WEATHERIZATION WEATHERS IMPLMENTATION CHALLENGES

Joel Yesley, PhD

PROGRAM OVERVIEW

This report will focus on the experience of the counties in the state in implementing a greatly expanded Weatherization Program as the result of a major infusion of funds provided by the American Recovery Act.  Under the program, counties can either directly perform weatherization tasks using in-house crews or contractors or they can subcontract the work out to local nonprofits, who in turn may hire subcontractors to do the actual work.  Most counties rely on subcontractors, who may be either nonprofit or for-profit entities, to do the work.  The state has final authority to allocate the work among the counties and any nonprofits that desire to operate within their jurisdictions, however.  In addition, the state can contract directly with nonprofits.  The state currently has nine subgrantee agreements with counties and nine agreements with nonprofit entities.  Maryland Energy Conservation, which currently performs weatherization tasks within 10 counties in the state, has received considerably more work than any other nonprofit in the state. 

Many counties in the state have experienced difficulties in implementing the new program.  Some of these problems resulted from requirements to base pay on prevailing wages in the local labor market as called for by the federal Davis-Bacon Act, as well as the need to satisfy federal requirements emphasizing transparency in reporting their progress.  Other problems have arisen from difficulties in finding weatherization companies that have the financial capacity to purchase the necessary equipment, which can be fairly expensive, and to accept payment for work performed on a retroactive basis, as mandated by state policy.  The rapid growth of the program has also created a shortage in the number of individuals with the requisite skills, a problem the state has attempted to ameliorate with a new training program offered by several community colleges.  The MB&TPI contacted several program managers throughout the state to learn about their problems and achievements in collecting information for this report.

The Maryland Department of Housing and Community Development directs the Weatherization Assistance Program (WAP), which is designed to help low-income households reduce their energy bills by installing energy conservation materials in their homes.  The weatherization services provided to approved applicants may include caulking, weather stripping, replacement of cracked or broken glass in windows and doors, duct wraps, pipe and attic insulation.  Priority is given to homeowners who are elderly, disabled, have families with children, and/or who have the highest energy consumption.  WAP services are provided to eligible households through local governments or nonprofit organizations, usually community action agencies. 

START-UP DIFFICULTIES

A report prepared by the Government Accountability Office noted that the program had been slow in starting up mainly because state and local weatherization agencies needed time to develop the infrastructures required for ensuring compliance with Recovery Act requirements.   The most problematic one relates to the Davis-Bacon requirement that all laborers working on Recovery Act-funded projects be paid at least the prevailing wage, including fringe benefits.  The report pointed out that many local weatherization agencies had decided to wait to weatherize homes using these funds until the Department of Labor had conducted county-based surveys that are needed to determine the prevailing wage.  In addition, the report noted that delays resulted from difficulties experienced by small contractors in adopting accounting procedures required by the Davis Bacon Act, including the submission of weekly certified payroll records to the contracting agency, which most firms have traditionally done on a bi-weekly basis.

These problems appear to have been experienced in Maryland, based on phone conversations with the program managers of several local weatherization agencies and their subcontractors.  Local weatherization agencies (including Community Action Agencies and other nonprofit entities) with operations in most of the counties in the state were contacted.  All of them attributed significant delays to problems resulting from Davis-Bacon Act procedures.  Although initial wage surveys were apparently conducted by the Department of Labor in September 2009, two agencies indicated the data needed to set appropriate wage rates were not available until early this year.  Rather than wait, some of them accepted contractor bids last September or October, with the understanding that the contracts would have to be modified once the survey data became available, necessitating retroactive payments.

Program managers in the City of Baltimore noted that the Davis-Bacon Act requirement to pay commercial building construction wages in five- or more-story multifamily residential buildings has inhibited work in large apartment complexes, rather than the lower residential construction wage rates. The GAO Report cited above also noted that this requirement has posed significant problems in other states as well, since the higher wage wages (by a factor of three in some areas) makes it more difficult for projects in commercial buildings to satisfy the cost-effectiveness requirement established by the American Recovery Act.

Another major problem has been a shortage in the number of available contractors who possess the expensive high-tech equipment needed to do the work.  Equipment costing several thousand dollars would include blower doors (decompressors), combustion analyzers, infrared cameras, and insulation blowers.  This is also a problem for some of the counties that have chosen to perform the work in-house. 

The state has designed the program so that work is paid for retroactively.  As a result, local weatherization agencies have been forced to hire contractors who have the financial capacity to make upfront payments for required equipment and staffing.  However, the number of these well established firms currently operating in the state has not been sufficient to expeditiously handle the demand stemming from the additional stimulus funds.  One-half of the local weatherization agencies (both county government and nonprofit program managers) contacted reported that this was a serious problem.  Some accused the state of withholding administrative funds in order to purchase unnecessary equipment for state inspectors while their own needs (or those of their contractors) for such equipment were neglected, thereby delaying the work.  High capital costs have hindered the ability of start-up firms to gain a foothold in the market. 

Another problem delaying program implementation has been a shortage of trained workers.  Many of the skills needed to weatherize homes go beyond basic home construction and heating, ventilation, and air conditioning repair skills.  Although some of the tasks can be very elementary (applying weather-stripping, insulating ducts), others involve more complex skills, such as diagnostic testing and conducting an energy audit that will recommend cost-effective weatherization methods (e.g., impact of air-sealing and insulation measures on the potential savings of improved heating efficiency).  The state has been offering a 5-day training program in basic weatherization skills at 5 community colleges throughout the state since the summer, which has been completed by over 300 individuals to date, although demand was at first less than expected.  Several other community colleges also offer a 5-day class in home energy analysis/audit.  There are some additional classes for more specialized skills training.  

These classes, which are paid for by the state, combine lecture with lab work, allowing students to gain familiarity with operating high tech equipment.  The program has been licensed by the Building Performance Institute, which sets nationally recognized standards for contractor certification, accreditation and quality assurance programs for HVAC and building shell work.  One local weatherization agency and one of the contractors contacted complained that the quality of training is inadequate in terms of hands-on experience, which results in the need to redo work.  In any event, the lack of adequate time for planning before the stimulus funds became available meant that any delay in implementing a training program could seriously hinder the state’s ability to accomplish its weatherization goals. 

In an effort to maintain accountability and minimize waste in the program, the state has adopted a policy of releasing administrative funds to local weatherization agencies in equal six month installments spread evenly over the 3-year length of the program, provided that they are on target to meet their goals.  Some of the local agencies contacted, however, complained that their ability to meet these goals was contingent on receiving the bulk of their allocated administrative funds (as determined by federal program guidelines), which may be used for equipment and vehicle purchases, in the initial stages of the program.  The huge increase in the program’s overall scope rendered their existing equipment supplies grossly inadequate.  The availability of these funds therefore bears little relationship to their needs.  As a result, the state policy of using these funds as performance incentives by making their release contingent on results achieved may be having the perverse effect of making it more difficult for local agencies experiencing cash shortages to achieve their goals.

The state policy of retroactively reimbursing local agencies for work performed may also be hindering their ability to use contractors lacking sufficient working capital to tide them over until reimbursement for their work, forcing them to rely more on well-established firms in the industry.  As a result, start-up and smaller established firms may be discouraged from bidding on contracts, thereby compromising the cost-effectiveness of the overall program.  To the extent these firms are more likely to hire less experienced and lower-paid workers, the needs of the displaced workers that the American Recovery Act accorded the highest priority may have been neglected to some extent. 

PROMISING PRACTICES

An examination of best practices adopted by other states in implementing their expanded weatherization programs would probably be instructive.   Wisconsin has received national recognition for developing an innovative program making effective use of the windfall of stimulus funds, which allowed the state to nearly double the scope of its program.  Perhaps the biggest challenge faced was the recruitment of an adequately trained workforce.  In previous years, local service providers had problems in providing day laborers with weatherization skills allowing them to work productively.  They realized that the greatly expanded scope of the program would require the adoption of a more long-term approach that enhanced their ability to attract and keep an experienced staff.  This required that they offer good pay as well as accommodate longer training periods for applicants with little experience in home remodeling. 

Wisconsin has made a major effort to upgrade its weatherization training program over the past decade.  The program is administered by the Wisconsin Energy Conservation Corporation (WECC), a private corporation that advises private businesses in developing energy efficient goods and services and also works with government agencies and utilities that sponsor energy conservation programs.  As a BPI (Building Performance Institute) training affiliate, WECC teaches contractors and technicians the fundamentals of building performance evaluation and home diagnostics.  WECC offers a 3-week basic training program, with one week in “Boot Camp” classes and two weeks of orientation and hands-on training within a working crew.  In addition, teams from WECC travel to individual Community Action Agencies (CAAs) to provide customized training in response to an immediate demand.   Although Wisconsin has developed its own training curriculum with WECC’s assistance over the past six years, the authors of an evaluation report recommend that states use other states’ existing materials as opposed to developing new training materials, a very time-consuming process.  

Another major requirement for success noted in this report is effective contractor supervision.  Wisconsin has adopted a policy of putting skilled supervisors at the job site, carefully guiding contractors through installation expectations of the program during the work.  The state has also developed a Field Guide made available to all contractors that describes installation procedures and operational expectations in detail.  The state has a policy of sharing the cost of contractor billable time by paying a stipend of $50 per day for each contractor employee attending a training session.  Before this policy was adopted, contractors resisted attending free training because of the lost billable hours.  Winning contractors are required to accept of minimum of two training days, with the state covering the cost of overnight accommodations, regardless of their previous experience. 

The City of Baltimore is also a good role model for other counties in the state, having successfully overcome some serious start up problems.  The program director, Ken Strong, has noted that a major positive factor has been the city’s greater ability to advance administrative and start-up funds to contractors relative to other local service providers in the state.  Nevertheless, the city took care to hire financially secure contractors to minimize the likelihood of any cash shortages.  The city has hired 7 active contractors, two of which are non-profits and three of which are for-profits based in Baltimore, and two of which are based outside of the city, one of which is a national firm. 

MARYLAND: ‘PROGRAM BACK ON TRACK’

The Weatherization Program has experienced some growing pains in the state, which may not be unlike the experience in several other states.  Notwithstanding the initial problems encountered in implementing the expanded program, however, the state claims that 14 of the 18 local weatherization agencies are on target to achieve their goals by the end of the current fiscal year.

General Accountability Office, “Recovery Act: One Year Later,” March 2010.

“Case Study: Wisconsin: Pioneer of Rapid Weatherization Expansions, 2000 & 2005,” Lina Karoglanova & Meg Power, June 2009.

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