Third party financing is an approach that has been used extensively over many years. It is, however, a little more complex than paying for a capital project with existing organizational resources. Additionally, the mechanism works best when a critical volume of financing is involved, so the scale of the project will naturally require the review and assurances of several levels of authority.

These complexities impact the following functions:

To best address the complexity and facilitate an effective and efficient financing transaction, representatives from these functional areas should be involved in the project discussions from the beginning. Here’s how and why.

Management
It is best to get buy-in from the highest level of the organization as possible. But often, especially if there is a pre-existing relationship, the first person to be engaged in considering the approach may be at the field or middle management level. These folks are important in identifying any issues or concerns from an operational perspective that could either support or delay the process. But eventually, buy-in at the highest level is necessary to move things beyond the consideration to action stage.

When the organization is a governmental entity, either state, municipal or tribal, it is important to remember that you have two different kinds of management: elected officials and operations staff. Who leads and who follows, on what issues and in what circumstances, varies from entity to entity. But broadly speaking, the elected officials set policy and direction and staff implements policy and direction through programs, procedures and protocols. Whoever you start with, it is important to discuss this with representatives from the other sector as soon as possible. Over-reaching or inappropriate involvement can create issues and disturbances that can delay or prevent the approach from moving forward. Timing is also important in establishing these approaches. In general, elected officials tend to be more effected by this. Impending elections can either help or hurt. It is useful to research and assess the current influences and conditions for both management sectors and to connect the third party financing approach to their current and emerging needs and concerns.

Facilities Management
These are the folks that can best assess the need for energy systems and the specific facilities/ sites for the approach. They are also key champions, since their opinion on “do-ability” carries the greatest weight. Some organizations may have a specific energy function within facilities management. If so, that will make the process go smoother. Often, facilities managers have many issues on their plate, with energy being only one of them. Coupled with the possibility that they may not have deep comfort with energy issues and analytical approaches, they may not be initially enthusiastic, in spite of the cost savings potential. However, one of the features of this approach is that the performance risk is borne by the developer/ finance group. The facilities managers will not need to take responsibility for the equipment, operations and maintenance and performance. They will need to monitor and review the contract performance terms. The procurement and finance personnel can assist them in this evaluation and review.

Procurement
All organizations have procedures regarding how goods and service are secured. Governmental entities are often bound by legal requirements regarding procurement. Engaging the procurement personnel in the discussion can help avoid pitfalls and increase the efficiency and effectiveness of the process.

Finance
Since this approach is primarily a financial transaction (as opposed to build/ design or capital investment project), finance personnel are critical to reviewing, analyzing and structuring the terms of the contract. Including their insights early in the process will help to avoid terms and conditions that will not meet the needs of the organizations and can delay the process.

 

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