HomeMy WebLinkAboutagenda.council.worksession.20091102MEMORANDUM
TO: Mayor and City Council
FROM: Jeff Rice
THRU: Phil Overeynder, Utilities Director
THRU: Steve Barwick, City Manager
THRU: John Worcester, City Attorney
DATE OF MEMO: October 293, 2009
MEETING DATE: November 2nd, 2009
RE: Performance Contracting Energy Efficiency Improvements
REQUEST OF COUNCIL: Staff requests council approval to contract with McKinstry for
Performance Contracting of energy efficiency improvements to thirteen (13) City of Aspen
owned buildings and facilities. Under the Colorado Governor's Energy Office (GEO) technical
energy audit and performance contracting model the performance contract awazd is to
McKinstry.
PREVIOUS COUNCIL ACTION: On October 5~" Staff and McKinstry presented to council
the final energy improvement work scope related to the McKinstry project. Council had
questions concerning duplicative efforts of projects listed, financial stability of McKinstry, the
financial aspect of the performance guarantees, utilizing local contractor resources, and Leas
option financing. The attached documents support the clarification of these concerns. Prior
council action: July 80' of 2008 council voted to approve a contract with the energy services
company McKinstry to perform technical energy audits in ten (10) city owned buildings and
facilities at a base cost of $0.10/square foot. Additional buildings were added to McKinstry's
scope for the audit and 14 buildings were audited, for a total audit cost of $38,000. The
Colorado GEO performance contracting model was made know to council at that time.
Performance contracting is using the savings in operating and maintenance costs generated from
improvements to offset the cost of implementing the improvements.
BACKGROUND: The City of Aspen owns and operates a number of buildings and facilities
varying in age and condition. With the exception of the Aspen Recreational Center (ARC) and
Red Brick Building none has undergone a technical energy audit to improve performance, reduce
energy use, reduce operating costs, and reduce cazbon emissions. McKinstry was challenged to
be innovative beyond traditional performance measures and integrate City goals for energy
Page 1 of 4
efficiency. These goals include reduced energy consumption, lower carbon emissions, and acting
as leaders on climate change and development of new energy economies. To date McKinstry has
performed technical energy audits in all tazgeted buildings and facilities and a detailed report has
been compiled. There were many potential areas of improvement and a preliminary list of
measures was constructed from which the final work scope was selected. Extensive staff input
was received on the final list of improvements. With McKinstry acting as our general contractor,
RFP's for improvement projects were developed. Those proposals were compiled into a final
work scope and financial matrix (attached) to complete the report.
DISCUSSION: The utilities energy efficiency division in cooperation with key city staff desires
to act on the proposed energy performance improvements identified in the technical energy
audits performed by McKinstry. The goal of this process will be to implement energy upgrades
to city facilities and buildings to reflect the City of Aspen's 2005 adoption of the Canary
Initiative and its commitment to reduce cazbon emissions to address climate change. When
implemented, the proposed improvements will have an annual net energy and operational cost
savings of $58,796, reducing the city cazbon emissions by 717,340 pounds per yeaz. McKinstry
will act as general contractor throughout the entire implementation process. McKinstry has
followed city procurement procedures releasing RFP's and obtaining bids for individual projects.
The costs of the project aze $1,310,210 with $752,967 of city capital and an estimated utility
rebate of $13,299. The calculated energy savings aze guazanteed as is the proposal dollaz amount
per improvement project. The work performed under McKinstry's supervision will be
guaranteed by McKinstry and upon completion including commissioning and monitoring
verification of savings will be performed. These savings aze guazanteed by McKinstry. What
this means is if we have a problem with performance, energy reduction, or operation, McKinstry
will repair the situation to guazanteed levels at no cost. Any reduction of savings realized
beyond the calculations presented will be to the benefit of the city and no further funds will be
awarded McKinstry.
The buildings and facilities that will receive improvements are Aspen City Hall, Electric Switch
Station, Golf Facilities, Ice Gazden, .Aspen Recreation Center, Pazking Department, Pazks
Facilities, Rio Grande, Red Brick, Yellow Brick, Parking Garage, Building and Plaza, Street
Facilities and Water Department Facilities. The improvement projects vary from building to
building and include lighting, controls; automation of systems, pumps, drive motors, waste heat
recovery, HVAC upgrades, retro-active commissioning, and new installation of necessary
equipment and structures. Upon completion of the project city buildings and facilities will use
less energy and operate more efficiently. This will lengthen the life of equipment, and in some
cases increased comfort for the building occupants.
If this proposal and subsequent performance contract with McKinstry is approved by Council,
the construction implementation phase will begin within two weeks of signing a contract. The
construction phase will be up to 180 days and the majority will be interior, low impact
construction.
Page 2
FINANCIAL/BUDGET IMPACTS: The energy improvements identified have a bundled
simple payback of 11.4 years. The $38,000 cost of the initial technical energy audits were
financed from the Utility Efficiency Budget. The total performance contracting proposal of
$1,310,210 is initially offset by $752,967 of contributed department capital budget. In addition,
the City will receive utility grants/rebates estimated at $13,299. The performance contracting
model allows the remaining $544,013 to be financed through atax-exempt municipal lease
purchase agreement over a 10-12 yeaz term at an expected 4.5 - 5.0% interest rate.
ENVIRONMENTAL IMPACTS: The technical energy audit provided discovery into a wealth
of energy efficiency and operations improvements directly in correlation with the City of Aspen
Canary Initiative and our commitment to reduce cazbon emissions and green house gases (GHG).
The percent energy reduction calculated for this project is 12% of current consumption in the
buildings receiving upgrades. That equates to 717,340 lbs of reduced cazbon emissions. A
benefit of the technical energy audits and the subsequent implementation of improvements will
be that Aspen "walks our talk". Aspen will continue to be established as a leading example in
energy efficiency, carbon reduction, and renewable technologies.
RECOMMENDED ACTION: Staff recommends awazd of performance contracting contract to
McKinstry in the amount of $1,310,210 for the purpose of implementing the proposed energy
saving improvements to the recommended City of Aspen facilities and buildings.
ALTERNATIVES: The city can choose to implement the energy savings improvement
proposals under individual contracts managed by city staff. The implications of this are
increased costs of individual construction elements with multiple general contractors, loss of
high level of quality control, loss of performance guarantees, loss of inclusive commissioning,
loss of monitoring and verification of improvements. This model also requires increased staff
involvement resulting in large impacts to staff and available time.
PROPOSED MOTION:
I move that we move forwazd to finalizing the financing arrangement and energy performance
contract with McKinstry to implement the identified projects.
CITY MANAGER COMMENTS:
ATTACHMENTS:
A. Updated Matrix Project Breakdown Summary
B. City of Aspen Awazd Letter
C. McKinstry Procurement Process for Aspen
D. Subcontractor List
E. McKinstry Financial Strength Document
F. Schedule C
Page 3 of 4
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October 28, 2009
Don Taylor
Director of Finance & Administrative Services
City of Aspen
130 South Galena Street
City Hall, 1sr Floor
Aspen, CO 81611
Dear Mr. Taylor:
We appreciate the City's inquiry into McKinstry's ability to stand behind the performance guarantees
associated with our energy performance contracting business. Providing these guarantees for many years
following the installation of an energy efficiency project is a task and responsibility that we take very seriously
and we are proud of our accomplishments to prove that our clients' projects are achieving real, sustainable
energy savings.
Over the past 10 years, McKinstry has implemented over 300 energy performance contracts for a total of
approximately $22.5 million in first year savings guarantees. Of those projects, 100 percent have met or
exceeded the guaranteed savings performance. In the few instances where projects experienced performance
issues, McKinstry was able to quickly identify and correct the performance Issue to ensure those projects
achieved their savings requirements.
McKinstry currently has $7 million in annual guarantees that are actively in place and in the measurement and
verification stages. McKinstry is currently constructing projects with an additional $2 million in annual
guarantees for projects that will be entering their guarantee period in the nearfuture.
As the President of McKinstry's energy services group, I would be happy to speak with your or any other City of
Aspen officials regarding our financial strength and ability to stand behind our energy savings guarantees.
Please feel free to contact me directly at 206-832-8227 at any time.
Best R,
Ash Awad, Presi~~
McKinstry Fssention, Inc.
5005 3rd Avenue South • Seattle, WA 98134.206.762.3311 • FAX 206.762.2624
Colo2do • California • Idaho • Kansas • Minnesota • Montana • Oregon • Texas • Washington • Wisconsin
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Subcontractor Procurement Process for City of Aspen ESPC
In order to establish a guaranteed maximum price for the proposed project, it is a McKinstry best
practice to develop subcontractor bid packages for the various scopes of work and to solicit pricing
from the subcontractor trades through a competitive bid process. In addition, it is a McKinstry best
practice to confer with the procurement staff of our clients to determine what procurement
processes should be followed.
The City of Aspen procurement process started on August 21, 2009 with a phone conversation
involving Rebecca Hodgson and Jeff Rice with the City of Aspen and Leslie Larocque and Garth
McCann with McKinstry. The City expressed their desire that local subcontractors be given every
opportunity to bid on the work. The City required that McKinstry place an advertisement with The
Aspen Times. Garth McCann contacted Ashton Hewitt, Aspen Times employee who handles the
City's advertisements, and placed an advertisement which ran on August 31, September 3, and
September 8 (2009).
The advertisement placed in The Aspen Times read as follows:
Request for Proposal
McKinstry Co., LLC
City ofAspen ESPC Building Modifications
Proposal Deadline -September 24, 2009
McKinstry Co. is soliciting proposals from qualified firms interested in providing quotations for
Mechanical, Electrical, Plumbing, HVAC Controls, and Windows for multiple buildings for the City of
Aspen.
Request for Proposal documents are available from Garth McCann at (303) 670-1196.
There will be a mandatory walk-thru of all buildings included in the project. This will be held
September 10th, 2009.
McKinstry Co. reserves the right to reject any and all bids and enter into a contract which, in its
opinion, best serves the needs of the City of Aspen and its citizens.
During the advertisement period, McKinstry only received a few phone calls from local
subcontractors who were interested in the project. They were sent the RFP package along with the
time and location of the walk-thru. In addition, due to the limited response from the advertisement,
McKinstry also contacted local subcontractors directly as well as other subcontractors that McKinstry
has worked with on previous projects in other locations in Colorado. The subcontractors are asked
to review the RFP prior to attending the walk-thru to understand the scope of work; therefore, the
time and location of the walk-thru is not provided in the advertisement to ensure that subcontractors
are informed and truly interested in the work. The ESPC method of procurement requires that all
subcontractors understand the contracting method, as it differs from the traditional design, bid and
build process. The ESPC model requires all subcontractors to provide a guaranteed maximum price
(GMP) to McKinstry with the understanding that there will be no change orders during the project.
Understanding the scope of work presented in the RFP documents and constructability via the walk-
thru are necessary components to providing the GMP bid pricing.
Rocky Mountain Region • 26719 Pleasant Park Road, Suite 220 • Conifer, CO 80433 • 303.670.1196 • FAX 303.670.1197
~'~instry
Page 2
Attached is the log of subcontractors that contacted McKinstry as a result of the advertisement and
the subcontractors McKinstry contacted directly, due to the poor response from the advertisement.
The log is attached to this document.
Summary of Subcontractor Log (see attached log)
Electrical Contractors 3 subcontractors contacted McKinstry via Ad
7 subcontractors solicited by McKinstry
9 of 10 are Aspen area subcontractors
2 of 10 subcontractors submitted a proposal
Mechanical Contractors 1 subcontractor contacted McKinstry via Ad
8 subcontractors solicited by McKinstry
6 of 8 are Aspen area subcontractors
2 of 8 subcontractors submitted a proposal
Building DDC Contractors 0 subcontractors contacted McKinstry via Ad
5 subcontractors solicited by McKinstry
0 of 5 are Aspen area subcontractors
2 of 5 subcontractors submitted a proposal
Window Contractors 0 subcontractors contacted McKinstry via Ad
6 subcontractors solicited by McKinstry
6 of 6 are Aspen area subcontractors
1 of 6 subcontractors submitted a proposal
The facility walk-thru occurred on September 10, 2009. The walk-thru was attended by 3 window
subcontractors, 3 building DDC subcontractors, 6 mechanical subcontractors, and 6 electrical
subcontractors. Of the subcontractors who attended the walk-thru, we received 1 window proposal,
2 DDC proposals, 2 mechanical proposals, and 2 electrical proposals. Attached are the walk-thru
sign-in sheets.
No subcontractors have yet been chosen for the work. Most competitive and responsive
subcontractor pricing has been used to establish the project pricing; however, no subcontractors
have been notified of award. It is expected that some, but not all of the scope of work will be
performed by local subcontractors. McKinstry will review the bid results with City of Aspen staff prior
to award and provide recommendations based on both price and qualifications. Although we expect
the choice of subcontractors to be a collaborative process between the City and McKinstry, the City
has the final right of choice.
Rocky Mountain Region • 26719 Pleasant Park Road, Suite 220 • Conifer, CO 80433 • 303.670.1196 • FAX 303.670.1197
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1.0 Qualifications
1.1 History and Focus of Company
1.1.1 STRUCTURE AND EVOLUTION OF THE FIRM.
Page 1
Provide information on how your company evolved, how long it has been in business under
its current and any former names, and its corporate structure (corporation, partnership, sole
proprietorship, joint venture, etc.) including identification of branch offices. Forjoint ventures
include the structure of the joint venture and historical information on each member.
Founded in 1960, McKinstry Co. originated as a Seattle area plumbing and piping contractor.
With the guidance and experience of the company's founders, mechanical engineers Merrill
McKinstry and George Allen, McKinstry quickly established itself as a leader in the
mechanical contracting arena.
As the business developed and the customer-base expanded, McKinstry recognized the
industry need for a full service, self-performing mechanical contractor. McKinstry expanded
its plumbing and piping services to eventually include sheet metal (HVAC), fire protection,
temperature and fire/life safety controls. Founders McKinstry and Allen also pioneered the
design-build method of mechanical construction in the Northwest. McKinstry's complete in-
house capabilities have positioned us as the only regional mechanical design-build firm with
full service offerings.
Over the years, McKinstry expanded its presence beyond Seattle to offer its services
throughout the Pacific Northwest through its offices in Spokane and Tacoma, Washington
and Portland, Oregon and in the Rocky Mountain Region through its regional office in
Evergreen, Colorado.
Today, McKinstry continues to build upon its experience and expertise to enhance its
offerings to include every facility need from building design to facility management. The
evolution from a design build mechanical contractor to a facility services firm was a natural
progression. As our services evolved, McKinstry developed a philosophy, For the Life of Your
Building, which supports our commitment to take responsibility to design, build and operate
our clients' facilities. McKinstry's philosophy stems from our Cycle of Services, which
incorporates our areas of expertise in Design, Pre-Construction, Construction,
Commissioning, Maintenance and Management. Our philosophy and Cycle of Services guide
our efforts as we move forward to develop innovative, cost effective facility solutions for our
customers.
Type of Firm:
X Corporation
_ Partnership
_ Sole Proprietorship
Joint Venture
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnesota
"""~ Page 2
Name and Address of Parent Company:
Name: McKinstry Co.
Address: 5005 3rd Ave S, Seattle, WA 98134
Tax Identification Number: 91-0715040
Branch offices:
Seattle -Corporate Office
5005 Third Avenue South
Seattle, WA 98134
206.762.3311
206.762.2624 Fax
coroorateoffice@mckinstrv.com
Toll Free: 800.669.6223
24-Hour Service: 206.762.5900
Boise
950 W. Bannock Street, #805
Boise, ID 83702
208.344.2781
208.344.5837 Fax
boiseoffice@mckinstrv.com
Dallas
13465 Midway Road, Suite 322
Dallas, TX 75244
214.296.0777
dallasoffice@mckinstrv.com Mao
Denver
26719 Pleasant Park Road, #220
Conifer, CO 80433
303.670.1196
303.670.1197 Fax
denveroffice@mcki nstrv.com
Irvine i
7700 Irvine Center Drive, Suite 800
Irvine, CA 92618
949.753.2894
i rvi neoffice@mckinstrv.com
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnesota
~~~
Kansas City
13287 Bluejacket Street
Overland Park, KS 86213
913.515.0711
kcoffice@mckinstrv.com Map
Madison
2310 Crossroads Dr., Ste 5200
Madison, WI 53718
608.242.9196
mad isonoffice@mckinstrv.com
Minneapolis
8451 Xerxes Avenue North
Brooklyn Park, MN 55444
763.767.0304
763.767.6147 Fax
mi n nea ool isoffice@mcki nstrv.com
Page 3
Missoula
306 West Railroad Avenue, Ste 104
Missoula, MT 59802
406.203.4615
406.728.5082 Fax
missoulaoffice@mckinstrv.com Mao
---- ®r__._.__~_.~.____.__.--
Portland
16790 NE Mason St Suite 100
Portland, OR 97230
503.331.0234
503.331.6906 Fax
oortlandoffice@mckinstrv.com
24-Hour Service: 503.331.0234
Salem
200 Hawthorne Ave SE, Ste C-306
Salem, OR 97301
503.331.0234
sa lemoffice@mckinstrv.com
Spokane -Downtown
9 S. Washington Street, #605
Spokane, WA 99201
509.747.3389
509.747.3313
Fax sookaneoffice@mckinstrv.com
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnesota
a~rr~.my
Page 4
Spokane-North
4023 East Central Avenue
Spokane, WA 99217
509.482.2775
509.482.2765 Fax
northsooka ne@mcki nstry.com
Tacoma
2306 Pacific Ave
Tacoma, WA 98402
253.572.9876
253.272.1714 Fax tacomaoffice@mckinstrv.com
24-Hour Service: 253.572.9876
Name of current firm: McKinstry Essention, Inc.
Years operating under this firm name: 3
Former firm names (if applicable):
Name: McKinstry Co.
Years in Operation: 49
Structure of Team if this is a joint venture: This is not a joint venture.
1.1.2 YEARS IN THE ENERGY BUSINESS.
State the number of years the company has been involved in the energy-efficiency related
business.
31 years
1.1.3 YEARS IN PERFORMANCE CONTRACTING.
State the number of years the company has offered energy performance contracting services
10 years.
1.1.4. NUMBER OF PERFORMANCE CONTRACTING PROJECTS.
State the number of performance contracting projects completed by the company: Number
under $1 million in project cost; Number over $1 million.
McKinstry has implemented over 250 Energy Services Performance Contracts in the last 8
years; 175 of these have been under $1 million and 75 of these have been over $1 million.
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnesota
ii~try
1.2 Financial Soundness and Stability of the Company
1.2.1 FINANCIAL SOUNDNESS
Describe the financial soundness and expected stability of the company.
Page 5
McKinstry is a financially strong and stable company that has a long history of profitability.
McKinstry has grown to be one of the largest contractors in the Pacific Northwest with annual
revenues averaging over $330 million. We have successfully completed on time and on
budget a number of projects over $30 million and have never failed to successfully complete
a project. Please see the letter in this section written by our Chief Financial Officer, Bill
Teplicky, for a more detailed discussion of McKinstry's financial soundness. Following are our
financial-related references:
Banking KeyBank Commercial Banking
Reference: Jill Scheuermann, Vice President
601 - 108t^ Ave. N. E., 4th Floor
Bellevue, WA 98009
Accounting James K. Darragh, CPA
Reference: Shareholder
Clark Nuber Co, PS
10900 NE Fourth St, Suite 1700
Bellevue, WA 98004
(425) 454-4919
Insurance Dale Ahrens, CPCU
Reference: HUB International NW, LLC
12100 E. 195th St., Suite 200
Bothell, WA 98011
425-814-1000
Bonding Mike Murphy
Reference: HUB International NW, LLC
12100 E. 195t^ St., Suite 200
Bothell, WA 98011
425-489-4500
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnesota
~instry
August 3, 2009
Adrien Ruger
Purchasing Agent
Division of Purchasing in Support of DFCM
3150 State Office Building
Salt Lake City, UT 84114
Regarding: Access to McKinstry's Audited Financial Data
Dear Mr. Ruger:
Page 6
We sincerely appreciate the opportunity to be considered as your energy services
company. Your request for audited financial information is reasonable; however, we
are aprivately-held company and our financial information is not typically available
for public review. To accommodate your request, either I or Joseph Hagar, Director
of Finance, will meet with a representative of yours and walk through our audited
financial statements in detail at a place and time of your choosing. We can also
address any specific questions you may have related to our financial information via
email or letter.
Typically, the request for financial information is used to verify that the firm has the
financial strength and overall company leadership required to guarantee project first
costs and long-term (SO to 20 years) of guaranteed energy savings. McKinstry is a
well managed and financially stable firm. As you may expect, it starts with our
stable leadership team. Our CEO, president, nearly all of our executive leaders, and
I have been with the company for at least 15 years.
We also have a seasoned financial management team that includes a Director of
Finance, with a CPA certification and masters in tax, and I personally have both my
CPA and CMA certificates. Each of us began our careers with Big 8 accounting firms
and we each have 20 years or more of financial management experience. We
understand the hallmarks of well run and financially stable firms.
McKinstry was incorporated in 1960 and has been profitable every year but one, so
we have 46 years of profitability. This longevity of profitability demonstrates our
ability to carry performance guarantees for terms that can easily exceed ten years.
What may be a better statement of financial strength is our ability to routinely
guarantee the construction costs of projects that exceed $25 million. We can
provide a list of large projects to which we have provided guaranteed maximum
pricing.
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnewta
~'
Page 7
Our banking relationships are very strong. We maintain nearly $20 million in lines of
credit that are typically no more than 50% used at any given point. We can also
readily establish project specific lines of credit as needed. In addition, McKinstry's
owners can provide $10 million of additional capital to McKinstry if needed. This
ensures that McKinstry can carry projects that require us to finance them through
the construction period.
We believe for the reasons stated above that McKinstry has a history of financial
stability and will continue to be stable for the life of your project, including warranty
and measurement and verification periods that follow the construction period.
Please feel free to contact me at (800) 669-6223 should you need to discuss
McKinstry's financial stability further. Additionally, this proposal includes letters of
reference from our bank and surety company illustrating our financial stability.
Sincerely,
~v.
Bill Teplicky
Chief Financial Officer
McKinstry Co.
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnesota
~'~instry
~~
Page 8
1.2.2 PROFITABILITY
Describe the company's profitability with supporting documentation covering the past three
years.
McKinstry Co. has been profitable each of the past three years. McKinstry Essention, Inc.
was established as a subsidiary in January 2006, and was profitable in 2006, 2007 and
2008. As a closely held company we do not disclose our financial statements publicly;
however, if you would like to arrange a meeting to review the financial statements please
contact:
Joseph Hagar, Controller
5005 3rd Ave South
Seattle, WA 98134
(206) 762.3311
ioseohh@mcki nstry.com
1.2.3 FINANCIAL REPORTS:
Provide the company's most recent 12-month audited financials including, at a minimum:
Balance Sheet, Income Statement, Statement of Cash Flow, and Statement of Financial
Conditions. Include the name, address, and telephone number of the preparer.
As a closely held company, we do not disclose our financial statements publicly; however, if
you would like to arrange a meeting to review the financial statements please contact:
Joseph Hagar, Controller
5005 3rd Ave South
Seattle, WA 98134
(206) 762.3311
> oseph h@mcki nstry.com
McKinstry has an annual audit of their financial statements by Clark Nuber, LLP. Copies of
these can be reviewed upon request.
Clark Nuber PS
10900 NE 4th Street, Suite 1700
Bellevue, WA 98004
(425) 454.4919
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnesota
i' "nstry
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1.2.4 BONDING:
Page 9
McKinstry has the ability to bond over $60 million on individual projects with an aggregate
bonding capacity of $200 million. Our surety estimates that McKinstry's current bonding
liability is less than $60 million. Our insurance and surety carriers both carry A++, XV AM
Best ratings. McKinstry's banking relationship includes an unsecured working capital line of
credit in excess of $18 million with a total relationship in the tens of millions of dollars.
McKinstry is currently bondable for 100% of a payment bond for construction of any projects
in Colorado and 100% of a performance bond for construction of any project in Colorado.
As a show of this financial strength, below are some of the largest jobs McKinstry has
performed over the last seven years:
1. Seahawks Stadium & Exhibition Hall/Garage-$37,000,000
2. Valley Medical Center Surgery Center-$6,500,000
3. Washington State Legislative Building-$16,700,000
4. Microsoft, St. Andrews-$18,000,000
5. Safeco, Redmond Campus-$17,000,000
A letter from a licensed surety confirming our bonding capabilities and current bonding rates
appears on the following page.
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnesota
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June ]1,2009
Mr. Joseph Hagar
McKinstry Essention, Inc.
5005 3" Ave. South
Seattle, WA 98124
Re: Surety Facility
McKinstry Essention, Inc.
Dear Joseph:
Page 10
NUB Mtematlonal Norfhwetr~ LLC
Sun:ty Bonds. Insurance
As surety broker for McKinstry Essention, Inc., we are pleased to provide comments concerning
your capabilities and bonding. McKinstry Essention, Inc, maintains an outstanding construction
organization and project management staff, and enjoys an excellent reputation for the timely
delivery of quality workmanship to satisfied customers. They have always conducted business
matters in a highly professional manner.
McKins[ry Essention, Inc. maintains an ongoing bonding relationship with Travelers Casualty
and Surety Company of America, an A+ rated insurer. Tmvelers Casualty and Surety Company
of America has committed to bonding single projects in excess of $60,000,000 and an aggregate
work program in excess of $20Q000,000. We estimate current bonded liability at less than
$60,000,000. These figures should not be construed as a limitation of bonding capabilities, but
rather as an indication of the level of support we have provided [his organization. McKinstry
Essention, Inc. is licensed to work in the State of Oregon, and maintains an office in Portland.
The decision to provide performance and payment bonds is subject to satisfactory review of final
contract terms and conditions, including financing arrangements acceptable to McKinstry and
Travelers.
If you have any further questions, please do not hesitate to call. We would be happy to provide
any assistance we can.
Sincerel ,
Michael A. Murphy
Executive Vice President
HUB Northwest
5005 - 3rd Avenue South, Seattle, WA 98134 Tel: (206) 762-3311 Fax: (206) 762-2624
Washington • Oregon • Idaho • Colorado • Minnesota
SCHEDULE C:
ENERGY AND COST SAVINGS GUARANTEE
Definition of Terms Used in the Performance Guarantee
The following terms are defined for use in these CONTRACT documents for the performance
guarantee.
Accumulated Realized Savings" means the sum of the actual energy savings achieved from
the Effective Date of this Agreement through the end of the current Annual Period, derived
from the sum of Measured & Verified Savings plus the Stipulated Savings.
Accumulated Guaranteed Savings" means the sum of the Guaranteed Measured & Verified
Savings plus the Stipulated Savings from the Performance Commencement Date of the
Agreement through the end of the current Annual Period.
"City" means The City of Cortez, Colorado.
"Annual Guaranteed Savings" are the Measured & Verified Savings and the Stipulated
Savings that occur in any Annual Period of the Guarantee Term.
Avoided Cost" means savings in units of consumption (e.g. kWh, kW demand, therms,
gallons, etc.) in a Billing Period multiplied by the utility rate for the Billing Period, as set forth
in Schedule E.
"Billing Period" is the term defined by a utility company as the time between meter readings
or fuel deliveries. It does not refer to the time when the bill was sent or when the payment
was to have been received. In some cases, the billing period is the same as the billing cycle
that corresponds closely (within several days) to meter-reading dates. For fuel oil and LPG,
the billing period is the number of days between fuel deliveries.
"BTU" is a unit of thermal energy defined as a British Thermal Unit and is the amount of
energy required to raise the temperature of one pound of water by one degree Fahrenheit.
"CCF" is a measure of energy equal to 103,000 BTUs.
"CONTRACTOR" means McKinstry Company.
"Energy Conservation Measure" or "ECM' means, in general, any energy saving equipment,
service, means, method, technique, procedure, or activity. For the sake of the CONTRACT
only ESCO Equipment and ESCO Services relating to installation, or modification of an
installation, in a facility which is primarily intended to reduce Energy Consumption or to allow
use of an alternate energy source will apply.
"Energy Consumption" means the amount of electrical energy and demand, natural gas, oil,
propane, or other fuel, consumed in the Facility in any Billing Period, as calculated by utilizing
the data, methodology and variables set forth in Schedule F. Energy Consumption may also
include other utilities such as water and sewer.
"Energy Cost Savings" (also see "Avoided Costs") means savings in units of consumption
(e.g. kWh, kW demand, therms, gallons, etc.) in a Billing Period multiplied by the utility rate
for the Billing Period, as set forth in Schedule E.
City of Cortez, Colorado Page 1 of 9
Schedule C: Energy and Cost Savings Guarantee
"Energy Savings" means, for each form of energy for each Billing Period, the difference
between the Baseline Energy Consumption for the Billing period and the Energy Consumption
actually incurred in the Billing Period as set forth in the Schedule F.
"Escalation Factor" means an annual escalation percentage, defined in Schedule E, to be
applied to the previous year's Energy Savings, Operational Savings and Measurement and
Verification Program, beginning the second Annual Period after the Acceptance Date.
"ESCO"means Energy Services Company, McKinstry Company.
"ESCO Equipment" means the equipment installed or caused to be installed by the ESCO, as
set forth in the Schedule A.
"ESCO Service" means all the services to be provided by the ESCO, as set forth in this
CONTRACT.
"Excess Savings" means the Realized Annual Savings less the Annual Guaranteed Savings
for the Annual Period. If the amount is zero or less there is no Excess Savings amount for
that Annual Period.
"Facility" means the buildings(s) or facility(s) included in the Energy Services Agreement and
described in the Technical Energy Audit.
"Facility Improvement Measure" or "FIM" means, in general, an equipment, service, means,
method, technique, procedure, or activity. For the sake of the CONTRACT only ESCO
Equipment and ESCO Services relating to installation, or modification of an installation, in a
facility which is primarily intended to reduce Energy Consumption or improve the facility or to
allow use of an alternate energy source will apply.
"Guaranteed Savings" means the amount of Avoided Cost that this Agreement anticipates
will be achieved at the Facilities under this Agreement, calculated as the aggregate of the
Measured & Verified Savings and the Stipulated Savings amounts identified in the
Performance Guarantee section of Schedule C, but not to exceed the aggregate of the
Contract Sum; the M & V Payments; and the OWNER'S cost of financing the Work.
"Guaranteed Measured & Verified Savings" means the Measured & Verified Savings
guaranteed to be achieved as described in the Pertormance Guarantee, Schedule C.
"kW" means Kilowatt, and is a measure of electric power.
"kWh" means Kilowatt hour, and is the product of kW and hours, which is a measure of
electric consumption.
"M&V Option" is the measurement and verification option used to measure and verify the
savings of a particular ECM or FIM. Options A though D follow the protocols identified by the
International Performance Measurement and Verification Protocol (IPMVP).
"Measured and Verified Savings" means the product of the energy savings which can be
measured and verified by the methodology as set forth in Schedule F and the applicable
utility rates described in Schedule E.
City of Cortez, Colorado Page 2 of 9
Schedule C: Energy and Cost Savings Guarantee
"Notice of Commencement of Energy Cost Savings° means written notice from the ESCO to
the Owner that the ESCO has substantially completed installation of ESCO Equipment and/or
that it has provided ESCO Services and that such equipment or services are now providing
Energy Savings.
"Owner" means The City of Cortez, Colorado
"Operational & Maintenance Savings" or "0&M Savings" are non-utility savings that have
been mutually agreed upon and stipulated by the CONTRACTOR and OWNER prior to or upon
implementation of the FIMs. The operational and maintenance savings for each
Performance Guarantee Period, with the corresponding Escalation Factor, are set forth in
Schedule E.
"Simple Payback" means the cost of the project including development, audit, design,
construction, management, fees, and other direct project costs divided by the sum of the first
year annual Energy Cost Savings and 0&M Savings, but does not include financing costs or
other escalation rates.
`Performance Guarantee Period" means each successive twelve month period following the
Performance Commencement Date described in Section 4.2.
"Realized Annual Savings" means the actual cost savings achieved by OWNER during an
Annual Period, calculated as the sum of the Measured & Verified Savings plus the Stipulated
Savings.
Savings Shortfall" means the Annual Guaranteed Savings less the Realized Annual Savings
for the Annual Period. If the amount is zero or less there is no Savings Shortfall amount for
that Annual Period.
Stipulated Savings" are the savings that have been mutually agreed upon and stipulated by
the CONTRACTOR and OWNER prior to or upon implementation of the FIMs.
"Utility Savings" means, for each form of energy or other utility for each Billing Period, the
difference between the Baseline Consumption for the Billing period and the Consumption
actually incurred in the Billing Period as determined in Schedule F.
"Therm" is a measure of energy equal to 100,000 BTUs.
City of Cortez, Colorado Page 3 of 9
Schedule C: Energy and Cost Savings Guarantee
GUARANTEE OVERVIEW
For this project, CONTRACTOR is prepared to guarantee the performance of the installed
initiatives to reduce energy consumption specific to units of energy. The target energy
reductions for the initiatives that will be implemented are as described in Table C.2. Based
upon the stipulated conditions as enumerated by OWNER personnel and the utility rates as
described in Schedule E, the utility cost savings are also shown in Table C.2.
Table C.2, the Savings Summary by M&V Option, provides the specific energy consumption
savings for each facility improvement measure (FIM) and the guarantee that CONTRACTOR
will provide associated with that measure. The savings guarantee is based upon specific
energy unit(s) (ie: kWh, Therms, etc.). The utility rates mentioned in Schedule E are only
used in calculating baseline and proposed energy savings. Savings calculations are based
upon both baseline operating characteristics and proposed operation criteria.
Baseline: "Baseline" refers to the existing operating characteristics that were used to
calculate energy cost savings. In general, all parties acknowledge the baseline associated
with any specific measure has been derived from the following sources:
1. Actual operating information gathered through field observation,
measurement, micro-data loggers, and owner's operating log books.
2. Owner provided information concerning stipulated factors such as
operational expenditures.
3. In some instances, a modified baseline may have been developed to address
areas whereby pre-retrofit conditions do not reflect a system that is operating
per current code or what the OWNER may deem as normal operation.
Proposed: The proposed operating criteria and system performance are described in
Schedule F in order to determine the savings provided in Schedule F. The operational
expenditures and analysis are described at the end of Schedule E. Systems must be
operated per the proposed criteria to ensure energy cost savings are realized. CONTRACTOR
will provide the initial start-up and commissioning of the systems to ensure that the systems
operate per the proposed operating criteria. OWNER acknowledges their responsibility to
ensuring that these criteria are maintained and associated energy savings are realized.
Energy Savings Guarantees are predicated on the OWNER maintaining their responsibilities
as provided in Schedule K, "City's Responsibilities."
PERFORMANCE GUARANTEE
CONTRACTOR guarantees that the Guaranteed Savings generated from the Performance
Commencement Date of this agreement to the last date of the Performance Guarantee
Period will be equal to the Guaranteed Savings shown on Table C.1. The measurement and
verification calculation methodology for determining the Measured & Verified Savings is set
forth in Schedule F. The Performance Guarantee is dependent upon and is subject to the
express condition precedent that the OWNER enters into and maintains, during the entire
term of the Performance Guarantee Period, the Measurement and Verification Program. If
the OWNER fails to enter into, breaches, cancels or otherwise causes the termination of the
Measurement and Verification Program, this Performance Guarantee shall terminate
immediately and be void and of no force or effect.
City of Cortez, Colorado Page 4 of 9
Schedule C: Energy and Cost Savings Guarantee
Table C.1: Guaranteed Avoided Costs
Year
Utilty
Savings Operational8
Maintenance
Savings Total
Avoided
Costs
1 $30,040 $2,340 $32,380
2 $31,585 $2,340 $33,925
3 $33,214 $2,340 $35,554
4 $34,931 $0 $34,931
5 $36,741 $0 $36,741
6 $38,650 $0 $38,650
7 $40,663 $0 $40,663
8 $42,787 $0 $42,787
9 $45,027 $0 $45,027
10 $47,390 $0 $47,390
Notes:
a.) Operational and Maintenance Savings from lamp and ballast inventory avoided
replacement costs end after three years.
GUARANTEE ACCOUNTING
CONTRACTOR shall prepare an annual reconciliation statement within sixty (60) calendar
days of the last day of each Performance Guarantee Period to determine whether Realized
Annual Savings for such Performance Guarantee Period resulted in an Excess Savings or a
Savings Shortfall by comparing the Annual Guaranteed Savings and the Realized Annual
Savings.
All operational, maintenance, and energy costs avoided by the OWNER from any steps taken
by CONTRACTOR in the Facilities will be included in the Realized Annual Savings for each
year. If, during the Construction Period, additional measures are identified and implemented
that generate additional energy, maintenance,, and operational savings, these savings may
be included in the Realized Annual Savings after the Pertormance Commencement Date. In
addition, any refunds collected, including but not limited to refunds from utility companies or
maintenance contractors after the Performance Commencement Date will be added to total
savings.
If CONTRACTOR can correct a shortfall through operational improvement at no expense to
the OWNER and with no future operational expenses or negative impact on the operations of
the OWNER, and the OWNER declines to allow such operational improvement without
reasonable cause, then any future shortfall the improvement would have corrected will be
stipulated and added to the savings on an annual basis. Should the Accumulated Realized
Savings at the end of the Annual Period be less than the Accumulated Guaranteed Savings,
CONTRACTOR shall pay the OWNER the Savings Shortfall within thirty (30) days following the
completion of the annual reconciliation for such Annual Period.
City of Cortez, Colorado Page 5 of 9
Schedule C: Energy and Cost Savings Guarantee
INFORMATION AND CHANGES IN USE
OWNER will notify CONTRACTOR in writing within thirty (30) calendar days of:
a. Any material changes to energy consuming or regulating equipment, operating
schedules, business/services conducted, occupancy, or hours of operation; or
b. Any malfunctions, failures and related changes in energy consuming or regulating
equipment; or
c. Any damage to, destruction of, or condemnation of the Work.
d. Executed preventive maintenance and repair records.
OWNER will provide CONTRACTOR with accurate Facility operating information, including
energy usage and cost, executed preventive maintenance and repair records, and occupancy
levels during each Annual Period, as soon as such information becomes available to the
OWNER.
GUARANTEE LIMITS
The payments and credits based on Savings Shortfalls, if any, are the sole remedy of OWNER
for this Performance Guarantee. Any payments made or to be made to OWNER under the
terms of this Performance Guarantee shall not exceed the payments actually made by
OWNER to CONTRACTOR for the Contract Sum.
GUARANTEE TYPES
There are five guarantee options to measure and verify savings:
Option A -Partially Measured Retrofit Isolation
Option B -Retrofit Isolation
Option C -Whole Facility Energy Use
Option D -Calibrated Simulation
Option E -Stipulated
Option A -Partially Measured Retrofit Isolation
Option A is a retrofit isolation approach designed for projects in which the potential to
generate savings must be verified, but the actual savings can be determined from short-term
data collection, engineering calculations, and stipulated factors. Post-installation energy use,
equipment performance, and usage are NOT measured throughout the term of the
CONTRACT. Post-installation and baseline energy use is estimated using an engineering
analysis of information that does not involve long-term measurements.
The intent of Option A is to verify performance through pre- and post-retrofit measurements.
Usage factors can be measured or stipulated based upon engineering estimates, operating
schedules, operator logs, typical weather data, or other documented information source.
Post-retrofit measurements are made only once. Thereafter, inspections verify that the
'potential to perform' exists. As long as the 'potential to perform' is verified, the savings are
as originally claimed and do not vary over the CONTRACT term.
Option A methods are appropriate for less complex measures for which performance and
operational characteristics are well understood and are unlikely to change. An Option A
approach can also be suitable when the value of the measure's cost savings are low.
City of Cortez, Colorado Page 6 of 9
Schedule C: Energy and Cost Savings Guarantee
Examples of projects where Option A may be appropriate include one-for-one lighting
replacement measures, high efficiency motors with constant loads, or measures with a small
percentage of overall cost savings.
Option B -Retrofit Isolation
Option B is a retrofit isolation or system level approach, and requires continuous
measurement to provide long-term verification of the savings. This method is intended for
retrofits with performance factors and operational factors that can be measured at the
component or system level and where long-term performance needs to be verified. Option B
is similar to Option Abut uses periodic or continuous metering. Short-term periodic
measurements can be used when variations in the measured factor are small. Continuous
monitoring information can be used to improve or optimize the operation of the equipment
over time, thereby improving the performance of the retrofit.
The intent of Option B is to verify performance periodically or continuously with long-term
measurements. Usage factors may be stipulated as in Option A or measured continuously.
Option B methods are appropriate for complex systems whose load or operating conditions
are not well known or are highly dependent on external factors. Examples of projects where
Option B may be appropriate include variable frequency drive installations, modifications to
control systems, chiller system upgrades, or measures with a high percentage of overall cost
savings.
Option C -Whole Facility Energy Use
Option C is awhole-building verification method. Savings are based on actual energy
consumption as measured by the utility meter(s) and/or regression modeling. Estimated
savings will vary over the CONTRACT term.
Option C verification methods determine savings by studying overall energy use in a facility.
The evaluation of whole-building or facility-level metered data is completed using techniques
ranging from simple billing comparison to multivariate regression analysis. Regression
analysis can be used to account for weather and other factors to adjust the baseline and
determine savings.
Option C is an appropriate and cost-effective method ONLY if facility operation is stable and
savings are expected to exceed 20% of total energy consumption. However, Option C cannot
verify the performance of individual measures but can verify the total performance of all
measures including interactions
Option C methods are appropriate for projects whose measures have a high degree of
interaction that would be difficult to predict, when overall energy savings are very large, or
when dedicated utility meters are available for retrofitted equipment or systems.
Option D -Calibrated Simulation
Option D is primarily awhole-building method but can be used at the component level.
Savings are based on the results of a calibrated computer simulation model. Estimated
savings may vary over the CONTRACT term if real weather data is used.
City of Cortez, Colorado Page 7 of 9
Schedule C: Energy and Cost Savings Guarantee
Option D uses calibrated computer simulation models of component orwhole-building energy
consumption to determine energy savings. Linking simulation inputs to baseline and post-
installation conditions completes the calibration, and may involve metering pertormance and
operating factors before and after the retrofit. Specialized software packages, such as DOE-2
or e-Quest, are used in Option D and the development of accurate building models requires
substantial time and expertise.
Option D methods are appropriate for complex projects where complex system interactions
need to be tracked. Due to the expense of properly conducting Option D, suitable projects
should have substantial cost savings or major building renovations such as window
replacements and building insulation.
Option E -Stipulated
Option E uses variables that are known and agreed upon by the OWNER and the
CONTRACTOR in advance, that are used in a calculation or simulated analysis that will
stipulate the outcome. Based on the established analytical methodology the savings will be
achieved upon completion of installation and commissioning of the Facility Improvement
Measure and no further measurements or calculations will need to be performed.
City of Cortez, Colorado Page 8 of 9
Schedule C: Energy and Cost Savings Guarantee
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