Integrating Environmental Sustainability into Airport Contracts (2013)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

17 An effective starting place for an airport operator to inte- grate environmental sustainability into contracts is where the greatest return on effort exists. In this context, this would be where environmental sustainability performance can be maximized through the scope of the contract. To understand where the best opportunities lie in airport contracts, a few airport operators have reviewed current contracts and identi- fied environmental impacts associated with the activity for each contract. Flughafen Zurich AG, the operator of Zurich Airport, has a robust process for tracking the environmental impacts of each stakeholder activity where there is an agreement or contract in place. They use a matrix to logically categorize the impacts of each contract type so that all airport staff involved in a new contract or renegotiation will have equal access to this information and understand the environmental impacts asso- ciated with its contract. The information within this matrix also serves as a checklist when contracts are constructed that involve any of the stakeholders listed. Such awareness pro- vides the airport department responsible for the contract and the procurement manager, and its contracted stakeholders, with opportunities to collaborate more aggressively on miti- gating each of the environmental impacts in a new contract. For instance, if two stakeholders both have an impact on fuel, there might be an opportunity for future contracts to require joint or coordinated activities between the two stakeholders, which could reduce fuel use or provide the right economic incentive to switch to alternative fuels. A representation of the matrix follows (Table 3). Table 3 illustrates the many types of environmental impacts associated with eight major stakeholders typically under contract at an airport. As part of this project the airport operators surveyed were asked which contracts they thought provided the most scope or opportunity to drive sustain- ability at their airport. The answers varied; however, there were a few contract types that were unanimously regarded as providing excellent opportunities to make a difference to an airport’s sustainability performance. These included design and construction contracts, tenant lease agreements, and janitorial service contracts, and each will be reviewed in more detail over the following sections. Our review did not reveal sufficient information on ground leases or interagency agreements; therefore, the following sections focus on the areas where information was available. Example contract language sorted by airport contract type can be found in the contract language appendix. DESIGN AND CONSTRUCTION CONTRACTS FOR MAJOR CAPITAL PROJECTS For airport operators embarking on a sustainability pro- gram, incorporating sustainability conditions or perfor- mance specifications into design and construction contracts is invaluable. There is sufficient publically available infor- mation on sustainability best practices and standards that can be applied efficiently to airport contracts and several different approaches to leveraging industry standards within this contract type. Also, because many airport operators have taken the step to incorporate sustainability language into these types of airport contracts, it is viewed as a tried and tested opportunity. Contractors in this sector are now expected to meet these sustainability standards; therefore, it is not as burdensome and costly for them to comply. For examples of design and construction contract language, see the appendix, pages A11 to A16. Many airport operators have developed their own sus- tainable design guidelines that provide detailed specifi- cations and requirements to contractors on all aspects of design and construction. In these cases, the airport operator can simply state in the contract “Contractor must adhere to the requirements set out in the ‘sustainable design guide- lines’” (or some version of this) and include the guidelines as one of the contract documents. The Los Angeles World Airports (LAWA) was one of many airport operators to publish sustainable design and construction guidelines and mandate the application of these on capital projects. The guidelines state LAWA developed these Sustainable Airport Planning, Design and Construction Guidelines (Guidelines) to facilitate the integra- tion of sustainable concepts and practices into capital, non-capital and tenant projects that are undertaken at each of its four airports: LAX, LA/Ontario International Airport (ONT), Van Nuys Airport (VNY), and LA/Palmdale Regional Airport (PMD). Several airports have building ordinance requirements, set for them by the city or county, which require all new build- ings or refurbishment projects over a specific size to achieve a LEED standard certification. The city of Atlanta Aviation chapter five EXAMPLE AIRPORT CONTRACT TYPES THAT PROVIDE OPPORTUNITIES FOR ENVIRONMENTAL SUSTAINABILITY

18 Department, under Building Ordinance, must incorporate the following requirement for airport capital projects at Hartsfield– Jackson Atlanta International Airport: “Facilities and buildings over 5,000 gross square feet of occupied space or two million dollars total project cost shall at a minimum incorporate sus- tainable design criterion as defined by this article. Design and project management teams are required to meet LEED Silver rating level [33–38 points—Ord. No. 2003-108, § 2(Exh. A), 12-9-03].” The California Building Standards Commission produces revised Building Codes every three years. The current Building Code, known as CalGreen serves as a resource for best practice building performance specifications that can be leveraged and incorporated into airport contract language. An excerpt from CalGreen can be found on page A11 in the appendix. In the absence of specific airport sustainable design guide- lines or ordinance requirements airport operators can set out specifications to adhere to the contract language itself or even refer contractors to some general resources available to the industry, including the Sustainable Airport Manual (SAM), sustainable design and construction chapter. SAM is an air- port industry collaborative effort to provide airports around the world with a LEED style, airport-specific guidance and, as such, is a resource available for all airports at no cost. Alter- natively, airport operators can state in contracts that contrac- tors need to meet the requirements of a LEED standard in the design and construction of the project. Some airport operators have not required the contractor to get LEED certification for the project even if it was built to LEED specifications. TENANT LEASE AGREEMENTS (INCLUDING CONCESSIONAIRE AND AIRLINE USE AGREEMENTS) Airport operators can include detailed specifications and requirements for tenants within lease agreements. These can cover the recycling of waste, compostable packaging, and energy efficiency standards. For examples of tenant lease agreement contract language, see appendix, pages A23 to A31. Airport operators can choose to keep the language infor- mal and simply require tenants to meet the airport’s envi- ronmental sustainability goals. A simple mechanism is for the airport operator to require the tenant to achieve and maintain an environmental certification such as a city sus- tainability business award. This assures the airport operator that the tenant is tackling the issues, but puts the responsi- bility on the tenant themselves in terms of what they should do. For example, San Francisco International Airport lever- ages contracts to promote a recycling incentive for all busi- nesses operating at San Francisco International Airport. The language states: All businesses operating at San Francisco International Airport must operate in an environmentally responsible way by conserv- ing resources, preventing pollution, and purchasing and/or using ‘green’ products and supplies. In support of the San Mateo County Green Business Certificate Program, the Airport Director encour- ages businesses to contact San Mateo County Department of Envi- ronmental Health, and complete the needed audit requirements to secure a Green Business Certificate for the San Francisco Inter- national Airport operations. Additional information about the San Mateo County Green Business Certificate Program is provided at www.recycle works.org/green/business/index.html. Tenants in this program receive a 50% discount on the cost of recycling from San Francisco International Airport. Concessionaire lease agreements provide a significant opportunity for airport operators to make contract require- ments to improve environmental performance at the airport. At Hartsfield–Jackson Atlanta International Airport there is a great opportunity because of the size of the contract as the airport is managed by a single company under one large contract. With large contracts there is more purchas- ing power to leverage and the airport operator can use this to influence contractors. To that end, at Hartsfield–Jackson Atlanta International Airport concessionaires must comply with the following language: TABLE 3 STAKEHOLDER AND ENVIRONMENTAL IMPACT MATRIX Environmental Impact Noise Vehicular Emissions Energy Water Waste Hazardous Materials Sustainable Procurement Sewerage Fuel LEED Stakeholder X X X X X X erianoissecnoC X X X X sraC latneR X X X X X X enilriA Planning Consultant X X X Janitorial Company X X X X X Construction Company X X X X X X X X X X Landscaping X X X X X X X X X X X X X Contractor Engineers

19 Concessionaire shall use compostable service ware along with con- sumer facing packaging and source separate all food service wastes for direct transport to off-airport composting facilities . . . Conces- sionaire agrees to offer ‘take out’ packaging to enable customers to more easily transport items through the Airport. Costs attribut- able to Concessionaire for complying with the waste separation initiative will not exceed $10 per square foot over and above trash removal and recycling costs, including labor and dumpster fees, assessed to concessionaires in 2011. Food concessionaires at the San Francisco International Airport must adhere to the city’s 16-point sustainable food policy as part of the lease agreement. Tenants must feature: 1. Displays that promote healthy eating and good environ- mental stewardship 2. Visible food preparation areas 3. Portion sizes which support good health 4. Portion-appropriate menu items for children Tenants must use: 5. Low- or non-phosphate detergents 6. Compostable, bio-resin bottles or paper boxes for all bottled water sales 7. Un-bleached paper products and compostable To Go containers and utensils To the very greatest extent possible, Tenants must use: 8. Organic agricultural products from the Northern Califor- nia region 9. Agricultural products that have not been genetically modified 10. Organic or all-natural meat from animals treated humanely and without hormones or antibiotics 11. rBST [recombinant bovine somatotropin]-free cheese, milk, yogurt and butter 12. Cage-free, antibiotic-free eggs 13. Sustainable seafood 14. Fairly Traded Organic Coffee 15. Products free of hydrogenated oils 16. Products free of artificial colors, flavors and additives. At Seattle–Tacoma International Airport, the taxi conces- sionaire agrees to the following language: Concessionaires shall act to ensure that the Independent Con- tractors operate a fleet of vehicles that minimize air emissions and institute operational practices that help protect impacts to the natural environment. Concessionaire shall also institute practices that promote the efficient movement of people to and from the Airport . . . ii) By March 1, 2012, Concessionaire shall ensure one hundred percent (100%) of the Independent Contrac- tor vehicle fleet it uses for on-demand taxi service utilizes alter- native fuels, as defined by the U.S. Energy Policy Act . . . Similarly, Boston Logan International Airport has a limited “front-of-line” program to reward operators of low emitting taxicabs. Airline use and lease agreements can impose environ- mental sustainability requirements on airlines. Airlines are significant stakeholders at airports and many of their activi- ties have environmental impacts. Airport operators can drive improved environmental performance through these agree- ments. At San Francisco International Airport the airline use and lease agreement contains the following language: Air Carriers operating at the Airport may also pursue various sustainability measures. City encourages such initiatives and from time to time may call upon Airline to cooperate with City where practicable in implementing sustainability measures that impact Airline operations such as tenant improvements to LEED Silver or better standards, energy and water conservation, solid waste reduction and recycling, electrification of ground services equipment, maximizing the use of preconditioned air, or single engine taxiing, provided that such sustainability measures are lawful. Airline shall agree to implement sustainability measures as required to meet City, State and federal regulations. JANITORIAL CONTRACTS Airport managers reported increasing concerns about environ- mental hazards as more information is available about the effect of certain cleaning materials and processes on human health. Because many of the common operating contract agreements, including janitorial contracts, involve some handling of poten- tially hazardous material, some airport operators have adopted provisions in their contracts guiding the handling and disposal of such materials, outlining contractor liability for improper methods and outcomes, and citing requirements for reporting. There is space within janitorial contracts to integrate a range of considerations into many aspects of the contract, from the specification of environmentally friendly cleaning products, to efficient cleaning operations and the reduction of waste prod- ucts. Many airports have a list of mandated cleaning products to be used on site that ensure that toxic chemicals are not used. This specification within janitorial contracts is common across airport contracts. For janitorial contract language examples see the appendix, pages A32 to A36. Portland International Airport has the following language in its janitorial contract: “All supplies and materials used in cleaning must be in compliance with ‘Green Cleaning’ requirements and continue to achieve the Port’s environmen- tal strategic goals.” The custodial cleaning contract for Chicago O’Hare Inter- national Airport incorporates the following language: Intended to reduce the environmental impact of products and services by developing a Green Purchasing Program . . . , Con- tractor is required to purchase supplies, materials, equipment, and other products meeting or exceeding the minimum require- ments of the Green Product Listing below, if such items are reasonably available that meet applicable OSHA [Occupational Safety and Health Administration], CDC [Centers for Disease Control and Prevention], or similar public health requirements. DRIVING INNOVATION AND MAXIMIZING ENVIRONMENTAL SUSTAINABILITY IMPROVEMENTS THROUGH CONTRACTS Contracts provide a mechanism for doing more than just pro- vide environmentally compliant goods or services. When the winning contractor is set to receive a large amount of money

20 over a long contract period, it is important that the airport operator negotiate for more in terms of contract value. For a contract to deliver maximum value to the airport operators, interviewees offered the following ideas: • Flexible contract language—Contractors and suppliers are typically the subject matter experts for the contract they are in competition to win. In some cases, there is potential value in not making the RFP and resulting con- tract too prescriptive. By leaving room for the supplier or contractor to be creative and suggest innovations, the airport operator realizes sustainability improvements and cost-efficiencies from the contractor that otherwise might not have been identified if the airport operator had written strict language. In some cases there is more value in listing detailed technical specifications; however, the use of flexible contract language is worth reviewing on a case-by-case basis. The Chicago Department of Aviation (CDA) has recently driven innovation through two of its RFPs using flexible con- tract language. The first example is with its janitorial contract, which at this time was under negotiation. The RFQ required contractors to create an innovative solution to the issue of toi- let seat cover waste. Chicago Department of Aviation did not know how to recycle this significant waste stream so it turned to its potential contractor base to generate a solution on its behalf. With the prospect of securing this multi-million dollar contract for a minimum of three years, the contract provided excellent incentive to create an innovative and sustainable solution for the airport on behalf of its contractors. The RFP language was as follows: • Plastic toilet seat covers—Thousands of toilet seat cover rolls are used at Chicago O’Hare International Airport every month. Made of polyethylene film, these covers represent a significant recyclable resource oppor- tunity. Within 90 days of contract execution, Contrac- tor must submit a proposed toilet seat cover recycling plan to the Chicago Department of Aviation for review and approval. The cost of the recycling plan must be at no cost or revenue positive to the city. Within 180 days of contract execution, Contractor must implement the recycling program for the used toilet seat covers unless the Commissioner consents in writing to a later imple- mentation date. Annually, as part of required documen- tation, Contractor must submit recycling report of toilet seat covers recycled, total weight, final recycled dis- position and costs/benefits. The second example demonstrates the high value-added potential when contracts are creatively shaped to maximize sustainability and leverage a contractor’s expertise. Chicago Department of Aviation expanded the scope of its parking garage management contract to include activities outside the standard contract requirements for such a service. To do this, Chicago Department of Aviation inserted a section of clauses into a parking garage management contract that required the contractor to develop a plan for outfitting, oper- ating, and paying for highly efficient lighting in the parking garage structure the contractor would manage if it won the contract. • Energy efficient lighting—Consultant will be required to develop a compre hensive relamping program for the Elevated Parking Structure (EPS) at O’Hare Interna- tional Airport. The EPS currently uses approximately 5,000 150-watt metal halide lamps with halophane fix- tures throughout the multi-level structure. These lights are on 24 hours per day, seven-days per week for lighting and safety reasons. The Consultant’s proposed relamp- ing program should include modernization of the exist- ing lighting to improve efficiency and a proposed dim- ming schedule sequence to provide safety, but reduce overall electrical consumption and provide cost savings to the Chicago Department of Aviation. As part of the Consultant’s proposal, the amount of electricity saved and anticipated cost savings to Chicago Department of Aviation shall be clearly identified and reported annu- ally on the anniversary of the Contract. Consultant shall submit the proposed relamping program to the Chicago Department of Aviation for review and approval. Con- sultant will be required to purchase, install, commission and operate the lighting units (ballasts and fixtures) for the duration of this Contract. The Chicago Department of Aviation will purchase the bulbs/lamps and provide to the Consultant for installation. Chicago Department of Aviation will maintain an inventory of replacement bulbs/lamps and provide to Consultant as replacements are needed. The Chicago Department of Aviation parking garage con- tract is notable because it combines the shared interests of the airport operator and the contractor by linking the win- ning of the contract, purchase, and maintenance of a capital asset (by the contractor) to the performance of the asset (to benefit the Chicago Department of Aviation). The contrac- tor is motivated to submit a winning proposal and will dedi- cate resources (more resources than if they did not originally pay for the asset) to maintain the capital asset once it is pur- chased, while the energy efficient relamping program and the maintenance of the lighting system will positively affect the airport operator’s financial bottom line and improve the traveling public’s experience. • Performance-based contracting. Performance-based contracting is a contract that defines obligations and outcomes in terms of performance indicators for the product or service. Performance-based contracts usu- ally cover a sufficient time to enable measurement of the contractors’ performance. Performance-based contracts encourage increased efficiencies and allow for innova- tion. Relationships are key, with common goals being essential to making the performance contract a success

21 for all. Performance can be measured on a monthly basis through the achievement of Key Performance Measures or Key Performance Indicators. Internationally, the highways industry has utilized performance-based con- tracts successfully on a wide scale. The benefits of performance-based contracts include: – The provision of a contractual environmental require- ment that encourages innovation, – Utilizing a contractor’s experience, – Focusing the client on performance rather than his- torical empirical relationships, and – Apportioning the risk between client and contractor appropriately. (Source: U.S. Department of Treasury) The United Kingdom has been driving the sustainable procurement agenda for many years and the government has a Sustainable Procurement Taskforce and national action plan. Many U.K. central and local governments have devel- oped their own strategies and plans for driving sustainability through their supply chains. One example is the Surrey County Council. The Council has developed partnering contracts that are similar to performance contracts. It defined recycling con- tent targets in the following performance indicator: “The con- structor will be expected to demonstrate an improvement in the use of recycled materials/products/processes year-on-year through the contract period.” Initially this was not overly ambitious, all parties entered into a process of setting baselines in year one from which tar- gets will be formulated. Regular meetings were established to develop the use of recycled materials, and the contract requirements records to be maintained regarding the extent of recycling. SCC’s partnering contract was awarded on both quality and price (50/50). The contractor requires all parties to work toward the delivery of key objectives—including the reduction or elimination of waste and selection of the most cost-effective solutions. The process is driven by set- ting targets, which includes recycled content. The partner- ing approach, and open book accounting, enables construc- tion wastes to be stockpiled and redeployed between the partners in the most effective way to achieve mutual ben- efit. As part of its partnership contract for highway main- tenance, SCC requires its contractors to record a range of information as it allows the Council to verify that the con- tractor has been fulfilling the requirement presented in the contract. Performance-based contracting is not common across U.S. airports; however, there are several examples where airport operators have explored the feasibility of this as an airport contracting mechanism and there are a few examples where airport operators are using it successfully, one of which is at Boston Logan International Airport. Massport has had a janitorial services performance-based contract in place since 2007. It engaged with a professional services firm to advise it on the procurement of a performance contract. Prior to the RFP for the janitorial performance contract, Massport per- formed a survey and benchmarking assessment at the airport. The survey presented a score of 47% for industry cleanliness standard. Building on the survey results and numerous inter- views with Massport staff and contractors from the cleaner through to management, the consultants determined a com- mon understanding of what clean was. These results and findings informed the performance contract-based RFP that resulted. Five cleaning companies pre-qualified, and among other concerns, they were evaluated on their green cleaning procedures. The contract was awarded for a period of three years, with an option for an additional two years. The con- tractor is required to meet a minimum cleanliness standard and how they achieve that standard is their responsibility. The major difference between this performance contract and a standard janitorial contract is that Massport has not speci- fied a number of cleaners required on-site or the frequency of tasks, which is for the contractor to determine for itself. The contract management and payment is based on cleaning inspections performed by a third party. The inspector scores the cleanliness and the contractor has to achieve a minimum performance target of 75%. If this is not achieved, there are financial deductions; if a higher score is achieved there are reward incentive payments. Massport has reduced its annual cleaning budget through the use of a performance contract. In addition, the contractor has been proactive and receptive in integrating environmen- tal sustainability improvements through the contract because of the flexibility it is offered by Massport in other areas. Massport meets weekly with the cleaning contractor to coor- dinate on issues and ideas for continual improvement. It is at these meetings that environmental goals are discussed. The flexibility of the performance contract ultimately allowed the janitorial services company to pursue a trial of aqueous ozone at Boston Logan International Airport. Aqueous ozone is a cleaning substitute for harmful chemicals and has been shown to generate financial savings as well as limit the need for cleaning chemicals. The evolution of the system is ongo- ing and Massport expects it to be implemented throughout all of its facilities. Contract language from the Massport janito- rial contract can be found in the appendix. • Energy performance-based contracts. An Energy Per- formance Contract (EPC) is a turnkey service, sometimes compared with design/build construction contracting that provides customers with a comprehensive set of energy efficiency, renewable energy, and distributed generation measures, and often is accompanied by guarantees that the savings produced by a project will be sufficient to finance the its full cost. A typical EPC project is delivered by an energy ser- vice company (ESCO) and consists of the following elements: – Turnkey service—ESCO provides all of the ser- vices required to design and implement a compre- hensive project at the customer facility, from the ini-

22 tial energy audit through long-term monitoring and verification of project savings. – Comprehensive measures—ESCO tailors a compre- hensive set of measures to fit the needs of a particular facility and can include energy efficiency, renewables, distributed generation, water conservation, and sus- tainable materials and operations. – Project financing—ESCO arranges for long-term project financing that is provided by a third-party financing company. Financing is typically in the form of an operating lease or municipal lease. – Project savings guarantee—ESCO provides a guar- antee that the savings produced by the project will be sufficient to cover the cost of project financing for the life of the project. Currently, EPC projects are typically financed by third- party financial institutions using a set of financing vehicles that are tailored to the requirements of an individual project, not by ESCOs. Many airports in the United States are participating in energy performance-based contracts. The structure of these contracts varies from airport to airport and there is scope within these contracts to ensure that the airport operators can include its energy goals and targets in these contracts. Typically, the air- port operators do not need to reimburse any upfront capital costs; however, benefits through efficiency improvements to its infrastructure can result in reduced energy consumption. RFQ language for the procurement of an energy services per- formance contract can be found in the appendix on page A35.