15 Tips to Mitigate Risk in your ESPC Project

An Energy Savings Performance Contract (ESPC) project is a major undertaking. And beyond the due diligence of the RFP process, there are some best practices customers can implement to mitigate risk and maximize success.

But, you don’t have to take our word for it!  Instead, we dug into the depths of the Department of Energy’s resource archives and compiled these 15 tips:

Before You Sign the Contract

1 – Use standardized procurement and contracting documents. Clearly state project plans, financial performance, expectations, and roles and responsibilities in contract documents. Make sure the ESCO fully documents the construction schedule, training from the ESCO, equipment to be installed, and equipment warranties.

2 – Negotiate costs and ask for open-book pricing to ensure that you receive good value. Consider the impact of escalation rates to estimate future cost savings.

3 – Require a detailed Measurement & Verification (M&V) plan before executing the contract, including clearly defined M&V procedures, the structure of the guarantee and how savings will be verified.

4 – Establish consensus of the financial arrangement and contract requirements by finance, facilities, and administrative personnel.

5 – Identify a project champion to shepherd the project and track and monitor project results.

6 – Spend time choosing the right ESPC partner. Remember: your ESCO will be your partner for a long time, so it is important to select one that shares your vision and is capable of meeting your needs, as well as your financial considerations.

After Contract Signing / During Construction

7 – Review maintenance requirements and services. An ESCO often requires routine maintenance on new equipment to guarantee performance or savings. Additional services can include reviewing operation strategies, reporting on equipment operating problems, and repairing and replacing equipment.

8 – Oversee construction. Meet regularly with your ESCO to discuss the schedule and approve next steps.

After Construction

9 – Approve the installation. Review the requirements detailed in the contract and upon completion of the project installation check that all equipment was installed as specified.

10 – Participate in commissioning. Confirm that equipment and systems function as designed. Also confirm that applicable codes and environmental regulations are met.

11 – Operate the facility as mutually agreed in the contract. The ESCO will maintain, monitor, and verify the installation as specified. Review the roles and responsibilities as stated in the contract to ensure you do your part to sustain equipment performance and savings.

12 – Maximize benefits through trained staff. Your ESCO will train your facility staff in optimal operation of equipment and systems. Staff training will help ensure savings and minimize future maintenance, while maximizing the life of the equipment.

13 – Initiate preventive maintenance practices. With new equipment and trained staff, and with maintenance problems eliminated, staff can turn their attention from short-term fixes to long-term preventive maintenance.

14 – Review the annual M&V reports. Meet with your ESCO regularly to ensure guaranteed savings are achieved as outlined in the contract. Report any concerns immediately and apply the contract protocol in the event of a savings shortfall (i.e., realized savings do not meet the contract specifications).

15 – Develop a life-of-contract plan. Savings and contract benefits accrue during the guarantee period and financing term that may last 15 years or longer. During this “life-of-contract” phase, maintaining long-term operational performance is critical to realizing continued savings. Develop a life-of-contract plan to manage the contract for the entire guaranteed savings period and capture performance data from M&V reports and energy management systems. Personnel responsible for the project’s success can use this plan to monitor and document activities during the contract term, providing continuity in the event of personnel changes.


Department of Energy, Office of Energy Efficiency & Renewable Energy. May 2021 “ESPC for Small Projects.”