DoD spent $132M on natural gas, with WGL Energy Services securing the contract

Contract Overview

Contract Amount: $132,147,953 ($132.1M)

Contractor: WGL Energy Services, Inc.

Awarding Agency: Department of Defense

Start Date: 2010-10-01

End Date: 2013-03-31

Contract Duration: 912 days

Daily Burn Rate: $144.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 29

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: A-DIRECT SUPPLY OF NATURAL GAS

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20892

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $132.1 million to WGL ENERGY SERVICES, INC. for work described as: A-DIRECT SUPPLY OF NATURAL GAS Key points: 1. The contract value of $132 million represents a significant investment in energy supply for the Department of Defense. 2. Competition dynamics for this contract are assessed to understand pricing efficiency and market responsiveness. 3. Risk indicators are evaluated to ensure reliable energy delivery and mitigate potential supply chain disruptions. 4. Performance context is established by comparing this contract's terms and outcomes to similar energy supply agreements. 5. The contract positions the Defense Logistics Agency within the broader energy procurement sector, highlighting its role in securing essential resources.

Value Assessment

Rating: good

The contract's total value of $132 million over approximately three years suggests a substantial commitment. Benchmarking against similar large-scale natural gas supply contracts for federal agencies indicates that the pricing structure, while subject to economic adjustments, likely falls within a reasonable range for the period. The fixed-price with economic price adjustment (FP-EPA) mechanism aims to balance cost certainty with market volatility, a common approach in energy procurement. Further analysis would require detailed historical pricing data and comparison of the specific delivery terms and locations.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. The presence of 29 bids suggests a robust competitive environment, which typically drives more favorable pricing and terms for the government. A high number of bidders generally implies that the market is healthy and that the solicitation was well-defined, attracting a wide range of potential suppliers. This level of competition is a positive indicator for price discovery and value for money.

Taxpayer Impact: The extensive competition for this natural gas supply contract is beneficial for taxpayers as it likely resulted in a more competitive price than a sole-source or limited competition award. It ensures that taxpayer funds are used efficiently by leveraging market forces to secure essential energy resources.

Public Impact

The Department of Defense is the primary beneficiary, ensuring a stable supply of natural gas for its operations. Services delivered include the direct supply of natural gas, crucial for heating, power generation, and other operational needs. The geographic impact is concentrated in Maryland, where the contract was awarded and likely served. Workforce implications are indirect, primarily related to the energy sector jobs supported by the contract's execution.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses introduce potential for cost increases beyond initial projections.
Reliance on a single supplier for a critical resource like natural gas carries inherent supply chain risks.
The duration of the contract (912 days) may not fully align with long-term energy market fluctuations.

Positive Signals

Awarded under full and open competition with a significant number of bidders, suggesting competitive pricing.
The fixed-price component provides a baseline cost, offering some predictability.
The contract specifies a direct supply, potentially simplifying logistics and ensuring a dedicated source.

Sector Analysis

This contract falls within the energy sector, specifically focusing on the procurement of natural gas. The market for natural gas supply is characterized by fluctuating prices influenced by global supply and demand, geopolitical events, and regulatory changes. Federal agencies are significant consumers of energy, and contracts like this are essential for maintaining operational readiness. Comparable spending benchmarks would involve analyzing other large-scale natural gas contracts awarded to federal agencies or large industrial consumers over similar timeframes.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' field is also false, suggesting no specific small business subcontracting goals were mandated within this award. This means the primary contractor, WGL Energy Services, Inc., likely fulfilled the contract using its own resources or larger subcontractors, with limited direct impact on the small business ecosystem for this specific award.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Logistics Agency (DLA), which is responsible for procuring goods and services for the Department of Defense. Accountability measures would be embedded in the contract terms, including performance standards and delivery schedules. Transparency is facilitated through contract databases like FPDS, which record award details. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Natural Gas Procurement
Federal Energy Contracts
Defense Logistics Agency Contracts
Department of Defense Energy Supply
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Potential for cost overruns due to economic price adjustments.
Supply chain vulnerability for critical energy resources.
Market volatility impacting final cost.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $132.1 million to WGL ENERGY SERVICES, INC.. A-DIRECT SUPPLY OF NATURAL GAS

Who is the contractor on this award?

The obligated recipient is WGL ENERGY SERVICES, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $132.1 million.

What is the period of performance?

Start: 2010-10-01. End: 2013-03-31.

What is the historical spending trend for natural gas by the Department of Defense over the last decade?

Analyzing the historical spending trend for natural gas by the Department of Defense over the last decade reveals a fluctuating pattern influenced by market prices, strategic energy initiatives, and evolving operational requirements. While specific aggregate data for natural gas alone is complex to isolate without detailed analysis of various contract types and agencies, overall energy expenditures for the DoD have been substantial. Periods of high global energy prices have generally correlated with increased spending, whereas periods of lower prices have seen reductions. The DoD has also increasingly focused on energy resilience and diversification, which may influence future spending patterns towards alternative sources or more flexible supply contracts. The $132 million awarded to WGL Energy Services represents a significant portion of annual spending for natural gas in a specific region and timeframe, but a comprehensive decade-long view would require aggregating data across numerous contracts and fiscal years.

How does the per-unit cost of natural gas in this contract compare to market rates during the contract period (2010-2013)?

Comparing the per-unit cost of natural gas in this contract to prevailing market rates during the 2010-2013 period requires access to the specific unit pricing within the contract and reliable market indices for the relevant delivery regions. The contract utilized a Fixed Price with Economic Price Adjustment (FP-EPA) structure, meaning the final per-unit cost would have varied based on market fluctuations as defined by the adjustment clauses. Generally, during this period, natural gas prices experienced volatility. To perform a precise comparison, one would need to: 1) Extract the base fixed price per unit from the contract. 2) Identify the specific economic price adjustment indices used (e.g., Henry Hub spot prices, regional indices). 3) Obtain historical data for these indices for the contract duration. Without this granular data, a definitive comparison is not possible. However, the presence of full and open competition with 29 bidders suggests that the negotiated price was likely competitive within the market context of the time.

What are the key performance indicators (KPIs) used to evaluate the performance of WGL Energy Services, Inc. under this contract?

Key Performance Indicators (KPIs) for a natural gas supply contract like this typically revolve around reliability, timeliness, and adherence to quality specifications. For WGL Energy Services, Inc., primary KPIs would likely include: 1) **Delivery Reliability:** Ensuring consistent and uninterrupted natural gas supply as per the contracted schedule and volumes. This is critical for DoD operations. 2) **Timeliness of Delivery:** Meeting all scheduled delivery windows and responding promptly to any urgent supply needs. 3) **Quality Compliance:** Supplying natural gas that meets the specified purity and energy content standards. 4) **Reporting Accuracy:** Providing accurate and timely reports on volumes delivered, pricing adjustments, and any operational issues. 5) **Invoice Accuracy and Timeliness:** Submitting correct invoices in accordance with contract terms. While specific KPIs are not detailed in the provided summary data, these are standard metrics for such essential service contracts. Performance would be monitored by the contracting officer's representative (COR) at the Defense Logistics Agency.

What is the track record of WGL Energy Services, Inc. in fulfilling federal energy contracts?

WGL Energy Services, Inc. has a significant track record of fulfilling federal energy contracts, particularly for natural gas and electricity supply. As a major energy services company, they have historically secured numerous awards from various federal agencies, including the Department of Defense, General Services Administration (GSA), and others. Their experience often involves large-scale, long-term supply agreements requiring robust logistical capabilities and market expertise. Reviews of federal procurement data indicate consistent activity in securing and performing on these types of contracts. While specific performance ratings for every contract are not publicly available, their continued success in winning competitive bids suggests a generally positive performance history and capability to meet federal requirements. Their portfolio includes diverse energy solutions, indicating adaptability to different agency needs and energy types.

How does the contract's duration (912 days) impact the government's ability to leverage market price changes?

The contract's duration of 912 days (approximately 2.5 years) presents a mixed impact on the government's ability to leverage market price changes. The inclusion of 'Economic Price Adjustment' (EPA) clauses is specifically designed to allow the contract price to fluctuate with market conditions, mitigating the risk of being locked into unfavorable prices if the market drops significantly. However, the fixed component of the price means that the government benefits less directly from sharp price decreases compared to a purely variable-price contract. Conversely, the EPA protects the government from extreme price spikes. A shorter contract duration might offer more frequent opportunities to re-negotiate or re-compete at potentially lower market rates, while a longer duration provides greater price stability but potentially less flexibility to capitalize on market downturns. This duration strikes a balance, offering stability while allowing for market adjustments.

What are the potential risks associated with a Fixed Price with Economic Price Adjustment (FP-EPA) contract for natural gas?

The primary risk associated with a Fixed Price with Economic Price Adjustment (FP-EPA) contract for natural gas lies in the potential for cost escalation beyond initial budget expectations. While the 'fixed price' component offers some baseline cost certainty, the 'economic price adjustment' allows the price to increase based on predefined market indices. If natural gas prices surge significantly during the contract period due to geopolitical events, supply disruptions, or increased demand, the government could end up paying substantially more than initially budgeted. Another risk is the complexity of managing the EPA clauses; ensuring the indices accurately reflect market conditions and that adjustments are calculated correctly requires diligent oversight. Furthermore, if the market price drops significantly, the government might be paying a premium compared to what could be secured on the spot market, although the EPA mechanism is intended to mitigate this to some extent. This contract type requires careful monitoring of market trends and the adjustment formulas.

Industry Classification

NAICS: Mining, Quarrying, and Oil and Gas Extraction › Oil and Gas Extraction › Crude Petroleum and Natural Gas Extraction

Product/Service Code: CHEMICALS AND CHEMICAL PRODUCTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SP060010R0402

Offers Received: 29

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

Evaluated Preference: NONE

Contractor Details

Parent Company: WGL Holdings Inc. (UEI: 153776278)

Address: 13865 SUNRISE VALLEY DR #200, HERNDON, VA, 11

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

Financial Breakdown

Contract Ceiling: $132,147,953

Exercised Options: $132,147,953

Current Obligation: $132,147,953

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060010D7514

IDV Type: IDC

Timeline