Owner's Guide to Understanding Methods and Terms of Performance Contracting

Abstract

Performance Contracting is a method of making improvements to a facility and using the savings produced by the improvements to pay for the work over a period of time, typically five to ten years. Energy Conservation Measures (ECMs) support the typical project. These ECMs may include a high efficiency lighting retrofit, computer controlled energy management, replacement of older inefficient heating and air conditioning equipment, heating and air conditioning systems redesign, among others. A Performance Guarantee assures that the annual savings will be achieved by making up the difference should a savings shortfall occur. Three contracting methods are used by owners seeking a Performance Contract: Request for Qualifications (RFQ); Request for Proposal (RFP); Negotiation. The method of selection can greatly effect the success of the project. Owners seeking to improve their facilities through Performance Contracting should carefully consider the impact of the contracting method they select as well as the reliability of the savings expected. These areas are explored in the following pages.