8/28/2014

The Department of Energy (DOE) ESPC IDIQ first arrived on the scene in 2009 in the heart of the recession.  Since its arrival, some 16 contractors have shared in project financing of a little over $2 billion.  This is a very unusual IDIQ in that the projects are “alternatively financed” not using appropriated capital funding by the Congress of the United States.  DOE’s Office of Energy Efficiency and Renewable Energy (EERE) runs the program, which consists of energy efficiency studies following by commercially financed projects to construct and install the energy saving programs uncovered by the studies.

The entire activity is thus initially funded by private financing, in cooperation with EERE, and projects typically amortize over a 25-year term.  During the amortization term, the Energy Service Company (ESCO), the holder of the IDIQ and the executor of the ESPC, receives the benefit of the energy savings as payback and profit.  Once the term is fulfilled, the agency where the project was executed then benefits from the energy savings into perpetuity.  This program is designed to promote energy conservative in an attractive package where energy capable industrial firms can improve environmental performance using federal realty and utility assets as test beds.

The IDIQ ceiling for the deal is advertised at $20 billion with an individual ceiling per company of $5.5 billion.  Companies must meet strict qualifications to bid on the IDIQ, including a size standard of $14 million in revenues and a portfolio of energy-related projects either federal or commercial.  Typical capabilities of successful companies include industrial grade energy competences, such as boiler plants, building and energy management control systems, lighting, refrigeration, electric generators, utility distribution systems, and energy generation systems.  Two fully described energy savings programs must be identified in the proposal, with supporting evidence of the cost / benefits of the program and its environmental impacts.

This is a ten-year term IDIQ, so for all companies who qualify and want into the program, action in the immediate future is required.  Candidates for bidding include not only the national energy companies with household names, but also large regional energy companies that have significant federal facilities within their service sphere.  Companies that do not have significant engineering study capability should partner with an independent engineering consulting firm, capable of in-depth studies, measurement, and oversight of energy construction and rehabilitation projects.  While the IDIQ may be delayed, our best guess is that the RFP will be out in late 2014, with an award date around May 2015.