Womble Carlyle Construction Industry Blog

Following the construction industry and related legal topics in the United States.

Wednesday, December 27, 2006

Green Building Not Green Enough?

This writer is not aware of any formal actions arising from a green building not achieving its intended "greenness" -- yet. We are monitoring a $20 million hotel project in American Canyon, California, in which the City Council agreed in 2003 to give a tax rebate of up to $1 million once it received a Leadership in Energy and Environmental Design (LEED) rating. The LEED rating is an independent nationally accepted standard for energy efficient and environmentally sound design.

The hotel opened on October 31, 2006, and still no LEED designation. The developer reports "the delay in receiving the LEED rating can be attributed in part to some consultants dragging their feet and not being entirely knowledgeable about green building practices." The City Manager says "until they have the designation, they don't get the credit." The developer reports that he expects to receive gold or silver certification within two months.

And what if the independent LEED designation doesn't come through? This case illustrates that it is just a matter of time before disgruntled building owners utilize the legal system to recover foreseeable damages if their green building turns out not to be green enough. (Today's entry was published by Ken Michael of Womble Carlyle's construction and real estate development group.)

Tuesday, December 19, 2006

CM-at-Risk versus Design-Build

In the December 11, 2006 issue of Engineering News-Record, a letter to the editor criticizes ENR for creating and perpetuating the impression that design-build is the predominant project delivery method. Michael Kenig, Vice Chairman of Holder Construction Co. and the Chairman of AGC's Project Delivery Committee, used some of ENR's own data to show that CM-at-risk revenue substantially outpaces design-build revenue. Mr. Kenig cites a 2005 CMAA/FMI survey of owners showing that a majority of the owners responding to the survey thought that CM-at-risk offers the best value of any project delivery method.

From this construction lawyer's experience, companies that excel at CM-at-risk are extremely skilled at building close relationships with owners very early in the process of project planning and design. They bring cost-estimating expertise to the process almost from the outset, and throughout they provide the owner with value engineering, constructability and life-cycle cost analyses -- services that few design firms bring to the owner.

CM's-at-risk frequently cement their relationship with the owner by folding the cost of these pre-construction services into the GMP. By the time the process gets to the construction documents phase and the CM-at-risk is ready to propose a GMP, the CM-at-risk has become an integral part of the team and the owner frequently feels quite dependent on the CM-at-risk.

Agreement forms standard in the industry recognize this unique relationship between the owner and the CM-at-risk. The AIA A111 (which uses the term "Contractor" but is frequently used for CM-at-risk arrangements) provides that the Contractor "accepts the relationship of trust and confidence established by this Agreement." AIA and AGC has a common standard form for CM-at-risk arrangements (AIA A121 and AGC 565) which states at the outset "The Construction Manager accepts the relationship of trust and confidence established with the Owner by this Agreement...."

In contrast, neither the AIA A141 nor the AGC No. 410 (the standard form agreements between an owner and design-builder) contains any language stating or even implying that such a relationship exists. Perhaps this explains in part why owners value CM-at-risk arrangements.

The letter may be found here. (Today's entry was published by Karen Carey of Womble Carlyle's construction and real estate development group.)

Tuesday, December 12, 2006

Window closes December 31 for grandfathered licensing of Georgia contractors

December 31, 2006 is the last day that persons or businesses seeking a Georgia contractor's license without examination can apply for that license.

After that date, candidates for contractor licenses will be required to submit to a licensing examination--as will those seeking to serve as qualifying agents for business organizations applying for contractor licensing. The so-called grandfather provision (for licensing by residency and experience) was extended for six-months by the 2006 General Assembly; but it will not be further extended.

Beginning January 1, 2007, the Georgia State Licensing Board for Residential and General Contractors is authorized to establish reciprocal licensing (without examination) for out-of-state contractors. Those seeking to obtain licenses by reciprocity must necessarily have obtained their foreign-state license through an examination process that is substantially equivalent and rigorous to the one that will be administered to candidates for first-time Georgia licenses.

Licensure is essential because, beginning January 1, 2008, all Georgia residential and general contractors must be licensed in one of three categories: (a) residential basic; (b) residential light-commercial; and/or (c) general contractor. Candidates for each must demonstrate a degree of financial stability, insurability, etc. After that date, local and state governments are statutorily prohibited from issuing building permits to unlicensed contractors; and severe penalties will be imposed on persons who attempt to violate the license statute--or help others violate it. Only the most minimal types of repair and maintenance work are exempted from the statute.

Georgia's new licensing statute does not significantly change existing state licensing laws and regulations applicable to specialty and trade contractors. (This entry was published by David Roberts of Womble Carlyle's construction and real estate development group.)

Wednesday, December 6, 2006

Optional Dispute Resolution Clauses deserve attention

It is good to note that courts continue to honor the intentions of the parties as expressed in contracts, including the choice of alternative dispute resolution. Noted at Construction Attorney Blog is the case of Higley v. N/S Corporation, 2006 WL 985753 (6th Cir., April 17, 2006), in which the contract contained this arbitration clause: "Should [N/S] and [Higley] be unable to resolve said dispute(s) through mediation, any and all dispute(s), at the sole discretion of [Higley], shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association." Higley filed suit and N/S sought to compel arbitration. The trial court denied the motion to compel and the Sixth Circuit affirmed, finding that a contract that gives one party the option to pick either arbitration or litigation will be upheld. Honoring such clauses allows the parties, as they see fit, to assess the underlying facts requiring dispute resolution and to utilize the most appropriate choice of dispute resolution for the circumstances. (This entry was posted by John Springer of the Womble Carlyle construction and real estate development group.)

Tuesday, December 5, 2006

Another Sustainable Rating System

With many of my recent posts focused on LEED certification, many readers may think that LEED is the only sustainable rating system available in the U.S. market. In fact, there are at least four other programs available: Green Globes, BREEAM (a British system), CASBEE (a Japanese system), and GBTool (an international system). Of these four, Green Globes appears to a promising up and comer in the U.S. market.

Green Globes is an online building and management sustainability audit launched last year in the U.S. by the Green Building Initiative. The rating system is being vetted by the building community for its potential as either an alternative to LEED or as an adjunct to the LEED certification program.

New York Construction.com describes the system:

The Web-based Green Globes system is designed as an interactive tool with eight questionnaires covering project stages from initiation to commissioning. Within each stage, the system groups questions into seven environmental performance categories, while also supplying reports that offer suggestions to users for enhancing the sustainability of a project.
The two systems have similarities. "Green Globes allows projects to earn points, with ratings determined by the percentage of points earned. Green Globes is based on a 1,000-point scale, and users can gain one to four 'globes' for levels of certification that would be roughly equivalent to the four rating categories of LEED."

But Green Globes differentiates itself in several respects. "Green Globes...doesn't require project teams to produce specialized documentation, but instead relies primarily on standard construction documents and onsite verification." It also "incorporates credits for 'life cycle analysis,' a methodology of assessing long-range environmental 'costs' of a particular product by accounting for resource and energy consumption and waste accumulation, among other factors." Perhaps most intriguing, Green Globe is available as a non-certification tool that can be used to quickly assess a project.

Green Globes has already been approved as a sustainable rating system by six states.