UESC Project Identification The Utility Audit ä Preliminary issues ä Arranging the audit ä Kickoff meeting ä The audit ä The audit results Establish Terms & Conditions ä Key sections ä Interest rate ä Issue and evaluate ä Negotiate ä CO signs contractual documents The Feasibility Study ä CO issues TO for Study ä The feasibility study ä Agency review Stop and $/ Go to Engineering & Design Go/ No go Decision

The Utility Audit ä Preliminary issues ä Arranging the audit ä Kickoff meeting ä The audit ä The audit results Go/ No go Decision

Working the Preliminary Issues  Contact your utility to find out audit offers and any associated fees  Meet with your acquisition team and decision makers to establish concurrence

Arranging for the Audit  Contact your utility and request the audit –Provide some form of written documentation that says whether or not the service is for free or fee –Designate your agencies COTR  Schedule a kick-off meeting with the utility and key acquisition team players App. 4

Hosting Your Audit Kick-off Meeting  Establish your project expectations  Hand over your collected facility data  Share the outcomes of the acquisition strategy development –Make site specific needs & constraints clear –Answer all questions completely  Arrange a tour of the facility (notify your tenants)

The Partnership Begins Here  Remember: This is not traditional contracting! Success depends on open communication.  By minimizing utility’s costs you maximize government’s value.  Consider a formal partnering session

The Audit  Utility collects and reviews utility bills, purchased fuels data and metered data –Evaluation of utility rate schedule options  Utility performs a site visit to look at: –the operation and use of buildings, building envelope and systems O&M procedures, insulation of pipes and tanksO&M procedures, insulation of pipes and tanks –all energy consuming equipment Lighting, heating and cooling, motors, hot waterLighting, heating and cooling, motors, hot water – the utility systems

The Audit Results The Audit Results  Utility provides report that: –documents existing equipment –describes recommended ECMs –offers a preliminary estimate of savings –establishes baseline conditions –offers technical recommendations –estimates payback periods

Note: the Audit is an Estimate!  Don’t expect “a bulls eye”, it’s the first approximation of the project  Use this as an opportunity to evaluate the utility’s technical ability and compatibility  It’s all negotiable (technical and price) until the contract is signed

Evaluating the Audit  Place more weight on technical factors and approach over price  Distinguish between significant issues that could affect project economics/feasibility and lesser details that can be fixed in negotiation

Focus the Evaluation  Is the ECM package reasonable and does it provide solutions to site problems?  Are estimates of energy and O&M savings reasonable?  Are assumptions, analyses and calculations clear and credible? –ECM costs, simple payback, energy and cost savings

Keep The Evaluation Focus  Were requested items included?  Are you comfortable with what you see?  Do you think this is a good fit for your continued partnership?

Make the Go/ No Go Decision  You make the call –Will you say thank you and go separate ways? –Will you ask for revisions? –Will you approve the audit and move forward?

Exercise: Examining Audit Results

Establish Contract Terms and Conditions ä Incorporating terms and conditions ä Interest rate ä Issue and evaluate ä Negotiate ä CO signs contractual documents

UESC Vehicles  Areawide Contract (AWC) –Task order placed underneath to establish terms and conditions for energy management services  Site Specific Contract  Basic Ordering Agreement (BOA)/ Agency Master Agreement

GSA Areawide Users Manual App. 3

Construction and Service Contracts  Most UESCs are a combination construction/ service contract. Utilization of FAR clauses is dependent on type of work –Determined by project specs and CO (Navy considers contracts to be pure construction) –For project’s design activities and performance phase activities (O&M, M&V), use FAR clauses for services –For project’s installation activities, use FAR clauses for construction.

Construction and Service Contracts  Wages and rates –Davis Bacon rates for construction, Services Contract Act rates for services  Warranty –FAR for construction, FAR for services  Payment and performance bonds –Requirements determined by CO, utility letter of credit is low cost option –FAR or for construction, FAR or for services

Incorporate Your Terms and Conditions  More detail can be incorporated through the Uniform Contract Format  Specific detail for each additional project phase is incorporated in task orders associated with the phase –TO for Feasibility Study, TO for Engineering & Design Package, TO for Construction & Installation

Uniform Contract Format  Part I: The Schedule  Part II: Contract Clauses  Part III: List of Documents, Exhibits, and Other Attachments  Part IV: Representations and Instructions

Section B: Supplies or Services and Prices/Cost  Required supplies and services  Total price (minimum/maximum)  Ordering  Utility margins

Section C: Descriptions/ Specs/Work Statement  General Requirements/ Project Scope  ECMs- types and restrictions  Facility Performance Requirements  M&V of ECM Performance  Installation Requirements  O&M, Repair, Response Time, Training  Subcontractors Use performance specifications. Prescriptive specifications should be used only when necessary.

Section E: Inspection and Acceptance  Inspection requirements  Acceptance requirements  Warranty of service

Section F: Deliveries or Performance  Period of performance  Principal place of performance  Deliverables

Section G: Contract Administration Data  Invoicing Instructions  Invoice submittals for TO projects

Section H: Special Contract Requirements  Wage determination  Title and ownership of equipment: –Government decides who retains title during the contract term (taxes, subsidies and interest are impacted)  Payment and performance bond requirements –Performance bonds on typical construction contract carry a penal sum of 100% of the price of implementation phase. –Payment bonds carry a penal sum of 40% if the project is 1-5 million dollars

Section H: Special Contract Requirements  Financier protection –Assignment of claims (direct finance payment to financier) –Notification to government of problems  Buy-down provisions –Index formula vs. fixed schedule –decide to either decrease the payment or reduce the term

Loan Amortization Schedule  Termination for convenience (  Termination for convenience ( FAR )  Required by financiers  Mutually agreed upon by agency, utility and financier  Buy-out options : –Add lender fees to capital portion of termination schedule –Increase the interest rate to accommodate risk –Leave it open to be agreed upon at time of buy-out –Indexed formula (recommended) Termination contracts- FAR 49, FAR

Section I: Contract Clauses Section J: List of Attachments  I: Clauses incorporated by reference  J: Definition of terms applicable to contract, Required schedules

Section L: Instructions, Conditions & Notice to Offerors  For each ECM in technical proposal, specify –Description and purpose –Current status –Implementation costs, rebates, –Annual energy and O&M costs (may not offer O&M) –Life-cycle cost analysis –Commissioning plan (Commission guide on FEMP web site) –M&V (if requested) –Guaranteed savings, if requested (Not offered by all utilities)

Section L: Instructions, Conditions & Notice to Offerors  Requirements for price proposal –Specify cost reasonableness verification method Explanation of equipment choicesExplanation of equipment choices Number of vendor quotes for generic equipmentNumber of vendor quotes for generic equipment Competition for subcontractorsCompetition for subcontractors

Section M: Proposal Evaluation Factors  Demonstrated knowledge of site requirements and constraints  Complete and accurate description of technologies  Evaluation of all directed ECMs  Management Plan  Construction schedule  Quality control plan  Price reasonableness demonstration

Optional Elements that Impact Interest Rate  Cost savings guarantee –is more risky to financier, could add up to 2-3%  Performance guarantee: –provides energy savings incentive to utility  Level of M&V  Responsibility for O&M

10 Ways to Lower Financing Costs  Time is money– don’t delay  Learn about financing  Use standard terms and conditions  Negotiate prepayment formula  Include assignment of claims  Ask for appropriate M&V  Don’t buy a rate lock  Bundle ECMs  Annual instead of monthly payments  Compare rates App. 5

Contractual Documents  Your contracting documents are determined by agency procedure  Reach agreement with utility  Utility signs, agency CO signs and project proceeds

The Feasibility Study ä Issue Task Order for Study ä The feasibility study ä Agency review Go/ No go Decision Stop and $

Feasibility Study  Definition: an investment-grade review of the site’s condition & potential efficiency improvements, and a detailed assessment of both the technical and economic viability of the proposed ECMs.

What the Feasibility Study Should Include  Technical –Building physical conditions –Hours of use or occupancy –Areas and use of conditioned space –Inventory of energy consuming equipment or systems –Inventory of energy consuming equipment operating conditions & loads –Baseline weather Verifies the audit assumptions App. 4

What the Feasibility Study Should Include  For price –Estimated annual operating cost –Project cost by ECM –Estimated annual cost savings by ECM –Unit cost by major components and systems –LCC analysis –Breakdown of implementation cost and estimate of annual energy savings

What the Feasibility Study Should Include  Other –O&M plan –M&V plan –Guaranteed performance/savings Ensure that individual ECM schedules don’t interfere with mission activities Ensure that individual ECM schedules don’t interfere with mission activities

What to Look for When Evaluating the Study  Inclusion of all required ECMs  Reasonable savings for each ECM  Reasonable baseline  Reasonable assumptions and interaction of multiple ECMs  Inclusion of ECMs for water and renewables

More Things to Look For When Evaluating the Study  Fuel neutrality  Price reasonableness  Reasonable financing rate  Savings that exceed payments  Reasonable term  Recognition of site-specific issues  Consideration of environmental benefits

The Economic Review of the Feasibility Study  Check to see if the utility looked at the rate schedule when calculating savings  Analyze the project implementation costs –Use cost estimating handbooks and past experience to compare –Consider level of competition among subcontractors  Examine adders: project management, hourly rate, OH and profit (both % and basis), taxes  Consider early ECM payoffs and financial impacts

Take a Look at the Estimate of Energy and Cost Savings  ECM baseline consistent with requirements  Acceptable ECM assumptions –Operating hours –Weather data  Acceptable variance between audit and final figure in feasibility study  Compare with an independent estimate and check the savings calculations

Evaluating Optional Items  Does what you see comply with the levels you asked for?  Will O&M be conducted by in-house staff or through the utility’s subcontractor –O&M handled by someone other than the utility will require a performance guarantee –do you still want it?  M&V cost benefit analysis –the FEMP M&V Guidelines provide information on available options

Why M&V  The Guidelines are grouped into four categories or options (A, B, C, & D). –Each option is a generic approach to measurement and verification of energy and water projects –The options address accuracy and risk allocation

Option A – Engineering Calculations  A stipulated approach which may include measured values at the retrofit  Example: Lighting retrofits –Based on calculated energy savings and time of use schedules or light loggers

Option B – Metering and Monitoring  A measurement approach which may include spot, short term or continuous measurement at the retrofit  Example: Variable Speed Drives – Based on actual, measured motor speed and corresponding monitored run time

Option C – Utility Meter Billing Analysis  An approach which studies the overall energy use through utility billing data analysis –Derived from long term, whole-building, facility or sub-metered data analysis  Example: Building Envelope –Used when the conserving measures cannot be measured directly. –Used when the anticipated energy savings is at least 20% of the total metered energy use.

Option D – Computer Simulation  A computer simulation modeling at the retrofit or the building level  Example: New Construction –Based on a comparison of the building energy use without energy and water measures less the energy use with conserving measures installed

M&V Plan Key Elements  Clarify the objectives  Determine the baseline approach –Consider the building characteristics, intended measures and interaction between measures  Specify the option to be used for each measure –Identify methods and procedures of data gathering and analysis for each measure  Indicate the reporting format and schedule  Identify budget impacts and resource requirements

M&V Results Baseline Energy Usage ECMs installed here Baseline or adjusted baseline Measured or calculated performance Time Avoided use or savings

Make the Go/No Go Decision  You make the call –Will you say thank you and go separate ways? –Will you approve or modify the feasibility study and issue a TO for the next step?  If you opt out here, you pay the fee established in the task order