There seems to be a pattern with Honeywell.

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Energy-savings project leaves Army in the cold

By Ralph Vartabedian

October 30, 2009

Reporting from Ft. Richardson, Alaska

Under a federal program to transform government facilities into models of energy efficiency, Honeywell International Inc. came calling on Army commanders here with a deal to replace the base's decades-old steam power plant.

The company proposed installing millions of dollars in new heating equipment and hooking the base to the local power grid -- all free in exchange for the company getting the bulk of future energy savings.

It was precisely the kind of deal that politicians and bureaucrats in Washington were pushing at facilities across the country -- modernizing aging machinery without the government spending any money of its own.

But today, the Ft. Richardson deal, one of the largest among hundreds of similar contracts, has sunk into a morass of accounting disputes and allegations of misconduct.

Army officials say they are stuck with a system that consumes more energy than before. Over the 25-year life of the project, the Army could lose more than $100 million, according to internal Army documents.

"There were no savings at all," said Army auditor Nayer Mahmoud, former chief of internal review at Ft. Richardson.

The Government Accountability Office, the investigative arm of Congress, issued a report in 2005 that questioned whether the contracts were saving any money.

The Army Audit Agency has issued numerous reports that found private contractors had grossly inflated projected cost savings. In one report on the Ft. Richardson project, outside auditors found that Honeywell was counting energy savings from nearly two dozen buildings that had been demolished.

Honeywell has been accused of fraud in a sealed federal False Claims Act lawsuit, according to congressional sources.

"Skeptics said this looks too good to be true," said Charles Tiefer, University of Baltimore professor of government contract law who has testified before Congress on the program. "And they were right."

"This program took the government on a disastrous diversion from real energy conservation," Tiefer said. "Strained bookkeeping took the place of sound energy practices."

The Ft. Richardson project has become one of the most prominent examples of what could go wrong.

Honeywell was awarded the contract without competition just months after its initial sales call in November 1999. The project was overseen by the Army Corps of Engineers out of Huntsville, Ala.

Some Army officers never liked the idea of depending on private contractors for something as important as heat and light in the subarctic.

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