E. Mitchell Swann
In recent years there has been increased discussion on the risk aspects of green or ‘high performance’ buildings and how the industry might address those risks. I gave my first presentation on the subject at a joint CIBSE/ASHRAE conference in September 2003 in Edinburgh, Scotland. While final case law and court decisions regarding green buildings are still limited at the time of this writing, prudent practice would recommend that designers, contractors and owners consider the potential risks, arrive at some appropriate factors or strategies to address those risks and act accordingly.
The Nature of Green Building Risks:
Green building project risk can be looked at in two broad columns – certification risk and performance risk. These in turn can be dissected into somewhat interlocking pieces as well.
Certification risk is probably the least traditional, most oblique and yet “simplest” risk element of green buildings. Its simplicity is in how that risk can be identified, not necessarily in how it is mitigated.
Most of the green building marketplace looks for “validation” of a green project via some sort of certification of the final building. The marketplace has, in general placed a higher value on certified green buildings – with higher values for higher certification levels. The US Green Building Council’s (USGBC) LEED® Certification protocol is currently the dominant system in the marketplace. Under the USGBC’s LEED process, certification is awarded not by the project team or local code officials but by a third party entity. This third party entity (formerly the USGBC but now the Green Building Certification Institute which has been created by the USGBC) is not under the domain of building code officials or a party to any contract binding the project team members. As a result, the final verdict on LEED certification rests with an entity that is not bound by contract to any part of the project team. In private work, one mitigation strategy is to make green building certification a “desire” or a goal but not a requirement of contract. In that way the failure to achieve certification or a certain level of certification would not be the cause of a contractual “breach”. However, green building certifications have become a requirement of statute in many state and local jurisdictions. In these situations it may be difficult if not impossible to exclude certification as a contractual obligation.
If certification is a requirement for the project a failure to achieve certification might prompt a client to press a claim against the design and construction team. Damages could range from loss of tax credits; zoning density options or expedited permit approvals to a diminution in value of the project in the marketplace. These potential damages may far exceed the fees charged to design the project. Consult your attorney before signing a contract which obligates you to deliver a certified project.
Promise of Performance
Inherent in the promise of green buildings is the expectation of higher performance in the form of reduced energy and resource consumption, improved indoor environmental quality and other benefits both tangible and intangible. These attributes are often touted explicitly as well. These performance expectations – both explicit and implied – can create exposure for design professionals because it is a long held concept that design professionals cannot ‘guarantee’ outcomes of their work. They cannot offer warranties of performance and most professional liability insurance policies (“errors and omissions” insurance) do not cover performance guarantees. In fact, some insurance policies disavow coverage if performance levels are a part of the contract or proposal. LEED certified buildings must meet certain energy performance levels as a pre-requisite of certification – these performance levels are higher than that set by ASHRAE’s Standard 90.1, which is a commonly used energy standard for building codes. This and similar energy reporting requirements may eventually alter the landscape of risk and performance liabilities for design professionals for years to come.
The Standard of Care
Within the practice of engineering and architectural design there is an inherent risk brought on by the performance of a professional’s duties and how a particular professional executes their work in comparison to similarly trained and experienced professionals on similar assignments under similar circumstances. This theoretical ‘yardstick’ of professional practice is called the “standard of care”. While a perfect job is not expected, it is expected that a design professional will execute his or her work with a reasonable level of judgment, quality and thoroughness.
The prevailing ‘standard of care’ is an evolving standard – as the industry changes, the customs and practices of the industry change and with it the standard of care. An item to consider is this: in the promotion of green buildings as a higher performance level of building compared to ‘non-green’ buildings, is there a corresponding elevation of the expected performance of engineering and architectural design duties? In effect, is the standard of care higher for green buildings than for non-green buildings and does this standard change with the desired level of building certification? Design professionals should be careful not to elevate the expected standard of care for their services by either expressly stating their “superiority” compared to other designers or by implying such comparisons in their proposals or final contracts.
Given that performance expectations are at the heart of many green building projects, the design professional should take steps to manage expectations at the front end of a project and to allow for reasonable investigation and correction at the backend of a project. The project designers are typically in the lead role of presenting the benefits of green buildings to prospective owners. Design professionals should be careful not to make or imply a promise of performance in areas which are not within their control or purview such as workforce productivity, health or “wellness”.
A key element in setting performance expectations is the energy model developed during design. A final design will be guided by the output of that model. A designer using an “outside” energy modeling consultant should take steps to ensure that potential liabilities are outside consultants have sufficient liability coverage to address any issues which may arise from an error or omission in the model. Similar concerns should be had about other modeling efforts for example daylighting and potable water demand.
The construction phase of a project always entails risk. Schedule delays, contractor defaults and construction workmanship risks are present in all projects green or otherwise. For green projects there can be additional risks in the areas of construction waste recycling and cleaning protocols during construction to maintain indoor air quality for the completed project. For contractors delving into their first green certified projects, these additional risks need to be accommodated. For the traditional risk elements, care must be taken to address the subtleties that arise with a green certification objective.
For example, in a default situation a surety may be called upon to provide a completion contractor or subcontractor to replace the defaulting entity. Typically the surety is required to find a replacement in a ‘timely manner’ so as not to delay the project (beyond the inevitable delay caused by the default), however if the defaulting contractor had a specialty role or expertise in achieving the green certification – for example a green roof contractor – it may be necessary for the surety to look harder to find a suitably experienced replacement contractor which may add to the time delay. The surety’s interest may be focused on time because the green certification may not be foremost in their mind. Special language may need to be inserted into the original bonding agreement to ensure that properly trained replacement contractors are part of any default resolution approach.
Delays may also arise when dealing with specialty products with few manufacturers or plants such that any break in the integrity of the product’s supply chain could delay the entire project. While this is a possibility with any product or supplier to a project, in instances where there are fewer vendor options or where venders are “new” in the marketplace and may have fewer production resources, the risk increases to the project.
Product substitutions also must be carefully considered since a particular product or type of product may be essential to garnering a key certification ‘point’. Product substitutions also must be evaluated with respect to compatibility issues between materials. For example, some insulation materials may not be compatible with certain types of adhesives or certain finish materials may not be compatible with certain types of primer coats. Failure to properly address or assess compatibility issues could create ‘defective workmanship’ situations and trigger a construction claim. The same concern faces designers as they write specifications and design systems and assemblies. Incompatibility of materials can lead to problems.
A key component of a building’s performance is how the building is operated and maintained. Poor maintenance can quickly erode the performance of energy efficient designs and equipment. Operational strategies that don’t keep energy in mind or are not cognizant of system needs, nuance and design intent can take efficient designs and render them ineffective. Green buildings are intended to be high performance buildings and the last link in the chain is the operator. Thus a major factor in performance outcomes is the style, manner and ‘quality’ of the maintenance and operations protocols in place at a facility. But this “operations” context raises some interesting considerations. If we accept the idea that operations and maintenance is a key part of achieving high performance is it reasonable to assert that those responsible for O&M have a ‘duty’ to carry out their work in a way that will achieve the high performance goals? If they fail to do so would that create a “liability” for them to the project? Would poor operations and maintenance protocols or execution offer a robust defense against claims of substandard construction or design error? Is a sustainable owner an responsible owner and does that responsibility create a ‘standard of care” for owners?
The risk profiles for green buildings closely align with those of regular projects however there are some categories which are inherent to green buildings which are not necessarily associated with more traditional projects. Green buildings have the expectation of improved performance and the objective of becoming certified at whatever level. These are risks which traditional construction does not bear. These risks are issues which the project team must contend with in their execution of the work and development of contracts.