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Selecting the Right Environmental Due Diligence Consultant

Finding Mr. Right: Choosing a Consultant for a Phase I ESA

There are a lot of choices when it comes to picking an environmental consultant to perform your Environmental Due Diligence work. In most cases, this process starts with finding the right consultant for your Phase I Environmental Site Assessment (ESA). Usually the three keys that you look for are cost, quality, and timing. In most cases, buyers ask for price assuming that quality is about the same and timing is not an issue. As a 25-year veteran in the business, this is not the case.

Generally, the lower the pricing, the lower the experience level of the inspector. The Phase I ESA is generally the entry project for most consultant, so pricing is an issue. Most consultant know that it’s a competitive market, so lower pricing usually means less expensive, lower billing rate professionals. In other words, they use the “greenhorn” or entry level professionals as much as possible. Good for the consultant but bad for the end user, especially with more complex properties like service stations, dry cleaners, and industrial facilities.

Phase I ESAs are a must for commercial real estate transactions requiring a lender and deals that exceed some threshold value. ESAs should also be considered on cash deals, since you buy the environmental liabilities along with the property. ESAs today are largely driven by price and to a lesser degree service and quality, which is much harder to assess. For most banks, brokers, buyers, or sellers, the obvious difference between consultants is the price and secondly how fast can they complete the work. Quality or experience is something much harder to evaluate.

Based on my experience, common problems encountered with ESAs are:

  • Inspector has minimal experience and possibly not even an environmental degree.
  • Inexperienced inspector may incorrectly identify Recognized Environmental Conditions (RECs) or even worse, miss them.
  • Best and cheapest firm for the Phase I ESA may not be your best choice to conduct Phase II Investigation and develop strategies for remediation and closure.
  • Selected ESA firm has little or no expertise with the regulatory agency such as the Texas Commission on Environmental Quality (TCEQ).
  • Inexpensive consultants usually have to “nickel and dime” their clients. Is your consultant available to respond to day to day questions so that you can “pick their brain” on an as needed basis without a bill for every minute? If you’re a deal maker, you need a “consultant in your back pocket” ready to address your environmental questions.

When it comes to ESA providers, we want it all: low cost, quick turn-around, and great quality from a true expert. But in reality, you can’t have all three. The real expert that provides great quality and service is not going to be the cheapest nor should they be way too expensive.

Five Keys to Selecting The Right Environmental Consultant:

  1. Review consulting firm’s experience. Pick your consultant based on staff assigned to your projects (inspector, reviewer, and project manager). Beware of the “greenhorn,” which is what you may get in many cases, especially if price is your driver. Also, what is the overall focus of the selected firm, environmental due diligence or many other services such as industrial compliance, remediation, water, wastewater, etc.?
  2. Check resumes of proposed staff starting with the inspector and primary writer.
  3. Ask for references of current clients with similar projects and call these references regarding quality and schedule.
  4. Identify a Consultant who is best fitted for the ESA and which firms are best for post ESA work such as Phase II Investigations, remediation, and regulatory closure. Sometimes the best ESA firm is NOT the best fit for determining if the property is contaminated, costs for remediation/closure, and working with more complicated tasks such as closure through Texas remediation programs such as the Voluntary Cleanup Program (VCP) and using a Municipal Setting Designation (MSD).
  5. If you suspect contamination, check consultant’s knowledge working with remediation programs such as the Texas Risk Reduction Program (TRPP) and experience working with state regulatory staff such as the TCEQ.

Whitehead E. S. provides quality environmental services at a fair price and knows how to work through environmental issues at contaminated properties to get Deals Done! For more information on Whitehead E. S., please contact Michael Whitehead at 469-609-8080 or mike@whiteheades.com.

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