During phase 2 of the utility energy service contract (UESC) process, the agency selects a utility and proceeds with a preliminary assessment (PA). If there is more than one serving utility offering utility energy services (e.g., a gas company and an electric company), the Federal Acquisition Regulations (FAR) require agencies to conduct a market survey of the eligible utilities, evaluate each of the interested utilities, and make a selection based on the best value for the government. The selection process includes notifying all utilities of the opportunity, reviewing responses, and selecting one utility to perform a preliminary assessment.
The utility's preliminary assessment is a first look at a viable energy project that will pay for itself from savings, provide a high-level investigation of the facility's energy-consuming systems, establish an energy consumption baseline and identify cost reduction opportunities. When the preliminary assessment is accepted at the end of Phase 2, the agency issues a notice to proceed with the investment grade audit.
Step 1: Agency Provides Fair Consideration to All Serving Utilities
Conducting a market survey and providing an opportunity for fair consideration to all eligible serving utilities (e.g., natural gas, electric or water distribution utility) is a requirement of the FAR 16.505(b). This requirement helps to ensure federal agencies get the best value for their projects. It is current practice to publish a notice on the Contract Opportunities page of beta.sam.gov (formerly FedBizOpps), or send a letter of interest to each serving utility to inquire about interest, experience, and capabilities.
Step 2: Agency Selects a Utility and Notifies All Eligible Serving Utilities of Selection
Whether you get one positive response or three, you will be evaluating the capabilities of each interested utility. Developing criteria for the partnership and the project will help you determine which utilities will best fit your program and project objectives. For example, most water utilities are municipal entities and will by necessity limit their time and resources to offering and implementing water-related opportunities. Such a business model will not support an expansive project. If your project is intended to be comprehensive, the utility will need to show their business model including project management, technical expertise, and financial resources.
It will be beneficial to your project and to the interested utilities to clarify and provide competition requirements that support your project and selection process sufficiently while limiting the time and costs the utility will expend. The evaluation can be as simple as a discussion or as rigorous as a formal competitive procurement. In either case, the federal agencies should pay close attention to the utility's:
- Related experience and expertise
- References and success stories
- Project markup costs
- Specific offers to limit administration costs.
Upon selection, the contracting officer sends a utility selection letter to notify the selected utility and notify non-selected competitors.
Utility-Energy Service Company (ESCO) Agreement
It is common practice for the utility to subcontract with an ESCO to implement UESC projects. The utility is always the agency's prime contractor, but the ESCO may be responsible for project activities including assessments, design, financing, installation, and post-acceptance services. The agency should confirm that the ESCO has been selected through a competitive process.
While the U.S. General Services Administration (GSA) in its areawide contract (AWC) allows the utility to perform requested services through subcontractors, including unregulated affiliates, energy conservation measure (ECM) subcontractors must be competitively selected. The AWC also requires subcontractor plans to comply with federal utility contract requirements (either GSA areawide or other delegated authority contract).
Step 3: Agency Issues an Authorization for the Preliminary Assessment
Under a GSA AWC, the energy management service authorization (EMSA) is used by the contracting officer to establish a bilateral agreement for energy management services. It is used to order available services such as the PA, investment grade audit (IGA), and other energy services. The EMSA is specific to each utility and can be downloaded from the GSA website.
The preliminary assessment is a high-level energy assessment to describe existing conditions and identify potential efficiency and renewable energy opportunities. It is based on a review of existing facility use and conditions, examining all energy-consuming systems, and establishing the baseline. The PA should also identify any opportunities to include renewable energy systems.
The goals of the utility's PA are to assess whether the site presents an opportunity for a viable UESC and to give the agency the information needed to make a confident decision about proceeding with the project. The utility typically offers the PA at no cost or future obligation to the agency. The agency should obtain the offer in writing prior to moving forward with the assessment.
Some agencies, depending on project size and scope or agency process will not require a PA, but will alternatively use an in-house or third-party assessment for the initial project scope, or skip the PA and start with an IGA.
Preliminary Assessment Kickoff Meeting
The PA kickoff meeting is attended by the agency acquisition team and the utility project team. During the kickoff meeting, the teams will establish roles and responsibilities, communications protocols, and schedules. They will also establish schedules and arrangements for the utility's site visits, PA requirements and expectations, and a schedule for PA submission and review.
Contents of the Preliminary Assessment
The key elements of the PA are a narrative description of the project, descriptions of the ECMs and their estimated energy and cost savings, a general performance assurance approach, financial schedules that detail the estimated costs, savings, and payments, and a management approach. The accuracy of the cost estimate will improve with design completion and subcontractor competition. The accuracy of the baseline will improve with metering and data logging. When agencies require a deeper level of detail from a PA, it is important to discuss expectations and agree to an acceptable level of detail or begin discussing requirements and deliverables for an acceptable fee for a more robust PA.
To meet the requirements for performance assurance, the utility must agree to establish a comprehensive and ECM-specific performance plan should the project move forward. A qualified and experienced commissioning professional will be expected to lead the effort. Additionally, under 42 U.S.C. § 8253(f)(3)(B), agencies must include commissioning requirements in the PA statement of work for buildings 50,000 square feet or larger.
Step 4: Utility Conducts the Preliminary Assessment, Agency Supports and Evaluates Phase 2 FEMP Assistance and Resources
The agency's decision to proceed is based on whether the project outlined in the PA is economically viable and addresses the agency's needs and priorities as conveyed to the utility. The team will need to reach several conclusions before it decides to proceed with the project described in the PA. For example, reviewers should be sure their questions about the utility's ECM descriptions and performance assurance approach are answered.
The project should include the top-priority ECMs expected in the final package. The PA should include:
- A summary of findings
- Recommendations for each ECM opportunity
- Rough estimate of the cost to implement the opportunities
- Reasonable ECM descriptions and projected energy savings
- Performance verification approach.
Questions to be considered before moving forward to the IGA:
- Does the PA meet or can it be adjusted to meet the majority of the agency's needs?
- Do you think the agency and utility are likely to have a good long-term working relationship?
- Are you comfortable with the utility's representatives and negotiations during the PA?
- Are the ECM descriptions and projected energy savings reasonable?
- Is the performance verification approach appropriate?
- Do all parties agree on the ECMs to be explored in the IGA?
Any agency comments about the PA should be recorded, consolidated, and provided to the utility. These comments should be resolved in the IGA and proposal without requiring additional iterations of the preliminary assessment.
Review of Technical Approach
In reviewing the utility's technical approach, it can be important to consider whether the PA reflects a comprehensive scope and to look for the utility's responsiveness to the agency's expressed preferences and priorities. The bottom-line estimates are important, but they depend on the assumptions used in the calculations. If facility operation changes would be required to install an ECM, this review should provide assurance that those changes are acceptable.
Review of Management Approach
The management approach in the PA includes:
- The utility's organizational structure
- Project management organization, approach, and project timeline (Is a full-time utility project manager assigned?)
- Proposed operations and maintenance (O&M) and repair and replacement (R&R) services.
The PA review should address whether the project management approach and timeline are well suited for successful project implementation and whether the O&M and R&R plan and responsibilities address site requirements.
Although the PA does not include a firm fixed price, it should reflect estimated pricing that is reasonable for the assessed ECM design and implementation, a financing estimate that is reasonable and obtainable, and service period pricing that is consistent with the assessed approach to sustaining and verifying performance.
"Go" or "No Go" Decision
After the agency reviews the PA a decision point is reached: Will the agency go forward with the project based on this PA? If the site decides to go forward, the contracting officer should provide comments to the utility about the PA, particularly about any adjustments needed in the utility's approach or direction as the utility team prepares to conduct the IGA.
If the agency rejects the PA, it must be treated in accordance with the solicitation. Typically, it must be treated as proprietary information, and the agency may not use it to develop future projects. Until an agency commits to go forward with a task order there is no cost risk to the government.