Against a background of the Government's ever-shifting position on retro fitting of both renewable energy and energy-efficiency technology, public-sector organisations are starting to see the benefits in using energy performance contracting models to reach their energy reduction targets with more certainty.  

The model, whereby Energy Service Companies (ESCos) install energy conservation measures and guarantee annual energy savings over an agreed payback period, is not a new concept but there are a growing number of UK companies who now offer this service compared to a few years ago.  In our experience, most public-sector institutions are not taking advantage of loans built into the model (so that little or no upfront payment for the work is needed) but they are attracted by the savings guarantee when they consider their future estate management contracts.

Most energy performance contracts are currently driven by the ESCo and so a client should give careful consideration to the contracting arrangements from the outset before moving too far in one direction. In particular it is often left up to a client to choose how the works will be executed using their own standard form contracts which may conflict with the model arrangements offered by the ESCo. Where framework agreements are utilised it is always wise for a public sector body to carry out a procurement due diligence exercise to ensure the contracting arrangements comply with the Public Contracts Regulations.