Program Friction is a Real Drag

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Flow 1-How Our Business WorksA contractor’s job doing quality work for homeowners is difficult and complicated in its own right. When Home Performance programs add requirements, approvals, inspections, payment timing issues and much more to the mix they add time, effort, frustration, and cost to projects—what I’ll call “friction”. The diagrams here illustrate the additional complexity added by a program.  No, I’m not making that second one up—it was actually developed by folks on the program side to describe a program process!

Flow 2-How We Have to Change Our Business in the ProgramThe reality this creates is that many contractors  simply choose not to participate recognizing that any benefits are outweighed by the costs. This can be a completely rational decision. It also increases costs and frustrations for homeowners, often negating any incentives intended to stimulate demand. And friction burns program resources on things other than the end goal, in this case energy savings and/or reduced demand.

Program friction increases costs, increases frustration, and decreases contractor and homeowner participation. Ultimately, it means more dollars spent and less energy saved.

Let’s illustrate some of the issues.

  • Many programs require pre-approval of projects, i.e., the program must sign-off before any work begins. In theory that makes sense. In practice, it sometimes takes weeks or months, for the pre-approval. Homeowners who were excited get frustrated. They complain to contractors. Contractors who are in the business of making homeowners happy spend a lot a time (and they pay their staff to do this) trying to assuage homeowners and trying to see into the often opaque approval process to figure out what the delays are. Sometimes homeowners and contractors walk away. Sometimes permanently.
  • Most of the modeling done in home performance is not only complicated, but badly inaccurate. It is often done only to determine rebate amounts, not to help a homeowner understand (because it is badly inaccurate in its engine and with program-required inputs) nor to help a contractor design or install energy savings measures. Modeling is expensive and doesn’t save energy. And as discussed earlier, the situation is made worse because a lack of standards means that modeling software historically hasn’t communicated well with other software and contractors need to do double entry of too much data.
  • Paperwork burden can grow costly, especially with requirements to submit the same information multiple times in different formats, often with signatures on every page. Sometimes under a home performance program a $3,000 home improvement can require more signatures that the sale of the home with an accompanying mortgage loan.
  • Inspections that create multiple visits to the home often annoy homeowners and create scheduling difficulties. In one Energy Upgrade California program as many as nine independent inspections were required in the course of a project—that’s a pretty high inspection-expense-to-project-cost ratio on a $5,000 retrofit. The delays can increase installation costs, and they frequent delay payments, especially where rebate and financing are involved (more on that in the next article in the series). Just as bad, multiple inspections are a huge burden on the homeowner.
  • The lack of (standard) standards mentioned in the last post makes all of the above even worse with unclear expectations leading confusion, rejections, multiple iterations, and redundant effort that shouldn’t be necessary. A related problem of changing standards at every program cycle–or even in the middle of program periods–is more rub and often for little benefit.

I could go on, and contractors could add many, many more examples. Ask them! The end result is clear: Program friction increases costs, increases frustration, and decreases contractor and homeowner participation. Ultimately, it means more dollars spent and less energy saved.

Now, I understand the program’s responsibility to ensure quality, safety, performance metrics, and proper use of taxpayer/ratepayer funds. This means layering some requirements into the program. The goal however, should be to reduce the friction to as near zero as possible, piggybacking on processes that already exist and that are already being paid for. There are several critical ways to help. First and foremost should be to bring contractors into the program design discussions early so they can help with low-friction processes. Rather than create long lists of requirements to try to force a poor incentive structure to give the results you want, try to incentivize what you want to see. Establish performance metrics for program implementers to include components that streamline and speed turnaround. And make sure there are ways to get feedback early and often to identify and remove unnecessary burdens that get inadvertently introduced.

Take a good look. What can you find to make the program start working more smoothly?

<<Previous: Lack of Consistent Standards

Next: The Incentive Float Can Sink a Contractor>>

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About the Author:

Mike Rogers is the President of OmStout Consulting. A nationally recognized expert in residential energy-efficiency, he works with contractors and programs to scale sustainable market approaches to improving homes. More on Google+

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