By Matt Doyle
Green building laws have changed the face of the modern construction industry. Stricter laws governing dust control, surety bonds and eco-friendly construction have many contractors and builders concerned about the increased expense that must be ultimately passed on to owners and property developers.
Pros and Cons of Eco-Friendly Building
Advocates for green building say the increased cost and scrutiny from local, county, state, and federal inspection departments is well worthwhile for the environmental benefits. Environmentally friendly construction practices help ameliorate damage to fragile ecosystems and reduce emissions and pollution from a number of industries, making them long-term solutions to many of the environmental problems facing our world today.
Opponents of green building say the added expense and oversight stifles cost-effective development and results in costs that drive many contractors out of the construction business. They point to surety bonds and other preventative statutes as sources of contention between contractors and public works and building department personnel, and claim the added expense results in loosing badly needed jobs. As one contributor wrote on greenbuildinglawblog.com, these opponents also cite logistical issues pertaining to uniform enforcement of the new codes as being of particular concern.
The Surety Bond Dilemma
One small item making a big impact in the estimated costs of green construction are the increased demands for surety bonds — money paid by contractors as an assurance to building and code enforcement departments that the contractor will adhere to all applicable environmental regulations. Depending on the projected risk of the market and the credit history of the applicant, these bonds can have premiums ranging from one to twenty percent of the bond amount. Bond amounts can fall anywhere between a few thousand dollars for a specialty contractor such as an electrician, to several hundred thousand dollars for a general contractor, depending on the size of the project, the reputation of the contractor, and how stringently regulations are enforced in the market under consideration.
Surety bonds are a three-way agreement between the contractor, or principal, the company providing the bond, or surety, and the government or private entity requiring the bond, or obligee. The principal uses the bond provided by the surety as a guarantee to the obligee that their regulations and best practices will be followed at every phase of construction. Opponents of green building regulations cite these bonds as an unnecessary financial burden on contractors and their employees.
Regulation and Expense
Every time a contractor is forced to pay fines against the surety bond, this depletes the part of the bond known as the penal sum. Because environmental regulations are strictly enforced across the nation, many contractors say they may not be able to continue in their chosen field.
Proponents of environmental construction regulation say the added up-front cost will be offset by the use of green materials that use less nonrenewable natural resources, thereby saving time, money, and the environment. They also point to stricter regulations on the horizon, noting that those who don’t start adhering to these practices now will certainly push themselves out of the market as new International Code Committee restrictions are implemented.
Matt Doyle is an expert in surety bonds and when he is not writing you can find him traveling the world one random place at a time.