So far, the way that an owner and contractor team decides to build a “green” building has been fairly standard. But that may change.
Historically, the most successful green initiatives were those driven by tax abatements and credits, expedited permitting, density incentives, utility credits and other incentives. The majority of these came through the U.S. Green Building Council rating system for Leadership in Energy and Environmental Design. In this voluntary framework, the project is ultimately evaluated by the benefits weighed against the costs for achieving those benefits.
Under these circumstances, the responsibility of a general contractor was detailed by the contract documents and precise specifications, which the contractor priced and the owner either accepted or rejected. In turn, the owner, which paid higher premiums for a “green” project, had the ability to minimize the extra costs of achieving this end result through value engineering and consultation with its construction team.
Course Change In contrast, there are pending legislative proposals to make green standards mandatory as part of the building code with only narrow exceptions. As early as 2003, Atlanta led the way in this paradigm shift, requiring city projects in excess of $2 million or 5,000 sq ft to reach a LEED Silver certification level. Now, the self-proclaimed leader in Southeast green standards is trying to push these and similar requirements on all commercial construction in Atlanta through green standards in the building code.
As of July, the Atlanta City Council was considering legislation that will require all projects to achieve certain levels of environmental sustainability. While the group spearheading this initiative, the Sustainable Building Task Force, has laudable goals, two questions remain: Should green standards rise to the level of building code requirements? Also, what impact will that have on the construction community as a whole?
Certain groups are concerned and are pushing for more time and a more in-depth analysis regarding the prior framework of voluntary, incentive-based green construction. The new framework pending before the City Council would remove the owner’s ability to opt in or out of LEED and require the implementation of these code-based green standards.
General contractors and architects will have a new standard of care based on “sustainability” and “efficiency” standards that will be evaluated over years, if not decades. The risk-control methods will need to evolve to address these heightened standards.
The new green standards and their interpretation in relation to the statute of limitations will likely be profound, as the sustainability and efficiency of a building or product can only be measured over time.
In those states that have statutes of repose, contractors may be able to look to outside limits and shift risk appropriately. However, in other states, such as Florida, green standards may well present extended liability risks for decades. These mandatory standards will continue to build upon the LEED disputes already arising, potentially resulting in what many have coined as the new age of construction “LEEDitigation.”
Bond and Insurance Issues Due to the nature of extended liability, it is likely that sureties and insurers will begin to encounter difficulties in addressing green standards. Sureties, in issuing performance bonds and other financial guarantees common to commercial construction projects, are notoriously conservative. They want to know not only whether a firm has the financial resources to complete a project, but also if the firm has sufficient experience in the types of projects it undertakes.
Green building is a new-enough field that not that many firms can claim a high level of expertise, cutting down the number of firms available for bonded work. That, in turn, delays or even eliminates some projects that might otherwise be undertaken.