Common use of Third Party Financing Clause in Contracts

Third Party Financing. If there is third party financing, then an energy savings performance contract may con- tain a clause: (1) Permitting the financing source to perfect a security interest in the in- stalled energy conservation measures, subject to and subordinate to the rights of the Federal agency; and (2) Protecting the interests of a Fed- eral agency and a financing source, by authorizing a contracting officer in ap- propriate circumstances to require a contractor who defaults on an energy savings performance contract or who does not cure the failure to make time- ly payments, to assign to the financing source, if willing and able, the contrac- tor’s rights and responsibilities under an energy savings performance con- tract; (a) Any amount paid by a Federal agency pursuant to any energy savings performance contract entered into under this subpart may be paid only from funds appropriated or otherwise made available to the agency for the payment of energy expenses and re- lated operation and maintenance ex- penses which would have been incurred without an energy savings performance contract. The amount the agency would have paid is equal to: (1) The energy baseline under the en- ergy savings performance contract (ad- justed if appropriate under § 436.37), multiplied by the unit energy cost; and (2) Any related operations and main- tenance cost prior to implementation of energy conservation measures, ad- justed for increases in labor and mate- rial price indices. (b) Federal agencies may incur obli- gations pursuant to energy savings per- formance contracts to finance energy conservation measures provided guar- anteed energy cost savings exceed the contractor’s debt service requirements. (a) After contractor implementation of energy conservation measures and annually thereafter during the con- tract term, an annual energy audit shall be conducted by the Federal agen- cy or the contractor as determined by the contract. The annual energy audit shall verify the achievement of annual energy cost savings performance guar- antees provided by the contractor. (b) The energy baseline is subject to adjustment due to changes beyond the contractor’s control, such as— (1) Physical changes to building; (2) Hours of use or occupancy; (3) Area of conditioned space; (4) Addition or removal of energy consuming equipment or systems; (5) Energy consuming equipment op- erating conditions; (6) Weather (i.e., cooling and heating degree days); and