1. www.bakerdconsulting.com 1 Energy Efficiency, Design, Construction, LEED & Green Projects: The Stimulus Does It All Tuesday, March 31, 2009 12:00 PM EDT You may listen to the audio over your computer speakers or you may use your phone to dial into the following number: 1-866-642-1665 Passcode: 342441

2. 2 Presenters Patrick Miller Associate, Baker & Daniels patrick.miller@bakerd.com 312.212.6514 Construction and Real Property Liability Group; Energy, Environment and Climate Change Legal Group Andrew Wheeler Senior Vice President, B&D Consulting andrew.wheeler@bakerd.com 202.312.7424 Energy & Climate Change Consulting Group

3. 3  $787 billion, 250+ programs and many different ways Washington and the states will spend the money.  Cabinet Agencies which we will cover today include the Departments of Energy, Agriculture, Defense, Interior, Labor, Housing & Urban Development and the Environmental Protection Agency.  Non-cabinet-level Government Entities receiving funding include NASA, Small Business Administration and the National Science Foundation.  The Recovery Package is now a public law. It moves into the complicated implementation phase. –Rulemaking process and RFP process –Getting the funding out in certain time frames –Oversight & Accountability How Will ARRA Work?

4. 4 Green Buildings In General  Utilization of best practices to: –Maximize efficiency in design, construction, operation and maintenance –Minimize waste and cost –Capture “free” inputs from the natural environment  Third party verification of construction quality and asset value  Improved “product”: –Energy and water savings –Indoor environmental quality

5. 5 Green Certifications and Standards  For buildings: ─Governmental ─LEED ─Green Globes  For products: ─EnergyStar ─Green Seal ─Greenguard ─GreenSpec

6. 6 ARRA Green Building Projects  NIST –$360 million for maintenance and renovation of NIST facilities and laboratories using green technologies that maximize energy and water savings. $180 million is for the competitive construction grant program for research science buildings including FY2008 and FY2009 competitions.  Bureau of Reclamation: Modernizing Facilities –$1 billion for DOI is directed for water and related resources projects.  GSA: Conversion to High Performance Green Buildings –$4.5 billion from the GSA's Federal Buildings Fund to convert GSA facilities to High-Performance Green Buildings  Bureau of Land Management: Construction –$180 million including funding for energy efficient retrofits of existing facilities.  Fish and Wildlife Services: Construction –$115 million including funding for energy efficient retrofits of existing facilities.  National Park Service: Construction –$589 million including funding for energy efficient retrofits of existing facilities.  Forest Service: Capital Construction and Maintenance –$650 million including consideration of alternative energy technologies.

7. 7 ARRA Green Building Projects  DOD: Military Construction –$4.24 billion for Facilities Sustainment, Restoration and Modernization for U.S. and U.S. territories' facilities. A portion of these funds shall be used to invest in energy efficiency projects and to repair and modernize DOD facilities, including Defense Health program.  DOD: Military Construction –Navy & Marine Corps: $100 million for energy conservation and alternative energy projects.  DOD: Energy Conservation and Investment –$120 million for the Energy Conservation and Investment Program.  DOD: Military Family Housing Construction –Army: $34.5 million for construction and improvements to family housing to provide jobs, increase quality of life and employ energy efficiency through advanced construction techniques. –Air Force: $80.1 million  DOD: Military Family Housing Operating Expenses –Army: $3.9 million for necessary maintenance including energy savings upgrade –Air Force: $16.4 million  VA: Medical Facilities –Of the $1 billion appropriated, funds will be used for non-recurring maintenance and energy projects. The Senate report describes energy projects as follows: wind turbine systems, rooftop photovoltaic systems, and water conservation measures.  VA: National Cemetery Administration –$50 million for monument and memorial repairs including energy projects.

8. 8 ARRA Green Building Projects  HUD: Public Housing Capital Fund –$4 billion ($3 billion by formula, $1 billion by competition) for investments including leveraging private sector funding or financing for renovations and energy conservation retrofit investments.  HUD: HOME Investments Partnership Program –$2.25 billion of which up to 20% may be used for investments in energy efficiency and green building technology. Funds are available until Sept. 30, 2011.  HUD: Native American Housing Block Grants –$510 million, of which $255 million is by formula. The amounts distributed by formula shall be used for construction, retrofits and rehabilitations including energy efficiency retrofits.  HUD: Assisted Housing –$250 million for energy retrofits and green investments to project owners of HUD Section 8 housing.  Army Corps of Engineers –$4.6 billion for construction, operation and maintenance for previously-authorized projects including $25 million for the Corps regulatory program.  Department of Education –Of the $53 billion, there are references to using recognized green buildings ratings systems.  USDA: Assisted Housing Stability and Green Retrofit Investments –$2.25 billion, $2 billion will provide full-year payments to landlords participating in the Section 8 Project- Based program and $250 million will support a program to upgrade HUD sponsored low-income housing to increase energy efficiency, including new insulation, windows and furnaces

9. 9 Green Projects: Risk Categories  Scope of Work  Certification Expectations  Product Expectations  Performance Expectations  Cost Savings Expectations

10. 10 Green Projects: Risk Allocation Options  Silence –Advantages: None –Disadvantages: Countless  Teaming + Waiver of Certification/Product/Performance/Cost Saving Guarantees –Advantage: Protects design/construction team and supply chain –Disadvantage: May reduce impact of innovation and technology  Stipulated Penalty Clauses –Advantage: Allows front-end negotiation of the issues –Disadvantage: May restrict ability to innovate  Incentives (e.g. shared cost savings) –Advantage: Motivates team –Disadvantage: May reduce quality of base scope

11. 11 Green Design and Construction Contracts  There are many Green specification options, but no form general conditions  AIA: 2007 B101 requires architect to consider “environmentally responsible design alternatives” and discuss them with the owner; 2007 A201 does not address green certification or product risks  AIA B214 does not address consequences of failure to achieve LEED certification  AGC, ConsensusDOCS, EJCDC do not address Green issues or LEED Certification  DBIA – Sustainable Project Goals Exhibit NEW!

12. 12 ARRA Weatherization Assistance Program  $5 billion administered through DOE’s Office of Energy Efficiency and Renwable Energy –Includes a provision that expands the eligibility of low-income households for weatherization assistance and increases the maximum funding assistance level per household. –Supports weatherization of homes, including adding more insulation, sealing leaks and modernizing heating and air conditioning equipment, which will pay for itself many times over. –Allows an average investment of up to $6,500 per home in energy efficiency upgrades and will be available for families making up to 200% of the federal poverty level – or about $44,000 a year for a family of four. –March 12: Vice President Joe Biden and Energy Secretary Chu announced Indiana will receive–$131,847,383 for the Weatherization Assistance Program.

13. 13 Current Federal Energy Efficiency Tax Credits  Business Deduction for Energy-Efficient Commercial Buildings –A tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50% of the heating and cooling energy.  Builder Tax Credit for Energy-Efficient Homes –Home builders are eligible for a $2,000 tax credit for a new energy efficient home that achieves 50% energy savings for heating and cooling. The credit equals $1,000 for realizing 30% energy savings.  Homeowners’ Credit for Efficiency Improvements –Homeowners are eligible for a tax credit of up to $500 for insulation, replacement windows, water heaters and heating and cooling equipment.  Homeowner Energy-Efficiency Tax Credit for Existing Homes –Increases the value of the energy efficient existing homes credit to 30 percent for 2009 and 2010, modifies the standards for qualifying property, and sets the per-dwelling maximum for this period at $1500 per taxpayer NEW!

14. 14 Department of Energy  Transportation Electrification –$400 million to states, local governments and metropolitan transportation authorities for qualified electric transportation projects that reduce emissions, including: truck stop electrification, airport ground support equipment and cargo-handling equipment.  Alternative Fueled Vehicles Pilot Grant Program –$300 million in grants through the Clean Cities program to state and local governments, metropolitan transportation authorities and others for encouraging the use of plug-in electric-drive vehicles or other emerging electric vehicle technologies.  Advanced Batteries –$2 billion in grants for the manufacturing of advanced batteries and components, including advanced lithium- ion batteries, hybrid electrical systems, component manufacturers and software designers.  Non-Defense Environmental Cleanup –$483 million to the Department of Energy, which can also be applied to brownfields cleanup.  Energy Efficiency and Renewable Energy Program –$2.5 billion for applied research, development, demonstration and deployment activities to include: $800 million for projects related to biomass and $400 million for geothermal. The balance of the money is for solar, wind, hydrogen, water power, and energy efficiency demonstrations for industrial and commercial practices.  Innovative Technology Loan Guarantee Program –$6 billion to pay for the costs of guarantees made under this section for renewable technologies and transmission technologies. This includes renewable energy systems such as incremental hydropower; electric power transmission systems; and leading-edge biofuels projects at the pilot or demonstration scale. This should support $60 billion of loans.

15. 15 Department of Energy (continued)  Energy Efficiency and Conservation Block Grants –$3.2 billion of which $2.8 billion is to states through the existing formula in EISA Title V subtitle V. The remaining $400 million shall be rewarded on a competitive basis as determined by the Secretary. Types of projects include energy audits, implementing building codes, and government building on-site projects that generate electricity from renewable sources  Smart Grid –$4.5 billion to modernize the electric grid including demand-response equipment, security and reliability enhancements, energy storage research, development, demonstration and deployment, and to facilitate recovery from disruptions from the energy supply.  Clean Coal –$800 million in competitive grants for the Clean Coal Power Initiative Round 3.  Fossil Energy Research and Development –$1 billion for fossil energy, coal technologies, carbon capture, coal mining technologies, oil and gas, oil and gas reservoirs, complex weld technology testing, and methane hydrate R&D programs  Advanced Research Projects Agency –$400 million to support high-risk, high-payoff research to accelerate the innovation cycle for both traditional and alternative energy sources and energy efficiency. This funding is for research and construction of laboratory facilities.

16. 16  Competitive Grants for Transportation –$1.5 billion for competitive grants to projects across all surface transportation modes that will have a significant impact on the nation, a metropolitan area or a region. Awards will range from $20 to $300 million.  Grants-in-Aid for Airports –$1.1 billion to be used by the FAA to provide discretionary airport grants to repair and improve critical infrastructure at airports. These investments will serve to provide important safety and capacity benefits.  Highway Infrastructure Investment –$27.5 billion in funds distributed by formula. Set asides are also provided for environmentally-friendly transportation enhancements.  Capital Assistance for High Speed Rail and Intercity Passenger Rail Service –$9.3 billion: $1.3 billion to Amtrak and the remaining $8 billion is provided for the development of intercity and high speed passenger rail. The Secretary has flexibility in allocating resources between the programs to advance the goal of deploying intercity high speed rail systems in the US. Grants will be distributed under the Intercity Passenger Rail Grants to States and the High Speed Corridors grant program.  Transit Capital Assistance –$6.9 billion divided up into formula grants for urbanized areas, rural areas, and growing state and high- density areas. Within this funding, $100 million is provided for discretionary grants to public transit agencies to reduce energy consumption or greenhouse gas emissions.  Fixed Guideway Infrastructure Investment –$750 million distributed through an existing authorized formula for capital projects to modernize or improve existing fixed guideway systems, including purchase and rehabilitation of rolling stock, track, equipment and facilities.  Capital Investment Grants (New Starts Program) –$750 million in discretionary grants to be competitively awarded. Department of Transportation

17. 17  Clean Water State Revolving Fund –$4 billion for Clean Water State Revolving Fund grants. Priority funds are designated for projects ready to proceed to construction within 12 months of enactment. This is for nonpoint source, watershed protection or restoration, estuary projects and traditional municipal wastewater treatment programs.  Drinking Water State Revolving Fund –$2 billion for Drinking Water State Revolving Fund grants. Priority funds are designated for projects ready to proceed to construction within 12 months of enactment. Eligible projects must facilitate compliance with national drinking water regulations or otherwise advance health protection objectives under the Safe Water Drinking Act. Projects to replace aging infrastructure are eligible if necessary to maintain compliance or advance the Act’s public health goals.  Diesel Emissions Reduction –$300 million for diesel emission reductions grants to states.  Superfund –$600 million to the EPA’s Hazardous Substance Superfund program to address uncontrolled releases from hazardous and toxic waste sites that threaten human health and the environment.  Brownfields Cleanup –$100 million to states and tribal authorities for remediation of brownfields sites. Four types of competitive grants are eligible: brownfields assessment, cleanup, revolving loan fund, and environmental job training. The 20% cost- sharing requirement is waived.  Leaking Underground Storage Program –$200 million in grants for cleanup activities with no cost-sharing requirement. Environmental Protection Agency

18. 18 ARRA Compliance – General  Basic Strategy: Oversight and Transparency  Basic Goals: Accountability, Risk Mitigation, Minimize Fraud and Abuse  Specific Provisions Largely Undefined  Implementation: –Federal: Agency and Department Heads OMB Memo M-09-10 (February 18, 2009) Example: DOE Inspector General: Memo OAS-RA-09-01 –State and Local: Executive Offices Section 1511 Certification »Question: Does “False Claims Act” Liability Apply?

19. 19 ARRA Compliance – Specific Provisions  Buy America  Hire America  Davis Bacon Act – Prevailing Construction Wage  Fixed Price Contracts  Competitive Contracting Procedures  State and Local Whistleblower Protection  “Executive Agencies” may not enter into “Federal Contracts” without complying with federal procurement laws and the Federal Acquisition Regulations

20. 20 ARRA Compliance – Hire America  Companies receiving TARP funds cannot hire foreign workers  Does not apply to overall ARRA projects

21. 21 ARRA Compliance – Buy America  Applies to All Iron, Steel and “Manufactured Products” used in ARRA public building and works projects  Terms appear to borrow from Buy American Act (1933 – Federal Procurement) and Buy America Statute (1964 – FTA Grants for State and Local projects)  BUT: Terms are not defined  Exemptions: –If requirement is “inconsistent with the public interest” –If the products are not produced “in sufficient and reasonably available quantities” in U.S. –If use of U.S. products increases cost of overall project by 25%  Penalties? –False Claims Act Liability –Contract and Legal Remedies: Invalid Bid, Void Contract, Contract Termination, Fraud  Basic Recommendation: –Broad Certifications and RFP’s require compliance and trigger liability –Therefore: Without express exemption for the project - - All building products should be American-made (entire supply chain)

22. 22 ARRA Compliance – Risk Allocation Strategies  Current Practice: –Broad Certifications Federal Agency and Department Heads State and Local Executives –Indemnification Agency passes risk to contractor Contractor passes risk to subcontractor Subcontractor passes risk to suppliers –Vague Penalties E.g. Does the Buy American requirement subject state and local contractors who sign broad certifications to federal False Claims Act liability?  Future Efforts: –Inspectors General, States and Local Officials will develop compliance best practices and RFP’s (i.e. contract provisions) with specific requirements  Minimum Recommendations: –Where Possible: Clarify broad and vague certifications before issuing or responding to RFP’s –Expressly incorporate ARRA funding and compliance elements into indemnification provisions in contracts

23. 23 Washington This Week  Energy Efficiency Markup –The full Senate Energy and Natural Resources Committee will mark up legislation updating appliance standards and industrial energy efficiency –Part of larger, comprehensive Energy reform –Energy efficiency is the “low-hanging fruit” –President Obama is making a significant push for energy efficiency  House Cap-and-Trade Legislation –Released this week, sponsored by Reps. Waxman (CA) and Markey (MA)  ARRA Oversight Hearing –The Senate Homeland Security and Governmental Affairs Committee is looking into how well ARRA funds are being spent

24. 24 Questions? Patrick Miller Associate, Baker & Daniels patrick.miller@bakerd.com 312.212.6514 Andrew Wheeler Senior Vice President, B&D Consulting andrew.wheeler@bakerd.com 202.312.7424