Air force utility privatization saves real money.

• Author: Krachman, Al
• Position: Viewpoint

The Air Force utilities privatization program has realized significant savings for the government, while also encountering some regulatory growing pains. Recent project accomplishments include saving $19.3 million in natural gas costs per year at a $1.1 million transaction cost, reducing water consumption by 28 percent, and reducing electric system outages by almost 40 percent. The program has saved the Air Force an estimated $520 million over the 50-year life cycle of projects, compared to continued government ownership.

With the current Department of Defense focus on energy security, this is good news. But the program still faces some open issues in the areas of labor standards and terminations that will need to be resolved in the future.

There are 270 Air Force utility systems left to evaluate for privatization. Because of the program's success, the Air Force is adjusting the intake of new systems for evaluation so that it can match procurement resources with the number of systems in review.

The Air Force has recognized maintenance, operations and upgrades of the four main utility systems, electric, natural gas, sewer and water, are not a core competency and, where appropriate and cost effective, should be privatized.

The Air Force had approximately 159 "privatized" or owned-by-others utility systems before the Congressional utilities privatization authorization, Title 10 U.S.C. [section] 2688, in 1998. The majority of these legacy systems are with airport authorities where National Guard bases resided or on overseas installations in host nations under Status of Forces Agreements.

Congress enacted Title 10 U.S. Code [section]2688 to provide statutory authority for the service secretaries to solicit and transfer ownership of Defense Department utility system infrastructure. It allows the Air Force to transfer ownership of existing utility distribution systems to private, municipal, regional, district, or cooperative utility companies or other entities where such conveyance demonstrates long-term economic benefits. Procurement of the underlying commodity is not part of utilities privatization.

Subsequently, DoD issued direction to the service secretaries to privatize utility systems. These directives were based on two premises: Utility system ownership and its associated operation and maintenance is not a DoD core competency, and utility systems on DoD installations must be restored to, and reliably maintained at, industry standards. Using...