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October 27, 2011

Is your LEED project a green hornet’s nest?

  • The advent of green building has brought extensive professional liability risk with it.
    Oles Morrison Rinker Baker


    No good deed goes unpunished and green building is proving to be no different. That the market is pushing forward with green building should come as no surprise to those in the construction industry — but the extensive professional liability risks might.

    Increased liability exposure for those projects coming under the “green building” purview arises from two major issues. First, with the implosion of “green” and “sustainable” being branded on everything from paper towels to luxury condominiums, there is the risk of heightened expectations on the part of the end user of the project. Second, there are still no universally accepted standards for what qualifies as green.

    Looking at the first issue, design professionals must be cognizant of any green representations they are making to the owners of the project. Owners, potential buyers and developers may have very different understandings of what green means. Managing expectations is key.

    The aggressive marketing of those in the green construction industry, including manufacturers and consultants, which are then passed along by the design professional, could possibly lead to allegations of fraud when the end product does not measure up. Moreover, construction professionals must be careful with the representations they are making about their qualifications and experience with green building, which could elevate the standard of care to which they are held.

    Questions and claims have arisen on a variety of issues. For example, what if the building was intended to meet certain LEED certification or other green standards, but fell short? What if it failed to receive expected tax breaks — either due to delay or performance? How do you incorporate and handle changes in the code requirements as more and more municipalities attempt to green their legislation? Are there patent issues to consider with these new green technologies?

    Understanding the green construction market will help design professionals and builders reduce the inherent risks.

    Professional industry groups are beginning to provide the framework to help their members understand their role in the green movement.

    The American Institute of Architects backs the public policy that “architects must be environmentally responsible and advocate for the sustainable use of those resources.”

    The AIA Code of Ethics requires its members to promote sustainable design and development principles and practices. The National Society of Professional Engineers also requires its engineers to adhere to the principles of sustainable development.

    AIA Form B101-2007 has attempted to provide limited guidance within the contract, requiring that the architect discuss the feasibility of incorporating environmentally responsible design with the owner.

    While the professional societies are embracing the green movement, they have not yet caught up to the times in providing the framework to handle the potential claims.

    Managing risk

    The AIA forms, and most other traditional construction contracts, leave open a host of risks for A/E professionals when it comes to green building.

    Communication between the architect and the owner to manage expectations and determine the key green objectives is crucial and a detailed scope of services pertaining to the green or LEED requirements must be set forth. Be careful not to guarantee achieving a specific LEED goal but rather discuss the participation of third parties required to achieve certification.

    Frank and frequent discussions about the project’s budget and schedule are a necessity to successfully accommodate the owner’s green expectations. As the project evolves, integration of green elements should be regularly discussed with the owner and any changes thoroughly confirmed and documented.

    Traditional project relationships must also be examined.

    It is imperative that all parties to the project consider the green aspects of their respective role. An integrated design process with the design and construction teams working together from the start will keep the costs in line. Costs for green or LEED projects usually only exceed those of traditional construction when the green elements are added piecemeal during the life of the project, instead of being considered integral to the project as a whole.

    Practically speaking, the design professional must work closely with the contractor or construction manager to ensure that the product selections are consistent with the green objectives of the owner. This imposes on the traditional allocation of means and methods belonging solely to the contractor and must be considered in the contract.

    Open communication with all project participants is essential — but is not enough to eliminate professional liability risks. The contract must address the many issues associated with green building and LEED certification. Specifically, waiver or allocation for risk for consequential damages as it relates to tax credits or incentives, higher rents and/or tenant expectations, anticipation of lower energy costs that may or may not be realized, maintenance costs, and failure to meet LEED or other green certifications must be addressed.

    Has risk been allocated for new and unproven systems or technologies and warranties on green products? The lead times associated with investigating, testing and/or obtaining the green products must also be weighed and allocations of risk assigned. Delivery and integration of materials between subcontractors must also be considered.

    Product substitutions must be carefully considered — confirming that the substitutions meet the standards, the products work together and whether the combination or addition of a product would jeopardize consideration for LEED points must be taken into account. Insurance coverage must be carefully considered, including A/E errors and omissions exclusions as related to the green and LEED components.

    The contract must also allocate responsibility for the post-occupancy review process for collecting data, measuring performance and reporting to the USGBC, as well as maintaining the LEED performance goals if the project is LEED certified.

    As the industry standards evolve and the participants in the green construction industry get more projects under their belts, green building will become more standardized. In the interim, education, communication, risk allocation and documentation will help keep design professionals from falling into the green hornet’s nest.

    Meghan A. Douris, LEED Green Associate, is an attorney at Oles Morrison Rinker Baker LLP specializing in construction, government contracts and commercial litigation.

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