Auditors Offering Contracting Services - Conflict of Interest?

This very question was recently posed in the BPI Group.  Is there a conflict of interest when an energy auditor also offers contracting or weatherization services to their clients?  At first glance, many would say that the easy answer is "yes". The common reasoning is that people will steer their clients towards the products they sell in order to make as much money as possible.  After all, that's what we are all in business for, isn't it?  The other answer was "it's just human nature".

Well I have a very strong opinion on this topic and my answer is a resounding NO!  I have spent a great deal of time and money to become certified as both a RESNET HERS Rater and a BPI Building Analyst.  I have also been through the Home Performance with Energy Star training.  All three of these protocols have standards of conduct and quality, as well as means to audit the results to insure these standards are upheld.  My personal goal is to help home owners solve their comfort and efficiency issues in the most cost effective manner possible.  I do this by performing the audits to the best of my ability based on the knowledge that I have gained.  After completing the audits, I give the home owners a list of prioritized improvements, similar to that of the HPw/ES protocol.  I also give them a summarized list of recommendations to improve the issues in each area of the home.  HERE IS THE KEY, I have now gained the home owner's trust because, similar to a doctor, I have given them a science based prescription to treat their home's issues.  

The one thing most home owners are going to want at this point is.......me (or you).  Who better to make sure that all the improvements are completed exactly to the specs of the audit than the person that performed the audit?  Do you really want to put all the effort into the audits only to find out that some jack leg contractor screwed everything up?  Do you really think the home owner is going to know how to manage the contractors so that the improvements are performed in the right order so one doesn't inhibit the other?  When I talk to a home owner, I tell them up front that I can perform the audit only or I can provide them with the contractors to complete the work to the specs of the audit. This gives them a single point of contact and billing. Because I have taken the time to choose quality contractors, it also assures they are licensed, insured, and actually know what they are doing.

I can certainly understand the point of those that believe there IS a conflict of interest.  Let's face it, there are plenty of unscrupulous people out there who's only goal is to line their pockets with as much cash as they can squeeze out of every sucker they can find.  What is unfortunate is that so many of us have been taken advantage of by someone like that, that we become cynical.

Remember the old saying "When life hands you lemons, make lemonade"?  We are being given a tremendous opportunity to go out there and take this industry by the horns and steer it in a direction where the good guys win. Let's prove to people that this industry can be run by educated people that have their client's best interests at heart. The more of us that stand up for our industry, the more we expose the bad guys out there.  While we are doing that, what's wrong with trying to earn a living for ourselves and those associated with our businesses (employees, vendors, etc)?  As long as you are up front with your clients and keep their best interests at heart, I don't see a conflict of interest at all.

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Tags: audit, conflicts, economics, energy, interest, of, standards

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Comment by Jon LaMonte on February 14, 2011 at 7:15pm

Bob

I charge the same amount for the audit whether I am doing the improvements or not.  I tell the customers that up front.  As a matter of fact, when I perform a HERS rating on new construction, RESNET requires that we provide a disclosure sheet on every job because we are being paid by the builder (not the eventual home owners) to perform the rating.

Presuming is like assuming, and remember what assuming does.  

FYI, the homeowners are glad to pay it because in the end, I am going to save them money.  Many of the situations I go into are where the homeowner is trying to avoid spending $15k-$20k on new windows.  And 9 times out of 10, replacing the windows won't fix there problems.  

For example, I recently completed a project on a home that started out with an audit.  The home owner swore he needed new windows and insulation.  Within minutes of starting the blower door, we found out the windows were fine.  His real problem turned out to be his ducts, a couple of chases and knee walls in the attic, and zero air sealing.  So instead of spending $15,000 on new windows and still having the same problems, he paid me $450 for the audit and the improvements cost $2,000.  He was very thankful and happy that I handled the project so there was no question of whether or not it was done right.

I would be careful about accusing people you don't know of committing improprieties.  I take great pride in the fact that I am helping home owners making their homes a more comfortable, healthy, and energy efficient place to live.  I also don't think that there is anything wrong with earning a living do so as long as I keep the home owner's best interests at heart.  I am sure as hell not going to work my butt off creating a great plan to help the home owner so some contractor can come in a screw it up or even worse, screw the home owner. Just look at the posts I made to Tamasin's comments and that should say it all.

Comment by Bob Kretvix on February 14, 2011 at 6:13pm

It doesn’t matter whether the homeowner likes you or trusts your recommendations, or even that you’re highly certified or trained.  The conflict of interest comes from the motivations when selling the audit and recommendations.  I presume that most of you who say it’s not a conflict sell the initial audit significantly cheaper than the actual hours you put into the audit, possibly even give the audit for free. (I can’t help but notice though that everyone saying it’s not a conflict make their real money by doing weatherization upgrades.) That means you are motivated to sell something after the audit to recoup that time.  If not, why not sell the audit at full cost in the beginning?  It’s because the audit is the hook to get in the door to sell other things like the radiant barrier or more general weatherization services. 

 

I’m sure you would agree that a doctor giving away free (or even very cheap) comprehensive medical exams in order to make money doing some surgical procedure is a conflict.  What’s the difference?  The doctor is very skilled and highly trained also, and hopefully he's trusted by the patient as well.  It’s the motivation for selling the cheap medical exams or energy audits that concerns me.  When times are good, it may not have any real impact because there may not be as much financial pressure to sell services after every audit.  But when times are slow the strong potential is there for selling upgrades that are not really needed in order to make money and recoup the time spent giving away the audit, or just to sell period.  The only way I could possibly overlook this as conflict is if the true value of the audit were sold at its real cost up front so there is no need to make up the money by selling something else afterwards.

Comment by Jon LaMonte on February 12, 2011 at 11:30am
To finish off, the guys at the coop aren't bad guys, they're just trying to help. Unfortunately they don't have proper training. The insulation sales person isn't a bad person, she had good ideas, she just doesn't have the building science knowledge we do. I can't fault her for trying to make a living either. (Although the margins are a bit high).
So what am I doing about it? I am going to visit the coop and the insulation company and offer them advice, so they don't look like fools down the road.
Comment by Jon LaMonte on February 12, 2011 at 11:22am
Another caveat to this story.
I got a call from a home owner asking me about audits. She was told by her electric coop that they give free energy audits and on the website there is a pic of a guy doing the blower door test. Only problem with this is that the energy audits are a visual only, take 30-45 mins, and are performed by paid employees from the company that have no certifications what so ever. How do I know this, I am a preferred energy audit contractor for this very coop. Once she found this out she was willing to pay me to do a full audit.
Caveat part 2 - So I go to the house and it turns out that the insulation company that I contract with on my jobs had already been there and quoted her on insulation. The problem is, a lot of what their sales person told them was wrong. Not only that, but the homeowner could go through me for the work and it would actually be cheaper.
Comment by Jon LaMonte on February 12, 2011 at 11:13am
Tamarin, as I said in my earlier post, we can only do what we can do. That is why it is up to those of us that are doing this for the right reasons have to make a stronger effort to find more like us. Then an even bigger effort needs to be made to get our message out to the home owners. I hate to keep using the term, but there are a lot of douche bags out there and I am going to do what ever I can to expose them.
Comment by A. Tamasin Sterner on February 12, 2011 at 6:12am

Yesterday, at a Home Show, three exhibitors were offering free energy audits.  All three told me they were BPI Certified BA Professionals.  One knew what she was talking about but the other two didn't.  Both were selling the foil type radiant barriers, among other "green" products, such as roofing and gutters! 

They proudly announced they were certified, but when I asked by what entity, I was told "the state".  When I pressed on, they said BPI and then "It's just a piece of paper.  Really easy"  They called a thermal imager a "heat gun" and couldn't answer any questions I asked about air sealing. 

This worries me.  Less as a concern for the impact on my business, and much more concerned about the impact on their customer's homes (or lack of energy-saving impact) when they install measures that are worthless, at the least, or dangerous at the most.  And, what a waste of money.

I'm thinking of having a booth that advertises "Sign Up Here for a NOT Free Energy Audit" and see what type of conversations I can get going about real energy audits.

Comment by David Willson on February 10, 2011 at 9:11am

I'm with Jon on this one and, like him, I feel strongly about it.  Perhaps that's because I make my living doing the work that I find while I do an audit, but it's also because I believe in and trust the value of 3rd party verification.  Before I contract with a homeowner for any work, after an audit, I let them know that there is a chance that they may be called by a 3rd party, that a certain percentage of my jobs get a 3rd party audit, and that my certification and ability to stay in business relies on my integrity and honesty.  I don't tell them this just so they trust me.  I tell them because I trust the system we have set up.

I see a significant difference between Home Energy Auditors and Home Inspectors: Inspectors don't get checked up on whereas I do from HPwES, California's EUC, etc., and the $20 or so apiece that I have to add on to the client's cost for a 3rd party verifier is small in the big picture.

Yes, there are a few 'unscrupulous' contractors out there but I don't know of any and they aren't affecting my business.  I also am HERS II Whole House Rater and Home Performance Contractor, BPI Analyst, Shell, and Multifamily, Green Building Professional, yada yada.  And no way will I put my huge investment in training, equipment, and my business get jeopardized by trying to fake results.  As long as there's real enforcement out there, I trust our system.

Comment by Jon LaMonte on January 19, 2011 at 3:05pm
Kent, I agree with you on both parts. Actual market research has proven that more people are looking towards companies that can offer multiple services. There is a partner company that I deal with and they use a business guru. His specialty is pulling failing companies out of the ashes and making them successful again. His own research has shown the same as the others. His biggest client is Mercedes, but he works with several Fortune 500 companies, so I have to say he is more than credible.
Bob, As far as home inspectors go, I believe the refi boom may have prompted that move. There were so many of them that were poorly trained and were only out to make a buck so there was a lot of hanky panky going on. I have several friends in the home inspection industry. The only other answer I have is, different industry, different rules. Not all similar industries are governed alike.
As far as the rest goes, I am a good person and I take in pride in what I do and how I help my clients. I am not going to cut off my nose to spite my face because of a few douche bags out there. I am providing a service that my customers actually want. Like the research shows, they want one person that can deal with a multitude of services, or a least manage the projects for them. One bill, one ear, one voice.
Comment by Kent Mitchell on January 19, 2011 at 2:04pm

Only a few bad contractors ruin the reputation for the majority - good contractors.  Do we let the bad people dictate what we can & can't do?  Apparently so.  In many areas of the country & especially in this economy, it is necessary for us to do whatever work we are capable of in order to keep paying the bills - many need to offer a variety of services to keep busy. Being versatile in our offering is key especially in the more rural areas.

Another factor here: The 3rd & 4th party quality system simply drives up the costs of legitimate business people - making it easier and possibly necesssary for the unlicensed or non-certified to do business. 

This is what it all boils down to - It is not a matter of conflict of interest - it is a matter of character morals, trust and costs.

Comment by Bob Kretvix on January 19, 2011 at 1:28pm

Jon, I'm sure that there are many honest people like you out there that do the right thing.  Many are part of Home Energy Pros.  But there are an awful lot of contractors out there that are not.  I have seen and been told about experiences from homeowners, even for BPI certified auditors, who were not so upstanding.  Somehow they get away with it anyway (hopefully not for long).

 

No one answered or even addressed my basic question last week about the similarities between home energy auditors and home inspectors. How is what we do different than a home inspector in this respect?  The home inspector supposedly knows the best means to help their homeowner customers too.  Yet ASHI and many states prohibit home inspectors from doing repair and renovation work related to the home inspection. If the professional society of home inspectors feels it is a conflict, how can our industry justify being different?

 

Conflict of interest means putting yourself in a position to have your results and judgments questioned just because you have something to gain from those findings.  It doesn't mean that everyone acts on those impulses.  But I believe this conflict harms our industry in general.  I have been told as much by disgruntled homeowners who paid for work that wasn't necessary, or got recommendations for improvements solely because that was the business of the auditor, such as HVAC upgrades.

 

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