Sustainable development in construction contracts
Wed 18 Jun 2008
1. What is sustainable development.
Sustainable Development is certainly not a new concept and is something that the social housing sector has been promoting for some time. In essence it is about looking at how you build, where you build and what you build to "meet the needs of the present without compromising the ability of future generations to meet their own needs" .
At a time when the concept is attracting mounting media attention and is high on the political agenda, there is increasing pressure for the construction industry as a whole to embrace the principles of sustainability.
2. Should construction contracts contain specific obligations with regard to sustainability?
There is currently little primary legislation governing this area although there has been a raft of government initiatives aimed at achieving sustainable development. The Housing Association sector has been inserting provisions into contracts for some time now with regard to compliance with the Code for Sustainable Homes and this sort of provision will probably become standard in all contracts for the construction of housing as the Code became mandatory for all as from May 1 2008. However, generally we are currently seeing very little in the way of contractual obligations in construction contracts with regard to sustainable development. Where attempts have been made, these have not always been met enthusiastically by contractors. We have seen this in particular with regard to obligations to source materials from sustainable sources.
The JCT Consultation
All this may change as a result of the recent Joint Contracts Tribunal (JCT) consultation which recently finished. The JCT invited organisations from all parts of the industry to explore whether construction contracts should include stronger sustainability provisions. Various questions were asked including whether there is an express need for standard contract provisions dealing with sustainability and whether such provisions should be legally enforceable. The level of response to the consultation was excellent. A working group is now being set up to decide how JCT will take this forward.
Why is this consultation important?
70 per cent of all construction contracts are under a JCT form and so whatever they decide will have a big impact on the construction industry as a whole and construction contracts in the future.
What provisions should be included?
The framing of appropriate clauses could be complicated. It is not always easy to adequately define a sustainability objective in contractual terms. Even if you can, there may be little loss suffered by the developer for failure by the contractor to comply with such a term and as a result the provision may lack teeth. Many respondents to the JCT consultation thought that contract conditions should be specific about sustainability performance but that clauses should refer to supporting documentation for implementation. This approach seems the most sensible way forward as long as consideration is given to the remedies available to the developer if there is a breach of such provisions.
The social housing sector is already familiar with provisions in building contracts where contractors must comply with the Code for Sustainable homes; such obligations seem likely now to be extended. For example, we could in the future see obligations for the contractor to source materials in accordance with certain standards or to comply with CIRIA Waste Guidance. Not all of the guidance published so far has statutory force and therefore compliance with such guidance needs to be expressly catered for in contracts if required. Any legislation in force prior to the coming in to force of the contract will have to be complied with by the contractor by virtue of the obligation generally in construction contracts to comply with all statutes and law. If the project is lengthy then consideration may need to be given to who will take the risk of a change in law as it may be that there will be further legislation implemented with regard to sustainability during the course of a project.
There should be effective remedies for breaches of ay provisions inserted into contracts regarding sustainable development. These could include performance monitoring provisions with payment deductions if the Contractor fails to hit certain standards although this could be complex. Another way may be to offer incentives for the Contractor to achieve certain standards.
It is important at the beginning of any project to ascertain what the sustainability objective is so that it can be incorporated effectively one way or another in to the project. The social housing sector has already embraced sustainability principles into their operations but there is still a way to go with regard to translating these principles in to construction contracts. All of this will of course come at a cost and it is uncertain currently who will foot the bill. However, that may be a small price to pay against the environmental and social benefits to the current population and future generations.
 Report of World Commission on Environment & Development 1987.
Article appeared in Inside Housing Sustainable Development published 18th June 2008.