Energy Performance Contracting Process

Energy Performance Contracting Process Objective: To provide a concise, easy to understand process, that labels each parties basic responsibilities for an Energy Performance Contract. All process steps must adhere to Florida Statues 489.145, 287.055, 255.05 and 287.057 A. Agency Procurement of Investment Grade Audit (IGA) 1. Agency identifies need to reduce energy costs in its buildings by investing in energy conservation measures (ECM’s). Agency intends to enter into a guaranteed energy performance savings contract with a licensed energy performance contractor (EPC) in compliance with F.S. 489.145. 2. Agency will develop a short analysis of the project that they intend to include into an energy performance contract. This should include but not limited to the scope of the project; age, use, and occupancy of the buildings, and current building equipment. 3. Agency will seek out the most highly qualified EPC on the State Term Contract to recommend and implement ECM’s that will provide the needed energy savings to the agency. 4. Agency will competitively select a guaranteed energy performance savings contractor in compliance with F.S. 287.055 and F.S. 489.145. a. Agency shall evaluate current statements of qualifications and performance data of EPCs that are on the State Term Contract. Agency can reference this information online at the DMS website. Each EPC will provide a summary of their qualifications or a link to their website to be viewed by all interested agencies. b. Agency shall rank the three providers deemed most highly qualified based on but not limited too; Professional Personnel, Minority Business Enterprise, Past Performances (References, On time, Budget, etc.), Current Workloads, Agency Business History. c. Agency shall conduct discussions with no fewer than three firms. d. Agency may require public presentations regarding their qualifications, approach to the project, and ability to furnish required services. e. Agency will provide published notice of the meeting in which it proposes to award contract, the names of the parties to the proposed contract, and the contract’s purpose. f. Agency selects most qualified EPC. g. Agency informs DMS and DFS of intent to enter into ESCO contract. Roy Jeter, CPA Financial Administrator Division of Accounting & Auditing Florida Department of Financial Services (850) 413-5363

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Dan Hedrick Operations and Maintenance Real Estate Development Department of Management Services (850) 413-9515

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5. Agency authorizes Investment Grade Audit (IGA) a. EPC will give a detailed analysis on each energy conservation measure they are proposing, including energy and energy related operating savings. At a minimum, an audit should include current and future energy consumption, projected savings, maintenance costs, simple payback, life cycle costs, building description, analysis methods, and calculations. Assumptions, baselines, and baseline adjustment criteria must be predetermined and agreed upon in the audit. Audit may include all commodity or unit prices. b. To provide consistency for review of a future guaranteed energy performance savings contract, the EPC will provide contract schedules A, B, E, and F in the IGA. c. A model Audit agreement can be found on the DMS website. d. Agency may enter into a separate agreement to pay for the audit, or the cost of the audit may be part of the final contract. e. It is suggested Agencies negotiate a mechanism that allows them to perform identified ECM’s with out further obligation under the audit in cases of emergencies (immediate or imminent equipment failure). 6. EPC submits IGA to the Agency a. Agencies’ internal staff reviews audit for completeness, guaranteed savings, and value of ECM’s (This process is contingent on the Agencies’ internal staffs or contracted staffs ability to review engineering documents). b. Agency can approve or not approve the audit. 1. If Agency does not approve the audit, they may ask EPC to resubmit with specific changes. 2. If the audit is unacceptable to the Agency, the Agency may move to work with the second ranked most qualified EPC. 7. Agency submits approved IGA to Department of Management Services for review a. DMS will assign a reference number to the IGA. b. DMS staff reviews audit. Staff will provide a comprehensive review of guaranteed savings, sound engineering practices, baseline assumptions and adjustment criteria, appropriate ECM’s, and unit costs to verify fiscal stewardship. c. DMS can approve or not approve the Audit. If DMS does not approve the audit, the Agency and EPC must make the necessary changes, and then resubmit to DMS for approval of revised audit. d. DMS will then send the approved audit back to the Agency so that they and the EPC can develop a guaranteed energy performance savings contract. e. A model contract agreement can be found on the DMS website.

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B. Agency Negotiation of a Guaranteed Energy Performance Savings Contract 1. Agency negotiates a Guaranteed Energy Performance Savings Contract with the EPC. The Guaranteed Energy Performance Savings Contract (Contract) will become part of a long term facilities management plan. The Contract should be carefully considered and should spell out exactly what the EPC and the Agency are obligated to do. A model contract is available to use as a starting point, however, many of the terms must be defined through negotiation. The Agency is responsible for negotiating the best agreement for the State and ensuring fiscal responsibility, accountability, and documentation. The Contract should be carefully considered and reviewed by the Agency’s management, legal, budget, purchasing, and facilities management staff before it is approved for review by DFS. 2. Agency submits the Guaranteed Energy Performance Savings Contract to the Department of Financial Services for review. a. When DFS receives the Contract for review, a review number will be assigned and a letter sent to the Agency contact noting this number and the date the Contract was received by DFS b. DFS will review the contract documentation for the following: 1. The Contract, Financing Agreement, and all schedules, exhibits, and appendixes must follow the latest Model Contract and Model Financing Agreement forms. DFS will review all sections in the Contract for language inconsistent with the Model Agreement. Any changes from the Model may require further review by DFS legal staff. 2. All blanks must be completed with correct information. 3. DMS must have approved the IGA. 4. Financing must have already been arranged and Schedule L completed. Results of at least three bids should be provided evidencing the financing is the most cost effective. 5. Agency management must provide a letter stating the contract was reviewed and approved by Agency legal, budget, purchasing, and facilities management staff. 6. Additionally, the following schedules will be reviewed: Schedule C – Energy Saving Guarantee Schedule D – Deliverables and Compensation to Company Schedule G – Construction and Installation Schedule Schedule I – Company’s Maintenance Responsibilities (any items being paid by the Agency) Schedule J – Agency’s Maintenance Responsibilities (any cost that may

not be in the cost flow)

Schedule K – Company’s Training Responsibilities (measurable deliverables) Schedule L – Third Party Financing Agreement 7. Certain schedules contain primarily engineering information and will be sent to DMS for review. The results of DMS’

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review will be incorporated into the DFS review. The following Contract Schedules will be sent to DMS for review: Schedule A – Equipment to Be Installed by Company Schedule B – Description of Facilities; Pre-existing Equipment Inventory Schedule E – Baseline Energy Consumption Schedule F – Savings Calculation Formulae; Methodology to Adjust Baseline c. The Contract will either be approved or denied in writing and a letter will be sent to the Agency along with an attachment listing material deficiencies and suggested changes. Material deficiencies must be corrected in order for the Contract to be approved. Suggested changes reflect minor errors or highlight items the Agency should consider. The Agency may renegotiate the Contract with the EPC. DMS must review any resulting changes made to the IGA and associated Contract schedules. Otherwise, a new version of the contract may be resubmitted to DFS. 3. Agency executes the contract and financing agreement approved by DFS and begins work on ECMs. C. Ongoing Measurement and Verification process begins (M and V). 1. M and V will be evaluated by the Agency or third party firm. This will be determined in the contract based on the Agencies level of expertise in measurement and verification of ECM’s. Assumptions, baselines, and baseline adjustment criteria must be predetermined and agreed to in the Audit. a. EPC will provide written reasons for changes to the assumptions or baselines. EPC and Agency must both agree with these changes before any future payments will be made. Mediation by a third party may need to be defined in the contract in case of disputes. b. Both parties must agree that the guaranteed savings have been realized. If they have not, the EPC must pay the difference. c. This process will continue for the life of the contract. All payments must be made by the end of the term of the contract, and all equipment and maintenance will be the full responsibility of the Agency at that time.

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