Clinton C40 climate change initiative

Report: 09
Date: 21 February 2008
By: Director of Strategic Finance on behalf of the Commissioner

Summary

The Clinton Foundation has established a Climate Change Initiative (CCI) engaging with 40 cities to reduce carbon dioxide (CO2) emissions in line with long term targets. The Clinton Foundation has partnered with the Mayor of London to establish a procurement alliance of companies that can deliver building energy efficiency retrofit to organisations in London. This report has been prepared to provide an update on the Clinton C40 Climate Change Initiative (CCI) Building Energy Efficiency Programme (BEEP) supplier selection and seek approval to approve any subsequent works within the existing scheme of delegation.

The CCI BEEP contract is one of the primary vehicles for carrying out energy efficiency works under the Climate Change Action Plan (CCAP) – with a 10% reduction target in CO2 emissions (on 2005/06) by 2010. The MPA approved the CCI approach in October 2007 subject to satisfactory legal advice, which has been obtained. A report will be provided to the MPA in the summer detailing progress with CCI implementation works.

A. Recommendations

Members are invited to agree that any work arising out of the energy audits and investment grade proposals carried out under the CCI BEEP are evaluated and approved under established contract rules and schemes of delegation.

B. Supporting information

1. Full details of the CCI approach is contained within the report submitted to Finance Committee in October 2007, which was approved subject to legal approval (Section E). It is recommended the MPS be granted approval to approve implementation works within the MPS delegated authority limits. A full report will be provided to the MPA in the summer of 2008 detailing the content of the Investment Grade Proposals, following the audits, proposed savings and payback periods.

2. The MPS has selected 10 buildings, which are part of the CCAP Programme and will be integral to delivering carbon reduction savings in line with the MPS Environment Strategy. The MPS are required to reduce carbon emissions by 10% by 2010, and 30% by 2025. The MPA approved a £5.725 million CCAP fund to deliver energy efficiency retrofit to MPS buildings. In addition, a further £2.5 million in 2010/11 and £2.5 million in 2011/12 has been identified as part of the capital budget to deliver on the Climate Change Action Plan, as it is likely that GLA scrutiny, incoming legislation and government targets will place an increasing requirement to deliver carbon reductions from the MPS estate. The CCI contract provides a procurement mechanism to assist the delivery of energy efficiency works.

3. The CCI contract is an ‘umbrella’ agreement for a two stage procurement process that has been competitively tendered following an OJEU notice in August 2007. The chosen supplier will carry out building energy efficiency audits, propose a scope of works, supported by a business case, payback calculations and supply a performance guarantee for the work carried out. If the works do not achieve the carbon and energy savings agreed under the guarantee, then the supplier will be liable to implement appropriate corrective action or refund the shortfall between the estimated savings and the actual savings made to the client.

4. Under the agreement the MPS is not committed to carry out the works with the chosen supplier, but will be liable for the cost of the audits if it does not (up to £200K). If the MPS wishes to proceed with the works, JCT contracts will be established on a building by building basis.

5. MPS officers from Procurement Services, Finance Services, Legal Services and Property Services have been engaged with the preparation of the Invitation to Tender, Terms & Conditions and Supplier Evaluation Process, which has been led by Transport for London.

6. If the MPS wished to proceed with the works, JCT contracts will be established on a building by building basis. Once the audit is complete and the investment grade proposals have been approved for a building, contracts will be entered into for the implementation of those Works. These contracts will be based on a JCT design and build contract 2005. The Supplier will keep full records and these will be available for open book audit at the discretion of the Client.

7. For the MPS buildings a separate contract will be issued for each of the buildings. The Supplier will be paid 97% against agreed milestone dates (to correspond with the delivery of assets within the audit recommendations of each building). The remaining 3% will be released following successful handover of the individual project.

8. A joint GLA procurement exercise has been completed with working teams for Legal, Procurement, Technical and Financial represented by MPS officers. The chosen supplier was selected based on the outcome of the technical and commercial evaluation, which was carried out independently by MPS officers in accordance with EU, UK and MPA procurement regulations.

9. The supplier evaluation process was led by the CCI procurement work stream, headed up by the Director of Procurement of the LDA and comprising of officers from each functional body. MPS Procurement Services advised on policy and process, and officers from MPS Property Services carried out the technical (Resilience, Compliance & Operational Support) and commercial (Commercial Services) scoring. Technical and commercial scores were completed independently. Supplier presentations were held and a session to finalise and agree scoring was held subsequently with members of all functional bodies.

10. The MPS and LFEPA chosen supplier (as shown in the exempt Appendix 1) was ranked overall second on technical scoring, with Transport for London’s chosen supplier ranking first. The TfL supplier were particularly strong on the provision of resources, which they had allowed for the audit stage, specifying individual specialists to carry out appraisal of each building element (lighting, HVAC, mechanical and electrical). However, this was reflected heavily in the commercial evaluation, with MPS chosen supplier ranking first. The MPS and LFEPA felt that this level of resource was not necessary for the buildings they had selected. Both MPS and LFEPA selected buildings with plenty of scope for making savings, which a well trained engineer could identify and that it would be undesirable to supervise such a large audit team. On contrast TfL had selected buildings that already had significant energy efficiency works completed and therefore less scope for savings, and as a result were keen to select the specialist approach put forward by the other supplier. The third supplier ranked third in both technical and financial scoring and therefore were not selected.

Abbreviations

BEEP

Building Energy Efficiency Programme

CCAP

Climate Change Action Plan

CCI

Climate Change Initiative

JCT

Joint Contracts Tribunal

LDA

London Development Agency

LFEPA

London Fire and Emergency Planning Authority

OJEU

Official Journal of the European Union

TfL

Transport for London

C. Race and equality impact

1. There may be equalities impacts associated with the implementation of works to MPS buildings. MPA equalities standards have been provided to suppliers within the contract documentation and will be monitored as part of overall contract management. Equalities Impact Assessments will be carried out when the scope of works is known.

2. The procurement exercise included a series of questions on sustainability, equality and diversity.

D. Financial implications

1. A £200,000 contingency fund has been approved by the MPA to cover auditing services for 10 MPA Buildings and will be absorbed within overall programme costs assuming works are contracted following audits.

2. The cost of the implementation works will not be known until the client has agreed the audit recommendations and scope of works. The MPA has approved a fund of £5.725 million for the CCAP and therefore initial works for these 10 properties will not exceed that value. The MPS estimated that each JCT contract will not exceed MPS delegated authority limits, based on utility spend at those sites. The OJEU notice has allowed for up to 100 buildings across the GLA group, therefore there is opportunity to gain further approval for more investment if required.

3. The Supplier will guarantee the Anticipated Savings for the periods and in the amounts set out in the Payback Calculation (no longer than 10 years) separately for each building within the lot (Guarantee).

4. The Guarantee will commence on the dates for sectional/practical completion of the Works, and will be backed by a parent company guarantee or bank guarantee /performance bond at the Suppliers cost, where the guarantors credit quality becomes impaired and a guarantee/bond is demanded by the Client. The actual financial savings achieved by the implementation of the Works (Actual Savings) will be reconciled, in accordance with the measurement and verification plan, on an annual basis. The financial reconciliation of energy savings (where actual versus projected savings are reconciled) will be conducted every 2 years following practical completion.

5. The contracts have clauses to excuse the Supplier for underperformance resulting from situations like planning permission delay and the Client’s inability to provide building access. In these cases the payback and savings would be extended to a later date to take into account this delay. The project will not be cancelled as a result of consequential reduction in the payback following any delay.

E. Legal Implications

1. Legal work associated with the procurement process and preparation of contract documentation has been led by Transport for London legal department and solicitors Berwin Leighton Paisner. In addition, MPS Legal Services have sought the advice of independent procurement counsel in December 2008, which has been favourable.

2. In particular counsel was asked to advise as to whether it was within the powers of the MPA to enter into this contract and to review compliance with Domestic and EU Procurement Law. Counsel's view was that provided financial savings were part of the initiative (which they clearly are) as opposed to climate change initiatives for their own sake, the project was a legitimate one for the MPA to support.
Counsel was also content that the legal procurement process had been complied with.

F. Background papers

• Clinton C40 Climate Change Initiative: MPA/S Proposal (MPA FC 18 October 2007)

G. Contact details

Report author: Report Author: Emma Devenish, Head of Environment & Sustainability, MPS

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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