Risk Mitigation on Green Construction Projects
October 2009

Green building is here to stay and will be in increasing demand for both commercial and residential building projects. Green building provides a unique opportunity for the small to mid-sized subcontractor. In fact, an integrated approach for green design, building and construction will be essential to efficiently building green projects. This provides a unique opportunity for the "green" subcontractor.

While the potential for increased business for a green subcontractor is clear, green building is not without risk. Owner expectations are often heightened in green building. Often the general contractor or developer has promised a certain level of "green" that may or may not be able to be achieved on a particular project. Arguably the most likely claim to arise will be that the finished building is not as "green" as promised by the contractor. An understanding of these risks will allow the green subcontractor to take steps to shield itself from liability on green projects.

It is imperative that green subcontractors include in their subcontracts clear definitions and performance standards; clear disclosures; and exercise greater caution in bid and contract negotiation. Of particular importance will be express contract provisions to protect the subcontractor should the general contractor or developer fail to deliver as green a building as initially promised. A green subcontract should include language that states that ordinary skill and care will be used to achieve the project's green objective; however the subcontractor does not warrant or guarantee that those objectives will be met beyond the subcontractor's limited scope of work.

Further, the subcontract should also contain express disclosures to protect against unrealistic expectations of the owner or user. Once such disclosure should be that a green building does not equate to a "defect free" building. Similarly, it should be clear that no specific level of energy efficiency or performance is guaranteed. The subcontract should also include a standard disclosure that new and innovative products and/or technologies may be used and that those products and technologies may lack proven history. The subcontractor should not expressly guaranty any new product or technology.

As with all projects, the parties to a green contract or subcontract must contractually account for the uncertainty that is likely to arise with a green project. A clear contract including realistic performance requirements and limit promises being made to the parties will certainly minimize these risks and allow subcontractors a degree of comfort when participating in green building projects.

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