One of a handful of laws in the U.S. requiring private buildings to meet LEED standards, legislation passed in 2006 in Washington, D.C., may be unenforceable as currently written. According to theWashington Business Journal, the D.C. Department of Environment is working to address a complaint from the surety industry, which issues bonds that guarantee the completion of construction projects.
One of a handful of laws in the U.S. requiring private buildings to meet LEED standards, legislation passed in 2006 in Washington, D.C., may be unenforceable as currently written. According to theWashington Business Journal, the D.C. Department of Environment is working to address a complaint from the surety industry, which issues bonds that guarantee the completion of construction projects.
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The law mandates specific LEED standards for new construction in the city, starting with LEED Silver public buildings in 2008 and ending with LEED Certified large commercial buildings in 2012 (see EBNVol. 15, No. 12). Developers must provide “performance bonds†for up to four percent of the construction cost, up to a maximum of $3 million. If the building fails to achieve LEED certification, the bond is paid into a green building fund held by the City.
The National Association of Surety Bond Producers (NASBP) and the Surety and Fidelity Association of America (SFAA) complained to D.C. officials in 2007 that the way the bonds are defined is not consistent with industry practice. Performance bonds are often issued by a third party (the surety) to ensure, for example, that a contractor meets its obligations. The performance bond in this case, however, does not serve to bring the building into compliance (developers are not required to change their buildings, just pay the fee) and may represent a conflict of interest, since the bond is paid to the same agency that enforces the law. The two groups also expressed concern that the legislation does not specify which party in a project team would be responsible for paying the bond to the City. That lack of clarity could lead the surety industry to avoid issuing the bonds, requiring owners to acquire lines of credit or put bond money in escrow, which could be more expensive for them.
The Department of Environment has created an interagency working group that hopes to have revised regulation ready in spring of 2009.
– Allyson Wendt
