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Part 1: Careful Planning Brings Benefits from Performance Contracting
By Dan Hounsell, Editor
September 2011 -
Maintenance and engineering managers constantly search for ways to finance upgrades of key facility systems, including lighting, electrical, and HVAC. The recent struggles of the U.S. economy have only ratcheted up the pressure to find savings. In a growing number of cases, performance contracting is a more popular option.
The strategy allows institutional and commercial facilities to enter an agreement with an energy service company (ESCO), which identifies energy-saving opportunities and recommends improvements financed through savings. The ESCO guarantees the savings will meet or exceed annual payments to cover project costs. If they do not, the ESCO pays the difference.
To make sure performance-contracting projects deliver promised savings, managers need to review a host of questions and understand key factors that can mean the difference between success and failure.
Because performance contracting potentially involves a range of systems, a number of people within the organization tend to be involved in overseeing its planning, execution, and monitoring. These parties can have both facilities and financial responsibilities.
"A successful performance-contracting engagement requires close collaboration from the initial audit through the post-construction performance period," says Patrick McElhaney, marketing director with FPL Energy Services Inc., an ESCO and subsidiary of NextEra Energy Inc. and an affiliate of Florida Power & Light Co. "This requires managers to assess their internal talent, qualifications, and experience and assign key stakeholders to work hand in hand with a qualified energy services provider, from initial audit through final implementation."
While many within facilities might have a stake in the process, a single point of contact tends to be the most effective tactic.
"It is important for customers to have a project champion throughout the entire process to facilitate communication as the project transitions between its various phases," says Michael Daigneault, vice president of development with Ameresco, an ESCO that provides services to customers in 34 states. "This helps maintain internal awareness of the project goals and the achievements of the performance contract. To identify these key individuals, many customers look to their heads of facilities and business or finance groups."
Performance Contracting Strategies for Success
Part 2: Performance Contracting Requires Understanding Facility Needs
Part 3: Selecting an ESCO: Questions To Ask