DoD awards $101.3M for water systems privatization at Picatinny Arsenal, NJ, over 30 years

Contract Overview

Contract Amount: $101,250,577 ($101.3M)

Contractor: American Water Operations and Maintenance, LLC

Awarding Agency: Department of Defense

Start Date: 2015-01-01

End Date: 2064-11-25

Contract Duration: 18,226 days

Daily Burn Rate: $5.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: IGF::OT::IGF CONTRACT AWARD FOR THE PRIVATIZATION OF POTABLE AND SERVICE WATER DISTRIBUTION AND WASTEWATER COLLECTION SYSTEMS LOCATED ON PICATINNY ARSENAL, NJ.

Place of Performance

Location: VOORHEES, CAMDEN County, NEW JERSEY, 08043

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $101.3 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC for work described as: IGF::OT::IGF CONTRACT AWARD FOR THE PRIVATIZATION OF POTABLE AND SERVICE WATER DISTRIBUTION AND WASTEWATER COLLECTION SYSTEMS LOCATED ON PICATINNY ARSENAL, NJ. Key points: 1. Long-term contract for essential utility services suggests a strategic approach to infrastructure management. 2. Fixed-price with economic price adjustment contract type aims to balance cost certainty with market fluctuations. 3. Full and open competition indicates a broad market search for the most capable provider. 4. The contract duration of over 30 years highlights the long-term nature of utility infrastructure needs. 5. Award to a single entity suggests specialized capabilities are required for this type of privatization. 6. The contract's focus on water and wastewater systems addresses critical environmental and operational needs.

Value Assessment

Rating: good

The contract value of approximately $101.3 million over 30 years equates to roughly $3.38 million per year. This figure needs to be benchmarked against similar public-private partnerships for utility management. Without specific cost breakdowns for operations, maintenance, and capital investment, a precise value-for-money assessment is challenging. However, the long-term nature and the fixed-price component suggest an attempt to achieve predictable costs for essential services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that the Defense Logistics Agency sought proposals from all responsible sources. The number of bidders is not specified, but this approach generally fosters a competitive environment, encouraging multiple companies to offer their best terms and pricing to secure the significant, long-term contract. This method is designed to identify the most advantageous offer for the government.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically drives down prices and improves service quality by allowing the government to select from the widest possible pool of qualified contractors.

Public Impact

Military personnel and their families residing at Picatinny Arsenal will benefit from reliable potable and wastewater services. The contract ensures the continued operation and maintenance of critical water distribution and wastewater collection infrastructure. The geographic impact is localized to Picatinny Arsenal, New Jersey, ensuring essential services for the base. The contract supports jobs within the utility management and infrastructure maintenance sectors, likely benefiting the local New Jersey economy.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to complacency or reduced incentive for innovation if not managed proactively.
Economic price adjustments, while necessary, could lead to cost increases beyond initial projections.
Reliance on a single private entity for critical infrastructure raises concerns about service continuity and emergency response capabilities.
Potential for disputes over contract scope, performance standards, or cost adjustments over the multi-decade term.

Positive Signals

Privatization can leverage private sector expertise and efficiency in managing complex utility systems.
Full and open competition suggests a thorough vetting process to select a capable and cost-effective provider.
Long-term contract provides stability and predictability for essential service delivery at the installation.
Fixed-price elements can offer some level of cost control for the government.

Sector Analysis

This contract falls within the Utilities and Energy Services sector, specifically focusing on water and wastewater management. Public-private partnerships for utility infrastructure are increasingly common across government and municipal entities seeking to modernize aging systems and transfer operational burdens. The market for such services is substantial, driven by the need for specialized expertise in managing complex, regulated systems, often involving significant capital investment and long operational lifecycles.

Small Business Impact

The provided data indicates that small business participation (sb) is false, and there is no mention of small business set-asides. This suggests the contract was not specifically targeted towards small businesses, likely due to the specialized nature and scale of the services required. Subcontracting opportunities for small businesses may exist within the prime contractor's operations, but this is not explicitly detailed in the award information. The overall impact on the small business ecosystem for this specific contract appears minimal.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting activity (Defense Logistics Agency) and the requiring activity at Picatinny Arsenal. Performance standards, service level agreements, and financial reporting requirements would be stipulated in the contract. Transparency is generally maintained through contract award databases and reporting requirements. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Public-Private Partnerships for Infrastructure
Utility Privatization Contracts
Department of Defense Base Operations Support
Water and Wastewater Management Services
Federal Facilities Management

Risk Flags

Long-term contract duration
Economic price adjustment clause
Reliance on single provider for critical infrastructure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $101.3 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC. IGF::OT::IGF CONTRACT AWARD FOR THE PRIVATIZATION OF POTABLE AND SERVICE WATER DISTRIBUTION AND WASTEWATER COLLECTION SYSTEMS LOCATED ON PICATINNY ARSENAL, NJ.

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 $101.3 million.

What is the period of performance?

Start: 2015-01-01. End: 2064-11-25.

What is the historical spending pattern for water and wastewater services at Picatinny Arsenal prior to this privatization contract?

Historical spending data for water and wastewater services at Picatinny Arsenal before the privatization contract award in 2015 is not directly available in the provided summary. However, such contracts are typically awarded when the government determines that privatization offers a more cost-effective or efficient solution compared to in-house management or previous contracting arrangements. Analyzing past budgets allocated to the base's public works department for utility operations and maintenance would provide a baseline. The shift to a long-term privatization contract suggests a strategic decision to leverage private sector expertise and potentially achieve economies of scale or specialized operational efficiencies that were not met previously. Understanding the previous cost structure would be crucial for a comprehensive value assessment of the current privatization effort.

How does the annual cost of this contract compare to the average cost of similar privatized utility services at other military installations?

The annual cost for this contract averages approximately $3.38 million ($101.3M / 30 years). Benchmarking this against similar privatized utility services at other military installations requires access to data on contracts with comparable scope (potable water distribution, wastewater collection) and duration. Factors influencing cost include installation size, population served, existing infrastructure condition, and local labor/material costs. Generally, privatization aims for cost savings through private sector efficiencies. A detailed comparison would involve analyzing the specific services included, performance metrics, and the economic price adjustment mechanisms of comparable contracts. Without such comparative data, it's difficult to definitively state if this contract represents a superior or inferior value proposition solely based on the annual figure.

What are the specific performance metrics and service level agreements (SLAs) included in the contract to ensure service quality?

The provided summary does not detail the specific performance metrics or service level agreements (SLAs) within the contract. However, for a contract of this nature and duration, robust SLAs are critical. These typically cover aspects such as water quality standards, system uptime, response times for service interruptions or emergencies, maintenance schedules, and compliance with environmental regulations. The 'Fixed Price with Economic Price Adjustment' (FP-EPA) contract type suggests that while the base price is fixed, adjustments are allowed for specific economic factors, implying a need for clear definitions of service delivery to justify these adjustments. The effectiveness of the contract hinges on well-defined and measurable SLAs that the American Water Operations and Maintenance, LLC must meet.

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

American Water Operations and Maintenance, LLC, is a subsidiary of American Water Works Company, Inc., a large, established utility company with extensive experience in managing water and wastewater systems across the United States. While the summary doesn't provide specific details on their track record with federal privatization contracts, American Water has a history of operating municipal and military utility systems. Their experience likely includes managing infrastructure, ensuring regulatory compliance, and handling large customer bases. Assessing their specific performance on similar federal contracts would involve reviewing past performance evaluations, any contract disputes, and their history of meeting contractual obligations, which is beyond the scope of the provided data but crucial for a full assessment.

What are the potential risks associated with a 30-year contract for utility privatization, and how are they mitigated?

A 30-year contract for utility privatization carries several potential risks. These include technological obsolescence, changes in regulatory requirements, potential for contractor underperformance or financial instability over the long term, and the risk of the government becoming locked into unfavorable terms. Mitigation strategies typically involve robust contract language, including performance standards, regular performance reviews, mechanisms for contract modification or termination under specific conditions, and potentially performance bonds. The economic price adjustment clause also serves as a mitigation tool against unforeseen inflation. Furthermore, ongoing government oversight and clear communication channels are essential to proactively address emerging issues and ensure the contractor remains aligned with the government's long-term interests.

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: SPE60012R0812

Offers Received: 2

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

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: $416,690,242

Exercised Options: $416,690,242

Current Obligation: $101,250,577

Actual Outlays: $4,261,642

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline