DoD's $16.3M electricity contract for FY10 shows potential for price volatility due to economic adjustments

Contract Overview

Contract Amount: $16,319,225 ($16.3M)

Contractor: Foreign Utility Consolidated Reporting

Awarding Agency: Department of Defense

Start Date: 2009-10-01

End Date: 2010-06-30

Contract Duration: 272 days

Daily Burn Rate: $60.0K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: FY10 UTILITIES (ELECTRICITY) 1ST QTR

Plain-Language Summary

Department of Defense obligated $16.3 million to FOREIGN UTILITY CONSOLIDATED REPORTING for work described as: FY10 UTILITIES (ELECTRICITY) 1ST QTR Key points: 1. The contract utilizes an economic price adjustment clause, which could lead to increased costs beyond the initial fixed price. 2. Limited competition for this utility service may have impacted the final negotiated price. 3. The contract duration of 272 days suggests a need for consistent, ongoing utility provision. 4. The specific nature of electricity distribution makes it a critical but often overlooked operational expense. 5. Benchmarking this contract's value is challenging without comparable utility contracts in the same region or for similar facilities.

Value Assessment

Rating: fair

The contract value of $16.3 million for electricity over approximately 9 months appears substantial. However, without specific details on the quantity of electricity procured or the exact pricing structure beyond 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT,' a direct value-for-money assessment is difficult. The economic price adjustment clause introduces a risk of cost escalation, making it harder to benchmark against fixed-price contracts. Comparisons to similar utility contracts for military installations would be necessary to determine if the pricing is competitive, especially considering the potential for bulk purchasing power.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under 'NOT AVAILABLE FOR COMPETITION,' indicating a sole-source or limited competition scenario. This approach is often used for essential utilities where a single provider may be the only viable option due to geographic location or existing infrastructure. The lack of robust competition means that price discovery may not have been optimized, potentially leading to a higher price than if multiple bidders had vied for the contract. The justification for this limited competition would need to be thoroughly reviewed to ensure it was indeed necessary.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government did not benefit from the price reductions typically driven by a competitive marketplace.

Public Impact

This contract directly supports the operational readiness of Department of the Army facilities by ensuring a continuous supply of electricity. The primary beneficiaries are the military personnel and civilian staff working at the affected installations, who rely on consistent power for their duties. The geographic impact is localized to the specific military installation(s) served by FOREIGN UTILITY CONSOLIDATED REPORTING. Workforce implications are minimal as this contract is for utility provision, not direct labor services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Risk of cost overruns due to the economic price adjustment clause.
Potential for suboptimal pricing due to sole-source award.
Lack of transparency in the specific unit costs of electricity provided.

Positive Signals

Ensures critical utility service for military operations.
Contract awarded to a known entity for utility provision.

Sector Analysis

The energy sector, specifically utility provision, is a critical component of government operations. This contract falls under the broader category of essential services required to maintain infrastructure. While specific market size data for military electricity contracts is not readily available, the federal government is a significant consumer of energy across all branches. This contract represents a portion of the Department of Defense's overall energy expenditure, which is subject to market fluctuations and regulatory environments.

Small Business Impact

The data indicates that small business participation was not a stated factor in this contract award ('ss': false, 'sb': false). There is no indication of small business set-asides or subcontracting requirements. This suggests that the primary contractor is likely a larger entity, and the contract's structure does not appear to prioritize small business engagement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and financial management offices. Transparency is limited by the 'NOT AVAILABLE FOR COMPETITION' status and the lack of detailed public reporting on the specific pricing mechanisms. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected in the procurement or execution of the contract.

Related Government Programs

Department of Defense Utilities Contracts
Army Energy Procurement
Federal Electric Power Contracts
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Sole-source award may limit price competition.
Economic price adjustment introduces cost uncertainty.
Lack of detailed performance metrics in provided data.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $16.3 million to FOREIGN UTILITY CONSOLIDATED REPORTING. FY10 UTILITIES (ELECTRICITY) 1ST QTR

Who is the contractor on this award?

The obligated recipient is FOREIGN UTILITY CONSOLIDATED REPORTING.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $16.3 million.

What is the period of performance?

Start: 2009-10-01. End: 2010-06-30.

What was the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was awarded under 'NOT AVAILABLE FOR COMPETITION' (CT: 'NOT AVAILABLE FOR COMPETITION'). This typically implies that only one responsible source was available or that the agency determined it was in the government's best interest to award to a specific contractor without competition. Common reasons include unique capabilities, proprietary technology, or the necessity of using existing infrastructure tied to a specific provider, especially for essential services like electricity in a fixed location. A full review of the contract file, including the Justification and Approval (J&A) document, would be required to ascertain the precise rationale.

How does the 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' clause typically affect the final cost compared to a standard fixed-price contract?

A 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FP-EPA) contract establishes a base price but includes a mechanism to adjust that price based on fluctuations in specified economic factors, such as labor costs, material costs, or, in this case, potentially the cost of electricity itself. Unlike a standard fixed-price contract where the price is set and remains constant regardless of market changes, an FP-EPA contract allows for upward (and sometimes downward) adjustments. This protects the contractor from unforeseen cost increases but introduces uncertainty for the government regarding the final expenditure. The magnitude of potential price changes depends on the specific economic indicators and formulas outlined in the contract's clauses.

What is the typical market rate or benchmark for electricity distribution services for a federal facility of this size?

Benchmarking the per-unit cost of electricity for federal facilities is complex due to variations in location, consumption volume, contract terms (fixed vs. variable pricing, economic adjustments), and the specific services included (e.g., distribution only vs. generation and distribution). Generally, large federal installations benefit from economies of scale, potentially securing lower per-kilowatt-hour rates than smaller consumers. However, the 'NOT AVAILABLE FOR COMPETITION' status and the economic price adjustment clause in this $16.3 million contract for FY10 suggest that a straightforward market rate comparison might not be directly applicable or easily obtainable without detailed knowledge of the specific utility provider's rate structure and the contract's adjustment formula.

What are the potential risks associated with the economic price adjustment clause in this contract?

The primary risk associated with the economic price adjustment (EPA) clause is cost escalation. If the underlying economic factors (e.g., fuel costs, market electricity prices) increase significantly during the contract period, the government could end up paying substantially more than the initially negotiated fixed price. This uncertainty makes budget forecasting more challenging and could lead to budget overruns. Additionally, the complexity of calculating EPA adjustments can sometimes lead to disputes between the government and the contractor over the correct amount. Without clear caps or limitations on the adjustments, the government bears the risk of market volatility.

How does the duration of 272 days impact the assessment of this contract?

A contract duration of 272 days (approximately 9 months) suggests that this award covers a specific period, likely a fiscal year or a portion thereof, for ongoing utility services. This duration is relatively short for infrastructure-related contracts but typical for recurring service needs like electricity. It implies that the government anticipates needing these services beyond this period and will likely need to re-compete or extend the contract. The assessment focuses on the value and performance within this defined timeframe, while also considering the need for future procurement actions and potential vendor lock-in if competition remains limited.

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: ONLY ONE SOURCE

Offers Received: 1

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

Evaluated Preference: NONE

Contractor Details

Address: 2011 CRYSTAL DR STE 911, ARLINGTON, VA, 08

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $16,319,225

Exercised Options: $16,319,225

Current Obligation: $16,319,225

Contract Characteristics

Cost or Pricing Data: NO

Timeline