19.9.1 In designing the payment mechanism Authorities should carefully consider their approach to energy costs to ensure each risk is allocated to the party best able to manage it. For a typical PF2 accommodation facility the Contractor is responsible for designing and building the facility and for hard FM services. On the other hand Authorities generally control the use of the building, and the Contractor may not even be routinely on site if soft services are not in the scope of services (as will be standard). Therefore, in principle, the optimal position in relation to consumption risk is for the Authority to be responsible for variations in consumption caused by the actions of users of the building and for the Contractor to be responsible for the efficiency of the design and built environment (as against the efficiency standards developed through the procurement process). Such efficiency standards however should not simply be measured in one handover process but should be monitored and tested over a two year period, thus testing the building with a full payload of occupants and across different seasons. If the building is then found not to comply with the agreed energy efficiency requirements, the Contractor should either rectify the building or make a compensatory payment for the Authority's loss.
19.9.2 It is unlikely for it to be practical for the Contractor to retain ongoing responsibility for utility performance of the building over the remaining term of the Contract. There are likely to be significant costs involved in monitoring and distinguishing between: (a) utility costs arising from the design of the building; and (b) costs arising from its use. Extensive physical metering of usage and personnel resources may be required to report and monitor the actual performance data. In addition ongoing recourse for the Contractor against its building designer (for design failures) could become difficult over an extended period. It will normally be more efficient therefore for the Authority to take consumption risk in its entirety after the extended two year acceptance regime, and to avoid imposing these costs on the project. Exceptions to this general rule may be possible only in particular sectors where: (a) appropriate metering systems (which do not involve disproportionate cost) are included in the design as standard; (b) the physical built environment and usage pattern is relatively simple; and (c) risk sharing arrangements are developed which are acceptable to the market and do not involve the Contractor making significant ongoing reserves against the risk. HM Treasury should be consulted in any case where the Authority wishes to adopt this course.
19.9.3 For price or tariff risk (including unit cost and standing charges) the public sector's bulk purchasing power will normally offer best value and hence this risk should be taken by the public sector. However the position varies from sector to sector - especially street lighting and waste - and judgements have to be made on a case by case basis.