Driving Demand: Working With and Learning from Contractors (Text Version)
Marion Fuller: Hello and welcome to the next Department of Energy webinar. The topic for today is Driving Demand - Working With and Learning from Contractors. My name's Marion Fuller. I work at Lawrence Brooklyn National Labs and I'm one of the Technical Assistance Providers for the Department of Energy. I'm going to go over a few slides that kind of let you guys know what the Technical Assistance Program is.
We offer support to all of the RF funded recipients across the country, so the block grant recipients and SEP recipients. And we provide resources and tools to help those local governments and state governments implement successful clean energy programs. We offer webinars like the one you're on today. We have a blog. We have best practices and project resources online and we also help just facilitate pure exchange through phone calls and also in-person meetings.
Some of the topics we provide support on include energy efficiency and renewable energy technologies, program design and implementation, financing, performance contracting and building state and local capacities for running these programs. If you're interested in getting support you can go to the Solution Center online at the DOE's website or you can also call the number you see on your screen or email that email at the bottom of the page. We will respond within 24-48 hours with the kind of best resource that we can find within our technical assistance network which is quite broad. We really have experts from a range of fields and backgrounds that can assist you and making sure that the program you're designing really works. So I encourage you to make use of that resource.
Today we have a really amazing panel of experienced folks from across the country. I'm excited about this webinar in particular because Working With and Learning From Contractors is probably I think one of the more important, if not the most important, factors of success in making a residential retrofit program that really takes off that gets not just tens or hundreds of folks involved, but thousands of folks involved each year. So we have a great list of speakers here.
Karen Villeneuve is the Director of the Residential Efficiency and Affordability Programs at NYSERDA, the New York State Energy Research and Development Authority. She oversees work force development programs, the financing programs, consumer education and outreach and she's also a board member of the Consortium for Energy Efficiency.
Second, we'll have Peter Krajsa from AFC First Financial Corporation speak. Peter works in a number of states helping to develop really innovative financing programs and he has over 25 years of experience in consumer lending. He'll be talking about the program in Pennsylvania that they set up that really has listened to and works with closely the contractors in that state.
And third we'll hear from Mike Rogers who's the Senior V.P. at GreenHomes America. Before joining GreenHomes he worked with the EPA for many years working on the Home Performance ENERGY STAR label. He has over ten years of experience in home performance contracting and really good insights from working with the programs in New York and other states over the kind of the long term.
And finally we'll hear from Matt Golden with the contractor's perspective in terms of what's working for them in terms of attracting customers. He's the co-founder and President of Recurve, a firm based in San Francisco and has a lot to offer in terms of the larger picture of what's working for the contractor as opposed to just the program perspective.
So we'll get started right away with Karen. Karen, take it away. Thanks.
Karen: Thanks, Marion. Hi. I'm going to talk today about our Home Performance with the ENERGY STAR program. Go to the next slide, please. This is to put it in context because there are so many different forms of Home Performance with ENERGY STAR that are operating across the country right now. Ours is a Whole House Program that includes the comprehensive home assessment and we do model to savings that we expect from the work that's being done. We require that our participating contractors who are our partners in this program to be BPI accredited contractors and they deliver both the audit and the services that would come out of, come through the scope of work.
We have an extensive workforce development initiative. We provide technical, business and marketing training. We also provide marketing incentives and we have our own comprehensive multi-media marketing campaign. We also provide the contractors with equipment incentives so that they can really set up to do this kind of work.
We have low interest financing to offer the consumers cash incentives for the consumers and we do have an additional incentive based on income eligibility for what we call our assisted Home Performance program. We also have a very robust quality control and quality assurance programs to not only make sure consumers are getting what they're paying for, but also to provide some additional technical assistance to our partners who maybe aren't doing something quite right on their projects and they need to learn their techniques better. So it's kind of on-site, on-the-job type technical assistance. Next slide.
Ours is a market transformation program. We're not out just to see how many retrofits we can do today and tomorrow and the next day. We're really trying to permanently change the landscape. We're using the natural forces of supply and demand to achieve this. Working with the contractors, helping them get educated and develop the skills, working with the delivery, the supply infrastructure to make sure energy efficient products are readily available and that we're getting new products into the marketplace, educating consumers, working with them to help them understand the value of home performance services and to help them think about energy a little bit differently in their homes. And the idea is to create a sustainable industry which means that at some point down the road, there's going to be enough demand that this industry can continue to operate regardless of whether our programs are there. Next slide.
Our program has evolved over years. We kicked it off back in 2001 and things have changed along the way. We've seen some improvements in technology and new practices, so it's changed and grown from a technical perspective. We've seen changing consumer attitudes that we're constantly taking a look at what the marketplace landscape is and what customers think of these kinds of programs and making adjustments in our programs based on where we are today.
Our contractor partners have become more experienced and our infrastructure has grown and so we've made adjustments to account for that. We look at what kind of savings we're achieving and then we tweak our program and try to focus on one thing or another based on trying to improve the savings that are being achieved. We've looked at participation rates from both the consumer side and the contractor side and made adjustments to improve that. Over time as the program has gotten bigger we have found a need to streamline our processes and so we've tweaked that and tried to improve our turnaround time. When you go from your first year of doing a couple of hundred jobs to now doing more than 6,000 a year you have to make sure you can process that paperwork a little faster.
And most importantly, we've looked at the degree of industry success. Are our partners able to make a business out of this? Because that's what it's all about, making sure that you have a program that supports the contractors that will enable them to be successful to response to the demand in the marketplace, to help grow the demand in the marketplace and eventually have an industry that will keep going as I said before regardless of whether we have programs to support it. Next slide.
Okay, so here's how the contractor participation has grown over the year. We've started off with a small number of contractors in the beginning and over time as we've expanded our workforce development initiatives, we've gotten more and more participation as contractors have seen the public responding and seen that there are opportunities in this industry. More contractors have participated. Next slide.
So co-op advertising - this is the thing that I really wanted to focus on today. It's important that if you're going to have a sustainable industry that the contractors have a stake in that success and that they have a means to really drive the participation of the consumers along with the program administrator. And so what we've devised is a co-op advertising program that allows them to do that. We subsidize contractor advertisements and special promotions. We co-brand it.
We have really pushed the use of the Home Performance with ENERGY STAR logo as the recognizable brand, not so much the NYSERDA logo, but really something that the consumer can latch onto. And so we have policies in place about how the program logo will be used, what kind of messaging should be in the advertising. What we're doing is really setting up a framework that the contractors can use. And as I said, we compliment the contractor advertising with a very broad multi-media advertising campaign that NYSERDA runs and pays for through television, through print advertising, through radio, through events, et cetera.
The reasons that we do this - there are many reasons we do this. One is to leverage advertising dollars. We have a limited budget. As you all know, cost effectiveness of a program like this is kind of marginal or non-existent in the very early years as you're really trying to build up the program. And so we had some very scarce advertising dollars. If we can put that against what the contractors are spending on advertising their business it'll make everybody's dollars go farther.
And very importantly, the contractor knows their customer. They know how to reach them. They've been doing advertising through whatever means works for them and we want to take advantage of that fact. The contractor is buying into the success of the program. If they're putting their money out there and eventually we want them to take on total responsibility for driving consumer demand and that's how you achieve market transformation. Next slide.
These are the policies that we have in place right now. We have reimbursement rates that are based on the number of retrofits that a contractor has completed. So to get somebody started we'll offer them some co-op advertising funds, but we don't want to continue to provide incentives for somebody who's not actually getting work done through the program. So we do tie the payback to the contractor to how much work they're actually getting done in the program.
We do have some very specific requirements regarding logo usage as the ENERGY STAR program does themselves. We include language in the ads and have a requirement that they include language in the ads that promotes the Home Performance with ENERGY STAR measures and the energy saving features of the program. They can't just have an ad about countertops and put a Home Performance with ENERGY STAR logo on the page and call it a Home Performance with ENERGY STAR ad. It has to really focus on the program.
And the co-op is eligible for media whether it's TV, radio, print media, promotions. They want to do some special promotions for their customers. Maybe it's a percentage off the work. Maybe it's a free audit. Maybe they're giving something away and so we can support that and maybe booths at home shows where they want to promote Home Performance with ENERGY STAR at their booth. So we will co-op all of those types of activities, and in fact, what we've said to our partners is come to us with creative ideas. We'll work together to develop something that works for both you and the program and we'll help you pay for it. Next slide.
The other strategies that we use in our program, first of all we like to get contractor input. We have roundtable discussions from time to time, particularly around marketing. Many of the contractors, because of the economy, are struggling right now and so we've had a number of conversations with them saying, okay. What do you think we should do differently with our advertising that's going to help drive more customer participation? And so we get a lot of input from the contractors who are our partners to make sure that we're being as effective as possible in our marketing strategies.
As I mentioned, we have incentives tied to performance. We also provide assistance to our partners. We do support some training activities that really help contractors learn how to sell Home Performance with ENERGY STAR and gives them some tips on marketing. We have professional marketing staff here at NYSERDA. We have professional marketing contractors who can help our partners figure out what they might do differently if they need that sort of assistance.
We provide downloadable logos, formats, templates for advertising. Something that we're just starting up is the customer referral bonus. It's another idea that we're going to put out there and say, hey, maybe we can help you out by providing an incentive to customers who refer you to another customer. So we're kind of talking with contractors about that idea.
We tell our partners where we're advertising. So if we're going to be at a home show, we let them know we're going to be there. We ask them who else is going to be there. We have a list of all the Home Performance contractors at our booth so that the public can see who else is there from the program.
If we're going to run a media campaign on television or radio we let them know when we're going to do that, what station it's going to be on so that they can piggyback on it and run their own ads to kind of reinforce the overall messaging. If we're going to run an ad in a newspaper we will tell them what we're doing. So we put all of our marketing information online in our contractors' portals so that they can see what's going on and they can take advantage of it.
As I said, we have a vibrant QAQC program and what that does - there are many contractors who actually use that as a selling point. They say to the homeowners that they're trying to sell a job to, by the way. I want you to know that NYSERDA is inspecting ten to fifteen percent of all of the projects that I do. So that's a selling point for the contractors to say we do good quality work and NYSERDA is actually looking over our shoulders to make sure we're doing good quality work.
And then finally we do some evaluation where we look at our marketing efforts. We look at demand in the marketplace and we try to determine which of the marketing activities including those being done by our partners are helping to drive sales. Next slide.
Marion: Karen, just a couple of questions on the side for you. How often does NYSERDA hold the roundtable discussions with contractors?
Karen: It varies. It depends on what's going on in the marketplace. If things are really chugging along we might not do it quite as often. If there is real struggle like there is this year, we're reaching out and doing a lot more meetings.
Marion: And then when you mentioned doing kind of this high level ad campaign in certain areas, is there a minimum number of contractors in an area that you use to kind of justify additional marketing and outreach in that area from NYSERDA?
Karen: It has less to do with the number of contractors. The marketing is - the purpose of marketing is two-fold. One, the major reason is to drive customer participation, but we're also trying to get contractors to join the program. So, and that's a really careful balancing act. If you promote a program too much and you've got a lot of customers but not enough contractors in the region, the customers will become very frustrated because nobody returns their calls and they can't get the work done.
But if you advertise enough to then drive demand, you can say to contractors in that region who maybe have been on the fence and don't quite know whether to jump in or not, look. We are driving demand. We're getting phone calls. There's customers who need services and we need more contractors. This would be a good time for you to join.
So it kind of depends on the nature of the marketing and what we're trying to achieve. It's a balancing act. We have to be careful that we don't have frustrated customers, but we also have to make sure that we're doing enough marketing to serve the partners that we have. If we only have a few partners in a region, we want to make sure that they're staying busy.
Marion: Yeah, and then one question about the overall strategy. Have the rebates and policies that you guys have created changed frequently? Do you revamp the program each year to reflect the current market or has it been pretty stable?
Karen: It's been pretty stable. I mean certainly not changing things every year. If we notice something in the marketplace that's really not working we've tested, we tend to test an approach. We might test it in a small region. Like, take a region where we have some contractors who are stable enough that they can take some risks with us sharing the risk in this program and we might test something in the marketplace and if it's not working we'll pull it back. If it is working, we'll put it out there, but changing things every year? No.
You need, you know, contractors need to get people trained. They need to get processes in place. You can take people out of a workforce program, out of training. They're certified. It still takes six months or a year for that trained person to become really proficient at what they're doing. You need to give contractors the time to grow, to make the investments they want to make, to get used to the program, to get things up and running, to make progress. And then as you measure that progress, which takes a couple of years in itself, then you can make changes. Though we have made adjustments over some time, but they've been gradual changes that account for what's going on in the marketplace and they've not been terribly frequent.
Marion: Okay, great. Thanks.
Karen: And so here's what has happened with our co-op program. You can see the blue bars represent the total invoices for marketing that have been submitted to us by our partners meaning that partner has spent this much money on their advertising campaign. The red bars represent NYSERDA's share of that advertising. So they submit invoices to us. We provide them with some of that money back, our share of it, and you can see how the dollars that we have spent have resulted in a lot more advertising overall for the program. Next slide.
And then this is our production. You can see we launched in 2001. There's two sections to this graph, the top part of the graph. The lighter blue and lighter red represent our assisted program. That's for income eligible households who are up to eighty percent of the state or area median income and for those customers we pay fifty percent of the cost of the work, up to $5,000.00.
So that narrower band at the top represents the assisted market and then the lower part of the graph represents everybody else. And you can see we have a nice steady growth pattern. It's not a straight-line graph. There's definitely a growth there over the past five years. We've been growing on average about twenty percent a year.
This year the demand is down. We are kind of more steady state compared to last year as opposed to growing by twenty percent. Again, it's a sign of the economy. We're about to launch the Green Jobs Green New York Program in New York state which we hope will result in greater participation rates as we provide some low interest financing, some new types of financing to the market that'll help us get there.
So that's been our experience. That's how we work with our contractors in New York State. And I guess that's the end of my presentation.
Marion: Thanks so much, Karen. Great, so we're now going to hear from Peter who will be talking about the program that he's involved with in the state of Pennsylvania. So Peter, I'll turn it over to you.
Peter: Thanks, Marion. I was looking at my bio there and it says I have 25 years of experience in consumer and mortgage lending. I wonder if anybody's ever said they have more than 25 years experience. I get the feeling I'll be here -
Marion: So you lose something after that point.
Peter: I'll still have 25 years of experience, but I will be talking and kind of reinforcing what Karen was talking about, not so much specifically about Pennsylvania, but what our experience is in, really in the nature of contractor-driven programs and how you get contractors further engaged in the programs we run across the country, Pennsylvania being the flagship program.
Very quickly, we've been around since 1947. We are a lender that specializes in nothing but energy efficiency lending programs. One of three Fannie Mae approved energy lenders in the country and we're in about 24 states now. We have about 3,000 contractors that we work with, also, starting a new Green Credit Union which is kind of going to be our new flagship. And I think I skipped a slide here. Next slide, please. Oh, there you are. That's fine, Marion.
The Pennsylvania Keystone HELP program which some of you may be aware of is an interesting program. Again, my topic here will be talking more about finance-driven kinds of things as opposed to Karen's which was more holistic in the whole Home Performance world, but we've done about 7,000 loans the last couple of years. The Philadelphia Better Business Building or Better Building Award Grant is going to be piggybacking off of this, so it's been a very successful program. Connecticut Solar Lease Program, the new Connecticut program for energy efficiency, Kentucky's performances program, so we're pretty engaged for our geography. Go ahead, Marion, please?
I think financing as many of you are aware really is a key component to all this consumer embracement and contractor embracing of home performance and energy efficiency lending. Our loan volumes actually doubled over what it was last year. There was this huge consumer demand for affordable financing and like all of the perfect storm where you have a credit crisis that we're aware of where banks have restricted home equity lending. That's if you have any equity in your home and you probably don't. And contractors are frustrated because they need the ability for consumers to pay for the improvements they're suggesting.
An enormous amount of improvements are financed one way or another and the most important factor I think in energy efficiency improvements is the recognition that contractors drive the demand. Consumers are not really jumping up and down about going out and getting their house weatherized or improved unless they're going to see dramatic impact in their electric bill. So it's the contractor who has to engage this in an education on sales process to get consumers to take full advantage of a program and take advantage of creating energy savings that we're all hoping for.
Rebates and tax credits are great, but where does the rest of the money come from? So that's why the financing is such a giant gap. And of course as Karen said, you got to keep it simple for the contractor and the consumer. The goal is the work performed and energy savings, not the number of audits conducted. Next slide, please?
I always talk about two kinds of consumers, the reactive consumer that we've all seen and our friend Dwight there who's a proactive consumer and - go ahead, Marion. The reactive consumer is, falls into what I call the financing twilight zone, those jobs that are between three and fifteen thousand that are too big for a credit card and too small for a home equity loan. It's really the vast majority of home improvements and our job and our goal with all of these programs is to get people to move to a more proactive state, but you can't ignore these people. When their heat pump is broken or their furnace is broken or they have no heat, how do we get them to engage with a well trained and ethical contractor base and put in an ENERGY STAR or high efficiency systems and maybe baby-step them into the way into home performance.
For most of these consumers, they end up going to a big box store and taking some kind of a teaser rate financing program that really is not in their best interest at zero percent for six months and then thirty-two percent thereafter. They want a longer term or lower rate than they can get from a bank and that's been the foundation of success of programs like Keystone HELP and I believe to a large extent the NYSERDA program and other programs like this. Next slide please, Marion?
Where we want to drive consumers though is into the proactive world and I can tell you first-hand. I was telling the other panelist that as we speak today I'm having a blower door on my house and I'm going through the entire process. My goal is making sure my dogs do not get sucked out through the blower door, but it's a fascinating thing. My motivation was other than the fact that I do this for a living was the fact that my utility bills had - the rate caps came off and my electric bills went up thirty percent. And that's no greater motivator than that.
So I'm in there looking at ways that I can save money on my house and I engaged a BPI certified contractor who's coming in making the recommendations. And it's going to be a longer process and one that takes more foresight and engagement on my part, but clearly where we're trying to drive the market. Next slide, Marion, please?
So where has everything worked? We've seen that contractor-driven programs, and I'm trying to make that distinction because sometimes programs think they can put a, run a state-wide program or a utility-wide program and do bill stuffers and a lot of PSA announcements and that consumers are going to flock to their local banks for some kind of energy efficiency financing program and that's not the case. They may call their contractor. The contractor has to be engaged. If it's too complex for the contractor to be engaged in the process, they're just going to suggest that they pay on the credit card or not do the job at all. So the programs that have been successful I think are the contractor-driven ones where the contractor becomes the focal point.
We can skip through on-bill financing. That's something we're getting engaged in. I think that's the great collection vehicle. I don't know if it really helps people get more loans. And of course we're all aware of the status of PACE. I think it's great for larger jobs and I think it's going to be a great piece of the puzzle, but I'm not sure if it solves all the problems for even smaller improvements. Marion, next slide?
So, contractor management and recruitment is really the key to a successful program. So anybody out there who's looking to roll out one of these programs, the first step that I think is having a contractor network that's financially and ethically stable and have somebody that is there monitoring that contractor network. You could have a great technical contractor. He may be a brilliant engineer, brilliant building scientist, but his company may not have the financial wherewithal to stand behind their work or their warranty, and if that ever happens that could damage the program tremendously.
So the first line of defense is always the financial and ethical vetting of the contractor network. Successful programs recruits and trains contractors on how to better utilize special financing and monthly payment plans to increase both their closing rates and market penetration to help grow their business. Again reiterating what Karen said, this is about helping contractors embrace a new business model so that they can make more money by selling more energy efficiency items and can we give them the tools to that that ultimately trickles down and helps the consumer to save more energy. Next slide, please?
We approach it in Pennsylvania, the Keystone Program, really in both programs. Both the loan program and the contractor approval process is a tiered process. So we will have loans that address what I call that reactive consumer. For example, right now is a 6-9-9 ten year unsecured loan for an ENERGY STAR rated improvement.
We're rolling out a new program that's going to be a 2-9-9 loan for a consumer that's going to go through the Home Performance protocol with a BPI audit and blower door and air sealing before they make that ENERGY STAR improvement. So we're trying to push the consumer. Not disregard the vast majority of consumers that have to replace their heat pump, but push them more toward this holistic improvement. We've tried to approach contractors the same way.
An approved contractor is somebody that goes through a pretty thorough screening on Better Business Bureau and personal credit and business credit to make sure that they were established and had been in business for awhile, but we've not assessed their technical capabilities. If you jump right down to the bottom, classification that the certified contractor is a BPI certified or accredited company and - but what we did was we realized we had to create this middle ground. So we created a middle ground of trained contractors that are people that go through a course called Home Performance 101 to try to get them to engage and move up the panel into a more comprehensive contractor approach to things here. Next slide, Marion, please?
So how do you get contractors engaged in your program? Well, one of the key steps is partnering with contractor trade groups to get them to embrace a program that you're running out, program-wide contractor introductory breakfasts that we find to have great success where we're introducing the program as well as training consumers and contractors to a certain extent. Excuse me one second. I had a speaker problem there.
But again as Karen points out, use the power of your program P.R. if you don't have the kind of money to help endorse and provide co-op advertising. The power of institutional public relations is huge. If AFC First sends out a press release, it'll get taken up by some media by whomever. When the Pennsylvania Treasury Department or the Department of Environmental Protection sends out a press release indicating that they're rolling out a new program and we're looking to recruit contractors, believe me. That gets traction.
So don't negate the power of the P.R. that you have in a program. Contractors will promote the program if they can see that it will help them increase their sales. And many - some of them have altruistic reasons for doing it, but ultimately these are private businesses that we're engaging here and your job is to help increase their sales. Again, if it's too bureaucratic they won't promote it.
And more importantly, contractor qualifications - you don't need to reinvent the wheel. They should align with national standards like Fannie Mae. The Fannie Mae loan program is the basis for contractor approvals for most of the state programs that operate. And then when we're talking about technical approval, utilize the BPI standards. Don't make things above and beyond what are already existing in what are becoming the national foundations for national energy efficiency programs.
Training basics - we go through lender and program overview when we do these seminars. We do a financing 101, why financing works. How do you integrate it into your sales process? We talk about contractor benefits, do a lot of role playing on how to present to the home owner. We go through the program details in process, sales tools and finally we do some FAQ's. So that's just an idea of how a contractor training would go. Next slide, please?
We suggest doing a lot of - if we're running a program in Pennsylvania, we'll do a lot of co-op seminars with sponsor affiliated groups or go through local trade groups. For example a chapter of efficiency first, we'll do a seminar with that or a heating and cooling contractor's webinar. We'll do a cooperative conference with them.
We go on location with larger contractors one on one. We certainly can't go - in Pennsylvania we have almost 1,500 contractors so we're not spending a lot of time with them on the pops one on one, but certainly larger contractors that have engaged business practices. We have a sales team out there working with them.
We are just creating a Green Energy Center in our facility here where we'll be able to produce training webinars for contractors, a lot of conference calls, and then we are also developing a series of website training shorts. A lot of role play to help contractors engage in this because you may have a lot of new sales guys coming in. A typical sales tool that we would offer our contractors to show them the comparative nature of how you can help consumers buy more energy efficiency improvements through lower payments, a kind of good, better, best approach here and you can see a comparative financing chart, just one of the tools that we offer. Next slide?
We always drive it with the - which do you think sounds better to a prospective buyer? The system's going to cost you $5,000.00 or your money and energy saving investment is just $58.00 a month? Contractors and consumers are in tuned to a monthly payment plan. You're buying essentially a small car when you're paying six or seven or eight thousand dollars and the presentation has to be made as such. That's our single greatest obstacle is getting contractors to always introduce financing on every sale. Next slide, pleases?
Many contractors make assumption as to who will finance. They don't offer anybody a promotion or every sale or every proposal. They think because somebody has a big house they don't need financing. In fact, if it's approached as a monthly payment plan, that will help them drive their sales. Don't make the customer ask the embarrassing question, "Do you have financing?"
You have a wonderful program here. Use it to improve your business. Put an estimated payment on every sale. And then finally just because you have a great financing plan, give consumers all the options of how they can pay, cash, do they want their points on credit cards? Let them choose the option they prefer. Again, these are just typical contractor sales approaches. Next slide, Marion.
We're offering training through our Green Energy Center now to increase the technical skill set of our contractors beyond this base level. So we want them to see how that by growing their business they can get engaged in potentially Home Star or programs that award recipients are putting on. We have this Home Performance 101. We go through BPI training and certification all as an integrative part of our program working in the geothermal, EPA, lead paint and other things. So it's all part of their ongoing package in process. Next slide, please?
You have to have ongoing support. You have to have an experienced staff that specializes in energy efficiency loans. We offer ecommerce, web links, web design, web portals to some degree the way NYSERDA does. You have to give these guys tools to help them make their case, marketing materials, active reports, integration with Green Energy Compass and other tracking software. Next slide?
Again, programs can be delivered through websites. We are very big on making sure that the contractors all have direct links to our site from their site. So a consumer, when they're talking about a program, they're directing a consumer to their personal contractor website that has an approved link back to the program because we're trying to help the contractor build the building. I don't really care about my brand. I care about the contractor's brand. Next slide.
And finally, don't get caught in red tape. All the programs that you're putting together have to be recognized that they're competing against credit cards. And consumers and contractors will always follow the path of least resistance, even if you are offering the most spectacular zero percent program in the world. If it's complex or if it smells of red tape they won't go there. And again, you want to accomplish your goal without overburdening contractors or consumers with complexity. Next slide, which I think is my grand finale here.
So that's us and again it's all about the contractor. It's all about making the contractor a reputable and discernable for the consumer and also helping them grow their business. Thanks Marion.
Marion: Great. Thanks so much, Peter. Let's move right on to Mike with GreenHomes America. We'll try to save some time at the end for questions, but feel free to continue to type them into the box there on the right-hand side of the screen. Thanks, Mike. Go ahead.
Mike: Great. Thanks, Marion, for the opportunity to speak in the context of your excellent report and thank all of you on the webinar for participating. As Marion mentioned, I'm Senior Vice President with GreenHomes America. Just to make things clear, we make our living on the ground fixing homes, knocking on doors at the retail level. Hello, Mr. and Mrs. Smith. Can we make your home more energy efficient?
Actually that's not the message we use. I know Matt's going to touch on that a little later, but we're acutely aware of what works out in the market and how programs impact the market. And I'm delighted to hear what Peter just said about the contractor as the focal point and Karen certainly mentioned several points along there as well.
Right now we're operating in New York, New Jersey, California, Utah. We'll be announcing a couple of additional locations shortly. So what I'll be talking about here today is based on real world experience as a contractor on the ground. In addition, I'll throw in observations from my previous life when I actually traveled around helping programs and contractors get up and running.
I'll be touching on a few points here and reinforcing several important points that Karen and Peter just made including, and I can't emphasize this enough, the importance of the contractor in the program's success. However, there's no way that we'll even to begin to touch on most of the great content in this report, so I would be terribly remiss if I didn't encourage all of you to take the time to read this driving demand report cover to cover. It's excellent. Read it and read it again.
Demand for this - we know the need is real. Demand is real. I'm not going to run through this list of drivers here, but I can assure you that with the right touch points we can reach out and hit most customers with the financing and other incentives and inducements that are out there, some of which Peter just discussed. We can actually have an enormous impact in existing homes, however it's important to get it right. And before I dive into what I think are my core recommendations, I want to touch on a couple of very important points that cross multiple areas, some of which are mentioned explicitly, others implicitly in the report including messaging and contractor business sustainability. Next slide, Marion.
Go ahead and click through to fill this out. First, this is a mistake that we often make in the energy efficiency world. We think that if we give people good information they're going to act accordingly and that people are going - if we generate a score for their house, if we give them a free audit they will take action. Well, that certainly has not been borne out by what we've seen in the field ever since the energy crisis in the mid-seventies. Good information, free audits do not translate to action. Next slide, please.
And if you think about this, we know this from other arenas and behavioral economics. People do not necessarily act rationally. We like to assume they do, but they don't. How many of you out there in the audience right now have tested your home for radon? We still know that lots of adults smoke. A lot of Americans are overweight. People don't even take advantage of the free money their companies are offering in their 401k plans. And I like to pick on myself, too. If I were a rational person, would I actually own six tents? I only go camping about three times a year.
So the point here is people make decisions for all sorts of reasons and the man who really inspired me to get into energy efficient, Amory Lovins, summed it up pretty well. "People don't want heating fuel or coolant. People want cold beer and hot showers," and it's critically important that we remember that as we design programs. And a conclusion that I would take away here is if you when you're designing your program, you focus only on good information and economic common sense, you're not likely to succeed. And that's why I feel obliged to say that I don't think free audit programs work.
We've spent a lot of money in this country giving free audits. I'm going to talk more about incentives and if you give away free audits, you're going to see a lot of audits. As Peter mentioned though, you don't necessarily want to see a lot of free audits. You want to see a lot of work getting done. And audits alone aren't going to get us there.
We also need to use a variety of messaging, marketing, messaging. I said it twice. It must be really important and as Peter said again, divorcing sales from the process, divorcing contractors from the process won't get you the results you need. Next slide please, Marion?
It's also important not just to think about the messaging, but as you heard from both Peter and Karen, the centrality of the contractor here to think about how the contractor's business works and how the program impacts the contractor. Now, I'm generalizing using real round numbers here, but for a company to get up and running, it takes about $100,000.00 to get going. Now, a larger company, for example GreenHomes, when we're starting a new location we're actually writing checks that may total $100,000.00.
For a smaller contractor, they don't have those sort of cash reserves so some of its tapping into their credit cards, the equity they have in their homes and a lot of it's the equivalent dollars in sweat equity. But the important take away here is contractors have to make real investments to get up and running and it takes a long time. And at the same time, they're balancing cash flow. They need to make payroll on Friday. They've got to pay all their suppliers, et cetera, and as Peter said. If we don't make it simple and easy for contractors to participate.
And by the way, I'm not advocating for low quality standards. I'll get to that in a minute. We need very robust quality, but they have to be clear and they have to be sensical and there has to be sort of an approach path for contractors to succeed here. If, on the other hand, you throw hurdles and fears and uncertainty with changing resources and dollar amounts, et cetera, you're going to scare contractors away. Next slide, please.
Here's kind of how our business works. We're a contractor and we primarily interact with the homeowner. There's some discussion back and forth throughout the marketing sales process, installation, et cetera. Sometimes out there in the real world we'll actually pull someone like Peter in, include a finance vendor in the equation. This is tough. This is tough. Right here by itself, it's tough to do a good job every time and make a living doing it for contractors. Next slide, please.
Remember the last slide how our business works. I'm not making this one up. This is actually a diagram and I won't mention the program person, but how they thought the process should work. Obviously it's a lot more complicated. The more complicated you make it, the more steps you add, the more intermediaries you add, the more times that a contractor has to go back and forth with the program with different quality folks, with different vendors, financing, trainers, et cetera, the more likely it is that they're going to fail or they're not even going to start to begin with. You just scared them away.
This is not an argument not to do nothing. I'm very familiar with Karen's program where we've been operating since day one. Actually In-therm, which is now GreenHomes America in Syracuse, was the very first program to sign up in Karen's program almost ten years ago. We're all for high quality. It just has to make sense. Go head. Next slide, please.
Along with that, we understand reporting. You need to be able to keep an eye on what we're doing. We're fine with submitting data to you. Please, though, try to streamline it. Don't ask for the same piece of data on 6 different forms or on 16 different forms. If it's the same piece of data and it's not changing, only ask for it once if you can. Next slide, please.
Good program design 101. Again, I'll point you back to the report because it touches on a whole host of key activities. I'm not going to run through everything. I would like to touch on certain key things, including aligning incentives with the goals you actually want to see. I talked a little bit about messaging. I'm going to reinforce a couple of points there.
I'm delighted that Peter dove into the contractor's needs and the importance of considering the practical needs of contractors and how it works there. And Karen certainly talked in her own program about being consistent and persistent and the stability that's required over time. And I'm going to reinforce that a little bit. Next slide, please.
Incentive structures, and this should be obvious, but I think it's worth repeating. If you want to see energy savings, you have to incentivize energy savings. The corollary to that again is audits don't save energy and free energy audits are not necessarily a good use of resources. I'd actually add that free energy audits aren't free.
Somebody's paying for that audit and if we're talking about using program dollars which are taxpayer funds or rate payer funds, we ought to be thinking about using those funds in the way that actually delivers the most results. And we can balance that certainly in the short term and as Karen talked about, in the longer term by transforming the market and getting market actors, homeowners, contractors to take ownership of this and invest their own money.
Marion: Mike, we have a question here about what the ideal customer co-pay might be for the audit? Do you have a sense of what you think that should be or a range?
Mike: Probably close to a hundred percent and it certainly should be a hundred percent up front. If you're going to incentivize an audit at all, I would strongly encourage you to do it only on the back end and only if the customer actually takes action and completes some minimum amount of work. Otherwise what you're doing is incentivizing an audit which again does not save energy. You're falling back on the fallacy that logic and good information alone drive people to action and it really isn't the case.
Marion: Yeah, and how much are audits running in your area just so folks have a sense of the cost we're looking at?
Mike: The cost of audits varies widely around the country and it's driven by lots of different factors. I think a good ballpark is probably in the $300.00 - $500.00 range. Although it varies widely based on what local wages are, even what size the housing stock is. I can tell you in New York and we have the luxury of doing this, over time the price of the audit in our market has been driven down to zero. We can't make a dime delivering an audit in our Syracuse market.
Fortunately we're a contractor and we can include that into the overhead, so we can keep our doors open. It's certainly not an approach I would advocate for, but unfortunately I don't control our competition and that's the direction they've taken it there over time. Other locations we're charging in the $300.00 - $400.00 range. It seems like in the long term $100.00 is about the sweet spot of once you get through the early adopters what the market's actually going to bear.
Marion: Great, thanks.
Mike: Along with that if you want to see deeper energy savings, you should scale your incentives to the energy savings. We're really interested in programs like Home Star which may or may not go anywhere, but it's already driving good program design around the country. Places like New Jersey where our incentives we're able to offer to customers are based on the level of savings that we're projected to achieve. A program launching in California right now, very similar type approach, and the more you invest, the more energy savings, the more bottom line results you deliver the higher the incentives.
This is a great tool by the way for contractors. It's a carrot that we can dangle in front of the homeowner. Hey, if we push it just a little bit further, you're eligible for a little bit more incentive. So it's where the interest of the homeowner, the contractor and the program all align moving towards deeper energy savings.
Stability is absolutely critical and I won't name names when it comes to programs, but programs that have thousands of dollars of incentives that they're there and then they go away, but then they come back again and then they go away again, and then the come back and then they're temporarily suspended. That's absolutely the wrong way to go about it. What happens is sort of in the low points if the market believes at all that the incentives may come back, they freeze. They don't do anything. Homeowners aren't going to make any sort of purchase when there aren't incentives available if they believe that the incentives are coming back.
So you have to think about what your goals are and you can start incentives very high. You saw Karen's curve. It takes time for this to ramp up, so you can reward the early adopters and encourage other folks to jump on. And then you can ratchet those incentives back over time if you don't have the budget to sustain the growing volume, but don't do a start, stop, start, stop, start, stop. That's death for consumer participation and it's death for contractor participation. And I'm not going to talk about financing because Peter did a great job talking about the important role and how that works.
Removing contractor speed bumps, making it easy for contractors is critical. Peter certainly mentioned this and Karen, in NYSERDA's program, I think has done a better job than anyone in the country in terms of involving contractors. Gathering them all at the early days of the program, even in advance of the program, gathering the contractors together in a room to hash out what's working? What's not working?
And I can tell you I sat in some of those meetings and they're lively and boisterous. And the program manager or administrator is always up there in the hot seat, but the feedback is critical. And this doesn't mean you tailor your program to every whim of every contactor. It still has to make sense. You still have a fiduciary responsibility to protect those funds, but you've got to listen to the contractors because they are the force on the ground that's driving this.
I won't talk more about co-op. Karen did a great job other than to say revisit Karen's slide and review all those points. Co-op's great. It does leverage dollars and it helps us contractors on the ground do what we already know how to do. And again, don't do anything that slows down the process. Delay is bad for a contractor. It's bad for the homeowner. It sort of extinguishes the motivation and will to move forward that at one point was ignited.
And as you're setting up your program requirements, respect the fact that contractors need to keep the money flowing to keep their business open. If we've completed a job, we understand you want to do quality assurance on the job, but make sure it's timely. We can't wait six months to get paid for doing that work because we've already had our crews out there. We owe them wages. We've already used the materials. We owe our supplier money. It's important that we actually get paid for the good work that we've done.
So we have no problem with quality assurance inspections. In fact we love them because it keeps all our competitors honest, but don't let that cripple the good contractors and good work you're trying to see. Next slide, please.
Just another quick point and I think this is something that programs in general can do that contractors can't do at the same level. We don't have the same level of credibility. There's all sorts of information and worse, misinformation out there. Windows are magic. We'll pay you money. We're going to reduce your energy bill so much if you put in new windows, you know, terrible products that full page color advertising people think are going to be their cure-all solutions.
What we need is the program to reinforce the messaging about what the right approach is. Your trusted resources - have a good website. Use good advertising. Use it like Karen does, though. Let the contractors know so we can dovetail our own efforts and our own messaging and move the ball forward together. Next slide, please.
Please don't confuse things. ENERGY STAR for example, great brand awareness out there, great credibility. Whether or not you use it, that's up to you, but please let's not in every state we go to create ten different programs with different requirements and different branding. We're confusing the market and if we really want some synergy here in the marketplace we have to be looking at the national level.
Coca Cola doesn't advertise it as Coca Cola in Atlanta and Red Stripe Cola in Washington, D.C. and some other cola in Houston. They take advantage of national branding. So friends, relatives, colleagues, workers around the country can start feeding off of each other. Try to be consistent on your branding. Try to be consistent on the program requirements, all that stuff. Next slide, please.
Again, take a look at the program. Take a look at the report. Great stuff there and thanks for the opportunity to talk with you today.
Marion: Thanks so much, Mike. I really appreciate it. And for those of you who haven't seen the report, he's referring to the Driving Demand for Home Energy Improvements report that Lawrence Brooklyn National Lab put out a few weeks ago. It is available online at drivingdemand.lbl.gov. And on that website there's also a list serve that you can join for practitioners to share ideas and we also will be sending out any resources or other information that we have available and that we come across. We'll send it out to that list serve. There's webinars, other links there as well that may be helpful. So that's drivingdemand.lbl.gov.
So let's go to our last speaker, Matt Golden from Recurve. Take it away.
Matt: That's great. Thank you, Marion. So I'm going to keep this really short and sweet because there's not a heck of a lot I was intending to say that wasn't already covered by any number of times potentially by the other speakers, but go ahead and advance the slide. Go actually one more.
One of the key things I wanted to talk about is targeting customers and a clear recognition that we have in the marketplace is that even if we hit all of our goals over the next two, three, five years, we're really clearly in early adopter land. And so one of the things, especially as we start talking about whole neighborhood approaches and these sorts of things, just being aware that the most cost effective customers to acquire tend to be those that really have a distinct problem that we can solve and are kind of in the early adopter category of the market.
And so recognizing that if we want to broaden our approach and say get everybody on the block, which is a combination of early adopters and a bunch of skeptics and laggards and others, you end up actually tuning your whole program to acquire the most costly customers. And so we're really careful as we go in the marketplace to try to identify those customers that are most likely to convert into a retrofit and then we measure all of our marketing and all of our approaches by the all in cost, not to acquire an audit or to acquire a lead, but the actual cost of acquiring a customer as a percentage of retrofitting revenue.
And the key thing is that you want to attack those places in the market that we can most cost effectively acquire customers because demand is the key to transforming this market, especially in the near term. And I know we have a lot of other goals attached to these programs as well, but the initial step to achieving any of those goals is actually standing out in the marketplace that has a successful company in it that are actually doing business, making money, creating jobs. And by far those folks that we can identify clear issues and are kind of ready to move are the most cost effective to acquire. So we go to the next slide.
Again, this is really key is, we sell solutions to problems, not products, not audits. We find that if customers cannot identify an issue that we're there to solve that we're very unlikely to convert that customer. For the most part things like global warming and what-not while we could drive audits tend to be not good drivers of people actually making investments to retrofit their homes at the end of the day. So we're looking for people that have really distinct issues that we can solve in the categories. We need to jump to the next slide.
This is a build, but we're looking of course at saving energy, but health, comfort and indoor air quality are really as important and oftentimes bigger drivers of customers actually pulling the trigger on the types of retrofit that we do. So especially with the transaction cost that we're talking about, you know the audit that's required, staying home from work, paying for a pretty large retrofit that may take a week or more to do in their home. When you're looking in straight financial terms it tends to be - it's important the people all want to save money. But when they're looking at kind of the transaction cost and the hassle associated with if you finance one of these projects, what ends up being a savings essentially but not a huge savings per month. We find that it's this combination of issues that actually brings people to do the work and actually move forward with the project.
And so even if your goals are aligned primarily or even totally with energy savings or carbon reduction which is great, recognizing that your customers are doing this for a variety of reasons and making sure that you're incorporating those into your market. So you've kind of got to get outside of the box that you think you might be thinking in within your goals and your own program. And there's a reason why environment support might be on the top of all of our minds, but again when it comes to actually making a large scale buying decision, people tend to actually put their money out to solve a problem that they actually can feel. And unfortunately, typically crunching doesn't tend to reach that level of paying.
So I'm going to probably be able to jump through - you know I thinking of the rest of my slides and looking at the time and I think I can go ahead and hand my time back and see if there's any questions from the audience.
Marion: Okay, great. I'll just - these will all be up online so folks know and we'll just actually go to this slide, which at the bottom of the screen has the place where you can go get the audio for this and also the slides. They'll be up in 3-5 days I was told. These are upcoming webinars you can see on our screen. You can register for those at that same link below. And so let's go to a few questions.
A question from a contractor in California who's asking how do you keep reporting and verification costs down? He says that in the California programs that they've planned to be a part of they think that the cost of reporting will maybe be about fifty percent of the rebate amount that the customers are giving, so a significant chunk of the cost that they experience. Anyone have a suggestion for how to keep those costs down for contractors? And maybe we could even start with Karen since you have so much experience from the New York program, how to make that easy for contractors?
Karen: Well, not knowing for sure what the reporting requirements are that are being spoken of, we require that the contractors upload the audit and actually the model that comes out of the audit. We have the contractors helping the customer fill out applications. I don't know. It might help to get a little more context.
Marion: Well, maybe you could just say how - what's expected in terms of reporting for contractors in your program just so folks can have a sense of how it's done elsewhere? And since you've done it for so long it's probably better than most I would guess.
Karen: Yeah, how about that? Mike might be in a better position to compare from program to program, but we require, like I said, uploading of data. The reporting itself, a lot of that is done through invoicing. If they're coming for incentives in one thing or another they've got to provide some evidence of the incentives that they're going after so there's a lot of invoice information. It's really the model and I think that that's where most of our partners do find the greatest challenge is that the model itself takes a fair amount of time.
One of the things that we are going to be doing because we do have this Green Jobs Green New York program that is rolling out, we've defined an audit. We didn't use to have a definition of an audit. There was a whole bunch of things that people had to do. There were some required minimum things, but we've really defined the minimum audit that has to take place for the program. They're going to have to upload the results of the audit, but we're not asking them to do the model unless the project actually goes forward.
Marion: That's great.
Karen: And so we're hoping that that will help the contractors eliminate some wasted time by only having to focus on the projects that go forward as far as modeling is concerned. I mean most of the reporting, figuring out that the energy savings and everything, we pull that from the models. We're really doing the program reporting.
Marion: What about Mike or Matt, do you have ideas from the contractor's perspective about what would make sense in making reporting and verification easier and less costly for contractors?
Mike: Matt, you want to take a crack?
Matt: So, we're experiencing - I don't think it's quite half the cost of the incentive, but it is a significant expense and actually what I was going to talk to was more actually programmatically and then I'm going to hand it back to Mike, which is I'd really encourage programs to look at standardizing for example on Home Performance XML and kind of their standard data structures because there are quite a number of innovative tools in the marketplace. And we really need to see an evolution in the type of systems that manage these programs and the tool the contractor used in the field. And we want to make sure that those innovative products are able to interact with programs in an operable way so that contractors can choose tools that work best.
I can't say we cracked the nut on making the California program go really streamlined at this point though. It's a pilot program two months in, so we definitely intend to continue to work with and try to kind of wring the kinks out as we move forward.
Mike: This is Mike. I'll just add it certainly is a non-trivial level of effort and expense for a contractor and programs need to be really cognizant of that. One thing that a program can do as it's doing this. First consider the software as Matt just talked about. We already have to use a variety of different software packages. That certainly slows things down, especially when package A doesn't talk to package B and we have to use them both in the same program.
The other thing is if you're going to require reporting, try to keep it to paper that the contractor's generating already. If you're requiring them to submit a model and a contract then don't require form C that essentially allows them to input everything that's already on the contract and in the model. Just basic things like that. The program - the information is there.
Rather than creating a bunch of as I mentioned earlier, a bunch of sort of duplicative forms that require you to enter the same data over and over again, pull it from what the contractor's already doing so the contractor can move forward and do the things that they do best, which is engage the homeowner, make the sale and actually deliver the improvement. And the program folks then can tease out whatever information they need from a due diligence perspective and a program accounting type perspective.
Matt: I'll just add - this is Matt. Look at that chart that Mike had that showed all the boxes and the flow of the program. Think in terms of the totality of your program because oftentimes any individual step just doesn't seem like a whole heck of a lot. But when you look at it in its totality it becomes completely unwieldy and so just always remember to back up and say, wait. What is the entire scope of things we're asking these folks to do and try to get an idea of how much burden that actually is?
Karen: Just to follow up on the software, when we started our program ten years ago there was really only one modeling software package out there that we felt we could use. Over the past few years there's been several more packages and modeling software that have evolved and are available. And we actually put out a request for qualification on the NYSERDA website to invite the manufacturers of other software to submit their packages. We established criteria saying this is what the software has to do and then you submit it and you demonstrate to us that your software can do that and we will make that an approved software for use in the program. And that way contractors can use something that they find particularly more user friendly than another package and maybe they're using the same, they're working in more than one state and they can use something that they're using in another state. So that is something that we've changed over time to make it a little easier for the contractors.
Marion: Great. And just so folks know, the webinar's officially over in a couple of minutes, but whoever is able to stay on we welcome that. We'll probably go an extra 15 minutes. I'm getting a bunch of good questions here. So I have another question that's probably for, maybe for Peter or Karen.
We have someone who's looking for advice on how a program should work with contractors who continually submit incorrect or inaccurate bids even though they receive ongoing coaching and sample bid forms. Any thoughts on how to deal with that?
Peter: I mean is that just a business practice issue really? Is it just a contractor who is - I hate to use the word incompetent, but a contractor that's not able to modify their business practices? If we have contractors like that, we will fire contractors if we sense or smell any kind of ethical issues or any kind of sales practice issues. They are terminated from the program.
If they have issues on terms of how do they participate in the program and you've done everything you can in terms of trying to coach them, it comes to a point where you say, well, it's just not worth it. So I think you've got to be - you can't exhaust yourself in dealing with an incompetent contractor.
Karen: Yeah, I mean I would agree with that. We bend over backwards to work with contractors and help them get processes in place. I think what Mike said before, he has actually helped a number of contractors, even contractors that are competing directly with him in the same market to get processes in place that can help them grow because there's plenty of work to go around. Competing with other contractors, you can also collaborate with other contractors and it's good for everyone to help grow the market. And I think using successful contractors to mentor contractors who are coming into the program is a really good thing to do.
Marion: That's a great idea. We have another question here from someone working in a very new market where he says the contractors don't have the resources yet to get up to speed on doing the energy modeling. Are there any guidelines of a prescriptive set of measures that can be used to justify savings? Just at least to get started, or do you guys think that you have to go straight in with energy modeling?
Karen: You know we did modeling a lot at the beginning and actually we have a database now with like 35,000 modeled homes. We ourselves are looking at are there ways that we can streamline the process and not require modeling for everything? Are there some kind of typical homes that if this is the description of your home, we feel pretty confident that we have a better understanding of the savings.
The problem is here in the Northeast and I don't know where the question is coming from. Boy, we've got some really, really old homes and we've got a lot of variety in the homes and every home is different. And where there may be some general rules of thumb about what the savings could be expected to be, people have done all kinds of work on their home and there's an awful lot of additions. You've got a home that was built a hundred years ago and it was a little tiny thing and it's got three or four additions built onto it. There are so many different configurations. It's really hard to do.
There may be other parts of the country where neighborhoods, a whole neighborhood that was all built at the same time and you might be a little more comfortable then going in and saying, okay. In this neighborhood, we feel pretty confident that we understand what's going on in these homes. Even there you might find somewhere someone has done some work, but I think it really depends on the scenario that you're working with and I'll pass it off to Mike and Matt who are better equipped to answer that.
Marion: Any other thoughts?
Mike: 'll chime in. I think at some level modeling, some type of modeling is necessary. For example, we need to size equipment properly and to do that you're doing manual J or equivalent which is essentially a model. So at some point it's kind of non-negotiable. You need to do some sort of modeling to be doing your job, but I think there's also probably some trade-offs and streamlining that could be done.
The one point thought that really shouldn't be negotiable is the diagnostics that feed the modeling. If we're talking about air sealing a home and we're not doing diagnostics using a blower door or using a duct blaster, certainly doing combustion safety, then there is no way we can be making any sort of recommendations that really make sense for that home. So modeling, I don't know what the perfect answer is, but it probably - there's some level of modeling that's required, but we shouldn't even be talking about a program without having the diagnostics.
Marion: Yep. Any other comments? Okay, then we have another question about attracting customers to attend events and Peter, I wonder if you can speak to this? There's someone who do something the same contractors at various events and they really want to reach out beyond this kind of core contractor group. Are there any good topics that will lure new contractors that have shown success for any of the programs you guys work with?
Peter: Attempting to lure contractors or consumers? You're saying how do you get contractors?
Marion: Contractors, yep. They're trying to basically reach out to contractors.
Peter: I was surprised at how quickly it was in both Pennsylvania - I'll use Pennsylvania and Connecticut as examples - how quickly the higher end contractors all fell into place. They saw that their competitors were offering a program and they wanted to get in on it. So I think it - I mean Connecticut was the same thing. We announced the program and contractors just signed up.
Now, getting them to use the program, that's the next step, so attracting contractors in to get approved is easy, at least in our experience. Motivating them to properly adjust their business to use it requires - this is where we're getting far more engaged in webinars and mandatory trainings and you know, we've always been - we didn't have mandatory sales training. We're making that part of our process right now. So I think you need to have a proactive engagement with like a business development staff to really get out there and get them to use the program.
Marion: Great. I mean there's -
Matt: I'll just jump in. So one of the things I think is important is just ____. So I think a lot of what is being rolled out so far has been workforce and contractor engagement first and then looking at demand creation. I think an awful lot of contractors have been pretty burnt by that scenario to the point where I think - and I've lived through in California with the California Solar Initiative which is a very healthy program with over 1,000 contractors that have been created in the last 6 or 7 years and it was just a handful before the program started. And what drove contractors into the business was that they saw that people were making money in the business. And it started out very lucrative and there was kind of a trade-off over time between the very lucrative incentive.
It started out at more than fifty percent of cost and then there was a trade-off over time as the industry stood up and actually became successful of those - you know, the rebates decreased and the requirements increased. And what drove contractors into the space was seeing people actually being successful and making money. And so I would actually say drive demand. We're better to have a very short term and I think it will be a very short term problem of more people wanting these services than there are suppliers, which is actually a good thing because we need these companies to be profitable. And that's not a bad word. It's not a four-letter word. Profit is how companies expand and grow their workforce.
So if you build it they will come meaning if the customers are there and they can make money, the contractors will pivot on a dime and be knocking on your door. But at this point I think a lot of the contracting community has feel really - you know there's been a lot of promises made, but there's not a lot of evidence yet that this is a market that we can actually make money.
Marion: Yeah, so you actually have to have something that they desperately want, i.e. the customers to get them involved on a reliable basis and that makes sense. One other question about contractors, not all contractors do kind of the Home Performance audits. Are there any programs that have been successful in creating audit reports that then non-audit contractors can actually use to do major work without doing their own evaluation? And I guess this is true in any case. Is there - have folks been able to do a single assessment on a home and then have multiple contractors bid on that work?
And just personally, actually, I have been looking at doing work on my own home and the idea that I might not be able to get multiple bids is a little bit concerning and also very different than what the rest of kind of the remodeling industry, et cetera looks like. Usually you have multiple bids, so any thoughts on that?
Peter: You mean multiple bids for different items is what you're -
Marion: Multiple bids for the same scope of work.
Peter: Why can't you do that? Why can't you get multiple contractors to come in and do - my problem as a lender is it's hard to have multiple contractors on a single job. I would rather have one guy be the GC and pay him and have him sub out to other people because we can't - the timing issue of staging funding on a job is too difficult, but what precludes you from getting multiple Home Performance contractors to come in and give you bids?
Marion: Well, usually it's a matter that each one needs to be paid a certain amount to do that evaluation. So you don't want - and I've heard contractors say that they don't want to bid on an evaluation that someone else has done, so it's that initial cost of doing that assessment.
Matt: So I can - this is Matt Golden. One of the issues, you know, there's a trade-off, but one of the issues that we have with contractors typically with third party auditors is that we're being asked to come in afterwards and actually take legal liability and responsibility for that work, the kind of success of that work scope. And the initial audit also - so one, is we have to actually trust that the auditor who did the work knew how to write a scope of work that we could actually build and that doesn't tend to be the case. Generalities and averages they could spit out of auditing tools automatically don't really because of the diversity in the housing stock, they don't really line up with what you can physically do in an individual house.
And because we also as contractors have to look at a lot of details around attic access, knob and tube wiring, size of the gas pipe, all sorts of really specific details that make or break our projects and our ability to actually build those specific work scopes. We almost always have to come back in and re-audit the house, so it's not actually - when you look at it from just a cost perspective it's not really streamlining our workflow at all. And it's actually putting a lot of extra cost on the homeowner because they're going to pay for that initial audit and quite frankly they're going to have to build into my price, pay me to do the next audit again. And that's been my experience and I was hoping Mike Rogers would pipe in because there are some programs like in New Jersey that started out that way. Mike, are you still on the line?
Mike: Yeah, and our experience is exactly the same. We have to do the audit because we need all those details. We need to know what that attic looks like. So if our technicians didn't go up in the attic and see what the bypasses look like and count the number of can lights and the other things that Matt talked about, gas line sizes, knob and tube, asbestos, there's no way we can bid from that scope of work and feel that we're actually bidding based on the real conditions that are there and that we're bidding a job that we can actually deliver because as Matt said, we're assuming all the liability.
I'll tell you, we're one contractor that's happy to go in after another contractor's done the work. We love to charge for the audit that we, you know, we actually get paid for our time, but we'll come to your house after somebody else has been there. Generally, even if we can't pay because we want to win your business and we're going to do the audit. We're going to build the trust and confidence in the customer. Get another bid. Keep us honest on pricing, but let's make sure we're talking apples and apples.
And we just, we have not seen and we've worked with people who do audits and do audits only and they're always looking for a contractor to deliver the work. And as Matt said, we have to go back in and re-do that audit. There's just no way out of it.
Marion: And so that implies that we're having contractors do the audit and then do the work, especially at least in the business models that you two are using, Mike and Matt. And I'm wondering for Karen, how does the quality assurance of NYSERDA's program really make sure that the customer is kind of getting what they paid for, having a good experience? It is the quality that is claimed by the program.
Karen: Yeah, so we sample ten to fifteen percent of the projects that are done in the program with new contractors. We sample a higher percentage. And with contractors who have proven themselves year after year it'll be a lower percentage. And we do a couple of different things.
First of all, we verify that the work that was in the scope was actually done. We talk to the customer about their experience and then we look very closely at the quality of the work done. We make sure it was done properly and we have had cases where we've called up the contractor and said you've got to get back over here. You have a problem. Sometimes there's health and safety issues that were not properly resolved and we have to make sure that that gets done.
If we have contractors that we continue to see problems with, we put them on suspension. We don't let them participate in incentive programs. If there are contractors who still don't come around and perform work to the quality standards, they are no longer in the program. We'll remove them from the program. And that gives the customers a sense of confidence knowing that that quality assurance program is out there, that they can trust the contractors that they're working with.
I understand the frustration with not being able to get multiple bids. A customer may be able to call a contractor up and say, look. I've already had a contractor in here. I've paid for an audit. They gave me a scope of work. I'm not quite sure that I understand it or I'd like to get another bid. Would you charge me if you come in and do another audit and bid on the work?
They might be able to get some contractors to do that. Our experience is exactly what Michael and Matt said, that we don't have contractors here who will just take someone else's audit and do the work based on that audit.
Mike: And in addition to that, the vast majority of customers that we serve and this is in every market we're in, they actually are getting multiple bids. There are some exceptions, especially where we have long-standing relationships and this is a relationship based business, but many, many of our customers have and other contractors, sometimes two or three other contractors in.
Marion: Great. Well, thank you all so much. We're 15 minutes over time and we still have over 100 people on the line so I think that's a really good sign. I want to thank all of the presenters. You did an excellent job and I really appreciate you sharing your experience with the group.
I encourage folks to sign up for future webinars and please feel free to give us feedback on this and other webinars. My email address is email@example.com and if you have feedback on what future webinars around driving demand issues you might want to see I'd be really open to ideas for that. So thank you all so much.