Overview
FAR Subpart 41.5 prescribes the specific solicitation provisions and contract clauses required for the acquisition of utility services, such as electricity, gas, and water. Recognizing that utility markets and regulations vary significantly by geographic region, this subpart provides a flexible framework allowing Contracting Officers to tailor language to meet local conditions and specific agency needs.
Key Rules
- "Substantially the Same As" Authority: Under FAR 41.501(a), provisions and clauses are prescribed on a "substantially the same as" basis. This grants Contracting Officers the authority to modify the text to fit the peculiar requirements of a local utility situation, provided they follow agency procedures.
- Territory Compliance: When seeking proposals from alternative (competitive) electric suppliers, the CO must include provision 52.241-1 to ensure compliance with established electric service territories.
- Regulated vs. Unregulated Rates:
- Use 52.241-7 for regulated services (where a utility commission sets rates).
- Use 52.241-8 for unregulated services (competitive or market-based rates).
- Infrastructure & Connection Costs: Specific clauses govern how the government pays for new infrastructure (Connection Charges), how it handles membership fees (Nonrefundable/Nonrecurring Service Charges), and what it owes if service is cancelled early (Termination Liability).
- Cooperative Credits: If the government receives service from a utility cooperative, it must include clause 52.241-13 to ensure the government receives its share of "capital credits" (refunded profits).
Responsibilities
- Contracting Officers (COs):
- Responsible for determining which clauses are applicable based on whether the utility is regulated or unregulated.
- Must customize "substantially the same as" clauses to align with local utility supplier terms.
- Must fill in specific blanks in clauses, such as identifying the CO responsible for rate changes or setting the $250,000 billing threshold for GSA areawide contracts.
- Must ensure that other applicable FAR parts (outside of Part 41) are incorporated into the utility contract as necessary.
- Utility Contractors: Must comply with service territory regulations and provide transparency regarding rate changes, connection charges, and potential capital credit distributions.
Practical Implications
- Market Adaptability: In deregulated energy markets (like parts of Texas or the Northeast), COs must be careful to use the "Unregulated Services" clause (52.241-8) rather than the regulated version, as the mechanism for rate adjustments differs significantly.
- Infrastructure Investment: When the government requires a utility to build a new substation or extend lines to a remote base, the use of 52.241-9 (Connection Charge) and 52.241-10 (Termination Liability) protects the contractor's investment while defining the government's maximum financial exposure.
- Administrative Oversight: For GSA areawide contracts, the CO has a specific duty to monitor billings; if an areawide customer exceeds $250,000 in annual billings, they are specifically designated in the rate change clause (52.241-7), increasing the level of oversight for high-value accounts.
- Flexibility in Drafting: Because utility companies often refuse to sign "standard" federal contracts, the "substantially the same as" guidance is a vital tool that allows the government to reach an agreement without violating FAR requirements.