Navy ESPC Program CDR Brad Hancock NAVFAC EPMO

National Association of Energy Service Companies 

Federal Market Workshop 

Navy ESPC Program 

CDR Brad Hancock 

NAVFAC EPMO 

19 March 2010

Afloat Energy 

Consumption 

Other 

13% 

Ships 

40% 

Energy Consumption 

Aviation 

47% 

• Conservation ashore can not offset Navy’s rising energy costs. 

• Legislation and EOs don’t apply to fleet. 

Navy Energy 

Consumption 

Fleet 

75% 

• $10/barrel increase cost DON $470M/year, of that $60M/year is shore 

Shore Energy 

Consumption 

Shore 

Vehicles 

25% Facilities 36% 

64% 

2 NAESCO Federal Market Workshop 19 March 2010

Installations: Law and Policy 

DOD Policy EPACT 2005 E.O. 13423 (1/24/2007) EISAct 2007 

Energy Reduction Goals Reduce consumption 2% from 

2006 to 2015 relative to 2003 

baseline. 

Renewables (Included in NDAA 2007)– To 

produce or procure from 

renewable sources not less 

than 25% of the total quantity of 

electric energy it consumes 

within its facilities and its 

activities during FY2025 and 

thereafter. 

Metering Install Advanced Meters on all 

facilities with an annual electric 

bill of $20K. 

Sustainable Facilities LEEDS Silver certification for 

all FY09 and beyond MILCON. 

Purchase renewable 

electricity: 

3% in FY2007-2009, 5% in 

FY2010-FY2012, 

7.5% in FY2013 and 

thereafter. 

Electric metering required on 

all federal buildings end of 

2012 (where practicable). 

Buildings to be designed to 

30% below ASHRAE 

standard, Application of 

sustainable design principles. 

In budget request, agencies 

must identify new buildings that 

meet or exceed the standard 

Reduce consumption either by 

3% per year, or 30% by 2015 

relative to 2003 baseline. 

Reduce water consumption by 

2% annually relative to 2007 

baseline. 

At least 50% of statutory 

(EPAct) goals come from 

“new” renewable sources 

placed into service after Jan 1, 

1999. 

Same goals as EO 13423. All 

new construction and 

renovations greater than 

$2.5M are required to reduce 

fossil fuel consumption by 55% 

in FY10 & 100% by FY30 

Install at least 1 renewable fuel 

pump at each fleet fueling 

center by 2010. 

None. Natural gas and steam 

metering must be installed on 

facilities (requires DOD 

interpretation) 

By July 1, 2007 submit plan to 

OMB New construction and 

major renovations to meet 

Federal Agencies MOU. 15% 

of bldg inventory sustainable 

by 2015 

Vehicles Purchase 100% AFV vehicles Increase poucahse of AFV, 

hybrid and plug-in vehicles 

when available. Reduce 

pertoleum consumption by 2% 

annually through 2015. 

Items in red represent the most stringent requirement 

All leased space is required to 

have earned Energy Star label 

in the most recent year. 

Requires comprehensive 

energy and water evaluations 

of all buildings on a 4-year 

cycle 

20 percent reduction in annual 

petroleum consumption and 10 

percent increase in annual 

alternative fuel consumption, 

using a FY 2005 baseline 


-5 

-10 

-15 

-20 

-25 

-30 

Percentage 

0 

FY 

2004 

Public Works 

Utilities / Energy Management: DoN Energy Usage Reduction - Corrected 

Reduction Goal (MBTU/KSF) 

Actual DoN Reduction 

Actual USMC Reduction 

Actual Navy Reduction 

Projected DoN Reduction 

Projected USMC Reduction 

Projected Navy Reduction 

FY 

2005 

FY 

2006 

FY 

2007 

FY 

2008 

4 AM.2 

NAESCO Upward / Outward Federal Market PW Workshop 19 March 2010 

FY 

2009 

FY 

2010 

Percentage 

0 

-5 

-10 

-15 

-20 

-25 

-30 

NAVFAC 

Component 

Navy 

Marine 

Corps 

Progress 

since ‘03 

Baseline 

(target @ 

-12%) 

-15.1 

-9.0 

Past 12 

month 

Progres 

s 

Washington -13.5 +3.2 

Mid-Atlantic -18.2 -6.7 

Southeast -6.3 +5.8 

Midwest -18.3 +0.4 

Southwest -9.4 +1.5 

Northwest -22.3 -5.6 

EURAFSWA -10.3 -0.7 

Hawaii -10.0 -3.0 

Marianas +5.1 -2.2 

Far East -14.2 -7.7 

Atlantic -14.5 -0.4 

Pacific -11.4 -6.4 

-2.4 

-3.0 

DON Total -14.1 -1.3 

Goal -12.0 -3.00 

Table Assessment Legend: 

In DON target; reduction >3%/yr 

In DON target; reduction < 3% 

Above DON goal or reduction >0%

CNIC CONUS Regions 


PROJECT GOALS (Region) 

Total annual project investment (first cost) required by each 

Region to meet the 3% annual energy reduction goal: 

• $45 M Mid-Atlantic 

• $27 M Southeast 

• $25 M NDW 

• $15 M Southwest 

• $15 M Northwest 

• $13 M Midwest 

• $ 5 M Europe and SWA 

• $12 M Japan 

• $ 4 M Hawaii 

• $ 2 M Marianas 

• $0.1 M Korea 

• $0.1 M Singapore 

• $ 9 M MCI West 

• $ 20 M MCI East 

• $ 20 M USMC (other) 

• $ 7 M NAVAIR 

• $ 3 M NAVSEA 

• $ 7 M BUMED 

• $ 11 M Housing 

• $ 9 M Navy (other) 

• Call it $250 M total 

• NOTE: These numbers EXCLUDE renewable investments 


FEC 

SE 

SW 

MW 

ML 

NW 

NDW 

EURSWA 

HI 

MAR 

FE 

LANT 

PAC 

Navy 

$ Value (M) 

$38.9 

$17.1 

$23.5 

$15.2 

$25.5 

$11.7 

$9.6 

$141.5 

$11.3 

$0.0 

$7.8 

$19.1 

$160.6 

FY10 USN Energy Program 

MBTU 

170,739 

59,335 

150,176 

95,427 

156,995 

41,531 

49,505 

723,708 

15,199 

0 

13,104 

28,303 

752,011 

# ECIP 

3 

8 

0 

1 

1 

0 

5 

18 

1 

0 

3 

4 

22 

# ESPC 

-5.4% 

-2.1% 

7 NAESCO Federal Market Workshop 19 March 2010 

1 

0 

1 

2 

2 

1 

1 

8 

1 

0 

0 

1 

9 

# UESC 

8 

4 

0 

1 

5 

6 

0 

24 

1 

0 

0 

1 

25 

% attained 

-19.2% 

-18.5% 

-22.3% 

-22.3% 

-9.6% 

-10.3% 

-14.7% 

-13.2% 

-5.1% 

-37.4% 

-28.8% 

-16.4% 

% FY13 

-1.3% 

-4.6% 

-0.8% 

-4.3% 

-0.7% 

-3.6% 

-1.9% 

-1.8% 

-0% 

-0.3% 

-0.5% 

-1.7%

Where We Are Going 

Shore Energy Program Drivers 

Legislation Mission requirements 

New Construction 

(ROI 5-10 years) 

•Build to LEED 

Silver 

•30% more efficient 

than ASHRAE 

•By 2015, 15% of 

the Navy’s building 

inventory shall be 

high performance 

sustainable buildings 

Shore Energy Program Mitigations 

Renewable Energy 

(ROI 7-30+ years) 

•By 2025, 25% 

of electricity to 

come from 

renewable 

sources 

Energy Efficiency 

(ROI 0.5 – 20 years) 

•Reduce energy 

intensity by 

3%/year 

Non-Tactical Vehicles 

(ROI 0-16+ years) 

•Reduce petroleum 

fuel consumption 

2%/year 

~$500M/year 

needed to 

comply with 

goals 


DON ESPC Organization 

• Key Organizations for ESPC work: 

– NAVFAC EPMO (Energy Program Management Office) 

– NAVFAC ESC (Engineering Service Center) 

• Specialized Engineering Support to the Navy. 

• Mission is to bring technology, engineering support, and best 

practices to NAVFAC and DON 

• Manage the Centralized ESPC Program. 

– SCAN (Specialty Center, Acquisition, NAVFAC) 

• Key member of the central ESPC Team 

• Provide all Contracting Officer support for DON ESPC projects 

– NAVFAC Engineering Commands (FECs) 

• First line of engineering support for all installations 

• Manage utility infrastructure 

• Member of the ESPC Team 

• Customer for some ESPC projects 

– FEAD (Facilities Engineering and Acquisition Division) 


7 

N 

ICO Energy 

Plan 

Construction 

Award 

8 

Commissioning 

Process Begins 

Y 

1 

Financed 

Project Concept 

6 

Award 

Approval 

Y 

The ESPC Process 

N 

Annual 

Payment 

N 

Request 

Final Proposal 

N N 

Measurement 

and Verification 

Terminate 

Initial 

Proposal 

Approval 


5 

Y 

2 

N 

Y 

Y 

3 

N 

4 

Y 

9 

Complete 

Payment

What We Need To Do 

• Develop regional plans 

• To meet 3% per year energy goals Navy will need to invest 

$250M/yr in projects. 

– Leverage all acquisition tools available 

• Expand local renewable energy production 50 MW each year. 

– Continue award of large renewable energy projects. 

– Maximize use of financed projects, EULs, PPAs, and PPVs to reduce 

appropriated fund burden. 

• Invest in sustainable MILCON and Special Projects. 

• Standardize policies for all Enterprises and SYSCOMS. (I.E. Navy 

energy strategy.) 

• Do not invest in RECs. Short term public relations ploy with no 

savings. 


Contact information 

CDR Brad Hancock, PE, CEM 

NAVFAC EPMO Operations Manager 

202-685-9231 

Brad.Hancock@navy.mil 

Want to know more: 

GovEnergy 2010 

Dallas, TX 

August 15-18 

GovEnergy.com 

12 NAESCO Federal Market Workshop 19 March January 2010 2005

BACKUP SLIDES 


The ESPC Process (Steps 1 and 2) 

1 

Financed 


Request 

• Steps 1 and 2 are Navy-specific actions and require no involvement 

on your (ESCO) part. 

• Step 1 is the Installations planning process to develop plans and 

procedures to achieve all required energy goals. Each Installation 

must develop 5-year plans. 

• Step 2 involves the Installation selecting which projects identified in 

Step 1 are going to move forward, and more importantly – which 

ones are going to move forward utilizing the ESPC execution vehicle. 


2

The ESPC Process (Steps 1 and 2) 

1 

Financed 


Request 

• Significant Changes / Improvements: 

– ESPC team members (Installation EM, FEC, Operations, FM) will be 

required to attend training sessions on the ESPC Process and each 

person’s specific roles and responsibilities will be clarified. 

– The Installation will be required to identify a bounded scope. This 

scope will not be allowed to migrate or “creep.” 

– The Installation will be required to develop a site data package prior to 

asking for an ESCO to consider their project. Site data package must 

include historical energy consumption, utility rates (approved by the 

UEM PLC and FM) that are applicable to the project, hours of operations, 

approval chains, and much more. 


2

The ESPC Process (Step 3) 

Initial 

Proposal 

• Step 3 involves notification of project intent and PA development. 

• Step 3 is completely different than the process we’ve used in the 

past. Our past process is simply that – the past. 

• Once a project request is received by the ESPC team, we will notify 

each of you in writing of the project intent. Included in that notice 

will be: 

– Project Scope. 

– Site Data Package. 

– Date of site visit. 

– Due date for PA 



Initial 

Proposal 


– ESCO selection does not occur until after Step 3 (not at the 

beginning of Step 3 as in the past) 

– PAs will be requested from all interested ESCOs. 

– Time frame for PA development / submission will be fixed 

(and all relevant data will be provided on day 1) 

– Site access will be limited, and controlled (Source Selection) 


The ESPC Process (Step 3 Con’t – The 

PA) 

Initial 

Proposal 

• PA will be limited to 20 pages. (TO Schedules and a page (or two) of 

assumptions do not count in the 20 page limit) 

• PA must address the items in the contract including O&M/R&R 

aspects, responsibilities and cost. Navy “going in” position is that 

the ESCO will be responsible for all O&M and R&R related to the 

proposed ECMs. 

• Your PA should outline how you will include these items. Failure to 

address these issues, or deferring to the final proposal will be viewed 

as either non-responsive or as a weakness in your PA. 

• All calculations and numbers must be explained such that Navy 

engineers can repeat (and check) the calculations. 



PA) 

Initial 

Proposal 

• All assumptions used in the proposal (necessary to repeat 

calculations or support data submitted) must be stated. Best 

to summarize these in an attachment. 

• Your M&V plan should not only provide your method but 

also address how your method would serve to quantify a 

shortfall in savings 

• The Navy does not stipulate savings. We may stipulate a 

parameter, but we will not stipulate savings. Even a lighting 

retrofit will require a level of M&V – even if that level is simply 

an annual verification of properly installed equipment. 



PA) 

Initial 

Proposal 

• When developing your project – focus on MBTU savings, not 

O&M. In many instances, due to Navy accounting, (and our FM) 

O&M savings will not be allowed. You should view O&M savings 

as a “bonus.” 

• O&M Savings in DON projects are only included in the project if 

approved in advance by the PM (but only at the IGA stage). 

• O&M savings must result in real, actual dollar, reductions in the 

installation’s budget. (“Should cost” analysis is not acceptable) 

• Remember: The project should remain economically viable 

without any O&M savings included. 



PA) 

Initial 

Proposal 

NOTE: The Navy is much more interested in sustainable projects (Projects 

fully maintained and monitored) than in “big” projects. Do not expect us 

to remove O&M so that we can have “more” of something. 

• Remember, these are performance contracts – if you have very little 

financial risk of performance, then the markup (profit) for that project 

should reflect that. 

• Please review your submittals! Grammar is one thing, but mentioning 

NAVSTA Safe Harbor in the project for NAS Anywhere will definitely make 

us wonder how much thought was truly expended in your project 

concepts. 

• Finally - Please remember significant figures! 



• Step 4 begins upon submission of the PA. 

• Step 4 includes selection of the ESCO and approval of the PA. 

– Selection will be based on a best-value analysis 

4 

Approval 

– Selection may occur after discussions (with ESCOs within a competitive 

range). Goal is to have enough clear information in the submitted PA to 

make an ESCO selection without discussions. 




– ESCO selection does not occur until after Step 3 (not at the 

beginning of Step 3 as in the past) 

– PAs will be requested from all interested ESCOs. 

4 

Approval 

– Time frame for PA development / submission will be fixed 

(and all relevant data will be provided on day 1) 

– Site access will be limited / controlled (Source Selection) 



• Step 5 begins with the NOITA / TORFP and ends with the 

submission of the final proposal. 

• Step 5 includes the IGA 

5 


– Submitted ~2/3rd of the way through the Final Proposal step 

– Used to validate the PA / highlight significant variances 

– A “go / no go” step 

• Step 5 concludes with the submission of the Final Proposal 




5 


– Step 5 includes the submission of the IGA prior to the final proposal. 

– Vision / goal is that most projects should reach this stage within four 

months of project initiation. 



• Step 6 begins with review of your final proposal 

– This involves written review comments by the Navy team 

– Responses by the ESCO 

– Logging all dispositions 

• Step 6 includes final negotiations 

6 

Award 

Approval 

• Step 6 concludes with getting the final approvals to award from the 

chain of command. 

– USMC HQ must approve all final proposals for their installations 

– CNIC approves selected projects (>$10M, > 15 yr term, > 35% debt load) 




6 

Award 

Approval 

– The changes and improvements to Step 6 will result from the 

cummulative improvements to the first five steps: 

• Command involvement (including FM) from day 1 

• Locked in scope (no surprises) 

• NAVFAC Operations lead in execution (The vertical, not horizontal axis) 

– gives increased visibility 

– puts energy projects in the proper “swim lane” 

– Properly aligns tasking with chain of command 


7 

The ESPC Process (Steps 7 through 9) 

Construction 

Award 

8 

Commissioning 

Complete 

Payment 

• Step 7 includes awarding the Task Order and the subsequent 

construction. 

• Step 8 is the performance period of the contract (complete with 

annual Measurement and verification and payment). 

• Step 9 is the final year of performance wrapped up with the final 

payment and contract closeout. 


9

7 

The ESPC Process (Steps 7 through 9) 

Construction 

Award 

8 

Commissioning 


– At this time, there are no changes to our existing process. These steps 

are rather straightforward and involve what you would expect. 

– Steps 7 and 8 are slated for LSS improvement, and the teams are 

currently being formed. 

– Areas of potential improvement: 

• Tracking and handling of M&V reports 

• Timeliness of payments 

• Handoffs from PM to FEAD to NTR 

• Handling of contract modifications during construction 

Complete 

Payment 


9

The ESPC Process (Other / Overall 

Aspects) 

• Each Project will have three primary POCs 

– KO, PM and EM 

– NOT the CO, or NAVFACHQ or OSD! 

• Words and phrases we do not want to hear: 

– Stipulation 

– Buy down 

– Mortgage 

– “But the (Army, Air Force, VA, etc) didn’t do it this way” 

– “But the base wanted it” 

• Notice there are no ESCO presentations in our process. 

ESPC projects are engineering projects, not salesmanship 

projects and must focus (and stand) on their technical merits. 


The ESPC Process (Other / Overall 

Aspects) 

• We will not use the “workshop method” in project 

development. 

• Please do not modify the various templates that we 

use in our process (example: the comments checklist) 

• Keep your executive summaries focused on energy 

reductions against our goals! 

– Ex: “xyz corporation is pleased to present this $17M 

wind and HVAC project with a 14 year term. If 

implemented this project will reduce your installation’s 

energy consumption by 12% and provide 0.4% (1,200 

kwh) of your electrical needs from renewable (wind) 

power.”

Navy ESPC Program CDR Brad Hancock NAVFAC EPMO

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