Building Green: What it Means for Your Business

Originally posted 2015-01-01 09:30:39. Republished by Blog Post Promoter

Kevin Kaiser, Suretybonds.comFor this week’s Guest Post Friday, Musings welcomes Kevin Kaiser. Kevin is the online marketing director for Surety, a leading online surety company. He specializes in educating current and prospective business owners about local surety requirements. He helps contribute to the Surety Bond Education Center and the Surety Bond Insider. To keep up with surety bond trends, follow Kevin and his cohorts on twitter.

D.C. officials are considering changes to a promising-yet-controversial green building law that has raised the ire of the surety industry.

The landmark 2006 Green Building Act mandates new green building requirements for private and public building projects in the District. According to the new regulations, which are set to take full effect in 2012, projects that fail to hit the necessary energy efficiencies and other green standards would be on the hook financially — with the money coming from the developer’s performance bond posted with the city.

But surety companies and industry groups have expressed concern with the concept of a “green performance bond.” These key risk-mitigation tools are standard for most construction projects and ensure that project owners and taxpayers are protected if the contract defaults or fails to follow the contract.

But surety companies are uneasy about the idea of guaranteed performance when it comes to green building. And there are also questions about who’s really on the hook if a contractor fails to hit the mandated energy-efficiency levels.

Historically, sureties have balked at bonding projects that require specific environmental benchmarks or third-party certification. LEED certification and other national designations require an OK from third parties like the U.S. Green Building Council.

As currently written, the act’s language may leave project developers scrambling to find companies will to issue suitable bonds.

“It’s not always the party that has to post the bond that’s responsible for that element of LEED certification,” Bob Duke, director of underwriting and assistant counsel for the District-based Surety and Fidelity Association, told the Washington Business Journal. “Maybe the party posting the bond doesn’t have control of the total obligation.”

But it looks like a compromise may be coming.

Surety industry officials and other D.C. experts have been working to resolve the bonding issue regarding the Green Building Act. A small semantic yet significant step may be changing the regulations to require a “bond” rather than a “performance bond,” according to the WBJ.

“There is confusion as to the ‘performance bond’ required by the Green Building Act,” Chris Cheatham, a D.C. attorney who’s covered the issue extensively on his environmental construction law blog, told the Washington Business Journal. “Revising the requirement to a “bond” should eliminate some confusion but questions still remain as to the availability of these types of bonds.”

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