A group of companies, including a unit of the German engineering conglomerate Siemens AG, won the U.S. Defense Department’s biggest contract last month, a potential $7 billion deal for alternative energy.
The Army plans to buy the renewable energy from privately developed power plants, according to the May 7 announcement. The facilities are to be built, operated and maintained by companies under an agreement hailed by service officials as the first of its kind.
“This effort will lead to enhanced energy security and sustainability for our installations,” Col. Robert Ruch, commander of the U.S. Army Corps of Engineers center in Huntsville, Ala., which is overseeing the work, said in a statement.
The award topped a list of more than 250 contracts with a combined value of more than $23 billion in May, according to a Military.com analysis of the Pentagon’s daily contract announcements. That figure is about 22 percent higher than the value from April and doesn’t reflect what is actually spent, or obligated, because many deals are only partially funded at first.
The Army selected five companies from a total of 16 bids as part of a contract to buy energy generated from geothermal technology. The firms were Constellation NewEnergy Inc., based in Baltimore; ECC Renewables LLC, based in Burlingame, Calif.; Enel Green Power North America Inc., based in Andover, Mass.; LTC Federal LLC, based in Detroit; and Siemens Government Technologies, based in Arlington, Va.
The contract includes a three-year base period and seven one-year options, according to the Army release. It’s the first of several expected this year with a combined potential value of $7 billion, the service said.
“In our current fiscal environment, attracting third-party money to build renewable energy production facilities that will allow military installations to purchase energy at a pre-determined rate without building, owning and maintaining the facility is the right thing to do,” Ruch said.
The Defense Department wants to derive 3 gigawatts of power — enough to power about 750,000 homes — from alternative sources such as solar, wind, biomass and geothermal by 2025.
Some lawmakers oppose the military’s push into renewable energy. Rep. Randy Forbes, R-Va., has criticized the Navy’s “Great Green Fleet” initiative to power ships, aircraft and combat vehicles with biodiesel and other alternative fuels as being unnecessarily costly. Fuels derived from algae and other alternative sources remain more expensive than petroleum-based products.
In a separate but related effort, Siemens has teamed with Chicago-based Boeing Co. to upgrade the Defense Department’s energy grid to be more independent.
“The challenge they face today is, at times they are dependent on the local utilities, which work, but at certain times today and in the future there might be the need to island or cut themselves off from the grid for security reasons,”
Judy Marks, chief executive officer of Siemens Government Technologies Inc., said in a video announcing the alliance. “We have an offer that will help them do that.”
Four out of the top five awards in May were so-called multiple-award contracts. Under these kinds of arrangements, companies win seats on the contract, then compete against each other for individual orders.
Four companies, including three from Virginia, shared the second-largest contract, a Navy agreement worth as much as $1.9 billion over five years to support habitat systems on vessels and small crafts.
A group of 15 companies, including units of defense giants such as London-based BAE Systems Plc and Bethesda, Md.-based Lockheed Martin Corp., won the third-largest contract, a Navy agreement potentially valued at $900 million over five years to provide information-technology services for combat systems and intelligence collection.
A group of 30 companies, including McLean, Va.-based SAIC Inc. and Chantilly, Va.-based Engility Corp., landed seats on the fourth-largest contract, a deal worth as much as $855 million deal over five years to provide the Marine Corps with logistics support.
A unit of Northrop Grumman Corp., based in Falls Church, Va., won the fifth-largest contract, an Air Force award potentially valued at $556 million to upgrade Global Hawk drones, the biggest unmanned aircraft in the fleet. Work is expected to be performed in San Diego and finish in 2015.
Northrop last month received individual contracts with a potential combined value of $872 million — the most of any company.