Sustainable design and construction (otherwise known as “Green Building”) is, as we all know, here to stay. Continued development in the field, however, has created a diverse and often confusing set of competing obligations, risks, certifications, standards and codes that may be applicable to sustainable design and construction projects. Owners, in particular, face problems if: (1) projects fail to achieve certification, (2) fail to qualify for tax credits that are contingent upon a certain level of certification, (3) fail to meet anticipated or stated claims in marketing or promotional materials, (4) fail to obtain expected lower operating costs and savings in energy costs, or (5) they lose their reputation as a purveyor of sustainable construction. For over a decade now, with limited success, the AIA has been attempting to address these emerging issues and risk allocation in its contract documents.
I. History of the AIA’s attempts to address sustainability issues
(a) B101-2007 and B214-2007
In 2007, the AIA very so slightly modified several of its standard form contracts to “address” some green building and sustainable design issues. For instance, the AIA inserted language in the AIA B101-2007 in Section 3 which required architects to address sustainability issues with owners:
§3.2.3 The Architect shall present its preliminary evaluation to the Owner and shall discuss with the Owner alternative approaches to design and construction of the Project, including the feasibility of incorporating environmentally responsible design approaches.
§126.96.36.199 The Architect shall consider environmentally responsible design alternatives, such as material choices and building orientation, together with other considerations based on program and aesthetics, in developing a design that is consistent with the Owner’s program, schedule and budget for the Cost of the Work.
However the AIA B101-2007 basically did nothing to assist in allocating liability risks. In essence, the AIA B101-2007 mandated that “environmentally responsible designs” be considered and discussed but essentially did nothing to address the risk allocation issues if the project moved forward using green design or construction methods.
The AIA, however, did create and release the AIA B214-2007, Standard Form of Architect’s Services: LEED Certification in an attempt to specifically establish the duties and responsibilities when the owner seeks LEED certification from the USGBC.
Among other things, the architect’s services included conducting a pre-design workshop where the LEED rating system would be reviewed and LEED points will be targeted, preparing a LEED Certification Plan, monitoring the LEED Certification process, providing LEED specifications for inclusion in the Contract Documents, and preparing a LEED Certification Report detailing the LEED rating that the project achieved. The AIA B214-2007 was specifically designed to be an attachment or addendum to the B101-2007 for those projects seeking LEED certification, and it provided the basic framework for how LEED goals will be targeted, how those goals will be included in the bid and contract documents, and what services an owner must provide in the process.
However, the B214-2007 failed to include any provisions dealing with what happens if the project does not achieve the desired or targeted LEED rating level. Instead, the contract form addressed the green or LEED “goals” for the project, rather than any formal contractual requirements for achieving a desired outcome. Also, the B214-2007 was silent on what, if any, “Green” requirements would be incorporated into the contract documents and was vague on the respective responsibility of the owner, architect, and contractor for “Green” performance.
In 2011, the first sustainable guide was released by the AIA. The D503-2011 was designed to be used with the use the standard AIA’s Conventional (A201) Family of documents, including AIA Documents A101–2007, A201–2007, and B101–2007.
In the D503-2011introduction, the AIA acknowledged that sustainable and design construction practices as well as mandatory and voluntary requirements (such as LEED) “cannot be achieved without each of the Project participants accepting new roles and responsibilities on the Project” and that the “rapidly changing field of sustainable design and construction presents new roles, responsibilities, risks and opportunities for those involved in the design and construction industry.”
Article 1 of the D503-2011 contained suggested language to be included in the A201 -2007 (to define a Sustainable Objective, Sustainable Measure, Sustainable Plan, Sustainable Certification, Documentation for Certification, and Certifying Authority. As regards contractual risk, the model language dictated that the Sustainable Plan (which the model language called to be prepared by the architect) would contain the owner’s, architect’s and contractor’s roles and responsibilities associated with achieving the Sustainable Measures.
However, the D503-2011 proposals for changes to the architect/owner agreement (AIA B101-207), expressly recommended to not change the standard of care language from the regular architect/owner agreement and expressly warned architects about adding “warranties, guarantees and assurances that a specific Sustainable Objective will be achieved.” All in all, while promoting sustainable construction, the B214-2007 did not encourage architects to take on any of the risk associated with sustainable construction.
(c) Sustainable Project Contract Documents
In 2013 the AIA released a set of five template contract Sustainable Project (“SP”) Contract Documents (“SP Documents”) to define roles and responsibilities, provide procedures and processes for owner, architects and contractors to identify sustainability goals, and to map out a plan to achieve those goals. These 5 SP Contract Documents were:
- A101 -2007 SP – Standard Form of Agreement Between Owner and Contractor for Use on a Sustainable Project Where the basis of payment is a Stipulated Sum
- A201-2007 SP – General Conditions of the Contract for Construction, for use on a Sustainable Project
- A401-2007 SP – Standard Form of Agreement Between Contractor and Subcontractor, for use on a Sustainable Project
- B101-2007 SP – Standard Form of Agreement Between Owner and Architect, for use on a Sustainable Project
- C401-2007 SP – Standard Form of Agreement Between Architect and Consultant, for use on a Sustainable Project
These five SP forms of agreement were essentially the 2007 editions of specified AIA contracts, but modified to include provisions that specifically addressed green/sustainability issues.
The SP Contract Documents addressed many of the legal issues surrounding green building by requiring the architect to conduct a Sustainability Workshop with the owner and relevant consultants, the product of which is a written Sustainability Plan identifying the owner’s Sustainable Objective for the project. The SP Contract Documents also required the Sustainable Measures to be outlined in a Sustainability Plan that was to be implemented and the SP Contract Documents allocate responsibility for each Sustainable Measure to a specific project team member.
The SP Documents, however, had several issues. First, and probably most importantly, they were designed for a Design-Bid-Build delivery system only. And, Design-Bid-Build is not considered by sustainability experts as the best project delivery system for green building. Second, the SP Documents tended to overprotect architects from any liability and, in some instances, did not allow an owner to recover damages if the “green” project actually fails to achieve the sustainability goals of the project. This author had strongly recommended that a project owner seriously study the SP Documents and consider some revisions to the standard provisions before using them as a contract.
The SP Documents were not embraced by the construction industry and the AIA admits that within one year of their release it “took a different approach to sustainability.” This new approach has led to the release of the E204-2017.
II. E204-2017 – Sustainable Projects Exhibit
This spring, the AIA unveiled the latest updates to its core set of documents and added the E204-2017 as an exhibit that can be used on any project and added to most AIA contracts to address the risks and responsibilities associated with sustainable design and construction services.
(a) The Hype
Proponents/authors of the exhibit argue that it can add “big value to your project on five unique ways.” They argue, implicitly acknowledging the failures of the SP documents, that the E204-2017 is easier to understand and that it is designed to be used with the standard AIA documents (not just Design-Bid-Build). They also argue that it protects architects and contractors from financial penalties when those third parties move at their own pace or come to conclusions that don’t line up with a client’s expectations, that by compiling the language describing the responsibilities of all parties involved in building a sustainable project — owner, contractor and architect — into a single concise document, that their respective roles are easily clarified, that it is up-to-date as possible and flexible enough to adjust to any future legal developments, and that uncertainty is reduced by clarifying the expectations and responsibilities of all parties involved. Also, another commentator calls the E204-2017 a “game changer.” So does the E204-2017 live up to the hype?
(b) Examining the E204-2017
Viewing the E204-2017 with an independent eye, this author agrees that the E204-2017 is another step in the right direction and that the E204-2017 is fairer to owners and contractors than any previous sustainable contract documents released by the AIA. However, all parties to construction agreements, especially owners, need to be careful when entering into these agreements and may need to propose certain revisions in certain areas as certain provisions of the E204-2017 still favor architects.
Generally, the E204-2017 governs the “Services of the Architect”, the “Work of the Contractor”, and “the requirements and services of the Owner, where the Project includes the achievement of a Sustainable Objective.” Both the Sustainable Objective and the Sustainable Measures must be identified and the responsibility allocated in the Sustainability Plan. Also, the E204-2017 allows the Sustainability Certification such as a third party certification from LEED or Green Globes to be designates as the Sustainable Objective or as part of the Sustainable Objective.
The Sustainability Plan is a very important document when it relates to the E204-2017 as it can be the document that outlines the project participants’ respective responsibilities:
The Sustainability Plan is a Contract Document that identifies and describes; the Sustainable Objective; the targeted Sustainable Measures; implementation strategies to achieve the Sustainable Measures; the Owner’s, Architect’s and Contractor’s roles and responsibilities associated with achieving the Sustainable Measures; the specific details about design reviews; testing or metrics to verify achievement of each Sustainable Measure; and the Sustainability Documentation required for the Project.
Unlike previous AIA sustainable project contract documents, with some notable exceptions discussed below, the E204-2017 is silent as to the risks and responsibilities of the project participants and seemingly allows them to negotiate their respective risk and responsibilities and then outline them in the Sustainability Plan. Appendix F to the D503-2013(Guide for Sustainable Projects) is an example of a Sustainability Plan but it was not considered a “Contract Document” under D503-2013. Clearly, the E204-2017 contemplates the Sustainability Plan being much more detailed than that short example and project participants would be well advised to thoroughly protect themselves in the Sustainability Plan and in the general contract documents in areas where the E204-2017 is silent.
The E204-2017 simplicity and its silence on some of the respective responsibilities of project participants is what makes it appealing and is why it is an improvement over previous AIA contract documents. However, this silence is also a reason why project participants, owners especially, may want to include other provisions either in the Sustainability Plan or in the main contract documents. For example, there is no language in the E204-2017 regarding the architect’s standard of care so unless the owner includes language to ensure that the standard is consistent with green building standards for sustainable design professionals or some sustainable baseline then the standard of care will be the professional skill and care ordinarily provided by architects practicing in the same or similar locality under the same or similar circumstances. Likewise, because of E204-2017’s silence, all the project participants’ responsibilities under all the contract documents should be reviewed and reallocated where appropriate for a sustainable project.
The E204-2017, however, is not silent on everything. For instance, the E204-2017 expressly excludes a warranty or a guarantee from either the architect or contractor that the Project will achieve the Sustainable Objective. An owner, however, may want to demand assurance that the Sustainability Objectives will be met and demand the insertion of language in the Contract Documents mandating that the architect warrant the design aspects and the Contractor warrant the construction portion specifying specific damages that the Owner can recover if the Sustainability Objectives are not achieved. Making sure that the Architect’s and Contractor’s insurance covered and such warranties would also be necessary as their standard insurance policies may not.
In addition to not guaranteeing achievement of the Sustainable Objective, the E204-2017 also waives claims by the owner, architect, and contractor against each other for consequential damages resulting from failure of the Project to achieve the Sustainable Objective or one or more of the Sustainable Measures. It is most likely that an owner paying for a sustainable project wants to possibly achieve LEED or some other third party certification, enjoy certain energy savings all possibly increasing the building’s value, or be expecting tax rebates or other financial incentives upon reaching the Sustainability Objectives. An owner may want to eliminate these waivers of consequential damages and, in fact, include penalty clauses in the contract to kick in should the Sustainability Objectives not be achieved. At the very least the definition of what is a consequential damage should be clearly delineated.
Finally, under the E204-2017, just like the SP Documents, the achievement of the Sustainable Objective is not a condition precedent to Substantial Completion. While there are many good reasons for not tying Substantial Completion to the completion of the Sustainable Objective (i.e., time lag for certifying authority to decide upon the achievement of the Sustainable Objective, commissioning requirements etc.), if the achievement of the Sustainable Objective is of the utmost importance to the owner, then an owner may want to consider slightly revising these provisions. In addition, the E204-2017 does not condition the achievement of the Sustainable Objective as a condition precedent to the issuance of the final Certificate of Payment, so this may also be an area that an owner may want to address as well.
With some missteps along the way, the AIA has made substantial progress with providing contractual tools for clarifying expectations and better defining the goals, processes, and the risks of sustainable construction. The E204-2017 is a strong positive step especially in the way it moves away from tying sustainable construction to the Design-Bid-Build project delivery system. It is nearly universally agreed in the sustainable construction world that an integrative project delivery system that brings all participants, including the owner, operators, designers and contractors, together early in the process to work out a vision and a budget as a single team is a better option than the Design-Bid-Build system – – so the E204-2017’s flexibility is a good development.
The E204-2017 overly protects architects but that’s to be expected – it’s drafted by the AIA. However, with some negotiation by owners and contractors their rights can be protected too. This author strongly advises that any green building project participant seek independent advice both from a sustainability expert and a lawyer familiar with green building before executing any contract documents.
 U.S. Green Building Council
 See AIA D503-2011 Introduction.
 General Conditions of the Contract for Construction.
 See D503-2011 at page 7 and 8.
 See D503-2011 at page 8.
 See D503-2011 at page11.
 See April 24, 2017 Blog, “Project Owners and the AIA’s Sustainable Project Contract Documents.”
 The AIA did release A141 – 2014 Exhibit C to be used with “Owner and Design-Builder” contracts to identify the scope of the design-builder’s sustainability services, if any, and to establish a process to determine the owner’s sustainable objective. However, this standard contract document also overprotects the Design-Builder.
 E204-2017, Article 1.1
 E204-2017, Articles 1.2.1 and 1.2.2
 E204-2017, Articles 1.2.4
 E204-2017, Articles 1.2.3 (emphasis added)
 See D503-2013 at page 6
 E204-2017, Article 6.1
 E204-2017, Article 5
 E204-2017, Article 3.8
 E204-2017, Article 3.9.2