Performance Contracting — Plan/Specification

• Design fees are usually either a percentage of the total construction budget or a flat rate. This has the effect of emphasizing speed and discouraging additional work such as improvements to overall building performance.
• Architects and engineers fear litigation from non-standard or undersized design. From the mechanical engineer's point of view, it is a good idea to grossly oversize a system since there is no incentive for saving equipment costs or energy costs.
• Contractors have little incentive to insure that building systems are installed to operate efficiently. For example, fans can be wired backwards thereby doubling their energy consumption, lights that should be programmed to go off at night can be left on, and economizers are often improperly installed so that free cooling is wasted. As long as the occupants don't complain, everyone is happy, except the owner, who is stuck with an exorbitant utility bill.

The Solution: Give an Incentive to Save Energy

• Develop an energy target with a computer model (e.g. $100,000/yr in utility bills). The model should represent a reasonably efficient building. For example, it could represent minimum compliance with an energy code. Include the energy target in the contracts with the A/E and/or the Contractor but leave it up to the A/E to determine the combination of energy measures that meet the target at the lowest cost.
• Model the proposed building at specific stages during the design process to make sure it will meet the target. If the building is off target, the A/E must improve the design. Pay the A/E a bonus for achieving the target at the construction document stage (optional).
• Monitor actual energy use in the second year of occupancy. Adjust the energy target for factors beyond the A/E and Contractor's control (e.g. plug loads, occupant schedules, and weather). If the building uses less energy than the adjusted target the owner pays the A/E or Contractor a pro rated bonus (up to a maximum amount). If the building uses more energy than the adjusted target the A/E or Contractor pays the owner a pro rated penalty (up to a maximum amount).