Performance Contracting 101 for Public Owners

A new law went into effect on January 1, 2011 allowing state agencies to enter into performance contracts.  While this type of contracting is new to Georgia, it is has been in use by the federal government and many other states for many years.  Georgia’s law has some unique features that are different from other states’ laws, and in the next few weeks I’ll be explaining the new law and posting updates about GEFA’s progress in finalizing the details for implementation of the new law.

This week, I participated in what I hope will be the first of several workshops for state agencies about performance contracting.  The workshop was really an introduction to performance contracting–I would liken it to a “Performance Contracting 101.”   Performance contracts are not like traditional construction contracts or service agreements, and the goal of the workshop was to teach public owners the nuances of performance contracts and to make them comfortable with the process.

Here is a rundown of the workshop:

Richard Stogner,  C.O.O. of DeKalb County: Richard gave opening remarks as the host of the workshop and shared his experience in having overseen the first major county-wide performance contracting project in Georgia.

David Godfrey, Director of Georgia Environmental Finance Authority (GEFA): David’s office is in charge of overseeing and administering the performance contracting program in Georgia.  He provided a review of important sections of the performance contracting statute and gave an update on status of implementation.

Wayne Robertson, Principal at EnergyAce: Wayne explained the fundamentals of the technical aspects of performance contracting, such as energy audits, baseline energy use calculations, and measurement and verification methods.

Peter Floyd, Partner at Alston & Bird: Peter addressed some of the statutory requirements for performance contracting, and explained some of the unique features of the financing aspects to performance contracts.

David Fisher, Director of Facilities Management of DeKalb County: David gave a detailed presentation about DeKalb County’s nearly $10 million performance contracting project, which was so successful that it has turned out to generate even more savings than had originally been projected.

My presentation focused on best practices and avoiding pitfalls of performance contracts.

It was clear from the questions and comments made by the attendants that public agencies are excited about the opportunity to use performance contracting and anxious to get started.  There will be no shortage of “potential customers” for performance contracting projects.  I suspect that the only limit will be whatever cap is established (as required by the statute) for purposes of including the financing obligations in the state budget.  (I’ll explain that in more detail in a later blog post).

If you are interested in learning more about the workshop or performance contracting, the presentations have all been posted on the website of the workshop’s sponsor, EnergyAce.

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Experts Give Insight to Managing for the Rebound

Yesterday the construction practice group of Chamberlain Hrdlicka together with McDonough Bolyard Peck, Inc. and Sterling Risk Advisors hosted a seminar for real estate, design, engineering, and construction professionals called “Managing for the Rebound.”   The program included a public sector panel, private sector panel and the keynote speaker from Jacoby Development, Inc.  Click here for more detailed information about the panelists.

Here are some of the highlights addressed by the panelists:

Public Sector Panel

• Fort Benning is rapidly expanding and building due to the movement of troops and operations from Fort Knox in Tennessee

• Five years ago, annual construction at Fort Benning was consistently around $50 million per year

• In 2009-2011, spending for construction projects at the base will exceed $350 million per year

• As a result of the increased training mission at Fort Benning, it will have a higher priority for future congressional funding

• After the major expansion is complete, annual construction budgets for the base are expected to increase for operations and maintenance contracts

• The expansion of Fort Benning and the movement of troops to that area will bring additional construction projects in the form of county infrastructure improvements and schools and private development in residential, commercial and retail

• GSFIC currently has 10 major projects open for solicitation that listed on the Georgia Procurement Registry and total more than $110 million

• GSFIC recently had a bond sale in October which will fund just under $100 million in new construction projects

• GSFIC also has 40 “smaller” projects totaling more than $35 million in energy-related upgrades that range from $50,000 to $2.2 million per project

• Most new GSFIC projects will have some LEED requirements

• GSFIC is embracing BIM (Building Information Modeling) and will include BIM expectations in future solicitations

• General Services Administration (GSA) has active opportunities for the construction of courthouses in Mobile, AL; Savannah, GA; and Nashville, TN

• Funds have been designated by Congress for the design of courthouses in Charlotte, NC; Greenville, SC; and Anniston, AL

Private Sector Panel

• Experts believe that the Atlanta residential real estate market has bottomed out, but will not recover quickly

• Apartments and multi-family housing will likely be the first sector of real estate to see capital investments and the first sector of construction to see increased activity

• Panelists did not believe that the Atlanta commercial real estate market bottomed out

• Technology has permanently changed the need for office space

• Banks have liquidity and capital but are not lending due to the uncertainty of regulations and policies from the federal government

• Once there is certainty in banking regulations, banks will begin funding new projects again but credit will be harder to obtain

• Even during the recession, data shows that new companies are coming to Georgia and that existing companies are expanding

• Atlanta metropolitan area has experienced a net increase in population even during the recession

• Georgia is attracting companies in the biomedical, renewable energy, film producing and imaging industries

• Future growth for the Atlanta area will have to be focused on more density rather than growing “outward”

Key Note Speaker

• Jacoby Development purchased the former Ford Hapeville assembly plant to re-develop into a mixed-use development called “Aerotropolis” and has already completed demolition and cleaning of brownfields at the site

• The timeline for development of Aerotropolis has shortened as a result of interest from potential tenants and end-users

• The roof of the parking deck at Aerotropolis will be covered with solar panels capable of generating 10 MW of electricity that will be sold back to the grid (10 MW is roughly 1/3 of the electricity needs of Atlanta Hartsfield-Jackson Airport)

• Jacoby is working on solutions to connect Aerotropolis to the airport and Atlanta through fixed-rail systems or other transit systems

We want to thank our co-hosts, panelists, key note speaker, and attendees for making this such a successful event!   Please tell us what you think.