Dispute Avoidance for Green Projects (Redux)

Taiwan's World Games Stadium,
http://inhabitat.com/taiwans-solar-stadium-100-powered-by-the-sun/

By now you likely have heard that the American Institute of Architects (AIA) released its revised construction contract documents. See Press Release dated Apr. 27, 2017 ("2017 AIA Contract Documents Now Available").  In this update, the AIA considered and analyzed industry  developments and then incorporated edits throughout its key contract documents used by owners, contractors, architects, and subcontractors.  Pertinent to sustainable or "green" building, the AIA released the brand new E-204™-2017 called the "Sustainable Projects Exhibit." 

Recall that back in May 2016 this blog touched upon this intersection of green building and dispute avoidance.  In that post, we noted that for this specialized context, the AIA offered D503™-2013 as a guidance document, which collected the various Sustainable Project (SP) agreements (variations of the A101, A201, etc.), illustrated how the contract language is modified from the base agreement.  The provisions in these SP versions were intended to avoid the unique issues that can arise on these green projects. 

Now in 2017, the AIA, owning to the fact that green building has become significantly more prevalent in the construction industry over the last decade, the AIA has simplified its approach. Rather than requiring parties to use separate SP versions of each  contract document, the AIA now offers a one-stop exhibit that parties can simply attach to any AIA contract document if the project includes a green objective, rating, or certification (e.g.  LEED® -- Leadership in Energy and Environmental Design).  Below is a look at the new and improved ways that E-204™-2017 anticipates and avoids disputes on green projects.

(1) Defines Responsibilities.

Likely the most important pre-project-commencement step is that the parties are on the same page with what the project is seeking to achieve in terms of sustainability, how to measure that achievement, and who is responsible for each step. Accordingly, first and foremost, Article 1 of E-204™-2017 requires the parties have a meeting of the minds to outline each element of their sustainability objectives include substance and deadlines.  In the follow-on sections, Articles 2, 3, and 4, the responsibilities of each project member are defined -- architect, contractor, and owner.  For example, at section 2.3, it is the architect's responsibility to convene a Sustainability Workshop and prepare the Sustainability Plan before the conclusion of the design phase in order to establish the green certifications, schedule, and budget. Other examples include that the contractor is unambiguously required to arrange for proper waste disposal (including a establishing a process for salvage and recycling) whereas the owner is unambiguously required to arrange for the final commissioning of the project. See section 4.5.  Communications about criteria and responsibilities in the first instance is a clear way to avoid ambiguities and therefore avoid disputes in the future.

(2) Defines Consequences.

The AIA E-204™-2017 forestalls various disputes by limiting the consequences.  For example, the contract document addresses use of copyright materials, the architect's plans, and clearly states how exactly the owner may use them for reaching the sustainability objectives, see section 2.8.  Another example, is green materials.  Green building criteria frequently includes selecting certain sustainable materials for construction, which materials may not perform as intended (or be available) given they may not have been tested or verified previously.  The AIA E-204™-2017 anticipates this potential dispute and at sections 2.5.2 and 3.5  requires the owner to sign off on the use of the green materials after the architect and contractor advise about the same.  The architect and contractor are thereby insulated from liability in the event the materials do not perform as intended.  Similarly, although the architect is responsible for marshaling the green certification process and the contractor is to build the green project as defined, neither the architect nor contractor is offering any warranty or guarantee to the Owner that the sustainable objective will, in fact, be achieved. See section 2.7 and 3.9.2.  This is a reasonable disclaimer given that "achieving the Sustainable Objective is dependent on many factors beyond the Contractor's and Architect's control."  See section 6.1.  Likewise, consequential damages are waived. See Article 5.

(3) Substantial and Final Completion.

Along the lines of not requiring the architect and contractor to guarantee the achievement of the green objective, substantial completion is not tied to the green achievement either.  Which the architect and contractor must fulfill their responsibilities toward achieving the green objective, actually achieving the green objective "shall not be a condition precedent to issuance of the final certificate of payment." 3.9.2.

In sum, the AIA E-204™-2017 provides a concise (6 page) way to incorporate a green objective into a project without wholly reinventing the wheel of the familiar construction contract.  It flags the issues that can crop up in a green project and addresses them in the first instance a manner that seeks to avoid ambiguity.  At the same time, the AIA still provides flexibility for the parties to divine their own particular terms and conditions. See Article 7.

 ---------------------------------------

The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts.  She is an associate at Pierce Atwood, LLP in Providence, Rhode Island.  She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.

Dispute Avoidance for LEED Projects

http://www.uclan.ac.uk/courses/assets/media/construction_law_dispute_resolution_banner.jpg

In this final LEED-focused post (see post #1 and post #2), we consider dispute avoidance in the context of green-building construction contracts.  Like all projects, disputes often arise when expectations are not met. LEED projects are no different.  Parties are best served and disputes avoided when obligations and contingencies are laid out ahead of time.  For example, the AIA has adopted a guide and contract language to address and avoid disputes in this specialized context.  See AIA D503 (collecting the various Sustainable Project (SP) agreements including owner-architect, architect-consultant, owner-contractor, contractor-subcontractor).  Note that the AIA does not endorse any particular certification and its documents can be tailored regardless of the certification system selected. Below are some key contractual considerations related to disputes on green projects through the lens of owners, contractors, and architects:


(1) Define Consequences. A mutual waiver of consequential damages provision is common in construction contracts. But for green projects, it is important to define what those consequential (and non-recoverable items) are. For example, not achieving a certain threshold of energy savings, spending more on operational costs than anticipated, missed financial or tax incentives, or disappointing improvements to employee production might fit the definition.  In the event these items are intended to avoid the waiver and are recoverable, deciding ahead of time how to measure them (which could be difficult to prove) may be a prudent course as well.


(2) Limit Liability. Generally a green-building project can only be designed or built or operated with the intention of meeting sustainable goals. Other parties must perform their expected obligations and other events must fall in place as well (e.g. contractors must have access to certain materials, efficient operation & maintenance must be executed as planned, and the authorities must interpret standards and approve the design). Likewise, as noted above the costs or damages of not meeting the expected green goal can be difficult to quantify. In light of of these types of risks, contracting parties may consider include a limitation of liability with a defined maximum.


(3) Avoid Guarantees. Similarly to #2 because project participants cannot guarantee the performance of others, contractors and designers on green-building contract should make it clear that achieving the project objective depends on events outside of any one contracting party's control.

(4) Attend to Confidentiality. Confidentiality provisions must be tailored to ensure the authority-review process does not run afoul of the terms. Authorities approving sustainable projects need to have access to and the right to reproduce and display project filings. Such reproduction and disclosure may be disallowed under typical design contracts.

 ---------------------------------------

The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts.  She is an associate at Pierce Atwood, LLP in Providence, Rhode Island.  She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.

LEED Appeals

In this second post about LEED, we briefly review the achievement categories for construction projects.  Then we take a look at LEED appeals and challenging whether credits within the categories were fulfilled.

As discussed in the post #1, LEED is a rating system for sustainable and efficient building, which achievement level—denoted by platinum, gold, silver, and certified—may be a requirement in the project specifications or a condition for funding.  The level is determined by points (up to 110 are available) earned in several categories.  The categories are often interrelated.  For example, the location selected can affect energy options including harnessing renewable power.  The universal categories (there are also regional categories) and brief examples of strategies for generating points follow:

•  location/transportation – (16 points) – develop areas near pre-existing roads/infrastructure and already developed surfaces to limit urban sprawl and avoid occupying green space, develop at a high priority sites like a brownfield, locate near public transportation, incentivize carpooling; provide electric car recharging services;
• sustainable sites – (10 points) - use native plants in landscaping, limit size of the building footprint by building upward to protect open space and habitats, minimize lighting or use screened or timed units, install pervious surfaces, collect and use rainwater for landscaping or even process water; use reflective or light-colored roofs or roof gardens and reduce paved surfaces to avoid heat absorption;
• water efficiency – (11 points) - limit water use by installing efficient plumbing valves and restrictors, use dual flush or low flow toilets, use rainwater as process water, monitor water use to manage consumption, use drought-tolerant plants in landscaping, install high-performance irrigation systems;
• energy/atmosphere – (33 points) - incorporate natural air sources through appropriate venting or harness wind energy, use solar energy and sunlight for some or all building power sources, insulate walls and the roof to conserve energy, give due consideration of size demands of the use and build appropriately, select high-performance appliances, lighting, and HVAC, design appropriately sized HVAC loops for heating and cooling;
• materials/resources – (13 points) - reuse building materials, rely on efficient framing spacing to use less material, use local materials to reduce travel emissions, use renewable, recycled, long-lasting, prefabricated materials, adopt streamlined recycling and waste programs;
• indoor environmental quality – (16 points) - design systems to filter air as it enters the building; test for radon, avoid building materials that emit volatile organic compounds; design ingress/egress to limit particulates collection from outside, use pest control that does not rely on chemicals; 
• innovation – (6 points) – credit is given for a cutting edge methodology even if it exceeds or does not fit into a specific category.

LEED certification process begins when a project team registers its application online.  (For guidelines on the entire application process, see the LEED Certification Guide). The team provides all necessary information about the project and documentation to establish the various credits.  The U.S. Green Building Council’s Green Building Certification Institute (“GBCI”) reviews the application, allows for supplemental clarifications during the “Preliminary Review,” and then provides a “Final Review” that states whether and to what level the project will receive LEED certification. 

At that point, the owner or project team has 25 days to appeal the credit decisions contained in the Preliminary Review.  Called the “Appeal Review,” the project team may amend their application with respect to single credit or seek out additional credits not previously submitted for review.  Generally the original reviewer will respond to the appeal.  This appeal process may be raised for a single credit or multiple credits and may be repeated without limit. However, each credit addressed is considered its own appeal and requires payment of its own appeal fee.  Interestingly, the appeal fee is greater depending on the complexity of the credit.  While this “Appeal Review” process is unlimited to the project team (a change from the 2012 version of LEED guidelines wherein an Appeal Board had the final say on credits), it may suffer from its new Laissez-faire approach.  For example, a formal review from an uninterested and qualified panel (or reviewer) is highly important when a credit decision is questioned.  As presently set up, the same reviewer who rejected the credit maybe the same person to review the appeal.

A variation of the “Appeal Review,” the project team also has the option of pursuing Credit Interpretation Rulings (CIR), which are project specific, or LEED Interpretations, which set precedents for all projects.  The CIR process invites the project team to seek out technical guidance related to a particular credit or facet of the LEED rating system. LEED Interpretations tend to ask similar questions as CIRs, but may be more complex or, in the LEED estimation, is worthwhile to use as precedent.  The difference between a CIR /LEED Interpretation and the Appeal Review described above appears to be the timeframe and breadth of appeal.  Appeal Review is necessarily during the application process, whereas the other two may be accomplished before application.  Appeal Review appears focused on sufficiency of backup for a credit as opposed to the technical guidance or the LEED regulations as a whole.

On the flipside of the project team’s appeals and interpretations is the “Certification Challenge.”  This policy is intended to ferret out “incidents of intentional or inadvertent misrepresentation which result in the inappropriate award of LEED certification.”  See the LEED Certification Guide.  Essentially it is an audit process that may initiated by the GBCI president for “any reason or no reason at all” within 18 months of LEED certification.  The GBCI may also proceed with a Certification Challenge if a third party with “specific personal knowledge” comes forward with a complaint.  In either case, there is an investigation by GBCI and an opportunity for the project team to be heard.  Upon an adverse determination, the project team may appeal to the GBCI Board of Directors.  In the event of an adverse decision before that board, the decision is final, and the LEED certification may be revoked.

Final Post: We will examine considerations in construction contracting in this green-building era aimed at avoiding disputes on a sustainable project.  For example, the AIA has adopted its own guide and contract language.  See AIA D503.

 ---------------------------------------

The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts.  She is an associate at Pierce Atwood, LLP in Providence, Rhode Island.  She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.