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Key Criterion for Selecting PC Firms for Schools

Guest post by: Eric A. Woodroof

Article Overview: How to Select the Best Firm for Performance Contracting in K-12 Schools

Key Criterion for Selecting PC Firms for Schools

Background:

Every year, I am proud to say that thousands of energy management projects/programs are developed which yield great savings and returns on investments. Unfortunately, some of these initiatives get "postponed" due to lack of funding to implement them. Thus, finding programs that pay for themselves or can be financed (such that positive cash flow is preserved throughout the program) has been a prerequisite for many buildings. Performance Contracting (PC) is one solution approach that resolves the cash-flow problem. However, hiring a PC firm can be complicated. If you choose wisely, your facilities can discover ways to save a lot of money with minimal expense. Of course there are some "horror stories" too, that have resulted in a dismal failure, where the facility lost money or paid excessively! So, for the success of your facility's energy program (and your reputation) it is critical to pick the right PC firm for the right job.

So, how do you select the best provider for such a service? Last month, I did a survey to identify the key success factors, and the data provided some interesting results. This study was done in school districts, but the results have meaning and application for many facility managers that manage multiple locations.

This article is organized by the outline below, so feel free to jump to the Data Analysis, Conclusion or Applications if you want to skip the details.

1. Background

2. Survey & Data Collection

3. Summary of Data Analysis

4. Conclusion

5. Applications

Survey and Data Collection:

16 school districts were interviewed to identify the key success factors for selecting a PC firm to provide an energy savings program for a school. The districts that were interviewed had already implemented an energy conservation program across their facilities for more than 2 years (and some had programs lasting more than 10 years). These small and large schools had worked with different PC firms ("providers") to deliver energy conservation programs in different areas of the country.

At the beginning of each interview, the following question was asked to the district employee who oversaw the contract with the provider:

"If you were to give advice to another school district that is in the process of selecting an energy consultant to provide an energy savings program- What are the Key Success Factors for success?"

The following Key Success Factors were mentioned by respondents:

1. Provider Capabilities / Track Record with References

2. Provider's Support/Training/Benchmarking

3. On-Site Energy Manager's Attitude/Leadership

4. District's Commitment to an Energy Saving Program during the early phases of implementation

5. Communication of the Program's Goals and Progress across District's Facilities/People

6. Provider's focus on creating a "self-sustaining" program (where eventually- the District does not need the provider)

7. Trust and Relationships between District and provider

8. Provider Flexibility during Implementation

Figures 1 and 2 show the response frequencies across all respondents in small and large schools. In other words: "What percentage of respondents listed Key Success Factors as [First and Second] priorities". Thus, in Figure 1- 43% of respondents identified "Provider Capabilities / Track Record with References" as the most important factor for a program.

FIGURE 1 - All Facility Sizes

FIGURE 2 - All Facility Sizes

Now for the Interesting part... When segregating the data by the school size and we get a clearer picture. Figures 3 and 4 show the response frequencies across respondents from school districts with student populations greater than 20,000 (Medium, Large and Extra-Large Districts).

FIGURE 3 - Large Schools

FIGURE 4 - Large Schools

Figures 5 and 6 (below) show the across respondents from school districts with student populations less than 11,000 (Small and Very Small Districts).

FIGURE 5 - Small Schools

FIGURE 6 - Small Schools

Summary of Data Analysis:

When stratifying the Key Success Factors by facility size, dominant factors are identified. Figures 3 & 4 show that Large Districts are more aligned on their Priorities of Key Success Factors.

• 80% of Large Districts identified their first priority as: "Provider Capabilities / Track Record with References",

• 83% of Large Districts identified their second priority as "Support/Training/Benchmarking".

This means that an overwhelming majority of large school districts (that have already implemented an energy savings program) feel that the most important Key Success Factor is "having a provider with strong capabilities and a good track record". The second most important factor relates to the support, training and benchmarking abilities of the provider.

In contrast, small districts were less aligned with respect to their priorities. Figures 5 & 6 show that the priorities identified are much more evenly distributed with no dominant priorities. This could mean that small school districts are truly a different market and require different needs.

Conclusion:

When selecting a provider for a performance contract, different-sized facilities have different priorities on the key success factors. This is important because when selecting a provider, you should evaluate their capabilities and references thoroughly (make sure they have done what their sales proposal claims). In addition, you should select a provider that has experience in your facility size/type so that they can benchmark your facility against others to evaluate performance and make adjustments as needed.

Applications:

Utilizing the results above can help you write a good Request for Proposal (RFP), which is often one of the first procurement steps for public facilities. Within your RFP, (in addition to the standard terms and conditions) you may want to ask for:

• The provider's main business focus as well as their length of service in the specific scope of work requested.

• The provider's process of delivering the services and verifying the results.

• The provider's ability to measure and compare the performance of your facilities versus benchmarks.

• At least 7 references (with contact names/phone numbers) where the provider has delivered a similar scope of work/services in similar facilities/climate regions. Within these references, the provider should also state the NET Benefits provided.

• The NET savings to your facilities (inclusive of all costs to be paid by your facility). If there is a guaranteed savings, that should be listed as well.

After you receive the proposals, the questions below can help you identify the best providers for your needs.

• How many references were provided? Are there multiple references from the same organization?

• How similar (or different) are the references when compared to your facility (size, location, function, etc.)?

• Does the provider have a personal relationship with any of the references? Is there a conflict of interest?

Some of the information below you may have to retrieve by contacting the provider's references.

• How long ago did the reference work with the provider?

• Why did the reference hire the provider in the first place?

• Did the provider follow through on their commitments?

• Are they continuing the relationship? Is the PC program still operating? Why or why not?

• Were there any surprises?

• Would the reference hire the provider again? Why or why not?

Finally, perhaps you should adjust your scoring criteria to give more weight to the characteristics that have been identified as "important" by other districts that have already implemented energy savings programs. Selecting the right firm for the job will yield greater savings and probability of long-term success... and that is good for all of us!

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Article Tags: criterion, k12 schools, pc firms, performance contracting



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