Commissioning Agent Guarantees LEED Certification

or

How I Learned to Stop Worrying and Blow Up My Market Share

Yesterday afternoon I received a newsletter from Energy Ace, a commissioning and LEED services firm out of Atlanta, with the headline "LEED Certification, or Your Money Back". Unnecessary comma's aside I found this to be a rather startling claim. Reading further into the release you can actually see the word "guarantee" (gasp!)... Full press release available here. How it works:

"clients must allow Energy Ace to oversee LEED administration, fundamental commissioning and energy modeling for each project -- services that the company provides in-house. After signing a standard service contract, Energy Ace would conduct LEED charettes -- the project phase where sustainability measures are mapped out -- and at that point, if everything looks good and team members are cooperative, the contract would be amended to guarantee certification. If a project misses its LEED target level (like Silver or Gold) or fails to earn certification altogether, Energy Ace would refund its LEED administration fee, which is between 30 percent and 45 percent of its total fees..."

First Take: Pros and Cons

On the pro side, theoretically their market share will increase (probably as much for being the first to offer it as for the peace of mind it will give owners... BD&C already scooped this, and you're reading it here). In addition to new clients, one of the clauses is that their firm must perform what is essentially their full suite of LEED related services instead of just CxA, LEED coordination, or modeling. This additional control helps both their bottom line and their ability to ensure that the project is moving along the right track. Also, by ensuring that at least the first phase of design and analysis has taken place, they have the ability to walk away from the promise if things don't look so good. Figuring out where to draw the line is likely going to be an interesting exercise!

Speculation

Not having seen the contract itself, I suspect (but can't confirm) that there is a clause in this guarantee that limits possible compensation for a missed target to the "LEED adminstration fee, which is between 30 percent and 45 percent of total fees" ONLY. In other words, this guarantee could potentially limit the owner's maximum compensation for a botched certification to the portion of the fee agreed upon. In a situation where missing certification could mean hundreds of thousands of dollars in lost incentives and countless other damages, does this contract actually serve to insulate Energy Ace from paying for these damages? Will owners see the "guarantee" and sign away their rights, or will they recognize it and demand no such clause be included? Again I should point out that I'm only working from a press release here and have no idea about the specifics of the contract. I certainly don't mean to imply that Energy Ace is actively gaming their clients!

The other big issue here is what does this mean for the other parties involved? Does a guarantee from one party, specifically an administrator who is responsible for overseeing and coordinating the LEED documentation process overall, in any way reduce the liability of the architect, engineers, or contractors involved in the project? I suspect not... Due to the fact that the owner may have signed away his right to collect damages beyond the fee from Energy Ace (again... speculation) they may pursue the other parties with additional vigor.

Obviously Energy Ace would not have the ability to really guarantee the certification unless they agreed to offer true design-build service with complete control over every aspect of design, engineering, and construction. No matter their efforts, a mistake from the contractor on SSp1, Construction Activity Pollution Prevention would mean that regardless of the efforts of the LEED administrator, the project would not achieve certification. This firm has worked on nearly 100 LEED projects to date, and I suspect that they're banking on the fact that as an industry we're over-concerned with missing LEED certification targets, an opinion that I'm increasingly leaning towards. Though there will doubtless be projects that miss their mark, my guess is that over the next few years the volume of these projects will be much smaller than many suspect.

If a project doesn't achieve the certification levels the owner desires they're liable to sue everyone anyway, regardless of what the contract says about guarantees. On the other hand claims that would normally be defended by an insurer may now be void, and the company may have to defend itself. I think it goes without saying that such a claim raises the standard of care, probably beyond what an insurance company is willing to tolerate.

Risk Management at it's best!

Is This Wise?

My guess is that the long term result of this for the company will be that yes, they may have to pay back a few fees over the years, but the marketing benefit and requirement for full services will more than offset the loss. At the end of the day I'm still on the fence about whether or not this is a good idea overall. I'm very interested to hear reader comments on this... please don't disappoint!

12 comments:

Eric O'Neill said...

I think the key phrase is "...the project phase where sustainability measures are mapped out -- and at that point, if everything looks good and team members are cooperative"

Many troubles for LEED consultants are a result of design team members who aren't fully committed to LEED, and contractors who similarly sound ambitious (until they get a signed contract). On a project with team members going about "business as usual", LEED certification can be very tricky. But with team members who are committed or experienced, the process can go very smoothly.

Obviously you still have the ambiguity associated with reviewers, however, they seem to have that taken care of in the first part of the above quote. If you're attempting silver certification, you design for gold. That gives you a nice credit/point cushion and has the added bonus of sometimes getting a higher certification than anticipated (especially if you end up with an extra construction exemplary credit or two).

So these guys have a good gig. They sign a contract with the owner for facilitation, commissioning, and energy modeling. They have the option of adding the guarantee after things start progressing and they have a chance to assess the situation. If I'm going into a project with a 10 credit cushion and a motivated team, we would have no problem providing that sort of guarantee. This would be a big deal if they put that promise right in their contract for the get-go.

David Clarke said...

Because "the project phase where the sustainability measures are mapped out" is the design phase, who's really in charge of the design? Energy Ace conducts design charrettes? I would expect state licensing agencies to weigh in on this one. Most sustainability measures are not simply added on by a consultant, but fully integrated in the design by the architect.

As a licensed architect, I can easily see a scenario where if the "guaranteed" services do not result in certification or the level desired, the architect is liable for neglect--or worse, aiding and abetting a non-architect offering what are really architect's services. That's not just a lawsuit waiting to happen, but a state fine or loss of license.

I may be overstating the risk, but if my client hired Energy Ace, I would walk from the project.

Anonymous said...

Energy Ace has made a bold (and possibly brilliant) business decision. Only time will tell really.

However, similar to what David was saying, I do think the real fear will be having the rest of the project team bail on them. Anyone who has worked on a LEED project knows that certification at any level doesn't happen without effort from many parties.

If you're on my team and you start to promise a victory contingent my own performance, I'm liable to pass on the project. There's already too much pressure as it is to reach higher certification levels. Take the contractor for example. All of sudden they find themselves bidding on a project that has a guarantee for LEED Platinum. Part of the success there is contingent upon their effort. Prices go up. Fine print gets added. Does the owner get refunded this extra cost as well if the project fails to meet the expectations of Energy Ace. I think not.

In the end, I bet it will be a huge success for Energy Ace. Unfortunately the clients won't fully understand all the ripple effects. Most of the time things will likely work out fine. It will be up to the other members of the project team to be savvy about the issue and advise the client accordingly when appropriate.

John Poole said...

I don't think they are taking a whole lot of risk. They know by now just by looking at a project if it's going get a LEED cert. So if they want to give the guarantee they will, and if not they walk. It seems like a dog and pony show to me.

Artful Dodger said...

If you read Chris Cheatham's blog: http://www.greenbuildinglawupdate.com/, he discusses it as Energy Ace's way to limit its damages. They refund only the LEED administration fee which is between 30 and 45% of its total fees.

Kara said...

Costar interviewed Wayne Robertson at Energy Ace about the press release -
http://www.costar.com/news/Article.aspx?id=3382057DA7A6BD8657098DA222674BBC. They're definitely getting a lot of interest for a rather conservative guarantee.

markgreenman said...

Commissioning in green build/retrofits will take off as an industry over the next 3 years. I have a client in Seattle who is actually looking for a commissioning agent with a LEED background. If you know of a good Seattle based person please have them contact me.

Mark Gragg
Greenman Alliance
mark@greenmanalliance.com

Danny Crew said...

We are in the early stage of considering a LEED platinum building. How do we go about finding a CxA? Is there a ballpark % or cost for such service?

Anonymous said...

Danny Crew....put together a concise RFP for a CxA. Run a search through ACG or NEBB for certified CxAs in your area. Cost should be around $1.00/square (VERY ballpark) depending on size and complexity.

Double check the qualifications of the CxA to insure that they meet USGBCs requirements for a CxA.

Good Luck!!

zrose said...

HA! This is very entertaining. I do understand everyone's shock and for some, their disgust, but at the end of the day the marketing ploy seems to have worked! This post is still ranking on google and still providing fere publicity for Energy Ace so good for them! Has anyone used these guys and actually had to request a refund do to non-certification?

-Zach
http://www.GreenEdu.com

laurent kanago said...

I agree with everyone above, the company is just having a marketing ploy. It is only a guarantee if they think it looks right. A loss of a certification can mean $100,000+ in incentives and tax deductions lost. the consultants may only loss $10,000. A guarantee will ease the minds of the owners but may make the contractors careless. I've talked to many people who have lost points over little errors

aadi said...

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Leed Certification Levels