DoD's $31.6M electricity contract for USFK locations awarded to Korea Electric Power Corporation

Contract Overview

Contract Amount: $31,623,571 ($31.6M)

Contractor: Korea Electric Power Corporation

Awarding Agency: Department of Defense

Start Date: 2020-10-26

End Date: 2021-09-30

Contract Duration: 339 days

Daily Burn Rate: $93.3K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: SUPPLY OF ELECTRICITY FOR USFK LOCATIONS

Plain-Language Summary

Department of Defense obligated $31.6 million to KOREA ELECTRIC POWER CORPORATION for work described as: SUPPLY OF ELECTRICITY FOR USFK LOCATIONS Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Performance period of 339 days suggests a short-term or interim need. 3. The contract type is Firm Fixed Price, which shifts cost risk to the contractor. 4. No small business set-aside was utilized for this procurement. 5. The contract value is substantial, indicating significant electricity demand. 6. The awarding agency is the Department of the Army, supporting Department of Defense operations.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to the sole-source nature and specific geographic location (USFK). Without competitive bids, it's difficult to assess if the price reflects optimal market value. The fixed-price structure provides cost certainty for the government, but the absence of competition raises questions about potential overpayment. Further analysis would require understanding the prevailing electricity rates in the specific USFK operational areas and comparing them to similar utility contracts in comparable overseas military installations.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Korea Electric Power Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors vying for the contract. While sole-source awards can be justified under specific circumstances (e.g., unique capabilities, urgent needs), they generally lead to less price discovery and potentially higher costs for the government compared to fully competed contracts.

Taxpayer Impact: The lack of competition means taxpayers may not be receiving the most cost-effective price for electricity. Without competing bids, there is a reduced incentive for the sole provider to offer the lowest possible price.

Public Impact

US Forces Korea (USFK) personnel and operations benefit from reliable electricity supply. Essential services and infrastructure at USFK installations are sustained. The contract supports the Department of Defense's mission in the Indo-Pacific region. Local workforce in Korea may be indirectly supported through the operations of Korea Electric Power Corporation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Lack of transparency in the justification for sole-source procurement.
Potential for price escalation if market rates for electricity increase significantly during the contract period.

Positive Signals

Firm Fixed Price contract provides cost certainty to the government.
Award to a known utility provider ensures reliable service delivery for critical military operations.
Contract supports essential infrastructure for national security.

Sector Analysis

The energy sector, specifically electricity supply, is a critical component of infrastructure supporting government operations, including military bases. This contract falls within the broader utility services market. While specific market size data for electricity supply to overseas military installations is not readily available, the global energy market is vast. Comparable spending benchmarks would involve analyzing other utility contracts for Department of Defense facilities, particularly those located in foreign countries, to understand typical pricing structures and service agreements.

Small Business Impact

This contract did not include a small business set-aside. Given the nature of large-scale utility provision, it is common for such contracts to be awarded to established, large utility companies. There are no indications of subcontracting opportunities for small businesses within the provided data, suggesting a limited direct impact on the small business ecosystem for this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and financial management divisions. Accountability measures are inherent in the Firm Fixed Price contract type, which obligates the contractor to deliver services at the agreed-upon price. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Utility Contracts
Overseas Military Base Support Services
Korea Electric Power Corporation Contracts
Firm Fixed Price Energy Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for above-market pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.6 million to KOREA ELECTRIC POWER CORPORATION. SUPPLY OF ELECTRICITY FOR USFK LOCATIONS

Who is the contractor on this award?

The obligated recipient is KOREA ELECTRIC POWER CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $31.6 million.

What is the period of performance?

Start: 2020-10-26. End: 2021-09-30.

What is the historical spending pattern for electricity supply to USFK locations?

Analyzing historical spending for electricity at USFK locations would provide crucial context for this $31.6 million contract. Without specific historical data, it's difficult to determine if this award represents an increase, decrease, or stable level of expenditure. Understanding past contract values, durations, and awarded vendors would help identify trends, potential cost efficiencies achieved or missed over time, and whether this sole-source award deviates from previous competitive procurement strategies. For instance, if past contracts for similar services were competitively bid and resulted in lower per-unit costs, it would raise further questions about the justification and value of this sole-source award. A review of prior years' spending on electricity for USFK would be necessary to establish a baseline and assess the current contract's financial performance in a broader historical context.

How does the price of electricity under this contract compare to commercial rates in South Korea?

Comparing the price of electricity under this contract to commercial rates in South Korea is essential for assessing value for money. Korea Electric Power Corporation (KEPCO) is the primary electricity provider in South Korea, and its rates are regulated. However, government contracts, especially those for military installations, may have different pricing structures or include specific service level agreements that influence cost. To perform this comparison, one would need to obtain KEPCO's standard commercial tariffs for comparable consumption levels and service types, and then analyze the unit price (e.g., per kilowatt-hour) within this DoD contract. Factors such as volume discounts, infrastructure maintenance charges, and any specific security or reliability requirements unique to a military base could cause deviations from standard commercial rates. A significant difference could indicate either a favorable arrangement for the government or a potential overpayment.

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

The justification for awarding this contract on a sole-source basis is critical for understanding the procurement strategy and potential impact on cost. Sole-source awards are typically made when only one responsible source is available or capable of meeting the government's needs. For utility services in a specific geographic location like a military base, this could be due to the existing infrastructure being owned and operated by a single entity (like KEPCO in South Korea), or a requirement for seamless integration with existing power grids. Other justifications might include urgent and compelling needs where competition is not feasible. Without the specific justification document (e.g., a Justification and Approval for Other Than Full and Open Competition), it is difficult to definitively assess the validity of the sole-source award and whether competitive alternatives were thoroughly explored and found unsuitable.

What are the risks associated with a sole-source contract for essential services like electricity?

Sole-source contracts for essential services like electricity carry several inherent risks. The primary risk is the lack of price competition, which can lead to the government paying a premium compared to what might be achieved through a competitive bidding process. This reduces the incentive for the sole provider to offer the most cost-effective solution. Another risk is potential complacency from the contractor, as there is no direct market pressure to innovate or improve efficiency to retain business. Furthermore, reliance on a single provider can create vulnerabilities if that provider experiences operational issues, financial instability, or changes its business strategy. For essential services, disruptions can have significant consequences for mission readiness and personnel safety, making robust performance monitoring and contingency planning crucial.

How does the contract duration (339 days) impact the overall value and risk?

The contract duration of 339 days suggests this is likely a short-term or interim contract, possibly to cover a gap until a longer-term solution can be procured or to address an immediate need. Short durations can limit the contractor's ability to amortize significant upfront investments, potentially leading to higher per-unit costs if those investments are factored in. From the government's perspective, a short duration offers flexibility to re-evaluate needs and market conditions but also necessitates frequent re-procurement, incurring administrative costs. It also means less opportunity to establish long-term performance improvements or cost savings through sustained partnership. The risk associated with price volatility is also higher over shorter periods, as the contractor may build in a premium to hedge against short-term market fluctuations.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Government of the Republic of Korea

Address: 55 JEOLLYEOK-RO, NAJU

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $31,623,571

Exercised Options: $31,623,571

Current Obligation: $31,623,571

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W91QVN18D0008

IDV Type: IDC

Timeline