Finance First 2.0

Finance First Frequently Asked Questions (FAQs) 

Updated 12/16/2024

Questions 1-10 were previously answered via an email from the Office of Energy Assurance dated 4 December 2024 to registered attendees to the Office's information session held 2 December, 2024. The answers presented below differ from the 4 December email. The responses below should be considered final and replace the responses previously issued.

1. How is this different than current Department of the Air Force (DAF) efforts?

• Changing the solicitation process for resilience: Currently, the DAF’s solicitation process begins by selecting a specific acquisition authority (e.g., power purchase agreement (“PPA”), energy savings performance contract (“ESPC”), enhanced use lease (“EUL”), utility energy service contract (“UESC”) etc.). The act of choosing an acquisition authority potentially limits the DoD to a narrower range of possible solutions (both material and financing) that might otherwise be possible if a project developer or vendor was given the opportunity to propose the acquisition authorities to use. Finance First is different because the contracted vendor will examine the installation resilience posture and propose both residence solutions and the acquisition pathways to execute the solutions. This approach, which is less prescriptive, allows vendors to propose a larger variety of bundled solutions to address DAF’s resiliency needs using the existing authorities available today.
• Creating a new business process: Finance First aims to prototype a new business process that brings partners to the table early, before project conception to finance comprehensive, resilient, carbon-free energy solutions to help DAF meet its resilience requirements more rapidly and efficiently.
• Iteratively collaborating: The CSO process will allow DoD to have an iterative conversation with industry experts to develop a comprehensive solution and scope of work to meet our stringent energy requirements. Unlike a FAR-based contract that requires us to enumerate a detailed requirement that the vendor needs to fulfill, under the prototype contract, we first start with a problem statement (e.g. “We need resilient, clean, cost-effective energy.”). Then we can collaborate with experts to define the art-of-the-possible using state-of-the-art technology.

2. Why are you doing this?

• The current pace of deploying resilient energy systems is unacceptably slow and compares poorly to best-in-class experience in the private sector. By engaging the private sector early, we can more efficiently close resilience gaps and improve the installation’s resilience posture. 
• In addition to our legal requirements to have resilient energy solutions at our installations, we have also identified thousands of energy resilience gaps across all our installations worldwide that will require a large expenditure of funds on infrastructure investments, and we need an approach that will allow for more efficient delivery. 

3. What are the benefits to the Air Force?

• Comprehensive, installation-wide solutions for energy resilience and clean energy: Finance First will provides us the opportunity to iteratively create the broadest possible scope of work for resilient and cost-effective energy solutions that we can de-risk prior to executing a long-term, follow-on contract.
• Efficiently address more gaps: Deployment of more efficient resilient solutions that address more installation gaps.

4. What are the benefits to the financier?

• Opportunities for the follow-on production contract include:
  • Large-scale infrastructure investment opportunities: The Department of Defense and DAF are some of the largest energy consumers in the world and we have identified thousands of energy resilience gaps that require third-party financing. The scope of our gaps far exceeds our appropriated capital budget.
  • Solid long-term investment: The federal Government pays its energy commodity and energy services bills on time, and over time ensuring a solid rate of return on your investment.
  • Capture of federal tax incentives: The DAF’s core competency is focused on national security; we are not in the utility business. So, we prefer that third parties own, operate, and maintain energy assets at our installations. Third-party owned projects may also capture the lucrative federal tax incentives for projects located at our installations.

5. What do you mean by prototype?

• DIU utilizes Other Transaction Agreements (OTA or Agreements) under the authority of 10 USC 4022 to partner with nontraditional and traditional defense contractors and non-profit research institutions to carry out prototype projects that are directly relevant to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the DoD, or the improvement of platforms, systems, components, or materials in use by the armed forces. A Prototype Project can generally be described as a proof of concept, model, reverse engineering to address obsolescence, pilot, novel application of commercial technologies for defense purposes, agile development activity, creation, design, development, demonstration of technical or operational utility, or combinations of the foregoing. A process, including a business process, may be the subject of a prototype project. 

6. What technologies do you want to deploy? 

• “Describe” rather than “Prescribe:” It is up to the selected vendor to recommend the right solutions and pathways to implement them. During this prototype, the DoD will describe their current resilience posture and resilience gaps rather than prescribe solutions. We are technology agnostic and want solutions that resolve the gaps described and improve the resilience posture. 
• Attributes versus mandatory requirements: In contrast to typical government RFP’s, the solicitation is descriptive (what is the problem that needs to be solved) vs. prescriptive (means and processes for solving the problem). The solicitation will be purposefully broad to encourage a broad range of solutions. 

7. What projects do you want us to invest in?

• See response above for Q6

8. What are your cybersecurity requirements?

• This will be determined under the prototype. If your solution requires cyber-security protocols, one of the milestones under the prototype will be to conduct due diligence with the appropriate DoD and industry stakeholders to identify the necessary protocols and best practices for your solution that you would need to implement.

9. How much money is the Government investing?

• Congress gave DAF approximately $3M in FY25: 
  • Funding could be used for the vendor’s commitment during prototype period to collaborate with the DAF and develop the project concept as well as document the new business process. This could include details of their resilient solution concepts as well as aligning those concepts with resilience gaps and mission requirements.
  • Funds may contribute to the prototype deliverables related to development and documentation of the new business process, in which the vendor partners with the DAF to examine gaps and propose financeable solutions.  
  • Regarding the long-term production contract: It is anticipated that following a successful prototype, the DAF would enter into a production contract with private industry that fulfills the concept and findings of the prototype. The production contract would be characterized by a long- term DAF commitment that pays over time for of the reliance solution with no upfront capital investment from DAF.

10. What are the terms and conditions for the prototype, follow-on contract?

• 10 USC 4022: If the prototype is “successfully completed,” under 10 USC 4022, the federal government may award a sole-source, follow-on production contract or transaction to the prototype participants. 

11. Do you have consumption data for the Air Force - either by base or overall? 

• Yes, we have Air Force consumption data at both the base and enterprise level. However, the consumption information available will not be provided until Phase II of the Commercial Solutions Opening. We anticipate providing consumption information, as it pertains specifically and solely to the installation where the prototype agreement will be performed. 

12. Where will the prototype agreement be performed?

• At the present time, it’s anticipated that the prototype agreement will be performed at Joint Base Andrews(JBA). Other installations may be added at a later date. Further information on the prototype installation(s) will be provided to respondents that are selected to provide Phase II Pitches.

13. Will the slides and recordings be available after the webinar held on December 2, 2024? 

• Yes. The slides were shared with webinar participants. If you would like a copy of the slides, please contact Michael Kahmann at DIU (mkahmann.ctr@diu.mil) and they will be provided to you.

14. How does the DoD view the integration of federal funding e.g. NDAA allocations like ERCIP or Division C funds) with state-level grants (e.g. Colorado’s Geothermal Energy Grant Program) in project financing?

• Any funds that the vendor can obtain outside of the DAF, such as state-level grants or federal grants from other agencies, can be applied as allowed by law to the resilient energy solutions.
• The DAF’s objective is to fund resilient energy solutions without using DAF capital or any other type of upfront capital outlay. The DAF will pay for these solutions through a payment over time, such as an off-take agreement. During the prototype period, the DAF is willing to investigate the use of various federal funding sources to finance the proposed solution in the most optimal way.
• The DAF objective is to finance these resilient energy solutions at the lowest cost of capital to DAF as possible, as quickly as possible. 
• To help achieve the above objectives, we encourage vendors to identify value in the “system” or “solution” (e.g., DAF land, site security, access to other customers, and collaborations with the nearby community), but the DAF will not provide federal funding as an up-front capital outlay.

15. Is the proposed energy generation asset outward facing to the civilian grid or strictly internal to the installations microgrid?

• This will be for the selected vendor performing the prototype to propose based on their expertise, the solution under consideration, and the characteristics of the prototype installation. The Government will not dictate on this matter, but we do expect the vendor to capitalize their solution to provide the most value. 

16. If ultimately, we are using an existing contract authority, what part of the business process is innovative?

•  This is a business process improvement initiative. It need not employ innovative (a) technology; or (b) financing structures. Please see answers to questions 1, 5, and 6 above for more detail on how the Government anticipates this innovative process will be executed and documented. 

17. Will the Government be providing real estate (land) at no cost, or will the Contractor have to factor in lease costs?

• Any property provided by the Government (whether intangible, or real) for long-term use would be provided at fair market value. 

18. If the location has specific environmental or operational constraints, is your team able to help navigate those processes for development and deployment?

• Yes, the Government will work to be helpful in these matters to the maximum extent practicable.

19. Will DIU/OEA provide the resilience “scoring” matrix?

• We anticipate that in advance of Phase II Pitches, selected respondents will be provided information regarding the problem set, including but not limited to resilience gaps. 
• A scoring matrix may be provided. It could include weighted categories such as correlation to an installation resilience narrative general impact if a resilience gap was addressed. 

20. Can we assume the Government will perform any required environmental due diligence?

• Performance of required environmental work is the responsibility of the vendor.

21. Will there be a specific acreage or roof space at JBA?

• Information available regarding acreage and/or roof space at prototype installations will be provided prior to the presentation of Phase II Pitches.

22. What is the amount of capital contribution from the Air Force? 

• Congress gave DAF approximately $3M in FY25. See question #9 for more details.

23. Can you state the expected useful life of the asset?

• The expected useful life of the asset depends on the type of asset proposed as part of the solution. 

24. What is the legal pathway for the prototype which allows the Government to sign a mutually acceptable contract?

• See question 5.

25. In the project description, it mentioned that prospective respondents should demonstrate financial capacity to carry out a project greater than $50M USD and to provide a letter of credit reflecting the financial capacity to finance projects at or above $50M USD. Are we being asked to directly invest $50M into the project if it awarded to us?

•  The term “letter of credit” as used in the Area of Interest solicitation does not pertain to a bank letter of credit. Rather, it pertains to credit information sufficient to allow the Government to make a reasonable determination that a $50M investment is within the financial means of the respondent. That information is not required in the response to the AOI but, rather, may be solicited from respondents during Phase II Pitches. The Government is asking for vendors to invest in these resilient energy projects. It is anticipated that projects that are sized to produce economies of scale may exceed $50M in capital investment. It is anticipated that this investment would be repaid (with an acceptable return on investment) via the financing structure used with the Government as a credit counterparty. (Note)

 26. In the CSO procedure it is stated that “Companies may submit multiple Solution Briefs in response to any single AOI if each submission represents a separate and distinct concept”. The firm has several commercial off the shelf solutions that could be applicable to different features of the desired solution. Based off this text, we would be able to submit two separate responses, correct?

•  Correct. Multiple responses are allowed, subject to the proviso referenced in the CSO and stated above.

27. Separate from the AOI, the DAF published a document entitled “Finance First Industry Day Frequently Asked Questions (FAQs) Document, dated December 2, 2024.” In that DAF published document, which was sent via attachment to an email to webinar participants on December 4, 2024, FAQ 1, third bullet stated that the Government wants to partner directly with the finance/investment community, versus partnering with developers. There is additional language later in the DAF FAQ email that seems to both support and contradict this statement. For example, the email attachments FAQ 5, second bullet listed the first prototype deliverable as “a project concept with an engineering design.” The AOI Problem Statement as posted on the DIU website would seem to be geared to developers. In our experience, the right approach is as outlined in the Problem Statement of the AOI; most financial institutions rely on developers to flesh out project scope and perform their required due diligence efforts to include the development of the initial project pro forma. It would be most useful to proposers for the Government to clarify its intent.

• The Government is looking to engage with industry on wholistic solutions to energy resilience gaps. Whether that engagement is primarily or initially with financiers or developers (or other parties) is not the Government’s concerns. We will not “prescribe” terms of engagement, nor will we prescribe technology or financial solutions. Rather, we intend to “describe” our energy resilience gaps, and ask industry, on a turnkey solution basis (that designs, constructs, finances, operates and maintains) to propose a rapid process that solves our problem(s) in an economic way.

28. Would a company that has an automated process for installing solar arrays more quickly and economically be a qualified respondent to the AOI? The requirements of the solicitation appear to call for holistic approaches to the entirety of the problem set, and not just one single facet. Furthermore, the qualifications appear to be in line with more established companies as opposed to start-ups. Is the foregoing an accurate assessment of what the solicitation is asking?

• The Government seeks turnkey solutions and consequently will view holistic solutions more favorably than solutions that purport to solve less than the full range of challenges that go into designing, constructing, financing, operating, and maintaining resilient energy projects. Companies are permitted to arrange teaming arrangements– irrespective of stage of development – to work toward that objective by entering into “teaming” arrangements with other industry partners that possess complementary capabilities.

29. Our company is interested in the Finance First solicitation. Is hydrogen of potential interest? Do you have an approximate $/kwh rate you can share so we can determine if our technology is cost-competitive?

• With respect to technology preferences, please see answer to question 6. With respect to $/kwh, this information will be provided in advance of Phase II Pitches.