Overview
FAR Part 41 prescribes the policies and procedures for the acquisition of utility services, including electricity, gas, water, and sewage. It establishes the General Services Administration (GSA) as the primary authority for utility procurement and representation, while outlining how agencies should utilize areawide contracts, separate contracts, or interagency agreements to meet their utility needs.
Key Rules
- Mandatory Use of Areawide Contracts: Agencies must use existing GSA areawide contracts within a supplier’s franchise territory unless service is available from more than one supplier or the use of the areawide contract is not advantageous to the Government.
- Contracting Limits: Statutory authority generally limits utility contracts to a period of 10 years, with specific exceptions for the Department of Energy (up to 25 years for certain installations) and shared-savings projects.
- Bilateral Written Contracts: For acquisitions exceeding the Simplified Acquisition Threshold (SAT), agencies must use bilateral written contracts. Agencies are prohibited from using a utility supplier's standard forms to bypass FAR-required clauses.
- State Law Compliance: Under Section 8093 of the DoD Appropriations Act, agencies must ensure the purchase of electricity is consistent with state laws, utility commission rulings, and established franchise territories.
- Review Requirements: Agencies must conduct monthly reviews of all utility invoices for accuracy and annual reviews for accounts exceeding the SAT to ensure the facility is being billed at the most economical rate.
- Scope Exclusions: This part does not apply to telecommunications, cable television (CATV), natural gas purchased as a commodity, or utilities obtained in foreign countries.
Responsibilities
- General Services Administration (GSA): Holds the statutory authority to manage utility services for the federal government, negotiate areawide contracts, and represent executive agencies in regulatory proceedings.
- Contracting Officers (CO): Responsible for conducting market surveys, performing acquisition planning, ensuring compliance with state electric laws, and maintaining "utility history files" when a supplier refuses to sign a bilateral contract.
- Senior Procurement Executive (SPE): Must certify that an agency has the technical qualified personnel and program capability when requesting delegated contracting authority from GSA.
- Federal Agencies: Responsible for notifying GSA within 30 days of executing an Authorization under an areawide contract and for referring rate-change interventions to GSA legal counsel.
Practical Implications
- Monopoly Management: In many regions, utilities operate as monopolies within "franchise territories." This simplifies the source selection process (often resulting in a sole-source Authorization under a GSA Areawide Contract) but complicates negotiations, as the government has limited leverage regarding rates.
- The "Refusal" Protocol: If a utility supplier refuses to sign a federal contract (a common occurrence with local monopolies), the CO cannot simply walk away. They must document the refusal, create a history file, notify GSA, and re-attempt to secure a bilateral contract every year.
- Rate Optimization: The annual review requirement is a critical cost-saving mechanism. Because utility tariffs change frequently, an agency may find that shifting from a general service rate to a time-of-use or industrial rate based on the previous year's data can yield significant budgetary savings.
- Infrastructure Costs: When establishing new service, COs must carefully negotiate "Connection Charges" and "Termination Liabilities." If the government terminates a contract early, it may be liable for the unamortized costs of the facilities installed by the utility.