The risk of bidding green jobs

March 1, 2010
Going “green” is a top priority for many owners, and contractors are rushing to bid these jobs. Even with a U.S. Green Building Council LEED certified in-house expert, one may not be aware of all the potential risks associated with bidding a green project. Contractors need to be aware of the risks and account for them, so profits are not at risk.

Going "green" is a top priority for many owners, and contractors are rushing to bid these jobs. Even with a U.S. Green Building Council LEED certified in-house expert, one may not be aware of all the potential risks associated with bidding a green project. Contractors need to be aware of the risks and account for them, so profits are not at risk. If you are bidding or reviewing such a project bid, consider the following risks (these may not include all risks, so use all your knowledge and in-house expertise to develop your bid).

The ASTM Standard E2114-06a defines a "green building" as one that provides specified building performance requirements while minimizing disturbance to and improving the functioning of local, regional and global ecosystems both during and after its construction and specified service life. The risks related with bidding a green building would include any events associated with the construction process. It would include risks related to the customer achieving a desired green certification. It would also include risks related to warranty and performance promises.

Prior to submitting any bid, contractors need to understand which green certification, such as U.S.GBC LEED certification, is being targeted to determine who has what responsibilities for achieving the certification. The green requirements can impact material and equipment costs and handling, labor productivity, installation sequencing and scheduling, equipment and system startup and checkout, and project closeout requirements. To learn about the impact of green requirements, the Sheet Metal and Air Conditioning Contractors’ National Association’s Bidding Green Task Force’s report, HVAC Contractor’s Guide to Bidding Green Building Projects (, is an excellent source, and some of the document’s information is referenced in this column.

Green contract requirements
There is a risk of not understanding the complete requirements of a green building. The project’s green requirements can be found just about anywhere within the bid documents. They may not all be in the specific section relating to the building functions such as the HVAC system. Some green requirements that impact everyone on site, such as construction waste management, should be included in the general requirements of the specifications. The prime contractor should point this out. "Should be" doesn’t always happen, so in preparing a bid for a green project, the contractor needs to be proactive in determining the green requirements and their impact.

The less knowledgeable the subcontractor is about green requirements and/or the more general the contract is in specifying green responsibilities, the greater the chance of a contract failure occurring. The subcontractor needs to understand the green construction and points certification requirements. Green construction and certification typically increase project document and overhead. It usually impacts productivity and scheduling.

Another risk factor to consider is if the design for a green section of the building started in the concept design stage or was added later. There is a greater risk of problems in design and construction when the green components are an afterthought rather than part of the initial intent for the facility. The bidding subcontractor should investigate the history of how and when green was incorporated into the facility and the green expertise of the architectural and engineering companies.

What can one do to reduce these risks? The obvious approach is to raise the bid price to cover the anticipated documentation and productivity impacts. One can always hire, or develop in-house, the knowledge and green expertise for the specific green certification targeted. Some general contractors provide green training to their staff and may welcome subcontractors.

The contractor should invest additional time with the owner and general contractor in defining the specific green expectations. Having a well-drafted contract that includes costs, considers change orders and delays, and includes an escalation clause is important. Be clear on the escape provisions for failure to obtain certification. This can include suspension of work and termination of contract.

According to the HVAC Contractor’s Guide to Bidding Green Building Projects, submittals on a sustainable project will usually be more extensive than on a comparable conventional project and will include not only the usual product submittals, but also equipment test reports and certification to specific green standards or requirements, manufacturer startup and checkout procedures, and operation and maintenance manuals. The HVAC contracting firm may also be required to keep more extensive records, regarding the source and characteristics of installed materials and equipment, startup and checkout of equipment, correction of nonconforming work, etc.

Building commissioning
For large projects, green certification usually requires that the owner hire an independent commissioning authority to verify that the building systems are installed and operate as intended. An owner may choose a third party to help ensure compliance, even if not required. The contractor may be required to prepare and submit its own commissioning plan to the owner’s commissioning agent. Or the contract may require that the subcontractor commissions the various systems in accordance with the procedures developed by the commissioning authority.

One can include additional commissioning costs as a line item in the bid. That cost may include the time to develop green-related commissioning plans during the construction phase. If a third party is to be involved, the contractor can seek to influence the selection process. Once one is selected, proactively communicate with the commissioning agent/firm.

Green performance warranty
Some materials and equipment currently being promoted as green are relatively new to the building industry and do not have a proven track record of actual performance as promised. There is a risk associated with the warranty of such material and/or equipment should it not perform or perform at less than promised green levels. State and/or local laws regarding the warranty period should be considered.

Contractors may address this risk when bidding by raising bid price in anticipation of the additional possible warranty work. Researching state and local warranty laws, and the performance history of all equipment and material covered under warranty can help determine the risk. The contractor may choose to not warrant functionality or performance, but only workmanship, materials and compliance with building codes.

Productivity, installation risks
Green certification requires that material be stored in a way that it has little chance of contamination especially from typical site conditions. This may mean not delivering and storing product on site and/or storing and covering any fabricated material to ensure no contamination. This may be a disruption to normal shop and field scheduling.

To address these risks, the contractor may raise the bid price, bid the job as time and materials, and/or negotiate a longer schedule to allow for any impacts. The contractor will probably want to provide green requirements training to field, shop and material delivery employees.

Sealants, cleaning fluids, etc.
Green building certification requires certain types of sealants, cleaning fluids, paints and adhesives. They must be ones that emit low-levels or volatile organic compounds (VOCs) to reduce indoor air contaminants both during construction and after occupancy. A failure to not use the right ones could cause a loss of certification points or the subcontractor may have to rework the problem area. Additional documentation and a proven system that ensures correct chemicals are used may be required.

Construction waste management
Green construction certification requires minimizing the amount of demolition and construction waste that is sent to a landfill by recycling that waste. The general contractor or construction manager is to establish a specific area on the construction site for recycling. A percent goal, based on weight or volume, will be established in order to earn this certification credit. Subcontractors will need to track their waste. They will need to move waste to the project recycling area and sort as required. This could increase project costs. If the project involves any demolition, the subcontractor should determine who owns the scrap and who will have rights to the proceeds from salvaged materials and equipment that is removed from the project. This should be determined prior to submitting a bid.

Bidding green projects is not only in vogue, but such projects may be more plentiful in the tight economy. Contractors can be successful in taking on the risk of green jobs if they do their homework and account for possible risk. The alternative may be another failed contract, leaving the work for the more savvy ones.

Dennis Sowards is an industry consultant and guest writer for Contractor Magazine. His company is Quality Support Services, Inc. and can be reached at [email protected] or at (480) 835-1185.

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