Spending to Save

December 9, 2005December 16, 2009 1303 Views Interior Surfaces

Performance contracting cuts costs for maintenance.
By Alexa K. Apallas

While corrections agencies are adequately forecasting their needs for future new prisons, according to Charles K. McGinnis of Johnson Controls Inc., they are failing to plan for the refurbishment of existing facilities.

Currently, there are about 100 performance-contracting projects for the corrections industry each year, McGinnis estimates, and Johnson Controls works on about 35 to 40 of those.

McGinnis thinks it’s hard for agencies to justify to taxpayers that aging prisons and jails must be repaired. “I think it's easier for them just to say, 'Hey, we're short on space; we've got to build a new facility' that it is to say, 'Hey, these 10 prisons that we have all have systems that have deteriorated to the point where their costs of operations are ridiculously high. Can we have $50 million to replace this stuff?',” he says.

A new contracting system, called performance contracting, is helping corrections agencies refurbish their facilities and save money at the same time.

Here's how it works: A corrections agency can select a partner through competitive procurement to analyze all of the facility's needs and develop a cost-savings profile from their cost of operations. Then, a performance contractor will guarantee that the cost savings will offset the costs of replacing the aging systems. The agency usually does not have to pay money up front; instead, the project is financed out of the existing operating expenses budget.

HVAC Replacement Example

For example, prison administrators might think it will cost too much to replace an old HVAC system. However, an HVAC system that's not running properly creates a huge energy drain. It may even break down repeatedly, forcing personnel to waste time and money trying to fix it. A performance contractor could analyze the situation and determine whether a new high-efficiency HVAC system would create enough energy savings to allow the prison to make up the cost of replacing the old one.

For instance, if an agency is budgeted to spend $10 million on utility payments for the year, a performance contractor can analyze the situation and guarantee the after improvements are made, the facility will only need to spend $8.8 million. Then, $1 million can be spent to lease more energy-efficient equipment, and the facility will still be $200,000 ahead.

McGinnis says that frequently, administrators will see savings in the very first year.

“[Agencies] get guaranteed performance, and they get an annual report that shows what their utility costs and operational costs would have been without the replacement,” McGinnis says. He estimates that 16 states are in various stages of implementing performance contracting.

Corrections facilities can save on operational costs by upgrading a variety of systems, such as HVAC, lighting and water usage. The replacement costs can be big, but so can the savings. The Utah Department of Corrections, for example, undertook an $11.5 million refurbishment project at its Draper facility and paid for the project entirely out of cost savings.

In phase one, it focused on electrical distribution system maintenance, a lighting retrofit, solid waste handling and water efficiency, among other things. In phase two, it focused on the geothermal system and steam system upgrades. Because the improvements helped the prison run more efficiently, the energy savings offset the project costs, even the extra costs that Johnson Controls built in to pay for having an escort to enhance the security on the prison construction site.

McGinnis says that while performance contracting has been used for 15 or 20 years in the education industry, correctional facilities are just beginning to catch on to the benefits. Nearly 80 percent of correctional facilities may be past their prime by 2014, meaning that refurbishment and performance contracting are poised to become an important future trend.

Overcrowding Nationwide Forcing Different Solutions

Overcrowding continues to plague jail and prison systems throughout the country. As inmate populations continue to grow, correctional authorities have been forced to address the problem.

For some, relief takes the traditional route of new construction:

Construction continues on a $9 million addition to the Jameson Annex, a maximum-security facility in South Dakota. The expansion, which will hold 192 beds, is scheduled to be complete April 2006.
An influx of inmates has caused County Commissioners in Indian River County, Fla., to increase a planned jail expansion to 384 beds, which will cost $21.2 million. The original plan called for 256 beds, with a price tag of $12.9 million. The additional cost will be paid with a 1-cent sales tax increase.
Officials in Lucas County, Ohio, are discussing the possibility of building a new jail could that could house up to 1,000 inmates. The new facility could cost up to $60 million. The county's current 28-year-old jail is operating over its 419-inmate capacity, with a population that regularly exceeds 500, according to Sheriff James Telb.
In Kentucky, 27 current and former inmates at Campbell County Jail are suing because of overcrowding. The facility opened in 1991 with the capacity of 135. In April, up to 238 inmates were housed at the complex. To help alleviate the problem, new laundry and kitchen facilities are being built to create more bed space. A new 256-bed facility is planned for a long-term solution.

For other localities, getting relief from overcrowding has to take a different tack:

A one-year variance was granted by the Texas Commission on Jail Standards to allow 46 more beds at Grayson County Jail to help the facility cope with overcrowding. The variance was granted with the condition that the county would investigate ways to expand the 287-bed jail.
If facilities are not expanded within the next two years, officials may be forced to release inmates early in Utah County, Utah, according to Sheriff James Tracy. Efforts to squeeze inmates into the county jail are exasperated and 100 work-release inmates may be released with global positioning ankle monitors to track movement.
- Nearly $107,000 in unbudgeted money is being spent to send prisoners from East Baton Rouge Parish Prison to other facilities in Louisiana. The East Baton Rouge facility has had more than 100 prisoners over capacity at times this year.
- County commissioners in Seneca County, Ohio, are seeking a waiver from the state that would increase the proposed capacity of an addition to the county jail from 48 to 60 inmates. Sheriff Tom Steyer said 48 beds would not be enough to accommodate a growing number of local inmates and immigration detainees.
Officials in Macomb County, Mich., are spending $503,500 for a design and consulting team that will create plans for a $50 million jail that will be built over the course of three years. Nonviolent inmates have been released early from the current facility due to overcrowding.