VA awards $27.9M Energy Savings Performance Contract to NORESCO, LLC for VISN 15 facilities

Contract Overview

Contract Amount: $27,958,118 ($28.0M)

Contractor: Noresco, LLC

Awarding Agency: Department of Veterans Affairs

Start Date: 2016-12-13

End Date: 2039-12-14

Contract Duration: 8,401 days

Daily Burn Rate: $3.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: IGF::CL::IGF VETERANS INTEGRATED SERVICE NETWORK 15, ENERGY SAVINGS PERFORMANCE CONTRACT THROUGHOUT VISN 15 FACILITIES - ALL ECMS

Place of Performance

Location: LEAVENWORTH, LEAVENWORTH County, KANSAS, 66048

State: Kansas Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $28.0 million to NORESCO, LLC for work described as: IGF::CL::IGF VETERANS INTEGRATED SERVICE NETWORK 15, ENERGY SAVINGS PERFORMANCE CONTRACT THROUGHOUT VISN 15 FACILITIES - ALL ECMS Key points: 1. Contract focuses on energy conservation measures (ECMs) to reduce utility costs and improve facility efficiency. 2. Long-term contract duration of over 20 years suggests a significant investment in infrastructure upgrades. 3. Performance-based contract structure aligns contractor incentives with achieving measurable energy savings. 4. Potential for substantial operational cost reductions and modernization of VA facilities. 5. Requires ongoing monitoring and verification to ensure projected savings are realized.

Value Assessment

Rating: good

This Energy Savings Performance Contract (ESPC) awarded to NORESCO, LLC represents a significant investment by the Department of Veterans Affairs in improving energy efficiency across VISN 15 facilities. ESPCs are designed to be cost-neutral, with savings generated from reduced utility consumption funding the project costs. Benchmarking ESPC pricing is complex as it is tied to achieved savings rather than a fixed price for goods or services. However, the long duration and scope suggest a comprehensive approach to energy management.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified contractors had the opportunity to bid. This competitive process is expected to drive favorable pricing and innovative solutions. The presence of multiple bidders generally leads to better price discovery and ensures the government receives competitive offers.

Taxpayer Impact: A full and open competition process for this contract likely resulted in a more cost-effective solution for taxpayers by leveraging market competition to secure the best value.

Public Impact

Veterans receiving care at VISN 15 facilities will benefit from modernized infrastructure and potentially improved environmental conditions. The contract delivers energy efficiency upgrades and potentially renewable energy solutions across multiple VA medical centers and associated facilities. Geographic impact is concentrated within VISN 15 facilities, primarily located in Kansas. The project may involve local skilled labor for installation and maintenance of energy conservation measures, providing economic stimulus.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (over 20 years) requires sustained oversight to ensure performance and prevent cost overruns.
Reliance on projected energy savings necessitates robust measurement and verification (M&V) protocols.
Potential for scope creep or unforeseen technical challenges during implementation of ECMs.

Positive Signals

Performance-based contract structure incentivizes contractor to achieve and sustain energy savings.
Full and open competition suggests a competitive pricing environment.
Focus on energy efficiency aligns with federal sustainability goals and potential long-term cost reductions.

Sector Analysis

Energy Savings Performance Contracts (ESPCs) are a key mechanism for federal agencies to improve energy efficiency and reduce utility costs without upfront capital investment. This contract falls within the broader engineering services sector, specifically focusing on energy management and infrastructure modernization. The market for ESPCs is robust, with numerous qualified Energy Service Companies (ESCOs) capable of undertaking such projects. The VA is a significant player in utilizing ESPCs to upgrade its vast portfolio of facilities.

Small Business Impact

Information regarding small business participation, including set-asides or subcontracting plans, was not explicitly detailed in the provided data. ESPCs often involve large prime contractors who may engage subcontractors. Further analysis would be needed to determine the extent of small business involvement and its impact on the small business ecosystem.

Oversight & Accountability

Oversight for this ESPC would typically be managed by the Department of Veterans Affairs' facility management and contracting offices. Measurement and Verification (M&V) plans are critical components of ESPCs, ensuring that the projected energy savings are achieved and verified over the contract's life. The Inspector General's office may also conduct audits to ensure compliance and prevent fraud, waste, and abuse.

Related Government Programs

Energy Savings Performance Contracts
Federal Energy Management Program (FEMP)
Department of Veterans Affairs Facility Modernization

Risk Flags

Long-term contract duration requires sustained oversight.
Accuracy of energy savings projections is critical.
Robust Measurement and Verification (M&V) is essential.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $28.0 million to NORESCO, LLC. IGF::CL::IGF VETERANS INTEGRATED SERVICE NETWORK 15, ENERGY SAVINGS PERFORMANCE CONTRACT THROUGHOUT VISN 15 FACILITIES - ALL ECMS

Who is the contractor on this award?

The obligated recipient is NORESCO, LLC.

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $28.0 million.

What is the period of performance?

Start: 2016-12-13. End: 2039-12-14.

What is the historical spending pattern for Energy Savings Performance Contracts within the Department of Veterans Affairs?

The Department of Veterans Affairs has been a consistent user of Energy Savings Performance Contracts (ESPCs) to achieve energy efficiency and cost savings across its extensive network of facilities. Historically, the VA has leveraged ESPCs to fund a wide range of energy conservation measures (ECMs), including lighting upgrades, HVAC system modernizations, building envelope improvements, and renewable energy installations. The total value of ESPCs awarded by the VA can fluctuate annually based on agency priorities, available funding, and the identification of suitable projects. While specific aggregate historical spending figures require detailed database queries, the VA consistently ranks among the top federal agencies in its utilization of ESPCs, reflecting a strategic commitment to sustainability and operational cost reduction. These contracts often span multiple years, with significant investments made annually to implement and maintain ECMs across various VISNs and individual facilities.

How does the pricing structure of this ESPC compare to typical market rates for similar energy efficiency projects?

ESPC pricing is inherently performance-based, meaning the contractor's payment is directly tied to the verified energy savings achieved. Unlike traditional fixed-price contracts, there isn't a simple per-unit cost to benchmark. Instead, the value is assessed by comparing the projected savings against the total project cost and the contractor's share of those savings. NORESCO, LLC, as a major ESCO, operates within a competitive market where pricing is influenced by factors such as project complexity, technology employed, and the duration of the contract. The government typically negotiates the contractor's share of savings, ensuring that the agency retains a significant portion of the cost reductions while the contractor is compensated for their investment, expertise, and risk. A thorough assessment would involve reviewing the specific ECMs, the baseline energy consumption, the projected savings calculations, and the negotiated savings share against industry standards for similar-sized projects and technologies.

What are the primary risks associated with long-term Energy Savings Performance Contracts like this one?

Long-term ESPCs, such as the one awarded to NORESCO, LLC, carry several inherent risks that require careful management. A primary risk is the accuracy of the energy savings projections; if actual savings fall short of estimates, the contract may not be cost-neutral as intended, potentially leading to financial shortfalls for the agency. Another risk involves the long duration (over 20 years), which increases the possibility of technological obsolescence or changes in energy prices that could impact the savings calculations. Furthermore, effective Measurement and Verification (M&V) is crucial; inadequate M&V protocols can mask underperformance. Contractor performance risk is also present, although mitigated by the performance-based nature of the contract. Finally, changes in agency priorities or budget constraints could affect the perceived value or necessity of the ongoing project, although ESPCs are designed to be self-funding through savings.

What is NORESCO, LLC's track record with the Department of Veterans Affairs and other federal agencies?

NORESCO, LLC, a subsidiary of Johnson Controls, is a well-established Energy Service Company (ESCO) with a significant track record in delivering energy efficiency projects for federal agencies, including the Department of Veterans Affairs. They have been involved in numerous ESPCs across various government departments, undertaking projects that range from comprehensive facility modernizations to specific technology upgrades. Their experience typically includes implementing a wide array of energy conservation measures such as advanced lighting systems, high-efficiency HVAC, building automation controls, and renewable energy solutions. While specific contract performance details and past issues would require a deeper dive into contract databases and IG reports, NORESCO is generally recognized as a major player in the federal ESPC market, known for its technical capabilities and project execution.

How does the scope of this contract align with the VA's broader sustainability and energy management goals?

This Energy Savings Performance Contract (ESPC) directly aligns with the Department of Veterans Affairs' broader sustainability and energy management goals, which are often driven by federal mandates such as Executive Order 13693 (Planning for Federal Sustainability in the Next Decade) and subsequent directives. ESPCs are a cornerstone strategy for federal agencies to reduce their greenhouse gas emissions, decrease energy consumption, and lower utility costs without requiring upfront appropriations. By investing in energy conservation measures (ECMs) across VISN 15 facilities, the VA is actively working towards improving the energy efficiency of its infrastructure, enhancing operational resilience, and contributing to national energy security. The long-term nature of the contract also supports sustained improvements and the integration of advanced energy technologies, reinforcing the VA's commitment to environmental stewardship and fiscal responsibility.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: ARCHITECT/ENGINEER SERVICES › ARCH-ENG SVCS - CONSTRUCTION

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

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

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $80,577,703

Exercised Options: $80,577,703

Current Obligation: $27,958,118

Subaward Activity

Number of Subawards: 18

Total Subaward Amount: $129,560,108

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: DEAM3609GO29039

IDV Type: IDC

Timeline