S_A12_FBO_MCR_JOFOC_Natural_Gas.pdf

JUSTIFICATION FOR OTHER THAN FULL AND OPEN

COMPETITION

PUBLIC UTILITY – NATURAL GAS UTILITY SERVICE

UNITED STATES PENITENTIARY MCCREARY

PINE KNOT, KENTUCKY

Contractor: Citi Power

Period of Coverage: 11/1/2016 through 9/30/2017

Estimated Amount: $366,000.00

UNITED STATES DEPARTMENT OF JUSTICE

FEDERAL BUREAU OF PRISONS

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITITON

USP McCreary Natural Gas Utility Service

Pursuant to the Federal Acquisition Regulation (FAR) Part 6.302-1(a)(1), 6.302-1(b)(3), and the Bureau of

Prisons Acquisition Policy (BPAP) 4100.05 Part 6.304(b), the Federal Bureau of Prisons (FBOP) has determined that the procurement of Natural Gas utility service for the United States Penitentiary (USP)

McCreary located in McCreary County, Kentucky, meets the criteria established for other than full and open competition. It is further determined that only one responsible source and no other supplies and/or services will satisfy agency requirements. This limitation on competition is justified as supported by the following information in accordance with FAR Part 6.303-2:

1. Identification of the Agency:

U.S. Department of Justice

Federal Bureau of Prisons

USP McCreary

330 Federal Way

Pine Knot, KY 42635

2. Nature and/or description of action being approved:

This justification for other than full and open competition is for the acquisition of Natural Gas utility services supplied to USP McCreary, from the original and sole provider of such services. USP McCreary has a present and continuing requirement for Natural Gas service for the proper operation of the facility.

3. Description of supplies or services required to meet the agency needs:

Pursuant to FAR Part 41.202, Citi Power continues to provide the “entire Natural Gas utility service” (i.e., supply, distribution, system operation and maintenance, metering, billing, etc.). Citi Power shall provide to the government facility at USP McCreary, Natural Gas services in a manner and form that is consistent with all applicable laws, rules, codes, industry standards, permits, and regulations, promulgated by any and all governmental authorities having jurisdiction. Citi Power shall provide services on an uninterruptible daily basis 365 days per year. Citi Power will be responsible to maintain and/or repair all associated equipment, including associated costs for such repair, up to the delivery point or meter of USP McCreary. Citi Power will be responsible to ensure that the equipment, utilized to provide natural gas services will be maintained and operated in compliance with all rules and regulations set by the Public Service Commission of

Kentucky, in accordance with all Federal, State, County, and local government for a safe natural gas service.

Citi Power shall provide Natural Gas utility services for the period from November 1, 2016, through

September 30, 2017, for a 11 month period, subject to funds availability (FAR Clause 52.232-18). The average monthly amount for Natural Gas utility service is estimated to be $33,272.73. The total estimated amount for Natural Gas utility service is $366,000.00.

Contract Line Item Number Performance Period Estimated Annual Cost $

CLIN 0001- Month 1 November 1-30, 2016 $30,000.00

CLIN 0002- Month 2 December 1-31, 2016 $50,000.00

CLIN 0003- Month 3 January 1-31, 2017 $70,000.00

JOFOC USP McCreary

Natural Gas Utility Services

CLIN 0004- Month 4 February 1-28, 2017 $65,000.00

CLIN 0005- Month 5 March 1-31, 2017 $43,000.00

CLIN 0006- Month 6 April 1-30, 2017 $32,000.00

CLIN 0007- Month 7 May 1-31, 2017 $20,000.00

CLIN 0008- Month 8 June 1-30, 2017 $16,000.00

CLIN 0009- Month 9 July 1-31, 2017 $13,000.00

CLIN 0010- Month 10 August 1-31, 2017 $13,000.00

CLIN 0011- Month 11 September 1-30, 2017 $14,000.00

Total Estimated Cost $366,000.00

4. An identification of the statutory authority permitting other than full and open competition:

This justification to award as a sole source is prepared pursuant to the exception to full and open competition requirements in accordance with the statutory authority for these services that is found at 41 USC §

3304(a)(1), when the supplies or services required by the agency are available from only one responsible source. The application which permits use of the cited statutory authority are stated at FAR Part

6.302-1(b)(3), “When acquiring utility services (see 41.101), circumstances may dictate that only one supplier can furnish the service (see 41.202).” When a public utility supplier refuses to execute a tendered contract the agency may proceed with the acquisition and pay for the utility service under the provisions of

31 USC § 1501(a)(8). Analysis of the market indicates that Citi Power has proprietary rights up to the meter at USP McCreary. In order for another provider to be capable of providing the service, significant capital improvements would be needed. The Bureau would be required to pay for the capital improvements, but it would not recover the costs of duplication of services, connection fees and infrastructure installation costs through competition. The current requirement is for follow-on services and does not include funding for capital improvements.

5. A demonstration that the proposed contractor’s unique qualifications or the nature of the acquisition requires use of the authority cited:

Citi Power is the private-owned sole provider of Natural Gas utility service in the McCreary County service area. The Public Service Commission of Kentucky is the governing body that sets all rates and tariffs with the responsibility of Natural Gas utility service for the locale in which USP McCreary resides. Citi Power is an entity in the Public Service Commission of Kentucky (KPSC) jurisdiction and the only agent authorized by rules and regulations to provide these services within the service area. Having a single supplier of Natural Gas for this area is the most efficient method of providing these services. This requirement cannot be conveniently or economically obtained by contracting directly with a private source because building multiple distribution and removal systems would be costly and inefficient.

6. A description of efforts made to ensure that offers are solicited from as many potential sources as is practicable including whether or not a notice was or will be publicized as required by FAR Subpart

5.2:

As stated in FAR Part 5.202, exceptions to transmitting a notice to the Government Point of Entry(GPE) at

(a)(5), the contracting officer need not submit a notice when “the proposed contract action is for utility services other than telecommunications services and only one source is available.” A General Services

Administration (GSA) area-wide nor a single point contract for Natural Gas utility services in the USP

McCreary area is available at this time.

Natural Gas Utility Services

7. A determination by the contracting officer that the anticipated cost to the Government will be fair and reasonable:

The current rates offered by Citi Power are equal to the market price levied other commercial and industrial users in the USP McCreary area. Citi Power published tariff has provided sufficient data to the FBOP contracting officer, pursuant to FAR 15.402, Pricing Policy, allowing the ability to make a preliminary determination that such anticipated costs appear to be fair and reasonable. Citi Power is a for-profit corporation operating pursuant to the right and power granted by Chapter 278, Section .040 of the Kentucky

Code. Utility rates are enacted by tariffs set by the KPSC, which is charged under Kentucky law to ensure that rates be just and reasonable. As regulated by the KPSC, Citi Power is authorized to provide (i) production, treatment, and distribution of natural gas; and (ii) for such utility services as the area may now or hereafter have the power to provide. Natural Gas rates established by the KPSC shall be adjusted as necessary by the Commission to compensate proportionately for any increase in the cost of energy purchased by Citi Power. A formal decision in the form of periodic rulings, reviews, or similar actions of a governmental body, or embodied in the laws, are sufficient to set pricing (see FAR 15.403-1[c][2]) and the purchasing of supplies and services from a responsible source is determined fair and reasonable. The establishment of the current supply and delivery of services began when the original service connections were installed and the meters set in 2002. As such, this contracting officer has determined the anticipated cost to the Government will be fair and reasonable.

8. A description of the market research conducted:

This documentation is in accordance with FAR Part 10, which describes the policies and procedures for conducting market research in a process of finding viable sources of goods and services to meet government requirements and to find the most suitable approach to acquiring, distributing, and supporting supplies and services. This report is submitted in support of an acquisition with an estimated value in excess of the simplified acquisition threshold. Below are the findings of the market research for the above referenced requirement.

Background: A review of the obligation reveals the following – The United States Penitentiary McCreary

(hereinafter referred to as “USP McCreary”) has a current and continuing requirement for Natural Gas utility service.

Title: Natural Gas Utility Service USP McCreary, to provide Natural Gas services for the FBOP, USP

McCreary in Pine Knot, KY. USP McCreary does not have onsite natural gas facilities.

Product Service Code: S- Utilities and Housekeeping Services – S111 Gas Services.

North American Industry Classification System (NAICS): 221210 Natural Gas Distribution = this industry comprises establishments primarily engaged in the distribution of Natural Gas.

Standard Industrial Classification (SIC) Code: 4924 Natural Gas Services.

Potential Sources: Citi Power is the sole provider of Natural Gas utility service in the USP McCreary service area. The KPSC is the governing body that approves all rates with the responsibility of Natural Gas utility services for the locale in which USP McCreary resides. FAR provides that a formal decision in the form of periodic rulings, reviews, or similar actions of a governmental body, or embodied in the laws, are sufficient to set pricing and the purchasing of supplies and services are determined fair and reasonable from a responsible source. I applied personal knowledge, interaction with knowledgeable individuals in local and Federal Government regarding market capabilities to meet the requirements, and research of generally accessible literature available on-line were the techniques used in researching this procurement for a supply/services of this type. During construction of the institution, one contract was awarded for the installation and operation of one source of natural gas leading to the institution. A review of State of

Kentucky regulations determined that a Natural Gas utility service is not a deregulated utility.

Deregulation would promote competition, but Citi Power falls under the jurisdiction of the Public Service

Commission of Kentucky. USP McCreary is within the service area of Citi Power, which has been providing natural gas utility services since 2002.

Deliver / Performance time: Pursuant to FAR Part 41.202, Citi Power continues to provide the “entire

Natural Gas utility service” (i.e., supply, distribution, system operation and maintenance, metering, billing, etc.). Citi Power shall provide to the government facility at USP McCreary, Natural Gas utility services in a manner and form that is consistent with all applicable laws, rules, codes, industry standards, permits, and regulations, promulgated by any and all governmental authorities having jurisdiction. Citi Power shall provide services on an uninterruptible daily basis 365 days per year. Citi Power will be responsible to maintain and/or repair all associated Natural Gas equipment, including associated costs for such repair, from the delivery point or meter of USP McCreary.

Citi Power shall provide Natural Gas utility services from November 1, 2016, through September 30, 2017, subject to funds availability (FAR Clause 52.232-18). The total estimated annual amount for natural gas utility service is $366,000.00.

Commercial Item Determination: Natural Gas utility service is an item that is of a type customarily used by the general public and by non-governmental entities for purposes other than governmental purposes.

Market Analysis: The results of market research have determined that the government’s needs can be met by items customarily available in the commercial marketplace.

The market research conducted by the contracting office and the Facilities Department personnel determined that a GSA area-wide or single point contract is not available in accordance with Title 31 USC §

1535. No Interagency Agreement is available for use either. GSA is specifically authorized by law and regulation to purchase utility services on behalf of other agencies by providing an Assisted Acquisition. In

August 2010, in accordance with 40 USC 121 § (d), GSA issued the FBOP a Delegation of Authority for nationwide authority to negotiate and execute utility service contracts at Federal facilities under the control and direction of the FBOP in accordance with 40 USC 501 § (b)(1)(B)for a 10 year period. The FBOP, as the requiring agency, must make a determination of the best procurement approach that satisfies USP

McCreary’s schedule, performance, and delivery requirements. Citi Power is the current Natural Gas utility service provider for USP McCreary and has serviced the facility since 2002. No other source could be expected to make the capital investments for the infrastructure required to provide Natural Gas service to meet USP McCreary’s requirements. USP McCreary has no reasonable expectation(s) that the Citi Power would entertain entering into a contractual relationship at this time. Numerous attempts to secure anything in writing to confirm the company’s position regarding this subject have been unsuccessful. Several letters and market research questionnaires have been sent to Citi Power trying to determine interest in entering into a bilateral written contract for the provision of Natural Gas utility services. Citi Power has not responded to any inquiry.

I have determined that the North American Industrial Classification System (NAICS) code is 221210

Natural Gas Distribution (Size Standard = 500 Employees). The purchase order will be a firm-fixed price requirements type utility order in accordance with FAR 41.202(c).

Results: Based on the information provided by the sources detailed above, the following information outlines the conclusions and provides the basis for this procurement.

It is this Contracting Officers determination there is a source available that is capable of providing the required services. The procurement will be conducted in accordance with the procedures as outlined in

FAR Part 12, 13, and 41. A Performance-Based Acquisition method will not be used for this procurement as it is determined not applicable. A PBA relies on the use of measurable performance standards and financial incentives in a competitive environment to encourage competitors to develop and institute innovative and cost-effective methods of performing the work.

One potential source is a local entity, the incumbent Citi Power, which appears able to satisfy the requirement and is regulated by the KPSC. The Citi Power recognizes Tariffs as an avenue through which local rates are adopted. Citi Power is small business.

The provision of Natural Gas utility service is essential for the orderly operation of USP McCreary. The specifications/description requirements documents shall specify needs using market research in a manner designed to promote full and open competition and only include provisions or conditions to the extent necessary to satisfy the needs of the FBOP or as authorized by law. However, the KPSC regulations state that in order to provide economical and efficient service to a community, the state of Kentucky grants electric distribution, natural gas distribution, steam heat, water, and wastewater companies the right to provide their service within a specific geographic area. History shows and economics dictate that the construction of facilities by multiple utilities in the same location would be extremely costly and disruptive to communities. The utility is regulated by state or local government to assure fair rates for safe and adequate service. The ratemaking process ensures the lowest reasonable rate for consumers while maintaining the financial stability of the utility. Under the law, the utility is entitled to recovery of its reasonable incurred expenses.

This requirement will not be posted to Fedbizopps as a combined synopsis solicitation to promote competition, broaden industry participation, and assist small business concerns in obtaining contracts for

USP McCreary, Pine Knot, Kentucky. This requirement meets the exemption at FAR 5.202(5) the proposed contract action is for utility services other than telecommunications services and only one source is available. Citi Power is the private-owned sole provider of Natural Gas utility service in the USP

McCreary service area. Citi Power is an entity in the KPSC jurisdiction and is the only agent authorized by rules and regulations to provide Natural Gas service in the McCreary County, KY area. Having a single supplier of Natural Gas service for this area is the most efficient method of providing natural gas.

The Bureau does not have the state and local approval or the resources to provide the funding for another company to distribute natural gas at the institution, another source is not available, and no other contractor can provide electric service through Citi Power lines.

The Energy Center of Expertise of the U.S. General Services Administration has issued a Delegation of

Contracting Authority to the U.S. Department of Justice, Federal Bureau of Prisons to negotiate and execute utility service contracts. This includes the provision of Natural Gas service for USP McCreary.

I also make the determination that this procurement action “NOT” be set-aside for small business. The

Small Business Procurement Review for the purchase of utility services has been granted a waiver by the

Office of Small and Disadvantaged Business Utilization to the FBOP for submitting routine procurements to the Office of Small and Disadvantaged Business Utilization for review in accordance with PGD 09-02.

Recommendation: The Government contemplates the single award of a firm-fixed price requirements type

Natural Gas utility service purchase order.

Comments: The conclusions from this market research will be incorporated into the agreement document for providing Natural Gas Utility Service for USP McCreary.

9. Any other facts supporting the use of other than full and open competition:

The provision of Natural Gas utility services is essential for the orderly operation of USP McCreary, which was designed with a rated capacity to collectively house approximately 1280 inmates. The facility houses male inmates of all security levels who are in in-custody and out-custody status. State regulations and local ordinances limit the providers of this service to only one.

10. A listing of the sources, if any, that expressed, in writing, an interest in the acquisition:

There were no other sources which expressed an interest in this acquisition.

11. A statement of the actions, if any, the agency may take to remove or overcome barriers to competition before any subsequent acquisition for the supplies or services required:

Contracting and requirements staff continue to conduct appropriate market research to determine if sources capable of satisfying the agency’s requirement exist and to overcome competition barriers. Deregulation laws are presently nonexistent and no alternative source of service is currently available. If another potential source emerges, the agency will assess whether competition for future requirements is feasible.

12. Contracting Officer’s Certification:

I hereby certify that this request for Justification and Approval of other than Full and Open Competition is made in good faith, that the supporting data and information are accurate and complete to the best of my knowledge and belief, and that I would not be making this request if it were feasible to fully compete this requirement. I further certify that this request is not the result of lack of advance planning or a desire to expend funds while those funds are still available.

__//SIGNED\\__________________ _12/14/2016_

Dennis Dempsey, Contract Specialist

Field Acquisition Office

I hereby certify that the supporting data provided by the technical and requirements personnel which form the basis for this justification is complete and accurate to the best of my knowledge and belief.

__//SIGNED\\__________________ _12/6/2016

Rodney Polk, Facility Manager

USP McCreary

Concurrence:

In accordance with BPAP 4100.05 Subpart 6.304(c), I certify I have reviewed this justification and find it adequate to support other than full and open competition.

__//SIGNED\\ ___________ _12/7/2016_

J. Ray Ormond, Warden

USP McCreary

Approved:

__//SIGNED\\ for _______________ _12/15/2016_

Jill D. Ryan, Chief

Field Acquisition Office