The Home Office has put in place a pioneering energy management contract across 90 per cent of its estate. The arrangement sees the Home Office and its suppliers, Amey and British Gas Business (BGB) operating the first ‘gain share’ energy management contract to be used in central government. The arrangement has led to initial savings of £212,000 equivalent to more than 1,200 tonnes of carbon in the first eight months of the contract’s operation.
Over the course of the three-year deal, Amey and BGB are managing energy consumption at 350 Home Office-managed buildings across London and the South East. The two companies are identifying inefficiencies, working out the engineering solutions required to overcome them, and investing their own money in the new technologies and infrastructure required to bring the new efficiencies about. Amey and BGB manage risk on the assets and are paid on a sliding scale according to how much they save the client. Based on the figures as of August, Amey and BGB are on track to save the Home Office £1.3 million in reduced energy bills over the lifetime of the contract.
John Cole, head of sustainability at the Home Office, says that his department was already well placed to consider this type of arrangement. “The Prime Minister had announced that he aimed to create the ‘greenest government ever’ and that all central government departments would reduce their carbon emissions by 10 per cent within 12 months,” he comments.
“In the Home Office, we had an advantage in reaching this target because we were already in the second year of our carbon management programme. We’d already started to invest in improving energy management systems which led directly to energy savings. This, in turn, had led to improvements in the quality of data through automatic meter reading (AMR), real-time data, and monitoring and targeting software. With better data and a good working relationship with our FM providers, we could consider setting better targets and striving for greater efficiencies.”
One year on and government has achieved the Prime Minister’s target, reducing carbon emissions by a total of 13.8 per cent. The Home Office’s reduction was even higher, at 17.6 per cent (against a weather-corrected baseline), meaning a cut of 5,386 tonnes in carbon emissions in part, a result of the gainshare arrangement.
GAIN SHARE at the home office How it works
A gain-sharing contract is one in which service providers share with their client any financial gains made as a result of innovation on the contract. A baseline for measuring subsequent savings is agreed at the outset. In the case of the Home Office, this was based primarily on the energy bills paid by the Home Office in the years prior to the contract taking force.
The issue is one of administration. As well as using the bills, complicating factors include whether the building is in constant use, whether the number of people in the building varies, and how the weather varies compared to the last recording period.
Gain share contracts are written carefully to exclude cost savings that may accrue as a result of minor price changes or processes. Instead, they’re based around significant changes to working practice or service provision. How all parties agree on what’s minor or significant is a critical part of the contract. In the case of the Home Office, the three-year contract is designed to:
Amey and BGB assess the condition of existing equipment; invest in new energy systems and take steps to reduce consumption. Both companies are paid on a sliding scale based on how much they save the client.
Amey already provides FM services at 350 Home Office properties across Whitehall and the East of England. This includes delivering catering, cleaning, grounds maintenance, security, project management, pest control, porterage, reception and mechanical and electrical services.
Discussion about the contract began in 2010 when Amey was already delivering a five-year contract to provide FM services at 350 Home Office-managed buildings across London and the South East. (FM World, 14 October 2010). Amey is one of the FM companies that have helped generate a total of £18 million in efficiency savings for the Home Office via sustainable FM services.
Gillian Duggan, managing director of Amey’s built environment division, says: “We knew that the Home Office’s priority was to reduce its carbon footprint. We had a proven track record with our FM contract and knew we could do the same in energy management across the same buildings.
“Amey and BGB were offering a complete solution. Amey had strong relationships and engineering expertise, while BGB brought technical expertise in building energy management systems and complex monitoring tools. In addition, with a shared responsibility for investing in new energy infrastructure, Amey and BGB could upgrade the Home Office’s energy systems at their own cost, taking some risk away from our customer.”
Says Cole: “When we embarked on this, they [Amey and BGB] already had some ideas; things like boiler control were part of the negotiating of the contract. It was important for us to get those ideas down and then carry out discussions with our local facilities delivery people to make sure that what we were planning was applicable to their specific buildings.”
Controlling influence
Some Home Office buildings date back to the 1960s and have energy control systems in need of further investment. No-one at the Home Office had been responsible for looking at daily patterns of consumption and comparing them to what was going on in the building.
Amey and BGB were able to interrogate the building far more closely and in greater detail than either the building occupiers or the Home Office’s own facilities delivery teams.
“We had had a fairly reactive approach to energy management,” confesses Cole. “We needed a complete culture change. We were keen to make the system proactive, understanding the root cause of problems and preventing issues arising in the first place.
“Ultimately, the Home Office does not specialise in energy controls or management. It was unlikely we would create a new post to oversee this, so the only viable way to achieve the ambitious savings set by the Prime Minister was to widen and improve the existing contract we had with Amey.
“We all agreed on a simple variation to our existing contract with Amey and BGB, capped the total amount we could pay and used engineers we already knew and trusted.
“We took advice from the Efficiency and Reform Group in the Cabinet Office and our own professionals in Home Office estates, and financial and commercial.”
The next steps
Determined to prove the gain share system would work, Amey and BGB carried out a trial run. Originally, the Home Office paid for some new equipment and the companies proved that it significantly reduced consumption. With a tested business case, the Home Office was able to agree to the idea of a wider initiative.
“Communication was key to the success of the energy management contract and it was vital that a team ethos was developed between Amey, the Home Office and BGB,” says Duggan.
“John Cole, head of sustainability at the Home Office, was key to the integration of these multiple teams. He has been an incredibly helpful link between the complex organisational structure of the Home Office and Amey.”
The team set up monthly meetings dedicated to environmental issues and invited all parties involved the Home Office Property Group (HOPG), Amey and BGB to participate. The team also devised a simple pro forma that allowed cleaners and engineers to monitor climatic conditions and record the condition of existing equipment while they worked. This has now been completed at around 100 sites.
“We realised that frontline staff should become the ‘eyes and ears’ of the gain share programme,” says Gillian. “They can monitor conditions outside of office hours when no-one else is in the building.”
“By providing basic yet fundamental information about conditions such as the temperature, or whether windows are open we’re making best use of resources and developing a bank of anecdotal knowledge about each building.”
“We then co-ordinate their observations about real-time conditions with technical data about energy consumption, generated by the BMS, to get a complete picture about the performance of buildings within our remit. Having two sets of data means we can monitor trends, spot anomalies and take early action to resolve problems.
“After assessing the condition of existing assets we develop plans to invest our own capital, based on the likely return on investment for all parties, in terms of predicted carbon and financial savings.”
Practical delivery
The first step was to understand the functionality of all of the Home Office’s building management systems. The team started by assessing the 20 buildings that consumed most energy.
Mike Chessum, head of energy services at BGB says: “This quickly generated significant benefits as many of the BMS were found to have complicated software issues that had developed over many years. This included some systems being completely over-ridden in an attempt to maintain occupants’ comfort levels.
“For example, in some buildings, heating, cooling and ventilation systems were set up so that they actually operated 24/7 even though they were programmed to operate in normal working hours. On another occasion, the software had corrupted so that building services replicated Sunday’s settings on a Wednesday, which resulted in all systems being switched off automatically. This again led to services being over-ridden manually.”
It’s not just poor programming sometimes controls are set based on wholly inaccurate assessments of a building’s energy requirement. The UK Border Agency office at Status Park near Heathrow is a case in point. This building was accepted as a 24-hour operation but, in reality, it wasn’t. Accordingly, controls were reconfigured and savings made. “Sometimes the culture of a building is that it’s open all hours, but in reality only certain elements of that building are actually running 24/7,” confirms Chessum. “Identifying this kind of misconception is a key element of what we’re doing. What is the pre-conceived idea of the building’s use, versus its actual use?
For John Cole, this way of working is quite a change. “Sometimes in the past, a BMS might have broken down and not been noticed,” he says. “Now, because of the pressure of time on this contract, that’s not likely to happen. Also, we have some BMS systems that are not particularly sophisticated, so they require regular visits in order to check their performance.”
Chessum describes how he found several software corruptions and re-programmed BMS systems based on demand rather set them on the basis of time.
“Through this, we have already delivered substantial carbon emission reductions and cost savings from the reduced usage of electric, gas and oil.”
From May 2010 to May 2011, total Home Office emissions savings were 5,386 tonnes (weather-corrected). Amey saved around 1,600 tonnes about a third of the total.
Showing the results
Proving that savings have been made after the implementation of energy efficiency measures is vital in gaining client confidence, and to create a snowball momentum on the contract. “We agreed benchmarks for historical data and designed a new measurement tool based upon actual invoiced energy to demonstrate where we had and had not made energy savings,” says Chessum. “This helped gain the trust and confidence of the client that we would deliver.”
With the client’s major sites addressed in year one, the expansion of the contract across the rest of the Home Office portfolio, representing far more buildings, of smaller size, can only mean more complexity as the contract partners seek further savings. The number of ventilation systems alone will run into the thousands.
But Cole is confident that the terms of the gain share deal will survive without change through to its completion in year three.
“We’ve had two reviews since we started the arrangement, but it’s still early days. There’s no mechanism in place to change the parameters of the contract between the three parties, so we’d have to stop and start it again. I don’t see that happening. We will learn from this agreement, but the fundamentals of it are fine.”
Only the beginning
Amey’s Gillian Duggan is pleased with the efficiency and carbon savings made so far, and believes the model has potential to be replicated in other government departments. “Ultimately, this is an ongoing learning process,” she comments. “Amey continues to listen to the Home Office and suggest further innovations and improvements to the service.”
And for the Home Office’s John Cole, the reward has been worth the effort. “Getting the process in place and improving communication felt like a long process at times,” he says, “but at the heart of the agreement there is a simple message: prove and reward actual savings based on the fuel bills. In the end, the results speak for themselves.
Paving the way
“We’ve all accepted that there’s an element of trust,” continues Cole. “Obviously I’m under pressure to prove this works, because at any time the National Audit office could come in and ask to look at how the contract operates. Yes, there is more recording and management of data to be done, so by volume the job is a bigger beast than it used to be. But the only thing the Home Office would have done differently is to have started this process sooner.”
