Jimmy Carter Was Here

[Rick Westmoreland]

Ted Cushman blogs on energy retrofittin biz & tools in Remodeling Magazine
http://www.remodeling.hw.net/blogs/p...g&PostId=89029

[Dancing Dan]

Hey - that's great Rick and your model sounds amazing - how's it going?

[Rick Westmoreland]

Thanks Dan, we're having a lot of fun right now. My contracting roots are actually in weatherization and it's really kind of cool to be 'in style' for once.

There's a huge disconnect between the energy auditing industry and the trade contractors, hopefully we can bridge that divide and put a little spark back into the economy. Right now I'm just trying to help a lot of guys I know get back to making a living again here in Kansas City.

[Overbuilders]

Thanks Dan, we're having a lot of fun right now. My contracting roots are actually in weatherization and it's really kind of cool to be 'in style' for once.

There's a huge disconnect between the energy auditing industry and the trade contractors, hopefully we can bridge that divide and put a little spark back into the economy. Right now I'm just trying to help a lot of guys I know get back to making a living again here in Kansas City.

Rick,

What is the ratio of stimulus-funded weatherization jobs vs client/homeowner-funded jobs you are doing? The article mentions Davis-Bacon wages, implying employees, but you also mention trade contractors, above. Do you hire employees for stimulus jobs and subcontractors for non-stimulus jobs?

[Rick Westmoreland]

Rick,

What is the ratio of stimulus-funded weatherization jobs vs client/homeowner-funded jobs you are doing? The article mentions Davis-Bacon wages, implying employees, but you also mention trade contractors, above. Do you hire employees for stimulus jobs and subcontractors for non-stimulus jobs?

Right now the lions share of my work is low income weatherization assistance program (WAP) work and that has been by design. Having done quiet a bit of this type work back in the late 80s and early 90s I knew that I needed a properly trained and equiped workforce to handle the specialty air-sealing work. Reducing air infiltration is the heart of home performance contracting and the very best school to learn that trade is OJT on WAP jobs. Having access to that skilled workforce empowers me to effectively pursue the more lucrative market rate weatherization work known as home performance contracting. Actively engaging in WAP allows me to keep a steady workflow for that specialty trade. I view WAP as a vehicle to develop and stabilize that workforce while I concentrate on develop the home performance market.

The ARRA funding is just now hitting the streets so Davis-Bacon repeorting has just now started being an issue.

The home owner funded work is just now gaining momantum as well. The Kansas side of of the metro are has just launched a new revolving loan fund for homeowners to use for weatherizing their homes. This is not an income restricted program like WAP but rater a market rate program. The loan fund is funded by ARRA funds so there for Davis-Bacon wages apply.

There are other market rate programs on the horizon as well such as Architecture 20/20's initiative call 14X Stimulus which would use ARRA funds to buy down interest rates on mortgage refinaces or purchase. The buy rate down is funded by ARRA so therefore Davis-Bacon would apply.

Right now the only real market rate work in my area is the utility funded rebate programs called Home Performance with Energy Star. It's actually pretty minimal rebate and should be supplemented by more robust financing which would more than likely be funded by ARRA and would the be subject to Davis-Bacon wages.

Regarding hiring -vs- subbing. Obviously I'm launching and testing my strategy using in house employees, contracting to the mechanical trades and subbing to the BPI auditors. Once I get it up and running I hope to run more of a project brokering type relationship where interested trade contractors can bid on work orders that are produced by private energy auditors using various financing mechanisms.

Perhaps there would be other general contractors that are better suited to market and sell this type of work if they have access to energy professionals. Perhaps realtors would want to help navigate their clients through the qualification process to sell more homes using government backed energy improvement mortgages (EIM) or energy efficient mortgages (EEM). Home improvement contractors could literally go back to their former customers and offer this new service, again brokering jobs by running their own Micro Energy Efficiency Improvement Program by simply engaging the pros through a connected network that would be tied to the financing mechanisms.

Or, I could use it to manage my own home performance contracting business here in Kansas City and help a lot of good workers get back to feeding their families.

The market opportunites are nationwide with localized flavors, but the operational processes don't vary by much. My system, since it's Internet based will be transportable and therefore available in any market. Since it's a subscripiton service, it'll be affordable and scalable. Forward looking contractors should be able to quickly enter the new 'Green Industry' at whatever level they feel fits them best.

That's starting to sound like a contracting eutopia, with everyone holding hands and playing together. I think I'll come back down to reality now and just concentrate developing my home performance contracting market here in Kansas City while I stabilize and develop my workforce using ARRA WAP.

[m beezo]

Rick,
sounds like you are getting this up and running and a few things caught my attention.One is Micro something (forgot the name now). But was wondering a bit more about that.

I looked into some of the green programs that are popping up all over the nation. One was Green Irene. This one is not so much blower doors and such but easy retrofits such as changing out to CFL bulbs, foam inserts on outlets and switches, caulking around windows, weatherstriping. The model is you get paid for a audit, then they tell you how to save money. The audit is not where you make the money but in the other products that you sell and install. Very low tech and much of it was not really as construction related as I thought it might be.

And most articles that I have read say that the $300 to $500 you get for an energy audit is not where you make the money. It is in the work afterwards. Is that what you are finding? I work on mostly 80 to 100 year old homes so know lots could be done on these houses to improve them. But not sure about jumping in to the pool and trying to do the energy audits and work. Seems to me that my luck has been that by the time I hear of the new trend, do my homework and get started the pool is pretty full of folks doing the same thing I was wanting to do.

Care to share a little of how you made the decision to get into the field? And maybe what your costs have been so far? Or maybe just direct me to a site that will help me understand it a little better. Maybe I can be one of your customers. Kansas City is not that far away. Maybe I will drive over to be trained.

[Rick Westmoreland]

One is Micro something (forgot the name now). But was wondering a bit more about that.

Micro Energy Efficiency Retrofit Program

Most utility companies off some some sort of energy efficiency rebate or loan program that typically require home energy audits by certified auditors in order to quantify the improvement measures. I'm envisioning a similar concept except done on a smaller scale that could be managed by remodeling or home improvement contractors.

We use Building Performance Institute (BPI) Certified Building Analysts and RESNET Certified Home Energy Raters in the energy audit process.

BPI auditors are trained and certified to perform home energy audits on existing homes. They must pass both a written and field test that insures that they know and understand building science and, more importantly, combustion safety testing. You could have a leaky furnace or hot water heater backdrafting carbon monoxide into the leaky and drafty home which has never posed any health problems before. The problem is that when you 'tighten up' the home, you could then be trapping those killer gases inside the home which could kill someone.

HERS raters are recognized by the mortgage industry to perform home energy modeling that quantifies the ROI of energy improvements. They have the authority to calculate and certify the financial payback that the homeowner should realize from investing in a home energy retrofit. In fact, the mortgage industry and the appraisal industry must recognize their documented improvement value.

There's a study out, done by the Appraisers Journal that quantifys the value of energy improvement savings. Something along the lines of - for every dollar of annual energy savings there should be up to $20 of increased appraisal value. Another words, if you can reduce your clients energy consumption by $60 per month the net value of those improvements would be $14,000. HERS raters can document that for you to provide to your clients.

Fannie, Freddie, VA, and FHA all recognize this and that's why they all have a version of an Energy Improvement Mortgage that will allow the client to add the improvement costs to their loan during a refi or existing home purchase. My Mini Energy Efficiency Program empowers me to navigate the realtors and home owners/buyers through this uncharted territory. These financing instuments have been around since the late 80s but the industry but neglected in favor of more 'friendly' conventional financing products. I spoke with a lender recently who told me that 80-85% of his business he's writing now are government loans where it was maybe 15-20% just a few years ago.

The main reason that realtors haven't been pushing these types of loans is because they don't really understand them. For the ones that do understand them, they don't have an easy way to implement them. Another words they're not connected to a contractor and auditor/rater network that can shepard them through the entire process. I saw this as a scalable business opportunity to penetrate an untapped market.

I conceptualized the idea sometime in Febuary of this year and began formulating a plan. The software that I developed to help not-for-profits rebuild homes in New Orleans was ideally suited to actually manage the process all I needed to do was replace the 'damage assement survey' module with an 'energy audit'. I researched the actaul energy auditor requirments and everything pointed to obtaining a BPI certification. I was already familiar with the HERS rating industry through Energy Star as a homebuilder. I was not certified in either but could see where they woule be needed.

In early April I recieved an invite attend an open house for a new green jobs training center here in Independence, Mo. So I went and signed up for both classes. One evening after class, I convinced my instructor to take a few minutes to check out how I planned to operate my new Home Performce Contracting enterprise. When she saw the software, she immediately saw the potential of networking the energy auditors with the home improvemnt industry so we 'partnered up" on the project. Now I had a 30 year home energy rater/auditor veteran with a RESNET accredited QA providorship to provide 3rd party HERS verification as well as a BPI certified training center. I couldn't ask for a better technology partner. After that, I was able to concentrate on workforce development.

My roots in the residential contracting business dates back to the mid 80s as a weatherization contractor. Having weatherized maybe thousands of homes over a span of 10 years or so, I already knew what steps I would have to take to profitabaly pursue. First I would need a properly trained and equiped crew to do the actual work. When the Obama Administration announced the billions of dollars in stimulus funds that would be going to weatherization, I knew I could use that program to train and stabilize a qualified workforce. I jumped through the requisite hoops needed to be a qualified contractor on the city's program. I bought the right equipment to cost effectively install the measures and I put them to work.

Now, with all the tools and personel in hand I needed to start building a market. I'll get more in to that later since I'm sure I've already bored everyone to death on this topic alread.

[jepaulsen]

Rick,

Good to hear about your business model developing. I recently completed the RESNET certification process, and am formulating a business model that blends the certification and energy savings process with my existing contracting business. I have found that one of the critical pieces is maintaing the "3rd Party" relationship between the two parts of the equation. In saying that, I still don't know that I have it all figured out, but am working on it.

I have started to forge alliances with several of the "low-income" sevice providers in the area, and will be working on how best to access the money that is out there to subsidize the process. I am curious what level of sucess you are having in working with the homeowners to get the money? It seems that cracking the code to getting the federal money flowing is the key to creating a viable weatherization retrofit program. Interested to hear your success/failures.

Also intereseted in any improvements that you are making in the area of the REMRATE software. My experience with it thus far is that it could be refined substantially to be more user friendly. It is far too "input" intensive, in many cases requireing input for sections that do not apply. It IS a good start to building diagnosis, but definitely could be improved.

Very happy to see a business model that is developing well ahead of mine... and looking forward to learning from your experiences!

[Rick Westmoreland]

Rick,

I recently completed the RESNET certification process, and am formulating a business model that blends the certification and energy savings process with my existing contracting business.

Congrats on completing the HERS certification process. Have you considered BPI as well? From the retrofit stand point, I feel that the combustion safety assurances that BPI requires are critical. What part of the country are you working in? Your profile is a little vague. :-)

[jepaulsen]

Rick,

Sorry about the profile - call it a work in (lack of) progress!

I'm in the Pacific Northwest - North of Seattle.

As to the BPI consideration... yes, I am looking at taking that as a next step in the training process. It looks like the major advantage in the BPI training is indeed the combustion burning testing. It also looks like there is a great deal of overlap in the two programs, so I am looking for a training class that may not require the entire week's worth of training. I know you can sit for the BPI test outside of the class, but i would like to go through the performance testing proceedures on the appliances to have a good grasp on the equipment end of the proceedure.

I am also wondering if you are seeing much call for the use of thermo-imaging in your work. Thus far, i see it as a great toy, and a good tool, but want to get some "on the ground" thoughts from guys in the industry currently, prior to spending $5k. I have seen them used in legal cases to back expert testimony - but do you think they justify the expense for energy assesments?

Any thoughts you have on the BPI training is appreciated as well.

-Justin

[Rick Westmoreland]

Justin,

I think thermal imaging is a nice bit of bling that homeowners would like to see but would rarely pay for. BPI certification is critical if your going to target the retrofit market, which is where I'm taking my business. As a contractor I'm using the energy audits to market my retrofit services, and throwing in the HERS rating to justify the cost of improvements as well as give them access to a larger financing pool.

I'm looking at the energy audits as a marketing expence. Like beezo said earlier, there are a many flavors of energy audit and I could have easily chose one of the 'prescriptive checklist' type audits but then I wouldn't have been giving my customers any real value. As far as I'm concerned, BPI is the nationally recognized gold satndard of energy audits and if I really want to build a sustainable business model with scalability I might as well start with the best credentials. Since BPI and HERS use the same basic software, REM/Rate or REM/Design, there's really no reason you can't include HERS ratings in the mix.

As I mentioned earlier, I had developed a software program to help rebuild New Orleans and meerly needed to modify the data collection module to be more taylored to an energy audit. We have embeded REM/Rate into our enterprise resource management software. Now we have a user interface that is not only simpler to collect date but also automates the suggested improvement process and quantifys it with real time localized contractor pricing. We'll be able to perform an audit and generate a comprehensive report which includes a preliminary HERS index rating, a recommended scope of improvements which includes an installed price and an after the work is complete proposed HERS index rating, That's the advantage of having a highly respected HERS providorship with an impecable 30 year history in the energy rating industry involved in the project. The Accurate Rater Network of
Hathmore Technologies, LLC is my building science technology partner.

Having them as a partner on this project has allowed me to concentrate on the aspect that I am more strongly suited, developing and manageing the actual retrofit contracting process.

By including the HERS rating I now give my clients access to larger pools of improvement capital through EEM/EIM vehicles. Here in Kansas City we have a faily aggressinve utility backed Home Performance with Energy Star program which provides rebates for enrgy audits athat perform at least on improvement. I would like to get the area's realtors to steer homeowners to at least take advantage of the energy audit rebate program on hoems that they are selling so that the the home can be 'prepackaged' for buyers to take advantage of a full-scale whole-house turn-key energy retrofit when they buy.

Because my original version of the software focused on networking rebuilding groups together under one common communications interface, I'm able to taylor that to the home energy retrofit industry. We're able to empower contractors to out source to energy diagnostic professionals and seamlessly integrate an energy retrofit program into the existing business with out having to invest thousands of dollars in training, equipment, and certifications. Not to mention the months of time it takes to actually be qualified to enter the market, instead they can just offer retrofit services as a companion service to their product line. It also gives them something to go back to their former clients with and say "We're now offering complete whole house energy retrofits".

At least that's the avenue that I'm taking here in Kansas City, who knows maybe this could be used in other areas as well.

[Overbuilders]

So in a nutshell...how is business? The first winter utility bill is normally the catalyst for your phone ringing off the hook. (Realizing federal funding is only now trickling in and there hasn't been any honest to goodness cold snap, followed by first utility bill sticker shock syndrome!) How many of the processes you have identified and use are up and running? Will all employees be paid Davis-Bacon wages or will you pay different scales based on ARRA /non-ARRA projects? Are you required to maintain race and gender hiring quotas since you will be receiving federal funds?

Talk about a gift horse, I have signs with logo for ColdProof.com showing a shivering house and my phone number. In years past when it turned cold and work was slow I would slap aforementioned signs on the work van. It wasn't unusual to receive a dozen calls or more per day asking about my service. I still have those signs and a new website is but a few clicks away...

I also own HomeEnergyLossProgram.com and HomeEnergyLossPrevention.com, which may be more marketable.

[Rick Westmoreland]

I love the cold proof graphic!

Business? In the last 30 days I've retrofited 8 homes, have 9 under contract, and 28 leads to run. My trade allies have a few dozen more leads each that they're working. I really don't know how well it's going to really do until I start marketing, so far this has been all word of mouth referals.

We're not marketing yet because we're still beta testing the system. The official launch of the Home Performance with Energy Star program year is 10/1 and the Kansas revolving loan program is still recruiting participating banks and utilities accross the state. From what I understand, it's not actually available in the KC metro area yet.

Davis-Bacon is really a non issue for us since we pay our workers more than the required rate, it's more of an issue of reporting and we've automated that for my business. The race and gender issue is just a part of doing business, and I've really never given it much thought. I guess it would depend on where the funds were coming from and what contractual obligations you would have to that funding source.

My real goal is to build a sustainable business model built on free market fundamantals. As far as I know, Fannie, Reddie, VA and FHA don't have any requirments for Davis-Bacon or even equal opportunity employment. What's been you experience with govenrment backed mortgages over the years?

I'm basically using all of the processes that I've mentioned. Essentially I've automated my own home energy retrofit program with my very close nit network of trade allies. We're beta testing in the field and so far it's working like a charm.

We haven't invested in all of the legalize needed for user agreements and terms and conditions etc that would be required to make it available outside of our own personal business use.

I rolled out my original JOT program in late '06, just in time for the market collapse. I'm a little reluctant to try that again. Do you think there would be a viable market for the system?