# Presentation: 118333

## Negotiating an Energy
and Water Audit Agreement

**and Water Audit Agreement**

## Audit Agreement Negotiations

- Don’t be Afraid to Negotiate Points with the ESCO
- Agree to Specific Deliverables
- Agree to Specific Timelines

## What are the requirements of an energy audit on which you can base an energy performance contract?

- Audit agreements must require sufficient detail so that a technically competent adviser can review the analysis
- Audits must provide the utility cost and consumption data to construct representative consumption baselines
- Audits savings estimates must correctly account for how HUD will value savings from various measures
- A high-quality audit is the foundation for a high-quality project
- Expect to spend about 3% of the projected project cost for a quality audit

## Costs of Audits

- Varies from Company to Company
- Cheaper isn’t Always Better
- Economies of Scale
- Sampling Can Keep Costs Down
- 3% of Project Costs is Reasonable Estimate for Audit Costs

## Timelines

- Varies with Size and Complexity of Facilities
- 60 to 120 Days
- Two Stages — Draft and Final Reports

## Data for an Audit

- Testing, e.g. Combustion Analysis, Pressure Diagnostics
- Crawl Space to Attic
- Visual inspection by well trained auditor is key component
- Must document accurate picture of building
- GIGO
- Representative Sampling is Okay for Most Things
- Exceptions are health & safety-related

## What are the main data your audit should contain?

- Summary table of proposed energy and water measures with itemized estimates of the cost, annual savings, annual maintenance costs, simple payback, and service life for each measure
- Analysis and summary of utility consumption baselines
- Narrative descriptions of the proposed measures in sufficient technical detail to evaluate their performance potential, including any operation and maintenance implications
- Full description of analysis methodology, calculations, data inputs, and assumptions
- Documentation of any projected maintenance savings

## Things to Watch Out For

- Problems Identified and Solutions Proposed
- Estimated Savings by Measure and in Total
- Data input and output
- Itemized Cost Estimates by Measure
- Be sure that annual fees not financed are included
- Financial Analysis by Measure and in Total
- Simple payback, NPV, B/C,  life-cycle costing

## Audits - HUD’s Role

- Approval Needed for Audit Agreement
- HUD Should Review Audit Results
- HUD’s Savings and Rate Provisions Should Match Those in the Contract
- E.g. If ESCo uses ratcheted rate, rather than blended rate, the savings to the HA will not be as projected

## Sample Project Price Estimate

## What are reasonable project cost estimates for an energy performance contract project?

- Very small projects (i.e., less than $300,000) and very large projects (i.e., over $5,000,000) make these results of thumb not applicable
- Audit costs approximately 3% of standard AIA definition of Project Construction Costs (PCC)
- Labor costs
- Subcontractor Costs
- Costs of Materials and Equipment
- Miscellaneous costs, such as permits, bonds, etc.
- Costs of temporary facilities, storage, etc.

## What are reasonable project cost estimates for an energy performance contract project?  (cont.)

- One time soft costs for design, construction management, overhead, profit, and commissioning average around 35–40% of PCC
- Ongoing annual fees are about 10–15% of PCC for training, maintenance, measurement, and verification

## What are the biggest hurdles to getting a good audit?

- Missing or inaccurate data on utility consumption/cost
- Inaccurate data on building operations and building loads
- Inaccurate estimation of measure implementation costs
- Improper valuation of HUD eligible utility savings
- Inaccurate estimation of future maintenance costs