ESCO procedure within ProZorro officially launched

October, 5 2017

A new Energy Services Contracts (ESCO) procedure within ProZorro was officially presented and launched. This means that from now state-owned and state-financed organizations are able to procure energy services online. For instance, thermo-modernization of schools, kindergartens, hospitals and other public buildings will improve their conditions and allow to save energy resources.

Commenced in 2016, the ESCO mechanism was developed in cooperation with EBRD Energy Efficiency Unit. It is functioning within the Prozorro e-procurement system and has the OpenProcurement system in its core. The idea behind ESCO is to reduce costs of heating systems renovation and heat insulation for state-owned or state-financed entities and involve private entities to compete at this market.

To realize the overall scope of the ESCO procedure, it comprises a new type of auction - a Multivariable auction, based on price plus other factors such as delivery times, service contracts, or negotiable bundles of products and services. Complexity of this auction is explained by the main principle of ESCO tenders: an ability to combine interests of the customers and providers of energy saving activities via introduction of a special non-price criteria.

In comparison with previously launched ProZorro procedures, where awarding criteria is the lowest cost, suggested by an energy service company during auction, for ESCO procedures it is the energy service contract performance indicator. This indicator is automatically calculated with the NPV formula (net present value), elaborated in conjunction with the EBRD, during the open tender stage on the basis of suppliers’ bids.

Tender winners will renovate heating systems or heat insulation at the expense of investors. As a result, energy sources costs are usually reduced at least for 20%, and a loan may be serviced with the saved money.