Cross-Laminated Timber Projects: The Pacific Northwest’s Next Big Timber Development

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The timber industry has left its fingerprints on generations of Washingtonians both past and present. My family’s connection to the old-growth forests nestled in the Cascades is all too familiar. In the 1960s, my grandfather started a humble two-man logging company in Deming, Washington that would later evolve into my father’s heavy civil contracting company, and inspire my practice as a construction and design attorney.

It is not surprising that the timber industry has been one of the single most influential factors in Washington’s development. In the mid-1800s, the California Gold Rush sent droves of San Francisco investors to the Puget Sound area to establish dozens of lumber mills that produced much needed building materials. By the late 1800s, Washington’s lumber industry supported the expansion of the Northern Pacific Railway to Seattle and Tacoma. And by the early 1900s, Washington became the nation’s leading producer of timber, producing more than 5 billion board feet of lumber per year.

The recent serendipitous explosion of cross-laminated timber (“CLT”) structures in the Pacific Northwest seems to pay homage to our state’s history as a leader in the timber industry. For the unfamiliar, CLT is a type of structural timber product composed of dimensional timber layers bonded together with structural adhesives. It creates a building material with the structural integrity of steel that can cut down construction schedules by as much as half.

Both public and private projects in Seattle, Tacoma, and Spokane have embraced CTL. However, after the collapse of Oregon State University’s Peavy Hall’s subfloor in August 2018, which engineers are linking to delaminating glue impacting up to 85 percent of the structure’s panels, it seems the risks of CLT are still being evaluated. These recent setbacks have caused the next generation of Washington’s timber entrepreneurs to pause and consider the risk mitigation tools they should employ before pursuing their next CLT project.

CLT has been a leading technology used by European developers for decades. However, the United States only recently took hold of the product after its adoption by the 2015 International Building Code. Likewise, the Seattle Building Code adopted the 2015 International Building Code, which generally limits the height of structures made of wood products to 85 feet and no more than six stories. Before its adoption, it appears the Seattle City Council was influenced by CLT’s ability to reduce carbon emissions, minimize waste in production, and stand up to natural disasters—making it a viable commercial alternative to materials like concrete and steel.

The Seattle City Council is not alone. Experts from across the timber industry have advocated for CLT’s many benefits. Conversely, some critics have pointed out CLT’s limitations, such as the pre-planning demands, intensive design process, hidden costs of innovation, and need for heightened risk management. Owners seeking to harness CLT’s many advantages must proactively work with their design and construction professionals to prepare a design plan that can be successfully constructed in the field, and avoid certain risks like those arising from the collapse of Peavy Hall. The following steps should be considered before starting any project utilizing innovative and developing technologies like CLT.

First, the source of the CLT materials for the project must be thoroughly investigated. Like many raw materials, wood has a plethora of physical properties; including, grain, texture, moisture content, weight, density, and decay resistance. These properties must be assessed and taken into consideration by the manufacturer to ensure that each batch is consistent with the project’s specifications. Purchasers of CLT should inquire about the manufacturer’s quality control standards, batch inspection practices, and testing procedures. Likewise, purchasers should have their attorneys review the CLT manufacturer’s warranties to make sure that risks are properly allocated, and that the warranty extends to the end user in the event of a product defect.

Second, the owner should engage a team of sophisticated professionals to carry out the delivery method selected for the project. The professionals’ construction contracts should be strategically negotiated to shift liability from the owner to the professional in the best position to shoulder the risk. Ensuring continuity in the construction contracts’ provisions allows the owner to streamline the administration of the project and control future disputes that may arise either during construction or post-completion. During negotiations, the owner should pay special attention to provisions regarding scope of work, indemnity, waiver of consequential damages, limitations of liability, and dispute resolution.

Third, as is common in many scenarios, the owner should consider forming a project-specific entity to provide limited liability to the owners for liabilities arising from the project. In order to maintain the benefits of limited liability, the owners must comply with corporate formalities. Common corporate formalities for project-specific entities include the preparation of separate financials, proper capitalization, purchasing adequate insurance coverages, and independent management and decision-making. If the owners fail to substantially adhere to these corporate formalities, they may face personal liability for liabilities arising from the project.

Finally, the owner should consult with its risk management personnel and insurance broker to ensure that all parties involved in the project purchase the correct types, limits, and durations of insurance coverage to protect against damages that may arise either during the project’s construction or after final completion. Professional liability, builder’s risk, and commercial general liability insurance policies should be reviewed by each professional’s counsel to make sure that no exclusions bar coverage for claims likely to arise from a CLT project. The differences in each participant’s scope of work may trigger a different exclusion that bars coverage for that insured.

Albeit in its infancy, it appears that owners’ utilization of CLT may be the Pacific Northwest’s next significant timber development. In the meantime, owners looking to cut down on construction time and costs should seriously consider using CLT on their next project while applying the risk mitigation tools outlined above.

Originally published as “Thinking of building with CLT? Here are some things to consider before starting” on October 4, 2018, by the Seattle Daily Journal of Commerce.

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Loni L. Hinton
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