Government Contracts Contract Provided for Payments Reflecting Energy Savings
Tuesday, October 13, 2020

Contract Provided for Payments Reflecting Energy Savings

By Government Contracts Editorial Staff

The Armed Services Board of Contract Appeals granted the contractor partial summary judgment in an appeal seeking payment of invoices because the contract provided for installment payments that reflected energy savings. The appeals involved a contract to upgrade and replace lighting fixtures with energy-efficient LED technologies and install state-of-the art electricity metering equipment in parking garages owned by the Washington Metro Area Transit Authority. The contract established two phases of performance: a construction phase followed by a ten-year maintenance phase. The contract did not require payment during the construction phase but required WMATA to pay the contractor 20 semi-annual installments over the maintenance phase based on achieved energy savings. The contractor contended WMATA breached the contract by failing to pay installment payments for supplies delivered and services rendered and accepted. The government argued the contractor failed to fulfill a condition precedent to payment because it did not establish it met the guaranteed annual energy savings set forth in the contract. The contractor countered that the contract required payment even if the actual energy savings were less than the guaranteed annual energy savings. According to the contractor, in the event of an energy savings shortfall, the scheduled payments for that period would be reduced to equal the actual project savings obtained.

“Amended Installment Payment”. The board agreed, finding that, read as a whole, the contract provided for partial payments. One clause stated that “[i]f the Project savings are less than the scheduled Installment payments, then the scheduled Installment payment(s) for that period are deemed amended to equal the actual Project savings obtained.” A second clause required WMATA to make timely payments based on “the prices stipulated in this contract…, less any deductions provided in this contract.” Taken together, these provisions expressly contemplated variances in the semi-annual installment payment amounts. Also, the contract included a table that specified the amount of each “scheduled installment payment” and provided an “amended installment payment” was appropriate when the actual project savings for the period was less than the scheduled amount. Thus, if the lighting system fell short of the stated savings amount, the contractor would be entitled to an “amended installment payment.” (Philips Lighting North American Corp., ASBCA, ¶96,112)

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