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  • April 10, 2012

    ASHRAE Illinois Chapter

    April Meeting

    Managing Contract Risks on Green Projects

  • April 10, 2012October 14, 2010

    The Rise of Green Buildings

    Project Delivery Methods

    Mastering Form Agreements

    Drafting and Negotiating Contract Terms

    Understanding Insurance and Bonding

    Overview

    Managing Contract Risks on Green Projects

  • April 10, 2012

    The Rise of Green Building

  • April 10, 2012

    Rise in Green Building

    Approximately $8 billion worth of green construction in 2006

    Grew to approximately $60 billion in 2010 Estimated $100-140 billion in 2013 Next three years:

    $554 billion to the national economy Green jobs will quadruple to 7.9 million

    By 2015 Green construction to represent almost half of

    nonresidential market McGraw-Hill

  • April 10, 2012

    Rise in Green Building Regulations

    International Code Council International Green Construction Code released last March

    ASHRAE Standard 189.1 Released last winter - commercial green building standard Replaces Standard 90.1-2007

  • April 10, 2012

    Project Delivery Methods

    Design-Bid-Build Design-Build Integrated Project Delivery

  • April 10, 2012

    Why Is Delivery Method Important?

    Delivery method typically owner-driven

    Considerations:

    Early involvement of contractor and subcontractors?

    Single point responsibility

    Responsibility for overseeing satisfaction of green objectives

    Understanding alignment of parties is critical to understanding potential risks.

  • April 10, 2012

    1. Design-Bid-Build (D-B-B)

    2. Design-Build (D-B)

    3. Construction Manager @ Risk

    4. Integrated Project Delivery (IPD)

    Project Delivery Methods

  • April 10, 2012

    Design-Bid-Build

    Discourages green value engineering

    Less collaborative

    Delayed contractor involvement

    Expensive post-award changes

    Design-Build

    Who is the owners ally/advisor?

    Single point responsibility

    Owner typically less-involved

    Project Delivery Methods

  • April 10, 2012

    CM at-Risk

    Requires experienced CM

    Disconnect from some trades

    Integrated Project Delivery

    The ultimate collaborative delivery method

    Early involvement of contractor and trades

    Value engineering encouraged and facilitated

    Needs strong owner and trusting participants

    Shared incentives for LEED certification

    Project Delivery Methods

  • April 10, 2012

    Managing Contract Risks on Green Projects

    Mastering Contract Forms

    Drafting and Negotiating Contract Terms

    Understanding Insurance and Bonding

  • April 10, 2012

    Mastering Contract Forms

  • April 10, 2012

    Importance of Contract Forms

    Design and construction organizations are moving quickly to prepare standardized forms

    Promote an industry standard

    Increase revenue

    Forms vary significantly from organization to organization

    Hasty preparation = missing terms and concepts

    Understanding forms means opportunity to avoid green pitfalls

  • April 10, 2012

    AIA

    B211-2007 Architects Services: Commissioning

    B214-2007 Architects Services: LEED Cert.

    D503-2011 - Guide for Sustainable Projects

    New Sustainable Projects Documents

    ConsensusDOCS

    DOC 310 Green Building Addendum

    DBIA

    Sustainable Project Goals Exhibit

    Whats Out There?

  • April 10, 2012

    AIA B211-2007 - Commissioning

    Covers architects services for commissioning Requires architect to:

    Develop a Commissioning Plan, Design Intent Document, and Commissioning Specifications;

    Review the contractors submittals related to the systems to be commissioned;

    Observe and document performance tests;

    Train operators; and

    Prepare a Final Commissioning Report.

    Incorporated into Owner-Architect Agmt.

    Not a stand alone document.

  • April 10, 2012

    Not a stand alone document

    Covers only LEED Services for architects

    Intended for use with B102-2007

    Not for contractors

    Architect Handles Certification Process:

    Conducts Pre-design Workshop

    Creates LEED Certification Plan

    Organize and Manage certification process

    Provide LEED specifications

    AIA B214-2007 LEED Certification

  • April 10, 2012

    AIA B214-2007 Continued

    Missing Terms:

    Disclaimer of guarantees or warranties

    Disclaimers of any implied guarantees

    Remedy provisions for failed certification

    Completion

    End of certification process?

  • April 10, 2012

    D503-2011 Sustainable Projects Guide

    Not a contract document, exhibit, or addendum that can be incorporated in whole into project contracts.

    Provides an overview of some of the key legal and contractual issues that can arise on projects that incorporate sustainable goals.

    Includes model contract language that can be added to: B101-2007 Owner-Architect Agreement

    A101-Owner-Contractor Agreement

    A201-2007 General Conditions

  • April 10, 2012

    AIA New Sustainable Projects Documents

    Set to be released in April or May 2012

    Incorporation of model language into:

    A101-2007 SP Owner/Contractor

    B101-2007 SP Owner/Architect

    A201-2007 SP General Conditions

    C401-2007 SP Architect/Consultant

    A401-2007 SP Contractor/Subcontractor

  • April 10, 2012

    Not a stand alone contract

    Assumes design-bid-build

    Invents new nomenclature:

    Green Building Facilitator Default = Architect

    Green Measures Physical those incorporated in Plans and Specs as part of

    design.

    Procedural means and methods in performance of work.

    ConsensusDOCS - 310

  • April 10, 2012

    ConsensusDOCS - 310

    Remedy Provision:

    Moves all tax and financial consequences (i. e. the cost savings) into the category of consequential damages that are subject to waivers of such damages in other construction documents.

    Missing Terms:

    Green Guarantee

    Disclaimer of warranties

    Payment of GBF

    Completion Issues

  • April 10, 2012

    Not a stand alone contract

    Assumes Design-Build Delivery

    Addresses:

    Green Standard Art. 1

    Art. 4 - Remedies section offers menu of options if project fails to meet green goals

    Waiver

    Liquidated damages

    Limited obligation to cure

    Art. 6 Sub. and Final Completion not contingent on certification.

    DBIA Sustainable Project Goals Exhibit

  • April 10, 2012

    Requires retention of independent Commissioning Authority

    Missing Terms: Payment

    Fails to Adequately Address: Other project delivery options

    Obligation for determining regulatory requirements

    DBIA Sustainable Project Goals Exhibit

  • April 10, 2012

    Drafting and Negotiating Green Contracts

  • April 10, 2012

    Conceptual Risks on Green Building Projects

    Impossible Promises

    Ambiguous/Overlapping Responsibility

    Increased Standard of Care

    Using traditional contract mechanisms and concepts on a green project

    Lack of precedent

    Benefits well-known and well-documented

    Conceptual Risks

  • April 10, 2012

    Risks on Green Building Projects

    Inexperience

    Increased risk of design/construction defects Unrealized Expectations

    Learning Curve: Products and Construction Methods

    Building Performance Issues

    Regional issues not always considered

    Failed Green Certifications

    Green construction is regular construction risk with a twist.

  • April 10, 2012

    Lack of Precedent

    No appellate case law to date.

    Limited LEEDigation: Only a few reported casescontaining green issues: Southern Builders v. Shaw Development (MD)

    Tax credits

    Poor contract drafting

    DestinyUSA (NY)

    Tax/Bond credits, False promises

    ACHRI v. City of Albuquerque (NM)

    ACHRI sued to prevent ordinance imposing energy eff. stds.

    Gidumal v. Site 16/17 Development (NY)

    Misrepresentation of LEED goals and energy performance

  • April 10, 2012

    What does Green mean?

    Defining the Green Standard

  • April 10, 2012

    Defining the Green Standard

    When you get down to it, whether a work of architecture is green is usually a shade of gray Christopher Hawthorne, Architectural Record, April 2008

    Is it an objective standard?

    It should be!

  • April 10, 2012

    Use Specificity:

    Sample Provision:

    Owner's Desired LEED Certification is LEED Certification at the Gold Level under the USGBCsLEED for New Construction Rating System, version 3.0 - 2009.

    The LEED Responsibility Matrix [Dated/Version], which is attached hereto as Exhibit A identifies the Prerequisites applicable to the Project as well as the Credits the Owner has decided to pursue for the Project.

    Defining the Green Standard

  • April 10, 2012

    Green Guarantees

    Owners Perspective: A guarantee is ideal (but may not be realistic)

    Designers Perspective: Any contract with the word guarantee creates

    an uninsurable risk and cannot be accepted.

    Contractors Perspective: Do not guarantee any level of certification.

    There are too many factors outside the contractors control.

    At most, contr

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