DoD's $2.89M natural gas contract for Clarksville, KY, awarded non-competitively for 29 years

Contract Overview

Contract Amount: $2,885,677 ($2.9M)

Contractor: Clarksville, City of

Awarding Agency: Department of Defense

Start Date: 2023-07-03

End Date: 2052-09-30

Contract Duration: 10,682 days

Daily Burn Rate: $270/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: NATURAL GAS UTILITY SERVICES.

Place of Performance

Location: FORT CAMPBELL, CHRISTIAN County, KENTUCKY, 42223

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $2.9 million to CLARKSVILLE, CITY OF for work described as: NATURAL GAS UTILITY SERVICES. Key points: 1. The contract's long duration raises questions about long-term price stability and potential for cost overruns. 2. Lack of competition suggests potential for higher prices compared to a more open bidding process. 3. The fixed-price nature offers some cost certainty but may limit flexibility if market conditions change drastically. 4. Performance risk is moderate, given the essential nature of the service and the established utility provider. 5. This contract represents a significant, long-term commitment for a critical utility service. 6. The sole-source award limits opportunities for other providers and potentially reduces market innovation.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its unique nature as a long-term, sole-source utility service agreement. The fixed-price structure for nearly 30 years makes direct comparison to shorter-term or competitively bid energy contracts difficult. While the total value is substantial, the annual cost needs to be assessed against historical utility rates in the region and potential fluctuations in natural gas prices over the contract's extensive lifespan. Without competitive bids, it's hard to definitively state if this represents the best possible price for the government.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not open to competition from multiple bidders. This typically occurs when a single provider is deemed the only viable option, often due to unique capabilities, existing infrastructure, or regulatory requirements. The lack of competition means the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to less favorable pricing.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. The long-term nature of the contract further amplifies this risk, as any inefficiencies or higher-than-market pricing will persist for nearly three decades.

Public Impact

The primary beneficiary is the Department of Defense, ensuring a consistent supply of natural gas for its facilities in Clarksville, KY. The City of Clarksville, as the contractor, benefits from a guaranteed, long-term revenue stream for its utility services. The contract supports the continued operation and readiness of military installations in the region. Local jobs within the Clarksville natural gas utility are likely sustained or supported by this long-term agreement.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Extended contract duration (nearly 30 years) increases exposure to market volatility and potential for price escalation.
Sole-source award limits opportunities for cost savings through competition.
Fixed-price contract may not fully account for potential future efficiencies or market downturns, potentially overpaying.
Lack of transparency in the sole-source justification process.

Positive Signals

Ensures critical utility service continuity for a significant military installation.
Provides predictable revenue for the local utility provider, supporting infrastructure and services.
Fixed-price element offers some budget certainty for the DoD over the contract term.

Sector Analysis

The energy sector, specifically natural gas distribution, is a critical utility service. Contracts for such services often involve long-term agreements due to the extensive infrastructure required and the essential nature of the supply. While large-scale energy procurement often involves competitive bidding, sole-source awards are sometimes necessary for localized, essential services where a single entity controls distribution. The market size for natural gas utilities is substantial, with significant regional variations in pricing and infrastructure.

Small Business Impact

This contract does not appear to involve small business set-asides, as it was awarded to a municipal entity (City of Clarksville). There is no indication of subcontracting requirements for small businesses within the provided data. The focus is on securing a direct utility service from an established provider.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management divisions. Given the long duration, periodic reviews of pricing and service delivery would be expected. Transparency is limited due to the sole-source nature of the award. Specific Inspector General jurisdiction would depend on the DoD agency overseeing the contract execution.

Related Government Programs

Defense Logistics Agency Energy Contracts
Utility Privatization Program
Base Operations Support Contracts
Federal Energy Management Program

Risk Flags

Long-term contract duration
Sole-source award
Potential for price escalation over contract life

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.9 million to CLARKSVILLE, CITY OF. NATURAL GAS UTILITY SERVICES.

Who is the contractor on this award?

The obligated recipient is CLARKSVILLE, CITY OF.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $2.9 million.

What is the period of performance?

Start: 2023-07-03. End: 2052-09-30.

What is the historical spending pattern for natural gas utility services by the Department of Defense in Kentucky?

Historical spending data for natural gas utility services by the Department of Defense in Kentucky is not readily available in a consolidated format. However, the Defense Logistics Agency (DLA) Energy is responsible for procuring fuel and energy for DoD installations. DLA Energy manages numerous contracts across various utility types and geographic locations. Analyzing past DLA Energy contracts for similar services in the region, or for other military bases in Kentucky, would provide context. Without specific historical data for this exact service and location, it's difficult to establish a precise spending pattern. However, the significant duration and value of this new contract suggest a substantial and ongoing need for natural gas at the Clarksville facility.

How does the annual cost of this contract compare to average commercial natural gas rates in Clarksville, KY?

Directly comparing the annual cost of this contract to average commercial natural gas rates in Clarksville, KY, is challenging without knowing the exact annual delivery volume and the specific rate structure within the firm fixed price. The contract's total value of approximately $2.89 million over 29 years averages to roughly $99,500 per year. Commercial rates fluctuate based on usage, time-of-use, and market conditions. The City of Clarksville, as the utility provider, likely has a different rate structure for municipal services compared to commercial customers. Furthermore, the fixed-price nature might insulate the government from short-term market fluctuations but could also mean they are not benefiting from potential price decreases. A detailed analysis would require comparing the contracted rate per therm or cubic foot against prevailing commercial rates, adjusted for volume and contract terms.

What are the specific risks associated with a 29-year fixed-price contract for natural gas?

A 29-year fixed-price contract for natural gas presents several risks. Firstly, market volatility is a significant concern; natural gas prices can fluctuate dramatically over such a long period due to geopolitical events, supply/demand shifts, weather patterns, and regulatory changes. If prices rise significantly above the fixed rate, the government could be overpaying substantially. Conversely, if prices fall, the government misses out on potential savings. Secondly, the contractor might face risks if their costs increase beyond what the fixed price accounts for, potentially leading to pressure to reduce service quality or seek contract modifications. Lastly, technological advancements or changes in energy policy could make natural gas less desirable or efficient over this timeframe, creating a risk of obsolescence or underutilization of the contracted service.

What is the track record of the City of Clarksville in providing utility services to government entities?

The City of Clarksville, as a municipal utility provider, has a track record of serving its residents and local businesses with natural gas services. Information regarding their specific track record in providing utility services directly to government entities, particularly federal ones, is not detailed in the provided data. Municipal utilities typically operate under public service mandates, focusing on reliability and affordability for their service area. Their experience would likely involve managing infrastructure, ensuring supply, and billing customers. Assessing their performance specifically for a large, long-term federal contract would require examining past performance metrics, customer satisfaction, and any history of disputes or contract issues, which are not available here.

Are there alternative energy sources or providers that could have been considered for this requirement?

Given that this contract was awarded on a sole-source basis to the City of Clarksville for natural gas distribution, it implies that alternative providers or energy sources were likely deemed unsuitable or unavailable for this specific requirement at the time of award. This could be due to the existing infrastructure owned and operated by the City of Clarksville, which would make it prohibitively expensive or impractical for another company to replicate. Alternatively, regulatory constraints or the specific needs of the DoD facility might necessitate a direct connection to the municipal gas grid. Without a competitive process, the extent of the exploration into alternatives is unclear, but the sole-source justification typically outlines why other options were not feasible.

Industry Classification

NAICS: Utilities › Natural Gas Distribution › Natural Gas Distribution

Product/Service Code: UTILITIES AND HOUSEKEEPING › UTILITIES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2215 MADISON ST, CLARKSVILLE, TN, 37043

Business Categories: Category Business, Government, U.S. Local Government, U.S. National Government, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $50,020,421

Exercised Options: $50,020,421

Current Obligation: $2,885,677

Actual Outlays: $168,130

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060023D8355

IDV Type: IDC

Timeline