With DOE Contract, SAIC Can Seek $5B in Energy Conservation Work

2/13/09Follow @bvbigelow

SAIC’s acquisition of an Oklahoma engineering company in 2007 could yield a substantial new revenue source for the San Diego-based government contractor. The company also known as Science Applications International Corp. (NYSE: SAI) said earlier this week its Benham Companies subsidiary was recently awarded an Energy Savings Performance Contract by the U.S. Department of Energy.

The DOE contract qualifies Benham for work to be awarded under a 2007 law that requires federal agencies to reduce their energy “intensity” by 30 percent from 2003 levels and water consumption by 16 percent from 2007 usage levels. SAIC did not disclose financial terms when it acquired Benham in mid-2007.

The federal government is the largest single user of energy in the United States. The DOE award enables the Oklahoma City-based firm to get project orders that could total as much as $5 billion over seven years if all options are exercised. Benham designs and builds industrial facilities, including oil refineries and public buildings, and specializes in designing and installing energy management technologies.

SAIC says its Benham subsidiary also won a second Energy Savings Performance Contract from the U.S. Army Corps of Engineers, although the total contract ceiling for that work is only $50 million over six years if all options are exercised.

Under the Energy Savings Performance contract, SAIC spokeswoman Melissa Koskovich says Benham is basically pre-qualified to bid for energy-saving projects, but a big difference is the company must arrange its own financing. Once a federal agency issues a contract to Benham for a particular project, Benham must obtain the necessary financing, and design and build the project. The government agency pays the company for its work over a specified period from the savings it gains from the reduced costs of its energy or water utility bills.

The DOE says the contractor must guarantee that its energy or water improvements will generate savings for the agency. After the contract ends, any continuing cost savings accrue to the agency.

SAIC’s Benham subsidiary was among 16 companies to get identical Energy Savings and Performance Contracts in December under the DOE’s Federal Energy Management Program. All 16 companies are listed here

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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