Green is gold, but may be risky

Engineers must carefully review contracts and insurance to ensure green building design proceeds smoothly.

02/05/2013


Learning Objectives

1. Better understand risks of green design/products

2. Learn to address some of the heightened risks

3. Learn about resources available to assist in green design.


Figure 1: From to 2007 to 2011, claims on projects where green design was promoted did not vary significantly from the claims profile of all building projects. Courtesy: Victor O. Schinnerer & Co. Inc.The “greening” of America and, indeed, the world, is now a common aspect of daily life for businesses everywhere. Whether it involves waste reduction, enhanced energy efficiency, adaptive reuse, recycling, or use of renewable resources, all are focused on how to leave a positive impact—or at least reduce the negative impact—on the environment.

Engineers face daily requests to “reduce energy consumption,” “maximize passive lighting,” “specify ‘green’ products,” and find other innovative ways to meet society’s desire for a greener world. With these requests comes real opportunity for engineers to make a difference and provide leadership that benefits our greater society. However, engineers need to widen their understanding of the unique risks associated with projects that have green construction and sustainability requirements and be proactive in their mitigation and management.

Four organizations are helping drive green construction and establish related goals: the U.S. Green Building Council and its LEED rating systems, the Green Building Initiative and its Green Globes initiative, the International Living Future Institute and its Living Building Challenge, and the U.S. Environmental Protection Agency (EPA)and its Energy Star program. In addition, many professional organizations, like ASHRAE, have set standards to encourage more energy-efficient buildings.

Across the country, the federal government and growing numbers of states and municipalities are building on the momentum created by these organizations and are mandating that public sector projects examine green alternatives and implement them where feasible. Meanwhile, many private-sector projects are seeking various levels of LEED or other certifications to take advantage of tax incentives, attract tenants, and establish a favorable reputation.

Engineers engaged in green projects must evaluate the risk created by this push for sustainability and, in particular, look closely at contract provisions that address standard of care, warranties, guarantees, and consequential damages.

Standard of care: Within the context of standard of care, engineers are required to undertake their work with the same care and consideration used by other engineers undertaking similar work in the same geographic area. This requires always evolving as the practice of engineering evolves. For example, engineers may take a cue from the American Institute of Architects (AIA), which has established requirements for design firms to examine “environmentally responsible” approaches under AIA B101-2007 Sections 3.2.3 and 3.2.5.1. This language and the actual words and actions of engineers and architects may actually be creating an evolving standard of care that would make failure to consider green options a violation of the standard. For example, the code of ethics for engineers has added “sustainability.”

The National Society of Professional Engineers (NSPE) - Section 3.2.d. states: “Engineers are encouraged to adhere to the principles of sustainable development in order to protect the environment for future generations.

The NSPE defines sustainable development as: “… the challenge of meeting human needs for natural resources, industrial products, energy, food, transportation, shelter, and effective waste management while conserving and protecting environmental quality and the natural resource base essential for future development.” The standard of care is evolving. For each project, engineers should at least formally evaluate sustainability issues and perhaps go much further in promulgating environmentally sensitive designs.

Warranties and guarantees: Another area of concern in green building is warranties and guarantees. Red flags should go up whenever engineers see contract wording such as: “Achieve LEED Gold”; “Guarantee that energy consumption will drop by X%”; “Warrant that plans will….” In reality, these outcomes are affected by owner and contractor decisions on siting, procurement, waste management, and other aspects of the project that are beyond an engineer’s control. Where possible, avoid any reference to such operational outcomes unless you as the engineer/specifier control the quality of the installation, the training of all operating personnel, the maintenance of the facility/machinery, and so on. Failure to do so can jeopardize your professional liability insurance coverage as these policies cover only “liability the engineer would have had in the absence of any contractual commitments.”

Consequential damages: Engineers should seek to avoid contractual language holding them accountable for consequential damages. Such damages (e.g., lost profits due to late opening of a casino) are disproportional to the compensation engineers receive to undertake their portion of the work on a project. Sustainable design increases the risk of such consequential damages as owners look to hold engineers responsible for the potential loss of tax credits or reduced occupancy rates or rental rates if a facility fails to achieve the requisite certification level.

While such damages may be covered by your insurance policy, they would result in deductible payments and potentially higher future premiums. The engineers on a project should not be held responsible for these.

Additional considerations that should be considered when designing energy-efficient or green buildings include:

· Unrealistic owner expectations: Does the owner understand that LEED Platinum certification costs more than LEED Silver or Gold?

· Certification not necessarily leading to better building performance.

· Defects or problems with innovative materials, including issues with procuring materials in a timely manner.

· Commissioning and operational issues.

· Under-skilled installers.


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