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Energy Savings Performance Contracts Reduce Risk with Integrated Design and Delivery


If you’ve ever had a project that had one too many change orders, then this video is for you. Hey everyone, this is Ira Nicodemus with Performance Services, and today we’re talking about the second financial benefit of an energy savings performance contract, which is integrated design and delivery. Now integrated design and delivery, if you’re not familiar with the phrase, is simply saying that there’s a single company that’s responsible for everything from the design, the engineering, of the project through the bidding, the pricing process, and then overseeing the construction, the delivery, and this has a lot of different benefits. Next week we’re going to talk about how this can lead to lower cost, but today we’re talking specifically about the benefit of reduced risk and specifically the risk of change orders. Now a change order is simply at some point in the construction process when you have a change to the original scope of work, and that normally comes back to you as the owner as a request for more money or more time. There’s a lot of risk when you have change orders in your projects. Now, where do change orders come from? Normally, what happens is you have a single company that is overseeing the design, the engineering, and then when a separate company is doing the bidding or the pricing, you know they’re trying to understand and interpret what the designer meant. Oftentimes there’s some miscommunications and misunderstandings which then manifest themselves during the construction process and that’s what leads to the change order, is that misunderstanding or that things that were missed. Now, when you work with a company that has an integrated approach like Performance Services, there’s really no reason to have change orders. The same company that’s doing the design is also overseeing the construction, so there shouldn’t be those miscommunications. And if for some reason something was missed, that’s really on that company. We can’t come back to you as the owner and say hey, you know, we need to change order for something that we were responsible for both in the beginning and later on. So because of this, we at Performance Services offer a no change order guarantee. That means that whatever the price is that we say your project is going to be delivered for, that’s what it is, and if we miss something along the way that causes more cost, that’s on us. We’re not going to come back and hit you with a change order for that work. So you can see how this reduces your risk, but how is it a financial benefit of a performance contract? And what I like to equate this to is an investment. When we think about a return on an investment we have to consider what the risk is associated with that return. So if I gave you the option of two different investments, they both have the same rate of return, let’s say it’s 10% a year, but I tell you that one is a lot riskier than the other, which one are you going to go with? Of course you’re going to go with the one that’s lower risk. And it’s kind of the same way when we’re looking at a construction methodology. If I can give you two different ways to complete your project, they’re going to have a similar cost, but one is going to have a much lower risk, then of course, you’re going to go with that one because it really does have a financial benefit. I hope you found this video helpful. If you did give it a like, give it a share, and if you have any questions, feel free to reach out to myself or anyone here at Performance Services. We’d love an opportunity to talk with you and see if this integrated approach might have some benefits on your next project. Thanks so much for watching. We really appreciate your time and stay tuned next week when we’ll talk about another financial benefit of energy savings performance contracts. I’ll talk to you then and take care.

Norman Bunn

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