Intelligent Buildings and the Competitive Bid-Spec Process CABA IIBC Landmark Research 2012 Continental Automated Buil

1. Intelligent Buildings and the Competitive Bid-Spec Process CABA IIBC Landmark Research 2012 Continental Automated Buildings Association (CABA) Project Webinar March 19, 2012 1

2. The Continental Automated Buildings Association (CABA) and the Intelligent and Integrated Buildings Council (IIBC) • CABA: • The Continental Automated Buildings Association (CABA) is an international industry association dedicated to the advancement of connected homes and intelligent buildings technologies • CABA has over 300 major private and public technology organizations committed to research and development within the intelligent buildings and connected home sector. Association members are involved in the design, manufacture, installation and retailing of products for home and building automation • CABA is a leader in initiating and developing cross-industry collaborative research, under the CABA Research Program • IIIBC: • The IIBC was established by CABA to specifically review opportunities, take strategic action and monitor initiatives that relate to integrated systems and automation in the large building sector • The Council's projects promote the next generation of intelligent building technologies and incorporates a holistic approach that optimizes building performance and savings • The IIBC works to strengthen the large building automation industry through innovative, technology-driven, collaborative research projects – each year the Council undertakes a major “Landmark Research Study” that is of particular relevance and timeliness to the commercial building s automation sector 2

3. 2012 IIBC Landmark Research: “Intelligent Buildings and the Competitive Bid-Spec Process” Selection Background • Landmark Research Selection: • In November 2011, the CABA IIBC Executive met to discuss the selection of the next piece of IIBC Landmark Research for 2012, from the many suggested topics in the CABA Membership Survey • From the short-listed projects, it was the consensus of the IIBC Executive and CABA, that a thorough examination of the “Competitive Bid-Spec Process” would be most beneficial – in terms of timeliness, and benefit and payback to members active in the commercial Intelligent and Integrated Buildings sector • The adoption and integration of intelligent building systems in new building and retrofit construction is often favored at the outset of a building project – but is frequently sidetracked, derailed, or abandoned as the building project makes its way from conceptual design through to completion • To gain a greater understanding of how, when and why this happens in many building projects, and which intelligent and integrated systems are affected most often by decision-makers, a study of the Competitive-Bid Spec Process aims to uncover, document and provide actionable insights, to mitigate these circumstances 3

4. Intelligent Buildings and the Competitive Bid-Spec Process: Research Study Background CABA has drafted a preliminary Research Prospectus for this Landmark Research Project. The prospectus was developed via discussions with industry participants – property owners and operators, developers, OEM’s, industry consultants, installers, and others relevant to the construction supply-chain. It can be viewed and downloaded at: http://docs.caba.org/documents/research-program/Prospectus-BidSpec.pdf ___________________________________________________________________ Situational Background: • The building technology and related services industry is fairly heterogeneous, in that the ultimate decision on technology adoption, service integration, retrofit projects and other on-going developmental plans are often dependent on the influence and needs of various service partners • There is a noticeable divide between various stakeholders that leads to delays in technology adoption and implementation of service projects. This may be attributed to the variations in available incentives to various stakeholders, and the fact that these are often not aligned properly to credit any particular category of stakeholder • Often low-cost technology, with quick payback, is favored over smart controls and automated solutions that may have a higher upfront cost, but could potentially lead to measurable returns in the long-term • Beyond cost reductions, it is imperative that a closer look at energy intensity of buildings and their mechanical systems are taken into consideration when designing for long-term sustainability 4

5. Intelligent Buildings and the Competitive Bid-Spec Process: Research Study Purpose • PURPOSE OF THE RESEARCH: • The overall purpose of this collaborative Landmark Research study is to: • Greatly improve the understanding of the market imperfections and the inconsistencies that exist in designing and implementing intelligent building projects • To provide a better understanding of how investment decisions on integrating intelligent technologies are made, and by whom in the decision-making process • The research should create the foundation for potential next steps by project participants: • To improve product/services market development • To develop methods to unify stakeholder decision-making processes • To develop vertical partner strategies and strategic alliances • To develop or enhance training and coaching, where necessary, and • To provide information on product demand into other parallel market segments and other business areas 5

6. Intelligent Buildings and the Competitive Bid-Spec Process: Research Objectives • High-Level Research Objectives: • As industry participants have indicated, there is not a “single” or uniform bid-spec process to follow, in all situations. Given the nature and purpose of the construction project, and segment of the market where new and retrofit projects occur – the process can be very dissimilar, in all eventualities. • Understanding this, the suggested outcomes of this collaborative research project should identify the following: • How, where, when and by whom, key decisions are made in the bid-spec process • The common and most frequent “pain points” in the process, and the scenarios under which they occur • The primary drivers and barriers of adopting intelligent building technologies • The key determinants of product and service selection, by type of decision-maker and at what juncture in the process • How supply-chain partners and building owners may best take a joint view of fundamental issues, throughout the process • The key success factors necessary to bridge the divide between supply-chain participants and key-decision makers • The critical work-streams and action plans necessary for implementing various collaborative goals, objectives and initiatives amongst stakeholders 6

7. Intelligent Buildings and the Competitive Bid-Spec Process: Value of the Study • THE STRATEGIC PERSPECTIVE: • The research study should provide participants with actionable outputs: • Understanding of competing strategies, needs and communications of building control systems commissioners, IT engineers, buildings developers, facilities managers, architects, and other stakeholder and supply chain partners • Identification of market demand and growth areas for new and existing products • Determination of product preferences for building owners/contractors/end-users, and the reasons thereof • Definition of critical success factors to expand product offerings to end-user markets • Establish a market approach and foundation for inclusive strategic decision-making efforts • Identification of key internal/external challenges to create a strong position for market particpants • Identification of the foundation for next steps by participant organizations • Identification of potential incentives and credits to represent stakeholders judiciously • Identification of mid-range/long-range opportunities for implementation 7

8. Intelligent Buildings and the Competitive Bid-Spec Process: Bid Solicitation (Generic) • Bid Solicitation • The process of making published construction data readily available to interested parties • Construction Managers • Contractors • Public Information • There are several services, including government entities and private planrooms, that allow project owners to release project details to solicit and obtain contractor bids • These services act as a gateway for project owners to release project information to a large group of contractors, general contractors or subcontractors in an attempt to solicit bids • Many of these services are subscription based or charge a flat rate for project data Bid Procurement and Project Delivery • Common methods of construction project delivery - all can be used to successfully plan, design and undertake a given construction project • Traditional Procurement • Design-Build • Design-Bid-Build (DBB) • Construction Manager as Constructor • Negotiated Approach • Digital procurement 8

9. Intelligent Buildings and the Competitive Bid-Spec Process: Basic Inclusions - Generic • Some Basic Requirements of a Bid-Spec: • Intended use of the product, or the intended need for the service provided • Detailed product requirements (materials used, minimum and maximum parameters, etc.) • Detailed service requirements (what must be provided, what service performed) • Performance requirements (what must it do, how is the work performed) • Product certifications, professional licenses or required training • “Build Inspection” at manufacturer’s facility during production • Space or weight restrictions • Parties handling the installation • The utilities that are available • Warranties (time period, parts and labor, onsite service and repair, extended warranty) • Training requirements, instructional and maintenance materials • Delivery instructions and Quantities needed • Timing and destination of deliveries • Specific responsibilities and timing of each party in the process 9

10. Intelligent Buildings and the Competitive Bid-Spec Process: Specific Inclusions - Sample In Preparing for Submitting a Project Bid: Steps in the Process Writing and documenting the proposal, in response to the Bid-Spec process, is seen as a time-consuming, laborious task that does not generate revenue • Prepare bid • Capture and evaluate inquiry, plan bid prep. • Capture inquiry • Complete inquiry • Translate customer requirements in product Model • Evaluate inquiry • Plan bid preparation • Draft technical solution • Identify similar solutions • Configure solution concept • Specify missing solution components • Calculate technical solution • Specify delivery conditions • Determine resource specific costs • Add overheads and surcharges • Fix price • Prepare bid document • Compile results into bid document • Write covering letter • Check and authorise bid • Send and present bid • Follow up bid • Archive bid • Check customer reaction • Negotiate contract • Document results of bid preparation • Handle order • Compare ‘to-be’ and ‘as-is’ • Compare bid and processed order • Analyse deviations • Feed back analysis and initiate actions 10

11. Intelligent Buildings and the Competitive Bid-Spec Process: Problems in the Bid-Spec Construction Process Common Interface Problems Amongst Construction Parties: Post Bid-Spec Study Conducted in Saudi Arabia, June 2009: All Parties Involved in Construction Process • Major Category Problems: • Financial problems • Inadequate contract and specifications • Other common problems • Specific Problems in Process: By Rank Order • Financial Problems • Violating Contract Conditions • Inadequate Contract and Specification • Low Construction Budget vs. Requirements • Delayed Progress Payments by Owner • Project Cost Estimate Inaccurate • Local Laws/Governmental Agencies/Codes • Insufficient Specification • Materials/Labor Price Changes • Insufficient Work Drawing Details • Poor Planning and Scheduling • Owner Slow Decision- Making • Skills and Productivity of Laborers • Lack of Communication – All Parties • Poorly Written Contract • Change Orders • Delay in Project Finish • Lack of Management Supervision *** NOTE: At least 12 of 18 directly related to Bid-Spec 11

12. Intelligent Buildings and the Competitive Bid-Spec Process: Problems in the Bid-Spec Construction Process (Continued) Present Day Scenario Missinterpretations lead to wrong calculations - the most wrong will often win the contract Planning / specifying: Only counting of inputs and outputs Seldom an automation schematic, and no complete Points List Dissatisfaction with all participating Proprietary control-specifications,or snippets from various vendors' guidespecs are often combined through the process Performance criteria and cost factor functionsare not clearly defined (the complete engineering) 12

13. Intelligent Buildings and the Competitive Bid-Spec Process: CABA IIBC Member Observations – Process Problems • CABA Teleconference, March 2 – IIBC Member “Pain Points” Discussion • Participants • Ingersoll Rand/Trane/ Schlage, Priva, Philips, Honeywell, Diebold, Realview, GE, SecurTek, Bell, Cadillac-Fairview • Agreed • Need to understand gaps in Bid-Spec Process • What influence channel partners play in process • Identify reasons for disconnects, lack of consensus, plausible resolutions • Greatly improve understanding of process imperfections and inconsistencies that exist in designing and implementing intelligent building projects • Identify the factors and influencers/decision-makers that have the most impact on intelligent technologies decisions • Study research prospectus needs to create foundation for potential next steps • To better understand how/ where/why the process often has; • Unfocused objectives • " Moving goal posts" • Unpredictable results • Identifying key opportunities for improvement • For use by individual members or by the IIBC, as potential action items 13

14. Intelligent Buildings and the Competitive Bid-Spec Process: CABA IIBC Member Observations – Process Problems (Continued) • Uncovering the Main “Pain Points" in the Process: • Where it Starts, How it Gets Derailed, and by Whom • Independent Engineering Consultants (overwhelmingly – too much power and influence in the process) • Owners, Developers and Architects • Those identified as "value engineering" intelligence out of building construction – cost • The Result • Cuts across market segments, new vs. retrofit, building types and other key variables in a horizontal fashion, and is not particular to any one segment • Primary Determinants identified - lack of understanding/caring about building life-cycle costs • Misunderstanding/not caring of the value-proposition of intelligent systems • Perceived ROI (+2 years – Unacceptable to Owners) • Cutting of intelligent systems first when budget ceilings are reached • Specs often built around mechanics instead of performance - negating argument/consideration of life-cycle cost • Decision-making process, or key determinants of selection derail process • Proclivity to select vendors with larger suite of products - perhaps cheaper, over the single-point solution 14

15. Intelligent Buildings and the Competitive Bid-Spec Process: CABA IIBC Member Observations – Process Problems (Continued) • Examination of Possible Solutions • Understanding disconnects between key players • Determining viable incentives – to whom, and how should they should be measured • Identifying the "real" discrepancies between building segments – different circumstances in different segments • Standardization and performance-based measures in bid-spec evaluation • Observations About the Spec Process • Often times “Alternate Specs" suddenly appear • The original objectives of the building are often changed through the process • Specs are sometimes written by unqualified people - resulting in “Looses Specs” - where the end-user doesn't really know what they want and architects and consultants dictate the process, mainly on price • The need for transparency and accountability in the process • The prevalence of “Copy and Paste Specs” where, the bid-spec is geared to a particular product or favored supplier • The existence of areas in the process that could and should be “Standardized and Measured by Performance” 15

16. Intelligent Buildings and the Competitive Bid-Spec Process: CABA Webinar Participant Observations – Process Problems • Tell Us Your Observations of the Process • The discussion of bid-spec process problems and “Pain Points" raised many key factors and issues • We would like to continue the “Pain Point" discussion in today’s Webinar – or any other observations on the • Bid-Spec Process you may have • We thank those who have agreed to speak to the issue for 2-3 minutes today • We Welcome All CABA Participants, IIBC Executive and Webinar • Attendees to Speak to the “Real-World“ Issues of the Bid-Spec Process • The key problems you perceive in the process • The possible solutions to explore • Your expectations from, and the value of, this Landmark Research • I Will Now be Reaching Out to You to Speak of Your Own Experiences with • the Bid-Spec Process – to Provide Your Insights and Thoughts • If you would like to speak, or ask any questions, please just click on “raise hand” on the upper right of your computer screen – I will acknowledge and you can come off mute by hitting *6 on your phone. We ask that you hit *7 on your phone when finished, go back on mute • We are fortunate to start the discussion with Joe Gillespie of Arc Advisory Service, who has been giving us advice on the project 16

17. Intelligent Buildings and the Competitive Bid-Spec Process: CABA Webinar Participant Observations – Process Problems The Importance of Our Discussion this Afternoon With Diebold Incorporated, Philips Research North America, and Siemens Industry having committed to the Project Steering Committee and Research RFP Development team, we are looking to; • Hone the study purpose, objectives and deliverables - to clearly meet the expectations of the study participants • With the participation of several study sponsors, we hope to develop ideas and perspectives that cut across industry lines – in the development of the Research RFP by the Steering Committee • With your input, we would like to make this study very relevant and actionable to your organization • As the Bid-Spec process is very wide ranging – it is essential that the Steering Committee RFP Team agree on the optimal study methodology to generate and maximize relevant and timely insights for your organization In terms of the Bid-Spec Process, there are many different mappings and processes in which building equipment can be specified. There are many stakeholders, regional and legislative issues and other factors in the process which essentially creates the environment of differing approaches for each project. It is important to CABA, our members and our Study Sponsors that we examine this issue with due diligence and the utmost clarity. 17

18. Intelligent Buildings and the Competitive Bid-Spec Process: Proposed Activities and Timelines • CABA Steering Committee Research RFP Team: • We look forward to having the Research RFP Team in place, with 4 to 7 Steering Committee Members, within the coming weeks • The RFP Team will put together the critical criteria for interested Research Vendors who wish to bid on this IIBC Landmark Research Study • The Team RFP Team will be responsible for the evaluation of proposals and the final selection of the Research Vendor to undertake this study 18

19. Intelligent Buildings and the Competitive Bid-Spec Process: Study Sponsorship Opportunities STUDY SPONSORSHIP OPPORTUNITIES: Ruby Sponsor: $15,000 per participant Benefits: Featured case study, Study Steering Committee participation, study scope definition, survey design, study presentation, final color reports (“print ready” electronic and three hardcopies) Emerald Sponsor: $10,000 per participant Benefits: Study Steering Committee participation, study scope definition, survey design, study presentation, final color reports (“print ready” electronic and two hardcopies) Diamond Sponsor: $5,000 per participant Benefits: Study input, final color reports (“print ready” electronic and one hardcopy) STUDY RESEARCH PROSPECTUS: To view and download the study research prospectus, please go to: http://docs.caba.org/documents/research-program/Prospectus-BidSpec.pdf 19

20. Intelligent Buildings and the Competitive Bid-Spec Process: CABA Contact Information For more information regarding the study, please contact: John Hall CABA Research Director Suite 210 1173 Cyrville Road Ottawa, ON K1J 7S6 hall@caba.org 613.686.1814 ext. 227 George Grimes CABA Business Development Manager Suite 210 1173 Cyrville Road Ottawa, ON K1J 7S6 grimes@caba.org 613.686.1814 ext. 226 20