DoD's $31.9M electric power contract with Duke Energy Progress shows limited competition and potential value concerns

Contract Overview

Contract Amount: $31,905,344 ($31.9M)

Contractor: Duke Energy Progress, LLC

Awarding Agency: Department of Defense

Start Date: 2016-08-01

End Date: 2026-07-31

Contract Duration: 3,651 days

Daily Burn Rate: $8.7K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: IGF::OT::IGF - BASE ELECTRIC

Place of Performance

Location: SHAW AFB, SUMTER County, SOUTH CAROLINA, 29152

State: South Carolina Government Spending

Plain-Language Summary

Department of Defense obligated $31.9 million to DUKE ENERGY PROGRESS, LLC for work described as: IGF::OT::IGF - BASE ELECTRIC Key points: 1. The contract was awarded on a 'not available for competition' basis, raising questions about price discovery and potential overpayment. 2. A long duration of over 10 years suggests potential for price escalation and reduced flexibility. 3. The firm-fixed-price contract type offers some cost certainty but may not fully capture market fluctuations. 4. The absence of small business set-aside or subcontracting requirements indicates limited focus on broader economic participation. 5. The contract's value, while significant, needs benchmarking against similar utility service contracts to assess value for money. 6. Performance context is limited without specific delivery metrics or service level agreements detailed in the provided data.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific service level agreements or comparable utility contracts for military installations. The long duration (over 10 years) could lead to prices that are not reflective of current market rates, especially if energy prices fluctuate significantly. The firm-fixed-price structure provides some predictability but might not be the most cost-effective for a service with potentially variable input costs over such an extended period. Further analysis of historical pricing trends for similar services would be beneficial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'not available for competition' justification, indicating that a full and open competition was not pursued. This typically occurs when a specific provider is deemed essential or uniquely capable, such as in the case of utility services where infrastructure may be geographically tied. The lack of multiple bidders means there was no direct price comparison or negotiation driven by competitive pressure, which can impact the final price achieved.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without a competitive process, there is less assurance that the government secured the most economical price for these essential electric power services.

Public Impact

The primary beneficiaries are the Department of Defense and its personnel at the South Carolina installation, ensuring reliable electric power for operations. The service delivered is essential electric power distribution, crucial for maintaining military readiness and daily functions. The geographic impact is localized to the specific military installation in South Carolina. Workforce implications are likely minimal for the government, with the contractor managing its own workforce for service delivery.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition could lead to higher costs for taxpayers.
Long contract duration may not adapt to changing energy market conditions.
Lack of specific performance metrics makes value assessment difficult.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Long-term award ensures continuity of essential utility services.
Contract awarded to an established utility provider likely ensures reliable service delivery.

Sector Analysis

The energy sector, specifically electric power distribution, is a critical utility service. Contracts for such services often involve natural monopolies or significant infrastructure dependencies, leading to sole-source or limited competition awards. The market size for utility services to federal installations is substantial, encompassing numerous agencies and locations. This contract fits within the broader category of infrastructure support services essential for government operations.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). There is no information regarding subcontracting requirements. This suggests that the primary contractor, Duke Energy Progress, LLC, will likely handle the service delivery internally, with limited direct opportunities for small businesses within this specific contract's framework.

Oversight & Accountability

Oversight for this contract would typically fall under the contracting officer and the Department of the Air Force's procurement and financial management systems. Accountability measures would be defined by the contract's terms and conditions, including any service level agreements. Transparency is limited by the 'not available for competition' award justification. Inspector General jurisdiction may apply if fraud, waste, or abuse is suspected.

Related Government Programs

Federal Utility Contracts
Department of Defense Energy Procurement
Electric Power Services
Base Operations Support Contracts

Risk Flags

Limited Competition
Long Contract Duration
Lack of Performance Metrics

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.9 million to DUKE ENERGY PROGRESS, LLC. IGF::OT::IGF - BASE ELECTRIC

Who is the contractor on this award?

The obligated recipient is DUKE ENERGY PROGRESS, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $31.9 million.

What is the period of performance?

Start: 2016-08-01. End: 2026-07-31.

What is the historical spending pattern for electric power at this specific Department of Defense installation?

Analyzing historical spending patterns for electric power at this installation would provide crucial context for the current $31.9 million contract. Without access to prior contract data or utility bills for this location, it's difficult to determine if the current award represents an increase, decrease, or stable expenditure. Understanding past spending can help identify trends, potential cost-saving opportunities, and whether the current long-term contract is justified by historical usage and pricing. It would also help in assessing if previous contracts were competitively bid or sole-sourced, offering a comparative baseline for evaluating the current procurement strategy and its value for money.

How does the pricing structure of this contract compare to market rates for similar utility services provided to other federal agencies or large commercial entities?

Comparing the pricing structure of this $31.9 million contract to market rates is essential for assessing value for money. Given its sole-source nature, direct price benchmarking is difficult. However, analysis could involve examining average per-kilowatt-hour costs or fixed monthly service charges for comparable facilities in South Carolina or similar regions. Utility rate structures can vary significantly based on usage volume, demand charges, and regulatory frameworks. If this contract's rates are substantially higher than benchmarks, it could indicate a lack of competitive pressure or unfavorable terms. Conversely, if rates are in line or lower, it might suggest effective negotiation despite the limited competition, or that the unique demands of the military installation justify the pricing.

What are the specific risks associated with a sole-source award for essential utility services over a 10+ year period?

A sole-source award for essential utility services over a 10+ year period carries several risks. Firstly, the lack of competition means the government forfeits the opportunity to secure potentially lower prices through bidding, possibly leading to overpayment. Secondly, the long duration exposes the contract to market volatility; energy prices can fluctuate significantly over a decade, and a fixed-price contract might not adequately account for these changes, potentially disadvantaging the government if prices fall or the contractor if prices rise sharply. Thirdly, there's a risk of vendor lock-in, making it difficult and costly to switch providers even if better options emerge. Finally, without ongoing competitive pressure, there might be less incentive for the contractor to innovate or improve service efficiency.

What performance metrics or service level agreements (SLAs) are in place to ensure the quality and reliability of the electric power distribution?

The provided data does not specify the performance metrics or service level agreements (SLAs) associated with this $31.9 million electric power distribution contract. Typically, such contracts would include detailed requirements regarding power reliability (e.g., maximum allowable outage duration and frequency), response times for service disruptions, and potentially power quality standards. The absence of this information makes it challenging to objectively assess the contractor's performance and ensure the government is receiving the expected level of service. Without defined SLAs, accountability for service failures is diminished, and verifying the value delivered beyond basic power provision is difficult.

What is the justification for awarding this contract as 'not available for competition', and were alternative procurement methods considered?

The justification for awarding this contract as 'not available for competition' (CT: NOT AVAILABLE FOR COMPETITION) typically stems from situations where only one source is capable of meeting the government's needs. For utility services like electric power distribution, this often relates to the existing infrastructure being owned and operated by a specific utility company within a defined service territory, creating a natural monopoly. Alternative procurement methods, such as full and open competition, would likely have been deemed impractical or impossible if no other provider could physically deliver the service to the installation. However, the specific documentation justifying this determination and outlining any consideration of other potential solutions or limited competition approaches would be necessary for a complete assessment.

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: Duke Energy Corporation

Address: 410 S WILMINGTON ST, RALEIGH, NC, 27601

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

Financial Breakdown

Contract Ceiling: $45,187,307

Exercised Options: $45,187,307

Current Obligation: $31,905,344

Actual Outlays: $2,714,903

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS00P14BSD1055

IDV Type: IDC

Timeline