The U.S. General Services Administration (GSA) has challenged energy service companies to make 30 federal buildings, totalling nearly 117 million square feet, more energy efficient. It is now accepting bids for the projects under the Deep Retrofit Challenge.
The Deep Retrofit Challenge asks the service companies to use Energy Service Performance Contracts (ESPCs) to make the retrofits. The challenge was spurred by a Presidential Memorandum on implementing energy-savings projects and performance-based contracting. In December 2011, President Barack Obama directed federal agencies to enter into at least $2 billion in performance-based contracts over the next two years.

Under an ESPC, a building is retrofitted for guaranteed greater energy performance at no net cost to taxpayers. The retrofit projects are paid for through energy savings over time. An ESPC is an agreement between a federal agency and an energy service company. The energy service company conducts a comprehensive energy audit for the federal facility and identifies improvements to save energy.

There are 16 energy service companies that are preapproved by, and under contract with, the U.S. Department of Energy to bid on these projects. The energy service  companies will consult with GSA on the designs, and constructs a project that meets GSA’s needs and arranges the necessary funding. The energy service company guarantees that the improvements will generate energy cost savings sufficient to pay for the project over the term of the contract. After the capital is paid back, all additional cost savings accrue to GSA. The energy service  company bears the risk if their improvements do not generate the projected savings. Contract terms of up to 25 years are allowed.

“This is a challenge to the private sector to bring innovative, energy- saving retrofits to federal buildings and to take performance-based contracts to the next level,” said Martha Johnson, administrator of the GSA.  “These retrofit projects create jobs, and performance-based contracts provide government with decades of lower utility bills and long- term cost savings without an up-front investment from the taxpayers.”
 
The Deep Retrofit Challenge was announced in October, and the list of 30 buildings is now published in a Notice of Opportunity for the 16 energy service  companies to bid on these projects. The buildings in the challenge were identified by GSA regional energy and portfolio managers based on renovation and alteration needs and potential savings opportunities.