UESC Project Implementation Construction & Installation ä Issue TO for construction ä The pre-construction meeting ä Review/accept final construction package ä Commissioning Stop and $ Engineering & Design Package ä CO issues TO ä Review E&D Package ä CO negotiates final price proposal Decision Go/ No go 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  Issue your task order for engineering and design –Include agency and site specific requirements  The utility will respond with a full set of plans and detailed specifications App. 4

When You Review the Package  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  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  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)Commissioning, M&V, O&M (if required) –Final price proposal –Estimated construction schedule Planned service interruptionsPlanned service interruptions Environmental complianceEnvironmental compliance Quality controlQuality control ECM installation sequenceECM installation sequence

Payments & Performance Bonds  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  Make sure that site inspection personnel are available  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 You’ll want to have this set up so you can move once you see the final construction schedule

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

Negotiating the Final Price Proposal  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  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 optionThis 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

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

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

Adder Example  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, basis points A less appealing project would have a higher adderA less appealing project would have a higher adder

Hedge  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 3 basis points per = 36 basis points or.36%12 3 basis points per = 36 basis points or.36%

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

Project Management  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  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?  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  CO issues Task order for Construction and Installation Phase  Arrange a pre-construction meeting

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

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

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

Commissioning and Acceptance  Commission each ECM as you go  The utility must notify the agency when the ECM is ready for testing and performance verification  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  Building systems including architectural, structural, mechanical, electrical, and controls are installed, undergo pre- functional performance tests, and are placed into operation.

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

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

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

Post-Installation  Conduct periodic performance verification –Receive M&V regular interval reports (if required)  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  Hands-on operation of the equipment including start-up, operation in normal and emergency modes, shutdown procedures, seasonal changeover, and manual/automatic control  Requirements and schedules for routine maintenance  Energy Management and Control System sequencing, strategies, operation and programming  Health and safety issues and concerns  When and how to re-commission

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

Performance Acceptance  Important in ensuring the effective, ongoing functioning of a facility’s architectural, structural and other systems.  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  Any additional ECMs or services proposed must be within the contract scope  If desired, CO will issue a task order and utility will submit a technical and price proposal.

Wrap Up Question and Answers