A Tale Of Two Meetings: The Construction Defect Litigation Industry vs. The “Green” Building Movement

Last night I attended the January GreenMeet, a monthly meeting for the San Diego Chapter of the U.S. Green Building Council (USGBC-SD). A week ago, I attended a seminar up in Orange County featuring prominent construction defect alternative dispute resolution and mediation professionals. Here are the three main differences I observed between the two meetings:

  1. Demographics – The median age for the attendees of the construction defect litigation seminar was late forties to early fifties. At the USGBC San Diego meeting, more than half the attendees appeared to be under forty.
  2. Outlook – The tone at the construction defect seminar was decidedly pessimistic and ended with several panelists and the moderator stating that the future of (residential) construction defect litigation as a profession was bleak. I believe that one of the presenters said, “It is time to find a new hobby.” At the USGBC-SD GreenMeet, the outlook was overwhelmingly positive. The people gathered for this meeting spoke enthusiastically about positive outcomes and emphasized goals that seek to improve quality of life.
  3. Economics – Every one of the panelists at the construction defect seminar, many of whom have been in the industry since the 1980s, spoke of decline in workload and therefore revenue associated with construction defect litigation. All of the esteemed mediators, arbitrators and retired judges stated that residential construction defect litigation represented less than 50% of their current cases. While many were involved in cases that were related to construction in the public works, commercial and institutional sectors, only a small percentage involved causes of action pertaining to construction defects. At the USGBC-SD meeting, let’s just say that the economic factors appeared to be a bit more favorable for the participants.

The honest truth is that residential construction, as a whole, is much better than it was in the 1980s and 1990s. Production home builders have learned from previous mistakes that led to litigation. Ross Hart, one of the most highly regarded and knowledgeable figures in the construction defect industry (who incidentally began practicing in construction defect in the late 1970s) showed a graph depicting the downward decline in case settlement amounts. The price per home to settle a typical construction defect claim in Southern California has dropped from an average of $20K – $30K in the 1990s, to around $8K – $10K in recent years. More often than not, the attorney fees and expert fees to defend a construction defect claim exceed the actual amount paid to a plaintiff homeowner. As a result, there is less work for attorneys and experts in construction defect litigation.

On the other hand, energy efficient and high-performance construction is seeing unprecedented growth. Projects that use less energy, water and other resources are being funded more readily than other projects. In fact, to showcase this trend, the meeting was held at DPR Construction’s new corporate offices – a net zero office building that uses less energy than it produces through photovoltaic panels installed on the roof. The interior of this office space more closely resembled something one would imagine Google or Facebook housed in, rather than a general contractor. In San Diego, two facilities (the military’s Camp Pendleton and the airport, Lindbergh Field) are in the process of doing $5B worth of energy efficient construction. In time for the upcoming centennial celebration in 2015, San Diego’s Balboa Park (where I walk daily) is seeking LEED certification for ten of its existing buildings.

So does that mean that green building is the future? Yes and no. The built environment will become more efficient and rely more upon sustainable materials and energy sources, as will the rest of manufactured products. However, I don’t think that the term “green” anything will be such a differentiator as it is now. Take for example the State of California’s adoption of CalGREEN, a set of standards incorporated into the state building code that mandate certain “green” requirements. If CalGREEN is the new building standard, then that means that the baseline has been raised. In looking at the proposals for the next version of USGBC’s LEED standards, the bar is also being raised. According to drafts opened for public comment, new baseline LEED-certified buildings meet criteria required for the current standard’s Platinum level of certification. Within the next two decades, California building code and baseline LEED certification will likely require net zero energy usage.

Construction defect litigation addresses building performance issues in a retroactive manner. The green building movement takes a proactive approach. Commissioning, verification, auditing – these terms will become more common in construction contracts, building codes and industry standards of practice. The most common and most costly construction defects involving the building envelope and plumbing/mechanical systems, will be detected, scrutinized and evaluated more closely as result. Moreover, if such evaluations are incorporated into construction contracts and industry standards of practice, defects detected during that period will likely be addressed as “punch list” items, rather than through litigation. The net result, I believe, is that resolving construction defects and other building performance issues will be less adversarial moving forward.

The future of construction is not unlike any other industry: it will require less resources to achieve equal or greater results. While construction defect litigation has reached critical mass and is therefore in decline, green building is on the rise. What green building does not eliminate, however, is the need for competent and well-trained experts that can provide third party verification of various claims.

“The times, they are a changing”

6 thoughts on “A Tale Of Two Meetings: The Construction Defect Litigation Industry vs. The “Green” Building Movement

  1. That is an incredible insight into the future! I agree that as a Construction consultant, I need to shift my emphasis which is something I have been working on already. It also illustrates that maybe as investigators we have made a change in our industry and that the need for our services is no longer there. Thanks for the "birds eye view" of the contrast between the two subjects.

    Steve Hill
    SHCC Inc

    1. Thanks for the comment, Steve. Or as I prefer to call you, Dad!

  2. Our firm specializes in the exterior building envelope with a nationwide practice. In addition to expert witness work, we provice services to designers, owners and contractors during the construction process. Our expert witness practice is still busy. The dynamics are changing with more retrofit projects than new construction. It stands to reason with the current dearth of new construction projects that anything associated with that would be reduced. And, with the lag time between construction and litigation, a decline in expert withness work for new construction seems inevitable.

    Geen and sustainable technology has definately taken hold and we feel it will be more and more a part of future projects for both new constuction and retrofit projects. There also will inevitably be litigation from some of the new technologies that don't work out exactly as planned. Rather than sit back and wait for the litigation, our company prefers to get involved with projects during design and construction and help prevent problems, reducing the need for litigation down the road.

    Paul Beers
    Glazing Consultants International, LLC

    1. Thanks for the response, Paul. It seems like the firms that have balanced their consulting between litigation and active construction are faring the best. Additionally, those firms that are not exclusively focused on residential construction defect work, seem to be faring better as well.

      Perhaps you or someone from your firm would be interested in doing a guest post, in order to provide some more insight? Let me know…

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