Once Skeptics, Builders See Green In Contracts for ‘Green’ Offices

SACRAMENTO, Calif. – When the state of California set out in 1999 to build one of the
largest "green" office complexes in the country, construction manager Ron Mitchell was
perplexed.

"I’m not joking, I thought the skin of the building was going to be green," Mr. Mitchell
recalls.

By QUEENA SOOK KIM
Staff Reporter of THE WALL STREET JOURNAL

But other builders and manufacturers were more outraged than confused by some of the
project’s bidding requirements.

"When California issued its green specs, it was scary," says Scott Lesnet, environmental
manager for All Steel Inc., a furniture company and subsidiary of Hon Industries Inc.,
Muscatine, Iowa. "They’re nuts," he recalls thinking. "There’s no way any company can
deliver all that."

Makers of furniture, carpet and other materials were required to meet strict limits on gases
emitted by 21 chemicals, such as benzene, that are considered unsafe. Construction
companies were required to recycle at least 75% of the debris from the site’s existing
buildings that were to be torn down. And in case bidders weren’t familiar with the
environmental acronyms peppering the binder-sized request — such as VOC (volatile
organic compound) or RC (recycled content) — the state included a glossary.

The Business and Institutional Furniture Manufacturer’s Association wrote the state to say
it found the bidding requests "to be impractical, if not impossible, to achieve in the near future."

But with a nearly $60 million contract on the line, manufacturers couldn’t afford to turn their backs on the huge potential profit. So All Steel and
two other furniture makers quietly went against the industry current and submitted a bid. All Steel landed the contract. And the furniture-makers
association has since backed off its stance.

Such projects are pushing green building into the mainstream, says Nigel Howard, vice president of the United States Green Building Council. The
Washington, D.C., building industry group has created a certification for buildings that meet certain standards for energy efficiency, indoor air
quality and use of novel technologies such as waterless urinals.

The program has won the blessing of environmental groups, such as the National Resources Defense Council, and even is catching on with the
private sector. This year, the council says, more than 400 building projects, including those by Toyota Motor Corp., RadioShack Corp., and
Goldman Sachs Group Inc., will apply for certification, up from 45 in 2000, when the program started.

Companies say green construction has obvious benefits: Energy and water bills are lower, for example. But no one is sure how much workers’
health and productivity benefit from such building standards. Still, trade groups and California’s Environmental Protection Agency say people fare
better in workplaces with lower levels of the harmful gases, such as formaldehyde, often emitted from new carpeting, upholstery, paints, sealants
and plastics used in buildings and office furniture.

The California complex, at the eastern end of the capitol mall, is serving as a template for about $500 million in new state projects, says Aileen
Adams, secretary of the State and Consumer Services Agency, which oversees the project. State officials also say data on the buildings and their
occupants will be collected to see if "green" workplaces really do make workers healthier and more productive.

1. Lighting: Sensors measure sunlight and adjust the indoor lights accordingly.

2. Water Conservation: Drinking water is filtered and the run-off is piped to an outdoor water fountain.

3. ‘Cool’ Roof: A white rubber material covers the roof, deflecting up to 70% of the sunlight.

4. Fresh Air: Carbon dioxide sensors adjust the building’s fresh air intake.

5. Alternate transportation: The parking lot has charging stations for electrical vehicles.

To get the construction industry to meet the challenge, the state broke from its tradition of awarding contracts to the bidder with the lowest price.
Instead, it told bidders it would pay $394 million for the project, which included a premium of 5% to 6% to pay for additional costs of going green.
The state also detailed the amount of recycled content that building materials must contain and required builders to beat California
energy-efficiency codes — already among the nation’s toughest — by 30%.

The state says it will recoup the money through energy savings estimated at about $400,000 annually. Still, at that rate, it could take about 50
years to pay back the initial $20 million investment represented by the premium.

Ultimately, two construction firms won bids for the complex to be used by the Department of Health Services and Department of Education.
Clark/Gruen Design Build Inc., managed by Clark Construction Group Inc. of Bethesda, Md., and Hensel Phelps Construction Co. of Greeley,
Colo.

Jon W. Ball, district manager at Hensel Phelps, says his first step was to bring Anthony Bernheim, a nationally recognized green designer, onto
the bidding team made up of subcontractors and Hensel Phelps employees, including Mr. Mitchell. Mr. Bernheim is a principal at the San
Francisco architecture firm SMWM. The master architectural firm for the whole complex, set to be completed next year, is Johnson Fain Partners
of Los Angeles.

From the start, both sides were skeptical, says Marian Keeler, a colleague of Mr. Bernheim’s. After their first meeting, team members reminded
Ms. Keeler to bring her green paint to the next one. Ms. Keeler shrugged it off as a bad joke but wondered if she was wasting her efforts.

For their part, the builders felt Mr. Bernheim waltzed in with a list of bells and whistles but didn’t explain how they fit into a green building. One of
the enhancements was to install air vents into the floors, rather than the ceiling, and set one inside every worker’s cubicle. Floor vents expose
workers to more fresh air, Mr. Bernheim explained, because it flows naturally upward as compared with ceiling vents that try to push the air down.

Mr. Bernheim introduced the builders to the criteria used in the industry to determine how "green" a building is according to a point system that
includes three categories: indoor environment and air quality; energy conservation and efficiency; and the reduction of waste and damage to the
Earth, as well as use of recycled materials. According to the number of points it earns for different features, a building can get one of four levels of
certification: certified, silver, gold and platinum.

In preparing their bid at weekly meetings, subcontractors consulted vendors and came up with hundreds of ideas but eventually submitted 110 to
the state and won the $68.7 million contract.

A walk with Hensel Phelps’s Mr. Mitchell through the new Department of Education building shows both the creativity and challenges in earning a
green seal of approval. Mr. Mitchell calls attention to the gray carpeting that contains 50% recycled content and is 100% recyclable. He opens
doors made of recycled sawdust panels covered in a thin veneer of blond wood. About 90% of the materials used in the building contain recycled
content — a far higher percentage than in most buildings.

To score points in energy efficiency, sensors near the windows set lighting levels to complement the natural light that streams in. All desk lights
are plugged into a motion-sensitive power strip; the lights go out when desks aren’t occupied.

In 1999, builders had to search long and hard to find many of the products that fit the state’s requirements. For the bathroom, Hensel Phelps found
only one manufacturer that made tiles with recycled content. But apparently the industry is catching on quickly: Several tile makers stepped up
their production schedules for recycled tiles to meet purchasing deadlines a year later, Mr. Ball says.

Some of the changes are even being led by such unlikely players as Johns Manville, a unit of Berkshire Hathaway Inc., the project’s supplier of
formaldehyde-free insulation. The Denver building-products maker was once identified with asbestos, a fire retardant formerly used in insulation.
Last month, Johns Manville became the first maker to stop using formaldehyde in all of its building insulation.

"We made the switch as a direct response to the persistent concern about formaldehyde from our customers," says company Market Manager Jo
Anne Cambruzzi, who adds the company sees a competitive advantage with "environmentally smart" products.

In addition, makers of more than a dozen products had to undergo tests for the 21 harmful gases, many more than the industry standard of three
or four, Mr. Lesnet says. All Steel spent a year and paid between $15,000 to $20,000 to test its cubicle-like workstations. When a station didn’t
pass the test, the company ripped it apart and retested each part until it identified which was emitting unacceptable levels of fumes. Once the
company found the culprit, which it declined to disclose, it went back to the vendor and asked it to find a solution. Now, all customers ordering the
same model workstation get one that meets the tougher standards of the California complex.

"The state really set a new benchmark," Mr. Lesnet says.

Write to Queena Sook Kim at [email protected]

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