by David F. McPherson, Partner and David E. Nemeth, Partner
The “green building” niche for the construction industry has been slowly developing for years. With the recent passage of new laws at the federal, state, county and city levels, however, it is not enough for contractors, developers and owners to be aware of the existence of green building laws; you should know those laws applicable to your particular jurisdiction, as well as the Leadership in Energy and Environmental Design (LEED) requirements. The focus of this article is to describe some recent developments affecting the green building movement in California. It will examine why it is critical for contractors, developers, and others in the industry, to be familiar with the LEED process given both the opportunities and requirements new building regulations and stimulus funding have created. Additionally, while meeting certain performance criteria has traditionally been within the control of owners and designers, the article provides a short discussion on how contractors can have a significant role in achieving LEED certification.
The Green Building Growth Industry
Earlier this year, the federal government adopted the American Recovery and Reinvestment Act of 2009 (the “Stimulus Act”), seeking to restart the American economy. While the Stimulus Act reaches far and wide, there are significant opportunities for contractors, developers and property owners with respect to “shovel ready” projects. A close examination of the Stimulus Act confirms there to be many opportunities connected to “green building.” Indeed, tens of billions of dollars in the Stimulus Act funding initiatives are earmarked for green building. To start with, the Stimulus Act provides at least $45 billion in funding for renewable energy, energy efficiency and other energy related programs. Almost $20 billion in tax incentives for renewable energy and efficiency measures are also included. Here are just a few examples: (1) at least $4.5 billion is allocated to the U.S. General Services Administration to convert its facilities to “high-performance green buildings” in an effort to make federal buildings more energy efficient; (2) $4.2 billion was set aside to modernize various Department of Defense facilities to go toward green building related improvements; (3) $6.3 billion in grants were established to assist state and local governments to make investments in energy efficient projects and those that would reduce carbon emissions. The Stimulus Act includes many additional programs related to green and sustainable building projects. It is readily apparent that the federal government is committed to spending significant resources towards energy efficient and green projects. The Stimulus Act is truly a shot in the arm for the green building market.
But even more is happening at the federal level with green legislation. On June 26, 2009, the House of Representatives passed the American Clean Energy and Security Act (“ACESA”), (also known as the Waxman- Markley comprehensive energy bill) which at the time of this writing, is before the Senate. The ACESA, if made into law, will have a great impact on green building. Some of the key components of the ACESA are: (1) 20% of electricity derived from renewable energy sources and efficiency by 2020; (2) $90 Billion invested in renewable technology; (3) implementation of energy saving standards for buildings and industry; and (4) a cap/trade/offset scheme for carbon emissions. While the ACESA bill contains much more, it is clear that green building is not a trend. It is here to stay. The question is: “Are you prepared?”
Impact In California
What does this mean for California? Much of the federal funding from the Stimulus Act is intended to flow directly from the Federal Department of Energy to grantees or people who “work with” the Internal Revenue Service to obtain tax rebates. Considerable funds will flow also into California public agencies to benefit the Golden State contractors, owners and residents. Perhaps most significantly, the California Energy Commission will receive almost $300 million in energy efficiency and renewable energy funds. While it remains to be seen how the agencies decide to best coordinate the programs, the significant funding represents a unique and unprecedented opportunity for contractors and developers in the green market place.
While the Stimulus Act alone should provide incentive for California contractors, developers and owners to recognize the need to understand the LEED requirements for construction, the California legislature has taken a leading role in the United States in implementing laws requiring more and more green building. Some examples of those actions include:
• Executive Order S-3-05 (2005) sets Green House Gas (GHG) emission reduction targets. Californians are to reduce GHG emissions to 2000 levels by 2010, reach 1990 levels by 2020, and then achieve an 80% reduction from 1990 levels by 2050. This would require buildings to become much more efficient and sustainable.
• California Global Warming Solutions Act of 2006 (AB 32) requires the California Air Resources Board to prepare regulations required to reduce GHG emissions to 1990 levels by 2020. These regulations are to be adopted by January 2012.
• Under SB 97 (2007), the California Office of Planning and Research must, by January 1, 2010, prepare guidelines for mitigation of actual GHG emissions or their effects. It is expected that these guidelines will include incentive bonuses for green buildings.
• With the passage of AB 811 (2008), property owners (commercial, industrial, and residential) are able to finance the installation of energy efficiency improvements and distributed generation, renewable energy sources (solar, wind, weatherization, energy efficient technology) that are permanently fixed to real property within the cities and counties opting in to this law with low interest loans which can be repaid in up to 20 years on property taxes.
The above just scratches the surface; nonetheless, it is abundantly clear that contractors, owners and developers cannot ignore the fact that green building is here to stay. While, California has long been recognized as a leader in green building laws and regulations, it is simply a matter of time (and that time will be short not long) that more and more states, counties and cities implement similar laws and requirements. Only those contractors, owners and developers with a working knowledge of the LEED requirements will be able to successfully navigate through this rapidly growing and expanding area of construction.
The Contractor’s Role In The LEED Process
Going back to long before LEED, a contractor was engaged to build a high-end resort for an owner that insisted the project be built to “fivestar” standards. Such quality designations are normally awarded to resort properties by the Mobil Travel Guide and others for categories such as service, restaurant quality, spa amenities and interior design. However, this “five-star” language made its way into the construction contract, and caused a great deal of debate and legal posturing when the contractor and owner were later litigating over the end-product. This vague “specification” for the project increased the owner’s expectations for the project, and of the contractor’s role in delivering a “five-star” resort. These expectations existed regardless of how vague the concept, or whether the performance of the contractor, in following the owner’s design, could even impact such a designation.
Today, substitute a LEED certification level for “five-star,” and it raises issues that are extremely similar to those faced by the resort contractor, but with very real expectations, standards, and consequences. Also, unlike a contractor’s ability to realistically impact whether a resort ultimately earns a “five-star” rating, achieving a particular level of LEED certification includes work within the entire project team’s control, including the contractor.
The LEED rating system is a third-party certification system developed by the United States Green Building Council (USGBC). LEED for new construction and major renovations, version 3, is new for 2009. The new version changes the total number of credit points available, and the number of points required to achieve each of the four levels: Certified, Silver, Gold and Platinum. The new ratings are based on a 100-point system, which replaces the old 69-point system. Under the new system, a project must earn a minimum of 40 points to achieve the LEED Certified level; LEED Silver requires 50 points; LEED Gold requires 60 points; and achieving LEED Platinum requires at least 80 points. While LEED 2009 has new credit requirements and point values, it does not change the six categories through which credits are earned. These categories remain: (1) Sustainable Sites, (2) Water Efficiency, (3) Energy & Atmosphere, (4) Materials & Resources, (5) Indoor Environmental Quality, and (6) Innovation & Design.
Owners and designers typically have the primary responsibility in the pursuit of LEED certification. However, green building projects work optimally with an integrated effort by the entire construction team, as the common goal of achieving a sustainable and LEED certified project requires the collaboration, involvement, and expertise of all team members. Contractors, therefore, play an integral role in this process.
Within the various LEED categories for new construction are prerequisites and credits with which contractors (and construction managers) must be familiar, as they have responsibilities with decision-making, calculations, submittals, and record keeping, all of which can make or break whether a project earns the LEED certification being sought. Therefore, in order to (a) successfully bid and compete for jobs requiring a particular level of LEED certification, and (b) be in position to successfully execute a project with LEED requirements, contractors must understand what kinds of verification and compliance are expected under the LEED categories.
For example, to obtain various points under the Material & Resources category, the project team must be able to establish that: An accessible area was provided for the collection and storage of materials for recycling (Prerequisite 1); 50% or more of non-hazardous construction and demolition debris was recycled and/or salvaged (Credit 2); 5% or more of materials used on the project, based on cost, are salvaged, refurbished or reused (Credit 3); 10% or more of the total value of materials on the project contain recycled content, (Credit 4), and/or 2.5% or more contain rapidly renewable building materials (Credit 6).
To obtain these Material & Resources credits, it may be the contractor’s responsibility, among others, to:
• coordinate and oversee the recycling area for the project to ensure debris is properly diverted from disposal;
• calculate and document the weight or volume of both the total and recycled amount of debris, to establish a high recycling rate;
• identify opportunities for using salvaged, recycled, local and/or rapidly renewable building materials; and
• calculate and document the value of these building materials to establish that the required percentages are achieved for credit.
These are just a few examples, taken from only one of the six 2009 New Construction credit categories. To assist with these efforts, as well as numerous others within the contractor’s control, the contractor must be familiar with the documentation requirements for all of the categories, and be prepared to keep spreadsheets and records necessary to establish, upon the project’s completion, that points should be awarded by the USGBC. The documentation required can range from taking photographs, to obtaining manufacturer’s information regarding recycled content, to obtaining and retaining data to establish the amount of volatile organic compounds (VOCs) emitted by the adhesives, sealants and primers used on the project.
Conclusion
The full scope of how the contractor’s decision making, calculation, cost analysis, submittal, and record-keeping responsibilities affect LEED certification, cannot be covered within the scope of this article. Given both the opportunities and requirements the “green building” movement has created, it is important for contractors to become extremely knowledgeable and experienced with LEED and other similar requirements, and the ways in which their respective expertise with the means and methods of construction can contribute toward a successful and sustainable project.
For over 30 years, Watt, Tieder, Hoffar & Fitzgerald, LLP has provided its clients with comprehensive legal services encompassing all aspects of construction, suretyship, government contracts and real estate. Our dedicated attorneys and focused practice afford us the vital tools to address our clients' needs.
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The information or opinion provided in this article is the author's own and not necessarily that of Watt, Tieder, Hoffar & Fitzgerald, LLP. The author is solely responsible for the information and opinion that he or she has provided. The information contained herein does not replace seeking specific legal counsel to directly address individual client needs. |
