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1. Prepared by: www.CABA.org

2. Table of Contents • Background, Project Objectives and Methodology3 • Key Takeaways6 • State of the Industry7 • Major Participant Groups8 • Bid-Specification Methods9 • Challenges with the Present Methods10 • Process Optimization11 • Project Cases12 • Conclusions13 • Contact Information14 2

3. Background The Continental Automated Buildings Association (CABA) is an industry association dedicated to the advancement of intelligent homes and intelligent buildings technologies. CABA is an international association, with over 300 major private and public technology companies committed to research and development within the intelligent buildings and connected home sector. Association members are involved in the design, manufacture, installation and retailing of products for home and building automation. CABA is a leader in initiating and developing cross-industry collaborative research, under the CABA Research Program. In 2012, CABA’s Intelligent & Integrated Buildings Council (IIBC) commissioned the “Intelligent Buildings and the Bid-Specification Process” research study to greatly improve the understanding of the commercial bid and product specification process throughout the intelligent buildings industry value-chain and related decision-making process. The broad purpose of the study was to identify and understand the market imperfections and inconsistencies that exist in designing and implementing intelligent building projects, as well as making investment decisions on intelligent technologies. To this end, the research identified and assessed critical areas and importance factors to enable project sponsors to: further product/services market development; unify stakeholder decision-making processes; identify opportunities/needs for training and coaching to remove obstacles from the process; and to provide product demand information to parallel market segments and other business areas. Organizations that participated in CABA’s “Intelligent Buildings and the Bid-Specification Process” 2012 study included: Automated Logic Corporation, BACnet International, Cadillac Fairview Corporation, Diebold Incorporated, Distech Controls Inc., Honeywell International, Hydro One Networks Inc., Ingersoll Rand/Trane/Schlage, International Facility Management Association (IFMA), Johnson Controls Inc., Lenel Systems International, Ontario Power Authority, Overhead Door Corporation, Philips Research North America, Siemens Industry, Inc., Smardt Chiller Group Inc., Telecommunications Industry Association (TIA), United Technologies Corporation and Verizon. CABA commissioned Frost & Sullivan (www.frost.com), an independent market research and consulting firm, to conduct this 2012 landmark research study. 3

4. Project Objectives • Key Research Objectives: • The key objectives of this research are as follows: • Evaluate the main aspects of the bid specification process • Understand how decisions are made in the process and the role of key influencers in such decisions • Determine the optimal way of working with various stakeholders involved in the process • Create the right customer and partner awareness approaches to achieve better technology adoption • Understand common goals and objectives that can be established for various participants to work cohesively for success • Understand the changing dynamics of the industry and the impact on intelligent building solutions and services • Create the right business approach to respond to changing demand • Define opportunities and prospects for market participants 4

5. Methodology The approach and methodology combined primary and secondary research. The primary research sample categorization included the following: Fulfillment Partners include Consulting Spec Engineers/Design Build Firms/Architects/ESCOs Others include CIOs, Associations, etc. Total sample size: N=60 5

6. Key Takeaways • The key takeaways of this research are as follows: • Intelligent building owners consider technology integration to be important. However, the investment and perceived value derived from it are not well aligned. Lack of product knowledge is a common issue among most owners and operators. • The demand potential for intelligent building solutions is further impacted by the perceived price-performance ratio of these products. Building owners do not have a clear idea of the actual benefits of buying these products and solutions. • Bid specification (also referred to as bid and spec, hereafter) is considered an integral part of the technology procurement processes in the intelligent building industry. • However, present bid and spec processes followed in the industry lack transparency, are price driven, and do not offer adequate impetus to the incorporation of intelligent technologies. • The issue lies in the fact that technology suppliers do not have a good grasp of spec practices, and likewise, spec providers lack a thorough understanding of technology advancements. • There is a greater need for vendors and service providers to collaborate and create joint bid and spec business models to service the intelligent building market. • The immediate need for industry participants is to organize initiatives to work together, and create structural frameworks for joint collaboration in developing building technology and spec development practices. 6

7. State of the Industry • Industry Transition • A gradual state of transition from conventional to intelligent buildings • Consensus on fundamental principles: • Definition of intelligence • A buildings’ intrinsic relationships with energy • Critical importance of energy efficiency, operational cost savings, and return on investment (ROI) • Policy impetus and energy mandates • New Challenges • Incorporating non-conventional project partners • Price Pressures • Notion of single supplier • Differentiating buyer from installer • Technology silos Key Trends and Dynamics 7

8. Major Participant Groups 8

9. Bid-Specification Methods • Design-bid-build • Starts with the owner contracting the design process to a fulfillment partner • No overlap of tasks • Contracts with separate parties for design and construction • Design-build and Performance Contracts • Single party for both the design and construction • Overlap of tasks reduces delivery time • Better adherence to specs • Construction Management (CM)* • CM firm acts as overall advisor • CM contracts third parties • Guaranteed maximum price • The end-user community considers these methods to be part of a well accepted structure. • Methods allow them to maximize the value on what they spend. • Methods also ensure that the involvement of right partners in execution and implementation is done in a justifiable manner. *Also referred to as Project Management (PM) 9

10. Challenges with the Present Methods • Design-bid-build • Takes longer to deliver, and increases the likelihood of change orders and delay claims • Building owner/operator’s limited visibility to actual construction/installation costs • Accountability issues, owing to no single point of responsibility for project delivery • Design-build and Performance Contracts • Leads to conflict of interest, with DB/CE and contractor being on the same team • Although owner/operator is guaranteed construction/installation cost, these are non-competitive • Involvement of owner/operator is only at the early stages of the process, with no impartial agent to represent owners’ interests • Construction Management • Leads to added costs to owner for hiring the CM/PM, paper work, and administrative time • May lead to cheaper products and services to offset risks and additional costs • Can cause conflict of interest, with one entity assuming multiple roles 10

11. Process Optimization • The following aspects need to be incorporated in the present bid and spec methods: • Opting for Objective Points Criteria- An objective evaluation criterion is required to ensure that product and technology selection is based on some quantification of actual benefits to the project/building. • Role of Quality Surveyor/Advisor- Given the disconnect among various delivery partners in the bid spec processes, there is a critical need for autonomous supervision to ensure that processes are followed transparently and the correct choices are made in selection of products, technology and services. • Create Scope for New Vendors- Creating scope for the inclusion of these smaller players is necessary, as it allows the building owner to take advantage of new innovative technology – at pricing that may not be available from larger vendors. • Avoid Cost Thresholds- Removing this component could potentially help optimize the process and allow for the inclusion of more vendors and suppliers into the selection process. • Mandate a Feedback Loop- Including this as a prescriptive requirement into the contractual process can offer valuable insights into technology performance, cost-benefit evaluation and establish their importance in intelligent building projects. • Integrated Value Chainand Delivery Approaches- This will prompt suppliers and service providers to collaborate and offer the most optimal solution, while capitalizing on collective bargaining capabilities to influence selection. 11

12. Project Cases 12

13. Conclusions • The distinctively disjointed and transactional model leads to low technology adoption • Collaboration is required between fulfillment partners, vendors and suppliers 13

14. Contact Information Contact John Hall CABA Research Director Suite 210 1173 Cyrville Road Ottawa, ON K1J 7S6 hall@caba.org 613.686.1814 ext. 227 Contact George Grimes CABA Business Development Manager Suite 210 1173 Cyrville Road Ottawa, ON K1J 7S6 grimes@caba.org 613.686.1814 ext. 226 14