1. Overview of US Army Corps of Engineers (USACE) ESPC & UESC Programs
Track 5:
Project Financing
Session 3:
ESPC Large and Small: The Basics of ESPC
Overview of US Army Corps of Engineers (USACE) ESPC & UESC Programs
Michael Norton
US Army Corps of Engineers, Huntsville Engineering & Support Center
August 11, 2015

2. Agenda Best Practices Synergistic Energy Programs
Energy Portfolio Management
Overview of ESPC
Memorandum of Understanding Between DOE FEMP and USACE
ESPC Programmatic Challenges & Philosophy
ESPC with a Comprehensive Approach
ESCO Selection Process
ESPC Project Development & Award
ESPC Performance Period
Overview of UESC
Partnership
Conclusion

3. Established Best Practices
Assistant Sec Army, Installations, Energy & Environment Army Net Zero Progress Report, May 2013:
Alternative financing mechanisms (ESPC, UESC, PPAs)
Resource efficiency managers (REMs)
Planning / energy evaluations (audits) (EEAP)
Energy / Utility Mgmt Control Systems (EMCS/UMCS)

4. Synergistic Energy Programs
Leveraging the Energy Tool Box: CEHNC manages a suite of programs and acquisition vehicles to support Army and DoD in meeting energy, water, waste and renewable energy mandates
Begins with Planning (Master Plans and Energy Audits)
The cornerstone for developing effective energy management strategies, capital investment and actionable plans / projects to meet reduction, net zero and renewable energy goals
Audits are scalable product for a holistic, integrated and comprehensive planning approach that leverages scale (vs. fragmented approach)
Create vision with comprehensive energy master plan

5. Investigation & Planning
Energy Portfolio Management Pathway to Net Zero, Energy Security and Meeting Federal Mandates
Conservation &
Reduction Measures
Renewable Energy
Goals
Execution/Acquisition
Investigation & Planning
Sustainment, Measurement & Verification
Behavioral Changes

6. Investigation & Planning
Energy Portfolio Management Pathway to Net Zero, Energy Security and Meeting Federal Mandates
Execution/Acquisition
Conservation &
ECIP
Reduction Measures
Renewable Energy
Goals
UMCS
FRP
PPA
UESC
Energy Master Plans
Sustainment, Measurement & Verification
Investigation & Planning
ESPCSPC
Metering
Net Zero Roadmaps
MDMS
CUP
EEAP
UMCS – Utility Monitoring and Control Systems
ECIP – Energy Conservation Investment Program
UESC – Utility Energy Services Contracting
ESPC – Energy Savings Performance Contracting
EEAP – Energy Engineering Analysis Program
REM
PPA – Power Purchase Agreements
REM – Resource Efficiency Manager
CUP – Commercial Utility Program
MDMS – Metering Data Monitoring System
FRP – Facility Reduction Program
Behavioral Changes

7. Energy Savings Performance Contracting (ESPC)
Overview. Leverages industry expertise and private sector financing to make infrastructure upgrades to federal facilities to reduce energy, water consumption, and waste stream
CEHNC is recognized expert in third party financing (ESPC, UESC) across federal government
Financed for up to 25 years and paid from consumption savings
Savings ensured by measurement & verification (M&V)
Provides operations and maintenance for more complex improvements; enables DPW to reallocate limited resources.
CEHNC uses worldwide ESPC Multiple Award Task Order Contract (MATOC)
CEHNC to be relied upon heavily for Army’s commitment the President’s Performance Contracting Challenge ($4B thru 2016)
In FY14 executed 16 task orders with capital investment of $243.6M
CEHNC has robust FY15 pipeline
New MOU with DOE Federal Energy Management Program (FEMP)

8. Memorandum Of Understanding U.S. Army Corps of Engineers (USACE)
Memorandum of Understanding (MOU) Third Party Financed Acquisition Support to Federal Government
Establish framework for partnership and collaboration
Leverage strengths of both agencies
Better support federal agencies in meeting President’s Performance Contracting Challenge (PPCC) through strategic activities to strengthen ESPC & UESC execution
Facilitate better education, training and knowledge transfer
Improve Measurement & Verification (M&V) activities
Memorandum Of Understanding
Between
U.S. Department of Energy (DOE) Federal Energy Management Program (FEMP)
And
U.S. Army Corps of Engineers (USACE)

9. ESPC Programmatic Challenges & Philosophy
Energy Master Plan
Develop holistic energy perspective utilizing multiple funding sources
Focus on energy systems to support groups of facilities to gain equipment efficiency, reduced maintenance and energy reduction
Bundling
CEHNC encourages ESCOs to bundle long payback ECMs with short payback ECMs
Bundling approach requires we leverage master planning and holistic approach (strategic art)
Combining SRM with ESPC
CEHNC has been successful in combining SRM with ESPC to leverage savings
O&M
Only include for complex ECMs or where base does not have resources. O&M on simple measures causes other ECMs to be dropped
Implementation of ECMs outside of ESPC
Must be careful in how you execute projects using appropriated dollars (do not take all the low hanging fruit)

10. ESPC with a Comprehensive Approach
Awards

11. ESPC Acquisition ESCO Selection Process
Contractor Selection – ESCOs compete through best technical approach and past experience utilizing a broad scope of work. Performance-based work statement for implementation of energy reduction measures.
- ESCO selection at the beginning of process, resulting in one ESCO chosen to execute work. Streamlined process has no down select, reduces timeline and cost
Site Visit
RFP
Select ESCO
CEHNC process requires ESCO proposal to be 20 pages or less to allow evaluators succinct information regarding the energy savings presented in the selected ECMs.
ESCO community prefers this method as it limits the amount of design effort associated with the selection. Other methods require hundreds of thousands of dollars in development that result in only one ESCO being selected. This accelerated process limits the development dollars expended prior to ESCO selection.
The selecting of limited ECMs is not a limiting factor in the long term ESPC process. After ESCO selection, the entire location is open to ESCO exploration for available work.
1-3 months

12. Project Initiation/ ESCO Selection
ESCO selection process utilizes customer’s top complex Energy Conservation Measures (ECM). 3-4 ECMs are selected based on the availability of each measure at that site. Intent is to select best qualified ESCO to perform most complex ECM.
Request For Proposal (RFP) or Notice of Opportunity for DOE FEMP IDIQ is sent to entire ESPC ESCO pool followed by a site walk. The site representatives and CEHNC staff are present to lead the walk.
Selection board includes representatives from CEHNC, customer, and in some cases, Command.
Board members review and send consensus recommendation to the Contracting Officer.
ESCO is selected and Notice to Proceed (NTP) is sent for Preliminary Assessment development.
ESCO selection allows the selected ESCO to begin the Preliminary Assessment (PA). This assessment is holistic and not restricted to the ECMs used during the site walk.

13. ESPC Project Development & Award Phase
Feasibility Study
Preliminary Assessment
Project
Approval
Negotiations & Award
6 -18 months
Proven streamlined process, notwithstanding external approval process
Implementation Structure
Centralized Project Management, “One-Stop-Shop”
Dedicated and experienced project development team to award, manage project, provide technical engineering and legal support
Standardized and streamlined acquisition processes
Easier to monitor portfolios due to centralized approach

14. Preliminary Assessment
ESCO performs high level audit to identify the potential ECM opportunities available to the customer. This assessment is “fence to fence” in nature that will allow the site future opportunities at energy savings.
This effort can be streamlined and scaled depending on customer desire/experience with ESPC.
ESCO identifies a high level, potential scope of work.
ESCO provides a Rough Order of Magnitude (ROM) project value.
Customer and CEHNC team work together to identify strategy to execute either through a single task order or in phases to achieve holistic approach. The ESCO will further develop ECMs and include in Feasibility Study and cost proposal.
CEHNC views items identified in this stage as in scope for all future work. If at a later date, a technology is identified that is not in the PA, that work will have to be resolicitied under a new effort.
* Customer has the option to do the entire list of ECMs at once or break into phases.

15. Feasibility Study/Proposal
Selected ECMs identified in the PA by the customer and CEHNC are developed to a 30% design level in the Feasibility Study. This step can be based on current mission requirements and the mandated 30% reduction goal. The feasibility study can be as little as $300K in investment or millions of dollars in investments. This depends on the site and command level of commitment.
ESCO performs detailed engineering study on the project and refines the scope of work.
CEHNC, customer, and ESCO develop the M&V baseline from which the project is built
ESCO develops the feasibility study (35% design) and firm fixed price proposal for the project
Includes detailed cost breakout that includes M&V and O&M performed by the ESCO
Savings guarantee
Measurement and Verification required in accordance with FEMP M&V protocols
O&M will be discussed and tailored to the customers requirements.
*ESCO has been working 100% at risk to this point

16. Feasibility Study/Proposal Review & Task Order Award
CEHNC and the customer conduct full review of the Feasibility Study and proposal
Depending on PWS this would include Mechanical, Electrical, Structural, Cost, etc. review
Detailed Cost Analysis is conducted
Includes Life Cycle Cost Analysis
Building Cost Analysis (“hard costs”)
Internal Government Estimate is developed for the total project
ESCO must show competitive selection of subcontractors
ESCO must show competitive selection of lender to have best interest rate
Task Order Award
Project approval at appropriate Command level
Negotiated and awarded
First payment to ESCO occurs about one year after completion and acceptance of improvements and validation of saving via M&V per the payment schedule in the task order.
Development & Award Phase
6 – 18 mo
Project Construction Phase
3 – 18 mo
Performance Period
O&M, M&V, and Payment
Phase
6 – 23 yrs
Selection of ESCO
1 – 3 mo

17. Performance Period
CEHNC will assist customer at the end of the project construction phase to reiterate the payment schedule required by the task order and necessary funding requirements. The customers resource management team should be part of this process.
Each ESPC requires an annual Measurement and Verification (M&V) to validate the savings. The customer’s Contracting Officers Representative (COR) is a critical part of the process to witness this annual requirement with the ESCO.
Equipment not maintained by ESCO must still be maintained by the customer to ensure the ESCOs guaranteed energy savings are not impacted.
Example: If filters are to be changed on an air handling unit, proof of this must be provided at the M&V visit.

18. Utility Energy Services Contracting (UESC)
Overview. Similar to ESPC but uses utility company expertise and capital to meet Federal mandates
Difference is the ability to go to the utility provider (existing relationship) rather than an ESCO (new partner)
Limited to a 10-year contract term for Army installations (non-Army up to 25 years)
Allows utilities to provide Federal customers:
Energy and water efficiency improvement projects
Renewable energy projects
Demand reduction services
FY14: CEHNC awarded three UESCs with capital investment of $48.4M as well as two Utility Service Contracts at Fort Campbell with capital investment of $14.25M
Growth Area:
Robust FY15 pipeline with anticipated award of 6 projects with capital investment of approximately $33.5M

19. Goals & expectations should be specific & well documented
A PARTNERSHIP
Requires mutual commitment from all parties to become true partners.
Long term relationship.
Contractor
Installation
Contracting
Agency
All parties must enter contract in good faith.
Goals & expectations should be specific & well documented

20. Conclusion
ESPC and UESC are proven tools to reduce an installation’s energy and water consumption.
Best solution when upgrades or modernization of existing equipment or systems cannot be funded through existing operating funds (SRM) or with other funding sources (MILCON, ECIP) in the required timeline.

21. Points of Contact Michael Norton, Chief, Energy Implementation Branch
Porscha Porter, ESPC Program Manager
Lisa Harris, UESC Program Manager
Adam Sunstrom, Contracting Officer
Bruce Forsberg, Technical Lead