Two years ago, the Rocky Mountain Institute (RMI) began planning its new 15,610-square-foot Innovation Center, in Basalt, Colo. The environmental advocacy group predictably opted for a net-zero energy building, but studies show that high-performance projects don’t always fulfill their efficiency claims.
To ensure its new headquarters will live up to its precedent, RMI used an energy performance–based contract, which may become more common as expectations of building efficiency increase and accountability becomes mandated. Unlike conventional contracts, which emphasize a project’s cost and schedule, performance-based contracts specify the owner’s building operations expectations and can hold the design and construction team accountable until post-occupancy data comes in. Financial incentives are often used to encourage teams to meet or exceed the criteria and can be rewarded throughout the project’s construction, upon completion, or when performance is confirmed.
Successful teams typically employ integrated project delivery, says Charles Eley, FAIA, a retired architect and engineer with expertise in energy-efficient and high-performance design. “Performance contracting really works best if there’s one entity, [such as a] design/build contractor,” he says. “If you have a traditional triangle of owner, contractor, designers ... you get all of this finger pointing.”
Before issuing its RFQ, RMI defined the criteria for its new headquarters—a 100-year design life and a maximum energy consumption of 19 kBtu per square foot—before exploring renewable-energy systems. “We wanted something that was really cutting edge, leading the industry, and something that can represent the values that we’re trying to instill,” says Cara Carmichael, RMI’s buildings manager. RMI subsequently selected Portland, Ore.–based ZGF Architects as the lead architect and Seattle-based KPFF Consulting Engineers as the structural engineer, Portland, Ore.–based PAE as the M/E/P engineer, and Denver-based J.E. Dunn Construction as the general contractor.
RMI then drafted an agreement that holds the owner, architect, engineer, and contractor equally responsible for the design. Similar to a design/build contract, the multiparty agreement requires the team to collaborate throughout the project. RMI worked with the design and construction team to establish the terms of the contract, which state that the profits of the team members will be withheld until in-house monitoring validates the building’s energy performance 18 months after occupancy. Construction is expected to begin this year, with completion anticipated in late 2015.
“The team is paid for all hours that we work, but our profits are withheld until the team meets the criteria,” says ZGF partner Kathy Berg, AIA. Because ZGF uses profits to pursue future work and maintain other business operations, the firm had to rethink its accounting when agreeing to the contract terms, she says.
RMI’s headquarters is also targeting Living Building certification and LEED Platinum certification, which will be independently certified by the International Living Future Institute and the U.S. Green Building Council’s Green Building Certification Institute, respectively.
While performance contracts are unusual now, they are not new. In 1994, Eley helped develop one of the first performance contracts in the nation for the reconstruction of two office buildings in Oakland, Calif., that had been damaged in the 1989 Loma Prieta earthquake.
Using DOE-2.1E software, Eley and his team developed an energy model to establish an annual energy-use target of $1.11 per square foot for the buildings, which totaled 450,000 square feet. According to the contract, if the actual annual energy costs were $20,000 less than the target, the city would pay the contractor five times the additional energy cost savings, up to $250,000. But if the costs exceeded the target by more than $20,000, the contractor would pay the city 15 times the additional energy cost, up to $250,000.
At the end of the year, the energy expenditures ended up at $1.08 per square foot, so neither party had to pay. “If there’s money on the table, people will pay attention,” Eley says. “If it’s a soft goal, they’ll have hundreds of excuses.”
Following the success in Oakland, Eley consulted on performance contracts for other projects such as the Robert E. Johnson Office Building in Austin, Texas, and Clackamas High School in Clackamas, Ore. However, neither included a penalty because the teams were unwilling to bear that risk, he says.
In 2007, the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) used a performance-based contract for its 220,000-square-foot Research Support Facility in Golden, Colo. Along with a list of project criteria that stipulated that the building had to accommodate at least 800 people and use no more than 25,000 BTUs per square foot, NREL created a wish list of desired but not required features, including net-zero energy.
After submitting an RFP and a conceptual design, Denver-based architecture firm RNL and Centennial, Colo.–based contractor Haselden Construction won the project. “I think we were the only team to develop a full net-zero approach to the project,” says Tom Hootman, AIA, RNL’s director of sustainability. The team determined that achieving the goal would also meet all of NREL’s contract criteria, he says.
NREL rewarded the team with financial incentives each time it exceeded the project criteria. For instance, it received a bonus when it tied the building’s egress lights with the building’s fire alarms so that the lights turn on only in emergencies. “It was a very different way of thinking about performance-based contracts because it was really about how we motivate a workforce,” says Paul Torcellini, principal engineer at NREL.
When the facility was completed in 2010, the project team gave its energy model to NREL. The contract mandated that if any of the facility’s systems failed to operate as modeled, Haselden would fix it to the expected condition. The format worked so well that NREL used similar contracts for the second phase of its Research Support Facility and four other structures on its campus.
Performance-based contracts do require an elevated level of awareness from all parties. Owners must make their expectations clear, and project teams must check and check again that their energy models both meet the owner’s criteria and align with reality. If post-occupancy requirements are included, then the owner and project team must commit to following through.
ZGF’s Berg believes more owners will embrace performance-based contracting as the next step in sustainable design because it leads to buildings that are cheaper to operate and more comfortable for occupants. “Those two primary benefits are going to be [why the contracts will] continue to develop in popularity,” she says.
Photo of aspen trees used with permission via a Creative Commons license with Flickr user Ashley Bristowe.