Legal debates come up frequently in the construction industry. No matter what the problem is or whose fault it actually was, professionals and project owners alike seem to be good at playing the blame game. When problems related to a structure’s stability or safeness arise, contractors generally find themselves having to resolve the problem in one way or another.

At times it seems that the government further complicates these
discussions by implementing additional environmental regulations that
contractors typically have to decipher on their own. With the recent
interest in eco-friendly green building, many government agencies are
trying to find a way to promote green building while also regulating the
contractors who take part in it.

So far, green performance bonds have emerged as one of the most potentially enforceable ways to
regulate the green aspect of the construction industry. Contractors
should make themselves familiar with the developing regulations that are
likely to become more widespread in the future.

How green performance bonds work

Green performance bonds are a specific type of surety bond that act as
legally binding contracts to guarantee a certain level of professional
performance. In the construction industry, surety bonds are frequently
called “contract bonds” since they’re used in congruence with
construction contracts. Generally, three major types of surety bonds are
used for most construction projects, but many government agencies also
make use of additional contract bonds to help protect consumers and
regulate the indsutry.

The use of green performance bonds is one of the most recent developments
in the sphere of contract bonds. Green performance bonds are written
especially for contractors who work with green products or use other
approaches related to green building. Three
entities are involved with each green performance bond that’s executed:
the contractor who buys the bond, the project owner that requires the
bond and the surety that executes the bond.

When a green performance bond would be useful

Say a contractor worked on a large scale public construction project
like remodeling a government building. Before beginning work on the
project, the contractor got a price break for using a revolutionary new
kind of insulation that was marketed as eco-friendly. Unfortunately, a
year after the project was completed, the insulation began to grow
mildew and deteriorate.

The government agency that paid for the renovation blames the
contractor, and the contractor blames the company who “tricked” the
contracting firm into buying the product in the first place. Obviously
the company says the contractor must have made some sort of mistake
while installing the insulation.

At this point the contractor’s insurance policies and surety bonds would probably come in handy. A contractor’s green
performance bond would provide a way for the project owner to collect
recompense even if a contractor doesn’t have the finances to fix the
situation personally. In such an instance, the surety would be held
responsible for either finding a new contractor to fix the problem or
providing financial compensation.

Currently, however, Washington DC is the only area that has laws
regarding the use of green performance bonds. The law is slated to go
into effect in 2012, but many in the industry are skeptical about just
how enforceable green performance bonds will actually be. Only time will
tell how effective, or not effective, green performance bonds will be. In
the meantime, eco-friendly contractors should try to keep up on
developments.

This article was provided by SuretyBonds.com, a nationwide
surety bond producer. SuretyBonds.com works with a number of construction
companies and distributes information to help keep the industry’s
professionals updated on developing regulations.

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