Managing the Cost of Green Buildings - US Green Building Council

Managing the Cost of Green Buildings
Geof Syphers, P.E. 1
Arnold M. Sowell, Jr. 2
Ann Ludwig 3
Amanda Eichel 4
1 Director of Green Buildings Services, KEMA Xenergy
Phone: 510 891-0446. Fax: 510 891-0440. Email: gsyphers@kema-xenergy.com
2
Undersecretary, California State and Consumer Services Agency
Phone: 916 653-4090. Fax: 916 653-3815. Email: asowell@scsa.ca.gov
3 Program Manager, Alameda County Waste Management Authority
Phone: 510 614-1699. Fax: 510 614-1698. Email: aludwig@stopwaste.org
4 Senior Consultant, Sustainable Building, California State and Consumer Services Agency
Phone: 916 653-4090. Fax: 916 653-3815. Email: aeichel@scsa.ca.gov
1. INTRODUCTION
As states, cities, counties, colleges and universities across the country are adopting LEED for
their projects and raising the environmental standards of construction, they are faced with the
challenge of keeping costs reasonable. Hampering the full acceptance of LEED is the concern
that sustainable building generally costs more than standard construction. Although the lifecycle
benefits of greening can far exceed the increase in upfront costs, most LEED projects will incur
some level of “green premium” above the standard budget. The amount of this premium largely
depends on the decisions made by the project team throughout the project. Keeping LEED
project costs reasonable is therefore an issue of fundamental concern for state and local
governments as they move to adopt green standards.
The issue of cost was specifically referenced in Executive Order D-16-00, which established the
Governor’s sustainable building goal for the State of California. The Order tasked the California
State and Consumer Services Agency (SCSA) to “implement the sustainable building goal in a
cost effective manner, while considering externalities…determine cost savings; use extended life
cycle costing; and adopt an integrated systems approach.” In response, the Secretary of the
SCSA established the Sustainable Building Task Force (SBTF), an interagency working group
with representatives from over 40 state agencies. Recognizing cost as a prohibitive factor to the
incorporation of sustainability into the capital outlay process, this group of agencies is funding
work to explore the economics of greening. A comprehensive study which develops an estimate
of the financial costs and benefits of sustainable building (conducted largely by Capital E of
Washington, D.C. with Future Resources Associates of Berkeley) will be released in August of
2003.
This paper, which summarizes research conducted as a joint effort between the Sustainable
Building Task Force and the Alameda County Waste Management Authority, builds upon this
research and explores the most universally applicable cost-saving strategies for LEED buildings.
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We use a cost analysis approach that directly applies to real projects. Despite the increased value
placed on lifecycle cost analysis, most public-sector capital outlay decisions are based largely on
initial cost. Green building decisions are no exception, even when they may result in
considerable savings over time. While it is important to search for ways to employ lifecycle cost
analysis (e.g., to justify additional financing for an energy-efficient HVAC equipment upgrade)
it is also important to achieve green building goals within existing project budgets.
2. THE COST OF LEED
Across the U.S., green building professionals are lowering their estimate of the cost of achieving
a LEED rating. As recently as a year ago, consultants would typically quote a range of 2 to 5%
additional total cost for certified projects and upwards of 5 to 10% for higher LEED ratings
(Silver, Gold, or Platinum). That picture has changed considerably, with estimates now coming
in much lower. Official numbers for some newer projects now show no net additional cost over
base budget, including Block 225 of the Capital East End in Sacramento, California (Gold); the
Brengel Tech Center in Milwaukee, Wisconsin (Certified); and the EPA Regional Office in
Kansas City, Kansas (estimated to meet LEED Silver) (CAB 2003, Zimmerman 2000, EPA
2000, respectively). A California SBTF study found that it is possible to achieve a LEED
Certified rating with little to no additional cost, and a Silver or Gold rating with 0 to 2%
additional funds, provided the decision to go green is made early in design (Kats, 2003).
Findings that the cost of LEED is decreasing are also consistent with KEMA Xenergy’s
experience working on 50 green building design assistance projects for local government
agencies. Company research shows a significant difference between the cost of an entity’s first
LEED project and their subsequent LEED projects. Traditionally, first LEED projects tend to
have a large fraction of an organization’s green building program start-up and training costs
ascribed to them. For example, the cost of developing a waste management plan, finding a list of
acceptable low-VOC finishes, or establishing appropriate contract documents is far less for
second and third LEED projects. A clear illustration of this cost trend is the experience of the
City of Seattle.
Seattle data show that the average incremental cost to meet LEED Silver across all municipal
projects is 1.7% (Athens, 2002), and that the incremental cost of LEED decreased over time.
Moreover, many current Silver projects are showing no incremental “green” cost. Figure 1 shows
cost premiums for achieving LEED Silver are declining for both large projects (over $10 million)
and small projects (under $10 million). This trend is one indication of the decreasing cost of
green building resulting from the increased experience of project teams.
For projects with budgets less than $5 million, the LEED application and documentation process
can be a significant proportion of the added costs. According to Nigel Howard, Vice President of
the USGBC, “While LEED documentation costs can be as low as $10,000 for an experienced
team, this appears to be unusual. Most teams are working on their first LEED project and often
report costs in the range of $30,000-$60,000” (Howard, 2002). Fortunately, as more design
teams and consultants gain experience, their fees for LEED documentation are decreasing.
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7%
6%
5%
4%
Small Projects
Large Projects
3%
2%
1%
Figure 1
0%
2000 2001 2003
Trend in incremental cost for meeting LEED Silver
in Seattle over 4 years (data not available for 2002)
This paper is intended to help public sector owners and project managers move more quickly
from the costly green building start-up phase to the more stable and economically viable phase.
The following section lists a few of the high-level factors that inflate costs, and Section 4
describes several ways to address them.
3. COMMON COST INFLATORS
3.1 Lack of a Clear Green Design Goal
The sooner a clear and comprehensive green design goal can be established for the project, the
better. Ideally, it should be set before releasing the initial design RFQ/RFP. If key decision
makers are uncomfortable with an early commitment to a specific LEED goal, a preliminary goal
should be set in the initial contract. This goal should be revisited at a designated time—generally
toward the end of schematic design after the first complete cost estimate.
3.2 Mid-Stream Attempts to Incorporate Green
In some cases, the decision to pursue LEED certification is made midway though project design.
The result is almost inevitably increased cost due to redesign and associated change orders.
However, despite the associated cost increases, even projects that move to pursue LEED during
late stages will gain from reduced operating costs and other associated environmental and human
health benefits.
As an example, the decision to construct the City of San Jose’s West Valley Library using the
LEED Certified standard was made just after the 50% construction documents were completed.
In an analysis of project costs KEMA Xenergy found the additional costs associated with the
change were a little more than 6%, involving redesign work and additional research to specify a
number of different materials. In effect, some aspects of this building were designed twice: once
to typical practice and once to the design standards of LEED Certified.
3.3 Decentralized Management of the LEED Process
Without a single point of responsibility for ensuring correct application of LEED, green building
efforts may become fractured. Multiple points of contact and responsibility may confuse the
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process and result in doubled efforts and inconsistent design and documentation. Although a
committed team is an essential component to integrated green design, a single point for LEED
implementation and documentation is a necessity.
3.4 Lack of Experience/Knowledge with LEED
A lack of experience with LEED requirements, green building components, energy- and watermodeling
programs, and especially the commissioning process can significantly increase a
project budget. The design and construction process for a group’s first LEED project is often
characterized by significant learning-curve costs. Design teams may waste time researching
inappropriate technologies, or an owner may accept a bid that is twice the reasonable amount for
commissioning services.
The relative newness of green technologies and systems can also lead to conservative decisionmaking
from designers, architects, and clients. They may add contingencies and risk factors to
green building systems and not fully integrate them into the building, reducing the potential for
cost savings and other benefits. As design teams gain experience, the time and cost required to
successfully integrate LEED into a project will be reduced significantly.
3.5 Insufficient Time/Funding
There is rarely enough time to fully research all the interesting new green materials and
technologies that continue to enter the market, just as there is rarely enough flexibility in the
budget to pay for everything—even for things that pencil out on a lifecycle basis. Therefore, it is
important to target research and incorporate green features that most closely reflect the project’s
goals and regional limitations.
4. COST MANAGEMENT STRATEGIES
Although there remain very real costs associated with greening, data indicates that the green
premium is shrinking. During the course of our research, we found wide agreement among green
building practitioners that there are considerable opportunities to lessen the economic impact of
green building. Some of the most important strategies are summarized here.
4.1 Is it the Right Project?
Determine whether the scope of the project is consistent with LEED goals. Not every project can
successfully take on the challenges of LEED certification. Part of managing costs is deciding to
pursue a LEED rating only where it makes sense. The successful LEED project should meet each
of the following criteria:
− Senior decision makers support pursuing a LEED rating;
− LEED can be introduced before completing construction documents (preferably much
earlier);
− If the project is a renovation, the scope is significant enough to warrant consideration of
green strategies (e.g. includes both interior finishes and system upgrades); and
− The project can meet all of the LEED prerequisites.
If the project does not meet all of these criteria, it is still possible to use LEED as a design guide
and achieve many of the LEED credits, but setting a goal of certification is probably unrealistic.
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4.2 Start Early and Set a Clear Green Goal
Set a high, but reasonable green goal early in the process. Over the long term, it is cheaper to
make a commitment early in the process and invest money up front during the soft-cost phase
instead of attempting to change designs later. Ideally, the decision to go green should be made
before soliciting design proposals so that contract language may reflect the green goal. This
allows more flexibility in decision-making and increases the opportunity to save money.
Including the green goal in the contract language is also an effective way to set expectations
early that the design must achieve the green goal within the specified budget. Without that
clarity, LEED requirements may be considered an add-on rather than an integral aspect of
design, creating a perverse incentive for members of the design team to show how expensive
LEED could be.
Not all green building measures add cost, but the ones that save money usually must be made
early (e.g., siting, orientation, choice of structural systems). Generally, investing in soft costs
(integrated design strategy, energy modeling, clear contract documents, and specifications)
allows the project team to avoid hard-cost mistakes (delays, change orders, callbacks).
Finally, it is important to note that the size or construction cost of a project has less bearing on
the cost of LEED Project Management than the number and nature of credits pursued. Current
estimates to document, manage, and report project compliance range from approximately
$10,000 to $60,000 (Howard 2002). Keep this number toward the lower end by staying current
with USGBC efforts to streamline documentation. At the beginning of the design process,
provide a binder to each firm that has their submittal requirements spelled out and copies of the
Letter Templates they will eventually need to sign.
4.3 Contract for Success
Write RFPs and contracts that clearly describe green building requirements (i.e., LEED Silver,)
thereby saving time and as much as half the costs associated with implementing LEED. The
contract documents should require design team bidders to summarize their sustainable building
experience and qualifications, and evaluate these qualifications as part of the selection process.
If possible, consider using a best-value bidding process that sets a fixed budget and allows
bidders to describe what they can include for that price. If such a contract is not possible, LEED
requirements should be included in the initial RFQ as well as in the design and construction
contracts. It is also helpful for the contractor to include a list of LEED credits each sub is
responsible for in the subcontracts.
The Capitol East End project in Sacramento is a good example of how a best-value process can
deliver a green building at a reasonable price. Project teams responding to the RFP were required
to incorporate specified sustainable features within the fixed project budget, but were also
awarded points for incorporating additional green features, so called innovation points. Although
no additional funding was available, Block 225 (the first of the five buildings to be completed)
achieved a LEED Gold rating, and included such innovations as a building integrated
photovoltaic system, utilization of reclaimed water from drinking water fountains to supply the
outdoor fountain, and an integrated pest management program relying on native plantings and
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eneficial bugs. The remaining four buildings in the complex went through a similar process and
are expected to achieve the Silver level (DGS, 2002).
4.4 Build a Good Team
Select a team that has experience with LEED or at a minimum select firms that have experience
with the collaborative process, design charrettes, and green building value engineering. If there is
no direct, internal experience with LEED, hire a consultant as an on-call advisor.
− Hire a strong mechanical, electrical and plumbing firm (MEP) at the beginning of design
and empower them to fully participate in the entire design process. Because so much of
the operating costs relate to equipment maintenance, renovation, and energy use, KEMA
Xenergy has found through interviews with project managers that hiring a good MEP can
save at least 10% of the MEP construction costs.
− Select proactive project managers who will champion the owner’s green interests and actively
manage and direct the design team.
− Select design teams that have sustainable design embedded within the firm’s culture. At
minimum, the green design experience of the architect/engineer (A/E) should reside
within the firm or in a consultant with whom the A/E has had recent experience.
− Look for a design team that has a history of creative problem solving to achieve efficient
and effective systems.
− During the application and interview process, require A/E firms to include: one LEED
Accredited professional on their design team; a résumé of the individual who will be in
charge of the project; and a description of that person’s experience with green building.
− Designate a LEED point person. This person should be on board as early as possible, and
he or she should remain on the team until the project and the LEED process is completed.
− Ensure that the design team’s LEED Accredited Professionals are assigned to the project
in the contract documents. In addition, it is often useful to include an outside perspective
for brief consultations.
− During the interview process, it is important to check the LEED advisors’ references. Ask
questions related to the level of assistance they have provided in the past; the accuracy of
their judgments on predicting USGBC rulings on various credits; and how realistic their
design assistance advice was.
4.5 Educate the Team & Identify Good Sources of Information
Encourage team members to get further training. Most owners are surprised to learn that LEED
Accreditation indicates a minimum level of expertise with the LEED Rating System. The current
exam can be passed with only a working knowledge of LEED and almost no application-related
experience, so credentials are currently a poor indicator of qualifications. Various LEED
practical/applied courses are now offered, and some seminars now address the implementation
side of LEED better than the basic LEED training. It is also possible to hire consultants to
provide training tailored to a specific project. Much can also be learned from case studies of
similar projects by reviewing lessons learned with other project teams and owners.
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Specific information needs on every project include:
− Materials availability, quality, price, and green attributes such as recycled content, VOC
content and place of final assembly;
− Technical and pricing information on advanced systems like underfloor air distribution,
heat recovery, energy management systems and daylighting strategies;
− LEED credit interpretations (access to past rulings and prediction for current project); and
− LEED process advice.
4.6 Utilize an Integrated, Holistic Design Process
Look at the project as a whole and use an integrated design process. Do not separate out the
green components from the rest of the project. Integrate all the candidate green measures into the
base budget. If the project is over budget, say so, and work to reduce costs overall. Avoid talking
about whether the base project is on budget separately from the green measures. Establishing an
integrated design process often leads to capital savings. For example, including the general
contractor in early discussions with the architect and engineer may help identify ways to
streamline the construction process. Involving a landscape architect early in the site planning
may reduce or eliminate the need for a permanent irrigation system. An analysis of KEMA
Xenergy projects found that investing 3% of total project costs during design yields at least 10%
savings in construction through design simplifications and reduced change orders.
Most project teams spend a lot of time identifying how much extra it might cost to build green,
so they are predisposed to seeing the project as comprised of a green part atop a base project. But
the reasons for adopting a holistic approach are convincing. The integrated design process can
lose momentum if the team thinks it is unlikely that the green design will ever be implemented.
Projects designed and built as a whole without clear demarcations between the base project and
the green options are less expensive than those where the dividing line between standard and
green is highlighted. This has to do with the way funding is normally allocated. Most budgeters
have no experience with estimating the costs of green measures, so they create contingencies to
cover the expected increase. Projects then have a tendency to grow into the new, higher budget,
and the incentive to complete projects at the original, lower budget evaporates.
For a successful integrated design process:
− Make the LEED point person a true member of the team, with authority to make
decisions. He or she should be the equivalent of a peer to the A/E project manager and
have equal decision-making authority as it relates to green building. This person should
perform LEED reviews at the same time that others perform standard reviews, acting in
parallel with the standard process. It is most effective to empower this person to be a part
of the change order review process, as well.
− Include contractors, property managers, real estate analysts, budget analysts, crew chiefs,
and operations and maintenance staff on the design team.
− Foster and require integrated design solutions and ensure that the selected sustainable
design strategies that are “whole system” in nature cannot be peeled off from the base
project as “add alternates.”
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− Hold at least one LEED charrette led by an experienced LEED facilitator prior to schematic
design. Participants should include the A/E design team and consultants, an
owner’s representative, building operations and maintenance staff, and the user group.
Specific green-building strategies should be identified and discussed and a preliminary
LEED assessment for the project made.
− The coordinator of the weekly job-site meetings should include a separate agenda item on
LEED implementation requirements, documentation, and submittals to ensure these
requirements are being met on an ongoing basis. The cost of these activities is small
compared to the cost of correcting mistakes later.
4.7 Understand Commissioning & Energy Modeling
Both commissioning and energy modeling have the potential to add significant up-front costs,
however both provide essential and tangible benefits to the project design and operating budget.
While the State of California supports the incorporation of a whole building commissioning
process for all new construction projects, this process may add significant up front costs to a
project. In most cases benefits of the commissioning process far outweigh the costs, often by the
time construction is complete (Dorgan, 2002). To help minimize upfront costs, use a sampling
approach and follow the LEED 2.1 guidelines on limiting the material needed on commissioning
for the submittal. The new LEED 2.1 Reference Manual (2003) clarifies that sampling is allowed
for LEED commissioning: “…the Commissioning Authority applies appropriate sampling
techniques…for example, instead of checking 100% of the controls system, which is the
contractor’s responsibility…” Make sure RFPs for commissioning services include language on
sampling, and check with potential commissioning authorities to verify that they understand this
process.
To manage design time, invest in a good energy model early on that allows the design team to
actively manipulate scenarios and explore both first-cost and operating-cost savings strategies. A
model is required by LEED to demonstrate compliance with the Minimum Energy Performance
prerequisite and the savings for the Optimize Energy Performance credit. Too often, however,
models are developed that meet the LEED requirements but provide very little useful planning
information.
4.8 Seek Out Rebates and Incentives
Identify utility, state, and other funding sources to help offset investments, especially in the area
of energy efficiency. Utilize programs like the California investor owned utility-sponsored
Savings By Design, which provides funding for design assistance to maximize energy efficiency
of new construction and major renovation. A complete list of California statewide incentives is
available online at: www.dsa.dgs.ca.gov/Sustainability/incentives.htm
4.9 Make the Project a Success for the Decision Makers
Senior decision makers are generally risk averse people and have different motivations than
project managers. To convince them to support green-building projects, it is essential to address
their concerns. Start the process by educating them. If possible, find one of their peers who can
talk with them about their experiences with LEED. Send them to training classes or on a tour of a
local project. Inundating senior decision makers with convincing information is usually the
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wrong approach because they generally do not have the time to sift through it all, relying instead
on trusted advisors.
Make a commitment to keep the project mainstream. So many green building advances are
possible with proven technologies that it is not necessary to take enormous risks. It is not
reasonable or feasible for most projects to achieve LEED Platinum. Stay focused on the
objectives of the decision makers. Include them in the process. Provide decision makers with a
list of ideas for environmental technologies and ask them what they would like to see in the
project. Set reasonable, achievable goals that can help the decision makers meet internal goals.
4.10 Manage Time
Collaboration in green building projects is different from the standard process because so many
new ideas are explored. To streamline discovery and decision-making, use the following techniques:
− Select an individual (or two) to manage the discovery process.
− Assign research topics to individuals but give them authority to create a team; record the
lead researcher’s name in the LEED scorecard next to the appropriate credit(s).
− Set a specific deadline for research results.
− Identify who the decision makers will be on large/expensive decisions before the research
is completed.
− Distribute a list of known, good research resources and set expectations for how much
time is available from outside consultants.
− Empower the discovery manager with the authority to decide whether and when to cut off
research or continue.
5. APPLICATIONS
The enormous usefulness of LEED has lead to its wide application to building types other than
the commercial office buildings originally targeted—everything from small retail stores to
airports. But while there is some information available on how to economically incorporate
environmental principles into offices, such guides are lacking for other building types. The
research conducted for the State and Consumer Services Agency and Alameda County Waste
Management Authority is described in detail in the full report, however a sample of the findings
by the four studied building types is given in Table 1.
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Table 1
Sample Cost Management Strategies for Four Building Types
Research
Laboratories Libraries K-12 Schools
Multi-family
Affordable Housing
Standardize the layout of services,
casework and circulation.
Consider designing
every lab with a standard
template of services even if
some will be capped in the
wall.
HVAC and filtration requirements
are often grossly overstated.
Work with the occupants
to develop a realistic
maximum expected load
based on diversity factors.
Identify and reduce energy
use in key elements such as
fumehoods, then implement
some form of heat recovery
wherever 100% outside air is
required.
Engage library staff regarding
material selection and
equipment preferences early
in the design process.
Maximize daylighting for
area lighting, and keep
ambient electric lighting
levels low by providing
good task lighting.
Design mechanical systems
based on actual demand and
anticipated growth instead of
reacting to inadequacies of
systems in existing facilities.
Include low-VOC paint, carpet,
sealants and adhesives
because these have no added
cost for libraries.
Adopt the Collaborative for
High Performance Schools
criteria in a district resolution
to clarify green goals and improve
budgeting.
Hire a design team that knows
how to promote green design
elements within the state and
local review process.
Use green materials and
elements as the architectural
focus while keeping the design
simple.
Beat California energy code
(Title-24) by 15% to help
focus the design team and to
access rebates and assistance
(e.g., Savings by Design).
Use targeted affordable
housing guidelines as the
main tool. Only use LEED
as a supplement.
Include low- and no-cost
measures (e.g., Energy Star
appliances, flyash in concrete,
low-VOC paint, engineered
lumber) before
considering more expensive
ones (e.g., solar photovoltaics,
greywater system).
Include green building
measures throughout the
design process even when
funds are unsure. Later,
these measures can become
bid alternates.
6. CONCLUSION
There are real costs associated with implementing LEED, and with experience, those costs drop
significantly. A number of strategies can be used to keep costs down on even a first LEED
project, including setting clear goals early on, identifying individual responsibility for LEED
credits, preparing the design team for collaborative decision making, and more. While budgeting
future projects based on lifecycle costs will alleviate some of the problems faced with paying for
green buildings, all projects must seek to minimize their initial costs—especially where
programs are raising the standards of construction.
7. REFERENCES
Athens, L., T. Gale, 2002. Developing a Public Portfolio of LEED Projects: The City of Seattle
Experience, the 2002 International Green Building Conference and Expo in Austin, TX.
CAB, 2003. East End Project Earns LEEDS Gold Certification. California Architects. P. 5.
Dorgan, C., Cox, R., and Dorgan, C., 2002. The Value of the Commissioning Process: Costs
and Benefits, the 2002 International Green Building Conference and Expo in Austin, TX.
EPA, 2000. Off the Shelf: A Case Study of the Kansas City Science & Technology Center.
Howard, N., R. Watson 2002. Special LEED Section: An Update on LEED 2.1, Environmental
Design and Construction, July 12, 2002.
Kats, G. et al., 2003. The Costs and Financial Benefits of Green Buildings: A Report to
California’s Sustainable Building Task Force (DRAFT).
LEED Reference Guide for New Construction & Major Renovations (LEED-NC) Version 2.1
Second Ed., May 2003.
Zimmerman, K, 2000. As reported in the owner’s newsletter at www.jci.com
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