DoD's $121M Privatized Water Utility Contract for JBSA Faces Long-Term Price Adjustments

Contract Overview

Contract Amount: $121,487,611 ($121.5M)

Contractor: American Water Operations and Maintenance, LLC

Awarding Agency: Department of Defense

Start Date: 2019-09-26

End Date: 2070-05-31

Contract Duration: 18,510 days

Daily Burn Rate: $6.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 7

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: UTILITY SERVICES CONTRACT FOR THE PRIVATIZATION OF THE WATER AND WASTEWATER UTILITY SYSTEMS AT JOINT BASE SAN ANTONIO, TEXAS.

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78205

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $121.5 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC for work described as: UTILITY SERVICES CONTRACT FOR THE PRIVATIZATION OF THE WATER AND WASTEWATER UTILITY SYSTEMS AT JOINT BASE SAN ANTONIO, TEXAS. Key points: 1. The contract is for a significant duration (over 18 years), increasing exposure to economic fluctuations. 2. American Water Operations and Maintenance, LLC is the sole awardee, raising questions about initial competition effectiveness. 3. The fixed-price with economic price adjustment (EPA) structure introduces risk of cost escalation over the contract's life. 4. This contract falls under the Defense sector, specifically supporting critical infrastructure at a major military installation.

Value Assessment

Rating: fair

The contract value of $121M over 18 years is substantial. Benchmarking is difficult without specific service level agreements and comparable privatized utility contracts, but the long duration and EPA clause suggest potential for cost increases beyond initial projections.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

Although advertised as full and open competition, only one entity, American Water Operations and Maintenance, LLC, was awarded the contract. This suggests potential barriers to entry or a lack of broader market interest, which could impact price discovery.

Taxpayer Impact: The long-term nature and economic price adjustment clause mean taxpayers are exposed to potential cost increases over nearly two decades, impacting the predictability of federal spending.

Public Impact

Ensures continuous water and wastewater services for Joint Base San Antonio personnel and operations. Privatization aims to leverage private sector expertise and potentially reduce government management burden. Long-term commitment raises concerns about adaptability to future technological advancements or changing environmental regulations. Potential for cost overruns due to economic price adjustments could divert funds from other critical defense needs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (18+ years)
Economic Price Adjustment (EPA) clause
Sole awardee despite full and open competition
Lack of clear performance metrics in provided data

Positive Signals

Addresses critical utility needs for a major military installation
Leverages private sector for specialized utility management
Potential for long-term cost savings if managed efficiently

Sector Analysis

This contract is within the Defense sector, focusing on essential infrastructure services. Utility privatization contracts, especially for large military bases, are common but require careful oversight due to their long-term nature and potential for cost escalation.

Small Business Impact

The data indicates this contract was not set aside for small businesses and the awardee is a large corporation. There is no indication of small business participation within the provided details.

Oversight & Accountability

The long duration of this contract necessitates robust oversight mechanisms to ensure performance standards are met and that the economic price adjustment clauses are applied fairly. Regular reviews and audits will be crucial for accountability.

Related Government Programs

Water Supply and Irrigation Systems
Department of Defense Contracting
Defense Logistics Agency Programs

Risk Flags

Long-term price escalation risk due to EPA
Potential for contractor lock-in
Limited visibility into performance metrics
Uncertainty of long-term infrastructure needs vs. contract terms
Sole awardee raises questions about initial competition effectiveness

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $121.5 million to AMERICAN WATER OPERATIONS AND MAINTENANCE, LLC. UTILITY SERVICES CONTRACT FOR THE PRIVATIZATION OF THE WATER AND WASTEWATER UTILITY SYSTEMS AT JOINT BASE SAN ANTONIO, 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 $121.5 million.

What is the period of performance?

Start: 2019-09-26. End: 2070-05-31.

What specific performance metrics and service level agreements are in place to ensure the quality and reliability of water and wastewater services under this privatized contract?

The provided data does not detail specific performance metrics or service level agreements. However, for a contract of this nature and duration, robust KPIs related to water quality, system uptime, response times for issues, and environmental compliance are typically established. These would be crucial for evaluating the contractor's performance and ensuring taxpayer value beyond the financial terms.

How will the government mitigate the financial risks associated with the economic price adjustment (EPA) clause over the 18-year contract term?

Mitigation strategies for the EPA clause typically involve establishing clear indices for price adjustments, setting caps on annual increases, and conducting periodic reviews of the necessity and fairness of the adjustments. The Department of Defense would likely employ contract specialists to monitor market trends and negotiate adjustments to protect against excessive inflation.

What analysis was conducted to confirm that full and open competition effectively yielded the best value, given only one awardee?

An analysis confirming best value would typically involve evaluating the proposals received against pre-defined criteria, including technical approach, past performance, and price. Even with one awardee, the government must demonstrate that the proposal met all requirements and represented a fair and reasonable price compared to independent government cost estimates or market research, justifying the award despite limited competition.

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: SPE60013R0805

Offers Received: 7

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: $601,123,675

Exercised Options: $601,123,675

Current Obligation: $121,487,611

Actual Outlays: $18,810,467

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline