Overview
FAR Subpart 23.2 outlines the policies and procedures for Federal agencies to utilize Energy Savings Performance Contracts (ESPCs). These contracts allow agencies to implement energy-efficient technologies and infrastructure improvements at government facilities without requiring upfront legislative appropriations or direct capital expenses from the U.S. Treasury.
Key Rules
- Financing Model: The Energy Service Company (ESCO) finances the capital costs of energy conservation measures. In exchange, they receive a contractually determined share of the actual cost savings generated by those improvements.
- Contract Duration: ESPCs may be awarded for a period not to exceed 25 years.
- Cost-Effectiveness: Agencies are mandated to use ESPCs only when they are determined to be life-cycle cost-effective for reducing energy use and operational costs.
- Regulatory Compliance: Procurement must follow the specific procedures, selection methods, and terms found in 10 CFR part 436, subpart B, rather than standard FAR acquisition procedures alone.
- Multi-year Rules: ESPCs are generally subject to FAR Subpart 17.1 (Multi-year Contracting) guidelines, with specific exceptions noted in Department of Energy regulations.
- Geographic Scope: These rules apply to acquisitions within the U.S. and outlying areas; agencies operating abroad must use "best efforts" to comply.
Responsibilities
- Contracting Officers (CO):
- Responsible for soliciting and awarding ESPCs using 10 CFR part 436 procedures.
- Authorized to use the "Qualified List" of ESCOs maintained by the Department of Energy (DOE).
- Must evaluate unsolicited proposals in accordance with FAR 15.603(e).
- Agencies:
- Must maximize the use of ESPC authority to meet energy reduction goals.
- Required to ensure the project is life-cycle cost-effective before proceeding.
- Energy Service Companies (ESCOs):
- Responsible for financing, implementing, and maintaining energy conservation measures.
- Must guarantee a specific level of energy savings to ensure the government's payments are covered by the reduction in utility bills.
Practical Implications
- Budgetary Flexibility: ESPCs are a powerful "off-balance-sheet" tool for Facility Managers. They allow for the modernization of aging HVAC systems, lighting, and water systems even during tight budget cycles because the project pays for itself through guaranteed savings.
- Risk Mitigation: Since the ESCO provides the financing and performance guarantees, the financial risk of the energy-efficient technology failing to perform is largely shifted from the government to the private sector.
- Streamlined Vendor Selection: By utilizing the DOE’s "Qualified List," Contracting Officers can significantly reduce the lead time for market research and vendor vetting, as these companies have already been pre-screened for technical and financial competence.
- Long-term Management: Because these contracts can last 25 years, agencies must be prepared for long-term contract administration and performance monitoring to ensure that the projected energy savings continue to manifest over the decades.