ENERGY + INNOVATIONFOR THE LIFE OF YOUR

BUILDING

Energy/Facilities Connection 05.21.08

Ryan Dickerson - Analyst | McKinstry

Agenda Introductions (Ryan Dickerson, McKinstry) What is Total Cost of Ownership? Case Studies Questions?

McKinstry Overview… 47 Year old Seattle Headquartered Company

WA, OR, ID, CO, MN, & WY pre-qualified ESCO Offer Full Service M/E/P Design & Construction Services Largest Dedicated Energy Services Group in the PNW Perform Projects of all sizes ($50k to $15M) Financially strong - $100M in bonding capacity 1200+ dedicated employees (500 professionals & 700 trades) 55 Engineers with 23 LEED Accredited Professionals

Total Cost of Ownership

Where did Total Cost of Ownership Come From?

Developed in the late 1980’s in the computer industry to manage the cost of IT infrastructure

Found that 1st costs were minor in comparison to infrastructure & support costs

Developed an integrated financial modeling tool for projects

Difficulties in Achieving High Performance Buildings

Typical approaches are fragmented – not integrated! No connections between first costs, operations costs, and

sustainability Design decisions are often first cost driven Last minute Value Engineering! LEED is based on a scorecard and not long term building

functionality

What options are currently used to make decisions?

Option Pros ConsValueEngineering

Effective formanaging 1st costdecisions

Only evaluates a single component,not the overall financial picture

Pro Forma Tracks developerssoft costs

Doesn't evaluate impacts of designdecisions on holistic budget

LEED Integratessustainability

Doesn't evaluate the long termfinancial of sustainability

Operating CostBudget

Good for managingongoing operationsbudget

Can't integrate with first costdecisions

DesignCharrette

Good for generatingsustainable ideas

Not a financial tool to evaluatedecisions

Are We Improving?

Is the design and construction industry improving as an industry?

How far have we come over the past 30 years as compared to other industries?

Industry Example:

Boeing changed the airline industry

Vertical Integration Outcome Focused Approach Span of Control Aligned All Parties

How does TCO Create High Performance Buildings?

What do you get with TCO? Decision making platform – considering all factors! Integration of all financial elements related to a building Clear view of NOI/ROI for each element of a project Integrates first cost with long term costs Allows for pragmatic assessment of sustainable features

Financial Model Tailored to Each Project

Evaluate Design Concepts

TCO

First cost

Capital

Renewal

costs

Program

Flexibility

costs

Operational

costs

Operational

benefitsImproved

productivity

Risk

Management

Energy

modeling

TCO

First cost

Capital

Renewal

costs

Program

Flexibility

costs

Operational

costs

Operational

benefitsImproved

productivity

Risk

Management

Energy

modeling

LEED / Carbon Footprint

Sustainability as an Evaluation/Outcome

You can be pragmatic about sustainability

High performance buildings do not need to be a first cost premium

TCO evaluates the cost and benefits of LEED points across all segments of the project

Mitigate Impact on Capital Expenditures

TCO can forecast capital improvements over life of building

Evaluate impact of first costs on future expendituresCapital Expenditures

Description First Cost Depreciable Portion

of First CostAverage Time

to ReplaceNPV

Structural and FinishesCeiling Finishes 10,363,197$ 25% 20 $6,960,493Exterior Doors 1,201,003$ 80% 30 $1,626,505Interior Doors 16,996,007$ 80% 30 $23,017,506Exterior Windows 5,713,861$ 65% 15 $9,037,502Flooring and Floor Finishes 29,565,591$ 50% 7 $69,624,573Wall Finishes / Exterior & Interior 12,191,996$ 60% 10 $30,204,391Partitions 13,106,396$ 65% 40 $17,580,035Roofing 1,993,436$ 100% 17 $5,046,706Yearly Renovation Costs 2,000,000$ 100% 1 $8,364,403

Communication and Control SystemsCommunications and Security 3,166,280$ 80% 10 $10,458,834Controls and Instrumentation 1,819,701$ 85% 10 $6,386,501

Mechanical/Electrical/Plumbing/Fire CodeHVAC 40,641,844$ 80% 30 $55,040,804Electrical Systems & Distribution 38,315,263$ 60% 10 $94,922,040Plumbing 16,973,187$ 60% 30 $17,239,951Fire Protection 3,043,915$ 30% 40 $1,884,416Conveying 4,080,000$ 85% 30 $5,870,843Other Special Systems and Devices 58,172$ 100% 10 $290,751Total Capital Renewal Cost $363,556,252

Truly Understand Operational Costs

Vast database of historical operations information to build the model

TCO aides decision making to minimize operations impacts

TCO helps bridge the gap between capital planning and operations department to achieve decision buy in.

Maintenance and Repair Summary

Maintenance & Repair Mixed UseBase

DesignCurrent Option

Elevator 0.35 0.35 0.35HVAC 0.15 0.15 0.15HVAC Controls 0.05 0.05 0.00Water Treatment 0.18 0.20 0.20Electrical 0.03 0.03 0.03Struc/Roof 0.06 0.06 0.06Plumbing 0.03 0.03 0.03Fire/Life Safety 0.08 0.08 0.08General Exterior 0.17 0.17 0.17General Interior 0.35 0.35 0.35Other/Contract 0.20 0.20 0.20Salaries 0.20 0.20 0.20Generator 0.12 0.12 0.12Data Center/Labs 0.10 0.10 0.10Total 2.07 2.09 2.04

Current DesignBenchmark

Operations Costs

Utilities25%

Security12%

Roads and Grounds2%

Maintenance20%

Custodial33%

Administrative8%

Utilities

Security

Roads and Grounds

Maintenance

Custodial

Administrative

Productivity – Improve Physical Learning , Teaching & Research Environment

Evaluate qualitative aspects of the building Evaluate success meeting tenant and owner priorities

PRIORITY VALUE CURRENT SCORE PRIOR

CATEGORY ITEM (1-10) (points) ( % VALUE)

PRODUCTIVITY Individual Work areas 7 20 0.80 16.00Team collaboration space 9 20 0.30 6.00Supervision adjacency 6 5 0.80 4.00Ammenities access 5 10 0.70 7.00Lab access 7 5 0.90 4.50

CATEGORY TOTAL 60 37.50

ENVIRONMENT Outside Air 7 5 0.75 3.75Natural Light 8 5 0.80 4.00Ceiling Height 4 5 0.60 3.00Noise Levels 6 5 0.60 3.00

CATEGORY TOTAL 20 13.75

SATISFIERS Food Service 8 5 0.90 4.50Shower & Bike Facilities 4 3 0.50 1.50Covered/proximate Parking 5 2 0.50 1.00Privacy Areas 7 5 0.60 3.00Interaction Areas 9 5 0.60 3.00

CATEGORY TOTAL 20 13.00

Total Score 64.25

TCO Quantifies Carbon Emissions Quantify Emissions From:

Energy Usage Worker Travel Material Shipping

Carbon Footprint Measurement Develops a System for Measuring Carbon Both During and After Construction

Offset PricingGJ Energy Used Metric Tonnes Pounds

Type of Vehicle Fuel Fuel Benchmark Customized Benchmark CustomUnit Type GJ/Unit GJ/Unit kg CO2/GJ CO2/GJ

1 Case Backhoe 50 Gallons Gasoline 0.130204 7 69.25 0.45 994 4.66$ 2 Dump Trucks 1,000 Gallons Diesel 0.140424 140 74.01 10.39 22,916 107.43$ 3 Excavator 200 Gallons Gasoline 0.130204 26 69.25 1.80 3,976 18.64$ 4567

Emissions Totals 1,250 173 13 130.73$

Total Energy Used

Metric Ton CO2

Type of Fuel UsedFuel Used Energy Used

Amount of Fuel UsedGJ Per Fuel Unit

lbs CO2

EmissionsBased on Terra Pass Pricing

Scale

Emissions Factorkg CO2 per GJ

Wide Range of Project Types Leveraging TCO

A Commercial Real Estate Project used TCO: To evaluate designs against previous benchmarks

K – 12 School District Client Project used TCO: To facilitate team communication Instead of traditional value engineering

Higher Education Project: To develop a Sustainability Master Plan

A Healthcare Project used TCO: To evaluate remodel vs. new construction scenarios

Keys to Successful Sustainable Projects

»Involve Entire Team»Understand the Desired End Result»Focus on the Real Project Drivers and Financial

Assumptions / Requirements»Integrated and Guaranteed Turn-key delivery»Stay Committed

Average Savings of High Performance Buildings

Energy Savings

30%

Carbon Savings

35%

Water Use Savings30-50%

Waste Cost Savings50-90%

“For the Life of Your Building” McKinstry projects have eliminated 150,000 metric ton of CO2 emissions in

the past five years. This equates to: Planting 9 million trees Removing 8,500 cars from local highways

McKinstry has saved customers nearly 150 million kWh & 10 million Therms in the past five years. That equates to

Converting 1 million 60-watt incandescent bulbs to fluorescent bulbs Converting 200,000 showerheads from 2.5 gpm to 2.0 gpm.

On average, McKinstry uses over 2 million pounds of steel annually, of which: 1.3 million pounds is recycled. The recycled content saves enough energy to power over 110 American

households per year.

Questions?