Energy turns to performance contracts to cut data centers

To meet governmentwide goals for streamlining computing operations, the Energy Department is using a novel procurement tool to whittle down its 89 data centers--federal energy savings performance contracts.

It's not that these contracts are new. They have been used for everything from Air Force water conservation projects to energy-efficient lighting for the Statue of Liberty. But they have not been used to reach sustainability goals specifically through improved information technology practices.

"ESPCs in the past have been something the facilities managers and energy managers have been aware of, but this is the first time in IT," says Jake Wooley, deputy director of the Energy Department's information technology management office. "We're calling it a proof of concept."

The department has enlisted Lockheed Martin Corp. to provide that proof. Under the terms of the contract, the company will offer an in-depth preliminary investigation to demonstrate where Energy can save money, and how much, through a data center consolidation.

The assessment, which was slated to be released in October, was done at no cost to Energy. The department and Lockheed Martin will work up a project agreement based on the assessment. Only then will the money begin to flow.

There are any number of unknowns in this consolidation effort.

How far will it reach? At the very least, agency executives are eyeing data facilities in Albuquerque, N.M., and at headquarters in Washington for possible closure. But it remains to be seen which data centers can be consolidated to drive long-term cost savings.

Other questions include how many employees a consolidation could affect, how much energy might be conserved, and how much money can be saved to offset the costs.

The Big Picture

The Energy Department's effort comes in the context of a governmentwide data center consolidation program, prompted in part by the explosive growth of such facilities. The number of federal data centers grew from 432 in 1998 to more than 2,000 today.

In February 2010, the Office of Management and Budget launched the Federal Data Center Consolidation Initiative, calling on agencies to take a hard look at energy consumption among their facilities with an eye toward closing 800 centers by 2015. Technology leaders are expected to:

--Reduce the energy and real estate footprint of government data centers.

-- Cut the cost of data center hardware, software and operations.

--Shift IT investments to more efficient computing platforms.

In October, OMB changed its data center definition, boosting the overall total and the number expected to close. Despite its specificity, the OMB directive has been met with ambivalence, according to MeriTalk, an online community of government information technology specialists. In its most recent survey, the "2010 Federal Data Center Demolition Derby," MeriTalk reported mixed reviews.

While 63 percent of federal IT executives are confident that consolidation will happen, three-fourths of respondents say it won't happen on time, according to the survey. Twelve percent think data center reduction won't happen at all.

While more efficient computing is a chief goal of the initiative, 62 percent say it will take them up to five years to shift operations to Web-based cloud services. None of the respondents could agree on how many data centers would be left standing: Guesses ranged from 300 to 900 centers.

Lockheed Martin officials are a bit more sanguine, at least about the Energy Department's project. They expect significant results, assuming the agency and contractor can work together effectively.

All Hands on Deck

A thorough data center assessment is a two-way street between federal managers and contractors.

"What we need from the government is participation and engagement in the project-development process. We can only make recommendations based on our understanding of government priorities, and, of course, the universe of possibilities the engineers make available to us," says Greg Caplan, Lockheed Martin's senior manager for energy performance contracting.

A data center consolidation program involves a range of stakeholders, including budget staff, energy management specialists and program personnel in the CIO's office. As agencies embark on these ventures they'll have to unravel a complex web of relationships among those who make the policy, those who pay the bills and, especially, those who manage the assets.

"The people whose buy-in is most import are the people who manage the facilities," Caplan says.

A federal energy-savings performance contract has two distinct advantages. There's no upfront cost to the agency, and the final scope of work is determined not solely by the agency, as is usually the case, but rather in close cooperation with the company doing the job.

But the timeline on such a contract can be problematic.

OMB's consolidation program looks for an agency to recoup expenses through energy savings over a 25-year period. That's easy when the target is a turbine, for instance, says Wooley at Energy. Hard assets often have a lifespan of decades.

But it is different in IT, where whole paradigms sometimes turn over in the course of just a few years. Typically, "we are not going to fund an IT upgrade 20 years out," he says. "I don't think the IT folks have been made aware of that idea. We are just used to our incremental enhancements year by year."

Consolidating data centers will require agencies to make many assumptions about their long-term needs and the changing state of technology.

The ultimate goal for OMB is energy savings--enough to pay for consolidation efforts in the long run. But Wooley's vision goes beyond the bottom line on the utilities bill. He's looking to improve IT services throughout the department, a move that should benefit all users.

A streamlined network could support desktop video, mobile computing and cloud computing applications. "It will allow us to take a much bigger step toward improving our IT infrastructure," Wooley says. "We want to be able to operate a highly efficient IT structure, and we want to be able to stop the significant costs of being able to do that."

Adam Stone, a freelance journalist based in Annapolis, Md., writes about federal management issues, technology and a broad range of business topics.