Submit your commercial solutions to solve national security challenges with the help from DIU.

I. BACKGROUND

Problem Statement

Across the Department of Defense (DoD), military installations and facilities are being asked to deploy resilient and reliable energy systems more quickly and cost-effectively. Meeting these goals will require streamlined business processes and substantial third party capital investment. Partnering with commercial industry in new ways is imperative to leveraging best in class business processes as well as private industry dollars to help address resilience gaps at speed and scale.

Issues facing the the DoD include: 

• Resilience Gaps: The DoD is facing a challenging landscape characterized by increasing demand for energy, gaps in installation resilience, new policy requirements, and threats from the environment as well as external malign actors.
• Protracted Time to Completion: DoD project time to completion compares unfavorably with best-in-class industry processes. Industry innovation can accelerate DoD project completion timelines.
• Antiquated Terms of Collaboration: DoD seeks to harness industry creativity and innovation. The Finance First initiative is focused on identifying new and different terms that can be leveraged with companies and financing entities to boost the speed and reduce the costs of a deployed solution.

Finance First is a process improvement initiative. Today, designing, constructing, and deploying resilient energy solutions, whether power generation, distribution, and/or storage, takes 5 to 10 years, versus best-in-class commercial projects that take only 2 to 3 years. Coinciding with that, most energy projects require too much up-front capital investment. Finance First is seeking industry solutions that will deliver completed projects in a timeline consistent with best-in-class commercial practices (2-3 years), and which will deliver electrons at an acceptable $/kwH with little or no up-front capital investment.

The DoD is seeking solutions that not only meet target installations' resilience needs but also align with our financial and operational goals. DIU recognizes the value of integrated approaches and are interested in proposals that bundle resilience enhancements/solutions with potential power generation projects. This bundled approach should encapsulate the cost of resilience measures within the framework of an acquisition authority (or new approach) of your choosing, offering a comprehensive solution that ensures long-term energy resilience. 

If bundling resilience projects together is proposed, your proposal should articulate how the bundling approach can deliver enhanced value, in terms of resilience, operations and maintenance, and financial viability, ensuring a mutually beneficial partnership. It should also detail what acquisition authorities the DAF and DoD could use (or develop) to acquire your proposed solution. 

For this effort, solution briefs presented in Phase II of the CSO process will leverage information provided by the government that details the resilience gaps that the vendors are being asked to bridge via their technical solutions. In those pitches, vendors will also be asked to include alternative financing structures and operational strategies to present a solution that addresses resilience gaps while providing a clear, cost-effective, and rapid pathway to achieving the government’s energy goals. Potential examples include requests for access to DoD land to reduce land acquisition costs, leveraging tax credits, and pursuing grants from other governmental organizations with the overarching goal of reducing the total cost of the project and ultimately, limiting the capital outlay from the DoD to as close to zero as possible. 

Vendors may be selected to provide solutions for additional installations across the federal government. Additionally, vendors who successfully meet the evaluation requirements of Phase I (as stated within the CSO), and who are invited to Phase II Pitches, may be requested to participate in further dialogue with the Government.

How Finance First is Different

Currently, the DAF’s and DoD’s solicitation process begins with a clear understanding of an installation’s resilience needs, which informs the range of project concepts that could close said installation’s resilience gaps. Subsequently, the DoD, through specific acquisition authorities (e.g., power purchase agreement (“PPA”), energy savings performance contract (“ESPC”), enhanced use lease (“EUL”), utility energy service contract (“UESC”) etc.), begins the solicitation process. The act of choosing an acquisition authority potentially limits the DoD to a narrower range of possible solutions (both material and financing) that might otherwise be possible if a project developer was given the opportunity to propose the acquisition authority and comprehensive project concept (including but not limited to potential new authorities requiring congressional action). 

Conversely, the Finance First initiative asks potential bidders to include a suggested acquisition authority or set of authorities (e.g., PPA, ESPC, EUL, UESC) along with their resiliency solutions. Recommendations to consider newly developed authorities will be entertained. By doing so, Finance First would allow the full suite of acquisition tools to be deployed in a fashion that will create a solution or set of solutions that optimally meet an installation’s resilience needs, as defined by the installation’s Installation Energy Plan (IEP) resilience score. Desired solutions will be comprehensive and resolve high priority mission resilience gaps provided by the DAF and DoD. 

II. DESIRED SOLUTION FEATURES

The Finance First prototype seeks partners (individually or with a consortium) who have a proven track record of rapid and innovative project delivery methods (inclusive of financing). Interested partners will be expected to provide innovative business processes, and energy generation and resilience solutions to close on-base resilience gaps. Interested project developers who can provide resilient energy solutions to DAF and other DoD installations should expect to:

1. Work with the DAF and DoD to define the scope and structure of a project that addresses key resilience gaps within their project portfolio.
2. Propose an accelerated project timeline that results in a “design to deployment” pace consistent with best-in-class private industry solutions.
3. Develop innovative approaches to finance the capital investment associated with the build-out of a proposed design solution with the aim of delivering energy at the lowest possible cost/kwh.
4. Communicate, based on mutual agreement of project scope, selection, structure, and acquisition pathway(s), reasonable financial, technical, commercial, and operational plans. (Note that innovation in terms of financing solutions and acquisition pathways that may involve statutory amendment are welcomed. SEE FOOTNOTE.)
5. Communicate whether a consortium, joint-venture, or unique teaming need would be expected from the agreed upon project selection and solution.
6. Communicate the commercial arrangements necessary for the project developer to provide cost savings to the DAF and DoD (e.g., expectation that excess power generation will be sold to the grid).

As stated earlier, the DAF and DoD encourages and seeks innovative solutions that not only meet our target installation’s resilience needs but also align with our financial and operational goals. The DAF and DoD recognize the value of integrated approaches, such as the bundling of resilience enhancements/solutions with potential power generation projects. These unique, integrated approaches should encapsulate the cost of resilience into a bankable project that is scoped, structured, and agreed upon in partnership with the DAF and DoD.

Submissions in response to this AOI must be comprehensive in their approach to solving the problem. 

Comprehensive solutions should be considered turn-key (i.e., financing, design, construction, long-term operations, and maintenance are included)

Prospective respondents are invited to set out their qualifications to undertake the project, demonstrating:

• Technical capacity to carry out projects through alternative delivery methods (e.g., Design, Build, Finance, Operate, Maintain (DBFOM); Build, Own, Operate, Transfer (BOOT)).
• Experience with bundling projects and financing the cost of those projects through unique project agreements (e.g., Standby Charge (SC) or Availability Payments (AP); Power Purchase Agreements (PPA)).
• Experience of the personnel to be involved.
• Experience and performance with similar projects.
• Financial capacity to carry out a project greater than $50M USD. Please provide a letter of credit reflecting the financial capacity to finance projects at or above $50M USD.
• Experience with respect to rapid design to deployment timelines.

FOOTNOTE:  Potential acquisition pathways may be executed under the following authorities and are subject to all relevant regulations: 40 USC 501; DFAR 241.205/PGI241.205; 10 U.S.C. 2913; 42 U.S.C. 8287; 10 U.S.C 2922a; 10 U.S.C. 2667. Vendors are expected to be familiar with those authorities and regulations associated with their proposed solutions. Plans should include expected agreements that the project would expect to have in place (e.g., Offtake Contract Agreement, Operations & Maintenance Agreement).