1


          1

          2

          3

          4

          5

          6            GOVENERGY CONFERENCE 2007

          7           HILTON NEW ORLEANS RIVERSIDE

          8                  KABACOFF ROOM

          9                TWO POYDRAS STREET

         10              NEW ORLEANS, LOUISIANA

         11                   AUGUST 8, 2007

         12                  3:00-5:00 P.M.

         13

         14

         15

         16

         17

         18

         19                 REPORTED BY:

         20           TERRY L. OWENS, RPR, CCR

         21

         22

         23

         24

         25

                                                           2


          1          MR. DARYL BERG:

          2               Well, good afternoon.  Everybody

          3          welcome to the GovEnergy Conference,

          4          before David starts with his karaoke

          5          contest.

          6               The topic for this afternoon is to

          7          talk a little bit about the DOE

          8          recompete of the ESPC IDIQ contracts,

          9          and we are going to talk a little bit

         10          about the process, why the government

         11          does what it does in their procurements,

         12          and then we will open up and give

         13          you-all the opportunity to voice your

         14          concerns or let you know what -- let us

         15          know what your issues are regarding the

         16          recompete and the draft RFP that was

         17          issued.

         18               So I will turn it over to David

         19          Rodgers.

         20          MR. DAVID RODGERS:

         21               Thank you, Daryl.  Good afternoon,

         22          Everyone.  I'm going to try to make it

         23          through this short introduction without

         24          keeling over from exhaustion.  I think

         25          if you have been here all week like I

                                                           3


          1          have, this has been one hell of a

          2          conference, a fantastic event.

          3          Hopefully this part, that word doesn't

          4          go into the transcript.

          5               But -- so -- and I know you-all

          6          have many other things to be working on.

          7          You have got sales leads to follow up

          8          from this conference.  We have got --

          9          but I just wanted to say a few words

         10          about why we are here and how important

         11          this is to us.

         12               The secretary met with many

         13          leading energy service companies, the

         14          ones that are on our current IDIQ

         15          earlier today.  He met with several

         16          others today, and then he gave this key

         17          note address and he announced the launch

         18          of our team initiative at the Department

         19          of Energy.  And in about 10 minutes, I

         20          get to go talk to the Wall Street

         21          Journal about the team initiative.  And

         22          so if we ever thought that we were going

         23          to make news about energy efficiency

         24          through these efforts, we were right.

         25          So that makes it all the more important

                                                           4


          1          that during this process here, which to

          2          the Wall Street Journal is not on their

          3          radar, but it's critical to the future

          4          of our program.  And so it's critical

          5          that we get this recompetition done

          6          right.

          7               And so Daryl and his team have

          8          already, through our regular systems,

          9          received some 600 comments, and I

         10          believe our responses to those have been

         11          posted this week.

         12          MR. DARYL BERG:

         13               Yes.

         14          MR. DAVID RODGERS:

         15               But I want you to know that I know

         16          how to use IIPS and so -- but I don't

         17          like to use IIPS and I'm sure not a lot

         18          of people do.  And so what we are trying

         19          to do with this session is to go another

         20          few yards in the direction of being

         21          open, listening and absorb your very

         22          important comments and input on the

         23          design of the request for proposals.

         24          Our goal is speed, but our second -- our

         25          other goal, equally as important, is

                                                           5


          1          quality.  So your comments here today

          2          are very much appreciated.  I encourage

          3          you to be as open as you possibly can

          4          within the context of your own business

          5          needs, et cetera.

          6               These folks here have to obey

          7          certain rules about what they can say,

          8          how much they can respond, how much they

          9          can answer.  They may not be able to

         10          say, "Yes, we will do that," "No, we

         11          won't do that."  In fact, they probably

         12          can't say any of that.  But what they

         13          can say is, "What did you mean by that?

         14          Could you explain that more," so that

         15          you can as effectively as possible tell

         16          us what's really the issue that you want

         17          us to deal with, and then this team will

         18          take that back to the office and will

         19          incorporate those as best we can within

         20          the constraints that we are under.

         21               So I just wanted to say, number

         22          one, thank you for spending the last day

         23          of the conference or the last afternoon

         24          changing your flights so that you could

         25          be here and participate.  Number two,

                                                           6


          1          thank you for the comments that you have

          2          already made, and number three, thank

          3          you for the comments that you will make

          4          today.

          5               With that, I'm going to turn it

          6          over back to the contracting team, but I

          7          just want to tell you, the secretary was

          8          truly touched by his experience here

          9          this week.  He said so earlier today

         10          when he got to meet the kids at the

         11          school and talk about having energy

         12          efficiency, rebuilding New Orleans

         13          schools better than they were before.

         14          And I think you folks know what that

         15          feeling is like because you provide

         16          those services to our agencies every day

         17          of the week.  So I'm grateful to you for

         18          what you have already done and for what

         19          we are about to do, and now I guess I'll

         20          leave you to the work and I will go talk

         21          to the Wall Street Journal about all the

         22          good things that you are doing and that

         23          we are doing together.

         24               Thank you very much.

         25          MR. DARYL BERG:

                                                           7


          1               Thank you, David.  For those of

          2          you that don't know me, my name is Daryl

          3          Berg.  I work for the Department of

          4          Energy, obviously, at the Golden Field

          5          office in Golden, Colorado.  I have

          6          several jobs, but what you need to know

          7          is I'm the contracting officer for the

          8          recompete of the DOE ESPC IDIQ contract.

          9          IDIQ means Indefinite Delivery/

         10          Indefinite Quantity.

         11               To my left, your right, is Julia

         12          Trautman.  She is the contract

         13          specialist for the recompete as well as

         14          the existing IDIQ contracts that DOE

         15          Golden Field office administers.

         16               And for those of you that missed

         17          the opening ceremony or don't know who

         18          David Rodgers is, he has multiple hats

         19          and he's here -- he was here earlier

         20          primarily as the acting FEMP program

         21          manager and he also is the Deputy

         22          Assistant Secretary for Energy

         23          Efficiency, I think, or is it -- Energy

         24          Efficiency.

         25               So what's going to happened today

                                                           8


          1          is I'll talk a little bit about some

          2          general overview of the government

          3          procurement process and why we do what

          4          we do and why we have to be vague

          5          sometimes and secretive other times.

          6          And after we get done with that and

          7          answer your questions to the point where

          8          you are comfortable with that process,

          9          I'll turn the microphone back over to

         10          you-all.  And the way we would like to

         11          do this is have you come up to the

         12          podium with the microphone so that our

         13          stenographer, her tape recorder can pick

         14          up your voice.  And that's important to

         15          us because she's taking notes so that we

         16          can have an accurate record of what your

         17          issues are and what your -- and what

         18          your rationale is for those issues so

         19          that we can take it back to the right

         20          people and try to resolve them.  Her

         21          transcript will be posted onto the DOE

         22          IIPS system in about a week, week to

         23          two, I think is the deadline, she has a

         24          week to finalize up all of her notes and

         25          it might take us a day or two to get it

                                                           9


          1          posted.

          2               And what else?  I was supposed to

          3          give a disclaimer.  If I accidentally

          4          commit to changing something or doing

          5          something that sounds like a good idea

          6          and it's logical, the disclaimer is is

          7          whatever ends up in the final RFP takes

          8          precedence.  Did I -- she was about to

          9          remind me of that, I could see that.

         10               For those of you who have used the

         11          DOE IIPS system, you will realize it

         12          isn't that much different than other

         13          government web-based systems for their

         14          procurement.  It's -- it's challenging

         15          to use.  It's not intuitive defined

         16          information on there.  I realize that.

         17          Out in the field that's beyond our

         18          control.  It's a mandated web-based

         19          program that we have to utilize at DOE.

         20          And if you haven't went in there and

         21          looked, what we have done is every time

         22          we have some information that we want to

         23          share publicly, we issue what we call a

         24          special notice onto IIPS.  And IPPS is

         25          also referred to sometimes as the DOE

                                                          10


          1          E-Center, so that can be a confusing

          2          thing.

          3               And oh, I forgot -- you forgot to

          4          remind me.  We had some technical

          5          difficulties of -- with the room

          6          coordination.  We were going to have

          7          Internet access, PowerPoint and a screen

          8          to bring you to IPPS and show you how to

          9          navigate it and that fell through, so I

         10          apologize for that.

         11               But the way you get to IPPS, if

         12          you haven't done so already, is go to

         13          the URL http://e-center.doe.gov.  And

         14          there are several ways to find

         15          information about this recompete.  But

         16          if you click on "Browse Opportunities"

         17          and then it will allow you to search by

         18          a number of different methods.  If you

         19          click on "Contracting Officer," I'm one

         20          of the first names to pop up, Daryl

         21          Berg, and you can click on that and you

         22          will find everything that we have posted

         23          on IPPS regarding this ESPC recompete.

         24               And you will see that we issued 10

         25          special notices to try and get out

                                                          11


          1          information and request feedback from

          2          you-all on what's important to you and

          3          we -- in addition to those 10 notices we

          4          issued a draft RFP, which as was pointed

          5          out earlier, we received several good

          6          quality comments about the draft RFP.

          7          And I can tell you that I was a little

          8          skeptical in the beginning about issuing

          9          it because I knew it would slow us down

         10          and speed was important to us to get

         11          this recompete completed, as David

         12          mentioned earlier, but the value we got

         13          out of receiving those comments far

         14          outweighed the price we paid in speed.

         15          The comments, although some duplication,

         16          but that's important because to some

         17          extent duplication shows the amount of

         18          people that -- well, it shows

         19          consistency and concern and it shows to

         20          some extent some importance of issues.

         21          If more people are interested in a

         22          certain issue, we might weigh that more

         23          heavily.  Sometimes other things are

         24          important, too, that weren't commented

         25          on that often.

                                                          12


          1               Out of the 600 some-odd comments

          2          that we got, it seemed like there were

          3          three general concerns that seemed to be

          4          prominent.  The first was the amount of

          5          risk being put on the ESCOs for -- to

          6          show energy savings and who would take

          7          various weather risk, energy rates risk,

          8          et cetera.  The other recurring theme

          9          was the idea of having on ramps and off

         10          ramps where you would maintain the

         11          existing ESCOs and just add new ones or

         12          have the ability to add new ones later

         13          on, and the off ramps to get rid of the

         14          poor performers.

         15               Another recurring issue was --

         16          well, let me backtrack a little bit.  In

         17          government when we establish an

         18          IDIQ-type contract, you are required to

         19          have a minimum guarantee where the

         20          government guarantees that the ESCO will

         21          meet or will get at least this amount of

         22          work or this amount of money, and if for

         23          some reason they don't, the government

         24          has to pay them that amount of money.

         25          In this particular case, the draft RFP,

                                                          13


          1          I think, suggested $5,000.  So the idea

          2          being is if you don't get any work, the

          3          ESCO at least gets $5,000 for their

          4          trouble.

          5               The second thing that is required

          6          by an IDIQ is to have a maximum ceiling,

          7          maximum order ceiling.  The draft RFP

          8          mentioned a billion dollars per -- per

          9          IDIQ contract, and that was the sum of

         10          contractor payments, not the investment

         11          on them.  And there were several people

         12          that were concerned that that wasn't

         13          going to be high enough.  So I just -- I

         14          bring -- I highlight those three because

         15          I've -- we are aware of those issues.

         16               Now, this afternoon it's fine for

         17          you to revoice those concerns, but it's

         18          more important -- well, as important or

         19          more important to know the why that is a

         20          concern from -- because in the

         21          government procurement process, the way

         22          it works is we try to draw on the

         23          expertise of several people throughout

         24          the government to craft this RFP that

         25          will subsequently become the contract.

                                                          14


          1          We have the good ideas and then it goes

          2          through several approval -- internal

          3          approval processes at the field level

          4          and at the headquarters level.  And I

          5          don't think it's bad to tell you that

          6          sometimes the field gets into battles

          7          with the headquarters element on what we

          8          think is important in the field and they

          9          may think it isn't important or that

         10          it's against rules or what have you.

         11               So there may be something that

         12          concerns you that also concerns me out

         13          in the field and I need the why in order

         14          to make a decision on whether I use that

         15          extra ammunition to make my point up

         16          higher or the why to convince me to

         17          change it and to also convince our

         18          approval or our approvers.

         19               So one of the most important

         20          things in the government procurement

         21          process, which is also one of the more

         22          frustrating things to particularly

         23          incumbent contractors, is that we are

         24          required to have -- to level the playing

         25          field, so to speak.  Everybody, whether

                                                          15


          1          you are an incumbent or whether you are

          2          a prospective contractor, is going to

          3          have the same opportunities to --

          4          throughout the procurement process.

          5               That's been a bit of a challenge

          6          with balancing the team initiative

          7          because there is focus -- there is

          8          concern that with the procurement

          9          ongoing, that it takes away from the

         10          team initiative of the ESCOs, and that's

         11          part of the idea of on ramps and off

         12          ramps.  And I can tell you that all of

         13          those things are being considered and --

         14          and we won't have any finality into

         15          those ideas until the final RFP.

         16               Now, another thing, there is a lot

         17          of useful incumbents particularly, but

         18          potential offerers have a lot of good

         19          ideas, they bring a lot of experience,

         20          and there is often, how should I say it,

         21          there is often pressure to involve those

         22          people that do this type of work on a

         23          day-to-day basis to develop your RFP, to

         24          develop your contract.  But as part of

         25          the level playing field, that prevents

                                                          16


          1          the government from doing that.  You

          2          see, if an incumbent ESCO is involved in

          3          developing the RFP or the statement of

          4          work or the terms and conditions or the

          5          evaluation factors, that gives those

          6          folks an unfair competitive advantage.

          7          So even though they have great ideas,

          8          they are the experts, it doesn't keep

          9          the playing field level and that's

         10          one of the -- that's one of the

         11          hallmarks of government procurements.

         12               Let's see.  So we are trying to be

         13          fair.  We are trying to listen.

         14               Oh, the IIPS issue again.  You

         15          will notice that oftentimes we are vague

         16          in our responses to your questions or

         17          concerns.  I can tell you that even if

         18          the response is short such as, "Thanks

         19          for the comment.  We will take it under

         20          advisement," or what have you, there was

         21          a lot of thought behind the scenes of:

         22          How do we incorporate this comment?

         23          Does it make sense, is it legal,

         24          et cetera?  So even if the comment is

         25          short, the thought that went into it was

                                                          17


          1          long.  We got several people together

          2          for a significant amount of time to

          3          review every single question and comment

          4          that was in there.  It was bounced off

          5          of procurement, legal and technical

          6          folks to look at the ability to

          7          integrate that comment or answer that

          8          question.

          9               So I understand that you may not

         10          have got your answer fully answered in

         11          IIPS, but I can assure you that it was

         12          considered.

         13               Now, because I can't commit to a

         14          change -- I can't commit to a change to

         15          the RFP because of the process we go

         16          through for approvals.  So maybe I think

         17          it's legal but someone up at

         18          headquarters, OGC, doesn't, so it may

         19          get changed in the review process.  So

         20          that's why I can't commit to yes, we are

         21          going to change something.

         22               Let me see.  That's about all off

         23          the top of my head I can think that's

         24          relevant about the procurement process,

         25          but I would like to throw it to you,

                                                          18


          1          you-all, and you come up here and you

          2          can feel free to voice your concerns

          3          about the draft RFP that was issued or

          4          ask me anything about the government

          5          procurement process or why we do what we

          6          do.  It's all open game.

          7               If I can't answer it, I apologize

          8          in advance.  I'll do my best to answer

          9          it within the rules I'm bound by.

         10               When you come up, introduce

         11          yourself.  It would be nice to know

         12          where you're -- what company you are

         13          from, so thanks.

         14               And I know we have a friendly

         15          crowd, but I got this voodoo doll just

         16          in case things get out of hand.

         17          MR. KEITH DERRINGER:

         18               It's good to know.  Keith

         19          Derringer, Ameresco.

         20               I guess I'd like to address one of

         21          the things that you mentioned in your

         22          opening remarks, and that was about --

         23          the concern about the contract capacity

         24          and your desire to understand what --

         25          where our concern is coming from.  And I

                                                          19


          1          know as one of the incumbent ESCOs I

          2          look at what we have in development

          3          current, that's in the DES stage or near

          4          the DES stage within the next week or

          5          so.  And also look at the team

          6          initiative, and I see a situation where

          7          we are anticipating having task orders

          8          in place within the next 12 months that

          9          would eat up 60 to 75 percent of the

         10          capacity that you are talking about

         11          doing for a contract.

         12               And I think that where our concern

         13          is coming from is that maybe these

         14          limits are looked at by looking

         15          historically about what's been done in

         16          the past under these contract vehicles.

         17          I think the environment we have

         18          presently now over the last year and

         19          going forward since we had

         20          reauthorization is very different, and I

         21          think with the 10 years or so we have of

         22          reauthorization in front of us

         23          currently, our concern is it's a lot of

         24          work for you guys to go through this

         25          process, it's a lot of work for us to go

                                                          20


          1          through this process, and we felt like

          2          that, you know, you needed to have a

          3          higher contract limit.  Either if you

          4          are going to calculate it based on the

          5          sum of all the payments, including issue

          6          and ONM, et cetera, it needs to be a

          7          higher number or you need to change your

          8          methodology for calculating it.

          9          MR. DARYL BERG:

         10               I appreciate that.  What number

         11          would you recommend?

         12          MR. KEITH DERRINGER:

         13               I think if you are going to stick

         14          with the calculation method that you

         15          have, I think what we are looking at is

         16          probably somewhere in the $10 billion

         17          range.  Obviously, the likelihood that

         18          every contract you are going to award is

         19          going to get to that limit may be a bit

         20          remote, but I think you are going to

         21          have some companies will be more

         22          successful than others.  That's what

         23          this history has shown us over the last

         24          10 years.

         25               Another way you could look at it

                                                          21


          1          is a shared contract ceiling capacity

          2          among the contractors.

          3          MR. DARYL BERG:

          4               Like we kind of do on the regional

          5          basis now?

          6          MR. KEITH DERRINGER:

          7               Yeah, right.

          8          MR. DARYL BERG:

          9               What number would you think for

         10          that?

         11          MR. KEITH DERRINGER:

         12               I haven't given that a lot of

         13          thought yet, to that scenario.  That

         14          sort of concern is coming up.

         15          MR. DARYL BERG:

         16               Thank you.

         17          MR. DOUG SATTLER:

         18               Doug Sattler, constellation

         19          Energy.  First and foremost, I would

         20          like to thank you for giving us your

         21          opportunity to, again, voice our

         22          concerns and comment on where we are

         23          with the draft RFP.  In the draft RFP as

         24          written, there is an indication, I don't

         25          recall the language exactly, that the

                                                          22


          1          contractor is essentially solely at risk

          2          for all of the costs associated with the

          3          initial proposal or preliminary proposal

          4          and the investment grade audit unless an

          5          award is made, and I was wondering what

          6          the genesis of that statement was.

          7          MR. DARYL BERG:

          8               Let me pause and think for a

          9          second on how I can answer that.

         10          MS. BETH SHEARER:

         11               I wanted to sort of fill that in

         12          for you a little bit.

         13          MR. DARYL BERG:

         14               Yeah.

         15          MS. BETH SHEARER:

         16               Beth Shearer.  I'm working with

         17          Siemens Corporation.  There are a couple

         18          of clauses that I think fills in what

         19          Doug was talking about.  In particular,

         20          for the initial proposal and the final

         21          proposal, it's H.6.2.  It says, "Final

         22          proposals will be reviewed in accordance

         23          with the instructions set forth in the

         24          task order RFP.  The agency will not be

         25          responsible for any costs incurred such

                                                          23


          1          as a proposal, preparation cost or the

          2          cost incurred in conducting the IGA

          3          unless a task order is awarded."

          4               In the past it's always, you know,

          5          once you got the notice of intent to

          6          proceed, this was after the initial

          7          proposal, if you did the investment

          8          grade audit and it was not -- and it

          9          didn't go to award, the contractor was

         10          compensated.  So what this is doing, in

         11          essence, for the contractor is it's now

         12          -- now the contractor has all the risk.

         13          There is no shared risk.  And this, you

         14          know, you could spend as much as

         15          $500,000 doing an IGA depending on the

         16          complexity of the project.  That's a

         17          huge amount of money to ask the

         18          contractor to take at risk.

         19               Previously I think the language --

         20          you know, the language said they would

         21          be compensated, and I wanted to take

         22          this liability just a little bit further

         23          in the statement of work, and in the

         24          clauses for operation of ECMs,

         25          preventative maintenance, repair of

                                                          24


          1          ECMs, contractor response, repair and

          2          response time.  In each one of those

          3          cases, it says, you know, if the

          4          government does something and it affects

          5          the project, then the government may

          6          give due consideration to the contractor

          7          for losses directly attributable to that

          8          material failure.  In the past it was a

          9          "will" as opposed to a "may."  So it was

         10          much more of a shared risk situation.

         11          And that's what I think, Doug, you were

         12          trying to get at.

         13          MR. DARYL BERG:

         14               Thank you, Beth.  Before I try to

         15          craft a response, a follow-up question

         16          to your question so that I understand

         17          and others do, as well.  The result of

         18          having the ESCO take on this additional

         19          risk, what are the repercussions to that

         20          site or to the government?  I guess what

         21          I'm -- what I'm kind of thinking is if

         22          the ESCO has taken on that risk, it

         23          would result -- it could result in a

         24          higher cost to the government because

         25          the contractor has to build that risk

                                                          25


          1          into their price, yada, yada, but I

          2          don't want to put words into you-guys'

          3          mouth.  What are your concerns about

          4          taking on the extra risk, is what I'd

          5          like?

          6          MS. BETH SHEARER:

          7               Okay.  Let me -- I'm going to

          8          answer that as a recovering bureaucrat.

          9          When I was at FEMP I had a little run-in

         10          with the VA and we had a Come to Jesus

         11          meeting and the VA had -- had accepted a

         12          number of investment grade audits and

         13          they were asked and was at the point of

         14          awarding contracts when they said, "Hold

         15          on, hold on, hold on.  Let's take a look

         16          at it."  And at the time if the contract

         17          read that the government would

         18          compensate if -- you know, if it didn't

         19          go to award, and so the VA was liable

         20          for a fair amount of costs, I don't know

         21          what it was at the time, and it was --

         22          and the government was honored bound by

         23          that.

         24               Now the government is not honored

         25          bound, and help me out, Mark, but you

                                                          26


          1          are taking on -- you know, you are

          2          taking on a huge amount of cost for

          3          which you may walk away penniless.  Your

          4          management will let you do that maybe

          5          once or twice before they say, "This is

          6          too much.  We are getting out of this

          7          business."  So you risk losing your

          8          ESCOs.  Is that --

          9          MR. DOUG SATTLER:

         10               If I could just add to that, it

         11          effectively is a disincentive, the risk

         12          associated with the IGA being shouldered

         13          by the ESCOs entirely is that this

         14          incentive in some ways for the ESCOs to

         15          develop more and bigger projects, which

         16          is precisely what we are all trying to

         17          achieve, particularly in light of the

         18          team initiative and energy security and

         19          the Energy Policy Act.

         20          MR. DARYL BERG:

         21               Very good.  Thank you.

         22          MR. KEITH DERRINGER:

         23               I'd like to add one thing to that.

         24          I think giving you a further example of

         25          how that can increase the cost to the

                                                          27


          1          government, it's -- presently one of the

          2          things that we try to do and we are

          3          doing as DES is we try to take things as

          4          far as we can to eliminate the areas of

          5          risk for the government and for the ESCO

          6          as far as what the project's going to

          7          look like, what it's going to cost, what

          8          the savings are going to be.  If you are

          9          pushing all of that risk over onto the

         10          ESCO, it's going to kind of change, I

         11          guess, the paradigm where we are all

         12          trying to work together to minimize that

         13          risk, where we are going to be trying to

         14          minimize that shared risk, we are going

         15          to try to minimize the costs that we are

         16          trying to incur on the front end and try

         17          to do more design effort after the tasks

         18          are awarded, which is going to increase

         19          the construction period which is going

         20          to increase interest during

         21          construction, costs for the project,

         22          which the end result, you get less

         23          improvements in the end.  Okay.

         24          MR. DARYL BERG:

         25               And to follow-up to Doug Sattler's

                                                          28


          1          question about the genesis of that

          2          and -- unless you have a follow-up to

          3          the same comment.

          4          MR. JOHN SHAW:

          5               John Shaw, Johnson Controls.  I

          6          think, Daryl, as it reflects this

          7          provision, as it would reflect to the

          8          government, what impact would it have to

          9          the government?  And simply put, it

         10          would have to -- whatever everybody is

         11          saying.  But viewing it from the

         12          government, you would have smaller

         13          projects because contractors would take

         14          less risk.  You would have slower

         15          projects because they wouldn't move as

         16          fast and you wouldn't have as much

         17          innovation or creativity because they

         18          are going -- we are going to stick to,

         19          you know, a proven set of technologies

         20          that are simply not innovative because

         21          we already know what they are.  So you

         22          will have smaller, slower and less

         23          innovative projects for the government.

         24          MR. DARYL BERG:

         25               I understand the first and the

                                                          29


          1          third.  I'm not getting quite the

          2          connection on why projects would be

          3          slowed down.

          4          MR. JOHN SHAW:

          5               Well, they would be slowed down

          6          because what you would -- I think to the

          7          earlier point, you simply wouldn't do as

          8          much work up front and so you would have

          9          a -- your IP would not have the detail

         10          that the government and the ESCO

         11          community has become accustomed to on

         12          the IPs in order to make sound

         13          decisions.  So I think you would -- what

         14          you would do is bounce back and forth.

         15          MR. DARYL BERG:

         16               Okay.  Okay.  The genesis of the

         17          change, I can't go into too much detail

         18          other than to say that there was an

         19          interpretation of some law, that's about

         20          all I can say.  And as I noted earlier,

         21          whether I agree or disagree with it,

         22          it's important to hear the rationale for

         23          why you have a concern, so I appreciate

         24          that.

         25               The other, I just -- not to get

                                                          30


          1          into a tit for tat, but I want to point

          2          out in the existing IDIQ contract that

          3          the idea of -- that the government, and

          4          this has been a debate for some time,

          5          whether the government is on the hook at

          6          the point of the NOI being issued for

          7          costs in developing the DES, and it's --

          8          like I say, it's interpreted different

          9          ways by different people.  But what the

         10          existing contract says is that the final

         11          proposals will be evaluated -- this

         12          is -- let me see if I'm on the right

         13          one.  It's H25 of the existing IDIQ

         14          contract.  "Final proposals will be

         15          evaluated and selected in accordance

         16          with the criteria set forth in the

         17          DORFP.  The government shall not be

         18          responsible for any costs incurred such

         19          as proposal preparation costs or the

         20          cost incurred in conducting the DES

         21          unless authorized by the agency

         22          contracting officer.

         23               So it did give the agency the

         24          ability to take on that stuff, but it's

         25          a little bit of a twist on the facts to

                                                          31


          1          say that it was -- that it was

          2          necessarily the norm or the requirement

          3          of the government to take on that.  And

          4          as you pointed out, basically what got

          5          chopped off in the draft RFP was the

          6          "unless authorized by the agency

          7          contracting officer."  So I think we are

          8          on the same sheet on that one.

          9               Another question concern, a

         10          follow-up?

         11          MR. BOB JOHNSON:

         12               Daryl, Bob Johnson with Trane.  I

         13          want to pile onto this just a little bit

         14          with two comments.  Having been involved

         15          in the VA situation that Beth so

         16          eloquently brought up here, if I recall

         17          correctly from that process, the VA

         18          legal team reviewed the NOITA and they

         19          determined that that, in fact, was a

         20          contract.  So it's confusing to me,

         21          probably to the industry, as well, why

         22          now there is a legal opinion that says

         23          just the reverse.  So both the H25 that

         24          you referenced a minute ago, Daryl, but

         25          also the H -- or the VA's decision at

                                                          32


          1          the time, at that point in time they

          2          decided that they would be obligated, in

          3          fact, to pay the ESCO industry those

          4          costs associated with the development of

          5          those projects.  So clearly something

          6          has changed, not legislatively, but with

          7          the thought process of whoever is

          8          deciding this.

          9          MR. DARYL BERG:

         10               And as you pointed out, and as I

         11          appreciate, that it is not uncommon to

         12          interpret it that way, so I'm hearing

         13          you on that.

         14          MR. BOB JOHNSON:

         15               Okay.  The second thing is, it's

         16          interesting to -- I just want to put

         17          this into perspective.  We are all here

         18          with the Federal government and we look

         19          at the Federal government as a clear

         20          customer in the ESCO industry.  In many

         21          cases our customers in the other

         22          markets, K through 12, state and

         23          municipalities, they look upon the

         24          Federal government contracts as a model

         25          for how they would want to do business.

                                                          33


          1          What you may, in effect, do as an

          2          unintended consequence here is to take

          3          this contract, put it out the way you

          4          do, have it interpreted by our other

          5          customers in other markets and in

          6          essence slow down the industry.

          7               Now, what does that mean?  It

          8          doesn't mean much except for the fact

          9          that we are -- we are all looking at a

         10          great externality here in terms of

         11          global warming and the fact that we can

         12          do more of these types of projects from

         13          an energy efficiency standpoint gives

         14          the -- not the industry but really our

         15          society the greater point as to where we

         16          are going to be better at what we do

         17          using efficiency as, in essence, a

         18          productivity.  So I'm putting on a

         19          bigger scale here, not to put more

         20          burden on it, but to say this is really

         21          a potential unintended consequence that

         22          hasn't been necessarily been brought up

         23          in the context of this contract but may

         24          happy in the greater societal context of

         25          this.

                                                          34


          1          MR. DARYL BERG:

          2               A follow-up question to you, Bob.

          3          MR. BOB JOHNSON:

          4               Yeah.

          5          MR. DARYL BERG:

          6               Just so I understand, do you

          7          mean -- obviously you mean to some

          8          extent that this new contract would be a

          9          model for municipalities and the states,

         10          but is your concern more in the part

         11          about the risk being put on the

         12          contractor and that having the negative

         13          effects on projects or just everything

         14          in general on the contract?

         15          MR. BOB JOHNSON:

         16               All the things that have been

         17          stated here because of the project is

         18          getting smaller, less sophisticated in

         19          terms of what they do so we wouldn't

         20          achieve if the energy savings we are

         21          looking for.  The effect we are talking

         22          about here on the Federal government

         23          projects would have the same effect in

         24          those potential municipality, state,

         25          public sector entities that would adopt

                                                          35


          1          the provisions of this contract, seeing

          2          the Federal government as the leader in

          3          this particular area, and that's where

          4          the disconnect would be.

          5          MR. DARYL BERG:

          6               Thank you.

          7          MR. BOB JOHNSON:

          8               Sure.

          9          MR. ANDREW MORTON:

         10               Andrew Morton with Johnson

         11          Controls.  I'm just going to piggy back

         12          on all of this comment, but make two

         13          statements.  One is you are exactly

         14          correct.  A lot of people have always

         15          assumed that in the contract it's

         16          spelled out that there was an

         17          obligation.  We know that's not the

         18          case.  You read it to us.  However,

         19          that's always been the intent that the

         20          industry has received as part of the

         21          contract and the process, that's my

         22          understanding, that you-all, Department

         23          of Energy, train in your super ESPC

         24          training workshops.

         25               So I -- Bob Johnson and I lived

                                                          36


          1          through the VA, putting the brakes on

          2          the bus, so to speak, and throwing us

          3          and many other ESCOs through the

          4          windshield.  But I just want to add to

          5          his comment that not only did the VA

          6          interpret the NOITA as a binding

          7          agreement, we came in with our legal

          8          counsel that had that same

          9          interpretation that referenced several

         10          other IDIQ models as a result.  So I

         11          just want to remind everybody that there

         12          was many different legal opinions and if

         13          we can maybe turn back to those and find

         14          the rationale behind that and compare

         15          that to what you are currently hearing,

         16          I think it would add a lot of value.

         17          Because there is no doubt from an

         18          industry perspective, for us to take on

         19          additional risk, I mean, ultimately in

         20          the long run it's going to cost the

         21          government a lot more money where there

         22          is a potential.

         23          MR. DARYL BERG:

         24               My recollection, and I don't see

         25          all the NOIT or the NOIs, and I know the

                                                          37


          1          VA won, but I know that it's been an

          2          interpretation of other agencies that

          3          same thing, and if you-all have

          4          references to those instances or what

          5          that -- those other agencies thought of

          6          as far as a commitment on the government

          7          at the point of the NOI to reimburse

          8          certain costs, that would be helpful to

          9          me, as well.

         10          MR. ANDREW MORTON:

         11               Okay.  So you want us to actually

         12          come up with other agency --

         13          MR. DARYL BERG:

         14               And points of contact would be

         15          helpful to me.

         16          MR. ANDREW MORTON:

         17               We can do that.

         18          MR. STEVE CRAIG:

         19               Hi, Daryl.  Steve Craig from

         20          Honeywell.  Just one point of

         21          information on Andrew's comment.  We

         22          went through this with the United States

         23          Coast Guard a couple of years ago, the

         24          DES cost.  I can get you the contact

         25          person, but they went through a full

                                                          38


          1          legal review and determined it is a

          2          contract and it can be done, so we will

          3          help you with the reference point there.

          4          MR. DARYL BERG:

          5               And, Steve, if I'm thinking the

          6          same one, the way they did it is they

          7          issued an NOI letter with a ceiling

          8          dollar amount; is that correct?

          9          MR. STEVE CRAIG:

         10               Absolutely.

         11               The other comment I have and just

         12          the last -- maybe the last comment on

         13          the DES cost, we are facing extended

         14          selling cycles.  It used to be nine

         15          months, now it's 12 months, some are 16

         16          months and 18 months, and it seems like

         17          we just can't get people to commit.  I

         18          talked to my team a lot about, let's try

         19          and get the customer to put a stake in

         20          the game.  You know, what's in it for

         21          them?  And if we take away the ability

         22          to put a backstop in before we go spend

         23          a half a million bucks on engineering or

         24          200,000, if there is not that backstop

         25          there, I see that there is really no

                                                          39


          1          stake in the game by the government to

          2          get something done.  Sales cycles will

          3          continue to get longer.  The projects,

          4          installation cycles will continue to get

          5          longer costing the government more

          6          interest rate.

          7               The other comment I have is I

          8          applaud you trying to put the contract

          9          together to make it easier for the

         10          agencies to do ESPC.  That's a wonderful

         11          thing.  But I see this as groups of

         12          people at the agency sitting around and

         13          say, "Hey, let's go ahead and do this.

         14          There is no cost to us."  And we hand in

         15          an initial proposal and it really --

         16          when we have a DES, it puts a stake in

         17          the game.  It makes them really think,

         18          Do we want to go forward?  I think if

         19          there isn't anything there, we are going

         20          to get people to say, Hey, let's go to a

         21          more final proposal where we can get

         22          better cost, and it's just we need some

         23          stake in the game by the government and

         24          I think we are losing it there.

         25          MR. DARYL BERG:

                                                          40


          1               Just so that I'm clear on what you

          2          are saying here, is that it's important

          3          to have the quality ESCO in doing good

          4          work, but that it's as important to have

          5          that site and the decisionmakers buy

          6          into the project.  And what you are

          7          saying is if they have a vested

          8          financial interest, it commits them to

          9          the project more, speeds it up, a better

         10          quality project.

         11          MR. STEVE CRAIG:

         12               Absolutely.

         13          MR. DARYL BERG:

         14               Okay.

         15          MR. STEVE CRAIG:

         16               Thank you.

         17          MR. KEITH DERRINGTON:

         18               To add a little to that -- Keith

         19          Derrington, Ameresco.  What happens

         20          currently with the current language and

         21          in the way it's typically done

         22          throughout government and with the

         23          industry, is when you are at that

         24          decision point to go to the DES or

         25          investment grade audit, it causes the

                                                          41


          1          whole project to be elevated through the

          2          management chain within the agency.  So

          3          they are getting the buy-in of the

          4          senior management chain to the project

          5          overall.  And I think if you eliminate

          6          that from the process, we are going to

          7          end up with a lot of projects that

          8          aren't going to get elevated high enough

          9          within the chain to get the buy-in

         10          that's necessary to ensure that we

         11          actually end up with true task orders in

         12          hand.  Thank you.

         13          MR. ROGER FLOOD:

         14               Roger Flood from TAC.  I want to

         15          talk about something the gentleman from

         16          Johnson Controls discussed, that of

         17          smaller, slower and emerging

         18          technologies.  In this conference you

         19          guys have talked specifically about new

         20          government goals as -- and in terms of

         21          renewables and that type of technology

         22          that you want to have installed, and so

         23          there is a very specific example of an

         24          area that probably ESCOs would be

         25          reluctant to spend time on, engineering,

                                                          42


          1          if they thought that their detailed

          2          energy analysis is going to be not

          3          reimbursed if you don't proceed.  So

          4          those are areas that are fairly risky.

          5          We are not sure they are really going to

          6          make sense when it's all said and done,

          7          and quite frankly, we probably would be

          8          unwilling to spend a lot of money on

          9          that if we think we are not going to get

         10          paid for it at the end.

         11          MR. DARYL BERG:

         12               Let me follow-up a question to

         13          you.  Not committing, but assuming it

         14          was able to be changed to where the

         15          government would be on the hook for the

         16          IG costs even if the task order doesn't

         17          go forward, what other ways are there

         18          out there to promote using emerging

         19          technologies or renewable energy

         20          technologies?  What incentives are there

         21          out there to get the ESCOs to pursue

         22          that, and do they get the agencies to

         23          want to do those type of things?  That

         24          would be useful for me.  If there is

         25          something contractually, we can have

                                                          43


          1          them contract.  Not to put you on the

          2          spot.

          3          MR. ROGER FLOOD:

          4               Well, I think the tax incentives

          5          that are in place are extremely good, if

          6          those could be made better.  The thing

          7          is you have got a situation where

          8          private industry can take advantage of

          9          these tax credits.  So us having to own

         10          them and sell energy back, being able to

         11          streamline that process is good.  States

         12          where there is not good rebates for

         13          emerging renewables such as -- in

         14          California we can do those projects and

         15          make it pay.  You start moving to other

         16          parts of the country where there is good

         17          opportunity for solar or wind but the

         18          local utilities don't really have the

         19          incentives in place?  If you have got

         20          installations or Federal -- you know,

         21          Federal installations in those parts of

         22          the country that don't -- they can't

         23          take advantage of incentives from your

         24          local utilities, they need a little bit

         25          more consideration, perhaps, from the

                                                          44


          1          standpoint of Federal tax credits or

          2          those types of incentives.

          3               And I can just tell you from

          4          experience working in the south where

          5          there is a lot of that opportunity,

          6          utility rates are relatively low.  The

          7          tax credits alone make it extremely

          8          difficult to make those projects

          9          cashflow.  Whereas you go to California

         10          and you get tons of money from the

         11          California Solar Initiative, it makes it

         12          worthwhile financially.  So it's kind of

         13          regionalized as to what can be done to

         14          make it better.

         15          MR. DARYL BERG:

         16               Roger, I agree about everything

         17          you say.  The challenge for me

         18          contractually is those state incentives

         19          or even government incentives are --

         20          they are not within my control.

         21          MR. ROGER FLOOD:

         22               Right.  I understand that.

         23          MR. DARYL BERG:

         24               If there are those incentives or

         25          rebates, the contract does allow them to

                                                          45


          1          be captured in TO3 and some other areas,

          2          too, but the -- essentially what you get

          3          in rebates captured and used toward the

          4          cost of the project but that --

          5          MR. ROGER FLOOD:

          6               Well, those types of things would

          7          have to be dealt with legislatively in

          8          the next session or the one after that

          9          just as they are identifiable and you

         10          know what you can do about them.  So you

         11          asked, and that was my answer.

         12          MR. DARYL BERG:

         13               I put you on the spot, too.

         14          MR. ANDREW MORTON:

         15               Can I --

         16          MR. DARYL BERG:

         17               Andrew.

         18          MR. ANDREW MORTON:

         19               I would just say, because Roger

         20          talked about what I would refer to as

         21          existing renewable technologies which

         22          are -- you know, the decision to include

         23          them or not include them is a lot of

         24          times driven based on financial

         25          incentives.

                                                          46


          1               The deeper part of your question

          2          is the emerging technology that DOE is

          3          really trying to promote, and it's our

          4          understanding your intent with this new

          5          contract is to promote that.  That being

          6          said, when we as an ESCO are working

          7          with a site trying to evaluate emerging

          8          technologies, the risk -- because we

          9          have to guarantee the savings is all on

         10          the ESCO.  And so contractually you may

         11          want to look at some kind of clause that

         12          will allow a sharing of risk

         13          post-installation when the technology

         14          truly is emerging.  I mean, photovoltaic

         15          have been around, we don't have an issue

         16          guaranteeing that, but if there is some

         17          new technology that's being created at a

         18          lab such as NREL or Argonne that's truly

         19          new, we are not going to take all that

         20          risk for performance when it's never

         21          been tried and true other than maybe,

         22          you know, tested at a DOE site.  So

         23          that's something that you might want to

         24          consider if you are truly trying to

         25          promote what I would call emerging

                                                          47


          1          technologies or in development.

          2          MR. DARYL BERG:

          3               Thanks.  A follow-up comment, and

          4          it's somewhat related to government

          5          procurement process.  We are talking

          6          about the draft RFP and some of the

          7          issues involved in that.  We are going

          8          to take -- we took -- take your comments

          9          that you submitted through IIPS, take

         10          your comments today, bring it back to

         11          the team, look at them and see what we

         12          can do with them.

         13               Once that happens, we are going to

         14          revise and develop what we call the

         15          final RFP, but it's just the RFP.

         16               Now, that goes through an internal

         17          approval process, like I mentioned, and

         18          once we post that again to IIPS, that's

         19          what you will propose against.  But that

         20          doesn't mean that you can't stop or that

         21          you can't ask questions still, that you

         22          can't have comments or recommendations

         23          that we can change.  And the way that

         24          would happen is we would amend the RFP,

         25          and if it's something relatively minor,

                                                          48


          1          we may not extend the offering period or

          2          maybe it's a major thing and then we

          3          have to, you know, push -- move the

          4          offering period.  So I just -- that just

          5          popped into my mind, that once the final

          6          RFP is issued, that doesn't mean that we

          7          can't amend it if it makes sense to do

          8          so.

          9          MR. ANDREW MORTON:

         10               Can I ask a follow-up on that,

         11          then?

         12          MR. DARYL BERG:

         13               Yes.

         14          MR. ANDREW MORTON:

         15               Because the fundamental thing that

         16          I saw as having this meeting in this

         17          reform, which we are very supportive of,

         18          but given the fact that you looked over

         19          600 questions and generated a 106-page

         20          document consolidated, we really

         21          appreciate that, but there was probably

         22          over 300 "Thank you for your comment.

         23          We will consider making changes."

         24               We understand you are bound by

         25          certain things, but it's going to be a

                                                          49


          1          lot more valuable to us if you make the

          2          decision on whether it's in or out and

          3          then update your RFP and post it again

          4          for us to make those comments instead of

          5          you issuing it and then having, you

          6          know, us individually or collectively

          7          make some suggestions and then you-all

          8          decide in the middle of the procurement

          9          at that -- when you issue it, you are

         10          truly in the middle of your procurement,

         11          right, that starts the clock, so to

         12          speak.

         13          MR. DARYL BERG:

         14               We already -- the clock started on

         15          the procurement a year ago so --

         16          MR. ANDREW MORTON:

         17               Okay.  That being said, I'm just

         18          asking or suggesting there is a lot of

         19          value if we know of those 2 or 300 of

         20          those "Thank you for your comments.  We

         21          will consider making the change," what

         22          way you are going so that we can offer

         23          truly what I would say is constructive

         24          feedback.

         25               I mean, today you are asking us to

                                                          50


          1          expand on what we have already commented

          2          on.  We truly are sincerely interested

          3          in knowing whether you are going to

          4          include or not include and then we would

          5          offer additional comments.  It's a

          6          suggestion.

          7          MR. DARYL BERG:

          8               We will take that into

          9          consideration.

         10          MR. BILL JOHNSON:

         11               Good afternoon.  Bill Johnson with

         12          Honeywell.

         13               It will sound an awful lot like

         14          the same story we have been talking

         15          about, but I want to move you forward

         16          just a bit in time about your contract

         17          should you leave it the way it is.  A

         18          couple of thing will happen, and the

         19          gentleman from TAC mentioned it probably

         20          the most directly should you not change

         21          the current position where there

         22          wouldn't be a cost to recover or a

         23          method to recover the investment cost

         24          for a failure-to-go-forward project.

         25          Should you make your awards -- should

                                                          51


          1          the contract holders make that

          2          investment and the first project doesn't

          3          go forward, you will lose contractors to

          4          the next project.  So the pool of

          5          contractors where you are looking to

          6          have a viable community will fail

          7          because there will be a point in time

          8          where the corporations will say, "You

          9          are not able to recovery your fees.  You

         10          are operating a business that falls in

         11          the red, and that's not the intent of

         12          your program."

         13               So I would suggest the revisit,

         14          reevaluate, so there is a couple of

         15          different business models for you to

         16          consider.  The honorarium approach to a

         17          design build business is the most

         18          obvious one, where it's already

         19          predetermined that a value is placed on

         20          a stake in the game for the Federal

         21          government.

         22               The second thing is in the absence

         23          of doing the hard work ahead of the

         24          award, you would have to move the

         25          engineering post-award in order to have

                                                          52


          1          a method for recovering those fees or to

          2          be ensured of it.

          3               That being true, you will lower

          4          the expectation of the pre-award

          5          deliverable requirements, so the quality

          6          of the documentation will go down.  You

          7          are looking for specific causes or

          8          implications associated with the current

          9          position.  That's the first one.

         10               The second one is the performance

         11          associated with engineering that's not

         12          done well in advance and done

         13          post-award.  The post-award engineering

         14          becomes irrelevant to the bottom line

         15          because the dollar amount is then fixed.

         16          So the consequence will be the

         17          performance during the out years or

         18          during the performance period associated

         19          with whatever measurements are

         20          installed.  So if what we are being

         21          accountable for is performance during

         22          that phase, you might see, you would

         23          expect to see an erosion of that as a

         24          result of the engineering not being done

         25          in advance.

                                                          53


          1          MR. DARYL BERG:

          2               So I understand that point, Bill.

          3          If the performance is degraded, though,

          4          that's going to cost you more money?

          5          MR. BILL JOHNSON:

          6               Correct.  Which will be the third

          7          consequence, it will drive the risk up

          8          in which case we will recover that risk

          9          somehow in the cost of the project.

         10          Otherwise you will be out of business,

         11          which will be the first point.  You will

         12          eliminate the contractors.

         13          MR. DARYL BERG:

         14               Or do the upfront.

         15          MR. BILL JOHNSON:

         16               Correct.

         17          MR. DARYL BERG:

         18               You are going to incur the costs

         19          one way or the other, is what you are

         20          saying?

         21          MR. BILL JOHNSON:

         22               Correct, correct.  So the risk --

         23          it's just purely a question of risk,

         24          right?  So in the absence of a

         25          mitigating factor for the risk, risk

                                                          54


          1          will be incurred.  The cost of risk can

          2          be accounted for in the value of the

          3          project.

          4               I'm going to take a slightly

          5          difference stance on another subject,

          6          and that is the value of an adaptive

          7          contract.  We are seeing an awful lot of

          8          things that have occurred in the last

          9          two years, five years in the energy

         10          market whereby things like renewable

         11          energy, innovative energy, incubator

         12          technology that's of value to the

         13          Federal government, that would be

         14          desired by the Federal government

         15          frequently makes it into a project but

         16          doesn't make it into the award, into the

         17          development but not into the award.

         18          Some adaptive nature to your contract.

         19          We have talked an awful lot about our

         20          purchase agreement, terms and conditions

         21          and the construct of that inside of a

         22          project.  It works, we think, inside of

         23          the existing program, and I think there

         24          would be value in looking at it in the

         25          long-term in your revised contract

                                                          55


          1          structure.

          2          MR. DARYL BERG:

          3               All right.  Thank you.

          4          MR. ROGER FLOOD:

          5               Just to kind of drive a point home

          6          maybe a little harder than it's been

          7          said so far, I don't think anyone here

          8          really has an issue with the ESCOs

          9          taking some of the risk up to the point

         10          of preliminary surveys and some initial

         11          discussions.  There is no issue with

         12          that.  Specifically the detailed

         13          analysis cost is what we are talking

         14          about here, and that point somebody

         15          within the government has said, "Yes, we

         16          are interested in this.  Yes, we want

         17          you to develop this project.  Yes, we

         18          want you to do the detailed energy

         19          analysis and all the energy work that

         20          goes with it."  So we have been told at

         21          that point that the government is

         22          interested in doing the project and

         23          interested in actively engaging us in

         24          this point in the process.  So that

         25          really hasn't been verbalized word for

                                                          56


          1          word like I just put it.  So we are

          2          being asked to perform a task that

          3          otherwise if you went to a local

          4          engineering firm and had them do that

          5          engineering study, it would be at least

          6          what we are going to charge if not more

          7          and they wouldn't be on the hook for the

          8          performance, they would give you a book

          9          and it would -- at that point you would

         10          have to even go further to develop plans

         11          and specs to do a design bid build,

         12          which is not what you are wanting to do.

         13               So this is a service that has a

         14          lot of value to start with, and to say

         15          that you are not going to be on hook for

         16          it probably isn't fair to the industry

         17          and you have asked us to do it so --

         18          MR. DARYL BERG:

         19               Roger, a follow-up question, and I

         20          should have asked this earlier to the

         21          folks.  Is it desirable or what I'm --

         22          is it you-all's desire that the

         23          government be on the hook for IGA costs

         24          whether it goes forward or not

         25          without -- should the government be on

                                                          57


          1          the hook, if they say, "Well, you know,

          2          we like what you did, but we just don't

          3          want to do the USPC anymore.  Sorry.

          4          Too bad for you"?  Or what happens if

          5          the ESCO does the IGA, I mean, and the

          6          ESCO says, "Well, we looked at the

          7          numbers.  It just ain't going to work,

          8          Folks.  I think it's in both our best

          9          interest just to walk away," should the

         10          government pay then?  Thoughts about

         11          that.

         12          MR. ROGER FLOOD:

         13               In the first scenario, definitely

         14          on the hook.  If we do the investment

         15          grade audit and the numbers look good

         16          and everything is as discussed, then

         17          definitely you should be on the hook.

         18          But something that was discussed in a

         19          couple of sessions throughout the last

         20          couple of days is there is preliminary

         21          meetings and there is discussions that

         22          happen to kind of set the boundaries and

         23          establish the project that we are going

         24          to be talking about developing between

         25          the ESCO that's been selected and the

                                                          58


          1          end user, the agency.  So when you

          2          discuss those boundaries and you set

          3          those boundaries, those establish the

          4          parameters that the ESCO needs to meet

          5          when they do the investment grade audit.

          6          So if you weren't in -- a lot of

          7          renewables in the project that have you

          8          longer payback, then you might be

          9          talking about a, just in simple terms, a

         10          neutral cashflow for 20 years that

         11          includes these items, some list.  If

         12          that's met and the government decides

         13          not to move forward, then the ESCO

         14          should be paid.

         15               Now, if you are talking about that

         16          early on and the ESCO says that's not

         17          possible.  You can't do that list of

         18          projects and expect a 20-year simple

         19          payback.  The government still wants to

         20          do it and it turns out not to be neutral

         21          cashflow or better as discussed, then,

         22          again, the ESCO should be paid.  If the

         23          ESCO says, yeah, we can do that, we can

         24          meet those parameters, and they go into

         25          the investment grade audit and then they

                                                          59


          1          are not able to for whatever reason, in

          2          that case the ESCO hasn't met what they

          3          said they could do, the government

          4          probably shouldn't have to pay for that

          5          audit.

          6               Now, I don't know if everyone

          7          would agree with that, but you set up

          8          initial parameters that need to be met

          9          and that's a team situation.  Both sides

         10          are saying, "We want this," and the

         11          other side is saying, "I can do that."

         12          Everyone agrees they move forward with

         13          the audit.  If it's successful, great.

         14          If not, then the ESCO agreed to take

         15          that risk.

         16          MR. DARYL BERG:

         17               Follow-up on that point, what I'm

         18          starting to hear, that if -- if the IGA

         19          costs do fall back to the -- let me try

         20          to backtrack again.  This contractual

         21          obligation seems like it needs some

         22          terms and conditions.  If this happens,

         23          then government, you are on the hook.

         24          But if this happens, then we are not

         25          going to hold you to it, that type of

                                                          60


          1          thing.  It has to be more than a

          2          discussion.  It's got to be in writing

          3          somehow.

          4          MR. ROGER FLOOD:

          5               That's correct.  We are all used

          6          to doing that.  Everyone in this room,

          7          we had those types of forms.

          8          MS. BRITTA McINTOSH:

          9               Britta McIntosh.  I think what

         10          general understanding has always been

         11          that it's been the job of the energy

         12          services company to put together a

         13          financially viable project.  And if we

         14          get to the end of the DES and we can't

         15          make a project financially viable, then

         16          shame on us for not getting it done.

         17          But if we do, even in the situation

         18          where we have now where the general

         19          understanding is that if we put a

         20          financially viable project on the table

         21          and the customer for whatever reason

         22          decides not to go forward with the

         23          project and you have that opportunity to

         24          recoup those costs, if we lose that

         25          opportunity for the government to have a

                                                          61


          1          stake in the game, as others have said,

          2          I think, you know, you are going to have

          3          a situation where, you know, the

          4          companies in this room are here to do

          5          projects, not just develop things for

          6          free and then have folks at the very end

          7          say, "Huh, you know what?  Thanks, but

          8          we will just put that on the shelf."

          9               There is already a lot of putting

         10          things on the shelf, you know, going on,

         11          and it's painful for us to have to go

         12          and recover costs in some cases.  And it

         13          translates into very long development

         14          cycles and having to hold reserves,

         15          having ultimately to make decisions on

         16          where you are going to spend your

         17          development dollars.  We don't have

         18          unlimited resources as companies to

         19          decide where we are going to invest in

         20          putting projects together.  And I think

         21          that that will be countered to the

         22          bigger, more, faster, you know, and more

         23          comprehensive and more innovative.

         24          That's where we are going to head, in

         25          the opposite direction.  And in some

                                                          62


          1          cases I think, Daryl, we have had this

          2          conversation before, the wish also to

          3          have smaller businesses involved in the

          4          ESPC program, that's also, I think,

          5          going to not happen or you potentially

          6          set up a lot of companies to participate

          7          for a very short period of time and

          8          realize, "Oh, my god, I'm going to go

          9          under.  I can't do this.  I can't lose

         10          that opportunity that far after I've

         11          extended myself that far down the pike."

         12               I mean, I think historically you

         13          have had some very large, strong

         14          companies playing, you know, in this

         15          arena, but if we want to open this up to

         16          a lot more participation, we have to be

         17          careful of that.

         18          MR. DARYL BERG:

         19               Thank you.

         20          MR. KEITH DERRINGER:

         21               Quick question.  Earlier you said

         22          that you would like some input or

         23          information if we had legal opinions

         24          that we knew of.  How do you want to

         25          receive that information?

                                                          63


          1          MR. DARYL BERG:

          2               The IIPS system doesn't let you do

          3          attachments as you all probably --

          4          MR. KEITH DERRINGER:

          5               Yes.

          6          MR. DARYL BERG:

          7               I guess if something like that,

          8          since it's something I requested

          9          personally, if you send it to the --

         10          it's espc@go.doe.gov.  That comes to my

         11          personal mailbox, but I separate out

         12          kind of my other e-mail from the

         13          recompetes, so I see it when it comes to

         14          me.

         15          MR. KEITH DERRINGTON:

         16               So you said it was espc.go.doe --

         17          MR. DARYL BERG:

         18               Espc@go.doe.gov.

         19               But if it's questions regarding

         20          the recompete, still go through IIPS.

         21          MR. KEITH DERRINGTON:

         22               Okay.  Thank you.

         23          MR. DARYL BERG:

         24               So the thing here is about risk.

         25          I'm sorry, but I just want to throw out,

                                                          64


          1          too, that if you have questions about

          2          the procurement process, if you want to

          3          know where we are at or what's going on

          4          next, don't hesitate to ask about that,

          5          too.

          6               Yes, sir.

          7          MR. STANFORD ROLLINS:

          8               Stanford Rollins with Providence

          9          Capital Resources.  In the upcoming

         10          future contracting opportunities, I

         11          request that the government provide

         12          guidance into the contracts, ESPC

         13          contracts or UESE contracts, for that

         14          matter, with respect to AA lenders,

         15          certified companies holding AA and small

         16          disadvantaged business certifications.

         17          With respect to how a proposal for

         18          financial services from an AA company

         19          will be evaluated and/or incentivized

         20          and also how the participation of a

         21          certified small business providing

         22          financial services will be accounted for

         23          in meeting the small business

         24          contracting goals, if that could be --

         25          if guidance on those matters could be

                                                          65


          1          provided so that your large ESCOs and

          2          utilities, the ESCOs can at least

          3          consider that.

          4          MR. DARYL BERG:

          5               Thank you.  We will consider that.

          6          MR. BOB STARLING:

          7               Bob Starling with B. Starling &

          8          Associates.  The fact that you have

          9          received, I believe, in an order of 600

         10          some comments, you have got some reviews

         11          you will be receiving.  You have

         12          received comments today.  Again, where

         13          do you stand on the schedule that was

         14          provided in the draft RFP?

         15          MR. DARYL BERG:

         16               Thanks.  I'm apprehensive to give

         17          a schedule because every time I do we

         18          bust it, we are always -- we are behind.

         19          We take this back, it's going to take

         20          some time, weeks as opposed to months,

         21          to get all the comments incorporated

         22          into the next RFP.  I suspect it will

         23          take maybe a couple of months in review

         24          because the way it happens is the

         25          reviewers look at it, then we have got

                                                          66


          1          to go revise it, it goes back to them,

          2          so a couple of months.  The last time

          3          that we went through the draft RFP was

          4          probably three, four months, so two

          5          months might be conservative.  Once the

          6          R -- the way it's currently envisioned

          7          is once the RFP is issued -- and by the

          8          way, the RFP will tell you where the

          9          site visit is going to be and where the

         10          preproposal conference is.  It will give

         11          you the data you are going to use to

         12          propose on and instructions on how to

         13          coordinate those visits.

         14               So after the RFP is scheduled or

         15          posted, then maybe tours a few weeks

         16          after that, and that will be part of the

         17          proposal offering period.  I don't --

         18          and I'm open for suggestions on how long

         19          that should be.  Our initial thought is

         20          45 to 60 days.  And then the -- what we

         21          do, once we get proposals, and like I

         22          say, things might change.  We might have

         23          to extend that for some reason or what

         24          have you.  Once we get the proposals,

         25          then we comb through them, make sure

                                                          67


          1          that they are responsive to what we

          2          asked for.  We get it ready for the

          3          individual reviewers.  And what we are

          4          looking at doing is having reviewers

          5          review them individually, come up with

          6          questions or strengths, weaknesses,

          7          something like that, and then we will

          8          reconvene and as a group come to

          9          consensus scores on the RFP.

         10               Once we score the offers, there

         11          will have to be a decision made whether

         12          to do what we call -- well, whether to

         13          do negotiations or not.  And so the way

         14          that happens is if we established -- we

         15          want to do negotiations with these top

         16          20 people.  We allow those top 20 to

         17          improve their proposals.  We re-evaluate

         18          them and then kind of get down to a

         19          final number.

         20               If we do negotiations or what we

         21          call discussions, that's going to add

         22          three, four months onto the process.  If

         23          we can decide not to do discussions or

         24          negotiations and award as -- with the

         25          information we got in the proposals,

                                                          68


          1          then obviously that's a time saver and

          2          then we can go straight to, you know,

          3          finalizing the award.

          4               If there is a protest for whatever

          5          reason, that will slow the process down,

          6          and I don't know how that will affect

          7          the continuity operations with the

          8          existing contract.  Irregardless, the

          9          idea here is that we get the new

         10          contracts awarded prior to the existing

         11          ones closing so that we don't have a

         12          slowdown of project development.

         13               If for some reason we can't do

         14          that, that obviously is a problem for

         15          everyone.  I could tell you that it's

         16          DOE's policy to recompete projects every

         17          five years, and we have extended the

         18          existing IDIQ contracts a couple of

         19          times, the ordering period a couple of

         20          times.  It has not been an easy process

         21          to do.  Internally it's taken months to

         22          get the various approvals to go get --

         23          to get exceptions to DOE policy.  So

         24          obviously I'm not saying if you have a

         25          legitimate -- if you have a legitimate

                                                          69


          1          harp, it's your prerogative to protest,

          2          but it's in everyone's best interest to

          3          keep this procurement moving as quickly

          4          as possible, to do the right thing so

          5          that we don't have protests, so that we

          6          have continuity of project development,

          7          so that's kind of the process, the

          8          general timeline.  I hope that answers

          9          your question.

         10          MR. BOB STARLING:

         11               Thank you for that detailed

         12          information.  Follow up with a question:

         13          In the draft RFP it does make some

         14          references to the number of contract

         15          awards expected.  Is there a finite

         16          number of contract awards that DOE is

         17          currently looking at?

         18          MR. DARYL BERG:

         19               No.  That's the other thing that

         20          government procurement says, you have to

         21          have a number.  The way -- the general

         22          way of how you get the number is you

         23          take in consideration what you have to

         24          guarantee as a minimum.  So, you know,

         25          in essence, DOE has an obligation to pay

                                                          70


          1          the minimum for each contract.  So if

          2          you had 10 contracts, the government has

          3          to come up with less money than if you

          4          had 50 contracts.

          5               The other part of the

          6          consideration is contract

          7          administration.  The other part is

          8          having a sufficient number of

          9          contractors out there that could do the

         10          work to meet the energy production

         11          goals, also to have sufficient

         12          competition out there for agencies to

         13          choose from.  So we won't know exactly

         14          until we see what we have got, is the

         15          short of it.

         16               So those are the considerations

         17          when we ultimately award, and the draft

         18          RFP gives us flexibility.  I think we

         19          put 10 or 10 to 12 or something in

         20          there, and we have flexibility more or

         21          less depending on what you want to do.

         22          MR. ED ANDERSON:

         23               Ed Anderson, FPL Energy Services.

         24          I'd like a little more clarification on

         25          that.  If you have a number in the final

                                                          71


          1          RFP, then you cannot go above that but

          2          you can go below that?

          3          MR. DARYL BERG:

          4               The RFP states we tend to award

          5          approximately 10 but we reserve the

          6          right to do more or less depending on --

          7          MR. ED ANDERSON:

          8               And that's the language you expect

          9          to have in there?  Because I don't

         10          believe that was in the draft.

         11          MS. BETH SHEARER:

         12               It was.

         13          MR. ED ANDERSON:

         14               It was?

         15          MS. BETH SHEARER:

         16               Yes.

         17               Beth Shearer.  This is sort of a

         18          clarification question for me.  You

         19          mentioned that maybe 10 billion was the

         20          right number for the dollar maximum

         21          amount?

         22          MR. KEITH DERRINGTON:

         23               Per contract.

         24          MS. BETH SHEARER:

         25               Per contract.  So that would be

                                                          72


          1          for the five-year original term and then

          2          the two three-year extras for a total of

          3          11 years?

          4          MR. DARYL BERG:

          5               That's generally how you do it.

          6          MS. SHEAR:

          7               So 10 billion per contractor for

          8          11 years.

          9          MR. DARYL BERG:

         10               You could do it both ways.  You

         11          could say whatever the amount is is for

         12          the initial base period of five years,

         13          or we can up front say this is for base

         14          and all option years, as well, which is

         15          preferable to me, at least, because if

         16          you don't establish that amount for the

         17          option years, you had to recompete those

         18          option years and give -- and go through

         19          a process to get additional ceilings.

         20          It's easier for everyone if we just

         21          establish a ceiling for the entire

         22          potential length of the contract.

         23          MS. BETH SHEARER:

         24               Then --

         25          MR. DARYL BERG:

                                                          73


          1               Which in that case if we -- for

          2          some reason we only do it for five

          3          years, that ceiling would still be five

          4          years.

          5          MS. BETH SHEARER:

          6               In that case, if it's for the

          7          total 11 years, 1 billion per contractor

          8          really is inadequate because, I mean,

          9          I'm just looking at what DOE is

         10          proposing and you are going to hit that

         11          within a year or two so --

         12          MR. DARYL BERG:

         13               What do you recommend, Beth?

         14          MS. BETH SHEARER:

         15               That's fine.  The $10 billion per

         16          contractor sounds about right.

         17          MR. DARYL BERG:

         18               So if we had 10, do you anticipate

         19          $100 billion worth of work out there

         20          for --

         21          MS. BETH SHEARER:

         22               I see.  So the number of

         23          contractors -- see, on the other hand, I

         24          think you should have a larger number of

         25          contractors, if you can, the flexibility

                                                          74


          1          to have --

          2          MR. DARYL BERG:

          3               Or if we had 50 and there were 10,

          4          $5 trillion worth of work out there or

          5          $500 billion?

          6          MS. BETH SHEARER:

          7               Yeah.  You are probably better off

          8          setting it a little high initially when

          9          you don't know the number of

         10          contractors.  It's a lot easier to

         11          keep -- it's a lot easier to have it

         12          higher than to have to try to bump the

         13          ceiling up, depending on the number of

         14          contractors.

         15          MR. ED ANDERSON:

         16               Just a quick comment, if I might.

         17          Just a point of clarification there.

         18          Your question was do we expect X number

         19          of contracts out there?  As I understand

         20          it, it's not -- you are not asking with

         21          these dollar limits how much work is out

         22          there.  The way it's currently written

         23          is what would the government pay over

         24          the total period of time.  They are two

         25          different and distinct issues.

                                                          75


          1          MR. KEITH DERRINGER:

          2               That's correct, and I think just

          3          to elaborate a little further, it's hard

          4          to predict what the universe is of

          5          projects can be done because as you know

          6          and we know, over the last 10 years the

          7          landscape of where we have been -- of

          8          the world we are trying to do business

          9          in changes.  We have legislative changes

         10          that come out from nowhere that will

         11          change what the goals and requirements

         12          are, and it's just hard to predict how

         13          that's going to go in the future.  And I

         14          think there is unanimity with anybody

         15          who either has a contract now or who

         16          doesn't have one and wants to get one in

         17          the future, is we don't want to see

         18          anyone make decisions that are going to

         19          paint you into corners that make it

         20          difficult for you later to deal with

         21          whatever changes come from Congress as

         22          far as goals or mandates.  Because it is

         23          very difficult to go through this

         24          process, you are living it, and we would

         25          like to see you come with something that

                                                          76


          1          suits the government's needs not only

          2          today but what they could be down the

          3          road.

          4          MR. DARYL BERG:

          5               Thanks.  That's certainly --

          6          that's everyone's desire and so

          7          that's -- we appreciate your feedback to

          8          give us some ideas.  It's a hard --

          9          MR. KEITH DERRINGER:

         10               It's nebulous.

         11          MR. DARYL BERG:

         12               I still don't know exactly what

         13          the right number is.  You could have --

         14          why not have it -- the maximum ceiling

         15          20 trillion?  What harm does it do,

         16          right?  Well, it's the regulations --

         17          MR. KEITH DERRINGER:

         18               Yeah.  I hear what you are saying.

         19          MR. DARYL BERG:

         20               You have to have some rationale

         21          for the number you picked based upon the

         22          amount of work available, ESCOs.  There

         23          has to be rationale for the numbers.  So

         24          that is what we are trying to figure

         25          out.

                                                          77


          1          MR. KEITH DERRINGER:

          2               Right.

          3          MR. CHRIS HESSLER:

          4               Chris Hessler with AJW, and we

          5          represent Noresco on a number of issues

          6          related to this subject.

          7               I'd like -- you had asked, Daryl,

          8          that we talk to you about whys and one

          9          of the whys I think that is necessary to

         10          address is why you got 600 comments.

         11          And in particular, why you got 600

         12          comments in contrast to general quiet

         13          from the industry -- excuse me, from the

         14          industry in the period since last year

         15          when you announced that you wanted to

         16          use the IIPS system and that if we had

         17          comments on the contract, that was the

         18          thing to do.

         19               And let me try and put it in this

         20          context.  My view is that the -- one of

         21          the challenges the ESPC has constantly

         22          had is that it is not traditional

         23          acquisition, and the contract that we

         24          were working with -- are working with

         25          has been discussed, refined and modified

                                                          78


          1          over years of hard work and it has

          2          reached a point where there are many

          3          folks who are comfortable with it and

          4          knowledgeable with it.  But one of the

          5          challenges we constantly run into is

          6          that there is a lack of institutional

          7          knowledge on the government side.

          8          Government folks change jobs, they

          9          change positions.  You are not always

         10          dealing with the same lawyer.  You are

         11          not always dealing with the same program

         12          officers.  And appropriately government

         13          employees are going to be very risk

         14          adverse about signing the government up

         15          to something if they are not absolutely

         16          sure that it's appropriate and proper

         17          and that the government is getting what

         18          it's supposed to get.  So people who

         19          move around in the government and are

         20          accustomed to traditional acquisition

         21          are not necessarily going to be

         22          accustomed to ESPCs and so it slows the

         23          process down.

         24               With this contract, a number of

         25          things have been changed and on the

                                                          79


          1          industry side we are not certain what

          2          the objectives are.  We have some

          3          speculation.  There has been some

          4          discussion.  It certainly appears that

          5          there are hard work put into it from

          6          your side, from the government side, and

          7          I'm sure that there are logical

          8          explanations for all of the changes.

          9          But the generic fear reaction is that

         10          there will be a whole lot of new

         11          uncertainty injected into the process

         12          even with those people who have

         13          institutional knowledge because there

         14          will be a discussion about what does

         15          this new change mean, what does this

         16          particular different phrase mean, and

         17          how do we interpret going forward?  So

         18          it compounds the problem of ESPC not

         19          being a traditional acquisition.

         20               This comes at the same time as

         21          significant direction, policy direction

         22          from the government in terms of the team

         23          initiative that we are discussing, in

         24          terms of the Executive Order, in terms

         25          of legislation, that that has been

                                                          80


          1          signed into law and legislation that is

          2          likely to be signed into law, that we

          3          should be using -- the Federal

          4          government should be engaged

          5          significantly in more aggressive energy

          6          efficiency activities.

          7               And so the volume of comment, and

          8          I think the level of enthusiasm behind

          9          the comment speaks directly to a fear

         10          based in history, based in the

         11          experience of all of the ESCOs that the

         12          uncertainties of new language compound

         13          all of the other difficulties and

         14          will -- will, even if they can all be

         15          worked out, even if all the changes in

         16          language are -- eventually come to be

         17          under by the ESPC experts on both sides

         18          and worked with, and even if the worst

         19          fears about risk shifting leading to

         20          higher costs and smaller projects and

         21          longer time lines weren't to be true, at

         22          least initially, the very fact that

         23          changes are being made will lead to

         24          those outcomes because of the

         25          uncertainties, because of the

                                                          81


          1          appropriate caution of government

          2          employees taking their responsibilities

          3          on behalf of the government seriously.

          4          So I would recommend that changes to the

          5          contract should be scrutinized from the

          6          perspective of having a very high

          7          threshold, that if there is not an

          8          extraordinarily compelling reason that

          9          suggests the government will get a

         10          better result from a policy perspective,

         11          from an outcome of greater energy

         12          efficiency, you should be very cautious

         13          about changing the contract.

         14          MR. DARYL BERG:

         15               Thank you.

         16               I don't know if I mentioned this

         17          before as a side note, we have the room

         18          until 5:00 or the stenographer up here

         19          is available until 5:00, so we can go up

         20          to that point.  We are not able to go

         21          past, but we still have plenty of time

         22          so --

         23          MR. ROGER FLOOD:

         24               In response to the question about

         25          your timeline, you mentioned something

                                                          82


          1          in the middle of your process that kind

          2          of peaked my interest.  You get initial

          3          responses, you reviewed them.  Suppose

          4          you get down to a list of 20 that you

          5          want to negotiate further with or look

          6          at closer or whatever and possibly ask

          7          them to do a further or more detailed

          8          look.  I think that's what you're -- I

          9          couldn't quite hear in the back, but it

         10          sounded like you were looking for maybe

         11          those 20 to do a more detailed proposal

         12          or offering and then you would negotiate

         13          with them.  I wonder what the point

         14          of -- because that sounds like a really

         15          easy decision for the government to have

         16          in a closed room, say, hey, why don't we

         17          get these 20 to look closer and we spend

         18          an extra 60 or 90 days of time, what

         19          would you expect to get from that that

         20          you can't get by just talking to them?

         21          MR. DARYL BERG:

         22               That's a good question.  The

         23          answer is a little bit less easy to come

         24          by.  What makes us decide to do

         25          discussions or negotiations and what

                                                          83


          1          does that mean exactly?  Well, it simply

          2          means to give the offerer the

          3          opportunity to improve their proposal.

          4          It doesn't necessarily mean that you

          5          have got to go back and do -- relook at

          6          the numbers or better detail.  It might

          7          be that we don't really understand what

          8          you were trying to do here, go back and

          9          make it more clear for us and we will

         10          reevaluate you after that.  Or, I don't

         11          know, maybe there were -- I can't come

         12          up with specifics, but it's to improve,

         13          not necessarily to redo or to go back

         14          and recrunch numbers.  It's just -- I

         15          don't want to say the word clarify

         16          because then government clarifications

         17          are something different than

         18          discussions, but, yeah, to make it more

         19          clear to us, understandable, to

         20          strengthen your proposal with the

         21          information that you already have or

         22          whatever so --

         23          MR. ROGER FLOOD:

         24               One of the things that's always

         25          fun from a competitive standpoint on our

                                                          84


          1          side is trying to figure out how far we

          2          can really go in this type of response.

          3          Some states have procurement processes

          4          where you do preliminary surveys as a

          5          first stage to either be short listed or

          6          get selected, then do a detailed audit.

          7               And so one of the things in a

          8          competitive process we are always trying

          9          to figure out is, okay, as an ESCO do we

         10          really want to do a more detailed

         11          response than the next guy than they are

         12          really asking for in the proposal

         13          solicitation?  Do we do something a

         14          little more detailed to show our extra

         15          interest, to kind of elevate the

         16          interest of the client?  So when you --

         17          and that always opens the door, when

         18          there is a second phase of further

         19          proposal, clarification or whatever term

         20          we want to use here, the gamesmanship

         21          kind of gets started a little bit, you

         22          are able to ramp up and maybe go back

         23          and recrunch numbers, do something a

         24          little bit more detailed than perhaps

         25          you did in the first phase.  I don't

                                                          85


          1          know.  I don't know if you intend to

          2          open that door or -- that's super easy

          3          for a client to do, to ask for, and then

          4          it really -- I mean, at that point we

          5          are all trying to figure out now what --

          6          okay.  What are they really looking at?

          7          What can I do at this point to get

          8          someone's interest?  So --

          9          MR. DARYL BERG:

         10               I'm not sure how to respond to it

         11          without specifics, but that's what

         12          happens, is about all I can say.  You

         13          understand that the decision on whether

         14          to do discussions or not will be based

         15          upon whether or what we have is

         16          sufficient to award with, and there is a

         17          lot of intangible things that go into

         18          that.

         19          MR. ROGER FLOOD:

         20               I guess I draw a distinction

         21          between discussions and redoing

         22          proposals.

         23          MR. DARYL BERG:

         24               It's essentially the same thing.

         25          MR. ROGER FLOOD:

                                                          86


          1               Okay.

          2          MR. DARYL BERG:

          3               Discussions are us telling you we

          4          think you have some deficiency here.  We

          5          would like you to go back and improve

          6          these certain areas.

          7          MR. ROGER FLOOD:

          8               Okay.

          9          MR. DARYL BERG:

         10               And you go back and try to fix

         11          that and try to game what we are looking

         12          for, how we are going to do this,

         13          resubmit it to us and we reevaluate it,

         14          score it, and then you either are in or

         15          you are out at that point.

         16          MR. ROGER FLOOD:

         17               What the goal -- I mean, the goal

         18          you are trying to get to is how is it

         19          going to be to do business with us in

         20          the future?  That's really what you are

         21          trying to get to.

         22          MR. DARYL BERG:

         23               Yeah.

         24          MR. ROGER FLOOD:

         25               Okay.

                                                          87


          1          MR. DARYL BERG:

          2               Anything else?

          3          MR. ANDREW MORTON:

          4               Daryl, I was just putting a little

          5          bit of pen to paper about the proposed

          6          time line and based on when you envision

          7          the RFP to come out.  I'm guessing best

          8          case December time frame.  If that's the

          9          case, you might want to make sure that

         10          you have at least a 60-day turnaround if

         11          not 75 days.

         12          MR. DARYL BERG:

         13               Because of the holiday.

         14          MR. ANDREW MORTON:

         15               Yes, because of the holiday.  So

         16          it's just a comment.  If it ends up

         17          hitting right end of December, it's

         18          going to impact not necessarily just on

         19          our side but your side and the site we

         20          have to go, et cetera.

         21          MR. DARYL BERG:

         22               Absolutely.

         23          MS. BETH SHEARER:

         24               Just another clarification.  The

         25          current contracts were extended to March

                                                          88


          1          of 2008?

          2          MR. DARYL BERG:

          3               Yes.  March 31st, 2008.

          4          MS. BETH SHEARER:

          5               And it's hard to get extensions.

          6          MR. DARYL BERG:

          7               Yes, ma'am.

          8          MR. CHRIS HESSLER:

          9               On of the -- Chris Hessler again.

         10          One of the issues you identified in the

         11          early list of themes was the on ramp

         12          question, and it would be worth

         13          discussing that a little bit, certainly,

         14          you know, in a larger policy context.

         15          The -- again, the primary, I think,

         16          concern from the perspective of many of

         17          the ESCOs is that the contract, the

         18          master contract itself is something that

         19          doesn't guarantee work.  It is the

         20          competition subsequent to being on, the

         21          contract that is where the work is

         22          obtained.

         23               The process of the competition

         24          that all of the existing contract

         25          holders went through and is about to be

                                                          89


          1          opened up again, is to identify for the

          2          government who is capable of doing this

          3          work.  The existing contract holders can

          4          be kicked off the contract and I am

          5          told, although I haven't investigated

          6          it, I am told that that has happened,

          7          the government has, in fact, kicked

          8          folks or removed folks from the contract

          9          for a cause.  And so the impulse of

         10          suggesting that an on ramp should be

         11          used is that the government, if it's not

         12          satisfied with the existing contract

         13          holder, has a means to remove them.  If

         14          it's not removing them, that is de facto

         15          evidence they are satisfied.  The policy

         16          objective expressed for the recompete

         17          primarily appears to be expanding the

         18          number of contractors.  And

         19          simultaneously the government, again,

         20          has in many different ways expressed a

         21          policy objective of being far more

         22          aggressive than it has been on energy

         23          efficiency work in the very near future.

         24               So the question then comes, what

         25          happens to the existing contract holders

                                                          90


          1          from a resource perspective as they

          2          engage in this process?  This is a long

          3          process.  You just went through a time

          4          line.  For the contract holder, being on

          5          the contract is going to be the most

          6          important business objective in the

          7          coming months.  Anything that distracts

          8          from ensuring that they have an

          9          opportunity to continue to be on this

         10          contract will become secondary to the

         11          process of participating in the

         12          recompete fully and with all the

         13          resources they can bring to bear.  And

         14          that means that the best and brightest

         15          individuals who are the ones that do the

         16          work, they are the ones who understand

         17          the projects, they are necessarily the

         18          ones that have to be involved in the

         19          recompete process because they are the

         20          ones who will show what the company is

         21          capable of doing.  So any executive will

         22          assign his best and brightest, her best

         23          and brightest to the process of

         24          responding to government's RFP.  By

         25          default that means that those folks are

                                                          91


          1          going to have at least diminished time,

          2          if not no time, to respond to this new

          3          initiative, the team initiative, or to

          4          the general thrust of doing more energy

          5          efficiency work for the government for

          6          the period of months when they are

          7          engaged in working on the recompete.

          8               So from a government perspective,

          9          it will get a diminished value from the

         10          existing contract holders for the term

         11          of -- the duration of the recompete.

         12               Additionally, if it is the notion

         13          that the IDIQs need to be recompeted

         14          periodically, that means you will

         15          periodically have the same disruption in

         16          the government's ability to do this

         17          work.  And, again, if you create the

         18          uncertainty about whether existing

         19          contract holders will continue, not only

         20          will they throw all their resources into

         21          ensuring they will continue, you also

         22          create to some degree uncertainty about

         23          what the longevity of these suppliers

         24          engaging in this work.  The notion here

         25          of the ESPC is to have long-term

                                                          92


          1          relationships.  Companies have resources

          2          to stand behind their guarantees which

          3          last considerably longer than five

          4          years.  It strikes me as less than

          5          logical and certainly less than optimal

          6          from the government's point of view to

          7          distract every five years from the

          8          business of doing that work, is to have

          9          a process that is essentially making

         10          people prove what has already been

         11          proved.

         12               So the notion of the on ramp is to

         13          enable the government to simultaneously

         14          maximize its opportunity with the

         15          existing contract holders, not robbing

         16          the government of any opportunity to

         17          protect itself from deficiencies if

         18          those contractors prove deficient and

         19          simultaneously obtaining the policy

         20          objective of expanding the number of

         21          contractors that are available to do

         22          business with the government.

         23               So from a policy perspective, the

         24          whole notion of the on ramp is to enable

         25          the government to achieve both of its

                                                          93


          1          objectives, more energy efficiency and

          2          more contractors to do even more in the

          3          future, without making any short-term

          4          disruption and establishing a new

          5          approach to allowing contractors to come

          6          on in the future in a way that is far

          7          less disruptive of this program overall.

          8               To the extent that you can, I

          9          would certainly like to know what sort

         10          of reaction the government has to the

         11          proposal that's already been made

         12          through the IIPS system.

         13          MR. DARYL BERG:

         14               Thanks, Chris.

         15               That's a lot to give responses to.

         16          I can tell you that the idea of on ramps

         17          are being considered out in the field

         18          and at the headquarters, so your point

         19          is well articulated and taken and we are

         20          looking into that.

         21               Just extemporaneously I have some

         22          issues to work out.  As you noted, it is

         23          not only the DOE's policy to

         24          periodically recompete IDIQs, it's the

         25          government's policy.  We are not the

                                                          94


          1          only ones.  The Army is doing it.  The

          2          Air Force is looking at doing it.  Other

          3          important IDIQs throughout the

          4          government for defense, you name it, are

          5          recompeted periodically.  That's just --

          6          that's the government norm.

          7               ESPCs are important, no doubt

          8          about it, and I think most people would

          9          agree with you there is a balance

         10          between putting effort into the

         11          recompete and toward project development

         12          and ensuring project success, there is

         13          no question about that.  It's a resource

         14          drain.  We acknowledge that.  It's just

         15          part of existing, if not law, I might

         16          step -- I don't know if it's law but

         17          it's in the regs as the norm.

         18               The idea of keeping the existing

         19          ESCOs with their current contract and

         20          just adding additional ones, that one

         21          I'd have to work out because contracts

         22          that have been around for 10 years have

         23          certain terms and conditions that were

         24          in effect 8, 10 years ago.  Adding new

         25          ones, you can't have the same terms and

                                                          95


          1          conditions, it's -- because laws change,

          2          regs change.

          3               The other part of it is from a

          4          contract administration and from a --

          5          say a program standpoint, it becomes

          6          difficult to manage two types of

          7          contracts.  For instance, the existing

          8          contracts are regional or text specific.

          9          It would be without -- it would be

         10          outside the scope of that contract to

         11          say, now, you used to only be in the

         12          western region but now you are good for

         13          the entire country.  You can't do that

         14          in government contracting.  That's

         15          called a cardinal change, out of scope

         16          change.  You would have to recompete

         17          that part of it, post it, so on and so

         18          such.

         19               So the new ones, if they did have

         20          the ability to go national or

         21          international, we can't -- we can't have

         22          a level playing field.  So what I'm

         23          saying is, your on ramp people, if we

         24          are going to allow to go international,

         25          would have an advantage from that aspect

                                                          96


          1          over your existing ones that only are in

          2          regional because we couldn't change it.

          3          So it becomes difficult administratively

          4          and programatically to have contracts

          5          with different processes, different

          6          restrictions in terms of -- so just,

          7          that's one of the things that would have

          8          to be overcome, and I don't know exactly

          9          how to do that.

         10               The new ones, you could have some

         11          substantially look like the existing

         12          ones but there is going to be various

         13          important yet subtle differences that

         14          would make the playing field uneven.

         15               So those are things that would

         16          have to be addressed if we do -- if we

         17          can -- if we choose to and if we can do

         18          the on ramp.

         19          MR. CHRIS HESSLER:

         20               That was extremely helpful and I

         21          appreciate the response.  The notion

         22          that this is -- that allowing someone

         23          who has one regional to be in a

         24          worldwide scope is a cardinal change is

         25          an interpretation I had not heard, and

                                                          97


          1          so what I would like to do is submit --

          2          I'm not sure what the process is now for

          3          submitting additional information, but

          4          the material that's been submitted so

          5          far on this came from a previous counsel

          6          for DOE who has procurement expertise

          7          and I'd certainly like their thoughts on

          8          that and share those with you.  Can I do

          9          that on the IIPS?

         10          MR. DARYL BERG:

         11               Right, through IIPS, again.  And

         12          let me -- does everyone know what I mean

         13          by cardinal change or out-of-scope

         14          change?  Maybe I'll take just 20 seconds

         15          to -- what it means in general is had we

         16          from the beginning opened this up to --

         17          without any geographic boundaries.  So

         18          you could do projects internationally.

         19          Had we done that in the beginning, would

         20          that have changed the results?  Would

         21          there be different ESCOs now had we

         22          allowed internationally?  So -- would

         23          ConEdison be here if we opened up to the

         24          world?  I don't know.  Would Noresco be?

         25          I don't know.  If you don't know the

                                                          98


          1          answer, then it's a cardinal change.  Or

          2          if you do know that it would have made a

          3          difference, it's a cardinal change to

          4          the existing scope of the contract, so I

          5          don't know.

          6          MR. CHRIS HESSLER:

          7               Not to challenge that, I think I

          8          understand exactly what you are talking

          9          about, but when you make such a change

         10          and are simultaneously offering an open

         11          opportunity for anyone who is not

         12          currently a contract holder to become

         13          one, does that issue have the same

         14          weight?

         15          MR. DARYL BERG:

         16               I understand -- to give this same

         17          opportunity to the newcomer, doesn't

         18          have the same weight, I'm not sure what

         19          that means.  The way cardinal changes

         20          are allowed in the government is your

         21          existing contract, say, has a regional

         22          restriction.  And now the government

         23          says it's in the best interest of

         24          this -- of the government to allow this

         25          individual to have work in the whole

                                                          99


          1          nation, not just be bound by the region.

          2          We have to go through the IIPS process

          3          again and say, hey, we intend to make a

          4          cardinal change to this contract.

          5          Anyone who wants to can submit a

          6          competing offer to also compete on this

          7          basis since you didn't have the chance

          8          the first time to submit a proposal for

          9          the whole nation as opposed to just the

         10          region, and you go back and evaluate

         11          competing proposals, you may or may not

         12          end up getting that cardinal change

         13          approved.  It's a difficult --

         14          MR. CHRIS HESSLER:

         15               It appears that the threshold

         16          question is, is there a material

         17          difference in the competence of an ESCO

         18          who is performing energy efficiency work

         19          in a single region that would suggest

         20          that they are not capable of performing

         21          it worldwide?  That, to me, seems to be

         22          the pivotal question in whether this is

         23          cardinal or not.  Again, let me -- I

         24          will offer to submit something --

         25          MR. DARYL BERG:

                                                         100


          1               Us not knowing that probably means

          2          that it is because if we don't know

          3          whether it would have made a difference

          4          back then, then we need to find out now.

          5          MR. CHRIS HESSLER:

          6               But in the context of offering an

          7          open opportunity for anyone to join the

          8          contract, you are not excluding anyone

          9          from a government opportunity.

         10          MR. DARYL BERG:

         11               But I'm saying you can't -- we

         12          can't -- those new people won't have the

         13          same contract as you.

         14          MR. CHRIS HESSLER:

         15               No, no.  Well, the theory would

         16          be, as in the comment, the theory would

         17          be that existing contract holders then

         18          are put on a modified contract.  The

         19          contract itself has been modified and

         20          many times in the past.  So all existing

         21          contract holders would be put on the

         22          exact same contract as anyone who goes

         23          through the recompete process.  It would

         24          be one contract.

         25          MR. DARYL BERG:

                                                         101


          1               But then you didn't get a chance

          2          to compete on the new contract whereas

          3          other new people had to compete with

          4          this apple whereas you have an orange.

          5          MR. CHRIS HESSLER:

          6               And the issue there is it is the

          7          government's position that it is

          8          materially different to have competence

          9          in one region versus competence

         10          worldwide.

         11               So I'm not -- it appears to me it

         12          comes down to that question.  If it's

         13          materially different, that you -- if you

         14          won't know how to do energy efficiency

         15          in the southwest, that doesn't mean you

         16          know how to do it in the northeast.

         17          Then if that's the government's

         18          position, that underscores cardinality.

         19          MR. DARYL BERG:

         20               The example comes down to

         21          regionalized or technology specific, but

         22          there are other terms and conditions

         23          that are different in the existing that

         24          are in the future, so it's more than

         25          just --

                                                         102


          1          MR. CHRIS HESSLER:

          2               Again, the precedent is that the

          3          contract has been modified so the point

          4          of view that I'm expressing is that this

          5          modification should not be viewed in any

          6          different light than previous

          7          modifications.  Therefore, existing

          8          contract holders should be enabled to be

          9          signed onto a modified new contract that

         10          is identical to the contract that the

         11          folks who go through the recompete are

         12          signed onto but there would be one

         13          contract.

         14          MR. DARYL BERG:

         15               Without having to compete?

         16          MR. CHRIS HESSLER:

         17               Absolutely.

         18          MR. DARYL BERG:

         19               And the other part is you wouldn't

         20          believe that changing it so that it

         21          looks like the new contract would be a

         22          cardinal change, is your position?

         23          MR. CHRIS HESSLER:

         24               Absolutely, but, again, I'll come

         25          back to you with specific comments on

                                                         103


          1          cardinality.

          2               With regard to the -- your comment

          3          about the IDIQ being commonly recompeted

          4          every five years, I'd have this comment.

          5          The value of precedence and the

          6          importance of precedence in the

          7          government and observing it is extremely

          8          important and needs to be respected, but

          9          precedence cannot be allowed to handcuff

         10          the government from making rationale

         11          policy decisions.  In other words,

         12          because we have done it before in

         13          similar circumstances does not mean that

         14          it must always be done the same way.

         15          The government has an obligation to

         16          examine its decisions from the

         17          perspective of the policy outcome of the

         18          specific decision.

         19               Again, ESPC is not traditional

         20          acquisition.  It has many features that

         21          are unique.  And so I think that it is

         22          important to consider that simply

         23          holding the ESPC to a convention of

         24          recompeting IDIQs when those other IDIQs

         25          are not necessarily the same sort of

                                                         104


          1          process and do not create the same type

          2          of relationship for the government with

          3          the contractor, it's important to take

          4          up the question specifically of whether

          5          that precedent should be held here and

          6          whether it has merit here simply because

          7          it's been used elsewhere.

          8          MR. DARYL BERG:

          9               Okay.  Thanks, Chris.  I might

         10          have steered us down the wrong track a

         11          little bit on saying that it's common

         12          practice or precedence to recompete

         13          contracts every five years or -- there

         14          is -- the regulation says multiple award

         15          contracts shall be awarded every five

         16          years unless some statutory exception

         17          applies.  There is other places where

         18          there is a different number than five

         19          years.  There is a debate on whether in

         20          the 42USC8287, whether the 25-year

         21          contract limitation on ESPCs means the

         22          IDIQ and/or the delivery orders or task

         23          orders themselves.  And so, you know,

         24          all that was thought of, the advantages

         25          and disadvantages of doing a recompete

                                                         105


          1          and getting new blood in there and

          2          having an updated contract that in

          3          theory we want to improve upon, all of

          4          those things are programatic, things

          5          that Daryl out in the field gets told by

          6          headquarters, "You are going to

          7          recompete.  Get it done."  So someone

          8          else other than Daryl has made -- has

          9          tried to balance all that and weigh it.

         10          MR. CHRIS HESSLER:

         11               I just want to clarify so that my

         12          comment is not misunderstood.  I don't

         13          in any way mean to suggest that the

         14          government has interest in prohibiting a

         15          recompete that enables its objective of

         16          having more contract holders.  That is

         17          not the basis of the assertion of the on

         18          ramp.  We think that these are mutually

         19          compatible outcomes with you can both

         20          get new blood, to use your phrase, and,

         21          excuse me, substantially advance the

         22          objectives of the team initiative and

         23          the Executive Order the President signed

         24          as well as the supporting legislation.

         25          MR. DARYL BERG:

                                                         106


          1               Thanks.  This has been very

          2          helpful for me.

          3               Anyone else?  Andrew?

          4          MR. ANDREW MORTON:

          5               We are drained.

          6          MR. DARYL BERG:

          7               I'm about there myself.  But I

          8          have to tell you that having this has

          9          given me some ideas to try to -- as we

         10          are talking, I'm thinking on how this

         11          would work so this has been good for me

         12          and I appreciate everyone.

         13               Yes, sir.

         14          MR. KEITH DERRINGER:

         15               Just one comment along those

         16          lines.  I think one thing that's been

         17          very difficult for us outside the

         18          government has been the IIPS process.

         19          Most of us have not had a lot of

         20          experience with IIPS.  In the past, I

         21          know I have not, and we have had a sense

         22          of frustration that, you know, we are

         23          sliding questions under, you know, a

         24          closed door and we have no idea

         25          whether -- you know, what happens to

                                                         107


          1          them, which is kind of disconcerting.

          2          You know, you don't know what happens to

          3          the questions.

          4          MR. DARYL BERG:

          5               Or even if we got them.

          6          MR. KEITH DERRINGER:

          7               And also it's been a situation

          8          where we think that these are kind of

          9          complex contracts, trying to do some

         10          pretty complex solutions.  It's not like

         11          you are ordering commodities off a

         12          schedule or something.  I think that

         13          this has been helpful for us as an

         14          industry and I hope it has been for you

         15          to be able to speak about some of these

         16          things and hopefully get a little

         17          communication going so maybe you have a

         18          little more perspective about where we

         19          are coming from and I think we've gained

         20          more perspective about where you are

         21          coming from.  I think it has been very

         22          beneficial.

         23          MR. ANDREW MORTON:

         24               Just a quick follow-up, Daryl.

         25          Since you came to us and said we need

                                                         108


          1          some clarification and that's part of

          2          the purpose of today's, I sure didn't

          3          know that you had any questions about

          4          our questions.  So that means that if

          5          you have any more questions, is it

          6          possible for you just to post them as a

          7          special notice on IIPS so that, you

          8          know, we will get you the references on

          9          the NOITA commitments, but if you had

         10          additional, we sure wouldn't want to

         11          miss out on the opportunity to continue

         12          to contribute if you had -- let's say

         13          you came up with five additional

         14          questions next week or the week after.

         15          If you post those and allow the industry

         16          and, you know, existing and future

         17          contract holders to answer, I mean, we

         18          would welcome that.

         19          MR. DARYL BERG:

         20               Absolutely.  Thanks, Andrew.

         21          That's a good point.  Anyone else?

         22          Going once, twice.

         23               All right.  Again, thanks,

         24          everybody, for showing up and I

         25          appreciate your comments.  They have

                                                         109


          1          been helpful to me.  I am already

          2          thinking about different strategies in

          3          my mind to make a better product.  So I

          4          hope you guys like the results that we

          5          have, that it's something we can all

          6          agree to and work with.  Thank you.

          7          AUDIENCE MEMBERS:

          8               Thank you.

          9               (Whereupon the meeting was

         10          concluded.)

         11

         12

         13

         14

         15

         16

         17

         18

         19

         20

         21

         22

         23

         24

         25

                                                         110


          1                REPORTER'S CERTIFICATE

          2

          3

          4

          5

          6           I, Terry L. Owens, CCR, RPR,

          7  Certified Court Reporter in and for the State

          8  of Louisiana, do hereby certify that the above

          9  meeting was reported by me in shorthand and

         10  transcribed under my personal direction and

         11  supervision, and is a true and correct

         12  transcript, to the best of my ability and

         13  understanding;

         14           That I am not of counsel, not related

         15  to counsel or parties hereto, and not in any

         16  way interested in the outcome of this matter.

         17

         18

         19

         20

         21
                               Terry L. Owens, CCR, RPR
         22                     Certified Court Reporter
                               State of Louisiana
         23

         24

         25