J-A (ESPC III MATOC) 16 Aug 24 Redacted.pdf

CUI

Source Selection Information - See FAR 2.101 and 3 .104-4

SCO-ALX and Headquarters Reviews

The following signatures indicate concurrence with contents of this document.

Table 2 – Projects in the Pipeline

Planned Projects/Solicitations in Development Under this Proposed J&A

Estimated Value

Current Status

Ft Liberty $30M NTP for PA 1QFY24, Award 1QFY26 Ft Drum $50M RFP FY24 and NTP for PA 4QFY24 West Point $30M RFP FY24 and NTP for PA FY25 Dugway Proving Grounds $15M RFP FY 24 and NTP for PA FY25 Detroit Arsenal $15M RFP FY 24 and NTP for PA FY25 Rock Island Arsenal Phase III $6M NTP for PA 4QFY24 Kwajalein Atoll Phase II $250M NTP for PA projected 4QFY24 Soto Cano $40M RFP FY25 and NTP for PA projected FY25 Kuwait $20M RFP FY25 and NTP for PA 3QFY25 Subtotal Estimated Value $456M

Estimated 15% Cost Impact $68.4M Estimated Impact based on higher-than-normal inflation and interest rates on financed projects

Total Capacity Needed for Projects (does not include Deep Energy Retrofit Work to be added to existing Task Orders)

$524.4M

Table 2 above identifies nine projects that have been solicited, but not yet been fully developed with a Rough Order of Magnitude (ROM) estimate total of $456M. These ROM estimates are further influenced by multiple factors, such as the current economic and continued supply chain issues, the dramatic increase in interest rates including the downstream effect of these rates on the overall project cost, and higher inflation rates – all of which must be taken into consideration when determining capacity needed. Thus, it is essential to allow for an estimated 15% cost impact to each project because of these known factors, which will account for an additional cost of approximately $68.4M, bringing the estimated capacity needed to approximately $524.4M.

Just recently, the Assistant Secretary of the Army for Installation Energy and Environment (ASA IE&E) has allotted $100M in Fiscal Year 2024 funding and directed CEHNC to conduct Deep Energy Retrofit (DER) assessments at multiple ESPC project locations to expeditiously execute these DER projects to maximize use of third-party financing, increase installation resilience, and meet or exceed a 40% reduction in energy building consumption. These will be issued as modifications under existing TO. At least twelve projects are projected over the next three fiscal years and using an average price of $25M from Table 2 (discounting Kwajalein as an outlier) this would produce another estimated $300M in requirements to be awarded under the ESPC III MATOCs (see Table 3 below). The total capacity needed under this J&A is $824.4M for a total capacity of $1,543,900,000 for the ESPC III MATOCs.

Table 3 – ESPC Projects Identified for Deep Energy Retrofit Modifications

Planned DER Projects via Modifications to Existing Task

Orders

Total Estimated Capacity Needed per FY

Current Status

Moore

$100M

RFP Projected to be issued 4QFY24 Natick RFP Projected to be issued 4QFY24 Huachuca RFP Projected to be issued 4QFY24 Leavenworth RFP Projected to be issued 4QFY24 Drum

RFP Projected to be issued 2QFY25 Riley RFP Projected to be issued 2QFY25 Walker RFP Projected to be issued 2QFY25 Bliss RFP Projected to be issued 2QFY25 Carson

RFP Projected to be issued 2QFY26 Knox RFP Projected to be issued 2QFY26 Leonard Wood RFP Projected to be issued 2QFY26 Presidio of Monterey POM RFP Projected to be issued 2QFY26 Total Estimated DER Modification Work Value

$300M

4. Authority Cited:

10 U.S.C. 3204(a)(1), as implemented by Federal Acquisition Regulation (FAR) 6.302- 1(a)(2), Only one responsible source and no other supplies or services will satisfy agency requirements.

5. Reason for Authority Cited:

a. Authorized under Section 155 of the Energy Policy Act of 1992 (P.L. 102-486), 42 United States Code (U.S.C.) § 8287 et seq., an ESPC is a multi-year contract between a Federal agency and an ESCO. As defined in 42 U.S.C. § 8287c, the term “energy savings performance contract” mean a contract that provides for the performance of services for the design, acquisition, installation, testing, and, where appropriate, operation, maintenance, and repair, of an identified energy or water conservation measure or series of measures at one or more locations. Pursuant to 42 U.S.C. § 8287 and 10 C.F.R. § 436, Subpart B, the solicitation and award of ESPCs are limited pre-qualified ESCOs (in this case existing ESPC III MATOC awardees). Under an ESPC, the ESCO conducts a comprehensive energy audit for the Federal facility and identifies different ECMs it could undertake to make improvements to those facilities to save energy, reduce consumption, and ensure energy resilience. In consultation with the Federal facility or installation, the ESCO designs and carries out a project that meets the Government’s needs.

b. To accomplish this, 42 U.S.C. § 8287 authorizes an “alternative financing method” for ESPCs

– in other words, agencies are not required to have appropriations upfront to pay the ESCO.

Instead, the ESCO can “front” the costs of the ECMs via third-party financing. As such, an ESPC can be used to take advantage of private sector expertise and capital so that energy and water conservation goals can be achieved when appropriated funds are limited or unavailable.

The ESCO is required to guarantee that the ECMs generate energy cost savings sufficient to pay for the project’s improvements to the installation’s facilities over the term of a task order. Each ESPC requires annual Measurement and Verification to validate the savings are obtained prior to paying the ESCO and their financier. The ESCO then is paid back over a fixed period of time from appropriations that would be used for the payment of energy expenses and related operation and maintenance expenses which would have been incurred without an ESPC.

c. ESPCs are more complex than traditional contracts due to their long-term duration of up to 25 years, the sophistication of energy saving systems, and the likelihood of changes in, or to the facility and how it is utilized over the long contract period that may affect project performance.

The Measurement and Verification (M&V) process illustrates one aspect of ESPC complexity.

It is a specialized and detailed field of engineering that is essential to ensuring that the project achieves guaranteed savings. M&V is complex because it attempts to measure energy conservation and cost reductions – neither of which can be directly measured. Instead, they must be ascertained by comparing actual performance to a complex yet hypothetical projection: the baseline. In addition, because facilities and their occupants are not static objects, the M&V process must account for modifications to facilities and occupant usage – both expected and unexpected. Accordingly, a properly designed M&V plan must be reliable, detailed, comprehensive, and to some extent flexible.

d. ESPC Task Order (TO) development (i.e., project initiation to TO award) is unique in that it can range from 2 to 3-years, depending on the size of the project, age of the facilities on the installation, availability of data on historical energy usage and consumption, and the complexity of energy conservation measures (ECMs) proposed. The average time for the development period was previously 2-years for prior projects awarded under ESPC III. The development of an ESPC now requires additional higher level Army approvals (land holding command general and Deputy Assistant Secretary of the Army for Energy and Sustainment, which is adding 3-9 months, thus extending the development period to almost 3 years. ESPCs also have multiple development milestones in addition to the initial developmental approval, which include multiple reviews and approvals from all Command levels. Projects for an Army Command involve not only the CEHNC and the installation’s commander, but also Deputy Chief of Staff (DCS) G-9, Headquarters Installation Management Command General Officer and Secretariat briefings, and signatory approvals. Projects executed for other DoD agencies also have their own internal review and approval processes before a TO can be awarded.

e. The ECMs identified, validated, and approved are unique to the ESCO and include proprietary design components. These solutions, by law, are not viable for transition to any other ESCO to implement. Shifting to a new vendor would require removal of the proprietary elements, re-solicitation to the MATOC holders, and duplication of costs and efforts of the feasibility studies.

An extension of the ESPC III MATOC to 07 May 2028 will assure that the Army will be able to execute its current mission and projects that have already been identified and programmed, with uninterrupted service to our customers by allowing solicitation of the known projects to continue to be initiated under ESPC III until the ESPC IV MATOC is available for project initiations/requests for TO proposals to be issued. There is no guarantee the current MATOC contractors will be selected for the ESPC IV MATOC nor is there a way to convert a TO solicitation issued under ESPC III MATOC to an ESPC IV MATOC TO award. If the ESPC III MATOC ordering period is not extended, the Army is at significant risk that it will fail to meet energy mandates issued by DOD and Congress regarding energy reduction goals, energy resilience metrics, and energy security initiatives. The Army does not want to risk failure on obtaining energy resiliency and independence with all the uncertainties currently ongoing in our complex political environment.

6. Efforts to Obtain Competition:

In accordance with 42 U.S.C. § 8287 and the implementing regulations at 10 C.F.R. Part 436, Federal agencies are required to select firms from the list of “qualified contractors” prepared by the DOE or the agency itself may solicit and award to qualified contractors using the procedures, selection method, and terms and conditions provided in 10 C.F.R. Part 436, Subpart B; see also FAR 23.205(c).

a. Effective competition.

Historically, CEHNC has successfully promoted competition under the ESPC III MATOC and promoted on-ramping of new entrants over the ordering period. The MATOC solicited and awarded the current ESPC III MATOC in accordance with 10 C.F.R. Part 436, Subpart B using full and open competition, as well as an on-ramp following the original awards; the MATOC currently contains 17 qualified ESCOs. In addition, the same solicitation was posted on FedBizOpps for the on-ramp of additional small businesses. Four additional small businesses were added to ESPC III MATOC as a result of the on-ramp solicitation.

For the work anticipated under this justification, CEHNC issued a Notice of Intent (NOI) to Sole Source on the government-wide point of entry from 09 – 24 February 2024. Two companies submitted responses; one of which is a current ESPC III MATOC holder and the other indicated interest in the new competitive ESPC IV MATOC acquisition. As a result, no additional competition was identified. See section 8, Market Research for additional details.

b. Subcontracting competition.

All Large Business firms under the ESPC III MATOC were required to submit a Small Business Subcontracting Plan prior to award which, at a minimum, should be consistent with their Small Business Participation Plan. Ample opportunity exists for subcontracting with all types of Small Business including SDBs, WOSBs, HUBZone, and SDVOSBs. By providing subcontracting opportunities to Small Businesses, the Large Businesses both formally and informally mentor these Businesses by helping them gain experience and increasing their ability to perform at a higher level. This in turn helps the Small Businesses grow as companies and independently compete for larger projects as prime Contractors or first-tier Subcontractors. The following small business participation goals were included in ESPC III:

• Small Business- 20%

• Small Disadvantaged Business- 3%

• Women-owned Small Business- 3%

• HUBZone Small Business- 2%

• Veteran-Owned Small Business- 2%

• Service-Disabled Veteran-Owned Small Business- 2%

Additionally, Each ESPC III MATOC TO RFP requires ESCOs to conduct a competition for the financing of the project. The ESCO must include a copy of three (3) subcontractor quotes and include the evaluation document used to select the subcontractor in their proposal. If the lowest priced subcontractor was not selected for the effort, the ESCO must provide documentation within their proposal as to why the lowest subcontractor was not selected. As a result, adequate subcontracting competition exists and is anticipated to continue.

7. Actions to Increase Competition:

CEHNC currently has issued a solicitation for the new ESPC IV MATOC using full and open competition with a small business reserve. Based upon a full analysis of the market research conducted, and pursuant to FAR 19.503(a)(1) Reserves, a total set-aside is not feasible because there is not a reasonable expectation of receiving offers that are competitive in terms of fair market prices, quality, and delivery from at least two responsible small business concerns that can perform the entire requirement. A small business reserve will: (1) maximize opportunities for small businesses allowing them to compete on unrestricted TO requirements; and (2) extend the opportunity for small businesses to learn, grow, develop, and partner. The anticipated target number of awardees is 20 (5-small businesses and 15-large businesses).

The Contracting Officer will set aside TOs for any of the small business concerns identified in 19.000(a)(3) Scope of part when there are two or more capable, within the reserve, to perform the work. Fair opportunity for each TO will be provided IAW FAR 16.505, Ordering for task orders. If an exception applies, the rationale for the decision will be documented IAW FAR 16.505(b)(2)(i).

CEHNC will actively seek new contractors to engage in new ESPC IV work under the new MATOC when awarded and by holding industry wide third-party financing workshops, participating in the small business workshops, and attending and participating directly in the annual National DOE/Federal Energy Management Program (FEMP) energy exchange.

8. Market Research:

As previously mentioned CEHNC issued a NOI for this MATOC capacity increase and ordering period extension on 9 February 2024 with a closing date of 24 February 2024. Two companies responded: S&S Consulting Partners, LLC and Johnson Controls Government Systems, LLC (JCGS). JCGS is currently an ESPC III MATOC holder and did not object to the extension. The Contracting Officer contacted S&S Consulting Partners to discuss their interest in the ESPC III MATOC, which resulted in the firm clarifying that S&S Consulting Partners are potentially looking to compete for the ESPC IV MATOC when the RFP is released but did not have any concerns over the extension of the ESPC III MATOC. As such, no additional competitive opportunities exist.

9. Interested Sources:

Based on the market research conducted in February 2024 only two vendors explicitly expressed interest: S&S Consulting Partners, LLC and JCGS. See paragraph 8 above for details. Additional sources include the current 17 ESPC III MATOC holders.

10. Other Facts:

a. Procurement History.

1. Current Indefinite-Delivery Contract (IDC): The ESPC III MATOC (8 May 2015-7 May 2025) is the third generation MATOC for ESPC services, in which multiple contracts were awarded to small and large businesses, see Table 1.

2. Previous IDC: ESPC II MATOC (22 Dec 2008 – 21 Dec 2018): The second generation MATOC for ESPC services was awarded on 22 Dec 2008, FFP contract, with a total capacity of $900M over a base plus 1 option period. There were 16 contractors who were awarded a contract which included 15 large and 1 small business.

3. Previous IDC: ESPC I MATOC (11 Aug 1997 – 30 Aug 2010): The first generation

MATOC for ESPC services with a total capacity of $150M over a base plus 2 option periods. As these were the CEHNC’s first attempt at developing MATOCs for ESPCs, they were awarded differently. The first set of contracts covered work in only 4 states. The second set of contracts covered work in the remaining 46 states.

b. The competitive status of these actions. The ESPC I, II and III MATOC shown above were solicited and awarded under full and open competition.

c. Authority Previously Used for Other Than Full and Open Competition: N/A

d. If a prior contract was accomplished using Full and Open Competition, include details on why sources are being limited. Current market research did not identify additional contractors interested and capable of performing the requirements of this MATOC. The existing MATOC holders have been the only identified contractors capable of performing the full requirements of the ESPC program.

e. Explanation of unusual patterns in procurement history. N/A – there are no unusual patterns in procurement history.