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Answers to frequently asked questions surrounding energy savings performance contracts (ESPCs).
An ESPC is a working relationship between a Federal agency and an energy service company (ESCO). The ESCO conducts a comprehensive energy audit for the Federal facility and identifies improvements to save energy. The following sections present a number of frequently asked questions from ESPC end-users and stakeholders.
Document provides clarification and guidance on issues commonly raised regarding the scope of 42 U.S.C. § 8287 et seq. It is a supplement to the Federal Energy Management Program's extensive collection of materials that are available to assist federal agencies execute successful energy savings performance contract (ESPC) projects.
Constrained budgets and increasing energy efficiency goals have led federal agencies to explore innovative ways to fund energy improvements, including the Department of Energy's Energy Savings Performance Contracts (ESPC). An expected increase in the use of ESPCs has raised questions about agencies' ability to ensure that the government's interests are protected. ESPCs can span up to 25 years and be valued at millions of dollars each. This book examines the extent to which agencies have used ESPCs and plan to use them; projects have achieved their expected cost and energy savings; and agencies have overseen and evaluated such projects.
Constrained budgets and increasing energy efficiency goals have led federal agencies to explore innovative ways to fund energy improvements, including ESPCs. An expected increase in the use of ESPCs has raised questions about agencies' ability to ensure that the government's interests are protected. ESPCs can span up to 25 years and be valued at millions of dollars each. GAO was asked to review federal use of ESPCs since 2005. This report examines the extent to which (1) agencies have used ESPCs and plan to use them; (2) projects have achieved their expected cost and energy savings; and (3) agencies have overseen and evaluated such projects. GAO compiled data on awarded ESPCs; reviewed agency guidance and files for a nongeneralizable sample of 20 ESPC projects that reflected a range of contract award dates, contract values, and other characteristics; and interviewed officials from the seven agencies with the highest energy usage and greatest facility square footage-the Air Force, Army, and Navy within the Department of Defense; the Departments of Energy, Justice, and Veterans Affairs; and the General Services Administration.
Energy savings performance contracts (ESPCs) allow Federal agencies to conduct energy projects with limited to no up-front capital costs, minimizing the need for Congressional appropriations.
Constrained budgets and increasing energy efficiency goals have led federal agencies to explore innovative ways to fund energy improvements, including energy saving performance contracts (ESPCs). Under ESPCs, private contractors finance the up-front costs of energy improvements. Agencies then repay contractors from the savings, such as those resulting from lower utility bills. An expected increase in the use of ESPCs has raised questions about agencies' ability to ensure that the government's interests are protected. ESPCs can span up to 25 years and be valued at millions of dollars each. This report examines the extent to which (1) agencies have used ESPCs and plan to use them; (2) projects have achieved their expected cost and energy savings; and (3) agencies have overseen and evaluated such projects. Tables and figures. This is a print on demand report.
Constrained budgets and increasing energy efficiency goals have led federal agencies to explore innovative ways to fund energy improvements, including ESPCs. An expected increase in the use of ESPCs has raised questions about agencies' ability to ensure that the government's interests are protected. ESPCs can span up to 25 years and be valued at millions of dollars each. GAO was asked to review federal use of ESPCs since 2005. This report examines the extent to which (1) agencies have used ESPCs and plan to use them; (2) projects have achieved their expected cost and energy savings; and (3) agencies have overseen and evaluated such projects. GAO compiled data on awarded ESPCs; reviewed agency guidance and files for a nongeneralizable sample of 20 ESPC projects that reflected a range of contract award dates, contract values, and other characteristics; and interviewed officials from the seven agencies with the highest energy usage and greatest facility square footage -- the Air Force, Army, and Navy within the Department of Defense; the Departments of Energy, Justice, and Veterans Affairs; and the General Services Administration. GAO is making recommendations to improve oversight of ESPC projects through clearer reporting of savings, improved training, and systematic evaluations of portfolios, among other things.
Federal agencies have had performance contracting authority since 1985, when Congress first authorized agencies to enter into shared energy savings agreements with Public Law 99-272, the Consolidated Omnibus Budget Reconciliation Act. By the end of FY 2001, agencies had used energy savings performance contracts (ESPCs) to attract private-sector investment of over $1 billion to improve the energy efficiency of federal buildings. Executive Order 13123 directs agencies to maximize their use of alternative financing contracting mechanisms such as ESPCs when life-cycle cost effective to reduce energy use and cost in their facilities and operations. Continuing support for ESPCs at the Administration and Congressional levels is evident in the pending comprehensive national energy legislation, which repeals the sunset provision on ESPC authority and extends ESPC authority to water savings projects. Despite the Congressional and Presidential directives to use ESPCs, some agencies have been reluctant to do so. Decision makers in these agencies see no reason to enter into long-term obligations to pay interest on borrowed money out of their own operating budgets if instead Congress will grant them appropriations to pay for the improvements up front. Questions frequently arise about whether pricing in ESPCs, which are negotiated for best value, is as favorable as prices obtained through competitive sourcing, and whether ESPC as a means of implementing energy conservation projects is as life-cycle cost effective as the standard practice of funding these projects through appropriations. The lack of any quantitative analysis to address these issues was the impetus for this study. ESPCs are by definition cost-effective because of their ''pay-from-savings'' requirement and guarantee, but do their interest costs and negotiated pricing extract an unreasonably high price? Appropriations seem to be the least-cost option, because the U.S. Treasury can borrow money at lower interest rates than the private sector, but appropriations for energy projects are scarce. What are the costs associated with requesting funding and waiting for appropriations? And how is the value of an energy project affected if savings that are not guaranteed do not last? The objective of this study was to develop and demonstrate methods to help federal energy managers take some of the guesswork out of obtaining best value from spending on building retrofit energy improvements. We developed a method for comparing all-inclusive prices of energy conservation measures (ECMs) implemented using appropriated funds and through ESPCs that illustrates how agencies can use their own appropriations-funded project experience to ensure fair ESPC pricing. The second method documented in this report is for comparing life-cycle costs. This method illustrates how agencies can use their experience, and their judgment concerning their prospects for appropriations, to decide between financing and waiting.