The Deputy Assistant Secretary of Defense (Installation Energy), under the Office of the Assistant Secretary of Defense (Energy, Installations and Environment), has the role and responsibility for, among other things, overseeing DOD’s installation energy program. The office also is responsible for issuing installation energy policy and guidance to the DOD components and serving as the primary adviser for matters regarding facility energy policy. In addition, the office provides management for energy conservation and resources, including establishing goals for the department’s energy conservation program, developing procedures to measure energy conservation, and developing policy guidance for reporting energy use and results of conservation accomplishments against goals for federal energy conservation and management. These goals and requirements are found in, but are not limited to, the Energy Independence and Security Act of 2007, the Energy Policy Act of 2005, and Executive Order 13693, Planning for Federal Sustainability in the Next Decade. Also, the military departments have established goals related to developing renewable energy projects. For example, the Secretary of the Navy has established goals to obtain half of the Navy’s energy from alternative sources and to produce at least half the shore- based energy requirements from renewable sources, such as solar, wind, and geothermal. Further, each military department has issued department-level guidance to develop 1 gigawatt of renewable energy, for a total of 3 gigawatts by 2025. In addition, DOD’s instruction on energy management states that the Secretary of a military department is responsible for developing an energy program management structure to meet DOD requirements, with the primary objectives of improving energy efficiency and eliminating energy waste, while maintaining reliable utility service. Each military service has assigned a command or headquarters to provide guidance and funding, with regional commands or military installations managing site-specific energy programs. According to DOD’s instruction, DOD component heads are to provide facilities with trained energy program managers, operators, and maintenance personnel for lighting, heating, power generating, water, ventilating, and air conditioning plants and systems. At the installation level, the departments of public works, general facilities, or civil engineering oversee and manage the day-to-day energy operations. Each year, DOD is to submit the Annual Energy Management Report to the congressional defense committees, as required by section 2925 of title 10 of the United States Code. This report describes the department’s progress toward meeting its energy performance goals and, among other items, provides information on all energy projects financed with alternative financing arrangements. The Annual Energy Management Report is required to contain the following information on DOD’s alternatively financed projects: the length of the contract, an estimate of the financial obligation incurred over the contract period, and the estimated payback period. The DOD components maintain a utility energy reporting system to prepare the data for submission of this report, which DOD describes as the primary vehicle by which it tracks and measures its performance and energy efficiency improvement. DOD has used partnerships with the private sector as a tool for alternative financing arrangements to further energy efficiency efforts and allow installations to improve infrastructure through upgrades to existing systems and the purchasing of new equipment. Each financing arrangement leveraged by private capital has distinct requirements and legal authorities, and sometimes DOD components combine arrangements to finance the same project. Table 1 summarizes the main alternative financing arrangements that are available to DOD for funding its energy projects. In December 2011, the President challenged federal agencies to enter into $2 billion in performance-based contracts, including ESPCs and UESCs, through the President’s Performance Contracting Challenge to meet the administration’s goals of cutting energy costs in agency facilities as part of a broader effort to reduce energy costs, cut pollution, and create jobs in the construction and energy sectors. In May 2014, the President expanded the challenge by an additional $2 billion, bringing the total goal to $4 billion in performance-based contracts across the federal government by the end of calendar year 2016. According to DOD, as of December 31, 2016, the three military departments and the other defense agencies combined had awarded 194 ESPCs and UESCs that totaled over $2.28 billion. DOD reported that these results exceeded its target of awarding over $2.18 billion in such contracts over this period. DOD and military service audits have examined the development and management of DOD’s alternative financing arrangements. For example, in May 2016, the DOD Inspector General found that the Air Force Civil Engineer Center did not effectively manage the Air Force’s existing ESPCs and made recommendations to improve controls and validate energy savings. In January 2017, the DOD Inspector General found that the Naval Facilities Engineering Command did not effectively manage the Navy’s 38 ongoing ESPCs that were in the performance phase. The DOD Inspector General stated that management was not effective because the command did not appoint contracting officer’s representatives for 31 of the ongoing projects and did not develop a quality assurance surveillance plan for any of them. Additionally, the DOD Inspector General reviewed five other projects in more detail and found questionable contract payments. The DOD Inspector General recommended the appointment of contracting officer’s representatives for ESPCs and that the Naval Facilities Engineering Command Expeditionary Warfare Center—which oversees the Navy’s ESPCs—document the validity of prior year energy savings for the selected ESPCs. In addition, in September 2014, the Army Audit Agency found that the Army’s renewable energy projects were generally operational and contributed to renewable energy goals. However, the audit also identified the need for improvements to ensure projects were performing as intended and that installations were reporting renewable energy output sufficiently to help the Army meet federal mandates and the DOD goals for renewable energy. At the time of the Army Audit Agency review, the Army was not meeting the federal and DOD renewable energy goals. Since 2005, the military services have used alternative financing arrangements for hundreds of energy projects to improve energy efficiency, save money, and meet energy goals; however, the military services have not collected and provided DOD complete and accurate data to aid DOD and congressional oversight of alternatively financed energy projects. Based on the data provided by the military services, the services have used alternative financing arrangements for 464 energy projects or contracts since 2005, entering into about 38 contracts annually from fiscal year 2005 through fiscal year 2016. The Army entered into the most alternatively financed contracts (305), followed by the Navy (90), the Air Force (50), and the Marine Corps (19). Military service officials attributed the continued use of alternative financing to three separate factors. First, officials cited the President’s Performance Contracting Challenge, issued in December 2011, which challenged federal agencies to enter into $2 billion in performance contracts, such as ESPCs and UESCs. Second, officials stated that they did not have sufficient appropriated funds to accomplish many of these projects, making alternative financing an attractive option for addressing needed repairs, obtaining new equipment designed to improve operations, and reducing energy consumption. Third, service officials stated that alternative financing reduces the risk for equipment maintenance and budgeting. Specifically, many contracts include a cost-savings guarantee, which requires that the contractor maintain the equipment in good working order over the life of the contract. Additionally, many contracts have fixed annual payments regarding projects, so the services have certainty in terms of budgeting for portions of an installation’s annual energy costs. The alternative financing contracts the military services awarded have obligated the government to pay billions of dollars to contractors over the next 25 years, as shown in table 2. According to military service officials, these contractual obligations are must-pay items from their annual budgets. In order to account for these must-pay items in their budgets, they said that the military service headquarters must have visibility into certain data, such as the costs of such projects. We found that from fiscal years 2005 through 2016, the military services have used UESCs more often than the other types of alternative financing arrangements we reviewed. Specifically, the military services have entered into contracts for 245 UESCs compared to 201 ESPCs. In addition to ESPCs and UESCs, the military services have also entered into financing agreements through PPAs. We found that of the 18 PPAs that either we or the military services identified as being awarded since 2005, 10 have been awarded since 2014. In these military power purchase agreements, a private entity will purchase, install, operate and maintain renewable energy equipment, and the military service will purchase the electricity generated by the equipment. Since 2005, the Army, Navy, and Marine Corps have reported contractor project investment costs totaling almost $1.46 billion for PPAs. Some of these projects, such as solar arrays, can have significant project investment costs to the contractor, and the military services compensate the contractors over time, either in part or in full, through payments for their energy usage. However, we identified challenges in determining the true costs of these PPA projects to the government for several reasons. First, the future cost to the government could exceed $1.46 billion because some of the PPAs are still in the design and construction phase and cost data are not known. Second, minimum purchase agreements are typically set in the contracts, but in some cases the service could purchase more than the minimum amount of energy required, which would increase the costs. Third, the energy providers have other ways of recouping their project investment costs, which means the military services may not be responsible for repaying all of the costs. In addition to possible rebates and tax incentives, energy developers may be able to take advantage of renewable energy credits, which can lower the up-front costs of projects by reimbursing either the military or the energy provider. Lastly, in some cases, the energy provider can take excess energy produced by the equipment and sell it to other customers as another means of recouping its investment costs and reducing the costs to the military services. Since 2005, the military services have not collected and provided complete and accurate project data to DOD on alternatively financed energy projects.