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UESC Project Implementation

UESC Project Implementation. Engineering & Design Package. Construction & Installation. The Payment Period. Issue TO for construction The pre-construction meeting Review/accept final construction package Commissioning. Invoices Payments Periodic Performance Verification

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UESC Project Implementation

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  1. UESC Project Implementation Engineering & Design Package Construction & Installation The Payment Period • Issue TO for construction • The pre-construction meeting • Review/accept final construction package • Commissioning • Invoices • Payments • Periodic Performance Verification • Follow-on projects • CO issues TO • Review E&D Package • CO negotiates final price proposal Decision Go/ No go Stop and $

  2. Engineering and Design • CO issues TO • Review E&D Package • CO negotiates final price proposal Decision Go/ No go

  3. App. 4 Initiating the Engineering and Design Package • Issue your task order for engineering and design • Include agency and site specific requirements • The utility will respond with a full set of plans and detailed specifications

  4. When You Review the Package • Look for consistency with the feasibility study in engineering drawings and design specifications • This should be 100%, you shouldn’t see any new design in the construction phase • Use FEMP for assistance • They have specialized expertise in advanced engineering technologies and can offer cautions and advice in areas like photovoltaics, systems controls and others

  5. Reviewing the E&D Package • The design package should include at least the following for each ECM: • Installation drawings • 100% of plans and specs • Commissioning, M&V, O&M (if required) • Final price proposal • Estimated construction schedule • Planned service interruptions • Environmental compliance • Quality control • ECM installation sequence

  6. Payments & Performance Bonds • Within a specified time frame after approval of ECM installation plans, the utility shall submit • Acceptable payment and performance bonds or • Letter of credit

  7. Start Planning for Installation • Make sure that site inspection personnel are available • Provide for a site individual to assist project implementation You’ll want to have this set up so you can move once you see the final construction schedule

  8. Commissioning and the Design Phase • Develop design and operating intent • Perform commissioning-focused design reviews • Develop Commissioning Plan & Specifications for construction • Should include specifics on commissioning during construction, acceptance and post acceptance

  9. Negotiating the Final Price Proposal • Price proposal includes • Construction cost • Financing cost over the term of the loan • Optional item cost (non-required costs) • Project management costs • Interest rate

  10. Structure the Interest • Interest payments during the construction period and the post-acceptance period: • Option 1: Structure the financing so that the cost of interest during the construction period is added to the total project cost resulting in one amount to be financed. • This is the most common option • Option 2: Structure the financing to include separate interest rates during construction (short term) and post-acceptance (long term).

  11. Total Interest Rate Base rate (SWAP rate*) 6.00% Adder 1.40% Hedge + 0.36% Total 7.76% *Rates can be found at http://www.bloomberg.com/

  12. Components of the Interest Rate • Base rate • Historically based on the Treasury Note rate for payment term of contract • Currently based on SWAP rate

  13. Adders • Basis points added as a result of financiers perception of project’s risk • Basis point = 1/100% or .01% • Contributing elements: • Utility’s credit rating • Loan amount • Loan term • Project’s technical risk

  14. Adder Example • Given: a major utility company with a good balance sheet, a $1 million project with a 10 year term and proven relatively simple technologies • Adder should be on the low side, 150-180 basis points • A less appealing project would have a higher adder

  15. Hedge • Basis points that protect the financier’s risk of interest rate fluctuations during project implementation • A typical hedge is 3-5 basis points per month • 12 months @ 3 basis points per = 36 basis points or .36%

  16. Sources of Financing • Utility: internal financing is not usually competitive due to internal rate of return requirement (>10%) • Consider some form of “competition” for third part financiers

  17. Project Management • Projects are partnerships but the utility is a business and must make a profit for shareholders • Utility profit (IRR) is typically 10-14% on services provided • You will be charged for project management and overhead (OH) fees • OH fees are ~ 15-20% on services portion • Project management fee is ~ 3-5% depending on complexity

  18. Go or No Go? • Will you continue the process? • No? Pay for the E&DS. • Yes. CO finalizes the contract, move to construction and installation

  19. Construction and Installation • Issue TO • The pre-construction meeting • Final construction package • Commissioning

  20. Initiate Project Construction and Installation • CO issues Task order for Construction and Installation Phase • Arrange a pre-construction meeting

  21. Pre-construction Meeting • The COTR and other facilities or engineering staff and utility reps must review and coordinate the project schedule and installation & inspection • Approve the final construction schedule • Bring in your designated inspection and implementation site personnel (identified during D&E) • Check to see that appropriate permits have been acquired

  22. Construction • The agency monitors the utility’s and subcontractor’s progress throughout the installation period to assure work is proceeding as planned

  23. Project Documents (Deliverables) • O&M manuals for installed ECMs • Inventory of spare parts (lamps, ballasts) • As-built drawings or revisions/updates to existing as-builts • Training • Warranties

  24. Commissioning and Acceptance • Commission each ECM as you go • The utility must notify the agency when the ECM is ready for testing and performance verification • The government must verify that new equipment was installed properly, then test equipment to ensure that it is performing to spec.

  25. Commissioning and the Construction Phase • Building systems including architectural, structural, mechanical, electrical, and controls are installed, undergo pre-functional performance tests, and are placed into operation.

  26. Project Completion and Acceptance • Per contract requirements, the utility notifies the agency of project completion • Agency deems • Substantial completion/beneficial occupancy • Final completion and acceptance • Completion of punchlist • The agency notifies the utility of project acceptance

  27. The Payment Period • Invoices • Payments • Periodic Performance Verification • Follow-on projects

  28. Invoices • Invoices are only accepted and processed after ECM installation and government signature on a Certificate of Completion (or whatever is required by the contract)

  29. Payments • CO must notify the utility that the installation has been accepted and that it complies with the terms of the contract • Utility bill paid from funding account determined during acquisition planning

  30. Post-Installation • Conduct periodic performance verification • Receive M&V regular interval reports (if required) • Verify and document the performance and actual energy savings progressing in sequence, from individual equipment through subsystem operation to complete systems and finally whole building.

  31. Include Training • Hands-on operation of the equipment including start-up, operation in normal and emergency modes, shutdown procedures, seasonal changeover, and manual/automatic control • Requirements and schedules for routine maintenance • Energy Management and Control System sequencing, strategies, operation and programming • Health and safety issues and concerns • When and how to re-commission

  32. Performance Acceptance Phase • Operations are proven under partial and full load, in all seasons, and under abnormal or emergency conditions. • Some commissioning contracts require an effort to fine-tune and optimize system operation, comfort control, control parameters, sequences and energy efficiency.

  33. Performance Acceptance • Important in ensuring the effective, ongoing functioning of a facility’s architectural, structural and other systems. • As use and function of facilities change, the building systems need to be adapted to the changing requirements of occupancy and utilization.

  34. Follow-on Projects • Any additional ECMs or services proposed must be within the contract scope • If desired, CO will issue a task order and utility will submit a technical and price proposal.

  35. Wrap UpQuestion and Answers

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