Performance Contracting Can Benefit Students, Community, Staff

Energy spending at schools is second only to teacher salaries, and 61 percent of schools report shortfalls in energy spending.

Bond referendums and annual budgets are often insufficient to cover annual repair and replacement needs. As a result, Band-Aid fixes are often applied to stretch the usefulness of existing energy systems, compromising student and staff comfort, health and building performance.

The situation is complicated by the unique dual purpose of schools. While more than 55 million students and more than 5 million faculty, staff and administrators spend their days in school buildings, educational facilities have a responsibility not only to the health and comfort of students and staff, but to the community that frequents its confines as well.

It’s an expensive quandary and the cost of doing nothing is high. Delaying maintenance causes schools to be reactive, rather than proactive, as they are faced with higher costs when maintenance goes from “scheduled” to “emergency.” A performance contract that provides incentives for managing a facility’s energy supply can be a helpful solution.

The Blue Springs School District in Blue Springs, Mo., a suburb of Kansas City, recently entered a performance contract that helped the district get a handle on its energy use and expenditures.

The district covers 58 square miles and serves students from five communities. It includes 21 elementary, middle and high schools with an annual enrollment of approximately 13,600 students.

Located in a growing metropolitan area, the student body increases by approximately 200 students each year.

In 2007, the district was in need of significant improvements to its infrastructure. As many as 97 rooftop units had surpassed their life-cycle expectancy, and it was estimated that 205 units would reach expectancy limits by 2010.

Utility expenditures were 35 percent to 45 percent more than potential at $1.22 per square foot, and 21 schools were in need of energy improvements. Indoor air, lighting and water usage was less than optimal, according to Bill Cowling, assistant superintendent of management services.

“Our annual repair and replacement budget was insufficient to cover the amount of repair and replacement needed,” Cowling says. “We knew what needed to be repaired or replaced; we simply lacked the funding to bring the facilities up to a completely efficient level.”

David Disney, senior vice president with JE Dunn Construction Group in Kansas City, introduced the concept of performance contracting to the school district.

“JE Dunn had been doing construction work for the school district for a number of years and we were familiar with their challenges,” Disney says. “We introduced the idea of performance contracting as a means to a beneficial end. We made the phone calls and brought together a group of professionals to discuss the pros and cons of performance contracting with the Blue Springs School District.”

Chad Remboldt, with Siemens Building Technologies, assisted the school district in evaluating its options. 

“Performance contracting, by definition, involves the school district contracting with an energy service company (ESCO), in this case Siemens Building Technologies, which identifies and evaluates energy saving opportunities and recommends improvements,” Remboldt says.

Improvements are paid for through savings realized. The ESCO guarantees that savings will meet or exceed annual payments to cover all project costs, usually over a mutually agreed contract term. If savings fail to materialize, the ESCO pays the difference.”

As a result of performance contracting, funds that would normally be spent maintaining lower-efficiency, obsolete energy systems can be redirected toward building improvements, improving quality of education for the students and the environment for faculty, staff and the community.

The performance contract for the Blue Springs school system included $14 million in infrastructure improvements at all of the district’s buildings.

“We agreed upon a 15-year lease purchase with Siemens,” Cowlings says. “It’s paid back by reallocating $600,000 in annual utility consumption savings, $223,000 annually in future costs avoided from the replacement budget and $140,000 annually in future costs avoided from the repair budget.”

Before the district entered into a performance contract, it had a $2.2 million annual utility expense. It budgeted $390,000 annually for repair and maintenance of energy systems, which was insufficient, according to Cowlings. The district now realizes more than $1 million in energy savings, which used to pay for improvements, Cowlings says

The district reallocated $366,000 of its original annual repair and replacement expenses and purchased more efficient equipment, reducing repair and replacement expenses to $24,000 per year.

The district replaced 167 multi-zone and rooftop units with high-efficiency units. Boiler and hot water systems and unit ventilators were replaced. Improvements were made to interior lighting, and a centralized automated control system connected to each building in the district via IT infrastructure now monitors HVAC systems. Additionally, water conservation measures were implemented, including installation of new fixtures, new flush valves and low-flow devices at sink faucets.

A certified district energy engineer and certified control technician maintain the systems.

“We’ve improved the quality of our educational system while we’ve made our environment more livable today and for future generations,” Cowling says.