When companies transfer their pollution risk to insurers or third parties, risk managers often turn to geo-environmental consulting firms for analysis and advice.
Other needs also drive risk managers to seek specialty consultants, for example: addressing an operational permit or regulatory requirement; responding to a perceived or identified environmental risk; obtaining or broadening pollution insurance; and managing a potential legal or claim scenario.
As a former consultant, I know how critical it is to hire the right consultant for the environmental challenge at hand.
When selecting a consultant in response to a pollution incident, one size does not fit all.
Hiring the wrong person can result in a number of bad outcomes, including unnecessary and costly delays; regulatory denials; excessive professional fees; poorly designed and implemented mitigation and remedial actions; broad exclusions and restricted coverage for pollution policies; and unsatisfactory claims settlements.
If risk managers are performing work that has to satisfy an insurance market or lender, ask for their recommendations. Your broker can help you with this. Insurers will normally accept your choice of a qualified consultant, but why not use consultants that the carriers are comfortable with and whose hourly rates and fees have been vetted?
Using a consultant who is familiar to an insurance market is especially important when performing actions for which you will be submitting claims. Many markets will also suggest specific emergency response contractors. Sometimes the carriers will be reluctant to make specific recommendations, but most will offer a list of qualified consultants.
Absent drivers such as those described above, risk managers can consider the following observations for making a reasonable selection of a consultant that could potentially influence a market's decision regarding your pollution risks:
1. Assess the scope of the job.
No one understands the scope of the problem like the risk manager.
Spend a little time scoping out the problem, identifying the breadth of the problem, any time limitations or applicable deadlines, and the related services the consultant must provide.
2. Identify potentially qualified firms.
A combination of networking, a few phone calls and research on the Internet can identify potentially qualified consultants.
Ask those consultants for statements of qualification specifically focused to the problem at hand.
Can the consultant clearly demonstrate experience with this problem, in this locale, interfacing with this set of regulators/insurers/stakeholders?
The size of the consulting firm is not nearly as important as the relevant experience of the consultant and the individuals within that firm who will work on your project.
3. Quote fees.
The statement of qualification should address fees. Insurance carriers often have acceptable ranges for professional fees and specific activities.
If you have a potential Environmental claim, most carriers will require preapproval of consultant fees and activities. Finding out what those ranges are, and using that as part of your selection criteria, will save considerable headaches if you have to negotiate a claim resolution for costs that were not preapproved. Y
our broker can generally help you find out what those rates are, and you can negotiate with your consultant.
4. Solicit proposals.
With your problem understood and with qualified firms identified, develop a request for proposal (RFP).
The RFP should be as specific as it is practical, requesting responses that are similarly specific. The scope of many environmental projects is often poorly understood at the project outset. Don't hesitate to seek proposals that limit the initial work by the consultant, allowing the risk manager the option to modify the scope (or even change consultants) as the work needed becomes clearer.
Proposals by at least three firms should clearly address the manner by which the work will be accomplished, often provided in the form of a work plan.
Thorough proposals will also clearly state the commercial conditions the consultant offers, including detailed build-up of the expected project cost, the schedule for predictable milestones, subcontractors, licensures applicable to the project, and acceptable insurances (for example, Professional Liability, Contractors’ Pollution Liability).
5. Realize that more than one consultant may be needed.
A single consultant can have multiple certifications and provide the necessary sign-off required for the work. Likewise, any given project may require the services of several technical professionals.
As an example, a small hydrogeology consulting firm that is investigating a contaminant plume in groundwater, which is off-gassing into an office building, may not have the in-house technical expertise to test the indoor air quality or design the corrective actions.
These services may necessitate hiring additional consultants or subcontractors. Knowing what the project could evolve into should influence your consultant hiring decision.
6. Think local.
Familiarity with “home turf” is critical when dealing with the various regulatory agencies, permits, environmental conditions, local contractors and equipment resources.
A small consulting firm or a local office for a large consultant can and should be experts in local conditions.
7. Confirm the consultant's adequate and relevant insurance coverage.
Make sure your consultant carries appropriate Professional Liability and Contractors’ Pollution Liability insurance with acceptable limits.
The last thing you want is to hire consultants, have them do a job, make a mistake and find out they didn't have adequate coverage.
Transportation of contaminated materials is a frequent gap. Watch for contract pass-throughs: Often consultants will be forced to use smaller local companies (such as drillers and transporters) who will not carry the coverage required of the consultant. This can leave a company exposed to loss.
8. Review, interview.
Well-prepared proposals will be easily reviewed.
Conduct face-to-face interviews with persons specifically proposed for the work to gain insight into a consultant's skill set.
Don't ignore “chemistry” with the project team as a selection factor. Environmental projects can be long; can you work with this team for an extended period?
Working with an environmental consultant through all of this requires technical skill and experience on the consultant's part, compatible communication styles, and a deep level of trust. Arriving at this “sweet spot” is much more likely to be the outcome of a focused effort by the risk manager than it is a lucky selection of the firm who happened to be there when the need arose.
W. Cliff Yeckes is senior vice president of Willis Americas Environmental and Mining, Willis Towers Watson, in Denver.
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