01 30 00.24 ATT Am-0001.pdf

Utilities Privatization Program

Adding new Utility Infrastructure after Privatization of a Utility System

How can we contract with the System Owner the installation/connection of new utility infrastructure?

If a new connection to the utility system is needed, there are several contracting mechanisms that we can use to accomplish this:

1. The military installation can submit a Description of Work, a Government Cost Estimate (GCE), and funding (MIPR) directly to DLA Energy so the connection can be executed through the Utilities Privatization (UP) contract. The Contracting Officer (CO)/Contract Specialist (CS) will request a proposal from the System Owner (SO), and after evaluating the proposal, the CO will incorporate the new requirements into the UP contract.

2. The Prime Construction Contractor enters into a contract with the SO for the SO to install and “tap in” the new utility infrastructure from the new facility point of demarcation to the SO’s utility system. In this scenario, the Prime Construction Contractor pays directly to the SO. A “Connection Charge Agreement” needs to be signed between the Prime Construction Contractor and the SO. The SO WILL NOT BE A CONSTRUCTION SUB-

CONTRACTOR.

3. The Prime Construction Contractor installs the new utility infrastructure and the SO only completes a “tap in” to the new utility infrastructure to its utility system. The SO WILL NOT BE A CONSTRUCTION SUB-CONTRACTOR. The Prime Construction Contractor needs to enter into a contract with the SO for the “tap in” of the new utility infrastructure to the SO’s utility system. The Military Facility will not have a contractual agreement with the SO.

Therefore, any disagreement between the Prime Construction Contractor and the SO, will have to be resolved between them. DLA Energy may enforce the terms and conditions of the UP contract only if the contractor did not perform the “tap in” in accordance with the performance standards establish in the UP contract (Section C.3.2 – Performance Standards). The SO shall be integrated from the design phase of the construction. The SO shall be given the opportunity to inspect the new infrastructure before connecting it to its utility system. This is very important because the SO must make sure that the new utility infrastructure meets its standards. Under this scenario, the Government will have to accept ownership of the new utility infrastructure most likely by completing a Form DD 1354. After the SO “tap in” of the new utility infrastructure to its system, the Program Manager in charge will commence the conveyance process which shall be completed via Bill of Sale (BoS).

If the connection is performed through the UP contract, conveyance of the new utility infrastructure is not necessary because the terms and conditions of the UP contract, including Section C.11.5.2 (b), will apply. In this case, the Government will never own the utility infrastructure.

If the Prime Construction Contractor and the SO sign a Connection Charge Agreement for the SO to install and “tap in” the new utility infrastructure to the SO utility system, the SO WILL own the new utility infrastructure after completing the installation. The Military Facility must use a Connection Charge Agreement template substantially the same as the template below:

CONNECTION CHARGE AGREEMENT

THIS CONNECTION CHARGE AGREEMENT between PRIME CONTRACTOR and Base Utilities Inc. is entered into as of this ____ day of _____________, 20___.

WHEREAS, PRIME CONTRACTOR and the United States Government entered into Contract No. ________________ for construction of ________________ (the Project) located at Minot Air Force Base.

WHEREAS, in accordance with the Department of Defense utilities privatization (UP) program, Utility Owner entered into a utility services contract under Contract No. SP0600-13-C-8280 with the Government to assume ownership, operations and maintenance of the water/wastewater utility systems at Minot Air Force Base, as well as to furnish all necessary labor, management, supervision, permits, equipment, supplies, materials, transportation, and any other incidental services required for the complete ownership, operation, maintenance, repair, upgrade, and improvement of these utility systems in accordance with all terms, conditions, and special contract requirements, specifications, attachments, and drawings contained in the UP Contract or incorporated by reference therein;

NOW, THEREFORE, in consideration of the mutual covenants contained herein as well as other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereto agree to the following terms and conditions of this Connection Charge Agreement:

1. [Insert Statement of Work for connecting facilities.]

2. [Insert Schedule provisions and penalties for connecting facilities]

3. [Insert Pricing and Payment provisions]

4. [Insert any other special provisions specific to the relationship between the construction contractor and the UP contractor, e.g., disputes, risk allocation, liability, etc.]

5. Any disputes between the Contractor and the Utility Owner shall be resolved by and between the parties to this Agreement and shall not be cognizable under the Disputes provisions of the Construction Contract or the UP Contract.

6. The parties acknowledge that installation of connecting facilities pursuant to a connection charge falls within the utility services provisions of Federal Acquisition Regulation (FAR) Part 41 and thus, is not a construction sub-contract. Therefore, the terms and conditions of the UP Contract shall govern the relationship between the Utility Owner and the Government, including the Utility Owner’s responsibility for compliance with applicable statutes and regulations.

7. Notices: All notices shall be delivered or sent to the respective parties at the respective addresses set forth below or to such different addresses as the respective parties may from time to time designate by notice properly given hereunder.

If to Utility Owner:

If to Contractor:

IN WITNESS WHEREOF, this Connection Charge Agreement is signed, sealed and delivered as of as of this ____ day of _____________, 20_______.

[Utility Owner]

By: _______________________________ Name: _______________________________ Title: _______________________________

[Contractor]

By: _______________________________ Name: _______________________________ Title: ____________________________

The Prime Construction Contractor and the SO need to SIGN THE CONNECTION CHARGE

AGREEMENT BEFORE THE SO COMMENCES WORKING ON THE NEW CONNECTION.

If this agreement is not signed by the parties before the SO commences working on the new connection, the Government may end up owning the new utility infrastructure. Once the Government owns the new utility infrastructure, transfer of ownership can only be performed via BoS, which is the least desirable method of transferring ownership due to the administrative burden it carries. The approval process for executing a BoS transferring ownership of new utility infrastructure is the same process we currently use when we are transferring ownership of an entire utility system.

The Military Facility may enter into a contract directly with the SO to install new utility infrastructure; however, the Program Office and DLA Energy do not recommend such contract actions.

As the contracting activity for UP contracts, DLA Energy must be informed of new utility infrastructure that will be connected to the SO’s utility system. New infrastructure may trigger a Request for Equitable Adjustment (REA) due to an increase in the SO’s utility inventory (assuming that the Government’s intent is for the SO to own the new utility infrastructure). If the Military Facility directly enters into a contract with the SO for the installation of new utility infrastructure, DLA Energy may not be informed of such contract. This increases the risk that proper funding will not be secured for the O&M and R&R that may be needed for conveyance of the new utility infrastructure. Furthermore, there is no need for the Military Facility to establish a separate contract with the SO because the installation of new utility infrastructure falls within the scope of the UP contract (Section C.11.5 - Connections and Disconnections).

The UP contract does not obligate the Government to enter into a contract with the SO for the installation of new utility infrastructure. However, in no event shall a contractor cap, connect to, or otherwise come in contact with the SO’s infrastructure without the SO’s express written permission.

Privatized Utility System Clause

A sample clause has been developed that Military Facilities should include in solicitations when the utility system has been privatized, and when it is expected that a new connection to the SO’s utility system will be performed as part of any resultant contract. For example, if the military installation is issuing a Request for Proposal (RFP) for the construction of a new building (MILCON or SRM), the below clause should be included in that solicitation if a new utility connection to the SO’s utility system will be needed:

X.X PRIVATIZED UTILITY SYSTEMS

The electrical distribution, water distribution, wastewater collection, and gas distribution utility systems at Minot Air Force Base have been sold to Verendrye Electric Cooperative, Base Utilities Inc, and Montana-Dakota Utilities, respectively, as part of the USAF utilities privatization (UP) effort. Therefore, the utility owner is the sole provider of these utility services to the installation and should be viewed just like any other local utility Contractor.

Newly installed system infrastructure and modifications of or connections to existing system infrastructure identified in the specifications and drawings must be coordinated with the utility owner prior to the contract start date. The utility owner must be integrated into the design, inspection of construction, tie-in to existing utilities, and conveyance of any exterior utilities. The preferred process for connecting facilities is to request that the utility owner install the required connecting facilities, up to a point of demarcation to be identified by the Government, as a connection charge. However, if a connection charge cannot be negotiated, work may be accomplished by the Prime Construction Contractor and later connected to the utility owner’s system, provided that the utility owner’s connection criteria, as set forth in its utility services contract with the Government, are met. Any fees associated with connecting Contractor constructed infrastructure to the utility owner’s system must be negotiated with the utility owner. All work on the system or facilities expected to connect to the system shall comply with the utility owner’s specifications and construction standards. In no event shall Contractor cap, connect to, or otherwise touch the utility owner’s infrastructure without the utility owner’s express written permission.

The utility owner may be contacted at:

Montana-Dakota Utilities (MDU) – 701-857-6821 Base Utilities Inc (BUI) – 701-727-5050 Verendrye Electric Cooperative (VEC) – 1-800-472-2141

-End of Clause-

The purpose of the aforementioned clause is to advise the Prime Construction Contractor that the system has been privatized and therefore, the design of any new utility infrastructure that will be connected to the SO’s utility system must be reviewed and approved by the SO. This will facilitate the communication between the Prime Construction Contractor and SO, and let them know that the military installation does not anticipate taking ownership of the new utility infrastructure.

As the Contracting Activity for the UP program, DLA Energy responsibility is to make sure that Contracting Officer’s Representatives (CORs) are aware of this process and that they are following these guidelines. The Program Manager in charge of UP actions at the Military Facility, is responsible for providing the Connection Charge Agreement and the Privatized Utility System clause templates included above, to the COR. Once the installation/connection is completed, the SO shall, if necessary, submit a REA to DLA Energy reflecting the fact that the SO’s utility inventory has changed. DLA

Energy will evaluate the REA and adjust the O&M and R&R if necessary. The CO/CS must include a signed copy of the Connection Charge Agreement in the contract file. It is important to clearly define who the legal owner of the new utility infrastructure is because DLA Energy can only pay O&M and R&R on utility infrastructure owned by the SO.

When should the SO submit a Request for Equitable Adjustment (REA) due to the increase in inventory?

It is important to mention that if the installation of the new utility infrastructure was completed through the UP contract or via a Connection Charge Agreement with the Prime Construction Contractor, the SO shall be given the opportunity to submit a REA to increase its Monthly Utility Services Charge (O&M and R&R). Furthermore, if the SO only performs a “tap in” to the new utility infrastructure to its utility system, conveyance of the new utility infrastructure must occur before the Monthly Utility Services Charge is increased. This is because DLA Energy can only pay O&M and R&R on utility infrastructure owned by the SO. In some contracts, the time for submitting a REA to increase the Monthly Utility Services Charge after the installation of new utility infrastructure is already defined.

However, if the contract is silent regarding this matter, the CO and the SO should agree to a date when the Monthly Utility Services Charge will be adjusted before executing a modification authorizing the installation of new utility infrastructure. This is important as the Military Service may need to program additional funding to cover the increase in the Monthly Utility Services Charge.