UESC Project Implementation Engineering Design Package CO issues

UESC Project Implementation Engineering & Design Package ä CO issues TO ä Review E&D Package ä CO negotiates final price proposal Decision Go/ No go Stop and $ Construction & Installation ä Issue TO for construction ä The pre- construction meeting ä Review/accept final construction package ä Commissioning The Payment Period ä Invoices ä Payments ä Periodic Performance Verification ä Follow-on projects

Engineering and Design ä CO issues TO ä Review E&D Package ä CO negotiates final price proposal Decision Go/ No go

Initiating the Engineering and Design Package v Issue your task order for engineering and design – Include agency and site specific requirements v The utility will respond with a full set of plans and detailed specifications App. 4

When You Review the Package v Look for consistency with the feasibility study in engineering drawings and design specifications – This should be 100%, you shouldn’t see any new design in the construction phase v Use FEMP for assistance – They have specialized expertise in advanced engineering technologies and can offer cautions and advice in areas like photovoltaics, systems controls and others

Reviewing the E&D Package v The design package should include at least the following for each ECM: – Installation drawings – 100% of plans and specs • Commissioning, M&V, O&M (if required) – Final price proposal – Estimated construction schedule • • Planned service interruptions Environmental compliance Quality control ECM installation sequence

Payments & Performance Bonds v Within a specified time frame after approval of ECM installation plans, the utility shall submit – Acceptable payment and performance bonds or – Letter of credit

Start Planning for Installation v Make sure that site inspection personnel are available v Provide for a site individual to assist project implementation You’ll want to have this set up so you can move once you see the final construction schedule

Commissioning and the Design Phase v Develop design and operating intent v Perform commissioning-focused design reviews v Develop Commissioning Plan & Specifications for construction – Should include specifics on commissioning during construction, acceptance and post acceptance

Negotiating the Final Price Proposal v Price proposal includes – Construction cost – Financing cost over the term of the loan – Optional item cost (non-required costs) – Project management costs – Interest rate

Structure the Interest v Interest payments during the construction period and the post-acceptance period: – Option 1: Structure the financing so that the cost of interest during the construction period is added to the total project cost resulting in one amount to be financed. • This is the most common option – Option 2: Structure the financing to include separate interest rates during construction (short term) and post-acceptance (long term).

Total Interest Rate Base rate (SWAP rate*) 6. 00% Adder 1. 40% Hedge + 0. 36% Total 7. 76% *Rates can be found at http: //www. bloomberg. com/

Components of the Interest Rate v Base rate – Historically based on the Treasury Note rate for payment term of contract – Currently based on SWAP rate

Adders v Basis points added as a result of financiers perception of project’s risk – Basis point = 1/100% or. 01% v Contributing elements: – Utility’s credit rating – Loan amount – Loan term – Project’s technical risk

Adder Example v Given: a major utility company with a good balance sheet, a $1 million project with a 10 year term and proven relatively simple technologies – Adder should be on the low side, 150 -180 basis points • A less appealing project would have a higher adder

Hedge v Basis points that protect the financier’s risk of interest rate fluctuations during project implementation – A typical hedge is 3 -5 basis points per month • 12 months @ 3 basis points per = 36 basis points or. 36%

Sources of Financing v Utility: internal financing is not usually competitive due to internal rate of return requirement (>10%) v Consider some form of “competition” for third part financiers

Project Management v Projects are partnerships but the utility is a business and must make a profit for shareholders – Utility profit (IRR) is typically 10 -14% on services provided v You will be charged for project management and overhead (OH) fees – – OH fees are ~ 15 -20% on services portion Project management fee is ~ 3 -5% depending on complexity

Go or No Go? v Will you continue the process? – No? Pay for the E&DS. – Yes. CO finalizes the contract, move to construction and installation

Construction and Installation ä Issue TO ä The pre- construction meeting ä Final construction package ä Commissioning

Initiate Project Construction and Installation v CO issues Task order for Construction and Installation Phase v Arrange a pre-construction meeting

Pre-construction Meeting v The COTR and other facilities or engineering staff and utility reps must review and coordinate the project schedule and installation & inspection v Approve the final construction schedule – Bring in your designated inspection and implementation site personnel (identified during D&E) v Check to see that appropriate permits have been acquired

Construction v The agency monitors the utility’s and subcontractor’s progress throughout the installation period to assure work is proceeding as planned

Project Documents (Deliverables) v O&M manuals for installed ECMs v Inventory of spare parts (lamps, ballasts) v As-built drawings or revisions/updates to existing as-builts v Training v Warranties

Commissioning and Acceptance v Commission each ECM as you go v The utility must notify the agency when the ECM is ready for testing and performance verification v The government must verify that new equipment was installed properly, then test equipment to ensure that it is performing to spec.

Commissioning and the Construction Phase v Building systems including architectural, structural, mechanical, electrical, and controls are installed, undergo prefunctional performance tests, and are placed into operation.

Project Completion and Acceptance v Per contract requirements, the utility notifies the agency of project completion v Agency deems – – – Substantial completion/beneficial occupancy Final completion and acceptance Completion of punchlist v The agency notifies the utility of project acceptance

The Payment Period ä Invoices ä Payments ä Periodic Performance Verification ä Follow-on projects

Invoices v Invoices are only accepted and processed after ECM installation and government signature on a Certificate of Completion (or whatever is required by the contract)

Payments v CO must notify the utility that the installation has been accepted and that it complies with the terms of the contract v Utility bill paid from funding account determined during acquisition planning

Post-Installation v Conduct periodic performance verification – Receive M&V regular interval reports (if required) v Verify and document the performance and actual energy savings progressing in sequence, from individual equipment through subsystem operation to complete systems and finally whole building.

Include Training v Hands-on operation of the equipment including start-up, operation in normal and emergency modes, shutdown procedures, seasonal changeover, and manual/automatic control v Requirements and schedules for routine maintenance v Energy Management and Control System sequencing, strategies, operation and programming v Health and safety issues and concerns v When and how to re-commission

Performance Acceptance Phase v Operations are proven under partial and full load, in all seasons, and under abnormal or emergency conditions. v Some commissioning contracts require an effort to fine-tune and optimize system operation, comfort control, control parameters, sequences and energy efficiency.

Performance Acceptance v Important in ensuring the effective, ongoing functioning of a facility’s architectural, structural and other systems. v As use and function of facilities change, the building systems need to be adapted to the changing requirements of occupancy and utilization.

Follow-on Projects v Any additional ECMs or services proposed must be within the contract scope v If desired, CO will issue a task order and utility will submit a technical and price proposal.

Wrap Up Question and Answers