[Federal Register Volume 59, Number 69 (Monday, April 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8594]
[[Page Unknown]]
[Federal Register: April 11, 1994]
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Part XI
Department of Energy
_______________________________________________________________________
Office of Energy Efficiency and Renewable Energy
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10 CFR Part 436
Federal Energy Management and Planning Programs; Proposed Rule
DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 436
[Docket No. EE-RM-94-201]
Federal Energy Management and Planning Programs
AGENCY: Department of Energy.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department of Energy (DOE) proposes to amend its Federal
Energy Management and Planning Programs regulations with regard to
energy savings performance contracts for existing Federally owned
buildings. Such contracts typically provide for installation of energy
conservation measures with private sector funds which are repaid out of
the resulting energy cost savings over time. Today's proposed rule
covers the following topics as required by section 801 of the National
Energy Conservation Policy Act qualified contractor lists; procedures
and methods to select, monitor, and terminate contracts; and substitute
regulations for provisions in the Federal Acquisition Regulation which
are inconsistent with section 801 and the relevant terms of which can
be varied, consistent with their authorizing legislation, in order to
carry out the intent of section 801.
DATES: Written comments (6 copies) must be received by DOE on or before
June 10, 1994. A public hearing will be held on June 1, 1994, beginning
at 9:30 a.m. at the address listed below. Requests to speak must be
received on or before May 27, 1994.
ADDRESSES: All written comments (6 copies), as well as requests to
speak at the public hearing are to be submitted to: U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy, EE-44, Notice
of Proposed Rulemaking for Energy Savings Performance Contracts, EE-RM-
94-201, 1000 Independence Avenue, SW., Washington, DC 20585, 202-586-
3012. FAX comments will not be accepted. The public hearing will be
held in room 1E-245, U.S. Department of Energy, Forrestal Building,
1000 Independence Avenue SW., Washington, DC 20585.
FOR FURTHER INFORMATION CONTACT: Joan Stone, EE-44, U.S. Department of
Energy, 1000 Independence Avenue SW., Washington, DC 20585, 202-586-
5772.
SUPPLEMENTARY INFORMATION:
I. Introduction
Background
Section 155 of the Energy Policy Act of 1992 (Pub. L. 102-486)
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 the head of a Federal agency 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 revised sections 801 and 804
of the Act by elaborating on the policies originally enacted and by
requiring issuance of 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 which are inconsistent
with the intent of section 801 as amended and which may be revised
accordingly consistent with generally applicable procurement statutes.
Such contracts, which may be for a term not to exceed 25 years, 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. Often
the contractor obtains third-party financing from a source which
requires adequate assurance of repayment. ``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.'' (1992 U.S. Code
Congressional and Administrative News 2476). The Act requires that the
Federal Acquisition Regulatory Council established under section 25(a)
of the Office of Federal Procurement Policy Act (41 U.S.C. 421) concur
in the final rule. The Federal Acquisition Regulatory Council has
reviewed this notice and has no objection to the issuance of this
proposed rule for the purpose of obtaining public comments.
Concurrent with preparation of this proposed rule, DOE has
developed model solicitations providing 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 determined
necessary to accommodate the unique nature of energy conservation
services which often require third-party financing. Copies of the model
solicitations will be placed in the DOE Freedom of Information Reading
Room for public examination.
DOE is also drafting a ``How To'' manual to provide detailed
standardized guidance for Federal agency facility managers and
procurement officers. The manual will cover energy savings performance
contracting concepts, project development procedures and tools,
acquisition planning procedures, guidelines for adapting model
solicitations, and techniques and tools to administer contracts after
award. The methods and procedures addressed in the model solicitations
and the manual will be incorporated into DOE-sponsored training
workshops.
II. Examination of Substitute Regulations
As noted above, section 801(b) of the Act provides that the
Secretary of Energy, with the concurrence of the Federal Acquisition
Regulatory Council, shall determine which existing regulations are
inconsistent with the intent of section 801 and formulate ``substitute
regulations'' consistent with the laws governing Federal procurement.
DOE has examined certain provisions of the Federal Acquisition
Regulation (FAR), which are codified at title 48 of the Code of Federal
Regulations (48 CFR), and related Federal procurement laws which have
been cited by private sector interests as disincentives to energy
savings performance contracts. The private sector contends that these
provisions increase the cost and reduce the economic feasibility and
attractiveness of entering into energy savings performance contracts
with Federal agencies. The following is a summary of DOE's analysis of
these provisions and of the appropriateness of formulating ``substitute
regulations'' in light of the direction in section 801(b) of Act.
Requirement for Cost or Pricing Data
A contractor is required to provide certified cost or pricing data
for any negotiated contract (or contract modification) if the contract
price is expected to exceed $100,000 (41 U.S.C. 254, implemented at 48
CFR subpart 15.8). The requirement for the submission of such data is
intended to ``enable the Government to perform cost or price analysis
and ultimately enable the Government and the contractor to negotiate
fair and reasonable prices'' (48 CFR 15.804-1(a)). The FAR sets forth
detailed guidance and direction on the cost elements and the breakdowns
for each element which are to be furnished and certified by a
prospective contractor. It also prescribes the consequences for the
contractor if it is determined that ``inaccurate, incomplete, or
noncurrent'' data has been provided (48 CFR 15.804-7).
Since an energy savings performance contract is likely to result in
payments by the Federal agency to the contractor in excess of $100,000,
the requirement for certified cost or pricing data would apply unless
the contract qualifies for one of the exceptions set out in the
statute. The available exceptions include ``* * * exceptional cases,
where the agency head determines that the requirements of this
subsection may be waived and states in writing the reasons for such
determination'' (41 U.S.C. 254(d)(5)(B); see also section 801(b)(1)(A)
of the Act).
DOE has preliminarily concluded that the requirement in 41 U.S.C.
254 for submission of certified cost or pricing data is inconsistent
with the intent of section 801 and that energy savings performance
contracts are an ``exceptional case'' under 41 U.S.C. 254(d)(5)(B)
which warrants a waiver from the requirement. These contracts are
unique in a number of ways. Under these contracts, the contractor
assumes all of the risk by making the initial capital investment
required to perform the contract, guaranteeing a certain level of
energy savings and tying its compensation to a percentage of that
guaranteed savings. Unlike traditional government contracts, payments
to the contractor are based solely on the energy savings realized by
the Federal agency, not on successful completion of the work or the
costs incurred in performing the work.
While solicitations for energy savings performance contracts may
request information on a prospective contractor's estimated costs, this
information will be used for limited purposes in the evaluation of
proposals. The nature and extent of the cost data required under FAR
Subpart 15.8 and the penalties for providing inaccurate or incomplete
data appear to be inappropriate and unduly burdensome in the case of a
contract under which the government incurs no real ``cost'' but merely
agrees to pay the contractor out of the energy savings which result
from the contractor's work. Consequently, DOE is proposing to waive the
requirement for submission of certified cost or pricing data in the
case of energy savings performance contracts.
DOE's preliminary conclusion regarding the requirement for
certified cost or pricing data is reflected in proposed Sec. 436.33.
DOE is interested in public comment on the preliminary conclusions set
forth above and on how the requirement for cost or pricing data impacts
the economic attractiveness of energy savings performance contracting
with Federal agencies.
Cost Accounting Standards
The requirement for contractors to comply with cost accounting
standards arises from 41 U.S.C. 422(f)(2) and its implementing
regulations at 48 CFR chapter 9900. The cost accounting standards
statute and implementing regulations authorize exemptions for classes
or categories of contractors and subcontractors from cost accounting
standards requirements and also provide waiver authority for individual
contracts and subcontracts. (41 U.S.C. 422(f)(4)).
The Cost Accounting Standards Board has recently amended certain of
its provisions, including one of the exemptions from cost accounting
standards requirements (58 FR 58798, November 4, 1993). The amended
provision, 48 CFR Sec. 9903.201-1(b)(15), provides an exemption from
the cost accounting standards requirements for firm fixed-price
contracts when the requirement for submission of certified cost or
pricing data has been waived. In the Department's view, energy savings
performance contracts are firm fixed-price contracts because the
payment (or price) to the contractor is not subject to adjustment based
solely on the contractor's cost experience in performing the contract.
Consequently, the Department's proposal to waive the requirement
for certified cost or pricing data (see proposed Sec. 436.33) would, if
adopted in the final rule, result in an exemption for energy savings
performance contracts from the requirement to comply with cost
accounting standards. This exemption would apply in the case of a
waiver from the requirement for certified cost or pricing data even if
a Federal agency's solicitation requests some cost information from
prospective contractors.
Davis-Bacon Act
The Davis-Bacon Act (40 U.S.C. 276a-276a-7), implemented at 48 CFR
Subpart 22.4, applies to contracts in excess of $2,000 involving
construction, alteration, or repair of a public building. It provides
that no laborer or mechanic employed directly on the site of the work
receive less than the prevailing wage rates as determined by the
Secretary of Labor. The statute does not authorize any exceptions or
waivers to this requirement.
By limiting DOE authority under section 801(b) of the Act to
promulgation of ``substitute regulations * * * consistent with the laws
governing Federal procurement,'' Congress clearly indicated that it did
not intend to authorize DOE regulatory exceptions to FAR provisions
based on statutes which do not provide for exceptions or which have a
limited list of exceptions inapplicable to energy savings performance
contracts and do not authorize the regulatory creation of other
exceptions. The foregoing preliminary conclusions have been influenced
by this understanding of the law. Members of the public are invited to
comment on those preliminary conclusions and on other FAR provisions
not discussed above in which a case can be made that the regulations
are likely to be a disincentive to participation by a significant
number of potential energy savings performance contractors.
Although not specifically required by section 801 of the Act, DOE
anticipates putting a case to the Federal Acquisition Regulatory
Council for amending the Federal Acquisition Regulation to incorporate
special provisions for energy savings performance contracts. It is
preferable for all acquisition regulations to be incorporated in the
Federal Acquisition Regulation to avoid confusion.
III. Section-by-Section Analysis
Section 436.30 Purpose and Scope
This section consists of three paragraphs. Consistent with section
801(c)(1) of the Act, the first paragraph provides that the subpart
applies to energy savings performance contracts awarded within 5 years
of the effective date of the rules. That paragraph also makes clear
that the rules in the subpart apply notwithstanding any provisions to
the contrary in the Federal Acquisition Regulation at title 48 of the
CFR and any related Federal agency regulations such as the Department
of Energy Acquisition Regulations (Provisions of the Federal
Acquisition Regulation and agency-specific regulations dealing with
subjects not covered by part 436 would continue to apply to energy
savings performance contracts). A purpose of this paragraph is to
ensure that contract specialists and contracting officers in Federal
agencies follow a generally uniform approach which avoids confusion
created by differing interpretations of existing procurement
regulations.
Paragraph (b) of proposed Sec. 436.30 is based on section 152 of
the Energy Policy Act of 1992, which amends section 546 of the Act, 42
U.S.C. 8256, by adding a new statutory paragraph encouraging Federal
agencies to participate in utility incentive programs generally
available to utility customers. Proposed Sec. 436.30(b) makes clear
that proposed subpart B of 10 CFR part 436 does not restrict
participation in such an incentive program.
Paragraph (c) of proposed Sec. 436.30 encourages Federal agencies
participating in utility incentive programs to require utilities to
select contractors in a competitive manner to the maximum extent
practicable and allowable by law. The promotion of competition is
encouraged rather than required because DOE does not have statutory
authority to issue substantive rules under section 546.
Section 436.31 Definitions
Energy Audit
Section 801(a)(2)(A) of the Act specifically requires that an
energy savings performance contract include requirements for an annual
energy audit after contract award. There are many methods and measuring
devices or instruments that may be used to assess the energy use in
buildings. The proposed rules do not mandate specific energy audit
requirements or standards. Rather, they allow each Federal agency to
select or negotiate reasonable energy audit procedures consistent with
the Act. Energy audit requirements will also depend on the energy
savings requirements and recommended energy technologies. For example,
facility energy consuming systems such as Heating, Ventilating, and Air
Conditioning (HVAC) systems will require more comprehensive data
collection and more complex data analysis during an energy audit than
will lighting systems. The energy savings performance contracting ``How
To'' manual will provide numerous recommended references on energy
auditing tools and techniques for Federal agency use.
The definition of ``energy audit'' does not specify audit
procedures which must be followed prior to contract award or subsequent
to contract award for the purpose of determining energy and cost
savings which are likely to result from implementation of energy
conservation measures. The reason for this omission is that the
proposed rules would not impose generally applicable requirements with
regard to the conduct of such an audit procedure. (To the extent that
guidance in this regard is needed, Federal agencies can refer to the
model solicitations and the ``How To'' manual.) Mandatory rules do not
seem needed because the requirement for contractors to provide a
performance guarantee places proposers under a strong incentive not to
overstate claims of future energy cost savings.
It should also be noted that Federal agencies will soon have at
their disposal the results of the energy survey of a large,
representative sample of Federal buildings and facilities as required
by section 550 of the Act 42 U.S.C. 8260. The energy survey data may
provide a basis for evaluating technical proposals.
Energy Baseline
The energy baseline is the most critical and fundamental element of
an energy savings performance contract. The energy baseline is used
throughout the contract duration as a benchmark or reference to
determine energy savings achieved as a result of the contractor's
installed energy conservation measures. Energy baselines are
established through energy audits conducted before facility retrofit.
As indicated in the proposed definition of ``energy baseline'', such a
baseline can be established using:
--Historical metered data.
--Engineering estimates based on calculation methods and formulas
accepted and recognized by national organizations such as the American
Society of Heating, Refrigeration, and Air Conditioning Engineers
(ASHRAE) and the Illuminating Engineering Society (IES).
--Computerized building load simulation models to predict a facility's
annual energy use from detailed data input on conditions of building
construction and energy consuming systems. Personal computer based load
simulation models such as DOE-2 and A Simplified Energy Analysis Method
(ASEAM) are available to Federal agencies.
--Statistical regression analysis models. A regression analysis model
depicts the statistical relationship between energy consumption and
factors on which consumption is dependent, such as weather and facility
occupancy. The model is in the form of a mathematical equation that
expresses energy consumption as a function of those factors that best
explain amounts of historical energy use. The regression model uses
current values of energy use factors to predict facility energy use
that would have occurred without the energy savings performance
services.
All energy savings performance contracts should include a procedure
for adjusting energy baselines during the contract term. Facility
energy utilization is dynamic and over a multiyear contract (5-10 years
or more) can be expected to change due to causes not attributed to
contractor energy conservation measures. For example, during an energy
savings performance contract, the contracting agency retains the right
to use its facilities as required to meet its mission. This right may
result in changes from initial baseline conditions due to different
facility use or occupancy or the addition or removal of energy-
consuming equipment.
Some baseline methods, such as statistical regression models, are
designed to adjust baselines if changes occur in occupancy or other
such factors on which the baseline is dependent. However, all
contingencies cannot reasonably be anticipated. Therefore,
solicitations should incorporate a provision that triggers negotiations
and equitable adjustments of initial energy baselines if Government-
caused changes affect total baseline energy use by more than
1 percent.
Although the proposed definition of ``energy baseline'' describes
appropriate alternative methods for establishing a baseline, the
proposed rules do not set forth specific requirements for selecting a
method to be used in a particular energy savings performance contract.
The choice is left to agency discretion. Since the development of a
baseline is dependent on available agency data, energy savings
requirements, and recommended energy technologies, Federal agencies are
provided discretion on selecting appropriate baseline approach and
adjustment procedures. As with energy audit techniques, energy
consuming systems such as HVAC systems will require more comprehensive
data collection and complex data analysis to develop an accurate energy
baseline or baseline adjustment method than will lighting systems. The
energy savings performance contracting ``How To'' manual will expand on
selection of appropriate baseline methods and adjustment procedures
that meet agency- and project-specific requirements and will discuss
the advantages and disadvantages of each approach. The model
solicitations also provide agency guidance on incorporating facility
and energy baseline data and requirements into energy savings
performance contract documents.
Energy Conservation Measure
This definition tracks the statutory definition in section 549 of
the Act 42 U.S.C. 8259.
Energy Cost Savings
The definition of this term is consistent with the definition of
``energy savings'' in paragraph (c)(2) of section 804 of the Act.
Adding the word ``cost'' to the statutory term helps to clarify its use
in other sections of the proposed rule as referring to monetary savings
as distinguished from savings in units of energy. ``Related operations
and maintenance expenses'' is added to this definition to conform with
section 802 of the Act, which allows payments to contractors from funds
made available for ``energy expenses (and related operations and
maintenance expenses).''
Section 436.32 Qualified Contractor List
Paragraph (a) of proposed Sec. 436.32 provides for DOE requests for
statements of qualifications on questionnaires provided by DOE.
Consistent with section 801 of the Act, the first questionnaire would
request from the firm information regarding prior experience,
capabilities to perform types of energy savings services, and financial
and project performance information. On the basis of the project
performance information received from the firm, DOE will send a second
questionnaire in the nature of a standard letter to at least three
clients who received energy savings services.
The first questionnaire is likely to ask the following questions:
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)________
____ Other (Explain) ________
(d) This submittal applies to:
[ ] Parent Company
[ ] Division
[ ] Subsidiary
[ ] Branch Office
List any Division or Branch Offices which are to be included in the
Prequalification process (attach separate list if more than one is
included).
(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) Identify associates and/or subcontractor(s) that you plan to
utilize for Federal Energy Savings Performance Contracts projects. If
your firm is using an associate and/or subcontractor(s), explain the
functions of both your firm and your associate and/or subcontractors
(such as project management, technical/engineering services),
construction, and maintenance services and the financial
responsibilities of each firm.
(k) 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.
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(l) Provide a 5-year summary of contract values for energy-related
services your firm provided (insert appropriate index number).
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Year Index Index No. Range of contract values
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19____.............................................. 1 Less than $100,000.
19____.............................................. 2 $100,000-$250,000.
19____.............................................. 3 $250,000-$500,000.
19____.............................................. 4 $500,000-$1 Million.
19____.............................................. 5 $1 Million-$2 Million.
6 $2 Million-$5 Million.
7 $5 Million-$10 Million.
8 $10 Million or greater.
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(m) Indicate the largest dollar value of investment your firm would
consider for a Federal Government ESPC contract.
(n) 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)
[ ] All Regions
[ ] Territories
[ ] Exceptions (specify) ____________
2. Experience
(a) List and briefly describe at least three of the largest
projects completed by your firm that have been operating and saving
energy for at least 2 years and that best illustrate your range of
experience relative to energy performance contracting and energy
management expertise (i.e., type of technologies implemented). For each
project provide information on the following items:
(1) Project title and location.
(2) Person to contact regarding the project, his or her position,
address, and telephone number.
(3) Identify if 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 organization.
(7) Type and term of contract.
(8) Identify the major types of work implemented and if your firm
or subcontractors did the work.
(9) Starting and ending dates.
(10) Indicate if the project was completed on schedule. If not,
explain.
(11) Projected 12-month energy savings for each project.
(12) Identify performance guarantees, if performance-based energy
service contract.
(13) Actual annual energy savings achieved for each project.
(14) Firm notes on project.
(b) Indicate the number of years in business as an Energy
Management Contractor: ______ years. Indicate all other names for your
organization and the length of time your organization had that name.
3. Technical Capability
List the technologies (e.g., lighting; HVAC systems, etc.) 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 those persons in your firm or subcontracting
firm(s) you are intending to utilize on projects.
(b) List all professional and skilled trades which your firm
customarily performs with its own employees.
5. Financial Status
(a) List all legal or administrative proceedings currently pending
or concluded adversely against your firm within the last 5 years which
relate to procurement or performance of any public or private
construction contracts.
(b) Disclose whether your firm (or its predecessors, if any) has
been insolvent or declared to be in bankruptcy within the past 5 years.
(c) Indicate whether your firm has been debarred by the Federal
Government and provide explanation. The second questionnaire would
request project-specific information from at least three of the firm's
clients, which the firm identified on the first questionnaire. The
questions in the second questionnaire are likely to be as follows:
1. Was the project completed on schedule?
2. Did contract involve energy savings performance guarantees? If
so, describe performance guarantees (e.g., annual energy or cost
savings).
3. Did installed project achieve energy savings projected or
guaranteed by contractor?
4. Was the method(s) used by the contractor to determine annual
energy savings acceptable for the type of energy conservation measures
installed?
5. Did contractor provide operations, maintenance, and repair
services as part of contract?
6. Did contractor arrange a utility demand-side management rebate?
7. What was the capital investment in the energy project? ______
Was capital investment financed by contractor or third party?
8. Provide an overall rating of the quality and timing of services
provided by the contractor. If your answers to questions 1-5 were all
affirmative, please briefly explain your reasons for giving a ``Fair''
or ``Poor'' rating, as applicable.
[ ] Excellent--Exceeded expectations, highly recommend contractor.
[ ] Good--Met all requirements, recommend contractor.
[ ] Fair--Achieved project objective, room for improved quality and
performance.
[ ] Poor--Shortfall in performance and quality, would not recommend.
Members of the public are invited to comment on the adequacy of the
foregoing questions for inclusion in these questionnaires. DOE would be
interested in specific suggestions for substituting or adding questions
to elicit information to be used in distinguishing between firms
minimally qualified to compete for contract awards and those which are
not qualified.
Paragraph (a) of proposed Sec. 436.32 also provides for annual
notices in the Commerce Business Daily to invite submission of new or
updated statements of qualification. DOE considered allowing potential
contractors to submit a statement of qualifications at any time. DOE
did not propose language to this effect in order to avoid undue
administrative burden and unnecessary confusion with regard to the
status of the list at any moment in time.
Paragraph (b) of proposed Sec. 436.32 contains the proposed
evaluation criteria for determining which firms are included on the
qualified list. These proposed criteria represent minimum
qualifications. Consistent with the competitive procedures under
proposed section 436.33, DOE anticipates that in many cases more than
one contractor from the qualified list will submit technical and price
proposals which will be comparatively evaluated to determine the best
proposal.
The evaluation criteria are quantitative and qualitative in nature.
An example of a quantitative criterion is a record of energy savings
performance contract services for not less than three clients with a
minimum of two years of energy cost savings for each contract. DOE
would be interested in comments as to whether this criterion would
eliminate too many potential applicants. DOE may reword this criterion
in the final rule so that the experience would relate to installation
of energy conservation measures. An example of a qualitative criterion
is that the firm possesses, or may subcontract for, the personnel with
adequate project experience consistent with the range of technologies
it may apply. Members of the public are invited to compare the list of
evaluation criteria with the questions asked on the questionnaire,
which are set forth above. DOE would be especially interested in
comments on the adequacy of the criteria to distinguish those firms
which are minimally qualified from those which should not be invited to
compete for contract awards or submit unsolicited proposals.
Paragraph (c) of proposed Sec. 436.32 states the general policy,
drawn from the statutory language in section 801 of the Act, that other
Federal agencies may develop their own qualified lists as long as they
use the same procedures that DOE uses for developing its list. The only
exception to this general policy is for the Department of Defense.
Authority to develop a qualified list of firms was previously
provided to the Department of Defense under 10 U.S.C. 2865. The
exception in paragraph (c) of proposed Sec. 436.32 would recognize the
authority of the Department of Defense to award contracts to firms
which have been competitively selected by a utility without regard to
whether such a firm is on a qualified list.
Section 436.33 Procedures and Methods for Contractor Selection
The first two paragraphs of proposed section 436.33 set forth the
procedures and methods for selecting energy savings performance
contractors from a qualified list by a Federal agency under the Act.
Section 801(b)(2)(B) states that Federal agencies are required to use a
qualified list if it is available. The third paragraph recognizes the
authority of the Department of Defense under 10 U.S.C. 2865(c)(2)(B) to
provide for direct negotiation of energy savings performance contracts
with firms competitively selected by a utility.
Paragraph (a) of proposed Sec. 436.33 would provide procedures for
competitive solicitation and selection of contractors. With respect to
a particular proposed energy savings project (which may consist of any
number of contiguously related buildings and facilities), a Federal
agency would be required to solicit ``intent to propose'' statements
from firms on the qualified list who may be interested in proposing.
Typically, a firm responding with an ``intent to propose statement''
will have had the opportunity for a walkthrough energy survey of
candidate buildings and facilities.
Paragraph (a)(1) further would provide for a Federal agency to
request technical and price proposals from firms who respond with
``intent to propose statements''. DOE anticipates that often
competitive negotiations with firms in the competitive range would then
occur.
Proposed paragraph (a)(3) would authorize a selection based on the
evaluation of technical and price proposals and other relevant
information (such as data submitted when applying for inclusion on a
qualified list). The paragraph would not require a selection if a
Federal agency has reason to abandon a potential project. However, if a
Federal agency is inclined to make a selection, the paragraph would
state the exclusive basis on which a selection should be made.
Proposed paragraph (a)(4) also provides a selection process
designed for an energy savings project which involves a large facility
with many contiguously related buildings and other structures at one
site. In this case, it does not seem cost-effective or practical, from
either the agency's or the competing firms' perspective, to require
technical and price proposals on each building prior to selection of a
firm. All but the largest firms would be disinclined to compete for an
energy savings project of this magnitude if they were expected to
prepare proposals (including conducting energy audits) for each and
every structure on the site prior to selection. Rules promoting such a
result would be inconsistent with section 801(b)(1)(A), which requires
procedures to select energy service contractors that will achieve the
intent of the Act in a cost-effective manner (42 U.S.C. 8287(b)(1)(A)).
Therefore, DOE is proposing that when an energy savings project
involves the type of facility described above, the Federal agency may
request technical and price proposals for a ``representative sample''
of the buildings and structures at the facility site. The proposed rule
does not define ``representative sample'' and would leave further
definition to agency discretion on a case-by-case basis. Members of the
public are invited to comment on this choice and to offer a definition
which would limit agency discretion. Based on its evaluation of the
proposals submitted, the agency may select a firm to conduct the
project. After selection, the agency may request technical and price
proposals from the selected firm for any or all of the remaining
buildings and structures that constitute the facility. Based on its
evaluation of these proposals, the agency may decide to contract with
the selected firm to provide energy savings services for any, all, or
none of the remaining buildings or structures. The word ``may'' is used
in paragraph (a)(5) because the paragraph states what a Federal agency
is authorized to do and not what it is required or mandated to do.
There may be circumstances in which a Federal agency will decide, with
respect to a large facility, that it is preferable to make separate
competitive awards or acquire energy conservation services in some
other way 10 U.S.C. 2865(b)(2)(8). For example, the proposer selected
on the basis of the representative sample may submit an unreasonable
price proposal for the balance of the structures. Another example would
be a facility in which some of the energy sources are separately
metered.
DOE believes that this process will facilitate energy savings
performance contracting in the case of large facilities composed of a
number of buildings and structures which serve different purposes or
uses (e.g., a medical complex) while preserving the benefits of
competition. In this type of situation, competing and selecting
contractors on a building-by-building basis seems impractical and
potentially problematic. Even though there may be a number of distinct
buildings or structures on a site, it may be more effective from an
energy efficiency/conservation perspective to treat these structures as
one unit or system in planning and designing energy savings services.
Consequently, from the Federal agency's viewpoint, the selection of a
single firm to provide such services for the entire facility might
appear to be the more practical and effective approach.
The scope of the energy savings project will be clearly defined at
the beginning of the competitive process so that competing firms will
be aware of the magnitude of the project. The Federal agency's interest
will be protected because the selected firm will not be guaranteed a
contract covering those buildings or facilities not included within the
representative sample. Firms interested in competing for a project of
this size, however, will not be deterred from proposing because of
excessively prohibitive proposal preparation costs.
DOE invites public comment on this proposed process and is
especially interested in ideas and suggestions to facilitate energy
savings performance contracting for those situations involving multi-
building facilities.
Based on the provision of section 801 of the Act authorizing
receipt of unsolicited proposals from qualified firms, DOE is proposing
in paragraph (b) of section 436.33 the procedure to be followed in
dealing with such proposals. If an unsolicited proposal had merit, the
Federal agency would have to publish notice in the Commerce Business
Daily acknowledging receipt and inviting other firms on a qualified
list to submit competing proposals. In order for an unsolicited
proposal to have merit, there would have to be ``adequate'' technical
and price components. It is explicitly stated that the evaluation of
competing proposals would be based on the same factors described in
paragraph (a)(4) as the basis for making a competitive selection from
among proposals that had been solicited. Paragraph (b) concludes with a
statement precluding a Federal agency from basing an award on an
unsolicited proposal if it is planning or acquisition through a
solicitation from among firms on a qualified list.
Paragraph (c) of proposed Sec. 436.33 would provide an exception to
the foregoing policies for competitive selections and for dealing with
unsolicited proposals. The exception would apply to the Department of
Defense under 10 U.S.C. 2865 and recognizes that Department's authority
to select energy savings performance contractors on the basis of
competitive selection by a utility rather than on the basis of the
methods described in proposed paragraphs (a) and (b).
Paragraph (d) of proposed Sec. 436.33 deals with cost accounting
standards applicable to energy savings performance contractors. The
rationale for paragraph (d) is described above in the portion of this
``Supplementary Information'' concerning ``substitute regulations.''
Section 436.34 Standard Terms and Conditions
Proposed Sec. 436.34 sets forth requirements for standard terms and
conditions which are unique to energy savings performance contracts.
Paragraph (a) deals with contractors who are financing the acquisition
of energy conservation measures through a secured loan or a lease-
acquisition. It is designed to protect the interests of the Federal
agency and the financing source in the event of default by the
contractor on the energy savings performance contract or of failure by
the contractor to make timely payments pursuant to a secured loan or
lease-acquisition agreement. It would require a Federal agency to
ensure that an energy savings performance contract contains a clause
authorizing a contracting officer to require a contractor to assign
both the rights and responsibilities of the contract to a willing and
able financing source. The clause would allow the contracting officer
the discretion not to require such an assignment in appropriate
circumstances such as an unwilling or unable financing source. The
paragraph presumes that a Federal agency would notify a financing
source in the event of default on the contract and that the financing
source would notify the Federal agency in the event of contractor
failure to cure lack of timely payments.
Proposed paragraph (b) would require a clause authorizing
modification, replacement, or change in equipment at no cost to the
Federal agency and with prior notification and approval by the
contracting officer.
Proposed paragraph (c) would require a contract clause specifying
the final disposition of title to systems and equipment.
Proposed paragraph (d) would require prior approval by the
contracting officer of any financing agreements including amendments to
applicable pre-existing agreements.
The previously described provisions in proposed Sec. 436.34 are
based on clauses currently in use by the Army. Specific clauses are
included in the model solicitations. DOE is not proposing rules
requiring that Federal agencies use standard clauses because it is
desirable to maintain some flexibility to take into account unique
facts and circumstances.
Section 436.35 Funding
Paragraph (a) of proposed Sec. 436.35 restates the statutory
requirement, established by section 802 of the Act, that payments under
energy savings performance contracts may be made only from funds
available for the payment of energy costs and related operations and
maintenance expenses.
Paragraph (b) implements section 801(a)(2)(B) of the Act. It
requires that the total cost for energy savings performance contract
services and utilities, after the contract is in place, may not exceed
the cost estimated by the Federal agency for all energy and related
operations and maintenance expenses without the energy savings
performance contract in place. The energy baseline, adjusted for
changes in initial baseline conditions (if any), indicates the energy
the agency would have consumed without an energy savings performance
contract.
To determine the agency cost of energy without an energy savings
performance contract under paragraph (b), the Federal agency would have
to multiply the current unit energy rates by the current annual energy
baseline and add the operations and maintenance cost avoidance for
related utility or energy consuming systems which the contractor
assumes (if any). The current annual energy baseline is derived using
the baseline method and adjustment procedure established in the energy
savings performance contract.
Federal agencies should use the above procedure to prepare annual
utility budgets, since the budget should, at minimum, include annual
estimates of: purchased utilities; all costs to generate and distribute
energy from Federal power production facilities; related operations and
maintenance expenses; and scheduled annual payments for energy savings
performance services.
Paragraph (c) tracks the wording of paragraph (a)(2)(C) of section
801, which authorizes a Federal agency to incur multiyear obligations
to pay a contractor for guaranteed savings pursuant to an energy
savings performance contract as long as those savings ``exceed debt
service requirements.''
All versions of the model solicitations include a provision which
provides that payments for contracted energy savings services commence
only upon inspection and acceptance of the contractor's energy
conservation measures and accrual of energy and related operations and
maintenance savings. Therefore, a Federal agency would not provide
advance payments for the contractor's recovery of its capital costs.
Such an advance payment is precluded by the statutory language. Given
coverage in the model solicitations, there is no need to restate the
proposition in regulatory language.
Paragraph (d) implements paragraph (a)(2)(B) of section 801, which
requires that energy savings performance contracts provide for a
guarantee of savings to the agency and establish payment schedules to
reflect that guarantee. Included in such payment schedules are
financing charges incurred by the contractor. Ordinarily, ``interest
and other financial costs'' are unallowable costs under the Federal
Acquisition Regulation (48 CFR 31.205-20). However, that regulatory
provision is inapplicable to energy savings performance contracts
because paragraph (a)(2)(C) of section 801 provides for obligations to
pay for ``debt service requirements'' and thus clearly contemplates the
role third-party financing may play in energy savings performance
contracts. Since financing charges are normally an essential aspect of
financing, it is only reasonable for payment schedules to reflect such
charges.
Paragraph (e) tracks the language of subsection (a)(2)(D) of
section 801 of the Act, which sets forth specific conditions upon which
Federal agencies are authorized to enter into multiyear energy savings
performance contracts, without funding total contract costs or
cancellation charges inherent in multiyear contracts. Specific
conditions of the multiyear contracting authority for energy savings
performance are:
(1) The contract was awarded competitively using procedures
established in this proposed rule;
(2) Funds are available and adequate to cover contractor payments
(if any) for energy savings estimated and scheduled to occur during the
first fiscal year of the contract period;
(3) Thirty (30) days prior to awarding an energy savings
performance contract, the agency head notifies appropriate
authorization and appropriations committees, if the contract includes a
clause establishing a proposed cancellation ceiling in excess of
$750,000. Cancellation charges represent the maximum liability the
Government assumes in the event the energy savings performance contract
is terminated for the convenience of the Government, or the utility
funds are not made available to the agency in a future fiscal year,
which would result in cancellation of all remaining years of the
contract; and
(4) The contract is governed by and contains applicable multiyear
contract provisions found in 48 CFR subpart 17.1. Subpart 17.1 provides
policy and guidance on applicability of multiyear contracting
provisions for a variety of contract types.
The model solicitations provide guidance on using multiyear
provisions in 48 CFR Subpart 17.1 and establishing the cancellation
ceiling for the energy savings performance contract.
Section 436.36 Procedures and Methods to Monitor Contracts
Section 801(a)(2)(A) of the Act provides that energy savings
performance contracts shall require an annual energy audit. Post-
installation and annual energy audits are intended to verify contractor
compliance with annual energy savings performance guarantees. As
pointed out earlier when discussing the definition of the term ``energy
audit,'' such audits and energy baselines are techniques used to
measure and determine energy savings performance attributable to energy
conservation measures installed under energy savings performance
contracts. The energy audits should not involve qualitative judgments
by the auditors; moreover, the proposed rule would promote objectivity
by providing for the agency to perform audits, or to approve an
independent consultant selected and paid by the contractor. It does not
appear appropriate to require agency audits only because section
801(a)(1) of the Act indicates auditing may be an allowable cost.
Public comments are invited on the wisdom of allowing the contractor to
select and pay the consultant to conduct its audit.
The specific audit and baseline methods selected for an energy
savings performance contract are based on project specific
characteristics. The ``How To'' manual and model solicitations provide
guidance for agencies to adapt energy audit and energy baseline
contract requirements to meet the project-specific needs.
Section 436.37 Procedures and Methods to Terminate Contracts
Proposed Sec. 436.37 addresses procedures related to terminating
energy savings performance contracts, which generally occurs under two
conditions: (1) when the Government exercises its right to terminate
for convenience; or (2) when the Government terminates for default
(i.e., contractor nonperformance).
Termination for Convenience
Energy savings performance contracts are multiyear contracts and,
as discussed previously, incorporate cancellation ceilings for each
year of the contract which reflect the contractor's incurred costs
prior to receiving payments for energy cost savings. In the event of a
termination for convenience, the Government must cancel any remaining
years of the contract. The maximum termination liability is established
by the cancellation ceilings, for each contract year, set forth in the
contract pursuant to multiyear contract provisions of 48 CFR subpart
17.1.
Termination for Default
An energy savings performance contract includes energy savings
performance guarantees to be provided by the contractor. In the event
the contractor is unable to meet the contract performance guarantees,
the Government may exercise its right to terminate for default due to
nonperformance of the contractor. Such action to terminate for default
shall be pursuant to Federal Acquisition Regulation Part 49. The
Government, however, may elect to take title to, and acquire from, the
contractor any equipment or energy conservation measures which may be
in the Government's best interest. For equipment the Government elects
to acquire, the Government shall provide compensation based on incurred
costs less payments made prior to termination pursuant to termination
provisions in 48 CFR Part 49.
The model solicitations include provisions which address title to
installed equipment, cancellation ceilings, and contract termination.
DOE does not believe that there is a need for detailed regulations with
regard to termination procedures, and the proposed rules would allow
Federal agency discretion in applying termination procedures based on
model solicitation guidance.
IV. 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 proposed 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 questionnaires proposed 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
adequate, 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 and retrieving the
collection of information.
(d) Review Under the National Environmental Policy Act
Pursuant to the Council on Environmental Quality Regulations (40
CFR part 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 proposed 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 proposed rules will revise certain policy and
procedural requirements applicable only to Federal contracts.
Therefore, the Department of Energy has determined that these proposed
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 proposed rules meet the requirements of
section 2(a) and (b) of Executive Order 12778.
V. Opportunities for Public Comment
Written Comments
Interested persons are invited to participate in this rulemaking by
submitting data, views, or comments with respect to the proposed
rulemaking.
Six copies of written comments should be submitted to the address
indicated in the ADDRESSES section of this notice. Comments should be
identified on the outside of the envelope and on the documents
themselves with the designation ``Energy Savings Performance Contracts;
Notice of Proposed Rulemaking, Docket No. EE-RM-94-201''. In the event
any person wishing to provide written comments cannot provide six
copies, alternative arrangements can be made in advance with DOE.
All comments received will be available for public inspection as
part of the administrative record on file for this rulemaking in the
Department of Energy Freedom of Information Office Reading Room, 1E-
090, Forrestal Building, 1000 Independence Avenue, SW., Washington, DC
20585, 202-586-6020, between 9 a.m. and 4 p.m., Monday through Friday,
except Federal holidays.
Any person submitting information which that person believes to be
confidential and which may be exempt by law from public disclosure,
should submit one complete copy, as well as two copies from which the
information claimed to be confidential has been deleted. DOE reserves
the right to determine the confidential status of the information and
to treat it accordingly under 10 CFR 1004.11.
Public Hearing
Request to Speak Procedures
A public hearing on the proposed rule will be held at 9:30 a.m. on
May 17, 1994 in room 1E-245 of the Forrestal Building, 1000
Independence Avenue, SW., Washington, DC 20585.
Any person who has an interest in the proposed rule or who is a
representative of a group or class of persons who has an interest in
the proposed rule may request an opportunity to make an oral
presentation. A request to speak at the public hearing should be
addressed to the address or phone number indicated at the beginning of
this notice. The person making the request should briefly describe his
or her interest in the proceedings and, if appropriate, state why the
person is a proper representative of a group. The person should also
provide a phone number where he or she may be reached during the day.
Six copies of the speaker's statement should be brought to the hearing.
In the event any person wishing to testify cannot meet this
requirement, alternative arrangements can be made in advance.
Conduct of the Hearing
DOE reserves the right to select persons to be heard at the
hearing, to schedule their respective presentations, and to establish
procedures governing the conduct of the hearing. The length of each
presentation will be limited to 10 minutes or based on the number of
persons requesting an opportunity to speak.
A DOE official will preside at the hearing. This will not be a
judicial or evidentiary-type hearing. It will be conducted in
accordance with 5 U.S.C. 553 and section 501 of the Department of
Energy Organization Act, 42 U.S.C. 7191.
Questions may be asked only by those conducting the hearing. At the
conclusion of all initial oral statements, each person who has made an
oral statement will be given the opportunity to make a rebuttal or
clarifying statement. The statements will be given in the order in
which the initial statements were made and will be subject to time
limitations.
Any further procedural rules needed for the proper conduct of the
hearing will be announced by the presiding officer.
A transcript of the hearing will be made by DOE and made available
as part of the administrative record for this rulemaking. It will be on
file for inspection at the DOE Freedom of Information Reading Room,
Forrestal Building, 1000 Independence Ave, SW., Washington, DC 20585,
between the hours of 9 a.m. and 4 p.m., Monday through Friday, except
Federal holidays. Any person may purchase a copy of the transcript from
the hearing reporter.
If DOE must cancel the public hearing, DOE will make every effort
to publish an advance notice of such cancellation in the Federal
Register. Actual notice of cancellation will also be given to all
persons scheduled to speak. The hearing date may be canceled in the
event no member of the public requests the opportunity to make an oral
presentation.
List of Subjects in 10 CFR Part 436
Energy conservation; Federal buildings and facilities; Reporting
and recordkeeping requirements; and Solar energy.
Issued in Washington, DC on this 5th day of April 1994.
Christine A. Ervin,
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 proposed to be
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:
Authority: 42 U.S.C. 6361, et seq.; 42 U.S.C. 8251, et seq.; 42
U.S.C. 8287, et seq.
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 Secs. 436.30 through 436.37 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 Standard terms and conditions.
436.35 Funding.
436.36 Procedures and methods to monitor contracts.
436.37 Procedures and methods to terminate 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 5 years of the
effective date of these rules unless the period of effectiveness is
extended by law. 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 and for
water conservation or the management of 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;
(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. Under paragraph (b) of this section and
to the extent allowed by law, Federal agencies are encouraged to
require utilities to select contractors in a competitive manner to the
maximum extent practicable.
Sec. 436.31 Definitions.
As used in this subpart--
Building means any closed structure primarily intended for human
occupancy in which energy is consumed, produced, or distributed.
DOE means Department of Energy.
Energy audit means a procedure conducted to determine the energy
and cost savings which are likely to result or which have resulted from
implementation of energy conservation measures.
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, 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 improve energy
efficiency, are life-cycle cost-effective under Subpart A of this part,
and that involve energy conservation, cogeneration facilities,
renewable energy sources, improvements in operations and maintenance
efficiencies, or retrofit activities.
Energy cost savings means a reduction in the cost of energy and
related operations 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 facility 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 an existing Federally owned building or facilities.
Energy savings means the determination, in electrical or thermal
units (e.g., kilowatt hour (kwh), kilowatt (kw), or British thermal
unit (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.
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.
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.
Secretary means the Secretary of Energy.
Sec. 436.32 Qualified contractors lists.
(a) DOE may prepare a list, to be updated annually, of firms
qualified to provide energy savings performance services. 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 types of energy savings services and financial and performance
information. DOE shall issue a notice annually, for publication in the
Commerce Business Daily, inviting new or updated statements of
qualifications.
(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
for not less than three clients with a minimum two years of energy
savings for each contract;
(2) All previous project clients contacted provide ratings which
exceed ``poor'';
(3) The firm and proposed associates and subcontractors identified
in the questionnaire possess the project experience, qualifications,
and breadth of skills appropriate to successfully implement the
technologies which the firm may propose to provide;
(4) The firm or any principal of the firm has not declared
bankruptcy within the last 5 years;
(5) The firm or principal of the firm is not on the list of parties
excluded from procurement programs under 48 CFR subpart 9.4; and
(6) There is no other adverse information which warrants the
conclusion that the firm is not minimally qualified.
(c) Except as provided by 10 U.S.C. 2865(c)(2)(A), a Federal agency
shall use DOE's list unless it elects to develop its own list of firms
qualified to provide energy savings performance services consistent
with the procedures in paragraphs (a) and (b) of this section.
(d) A firm not designated by DOE or a Federal agency pursuant to
the procedures in paragraph (a) and (b) of this section as qualified to
provide energy savings performance services shall receive a written
decision and may request a debriefing from a DOE official. Review of
such a decision shall be conducted in accordance with procedures
developed by the Board of Contract Appeals of the General Services
Administration.
(e) Notwithstanding the procedures in this section with regard to
annual updating, if the Board of Contract Appeals of the General
Services Administration reverses or remands a Federal agency decision
determining that a firm is not qualified, the Federal agency shall add
the firm to its qualified list as appropriate either upon receipt of
the Board's decision or, if the Federal agency decides to appeal, after
the decision is upheld finally upon judicial review.
(f) The filing of an appeal with the Board of Contract Appeals
shall not stay the decision of a Federal agency to issue a new or
updated list of qualified contractors or to use that list in accordance
with this subpart.
Sec. 436.33 Procedures and methods for contractor selection.
(a) Competitive selection. Competitive selections based on
solicitation of firms on a qualified list are subject to the following
procedures--
(1) With respect to a particular proposed energy savings
performance project, Federal agencies shall request the submission of
``intent to propose'' statements from all firms on the list who may be
interested in proposing.
(2) From those firms submitting ``intent to propose'' statements,
Federal agencies shall request technical and price proposals and the
text of any third-party financing agreement from each firm.
(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 the subpart, and any other information determined to be
relevant, the Federal agency may select a firm to conduct the project.
(4) If a proposed energy 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 walkthrough
energy audit of all such structures, the Federal agency 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 under paragraph (a)(4) of this section. After selection of a
firm, but prior to award of an energy savings performance contract, the
Federal agency 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 or make a separate
award for all or some of the remaining buildings and other structures.
(b) Unsolicited proposals. Federal agencies may consider
unsolicited energy savings performance contract proposals from firms on
a qualified list under this subpart which include technical and price
proposals and the text of any financing agreement (including a lease-
acquisition). Consistent with the authority provided by 10 U.S.C.
2304(c)(5) or 41 U.S.C. 253(c)(5), and after determining that technical
and price provisions are adequate, Federal agencies may award a
contract to a firm on a qualified list under this subpart on the basis
of an unsolicited proposal, provided that the Federal agency complies
with the following procedures--
(1) An award may not be made to the firm submitting the unsolicited
proposal, unless the Federal agency 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.
(2) 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 or if there are other energy conservation measures which
reasonably could be implemented in the existing Federally owned
building or facility.
(c) Defense contracts. Consistent with 10 U.S.C. 2865(c)(2)(B), and
notwithstanding the selection procedures under Sec. 436.32 and of this
section, the Department of Defense may provide for the direct
negotiation by departments, agencies, and instrumentalities of the
Department of Defense, of contracts with energy savings performance
contractors that have been competitively selected and approved by any
gas or electric utility serving the department, agency, or
instrumentality concerned.
(d) Certified cost or pricing data. Solicitations and contracts
under this Part shall not require the submission of certified cost or
pricing data pursuant to the authority provided under 41 U.S.C.
254(d)(5)(B) and 48 CFR 15.804-3(i).
Sec. 436.34 Standard terms and conditions.
Any energy savings performance contract shall contain clauses--
(a) Protecting the interests of a Federal agency and a secured
lender or lessor of a lease-acquisition agreement 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 on a secured loan
or a lease-acquisition, to assign to the lender or lessor, if willing
and able, the contractor's rights and responsibilities under an energy
savings performance contract;
(b) Authorizing modification, replacement, or changes of equipment
provided there is no cost to the Federal agency and there is prior
notification and approval by the contracting officer;
(c) Providing for the final disposition of title to systems and
equipment; and
(d) 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 acquisition of energy conservation measures.
Sec. 436.35 Funding.
(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.
(b) Aggregate annual payments by a Federal agency to utilities and
energy savings performance contractors, under an energy savings
performance contract, may not exceed the amount that the Federal agency
would have paid for energy and related operations and maintenance
expenses 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 section 436.36), 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.
(c) 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.
(d) An energy savings performance contract shall provide for a
guarantee of savings to the Federal agency, and shall establish payment
schedules reflecting such guarantee, considering the capital, financial
charges, maintenance or repair costs incurred by the contractor to
provide performance guarantees under the contract.
(e) Federal agencies may enter into a multiyear energy savings
performance contract for a period not to exceed 25 years without
funding of cancellation charges before cancellation, 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 costs of
the multiyear energy savings performance contract for the first fiscal
year;
(3) Thirty (30) 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) The multiyear energy savings performance contract is subject to
48 CFR subpart 17.1.
Sec. 436.36 Procedures and methods to monitor contracts.
(a) After contractor implementation of energy conservation measures
and annually thereafter during the contract term, an energy audit shall
be conducted by the Federal agency or an independent consultant hired
by the contractor and approved by the Federal agency. The energy audit
shall verify the achievement of annual energy savings 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; and
(6) Weather (i.e., cooling and heating degree days).
(c) Federal agencies shall specify requirements for annual energy
audits that are consistent with this subpart and the energy baseline
and baseline adjustment procedures used in the energy savings
performance contract.
Sec. 436.37 Procedures and methods to terminate contracts.
(a) In the event an energy savings performance contract is
terminated for the convenience of the Government, the termination
liability of a Federal agency shall not exceed the cancellation ceiling
set forth in the contract, for the year in which the contract is
terminated.
(b) In the event an energy savings performance contract is
terminated for default, the Federal agency may take title to
contractor-installed equipment, if the Federal agency provides
compensation to the contractor pursuant to termination for default
provisions in 48 CFR part 49.
[FR Doc. 94-8594 Filed 4-8-94; 8:45 am]
BILLING CODE 6450-01-P
