$700 plus travel by an EP working out of their house with very little overhead is feasible.

The size of the deal does matter, however just ask any of your friends in community banking with loan size of $2M or less, the borrower has a lot more at stake, they are less savvy (legal  and insurance protections), more price sensitive, and stand to lose all their equity in some cases if an unknown or unidentified environmental issue arises. Furthermore, the firms that bid $1,500 or less do not likley carry the appropriate insurance or don't stay in business for the duration of the investors hold period (if the enviro impact is discovered upon sale lets say). It's not a fun place to be in the market given you are dealing with less sophisticated borrowers/lenders with a fairly high downside in terms of fee and risk.

I'm starting to accept the reality that there must be a market for $700 Phase Is or there wouldn't be $700 Phase Is.  Hey, that's great.  Have at it.  Most properties are going to show clean anyway and many have a stack of prior Phase I reports making it easy for the next guy.  The odds are low for rolling snake eyes.

The question I have is how sustainable is that market insofar as developing the next generation of competent EPs?  Where's the budget for training and employee retention.  How long before you burn out doing $700 Phase Is?  How fun can that be?  How long can you go riding on the very edge of profit or loss.  One hiccup in time and you've lost money.

You have to ask yourself, what kind of consultant do you want to be?  I feel lucky to be able to turn away low-margin work.  Mergers and acquisitions?  Good stuff.  Banks?  meh

I was also on that conference call.

One other problem is that the client paying $3,500 may not receive anything better than the client paying $700, as essentially the same type of beginner/trainee"junior staff" labor may be used.

A run of the mill Phase I may take three days - research and review one day, site, area, and city visit another day, then report the third day.  If the Phase  I "mill" supplied the database, aerials, and so forth, $700 would then work out to $233.33 per day for the person doing the work, which is $58,333 per year if they are always busy and work 50 weaks per year.  I think that beats the average family income in the USA, and beats what many big companies would pay the same worker to be sitting in their cubicle-land.   

Requiring that an EP perform the site visit would be very helpful, and I'll be pushing for that change to E1527. 

It would also be nice to require that the report list the major Phase I tasks, then name the person who performed each task, or give the percentage of each task done by each person if more than one worked on it.   The fakers could still lie, but they would have to be far more blatant lies. 

How many us are doing stand-alone Phase Is?  We're typically also doing full asbestos, lead, and universal waste surveys, and often also property condition assessments.  I know the "mills" are also trying to claim they can do all of those things...  

I would suggest that there is a little more to the picture here than meets the eye. Yes there might be a very few people doing $700 Phase Is but not many. If there are, it cannot be much of a product and they are obviously looking for Phase II add-on work when they walk out the door.

I would suspect that most of these are subcontract jobs wherein a larger company buys the radius report, aerials and sanborns for the sub. The sub must provide everything else. This is how Land America used to operate with a virtual company of nationwide subs that they did not even know, for the most part. They ususally paid about $900 or so per job, depending on the property (they went bankrupt a couple of years ago).

There are other firms that picked up their pieces and I would imagine this is what you are seeing....the new firms have lowered the rates even further. 

It is rough out there for sure.

$700 Phase 1s?  Even a subcontractor working from the kitchen table has some expenses and has to pay self-employment taxes.  One $700 Phase 1 x 52 weeks per year = $36,400 - expenses and taxes = MAYBE $29,000. 

I only know Matt Fox through his posts on other discussions.  Based on what I've read I respect him as a professional but I obviously respect him more than he respects himself.  Matt, buddy; you're worth a lot more than $700 a pop.

In response to MSA, if an EP can perform Phase 1 after paying 1/3 of that for data aquisition and putting in 3 or 4 days labor and paying all expenses and overhead including (continuous) continuing education at ASTM or EDR prices and constantly improving your end product based on your personal higher standards based on what you learn in class from instructors and colleagues...if your fee basis after all that is $1,500 you're a magician. 

If a firm's been bidding $1,500 or less for 15 years it might be time to get an impartial professional opinion of their work product and take a refresher course in business.  15 years ago I bid $1,500 but a lot's changed since then. 

I suggest that all who are concerned about this issue contact EPA and help create a record for the review of AAI. In my opinion, AAI has facilitated and exacerbated this race to the bottom.

• The definition of EP needs to be revised.
• I would also suggest that an EP needs to be more involved in the process, not just supervising the work.
• I would also like to see national licensing or at least mandates for states to create licensing programs if their remedial programs are to be considered "state response programs" that are entitled to the federal enforcement deferral, and
• mandatory reporting for historical contamination

Larry

www.SchnapfLaw.com

I just ran into another example that illustrates both the challenge and maybe a possible solution.

The Challenge - We reviewed a Phase I for a bank client which was performed on a large industrial site with quite a history of contamination, violations, etc. in January 2010. The Phase I was performed by a small firm that we know of that falls into the "low-price" category. Just to mention some of the highlights - no interviews or mention of interviews, listed no historic RECs or even a section for them (even though there had been multiple regulatory cases on the site), only had an abbreviated EDR Radius report (no Sanborns, aerials, topos, city directories, etc. in the report), no inclusion of any closure letters for the cases or apparent review of them, concluded that no RECs are present although there was demonstrated existence of contamination present above MSLs, etc. Maybe a reasonable person could argue away a few of these items, but, to me, this is clearly a non-conforming Phase I. I am guessing (although I am not in their shoes), that this resulted in part due to pressure to "get the job done" at a cost that left some margin given a low price. We see cases like this more than we would expect. The problem is not the low price - the problem is the resulting product.

The Opportunity - There has been talk of changing the ASTM requirements and/or some sort of regulatory "certification" to address the issue. I think that these avenue have potential but may take awhile and could result any result - good, bad or indifferent. Perhaps we - the community of environmental professionals - should consider taking action ourselves. What if we formed some kind of review body that EP firms could submit their Phase I's to for review? This body would, in turn, "certify" firms that comply with the ASTM standards. Firms could then identify themselves as "certified". Buyers would have this additional information to make informed purchase decisions. Of course there are lots of questions regarding client confidentiality, funding, process, etc. I am willing to work with others to develop a design.

Regards -- Walt

This is an interesting discussion for several reasons.  As the owner of a small (two environmental professionals and support staff) firm in MI, I have felt the pressure to give in on price, especially in the last 12 months or so.  Several firms in my area have taken a Walmart approach to marketing themselves.  However, I am not willing to do this work at a loss.  As anyone who has done this work for a length of time knows, the pressure of time, large liability exposures, and the pressure of delivering bad news to friends/clients makes this job very hard at times.  For every "easy" Phase I I have performed, I can think of a challanging one that was worth much more than I charged.

What I have noticed is that the folks who were telling me about the other firms lower fees months ago continue to call us. People recognize our integrity when they know that we are charging a fair and consistent fee.  The firms who offer "specials" or "any Phase I for $xxx until the end of April" compromise the one thing you really need to be able to last in this business, integrity.  This issue is as old as business itself.  My advice is: if you know you are the best, and you charge a fair fee, stick to what you are doing. 

Another interesting observation from reading the posts above is the issue of "size of deal vs. environmental risk."  Granted, banks have entirely different risks than owners.  However, this sort of thinking, that the size of the deal matters, is, in my experience, very dangerous.  My experience is that some of the least expensive properties pose some of the greatest environmental risk.  While you MIGHT be able to walk away from an environmental cleanup liabilty by using a holding company, the headaches associated with being a part of an enforcement action still do not make this an easy prospect.  Not to mention the potential PR damage that could be associated with walking away from a contaminated site in a community that would like ALL contamination cleaned up.  I have helped numerous banks in the last couple of years take back sites that they thought were "small deals" when times were good, only to find out that they have large hurdles to clear, environmentally, just to take it back, let alone get rid of it again.

Hope someone saves all of this noise.  It'll make for a good defense  when one needs to demonstrate that there is no such thing as "good commercial and customary practice" in the business of all appropriate inquiries.