Energy savings performance contracts (ESPCs) are a partnership between a federal agency and an energy service company (ESCO). After being selected for a potential award, the ESCO conducts a comprehensive facility energy audit and identifies improvements to save energy. In consultation with the agency, the ESCO designs and constructs a project that meets the agency's needs and arranges financing to pay for the project.
The ESCO guarantees that the improvements will generate sufficient energy cost savings to pay for the project over the term of the contract. After the contract ends, all cost savings accrue to the agency. The agency is responsible for contract administration for the entire term of the contract.
Types of Federal Energy Savings Performance Contracts
Most federal ESPC projects have been implemented as task orders awarded under U.S Department of Energy (DOE) indefinite-delivery, indefinite-quantity (IDIQ) ESPCs. The DOE IDIQ ESPCs were established to streamline the ESPC process and make ESPC procurements as practical and cost-effective for agencies as possible. DOE awarded these master IDIQ (or "umbrella") ESPCs to competing ESCOs that were best qualified to serve federal agencies under the terms and conditions in the DOE IDIQ ESPCs. More than 300 projects have been awarded under the DOE ESPC IDIQs since their inception in 1998.
DOE’s ESPC ENABLE program streamlines ESPCs especially for small sites (typically smaller than 200,000 square feet) that need basic energy conservation measures (ECMs). ENABLE ESPCs offer tools and templates that can allow agencies to award a task order in as few as 12 weeks. These ESPCs are procured through the General Services Administration Federal Supply Schedule 84, SIN 246-53. Benefits of ESPC ENABLE include:
- No up-front capital costs to agencies
- Guaranteed energy cost savings that exceed annual payments
- Prescribed measurement and verification to ensure savings are achieved
- Standard tools and contract templates to allow consistency and project replication.
The U.S. Army Corps of Engineers’ ESPC program awards master ESPCs and multiple award task order contracts (MATOCs), which are available to federal agencies. For more information, visit the Army Corps' Energy Division ESPC Program website.
Energy Savings Performance Contract Legislated Authority
The use of ESPCs is authorized, required, or encouraged by:
- Multiple statutes, including 42 U.S.C. § 8287 et seq.; 10 C.F.R. § 436.30 et seq.
- Federal Acquisition Regulations (FAR)
The legislated authority for federal agency use of ESPCs determined these key characteristics and benefits of federal ESPCs.
- The legislated purpose is to achieve energy savings and ancillary benefits.
- Savings guarantees are mandatory.
- Measurement and verification is mandatory.
- Savings must exceed payments for each contract year.
- Contract term cannot exceed 25 years.
- Infrastructure improvements that pay for themselves over time.
- Ability to purchase long-payback equipment by bundling with short-payback ECMs.
- Reduced vulnerability to budget impacts from utility rate hikes and extreme weather.
- Enhanced ability to plan and budget accounts.
- Guaranteed cost savings and equipment performance.