The U.S. Army Corps of Engineers (USACE) Vicksburg District is saving nearly $34,000 monthly in costs to operate the Tensas-Cocodrie Pumping Plant in Monterey, Louisiana, thanks to the U.S. Army Engineering and Support Center, Huntsville’s Commercial Utilities Program (CUP). The program negotiates with utility providers to ensure reliable utility services for Army installations and facilities at the lowest possible cost.
Over the course of the 10-year contract period, USACE will save $402,000 annually or $4 million.
Vicksburg District contacted CUP Program Manager Bernard Givan in August 2014 requesting assistance to find a way to reduce the $54,000 monthly power bill it had been paying for electric power at the pumping plant since 1993, with slight adjustments based on actual operations. The plant controls water levels in a basin near four major rivers including the Mississippi River. The plant consists of five very large three-story electric pumps. Other than routine testing, the pumping plant does not operate until a flood event occurs.
“USACE greatly needed to reduce this high cost of electric service due to budget constraints and because it was shown to be above average,” Givan said. “The district decided to take the following steps: 1) terminate the existing contract for electric service, 2) implement a temporary agreement for up to 6 months and 3) negotiate a more cost effective permanent contract. The contracting officer could execute step 1, but steps 2 and 3 would require subject matter expert support.”
Givan said he used his prior experience with the Alabama Public Service Commission and Alabama Power Company to develop a strategic approach to reduce the monthly rate to more accurately reflect pumping plant operations and to provide and calculate rate components that allowed the contracting officer to productively lead negotiation discussions with the utility provider. Army Regulatory Law was also added to the team to provide advice, to serve on the negotiation team and, if necessary, to go before the state public utility commission for resolution.
“The team negotiated with the utility provider over a six-month period,” Givan said. “CUP provided rate analysis and transmission line service cost estimates. USACE invested only $16,771 for CUP labor and travel.”
To further clarify technical support, the utility said maintenance and operation (O&M) expenses of the transmission line serving the pumping plant were substantial and could not be reduced. Givan found a generally acceptable method to calculate the cost to operate and maintain the transmission line that demonstrated the O&M cost should be only $12,000. This transmission line cost combined with the calculated minimum monthly usage cost of $10,000 helped establish a new total monthly rate of $22,000 that still allowed the utility to comfortably recover all costs.
“Since this was the first negotiation for the program, the experience and team building approach for this project helped establish the ideal Army utility negotiation team model,” Givan said. “The model team consists of the CUP program manager, contracting officer, utility regulatory law attorney and one or more representatives of the supported facility. A utility consultant will be added to the team as required. This effort can be replicated by any agency or department that owns large facilities. Utility contracts are generally 10-year agreements that should be reviewed for utility market or industry changes as well as outdated facility requirements. A similar negotiation team will provide the depth, knowledge and flexibility to arrive at a ‘win-win’ negotiation.”