1. ENERGY + INNOVATION FOR THE LIFE OF YOUR BUILDING Energy/Facilities Connection 05.21.08 Ryan Dickerson - Analyst | McKinstry

2. Agenda  Introductions (Ryan Dickerson, McKinstry)  What is Total Cost of Ownership?  Case Studies  Questions?

3. McKinstry Overview…  47 Year old Seattle Headquartered Company  WA, OR, ID, CO, MN, & WY pre-qualified ESCO  Offer Full Service M/E/P Design & Construction Services  Largest Dedicated Energy Services Group in the PNW  Perform Projects of all sizes ($50k to $15M)  Financially strong - $100M in bonding capacity  1200+ dedicated employees (500 professionals & 700 trades)  55 Engineers with 23 LEED Accredited Professionals

4. Total Cost of Ownership

5. Where did Total Cost of Ownership Come From?  Developed in the late 1980’s in the computer industry to manage the cost of IT infrastructure  Found that 1 st costs were minor in comparison to infrastructure & support costs  Developed an integrated financial modeling tool for projects

6. Difficulties in Achieving High Performance Buildings  Typical approaches are fragmented – not integrated!  No connections between first costs, operations costs, and sustainability  Design decisions are often first cost driven  Last minute Value Engineering!  LEED is based on a scorecard and not long term building functionality

7. What options are currently used to make decisions? OptionProsCons Value Engineering Effective for managing 1st cost decisions Only evaluates a single component, not the overall financial picture Pro Forma Tracks developers soft costs Doesn't evaluate impacts of design decisions on holistic budget LEED Integrates sustainability Doesn't evaluate the long term financial of sustainability Operating Cost Budget Good for managing ongoing operations budget Can't integrate with first cost decisions Design Charrette Good for generating sustainable ideas Not a financial tool to evaluate decisions

8. Are We Improving?  Is the design and construction industry improving as an industry?  How far have we come over the past 30 years as compared to other industries?

9. Industry Example:  Boeing changed the airline industry  Vertical Integration  Outcome Focused Approach  Span of Control  Aligned All Parties

10. How does TCO Create High Performance Buildings?

11. What do you get with TCO?  Decision making platform – considering all factors!  Integration of all financial elements related to a building  Clear view of NOI/ROI for each element of a project  Integrates first cost with long term costs  Allows for pragmatic assessment of sustainable features

12. Financial Model Tailored to Each Project

13. Evaluate Design Concepts TCO First cost Capital Renewal costs Program Flexibility costs Operational costs Operational benefits Improved productivity Risk Management Energy modeling TCO First cost Capital Renewal costs Program Flexibility costs Operational costs Operational benefits Improved productivity Risk Management Energy modeling LEED / Carbon Footprint

14. Sustainability as an Evaluation/Outcome You can be pragmatic about sustainability High performance buildings do not need to be a first cost premium TCO evaluates the cost and benefits of LEED points across all segments of the project

15. Mitigate Impact on Capital Expenditures  TCO can forecast capital improvements over life of building  Evaluate impact of first costs on future expenditures

16. Truly Understand Operational Costs  Vast database of historical operations information to build the model  TCO aides decision making to minimize operations impacts  TCO helps bridge the gap between capital planning and operations department to achieve decision buy in.

17. Productivity – Improve Physical Learning, Teaching & Research Environment  Evaluate qualitative aspects of the building  Evaluate success meeting tenant and owner priorities

18. TCO Quantifies Carbon Emissions  Quantify Emissions From:  Energy Usage  Worker Travel  Material Shipping  Carbon Footprint Measurement  Develops a System for Measuring Carbon  Both During and After Construction

19. Wide Range of Project Types Leveraging TCO  A Commercial Real Estate Project used TCO:  To evaluate designs against previous benchmarks  K – 12 School District Client Project used TCO:  To facilitate team communication  Instead of traditional value engineering  Higher Education Project:  To develop a Sustainability Master Plan  A Healthcare Project used TCO:  To evaluate remodel vs. new construction scenarios

20. Keys to Successful Sustainable Projects » Involve Entire Team » Understand the Desired End Result » Focus on the Real Project Drivers and Financial Assumptions / Requirements » Integrated and Guaranteed Turn-key delivery » Stay Committed

21. Average Savings of High Performance Buildings Energy Savings 30% Carbon Savings 35% Water Use Savings 30-50% Waste Cost Savings 50-90%

22. “For the Life of Your Building”  McKinstry projects have eliminated 150,000 metric ton of CO2 emissions in the past five years. This equates to:  Planting 9 million trees  Removing 8,500 cars from local highways  McKinstry has saved customers nearly 150 million kWh & 10 million Therms in the past five years. That equates to  Converting 1 million 60-watt incandescent bulbs to fluorescent bulbs  Converting 200,000 showerheads from 2.5 gpm to 2.0 gpm.  On average, McKinstry uses over 2 million pounds of steel annually, of which:  1.3 million pounds is recycled.  The recycled content saves enough energy to power over 110 American households per year.

23. Questions?