2010 Edmonton Event
Event Summary
RISK | RISK MANAGEMENT AND CONTAMINATED SITES | END GOALS | BE PROACTIVE | TIPS
ECO Canada hosted a morning Workshop and Networking Luncheon on Wednesday, September 8, 2010 in Edmonton, Alberta at the Royal Glenora Club.
The workshop explored the fundamentals of project management, introduced risk management and explored the types of risk a professional may encounter on contaminated sites work. Ken Lyon, workshop facilitator and Principal Hydrogeologist and Technical Director at WorleyParsons, presented concepts, suggested tools for quantifying uncertainty and risk on projects, and summarized the workshop material in a case study exercise.
Following the workshop, the networking luncheon, attended by over 75 people, provided professionals a forum to network and to learn from an esteemed panel which discussed Contaminated Sites: Managing Project Risk. The panel was moderated by Brian Adeney, of EBA Engineering Consulting Ltd., and included participation from: Alex MacWilliam, a partner at Fraser Milner Casgrain; Ken Lyon, the above workshop facilitator; Ian Radzichowsky, the Director of Regulatory Compliance and Risk Management with HAZCO Environmental Services; and Mike Mellross from the City of Edmonton’s Brownfield Redevelopment Grant Program.
The panel discussed what types of risks are encountered in their lines of work and identified how they manage risk on their organization’s projects. It was communicated that risk and risk management will be reflective of an organization’s position and relationship to the contaminated site project.
What is risk and how can it be described?
Risk can be described as an uncertain event or condition that, if it occurs, has an effect on at least one project objective (PMI, 2008). Additionally, Risk is often identified as a hazard, danger or threat, and the combined effect leads to volatility and uncertainty (Risk Analysis and Management for Projects 2005).
Risk (R) equals the consequence (qualitative or quantitative), described by an event that leads to consequence (E), multiplied by the likelihood of occurrence (L).
Risk (R) = Event with Consequence (E) * Likelihood of Occurance (L)
Consequences can be negative, which is a traditional point of view, or can be positive and viewed as an opportunity.
Consequences can vary, but generally risk is viewed in terms of: health and safety, financial costs, time, reputation, natural environment, and general business.
How do we treat risk?
Once risk has been identified, how do you treat it? Ken Lyon suggested the Four “T” process, adapted from Dorfman (1997) that can be applied to contaminated sites work. The process suggests treating risk in four ways:
Tolerate - The first alternative is to ‘tolerate’ the risk and retain the risk in the organization. An example of retention process would be to accept the risk and maintain financial reserves as a form of self-insurance.
Terminate - Secondly, risk can be ‘terminated’. In this case the risk could, for example, be mitigated through remediation/reclamation.
Treat - Thirdly, a party may choose to ‘treat’ the risk by reducing the likelihood of occurrence or consequences of the risk.
Transfer - And finally, an organization may wish to ’transfer’ the risk by means such as insurance or other contractual agreements.
Risk management and contaminated sites
There has been a growing focus on risk management in the contaminated site sector in Alberta. Brian Adeney mentioned that the drivers of risk management adoption are due to the increased complexity of contaminated site projects including factors such as size, remoteness, and environmental health and safety considerations.
Ken Lyon feels that the current focus on risk management has been caused by economic decline and a demand for strict cost controls. He mentions that Alberta has become more financially conservative and cost over-runs are not acceptable. Additionally, Ken mentioned that the changes in the regulatory landscape are also driving a risk management approach to contaminated site work.
Risk management strategies are driven by the end goal
Contaminated site work is complex and involves interaction among multiple stakeholders. Owners, consultants, and contractors have varying levels of risk tolerance. What one project party may deem as a tolerable risk on a contaminated site, another may not, and it is therefore imperative the end goal of a contaminated site management project is clear to all involved. This idea was shared by all on the panel.
Ken Lyon recommends that all parties first identify what the desired end state of the contaminated site is. It is recommended, for example, to identify if the site contamination is to be contained and monitored, remediated to be regulatory compliant, or remediated and reclaimed for commercial sale. Knowing the end goal will allow a risk management strategy to be implemented and scaled to the project.
A land owner is generally risk tolerant and economically driven, but is required to be regulatory compliant. Alex MacWilliam mentioned that it is important to understand whether the contaminated site work is being worked on by ‘choice’ or by ‘force’. For example, a party may view a contaminated site as an investment opportunity by choice, or a party may be forced into action due to contamination being found. An owner must keep perspective and consider how to align their commercial interests and regulatory obligations, while trying to eliminate conflict between stakeholders. By pre-identifying the owner’s end goal, a risk management strategy can be created to manage priorities such as timeliness and cost controls.
Some land owners are very risk averse in relation to contaminated sites, as is the case for the City of Edmonton and other municipalities. Mike Mellross explained that this is due to the municipality’s mandate to balance redevelopment, human and environmental health, and maintain safe and viable communities. However, even in these organizations we see new risk management strategies emerging. For example, the new Brownfield Redevelopment Grant Program allows for contamination tolerance strategies like exposure control and interim land use planning for the first time in the city. For Mike's presentation on the Brownfield Redevelopment Grant Program click here.
Be proactive
Consultants and Contractors are risk tolerant and must balance the goals of the client while juggling their organization’s technical and operational risks. Consultants and contractors assume risk by recommending and completing the project work on the contaminated site. It is imperative that they proactively consider the project goals and identify the risks associated with the proposed work and align a scalable strategy appropriate to the project.
At HAZCO, Ian Radzichowsky explains that the organization accepts a wide range of project risks when taking a bid from paper to operation. HAZCO’s bid is a response to an RFP and often further discovery is needed, once a contract is awarded, to ensure the optimal remediation strategy is identified and that the project will remain regulatory compliant. To manage this risk, Ian explained the importance of pre-planning and being proactive. Budgets are ‘skinny’ and thorough initial investigation will reduce the likelihood of error and allow for more creative approaches and contingency plans that allow for delay, change, or even cancellation of the project.
As a contractor, Ian mentioned the importance of being on time and on budget. Failing to meet those guidelines means HAZCO faces financial risk. To manage the risk they try to be proactive by continually monitoring the budget, schedule and regulatory and contractual obligations. HAZCO makes regular site visits and ensures the appropriate and most experienced staff are selected for each project.
Know the goal of the true end client
Alex reiterated the importance of a clear end goal, especially if the owner is looking to sell or gain financing from a bank. Banks are risk adverse and it is imperative the owner and client align the contaminated site project to meet the bank’s requirements. For example, some banks may not consider contamination tolerance and exposure control an approved way to deal with contamination, and therefore may refuse financing options on a property that did not treat the contamination.
Tips for managing risks on contaminated sites projects
Manage interactions among owners, consultants, and contractors
An owner must keep perspective and consider how to align their commercial interests and regulatory obligations while trying to eliminate conflict between stakeholders. An owner will be focussed on managing the project in a timely matter and faces the risk of delays, conflict between invested parties and stakeholders, and regulatory intervention which can be very costly.
Alex mentioned that in the case of disputes related to contaminated sites, it is always best for the involved parties to solve their disputes outside the courts. It is imperative that creative solutions are found outside the court.
Communicate, communicate, communicate
Ken Lyon mentions that as a consultant you must clearly communicate with the client and understand the goals of the project. Document your recommended decisions and maintain open communication with the client.
Human Resources
Ken also mentions that risk can arise from different business and operating styles. It is important to understand different contracting styles and manage expectations. Project Managers must identify how to solve differences in opinion and how to manage multi-disciplinary teams. One way to do this is to develop a broad network of professional contacts working in different disciplines in the environment sector so that you have people you can turn to for external validation and guidance when the project enters into an area of work that is not your traditional base of expertise.
NOTE – the purpose of developing the community of Environmental Professionals through events like this, Environmental Professional (EP) certification and the Alberta chapter of environmental professionals, is to build the multi-disciplinary pool of people that the environment sector and the general public can turn to for reliable and credible information.