Innovating or Interfering?

04/11/2011 | By Janelle Penny,Kylie Wroblaski

An examination of the government’s role in greening the building industry

Innovating or Interfering? Innovating or Interfering? Innovating or Interfering? Robert A. Peck Innovating or Interfering?

The federal government has adopted the role of beta tester for innovative green technology in the hopes of determining best practices for the building and facility management industries. Some believe subsidizing green technology for private entities is in the public's best interest and will eventually lend more viability to green products and practices.

But is the government interfering with the marketplace by subsidizing such technology? Is it the government's place to fund green improvements to private facilities? Should tax revenue fund the purchase of experimental green technology, which may or may not add uncountable green value to a facility and is not necessary for a building's functionality?

Driving Change from Within

How the Government Greens Its Existing Buildings
In recent years, the federal government has imposed greener practices on itself through a combination of presidential mandates and the revision of its building practices. The General Service Administration (GSA)'s self-styled role as a "green proving ground," coupled with an ambitious revision to its building standards and an executive order requiring dramatic reductions in greenhouse gas emissions, drive the government's current priorities.

The steepest energy cuts facing today's federal building projects were handed down in Executive Order 13514, Federal Leadership in Environmental, Energy, and Economic Performance. The wide-ranging policy, signed by President Barack Obama in October 2009, mandates steep reductions in greenhouse gas emissions by 2020, with the goal of cutting emissions an average of 28% across all federal agencies.

The executive order requires improvements in water efficiency and management, waste reduction, and other areas, with an emphasis on cost-effective strategies that minimize consumption. It also mandates that every new federal building entering the planning process in or after 2020 must achieve zero-net-energy status by 2030.

Leading this charge is Robert A. Peck, Public Buildings Service (PBS) Commissioner of GSA. As the government's top real estate professional, Peck, a land use lawyer by trade, oversees more than 370 million square feet of workspace for 1.1 million federal employees. Now, he aims to lead GSA beyond the era of mediocre, inefficient construction and make the agency a model of sustainable practices.

"From 1949 until about 1994, GSA was building pretty mediocre federal buildings," Peck says. "We made a determined policy change to do what we had often said we were going to do, which was hiring the best contemporary American architects. It meant that for once GSA was regarded as a leader somewhere in the industry. I think that has carried over to people regarding us as something of a leader in green building as well."

Agencies developed their own reduction targets in response to the executive order and announced game plans to meet them. Improvements range from a major remodel on the IRS Service Center in Andover, MA, to energy generation projects at Fort Bliss in Texas.

"We'll report to the private sector what seems to be working the best," says Peck. "The executive order that President Obama issued in 2009 encouraged us to take a look at where we put our facilities in the first place. We want to get the best bang for our buck, but we want to put facilities someplace where they are really well-located."

GSA: The Green Proving Ground
Pointing the way to greener pastures is not a new role for the federal government, says Jay Coalson, president of sustainability consulting firm Green Building Services, which has partnered with GSA on several projects. Though the emphasis on sustainable practices is relatively young, the federal government has frequently flexed its muscles to affect change in other arenas.

Pointing the way to greener pastures is not a new role for the federal government, says Jay Coalson, president of sustainability consulting firm Green Building Services, which has partnered with GSA on several projects. Though the emphasis on sustainable practices is relatively young, the federal government has frequently flexed its muscles to affect change in other arenas.

"The federal government has the ability as a consumer of facility space to greatly influence the industry, and I think it's appropriately flexing its rights as a consumer," Coalson says. "By raising the bar on industry expectations, it causes design, engineering, and facility firms to ensure they have the skill sets that are necessary to put that forward."

This role, coupled with GSA's mission as the nation's "green proving ground," as Peck puts it, offers the private sector a peek at which technologies can deliver promised results. Vegetated roofs are among the technologies GSA implemented long before they were widely adopted in the private sector.

"There's a level of responsibility as it relates to the public good that's tied to the emergence of these technologies," says Coalson. "Organizations that have sole focus on fiduciary responsibilities can't always take that step. They may recognize the value of that technology and recognize that down the line it's going to be meaningful to the marketplace, but they can't always take that step." The government provides the needed market to test that technology.

"We're very aware that we're spending taxpayers' dollars on whatever we do," Peck says. "One way we can return on the investment to the American people is to try new technologies and new ways of doing green building so the American building industry doesn't have to."

However, not all building professionals view GSA's role through the same lens. Jerry Yudelson, principal of green building consultancy firm Yudelson Associates, says the government's building case studies can be helpful, but only when viewed through the context of what's realistically feasible for the private sector.

"Investing in green building certainly has positive value for building owners, independent of what the government does, and that's been proven over the last 5 years with real data," Yudelson says. "That's the kind of stuff that influences the private sector a lot more.

Leaner, Greener New Buildings
Obama's executive order is backed by GSA's extensive revisions to its internal building policy, P100, stipulating minimum requirements that all new federal buildings must meet. The 2010 version of the building standards requires all new buildings to meet criteria for LEED Gold instead of the previous requirement of Silver.

Obama's executive order is backed by GSA's extensive revisions to its internal building policy, , stipulating minimum requirements that all new federal buildings must meet. The 2010 version of the building standards requires all new buildings to meet criteria for LEED Gold instead of the previous requirement of Silver.

Luckily, the cost difference between the two levels is steadily shrinking, Coalson says. The increasing sophistication of the commercial building industry will likely continue closing this gap, which may pave the way for stricter LEED standards, a beefed-up requirement for Platinum GSA buildings instead of Gold, or both.

"The expertise and techniques that are available in the market now have closed the gap from when GSA made the decision for Silver however many years ago," Coalson says. "The market has become that much better at delivering high-performing buildings. If you're smart about the way it's done, you're going to select measures that will deliver a return on investment and enhance productivity."

How the Government Greens Leased Private Space
he government isn't stopping with greening its own buildings. It's also promoting greener buildings in the private sector through GSA's stringent lease requirements.

"GSA has been updating its lease provisions to implement various sustainability laws and executive orders, including the Energy Independence and Security Act of 2007 (EISA)," explains John Thomas, GSA's director of realty policy. "In September 2010, GSA issued guidance requiring that no federal agency enter into a leasing contract on or after Dec. 19, 2010, for a building that has not earned the ENERGY STAR label in the most recent year."

Exceptions to this requirement include leases of less than 10,000 square feet, availability of space in Energy Star-labeled buildings, cultural significance, and other factors.

And while GSA has strict standards for its own building projects, requiring LEED Gold for new construction, it requires a slightly more lax LEED Silver standard for spaces it leases. "In December 2007, GSA issued a policy requiring a LEED-NC Silver rating for all lease construction projects of 10,000 rentable square feet and above," Thomas says. "GSA's PBS has been undergoing a lease process reform effort for over a year to streamline, standardize, and simplify PBS lease acquisition processes."

These standards may give building owners a push in a greener direction. Private building owners must step up to meet the government's requirements or risk losing the lease to a competitor, and the fear of losing a GSA tenant may be incentive enough.

"GSA is a good tenant because it signs long-term leases and will pay the rent," says Yudelson. "If you're interested in that market, you're going to want to make sure that the real estate meets its requirements."

Providing Green Motivation
To entice private building owners to green their buildings, the government opts for a carrot instead of a stick, offering incentives to building owners. "President Obama has heard the message that the commercial real estate industry needs incentives – not mandates – to retrofit existing buildings," says Karen Penafiel, vice president of advocacy for BOMA.

To entice private building owners to green their buildings, the government opts for a carrot instead of a stick, offering incentives to building owners. "President Obama has heard the message that the commercial real estate industry needs incentives – not mandates – to retrofit existing buildings," says Karen Penafiel, vice president of advocacy for BOMA.

The new Better Buildings Initiative, President Obama's plan to make commercial buildings 20% more energy efficient over the next decade, has the potential to greatly impact the industry by catalyzing private investment through incentives to upgrade facilities. With revamped building standards regulations – from the government and private companies to municipalities and states – incentive programs can encourage owners to green their facilities, even under a tight budget.

According to Chris Roth, national project manager for the GSA National Brokerage Contract at Jones Lang LaSalle, the initiative provides support for landlords to make energy improvements to meet building standards and tenants' needs by providing more financing opportunities for retrofits and tax incentives for building efficiency. "Landlords should pay close attention to standards that may apply to future tenants and even current tenants," he says. "We're seeing cities and states starting to mandate a level of efficiency, but even where it's not required, tenants are asking how buildings comply with standards."

The Better Buildings Initiative may be new, but it isn't the only incentive program for greening facilities. In 2010, several organizations, including the USGBC, BOMA, AIA, and IFMA, banded together to sponsor Using Executive Authority to Achieve Greener Buildings: A Guide for Policymakers to Enhance Sustainability and Efficiency in Multifamily Housing and Commercial Buildings, a report that presents a list of opportunities to enhance energy efficiency and sustainability in multifamily and commercial buildings without seeking new funds or authority from Congress. For the most part, items in the document are underutilized programs that may need some tweaking, but don't require new Congressional authority.

"For the past several years, it has been extremely difficult for Congress to pass any meaningful legislation, especially on energy policy," explains Penafiel. "In the absence of Congressional action, the idea emerged to examine existing programs and authorities to see how they could be better utilized or expanded to accomplish some of our objectives – without calling on Congress."

There's No Such Thing as a Free Upgrade
Money for incentives has to come from somewhere. And as with all other federal programs, these enticement dollars come from American taxpayers. Is it the government's place to use taxpayer dollars to fund incentive programs for private companies?

"Providing tax incentives to all types of industries and individuals is how our tax and regulatory system seems to work across the board," Penafiel says. "But you can't just look at it as a publicly funded tax break benefiting just a few building owners. The government's main interest is the environmental benefit to all of reducing our nation's energy consumption."

The potential benefits for the public don't stop there. Penafiel argues that these incentives, and the lower energy consumption results that come with them, will lead to fewer new power plants and that tax credits are more economical than building them. The proposed tax incentives will also leverage private sector investment and lead to job creation.

"Keep in mind that the tax incentive under discussion is not a new one," she adds. "President Obama is proposing that a tax deduction, first passed in 2005 and signed into law by President Bush, be revamped to become more generous and more usable."

While incentive programs sit well with owners interested in bringing their buildings up to par, they are optional by nature, so not every building owner will buy in. To green a wider swath of buildings, cities, states, or the country as a whole, lawmakers may impose a mandate requiring stricter standards. "I think you're going to see cities and municipalities become smarter about building codes," Coalson says. "The bar is going to go up."

For example, Washington, D.C.'s Green Building Act of 2006 requires that after Jan. 1, 2012, non-residential, privately-owned buildings 50,000 square feet or greater must fulfill or exceed LEED for New Construction 2.2 or LEED Core and Shell 2.0 standard at certification level.

While Washington, D.C. may be the first municipality to mandate stringent green building standards, it could become the norm. "It wouldn't surprise me to see the standards raised simply because the market continues to get better," explains Coalson. "Someone will raise the standard, whether it's GSA or USGBC. We have to continue to move forward."

Whether you agree or not, it appears that the government plays a large role in greening the building industry – taking on the parts of both the experimental guinea pig and the motivator.

"We want to see the government lead by example, and that is starting to happen as a result of recent legislation and executive orders," Penafiel says. "But we know from experience that innovation usually comes from the private sector and the private sector should be encouraged to do what is best. Not every commercial real estate company has the appetite to be the guinea pig. We are looking forward to learning from GSA."

Kylie Wroblaski (Kylie.Wroblaski@buildings.com) and Janelle Penny (Janelle.Penny@buildings.com) are associate editors of BUILDINGS.


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