[Federal Register Volume 60, Number 68 (Monday, April 10, 1995)]
[Rules and Regulations]
[Pages 18326-18337]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8750]
[[Page 18325]]
_______________________________________________________________________
Part VII
Department of Energy
_______________________________________________________________________
Office of Energy Efficiency and Renewable Energy
_______________________________________________________________________
10 CFR Part 436
Federal Energy Management and Planning Programs, Energy Savings
Performance Contract Procedures and Methods; Final Rule
Federal Register / Vol. 60, No. 68 / Monday, April 10, 1995 / Rules
and Regulations
[[Page 18326]]
DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 436
[Docket No. EE-RM-94-201]
RIN 1904-AA62
Federal Energy Management and Planning Programs; Energy Savings
Performance Contract Procedures and Methods
AGENCY: Department of Energy.
ACTION: Final Rule.
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SUMMARY: The Department of Energy gives notice of final rules
establishing a five-year pilot program of energy savings performance
contracts designed to accelerate investment in cost effective energy
conservation measures in existing Federal buildings and thereby save
taxpayer dollars. Such contracts typically provide for installation of
energy conservation measures financed with private sector funds which
are repaid out of the resulting energy cost savings over time. This
notice covers the following topics as required by section 801 of the
National Energy Conservation Policy Act (42 U.S.C. 8287): qualified
contractor lists; procedures and methods to select, monitor, and
terminate contracts; and substitute regulations for certain provisions
in the Federal Acquisition Regulation which are inconsistent with
section 801 and which can be varied consistent with their authorizing
legislation.
EFFECTIVE DATE: These rules become effective May 10, 1995.
FOR FURTHER INFORMATION CONTACT: Joan G. Stone, EE-92, Office of
Federal Energy Management Programs, U.S. Department of Energy, 1000
Independence Avenue, SW., Washington, DC 20585, (202) 586-5772
(regarding the regulations) and the FEMP Help Desk (for a copy of the
revised model solicitations) (800) 566-2877.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Department of Energy (Department or DOE) today publishes a
notice of final rulemaking which will inaugurate a Congressionally
mandated experiment in procurement reform. This experiment involves a
pilot program to test for five years the concept of accelerating
installation of energy conservation measures in existing Federally
owned buildings through energy saving performance contracts. This type
of contracting calls for Federal agencies to contract for energy
conservation services with performance guarantees and pay for them in
the future from the resulting cost savings. If successful, this program
will boost the level of energy efficiency investment significantly
beyond what can be purchased with appropriated funds. It will also make
a contribution to achieving ambitious national energy efficiency goals
and to reducing greenhouse gas emissions.
Today DOE is also releasing revised versions of the model
solicitations which were made available for public comment. These
solicitations provide guidance to implementing Federal agencies on
conducting procurement actions consistent with the rules in this
notice. DOE will use these model solicitations in training workshops
for agency procurement professionals.
On March 10, 1994, the President issued Executive Order 12902,
Energy Efficiency and Water Conservation at Federal Facilities (59 FR
11463). Section 401 of the Executive Order requires agencies to utilize
energy savings performance contracts to meet the goals and requirements
of the Act. With the issuance of today's regulations and the model
solicitations, Federal agencies have the regulatory flexibility to
comply with the President's management directions. What is necessary
now is action by senior agency officials, an appropriate agency
priority on employing energy savings performance contracts, development
and maintenance of a trained cadre of dedicated procurement personnel,
and accountability for results.
Background
On April 11, 1994, (59 FR 17204) DOE published a notice of proposed
rulemaking under section 155 of the Energy Policy Act of 1992 (Pub. L.
102-486). Section 155 revised the legislatively mandated policies with
regard to energy saving performance contracts originally set forth in
sections 801-804 of National Energy Conservation Policy Act (Act).
Section 801 specifically authorizes Federal agencies to enter into such
a contract for a term not to exceed 25 years. It also provides that
such a contract contain provisions requiring the contractor to ``incur
costs of implementing energy savings measures, including at least the
cost (if any) incurred in making energy audits, acquiring and
installing equipment, and training personnel, in exchange for a share
of any energy savings directly resulting from implementation of such
measures during the term of the contract'' (42 U.S.C. 8287(a)(1)). In
addition, the Act specifically authorizes payment of amounts required
by an energy savings performance contract ``only from funds
appropriated or otherwise made available to the agency . . . for the
payment of energy expenses (and related operation and maintenance
expenses)'' (42 U.S.C. 8287a). Periodic reporting on progress by
Federal agencies in modifying contract practices and in achieving
energy savings under contracts is mandated by section 803 of the Act
(42 U.S.C. 8287b). Definitions pertinent to sections 801-803 are set
forth in section 804 of the Act (42 U.S.C. 8287c).
Section 155 of the Energy Policy Act inserted in section 801 a
requirement for DOE to issue appropriate rules containing: (1) Methods
and procedures for selecting, monitoring, and terminating energy
savings performance contracts; and (2) ``substitute regulations'' for
provisions of the Federal Acquisition Regulation (FAR) which are
inconsistent with the intent of section 801 as amended and which may be
revised consistent with generally applicable procurement statutes.
Energy savings performance contracts are designed to reduce the cost of
energy in Federal buildings without capital investment by the building
owner. Typically, the terms of such a contract provide for contractor
purchase, installation, and maintenance of energy conservation measures
with a guarantee of annual energy cost savings in consideration for a
share of such savings. ``Under these contracts, the contractor is
expected to bear the risk of performance, make a significant initial
capital investment, guarantee significant energy savings to the
government agency, and from these savings, the agency, in effect, makes
payment to the contractor.'' H.R. Conf. Rep. No. 102-1018, 102d Cong.,
2d Sess., 385, reprinted in 1992, U.S. Code Congressional and
Administrative News 2476.
The Act requires that DOE obtain the concurrence of the Federal
Acquisition Regulatory Council established under section 25(a) of the
Office of Federal Procurement Policy Act (41 U.S.C. 421) in the
issuance of the final rule. The Federal Acquisition Regulatory Council
has reviewed this notice and has no objection to the issuance of the
final rule.
The model solicitations, referred to earlier in this Supplementary
Information, provide uniform formats and standardized contract
provisions recommended for Federal agency use in energy savings
performance contracts. The model or generic solicitations include some
provisions that have been [[Page 18327]] determined necessary to
accommodate the unique nature of energy conservation services which
often require third-party financing.
II. Discussion of Comments and Other Changes
DOE held a public hearing on June 1, 1994, and the closing date for
receipt of written comments was June 10, 1994. Nineteen interested
persons filed written comments of which 13 presented oral comments at
the public hearing. DOE appreciated all comments and suggestions
submitted in response to the proposed rule. DOE was especially
appreciative of certain of those written comments that addressed the
proposed guidance in the draft model solicitations in addition to the
proposed regulations. DOE fully considered all of the suggestions and
arguments made in the comments in revising the proposed regulations and
the draft model solicitations. In this Supplementary Information
section, DOE explains significant changes from the proposed
regulations. Included in the explanation are responses to the major
policy issues distilled from comments directed at the proposed
regulations, as well as from comments directed at the draft model
solicitations that had implications for the proposed regulations.
DOE has chosen not to respond to comments that request actions
beyond its legal authority to issue regulations. For example, there is
no need to respond to policy arguments in comments criticizing DOE's
legal conclusions rejecting suggested substitute provisions for the
Federal Acquisition Regulation. DOE hereby reaffirms its previously
expressed views in this regard.
DOE has sent to each of the commenters a copy of the revised model
solicitations and will be scheduling a public meeting at which time
there can be a dialog on issues that relate solely to those
solicitations. Interested persons who did not comment on the proposed
regulations may obtain a copy of the revised model solicitations by
calling the FEMP Help Desk at 1-800-566-2877. Any such person may
attend the public meeting which will be noticed in the Federal
Register.
A. Section 436.30 Purpose and Scope
As proposed, 10 CFR Sec. 436.30(c) would encourage competition in
utility incentive programs under section 546(c) of the Act. 42 U.S.C.
8256(c). A commenter recommended that language be added to proposed
Sec. 436.30(b) which would prohibit agencies from participating in
utility incentive programs when the services could be provided by
energy service contractors through energy savings performance
contracts. Another commenter seeking to maximize competition suggested
that the language in Sec. 436.30(c) be revised to ``require'' instead
of encourage utilities to select their contractors in a competitive
manner. DOE did not accept either of these suggestions because it does
not have the authority to regulate agency activities or contractual
agreements with regard to utility incentive programs as authorized
under section 546 of the Act.
DOE has added a paragraph (d) containing language to ensure that
the rules published today are broadly construed when the regulatory
language is not restrictive. Permissive language in the regulations
(``may'' rather than ``shall'') ordinarily should not be read to limit
agency discretion. For example, the express authority to accept
unsolicited proposals if certain conditions are satisfied does not
preclude agencies from rejecting such a proposal because it prefers
competitive solicitations or concludes that the proposal is too
narrowly focused on one or two energy conservation measures.
B. Section 436.31 Definitions
Energy Audit
Regarding the definition of ``energy audit,'' commenters generally
agreed with the Department's position that specific energy audit
requirements should not be prescribed in mandatory regulations. Apart
from regulatory provisions requiring there to be energy audits at
certain times, the specifics with regard to energy audits appear in the
revised model solicitations.
Numerous comments on the model solicitations were received relating
to the applicability, rigor, and timing of energy audits which may be
conducted by a Federal agency or an energy service company, before or
during a contract. Detailed responses to these comments appear later in
this Supplementary Information section in the discussion of comments
with regard to Sec. 436.33. However, at this point, DOE notes that, in
order to promote clarity, the definition of ``energy audit'' has been
limited to ``annual energy audits'' that take place during the course
of a contract to verify savings and to determine whether to adjust the
energy baseline for changes in conditions beyond the contractor's
control. This limitation is consistent with the statutory text which
uses the term ``energy audit'' only in connection with post award,
annual energy audits. DOE has also added definitions for two new terms:
``preliminary energy survey'' and ``detailed energy survey.'' These two
terms refer to audit-type procedures which may precede contractor
selection and contract award, respectively.
Energy Conservation Measures
One commenter recommended that the definition of ``energy
conservation measures'' include language which addresses ``other
environmental improvements'' to encompass technological breakthroughs.
DOE did not incorporate this comment into the rule because DOE has no
authority under 42 U.S.C. 8287c to include the additional language.
Energy Cost Savings and Energy Savings
One commenter suggested that the statutory definition of ``energy
savings'' in section 804 of the Act be included in the rule instead of
the proposed ``Energy Cost Savings'' definition. Further, the commenter
suggested that the proposed definition of the term ``Energy Savings''
be changed to ``Energy Unit Savings.''
DOE has accepted the latter suggestion because it implies in plain
English that the measure of savings is in physical units. However, DOE
has decided to retain ``energy cost savings'' as the defined term for
savings measured in dollars. In general, DOE prefers to use defined
terms which have definitions close to normal usage.
Some of the comments indicated uncertainty about the extent to
which energy-related operation and maintenance cost savings are
included in the definition of ``energy cost savings.'' DOE recognizes
that the law allows a contractor to be paid from savings in related
operation and maintenance costs, if the contractor assumes
responsibility for operations or maintenance of equipment it has
retrofitted or replaced and which is currently covered in an operation
and maintenance service contract.
One commenter recommended that DOE consider how ``soft savings''
should be defined and considered. Examples of soft savings are
increased worker productivity and extended equipment life. DOE has
decided not to address soft savings in the final rule because it is too
subjective and difficult to measure accurately.
Energy Savings Performance Contracts
A commenter asked DOE to clarify whether the procedures in the rule
for energy savings performance contracts apply to water conservation
projects. DOE did not include water conservation in the definition for
``energy savings performance contracts'' in the rule because water
conservation was not [[Page 18328]] included in the definition in 42
U.S.C. 8287c.
C. Section 436.32 Qualified Contractor List
Paragraph (a) of 436.32 provides for annual notices in the Commerce
Business Daily inviting submission of new statements of qualification
and requiring submission by listed firms of updates to their statements
as appropriate. This provision differs from the proposed rule only to
the extent that the wording has been altered to make clear that
submission of updated information is required.
One of the commenters on proposed Sec. 436.32(a) argued that an
annual update of the qualified list may unnecessarily restrict
competition. Furthermore, the commenter argued that the usefulness of
any such list may be limited by the age of the information provided by
contractors. This commenter recommended that the list should be open
continuously to add qualified contractors. Although an annual notice
will be published, DOE will allow potential contractors that are not on
a qualified list to submit a statement of qualifications at any time.
DOE agrees that this will assist in increasing competition among firms.
The proposed rule provided for updating statements of
qualifications, but did not make explicit that a firm could be delisted
for failure to respond or because new information warranted
disqualification. Paragraph (c) of Sec. 436.32 remedies that omission.
The preamble to the proposed rule set forth two questionnaires
which would be used to establish the qualified list of firms as
provided under paragraph (a) of Sec. 436.32. In response to DOE's
request for public comments on the adequacy of the questionnaires, a
number of firms submitted comments. The most significant of these are
addressed below. These questionnaires have been revised based on public
comments as discussed below. A copy of them is set forth after a
discussion of public comments.
DOE agrees with commenters that it would be difficult for firms to
identify all associates and subcontractors without the knowledge of
specific projects and its location. The questionnaire was revised by
deleting the requirement for the identification of subcontractors.
A commenter recommended that the table under ``EXPERIENCE,''
seeking a five year summary of contract values for energy-related
services, be clarified. It was noted that the total project cost had
little bearing on technical ability or project management expertise.
Based on this comment, the table was deleted, and a question was added
to ``Financial Status'' requesting the largest capital investment for
an energy savings performance contract for which the firm acquired
financing.
Some of the commenters criticized the request for all legal or
administrative proceedings pending or concluded adversely against firms
within the last five years relating to procurement or performance of
construction contracts. The commenter argued that: (1) Responding to
the request would be too burdensome; (2) adverse judgments may not have
an impact on a firm's financial status; and (3) the information would
be sought and reviewed by a contracting officer in any event prior to
award. DOE has accepted these comments and has deleted the request.
A commenter was concerned about the disclosure of proprietary
information provided on their statements of qualifications. In the
Department's view, information in a firm's statement of qualifications
will be subject to the same restrictions on disclosure of proprietary
and business sensitive information as other proposals and documents
submitted to the Federal government by private firms. The Department
does not believe any additional restrictions are necessary or
advisable.
One of the comments suggested that the questionnaire should include
questions about potential performance guarantors, and argued that the
best interests of the government would be served if the qualified list
did not include a firm that would rely on a legally separate guarantor
in which the firm has an indirect financial interest. Contrary to this
comment, DOE has concluded that the questionnaire should not include
questions about potential performance guarantors because a firm's
decision to seek insurance, regardless of source, is not relevant to
determining whether a firm has the minimum qualifications to provide
energy savings performance services.
Comments received on the experience criteria were divided. Some
comments argued that new firms may have difficulty meeting the two year
experience requirements, even if they have experienced personnel, and
that reputable firms would have difficulty qualifying if they have no
performance contracting experience. Another commenter stated that two
successful contracts with two clients should be sufficient for
qualification. To broaden the list of qualified firms and increase
competition, paragraph (b)(1) of Sec. 436.32 has been revised to allow
contractors to qualify if they provide two contracts for installation
of energy conservation measures, regardless of whether they are energy
savings performance contracts, and if they otherwise have appropriate
project experience showing success in using energy conservation
technologies.
In response to comments that the draft experience criteria should
remain unchanged because firms without a proven track record may not
generate energy savings, DOE observes that the qualified list is an
initial screening, and agencies will independently review a firm's
qualifications through their source selection process and determine
whether or not a firm has the ability to generate savings.
A question was asked by one commenter as to the effect a decision
by DOE with respect to inclusion on the qualified contractors list
would have on a contracting officer's obligation to refer
nonresponsibility determinations to the Small Business Administration
under FAR 19.602. Section 801(b)(2) of the Act authorizes the
Department to establish a list of qualified contractors and requires
agencies to use this list, or one developed in the same manner by the
agency itself. Furthermore, agencies are authorized by the Act to
select firms from the list to conduct discussions concerning a
particular project. While this rule establishes certain criteria for
inclusion of a firm on the list, the contracting officer is still
required to make a responsibility determination on a procurement-
specific basis. A decision that a particular small business is not
``qualified'' and, therefore, not eligible to be included on the
qualified contractors list is not a determination of non-responsibility
and has no effect on a contracting officer's obligation to make
responsibility determinations.
Under paragraph (b)(2) of proposed Sec. 436.32, a firm would have
to be rated fair or better by its project clients to meet the minimum
criteria. Commenters argued that the minimum criteria be raised to a
rating above ``fair.'' DOE decided not to accept this comment. Instead
the client questionnaire was revised to add ``recommend contractor'' to
the rating of ``fair'' to make it clear that even though there was room
for improved quality and performance, the client would still give the
firm a positive recommendation because the firm met the project
objective. With this modification of the questionnaire, DOE believes
that a client rating of fair or better is sufficient to consider a firm
for the qualified list. During the actual source selection process,
agencies will independently make the determination whether a firm meets
the minimum requirements to accomplish a specific project.
[[Page 18329]]
Commenters recommended that paragraph (b)(4) of proposed
Sec. 436.32 be changed by adding a statement related to the financial
strength of the firm to provide adequate bonding. This was not included
in the qualification process because agencies will address a firm's
bonding capabilities prior to the award of a specific contract.
A commenter recommended that paragraph (c) of proposed Sec. 436.32
should be revised to allow any Federal agency to enter into sole source
contracts with firms competitively selected by local utilities. This
recommendation was not incorporated in the final rule because DOE has
no authority under 42 U.S.C. Sec. 8287 to implement it.
One commenter recommended that firms not selected for inclusion on
the qualified contractors list be given an opportunity to comment on
adverse information short of filing an appeal to the General Services
Administration Board of Contract Appeals. Section 436.32(d) of the rule
provides firms found not to be qualified the opportunity for a
debriefing from a DOE official. In the Department's view, this should
provide an efficient informal method for advising a disappointed firm
of the basis for the Department's decision. Furthermore, since the list
will be updated on a continual basis rather than annually, firms will
be able to provide corrected or supplemented statements of
qualifications for consideration by the Department at any time.
Following are questionnaires the Department plans to use for
establishing the qualified list:
1. General Information
(a) Name and address of firm:
(b) Telephone No.:
Fax No.:
(c) Indicate type of firm:
______ Partnership
______ Corporation
______ Sole proprietor
______ Branch Office of
____________
______ Joint Venture (List venture partners)
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______Other (Explain) ____________
(d) This submittal applies to:
[ ] Parent Company
[ ] Subsidiary
[ ] Division
[ ] Branch Office
[ ] Other
List the names of any of the above marked entities which are to be
considered in the prequalification process, and describe their
functions, responsibilities, and interrelationships.
(e) Names and titles of two people authorized to represent the firm
(f) Federal Employer Identification Number
(g) Year firm was established
(h) Name and address of parent company (if applicable)
(i) Indicate previous names of firm: ____________
(j) Has your firm been competitively selected by a Utility Company
under a Demand-Side Management Bidding program to provide conservation
services for commercial and industrial customers? Yes ______ No ______
If yes, please designate the utility and provide pertinent information.
(k) Indicate the largest dollar value of investment your firm would
consider for a Federal Government energy savings performance contract
(ESPC)
(l) Indicate the regions of the country your firm would consider
providing Federal ESPC services
[ ] Region 1 (CT, ME, NH, VT, MA, RI)
[ ] Region 2 (NY, NJ)
[ ] Region 3 (MD, DE, VA, WV, DC, PA)
[ ] Region 4 (FL, GA, KY, MS, NC, SC, TN, AL)
[ ] Region 5 (IL, IN, MI, MN, OH, WI)
[ ] Region 6 (AR, LA, NM, OK, TX)
[ ] Region 7 (IA, KS, MO, NE)
[ ] Region 8 (CO, MT, ND, SD, UT, WY)
[ ] Region 9 (CA, AZ, NV, HI)
[ ] Region 10 (WA, OR, AK, ID)
[ ] All Regions
[ ] Territories
[ ] Overseas Facilities
[ ] Exceptions (specify) ____________
2. Experience
(a) List and briefly describe two projects completed by your firm
that have been operating and saving energy or reducing utility costs
and that best illustrate your range of experience relative to energy
savings performance contracting or energy management expertise (e.g.,
type of technologies implemented). If your firm does not possess ESPC
experience with the technologies for which you want to be qualified,
provide the experience of your firm in implementing other technologies.
One project should represent the largest project completed, and the
other should represent a recently completed project. For each project,
provide information on the following items:
1) Project title and location.
2) Client to contact regarding the project, his or her position,
address, and telephone number.
3) Whether the project was for public or private sector.
4) Briefly describe the facility including function, number of
buildings, and size in square feet.
5) Total contract amount.
6) Type of financing arranged by your firm.
7) Type and term of contract.
8) Starting and ending dates.
9) Whether the project was completed on schedule. If not, explain.
10) Projected annual energy savings and/or demand reduction.
11) Performance guarantees, if performance-based energy service
contract.
12) Actual annual energy savings and/or demand reduction achieved
for each project.
13) Notes, explanations, or any other information relating to the
project. (Optional)
(b) Indicate the number of years in business as an Energy
Management Contractor: ________ years. Indicate all other names for
your firm and the length of time your firm had that name.
3. Technical Capability
List the technologies (e.g., lighting; HVAC systems) which your
firm may propose to apply to a building or facility to implement energy
conservation measures under an energy savings performance contract.
4. Available Staff
(a) Indicate the experience in energy management and energy
conservation services of the personnel in your firm that you are
intending to utilize on projects.
(b) List all professional and skilled trades which your firm
customarily performs with your own employees.
5. Financial Status
(a) For each year in the last five years, identify the largest
capital investment for an ESPC in which your firm acquired financing.
(b) State whether your firm (or predecessors, if any) or any
principal of the firm has been insolvent or declared to be in
bankruptcy within the past 5 years.
(c) Indicate whether your firm or any principal of the firm has
been debarred by the Federal Government and provide explanation.
The following is the revised questionnaire that the firm will send
to two of its clients:
1. Was the project completed on schedule? [[Page 18330]]
2. Did contract involve energy savings performance guarantees? If
so, describe performance guarantees (e.g., annual energy or cost
savings).
3. Did the installed project achieve energy savings and/or demand
reduction projected or guaranteed by contractor?
4. Was the method(s) used by the contractor to determine annual
energy savings and/or demand reduction acceptable for the type of
energy conservation measures installed?
5. Did the contractor provide satisfactory operations, maintenance,
and repair services, if any?
6. Were rebates from the utility in your area available to you? If
yes, did the contractor arrange satisfactory utility supplier rebates
or other financial incentives?
7. Did the contractor provide or arrange satisfactory project
financing?
8. What was your total compensation under the contract?
----------------------------------------------------------------------
9. Provide a rating, using the categories identified below, of your
overall satisfaction with the services provided by the contractor.
Please briefly explain your reasons for giving a rating of ``Fair'' or
``Poor,'' as applicable.
[ ] Excellent--Exceeded expectations, highly recommend contractor.
[ ] Good--Met all requirements, recommend contractor.
[ ] Fair--Achieved project objective, room for improved quality
and performance, recommend contractor.
[ ] Poor--Significant shortfall in meeting contractual
requirements, would not recommend.
If an accreditation process by a professional association
effectively covers some or all of the information requested through
this survey, evidence of accreditation could be submitted in lieu of
the relevant portion(s) of this questionnaire.
D. Section 436.33 Procedures and Methods for Contractor Selection
The proposed contractor selection methods and procedures in the
proposed rule and in the model solicitations attracted substantial
comment. Several commenters provided detailed critiques of the method
for competitive selection of contractors. In their view, the
Department's proposed method of contract award would be more expensive
for prospective contractors and expose them to more risk than the usual
method under which such contracts are awarded in the private sector.
Under the draft model solicitations, all potential contractors would
conduct ``investment-grade'' audits before submitting a proposal. This
is an expensive undertaking which, the commenters argued, would
discourage firms from competing and from offering a comprehensive
package of energy conservation measures.
The foregoing comments led the Department to rethink the method for
competitive selection of contractors. Both the proposed regulations and
the draft model solicitations have been revised to provide Federal
agencies the option to use a two stage proposal process instead of the
more conventional selection process. In the first stage, the Federal
agency would solicit initial proposals. In the solicitation, the
Federal agency could release whatever data it had about a building,
indicate what energy conservation measures should be included in a
proposal, and allow potential proposers the opportunity to conduct a
``preliminary energy survey.'' Upon receipt of proposals, the Federal
agency would preliminarily select a proposer and announce an intent to
make an award. However, prior to award, the Federal agency would have
the option to require a selectee to conduct a ``detailed energy
survey'' to confirm or modify its proposal, subject to the condition
that the confirmed or modified proposal would include a performance
guarantee that does not reduce the energy cost savings estimated in the
initial proposal more than a fixed percentage set forth in the
solicitation. If this condition is not met, the Federal agency may
select another firm from among those submitting initial proposals. On
the other hand, as the model solicitation provides, if the detailed
energy survey revealed previously unsuspected potential savings, the
contract award could include the additional energy conservation
measures.
DOE decided to describe pre-award energy auditing procedures as
energy surveys because section 801 of the Act only refers to ``annual
energy audits.'' The difference between a ``preliminary energy survey''
and a ``detailed energy survey'' is the degree of rigor in the survey.
The former would be in the nature of what some of the comments
described as a ``scoping audit,'' and the latter could resemble what
some of the comments described as ``investment grade audits.'' There
would be no obligation on a Federal agency to require a ``preliminary
energy survey,'' and if existing data were sufficient, then there would
be no functional purpose to such survey. The degree of rigor in a
``detailed energy survey'' would be a function of how much information
a proposer who has been selected for award needs to confirm or modify a
proposed performance guarantee. The Department is of the view that
selection for award should be enough of an inducement for a proposer to
undertake the risk of conducting a ``detailed energy survey'' that
might not lead to an award. The Department believes that this change in
the method of selecting a contractor will reduce cost and risk for
potential contractors and, thereby, increase competition in energy
savings performance contracting for the Federal Government.
One commenter objected to the provision in proposed
Sec. 436.33(a)(1) that agencies ``request the submission of `intent to
propose' statements from all firms on the list who may be interested in
proposing'' and that selection of the contractor be from those firms
submitting ``intent to propose'' statements. The commenter considered
this provision inconsistent with the statutorily-based requirement in
48 CFR subpart 5.2 that proposed contract actions be synopsized in the
Commerce Business Daily. The Department agrees with this comment and
has revised Sec. 436.33(a) of the rule to provide for issuance of a CBD
notice to inform interested firms of a planned energy savings
performance contract. DOE has decided that the proposed rule
requirement for submission of an ``intent to propose'' statement for
firms on the qualified list is unnecessary in light of the decision to
use a CBD notice to inform firms of a performance contract action.
Section 436.33(a)(4) of the proposed rule stated that a contractor
may be competitively selected based on proposals for a representative
sample of buildings at a large facility. The agency may then request
further proposals from the contractor for all or some of the remaining
buildings at the site. One commenter suggested the addition of language
to this section clarifying that the agency is not obligated to award a
contract or contracts to the selected contractor based on such further
proposals. The agency is free to conduct additional competitions
covering the other buildings. The Department agrees that agencies
should be free to conduct such a competition, but does not agree that
this clarification is necessary because the regulatory provision is
worded permissively. It states what an agency ``may'' do and not what
it must do.
Some commenters expressed concern about the protection of
proprietary and confidential information that may be contained in
unsolicited proposals. [[Page 18331]]
Section 801(b)(2)(C)(iii) of the Act requires Federal agencies to
publish a notice in the Commerce Business Daily regarding the receipt
of an unsolicited proposal and inviting other qualified firms to submit
competing proposals. In the Department's view, the content of such
notices, as well as unsolicited proposals themselves, will be subject
to the same restrictions on disclosure of proprietary and business
sensitive information as other proposals and documents submitted to the
Federal government by private firms. The Department does not believe
any additional restrictions are necessary or advisable.
One commenter recommended that the proposed rule be revised to
permit the submission of unsolicited proposals from any firm, not just
those on the qualified contractors list. The commenter contended that
this provision in the proposed rule is an unnecessary limitation which
is inconsistent with section 801 of the Act. The Department does not
agree with this comment. Section 801(b) of the Act permits receipt of
unsolicited proposals from those companies that are ``qualified.'' The
word ``qualified'' is used in connection to the statutory provisions
governing the qualified contractor's list. As used in context,
``qualified'' appears to apply only to companies on the qualified
contractors list. Firms will be able, under the final rule, to submit
statements of qualifications at any time and may be added to the list
if found to be qualified. Thus the limitation in section 801 of the Act
on unsolicited proposals should not act as an impediment to firms
wishing to submit such a proposal.
One commenter suggested the deletion from Sec. 436.33(b) of the
reference to the statutory provisions (10 U.S.C. 2304(c)(5) and 41
U.S.C. 253(c)(5)) which permit other than full and open competition
when ``authorized or required by law.'' The commenter argued that the
procedures and methods established pursuant to section 801(b)(2) of the
Act constitute ``competitive'' procedures for the selection of energy
savings performance contractors. In considering this comment, the
Department examined the applicability of the Competition in Contracting
Act provisions to the ``procedures and methods'' which the Energy
Policy Act requires the Secretary of Energy to establish for the
selection, monitoring and termination of contracts with energy savings
performance contractors. The Department has concluded that, under 41
U.S.C. 253(a)(1), the procedures and methods required by the Act are
``procurement procedures otherwise expressly authorized by statute,''
and, as a consequence, are exempt from the Competition in Contracting
Act's requirement for full and open competition. Accordingly, the
reference to 10 U.S.C. 2304(c)(5) and 41 U.S.C. 253(c)(5) has been
deleted in the final rule.
The Department has added language to Sec. 436.33(b) to clarify
that, with respect to the receipt of unsolicited proposals for energy
savings performance contracts, the provisions contained in Sec. 436.33
apply instead of the following Federal Acquisition Regulation
provisions which relate to the treatment of unsolicited proposals: 48
CFR 15.503(a) and (c); 48 CFR 15.506-2(a)(1); 48 CFR 15.507(a), (b)(2),
(b)(3), (b)(4) and (b)(5). These provisions have been made inapplicable
because they relate to the requirement in the Federal Acquisition
Regulation that unsolicited proposals must be unique and innovative.
This requirement does not apply to the selection and award of energy
savings performance contracts.
One commenter objected to the prohibition in proposed
Sec. 436.33(b)(2) against an award of an energy savings performance
contract based on an unsolicited proposal ``if there are other energy
conservation measures which reasonably could be implemented in the
existing Federally owned building or facility.'' This proposed
prohibition, in the commenter's view, is overly broad and vague and
could make the award of energy savings performance contracts on the
basis of unsolicited proposals difficult if not impossible. The
Department agrees that the proposed limitation is unnecessarily
restrictive and is not required by the Act. Thus the Department has
deleted it.
The proposed rule did not purport to restrict agency awards based
on unsolicited proposals where no response is received to a Commerce
Business Daily notice. However, there was concern expressed in the
comments about acceptance of such an unsolicited proposal if it focused
exclusively on a small number of energy conservation measures and
ignored other significant opportunities to increase energy efficiency.
Although refusal to accept an unsolicited proposal could be predicated
on an excessively narrow focus, DOE is not prepared to require that
agencies reject all unsolicited proposals with only one or two energy
conservation measures. The facts and circumstances may warrant agency
acceptance of such a proposal. Accordingly, DOE has restructured
paragraph (b) of Sec. 436.33 into three paragraphs to make the policies
on unsolicited proposals easier to read, and paragraph (b)(2) makes
explicit that an agency may reject an unsolicited proposal because it
is too narrow in scope.
One of the commenters expressed an interest in clarification of
paragraph (c) of proposed Sec. 436.33 which purported to recognize the
authority of the Department of Defense under other law, 10 U.S.C. 2865,
to negotiate ``energy savings performance contracts'' with contractors
selected competitively by utilities. Another commenter argued for
deletion of paragraph (c) because it could be a source of potential
confusion. DOE has opted to delete the paragraph because construction
and application of 10 U.S.C. 2865 is the responsibility of the
Department of Defense.
Almost all commenters agreed with the Department's preliminary
determination that the requirement for submission of certified cost or
pricing data should be waived. These commenters provided additional
support for the conclusion that this requirement is inconsistent with
the intent of section 801 of the Act. They pointed out that, under
energy savings performance contracts: (1) The government makes no up-
front payments to the contractor; (2) the risk of performance is
entirely with the contractor; and (3) the government only pays the
contractor out of verified savings that result from the services
performed by the contractor. They emphasized the expense and
administrative burden that submission of certified cost or pricing data
and compliance with cost accounting standards represent to energy
service companies. A number of commenters noted that, for smaller
companies, compliance with these requirements might pose a significant
impediment to competing for government contracts.
Two commenters questioned DOE's authority to waive the requirement
for submission of certified cost or pricing data for other Federal
agencies. They also pointed out that the Truth in Negotiations Act,
which requires the certification, was designed to assist the government
in negotiating fair and reasonable prices and that energy savings
performance contracts must be awarded at fair and reasonable prices.
The Department agrees that in most cases the waiver authority
provided by law appropriately resides with the head of the procuring
activity awarding the contract (Sec. 304A(b)(1)(B) of the Federal
Property and Administrative Services Act of 1949). In the case of
energy savings performance contracts, however, the Energy Policy Act
expressly directs the Secretary of Energy to establish
[[Page 18332]] methods and procedures for selecting, monitoring and
terminating such contracts. Other agencies are required to follow these
procedures if they wish to enter into an energy savings performance
contract. Consequently, the Department has concluded that it has the
necessary authority to find that energy savings performance contracts
as a class are ``an exceptional case'' and to direct the heads of
procuring activities to waive the requirement for the submission of
certified cost or pricing data for such contracts.
It should be noted, however, that waiver of the requirement for
certified cost or pricing data is not intended to preclude contracting
officers from requesting information considered necessary to determine
whether a contractor's prices are fair and reasonable. Language has
been added to Sec. 436.33(c) to provide that the waiver does not
preclude agencies from requesting the submission of pricing and related
financial information as part of contract proposals.
One commenter suggested that the rule itself, rather than merely
the preamble, contain a provision stating that energy savings
performance contracts are firm fixed-price contracts. The Department
agrees with this comment and has added appropriate language which
appears in Sec. 436.33(c) of the final rule.
E. Section 436.34 Multi-year Contracts
In editing the proposed rules, DOE decided to reorganize some of
the provisions by redesignating proposed Sec. 436.35(e) as Sec. 436.34.
Paragraph (a)(2) has been reworded to make it clearer that the funding
condition prerequisite for a multiyear contract only requires that
appropriations for the costs of the first fiscal year (not the total
contract term) must be available and adequate. DOE has also added a new
paragraph (b) to Sec. 436.34 designed to prevent misunderstanding of
paragraph (a)(2). The new paragraph reinforces the plain meaning of
paragraph (a)(2) because some agency officials, on the basis of an
inappropriate excess of caution, may be inclined to construe paragraph
(a)(2) or other provisions of the Act or the regulations to require
that agencies have adequate and available appropriated funds to pay for
contract costs of the entire multiyear term of the contract. Such a
requirement would amount to a crippling interpretation of the Act and
these regulations, and would be inconsistent with the literal meaning
of relevant statutory and regulatory provisions and with the underlying
Congressional intent.
DOE has redesignated proposed paragraph (b) as paragraph (a)(4) and
has added language to clarify that the establishment of a cancellation
ceiling is required in the case of a multiyear energy savings
performance contract under this part.
F. Section 436.35 Standard Terms and Conditions
Proposed Sec. 436.34 has been redesignated as Sec. 436.35(a). It is
not an exclusive list of contractual terms and conditions. The items
covered involve subjects not specifically addressed by the Act (e.g.,
financing agreements and disposition of title) or statutory
requirements that need some interpretation (e.g., provision for conduct
of the annual energy audits). A phrase has been added to paragraph
(a)(1) to make clear that a clause pertinent to the risk of default on
financing would be unnecessary if there is no third party financing.
Language has also been added to paragraph (a)(1) to require contracting
officers to consider any expected change in the performance of
equipment which the contractor is proposing to modify or replace.
Paragraph (c) of proposed Sec. 436.34, which has been redesignated
as paragraph (a)(3) of Sec. 436.35, indicated that a contract should
contain a clause on ``final'' disposition of title to systems and
equipment. DOE deleted the word ``final'' to avoid any ambiguity with
regard to whether an agency may negotiate a clause delaying the
disposition decision until some future point in time during the
contract term.
Comments were received concerning the need for a lender to acquire
a security interest in installed energy conservation measures. DOE
added language in a new paragraph (b) to clarify that energy savings
performance contracts may permit a financing source to acquire a
security interest in the installed systems and equipment. DOE also
shifted proposed Sec. 436.34(a) to Sec. 436.35(b) so that the
regulatory policy on third party financing is located in a single
paragraph and stated permissively.
G. Section 436.36 Conditions of Payment
Section 436.36 was proposed as Sec. 435.35. The section title has
been changed from ``Funding'' to ``Conditions of Payment'' in order to
make it easier to identify the subject matter covered by the text.
H. Section 436.37 Annual Energy Audits
Section 436.37 was proposed as Sec. 436.36. In order to identify
the subject matter more clearly, the section title was changed from
``Procedures and methods to monitor contracts'' to ``Annual energy
audits.''
As discussed above, the term ``energy audit'' used in the proposed
rule in Sec. 436.36 will be changed in the final rule to ``annual
energy audit'' to clarify that the procedures for monitoring contracts
refer only to annual energy audits used to verify post-installation
energy savings performance annually as required by section 801 of the
Act. The ``annual energy audit'' refers to an energy savings
measurement and verification procedure or method agreed to in the
contract and occurs after energy conservation measures are installed
and operational and annually thereafter throughout the contract term.
The Department recognizes that it is common industry practice to
monitor the energy savings performance of contractor installed measures
on a monthly basis. However, the final rule incorporates an annual
energy audit requirement, which at the Federal agency's discretion, may
be an annual review and confirmation of cumulative monthly energy
savings reports submitted by the contractor over a year.
A few commenters suggested that the hiring of an independent
consultant by the contractor to conduct annual verification of savings
guarantees created the appearance of a conflict of interest. Commenters
recommended that the Federal agency verify the annual energy savings
performance itself, or if it lacked the in-house expertise, pay for an
independent consultant to perform the annual energy audits. One
commenter suggested that if the agency could not perform annual savings
verification and paying for consultant services for the same was not
practicable, it could consider utilizing a consultant hired by the
contractor and approved by the government. The Department recognizes
that the Federal agency has an obligation to verify energy savings
performance which is the basis of payment and to confirm that the
government has received contracted annual energy savings. The
Department therefore agrees with the suggestion that the federal agency
is ultimately responsible for verifying annual energy savings. This may
involve an in-house review of monthly energy savings reports generated
by measurement and verification protocols incorporated in the contract,
or may involve use of a consultant as needed. The Department has
modified the proposed regulatory provisions applicable to annual energy
audits, and Sec. 436.37 reflects these modifications.
[[Page 18333]]
Extensive public comment was received on the issue of annual energy
audits, energy baselines, and energy savings measurement and
verification protocols generally. Many comments supported DOE's
proposal to avoid the use of a prescriptive method for developing
energy baselines or conducting post installation or annual energy
audits. Other commenters suggested, however, the adoption of
standardized measurement and verification protocols such as those used
in utility Demand Side Management programs in New Jersey and California
which were developed collaboratively by members of the energy services
and utility industries. The Department recognizes the value that
standardizing methods or protocols would have on streamlining or
improving government evaluations of performance contract proposals,
particularly for proposals with various energy conservation measures.
However, the Department will not regulate the methods or procedures for
establishing energy savings performance, as there are currently no
recognized national standards or protocols available for energy savings
measurement and verification. The Department, however, plans to use the
existing measurement and verification protocols recommended by several
commenters in Federal agency energy savings performance contracting
training materials to expose federal personnel to various techniques,
methods and procedures used in the energy services and utility
industries to validate energy savings performance. The Department is
actively participating in a collaborative process with the private
sector to develop a national consensus protocol for monitoring and
verification of energy service performance contracts. That protocol is
expected to be available in early 1996. In the near term, the
Department plans to provide direct technical assistance to agencies
relating to negotiation of contracts which include mechanisms to verify
energy savings performance.
One commenter suggested that two factors should be added to the
list of factors contributing to energy baseline adjustments in
Sec. 436.36(b). The recommended additional factors were ``Utility
rates'' and ``Major change of use.'' The Department agrees with the
suggestion of adding ``(7) Utility rates,'' but ``Major change of use''
is considered too ambiguous to be included the final rule.
I. Section 436.38 Terminating Contracts
Section 436.38 was proposed as Sec. 436.37. The section title has
been shortened from ``Procedures and methods to terminate contracts.''
Comments were provided with respect to the appropriate provisions
and methods for terminating an energy savings performance contract in
the event of a termination for the convenience of the government or a
termination for default. One commenter provided a very detailed
discussion of this subject, asserting that, even when the Federal
agency is receiving the guaranteed energy cost savings, a termination
for convenience could result in the contractor incurring a loss on the
contract. The commenter argues further that, because the termination
for convenience provisions of the Federal Acquisition Regulation focus
on costs incurred by the contractor in performing the work, many of the
standard provisions are inappropriate for contracts based solely on the
energy cost savings realized by the Federal agency.
Although DOE agrees that contractor compensation under an energy
savings performance contract is not tied to costs incurred, the
Department is not persuaded that the use of the standard termination
for convenience clause would result in a financial loss for the
contractor. In the Department's view, if an energy savings performance
contract is terminated for the convenience of the government, the
contractor could expect to recover its capital investment, any incurred
maintenance and repair costs (services), financing costs (including any
prepayment penalty) and a reasonable profit. As provided in
Sec. 436.35(a)(6) of the rule, ``financial charges'' are appropriate
costs which are to be reflected in payment schedules under energy
savings performance contracts.
In the example provided by the commenter in which the realized
energy savings fall considerably short of the guaranteed savings
amount, the commenter argued for special termination provisions on the
theory that there is little incentive for the agency to terminate the
contract, since the contractor is required to continue paying the
agency the guaranteed amount whether or not that amount of savings is
realized. DOE is not persuaded by this argument because it is based on
the faulty premise that a contractor would have no right to a baseline
adjustment. Section 436.37 provides for such an adjustment in
appropriate circumstances and anticipates that the details will be
negotiated as part of the contract.
The Department recognizes that, unlike contract termination under
the Federal Acquisition Regulation, termination of an energy savings
performance contract in the private sector is usually governed by a
schedule of termination amounts for each year of the contract, which is
negotiated and agreed to between the parties at the time of entering
into the contract. While the Department is not persuaded that this
termination method should be ``substituted'' for the standard
termination provisions in the Federal Acquisition Regulation, agencies
may consider such an approach on a contract-specific basis.
The provisions of the proposed rule on termination were consistent
with the Federal Acquisition Regulation. To clarify this, a new
paragraph (a) has been added to reference the applicable part of the
Federal Acquisition Regulation, 48 CFR part 49. Proposed paragraph (a)
has been retained as paragraph (b) to reinforce the requirement that
the termination liability of the Federal agency may not exceed the
cancellation ceiling set forth in the contract. Proposed paragraph (b)
has been deleted as unnecessary.
III. Procedural Requirements
A. Review Under Executive Order 12866
Today's regulatory action has been determined to be a ``significant
regulatory action'' under Executive Order 12866, ``Regulatory Planning
and Review,'' 58 FR 51735 (October 4, 1993). Accordingly, it was
subject to review by the Office of Information and Regulatory Affairs
(OIRA). OIRA completed its review without requesting any substantive
changes.
B. Review Under the Regulatory Flexibility Act
The rules were reviewed under the Regulatory Flexibility Act of
1980, Pub. L. 96-354, which requires preparation of a regulatory
analysis for any rule which is likely to have significant economic
impact on a substantial number of small entities. DOE certifies that
these rules will not have a significant economic impact on a
substantial number of small entities and, therefore, no regulatory
flexibility analysis has been prepared.
C. Review Under the Paperwork Reduction Act
New information collection requirements subject to the Paperwork
Reduction Act, 44 U.S.C. 3501, et seq., or recordkeeping requirements
are proposed by this rulemaking. Accordingly, this notice has been
submitted to the Office of Management and Budget for review and
approval of the paperwork requirements. Earlier in this notice, DOE
described two [[Page 18334]] questionnaires for use under the rule. The
first involved a contractor's qualifications for inclusion on the
qualified contractors list. The second would be directed at clients of
a contractor applicant for inclusion on the list in order to obtain
project specific information with regard to the client's experience
with the contractor.
The information DOE proposes to collect on the above-described
questionnaires is necessary to determine whether a contractor is
adequately experienced and reliable to be placed on the qualified
contractors list. DOE believes that in the typical case the frequency
of response will be once every 12 months. After the initial application
is filed, a successful contractor would only have to update information
which might have changed during the interim. The public reporting
burden is estimated to average less than two hours per response,
including the time for reviewing instructions, searching existing data
sources, gathering and maintaining the data needed, and completing the
questionnaire.
On August 8, 1994, OMB approved the collection of information
through August 1997 and assigned approval number 1910-0067.
D. Review Under the National Environmental Policy Act
Pursuant to the Council on Environmental Quality Regulations (40
CFR 1500-1508), the Department of Energy has established guidelines for
its compliance with the provisions of the National Environmental Policy
Act (NEPA) of 1969 (42 U.S.C. 4321, et seq.). Pursuant to Appendix A of
Subpart D of 10 CFR Part 1021, National Environmental Policy Act
Implementing Procedures (57 FR 15122, 15152, April 24, 1992)
(Categorical Exclusion A6), the Department of Energy has determined
that these rules are categorically excluded from the need to prepare an
environmental impact statement or environmental assessment.
E. Review Under Executive Order 12612
Executive Order 12612, 52 FR 41685 (October 30, 1987), requires
that regulations, rules, legislation, and any other policy actions be
reviewed for any substantial direct effects on States, on the
relationship between the National Government and the States, or in the
distribution of power and responsibilities among various levels of
Government. If there are sufficient substantial direct effects, then
the Executive Order requires preparation of a federalism assessment to
be used in all decisions involved in promulgating and implementing a
policy action. These rules will revise certain policy and procedural
requirements applicable only to Federal contracts. Therefore, the
Department of Energy has determined that these rules will not have a
substantial direct effect on the institutional interests or traditional
functions of States.
F. Review Under Executive Order 12778
Section 2 of Executive Order 12778 instructs each agency to adhere
to certain requirements in promulgating new regulations and reviewing
existing regulations. These requirements, set forth in section 2(a) and
(b)(2), include eliminating drafting errors and needless ambiguity,
drafting the regulations to minimize litigation, providing clear and
certain legal standards for affected legal conduct, and promoting
simplification and burden reduction. Agencies are also instructed to
make every reasonable effort to ensure that the regulation: specifies
clearly any preemptive effect, effect on existing Federal law or
regulation, and retroactive effect; describes any administrative
proceeding to be available prior to judicial review and any provisions
for the exhaustion of such administrative proceedings; and defines key
terms. DOE certifies that these rules meet the requirements of section
2(a) and (b) of Executive Order 12778.
List of Subjects in 10 CFR Part 436
Energy conservation; Federal buildings and facilities; Reporting
and recordkeeping requirements; Solar energy.
Issued in Washington, D.C. on this 31st day of March 1995.
Peter S. Fox-Penner,
Prinicpal Deputy Assistant Secretary, Energy Efficiency and Renewable
Energy.
For the reasons set forth in the preamble, Part 436 of Title 10,
Subchapter D of the Code of Federal Regulations is amended as set forth
below:
PART 436--FEDERAL ENERGY MANAGEMENT AND PLANNING PROGRAMS
1. The authority citation for Part 436 is revised to read as
follows:
42 U.S.C. Sec. 6361; 42 U.S.C. 8251-8263; 42 U.S.C. 8287-8287c.
2. Section 436.2 is amended by removing the word ``and'' after the
semicolon at the end of paragraph (b), redesignating paragraph (c) as
paragraph (d), and adding a new paragraph (c) as follows:
Sec. 436.2 General objectives.
* * * * *
(c) To promote the use of energy savings performance contracts by
Federal agencies for implementation of privately financed investment in
building and facility energy conservation measures for existing
Federally owned buildings; and
* * * * *
3. New Subpart B, consisting of sections 436.30 through 436.38, is
added to read as follows:
Subpart B--Methods and Procedures for Energy Savings Performance
Contracting
Sec.
436.30 Purpose and scope.
436.31 Definitions.
436.32 Qualified contractors lists.
436.33 Procedures and methods for contractor selection.
436.34 Multiyear contracts.
436.35 Standard terms and conditions.
436.36 Conditions of payment.
436.37 Annual energy audits.
436.38 Terminating contracts.
Subpart B--Methods and Procedures for Energy Savings Performance
Contracting
Sec. 436.30 Purpose and scope.
(a) General. This subpart provides procedures and methods which
apply to Federal agencies with regard to the award and administration
of energy savings performance contracts awarded within five years of
May 10, 1995. This subpart applies in addition to the Federal
Acquisition Regulation at Title 48 of the CFR and related Federal
agency regulations. The provisions of this subpart are controlling with
regard to energy savings performance contracts notwithstanding any
conflicting provisions of the Federal Acquisition Regulation and
related Federal agency regulations.
(b) Utility incentive programs. Nothing in this subpart shall
preclude a Federal agency from--
(1) Participating in programs to increase energy efficiency,
conserve water, or manage electricity demand conducted by gas, water,
or electric utilities and generally available to customers of such
utilities;
(2) Accepting financial incentives, goods, or services generally
available from any such utility to increase energy efficiency or to
conserve water or manage electricity demand; or
(3) Entering into negotiations with electric, water, and gas
utilities to design cost-effective demand management and conservation
incentive programs to address the unique needs of each Federal agency.
(c) Promoting competition. To the extent allowed by law, Federal
agencies [[Page 18335]] should encourage utilities to select
contractors for the conduct of utility incentive programs in a
competitive manner to the maximum extent practicable.
(d) Interpretations. The permissive provisions of this subpart
shall be liberally construed to effectuate the objectives of Title VIII
of the National Energy Conservation Policy Act, 42 U.S.C. 8287-8287c.
Sec. 436.31 Definitions.
As used in this subpart--
Act means Title VIII of the National Energy Conservation Policy
Act.
Annual energy audit means a procedure including, but not limited
to, verification of the achievement of energy cost savings and energy
unit savings guaranteed resulting from implementation of energy
conservation measures and determination of whether an adjustment to the
energy baseline is justified by conditions beyond the contractor's
control.
Building means any closed structure primarily intended for human
occupancy in which energy is consumed, produced, or distributed.
Detailed energy survey means a procedure which may include, but is
not limited to, a detailed analysis of energy cost savings and energy
unit savings potential, building conditions, energy consuming
equipment, and hours of use or occupancy for the purpose of confirming
or revising technical and price proposals based on the preliminary
energy survey.
DOE means Department of Energy.
Energy baseline means the amount of energy that would be consumed
annually without implementation of energy conservation measures based
on historical metered data, engineering calculations, submetering of
buildings or energy consuming systems, building load simulation models,
statistical regression analysis, or some combination of these methods.
Energy conservation measures means measures that are applied to an
existing Federally owned building or facility that improves energy
efficiency, are life-cycle cost-effective under subpart A of this part,
and involve energy conservation, cogeneration facilities, renewable
energy sources, improvements in operation and maintenance efficiencies,
or retrofit activities.
Energy cost savings means a reduction in the cost of energy and
related operation and maintenance expenses, from a base cost
established through a methodology set forth in an energy savings
performance contract, utilized in an existing federally owned building
or buildings or other federally owned facilities as a result of--
(1) The lease or purchase of operating equipment, improvements,
altered operation and maintenance, or technical services; or
(2) The increased efficient use of existing energy sources by
cogeneration or heat recovery, excluding any cogeneration process for
other than a federally owned building or buildings or other federally
owned facilities.
Energy savings performance contract means a contract which provides
for the performance of services for the design, acquisition,
installation, testing, operation, and, where appropriate, maintenance
and repair of an identified energy conservation measure or series of
measures at one or more locations.
Energy unit savings means the determination, in electrical or
thermal units (e.g., kilowatt hour (kwh), kilowatt (kw), or British
thermal units (Btu)), of the reduction in energy use or demand by
comparing consumption or demand, after completion of contractor-
installed energy conservation measures, to an energy baseline
established in the contract.
Facility means any structure not primarily intended for human
occupancy, or any contiguous group of structures and related systems,
either of which produces, distributes, or consumes energy.
Federal agency has the meaning given such term in section 551(1) of
Title 5, United States Code.
Preliminary energy survey means a procedure which may include, but
is not limited to, an evaluation of energy cost savings and energy unit
savings potential, building conditions, energy consuming equipment, and
hours of use or occupancy, for the purpose of developing technical and
price proposals prior to selection.
Secretary means the Secretary of Energy.
Sec. 436.32 Qualified contractors lists.
(a) DOE shall prepare a list, to be updated annually, or more often
as necessary, of firms qualified to provide energy cost savings
performance services and grouped by technology. The list shall be
prepared from statements of qualifications by or about firms engaged in
providing energy savings performance contract services on
questionnaires obtained from DOE. Such statements shall, at a minimum,
include prior experience and capabilities of firms to perform the
proposed energy cost savings services by technology and financial and
performance information. DOE shall issue a notice annually, for
publication in the Commerce Business Daily, inviting submission of new
statements of qualifications and requiring listed firms to update their
statements of qualifications for changes in the information previously
provided.
(b) On the basis of statements of qualifications received under
paragraph (a) of this section and any other relevant information, DOE
shall select a firm for inclusion on the qualified list if--
(1) It has provided energy savings performance contract services or
services that save energy or reduce utility costs for not less than two
clients, and the firm possesses the appropriate project experience to
successfully implement the technologies which it proposes to provide;
(2) Previous project clients provide ratings which are ``fair'' or
better;
(3) The firm or any principal of the firm has neither been
insolvent nor declared bankruptcy within the last five years;
(4) The firm or any principal of the firm is not on the list of
parties excluded from procurement programs under 48 CFR part 9, subpart
9.4; and
(5) There is no other adverse information which warrants the
conclusion that the firm is not qualified to perform energy savings
performance contracts.
(c) DOE may remove a firm from DOE's list of qualified contractors
after notice and an opportunity for comment if--
(1) There is a failure to update its statement of qualifications;
(2) There is credible information warranting disqualification; or
(3) There is other good cause.
(d) A Federal agency shall use DOE's list unless it elects to
develop its own list of qualified firms consistent with the procedures
in paragraphs (a) and (b) of this section.
(e) A firm not designated by DOE or a Federal agency pursuant to
the procedures in paragraphs (a) and (b) of this section as qualified
to provide energy cost savings performance services shall receive a
written decision and may request a debriefing.
(f) Any firm receiving an adverse final decision under this section
shall apply to the Board of Contract Appeals of the General Services
Administration in order to exhaust administrative remedies.
Sec. 436.33 Procedures and methods for contractor selection.
(a) Competitive selection. Competitive selections based on
solicitation of firms are subject to the following procedures--
(1) With respect to a particular proposed energy cost savings
[[Page 18336]] performance project, Federal agencies shall publish a
Commerce Business Daily notice which synopsizes the proposed contract
action.
(2) Each competitive solicitation--
(i) Shall request technical and price proposals and the text of any
third-party financing agreement from interested firms;
(ii) Shall consider DOE model solicitations and should use them to
the maximum extent practicable;
(iii) May provide for a two-step selection process which allows
Federal agencies to make an initial selection based, in part, on
proposals containing estimated energy cost savings and energy unit
savings, with contract award conditioned on confirmation through a
detailed energy survey that the guaranteed energy cost savings are
within a certain percentage (specified in the solicitation) of the
estimated amount; and
(iv) May state that if the Federal agency requires a detailed
energy survey which identifies life cycle cost effective energy
conservation measures not in the initial proposal, the contract may
include such measures.
(3) Based on its evaluation of the technical and price proposals
submitted, any applicable financing agreement (including lease-
acquisitions, if any), statements of qualifications submitted under
Sec. 436.32 of this subpart, and any other information determines to be
relevant, the Federal agency may select a firm on a qualified list to
conduct the project.
(4) If a proposed energy cost savings project involves a large
facility with too many contiguously related buildings and other
structures at one site for proposing firms to assume the costs of a
preliminary energy survey of all such structures, the Federal agency--
(i) May request technical and price proposals for a representative
sample of buildings and other structures and may select a firm to
conduct the proposed project; and
(ii) After selection of a firm, but prior to award of an energy
savings performance contract, may request the selected firm to submit
technical and price proposals for all or some of the remaining
buildings and other structures at the site and may include in the award
for all or some of the remaining buildings and other structures.
(5) After selection under paragraph (a)(3) or (a)(4) of this
section, but prior to award, a Federal agency may require the selectee
to conduct a detailed energy survey to confirm that guaranteed energy
cost savings are within a certain percentage (specified in the
solicitation) of estimated energy cost savings in the selectee's
proposal. If the detailed energy survey does not confirm that
guaranteed energy savings are within the fixed percentage of estimated
savings, the Federal agency may select another firm from those within
the competitive range.
(b) Unsolicited proposals. Federal agencies may--
(1) Consider unsolicited energy savings performance contract
proposals from firms on a qualified contractor list under this subpart
which include technical and price proposals and the text of any
financing agreement (including a lease-acquisition) without regard to
the requirements of 48 CFR 15.503 (a) and (c); 48 CFR 15.506-2(a)(1);
and 48 CFR 15.507(a), (b)(2), (b)(3), (b)(4) and (b)(5).
(2) Reject an unsolicited proposal that is too narrow because it
does not address the potential for significant energy conservation
measures from other than those measures in the proposal.
(3) After requiring a detailed energy survey, if appropriate, and
determining that technical and price proposals are adequate, award a
contract to a firm on a qualified contractor list under this subpart on
the basis of an unsolicited proposal, provided that the Federal agency
complies with the following procedures--
(i) An award may not be made to the firm submitting the unsolicited
proposal unless the Federal agency first publishes a notice in the
Commerce Business Daily acknowledging receipt of the proposal and
inviting other firms on the qualified list to submit competing
proposals.
(ii) Except for unsolicited proposals submitted in response to a
published general statement of agency needs, no award based on such an
unsolicited proposal may be made in instances in which the Federal
agency is planning the acquisition of an energy conservation measure
through an energy savings performance contract.
(c) Certified cost or pricing data.
(1) Energy savings performance contracts under this part are firm
fixed-price contracts.
(2) Pursuant to the authority provided under section 304A(b)(1)(B)
of the Federal Property and Administrative Services Act of 1049, the
heads of procuring activities shall waive the requirement for
submission of certified cost or pricing data. However, this does not
exempt offerors from submitting information (including pricing
information) required by the Federal agency to ensure the impartial and
comprehensive evaluation of proposals.
Sec. 436.34 Multiyear contracts.
(a) Subject to paragraph (b) of this section, Federal agencies may
enter into a multiyear energy savings performance contract for a period
not to exceed 25 years, as authorized by 42 U.S.C. 8287, without
funding of cancellation charges, if:
(1) The multiyear energy savings performance contract was awarded
in a competitive manner using the procedures and methods established by
this subpart;
(2) Funds are available and adequate for payment of the scheduled
energy cost for the first fiscal year of the multiyear energy savings
performance contract;
(3) Thirty days before the award of any multiyear energy savings
performance contract that contains a clause setting forth a
cancellation ceiling in excess of $750,000, the head of the awarding
Federal agency gives written notification of the proposed contract and
the proposed cancellation ceiling for the contract to the appropriate
authorizing and appropriating committees of the Congress; and
(4) Except as otherwise provided in this section, the multiyear
energy savings performance contract is subject to 48 CFR part 17,
subpart 17.1, including the requirement that the contracting officer
establish a cancellation ceiling.
(b) Neither this subpart nor any provision of the Act requires,
prior to contract award or as a condition of a contract award, that a
Federal agency have appropriated funds available and adequate to pay
for the total costs of an energy savings performance contract for the
term of such contract.
Sec. 436.35 Standard terms and conditions.
(a) Mandatory requirements. In addition to contractual provisions
otherwise required by the Act or this subpart, any energy savings
performance contract shall contain clauses--
(1) Authorizing modification, replacement, or changes of equipment,
at no cost to the Federal agency, with the prior approval of the
contracting officer who shall consider the expected level of
performance after such modification, replacement or change;
(2) Providing for the disposition of title to systems and
equipment;
(3) Requiring prior approval by the contracting officer of any
financing agreements (including lease-acquisitions) and amendments to
such an agreement entered into after contract award for the purpose of
financing the [[Page 18337]] acquisition of energy conservation
measures;
(4) Providing for an annual energy audit and identifying who shall
conduct such an audit, consistent with Sec. 436.37 of this subpart; and
(5) Providing for a guarantee of energy cost savings to the Federal
agency, and establishing payment schedules reflecting such guarantee.
(b) Third party financing. If there is third party financing, then
an energy savings performance contract may contain a clause:
(1) Permitting the financing source to perfect a security interest
in the installed energy conservation measures, subject to and
subordinate to the rights of the Federal agency; and
(2) Protecting the interests of a Federal agency and a financing
source, by authorizing a contracting officer in appropriate
circumstances to require a contractor who defaults on an energy savings
performance contract or who does not cure the failure to make timely
payments, to assign to the financing source, if willing and able, the
contractor's rights and responsibilities under an energy savings
performance contract;
Sec. 436.36 Conditions of payment.
(a) Any amount paid by a Federal agency pursuant to any energy
savings performance contract entered into under this subpart may be
paid only from funds appropriated or otherwise made available to the
agency for the payment of energy expenses and related operation and
maintenance expenses which would have been incurred without an energy
savings performance contract. The amount the agency would have paid is
equal to:
(1) The energy baseline under the energy savings performance
contract (adjusted if appropriate under Sec. 436.37), multiplied by the
unit energy cost; and
(2) Any related operations and maintenance cost prior to
implementation of energy conservation measures, adjusted for increases
in labor and material price indices.
(b) Federal agencies may incur obligations pursuant to energy
savings performance contracts to finance energy conservation measures
provided guaranteed energy cost savings exceed the contractor's debt
service requirements.
Sec. 436.37 Annual energy audits.
(a) After contractor implementation of energy conservation measures
and annually thereafter during the contract term, an annual energy
audit shall be conducted by the Federal agency or the contractor as
determined by the contract. The annual energy audit shall verify the
achievement of annual energy cost savings performance guarantees
provided by the contractor.
(b) The energy baseline is subject to adjustment due to changes
beyond the contractor's control, such as--
(1) Physical changes to building;
(2) Hours of use or occupancy;
(3) Area of conditioned space;
(4) Addition or removal of energy consuming equipment or systems;
(5) Energy consuming equipment operating conditions;
(6) Weather (i.e., cooling and heating degree days); and
(7) Utility rates.
(c) In the solicitation or in the contract, Federal agencies shall
specify requirements for annual energy audits, the energy baseline, and
baseline adjustment procedures.
Sec. 436.38 Terminating contracts.
(a) Except as otherwise provided by this subpart, termination of
energy savings performance contracts shall be subject to the
termination procedures of the Federal Acquisition Regulation in 48 CFR
part 49.
(b) In the event an energy savings performance contract is
terminated for the convenience of a Federal agency, the termination
liability of the Federal agency shall not exceed the cancellation
ceiling set forth in the contract, for the year in which the contract
is terminated.
[FR Doc. 95-8750 Filed 4-7-95; 8:45 am]
BILLING CODE 6450-01-P
