As construction companies arm themselves for every project with the skills and tools necessary for success, they would be wise to include a team educated on the responsibilities and potential liabilities associated with LEED contracts.
Understanding LEED
Because the LEED rating process is controlled by a third party, the U.S. Green Building Council (USGBC), contractors should avoid signing on as the party responsible for delivering a LEED-certified building. Contractors can use their best efforts to obtain a specific rating; however, ultimate certification is a function of the USGBC.
Boilerplate contracts may incorporate LEED principles without identifying them as such. Failure to pick up on LEED requirements may lead to a contractual default, and can adversely affect the project’s chances of achieving certification.
Before any LEED points can be granted, projects must satisfy seven prerequisites. For example, a contract may call for installation of 50 percent wood-based materials produced from wood obtained from forests certified by the Forest Stewardship Council (FSC). To earn LEED credits for FSC materials, specific chain-of-custody documentation must be obtained from contractors, subcontractors and vendors to verify wood materials are FSC certified. An incomplete or unclear understanding of LEED credits can place contractors in a potentially costly position of re-ordering or replacing materials that do not conform with LEED goals, or face a contractual default.
Certified or Certifiable?
Clarifying the contractor’s role from the outset of a project is paramount. Contractors bidding on LEED projects should begin with a goal. Is the project aiming for certification, or is the goal to create a certifiable building? If the project requires certification, what level must be achieved? A clear understanding of whether the project requires contractors to assist in the goal of achieving certification, or deliver a LEED-certified building, will dramatically influence negotiations and overall interpretation of the contract.
Once the underlying goal is determined, contractors should be careful to educate the construction team on how their everyday actions on a project site can affect the likelihood of success. Many LEED credits require sustainable behaviors from project inception, which are virtually impossible to recreate if the initial opportunity is lost. Even if a party is not responsible for delivering a LEED-certified building, certain actions, such as smoking onsite, can impact the requirements associated with various LEED points.
Also, the projected goal of a LEED development is almost always tied to specific financing criteria, marketing strategies and permitting requirements. Failing to achieve an expected rating may prevent the project from obtaining expected grants, tax rebates or occupancy permits.
Limiting Liability and Indemnification
Indemnification clauses traditionally cover general liability issues, such as negligence and “bad acts.” While these provisions already inspire negotiation between parties, indemnification clauses may require a third or fourth look when LEED obligations are in play. Contractors should make every attempt to insulate themselves from claims for damages and costs associated with failed credits, errors in templates or supporting documentation, or the denial of certification.
Contracts should specify who is responsible for preparing and submitting LEED templates for review by the USGBC. Certification applications may be submitted either in their entirety at the end of the construction phase, or in two phases, with the first being at the end of the design phase and the second at the end of construction. Regardless, clarification of these roles will assist in limiting contractor liability and provide a more organized product for the USGBC review.
Construction companies know a successful project demands a myriad of components, skills and players. With a LEED project, a few more factors are thrown into the mix, but the balancing act is no different. A careful reading of LEED-oriented contracts coupled with an understanding of the process’ underlying principles will ensure contractors are armed with the tools for success.
![]()
Wednesday, February 8, 2012