Green building may be becoming the normal standard in new construction and renovations. There are tens of thousands of green certified and registered projects in the United States alone, and that number is growing quickly. See http://www.usgbc.org/articles/about-leed. State and local governments are helping fuel the movement by incorporating sustainability requirements into public construction projects. Many government agencies have adopted specific green building certification standards, such as LEED or Green Globes, and require developers and contractors to meet those standards. But, because green construction is relatively new for those entities as well as the local governments, there are significant issues both sides must be aware of during the public procurement process.
The Procurement Process
Government agencies typically conduct a competitive solicitation to select a developer, design professional, or contractor for a construction project. This is often done through one of several procurement vehicles, and sometimes a combination of them. For example, an Invitation for Bid (IFB) is a common procurement method when the project specifications are already determined. Bidders are usually required to submit a hard price to complete the project, and the bidder with the lowest price is usually top ranked. A Request for Proposals (RFP) may be utilized when the public agency does not have a defined scope of work for a project. Proposers are often given the opportunity to be more creative in the proposal and determine the best way to proceed with a public project. Price can still be a factor, but it is not the only factor. A Request for Qualifications (RFQ) is often a request for proposers to compete for a project based on characteristics such as experience, expertise, and general ability to complete the project. Sometimes an RFQ, or the similar Request for Letters of Interest (RLI), is used to reduce the number of proposers or bidders competing for an RFP or IFB.
These types of solicitations contain defined specifications to which the bidder or proposer should respond. After the submission deadline, the agency may first review the bids or proposals to determine whether they are responsive or responsible. A bid or proposal is often considered responsive if it contains all of the information sought in the solicitation specifications. A bid or proposal is often considered responsible if it shows that the submitter has the ability to perform the contract or project at issue. Once the public agency determines which bidders or proposers meet the state criteria, it conducts an evaluation and ranks the bidders or proposers accordingly. The agency may then seek to enter into a contract with the topranked firm.
Green Building Procurement Challenges
Procurement for green buildings or green construction presents unique challenges. In a typical procurement model, the government agency specifies what it wants to be built, for an estimated price range, and awards the contract to the lowest bidder or best overall proposer. For green buildings, the agency should focus more on the design and building standards, and what it wants (or may be required by law) to achieve. Environmental issues should be considered and reflected in the evaluation criteria. In addition, the procuring agency should clearly define how to assess an offer, factor in environmental or performance criteria, the life-cycle costs and similar green building factors. Does the agency want a building that achieves a specified certification, like LEED Gold, or is it looking for certain performance and functionality levels, such as a percentage reduction in water usage over a comparable building, or improved indoor air quality levels, or reduced emissions, etc.? Both options involve factors that may be beyond the awardee’s control. Green building ratings often involve a third-party certification. Building performance may be dependent on occupant usage. In any event, those goals must be clearly defined in the specifications. Public bidding laws usually require an apples-apples comparison of the bids and proposals. Bidders and proposers can gain advantages during the procurement process, however, based on the language in the specifications. For example, if a green building is sought but the green building goals are not well defined in a solicitation, a bidder that seeks to incorporate green building components and materials may have a disadvantage over a bidder that does not. That is because green building products may entail a higher cost versus other products performing the same function. Or, green building may require additional oversight during the planning and construction phases as compared to traditional building practices. If the agency ranks the lowest-cost bidder or proposer the highest, the agency may not be getting what it wants. Further, in green building, products or projects may cost more initially during design and construction than traditional projects, but will save more money throughout the life cycle of the building. Simply choosing the cheapest bidder or proposer may cost the agency more in the long run.
One issue that has already led to bid protests is a bidder’s or proposer’s experience with green building. Suppose a city wants to build a government center that is to be certifi ed LEED Platinum, and wants a firm to design and build it. That city may want a design-build firm that has built LEED or other green certified buildings before. If a proposer is to be evaluated on its green building experience, as opposed to its building experience in general, the specifications must be clear regarding that qualification. Further, the evaluation criteria should specify what weight is given to that qualification. For example, if the proposer submits the best price and a good design for the government center but has no green building experience, can it still be ranked number one? Conversely, if green building experience is not an express requirement, the city must ensure that it does not base its final ranking of proposers on that factor. In other words, it cannot choose a bidder or proposer based solely on that criterion.
The Pennsylvania Supreme Court rejected a protest on a multimillion dollar green building project based on the consideration of qualifications. In Hampton Technologies, Inc. v. Dept. of General Services, 610 PA 541 (Pa. 2011), an electrical contractor that submitted a proposal for a project that was to be LEED certified did not get the top ranking. The contractor alleged the agency improperly considered experience with LEED certification, despite the fact that it was not listed in the solicitation criteria. The court found the RFP did reference LEED experience in two categories of the evaluation criteria, but ultimately rejected the protest on other grounds.
In Hughes Group, LLC v. U.S., 2014 WL 1604330 (Fed. Cl. 2014), a disappointed contractor for janitorial and landscape services fi led a protest against the awarding agency on a project that sought green cleaning services. The evaluation determined the contractor had an “unacceptable” rating for LEED-EB (existing building)/Green Cleaning. Since that factor was considered one of the most important components of the contract, it was held that the contractor lacked standing to protest because it could not have won the award based on the “unacceptable” green rating.
Green building on public projects raises other issues that must be considered by the agency and the bidders or proposers. What happens when a green building goal is not achieved, but the building otherwise functions properly? Will the awardee bear a penalty or some other risk in not achieving the goal? How will damages be measured? Will the award bidder or proposer provide warranties to address these issues? Are those warranties reflected in the proposal cost?
All the players must be aware of new green building requirements and evaluation criteria in the solicitations. It is critical for the procuring agency to have a well-defied plan to advertise and award such projects. Bidders and proposers must pay strict attention to the specifiations and ensure that they provide the information sought and meet whatever requirements are sought in order to be deemed responsive and responsible. If any questions arise after the solicitation is advertised, bidders and proposers should determine immediately if there is a process to seek clarification of the green building specifications. Failure to do so could result in the waiver of the ability to challenge those specifi cations later in the procurement process.