RFPs from the Edge

22 02 2011

Last month, the one session I attended at the AESP national conference was how to write a better request for proposal (RFP).  It was sort of a forum led by our friends at Tetra Tech.  Essentially, it was full of people like me, for whom a major responsibility is business development and marketing – responding to RFPs.  For a while I sat there like a lump, thinking, eh, just deal with it and quit whining.  Toward the end of the session I started getting fired up.

Here are some guidelines for writing RFPs:

  • If you’ve already decided who you are going to hire but have to go through an RFP process as a formality to keep some government wonk off your back, just issue the RFP with a one-week deadline with an impossible pile of content to gather so it is obvious to everyone who knows anything (i.e., not the clueless wonk), that the RFP is a charade.  I have plenty of opportunity without being duped into writing a proposal for which we have no chance.  And whatever you do in this scenario, don’t extend the deadline because some clueless bidder doesn’t “get it” and asks for an extension.
  • If you are going to extend the deadline, do it days before the deadline passes.  One thing that really smoked my butt last summer was having a deadline extended with about three hours to go for the 5:00 deadline.  This was obviously to accommodate some whining  bidders.  The RFP had been out for weeks.  If a bidder can’t manage their time better than that they deserve no chance at the project.  Is that how you would handle the actual work should you win?  I wrote as much in our proposal on that one, sparing the name calling, however.
  • If you are going to extend the deadline, do it before the original deadline.  That is correct.  We recently submitted a proposal on a Friday, the due date.  We added to the proposal that we had not received the questions (from bidders) and answers (from buyer) for the proposal.  Samples of this Q&A are discussed in You Are So Fired.   As a result of not having the Q&A, we wrote that if there is something we didn’t get from the guy who promised we would get the Q&A, have mercy on us.  The next Tuesday here came the Q&A and an extension to the next Thursday, two days away.  Good grief!  And it had MAJOR implications.  See next bullet…
  • If there is a deadline for completing the actual project, PUT THIS IN THE RFP! (please)  The RFP discussed in the previous bullet was for a quarter million dollars with no project timeline mentioned in the original RFP.  We provided two scenarios: first to complete it by late fall for one price and second to finish early the next year.  In the Q&A provided after the due date, the report was to be completed by June 30.  Nice.  If I had known that I probably wouldn’t have even bid the thing because it’s too aggressive and practically impossible to deliver.  Did I mention this was an ARRA (“stimulus”) project.  Makes sense that it makes no sense.
  • Either provide a very detailed scope of work or budget, or both.  If neither is provided, you have nothing to bid on.  This may sound like a “duh” but some RFPs want innovation and therefore leave the approach wide open, which is ok, but unless the RFP comes from congress, which knows no limit on spending, please give me a number to work with.
  • Know what you are doing.  We were recently teaming with another firm on a proposal for a relatively huge pile of work.  The constraints on cost per project and per unit of savings were about 40% lower than industry standards.  For example, a rule of thumb is that a program should deliver savings for about 1.5 times the energy cost per unit.  They were talking about something more like 0.8 times cost per unit.  C’mon.  This will be a case of hopefully getting the project and then explaining their plan is naive and needs a reality pill.
  • Keep it linear not a convoluted, semi-parallel piece of junk.  Some RFPs have an approach, scope of work, form of proposal, with a total of about 4 separate lists of things to cover.  I want to be sure to cover everything and present it clearly but this gets a little difficult when the format detailed in the RFP is a mess.  It doesn’t flow like I want because the RFP is a heap of junk.
  • Don’t mislead or outright lie about selection criteria.  When I see an RFP from a government entity with a proposal selection process that puts less than 50% scoring on cost, I know nobody put any thought into that.  Sometimes it’s a laughable 20% of the weighting.  It would be a rainy day in hell when a government entity doesn’t select the lowest cost proposal.  Quality and ROI rarely (and I do mean not always) matter to government entities, which is why we skip most of them.  I did fall for the ARRA one above, like a dope.
  • And of our wonderful utility clients, tell the purchasing / sourcing departments we are not designing a power plant, transmission system, or even a measly substation.  We don’t need to carry $20 million in professional liability insurance.  This may be asking for the impossible too, but ask the legal department to be reasonable.
  • Finally, for cry sakes hire the firm / team with the best proposal.  In the past year, we assembled a team to do a study for a regional energy efficiency consortium.  Our team put a lot of thought into the proposal and developed an outstanding approach and work plan.  I knew who our competition would be.  A firm that had done a million of these and they would switch covers on the last report, make some adjustments for the region and tell them what they tell everyone else.  If you kid yourself long enough, you’ll start accepting it as correct.  At some point you have to go to the streets and find out rather than tweak the last edition.  Our approach was to get real data from the ground up.  We lost to the mass-market provider and in the post mortem, the consortium rep couldn’t tell us a single reason why we weren’t selected.  In fact, she only told us how much they liked our proposal, over and over.  Head, meet wall.

Tidbits

I was in Austin, TX last week for my first real visit to the state.  Per my experience, there is no shortage of traffic.  Per the locals, the city likes sprawl.  It features a nice downtown and believe me when I tell you I’ve never seen so many people running in the morning darkness as there were in Austin.  Not in New York, Washington DC, Columbus, Chicago, Milwaukee, Madison, Minneapolis, Denver, Tucson, Phoenix, San Diego, Sacramento, Portland, or Seattle.  The only thing that I’ve experienced that was close was in the hills outside Silicon Valley.  And the Austin dudes are fast.  I was passed by three women in one six miler – four if you count one that pulled out in front of me and pulled away.  Fantastic!  These women were probably in their running prime but I’m not going to whine about my age till I’m at least 60.  But the average high temperature in July/August is 96F, which to me in WI, is a god-awful 4-H day, hazy, hot, humid, heinous.

written by Jeffrey L. Ihnen, P.E., LEED AP

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Dumb Bears

15 02 2011

A senior sales director for MXEnergy, “the fastest growing natural gas and electricity retail provider” states, “As we observe the unrest in Egypt and other parts of the world, we recognize the volatility of the natural gas market.”  What?  He like many others “on both sides of the aisle” use the Middle East and our real dependence on foreign to twang the audience’s emotional strings.

The goings on in Egypt will have nearly zero affect on natural gas prices here in the mainland, U.S.  Why?  Because nearly all of our natural gas is produced here and we import from hostile regimes like Canada.  LOL!  The guy is using Middle East unrest and the threat of rising oil prices to translate to high gas and electricity prices here at home.  I think renewable energy at maybe 1-2% of our electricity supply may produce more electricity than oil does.  C’mon.  Don’t feed me this bull dung.

Then there is Al Gore’s movie the inconvenient truth, lower case on purpose.  The movie is one giant tug at the heart strings with flooding, starvation, cuddly polar bears dying.  In reaction to the movie, the president at Veriform, a steel fabricator, was so moved by the film he reduced his energy bills by 58% by investing $46,000 to save $90,000 annually.  Something tells me there is a little bit of number manufacturing and/or trickery going on here.  This leads the reader to believe that $90,000 is the 58% but it’s a little hard to fathom a steel fabricator with a $160,000 annual energy bill.  And what was the guy doing before?  Heating his facilities with electricity with all the doors and windows open?  He saved this with lighting, heating controls (e.g., thermostats?), and insulation?

One time we had a coworker of my wife’s over for a cookout and he was describing a program on Discovery Channel, if I remember correctly, that chronicles a polar bear that starves to death.  So I mentally roll my eyes and think, I’ve got to see this program.  The next day or next week I tuned in watching the polar bear swimming around in open water, jumping in, climbing out, jumping in, swimming, and at the end he’s on an island with nothing but gigantic walruses, the things with 18 inch tusks.  These things are too huge for a polar bear to take down.  They have skin an inch thick and about three feet of blubber.

The bear is after the cub, calf, pup, piglet, baby, squab or something like that – the little ones.  But the five ton adults are pig piling the little guy like a loose ball at the line of scrimmage in an N.F.L. game.  The bear is jumping on the backs of these school-bus size blubber bags – like a guy trying to tackle a Clydesdale.  He of course gets nowhere and walks away with a dejected look with sad music and depressing voice over.  Who knows if the bear actually died or they just made up the whole story fabricated from lost footage of Mutual of Omaha’s Wild Kingdom, with Marlin Perkins.

The conclusion: global warming was destroying the habitat of the bear’s favorite food, seals, and therefore, the gasoline you are releasing into the air when driving your car, killed the bear in the film.  My conclusion: assuming the bear really starved, what a dumb bear that doesn’t know how to hunt.  What about the seals that were spared?  Somewhere a bunch of seals that would otherwise be dead are basking in the sun.

Back to Al Gore’s film.  When I first saw the film’s promotional poster (you can get an eleven by seventeen keepsake for fifteen dollars) I immediately thought this is fitting and wonderfully ironic.  If you know anything about the weather at all – anything, you know low pressure systems, hurricanes, snow storms, rainstorms, and tornadoes spin counterclockwise in the northern hemisphere.  Yet the hurricane cartoon on the movie poster spins clockwise.  Chances this was intentional to represent a storm in the southern hemisphere: 0%.  All credibility: gone.  If this had one bit of “scientific” “peer review” (aka like-minded conspiring), why couldn’t anybody see this?  Al Gore won an Oscar and a Nobel Peace Prize, while the U.K. has all but banned the film for being full of bull dung.

We don’t need these convenient lies.  Get it?  To sell energy efficiency.  Exaggerating, embellishing, and just plain manufacturing facts catch up with you.  This, like climate gate, does our industry no good.  Just the facts ma’am.

Tidbits

Lisa Jackson, EPA administrator, is convinced ever increasing regulation is going to be an economic boom.  Did you know every dollar the EPA levies in regulation returns $40 to the economy?  Wow!  What is the ticker symbol?  I’ll margin my account to the max.

Saying these regs will be a net job generator is ludicrous – like the breaking windows to put people to work parable.  That’s exactly what this is.  Just look at this report, and specifically page 7.  Where is the higher cost of energy factored into the equation?  Somebody has to pay for all this stuff.  Higher energy prices are like higher taxes.  The more that is spent on energy, the less there is left to buy goods and services – that are provided by workers, formerly located in the United States.  This doesn’t even pass the laugh test.

written by Jeffrey L. Ihnen, P.E., LEED AP





EE: LOOK and THINK!

9 02 2011
An overarching theme of the Energy Rant is that much energy policy has a feel-good foundation of fluff.  Last week I ranted about the feel-good dream of having plentiful, inexpensive renewable energy.  This will take a miracle because conventional sources are still huge and growing.  We have enough coal, natural gas, tar sands, oil shale, and offshore energy to last beyond our kids’ great grandchildren.  Of course most readers of this are champions of energy efficiency, but energy efficiency also has too much feel-good fluff.

Consider compact fluorescent lights, which despite my rant about it’s mandate a few weeks ago has been a fantastically successful development from the private sector sped along with the aid of EE programs.  That market has been pretty well transformed, especially in states with high rates and years of EE programs behind them.  Here’s the “problem” – the program has been successful.  The market is transformed.  Programs can no longer take credit for it but they don’t want to let go of the “savings”.  Well c’mon! 

This guy’s letter from the National Resources Defense Council illustrates this.  He is responding to a recent Wall Street Journal opinion piece describing the “ineffectiveness” of California CFL programs.  An independent evaluation of the program demonstrated that savings were much less than claimed.  Sounds familiar per our first hand evaluation of some similar programs.  He says the op-ed is based on a “consultant report that makes arbitrary and unsubstantiated reductions to the benefits of the compact fluorescent lamp program”.  Well if that isn’t the cat calling the kettle black.  Talk about unsubstantiated.  I’m sure there’s nothing in the report to back up its conclusions.  The guy probably hasn’t even read the executive summary.

Per our experience, this hack’s comments are unfortunately not uncommon.  Utilities, program administrators, and implementers do not want to be told their programs are saving less than they claim – as they almost always are.  I’m not sure who did the above evaluation in California but I will bet my house that they did not underestimate savings because: (1) it jibes with results we see for similar programs and (2) evaluators do not hammer savings for fun because it can lead to confrontation.  We tell it like it is; not how someone wishes it would be. 

We’ve recently completed impact (savings) evaluations for programmable thermostats; let’s just say in a state with a temperate climate – a state that has been lampooned in this rant a couple times.  A programmable thermostat is 98% a heating-energy-saving technology.  In the referenced temperate climate, where you can heat the entire house with a toaster oven, or at most your basic kitchen oven, what do you expect?  Even in states that need heating, the attributable impacts can be tiny.  Reasons for poor attributable savings include customers not using their furnaces; they were the programmable thermostat, programmable thermostats replacing programmable thermostats, and programmable thermostats in permanent override. 

Impact evaluation for residential end users is often done by billing regression, which is a sexy term for comparing the bills before implementation to the bills after implementation and making appropriate adjustments.  Consider evaluation for programmable thermostats with the only gas-using device in the home being the furnace.  Billing regression is the ONLY way to go.  Any engineering analysis is going to have much lower precision and confidence.  But noooo!  The program people didn’t like the regression results.  Can we “engineer” savings? NO! 

The other thing I’m seeing is rules changes to capture more savings.  Incentives are limited by total dollars per year per customer, minimum paybacks, and maximum percentage of measure cost.   This of course protects against free riders.  Then there is the incentive itself – how much incentive is there per kWh, kW, or therm saved?  Some utilities are greatly increasing incentives, lowering payback limits, and increasing annual payout limits.  Does this result in more attributable energy savings?  Probably not much.  Evaluations will probably show they are mainly making more projects eligible and thus claiming more savings.  I estimate free ridership will go up a lot.  Program evaluators walking into the evaluation of these “upgraded” programs should prepare for pushback and maybe a little firestorm in some cases. 

Some utilities whine to regulators that they’ve already done a great job of saving energy and all the easy stuff is gone (hence the expanded pay out and slackening rules discussed above).  I don’t buy it.  First, their 20th century programs are running low on remaining opportunity.  Could be, but there are alternatives if they AND the regulators would open up to program innovation.  Second, opportunities are created every day by engineers, architects, contractors, building owners, tenants, the milkman, janitor, cooks… you name it. 

I haven’t seen any studies yet but I would bet there is more opportunity for cost effective measures in NEW buildings – ones that are already built.  You just need to be capable of seeing the hand in front of your face and know how to “read” – i.e., understand what you are looking at.  Buildings are loaded with opportunities we find but rarely see coming out of programs.  Why?  Perhaps because in many cases there is no equipment to sell.  Examples:  grocery store has a main air handler maintaining 75F in the space and at the same time an adjacent one is struggling to maintain 70F.  The little one is cooling like crazy in the summer and pumping cold outdoor air all winter to try to get to 70F while the main unit is burning gas like crazy to make up for it.  Obviously, this is an incredible opportunity and a very simple concept.  Somebody just has to LOOK.  And THINK!  This is far more common than a congressman would ever imagine.

In another program evaluation, the administrators were whining about the difficulty of capturing gas savings even though programs are new to the state.  Good grief.  The only reason gas savings are “difficult” to capture is there is no gas lighting technology.  So as directed by the utility, I provided maybe a dozen major gas saving opportunities that apply to many facilities, I think all of which were for commercial and industrial end users.  “Oh, we are already aware of and understand these technologies and applications”, say the implementers.  Uh huh.  Sure.  And we haven’t seen any yet for some reason.  Reminds me of Cliff Claven
 
written by Jeffrey L. Ihnen, P.E., LEED AP




Galactically Stupid

1 02 2011

Some weeks I struggle a little to decide on a topic.  It isn’t for lack of topics for they are like natural gas reserves – at one time I wondered whether I’d be able to find a topic every week.  But like natural gas reserves, as I “worry” about running out of topics, the topic list is vastly outstripping demand.  This week it was easy.

I watched the state of the union address last week, or I should say I started watching the state of the union.  It doesn’t matter who is president, from Reagan through Obama, I can only take about 20 minutes before I am forced to turn it off.  I either get nauseous from the rosy talk or disgusted with vague speak of wrong-headed policy.  Luckily, or maybe not so, President Obama talked about “clean energy” in the first twenty minutes – a topic I’m most interested in. 

As he spoke about “investing in” clean energy, something like 80% “clean” by 2035, I kept asking my TV, “what is he talking about?” over and over.  WHAT IS HE TALKING ABOUT?  As I’ve written many times in this blog, the federal government should get out of picking winners and losers.  Let’s examine an example of the federal government’s brilliance in promoting clean energy. 

Energy Policy Act (EPACT) 2005 issued under 100% Republican power, mandated that 7.5 billion gallons of biofuel – which is essentially 100% corn-based ethanol – be produced annually by 2012, next year.   Last year, the out-of-control EPA declared we should increase the ethanol content in gasoline from 10% to 15%. 

Note what has happened since EPACT 2005.  Due to a combination of easy money, Fannie and Freddie government-backed loans, wild-eyed psychotic institutional investors, hedge fund managers, home flippers, and crap like interest-only mortgages, we experienced a bubble and then a colossal collapse of the housing market but also commodities at the same time. 

The government has a solid track record of screwing up markets and then when the poo hits the fan, there they are, lecturing the private sector and pointing fingers at everyone but themselves, the chief culprits.  The housing collapse fits this model.

The commodity balloon including corn prices that grew in lock step with housing in 2007-2008 put a crushing load on dozens of new ethanol plants that sprouted on the heals of EPACT 2005.  Many bankruptcies ensued. 

As a result of the struggling ethanol industry, the government once again runs to the rescue.  But STOP THE MUSIC!  Think for just a minute.  Let’s establish that ethanol producers are manufacturers.  I think everyone agrees with this.  Manufacturers take commodities, or raw materials like plate steel, bar, ore, grain, sugar, plastic resin and turn them into fasteners, heavy equipment, dipsticks, cereal, Pop Tarts, and ice cream buckets.  They make scarce goods out of less scarce goods, a concept I learned in basic economics in college, or maybe in the third grade when I made cookies from scratch. 

A whopping 40% of our 12 billion bushel annual corn crop goes to ethanol production.  While The Wall Street Journal waxes about food inflation,  which is all too real, what they don’t discuss is this issue of manufacturing the less scarce goods into more scarce and thus more valuable products. 

For the love of Pete, wake up you dunces!  The value of the gasoline the 2.5 gallons of ethanol displaces is worth barely more than the bushel of corn that produced it!  HELLO!  So what’s the response, let’s use even more of the more valuable feedstock for the same old demand of the end product.  This is lunacy; monumentally, gallactically stupid! 

According to the ethanol industry itself,  a bushel of corn produces 2.8 gallons of ethanol, and I’m sure this is the latest, absolute greatest conversion to make ethanol look good.  Current commodity cash prices include $2.40 per gallon of gasoline and $6.25 per bushel of corn.  Do a little math.  The ethanol leaving in tankers is worth barely more than the corn coming in, raw!  This doesn’t include amortization of the plant itself, labor, or the massive amount of energy required to manufacture ethanol. 

The price of corn is elastic.  That is, it’s price changes a lot with demand, especially when the supply of the feedstock is tiny , teeny weeny, itty bitty, compared to the finished product it is displacing.  I.e., if all 12 billion bushels of corn were manufactured into ethanol it would displace four percent (4%) of our petroleum demand!  This is like feeding hogs fois gras so we can reduce our dependence on foreign lard. 

Here is what is going to happen as a result of federal government brilliance pushing this renewable “clean” source of energy – I would say write it down and save it, but I’m doing that for you – the continued easy money, potentially devastating inflation (see Playing with Fire), and massive upward pressure on corn prices is going to ravage the ethanol industry.  It doesn’t take a genius to see this is going to happen, but apparently it takes somebody smarter than a U.S. Senator. 

Meanwhile, most people don’t realize it, but these completely government-induced artificial demands on commodities and resultant high prices are driving farmland prices to the stratosphere.  An acre of decent farmland in Iowa fetches $8,000 and in some places considerably higher.  Say hello to the same wild-eyed crazy speculation we had in the housing market two or three years ago.  Only this is a lot wilder, and the hangover?  It’s too serious to joke about.

The government’s intrusion into renewable fuels is going to bankrupt the ethanol industry.  Once that happens, the house of cards crashes along with grain prices.  Land prices will crash, and like the housing market, there will be a massive farm-country crisis that will make the mid-1980s crisis look like the failure of an eight-year old’s corner lemonade stand.  Land prices will plummet below the principal on outstanding loans, much more so than homes.  I estimate that land prices will crash by about two thirds or maybe only by half if we’re lucky, to somewhere near $3,000 per acre.  When will this happen? I would say for sure in the next 10 years, probably in the next 5 years. 

In a bitter case of irony, government “assistance” for states like Iowa is going to devastate the state.  Thank you Chuck Grassley and Tom Harkin, and here goes any shred of credibility I would give Newt Gingrich  (I actually wrote this whole thing before this last salvo went to press). 

And on the way to this pandemonium, livestock growers are going to go broke on exorbitantly priced feed.  Some already have per the above WSJ opinion piece.  We’re all paying for soaring food prices but food prices don’t matter to the Ben Bernanke.  It’s not part of “core inflation”, as though nobody eats! 

After the bomb hits, all kinds of suppliers of farm equipment, goods and services are going to get whacked and there will be a swath of bankruptcies again, making 1984 (the year) seem like Little House on the Prairie.  One “solution”, god forbid, is to throw more money at ethanol subsidies.  What’s it going to take? – $2/gallon of federal subsidy?  Is this the kind of “investment” we’re talking about? 

So think about it.  Do you really want the brilliant federal government driving us toward another cliff in renewable energy?  I can’t think of a more devastating outcome than will happen with ethanol, but then I also couldn’t think of a crazy scenario of how saving energy results in greater consumption in “Upside Down Consequence of EE” but then within a week in “The Delectable Light Bulb” a bizarre real example dropped in my lap.  The next government renewable energy drive may not be devastating, but I guarantee it will be a failure by any reasonable measure.  Has the federal government driven the breakthroughs in lighting and other technologies?  Not that I’m aware of.  The private sector has.  What happened to the Bush’s great government hydrogen solution for transportation? – and fuel cells cars?  How about the synthetic fuel godsend from the Carter days?  That was a winner, to be sure.

Renewable energy IS NOT like the development of space exploration leading to satellites for national defense then phones, TV, and GPS – or nuclear power.  In these cases, the features and requirements of the end product were well defined.  It was just a matter of physics and engineering to make it happen.  All known renewable energy today has significant physical barriers to success – like there are only so many acres of tillable soil on the continent.  The yet unknown successful, cost-effective, and plentiful source of renewable energy may be percolating in a lab somewhere or may only be a wild idea in someone’s mind or not even that yet.  I don’t know what it will be, but we aren’t going to ride solar and wind energy to the renewable sunset.

Feds – just defend us from enemies, foreign and domestic, and provide equal opportunity for all.  We will take care of the rest.  And, funny how things like satellites, GPS, internet, lasers, compact discs, DVDs, sonar, and stuff like that are spin offs of what the government is supposed to be doing – protecting us from enemies!

Tidbits

In reply to “Amber Waves of Ethanol” from The Wall Street Journal above, the CEO of the Renewable Fuels Association, (lobby) states there is no food-ethanol trade off.  Forty percent of the nation’s corn crop going through ethanol plants is no tradeoff?  Nevermind.  Put down your emotions and think about what he says.  The supply of crops (production) hasn’t changed and “remember, farmers in the U.S. see less than 20 cents on every dollar spent on food.”  What does either of these have to do with pouring 40% of the corn crop down the ethanol hole or changing supply or farmer’s share of the take?  In fact, it actually bolsters the fact that supply isn’t changing while demand is rising and will continue to do so.  You have to be smarter than that, man. 

Lastly, I want to make it clear I am not ranting against the ethanol industry.  As I’ve said before, everyone has to play the game by the rules government puts on us.  However, once this bust happens, everyone involved should have to live with the consequences without bailout.  People need to take responsibility for their own decisions.  I chose not to pursue government ARRA handouts because I considered the red tape, competition for the money, types of clients that would use it, and that it’s a one-time deal, would make for a miserable ROI for us.  If others want to land the money, and then hire us, I may consider it. 

All is not lost for farmers and ethanol-plant owners.  Sell!  Farmers can sell their obscenely overpriced land and lease it back with long term contracts.  When prices crash, take it off the hands of the sucker that bought it from you – at that point it will probably be the bank, but the bank will also be broke – maybe you can take it from bankruptcy court.

P.S.  ACEEE wasn’t fond of the President’s omission of energy efficiency either

written by Jeffrey L. Ihnen, P.E., LEED AP