The ESPC concept is the better alternative to the more traditional method of remodeling an existing building to make it more energy efficient, less costly to operate, to make it more useful, durable, and fix equipment needing repair (preventative maintenance).
Design-Bid-Build
Typically we (Public Works and Purchasing Departments) have always viewed building retrofits or remodel projects as construction projects, and everyone knows that the owner will need designer (A/E) expertise to design the work to be done, usually hired after a lengthy RFP with general requirements of what is to be done. Normally it will be a 90 -120 day process and includes a negotiation period before the agreement can be approved by the owner's process. Then those professionals take six months to a year or longer to produce very specific detailed plans and specifications of the work they feel is needed; with an ultimate owner approval process that allows the project to go out to bid for the construction contract. During this construction bidding process, there are probably two meetings (a prebid and a job walk), and subsequent notifications (addendums) that change the bidding documents (45-60 days). After the bid opening there are evaluations for responsiveness of the proposal, and reviews of the contractor to make sure the contractor is qualified or responsible and can do the work. Finally there is a meeting of the owner's board/council to approve award of the contract to the lowest bidder, and hopefully there are no protests. Thereafter there are preconstruction meetings with everyone who will be involved in the construction, the gathering of all documents, discussion of the procedures to be used, and the issuance of a notice to proceed. So, from the initial idea to the work being accomplished can be three to five years.
Inherent problems with the Design-Bid-Build construction process are: (1) The low bid process does not always get the best or even a good contractor; (2) The detailed Project Management (PM) oversight needed by the owner, especially the expertise required to perform good PM services, is seldom available in-house, that could require a lengthy solicitation process to out source this responsibility; (3) Construction change orders because of unforeseen circumstances or deficiencies in the plans and drawings; (4) The construction guaranty or contractor warranty period is very short, typically one year; and (5) Requirements to have all of the budgeted monies up front for the entire process.
Performance Contracting - Especially ESPC
A brief description of an ESPC, or Performance Contracting, quickly demonstrates why many professional buyers and/or contracting officers prefer the ESPC process.
Initially an owner should bring on board a well qualified Third Party Consultant expert as part of the owner's team with a contract that details all of the consultant's responsibilities, and holds them accountable. This can be accomplished through a solicitation process, by utilizing the joinder provisions of your state, or locating a reliable peer who can refer a Third Party Consultant that they have used. Thereafter, the consultant will assume the responsibility of representing the interests of the owner, being their eyes and ears, as well as providing ideas, concepts, being the compliance officer, and being responsible to the owner for making sure they receive the benefit of their bargain.
Initially, the consultant will tour the property, gather all ideas and requirements of the owner's staff, test the feasibility of the project and make sure that it is an ESPC eligible project, and verify the current amount of energy currently being utilized.
If it is a viable project, then the consultant will move into the next step and prepare a request for proposal (RFP) based upon the entity's normal RFP boilerplate, the criteria requested by the owner's staff, provide sample measurable evaluation criteria for this particular project's scope, and specify particular results that should be accomplished during an ESPC retro construction project. That means that within 30 - 45 days after signing the consulting contract, the consultant should have this RFP for a construction performance or design-build type contract ready for advertising. About two weeks later the consultant will conduct a pre-RFP conference and project walk through for the owner with all potential contractors, sometimes referred to as ESCo's (Energy Service Companies). ESCo's are specialty companies that concentrate on energy savings construction projects, utilizing extensive research and knowledge in energy savings, construction expertise, and innovation to accomplish a successful retrofit.
The solicitation opening should follow 2-4 weeks thereafter. The consultant will use their expertise to assist the owner's staff in their evaluation of the proposals received, help them through the evaluation process, and make sure that the proposals received are actually viable. Consultants should not be voting members of the evaluation team. Please note that all of these construction firms should already be on a Qualified Contractors list, or become qualified during the solicitation process indicating their experience and certifications. The consultant should be able to process both the qualifications and project evaluations concurrently. In any event, the criteria for award will be to the construction firm with the most energy savings, the best plan, the most experience, the best reputation, and the best ability to work with the owner/staff; and NOT BE BASED ON LOW BID.
This then leads into a third phase, the award and issuance of the Energy Savings agreement, with its many safeguards and clauses recommended and drafted by the consultant. The consultant should be involved and participate in this process to any degree requested by staff.
The signing and approval of the design-build contract leads into the next phase, the actual preparation of a detailed energy audit and development of all of the plans and specs for the actual construction project. The consultant will be monitoring the ESCo process and cross-checking calculations, results and plans throughout this 4-6 month period, and be able to verify the firm's potential success. There will be 2-4 progress meetings conducted during this stage, and all parties, including the owner, will have a very complete understanding of all details by the time the plans are finalized. The consultant will be verifying the very detailed plans, specifications with measurements, and make sure that the energy savings originally proposed in the ESCo's RFP response are included in the resulting plans. Keep in mind that we are discussing a design-build, best value type, CMR type contract, with a performance contract result that has a ten to fifteen year guaranty, so project quality has been moved to the top of the priority chain. All construction costs are open book so the owner knows the cost of each line item.
Again, after the detailed energy audit and preliminary design, approval will be needed from the owner to proceed into the actual construction phase, with a report and recommendation by the consultant.
Thereafter, the project moves into the final phase, the actual construction. Again, the consultant will be monitoring the progress and elements of the construction as there may be ongoing design changes, and all results will have to be verified and possibly approved. The end result will be a verified energy savings when compared to the original benchmark reports. Lastly, the contractor will submit a request for payment. At this point, the consultant can pinpoint how long it will take to pay off the construction costs from the energy savings generated by the project. Note: There are no Change Order requests for payment by the contractor. The contractor also has to be bonded and insured, and must have all solutions proposed in their response to the RFP that was also agreed to in their construction agreement, and they meet or exceed the original energy savings estimated in their original proposal. This energy savings is guaranteed by the ESCo (construction contractor) for up to fifteen years.
During construction, the source of financing this construction needs to be determined. It can partially or wholly come from Stimulus monies, bonds, grants, entity budget, or a loan supported by the savings generated. The owner/entity (or the consultant in cooperation with the owner) can conduct this financing solicitation, and it will be awarded once the final figure is determined. With the right wording the underwriter will accept monthly payments based upon the energy costs saved, and the payback contract can be as long as 15 years. The installed work supplies and/or replacements thereof are guaranteed, and bonded for up to the same 15 years, as is the guaranteed energy savings. Failures result in checks or direct payment to the owner from the ESCo in addition to the replacement or repairs. The owner can even have a contract for operating and maintaining all equipment.
The energy savings may be revisited each year throughout the term of the agreement/guaranty. Deviations will trigger makeup payments and corrections by the ESCo.
Keep in mind that the above ESPC construction is a 6-18 month process, depending upon the size of the construction project. It is fully guaranteed, and there is little or no up front cost to the owner for the construction. No change order requests by the contractor. The post-construction monitoring of this project meets or exceeds federal and state legislation and guidelines, especially those required by the Stimulus Plan. These ESPC repairs, replacements, and improvements are faster and less costly than the conventional design-bid-build concept, and produces a higher quality product.
Third-Party Consultants
When I say a "qualified Third-Party Consultant", I am referring to unbiased, without conflicts of interest, certified, experienced energy experts who can analyze building projects, write complex project descriptions, know who the ESCo's are, what ESCo's do, and how they operate, be able to perform the complex engineering equations it takes to actually arrive at actual energy savings by factoring in all of the variables for future usage, and know what the latest trends are as well as what the latest energy savings equipment can really provide.
Normally, in-house expertise lacks one or more of the above criteria. There are also consultants associated with ESCo's or product suppliers trying to be named as Third Party Consultants that you should be aware of who will not be competent, will show favoritism, not be an independent Third Party for an owner/government, or may have serious open or hidden conflicts of interest.
|