Navigation of sustainability provisions in construction contracts

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With regime change in Washington, many construction professionals expect a second Trump administration to shift federal procurement funds away from initiatives that support sustainable construction.

Still, even without the formidable force of federal dollars, experts say the demand for more environmentally conscious construction isn’t going anywhere, so builders must be equipped to manage the sustainability clauses of their contracts

As extreme weather exacts an increasingly expensive toll on the built environment, there is a growing push from private customers, as well as state and local governments, to switch to more sustainable construction, said Mandy MacVey , a partner at the Washington, DC-based law firm Venable. , where she specializes in construction litigation.

“There are a lot of companies that have made a carbon reduction commitment, and so between the city, state and corporate buy-in, there’s still a critical mass of buy-in interest that’s not going to go away completely as a result of what happens at the federal level.” MacVey said.

The push is global: multinational contractors are having to meet an increasing number and variety of sustainability requirements from property owners around the world, said lawyer Meena Kamath, head of built environment at The Chancery Lane Project. The UK-based non-profit organization creates free customizable contract language to reduce carbon emissions in various sectors internationally, including construction in the United States.

“Climate risk is a business risk,” Kamath said. “So if you’re not protecting your business, especially a physical business like construction, like real estate, from climate risks and the physical impacts of that, you’re not protecting your business, period.”

With the potential for less federal regulation, there will likely be greater focus on, among other things, private agreements and contracts, said Nicole DeNamur, an attorney and founder of Seattle-based Climate Aligned Law.

“I think contracts will play an increasingly important role in driving sustainability,” DeNamur said. “The market, in general, will continue to demand more environmentally conscious spaces and practices.”

What should builders expect?

According to Kamath, sustainability provisions in construction contracts can address a wide range of environmental considerations for projects.

“All the decisions that are made for a building: concrete or low-carbon steel, which supplier to use, what kind of materials to use, how to transport any goods to your site, where you get them from, what is the location of the your suppliers. are and your work is – all these decisions have a carbon footprint,” Kamath said. “All these decisions have a contract associated with them.”

Private owners may want their project to meet a particular green standard, most commonly the US Green Building Council’s LEED ratings. A corporate client may want something more specific, for example Amazon used concrete with carbon capture technology at its HQ2 building in Arlington, Virginia.

MacVey said he expected more project reports as owner entities, whether a government or a publicly traded company working internationally, seek to meet European Union or California requirements, for example.

good practices

Builders need to understand the relevant sustainability provisions in contracts to assess risk and price their work accordingly. For example, in light of ongoing supply chain issues, contractors should ensure they have the right to substitute and a robust change order provision, with the ability to seek cost and schedule changes as needed, according to MacVey.

“I predict there is at least one opportunity in the future [with] certain low-carbon materials, demand could exceed supply,” MacVey said. “If the technical requirement is to try to use reclaimed and recycled materials, they’ll want to make sure they’ve thought about the warranty. You won’t guarantee that everything will be like new.”

MacVey said he’s seeing more companies expand their supplier code of conduct, and that’s important for builders to look for because it can be an easily overlooked attachment or link. GCs should also carefully review the measures regarding the order of preference, i.e. if there is ambiguity or conflict, what takes precedence over what.

“Contractors should definitely be aware of the pieces and how they stack up so they feel comfortable and clear about how it will be interpreted in the event of something impacting cost and schedule,” MacVey said .

It’s also important for contracts to address that sustainability technology is rapidly improving and GCs will be working with different tools and materials in the near future, DeNamur said.

“There’s kind of a balance between how you can recognize that because sustainability is changing so quickly, best practice now probably won’t be best practice, or the best product or technology available, in the short term,” he said. DeNamur said. “You have to have a certain flexibility to adapt to the reality of working in today’s world.”

According to MacVey, projects that aim for a higher level of environmental sustainability often use collaborative delivery methods, which provide more opportunities for discussion between designers, procurement teams, legal teams and other entities.

“One of the things that I find exciting is that sustainability requires more collaboration and more holistic assessment, and also more fair and equitable risk allocation,” MacVey said.

There are many frameworks and resources to support builders navigating new sustainability waters, DeNamur said. They include the View the sustainability framework for infrastructure projects and the Contractor’s commitment to sustainable building practicesan industry guide by and for builders with best practices and tips to get you started on greener construction.

Reducing a project’s carbon impact is not a one-time effort, and he advises engaging with property owners early and often about how to approach it.

“In my experience, you can’t underestimate the power of a simple conversation,” DeNamur said.

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