2017 showed why climate-smart agriculture is necessary. Here’s how global and local action can speed it up.

2017 showed why climate-smart agriculture is necessary. Here’s how global and local action can speed it up.

2017 showed why climate-smart agriculture is necessary. Here’s how global and local action can speed it up.

Written by Molly Rauch

During the State of the Union, Trump crowed about his “victories” – from winning the war on “beautiful clean coal” (which doesn’t exist) to rolling back more regulations that protect American families than any other President. But earlier in the day, while the news was...

Just yesterday, the administration announced plans to cut the Department of Energy’s (DOE) renewable energy and energy efficiency program budgets by 72 percent according to a leaked draft of the DOE budget for fiscal year 2019. This is the second major blow to the renewable energy industry, coming only days after Trump imposed a 30% […]

Just yesterday, the administration announced plans to cut the Department of Energy’s (DOE) renewable energy and energy efficiency program budgets by 72 percent according to a leaked draft of the DOE budget for fiscal year 2019. This is the second major blow to the renewable energy industry, coming only days after Trump imposed a 30% […]

Outcome-based contracting is about to reach a whole new level. Here’s why.

Even though it’s set to receive billions in settlement dollars after the 2010 Gulf oil spill, Louisiana will fall short of what’s needed to fully implement critical wetland restoration projects to better protect its fragile coast.

Rather than scaling back ambition, however, the state is trying a new and emerging procurement approach – pay-for-performance contracting – to stretch the dollars.

The state’s Coastal Master Plan has budgeted $50 billion over the next half century, to which the oil spill settlements will contribute about $15 billion. Here’s the trick: By tying compensation to contractors to specific, stated outcomes – rather than to just job completion – Louisiana should be able to save money and thus restore more of the coast sooner and more effectively.

Such tangible benefits help explain why outcome-based contracting is catching on in communities and states nationwide, all of whom struggle with budget challenges. And why it’s becoming a buzzword in procurement and sustainable investment circles.

From energy services, to healthcare to…

The idea that contractors and suppliers are rewarded based on outcomes and results has been around for some time in the healthcare industry – for example between insurers and medical suppliers who follow patient outcomes.

It’s also gained traction in the education sector where schools are contracting with energy services companies that promise savings on power bills. This will, in turn, pay for construction costs or services over time without burdening local taxpayers.

Even the federal government has used outcome-based contracting to reduce energy and water costs.

The fact that Louisiana is eyeing this contracting model for its massive coastal restoration project now takes pay-for-performance to a whole new level.

How performance contracting delivers

Natural infrastructure solutions, such as wetland restoration, are among more than 100 projects included in Louisiana’s master plan.

Traditional contracts may, for example, stipulate the placement of clean sediment in open water areas to a certain elevation and planting native wetland grasses a certain distance apart. Under such arrangements, contractors get paid for material and labor, but not necessarily for how well the product – in this case, the restored wetland – performs.

Outcome-based contracting, on the other hand, might instead consider whether the wetland has the desired biodiversity, for example, or whether it attracts nesting of endangered species. A clear set of objectives, and means for collecting data on the progress of selected indicators, help determine such outcomes.

Other outcomes under consideration may be whether the wetland is self-sustaining or slowing coastal erosion. Or whether it reduces flooding of nearby properties and slows storm surge, averting expensive damage.

Louisiana could save billions

Under some pay-for-performance models, the service provider may bring their own financing and insurance. This means the buyer doesn’t pay a dime until the project is completed and the outcome satisfactory.

Whether these contracts realize better outcomes at less public cost will depend on how the terms of contracts are defined, and how the service providers respond. It may take a few tries to find the optimal terms.

But pay-for-performance contracting could ultimately save a state such as Louisiana millions, if not billions, and bring out the best the private sector has to offer: expertise, speed and risk sharing.

Together with other innovative financing tools such as environmental impact bonds, these new approaches can help unlock private capital for much-needed infrastructure projects nationwide, at the right time.

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We’ll send regular updates about developments in technology, science and the environment.

Thank you for subscribing to the Climate Tech Brief.

krives February 1, 2018 - 08:10

Outcome-based contracting is about to reach a whole new level. Here’s why.

Even though it’s set to receive billions in settlement dollars after the 2010 Gulf oil spill, Louisiana will fall short of what’s needed to fully implement critical wetland restoration projects to better protect its fragile coast.

Rather than scaling back ambition, however, the state is trying a new and emerging procurement approach – pay-for-performance contracting – to stretch the dollars.

The state’s Coastal Master Plan has budgeted $50 billion over the next half century, to which the oil spill settlements will contribute about $15 billion. Here’s the trick: By tying compensation to contractors to specific, stated outcomes – rather than to just job completion – Louisiana should be able to save money and thus restore more of the coast sooner and more effectively.

Such tangible benefits help explain why outcome-based contracting is catching on in communities and states nationwide, all of whom struggle with budget challenges. And why it’s becoming a buzzword in procurement and sustainable investment circles.

From energy services, to healthcare to…

The idea that contractors and suppliers are rewarded based on outcomes and results has been around for some time in the healthcare industry – for example between insurers and medical suppliers who follow patient outcomes.

It’s also gained traction in the education sector where schools are contracting with energy services companies that promise savings on power bills. This will, in turn, pay for construction costs or services over time without burdening local taxpayers.

Even the federal government has used outcome-based contracting to reduce energy and water costs.

The fact that Louisiana is eyeing this contracting model for its massive coastal restoration project now takes pay-for-performance to a whole new level.

How performance contracting delivers

Natural infrastructure solutions, such as wetland restoration, are among more than 100 projects included in Louisiana’s master plan.

Traditional contracts may, for example, stipulate the placement of clean sediment in open water areas to a certain elevation and planting native wetland grasses a certain distance apart. Under such arrangements, contractors get paid for material and labor, but not necessarily for how well the product – in this case, the restored wetland – performs.

Outcome-based contracting, on the other hand, might instead consider whether the wetland has the desired biodiversity, for example, or whether it attracts nesting of endangered species. A clear set of objectives, and means for collecting data on the progress of selected indicators, help determine such outcomes.

Other outcomes under consideration may be whether the wetland is self-sustaining or slowing coastal erosion. Or whether it reduces flooding of nearby properties and slows storm surge, averting expensive damage.

Louisiana could save billions

Under some pay-for-performance models, the service provider may bring their own financing and insurance. This means the buyer doesn’t pay a dime until the project is completed and the outcome satisfactory.

Whether these contracts realize better outcomes at less public cost will depend on how the terms of contracts are defined, and how the service providers respond. It may take a few tries to find the optimal terms.

But pay-for-performance contracting could ultimately save a state such as Louisiana millions, if not billions, and bring out the best the private sector has to offer: expertise, speed and risk sharing.

Together with other innovative financing tools such as environmental impact bonds, these new approaches can help unlock private capital for much-needed infrastructure projects nationwide, at the right time.

Get innovation updates

We’ll send regular updates about developments in technology, science and the environment.

Thank you for subscribing to the Climate Tech Brief.

krives February 1, 2018 - 08:10

Written by Diane MacEachern

Rachel Lincoln Sarnoff makes it a habit to say “No straw, please,” when she goes out to dinner. In fact, the executive director of the 5 Gyres Institute makes it a habit to avoid single-use plastic just about everywhere. In a recent TEDX Talk, she...

By Jason Mathers, supply chain director at EDF, Corporate Partnerships Electric vehicles are poised to take off. We’ve just closed a year of record demand and investment. It’s no longer a question of whether electric vehicles – or EVs – will arrive, it’s how: How big of a role will EVs play, how soon and […]

By Andy Bilich, clean energy analyst, and Jamie Fine, senior economist Last month, all three of California’s major investor-owned utilities submitted applications to the California Public Utilities Commission detailing their respective strategies for how to transition residential customers to time-of-use pricing. Time-of-use pricing, if done right, is a low-cost strategy to help meet California’s climate […]

By Andy Bilich, clean energy analyst, and Jamie Fine, senior economist Last month, all three of California’s major investor-owned utilities submitted applications to the California Public Utilities Commission detailing their respective strategies for how to transition residential customers to time-of-use pricing. Time-of-use pricing, if done right, is a low-cost strategy to help meet California’s climate […]

By Andy Bilich, clean energy analyst, and Jamie Fine, senior economist Last month, all three of California’s major investor-owned utilities submitted applications to the California Public Utilities Commission detailing their respective strategies for how to transition residential customers to time-of-use pricing. Time-of-use pricing, if done right, is a low-cost strategy to help meet California’s climate […]

  Welcome to our staff Q&A series where you can meet the people behind Restore the Mississippi River Delta! To kick off this series, we're introducing our newest staff member, Devyani Kar. Click here to meet more of our team. Tell us a little about what you do with EDF and Restore the Mississippi River Delta? I am the coastal projects and programs manager for Environmental Defense Fund’s Mississippi River Delta restoration program where I lead research and analysis to ...

Read The Full Story

The post Meet Our Staff: Q&A with Devyani Kar appeared first on Restore the Mississippi River Delta.

  Welcome to our staff Q&A series where you can meet the people behind Restore the Mississippi River Delta! To kick off this series, we're introducing our newest staff member, Devyani Kar. Click here to meet more of our team. Tell us a little about what you do with EDF and Restore the Mississippi River Delta? I am the coastal projects and programs manager for Environmental Defense Fund’s Mississippi River Delta restoration program where I lead research and analysis to ...

Read The Full Story

The post Meet Our Staff: Q&A with Devyani Kar appeared first on Restore the Mississippi River Delta.