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    The Equipment Replacement Proposal of the Future

    April 20, 2016
    What if you could offer your customers a system efficiency option of 57%, 78% or 93%?
    No, this is not equipment rated efficiency, but the field-measured efficiency of the operating system once it has been installed and verified in a home. Let’s take look at a sample proposal that may be delivered by progressive contractors in the near future.

    What if you could offer your customers a system efficiency option of 57%, 78% or 93%?
    No, this is not equipment rated efficiency, but the field-measured efficiency of the operating system once it has been installed and verified in a home. Let’s take look at a sample proposal that may be delivered by progressive contractors in the near future.

    Field Measured System Efficiency
    Constant advancements in our ability to field measure the efficiency of an installed system is changing our industry. The basic foundation of our profession, equipment efficiency, is being replaced by an emerging installed system efficiency score.

    The moment consumers understand equipment efficiency ratings are completely dependent on the measured performance of the installation, the game changes.

    When this happens, the equipment replacement decision shifts from the rated efficiency of the equipment to a far more important and essential number, the scored performance of the installed system.

    While equipment rated efficiency is the maximum laboratory efficiency potential of the equipment, consumers may soon make wiser buying decisions based on what they actually will receive from their qualified contractor.

    Transparency in Your Proposals
    Today customers are buying a 96% AFUE rated furnace that may be installed on a 50% efficient duct system. The final result is a heating system that is operating at a field verified efficiency of 48%. Is this a potential liability for you?

    Read a few of your proposals. Do your proposals suggest a 96% efficiency system? Or do you clearly indicate the 96% is the equipment rated capacity and in truth the final outcome of your work will be a far less efficient system? If you say yes to that question, how do you realistically do that?

    This shift in the way our customers buy replacement equipment will separate the men from the boys and the ladies from the girls in our industry. Contractors with the ability to deliver the goods by diagnosing and upgrading the installed performance of the entire system will possess a distinct advantage over those who are only willing to swap the box.

    The benefits of this new breed of proposal will include room-to-room comfort, much smaller and more efficient systems, and an assurance of increased “system” longevity.

    Equipment Efficiency Label or System Label? Might the efficiency label on the equipment soon be trumped by a system efficiency label? Could this evolution in our industry be possible?


    What Will Performance-Based Proposals Look Like?
    Here’s the meat of this new proposal based on the verified performance of an upgraded HVAC system with equipment replacement. Interestingly, all three options include the exact same equipment: a standard efficiency split system.

    Equipment Replacement Proposal

    Install replacement air conditioning and heating equipment necessary to heat and cool your home. Include system renovation tasked needed to deliver the following results:

    Option One
    Test, diagnose, upgrade and commission your heating and cooling system to deliver a minimum verified system performance of 93%....$13,500.00

    Option Two
    Test, diagnose, and renovate your HVAC system to deliver a minimum verified system performance of 78%....$10,500.00

    Option Three
    Install replacement equipment to deliver a verified system minimum performance of 57%....$7,500.00

    What May be Obviously Excluded from These Proposals?
    The rated efficiency and capacity of any equipment is a most obvious exclusion from this proposal.

    If there are any equipment variables between the three options, the needed capacity of the equipment may be reduced as the price the job increases. This is because the delivered heating and cooling capacity of the system improves with each upgrade made to the duct system and greater attention given to the commissioning process.

    As you can see, the focus of the proposal has shifted toward what the customer will actually receive, and away from an insinuated result based on laboratory specifications. The contractor is no longer a dealer, but has become the architect of the system. The customer can select the level of performance they desire.

    The brand of the equipment is not mentioned. The manufacturer and brand of the system becomes the contractor that designs and assembles the collection of components that creates the system.

    A detailed scope of work is not mentioned. Part of a performance-based sale is educational for the customer where they participate in the actual testing and diagnosing of the system. There is no need to itemize the scope of work in the proposal because the homeowner has confidence in the outcome of each option and chooses accordingly. The commissioning report at the conclusion of the job provides needed documentation the promised results were delivered.

    What May These Proposals Include That Are Missing Today?
    A performance-based proposal directly addresses the outcome of the job. The typical HVAC replacement proposal today does not. Performance is inferred by equipment-rated efficiency and the customer is left to assume the result will be comparable to that rating.

    Results are all that matter to customers. Somehow, our industry has deteriorated to the point where all responsibility for comfort and efficiency is assured by simply replacing the equipment.


    Questions Customers May Ask
    When you finally meet a customer who already has a performance-based proposal in hand offering options similar to those listed above, what will be your response when they ask you questions like the following:

    • What level of installed efficiency are you offering with your equipment replacement?
    • So, aren’t you going to test my system to discover what improvements are needed besides new equipment?
    • Are you willing and able to document and verify the results that I actually receive when the work is completed?
    • What level of performance does your average system deliver after equipment replacement?

    Unless you are prepared, it may be a bad day to be you.

    Many Other Questions
    As with most changes that have occurred in our industry, we don’t know all the questions that will follow as this new approach moves into the market. One thing is for sure, today’s customers are looking for something better. Those willing to move ahead of the status-quo will have the advantage.


    Rob “Doc” Falke serves the industry as president of National Comfort Institute -- an HVAC-based training company and membership organization. If you're into sharing your views about performance trumping rated efficiency, contact Doc at [email protected] or call him at 800-633-7058. Go to NCI’s website at nationalcomfortinstitute.com for free information, articles, and downloads.