Presenters: Nick Alioto, Education Consultant Performance Services, Inc. (414)

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2 Presenters: Nick Alioto, Education Consultant Performance Services, Inc. (414) Roger Dickson, Chief Finance & Operations Officer School District of New Berlin (262) Donald Schoenfeld, Attorney von Briesen & Roper, s.c. (414)

3 AGENDA 1. Introduction 2. Energy Exemption Legislation: Project components 3. Legal Aspects of Performance Contracting 4. Case study: School District of New Berlin 5. Energy Project Tools

4 Nick Alioto Education Consultant Performance Services, Inc.

5 ACT 28 (2009) Allowed schools authority to exceed revenue limits (by the amount spent that year on energy efficiency projects) DPI Requirements

6 ACT 32 (2011) Added operational cost savings Governed by general municipality law (use of performance contracts) Can finance up to 20 years

7 ACT 20 (2013) Added state trust fund loan as an acceptable funding source Revenue limit applies to debt service paid during calendar year. Required that measured utility savings must be used to pay project debt service

8 Polling Question

9 Basic Requirements: 1. Facilities study 2. Must save energy or operational costs 3. Utilize a performance contract with a Qualified Provider 4. Project bonds or notes cannot exceed 20 years 5. Exemption authorized by school board annually (non-recurring)

10 Steps to a Project: 1. Facilities study report 2. Determine project scope 3. Issue the RFP 4. Select qualified provider 5. Resolution for Debt Issuance 6. Resolution to exceed revenue limit for Energy Savings Expenditure There should be no financial commitment until actual award of the project!

11 What are Savings? Energy-related reduction: Utility Costs Maintenance Labor Material Costs Capital Cost Avoidance School decides

12 Energy Efficiency Project Examples: Roofs Windows Doors Lighting HVAC Temp Controls Water Conservation Renewables Code compliance

13 Donald Schoenfeld Attorney von Briesen & Roper, s.c.

14 Polling Question

15 Purpose of an RFQ Many ESCO s strongly prefer a District to use a RFQ to select a provider. An RFQ is a written request sent by the District to contractors who are invited to show that they (i) are a Qualified Provider, (ii) will provide a free Report and (iii) best serve the needs of the District. A Qualified Provider is defined by Energy Performance Contracting Statute (Statute ) as a person who is experienced in the design, implementation, and installation of energy conservation and facility improvement measures and who has the ability to provide payment and performance bonds equal to the maximum amount paid under a contract. A Report is required by the Statute to contain (i) recommendations as to the energy conservation and facility improvements ( ECMs ), (ii) estimated costs of installation, modification, remodeling, design, engineering, maintenance, repairs and financing and (iii) a guarantee of the minimum energy or operational savings created by the ECMs.

16 RFQ Process Publish Meeting Notice Qualified Provider Selection Qualified Provider Report Performance Contract

17 RFQ Process 1. The District publishes a meeting notice with information about the Qualified Providers who responded and the project. 2. The District selects the Qualified provider. 3. The Qualified Provider prepares a Report. The Report is free unless the District chooses a different Qualified Provider to do the work, in which a substantial break-up fee is required (from tens of thousands to hundreds of thousands of dollars). 4. In almost all cases, the Qualified Provider who issued the Report is chosen to do the work instead of paying the break-up fee. 5. The parties enter into a Performance Contract (the Statute defines it as a contract for the evaluation and recommendation of ECMs and for the implementation of one or more of the ECMs) but there is no competitive bidding on the cost of the work.

18 Issues with the RFQ Process Many performance contractors strongly prefer the RFQ process because it avoids competitive bidding on the cost of the project. This protects very substantial profit margins for performance contractors in these contracts.

19 Purpose of an RFP An RFP is a written request to selected contractors to (i) demonstrate that they are Qualified Providers, (ii) demonstrate the energy and operational savings on a common set of ECMs and (iii) competitively bid the cost. The RFP process introduces competitive bidding on costs of the Project and is the best procedure to get the most project work for the least cost.

20 RFP Process Preliminary Study Issue RFP Receive Proposals Select Qualified Provider Performance Contract

21 The RFP Process 1. The District first engages a Qualified Provider to produce a Report and then issues an RFP. 2. The Report (minus competitive information) is included with the RFP to solicit bids for the project. 3. Each bidder who responds will examine the facilities and determine the cost of the ECMs and the energy and operational savings. 4. The District will choose a Qualified Provider from among the competitive bids.

22 Benefits of the RFP Process The District obtains competitive bids all based on the same Report to get the best project for the least funds.

23 Issues with the RFP Process Many major providers may refuse to bid until the RFP process becomes the standard procedure in Wisconsin. The District may have to pay for the Report, rather than obtain a free report from a Qualified Provider.

24 Available Energy Project Tools Preliminary facility study at no cost Sample RFP Sample resolutions ACT 32 Whitepaper

25 Roger Dickson Chief Finance and Operations Officer School District of New Berlin

26 Performance Contracting Traditional performance contracting Low transparency Decisions out of hands of management High profit Generally avoid Required under Act 28 & 32 Non-traditional contracting addresses all issues of traditional process

27 The Process the Pre-study Identify if should go to next step Is it worth the time and effort Potential energy savings (low hanging fruit already picked) Operational savings Comfort improvements Focus on Energy Other independent engineering study Begin to involve financial advisor

Project timelines Separate propriety information (draft report)

28 The Process Initial study Detailed study to identify projects and savings Best if study includes: Complete list of equipment Project timelines Separate propriety information (draft report) from base study Limited number of companies that will do this for free

29 The Process RFP Required by Acts 28 & 32 Include: Non-proprietary parts of initial study Specific contracts to be signed upon acceptance 1. Performance services agreement 2. Performance services guarantee Ample time for interested parties to inspect facilities (3 to 5 weeks) Basis upon which selection will be made

30 The Process Bid review Compliance with RFP Compliance with law Transparency Price Savings guarantee Change orders Will there be any? How will costs be determined? Contingencies

31 The Process Bid Award Ample time for school board review of recommendation Open meeting requirements Clear identification of scope including, if applicable, change order and contingency Final contract execution Borrowing process

32 Installation Begins

33 Nick Alioto Education Consultant Performance Services, Inc.

34 Recommendations Obtain a no-cost, no-commitment preliminary study or seek fee proposals for one Establish decision-making criteria Ask for firm pricing through an RFP Involve financial advisors early Involve community

35 Polling Question

37 Presenters: Nick Alioto, Education Consultant Performance Services, Inc. (414) Roger Dickson, Chief Finance & Operations Officer School District of New Berlin (262) Donald Schoenfeld, Attorney von Briesen & Roper, s.c. (414)

Request for Proposal

Request for Proposal *************************************************************************** PROJECT NO: - 001 PROJECT NAME: Act 32 Qualified Performance Contract ISSUE DATE: 5/25/2016 DUE DATE: 6/6/2016