How to Embed Sustainable Innovations and Digital Transformations in Construction Contracts

The built environment plays a major role in the health of earth’s environment, and green-construction initiatives can significantly improve global sustainability.

The adoption of green initiatives is not without its challenges but, with the support of world leading Employers keen to meet sustainability targets, we have seen significant growth in the use of sustainable construction practices as a value enhancement to projects in the Middle East.

Whether by reducing the carbon footprint through green focused procurement choices, using prefabrication or modular construction to reduce waste, the adoption of BIM technology and digital twins to introduce efficiencies to reduce the project’s environmental impact, these approaches are vital components of the procurement and contract process.

So how do you embed climate solutions into your commercial arrangements and use contractual drafting to deliver net zero targets? In this article we set out three key takeaways to consider on your next green project.

1. The Chancery Lane Project Drafting

Beale & Company are a proud contributor to the TCLP The Chancery Lane Project (‘TCLP’) – a lawyer led organization aiming to change the way in which the world contracts. The TCLP have prepared a number of contractual clauses to facilitate climate solutions, that can be incorporated into contracts across a number of sectors.

Some of the relevant clauses from the TCLP which we have recommended for the construction industry in the Middle East include (but are not limited to):

• Estelle’s Clause – Climate Standard of Care (Construction): revises the standard of care under a contract, to require contractors and/or service providers to comply with a new definition of “Best Industry Practice” in mitigating climate risk and to ensure that the project has and meets its “Net Zero Objectives”.
• Luna’s Clause – Net Zero Aligned Construction Modifications: this clause incentivises contractors to propose modifications that can be classed as “Net Zero Modifications” to project works, which will benefit the Employer, the overall project and the environment.
• Tristan’s clause – Procurement: a construction materials procurement clause that can be used to set a carbon budget for construction projects under design & build contracts. This clause was based on the JCT but we have adapted this for use in FIDIC Yellow book based agreements. This can help to reduce greenhouse gases and incentivise participants to use more sustainable materials.

2. Practical Considerations

Clearly defining an  organization’s sustainability goals and objectives is crucial to have benchmarks against which results can be measured.. These objectives could involve reducing carbon emissions, encouraging circular economy practices, utilizing renewable materials, or supporting local businesses.

Once established, these objectives can be incorporated into a sustainability criteria and used as part of the procurement process.  The importance in codifying these goals and making the objectives clear, objective and measurable is important so as to avoid:

• Scope Creep: Scope creep is where the scope of services or works includes additional requirements that could result in services beyond those for which pricing has been . With green drafting, if the objectives are not clear at procurement, there is a risk of creep. This can cause pricing issues, conflicts between specifications and the green objectives or possibly lead to dispute.
• Strict obligations/fitness for purpose: From some of the examples we have seen in practice, when green drafting clauses are included in contracts without care, they can contain fitness for purpose obligations. Fitness for purpose obligations (essentially a guarantee that a service will meet certain requirements) is cause for concern as such a clause will go beyond the scope of cover under most professional indemnity insurance policies leading to significant business risk.

3. Procurement Issues

When considering the procurement of materials in light of ‘green’ drafting clauses, it is important that there is alignment between the obligations under these clauses, and the specifications. It is equally important that the Engineer appointed on the project is aware of the green drafting clauses, and proactive in managing any material submittals which are submitted in pursuit of meeting the green objectives.

We often see conflicts between circular economy principles (reuse and recycle) and industry standard clauses. For example, deleterious materials clauses generally prohibit the use/specification of materials that do not meet current standards (which re-used / recycled materials may not). Similarly, contracts often require that materials are “new” which is clearly in conflict with the principle of re-use.

Another example may be a conflict between a requirement to use the latest green technology and a specification which requires a product to have a history of use before it can be specified for use. We have found this type of conflict to be particularly prevalent in solar/data centre projects which call for the use of the “latest” battery technologies (which are advancing at rates which might not keep up with specifications that are issued at time of tender) and which call for a certain testing history.

For further information, please feel free to reach out to the team.