Avoiding Pitfalls in Energy Performance Contracting

Performance contracting can be a way for facility owners or operators to “go green” and save money. What that means is that contractors include service and equipment packages which provide retrofits that increase efficiency by reducing energy consumption.

Performance contracts are different from routine installation or construction contracts. They offer to the facility owner the guarantee of improved energy efficiency, and that guarantee is backed with the promise of monetary payments if it is not met.

The engineering profession has developed standardized guidelines and best practices, and for federal projects the U.S. Department of Energy has created guidelines.

To avoid contract problems, the author says it is important to understand the objective: Savings in this context are measured in units of energy, not dollars, and the guarantee is that the new installation will consume less energy to achieve a specified output. Make it a hands-on project for senior management. Get help from an outside consultant. Get your entire maintenance team on board. Remember contracting basics, and that all key terms of any construction project need to be addressed, and provide for efficient dispute resolution.

Finally, it’s important to agree on the savings report form and get access to data and calculations. The complexity and volume of data involved in energy efficiency calculations create a risk that the post-project savings reports will be either an unhelpful avalanche of information or too little information to allow for an adequate review.