CaseHistory-55
===

[00:00:00] Liz: Welcome to the GBA case history series brought to you by the GBA podcast. My name is Elizabeth Brown and I am a geotechnical practice manager at Atlas Technical Consultants.

[00:00:14] Abi: And I'm Abby Corbett, a project consultant at SME, and today we're gonna do a deep dive on a case study. That's pretty wild.

[00:00:26] Liz: Oh yeah, this one's a doozy. We're talking about GBA case history number 55, which is an environmental remediation project that went so wrong. It's a textbook example of how not to handle things.

[00:00:42] Abi: Yeah, and honestly, it just started as some leaky underground storage tanks then spiraled into a legal nightmare.

[00:00:50] Liz: Oh yeah, we've got unknown contaminated soils, remediations lawsuits, the whole nine yards. This one's got it all.[00:01:00] 

[00:01:00] Abi: Okay, so let me set the scene. We've got this auto parts manufacturer. They find these leaky tanks, and what's this first mistake they make? The CEO decides to handle the whole thing in-house. He directed his team to remove the tanks and did not hire any professionals.

[00:01:19] Liz: Ooh. Seriously, that's bad.

[00:01:22] Abi: Yeah, tell me about it. Instead of calling a qualified environmental professional, an expert who actually deals with this kind of stuff, he figured, Hey, we could take care of this my ourselves.

[00:01:35] Liz: Yeah. Almost never a good idea. Don't you think? Especially when you're dealing with potential environmental contamination, you'd think that they'd wanna avoid, legal headaches.

[00:01:49] Abi: For sure. Environmental regulations are just really complex and the consequences are so huge, not to mention the potential harm to the environment and public [00:02:00] health. But let's fast forward three years later now, the CEO would like to sell the property.

[00:02:05] Liz: Surprise, surprise.

[00:02:08] Abi: And he finally realizes that he will need some professional help at the tank excavation locations. But remember, this guy is gonna be all about speed and cutting costs. So he brings in this environmental firm, they do an initial assessment and find high levels of petroleum hydrocarbon contaminating the northeast segment of their tank excavation. They provide four remediation alternatives, but they did recommend some further investigation before they ended up picking a method, which I mean, I think is a hundred percent reasonable and not really out of the ordinary.

[00:02:45] Liz: Sure. Get all the facts before you start digging. Makes sense to me

[00:02:49] Abi: right. But our cost conscious, CEO decided, let's just go ahead and sit on those recommendations.

[00:02:56] Liz: for real. So how long did he sit on 'em for?[00:03:00] 

[00:03:01] Abi: Six months.

[00:03:04] Liz: Are you serious? Six months. Talk about delaying the inevitable.

[00:03:09] Abi: Yeah. And honestly, after those six months are up, you'd think he'd go ahead and give the green light to the firm to continue with their investigation. But he of course, decides to shop around for a cheaper option,

[00:03:23] Liz: Oh, one of those I've had to deal with those. So choosing an environmental consultant based solely on price, kind of a red flag.

[00:03:34] Abi: The way I think about it, it's like choosing a surgeon based on someone with the cheapest rates. I personally wouldn't do that with my health, and I feel like the same should apply to the environment.

[00:03:46] Liz: Yeah, totally agree with you there. So what does he end up going with?

[00:03:50] Abi: Okay, so he ended up having his team solicit some competitively priced proposals and the GBA member firm ended up bidding when the [00:04:00] GBA firm asked the manufacturer's facility manager while they were even looking for a new environmental consultant. They were basically just told that the first firm wasn't able to meet the schedule, so the GBA firm ended up bidding low and they proposed drilling six borings spread across several locations across the site to further characterize the contamination.

[00:04:24] Liz: Ah, I'm guessing the manufacturer wasn't keen on spending more money on further investigation. I feel like you can often spot these troublesome clients early on. They seem to consistently push for the lowest price and try to dictate the solution instead of collaborating on a solution.

[00:04:42] Abi: You are so right from the start. On this one, the project manager just was put under so much pressure. He had to deliver results quickly and cheaply because the property was in escrow at the time. And the remediation, it happened to be a condition of the transfer. The manufacturer's facility [00:05:00] manager said that all six borings weren't gonna be necessary. He told the member firm to only focus on the northeast side of the excavation.

[00:05:10] Liz: Why am I not surprised? I can already see where this is going. Like total recipe for disaster. Alarm bells should totally be ringing at this point, right? 

[00:05:22] Abi: Absolutely. But the project manager went ahead anyway. There was so much pressure to please the client, and I feel like sometimes that just overshadows some judgment. So they did only the three borings, and again, they went to recommend that they should do some more investigation to provide an actual appropriate remediation plan. But again, they weren't permitted to do some more investigation.

[00:05:51] Liz: Of 

[00:05:51] Abi: The manufacturer's facility manager, said that they basically wanted the member firm to rely on the volume estimates from the very first firm [00:06:00] and choose one of the first firms for recommendations.

[00:06:05] Liz: Oh, talk about a tough position to be in.

[00:06:09] Abi: Yeah, I definitely wouldn't wanna be there. The member firm's project manager reviewed and did outline the limitations of each of the four methods for the manufacturer. Then the manufacturer chose excavation as the remediation method, and let's be real. It was just because it was the fastest

[00:06:30] Liz: Of course it was probably the cheapest too, right? It seems straightforward enough. Dig up the contaminated soil, get rid of it. Problem solved, maybe.

[00:06:41] Abi: Maybe, but it turned out the contamination was way more extensive than they originally thought, and it extended up against neighboring buildings.

[00:06:52] Liz: Oh no, that's not good. And of course, I think. Most of the time, it turns out that the problem's bigger than what we [00:07:00] expect, but up against an existing building. So now we've got an even bigger problem and all because they didn't go through the proper assessments to figure it out correctly. The first go around.

[00:07:13] Abi: Exactly. It really would've helped if they could do more investigation from the start. Thorough assessments and flexible planning really are crucial for mitigating these kinds of risks. So now they're stuck. They can't excavate any further without damaging the buildings, but they also can't just leave that contamination as is.

[00:07:34] Liz: Yeah, what a tough place to be in. And really, it's gonna end up costing more money at this point in time than if they would've just done the proper investigation. So what happened next?

[00:07:45] Abi: You're on the right track. The county finds out about the situation and then the Department of Environmental Affairs steps in the DEA stated that if the GBA member firm did not complete the remediation, the [00:08:00] manufacturer would be required to note on the property deed that future excavation in the area would have to follow some special precautions, and let's be real.

[00:08:09] He knew it would make it really hard to sell the property.

[00:08:14] Liz: Yeah. Why would you wanna be buy a piece of property that has restrictions on it, that there's a known environmental problem? You say environmental issues, dollar signs start flying.

[00:08:24] Abi: Yes, and it's just way too scary as a buyer. So obviously CEO is furious. Remember, he is just trying to sell this property quickly and he basically demanded that the GBA member firm fix it at no extra cost.

[00:08:42] Liz: what?

[00:08:43] Abi: Yeah, and the member firm really did try to discuss some other options with the facility manager, but to no avail. Not only that, a week after those discussions, they got a letter terminating their services, and not long after that, they [00:09:00] got sued for breach of contract.

[00:09:02] Liz: Oh, you've gotta be kidding me. Talk about a hostile client. But this is where clear contracts and communication become absolutely essential.

[00:09:13] Abi: Right, and ideally the initial agreement should have outlined the potential for unanticipated conditions and those associated costs, but it turns out the wording might not have been very clear. I. And that put the firm in a difficult position. Think increased costs. You got that angry client, there's potential liability. It really is turning into that full on nightmare scenario.

[00:09:38] Liz: Yeah the storm's coming, that's for sure. So what happens next? What did the firm do

[00:09:42] Abi: There's another little thing in the story,

[00:09:46] their insurance didn't cover them for this.

[00:09:50] Liz: Oh, no.

[00:09:51] Abi: Yeah, so they called their insurance company and discovered that their insurance actually doesn't cover any [00:10:00] contractual liability claims.

[00:10:02] Liz: Oh, that's awful. Talk about a critical point. Could you perhaps break down the difference between contractual liability and professional negligence for our listeners?

[00:10:15] Abi: For sure, so contractual liability is when you fail to fulfill the terms you agreed to in the contract. Professional negligence on the other hand, involves failing to meet the expected professional standard of care. So in this case, the lawsuit was based on the former, it was a breach of contract

[00:10:36] Liz: Oh, that's awful. So essentially they're stuck between a rock and a contaminated hard place with no insurance to step in and help 'em out. Oh, I would not wanna be in that situation. So what happens next?

[00:10:50] Abi: So no insurance and they didn't have the right lawyer, so they're scrambling to find the correct lawyer while facing this looming lawsuit, [00:11:00] and plus knowing all the financial pressures that are coming.

[00:11:04] Liz: Ugh. Oh, awful. So really, I think though it's a good reminder as to why having a good lawyer on your side before problems arise is so important. Really, they could have helped navigate the tricky contract language and some of those risks if they would've already had a good lawyer on their team.

[00:11:23] Abi: A hundred percent. So they did end up finding one though. They got the lawyer and the lawyer read through. Basically the entire case and decided to counter sue for the fees. The manufacturer hadn't paid the GBA firm yet, and now we got a legal battle.

[00:11:40] Liz: What they hadn't been paid, so they have collection issues on top of the legal battle. Man, that's a double whammy.

[00:11:50] Abi: Exactly. I can't imagine how draining financially and emotionally it was. And honestly, let's be real. It's also that time, the energy and their [00:12:00] reputation on the line.

[00:12:02] Liz: Yeah, and reputation is so important. So how does it all end? Did they actually go to court?

[00:12:08] Abi: Okay? They didn't, fortunately there was that cooler. Ha, okay? They didn't. Fortunately the cooler heads prevailed. Both sides ended up a greening to a binding arbitration.

[00:12:21] Liz: Okay. I'm not a lawyer here. What does that mean? Can you explain it?

[00:12:27] Abi: Absolutely, I'm not either, so I looked it up and basically binding arbitration is when a neutral third party hears both the sides, and then they make the decision that's legally binding. It's faster and almost always less expensive than a trial.

[00:12:43] Liz: That sounds good. So it's basically like a referee for legal disputes.

[00:12:47] Abi: Yes, that's the perfect way to put it. So they do a lot of back and forth and weighing the potential costs of more litigation, but both sides agreed to drop their claims.

[00:12:58] Liz: Wait, so they just dropped it [00:13:00] like nobody won.

[00:13:03] Abi: Yeah, so the GBA member firm ended up just forfeiting that $40,000 unpaid fee it's a costly lesson learned.

[00:13:12] Liz: Ooh. Ouch. Man. That does hurt. So let's zoom out a bit. So this whole mess started with the CEO cutting corners. Trying to handle contamination himself doesn't sound good. So what would you say are some of the key takeaways here, even for perhaps people who aren't environmental professionals?

[00:13:35] Abi: Honestly, this case shows the dangers of cutting corners, poor communication, and just not managing risk. Those problems can pop up anywhere and not just in environmental work. Let's break down the lessons learned in it. If you had to pick, what's the first lesson learned that comes to your mind?

[00:13:54] Liz: Hmm. I think, client selection is crucial. It's critical. You wanna [00:14:00] make sure that you have a good client that doesn't only care about the lowest bid, but that also cares about the quality and values, what you're gonna do for them.

[00:14:11] Abi: Exactly, you get what you pay for. If someone's only focusing on the cheapest option, they probably don't value your quality or your expertise, and that's just gonna lead to unrealistic expectations and probably a dispute down the road.

[00:14:27] Liz: Oh, absolutely. So what about like the crazy communication that happened in this story? That's gotta be important too.

[00:14:35] Abi: Absolutely. I agree. Clear communication and strong contracts are essential on any project contracts lay that foundation for a good working relationship. They outline the scope of work, the payment terms, how to handle any unexpected issues, and it keeps that communication open throughout the entire project.

[00:14:56] Liz: I totally agree. Communication, it's key. Not just [00:15:00] in what we do, but in life. Communication is so important. And really addressing concerns early on can prevent some of those small problems from snowballing into these like huge headaches, which leads into another lesson learned. I think that that lesson is proactive risk management.

[00:15:16] Abi: Absolutely like having a good legal counsel in advance of a problem.

[00:15:22] Liz: Exactly. It's all connected. Like having legal expert on your side can help you navigate those tricky situations. I like to think of it as an investment in your peace of mind.

[00:15:33] Abi: Ah, I like that a lot. Okay, so let's sum it up. What's the one thing you want our listeners to remember?

[00:15:41] Liz: Hmm. I think I'd say it's this, whether you're negotiating a contract, managing a project, or even like making a big purchase. The principles of due diligence, like clear Communication and risk Management, they apply to everything.

[00:15:58] Abi: They really do. [00:16:00] It's all about making smart decisions, protecting yourself, and being prepared for the unexpected. Because let's face it, you never know what's going to happen.

[00:16:11] Liz: Oh, that is so true. And that concludes this episode of the Case History Series brought to you by the GBA podcast. I hope you were able to take away some useful information that will help you and others at your firm make good risk-based decisions in the future.