Many contractors have growing concerns that their already narrow profit margins will shrink even more as the demand for “green” increases and more and more environmentally responsible systems are added to specifications.
The current green landscape isn’t the first eco-trend that we’ve faced. Then as now, contractors need to take the mystery out of green buildings, get educated, understand owner motivations, and ultimately find ways to get more “green out of green.”
To look at what we can do moving forward, we need to take a glance back.
In the 1970s, the oil crisis precipitated a number of significant changes in construction. Thermal panes, water-source heat pumps and rooftop variable air volume units created new opportunities for mechanical contractors to solve building problems and grow their own business in the process.
More recently, the rolling blackouts of 2000 affected California and drew national attention. The root cause was supply-demand imbalance, inconsistent rules and flawed regulation. People in offices and homes across the state struggled to continue day-to-day life when their energy resources were not as reliable.
Then, as now, contractors became a resource for taking the mystery out of energy efficiency and specifying the systems that would meet the long-term goals of the building owner.
It’s clear that “green” isn’t going away. Demand for green, energy-efficient systems is expected to increase over the next few years.
The U.S. Green Building Council (USGBC) saw a 61% increase in the number of attendees at its annual meeting in 2007 vs. 2006, just one indicator that interest in sustainable building design and construction is growing.
The USGBC estimates that in 2006 alone, more than 1,000 LEED (Leadership in Energy and Environmental Design) projects were registered around the country, representing more than 100 million square feet of projects. And these aren’t just “fringe” buildings – these are mainstream companies and building owners demanding environmentally responsible, green buildings.
Simply put, a few short years ago, green wasn’t on the radar screen of most contractors. Any efforts in this area were incumbent on the building owner. Until recently, only niche projects or building owners with unique perspectives pushed for green construction. Even then, they were forced to do most of the research and pull from a small pool of contractors. Times have changed and contractors need to know the facts.
Financial—The myth about green buildings is that they cost substantially more to build than conventional buildings. When green building practices were first conceived, that was true. A rapid learning curve in the design community has reduced the premium for greening a building to about 2% of overall construction cost. This requires the entire owner and contractor teams to plan appropriately and timely for “green” construction. This premium is quickly recovered through the substantial reduction in operating costs inherent in green buildings.
Environmental—Green buildings use less energy, consume fewer resources in their construction, and minimize the impact on their surrounding environment and infrastructure.
Health—Green buildings have better indoor air quality, reducing absenteeism and illness among occupants. Productivity—Studies have shown that people working in green buildings are 5% to 16% more productive than those in conventional buildings, according to the Institute for Market Transformation to Sustainability.
In 1998, the USGBC created LEED, a voluntary green building rating system establishing national criteria for sustainable buildings.
LEED promotes several green building initiatives, including integration of whole-building design, creating sustainable communities, facilitating green-building competitions, and increasing public awareness of green buildings as healthy places for human habitation and commerce.
There are four levels of certification with the LEED programs – certified, silver, gold and platinum. The certified level is based on the number of points the project team earns in each of six categories. With LEED NC v2.2 (New Construction), there are a total of 69 possible points a project can earn. The six categories are:
- Site selection (14 possible points)
- Water efficiency (5 possible points)
- Energy and atmosphere (17 possible points)
- Materials and resources (13 possible points)
- Indoor environmental quality (15 possible points)
- Innovation and design process (5 possible points)
To be LEED certified, a building must obtain 26-32 points; to earn silver certification, a building needs To be LEED certified, a building must obtain 26-32 points; to earn silver certification, a building needs 33–38 points; gold 39–51 points; and platinum 52–69 points. Mechanical systems can influence a minimum of 23 points, and your hvac systems provider will tell you which systems fit the bill.
The USGBC has targeted many areas in the built environment and have developed other programs to support this. In addition to LEED NC v2.2, the following programs have been developed:
- LEED CS v2.0 for core and shell construction
- LEED CI v2.0 for commercial interiors
- LEED EB v2.0 for existing buildings
- Other programs targeting residential and neighborhood development.
Building Codes, Legislation LEED is not yet part of any building codes, but government officials at local and national levels are developing guidelines for new construction and retrofits that raise the bar. From Akron, Ohio, to Washington, D.C., more than 43 cities, eight federal agencies and 18 states have passed legislation, executive orders, ordinances, policies or offer incentives promoting or requiring LEED-based construction. For example:
- Federal – Lawmakers are setting the example with the Energy Policy Act of 2005. This program set energy reduction goals for the government itself, and it offered tax breaks to businesses for building energy-efficient buildings or making energy-efficient improvements to existing structures.
- California – The state adopted Title 24 in response to California’s energy crisis and resulting rolling blackouts. The program sets minimum standards for both residential and commercial buildings to help reduce energy consumption, increase energy delivery system reliability, and improve energy efficiency.
- Princeton, N.J. – The city amended their Master Plan in 2005 to encourage the use of LEED standards in the design, construction and operation of all public facilities and publicly funded projects.
- New York City – The city enacted Local Law 86 late in 2005, which requires city-funded capital projects to be designed and constructed in accordance with LEED standards. Recognizing that there is substantially more “green” benefit to be extracted from existing building stock than new construction, the city is now considering how best to address the issue of upgrading existing buildings to green standards.
- Boston – The city added requirements to the zoning code that call for both public and private developments over 50,000 square feet to be LEED certified.
“Building owners tend to understand and embrace the benefits of LEED,” explains Rick Dustin, director of engineering at the mechanical firm of McKenney’s Inc. “For developers who build a building, lease the space and then sell the building in a few years, LEED won’t make sense until the real estate market starts placing a higher value on a LEED-certified building. This will allow owners to sell their properties at a higher value.”
That’s why it’s critical to understand owners’ motivations:
- Energy cost is the single biggest expense — The Building Owners and Managers Association estimates the commercial-office-building industry spends approximately $24 billion annually on energy today – the single-largest operating expense for a building.
- Energy costs keep rising – According to the 2007 Annual Energy Outlook released by the Energy Information Administration, energy demand will increase 30% over the next 25 years. While alternative energy resources are developed, they will not fill the gap, leading to projected cost increases at a pace exceeding the rate of inflation.
- Mandates and Incentives are on the rise – In 2007 the American Institute of Architects is monitoring pending legislation in 27 states that would either mandate sustainable building practices, offer tax incentives for applying energy efficient materials in new construction or renovation projects.
Contractors can help translate these critical requirements to developers and consulting engineers, so that the right specifications are developed with the correct budget built in. Here’s what to consider:
- Lifecycle costs – Green buildings cost less to operate over the life of the building. The greater, more positive impact of a well-designed and properly installed green building system is found in the sum of a building’s construction and operating costs over time. Data shows that LEED certified buildings consume on average 30% less energy and 30% to 50% less water.
- Tax incentives – Many local governments offer some form of tax relief for building owners who build or renovate a more energy-efficient structure.
- Bragging rights – LEED and Energy Star certifications can be an object of pride and a promotional tool to attract tenants to their buildings.
- The first step to successfully (and profitably) incorporate green building practices is education. In short, know how a green system works.
“There is still a lot to be learned,” says Dustin, who oversees all engineering activities at McKenney’s. “But the sooner you adopt it and start educating yourself, the better resource you will become for your customers and differentiate yourself from the competition in the marketplace.”
Here is a list of tips to get more “green” out of a green project:
- Ask lots of questions. Does your customer understand the long-term benefits of building green? If so, learn about your customer’s motivations for going green and their expectations of a green building.
- Know a green system’s installation requirements. Make sure those requirements are factored in to the construction schedule. For example, many hvac certification programs require a building be ventilated with outdoor air prior to occupancy. Depending on the ventilation rate, this may require weeks to accomplish. Adding this week to the schedule at the start of the construction process helps manage the customer’s expectations.
- Document the entire installation and provide complete records of the construction process. Many LEED-certified buildings must re-certify during the life of the building. Capturing and providing complete documentation makes this task much easier.
- Practice makes profit. The more green projects a mechanical contractor completes, the easier it becomes to build in efficiencies throughout the process. As costs go down on the next project, both the profit margin and business advantage improve measurably.
For McKenney’s, the engineering group quickly gained notice after working on a building expansion for Southface, an Atlanta, Ga., nonprofit that promotes building sustainability for businesses and residents through education, research and technical assistance. “It has become a recognition tool for our company within the Atlanta construction community and demonstrates our ability to successfully design, build and support LEED projects,” Dustin explains.
Many contractors “place a substantial premium on LEED projects prior to understanding their scope of work and the true impacts. To minimize the costs and maximize the benefits of LEED construction, participants (owner, architect, engineers and contractors) must collaborate early in the design process on all issues. Without early integration, cost control will be difficult and the real advantages will not be realized. With delayed decision-making and team integration come construction delays during the ‘scramble’ to find the points required to obtain certification. This quickly becomes very costly,” says Dustin. “In some areas, the market simply hasn’t progressed to where the teams understand the process and costs involved, but it will.”
The opportunities that abound in green buildings are only disguised as challenges. When a mechanical contractor takes the time to understand the growing market, what motivates the building owners, and invests time in knowing the steps to take to meet the green goals set either by the customer or the law, the future of green building practices grows all the greener.
John Conover has served in a variety of roles in his 25-plus years with Trane, gaining innovative insights into the sales process, and ways to gain and retain customers. He leads Trane’s green initiative.