While the benefits to the environment, community, owner, contractor and designer are undisputed, significant bidding and negotiating risk exposures lurk beneath the surface of sustainable construction projects. Here are some tips for green building success.
Get a Roadmap
Before a construction firm gets behind the wheel of a LEED-certified project, insist on a LEED charette. It will serve as a roadmap to ensure seamless collaboration among the owner, designer and contractor so performance goals are achieved efficiently.
“When you receive bid documents and there is no LEED charette included—that’s a major red flag that you absolutely must heed,” says David Gehringer, preconstruction manager at Nason Construction, a firm operating in Pennsylvania, Delaware and Maryland. “The charette is critical to identifying the sustainable concepts and strategies, as well as aligning the owner, designer and contractor. Without it, you are bidding blindly.”
If the bid documents don’t include a charette, immediately facilitate a meeting with the owner and design professional so all parties can agree on expectations.
“Overall, LEED requirements bring out the best in integrating the owner, designer and contractor; however, you must be diligent in initiating such collaboration early on in the bid process to adequately manage expectations and ensure your responsibilities,” says Mark Purcell, a project executive at Nason Construction.
Be Wary of Low Bids
When it comes to increasing profits on a LEED-registered project, inexperienced subcontractors often overlook unforeseen costs not associated with traditional buildings.
“The lowest subcontractor bid can look tempting, but a savvy general contractor must conduct a comprehensive assessment of all the nontraditional costs before accepting such a bid,” Gehringer says. “If your subcontractor has not accounted for these costs, you must not accept the bid, as it would later become a burden on your profitability.”
In addition to accounting for such costs, ensure subcontractors have the necessary experience to meet the demands of the LEED checklist.
“The last thing you want is an inexperienced subcontractor laying down carpet without first following the appropriate off-gas procedures. An oversight like that could cost you air quality credits that would have been earned otherwise,” Purcell says.
Read the Contract Closely
If not properly managed, LEED projects can be cost-prohibitive, but paying attention to the contract can significantly enhance the profit margin. For an owner to capitalize on tax credits or other cash flow opportunities, such as surplus energy sell-off or increased occupancy rates, specific performance requirements within the design may be required. Unless these metrics and standards are clearly defined in the contract, the designer or contractor could be held responsible for not meeting expectations.
A thorough review of the bid documents is critical from the outset. This should include a detailed assessment of all materials used and contractual obligations for each.
“With so many new materials being used in LEED construction, from vegetative roof membranes to low-VOC flooring adhesives, it is easy to find your construction firm in the middle of a blame game with the product manufacturer,” Gehringer says.
“To avoid this finger-pointing and the resulting claims that could follow, be sure your contract clearly defines your installation obligations versus product warranties.”
Amend Warranties or Guarantees
Standard LEED contract templates include the terms “declare,” “affirm” or “certify,” which imply the contractor warrants or guarantees its work will achieve a level of performance (i.e., LEED certification). Because such claims are non-defensible, every general and professional liability policy contains a standard exclusion for express warranties/guarantees, raising concern about the insurability of the contract.
To reduce exposure, avoid signing warranties/guarantees in contracts. Instead, have the contract amended to include rating satisfaction language that clarifies the firm will endeavor to design or build to a performance standard. The “endeavor to” language is less stringent.
Adhere to the Timeline
Realization of tax credits and satisfactory completion of LEED documentation often requires the project team to meet a milestone or deadline. Incorporating these milestones into the overall project plan is key to success. For example, failure to satisfy application requirements, such as obtaining a certificate of occupancy for the final credit certificate prior to its expiration date, would disqualify the owner from obtaining the credit.
Damage claims for both negligence and breach of contract may be the owner’s only recourse to obtain financial compensation for the lost tax credits.
Consult with Experts
While the additional work to satisfy the requirements of a sustainable project may be daunting at first, a thorough review of the contract and a careful project management system can reduce liability exposures considerably.
Consulting with an insurance broker and legal counsel regarding any specialized indemnification or satisfaction of insurance requirements is always encouraged to reduce overall exposure.
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Friday, September 3, 2010