GLRPPR Sector Resource: Efficiency Performance Contracting for Smaller Manufacturers: Progress in the Metalworking Industry
Efficiency Performance Contracting for Smaller Manufacturers: Progress in the Metalworking Industry
Efficiency performance contracts (EPCs) for small and medium enterprises (SMEs) are a marketbased approach that rewards suppliers for improving efficiency and reducing waste in SME operations through pollution prevention and energy efficiency innovations. However, prior research has shown that purchases typically covered by EPCs - such as metalworking fluids, chemicals, paint, electricity, or natural gas -- are usually too small in SMEs to support traditional EPC programs. This report addresses the possibility of combining two or more of these purchases under one EPC, or linking them to a larger purchase, such as tooling. This project assisted and monitored the progress of six Illinois SMEs in the metalworking industry as they explored the adoption of EPCs and the expansion of these EPCs to include multiple purchase areas. Results indicate that an EPC based on tooling is clearly practical and beneficial for many SMEs. SME managers expressed interest in expanding tooling management EPCs to include metalworking fluids, and developing EPCs based on energy or paint purchases. However, no EPC other than tooling management has yet been adopted by an SME participating in the project. Though the recent economic downturn is likely to focus greater management attention on cost cutting strategies such as EPCs, adoption is likely to be slow without significant assistance to reduce uncertainty and risk.
Illinois Sustainable Technology Center via IDEALS
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