Contractual Implications of Environmental Compliance Requirements in Construction Projects

Abstract

Environmental compliance requirements are becoming more important in today’s construction industry due to the increasing number of environmental regulations imposed on many projects as well as the encroachment of various projects on environmentally sensitive areas. In 2015, the estimated total administrative and judicial penalties for environmental noncompliances in the United States was $237 million. To this end, various research efforts have investigated interrelated issues, including environmental impact assessment, environmental performance, and developing environmental practices on construction sites to minimize environmental hazards and comply with regulations. However, to date, there have been very limited studies examining the contractual framework detailing the rights and obligations of contractors and owners as related to environmental permits and regulations. The goal of this research is to provide contract administration guidelines related to the implications of environmental regulations and permitting in construction projects. This study used a multistep interdependent research methodology that involved (1) analyzing contractual provisions of the San Francisco–Oakland New Bay Bridge (SFONBB) as a representative project that involved rigorous environmental requirements in a sensitive area that were clearly reflected in the associated contractual provisions; (2) extracting the learned contractual lessons from the SFONBB project and recommendations that highlight the conditions that should be carefully considered in similar future projects; and (3) developing an extensive checklist to be used by the associated parties in drafting contractual provisions relevant to environmental regulations and permitting. Outcomes of this research will support stakeholders associated with construction projects—that have critical environmental conditions—with the knowledge required to better understand and draft the special contractual considerations associated with these types of projects. Ultimately, this study aims to play a positive role in minimizing environmental disputes caused by poor contract administration.