Ideas for the industry June 21, 2016
Maximizing Value with an Innovative RFP Model
An energy performance project is amongst the most relevant ways to address today’s economic and environmental challenges. And there is every interest in maximizing a project’s long-term benefits.
Achieving an ambitious project begins with the request for proposals (RFP) process. The typical approach that favors the lowest bidder is incompatible with the goal of optimal project performance. A different RFP process, based on net present value (NPV), compels firms to innovate, develop optimal solutions, and commit to delivering results. NPV also provides a basis for comparing projects to see which offers the greatest long-term value.
NPV takes into account all costs and savings to provide a single number that indicates the value in today’s dollars of a project’s future cash flows. Awarding a project to the bidder who commits to the highest NPV is the best way to favor innovative solutions and ensure that optimal results are delivered.
How can NPV be integrated into the evaluation process for energy performance projects? We prepared the following document that provides an overview of the advantages of using NPV, as well as the ways that NPV and qualitative evaluations can be combined in the RFP process to select the most beneficial project.
