A Decision Support Tool for Building Leasing
Strategies to Achieve the Executive Order Mandate
for Federal Government Green Buildings
E.O. 13514:Federal
Leadership in
Environmental,
Energy , and
Economic
Performance
How to Go Green and Save $
Members:
Alexandre Cheytanov
Nathan Bales
Paramjeet Khanna
Chris Swift
Sponsor:
Federal Aviation
Administration
Federal Aviation Administration-FAA
• Mission: “To provide safest, most efficient
Aerospace System in the world.”
DOT
FAA
NHTSA
FTA
FRA
– 16 Billion Dollars Budget,
– Employed over 48,000 people
3
….
Real Estate Property at a Glance
Air Traffic Organization
Aviation Safety 
Total Real Estate
Number of
Properties
Structures
42,813
Land
7,084
Buildings
10,739
4
• Owned
9,658
• Leased
1,081
Administration Operations
REMS Excel File OCT 1 2012 from FAA
aviation Logistic Division
Geographic Location for FAA Leasing
•
•
•
•
Western Service Area (WSA)
– AWP=Western Pacific Region
– ANM=Northwest Mountain Region
– AAL=Alaska Region
Central Service Area (CSA)
– ACE= Central Region
– ASW= Southwest Region
– AGL= Great Lakes Region
Eastern Service Area (ESA)
– AEA= Eastern Region
– ANE= New England Region
– ASO= Southern Region
Technical Centers/Headquarters
– ATC=William J. Hughes Technical Center
– AMC=Mike Monroney Aeronautical
Center
– HQ
5
Reference
http://www.faa.gov/about/office_org/head
quarters_offices/arc/
Service Area Building Distributions
300
253
Number of Buildings
250
203
200
176
150
105
100
50
0
6
FAA Service Areas
Source: REMS Excel File OCT 1 2012 from
FAA Aviation Logistic Division
WSA
CSA
ESA
CTR
Office of Regions and Center
Operations (ARC)
• Real Estate Contract Officers (RECO)
– Lease acquisition process
– Cost analysis of current and potential leases
– Negotiations for lease renewals and potential new leases
– Managing buildings condition and problems (reported by
employees)
7
Current RECO Leasing Process
Negotiations
Selection
8
Reference:
http://fasteditapp.faa.gov/ams/do_action
Electricity Projections
2011 US Government Spent $7 Billion dollars on energy
10
Source: U.S. Energy Information
Administration
Natural Gas Projections
2011 US Government Spent $7 Billion dollars on energy
11
Source: U.S. Energy Information
Administration
Environmental Concerns
• Commercial Buildings account for
– 39.4% of total US energy consumption
– 38.1% of total Nations CO2 emissions
– 12.4% of total water use in the US
12
Reference:
ww.epa.gov/greenbuilding/pubs/faqs.htm#
5
Benefits of Green Buildings
• 30% Lower Operating expense
• Use less energy
– 25% decrease in electricity consumptions
– 11% decrease in water consumptions
• 27% increase satisfaction of occupants
13
Reference :http://greenbuildingelements.com/2011/11/20/greenfederal-buildings-are-a-financial-saving-as-well/
Executive Order 13514
• Executive Order 13514-was signed by President Barack Obama on
October 5th 2009
• Main E.O.13514 goals for All Government agencies:
– Establish a Strategic Sustainability Performance Plan
– Prioritize actions based on lifecycle cost and Return on
Investment
– 15% of all Buildings that are: > 5000sq. ft. need to be
converted into “Green Buildings” by FY2015
• with annual progress towards 100% compliance
* Green Buildings are High Performance Sustainable Buildings as outlined by the E.O.13415
Reference:
www.fedcenter.gov/programs/eo13514
Leadership In Energy and
Environmental Design (LEED)
Created by the United States Green Buildings Council (USGBC) to
evaluate new and existing buildings
Prerequisites and Credits
Possible
points
Sustainable Site
26
Water Efficiency
14
Energy and Atmosphere
35
Materials and Resources
10
Indoor Environmental quality
15
Innovation in operation
6
Regional priority
4
16
Score
Bonus Points
Reference: http://new.usgbc.org/leed/
Award
Scale
Certified
40-49
Silver
50-59
Gold
60-79
Platinum
80+
FAA Gap
FAA Building Inventory
45
40
40
35
Percent of Total Buildings
35
30
30
25
25
Sustainable
Sustainable Projection
20
20
15
y = 0.1412ln(x) + 0.6298
R² = 0.82607
15
10
5
5
5
5
0
0.6
0.7
0.9
7
0.8
9
11
2015 Gap
0.8
Fiscal Year
18
Executive Order
Source: REMS Excel File OCT 1 2012 from
FAA Aviation Logistic Division
2020 Gap
Stakeholders
Stakeholders
Objectives
Tensions
Oversight Groups
Energy targets/
Education/
Guidance
Targets/
Feedback
Federal Aviation
Administration (FAA)
Develop/Implement
sustainability policy and
plans
Additional requirement
with Existing resources
Taxpayers
Money being used wisely
Hold Congress/
White House
accountable.
Manufacturers
Observers/Produce
Profit/Changes
DOE, EPA, Federal Energy
Management Program
(FEMP)
20
Decision making factors and interactions in
the building leasing process
Green Rent
Premium
+
Cost of Existing
Building
($ per sq/ft)
+
Life Cycle Costs
LCCLA
-
∑
Renovate
Aging
+
Life Cycle Costs
Cost of Renovating
to LEED building
($ per sq/ft)
Cost of Green
Technology
Acquire Green Lease
Fulfill E.O.13514
21
-
Encourage
Innovation
Life Cycle Costs
High
Energy
Cost
Cost of Relocating to
LEED Building
($ per sq/ft)
Relocate
E.O.13514
Increased
Market
Availability
-
New Green
Innovations
- Water
- Energy
- Capital
Problem
• Target
– Out of 1081 total Leased Buildings 125 Fall within
E.0.13514
• Identify 15 to help FAA achieve 15% overall Goal.
• Actual status of FAA progress
– As of FY 2012, <1% of direct leases have been identified
– No extra budget will be appropriated for this process
• RECO approach to lease acquisition
– Currently are concerned with upfront costs of rent not life-cycle costs
23
Need Statement
• A system/process is needed to help RECO’s analyze
life-cycle costs and benefits and to suggest a course
of action to provide a “win-win” solution for all
stakeholders
1. To satisfy EO 13514 goals (Environmental)
2. To meet FAA’s financial requirements (Net-zero
life-cycle cost)
3. To minimize impact for employees that may be
affected
24
Mission Requirements
• The system shall analyze the costs and benefits for each
alternative for each building
• The system shall rank most cost effective buildings and which
alternative is best
• The system shall give probability of breakeven with 95%
confidence
• The system shall calculate total life-cycle savings with 95%
confidence
25
Design Alternatives
1. Status Quo
– Renew current without HPSB
– E.O.13514: Not Met
2. Renovation
– Renew with HPSB renovation
– FAA does not cover renovation costs
– E.O.13514: Met
3. Relocation
– Move operation to an HPSB
– Initial Relocation costs
– E.O.13514: Met
27
Design of Experiment
Lease #
Inputs
XXXXXX
-XX-X00017
Building
Lease Annual
# of
Size
Region
Term Rent
Occupants
(sq.ft.)
(yrs.) ($/yr.)
Status Quo
Conversion
10950
10950
ASO
ASO
53
53
5
5
Outputs
Elect.
Elect.
Unit
Usage
Cost
(kWh/yr.)
($/kWh)
$165,995
122840.7
.31
$175,955
98272.52
.03
0.0867
0.0867
Natural
Gas
Usage
(cu.ft.)
305472.
72
1.
2.
244378.
3.
18
4.
5.
Relocation
28
10950
ASO
53
5
$175,956
98272.52
.03
0.0867
244378.
18
6.
7.
Natural
Water
Water
Relocatio
Water
Total
Gas Unit
Usage
Disposal
Emissions
n Costs
Unit Cost
Life-cycle
Cost
(1k
Costs
(kg)
($)
($/1k gal)
Cost
($/cu.ft)
gal/yr)
($/1k gal)
0.0097
0
290.374
3.35
1.97
$938,966.0
350,834.95
0
System Assumptions:
Square footage remains the same
Number of employees remains the same
$974,046.0
0.0097HPSB
0 is available
232.299 3.35
in the1.97
market0 area280,667.96
Relocation: will remain in the same
market
Renovation: Lessor agrees to pay/perform
$1,019,846
work 3.35
0.0097necessary
45800 232.299
1.97
280667.96
.00
Partial service lease: Includes M&R costs
Utility costs are separate from rent
Method of Analysis
EIA
Energy Data
Consumption
Data
Data & Cost
Analysis
Elect.
Nat.Gas
Water
Historical
Data
Distributions
Capital Cost
Distribution
Lease Data
Water Cost
Distribution
REMS
Life Cycle Costs
Stochastic
LCCLA
ΔCapital, ΔEnergy,
ΔWater
Energy Cost
Distribution
Square ft./HPSB
Deterministic
LCCLA
∑Capital+∑Energy+∑Water
Lease Term
Location/Climate Zone
Electricity Price/Consumption
Natural Gas Price/Consumption
Water Price/Consumption
Rent Premium Price
Capital/Initial Price
Building
Properties
Capital
CBEC
Capital Cost Data
GSA
Phase 1
30
Phase 2
Phase 3
Breakeven/
Variances
Net-Zero
Ranking
Method of Analysis
OMB A-94 Standard:
Deterministic
LCCLA
∑Capital+∑Energy+∑Water
Evaluation for cost-effectiveness, leasepurchase, and for internal government
investment
• Two Part Government Wide
Standard
1. Equation
2. Building Life-Cycle Cost (BLCC)
N
N
N
N
CElec
CNG
CWater
CRe nt
OMB = å
+
+
+
å
å
å
t
t
t
t
(1+
d)
(1+
d)
(1+
d)
(1+
d)
t=0
t=0
t=0
t=0
N =Length of Lease
D =Discount rate used to adjust cash flow to present value
CElec = Annual Electricity Cost
CNG = Annual Natural Gas Cost
CWater = Annual Water/Disposal Cost
CRent = Annual Rent Cost
31
Method of Analysis
EIA
Energy Data
Consumption
Data
Data & Cost
Analysis
Elect.
Nat.Gas
Water
Historical
Data
Distributions
Capital Cost
Distribution
Lease Data
Water Cost
Distribution
REMS
Life Cycle Costs
Stochastic
LCCLA
ΔCapital, ΔEnergy,
ΔWater
Energy Cost
Distribution
Square ft./HPSB
Deterministic
LCCLA
∑Capital+∑Energy+∑Water
Lease Term
Location/Climate Zone
Electricity Price/Consumption
Natural Gas Price/Consumption
Water Price/Consumption
Rent Premium Price
Capital/Initial Price
Building
Properties
Capital
CBEC
Capital Cost Data
GSA
Phase 1
32
Phase 2
Phase 3
Breakeven/
Variances
Net-Zero
Ranking
Method of Analysis
33
Method of Analysis
Deterministic
LCCLA
∑Capital+∑Energy+∑Water
34
Life Cycle Costs
Method of Analysis
Current FAA analysis vs. LCC analysis for 2 Buildings
$450.00
$417.98
$400.00
$352.31
$366.26 $366.86
$350.00
$300.00
LCCLA better
estimate for
evaluating lease
options
Status Quo LCC/Sq ft
$0.00
DTFAEA-04-L-00017
Building A
DTFAEA-98-L-15465
Building B
Lease Contract
35
Renovate LCC/Sq ft
Relocate
Renovate
Status Quo
$50.00
FAA/Sq ft
Current
$100.00
Relocate
$150.00
Renovate
$200.00
Status Quo
$241.60 $237.32 $239.46
$250.00
Current
Cost/ Sq ft
$265.50
Relocate LCC/Sq ft
Method of Analysis
EIA
Energy Data
Consumption
Data
Data & Cost
Analysis
Elect.
Nat.Gas
Water
Historical
Data
Distributions
Capital Cost
Distribution
Lease Data
Water Cost
Distribution
REMS
Life Cycle Costs
Stochastic
LCCLA
ΔCapital, ΔEnergy,
ΔWater
Energy Cost
Distribution
Square ft./HPSB
Deterministic
LCCLA
∑Capital+∑Energy+∑Water
Lease Term
Location/Climate Zone
Electricity Price/Consumption
Natural Gas Price/Consumption
Water Price/Consumption
Rent Premium Price
Capital/Initial Price
Building
Properties
Capital
CBEC
Capital Cost Data
GSA
Phase 1
36
Phase 2
Phase 3
Breakeven/
Variances
Net-Zero
Ranking
Example of Phase 3 Outputs
• Total Buildings Evaluated: 125
• Simulated: Partial Service Leases
to capture savings from energy
reduction
• Generated: Break even and
Confidence interval graphs for
each building
37
Break Even Good Case
Good
Building Id: 92
State:PA, Coraopolis
Size:14,662sq/ft
Employees:40
Term: 10 years
Break Even Probability
• 76% Probability
38
•
•
•
•
•
Bad
10 Year Lease
~15,000 Sq. Ft
ESA:Building
Pennsylvania
Id: 90
Higher Energy Unit Cost
State:NJ, Linwood
~40 Employees
Size:14,000
Employees:75
Term:10 Years
Break Even Probability
• 55% Probability
76% Probability of breaking even
Break Even Bad Case
•
•
•
•
•
39
55% Probability of breaking even
10 Year Lease
~15,000 Sq. Ft
ESA: New Jersey
Lower Energy Unit Cost
~75 Employees
Sample Confidence Interval
•
•
•
•
•
•
•
•
Confidence In Decision
CI level: 95%
Lower Bound:-153,146
Upper Bound:323,342
•
•
•
10 Year Lease
~15,000 Sq. Ft
ESA: Pennsylvania
Higher Energy Unit Cost
~40 Employees
Confidence In Decision
CI level: 95%
Lower Bound:-801,890
Upper Bound:923,140
$ 153,000
$ 323,000
Costs
Savings
Sensitivity Good Case
-50.2%
44.5%
5.3%
Sensitivity Components
41
5.3
• Capital Costs are primary
contributors
Sensitivity Component
- Reduced in negotiation
• Higher Energy Cost
- Positively contribute
towards a higher break
even point
Sensitivity Bad Case
-49.8%
49.7%
0.3%
• Lower Energy Costs
- Negatively contribute
towards a higher break
even point
• Target Buildings with:
- Lower capital cost &
Higher energy cost
42
Value Hierarchy Survey
Surveyed 20 potential
users agency wide
• Primary Users:
– RECO
– Management
• Additional Users:
– ALO – Logistics Program
Office
– Finance Office
44
Value Hierarchy
Utility Analysis Shows:
• Larger buildings would be
the best candidates
– Due to bigger reduction
in energy consumption.
“Due to FAA’s limited
resources, rank buildings by
HPSB compliance and cost
effectiveness. ”
-Mr. Adhikari
Program Mgr. for HPSB ALO FAA
45
Utility
Addition to Compliant
Inventory
0.378
Efficiency
0.315
Employee Satisfaction
0.307
Electricity Reduction
0.379
Natural Gas reduction
0.293
Water Usage reduction
0.328
Cost Benefit Analysis
Utility vs. Costs of Top 15 Buildings
0.90
0.80
0.70
Utility
0.60
0.50
Status Quo
0.40
Renovation
Relocation
0.30
0.20
0.10
0.00
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
Cost
46
$3,000,000
$3,500,000
$4,000,000
$4,500,000
Results
47
Rank
State
Lease Contract
Square Feet
Net-Zero
95% CI Variance
Utility
1
DC
XXXX-XX-XX-62656
40,363
$416,091
$1,489,704
0.691
2
CA
XXXX-XX-XX-00103
123,876
$200,219
$1,112,147
0.743
3
PA
XXXX-XX-XX-00009
14,662
$85,782
$854,098
0.566
4
NJ
XXXX-XX-XX-00017
14,000
$59,930
$851,372
0.561
5
MT
XXXX-XX-XX-00015
23,477
$48,627
$850,441
0.583
6
ME
XXXX-XX-XX-R1844
10,800
$33,472
$988,855
0.555
7
ME
XXXX-XX-XX-00010
7,500
$14,460
$851,589
0.555
8
VA
XXXX-XX-XX-62481
15,155
$7,277
$848,597
0.535
9
PA
XXXX-XX-XX-16427
6,700
$355
$627,984
0.541
10
NM
XXXX-XX-XX-01361
5,618
$340
$8,750
0.534
11
MO
XXXX-XX-XX-00116
7,645
-$3,281
$834,920
0.533
12
MI
XXXX-XX-XX-00138
10,000
-$4,271
$837,726
0.573
13
OR
XXXX-XX-XX-00193
5,200
-$5,081
$845,531
0.550
14
CA
XXXX-XX-XX-00012
5,000
-$6,328
$837,425
0.562
15
AK
XXXX-XX-XX-00009
8,700
-$6,895
$839,745
0.574
Recommendations
1. LCC Lease Analysis is a better estimate for
evaluating leasing options
2. Its all about **LOCATION*&*ENERGY**
3. Target partial service leases
– If not possible, negotiate for a lower rent cost
due to energy savings over length of lease
49
Proposed Future Work
• Case Study
– Apply case study to identified building
– Collect actual consumption data for
• Baseline
• Alternatives
• Validate LCCLA simulation with case study
findings
50