Environmental due diligence is required for commercial property transactions in most municipalities. This involves one or more investigation, which must be performed by an environmental professional, to determine whether a property contains any hazardous materials, or is exposed to hazardous materials from neighboring properties.
In most regions, there are dozens of firms offering to perform these investigations. Some are large, well-known companies while others are small, one-person operations, and some fall in between. When engaging a consultant or firm for your property purchase, there is one critical element to getting a quality report that will protect you and your property. Who will perform the inspection?
Thatâ€™s right. Who will perform the inspections?
If you turn to a large firm, they may not be able to answer the question. Why? Because the way most firms work is that they serve as middlemen, reviewing your request and sending the required inspections out for bid to their network of vendors. They take the lowest bid and mark it up based on their target margins to determine pricing.
Whatâ€™s wrong with this? Well, it exposes you to unnecessary risks. First, you wonâ€™t know the qualifications of the people assessing your property. Second, the person inspecting your property will have no knowledge of you, the buyer, or your intended use of the property. This means they will not be able to look for any issues that might impact the feasibility of your project. Finally, in this business model, the person inspecting your property is not working for you. They are working for the firm that hired them, and because they bid as low as possible, they are likely to do as little as possible to satisfy their employerâ€™s requirements while protecting their own profits.
Think of it this way. If you have a legal problem, and you hire a law firm to protect you, would you want them to farm your project out to a bunch of paralegals and give it to the lowest bidder, sight unseen? Probably not. Yet thatâ€™s how many large environmental consulting firms handle due diligence investigations and reports.
When it comes to choosing a small, one-person consultant, it is also critical to know who is doing the work. Sure, you know that the proprietor of the company will likely do the work, but is that person qualified for the type of report you need? If you need additional reports, will that person be able to perform them or will you have start over, qualifying and hiring one or more additional firms?
The current business model evolved through a series of mergers and acquisitions, where companies shed employees to cut cost and preserve margins. They have minimal payroll and outsource nearly all investigation and reporting. It might be good for the partners and shareholders, but it does not always do enough to protect property buyers, lenders, and investors.
The environmental consulting industry is due for a new model, one where the firm hires its own engineers and inspectors, all aimed at delivering the best possible product at the lowest possible priceâ€”one that thoroughly protects the buyer. Will this type of firm always be able to deliver rock-bottom pricing? Maybe not. But it will be more concerned with delivering rock-solid results that gives buyers confidence that they know exactly what they are buying. Which is more valuable?
To learn more about how to select an environmental due diligence consultant,Â download our Project Manager’s Guide to Environmental Due Diligence.