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Graphic displays the cycle of cost savings for ESA ECM.

An energy savings performance contract energy sales agreement (ESPC ESA) is a project structure, similar to a power purchase agreement, that uses the multiyear ESPC authority to implement distributed energy projects—referred to as ESA energy conservation measures (ECMs)—on federal buildings or land. The ESA ECM is initially privately owned for tax incentive purposes, and the federal agency purchases the electricity it produces with guaranteed cost savings. An ESPC can be used for the acquisition of utility services per 48 CFR § 41.102(b)(7) (2015).

Start an ESPC ESA

To start an ESPC ESA, an agency should review the ESPC ESA requirements and contract vehicle options. For questions, more information, or assistance:

Benefits of ESPC ESAs

  • ESPC ESAs do not require any upfront capital from a federal agency for the ESA ECM.
  • ESPC ESAs provide guaranteed cost savings, and a federal agency only pays for the electricity that is generated, minimizing federal risk.
  • The energy service company (ESCO) may be able to take advantage of federal and other tax incentives and can sell the renewable energy certificates generated by the ESA ECM to reduce the ESPC ESA price.
  • The ESCO is responsible for ESA ECM operations and maintenance, and for equipment repair and replacement, which also reduces federal risk.

ESPC ESA Requirements

ESPC Authority Requirements: The ESPC ESA must meet all ESPC legal requirements (see 42 U.S.C. § 8287, et seq.), including the requirement that the agency pay for the cost of the ESPC ESA from the energy cost savings generated each year over the life of the contract. The ESCO must be on the U.S. Department of Energy's (DOE) Qualified List of ESCOs or an agency’s list of qualified contractors prior to contract award.

Office of Management and Budget (OMB) Requirements: In order for the ESPC ESA contract to be scored annually, it must be consistent with the requirements under OMB Memo M-12-21, “Addendum to OMB Memorandum M-98-13 on Federal Use of Energy Savings Performance Contracts (ESPCs) and Utility Energy Service Contracts (UESCs),” including the requirement that the federal government retain title to on-site energy generation by the end of the contract.

Tax Incentive Requirements: The ESCO may be eligible for tax incentives such as the federal Investment Tax Credit and the Modified Accelerated Cost Recovery System. The Internal Revenue Service Revenue Procedure 2017-19, published in Internal Revenue Bulletin 2017-7, provides a safe harbor under which the IRS will not challenge the treatment of an ESPC ESA as a service contract under 26 U.S.C. § 7701(e)(3). Section 4 specifies safe harbor requirements, including a maximum contract length of 20 years. Section 5 contains details regarding an example ESPC ESA project. Tax incentive eligibility due diligence is the responsibility of the ESCO, not the government.

ESPC ESA Contract Vehicle Options

Select an item below to learn more about the contract vehicle, templates, and other FEMP resources.

Master contract that allows federal agencies to work with 21 DOE Qualified ESCOs holding the current DOE IDIQ ESPC contract.
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Templates for ESPC ESA documentation support federal agency contracting officers and other acquisition team members in executing their projects.
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Procurement process to implement basic ECMs under an ESPC. More than 20 DOE Qualified ESCOs are on GSA Supply Schedule SIN 334512.
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Below is a comparison table that will help you determine the best contract vehicle for your planned ESPC ESA project.

Contract VehicleDOE IDIQ ESPCDOE ESPC ENABLESite Specific/Stand-Alone
Contract typeTask orders (TOs) under DOE IDIQGSA Supply Schedule SIN 334512Request for proposal (RFP) is basis for the contract
ESCO selection processNotice of opportunity (NOO)NOORFP
Private-sector partnerOne of 21 ESCOsOne of over 20 ESCOs on GSA Supply Schedule 84ESCO must be on DOE's Qualified List of ESCOs by the time of award
Project size$2 million or largerNo fixed size or cost limits, suitable for smaller projectsDistributed energy project that is typically greater than 500 kW
ECMsUnlimitedSolar PV, lighting, water, basic HVAC controls, HVAC equipment, boilers, chillers; motors being added; other ECMs under hybrid approachSingle ESA ECM preferable
Preliminary assessment (PA) and investment grade audit (IGA)PA and IGA requiredIGA requiredNot applicable, ESCOs respond to an RFP
Project development tasksESCO can be made responsible for most tasksESCO can be made responsible for most tasksAgency must complete most, if not all, tasks

Key Resources

Report explores procurement options and agreements that may be useful to federal agencies interested in implementing microgrids at their sites.
Fact sheet describes the U.S. Drug Enforcement Administration’s 2.5-MW photovoltaic system at their El Paso Intelligence Center in El Paso, Texas.
Fact sheet describes how the Federal Energy Management Program helps agencies implement energy savings performance contract energy sales agreements.
Fact sheet describes federal investment tax credit considerations for privately owned solar photovoltaic projects on federal land and buildings.
Fact sheet highlights how NIST installed a 5-MW photovoltaic system using an energy savings performance contract energy sales agreement.
Templates for ESPC ESA documentation support federal agency contracting officers and other acquisition team members in executing their projects.