Launch — through a public-private partnership — an intermediary that sits between building owners (buyers) and installers/manufacturers (sellers) and supplies the transaction infrastructure the retrofit market lacks. By taking over a narrow set of functions — customer discovery, scoping, pricing, and contracting — it cuts project cost and complexity so far more owners adopt efficiency and resilience measures. In effect, an eBay / AirBnB / NYSE for building decarbonization.
The market barely functions: high transaction costs, low trust, long and opaque price discovery, inconsistent prices for similar work, and mostly one-off transactions that leave owners no way to penalize poor performance. Many owners who start abandon midway — even where subsidies exist.
Construction firms set the price through information asymmetry and hard-to-compare bids. Their asset-light model — a survival response to boom-and-bust — discourages technology investment, rewards billable labor hours, and keeps adoption low.
Cost squeeze: construction wages have risen at or above inflation for decades while productivity has stayed flat (value-added per worker ~40% lower than in 1970). Upgrades keep getting less affordable.
Functions that advanced value chains rely on — continuous cost reduction, packaging, customer discovery — are simply missing here. Appliances get better and cheaper every year; retrofit costs move the wrong way.
The scale is large: roughly a third of occupied U.S. homes had repair needs in 2022, with an estimated ~$149 billion to address them — demand that stays stranded while the market works this poorly.
The solution: an intermediary as critical infrastructure #
Assumes a narrow set of functions now scattered across the value chain: customer discovery, scoping, pricing, contracting.
Single point of contact for owners, presenting all-in-one offers — equipment + installer + financing through a partner (the intermediary takes nothing from the financing).
Segments buildings and pools demand; uses bulk procurement to win better pricing, terms, and delivery times.
Standardized contracts and packaged solutions; faster, transparent price discovery; consistent information for owners.
Forcing mechanism: contracts require proven, cost-reducing technologies and practices — a lever absent in the market today.
Moves the owner from price-taker to price-setter — issuing a standard price sheet backed by pipeline and procurement volume.
Builds trust: consistent information, performance risk shifted off the owner, public oversight, and a way to penalize non-performers.
Benefits — buyers: faster, transparent, consistent pricing; lower cost; reduced transaction (and some performance) risk; simpler selection and financing.
Benefits — sellers: predictable cash flow and demand; ability to hire longer-term and specialize; lower customer-acquisition cost.
Core function = a contracting entity / transaction facilitator. Everything else — takeoffs, segmentation, standardized offers, quality control, customer acquisition — serves that one function.
Organization: two layers — a lean management team plus core functions delivered via performance-based contracts with specialist firms. This gives flexibility and removes dependence on any single firm (swap a non-performer; run initiative-specific contracts by region or measure).
Cost structure: most administrative cost passes through to the public sponsor (~90%, not all — so the intermediary keeps an incentive to economize). Lowers the capital raise and the fee to owners.
Revenue — a modified cost-plus model: a small fee on transaction size (e.g., ~3%) with a fee ceiling, so there's no incentive to inflate project cost — plus a bonus from the public entity for cost reductions below a reference price. Value won through procurement flows entirely to the owner (the Costco model), unlike ESCOs whose high return hurdles push fees up.
Illustrative: on 1,000 heat pumps across 10 buildings with a $15,000 reference cost, the allowed fee is capped at 75% of transaction size while the intermediary negotiates the installed price down to $10,000. Its revenue is the capped ~3% fee plus a bonus for the $5,000 per-unit reduction — it profits by cutting cost, never by inflating it.
Superseding agreements (Master Services Agreements) with construction firms are signed first — fixing pricing practices, standardized owner contracts, change-order limits, required technologies, and the intermediary's authority over scope. The construction firm keeps all construction risk and liability.
Delivery sequence: design a standardized measure → segment buildings → set a reference price → size demand → take competitive bulk bids on one platform → embed financing → present to the owner (the installer is paid by the intermediary, not the owner) → independent quality control.
Public capital for decarbonization is finite; building this transaction infrastructure expands the market with minimal public investment, while the public-private structure enables strong oversight and customer protection.
It ends the one-off-transaction problem by becoming the trusted, repeat counterparty for both sides — and shifts owner expectations to the positive.
In a qualitative Irrational Labs study, 90% of building owners responded positively to an entity serving these functions.
Single-purpose charter. Track annual pipeline $, cost reduction vs. reference, cost variability, price-discovery time, contracting time, and market-size expansion.
Risks / mitigations: performance → insurance; inventory → conditional purchase agreements; construction → the provider carries it; pipeline shortfall → pass-through costs + subsidies + performance contracts; political → multi-year public commitments; public-sponsor overreach → keep metrics market-oriented.
Conditions for success: full discretion to fire non-performers; compensation tied to volume and cost reduction; arm's-length from financing, verification, and construction (no manufacturer/provider revenue; never an installer); an independent verifier reporting to the state energy office; access to building-data platforms for product-market fit; don't split the market across competing intermediaries; don't restrict it to LMI-only.
The full draft also includes appendices on the construction cost squeeze, the unmet needs of building owners, and the sources of transaction cost.
Strategy Notebook
Establishing missing transaction infrastructure for building retrofits · Summary of the reviewer draft · Confidential — for review only
The proposal #
Launch — through a public-private partnership — an intermediary that sits between building owners (buyers) and installers/manufacturers (sellers) and supplies the transaction infrastructure the retrofit market lacks. By taking over a narrow set of functions — customer discovery, scoping, pricing, and contracting — it cuts project cost and complexity so far more owners adopt efficiency and resilience measures. In effect, an eBay / AirBnB / NYSE for building decarbonization.
The problem #
The solution: an intermediary as critical infrastructure #
Benefits — buyers: faster, transparent, consistent pricing; lower cost; reduced transaction (and some performance) risk; simpler selection and financing.
Benefits — sellers: predictable cash flow and demand; ability to hire longer-term and specialize; lower customer-acquisition cost.
How it's built (private operator) #
Public benefit #
Governance, metrics & risk #
The full draft also includes appendices on the construction cost squeeze, the unmet needs of building owners, and the sources of transaction cost.