Today it is my great pleasure to present a guest post by Mark Rabkin of Althans Insurance Agency. Mark can be found on twitter @MeRabkin and is a very valuable resource to all involved in the construction world when it comes to insurance.
When a large, publicly funded construction project is sent out to bid, each contractor that is vying for a piece of the pie must submit a bid and performance bond in conjunction with their application. The bid and performance bond is underwritten by a surety company and provides a financial guarantee to the owner of the project that the contractor will comply with the terms of the construction contract. Should a contractor fail to perform, the surety company will either pay the current contractor to complete the project or hire another contractor to either fix the errors caused by the first or complete the job if the original contractor becomes insolvent. The surety company will then pursue the original contractor to collect on the defaulted amount.
As indicated above, a surety bond is meant to guarantee the performance of a contractor as per the construction contract. The surety underwriters evaluate a “risk” based on their financial position, overall industry expertise including managerial experience and familiarity with the construction methods upon which they are bidding. It is important to note that the most critical component of a final bond is the actual contract that is entered into between the various parties involved. Should the contract contain language that is onerous to either party, a surety will either refuse to bond the contract or seek to have that specific language excluded or stricken from the contract. For example, extended warranty periods or usurious liquidated damages clauses are significant red flags to surety underwriters and legal departments.
Building projects that are registered for certification by an independent third party such as the US Green Building Council are rapidly growing in number. Many federal, state and municipal entities now either require or encourage new construction, major renovation or leased space to demonstrate some level of environmental stewardship throughout the construction process or energy efficiency within the subsequent operation of the facility. There has been much debate within risk management circles regarding the possibility that a project could fail to either achieve certification or attain a specified level of achievement. These situations could result in lost revenue opportunities for the loss of tenants, lost tax incentives, utility expenses higher than promised or any other failure to achieve an expected benefit of the proposed project. To protect themselves, project owners will look to transfer the risk to the design team or construction contractors and subcontractors. It should be noted that most if not all sureties will refuse to bond a contract that contains language that guarantees certification by a third party entity such as the US GBC or seeks to guarantee a specific level of energy efficiency.
Traditional general liability insurance defends and protects contractors for bodily injuries or property damage caused by the insured party’s negligence. It does not provide for defense or indemnification for claims due to breach of contract. Should a third party claim financial injury due to the negligence of a contractor, professional liability coverage (also called errors and omissions) could respond. This coverage is available in the market for construction companies and is increasingly necessary as more contractors are obtaining accreditation as “specialists” upon successfully earning their LEED-AP designations.
Mark E. Rabkin is a triple bottom line risk manager for Althans Insurance Agency in Cleveland, Ohio. He counsels clients on the risks faced everyday that impact his client’s financial, social and environmental exposures.
Today I am starting a new blog series which will focus on major developments in the sustainable design and construction world that occur each week. Please feel free to either send me email or send me a message on twitter @richcartlidge with any developments you feel are worthy of a mention.
This is just a brief summary of recent developments in the sustainable development and construction world. If you find this interesting please let me know and I will make sure to continue to compile interesting stories throughout the week.
We live in a wonderful world! However, one needs to wonder what will the world look like for future generations if we don’t take action to change it for the better? The passion I have for sustainable building, design, and renewable energy powers me through each day and encourages me to crush it! However, I have realized that this passion is worthless unless it helps to educate others, share information, and inspire individuals to do whatever it is they can to spread the message. Today as part of the construction update presented by Konstructr one of the speakers said that green should not be an add on to a project but should be the project. That is precisely the message that needs to be spread! Green is not an add on benefit, a premium option, or a special feature that should be added to a building, every building we build should be sustainable, efficient, and capable of lasting for thousands of years. The word green needs to vanish from our vocabulary and each one of us needs to do whatever we can no matter how small to spread the word that sustainability is not just viable but necessary. Let us use the collective power of the Konstructr network to spread the word, educate others, and facilitate the flow of information that will ensure the world we leave behind for future generations is a bright one indeed!
If you are involved in the design or construction of a green building there are a plethora of legal issues which you should be considering. The best known issue is how to define who is responsible for achieving certification if the building is pursuing LEED certification. Traditional contract documents such as the AIA forms do not adequately address the nuances of green design and construction, a problem which was partially brought to light in the Shaw case as discussed by Stephen Del Percio. It is important that as a designer or contractor you seek legal counsel regarding the potential litigation that can arise if a building does not achieve certification. As Chris Cheatham has explained at GBLU there are currently no available mechanisms to ensure certification. In addition to the issue of certification the following issues should also be addressed:
- Does the design professional have adequate insurance coverage considering the green nature of the project?
- Will product warranties and guarantees be voided by green construction procedures or installation methods?
- How will long term performance goals be delegated amongst future building occupants?
- Are there intellectual property infringements from copying installation methods or designs from other green buildings?
- What is the availability of green building materials and their cost of replacement? Will a traditional insurance product cover the rebuilding to green standards if a loss occurs?
Great River Enegy recently released a white paper detailing the construction of their Maple Grove, Minn. headquarters, the first building to achieve LEED Platinum in the state. The text of the white paper can be found here.Great River Energy not only built a sophisticated building which scored 56 points but also built a structure which can be used to educate others.
The key features of the Great River headquarters are:
- Uses 50% less energy and 90% less water than a structure built to just state codes
- Utilizes an in lake geothermal HVAC system
- In floor displacement ventilation system
- Daylight harvesting
- 72 kilowatts of on site solar power and a 200 kilowatt wind turbine
- Only cost 10% more than a traditionally built structure
The Great River Energy headquarters is an excellent example of how proper research, communication between all team members, and follow up evaluation and corrective action can create a building that is not only sustainable and efficient but also an excellent educational tool to spread the message that green building does not need to break the bank.
We need to rethink the way we evaluate buildings and energy usage for as the CEO of Green River Energy said: “At Great River Energy, we know the cheapest—and cleanest—kilowatt-hour is the one we don’t have to produce. So conservation and energy efficiency have become our first
fuel.”
KCast Player
Vik Duggal is at Austin’s South by Southwest and sits down with Joshua Karpf and Bart Casabona from Pepsi-Cola Company to talk sustainability.
Question from today’s KCast:
What are everyday things you do to make a difference in the world?
Links from today’s KCast:
Pepsico at SXSW
Josh is on twitter
Bart is on twitter
KCast Player
KCast turns the tables as the Konstructr nation nominates Chris Cheatham to take an opportunity to ask Vik Duggal some questions. Vik takes the time to answer question about the industry, Konstructr, and two of the most feared questions: 1) What does he do? and 2)Who will be the superman of the industry?
Links from today’s KCast:
Control Contractors, Inc.
Vik Duggal’s personal blog
Chris Cheatham on Konstructr
This seems to be the mentality behind much of the green marketing out there, specifically in the construction industry. Marketers are scrambling to find originality in green marketing and in their frenzy produce sub-standard creative that either offends because it’s greenwashing or because it’s just poor creative.
As a marketing professional and believer in the green movement, it’s hard for me to determine which is more offensive. I think the core problem with green marketing is that manufacturers of ‘green’ products have an ultimate misunderstanding of what their audiences want. This, of course, can then be tracked back to a lack of knowledge about what their audiences really know.
For example, what’s the difference in general green IQ between an architect and contractor? How about a designer and builder? Engineer and inspector? Judging by a quick flip through any trade pub, most do not understand the differences. As a result, we end up with poorly targeted ads that completely miss their audience’s interests.
Architects may not be as focused on the bottom line as a builder. And a builder might not be as concerned with aesthetics as an architect. It’s as though the green movement started and marketers completely forgot everything they knew about the audiences they try so hard to reach.
So instead, we are the recipients of grossly overgeneralized marketing that sets out to cover everything green. Have a green product? Throw a leaf in your logo and show a meadow in the background of your print ads and you’re good to go.
Screw it, it’s green.
Here’s the million dollar questions so many building product manufacturers are trying to answer: Where do architects go for green information?
The funny thing about green is that architects have in some ways surrendered expertise. Green building is expanding so quickly that one cannot expect the average architect to keep up with every new product, building method or certification.
Enter the emergence of third-party online resources. These are the people and sites propelling the green movement by providing up-to-date information on every green topic imaginable. But are architects using them?
We know you get Arch Record every month. Maybe you read Architect. But these pubs only focus on green one month out of the year. Maybe you’re now reading eco-structure, GreenSource or Environmental Design & Construction. But as quickly as the green building product industry and certifications continue to evolve, is an update once a month enough?
I still read these pubs each month, but I’m online everyday, looking for the latest news and best products. I suspect architects are doing the same. There is an endless list of online green resources, and sifting through it can be daunting and time consuming. But once you lock in on the best of the best, you have a constant, unrivaled up-to-date stream of all things green.
From product databases to blogs, when you need to spec a recyclable wall cladding or recycled countertops, nothing is more immediate or thorough as the internet. What separated print from online was the journalism behind in-depth case studies and industry profiles. However, blogs such as Jetson Green are quickly closing the gap, providing well-written articles of their own.
We know architect product libraries are becoming dated and unreliable, especially for green building. We know there are just too many benefits to the online world to deny it’s influence: downloadable specs, BIM, online continuing education. We also know that Google is where many architects turn for that first piece of information.
The question is, where are you going next?