Defense Energy Consortium (DECo) - Consortium Management Organization (CMO)

Please only submit a Proposal if you are true Consortium Management Organization (CMO). If you are just intersted in being a member of the consortium once it is established please send an email to the Mr. Brock Moon and Mr. Nicholas Kimmey that you are interested in becoming a member of the eventual consortium and we will pass your information along to the CMO. 

Department of Defense (DoD) installations largely rely on off-site energy providers to support land, air, sea, space, and cyberspace-based national security missions. This dependence creates unacceptable risks, because grid outages caused by maintenance issues, extreme weather, and attacks by determined adversaries may impact our national security missions. To ensure mission continuity even during a grid outage, congress has mandated that DoD achieve by 2030 at least 99.9% energy resilience year-round (i.e., no more than 8.76 hours of downtime annually) for all of its critical missions at all DoD installations (See 10 U.S.C. § 2920).

The Department of the Air Force (DAF) alone has identified nearly 4,000 resilience gaps at its installations worldwide that need rapid and cost-effective mitigation. Meeting this challenge requires DAF to access innovative energy resilience technologies, deploy commercial off-the-shelf technologies, and implement new business models at an enterprise-wide scale with commercial speed.

Concerned that DoD and the military services are unable to access or deploy these technologies and business models at the scale, speed, and cost-effectiveness required to meet its energy resilience challenges, Congress has encouraged DoD to leverage its authority pursuant to 10 U.S.C. § 4022, to partner with a third-party consortium dedicated to military installation resilience and energy innovation.[1]

10 U.S.C. § 4022 authorizes DoD to conduct prototype projects that are directly relevant to enhancing DoD’s mission effectiveness. Other Transaction Authority (OTA) is an alternative to Federal Acquisition Regulation (FAR)‐based acquisitions that 1) enables innovative, non-traditional defense contractors to engage with DoD, 2) identifies and realize teaming opportunities among entities to promote integrated research and prototyping efficiencies, 3) improves the timeline from solicitation to award for DoD prototypes, 4) and reduces the cost and improves integration of energy resilience prototypes. Because energy innovation is rapidly occurring in the private sector and around the world, establishing a public-private partnership with streamlined processes will help DAF access this innovation to strengthen the energy resilience of its installations.

Consortium Management Organization (CMO)

DAF is issuing this competitive RFP to select a CMO with whom to establish the Defense Energy Consortium (DECo), a first-of-its-kind, public-private partnership where the members of the consortium will be responsible for fully financing potential projects using private capital to increase the energy resilience and mission assurance of DAF installations worldwide. Unlike other consortia previously authorized under 10 U.S.C. § 4022, DECo will not guarantee any appropriated funding for either the CMO nor obligated funds for future prototype projects awarded through the CMO.

The CMO’s members will include financiers, small businesses, non-traditional defense contractors, and an administrative team that will manage the operations of the consortium. Once DAF negotiates and executes the Base OTA Agreement, or Consortium Management Agreement (CMA), DAF will competitively issue, down select, and award prototype agreements to the CMO as the entity authorized to represent the consortium member or team that proposed the prototype project.

10 U.S.C. § 4022 allows the entire cost of the prototype to be fully financed by the performers using third-party capital, provided DoD provides some form of consideration, such as access to DAF property and facilities.[1] DoD has formed 30-plus consortia that leverage 10 U.S.C.§ 4022, but they rely on public financing through congressional appropriations instead of leveraging billions in readily available private capital. Because DECo will rely on private financing, DECo’s programmatic, legal, and fiduciary roles and responsibilities will be materially different from the standard DoD OTA consortium business model and will require DAF and the down selected CMO to iterate, deliberate, and negotiate novel business processes and terms and conditions for a CMA to establish DECo.

Following selection of the CMO by DAF, the CMO will work with DAF at its own expense and financial risk to conduct the necessary due diligence to establish the unique features of DECo and to negotiate the CMA. DAF expects that these due diligence activities will occur over an extended period of time and may include the following:

• Obtaining Funding Commitments: DECo’s business model of relying solely on private financing instead of public funds will require a pool of investors. Following the selection of the CMO and prior to executing the CMA, the CMO will likely need to work with financial experts and fund managers to raise capital by attracting additional financiers to DECo. The CMO’s financial experts will be responsible for complying with all relevant legal requirements for managing investor funds. Ideally, the CMO’s financial experts will also have the capacity and expertise to engage with the investment authorities in the nations that host DAF installations (i.e., Germany, Greenland, Italy, Japan, Portugal, Spain, South Korea, Turkey, and the United Kingdom) and be able to guarantee that no improper investments are being made by prohibited countries or from questionable sources.
• Building DECo’s Membership: The CMO will need to build DECo’s membership to include a broad array of energy-related stakeholders. These stakeholders include, but are not limited to, small businesses, traditional defense contractors, original equipment manufacturers, nonprofit organizations, national laboratories, academia, energy service companies (ESCOs), utilities, utility associations and research organizations, and professional services companies. The CMO will need to ensure that it will not unnecessarily exclude or burden innovative companies and non-traditional defense contractors from becoming members.
• Negotiating the DECo CMA: The unique nature of DECo’s reliance on private financing combined with its focus on installation energy prototypes will require DAF and the CMO to negotiate novel terms and conditions for a CMA to govern the consortium. For instance, the CMO and its members under the terms of the CMA will need to adhere to federal, state, and utility laws, regulations, and procedures, including transmission interconnection requirements, National Environmental Policy Act (NEPA) procedures, and federal real estate leasing laws to build onsite energy resilient generation.

Similar considerations will need to be addressed for DAF installations overseas.

Any solution proposed will require DECo and its members and financiers to use one or more federal laws and regulations for structuring the long-term, third-party financed, power purchase agreements and energy services contracts (See Attachment 1). This will require DECo to have in-house expertise and experience with negotiating and executing energy commodity and energy services contracts with DoD.

The novel CMA terms and conditions may also include the following – indemnifying DAF against all costs incurred while executing a prototype project if DAF decides not to award a follow-on production contract; transparency and reporting requirements detailing the CMO’s financial due diligence of its investors and members; processes for calculating and disclosing reasonable Returns on Investment (ROIs) on a portfolio of prototype projects, and continuing education requirements for DECo’s members and financiers to maintain proficiency on DoD’s specialized energy procurement laws.