This document discusses the growth of green building initiatives and standards like LEED. It notes that while LEED certification has become prominent, the process of achieving certification can be complex, with many choices around which standard and requirements to follow. This complexity is compounded for public projects that must also meet procurement requirements. The document also discusses risks like failure to achieve certification and emerging policies around reducing carbon emissions that will require upgrades to existing buildings.

1. Green is the New Black
It’s fashionable. It may even be profitable. And,
heaven help us, the Government has decided to help.
The “green initiative” has many faces. Among the
more visible of these have been anti-pollution acts, such as
the Clean Air Act and Clean Water Act that were the core of
the United States environmental policy in the late 20th
Century. Now, however, the dangers of greenhouse gases
and climate change have come to the forefront. That
transformation has been due, at least in part, to the
success of those earlier environmental efforts in reducing
the load of toxins that are still dumped into the
environment. While the recovery of the American Bald
Eagle and its removal from the endangered species list
stands as a visible reminder that environmental
responsibility can pay dividends, the 21st Century faces a
different set of environmental challenges.
Whether or not human activity has played a role in
bringing about climate change, the world is going to
mandate reduced emissions of greenhouse gas. The final
shape of the rules that will mandate or encourage such
reductions cannot presently be predicted, but it is
substantially certain that something is coming. Some laws
are already in place. Even where there is no legal mandate
for reducing the carbon footprint of business activities,
environmental responsibility is sometimes a voluntary
election. Green businesses can differentiate themselves
from their competitors: some consumers will prefer to buy
green. Moreover, depending on the final shape taken by
environmental laws, there may be an advantage in
reducing a business’ carbon footprint in advance of the
legal mandate. For example, coping with a "carbon tax"
may require more lead time than may be available once the

2. laws are enacted, but businesses that start to reduce their
carbon footprint now, in advance of the mandate, may find
it easier to soften the impact of the tax once it actually
arrives. Under Cap and Trade, a business that lowers its
output now may find that it has "credits" resulting from its
small footprint. Regardless of the details, businesses are
going to need to reduce their impact on the environment.
Real estate is an especially fertile field for "greening."
The energy demands of the built environment are
astonishing, and include heating, ventilation and air
conditioning; illumination; and vertical transportation
systems. These are energy-intensive uses. The built
environment is also the source of much of the solid waste
that urban planners, environmental engineers, and
municipalities around the world struggle to dispose of.
Standards for green real estate, however, began with new
construction and major renovations. Standards for
greening an existing building are a later addition. The US
Green Building Council issued its first LEED guidelines--
for New Construction and Major Renovations--in 1998,
with guidelines for other projects following later. LEED has
established a significant lead over other "third party"
certification programs.
Voluntary Greening
The market’s response to the green movement includes the
emergence of companies that attest to products’ and
activities’ meeting standards of environmental
responsibility. The most prominent of these is the United
States Green Building Council, whose LEED certifications
have come to be commonly seen as THE brand that
consumers identify with green properties. There are other
providers of certification services, and some providers offer
a range of services that may be highly variable. However,

3. LEED has a dominating market share, due in no small part
to the use of LEED by the federal government.1
This produces a kind of momentum that is hard to
stop. The process of certifying a green building is not
simple. Having multiple, parallel certification programs
multiplies thje complexity and dilutes the experience
gained from the projects that have been completed. As
owners, developers and design professionals acquire more
and more experience in designing projects and shepherding
them through the certification process, they acquire an
incentive to continue using the system in which they have
experience. This momentum is transferred to the
contractors, who are often required to demonstrate that
they have experience with the certification system selected
by the owners and developers. In short, while there are
alternatives to LEED, they need more time to develop into
robust systems that have the support of enough design
professionals and contractors to make them feasible. For
the present, there are few alternatives to LEED that are
feasible, and even LEED has its moments.
Although the USGBC has been in operation for
nearly 20 years, the LEED guidelines have not been
rushed. The guidelines for New Construction were first
released in 1999, so the market has had some time to
develop the resources--sometimes extensive--that are
needed to achieve certification as green. "Some" is not the
same as "enough." Scant though the resources are for a
1See, e.g.,United States General Services Administration,
“Sustainable Design,”
http://www.gsa.gov/portal/content/104462: “The GSA
uses the U.S. Green Building Council’s (USGBC)
Leadership in Energy and Environmental Design (LEED®)
green building certification system as a tool for evaluating
and measuring achievements in sustainable design.”

4. LEED project, they are even scarcer for other brands. Now,
a developer has two sets of decisions to make with respect
to green certification. First, he must decide whether to
employ LEED or a different brand; and second, if he selects
LEED, he needs to determine which of the seven different
programs he will seek certification under. More decisions
will be needed as the process of project design goes
forward.
A similar set of choices must be made with respect to
construction documents generally. A developer has to
choose between custom contracts or using forms published
by the American Institute of Architects or similar
organizations; then it must decide which sort of project
delivery system will be adopted; and whether to require the
design team to write specifications in accordance with the
standards of the Construction Specifications Institute (the
so-called MASTERSPEC system) are all part of the pre-
construction process that should be considered for any
significant project.
Just as a developer has to select between using AIA
forms or those of a different organization, so too a
developer of a green project must choose between LEED or
one of the competing organizations. That selection must
reflect the availability of qualified personnel to implement
that plan. One of the reasons why LEED has a growing
market share is the relatively-greater supply of design
professionals and contractors who have the requisite
credentials and experience. But one must still approach
the design of the project with an awareness that even
under LEED, the best-established program, the personnel
to perform the work are not as plentiful as construction
trades generally. A developer who has selected AIA forms
must then select from between a number of “Project
Delivery Systems:” lump-sum contracting, cost-plus

5. contracting of several kinds, construction management,
and design-build are just the broad categories of systems.
Likewise, having selected LEED as the overall program, a
developer must choose among seven different LEED
"pathways"--New Construction & Major Renovations,
Existing Buildings Operation & Maintenance, Core & Shell,
Commercial Interiors, Retail, Healthcare, and
Communities. Each of these pathways has a multiplicity of
prerequisites, credits and alternative pathways. This is
similar to selecting, e.g., "CM At Risk" from the library of
AIA forms. The exact credits selected in planning are
analogous to the process that applies to drafting contract
documents generally.
The coordination process is especially daunting
because LEED and similar programs affect the way in
which the whole project is approached. These terms belong
in the General Requirements of the Contract, also known
as Division I of the Specification. The process is daunting
because relatively few contract drafters have the technical
experience to delve into the specification book and adjust
the contract documents to be consistent. The parties
should be aware that if this coordination is not built into
the design of the project from the very start, they will have
the Devil's own time trying to retrofit the green-ness into
the finished design of the project.
While the multiplicity of choices and combinations
can seem bewildering, the multiple LEED programs can be
used to simplify the design process. For example, securing
a high rating for new construction sometimes requires that
the developer know what the tenant mix is going to be. For
speculative projects, this is often impossible to ascertain
until the project is ready to receive the Tenant
Improvement Work.

6. LEED allows the developer to secure a high rating for
the Core and Shell Work, irrespective of the tenant mix.
The tenant work can be certified and rating separately, as a
Commercial Interior, Retail or Health Care space. This
flexibility encourages developers to certify work so far as is
practicable, while reserving a final determination on future
work until that work is contracted-for.
Despite the similarities between the decisions made
with respect to construction generally and green
construction, environmentally-responsible construction
has some distinctive considerations. First and foremost,
not all designers and contractors have experience in green
construction. It is not unheard of for public works that
mandate green-experienced contractors to receive only a
single bid from a qualified contractor. This has impacts on
feasibility and pricing.
Second, communication is critical. Given the reality--
general contractors can't be relied on to get the word out to
the trades--success on a LEED project requires frequent,
effective meetings to reinforce the message and shame
those who behave irresponsibly. It is not enough to specify
that LEED credits must be earned, because many of the
credits for New Construction and related programs demand
certain processes during construction.
Or Equivalent
Some observers might think that the lack of LEED-
qualified contractors might be ameliorated by allowing
systems other than LEED to be used as “equivalent.” This
would open up bidding to contractors who lack experience
in LEED but who have other experience that is deemed to
be equivalent.
The "Or Equivalent" approach is often used in
bidding projects so that the design does not in effect pre-

7. select the manufacturer or installer. If there is only one
contractor in a market who is qualified to implement a
particular brand of green construction, then specifying that
brand is a selection of that one contractor, and the bidding
may be open to attack. That one contractor may have the
ability to charge a monopoly price and--more importantly--
can dictate terms for performing the work. Achieving
significant improvements in energy efficiency and
environmental impacts may require a change in the way
public contracting is handled in America. The higher
qualifications demanded by LEED (and similar programs)
may be inconsistent with the sealed public bidding that
remains central to public contracting. The result, as in the
E&A Restoration case is that there are not enough qualified
contractors in a market to make real competitive bidding
possible.
Moreover, the fact that four out of five bidders in
E&A were unqualified reflects another reality of
construction: the best contract is no substitute for
vigilance. This is not an occasion to delve into how
widespread are the shady practices of construction
contractors--but neither should a developer fail to
supervise their forces closely.
The alternatives to LEED do offer some advantages in
terms of expense,2 but they have their own problems. More
contractors and designers will be familiar with and
qualified under LEED than are likely to be found under any
of the alternative programs. The alternatives have less
recognition, and many of them are less comprehensive
than LEED. For example, a building can receive a rating
under the Green Globe system merely by reducing energy
consumption below a benchmark: no water conservation is
2 See, e.g., “Green Globes certification rises as alternative to LEED,” Philadelphia Business Journals August 20,
2007 <http://www.bizjournals.com/philadelphia/stories/2007/08/20/focus5.html?page=all>

8. required, while LEED always requires at least some
attention to water consumption as well as power
reduction.
There is a certain alignment between LEED and
Energy Star, and Energy Star is one of the certification
pathways that can be incorporated into a LEED program.
However, other brands of green certification are often not
equivalent. They call for their own qualifications, which
may be entirely distinct from the criteria for obtaining
LEED credentials.
Managing the Risks
The process of greening the real estate of a business
depends in large part on awarding one or more contracts.
Like all contracts and commercial activity, there are risks
to be managed, and contracts should be used as a
principal tool for allocating and sharing risks. At the very
least, a contract should express the risks that a party takes
by breaking, rather than performing, the contract.
The most patent risk added by greening the project is
that of failure to achieve “certification” or a desired
“rating.” 3
Such failures can be ascribed to a variety of causes.
Perhaps the project’s LEED consultant misconstrued the
requirements for certification or rating; perhaps the
consultant took credits that were not really justified by the
design of the project; or perhaps the construction team’s
failure to follow the mandate of the contract documents is
what led to the downfall. Whenever there is a failure, we
can expect a great deal of blame to go around; some of that
blame will likely lead to a claim; and claims are of course
grist for the risk management mill.
3 In LEED terminology, a project may be “certified” as being LEED-compliant. This is the lowest rung in
the LEED system and and in “ its achievement is a prerequisite to the project’s receipt of a Silver, Gold or
Platinum “Rating.”

9. There is another level of risk management at work
with respect to green real estate, and that is the recognition
that something is coming. This is essentially a political risk.
Curbs on greenhouse gas emissions are just around the
corner, if not already in place. The exact shape that these
controls will take cannot be predicted, and the debate
between “cap and trade,” “carbon tax” and other paradigms
will not be concluded soon. But some policies are already
in effect, and they include the New York City Greater
Greener Buildings Program (“GGBP”). This program has
had enormous impacts on owning and operating real estate
in the City of New York.
New York City has adopted a policy of reducing
annual CO2-equivalent emissions by more than 22 million
metric tons by 2025, a reduction of more than 40% of the
City’s carbon footprint; sixty per cent of this reduction is to
be found by improving the energy efficiency of New York’s
buildings. Owners of affected real estate are going to incur
significant capital expenditures to meet these objectives by
2025. It appears that owners may be able to mitigate this
burden by getting started now.
Farewell to Grandfathering
Changes in the laws governing the ownership and
operation of real estate can, if enforced “in one fell swoop”
impose a financial burden on landlords that is
economically infeasible or politically unpalatable. In many
cases, municipalities and higher government echelons have
generally allowed existing stock to persist as “legal
nonconforming uses” until replaced or substantially
reconstructed. The colloquial term for this process, of
course, is “grandfathering.” New improvements must
comply with the revised legislation, but the existing

10. building can remain until replaced. Generally speaking,
small improvements, renovations and additions have been
permitted without requiring the existing building to be
“brought up to Code,” and a rule of 50% has long applied to
code changes: until more than 50% of a building (or, in
some settings, a floor) has been reconstructed, the
remainder of the existing construction may remain in
compliance with the “Old Code.”
“As national and state energy laws become updated periodically,
New York City's energy laws must also be updated to reflect equal
or more stringent regulations. No longer exempting renovations
affecting less than half of the building system, Local Law 85
(LL85), the second law in the Greener, Greater Buildings Plan
(GGBP), now requires buildings to meet the most current energy
code for any renovation or alteration project. LL85's requirement
is based on a series of local energy laws, collectively called New
York City Energy Conservation Code (NYCECC). NYCEEC
currently comprises the 2010 Energy Conservation Construction
Code of New York State (ECCCNYS), Local Law 85 of 2009,
Local Law 48 of 2010 and Local Law 1 of 2011.”4
Other components of the City Plan require annual
“benchmarking” of energy and water consumption by
“large” buildings,5 the conduct of energy audits and
"retrocommissioning,"6 and the installation of lighting
upgrades and submetering.7
It should not be surprising that there are parallels
between the NYC ECC and the LEED Guidelines.
One part of the GGBP that may not have been
thought through is the requirement that buildings be
brought up to code in connection with even a minor
4 http://www.nyc.gov/html/gbee/html/plan/ll85.shtml
5 Local Law 84. New York City real estate is “concentrated:” the top 2% of the City’s buildings--those with
more than 50,000 square feet of internal space--generate nearly than half of the City’s carbon footprint.
6 Local Law 87.
7 Local Law 88.

11. renovation or alteration. While exemptions are available,
the fact that the GGBP even potentially applies to a project
is another obstacle to be navigated before the project can
proceed.
There was a time--long before 9/11 changed
everything--when a special overlay district existed in lower
Manhattan just south of the World Trade Center. Buildings
in this district had to be built with pedestrian circulation
spaces--like an indoor mall--at the second story level. This
was a prelude to the permanent separation of pedestrian
and vehicle traffic. Vehicles would operate at the existing
street level and pedestrians would circulate in the new
spaces. This district would be the pioneer in Manhattan’s
leap into the 21st Century. It didn’t happen.
The numbers of compliant buildings could be
counted with the fingers of one hand. Instead, the building
stock in the district aged rather than take on the burden of
constructing interior space that would never produce
revenue. One important difference between the failed
overlay district and the GGBP lies in the benefits that
GGBP is expected to bring to owners: green buildings cost
less to operate, especially as the expense of energy, water
and carbon emissions continues to rise, while the special
overlay district, with the second-story pedestrian
circulation facilities it mandated, was a pure burden.
Make the Tenants Pay
The GGBP is targeted at the largest 2% of the
buildings in the City--those with more than 50,000 square
feet of space. The vast majority of this space is income-
producing under leases of building space to tenants.
Compliance with the NYCECC will produce expenses that
must be borne, in the first instance, by landlords. Whether
the landlords can recover these expenses from the tenants,

12. and how that can be accomplished, will depend on many
factors.
Some expenses will represent operating expenses.
The most obvious example of an operating expense that
can have an impact on energy consumption is the periodic
replacement of light bulbs. Under the typical New York
City commercial lease, increased operating costs will be
recouped through rent “escalators.” Some rent escalation
clauses are based on metrics (such as the prevailing rate of
porters’ wages) that might not reflect the expenses incurred
to comply with the Code. However, augmented operating
expenses are at least addressed (or consciously omitted
from) the leases. In the absence of a pass-through clause,
the rent fixed in the lease will not be subject to
adjustment.
In cases where the expenses are capital in nature,
recoupment may be more complicated. Capital
expenditures are not operating expenses that can result in
additional rent pursuant to an escalation clause; on the
contrary, they produce reduced operating expenses that
may be passed through to tenants under the rent
“escalation” clause, or reaped directly by the tenant
through reduced utility bills. This produces a disconnect
between the benefits of the project and its burdens: owners
pay for the Work and tenants reap the cost savings.
Historically, commercial leases have not always
considered capital expenditures when providing for rent
escalation. In theory, landlords paid for Work that could
improve their bottom line, and they did not pay for Work
that was not to their benefit. At the same time, the
regulated residential markets--governed by Rent Control
and Rent Stabilization--have always permitted rent
increases to recover the cost of “major capital
improvements.” Importing the idea of rent escalation that

13. reflects capital expenditures into commercial leasing is not
always easy. For one thing, it is open to negotiation.
New York City real estate lawyers are infamous for
their ability to prolong lease negotiations. In a remarkable
exercise in social responsibility, the New York City real
estate industry has developed a model clause for
addressing the brave new world of energy efficiency and its
impact on commercial leases.
The Future of Sustainability?
The New York City Mayor's Office of Long-Term
Planning and Sustainability has developed model lease
language that addresses sharing the costs and benefits of
energy efficiency projects by providing for a pass-through
structure based on predicted energy savings and expenses.
The problem of underperforming projects is addressed
through a "performance buffer," by setting annual
payments at 80 percent and extending the payback period
by 25 percent.
The parties are of course free to negotiate their own
path through the thickets of competing concerns. They can
slow down the payments to a greater extent, or accelerate
them depending on their objectives and success at the
bargaining table. Indeed, anyone negotiating a long-term
lease of space in New York City needs to recognize that the
law will require more, not fewer, steps to reduce the City’s
carbon footprint. The City’s plans call for reducing the
City’s annual carbon footprint by 22.1 million metric tons
of CO2 by 2025; of this, nearly 60% is expected to come
from buildings. It’s an ambitious plan, one that will have a
significant impact on New York City real estate for the
foreseeable future.
One of the engines that is expected to drive the whole
GGBP is the mandate, in Local Law 87, for periodic

14. “auditing” of building systems, to include implementing the
recommendations of the audit for improving the building’s
performance. The law calls for a ten-year cycle for repeating
the audit-recommendation-implementation process.
Coupling the decennial cycle for upgrades with the
mandate that all renovation and alteration projects bring
the building into compliance with the then-current energy
efficiency code, the expectation is that buildings will
upgrade to current energy standards every ten years.
We have no experience with how the ECC will evolve.
If it is reasonably stable then owners may be able to
recover the capital costs over the twenty-five year period
contemplated by the model “Energy Aligned Clause.”
However, if the ECC evolves rapidly, it may well turn out
that the installations currently being made to bring a
building into compliance will need to be superseded in ten
years’ time, when the next round of audits and upgrades
arrives. This is precisely the kind of uncertainty that
should be relieved by remedial legislation or the adoption of
regulations to the extent feasible.
In the meantime, Owners should pay close attention
to the kinds of projects they can undertake to improve their
energy efficiency score without triggering the obligation to
upgrade the entire building. As provided in NYCECC
101.4.4:
Exception: The following need not comply with this code,
provided the energy use of the building is not increased:
1. Storm windows installed over existing fenestration.
2. Glass only replacements in an existing sash and frame.
3. Existing ceiling, wall or floor cavities exposed during
construction provided that these cavities are filled with
insulation.
4. Construction where the existing roof, wall or floor cavity is
not exposed.

15. Doing well by doing good
Quite apart from the growing mandates for
environmentally-responsible development, there is
economic value in many of the activities that green a
project. A building that capitalizes on capturing the energy
of the Sun to provide a measure of heat can save money as
compared to a conventional HVAC system. Those cost
savings can translate into increased rent (or enhanced
sales prices from condominium and cooperative offerings.
Sustainable systems generally are expected to benefit
owners through reduced operating and replacement costs.
Beyond these quantifiable measures of benefit, there
is a more numinous benefit in securing the certification of
a project as being environmentally responsible. The
LEED(R) family of certifications, developed and sponsored
by the US Green Building Council, is widely advertised in
offerings of new and remodeled space. The LEED system
provides designers and planners with a scorecard, whereby
a project may qualify for status as “LEED Certified” or the
higher levels of Silver, Gold and Platinum. Separate criteria
are established for new construction, renovations, and
whole communities. Other certification providers have
emerged as well.
There are, of course, flies in the ointment. During the
design of a green project, a properly-credentialled designer
or consultant will establish a projected score or rating. Like
the architect’s report found in offerings of condominium
and cooperative interests under New York’s Martin Act, a
projected score depends on the project being constructed in
accordance with the design documents. When making
statements about a building that has not been constructed

16. yet, a design professional should of course make it clear
that the statements are predicated on the Work being
performed in accordance with the Construction
Document.
There have been many tales shared in a variety of
settings about projects that were required to achieve
certification or ratings that did not, in fact, receive the
desired evaluation. There have been many lawsuits filed by
purchasers of condominium and cooperative apartments,
against the design professional who signed off on the
“Statement of Building Condition.”
When a building fails to achieve the desired rating
after completion, there will be repercussions. It’s not
unheard of for the compensation of the “operating” or “dirty
shoe partner” in a development venture to depend, in part,
on achieving a LEED rating of a particular level. There are
reports that government financing for public works may
require LEED certifications or ratings.8
For example, a building may have planned to score
“points” because the design documents called for stringent
attention to waste products, including the preservation of
structures already present, recycling or salvaging materials
from the demolition process, and other creditable practices.
If those points are not awarded during the as-built review
and rating process, the points not awarded can make the
all the difference in whether the project is certified or
rated.
LEED as a moving target
Although LEED is a voluntary program, and its
rating criteria lack the “official” characteristic of ANSI and
similar standards, the US Green Building Council has
8 The project in the E&A Restoration case, discussed below, required a LEED Gold rating as a
precondition to funding from certain State agencies.

17. committed to making LEED a consensus-based standard.
The Council had prepared a revision of the standard--
known as LEED2012--but delayed issuing it due to
pushback from a wide range of stakeholders.9
At the same time, LEED is having an impact on
government contracting. A recent case in New York had to
grapple with a bid package issued by a local government
that required bidders to show that they had recent
experience in successful completion of several LEED-
certified projects. In E&A Restoration v. Town of North
Hempstead, 2011 NY Slip Op. 30252(U), a bidder was
disqualified because it lacked the experience and staffing
required by the invitation to bid:
The Town will not accept bids from, nor award a contract to,
anyone who cannot prove to the satisfaction of the Town Board
that he has sufficient experience in this type of construction and
financially able and organized to successfully carry out the work
covered by the Plans and Specifications in the required
completion time. Special qualification requirements are contained
in the Contract Documents.
The technical requirements outlined in the Project bid
documents required that a responsive contractor
demonstrate, among other things:
(a) Sufficient experience in the completion of five projects similar
in nature, size and extent to this Project, and familiarity with the
special requirements indicated in the Bid documents.
(b) The experience and expertise required to perform the work so
as to achieve the desired LEED rating; and
(c) An experienced LEED accredited professional be engaged to
coordinate the LEED requirements of the Project.
The petitioner did not have the experience called for
by the bid documents. It did not have a LEED-credentialled
employee on staff, and there was no indication of how the
9 See http://archrecord.construction.com/news/2012/07/120720-Tumult-Grows-Over-LEED-Rating-
System-Update.asp

18. petitioner intended to comply with the limitations on
personnel and organizations that may “sign off” on a LEED
rating. Notably, the LEED rules have a sliding scale that
determines who may be selected as the “certification
authority” for the certification and/or rating of the project.
A project of this magnitude calls for an independent
commissioning authority, but the petitioner did not
demonstrate that it was even aware of this rule.
Contractors are used to certification rules under
which the contractor certifies that the Work is in
substantial accordance with the construction documents.
The architect serves to check on the completeness and
propriety of the work--usually as a precondition to
payments--and the governmental authorities may conduct
some critical or final inspections of their own. However, the
special nature of LEED certifications means that the
architect or engineer cannot be presumed to have the
special knowledge needed to evaluate and score the as-
built condition of the property.
There is also a conflict of interest that is inherent in
having the LEED certifications issued by a contractor,
construction manager, architect or engineer of record. The
LEED rules allow small projects to be signed-off by the
contractor, but as the size of the project increases, the
authority to issue the certifications is progressively-
restricted to personnel with increasing amounts of training,
education, experience and independence.
As it turned out, the disappointed bidder did not
even remotely satisfy the qualifications required by the bid
package. And the court made it clear that it was not going
to second-guess the decision of the Town to require a LEED
platinum rating for the project.
One attack that doesn’t appear from the record to
have been raised by the disappointed bidder is whether or

19. not the qualifications demanded were in fact consistent
with the mandatory public bidding laws of New York. A bid
package that demands restrictions and qualifications may
be attacked on the ground that only a very few
contractors--perhaps only one--can meet the technical
requirements of the bid package. When this problem is
recognized, some municipalities permit the bidders to
propose alternate means to satisfy the requirements.10
In E&A Restoration, only one bidder demonstrated
that it had the means to fulfill the technical requirements
to bid. On its facts, it does not seem likely that this attack
would have succeeded in E&A Restoration. The Town held a
pre-bid conference, which the disappointed bidder
attended. The record does not indicate that the
disappointed bidder objected to the mandated
qualifications and experience. It did not suggest that the
LEED mandate was inconsistent with the legal policy of
free competitive bidding. The Town also held post-bid
meetings with the three lowest bidders, inviting them to
submit additional materials to establish that they had the
knowledge and experience to bring the project in
successfully. None of the three lowest bidders was able to
establish any level of competence with respect to LEED
projects.
As a result, the Town determined that the three
lowest bids were “non-responsive.” It held further post-bid
meetings with the fourth and fifth lowest bidders. It
determined that the fourth lowest bidder did meet all of the
criteria set forth in the Invitation to Bid, and awarded the
contract accordingly. The disappointed bidder filed suit to
set aside the contract award. To prevail, he had to show
that the Town’s determination that his bid was “non-
10 See, e.g., League of Minnesota Cities, “Competitive Bidding Requirements in Cities” (May 2012)
www.lmc.org/media/document/1/competitivebidding.pdf

20. responsive” was arbitrary, capricious, or lacked a
substantial basis in fact. He did not succeed and the
contract award was upheld. It should not be overlooked
that the Town made extra efforts to give the “low” bidders
every opportunity to demonstrate their ability to fulfill the
contract. The Town ended up on the receiving end of a
lawsuit anyway.
Weighing the Risks
Construction is already a risk-laden adventure.
Getting work done correctly, on time, on budget, without
leaving a wake of broken property and bodies is not an
automatic process. Construction, like aviation, is an
opportunity for things to go wrong, in the worst possible
way and at the worst possible moment. Greening the
project--whether through LEED or another certification
program--represents an additional layer of complications
and risks. The litigation risk--such as arose in E&A
Restoration--is but the tip of the iceberg.
The costs of LEED compliance are often
underestimated. An early LEED project in Ohio was
awarded on the assumption that there was no substantial
additional cost in securing certification for the building.
The way in which LEED compliance was specified in the
contract documents and priced was less than ideal:
Since it was impossible to command the bidders to read LEED
guidelines prior to the bid due date, the information had to be
included in the specs. The university decided to bid many LEED
requirements as Add Alternates in the hope it could contain costs.
It was quickly discovered if a contractor did not want to be
responsible for a LEED requirement, he simply bid a high amount
on the alternate, and hoped the owner would either omit the item,

21. or pay an outrageous sum for its inclusion. Under state rules, high
alternate costs do not necessarily affect a base bid. Rather than
contain costs, it forced the owner (i.e. the university) to spend
more money than anticipated just to gain minimal compliance.
This is not cost-containment. 11
Contract Administration and the Contract
Documents
The “standard” form construction contracts--such as
those published by the American Institute of Architects--
contain a significant number of administration tools that
are not always attended-to. One of these--the “alternate”
bid--is often misunderstood, although it can be very useful
when considering whether to require certification or rating
of a project. Sometimes, an owner or its designers have not
decided, at the time that bids are solicited, on all of the
details of the work. By specifying some elements of the
work as additions that the Owner may elect to have
performed or omitted, an Owner can defer making a
decision on certain design elements. Properly handled,
alternate bids can help an owner make decisions in light of
the price to be paid for the alternatives. Perhaps the Owner
is considering the use of a vegetated roof, but is
uncommitted to the expense of installing and then
maintaining the plant cover. In such a case, the bidding
documents could instruct the bidder to include an ordinary
built-up roof in the “base” bid, and that the bid also specify
the cost and time needed to install the vegetated roof (or
other roofing systems that may earn a bonus for preventing
11LenHarding,"Specifying LEED Under Public Bid Rules," The Construction
Specifier (July 2005) ftp://ftp.osfc.ohio.gov/LEED%20and%20Green
%20Schools/Specifications/Specifiying%20LEED%20in%20public
%20bidding.pdf

22. heat wells). An alternate bid gives the Owner the option, at
a stated price and subject to other terms to require
performance of additional work. Contractors have several
tools available to avoid undertaking the alternate, most
notably by overpricing the alternate work so as to make it
prohibitive.
The antidote to that move on the contractor’s part is
to structure the package for “deduct” alternates: the
contractor is required to include the green roof in the base
bid, with an amount to be deducted from the contract sum
if the Owner decides to delete that work. While the two
approaches can produce the same result, the Contractor
has a disincentive to overprice the green roof, since under a
deduct alternate, the Owner would be able to elect to omit
the green roof, and obtain an unreasonably large reduction
in the price of the overall project.
This exemplifies why it is important to include LEED
or other certifications in the program from the very start.
Simply taking the documents for a conventionally-designed
project, and expecting a LEED or other consultant to graft
on the green provisions as an afterthought is a bad idea.
The quest to satisfy prerequisites and then to rack
up points as needed to certify or rate the project really
needs to be part of the task before Schematic Design even
begins. After all, one of the most fertile sources of points
lies in Site Selection. Much emphasis is laid on the
sustainability of the site--something that you can’t adjust
once the project reaches the point of site acquisition and
schematic design. Environmental responsibility needs to be
addressed as part of the Owner's program: it is truly a pre-
design concern.
Preparing the Contract Documents

23. There are reports from the trenches that it can make
a big difference where you put the green requirements for
the Work. Of course, this is true of construction documents
generally If the documents are being drawn up in the
“conventional” manner, there are several containers for the
legal terms that are concocted by the design team and the
lawyers. Since all of the terms of all of the documents are
read together, the legal effect of a provision might not
depend on whether it is in the Owner-Contractor
Agreement, or in the General, Supplementary & Special
Conditions of the Contract; or in the General Requirements
(Division I of the Specifications) or in Divisions II thorough
XVI (more or less), and contractors are usually required to
read all of the conract documents. However, trade
contractors are notorious for ignoring all of the
Specifications beyond the one division that pertains most
closely to their Work. If you put the LEED requirements
into Division I (where they technically do belong), trades
may never read them. Many contract drafters include the
LEED (or other green) terms in the Contract Conditions, or
they prepare a distinctive binder of LEED provisions (which
is adopted as a Special Condition of the Contract). Other
drafters include detailed alerts in the Contract's General &
Supplementary Conditions, on the theory that those
documents might be read by the contractors’ lawyers.
These problems, which are essentially problems in
communication, result from another dirty little secret about
construction contracts: you can provide that the terms and
conditions of the Owner-Contractor Contract are
incorporated by reference into the subcontracts. You can
mandate that the full Project Manual and reduced
drawings be furnished to every bidder. And you will still
find, when push comes to shove, that the General
Contractor did not provide complete bid packages to the

24. trades. This is a widespread problem, not limited to LEED,
but LEED amplifies the problems because of its demand
that the entire team participate in the process.
Those who write construction-related contracts
sometimes think that once the contract is signed and
delivered, the policies and procedures written into the
documents will somehow “just happen.” This problem is
not limited to green construction. The “standard” form of
General Conditions published by the American Institute of
Architects calls for a large number of submittals by the
construction team. These include a variety of schedules,
shop drawings, product samples and information, as well
as miscellaneous documents, to include permits, insurance
certificates and policies, licenses, applications for payment,
notices and a wide variety of other documents. There
should also be a schedule of submittals, one that identifies
all the submittals that are required under the Contract
Documents. Nonetheless when legal counsel returns to the
project to try to fix problems, one of the recurrent problems
we see is the lack of conrol over submissions and
schedules.
Experienced contractors know the importance of
keeping current with submittals, but many are not
conversant with the special submittals that are required
under the LEED program. Their compliance with controls
is less than exemplary in many cases, and LEED simply
multiplies the problem.
So long as green construction remains a novelty,
owners and developers should pay special heed to the
coordination between the general submittals and the LEED
submittals. There is a saying in construction that trouble
creeps in whenever the work of two different trades has to
"join." The same can be said of contracts and their
administration. The LEED program has its own special

25. demands, but unless the flow of LEED information is
coordinated with the larger flow of information about the
project as a whole, bad outcomes can be expected.
Key Take-Aways
The Green Mandate is here, and it is going to
increase in magnitude.
Start green: don't try to engraft green construction
into a project that is already under way. Green is a pre-
design issue.
Start with the small, easy projects. Replacing all of
the incandescent light bulbs with compact fluorescents is a
good start. It is already inevitable, so the marginal cost of
CFLs is minimized.
Highlight the LEED requirements in the contract
documents to preclude later claims that the contractor did
not include LEED costs in his base bid.
Consider using "deduct alternates," rather than "add
alternates" to maintain flexibility in the scope of work in
light of actual costs.