicals) are subject to volatility. For utility privatization, this structure aims to balance cost certainty for the government with the contractor's need to manage risks associated with fluctuating market prices. Industry standards often involve specific indices or formulas for calculating economic adjustments, which are negotiated during the contract award. A comparison would involve examining the specific indices used in this contract against those in comparable contracts, as well as the frequency and caps on adjustments. The goal is to ensure the adjustments are reasonable and reflect genuine market changes rather than excessive profit.

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

Key Performance Indicators (KPIs) and Service Level Agreements (SLAs) are critical for ensuring the contractor meets the required standards for water quality, wastewater treatment, system reliability, response times for emergencies, and infrastructure maintenance. While specific KPIs/SLAs are not detailed here, they typically include metrics such as water purity levels meeting EPA standards, wastewater discharge compliance, system uptime percentages, and turnaround times for service requests. Monitoring is usually conducted through regular reporting by the contractor, site inspections, performance audits, and potentially independent testing. Failure to meet these KPIs/SLAs often results in penalties or corrective action plans, as defined within the contract.

What is the contractor's track record and experience in managing large-scale water and wastewater utility privatization projects, particularly for federal agencies?

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 extensive experience in operating and maintaining water and wastewater systems for both municipal and military clients. Their track record includes managing complex infrastructure projects, ensuring regulatory compliance, and implementing capital improvement plans. Assessing their specific experience with federal agencies and large-scale privatization contracts would involve reviewing past performance evaluations, contract awards, and any publicly available information on their project successes and challenges.

What are the potential risks associated with the extremely long contract duration (over 50 years) for the government, beyond cost escalation?

Beyond cost escalation, the primary risks of such a long contract duration include technological obsolescence, where the contracted services or infrastructure may become outdated compared to advancements in water treatment or management technologies. There's also the risk of reduced flexibility; the government may be constrained in adopting new, more efficient, or environmentally friendly solutions if they are not part of the original contract scope. Furthermore, long-term dependency on a single provider can reduce bargaining power over time. Regulatory changes are another significant risk; if environmental or safety regulations become more stringent, the contract may need costly renegotiations or amendments to ensure compliance, potentially negating initial cost benefits.

How does the privatization of water and wastewater services align with broader trends in federal infrastructure management and public-private partnerships?

The privatization of water and wastewater services aligns with a broader trend in federal infrastructure management that seeks to leverage private sector expertise, capital, and efficiencies to manage and upgrade aging public assets. Public-Private Partnerships (P3s) are increasingly viewed as a viable mechanism for addressing infrastructure deficits, especially when government budgets are constrained. This contract exemplifies a P3 where the government outsources the operation and maintenance of critical utility infrastructure. While P3s can offer benefits like faster project delivery and access to private capital, they also require careful structuring, robust oversight, and clear performance metrics to ensure public interest is protected and value for money is achieved.

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: SP060010R0802

Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

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: $412,936,601

Exercised Options: $412,936,601

Current Obligation: $111,619,073

Actual Outlays: $1,139,824

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline