American City & County magazine recently published an article detailing the misadventures of Jackson, Mississippi’s attempt to upgrade their water meter and billing systems after signing a contract with Siemens, Inc. The contract (signed in December of 2012) was supposed to generate 120 million dollars in guaranteed savings. However, incorrectly installed water meters and syncing issues with the city’s wireless networks led to residential customers being heavily overcharged while some industrial customers never even received a bill. The city’s attempts to rectify these problems led to increased operating costs and no savings, despite Siemen’s guarantee.

Unsurprisingly, the City of Jackson sued Siemens and local subcontractors over the debacle. After eight months of litigation, a settlement was reached, and Siemens reimbursed the City of Jackson for the entire amount of the original contract—just shy of $90 million. But, while this may seem like a win for the city, the Jackson Free Press reports that the legal battle accrued $30 million in attorney fees, which devoured nearly a third of the settlement amount that would’ve gone back to the city.

Jackson is doing their best to fix the mess they found themselves in, but this should serve as a warning that contract “guarantees” aren’t always as promising as they appear. Given the cost Jackson has paid in terms of time, legal fees, and angry customers, it should come as no surprise that such contracts could result in tremendous pain for smaller municipal and county utility companies. Accordingly, we thought we should share American City & County’s tips for what to look for when reviewing energy performance and savings contracts.

• Do not let contractors talk your entity into expanding the scope of your priorities. You know what your entity truly needs, they don’t.
• Beware of guaranteed savings provisions. American City & County notes that these provisions contain multiple components and may not specify recoupment in dollar amounts. That means your entity will be responsible for any savings-related shortfalls that occur.
• Ensure water meter system upgrades will work with the wireless network your entity uses for billing. New systems may work in theory but have been known to fail in the field.
• Verify your savings. It is recommended that your entity require contractors to pay a third party to test and track project improvements and savings rather than the contractors themselves.

Utility infrastructure upgrades can be of great benefit to your entity’s employees and customers. However, there is a certain amount of risk involved as well, especially when it comes to “guarantees”. Remember to do your research and follow these tips before signing on for any sort of contracted upgrades to your entity’s current system.