Smithsonian Institution's $35.9M energy contract with NORESCO, LLC shows long-term savings potential

Contract Overview

Contract Amount: $35,898,952 ($35.9M)

Contractor: Noresco, LLC

Awarding Agency: Smithsonian Institution

Start Date: 2007-07-31

End Date: 2029-05-31

Contract Duration: 7,975 days

Daily Burn Rate: $4.5K/day

Competition Type: NON-COMPETITIVE DELIVERY ORDER

Number of Offers Received: 1

Pricing Type: LABOR HOURS

Sector: Energy

Official Description: SUPER ENERGY SAVINGS PERFORMANCE CONTRACT

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20560

State: District of Columbia Government Spending

Plain-Language Summary

Smithsonian Institution obligated $35.9 million to NORESCO, LLC for work described as: SUPER ENERGY SAVINGS PERFORMANCE CONTRACT Key points: 1. The contract aims to achieve significant energy cost reductions through efficiency upgrades. 2. Long contract duration suggests a focus on sustained performance and lifecycle value. 3. As a non-competitive delivery order, the initial award warrants scrutiny for best value. 4. Performance is tied to actual energy savings, aligning contractor incentives with agency goals. 5. The contract's scope includes infrastructure modernization for improved operational efficiency. 6. Geographic focus on Washington D.C. concentrates benefits within a specific region.

Value Assessment

Rating: good

This contract's value is assessed based on its potential for long-term energy savings, a common metric for Energy Savings Performance Contracts (ESPCs). While specific pricing details are not provided, the structure of ESPCs typically involves the contractor financing improvements and being repaid through documented energy cost reductions. Benchmarking against similar ESPCs would require detailed cost breakdowns and projected savings, which are not available here. However, the substantial duration suggests a significant investment in efficiency measures expected to yield considerable returns over time.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a non-competitive delivery order. This indicates that the Smithsonian Institution likely leveraged an existing indefinite-delivery/indefinite-quantity (IDIQ) contract or a pre-negotiated agreement, possibly through the General Services Administration (GSA) or another federal agency's established ESPC program. The lack of open competition at the delivery order level means that the pricing and terms were not subjected to a broad market solicitation, potentially limiting price discovery.

Taxpayer Impact: For taxpayers, a sole-source award means that the government did not benefit from the competitive bidding process, which typically drives down prices. While the long-term savings from energy efficiency are the primary goal, the initial cost and terms might not reflect the absolute lowest possible price achievable in a fully competitive scenario.

Public Impact

The Smithsonian Institution directly benefits from reduced utility costs and improved facility operations. The contract delivers energy efficiency upgrades and modernization of infrastructure. The primary geographic impact is within Washington D.C., where the Smithsonian's facilities are located. Workforce implications may include specialized technical roles for installation and maintenance of energy-efficient systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of upfront competition for this delivery order could mean a less favorable price than a fully competed contract.
The long contract duration (ending 2029) means potential for cost overruns or performance issues to persist if not managed closely.
Reliance on a single contractor for a significant energy infrastructure project concentrates risk.

Positive Signals

The contract is structured to pay for itself through guaranteed energy savings, aligning financial incentives.
Focus on energy efficiency contributes to federal sustainability goals and reduces environmental impact.
The contractor, NORESCO, LLC, is a known entity in the energy services sector, suggesting some level of expertise.

Sector Analysis

This contract falls within the Energy Services sector, specifically Energy Savings Performance Contracts (ESPCs). ESPCs are a tool used by federal agencies to implement energy efficiency and renewable energy projects without upfront capital investment. The market for ESPCs is significant, with numerous qualified contractors capable of delivering such services. The Smithsonian Institution's spending aligns with a broader federal trend towards modernizing infrastructure and reducing energy consumption to meet sustainability mandates and control operational costs.

Small Business Impact

This contract does not appear to involve a small business set-aside. As a delivery order under a potentially larger IDIQ or pre-negotiated agreement, the focus is on the prime contractor's capabilities. There is no explicit information regarding subcontracting plans for small businesses within the provided data. The impact on the small business ecosystem is likely minimal unless the prime contractor actively engages small businesses for specialized services.

Oversight & Accountability

Oversight for this contract would typically be managed by the Smithsonian Institution's contracting officers and facilities management. As an ESPC, performance is often monitored through energy usage data and verified savings. Transparency is generally achieved through regular reporting by the contractor on energy consumption and cost savings. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Energy Savings Performance Contracts (ESPCs)
Federal Energy Management Program (FEMP)
Smithsonian Institution Facilities Management
General Services Administration (GSA) Energy Contracts

Risk Flags

Non-competitive award
Long contract duration
Potential for performance shortfall in savings guarantees

Frequently Asked Questions

What is this federal contract paying for?

Smithsonian Institution awarded $35.9 million to NORESCO, LLC. SUPER ENERGY SAVINGS PERFORMANCE CONTRACT

Who is the contractor on this award?

The obligated recipient is NORESCO, LLC.

Which agency awarded this contract?

Awarding agency: Smithsonian Institution (Smithsonian Institution).

What is the total obligated amount?

The obligated amount is $35.9 million.

What is the period of performance?

Start: 2007-07-31. End: 2029-05-31.

What is the historical spending pattern for energy efficiency projects at the Smithsonian Institution?

Analyzing historical spending on energy efficiency projects at the Smithsonian Institution is crucial for contextualizing this $35.9 million contract. While specific historical data is not provided, federal agencies like the Smithsonian are increasingly investing in energy efficiency due to mandates and cost-saving opportunities. ESPCs have become a popular mechanism for such investments, allowing agencies to upgrade infrastructure without upfront capital. A review of past Smithsonian budgets and capital improvement plans would reveal the scale and frequency of similar energy-focused initiatives. Understanding this history would help determine if this contract represents a significant increase or a continuation of established energy management practices. It would also shed light on the agency's commitment to long-term sustainability goals and its capacity to manage such large-scale projects effectively.

How does the projected energy savings compare to the contract value and duration?

The contract value is $35.9 million, with an end date of May 31, 2029. The core of an Energy Savings Performance Contract (ESPC) is that it is designed to be cost-neutral or cost-saving over its life. The contractor, NORESCO, LLC, is expected to finance the energy conservation measures (ECMs) and be repaid through the documented savings generated. Therefore, the projected energy savings must, at a minimum, equal the contract's total value over its duration to be considered a break-even proposition. Ideally, the savings should exceed the contract value to represent a net financial benefit to the Smithsonian Institution. Without specific projections from NORESCO, it's impossible to definitively benchmark the value. However, the success of such contracts hinges on accurate baseline energy use calculations and realistic savings estimates. The long duration suggests significant upfront investment and a commitment to achieving substantial, long-term reductions in energy consumption and associated costs.

What specific energy conservation measures (ECMs) are included in this contract?

The provided data does not specify the exact energy conservation measures (ECMs) included in this $35.9 million contract with NORESCO, LLC. Typically, ESPCs encompass a range of upgrades aimed at reducing energy consumption and operational costs. Common ECMs include retrofitting lighting systems with LEDs, upgrading HVAC (heating, ventilation, and air conditioning) systems for better efficiency, improving building envelope insulation, installing smart building controls and energy management systems, and potentially incorporating renewable energy sources like solar panels. The specific measures would be detailed in the contract's Statement of Work (SOW) and would be tailored to the Smithsonian's facilities and their unique energy usage patterns. Understanding the specific ECMs is crucial for assessing the technical approach, potential for savings, and the long-term impact on the institution's infrastructure and sustainability goals.

What is NORESCO, LLC's track record with similar large-scale ESPCs for federal agencies?

NORESCO, LLC is a well-established energy services company with a significant track record in implementing Energy Savings Performance Contracts (ESPCs) for various clients, including federal agencies. They have been involved in numerous projects across different government departments and facilities, focusing on energy efficiency, water conservation, and renewable energy solutions. Their experience often includes managing complex projects with substantial budgets and long performance periods, similar to the Smithsonian Institution's contract. Evaluating NORESCO's past performance, including the success of their projects in meeting or exceeding guaranteed savings, their financial stability, and their client satisfaction ratings, would provide valuable insight into the likely success of this particular contract. Publicly available information, case studies, and past performance reviews from agencies like the Department of Energy or the General Services Administration can offer a basis for this assessment.

Are there any performance risks associated with this contract, and how are they mitigated?

Performance risks in an ESPC like this are primarily related to achieving the projected energy savings. If actual savings fall short of the guaranteed amounts, the contractor may not recoup their investment, or the agency may not realize the expected financial benefits. Risks can stem from inaccurate baseline energy use calculations, unforeseen operational changes, equipment failures, or inadequate implementation of energy conservation measures (ECMs). Mitigation strategies typically include robust measurement and verification (M&V) protocols, which are standard in ESPCs. These protocols ensure that savings are accurately tracked and verified over the contract's life. The contract structure itself, where the contractor is paid based on achieved savings, acts as a primary risk mitigation tool, aligning their financial incentives with performance. Furthermore, the Smithsonian Institution would likely have contract managers overseeing the project and ensuring compliance with the SOW.

Competition & Pricing

Extent Competed: NON-COMPETITIVE DELIVERY ORDER

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: LABOR HOURS (Z)

Contractor Details

Address: 1 RESEARCH DR STE 400 C, WESTBOROUGH, MA, 01581

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation

Financial Breakdown

Contract Ceiling: $35,898,952

Exercised Options: $35,898,952

Current Obligation: $35,898,952

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Timeline