Contract-to-Closure

Environmental Liability Risk Transfer programs, Contract-to-Closure (CtC) pioneered by BJAAM, can provide a unique solution for companies seeking an exit from their legacy environmental liabilities or long-term closure obligations.  The scope of the liability risk transfer can range from a commitment to remediate a site for a guaranteed fixed price or the outright transfer of the asset and/or associated liabilities. BJAAM’s CtC program provides an organization the ability to transfer the responsibility and management of contamination issues, large and small, for a single facility or group of properties.

Acquiring, selling, or otherwise conveying contaminated property can complicate the real or perceived environmental liability associated with the past industrial uses. These liabilities can cost the new landowner millions of dollars to comply with agency required clean-up guidelines. In most cases, environmental liabilities will also be attached to previous landowners. Contractual obligations binding liability to new or previous owners through “indemnification clauses” can also present problems during contract negotiations. A complete and comprehensive legal review in conjunction with a CtC can protect both buyer and seller and allow transactions to proceed smoothly. Moreover, the CtC allows both buyer and seller to negotiate a purchase price in a clear and concise manner knowing that the cost of the environmental clean-up and future liabilities have been established.

The principal benefits of the CtC program include:

• Cost certainty and stakeholder reassurance

• Creation of real estate value for non-performing assets

• Facilitation of transactions

•  Improved financial disclosure and accounting treatment of liabilities

•  Reduced management distraction on non-core operations

BJAAM’s CtC program can offer an attractive alternative or supplement to more traditional cost-overrun insurance. Under CtC, we provide our clients with first dollar coverage - there is no co-insurance. Thus, our clients know upfront what the total cost will be. Since BJAAM acts as both the “insurer” and “contractor” on the CtC, we are able to actively manage the risk to limit the down-side. By doing this, we are able to control the costs and risks associated with a project which in turn allows us to accept a greater share of the risk as well as to provide our clients with lower overall project costs or “premiums”.

Quantifying Financial Uncertainty

Uncertainties associated with environmental remediation can be significant - stifling business transactions, including dispute resolutions, and balance sheet reserve valuations that would otherwise make sense. BJAAM’s CtC program was developed to assist our clients in evaluating and addressing these risks. Under this program, BJAAM guarantees regulatory closure of environmental problems for a fixed price. By doing so, we are able to provide our clients with the surety in cost that they require while moving the risks and liability to BJAAM’s shoulders where it can be effectively managed.

The CtC program takes advantage of BJAAM’s experience and expertise in evaluating and addressing uncertainties. The core of the program is our probabilistic and risk matrix cost estimating toolset. We use these tools to assess what we know and don’t know about a site. The uncertainties are then factored into a statistical analysis to assess their impact on the overall remedial scope and price allowing us to predict the project budget that effectively balances the potential risks versus the estimated costs. Once the project budget is established, BJAAM utilizes a combination of self- and third-party insurance products to provide the necessary financial assurances to guarantee full transfer of the environmental liability away from our client. BJAAM’s ability to effectively structure the risk and financial aspects of the CtC program gives our clients the ability to turn their focus away from their environmental issues and on to their everyday core business.

BJAAM has successfully completed hundreds of projects under the CtC program since its inception in the mid-1990’s. These projects have ranged in size from under $50,000 to over $3 million, without a single change order for the agreed upon remediation. We have defended our work under regulatory audit and have delivered any additional information or remediation required by the regulators at no additional cost to our client.

What makes us different? We are a professional environmental firm that shares your goals and are willing to stand behind our work and estimates. We are a company fluent in regulatory and technical issues who can manage the process and avoid surprises through our unique program:

• Guaranteed Regulatory Closure for a Fixed Price

• Full Liability Transfer

• Insurance Wrap Around (optional)

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