Large Opportunities and Potential Risks: Renewable and Alternative Energy Companies Competing for the Army’s $7B Contract

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Renewable and alternative energy (“RAE”) companies will throw their hats into a rich, but potentially risky, ring for an opportunity to contract with the U.S. Army beginning at the end of September 2012. A number of those companies may be selected in November 2012 to belong to a pool of contractors from which some may be selected over the next ten years to help the U.S. Army satisfy a Department of Defense (“DOD”) mandate to produce or procure at least 25% of its total facility energy needs from RAE sources by 2025. Over the contracts’ 10-year term, the Army will issue a number of task orders ranging in value from $500 (the minimum) to $7B (the total of all task orders to be issued). Some of the task orders will be set aside for small businesses, and teams of contractors are encouraged to participate. Many of the contractors may be experienced at conducting business with the government and others may be dealing with the government for the first time, but all would be well-advised to exercise caution – both for the risks that apply to government contracting in general, but also for risks that are specific to this particular contract.

THE NET-ZERO ENERGY INITIATIVE -

The DOD is the largest energy consumer in the U.S. Government. In 2008, the DOD spent $20B on energy. Roughly a quarter of that amount was spent on the facility energy needs of the DOD’s approximately 28 million acres. Despite all of the strategies employed to date, the current DOD facility annual energy bill is $4B. Previous efforts to control energy requirements include Executive Order 13423, “Strengthening Federal Environmental, Energy, and Transportation Management, signed on January 24, 2007, which sets forth requirements for meeting certain energy-related requirements, including a reduction in dependence on fossil fuels. In 2008, a Defense Science Board task force called on the DOD to be more aggressive in reducing the military’s dependence on others for its energy needs. Each of the Army, Air Force and Navy are required to meet at least 25% of their total facility energy needs with RAE sources by 2025. In addition, the Army has set a goal of “net-zero” energy consumption by 2030, meaning each of its installations will produce as much energy as it consumes.

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