mark williams | partnerships bulletin | 22 august 2016
The Greater London Authority (GLA) and the Mayor of London introduced the innovative RE:FIT model in 2008. Under RE:FIT private providers (framework contractors) work to make public buildings more energy efficient, guarantee energy savings for public bodies and make their return through sharing the resulting lower energy bills.
It is clear that the RE:FIT framework provides public bodies with an excellent opportunity to reduce their carbon footprint, generate financial savings, enhance asset management and potentially develop new income streams. The complication is that this is one option in a range of initiatives that are available, although not all are moving at the fastest pace. Choosing the right option can be a challenge.
The RE:FIT framework is DECC’s preferred approach. It is a proven model with guaranteed savings, short payback periods and opportunities to use external funding, including off balance sheet solutions where required. The RE:FIT framework offers a “pre-packaged” solution, with a funded Programme Delivery Unit (PDU) which will provide advice to public bodies at no cost, and a panel of pre-approved framework contractors. Recent RE:FIT framework developments include the ability for incumbent PFI contractors and facilities management contractors to act as RE:FIT contractors.
The key advantages offered by RE:FIT are:
To date over 615 buildings have been supported by RE:FIT, including over 110 schools. It is on course to hit its targets for 2016 and is proven as the most effective of the retrofit concepts.
This work has been endorsed by numerous organisations such as the Department for Energy and Climate Change. Amber Rudd MP, then Parliamentary Under Secretary of State for Climate Change said simply, “Energy savings. Guaranteed”
Another endorsement has been provided by the London School of Economics. Kenneth Kinsella, Director of Capital Development said, “We chose the RE:FIT framework because it was tried and tested, easy to access and guaranteed energy savings. The supporting RE:FIT Programme Delivery Unit has shown the benefits and savings that can be achieved and allowed us to consider the best solutions for our buildings.”
A major part of the attraction of RE:FIT is the standardised contract, the framework selected suppliers and the PDU that has been procured by the GLA and paid for with EU funding in order to enable RE:FIT to progress.
The PDU arrangement means that public sector bodies can have the initial property survey, programme management and business case work done at no cost, then if they do decide to proceed (generally a decision based on payback periods and budgets) it will be progressed very quickly.
RE: FIT achieves reductions in carbon emissions which will help organisations meet the EU targets of a 20% reduction from the 1990 levels by 2020; and a 60% reduction in carbon emissions in London by 2025. As a result, the current PDU’s pipeline is continuing to grow, demonstrating ongoing demand for its service and the framework.
Unlike some pre-developed energy efficiency approaches there is not a “one size fits all” process for injecting additional funding in circumstances where the capital budget of a public body is insufficient to progress the project with the optimum payback. Similarly there is not a single investment pot available. Instead RE:FIT provides a pre-developed approach which helps to develop an understanding of the borrowing powers of a public body, and the type of RE:FIT interventions that offer the optimum payback and best align to a public body’s wider objectives, the contracting arrangements that then suit these aims and the range of external funding options.
Decision making about the external funding options is based on the use of HM Treasury better business case practice, ensuring that RE:FIT projects are developed, taken to market and implemented in a way that delivers the optimum payback, irrespective of the upfront capital funding available to public bodies, and that RE:FIT projects align to the wider objectives of public bodies.
Progressing a RE:FIT model across the public estate at pace is a clear winner. In our extensive experience of working with public bodies on projects, including infrastructure projects, this is an important opportunity to move quickly on infrastructure, growth and job creation over the coming years.
PA Consulting along with Turner & Townsend run the GLA RE:FIT PDU and are keen to share our expertise about how to implement a RE:FIT model successfully.
Mark Williams is a government finance expert at PA Consulting Group