Department of the Army's $24.1M utility contract for steam and air-conditioning supply shows limited competition

Contract Overview

Contract Amount: $24,134,631 ($24.1M)

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: $88.7K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: FY10 UTILITIES (HEAT) 1ST QTR

Plain-Language Summary

Department of Defense obligated $24.1 million to FOREIGN UTILITY CONSOLIDATED REPORTING for work described as: FY10 UTILITIES (HEAT) 1ST QTR Key points: 1. The contract's fixed-price with economic price adjustment structure may expose the government to fluctuating energy costs. 2. With a duration of 272 days, the contract represents a short-term need for essential utility services. 3. The award amount of $8.87M is significantly lower than the total contract value, suggesting potential for undelivered services or phased funding. 4. The lack of a specific Product Service Code (PSC) makes direct benchmarking difficult. 5. This contract falls under the broad category of utilities, essential for base operations.

Value Assessment

Rating: fair

The total contract value is $24.1M, with an award amount of $8.87M. Without comparable contracts for steam and air-conditioning supply in the same geographic region or for similar facility types, it is difficult to definitively assess value for money. The fixed-price with economic price adjustment (EPA) clause introduces potential cost volatility for the government, which could lead to higher-than-expected expenditures if energy prices rise significantly. The contract's duration of 272 days suggests a short-term need, making long-term price comparisons less relevant.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a 'NOT AVAILABLE FOR COMPETITION' basis, indicating a sole-source procurement. This means that only one vendor was solicited or deemed capable of fulfilling the requirement. The lack of competition limits the government's ability to leverage market forces to achieve the best possible pricing and terms. It also raises questions about whether alternative solutions or vendors were adequately explored.

Taxpayer Impact: Sole-source awards generally result in higher prices for taxpayers as there is no competitive pressure to drive down costs. This limits the government's ability to secure the most economical solution.

Public Impact

This contract directly benefits Department of the Army facilities by ensuring the provision of essential heating and cooling services. The services delivered are critical for maintaining habitable and operational environments within military installations. The geographic impact is localized to the specific Army base or bases served by this utility contract. Workforce implications are likely minimal for the contracting agency, but the contractor will utilize its own personnel for service delivery.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Economic price adjustment clause introduces risk of cost overruns due to market fluctuations.
Lack of specific PSC hinders detailed benchmarking and performance analysis.

Positive Signals

Ensures essential utility services are provided to Department of the Army facilities.
Contract is for a defined period, limiting long-term financial commitment.
Awarded to DCA, suggesting a potentially established relationship for utility services.

Sector Analysis

The utilities sector, particularly for large-scale heating and cooling, is a critical component of infrastructure support for government facilities. This contract for steam and air-conditioning supply falls within the broader energy and facilities management market. Comparable spending benchmarks are difficult to establish without more specific details on the type and scale of the facility being served, as well as the geographic location which influences energy costs. However, the total contract value of $24.1M indicates a significant requirement for these essential services.

Small Business Impact

There is no indication that this contract includes small business set-asides. Given the sole-source nature of the award and the specialized nature of utility provision, it is unlikely that small businesses were significantly involved as prime contractors. Subcontracting opportunities for small businesses are not specified but would depend on the prime contractor's practices.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and facility management divisions. Accountability measures would be tied to the performance standards outlined in the contract. Transparency is limited due to the sole-source nature of the award and the lack of detailed public information beyond the basic award data. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Utilities Contracts
Army Base Operations Support
Steam and Air-Conditioning Services
Fixed-Price with Economic Price Adjustment Contracts

Risk Flags

Sole-source award may lead to higher costs.
Economic price adjustment introduces cost uncertainty.
Lack of specific PSC hinders benchmarking.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.1 million to FOREIGN UTILITY CONSOLIDATED REPORTING. FY10 UTILITIES (HEAT) 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 $24.1 million.

What is the period of performance?

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

What is the historical spending pattern for steam and air-conditioning supply for this specific Department of the Army facility or similar facilities?

Analyzing historical spending for steam and air-conditioning supply for this specific Department of the Army facility or similar installations would provide crucial context for evaluating the current contract's value. Without access to historical data, it's challenging to determine if the $24.1M total value represents an increase, decrease, or stable expenditure compared to previous periods. Understanding past spending trends can reveal patterns of cost escalation, identify potential inefficiencies, or highlight consistent service needs. Furthermore, comparing this contract's value to similar contracts awarded to other military branches or government agencies for comparable facilities can offer a benchmark for assessing reasonableness. This comparative analysis is essential for determining if the current award is competitive and cost-effective, especially given the sole-source nature of this procurement which inherently limits direct price comparison.

What specific risks are associated with the 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) clause in this contract?

The 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT' (FPEPA) clause in this contract introduces several risks for the Department of the Army. Primarily, it exposes the government to potential cost increases if the prices of specified economic factors, such as fuel or labor, rise during the contract period. While intended to protect the contractor from unforeseen market volatility, it shifts that risk to the government. The extent of this risk depends on the specific economic indicators tied to the adjustment and the volatility of those markets. For a utility contract involving steam and air-conditioning, fluctuations in energy commodity prices (e.g., natural gas, coal) are a significant concern. Without clear caps or limitations on the economic price adjustments, the total expenditure could exceed the initial $24.1M estimate, impacting budget predictability. Careful monitoring of market trends and the application of the EPA formula is crucial to mitigate these risks.

Given the sole-source award, what steps were taken to ensure fair and reasonable pricing?

When a contract is awarded on a sole-source basis, as indicated by 'NOT AVAILABLE FOR COMPETITION,' the procuring agency bears a heightened responsibility to ensure fair and reasonable pricing. Standard competitive procedures are bypassed, necessitating alternative methods for price validation. This typically involves conducting a thorough cost and price analysis of the contractor's proposal. Such analysis may include reviewing the contractor's cost elements (e.g., labor, materials, overhead), profit margins, and comparing these to historical data, industry standards, or data from similar commercial services. The agency might also request detailed cost breakdowns and justifications from the contractor. In some cases, independent government cost estimates or market research may be employed to establish a benchmark. The effectiveness of these measures in ensuring fair pricing is directly proportional to the rigor and thoroughness of the analysis performed by the contracting officers.

What is the significance of the award amount ($8.87M) being substantially less than the total contract value ($24.1M)?

The discrepancy between the award amount ($8.87M) and the total contract value ($24.1M) for this utility contract suggests a phased funding approach or that the full value represents the government's maximum potential obligation over the contract's term, not necessarily the amount immediately obligated or expected to be spent. It is common for large, multi-year contracts, or those with uncertain future needs, to have a lower initial award amount. This could mean that only a portion of the total value is funded in the current fiscal year, with subsequent funding dependent on appropriations or continued need. Alternatively, the $24.1M might represent the ceiling price for all potential services over the contract duration, and the $8.87M is the amount obligated at the time of award. This structure allows for flexibility but requires careful tracking of obligations and expenditures to manage the budget effectively.

How does the lack of a specific Product Service Code (PSC) impact the analysis of this contract?

The absence of a specific Product Service Code (PSC) for this contract, listed as 'PSC: ', significantly hinders a detailed analytical assessment. PSCs are standardized codes used by the federal government to classify products and services procured. They are crucial for categorizing spending, enabling comparative analysis across different agencies and contract types, and identifying market trends. Without a PSC, it becomes difficult to accurately benchmark this contract against similar utility services, assess its value for money in a broader market context, or identify potential competitors. This lack of classification makes it challenging to retrieve relevant historical data or find comparable contract awards, limiting the depth of due diligence and the ability to identify potential risks or opportunities associated with this type of procurement.

Industry Classification

NAICS: Utilities › Water, Sewage and Other Systems › Steam and Air-Conditioning Supply

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: $24,134,631

Exercised Options: $24,134,631

Current Obligation: $24,134,631

Contract Characteristics

Cost or Pricing Data: NOT OBTAINED - WAIVED

Timeline