Commerce Department's NIST contract for electric power awarded to Hess Corporation for over $14.6 million

Contract Overview

Contract Amount: $14,682,408 ($14.7M)

Contractor: Hess Corporation

Awarding Agency: Department of Commerce

Start Date: 2009-12-22

End Date: 2010-12-31

Contract Duration: 374 days

Daily Burn Rate: $39.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 11

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Energy

Official Description: FURNISH AND DISTRIBUTE ELECTRIC POWER TO NIST, GAITHERSBURG, MD

Place of Performance

Location: GAITHERSBURG, MONTGOMERY County, MARYLAND, 20899

State: Maryland Government Spending

Plain-Language Summary

Department of Commerce obligated $14.7 million to HESS CORPORATION for work described as: FURNISH AND DISTRIBUTE ELECTRIC POWER TO NIST, GAITHERSBURG, MD Key points: 1. The contract's fixed-price with economic price adjustment structure may expose the government to fluctuating energy costs. 2. Full and open competition was utilized, suggesting a potentially competitive bidding process. 3. The contract duration of 374 days is relatively short, indicating a need for ongoing procurement. 4. The award was a delivery order, suggesting it was part of a larger contract vehicle. 5. The North American Industry Classification System (NAICS) code 221112 points to fossil fuel electric power generation. 6. The contract was awarded to a single entity, Hess Corporation, for the delivery of electric power. 7. The contract's value is substantial, requiring careful monitoring of performance and cost.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without more specific details on the quantity and type of electric power procured. However, the fixed-price with economic price adjustment clause introduces a risk of cost overruns if energy prices increase significantly during the contract period. Comparing this to similar contracts for utility services would be necessary to fully assess value for money. The raw dollar amount of $14.6 million for a one-year delivery order for electric power to a single facility suggests a significant operational need.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. With 11 bids received, the competition level appears robust. This suggests that the government likely received competitive pricing, although the economic price adjustment clause could mitigate some of the benefits of this competition over time. The presence of multiple bidders generally leads to better price discovery and potentially lower costs for the government.

Taxpayer Impact: The full and open competition and the receipt of 11 bids are positive indicators for taxpayers, suggesting that the contract was likely awarded at a competitive price point, minimizing potential overspending.

Public Impact

The primary beneficiary of this contract is the National Institute of Standards and Technology (NIST) in Gaithersburg, Maryland, which receives a reliable supply of electric power. The service delivered is the furnishing and distribution of electric power, essential for NIST's research and operational activities. The geographic impact is localized to NIST's facility in Gaithersburg, Maryland. There are no direct workforce implications mentioned, as this is a service contract for utility provision.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to increased costs if energy prices rise.
Reliance on a single supplier for a critical utility like electricity poses a potential risk.
The contract is a delivery order, which may indicate a need for ongoing, potentially complex, procurement processes.
The specific type and quantity of electric power are not detailed, making precise value assessment difficult.

Positive Signals

Awarded under full and open competition, suggesting a competitive process.
Received 11 bids, indicating significant interest from potential suppliers.
The contract provides a critical utility service necessary for NIST operations.
The fixed-price component offers some cost certainty, despite the economic adjustment.

Sector Analysis

The energy sector, specifically electric power generation and distribution, is a critical component of federal infrastructure spending. Contracts for utility services are common across various federal agencies to ensure operational continuity. The market for electric power is generally competitive, especially in areas with multiple providers. Benchmarking this contract's value would require comparing its per-kilowatt-hour cost against regional utility rates and other federal contracts for similar services, considering factors like demand and transmission costs.

Small Business Impact

There is no indication that this contract included small business set-asides, as the award was made to Hess Corporation. Furthermore, the contract does not appear to have specific subcontracting requirements for small businesses mentioned in the provided data. This suggests that the primary focus was on securing the electric power supply through a competitive process, rather than specifically promoting small business participation.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Commerce's contracting officers and the National Institute of Standards and Technology's program managers. Accountability measures would be tied to the delivery of electric power as specified in the contract terms. Transparency is generally provided through contract databases like FPDS, where this award is recorded. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Federal Utility Contracts
Department of Commerce Procurement
NIST Operational Support
Electric Power Supply Agreements
Fixed-Price with Economic Price Adjustment Contracts

Risk Flags

Economic Price Adjustment Clause
Potential for Cost Overruns
Reliance on Single Supplier for Critical Utility

Frequently Asked Questions

What is this federal contract paying for?

Department of Commerce awarded $14.7 million to HESS CORPORATION. FURNISH AND DISTRIBUTE ELECTRIC POWER TO NIST, GAITHERSBURG, MD

Who is the contractor on this award?

The obligated recipient is HESS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Commerce (National Institute of Standards and Technology).

What is the total obligated amount?

The obligated amount is $14.7 million.

What is the period of performance?

Start: 2009-12-22. End: 2010-12-31.

What is the historical spending pattern for electric power at NIST, Gaithersburg, MD?

Analyzing historical spending for electric power at NIST, Gaithersburg, MD, would involve reviewing past contracts for utility services at this location. This would include examining contract values, durations, and the types of contracts awarded (e.g., fixed-price, cost-plus). Understanding trends in spending, such as year-over-year increases or decreases, and identifying any significant shifts in procurement strategies would provide valuable context. For instance, a consistent increase in spending might indicate rising energy costs or increased demand, while a shift from multiple smaller contracts to a single large one could suggest consolidation for efficiency. Without access to NIST's complete procurement history for this specific service, a detailed historical analysis is not possible, but such an analysis would be crucial for assessing the long-term cost-effectiveness of the current $14.6 million award.

How does the price per unit of electric power in this contract compare to market rates in Maryland?

To compare the price per unit of electric power in this contract to market rates in Maryland, we would need to know the exact quantity of electricity (in kilowatt-hours) procured under the $14.6 million award and the contract's duration. Assuming the contract covers a full year of operations, we could estimate an average annual cost. Then, we would need to research average commercial or industrial electricity rates from utility providers in the Gaithersburg, Maryland area for the period of the contract (December 2009 to December 2010). The contract's 'fixed price with economic price adjustment' clause complicates a direct comparison, as the final cost could fluctuate. However, an initial benchmark could be established by dividing the total contract value by the estimated kilowatt-hours consumed. If this calculated rate is significantly higher or lower than prevailing market rates, it would warrant further investigation into the specific circumstances, such as the reliability of supply, peak demand charges, or the inclusion of ancillary services.

What is Hess Corporation's track record in providing electric power to federal agencies?

Assessing Hess Corporation's track record in providing electric power to federal agencies would involve a review of their past federal contract awards. This would include examining the types of services rendered (e.g., generation, distribution, renewable energy), the value and duration of those contracts, and their performance history. Key indicators would be any past performance evaluations, contract modifications, or instances of disputes or terminations. A search of federal procurement databases (like FPDS or SAM.gov) could reveal the extent of their federal business. If Hess Corporation has a history of successfully fulfilling similar utility contracts for other government entities, it would lend confidence to their ability to meet the requirements of this NIST contract. Conversely, any negative performance indicators would raise concerns about reliability and value.

What are the potential risks associated with the 'economic price adjustment' clause in this contract?

The 'economic price adjustment' (EPA) clause in this contract introduces a significant risk of cost escalation for the government. This clause allows the contractor, Hess Corporation, to adjust the contract price based on fluctuations in specific economic factors, typically related to the cost of inputs like fuel, labor, or materials. In the context of electric power generation, this most likely relates to the price of fossil fuels used to generate electricity. If the price of these fuels increases significantly during the contract period (December 2009-December 2010), the government will be obligated to pay a higher price for the electricity supplied, potentially exceeding the initially anticipated fixed price. This uncertainty makes budget forecasting more difficult and could lead to the government paying more than if a firm fixed price had been negotiated, especially if energy prices trend upwards.

How does the number of bidders (11) impact the perceived value for money in this contract?

The fact that 11 bids were received for this contract is a strong positive indicator for value for money. A higher number of bidders generally signifies robust competition, which typically drives down prices as contractors vie for the award. This suggests that the government likely benefited from competitive pricing, as Hess Corporation would have had to offer a compelling bid to win against ten other interested parties. While the 'economic price adjustment' clause introduces some uncertainty regarding the final cost, the initial competitive bidding process increases the likelihood that the base price was fair and reasonable. Furthermore, a competitive environment often encourages contractors to offer better service quality and performance to secure future business, indirectly contributing to overall value.

What is the significance of this contract being a 'delivery order' rather than a standalone contract?

The designation of this award as a 'delivery order' implies that it was issued under a pre-existing, larger contract vehicle, often referred to as an 'indefinite-delivery, indefinite-quantity' (IDIQ) contract or a similar master agreement. This means that the foundational terms, conditions, and pricing structure were likely established earlier through a separate, potentially more extensive, competitive process. The issuance of a delivery order then specifies the exact quantity, delivery location, and delivery date for a particular segment of the overall requirement. For taxpayers, this can signify efficiency, as it streamlines the procurement process for recurring needs. However, it also means that the competition for this specific $14.6 million award might have been less direct than if it were a standalone, full-and-open competition initiated from scratch. The value and competitiveness are thus tied to both the original IDIQ award and the specific terms of this delivery order.

Industry Classification

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

Product/Service Code: PURCHASE OF STRUCTURES/FACILITIES › PURCHASE FACILITY NOT A BUILDING

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 11

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

Evaluated Preference: NONE

Contractor Details

Address: 1 HESS PLAZA, WOODBRIDGE, NJ, 07095

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

Financial Breakdown

Contract Ceiling: $14,682,408

Exercised Options: $14,682,408

Current Obligation: $14,682,408

Contract Characteristics

Multi-Year Contract: Yes

Consolidated Contract: Yes

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SP060009D8016

IDV Type: IDC

Timeline