Subpart 41.2 - Acquiring Utility Services

Overview

FAR Subpart 41.2 establishes the policies and procedures for Federal agencies to acquire utility services, including electricity, gas, water, and sewage. The primary objective is to ensure the government obtains these essential services from sources that offer the highest degree of economy, efficiency, and reliability while strictly adhering to state laws and GSA (General Services Administration) guidelines.

Key Rules

• Bilateral Written Contracts: For acquisitions exceeding the Simplified Acquisition Threshold (SAT), agencies must use a bilateral written contract. Agencies are prohibited from using a utility supplier’s standard forms or clauses to bypass FAR or statutory requirements.
• State Law Compliance (Electricity): Per Section 8093 of the Department of Defense Appropriations Act of 1988, the purchase of electricity must be consistent with state laws, utility commission rulings, and established franchise territories.
• Sourcing Hierarchy: Agencies should generally prioritize sources in the following order:
  1. GSA Areawide Contracts: Pre-negotiated vehicles that must be used unless competition is available or the contract is disadvantageous.
  2. Interagency Agreements: Utilizing services from other government entities (e.g., Tennessee Valley Authority) via the Economy Act.
  3. Separate Contracts: Negotiated independently when no areawide contract exists.
• Contract Duration: Separate utility contracts may be established for periods exceeding one year but not exceeding ten years if the longer term results in lower rates or reduced connection charges.
• Competition Requirements: Contracting Officers (COs) must conduct market surveys and acquisition planning to promote full and open competition, provided such competition does not violate state utility regulations.

Responsibilities

• Contracting Officers (CO):
  • Conducting market surveys to determine the availability of competitive utility sources.
  • Ensuring electric utility acquisitions are consistent with state law, seeking legal counsel when necessary.
  • Maintaining a "Utility History File" if a supplier refuses to sign a bilateral contract.
  • Executing "Authorizations" under GSA areawide contracts and notifying GSA of such actions.
• Legal Counsel: Advising the CO on the legality of competitive electric utility acquisitions regarding state-approved territorial agreements.
• General Services Administration (GSA): Negotiating areawide contracts, providing technical and acquisition assistance, and acting as the repository for documentation when utilities refuse to sign federal contracts.
• Head of Contracting Activity (HCA): Approving determinations to pay for utilities via invoice or purchase order when a formal bilateral contract cannot be obtained.

Practical Implications

• Navigating Monopolies: In many jurisdictions, utilities operate as regulated monopolies. This subpart provides the CO with a specific "out" (using purchase orders or invoices) if a utility provider refuses to sign a federal contract, preventing a lapse in essential services.
• Avoidance of Standard Commercial Forms: Contractors often try to force the government to sign their standard "Service Agreement." This subpart strictly forbids COs from doing so if it means omitting mandatory FAR clauses, ensuring that federal sovereign protections remain intact.
• Long-term Cost Savings: The provision allowing for 10-year contract terms is a powerful tool for COs. It allows the government to leverage its long-term stability to negotiate lower rates or have expensive connection and infrastructure charges waived by the utility provider.
• Complex Electricity Markets: In "deregulated" states, COs must be diligent. They cannot simply choose an alternative green energy provider without first confirming through a legal and market survey that such a move doesn't violate state-sanctioned franchise rights.