From lowering utility bills to modernizing buildings, reducing maintenance costs, and improving the building environment for occupants, an energy savings performance contract (ESPC) can prove incredibly valuable for most organizations, all with little or no cost to the client.
Yet, ESPC projects can be complex and don't always meet expectations. Selecting a good energy service company (ESCO) and keeping some basic principles in mind will help make your energy savings performance contract a successful one.
Understand the ESPC process
Before diving in, it's important to understand that ESPC projects are design-build projects. Unlike traditional design-bid-build, your organization hires an ESCO to develop the project scope, price it, build it, and guarantee the results. Because each energy service company may propose different scopes and pricing, comparing bids only by cost is insufficient.
Have an ESPC project champion
Every successful energy savings performance contract needs a champion — a person with influence and enthusiasm who advocates for the project internally. The biggest risk to ESPC projects is inaction, which the right champion can overcome by maintaining momentum and commitment.
Be clear on objectives and criteria
Ask: What exactly are you trying to achieve through your energy savings performance contract? Most clients are looking to replace aging infrastructure like boilers, chillers, ventilation systems, and controls. Some upgrades may have long payback, but combining them with faster payback items like new lighting can make the project financially viable.
Clear objects help your energy service company tailor the project to your organization's needs.
How to choose an ESCO
Knowing how to choose an ESCO is critical to the success of ESPC projects. A poor partner may not deliver, while the right energy service company can exceed expectations.
The best procurement process takes the form of request for qualifications that includes:
- Company background, project experience, and resumes of assigned personnel
- Proof of financial strength (audited financial statements)
- Details on self-performed vs. subcontracted work
- A sample project pricing example to clarify makeups and project management fees
- A firm price to conduct the investment grade audit (IGA)
- Other organizational priorities like safety ratings, use of small or minority businesses, etc.
Above all, beyond knowing how to choose an ESCO, be sure it's an energy service company you enjoy working with — this partnership can last for years.
Get commitment from all stakeholders
If your organization has a board or council, keep them informed and supported throughout the ESPC process. In addition, consult all relevant stakeholders, including facilities, finance and capital planning, during the development of the project and invite them to participate in the ESCO selection.
Understand the IGA report
IGA reports are technical, covering project details, financing strategies, and explanations of maintenance roles. Take the time to fully understand the contents of the report, ask questions and for clarification. Make sure you know what support your organization will need to provide during construction and operations before work begins.
Assign a knowledgeable owner's representative to ESPC projects
Successful ESPC projects have an owner's representative with a deep technical knowledge and organizational insight. This person should be a direct employee, not an external consultant.
Be collaborative
The most effective ESPC projects are collaborative. Everyone involved in the ESPC process should share a clear understanding of project goals and work together to address challenges as they arise. Create a written statement of the project goals to which both parties commit in advance.
By following these guidelines and fostering strong partnerships, ESPC projects can deliver lasting benefits for your organization.
Project Development Manager
As Project Development Manager, Ken Robinson is responsible for developing and rolling out processes and tools to streamline how we execute various tasks. His overall goal is to create efficient processes to deliver the best solution to our clients.
