Alternative Project Delivery and Energy Efficiency

1. Alternative Project Delivery and Energy Efficiency IASB Fiscal Management Conference Mary Gannon, IASB Dave Harvey, CTS, 515-223-1200 Bill Decker, Harlan CSD, 712-755-2152 Stan Sibley, Glenwood CSD, 712-527-9034 July 16, 2007

2. Need for Change • Large amount of new construction in Iowa Schools • Continuing need for energy efficiency improvement • Old and aging buildings (majority over 25 years) • Growing backlog deferred maintenance • ISU Study, $3.5B in facility needs in 1995 • Energy systems have profound impact on productivity • http://www.ia-sb.org/SchoolFacilities.aspx?id=562 • Multiple funding streams (PPEL, SILO, DNR Energy Bank, etc) for projects but Limited Project Delivery Options

3. Barriers in Iowa • Dillon’s Rule – • School districts only have those powers expressly authorized by the Code of Iowa. • Without enabling legislation, Iowa Schools can not use Alternative (Integrated) Project Delivery options: • Design/Build • Energy Efficiency Contracting

4. Alternative Project Delivery • Master Builder of Iowa Annual Conference - Lessons “We can all learn from Design-Build” (February 2007) • Presenters referenced Penn State University study that examined 351 projects in 37 states and determined: • Total project costs can be reduced by 6% using Alternative Project Delivery compared to the Traditional Approach • Total delivery time was 33% less • Change order cost were 5.2% less • Expert Panel presenters noted that design-build can offer best value for public owners because it is “solution” based, not “cost” based

5. Delivery Method Comparisons • Traditional Approach • Design-Bid-Build • Designer hired (Architect or Engineer) to design the project • Produce Specifications for Public Bid • Project Awarded to Lowest Bidder • Alternative Project Delivery Approach • Design-Build and/or Energy Efficiency (performance based) Contracts • Integrated Design • Designer works for Owner under a Contractor Led Team • Produce Request for Qualifications/Proposals • Project Awarded based on “Best Value”, typically: • Experience and Qualifications, • Innovation, • Lowest Cost

6. Traditional ApproachDesign-Bid-Build Owner Architectural Engineering General Contractor Sub contractor GC direct contract with Owner Subs hired and work under GC Designer completes 100% design prior to bidding Designer may provide oversight Sub contractor Sub contractor Sub contractor

7. Pros Separate and distinct areas of authority (Architect, General Contractor, Subcontractors, Owner) Traditional/accepted approach Design, control and oversight by Architect/Engineer Low bidder awarded contract -clear cut method of selection Traditional contract terms Cons Less Collaborative effort between Owner, Designer and Contractors Longer Process Project typically 100% designed before bid Price not known until bid day Architect fee added to entire project cost (6%-10%) Low bidder awarded contract Omissions in design cause conflict Potential for Change Orders-Industry average of over 8% added cost Conflict between parties Traditional Approach Pros and Cons, Design-Bid-Build

8. Integrated Design-Build Team Approach Owner Design Build or Energy Efficiency Contractor Architectural Engineering Sub Sub Supplier Supplier

9. Pros Integrated - Team approach Lowest cost Faster time to complete project Less conflicts Greater Input from Owner, Contractor and Subcontractors can improve project quality and lower cost Fixed price Fewer change orders (No one to point fingers at) Cons Iowa public owners not familiar with process Must define criteria up front Does not completely eliminate conflicts Selection of firm is based on multiple factors (qualifications, track record, innovation, price, capabilities) Alternative Project DeliveryDesign-Build-Energy Efficiency

10. Example Cost Comparison

11. National Best Practice • No shortage of “best practice” for energy efficiency • US Department of Energy • Association of Energy Engineers • US Green Building Council • Iowa Dept. of Natural Resources • Many, many more….. • Additional project delivery tools to expedite the energy efficiency process in Iowa Schools

12. Alternative Project Delivery – Energy Efficiency Contracts • Comprehensive, integrated energy upgrades • Uses competitive procurement process based on value • Discloses costs of each component and performance guarantee • Written guarantee of energy and/or operational cost savings • Project costs financed on multi-year basis • Paid for through energy and/or operational cost savings • Mechanism to allow savings to remain in operational side of School budget • Energy savings verifiable using International Performance Measurement and Verification Protocol • Projects can utilize local design professionals as part of the team • Variety of financing sources are used including investment firms, banks and DNR, etc.

13. Energy Efficiency Contract Example

14. Performance Based Energy Efficiency Contracting is proven • Widespread Use by Federal Government • Most facilities in Iowa have been successfully retrofitted • August White House Directive to increase usage of Energy Efficiency Contracts • Enabling Legislation in at least 46 of 50 US states • Includes every state that borders Iowa • Large scale adoption by Iowa’s private sector • Most Private Colleges have all ready utilized • Several Hospitals • Over 300 Commercial and Industrial Users

15. Example Project, Rework • Cape Girardeau Schools • Comfort and utility concerns at 4 Year old High School • Utilized RFP Selection Process-Performance Based Solutions • Implement variety of Comfort and Energy Related Improvements under Energy Efficiency Contract • Retrofit/Re-commissioning of Energy Systems • Annual Payment $23,000 • Annual Energy Savings Verified $71,000 • Verified improvement of Indoor Air Quality (IAQ) and Occupant Comfort

16. Example Project, Design Build • Palmyra R-I Schools • BOE Comparison between Traditional vs. Alternative Project Delivery • Complete Gut/complete renovation of High School and Elementary Schools, add on Classroom additions • Selected Integrated Project Process (Hybrid Design-Build-Energy Efficiency Contract) • Selection based on Experience, Qualifications & Guaranteed Maximum Price • “fast track” comprehensive project substantially completed in under 90 days (summer 2007) • On time, under budget with $0 change orders

17. Example Project, New Construction • Need: • Traditional Funding Sources not large enough to accomplish all construction related goals. • Typical Result: • “value engineering” to reduce cost (less efficient energy systems, etc.) • Solution: • Use of Design Build as an Option to lower cost and improve quality • Use of Energy Efficiency Contract as an Option to fund energy infrastructure • Finance incremental cost of high efficiency energy systems through reduced operating costs from such systems

18. Solution – Create Additional Tools for Public Building Owners • Allow use of Alternative Project Delivery (Design Build and Energy Efficiency Contracting) as an Option for: • New Construction and Retrofit Projects • For energy efficiency and indoor air quality enhancements • Where Performance can be achieved, verified and proven • Where a competitive process is used to solicit and evaluate proposals beyond just initial cost • Allow public entities to select a bidder to provide projects based on best value when considering multiple factors (initial cost, life cycle cost, performance guarantees and quality)

19. Benefits to Iowa Schools • Provides additional project deliver tools for local school to consider • Increases amount of energy efficiency investment in Iowa's Schools • Improve learning environments and occupant productivity (High Performance Schools) • Allows districts greater flexibility – larger spending authority to accomplish goals while minimizing risk and cost to taxpayers • Allows schools the ability to Fast Track construction projects

20. Experience with Traditional vs. Alternative Project Delivery • Bill Decker, Harlan CSD • Stan Sibley, Glenwood CSD • Need for “More Tools” for project delivery in Iowa Schools