Public organizations often find their buildings in need of hefty upgrades without the money to cover these steep costs. School districts, for example, face the challenge of needing to keep their facilities up to industry standards on a typically limited budget. This is where performance contracting comes in.
How Performance Contracting Works
John Poggi, account executive at Johnson Controls, describes performance contracting as “a funding mechanism that allows administrators to implement facility improvements without a capital expense.”
Poggi explains how a performance contract is developed: The financial partner assesses the building, including infrastructure, systems and technologies already in place, and proposes a project that addresses the specific needs of the building. This includes the project description, scope, costs and savings estimate over a specified period.
This proposal is then made possible with a low-interest loan, which will be paid by the building owner, with guaranteed energy savings on an annual basis. With it, organizations can conduct upgrades and pay for them through the resulting energy savings.
If the estimated energy savings aren’t reached, the operator holds the financial responsibility. This system allows organizations to get needed upgrades without taking on financial risk.
“Performance contracts are a great option for smaller entities and school districts to achieve a better infrastructure, updated systems and heightened operational efficiency,” Poggi says.
He explains that’s because these groups often have limited employees, staff and funding, making proactive maintenance more difficult. This doesn’t require moving out of the normal operating budget because the project is paid with energy savings.
In addition to helping an organization’s bottom line, energy saving upgrades can also reduce emissions and increase sustainability.
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Performance Contracting at Manassas School District
The Manassas City Public School District in Virginia put performance contracting in action for its 2018 upgrades. The district partnered with Johnson Controls to assess the facilities, come up with a project to address needed upgrades and determine a savings estimate.
The project included a variety of upgrades, including lighting, water and building envelope improvements. Once the project was complete, the savings totaled nearly $165,000, over double the original savings estimate.
Upgrade highlights Poggi shares include:
- HVAC improvements resulting in better indoor air quality by including bipolar ionization, which significantly reduces harmful particulates that spread illness among students, faculty and staff.
- A solar learning lab, where students can spend more time outdoors, charge their mobile devices and learn about the benefits of renewable energy.
The student experience has been heightened because of the improvements. “Altogether, the feedback received has encompassed that better academic performance results from improvements to learning environments,” Poggi says.
Hallie Eickhoff serves as a digital marketing intern for BUILDINGS, interior+sources and Meetings Today. Eickhoff will graduate with a degree in communication studies and public relations with a minor in creative writing from Coe College in Cedar Rapids, IA, in May 2020.
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