Overview
Subpart 41.4 establishes the administrative requirements for managing utility service contracts, focusing on continuous oversight and cost-efficiency. It mandates periodic reviews of invoices and account rates to ensure the government receives the most economical service while providing procedures for handling rate changes in both regulated and unregulated markets.
Key Rules
- Monthly Invoice Reviews: Agencies must review all utility service invoices every month to verify accuracy.
- Mandatory Annual Reviews: Accounts with annual values exceeding the Simplified Acquisition Threshold (SAT) must undergo an annual review.
- Discretionary Annual Reviews: Accounts at or below the SAT are reviewed only when it is considered advantageous to the Government.
- Review Criteria: Annual reviews must examine the facility’s usage, service characteristics, and delivery points over the most recent 12-month period to ensure the "most economical, applicable rate" is being applied.
- Competitive Market Analysis: Annual reviews must include an examination of competitive markets for potentially more advantageous service offerings.
- Rate Change Implementation:
- Regulated Services: Rate changes approved by a regulatory body are incorporated via unilateral contract modification.
- Unregulated Services: Changes are subject to negotiation and must be incorporated via bilateral contract modification.
- Prompt Payment: Agencies must process rate changes quickly and pay resulting charges promptly to avoid late payment penalties.
Responsibilities
- Federal Agencies/Contracting Officers:
- Conducting monthly and annual reviews.
- Determining if proposed rate changes are reasonable, justified, and non-discriminatory.
- Requesting immediate rate changes from suppliers if more advantageous rates are identified.
- Initiating contract modifications to reflect approved rate changes.
- General Services Administration (GSA):
- Acting as the lead for regulatory interventions that affect multiple Federal agencies.
- Granting delegations of authority to specific agencies to intervene before regulatory bodies.
- Paying Office/Verifying Office:
- Receiving copies of contract modifications to ensure accurate invoice processing and payment.
- Utility Suppliers:
- Notifying agencies of proposed changes to rates or terms and conditions.
- Furnishing services under the most economical rate applicable to the facility’s usage.
Practical Implications
- Proactive Cost Management: This subpart moves the agency beyond passive bill-paying into active "rate chasing." Contracting Officers (COs) and energy managers must actively monitor the market and utility tariffs to ensure the government isn't overpaying due to shifts in usage patterns.
- Regulatory Watch: When utility companies propose rate hikes to public utility commissions, agencies cannot simply wait for the result. If the impact is significant or affects multiple agencies, the CO must coordinate with GSA to potentially intervene and protest the hike.
- Administrative Speed: Because regulated rate changes are often effective on a date set by a commission (not the agency), the administrative process for unilateral modifications must be streamlined to prevent interest penalties under the Prompt Payment Act.
- Audit Readiness: The requirement for a "12-month lookback" during annual reviews creates a specific documentation trail that auditors (such as the GAO or IG) will look for to ensure the agency is exercising proper fiscal stewardship of utility funds.