Cutting Costs and Modernizing Buildings through Performance-Based Contracting

Editor’s Note: On June 19th, the White House Council on Environmental Quality brought together leaders from government, private industry, non-profits, and academia at a White House event to highlight President Obama’s $2 billion commitment to improve the energy efficiency of Federal buildings through performance contracting.  Below, U.S. Department of Transportation Assistant Secretary Brodi Fontenot shares some of the innovative ways his agency is using performance-based contracting to conserve energy, cut waste, and save taxpayer dollars.

The U.S. Department of Transportation’s (DOT) operations encompass more than 10,000 buildings in all 50 states, from air traffic control centers and research facilities to our regional offices and headquarters. That kind of range complicates our efforts to green our internal operations and infrastructure, yet over the last two years, DOT has improved its sustainability performance across all seven measures of the OMB Sustainability and Energy Scorecard.

To achieve those results and continue to move forward on sustainability, we are trying to use every tool available.  One tool that has served us well is Performance-Based Contracts (PBCs). A PBC is a tool where a company makes improvements at little to no upfront capital cost and is paid through the savings from the project over many years. It is a win-win-win for government, industry, and the environment.

These contracts are an important vehicle for meeting our energy and water goals. PBCs are attractive because they are a low-cost tool with limited upfront capital investment that emphasizes performance. DOT has dedicated sources of funding for some building improvements, but PBCs present a vital tool to stretch the value of taxpayer dollars.

PBCs leverage knowledge and resources to make much needed improvements. For example, DOT owns the U.S. Merchant Marine Academy in Kings Point, New York. Established in the 1940s, the Academy provides a top-notch education to America’s future merchant mariners. However, many of the Academy’s 46 buildings haven’t been touched in half a century. In 2012, we initiated a PBC at Kings Point to make essential energy, water, and heating improvements that – in challenging financial times – were not funded by other sources. With the help of that PBC, students at the Academy will soon have first-class facilities to match their first-rate education.

Although we are in varying stages on our projects, DOT is already reaping rewards. For example, the Federal Aviation Administration’s Northern California Terminal Radar Control (TRACON) in Sacramento, California was recently awarded a PBC for infrastructure upgrades. Through the PBC project, the facility is reducing its water use by 40% through over 4 acres of xeriscaping that uses recycled rubber and decomposed granite. The rubber mulch came from 61,000 recycled tires and the project is projected to save over 3 million gallons of water annually. It also decreases the facility’s total energy use by 35% due to improvements in energy infrastructure, including the installation of a 1-megawatt photovoltaic system capable of producing 50% of the facility’s electricity needs.

Overall, DOT expects to award PBCs valued at $36 million by this December, and we are excited about the future improvements and the use of innovative technologies in those projects. The Department of Transportation’s commitment to PBCs comes from our firm belief that this is a cost-effective method to achieve our energy and water goals.  Through PBCs, we  are already  saving money and cutting energy, pollution, and waste by incorporating sustainable practices into our operations.  And, with our growing expertise in performance-based contracting, we expect to see even greater value for taxpayers down the road.

Brodi Fontenot is the Assistant Secretary for Administration and Senior Sustainability Officer at the U.S. Department of Transportation