Tenderloin Achieves Economies of Scale by Bundling Efficiency Projects
Tenderloin Neighborhood Development Corporation (TNDC) is one of the largest community-based affordable housing organizations in San Francisco; it oversees a portfolio of 31 buildings with 15 additional in development. The organization has always taken a holistic approach to community development, pioneering supportive housing in the early 1990s and opening an after school program shortly thereafter. In 2008, TNDC expanded its focus to include sustainability efforts in its building portfolio, and in 2013 the organization hired a consulting company to perform comprehensive energy audits.
In 2015, TNDC hired a Sustainability Program Manager, providing an institutional structure to the organization’s green aspirations. The Sustainability Program Manager worked across various departments within TNDC to revisit the results of earlier energy audits and create a financially feasible plan. Through joint planning efforts, all concerned parties realized it would be more efficient to bundle energy upgrades across multiple buildings, rather than implementing the upgrades on a building-by-building basis. This innovative approach to managing a high number of relatively simple and uniform upgrades allowed TNDC to benefit from economies of scale. The organization also developed a new protocol to use benchmarking data while considering future upgrades across its portfolio, which encourages building conditions to be considered in a systemic manner.
TNDC’s facilities, property management, asset management, and accounting teams had already collaborated to create internal guidelines for drafting requests for proposals (RFPs) for individual energy efficiency projects. However, the existing process proved to be a sub-optimal approach when multiple buildings were put in a queue for near identical scopes of work.
While the new bundled approach to writing RFPs was created to minimize the administrative burden on TNDCs staff, a more detailed but singular RFP was required. A greater level of detail was necessary because some buildings have different co-owners or lenders and TNDC had to ensure that the RFPs listed all efficiency measures and that it requested pricing at the building level. Doing so allowed TNDC to reconcile costs with its accounting department and divide costs among various project budgets.
It was crucial for the RFPs to be extremely specific in laying out expectations that affected cost. For example, the RFPs specified the style of existing fixtures in each building (incandescent, CFL, or linear fluorescent). They also included an appendix listing the location of lighting fixtures in each building. TNDC used budget figures from its 2013 energy audits to draft RFPs in late 2015. This time gap is a challenge that is typical among large multifamily organizations, but it introduced room for error in the budget estimates due to inflation and market changes. Since there are several steps required between the delivery of energy audits and project implementation, a delay of this length is often unavoidable.
Because lighting accounts for a large portion of commercial and multifamily building utility costs in San Francisco, the consulting company that originally performed TNDC’s portfolio-wide energy audit in 2013 created a report that prioritized lighting efficiency upgrades. This increased focus on lighting efficiency is due to the city’s temperate climate, which reduces the need for significant heating and cooling.
The report included calculations for the approximate cost and return on investment (ROI) for upgrades at each building, using data from utility bills, existing electrical systems, and projected savings. Because available lighting technologies had changed significantly since the time when the energy audits were performed (2013) and the time when the RFPs were released (2015), additional investigations were performed by TNDC to ensure the accuracy of recommendations. Most notably, all sensor and control recommendations were considered separately from fixture replacements to allow additional time for testing prior to system-wide replacement.
With the hire of a Sustainability Program Manager and setting aside capital improvement funds for efficiency upgrades, TNDC established an institutional structure for implementing energy efficiency upgrades. The Sustainability Program Manager began monitoring the condition of buildings across the portfolio and planning capital improvement projects specifically related to sustainability. In November 2015, the organization revisited the 2013 energy audit reports to determine which buildings to target first. TNDC also referred to the data it was tracking for the Better Buildings Challenge to analyze which buildings were performing poorly.
TNDC found that bundling the relatively straightforward capital improvement projects together saved project management time and made projects more attractive to contractors because of the inherent benefits bulk purchasing and job site coordination bring with larger scale projects. Managing each of the buildings as separate projects and issuing separate RFPs would require a significant amount of time and money. The same is true for tracking and qualifying for utility incentives that change over time for a scope of work that spans several years. The bundling strategy was especially effective since the work for some buildings was limited to switching out incandescent light bulbs with LEDs. This strategy also encouraged communication and collaboration among building managers, rather than having each building’s project operate in a silo.
TNDC used the expected ROIs to group projects into three phases of efficiency upgrades, which will be completed in 2016.
- Phase I: 8 projects at 5 buildings with a projected ROI of 5 years or less
- Phase II: 6 projects at 4 buildings with a projected ROI of 5-10 years
- Phase III: 9 projects at 7 buildings with a projected ROI of 10+ years
Splitting the projects into three phases improved project management, ensured that TNDC maximized the use of their funds, and allowed TNDC to use lessons learned from Phase I to adapt later phases as needed. For example, TNDC retained the flexibility to combine Phases II and III into a single RFP if Phase I proved to be straightforward and manageable. Even though TNDC included 8 retrofit projects across 5 buildings in its first Phase, it was nevertheless difficult to attract the minimum of three contractors, underscoring the challenges of contracting this type of work out on a building-by-building basis.
Although the improvements will be completed in 2016, TNDC included the necessary funding in its 2015 capital improvements budget, based on the results of its annual facilities conditions assessment and the comprehensive energy audits. TNDC believes this phased approach is ideal for projects implemented across a large portion of its building portfolio and hopes to replicate this model in the future for similar projects, such as plumbing upgrades. Currently, TNDC has issued an RFP for Phase I and is waiting for one more response from contractors. The other two phases will move forward once Phase I is substantially complete, with all work finished by the end of 2016.
TNDC held a Phase I kick-off meeting and invited General Managers, Assistant Managers, and Maintenance Supervisors from each of the affected buildings. This opportunity allowed building staff to provide real-time project feedback and ensure that its staff was informed about the process. More recently, TNDC has re-established its green committee that will, among other efforts; focus on tenant outreach and education related to energy, waste, and water reduction. TNDC is also developing several new resources to enhance its outreach efforts, including a presentation to train building managers and maintenance supervisors about the sustainability program and related capital improvement projects.
Tools & Resources
- Excerpts from Phase 1 RFP
- Sustainability Training Presentation for Building Managers
TNDC will be implementing all three Phases of its energy-efficient lighting upgrades in 2016 and anticipates several benefits from the work. The projected cost savings from retrofits will free up capital for other work. Without the phased approach, it would take TNDC several years to implement these efficiency measures because of the administrative burden. Lessons learned from this project have changed the way that TNDC budgets and plans for similar upgrades to its building portfolio in the long-term. The organization has developed a replicable process that it plans to apply to future upgrades across its portfolio, which encourages staff to view building conditions in a systemic manner, considering if there are other improvements that could be implemented on a larger scale.
Over time, staff budget allocations for project coordination are expected to decrease as this project bundling process becomes the TNDC norm. Until those measured results are in hand, electric consumption for each of the phased properties will be monitored on a monthly basis once the upgrades have been completed to gauge success at a property level. To this end, weather normalized data, taken from Portfolio Manager, will serve as the measure of success when tracking the energy consumption at each property. Per estimates from the historic energy audits, TNDC anticipates an annual energy savings of approximately 118 MMBtu once all three phases are complete. This translates into a 3% source energy reduction as measured against a 2012 baseline for the 11 properties and 500,000 square feet of developed space that are included in the 3 phases of work.
Tenderloin Neighborhood Development Corporation bundled a series of small energy efficiency upgrades together to cut administrative costs. This new organizational protocol has transformed the budgeting and planning process and allowed for more streamlined communication between building managers.
Affordable Housing Non-Profit Corporation
Managing the administrative complexity of implementing a series of small, site specific energy efficiency upgrades
Create a multi-phased administrative model that bundles project tasks and deliverables to achieve beneficial economies of scale
Developed a new organizational protocol that has transformed the budgeting and planning process