Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law
While it is impossible to list all of you who have contributed to Guest Post Fridays here at Musings (please use the link above to review all of these posts and see who else has contributed) and to thank you individually, please know that each and every one of your contributions have made Construction Law Musings a more vibrant and interesting place to visit. The opportunity to work with such varied, intelligent, and insightful people over the last year has been wonderful. With each post I learn something new.
Without these contributions to add a layer of color that I could not provide alone, Musings would just be another blog about construction law by a Virginia lawyer. With them, Musings is a fun place to hang out and learn. To those who have posted here in the past, the door is always open for a repeat posting, just give me a buzz with a topic and when you can do it.
In short, thank you to all of you who have contributed since this experiment began and I look forward to hearing what you all have to say in the future.
For this week’s Guest Post Friday, Musings welcomes Ryan Bowers (@ryanbbowers). Ryan is a construction law attorney and business litigator.Ryan’s construction practice draws on his years of hands-on experience in the construction field, which predates his practice of law. He also maintains Law under Construction, a blog built for Indiana construction professionals to monitor legal news and developments. Ryan is an attorney at Kroger, Gardis & Regas, LLP in Indianapolis, Indiana, a full service law firm founded in 1937.
First and foremost, I would like to thank Chris for the opportunity to guest post on Construction Law Musings. Earlier this year, I finally had the opportunity to pursue a blog that combined by two passions: construction and hockey the law. After stumbling across Musings in the wee hours following one too many coke zeros and a half finished fireplace remodel, I was both impressed and inspired. Law under Construction was born. I am honored to take my blog on the road so soon in its rookie season.
I am a construction junkie. Having a father who is a master plumber, licensed builder, and owner of a mechanical construction company will do that to you. Learning to solder at 15 will do that to you. Installing fire suppression systems at 19 will do that to you. Remodeling a 1929 house will…. So, I have found inspiration for my blog posts (many yet unfinished, like my house…) in the practical experiences of my past.
A recent thanksgiving post-turkey, pre-nap, conversation with my brother, the president of the aforementioned contractor, sparked one such idea. When the topic of LEED came up, he said, and I (sort of) quote “man, I am seeing LEED everywhere, should I get LEED accredited?” Honestly, I was a little stumped. Good thing the tryptophan set in.
I have since pondered the question: should contractors and subs seek LEED accreditation for someone on staff (or at least gain a working understating)? Fortunately, in the interim, I also had the opportunity to attend a wonderful event put on by SMPS Indiana, where owners who led green projects gave their post-LEED certification perspectives, which provided some very useful information (referred to herein as the “panelists”). Given the lack of litigation involving LEED issues, there is no clear answer. However, I am hopeful that you (and my bro) will find my insights useful.
The pros…
Obtaining projects: I recently read that the “green movement” is no longer a movement, but rather here to stay. Indeed, one of the panelists confirmed that her university has committed all future new construction or significant renovations to LEED silver certification (or higher). And it’s not just buildings anymore – “green” will encompass other critical infrastructure projects (see here). Thus, in order to obtain work on “green” projects, contractors may need to obtain accreditation or, at least, become knowledgeable. Although this applies more in the context of integrated project delivery, design-build, etc., it will likely only increase as green building increases. The economics of these project structures demand quality and skilled contractors. One of the panelists noted that one of their first steps was to bring in a LEED accredited contractor familiar with the local skill set and local supplies. Another noted getting novice subcontracts to understand the LEED process proved difficult.
Less potential for construction defects: Geothermal heating and cooling. Vegetative roofs. Mini-wind turbines. Hal 9000. Ok, I am kidding about the last one. But these are new, sophisticated, and often unproven technologies (especially with Platinum certification). It takes a careful reading of the spec manual. There is a risk of noncompliance and the need to allocate risk. LEED accreditation, as well as the required continued education that follows, may help a contractor’s understanding of these technologies and avoid future defect claims.
Fewer delays: Working on a LEED project with no prior experience may lead to project delays, such as the inability to follow the site-specific LEED action plan or unfamiliarity with submittals for LEED or the unique materials. One panelist noted that, although the project was publically bid, they were lucky enough to land a LEED contractor, as it was extremely beneficial. On the flipside, another had a demolition contractor with zero prior experience, who had to be constantly educated on LEED. This inevitably led to delays.
Equal (and green) footing: Often, the architect on a LEED project is accredited and leads the overall effort. Having equal knowledge of various LEED related processes, designs, technologies, etc. may be helpful. For instance, when you submit a LEED related claim to the architect, LEED knowledge may help you decide how to proceed after a denial. One of the panelists pointed out a situation where engineers on a project had designed to traditional specs, which the contractor caught thanks to LEED knowledge.
Likewise, the cost increases on LEED projects can range from 2-10% (based on various sources). One panelist noted a 3% increase. Knowing and recognizing these differences can help ensure accurate project bids and help maintain already thin profit margins. Furthermore, if you know LEED, you may actually be able to bid lower if you don’t have to add “risk” costs to your bid. Always a good result.
Finally, with guarantees of LEED certification popping up in contracts, new provisions affecting rights and liabilities on green projects may also pop up (i.e. for failure to achieve LEED certification or later decertification). There may also be special warranties for green products. Understanding these concepts prior to executing contract documents (or associating with a qualified attorney) will help minimize unknown risks.
Obtaining project bonds: Although not a current concern, it may be in the future. With the emergence of more green projects (and of greater value), the way sureties handle such projects may change. Since the surety is guaranteeing completion in accordance with plans and specifications, and given the concerns raised above, having a LEED AP on staff may become a prerequisite to qualify for a bond on a green project. Green insurance products are already emerging, this could be next. Remains to be seen. (thanks to my co-blogger, and resident surety expert, Jennifer Watt for the input here).
Safety: As a result of the way debris is handled on a LEED project (reuse, recycling, salvaging, etc.) one panelist noted a 0 accident site. And a healthy employee is a productive employee. On the flipside, I don’t often hear contactors complain about fewer workman’s comp claims.
Goodwill and peace on earth: Just as the panelists remarked that their green projects have resulted in an overall better public image (better recruiting of employees / students), a more eco-friendly image for a contractor can be a positive.
On to the cons…
Competing standards: Although the most widely recognized, LEED is not the only player in the game. Other “green” standards include Green Globes and Energy Star. Further, recently an individual filed a class action against the USGBC attacking LEED. (see here) Ignoring the merits (or lack thereof) to the case, why invest resources into something that may not stand the test of time. For example, one panelist noted that, while they achieved LEED certification with one project, on a subsequent project they were pursuing the LEED elements generally, but not seeking the formal certification due to time and money concerns. Another panelist was now pursing Energy Star on a project. One should also consider the new International Green Construction Code (IGCC). If the code achieves widespread adoption, simply building to the code may alleviate the concerns above, and separate LEED knowledge may become superfluous.
It is hard: As a lawyer studying for the LEED Green Assoc. exam right now, I can attest to this fact. Several of the most skilled plumbers and sharpest mechanical minds I know have had difficulty with the testing aspect of their master’s exam. Putting in the time (and money) may not result in accreditation. Plus, you need to maintain continuing education hours, an additional burden.
Enough actual “green” projects?: I don’t have any real data on this one, but it is worth considering whether you even want to get involved in this area.
Sub it out: There appear to be myriad LEED consultants out there (and likely one is already involved in your LEED project). Get the information from someone else when you need it.
Image: The “green movement” raises red flags in some people’s minds. For anyone with this mindset, I leave you with these thoughts: a hospital represented on the panel stated that it did not seek LEED certification to “save the world;” but rather to “save the sanity” of the staff with a better workspace (via incorporation of daylight). Further, many of the elements of the LEED project (no formaldehyde / no voc) were things that everyone already wanted – so there was no hard sell. Green building may simply be what people already want, but just don’t realize.
For this weeks Guest Post Friday, Musings welcomes Matthew DeVries. Matt is the author of www.bestpracticesconstructionlaw.com, is a construction attorney in Nashville, Tennessee. He is a father of five energetic children and he often uses his family experiences to shed light on the green building, sustainable design, technology and project management issues discussed in his blog. You can reach him at (615) 742-8577, mdevries@smithcashion.com, or on Twitter: @matthewdevries.
You’ve already met my eleven year old Princess. Many months ago, I was teaching my kids about grace … undeserved merit or favor. Well, my daughter was stalling and delaying on eating her meal … by almost an hour. So, naturally, I saw this as a teachable moment.
“Honey, do you remember when we were talking about grace this week? Although you should eat all your food, I am going to show you some grace tonight. Even though you don’t deserve it, I am going to eat the rest of your chili for you.” How nice of me. I proceeded to spoon the rest of her chili into my bowl. Happy tummy!
Without skipping a beat, my inquisitive daughter asked, “Dad . . . You got any grace for my broccoli?” Nice.
While we continue to joke about that evening, I am reminded that too many times we fail to get something because we fail to “ask” for it. And when we ask for it, we sometimes fail to ask for it properly. Having litigated construction disputes for many years, the issue of entitlement often turns on whether the contractor properly submitted its claims in accordance with the terms of the parties’ contract. Whether the dispute involves a change order, delay damages, or time extension, I have litigated too many claims for additional compensation or time where: (a) the request was never made; (b) the request was not timely made; or (c) the request was not properly made.
As an attorney, I try to teach all my clients that proper documentation primarily serves as a claim preservation method—whether to provide notice of the claim or to document the claim impact. No matter the size of the project, proper documentation will eliminate a number of disputes. For example, consider the following claim provision: “Any claim for additional time must be given within seven days of the event given rise to the delay.” Best Practices would teach you to outline and highlight these types of provisions in your contract documents before you start contract performance. Make a spreadsheet with key provisions. And when one of those “events” arise, you should immediately send your letter “asking” for additional time or, at a minimum, “preserving” your right to later seek additional time and money. Don’t wait until the lawsuit or demand for arbitration before giving notice of your claim.
In other words, if you want someone else to eat your broccoli … you have to ask for it!
As always, please join the conversation and subscribe if you want to keep up with this and other Guest Post Friday posts.
Here at Musings, we have discussed the issues to do with LEED de-certification because of energy reporting (or lack thereof) by the owner of the building. Remember the italicized portion of this last sentence, because the de-certification discussion has taken a new turn. Now, not only can the Owner of a building tank its LEED Certification through its own failure to comply with USGBC rules, the certification of a building can be challenged by third parties. Hidden in the USGBC LEED Policy Manual, is language granting USGBC the right to retroactively review a project’s LEED certification level on either its own initiative or based upon the complaint of a third party.
My fellow construction attorneys and friends Doug Reiser of the now defunct Builder’s Counsel Blog (@douglasreiser on Twitter) and Chris Cheatham of the Green Building Law Update (@chrischeatham on Twitter) have discussed this policy and the failed challenge by a Wisconsin group to the LEED certification of a local high school. Both of these guys have asked some great questions and I recommend that you read their analysis.
My focus here, as always, is on the “on the ground” risk management issues for contractors and subcontractors on projects seeking, and in this case obtaining LEED certification. The real issue here, from my perspective as a construction lawyer, is the further implication of third-party action in the potential liability of the construction professional who constructs the building.
For the same reasons that contractors and subcontractors (and even architects and construction managers) need to structure their construction contracts to assure that failure of a building to meet certain energy benchmarks 3, 4, or even 10 years down the road does not come back to bite them, these same construction professionals must assure that their contracts shield them from the potential liability of LEED de-certification due to a challenge like that in Wisconsin. This policy by the USGBC creates more questions than it answers, for example, how will insurance companies and bonding companies deal with the totally uncontrollable possibility of a certification challenge? How will the ghost of liabilities future (like that mangled Dickens reference?) dampen the enthusiasm for sustainable construction overall?
The Eeyore in me fears that our much-needed shift to sustainable, energy-efficient building stock will be hindered by the worries of contractors. My hope (and, yes, I do have an optimistic side!) is that by asking these questions now, we can all work to deal with them and, with some luck and good planning, create a strong sustainable infrastructure that will be around for years to come.
This debate must continue. If you comment on one post here at Musings, please make it this one because I truly do not have the answers to these questions. Because of the uncertainty relating to the legal aspects of this brave new building world, your input on this topic is invaluable.
As always, I welcome your comments below. Please subscribe to keep up with this and other Construction Law Musings.
And, in one of my favorite areas of law, mechanic’s liens, the Court in Peed Plumbing Inc. v. Freedland clarified the mechanic’s lien rules on who has to be served with and enforcement action and when.
Musings highly recommends these links and cases for some quick information on how courts and others will look at certain contractor claims and defenses.
As always, please join the conversation with a comment below and/or subscribe to keep up with the latest Musings and Guest Post Fridays.
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