Analysis of Implementing Lifetime Energy Cost, Including Fully Burdened Cost of Fuel and Energy Footprints of Contractors, as Mandatory Decision Factors in Navy Acquisition

Abstract

The Secretary of the Navy (SECNAV), the Honorable Ray Mabus, in an address to the Navy Energy Forum, announced as a new acquisition policy that the lifetime energy cost of a building or a system, and the fully burdened cost of fuel in powering those, will be a mandatory evaluation factor used when awarding contracts. Secretary Mabus went on to say, "we will also use the overall energy efficiency and the energy footprint of a competing company as an additional factor in acquisition decisions" (Mabus, 2009). Secretary Mabus made this announcement and shared three other green and efficiency goals for the Department of the Navy. His address now puts the onus on the Navy acquisition community to implement the broad policy goals that he outlined. A challenge to the community will be how to implement these goals with a uniform, objective, and definable standard that is able to withstand the scrutiny of Congress, which requires full and open competition, the business models of the defense industry, and the legal challenges that are sure to follow as a result of competition. This project analyzes the challenges of implementing Secretary Mabus's announcement. Our analysis further defines the problem, offers recommendations for proceeding, and suggests areas for further study. Specifically, in this project we first conduct a literature review in the areas of total ownership cost, including the fully burdened cost of fuel, and of measuring energy efficiency. We then lay out a methodology for examining the issues associated with the implementation of the SECNAV's announcement. Next, we survey and analyze available private-industry practices in the areas of green procurement, or managing energy efficiencies, looking for possible applications for the Department of the Navy. We then explore the issues involved with the implementation of the SECNAV's policy by defining the elements of total ownership cost, delving deeper into the fully burdened cost of fuel, and examining the difficulties with quantifying the energy efficiencies of competing companies. Finally, we conclude the project with detailed recommendations for proceeding and suggestions for further study. After completing the project, the principle recommendation is that Navy and Marine Corps acquisitions contractors put in place an energy management process rather than submit to an arbitrary yardstick for energy efficiency and footprint for their companies.