OGBL welcomes a guest post by Danielle Rodabaugh, editor of the Surety Bonds Insider
Introduction
Consideration for environmentally friendly building practices and sustainable projects continues to be a pressing issue for the construction industry as a whole. Unfortunately, the well-intentioned Green Building Act, which was passed to promote green building, has raised concern among surety industry leaders. Although it was passed in 2006, surety bond implications resulting from the law seem to be more complicated than ever — and it’s slated to go into effect in just a few months.
What is the Green Building Act?
The Council of the District of Columbia enacted the Green Building Act in 2006 as a way to guarantee certain commercial buildings would become LEED certified. The problem with the law, however, is that it required contractors who would build in the district to post a green performance bond for certain projects. Such a bond did not exist at the time.
The council had some misconceptions of what exactly surety bonds are and how they work. As a result, a seemingly unenforceable surety bond requirement was created. Stakeholders in both the construction and surety industry have worked tirelessly to have the law revised before it goes into effect in January, but confusion remains.
What’s the difference between a performance bond and a green performance bond?
Standard performance bonds function as risk-management tools that ensure contractors complete projects according to contract. Surety providers remain hesitant to issue green performance bonds because it’s so much riskier to provide a financial guarantee of green building due to changing environmental policies and eco-friendly products that end up deteriorating after a few years. Simply put, surety providers are refuting D.C.’s authority to require a surety bond that’s so risky when it’s not viable for them to underwrite.
How does the Green Building Act affect contractors now?
The actual effects of the Green Building Act remain to be seen since the law won’t go into effect until January. However, the ambiguity surrounding its legal language and its enforceability have become increasingly concerning as the date nears. Stakeholders who represent the surety industry, such as the National Association of Surety Bond Producers, have made countless efforts to point out the law’s inherent flaws to legislators and other government organizations in the district.
If a solution is not found soon, contractors in the D.C. area could face fines for failing to meet the law’s requirements, something that’s difficult to comprehend since the specific contract bond the law requires still ceases to exist.
How can Ohio contractors learn about environmental responsibility?
Even though no Ohio law mandates the use of a green performance bonds, there are still a number of ways Ohio contractors can make an effort to be environmentally responsible when working on construction projects in the meantime.
A number of organizations still work to help contractors take the initiative to be environmentally responsible on their own. For example, the Central Ohio Chapter of the USGBC serves as an outstanding resource. In addition, contractors can track Ohio clean energy news at GreenEnergyOhio.org. The University of Ohio also maintains Planet Ohio, the institution’s Office of Sustainability that provides a number of educational resources to contractors who are interested in green building.
Until the issue is resolved, construction professionals in D.C. could be stuck grasping for nothing but air and then paying penalty fees for failing to obtain the bond. As the clock continues to wind down, the gaping hole between the government’s expectations and surety provider’s ability to comply could result in serious repercussions for not only the D.C. market, but also the construction industry as a whole.
This article was written by Danielle Rodabaugh, editor of the Surety Bonds Insider. The publication is sponsored by SuretyBonds.com, a nationwide surety bond producer. One of the agency’s continuing goals is to educate professionals and their lawyers about industry regulations. SuretyBonds.com has a special interest in helping contractors access more resources regarding green building processes. The views and opinions shared in this post are those of the author and may not necessarily reflect those of OGBL.
