phoenix convention center phoenix, arizona overview of us army corps of engineers (usace) espc &...

Phoenix Convention Center • Phoenix, Arizona

Overview of US Army Corps of Engineers (USACE) ESPC & UESC Programs

Track 5:Project Financing

Session 3:ESPC Large and Small: The Basics of ESPC

Michael NortonUS Army Corps of Engineers, Huntsville Engineering & Support Center

August 11, 2015

Energy Exchange: Federal Sustainability for the Next Decade2

Agenda

• Best Practices• Synergistic Energy Programs• Energy Portfolio Management• Overview of ESPC• Memorandum of Understanding Between DOE FEMP and USACE• ESPC Programmatic Challenges & Philosophy• ESPC with a Comprehensive Approach• ESCO Selection Process• ESPC Project Development & Award• ESPC Performance Period• Overview of UESC• Partnership• Conclusion

Energy Exchange: Federal Sustainability for the Next Decade

Established Best Practices

Assistant Sec Army, Installations, Energy & Environment Army Net Zero Progress Report, May 2013:

►Alternative financing mechanisms (ESPC, UESC, PPAs)

►Resource efficiency managers (REMs)

►Planning / energy evaluations (audits) (EEAP)

►Energy / Utility Mgmt Control Systems (EMCS/UMCS)

3


Synergistic Energy Programs

Leveraging the Energy Tool Box: CEHNC manages a suite of programs and acquisition vehicles to support Army and DoD in meeting energy, water, waste and renewable energy mandates

Begins with Planning (Master Plans and Energy Audits)The cornerstone for developing effective energy management strategies,

capital investment and actionable plans / projects to meet reduction, net zero and renewable energy goals

Audits are scalable product for a holistic, integrated and comprehensive planning approach that leverages scale (vs. fragmented approach)

Create vision with comprehensive energy master plan

4


Energy Portfolio ManagementPathway to Net Zero, Energy Security and Meeting Federal Mandates

5

Execution/Acquisition

Investigation & Planning

Sustainment, Measurement & Verification


Energy Portfolio ManagementPathway to Net Zero, Energy Security and Meeting Federal Mandates

6

PPA

ESPCSPC

FRP

UMCS

ECIP

UESC

Net Zero Roadmaps

Metering

CUPMDMS

Execution/Acquisition

Investigation & Planning

Sustainment, Measurement & Verification

Energy Master Plans

EEAP

REM

UMCS – Utility Monitoring and Control SystemsECIP – Energy Conservation Investment ProgramUESC – Utility Energy Services ContractingESPC – Energy Savings Performance ContractingEEAP – Energy Engineering Analysis Program

PPA – Power Purchase AgreementsREM – Resource Efficiency ManagerCUP – Commercial Utility ProgramMDMS – Metering Data Monitoring SystemFRP – Facility Reduction Program


Energy Savings Performance Contracting (ESPC)

Overview. Leverages industry expertise and private sector financing to make infrastructure upgrades to federal facilities to reduce energy, water consumption, and waste stream

► CEHNC is recognized expert in third party financing (ESPC, UESC) across federal government

► Financed for up to 25 years and paid from consumption savings► Savings ensured by measurement & verification (M&V)► Provides operations and maintenance for more complex improvements; enables DPW

to reallocate limited resources.► CEHNC uses worldwide ESPC Multiple Award Task Order Contract (MATOC)

CEHNC to be relied upon heavily for Army’s commitment the President’s Performance Contracting Challenge ($4B thru 2016)

► In FY14 executed 16 task orders with capital investment of $243.6M► CEHNC has robust FY15 pipeline► New MOU with DOE Federal Energy Management Program (FEMP)

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Establish framework for partnership and collaboration

Leverage strengths of both agencies Better support federal agencies in meeting

President’s Performance Contracting Challenge (PPCC) through strategic activities to strengthen ESPC & UESC execution

Facilitate better education, training and knowledge transfer

Improve Measurement & Verification (M&V) activities

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Memorandum of Understanding (MOU)Third Party Financed Acquisition Support to Federal Government

Memorandum Of Understanding

Between

U.S. Department of Energy (DOE) Federal Energy

Management Program (FEMP)

And

U.S. Army Corps of Engineers (USACE)


Energy Master Plan– Develop holistic energy perspective

utilizing multiple funding sources– Focus on energy systems to support

groups of facilities to gain equipment efficiency, reduced maintenance and energy reduction

Bundling– CEHNC encourages ESCOs to bundle

long payback ECMs with short payback ECMs

– Bundling approach requires we leverage master planning and holistic approach (strategic art)

ESPC Programmatic Challenges & Philosophy

Combining SRM with ESPC– CEHNC has been successful in

combining SRM with ESPC to leverage savings

O&M– Only include for complex ECMs

or where base does not have resources. O&M on simple measures causes other ECMs to be dropped

Implementation of ECMs outside of ESPC– Must be careful in how you

execute projects using appropriated dollars (do not take all the low hanging fruit)


ESPC with a Comprehensive Approach

ESPC Awards


Contractor Selection – ESCOs compete through best technical approach and past experience utilizing a broad scope of work. Performance-based work statement for implementation of energy reduction measures. - ESCO selection at the beginning of process, resulting in one ESCO chosen to execute work. Streamlined process has no down select, reduces timeline and cost

Site VisitRFP Select

ESCO

1-3 months

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ESPC Acquisition ESCO Selection Process

CEHNC process requires ESCO proposal to be 20 pages or less to allow evaluators succinct information regarding the energy savings presented in the selected ECMs.

ESCO community prefers this method as it limits the amount of design effort associated with the selection. Other methods require hundreds of thousands of dollars in development that result in only one ESCO being selected. This accelerated process limits the development dollars expended prior to ESCO selection.

The selecting of limited ECMs is not a limiting factor in the long term ESPC process. After ESCO selection, the entire location is open to ESCO exploration for available work.


Project Initiation/ ESCO Selection

ESCO selection process utilizes customer’s top complex Energy Conservation Measures (ECM). 3-4 ECMs are selected based on the availability of each measure at that site. Intent is to select best qualified ESCO to perform most complex ECM.

Request For Proposal (RFP) or Notice of Opportunity for DOE FEMP IDIQ is sent to entire ESPC ESCO pool followed by a site walk. The site representatives and CEHNC staff are present to lead the walk.

Selection board includes representatives from CEHNC, customer, and in some cases, Command.

Board members review and send consensus recommendation to the Contracting Officer.

ESCO is selected and Notice to Proceed (NTP) is sent for Preliminary Assessment development.

ESCO selection allows the selected ESCO to begin the Preliminary Assessment (PA). This assessment is holistic and not restricted to the ECMs used during the site walk.

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ESPC Project Development & Award Phase

Feasibility StudyPreliminary Assessment

Project Approval

Negotiations & Award

6 -18 months

Proven streamlined process, notwithstanding external approval process Implementation Structure

Centralized Project Management, “One-Stop-Shop” Dedicated and experienced project development team to award, manage

project, provide technical engineering and legal support Standardized and streamlined acquisition processes Easier to monitor portfolios due to centralized approach


Preliminary Assessment ESCO performs high level audit to identify the potential ECM opportunities

available to the customer. This assessment is “fence to fence” in nature that will allow the site future opportunities at energy savings.

This effort can be streamlined and scaled depending on customer desire/experience with ESPC.

ESCO identifies a high level, potential scope of work.

ESCO provides a Rough Order of Magnitude (ROM) project value.

Customer and CEHNC team work together to identify strategy to execute either through a single task order or in phases to achieve holistic approach. The ESCO will further develop ECMs and include in Feasibility Study and cost proposal.

CEHNC views items identified in this stage as in scope for all future work. If at a later date, a technology is identified that is not in the PA, that work will have to be resolicitied under a new effort.

* Customer has the option to do the entire list of ECMs at once or break into phases.

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Feasibility Study/Proposal

Selected ECMs identified in the PA by the customer and CEHNC are developed to a 30% design level in the Feasibility Study. This step can be based on current mission requirements and the mandated 30% reduction goal. The feasibility study can be as little as $300K in investment or millions of dollars in investments. This depends on the site and command level of commitment.

ESCO performs detailed engineering study on the project and refines the scope of work. CEHNC, customer, and ESCO develop the M&V baseline from which the project is built ESCO develops the feasibility study (35% design) and firm fixed price proposal for the project

– Includes detailed cost breakout that includes M&V and O&M performed by the ESCO– Savings guarantee – Measurement and Verification required in accordance with FEMP M&V protocols– O&M will be discussed and tailored to the customers requirements.

*ESCO has been working 100% at risk to this point

15


Feasibility Study/Proposal Review & Task Order Award

CEHNC and the customer conduct full review of the Feasibility Study and proposal – Depending on PWS this would include Mechanical, Electrical, Structural, Cost, etc. review

Detailed Cost Analysis is conducted– Includes Life Cycle Cost Analysis– Building Cost Analysis (“hard costs”)– Internal Government Estimate is developed for the total project– ESCO must show competitive selection of subcontractors– ESCO must show competitive selection of lender to have best interest rate

Task Order Award– Project approval at appropriate Command level– Negotiated and awarded– First payment to ESCO occurs about one year after completion and acceptance of improvements and

validation of saving via M&V per the payment schedule in the task order.

Development & Award Phase

6 – 18 mo

Project Construction

Phase3 – 18 mo

Performance PeriodO&M, M&V, and Payment

Phase6 – 23 yrs

Selection of ESCO

1 – 3 mo

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Performance Period

CEHNC will assist customer at the end of the project construction phase to reiterate the payment schedule required by the task order and necessary funding requirements. The customers resource management team should be part of this process.

Each ESPC requires an annual Measurement and Verification (M&V) to validate the savings. The customer’s Contracting Officers Representative (COR) is a critical part of the process to witness this annual requirement with the ESCO.

Equipment not maintained by ESCO must still be maintained by the customer to ensure the ESCOs guaranteed energy savings are not impacted.

– Example: If filters are to be changed on an air handling unit, proof of this must be provided at the M&V visit.

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Utility Energy Services Contracting (UESC) Overview. Similar to ESPC but uses utility company expertise and capital to meet Federal mandates

►Difference is the ability to go to the utility provider (existing relationship) rather than an ESCO (new partner)

►Limited to a 10-year contract term for Army installations (non-Army up to 25 years)

Allows utilities to provide Federal customers:►Energy and water efficiency improvement projects ►Renewable energy projects ►Demand reduction services

FY14: CEHNC awarded three UESCs with capital investment of $48.4M as well as two Utility Service Contracts at Fort Campbell with capital investment of $14.25M

Growth Area: – Robust FY15 pipeline with anticipated award of 6 projects with capital

investment of approximately $33.5M

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A PARTNERSHIP

Requires mutual

commitment from all

parties to become

true partners.

All parties must enter contract in good faith.

Goals &

expectations should

be specific & well

documented

Long term relationship.

19

Contractor

Installation

Contracting Agency


Conclusion

ESPC and UESC are proven tools to reduce an installation’s energy and water consumption.

Best solution when upgrades or modernization of existing equipment or systems cannot be funded through existing operating funds (SRM) or with other funding sources (MILCON, ECIP) in the required timeline.

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Points of Contact

• Michael Norton, Chief, Energy Implementation [email protected], 256-895-8232

• Porscha Porter, ESPC Program [email protected], 256-895-1663

• Lisa Harris, UESC Program [email protected], 256-895-1663

• Adam Sunstrom, Contracting Officer [email protected], 256-895-1154

• Bruce Forsberg, Technical Lead [email protected], 256-895-1707

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