LEED projects are hotter than ever, especially with the amount of public works projects being funded by the Stimulus package. As more and more LEED projects get underway, more and more mistakes occur. Unfortunately, mistakes all too often lead to disputes and litigation.
I Don’t Get It? LEED What?
Here is the readers digest explanation of LEED projects.
A property owner or public entity wants to construct its project to be environmentally friendly. In doing so, it can seek a certification from one of many organizations – one of which is the U.S. Green Building Council, who certifies a project as a LEED project (Gold, Silver, Platinum, etc. – depending on how green it is).
Seeking certification carries certain benefits (i.e. PR, tax credits), and in some circumstances certifications are required.
Certification is achieved by meeting two types of goals.
On the one hand, the project meets the goal of saving energy in the construction process. This is done by purchasing materials manufactured locally (to prevent the environmental price of long-range delivery), recycling materials, creating a job site that meets debris and water run-off requirements, etc.
On the other hand, the project meets the goal of saving energy while in use post-construction. This is done by using energy efficient appliances and lighting, planting trees and reducing the “heat island effect,” enhancing the quality of life of those who will spend time in the building, etc.
The LEED certification is achieved by collecting points. For each sustainable goal met by the project, a point is awarded. A project must accumulate a number of points for certification, with the level of certification increasing with the collection of additional points.
Those administering LEED projects spend a great deal of time planning the construction project to ensure that the proper number of points are accumulated…and sometimes, it’s a close-call.
How One Contractor Can Hurt A Project’s Chance At Getting LEED Credits
After the planning phase, work on the project begins, and the property owner or architect will depend upon each supplier and subcontractor to performing its work or delivering its materials to qualify for LEED credit. Work performed or supplies delivered incorrectly can easily result in the loss of a LEED point.
Let’s take the example of concrete.
The LEED system requires concrete used in a parking lot or a rooftop to be a certain color to achieve LEED credit (LEED credit 7.1 requires concrete to meet certain color requirements to reduce the “heat island effect” for example).
Let’s say that the concrete subcontractor is a bit asleep at the wheel, and pours the wrong concrete. The concrete solidifies, and the owner/architect doesn’t notice for a few days (if not later!) that the concrete is incorrect.
That LEED point is lost.
The LEED Point is Lost….but Now What?
This is a very concerning question for the construction industry, and many legal experts are at a loss in predicting just how this will play out in the courts. The problem is more complex than it seems at first glance.
Let’s assume that a subcontractor or supplier actually was required to perform in a way that would qualify for LEED credit, and that it failed to do so for reasons that are 100% its fault.
The next question is tough: What are the damages? In answering this question, let’s look at two scenarios:
Scenario 1: The LEED Point is lost, but the LEED certification is still achieved.
This is entirely possible. While the construction planning often cuts LEED certification points close, there is usually at least some cushion between the points a project should get, and the points it is required to get. So, in theory, a subcontractor or supplier can completely mess up, the LEED point can be lost and the project may still get its certification.
If this happens, did the owner/architect sustain any damages? The answer is….possibly.
In some instances, the idea behind a LEED point is not just to get a certification…the owner may also be interested in energy savings. Let’s take our concrete example again – if the correct concrete was poured, this could theoretically cool off the project’s premises. This may result in lower energy bills during hotter months.
While the failure to gain the point may not have cost the owner certification, it may cost the owner thousands of dollars in energy savings over the coming years.
Other types of examples, however, may yield more complex results. There may not be any calculable damages for accidentally failing to buy locally manufactured materials, for example. If its the same materials – just manufactured somewhere else – there may not be any damages beyond the loss of a LEED point.
Scenario 2: The LEED point makes a difference
What if the LEED point costs the project’s LEED certification? What damage is sustained?
Calculating these damages may be more realistic in some circumstances versus others. If the property owner sought certification because it was required, or because of a desired tax break….the damages can at least be quantified. If, however, the owner was simply doing it to feel good, or for good PR, there will be much debate about just what – if any – monetary damages were sustained by the LEED failure.
In the end, one issue that owners must remember is that they will have the burden at trial in proving their damages, and likely being required to prove it by a preponderance of evidence. Calculating the cost of losing a LEED point or the loss of theoretical energy savings can be quite tough. With that in mind, owners may want to consider liquidated damages provisions for these types of a defaults….and those signing contracts with owners or GCs may want to be weary of the same.
This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.