[Federal Register Volume 59, Number 69 (Monday, April 11, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-8594] [[Page Unknown]] [Federal Register: April 11, 1994] _______________________________________________________________________ Part XI Department of Energy _______________________________________________________________________ Office of Energy Efficiency and Renewable Energy _______________________________________________________________________ 10 CFR Part 436 Federal Energy Management and Planning Programs; Proposed Rule DEPARTMENT OF ENERGY Office of Energy Efficiency and Renewable Energy 10 CFR Part 436 [Docket No. EE-RM-94-201] Federal Energy Management and Planning Programs AGENCY: Department of Energy. ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: The Department of Energy (DOE) proposes to amend its Federal Energy Management and Planning Programs regulations with regard to energy savings performance contracts for existing Federally owned buildings. Such contracts typically provide for installation of energy conservation measures with private sector funds which are repaid out of the resulting energy cost savings over time. Today's proposed rule covers the following topics as required by section 801 of the National Energy Conservation Policy Act qualified contractor lists; procedures and methods to select, monitor, and terminate contracts; and substitute regulations for provisions in the Federal Acquisition Regulation which are inconsistent with section 801 and the relevant terms of which can be varied, consistent with their authorizing legislation, in order to carry out the intent of section 801. DATES: Written comments (6 copies) must be received by DOE on or before June 10, 1994. A public hearing will be held on June 1, 1994, beginning at 9:30 a.m. at the address listed below. Requests to speak must be received on or before May 27, 1994. ADDRESSES: All written comments (6 copies), as well as requests to speak at the public hearing are to be submitted to: U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, EE-44, Notice of Proposed Rulemaking for Energy Savings Performance Contracts, EE-RM- 94-201, 1000 Independence Avenue, SW., Washington, DC 20585, 202-586- 3012. FAX comments will not be accepted. The public hearing will be held in room 1E-245, U.S. Department of Energy, Forrestal Building, 1000 Independence Avenue SW., Washington, DC 20585. FOR FURTHER INFORMATION CONTACT: Joan Stone, EE-44, U.S. Department of Energy, 1000 Independence Avenue SW., Washington, DC 20585, 202-586- 5772. SUPPLEMENTARY INFORMATION: I. Introduction Background Section 155 of the Energy Policy Act of 1992 (Pub. L. 102-486) revised the legislatively mandated policies with regard to energy saving performance contracts originally set forth in sections 801-804 of National Energy Conservation Policy Act (Act). Section 801 specifically authorizes the head of a Federal agency to enter into such a contract for a term not to exceed 25 years. It also provides that such a contract contain provisions requiring the contractor to ``* * * incur costs of implementing energy savings measures, including at least the cost (if any) incurred in making energy audits, acquiring and installing equipment, and training personnel, in exchange for a share of any energy savings directly resulting from implementation of such measures during the term of the contract'' (42 U.S.C. 8287(a)(1)). In addition, the Act specifically authorizes payment of amounts required by an energy savings performance contract ``* * * only from funds appropriated or otherwise made available to the agency * * * for the payment of energy expenses (and related operation and maintenance expenses)'' (42 U.S.C. 8287a). Periodic reporting on progress by Federal agencies in modifying contract practices and in achieving energy savings under contracts is mandated by section 803 of the Act (42 U.S.C. 8287b). Definitions pertinent to sections 801-803 are set forth in section 804 of the Act (42 U.S.C. 8287c). Section 155 of the Energy Policy Act revised sections 801 and 804 of the Act by elaborating on the policies originally enacted and by requiring issuance of appropriate rules containing: (1) Methods and procedures for selecting, monitoring, and terminating energy savings performance contracts; and (2) ``substitute regulations'' for provisions of the Federal Acquisition Regulation which are inconsistent with the intent of section 801 as amended and which may be revised accordingly consistent with generally applicable procurement statutes. Such contracts, which may be for a term not to exceed 25 years, are designed to reduce the cost of energy in Federal buildings without capital investment by the building owner. Typically, the terms of such a contract provide for contractor purchase, installation, and maintenance of energy conservation measures with a guarantee of annual energy cost savings in consideration for a share of such savings. Often the contractor obtains third-party financing from a source which requires adequate assurance of repayment. ``Under these contracts, the contractor is expected to bear the risk of performance, make a significant initial capital investment, guarantee significant energy savings to the government agency, and from these savings, the agency, in effect, makes payment to the contractor.'' (1992 U.S. Code Congressional and Administrative News 2476). The Act requires that the Federal Acquisition Regulatory Council established under section 25(a) of the Office of Federal Procurement Policy Act (41 U.S.C. 421) concur in the final rule. The Federal Acquisition Regulatory Council has reviewed this notice and has no objection to the issuance of this proposed rule for the purpose of obtaining public comments. Concurrent with preparation of this proposed rule, DOE has developed model solicitations providing uniform formats and standardized contract provisions recommended for Federal agency use in energy savings performance contracts. The model or generic solicitations include some provisions that have been determined necessary to accommodate the unique nature of energy conservation services which often require third-party financing. Copies of the model solicitations will be placed in the DOE Freedom of Information Reading Room for public examination. DOE is also drafting a ``How To'' manual to provide detailed standardized guidance for Federal agency facility managers and procurement officers. The manual will cover energy savings performance contracting concepts, project development procedures and tools, acquisition planning procedures, guidelines for adapting model solicitations, and techniques and tools to administer contracts after award. The methods and procedures addressed in the model solicitations and the manual will be incorporated into DOE-sponsored training workshops. II. Examination of Substitute Regulations As noted above, section 801(b) of the Act provides that the Secretary of Energy, with the concurrence of the Federal Acquisition Regulatory Council, shall determine which existing regulations are inconsistent with the intent of section 801 and formulate ``substitute regulations'' consistent with the laws governing Federal procurement. DOE has examined certain provisions of the Federal Acquisition Regulation (FAR), which are codified at title 48 of the Code of Federal Regulations (48 CFR), and related Federal procurement laws which have been cited by private sector interests as disincentives to energy savings performance contracts. The private sector contends that these provisions increase the cost and reduce the economic feasibility and attractiveness of entering into energy savings performance contracts with Federal agencies. The following is a summary of DOE's analysis of these provisions and of the appropriateness of formulating ``substitute regulations'' in light of the direction in section 801(b) of Act. Requirement for Cost or Pricing Data A contractor is required to provide certified cost or pricing data for any negotiated contract (or contract modification) if the contract price is expected to exceed $100,000 (41 U.S.C. 254, implemented at 48 CFR subpart 15.8). The requirement for the submission of such data is intended to ``enable the Government to perform cost or price analysis and ultimately enable the Government and the contractor to negotiate fair and reasonable prices'' (48 CFR 15.804-1(a)). The FAR sets forth detailed guidance and direction on the cost elements and the breakdowns for each element which are to be furnished and certified by a prospective contractor. It also prescribes the consequences for the contractor if it is determined that ``inaccurate, incomplete, or noncurrent'' data has been provided (48 CFR 15.804-7). Since an energy savings performance contract is likely to result in payments by the Federal agency to the contractor in excess of $100,000, the requirement for certified cost or pricing data would apply unless the contract qualifies for one of the exceptions set out in the statute. The available exceptions include ``* * * exceptional cases, where the agency head determines that the requirements of this subsection may be waived and states in writing the reasons for such determination'' (41 U.S.C. 254(d)(5)(B); see also section 801(b)(1)(A) of the Act). DOE has preliminarily concluded that the requirement in 41 U.S.C. 254 for submission of certified cost or pricing data is inconsistent with the intent of section 801 and that energy savings performance contracts are an ``exceptional case'' under 41 U.S.C. 254(d)(5)(B) which warrants a waiver from the requirement. These contracts are unique in a number of ways. Under these contracts, the contractor assumes all of the risk by making the initial capital investment required to perform the contract, guaranteeing a certain level of energy savings and tying its compensation to a percentage of that guaranteed savings. Unlike traditional government contracts, payments to the contractor are based solely on the energy savings realized by the Federal agency, not on successful completion of the work or the costs incurred in performing the work. While solicitations for energy savings performance contracts may request information on a prospective contractor's estimated costs, this information will be used for limited purposes in the evaluation of proposals. The nature and extent of the cost data required under FAR Subpart 15.8 and the penalties for providing inaccurate or incomplete data appear to be inappropriate and unduly burdensome in the case of a contract under which the government incurs no real ``cost'' but merely agrees to pay the contractor out of the energy savings which result from the contractor's work. Consequently, DOE is proposing to waive the requirement for submission of certified cost or pricing data in the case of energy savings performance contracts. DOE's preliminary conclusion regarding the requirement for certified cost or pricing data is reflected in proposed Sec. 436.33. DOE is interested in public comment on the preliminary conclusions set forth above and on how the requirement for cost or pricing data impacts the economic attractiveness of energy savings performance contracting with Federal agencies. Cost Accounting Standards The requirement for contractors to comply with cost accounting standards arises from 41 U.S.C. 422(f)(2) and its implementing regulations at 48 CFR chapter 9900. The cost accounting standards statute and implementing regulations authorize exemptions for classes or categories of contractors and subcontractors from cost accounting standards requirements and also provide waiver authority for individual contracts and subcontracts. (41 U.S.C. 422(f)(4)). The Cost Accounting Standards Board has recently amended certain of its provisions, including one of the exemptions from cost accounting standards requirements (58 FR 58798, November 4, 1993). The amended provision, 48 CFR Sec. 9903.201-1(b)(15), provides an exemption from the cost accounting standards requirements for firm fixed-price contracts when the requirement for submission of certified cost or pricing data has been waived. In the Department's view, energy savings performance contracts are firm fixed-price contracts because the payment (or price) to the contractor is not subject to adjustment based solely on the contractor's cost experience in performing the contract. Consequently, the Department's proposal to waive the requirement for certified cost or pricing data (see proposed Sec. 436.33) would, if adopted in the final rule, result in an exemption for energy savings performance contracts from the requirement to comply with cost accounting standards. This exemption would apply in the case of a waiver from the requirement for certified cost or pricing data even if a Federal agency's solicitation requests some cost information from prospective contractors. Davis-Bacon Act The Davis-Bacon Act (40 U.S.C. 276a-276a-7), implemented at 48 CFR Subpart 22.4, applies to contracts in excess of $2,000 involving construction, alteration, or repair of a public building. It provides that no laborer or mechanic employed directly on the site of the work receive less than the prevailing wage rates as determined by the Secretary of Labor. The statute does not authorize any exceptions or waivers to this requirement. By limiting DOE authority under section 801(b) of the Act to promulgation of ``substitute regulations * * * consistent with the laws governing Federal procurement,'' Congress clearly indicated that it did not intend to authorize DOE regulatory exceptions to FAR provisions based on statutes which do not provide for exceptions or which have a limited list of exceptions inapplicable to energy savings performance contracts and do not authorize the regulatory creation of other exceptions. The foregoing preliminary conclusions have been influenced by this understanding of the law. Members of the public are invited to comment on those preliminary conclusions and on other FAR provisions not discussed above in which a case can be made that the regulations are likely to be a disincentive to participation by a significant number of potential energy savings performance contractors. Although not specifically required by section 801 of the Act, DOE anticipates putting a case to the Federal Acquisition Regulatory Council for amending the Federal Acquisition Regulation to incorporate special provisions for energy savings performance contracts. It is preferable for all acquisition regulations to be incorporated in the Federal Acquisition Regulation to avoid confusion. III. Section-by-Section Analysis Section 436.30 Purpose and Scope This section consists of three paragraphs. Consistent with section 801(c)(1) of the Act, the first paragraph provides that the subpart applies to energy savings performance contracts awarded within 5 years of the effective date of the rules. That paragraph also makes clear that the rules in the subpart apply notwithstanding any provisions to the contrary in the Federal Acquisition Regulation at title 48 of the CFR and any related Federal agency regulations such as the Department of Energy Acquisition Regulations (Provisions of the Federal Acquisition Regulation and agency-specific regulations dealing with subjects not covered by part 436 would continue to apply to energy savings performance contracts). A purpose of this paragraph is to ensure that contract specialists and contracting officers in Federal agencies follow a generally uniform approach which avoids confusion created by differing interpretations of existing procurement regulations. Paragraph (b) of proposed Sec. 436.30 is based on section 152 of the Energy Policy Act of 1992, which amends section 546 of the Act, 42 U.S.C. 8256, by adding a new statutory paragraph encouraging Federal agencies to participate in utility incentive programs generally available to utility customers. Proposed Sec. 436.30(b) makes clear that proposed subpart B of 10 CFR part 436 does not restrict participation in such an incentive program. Paragraph (c) of proposed Sec. 436.30 encourages Federal agencies participating in utility incentive programs to require utilities to select contractors in a competitive manner to the maximum extent practicable and allowable by law. The promotion of competition is encouraged rather than required because DOE does not have statutory authority to issue substantive rules under section 546. Section 436.31 Definitions Energy Audit Section 801(a)(2)(A) of the Act specifically requires that an energy savings performance contract include requirements for an annual energy audit after contract award. There are many methods and measuring devices or instruments that may be used to assess the energy use in buildings. The proposed rules do not mandate specific energy audit requirements or standards. Rather, they allow each Federal agency to select or negotiate reasonable energy audit procedures consistent with the Act. Energy audit requirements will also depend on the energy savings requirements and recommended energy technologies. For example, facility energy consuming systems such as Heating, Ventilating, and Air Conditioning (HVAC) systems will require more comprehensive data collection and more complex data analysis during an energy audit than will lighting systems. The energy savings performance contracting ``How To'' manual will provide numerous recommended references on energy auditing tools and techniques for Federal agency use. The definition of ``energy audit'' does not specify audit procedures which must be followed prior to contract award or subsequent to contract award for the purpose of determining energy and cost savings which are likely to result from implementation of energy conservation measures. The reason for this omission is that the proposed rules would not impose generally applicable requirements with regard to the conduct of such an audit procedure. (To the extent that guidance in this regard is needed, Federal agencies can refer to the model solicitations and the ``How To'' manual.) Mandatory rules do not seem needed because the requirement for contractors to provide a performance guarantee places proposers under a strong incentive not to overstate claims of future energy cost savings. It should also be noted that Federal agencies will soon have at their disposal the results of the energy survey of a large, representative sample of Federal buildings and facilities as required by section 550 of the Act 42 U.S.C. 8260. The energy survey data may provide a basis for evaluating technical proposals. Energy Baseline The energy baseline is the most critical and fundamental element of an energy savings performance contract. The energy baseline is used throughout the contract duration as a benchmark or reference to determine energy savings achieved as a result of the contractor's installed energy conservation measures. Energy baselines are established through energy audits conducted before facility retrofit. As indicated in the proposed definition of ``energy baseline'', such a baseline can be established using: --Historical metered data. --Engineering estimates based on calculation methods and formulas accepted and recognized by national organizations such as the American Society of Heating, Refrigeration, and Air Conditioning Engineers (ASHRAE) and the Illuminating Engineering Society (IES). --Computerized building load simulation models to predict a facility's annual energy use from detailed data input on conditions of building construction and energy consuming systems. Personal computer based load simulation models such as DOE-2 and A Simplified Energy Analysis Method (ASEAM) are available to Federal agencies. --Statistical regression analysis models. A regression analysis model depicts the statistical relationship between energy consumption and factors on which consumption is dependent, such as weather and facility occupancy. The model is in the form of a mathematical equation that expresses energy consumption as a function of those factors that best explain amounts of historical energy use. The regression model uses current values of energy use factors to predict facility energy use that would have occurred without the energy savings performance services. All energy savings performance contracts should include a procedure for adjusting energy baselines during the contract term. Facility energy utilization is dynamic and over a multiyear contract (5-10 years or more) can be expected to change due to causes not attributed to contractor energy conservation measures. For example, during an energy savings performance contract, the contracting agency retains the right to use its facilities as required to meet its mission. This right may result in changes from initial baseline conditions due to different facility use or occupancy or the addition or removal of energy- consuming equipment. Some baseline methods, such as statistical regression models, are designed to adjust baselines if changes occur in occupancy or other such factors on which the baseline is dependent. However, all contingencies cannot reasonably be anticipated. Therefore, solicitations should incorporate a provision that triggers negotiations and equitable adjustments of initial energy baselines if Government- caused changes affect total baseline energy use by more than1 percent. Although the proposed definition of ``energy baseline'' describes appropriate alternative methods for establishing a baseline, the proposed rules do not set forth specific requirements for selecting a method to be used in a particular energy savings performance contract. The choice is left to agency discretion. Since the development of a baseline is dependent on available agency data, energy savings requirements, and recommended energy technologies, Federal agencies are provided discretion on selecting appropriate baseline approach and adjustment procedures. As with energy audit techniques, energy consuming systems such as HVAC systems will require more comprehensive data collection and complex data analysis to develop an accurate energy baseline or baseline adjustment method than will lighting systems. The energy savings performance contracting ``How To'' manual will expand on selection of appropriate baseline methods and adjustment procedures that meet agency- and project-specific requirements and will discuss the advantages and disadvantages of each approach. The model solicitations also provide agency guidance on incorporating facility and energy baseline data and requirements into energy savings performance contract documents. Energy Conservation Measure This definition tracks the statutory definition in section 549 of the Act 42 U.S.C. 8259. Energy Cost Savings The definition of this term is consistent with the definition of ``energy savings'' in paragraph (c)(2) of section 804 of the Act. Adding the word ``cost'' to the statutory term helps to clarify its use in other sections of the proposed rule as referring to monetary savings as distinguished from savings in units of energy. ``Related operations and maintenance expenses'' is added to this definition to conform with section 802 of the Act, which allows payments to contractors from funds made available for ``energy expenses (and related operations and maintenance expenses).'' Section 436.32 Qualified Contractor List Paragraph (a) of proposed Sec. 436.32 provides for DOE requests for statements of qualifications on questionnaires provided by DOE. Consistent with section 801 of the Act, the first questionnaire would request from the firm information regarding prior experience, capabilities to perform types of energy savings services, and financial and project performance information. On the basis of the project performance information received from the firm, DOE will send a second questionnaire in the nature of a standard letter to at least three clients who received energy savings services. The first questionnaire is likely to ask the following questions: 1. General Information (a) Name and address of firm: (b) Telephone No.: FAX No.: (c) Indicate type of firm: ____ Partnership ____ Corporation ____ Sole proprietor ____ Branch Office of ________ ____ Joint Venture (List venture partners)________ ____ Other (Explain) ________ (d) This submittal applies to: [ ] Parent Company [ ] Division [ ] Subsidiary [ ] Branch Office List any Division or Branch Offices which are to be included in the Prequalification process (attach separate list if more than one is included). (e) Names and titles of two people authorized to represent the firm (f) Federal Employer Identification Number (g) Year firm was established (h) Name and address of parent company (if applicable) (i) Indicate previous names of firm: ____________ (j) Identify associates and/or subcontractor(s) that you plan to utilize for Federal Energy Savings Performance Contracts projects. If your firm is using an associate and/or subcontractor(s), explain the functions of both your firm and your associate and/or subcontractors (such as project management, technical/engineering services), construction, and maintenance services and the financial responsibilities of each firm. (k) Has your firm been competitively selected by a Utility Company under a Demand-Side Management Bidding program to provide conservation services for commercial and industrial customers? Yes ____ No ____ If yes, please designate the utility and provide pertinent information. ---------------------------------------------------------------------- (l) Provide a 5-year summary of contract values for energy-related services your firm provided (insert appropriate index number). ---------------------------------------------------------------------------------------------------------------- Year Index Index No. Range of contract values ---------------------------------------------------------------------------------------------------------------- 19____.............................................. 1 Less than $100,000. 19____.............................................. 2 $100,000-$250,000. 19____.............................................. 3 $250,000-$500,000. 19____.............................................. 4 $500,000-$1 Million. 19____.............................................. 5 $1 Million-$2 Million. 6 $2 Million-$5 Million. 7 $5 Million-$10 Million. 8 $10 Million or greater. ---------------------------------------------------------------------------------------------------------------- (m) Indicate the largest dollar value of investment your firm would consider for a Federal Government ESPC contract. (n) Indicate the regions of the country your firm would consider providing Federal ESPC services. [ ] Region 1--(CT,ME,NH,VT,MA,RI) [ ] Region 2--(NY,NJ) [ ] Region 3--(MD,DE,VA,WV,DC,PA) [ ] Region 4--(FL,GA,KY,MS,NC,SC,TN,AL) [ ] Region 5--(IL,IN,MI,MN,OH,WI) [ ] Region 6--(AR,LA,NM,OK,TX) [ ] Region 7--(IA,KS,MO,NE) [ ] Region 8--(CO,MT,ND,SD,UT,WY) [ ] Region 9--(CA,AZ,NV,HI) [ ] Region 10--(WA,OR,AK) [ ] All Regions [ ] Territories [ ] Exceptions (specify) ____________ 2. Experience (a) List and briefly describe at least three of the largest projects completed by your firm that have been operating and saving energy for at least 2 years and that best illustrate your range of experience relative to energy performance contracting and energy management expertise (i.e., type of technologies implemented). For each project provide information on the following items: (1) Project title and location. (2) Person to contact regarding the project, his or her position, address, and telephone number. (3) Identify if project was for public or private sector. (4) Briefly describe the facility including function, number of buildings, and size in square feet. (5) Total contract amount. (6) Type of financing arranged by your organization. (7) Type and term of contract. (8) Identify the major types of work implemented and if your firm or subcontractors did the work. (9) Starting and ending dates. (10) Indicate if the project was completed on schedule. If not, explain. (11) Projected 12-month energy savings for each project. (12) Identify performance guarantees, if performance-based energy service contract. (13) Actual annual energy savings achieved for each project. (14) Firm notes on project. (b) Indicate the number of years in business as an Energy Management Contractor: ______ years. Indicate all other names for your organization and the length of time your organization had that name. 3. Technical Capability List the technologies (e.g., lighting; HVAC systems, etc.) which your firm may propose to apply to a building or facility to implement energy conservation measures under an energy savings performance contract. 4. Available Staff (a) Indicate the experience in energy management and energy conservation services of those persons in your firm or subcontracting firm(s) you are intending to utilize on projects. (b) List all professional and skilled trades which your firm customarily performs with its own employees. 5. Financial Status (a) List all legal or administrative proceedings currently pending or concluded adversely against your firm within the last 5 years which relate to procurement or performance of any public or private construction contracts. (b) Disclose whether your firm (or its predecessors, if any) has been insolvent or declared to be in bankruptcy within the past 5 years. (c) Indicate whether your firm has been debarred by the Federal Government and provide explanation. The second questionnaire would request project-specific information from at least three of the firm's clients, which the firm identified on the first questionnaire. The questions in the second questionnaire are likely to be as follows: 1. Was the project completed on schedule? 2. Did contract involve energy savings performance guarantees? If so, describe performance guarantees (e.g., annual energy or cost savings). 3. Did installed project achieve energy savings projected or guaranteed by contractor? 4. Was the method(s) used by the contractor to determine annual energy savings acceptable for the type of energy conservation measures installed? 5. Did contractor provide operations, maintenance, and repair services as part of contract? 6. Did contractor arrange a utility demand-side management rebate? 7. What was the capital investment in the energy project? ______ Was capital investment financed by contractor or third party? 8. Provide an overall rating of the quality and timing of services provided by the contractor. If your answers to questions 1-5 were all affirmative, please briefly explain your reasons for giving a ``Fair'' or ``Poor'' rating, as applicable. [ ] Excellent--Exceeded expectations, highly recommend contractor. [ ] Good--Met all requirements, recommend contractor. [ ] Fair--Achieved project objective, room for improved quality and performance. [ ] Poor--Shortfall in performance and quality, would not recommend. Members of the public are invited to comment on the adequacy of the foregoing questions for inclusion in these questionnaires. DOE would be interested in specific suggestions for substituting or adding questions to elicit information to be used in distinguishing between firms minimally qualified to compete for contract awards and those which are not qualified. Paragraph (a) of proposed Sec. 436.32 also provides for annual notices in the Commerce Business Daily to invite submission of new or updated statements of qualification. DOE considered allowing potential contractors to submit a statement of qualifications at any time. DOE did not propose language to this effect in order to avoid undue administrative burden and unnecessary confusion with regard to the status of the list at any moment in time. Paragraph (b) of proposed Sec. 436.32 contains the proposed evaluation criteria for determining which firms are included on the qualified list. These proposed criteria represent minimum qualifications. Consistent with the competitive procedures under proposed section 436.33, DOE anticipates that in many cases more than one contractor from the qualified list will submit technical and price proposals which will be comparatively evaluated to determine the best proposal. The evaluation criteria are quantitative and qualitative in nature. An example of a quantitative criterion is a record of energy savings performance contract services for not less than three clients with a minimum of two years of energy cost savings for each contract. DOE would be interested in comments as to whether this criterion would eliminate too many potential applicants. DOE may reword this criterion in the final rule so that the experience would relate to installation of energy conservation measures. An example of a qualitative criterion is that the firm possesses, or may subcontract for, the personnel with adequate project experience consistent with the range of technologies it may apply. Members of the public are invited to compare the list of evaluation criteria with the questions asked on the questionnaire, which are set forth above. DOE would be especially interested in comments on the adequacy of the criteria to distinguish those firms which are minimally qualified from those which should not be invited to compete for contract awards or submit unsolicited proposals. Paragraph (c) of proposed Sec. 436.32 states the general policy, drawn from the statutory language in section 801 of the Act, that other Federal agencies may develop their own qualified lists as long as they use the same procedures that DOE uses for developing its list. The only exception to this general policy is for the Department of Defense. Authority to develop a qualified list of firms was previously provided to the Department of Defense under 10 U.S.C. 2865. The exception in paragraph (c) of proposed Sec. 436.32 would recognize the authority of the Department of Defense to award contracts to firms which have been competitively selected by a utility without regard to whether such a firm is on a qualified list. Section 436.33 Procedures and Methods for Contractor Selection The first two paragraphs of proposed section 436.33 set forth the procedures and methods for selecting energy savings performance contractors from a qualified list by a Federal agency under the Act. Section 801(b)(2)(B) states that Federal agencies are required to use a qualified list if it is available. The third paragraph recognizes the authority of the Department of Defense under 10 U.S.C. 2865(c)(2)(B) to provide for direct negotiation of energy savings performance contracts with firms competitively selected by a utility. Paragraph (a) of proposed Sec. 436.33 would provide procedures for competitive solicitation and selection of contractors. With respect to a particular proposed energy savings project (which may consist of any number of contiguously related buildings and facilities), a Federal agency would be required to solicit ``intent to propose'' statements from firms on the qualified list who may be interested in proposing. Typically, a firm responding with an ``intent to propose statement'' will have had the opportunity for a walkthrough energy survey of candidate buildings and facilities. Paragraph (a)(1) further would provide for a Federal agency to request technical and price proposals from firms who respond with ``intent to propose statements''. DOE anticipates that often competitive negotiations with firms in the competitive range would then occur. Proposed paragraph (a)(3) would authorize a selection based on the evaluation of technical and price proposals and other relevant information (such as data submitted when applying for inclusion on a qualified list). The paragraph would not require a selection if a Federal agency has reason to abandon a potential project. However, if a Federal agency is inclined to make a selection, the paragraph would state the exclusive basis on which a selection should be made. Proposed paragraph (a)(4) also provides a selection process designed for an energy savings project which involves a large facility with many contiguously related buildings and other structures at one site. In this case, it does not seem cost-effective or practical, from either the agency's or the competing firms' perspective, to require technical and price proposals on each building prior to selection of a firm. All but the largest firms would be disinclined to compete for an energy savings project of this magnitude if they were expected to prepare proposals (including conducting energy audits) for each and every structure on the site prior to selection. Rules promoting such a result would be inconsistent with section 801(b)(1)(A), which requires procedures to select energy service contractors that will achieve the intent of the Act in a cost-effective manner (42 U.S.C. 8287(b)(1)(A)). Therefore, DOE is proposing that when an energy savings project involves the type of facility described above, the Federal agency may request technical and price proposals for a ``representative sample'' of the buildings and structures at the facility site. The proposed rule does not define ``representative sample'' and would leave further definition to agency discretion on a case-by-case basis. Members of the public are invited to comment on this choice and to offer a definition which would limit agency discretion. Based on its evaluation of the proposals submitted, the agency may select a firm to conduct the project. After selection, the agency may request technical and price proposals from the selected firm for any or all of the remaining buildings and structures that constitute the facility. Based on its evaluation of these proposals, the agency may decide to contract with the selected firm to provide energy savings services for any, all, or none of the remaining buildings or structures. The word ``may'' is used in paragraph (a)(5) because the paragraph states what a Federal agency is authorized to do and not what it is required or mandated to do. There may be circumstances in which a Federal agency will decide, with respect to a large facility, that it is preferable to make separate competitive awards or acquire energy conservation services in some other way 10 U.S.C. 2865(b)(2)(8). For example, the proposer selected on the basis of the representative sample may submit an unreasonable price proposal for the balance of the structures. Another example would be a facility in which some of the energy sources are separately metered. DOE believes that this process will facilitate energy savings performance contracting in the case of large facilities composed of a number of buildings and structures which serve different purposes or uses (e.g., a medical complex) while preserving the benefits of competition. In this type of situation, competing and selecting contractors on a building-by-building basis seems impractical and potentially problematic. Even though there may be a number of distinct buildings or structures on a site, it may be more effective from an energy efficiency/conservation perspective to treat these structures as one unit or system in planning and designing energy savings services. Consequently, from the Federal agency's viewpoint, the selection of a single firm to provide such services for the entire facility might appear to be the more practical and effective approach. The scope of the energy savings project will be clearly defined at the beginning of the competitive process so that competing firms will be aware of the magnitude of the project. The Federal agency's interest will be protected because the selected firm will not be guaranteed a contract covering those buildings or facilities not included within the representative sample. Firms interested in competing for a project of this size, however, will not be deterred from proposing because of excessively prohibitive proposal preparation costs. DOE invites public comment on this proposed process and is especially interested in ideas and suggestions to facilitate energy savings performance contracting for those situations involving multi- building facilities. Based on the provision of section 801 of the Act authorizing receipt of unsolicited proposals from qualified firms, DOE is proposing in paragraph (b) of section 436.33 the procedure to be followed in dealing with such proposals. If an unsolicited proposal had merit, the Federal agency would have to publish notice in the Commerce Business Daily acknowledging receipt and inviting other firms on a qualified list to submit competing proposals. In order for an unsolicited proposal to have merit, there would have to be ``adequate'' technical and price components. It is explicitly stated that the evaluation of competing proposals would be based on the same factors described in paragraph (a)(4) as the basis for making a competitive selection from among proposals that had been solicited. Paragraph (b) concludes with a statement precluding a Federal agency from basing an award on an unsolicited proposal if it is planning or acquisition through a solicitation from among firms on a qualified list. Paragraph (c) of proposed Sec. 436.33 would provide an exception to the foregoing policies for competitive selections and for dealing with unsolicited proposals. The exception would apply to the Department of Defense under 10 U.S.C. 2865 and recognizes that Department's authority to select energy savings performance contractors on the basis of competitive selection by a utility rather than on the basis of the methods described in proposed paragraphs (a) and (b). Paragraph (d) of proposed Sec. 436.33 deals with cost accounting standards applicable to energy savings performance contractors. The rationale for paragraph (d) is described above in the portion of this ``Supplementary Information'' concerning ``substitute regulations.'' Section 436.34 Standard Terms and Conditions Proposed Sec. 436.34 sets forth requirements for standard terms and conditions which are unique to energy savings performance contracts. Paragraph (a) deals with contractors who are financing the acquisition of energy conservation measures through a secured loan or a lease- acquisition. It is designed to protect the interests of the Federal agency and the financing source in the event of default by the contractor on the energy savings performance contract or of failure by the contractor to make timely payments pursuant to a secured loan or lease-acquisition agreement. It would require a Federal agency to ensure that an energy savings performance contract contains a clause authorizing a contracting officer to require a contractor to assign both the rights and responsibilities of the contract to a willing and able financing source. The clause would allow the contracting officer the discretion not to require such an assignment in appropriate circumstances such as an unwilling or unable financing source. The paragraph presumes that a Federal agency would notify a financing source in the event of default on the contract and that the financing source would notify the Federal agency in the event of contractor failure to cure lack of timely payments. Proposed paragraph (b) would require a clause authorizing modification, replacement, or change in equipment at no cost to the Federal agency and with prior notification and approval by the contracting officer. Proposed paragraph (c) would require a contract clause specifying the final disposition of title to systems and equipment. Proposed paragraph (d) would require prior approval by the contracting officer of any financing agreements including amendments to applicable pre-existing agreements. The previously described provisions in proposed Sec. 436.34 are based on clauses currently in use by the Army. Specific clauses are included in the model solicitations. DOE is not proposing rules requiring that Federal agencies use standard clauses because it is desirable to maintain some flexibility to take into account unique facts and circumstances. Section 436.35 Funding Paragraph (a) of proposed Sec. 436.35 restates the statutory requirement, established by section 802 of the Act, that payments under energy savings performance contracts may be made only from funds available for the payment of energy costs and related operations and maintenance expenses. Paragraph (b) implements section 801(a)(2)(B) of the Act. It requires that the total cost for energy savings performance contract services and utilities, after the contract is in place, may not exceed the cost estimated by the Federal agency for all energy and related operations and maintenance expenses without the energy savings performance contract in place. The energy baseline, adjusted for changes in initial baseline conditions (if any), indicates the energy the agency would have consumed without an energy savings performance contract. To determine the agency cost of energy without an energy savings performance contract under paragraph (b), the Federal agency would have to multiply the current unit energy rates by the current annual energy baseline and add the operations and maintenance cost avoidance for related utility or energy consuming systems which the contractor assumes (if any). The current annual energy baseline is derived using the baseline method and adjustment procedure established in the energy savings performance contract. Federal agencies should use the above procedure to prepare annual utility budgets, since the budget should, at minimum, include annual estimates of: purchased utilities; all costs to generate and distribute energy from Federal power production facilities; related operations and maintenance expenses; and scheduled annual payments for energy savings performance services. Paragraph (c) tracks the wording of paragraph (a)(2)(C) of section 801, which authorizes a Federal agency to incur multiyear obligations to pay a contractor for guaranteed savings pursuant to an energy savings performance contract as long as those savings ``exceed debt service requirements.'' All versions of the model solicitations include a provision which provides that payments for contracted energy savings services commence only upon inspection and acceptance of the contractor's energy conservation measures and accrual of energy and related operations and maintenance savings. Therefore, a Federal agency would not provide advance payments for the contractor's recovery of its capital costs. Such an advance payment is precluded by the statutory language. Given coverage in the model solicitations, there is no need to restate the proposition in regulatory language. Paragraph (d) implements paragraph (a)(2)(B) of section 801, which requires that energy savings performance contracts provide for a guarantee of savings to the agency and establish payment schedules to reflect that guarantee. Included in such payment schedules are financing charges incurred by the contractor. Ordinarily, ``interest and other financial costs'' are unallowable costs under the Federal Acquisition Regulation (48 CFR 31.205-20). However, that regulatory provision is inapplicable to energy savings performance contracts because paragraph (a)(2)(C) of section 801 provides for obligations to pay for ``debt service requirements'' and thus clearly contemplates the role third-party financing may play in energy savings performance contracts. Since financing charges are normally an essential aspect of financing, it is only reasonable for payment schedules to reflect such charges. Paragraph (e) tracks the language of subsection (a)(2)(D) of section 801 of the Act, which sets forth specific conditions upon which Federal agencies are authorized to enter into multiyear energy savings performance contracts, without funding total contract costs or cancellation charges inherent in multiyear contracts. Specific conditions of the multiyear contracting authority for energy savings performance are: (1) The contract was awarded competitively using procedures established in this proposed rule; (2) Funds are available and adequate to cover contractor payments (if any) for energy savings estimated and scheduled to occur during the first fiscal year of the contract period; (3) Thirty (30) days prior to awarding an energy savings performance contract, the agency head notifies appropriate authorization and appropriations committees, if the contract includes a clause establishing a proposed cancellation ceiling in excess of $750,000. Cancellation charges represent the maximum liability the Government assumes in the event the energy savings performance contract is terminated for the convenience of the Government, or the utility funds are not made available to the agency in a future fiscal year, which would result in cancellation of all remaining years of the contract; and (4) The contract is governed by and contains applicable multiyear contract provisions found in 48 CFR subpart 17.1. Subpart 17.1 provides policy and guidance on applicability of multiyear contracting provisions for a variety of contract types. The model solicitations provide guidance on using multiyear provisions in 48 CFR Subpart 17.1 and establishing the cancellation ceiling for the energy savings performance contract. Section 436.36 Procedures and Methods to Monitor Contracts Section 801(a)(2)(A) of the Act provides that energy savings performance contracts shall require an annual energy audit. Post- installation and annual energy audits are intended to verify contractor compliance with annual energy savings performance guarantees. As pointed out earlier when discussing the definition of the term ``energy audit,'' such audits and energy baselines are techniques used to measure and determine energy savings performance attributable to energy conservation measures installed under energy savings performance contracts. The energy audits should not involve qualitative judgments by the auditors; moreover, the proposed rule would promote objectivity by providing for the agency to perform audits, or to approve an independent consultant selected and paid by the contractor. It does not appear appropriate to require agency audits only because section 801(a)(1) of the Act indicates auditing may be an allowable cost. Public comments are invited on the wisdom of allowing the contractor to select and pay the consultant to conduct its audit. The specific audit and baseline methods selected for an energy savings performance contract are based on project specific characteristics. The ``How To'' manual and model solicitations provide guidance for agencies to adapt energy audit and energy baseline contract requirements to meet the project-specific needs. Section 436.37 Procedures and Methods to Terminate Contracts Proposed Sec. 436.37 addresses procedures related to terminating energy savings performance contracts, which generally occurs under two conditions: (1) when the Government exercises its right to terminate for convenience; or (2) when the Government terminates for default (i.e., contractor nonperformance). Termination for Convenience Energy savings performance contracts are multiyear contracts and, as discussed previously, incorporate cancellation ceilings for each year of the contract which reflect the contractor's incurred costs prior to receiving payments for energy cost savings. In the event of a termination for convenience, the Government must cancel any remaining years of the contract. The maximum termination liability is established by the cancellation ceilings, for each contract year, set forth in the contract pursuant to multiyear contract provisions of 48 CFR subpart 17.1. Termination for Default An energy savings performance contract includes energy savings performance guarantees to be provided by the contractor. In the event the contractor is unable to meet the contract performance guarantees, the Government may exercise its right to terminate for default due to nonperformance of the contractor. Such action to terminate for default shall be pursuant to Federal Acquisition Regulation Part 49. The Government, however, may elect to take title to, and acquire from, the contractor any equipment or energy conservation measures which may be in the Government's best interest. For equipment the Government elects to acquire, the Government shall provide compensation based on incurred costs less payments made prior to termination pursuant to termination provisions in 48 CFR Part 49. The model solicitations include provisions which address title to installed equipment, cancellation ceilings, and contract termination. DOE does not believe that there is a need for detailed regulations with regard to termination procedures, and the proposed rules would allow Federal agency discretion in applying termination procedures based on model solicitation guidance. IV. Procedural Requirements (a) Review Under Executive Order 12866 Today's regulatory action has been determined to be a ``significant regulatory action'' under Executive Order 12866, ``Regulatory Planning and Review,'' 58 FR 51735 (October 4, 1993). Accordingly, it was subject to review by the Office of Information and Regulatory Affairs (OIRA). OIRA completed its review without requesting any substantive changes. (b) Review Under the Regulatory Flexibility Act The proposed rules were reviewed under the Regulatory Flexibility Act of 1980, Pub. L. 96-354, which requires preparation of a regulatory analysis for any rule which is likely to have significant economic impact on a substantial number of small entities. DOE certifies that these rules will not have a significant economic impact on a substantial number of small entities and, therefore, no regulatory flexibility analysis has been prepared. (c) Review Under the Paperwork Reduction Act New information collection requirements subject to the Paperwork Reduction Act, 44 U.S.C. 3501, et seq., or recordkeeping requirements are proposed by this rulemaking. Accordingly, this notice has been submitted to the Office of Management and Budget for review and approval of the paperwork requirements. Earlier in this notice, DOE described two questionnaires proposed for use under the rule. The first involved a contractor's qualifications for inclusion on the qualified contractors list. The second would be directed at clients of a contractor applicant for inclusion on the list in order to obtain project specific information with regard to the client's experience with the contractor. The information DOE proposes to collect on the above-described questionnaires is necessary to determine whether a contractor is adequate, experienced and reliable to be placed on the qualified contractors list. DOE believes that in the typical case the frequency of response will be once every 12 months. After the initial application is filed, a successful contractor would only have to update information which might have changed during the interim. The public reporting burden is estimated to average less than two hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data, needed, and completing and retrieving the collection of information. (d) Review Under the National Environmental Policy Act Pursuant to the Council on Environmental Quality Regulations (40 CFR part 1500-1508), the Department of Energy has established guidelines for its compliance with the provisions of the National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 4321, et seq.). Pursuant to appendix A of subpart D of 10 CFR part 1021, National Environmental Policy Act Implementing Procedures (57 FR 15122, 15152, April 24, 1992) (Categorical Exclusion A6), the Department of Energy has determined that these proposed rules are categorically excluded from the need to prepare an environmental impact statement or environmental assessment. (e) Review Under Executive Order 12612 Executive Order 12612, 52 FR 41685 (October 30, 1987), requires that regulations, rules, legislation, and any other policy actions be reviewed for any substantial direct effects on States, on the relationship between the National Government and the States, or in the distribution of power and responsibilities among various levels of Government. If there are sufficient substantial direct effects, then the Executive Order requires preparation of a federalism assessment to be used in all decisions involved in promulgating and implementing a policy action. These proposed rules will revise certain policy and procedural requirements applicable only to Federal contracts. Therefore, the Department of Energy has determined that these proposed rules will not have a substantial direct effect on the institutional interests or traditional functions of States. (f) Review Under Executive Order 12778 Section 2 of Executive Order 12778 instructs each agency to adhere to certain requirements in promulgating new regulations and reviewing existing regulations. These requirements, set forth in section 2(a) and (b)(2), include eliminating drafting errors and needless ambiguity, drafting the regulations to minimize litigation, providing clear and certain legal standards for affected legal conduct, and promoting simplification and burden reduction. Agencies are also instructed to make every reasonable effort to ensure that the regulation: Specifies clearly any preemptive effect, effect on existing Federal law or regulation, and retroactive effect; describes any administrative proceeding to be available prior to judicial review and any provisions for the exhaustion of such administrative proceedings; and defines key terms. DOE certifies that these proposed rules meet the requirements of section 2(a) and (b) of Executive Order 12778. V. Opportunities for Public Comment Written Comments Interested persons are invited to participate in this rulemaking by submitting data, views, or comments with respect to the proposed rulemaking. Six copies of written comments should be submitted to the address indicated in the ADDRESSES section of this notice. Comments should be identified on the outside of the envelope and on the documents themselves with the designation ``Energy Savings Performance Contracts; Notice of Proposed Rulemaking, Docket No. EE-RM-94-201''. In the event any person wishing to provide written comments cannot provide six copies, alternative arrangements can be made in advance with DOE. All comments received will be available for public inspection as part of the administrative record on file for this rulemaking in the Department of Energy Freedom of Information Office Reading Room, 1E- 090, Forrestal Building, 1000 Independence Avenue, SW., Washington, DC 20585, 202-586-6020, between 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. Any person submitting information which that person believes to be confidential and which may be exempt by law from public disclosure, should submit one complete copy, as well as two copies from which the information claimed to be confidential has been deleted. DOE reserves the right to determine the confidential status of the information and to treat it accordingly under 10 CFR 1004.11. Public Hearing Request to Speak Procedures A public hearing on the proposed rule will be held at 9:30 a.m. on May 17, 1994 in room 1E-245 of the Forrestal Building, 1000 Independence Avenue, SW., Washington, DC 20585. Any person who has an interest in the proposed rule or who is a representative of a group or class of persons who has an interest in the proposed rule may request an opportunity to make an oral presentation. A request to speak at the public hearing should be addressed to the address or phone number indicated at the beginning of this notice. The person making the request should briefly describe his or her interest in the proceedings and, if appropriate, state why the person is a proper representative of a group. The person should also provide a phone number where he or she may be reached during the day. Six copies of the speaker's statement should be brought to the hearing. In the event any person wishing to testify cannot meet this requirement, alternative arrangements can be made in advance. Conduct of the Hearing DOE reserves the right to select persons to be heard at the hearing, to schedule their respective presentations, and to establish procedures governing the conduct of the hearing. The length of each presentation will be limited to 10 minutes or based on the number of persons requesting an opportunity to speak. A DOE official will preside at the hearing. This will not be a judicial or evidentiary-type hearing. It will be conducted in accordance with 5 U.S.C. 553 and section 501 of the Department of Energy Organization Act, 42 U.S.C. 7191. Questions may be asked only by those conducting the hearing. At the conclusion of all initial oral statements, each person who has made an oral statement will be given the opportunity to make a rebuttal or clarifying statement. The statements will be given in the order in which the initial statements were made and will be subject to time limitations. Any further procedural rules needed for the proper conduct of the hearing will be announced by the presiding officer. A transcript of the hearing will be made by DOE and made available as part of the administrative record for this rulemaking. It will be on file for inspection at the DOE Freedom of Information Reading Room, Forrestal Building, 1000 Independence Ave, SW., Washington, DC 20585, between the hours of 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. Any person may purchase a copy of the transcript from the hearing reporter. If DOE must cancel the public hearing, DOE will make every effort to publish an advance notice of such cancellation in the Federal Register. Actual notice of cancellation will also be given to all persons scheduled to speak. The hearing date may be canceled in the event no member of the public requests the opportunity to make an oral presentation. List of Subjects in 10 CFR Part 436 Energy conservation; Federal buildings and facilities; Reporting and recordkeeping requirements; and Solar energy. Issued in Washington, DC on this 5th day of April 1994. Christine A. Ervin, Assistant Secretary, Energy Efficiency and Renewable Energy. For the reasons set forth in the preamble, part 436 of title 10, Subchapter D of the Code of Federal Regulations is proposed to be amended as set forth below: PART 436--FEDERAL ENERGY MANAGEMENT AND PLANNING PROGRAMS 1. The authority citation for part 436 is revised to read as follows: Authority: 42 U.S.C. 6361, et seq.; 42 U.S.C. 8251, et seq.; 42 U.S.C. 8287, et seq. 2. Section 436.2 is amended by removing the word ``and'' after the semicolon at the end of paragraph (b), redesignating paragraph (c) as paragraph (d), and adding a new paragraph (c) as follows: Sec. 436.2 General objectives. * * * * * (c) To promote the use of energy savings performance contracts by Federal agencies for implementation of privately financed investment in building and facility energy conservation measures for existing Federally owned buildings; and * * * * * 3. New subpart B, consisting of Secs. 436.30 through 436.37 is added to read as follows: Subpart B--Methods and Procedures for Energy Savings Performance Contracting Sec. 436.30 Purpose and scope. 436.31 Definitions. 436.32 Qualified contractors lists. 436.33 Procedures and methods for contractor selection. 436.34 Standard terms and conditions. 436.35 Funding. 436.36 Procedures and methods to monitor contracts. 436.37 Procedures and methods to terminate contracts. Subpart B--Methods and Procedures for Energy Savings Performance Contracting Sec. 436.30 Purpose and scope. (a) General. This subpart provides procedures and methods which apply to Federal agencies with regard to the award and administration of energy savings performance contracts awarded within 5 years of the effective date of these rules unless the period of effectiveness is extended by law. This subpart applies in addition to the Federal Acquisition Regulation at Title 48 of the CFR and related Federal agency regulations. The provisions of this subpart are controlling with regard to energy savings performance contracts notwithstanding any conflicting provisions of the Federal Acquisition Regulation and related Federal agency regulations. (b) Utility incentive programs. Nothing in this subpart shall preclude a Federal agency from-- (1) participating in programs to increase energy efficiency and for water conservation or the management of electricity demand conducted by gas, water, or electric utilities and generally available to customers of such utilities; (2) accepting financial incentives, goods, or services generally available from any such utility, to increase energy efficiency or to conserve water or manage electricity demand; (3) entering into negotiations with electric, water, and gas utilities to design cost-effective demand management and conservation incentive programs to address the unique needs of each Federal agency. (c) Promoting competition. Under paragraph (b) of this section and to the extent allowed by law, Federal agencies are encouraged to require utilities to select contractors in a competitive manner to the maximum extent practicable. Sec. 436.31 Definitions. As used in this subpart-- Building means any closed structure primarily intended for human occupancy in which energy is consumed, produced, or distributed. DOE means Department of Energy. Energy audit means a procedure conducted to determine the energy and cost savings which are likely to result or which have resulted from implementation of energy conservation measures. Energy Baseline means the amount of energy that would be consumed annually without implementation of energy conservation measures based on historical metered data, engineering calculations, building load simulation models, statistical regression analysis, or some combination of these methods. Energy conservation measures means measures that are applied to an existing Federally owned building or facility that improve energy efficiency, are life-cycle cost-effective under Subpart A of this part, and that involve energy conservation, cogeneration facilities, renewable energy sources, improvements in operations and maintenance efficiencies, or retrofit activities. Energy cost savings means a reduction in the cost of energy and related operations and maintenance expenses, from a base cost established through a methodology set forth in an energy savings performance contract, utilized in an existing federally owned building or facility as a result of-- (1) The lease or purchase of operating equipment, improvements, altered operation and maintenance, or technical services; or (2) The increased efficient use of existing energy sources by cogeneration or heat recovery excluding any cogeneration process for other than an existing Federally owned building or facilities. Energy savings means the determination, in electrical or thermal units (e.g., kilowatt hour (kwh), kilowatt (kw), or British thermal unit (Btu)), of the reduction in energy use or demand by comparing consumption or demand, after completion of contractor-installed energy conservation measures, to an energy baseline established in the contract. Energy savings performance contract means a contract which provides for the performance of services for the design, acquisition, installation, testing, operation, and where appropriate, maintenance and repair of an identified energy conservation measure or series of measures at one or more locations. Facility means any structure not primarily intended for human occupancy or any contiguous group of structures and related systems either of which produces, distributes, or consumes energy. Federal agency has the meaning given such term in section 551(1) of title 5, United States Code. Secretary means the Secretary of Energy. Sec. 436.32 Qualified contractors lists. (a) DOE may prepare a list, to be updated annually, of firms qualified to provide energy savings performance services. The list shall be prepared from statements of qualifications by or about firms engaged in providing energy savings performance contract services on questionnaires obtained from DOE. Such statements shall, at a minimum, include prior experience and capabilities of firms to perform the proposed types of energy savings services and financial and performance information. DOE shall issue a notice annually, for publication in the Commerce Business Daily, inviting new or updated statements of qualifications. (b) On the basis of statements of qualifications received under paragraph (a) of this section and any other relevant information, DOE shall select a firm for inclusion on the qualified list if-- (1) It has provided energy savings performance contract services for not less than three clients with a minimum two years of energy savings for each contract; (2) All previous project clients contacted provide ratings which exceed ``poor''; (3) The firm and proposed associates and subcontractors identified in the questionnaire possess the project experience, qualifications, and breadth of skills appropriate to successfully implement the technologies which the firm may propose to provide; (4) The firm or any principal of the firm has not declared bankruptcy within the last 5 years; (5) The firm or principal of the firm is not on the list of parties excluded from procurement programs under 48 CFR subpart 9.4; and (6) There is no other adverse information which warrants the conclusion that the firm is not minimally qualified. (c) Except as provided by 10 U.S.C. 2865(c)(2)(A), a Federal agency shall use DOE's list unless it elects to develop its own list of firms qualified to provide energy savings performance services consistent with the procedures in paragraphs (a) and (b) of this section. (d) A firm not designated by DOE or a Federal agency pursuant to the procedures in paragraph (a) and (b) of this section as qualified to provide energy savings performance services shall receive a written decision and may request a debriefing from a DOE official. Review of such a decision shall be conducted in accordance with procedures developed by the Board of Contract Appeals of the General Services Administration. (e) Notwithstanding the procedures in this section with regard to annual updating, if the Board of Contract Appeals of the General Services Administration reverses or remands a Federal agency decision determining that a firm is not qualified, the Federal agency shall add the firm to its qualified list as appropriate either upon receipt of the Board's decision or, if the Federal agency decides to appeal, after the decision is upheld finally upon judicial review. (f) The filing of an appeal with the Board of Contract Appeals shall not stay the decision of a Federal agency to issue a new or updated list of qualified contractors or to use that list in accordance with this subpart. Sec. 436.33 Procedures and methods for contractor selection. (a) Competitive selection. Competitive selections based on solicitation of firms on a qualified list are subject to the following procedures-- (1) With respect to a particular proposed energy savings performance project, Federal agencies shall request the submission of ``intent to propose'' statements from all firms on the list who may be interested in proposing. (2) From those firms submitting ``intent to propose'' statements, Federal agencies shall request technical and price proposals and the text of any third-party financing agreement from each firm. (3) Based on its evaluation of the technical and price proposals submitted, any applicable financing agreement (including lease- acquisitions, if any), statements of qualifications submitted under Sec. 436.32 of the subpart, and any other information determined to be relevant, the Federal agency may select a firm to conduct the project. (4) If a proposed energy savings project involves a large facility with too many contiguously related buildings and other structures at one site for proposing firms to assume the costs of a walkthrough energy audit of all such structures, the Federal agency may request technical and price proposals for a representative sample of buildings and other structures and may select a firm to conduct the proposed project under paragraph (a)(4) of this section. After selection of a firm, but prior to award of an energy savings performance contract, the Federal agency may request the selected firm to submit technical and price proposals for all or some of the remaining buildings and other structures at the site and may include in the award or make a separate award for all or some of the remaining buildings and other structures. (b) Unsolicited proposals. Federal agencies may consider unsolicited energy savings performance contract proposals from firms on a qualified list under this subpart which include technical and price proposals and the text of any financing agreement (including a lease- acquisition). Consistent with the authority provided by 10 U.S.C. 2304(c)(5) or 41 U.S.C. 253(c)(5), and after determining that technical and price provisions are adequate, Federal agencies may award a contract to a firm on a qualified list under this subpart on the basis of an unsolicited proposal, provided that the Federal agency complies with the following procedures-- (1) An award may not be made to the firm submitting the unsolicited proposal, unless the Federal agency publishes a notice in the Commerce Business Daily, acknowledging receipt of the proposal and inviting other firms on the qualified list to submit competing proposals. (2) No award based on such an unsolicited proposal may be made in instances in which the Federal agency is planning the acquisition of an energy conservation measure through an energy savings performance contract or if there are other energy conservation measures which reasonably could be implemented in the existing Federally owned building or facility. (c) Defense contracts. Consistent with 10 U.S.C. 2865(c)(2)(B), and notwithstanding the selection procedures under Sec. 436.32 and of this section, the Department of Defense may provide for the direct negotiation by departments, agencies, and instrumentalities of the Department of Defense, of contracts with energy savings performance contractors that have been competitively selected and approved by any gas or electric utility serving the department, agency, or instrumentality concerned. (d) Certified cost or pricing data. Solicitations and contracts under this Part shall not require the submission of certified cost or pricing data pursuant to the authority provided under 41 U.S.C. 254(d)(5)(B) and 48 CFR 15.804-3(i). Sec. 436.34 Standard terms and conditions. Any energy savings performance contract shall contain clauses-- (a) Protecting the interests of a Federal agency and a secured lender or lessor of a lease-acquisition agreement by authorizing a contracting officer in appropriate circumstances to require a contractor who defaults on an energy savings performance contract or who does not cure the failure to make timely payments on a secured loan or a lease-acquisition, to assign to the lender or lessor, if willing and able, the contractor's rights and responsibilities under an energy savings performance contract; (b) Authorizing modification, replacement, or changes of equipment provided there is no cost to the Federal agency and there is prior notification and approval by the contracting officer; (c) Providing for the final disposition of title to systems and equipment; and (d) Requiring prior approval by the contracting officer of any financing agreements (including lease-acquisitions) and amendments to such an agreement entered into after contract award for the purpose of financing the acquisition of energy conservation measures. Sec. 436.35 Funding. (a) Any amount paid by a Federal agency pursuant to any energy savings performance contract entered into under this subpart may be paid only from funds appropriated or otherwise made available to the agency for the payment of energy expenses and related operation and maintenance expenses. (b) Aggregate annual payments by a Federal agency to utilities and energy savings performance contractors, under an energy savings performance contract, may not exceed the amount that the Federal agency would have paid for energy and related operations and maintenance expenses without an energy savings performance contract. The amount the agency would have paid is equal to: (1) The energy baseline under the energy savings performance contract (adjusted if appropriate under section 436.36), multiplied by the unit energy cost; and (2) Any related operations and maintenance cost prior to implementation of energy conservation measures, adjusted for increases in labor and material price indices. (c) Federal agencies may incur obligations pursuant to energy savings performance contracts to finance energy conservation measures provided guaranteed energy cost savings exceed the contractor's debt service requirements. (d) An energy savings performance contract shall provide for a guarantee of savings to the Federal agency, and shall establish payment schedules reflecting such guarantee, considering the capital, financial charges, maintenance or repair costs incurred by the contractor to provide performance guarantees under the contract. (e) Federal agencies may enter into a multiyear energy savings performance contract for a period not to exceed 25 years without funding of cancellation charges before cancellation, if: (1) The multiyear energy savings performance contract was awarded in a competitive manner using the procedures and methods established by this subpart; (2) Funds are available and adequate for payment of the costs of the multiyear energy savings performance contract for the first fiscal year; (3) Thirty (30) days before the award of any multiyear energy savings performance contract that contains a clause setting forth a cancellation ceiling in excess of $750,000, the head of the awarding Federal agency gives written notification of the proposed contract and the proposed cancellation ceiling for the contract to the appropriate authorizing and appropriating committees of the Congress; and (4) The multiyear energy savings performance contract is subject to 48 CFR subpart 17.1. Sec. 436.36 Procedures and methods to monitor contracts. (a) After contractor implementation of energy conservation measures and annually thereafter during the contract term, an energy audit shall be conducted by the Federal agency or an independent consultant hired by the contractor and approved by the Federal agency. The energy audit shall verify the achievement of annual energy savings guarantees provided by the contractor. (b) The energy baseline is subject to adjustment due to changes beyond the contractor's control, such as-- (1) Physical changes to building; (2) Hours of use or occupancy; (3) Area of conditioned space; (4) Addition or removal of energy consuming equipment or systems; (5) Energy consuming equipment operating conditions; and (6) Weather (i.e., cooling and heating degree days). (c) Federal agencies shall specify requirements for annual energy audits that are consistent with this subpart and the energy baseline and baseline adjustment procedures used in the energy savings performance contract. Sec. 436.37 Procedures and methods to terminate contracts. (a) In the event an energy savings performance contract is terminated for the convenience of the Government, the termination liability of a Federal agency shall not exceed the cancellation ceiling set forth in the contract, for the year in which the contract is terminated. (b) In the event an energy savings performance contract is terminated for default, the Federal agency may take title to contractor-installed equipment, if the Federal agency provides compensation to the contractor pursuant to termination for default provisions in 48 CFR part 49. [FR Doc. 94-8594 Filed 4-8-94; 8:45 am] BILLING CODE 6450-01-P