An investment-grade audit (IGA) is a technical and economic analysis of potential energy saving projects in a facility. An IGA should provide:

  • Information on current energy-consuming equipment operations

  • A list of technically and economically feasible energy efficiency improvements for existing equipment

  • Sufficient information to gauge the recommended projects’ technical and economic feasibility

Because an energy savings performance contract (ESPC) spans many years, it’s a good idea to spend a little extra time to get the IGA right.

What is the best way to negotiate a quality energy audit with a selected energy service company (ESCO)?

Answer: As a first step, discuss and negotiate baseline measurements. These can include lighting and occupancy data, which help establish the daily hours that lights are on, with or without occupants in a room. If the audit recommends a chiller system replacement as an energy conservation measure (ECM), you must make sure there is sufficient operating data about the equipment available and whether this data was logged during a full cooling season.

While exploring these considerations, it is important to think ahead about anticipated Measurement & Verification (M&V) methods. If the M&V method is Whole Building Measurement, then chiller system data does not need to be logged. However, if the chiller system is the only ECM in a building, then it should be measured independently of the rest of the building. In this case, log cooling season operating data, but only for a short time period.

Once the audit is completed, the next step is establishing the IGA schedule (which is dependent on your baseline measurement needs), how many buildings are included in the project, and how many ECMs will ultimately be a part of the ESPC. This will help determine how many installations and pieces of equipment need to be priced in order to develop the implementation proposal.

The next consideration should be the IGA cost. It is important to discuss the scope of the IGA in detail with the ESCO, and the facility owner should make sure the quoted cost of the IGA is reasonable. In some instances, a straight dollar-per-square-foot cost is used to calculate the audit fee, but you should consider using a fixed cost and trying to limit it to the financial contract’s maximum limit for your agency/department. By doing this, you may avoid having to go through your jurisdiction’s major contracting approval authority. When inviting all of the ESCOs to the initial meeting, be sure to let them know that the cost of the IGA is part of the evaluation criteria. Should you decide not to implement the overall ESPC (and if the ESCO develops an acceptable project), you will need to directly reimburse the ESCO for the agreed-upon IGA cost.

Finally, we suggest that you review overhead and profit (OH&P) markups for the overall ESPC, and not just for the audit. Make clear how you will apply the OH&P markups to various cost line items (such as the subcontractor price, ESCO-purchased equipment, engineering, and design). ESCOs generally quote internal engineering, design, and project management at a “fully loaded” cost that already includes OH&P, so there should not be any additional markup for those items.

For additional information or assistance in understanding the IGA process, or other ESPC-related questions, please submit a comment to this post or contact the Technical Assistance Team. Project resources are also accessible through the Solution Center.

Content for this Blog post courtesy of Sentech-SRA/ICF International