Performance Contracting Research Articles

Linkages between policy and business innovation in the development of China's energy performance contracting market

China has a large and growing energy performance contracting (EPC) market. In 2017, the EPC investment was 111 billion CNY, making China the largest EPC market globally. EPC has played a significant role in driving energy efficiency improvement. This paper evaluates four key factors driving the EPC market and their interactions: incentive policies, China's Five-Year Plans, and business innovations in diversifying contract models and strengthening measurement and verification (M&V). We use multiple data sources: detailed information from 21 pilot projects, industry-wide surveys, and policy information. Our study indicates that supportive policies were important for the initial market development; after introducing government incentives in 2010, ESCO employees doubled within a year and the annual total energy savings from EPC projects increased from 11 million tce in 2010 to 34 million tce in 2015. As the market was established and continued to grow, the private sector undertook the initiative to address the issues that were left out of policies. By diversifying contract models and taking robust M&V practices, EPC stakeholders were able to overcome certain market barriers and enabled the sustainable growth of the market. Future EPC policies could incorporate business innovations to ensure long-term development of China's EPC market.

Cracking the Achilles’ heel of energy performance contracting projects: the credit risk identification method for clients

ABSTRACTA credit risk identification model is established to examine the credit status of Energy performance contracting (EPC) project clients (i.e., energy-using companies) in China based on rough set theory. The model is verified with data from 120 listed companies at different times. Study shows that lack of credit is one of the main obstacles to the implementation of EPC projects, and information asymmetry is the main reason for this lack of credit among potential clients in China. The credit risk identification method based on rough set theory can make up for the shortcomings of existing EPC projects in terms of credit risk identification, including redundant information and indicators, and unclear decision rules. Credit risk identification indicators of clients are dynamic. The research results can help energy service companies (ESCOs) determine the credit status of clients, facilitate cooperation between ESCOs and clients, and help explain the various dynamics of clients’ credit risk identification indicators over time.

The Upshot of Autonomy and Efficiency of Urban Water Service Providers inUganda and Tanzania

The theoretical and empirical debate on the effect of managerial autonomy on the efficiency of urban utilities is still ongoing, yet limited research has been conducted in the water sector in developing countries. To address the gap, this paper gives empirical evidence on the effect of managerial autonomy on the efficiency of urban water service providers in Uganda and Tanzania. Using the managerial autonomy index and Data Envelopment Analysis (DEA), information from performance and management contracts, utility annual financial reports, partnership deed agreements, water policy statements, and results of 66 respondents was used to determine the level of managerial autonomy and efficiency in the 30 Decision Making Units (DMUs) of NWSC in Uganda and DAWASCO in Tanzania. The effect of managerial autonomy on efficiency was determined using Tobit regression analysis. The results show the mean managerial autonomy level of 47% implying that Head Office (HO) of water utilities has given limited autonomy to the different Decision Making Units (DMUs). Most of the DMUs have no or limited autonomy on procuring assets for their units, entering loan agreements, approving the annual report, and determining staff compensation. The fully efficient towns (1.00) are four and the mean efficiency level is 0.63. The Tobit regression model indicates that the adoption of managerial autonomy significantly (Prob>chi2 = 0.0006) contributes to efficiency. The findings indicate a high likelihood of managerial autonomy causing a change in the efficiency of urban water utilities. The position that an increase in managerial autonomy will cause the likelihood for technical efficiency to decrease, could be expected in the event that the principal (HO) who grants autonomy may not keenly and continuously supervise and monitor the activities of the agent (DMU). Urban water utility managers should put in place an appropriate structural framework to govern the relationship between the water utility HO and the DMU. Besides this, the utility head office should delegate decision making powers to the DMUs based on a clear framework.

Due and specific performance of contractual obligations under Russian law

The article examines the due and specific performance of contractual obligations under Russian law in addition to determining the ratio of these categories among themselves. The relevance of this article stems from the evolution of the market economy and the concomitant increase of the role of contractual performance, which mediates the movement of benefits between the parties of a business transaction. The effectiveness of this process, contributing to the economic growth of the state, is possible if the obligations are duly performed. The aim of the work is to examine the nature and structure of due and specific performance in order to identify their interrelation and value in the course of contractual performance. The research material consisted of the Civil Code of the Russian Federation, Russian jurisprudence, and Russian authors’ scientific papers in the field of civil law. The methodological basis involved general scientific (analysis, synthesis, and analogy) and special legal methods (comparativelegal, formal-logical, systemic, structural-functional methods, and method of interpretation). The allocation of the principle of due contractual performance under Russian law is justified. Herewith, due and specific performance are not just closely interrelated, but they are related overall and as components. It seems appropriate to consider specific performance as an element of the above-mentioned principle. However, specific performance is not a principle due to its lack of universality caused by certain restrictions and conditions for its implementation, taking into account the existing legal regulation and current practice. At the same time, specific performance continues to play an important role in the course of primarily long-term contractual performance and the performance of obligations arising from contracts involving monopolistic companies.

Does Outsourcing Improve or Weaken Administrative Justice? A Review of the Evidence

This paper examines the impact of outsourcing on administrative justice in UK public services. It examines a number of case-studies concerning the performance of private contractors in the delivery of public services and the degree to which they have been able to ensure administrative justice. It is not possible to provide a single, overall answer as to whether outsourcing improves or weakens administrative justice. The possibilities and limitations of outsourcing, and its impact on administrative justice, need to be carefully considered in light of the particular governmental function, the policy context, and the capabilities of both private contractors and government. The quality of administrative justice provided through outsourced government is influenced by various factors: the scale and organisational complexity of public services; the professional knowledge required to administer them; the mechanisms by which government rewards contractors; the capability of government to monitor contractors; the focus given to the needs and perspectives of users; and the balance between values such as cost-efficiency and administrative justice norms.

Outsourcing Strategy as a Viable Determinant of Organizational Performance: Evidence from Telecommunication Companies in Nigeria

The study aimed to determine how outsourcing core functions influence performance in relation to cost reduction, risk reduction, quality improvement and organizational efficiency of selected companies in the Nigeria telecommunications sector. Descriptive research design was adopted for the study, and census survey was used in determining the population made up 88 management and technical staff that are involved in outsourcing decisions and implementation. Structured questionnaires was used for data collection, and SPSS tool was used to quantitatively analyze the data using regression analysis to establish the relationship between outsourcing core functions, and performance of the organizations looking at cost reduction, risk reduction, quality improvement and organizational efficiency. The outcome indicated a strong positive relationship between Cost reduction and performance, weak positive relationship between Quality improvement, Organizational efficiency and performance, and a moderate positive relationship between Risk Reduction and performance The study therefore recommends that companies should concentrate on their core functions for competitive advantage and sustainability, and outsource non-core functions to free resources for value optimization, Firms should monitor outsourcing contracts for better performance, and conduct situational analysis before taking outsourcing decisions irrespective of whether they are core or non-core functions for efficiency and value optimization. Keywords: Core functions, Cost Reduction Non- core functions, Outsourcing, Performance . DOI : 10.7176/EJBM/12-2-11 Publication date: January 31 st 2020

ПРИНЦИП ДОБРОСОВЕСТНОСТИ И ЕГО ВЛИЯНИЕ НА КВАЛИФИКАЦИЮ ПРАВОВЫХ СВЯЗЕЙ

Introduction: this article looks into the matter of how the principle of good faith, as applied in different legal systems, impacts the legal bonds between commercial entities, depending on whether such bonds actually exist or not, and in the context of classification of key contractual terms. Being essentially abstract, the principle of good faith can be interpreted in different ways from a legal perspective and, therefore, may entail different legal consequences, which, on the one hand, can close the legal and contractual gaps but, on the other hand, can give rise to legal uncertainty and destabilization of the civil turnover. Purpose: to identify the general legal elements of good faith and the ways the requirements of the generally binding character of good faith are applied at different stages of the contractual process; to define the conditions for the contractual performance to change under the influence of good faith. Methods: dialectical methods of research, deduction and induction techniques, empirical methods of comparison, description and interpretation as general scientific methods; there were also used specific scientific methods such as historical, legal comparison, and systems analysis. Results: analysis of the applicable legislation, court practice and scientific research shows that good faith is currently opposed to the formal concept, and this has become the cause of different approaches to assigning the generally binding character to good faith in the continental law and common law systems. The generally binding character of good faith is presumed in countries with the continental system of law because the judiciary often lacks any other possibility to take into account the actual will of the parties, whereas the common law countries operate a wide range of legal mechanisms for revealing the intentions of the parties, and, therefore, the generally binding character of good faith may jeopardize legal certainty and stability of legal bonds. Conclusions: the principle of good faith, whilst having many-faceted functions and tasks, is mainly aimed at taking into account the subjective component of legal relations in order to exclude the parties’ conduct intended to discriminate the legal position of the other party. Essentially, this objective consolidates all the legal principles because, notwithstanding the differences in legal substance, application of such principles by courts eventually brings about the same outcome. However, the forms of the discriminatory conduct prohibition do not produce the same impact on the legal bond development, and this can make commercial turnover unpredictable. In practice, when choosing an applicable legal principle, the judiciary would do better to opt for a model that would preserve the legal bond and would allow for achieving the contractual purpose, while excluding bad/unfair conduct of any one party.

Study of Energy Saving Performance Contracts Application for Electrical Energy Efficiency in Industrial and Commercial Sectors

Industrial and Commercial sectors are the largest energy consumption. Building sector is one of the biggest energy consumptions, especially in Industrial and commercial devices, like air conditioning systems, lighting systems, and building transportation systems. Energy Saving Performance Contract (ESPC) could be an alternative to support implementation of energy efficiency in building sector up to 10-30%. This study investigates about application of ESPC for air conditioning system retrofit in Industrial and Commercial building, namely Chiller. Chiller retrofit could produce energy efficiency 210 MWh/year or reduce up to 30% of energy consumption with a 5-year payback period investment. This study can be broadened to develop application of ESPC in Indonesia.

The Performance of Hedge Fund Performance Fees

We study the long-run outcomes associated with hedge funds' compensation structure. Over a 22-year period, the aggregate effective incentive fee rate is 2.5 times the average contractual rate (i.e., around 50% instead of 20%). Overall, investors collected 36 cents for every dollar earned on their invested capital (over a risk-free hurdle rate and before adjusting for any risk). In the cross-section of funds, there is a substantial disconnect between lifetime performance and incentive fees earned. These poor outcomes stem from the asymmetry of the performance contract, investors' return-chasing behavior, and underwater fund closures.

ENERGY SERVICE CONTRACT AS A SPECIAL FORM OF ENERGY EFFICIENCY

Introduction. One of the central problems of business organization at all stages of the history of civilization is the problem of resource and financial support. Absolutely typical even for large and stable companies can be considered a situation when they feel lack of funding for the implementation of a particular investment program, for example, in the field of construction, technical re-equipment, etc. The development of the energy services market in Ukraine is constrained by objective reasons, which are equally characteristic of other countries in which these services have become widespread or are just being implemented. The reasons for that are imperfect legislation, lack of the necessary methodology, high financial and political risks. As the experience of other countries shows, it may take from 3 to 5 years for the energy services market to function properly. During this period, the necessary changes have been made to the legislation, the methodology of measuring and verifying energy saving resources, selection and evaluation of energy service projects have been developed and improved, institutes of development and financial support of energy service companies have been created, available banking products have been appear. Therefore, it is safe to say that the development of energy services in Ukraine is still subject to general trends. Objective – definition of types of performance contracts, their characteristics. Specification of conditions for the implementation of energy service contracts in the market of these services. Method (methodology). The methodological basis of the study were the theoretical provisions on the functioning of the energy market. Results. The main conditions of performance contracts have been determined, which allow to distinguish energy service companies among a number of organizations and firms engaged in energy audit. Conditions that are advantages that the energy service provides in comparison with the contract or economic way of carrying out energy saving measures.

Picture fuzzy multi-criteria group decision-making method to hotel building energy efficiency retrofit project selection

Building energy consumption accounts for a considerable proportion on energy consumption. To reduce building energy consumption, building energy efficiency retrofitting (BEER) based on Energy Performance Contracting mechanism is the most feasible and cost-effective method. With the increase number of BEER projects, BEER project selection has become an essential problem for energy service companies. In this paper, a multi-criteria group decision-making (MCGDM) method is proposed to deal with BEER project selection problem. First, picture fuzzy sets are employed to describe the evaluation information under the complex and uncertain environment. Subsequently, picture fuzzy weighted average operator and Laplace distribution-picture fuzzy order weighted average operator are proposed based on convex combination to aggregate individual evaluations into the overall evaluations. Furthermore, picture fuzzy TOPSIS-based QUALIFLEX method is developed to identify the optimal ranking of alternatives. Moreover, the practicality, effectiveness and advantages of the proposed MCGDM method are illustrated using a case study of hotel BEER project selection and comparative analysis. Finally, conclusions about primary contributions, and future discussions of the proposed method are demonstrated.

Management of the Territories on which the Energy Renewable Sources have been Located

At present, rising energy prices have a negative impact not only on the state of the economy of many countries in the world, which are dependent on imported energy, but also on the well-being of their citizens. That is why the implementation of renewable energy sources, in particular alternative, which will increase the level of energy security of Ukraine, reduce the cost of natural energy and improve the quality of life of the population, plays a significant role. National instruments for regulating the development of green energy should take into account such innovative instruments as grants, application of the trading certificate system, energy certification, financing of energy-saving projects on the basis of performance contracting, use of green tariffs, energy certification, etc. The experimental project of the territory organization with the installation of wind farms and protection zones has been presented in this work. The article highlights the methodological and methodological approaches to managing the territories where renewable energy sources are located, taking into account the landscape requirements.

How Long-Term Contracts can Mitigate Inefficient Renegotiation Arising Due to Loss Aversion

A loss-averse buyer and seller face an uncertain environment. Should they write a long-term contract or wait until the state of the world is realized? I show that simple long-term contracts perform better than insinuated in Herweg and Schmidt (2015), even though loss aversion makes renegotiation sometimes inefficient. During renegotiation, the outcome induced by the long-term contract constitutes the reference point to which the parties compare gains and losses induced by the renegotiated transaction. Whereas Herweg and Schmidt consider that the long-term contract is always performed, it should not in bad'' states. This alters the threat point in renegotiation, making it easier to renegotiate and thus improves the performance of long-term contracts. Specific performance contracts perform better than in Herweg and Schmidt but are still problematic. Option contracts perform much better since only one party has the ex-post trade decision making it much easier to prevent the contract is inefficiently enforced due to loss aversion. My findings suggest that loss aversion alone cannot explain why parties sometimes abstain from writing beneficial long-term contracts but give important insights on how long-term contracts should be written when parties are aware they are loss averse.

The Performance of Hedge Fund Performance Fees

We study the long-run outcomes associated with hedge funds' compensation structure. Over a 22-year period, the aggregate effective incentive fee rate is 2.5 times the average contractual rate (i.e., around 50% instead of 20%). Overall, investors collected 36 cents for every dollar earned on their invested capital (over a risk-free hurdle rate and before adjusting for any risk). In the cross-section of funds, there is a substantial disconnect between lifetime performance and incentive fees earned. These poor outcomes stem from the asymmetry of the performance contract, investors' return-chasing behavior, and underwater fund closures.

Assessment of the Moderating Effect of Performance Contracting on Utilisation of Monitoring and Evaluation Tools on the Performance of Research Projects in Public Universities, Coast Region, Kenya

Assessment of the Moderating Effect of Performance Contracting on Utilisation of Monitoring and Evaluation Tools on the Performance of Research Projects in Public Universities, Coast Region, Kenya

Data driven process for the energy assessment of building envelope retrofits

In the last decades, a growing industry has been created in relation to building envelope retrofits. Linked to the lack of financial capacity of many building owners, innovative instruments such as energy performance contracts have been promoted by public bodies. This kind of instruments require of detailed energy assessment processes in order to define the expected heat load reduction and the associated economic flows between building owners and Energy Services Companies. When dealing with building envelopes, existing methods for building envelope heat loss characterization require of substantial efforts in terms of equipment and time, which makes them difficult to apply in real practice. In this paper, a novel method is proposed based on whole-building heat load assessment by means of heat meters, and analytical calculations of building envelope transmission heat load coefficients. This method, which requires minimal or no additional equipment, can be used over historical data from District Heating systems. It assigns a specific load fraction to building envelope heat transfer and allows to assess the expected reduction due to the building envelope retrofit. Numerical and experimental data is presented based on an educational building in the city of Burgos, Spain.

Optimum Selection of Energy Service Company Based on Intuitionistic Fuzzy Entropy and VIKOR Framework

Energy user's choice of energy service company affects the smooth implementation of energy performance contracting. Energy performance contracting is a new mechanism for energy saving. In the energy performance contracting, the energy user and energy service company cooperate to save energy and share the benefit. One difficulty in actualizing the energy performance contracting is to select the optimal energy service company. However, there are few literatures to analyze the efficient selection mechanism. A government is used as the energy user and the energy service company selection based on intuitionistic fuzzy entropy and VIKOR framework is studied in this paper. A group decision-making method based on intuitionistic fuzzy entropy and VIKOR framework is proposed to solve the multi-attribute group decision-making problem with the unknown decision-makers' weight and attribute weight. First, the attribute synthetic weight is determined by intuitionistic fuzzy entropy weight method and weight coordination coefficient, and expert weight is determined by objective decision information after considering the intuitionistic fuzzy entropy of decision matrix; then, the intuitionistic fuzzy group decision matrix aggregated by experts is obtained through the aggregation of intuitionistic fuzzy weighted average (IFWA) operator, and the improved intuitionistic fuzzy number distance measure is introduced into the solutions of group utility value and individual regret value to make the evaluation results more accurate and reasonable. Finally, the validity and practicability of decision-making method is analyzed and verified with an example, so as to provide a new method and idea for multi-attribute intuitionistic fuzzy group decision-making.

Trust and the intent to cooperate in energy performance contracting for public buildings in China

PurposeThe purpose of this paper is to explore the key factors in generating trust, and the effects of trust on the intention to cooperate in energy performance contracting (EPC), from the perspective of energy saving companies (ESCOs).Design/methodology/approachA questionnaire survey was undertaken to collect the data from the experienced project managers in ESCOs. Structural equation modeling was used to test the hypotheses.FindingsThe results revealed that competence, integrity, communication, reciprocity and contract had positive effects on calculative trust and relational trust. Both calculative trust and relational trust, in turn, were found to have positive effects on the intention to cooperate.Research limitations/implicationsThe conclusions are derived from the Chinese cultural background and may apply to a certain geographical scope. In addition, this study focused on the perspective of ESCOs but did not consider that of facility owners.Practical implicationsThis research would supply guidance for facility owners or users to cultivate trust from ESCOs and achieve cooperation in EPC.Originality/valueMost of the existing studies have focused on the perspective of facility owners while few have attempted to investigate the perspective of ESCOs. This study contributes to the knowledge body relating to EPC by investigating the relationship between trust and the intention to cooperate from the perspective of ESCOs. In addition, most EPC studies recognized trust as a condition for the successful execution of EPC projects but failed to consider the role of trust in setting up the cooperation relationship prior to project execution.

Impact of Different Policy Instruments on Diffusing Energy Consumption Monitoring Technology in Public Buildings: evidence from Xi’ an, China

Abstract Energy Consumption monitoring technology (ECMT) can effectively reduce the energy consumption of public buildings (PB) in the operational phase, but it is not used widely in China. The main reason for this is that the existing policies have a poor effect on diffusing ECMT; thus, studying the impact of different policy instruments on ECMT in PB is of great significance to the widespread use of ECMT and its role in decreasing the energy consumption of PB. This paper systematically reviews the policy related to ECMT in China from 1990 to 2018, and, on this basis, divides the promotion stage of China’s ECMT into three stages: the concept stage, the demonstration stage and the gradual promotion stage. A questionnaire survey and semi-structured interview of 313 stakeholders (ECMT suppliers, government officials, and scholars) was used to study the influence of command-and-control instruments (CAC), economic incentive instruments (EI) and exhortatory instruments (EXI) on the diffusion of ECMT in PB. The empirical results show that CAC and EXI contribute to the diffusion of ECMT in PB, whereas EI do not. In more detail, laws and regulations, energy consumption quotes, education and information programs, and energy audits and disclosure also have a significant impact on diffusing ECMT, whereas technical standards, subsidies for adopting ECMT, energy performance contracting, and carbon trading do not. Finally, relevant policies and suggestions are put forward based on the results.

The Effects of the Performance Based Financing (PBF) on Health Institutions Performance in Rwanda

Health Institutions in Rwanda are facing with various difficulties related to the responses they must reserve the needs of the population’s health. Infrastructures and equipment does not meet the needs of population, insufficiency of health staff and staffs no motivated and low motivation, the decrease of performance, etc. Hence the introduction of Contractual Approach (AC) or Performance Based Financing (PBF) policy was taken as a solution of the problem. The PBF was designed to improve health services performance. It seems that the performance goal is not yet effectively achieved because the complaints are still raising, rewashing and are felt in different health centers (HC) in Rwanda. Thus, the present study of the effects of the Performance Based Financing (PBF) on health institutions performance in Rwanda, case Rwamagana District Health Centers, period 2007-2010, seems valuable. The objectives of the study were to determine the level of staffs satisfaction and motivation by PBF; to identify the factors of motivation and measure the increasing performance increasing. The research adopted the descriptive design and the sample were 6 in 11 heath centers and a total 86 respondents in 172 staffs were selected randomly. The data were collected through questionnaires and analyzed with SPSS v21, descriptive statistics, correlation analysis and ANOVA Model were used. The study findings were revealed that the PBF is applied in Rwamagana District Health Centers, the PBF has the remarkable positive effects on Health Centers Performance, the staffs were good satisfied and motivated by PBF as the most factor of staffs motivation among others, the correlation between variables was the most significant and motivated (r = 0.771, P < 0.01).