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Daily Journal of Commerce – Portland, Oregon – Seattle-based mechanical construction and engineering firm McKinstry Co. has been awarded a federal Energy Department contract worth up to $5 billion over the next decade. McKinstry employs approximately 190 people out of its Portland office.

Under the contract, the biggest in its history, McKinstry would help make federally owned buildings and facilities more efficient. The contracts cover energy and water efficiency upgrades as well as renewable energy projects. 

McKinstry would pay for the design and construction up front, with the federal government paying the company out of the savings in its energy bills.

This type of arrangement, called an Energy Savings Performance Contract, or ESPC, was authorized under the Carter administration, said Bill Raup, a manager with the Energy Department’s ESPC program. But contracts such as the one McKinstry was awarded, called Super ESPCs, have been around only since 1995.

Super ESPCs allow companies that pass a rigorous selection procedure to prequalify for all projects during the length of the contract. “An agency can issue an RFP and go through the whole process,” Raup said. “But in practice, that’s cumbersome. Supers award them an umbrella contract.”

The contractor designs, builds and gets financing for the energy saving project and guarantees that the improvements will generate actual savings. The government pays the companies until the contract ends. Then the federal government gets to keep all future savings on its utility bills.

So why would contractors take the chance, and bear the up-front expense? “Because it works,” said McKinstry spokeswoman Genevieve Guinn. “There are risks, but even in the most conservative designs, you can save 20 to 30 percent right off the bat.

Government statistics back her up. The private sector has invested $1.23 billion so far in federal energy efficiency improvements since 1998, according to the Energy Department’s Federal Emergency Management Program. This investment has resulted in $3.03 billion in savings.

McKinstry was one of 16 companies awarded a $5 billion contract – for a total of $80 billion – but the only one headquartered in the West. That doesn’t mean McKinstry is guaranteed projects within the government’s western region, Raup said. It must still compete with the other 15 companies for projects, albeit in a streamlined process.

Guinn said McKinstry plans to compete for projects around the country. The company has 13 offices, mostly in the Northwest but also as far afield as Minneapolis and Dallas.

Although McKinstry might find itself competing with Siemens or Johnson Controls for a project, Guinn doesn’t expect that to happen often. “In theory, we could be going after the same jobs,” she said. “In reality, the federal government is the largest landowner in the country. Even with 16 companies, there is enough work for all the companies.”

The federal government is also the country’s single largest energy user, according to an Energy Department press release announcing the contract awards. As such, making the government more energy efficient can significantly cut greenhouse gas emissions and boost the renewable energy industry, Energy Secretary Samuel Bodman said in the release.

With energy conservation now gaining currency – President-elect Barack Obama visited McKinstry during his primary campaign and later touted the company as a model of sustainability – Guinn wasn’t surprised McKinstry got the contract. “Our work speaks for itself,” she said. “We firmly believe that energy efficiency is the first fuel – if we can conserve energy and take power off of the grid, we really can mature the other technologies.”

It’s a measure of validation for McKinstry that its once-unglamorous work – improving buildings’ heating and cooling systems, for example – is now considered sustainable chic. “We’ve been doing this for years,” Guinn said. “We just kind of had to wait for the party.”