Energy Efficiency, Design, Construction, LEED & Green Projects: The Stimulus Does It All

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Energy Efficiency, Design, Construction, LEED
Green ProjectsThe Stimulus Does It All

• Tuesday, March 31, 2009
• 1200 PM EDT
• You may listen to the audio over your computer
  speakers or
• you may use your phone to dial into the following
  number
• 1-866-642-1665
• Passcode 342441

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Presenters

• Andrew Wheeler
• Senior Vice President, BD Consulting
• andrew.wheeler_at_bakerd.com
• 202.312.7424
• Energy Climate Change Consulting Group

• Patrick Miller
• Associate, Baker Daniels
• patrick.miller_at_bakerd.com
• 312.212.6514
• Construction and Real Property Liability Group
  Energy, Environment and Climate Change Legal Group

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How Will ARRA Work?

• 787 billion, 250 programs and many different
  ways Washington and the states will spend the
  money.
• Cabinet Agencies which we will cover today
  include the Departments of Energy, Agriculture,
  Defense, Interior, Labor, Housing Urban
  Development and the Environmental Protection
  Agency.
• Non-cabinet-level Government Entities receiving
  funding include NASA, Small Business
  Administration and the National Science
  Foundation.
• The Recovery Package is now a public law. It
  moves into the complicated implementation phase.
• Rulemaking process and RFP process
• Getting the funding out in certain time frames
• Oversight Accountability

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Green Buildings In General

• Utilization of best practices to
• Maximize efficiency in design, construction,
  operation and maintenance
• Minimize waste and cost
• Capture free inputs from the natural
  environment
• Third party verification of construction quality
  and asset value
• Improved product
• Energy and water savings
• Indoor environmental quality

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Green Certifications and Standards

• For buildings
• Governmental
• LEED
• Green Globes
• For products
• EnergyStar
• Green Seal
• Greenguard
• GreenSpec

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ARRA Green Building Projects

• NIST
• 360 million for maintenance and renovation of
  NIST facilities and laboratories using green
  technologies that maximize energy and water
  savings. 180 million is for the competitive
  construction grant program for research science
  buildings including FY2008 and FY2009
  competitions.
• Bureau of Reclamation Modernizing Facilities
• 1 billion for DOI is directed for water and
  related resources projects.
• GSA Conversion to High Performance Green
  Buildings
• 4.5 billion from the GSA's Federal Buildings
  Fund to convert GSA facilities to
  High-Performance Green Buildings
• Bureau of Land Management Construction
• 180 million including funding for energy
  efficient retrofits of existing facilities.
• Fish and Wildlife Services Construction
• 115 million including funding for energy
  efficient retrofits of existing facilities.
• National Park Service Construction
• 589 million including funding for energy
  efficient retrofits of existing facilities.
• Forest Service Capital Construction and
  Maintenance

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ARRA Green Building Projects

• DOD Military Construction
• 4.24 billion for Facilities Sustainment,
  Restoration and Modernization for U.S. and U.S.
  territories' facilities. A portion of these funds
  shall be used to invest in energy efficiency
  projects and to repair and modernize DOD
  facilities, including Defense Health program.
• DOD Military Construction
• Navy Marine Corps 100 million for energy
  conservation and alternative energy projects.
• DOD Energy Conservation and Investment
• 120 million for the Energy Conservation and
  Investment Program.
• DOD Military Family Housing Construction
• Army 34.5 million for construction and
  improvements to family housing to provide jobs,
  increase quality of life and employ energy
  efficiency through advanced construction
  techniques.
• Air Force 80.1 million
• DOD Military Family Housing Operating Expenses
• Army 3.9 million for necessary maintenance
  including energy savings upgrade
• Air Force 16.4 million
• VA Medical Facilities
• Of the 1 billion appropriated, funds will be
  used for non-recurring maintenance and energy
  projects. The Senate report describes energy
  projects as follows wind turbine systems,
  rooftop photovoltaic systems, and water
  conservation measures.

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ARRA Green Building Projects

• HUD Public Housing Capital Fund
• 4 billion (3 billion by formula, 1 billion by
  competition) for investments including leveraging
  private sector funding or financing for
  renovations and energy conservation retrofit
  investments.
• HUD HOME Investments Partnership Program
• 2.25 billion of which up to 20 may be used for
  investments in energy efficiency and green
  building technology. Funds are available until
  Sept. 30, 2011.
• HUD Native American Housing Block Grants
• 510 million, of which 255 million is by
  formula. The amounts distributed by formula shall
  be used for construction, retrofits and
  rehabilitations including energy efficiency
  retrofits.
• HUD Assisted Housing
• 250 million for energy retrofits and green
  investments to project owners of HUD Section 8
  housing.
• Army Corps of Engineers
• 4.6 billion for construction, operation and
  maintenance for previously-authorized projects
  including 25 million for the Corps regulatory
  program.
• Department of Education
• Of the 53 billion, there are references to using
  recognized green buildings ratings systems.
• USDA Assisted Housing Stability and Green
  Retrofit Investments

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Green Projects Risk Categories

• Scope of Work
• Certification Expectations
• Product Expectations
• Performance Expectations
• Cost Savings Expectations

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Green Projects Risk Allocation Options

• Silence
• Advantages None
• Disadvantages Countless
• Teaming Waiver of Certification/Product/Performa
  nce/Cost Saving Guarantees
• Advantage Protects design/construction team and
  supply chain
• Disadvantage May reduce impact of innovation
  and technology
• Stipulated Penalty Clauses
• Advantage Allows front-end negotiation of the
  issues
• Disadvantage May restrict ability to innovate
• Incentives (e.g. shared cost savings)
• Advantage Motivates team
• Disadvantage May reduce quality of base scope

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Green Design and Construction Contracts

• There are many Green specification options, but
  no form general conditions
• AIA 2007 B101 requires architect to consider
  environmentally responsible design alternatives
  and discuss them with the owner 2007 A201 does
  not address green certification or product risks
• AIA B214 does not address consequences of failure
  to achieve LEED certification
• AGC, ConsensusDOCS, EJCDC do not address Green
  issues or LEED Certification
• DBIA Sustainable Project Goals Exhibit

NEW!
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ARRA Weatherization Assistance Program

• 5 billion administered through DOEs Office of
  Energy Efficiency and Renwable Energy
• Includes a provision that expands the eligibility
  of low-income households for weatherization
  assistance and increases the maximum funding
  assistance level per household.
• Supports weatherization of homes, including
  adding more insulation, sealing leaks and
  modernizing heating and air conditioning
  equipment, which will pay for itself many times
  over.
• Allows an average investment of up to 6,500 per
  home in energy efficiency upgrades and will be
  available for families making up to 200 of the
  federal poverty level or about 44,000 a year
  for a family of four.
• March 12 Vice President Joe Biden and Energy
  Secretary Chu announced Indiana will
  receive131,847,383 for the Weatherization
  Assistance Program.

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Current Federal Energy Efficiency Tax Credits

• Business Deduction for Energy-Efficient
  Commercial Buildings
• A tax deduction of up to 1.80 per square foot is
  available to owners or designers of new or
  existing commercial buildings that save at least
  50 of the heating and cooling energy.
• Builder Tax Credit for Energy-Efficient Homes
• Home builders are eligible for a 2,000 tax
  credit for a new energy efficient home that
  achieves 50 energy savings for heating and
  cooling. The credit equals 1,000 for realizing
  30 energy savings.
• Homeowners Credit for Efficiency Improvements
• Homeowners are eligible for a tax credit of up to
  500 for insulation, replacement windows, water
  heaters and heating and cooling equipment.
• Homeowner Energy-Efficiency Tax Credit for
  Existing Homes
• Increases the value of the energy efficient
  existing homes credit to 30 percent for 2009 and
  2010, modifies the standards for qualifying
  property, and sets the per-dwelling maximum for
  this period at 1500 per taxpayer

NEW!
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Department of Energy

• Transportation Electrification
• 400 million to states, local governments and
  metropolitan transportation authorities for
  qualified electric transportation projects that
  reduce emissions, including truck stop
  electrification, airport ground support equipment
  and cargo-handling equipment.
• Alternative Fueled Vehicles Pilot Grant Program
• 300 million in grants through the Clean Cities
  program to state and local governments,
  metropolitan transportation authorities and
  others for encouraging the use of plug-in
  electric-drive vehicles or other emerging
  electric vehicle technologies.
• Advanced Batteries
• 2 billion in grants for the manufacturing of
  advanced batteries and components, including
  advanced lithium-ion batteries, hybrid electrical
  systems, component manufacturers and software
  designers.
• Non-Defense Environmental Cleanup
• 483 million to the Department of Energy, which
  can also be applied to brownfields cleanup.
• Energy Efficiency and Renewable Energy Program
• 2.5 billion for applied research, development,
  demonstration and deployment activities to
  include 800 million for projects related to
  biomass and 400 million for geothermal. The
  balance of the money is for solar, wind,
  hydrogen, water power, and energy efficiency
  demonstrations for industrial and commercial
  practices.
• Innovative Technology Loan Guarantee Program
• 6 billion to pay for the costs of guarantees
  made under this section for renewable
  technologies and transmission technologies. This
  includes renewable energy systems such as
  incremental hydropower electric power
  transmission systems and leading-edge biofuels
  projects at the pilot or demonstration scale.
  This should support 60 billion of loans.

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Department of Energy (continued)

• Energy Efficiency and Conservation Block Grants
• 3.2 billion of which 2.8 billion is to states
  through the existing formula in EISA Title V
  subtitle V. The remaining 400 million shall be
  rewarded on a competitive basis as determined by
  the Secretary. Types of projects include energy
  audits, implementing building codes, and
  government building on-site projects that
  generate electricity from renewable sources
• Smart Grid
• 4.5 billion to modernize the electric grid
  including demand-response equipment, security and
  reliability enhancements, energy storage
  research, development, demonstration and
  deployment, and to facilitate recovery from
  disruptions from the energy supply.
• Clean Coal
• 800 million in competitive grants for the Clean
  Coal Power Initiative Round 3.
• Fossil Energy Research and Development
• 1 billion for fossil energy, coal technologies,
  carbon capture, coal mining technologies, oil and
  gas, oil and gas reservoirs, complex weld
  technology testing, and methane hydrate RD
  programs
• Advanced Research Projects Agency
• 400 million to support high-risk, high-payoff
  research to accelerate the innovation cycle for
  both traditional and alternative energy sources
  and energy efficiency. This funding is for
  research and construction of laboratory
  facilities.

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Department of Transportation

• Competitive Grants for Transportation
• 1.5 billion for competitive grants to projects
  across all surface transportation modes that will
  have a significant impact on the nation, a
  metropolitan area or a region. Awards will range
  from 20 to 300 million.
• Grants-in-Aid for Airports
• 1.1 billion to be used by the FAA to provide
  discretionary airport grants to repair and
  improve critical infrastructure at airports.
  These investments will serve to provide important
  safety and capacity benefits.
• Highway Infrastructure Investment
• 27.5 billion in funds distributed by formula.
  Set asides are also provided for
  environmentally-friendly transportation
  enhancements.
• Capital Assistance for High Speed Rail and
  Intercity Passenger Rail Service
• 9.3 billion 1.3 billion to Amtrak and the
  remaining 8 billion is provided for the
  development of intercity and high speed passenger
  rail. The Secretary has flexibility in
  allocating resources between the programs to
  advance the goal of deploying intercity high
  speed rail systems in the US. Grants will be
  distributed under the Intercity Passenger Rail
  Grants to States and the High Speed Corridors
  grant program.
• Transit Capital Assistance
• 6.9 billion divided up into formula grants for
  urbanized areas, rural areas, and growing state
  and high-density areas. Within this funding, 100
  million is provided for discretionary grants to
  public transit agencies to reduce energy
  consumption or greenhouse gas emissions.
• Fixed Guideway Infrastructure Investment
• 750 million distributed through an existing
  authorized formula for capital projects to
  modernize or improve existing fixed guideway
  systems, including purchase and rehabilitation of
  rolling stock, track, equipment and facilities.
• Capital Investment Grants (New Starts Program)

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Environmental Protection Agency

• Clean Water State Revolving Fund
• 4 billion for Clean Water State Revolving Fund
  grants. Priority funds are designated for
  projects ready to proceed to construction within
  12 months of enactment. This is for nonpoint
  source, watershed protection or restoration,
  estuary projects and traditional municipal
  wastewater treatment programs.
• Drinking Water State Revolving Fund
• 2 billion for Drinking Water State Revolving
  Fund grants. Priority funds are designated for
  projects ready to proceed to construction within
  12 months of enactment. Eligible projects must
  facilitate compliance with national drinking
  water regulations or otherwise advance health
  protection objectives under the Safe Water
  Drinking Act. Projects to replace aging
  infrastructure are eligible if necessary to
  maintain compliance or advance the Acts public
  health goals.
• Diesel Emissions Reduction
• 300 million for diesel emission reductions
  grants to states.
• Superfund
• 600 million to the EPAs Hazardous Substance
  Superfund program to address uncontrolled
  releases from hazardous and toxic waste sites
  that threaten human health and the environment.
• Brownfields Cleanup
• 100 million to states and tribal authorities for
  remediation of brownfields sites. Four types of
  competitive grants are eligible brownfields
  assessment, cleanup, revolving loan fund, and
  environmental job training. The 20 cost-sharing
  requirement is waived.
• Leaking Underground Storage Program
• 200 million in grants for cleanup activities
  with no cost-sharing requirement.

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ARRA Compliance General

• Basic Strategy Oversight and Transparency
• Basic Goals Accountability, Risk Mitigation,
  Minimize Fraud and Abuse
• Specific Provisions Largely Undefined
• Implementation
• Federal Agency and Department Heads
• OMB Memo M-09-10 (February 18, 2009)
• Example DOE Inspector General Memo
  OAS-RA-09-01
• State and Local Executive Offices
• Section 1511 Certification
• Question Does False Claims Act Liability
  Apply?

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ARRA Compliance Specific Provisions

• Buy America
• Hire America
• Davis Bacon Act Prevailing Construction Wage
• Fixed Price Contracts
• Competitive Contracting Procedures
• State and Local Whistleblower Protection
• Executive Agencies may not enter into Federal
  Contracts without complying with federal
  procurement laws and the Federal Acquisition
  Regulations

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ARRA Compliance Hire America

• Companies receiving TARP funds cannot hire
  foreign workers
• Does not apply to overall ARRA projects

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ARRA Compliance Buy America

• Applies to All Iron, Steel and Manufactured
  Products used in ARRA public building and works
  projects
• Terms appear to borrow from Buy American Act
  (1933 Federal Procurement) and Buy America
  Statute (1964 FTA Grants for State and Local
  projects)
• BUT Terms are not defined
• Exemptions
• If requirement is inconsistent with the public
  interest
• If the products are not produced in sufficient
  and reasonably available quantities in U.S.
• If use of U.S. products increases cost of overall
  project by 25
• Penalties?
• False Claims Act Liability
• Contract and Legal Remedies Invalid Bid, Void
  Contract, Contract Termination, Fraud
• Basic Recommendation
• Broad Certifications and RFPs require compliance
  and trigger liability
• Therefore Without express exemption for the
  project - - All building products should be
  American-made (entire supply chain)

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ARRA Compliance Risk Allocation Strategies

• Current Practice
• Broad Certifications
• Federal Agency and Department Heads
• State and Local Executives
• Indemnification
• Agency passes risk to contractor
• Contractor passes risk to subcontractor
• Subcontractor passes risk to suppliers
• Vague Penalties
• E.g. Does the Buy American requirement subject
  state and local contractors who sign broad
  certifications to federal False Claims Act
  liability?
• Future Efforts
• Inspectors General, States and Local Officials
  will develop compliance best practices and RFPs
  (i.e. contract provisions) with specific
  requirements
• Minimum Recommendations
• Where Possible Clarify broad and vague
  certifications before issuing or responding to
  RFPs
• Expressly incorporate ARRA funding and compliance
  elements into indemnification provisions in
  contracts

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Washington This Week

• Energy Efficiency Markup
• The full Senate Energy and Natural Resources
  Committee will mark up legislation updating
  appliance standards and industrial energy
  efficiency
• Part of larger, comprehensive Energy reform
• Energy efficiency is the low-hanging fruit
• President Obama is making a significant push for
  energy efficiency
• House Cap-and-Trade Legislation
• Released this week, sponsored by Reps. Waxman
  (CA) and Markey (MA)
• ARRA Oversight Hearing
• The Senate Homeland Security and Governmental
  Affairs Committee is looking into how well ARRA
  funds are being spent

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Questions?

• Andrew Wheeler
• Senior Vice President, BD Consulting
• andrew.wheeler_at_bakerd.com
• 202.312.7424

• Patrick Miller
• Associate, Baker Daniels
• patrick.miller_at_bakerd.com
• 312.212.6514