Risk Sharing Expedites and Reduces Cost for Site Closure: Utilizing Probability Analysis, Lump Sum Agreement, and Proactive Technical and Regulatory..., 1998 Environmental Conference Proceedings

Roger L. Herritz, P.E.

Vice President

Woodward-Clyde Consultants

Over the last 2 decades Owners 1 (i.e. responsible parties) of contaminated industrial sites have been performing remedial actions in an effort to obtain regulatory site closure. Owners of contaminated sites are looking for innovative methods to expedite obtaining site closure, reducing project cost, time, and administration.

Past efforts to obtain site closure have struggled, often significantly exceeding the originally estimated costs, schedule, and administration efforts. Typical past efforts involve several phases of investigation, followed by several years of remedial activities, likely never achieving the regulatory clean-up criteria.

A new method which expedites site closure, and reduces costs, involves the owner and consultant entering into a risk-sharing approach. The first step in this approach involves the Owner and Consultant forming a Team to develop a probable distribution analysis of the range of remediation costs for site closure. This analysis involves looking at three scenarios (best, most likely, and worst case) for each specific of each scenario occurring, along with the expected cost of each, if it occurred. Then, each of the scenarios’ probabilities and costs are summarized utilizing the Monte Carlo statistical analysis method. A distribution of probable environmental liability is generated, enabling the Owner to make decisions with explicit considerations of the risks, based on levels of confidence. The Owner/Consultant Team then will develop a risk sharing lump sum agreement to perform work necessary to obtain site closure. The lump sum agreement contains financial incentives and disincentives (for both Owner and Consultant), which provide the motivation for both parties to work pro-actively and aggressively to obtain site closure. Once the agreement is established, the team uses, a proactive technical and regulatory strategies to expedite site closure. Release Minimization Measures Interim Remedial Measures Streamlined Submittals & Expedited Work “at risk”Variances, Deed Restrictions, etc.