Pentagon green-energy award tops $19 billion in May contracts

The Pentagon bucked the automatic budget-cutting trend last month by going green.

The U.S. Defense Department kicked off a renewable energy program with a contract that may reach $7 billion as the Obama administration seeks to curb the military’s fossil-fuel use.

The agreement, with initial awards to Munich-based Siemens, Chicago-based Exelon’s Constellation Energy Group and three other companies, topped the more than 240 contracts announced by the military in May, according to federal data. Those awards have a maximum value of $19.4 billion, a 2.1 percent increase from April’s total.

The five firms that received the award will be eligible to construct geothermal projects on or near military installations. The projects would generate electricity from heat produced by the Earth’s core.

The Pentagon plans to add companies to the deal this year and expand it to include solar, wind and biomass energy production. The $7 billion ceiling would cover purchases over a 30-year period, according to the Army Corps of Engineers.

Defense Department contracts increased 2.1 percent in May.

The awards will improve the military’s “energy security and sustainability,’’ Debra Valine, a spokeswoman for the Army Corps, said in an e-mail.

The contract award came even as automatic federal cuts known as sequestration are slicing the defense programs and triggering furloughs for as many as 680,000 of the Pentagon’s civilian workers.

Military contracts had tumbled to $19 billion in April from $39.4 billion a month earlier. The Pentagon announced $19.5 billion in awards in May 2012.

The Defense Department is the world’s single largest consumer of energy, excluding countries. Spending on fuel contracts jumped 54 percent to $21.7 billion in the year ended Sept. 30, compared with $14.1 billion the prior year, according to data compiled by Bloomberg.

The Obama administration in April 2012 set a goal of generating enough renewable energy on military installations to power 750,000 homes by 2025. The Pentagon has a separate goal of getting 25 percent of its energy from renewables by that year.

Private financing

The military missed its target in fiscal 2011. Some 8.5 percent of its energy came from renewables that year, missing the Pentagon’s goal of 12 percent, according to a Defense Department report.

The renewable energy contract doesn’t require a large upfront investment from the Defense Department, said Larry Allen, president of Allen Federal Business Partners, a consulting company in McLean.

Under the arrangement, the military will sign long-term deals to purchase renewable energy from the contractors. The companies will then build the projects using private financing. They’ll benefit from having locked in the Defense Department as a customer, Allen said.

The other awardees are Rome-based Enel Green Power, Burlingame, Calif.-based ECC Renewables and Detroit-based LTC Federal.

The second- and third-biggest agreements disclosed in May also were so-called multiple-award contracts, or agreements with groups of companies to supply the same products or services. Under the arrangements, the selected contractors compete for orders as specific needs arise.

The No. 2 deal was a $1.9 billion Navy contract with four closely held companies to upgrade living quarters on military vessels. The winners included Delphinus Engineering, based in Eddystone, Pa., and Tecnico, based in Chesapeake, Va.

The No. 3 award, a five-year agreement for a range of information technology services valued at as much as $900 million, will be shared among 15 contractors including McLean-based SAIC and Falls Church-based Computer Sciences.

Northrop Grumman, also based in Falls Church, won the fourth-biggest award, a $556 million agreement for upgrading Global Hawk surveillance drones.

—Bloomberg Government

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