Construction Contracts for Sustainable Projects

September 22, 2011

The market continues to look for construction projects that are sustainable. Building developers, owners and tenants seek value from energy efficiency and a recognizable commitment to the environment. Rating systems, such as the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) certification, have received widespread recognition.

The role of the contractor in achieving sustainable construction and energy use certification is important, but there are special risks for contractors involved in projects with specific sustainable goals. Achieving a particular standard or rating is a team effort and requires coordination among the owner, designer, contractors and material suppliers. There are a number of factors that contribute to success, many of which are beyond the control of the contractor. There are many decisions that are made by owners and designers, with or without the input of the contractor. Failure to achieve a certification standard can have unpleasant consequences, and a disappointed owner may be swift to seek remedies from the others involved in the project.

For any construction project, one role of the written contract is to allocate risks fairly to those in the best position to control those risks. A contract for a sustainable project is no different, but presents several new issues for contractors to consider:

Know what is in the specifications. A number of elements considered in the certification process involve action by the contractor, such as specific record-keeping responsibilities, reuse or recycling of building materials, and use of specific procedures and materials. It should be the responsibility of the designer to write clear specifications, but is up to the contractor to assure compliance with those requirements. Care must be taken to observe performance and monitor subcontractors for their compliance, as well. Substitutions of materials or equipment must be reviewed and approved by the designer and owner.
Conform design-build work to the objectives of the project. If elements of the project include designs furnished through the contractor, the contractor must coordinate those designs with the performance expectations of the designer and the performance level required to achieve certification.
Don’t promise a specific rating or certification. Because there are too many elements in the certification process that are beyond the control of the contractor, the contractor should not make any guaranty or warranty that the project will achieve any rating or certification. The contractor may acknowledge the owner’s intent and agree to comply with the specifications furnished by the owner or designer, but the contractor should expressly disclaim any responsibility if the project’s desired rating is not attained for reasons beyond the contractor’s control.
Watch warranties. The contractor should avoid any warranties that promise processes, materials, systems, fixtures or equipment will achieve specific results or perform to specified standards. Those warranties should come from the manufacturer of the item in question. The obligation of the contractor should be limited to installation of the item in accordance with the manufacturer’s instructions. Also, the contractor should not be responsible for claims by the owner or architect that the project, when constructed, will achieve a specified level of energy or utility use, savings or efficiency.