June 28, 2001

Can you build green without going in the red?

Mention the words “integrated approach” to an engineer and you’ll see beads of nervous sweat form on their foreheads. The phrase elicits feelings of fear and vulnerability unlike those ever felt before in this industry. They complain, “I’ll never get enough fee to go to the various meetings” or “I’ll use up all of my design fee in studying the various scenarios!”

Instead of pointing fingers of blame or ignoring the integrated approach all together, engineers must come up with a solution. In this case that would mean establishing a unique fee structure for sustainable building.

To make this happen, engineers, architects, and building owners will need to work together and open their minds to new methods, and collaborate from the very beginning to create a fair approach.

Like any new concept, sustainable building and the integrated approach make building-design professionals uncomfortable. It is different than what many have been doing for so long, but once the smoke clears, they will see that the idea is not a new one at all.

Historically, engineering firms have relied upon “rules of thumb” when determining their fees for large projects, such as taking a percentage of construction costs or an arbitrary number of dollars per sheet. However, these “rules” are based upon many years of experience doing the same types of projects under the same types of delivery systems, over and over again.

Sustainable building projects present a challenge using these rules of thumb. There may be too many variables and each project is unique, making a standardized system for determining fees nearly impossible. It is essential that building owners and project teams realize this uniqueness from the very beginning.

An integrated approach allows for a coordinated effort between complementary trades in order to elicit optimal design strategies. The architect works closely with the project team in the very beginning.

An example is the architect, HVAC engineer and electrical/daylighting designer working together on bringing natural daylight into the building, refining the approach until it satisfies all the needs of the space. This group approach also strongly encourages creativity on all fronts. The varying experiences of the design team invigorates, educates and challenges those involved.

Understanding the integrated approach is only half of the battle. An agreed-upon fee structure for professional services is critical in bringing sustainable building into the mainstream of everyday construction, and it will also lead us on a path toward profitability.

One method that may work is performance-based fees, in which the engineer is rewarded for energy saved. This would require a reasonable goal for the project energy savings along with extra incentives to exceed that goal.

In theory, this sounds like a great way to provide incentive for engineers to participate fully in an integrated approach. However, young would-be engineers are taught in their management classes that contractually engineers are not responsible for “means, methods, techniques or procedures.” Translation: You can design it, but you have no control over how it is installed or operated.

Which brings up the question, why would engineers assume the risk of having their design fees tied directly to the efficiency of the system they are designing when they are unable to take responsibility over the installation of the system itself? And this begs a further question: How many engineers even want that kind of responsibility to begin with?

Lessons can be learned from an industry that was born on the East Coast in the 1980s: performance contracting. It is the only delivery system that places sole responsibility of the system’s performance on the company that is designing and installing it.

These companies, sometimes called energy services companies or ESCOs, gather historical information about a building or facility, such as its systems design, usage and maintenance. This information is used to verify the actual amount of money a building owner or operator is spending on an annual basis for utility bills and capital expenditures. The ESCO will then design and install or retrofit a new system, guaranteeing the savings.

ESCOs can assume such risks because they are paid to. A typical fee structure for performance contracting is in two parts: the audit/development phase and the design/implementation phase. An ESCO can present a fixed fee for the research and exploration of the building or facility, which in turn is used to gather enough information to direct the design phase. Only after the audit phase will the ESCO commit to the design phase fee.

This method is not a new one, and it can be directly applied to sustainable building design. A two-part fee system could be used to insulate the risk of exploration from the design phase. Part 1 would consist of research and conceptualization. The owner would be protected from cost overruns by being presented with a “cost-plus max” or an “hourly not to exceed.”

Part 2 of the fee, which represents the effort for the actual implementation of the project, would only be determined after Part 1 has taken place.

Like any new idea, restructuring professional services fees will more than likely be met with trepidation. Architects and engineers will need to work together to show building owners that the potential increase in design fees are a tiny portion of the savings a sustainable building will enjoy.

Decreased operational costs, improved occupant satisfaction and performance, and conservation of materials and natural resources far outweigh the initial costs of the project.

Sustainable buildings are intended to have elements that mimic the natural state of their surroundings. This means that each solution is unique, and relying on rules of thumb to determine cost and effort will not apply.

That’s not to say that the sustainable building processes cannot be identified. It will just take pioneering building owners, engineers and architects to agree up front that there is no tried-and-true method. There will be risks, but the payoff is a building that will save the owner money over time and has a reduced impact on the environment.

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