Minimizing Risks in Performance Contracting Projects: A Customer Checklist

Abstract

Performance contracting (PC) is the process of providing guaran-
teed facility improvements that typically require no up-front capital.
Since the savings generated from this process pay for the costs of the
improvements, these types of projects are fiscally attractive. This is espe-
cially true for owners or entities that have very little or no capital to
finance much needed improvements. Ensuring success with a perfor-
mance contract is, however, an ongoing process starting with the com-
pany selection, through project design, implementation and contract
maintenance. As the number of companies offering these type of services
is increasing everyday, and their approach, track record, and offerings
vary, a client is challenged with asking a lot of questions en route to
selecting and maintaining the right partner.
All aspects of a PC agreement are defined in a contract. Under-
standing this contract is the client’s biggest challenge. A typical contract
has five separate sections dealing with 1) Contract Terms & Conditions;
2) Scope of Work, 3) Performance Guarantee, 4) Baseline, Measurement
& Verification, and 5) Financial Analysis. Complying with all the stated
objectives of the contract and ensuring that the financial and perfor-
mance guarantees are met requires considerable effort by both the En-
ergy Service Company (ESCO) and the client.
This article will provide simple checklists for each aspect of the PC
process starting with the qualification process. The checklist will detail
questions that can provide tremendous insight on a company, their ap-
proach to the business, specific details about your project, and their long
term commitment to your project.