A bill to expand upon the Department of Defense Energy Efficiency Program required by section 317 of the National Defense Authorization Act of 2002 by authorizing the Secretary of Defense to enter into energy savings performance contracts, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``National Defense Energy Savings Act 
of 2004''.

SEC. 2. ENERGY SAVINGS PERFORMANCE CONTRACTS.

    (a) Contracts Authorized.--The Secretary of Defense may enter into 
an energy savings performance contract under this section for the sole 
purpose of achieving energy savings and benefits ancillary to that 
purpose. The Secretary may incur obligations under the contract to 
finance energy conservation measures so long as guaranteed savings 
exceed the debt service requirements.
    (b) Terms and Conditions.--
            (1) Contract period.--Notwithstanding any other provision 
        of law, an energy savings performance contract may be for a 
        period of up to 25 years beginning on the date on which the 
        first payment is made by the Secretary pursuant to the 
        contract. The contract need not include funding of cancellation 
        charges (if any) before cancellation, if--
                    (A) the contract was awarded in a competitive 
                manner, using procedures and methods established under 
                this section;
                    (B) the Secretary determines that funds are 
                available and adequate for payment of the costs of the 
                contract for the first fiscal year;
                    (C) the contract is governed by part 17.1 of the 
                Federal Acquisition Regulation; and
                    (D) if the contract contains a clause setting forth 
                a cancellation ceiling in excess $10,000,000, the 
                Secretary provides notice to Congress of the proposed 
                contract and the proposed cancellation ceiling at least 
                30 days before the award of the contract.
            (2) Costs and savings.--An energy savings performance 
        contract shall require the contractor to incur the costs of 
        implementing energy savings measures, including at least the 
        cost (if any) incurred in making energy audits, acquiring and 
        installing equipment, and training personnel, in exchange for a 
        share of any energy savings directly resulting from 
        implementation of such measures during the term of the 
        contract.
            (3) Other terms and conditions.--An energy savings 
        performance contract shall require an annual energy audit and 
        specify the terms and conditions of any Government payments and 
        performance guarantees. Any such performance guarantee shall 
        provide that either the Government or the contractor is 
        responsible for maintenance and repair services for any energy 
        related equipment, including computer software systems.
    (c) Limitation on Annual Contract Payments.--Aggregate annual 
payments by the Secretary to a contractor for energy, operations, and 
maintenance under an energy savings performance contract may not exceed 
the amount that the Department of Defense would have paid for energy, 
operations, and maintenance in the absence of the contract (as 
estimated through the procedures developed pursuant to this section) 
during term of the contract. The contract shall provide for a guarantee 
of savings to the Department, and shall establish payment schedules 
reflecting such guarantee, taking into account any capital costs under 
the contract.
    (d) Rulemaking.--Not later than 90 days after the date of the 
enactment of this Act, the Secretary, with the concurrence of the 
Federal Acquisition Regulatory Council, shall issue final rules to 
establish the procedures and methods for use by the Department of 
Defense to select, monitor, and terminate energy savings performance 
contracts in accordance with laws governing Federal procurement that 
will achieve the intent of this section in a cost-effective manner. In 
developing such procedures and methods, the Secretary, with the 
concurrence of the Federal Acquisition Regulatory Council, shall 
determine which existing regulations are inconsistent with the intent 
of this section and shall formulate substitute regulations consistent 
with laws governing Federal procurement.
    (e) Implementation Procedures and Methods.--The procedures and 
methods established by rule under subsection (d) shall--
            (1) provide for the calculation of energy savings based on 
        sound engineering and financial practices;
            (2) allow the Secretary to request statements of 
        qualifications, which shall, at a minimum, include prior 
        experience and capabilities of contractors to perform the 
        proposed types of energy savings services and financial and 
        performance information from firms engaged in providing energy 
        savings services;
            (3) allow the Secretary to presume that a contractor meets 
        the requirements of paragraph (2) if the contractor either--
                    (A) has carried out contracts with a value of at 
                least $1,000,000,000 with the Federal Government over 
                the previous 10 years; or
                    (B) is listed by a Federal agency pursuant to 
                section 801(b)(2) of the National Energy Policy Act (42 
                U.S.C. 8287(b)(2));
            (4) allow the Secretary to, from the statements received, 
        designate and prepare a list, with an update at least annually, 
        of those firms that are qualified to provide energy savings 
        services;
            (5) allow the Secretary to select firms from such list to 
        conduct discussions concerning a particular proposed energy 
        savings project, including requesting a technical and price 
proposal from such selected firms for such project;
            (6) allow the Secretary to select from such firms the most 
        qualified firm to provide energy savings services based on 
        technical and price proposals and any other relevant 
        information;
            (7) allow the Secretary to permit receipt of unsolicited 
        proposals for energy savings performance contracting services 
        from a firm that the Department of Defense has determined is 
        qualified to provide such services under the procedures 
        established pursuant to subsection (d) and require facility 
        managers to place a notice in the Commerce Business Daily 
        announcing they have received such a proposal and invite other 
        similarly qualified firms to submit competing proposals;
            (8) allow the Secretary to enter into an energy savings 
        performance contract with a firm qualified under paragraph (7), 
        consistent with the procedures and methods established pursuant 
        to subsection (d); and
            (9) allow a firm not designated as qualified to provide 
        energy savings services under paragraph (4) to request a review 
        of such decision to be conducted in accordance with procedures, 
        substantially equivalent to procedures established under 
        section 759(f) of title 40, United States Code, to be developed 
        by the board of contract appeals of the General Services 
        Administration.
    (f) Transition Rule for Certain Energy Savings Performance 
Contracts.--In the case of any energy savings performance contract 
entered into by the Secretary, or the Secretary of Energy, before 
October 1, 2003, for services to be provided at Department of Defense 
facilities, the Secretary may issue additional task orders pursuant to 
such contract and may make whatever contract modifications the parties 
to such contract agree are necessary to conform to the provisions of 
this section.
    (g) Pilot Program for Nonbuilding Applications.--
            (1) In general.--The Secretary may carry out a pilot 
        program to enter into up to 10 energy savings performance 
        contracts for the purpose of achieving energy savings, 
        secondary savings, and benefits incidental to those purposes, 
        in nonbuilding applications.
            (2) Selection.--The Secretary shall select the contract 
        projects to demonstrate the applicability and benefits of 
        energy savings performance contracting to a range of non-
        building applications.
            (3) Report.--Not later than three years after the date of 
        the enactment of this Act, the Secretary shall submit to 
        Congress a report on the progress and results of the pilot 
        program. The report shall include a description of projects 
        undertaken; the energy and cost savings, secondary savings and 
        other benefits that resulted from such projects; and 
        recommendations on whether the pilot program should be 
        extended, expanded, or authorized.
    (h) Definitions.--In this section:
            (1) Energy savings.--The term ``energy savings'' means a 
        reduction in the cost of energy, from a base cost established 
        through a methodology set forth in the energy savings 
        performance contract, utilized in an existing federally owned 
        building or buildings or other federally owned facilities as a 
        result of--
                    (A) the lease or purchase of operating equipment, 
                improvements, altered operation and maintenance, 
                increased capacity or payload, or technical services; 
                or
                    (B) the increased efficient use of existing energy 
                sources by cogeneration or heat recovery, excluding any 
                cogeneration process for other than a federally owned 
                building or buildings or other federally owned 
                facilities.
            (2) Energy savings performance contract.--The term ``energy 
        savings performance contract'' means a contract that provides 
        for the performance of services for the design, acquisition, 
        installation, testing, operation, and, where appropriate, 
        maintenance and repair of an identified energy conservation 
        measure or series of measures at one or more locations. Such 
        contracts--
                    (A) may provide for appropriate software licensing 
                agreements; and
                    (B) shall, with respect to an agency facility that 
                is a public building, as defined in section 13(l) of 
                the Public Buildings Act of 1959 (40 U.S.C. 612(l)), be 
                in compliance with the prospectus requirements and 
                procedures of section 7 of the Public Buildings 
                Accountability Act of 1959 (40 U.S.C. 606).
            (3) Nonbuilding application.--The term ``nonbuilding 
        application'' means--
                    (A) any class of vehicles, devices, or equipment 
                that is transportable under its own power by land, sea, 
                or air that consumes energy from any fuel source for 
                the purpose of such transportability, or to maintain a 
                controlled environment within such vehicle, device, or 
                equipment; or
                    (B) any Federally owned equipment used to generate 
                electricity or transport water.
            (4) Secondary savings.--The term ``secondary savings'' 
        means additional energy or cost savings that are a direct 
        consequence of the energy savings that result from the energy 
        efficiency improvements that were financed and implemented 
        pursuant to the energy savings performance contract. Such 
        secondary savings may include energy and cost savings that 
        result from a reduction in the need for fuel delivery and 
        logistical support, personnel cost savings and environmental 
        benefits. In the case of electric generation equipment, 
        secondary savings may include the benefits of increased 
        efficiency in the production of electricity, including revenue 
        received by the Federal Government from the sale of electricity 
        so produced.
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of Defense.

Summary: National Defense Energy Savings Act of 2004 - Authorizes the Secretary of Defense to: (1) enter into an energy savings performance contract in order to achieve energy savings and ancillary benefits. (2) incur obligations under the contract to finance energy conservation measures so long as guaranteed savings exceed the debt service requirements. And (3) implement a pilot program to enter into up to ten energy savings performance contracts for the purpose of achieving energy savings, secondary savings, and incidental benefits, in nonbuilding applications. Sets forth implementation guidelines, including contract terms and conditions.