The blogs have been crackling for several weeks with reports and analysis of the LEED “challenge” process.  Chris Cheatham devoted a multiple part series to analyzing the challenge filed and ultimately rejected to the LEED Gold certification awarded to the Northland Pines High School in Wisconsin.  Shari Shapiro has discussed the same and included an interesting interview with the challengers discussing their reasoning for the protest.

Without getting too bogged down in the technical details of the Northland Pines case that are covered elsewhere, I would highlight a couple important takeaways from what we have learned from the Northland Pines challenge case:

1. Currently, anyone can file a challenge – there are no standing requirements whatsoever.  If anyone can file a challenge, the threat to projects, and to LEED, is that anyone will file a challenge.
2. There are very loose/limited guidelines or rules on procedure, hearings, document and information exchange and the like in the challenge process.  Look for a future revamping adding more clarity in the challenge process rules.
3. It appears that USGBC permitted Northland Pines to correct, amplify and update its submittals during the challenge process to demonstrate compliance with the prerequisites.  USGBC needs to make clear whether certification requires bright line compliance based on initial submittals and information, or whether they are more interested in allowing some wiggle room as long as the project meets the standards at the end of the finish line.  Failing to make this basic philosophical tenet clear is not fair to project participants, opens the process to future inconsistency during later challenges, and ultimately threatens the credibility (and thus potentially the viability) of the USGBC process.
4. Last point, which may be the biggest and has not really percolated as a point of focus: as currently conceived, the LEED challenge process adds another completely unpredictable line item expense to the process.  The challenge process may also add another angle of attack on projects for unhappy losers in bidding, neighborhood NIMBY uprisings, and competitors that may want at low cost and effort to financially damage their opponents.  At least courts have a theoretical sanctions approach to address complaints filed in bad faith.  USGBC should strongly consider adopting rules that require a USGBC member to certify the challenge as being in good faith, along with membership penalties or sanctions for individuals signing off on complaints that have zero merit.

The challenge process in theory may add an important element of credibility, verification and transparency to LEED certifications.  As it stands though, there are loose rules, no standing requirements, and one can easily file challenges even in bad faith without facing any impact.  If we start seeing a rash of such challenges, we may start also seeing a growing movement away from LEED certification due to increased unpredictability.  The current challenge structure presents some serious risks and issues moving forward and needs to be the subject of significant thought and retooling to avoid future problems.

It’s a beautiful, warm spring day here in Richmond, VA.  The sprinklers were going in neighborhood yards as I left for work this morning and the clouds are moving lightly on the breeze.  With the sun shining and the birds chirping outside of my office window, even I and my old pal Eeyore could smile and see some optimism for the future.

Activity abounds in the sustainable building world.  California is implementing the first state wide “green”  building code and, according to my friend Imad Naffa (@imadnaffa on Twitter), that state will be pressing builders and developers to build in a sustainable manner.  Governmental units, both small and large, are seeking to add zoning or other incentives to build in a sustainable manner.   More and more developers are seeking LEED certification (though this certification is sometimes subject to challenge).  All of these signs point toward the desire for a more energy efficient and responsible built environment.

The dad in me wants this badly and quickly.  Better air quality, less energy use, and a more predictable weather pattern (to the extent that weather is predictable) can only lead to a better future for my kids.  However (and this is where you should get the “here he goes again” look on your face as you read this), the sad little donkey on my other shoulder is always reminding me to step back and take a quick look at the big picture.

The enthusiasm for the sustainable construction paradigm is laudable but should not overtake some sensible discussion of risks and costs.  Questions (several of which I have discussed at Construction Law Musings) that should be considered during the policy phase of this enterprise are as follows:

• What are the costs to a private developer of forced “green” building that cannot be tailored to a particular project?  Will these costs preclude certain development?
• Can the insurance industry catch up with the regulators?  Without proper insurance coverage, contractors may not be able to justify construction.
• How does the use of LEED (a laudable private rating system that can change without the usual legislative process) in certain zoning and building requirements create risks for the owners, architects and builders?
• What about simple time horizon risks?

None of these issues are insurmountable and I remain optimistic that we can deal with them in a rational fashion.  While I don’t know the answers to these questions from a legal risk management standpoint, as a construction attorney and father, I feel that I would not be promoting a permanent change without bringing the questions to light so that they don’t surprise us and kill this hard fought momentum.  Once many of these questions are considered carefully, we may decide that some are simply too small to deal with, while others are highly relevant and should be dealt with before the courts make the decisions for us.  Once the questions are in the open and some answer is reached, a more permanent foundation for a brighter, more energy efficient future will arise.

Let me close by saying that because of folks like Yahya Henry and the other contributors here at Aribra, and the many great friends I have met along the way, Eeyore is getting quieter and quieter as time goes on.

A recent article at the Ahead of Schedule Blog brings up a project owner’s perspective on “green” building.

The article starts by stating that:

Despite the explosion of articles, seminars and webinars on green building and development during the last year or so, there is a dearth of information in the development world regarding what project owners and developers who do want to build a green project should actually put in their design and construction contracts.

The post then lists several good points regarding what a construction project owner should look for and request in its contracts, particularly with a design professional.

My blog, Construction Law Musings generally discusses these issues from a contractor, sub-contractor or construction attorney’s perspective and the potential liability inherent in constructing such projects and this article has much to recommend it, and not just from an owner standpoint.  The fact remains that owners will be seeking sustainable building, whether through LEED or some other energy efficiency or environmental measure.  Project Owners will either chose sustainable building for economic or moral reasons, or through government mandate.

Knowing the other side’s playbook is one way that a football team can prepare, the same holds true in pre-construction negotiation of contracts. Knowledge of the types of contractual provisions an owner will seek to include in a construction contract can and will go a long way toward a general contractor’s ability to negotiate a proper contract, both with the owner and its subcontractors.  A working knowledge of the possible issues between owners and architects will inform a contractor’s working knowledge of the benefits and potential liabilities inherent in “green” building and keep it ahead of the curve.  Such knowledge will also go a long way toward dealing with these issues of human action and the long time horizons inherent in sustainability.

In short, just like a football coach who would love to know the other teams next play, contractors should be sure to check out this article and it’s insight into an owner’s “playbook.”

For more on this check out fellow Aribra contributor Tim Hughes’ post at the Virginia Real Estate, Land Use and Construction Law blog.

An article in a recent issue of Constructor Magazine, the publication of the AGC of America, makes a point that I have been making for a while, namely that sustainable building is here to stay.

The article quotes several contractor members of the AGC and essentially concludes that

Green is the new gold

I agree. Especially in tough economic times such as these, contractors and subcontractors need to distinguish themselves. Owners need to save money through more sustainable and energy efficient practices. Possibly more importantly, government is jumping into the breach to require such building practices, whether through building codes or LEED certification requirements.

Not only is such activity a moral imperative, but it makes good economic sense. For this reason construction professionals must learn how to “talk the talk” of sustainability. To miss this train could mean bankruptcy or worse given current trends.

Of course the risks must be taken into account. Contracts must be drafted in such a way that those performing the work are not held accountable for uncontrollable human interaction with a building so that contractors and subcontractors will be ready to do what is necessary for a sustainable building future. A qualified construction attorney can help.

In short (like that isn’t too late at this point), while construction professionals must learn to build “green” to survive, they also need to make sure they don’t die trying.

As always, I strongly encourage comments below. Also, please check out my Construction Law Musings for other information on sustainable building and other construction topics.

From New York Times | Flawed Building Likely a Big Element

Engineers and architects who have worked in or visited Haiti say that substandard design, inadequate materials and shoddy construction practices likely contributed to the collapse of many buildings in the earthquake that struck Tuesday.

Cameron Sinclair, executive director of Architecture for Humanity, a nonprofit design group based in San Francisco, said he was “horrified” when he visited Port-au-Prince and Gonaïves last October to assess the quality of construction there.

Mr. Sinclair said that design and construction were far worse than in other developing countries he had visited. “In Haiti, most if not all of the buildings have major engineering flaws,” he said.

Most houses and other structures are built of poured concrete or block, there being very little lumber available due to mass deforestation, said Alan Dooley, a Nashville architect who designed a medical clinic, built of reinforced concrete, in Petite Rivière de Nippes, a fishing village 50 miles west of Port-au-Prince.

Concrete is very expensive — much of the cement for it comes from the United States, Mr. Dooley said — so some contractors cut corners by adding more sand to the mix. The result is a structurally weaker material that deteriorates rapidly, he said. Steel reinforcing bar is also expensive, he said, so there is a tendency to use less of it with the concrete.

Building codes are limited or nonexistent, so columns and other elements made from concrete are often relatively thin, designed without proper margins of safety. “We would double the design strength, just to give it a factor of safety,” Mr. Dooley said, referring to practices in the United States. “There they’d design it to what it would hold.”

Concrete blocks are often substandard too, said Peter Haas, executive director of Appropriate Infrastructure Development Group, a nonprofit organization that is working on several projects in Haiti. Many of them are made in small batches at people’s homes, and the quality can vary. “When you’re buying blocks at the store you really have no idea of where they’re from,” Mr. Haas said. “And all it takes is for the block that was made at home to collapse.”

When builders in Haiti do take disasters into account in their designs, their most recent experience has been with hurricanes, the last major earthquake having occurred two centuries ago. “Newer construction has been developed to withstand hurricanes, not earthquakes,” said John McAslan, a London architect who has studied Haitian buildings, working with the Clinton Global Initiative. “If you engineer for one you’re not necessarily covering the other.”

Mr. Dooley said that his original design for the medical clinic called for a steel roof, but that was changed to a reinforced concrete one to better withstand hurricane-force winds. The building survived the earthquake with apparently little damage, he said.

But many other concrete roofs presumably collapsed, adding to the loss of life. Mr. Sinclair said he had seen houses where builders put concrete roofs on top of low-grade blocks. “Then it just pancakes,” he said.

Full | Flawed Building Likely a Big Element

As I thought about my good friend Eeyore, and my prior post (and borderline obsession with children’s characters (a totally different issue)), I realized that many can (and sometimes do) take my attitudes and penchant for baby steps as skepticism toward the whole idea of sustainable construction and its necessity.  Nothing could be farther from the truth.

I am committed in a very real way toward the idea of sustainability, I just feel that we are rushing headlong into the void without thought of potential consequences of our actions.  In the laudable zeal to make broad sweeping changes to governmental policy and building activity, I see the details being lost.  As I have posted before, here and elsewhere, I am at heart a risk management guy.  I see many issues through the same liability lens and feel that Murphy was an optimist.  For this reason (much to my lovely wife’s chagrin) I always look for the cloud in the silver lining (is that enough mangled cliches for one post?).

While I don’t think everyone in the “green” construction space should be thinking this way, we do need folks who are willing to look at issues as simple as a broken window or the potential for liability due to new technologies that are not time worn and tested as we move forward toward a more sustainable future.  This is not rocket science.  These are not high level policy issues.  We need to make sure that we consider the simple questions even if we don’t have the answers.

Why do I spread this wet blanket (okay I couldn’t resist one more bad metaphor)?  Because if we head into the future without consideration for these questions the whole sustainable enterprise could come crashing down.  One or two big products liability lawsuits or energy performance related lawsuits could chill the market for these buildings by driving contractors and suppliers from the space.  Without the companies that deliver the parts and build the buildings, all of the academic and policy decisions will be for naught.

In short, it is my commitment to a long term solution, and not skepticism that keeps me working to make sure that we understand the risks.  Without consideration of these very real and very critical (in my view as a construction attorney) issues, the market will not open and we will continue to live in the world of theory without meeting our potential and historical values through a long term and, yes, sustainable movement toward more energy efficient infrastructure.

Okay, that felt good, now back to working on contracts to deal with these issues.

**

Download Build2Sustain’s White Paper “It’s Time To Jump Into Sustainability”.

I am sitting here looking out at a wet, dark and windy day here in Richmond, VA.  In many ways I can relate to the clouds.  As an attorney I almost always feel like I am raining on the “sustainable building” parade.  On Build2Sustain conference calls, I always feel like I’m the one saying “whoa” we need to think about the liability.

As I’ve said at Musings before, Eeyore is one of my favorite characters from A. A. Milne.  Eeyore, you may remember, is the donkey on whom it’s always raining.  He is the loveable character that always feels like the sky is falling, but plugs along anyway.

I can relate.  I am firmly committed to sustainable building.  I think that the economic impact, combined with the moral imperative, make such a goal both worthy and required.  However, certain risks are inherent in any new use of technologies and any new mode of thinking, no matter how worthy.   Some of the issues that will need to be dealt with by contractors, architects, owners and, yes, lawyers, are the following:

• Insurance- the insurance industry is still catching up with energy related underwriting
• What standard of care applies due to a green building claim?
• Potential Trademark claims
• Longer time horizons and contractual or government requirements on energy goals

I sometimes feel like we are rushing past these issues without the careful thought that we need to give such risks in our (understandable) enthusiasm.  I tell clients to plan ahead, but it is human nature to be overtaken with excitement at a new venture and the vision of a better, cleaner, world.  However, until these issues are hammered out (hopefully without litigation to have judges tell us what to do), this march to a sustainable future will be a slow one.

The government can only do so much through mandate.  The private sector must be ready to move forward and pour money into sustainability.  Without some assurance and possibility to at least manage these risks, project owners and builders will be justifiably wary.  The sooner the risks are at least out in the open, if not resolved, the sooner the private sector will get fully behind sustainable construction and building management.

Until then, Eeyore and I will keep plugging through the rain.

Image from FreeFoto

by Christopher Hill

Much discussion has centered around the de-certification aspect of the energy reporting requirements of the new LEED guidelines.  However, as I have been reading and commenting on the proposed energy reporting requirements found in the latest LEED certification guidelines, and looking at the issue through the eyes of Eeyore (my favorite A. A. Milne character), I realize that my biggest issue with the reporting requirement is a broken window problem.

No, not the Broken Window Fallacy first set out by Mr. Bastiat years ago.  The problem I am talking about is not the illustration of an economic theory, but a practical issue I see with the use of long term energy reporting.

Once this energy data is out there (and it will be because what’s the point of building a LEED Platinum building just to have it de-certified?), owners and governmental entities will use it and make it a part of their contracts or regulations.  It is at this point that broken windows become a problem.

In short, what happens if a kid breaks a window or someone leaves a door open?  Despite training and lectures, humans make mistakes.  Who’s fault is it when such a problem (totally unrelated to design or construction) causes the building to fail to meet an energy reporting standard a year or more after construction?

I feel that these sorts of relatively straightforward issues must be dealt with if sustainability and “green” construction is to take hold.  I also feel that attorneys, architects and other construction professionals should work together to deal with them before the trouble occurs.

The USGBC has imposed extended reporting requirements as part of its minimum program requirements for LEED. It appears the extended reporting already adopted may only be an initial step. We may see extended reporting requirements backed up by decertification; we may see on-going recertification as a basic part of LEED program structure.  I admit this is speculative, but we may be seeing a shift from LEED using energy modeling towards an actual performance model.

Given the overall goal of improved building performance implicit in LEED, these changes and speculated upon shifts may make sense technically. These changes, however, raise some significant questions regarding risk and responsibility. The ultimate impact on risk, and thus embedded costs, of these changes may vary dramatically from state to state because of each state’s underlying legal framework.  Placing these changes into the complex network of construction contracts, contractual allocations of risk, and shared responsibilities raises some interesting observations and questions:

• States whose limitations period runs based on “injury”, such as Virginia, may experience extended limitations triggers where building performance is alleged to be the failure; such results could be different for the various players depending on their roles
• In damage trigger states, courts may find that “injuries” were suffered far earlier than owners even suffered performance problems, so results in these states are difficult to predict and there could be big winners and losers
• States with discovery based limitations accrual, such as Maryland and the District of Columbia locally, will present cases with ever longer, potentially plausible, arguments regarding why the owner “reasonably did not know” of a problem for years after occupancy of the project
• The timing issues presented by extended performance questions mean that contractual agreements on statute of limitations and when they start to run should be focal points of contract negotiations; negotiations regarding extended warranties will be pivotal as well
• The growing use of LEED certification in various local zoning approvals means decertification may carry unintended consequences. If a project is decertified, is there a possibility that its occupancy permit is threatened?
• The potential for decertification, or a failure to participate in recertification if that becomes standard, may place commercial landlords at potential for extended risk of breaches of lease agreements depending on the LEED requirements imposed
• Lease agreements in turn need to be carefully worded so that all parties are on the same page as to exactly what is the yardstick and time frame for complying with LEED related terms

These are just a few of the wrinkles that come the mind when one places an overlay of extended performance obligations into the context of LEED.  We will keep a close watch on these developments moving forward.  We believe that continued movement on the extended performance axis by USGBC will have some serious economic impact on the financial aspects of LEED projects, who “wins” and who “loses” based on these changes, and where bottlenecks may develop on the economic risk side of the equation in reaction to extended performance obligations.