Utilities Privatization

Building sustainable Air Force installations requires an investment in dependable, energy-efficient utility systems. The Air Force is transforming base infrastructure around the country by privatizing the right utility systems at the right time. To date, the UP Project Management Office at AFCEC has privatized 66 water, wastewater, electric and natural gas utility systems valued at $3.6 billion with a cost avoidance of over $511 million.

What is UP?

Utilities Privatization establishes a partnership and direct investment for both the Air Force and utility system providers because systems are privatized were fiscally attractive and operationally sound. Privatization of utility systems involves a "bill of sale" conveyance of the real property to a third party, such as a municipal, private, regional, district, or cooperative utility company. The Air Force conveys the entire system within points of demarcation on the installation, and no longer owns, operates, maintains, or repairs these systems. The agreement also includes a utility service contract for operations, maintenance, and recapitalization for a specified period of time, not to exceed 50 years. System ownership is transferred to the successful offeror under terms and conditions that protect Air Force interests. The terms of the contract are solely for the service of the system and rarely include electrical power, natural gas, water, and wastewater treatment.

By divesting the Air Force of these utilities, active, Guard, and Reserve installation commanders can focus on operations and core defense missions and functions, rather than repairs and upgrades to utility systems.

UP History

Historically, Air Force civil engineers were meeting mission requirements operating and maintaining utility systems at significantly less cost than industry standard for many years. But, by the end of the 20th century energy consumption had increased and the amount of technicians available on a daily basis began decreasing; as a result of the system degradation the Air Force began looking for a solution.

In December 1998, Defense Reform Initiative Directive #49 mandated all military departments to develop plans to privatize utilities on military bases. The UP program would bring sweeping changes to installations and joint bases.

High-level UP Program Roles

Once utility systems eligible for privatization are identified by AFCEC/CNU Division, AF Facilities, Environment and Energy (AF/A4CFN) will provide the centralized management for appropriate privatization projects.

  • AF/A4CFN is the UP Program Management Office and AFCEC/CNU is the Air Force UP Program Execution Office.
  • The major command and installation will assist and facilitate the privatization process and interact with AF/A4CFN on policy issues.  major command and installation will assist and facilitate the privatization process and interact with AF/A7CEN on policy issues.
  • The Deputy General Counsel for Installations and Environment will assist and facilitate on legal issues.
  • AFCEC will assist and facilitate execution management.
  • The Defense Logistics Agency Energy (DLA Energy) will continue to provide contracting officer support for UP projects currently assigned and will become the centralized contracting office for most UP projects. Exceptions to this policy are approved by The Deputy Director of Civil Engineers as recommended by AFCEC/CNU.  

UP Benefits

  • An awarded, 50-year utility services contract becomes a "must pay bill," which means funds will always be used for utility system maintenance, operation, renewals, and replacements.
  • The Air Force funds industry standard upgrades to installation utility systems, in coordination with the contractor's accepted schedule.  

  • The Air Force can focus resources on the core mission
  • Base mission not impacted during utility system transfer
  • Air Force military civil engineers still receive training on privatized systems when training is included in the utility services contract.
  • Readiness is not negatively impacted. Work will still remain on parts of utilities not privatized, including those inside buildings and on the airfield. The Air Force maintains a bottom line number of personnel to fill wartime requirements in each specialty.
  • The long-term benefits of UP outweigh the cost of continuing in-house utilities operations. Many installation utility systems badly need major upgrades. By turning them over to a third party, the Air Force has long-term operational stability.

AF Privatization Process

It's imperative that a utility provider demonstrates its solvency because the contract spans 50 years. The agreement is not entered into in haste. The complex, three-phase process can take up to five years and involves legal, contracting, financial, and engineering teams at all levels of the Air Force. AFCEC's UP team visits a base and compiles data for electric, water, wastewater, and gas systems. The UP team works with base leadership and the major command to decide which systems will be privatized. They also determine how to best integrate UP infrastructure improvements to make the utility system more reliable and sustainable through a three-phase process: utility system data collection, contracting and post-award management.

Data collection is performed for all utility systems unless they are exempt or deferred for security or economic reasons. AFCEC and support contractors visit installations, with support from MAJCOM and base personnel to
  • Collect the utility system inventory and workload data for each system
  • Prepare the applicable JA Sections for inclusion in the UP Request for Proposal (RFP) and the government should cost estimate (GSCE)
  • Assist the installation in completing the Environmental Impact Analysis process, if required
  • Identify any risks to privatization that must be addressed in the RFP
Contracting is conducted by the procurement contracting office (PCO) and includes all steps required for the RFP release such as
  • Source selection evaluation if there is competition for the system
  • Negotiations for all solicitations, to include those in post-competitive sourcing
  • Preparation of a UP Source Selection Decision Document (SSDD) package for the Air Force Source Selection Authority (SSA).