VA awards $29.7M contract for fossil fuel electric power generation in Louisiana

Contract Overview

Contract Amount: $29,661,996 ($29.7M)

Contractor: Centerpoint Energy Resources Corp.

Awarding Agency: Department of Veterans Affairs

Start Date: 2021-03-31

End Date: 2027-04-05

Contract Duration: 2,196 days

Daily Burn Rate: $13.5K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Energy

Official Description: SHREVEPORT UESC

Place of Performance

Location: SHREVEPORT, CADDO County, LOUISIANA, 71101

State: Louisiana Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $29.7 million to CENTERPOINT ENERGY RESOURCES CORP. for work described as: SHREVEPORT UESC Key points: 1. Contract focuses on essential energy infrastructure for a critical federal agency. 2. Limited competition raises questions about potential price optimization. 3. Long contract duration suggests a need for stable, long-term energy supply. 4. Geographic concentration in Louisiana may indicate regional energy market dynamics. 5. Fixed-price contract structure shifts some cost risk to the contractor.

Value Assessment

Rating: fair

The contract value of $29.7 million over its duration appears substantial for a single delivery order. Benchmarking against similar energy generation contracts for federal facilities is challenging without more specific service details. However, the lack of competition suggests that the pricing may not have benefited from a competitive bidding process, potentially leading to a less optimal value for the government compared to a fully competed contract. The fixed-price nature provides cost certainty but requires careful monitoring to ensure performance aligns with the agreed-upon price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that only one vendor, CenterPoint Energy Resources Corp., was deemed capable or available to fulfill the requirement. This approach bypasses the standard competitive bidding process, which typically involves multiple proposals and allows for price discovery through market forces. The justification for a sole-source award often relates to unique capabilities, urgent needs, or the absence of adequate competition.

Taxpayer Impact: Sole-source awards can limit opportunities for taxpayers to benefit from competitive pricing, potentially resulting in higher costs than if multiple vendors had vied for the contract.

Public Impact

The Department of Veterans Affairs (VA) facilities in Louisiana will receive a consistent and reliable supply of electricity. This contract supports the operational continuity of healthcare services provided by the VA. The contract's geographic focus is Louisiana, ensuring energy needs are met within the state. It sustains the energy infrastructure required for VA operations, indirectly supporting healthcare professionals and patients.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Long-term commitment without clear performance metrics could lead to complacency.
Reliance on a single provider for critical infrastructure poses a risk if the provider fails.

Positive Signals

Fixed-price contract provides budget certainty for the VA.
Long duration indicates a stable, long-term energy solution.
Contractor is likely experienced in providing energy services to federal entities.

Sector Analysis

The energy sector, particularly fossil fuel electric power generation, is a critical component of national infrastructure. Federal agencies are significant consumers of energy, and contracts in this space often involve substantial investments. This contract fits within the broader category of utility services and infrastructure support for government operations. Comparable spending benchmarks are difficult to establish without knowing the specific energy output and service level agreements, but large federal energy contracts can range from millions to billions of dollars.

Small Business Impact

This contract does not appear to include a small business set-aside. Given the nature of large-scale energy generation and supply, it is common for such contracts to be awarded to larger, established utility providers. There is no explicit indication of subcontracting opportunities for small businesses within the provided data, though the prime contractor may engage them for specific services.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Veterans Affairs' contracting and program management offices. Accountability measures would be defined in the contract's terms and conditions, including performance standards and payment schedules. Transparency is generally facilitated through contract databases like FPDS, although the detailed justifications for sole-source awards may have limited public visibility. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Federal Energy Management Program
Department of Energy - Utility Services
VA Capital Asset and Business Operations Management

Risk Flags

Sole-source award may limit cost savings.
Long contract duration could expose government to unfavorable market shifts.
Lack of detailed performance metrics in summary data.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $29.7 million to CENTERPOINT ENERGY RESOURCES CORP.. SHREVEPORT UESC

Who is the contractor on this award?

The obligated recipient is CENTERPOINT ENERGY RESOURCES CORP..

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $29.7 million.

What is the period of performance?

Start: 2021-03-31. End: 2027-04-05.

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

The provided data indicates the contract was awarded as 'NOT AVAILABLE FOR COMPETITION,' which is synonymous with a sole-source award. The specific justification would typically be documented by the agency in a Justification and Approval (J&A) document. Common reasons for sole-source awards include that the agency received proposals from only one source, or that only one source possesses the unique capability or specialized expertise required for the contract. For energy contracts, this could relate to existing infrastructure, specific geographic service territories, or unique generation capabilities that only one entity possesses. Without the official J&A, the precise reason remains speculative, but it implies a lack of viable alternatives at the time of award.

How does the fixed-price contract type impact risk and value for the VA?

A Firm Fixed Price (FFP) contract, like this one, establishes a ceiling price for the work. This shifts the primary risk of cost overruns to the contractor, CenterPoint Energy Resources Corp. For the VA, this provides significant budget certainty, as the total cost is known upfront, assuming the contractor meets all performance obligations. The value proposition hinges on whether this fixed price is competitive. Since it was a sole-source award, the VA may not have achieved the lowest possible price that could have been secured through open competition. However, the FFP structure protects the VA from unexpected price increases related to fuel costs or operational inefficiencies by the contractor, which is a significant benefit for long-term planning.

What are the potential risks associated with a long-duration contract (2196 days) for energy generation?

A long-duration contract like this one (nearly 6 years) for energy generation carries several potential risks. Firstly, market conditions for energy prices can fluctuate significantly over such a period. While the fixed price offers some protection, if market prices drop substantially, the VA might be locked into paying a higher rate than currently available. Secondly, technological advancements in energy generation could render the current infrastructure or fuel source less efficient or environmentally friendly over time. Thirdly, there's a risk of contractor performance degradation or complacency due to the long-term nature of the agreement, especially without robust performance monitoring and incentive mechanisms. Finally, unforeseen geopolitical or environmental events could impact the contractor's ability to reliably supply power.

Can we compare the per-unit cost of this contract to other federal energy contracts?

Directly comparing the per-unit cost of this contract is challenging with the provided data. The contract value is $29.7 million, and the duration is 2196 days. However, we lack critical information such as the total kilowatt-hours (kWh) of electricity to be supplied, the peak demand requirements, or the specific type of fossil fuel used and its associated costs. Without these metrics, calculating a meaningful per-unit cost (e.g., cost per kWh) for benchmarking is impossible. Federal energy contracts vary widely based on location, energy source, service level agreements, and market conditions, making direct comparisons difficult even with more data.

What is the historical spending pattern for this type of service by the Department of Veterans Affairs?

The provided data only pertains to a single contract award. To assess historical spending patterns for fossil fuel electric power generation by the VA, a broader analysis of past contracts would be necessary. This would involve querying federal procurement databases (like FPDS) for similar contracts awarded by the VA over several fiscal years, looking at contract types, durations, values, and competition levels. Understanding historical spending would help determine if this $29.7 million award is consistent with past investments, if spending has increased or decreased, and whether the VA has historically relied on sole-source awards for such services or has pursued more competitive strategies.

Industry Classification

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

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: Artera Services, LLC

Address: 1111, LOUISIANA STREET, HOUSTON, TX, 77002

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

Financial Breakdown

Contract Ceiling: $63,300,539

Exercised Options: $63,300,539

Current Obligation: $29,661,996

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS00P13BSD0947

IDV Type: IDC

Timeline