Overview
FAR 41.201 establishes the federal policy for acquiring utility services, emphasizing procurement from sources that offer the greatest economy, efficiency, and reliability. It mandates the use of bilateral written contracts for requirements exceeding the simplified acquisition threshold and strictly requires compliance with state utility laws regarding electricity franchises.
Key Rules
- Bilateral Contract Requirement: For utility acquisitions above the simplified acquisition threshold, agencies must use a written bilateral contract including FAR 41.501 clauses; they are prohibited from using a supplier’s standard forms to bypass these requirements.
- Adherence to State Law: Per Section 8093 of Public Law 100-202, agencies must purchase electricity in a manner consistent with state law, including state utility commission rulings and established service territories.
- Pre-Competition Verification: Before seeking competitive electric utility services, the Contracting Officer (CO) must conduct a market survey and consult legal counsel to ensure competition does not violate state law.
- Representations: Suppliers competing for electric service must provide a formal representation that their service is consistent with applicable state laws and federal statutes.
- Statutory Exceptions: Certain exceptions to state franchise exclusivity exist for shared energy savings contracts, specific military energy production facilities, and national defense situations where a franchise utility cannot meet reliability standards.
- Interagency Agreements: Agencies are permitted to enter into agreements for power transfers with Federal power marketing agencies or the Tennessee Valley Authority (TVA).
Practical Implications
- Contracting Officers cannot simply sign a utility provider's "standard" service agreement; they must ensure the document is a FAR-compliant bilateral contract that incorporates mandatory federal provisions.
- Procuring electricity often requires a complex legal and market analysis to determine if a specific service area is deregulated or if a "qualifying facility" can legally provide power under state-specific utility regulations.