In this Edition
Construction
Management Specialists
111 Pine Street, Suite 1315
San Francisco, CA 94111
(415) 981-9430
806 West Pennsylvania Ave.
San Diego, CA 92103
(619) 550-1187
www.TBDconsultants.com
Market Update
Gordon Beveridge
As the recession bites deep into the construction industry, how is this affecting the bidding market? Gordon looks at these issues in this article.
What will LEED Cost?
Oliver
Fox, LEED AP
This is a question we are often asked by architects and owners here in San Francisco (on commercial projects) and unfortunately there is no straight answer. The answer involves the project certification level (certified, silver, gold or platinum), size of the job, function of the building and whether it’s tenant improvement or new build. The most accurate analysis is to review each project individually, however at conceptual design we need to use past project experience.
James Jenkins (LEED AP), Principal at San Francisco based GCI General Contractors who have completed several LEED projects including gold and platinum, uses Table 1 as an early stage benchmark. Although costs can vary on a wide range of factors, "costs mainly depend on how far the owner wants to push the green envelope especially at gold and platinum level when enhanced MEP (energy & water efficiencies) systems are the main cost drivers."
Table 1. Includes construction costs and soft costs
TBD has seen that certification and silver level do not affect the budget negatively especially in California with Title 24 energy efficiency standards. If the project team decides early enough, these green targets can be achieved with minimal addition construction costs (hard costs) but there will always be the soft costs premiums, which are a small percentage of the overall project cost.
Current soft costs for LEED projects:
- LEED Project Registration (flat fee)
- Project certification (based on SF of building) for construction and design review
- Premium fees from architects and MEP engineers depending on level of certification
- Third party commissioning (prerequisite) which involves an outside team that is not part of the design or construction team. This premium is approximately 0.5% - 1% of construction costs
The most significant soft cost is the architects and engineers’ additional time and effort to participate in the LEED process. LEED imposes incremental requirements on architects and engineers because these designers must assess how a project could best attain certification and prepare the design and specifications to reflect these additional requirements. As architects complete more LEED projects the more comfortable and efficient they become. The costs associated with administrative time for documentation, preparation and submittal to the GBCI will always be present but design cost premiums for designing to LEED requirements is reducing quickly.
With regards to construction cost and incorporating sustainable design elements, systems are becoming more affordable and more common in the market place. With this higher demand, economies of scale take effect and drive down the cost of reasonable sustainable design. General contractors experienced with the paper work can lead the process with help from their subcontractors. There are definitely additional costs associated with “holding the subcontractors hand” if their team hasn’t worked through a LEED project before says Jon Helman, CFO at GCI General Contractors. "Once a contractor has worked on several green projects, that initial unknown LEED factor disappears, so much so that we don’t see significant construction premiums associated with silver and certified in our TI projects".
With many sustainable materials like recycled carpet, low VOC paint, FSC wood and PVC & VOC free resilient flooring costing the same as standard products, most companies can renovate or construct new buildings with sustainability in mind comfortable that it’s not going to effect the project balance sheet. When sustainable design items like green roofs systems, chilled beams, grey water systems and storm water storage start being added, this is where cost premiums occur. Such premiums can often be shown to be worthwhile by using lifecycle analysis to measure the payback period, environmental considerations, branding and public relations LEED can give, providing higher visibility, marketing power and a healthy environment to attract employees and clients (evident with projects like the Academy of Sciences in Golden Gate Park).
With many sustainable materials like recycled carpet, low VOC paint, FSC wood and PVC & VOC free resilient flooring costing the same as standard products, most companies can renovate or construct new buildings with sustainability in mind comfortable that it’s not going to effect the project balance sheet. When sustainable design items like green roofs systems, chilled beams, grey water systems and storm water storage start being added, this is where cost premiums occur. Such premiums can often be shown to be worthwhile by using lifecycle analysis to measure the payback period, environmental considerations, branding and public relations LEED can give, providing higher visibility, marketing power and a healthy environment to attract employees and clients (evident with projects like the Academy of Sciences in Golden Gate Park).
Special thanks to James Jenkins & Jon Helman at GCI General Contractors
This is the second in a two-part article looking at the issues surrounding GMP negotiation, in our continuing series on the GMP procurement method.
Design consultant: Katie Levine of Vallance, Inc.