Sharing the risk and savings in Jyväskylä, Finland
In 2010 the City of Jyväskylä started a project called Jyväskylän Optimi aimed at enhancing innovation and promoting life cycle thinking in procurement. The innovative procedure was piloted with the construction project of a school and day-care centre where specific targets for energy efficiency and sustainable development were included. It was decided to tender for a contractor to design, build and also operate the facilities to enhance efficiency. The negotiated procedure was used.
The essential new element in life cycle procurement was to transfer the risk of exceeding the agreed limits of energy consumption from the customer to the service provider. The limits for heating energy, electricity (excluding user electricity demand such as lighting, other appliances etc.) and water consumption as well as the payment terms and price risk for exceeding the limits were established in the service contract. If, on the other hand, consumption is below the limits set, the savings are shared 50/50 between the customer and the service provider.
For example, if the heating energy consumption of the buildings exceeds the established limit, the service provider pays the extra energy use, including carrying the price risk. On the other hand, the customer carries the risk of increasing energy unit prices for the energy consumption below the limit set in the contract. Every calendar year, in January, the customer and the service provider balance out the previous year’s actual energy unit cost against the corresponding amount of energy according to the risk-sharing mechanism described above.
The mechanism has proven its role as an incentive to design and implement the most energy efficient buildings possible. In addition, the contract encourages the use of the property as energy efficiently as possible due to the 50/50 division of savings. The contract was signed in autumn 2011, and it will last until 2033.
Click here to go back to the snapshots index.