Author: Sarah Morton
Before you start setting up a bulk-buy program, it's important you manage the risks. There are many ways to do this, but as a starting point, you should have appropriate insurance in place, and the support of professional legal advice.
1. Insurance, contracts and legal advice
Make sure you have professional indemnity and public liability insurance that fully covers the activities you're undertaking. Also, check your suppliers insurance is adequate and what it covers. If your bulk-buy group is taking a hands-on role, you'll need to ensure there are no gaps in the insurance cover between the various parties.
We recommend you take professional legal advice, including vetting of contracts, insurance and disclaimers. If you're an incorporated body, this will protect the group executive from personal liability.
Any contracts should include penalty clauses for serious non-compliance of the supplier (such as changes to installation price, quality, installation timings or access to incentives) and penalty clauses for customers (for example, for late payment). Disclaimers may include details of why you choose a particular offer and a statement saying the bulk-buy organising group are not recommending a particular supplier and that you encourage prospective participants to do their own research.
Ensure you have a risk assessment framework in place. The more roles your bulk-buy group takes on, the more risks will be inherent. For example, if you're involved in the supply chain, freight insurance and fire and theft cover may be worthwhile. If you're involved in financing, consider credit risk.
Remember to take advantage of the experience of other bulk-buy groups. They may be able to provide examples of contracts and disclaimers that you can use as a reference.
2. Provide clear, transparent information
Information on your offer should be clear, concise and easy to access, and prospective participants should read it before they join the bulk-buy. Outline any sources of uncertainty in the offer, such as government incentives.
Make sure any paperwork relating to the offer (including contracts) clearly states the price, its period of validity and what it does and doesn't include. You should also supply specific information on any variations to the standard offer, such as:
- potential price changes - possibly due to fluctuating exchange rates and Renewable Energy Certificate (REC) prices
- non-standard installations - in the case of solar PV this may include houses with flat or tiled roofs.
The reason for this is to manage expectations and ensure suppliers meet their commitments to price and delivery dates.
3. Government legislation and incentives
Understand any relevant regulations (including Australian standards) and state and federal government incentives (including feed-in tariffs, rebates, RECs and energy efficiency certificates). Also, be aware of any relevant local government heritage and development laws. And remember, while incentives may seem guaranteed for a certain period, they can and do change - often without notice. So stay in touch with new developments and be prepared to respond if necessary.
4. Due diligence
When you promote a certain supplier or product, it's important to do ‘due diligence’ to minimise your risk exposure. This involves investigating the credentials and capacity of the supplier, including:
- their record within the community and the industry - their reputation for reliability, service and quality
- the equipment they propose. Does it meet Australian standards? What warranties are in place?
- accreditation or registration. Is it relevant and up to date?
- proof of current insurance cover. What's the value of the cover?
- their workload and capacity to deliver. Do they have experience with bulk-buys?
5. Managing resources, service and delivery
This varies from moderately simple and low risk, to complex and high risk, depending on the roles and responsibility taken by the group. However, even a model where the bulk-buy group isn't involved in administration, equipment sourcing, delivery and installation, it still takes a lot of time to communicate with group members and suppliers and to fully assess and choose the right bulk-buy offer. Group members will expect a quality service regardless of who's responsible, so it's essential the group has the necessary resources and skills.
Groups that take a more hands-on approach often have experience from a previous bulk-buy.
6. REC pricing and exchange rate variation
REC prices can fluctuate wildly and exchange rates are quite variable. So make it very clear whether the offer is independent of these factors or, if not, how it may vary.
Bulk-buy groups attracting fixed offers are more likely to be those with high installation volumes. Price guarantees vary - for example, one may involve a contract where the system price only decreases (if the REC price increases), meaning such an arrangement carries a lower risk.
More information
For resources to help groups assess risk and governance go to Governance articles.