Performance Contracting Research Articles

An Energy Performance Contract Optimization Approach to Meet the Competing Stakeholder Expectations under Uncertainty: A Canadian Case Study

Energy performance contracts (EPC) can address economic sustainability challenges associated with residential energy retrofitting projects, including funding limitations, poor quality of project delivery, and landlord-tenant dilemma. Literature has overlooked the impact of weighted average cost of capital (WACC) and funding sources in EPC planning. However, the WACC, stakeholder priorities, and uncertainties can alter the project outcomes. This study proposes a Monte-Carlo simulation based non-linear multi-objective optimization approach to address the aforementioned challenges. A case study conducted in British Columbia indicated that the maximum overall project profitability can vary between $18,035 and $20,626 with decision priorities. The overall project profitability can vary over 9% due to uncertainties. The project profits can change over $3000 due to changes in the WACC. These observations confirmed the criticality of accounting for WACC, stakeholder priorities, and uncertainties in EPC planning. The risk of compensating for the performance compromises and profits increases simultaneously for the energy services company with the increasing contract periods, while it is inverse for the owners. Therefore, the contract period must be decided considering the profit expectations and risk tolerance of the stakeholders. Extended contract periods allow lower capital contributions from the building owners, potentially solving the principal-agent disputes in rental buildings.

Improving the Efficiency of Energy Consumption in Buildings: Simulation of Alternative EnPC Models

The construction sector and the operation and maintenance of buildings largely contribute to energy consumption and emission of greenhouse gases (GHGs) in the European Union (EU). Therefore, it is of utmost importance to improve the energy performance of buildings. Yet, this frequently involves high short-term investments, which may not be compatible with owners’ budgetary constraints. In this research we analyze the importance of Energy Performance Contracting (EnPC) for the improvement of energy efficiency in buildings. These models allow bypassing budgetary restrictions of owners (public and private ones) and bring private capital to finance energy efficiency measures. The paper analyses different models of contracting Energy Service Companies (ESCOs), from traditional models to alternative models, and exposes the versatility of the new contracting models and the associated risks. Several applications of energy performance contracts implemented in European countries are presented to identify the main characteristics that lead to successful contracts. The paper also includes the discussion of energy performance contracts applied to a public building (a school) that seeks to reduce its annual energy consumption, by testing the use of three types of energy performance contracts. The results show that there is potential in the use of EnPC but it is critical to select the most adequate model, especially when defining the contract duration, to balance both owners’ and companies’ interests.

Cultural norms to support gender equity in energy development: Grounding the productive use agenda in Rwanda

Changes to cultural norms as a result of electrification can promote gender equity. This paper contributes to the energy transitions literature addressing research complexity from investigating consumption behaviours and opportunities for behaviour change. We ask: how cultural norms influence productive uses of energy technologies and how norms may change as a result of electrification? A scoping and critical review of literature, and empirical study applying grounded theory analysis and the energy cultures framework suggests the value of exploring existing and emerging energy cultures, particularly the nature of material cultures, norms and practices. Qualitative methods used include key informant interviews, transect walks and observation. The application is in the Bugesera District of Rwanda. The main study finding is that there are relationships between mini-grids, fuels, values, beliefs and traditions that influence uptake and vice-versa. The emphasis on of productive use is revisited to suggest inclusion of norms such as Agakiriro — making wealth through small scale business enterprises; Ubudehe — mutual assistance welfare practice; new material realities of the modern Rwandan household; local and international technological innovations; old programs — One Laptop Per Child; imihigo – a tradition of goal setting translating to performance contracts, and Made in Rwanda — enhancing the domestic market through value chain development. Inclusion of gender concerns in the push for productive use of electricity and in renewable energy policy can promote sustainable value chain creation and inclusive business model development. Finally, we reflect on policy considerations for stakeholders working in energy development in Rwanda and elsewhere.

Contractual performance by a third party governed by lex contractus and the effectiveness of avoidance action in insolvency proceedings

Upon a request for a preliminary ruling on the articulation between Article 13 of the European Insolvency Regulation n° 1346/2000 and Article 12(1)(b) of Rome I Regulation, the Court of Justice of European Union has confirmed in a decision on April 22, 2021 that a payment made in perfor-mance of a contract by a third party is subjected to the law applicable to that contract and not to the law of the Member State opening the insolvency proceedings where the payment is challenged by an avoidance action. The decision raises some reflections on the correlation between the European Insolvency and Rome I Regulations as well as the effectiveness of avoidance action in insolvency proceedings.

An energy performance contracting parameter optimization method based on the response surface method: A case study of a metro in China

As an effective mechanism for improving energy efficiency, energy performance contracting (EPC) is receiving increasing attention. However, due to many uncertain factors that affect contract parameters, a reasonable distribution of participants' interests is necessary. To reasonably determine EPC contract parameters, this paper proposes a framework based on Geometric Brownian motion (GBM) and the response surface method (RSM) to optimize EPC contract parameters. First, GBM is used to simulate the energy prices, energy savings, energy-saving revenue allocation, etc. Then, the RSM is proposed to optimize multiple contract parameters. Finally, the proposed method is applied to the Wuhan Metro Line 2 lighting system renovation project. The results demonstrate that (a) the contract parameter optimization framework based on the GBM-RSM provides an effective method for optimizing the combination of EPC contract parameters. (b) The GBM-based method of quantitative simulation effectively expresses the uncertain factors of energy-saving performance in EPC renovation and provides reasonable data support for optimizing EPC contract parameters. (c) The established response surface optimization model of EPC contract parameters is an efficiently fitted model. A comparison between the optimization results and actual application results shows the feasibility of response surface optimization of EPC contract parameters, which improves the benefits for the owner of energy-saving renovation and thus increases the owner's enthusiasm, while guaranteeing a reasonable return for energy-saving companies. Hence, this study provides an effective method for optimizing EPC contract parameters and offers a reference for similar problems.

Performance Contract — Focus on Losses Controle, in Social Vulnerability Areas: Cangaíba Case Study

Among the modalities of contracts in the sanitation sector, there is a contracting modality implemented in mid-2010 and which is on the rise, where the due payments to the hired company, is based and dependent of the results reached in the project. There are several variations on this model of contract, since the that one where the receivables are completely dependent of the results until that one where there is a fixed price for the assets and basic services, and there is a plus compensation for the overcome results. This modality has been diffused specially because of the achieve remarkable results for both sides, contractor and contracted. The possibility of increasing gains with mutual advantages, as well as to enable greater technological advancement, are the great attractive and the driving force of this type of contracting: The model used to allow the contracted company to apply technical solutions, although not provided in the scope, if it promises improvement on the results of the project.

A Conceptual Framework for Implementing Lean Construction in Infrastructure Recovery Projects

Natural hazards can have substantial destructive impacts on the built environment. Providing effective services in disaster areas is heavily reliant on maintaining or replacing infrastructure; thus, post-disaster reconstruction of infrastructure has attracted growing attention. Due to the complex and dynamic nature of infrastructure recovery projects, contractor companies engaged in this work have typically experienced poor performance. Furthermore, from a commercial perspective, the post-disaster reconstruction environment is characterized by fierce competition and market uncertainty, challenging the organizational resilience of companies undertaking this work. One approach for improving contractor performance is the implementation of lean construction, but the literature lacks consensus on its capability to affect organizational resilience. To respond to this problem, a conceptual framework applicable for lean implementation in infrastructure, which explicitly addresses organizational resilience, is required for recovery projects. In parallel, contributing components to effective implementation of lean-recovery and supportive theories for justifying the conceptual framework must be identified. Consequently, this paper proposes a conceptual framework to implement lean practices for the enhancement of organizational resilience. The framework is developed using a systematic research method, wherein 110 research documents were discovered initially, and following processing, 18 relevant documents were identified and analyzed. Through this process, contingency and Transformation-Flow-Value (TFV) theories were identified as an appropriate foundation for a framework to implement lean construction in infrastructure recovery projects.

Relationship between the Perceived Effects of Implementation of Performance Contracting Process and Head Teachers’ Performance in Public Day Primary Schools in Kericho County, Kenya

This study tries to check the association between perceived effects of performance and head teachers’ performance. The research context is public day primary schools in Kericho County, of Kenya of Kenya. Both quantitative and qualitative approach has been applied. A sample of two hundred twenty-seven head-teachers from Six Sub County Directors has been used for this study. The results also show that implementation of performance contracting process had a statistically significant relationship with head-teachers’ performance primary day schools in Kericho County.

Market fragmentation of energy resource prices and green total factor energy efficiency in China

This paper studies the market fragmentation condition of energy resource (such as coal, gasoline, diesel and electricity) prices by using the relative price method and analyzes its impact on China's green total factor energy efficiency. Results shows that: (1) Market fragmentation of China's energy resource prices presents an inverted U-shaped curve in 2004–2009, and then tend to be stable in 2010–2018 with a peak in 2007. The market fragmentation of China's energy resource prices of energy transfers out provinces is more serious than that of energy transfer in provinces. (2) The trend of China's green total factor energy efficiency presents N-shape curve in 2004–2014, and then it tends to be stable around 0.850 in 2015–2018. The green total factor energy efficiency of energy transfers out provinces is lower. Phenomenon of “energy efficiency curse” is significant in China. (3) Impact of market fragmentation of energy resource prices on green total factor energy efficiency also presents an inverted U-shaped curve. And at current stage, reducing the degree of market fragmentation of China's energy resource prices is conducive to the improvement of green total factor energy efficiency. According to the study results, we believe that reduce the market fragmentation of energy resource prices and promote the internal opening of the energy market, promote demand side management measures such as energy performance contracting, reduce the proportion of coal consumption in total energy consumption and improving energy efficiency, increase green total factor energy efficiency of energy transfer out provinces are all effective ways to improve China's green total factor energy efficiency.

Critical success factors in the management of petrochemical construction projects for contractors and subcontractors during the COVID-19 pandemic

This research identifies the critical factors of multinational enterprises affecting the successful performance of contractors and sub-contractors during the COVID-19 pandemic. Among these critical success factors, labour availability, site accessibility, shortage of construction resources, and inadequate epidemic prevention in construction planning caused by the lockdown policy were the most fundamental successes encountered in construction projects. The present study focuses on Thailand's construction industry with the aim of identifying critical success factors and finding the cause-and-effect relationship among these essential success factors. To understand these interdependent relationships, this study distinguishes between ‘driving’ and ‘dependent’ critical success factors. Mixed-methods were applied to investigate the mutual relationships that exist between these critical success factors. The results show that the critical factors driving contractors’ successful performance are related to 18 critical factors that must be considered during construction management. Interpretive Structural Modelling found that the success factors during the COVID-19 pandemic were effectiveness management, e.g. profitability and client satisfaction. However, important performance drivers of contractor success that are compatible with MICMAC strategic analysis and the construction action plan, and participation of contractors by increasing knowledge on construction management and internal monitoring, are crucial success drivers for contractors and sub-contractors.

Modernizing the energy infrastructure at federal facilities: Should utilities play a bigger role?

Since the Energy Policy Act of 1992, federal facilities have increasingly used performance contracting to finance energy and water efficiency measures. Utility Energy Performance Contracts (UESCs) have received less attention despite having similar goals and processes as Energy Savings Performance Contracts (ESPCs). This paper provides a comparison between the two performance contracting models and highlights the tradeoffs that should be considered. Higher costs observed in ESPCs are driven by higher overhead and the costs of savings guarantees. These cost drivers cascade into longer financing terms and higher interest rates. These results suggest that federal agencies should explore UESCs as a potentially more cost-effective way to achieve energy savings improvements.

Green bond as a new determinant of sustainable green financing, energy efficiency investment, and economic growth: a global perspective.

The purpose of the study is to test the role of green bond financing on energy efficiency investment and economic growth. To achieve the study objective, fuzzy decision-making modeling technique is applied. The results revealed that bank loans are now the main source of financing for energy efficiency projects. Project-based financing might be replaced with Energy Performance Contracts (EPC) warranting energy efficiency investment. Moreover, green banks invest both public and private funds in energy efficiency promoting economic growth. The usage of green bonds for financing environmentally beneficial projects or companies is limitless. Providing for screening energy efficiency investment proposals with small payback hurdle rates might have large opportunity costs. Green bonds can be used to remove the financing barriers for green finance and sustainability tool. On this, study provides policy implications to key stakeholders; if suggested policy suggestions implemented successfully, these would help to enhance scope of green bond financing to uplift energy efficiency financing and green growth successfully.

Risk management application in South African power utility construction projects

South Africa's largest electricity producer has embarked on mega investments to build new power stations. This paper reports on the risk management maturity level, and risk management processes. The research adopted the survey research method and self-administrated questions to collect primary data. The investigation targeted the total population of 100 engineers, technical managers, safety officers and quality officers. The researchers collected a total of 44 useful responses. The research established that the overall risk management maturity at the intermediate level. The risk response planning and risk monitoring were identified as processes that need improvement. The risk factors in the South African power utility construction projects were a lack of pre-planning, the level of contractor's performance, community unrest, labour unrest, safety incidents, defective work and poor risk management skills. The paper has both theoretical and practical implications despite the limitations associated with the study design.

IS SCHOOL CATEGORY A PREDICTOR OF PERFORMANCE CONTRACTING TARGETS IN PUBLIC SECONDARY SCHOOLS IN KAKAMEGA COUNTY, KENYA?

In order to improve the quality education in Kenya, Teachers Service Commission (TSC) embraced Result Based Management Approach, which involves Performance contracting for heads of primary and secondary schools. This study sought to establish the effect of school category on attainment of Performance Contracting targets by secondary school principals in Kakamega County. The study used descriptive survey research design. The study population comprised of 358 principals of public secondary schools in Kakamega County. Stratified, proportionate and random sampling techniques were used to select a sample of 126 respondents. Data was collected using a questionnaire form the school principals. Research instruments were validated using face and content validity while reliability was determined using spilt-half test technique at r= 0.8. Data was analyzed descriptively using means and percentages; and inferentially using multiple linear regression by aid of Stata version 12. Inferences were made at 0.05 level of significance on a two-tailed test. Data was analyzed and presented inform of tables. The findings of the study showed a statistically significant relationship between school category and in particular day schools with mean attainment of performance contracting targets in public secondary schools in Kakamega County. Day schools predicted – 5.475 points low in mean attainment of performance contracting targets. The findings conclude that school category affect the attainment of performance contracting targets.

Exploring the value of ICT in warehouse management at the electricity company of Ghana, Takoradi

This study sought to examine the effectiveness of Information Technology in warehouse management using the Electricity Company of Ghana, Takoradi as a case study. A structured questionnaire was used to collect primary data from the respondents from ECG in Takoradi. Public procurement and supply chain officers and other staffs from various departments were employed for the study. The data collected were analyzed by using percentages, relative importance index, mean score and median. The findings revealed lack of technology is a key challenge of stock control in organization productivity in Electricity Company of Ghana at Takoradi. The organization does not have adequate inventory control measures in place. Training of staffs at the organization helped them to comply with the rules and regulations for stock control. The organization has adequate warehouse space to hold additional stock. The organization has stock control systems available. However, performance contracts are impediments to works. Also, internal and external controls are rarely monitored. It is therefore recommended that there should be proper distribution planning to enhance organizational productivity in the state corporations, especially ECG. The public organizations should have internal assessment when planning. The distribution planning should ensure timely delivery. The organization should ensure that the participatory planning is adequate. The study proposes the need for investigating on appropriate ways to increase formalization of information technology adoption in order to enhance adoption of modern technologies in inventory management as a tool to boost performance. The study concludes that Electricity Company of Ghana should invest more in modern technologies for example enterprise resource planning (ERP) systems in order to achieve system integration, minimize communication costs, enhance efficiency and increase sharing of information which will eventually lead to improved performance.

Provider Altruism in Incentives Contracts: Medicare’s Quality Race

The paper analyzes the impact of provider altruism and motivation on the out ­comes of pay-for-performance reimbursement in healthcare, where a fixed price contract on quantity is supplemented with a relative performance contract on quail­ty. We develop a theoretical model which forecasts the crowding out of most alt­ruistic providers. Using the example of Medicare’s nationwide natural experiment with a relative performance contract on quality (the data for 3000 acute care hospitals in 2004-2017, with the incentives contract implemented since 2013), we conduct an empirical test of the model predictions. We assume that altruism is hete­rogeneous across hospitals and the values of altruism in each hospital are higher for quality measures which are strongly associated with the patient’s benefit. The analysis employs dynamic panel data estimations to account for «habit-formation» and we exclude pre-reform and post-reform «regression-to-the-mean» effects by modeling the time-dependent long-term mean as a function of hospital characteristics. We focus on highest-quality hospitals and discover a deterioration of quality measures, which may be linked to the patient’s benefit (communication of patients with medical personnel and ability to receive help promptly). It may be interpreted as an illustration of the fact that relative performance incentive contracts may be associated with crowding altruistic providers out of the healthcare market.

Epc(Hc)- Energy Performance Contracting (Epc) Model for Historic City Centres

Epc(Hc)- Energy Performance Contracting (Epc) Model for Historic City Centres

Energy Performance Contracting from the Perspective of Public Sector—A Bibliometric Analysis

In advocating energy-saving and low-carbon today, energy performance contracting has become an important policy tool for energy management in the public sector. Based on the perspective of public sector, this article uses hotspot comparison to find trends and policy issues in energy performance contracting. Through the cluster analysis of the literature co-citation network and the frequency analysis of keywords, it is found that the Chinese energy performance contracting research needs to be improved in four aspects: Industry and sector, Financing, Evaluation criteria and Supporting measures. Based on these, we put forward policy implications for improving Chinese energy performance contracting in the future.

Performance Contracting and Service Delivery in Public Secondary Schools in Trans-Nzoia County, Kenya

Background : Education institutions in Kenya are obliged to provide quality service to the citizens. The Education sector in Kenya has undergone sector reforms just like the other public agencies. Among the most recent is the introduction of performance in schools that gave birth to introduction of performance contracting with the aim of improving efficiency and effectiveness in the management of public resources as well as delivery of service in these institutions. However, despite the reforms, secondary schools in Trans-Nzoia county are still experiencing poor service deliveries. This study objective was to assess the influence of stakeholders’ participation in setting performance targets on service delivery in public secondary schools. Materials and Methods : The study adopted the descriptive survey design with both qualitative and quantitative approaches being used. The study targeted all the 241 principals, 241 BOM Chairpersons, 257 Senior teachers and 526 student’s leaders from 241 secondary schools in Trans-Nzoia county. A sample of 26 secondary schools was identified using Stratified random sampling from four strata. Purposive samplings techniques were used to select 26 principals, 26 BOM Chairpersons, 90 senior teachers and 227 student leaders. The instruments used to collect data were interview schedule, questionnaire and document analysis and Interview schedule were used to collect data from the principals, while questionnaires were administered to BOM Chairpersons, senior teachers and student leaders. Results : The average level of satisfaction in service delivery based on the rating by teachers was 50.3% (mean = 2.5127, std. dev = 1.03458 ) rated moderate, 53.9% (mean = 2.6955, std. dev = 0. .62639) rated moderate by students, and 51.76% (mean = 02.588, std. dev = 0.97818 ) rated moderate by chairpersons Board of Management (BOM). There was a significant positive correlation between stakeholder involvement in setting performance targets and service delivery among secondary schools in Trans-Nzoia County. Linear regression findings indicated that Stakeholder’s involvement in setting performance targets had a statistical significant positive casual effect on service delivery in public secondary schools in Trans-Nzoia County, Kenya ( b = 0 .854 , p-value = 0.00 < 0.05). Conclusion: Enhanced stakeholders’ involvement in setting performance targets contributes to improvement of service delivery in public secondary schools in Trans-Nzoia County, Kenya .

The role of performance contracting on performance of public universities in Kenya

Public universities have undergone major reforms in the past few years. These reforms have broughtabout challenges to both management and employees of these universities. One of changes that cameas a result of these reforms is performance contracting. This study sought to establish the role ofperformance contracting on the performance of public universities in Kenya. The study objectives were: to establish how stakeholder involvement affects performance in public Universities; to determine how staff training affects performance in public Universities; to assess the impact of monitoring and evaluation on performance in public Universities; to examine how organizational structure affects performance in public Universities. The study was anchored on two main theories; first the New Public Management theory and goal theory. The study was done in four public universities with campuses within Nairobi Central Business District. The research adopted a descriptive research design of survey in nature. The Study found out that collaboration with internal stakeholders, like lecturers, students and other staff members, as well as external ones parents, local government and other parties is important in enhancing performance. It was further established that training influenced performance in public universities to a great extent. The study recommended that, various measures need to be put in place to entrench performance contracting in private and public universities and if possible, to the smallest units of operation. Measured factors leading to effectiveness of performance such as organizational productivity, employees’ motivation, organizational effectiveness and organizational culture.