Q: Legislation is being implemented around the country to create new construction building code requirements related to sustainability and other “green” building certifications that will require that buildings become more energy-efficient and environmentally responsible. Could you recommend the best way to address some of these issues in contracts?

A: Whether it’s green or sustainable design as opposed to any other type of design, certain fundamental contract principles always apply. All contracts must address risks associated with designing and building green. Owners primarily want to shift the risk of failing to achieve certification or energy goals to designers and contractors. You should be on alert for risk-shifting provisions, and you need to draft provisions to address certification requirements. It is important not to take on risk that you cannot control.

The details in terms of “green” or sustainable construction are found in the contract plans and specifications. The specifications become especially critical on green projects inasmuch as the plans and specifications provide the detail to achieve the “certification.” Therefore, it is generally insufficient to simply reference a certification requirement; instead, you should try to weave the specific requirements throughout the specifications into all affected scopes of work. Special attention needs to be paid to the submittal requirements because the submittal information will enable the design professional to better evaluate whether the applicable green sustainability requirements are being met in the contract documents.

Q: What are some specific things that you would suggest we address in contracts relative to “green” projects?

A: You need to make sure your client understands the difference between “green” guidelines and standards. Guidelines provide direction as to how to accomplish goals, but parties may not necessarily be contractually obligated to achieve the results. Standards are actual contractual requirements the parties must achieve. If a certain standard is to be achieved, then those requirements must be addressed in the contract and defined as standards, not guidelines. There is a lot of misunderstanding in this area when it comes to “green” and “sustainable” design and construction.

Also, if a certain performance is expected in the design and the construction, there needs to be a contractual tool to objectively measure this success. One common method is to establish benchmarks in the contract that objectively allow a building owner or operator to assess the building and its performance as compared to the design of similar buildings. This is an evolving process in various jurisdictions and among rating agencies. What is currently lacking is a means to quantify or measure the performance. This leads to potential disputes as to whether the design intent was achieved upon completion of the project. The failure to achieve a particular certification may result in the loss of certain financial incentives, and if this loss is significant enough, the design professional can expect the owner to make a claim or file a lawsuit for failure to achieve the certification that ultimately cost the owner some money. Not only is there this risk in the short run for such legal exposure, there may liability exposure for green buildings long after completion due to unachieved anticipated savings and energy efficiencies over the life of the building. Therefore, the lack of a benchmark standard to measure results objectively can complicate the liability exposure.

Q: What are some of the steps engineers can set forth in contracts to protect him or herself from exposure and unnecessary risk?

A: One of the most important steps is to know your team. You also must make sure the parties’ realistic expectations are documented when the contract drafting begins so they are fully understood and shared between all involved. I would also recommend that both the design and construction contracts address the requirement to develop a “green” management plan for both processes so the parties can keep track of the various issues related to green and sustainable design. Thereafter, make sure the contract documents require documentation of environmental performance criteria for all materials and systems specified so the submittals can be evaluated and compared against the detailed performance criteria in the specifications to avoid troublesome issues too far in the process before they can be economically addressed.

Michael J. Baker, Esq., is a partner in the Cerritos, Calif.-based law firm of Atkinson, Andelson, Loya, Ruud & Romo. He is an expert in design and construction contracts, mediation, and litigation. Please send him your legal questions via e-mail at mbaker@gostructural.com.

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