Treasury's IRS spent $12M on electric service in West Virginia over 5 years, with limited competition

Contract Overview

Contract Amount: $12,027,956 ($12.0M)

Contractor: THE Potomac Edison CO

Awarding Agency: Department of the Treasury

Start Date: 2007-10-01

End Date: 2012-10-07

Contract Duration: 1,833 days

Daily Burn Rate: $6.6K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: ELECTRIC SERVICE FOR ECC/ANNEX

Place of Performance

Location: KEARNEYSVILLE, JEFFERSON County, WEST VIRGINIA, 25430

State: West Virginia Government Spending

Plain-Language Summary

Department of the Treasury obligated $12.0 million to THE POTOMAC EDISON CO for work described as: ELECTRIC SERVICE FOR ECC/ANNEX Key points: 1. The contract provided essential electric power distribution services to the IRS facilities in West Virginia. 2. The duration of the contract was approximately 5 years, indicating a medium-term commitment. 3. The contract was awarded on a firm-fixed-price basis, which shifts cost risk to the contractor. 4. The sole awardee suggests a lack of robust market competition for this specific service in the region. 5. The contract value of $12 million over five years averages to $2.4 million annually. 6. The absence of small business set-aside indicates this was not specifically targeted for smaller enterprises.

Value Assessment

Rating: fair

Benchmarking electric service costs is challenging without specific usage data and local market rates. However, the $12 million expenditure over five years for electric service to IRS facilities in West Virginia appears substantial. Without comparable contracts for similar facilities or detailed breakdowns of energy consumption, it's difficult to definitively assess value for money. The firm-fixed-price structure provides cost certainty but may not reflect the lowest possible price if competition were more robust.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a sole-source or limited competition basis, as indicated by the 'NOT AVAILABLE FOR COMPETITION' status. This means that only one vendor was solicited or considered for the award. The lack of open competition limits the government's ability to explore alternative pricing and service models, potentially leading to higher costs than if multiple bids were received.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding, as the government did not benefit from price discovery through multiple offers.

Public Impact

The primary beneficiaries are the Internal Revenue Service facilities in West Virginia, ensuring continuous operation. The service delivered is essential electric power distribution, crucial for maintaining government infrastructure. The geographic impact is localized to West Virginia, where the IRS facilities are located. The contract supports the operational workforce at the IRS facilities by ensuring reliable power.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition could lead to suboptimal pricing for taxpayers.
Lack of transparency in the sole-source award process hinders full accountability.
Potential for overpayment due to the absence of market-driven price discovery.

Positive Signals

Firm-fixed-price contract provides budget certainty for the government.
Ensured continuity of essential electric service for critical IRS operations.
The awardee, The Potomac Edison Co., is a known utility provider, suggesting reliability.

Sector Analysis

The electric utility sector is characterized by regulated monopolies and significant infrastructure investments. Contracts for electric service are typically awarded to local utility providers, often on a sole-source or limited competition basis due to the nature of power distribution networks. The $12 million spent over five years by the IRS represents a portion of the federal government's overall spending on utility services, which is a recurring operational expense across numerous agencies and facilities nationwide.

Small Business Impact

The contract was not awarded as a small business set-aside, and there is no indication of subcontracting requirements for small businesses. This suggests that the primary focus was on securing reliable electric service from an established utility provider, rather than specifically promoting small business participation.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Treasury's Inspector General, responsible for ensuring the integrity and efficiency of its financial operations. Accountability measures would be tied to the terms of the firm-fixed-price contract, focusing on service delivery and adherence to the agreed-upon terms. Transparency is limited by the sole-source nature of the award.

Related Government Programs

Federal Utility Services Contracts
IRS Facility Operations
Department of the Treasury Operational Expenses
West Virginia State Contracts

Risk Flags

Limited Competition
Potential for Overpricing
Lack of Transparency in Award

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $12.0 million to THE POTOMAC EDISON CO. ELECTRIC SERVICE FOR ECC/ANNEX

Who is the contractor on this award?

The obligated recipient is THE POTOMAC EDISON CO.

Which agency awarded this contract?

Awarding agency: Department of the Treasury (Internal Revenue Service).

What is the total obligated amount?

The obligated amount is $12.0 million.

What is the period of performance?

Start: 2007-10-01. End: 2012-10-07.

What is the historical spending pattern for electric services at IRS facilities in West Virginia?

Historical spending data for electric services at IRS facilities in West Virginia prior to this 5-year contract (2007-2012) is not readily available in the provided data. However, the $12,027,956.21 awarded for this period suggests a significant and ongoing need for reliable power. Understanding past expenditures would require accessing historical contract databases or agency budget reports. Without this context, it's difficult to determine if this contract represented an increase, decrease, or stable level of spending for these services. Future analysis could involve tracking subsequent contracts for the same facilities to identify trends in cost and service.

How does the annual cost of this contract compare to similar IRS facilities in other states?

Comparing the annual cost of this contract, approximately $2.4 million ($12M / 5 years), to similar IRS facilities in other states is challenging without specific data on facility size, energy consumption, and local utility rates in those comparable locations. The provided data only details this single contract. To perform such a comparison, one would need to identify IRS facilities of comparable operational scale and geographic location (considering regional energy market differences) and then research their electric service contracts or utility bills. Factors like building size, number of occupants, operational hours, and specific energy-intensive equipment would significantly influence costs, making direct comparisons difficult without detailed operational context.

What are the specific risks associated with a sole-source award for essential utility services?

The primary risk associated with a sole-source award for essential utility services like electricity is the potential for inflated pricing due to a lack of competition. The sole provider faces less pressure to offer competitive rates, potentially leading to higher costs for the government and, by extension, taxpayers. Another risk is reduced incentive for the provider to innovate or improve service quality beyond the minimum contractual requirements, as there are no competing alternatives for the government to switch to. Furthermore, the lack of a competitive bidding process can obscure the true market value of the service, making it harder to ensure optimal value for money.

What performance metrics were likely used to evaluate The Potomac Edison Co.'s service delivery under this contract?

While specific performance metrics are not detailed in the provided data, contracts for essential utility services typically include metrics related to reliability, uptime, and response times. For electric power distribution, key performance indicators (KPIs) would likely focus on minimizing service interruptions (outages), ensuring consistent power quality (voltage stability), and prompt restoration of service following any disruptions. The contract's firm-fixed-price nature suggests that the primary focus would be on the successful delivery of uninterrupted power, with penalties potentially incurred for significant failures to meet reliability standards.

What is the typical duration for federal contracts providing electric utility services?

Federal contracts for electric utility services can vary significantly in duration, often depending on the specific needs of the facility, the terms offered by the utility provider, and the agency's budgeting cycles. Contracts can range from short-term (1-3 years) to medium-term (3-7 years), and sometimes longer if tied to infrastructure upgrades or specific energy supply agreements. The 5-year duration of this contract (October 2007 to October 2012) falls within the common medium-term range for such essential services, providing a balance between ensuring continuity and allowing for periodic re-evaluation of needs and market conditions.

Industry Classification

NAICS: Utilities › Electric Power Generation, Transmission and Distribution › Electric Power Distribution

Product/Service Code: UTILITIES AND HOUSEKEEPING › UTILITIES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Firstenergy Corp (UEI: 799249461)

Address: 800 CABIN HILL DR, GREENSBURG, PA, 14

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

Financial Breakdown

Contract Ceiling: $12,027,956

Exercised Options: $12,027,956

Current Obligation: $12,027,956

Parent Contract

Parent Award PIID: GS00P08BSD0539

IDV Type: IDC

Timeline