Case Study - U.S. Postal Service Facilities

Overview

The U.S. Postal Service (USPS) was the first Federal agency to award a shared energy savings (SES) contract (now known as energy savings performance contracts). The contract was awarded to the Co-Energy Group in December 1987 for a lighting retrofit at the USPS General Mail Facility in San Diego, California. The local utility, San Diego Gas & Electric, provided a significant rebate that reduced the installation cost. The contractor invested $164,714; the Government s share of savings was $593,390 over seven years. This pilot project was so successful, it encouraged USPS to pursue additional SES projects. Three five-year contracts were awarded in 1992 that cost the contractors about $800,000 and will generate total energy savings worth $1.37 million. From this, the USPS will realize about $145,000 in saved energy costs and obtain maintenance services worth $230,000. In 1995, eight additional contracts were signed with an energy cost savings between $2 million and $3 million.

Background

The USPS was the only agency that could operate apart from Federal procurement restrictions until the recent reform of Federal Acquisition Regulations. To operate a business-like public service, the Postal Service is an independent Federal establishment with the authority to raise its own revenue through postage and purchase products and services through its own procurement regulations in accordance with Congressional policy. Rather than giving more weight to up-front costs, the USPS routinely purchased products and services with an eye to finding the "best value" available. This flexible procedure allowed USPS contracting officers to easily carry over their "best value" philosophy in considering energy consumption, energy efficiency, environmentally-preferable products, and other factors to meet the new mandatory standards for energy efficiency in Federal procurement contained in the Energy Policy Act of 1992 (EPACT). USPS contracting officers were prepared for the challenges of awarding contracts under alternative funding methods.

Project Summary

The lighting retrofit in the San Diego facility included fixtures, ballasts, lamps, reflectors, and controls in a 15-year-old, 1.7-million-square-foot, three-building complex.

Since then, the USPS has overseen SES and ESPC projects for numerous postal facilities.

Locations and Dates of USPS' ESPC Contracts
San Diego, CA Dec. 1987
Oklahoma City, OK Nov. 1991
New Orleans, LA Jan. 1992
Southern Maryland Mar. 1992
NY Church Street Mar. 1995
Baltimore Apr. 1995
Portland (55 facilities) Apr. 1995
Indiana (36 facilities) Jul. 1995
Envest (79 facilities) Jul. 1995
Portland Showcase Aug. 1995
New Jersey Sept. 1995
St. Paul Showcase Oct. 1995

The contract for the first project in San Diego specified the technical guidelines to be followed. Since then, USPS contracts allow contractors more freedom, encouraging "performance-based" retrofits that encourage them to make recommendations based on their expertise and experience. USPS procedures also allow offerors flexibility regarding financial proposals. Generally, proposals are requested, outlining a five-year and ten-year payment plan, along with any alternative financing plan.

Lessons Learned

The USPS successfully overcame the financial barrier of sharing money earned by saving energy during the last eight to nine years. This was accomplished through various methods:

Strategic Planning: The USPS has developed a strategic plan regarding energy efficiency, outlining an alternative financing mechanism as one major strategy.

Education: The former National Energy Coordinator for USPS published a paper (see References) that discusses the economic value of the alternative funding of energy-saving projects and shows how to track the projects financially. A copy of this document is provided to USPS financial officers in the field as a reference. The concept of alternative financing for energy projects was also presented at various USPS meetings and seminars.

Project Justification: Before the USPS proceeds with an ESPC solicitation, a "Justification of Expense" is prepared that must be signed by representatives of operations, maintenance, and finance departments at the facility and area level. This document notifies all appropriate staff that a project is planned that may incorporate alternative financing. Inclusion of these officers early in the project has helped to attain project support to enable an efficient evaluation and implementation process.

Alliance with Purchasing: At both USPS Headquarters and field offices, a strong alliance is set up between area energy coordinators and area procurement personnel. The two groups participate together in training sessions to teach field personnel about how ESPC projects have worked in other locations. This team approach allows purchasing departments to feel they "own" the projects because they were consulted early.

Partnerships with Utilities: After examining EPACT, USPS realized it did not have adequate personnel and money to fulfill all the requirements of the law. The agency also recognized, however, that there was a direct tie between energy savings performance contracting and utility servicing. The USPS has been very effective in entering into utility partnerships and has used this partnership strategy to create USPS "Energy Showcases". To date, USPS has designated seven potential "showcases" and has signed two utility-partnership agreements that include an alternative financing mechanism. Utility partnerships also provide an excellent method for USPS to address multiple facilities under one contract.

Public and Internal Recognition: USPS projects have been nominated for DOE s Federal Energy Efficiency Awards, which recognize projects and individuals for achievements related to ESPC. USPS also recognizes outstanding ESPC-related achievements internally by employees in the areas of purchasing, maintenance, and finance.

Benefits of Using an ESPC

SES and ESPC have been used by the USPS to replace inefficient equipment, reduce utility and maintenance costs, and help the USPS achieve its energy conservation goals.

References

(1) Fennewald, Paul, Economic Model for Alternative Financing of Energy Projects, U.S. Postal Service, 1994.