UESC Project IdentificationUESC Project Identification

The Utility Audit

Preliminary issuesPreliminary issues

Arranging the audit Arranging the audit

Kickoff meetingKickoff meeting

The auditThe audit

The audit resultsThe audit results

Establish Terms & Conditions

Key sectionsKey sections

Interest rateInterest rate

Issue and evaluate Issue and evaluate

Negotiate Negotiate

CO signs CO signs contractual contractual documentsdocuments

The Feasibility Study

CO issues TO for CO issues TO for StudyStudy

The feasibility The feasibility studystudy

Agency reviewAgency review

Stop and $/Stop and $/Go to Engineering & Go to Engineering &

Design Design

Go/ No go Decision

Go/ No go Decision

The Utility AuditThe Utility Audit Preliminary issuesPreliminary issues

Arranging the audit Arranging the audit

Kickoff meetingKickoff meeting

The auditThe audit

The audit resultsThe audit resultsGo/ No go Decision

Working the Working the Preliminary IssuesPreliminary Issues

Contact your utility to find out audit Contact your utility to find out audit offers and any associated feesoffers and any associated fees

Meet with your acquisition team and Meet with your acquisition team and decision makers to establish decision makers to establish concurrenceconcurrence

Arranging for Arranging for the Audit the Audit

Contact your utility and request the Contact your utility and request the auditaudit– Provide some form of written Provide some form of written

documentation that says whether or not documentation that says whether or not the service is for free or feethe service is for free or fee

– Designate your agencies COTRDesignate your agencies COTRSchedule a kick-off meeting with the Schedule a kick-off meeting with the

utility and key acquisition team utility and key acquisition team players players App. 4

Hosting Your Hosting Your Audit Kick-off MeetingAudit Kick-off Meeting

Establish your project expectationsEstablish your project expectationsHand over your collected facility dataHand over your collected facility dataShare the outcomes of the acquisition Share the outcomes of the acquisition

strategy developmentstrategy development– Make site specific needs & constraints Make site specific needs & constraints

clearclear– Answer all questions completelyAnswer all questions completely

Arrange a tour of the facility (notify your Arrange a tour of the facility (notify your tenants)tenants)

The Partnership The Partnership Begins HereBegins Here

Remember: This is not traditional Remember: This is not traditional contracting! Success depends on contracting! Success depends on open communication.open communication.

By minimizing utility’s costs you By minimizing utility’s costs you maximize government’s value.maximize government’s value.

Consider a formal partnering Consider a formal partnering sessionsession

The AuditThe Audit

Utility collects and reviews utility bills, Utility collects and reviews utility bills, purchased fuels data and metered datapurchased fuels data and metered data– Evaluation of utility rate schedule optionsEvaluation of utility rate schedule options

Utility performs a site visit to look at:Utility performs a site visit to look at:– the operation and use of buildings, building the operation and use of buildings, building

envelope and systemsenvelope and systems• O&M procedures, insulation of pipes and tanksO&M procedures, insulation of pipes and tanks

– all energy consuming equipmentall energy consuming equipment• Lighting, heating and cooling, motors, hot water Lighting, heating and cooling, motors, hot water

– the utility systemsthe utility systems

The Audit ResultsThe Audit Results

Utility provides report that:Utility provides report that:– documents existing equipmentdocuments existing equipment– describes recommended ECMsdescribes recommended ECMs– offers a preliminary estimate of savingsoffers a preliminary estimate of savings– establishes baseline conditionsestablishes baseline conditions– offers technical recommendationsoffers technical recommendations– estimates payback periodsestimates payback periods

Note: the Audit Note: the Audit is an Estimate!is an Estimate!

Don’t expect “a bulls eye”, it’s the Don’t expect “a bulls eye”, it’s the first approximation of the projectfirst approximation of the project

Use this as an opportunity to Use this as an opportunity to evaluate the utility’s technical evaluate the utility’s technical ability and compatibilityability and compatibility

It’s all negotiable (technical and It’s all negotiable (technical and price) until the contract is signedprice) until the contract is signed

Evaluating the AuditEvaluating the Audit

Place more weight on technical factors Place more weight on technical factors and approach over priceand approach over price

Distinguish between significant issues Distinguish between significant issues that could affect project that could affect project economics/feasibility and lesser details economics/feasibility and lesser details that can be fixed in negotiation that can be fixed in negotiation

Focus the EvaluationFocus the Evaluation

Is the ECM package reasonable and does it Is the ECM package reasonable and does it provide solutions to site problems?provide solutions to site problems?

Are estimates of energy and O&M savings Are estimates of energy and O&M savings reasonable?reasonable?

Are assumptions, analyses and calculations Are assumptions, analyses and calculations clear and credible?clear and credible?– ECM costs, simple payback, energy and cost ECM costs, simple payback, energy and cost

savingssavings

Keep The Evaluation FocusKeep The Evaluation Focus

Were requested items included?Were requested items included?Are you comfortable with what you see?Are you comfortable with what you see?Do you think this is a good fit for your Do you think this is a good fit for your

continued partnership?continued partnership?

Make the Go/ No Go DecisionMake the Go/ No Go Decision

You make the callYou make the call– Will you say thank you and go separate Will you say thank you and go separate

ways?ways?– Will you ask for revisions?Will you ask for revisions?– Will you approve the audit and move Will you approve the audit and move

forward?forward?

Exercise: Exercise: Examining Audit ResultsExamining Audit Results

Establish Establish Contract Terms Contract Terms and Conditionsand Conditions

Incorporating terms Incorporating terms and conditionsand conditions

Interest rateInterest rate

Issue and evaluate Issue and evaluate

Negotiate Negotiate

CO signs CO signs contractual contractual documentsdocuments

UESC VehiclesUESC Vehicles

Areawide Contract (AWC) Areawide Contract (AWC) – Task order placed underneath to establish Task order placed underneath to establish

terms and conditions for energy terms and conditions for energy management servicesmanagement services

Site Specific Contract Site Specific Contract Basic Ordering Agreement (BOA)/ Basic Ordering Agreement (BOA)/

Agency Master AgreementAgency Master Agreement

GSA Areawide GSA Areawide Users ManualUsers Manual

App. 3

Construction and Construction and Service ContractsService Contracts

Most UESCs are a combination construction/ Most UESCs are a combination construction/ service contract. Utilization of FAR clauses is service contract. Utilization of FAR clauses is dependent on type of work dependent on type of work– Determined by project specs and CO (Navy Determined by project specs and CO (Navy

considers contracts to be pure construction)considers contracts to be pure construction)– For project’s design activities and performance For project’s design activities and performance

phase activities (O&M, M&V), use FAR clauses for phase activities (O&M, M&V), use FAR clauses for servicesservices

– For project’s installation activities, use FAR For project’s installation activities, use FAR clauses for construction.clauses for construction.

Construction and Construction and Service ContractsService Contracts

Wages and ratesWages and rates– Davis Bacon rates for construction, Services Davis Bacon rates for construction, Services

Contract Act rates for servicesContract Act rates for services WarrantyWarranty

– FAR 52.246-20 for construction, FAR 52.246-21 for FAR 52.246-20 for construction, FAR 52.246-21 for servicesservices

Payment and performance bondsPayment and performance bonds– Requirements determined by CO, utility letter of Requirements determined by CO, utility letter of

credit is low cost optioncredit is low cost option– FAR 28.102 or 52.228-15 for construction, FAR FAR 28.102 or 52.228-15 for construction, FAR

28.103 or 52.228-16 for services28.103 or 52.228-16 for services

Incorporate Your Incorporate Your Terms and ConditionsTerms and Conditions

More detail can be incorporated More detail can be incorporated through the Uniform Contract through the Uniform Contract FormatFormat

Specific detail for each additional Specific detail for each additional project phase is incorporated in task project phase is incorporated in task orders associated with the phaseorders associated with the phase– TO for Feasibility Study, TO for TO for Feasibility Study, TO for

Engineering & Design Package, TO for Engineering & Design Package, TO for Construction & InstallationConstruction & Installation

Uniform Contract FormatUniform Contract Format

Part I: The SchedulePart I: The SchedulePart II: Contract ClausesPart II: Contract ClausesPart III: List of Documents, Exhibits, and Part III: List of Documents, Exhibits, and

Other AttachmentsOther AttachmentsPart IV: Representations and Part IV: Representations and

InstructionsInstructions

Section B: Supplies or Section B: Supplies or Services and Prices/CostServices and Prices/Cost

Required supplies and servicesRequired supplies and servicesTotal price (minimum/maximum)Total price (minimum/maximum)Ordering Ordering Utility marginsUtility margins

Section C: Descriptions/ Section C: Descriptions/ Specs/Work StatementSpecs/Work Statement

General Requirements/ Project ScopeGeneral Requirements/ Project ScopeECMs- types and restrictionsECMs- types and restrictionsFacility Performance RequirementsFacility Performance RequirementsM&V of ECM PerformanceM&V of ECM Performance Installation RequirementsInstallation RequirementsO&M, Repair, Response Time, TrainingO&M, Repair, Response Time, TrainingSubcontractorsSubcontractors

Use performance specifications. Prescriptive Use performance specifications. Prescriptive specifications should be used only when necessary.specifications should be used only when necessary.

Section E: Inspection and Section E: Inspection and AcceptanceAcceptance

Inspection requirementsInspection requirementsAcceptance requirementsAcceptance requirementsWarranty of serviceWarranty of service

Section F: Deliveries or Section F: Deliveries or PerformancePerformance

Period of performancePeriod of performancePrincipal place of performancePrincipal place of performanceDeliverablesDeliverables

Section G: Contract Section G: Contract Administration DataAdministration Data

Invoicing InstructionsInvoicing InstructionsInvoice submittals for TO projectsInvoice submittals for TO projects

Section H: Special Contract Section H: Special Contract RequirementsRequirements

Wage determination Wage determination Title and ownership of equipment:Title and ownership of equipment:

– Government decides who retains title during the Government decides who retains title during the contract term (taxes, subsidies and interest are contract term (taxes, subsidies and interest are impacted)impacted)

Payment and performance bond requirementsPayment and performance bond requirements– Performance bonds on typical construction contract Performance bonds on typical construction contract

carry a penal sum of 100% of the price of carry a penal sum of 100% of the price of implementation phase. implementation phase.

– Payment bonds carry a penal sum of 40% if the Payment bonds carry a penal sum of 40% if the project is 1-5 million dollarsproject is 1-5 million dollars

Section H: Special Contract Section H: Special Contract RequirementsRequirements

Financier protectionFinancier protection– Assignment of claims (direct finance Assignment of claims (direct finance

payment to financier)payment to financier)– Notification to government of problemsNotification to government of problems

Buy-down provisionsBuy-down provisions– Index formula vs. fixed scheduleIndex formula vs. fixed schedule– decide to either decrease the payment or decide to either decrease the payment or

reduce the termreduce the term

Loan Amortization ScheduleLoan Amortization Schedule

Termination for convenience (Termination for convenience (FAR 52.249-2) Required by financiersRequired by financiers Mutually agreed upon by agency, utility and Mutually agreed upon by agency, utility and

financierfinancier Buy-out optionsBuy-out options::

– Add lender fees to capital portion of termination Add lender fees to capital portion of termination scheduleschedule

– Increase the interest rate to accommodate riskIncrease the interest rate to accommodate risk– Leave it open to be agreed upon at time of buy-out Leave it open to be agreed upon at time of buy-out – Indexed formula (recommended)Indexed formula (recommended)

Termination contracts- FAR 49, FAR 52.217-2

Section I: Contract ClausesSection I: Contract Clauses Section J: List of Attachments Section J: List of Attachments

I: Clauses incorporated by referenceI: Clauses incorporated by referenceJ: Definition of terms applicable to J: Definition of terms applicable to

contract, Required schedulescontract, Required schedules

Section L: Instructions, Section L: Instructions, Conditions & Notice to Offerors Conditions & Notice to Offerors

For each ECM in technical proposal, specify For each ECM in technical proposal, specify – Description and purposeDescription and purpose– Current statusCurrent status– Implementation costs, rebates, Implementation costs, rebates, – Annual energy and O&M costs (may not offer O&M)Annual energy and O&M costs (may not offer O&M)– Life-cycle cost analysisLife-cycle cost analysis– Commissioning plan (Commission guide on FEMP Commissioning plan (Commission guide on FEMP

web site)web site)– M&V (if requested)M&V (if requested)– Guaranteed savings, if requested (Not offered by all Guaranteed savings, if requested (Not offered by all

utilities)utilities)

Section L: Instructions, Section L: Instructions, Conditions & Notice to Offerors Conditions & Notice to Offerors

Requirements for price proposalRequirements for price proposal– Specify cost reasonableness verification Specify cost reasonableness verification

methodmethod• Explanation of equipment choicesExplanation of equipment choices• Number of vendor quotes for generic Number of vendor quotes for generic

equipmentequipment• Competition for subcontractorsCompetition for subcontractors

Section M: Proposal Evaluation Section M: Proposal Evaluation FactorsFactors

Demonstrated knowledge of site Demonstrated knowledge of site requirements and constraintsrequirements and constraints

Complete and accurate description of Complete and accurate description of technologiestechnologies

Evaluation of all directed ECMsEvaluation of all directed ECMs Management PlanManagement Plan Construction scheduleConstruction schedule Quality control planQuality control plan Price reasonableness demonstration Price reasonableness demonstration

Optional Elements that Impact Optional Elements that Impact Interest RateInterest Rate

Cost savings guarantee Cost savings guarantee – is more risky to financier, could add up to is more risky to financier, could add up to

2-3%2-3%

Performance guarantee: Performance guarantee: – provides energy savings incentive to utilityprovides energy savings incentive to utility

Level of M&VLevel of M&VResponsibility for O&MResponsibility for O&M

10 Ways to Lower 10 Ways to Lower Financing CostsFinancing Costs

Time is money– don’t delayTime is money– don’t delay Learn about financingLearn about financing Use standard terms and conditionsUse standard terms and conditions Negotiate prepayment formulaNegotiate prepayment formula Include assignment of claims Include assignment of claims Ask for appropriate M&VAsk for appropriate M&V Don’t buy a rate lockDon’t buy a rate lock Bundle ECMsBundle ECMs Annual instead of monthly paymentsAnnual instead of monthly payments Compare ratesCompare rates

App. 5

Contractual DocumentsContractual Documents

Your contracting documents are Your contracting documents are determined by agency proceduredetermined by agency procedure

Reach agreement with utilityReach agreement with utilityUtility signs, agency CO signs and Utility signs, agency CO signs and

project proceedsproject proceeds

The The Feasibility StudyFeasibility Study

Issue Task Issue Task Order for StudyOrder for Study

The feasibility The feasibility studystudy

Agency reviewAgency review

Go/No go Decision

Stop and $

Feasibility StudyFeasibility Study

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

What the Feasibility Study What the Feasibility Study Should IncludeShould Include

Technical Technical – Building physical conditionsBuilding physical conditions– Hours of use or occupancyHours of use or occupancy– Areas and use of conditioned spaceAreas and use of conditioned space– Inventory of energy consuming Inventory of energy consuming

equipment or systems equipment or systems – Inventory of energy consuming Inventory of energy consuming

equipment operating conditions & loadsequipment operating conditions & loads– Baseline weatherBaseline weather

Verifies the audit assumptionsVerifies the audit assumptionsVerifies the audit assumptionsVerifies the audit assumptions

App. 4

What the Feasibility Study What the Feasibility Study Should IncludeShould Include

For priceFor price– Estimated annual operating costEstimated annual operating cost– Project cost by ECMProject cost by ECM– Estimated annual cost savings by ECMEstimated annual cost savings by ECM– Unit cost by major components and Unit cost by major components and

systemssystems– LCC analysisLCC analysis– Breakdown of implementation cost and Breakdown of implementation cost and

estimate of annual energy savingsestimate of annual energy savings

What the Feasibility Study What the Feasibility Study Should IncludeShould Include

OtherOther– O&M planO&M plan– M&V planM&V plan– Guaranteed performance/savingsGuaranteed performance/savings

Ensure that individual ECM schedules Ensure that individual ECM schedules don’t interfere with mission activitiesdon’t interfere with mission activities

Ensure that individual ECM schedules Ensure that individual ECM schedules don’t interfere with mission activitiesdon’t interfere with mission activities

What to Look for When What to Look for When Evaluating the StudyEvaluating the Study

Inclusion of all required ECMsInclusion of all required ECMsReasonable savings for each ECMReasonable savings for each ECMReasonable baselineReasonable baselineReasonable assumptions and Reasonable assumptions and

interaction of multiple ECMsinteraction of multiple ECMsInclusion of ECMs for water and Inclusion of ECMs for water and

renewablesrenewables

More Things to Look For When More Things to Look For When Evaluating the StudyEvaluating the Study

Fuel neutralityFuel neutralityPrice reasonablenessPrice reasonablenessReasonable financing rateReasonable financing rateSavings that exceed paymentsSavings that exceed paymentsReasonable termReasonable termRecognition of site-specific issuesRecognition of site-specific issuesConsideration of environmental benefitsConsideration of environmental benefits

The Economic Review of the The Economic Review of the Feasibility StudyFeasibility Study

Check to see if the utility looked at the rate Check to see if the utility looked at the rate schedule when calculating savingsschedule when calculating savings

Analyze the project implementation costsAnalyze the project implementation costs– Use cost estimating handbooks and past Use cost estimating handbooks and past

experience to compareexperience to compare– Consider level of competition among subcontractorsConsider level of competition among subcontractors

Examine adders: project management, hourly Examine adders: project management, hourly rate, OH and profit (both % and basis), taxesrate, OH and profit (both % and basis), taxes

Consider early ECM payoffs and financial Consider early ECM payoffs and financial impactsimpacts

Take a Look at the Estimate of Take a Look at the Estimate of Energy and Cost SavingsEnergy and Cost Savings

ECM baseline consistent with requirementsECM baseline consistent with requirements Acceptable ECM assumptionsAcceptable ECM assumptions

– Operating hoursOperating hours– Weather dataWeather data

Acceptable variance between audit and final Acceptable variance between audit and final figure in feasibility studyfigure in feasibility study

Compare with an independent estimate and Compare with an independent estimate and check the savings calculationscheck the savings calculations

Evaluating Optional ItemsEvaluating Optional Items

Does what you see comply with the levels Does what you see comply with the levels you asked for? you asked for?

Will O&M be conducted by in-house staff or Will O&M be conducted by in-house staff or through the utility’s subcontractorthrough the utility’s subcontractor– O&M handled by someone other than the utility O&M handled by someone other than the utility

will require a performance guarantee will require a performance guarantee – do you still want it?do you still want it?

M&V cost benefit analysisM&V cost benefit analysis– the the FEMP M&V GuidelinesFEMP M&V Guidelines provide information on provide information on

available options available options

Why M&VWhy M&VThe GuidelinesThe Guidelines are grouped into four are grouped into four

categories or options (A, B, C, & D). categories or options (A, B, C, & D). – Each option is a generic approach to Each option is a generic approach to

measurement and verification of energy measurement and verification of energy and water projectsand water projects

– The options address accuracy and risk The options address accuracy and risk allocation allocation

Option A – Engineering Option A – Engineering CalculationsCalculations

A stipulated approach which may A stipulated approach which may includeinclude measured values at the retrofit measured values at the retrofit

Example: Lighting retrofitsExample: Lighting retrofits– Based on calculated energy savings and Based on calculated energy savings and

time of use schedules or light loggerstime of use schedules or light loggers

Option B – Metering and Option B – Metering and MonitoringMonitoring

A measurement approach which may A measurement approach which may include sinclude spot, short term or continuous pot, short term or continuous measurement at the retrofitmeasurement at the retrofit

Example: Variable Speed DrivesExample: Variable Speed Drives– Based on actual, measured motor speed Based on actual, measured motor speed

and corresponding monitored run time and corresponding monitored run time

Option C – Utility Meter Billing Option C – Utility Meter Billing AnalysisAnalysis

An approach which studies the overall energy An approach which studies the overall energy use through use through utility billing data analysisutility billing data analysis– Derived from long term, whole-building, facility or Derived from long term, whole-building, facility or

sub-metered data analysissub-metered data analysis

Example: Building EnvelopeExample: Building Envelope– Used when the conserving measures cannot be Used when the conserving measures cannot be

measured directly.measured directly.– Used when the anticipated energy savings is at Used when the anticipated energy savings is at

least 20% of the total metered energy use.least 20% of the total metered energy use.

Option D – Computer Option D – Computer SimulationSimulation

A cA computer simulation modeling at the omputer simulation modeling at the retrofit or the building levelretrofit or the building level

Example: New ConstructionExample: New Construction– Based on a comparison of the building Based on a comparison of the building

energy use without energy and water energy use without energy and water measures less the energy use with measures less the energy use with conserving measures installedconserving measures installed

M&V PlanM&V PlanKey ElementsKey Elements

Clarify the objectivesClarify the objectives Determine the baseline approach Determine the baseline approach

– Consider the building characteristics, intended Consider the building characteristics, intended measures and interaction between measuresmeasures and interaction between measures

Specify the option to be used for each measureSpecify the option to be used for each measure– Identify methods and procedures of data gathering and Identify methods and procedures of data gathering and

analysis for each measureanalysis for each measure

Indicate the reporting format and scheduleIndicate the reporting format and schedule Identify budget impacts and resource Identify budget impacts and resource

requirementsrequirements

M&V ResultsM&V ResultsM&V ResultsM&V Results

BaselineBaseline

En

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sag

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ner

gy

Usa

ge

ECMs installed here

ECMs installed here

BaselineBaseline or adjusted baselineor adjusted baseline

Measured or calculated performanceMeasured or calculated performance

TimeTime

Avoided use or savings

Make the Go/No Go DecisionMake the Go/No Go Decision

You make the callYou make the call– Will you say thank you and go separate Will you say thank you and go separate

ways?ways?– Will you approve or modify the feasibility Will you approve or modify the feasibility

study and issue a TO for the next step? study and issue a TO for the next step?

If you opt out here, you pay the fee If you opt out here, you pay the fee established in the task orderestablished in the task order