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Cost Premiums, Risks Could Nix LEED Platinum at Silicon Valley Community College

Cabrillo College Green Technology Center

Bids for a new 14,000-square-foot student technology center at Cabrillo College in Watsonville, California were opened up a couple of weeks with the lowest bidder nearly $1 million over the project’s estimated $5 million budget. The Green Technology Center, as the new building will be known, was designed by architect Peter Kasavan of Salinas, California, who had some interesting comments about the project’s plans for LEED Platinum certification. According to Kasavan, the increase in the project budget is

“largely due to the expensive recyclable materials required and risk involved in constructing a LEED platinum building. There is a lot of liability with [LEED] and no margin of error. There are a number of requirements by the general contractor in terms of record keeping, special handling and a special commissioning after it’s finished by a third party.”

Absent any additional facts, it seems like a bit of a stretch to blame a 20 percent budget overrun solely on the risks associated with the LEED certification process. However, I do think that Mr. Kasavan’s identification of the financial risks associated with LEED certification are important to note because they echo the conclusions contained in last summer’s Marsh report, Green Building: Assessing the Risks, Feedback from the Construction Industry, which we wrote about here at GRELJ. As you may recall, Marsh convened four forums in Washington D.C., San Francisco, Chicago, and New York City in late 2008 and early 2009, which were attended by a total of 55 A/E/C industry executives, who identified financial risks (i.e., the costs of third-party certification, the risks of delay in receiving certification, and the risks of failure to obtain incentives) as the top perceived green building risk.

Although there is certainly liability associated with the LEED certification process, whether those liabilities alone should be blamed for the increased costs here is unclear, particularly absent any indication that the project’s failure to earn LEED Platinum would result in the college failing to earn anticipated financial incentives. I would be curious to see the terms of the RFP and whether it contains any contract provisions passing along those risks to bidders in order to put Mr. Kasavan’s comments in some sort of context.

In any event, Salinas plans to continue working on the budget and the project is slated for review by the controlling local board sometime later in the fall.

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One Response to Cost Premiums, Risks Could Nix LEED Platinum at Silicon Valley Community College

  1. Peter Kasavan September 17, 2011 at 5:51 pm #

    Three possible considerations for bids exceeding the estimate were identified:

    1. A number of the green finishes specified were only available from a sole (or limited) source. As a publically bid project the ability to negotiate prices in advance is not possible. Since no “equals” were available it appears some of these sole-source materials were bid by suppliers to the general contractors at higher prices than were identified during research.
    2. LEED products, systems and the certification process is still relatively new. Therefore the advantage of a solid database of actual impacts of LEED on local construction costs were not available to inform the estimate.
    3. This is a small market. Most of the local general contractors bidding public works projects do not have any experience or familiarity with LEED certification. The materials, processes, paperwork and reporting requirements therefore represent unfamiliar risks. This likely affected the bids to mitigate those percieved, (and actual) risks.

    It is possible, even likely, that as architects, contractors and sub-contractors gain more experience in LEED projects these costs will be able to be more accurately anticipated.
    What is clear is that LEED added to the project costs not only in hard construction costs but in the soft costs associated with design,commissioning and compliance with the certification protocols.

    The project proceeded and is approximately 80% complete at this writing.

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