VA awards $4.5M Energy Savings Performance Contract to NORESCO, LLC for 20-year Heartland Network project

Contract Overview

Contract Amount: $4,547,483 ($4.5M)

Contractor: Noresco, LLC

Awarding Agency: Department of Veterans Affairs

Start Date: 2018-05-31

End Date: 2039-11-14

Contract Duration: 7,837 days

Daily Burn Rate: $580/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Energy

Official Description: IGF::OT::IGF OTHER FUNCTIONS - ENERGY SAVINGS PERFORMANCE CONTRACT FOR VISN 15 HEARTLAND NETWORK

Place of Performance

Location: LEAVENWORTH, LEAVENWORTH County, KANSAS, 66048

State: Kansas Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $4.5 million to NORESCO, LLC for work described as: IGF::OT::IGF OTHER FUNCTIONS - ENERGY SAVINGS PERFORMANCE CONTRACT FOR VISN 15 HEARTLAND NETWORK Key points: 1. Contract aims to achieve significant energy savings and facility modernization for the VA. 2. Long-term nature of the contract (20 years) suggests a focus on sustained performance and lifecycle cost reduction. 3. The project is categorized under Engineering Services, indicating a need for specialized technical expertise. 4. Fixed-price contract type provides cost certainty for the government, shifting performance risk to the contractor. 5. The award was made through full and open competition, suggesting a robust market for these services.

Value Assessment

Rating: good

The contract value of $4.5 million over 20 years, averaging $225,000 annually, appears reasonable for an Energy Savings Performance Contract (ESPC) of this duration and scope. ESPCs are designed to be cost-neutral or cost-saving, with savings generated by the project paying for the investment. Benchmarking against similar ESPCs is challenging without specific project details, but the VA has a history of utilizing ESPCs effectively to upgrade facilities and reduce operational costs.

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 vendors had the opportunity to bid. This competitive process is expected to drive favorable pricing and ensure the government receives the best value. The presence of multiple bidders suggests a healthy market for energy efficiency services within the federal sector.

Taxpayer Impact: Taxpayers benefit from a competitive process that is likely to result in lower overall project costs and higher guaranteed savings compared to a sole-source or limited competition award.

Public Impact

Veterans and VA staff will benefit from modernized and more energy-efficient healthcare facilities within the VISN 15 Heartland Network. The project will deliver improved facility infrastructure, potentially leading to enhanced comfort and operational reliability. Geographic impact is concentrated within the VISN 15 Heartland Network, serving multiple VA medical centers and facilities in that region. The contract may indirectly support jobs in the energy efficiency and engineering sectors through the contractor's activities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (20 years) requires diligent monitoring to ensure sustained savings and contractor performance.
Reliance on future energy savings to fund the project introduces a degree of financial risk if savings targets are not met.
Complexity of energy infrastructure upgrades can lead to unforeseen technical challenges or cost overruns.

Positive Signals

Focus on energy savings aligns with federal sustainability goals and can lead to significant long-term operational cost reductions.
The use of an ESPC structure shifts performance risk to the contractor, ensuring the government only pays for achieved savings.
Award through full and open competition suggests a strong likelihood of receiving competitive pricing and high-quality services.

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. These contracts leverage private sector investment and expertise to finance and implement energy conservation measures. The market for ESPCs is robust, with several established Energy Service Companies (ESCOs) competing for federal projects. This contract fits within the broader trend of federal agencies seeking to modernize aging infrastructure and meet congressionally mandated energy reduction targets.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. However, the prime contractor, NORESCO, LLC, may engage small businesses as subcontractors to perform specific tasks or provide materials. The extent of small business subcontracting will depend on NORESCO's business practices and the specific requirements of the project. Analysis of subcontracting plans would be necessary to fully assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of Veterans Affairs (VA) contracting officers and program managers. The performance-based nature of ESPCs means that contractor payment is contingent upon achieving guaranteed energy savings, providing a strong accountability mechanism. The VA's Office of Inspector General (OIG) may also conduct audits or investigations into the contract's performance and financial aspects. Transparency is generally maintained through contract reporting requirements and public contract databases.

Related Government Programs

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

Risk Flags

Long-term contract duration requires sustained oversight.
Performance risk tied to energy savings realization.
Potential for technology obsolescence over 20 years.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $4.5 million to NORESCO, LLC. IGF::OT::IGF OTHER FUNCTIONS - ENERGY SAVINGS PERFORMANCE CONTRACT FOR VISN 15 HEARTLAND NETWORK

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 $4.5 million.

What is the period of performance?

Start: 2018-05-31. End: 2039-11-14.

What is the track record of NORESCO, LLC in delivering similar Energy Savings Performance Contracts for the federal government?

NORESCO, LLC is a well-established Energy Service Company (ESCO) with a significant history of executing ESPCs for federal agencies, including the Department of Defense and the Department of Veterans Affairs. They have a portfolio of projects involving a wide range of energy conservation measures, such as HVAC upgrades, lighting retrofits, building automation systems, and renewable energy installations. Their experience typically includes developing projects, securing financing, implementing measures, and guaranteeing energy savings over the contract term. While specific project performance data is often proprietary, NORESCO's longevity and continued success in winning competitive federal ESPC awards suggest a generally positive track record in delivering on their contractual obligations and achieving guaranteed savings for their government clients.

How does the $4.5 million contract value compare to other VA ESPCs of similar scope and duration?

The $4.5 million contract value over a 20-year period, averaging $225,000 annually, represents a moderate investment for an ESPC. The total value is influenced by the scope of energy conservation measures (ECMs) to be implemented, the size and complexity of the facilities, and the projected energy savings. Larger, more complex projects involving significant infrastructure overhauls can easily reach tens or hundreds of millions of dollars. Conversely, smaller projects focusing on specific upgrades like lighting or controls might be in the low millions. Without detailed information on the specific ECMs and the number of facilities covered under this VISN 15 Heartland Network contract, a precise comparison is difficult. However, the value appears consistent with ESPCs aimed at comprehensive facility upgrades over an extended period, where savings are realized incrementally.

What are the primary risks associated with this type of long-term Energy Savings Performance Contract?

The primary risks associated with this 20-year ESPC include: 1. **Performance Risk:** The risk that the implemented energy conservation measures (ECMs) may not achieve the guaranteed savings, potentially leading to a shortfall that the government must cover. This is mitigated by the contractor's guarantee and performance-based payment structure. 2. **Technology Obsolescence:** Over a 20-year period, energy technologies can evolve. There's a risk that the chosen technologies might become outdated or less efficient compared to newer alternatives, impacting long-term savings. 3. **Utility Rate Fluctuations:** ESPC savings calculations are often based on projected utility rates. Significant, unforeseen increases or decreases in energy prices can impact the actual savings realized. 4. **Contract Administration Burden:** Long-term contracts require sustained oversight and administration by the agency to ensure compliance and verify savings. 5. **Contractor Viability:** While less common with established ESCOs, there's a long-term risk associated with the financial stability and operational continuity of the contractor over two decades.

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

While the specific Energy Conservation Measures (ECMs) are not detailed in the provided data, ESPCs typically encompass a range of upgrades aimed at reducing energy consumption and operational costs. For a contract of this nature with the VA, likely ECMs include: **Lighting Retrofits:** Replacing older, inefficient lighting systems with modern LED technology. **HVAC Upgrades:** Modernizing heating, ventilation, and air conditioning systems for improved efficiency and control, including potential upgrades to chillers, boilers, and air handlers. **Building Automation Systems (BAS):** Implementing or enhancing BAS to optimize energy use based on occupancy, weather, and operational schedules. **Water Conservation:** Installing low-flow fixtures and efficient water heating systems. **Renewable Energy Integration:** Potentially incorporating solar panels or other renewable sources, though this is less common as a primary focus in standard ESPCs unless specifically targeted. **Building Envelope Improvements:** Enhancements to insulation, windows, and roofing to reduce thermal loss.

How does the 'Firm Fixed Price' contract type impact the government's financial exposure?

The 'Firm Fixed Price' (FFP) contract type means that the total price of the contract is fixed and not subject to adjustment based on the contractor's cost experience. For the government, this provides a high degree of cost certainty. Unlike cost-plus contracts, the VA is not obligated to pay more if NORESCO, LLC incurs higher-than-expected costs during the project execution. This shifts the financial risk of cost overruns entirely to the contractor. In the context of an ESPC, the FFP nature applies to the overall project cost, while the savings guarantee mechanism ensures that the government's net expenditure is tied to achieved energy savings, making the FFP structure a favorable arrangement for managing upfront investment risk.

What is the significance of the contract being awarded to 'NORESCO, LLC' versus another ESCO?

The award to NORESCO, LLC signifies that, based on the evaluation criteria outlined in the solicitation, they presented the most advantageous offer among the competitors. This could be due to a combination of factors including: **Technical Approach:** The proposed solutions and technical expertise offered by NORESCO may have been deemed superior. **Price/Savings Guarantee:** Their proposed project cost and the level of guaranteed energy savings might have offered the best value proposition. **Past Performance:** NORESCO's track record on previous, similar contracts could have been a significant factor. **Understanding of Requirements:** Their demonstrated understanding of the VA's specific needs for VISN 15 facilities. The selection of a particular ESCO like NORESCO, a known entity in the federal ESPC market, suggests they met or exceeded the government's requirements and expectations for this complex, long-term project.

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: $18,956,213

Exercised Options: $18,956,213

Current Obligation: $4,547,483

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $6,109,440

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