Performance Contracting Research Articles

Contracting out public transit services: a competitive performance-based approach

The literature on public transit services contracting, emphasizes the need of efficient contracting designs to promote parties’ interest alignment. There is, however, limited research addressing specific incentive mechanisms. The paper contributes to that literature by developing a performance-based model with an embedded incentive bonus/malus (B/M) mechanism for contracting out transit services. Monte Carlo simulation documents that model’s performance appears sensitive to stochastic specification of some of the B/M drivers, and responsive to changes in the contractual performance factors out of the sub-concessionaire’s control. Evidence on the operation of a light-rail transit system designed based on a version of the model, document that it may contribute to promote ridership patronage, increase the average ride, and ultimately promote the economic operating efficiency of the system. Some policy implications are drawn, namely in terms of public funds allocative efficiency, and promotion of social welfare in contracting transit services.

Analysis of the experience of performance contracting development in Russia

Importance. To date, performance contracts in terms of modernization and management of fixed assets are practically not used in the economy of the Russian Federation and, in particular, at the level of industrial enterprises. The entire experience of developing performance Contracting in Russia is directly related to energy service contracts. At the same time, the existing potential to reduce energy consumption and increase energy efficiency makes it possible to use the performance Contracting mechanism in Russia today. The successful development of performance Contracting in the energy sector allows us to make a reasonable conclusion about the possibility of its use in other non-energy sectors, and in particular in the process of managing the fixed assets of industrial enterprises. The proposed approach to the use of performance Contracting in the management of fi xed assets of industrial enterprises is based on the idea that the contractor under such a contract assumes all the risks of introducing new fi xed assets in real production. Objectives is to analyze the problems of performance Contracting development in Russia and develop recommendations for its development. Methods. In the process of achieving these goals, the following methods of scientific knowledge were used: dialectical; analysis and synthesis. The research is based on the study of current scientific and periodical economic literature. Results. A brief history of the formation and development of energy service contracts is given. The main statistical data that characterize the development of the performance Contracting market in Russia at the current stage are reflected. Conclusions. Based on the conducted research, the necessity of using performance Contracting in the management of fixed assets of industrial enterprises is justified. The final part of the article presents the main reasons that hinder the mass development of performance Contracting in Russia,as well as some recommendations for its development. The conclusion is based on the need to continue work on the introduction of incentive mechanisms for industrial enterprises in the field of performance contracts for financing projects and activities to update and modernize basic funds, as well as to improve their energy efficiency, which will allow attracting new investments in energy conservation and ensure the return of invested funds by saving financial resources.

Energy Performance Contracting Initiative in Malaysian Public Hospitals

Ministry of Health Malaysia (MOH) has integrated sustainability program in the management of its assets particularly hospital buildings in line with the national sustainability goals and the United Nation Sustainable Development Goals. The fundamental sustainability change is significant since 2015 in the public healthcare sector where green business practice is more appreciable through formation of policy and sustainability related programme. Public hospital in Malaysia are very high energy consumers, therefore various energy projects have been implemented through Energy Performance Contracting (EPC). EPC projects in MOH is intended to deliver energy expenditure savings as well as to offset hospital building carbon footprint. EPC practice in government hospitals have managed to offset about 15.7 ktonne carbon emission in 2019 or about 16% of Government building national emission reduction target. Energy project such as energy efficient chiller retrofit, LED lighting retrofit and solar thermal hot water are some of the EPC initiatives by MOH in public hospitals. The energy projects not only serve to meet the overall Hospital Facility Management Contract sustainability goals but also to complement the green building target for Malaysian Healthcare building by 2025. The aim of this paper is to review the development of the EPC projects in public healthcare sector and its impact on government energy spending as well as to the climate.

Optimasi Pemakaian Sendiri PLTU dengan Metode Audit Energi pada Motor Listrik 3 Fasa di PLTU X

PLTU X is an industrial power plant with a large consumption of electrical energy for its own use. In ISO50001, every industry with a large Energy Consumption Intensity (IKE) needs to be audited for energy consumption. The company performance contract also regulates that the percentage of own use should not exceed 6% of electricity production. Currently, the percentage of own use in PLTU X unit 5 is greater than unit 4. For this reason, it is necessary to conduct an energy audit for own use with the aim of reducing the percentage of own use in unit 5 by 0.5% from current conditions and finding opportunities for energy savings at PLTU X unit 5. To analyze this problem using the energy audit method, analysis using the performance test method using the "gate cycle" and testing the quality of the voltage source by measuring using power quality analysis. After finding the equipment with the greatest energy consumption, fish bone tools were used to find the main cause of this abnormality.

THE LAW AND ECONOMICS OF FORCE MAJEURE LITIGATION: THE CASE OF COVID-19

In the aftermath of the Covid-19, the world is witnessing a flurry of disputes over contractual performances and compensation claims for injuries with India being no exception. The pandemic has forced companies and firms to suspend their promised supply of goods or services, triggering legal demands of compensation from the counterparties in the contract. Many employers have held back on the promised wages, debtors have suspended servicing their debts, and insurance companies have refused to compensate claimants for the business income losses. In many of the disputes triggered by Covid-19, one or the other contracting party has invoked the pandemic as ‘force-majeure’, or an event that has frustrated the contact. In many other disputes, the suppliers have argued that the disease has made contractual performance an economic impossibility. That is, the pandemic has increased the cost of contractual performance to a level that they cannot afford.

Performance contracts for offshore drilling wells at Petrobras

Performance contracts for offshore drilling wells at Petrobras

Influencers of Performance Contracting in Service Delivery: A Trend Analysis in the State Department of Water and Irrigation of Kenya

Influencers of Performance Contracting in Service Delivery: A Trend Analysis in the State Department of Water and Irrigation of Kenya

Performing Contracts in COVID-19 Times in England and in France: Different Responses, Same Result?

Neither France nor England has an ideal solution to the challenges posed by COVID-19 for contractual performance. Messy and limited state intervention or narrowly construed doctrines may not address the needs of contracting parties.

Circular Economy Performance Contracting: the contract that does not exist …yet

In 2017, construction and demolition waste were again the heaviest waste stream in France with 227.5 million tonnes (42.2 million tonnes for the building sector). To achieve a 70% (by weight) recycling target by 2020 for non-hazardous CDW various policies have been launched by the French government. However, public procurement has been neglected. In the field of energy saving, energy performance contracting has been widely used to guaranty energy efficiency improvement after building refurbishments. The paper shows how this approach could be duplicated to building deconstruction projects. Circular Economy Performance Contracting (CEPC) would encourage creativity of the deconstruction contractors and the value-chain and maximise circularity. It would lead to significant environmental benefits (e.g. increase of reused products and materials, reduction of CO2 emissions).

Business Models in the context of carbon mitigation: New Questions and Approaches illustrated by the Example of Energy Performance Contracting in Germany

The German government has set ambitious climate protection targets to limit global warming. The goal is to achieve an energy efficient and almost climate-neutral building stock by 2050. This will require, among other actions, a reduction of the primary energy demand of buildings by up to 95% by the end of 2050. In order to achieve an almost climate-neutral building stock, measures for deep energy retrofit are required. In addition to an existing financial demand, there are additional barriers to the expansion of activities to improve the energy performance and to reduce greenhouse gas (GHG) emissions of the existing building stock. One way to overcome these barriers are novel business models such as Energy Performance Contracting (EPC). The question arises as to whether and how the reduction of GHG emissions can be taken into account in the savings guarantees as they are typical for EPCs. This and other questions are addressed in the paper using conjoint analysis. Among other results, it is pointed out that specific approaches are required for different target groups such as the public sector and private homeowners. Finally, recommendations for further action are given. The presented partial results are drawn from the research work “Analysis of business models with regard to their potential for GHG reduction and energy efficiency of buildings”.

Does Performance Contracting Drive Citizen-centric Service Delivery: The Case of Huduma Centers’ in Kenya

Does Performance Contracting Drive Citizen-centric Service Delivery: The Case of Huduma Centers’ in Kenya

Freedom to (Smart) Contract

Since Friedrich Kessler wrote “Contracts of Adhesion-Some Thoughts About Freedom of Contract” in 1943, condemning narrow adherence to the principle of “freedom to contract” in the face of large scale enterprises’ growing preference for standard form contracts, Courts have balanced their desire to uphold contracts while protecting weaker parties from adhesion. Today, they face similar challenges with the rise of code-driven smart contracts and blockchain governance. Similar to Kessler’s world, where standard-form contracts were a tool for “excluding or controlling the ‘irrational factor’ in litigation” such as uncertain outcomes of judicial interpretation, automated smart contracts aim to put themselves outside the control of both contractual parties and the courts, thus removing any ability to breach or tamper with the original terms. Smart contract advocates contend that removing the judiciary as the governing body over contract law and imposing contractual performance via decentralized blockchain governance improves efficiency and certainty.
 But, how much can one really write a contract that completely circumvents the potential for legal intervention or judicial enforcement? Will smart contracts finally achieve the complete separation between private and public law that advocates of “freedom to contract” originally claimed, or does the common law legal system’s deep-rooted belief in the rule of law and due process prevent the judiciary from being excluded from contract enforcement regardless the medium? And is there a risk that, as smart contract sceptics posit, smart contract platforms and blockchain governance create a new feudal order with a “potentially illegitimate exercise of power” and “normatively suspect” wealth distributions?
 The short answer, as this paper will demonstrate, is that as long as smart contracts meet the traditional requirements of a contract, they cannot fall outside the establish legal system’s purview. The only thing a smart contract truly adds to traditional contracts is automated execution that is enforced by the blockchain’s consensus mechanism; this may provide some efficiency to the legal system by streamlining basic performance but it cannot be the only form of governance over smart contracts. While there may be procedural challenges to undoing or enforcing specific performance under smart contracts because of their decentralized features, any substantive problems that could occur within a smart contract are imminently addressable with and must be subjected to the principles and remedies found in traditional contract law. Finally, I will conclude with current developments in smart contracts which point to a potential for them to become an integral part of our legal system going forward. Overall, I will argue that smart contracts, if carefully drafted to consider potential pitfalls and the future needs of contracting parties to amend or enforce, can hold the potential to provide efficiencies and greater legal certainty to contracting parties. This is achieved, not through circumventing the legal system, but by working with it to automate simple performance enforcement and deferring more complex contractual breakdowns to the judiciary.

Risk Assessment of China’s Water-Saving Contract Projects

In order to alleviate the problem of water shortage, the Ministry of Water Resources of China proposed a Water-Saving Contract (WSC) project management model in 2014, which is similar to the Energy Performance Contract (EPC). In this context, this research aims to explore the applicability of China’s WSC projects by risk assessment, and to help promote WSC projects in China. Different from traditional risk assessment, this paper takes into account the uncertainty of the EPC project’s risks, and adopts the multielement connection degree set pair analysis to evaluate both the level and trend of the risks. The results show: (1) the overall risk of China’s WSC projects is low, so WSC projects are very suitable for promotion in China. However, the overall risk shows a trend of decelerated ascent, which shows that there are some potential high-risk factors in China’s WSC projects; (2) among the many risks of the WSC projects, audit risk, financing risk, and payment risk are at a high-risk level; market competition risk is at a medium-risk level; the remaining risks are at a low-risk level; (3) among the medium and high risks, audit risk, financing risk, and market competition risk have a trend of accelerated ascent, while payment risk has a trend of decelerated decline; in low risks, inflation risk has a trend of decelerated ascent, while the remaining risks have a trend of accelerated decline.

Recruitment, Effort, and Retention Effects of Performance Contracts for Civil Servants: Experimental Evidence from Rwandan Primary Schools

This paper reports on a two-tiered experiment designed to separately identify the selection and effort margins of pay-for-performance (P4P). At the recruitment stage, teacher labor markets were randomly assigned to a pay- for-percentile or fixed-wage contract. Once recruits were placed, an unexpected, incentive-compatible, school-level re-randomization was performed, so that some teachers who applied for a fixed-wage contract ended up being paid by P4P, and vice versa. By the second year of the study, the within-year effort effect of P4P was 0.16 standard deviations of pupil learning, with the total effect rising to 0.20 standard deviations after allowing for selection.

External Factors of Delay That Affect the Performance of International Construction Contractors in Kuwait

As the construction industry in Kuwait develops, the need for international contractors to handle and manage these projects rises as well. Currently, 70% of the projects in Kuwait get delayed, some by internal factors, and some by external ones. Thus, the purpose of this research is to provide a framework for international construction contractors in Kuwait regarding the external factors of delay that they might face in their projects. External factors of delay are a newly generated type of delays that represent all the delays that are beyond the contractor’s control and cannot be anticipated in the project. In this research, the most important and frequently occurring external factors of delay were extracted and discussed with 15 project management professionals to elaborate their perspectives and construct a survey to evaluate the impact and frequency of these delaying factors in the construction industry in Kuwait. This survey was distributed to 80 project management practitioners; then, the outcomes were analyzed by using the Relative Importance Index methodology to rank the effect of the examined delaying factors. Hence this research will provide international construction contractors with an illustration of the delaying factors that they should focus on and the ones they can pay less attention to them.

Teacher Perceptions on Implementation of Teacher Performance Appraisals in Public Secondary Schools in Bungoma County, Kenya

In public secondary schools, the teachers have to undergo a continuous Teacher Performance Appraisal (TPA) which forms part of the Performance Contract that the Principal signs as a binding agreement between the school and the government. The purpose of this study was to determine the Influence of Teacher Performance Appraisal policy in the Implementation of Performance Appraisal among Public Secondary Schools in Bungoma County. The specific objective was to establish the influence of Teacher Performance Appraisal and Development (TPAD) policy on implementation of performance appraisal. This study was guided by the Performance Appraisal Model. Descriptive research design was used with both qualitative and quantitative data collected for analysis. The study targeted 1107 respondents drawn among Sub County TSC directors, TSC Human Resource Officer, Principals, Deputy Principals and Directors of studies in schools. The study sample included 111 respondents, probability sampling; specifically stratified random sampling was used to pick the schools included in the sample. National schools, being only 2 in the County were purposively sampled; data collection was done using interview schedules, questionnaires and Focused Group Discussions (FGD). Data was analyzed using both descriptive and inferential statistics; findings were presented using tables. The study found that teacher perceptions do affect the implementation of TPAD. The study recommends that: teachers are sensitized and capacity built on TPAD to enhance their understanding of the practice. Teachers should take opportunities for peer learning to reflect and refine their own quality assurance processes and that teachers too can keep a diary to record thoughts about daily Classroom and outdoor activities.

Performance Appraisal An Outcome Of Performance Contracting In Insurance Firms In Kenya Nairobi County

Performance Appraisal An Outcome Of Performance Contracting In Insurance Firms In Kenya Nairobi County

Performance contract scenario and socio-economic development of Rwanda

Performance contract scenario and socio-economic development of Rwanda

Financing Mode of Energy Performance Contract Based on Network Joint Guarantee and Carbon Emission Option for Coastal Areas

Feng, L.Y.; Guo, J.J., and Li, Y., 2020. Financing mode of energy performance contract based on network joint guarantee and carbon emission option for coastal areas. In: Qiu, Y.; Zhu, H., and Fang, X. (eds.), Current Advancements in Marine and Coastal Research for Technological and Sociological Applications. Journal of Coastal Research, Special Issue No. 107, pp. 317-322. Coconut Creek (Florida), ISSN 0749-0208.The difficulty in financing small and medium-sized energy service companies is one of the obstacles to the smooth development of energy performance contract. Based on the characteristics of energy performance contract in coastal areas, this paper introduces the concept of network joint guarantee and carbon emission option and demonstrates their advantages in the field of energy performance contract. A case study of a coastal area was conducted, where the Shapley value algorithm is used to analyze the impact of the application of this financing mode on the efficiency of energy service companies, which corroborates the reduction of both the pressure of energy service companies and the financing risk posed to them. Therefore, the conclusion can be drawn that “network joint guarantee and carbon emission option” mode can help address financing problems.

Research on the synergy incentive evolution among the EPC subjects of energy efficiency retrofitting of existing buildings from the perspective of fairness cognition

Abstract In the energy performance contracting (EPC) mode, the energy services company (ESCO) involved in energy efficiency retrofitting of existing buildings often faces the parallel construction of multiple tender segments and multi-professional subcontractors. The one-to-many structure for ESCO and subcontractors causes difficulties to the project quality management and directly affects the effect of energy efficiency retrofitting of existing buildings. Therefore, this paper constructs a revenue-sharing incentive model by considering situation where subjects have fairness cognition. Through the social calculation experiment of the model, results show the following: (1) increasing the revenue-sharing coefficient will help to optimize the engineering quality of energy efficiency retrofitting and increase the energy-saving income; (2) in order to get better incentive effect, the engineering quality grade of energy efficiency retrofitting should match with the incentive strength; (3) because of the impact of fairness cognition, the incentive level difference is too large, and the incentive effect will gradually weaken in the subsequent incentive cycle; (4) subcontractor’s effort level changes can prompt ESCO to adjust the corresponding incentive intensity. Finally, some suggestions are put forward to optimize the engineering quality management of energy efficiency retrofitting of existing building, which is of great significance to improve the effect of energy efficiency retrofitting of existing building under EPC mode.