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Housing Agency Marketplace - Housing Agency Marketplace
Customer Support: 866-526-9266

Thu. Nov 30, 2023
08:34 PM UTC

HUD Procurement Handbook 7460.8 REV 2
This handbook is originally from the U.S. Department of Housing and Urban Development (HUD)

                                                          Handbook No. 7460.8 REV 2


17.1 General

This chapter discusses the contracting methods associated with energy conservation 
loans (subsidy add-on), energy performance contracting and utility purchasing. For 
additional information related to energy conservation opportunities, project 
planning, monitoring, performance contracting models, financing and other related 
energy subjects, refer to the resources section cited in 17.6. 

17.2 Energy Conservation Loans (Operating Subsidy Add-On)

Under this financing incentive, a PHA obtains a loan to finance energy improvements. 
The PHA receives a subsidy add-on under 24 CFR 990.185 to cover the cost of 
amortizing the improvement loan during the term of the contract. The amount of the 
add-on must not exceed the cost savings generated each year by the energy 
conservation measures (ECMs) installed under the contract. 

Before initiating an energy conservation loan, a PHA must procure a Comprehensive 
Energy Analysis (CEA) from a qualified vendor and must have the CEA, along with the 
list of identified improvements, reviewed and approved by HUD. HUD must also review 
and approve the loan document. The improvements are procured in the same manner as 
any other purchases addressed in this handbook.

17.3 Energy Performance Contracting (Frozen Rolling Base Incentive)

	A.	General.  Energy performance contracting allows the PHA to qualify 
		for the incentive to freeze the utility rolling base (see 24 CFR 
		990.185). A PHA’s utility expense level (UEL) will be calculated at 
		the pre-retrofit consumption level. The PHA keeps 100 percent of the 
		savings that result from the decreased consumption due to the energy 
		efficiency measures installed, of which 75 percent must be used to 
		pay off the debt and related project costs. 

	B.	Third-Party Energy Performance Contracts (EPCs).  With a 
		third-party EPC, the energy performance contractor must be 
		procured in a manner that provides full and open competition 
		consistent with the instructions in this handbook and 24 CFR 
		85.36. Typically, this means procurement by competitive 

		For Third-Party EPCs, HUD approval is required of:

		A.	The CEA, which the PHA must procure from a qualified vendor

		B.	The RFP for the energy contractor, prior to advertisement. 
			Approval will be based upon a determination by HUD that 
			payments under the contract can be funded from the 
			reasonably anticipated energy cost savings. 

		C.	The final performance contract negotiated between the PHA 
			and the energy performance contractor.

	C.	Self-Managed Energy Performance Contracts.  PHAs may, at their 
		discretion, seek to self-manage an energy performance contract. The 
		energy improvements are procured in the same manner as any other 
		purchases addressed in this handbook. 



                                                          Handbook No. 7460.8 REV 2
		PHAs must be designated Standard Performers or High Performers 
		under the Public Housing Assessment System (PHAS) to complete 
		energy projects without an energy services company.  HUD will 
		consider requests on a case-by-case basis from PHAs designated as 
		Troubled under PHAS when an authority is able to show it has the 
		appropriate capabilities to successfully complete the project.

	For self-managed EPCs, HUD approval must be secured for the following: 

		1.	In lieu of the RFP commonly used with third-party EPCs, 
			the PHA must provide a detailed energy project plan.  
			The project plan will include an assessment of its 
			facility needs; PHA statement of capabilities and 
			internal project processes; an assessment of the 
			agency’s energy opportunities, including capital costs 
			and estimated savings; financial cash flow projections; 
			a project commissioning and preventative maintenance 
			plan; and a measurement & verification plan. PHAs must 
			have on their team a licensed (bonded) professional 
			engineer familiar with performance contracting, 
			commissioning, measurement & verification, state and 
			local codes.  

		2.	An initial plan must be submitted to the HUD field office 
			for review and approval to proceed. After a detailed 
			engineering study is completed, the PHA will submit its 
			detailed project plan for field office review and approval. 
			The detailed study will be based on actual quotes for 
			construction, finance, maintenance, and other costs. The 
			PHA must also identify how it will complete design and 
			construction and integrate the energy project with its 
			ongoing modernization program. Included in its energy 
			project plan the PHA will include a detailed description of 
			its construction management practices and associated 
			financial controls. The description should include 
			protocols for design, construction inspections, 
			construction draws, and requisition approvals.
17.4 Utility Purchasing

Deregulation and restructuring in the utility industry allows utility providers to 
operate like other open markets, with greater competition and choices. These 
changes offer utility consumers such as PHAs an opportunity to achieve lower 
utility costs by purchasing energy directly from the utility providers at lower 
rates, based on a direct rate reduction or from new consumer rate strategies. Where 
deregulation has occurred and there are multiple providers, PHAs must competitively 
procure utilities in accordance with 24 CFR § 85.36.

Alternately, where deregulation has not occurred (a publicly regulated rate 
environment where there is one utility provider for gas, electric, fuel, oil and/or 
water), the PHA is not required to competitively procure utilities. Further, unlike 
other sole source procurements, the PHA does not need to justify the reasonableness 
of the price charged or require HUD approval. 

17.5 Procurement Regulations Pertaining to Energy Conservation Loans and Energy Performance

Conceptually, both strategies are nothing more than financing methods that result in 
energy savings over a period of time. Both operate within the guidelines of all 
Federal procurement regulations specified elsewhere in this handbook.                                                           


                                                          Handbook No. 7460.8 REV 2 

	A.	PHAs must adhere to applicable State and local procurement 
		requirements, as well as the PHA’s Procurement Policy. For 
		example, the PHA must include the form HUD-5370, General 
		Conditions of Contracts for Construction, with all construction 
		contracts for more than $100,000; or form HUD-5370-EZ for 
		construction contracts between $2,000 and $100,000;

	B.	PHAs must treat the energy improvement measures as any capital 
		program and follow requirements for Federally funded construction 

	C.	In capturing the savings, PHAs must conform to the requirements 
		defined in the Operating Fund rule (24 CFR Part 990); 

	E.	With respect to third-party EPCs, negotiating terms and conditions 
		can be a crucial component of the procurement process. 
17.6 Resources

Additional information and expertise on energy conservation loans, energy performance 
contracting, and other energy conservation measures can be found at:

	A.	Relevant Public Housing Notices and Guidebooks 

		1.	Energy Performance Contracting for Public and Indian 
			Housing – A Guide for Participants, prepared by HUD/DOE 
			(2/92). This guidebook, which outlines the details of 
			preparing, implementing, and managing an energy 
			performance contract is available at HUD User 
			(1-800-245-2691),  or the  HUD PIH Energy 
			Conservation Clearinghouse webpage at:

		2.	Energy Conservation for Housing – A Workbook prepared by 
			HUD 9/98. This guidebook outlines the details of preparing, 
			implementing, and managing an energy performance contract. 
			The workbook is available from the Public and Indian 
			Housing Information and Resource Center (PIH IRC) at 
			1-800-955-2232 or the PIH Energy Conservation Clearinghouse 
			webpage at:

		3.	Training Materials for Streamlining Energy Performance 
			Contracting can be obtained at:

		4.	These documents are available from HUD User (1-800-245-2691 
			or or Public and Indian Housing energy site

			a.    Any successor or related notices, handbooks, or 

	B. 	Local HUD. From the beginning of the planning process, view the 
		local HUD Field Office as a partner in the process. Involving the 
		HUD field office early and throughout the project should help to 
		obtain a timely review and approval by HUD. HUD is required to 
		approve key documents in the process and will be able to provide 
		guidance proactively in order to expedite the approval process. 
		The local                                                         


                                                          Handbook No. 7460.8 REV 2

		HUD field office will be able to provide information on other PHAs 
		using performance contracting and sources of technical assistance 
		in the area.

	C. 	If no relevant technical expertise exists within the PHA, the PHA 
		should consider engaging the services of a qualified consultant. 
		These fees can be paid from the savings generated or the capital 
		budget. (Note: Such an individual or firm may not later be 
		included, or compete, in a solicitation for the energy performance 

	D. 	Other Federal and private energy-conservation programs or local 
		utility providers.

	E.	Other PHAs who have successfully implemented these utility 
		conservation measures.  HUD’s energy website related to 
		“Success Stories” can be helpful



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