Performance contracting allows a project to be paid for in the future using the savings accrued by the implementation of the project today. Here's how it works: The customer signs an agreement with a private contractor. The contractor then drafts a plan for the design and implementation of a project that will, over a certain period of time, exact savings that generally surpass all of the project costs. The contractor is paid according to the performance savings of the project. If the project does not produce the predicted savings, then the private contractor is responsible for the additional costs. In this way, the private contractor takes full responsibility for any risks associated with the project.
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