We’ve reached a unique point in the evolution of performance contracting in the federal market, particularly within the Army, the leading agency in the deployment of performance contracting projects. With the support of the Army Corps of Engineers, the Army has leveraged the performance contracting model for more than three decades to modernize its infrastructure. Since 1992, the Army has delivered 300 projects representing $3.9 billion in investment, with roughly $2.6 billion still in performance and about $900 million currently in development across energy savings performance contracts (ESPCs) and utility energy service contracts (UESC) programs.
With any program that proves to be successful, there eventually comes a point when the most accessible opportunities have been captured. The Army is reaching that stage now. Much of the “low-hanging fruit” has already been addressed, and while years of projects have chipped away at deferred maintenance, significant opportunities remain to strengthen resilience and improve operational efficiency across installations.
The need for third-party partnerships has never been greater. With constrained resources and more complex infrastructure needs, the Army is looking to energy service company (ESCO) partners to help drive the next phase of modernization—arguably the most critical phase—where success depends on digging deeper into facility challenges and finding creative ways to make projects work.
Eagerness to continue driving the success of performance contracting is evident in the urgency they put behind the $3 billion 10-year ESPC Multiple Award Task Order (MATOC) IV contract, which was awarded to 18 ESCOs in June of 2025 – 3 months ahead of schedule and in their strong finish to 2025 with over $222M in ESPC contracts.
Energy Services Today met with key Army Corps of Engineers Huntsville Center (USACE) officials who oversee ESPCs and UESCs to discuss the current state, including Michael Lazaro, ESPC Branch Chief, and Dale Adkins, UESC Branch Chief.
EST:
How would you characterize the current pipeline of projects across the Army by development stage, activity level, and overall momentum?
Lazaro:
In general, the goal is to maintain a steady flow, roughly six to ten projects at a time across ESPC and UESC. There is also an Office of the Secretary of Defense annual investment goal of $130 million per year.
We also see that many installations have already addressed a lot of the “low-hanging fruit.” Lighting and major HVAC opportunities have been implemented in many places, so opportunities can be harder to find today and more complex to structure. Interest rates also affect viability.
On top of that, we are dealing with resourcing pressures such as hiring constraints, staffing losses, and limited capacity. That increases reliance on contracting support and third-party solutions.
Adkins:
The Army is being strategic. Many easy opportunities have been addressed already, so new projects are more complex and expensive. That means we have to be careful about what we pursue so we are fair to both industry and the government, and also realistic about whether the government side can resource the project and keep it moving.
We are seeing a push toward high-impact needs, strategic projects where the “bang for the buck” is meaningful. But some scopes are simply hard to make cash-flow.
EST:
What are the harder-to-implement measures you are looking at now? Renewables, microgrids, advanced HVAC, or other technologies?
Adkins:
Yes, those categories. Depending on the location it may be solar. There is interest in geothermal and microgrids. Under UESCs, generation has been used in certain cases to help installations control power distribution during a crisis.
EST:
Where do you see bottlenecks in the ESPC task order process?
Lazaro:
One challenge is that these projects often involve aging infrastructure, so scope can evolve as conditions are discovered. Another is managing expectations and ensuring project scope remains tied to energy and contract requirements.
Resourcing also affects timelines. Installations are geographically spread, with varying priorities and staffing levels. Approvals are necessary, but they can take time.
EST:
How can ESCO partners support you more effectively?
Adkins:
Partnership matters. The government wants best value and industry needs a viable project, so we need alignment on where that line is. The strongest partners listen closely to the installation’s intent and bring a holistic solution that is realistic for both sides.
Lazaro:
Given constrained resources, there is a real need for ESCOs to be as turnkey as possible. Access, security requirements, escorts, and logistics can add workload for already understaffed DPWs. Even when the project is a win long-term, it can add short-term burden to teams that do not have bandwidth. We work internally and with our ESCO partners to find solutions to reduce that burden because third-party contracting is so critical.
EST:
With the change in administration in 2025, has the internal perception of performance contracting shifted?
Adkins:
Third-party financing is supported across administrations because appropriations alone will not solve the backlog. The emphasis may shift, and some technologies may require more justification, but the model remains. Renewables are still possible if they are cost-viable and supported by the right analysis.
EST:
Where do you see untapped opportunities?
Adkins:
Organic Industrial Base facilities are a major focus. Modernizing those facilities is more challenging, but it has a high impact. Cyber and controls also continue to evolve and require focus. Generation is tied to resiliency, and installations need the ability to operate and isolate when required.
Lazaro:
Agreed. For example, if modernization models prove successful at depots, we could see a broader push across similar facilities. These sites are where readiness and production capability really intersect with infrastructure.
What this is signaling:
• ESPC remains a core delivery tool. The Army continues to rely on ESPCs and UESCs to modernize infrastructure and strengthen installation resilience. It is increasingly looking for comprehensive, “fence-to-fence” proposals that bundle deeper efficiency and infrastructure upgrades.
• Budget pressure strengthens the case for third-party finance. Limited appropriations mean installations must justify capital spending carefully, making ESPCs and UESCs an essential pathway to advance projects that otherwise would remain unfunded.
• Private-sector expertise is essential. The Army sees ESCOs as critical partners in addressing deferred maintenance and modernization needs, particularly as internal staffing constraints increase reliance on turnkey delivery.
• Innovative ECMs will drive the next wave of projects. With many traditional measures already implemented, projects that incorporate creative, cost-viable technologies are more likely to gain traction.
• Understand the installation’s mission first. ESCO teams that listen to installation priorities and align proposals with operational needs are far more likely to move projects from concept to contract.
With the success of ESPCs over the past three decades, the industry must look deeper, be creative, lead with the mission, evaluate all viable options, and help advance Army and DoD facilities to support the next generation of garrisons and operations.
