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The following article originally appeared in the Environmental Law Update published by Orrick Herrington & Sutcliffe and is reprinted with Permission. The article was written by Bruce S. Klafter.
A PRIMER ON CHOOSING AND USING ENVIRONMENTAL CONSULTANTS
Choosing a qualified environmental consultant these days is no easy task. The importance of spending the time necessary to make a thoughtful selection cannot be underestimated; the choice of consultants often affects the ultimate success of many transactions, lawsuits or regulatory compliance matters. Consumers of environmental consulting services should pay close attention to issues raised at three stages of the consulting relationship: (1) selecting the consultant; (2) negotiating a contract for services; and (3) managing the consultant's work. This primer highlights some of the issues that arise in each of these important stages of a company's relationship with an environmental consultant.
Environmental consultants span numerous disciplines and possess a wide variety of capabilities. Some firms can perform cleanup work or other field functions, while others may only perform analysis and investigative tasks. There are also many "full-service" environmental consultants who offer a wide range of services. The definition of a "qualified environmental consultant," therefore, varies with the nature of the work to be performed. For example, the complexity of a long-term Superfund cleanup requires different talents than a health and safety audit at a single facility. The trick is to find the right consultant at the right terms for the job at hand.
The task of finding a qualified environmental consultant is complicated by the sheer number of firms now offering such services. The vast array of environmental laws and predictions of billions of dollars in cleanup work has fueled a modern day gold rush in the environmental contracting industry. Like any large service industry there are many capable environmental consultants, but the industry also has its share of less competent firms. It is not enough to open a phone book and look for company names beginning with "enviro. . . , or "chem . . .". As with the selection of environmental counsel, companies are well advised to invest the time and effort required to find the "right" consultant.
WHY USE A CONSULTANT –
Environmental compliance is more often than not a team effort in the sense that various disciplines are involved. Environmental regulation, whether at the federal, state or local level, requires such an approach as it increasingly merges science, technology, law and public policy. Compliance with this myriad of environmental rules creates roles for company personnel familiar with operations and processes, lawyers experienced in interpreting complicated regulations and dealing with regulators, and consulting professionals readily able to access informational databases, take and analyze soil and water samples and handle hazardous substances.
Retaining an environmental consultant may be necessary, even to determine whether certain environmental laws apply to a company. Many state and federal statutes and regulations contain scientific standards which require technical interpretation and application. For example, identifying hazardous wastes and evaluating the threshold for numerous reporting, permitting, cleanup and liability issues require a determination of either (a) the identity and origin of a given material and whether it is on regulatory lists, or (b) whether the material has hazardous "characteristics," such as "reactivity," "explosivity" or "toxicity." [Note: See the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6921 (criteria for identifying or listing hazardous wastes) and the California Health & Safety Code 25117 (definition of hazardous waste incorporating RCRA definition and focusing on waste characteristics).]
The diversity of environmental experts is every bit as great as the diversity of environmental regulation. For instance, matters involving hazardous materials may require expertise in such fields as engineering, chemistry, biology, hydrogeology, and air quality. A land development project, on the other hand, may create different needs, such as fish and wildlife science, aquatic biology, environmental impact assessment, traffic analysis and economics.
Environmental consultants can be effectively used in many contexts, in such roles as information gatherers, analysts, managers, or advisors. If a matter is likely to result in government enforcement or private party litigation, a company may need to look for a consultant who also may someday have to serve as a percipient or expert witness.
SELECTING A CONSULTANT –
The preferred approach to selecting a consultant is to interview several consultants off a "short-list" generated by referrals or other reliable sources. Request a firm description, resumes of team members and other materials in advance of any meeting and be prepared to ask specific, challenging questions of the firm's representatives. There are a few subjects that always should be covered. Although a candidate may possess impressive credentials, carefully examine the consultant's qualifications for the particular investigation, e.g., experience with the type of facility or process involved or the cleanup of similar substances. A company should not assume that the individual interviewed invariably will be the person handling the daily progress of your matter. Accordingly, inquire into the availability of key personnel. If a firm has qualified people, make sure they can work on your matter for its expected duration. Similarly, satisfy yourself that the firm can meet the scheduling needs of the company (as well as any government agency that may be involved), and can start on your project when you want. Always obtain reliable references from several clients after the meeting.
In addition to these substantive concerns, carefully review cost issues with the prospective consultants. Many large consulting firms bill in a fashion like law firms, where individuals are assigned hourly rates and all costs are separately billed. Some firms now use a system where rates are multiplied by a numerical factor which is keyed to the type of project. Overhead costs also should be addressed. A firm may incorporate all overhead into its bills. Others may charge by the hour for clerical personnel as well as professionals. It is important to understand fully how your work will be billed before entering into the consulting contract.
The status of the environmental matter also will dictate the skills required by your consultant. The consultant, of course, must be technically competent for the job. If government agencies or other private parties are involved in the matter, the consultant also should have the ability to work well with regulators and other consultants, evaluate the strengths and weaknesses of technical proposals offered by others, and, as appropriate, persuasively advocate the technical merits of your position. In addition, if it appears likely that a matter will result in litigation, you will also need to consider whether the consultant will make an effective percipient or expert witness. Depending on your needs, it may be advisable (and in the long term cost effective) to hire one consultant to handle the project and another to serve solely as an expert witness and/or intermediary with government agencies. Despite the importance of retaining the consultant with the technical expertise necessary for the project, these "people skills" too often are ignored when a consultant is selected.
NEGOTIATIONS AND CONTRACTING –
Once a qualified environmental consultant is chosen, the parties must agree on a written contract for services. Several considerations come into play at this point, but perhaps the single most critical item is properly defining the scope of the work. The contract should identify the nature of the investigation and the anticipated activities of the consultant in as much detail as possible. Beware of shorthand phrases or terms that lack an accepted definition, such as "Enviro-Tech will perform a Phase I site assessment.'' The elements of such a "Phase I site assessment" should be delineated to avoid any misunderstanding about how comprehensive the work is to be. In order for the company to remain informed about the status of the project, requiring periodic progress reports may be appropriate. The contract should address the need for prior authorization before the consultant incurs substantial expenditures or begins new segments of a project. In some cases, it might be advisable to hire one firm to design a remedial plan and hire a second to undertake the work so that the firms have no stake in enlarging the scope of the work.
Other important considerations in negotiating the contract include indemnities, limits on liability and insurance. Do not accept boilerplate contract provisions furnished by a consultant unless those provisions are fair and protect your company's interests. An illustrative California Court of Appeal decision recently upheld a liability limitation in an engineering contract, with devastating results for the client. In Markborough California Inc. v. Superior Court, (1991), a manmade lake suffered a structural failure that cost $5 million to repair. The designer's liability was held to be contractually limited to $67,640, the amount of his fee. Established consultants can often obtain insurance of $1-5 million per occurrence. The insurance policy limits will be a far more reasonable limitation on liability in most instances than the amount of the consulting fee or an arbitrary figure inserted into the agreement. Consultants in many cases will negotiate provisions considered unacceptable by the client, particularly for large projects, but only if they are asked to do so.
Information flow and document retention issues should also be addressed at the outset of any relationship with a consultant. Government enforcement or private party litigation looms as a possibility in connection with most environmental matters. Litigation about a seemingly routine compliance matter may appear remote at the time a consultant is hired, but it always is prudent to anticipate how a project might be unraveled in a lawsuit years later. A company should become thoroughly familiar with the document retention program of the consultant before work begins, and insist on appropriate project-specific changes. Retention of drafts and internal memoranda in consultant files (or, for that matter client files) often serves little purpose other than someday to provide an opposing party in litigation with a discovery roadmap, and should be discussed when the consultant is retained. Discovery issues also may make oral rather than written progress reports more appropriate for particular projects. Collateral writings by the consultant could raise discovery problems as well. Consider setting parameters concerning outside writings by the consultant (particularly one with an academic bent) at the outset of the relationship; the consultant should not use your project (or the issues it presents) as a case study for an article or paper unless expressly permitted to do so.
Environmental projects present unique and difficult evidentiary privilege issues that place a premium on making every effort to maintain confidentiality. Some courts have concluded that documents generated for the purpose of regulatory compliance – even documents that serve the dual purpose of litigation preparation – do not constitute work product and thus are subject to production in litigation. Other courts have held that oral or written communications directly between consultant and client do not represent work product and thus are also subject to disclosure. In order to improve the chances of maintaining confidentiality, the safest course is to involve an attorney as early as possible in the relationship with the consultant. An attorney may not simply be used as a conduit in order to maintain as confidential information that otherwise would be subject to disclosure. But involving an attorney in the management of a project may enhance the possibility that information developed by the consultant will constitute protected work product under either federal law (information generated at the direction of an attorney in anticipation of litigation. [Note: See Fed. R. Evid. 26(b)(3)) or state law (information generated in connection with rendering non-litigation legal advice. See Cal. Civ. Proc. Code 2018.1]
MANAGING A CONSULTANT –
Managing the consultant after the project begins obviously raises many fact-specific questions, but some general guidelines apply as well. Perhaps the most important is to manage the flow of information from the consultant.
A company representative and counsel should review analyses of data or test results and drafts of reports before any final written report is authorized and prepared. All submissions to government agencies should be made directly by the company, or by the consultant after authorization by the client. It is imperative that the company stay fully informed about consultant activities. Maintaining company involvement will promote cost-efficiency. Moreover, the company must never lose sight of the fact the reporting and compliance obligations fall on the company, not the consultant. The company is ultimately, responsible in the event of non-compliance with regulations or agency directives, and should maintain sufficient involvement in the project and the consultant's activities to ensure that it remains in compliance. In addition, where litigation is underway or anticipated, it is crucial to manage information flow to the consultant in order to retain control over what material may be subject to discovery and, if the consultant will be used as a testifying expert, to establish the bases of any opinion.
In matters of any complexity, an attorney should participate in the project as early as possible. First, as noted above, the lawyer's involvement may improve the chances of preserving the confidentiality of information. Second, the attorney can help evaluate whether the consultant is complying with applicable regulations and agency directives. Third, in hazardous waste site investigation and remediation matters, an attorney can guide consultant activities so that they are consistent with the National Contingency Plan, 40 C.F.R. pt. 300 et seq., the federal regulations with which a private party must comply in order to recover cleanup costs from other responsible parties under the Comprehensive Environmental Resource, Compensation and Liability Act (CERCLA), 42 U.S.C. 9607(a).
A consultant can best act effectively and efficiently where he or she is receiving the cooperation needed. The company must promptly forward records to the consultant upon request, arrange full access to facilities, review drafts quickly, and otherwise ensure that the consultant has all the information necessary to understand and address the environmental problem. The overall emphasis in the consultant-client relationship should be on practical, cooperative, economical problem-solving.
One final caveat is to maintain a clear distinction between the consultant's role and the roles played by your environmental attorney and by yourself as manager. The project engineer should focus on technical issues, and should not direct project activities to the extent that the consultant in effect is practicing law or making business decisions. The environmental consultant should furnish information, analysis and advice that can be incorporated by your attorney into his legal advice and by your company into its business judgments. The legal issues, however, rest with your counsel. Above all, the major decisions about the direction of a project rest with the company. Early, careful and active involvement in the selection and management of consultant activities will result in making the company's decision-making as thoughtful and meaningful as possible. Care in choosing and contracting with the consultant and in managing the consultant-client relationship will improve the odds that your company will receive valuable service in addressing its environmental problems.
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