On August 22, 2012, the U.S. Army Engineering & Support Center in Huntsville, AL held a pre-proposal conference to discuss the final multi-award task order contract that was issued on August 7, 2012 (the “Final RFP” or “MATOC”). My colleague, Lane Tucker, and I attended to hear the Army’s presentations and to engage directly with renewable energy developers, consultants, seasoned government contractors, large energy service contractors (ESCOs), and others. The conference provided attendees a great opportunity to explore the field of potential contractors and subcontractors and start (or continue) conversations about potential teaming arrangements that could result in both a MATOC award and one or more base task order awards.
For those who could not attend, fear not; all of the presentation materials will soon be available on the Army EITF website and the Huntsville team will post all of the questions presented, along with the Army’s formal responses, to the ProjNet website. Also important is that Tonju Butler, the Procuring Contracting Officer, indicated that the deadline for questions on the Final RFP would be extended from today until September 7, 2012, so that individuals and teams can have additional time to formulate and posit questions that may be important to their proposals. However, that change has not yet been posted to the FedBizOpps website as an amendment. It is too early to tell whether this extension foreshadows an extension of the October 5, 2012 proposal deadline. Right now, the Army is holding firm to that date, so individuals and teams that intend to respond should plan accordingly. Keep an eye out for other amendments to the Final RFP, too. Conference attendees were assured that more would be forthcoming to clarify small technical issues and, hopefully, to flush out the structure for proposing prices. All amendments will be posted to the FedBizOpps website for the MATOC.
Here are a few takeaways and a short discussion about some important issues. Be sure to check the Q&A on the ProjNet website for any official responses from the Army on these topics.
The Army staff that presented at the conference, including John Lushetsky, Executive Director of the EITF, and Tonju Butler, had a difficult task. Standing face-to-face with the 600+ attendees, they were asked hard questions about pricing, technology qualifications, pricing, local utility relationships, pricing, teaming and joint ventures, and (yes) pricing. Some of the questions were easily answered while others were not answered at all. To the Army’s credit, the Huntsville staff was careful not to speak out of turn- evidence that it is taking industry’s questions seriously and is willing to take the time necessary to develop thoughtful and (we hope) comprehensive responses.
Price: The MATOC states that “the maximum unit price should be based upon the Offeror’s estimate of the total cost for development, construction, operation, and maintenance of the renewable energy production facility at a location and size that is suitable, but not ideal for the technology proposed.” These maximum unit price rates for each technology “will be evaluated to determine price reasonableness and realism.” Thus, the Army will be making an initial judgment on price even at the MATOC level, when the offeror is not bidding on a specific project. MATOC Section L.6, Vol. V, 5 (Maximum Rates), page 96. Many attendees expressed concerns about the inflexibility of this requirement. For example, entering a single per kWh price for solar would not permit the offeror to distinguish between prices with and without incentives like the PTC and ITC, or at different installed megawatt sizes. These issues remain unanswered, but the Huntsville staff did say that “we’ve heard you on pricing” and plans to issue an amendment to the Final RFP addressing some of these concerns. One thing they also made clear is that the amendment will state that the price proposed for each technology must include the cost of financing.
Partial ownership of existing facilities: An entity is a small business under NAICS Code 221119 if it is primarily engaged in the generation, transmission, and/or distribution of electricity and the entity did not sell more than four million MWh of electricity during the last year. The Huntsville staff indicated that an entity that owns part of an existing facility (e.g., 40% ownership of an existing wind farm) must count the entire output of that facility when calculating whether the entity is over or under the four million MWh mark.
Projects currently under construction: This is an important one. Under the Corporate Technical/Management Experience requirements of the MATOC, Section L.6, Vol. I, Tab A, for technologies other than solar, offerors must describe three (3) 4MW or larger projects that the offeror had primary corporate responsibility for implementation. For solar, offerors must describe three (3) 2MW or larger projects. At the conference, the Huntsville staff clarified that for projects to qualify under this requirement they cannot be under construction at the time a proposal is submitted.
Will the Navy and Air Force also use the MATOC as a primary contracting vehicle: Huntsville staff indicated that the MATOC “will be available to those sister agencies” if they want to use it.
Energy Storage: The Army will not pay more than the amount bid by an offeror at the MATOC stage for energy storage technology. However, a task order may specify a base's particular interest in “energy security.” In such a case, proposals including storage technologies could be looked favorably upon in comparison to proposals that did not. For bidders interested in integrating storage technology, a potential workaround could be to propose one price for a particular technology (e.g., solar) and a separate price (under the CLIN for “Hybrid Projects”) that includes both solar and storage.
Financing: According to Huntsville staff, the Final RFP will be amended to state that the price proposed for each technology must include the cost of financing. However, they also stated clearly that Letters of Commitment from financiers will NOT be required (although LOCs from key subcontractors are still required). In this regard, if the offeror (i.e., the legal entity with whom the Army will contract, such as the prime contractor or joint venture) cannot demonstrate its ability to procure financing, a letter of commitment must be provided from an entity that can.
Hydro: Although I've heard commentary that hydropower was left out of the Final RFP, that's not entirely true. The Responses to Frequently Asked Questions that the Army published along with the MATOC explicitly states that "low head/low flow water turbines and ocean energy technologies are included under the NAICS 221119." See Question 33. Provided dam construction is not necessary, certain hydro projects may have a place at the task order level. There may be instances where a particular base has not determined the type of technology it wants developed on site- in which case the base may issue a request for information from developers before the task order is published. It is important to note, however, that teams responding to the Final RFP must bid one or more of the core technologies- wind, solar, biomass, and geothermal. Thus, any potential hydro bidder must hitch its wagon to a developer of one of those technologies if it does no tdeveloper them itself.