ASHRAE Journal - January 2014 - 70

COLUMN THE PERFORMANCE GAP
accountability intended. LEED does not enforce the
quality of the Cx or M&V delivery.
Besides promoting better communication and perhaps
"buy-in" of each team member in the collaboration process,
LEED does not provide actual incentives for contractors
or ongoing operations staff to ensure efficient
performance. And, studies indicate that LEED does not
necessarily equal energy efficiency (Figure 4). Markers
below and to the right of the line indicate worse performance
than predicted. This data was taken from my colleagues'
post-implementation studies.
Other published studies with larger data sets show the
same "scatter."Figure 51 shows measured versus design EUIs.
Performance Contracting
Performance contracting is a financing mechanism
primarily for retrofit energy projects that is often tied
to a specific project delivery method. Performance contracts
allow the agency to take out a low interest rate note
to pay upfront for capital and energy improvements and
use the energy and operational savings to pay for the
financing. Energy service companies (ESCOs) respond
to a request for proposals with audit pricing and agreements
for maximum allowable mark-up rates or other
commitments.
Once selected, the contractor audits the facility and
provides a detailed energy study with project scope recommendations,
energy savings calculations, financial
feasibility details, and a proposed M&V plan. The owner
chooses either to pay for the energy audit services at the
bid rate, or move forward into a project contract with the
contractor.
Performance contracting follows a delivery process
much like a design-build method. However, the M&V
process that is typically required to secure financing
is the key to reducing owner risk. Different M&V
approaches range from low cost/effort to high cost/
effort, which also simultaneously range in owner risk
mitigation. Reduced M&V effort helps avoid diverting
capital or investment dollars from tangible project scope.
Unfortunately, robust M&V can divert additional money
away from the construction because the contractor does
not want to assume unmanageable risk either.
If the contractor is expected to provide robust whole
building meter analysis, the energy savings and cost
avoidance guarantees will most assuredly be reduced significantly
to mitigate the contractor's risk as well. A 2002
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ashrae.org JAN UARY 2014
Lawrence Berkeley National Laboratory study,2 discusses
how even how even a decade ago, in order to reduce their
risks, ESCOs often de-rate energy savings-showing actual
performance exceeding predicted savings in 57% of the
cases. A total of 59% of projects performed within ±15% of
savings estimates.
Many performance contracting projects avoid shortfalls
by creating a buffer that results in a large performance
gap with excess savings. Excess savings may not seem
like a problem, but certainly the money could be better
spent on further upgrades. Either way, errors in the M&V
plan and execution are easily made and rarely caught,
but that points back to a few other pitfalls, including
inadequate details and underqualified team members.
Incentivizing Goals
The methods discussed here encourage communica-
tion and collaboration between disciplines, contractors,
and with the owner. However, few completely address
the accountability pitfall leading to the performance gap.
Future improvements and additions should incorporate
goal-based incentives for project delivery teams and
ongoing operations staff.
Additional incentives that could be developed and
investigated further in the industry include financial
bonuses based on project performance. Currently, some
projects incentivize contractors based on exceeding
timeline expectations. Why not change the incentives to
match the energy goals?
Design teams often add multiple safety factors to sys-
tem specifications because the contracts will hold them
liable (negative incentive) for systems that are proven
unable to achieve the comfort parameters set forth in the
goals. Why not add incentives to right size the solutions
and optimize energy efficiency?
Operators are unofficially incentivized to reduce com-
fort complaints and tenant calls at all costs, mainly due
to their limited personnel and schedules. So Band-Aid
fixes often result, which contribute to energy waste. If
operators were financially incentivized to save energy
through shared savings or bonus structures, they
would be more likely to troubleshoot and solve the root
problems, accept help from experts, and risk slightly
increased work requests.
Combining some of the existing methods and strate-
gies for increasing accountability with other well-devised
creative incentives could further close the performance
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