Commissioning Market Research November 19, 2004

Market Research Five Research Questions 1.What are the odds that any new, un-commissioned building will have flaws that financially impact the owner? 2.What are the effects of those flaws on the building owner and occupants? 3.What is the value to the owner of reducing the probability of flaws, the costs of commissioning as compared to other risk mitigate strategies and the price point commissioning needs to meet to remain competitive? 4.Which commissioning processes meet these price points? 5.What is the probability that these commissioning processes will prevent building flaws and deliver value to the owner?

Market Research 1. Probability of Building Flaws Statistically significant evidence of the probability of failures in design, construction, operation Anecdotal evidence of severe failures For all sectors or only a few Tasks could include: mining existing databases; gathering new data through surveys, interviews, or building investigations; reviewing RCx reports; and defining data models and data collection protocols.

Market Research 2. Effects of Building Flaws Statistically significant evidence of the costs of failures in design, construction, operation Anecdotal evidence of actual costs For all sectors or only a few Tasks would be similar to #1 Costs studied could include: schedule delays, cost overruns, warranty callbacks, energy, routine maintenance and repairs, system downtime, reduced productivity, tenant complaints/turnover and poor IAQ.

Market Research 3. Value of Reducing Probability of Building Flaws Determine perceived value of Cx based on probability of flaws and costs of effects Need to understand best way to communicate probabilities and costs to decision makers For all sectors or only a few Data collection methods could include: focus groups, surveys, interviews and other traditional market research methods.

Market Research 4. Cost-effective Cx Process Determine which aspects of Cx process provide the most value at the least cost Need to find the optimal Cx process to meet price points while providing required value Research goals could include: collecting data on costs and benefits of Cx by activity and defining benefits.

Market Research 5. Impact of Cx on Preventing Building Flaws Determine the probability that the identified Cx processes will prevent building flaws Need to make a compelling case that Cx reduces probability of flaws Data collection should focus on extensive and well- documented studies of the performance of commissioned buildings

1. Introduction Two perspectives on Cx Cx as an energy conservation measure (ECM) versus Cx as a tool to: Increase attention to detail Improve communication Avoid building flaws

1. Introduction Two perspectives on Cx Cx is usually portrayed as one of many ECMs when it is proposed to a potential customer. But, Cx’s non-energy benefits are a fundamental difference between Cx and other ECMs. How does selling Cx for its non-energy benefits require a shift in the Value Model and the Value Proposition?

2. Cx as Insurance New Construction Insurance and Cx are both ways to mitigate risk. Cx provides the most benefit where there is the greatest risk of building flaws, just like insurance benefits those who have the greatest risk of incident. Like insurance, the benefits of Cx depend on the probability of problems.

2. Cx as Insurance New Construction An insurance provider can say to a customer: “There’s X% chance you’ll have a catastrophic accident this year, resulting in $Y in medical bills, so this $Z policy is a great deal!” What if the Cx provider could say something similar: “Every year, X% of buildings are built with flaws that have an average cost to the owner of $Y and an impact on performance of Z%. Commissioning reduces your risk of receiving a flawed building, and at $Q, that’s a great deal!”

2. Cx as Insurance New Construction But we don’t have enough data on the risk to the building owner of receiving a flawed product! No statistically significant studies of the probability of building flaws in both Cx’d and un-Cx’d buildings

3. Cx as Immunization New Construction Immunizations and Cx are both designed to prevent problems. Cx reduces the likelihood of building flaws, just like an immunization reduces the likelihood of getting a disease. In both cases, the decision to take preventative action depends on the probability and likely cost of experiencing the problem.

2. Cx as Immunization New Construction A person considering the flu shot may say to themselves: “I don’t know for sure that I’ll get the flu this year, but the cost of the flu shot is only $X, and if I do get the flu I will suffer not only because I’m sick, but because of lost wages and the cost of doctors and medicines.” What if a building owner could say something similar: “I don’t know for sure that my building will have flaws, but the cost of commissioning is only $X, and if my building does have flaws the cost to me will be significant.”

2. Cx as Immunization New Construction But we don’t have enough data on the cost to the building owner of receiving a flawed product! No statistically significant studies of the costs to the owner.

3. Implications Argument Customers should not be told that Cx will save $X or Y% of construction or operating costs. These numbers are unknowable, and probably wrong Therefore, it doesn’t make sense to market Cx the same way as an ECM, or to compare it to ECMs in incentive programs.

3. Implications A New Way to Market Cx Providers should base their marketing strategy around problems in un- commissioned buildings. Owners need to be convinced that the chances of receiving a flawless building are slim, and that flaws are expensive. There is NO cost that owners are willing to bear if they do not believe they are at risk.

4. Market Research Value Model A framework for describing how Cx provides value to various constituents Describes costs and benefits of Cx qualitatively Defines metrics for communicating costs and benefits Provides descriptive information as to Cx’s specific, measurable values and its “perceived” or “core” values Identifies attributes that must be documented to provide a compelling case that Cx provides these values

4. Market Research Value Proposition A set of information that can be communicated to various categories of decision makers to compel them to choose commissioning Follows framework of the Value Model Includes documentation of the expected benefits Provides evidence of typical building flaws and worst case scenarios

5. Scope and Budget Scope and budget still to be determined Guidelines: Two or three years About $100,000 per year