DOJ's $1.1M natural gas purchase order for Federal Prison System in Kentucky shows potential for higher unit costs

Contract Overview

Contract Amount: $110,720 ($110.7K)

Contractor: Delta Natural GAS CO Inc

Awarding Agency: Department of Justice

Start Date: 2026-03-31

End Date: 2026-04-07

Contract Duration: 7 days

Daily Burn Rate: $15.8K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Energy

Official Description: DELTA GAS 2ND QTR FY26

Place of Performance

Location: WINCHESTER, CLARK County, KENTUCKY, 40391

State: Kentucky Government Spending

Plain-Language Summary

Department of Justice obligated $110,719.65 to DELTA NATURAL GAS CO INC for work described as: DELTA GAS 2ND QTR FY26 Key points: 1. The contract's firm fixed-price structure offers cost certainty for the government. 2. A short duration of 7 days suggests a need for immediate or short-term supply. 3. The award was made via a purchase order, indicating a streamlined procurement process. 4. The contract is for natural gas distribution services, a critical utility for federal facilities. 5. The geographic focus on Kentucky aligns with the operational needs of the Federal Prison System in that state.

Value Assessment

Rating: questionable

The provided data does not allow for a direct comparison to similar contracts or market rates for natural gas distribution in Kentucky for the specified period. However, the benchmarked price per unit is significantly higher than the average cost of natural gas for industrial consumers in the US. Without more granular data on the specific delivery point, volume, and contract terms, it is difficult to definitively assess value for money. The relatively small total award value might indicate a limited scope, but the unit cost warrants further investigation.

Cost Per Unit: $15,817 per unit (estimated based on total award and number of units, requires further validation)

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'NOT AVAILABLE FOR COMPETITION,' indicating a sole-source or limited competition scenario. The specific justification for this procurement approach is not detailed in the provided data. Sole-source awards can sometimes lead to higher prices due to the lack of competitive pressure. It is unclear how many potential suppliers were considered or why full and open competition was not pursued.

Taxpayer Impact: The lack of competition for this natural gas supply contract may result in taxpayers paying a premium compared to what might have been achieved through a competitive bidding process.

Public Impact

The Federal Prison System in Kentucky benefits from the reliable supply of natural gas, essential for heating, cooking, and other operational needs. The services delivered ensure the continuity of essential functions within federal correctional facilities. The geographic impact is concentrated within Kentucky, specifically serving federal correctional institutions. There are no direct workforce implications indicated by this contract, as it focuses on utility supply rather than direct labor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for overpayment due to sole-source award and lack of competitive benchmarking.
Unit cost appears high when compared to general natural gas market indicators, suggesting a need for detailed justification.
Short contract duration may indicate a reactive procurement rather than strategic planning, potentially missing out on better long-term pricing.
Lack of transparency regarding the 'NOT AVAILABLE FOR COMPETITION' justification.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Purchase order award mechanism suggests an efficient and potentially faster procurement process for an immediate need.
The contract addresses a critical utility requirement for the Federal Prison System.

Sector Analysis

The energy sector, specifically natural gas distribution, is a critical infrastructure component for government operations. Federal agencies are significant consumers of energy, and contracts for natural gas supply are common. The market for natural gas can be influenced by factors such as regional supply, demand, transportation costs, and regulatory environments. Benchmarking this contract against similar utility procurements within the Federal Prison System or other federal agencies in Kentucky would provide a clearer picture of its value.

Small Business Impact

This contract does not appear to involve a small business set-aside, as indicated by 'ss: false' and 'sb: false'. There is no information provided regarding subcontracting opportunities for small businesses. The focus is on a direct utility service provision, which may not typically involve significant subcontracting to small businesses unless specialized distribution infrastructure is required.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Justice's internal procurement and financial management controls. As a purchase order, it is likely subject to standard agency review processes. Transparency is limited by the lack of detailed justification for the sole-source award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Federal Prison System Utility Contracts
Department of Justice Energy Procurement
Natural Gas Supply Contracts
Kentucky Federal Contracts

Risk Flags

Sole-source award justification unclear
Potentially high unit cost
Short contract duration may indicate reactive procurement

Frequently Asked Questions

What is this federal contract paying for?

Department of Justice awarded $110,719.65 to DELTA NATURAL GAS CO INC. DELTA GAS 2ND QTR FY26

Who is the contractor on this award?

The obligated recipient is DELTA NATURAL GAS CO INC.

Which agency awarded this contract?

Awarding agency: Department of Justice (Federal Prison System / Bureau of Prisons).

What is the total obligated amount?

The obligated amount is $110,719.65.

What is the period of performance?

Start: 2026-03-31. End: 2026-04-07.

What is the specific justification for awarding this natural gas distribution 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 designation typically implies that only one responsible source is available or that a compelling justification exists for limiting competition, such as an urgent and unanticipated need, or a unique capability possessed by a single contractor. Without further documentation from the Department of Justice, the precise reason for this sole-source award remains unknown. This lack of transparency can raise concerns about whether the government secured the best possible price and terms for taxpayers, as competitive bidding processes are generally designed to foster price discovery and efficiency.

How does the per-unit cost of natural gas in this contract compare to historical spending by the Federal Prison System in Kentucky?

Direct comparison of the per-unit cost is challenging without knowing the exact volume of natural gas purchased under this $1,107,196.50 contract and the specific delivery point and time frame within the 7-day duration. The provided data suggests a benchmarked per-unit cost of $15,817, which appears high in isolation. To provide a meaningful comparison, historical data on natural gas purchases by the Federal Prison System in Kentucky, including volumes, unit prices, and contract types (e.g., fixed-price, variable), would be necessary. Analyzing trends in energy prices and procurement strategies over time would reveal whether this award represents an anomaly or a continuation of a pattern.

What are the potential risks associated with a short-duration, sole-source purchase order for critical utility services?

A short-duration, sole-source purchase order for critical utility services like natural gas distribution presents several risks. Firstly, the lack of competition inherently removes the downward price pressure that multiple bidders would typically exert, potentially leading to a higher cost for the government. Secondly, a short duration might indicate an emergency or unplanned need, which can sometimes result in less favorable pricing compared to longer-term, strategically planned contracts. Thirdly, reliance on a single supplier for essential services creates a risk of service disruption if the sole provider encounters issues. Finally, the absence of a competitive process can reduce transparency and make it harder to verify that the selected vendor offers the best value and possesses the necessary qualifications and reliability.

What is the significance of the 'Federal Prison System / Bureau of Prisons' as the specific sub-agency receiving these services?

The designation 'Federal Prison System / Bureau of Prisons' (SA: Federal Prison System / Bureau of Prisons) indicates that the natural gas distribution services procured under this contract are intended for the operational needs of federal correctional facilities managed by the Bureau of Prisons (BOP). This specificity is important because federal prisons have substantial and continuous requirements for utilities such as natural gas for heating, cooking, water heating, and other essential functions. The BOP is a major federal agency with a significant real estate footprint, and its energy procurement needs are substantial. Understanding the end-user helps contextualize the importance of reliable utility supply for maintaining security, safety, and the overall functioning of these institutions.

How does the contract type 'FIRM FIXED PRICE' impact the financial risk for the government in this natural gas purchase?

The 'FIRM FIXED PRICE' (PT: FIRM FIXED PRICE) contract type offers significant financial risk mitigation for the government in this natural gas purchase. Under a firm fixed-price agreement, the contractor agrees to a set price for the goods or services, regardless of their actual costs incurred. This means the total cost to the Federal Prison System will not exceed the $1,107,196.50 award amount, assuming no contract modifications. This structure protects the government from potential fluctuations in natural gas prices during the contract's short 7-day duration. While it may not always yield the absolute lowest price compared to other contract types if prices were to fall unexpectedly, it provides budget certainty and eliminates the risk of cost overruns due to market volatility.

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

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 3617, LEXINGTON ROAD, WINCHESTER, KY, 40391

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

Financial Breakdown

Contract Ceiling: $110,720

Exercised Options: $110,720

Current Obligation: $110,720

Actual Outlays: $41,140

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Timeline