Contract Between the Economic Regulatory Administration, Department of Energy, and Stone & Webster Management Consultants, Inc.

A review was requested of a contract between the Economic Regulatory Administration (ERA), Department of Energy (DOE), and a private contractor. The examination reviewed the solicitation for the contract, the procedures used by DOE in conducting the procurement, the award of the contract, and the propriety of contract modifications proposed by DOE. A determination was also requested on whether the contract should be terminated. The contractor's purpose is to help develop materials to assist state public utility commissions and major nonregulated utilities in evaluating and adopting improvements in certain ratemaking procedures, including both rate design and regulatory practices. It is apparent from the request for proposals' (RFP) statement of work and from other language and provisions in the RFP and resultant contract that the items to be furnished by the contractor will have an impact on preparation of legislative guidelines by DOE. The extent of the impact is not clear. It is clear from the record that the contractor is not establishing DOE policy. Accordingly, this issue provides no basis to question the authority of DOE to enter into the contract. Organizational conflict of interest was examined in legislative detail. DOE should have either disqualified the contractor from competition or made a formal determination that it was otherwise in the best interests of the government not to disqualify the offerer, and imposed in the contract conditions to mitigate the conflict. It is appropriate to recommend termination of the contract absent the position of DOE regarding the organizational conflict of interest options.