Are you considering a Performance Contract? Want to learn more about the steps involved? Let’s review the steps of this process.

Step 1 Determine Need: The first step is to perform a preliminary audit of the buildings to benchmark and screen for savings and needs opportunities. Are the utility costs more than $1.50/sq. ft? Is the energy bill more than $500,000 per year? If so, it may be time to take a deeper look at the facilities.

Step 2 Assemble Team: Pull together a diverse project team including associates with technical expertise, facility operations and maintenance staff, associates with procurement, budget, and legal experience.

Step 3 Define Project: The next step is to define the project and prepare a preliminary scope of work. Typical needed items include a facility profile including an occupancy and building schedule, building envelope specifications, and a preliminary proposed scope of work. The scope of work could include lighting, HVAC and water conservation projects, operations and maintenance considerations, proposed measurement of energy and load shedding, and the requirements for new technology implementation and financial considerations.

Step 4 Prequalification: North Carolina State Energy Office has developed a list of prequalified ESCOs that are authorized to develop and deliver Guaranteed Performance Contracts to governmental units in North Carolina. Each ESCO has successfully completed a process that certifies their qualifications for these types of projects.

Step 5 Request for Proposal (RFP): At this stage in the Performance Contracting Process, the project team will work together to prepare the Request for Proposal (RFP). This process includes the formal communications of intent, actual preparation of the official RFP, issuing the request for proposal publicly, a facility site visit, and sharing of information and selection criteria with ESCOs.

Step 6 Proposal Evaluation: The project team will need to evaluate each ESCO proposal based on the evaluation criteria established prior to starting the proposal process. A thorough review of the ESCO’s expertise and support capabilities should be completed during this step of the process.

After a review of the proposals, the project team should conduct reference interviews to support claims made by each ESCO. Once completed, the short-listed ESCOs should each perform an oral presentation to the project team. An informal Q&A session typically follows to clarify any outstanding questions.

Once these steps are completed the highest ranked ESCO will be selected based on the overall evaluation scoring, presentations, and question and answer session. The selected ESCO then prepares preliminary costs and savings and proceeds with an Investment Grade Audit (IGA) scope, cost, and timeline negotiations.

Step 7: Selection of the ESCO Technical Audit and Project Development: After the ESCO is selected it is time to proceed with the Investment Grade Audit (IGA). The IGA report leads to the Energy Services Agreement (ESA), which is the final scope of work that includes engineering, equipment costs, installation, commissioning, warranty, and potentially annual maintenance. The IGA report also includes the financial basis for justifying the economics of the Performance Contract. It will serve as the basis for energy cost savings for the Performance Contract and the guaranteed results. This phase typically ranges anywhere from six weeks to three months.

Step 8: Negotiations: During this stage, the owner and ESCO risks and responsibilities are defined and detailed in the ESA contract language. The contract will often be reviewed by legal counsel, a third-party engineer, and others as appropriate per governmental unit requirements.

Step 9: Measurement and Verification Stage: Measurement and Verification Services (M&V) continue on after the project’s construction work is complete. Energy savings are measured and verified by the ESCO and often times by an independent third party. The M&V stage ensures that the energy saving conservation measures (ECMs) are preforming per the guarantee and the M&V plan as described in the ESA. If the guaranteed energy savings are below the guaranteed amount any year during the contract term, the ESCO is responsible for reimbursement of the savings shortfall on an annual basis. This is one of the benefits of a Performance Contract.

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