Friday, March 23, 2012

Email to Bryan and Contractors 3/23/12, COST EFFECTIVENESS ANNOUNCEMENT?!

In response to Cost Effectiveness Program Announcement 3-22-12.pdf I wrote Bryan Henderson and CC'd all contractors from an earlier NYSERDA announcement the following message:

On Fri, Mar 23, 2012 at 3:58 PM, Ted Kidd <> wrote:
Hi Bryan,

Looking over the recent program announcement has me really concerned.  This is going to really hurt a lot of contractors and homeowners - and the program overall.  


You are now telling everyone to do very accurate audit modelling. Building accurate models means all contractors will now find themselves the boat we've always been in, very few viable jobs, and even fewer truly comprehensive jobs that can go through the program.  I think this will further marginalize HPwES, which is devastating for me because I feel at it's foundation this program is sheer brilliance.  This current path is like a farmer who's diligently fertilized and planted, then opting to only water every 10th row.   If you send people to homes and they have fewer and fewer program opportunities, how long do you have a program?  This program needs more opportunity, not less!  

I know this because our approach from the start has been accurate modelling, thoughtful collaborative design, then delivery of recommendations. That approach means higher contractor audit cost and fewer projects that meet SIR.  I haven't done the exact numbers, but in our first 50 audits roughly 45 were on natural gas and fewer then a handful of those had a viable project, much less a comprehensive one.  

I was hoping CSG would help me convey this problem to you, but after many much cajoling and many promises to review and confirm our models were accurate, Earl Hicks abandoned me.  Otherwise I would have been having this conversation with you 6 months ago and maybe helped you avoid the problems you are now about to face.  


Seems incentive has recently been completely overlooked.  The commissioned salesperson is your front line and they need to pay bills like everyone else.  With all the uncertainty in making a sale, having confidence in the program that takes you there is really important.  This program change takes the salesperson from; "Crap, how do I get this contract to pass" to "Crap, I've gotta go tell the homeowner this job doesn't qualify (and now I won't be paid for all my time)."   This takes the program from sometimes marginalized to almost always marginalized for even the most passionate.

Many contractors look at this program as JAST (Just Another Sales Tool).  They go to the home, most often sell solutions at that initial visit, then go to the office and attempt to get the model to pass.  Implicit in this path is a fair number of inaccurate models and a fair amount of wasted effort and frustration.  It's an absurd process, but these guys don't have the luxury of not selling "because the model is not accurate" or because the program's design is fatally corrupted.  They invested the time and need to earn a living, so they do whatever it takes to get the job through.  Designing comprehensive work should be the goal, but it's been supplanted by SIR and churning out proposals.  


For the program to really work, that must change.  Since homeowners mostly don't track, complaints about failure to meet annual savings projections are very unlikely.  Contractors and homeowners need to easily see what was promised and what actually occurred.  Furthermore, the rare complaint about energy results must not be met with facetious defenses; telling homeowners "you must have changed your behavior" or some other completely false misdirection.  Currently this "go away" response has implicit blessing from the program!   

When this work is done comprehensively we change peoples homes from Hummers to Prius. NYSERDA and BPI made this possible.  My tracking has no statistical significance but anecdotal evidence suggests behavior has about as much impact as setting cruise at 60 vs 65.   The difference between 50% savings and 55% savings if you are LUCKY.  Not nothing, but immaterial on relative terms (and with modern equipment, human interaction with equipment settings may actually INCREASE consumption.)  Without tracking on a larger scale a huge opportunity for detecting these patterns and learning from success and failure is lost. 

Another reason to track - I frequently see non-program contractor insulation work on incredibly leaky houses with high bills.  Results tracking raises the bar for everyone.  Transparently "Poor Results" provides powerful counterbalance to "low bid" work.   

The way forward:

Track and share with contractors the results of their work (BTU promised to BTU saved ratio).  

Tell contractors that that eventually this information will be used for marketing and for program awards, including $ for ratios above 1:1. 

Over night the orientation towards this work will change from "get the job sold and done as cheaply and quickly as possible" to "get the job done as energy effectively as possible".  

Contractors will compete for results.  

Main focus will shift from cost to quality.

Everyone wins.

This program should want every contractor in, every job in.  Every energy savings opportunity incentivized, not discouraged.  Every sales person excited about and selling this program, not terrified of it. 

It would be nice if changes were made with consideration for contractors for a change.  In contractors defense, without tracking how can they know whether results match promise or not?  Since almost nobody tracks results everyone is completely disconnected from whether results match promise, or if any savings even occur.  Contractors know how to analyze sales numbers and could easily do the same for energy numbers, but they aren't given these numbers to look at.   Without tracking they don't see patterns, they don't learn what actually saves energy.  They can not be scapegoat here, they've done what they were told in the hope of selling enough work to get a paycheck on Friday.   

For this change to be fair to the contractor, it must not be implemented over night.  If there are significant failures the contractors should be given time to understand and correct rather than having a switch flipped, after all they had no feedback loop from the program regarding energy results.   A reasonable Gantt Chart needs to be mapped and communicated so contractors can understand current performance, understand time frames, re-orient priorities given this new information, see improvement, and be prepared. 

For all this to occur, program incentives need to be based upon energy savings, not project cost.  The program shouldn't tell homeowners what is a good investment, that's really for the individual homeowner to decide.  The program would tell how much it will participate in each homeowner's project.  This needs to be based upon the project energy savings, not total project cost.  This simple change to incentives could make all projects meet TRC, even jobs with windows, and rejuvenate enthusiasm for the program for everyone.  

Best regards,

Ted Kidd

Learning from our mistakes means admitting to them first.  It takes all of us to build a better system. - Dr. Sanjay Gupta

This message included the earlier "Conversations with Bryan" emails: 2/24 and 3/21.

SUMMARY:  SIR cliff based incentive is corrupt by design.  The bar is invisible, set too high, forces realization rates down, and creates all types of problems with the sales process.   Sales measures basket height after the sale then contorts modelling to reach.  Time for a new approach.  

NEXT POST:  Surprising response from Contractors. 

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