It's Not Easy Building Green
For starters, lets get a clear understanding of what Green Construction entails.
According to the Environmental Protection Agency (EPA), green building is the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life-cycle from siting to design, construction, operation, maintenance, renovation and deconstruction.
Now lets get down to business, and discuss how Green Construction and your own risk management go hand-in-hand and further discuss how you can manage your contract exposures.
Read these 5 important points to best minimize your Green Building risks and make it pretty easy to be green.
1. Limit Contract WarrantiesIts true that green building leads to operational cost savings, healthier work and living spaces, and increased tax incentives, but its important to limit warranties to those expressly provided in the contract. If you oversell the benefits that you can deliver, you could face alleged fraud or false advertising charges.
Additionally, no single party is responsible for meeting a construction projects certification goals, and certification is typically regulated by a third party over which you have no control. Therefore, never guarantee the level of certification on a project. Instead, warrant that the work will meet project specifications and accepted industry standards.
2. Reduce Delay RisksAnticipate unexpected delays, such as a shortage of green materials or lack of skilled workers, by updating the contracts force majeure clause to shift the risk allocation for these types of delays to the owner.
Also specifically define in the contract what is meant by substantial completion, and dont tie it to a projects certification status. Obtaining certification may take up to a year after substantial completion of a project is reached. Therefore, it is also advisable to revise the contract if it restricts payments to you based on certification status.
3. Define Consequential DamagesWhile many traditional construction contracts include mutual waivers of consequential damages, it is unclear if the courts consider lost tax incentives, decreased energy savings, decreased water bill savings, etc. as consequential damages. To ensure that these types of sustainable construction damages are waived, include them in the clause waiving consequential damages.
4. Retain Right to CureGreen building projects often use new, unproven materials and technologies, which may lead to future maintenance and performance issues. Spell out in the contract who is responsible for a components maintenance or malfunction, or what happens if a manufacturer goes out of business. Additionally, incorporate a clause which states that you retain the right to cure any alleged defective work, materials or equipment prior to the owner hiring another contractor to repair the work.
5. Count on Our Construction ExpertiseWhile this article focuses on common contract considerations, the process of taking a green building project from conception to use is complex. You can count on our firms well-informed risk managers to help you pinpoint exposures unique to your construction business and the potential ways to manage or transfer those risks.
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