oversight

Federal Agencies Can Do More to Promote Energy Conservation by Government Contractors

Published by the Government Accountability Office on 1977-09-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                           DCCUMENT FESUMS

03700 -   B2774015]

Federal Agencies Can Do Mere to Prcmote Energy Conservation by
Government Contractors. ED-77-62; B-178205. September 30, 1977.
42 pp. + 8 appendices (30 pp.).
Report to the CongreEs; by Robert P. Keller, Acting Comptroller
General.

Issue Area: Energy: Effect f Federal Efforts on Energy
    Conservation (16C7); Pederal Procurement of Goods and
    Services (1900).
Contact: Energy andA M!.neral.s Div.
Budget Function: National Defense: Department of Defense -
    Procuremen t s Contracts (058); Natutral escurces,
    Environmea.t, ad  Energy: Energy 305).
Organizatin Concerned: Department of Energy; Department of
    Commerce; Department eo Defense; Offiche of Management and
    Budget.
congressional Relevance: Hovse Committee on Armed Services;
    Senate Committee on Armel Services; Congres.
         It has been estimated that from 4 to 7% of energy
consumed in the United States is in support c Government's
purchases of goods and services. Energy conservation programs
were reviewed at 23 overnment contractors' plants to evaluate
their effectiveness and to assess efforts of Federal agencies in
helping to establish viable programs. Findi.gr/Conclusions: All
contractors reviewed were taking scme conservation measures, but
few had viable energy management programs. Most companies were
reluctant to invest in adequate staff or equipment that did not
recov= costs in a short time. Federal agencies did not: supply
adequate leadership as evidenced by the following: (1) energy
conservation information was not effectively disserinated to
contractors; (2) lighting level guidelines were not generally
used or interpreted consistently; and (3) improvements were
needed in the Department of Defense's energy management program.
Although there was agreement on the need for further
conservation, several contractors disagreed on amounts of energy
that could be conserved. The National Energy Plan proposal ro
give tax credit to industzy for investing in conservation
measures is desirable. I'he new Department of Energy should help
bring together fragmented programs. Recommendations: The
Director, Office of Management and Budget, and the Secretary of
Energy should juintly develop a procurement polity that requires
contractors to establish viable energy management rograms.
Other measures for improving programs should inclu&a:
establishing reasonable goals, monitoring contractors' efforts,
and reporting tc Congress; use of Government contracting
personnel to disseminate informaticn; developing easily
understood lighting guidelines; planning for coordinated efforts
by Department of Defense elements; expanding the scope of
Defense Contract Audit Agency energy aidits; and advising
contractors of funding under the Energy Conservation Investment
Prograu. (HTI)
           REPORT TO THE CONGRESS

           BY THE COMPTROLLER GENERAL
.   As,'   OF THIE UNITED STATES




           Federal Agencies Can Do More
           To Promote Energy Conservation
           By Government Contractors
           Although the Federal Government has been
           promoting energy onservatior since late
           1973 and several agencies have programs
           that deal with industrial energy conservation,
           these programs and actions have had little
           effect at Government contractors' plants.
           All contractors had taken some conservation
           actions at the facilities reviewed. Very few,
           however, had viable energy management pro-
           grams.
           Contractors can do more to ave energy. The
           potential for achieving additional reductions
           in energy use is more than 20 percent in
           some plants.
           Because of possibly high energy savings, the
           Government must work effectively as a unit
           to foster and promote energy conservation.




           EMD-77-62                                        SEPTEMBER 30, 1977
               COMtPitOLKR GENERAL OF    HE UNITED STATES
                         WAHINQ TON, D.C. 3014




B-178205



To the Pres dent o the Senate and tne
Speaker of the House of Representatives

     In view of the importance of conservation as an element
of a national energy policy, ar.d as a followup to earlier
work we performed, we reviewed the energy conservation pro-
grams at 20 Government contractors' plants. Our review
evaluated the effectiveness of the contractors' prog:ams and
assessed the efforts of Federal agencies in assisting con-
tractors to establish viable conservation programe.

     Although the Federal Government has been promoting
energy conservation since late 1973 and several agencies
have programs that deal with industrial energy conservation,
these programs and actions have had little effect at con-
tractors' plants. Through its procurement plicies, the
Government has an opportunity to promote energy conservation
actions by contractors. In view of the large nergy savings
that could be realized, we believe the Govcrnment must assume
a more effective and coordinated leadership role to foster
and promote energy conservation.

     We made our review pursuant to the Budget and Accounting
Act, 1921 (31 U.S.C. 53), and the Accounting and Auditing Act
of 1950 (31 U.S.C. 67). Contractors' records were examined by
our authority as set forth in 10 U.S.C. 2313(b).

     Copies of this report are being sent to the Director,
Office of Management and Budget; the Secretaries of Energy,
Defense, and Commerce; the Administrators of the Federal
Energy Administration, the Office of Federal Procurement
Policy, and the General Services Administration; and the
chairmen of energy-related congressional committees.




                       Acting     Comptroller General
                                  of the United States
COMPTROLLER GENTrHAL'S             FEDERAL AGENCIES CAN DO MORE
REPORT TO THE CONGRESS             TO PROMOTE ENERGY CONSERVATION
                                   BY GOVERNMENT CONTRACTORS

         This report provides Federal agenies and the
         This report provides Federal agencies and the
         Congress wilt, information on the effectiveness
         of agency efforts to promote voluntary energy
         conservation by Government contractors. These
         efforts have not been very effective. While
         contractors have taken specific energy con-
         servation actions, further energy savings are
         possible if all contractors set up viable
         energy management programs in their plants.
         At 20 Government contractors' plants:
          -- All contractors were taking some conserva-
             tion measures. However, reductions in
             energy consumption only partly resulted
             from conservation; much of the decr, ases
             stemmed from economic factors. By operat-
             ing more efficiently and using more efficient
             equipment and techrc.ogies, contractors
             can reduce their energy consumption--perhaps
             by over 20 percent in some plants.   (See
             ch. 2.)
          -- Few contractors have viable energy manage-
             ment programs. While most contractors
             have issued energy policy statements and
             formed conservation committees, few have
             followed up with adequate program staffing
             and funding. (See ch. 3.)

          -- Several factors have ipeded the develop-
             ment of energy managerent programs. In-
             ternally, program costs seem to be the
             major inhibiting factor. For example, many
             companies did not assign full-time staff
             to their programs and were reluctant to in-
             vest in energy-saving equipment that did
             nc: recover its cost in a relatively short
             titde. The most important external impedi-
             ment appears to be a lack of strong Federal
             leadership. (See chs. 3 and 4.)




yArL$h Upnu, ram. 1.tho rvrt
 At- - rsMs i) rv 1 r..        i                    EMD- 77- i
What are Federal agencies doing to help con-
tractors establish viable energy manage-
ment programs? Not enough.
-- Energy conservation publications and
   material were not effectively sent to
   contractors. (See p. 23.)
-- Lighting level guidelines and standards,
   established by several Federal agencies
   and technical societies, are not generally
   accepted and used by contractors. The
   guidelines are interpreted and applied
   differently. (See p. 24.)
-- Improvements are needed in the Depart-
   ment of Defense's energy management pro-
   gram. (See p. 27.)
The contractors reviewed and the Federal
Enegy Administration, Office of Management
and Budget, Department of Commerce, Depart-
ment of Defense, and General Services Ad-
ministration agreed that further conserva-
tion is necessary. Several contractors
disagree on how much more energy could be
conserved. Some feel that financial    -
centives such as accelerated depreciation
and investment tax credits are needed to
help them do more to conserve energy.
The Office of Management and Budget, De-
partment of Commerce, and Department of
Defense agreed with GAO's recommenda-
tions, except for developing a procurement
policy that would require Government con-
tractors to establish viable energy msnage-
ment programs. The Federal Energy Adminis-
tration and General Services Administration
are willing to work with the other three
agencies to develop a procurement policy.
Recently, the administration and the Con-
gress acted to more effectively deal with
the Nation's energy problem. On April 29,
1977, the President's proposed National
Energy Plan was isbsed and legislation
creating the Department of Energy was signed
August 4, 1977.



                     ii
The National Energy Plan proposes tax credits
for industry and business when they invest
in energy-saving equipment and conservation
measures. GAO supports these proposals.

The new Department of Energy was given
the authority and programs necessary to
foster, encourage, and require energy con-
servation. This should hel bring together
the Government's fragmented nergy policies
and programs.

These actions are a positive response to the
issues raised by the contractors and agencies
in the~' comments and could alleviate or re-
 aive barriers that have prevented contrac-
tors from developing viable energy manage-
ment programs. However, these actions, by
themselves, may not be enough. The Govern-
ment should develop a procurement policy
that requires contractors to establish energy
management programs that adequately incor-
porate the following five elements.

-- Commitment by top management.

-- Development of comprehensive energy-use
   surveys.

--Goal setting based on survey evaluations.
---Employee motivation campaigns.

-- Monitoring programs and their results.
A means should be established for the Govern-
ment to monitor and evaluate the overall
effectiveness of the contractors' energy
management programs, including the actions
that are taken in response to any new tax
incentives.

RECOMMENDATIONS
GAO recommends that:

--The Director, Office of Management and
  Budget, and the Secretary of Energy jointly
  develop an energy conservation-related



                       iii
procurement policy that requires Government
contractors to establish viable energy man-
agement programs that include the five pro-
gram elements listed above.
-- The Secretary of Energy establish reasonable
   ¢energy conservation targets and goals for
   major Government contractors, monitor
   the contractors' efforts oward achieving
   these goals, and report to the Congress within
   24 months on the progress being made arn
   with recommendations as to whether any new
   financial incentives that are pr)vided by
   the Congress for energy conservation are
   sufficient, or whether mandatory standards
   are necessary.
--The Secretary of Energy and the Secretary
  of Commerce use Government contracting
  personnel in the Department of Defense,
  the General Services Administration, and
  other agencies to isseminate energy con-
  servation publications and materials to
  contractors.

-- The Secretary of Energy review the various
   lighting guidelines and standards that are
   currently in existence and develop na-
   tional lighting guidelines and standards
   that can be easily understood and consis-
   tently applied in commercial, public, and
   industrial buildings.

-- The Secretary of Defense:
   Develop a formal plan for a coordinated and
   uniform effort to be exerted by all Depart-
   ment of Defense elements to promote energy
   conservation by its contractors.

   E-pand the scope of the Defense Contract
   Audit Agency energy audits and use tech-
   nical assistance in these audits for
   evaluating contractors' energy manage-
   ment programs.
   Use the Agency's energy audits to monitor
   contractors' efforts to establish and main-
   tain viable energy management programs.



                      iv
   Advise all contractors operating Government-
   owned plants, and the military services re-
   sponsible for administering such plants, that
   projects can be submitted for funding nder
   the Energy Conservation Investment Program.

MATTERS FOR CONSIDERATION
BY THE CONGRESS
A National Energy Plan containing financial in-
centives for industry to conserve energy is
expected t be enacted. GAO supports investment
tax credits -as one incentive. The Federal agen--
cies and contractors responding to this report
believe that these incentives will be an iduce-
ment for contractors, and all industry, to con-
serve more energy.
Because the Congress must ultimately decide
whether voluntary or mandatory energy conserva-
tion programs are needed in industry, GAO be-
lieves the Congress should maintain close
oversight of this area. The Congress could
include, in any new legislation, a requirement
that the Secretary of Energy monitor and report
on industry's efforts in response to any new
financial incentives that are provided for
energy conservation.




                    v
                                                         Page
   V    Letter dated April 28, 1977, from the
          Department of Commerce                          57
  VI    Letter dated May 19, 1977, from the
          Department of Defense                          64
 VII    Letter dated April 20, 1977, from the
          General Services Administration                68
VIII    Principal officials responsible for
          administration of activities
          discussed in this report                       71
                   ABBREVIATIONS

ANSI    American National Standards Institute
DCAA    Defense Contract Audit Agency
DOD     Department of Defense
ECIP    Energy Conservation Investment Progrem
ERDA    Energy Research and Development Administration
FEA     Federal Energy Administration
FMC     Federal Management Circular
GAO     General Accounting Office
GSA     General Services Administration
COGCO   Government-owned, contractor-operated
HVAC    heating, ventilating and air-conditioning
IES     Illuminating Engineering Society
OFPP    Office of Federal Procurement Policy
OMB     Office of Management and Budget
PBS     Public Building Serxice
                      Con tents


DIGEST                                                        i
CHAPTER

   1      INTAODUCTION
              The need for energy conservation                1
              Ene:-gy U- by the Federal Government            1
                                                              2
              GAO reviews f contractors' energy
                conservation programs
              Energy use in contractors' plants               2
                                                              3
  2       ACTIONS HAVE BEEN TAKEN TO CONSERVE EERGY
            BUT THE POTENTIAL FOR FURTHER CONSERVATION
            IS HIGH                                       5
              Much of the reductions in energy con-
                sumption c'n be attributed to
                economic f a'tors                         5
              A three-phase approach for conserving
                energy                                    6
              More emphasis needs to be given to
                eliminating waste in easily
                recognized areas
              Capital investments will be needed to       7
                achieve further reductions in energy
                use                                      10
              Improvements in technology can signifi-
                cadntly improve energy-use efficiency    13
  3       NEED FOR VIABLE ENERGY MANAGEMENT PROGRAMS     15
              Programs lack emnphasis and continuity     15
                   Need for top management to provide
                     emphasis and resources              16
                   Comprehensive energy-use surveys
                     are needed                          17
                   Need to establish realistic goals     l1
                   More effective employee motivation
                     needed                              18
                   Need for conservation actions and
                     programs to be monitored            18
              Increasing energy costs have not stimu-
                lated improved energy management
                programs                                 19
              Impediments to developing energy manage-
                ment programs                            20
                                                           Page

CHAPTER
   4        O(!lr.   AREAS WHERF IMPROVEMENTS ARE NEEDED
                'O POMOTE ENERGY CONSERVATION               21
                  Federal procurement policy should
                    include energy conservation
                    direct.on for contractors               21
                  Publications and information must be
                    more effectively disseminated           23
                  Recommendation                            24
                  National lighting guioelrines ad
                    standards should be developed           24
                  Recommendation                            27
                  Improvements .eeded in Department of
                    Defense energy management program       27
                  Recommendations                           31

   5        AGENCY AND CONTRACTOR COMMENTS AND OUR
                EVALUATION                                  32
                  Contractor comments                       3',
                  Federal Energy Administration comments    34
                  Office of Management and Budget
                    comments                                35
                  Department of Commerce comments           36
                  Department of Defense comments            38
                  General Services Administration
                    comments                                39
                  Overall conclusions                       4G
                  Recommendations to the Director,
                    Office of Management and Budget
                    and the Secretary of Energy             41
                  Matters for consideration by the
                    Congress                                42
APPENDIX

            Schedule showing contractor energy     se
              and cost information for 1975                 43

       II   Statistical analysis explaining variations
              in energy ,se                                 44

   III      Letter dated March 29, 1977, from the
              Federal Energy Administration                 49

       IV   Letter dated April 21, 1977, from the
              Office of Management and Budget               54
                          CHAPTER 1

                        INTRODUCTION

     In 1958, for thle first time, the United States consumed
more energy than it produced. Since then the gap between
domestic energy supply and demand has widened. Demand peaked
in 1973 and actually declined somewhat in 1974 and 1975
apparently because of reduced economic activity, higher fuel
prices, and conservation measures. In 1976, however, energy
demand resumed its upward trend while domestic production con-
tinued to fall.
     The gap between supply ard demand has been largely filled
by oil imports. In 1975 petroleum products provided about 46
percent of the Nation's total energy, and 37 percent of these
petroleum products were imported. The dependence on foreign
oil rose to about 42 percent in 1976 and is expected to climb
to about 46 percent in 1977. The cost of oil imports has
grown from $3 billion in 1970 to about $27 billion in 1975
and is projected to reach $32 billion in 1977.

THE NEED FOR ENERGY CONSERVATION
     The Nation's increasing reliance on imported oil leaves
it vulnerable to supply disruptions which could adversely
affect the national economy. 'Jut this reliance could be
lessened by reducing energy demand. Depending on policy
actions taken to change consumption patterns, demand can sub-
stantially var-.. In April 1977 the President issued the
National Eneryy Plan, hich combines legislative, adminis-
trative, and budgetary proposals aimed at solving the Nation's
energy problem. The plan calls for measures ranging from both
mandatory and voluntary conservation actions to expanded re-
search on nonconventional energy sources. The administration
estimates that if the plan is fully implemented, energy demand
growth during the next 10 years can be reduced from the
historical rate of 3.5 percent to 2.2 percent annually. The
plan also proposes a goal of reducing the growth rate to
below 2 percent a year by 1985 through additional voluntary
conservation measures.

     In simple terms, energy conservation means using less
energy and using it more efficiently. Several Federal
agencies, including the Energy Research and Development Admin-
istration (ERDA) and the Federal Energy Administration (FEA),1

1AlthoughFEA is discussed throucghout this report, our recom-
mendations in chapters 4 and 5 are addressed to the newly es-
tablished Department of Energy to which the functions of FEA
have been assigned. See p. 40 for information on the re-
sponsibilities of the Department of Energy.
have found that conservation provides a potentially cheaper
alternative for developing additional sources of supply.
They have shown that it often costs less to save a barrel of
oil than to develop a new one.
ENERGY USE BY THE FEDERAL GOVERNMENT
     The Federal Government is the Nation's largest single
purchaser of energy, directly consuming almost 3 percent of
the energy used in the United States. Although this percert-
age seems small, it represents the equivalent of about 300
million barrels of oil, costing about $3 billion a year. In
addition, the Government uses much energy indirectly through
its purchasing and other activities. It relies heavily on
private industry to provide goods and services needed to sup-
port and carry out its missions.
     The total amount of energy used by the thousands of
private contractors that do business wth the Government is
not known. However, available information indicates that
from 4 to 7 percent of the energy consumed in the United
States'is in support of the Government's purchases of goods
and services. Thus, the total amount of energy used by the
Government comprises 7 to 10 percent of national consumption.
It is clear that the Government has a large potential for
saving energy and providing leadership in the development
and implementation of an gS assive national energy conserva-
tion effort.
GAO REVIEWS 0O CONTRACTORS'
ENERGY CONSERVATION PROGRAMS

      In October 1974 we issued a report o the results of a
survey of five Government contractors' energy conservation
programs.: In the report we pointed out that although some
actions had been taken to conserve energy, further commitment
by both tbh contractors and Federal agencies was needed to
assure viible conservation programs. In view of the impor-
t,nce of conservation as an element of a national energy
policy, and as a followup to our earlier work, we reviewed the
energy conservation programs of an additional 20 contractors.
Our review evaluated the effectiveness of the contractors'
programs and assessed the efforts of Federal agencies in
r.ssisting contractors to establish viable conservation
programs.


1 Letterreport to the Secretary of Defense and the Administra-
 tors of the Federal Energy Administration and General Services
 Administration. B-178205, October 29, 1974.

                               2
     The contractors included in our review were selected for
broad geographical coverage and importance in terms in of
business volume and energy use)  Their  total  sales      1975
exceeded $3.68 billion. Their energy costs    totaled more   than
$45 million, ranging from about $319,000 to over   $11  million
per year. The energy used by these contractors represented
the equivalent of 4.6 million barrels of oil. A list of      the
contractors and their associated energy  use,  by type,   is
shown in appendix I.

ENERGY USE IN CONTRACTORS' PLANTS
     Industrial companies use energy for manufacturing opera-
tions, transportation, heating, cooling, and lighting. Elec-
tricity was the major type of energy used by most of the
contractors we visited. In 15 of the 20 locations, electricity
accounted for over 50 percent of total energy consumption.
Heating fuel was also a large energy source in many-of the
locations. It is often converted to steam or hot water,  which
is piped throughout the facility for space heating and for
various manufacturing functions.

     Energy use varies with facility design and operational
characteristics (such as single and multiple shifts), energy
intensity of production activities, and climatic conditions.
At many locations it was not possible co trace the patterns of
energy use because consumption was generally not submetered a
to major pieces of equipment or functional operations within
plant. For five locations where we were able to develop
approximate energy-use profiles, the dominant energy users
were more often lighting and heating, ventilating, and air-
conditioning (HVAC) rather than manufacturing operations.
The estimated distribution of energy consumption for five
companies is shown in the following table.

           Distribution of Total Annual Energy Use
                                               Manufacturing
      Contractor       Lightirq       HVAC       and other

                       ----------- (percent)----

          A               15           44            41
          B               19           54            27
          C               17           32            51
          D               50           35            15
          E               29           44            27



                                  3
     Voluntary reductions in annual energy consumption, as
well as potential conservation actions advocated by FEA, the
General Services Administration (GSA), and the Department of
Commerce, heavily emphasize curtailments in and more effi-
cient use of lighting and HVAC operations. As shown above,
these activities account for a major portion of annual energy
use, and waste in these areas is often easily identified.




                             4
                         CHAPTER 2

    ACTIONS HAVE BEEN TAKEN TO CONSERVE ENERGY BUT
    THE POTENTIAL FOR FURTHER CONSERVATION IS HIGH

     All contractors had taken some conservation measures at
the facilities included in our review. However, the reduc-
tions in energy use experienced by many contractors only
partially stemmed from these efforts. A substantial portion
was attributable to economic factors. Our statistical anal-
ysis indicated that while some conservation actions may have
been stimulated by increases in the cost of energy, changes
in consumption are more closely linked to changes in employ-
ment levels and plant areas. Thus, much of the decrease in
energy use experienced by the contractors could be temporary
and may disappear as the national economic climate improves.
     The potential for additional energy reductions a in-
dividual plants is high. In our opinion, 1975 consumption
levels could be cut more than 20 percent. Few of the con-
tractors had implemented all the easily identified and
generally recommended energy corservation measures which
require no expenditure of capital funds. Much more could
be done in this area. In addition, relatively few energy
conservation projects requiring capital spending had been
implemented. By replacing existing equipment with new techno-
logicaily advanced energy-efficient equipment, energy use
could be further reduced by a significant amount.
MUCH OF THE REDUCTIONS IN ENERGY CONSUMPTION
CAN BE ATTRIBUTED TO ECONOMIC FACTORS
     We obtained data from the 20 contractors on employment
levels, plant areas, manufacturing activities, and types and
cost of energy used. The basic data indicated to us that
changing levels of business activity, as reflected in changes
in employment and plant utilization, may have influenced the
energy consumption patterns of the contractors.
     Using statistical analys:s, we assessed the impact that
employment, plant area, energy unit prices, heating degree
days, and the contractors' voluntary energy conservation
efforts had on their energy use. The analysis included 18
of the 20 contrectors for the years 1972 through 1975. Two
contractors were excluded from the analysis; one because it
operated in an energy intensive field and the other due to
insufficient data.




                             5
     Employment, plant area, and energy unit prices wre
statistically significant factors in the overall use of
energy by these companies. Our analysis showed that employ-
ment was the most important element in electricity consump-
tion, accounting for almost 67 percent of the variation in
electrical energy use. Plant area was the most important
factor in explaining heating fuel consumption. It accounted
for roughly 74 percent of the variation in the fuel used for
heating. The summary results of the statistical analysis
are included in appendix IT.
     While it was difficult to separate the effects of volun-
tary efforts from those of increasing energy costs, we be-
lieve that higher prices may have had more of an impart in
conserving energy. From 1972 through 1975, energy costs in-
creased significantly. For example, average electricity
prices for 12 contractors rose 88 percent, and average heat-
ing fuel prices went up 130 percent.
     The results of our analysis were in general agreement
with data released by the Department of the Interior on
April 5, 1976, which showed that total energy use in the
United States declined by 2.5 percent in 1975. Interior
reported that several factors, including higher fuel prices,
energy conservation efforts, and reduced economic activity
crntributed to this drop. Reduced economic activity was
indicated as the strongest force in restraining energy use.
A THREE-PHASE APPROACH FOR
CONSERVING ENERGY

     Energy conservation activities can be grouped into three
phases. Phase I includes what are generally known as com-
mon sense type measures, such as turning off lights and
equipment when not needed, reducing light levels, and utiliz-
inc more efficient light sources. Such efforts require rela-
tively little capital investment and prior analysis. Phase
II involves those projects requiring more extensive engineer-
ing studies and capital outlays with the potential of early
cost recovery. Examples include air-conditioning economizing
systems and automated facility central control systems. Phase
III projects refer to major renovations which may require ex-
tensive economic feasibility studies, major capital outlays,
and cost recovery periods of over 10 years. Such projects
might involve installation of heat recovery systems, double
glazing of windows, and insulation of building walls and roofs
to reduce HVAC loads.




                              6
     The identified potential for further reductions in energy
                        is shown in the following table.
use for six contractors
         Estimated Potential for Further Reductions
           in Energy Use for Selected Contractors
                                                  Potential
               Identified potential by phase       reductions
                  I         II         III     relative to 1975
Contractor
                           (therms)               --   (percent)

              1,219,425    3,041,232       720,000        19
    A
              1,596,910      891,867          -           15
    B
              1,118,277      167,420          -           17
    C
                 877,270     365,530          -           17
    D
                 322,804     190,400       251,204        20
    E
               2,031,711     612,360      3,127,680       23
    F
                                                            were
     These estimates of potential energy-use reductions by  the
                                               either
identified through partial energy-use surveys        or  a  combi-
contractors or by our staff members in the plants,
nation of both, and were agreed to by the contractors. These    that
potential reductions relate to specific identified actions  for
could be taken and do not represent the total  potential
energy conservation that might be identified throughthatcompre-
                                       we recognize         the po-
h-nsive energy-use surveys. Although
tential in individual plants depends on many  factors,   including
                                                                we
tha past efforts that have bean made to reduce energy use,
believe that this potential exceeds 20 percent  in  many   plants.
                                                               large
     The fact that a contractor listed in the table has a
                                                           imply
potential fcr future conservation does not necessarily
that little effort has been made to save energy. In some
                                                                that
cases, the fact that the potential can be stated indicates   conser-
the contractor has tried to identify  new cost-effective
vation projects.

MORE EMPHASIS NEEDS TO BE GIVEN TO ELIMINATING
WASTE IN EASILY RECOGNIZED AREAS
     All of the contractors had implemented conservation turn-
measures involving such obvious Phase I type actions as
ing lights and ventilation fans off in unoccupied building
areas at night, on weekends, and holidays and changing thermo-
                                                        the
stat levels to around 780 F in the summer and 680 F indone in
                                                   be
winter. Nevertheless, we found that much more can
many of these areas.
                                      7
      Several of the suggested Phase   conservation measures are
 listed below together with the number of contractor locations
 at which the measures were implemented and the number of
 cations where more could be done. To provide some idea oflo-
 relative energy savings resulting from each of the measures,the
 the estimated savings of one of the largest contractors are
 shown.

            Frequently Implemented Phase I Type
                   Conservation Measures

                                                     Estimated
                                                       annual
                                                       energy
                            Number of locations        savings
                            Measures     Could do      for one
Conservation measures      implemented     more      contractor

                                                      (millions)
Turn off lights when
  not needed                   19           17        20.2 kwh
Change from uniform to
  task lighting and
  lower light levels           15           15        24.9 kwh
Utilize economize:
  light bulbs                  12           11         6.1 kwh
Change thermostat
  settings to 780 F
                                                       9.2 kwh
  in summer; 680 F                                       and
  in winter                    15            5         0.4 therms
Turn off ventilation
  fans when buildings                                 35.0 kwh
  are largely unoccupied                                 and
                               12            9         1.8 therms
Turn off boilers used
  for comfort heating
  when not needed               6            5         2.4 therms
     A reduction of 1 million kwh is equivalent to saving 1,724
barrels of oil. Thus, the total energy saved by the contractor,
for which the estimated annual energ- savings are shown
                                                        above,
comes to approximtely 248,000 barrels of oil. Obviously,
potential for reducing energy consumption through such     the
                                                       easily
implemented, low-cost Phase I conservation measures is g:eat.
The following are some specific examples of what can be
accomplished.




                               8
Reducing lighting associated energy use
     Lighting is a major consumer of electrical energy ii.
buildings. Much of the energy used to light buildings is
wasted through poor design practices and maintaining exces-
sively high light levels. There are various actions that can
be taken to reduce substantially the energy consumed by the
lighting system, while still providing building occupants with
the quality and quantity of illumination required to perform
their various tasks and functions.

     At one location, we found that the contractor had cut his
energy use by about 19 percent. Despite the contractor's ap-
parently successful efforts, we identified additional potential
energy savings in lighting of about 19 percent, or 12.3 million
kwh, as shown below.

                                Annual          Estimated
                                energy      Cost to     Annual
      Opportunity               savings    implement    savings
                               (million
                                 kwh)
Use of economizer
  fluorescent lights                 2.6    $10,422    $ 64,100
Reduce light levels                  6.8       -        170,700
Install switcAes to turn
  off office lights when
  not in use                         2.9     70,000      72,500
     Total                          12.3    $80,422    $307,300

     Many areas at this particular location were designei with
high uniform light levels averaging 110 footcandles in office
areas and 150 footcandles in assembly areas. The light levels
had been lobered in some areas (primarily hallways) but gener-
ally, t   levels in work areas had not been reduced. Based or
selected light level readings, the plant manager agreed that
the lighting in office, assembly, and warehouse areas could be
cut anywhere from 35 to 45 percent with a savings of 6.8
million kwh a year or about $170,000.

      We also suggested the use of more economical fluorescent
lights as a way to conserve energy. The plant manager deter-
mined that the first year savings were greater than the ad-
ditional cost of the new lights and, therefore, decided to use
them.


                                9
Turing off ventilation fans
     Ventilation and climate control operations can signifi-
cantly affect a building's total energy consumption. It is
common practice to ventilate areas such as offices and con-
ference rooms 24 hours a day, rather than just when they are
in use. Conservation guidelines issued by sveral govern-
mental agencies and industry associations point out that
energy use could be reduced considerably.if such areas were
only ventilated when they are occupied.
     Twelve of the facilities we visited were trying to con-
serve energy by turning off ventilation fans. However, we
found many opportunities for greater sa: ils. For example,
at one location, 125 fans were in operat   go.   At the time of
our review, 12 operated constantly to cox.rol the humidity
for certain production needs while the remaining 113 were
for employee comfort and, therefore, could be turned off
after working hours. But only 1 of the 113 fans was shut
down during nonworking hours.

     A central plant security monitoring system is planned
within the next 2 years which will be designed to cycle the
ventilation fans. We observed that until the central control
system is installed, the 112 fans could be switched off man-
ually during nonduty hours. The plant manager agreed that
the fans could be turned off at night and on in the morning.
The estimated annual savings would be more than 2.7 million kwh
or the equivalent of about 4,700 barrels of oil. The annual
dollar savings would amount to about $82,000.
CAPITAL INVESTMENTS WILL BE NEEDED TO
ACHIEVE FURTHER REDUCTIONS IN ENERGY USE
     While substantial energy savings can be realized for lit-
tle or no cost, many measures require capital investment.
At several locations, we noted significant potential for fur-
ther reductions in energy use from Phase II and III projects.
However, without appropriate incentives, the capital needed
for such projects may not be forthcoming because the payback
periods may be considered unduly long or projects with higher
priority may preempt available funds.
     Examples of Phase II and III type projects include the in-
stallation of central automatic facility and equipment con-
trols, localized light switches, ventilation economizer sys-
tems, and wall and roof insulation. Energy savings from
these kinds of projects can exceed 15 percent. Cost recovery
periods based on energy savings alone vary from about a year
for some economizer systems to about 4 years for such things
as localized light switches.

                              10
Installation of central, automated
facility control systems

     Energy can be conserved in many plant operations through
increased use of automated control systems. We noted that 10
of the 20 contractors were considering or had recently pur-
chased such systems.  Installation cost, estimated cost
recovery periods, and estimated percentage reductions in
total facility energy use are shown in the following table
for five contractors.

                Cost to   Estimated cost    Reduction in energy
  Contractor    install   recovery period   use relative to 1975

                              (years)             (percent)
       A       $ /0,00          0.8                   5
       B        225,000          .6                  11
       C       220,000         1.7                    ?
       D         89,000        1.3                    2
       E       250,000         2.2                   2
     The estimated cost recovery periods vry from less than
a year to about 2 years, depending on plant size and system
complexity, and on the basis used for estimating cost sav-
ings. Relatively low percentage savings in energy may be de-
ceiving. For instance, the 2 percent reduction in annual
electricity use for contractor E corresponds to 5.5 million
kwh or the equivalent of 9,483 barrels of oil.

Installing localized liqght switches can
be helpful in reducing electricity use

     We found only three facilities with effective lights-off
programs. At a number of the facilities, it appeared to us
that the installation of localized switches to trn off un-
needed lights would result in significanL energy savings.

     At one location, facility engineers estimated that the
installation of about 4,000 local switches would produce an-
nual electricity savings in excess of 7 million kwh, about 3
percent of the facility's power use.   The annual cost savings
would amount to about $14U,000.  Installation costs for the
switches were estimated to be about $500,000, thereby making
the cost recovery period somewhat less than 4 years.   But
this project was not considered econosnically attractive by
the contractor.


                               11
     At another location, however, a contractor had modified
the centrally switched facility to semilocalized switching
by rewiring and installing 77 individual switches, The cost
to install the s itches was about $8,000. The estimated sav-
ings amounted to 810,000 kwh per year or about $13,800, cor-
responding to a cost recovery period of less than a year.

Improving the efficiency of the
climate control system an result
in significaint energy savings

     While many contractors were improving the efficiency
of their HVAC operations, there is much more that can be
done in this area. We noted that only 7 of 17 facilities
which could use automatic fresh air economizers had done so.
The remaining 10 companies were either not equipped with
economizers or existing economizers were inoperative due to
lack of proper maintenance. The following table, which is
based on information from a consultant's study of one
facility, illustraCes some of the potential for energy con-
servation associated with HVAC systems operation.


                               HVAC Enery   Conservation Study Results

                                                            Estimated
   Energy                                                          Cst-             Reductions
conservation            Implementation      Annual erergy       recovery          in enerqy use
opportunity                  cost           cost rduction        pe ri od   Electricity   Heating fuel

                                                                 (years)       (kwh)        (therms)
Turn off air-
  conditioning sy-
  tems on weekends
  and at niht             5      -                240,000                   11,300,000      150,000
Repair and install
  air economizer
  systrem ~44,000                                 32,000           1.4       1,800,000      -60,000
Incorporate variable
  air volume tempera-
  ture controls               141,000             66,970           2.2      2,300,000       150,000
    Total                 $185,000             $338,970                     15,400,000      240,000




     The potential energy savings shown above correspond to
about 10 percent of the total energy used at the facility in
1975. The contractor had partially implemented the air-
conditioning turnoff program suggested by the study and was ne-
gotiating a contract for about $35,000 to repair existing
fresh air intake economizers and install new ones where ap-
propriate.  The installation of variable air volume tempera-
ture controls was postponed pending verification of savings
realized from the other two measures.



                                             12
IMPROVEMENTS IN TECHNOLOGY CAN SIGNTFICANTLY
IMPROVE ENERGY-USE EFFICIENCY

      Advancements in technology can improve the energy effi-
- ·ncy of facility operations and industrial processes.   Many
    -hese, such as waste heat recuperators, promise efficien-
   .s of mora than 30 percent.  Our review indicated, however,
that potential users may be reluctant to invest in advanced
technologies because of a lack of confidence in new equipment
performance and reliability.   Examples of some new energy ef-
fi-Lent technological products which we noted during our re-
view are discussed below.

Chiller condenser cleaning brushes

     In industrial companies, chiller operations alone can
account for more than 25 percent of electrical energy con-
sumption.  Automated brush cleaning of the internal parts of
the chiller condenser tubes can reduce energy use from be-
tween 10 to 30 percent in most instances.  Systems installa-
tion cost is about $15 for each 12,000 Btu's of capacity and
 ist recovery periods range from about i to 2 years.

Exhaust air heat recovery systems

     The use of exhaust  ir heat recovery systems is recom-
mended by several Federal agencies as a cost-effective way
to conserve energy.  Such systems can recover up to 8  per-
cent of the waste energy in the exhaust air fr useful tasks,
such as space heating or preheating combustion air.

     The systems are most effectively used in industrial proc-
es.es where exhaust air temperatures exceed 1500 F or sub-
stantial amounts of processed air are exhausted.  In such
cases, system cost recovery periods are often less than 3
years.

     For example, at one private company, a heat recovery
unit was installed over a paint shop.   Exhaust air from
paint baking and drying ovens was about 2250 F.   In the re-
covery unit, heat from the exhaust air was transferred to the
cold, incoming air which was used in turn to space heat the
paint shop.   Purchase and installation costs amounted to
about $22,000.   Annual cost savings from reduced heating re-
quirements were estimated to be about $13,000, and the cost
recovery period is less than 2 years.

     We observed many contractor operations such as paint
booths, welding shops, and chemical treatment areas in which
large quantities of air were exhausted.  Most of these oper-
ations exhausted processed air without attempting to recover



                            13
the energy it contained. We believe that much improvement
can be made in this area and that contractors should evalu-
ate their operations to assess the possibilities for cst-
effective application of exhaust air heat recovery systems.




                            14
                           CHAPTER 3
         NEED FOR VIABLE ENERGY MANAGEMENT PROGRAMS
     Energy management involves the same basic techniques
that apply to production, purchasing, finance, and adminis-
t-ation. Little attention was given to energy management
in the past because energy was plentiful and cheap. But
with energy costs climbing, energy management programs are
becoming more important.

     Contractors have taken many specific energy conserva-
tion measures. However, few have established viable energy
management programs. At many facilities, we observed inac-
tive or lagging conservation programs. While most contrac-
tors had issued coInservation poli-y statements and formed
energy conservation committees, ew had adequate program
staffing and funding. None h     developed comprehensive
energy-use profiles, and goals for reducing energy use were
generally set more or less arbitrarily.

     A number of factors have impeded the development of
energy management programs. Program costs seem to be the
strongest internal factor while a lack of strong Federal
leadership appears to be the most important external factor.

PROGRAMS LACK EMPHASIS AND CONTINUITY
     Although several contractors appeared to be slowly devel-
oping energy management programs, none h 4 established pro-
grams which adequately incorporated the five program elements
advocated by FEA and the Department of Commerce. The five
elements are

     -- top management commitment,

     -- development of comprehensive energy-use surveys,

     -- goal setting based on survey evaluations,

     -- employee motivation campaigns, and
     -- monitoring program implementation and results.
     The relative lack of emphasis and continuity of the
contractors' energy conservation programs is indicated by the
fact that average percentage energy-use reductions were much
larger in 1974 than in ither 1973 or 1975. In general, the
contractors were more aggressively implementing conservation
measures in 1974 than in either of the other 2 years.


                             15
Need for top management to
provide emphasis and resources
     Company conservation programs are as strong as the com-
mitment of top management and the resources allocated to
support them. In the plants we visited, most corporate
headquarters had issued policy statements supporting conserva-
tion efforts. Most of the companies had also established
energy conservation committees and assigned part-time energy
coordinators. However, prior to our review only one company
had a full-time staff member assigned to its program and only
six companies supported their programs with capital funds
exceeding 3 percent of their annual energy costs.

     In a budget-balancing mcre, one company simply laid off
all four technicians who had been assigned to energy conserva-
tion projects. We noted that the technicians could have more
than offset their annual salaries if the company had taken
such easily implemented conservation measures as lowering
light levels and turning off lights and ventilation fans at
night.

     At another company, top management seemed generally
unaware of the status of its conservation program. In a
letter to FEA, the company's president designated the manager
of facility engineering as the energy coordinator.    owever,
in discussions with the  energy coordinator, we learned that he
had not been told what  his responsibilities were, except to
act as a focal point to z-ceive information from FEA. In ad-
dition, many companies had not allocated adequate funds 4-
the energy conservation programs. At several companies,
proposed projects with less than 3-yeaL cost recovery periods
had not been funded.
     While there were numerous instances of inadequate manage-
me-t support for energy conserva._sn programs, there were also
some indications of increasing management interest in develop-
ing such programs. In this connection, during our review a
corporate official for one company advised us that while the
company had not completed the Phase I energy conservation
measures, they have been energy conscious for years and had a
very active program during 1974. He stated that it was the
company's intention to return to an active program. He also
advised us that a formal policy and procedure for energy con-
servation had been prepared. On the important point of
funding, the official advised us that, as the company's fi-
nancial position improveL, consideration will be given to
the more sophisticated conservation measures requiring greater
capital expenditures. He stated that, due to the rapid fluc-
tuations in the company's financial position, a definite pay-
back period had not been established for evaluating energy


                              16
conservation proposals, but he believed a 2- to 3-year write-
off period would be acceptable in the near future.

Comprehensive energy-use surveys are needed
     Detailed knowledge of plant and equipment energy use is
necessary to (1) identify areas of energy waste in facility
and equipment operations, (2) justify the cost effectiveness
of proposed energy conservation projects, and (3) verify the
success of implemernt.d conservation actions. Yet, at the time
of our review, none of the contractors had completed such
comprehensive energy-use surveys. As a result, energy conser-
vation coordinators at many companies were unable to quantify
energy savings from specific, implemented conservation meas-
ures. They could not separate the impact of business condi-
tions on energy use from the effects of genuine, long-term
conservation actions. Further, the efforts of many energy
conservation coordinators may be frustrated by the lack of
credible data when they try to justify capital outlays for
proposed conservation projects.
     In carrying out Phase I type conservation actions,
detailed surveys may not always be necessary since such meas-
ures as turning off lights and fans, reducing light levels,
and resetting thermostats are clearly effective energy savers.
However, once the more obvious actions have been taken, con-
tinued energy-use reductions depend on identifying more
difficult areas and following up with action. Representatives
of three companies indicated, though, that they believed
detailed surveys were too costly and required too much man-
power. Several other executives felt that company staffs are
sufficiently acquainted with plant and equipment operations to
identify energy wste without lengthy studies.
     We believe, however, that after the obvious energy waste
has been eliminated, furthe: major conservation measures are
rarely identified and implemented without a detailed survey of
plantwide energy use. At two facilities, for instance, pro-
fessional consultants' studies of plantwide HVAC systems turned
up major energy waste areas. In addition, a consultant's study
of the chemical process and heating operations at a Government-
owned, contractor-operated (GOCO) plant found that energy costs
could be cut by 25 percent if all identified conservation op-
portunities were implemented.




                             17
Need to   stablish realistic goals

     FEA and Commerce energy management guidelines point out
that goals for reducing energy use should be realistic and
based on evaluation through energy-use surveys. We observed
that only two companies had based their energy conservation
goals on engineering estimates corresponding to potential,
identified energy conservation actions. Four companies had
no quantifiable goals, whereas the goals in the remaining 14
companies were based on arbitrary considerations or were im-
posed on the companies by external sources, such as the local
Public Utilities Commission.

More effective employee motivation needed

     Even though most of the companies surveyed had made
numerous appeals to employees to help conserve energy, we be-
lieve that these efforts need to be expanded and improved.
Company publicity efforts typically included newspaper arti-
cles, top management memoranda to employees, posters, and
notices on light switches. Yet the lights-off programs in
17 companies we visited were only partially effective. In
one company, more than 26,000 violations were reported during
an 11-month period. We also noted uring our night inspec-
tions that numerous violations were still occurring.

Need for conservation actions
and programs to be monitored
     It is important for management to review the progress
and effectiveness of implemented eergy conservation projects.
This review process often requires onsite inspections because
reductions in energy use resulting from specific conservation
projects are usually not traceable when monitoring on a plant-
wide basis. Monitoring is particularly necessary to insure
implementation of those Phase I type actions which require
employee participation to be successful.

     We noted during our plant visits that few companies
adequately monitored conservation efforts. Mst of the com-
panies either had no monitoring program, or their existing
programs were ineffective. An official of one company first
told us that the company had an effective conservation program
and had put into effect all conservation actions which did
not require capital funding. He was somewhat surprised, how-
ever, when we demonstrated to him (backed up by his own
facility engineering staff) that plantwide electricity use
could be further reduced another 10 percent by simply enforc-
ing the lights-off program, by reducing light levels to
company recommended standards, and by using watt-economizer



                             18
 fluorescent light bulbs. A a result of our discussions. the
 company took action to put a periodic monitoring program into
 effect.

 INCREASING ENERGY COSTS AVE NOT STIMULATED
 IMPROVED ENERGY MANAGEMENT PROGRAMS

      In spite of rapidly rising energy costs, the conservation
 efforts at many of the plants we visited appeared to have
 slowed down or even halted after initial low-cost Phase I
 type conservation actions had been implemented. This is con-
 trary to the claims of several contractors that rising energy
 costs stimulate their conservation efforts. Further, we noted
 numerous instances where energy conservation investment
 opportunities with payback periods of 1 ye-.r or less had not
 been acted on.

      In 1975 total energy costs for the 20 plants we visited
 were more than $45 million--an increase of 61.5 percent over
 1973. Total energy cost increases during this period ranged
 from about 15 percent to 100 percent. Unit energy prices
 increased even more, ranging from about 137 percent for
 electricity to over 180 percent for heating fuel. As shown
 below, 14 companies experienced their highest annual energy
 cost increases in 1974 while the remaining 6 companies'
 energy costs increased most rapidly in 1975.

         Schedule of Energy Cost Increases for 1973-1975

                          Number of
                          companies         Average percentage
                        showing high-        change in energy
           Average       est year to         unit prices over
         energy cost    year percent-         preceding year
Year     per company    age increase    Electricity Heating fuel
          (millions)
1975        $2.27             6            20.8            33.5
1974         1.79            14            45.4            70.7
1973 a       1.41             -            11.0            17.8


a/1972 as a base year applied only to 12 companies.

     Considering that increases in the cost of energy are fore-
cast for the future, it appears that energy is becoming a more
significant cost of doing business. Nevertheless, increasing



                                  19
energy costs have not acted as a stimul'us for contractors to
establish viable energy management programs or allocate
adequate financial resources to the program.
IMPEDIMENTS TO DEVELOPING
ENERGY MANAGEMENT PROGRAMS

     Our review indicated that from a contractor's viewpoint,
a number of factors, both internal and uxternal, impede the
development of viable energy management programs. As previ-
ously noted, program costs appear to be the strongest internal
imp diment. Many companies did not assign full-time staffing
to their programs. Also, many companies were reluctant to
invest in energy-saving equipment unless the investment could
pay back its costs in a relatively short time period--l to 2
years in some cases. In addition, conservation projects must
compete for funding with business expansion, equipment replace-
ment, and required occupational safety and environmental
investments.

     E 4:ternally inhibiting is the fact that, until recently,
the Federal Government has not effectively emphasized the need
for energy conservation. The voluntary nature of the Govern-
ment's program and continuing doubts about the necessity of
conservation may have contributed to contractors' reluctance
to initiate actions that might cause their eployees some in-
convenience.
     The credibility gap concerning the reality of the energy
problem and the need for conservation still lingers. Accord-
ing to one contractor executive, the Government still has not
convinced people that conservation is necessary   Another
official pointed out that energy conservation was given high
priority during the 1973 Arab oil embargo, but now that oil
is available, conservation has dropped in 'rioiity and become
just another area of potential cost reduction. We believe
that the lack of resources provided by contractors to develop
energy management programs and to fully implement known conser-
vation measures are to some extent attributable to doubts
people have regarding the need for conservation.




                             20
                         CHAPTER 4
          OTHER AREAS WHERE IMPROVEMENTS ARE NEEDED
               TO PROMOTE ENERGY CONSERVATION
     The Federal Government has been promoting energy conlser-
vation since late 1973. Ahough several Federal agencies
have programs dealing with industrial energy conservation,
these programs have had little effect at Government contrac-
tors' plants. As we have noted, this lack of impact stems
from the fact that the need for energy conservation has not
been effectively emphasized; also, agencies have relied on a
voluntary energy conservation philosophy in their relation-
ships with contrdctors.

      In view of the significant energy savings that could be
realized, the Government must assume a more effective and
coordinated leadership role to promote energy conservation.
There are several issues which we believe need to be consid-
ered. They include the development of an energy conservation-
related procurement policy, more effective dissemination of
energy conservation information and techniques, the develop-
ment of national lighting guidelines and selected improve-
ments which we feel are needed in the Department of Defense
(DOD) energy management program. These issues are discussed
in the following sections of this chapter.

FEDERAL PROCUREMENT POLICY SHOULD INCLUDE ENERGY
CONSERVATION DIRECTION FOR CONTRACTORS

     In October 1974 we issued a report to the Secretary of
Defense and the Administrators of FEA and GSA on the results
of an initial survey of five contractors' energy conservation
programs. We concluded that although the contractors had
taken some actions to save energy, there was a need for the
agencies to become more directly involved and provide guid-
ance and direction to contractors for establishing effective
energy conservation programs. We suggested the development
of a tormal Government-wide contractor energy conservation
policy and a unified Federal approach to require contractors
to adopt, through the contracting process, viable energy
conservation programs.

     In responding to our report, the three agencies (DOD,
FEA, and GSA) indicated they preferred to rely on voluntary
rather than mandatory actions for achieving energy conserva-
tion at contractors' plants. DOD stated that the use of an
energy conservation clause in contracts had been studied ex-
tensively in coordination with GSA, and it was determined to
be administratively unworkable. Both FEA and GSA advised us,

                             21
however, chat they supported our suggestion on the need for a
formal Government-wide contractor energy conservation policy
and that effo'   were being made to evelop such a policy.

     Such efforts by FEA and GSA were curtailed when the Of-
fice of Federal Procurement Policy (OFPP) rejected a GSA
proposed contract clause. In this respect, in February 1975
GSA advised OFPP of several alternatives and actions that
had been considered to encourage or require contractors to
conserve energy. GSA stated that the time was right for
establishing a Federal procurement policy which rquests that,
in contracts over $10,000, contractors voluntariy agree to
use their best efforts to conserve energy. GSA, therefore,
recommended that the Federal procurement community, through
OFPP, take the initiative and institute a voluntary contrac-
tor energy conservation clause.

     On April 28, 1975, OFPP advised GSA of its opposition
to the inclusion of an energy conservation compliance clause
in Government contracts. OFPP questioned whether the bene-
fits to be gained by the proposal would outweigh the addi-
tional burdens that would be imposed on the procurement proc-
ess and on the contractors. OFPP concluded that the Federal
Government should not open the procurement process to the
implementation of socioeconomic programs by administrative
direction unless a determination was made that -uch action
was compelling in the national interest.
      We believe the rep ,vanced              by OFPP for rejecting
GSA's proposal    are  qL    _~      e.   Energy  conservation is a
vital  part  of  the  national   .    awe  to  halt our growing de-
pendence  on   imported   oil.   Th.  Federal   Government,  perhaps
more than   any  other  sector   of  the  economy,  must  develop  and
implement   an  aggressive    conservation    effort to  limit its
growth of energy demand. The Government is a large energy
user. It has influence in many sectors of the economy. An3
it has an obligation to responsibly establish and imple:ent
policies it advocates for adoption by others. Given the
range of activities existing in the Federal Government, it
has a unique opportunity to show what can be done.
     We believe this report clearly demonstrates that there
are numerous opportunities for contractors to use energy
more efficiently. Many of the actions that could be taken
by the contractors to conserve energy are cost effective.
Some actions can be accomplished at no cost while others
may require minimal capital expenditures. For example, one
contractor had the opportunity to achieve energy savings of
12 million kwh annually and realize cost savings of over
$225,000 by reducing light levels and installing switches
to turn off lights when not in use.

                                   22
     To realize these savings, however, the factors which
save impeded the development of energy management programs
must be removed. A wide range of Government procurement
policy options are available to encourage contractors to
conserve energy. These range rom voluntary programs and
reporting to mandatory development, implementation, and sub-
mission of energy conservation plans. A procurement policy
requiring the development of energy management programs and
a provision allowing contractors to share in the cost savings
may be the motivation and incentive heeded to assure realiza-
tion of substantial energy savings. Accordingly, we believe
that the Office of Management and Budget (OMB) should have
OFPP, in line with its statutory responsibility to provide
overall direction of procurement and procurement-related
policies:

     --Work with the Department of Energy, GSA, DOD, and
       other appropriate executive branch agencies to de-
       velop an energy conservation-related procurement
       policy and contract clause that would require Govern-
       ment contractors to establish viable energy manage-
       ment programs.

     --In developing this policy, give consideration to al-
       lowing contractors to share in the cost savings which
       accrue from the implementation of energy conservation
       opportunities.

PUBLICATIONS AND INFCRMATION MUST
BE MORE EFFECTIVELY DISSEMINATED

     Federal agencies have developed or contracted out for
numerous publications and studies to assist industry in con-
serving energy. For example, FEA, Commerce, and the National
Bureau of Standards have jointly developed a handbook entitled
"Energy Conservation Program Guide for Industry and Commerce
(EPIC)" which focuses on two aspects of energy conservation.
First, it presents the key steps necessary to implement an
energy conservation program. Second, it presents informa-
tion on specific energy conservation opportunities which
have been identified by industry as ways to reduce energy
use. In spite of all of the agencies' efforts in funding
studies and publishing handbooks and brochures, we found
that very few of the contractors' plant personnel had re-
ceived any of this information.

     The District Director of one of Commerce's field offices
told us that representatives from his office were spending 2
days a week visiting business concerns throughout the area
encouraging them to conserve energy and providing them with
information on how this can be accomplished. The Director

                             23
stated, however, that large firms, such as the contractors we
were reviewing, were not being visited by representatives from
his office. He said the Department's efforts were directed
primarily at medium and small size firms, and he felt that
large firms have the means to produce a conservation program
with-,ut the help of Commerce.
     \  believe some of the material developed by these agen-
cies "ould be very useful in assisting contractors to estab-
lish and implement energy management programs. We feel that
FEA and Commerce should coordinate their efforts to dissemi-
nate this material through DOD and GSA in order to take ad-
vantage of their network of contract administration repre-
sentatives who are in day-to-day contact with firms doing
business with he Government. In this way, FEA and Com-
merce will be able to reach thousands of business firms, both
large and small, who could greatly benefit from receiving
this information.
RECOMMENDATION

     We recommend that the Secretaries of Energy and Commerce:
     --Use Government contracting personnel in DOD, GSA, and
       other agencies to disseminate energy conservation
       publications and materials to contractors.
NATIONAL LIGHTING GUIDELINES AND
STANDARDS SHOULD BE DEVELOPED

     During the past few years, FEA has stressed reducing
lighting levels in buildings as a major means of conserving
energy. Lighting level guidelines and standards have been
promulgated by several Federal agencies and technical soci-
eties. But these guidelines and standards are not generally
accepted and used by the contractors, and the lighting levels
in many facilities exceed the applicable standards. We found
that there are problems in interpreting and applying the
guidelines and, in some instances, t'ie various standards con-
flict with each other.

     On November 18, 1974, FEA called for a voluntary 25 per-
cent reduction in energy used for lighting, heating, cooling,
and operating commercial, public, and industrial buildings.
As part of this effort, FEA published a booklet entitled
"Lighting and Thermal Operations, Energy Managemeat Action
Program for Commercial   Public   Industrial Buildings."
     These guidelines recommerded lighting levels ranging
from 50 to 100 footcandles for office work centers, 30 foot-
candles for office space where there were no immediate tasks,


                             24
and 10 footcandles for hallways and corridors.  For tasks
performed in manufacturing areas, the guidelines suggested
that the levels at the work stations should be no greater
than those established by the American National Standards
Institute (ANSI). The ANSI standards were based on stand-
ards that had been developed by the Illuminating Egineerig
Society (IES).
     We observed that most of the contractors were still
using uniform, overall lighting systems and that the light-
ing levels at many plants exceeded the FEA recommended stand-
ards. For example, at one location we took 77 different
light level readings and found that 66 exceeded the applica-
ble standard. At another location, our tests showed that
the light levels generally exceeded the standards as follows:
                                      FEA        Footcandles
           Location                standards      measured

    Secretary's desk                 50±10           90
    Reading desk, computer room      50±10          125
    Day superintendent's desk        50±10          100
    Supervisor's desk                50±10          130
    Manager's desk                   50±10          120

     At this same plant, we took light level readings in
various manufacturing areas and found that they exceeded the
standards published by ANSI and IES as shown below:
                                  ANSI-IES     Footcandles
           Location               standard      measured
       Machine shop tool crib       50         200
       Machine shop final
         inspection                100         200
       Machinte shop grinders       50          90
       Weld shop                    50          95
     There are several reasons why the guidelines and stand-
ards were not being used. Several contractors indicated
that they do not agree with the FEA guidelines. They believe
that lowering light levels to the recommended levels would
adversely affect employee morale and productivity.
     Furthermore, the FEA guidelines stress that the light-
ing levels recommended by them are for nonuniform task
lighting. That is, only the task itself is fully illumi-
nated at the recommended light level and the surrounding
areas drop off in illuminaticn.  We found that there is a
problem using the guidelines and standards because the tasks
themselves are often poorly defined and the definitions can
be confusing. For example, the guidelines define some office


                             25
tasks as "Normal office work, such as reading and writing
                                                   somewhat
* * ',," others as "Prolonqed office work which is
difficult visually * * *,"  and still others as "Prolonged
office work which is visually difficult and critical in
nature * * *."   The guidelines state that visual difficulty
is not only a function of the type of task and :he lighting
system, but also of the length of time theA.4sk must be per-
                                                        they
formed. In our discussions with contractor ,.rsonnel,
                                            ca n mean dif-
pointed out that these types of definitions
terent things to different people.
     An official of IES told us that many people take their
recommended light levels out of context and use them to
uniformly light areas surrounding tasks to recommended task
                                                      in
levels. He said the IES had not been very successful
obtaining widespread acceptance that its recommended levels
are for task lighting only and not for uniform lighting.
     GSA has also issued two sets of office lighting guide-
lines and standards. One set was intended primarily for
internal use by the Public Building Service (PBS) of GSA
in the maintenance and operation' of buildings in its inve!n-
tory. The second set was issued under a Federal Management
Circular (FMC) to the heads of executive departments and
agencies and was applicable to all buildings owned or leased
by executive departments and agencies, including GOCO facil-
ities.
     A comparison of the various standards showed that in
addition to the problems of interpretat.on and application,
the lighting levels recommended by FEA and GSA are differ-
ent from each other. And both are dif.'erent  from the levels
recommended by IES for office tasks which are  similar in
                                                      is a
nature. To illustrate the variations, the following
comparison of several tasks and the recommended lighting
levels.




                               26
                                    Recommended lighting level
    Task description              FEA   FMC       PBS       IES
                                          -(footcandles)
Drafting                      100±20     50   100±20    150 to 200
Reading poor
  reproductions                75±15     50    75±15       150
Reading handwriting in
  hard pencil or on poor
  paper; reading fair
  reproductions                75±15     50     $5±15      100
Reading handwriting in
  ink or medium pencil on
  good quality paper          50±10      50    50±10        70
Reading high contrast or
  well printed materials      50±10      50    50±10        30

     The Energy Policy and Conservation Act (Public Law
94-163) requires the development and implementation of an
energy conservation plan for buildings owned or leased by
agencies of the United States. This plan is to include man-
datory lighting efficiency standards. The act also requires
States to establish mandatory lighting efficiency standards
for public buildings if they want to qualify for Federal
assistance for their State energy conservation programs. In
view of these requirements, we believe that the various
lighting level guidelines and standards currently in exist-
ence should be reviewed, and national lighting guidelines
and standards that can be easily understood and consistently
applied should be developed.

RECOMMENDATION

     We recommend that the Secretary of Energy:
     -- Review the various lighting guidelines and standards
        that are currently in existence and develop national
        lighting guidelines and standards that can be easily
        understood and consistently applied in commecial,
        public, and ndustrial buildings.
IMPROVEMENTS NEEDEr IN DEPARTMENT OF
DEFENSE ENERGY MANAGEMENT PROGRAM

     DOD was responsible for the greatest part of the Govern-
ment business at each of the 20 plants we visited. Over the
past few years, DOD has taken a number of actions to more
effectively manage its energy resources and promote energy
conservation. In January 1974, a Director for Energy was


                             27
appointed to be primarily responsible for energy matters
within DOD. His duties include managing the Department's
overall energy conservation program and coordinating the
efforts of the various DOD elements involved in performing
energy-related functions.
     We were told by the Director that DOD has tried to mo-
tivate and encourage contractors to voluntarily conserve
energy. For instance, DOD issued a procurement circular
which requested defense contractors to implement energy con-
servation measures.

     We recLgnize that DOD has taken actions to promote
energy ccnservation, but we believe that there are several
areas in which more can be done to strengthen and improve
the Department's energy management program.
Formal plan needed fr promoting
energy conservation by contractors

     In October 1974 we reported to DOD that there were in-
consistencies in the manner in which it was promoting energy
conservation at contractors' plants. We suggested that a
formal plan should be developed for providing energy con-
servation guidance and direction to contractors.
     In our current review, we found that the efforts being
made by DOD are still not being carried out in a coordinated
and consistent manner. For example, contractors operating
Army-owned plants were requested to use the lighting stand-
ards established by GSA, while contractors operating Air
Yorce- and Navy-owned plants were not asked to do so.
     DOD is in a unique position, through its network of
plant representatives, to give energy conservation guidance,
encouragement, and direction to contractors. We noted, how-
ever, that the plant representatives generally have little
to do with contractors' conservation programs. One plant
representative told us he does not believe he is in a posi-
tion to take action to encourage the contractor to conserve
energy because there are no energy conservation provisioni,
in the contract. At another location, the Government plant
representative's staff member, who was designated as the
energy conservation coordinator, said he was not familiar
with the contractor's energy conservation program and did
not know who on the contractor's staff was involved in it.

     In view of the many opportunities for contractors to
conserve energy, we believe DOD should develop a formal plan
for a coordinated and uniform effort to promote maximum
energy conservation by contractors.

                             28
Defense Contract Audit Agency'    energy
audits should be expanded
     In February 1974 the Defense Contract Audit Agency
(DCAA) initiated audits of defense contractors' energy con-
sumption. The DCAA regional offices were to determine if
contractors had program plans to adequately monitor the use
and cost of energy and if they intended to institute addi-
tional procedures to further reduce energy use.
     The DCAA audit reports and additional infrmation were
made available to the DOD Director for Energy when he testi-
fied in April 1975 before the Senate Committee on Government
Operations. He s' jd that only 4 of 127 contractors where
DCAA audits had ben completed were considered to have ene- j-
use programs that were lacking in some respect.

     As part of our review, we looked at te DCAA audits and
held discussions with DCAA officials. We found that the work
done by DCAA was generally restricted to a review of energy
use documents and published contractor programs. Further,
DCAA informed us that if the contractor had reduced energy
consumption by 5 percent, which was the nationwide oal at
the time of their audits, the program was deemed adequate.
In our opinion, DCAA's efforts were too limited to assess
the overall adequacy of a contractor's program. We believe
that if DCAA had expanded the scope of their work, signifi-
cant additional potential for energy reductions would have
been readily identified. As noted throughout this report,
we found many opportunities for contractors to conserve
energy through such easily recognized Phase I type measures
as turning off lights and ventilation fans and using more
efficient lighting.

      We believe that the Director for Energy could get use-
ful information for the Defense energy management program
from the DCAA energy audits. They could serve as a means of
monitoring contractors' efforts to establish and implement
viable energy management programs. The audits should be ex-
panded, however, to determine whether contractors' conserva-
tion programs adequately incorporate the five elements recom-
mended by FEA and Commerce: (1) top management commitment,
 (2) development of comprehensive energy-use surveys, (3)
goals based cn survey evaluations, (4) employee motivation
campaigns, and (5) internal monitoring of the program. In
addition, we believe that DCAA should use technical assist-
ance where necessary to insure that the audits are compre-
hensive enough to properly assess contractors' programs.




                             29
Action should be taken on proposals for Energy
Conservation Investment Program   undalng
     Seven of the 20 plants reviewed were GOCO facilities.
Capital investments for plant and equipment additions and
modifications at these facilities are nor.nally funded from
the procurement budgets of the DOD organization owning the
plant. Items which are considered normal maintenance and
upkeep are paid for by the contractor.

     We noted that generally, those energy conservation proj-
ects requiring capital investment from procurement funds
had to compete with other capital investment projects for
limited funds. Projects which were production-related or
those which were needed in order to comply with environ-
mental and safety regulations took precedence over energy
conservation investments regardless of cost recovery periods.
For example, one GOCO contractor submitted nine energy con-
servation projects in its fiscal year 1977 procurement
budget request. These projects were subsequently deleted
in spite of the fact that three of the projects had cost
recovery periods of from 2 to 8 months. When we discussed
the reasons for dropping these projects with DOD officials
at the plant, we were told they were deleted because of the
unavailability of funds. One official said that unless the
projects have a beneficial effect on production, there was
little chance of them being approved.

     In March 1975 DOD established an Energy Conservation
Investment Program (ECIP) which started in fiscal year 1976.
The purpose of this program was to reduce energy consumption
thiough self-amortizing, retrofit projects to existing fa-
cilities. The program was intended to operate for 6 years
and funding levels of over $100 million per year were
established.

     Proposed projects and cost estimates for ECIP funding
were requested by DOD from a number of GOCO plants, includ-
ing the one discussed above. This contractor submitted the
same nine projects that were previously deleted from his
fiscal year 1977 cpital budget request plus one additional
project. Five of the 10 projects appeared to meet the
funding criteria that had been established for the ECIP
program, but none were approved.

     In discussions with DOD program officials, we learned
that very few GOCO projects were being submitted by the
military services for ECIP funding. We were advised that
GOCO projects could be funded if they meet the criteria. We
also discussed this matter with officials in the office of


                             30
the Director for Energy. They indicated they were unaware
of the high deletion rate of energy conservation projects at
GOCO lants and the lack of participation in ECIP.

     It appears that there has been a lack of communication
and coordination within DOD on the funding of energy conser-
vation projects at GOCO plants. We believe that action
should be taken to insure that all DOD elements and GOCO
contractors are aware that ECIP funding is available and
that requests for such funding will be considered if a proj-
ect meets established criteria.
RECOMMENDATIONS

     We recommend that the Secretary of Defense take action
to improve DOD's energy management program by:
     -- Developing a formal plan for a coordinated and uni-
        form effort to be exerted by all DOD elements to
        promote energy conservation by its contractors.

     -- Expanding the scope of the DCAP energy audits and
        using technical assistance in these audits for evalu-
        ating contractors' energy conservation programs.

     -- Using the DCAA energy audits to monitor contractors'
        efforts to establish and maintain viable energy
        management programs.

     -- Advising all contractors operating Government-owned
        plants and the military services responsible for
        administering such plants that projects can be sub-
        mitted for funding under the ECIP.




                             31
                           CHAPTER 5

                 AGENCY AND CONTRACTOR COMMENTS
                      AND OUR EVALUATION
     We furnished a draft of this report for revil w and com-
ment to the 20 contractors whose plants we visitea and to
the five Federal agencies (FEA, OB, GSA, DOD, and Commerce)
responsible for the matters discussed throughout this report.
The contractors and the Federal agencies agreed that further
conservation of energy resources was necessary; however,
there were differences of opinion expressed by a number of
the contractors as to how much more energy could be conserved.
Some of the contractors also expressed the view that what is
needed to assist industrial firms to improve and expand their
efforts to conserve energy are financial incentives such as
accelerated depreciation and nvestment tax credits.
     OMB, DOD, and Commerce agreed with all of our recommenda-
tions except for developing a procurement policy that would
require Government contractors to establish viable energy
ma gement programs. The primary reason cited by these
agencies was the lack of a coordinated national policy for
energy conservation. FEA and GSA indicated a willingness to
work with the other three agencies in the development of an
appropriate procurement policy that would adequately address
this subject.

     Discussed below are the major comments on our report,
along with our evaluation where differences exist.

CONTRACTOR COMMENTS
     With respect to the actions that have been taken by con-
tractors to conserve energy and the potential for further
conservation, eight of the contractors advised us of various
conservation actions that had been taken since the time we
visited their plants. These actions included improvements
made in their energy management programs, such as assigning
a full-time coordinator to manage the program, and actions
to reduce their energy consumption by means of relamping and
insulation programs.

     Concerning the potential for further conservation, five
contractors informed us that they believe the 20 percent re-
duction figure we cite may be too optimistic for those con-
tractors who have already embarked on and implemented conser-
vation programs.  Conversely, one contractor stated that they
are reasonably sure the 20 percent reduction can be aclievee-7
Another contractor informed us that, subsequent to our review,



                              32
they significantly expanded their conservation program, and
in 1976 consumption of electricity decreased 27 percent and
natural gas decreased 16 percent compared to 1975 consumption.
It was evident from the comments made by the contractors that
there are differing views on the amount of energy savings
that can reasonably be expected to be realized n industrial
plants. Our review clearly indicated that the potential for
energy reductions in individual plants is igh.   We recognize,
of course, that the reductions achieved will vary widely d-
pending on many factors, including the past efforts that have
been made to reduce energy use and the commitment that manage-
ment makes to establish and carry out a viable energy manage-
ment program.

      In their comments, a number of the contractors expressed
the view that they have good energy management programs and
that what is needed to assist industrial firms to improve and
expand their efforts to conserve energy are financial incen-
tives such as accelerated depreciation and investment tax
credits. As stated earlier, financial constraints are a
major impediment to companies' development of viable energy
management programs. For eample, many companies require
very short cost recovery plods for in estments in energy-
saving projects and equipment. We believe that conservation
should have top priority for Government financial assistance
because it has the greatest potential payoff and is most
attractive on an incremental cost basis. Areas offering the
greatest opportunity include insulption and other measures to
conserve energy in new and existing buildings and the use of
more efficient equipment and processes in industrial plants.
Still, there is a need, as discussed in this report, for con-
tractors to establish viable energy management programs and
to allocate more financial and staff resources to their pro-
grams.

     We support the concept of investment tax
incentive fcr achieving energy conservation in credits as an
                                                the industrial
sector. In our March 17, 1975, Alternative Energy Proposalsl
we proposed a 10-year industrial investment tax credit of 10
percent for the installation of equipment which would result
in improved energy efficiency. We also proposed that model
performance standards be developed for industrial processes
in key energy-using industries based on the most efficient
technology available. The standcards were to include increased

1Alternative
            Energy Proposals Developed by the General   count-
ing Office in Response to Congressional Inquiries: St..ement
of Comptroller General before House Ways and Means Committee
on March 17, 1975.

                             33
 energy efficiency in steam generation, heat recuperation,
 materials recycling.                                      and

     More recently, in our report on the President's National
Energy Plan, 1 we agreed witll the administration's
                                                    proposals
to provide a 5-year, 10-percent investment tax credit
                                                        for in-
dustry for investments in approved energy-saving industrial
equipment and a 10-percent tax credit for business
                                                     invest-
ments in approved energy conservation measures. We
                                                      believe
that these financial incentives may result in additional
                                                           ef-
forts by industry to conserve energy by making energy-saving
investments more economically attractive.

 FEDERAL ENERGY ADMINISTRATION COMMEN'IS
      FEA stated that it agreed with our general conclusions
that while Government contractors have  taken specific energy
conservation actions, there are many opportunities
                                                    for achiev-
ing further significant energy savings if viable conserva-
tion programs were established by all contractors
                                                   in
plants. FEA agreed that the Government, through its their
ment policies, can promote positive energy conservationprocure-
tions by contractors and advised us that it partially      ac-
curs with our recommendation for the development of     con-
                                                      a pro-
culrement policy and contract clause that would require
crnment contractors to establish viable energy managementGov-
programs. PEA said it is their feeling that all segments
industry should have viable programs and that requiring       of
Government contractors to have such program; iimits        only
                                                     the po-
tential benefits as compared to an appeal to the entire
                                                           in-
dustrial community. FEA said it has worked with OFPP
past on this subject and will continue to in the futur  in  the
such a reql'rement is decided upon.                        if

      We agree with the view expressed by FEA that all seg-
ments of industry should have viable energy conservat'on
programs. We believe, however, that FEA should not
                                                     propose
inaction on the part of the Federal Government developing
and implementing an energy conservation procurement
                                                     policy
for contractors simply on the basis of limited potential
benefits which it believes can be realized when compared
the entire industrial community. Benefits are benefits to
                                                         from
whatever source they come. We believe there are significant
benefits to be gained from the action we proposed.
                                                     The
Federal Government is a large energy user, and we believe
it has an obligation to responsibly establish and implement
policies it advocates for adoption by ohers.

lAn Evaluation of the National Energy Plan.   EMD-77-48,
 July 25, 1977.


                              34
     With respect to our two reconmmendations for FEA to use
Government contracting personnel to disseminate publications
and materials to contractors and to pursue the development
of national lighting guidelines and standards, FEA advised
us that it concurred with the intent of our recommendations
and thdt actions were being taken on these matters.
 OFFICE F   MANAGEM ENT AND BUDGET COMMENTS

     OMB stated that it does not support our recommendation
for OFPP to develop an energy conservation-related procure-
ment policy and contract clause that would require contrac-
tors to establish viable energy management programs. OMB's
re sons weze the lack of a coordinated national policy for
en rgy conservation and the lack of a quantification of the
cost and benefits for such socioeconomic programs.

     On April 29, 1977, a very important first step was taken
toward the development of a national energy policy when the
administration presented its National Energy Plan. The pan
is based on a number of principles, strategies, and goals
which the administration believes must be pursued if the Na-
tion is to solve its energy crisis. The first principle set
forth n the plan states, in part, that the energy problem
can be effectively addressed only by a Government that ac-
cents responsibility for dealing with it comprehensively.
The sixth principle--the cornerstone of a National Energy
Policy--is that the growth of energy demand must be re-
strained through conservation and improved efficiency. In
our view, a further step in the direction of developing and
implementing such a policy would be for OMB to demonstrate
its commitment to supporting the cornerstone of the admini-
stration's energy plan through the development of a Govern-
ment-wide procurement policy that calls for all contractors
to establish viable energy management programs. We believe
this report clearly points out the need for such a policy.
It shows the energy waste that is now occurring and the po-
tential for savings in this area.

     Regarding the need for quantification of the cost and
benefits of an energy conservation program, we again believe
that tis report adequately demonstrates the savings, both
in terms of dollars and energy, that can be achieved through
energy conservation programs. The report also recognizes
that some energy conservation projects may require extensive
economic feasibility studies, capital outlays, and cost re-
covery periods exceeding 10 year's. In fact, a few of the
contractors we visited had conducted selected studies that
showed, for individual conservation projects, what the costs,
benefits, and payback periods would be. Thus, the quantifi-
cation of costs and benefits has been done to some extent,


                               35
but more is needed. Since a good energy conservation pro-
gram would include these studies as an integral part, OMB's
statement that more cost/benefit studies are needed before
further action can be taken seems to us to be contradictory
and not well founded. Further, as this report shows, signif-
icant savings can be achieved through common sense type ac-
tions, such as turninq off lights and equipment when not
needed, reducing light levels, and using more efficient light
sources. Actions of this type require little investment for
the substantial benefits or savings that can be achieved,
and have long been recognized as being cost effective.
DEPARTMENT OF COMMERCE COMMENTS

     Commerce stated that the report certainly shows a need
for improvement in Government energy conservation efforts
aimed at the type of companies reviewed. It also stated
that the report suggests a specific and reasonable way to im-
prove the dissemination of information to contractors about
energy conservation, and it intends to implement our recom-
mendation on this matter.
     Commerce does not believe, however, that the report
fully identified the reasons for the inadequate energy con-
servation programs found in the companies reviewed, and for
this reason, suggested that we eliminate our recommendation
for the development of an energy conservation procurement
policy that would require contractors to establish viable
energy management programs. The agency's comments seem to
indicate several concerns. On the one hand, they believe
that some of our findings show that a voluntary program
should be continued because of the achievements that have
been made; on the other hand, they are concerned that some
of our findings may result in the premature abandonment of
the voluntary approach to energy conservation. They pointed
out, however, that the agency does not suggest that mandatory
measures are never appropriate, but only that they are a last
resort, to be used where normal incentives such as the cost
of energy, as well as the desire of individuals and indus-
tries to promote the public interest cannot be relied upon to
accomplish the needed result.
     We believe that the voluntary approach to energy conser-
vation has not been fully effective. It has not been effec-
tive because many of the companies visited were simply not
aware of how to go about establishing and implementing an f-
fective conservation program. They were also not aware of
the potential savings involved. Perhaps this would not have
been the ase if agencies like Commerce had been more effec-
tive in disseminating information to these co.apanies on

                             36
energy conservation. For example, in commenting on our re-
port one contractor stated that:

     "Dissemination of useful information should be
     improved. Our experience here is that we have
     received essentially no information from Federal
     agencies except the FEA guidelines on lighting
     which were received during the GAO review of
     this plant."

      Despite the lack of awareness by contractors of the
potential savings involved from a good energy conservation
program, Commerce stated that their programs have stressed
the distribution of information and use of seminars to pro-
mote understanding of these savings. We believe, however,
that Commerce's efforts to disseminate information were very
limited. Further, the Director of one of the agency's
field offices told us that large firms, such as the contrac-
tors we reviewed, were not being visited by their represen-
tatives because he believed that these firms had the means
to develop a conservation program without help from Commerce.
While large firms may be capable of developing a good con-
servation program, our review showed that most had not,
                                                         and
they could have used some help.

      Commerce questioned whether our findings have wide-
spread applicability since (1) they ae based on a sample
of only 20 contractors, (2) some of the firms may have little
incentive to reduce costs because of the types of contracts
they held, and (3) a numb¢ - of the plants reviewed were GOCO
facilities. The 20 firms we elected for review were based
on a judgment sample and, therefore, cannot be statistically
projected to all Government contractors. The contractors
were chosen to provide broad geographical coverage  and were
significant in terms of business volume and energy use.
These were large firms, with total annual energy costs rang-
ing from $319,000 to over $11 million. Since significant
savings can be realized from adoption of better conservation
measures by them, we believe our assessment of their energy
use provides a useful input for energy conservation policy
decisions. The widespread presence of conservation oppor-
tunities among these contractors also leads us to believe
that similar opportunities may be present, to some extent,
in other Government contrz:tors' facilities.

     We agree with Commerce that, to the extent that costs
are a factor in energy conservation, procedures need to be
worked out by the agencies to increase the cost incentives
for certain types of contracts and contractors. Our analy-
sis shows that price does not have a great effect on some


                            37
contractors' energy use because of their type of contract.
This was shown by the low-price elasticities of both electric
energy and heating fuel energy uise.
     Commerce stated that, in assessing the effectiveness of
conservation programs, economic factors cannot be differenti-
ated from the impact that voluntary conservation efforts had
on the program. Commerce said that GAO tries to make such a
distinction through the use of statistical techniques to de-
termine which of these factors has contributed most to the
degree of energy conservation actually achieved. In explain-
ing their position, Commerce pointed out that its program and
FEA's program both have relied upon understanding of the cost
effectiveness of energy conservation as a primary motivating
factor and thus, to separate economic considerations from the
impact of voluntary conservation programs is fallacious.

     We believe it i possible through statistical techniques
to assess the relationship that economic actors such as em-
ployment, plant ;aea and energy unit prices) and voluntary
conservation efforts have on reducing ti.e use of energy. As
shown in appendix II, we tested this belief by including the
voluntary program as an explanatory variable n our statisti-
cal analysis. The analysis showed that the economic factors
were statistically significant in explaining overall energy
use by the contractors. It was difficult to separate the
effects of voluntary conservation efforts from those of in-
creasing energy costs; however, we believe that increased
prices may have had more of an impact in conserving energy
than the voluntary efforts. In addition, and more impor-
tantly, we did not rely solely on our statistical analysis to
measure the voluntary program's full impact on energy used.
As shown in our report, we relied extensively on t    findings
from our reviews at the contractors' plants to assess the vol-
untary efforts that were being made to conserve energy.

DEPARTMENT OF DEFENSE COMMENTS
      DOD advised us that the report would be helpful as it
icontinues to develop measures to insure that contractors use
 their energy more efficiently. DOD concurred with the recom-
mendations we made for improving its internal energy manage-
ment program ancd advised us of the actions that had been
 taken on these matters.

     While DOD concurred that it can improve its energy con-
servation efforts at contractors' plants, it was also totally
against developing a contract clause requiring contractors to
establish viable energy management programs. The reasons



                             38
were much the same as those given by OMB and Commerce. DOD
said it was their view that an effective industrial energy
conservation program should emanate from the highest level
of Government concerned with overall energy policy and man-
agement. DOD said that pending some movement of the Govern-
ment in this direction, it feels the best approach for DOD
in complying with existing guidance is to continue current
promotional efforts with its contractors.

     During our review, we did not find that DOD's promo-
tional efforts were very effective. From our experience,
Government contractors are usually reluctant to actively pur-
sue accomplishing socioeconomic objectives. Therefore, we
believe it is necessary for DOD nd other agencies to take
more positive action to assure that contractors comply. In
this case, an appropriate contractual clause in all major
contracts appeared to be a logical course of action.

     DOD also commented that it feels, given the dramatically
rising energy prices during the period 1972-1975, decreases
in employment could not adequately explain the significant'
decline in energy use experienced by the contractors during
this period. As discussed in chapter    and appendix II, our
statistical analysis shcded that plant area, employment,
heating degree days, and price are important variables in ex-
plaining energy use. We have added estimates of average en-
ergy use by the contractors in 1972 and 1975 in table 2 of
appendix II to more fully respond to the question raised by
DOD. This table implies that not only is the coefficient of
the particular variable important in explaining changes in
erergy use, but how much that variable itself changes is also
a actor. Thus, for example, during the period, large price
changes with a low coefficient account for more of the elec-
trical energy decline than employment. Also, for heating fuel
energy use, we agree with DOD that some of the reduced plant
areas may have been because of conservation efforts hy the
contractors. On the other hand, we believe that economic
factors are also important in explaining this change.

GENERAL SERVICES ADMINISTRATION COMMENTS
     GSA stated that it cormpieiey supports the efforts to
save energy in every way possible. GSA stated that it would
be willing to assist OFPP in developing appropriate parts of
the energy conservation procurement policy and contract
clause which we recommended for Government contracts. GSA
also informed us that i agreed with our recommendation for
improving the distribution of energy conservation publications
and advised us of several actions it was taking in this
regard.


                             39
OVERALL CONCLUSIONS

     Our basic purpose in this report has been to provide the
responsible Federal agencies and the Congress with informa-
tion on the effectiveness of the agencies' efforts to promote
voluntary energy conservation by Government contractors. We
believe these efforts have not been very effective. While
contractors have taken many specific energy conservation ac-
tions, there are numerous opportunities for achieving further
significant energy savings if viable energy management pro-
grams were established by all contractors in their plants.

     The factors which our review indicated have impeded the
development of energy management programs are twofold:    (1)
the overall financial constraints that a e associated with
establishing and implementing the program; these include the
cost of staffing and funding for proposed conservation proj-
ects, the relatively short payback periods that are required
for capital investments, and the fact that energy conserva-
tion projects nust compete for fu-nding with other capital in-
vestment projects and required occupational safety and envir-
onmental investments and (2) a lack of strong Federal leader-
ship emphasizing the need for energy conservation. We
believe our identification of these factors as primary impedi-
ments has been confirmed to a large extent by the comments
made by some of the contractors and agencies that a coordi-
nated national energy policy and financial incentives, such
as investment tax credits, are needed to motivate and assist
contractors to improve and expand their efforts to conserve
energy.

     Within recent months, two important actions have been
taken by the administration and the Congress to more effec-
tively deal with the Nation's energy crisis. These two ac-
tions were the issuance by the President on April 29, 1977,
of a proposed National Energy Plan and the legislation that
was signed on August 4, 1977, (Public Law 95-91, 42 U.S.C.
7101) creating the new Department of Energy. As discussed on
page 34, the National Energy Plan contains proposals to
provide tax credits for industry and business for invest-
ments in energy-saving equipment and conservation measures.
We support these proposals.

      The new Department of Energy was established by reorgan-
ization of energy functions within the Federal Government in
order to secure effective management to assure a coordinated
national energy policy. Under the legislatic , the Depart-
ment was given the authority and programs necessary to foster,
encourage, and--where appropriate--require energy conserva-
tion.   In addition to the consolidation of conservation pro-
grams from the primary energy agencies (FEA and ERDA), the

                             40
Department acquired authority from Commerce for the Govern-
ment's program to promote voluntary industrial energy con-
servation. This reorganization should help bring the Govern-
ment's heretofore fragmented energy policies and programs
into a structure capable of both developing and implementing
an overall national energy plan.

     We believe the two actions discussed above re a posi-
tive response to the issues raised by the contractors and
agencies in their comments, and could have a direct and sig-
nificant impact on alleviating or removing the barriers which
our work indicates have impeded the development of viable
energy management programs by Government contractors. We are
concerned, however, whether these actions standing alone are
sufficient and believe that the Government should develop an
energy conservation-related procurement policy requiring con-
tractors to establish energy management programs that ade--
quately incorporate the following five program elements:    (1)
top management commitment, (2) development of comprehensive
energy-use surveys, (3) goal setting based on survey evalua-
tions, (4) employee motivation campaigns, and (5) monitoring
program implementation and results. We believe a means
should also be established for monitoring and evaluating the
overall effectiveness of the contractors' energy management
programs, including the actions that are taken in response to
any new tax incentives that are provided for energy conserva-
tion purposes. We believe this could be accomplished by
adopting a suggestion made by FEA that contractors be re-
quired to submit their energy conservation plans as a part
of their proposals when bidding on Government contracts, and
these plans could then be evaluated as a part of the source
selection process. After coctract award, the effectiveness
of a contractor's energy management program could be evalu-
ated against prescribed standards by the contract administra-
tive services and the contract audit agency.

RECOMMENDATIONS TO THE DIRECTOR,
OFFICE OF MANAGEMENT AND BUDGET
AND THE SECRETARY OF ENERGY

     We recommend that_the Director, Office of Management
and Budget and the Secretary of Energy jointly develop an
energy conservation-related procurement policy that requires
Government contractors to establish viable energy management
programs which include the five program elements previously
listed. This policy should provide for contractors to sub-
mit their program plans as part of their contract proposals
and for subsequent evaluation of the effectiveness of he
program by contract administrative and audit agency persoin-
nel.


                              41
     We also recommend that the Secretary of Energy establish
reasonable energy conservation targets and goals for major
Government contractors. Using information obtained by offi-
cials of the agencies responsible for awarding and adminis-
tering the contracts, the Secretary should monitor the prog-
ress of the contractors' efforts toward achieving these
goals. The Secretary should then report back to the Congress
within 24 months on the progress being made and with recom-
mendations as to whether any new financial incentives that
are provided by the Congress for energy conservation are suf-
ficient, or whether mandatory standards are necessary.
MATTERS FOR CONSIDERATION
BY THE CONGRESS

     Within the near future, a National Energy Plan is ex-
pected to be enacted which will contain financial incentives
for industry to pursue with more vigor the conservation of
our energy resources. We support the concept of investment
tax credits as an incentive for achieving energy conservation
in the industrial sector. The Federal agencies and contrac-
tors responding to our report believe that these incentives
will be an inducement for contractors, and all of industry,
to conserve more energy.

     Because the Congress must ultimately decide whether vol-
untary or mandatory energy conservation programs are needed
in industry, we believe that the Congress should maintain
close oversight of any new programs and incentives it pro-
vides for industry in this area. We believe this could be
accomplished by means of the report which we have recom-
mended that the Secretary of Energy provide to the Congress.
The Congress could include a specific requirement for this
report in any legislation thac is enacted to provide finan-
cial incentives for industrial energy conservation.




                            42
      APPENDIX I
                                                        SCIDELN lOIOIIG CONTRACTOR
                                                                                 NCRGY use                                        *APPENDIX      I
                                                        ANDCOl? I      INFlfAlON FRo 1975 Inote )
                                                                                                           Total ftcil ty energy
                                                                  sneroy    vIn                                   leuivlOnt
                                                                                                                         (note b)
                          Contractor                       Electricity      (note c)               heros    mrrel* of oil       energy coot
                                                           (000 kho)       (000 therm l                                   (000)
      1. Aerojet olid Propulaion Company
          (note d) Sacramento, Califerni                     35,394           3,320               6,b59                            5S101,325
      2. Dell Telophone Laboratories
           lhippony, Now Jerey                               23,357           1,094               3,429              59                    835
      3. Control Dte Corporation
          Asroapaoe Divilion
           ,inneapolia, inneoota                             14,666                260           1,726               30                    319
  4. Geneorl Dynenics
      fort worth Divialon
      Fort o-th, Texas                                      113,780         14,102           25,480             439                  2,520
  5.      neral lloc:rio opony
          Ord,.- * staie -
          Pittlfield, lrtachuuetts                           31,464          1,573               4, 739              2              1,110
  6. Ocneral lectric Company
       Space Dii irion
       Valley rcrge, Pennsylvania                            $6,714          1,210               ',81           119                 1,911
  7. Goodyear A iopce Corporation
       Akron, nh.,                                           32,971          3,668               6,96           120                 1,363
  i.    Roleton Defense Corporation (note o)
          lolston Army mlunition Plant
          ringport, Tenneeooe                               86,712          70,462           79,153           1,365                11,062
  9. loneywell Inc.
       Twin Cities Ary Ammunition Plant
       Now Brighton, Minneoota                              23,721           1,446               3,520              i6                902
10. Hughes Aircraft Compony
      ground Systoem Group
      Fullerton, ClitornT                                   63,500           1,015               7,365         127                  1,642
11.  CT United States, Inc. (note o)
      Indinoa Army Ammunition Plant
      Cherleotown, Indiaon                                  18,760           2,962           4,836              63                    643
12.     Lockheed iolsileo nd Spae Comnpav
          Sunnyvale, Clifornic                              210 4            4,614          25,663             442                  4,306
13.     Nirtin Marietta Arompace
         Orlando Division
         Orlondo, lorida                                    65,651                705        7,270             125                 1,678
14.     lockwell International (not f)
          Columbus Aircraft Division
          Columbus, Ohio                                    76,447           6,608          16,453             264                 2,655
15. perry Rind Corporation
     sperry Division
     Great Neck, New York                                   33,084           1,633           5,141              69                 1,522
16. T       Inc.
         TIM quipment      'oup
         luclid, Ohio                                       96,713           4,357         14,229              245                 2,564
17. tr Inc.
      TII   ytoenms and noergy Group
      ledondo     sach, California                         138,918           3,319         17,211              297                 3,714
)J.    United Technologies Corporation
          ordon Divilion
        lorwllk, Conneoticut                                15,564                74)       2,306              40                    Gil
It. Vought Corporation       yoteno Division
      D llas, Tas                                          150,101          10,622         25,632             442                  3,311
20. Westinghouseo lectric Corporecion
     lletro-Nechaniol Division
     Cheowirk, Pennsylvani                                  31.672
                                                              ,,4                           375 2              o5                   747
           Total                                         1.324,077                       2l 6l612          _1/436
*/Tbe date hown i for calndar yeor 1975 xcept horo otherwise noted.                       For thoeo oxceptions the dt
  correponde to  fiscal yeor bait asoused by these contrcetor.
b/By total facility energy in quivalent theornt,     rotoer to the combined consumption of electricity mnd
  beating fuel (converted to equivalont therea.    In converting electricity usage to quivalent therms,
  we used the conversion factor of 10,000 tu'    equals I kwh, reflecting resource energy inputs t the
  powerplents.  In converting to equivilont brrolo of oil, we used the conversion fector for crude oil
  uosedby the Dopartment of the Interior--5,600,000 tu's per barrel.
 /Ibeating uel is theo su, in equivaleont trms (I ther -*100,000 tu ), of the uls used in the tfcilritie
   and includes, whereo ppltceble, fuel oil, natural gas, coal, purchased steam, nd propane.
f/Daota hown i on      fiscol year bisl December 1, 1974 - November 30, 1973.
 /Data hown i on       fiscal year boosist uly i, 1974 - Juno 30, 1975.
'/Dota      hown io on           year bDoitl
                           fiscaol             October 1, 1974 - September 30,           1975.
!/Colun does not         dd to total due to rounding.

                                                                 43
APPENDIX II                                          APPENDIX II



                      STATISTICAL ANALYSIS
               EXPLAINING VARIATIONS IN ENERGY USE

SUMMARY OF RESULTS

     We performed a number of regression analysesl to esti-
mate the relationships between total energy use and the area
of the plant, the number of employees of the company, heating
degree days, the relative price of energy (total cost of that
energy divided by the total energy used), and a variable to
measure the effect of the "voluntary energy conservation
program."
     Several of these variables were highly correlated, mak-
ing it difficult to separate the effects of one from the
other. This was true of plant area and employment and also
of the price variable and the variable representing the "vol-
untary energy conservation proqram" in 1974 and 1975. Tabl-
1 on page 47 shows that while the price variable svas signi-
ficant, the variable used to measure the conservation program
was not when both were included in the same equation. On the
other hand, the conservation program variable was significant
when the price variable was not included in the estimating
relationship. We analyzed electrical energy used and energy
used for heating separately to eliminate the problem of cor-
relation between employment and plant area. The results of
these two analyses ze summarized in the following table
which lists the coefficients of the most significant esti-
mated regression equations.

                                    Electrical       Energy used
Variable                            energy used      in heating

Employment                              0.77              (a)

Energy price                            -.53            -0.35

Area                                     (a)             1.21

Degree days heating                      (a)              .50

aNot included in equation.
1A statistical technique that attempts to measure the rela-
 tionship between a given variable (in our cse energy use)
 and other variables o interest (area, employment, relative
 price, etc.).


                               44
APPENDIX II                                        APPENDIX II


These values can be explained in the following manner. The
coefficient of 0.77 for employment in the electrical energy-
use equation means that a 1-percent increase in employment,
other things elng equal, will result in a 0.77 (i1-percent
increase in electric=l energy use. 1A 1-percent increase in
the price of eectricity means a 0.5: (2)-percent decrease in
energy used.
     The sign of the price coefficient confirms economic
theory that price increases redlice quantity consumed while
price decreases would increase uantity consumed. These two
examples should aid in interpreting relationships that are
directly related (shown by a positive value) and those that
                                                       3   Other
are inversely related   (shown by a negative value).
values in the chart have similar explanations.




1 Thevalue of G.77 is the best single estimate; however, a
 more precise statistical statement would be that we may be
 95 percent confident that the value lies between 0.63 and
 0.91.
2 Similarly,for 95 percent confidence, the value lies be-
 tween 0.23 and 0.83.
3 Direct or positive relationship means that an increase in
 the independent variable results in an increase in the de-
 pendent variable, while a decrease in the independent vari-
 able resiu 7in a decrease-in the dependent variable. An
 inverse relationship means an increase in the independent
 variable results in a decrease in the dependent variable,
 and a decrease in the independent variable results in an
 increase in the dependent variable.




                               45
APPENDIX II                                      APPENDIX II



TECHNICAL DETAILS

     Initially, we used regression analyses to determine tile
relationship between overall energy consumption and employ-
ment, plant area, heating degree days, unit price of energy,
and a variable to control for the effect of the voluntary pro-
gram. Graphs of energy consumption plotted against the other
variables (factors) indicated that some of the variables my
vary nonlinearly with energy use. For this reason and the
fact that the use of logarithms allows elasticities to be ob-
tained directly from the coefficients of the regression
equations, we primarily used natural logarithms of the data
in our analysis.

     Our analysis on a year-to-year basis indicated that some
variables thought to be significant were not. We increased
the sample size to 66 observations by pooling te data for
the 18 companies for the 3 or 4 years where data was avail-
able. Whereas some of the variables were not statistically
significant when estimated on a year-by-year basis, they be-
come significant when estimated using the pooled data.
     We found that some of our explanatory variables were
highly correlated to each other as well as to energy use.
For example, employment and area, two of the more important
explanatory variables, are closely correlated. Also, unit
price and the control variable for the volunteer program are
closely related. This phenomenon makes it difficult to sep-
arate the impact of the different explanatory variables on
energy use.

     Separating the regression analysis into two equations,
one representing electrical energy used and the other repre-
senting energy used for heating helped alleviate this prob-
lem. Further, it was logical to make this division since
some of the explanatory variables relate only to either heat-
ing energy or electrical energy. 1

     To determine which variables contributed the most explan-
atory power to our equations, we ran a number of regressions
in log form using dfferent combinations of explanatory var-
iables. The results are summarized in the following table.

-For example, heating degree days clearly correlates only
 with energy used for heating.




                              46
APPEND         . 'I                                                                                    APPENDIX II
                                                                 TABLE 1

                                    REGRESSION ANALYSIS RESULTS ON LOGARITHMIC

                                      VALUES USING THE LEAST SQUARES METHOD


                                 _) . Deendent Variable--Overall Enerqy Use
                           …_2.................
                           …
                                                              egree lFrLce
                                                              days    of     Program                           P2
 Eguation No.             Constant            Area EMl1oyment heat  energy  (note-a)                        (note b)
           1                2.207      0.927           d/              d            d/            a/
                         c/(4.76)    (14.85)                                                                 0.7751
           2                2.673        d/         0.779              d/           d/            d/
                           (4.12)                  (9.89)                                                     .6045
           3                1.569       .616         .246              d/        -0.465           d/
                           (3.63)     (7.03)       (3.10)                       (-4.17)                       .8430
           4                1.866       .732         .231              d/           d/         -0.201
                           (3.91)     (8.08)       (2.67)                                     (-2.23)         .8140
           5                2.274       .575         .213             -0.075      -.657          .178
                           (2.56)     (6.15)       (2.43)            (-1.18)    (-3.74)        (1.37)         .8504

 __________           ___________          Variabe--Electric
                                                    _2__ndent    Energy_
                                                                       Use
                                                           Price
                                                            of        Program                              2
 Eguation No.             Constant       EmloXyrent    electricity    (note a)                         (note b)
           I                1.885              0.821                  a/                 d/
                           (3.15)          (11.32)                                                      0.6671
           2                2.061            .811                     d/           -0.177
                           (3.42)         (11.26)                                 (-1.50)                .6787
           3                1.311            .769                   -0.528            d/
                           (2.27)         (11.19)                  (-3.43)                               .7194
           4                 .9b2            .763                    -.684            .161
                           (1.50)         (11.06)                  (-3.21)          (1.06)               .- 244

                                 De   dent vr   at
                           ____.........................               na .............
                                                                              F u.. I..
                                                feat.ng               Degree
                                      Plant      fuel                  days             Proaram           Rf
 Equation No.           Constant      area       Lrice                 heat             (notea)        (note b)

       1                  -0.575         1.139              d/             d/            d/
                          (-.907)      (13.37)                                                          0.7363
       2                  -5.931         1.206          -0.352        0.497              d/
                         (-6.38)       (15.77)         (-3.12)       (6.78)                              .8509

       3                  -5.191         1.296              a/         .442          -0.246
                         (-5.54)       (17.87)                       (6.09)         (-2.35)              .8416

       4                  -5.850         1.216           -.318         .492           -.435
                         (-6.01)       (14.89)         (-1.9b)       (6.53)          (-.301)             .8511


 a/Program-Dummy variable for "voluntary" program to start in 174. 197k ant, 173
   coded zero, and 1974 and 1975 coded 1. The program variable is not expressed
   as a logarithm.

 b/R -A measure of the amount of variance in the dependent variable that                                 is ex-
   plained by variations of the independent variables.

 c/Numbers in pa:entheses are T values--a value of 1.96 or larger indicates a
   statistically significant variable at the 95-percent level of confidence.

d/Variable no,         included     in the euation.


                                                       47
APPENDIX II                                                                                                                 _ ,i                                                                 APPENDIX II
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                                                                                                                      48
 APPENDIX   III                                        APPENDIX III



                  FEDERAL ENERGY ADMINISTRATION
                          WASHINGTON, D. C. 20461


                           March 29, 1977
                                                    OFCE OF HE ADMINISTIATOR




Mr. Monte Canfield, Jr.
Director
Energy and Minerals Division
U.S. General AccountinS Office
Washington, D.C. 20548

Dear Mr. Canfield:
Thank you for your letter of February 24, 1977, enclosing
copies of the draft report to Congress on "Improvements Needed
in Federal Agencies' Programs and Efforts to Promote Energy
Conservation by Government Contractors."
1 appreciate the opportunity o review and comment on the report
and I agree with your generr.l conclu·ons that:

            -Governmentcontractors have taken specific energy
            conservation action; however, there are many oppor-
            tunities for achieving further significant energy
            savings if viable energy conservation programs were
            established by all contractors in their plants.
            The Government, through its procurement policies, can
            prcmote positive energy conservation actions by
            contractors.
            Federal agencies should increase their efforts of
            disseminating energy conservation materials to
            Governent contractors.
            There is a need to develop uniform lighting guidelines
            and standards for use in commercial, public and
            industrial buildings.




                                    49
APPENDIX III                                     APPENDIX III


In a few instances, I do have some concern about specific
details in your recommendations. These are noted in the
enclosed colments on the individual recommendations.
Your report will be most helpful to the Federal Energy
Administration and other Federal agencies as we strive to
develop measures to ensure that Government contractors use
their energy more efficiently in the future.

                                Sincerely,



                                     F O'Leary
                                Administrator
Enclosure




                           50
APPENDIX III                                    APPENDIX III

                COMMENTS ON RECOMMENDATIONS

Recommendations: "We recommend that the Office
                                                of Federal
Procurement Policy, in line with is statutory responsi-
bility to provide overall direction of procurement
                                                   and
procurement-related policies:

    Work with the Federal Energy Administration, the
                                                      General
    Services Administrati.on, the Department of Defense,
                                                         and
    other appropriate Executive Branch agencies in
    development of an energy conservation related   the
                                                   procure-
    ment policy and contract clause that would require
    Government contractors to establish viable energy
    management programs."

    "In developing this policy, give consideration
                                                   to
    allowing contractors to share in the cost savings
                                                      which
    accrue from the implementation of energy conservation
    opportunities."
    Comments: We partially concur. It is our feeling
                                                         that
    all segments of industry should have viable energy
    conservation programs. Requiring only Government
    tractors to have such programs severely limits      con-
    potential benefits as compared to an appeal to  the
                                                    the
   entire industrial community. However, if such
                                                   a
   ment is decided upon, what constitutes a viable .equire-
   conservation program should be clearly defined. energy
                                                      Once
   this has been established, contractors could be
   to submit their energy conservation plans as a    required
                                                   part of
   their proposals when bidding on Government contracts
   and these plans would be evaluated as a part of
                                                     the
   source selection process. There are additional consider-
   ations, such as whether to exclude certain sizes
   types of contracts, which would have to be exploredor
   administrative decisions made in order to              and
                                              implement the
   recommendations. After contract award, the effectiveness
   of a contractor's energy conservation program
                                                  could
   then be evaluated against a standard by the contract
   administrative services and the contract audit
                                                   agency.
   The Federal Energy Admfnistration (FEA) has worked
   the Office of Federal Procurement Policy in the      with
                                                    past on
   this subject and will continue to in he fu'ure.

   We concur in that portion of the recommendation
   ing sharing of energy conservation cost savings concern-
                                                   with
   contractors.




                            51
APPENDIX III                                     APPENDIX III

Recommendations:  "We recommend that the Federal Energy
Administrat' n and the Department of Commerce:

     Use Go e .. !nt contracting personnel in the Department
     of De' in',   _ 9 General Services Administration, and
     other B4e ches to disseminate energy conservation
     publicz-i-r.s a .- materials to contractors."

     Comments% We concur in the intent of this recommenda-
     tion. FEA Lw, used this communication channel a few
     times in the past. It is a valuable channel, and we
     intend to make use of it in the future whenever we have
     publications and materials appropriate to this audience.
     The Government can also learn from industry. Government
     personnel ho have access to contractor facilities
     should look for energy conservation techniques that
     could be used by Federal agencies. A good example of
     this type of information exchange has been in the
     vehicular area. Several Government agencies are incor-
     porating in their operations some of the energy conser-
     vation techniques developed by Douglas Aircraft Company
     in their very successful vehicular energy conservation
     program.

Recommendations:   "We recommend that the Federal Energy
Administrat.in:

     Review the various lighting guidelines and standards
     that are currently in existence and develop national
     lighting guidelines and standards that can be easily
     understood and consistently applied in commercial,
     public and industrial buildings."

     Comments: We concur in the intent of this recommenda-
     tion. The several existing lighting standards are being
     reviewed by FEA, in conjunction with the National
     Bureau of Standards and the Energy Research and Develop-
     ment Administration, for development of a Federal
     lighting standard in response to the Energy Policy and
     Conservation Act (EPCA) requirements. Housing and
     Urban Development has been assigned responsibility
     under EPCA for development of national building standards.
     We believe promulgation of a lighting standard for
     commercial, public, and industrial buildings would be
     more appropriately done in conjunction with that work.
     In any case, implementation of the recommendation would
     require legislative authority if the standard were
     anything more than a guide for voluntary action.




                             52
APPENDIX III                                      APPENDIX III

Recommendations:   "We recommend that the Department of Defense
take action to improve its energy management program ....   "
     Comments: FEA has no direct interest affected by this
     recommendation. However, we have assisted the Department
     of Defense in its promotion of energy conservation
     programs in the past and will continue to do so in the
     future.




                             53
APPENDIX IV                                            APPENDIX   TV


              EXECUTIVE OFFICE OF THE PRESIDENT
                OFFICE C.' MANAGEMENT AND BUDGET
                       WASHINOTON. D.C.   0503




                                                 April 21, 1977
 Mr. Monte Canfield, Jr
 Director, Energy ar6d Mnerals
   Division
 General Accounting Office
 Washington, D. C.   20548

 Dear Mr. Canfield:

 By letter dated February 24, 1977, Mr. R. W. Gutmann,
 Director, Procurement and Systems Acquisition Division,
 General Accounting Office, forwarded to this Office
 copies of a draft report entitled, "Improvements Needed
 in Federal Agencies' Programs and Efforts to Promote
 Energy Conservation by Government Contractors."
 Mr. Gutmann requested our conments on the draft report
 and advised that these comments could be referred to
 your Division.

 The draft report has been carefully reviewed and evaluated.
 The initial recommendations enunciated in the draft report
 address the Office of Federal Procurement Policy (OFPP),
 an element of the Office of Management and Budget. The
 recommendations were (1) that OPPP work with other
 executive branch agencies to develop an energy conservation
 related procurement policy and contract clause requiring
 Government contractors to establish viable energy mnage-
 ment programs, and (2) that in developing this policy,
 OFPP give consideration to allowing contractors to share
 in cost savings.

 As you know, President Carter has moved tA form a
 Department of Energy and to develop a comprehensive
 national energy conservation policy. It can be presumed
 that a sizeable portion of this policy, when developed,
 will address itself to energy conservation matters
 apropos of industry in general.

 An essential benefit of such a national policy, in our
 judgment, is that it can be uniformly applied. It can be
 imposed industry-wide, not just on that segment of industry
 contracting with the Government.
 The history of attempting to implement socic- 3conomic
 objectives through the procurement process has been uneven
 and in many cases produced unsatisfactory results even


                                   54
APPENDIX IV                                      API   NDIX IV

when backed by statutory requirements and concerted
implementation efforts. This has been caused principally
by (1) disparaties in business conditions created between
industry as a whole and that minority which holds Federal
contracts, and (2) because cost and benefits have been
generally unknown, presenting questions over effectiveness
and efficiency of government procurement as well as in
pursuing the particular non-procurement objective. The
Commission on Government Procurement,    whicl. the
Comptroller General was a ember, reported that "the
cumulative effect of programs already imposed on the
procurement process and the addition of those contemplated
could overburden it to the point of threatening breakdown."
The conclusion is even more valid today.
Pending development of a national policy, we are pleased to
advise you that the OFPP has been active and successful in
implementing its responsibilities for those national policies
that have been promulgated to assist energy conservation. On
August 6, 1976 the Administrator for Federal Procurement
Policy issued OFPP Policy Letter 76-1 to the Heads of
Executive Departments and Establishments. This policy letter,
which implements, in part, Executive Order 11912, requires
that the principles of energy conservation and efficiency
be adhered to where meaningful and practicable; e.g., in
developing Government requirements and in source selection
decisions. The Department of Defense will implement this
policy in a soon to be released Defense Procurement Circular.
A copy of the proposed Department of Defense implementation
has been provided to the General Services Administration fo;
implementation in its Federal Procurement Regulations.
On February 2, 1977, OFPP issued its Policy Letter 77-1,
again to the Heads of Executive Departments and Establishments.
This policy letter was issued in compliance with the Solid
Waste Disposal Act, as amended by Public Law 94-580, the
Resources Conservation and Recovery Act of 1976, enacted on
October 21, 1976. The letter directed that Federal procure-
ment be effected in a manner that maximizes the use of
recovered or recycled materials.
Pending the development of a coordinated national policy for
energy conservation with uniform industry-wide procedures;
and pending further quantification of the cost and benefits
for such socio-economic provisions, we do not support the
recommendations directed to the OFPP but have directed the
office to continue to aggressively look for opportunities to
promote energy conservation.




                             55
APPENDIX IV                                         APPENDIX IV

The remaining recommendations in the draft report are
addressed to other agencies or offices. These
recommendations should be useful to those eventually
charged with development of national energy conservation
standards and programs.

                           Sincerely,


                           J   s T. McIntyre, Jr.
                           Daputy Director




                             56
APPENDIX V                                         APPENDIX V



             fi      W ITIED  TATES OL. ARTMENT OF COMMERCE
                     Th Assistant Sstary  for Adminstratlion
                     Washington, D.C. 20230




April 28, 1977




Mr. Monte Canfield, Jr.
Director, Energy and
  Minerals Division
U.S. General Accounting Office
Washington, D. C. 20548

Dear Mr. Canfield:
This is in reply to your letter of February 24,
1977, requesting comments on the draft report
entitled Improvements Needed In Federal Agen-
cies' Programs and Efforts To Promote Energy
Conservation by Government Contractors."
We have reviewed the enclosed comments of the
Assistant Secretary-designate for Domestic and
International Business and believe they are
responsive to the matters discussed in the
report.

Sincerely,



AssistrAt Secretary-designate
  for Administration


Enclosure




                                                       d          .4


                                                       7s0.T1o,

                                57
  APPLr)IX V                                                APPENDIX V

                        ,IZ
                        7t        UNITED STATES LPARTEWiT OF COMMERCE
                        v~P   l   The Assistant Scnetar for Domdstio
                                  and Intrnational Business
                                  Washington, D.C. 2230




April 19, 1977




Mr. Monte Canfield, Jr.
Director, Energy and
  Minerals Division
U. S. General Accounting Office
Washington, D.C.    20548
             Re:   GAO Report "Improvements Needed in
                   Federal Agencies' Programs and Efforts
                   to Promote Energy Conservation by
                   Government ontractors"

Dear Mr. Canfield:

Enclosed is the response of the Domestic and Internatio                1
Business Administration to the above-referenced report.
We believe that the report makes several valuable reconmmen-
dations but the report aso, we feel, gives an unfair picture
of the present Voluntary Industrial Energy Conservation
Program (VIECP). The enclosed response treats those
concerns in some detail.
Sincerely,


F ank A. Weil
Assistant Secretary-designate
Domestic and International Business

Enclosure




                                    58
                                                                           0s~l
APPENDIX V                                        APPENDIX V




                        COMMENTS OF


    _OMESTIC AND INTEP'~%TIONAL BUSINESS ADMINISTRATION



                  DEPARTMENT OF COMMERCE



                            ON


                    DRAFT GAO REPORT



                         ENTITLED


         "IMPROVEMENTS NEEDED IN FEDERAL AGENCIES'
         PROG dqs AND EFFORTS TO PROMOTE ENERGY

         CONSERVATION BY GOVERNMENT CONTRACTORS"




                           59
   APPENDIX V                                       APPENDIX V




         Analysis of Draft GAO Resort "Improvements
      Needed in Federal Agencies' Programs and Efforts
  to Promote Energy Conservation by Government Contractors"




The draft GAO Report "Improvements Needed in Federal Agencies'
Programs and Efforts to Promote Energy Conservation by Govern-
ment Contractors" is valuable and correct in a number of respects.
It certainly shows a need for improvement in Government energy
conservation efforts aimed at the type of company investigated:
i.e., large companies--primarily in the aerospace industry--
having defense procurement contracts. The study also suggests
a specific and reasonable way to improve the dissemination of
information to Government contractors about energy conservation
by FEA and the Department of Commerce. This suggestion, which
we intend to implement, is tit this Department and the FEA
should "utilize Government tcntracting personnel in the Depart-
ment of Defense, the General Service Administration, and other
agencies to disseminate energy conservation publications and
materials to contractors." Also, by describing several instances
in which Government contractors voluntarily implemented energy
conservation measures whose value had been demonstrated by the
investigators, the study gives practical and credible examples
of the workability of voluntary energy conservation programs
based on understanding rather than coercion.

On the other hand, insofar as the study purports to indicate
that the inadequate energy conservation practices found were
the result of the voluntary approach to energy conservation,
it seems invalid, and reliance upon such evidence by the
Congress may result in the premature abandonment of the
voluntary approach to energy conservation. We do not suggest
that mandatory measures are never appropriate, but only that
they are a last resort, to be used where normal incentives
such as the cost of energy, as well as the desire of




                               60
  APPENDIX V                                            APPENDIX V
individuals and industries to promote the public interest,
cannot be relied upon to accomplish the needed result. We
also believe that a study limited to a few defense contractors
is an inadequate Lasis upon which to assess the overall
effectiveness of voluntary conservation programs.




                    [See GAO note 1, p. 63.1




A further skewing factor is the fact that about one-third of
the firms in the sample were Government-owned, contractor-
operated (GOCO) plants with respect to which there was a
Government policy that placed    low priority on energy con-
servation projects involving capital expenditures    As to
these plants, the study noted: "Projects which w'e production
related or those which were required to comply with
environmental and safety regulations took precedence over
energy conservation investments regardless of cost recovery
periods." (See p. 48.) With such a ample, the study could
be exp(ected to show a need for improvement in energy conservation.
On page 34 it is stated that Government energy conservation
programs ad actions have had little effect at Government
contractors' plants, and that    "   . . . the primary reason for
this lack of impact is that the need for energy conservation
has not been effectively emphasized and the agencies have
relied on a voluntary energy conservation philosophy." The
only evidence in the study that might be relevant to such
an assertion is: (a) facts that show that companies in the
group studied had not effectively implemented known conserva-
tion measures; and (b) a regression analysis purporting to
indicate that, for the companies studied, increased energy
costs were a more significant factor in promoting energy
conservation than was the Government's voluntary conservation
program.

(See GAO note 2, p. 63.1

                                61
  APPENDIX V                                       APPENDIX V

As to the first of the above types of evidence, we note
that one cannot conclude from data showing inaction on
energy conservation--without more--that such inaction
results from unwillingness to act where a company is aware
of the potential benefits achievable. On the contrary,
there are numerous instances recounted in the study (See,
e.q., pp. 13, 14, 15, 18, 28 and 30) in which the contractors
implemented measures suggested by the investigators as soon
as they understood the magnitude of the savings that could
be achieved. Also, in some cases involving GOCO plants, agency
policies directly blocked management's intended implementation
of conservation measures.
                                [See GAO note 1, p. 63.]
All of these impediments to the operation of natural cost
reduction incentives--i.e., lack of understanding, Government
agency policies which directly discourage investment in enera,
conservation investments at GOCO plants  [See GAO note 1, t. 63.]

      need to be removed before one can conclude that a
voluntary approach to energy conservation cannot work.

The regression analysis is the other evidence relied upon
to indicate the ineffectiveness of voluntary conservation
efforts as compared to "economic factors" such as the rising
cost of energy. Before addressing the analysis itself,
would like to point out a fallacy involved in the attempt
to differentiate between "economic factors" and the response to
voluntary conservation program efforts. The DOC and FEA
programs have relied upon understanding of the cost effective-
ness of energy conservation as a primary motivating factor,
because there are large potential energy conservation possibili-
ties that not only would serve the national interest, but
would be demonstrably cost effective. Our programs have
stressed the distribution of information and the conduct of
seminars to promote understanding of these savings possibilities,
which are often a direct function of the cost of energy. Thus,
to "separate" economic considerations from the impact of
voluntary conservation programs is fallacious.

However, the stady purports to make just such a distinction,
and to determine, using statistical techniques, which of
these factors has contributed most to the egree of energy
conservation actually achieved.   (See p. 8.) Appendix III
of the paper, at p. 6, shows that for the "voluntary program"
factor, a dummy variable (set at zero and 1 for different
periods) was uses, even though it was recognized that 47e
factor of energy price was "highly correlated" with th
factor. The use of a dummy vriable in such     situation



                              62
 APPENDIX V                                       APPENDIX V

generally oes not yield meaningful results. In the present
case, wheks the variables are not only "highly correlated,"
but fundamentally the same, as discussed above, the result
obtained would seem to be meaningless.
The study thus did not adequately analyse the reasons for the
poor energy conservation programs found n the companies
studied. Furthermore, while the study (p. 37) notes that a
"wide range of Government procurement policy options are
available to encourage contractors to conserve energy," these
options are not outlined or discussed in any detail. Nor are
options outside the procurement process iscussed, It is
merely stated, without explicit analysis: "e believe that
a procurement policy requiring the development of energy
management programs and a provision allowing contractors to
share in the cost savings may be the motivation and incentive
needed to assure timely realization of substantial energy
savi ngs."
For the above reasons, the study, while helpful in denti-
fying certain problems, is inadequate in its analysis of
both the causes of those problems and the effectiveness
of alternative solutions nvolving changes in basic Government
policies, either with respect to standard contract provisions
or to fundamentally new approaches to energy conservation
by the Government. The study would be greatly improved by
the elimination of those sections either explicitly or
implicitly recommending such basic changes until the defi-
ciencies of the study and subsequent report have been remedied.


GAO notes:
    1. Deleted comments refer to material contained in the
       draft report which has been revised or which has
       not been included in the final report.
    2. Page references throughout this appendix refer to
       our draft report and may not correspond to :is
       final report.




                            63
  APPENDIX     VI                                                APPENDIX VI


                            ASSISTANT SECRETARY OF DPSE
                                WASIN'   rON,   .C. sas01




Manpower, Reserve                                           19 May 1977
Affairs aiid Logistics


       Mr. Monte Canfield, Jr.
       Director, Energy and Minerals Division
       United States General Accounting Office
       Washington, D. C. 20548

       Dear Mr. Canfield:

       This is in reply to a letter from Mr. R. W. Gutrann, Director,
       Procurement Division, GAO, dated 24 February 1977, to the Secretary
       of Defense regarding a draft report on "Improvements Needed in Federal
       Agencies' Programs And Efforts To Promote Energy Conservation By
       Government Contractors, " GAC Code 95n272, OSD Case #4558.

       We appreciate the opportunity to z.* riew and comment on the draft report.
       The report will be most helpful as the Department of Defense and other
       Government age.acies continue to develop measures to ensure that
       Government contractors use their ene!gy more efficiently.

      With reqgrd to the specific recommendations concerning the Department
      of Derense (DoD):

                   We concur that a viable energy program needs to be promoted
      to encourage private industry to make energy conservation investments
      in cont~tctor-owned and contractor-operated plants.

             -     The Defense Contract Audit Agency (DCAA) as prepared an
      operations audit program for energy conservatio that substantially
      expands our original adequacy test. This pogram incorporates the
      five program elements advocated by the Federal Energy Administration
      as outlined in the draft report and utilizes technical assistance from
      other DoD sources. It was programmed into our audit schedule in
      February 1977 for defense contractor locations having an auditable
      dollar value of $150 million or more     The program will also be
      accomplished at other locations as resources permit.

                 Even though the Energy Conservation Investment (ECI)
      Program was developed for in-house facilities, we concur with the
      GAC recommendations that Government-owned Contractor-operated
      (GOCO) plants be included within the program. The Department of


                                         64
APPENDIX VI                                                 APPENDIX VI


the Army currently has a small number of ECI projects or GOCO
facilities in the 1979 and 980 programs. Next year's Planning and
Programming Guidance Memorandum will provide the opportunity to
accomplish more energy conservation projects in these facilities.

With respect to the recommendation that the Office of Federal
Procurement Policy work with other agencies to develop a contract
clause that woull require Government contractors to establish viable
energy management programs, we believe it would b impractical to
develop a meaningful clause until such time as the cognizant Federal
agencies develop the necessary energy standards.

Addressing the overall thrust of the report, it must be recognized that
DoD is a promoter of industry energy management programs and is
actively engaged in this effort with contractors. A copy of the latest
Defense Logistics Agency (DLA) guidan.e to Defense Contract
Administration Services Regions is at Enclosure 1. DLA will also
continue to provide technical assistance to DCAA in their expanded
energy audits.          [See GAO note 1, p. 67.1

We concur that DoD can always mprove its energy conservation effort with
industry. However, the largest industrial users of energy are the basic
material producers, i. e,,, al.minum, steel, castings, forgings, etc.
DoD has very minor direct procurement from these elements of industry.
Additionally, )oD procurement represents a relatively small portion of
the average contractor's total business, so our procurement impact on
the corporate energy management policy is of minor importance. Since
en'aergy usage is .t4 generally susceptible to control or accountability on
a contract by contraLt basis, meaningful conservation measures must
emanate from plant or corporate policy.

It is our view that an effective industrial energy conservation program
should emanate from the highest level of Government conr-rned with
overall energy policy and management. This type program could be
pursued with the "captains of industry" with the full force of major
public policy and would include the total industrial community. Pending
some movement of our Government in this direction, we feel the best
approach for DoD in complying with existing guidance is to continue
current promotional efforts with defense contractors.




                                  65
APPENDIX VI                                                APPENDIX VI


   Generally speaking, it is recommended that the savings and the
   voluntary efforts of the contractors visited be presented in a more
   positive fashion in the report, adding objectivity. Some suggested
   clarifications and corrections to the text are at Enclosure 2.

                                         Sincerely,




                                           DALE R. BABIONE
                                  Acting Principal Deputy Assistant
                                   Secretary of Defense (Logistics)



   Enclosures (2)




                                 66
 APPENDIX VI                                                    '.PPENDIX   VI
                SPECIFIC COMMENTS ON THE REPORT


   While the report stateL defense contractors had made some conservation
   efforts, it does not fairly present the significant reductions repcrted on
   page 30. Energy costs at the 20 locations surveyed increased only
   61. 5 percent in the test period while unit prices for electricity and heating
  fuel increased 139 and 180 percent respectively. The observations on
  pages 7-9 (and Appendix III) relate to increases and decreases in energy
  consumption which correlate with conditions such as employment, con-
  servation programs, energy cost, degree days and plant area. Although
  the energy use by these companies is affected by such factors, the infor-
  mation presented does not demonstrate that the significant reductions in
  energy consumption at the 20 locations were caused by decreases in
  employment. It is also noted that reduction in occupied plant area is a
  conservation opportunity exercised by many contractors as part of their
 conservation programs. The opinion expressed that an "observed
 decrease in annual energy use could be temporary and may disappear
 as the national economic climate improves" is related to the conclusions
 of the Department of the Interior reported on page 9 and not the 20 locations
 which GAO reports "may" have been influenced by changes in employment
 levels and plant area. A reader would have a serious misunderstanding
 that the voluntary programs of the 20 locations had little impact on the
 significant savings reported on page 30.




                          (See GAO note 2.1




[See GAO note 3.]

GAO notes:

    1.   The enclosure r..rred to in this paragraph has
         not been included as part of this appendix,

    2.   Deleted comments refer to material contained in
         the draft report which has been revised or which
         has not been included in the final report.

    3.   Page references throughout this appendix refer
         to our draft report and may not correspond to
         this final report.
                                                                         Encl 2
                                    67
APPENDIX VII                                                            APPENDIX VII
                            UNITED STATES OF AMERICA
                   GENERAL SERVICES ADMINISTRATION
                                WASHINGTON. DC    20




 April 20, 1977




 Honorable Elmer B. Staats
 Comptroller General of the United States
 General Accounting Office
 Washington, DC 20 48

 Dear Mr. Staats:

 We have reviewed your Draft Report "Improvements Needed in
 Federal Agencies' Programs and Efforts to Promote Energy
 Conservation By Government Contractors", and have included
 our comments as an enclosure.

 The General Services Administration completely supports the
 efforts to save energy in every way possible. We have demon-
 strated strong agency programs to save energy--in the design
 of new buildings, operation of existing buildings, motor
 vehicle management, appliance procurement and other areas.
 We are attempting to do more and are confident that we can
 save additional energy.

 We appreciate the opportunity to submit our comments on this
 report.

 'icerely,


 Robert T. Griffin
 Acting Administrator


Enclosure




                  Keep Freedom in rour Future With U.S. Savuings Bods



                                            68
APPENDIX VII                                                   APPENDIX VII


                                                  GSA FACT SHEET
                                                  Public Buildings Service
                                                  March 22, 1977

     SPECIFIC COMENTS ON RECOMMENDATIONS IN IHE REPORT INVOLVING GSA

  Rcommendation page 53 - The Office of Federal Procurement Policy (OFPP)
  should work with the FEA, GSA, DOD, and other appropriate ExecAtive Branch
  agencies in the development of an energy conservation related procurement
  policy and contract clause that would require Government contractors to
  establish viable energy management programs.
  Response - GSA will assist OFPP in developing appropriate parts of the
  policy action cited in this recommendation.
  Recommendation, page 53 - Give consideration to allowing contractors to
  share n the cost savings which accrue from the implementation of energy
  conservation opportunities.
  Response - GSA is operating a Value Management program in both of its
  largest procuring entities, the Public Buildings Service (PBS) and the
  Federal Spply Service (FSS). These programs recognize and reward cost
  sa\ings and performance improvement, including energy savings.
  Recommendation, page 53 - The FEA and Department of Commerce should
  utilize Government contracting personnel in the DOD, GSA, and other
  aqencies to disseminate energy conservation publications and materials
  to contractors.
  Response - GSA will take and/or continue several actions to increase the
  distribution of its energy conservation publications. We expect to:
      - Continue the availability of GSA energy publications at our
        Regional Business Service Centers which are frequented by
        contractors and prospective contractors. To date, thousands
        of our publications, applicable to the building ndustry,
        have been provided to interested parties at a nominal ee,
        and provided to state and local governments at no charge.
      - Encourage functional personnel to urge contractors to read
        and use our energy conservation publications.
      - Consider distributing its energy conservation publications
        through the National Technical Information Service (NTIS),
        with the result that more organizations would become
        aware of their availabillty.


   [See GAO note    . 70 .]




                                     69
APPENDIX; VII                                                  APPENDIX VII

       - Continue to stress the importance of energy conservation
         through our regional energy conservation conferences.
         Since October 1976, more than 1,200 persons have attended
         GSA energy conservation seminars which have been held in
         Boston, New York City. Philadelphia and Washington.
         Instructions on how to request energy conservation infor-
         mation are presented at each conference.
       - Ctntinue incorporating building energy conservation
         guidelines in each architech/engineer contract.
       - Work with trade and professional associations to
         promote energy conserva!tion with their members.
  Recommendation, page 53 - The FEA shoulJ review the various lighting
  guidelines and starad  s that can be easily understood and consistently
  applied in commercial, pblic and industrial :uildings.
  Response - GSA has made substantial progress in reducing the energy used
   or lighting in both new and existing buildings and stands ready to assist
  FEA in this matter, if desired. Existing legislation requires FEA to
  develop lighting efficiency standards.




  GAO note:     Page references throughout this apperlix refer
                to our draft report and may not corre',on to
                the final report.




                                     70
APPENDIX VIII                                       APPENDIX VIII
                PRINCIPAL OFFICIALS RESPONSIBLE

                FOR ADMINISTRATION OF ACTIVITIES

                   DISCUSSED IN THIS REPORT


                                       Tenure of office
                                       From           To

                OFFICE OF MANAGEMENT AND BUDGET
DIRECTOR:
    James T. McIntyre, Jr.
      (acting)                       Sept.   1977     Present
    Bert Lance                       Jan.    1977     Sept. 1977
    James T. Lynn                    Feb.    1975     Jan. 1977
    Roy L. Ash                       Feb.    1973     Feb. 1975
                    DEPARTMENT OF ENERGY
SECRETARY OF ENERGY:
    James R. Schlesinger            Aug.     1977     Present
           OFFICE OF FEDERAL P)CUREMENT POLICY
ADMINISTRATOR:
    Lester A. Fettig                May      19/7     Present
    James D. Currie-(acting)        Feb.     1977     May   1977
    Hugh E. Witt                    Dec.     1974     Feb. 197'
                 FEDERAL ENERGY ADMINISTRATION
ADMINISTRATOR:
    John F. O'Leary                 Feb.     1977     Present
    Gorman Smith (acting)           Jan.     1977     Feb. 1977
    Frank G. Zarb                   Dec.     1974     Jan. 1977
    John C. Sawhill                 May      1974     Dec. 1974
    William E. Simon                Dec.     1973     May   1974
                  DEPARTMENT OF COMMERCE
SECRETARY Ck COMMERCE:
    Juanita Freps                   kan.     1977     Pre'sent
    Elliot L. Richardson            Fe-.     1976     Jan. 1977
    Rcdgers C. B. Morton            May      3975     Feb. 1976
    John K. Tabor (acting)          Mar.     1975     Apr.   1975
    Frederick B. Dent               Feb.     1973     Feb. 1975




                               71
APPENDIX VIII                                       APPENDIX VIII

                                          Tenure of office
                                         From           To


                     DEPARTMENT OF DEFENSE

SECRETARY OF DEFENSE:
    Harold Brown                      Jan.   1977       Present
    Donald Rumsfeld                   Nov.   1975       Jan. 1977
    James R. Schlesinger              July   1973       Nov. 1975

                GENERAL SERVICES ADMINISTRATION

ADMINISTRATOR:
    Joel W. Solomon                   May    1977       Present
    Robert T. riffin (cting)          Feb.   1977       May   1977
    Jack Eckerd                       Nov.   1975       Feb. 1977
    Arthur F. 'ampson                 June   1972       Oct. 1975




(950272)


                               72