On August 7, 2012, the Army released a request for proposal (“RFP”) to participate in a Multiple Award Task Order Contract (MATOC) to facilitate the Army’s procurement of renewable and alternative energy through Power Purchase Agreements for the purchase of energy over a period of 30 years or less, in its effort to procure long-term a safe, secure and cost-effective energy supply.
The solicitation is in response to the Department of Defense’s goal to deploy three gigawatts of renewable (solar, wind, biomass, or geothermal) energy on Army, Navy and Air Force installations by 2025. The Army’s goal is one gigawatt of that total and its mandate is to procure at least 25% of its total facility energy needs from renewable and alternative energy sources by 2025. All of the energy under the MATOC will be produced on or near a military base. While firms will be able to sell some of the electricity onto the commercial power grid, the Army base would have priority use of the power in the event of a disruption to the public electric grid.
The MATOC creates an process where many companies can compete against each other for the agreements. The RFP requires contractors to first offer a maximum price per kWh and includes a most-favored-customer provision. The selected companies will then enter into a long-term power purchase agreement or other similar contracting arrangement with the government to supply power. However, price is not the only criteria used here: solid management and execution teams are critical.
The Army’s goal is to have 50% of the contracts awarded to “small companies”, defined as businesses engaged in the generation, transmission, and/or distribution of electric energy for sale with a total electric output for the preceding fiscal year of equal to or less than 4 million megawatt hours. To fulfill this goal, projects which have an energy production of 4 megawatts or less will only go to small businesses, projects with energy production between 4 and 12 megawatts will first be offered to small businesses and projects with an energy production of greater than 12 megawatts will be open to all competing companies. Large developers, however, are required to submit small business subcontracting plans and participation plans to ensure the involvement and participation of small business enterprises.
The energy-producing facilities will be primarily built on land under the Department of Defense’s jurisdiction, but private property in the vicinity of an Army facility, will be considered. The private sector must actually provide the money and build, own and operate the plants. The Army will merely be acting as a customer purchasing the energy produced by them.
The Hon. Katherine Hammack, assistant secretary of the Army for installations, energy and environment, summarizes some key points of the project: “By diversifying our installation’s energy sources to include sustainable, reliable energy, we improve our ability to fulfill our missions during energy interruptions and to better manage energy price volatility. Energy budget assurance is energy security, just as is providing for the continuity of operations. Army energy security and sustainability are operationally necessary, financially prudent and mission critical. The $7 billion MATOC RFP will help us fill those goals.”
On August 22, 2012, more than 600 interested attendees participated in the pre-proposal MATOC conference in Huntsville, Alabama. Following that meeting, hundreds of questions and comments have been posted and answered, resulting in six amendments to the original RFP, the most recent one being September 28, 2012.
Final bid submissions for phase one of the process are due on October 5, 2012. The Army hopes to select the qualified bidders by the second quarter of 2012 and seek bids on individual projects soon thereafter.