osfma conference 2003 april 9, 2003 are you asking the hard questions about performance contracting?...

OSFMA Conference 2003April 9, 2003

Are You Asking the Hard Questions about

Performance Contracting?

OSFMA Conference 2003


Today’s Agenda• Introductions

• Brief Overview

• 10 FAQ’s

• YOUR QUESTIONS!


ESPC Overview

• ESPC is an innovative method to purchase energy efficiency improvements in buildings

• A single procurement is used to purchase a complete package of services

• Project financing of the entire projects so there are no up front costs


ESPC Overview

• Projects are paid for from savings, and funds are provided by the District, Utility Rebates (PPF), BETC and/or SELP Loan Program.

• How does it work?– ESCO guarantees that savings

will meet or exceed annual payment to cover project costs


Benefits of ESPC

• It allows energy project completion with little or no funding or experience

• Streamlines the procurement process• Provides continuity• Projects are commissioned• Guaranteed savings

– Shifts the risk from the owner to the ESCO


Basics of Performance Contracting

• Energy Service Company (ESCO):– Identify and evaluate energy savings

opportunities– Develop engineering design and

specifications– Manage the project from design to

installation– Arrange for financing– Train staff– Guarantee project cost, performance &

savings


10 Frequently Asked Questions


Why use the ESPC Program?

• Most difficult question to answer• Reasons typically given for not

using ESPC:– We have all the funding we need.– We have done or are doing

everything.– ESPC must be more expensive.– We do not need an ESCO.– We do not want to borrow any funds.


What makes an ESPC Attractive to a School District?

• Guarantees for Performance. Savings, Costs, etc.

• Multiple Financing Options – Treat Projects as Investments

• Everything is Negotiable – Custom Fit for each District’s Needs

• Open Book Pricing• 100% of Construction Savings Returned to

School District• Proven, Successful Practice


How do I know if I am a Good Candidate?

• High Energy Use Index or Cost per Square Ft. • Aged Equipment and Systems

– Energy using equipment ready for replacement– Deferred maintenance problems or high maintenance

costs

• IAQ issues• Comfort problems• No funds to implement needed upgrades• No remodels for 5-10 years


What type of projects can be done?

• Have an energy or efficiency component• Holistic approach that aggregates projects• Impact to energy use and/or client comfort• Projects include:

– Lighting– HVAC– Water

Conservation

– Controls– Windows– Building Envelope


What type of projects can be done?

• Salem Keizer Public School’s Projects– HVAC– Controls– Thermal Shell– Load/Demand Management


Isn’t Design/Bid/Build Cheaper?

• Yes, sometimes D/B/B is cheaper!– Get what you pay for.

• ESPC allows you to select based on value and life cycle, and not low bid!

• Must compare apples to apples!– ESPC costs are turnkey

• Direct comparisons demonstrate that ESPC is very competitive


What is covered in the project cost?

• Construction Costs (including all subs)• Construction Management• ESCO’s Fees (including all

engineering)• Payment and Performance Bonds • Turnkey project required to achieve

guaranteed savings


What Services are offered by the ESCO?

• Engineering, Design, Estimating, Construction Management, Commissioning, Verification– Single Point of Accountability

• Guaranteed Maximum Cost & Savings

• Long-term Partnership


Why do Measurement & Verification?

• To determine the effectiveness of measures

• Assures savings attributed to the project

• What to do:– Must establish a baseline for comparison– Establish a M&V plan

• Industry standards (Ashrae, IPMVP)

– Measure & track savings & trends


What Funding Sources Can We Use?

• SB1149 Funds• BETC• SELP Loan• Guaranteed Energy Savings• Hard O&M Savings• Mixing of school district funds and

borrowed capital is allowed• Planning a bond/levy can be reduced

with performance contracting


Salem-Keizer Public Schools Process

• Meet with Purchasing Department• Homework – Workshops, Talk to

Contractors, Other Customers• RFP/RFQ – Know What You Want• Interview Finalists• Negotiate Contract with Selected

ESCO• Begin the Contract – IGA,

Implementation, M&V


How do we get Started with an ESPC?

• Call the Oregon Office of Energy– Or Visit their web site:

www.energy.state.or.us

• Different contract stages (Investment Grade Audit, Implementation and M&V– Template documents available

• Pending Legislation SB3476


Kennewick School District

• Fast Track Project (6 months from beginning to end)

• Focused on Controls, Lighting and Power Factor Correction in 3 facilities



• The Results– Under budget (~5% lower)– Installed before the end of estimated

construction period– Higher Utility Rebate than Originally

Estimated– KSD where able to select the

contractors and equipment



• The savings:

– 679,877 kWh/yr. – 24,823 therms/yr.– 158 kW/month– Totaling over $63,000 annually

• Project is on track to exceed these savings


YOUR QUESTIONS!


Other FAQ’s - 1

• What Should I Consider When Selecting an ESCO?• How does the District and ESCO work together? • What savings are used to determine cost-

effectiveness? • When does a District pay for the Project?• How do savings get established?• What is an Investment Grade Audit?• How do I select and ESCO?• What are the differences between PC’s done

before and ones done now?


Other FAQ’s - 2• What if the Guarantees are not met?• Can a School District use their own Funds?• What can we do under the ESPC Program?• How long does it take to develop a project?• Does the ESCO select the Vendors/Contractors?• How long are the savings monitored and

guaranteed?• Why are the typical bid laws not applicable? • Is competitive pricing used?• When does a District pay for engineering fees

and construction costs?


What is Guaranteed?

• Project Cost are at 100%• Utility Costs are up to 100%• Operations and Maintenance

Savings are not typically guaranteed

• Equipment Performance• Warranty Issue Resolution


How does a District Select an ESCO?

• Ability to choose your own partners• Select from List or Interview firms

based on their qualifications• The State Process meets the

Competitive Selection required in 39.35

• Once you select an ESCO all bidding requirements are met


What Should I Consider When Selecting an ESCO?

• “ Is the company capable of being a Single-point of Accountability for the Long-Term?”

• In-house engineering/design depth• Experience of key individuals assigned to your project• In-house construction/project management depth• In-house construction estimating group• Ability/experience to provide innovative solutions• Ability to provide ongoing support services, when

required• Dedication to supporting and providing staff training• “Open-Book” Pricing, and ESCO fee flexibility!


What savings are used to determine cost-effectiveness?

• Utility Cost Savings– Electrical, Water/Sewer, Gas, Waste

• Hard Cost Operations and Maintenance Savings (direction of District)

• No staff labor savings– Seasonal, Contract, or Overtime Labor

can be considered• Avoided hard cost dollars are allowed


When does a District pay for the Project?

• During the investment grade audit no invoices are submitted by ESCO.

• Prior to project implementation payment terms are discussed.– District is not obligated to pay until

project is complete and energy savings commence

– ESCO may add construction period financing


How do savings get established?

• Investment grade audit

• Real data measurements and logging– Historical information

• Accepted engineering practices

• Reviewed by OOE and District


What if the Guarantees are not met?

• Project Costs (Latent conditions)

• Savings Guarantee is based on saved units of energy (Therm’s and kWh) not dollars

• ESCO must make up the savings short fall typically on an annually basis


Thank you for your time...QUESTIONS?

Cam HamiltonMcKinstry / Energy

Services206.832.8146800.669.6223

[email protected]

www.mckinstry.com

David FurrSalem Keizer Public

Schools206. 399-3362

[email protected]

www.salemkeizer.org

Betty MerrillOregon Office of

Energy503. 378.6510

[email protected]

www.energy.state.or.us

osfma conference 2003 april 9, 2003 are you asking the hard questions about performance contracting?...

Documents

osfma conference

esco slide

espc overview espc

espc overview projects

espc program

type of projects

performance savings

benefits of espc