New Building Performance Contracting

Energy services companies (ESCOs) have successfully implemented performance contracts at thousands of existing buildings in the US and worldwide. ESCOs upgrade lighting, air conditioning and other systems and are paid out of the resulting energy savings over time. Performance contracting, however, has been primarily limited to retrofits as opposed to new construction.

With support from the Energy Foundation, Architectural Energy Corporation has implemented a New Buildings Performance Contracting Pilot Program. A set of guidelines based on this experience may be downloaded here. For additional overview information follow the links below.

Guidelines — Executive Summary

The way buildings are typically designed, constructed and operated offers little incentive for energy efficiency. A/E firms are often paid a flat fee or a percentage of construction costs, an arrangement that discourages them from spending extra time on innovation and efficiency. Performance contracts provide an incentive to design and construct efficient buildings, making it worthwhile for designers to integrate energy efficiency into the plan from the start, when it is possible to have the largest impact with the least effort and cost.

Recent interest in performance contracting comes from the recognition that the market has failed to pursue large economic opportunities in building energy efficiency. This failure stems from the inability of design professionals to explore alternatives due to the limited time allowed by contracts awarded from low bids.

Performance contracting, as described in the guide, is different from typical energy service company projects because it is applied to new construction rather than retrofits. The long term impact of improving the energy efficiency of new buildings is enormous. Worldwide, over 3 billion square feet of new commercial buildings were constructed in the last decade, and that rate is expected to increase.

In this guide you will find information that can help you decide if performance contracting is right for your project, and a step-by-step guide to creating performance contracts.

Energy Performance Contracting for New Buildings [396kb doc]

Final Report — Oakland Administrative Building

[949kb ]

Performance Contract Examples

Design/Build Projects

Plan/Specification Projects

Design Team Incentive - A portion of the architect/engineer or design/build contractor's compensation is tied to the building meeting an energy performance target. All four Phase I projects were of this type.

ESCO New Building - An ESCO finances and implements improvements to the design of a new building before it is constructed and is paid out of future energy savings. This type of performance contract was used by the Federal Government at a recently constructed courthouse in Tucson, Arizona.