Commentary: Four Tips for Managing Subcontractor Risks on Sustainable Projects
As most green experts know, LEED credits frequently hinge on routine construction tasks.
Consider the contractor who must obtain indoor environmental quality (EQ) credit 4.2 as part of his contract with the owner but employs a subcontractor who uses high volatile-organic-compound paint for touch-up and punch-list work, dropping the project down a level of certification. If the credit was critical to achieving LEED Silver, which the owner needed to take advantage of tax credits exceeding $500,000, the contractor may be liable to the owner for significant damages.
Under such circumstances, contractors must take steps to ensure subcont
Here are four steps contractors can take to protect themselves on green projects, and most firms should consider employing all four of them.
Green Flow-Down Provision
Although most contractors use subcontracts that contain flow-down provisions, they should ensure that typical flow-down provisions are particularly strong on green projects and add a separate flow-down provision specific to LEED requirements. A green flow-down provision should include an acknowledgement of the LEED objectives and a clear assumption of the contractor’s LEED obligations to the owner.
The following is an example of such a provision: “The subcontractor acknowledges that the work under this subcontract is for a project seeking LEED certification. The subcontractor hereby assumes toward the contractor all the same obligations, rights, duties and redress that the contractor assumes toward the owner and architect/engineer under the prime contract, LEED project requirements, and/or LEED responsibility matrix as they relate to the subcontractor’s work.”
A well-drafted green flow-down provision, in conjunction with a carefully drafted indemnification provision, allows a contractor to downstream risk that should be borne by the subcontractor responsible for complying with LEED requirements.
Contractors working on sustainable projects should add additional pre-qualification questions and requirements before hiring subcontractors. This will screen subcontractors that are inexperienced on green projects and the often-peculiar limitations imposed by certification standards. The level of pre-qualification is up to the contractor, but may include the following criteria:
• The number of LEED or Green Globes projects the subcontractor has completed.
• The number of LEED-accredited professionals the subcontractor has on staff.
• The subcontractor’s experience with sustainable building products.