SCOPE OF WORK

The Government Unit should consider taking full advantage of the ESCO's technical expertise and SOEP's input to help identify and assess the opportunities that are most cost-effective or most valuable for the Government Unit's facilities. a. Steps: This will be an interactive approach, working with the Government Unit, ESCO's and SOEP following these steps: 1) Assessment of Needs and Opportunities a) Meet to discuss interests, plans, problems, etc. related to facilities and operation of facilities. b) Collect data and background information on buildings, equipment and facilities operation. c) Perform a walk-through of facilities and interview staff and occupants to identify potential measures. d) Meet to explain findings and establish agreement on measures to analyze. 2) Analysis of Measures a) Establish base year consumption and reconcile with end-use consumption estimates. b) Conduct a analysis of potential measures. 15 I Page Energy Savings Performance Contract Program Amended Regulation c) Meet to present findings and establish agreement on measures to further analyze. Establish costs, schedule and government resources required to complete an Investment Grade Audit Report 3) Further Analysis and Audit Report. a. Further analyze measures. b. Develop a preliminary IGA Report. c. Meet with the Government Unit to discuss results. d. Prepare final IGA Report. 2. Energy Savings Performance Contract Proposal. a. Develop the ESPC proposal. b. Meet to examine results and negotiate final terms. b. General Conditions 1. Energy Savings Performance Contract Term. The ESPC Term shall have a term no greater than fifteen (15) years and no greater than the cost-weighted average lifetime of the equipment. 2. Annual Guaranteed Energy and Cost Savings. A performance guarantee is required for the entire financing term. The guarantee is based on energy savings attributable to all conservation measures and must create cost avoidance equal or greater to all annual project costs each year during the finance period. Annual project costs include debt service, ESCO's fees, SOEP's consulting fees, maintenance services, monitoring services and other services. The Government Unit and the ESCO shall agree on the forecast unit energy costs to be used for the guarantee. 3. SOEP's Technical Assistance Fee. The OMB and/or the corresponding Government Unit, in those cases in which the Government Unit is not subject to OMB oversight, shall reserve a portion of the annually guaranteed savings for the Government Unit to pay for SOEP's technical assistance. The fee shall be established in the Technical Assistance Agreement and shall be established by SOEP based on the input and assistance provided to the Government Unit during the ESPC process. The fee shall never be less than 0.5% nor shall it exceed 2.50% of the annual cost savings guaranteed by the ESPC. 4. Excess Savings. Annual cost savings beyond the guaranteed minimum savings will be retained by the Government Unit and will not be allocated to shortfalls in other years. 5. Annual Savings Guarantee. The annual savings guarantee for all measures must be estimated for each year during the contract period. 16 I Page Energy Savings Performance Contract Program Amended Regulation 6. Allowable cost and savings factors approved for consideration. The Government Unit will provide ESCOs with sufficient guidance to develop savings estimates. a. Payment sources that can be incorporated: 1. Energy and water cost savings. 2. Material/commodity savings, including scheduled replacement of parts (only for years that these cost savings are applicable). 3. Outside labor cost savings, including maintenance contracts (excludes internal labor costs incurred by the Government Unit). 4. In-house labor costs. 5. Deferred maintenance cost. 6. Outside incentive funds (utility incentives, grants, etc.). 7. Any savings related to maintenance and operation of the facilities will be limited to those that can be thoroughly documented. b. Additional factors related to establishing savings that cover all costs: 1. Escalation rates that apply to each payment source. These are rates to be used in cash flow projections for project development purposes. Federal government guidelines may be applied for utility escalation rates to ensure reasonableness. 2. Interest rates (municipal tax-exempt rates for public institutions). 3. The Government Unit's cash outlay (Institution's sole discretion). c. Cost and Pricing for IGA Development. The rates will be used in the IGA and subsequent ESPC. c. Data Collection Collect data and background information from the Government Unit concerning facility operation and energy use for the most recent three (3) years from the effective date of the Contract as follows, and if available: 1. Building square footage. 2. Construction data of buildings and major additions including building envelope. 3. Utility company invoices. 4. Occupancy and usage information. 5. Description of all energy-consuming or energy-saving equipment used on the premises, as available. 6. Description of energy management procedures utilized on the premises. 7. Description of any energy-related improvements made or currently being implemented. 8. Description of any changes in the structure of the facility or energy-using or water-using equipment. 9. Description of future plans regarding building modifications. 10. Drawings, as available (may include mechanical, plumbing, electrical, building automation and temperature controls, structural, architectural, modifications and remodels). 17 I Page Energy Savings Performance Contract Program Amended Regulation 11. Original construction submittals and factory data (specifications, pump curves, etc.), as available. 12. Operating engineer logs, maintenance work orders, etc., as available. 13. Records of maintenance expenditures on energy-using equipment, including service contracts. 14. Prior energy audits or studies, if any. 15. Operating requirements for specialty use facility, for example, required pressurization, humidity, temperature, fresh air injection/outside air turnover, levels of any other contaminants et cet. The Government Unit will agree to work diligently to furnish the ESCO, upon request, accurate and complete data and information as available. Where information is not available from the Government Unit, the ESCO will make a diligent effort to collect such information through the facility inspection, staff interviews and utility companies. The Government Unit will make appropriately qualified staff available to witness existing conditions and certify accuracy of data collected. It is important for the ESCO to provide an estimate of the level of resources required for this task in the IGA proposal. ESCOs will agree to work diligently to assess validity of information provided and to confirm or correct the information as needed. d. Identify potential measures 1. Interview the facility manager, maintenance staff, subcontractors and occupants of each building regarding: a. Facility operation, including energy management procedures. b. Equipment maintenance problems. C. Comfort problems and requirements. d. Equipment reliability. e. Projected equipment needs. f. Occupancy and use schedules for the facility and specific equipment. g. Facility improvements - past, planned and desired. 2. Survey major energy consuming equipment, including lighting (indoor and outdoor), heating and heat distribution systems, cooling systems and related equipment, automatic temperature control systems and equipment, air distribution systems and equipment, outdoor ventilation systems and equipment; exhaust systems and equipment; hot water systems, electric motors, transmission and drive systems, special systems (kitchen/dining equipment, etc.), renewable energy systems, other energy using systems and water consuming systems (restroom fixtures, water fountains, irrigation systems, etc.). 3. Perform "late-night" surveys outside of normal business hours or on weekends to confirm building system and occupancy schedules, if deemed necessary. 18 I Page Energy Savings Performance Contract Program Amended Regulation 4. Develop a preliminary list of potential energy and water Conservation Measures. Consider the following for each system: a. Comfort and maintenance problems. b. Energy use, loads, proper sizing, efficiencies and hours of operation. c. Current operating condition. d. Remaining useful life e. Feasibility of system replacement. f. Hazardous materials and other environmental concerns g. Institution's future plans for building renovation h. Facility operation and maintenance procedures that could be affected i. Capability to monitor energy performance and verify savings. The Government Unit will allowESCOs reasonable access to facility staff to ensure understanding of existing systems and opportunities. ESCOs will agree to work diligently to assess validity of information provided and to confirm or correct the information as needed. c. Establish base year consumption and reconcile with end use consumption estimates. 1. Establish base year consumption by examining utility consumption patterns and bills for the past three (3) years for electricity, gas, steam, water and others, where applicable. Present base year consumption in terms of energy units (kWh, kW, ccf, Therms, gallons, or other units used in bills), in terms of dollars and in terms of dollars per square foot. Describe the process used to determine the base year (averaging, selecting most representative contiguous twelve (12) months, etc.). Consult with facility personnel to account for any anomalous schedule or operating conditions on billings that could skew the base year representation. ESCOs will account for periods of time when equipment was broken or malfunctioning in calculating the base year. 2. Estimate loading, usage and/or hours of operation for all major end uses of total facility consumption including, but not limited to: lighting, heating, cooling, motors (fans and pumps), plug loads and other major energy and water using equipment. Where loading or usage are highly uncertain (including variable loads such as cooling), ESCOs will use its best judgment, spot measurements or short-term monitoring. ESCOs should not assume that equipment run hours equal the operating hours of the building(s) or facility staff estimates. 3. Reconcile annual end-use estimated consumption with the annual base year consumption. This reconciliation will place reasonable "real-world" limits on potential savings. 4. Propose adjustments to the baseline for energy and water saving measures that will be implemented in the future. f. Develop a preliminary analysis of potential energy and water conservation measures. 19 I Page Energy Savings Performance Contract Program Amended Regulation This list shall be compiled and submitted to the Government Unit within the term agreed in the IGA Contract.. 1. List all potential opportunities, whether cost-effective or not. Consider technologies in a comprehensive approach including, but not limited to: lighting systems, heating/ventilating/air conditioning equipment and distribution systems, controls systems, building envelope, motors, kitchen equipment, pools, renewable energy systems, other special equipment, irrigation systems and water saving devices. 2. Identify measures which appear likely to be cost effective and therefore warrant detailed analysis 3. For each measure, prepare a preliminary estimate of energy or water cost savings including description of analysis methodology, supporting calculations and assumptions used to estimate savings. g. Present preliminary findings prior to thorough analysis. Describe how the projected project economics meet the Government Unit's terms for completing the IGA and Proposal Contract. Discuss assessment of energy use, savings potential, project opportunities and potential for developing an ESPC. Develop a list of recommended measures for further analysis. The Government Unit shall have the option to reject calculations of savings, potential savings allowed or project recommendations. h. Analyze savings and costs for each energy and water saving measure. 1. Following the methodology of ASHRAE or other appropriate nationally-recognized authority following the engineering principle(s) identified for each retrofit option. 2. Utilize assumptions, projections and baselines which best represent the true value of future energy or operational savings. Include accurate marginal costs for each unit of savings at the time the audit is performed, documentation of material and labor cost savings, adjustments to the baseline to reflect current conditions at the facility, calculations which account for the interactive effects of the recommended measures. 3. Use best judgment regarding the employment of instrumentation and recording, SO as to achieve an accurate and faithful characterization of energy use. 4. Use markups and fees in all cost estimates. 5. Develop a preliminary measurement and verification plan for each measure. 6. Follow additional guidelines for analysis and reports. 20 I Page Energy Savings Performance Contract Program Amended Regulation 7. Include cost to provide services and complete application for Energy Star Label, LEED- EB certification for Existing Buildings, or other certifications. Also include cost for EPA's Tools for Schools or other such program related to improved air quality. i. Investment Grade Audit Report. The report provides an engineering and economic basis for negotiating a potential ESPC between the Government Unit and the ESCO. The report shall be completed within the term agreed in the IGA Contract. The report shall include: 1. Overview a. Contact information. b. Summary table of recommended energy and water saving measures, with itemization for each measure of total design and construction cost, annual maintenance costs, the first year cost avoidance (in dollars and energy units), simple payback and equipment service life. c. Summary of annual energy and water use by fuel type and costs of existing or base year condition. d. Calculation of cost savings expected if all recommended measures are implemented, and total percentage savings of total facility energy cost. e. Description of the existing facility, mechanical and electrical systems. f. Summary description of measures, including estimated costs and savings for each as detailed above. g. Discussion of measures considered but not investigated in detail. h. Conclusions and recommendations. 2. Base year energy use a. Description and itemization of current billing rates, including schedules and riders. b. Summary of all utility bills for all fuel types and water. c. Identification and definition of base year consumption and description of how established. d. Reconciliation of estimated end use consumption (i.e. lighting, cooling, heating, fans, plug loads, etc.) with base year (include discussion of any unusual findings). 3. Full description of each energy and water saving measure including: a. Written description 1. Existing conditions. 2. Description of equipment to be installed and how it will function. 3. Include discussion of facility operations and maintenance procedures that will be affected by installation/implementation. 4. Present the plan for installing or implementing the recommendation. 21 I Page Energy Savings Performance Contract Program Amended Regulation 5. Demonstration of applicability of the measure for the environment in Puerto Rico. b. Savings calculations 1. Base year energy use and cost. 2. Post-retrofit energy use and cost. 3. Savings estimates including analysis methodology, supporting calculations and assumptions used. 4. Annual savings estimates. The cost savings for all energy saving measures must be estimated for each year during the contract period. Savings must be able to be achieved each year (cannot report average annual savings over the term of the contract). 5. Savings estimates must be limited to savings allowed by the Government Unit. 6. Percent cost-avoidance projected. 7. Description and calculations for any proposed rate changes. 8. Explanation of how savings interactions between retrofit options are accounted for in calculations. 9. Operation and maintenance savings, including detailed calculations and description. Ensure that maintenance savings are only applied in the applicable years and only during the lifetime of the particular equipment. 10. If computer simulation is used, short description and key input data shall be provided. If requested by the Government Unit, access will be provided to the program and all assumptions and inputs used, and/or printouts shall be provided of all input files and important output files and included in the Investment Grade Audit with documentation that explains how the final savings figures are derived from the simulation program output printouts. 11. If manual calculations are employed, formulas, assumptions and key data shall be stated. 12. Conclusions, observations, caveats. C. Cost estimate - detailed scope of the construction work needed, suitable for cost estimating. Include all anticipated costs associated with installation and implementation. Provide specifications for major mechanical components as well as detailed lighting and water fixture counts. 1. Engineering/design costs. 2. ESCO/vendor estimates for labor, materials, and equipment; include special provisions, overtime, etc., as needed to accomplish the work with minimum disruption to the operations of the facilities. 3. Permit costs and applicable taxes. 4. Construction management fees. 5. Environmental costs or benefits (disposal, avoided emissions, handling of hazardous materials, etc.). 22 I Page Energy Savings Performance Contract Program Amended Regulation 6. All markups and fees stated in the IGA Contract shall be used in the cost estimates, unless otherwise documented and justified due to change in scope or size of project or other unforeseen circumstances. 7. Conclusions, observations, caveats. d. Other considerations 1. Estimate of average useful service life of equipment. 2. Preliminary commissioning plan. 3. Preliminary measurement and verification plan, following the International Performance Measurement and Verification Protocol (IPMVP), explaining how savings from each measure is to be measured and verified. 4. Discussion of impacts that facility would incur after contract ends. Consider operation and maintenance impacts, staffing impacts, budget impacts, etc., and identify who is responsible for maintenance. 5. Compatibility with existing systems. Include the name of the existing controls system, if new controls systems will have to be compatible with an existing brand of controls. Also note if a sole-source vendor is established for controls systems. 6. Complete appendices that document the data used to prepare the analyses. Describe how data were collected. 7. Certification by a Puerto Rico registered Professional Engineer (PE) and a Certified Measurement and Verification Professional (CMVP) that commonly accepted principles have been applied to the measurements, design, and calculations presented in the IGA and that the estimates appear reasonable. 8. An estimate of the Government Unit resources, and schedule, required to support implementation, operations and maintenance of the measures. j. Review Recommendations Review the recommendations, savings calculations and impact of the measures on the operations of the facility. Describe how the projected savings meet the Institution's terms for completing the IGA and Performance Contract Proposal. Discuss the willingness and capability of the Government to make capital contributions to improve the economics of the overall project. k. Revise Audit as directed by the Government Unit Review the IGA report under the guidance of the Contract Administrator and/or Evaluation Committee. The Contract Administrator and/or Evaluation Committee will generate recommendations addressed to the ESCO before proceeding with the ESPC Proposal. I. Prepare an Energy Savings Performance Contract Proposal (Term Sheet). In anticipation of the ESCO and the Government Unit entering into an ESPC to design, install and monitor the energy and water saving measures proposed in the IGA Report, the ESCO shall prepare a proposal for terms to be incorporated in an ESPC to include: 23 I Page Energy Savings Performance Contract Program Amended Regulation 1. Project Price. The total amount the Government Unit will pay for the ESCO's services. Costs may include but are not limited to: engineering, designing, packaging, procuring, installing (from IGA Report results); performance/payment bond costs; construction management fees; commissioning costs; maintenance fees; monitoring fees; training fees; legal services; overhead and profit; other markups. 2. Include a List of Services that will be provided as related to each cost. 3. Expected term of the ESPC. 4. Description of how the project will be financed including available interest rates and financing terms, based on interest rates likely available to the Government Unit at this time and based on a 30-day, 60-day and 90-day lock option. 5. Explanation of how the savings will be calculated and adjusted due to weather (such as heating and cooling degree days), occupancy or other factors. Monitoring and verification methods must be consistent with the latest version of the International Performance Monitoring and Verification Protocol. 6. Analysis of annual cash flow for the Government during the contract term. m. Portfolio Manager rating and energy performance target score estimate. For each eligible building, the ESCO shall provide a pre-retrofit Energy Performance Rating using EPA ENERGY STAR's Portfolio Manager, the weather normalized energy intensity in Btu/SF, and an estimated post-retrofit Energy Performance Rating. If the building type is not eligible for rating in Portfolio Manager, then the normalized source Energy Use Intensity will suffice. The ESCO shall provide a completed Cash Flow Opportunity Calculator (CFO Calculator) for the project, with variables inserted that represent the most likely options available to the customer. This will enable the ESCO and the Government Unit to have an agreed-upon format for discussing project financing options and the potential costs of project delays. The CFO Calculator will be provided in both hard copy and electronic format, SO that the Government Unit, in coordination with GDB can run its own analyses on financing options in the agreed format. The ESCO will submit a completed Cash Flow Opportunity spreadsheet using the Cash Flow Opportunity Calculator (CFO Calculator) for the total project which shall include all facilities to be improved.