HomeMy WebLinkAboutCAP 2007-03-27 Item 2E - Discussion - HVAC Performance Based Contract Process for Tukwila PoolParks and Recreation Department
Bruce Fletcher, Director
INFORMATIONAL MEMORANDUM
TO: Mayor Steve Mullet
Community Affairs and Parks Committee
FROM: CS Rick Still, Deputy Director of Parks and Recreation
DATE: March 21, 2007
SUBJECT: City of Tukwila Pool HVAC Performance -Based Contract Process
ISSUE
Performance -Based Contractor selection process for the City of Tukwila Pool's HVAC
system.
The City of Tukwila Pool Heating, Ventilation, and Air Conditioning (HVAC) system has
had emergency repair work performed 5 times in the past ten months costing $9,956.
Staff was hopeful that these repairs would keep the system operational for a long
period of time. However, the fan motor, bearings and shaft of the main system
continue to get out of balance and need to be completely replaced, as well as, many
other parts of the system are not operational.
When the system does stop operating (usually during the middle of the night), the
condensation builds up on the fire alarm beam detectors, due to the extreme humidity,
and this sets off the fire alarm in the middle of the night causing an unnecessary call
out for the fire dept and potentially calling them away from a more serious situation.
This also causes a staff member to be at the building (24 hours, 7 days a week) on a
fire watch until the situation is fixed. The current HVAC system repairs need to be
made or the pool may not be operational for an undetermined time and at an unknown
cost.
Staff has investigated Chapter 39.35A of the Revised Code of Washington (RCW) with
the City Attorney's office and Finance Department. This code allows a performance
based contract for energy equipment and supplies. Instead of hiring a HVAC
consultant to put a bid packet together for a specific scope of contracted work, the city
can utilize the performance -based contract process to:
1. Conduct a Request for Qualifications (RFQ) to select the most qualified
Energy Services Company (ESCO);
2. Have said company perform an energy audit that meet the qualifications and
criteria of the City, i.e. guaranteed energy- savings, guaranteed installation
cost, and guaranteed performance;
3. Construct or implement the projects identified through the energy audit; and
4. Verify the energy savings and overall system performance as guaranteed.
Community Affairs and Parks Committee
Information Memorandum
City of Tukwila Pool
HVAC Performance -Based Contract Process
Page 2
This memorandum is to inform you of the process that staff is using for energy
equipment, i.e. City of Tukwila Pool's HVAC system. The City of Tukwila "can, by
resolution, choose to negotiate a performance -based contract under Chapter 39.35A
RCW" to guarantee energy- savings, installation cost, and HVAC performance rather
than developing plans and specifications to publicly `bid' this scope of work.
To help answer any questions you may have, staff has invited an ESCO contractor
representative to attend the CAP meeting.
ALTERNATIVES
Alternative One:
The City can choose to utilize the ESCO process.
Consequences:
The HVAC system will be audited to seek energy efficiencies and repair items.
A list of projects will be provided from the audit that the City can choose from to
make repairs based on a cost benefit analysis approach.
The City can choose to make these repairs or plan to have them made in the
future.
The energy performance and construction installation cost are guaranteed, if
they are done as part of the ESCO process.
Alternative Two:
The City can choose to make repairs as things wear out and break down and not
repair items that are not working.
Consequences:
There are known items that are on a weekly staff watch list to keep operational.
There are known items that are not working, which means the system is not
working efficiently.
Repairs that are performed on an emergency basis cause unscheduled pool
closures; and there are no performance guarantees (cost savings), and the
repair cost are time and materials until the system is operational (no cost
control).
Alternative Three:
The City can choose not to do anything at this time.
Consequences:
This alternative is very similar to Alternative Two since there are known items
that need to be replaced /repaired to keep HVAC system operational.
cc: City Administrator
Director of Parks Recreation
City Attorney
Finance Director
Community Affairs and Parks Committee
Information Memorandum
City of Tukwila Pool
HVAC Performance -Based Contract Process
Page 3
RECOMMENDATION
Information Only: Staff is currently in the RFQ process to obtain an ESCO contractor.
Once the energy audit is conducted, a preferred action will be recommended to the
City Council.
ATTACHMENTS:
1. RCW 39.35A
2. Comparison of Energy Performance Contracting with Conventional Procurement
Procedures
3. Energy Savings Performance Contracting Adds Value to Public Works Projects
4. RFQ for Energy Performance Contract
Chapter 39.35A RCW
Performance -based contracts for energy equipment
RCW Sections
39.35A.010 Legislative finding.
39.35A.020 Definitions.
39.35A.030 Performance -based contracts for energy equipment and supplies.
39.35A.040 Application of other procurement requirements.
39.35A.050 Energy service contractor registry Identification of performance -based contracting
services.
39.35A.010
Legislative finding.
39.35A.020
Definitions.
The legislature finds that:
(1) Conserving energy in publicly owned buildings will have a beneficial effect on our overall supply of
energy;
(2) Conserving energy in publicly owned buildings can result in cost savings for taxpayers; and
(3) Performance -based energy contracts are a means by which municipalities can achieve energy
conservation without capital outlay.
Therefore, the legislature declares that it is the policy that a municipality may, after a competitive
selection process, negotiate a performance -based energy contract with a firm that offers the best proposal.
[1985 c 169 1.]
Unless the context clearly indicates otherwise, the definitions in this section shall apply throughout this
chapter.
(1) "Energy equipment and services" means energy management systems and any equipment, materials,
or supplies that are expected, upon installation, to reduce the energy use or energy cost of an existing
building or facility, and the services associated with the equipment, materials, or supplies, including but not
limited to design, engineering, financing, installation, project management, guarantees, operations, and
maintenance.
(2) "Energy management system" has the definition provided in RCW 39.35.030.
(3) "Municipality" has the definition provided in RCW 39.04.010.
(4) "Performance -based contract" means one or more contracts for energy equipment and services
between a municipality and any other persons or entities, if the payment obligation for each year under the
contract, including the year of installation, is either: (a) Set as a percentage of the annual energy cost
savings attributable under the contract to the energy equipment and services; or (b) guaranteed by the other
persons or entities to be less than the annual energy cost savings attributable under the contract to the
energy equipment and services. Such guarantee shall be, at the option of the municipality, a bond or
insurance policy, or some other guarantee determined sufficient by the municipality to provide a level of
RCW 39.35A Page 1 of 2
assurance similar to the level provided by a bond or insurance policy.
[2001 c 214 18; 1985 c 169 2.]
Notes:
Severability Effective date 2001 c 214: See notes following RCW 80.50.010.
Findings 2001 c 214: See note following RCW 39.35.010.
39.35A.030
Performance -based contracts for energy equipment and supplies.
(1) Each municipality shall publish in advance its requirements to procure energy equipment and services
under a performance -based contract. The announcement shall state concisely the scope and nature of the
equipment and services for which a performance -based contract is required, and shall encourage firms to
submit proposals to meet these requirements.
(2) The municipality may negotiate a fair and reasonable performance -based contract with the firm that is
identified, based on the criteria that is established by the municipality, to be the firm that submits the best
proposal.
(3) If the municipality is unable to negotiate a satisfactory contract with the firm that submits the best
proposal, negotiations with that firm shall be formally terminated and the municipality may select another
firm in accordance with this section and continue negotiation until a performance -based contract is reached
or the selection process is terminated.
[1985 c 169 3.]
39.35A.040
Application of other procurement requirements.
If a municipality chooses, by resolution or other appropriate mechanism, to negotiate a performance -based
contract under this chapter, no otherwise applicable statutory procurement requirement applies.
[1985 c 169 4.]
39.35A.050
Energy service contractor registry Identification of performance -based contracting services.
The state department of general administration shall maintain a registry of energy service contractors and
provide assistance to municipalities in identifying available performance -based contracting services.
[2001 c 214 19.]
Notes:
Severability Effective date 2001 c 214: See notes following RCW 80.50.010.
Findings 2001 c 214: See note following RCW 39.35.010.
RCW 39.35A Page 2 of 2
COMPARISON OF
ENERGY PERFORMANCE CONTRACTING
WITH
CONVENTIONAL PROCUREMENT PROCEDURES
STANDARD PROCUREMENT
SPEC AND BID EVERY PHASE
OF IMPLEMENTATION
1. Usually requires a capital budget authorization.
2. Extended completion time due to need to obtain
budgetary approvals from Agency, Governor and
Legislature. Time for completion can vary from
2.5 years to 6 years. Increased costs can vary
from 3 -15% due to inflation.
3. Project is funded by State issued bonds which are
repaid over a 30 year period using tax exempt
financing.
4. These projects seldom qualify for utility rebates
since the programs are normally over before the
projects are funded.
5. Long term energy savings are, rarely, if ever
guaranteed. Staff turnover, lack of ongoing
training, lack of energy conservation
expectations, and maintenance failures often kill
project performance.
6. Comfort and lighting performance standards are
seldom a part of any construction contract with a
hardware vendor.
7. Change Orders are common practice because of
misinterpretation or funding availability and
scope of project do not match.
8. Separate phases of project implementation
diffuses the source of responsibility for effective
performance and often results in disputes over
liability for non performance.
9. Equipment is guaranteed to be free from defects
for one year from substantial completion.
ENERGY PERFORMANCE CONTRACT
COMPETITIVE NEGOTIATIONS
FOR PROFESSIONAL SERVICES
1. Utilizes existing appropriated utility budget line item
to pay all project costs.
2. Third party financing is available, which allows the
public building owner to construct projects sooner.
Time for completion for an average project will be 18
months from project conception. No increased costs
due to inflation.
3. Project is funded by State Treasurer lease purchase
financing or Municipal Lease (tax exempt or capital)
financing which is repaid over a 10 year period.
4. EPC maximizes utility financial participation in the
project. This reduces the amount to be financed or
allows additional conservation projects to be
implemented.
5. ESCO provides guarantee of performance, monitors
and verifies energy consumption, and trains staff to
achieve long term project performance. Energy
savings are guaranteed by the ESCO.
6. EPCs typically contain a performance definition and
guarantee of lighting and comfort conditions.
7. No change orders unless Owner elects to increase
project scope within cost effectiveness criteria.
8. A single point of financial and technical
accountability for total project performance is
standard.
9. EPC guarantees the project functions as designed,
maintains specific comfort conditions, saves energy
and saves dollars over the life of the Agreement with
the ESCO.
April 2003
Washington State Department of
General Administration Visit our web site at httn:/ /www.aa.wa.gov /EAS /enc /esnc.htm
10. Incremental project implementation often leads to
eliminating cost effective retrofits due to
inadequate funds, limited staff time, and overly
narrow or biased project specifications.
11. Most public institutions can not afford to pay for
top notch technical energy staff nor can they
afford to train existing staff.
12. Capital energy projects must compete with other
capital priorities in an environment of limited
budget resources.
13. There is no direct reward to managers or staff for
reducing energy costs.
14. New project responsibilities can bring risks of
non- performance and technical errors due to lack
of internal technical expertise.
15. The operations and maintenance budgets of public
institutions are usually under funded resulting in
comfort problems, equipment breakdowns, lack
of staff training, and wasted energy.
16. When project construction is accepted by staff,
there is no guarantee that future improvements
will be made to respond to changing conditions.
Washington State Department of
General Administration
10. Performance contractors consider all cost effective
retrofits and secure financing for all feasible
improvements. The costs of other needed capital
improvements may be underwritten from any
additional utility cost savings generated by the project.
11. ESCOs internalize technical expertise in order to
guarantee project performance.
12. EPCs are not fmanced through a capital process.
Funding is available from ESCOs, lenders and State
Treasurer. Performance guarantees are designed to
cover the costs of project financing, ongoing
guarantees, and monitoring and verification of
savings.
13. Compensation to the ESCO is tied directly to project
performance and provides a very tangible financial
incentive for reducing energy costs.
14. Willingness to accept technical responsibilities and
risks is tied to direct financial rewards which are
based on project performance.
15. ESCOs cannot afford to under fund any functions
critical to protecting their investment and meeting the
performance guarantees contained in the contract.
16. ESCOs have a strong incentive to respond to changes
in technology, utility rates, and building requirements
to maintain the guarantee of project performance over
the term of the contract.
April 2003
Visit our web site at httR:// www.ga.wa.ssov /EAS /enc /esac.htm
ENERGY SAVINGS PERFORMANCE CONTRACTING
ADDS VALUE TO PUBLIC WORKS PROJECTS
Energy Savings Performance Contracting, or simply performance contracting (PC), shares many
similarities with conventional public works design and construction practices. However, there
are some distinct differences between PC and the design, bid, build (DBB) process. PC can
provide many opportunities to an owner installing energy efficiency equipment, which are not
otherwise available when using the DBB process.
The advantages to PC for procuring energy efficiency equipment include:
Third party financing is available, which allows the public building owner to construct projects
sooner. Some public works projects can take as long as six years to complete: identify project
and request funding in the first biennium; design in the second biennium; and, construct in the
third biennium. Using PC a similar project can be completed in eighteen months.
By using third party financing for procuring energy efficiency equipment the owner reserves
scarce capital dollars for more pressing building improvements. Combining third party financing
with capital dollars allows the owner to leverage the capital appropriation, essentially doing
"more with less."
PC maximizes utility financial participation in the project.
Energy service company (ESCO) selected based on qualifications. Since the ESCO also provides
general contracting services the owner is also selecting the highest qualified general contractor,
rather than the low bid contractor.
Building audit findings must meet owner's cost effectiveness criteria or owner not responsible for
ESCO audit costs.
There is a single point of accountability from audit through design, construction and
commissioning, which reduces the uncertainty of identifying a responsible party when design or
construction issues arise.
Subcontractors can be pre qualified and only the most highly qualified and reliable subcontractors
will be invited to bid the work.
Owner/ESCO can select other than the low bid subcontractor.
Owner can specify equipment by manufacturer.
ESCO guarantees equipment performance and assists owner with warranty issues. DBB requires
that equipment is free from defects for one year. PC guarantees the project functions as designed,
maintains specific comfort conditions, saves energy and saves dollars over the life of the contract
with the ESCO.
No change orders unless the owner elects to increase scope.
Open book pricing and construction cost reconciliation assure fairest value for the owner.
ESCO guarantees construction cost and assumes financial responsibility for cost overruns.
Commissioning is an integral component of PC, not an extra cost.
The owner has more control over contractor (ESCO) overhead and profit. O &P is negotiated and
multiple markups of subcontractor costs are not allowed.
ESCO provides a guarantee of energy savings and reimburses owner for any savings shortfalls.
ESCO's monitoring and verification (M &V) services provides owner with assurance equipment
will perform for the life of the agreement.
Performance contracting is a "value added" process for improving building energy efficiency.
April 2003
Washington State Department of
General Administration Visit our web site at htta:/ /www.2a.wa.2ov /EAS /enc/esnc.htm
Request for Qualifications
for
Energy Services Company
(ESCO)
The City of Tukwila Pool
City of Tukwila, Washington
Introduction
The City of Tukwila seeks proposals from interested Energy Services Companies (ESCOs)
to provide performance -based contracting for the City. The intent of selecting an ESCO is
to develop a qualified project that addresses aging HVAC systems in the City of Tukwila
Pool. The likely scope of the Performance Contract will focus on renovating the HVAC
systems in the aquatic center which may include upgrades to boiler systems, upgrades to
ventilation systems, control system upgrades, and other potential HVAC system
improvements, and humidity control measures. The entire process consists of the
following four phases:
RFO Phase: Through this RFQ, the City will select an ESCO based on written
submissions and overall qualifications. The City reserves the right to interview
appropriate firms if necessary to further qualify capabilities of ESCOs.
Enerav Audit Phase: This phase of work will focus on the development of
energy- savings measures that meet the qualifications and criteria of the City.
The outcome of this phase will be a formal proposal to the City that includes, but
may not be limited to, guaranteed cost, guaranteed energy savings, proposed
scope of work, and other miscellaneous supporting documentation.
Construction Implementation Phase: Upon satisfactory results of the Energy
Audit, and at the option of the City, the City may enter into a contract with the
ESCO to implement the proposed measures from the Energy Audit.
Performance Assurance Phase: This phase will focus on the verification of
energy savings and overall system performance as guaranteed by the ESCO and
agreed to by the City.
Preliminary Project Schedule
The following information outlines the preliminary schedule for the project. The intent of
the City is for the proposed project to be completed prior to the end of the 2007 calendar
year. As such, it will be critical that the ESCO have the resources available to meet these
dates and accommodate the development and construction schedule. All dates are
subject to change at the discretion of the City.
RFQ Responses Due April 6, 2007
ESCO Selection April 11, 2007
Audit Development April 2007 May 2007
Approval Long Lead Equipment May 2007
Project Construction June 2007 September 2007
RFQ Response
Please submit three copies of RFQ response by 4:00 pm on April 6 2007 to The City
of Tukwila at the following address:
City of Tukwila
Parks and Recreation Department
Attn: Rick Still
12424 42n Avenue South
Tukwila, WA 98168
Any questions regarding this RFQ should be directed to the following:
Rick Still. Deputy Director
Parks and Recreation Department
Phone: 206 767 -2344
E -mail: rstilaci.tukwila.wa.us
City of Tukwila Pool
RFQ for Energy Services Company
Due: April 6, 2007
Page 2 of 4
Proposal Response: Please respond to the following questions in your RFQ response.
Please present information in a clear and concise format. There is no limit to the number
of pages of the response.
1. EXPERIENCE
Provide a list of all Energy Services Performance Contracting (ESPC) projects
completed in the past five years. Include the value of the project, project dates,
project team, summary of the work completed, and any other relevant
information. Limit experience to the following categories:
a. Aquatic projects in the State of Washington
b. Other project experience in Washington State (no more than ten projects)
2. PROJECT TEAM
Provide information that details the proposed project team, organization structure,
and management approach. Identify who will have primary responsibility for each
task of the project, including technical analysis, engineering design, construction
management, and performance assurance. Provide resumes for each project team
member.
3. DESIGN
Describe your firm's design capabilities and whether design services would be
conducted with in -house ESCO engineering personnel or whether design services
would be contracted to outside consultant /engineering firms.
4. ENERGY AUDIT APPROACH
a. Baseline Calculation Describe in detail the methodology your firm normally
uses to compute the baseline energy use in facilities.
b. Baseline Adjustment Describe the method(s) used to adjust the energy
baseline due to such factors as weather and facility use changes. Describe
factors that would necessitate adjustment.
c. Savings Calculations List all procedures, formulas and methodologies,
including special metering or equipment your firm will use to calculate energy
and Operation Maintenance savings.
5. SUBCONTRACTING APPROACH
Describe your firm's approach to subcontracting and whether your firm has the
capabilities to provide any of the expected work with in -house forces. Describe
how cost competitive pricing will be secured and maintained for this project.
6. CONSTRUCTION CLOSE -OUT
Describe your firm's construction close -out processes including project
commissioning, training, and other related activities.
City of Tukwila Pool
RFQ for Energy Services Company
Due: April 6, 2007
Page 3 of 4
7. MEASURE VERIFICATION
Describe the methodology proposed for ongoing monitoring and savings
verification of the proposed project.
8. FEE SCHEDULE
Provide a fee schedule and show how it would be applied to project costs. Clearly
indicate any in -house staff labor that would be utilized and the associated labor
rates for each labor category. Describe how project costs will be reconciled at the
end of the project.
Proposal Evaluation: The City will use City staff to evaluate all proposals. The
evaluation will be scored using the criteria below. Responses will be evaluated and
ranked /scored. Should two or more ESCOs have similar scores, the City reserves the right
to conduct interviews of the ESCOs in order to gain additional insight into each firm's
capabilities and qualifications. Should this step be required, the City will notify only those
ESCOs that have been selected for interviews.
Evaluation Criteria Weight.
Experience
Project Team 15
Design 10
Energy Audit Approach 10
Subcontracting Approach l 15
Construction Close -Out 15
Fee Schedule 10
Measure Verification 5
City of Tukwila Pool
RFQ for Energy Services Company
Due: April 6, 2007
Page 4 of 4