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Should You Self-Implement Or Outsource DSM Programs?

May 05, 2021

Do stairs go up or down? What is the difference between regular ketchup and fancy ketchup? Many such questions have pestered humankind. As program administrators, the age-old question we deal with regularly is, “Should we implement in-house or outsource our DSM programs?”  The answer is almost always, “It depends.” Over the past decade, the trend in the utility industry has been to increasingly rely on third parties in program execution. In fact, some states require that all programs be outsourced. There are as many reasons to outsource as to self-implement. The issues to be considered are time, talent, cost, and how much risk the utility is willing to take. Do you have the time to build and implement a program? Do I have the internal talent and skills to execute? How vital is the relationship with the end-user customer? If a program does not perform, who accepts the responsibility?

carbon-reduction-programs-bannerProgram development takes time. It is time to think through who the target audience is, how we reach them, and how we motivate the desired behavior. Often, it is easier for the utility to acquire the program design from a consultant rather than devote the staff time to creating a new design. The complexity of the program can also make a significant difference. Is the program a straightforward high-efficiency HVAC incentive program or a strategic energy management program for market transformation? Simple is easier to design than complex. When it is time to execute, does your staff have the necessary administrative skills and talent in marketing? Good program development and management talent can come at a premium. If you cannot hire the talent from outside, then you must develop it yourself. Either of those options will require the time and money you may not have. One of the predominant advantages of in-house implementation is the control over brand and program messaging. Care must be taken to prepare the field teams of your implementation contractors to be on target with the utility brand. Then we come to the performance of the program. Who bears the responsibility for a program implemented in-house if targets are not met? With an implementation firm, you have the option to reduce payment or terminate the contract—a difficult proposition with utility employees.

Many questions and not many definitive answers.  Does it cost more to implement programs through third parties? Probably yes. It stands to reason that you are hiring a team and maybe subcontractors under them. They each must be compensated for their time, benefits, and, yes, a profit. As needed, implementation firms have the flexibility to add and reduce staff. This expertise and flexibility come with a cost.  To further complicate the issue, a new model is developing that combines in-sourcing and outsourcing elements. In this model, the utility takes a lead role in day-to-day implementation activities while relying on outsourced staff to perform the field implementation work. Whichever model is selected, consider the costs you will incur and the savings you may not achieve if programs are not well designed and executed.

Of course, it is always possible to run some programs in-house while outsourcing others. And, when it comes to tracking your portfolio of programs, consider utilizing a tracking system such as eTRACK+ that has the flexibility to simultaneously track both in-house and outsourced programs where staff responsibilities are controlled through role-based access.

To summarize, the direction stairs depend on your perspective, and fancy ketchup is sweeter and thicker than regular.

Written by - Michael Stockard
Michael Stockard is an independent consultant at Stockard Energy Advising and is a member of the Advisory Panel at ANB Systems. Michael has over 40 years of experience in the design and implementation of demand-side management programs.

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