UESC Project Identification

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

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

3. 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

4. App. 4 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

5. 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)

6. 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

7. 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 tanks • all energy consuming equipment • Lighting, heating and cooling, motors, hot water • the utility systems

8. 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

9. 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

10. 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

11. 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

12. 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?

13. 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?

14. Exercise: Examining Audit Results

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

16. 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

17. App. 3 GSA Areawide Users Manual

18. 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.

19. Construction and Service Contracts • Wages and rates • Davis Bacon rates for construction, Services Contract Act rates for services • Warranty • FAR 52.246-20 for construction, FAR 52.246-21 for services • Payment and performance bonds • Requirements determined by CO, utility letter of credit is low cost option • FAR 28.102 or 52.228-15 for construction, FAR 28.103 or 52.228-16 for services

20. 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

21. 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

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

23. Section C: Descriptions/ Specs/Work Statement Use performance specifications. Prescriptive specifications should be used only when necessary. • 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

24. Section E: Inspection and Acceptance • Inspection requirements • Acceptance requirements • Warranty of service

25. Section F: Deliveries or Performance • Period of performance • Principal place of performance • Deliverables

26. Section G: Contract Administration Data • Invoicing Instructions • Invoice submittals for TO projects

27. 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

28. 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

29. Loan Amortization Schedule • Termination for convenience (FAR 52.249-2) • 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 52.217-2

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

31. 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)

32. Section L: Instructions, Conditions & Notice to Offerors • Requirements for price proposal • Specify cost reasonableness verification method • Explanation of equipment choices • Number of vendor quotes for generic equipment • Competition for subcontractors

33. 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

34. 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

35. App. 5 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

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

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

38. 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.

39. App. 4 What the Feasibility Study Should Include Verifies the audit assumptions • 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

40. 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

41. 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

42. 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

43. 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

44. 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

45. 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

46. 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

47. 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

48. 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

49. 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

50. 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.