Green Building Law Update

What Constitutes a Differing Site Condition?

Chris Cheatham — Fri, 12 Mar 2010 17:25:38 -0500

[I have said many times that the legal principles that will apply to green building projects will be very similar to existing legal principles in the construction law field. On Fridays we will be reviewing legal developments from the construction industry that most likely will be applied to green building projects.]

When I prepare construction claims for clients, one of the first steps is to gather the facts and develop potential legal bases for the claims. There is one legal basis that clients seem to know, and argue for, more than any other: Differing Site Conditions.

A Differing Site Condition is essentially an unanticipated physical condition encountered by a contractor at a project site, which requires additional work by the contractor. Most federal contracts contain a Differing-Site-Condition clause. As described in Foster Constr. C.A. & Williams Bros. Co. v. U.S.:

"The purpose of a [differing site] conditions clause is thus to take at least some of the gamble on subsurface conditions out of bidding. Bidders need not weigh the cost and ease of making their own borings against the risk of encountering an adverse subsurface, and they need not consider how large a contingency should be added to the bid to cover the risk."

The typical example of a Differing Site Condition occurs when boulders or other large objects are unexpectedly found below the surface and require removal prior to construction.

Contractors often want to argue that a non-physical condition constitutes a Differing Site Condition. Here are two examples of non-physical conditions that I have seen argued as Differing Site Conditions:

1. The contractor expected certain labor conditions in the surrounding area. When he started the project, labor conditions had changed due to a competing project.

2. The contractor properly relies on site boundaries in preparing its bid. When the project starts, the site boundaries change.

Do you think these two scenarios constitute an actionable Differing-Site-Conditions claim?

Photo: ubac

Why Do Federal Agencies Seek Green Building Certification?

Chris Cheatham — Thu, 11 Mar 2010 07:04:35 -0500

I had never quite understood why federal agencies were so focused on green building certification. That was, until I read this:

"U.S. agencies are required to have 15 percent of their existing building inventory incorporate sustainable elements by 2015 under Executive Order 13423, signed by George W. Bush in 2007.

To comply with the order, the Department of Veterans Affairs aims to have 21 facilities reviewed and rated by third-party green building systems by the close of this year.

'Reaching the goal of 21 third-party certifications in 2010 will make VA a leading example of green achievement,' said Secretary of Veterans Affairs Eric K. Shinseki in a prepared statement. 'We will proudly reach and surpass the 15 percent requirement before 2015.'"

In order to demonstrate sustainable elements in its existing building stock and satisfy Executive Order 13423, Veterans Affairs is obtaining Green Globes certification for existing buildings. As we move closer to 2015, obtaining green building certification for a federal building will be an important step towards an agency's compliance with Executive Order 13423.

The consequences are growing for failing to achieve green building certification. Simultaneously, the importance of negotiating a balanced green building contract is also growing.

Related Links:

15 Veterans Affairs Medical Centers Attain Green Globes Certification (GreenerBuildings)

Photo credit: cisc1970

Federal Agency Adopts Green Globes Certification

Chris Cheatham — Wed, 10 Mar 2010 09:33:07 -0500

During green building presentations that include legal views, I usually expect that someone in the crowd will not agree with my views of the green building industry. Usually, the unhappy audience member cannot fathom that there are potential risks associated with green building. Last week, though, I received a much different reaction when I presented to the National Research Council.

A number of the federal agency employees in attendance voiced dismay that I focused exclusively on federal agencies' adoption of the United States Green Building Council's (USGBC) LEED rating system. Some audience members expressed concern that federal agencies had wholesale adopted LEED certification in order to build green.

These concerns reminded me of a recent news article highlighting alternative green building certification adopted by a federal agency:

"Fifteen Veterans Affairs Medical Centers in 10 states have received Green Globes green building ratings under the assessment system administered by the Green Building Initiative.

The GBI's third-party review system certifies buildings at four levels with ratings ranging from a single to four Green Globes.

All but two of the 15 VA medical centers that were recently certified received ratings of three Green Globes. The Los Angeles Ambulatory Care Center and the Durham VA Medical Center in North Carolina each received a rating of two Green Globes."

In describing the U.S. Department of Veterans Affairs' Green Globes buildings, Rob Watson, the Father of LEED, argued that Green Globes was continuing to "penetrate its mid-market target."

The use of non-LEED rating systems is a new development in federal policy, and one that may continue to gain in popularity for different building markets. On Thursday, we will look at why green building certification is so important to federal agencies.

Is it possible that two green building rating systems can live harmoniously in federal policy?

Related Links:

15 Veterans Affairs Medical Centers Attain Green Globes Certification (GreenerBuildings)

Yogi Berra Was Right (GreenerBuildings)

Does Your Construction Project Require Davis-Bacon Wages?

Chris Cheatham — Fri, 05 Mar 2010 16:40:29 -0500

[I have said many times that the legal principles that will apply to green building projects will be very similar to existing legal principles in the construction law field. Going forward, on Fridays we will be reviewing legal developments from the construction industry that most likely will be applied to green building projects.]

If you are working on a construction project funded by the American Recovery and Reinvestment Act (or you have any hint that you are), you need to be aware of your responsibility to pay Davis-Bacon wages.

Section 1606 of the American Recovery and Reinvestment Act (ARRA) sets out the Davis-Bacon wage requirements:

"Notwithstanding any other provision of law and in a manner consistent with other provisions in this Act, all laborers and mechanics employed by contractors and sub contractors on projects funded directly by or assisted in whole or in part by and through the Federal Government pursuant to this Act shall be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code."

The Department of Labor (DOL) has broadly interpreted Section 1606 (pdf) of American Recovery and Reinvestment Act (ARRA):

"Section 1606 of ARRA plainly indicates that the Davis-Bacon prevailing wage requirement broadly applies to ARRA-appropriated construction projects. . . . [The ARRA] also extends the prevailing wage requirements to projects 'assisted in whole or in part by and through the Federal Government pursuant to this Act' thus encompassing any assistance provided for ARRA projects through grants, loans, guarantees, and insurance."

In short, if any ARRA dollars are funding your construction project, Davis-Bacon wages are required (barring very limited exceptions). If you are working on a construction project in 2010, particularly one funded by a governmental entity, it is important that you ask if the project is being funded in any amount by ARRA funds. If ARRA funds find their way into your project and you have not accounted for Davis-Bacon wage requirements, a change order may be necessary.

The American Recovery and Reinvestment Act (GPO)

GSA's Green Building Role in the Federal Government

Chris Cheatham — Thu, 04 Mar 2010 13:28:03 -0500

While preparing for my presentation "Legal Considerations When Building Green" for the National Research Council, I contemplated what proposals I wanted to make to the federal agency representatives that would be in attendance.

The federal government is pushing federal investment in green buildings through $25 billion allocated from the American Recovery and Reinvestment Act and through the Executive Order 13514, which includes numerous building efficiency requirements. As federal agencies attempt to implement green building programs, it is important to facilitate and share green building knowledge across the numerous federal agencies.

In my view, the General Services Administration (GSA) is in the best position to facilitate a cohesive federal strategy for green building. The GSA has been developing and constructing LEED certified buildings since 2002. Last year, the New York Times profiled a GSA building in Ohio that failed to achieve energy savings despite receiving LEED certification in 2002. The GSA has experience, both good and bad, with green buildings that can significantly benefit other federal agencies that are just now starting out with green buildings.

As I contemplated making what I thought was a drastic proposal, the GSA released the following information:

"GSA has made significant changes that will strengthen its role in helping the Obama Administration make the federal government a leader in sustainability.

First, the Office of Federal High-Performance Green Buildings has been moved from PBS [Public Buildings Service] to the Office of Governmentwide Policy. . . .

As part of governmentwide policy, the Office of Federal High-Performance Green Buildings will expand its reach to provide federal agencies with measurement tools and policies to meet its sustainability mandates."

To me, this seems like a move in the right direction. But what do you think? Is the GSA the best agency to coordinate federal green building policy?

New York Times, USGBC Address LEED Performance Gap (GBLU)

Los Angeles Times Assails Weatherization Program

Chris Cheatham — Fri, 26 Feb 2010 11:33:59 -0500

Back in January 2010, I said this: "Government officials and citizens are going to expect results form the significant investments in the green movement (particularly in an election year). In 2010, the nation will begin to decide if investments in the green building and renewable energy industries were worth it."

Not one month later, it appears that media critiques of American Recovery and Reinvestment Act(ARRA) green building programs have begun. Last Thursday, the Los Angeles Times ran the following headline:

"Obama's federal government can weatherize your home for only $57,362 each"

How did the Los Angeles Times come up with this number? The Times did some very simple math to calculate how much money had been spent per home so far.

"The Energy folks did tell ABC they've so far spent 522-million Recovery Act dollars on the program. So, let's see, about 9,100 homes divided into that chunk of stimulation change to believe in is -- gee! -- about $57,362 worth of very expensive weatherstripping for each home fixed up so far."

Of course there is more to the Times' blog post. The Energy Department had to resolve Davis-Bacon wage determinations prior to starting the weatherization program. At the end of the Los Angeles Times post, the Energy Department's response was included:

"The GAO report cites figures from September 2009 -- almost five months out of date. Since then, we have resolved Davis-Bacon wage issues in all 50 states, clarified how states should handle historic preservation and worked with states to resolve any remaining barriers. As a result, by the end of 2009, our programs had weatherized about 124,000 homes in total, and we are on track to weatherize more than 250,000 this year. In fact, since September 2009, we have tripled the pace of Recovery Act funded home weatherization. The report also erroneously implies that our goal was to weatherize 593,000 homes in 2009. That is wrong. The goal has been to weatherize that number by March 2012, and we are on track to meet that goal."

The Los Angeles Times article suggests the media is going to comprehensively cover the progress and accounting of ARRA green building projects in 2010. While this Los Angeles Times article may have relied on stale statistics, you can bet that the Department of Energy's weatherization program, and the contractors taking part in it, will be under additional scrutiny.

Green Building Industry to Face More Scrutiny (GBLU)

Where the Heck are the Green Jobs?

Chris Cheatham — Wed, 24 Feb 2010 08:19:38 -0500

I often get the same question about the American Recovery and Reinvestment Act: where are the green jobs and projects? A recent Wall Street Journal article sheds light on that question:

"The Obama administration's economic-stimulus program has delivered about a third of its total $787 billion budget during its first year, much of that to maintain social services and government jobs and to provide tax cuts for workers. Now, the pace and direction of stimulus spending are about to change.

Infrastructure spending is set to step up in the second year of the stimulus program, which should mean more money flowing to private-sector employers."

Infrastructure spending includes the green building projects that will be administered by the General Services Administration, the Department of Defense and the Department of Energy. A large portion of the $180 billion set aside for infrastructure projects has not been spent:

"During year one of the stimulus, only about $20 billion of money was handed out for infrastructure projects.

'I think we'll see a lot more stimulus money get into actual contracts and actual hiring in 2010 than we did in 2009,' said Kenneth Simonson, chief economist of the Associated General Contractors of America."

If you are looking for ARRA green building projects, 2010 appears to be the year.

Photo: vividbreeze

Related Links:

Bulk of Stimulus Spending Still to Come (WSJ)

ENERGY STAR Leaders Program Proves Successful

Chris Cheatham — Tue, 23 Feb 2010 13:13:13 -0500

What would you tell the federal government about green building law if you had the opportunity?

This past weekend, I contemplated this question as I prepared for a presentation that two colleagues - Catherine Kunz and Stephen McBrady - and I will be giving to the National Research Council and 15 federal agencies that will be in attendance. While preparing for the presentation, I came across new information and resources that I will share with you over the coming weeks.

While my presentations often focus on legal pitfalls facing the green building industry, I like to start each presentation on a positive note, by pointing out the benefits of the green building industry. For the presentation to the National Research Council, I will begin with this headline:

What is the ENERGY STAR Leaders Program and why has it worked?

"Owning a building that achieves top energy performance is a sign of good management, but owning a portfolio of buildings that achieves continuous improvement in energy performance demonstrates superior management and environmental leadership. Those ENERGY STAR partners who demonstrate continuous improvement organization-wide, not just in individual buildings, qualify for recognition as ENERGY STAR Leaders. . . .

An ENERGY STAR Leaders designation helps you leverage your management success, as organizations with strong energy management often outperform their competitors by as much as 10%. Associations, financial analysts, and other stakeholders can use the Leaders designation as an objective way to distinguish leading organizations from their peers. In addition, with more than 68% of U.S. households recognizing ENERGY STAR as the national symbol for protecting the environment through energy efficiency, ENERGY STAR Leaders can promote their energy efficiency improvements to customers and clients."

While I have concerns about other federal green building programs and regulations, the ENERGY STAR Leaders program is successfully promoting energy efficiency in the nation's building stock.

What other governmental green building programs would you deem a success?

Related Links:

Become an ENERGY STAR Leader (EPA)

EPA's ENERGY STAR Leaders Quadruple Energy Savings in One Year (EPA)

Update: Energy Department Concerned About Geothermal Earthquake Risk

Chris Cheatham — Fri, 19 Feb 2010 09:11:13 -0500

When you think of green energy projects, what sort of results do you anticipate? New energy sources? Reduced energy costs? Green jobs?

What about earthquakes?

Geothermal energy, a widely-touted green energy source, involves drilling miles-deep wells into underground reservoirs in order to tap steam and hot water that can be used for energy applications. I have previously referenced a geothermal energy project that was shut down by the Swiss government for allegedly causing earthquakes in 2006 and 2007.

Apparently, the potential for earthquakes triggered by geothermal energy projects is also a concern for the U.S. Department of Energy, as detailed in a December 30 DOE letter:

"The United States Energy Department, concerned about earthquake risk, will impose new safeguards on geothermal energy projects that drill deep into the Earth’s crust. The new policy is being instituted after a project in California that used the new technology was shut down by technical problems and encountered community opposition, federal documents indicate.

The project, by Seattle-based AltaRock Energy, would have fractured bedrock and extracted heat by digging more than two miles beneath the surface at a spot called the Geysers, about 100 miles north of San Francisco. The company ran into serious problems with its drilling and faced accusations from scientists and local residents that it had not been forthcoming enough about the earthquake risk. AltaRock denied those accusations."

Most striking to me is that on September 11, 2009, the DOE downplayed the potential for earthquakes caused by the California geothermal project:

"In a second document dated Sept. 11, 2009, but not previously disclosed, the department concluded that earthquakes that would have been set off by the AltaRock project would 'not have a significant impact on the human environment.'”

Just another example of how new, green technologies will result in unintended consequences. How can you extrapolate this example to the green building industry?

Photo Credit: peripathetic

Related Links:

Green Energy Project Causes Earthquakes? (GBLU)

Geothermal Basics (DOE)

Geothermal Drilling Safeguards Imposed (NYT)

Update: Precedence Setting LEED CIRs Reconsidered

Chris Cheatham — Thu, 18 Feb 2010 10:34:05 -0500

If you participate on building projects that are seeking LEED certification, this news may come as a relief to you. According to Marian Keeler of Simon & Associates, the United States Green Building Council (USGBC) is reconsidering its decision to stop making Credit Interpretation Requests (CIRs) public.

I have previously described a CIR as follows:

"To achieve LEED certification, a project must achieve a certain number of credits. But the requirements for each credit are often open to interpretation. To resolve this uncertainty, a technical advisory board evaluates each CIR to determine whether or not a credit should be granted. Historically, USGBC has published these credit interpretations to inform other builders and designers in future projects."

In June 2009, I reported that the USGBC had announced that, effective June 26, 2009, a CIR would only be applicable to the project that submitted it. At the time, I suggested that "[w]ithout public CIRs, architects, engineers and contractors are going to have more trouble interpreting credits and determining strategies that will successfully achieve a LEED credit."

It appears that the USGBC is now reconsidering its decision and plans to implement a new CIR system:

"USGBC is currently developing a new process by which any LEED stakeholder (whether part of a registered project team or not) may submit a request or highly technical inquiry directly to USGBC. Unlike Project CIRs that are only applicable to a specific project, these inquiries will be processed and issued by USGBC and will set precedent across all applicable LEED programs. Fees and turn-around times associated with submitting these inquiries is to be determined. More information on this process will be made available in the coming weeks."

I will reach out to the USGBC for further information. Why do you think the USGBC is reconsidering?

Related Links:

Why Do Non-Public CIRs Mean LEEDigation? (GBLU)

CIRs and Precedence Policy (LEEDuser)

Photo credit: eddiewls

Tysons Corner Bonus Density Program Criticized

Chris Cheatham — Mon, 15 Feb 2010 18:22:34 -0500

I used to work in Tysons Corner, Virginia. It is a fascinating place for many reasons, not the least of which is the fact that the area supports 105,000 jobs but only 17,000 residents. One of the consequences of this job-to-resident ratio is a daily traffic jam as workers leave for the day.

Government officials want to remake Tysons Corner into a more sustainable community by increasing density and residential options. As you can probably imagine, there are many competing proposals put forward by varying interest groups. One of the proposals involves permitting density bonuses to developers if a building seeks LEED certification:

"As far as density bonuses, a 10 percent bonus is proposed in return for LEED platinum certification, and bonuses are to be compoundable. For example, if a developer obtained a 20 percent density bonus for offering 20 percent affordable housing, the additional bonus for LEED certification would be for 10 percent of the resulting density cap, for a total bonus of 32 percent."

The proposed density bonus program is similar to the Arlington bonus density program. Not everyone supports the Tysons Corner bonus density program though:

“Representing the Town of Vienna, Town Council member Laurie Cole said the ‘implementation entity’ that is to oversee the fulfillment of the plan should include residents of the surrounding communities. ‘The future of Tysons Corner affects us directly and deeply,’ she told the commission. Cole advised against density bonuses for LEED (Leadership in Energy and Environmental Design) certification, as well as the compounding of density bonuses, saying that such policy was ‘testing the surface tension of what Tysons Corner can contain.’”

“[Jonathan Cox of AvalonBay Communities] also said recommendations for LEED certification would be punitive to residential redevelopment, as LEED standards were developed for office and commercial buildings and not for residential developments.”

What do you think of these criticisms of the proposed Tysons Corner bonus density program?

Arlington County Revises Green Building Density Program (GBLU)

Photo: Shanghai Steve

What Does Climate Change Disclosure Mean for Green Building?

Chris Cheatham — Fri, 12 Feb 2010 13:14:07 -0500

Did you know your company may have a duty to disclose how climate change may impact your business?

A group of Crowell & Moring attorneys - James Chen, Bryan Brewer and Jessica Hall - recently released a Climate Change Client Alert regarding the issuance of climate disclosure guidance by the Securities and Exchange Commission (SEC). This alert has important implications for those companies required to make disclosures and may impact the green building industry as well.

"On January 27, 2010, the Securities and Exchange Commission ("SEC") approved, by a slight majority, the issuance of guidance on how existing public company-disclosure requirements may apply to climate change. A pre-publication copy of the guidance was made available on February 2, 2010 (see below). Unlike a law or rule promulgated pursuant to legal authority, the interpretive guidance is not legally binding. It is, nonetheless, significant as the SEC's first express statement regarding how climate change issues may implicate companies' disclosure requirements.

Existing disclosure rules cover a company's risk factors, business description, legal proceedings, and management discussion and analysis. Companies must disclose to investors material information that may impact their business. Materiality is generally determined by reference to the "reasonable investor." The SEC has long acknowledged that environmental factors may trigger disclosure duties under certain circumstances. The issue of climate change was not specifically considered until 2007.

The SEC's interpretive guidance indicates that climate change may trigger existing disclosure requirements for some companies. In assessing whether disclosure is required, companies should consider the following:

existing domestic laws and regulations relating to climate change, including the potential impact of pending laws and rules;

opportunities and risks arising from legal or technological aspects of climate change, including indirect impacts of regulation like decreased demand for carbon-intensive products;

potential positive and negative effects of international legal instruments governing climate change; and

actual and potential physical impacts of climate change on business operations.

Thus, under the SEC's guidance, a company may have to consider the materiality and possible disclosure of impacts related to the Environmental Protection Agency's mandatory greenhouse gas reporting rule, promulgated in 2009, as well as other pending Clean Air Act rule-makings on greenhouse gases. Companies may also have to consider the likelihood of enactment and impacts of comprehensive climate change legislation. In addition, companies may have to disclose risks related to the rise in private tort litigation involving greenhouse gas emitters. Finally, if international negotiations lead to a post-Kyoto Protocol climate treaty, companies may have to consider how the treaty would impact their businesses."

I am particularly interested in how "existing domestic laws and regulations relating to climate change" may trigger disclosure rules. For example, in cities like Washington, D.C., Austin, Texas and New York City, municipal governments are attempting to create a market for energy efficient buildings by requiring disclosure of building stock energy usage. If a major, publicly-traded real estate development company owns property with poor energy efficiency in one of these cities, could the developer be required to disclose this information?

D.C. Keeps PACE To Support Energy Efficient Homes

Chris Cheatham — Wed, 10 Feb 2010 11:49:41 -0500

Do you remember Property Assessed Clean Energy (PACE) bonds? If you recall, in a June 2009 post, I proclaimed my undying affection for PACE bonds, which can serve as a financing mechanism to retrofit homes and buildings:

“PACE is a bond where the proceeds are lent to commercial and residential property owners to finance energy retrofits (efficiency measures and small renewable energy systems). OWNERS then repay their loans over 20 years via an annual assessment on their property tax bill. PACE bonds can be issued by municipal financing districts or finance companies and the proceeds can be used to retrofit both commercial and residential properties.”

My hope was that jurisdictions across the country would use PACE bonds to finance retrofits of homes and buildings. Turns out, PACE bonds have been proposed in my own backyard.

In December 2009, District of Columbia Mayor Adrian Fenty announced his "administration is preparing an application for a federal grant to create a $35 million revolving fund that would make loans to District homeowners and commercial property owners for energy efficiency improvements."

There are two basic steps to establish a PACE bond program. First, a state must pass enabling legislation. Second, the state must secure seed money for the revolving fund that will finance the PACE bonds. The D.C. government is proceeding forward with both steps:

"[T]he Council of the District of Columbia is expected to take up legislation that would create not only an administrative mechanism for running the program, but would create a 'property assessed clean energy' (PACE) bond program, that will ensure sustainable funding for this initiative in coming years. The legislation would allow the District to issue a series of conduit bonds up to $250 million. The federal funds would initially seed the fund and future bond sales would be backed by future tax collections.

The average age of a building in the District is about 72 years old, or about 30 years older than the national average. Given the age of the city’s building stock, officials see a greater need for energy efficiency retrofits and program managers expect the property owners could collectively save about $10 million in utility costs during the program’s first three years."

As an owner of a hundred-year-old row house, I am looking forward to the opportunity to apply for a PACE bond.

What do you think of this program?

Related links:

A Green Building Breakup (GBLU)

District Seeks $35M Grant for Energy Efficiency Fund (DC)

PACEnow (PACEnow.org)

Photo: edwhitaker

Can a Green Schools Program Be Inequitable?

Chris Cheatham — Fri, 05 Feb 2010 08:51:19 -0500

In Ohio, there is LEEDigation brewing. But it's not the LEEDigaiton that I anticipated.

The Ohio School Facilities Commission (OSFC) requires that new OSFC-funded schools achieve LEED Silver certification. The Washington-Nile school district is balking at the additional costs incurred as a result of the LEED certification requirement.

When a school project is pursuing LEED certification, OSFC provides three percent more funding than the estimated project costs in order to pay for the incremental costs of certification. According to Washington-Nile Superintedent Patricia Ciraso, 3 percent is insufficient to cover the costs of LEED certification in her school district (red dot in the picture on the left):

"'It might cover it in Columbus, or Cleveland, where you have people that deal with LEED constantly. These contractors down here, this is new to them and they’re going to have to deal with it. They’re probably going to have to bring in some people, or at least have some people trained,' she said.

To help prove the need for greater LEED funding at smaller, isolated districts, the school has retained an attorney in Columbus, with experience in school projects, to research the equity of LEED funding for schools in Ohio. Ciraso said the outcome of this battle could have local impact on LEED funding for school projects at New Boston and Clay also.

'If you are co-funding these projects and you have said silver is the appropriate LEED certification, why would you not want to fund to that level?' she asked."

I had always assumed LEEDigation would involve post-construction disputes when a project failed to achieve its green building certification. A pre-construction dispute involving public funding for certification is a new issue, and one that could impact other state green building programs.

Did you see this coming?

LEED Funding for Green School Causes Construction Delay

Chris Cheatham — Wed, 03 Feb 2010 18:21:20 -0500

Last Thursday, during a webinar on green building legal issues, I stated the following:

"I really believe schools will be a hotbed for green defect claims, in terms of energy efficiency, and other green building components. Schools rely on tight budgets. . . . Be careful what you are promising on these green school projects."

On Friday, I read an article titled "Construction Delayed at West School," which led with the following paragraph:

"Construction is at a stand-still at Washington-Nile School, where issues surrounding state-mandated LEED (Leadership in Energy and Environment Design) elements have placed the new middle school building project over-budget. Now attorneys working for the school are researching the equity of LEED funding for schools in Ohio; the outcome of which could also affect building projects at New Boston and Clay."

I was close.

In Ohio, the Ohio School Facilities Commission (OSFC), administers the state’s Kindergarten through 12th Grade public school construction program and helps school districts fund, plan, design, and build or renovate schools. In a previous post, we highlighted the OSFC's green buiding requirement for Ohio schools:

"OSFC Resolution 07-124 . . . mandates that all newly constructed or substantially renovated school buildings that are state funded achieve a minimum of Silver certification in the US Green Building Council's LEED-Schools (Leadership in Energy and Environmental Design) rating system with emphasis in energy conservation."

As highlighted in the article, the OSFC accepted the Washington-Nile School (tiny red dot in the photo to the left) as a special-needs project. Because of the district’s low wealth base, the OSFC agreed to provide 98 percent of the funding for a new $16 million middle school. The remaining 2 percent (about $320,000) was paid from the school’s General Fund.

By accepting the OSFC funds, the school district is required to build the new Washington-Nile School to LEED Silver certification. But the bids for the school were over-budget despite numerous changes made to the design:

"'We knew a little about LEED. We didn’t know much, so they (the OSFC) educated us and they did a very good job. We bought into that and we designed accordingly. We made sure we had some educational LEED credits,' Washington-Nile Superintendent Patricia Ciraso said. She explained that while striving to meet these LEED requirements, the school had to give up other features they had hoped to add. By choosing to cut-back on windows, the school had change its lighting system, which means redesigning the entire electrical system — and what they ended up with still was estimated at least $1.2 million over-budget."

On Friday, we will look at allegations by the Washington-Nile school district that the OSFC is not properly funding the necessary LEED-certification costs. You will want to check back, as these allegations include a creative legal challenge to the state's funding of green schools, which could have broad implications for other state green building programs.

Related Links:

Sensible Interview: OSFC (GBLU)

Live Webinar (GBLU)

Construction Delayed at West School (Portsmouth Daily Times)

Important Revision to the D.C. Green Building Act

Chris Cheatham — Mon, 01 Feb 2010 14:43:32 -0500

In December 2009, an Amendment to the D.C. Green Building Act of 2006 was introduced by the D.C. Council. Labeled the "Green Building Technical Corrections, Clarification, and Revision Amendment Act of 2009," this Amendment includes many revisions to the original Green Building Act. One of those revisions involves the "performance bond" requirement:

"'Sec. 6. Bond requirements.'.

(2) Section 6 is amended by striking the phrase 'performance bond' wherever it appears and inserting the word "bond" in its place."

That's it. This feels anti-climatic. We have been discussing this same issue since the dawn of Green Building Law Update. Back on August 15, 2008, one of my very first posts pointed out the performance bond issue. So what does this fix?

1. Replacing "performance bond" with "bond" will eliminate the confusion that was certain to ensue in the construction and surety industry. Performance bonds guarantee a contractor will building according to the plans and specifications. Here, a developer has to guarantee that a project will achieve green building certification.

2. I still have concerns about the bigger issue of whether these "bonds" will be available. Bond instruments guaranteeing green building certification simply do not exist in the market. Maybe a surety will develop these bonds, maybe they will not.

In the end, I applaud the D.C. City Council for addressing the "performance bond" issue.

What do you think about this revision? Disaster averted?

The Green Building Unicorn (GBLU)

Green Building Technical Corrections, Clarification, and Revision Amendment Act of 2009 (DC Council)(pdf)

Hitting Reset on the D.C. Green Building Act

Chris Cheatham — Fri, 29 Jan 2010 14:09:55 -0500

Back in April 2009, I took a vow of silence. I promised to stop writing about the "performance bond" requirement in the D.C. Green Building Act. I had faith the D.C. Council would address the issue. Thankfully, it appears our long nightmare may be coming to an end.

Today, I am going to reset the "performance bond" issue (I have not written about it since April 2009!). On Monday, I will discuss the "Green Building Technical Corrections, Clarification, and Revision Amendment Act of 2009" (pdf) and the proposed revision to the "performance bond" requirement.

As background, for every green building mandate, you need an enforcement mechanism. The D.C. Green Building Act of 2006 requires that "after January 1, 2012, all new construction of projects 50,000 square feet or greater must comply to the LEED certification level." Here is how I described the enforcement mechanism in a previous white paper:

"One of the most controversial provisions in the Green Building Act is the performance bond requirement. After January 1, 2012, an applicant for construction of a privately-owned building must provide a performance bond which is due and payable prior to receipt of a certificate of occupancy. Thus, after January 1, 2012, if a construction project must meet green requirements in the Green Buildings Act, the 'applicant for construction' must also provide a performance bond guaranteeing satisfaction of the green requirements."

There are two primary problems with the D.C. Green Building Act "performance bond" requirement.

1. "The Act incorrectly uses the term 'performance bond' as the bond described in the Act 'seems to function more in the manner of a license or compliance bond, which typically guarantees compliance with a law or code.' A performance bond typically assures one party that another party will perform the contract in accordance with its terms and conditions."

2. "Let me make this clear: no bond or insurance instrument has been created that guarantees green certification. This type of security instrument does not exist. I have discussed the issue with sureties, surety industry groups, insurance companies and insurance brokers. None of them know of a security instrument that guarantees green building certification."

So what did the D.C. City Council correct either of these problems? Check back on Monday as I continue this discussion.

DC's Green Bond: The Worst Case Scenario (GBLU)

Green Bond Coming to a City Near You (GBLU)

The Green Building Unicorn (GBLU)

Green Building Technical Corrections, Clarification, and Revision Amendment Act of 2009 (DC Council) (pdf)

Photo: Henry Stern

Live Webinar (1:00 pm EST): "Green Building Legal Issues on the Horizon"

Chris Cheatham — Thu, 28 Jan 2010 09:18:03 -0500

You can view my webinar "Green Building Legal Issues on the Horizon" live at 1 pm EST or archived on demand. If you are having trouble, you can also try the BrightTALK website.

PLEASE NOTE: We experienced some technical difficulties at the beginning. Please fast forward to the 2:10 mark for the beginning of the presentation. Thanks!

Green Building Law Update Will Do It Live

Chris Cheatham — Wed, 27 Jan 2010 09:14:13 -0500

This week, I am going to be trying something new and exciting here at Green Building Law Update. On January 28 at 1 pm (eastern), I will be participating in a live webinar hosted by BrightTALK titled "Green Building Legal Issues on the Horizon."

What makes this webinar truly unique is that you can listen to it (for free) right here at Green Building Law Update. On Thursday morning, I will put up an additional blog post that will include a live webinar viewer. Simply log on to www.greenbuildinglawupdate.com on Thursday morning and you should be good to go. As a backup plan, you can also view the webinar by going to the BrightTALK page.

I am excited about this opportunity because while I have spoken to many audiences on green building legal topics, I have not been able to speak to you you, my faithful blog readers. My hope is that you will learn four things from the webinar:

You should think twice before making green building guarantees
Guarantees of green building certification are risky
Insurance for green building projects is difficult to obtain; and
Energy efficiency is hard to control

What other information can I include in the presentation that would benefit you? What green building legal questions do you have? Feel free to ask in the comments below and I will do my best to address your issue.

Related Links:

BrightTALK: Green Building (BrightTALK)

3 Reasons Why Your Green Building Regulation is a Problem

Chris Cheatham — Fri, 22 Jan 2010 11:59:08 -0500

On Wednesday, I posited that codifying the LEED rating system, or any other third party green building rating system, is not a viable option for an entire state.

Why? Here are three primary considerations:

1. There are troubling antitrust issues associated with the LEED rating system. These antitrust issues are significantly exacerbated by the incorporation of LEED into regulations or building codes.

2. The LEED rating system was never intended to be codified. In fact, the LEED rating system is meant to apply to only 25 percent of new construction starts.

3. I believe the USGBC has recognized the problems associated with codification of the LEED rating system. In response, the USGBC, along with other groups, is quickly pushing along publication of ASHRAE 189.1P, which codifies many of the elements of the LEED rating system. This is just a hunch, but I anticipate that the USGBC will start urging jurisdictions to adopt ASHRAE 189.1P instead of the LEED rating system.

Can you think of any other reasons?

LEED and the 25 Percent Rule Revisited (GBLU)

Standard 189.1P (ASHRAE)

Photo: ilaria gallo