Energy-saving data center contract languishes under OMB hold

OMB put the brakes on a contract between the Energy Department and Lockheed Martin in March and has yet to explain its reasons, according to the affected parties.

data center cages

After investing millions of dollars into a contract to consolidate data centers and profit from the cost savings acheived, Lockheed Martin now sits idle waiting further explanation of why OMB put a hold on the project in March. (Stock image).

Energy savings performance contracts (ESPCs) have been widely used across the federal government to improve energy efficiency at major facilities' infrastructures, but a first-of-its-kind partnership between the Department of Energy and contractor Lockheed Martin aims to bring those same optimizations to data centers. Energy CIO Robert Brese earned an FCW Federal 100 award for his work in establishing such arrangements.

Here's how it could work: An energy savings company (ESCO) – in this case Lockheed Martin – identifies energy consumption metrics, discovers improvements and creates an energy savings project catered to the agency. The identified savings pays for the cost of the project, rendering capital and upfront investments unnecessary. The agency then would have a repeatable method for optimizing its data centers to specifications set forth by the Federal Data Center Consolidation Initiative, and would make good on President Barack Obama's energy savings projects memorandum.

There's just one problem with this first ESPC: DOE officials say that as they prepared in March to issue a task order to Lockheed Martin -- after going through more than a year's worth of work and completing the necessary approval processes -- officials at the Office of Management and Budget placed the project "on hold."

Reasons for the hold on the $70 million data center consolidation ESPC are not known, and OMB did not confirm or deny the hold to FCW. It is unclear whether OMB has the authority to place another agency's contract on hold.

As the ESCO for the project, Lockheed Martin's profits would have come directly from savings it guaranteed DOE. The optimization of two data centers – one in New Mexico and one in Maryland – projected to achieve a 70 percent reduction in energy consumption and generate another $6 million in annual lifecycle cost savings. Such savings would have paid the contract off in six years. The hold puts the company, which invested millions of dollars at its own risk, in the unenviable position of waiting for answers that haven't come yet.

"ESPCs address the challenges of data center consolidation most often cited by Federal CIOs -- lack of funds and uncertainty about the return on investment," said Roger Flanagan, Director of Energy Solutions for Lockheed Martin. "By competitively selecting a partner at the outset of project development, agencies can draw on industry expertise to significantly reduce large energy consumption and costs associated with IT operations."

The hold has also had a chilling effect on other data center ESPC efforts, according to Jennifer Schafer, executive director of the Federal Performance Contracting Coalition, an industry group that represents energy service companies. Three other major agencies – the General Services Administration, NASA and the U.S. Navy -- have selected ESCOs for their own data center optimization efforts, and others like the Department of Transportation have released notices of opportunity.

All are now looking at what happens with the DOE-Lockheed Martin deal. If it falls apart, Schafer said, the whole movement probably will.

"It's the first, and it would be incredibly awful for them to have a bad decision on this first one – the rest will die," Schafer said. "We won't do data centers in the federal government."

Paul Hamilton, vice president of government affairs for Schneider Electric, said his company is hoping to receive a task order soon from the Navy for work that includes data center optimization in San Diego. Schneider Electric is a big player in the world of data center infrastructure, and one of 16 ESCOs in the DOE's Federal Energy Management Program under an indefinite-delivery, indefinite-quantity (IDIQ) contract that previously did long-term modernization work like lighting.

Hamilton said its recent efforts in data center optimization will be for naught if the OMB hold continues indefinitely. "We're not waiting in the wings, we're actively developing those projects right now and proceeding as if it will get resolved," he said. "If it doesn't, then we've done a lot of work for nothing."

Hamilton's main criticism of OMB's handling of the issue is a lack of transparency.

No industry reps contacted by FCW, including Lockheed Martin and Schneider Electric, had seen or read any explanation from OMB for the hold. When contacted by FCW, officials from DOE said they had not received an explanation from OMB, a timeline for when a decision might come, or a detailed reasoning behind the decision to hold. OMB declined to answer those and other questions when posed by FCW.

"OMB provides guidance to agencies regarding the implementation of these memoranda," said an OMB spokeswoman, referring to the Federal Use of ESPCs and Utility Energy Service Contracts memorandum.

The hold also raised eyebrows because OMB has championed "innovative efforts" for agencies in recent months, with federal CIO Steven VanRoekel and others calling on agencies to do things like optimize data centers with increasingly tight wallets.

OMB has been criticized by GAO and congressional oversight committees for its poor leadership and lack of metrics in carrying out the FDCCI, which OMB once promised would save the government several billion dollars. A recent GAO report, released during a hearing of the House Oversight and Government Reform Subcommittee on Government Operations, stated only $63 million in documented savings and cost avoidance would be achieved by fiscal 2013's end.

And now ESPCs -- and OMB's hold -- are on the congressional radar as well.

On May 2, Senate Energy and Natural Resources Chairman Ron Wyden (D-Ore.) penned a letter to the White House calling for the increased use of ESPCs. In the letter, Wyden specifically urged OMB to approve "these and future projects in a timely manner in order to ensure that momentum continues toward achieving the $2 billion ESPC investment goal."

"ESPCs are a good deal for government," Wyden said. "These projects save money by reducing the cost of energy and operations in federal buildings, and they do not require any outlay of funds. For these reasons, I urge you to support a robust ESPC program and to reduce administrative barriers to the use of these contracts. In this time of serious budget constraint, I intend to do all I can to work with you in maximizing the use of performance contracting."

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.