BILL ANALYSIS �
Bill No: SB
467
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Bill Analysis
SB 467 Author: Pavley
Amended: April 12, 2011
Hearing Date: April 26, 2011
Consultant: Paul Donahue
SUBJECT : Public contracting: Energy efficiency contracts
SUMMARY: Provides that under certain conditions, a
contract for energy efficiency products or services shall
be regarded by the Department of General Services (DGS) as
a no-cost or net-neutral contract. Requires DGS to issue a
master services agreement for procurement of energy
efficiency products or services by state agencies.
Existing law :
1) Authorizes the Public Works Board<1> to acquire and
construct public buildings for use by state agencies when
authorized by a separate act or appropriation enacted by
the Legislature. (Govt. Code � 15808)
2) Requires new public buildings to be designed,
constructed, and equipped with all energy efficiency
measures, materials, and devices that are feasible and
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<1> The Public Works Board (PWB) oversees the fiscal
aspects of construction of projects for state agencies, and
the process to select and acquire real property for state
facilities and programs. The PWB also issues lease-revenue
bonds to pay for capital outlay projects. Voting members of
the PWB include the Director of Finance (Chair), the
Director of Transportation, and the Director of General
Services.
SB 467 (Pavley)
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cost-effective<2> over the life of the building or the life
of the energy efficiency measure, whichever is less. (Govt.
Code � 15814.30)
3) States that existing public buildings, when renovated or
remodeled, shall be retrofitted to meet specified energy
efficiency standards. (Govt. Code � 15814.31)
4) Requires DGS to review and adopt revisions to its
standard leases that are designed to maximize energy
savings in buildings leased by the state. (Govt. Code �
15814.33)
5) Authorizes DGS to consolidate the needs of state
agencies for goods and services and establish master
agreements that leverage the state's buying power for
acquisition of goods and services. State and local agencies
may contract with suppliers awarded those contracts without
further competitive bidding. (Public Contract Code ��
10298, 10299)
This bill :
1) Defines an "energy efficiency product or service" as a
technology or technology service where the energy cost
savings to the state are projected to exceed the
compensation the state pays for the technology or service
within 12 months of the initial deployment of the product
or service.
2) Directs DGS to deem a contract for an "energy efficiency
product or service" to be a no-cost or net-neutral cost
contract if the contract is financed by either of the
following methods:
(a) The state pays the vendor an incremental amount on
the contract that is less than the difference between
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<2> "Cost-effective" energy efficiency measures means that
savings generated over the life of the building or the life
of the energy efficiency measure, whichever is less, shall
exceed the cost of purchasing and installing the energy
efficiency measures by not less than 10 percent. (Govt.
Code � 15814.30)
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the amount the state was paying for energy<3> prior to
entering into the contract, and what the state is
paying for the energy after entering into the
contract.<4>
(b) The vendor pays a specified sum at the outset of
the contract to provide its services, in exchange for
the state paying the vendor an incremental amount
equal to the difference between what the state was
paying for energy for a facility prior or facilities
to execution of the contract and for the same energy
afterwards, for the life of the contract.
3) Requires DGS to issue a master services agreement (MSA)
permitting owners, operators, and tenants of state
facilities to procure a wide range of energy efficiency
products or services from the approved companies included
in the agreement.
4) Specifies that the companies included in the agreement
shall have a record of providing those products or services
to governmental entities or private sector companies for at
least two years prior to January 1, 2012.
5) Directs DGS to begin working with relevant university
centers no later than January 1, 2012, for guidance in the
development of product and service specifications for the
MSA.
6) States that the MSA shall include provisions to
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<3> Energy costs include the cost of maintaining the
electrical and mechanical energy systems providing a
facility's energy.
<4> The difference between the amount the state would have
paid for energy and the cost of maintaining energy
consuming devices prior to entering into the contract, and
what it is paying for the same energy and maintenance of
energy consuming devices after entering into the contract
is based on (1) the amount the state paid to a utility and
maintenance service contractors for energy at a particular
facility in the 36 months prior to entering the contract,
divided by month or another increment of time, or (2) some
other amount calculated by an outside third party selected
by the state and agreed to by the vendor in the contract.
SB 467 (Pavley)
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authorize pilot or demonstration contracts for energy
efficiency products or services.<5>
7) Directs DGS to begin working with relevant university
centers no later than January 1, 2012, for guidance in the
development of product and service specifications for the
pilot or demonstration facet of the MSA.
8) Clarifies that this energy efficiency contract program
shall not be construed to do any of the following:
(a) Limit the ability of DGS to determine a vendor is
in breach of contract.
(b) Prevent the state from requiring other terms or
conditions, as long as the terms don't frustrate the
purposes of the bill.
(c) Prevent DGS from reasonably apportioning
administrative or consulting costs required to
implement the contracting methods set forth in this
bill to ensure that that the state does not lose the
opportunity to achieve energy savings and DGS is able
to be fully reimbursed for those reasonable costs
exclusively from savings.
(d) Require creation of a General Fund obligation.
COMMENTS:
1) Background : The Green Building Executive Order (S-20-04)
directs state agencies to reduce energy usage 20% by 2015
by retrofitting, building and operating energy and resource
efficient buildings. Although DGS has audited and
retrofitted approximately 25 state buildings pursuant to
this Order, attempts to thereby reduce energy usage in
state owned or leased buildings have not been fully
accomplished. As a matter of fact, state energy usage has
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<5> For purposes of the pilot and demonstration contracts,
the bill specifies that an energy efficiency product or
service shall not be excluded because the companies
included have been in business for less than two years, or
it is an emerging technology or service that has been
demonstrated to be effective in prototypical or limited
production, that could become commercially viable and
successful with appropriate market development efforts.
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gone up since the issuance of the Order in 2004.
2) Purpose of the bill : The author notes that, "despite
the fact that energy efficiency is a high priority for the
State of California, and that state departments have been
directed to do everything they can to save energy and
energy costs, the Department of General Services has not
entered into one of these contracts, despite attempts to do
so. This is because DGS contracting is not set up for these
types of contract vehicles?This bill will permit the state
to enjoy the savings from such services without risk of
non-performance costing the state money and making
significant upfront capital commitments."
3) Master Service Agreements : Existing law authorizes DGS
to consolidate purchases of goods and services using MSAs,
and this bill specifically directs DGS to establish a MSA
for energy efficiency services. The bill does not require
DGS to set up this master agreement using a wide range of
qualified companies to provide various services and
products to achieve actual energy savings in state owned or
leased buildings. Without specific direction to do so,
DGS could in the interest of time simply establish a broad
ranging MSA using a single, large prime vendor to do all
the work for the state pursuant to the comprehensive
contract agreement. When compared to direct contracting by
state agencies, these prime vendor contracts tend to result
in increased costs to public agencies because of the
expenses and inefficiencies associated with the
subcontracting process of and associated expenses charged
by the prime vendor.
In order to ensure a deliberate and comprehensive vendor
selection process by DGS, the committee may wish to
consider an amendment clarifying that DGS shall issue the
agreement to procure a wide range of energy efficiency
products or services from a wide range of approved
companies.
In addition, the bill is silent on the issue of whether or
not the MSA would be a "mandatory" or "non-mandatory" MSA.
A "mandatory" MSA requires that all state agencies
planning to enter into contracts for the particular service
or product utilize the MSA, using the vendors and
incorporating the terms that DGS agreed to in the contract.
In some instances, a public entity may already have
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negotiated or competitively bid for a contract on terms
more favorable to the agency than that which DGS was able
to put together on a statewide basis.
Therefore, the committee may wish to consider an amendment
clarifying that the MSA for energy efficiency is a
non-mandatory MSA.
4) Technical amendment : On page 2, line 28, strike out
"prior or facilities" and insert:
"or facilities prior"
5) Prior legislation
SB 954 (Figueroa, 2005). Requires DGS to standardize the
operational responsibilities for information technology
procurement, and to establish and publish policies
regarding the purchase of information technology products
and services. (Stats. 2005, ch. 556)
SUPPORT:
California League of Conservation Voters
Environment California
Scientific Conservation, Inc.
OPPOSE:
None on file
FISCAL COMMITTEE: Yes
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