Last week, we published an article identifying some Things That Can Go Wrong On A Green Building Project. To prepare for these potential problems (and others), here is a list of things you should keep in mind when contracting for a green building project:

1) Define Things: Terms like ‘sustainability,’ ‘green certification’ and ‘high performance building’ do not have any universal meanings. Clearly define the goals of the building and project. Consider adopting a rating system, and specify the system and the version.

2) Designate a responsible party for certification: A green/LEED coordinator can go a long way, designating someone who will be responsible for coordinating all parties, analyzing the work to ensure compatibility with the rating system, and put together all the paperwork required on the project.

3) Responsibility Matrix: Create a “matrix” of who will be responsible for what. This will at least mitigate the finger-pointing if or when something goes arwy.

4) Payment Issues. An especially important consideration for contractors: Be cautious about tying certification with substantial or final completion. Certification may never come, but in all cases, it could take between 6-18 months after substantial completion to get certified. That’s a long time to have money withheld – and this will create payment problems with subs and suppliers. If nothing else, make sure your contracts up and down the chain have the same payment timeframes and expectations.

5) Know Vendors and Products. These technologies are new and can be complex. Don’t subscribe to a technology without investigating. Get to know the products and manage the expectations of the owner. For a discussion of how these new green technologies can present problems, see Paul Beers’ guest post on Chris Hill’s Construction Law Musings.

6) Consequential or Specific Damage Waivers (LDs). Damages for failure to certify or for failure to meet certain benchmarks may be murky. Consider waiving consequential damages, and call out these specific expectations and considering waiving those damages or presenting LDs for them. For a discussion about whether a consequential damage waiver is effective for green building damages, see this blog post: Is Failure To Achieve LEED Certification Consequential Damages?

7) Flow Down. Make sure your obligations up the chain, go down the chain.

Related articles

• Is Failure To Achieve LEED Certification Consequential Damages? (constructionlawmonitor.com)
• Examples of Things That Can Go Wrong on a Green Building Project (constructionlawmonitor.com)
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Green Building is all the rage in the United States. Whether it be a LEED project, or just a promise to the property owner to build or make a building more efficient and sustainable, as 2010 passes onto 2011, those in the construction industry are quite likely to run into projects with at least some green elements.

When bidding, contracting and working on these projects, it’s important to know what might go wrong. After all, if you have no idea what things can go wrong, you have no way to prepare for them (or charge for the extra risk).

There’s no way to enumerate all of the risks…but here are a few to get you thinking about it:

1) Vegetative Roofing: In some areas, these so-called “green roofs” are becoming popular. The most ambitious green roof program is likely found in Portland, which we’ve discussed in a previous post. Essentially, vegetation is planted on the roof of a building to better insulate it, reduce the heat island effect in the area, and better control water runoff. The downside? Well, it’s quite a bit heavier than a standard roof, and the construction and design of the structure should accommodate the extra weight.

2) Rainwater Runoff: Plan on channeling rainwater into storing containers to use within the property as waste water? Be sure to contract with someone with experience, because the control of rainwater is different than the disposing of it through ordinary guttering systems.

3) Greenwashing: It’s popular to be green, and there’s an absence of real regulation prohibiting businesses from advertising its products and services as “green” – which, really, is undefined. So, when incorporating a service or product into your technology, make sure you select vendors, products, services and the like that will live up to their marketing.

4) New, Untested Technologies: Even the stuff that isn’t fraudulently labeled green may still present problems, as many technologies advertised as green may simply not perform as expected, since the technologies and products are new and haven’t been tested over time. The lesson? Keep your vendors on the hook for promises made by their products, and be cautious about relaying promises that are uncertain.

5) Human Interference: Green buildings and green technologies are not insulated from human intervention. Especially considering energy performance, the human factor can be great – as humans are the ones that will control energy use (such as using more than the allocated energy amounts), and generally doing things that can affect energy use (covering windows, for example) .

6) Certification Problems: Rating and certification system (like LEED) are not easy to guarantee. The certification decision is left to a third party, certification can be taken away, and certification can be challenged. Don’t be too concerned – many projects work toward a certification and get it. But know the road ahead.

Related articles

• Is Failure To Achieve LEED Certification Consequential Damages? (constructionlawmonitor.com)

LEED projects are hotter than ever, especially with the amount of public works projects being funded by the Stimulus package. As more and more LEED projects get underway, more and more mistakes occur. Unfortunately, mistakes all too often lead to disputes and litigation.

I Don’t Get It? LEED What?

Here is the readers digest explanation of LEED projects.

A property owner or public entity wants to construct its project to be environmentally friendly. In doing so, it can seek a certification from one of many organizations – one of which is the U.S. Green Building Council, who certifies a project as a LEED project (Gold, Silver, Platinum, etc. – depending on how green it is).

Seeking certification carries certain benefits (i.e. PR, tax credits), and in some circumstances certifications are required.

Certification is achieved by meeting two types of goals.

On the one hand, the project meets the goal of saving energy in the construction process. This is done by purchasing materials manufactured locally (to prevent the environmental price of long-range delivery), recycling materials, creating a job site that meets debris and water run-off requirements, etc.

On the other hand, the project meets the goal of saving energy while in use post-construction. This is done by using energy efficient appliances and lighting, planting trees and reducing the “heat island effect,” enhancing the quality of life of those who will spend time in the building, etc.

The LEED certification is achieved by collecting points. For each sustainable goal met by the project, a point is awarded. A project must accumulate a number of points for certification, with the level of certification increasing with the collection of additional points.

Those administering LEED projects spend a great deal of time planning the construction project to ensure that the proper number of points are accumulated�and sometimes, it’s a close-call.

How One Contractor Can Hurt A Project’s Chance At Getting LEED Credits

After the planning phase, work on the project begins, and the property owner or architect will depend upon each supplier and subcontractor to performing its work or delivering its materials to qualify for LEED credit. Work performed or supplies delivered incorrectly can easily result in the loss of a LEED point.

Let’s take the example of concrete.

The LEED system requires concrete used in a parking lot or a rooftop to be a certain color to achieve LEED credit (LEED credit 7.1 requires concrete to meet certain color requirements to reduce the “heat island effect” for example).

Let’s say that the concrete subcontractor is a bit asleep at the wheel, and pours the wrong concrete. The concrete solidifies, and the owner/architect doesn’t notice for a few days (if not later!) that the concrete is incorrect.

That LEED point is lost.

The LEED Point is Lost�.but Now What?

This is a very concerning question for the construction industry, and many legal experts are at a loss in predicting just how this will play out in the courts. The problem is more complex than it seems at first glance.

Let’s assume that a subcontractor or supplier actually was required to perform in a way that would qualify for LEED credit, and that it failed to do so for reasons that are 100% its fault.

The next question is tough: What are the damages? In answering this question, let’s look at two scenarios:

Scenario 1: The LEED Point is lost, but the LEED certification is still achieved.

This is entirely possible. While the construction planning often cuts LEED certification points close, there is usually at least some cushion between the points a project should get, and the points it is required to get. So, in theory, a subcontractor or supplier can completely mess up, the LEED point can be lost and the project may still get its certification.

If this happens, did the owner/architect sustain any damages? The answer is�.possibly.

In some instances, the idea behind a LEED point is not just to get a certification�the owner may also be interested in energy savings. Let’s take our concrete example again – if the correct concrete was poured, this could theoretically cool off the project’s premises. This may result in lower energy bills during hotter months.

While the failure to gain the point may not have cost the owner certification, it may cost the owner thousands of dollars in energy savings over the coming years.

Other types of examples, however, may yield more complex results. There may not be any calculable damages for accidentally failing to buy locally manufactured materials, for example. If its the same materials – just manufactured somewhere else – there may not be any damages beyond the loss of a LEED point.

Scenario 2: The LEED point makes a difference

What if the LEED point costs the project’s LEED certification? What damage is sustained?

Calculating these damages may be more realistic in some circumstances versus others. If the property owner sought certification because it was required, or because of a desired tax break�.the damages can at least be quantified. If, however, the owner was simply doing it to feel good, or for good PR, there will be much debate about just what – if any – monetary damages were sustained by the LEED failure.

Concluding

In the end, one issue that owners must remember is that they will have the burden at trial in proving their damages, and likely being required to prove it by a preponderance of evidence. Calculating the cost of losing a LEED point or the loss of theoretical energy savings can be quite tough. With that in mind, owners may want to consider liquidated damages provisions for these types of a defaults�.and those signing contracts with owners or GCs may want to be weary of the same.

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The U.S. Green Building Council�s LEED� has recently released the newest in its line of guidebooks. LEED (Leadership in Energy and Environmental Design) is the foremost authority in green building construction, conservation and sustainability.

Then new guide book is entitled �Green Office Guide: Integrating LEED Into Your Leasing Process� It is a comprehensive guide on how to incorporate green building techniques into the landlord / tenant contractual relationship.

Previously LEED has published guidebooks covering green new construction, renovations and other construction areas. This is the first time they have ventured into the lease contract. This guidebook can be very beneficial for those landlords who want to require tenants uphold green standard when occupying a property.

Katie Rothenberg, of the Green Building Council comments on the guidebook: �It is written to provide critical background content as well as functional tools (including lease language and site selection checklists) that can be used throughout the transaction.�

So if you are a tenant, whether it be your home or business, or a landlord and sustainable, renewable, green practices are what you are looking for then this guide book can be found at the Council�s website.

GreenBuildingElements.com recently posted a blog titled “Are There Any Risks in Building Green?” The post mentions a survey conducted by the Marsh Green Building Team finding two things that play into builders� reluctance to construct green projects: financial concerns and legal concerns.

Examining the Legal Risks

We’ll talk about the legal concerns (& have in the past), which the post summarizes as follows:

The idea of jumping into a supposedly �green-built� project, and then failing to reach LEED certification levels expected by others, is unnerving to think about. There�s also the worry in many constructions that standards of operation and new design features – especially those not covered by the insurance market � will fall short because contractors won�t be willing to take on those things.

Let’s face it – ordinary construction projects present enough legal challenges. Throwing in unfamiliar green certification process programs and novel green technologies increases risk. Here are some of the risk factors mentioned by the Marsh Green Building Team report:

• Not obtaining the LEED certification expected;
• Determining the appropriate standard of care used by green builders and professionals;
• The competence of team members, subcontractors, laborers in green building technologies and requirements;
• Untested contract language;
• Concerns about contractors taking design responsibilities not covered by insurance.e

Managing Risk

The existence of risk should not stop owners, builders and designers from participating in a green building project. As the Marsh Team analyzes and the Green Building Elements post discusses, there are many possible solutions for the legal risk factors identified.

Plus, as anyone in the construction industry knows, risk is absolutely everywhere. A builder is in the business of managing and mitigating risk…and it’s possible to do this with green building.

• Address Concerns in the Contract: “Green Contracts” are largely untested, but that is no reason to not draft green contract language. Before a project begins, have a lawyer experienced in green building projects draft language regarding the roles and responsibilities of each party in a green certification process, and properly allocate risk and liability for green building tasks.
• Do Not Greenwash. If you haven’t heard the term ‘Greenwashing,’ and you’re in the green business…it’s time to read up on it. A builder or designer or supplier can avoid a lot of risk on a green building by simply avoiding vague and misleading advertising or labeling of services/products.
• Insure. Finally, it all goes back to insurance. Insurance is a familiar product in the construction industry, and while policies protecting builders and designers from green building exposure is new…it is out there. Talk to an attorney and/or your insurance agent about these products.

Hall Vineyards in Napa Valley is one of our favorite wineries (and for you Krewe of Cork folks, they have participated in the NOWFE’s Royal Street Stroll the past few years).

They are building a new winery in St. Helena and just announced that they have obtained Gold LEED Certification.

I wouldn’t write about it here unless there was some applicability to green building in Louisiana, and there is.

In connection with the announcement, Hall Wines published a new website dedicated to educating its visitors about the LEED certification process, and what sustainable elements of its winery qualified for certification.

The website is noteworthy for two reasons:

First, you can watch videos of the construciton process and watch a live feed of the winery from the site. Spending a bit of time on the webpage can help Louisiana builders learn more about the LEED process, and get some ideas they can incorporate into their Louisiana green building projects.

Second, it’s interesting that Hall Wines is turning its certification into an exhibit. They offer LEED tours at the winery, and incorporate the sustainable site into its their brand. Perhaps a launch like Hall Wines can justify the possible increased cost of green building.

If you were to survey green building critics, it’s safe to guess most will argue that the cost to build green do not outweigh the benefits.

Indeed, many have suggested that the cost of building green (especially gaining LEED certification) is significantly higher than building to ordinary standards. Others argue that LEED certification can be achieved through an everyday budget.

Regardless of where you fall on this issue, everyone should agree that green building projects have certain specifications, and bidding contractors must project the construction costs responsibly.

And so, one of the most challenging components of a constructing a green building may be the process of bidding it.

Since green building work is just starting to take hold in the construction industry, many contractors and subcontractors are working on little-to-no experience on green projects. And sometimes the data behind green building techniques and products are thin (see greenwashing).

On Wolfe Law Group’s Construction Law Monitor, we published a 2-part article on the Bidding Process and Change Orders: Bidding Errors and Change Orders: Avoiding a Nightmare [Part One and Part Two].

How do we suggest you avoid Bidding Error nightmares? Spend time with the Contract Documents pre-bid.

With green building projects, this is more true than usual.

When preparing your green bid, here are some example thoughts that should be considered:

• If the project is being certified with LEED or another standard, who will be responsible for the submittal process? Who will be responsible for monitoring the construction process?
• Contact vendors who will be providing the project’s materials, and review the data they have to back-up their performance and environmental claims. It would be a pity to plan on using one product, and being forced to later use a more expensive substitute. See this article on how to shop for green building materials.
• If the builder is anticipating a tax credit, do you understand the requirements to qualify for the credit? Will this increase your construction costs?

A successful green building project starts where successful ordinary projects begin: during the bidding and contracting period.

Whether your green building project will increase costs, or not, understand the green building expenses associated with your project, and avoid bidding errors and change order nightmares.

Last week, the New Orleans’ Times Picayune ran an article about a green housing program being launched this month in Mandeville, Louisiana, providing more evidence that “green building” efforts in Louisiana are growing.

According to the article, Mandeville is the third Louisiana community to participate in the “EnviRenew” program from the Salvation Army, with the first and second communities being Broadmoor and Riverview.

On their website, EnviRenew defines its mission as follows:

Envirenew, is a comprehensive strategy for community renewal. It is doing the most good in our neighborhoods and for the future of our city.

The program will build 20-25 homes in the Mandeville area, with each costing approximately $200,000, and each qualifying for LEED certification. It will be an excellent opportunity for contracts with green experience to work on LEED projects, and for inexperienced green builders to participate on a project undergoing the certification process.

An article in New Orleans’ City Business Magazine this week reports that “green” jobs in Louisiana have grown in the past decade.

The data – taken from a report that analyzed the growth of clean energy jobs across the nation – demonstrated that Louisiana’s growth in the green sector has been average. The City Business story noted that “Louisiana had the 24th most clean-energy businesses an the 22nd most green jobs.”

Remember that previously on the Louisiana Green Law blog, we asked whether the Green Building Boom was finally arriving in Louisiana. It’s no secret that since Hurricane Katrina, rebuilding the Big Easy “green” has been all the buzz.

As the City Business blog notes, even the New York Times recognizes that Louisiana is in the hunt for money in the green economy, although missing venture capital funding and a lot of the deep pockets that exist in California and along the West Coast.

However…as with all my discussions about green opportunities, it’s important for capitalizing businesses to be cautious of the risks [see blog category: Green Building Risks].

Is your business’ green advertising really greenwashing?

If your product or service doesn’t increase energy performance, or doesn’t qualify for the anticipated LEED credit or other green credit, will your company be exposed to litigation and damages?

Unfortunately these days, there are more questions than answers. It’s prudent to consult with an attorney if your company is experimenting in the green industry. It’s a huge sector with lots of opportunity, but it’s worth analyzing the risks, and protecting your investments.

Anyone familiar with green building or the LEED Certification process should know that great emphasis is placed on the reflectivity of open spaces.

Under LEED Credit SS 7.1, for example, parking lots and open spaces must have a reflectivity (SRI) of at least 29 to qualify for credit. Similar, roof installations must contain a percentage of vegetation or reflectivity to achieve credit SS 7.2.

The idea of pavement and roofs being white, instead of black, in other words, isn�t new.

However, in the news this week is a rather radical proclamation by a scientist at Lawrence Berkeley National Lab in California, who opine that painting rooftops whiter will cause enough sunlight to bounce back into space and cool the planet. They also aver that it will save in energy costs, as the planet � and individual homes � will stay cooler.

Contractors in Louisiana might want to take note of the study, as the state has generally hot summers and year-long weather. There may soon be a market in taking residential and commercial roof installations, and coloring them white.

Marketing the sale of a “white roof” or “white roof coating” has already begun actually. See this Craig’s list ad, and Spray Foam Louisiana’s website for cool roof systems.

Of course, with any type of green construction, it will be important to insulate your company�s offering from liability. The idea of a �white roof� lowering energy costs for individual homeowners is just that: an idea, and there are many other variables (insulation, roof type, etc.) impacting the energy costs of a home of business.

One of the dangers with �green building� is the promises that come along with the construction offers. Selling your service by highlighting energy savings and performance enhancements is legally problematic if the service doesn�t result in savings and efficiency.

If your company is engaged in a service that promises energy savings, be aware, and speak with an attorney about how you can protect yourself from potential liability by smart contracting.