Energy performance contracts (EPCs) are a cost and tax-neutral method used to upgrade school facilities.
Amid the COVID-19 fallout grinding traditional bond work to a halt, EPCs are quickly gaining the interest of architectural firms that are positioning themselves as experts.
But, are the firms you entrust with traditional design work telling you the full story about these complex, unique, energy engineering-based contracts? Are they even qualified?
It is essential that you, as the trusted steward of your district’s financial resources, become aware of the reality of what occurs “behind the scenes” of energy performance contracts, and the skillset and experience required to be successful in taking advantage of their benefits.
The entire financial foundation of an EPC is the quality and accuracy of complex energy calculations. The calculations require deep knowledge and expertise in Measurement and Verification, a skill most architects don’t have.
Asking your architect to perform this function for you, is like asking your primary care physician to perform heart surgery; it simply doesn’t align.
A common misconception about EPCs is that because there is an SED submittal component, the district architect should automatically manage the entire project.
In reality, when best practices are followed, your lead design firm will be the one that employs certified energy professionals and engineers primarily, and specializes in the unique technical aspects of EPCs.
A representative from ECG was once speaking with a Superintendent about engaging in an EPC with his district, and he challenged her by saying: “why wouldn’t I go to my architect for this – they said it’s easy, you just appoint this one particular ESCO, and they take care of it all, and it’s guaranteed, so they have to cut you a check if it doesn’t work.”
Oversimplification of the EPC process and its complexities should be a red flag that the entity, with whom you are speaking, has zero to little knowledge about how much effort it takes to protect you, and to ensure you receive your guaranteed savings.
When you engage in an EPC, the first step is the evaluation of current systems to determine whether their efficiency is “right-sized.” Your architect likely designed many of these systems.
Having your architect evaluate their work,
is like asking a student to grade his/her performance in the classroom- they cannot be objective.
To ensure a complete, unfiltered, and unbiased evaluation of your savings potential and the quality of your current systems, engage an independent, impartial expert to evaluate the systems, and provide insight.
EPCs are incredibly complicated and require an entirely different skill set than what the architectural firms possess. Some firms are so inexperienced and misinformed that several Energy Service Companies (ESCOs) will no longer propose on RFPs with which they are associated. This lack of experience limits the proposals, solutions, ideas, and ingenuity your district receives, reducing your overall options. When provided fair and informed evaluations, ESCOs will participate.
Would you like it if a novice from another industry started telling you how to do your job, and then was responsible for your performance review?
Several architects are known to favor one particular ESCO, to the extent that other ESCOs will not respond to any RFP with which that architect is involved. Beyond the suspicious optics to your board of receiving only one proposal, this hurts your district’s, options, and leverage, with no way of cross-referencing that ESCO’s findings.
Surely every RFP contest run by your architect couldn’t possibly result in the selection of the same ESCO, right? WRONG!
In an EPC, you get “one bite at the apple” to get as much insight, and work funded through savings as possible. Getting only one proposal significantly limits your EPC opportunity.
Some architects like to say that they are the best choice to lead any building initiative because they “know your buildings”, and will take a “holistic, long-term approach.” While this sounds beneficial, it’s of little value in an EPC.
In an EPC, the ESCOs must audit and “learn” your buildings entirely on their own, independently. They must guarantee the savings, so they will bring in their expert energy engineers to evaluate your equipment, propose new systems, and calculate the energy savings. Your architect can offer insight; however, the ESCOs will assess the systems, and will receive little benefit from the architect’s knowledge.
Savings are guaranteed when the foundation is built correctly; however, there are many instances where your savings can be inadvertently forfeited. It is your responsibility to know the numbers and verification methods to ensure the realization of your savings. This guarantee requires a vigorous review of the engineering calculations that establish the protection of your savings guarantee in the contract.
To establish a meaningful guarantee, the firm that is advising you must understand the intricacies of how guarantee methodologies work. Protect yourself from a rude awakening of savings shortfalls, where the contract is written in a way that the ESCO is “off the hook.”
“Expertise is a consequence of practice.”
How much practice does your Architect have with EPCs?