Landmark Environmental, LLC
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Environmental Remediation Co$t Estimating and Co$t Risk Analysis
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THE CHALLENGES
Brownfield cleanup costs can make or break a deal in a real estate transaction or redevelopment project. Costs can range from $50,000 to $5,000,000. As the scale of the project grows, the need to understand and estimate costs grows.
But cost estimating presents unique challenges, and the lack of a reliable and accurate cost estimate can bog down a project. This is especially true on projects that involve a mixture of landowners, federal and state regulatory agencies, attorneys, bankers, and grantmakers. All need to answer the question: is it economically feasible to redevelop a contaminated site?
The challenge is to capture all possible contingencies. Capturing contingencies has traditionally been a problem with cost estimating because typically a single cost estimate is prepared with spreadsheet software. Assumptions are listed and a single estimate results. Although several estimates are sometimes prepared for different scenarios, analyzing cost risks remains difficult.
Landmark understands the importance of cost estimating and utilizes cutting-edge software that uses risk analysis techniques to help decision-makers manage the uncertainty inherent in remediation cost estimates.
THE SOLUTION
Landmark works with clients to understand the specific redevelopment plans to identify uncertainties early in the planning process. We then use these plans in cost modeling scenarios. With a client-focused and planned land use-driven approach, we develop response action plans that incorporate building design, property layout, cut and fill and even landscape architecture to better predict remediation costs.
LANDMARK'S EXPERIENCE
Landmark has prepared cost estimates on projects ranging from the removal of underground storage tanks to the cleanup of former Superfund sites. The goal of the cost estimate is to minimize financial risks and gain the confidence of all parties involved. We have prepared cost estimates for:
* Feasibility studies
* Construction
* Probabalistic scenarios
* Alternative development plans
* Third party review of estimates
* Development and review of construction bids and payment applications
* Cost risk analysis (see next section).
Landmark’s cost estimating skills have contributed to the cleanup and redevelopment of properties ranging from a 10-acre former Superfund site on the Mississippi River to a 42-acre former commercial/industrial/ residential property. These projects reflect Landmark’s skill at using cost estimates to bring projects to completion.
PROJECT EXAMPLE
Since most cleanup and redevelopment projects involve – at least – the excavation of contaminated soil, Landmark uses risk analysis software to estimate soil volume and disposal costs, which can be a costly unknown. The software allows us to enter a range of values and generate a range of costs.
Although risk analysis software is a useful tool for identifying and managing project cost risk, the cleanup and regulatory strategy that Landmark and the client creates is what will ultimately save the client money. In the case shown below, costs are controlled by devising property-specific cleanup goals to meet the client‘s needs for planned property uses. Cleanup goals were driven by a range of property uses (utility corridors, storm-water pond, etc.), and by a development plan that minimized unnecessary excavation such as soil under buildings.
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In the example shown in the graph, the project involved a minimum volume of contaminated soil to be excavated of 5,000 cubic yards (CY), although the expected value was 20,000 CY, while the maximum soil volume excavated for development was an additional 25,000 CY. So the range of the volume of contaminated soil varied from 5,000 to 45,000 CY.
The figure shows the probability distribution for total contractor and engineering remediation costs, with a range from $1.3 to $3.7 million and a mean of $2.2 million. The graph also shows there is a 90% chance the costs will be between $1.5 and $3.0 million. The actual cost for this project was $2.0 million with a total volume of 18,000 CY.
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Landmark knows how to develop a
response action plan that controls
and minimizes remediation costs.
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Insurance?
If remediation cost estimates are $1,000,000 or more, consider cost cap insurance as an additional way to reduce risk.
Landmark can help you make sure you negotiate the right insurance starting cost (when the insurance actually kicks in).
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