using process redesign to improve dod's environmental security program: remediation program...
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title:UsingProcessRedesigntoImproveDoD'sEnvironmentalSecurityProgram:RemediationProgramManagement
author: Drezner,JeffreyA.;Camm,FrankA.publisher: RAND
isbn10|asin: 083302695Xprintisbn13: 9780833026958ebookisbn13: 9780585243467
language: English
subject
Hazardouswastesiteremediation--UnitedStates,Militarybases--Wastedisposal--Environmentalaspects--UnitedStates,UnitedStates--ArmedForces--Facilities--Environmentalaspects,UnitedStates.--Dept.ofDefense--Environmentalaspects,
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E.I.duPontdepublicationdate: 1999
lcc: TD1040.D741999ebddc: 363.72/878
subject:
Hazardouswastesiteremediation--UnitedStates,Militarybases--Wastedisposal--Environmentalaspects--UnitedStates,UnitedStates--ArmedForces--Facilities--Environmentalaspects,UnitedStates.--Dept.ofDefense--Environmentalaspects,E.I.duPontde
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TheresearchdescribedinthisreportwassponsoredbytheOfficeoftheSecretaryofDefense(OSD).TheresearchwasconductedinRAND'sNationalDefenseResearchInstitute,afederallyfundedresearchanddevelopmentcentersupportedbytheOSD,theJointStaff,theunifiedcommands,andthedefenseagenciesunderContractDASW01-95-C-0059.
LibraryofCongressCataloging-in-PublicationData
Drezner,JeffreyA.UsingprocessredesigntoimproveDoD'senvironmentalsecurityprogram:remediationprogrammanagement/JeffreyA.Drezner,FrankCamm.p.cm."PreparedfortheOfficeoftheSecretaryofDefensebyRAND'sNationalDefenseResearchInstitute.""MR-1024-OSD."Includesbibliographicalreferences.ISBN0-8330-2695-X1.HazardouswastesiteremediationUnitedStates.2.MilitarybasesWastedisposalEnvironmentalaspectsUnitedStates.3.UnitedStatesArmedForcesFacilitiesEnvironmentalaspects.4.UnitedStates.Dept.ofDefenseEnvironmentalaspects.5.E.I.duPontdeNemours&CompanyManagementEnvironmentalaspects.6.OlinCorporationManagementEnvironmentalaspects.7.EnvironmentalmanagementUnitedStatesCasestudies.I.Camm,FrankA.,1949.II.Title.TD1040.D741999363.72'878dc2198-49228CIP
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Allrightsreserved.Nopartofthisbookmaybereproducedinanyformbyanyelectronicormechanicalmeans(includingphotcopying,recording,orinformationstorageandretrieval)withoutpermissioninwritingfromRAND.
Published1999byRAND1700MainStree,P.O.Box2138,SantaMonica,CA90407-2138133HSt.,N.W.,Washington,D.C.20005-4707RANDURL:www.rand.org/ToorderRANDdocumentsortoobtainadditionalinformation,contactDistributionServices:Telephone:(310)451-7002;Fax:(310)451-6915;Internet:[email protected]
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UsingProcessRedesigntoImproveDoD'sEnvironmentalSecurityProgramRemediationProgramManagement
JeffreyA.DreznerFrankCamm
PreparedfortheOfficeoftheSecretaryofDefense
NationalDefenseResearchInstitute
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PrefaceTheDepartmentofDefense(DoD)facesadifficultcleanupchallenge,withthousandsofsitesatactiveandclosinginstallationsandformerlyuseddefensesites.Effortstoincreasetheefficiencyofcleanupactivities,byeitherreducingcostsoracceleratingtheprocess,couldhaveasubstantialeffectonDoD'sabilitytomeetitscleanupobligationswithinanincreasinglyconstrainedbudgetenvironment.
Theresearchreportedhere,whichwasconductedfromlate1995toearly1997,ispartofalargerstudy.ThelargerstudyisexaminingtheenvironmentalmanagementpracticesofcommercialfirmsrecognizedashavingthebestpracticesinthatfieldanddrawinglessonsthatDoDcouldusetoimproveitsownenvironmentalmanagementprocesses.TheoverallstudyisexaminingfourareasofimportancetoDoD:designingweaponsystemstohavemorecost-effectiveenvironmentalperformance;managingtheindustrialprocessesincentrallogisticsactivities;balancingenvironmental,military,andcostconsiderationsinmanaginganinstallation;andremediationprogrammanagement.
Thisreportaddressesremediationprogrammanagementandshouldbeofinteresttoofficialsconcernedwithremediationinboththepublicandprivatesectors.
ThisresearchwassponsoredbytheOfficeoftheDeputyUnderSecretaryofDefenseforEnvironmentalSecurityandperformedwithintheAcquisitionandTechnologyPolicyCenterofRAND'sNationalDefenseResearchInstitute,afederallyfundedresearchanddevel-
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opmentcentersupportedbytheOfficeoftheSecretaryofDefense,theJointStaff,theunifiedcommands,andthedefenseagencies.
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Contents
Preface iii
Figure vii
Tables vii
Summary ix
Acknowledgments xv
Acronyms xvii
ChapterOneINTRODUCTION
1
ResearchApproach 3
OrganizationofReport 6
ChapterTwoREMEDIATIONPROGRAMMANAGEMENTISSUES
7
ManagingRemediationPrograms 7
ChallengesforDoD 10
ChapterThreeOVERVIEWOFINNOVATIVECOMMERCIALREMEDIATION-MANAGEMENTPRACTICES
13
LessonsfromtheLiterature 14
FrameworkSupportingCaseStudies 18
ChapterFourCASE1:REMEDIATIONPROGRAMMANAGEMENT
21
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ATDUPONT
CorporateEnvironmentalPolicyandPractice 22
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RemediationProgramPolicyandPhilosophy 25
ManagementStructureandResponsibilities 27
RemediationProgramManagers 32
CoreResources 33
DuPontEnvironmentalRemediationServices 36
LegalFunction 37
ProcessesandImplementation 37
PerformanceMeasurement 42
RegulatoryandCommunityInteractions 43
CostandFinancialConsiderations 45
OtherElements 48
RiskAssessment 48
InformationSystems 50
LessonsLearned 51
ChapterFiveCASE2:REMEDIATIONPROGRAMMANAGEMENTATOLINCORPORATION
53
CorporateEnvironmentalManagementPolicyandPerformance
54
RemediationPolicy 56
ContextandGeneralManagementPhilosophy 56
ProgramManagementStructure,Roles,and 59
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Responsibilities
SiteManagement 65
UseofExternalSourcesforServices 66
PerformanceMeasurementandIncentives 68
StakeholderInteractions 74
FinancialCosts 79
OrganizationalChange 83
LessonsLearned 86
ChapterSixCONCLUSIONS
87
Bibliography 93
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Figure
1.OutlineoftheSuperfundCleanupProcess
8
Tables
1.DuPontEnvironmentalExpenses
24
2.DuPontAnnualExpendituresRelatedtoRemediationActivities
46
3.OlinWasteStreams,1994
55
4.Olin'sEnvironmentalExpenditures
81
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SummaryTheDepartmentofDefense(DoD)facesadifficultcleanupchallenge,withthousandsofsitesatactiveandclosinginstallationsandformerlyuseddefensesites(FUDSs).Effortstoincreasetheefficiencyofcleanupactivities,byeitherreducingcostsoracceleratingtheprocess,couldhaveasubstantialeffectonDoD'sabilitytomeetitscleanupobligationswithinanincreasinglyconstrainedbudgetenvironment.
Corporateenvironmentalmanagementpracticeshavebecomemoreproactiveandinnovativeinrecentyears.Theparadigmshiftisfromacorrectiveactionperspectivetooneofpreventionandincludesself-auditingpracticesandtheintegrationofenvironmentalconsiderationsintocorebusinessprocesses.Whilediscussionsintheliteratureregardingthis"new"environmentalmanagementparadigmusuallyrefertocompliance,pollutionprevention,andconservationactivities,thereisnoinherentreasonthatelementsofthenewenvironmentalmanagementparadigmcannotapplytoremediation.Forexample,proactiveremediationprogrammanagementmightincludesignificantvoluntarycleanupactivities.Thenotionofgoing"beyondcompliance"inthecleanupcontextmightrelatetovoluntarilytakingstepstoenhancetheprocessdefinedinregulations.Itmightalsomeanmanagingfinancialliabilitiesorenvironmentalrisksinsuchawayastoreducethembeyondwhatisrequiredbystandardsandregulations.Open,publiccommunicationandstakeholderparticipationfoundationsofthenewenvironmentalmanagementpracticeshavebeenfoundtofacilitatesuccessfulcleanupinboththepublicandprivatesectors.Similarly,thebenefitsofgoodrelationshipswithregulators(e.g.,increasedflexibility)shouldtheo-
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reticallyaccruetocleanupactivitiesinthesamemanneraspollutionpreventionorcompliancewould.Lastly,addingshareholdervalue,acorecriterionforevaluatingpollutionpreventionandother"beyondcompliance"initiatives,enhancesefficientpropertyredevelopmentandtransfer,andcost-effectiveremedyselectionandefficientexecutioninthecleanupcontext.
Theresearchreportedhere,whichwasconductedfromlate1995toearly1997,ispartofalargerstudy.Thelargerstudy'sobjectiveistohelpDoDredesignitsenvironmentalsecurityprogramandrelatedprocessestomeetitsenvironmentalobligationswithgreatereconomicefficiencytopromoteDoD'scorenationalsecuritygoals.Specifically,theOfficeoftheDeputyUnderSecretaryofDefenseforEnvironmentalSecurityaskedRANDtostudytheenvironmentalmanagementpracticesofcommercialfirmsrecognizedashavingthebestpracticesinthisfieldandtodrawlessonsthatDoDcouldusetoimproveitsownenvironmentalmanagementprocesses.Thisreportfocusesonremediationprogrammanagement.Thecoreofourapproachistousetwoin-depthindustrycasestudiestoanalyzeremediationprogrammanagementimplementationissuesincontextsrelevanttoDoD.
Accordingtooneofthefewstudiesthatspecificallyfocusesonremediationprogrammanagement,privatesectorbestpracticesinremediationmanagementincludesixelements:1
Buildingandmaintainingastrongpositiverelationshipwiththeregulatorycommunityincludeopencommunicationsandanefforttounderstandtheregulatoryprocess,aswellascommunicatingyourprocesstotheregulator.
Proactiveidentificationandmanagementofremediationliabilitiesdemonstratesresponsibleactiontoprotecthumanhealthandtheenvironment,andisalsoindicativeofmanagingenvironmentalissues
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ingeneralfromabroaderbusinessperspective.
Risk-baseddecisionmakingtoincreasethecost-effectivenessofremediesrequiresthatreasonableoptionsforfuturelandusebedefinedearlyintheremediationprocess.Regulatorsandother
1ArthurD.Little,Inc.,1995.SeealsoLangsethandLambe,1995.
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stakeholders(thoseinthecommunityandshareholders)mustbebroughtintotheprocessearly.
Useofinnovativetechnologieshasthepotentialtoreducelong-termcostsassociatedwithremediationactivitiesandtoimprovetheireffectiveness.
Managingremediationasabusinessprocesscanbeaccomplishedbyensuringthatpersonnelwithgeneralbusinessexperiencearecloselyinvolvedinremediationprogrammanagement.Viewingremediationasavalue-addedactivityofteninvolvesgeneratingcostreductionoravoidingcoststhroughtheuseofinnovativetechnologiesandremediesthataremorecost-effectiveforagivenlevelofacceptablerisk.
Ensuringlearningandcontinuousimprovementinvolvescapturingtheexperiencesofbothongoingandcompletedremediationactivities,andestablishingafeedbackprocesstoensurethatpastexperienceisdisseminatedandincorporatedintothecurrentprocess,asappropriate.
Weexaminedtheremediation-managementprogramsoftwolargechemicalcompanies,OlinCorporationandDuPont.Thesecompaniesappearedtobeamongthebestinprivate-sectorremediationpracticeandhadrecentlyreorganizedtheirremediationprogramstofacilitatethedevelopmentandexecutionofmorecost-effectiveremediationstrategies.Theirprogramsreflecttheindustrybestpracticeslistedabove.
ThecriticalprogramcharacteristicsofDuPont'sremediation-managementprocessesare
centralizedmanagement,withsomedecentralizedexecution
integrationofabusinessmanagementperspectiveandapproach
useofrisk-assessmentandscience-basedevidencetoinfluence
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remedyselection
developmentandmaintenanceofcooperativerelationshipswiththeregulatorycommunitybybuildingtrustandcredibilityandusingatechnicaladvocacyprogram
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cost-effective,risk-basedstrategiesthataddressallurgentrisksandoff-sitecontaminationimmediatelyandthenpressforcost-effectivecontainment.
ThecriticalcharacteristicsofOlin'sremediation-managementprogramare
centralizedmanagementtoensurecoordinatedstrategyandcontinuousimprovement
businessprocessperspective,includingextensiveperformancemeasurement
ateammanagementapproach
developmentandmaintenanceofcooperativerelationshipswiththeregulatorycommunityandotherstakeholders
carefullymanageduseofexternalserviceproviders.
Thecontrastbetweencentralizedanddecentralizedmanagementdeservesfurtherdiscussion,sinceitisacoreelementofprogrammanagementforbothcompanies.Adecentralizedprogrammanagementstructuremaybeappropriateformanagingaverylargenumberofgeographicallydisbursedsites.Financialandmanagementresponsibilityresideswiththebusinessunitthatcreatedtheproblem.Whilethisstructureallowsforincreasedresponsivenesstovariationinstate/localregulatoryenvironment,thereisnocentralcontrol,coordination,orstandardizationofprocesses.Acentralizedstructuresimplifiesresponsibilityforcostsandprovidesconsistencyinapproach.Centralizationdoesnotmeanisolationfromlinebusinessunitssiteandplantrepresentativescanbeincludedinmanagementteams,aswellasothercorporatefunctions(researchanddevelopment,andlegal).
Thedistributionofresponsibilitiesbetweenthecentralmanagement
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groupandthedecentralizedexecutionteamssuggestedbythecasestudiesissignificantlydifferentfromDoD'scurrentprocesses.Inparticular,intheprivatesector,thecentralorganizationmaintainsstrictcontrolovercostsandfunding;incontrast,DoD'scurrentpolicyallowsthemilitaryservicesanddefenseagenciestomaintaincontrolofthemajorityofremediationfunding.Thecurrentdefenseremediationfundingpolicydevolutionwasinitiatedtofacilitate
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servicebuy-inandaccountabilityforfundingallocationdecisionsandtoimprove''end-user"(remediationagency)discretioninactivityprioritization.ThecasestudiesargueforretractingDoD'srecentlyimplemented"devolvement"strategy.
Manyofthespecificapproachesdiscussedinthecasestudiesarepotentiallyapplicableandappropriate,inaslightlymodifiedform,toDoD'sremediationprogram.Theseapproachesincludecentralizedmanagementwithdecentralizedexecution(DoDalreadyhasthisstructure,butnotthespecificdistributionofresponsibilitiessuggestedbythecasestudies),adoptionofabusinessprocessapproach,more-focuseduseofperformancemeasurement,proactiveidentificationandmanagementofpotentialliabilities,andimprovedstakeholder(regulatorandcommunity)interactions.DoDcantailorthelessonsfromthecasestudiestoitsowncultureandorganizationalenvironment.
Theissueofimplementingthechosenreformsmustbeaddressedatthetimethatremediationpolicyisdeveloped.Thefirmsovercamebarrierstoorganizationalchangethrough
reasonablyclearvisionofthedesiredfuturestate
strongleadershipsupport
centrallymanagedresourcesandproblemsolvingintheinitialphasesofimplementation
iterativeprocessimprovements,incorporatingfeedbackfromemployeesandexternalstakeholders
ateammanagementapproach
performanceevaluationsofindividualsandgroups,withanemphasisonchange.
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Again,withsometailoring,theselessonsaredirectlyapplicabletoimprovingDoD'sremediationprogram.
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AcknowledgmentsThisresearchbenefitedgreatlyfrommanydiscussionswithremediationprogramofficialsinbothgovernmentandindustry.Wegreatlyappreciatetheirtimeandassistance.
AveryspecialthanksgoestotheremediationprogramofficialsatOlinandDuPontforparticipatinginourresearch.Theseofficialsspentconsiderabletimewithusprovidingextensiveinformationontheirremediationprocesses.Wegreatlyappreciatetheiropennessinthesediscussions.
D.J.Petersonprovidedahelpfulreviewofthedraft,andChristinaPitchereditedandformattedthedocument.
Anyerrorsarethesoleresponsibilityoftheauthors.
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Acronyms
ADL ArthurD.Little
AOC Areaofconcern
AFB AirForcebase
ARAR Applicableorrelevantandappropriaterequirement
BRAC BaseRealignmentandClosure
CAP Communityadvisorypanel
CEO Chiefexecutiveofficer
CERCLISComprehensiveEnvironmentalResponse,Compensation,andLiabilityInformationSystem
CERCLAComprehensiveEnvironmentalResponse,Compensation,andLiabilityAct
CMA ChemicalManufacturersAssociation
CR CoreResources
CRG CorporateRemediationGroup
DERA DefenseEnvironmentalRestorationAccount
DERS DuPontEnvironmentalRemediationServices
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DoD DepartmentofDefense
DoE DepartmentofEnergy
EH&S Environment,Health,andSafety
EMIS EnvironmentalManagementInformationSystem
ER&E EnvironmentalRemediationandEngineering
EPA EnvironmentalProtectionAgency
ERG EnvironmentalRemediationGroup
EVA Economicvalueadded
FASB FederalAccountingStandardsBoard
FUDS Formerlyuseddefensesite
FY Fiscalyear
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HEARTHavingEverythingAboutRemediationTechnologies
IPA IndependentProjectAnalysis,Inc.
IPT Integratedproductteam
ISO InternationalStandardizationOrganization
ITP IndustryToxicsProgram
LCA Lifecycleassessment
NOD Noticeofdeficiency
NOV Noticeofviolation
NPL NationalPrioritiesList
PRP Potentiallyresponsibleparty
RA Remedialaction
RCRA ResourceConservationandRecoveryAct
RMB RemediationManagementBoard
RMT RemediationManagementTeam
ROD RecordofDecision
RPM Remediationprogrammanager
RTDF RemediationTechnologyDevelopmentForum
SARA SuperfundAmendmentsandReauthorizationActof1986
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SEC SecuritiesandExchangeCommission
SHE Safety,health,andenvironment
SWMUSolidwastemanagementunit
TRI Toxicreportinginventory
TSD Treatment,storage,anddisposal
VOC Volatileorganiccompound
VP Vicepresident
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ChapterOneIntroductionTheDepartmentofDefense(DoD)facesadifficulthazardouswastecleanupchallenge,withthousandsofsitesatactiveandclosinginstallationsandformerlyuseddefensesites(FUDSs).Infiscalyear1994(FY94),approximately$2.4billionwasspentoncleanupactivitiesthroughtheDefenseEnvironmentalRestorationAccount(DERA)andtheBaseRealignmentandClosureLaw(BRAC);inFY96,approximately$2.1billionwillbespent,slightlylessthanhalfofthetotalDoDenvironmentalsecuritybudget.Effortstoincreasetheefficiencyofcleanupactivities,eitherbyreducingcostsoracceleratingtheprocessthroughsimplificationandstreamlining,couldhaveasubstantialeffectonDoD'sabilitytomeetitscleanupobligationswithinanincreasinglyconstrainedbudgetenvironment.
Corporateenvironmentalmanagementpracticeshavebecomemoreproactiveandinnovativeinrecentyears.Thechangeisinresponsetotheincreasingcostsofenvironmentalmanagementandtheneedtodevelopandexecutemorecost-effectiveenvironmentalmanagementstrategies.Theparadigmshiftisfromacorrectiveactionperspectivetooneofpreventionandincludesself-auditingpracticesandtheintegrationofenvironmentalconsiderationsintocorebusinessprocesses.Discussionsintheliteratureregardingthis"new"environmentalmanagementparadigmusuallyrefertocompliance,pollutionprevention,andconservationactivitiesandrelatetocurrentandfuturebusinessoperations.Interestingly,thereisalmostno
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discussionoftheapplicationoftheseprinciplestoremediation1ofhazardouswastesites.Thegapintheliteratureexistsbecausenoonehasyetthoughtthroughtheapplicationofthenewparadigmtocleanup.2Thereisnoinherentreasonthatelementsofthenewenvironmentalmanagementparadigmcannotapplytoremediation.
Theapplicationofproactiveenvironmentalmanagementprinciplestoremediationactivitiescanbeconceptualizedasfollows:
Acomprehensiveenvironmentalmanagementsystemwillincluderemediationactivities(aswellaspollutionpreventionandcompliance)andintegratesuchactivitiesintotheoverallenvironmentalmanagementpolicyandprogram,aswellascorebusinessfunctions.
Remediationitselfisaprocessgeneratingwastestreamsthatneedtobemanaged.
Remediationmanagementisacomplexprocessthatcanpotentiallybeimprovedthroughmanagementinnovations.
Forexample,proactiveremediationprogrammanagementmightincludesignificantvoluntaryremediationactivities.Thenotionofgoing"beyondcompliance"intheremediationcontextmightrelatetovoluntarilytakingstepstoenhancetheprocessdefinedinregulations.Itmightalsomeanmanagingfinancialliabilitiesorenvironmentalrisksinsuchawayastoreducethembeyondwhatisrequiredbystandardsandregulations.Open,publiccommunicationandstakeholderparticipationfoundationsofthenewenvironmentalmanagementpracticeshavebeenfoundtofacilitatesuccessfulcleanupinboththepublicandprivatesectors.Similarly,thebenefitsofgoodrelationshipswithregulators(e.g.,increasedflexibility)shouldtheoreticallyaccruetocleanupactivitiesinthesamemanneraspollutionpreventionorcompliancewould.Lastly,addingshareholder
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value,acorecriterionforevaluatingpollutionpreventionandother"beyondcompliance"initiatives,suggestsefficientproperty
1Throughoutthisreport,weusetheterm"remediation"ratherthantheterm"cleanup."Sitesarerarelyevercleanedtotheiroriginalstate,sothetermremediationbetterreflectstheprocessthatactuallyoccurs.2Someexamplesdoexist.SeeLangsethandLambe,1995;Baker,1995;andLawrenceandCerf,1995,pp.4854.
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redevelopmentandtransfer,andcost-effectiveremedyselectionandefficientexecutioninthecleanupcontext.
Remediationviewedasaprocessrequiringprogrammanagementsuggeststhatmostprovisionsoftheemergingenvironmentalmanagementparadigmareapplicable:clearpolicystatement,goalsandmetrics,aformalprocesswithdesignatedresponsibilities,provisionsforadequateresources,documentation,andqualityassurance.
Itwouldbeproactivetoviewcleanuptasksasavalue-addedactivityinitsownright,includingfacilitatingpropertydevelopmentandtransfer,providingfeedbackonmaterialusagethatmightinformcomplianceandpollutionpreventionprograms,andreducingthelong-termcostsofenvironmentalmanagement.
CurrentDoDremediationpolicyandpracticesupportsthisapproach,andDoDleadsthewayinanumberofareas.ButcommercialfirmshaveexperienceinotherareasthatDoDcanusetoimproveitscurrentprogram.Thisresearchfocusesonopportunitiestolearnfromtheprivatesectorintheareaofremediationprogrammanagement.AreasofpriorityinteresttoDoDincludeapplicationofbusinessmanagementprinciplestoremediation,costandliabilityestimationprocesses,resourceallocationprocesses,determininginformationneeds,monitoringperformance,andinteractingwithregulatorsatlocal,state,andfederallevels.
ResearchApproach
Theresearchreportedhere,whichwasconductedfromlate1995toearly1997,ispartofalargerstudy.Thelargerstudy'sobjectiveistohelpDoDredesignitsenvironmentalsecurityprogramandrelatedprocessestomeetitsenvironmentalobligationswithgreatereconomicefficiencytopromoteDoD'scorenationalsecuritygoals.Specifically,
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theOfficeoftheDeputyUnderSecretaryofDefenseforEnvironmentalSecurityaskedRANDtostudytheenvironmentalmanagementpracticesofcommercialfirmsrecognizedashavingthebestpracticesinthatfieldtodrawlessonsthatDoDcouldusetoimproveitsownenvironmentalmanagementprocesses.
TheentirestudyfocusesonenvironmentalmanagementinfourDoDpolicyareas:weaponsystemdevelopmentandmodification,depot-
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levellogisticsprocesses,integratedenvironmentalfacilitymanagementoninstallations,andmanagementofremediationprograms.RAND'sresearchhasfourmaintasksbasedonthesepolicyareas:
1.Weaponsystemdevelopmentandmodificationfocusesonhowinnovativefirmsmanageandincorporateenvironmentalconcernsintotheirstate-of-the-artdesignprocessesforlong-livedproductsandindustrialprocesses.Specialattentionwillbegiventohowtheycurrentlyapplyformallifecycleassessment(LCA)toolsaspartofthesedesignprocesses.ThestudyseeksimplicationsforpollutionpreventionactionsrelevanttoDoDdesignandmodificationofweaponsystems.
2.Depot-levellogisticsprocesses(concentratedonindustrialprocesses)focusesonhowinnovativeplantswithindustrialprocesseslikethoseinDoDmanagecomplianceandpromotecost-effectivepollutionprevention.Thefocusisonmaintenance/repairandoverhaul/remanufacturingprocesses.Also,thestudywillexaminehazardousmaterialmanagementsystemsandwillseekimplicationsforDoDrepairandoverhaulfacilities,shipyards,similardepot-levellogisticscenters,andotherDoDinstallationswithsimilarprocesses.
3.Integratedenvironmentalfacilitymanagementoninstallationsfocusesonhowfacilitieswithdiverseactivitiesdevelopintegratedwaystocomplywithcurrentregulationsandpreventfuturepollution.Thefocusisoncommercialeffortstoimplementintegratedwhole-facilityplanningandoninnovativemultimediaenvironmentalmanagementefforts.Suchactivitiesincludecommercial,residential,industrial,andnaturalresourcemanagementactivities.ThestudyseeksimplicationsforDoDinstallations.
4.Managementofremediationprogramsexaminesinnovativeremediationprogrammanagementpracticesintheprivatesectorto
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identifyprocessesthatcanenhanceDoD'sprogram.Thestudyisparticularlyinterestedinriskmanagementandprogram-leveldecisionprocesses,andtheinformationsystemssupportingthem.
Thisreportfocusesonthefortharea,remediationprogrammanagement.
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Thecoreofourapproachistousein-depthindustrycasestudiestoanalyzeremediationprogrammanagementimplementationissuesincontextsrelevanttoDoD.Weidentifyinnovativeprivate-sectorprocessesthatcanbeadaptedtomeetDoD'sspecificmanagementchallenges.Casestudiesallowthein-depthexaminationofprocessesandimplementationproceduresnecessarytodrawusefullessonsforDoD.Pleasenotethatthecasestudiesprovideonlyasnapshotoftheinnovativeenvironmentalmanagementpracticesreflectedatthetimeofourinterviews.Thesecasestudiesaresupplementedbyacomprehensivereviewoftheliteratureanddiscussionswithindustryandgovernmentofficialsinvolvedinenvironmentalmanagementinthefourthareadescribedabove.
Weareparticularlyinterestedinunderstandingtherationaleforaprocess,andunderstandinghowimplementationactuallyworks,includingidentifyingprocessenablers.Wearealsointerestedinidentifyingconstraintsaffectingimplementationandunderstandinghowthoseconstraintsweremanaged.
Thecaseswereselectedbasedonseveralcriteria:
Alargeindustrialfirmwithmultiplebusinessunitslocatedinmultiplegeographicalareas.
Fullorpartialresponsibilityformanagingremediationatalargenumberofgeographicallydisbursedsites.
Acknowledgedasrepresentativeofindustrybestpracticeinremediationmanagement.
Coreelementsofthefirms'remediation-managementprogramresponsivetoDoD'sareasofprimaryinterest.
ThefirsttwocriteriaaremeanttoensurebroadcomparabilitywiththenatureofDoD'senvironmentalremediationchallenge.Thelasttwo
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criteriaaremeanttoensurethatlessonsfromthecasestudiescanbeusefullyappliedtoareasofDoD'sprogramthatareconsideredimportantbyDoD'senvironmentalremediationcommunity.
OurresearchapproachnecessarilyraisesissuesoftransferabilitybetweenthepublicandprivatesectorsbetweenDoDandspecificindustrialsectorsinparticular.IssuesofparticularrelevancetotransferabilityofbestpracticesfromtheprivatesectortoDoDincludethe
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typeofdecisionstobemade(whattheinformationisusedfor),theinformationneededtoinformthosedecisions,andthetypesofriskstobemanaged.OurworkinghypothesisisthatbroadremediationprogrammanagementinformationneedsandusesaregenerallysimilarbetweenDoDandlargeprivate-sectorfirms.
OrganizationofReport
ChapterTwoofthisreportintroducesissuesassociatedwithremediationprogrammanagement.Suchissuesastheinherentuncertaintyofremediation,theneedtocost-effectivelymanageliabilities,andregulatoryandcommunityrelationsarerelevantinboththeprivateandpublicsectors.AreasofspecialconcerntoDoDarethenidentified,aswellastheparticularmanagementchallengesfacingDoDremediationmanagers.
ChapterThreereviewssomegenerallessonsonremediationmanagementderivedfrompubliclyavailablesourcesandnoncasestudyinterviewswithbothprivate-andpublic-sectorofficials.Interestingly,whilethereisavastliteratureonthetechnical,projectlevel,andliabilityaspectsofremediation,thereisverylittleonprogrammanagement.Weattemptheretosummarizebrieflytheavailableinformationanddevelopaframeworkforpresentingthecasestudies.
ChaptersFourandFivepresentthetwocasestudiesthataretheheartofthisresearch.Thediscussionisorientedaroundtheframeworkdevelopedearlierandincludesconcreteexamplesillustratinghowinnovativeprivate-sectorfirmsimplementbestpracticesinremediationmanagement.Thecasesaresufficientlydifferentthateachemphasizesafundamentallydifferentapproachtoremediationprogrammanagementatthespecificissuelevel,butmajorcommonalitiesexistathigherlevels.
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ChapterSixpresentsconclusionsandrecommendationsforactionsDoDcouldtaketoenhanceitsremediationprogram.
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ChapterTwoRemediationProgramManagementIssuesThischapterpresentsabriefandsimplifiedviewofremediationprogrammanagement.Thepurposeofthisoverviewistoprovidesomecontextinwhichtheimportanceofthevariousattributesoftheremediationprogrammanagementprocessesdescribedinsubsequentchapterscanbeinterpreted.
ManagingRemediationPrograms
Complexity,size,andinherentuncertaintyposedifficultchallengesforremediationprogrammanagement.Byprogrammanagement,werefertothemanagementofmanyindividualremediation-relatedprojectsatdifferentsites.Largefirms,particularlythoseinthechemicalorenergyindustries,maybemanagingactivitiesatseveralhundredsitesatanyonetime.Eachsiteislikelytohaveitsownuniquephysical(contaminantsandgeology),economic,andpoliticalcharacteristics.Eachsiteislikelytobeatadifferentstageintheremediationprocess.
Figure1outlinesthetraditionalSuperfundcleanupprocessasdefinedbyregulations.WhilespecifictoSuperfund,thebasicstepsintheprocesswouldbesimilarinanyremediationproject,includingthoseconductedunderResourceConservationandRecoveryAct(RCRA)cleanupprovisions,stateregulations,andvoluntarycleanups.Basicstepsincludesiteidentificationandcharacterization,riskassessment,remedyselection,remedialaction,andlong-termoperationsandmonitoring.
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Figure1OutlineoftheSuperfundCleanupProcess
ThefirstcolumnofactivitiesshowninFigure1concernssiteidentificationandlistingontheNationalPrioritiesList(NPL).TheseactivitiesaremostoftenperformedbytheEnvironmentalProtectionAgency(EPA),althoughindustrypotentiallyresponsibleparties(PRPs)andotherstakeholdersmaytracktheprocessandcommentondecisions.Thesecondcolumnofactivitiesconcernsinitialplanning,detailedsitecharacterization,andremedyselection.Riskassessmentcanplayarolehere.EPA,PRPs,orremediationserviceproviders(contractors)canperformboththesitecharacterizationandriskassessment.Ultimately,theremedyisformalizedinaRecordofDecision(ROD).ItisusuallyaftertheRODhasbeenpub-
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lishedthatthePRPgroupofficiallyforms.TheactivitiesinthelastcolumnareperformedbythePRPsortheirremediationserviceprovidersandinvolvedetailedprojectdesignandexecution.Evenaftersiteclosure,therecanbeanextensivemonitoringperiodtoensurethattheremedywassuccessful.
TheprocessoutlinedinFigure1ishighlystylized:Theactualprocessismuchmorecomplex.Therearemanyopportunitiesforthevariousstakeholderstointeractandreachinterimagreementsthateithermitigatetheneedforsomeelementsofsubsequentphasesormodifythosephases.TheprocessleadinguptopublicationoftheRODcantakemanyyears.Theactualremedialactionmayalsotakemanyyears.Thesubsequentmonitoringprogramcanlastdecades.
Thetraditionalcleanupmanagementprocessresultsfromstrictadherencetoregulations.Theresultisthatinnovationisnotemphasizedorencouraged.Afirm'sgoalisoftentominimizepotentialfutureliability.Therequiredpublicparticipation(throughhearingsatcertainpointsintheprocess)canresultinsomedelayandtensionsamongthecommunity,firms,andregulators.TheSuperfundprocessalsohasaclearpreferenceforpermanenttreatmentsolutions.Inshort,thecurrentsystemdiscouragesrisktakingandexperimentation.Liabilityexposureandthegovernment'srelativeinflexibilityinenforcementcontributetotheproblem.1
OlinCorporation'sperspectiveonthesourcesofuncertaintyregardingremediationliabilitiesisrepresentativeoftheindustry'sandincludesthefollowing:2
Identificationofnewsites.
Developmentsatsitesresultingfrominvestigativestudies.
Advancesintechnology.
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Changesinenvironmentallaw,regulations,andtheirapplication.
Scarcityofreliabledatapertainingtosites.
1PorterandvanderLinde,1995.2FromOlin1995AnnualReport,Norwalk,Conn.
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DifficultyinassessinginvolvementandfinancialcapabilityofotherPRPs.
Abilitytoobtaincontributionsfromotherparties.
Longtimeperiodsassociatedwithremediation.
Themultiplesourcesofuncertaintyaffectingremediationprogrammanagementaffectafirm'sabilitytomanageefficiently.Ingeneralterms,theseincludetheabilitytocharacterizeaccuratelythecontaminantsatasite,assessaccuratelyexposurepathwaysforhealthandenvironmentaleffects,estimateremediationprojectcosts,andadapttochangesintechnologyandregulatoryenvironment.Inmanycases,theresultisagreatdealofinherentuncertaintyregardingthecost-effectivenessofaselectedremedy.
ChallengesforDoD
ThechallengesofmanagingremediationprogramsinlargecommercialfirmsandDoDaresimilar.Theseincludethetypeofcontamination(petroleum,oilandlubricants,solvents,heavymetals,paint,acid,asbestos,andpesticides)aswellasthetypeofareacontaminated(storageareas,undergroundstoragetanks,landfills,otherdisposalsites,buildings,andlagoonsandponds).Forthemostpart,DoDdoesnotrequireanyuniquetechnologiestomeetitsneeds,withtheexceptionofburiedordnanceandmixedhazardousandradioactivewaste.3ThechiefdifferenceistheabsolutemagnitudeoftheprograminDoD:DoDclearlyhasmanymoresitesandamuchlargertotalvolumeofwastetoaccountforthanthelargestchemicaloroilcompanies.
DoDhasmadesubstantialprogressinaddressingitsremediationproblemandhasanumberofongoinginitiativesthatrelate,atleastinpart,tobestpracticeintheprivatesector.4
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AreviewofDoD'scurrentremediationprogramanddiscussionwithprogramofficialssuggestthatDoDhasthefollowingareasofspecial
3CongressionalBudgetOffice,1995.4SeethestatementofCleanSites,Inc.,president,EdwinH.Clark,1996;seealsoDepartmentofDefense,1996.
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interestinwhichlessonsfromtheprivatesectorwouldbeparticularlyhelpful:
Liabilityandcostestimatingandcontrolprocesses.Theseincludetools,models,skilledpersonnelandtraining,aswellasmonitoringandcontrol.Liabilityandcostestimatinghaveimplicationsforbudgets,internalandexternalpolitics,andrelationshipswithstakeholdersinDoD'sremediationprocesses.DoD'sneedistoestimatecostsmoreaccuratelyandtoreducetheoverallcosts(increasecost-effectiveness)ofremediationstrategies.
Managementprocesses.Theseincludeprocesscontrolandmechanismsforcontinuousimprovement.Establishingappropriateincentivestomotivatethedesiredbehaviorisaparticularlyimportantelementhere.GiventhesizeoftheDoDremediationprogram,theapplicationofvariableoversightprocessestofocusmanagementattentionwhereitisneededisalsoofspecialinterest.TheabilitytoadapttoachangingregulatoryandtechnicalenvironmentisanotherimportantneedforDoD.
Resourceallocationprocesses.Theseincludeprioritization,riskmanagement,risk-baseddecisionmaking,andestablishinglinksbetweenallocationprocessesandremediationactivities.Dealingwiththepoliticalprocessandexistingregulatorycommitmentsisalsoofconcern.
Determininginformationneeds.Thisincludesunderstandingtheinformationneedsofdecisionmakers,theinformationgeneratedbyandrequiredbydecisionprocesses,andinformationmanagementanddatatransformationprocesses.Informationflowstoandfromstakeholdersarealsoimportant.
Monitoringperformance.Thisincludesestablishinggoals,identifyingmetrics,collectingandorganizingthenecessaryinformation,and
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providingforfeedbackandcontinuousimprovement.
Interactingwithregulators.Thisincludesestablishingcleanupstandardsandremedyselectionprocessesandcriteria.
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Whilethecasestudiesandliteraturereviewcoverallsixtopics,ourresearchfocusesonthree:managementprocesses,performancemonitoring,andinteractionswithregulators.
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ChapterThreeOverviewofInnovativeCommercialRemediation-ManagementPracticesRemediationremainsoneofthelargestenvironmentalmanagementproblemsformanycommercialfirms,especiallyforlargechemical,petroleum,andmanufacturingfirmswithproductionactivitiesatmanysites.ThesefirmsofferareservoirofexpertiseonhowtoapplythenewapproachdiscussedinChapterTwotothemanagementofcleanupprograms.RemediationprogrammanagementpracticesintheprivatesectorprovidelessonsthatDoDcanusetoreducecostsandfutureliabilitiesthroughapplicationofcost-effectivestrategies.
SeveralaspectsofremediationprogrammanagementintheprivatesectorappeartobeapplicabletoDoD'sareasofpriorityinterest:
Theuseofinnovativeprogrammanagementinitiativesinspecificprocessareas.
Applicationofabusinessmanagementperspectivetocostandliabilityestimation.
Resourceallocationprocesses.
Monitoringandperformanceincentives.
Introductionofcoreorganizationalvaluesintotheremediationprogrammanagementprocesses.
Interactionswithregulatorsandlocal,state,andfederallevels.
Thischapterbrieflyreviewssomeofthelessonsonremediationprogrammanagementthatcanbedrawnfrompubliclyavailablesources.However,thetopic(remediationprogrammanagement)
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hasnotbeenextensivelyaddressedintheliterature,andinnovationsinthisareaarerelativelynew.Wethusdrawononlyafewsources.
LessonsfromtheLiterature
Theliteratureonremediationfocusesonproject-orsite-levelmanagementandthetechnologyassociatedwithremediation.Thereisverylittleliteratureaddressingprogram-levelmanagementissuesforeithergovernmentagenciesortheprivatesector.Reviewsofgovernmentagencyprogramstendtofocusonsimplemetricsandarenotparticularlyusefulintermsofprocessimprovement.1EPAproducedareportin1994thatbenchmarkedtheenvironmentalmanagementsystemsofthemilitaryservices,butremediationprogrammanagementwasnotaddressedspecifically.2TheDepartmentofEnergy(DoE)hasrecentlyexamineditsprogrammoreholistically3andhasalsobeguntobenchmarkitsprocessesagainstothergovernmentagenciesandtheprivatesector.4Theliteratureonprivate-sectorremediationprocessestendstofocusonreformofSuperfund,ratherthanonmanagementprocesses.
Althoughtheliteratureisscarce,somecommercialfirmshaveinvestedinanalysesintendedtobenchmarkandimprovetheirremediationprograms.OneprominentexampleisHAZRISK,5aresearchprogramsponsoredbyoveradozenlargeenergyandchemicalcompanies(andonegovernmentagency)toaddresscostandschedulingissuesofremediationprojects.Basedonaunique,largedatabasedevelopedandmaintainedbyIndependentProjectAnalysis,Inc.(IPA),HAZRISKprovidesasetoftoolsusefulinestimatingthecost,schedule,andneededcontingencyforremediationprojects.InOctober1995,theHAZRISKdatabaseincluded423projectsrepresent-
1See,forinstance,CongressionalBudgetOffice,1994and1995;U.S.GeneralAccountingOffice,1994a,1994b,and1996;andDepartmentof
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Defense,1995a.2U.S.EnvironmentalProtectionAgency,1994.3NationalResearchCouncil,1995.4Mallicketal.,1994;DepartmentofEnvironment,1994;andU.S.DepartmentofEnergy,1993a.5HAZRISKisthecreationofIndependentProjectAnalysis,Inc.,Reston,Va.SeetheHAZRISKinformationpamphlet,Reston,Va.;HAZRISKNewsletter,1996;IndependentProjectAnalysis,Inc.,1995;andPainter,1996.
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ing$2.5billionintotalcosts.WhileHAZRISKisfocusedontheprojectlevel,resultsfromanalysisofthedatabaseareapplicabletoprogram-levelmanagementconcerns.Forinstance,HAZRISKtoolscanprovideseniormanagementwithanimprovedunderstandingoftheprobabilitythattheactualcostandscheduleofindividualprojectswillbeclosetotheoriginalestimates,andanunderstandingofthefactorsthataffectcostandscheduleoutcomes.
HAZRISKisabenchmarkingtoolthathasbeenusedbyDoEtocomparetheperformanceofitsremediationprojectswiththatoftheprivatesector.Thisstudyconcludedthatcostandscheduleoutcomes(costgrowthandscheduleslip)forDoEprojectsaresomewhatworsethansimilarprojectsintheprivatesector.Reasonsforthisdisparityincludepoorprojectdefinition,redundancyandlackofcontrolandaccountability(becauseoftheuseofmultipleprimecontractorsonindividualprojects),inappropriatecontractingstrategies,lackofclosureonprojectobjectiveswithregulators,andinadequateconnectionbetweenprojectriskandcontingenciesintheprojectbudget.6TotheextentthatDoEandDoDmanagementpracticesaresimilar,theIPAstudysuggestsconsiderablescopeforimprovementinanumberofimportantareasrelatedtoprogrammanagement:applicationofconsistentguidanceonprojectdefinition,improvedallocationofcontingencyfunds,improvedrelationswithregulators,andmore-efficientcontractingstrategies.
AccordingtoastudybyArthurD.Little,Inc.(ADL),oneofthefewstudiesthatspecificallyfocusonremediationprogrammanagement,private-sectorbestpracticesinremediationmanagementincludesixelements:7
Buildingandmaintainingastrongpositiverelationshipwiththeregulatorycommunity.
Proactiveidentificationandmanagementofremediationliabilities.
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Risk-baseddecisionmakingtoincreasethecost-effectivenessofremedies.
6U.S.DepartmentofEnergy,1993b.7ArthurD.Little,Inc.,1995.SeealsoLangsethandLambe,1995.
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Useofinnovativetechnologies.
Managingremediationasabusinessprocess.
Ensuringlearningandcontinuousimprovement.
Buildingastrongpositiverelationshipwiththeregulatorycommunityincludesopencommunicationsandarealefforttounderstandtheregulatoryprocess,aswellascommunicatingyourorganization'sprocesstotheregulator.Feedbackandcommunicationfromallrelevantregulatorsshouldbeencouraged,includinglocal,state,regional,andfederalagencies.Overtime,arelationshipbuiltoncredibilityandtrustwillemerge,facilitatingtheoverallremediationprocess.
ADLdescribesproactiveidentificationandinitiationofremediationactivitiesasintendedinparttoimproverelationshipswithregulatorsbydemonstratingresponsibleactiontoprotecthumanhealthandtheenvironment,butitisalsoindicativeofmanagingenvironmentalissuesingeneralfromabroaderbusinessperspective.Knowingthefullextentofyourorganization'spotentialremediationliabilitiesallowsimprovedlong-termplanningandresourceallocationdecisions.Onepotentialdownsidetothisstrategyisthescenarioinwhichremediationactivitiesareinitiatedvoluntarilybythefirm,butthesiteneedstoberevisitedbecauseofchangesinregulationsorstandards.
ADLfoundthatfocusingremediationdecisionsonpropertyreusegenerallyleadstomorecost-effectiveandrisk-baseddecisionsregardingremedies.Bestpracticeinthisregardrequiresthatreasonableoptionsforfuturelandusebedefinedearlyintheremediationprocess.Regulatorsandotherstakeholders(thoseinthecommunityandshareholders)mustbebroughtintotheprocessearly.
Theuseofinnovativetechnologieshasthepotentialtoreducelong-
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termcostsassociatedwithremediationactivities,andimprovetheireffectiveness.Sincethecurrentregulatorystructureisnotsetuptofacilitatetheuseofnewtechnologies,thekeyistoworkcloselywithregulators,buildingonapositiverelationship.
Managingremediationactivitiesasabusinessprocessisperhapsthemostfundamentalandimportantelementofbestpractices,accordingtoADL.Thenotionistomoveawayfromthepurelytechnicalor
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regulatory-drivenprocesstowardonethatcontributesvaluetothecompany.Abusinessperspectivecanbeintroducedintoremediationmanagementbyensuringthattheremediationteamincludespersonnelwithgeneralbusinessexperience.Viewingremediationasavalue-addedactivityofteninvolvesgeneratingcostreductionoravoidingcoststhroughtheuseofinnovativetechnologiesandremediesthataremorecost-effectiveforagivenlevelofacceptablerisk.
Othersinvolvedinremediationhaveadvocatedtreatingremediationasabusinessprocess.8Theproblemisthatthetraditionalcleanupapproachdoesnotcreateshareholdervalue.Abusinessapproachtoremediationwouldincludeusingflexiblecontractingvehiclesandtermsandconditions,beingresponsivetocustomers,partneringwithregulatorsandthecommunity,treatingriskasan''opportunity,"andfocusingonpropertyredevelopment,reuse,andtransferconsiderations.Inthisinterpretation,thebusinessperspectiverequirestheintegrationoftheotherelementsofbestpractice.
ADL'slastidentifiedbestpracticeiscontinuousimprovement.Thisinvolvescumulativelearningovertime,capturingtheexperiencesofbothongoingandcompletedremediationactivities,andestablishingafeedbackprocesstoensurethatpastexperienceisdisseminatedandincorporatedintothecurrentprocess,asappropriate.
TheADLworkidentifiedotherareasofconcerninremediationmanagement.Theseareasinfluenceacompany'sabilitytoeffectivelyimplementtheelementsofbestpracticesdiscussedabove.Theseotherareasincludestructuringremediationresources(managingexternalrelationshipsandinternalresources)andmeasuringqualityandeffectiveness(cost,performance,andcommunicationofeffectiveness).9
Inthecurrentbestpracticevernacular,thereappearstobeagrowingconsensusamongleadingfirmsthatremediationisaprocesswhose
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goalissystematicriskreduction.Bestpracticealsoincludesengag-
8GordonM.Davidson,presentationattheFederalFacilityCleanupConference,Washington,D.C.,May13,1996.9ArthurD.Little,Inc.,1995,pp.1526.
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ingemployeestodevelopandapplyinnovativesolutionsthroughvariousrewardandincentivestructures.
Thesebestpracticesinremediationmanagementrepresentachangeinperspectiveandculturethatisfairlyrecentwithinthelast5to10years.Themotivationforthischangewastheperceptionofrisingcostsandtheneedtodevelopmorecost-effectivestrategiestoregainsomecostcontrol.Thechangecanbecharacterizedasmovementfromalitigation-drivenstancetoaproactivemanagementapproach.Therationaleforthischangeappearstobearecognitionofsomelong-termbenefits:improvedregulatoryandcommunityrelations,increasedcost-effectivenessofremediesandvalue-addedtothefirm,andimprovedresourceallocationthroughintegrationofremediationintothestrategicplanningprocess.Despitethiseconomicrationale,thedifficultyofchangingestablishedpracticesandorganizationshasmeantthatrelativelyfewfirmshavemadethechange.
FrameworkSupportingCaseStudies
Asynthesisoftheavailableliteraturesuggestsasetofcharacteristicsofagoodprogramformanagementofremediationactivities.Thesecharacteristicsinclude
flexibilitytoadapttoachangingenvironment(regulatory,economic,politicalconditions)
explicitmechanismsformanagementcontrolandoversight,aswellasprocessimprovement
performanceincentivesforindividualsandteams
projectandprogrammanageraccountability
proactiveidentificationandmanagementofrisks
businessfocus(value-added,strategicaction)
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managementcommitmentandadequateprovisionofresources
openandwell-definedprocessesthataccommodatestakeholderinvolvement.
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Theseelementsofbestpracticesformthebasisfortheframeworkweuseinthenexttwochapterstodiscusstheremediationprogrammanagementcasestudies.
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ChapterFourCase1:RemediationProgramManagementatDupontDuPontisaglobalresearchandtechnologycompanymanufacturingproductsbasedonchemicals,polymers,fibers,andpetroleum.Productmarketsincludeaerospace,agriculture,automotive,construction,electronics,packaging,refining,andtransportation.1In1994,DuPonthadanetincomeof$2.7billiononsalesof$39.3billion.Thecompanyhasabout150manufacturingfacilities,20naturalgasprocessingplants,andmanyproduct-handlinganddistributionfacilities.2
DuPont'spollutionprevention,compliance,andconservation-relatedactivitiesaremanagedoutofeachbusinessunitandtheSafety,Health,andEnvironmentExcellenceCenter.DuPontappearstohaveastrongcorporateenvironmentalethicandafairlycomprehensiveenvironmentalpolicy.RemediationactivitiesaremanagedseparatelythroughtheCorporateRemediationGroup(CRG).Thereappeartobelimitedlinksbetweenremediationprogrammanagementactivitiesandpollutionpreventionandcomplianceactivities.
ThefollowingdescriptionofDuPont'scorporateenvironmentalpolicy,practice,andperformancedrawsmainlyonpubliclyavailableinformationandsecondarysourcesandismeanttoprovidecontextforthemorethoroughdiscussionofthecompany'sremediationprogram.ThediscussionofDuPont'sremediationprogramisbasedon
1DuPontNewsRelease,Wilmington,Del.,September20,1995.2DuPont1994AnnualReport,Wilmington,Del.,p.34.
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interviewswithcompanyremediationprogramofficialsanddocumentationprovidedduringtheseinterviews.Ofspecialinterestarethecompany'soverallrisk-basedremediationstrategy,theintroductionofbusinessvaluesintoremediationprogrammanagement,theuseofriskassessmentinregulatoryinteractions,andtheoverallstructureandoperationoftheCorporateRemediationGroup,whichfacilitatestheseotherattributes.
DuPont'senvironmentalremediationliabilityderivesmostlyfromRCRAcorrectiveactions.Todate,Superfundaccountsforonlyabout2025percentoftotalliability(costs).Thereare55RCRAcorrectiveactionsites,andthesereceivethemostmanagementattentionandresources.DuPonthasbeenidentifiedasaPRPat77NPLsitesandfacespotentialliabilitygreaterthan$1millionat20ofthese,with3to4posingsignificantlylargerpotentialliability.DuPontincursliabilityatapproximately180otherlocationsincludingstatesites,orphansites(acquiredinthepast),indemnificationtoownerofpropertysoldbyDuPont,andformerexplosivemanufacturingfacilities.
CorporateEnvironmentalPolicyandPractice
Priortothemid1980s,DuPont'senvironmentalpracticeswerecharacterizedbypolicythatfocusedon,asaminimum,legalcompliance;thecompanydidnotfocusonmore-proactivepositionsandpracticestogobeyondcomplianceuntilthelate1980s.Aftera1989publicannouncementinwhichthechiefexecutiveofficer(CEO)claimedthetitleof"chiefenvironmentalofficer,"DuPontestablishedspecificgoalsinareasofwasteminimization,pollutionprevention,productstewardship,stakeholderinteractions,andmanagementcompensation.Thesecorporategoalsaresometimessupplementedbymore-specificgoalsadoptedbythebusinessunitstobetterreflecttheirproductsandprocesses.AnEnvironmentalLeadershipCouncilwasformed,composedofseniorvicepresidentsfromstafffunctionsand
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businessunits,tosetpolicy,reviewperformance,andfacilitatechange.
"Itisthecompany'spolicytocomplyfullywithorexceedalllegalrequirementsworldwide."3Today,manyvoluntaryprogramsarein
3DuPont1994AnnualReport,Wilmington,Del.,p.34.
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placetominimizeenvironmentalrisksfrombusinessoperations.DuPont'scorporateenvironmentalpolicy4includesadherencetothehigheststandardsofbusinessoperationsandenvironmentalprotection;goalsofzerowastedischargesandzeroinjuriesandillness;efficientuseofresources;habitatconservation;continuousimprovementofpractices,processes,andproducts;openpublicdiscussion;inputtopublicpolicymaking;managementandemployeecommitment;andaccountability.Thislatterelementincludesallocatingadequateresourcestomeettheothersubstantiveelementsofthecorporatepolicy.5Long-termpolicyobjectivesincludethefullintegrationofsafety,health,andenvironment(SHE)concernsintobusinessoperationsandbuildingpartnershipswithstakeholders.Anew"Safety,Health,andEnvironmentCommitment"wasadoptedin1994andextendsDuPont'szeroinjuriesandillnessstandardtoenvironmentalissues.6Bytheendof1995,DuPontexpectedtohaveimplementedallmanagementpracticesbasedontheChemicalManufacturersAssociation's(CMA)ResponsibleCareprograminareasofpollutionprevention,employeesafety,processsafety,communityawareness,andemergencyresponse.7Productstewardship,thenewestandmostcomprehensiveelementofResponsibleCare,andinternationalimplementationlagsomewhat.8
DuPonthaspublishedasetofcorporatepositionson10environmentalissues.9Ingeneral,thesepositionssuggestaproactivefirmwithastrongenvironmentalethicandaclearpreferenceforrisk-baseddecisionmakingtoensurethecost-effectiveuseofscarcere-
4Thelatestversion,datedJuly1994,replacedtheNovember1971policy.BillMcEnroe,Manager,Safety,Health,andEnvironment(SHE)InformationManagement,DuPont,presentationatEMISconference,April1619,1996.5DuPont,Safety,Health,andtheEnvironment1995ProgressReport,Wilmington,Del.,p.5.
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6DuPont1994AnnualReport,Wilmington,Del.,p.3.7CMAadoptedaprogramtoimproveenvironmentalperformanceofmembercompaniesafteraseriesofaccidentsinthelate1980s.TheinitiativewascalledResponsibleCareandwasintendedtobothchangeindustry'sdecisionprocessesandimproveenvironmentalperformance.SeeLoisEmber,ChemicalandEngineeringNews,May29,1995,pp.1017.8DuPontSafety,Health,andtheEnvironment1995ProgressReport,Wilmington,Del.,p.8.9DuPontViews,Wilmington,Del.,1996.
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sources.DuPontadvocatesflexibleregulatoryregimestiedtospecificrisk-basedstandards.DuPont'sbeliefthatrisk-baseddecisionmakingandflexibleregulatoryregimesleadtocost-effectivesolutionsisalsoreflectedinitsremediationprogram.
Complianceandvoluntaryprogramsposesignificantcosts(seeTable1).About$400millionwasspentin1994onenvironmentallyrelatedcapitalexpenditures.Furthersignificantcapitalexpendituresareexpectedforsolidandhazardouswastetreatment,storage,anddisposal(TSD)facilitiesandforcompliancewiththe1990CleanAirActAmendments.Estimatedpretaxenvironmentalexpenditureschargedtocurrentbusinessoperationstotaledabout$950millionin1994,downfrom$1billionin1993.Thisincludesremediationaccruals.About75percentoftotalexpendituresarerelatedtoU.S.operations.
Toxicreportinginventory(TRI)wasteisdown27percentfrom1991.Therecentdelistingofhydrochloricacidandammoniumionwasteswillresultin1996TRIreportablewastesoflessthanone-fourthof1991figures.DeepwelldisposalwasteisthelargestcontributortoDuPont'sTRIwaste.10,11Thecompanybelievesthat"class1"undergroundinjectionintheappropriategeologicalformations
Table1DuPontEnvironmentalExpenses(millionsofthen-yeardollars)
19911992 1993 1994TotalPretaxcosts 900 900 1,000 950Accrualforremediation 130 160 183 185Expendituresforpreviouslyaccruedactivities 91 121 126 91Accruedbalanceforfutureyears 426 465 522 616SOURCE:DuPontSafety,Health,andtheEnvironment1995ProgressReport,Wilmington,Del.,p.18.
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10DuPontNewsRelease,Wilmington,Del.,December11,1995.11EPA,TexasNaturalResourceConservationCommission,LouisianaDepartmentofEnvironmentalQuality,andOhioEPAalladvocatethatdeepwelldisposalwastenotbeincludedinTRIsinceitmisleadsthepublicandisnotareleasetotheenvironment.ToobtainanEPAundergroundinjectionpermit,theownermustshowthattherewillbenoreleasetoshallowwateracquifersin10,000years.
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(typically12milesbelowtheearth'ssurface)isthesafestdisposalpracticeforsomewastestreams.Forthe17chemicalstrackedinEPA's"33/50"program,emissionshavebeenreduced58percent,surpassingthe1995reductiongoalof50percent.12
DuPonthasconductedfourindependentevaluationsofthecompany'sEnvironmentalAuditProgram,managedbytheSafety,Health,andEnvironmentExcellenceCenter.Themostrecentaudit,conductedbyEnvironmentalResourcesManagement,Inc.,concludedthatDuPont'sprogramis"generallyconsistentwithand,insomecases,exceedsexpectationsoftheestablishedcriteria."TheprogramwasevaluatedagainsttheInternationalStandardizationOrganization(ISO)14,000environmentalauditprogramguidelines,EPAcriteria,andgenerallyacceptedauditstandardsandpractices.
RemediationProgramPolicyandPhilosophy13
DuPonthasaformalcentralizedprogramformanagingremediationactivitiesinawaythatreflectscorporateculture,businessphilosophy,andenvironmentalpolicy.Theremediationprogramhasidentifiableanddistinctgoalsandprocesses.Thebasicemphasisistoaddvaluetothecorporationoratleastminimizecostsforthesameeffectiveness.
Corporateremediationpolicyis
tobeprotectiveofhumanhealthandtheenvironment,tobeproactivewhereaplumemayimpactneighbors'property,touseriskassessmenttoassistindeterminingremediesandtoadvocatecontainmentstrategieswhereverappropriate.14
Formally,DuPont'spositiononsiteremediationreadsasfollows:
DuPontisinvolvedintreatingvarioussitesasapresentorformerowner/operatororasoneofanumberofmulti-partyusersofasite.
12DuPontSafety,Health,andtheEnvironment1995ProgressReport,
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Wilmington,Del.13Inthefollowingdiscussion,a"site"iscomposedofoneormoresolidwastemanagementunitsasspecifiedbyregulations.AsiteisroughlyequivalenttoaDoDinstallationasaunitofanalysis.14DuPont,letterattachment,Wilmington,Del.,August23,1994.
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Inaddition,DuPontmayprovidesiteremediationservicesthroughitswholly-ownedsubsidiary,DuPontEnvironmentalRemediationServices.
Aspartofthecompany'sCommitmenttoSafety,Health,andtheEnvironment,DuPontisdedicatedtotheprotectionofhumanhealthandtheenvironment.Thecompanyemphasizesriskassessmentmethodologytoguidethechoiceofremedyandisproactivewhereasitemayhaveacontaminantsituationharmfultohumanhealthand/orpropertyvalue.Inevaluatingtheremedy,DuPontseekscost-effectivecontainmentsystemstoeliminaterisktohumanhealthandtheenvironment.Sourcedestructionorcompleteremovalisrarelyfeasible,butisusedwhereriskcannotbecompletelyeliminated.
DuPontcontinuestoresearchbetterandmorecost-effectiveremediationtechnologies,includingin-grounddestructionapproachessuchasbioremediationandbioventing,andabovegroundtreatmentsuchassoilwashing.
Thecompanymaintainsanongoingdialoguewiththeregulatorycommunityandencouragescooperationamongmulti-stakeholdergroupstoeffectivelyremedysites.15
Interestingly,DuPont'sremediationpolicyisnotformallyreviewedandapprovedbycorporatemanagement.However,theapproachdevelopedoverthelastseveralyearsappearstohavebeengenerallyacceptedthroughoutthecorporation.Thefollowingaretheelementsofthis[unofficial]policy:
Protecthumanhealthandtheenvironment.
Developcooperativerelationshipswithregulators,notadversarialrelationships.
Beproactivewheretheriskisurgent.
Emphasizerisk-assessmentmethodstodriveremedyselection.
15DuPontViews,Wilmington,Del.,1996.
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Recognizethattherearenotenoughdollarstoachievepristineconditions.Rather,movetowardcost-effectivecontainmentwheredestructionorremovalisnottechnicallyfeasibleorisextremelyexpensive.
Developlower-cost,effectiveremediationstrategies.
Inpractice,thismeansdevelopingreasonablecost-effectivesolutions,mostoftenincludingsomeformofcontainmentstrategy.
Remediationactivitiesintendedforpropertyredevelopmentortransferimplyadifferentsetofpolicyguidelinestiedmoretofutureuseandliabilityconcerns.Containmentistypicallynotaviablestrategy,inandofitself,forredevelopmentofpropertythatwillbesold.Thefocusoftheremediationstrategyforthesesitesistoobtaina"nofurtheraction"requirednotice.Withrespecttositesthatcanberedeveloped,DuPontgetsaregulatoryreleasefromfurtherliability.Ifasiteistransferredunderregulationsthatapplygenericstandards,futureusecanbeunrestricted.Ifitistransferredunderregulationsbasedonariskassessment,deedrestrictionsarerequiredtoavoidpracticesthatcouldincreasetheriskbeyondthatwhichclearedDuPont.UntilDuPontgetsregulatoryrelieffromfutureliability,DuPontwillnotsellasite.Itwillleaseitforlong-termuse.Suchleasescarefullylimitsiteusetoavoidanyfurtherproblems.DuPontretainscontroloverallfutureregulatoryworkonsitesthatitownsandleasesout.
ManagementStructureandResponsibilities
TheCorporateRemediationGrouphasfullresponsibilityforremediationactivitieswithinDuPont.CRGisnotpartofDuPont'ssafety,health,andenvironmentfunction,butratherisadistinctfunctionalcostcenter.TheCRGdirectorreportstoabusinessunitdirector,primarilyforadministrativepurposes.Risingremediation
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costsanddiscontinuedbusinessesjustifiedcreatingaseparateunittocontrolcosts.Priortothis,operatingbusinessunitshandledtheirownremediation.
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TheCRGwasestablishedin1992andiscomposedofthreeorganizations,eachwithspecificresponsibilities:16
Remediationprogrammanagers(RPMs)areresponsibleforresourceallocationandfinancialmanagement,compliancestrategydevelopment,interactionswithregulators,andprogramoversight.TheRPMgroupconsistsof11RPMs,eachresponsibleforaregionroughlycorrespondingtoEPA's10administrativeregions,withtwoaddressingremediationoutsidetheUnitedStates.TheRPMsreporttothedirectorofRemediationPrograms.TheyarethebusinesselementoftheCRG.
CoreResources(CR)isresponsiblefortechnologydevelopment,technicalsupport,riskassessment,andlegislation/regulatorypolicyadvocacysupport.Thisgroupcurrentlyhasastaffof17.
DuPontEnvironmentalRemediationServices(DERS)isawhollyownedsubsidiaryresponsibleforprojectexecution,includingprojectmanagement,studiesandanalyses,technicalconsulting,riskassessment,design,andconstructionmanagement.DERSiscurrentlyintransitionbecausethedecisionhasbeenmadetoexitthebroadermarketandtoconcentrateonmanagingDuPont'sremediationliabilities.
PersonnelinthesegroupsspendtheirfulltimeaddressingremediationissuesfallingundertheComprehensiveEnvironmentalResponse,Compensation,andLiabilityAct(CERCLA),RCRA,andsimilarstatelaws.Projectmanagementisconductedthroughteamsthatincluderepresentativesfromallthreegroups.CRGacceptscostresponsibilityonlyforwastesthatweregeneratedanddisposedofpriorto1990(whenDuPont'sGroundwaterProtectionPolicywasestablished).Businessunitsareresponsibleforremediationcostscausedbymore-recentreleasesalthoughtheyshouldworkwithCRGresourcestocorrectthesituation.Personnelfromcorporatelegal,engineering,
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researchanddevelopment(R&D),andfinancialfunctionssupplementCRGresourcesasneeded.
16BriefingchartsfromDuPont,March14,1996.[Thereisafourthgroup,ConocoEnvironmentalServicesDivision,whichappearstoprovidecapabilitiessimilartoDuPontEnvironmentalRemediationServicesforConoco.]
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Priorto1992,theLegalDepartment,theEngineeringDepartment,andindividualplantsites/businessestypicallywereresponsibleforimplementationandcosts.Theemphasiswasontechnicalsolutionsnegotiatedwithstateand/orEPAofficialswithoutthebenefitofdetailedriskassessments.Thebusinessside,whichpaidthebills,hadlittleexpertiseinremediationandgenerallydidnotquestiontheprogramstrategyandcosts.Therewasnoprovisionfordocumentingandtransferringlessonslearnedacrossprojectsorbusinessunits.
TheCRGwasestablishedbecauseDuPontmanagementobservedsteeplyrisingremediationcosts(upto$170millionfor1992),projectionsofthosecostssuggestedsignificantfutureexpenses(fearthatcostscoulddouble),andDuPontlackedsufficientbusinessfocusinmanagingtheremediationprocess.17Managementoftheremediationprogramwasverydiffuse.RemediationmanagementwasfrequentlyconductedbysiteSHEmanagerswithlimitedexperienceinremediation,andthebasisfordecisionmakingwashighlyvariableandsometimesinconsistentthroughoutthecompany.Assuch,theremediationprogramofferedsignificantopportunityforoptimizationtoyieldmore-consistentandcost-effectivesolutions.
Theseniorbusinessmanagementsawproblemsinthisearlymanagementstructure:
LackofdefinitionofDuPont'sresponsibilitiesforenvironmentalexcellenceinremediation.
InadequateintegratedmanagementofDuPont'sremediationliabilitytoensureconsistentprotectionofhumanhealthandtheenvironmentusingrisk-based,cost-effectiveapproaches.
DiffuseresponsibilityforremediationwithinDuPont.
Poorintegrationofthedisciplines/skillsneededtoaddressremediationissues.
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Difficultytrackingallcostsofremediationonaregularbasis.
ContractorsmakingrecommendationsanddecisionswithoutguidancefromanoverallvisionfromDuPont.
17AgeneralruleofthumbsaysthatDuPontrequiresabout$1.5billioninsalestogenerateenoughrevenuestocover$150millioninremediationcosts.
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PoorcommunicationoflessonslearnedwithinDuPont.
In1991,acentralizedapproachembodiedinwhatbecameCRGwasproposed.Somemembersofthelinebusinessexpressedconcerntheycouldlosecontrolovertheiroperationsandcommunityrelationsforwhichtheywouldstillbeheldresponsible.CRGcameintobeingin1992.Inthesameyear,DERSwasreorientedtofocusmainlyoninternalbusiness.
CRG'sinceptionwasduetoanumberofperceivedbenefitsovertheprevious,more-decentralizedstructure:
Managementcouldachievemore-consistentprotectionofhumanhealthandtheenvironment.
Overallbusinessleadershipcouldbeprovidedandcostaccountabilityclearlydefined.
Overallstrategiesandtacticscouldbedevelopedintobestpractices.
SuperfundPRPprocedurescouldbeoptimizedusingteamswithbusiness,technical,andlegalrepresentatives.
Legalwouldhaveadefinedclient.
Projectauthorizationcouldbeformalizedandstandardized.
BetterinputtoprioritizetechnicalprogramstowardrealDuPontissuescouldbeprovided.
Allocationofcostsamongbusinessunitscouldbeestablishedsothatmore-predictableandless-variablecostswouldhitthebusinessbottomlineonayear-to-yearbasis.
TheCRGwasgiventotalresponsibilityforremediationwithinDuPont.Asa''business"unit,CRG'sfunctionwastocentralizeliabilityandcostaccounting,developandcoordinatemorecost-
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effectiveremediationstrategies,andprovideabusinessperspectivetoremediationmanagement.CRGwasalsotaskedwithdevelopinganinternalcost/liabilityallocationprocedure.DERSwasincludedaspartoftheCRGwithanin-housefocus.
CRGhastwokeycustomers,broadlydefined,eachwithdifferentinterests.Regulators,asasurrogateforthepublic,areonecritical
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customer,andmuchofCRG'sactivitiesareorientedtowardsatisfyingandinteractingwithregulators.DuPontitselfisalsoanimportantcustomer,andobviously,costisasignificantbusinessfactor.Thus,theCRG'staskistobalanceregulatorycomplianceandcost-effectiveremedialactionsthatprotecthumanhealthandtheenvironment.
WiththecreationoftheCRG,DuPontbusinessunitsnolongerhavedirectremediationresponsibility.However,sinceremediationactivitiesoccurataplantsite,andbecausetheplantmanagerisresponsibleforcommunityrelations,plantrepresentativesareincludedonprojectremediation-managementteams.Ratherthanfinancialortechnicalsupport,theconcernhereisassurancethatthecommunitysupportsremedialdecisions.
DuPontdifferentiatesbetweenremediationprogrammanagementandremediationprojectmanagement.Theprogrammanagerisresponsibleforteamorganization,strategydevelopment,andfinancialmanagement.Theprojectmanagerworkstowardawell-definedtacticaloutcome(definedbythestrategy).ThereisnodirectreportauthoritybetweentheremediationprojectmanagerandtheDERSprojectmanager.
Reportingtoseniormanagementisviaperiodicstatusupdateswrittenbythedirectorofcorporateremediationprograms.Theseupdatesincludeaccomplishments,projections,andkeyissues.Therehavebeenseveralreviewsattheboard-of-directorlevelfortheEnvironmentalPolicyCommittee.
Asintended,theCRGstructureresultsinahighlycentralizedremediationprogram.Generalstrategydevelopment,policyformulation,andallocationofdollarsoccurcentrally.However,considerableimplementationflexibilityisgiventotheregionalRPMs.Itismanagement'sroletohirehigh-qualitypeople,trainthem,provideguidance,andthenallowtheirgoodjudgmenttobeused.
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Theremediationprojectmanagementteamforanoperatingsite(underRCRAcorrectiveaction)includesasitecoordinator(plantrepresentative),aDERSprojectmanager,anattorneyfromtheLegalDepartment,andtheRPMforthatregion.ThemanagementteamdifferssubstantiallyforSuperfundsites:Itgenerallydoesnothaveasitecoordinator,forlackofDuPontpresence,but,forlargersites,has
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amemberfromCR.Whilethecompositionofthetwotypesofteamsimpliessomewhatdifferentapproaches,theoverallresponsibilitiesofthetwotypesofteamsarethesame:Developthestrategyforsiteinvestigation,developproposedremediesthatareprotectiveandcomplywithapplicablerules,andnegotiatewiththeregulators.18
PlantmanagerscollocatedwithCERCLAandRCRAsiteshavethreeresponsibilities.19Thefirstistoensurethattheplantcomplieswithallapplicablelawsandregulations.Hence,CRGhastokeeptheplantmanagersatisfiedaboutitsremediationapproach.ThisistheresponsibilityoftheDERSprojectmanagerateachsite.Thesecondistokeeptheiremployeesfocusedonthecorporategoals.Inthiscase,thatmeansreenforcingthecorporatepositionthatremediationpolicyisnowacentralandnotabusiness-unitresponsibility.ThelastistocommunicatewithandlistentothecommunityregardingDuPontpolicybothlocalandcorporatepolicy.Evenifthepolicyresponsibilitymigratestothecorporatelevel,alocalplantmanagerremainsDuPont'sprincipalsourceofinformationaboutthecommunityandmaintainsDuPont'srelationshipwiththecommunity.
RemediationProgramManagers
DuPont'sRPMsformthecriticallinkbetweenitsenvironmentaldecisionmakingandcorecorporategoals.
RPMsbringtheperspectiveofbusinesspeopletoCRGtointegrateremediationwiththerestofthecompany.ItsmemberscomefromnonremediationbackgroundsinthebusinessunitsofDuPontandtypicallyhaveover20yearsofexperience.RPMshavefinalresponsibilitytoallocateresourcesandmakedecisions,andtheyrelyontheotherpartsofCRGforsupport.TheirbusinessbackgroundismeantinparttogivethebusinessunitsconfidenceandmakeiteasierforthemtogiveupcontroltotheCRG.Inpractice,thebusinessper-
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18"CorporateRemediationGroup(CRG)Overview,"December29,1994,DuPontinternalmemo,Wilmington,Del.19Notethatmanagersremainresponsible[andliable]forotherenvironmentalissues.Wastewater,wastemanagement(includingpollutionprevention),airpollutionmanagement,andcommunityrelationsaretheothermainareas.
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spectivetranslatestoconceptsofprotective,risk-based,andcost-effectiveremediationstrategies.
RPMsarerequiredto"addvalue"tothecompany,ingeneral,andtoremediationactivities,inparticular.Thenotionof"addingvalue"withrespecttotheRPMfunctionincludesinterpretingcorporatepolicy,ensuringeffectivecommunicationbothinternallyandexternally,usingjudgmenttospeedresponsetimestodealwithurgentrisks,emphasizingcost-effectivenessandcostcontrol,andnegotiatingwithregulatorstoachieverisk-based,cost-effectiveremediesprotectiveofthepublicandenvironment.20
SpecificresponsibilitiesoftheRPMsincludeensuringthateachsitehasaneffective,interdisciplinaryremediationteam;ensuringthattheteamdevelopscost-effectivestrategiesconsistentwithcorporateandregulatorypolicyandincludesuseofbestpracticesandinnovativetechnologiesandtechnicalapproaches;leadingteamsinregulatoryinteractions;questioningoverlyconservativeoroutdatedassumptionsthatleadtoexcesscosts;andrepresentingDuPontbusinessinterestsinremediationactivities.
RPMsgenerallystayoutofthetechnicaldetailsofprojectmanagement.Onlyforthelargestsites,whereanRPMoverseesaverysmallnumberofremediationprojects,doRPMsgetinvolvedintechnicaldetails.EachRPMisinvolvedinupto20sites.Bestuseoftheirtimeistoensurethatstrategiesaredeveloped,tacticsareimplemented,andcostfactorsareconsidered.Theyrarelyhavethetimetobecomeimmersedinthefinertechnicalnuancesunlessthesearevitaltostrategy.
Intheend,RPMsarejudgedonproblem-solvingperformanceandeffectivecostmanagement.
CoreResources
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CoreResourceshasamixofresponsibilitiesrelatedtotechnicalandregulatoryexpertise.CRisresponsiblefordevelopingtechnologiesspecifictoDuPont'sneeds.CRmembersenterintopartnerships
20BriefingchartsfromDuPont,Wilmington,Del.,March14,1996.
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withgovernment,academic,research,andotherprivate-sectororganizations(includingotherchemicalindustryfirms)toleverageknowledgeandtechnologyresources.Ingeneral,CR'stechnology-developmenteffortsareorientedathowtocost-effectivelyreducerisk.
CR'sworkisconductedpredominantlythroughtechnologyandadvocacyteams.Technologyteamsaretaskedtomaintainastrongcompetencyintheirtechnologyarea,advocatepreferredtechnologytoregulators,andtransfertechnologytoDERSprojectmanagersandotherstaff.Theteamsareinterdisciplinaryandcross-functional,includingmembersfromrelevantCRGandotherDuPontorganizations(e.g.,R&D,Engineering,Conoco).Therearecurrentlyfivetechnologyteams:
Bioremediation.
Containmentandtransportmodeling.
Insitutreatment.
Pumpandtreat.
Soilprocessing.
CR'stechnology-developmentworkisnotconsideredtobeR&DbytheCRpersonnel.Rather,itismuchmoreappliedresearchfocusedonspecificDuPontremediationneeds.BecauseofDuPont'semphasisonrisk-basedsolutions,technologydevelopmentandapplicationfocusontechnologiesthatcontributetocontainment,stabilization/solidification,permeablereactivebarriers,impermeablebarrierimprovement,pumpingandtreating,soilwashing,bioremediation,andbioattenuation.
DuPontparticipatesintheRemediationTechnologyDevelopmentForum(RTDF),whichincludesbothgovernment(EPA,DoE,DoD)
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andotherprivate-sectorfirms(e.g.,Monsanto,GE,Dow).Thereareseveralspecificdevelopmentanddemonstrationprojectsunderwaythroughthispartnershipprogram.Resultsaredisseminatedamongthepartnersandcanbeusedatnocosttoparticipants.Othernonpartnerorganizationsneedtolicensethetechnologytobeabletouseit.LicensesareheldbytheRTDFgroupthatdevelopedthetechnology.
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Asanexample,oneofthepartnershipsDuPontisparticipatinginisanRTDFIntrinsicRemediationProjectatDoverAirForceBase(AFB).ThegroupincludesrepresentativesfromDuPont,Dow,Monsanto,Zeneca,Ciba-Geigy,GeneralElectric,theU.S.AirForce,EPA,andDoE.Thestudy,whichbeganinFebruary1995,combinesfieldandlaboratoryresearchonintrinsicremediationforaplumeatDoverAFB.Thestudygoalsaretodeterminewhetherthecontaminantsarebeingdestroyedatthesitethroughbioremediationprocesses,identifythedegradationmechanisms,anddevelopprotocolsforimplementingintrinsicremediationatothersites.21ThisparticularRTDFprojectillustratestwoimportantaspectsofDuPont'sremediationprogram:formingpartnershipstoleverageresourcesandinvestinginresearchtosupportacceptanceofmorecost-effective,risk-basedstrategies.
Acompanioninternalpaperonintrinsicremediationconcludesthatforanexamplesite,intrinsicremediationcouldleadtoacostsavingsof$1.2millionoverthesimplestpumpandtreatsystem.22Forthetworemediesinthisexample,theup-frontinvestigationcostsareassumedtobethesame;theincrementalcostofintrinsicremediationabovetheinvestigativecostsis$100,000.DuPonthasalsosurveyedover50ofitsownRCRAandCERCLAsitestogatherevidencethatbioremediationisinfacttakingplace.DuPontconcludesthatintrinsicremediationisaviableremedyundercertainconditionsandrepresentssubstantialavoidedcostsatnoincreaseinriskifappliedproperly.
Oneofthemoreimportantfunctionsandvaluesofthetechnologyteamsistechnicaladvocacytogetacceptanceofmorecost-effectiveremedies.Technicaladvocacyincludesworkingwithregulatorstodevelopgoodsciencethatcanbetranslatedintoregulatoryguidance.
TheCRGhasaformaladvocacyprogramandteam.SeveralCRstaffarethemainpointsofcontactworkingwiththeLegalDepartment,ExternalAffairs,andplantrepresentatives.Thefocusoftheadvocacy
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programistoachieve(atboththestateandfederallevel)leg-
21Ellisetal.,undated.22Ellis,undated.Thesavingsassumesa12percentdiscountrate,3percentinflation,anda30-yeartimehorizon.
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islativeandregulatoryprovisionsforremediesbasedonsite-specificfactorsandrisk.Riskisroughlydefinedasexposuretohazardthatmightharmhumanhealthortheenvironment.Individualsaredevelopedasleadersinspecificadvocacyareas(e.g.,Superfundreform,RCRAcorrectiveaction,humanhealthrisks,orecologicalrisk).Withinthestates,theeffortiscarriedoutinconjunctionwithStateChemicalIndustryCouncils.Atthefederallevel,workisconducteddirectlywithEPAorthroughCMAandbroaderbusinesscoalitions.
DupontEnvironmentalRemediationServices
Astheoverallprogramleaders,theRPMsworkcloselywithDERSprojectteams.DERSmanagersandscientistsserveonteamsdevelopingthestrategies.Throughprojectmanagementactivities,DERSisresponsibleforexecutingthevision/strategythatRPMsdevelopatindividualsites.Itdevelopsthedetailshandedofftooutsidecontractorsforfinalexecution.Italsosupportsnegotiationeffortswithregulators.Thisalignmentofawhollyownedsubsidiary(asDERSis)isimportantinenhancingtheoutcomeofnegotiations.Evenifthisalignmententailshighercoststhanusinganexternalsource,themajorportionofcoststhatwillbeincurredisdeterminedbytheup-frontstrategicdirectionratherthaninthefinalexecutionofaremedy.DuPonthasconcludedthat"front-endloading"duringtheplanningstagewillleadtotherightoutcomewiththeregulatorandpublicandalsototherightdesignforimplementation.HavingacaptiveresourcegroupgivesDuPontthemanagementdisciplinethatitcouldnotgetintheexternalmarket,makingthisinternalprovisionpreferable.
DuPontdecidedinJune1996tofocusDERSonin-houseremediationservices,thusexitingtheexternalmarketplace.Theexternalmarketwasdeterminedtobetoocompetitiveandinahighstateofflux.The
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decisionresultedinadownsizingoftheDERSorganizationfrom300+toabout160employees.Themainadvantageofanin-houseremediationserviceprovideristhealignmentwithcorporateobjectivesandstrategy.Insomecases,externalconsultantstoooftenfocusonbillablehours;thuscostscanincreasesignificantlyevenwhenthehourlyrateappearscompetitive.DERSperformsessentiallyatechnicalconsultantfunction,includingstudiesandanalyses,fieldtestsandsitecharacterization,remedydesign,andprocurementof
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materialsandservices.Theorganizationdoesnotactuallyexecuteremedialactions,butratheractsasDuPont'sprojectmanagementorganization,withsubstantialtechnicalcapability.DERSisfullyresponsibleforup-frontremedialdesign.
LegalFunction
AtDuPont,thelegal"function"reportstotheGeneralCounsel.CRGandRPMsareimportantclientsfortheLegalDepartment:About50percentofthecorporateenvironmentallegalstaffworkonCRG-relatedissues(theequivalentoffourfull-timelawyers).
Thelegalfunctioninsupportofremediationassistsininterpretinglawsandregulationsandapplyingregulatoryexpertiseinprojectnegotiations.Legalstaffattempttobesensitiveabouthowtheregulationsareimplementedandtobemoreproactiveandrisk-basedincompliance.Inotherwords,legalstaffsearchforopportunitiesandsupportthepushformore-reasonable(risk-based)remedies.BeingsensitivetotheEPAsitemanager,forinstance,requiresawarenessofhisorherneedsandthepressuresinfluencingthoseneedsandhisorherbehavior.DuPontattemptstodemonstrateconsistentcredibilityinitsinteractionswiththeregulatorycommunity,includingconsistentfollow-throughonpromisesorcommitments.
Evenafterinitialagreementshavebeencompleted,thelegalgrouphelpsDuPontremainactiveintheprocesstocontinuallyimprovetheremedyselection/designtobemorecost-effective.ThisincludesthevalueengineeringprocessafteraRODissigned.CorrespondingtoDuPont'sbasicstrategy,theideaistomakeuseoftheuncertaintyinherentinremediationtoassurecost-effectiveness.
ProcessesandImplementation
Asignificantculturechangebeganaboutfiveyearsagowiththe
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creationoftheCRG.Thenewcultureemphasizedidentifyingenvironmentalliabilitiesandthenmanagingthoseliabilitiesthroughcost-effective,risk-basedstrategies.Thischangewasfairlysignificant,intermsofboththeallocationofresponsibilitiesandassociatedincentivesfacingkeymanagersandcorporatecultureingeneral.This
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changeappearstohavebeensuccessful.ThefollowingparagraphsdescribethekeystothesuccessofthechangetotheCRGprocess.
Onekeychangeinachievingacceptancebythebusinessunitswastheshiftinbudgetingresponsibilityforremediation.Inthepast,eachlocaleandrelatedbusinessunitbudgetedforremediationofitsownfacilities.In1992,CRGassumedresponsibilityforthesecosts.Thevariablecomponentofamanager'scompensationaccountsforasignificantportionoftotalcompensationandreflectsbothcorporatewideandbusiness-unitperformance.Whenbudgetingresponsibilityisshiftedfrombusinessunitstothecorporation,theeffectsofremediationperformanceontotalcorporateperformancebecomeremoteenoughthatlocalmanagersareexpectedtoandgenerallydofocustheirattentionontheactivitiesinthebusinessunitthatarewithintheircontroltoaffectandthusimprovebusinessresults.
CRGexperiencedsomeresistanceduringthetransitiontothisnewsystem.Lossofcontrolbyplantmanagementwasanissueatthreeorfourlocations.Somehadvestedpersonalinterestsintheremediestheyhadchosenandhaddifficultyrelinquishingcontrol.WhydidtheviewsoftheselocalmanagerscontinuetomattertothemevenaftertheshiftinresponsibilityandbudgettoCRG?DuPonthasatraditionofconsensusmanagementthatdiscouragesmanagersfrompushingissuestohigherlevelsforresolution.Managersareexpectedtoworkoutlocalsolutionsamongthemselves,anditwaslikelydifficultforsomemanagerstorelinquishthiscontrol.
ThesecondkeychangewasidentifyinganexperiencedprogrammanagerwhogrewuponthebusinesssidebutwhoalsohadplantandatechnicalbackgroundandwhowouldbeheldaccountableforbringingDuPont'scorevaluesintotheremediationarena.Thecorebusinessexperience,theseniority,andthevaluesusedtojudge
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performanceareimportant,bothtothebusinessunitsandtotheCRG,insettingupandexecutinganewkindofapproach.PerseveranceandcreativityarevaluedattributesofagoodRPM,asareproblemsolvingandawillingnesstochallengeconventionalwisdomtoimplementsolutions.23RPMsmustfeelcomfortablewithuncertainty
23CRGvaluesagoodnegotiator,butnotesthedifferencesbetweentraditionalbusinessnegotiationandnegotiationwitharegulator.Inbusinessnegotiation,eitherpartycanalwaysstepaway,somutualagreementsaretheonlykindthatsurvivenego-
(footnotecontinuedonnextpage)
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andwithproblemsthatarenotwelldefinedthose"withoutboundaries."Theymustunderstandthecostofcapitalandthetimevalueofmoney.
AthirdkeyhasbeenlettingthescientistsinCoreResourcesfocusonwhattheylovetechnologyissuesratherthanontryingtoworkthewholerangeofissuesastheydidbeforetheCRGwasformed.CRstaffclearlyrevelinthetechnologicalissuesthattendtodominatetheliteratureonremediation.However,anytechnologyworkmustnotlosesightofDuPont'scoreremediationconcerns.
Afourthkeyhasbeenworkingcloselywithlawyersonfirmnegotiations.Thefirstinformationthedecisionmakerneedsisaclearstatementofwhathastobedone.Moreoftenthannot,thereisroomtonegotiate.
CRGappearstooperateunderthefollowingsetofprinciples:
DuPontisanethicalcompanyandwantstobeperceivedasanethicalcompany.Itplacesahighvalueonhumanlifeandhealthandtheenvironmentandwilldowhatisrequiredtoprotectthese.
DuPontwillexecuteitsethicalresponsibilitiesinacost-effectivemanner.Tothefullextentpossible,itwillrelyonscientificevidencetoidentifytheeffectsofitsactionsandchooseamongtheoptionsthatassureprotectinghumanhealthandtheenvironmentmostcost-effectively.
DuPontwillcomplywithapplicableregulations,butitwillnotbepassiveaboutregulation.DuPontwillstrivetoeducateregulatorsandthepublicaboutthecostsofalternativesandbeasaggressiveaspossibleaboutscientificevidenceandcost-effectivenessduringtheformationandimplementationofregulations.
DuPontvaluescreativityandperseveranceinthepersonnelwho
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implementitsenvironmentalpolicy.Itvaluescloseinteractionwithregulatorsandthepublicatlargetomakeitscase.Thisiswhatitmeansbybeingproactive.
(footnotecontinuedfrompreviouspage)
tiation.Inregulatorynegotiation,theregulatorwillnotandcannotgoaway.Thiscallsfordifferentskills,butCRGstillwantsRPMswholearnedtheirnegotiationskillsinbusiness,notregulation.
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TheseoperatingprinciplesclearlyreflectDuPont'sremediationpolicyandstrategy.
Thefollowingarecorollariesoftheseprinciples:
DonotexpectEPAtoconsidercostahighpriority.InCERCLAactions,workwithEPAcloselythroughouttheprocesssothatrealrisksareaddressedandthemostcost-effectiveequallyprotectiveremedyischosen.WhereDuPonthasalargestake,getaDuPontrepresentativeinaleadershiproleandsupportthatrepresentativewithscientificfactsandriskanalysis.
TakestepstoavoidcreatingafutureliabilityforDuPont.Theseinclude,butarenotlimitedto,
Immediatelycleaningupspills
Dealingwithgroundwaterplumesthatmightmoveoff-site
Usingbestpracticestoprotectgroundwater,suchasuseofsecondarycontainmentwhereappropriate
Avoidingsendinghazardouswastetoanylandfillthatdoesnotmeetstrictinternalguidelinesfordesign,compliance,andmanagement
NotsellingpropertythatiscontaminatedbecauseDuPontcouldberesponsibleforaremedyorexposurebutnotbeincontrolofremedyselectionoraccess.
BewillingtopressEPAintoidentifyingallresponsibleparties.Bewilling,ifnecessary,tosueallidentifiedPRPs.Examineallavailablerecordstohelpestablishshares.Encourageuseofarbitrationtoestablishcostallocations.DuPont'sstatusasbothatechnologyleaderandafinanciallysecurepartygivesitleverageaswellasliability.
Stayfocusedonthebigmoney.Gettingtherightremedyisfarmoreimportantthanarguingthedetailsaboutretroactiveliability.Inthe
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longrun,thebeststrategyistokeepthetotalcostdownforallresponsibleparties.
Insistonusingrealisticscientificevidenceandreasonableassumptionsindevelopingriskassessments.Collecttheinformationyouneedtomakeyourcase.TheCRG'sviewisifDuPont
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hasacontaminationproblemanditcouldcausearisktohumanhealthandtheenvironment,itneedstoknowaboutit.Currentanalyticaldataandstrongtransportandfatemodelshelpindefiningrisk.
Aslongasnothreattolife,health,orenvironmentdevelops,andtheotherconsiderationsabovearecovered,lettheregulatorsdictatethetimetable.Donotrushtoremediesuntilthesiteisadequatelyunderstood.Insomecases,itmaymakemoresensetodemonstratetheapplicabilityofinnovativetechnology.
Donotencouragecontractorstooverdevelopworkplans.Thiscanleadtohighercostsimmediatelyandinthefuture.AcontractorshouldnotbejudgedunfavorablymerelybecauseEPAreturnstheworkplanwithanoticeofdeficiencies(NoDs).Infact,itmaybeapositivesignthatthecontractorisseekingabetterremedy.
Nevergiveupifyoufeelthattheregulatorhastakenanunjustifiedposition.Goodsciencecombinedwithpersistencepaysoffinthelongrun.
DuPontdoesnotexplicitlyprioritizeacrosssitesorfacilities,exceptbyaddressinganysitethatpresentsanimmediateunacceptablerisk.Sitesaremanagedholistically,withsomeresourceandemphasistrade-offsamongwasteunitsatagivensite.Thebasicremediationpolicyis''norisktohealthorproperty."Risksareclearlydefinedthroughriskassessments.Implementationofthepolicyhastwoparts:
1.Thegoalisfornoplumetogooff-site.Priorityactionsaretakentoachievethisgoal.Inthosefewinstanceswhereaplumemayalreadybeoff-site,DuPonttakesimmediateactiontoeliminateorsubstantiallyreduceanyharmtohumanhealthortheenvironment.
2.Userisk-basedinsitutreatmentandcontainment.ThisstepisintendedtofullycontainthewastetoDuPontproperty,withnoriskoff-site.Thisiswherecost-effectivenessplaysakeyroleinselecting
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thepreferredremedy,butagain,theriskassessmenthelpsdefinetheabilityofalternativeremediestoachievethedesiredriskreduction.
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Theprotocolisfairlyclear,giventheoverallremediationstrategy.Addressoff-sitewastefirst,addresswasteunitswiththepotentialtoreleaseormigrateoff-sitenext,andcontainwastesfromallunitstowithinthesite.DuPontdoesnothaveastrictbudgetforremediationactivities.Rather,cost/expenditureprojectionsaremadebasedontheneedtoaddressurgentrisks(off-siteplumes)andcomplywithregulations.
Timegenerallyisnotascriticalafactorinremediationprocessesafteractionhasbeentakentoensuretheprotectionofhealthandtheenvironment.Astrategytogetremediationcompletedinashorttimeframewillnotworkwellsincetheprocessistoocomplexandtheresulttendstowardexpensivetreatmentremediesratherthanthemorecost-effectiverisk-basedstrategiesDuPontprefers.
DuPont'sbusinessnecessarilyincludestheuseofavarietyofchemicals.However,itseekstoeliminateallleakstotheenvironmentandworkstowardthegoalof"zero"wastegeneration.CRG'sroleislimitedtohistoricreleases,andCRGisnotinvolvedinsitemanagementwherelinemanagementischargedwitheliminatingreleases.Eachplantretainsresponsibilityforthemanagementofallsolidwastesassociatedwithongoingactivities.UnderRCRAremediationofanyspillsafter1992,theplants/businesseshaveincentivetoavoidspillsfromongoingoperations.
PerformanceMeasurement
DuPontdoesnothavea"micro"-levelviewofremediationperformancemetrics.Noperformancemetricsareusedtotrackprogress,status,orrisk.Metricsareallaggregate:
"Allsitescontained."ThiscorrespondstothegoalofensuringthatnoplumeleavesDuPontproperty.
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Dollarsspent.ThegoalistodrivecostsdownoverthelongrunasSuperfundandRCRAcorrective-actionprogramsruntheircourse.
Avoidedcost.ThisistheprimarymetricandismeasuredattheDERSprojectlevel,althoughallteammembersmaycontributetoidentifyingalower-costsolution.
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Ingeneral,therearefewmetricsusedtomakeremediation-relatedtrade-offsamongremedy,investment,orresource-allocationcostdecisions.Onoccasion,theup-frontcostofremovingasourceversusthecostofcontainmentwillbecomparedonapresentvaluebasisusingDuPont'scostofcapitalasadiscountfactor.Remediationisnotablackandwhiteprocess.Itinvolvesqualitypeopleusingtheirjudgmentworkingtowardacceptedgoals.
Onlytwometricswereidentifiedasusefulinmeasuringprogramperformance:
Numberofsiteswherecontainmenthasnotbeenachieved.Containmenthasbeenachievedatallbuttwoandbotharegettingcloseattention.
Spendingonremediation.However,asmentionedseveraltimesearlier,DuPont'sprimarygoalistoprotecthumanhealthandtheenvironmentinacost-effectivemanner.
RegulatoryandCommunityInteractions
InteractingwithregulatorsatalllevelsisacriticalelementofDuPont'sremediationstrategy.Thenotionisto"pushforreasonableness."DuPontrecognizesthatsomeregulatoryprojectmanagersareinexperienced.Therefore,DuPontacceptstheresponsibilityofworkingcloselywithEPAandotherregulatorsontechnicalmattersandchallengingtheassumptionsthatdriveregulatorydecisions.DuPontseekstoeducatetheregulatorsontherealriskpresentatasiteandsometimes,onanon-site-specificbasis,providesseminarsontheefficacyofinnovativeremedialoptions.
Negotiatingwithregulatorsischaracterizedbytheobservationthatthenegotiatingpartiesdonothaveequalstanding.DuPont"can'twalkaway"fromthenegotiationsifitdoesnotagreewiththeregulations
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ordoesnotlikethewaytheregulationsareimplemented.Thus,DuPontwillinvestinup-frontactivitiesgoodscience,analyses,riskassessmentasleveragetousewithregulators.Insomecases,DuPontwill"overinvestigate"sitestodemonstrateamorecost-effective,risk-basedremedy.
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OurdiscussionswithDuPontappearedtoreflectanimplicitunderstandingthatCERCLAandRCRAenvironmentsarequitedifferent.RCRAismoreimportanttoDuPontthanCERCLA,andRCRAoffersmoreflexibility.CERCLA'sstrongpreferenceforpermanenceandtreatmentandtheneedtomeetapplicableorrelevantandappropriaterequirements(ARARs)contributetothedrivetowardmore-extremeandcost-ineffectiveremediesthandoesRCRA.EvenwhentheCERCLAprocessincludesagoodriskassessment,thatseldomisthebasisfortheremedydecision.RCRAhasmore-inherentflexibility,allowsnegotiation,andhasamoreflexible,lesssequentialprocess.RCRAcanbeinterpretedtoallowrisk-baseddecisions.Forexample,plantstypicallyhaveinterimmeasuresinplacetomanagegroundwatercontaminationonDuPontproperty.EachmeasurerequiresapermitunderRCRA,butDuPontretainsagreatdealofdiscretionabouthowtomanagegroundwaterplumesaslongastheydonotleaveDuPontproperty.24
Despiteacknowledgeddifferencesinregulatoryregimes,thesameregulatorycomplianceapproachisappliedtobothRCRAandCERCLA.ThemaindifferenceisthatunderRCRA,DuPontisusuallysolelyliable.UnderCERCLA,DuPontisusuallyonlyoneofmanyPRPsatasite.
DuPont'sstrategyforSuperfundsiteswhereithasalargershareofresponsibilityistoencourageleadershipofthePRPtechnicalsteeringcommitteebyaCoreResourcesexpertwitharational(risk-based)remedy.TheDuPontRPMmarshalsnecessaryresourcestodefendDuPont'spositionsothatitpaysitsfairshareanddoesnotsubsidizeotherviableandresponsibleparties.
Insomecases,anexternalaffairsgrouphelpswithcommunity/stakeholderparticipation.Communityinvolvementincludeseducationonscienceandrisk.DuPontrecognizestheneedto
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beopen,consistent,andpatient.DuPontwantstocreateandretainanimageofanethicalcompanyandtasksitsplantmanagerstocommunicatewithneighborsandmonitorcommunityattitudes.CommunityinvolvementishighonsomeCERCLAsites,whereneighbors
24RCRAisnottheonlyconsiderationaffectingDuPont'smanagementofsuchplumes.Plumesthatmoveoff-sitecancausecommunityreaction.EvenintheabsenceofRCRA,DuPontwouldtrytomaintaincontainmenton-site.
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areconcernedaboutrisks.MostofDuPont'ssitesfallunderRCRAcorrectiveactions,andproblemsarecontained/limitedtoDuPontproperty.
Thekeytoeffectivenegotiationiscredibility,andthatissomethingDuPonttriestocultivatewithbothregulatorsandcommunities.Credibilityinvolvesintent,openness,expertise,andademonstratedcapabilitytofollowthroughonpromises.DuPontremediationmanagersattempttoachievethiscredibilitybyworkingcloselywiththeirEPA/statecounterparts.Theytrytoberesponsiveandtoavoidsurprisingtheregulatorsandexpecttobetreatedinacomparablemanner.
CostandFinancialConsiderations
Remediationliabilitiesarethecostsassociatedwithcontaining,treating,orremovingcontaminationatpropertieswithwhichDuPontisassociated.Costdataareaccumulatedbyproject,andtotalcorporatespendingisdocumentedandtrackedcentrally.Unitcosttrendanalysisisnotformallydone,althoughcostinformationiscapturedinadatabasetohelpestimatefutureprojectsmoresuccessfully.
DuPontaccruesreservesforbothCERCLAandRCRAremediationactivities"whenitisprobablethataliabilityhasbeenincurredandreasonableestimatescanbemade."Accruedliabilitiesarenotdiscountedand,exceptwhencalculatingsharesatSuperfundsites,donotincludepotentialrecoveryfromthirdparties.Thecompanyaccrued$185millionin1994forremediationactivities,$183millionin1993,and$160millionin1992.About75percentoftheaccrualisrelatedtoRCRAand25percenttoCERCLA-relatedliabilities.Expendituresforpreviouslyaccruedremediationactivitieswere$91millionin1994,$126millionin1993,and$121millionin1992(see
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Table2).Ingeneral,environmentalremediationcostsarechargedtoexpense.Environmentalcostsarecapitalizedifcostsincreasethevalueofthepropertyand/ormitigateorpreventpollutionfromfutureoperations.25
25DuPont1994AnnualReport,Wilmington,Del.,p.44.
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Table2DuPontAnnualExpendituresRelatedtoRemediation
Activities(inmillionsofthen-yeardollars)
RemediationExpenditures 1991 1992 1993 1994RCRA 103 90 70CERCLA 18 36 21Total 91 121 126 91SOURCE:DuPont1994AnnualReport,Wilmington,Del.,pp.3435.;DuPontSafety,Health,andtheEnvironment1995ProgressReport,Wilmington,Del.,p.18.
PotentialRCRA-andCERCLA-relatedliabilitiesaresubjecttouncertaintyduetothecomplexprocessofgeneratingestimates.Remediationactivitiesoccuroverarelativelylongtimehorizon,andcostsvaryacrosssitesbecauseofsitecharacteristics,newremediationtechnologies,andthechangingregulatoryframework.DuPont'sestimatingprocessiscontinuousandattemptstoaccountforchangesintechnology,regulations,remediationphase,andsitecharacteristics.Remediationactivitiesareinprogressatvariousstagesat145sites,andliabilitieshavebeenresolved(throughcompletionordeminimissettlements)atanadditional48mostlynon-ownedmultipartySuperfundsites.LiabilitiesunderCERCLAcannotbepreciselyestimatedbecauseofthelargenumberofPRPsinvolvedatanyparticularsite,thescarcityofreliabledataatthesesites,uncertaintyabouthowlawsandregulationswillbeappliedateachsite,anduncertaintysurroundingremedyselectionandtechnologies.
CRGfinancesremediationcostsasfollows.CRGprojectsexpenseseachyear.Thefundstosupportexpensesareallocatedbyapplyingaformulathatchargesabout65percenttooverallcorporateoverheadandabout35percenttothe19individualbusinessunits.BusinessunitspayaproportiondeterminedbyastudyconductedbeforeCRG
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wassetup.26Thatstudyidentifiedallknownsitesandprojectedthepotentialshareofcosts(liabilities)outtobetween30and40years.Thesejudgmentswerecrude,buttheycarriedenoughweightinside
26Proportioncalculationsareactuallymorecomplicated.Anestimateoffutureliabilityforeachplantsiteprovidesthebasisforacorporatereserve.CRGcandrawdownoraddtothatcorporatereserveeachyeartoironoutdifferencesbetweenexpectedandactualcostsoverthecourseofayear.Periodicreviewswithbothinternalandoutsideauditorsareheldtoensurethatthisprocessismanagedproperly.
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thecompanytoinduceachangeinorganization.Withafewminorexceptions,theproportionalshareofthetotalbudgetassumedbyeachbusinesshasnotchangedsubstantiallysincetheoriginalstudywascompleted.Thisallocationremovesanyincentiveforbusinessunitstoattempttomicromanageremediationefforts.
DuPontleviesataxonthebusinessunitssothattheywillmaintainsomeawarenessthatremediationcostsmoney.The65/35splitapparentlyforcesbusinessunitstoreflectsomeportionofthecostintheirpriceswithoutmakingthemuncompetitiverelativetoyoungerfirmswithsmallerremediationliabilities.Butwhattheypayisnotrelatedtoactualexpendituresattheirsitesinagivenyear,sotheyhavenosite-specificinterestinthedecisionsCRGmakesonremedies.Businessunitsaretrulypayingforonlytheirpastactions.
Thereisalsoadifferencebetweenaccrualsandexpenditureinanygivenyear.Annualaccrualsaredeterminedbasedonliabilityprojectionsandadeterminationofwhethertodrawdownorincreasethecorporateenvironmentalliabilityreserve.Expendituresareprojectionsofcoststobeincurredthatyear.Ifadecisionismadetodrawdownthetotalliabilitypool,thenaccrualmightbelowerthanexpendituresforthatyear,withthebalancemadeupbywithdrawingfromthecorporatereserve.
FederalAccountingStandardsBoard(FASB)guidelinesallowtheaccrualreservetobethelow-endestimateofarange.Therangeisestimatedforeverysitewhereliabilityisexpectedtobeabout$1millionormore.DuPontthenaddssomeextratocoverbothuncertaintyandmiscellaneouscoststhatarisefromsmallerliabilities.Aformulaisnotusedtodevelopmostprobablenumbersoruncertaintyvalues.
DuPont'sratioofremediationdollarstorevenuesisfairlylow.In1994,thisratiowas0.0040($91millioninremediationcosts/$23
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billioninrevenue).DuPontusesthisroughcalculationtoinformallycompareitselfwithotherfirms.
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OtherElements
RiskAssessment
Asnotedabove,risk-assessmentliesattheheartofCRG'svisiontopresentascientificallybasedcost-effectivesolution.DuPontmaintainsahighlevelofrisk-assessmentcapabilityorientedtowardeducatingregulatorsontherealriskatasite.Thisispartofthe"advocacy"conceptinwhichDuPontactivelypushesforrisk-basedcontainmentorinsitutreatmentstrategies.DuPontreliesonrisk-assessmentprofessionalswhomeetquarterlytocomparenotesacrossthecompany.SuchcommunicationhelpskeeptheCRGmembersinformedaboutthebusinessunits.CRGhaseightrisk-assessmentprofessionalsandotherswhosupportthemwithmodels.
ThepurposeofDuPont'srisk-assessmentprocessistochallengeoverlyconservativeassumptionsthatleadtoneedlesslyexpensiveremediesandtointroducemore-realisticassumptionstodealwiththeuncertaintiesofremediation.Forinstance,MonteCarlotechniquesfordealingwithuncertaintyproducemore-reasonable(cost-effective)andyetprotectiveremedies.Theidealistouseriskassessmenttoselecttheleast-costremedythatachievesanagreed-uponrisklevel,givenanagreed-uponprotocol(assumptionsunderlyingriskcalculationsandlevels).Somestatesallowthistypeofprocess(e.g.,TexasandNewJersey),othersdonot.Thisprocessimpliesthatthereisnovalid"generic"riskstandardapplication.
UnderlyingDuPont'sphilosophyonriskassessmentisthenotionthatitisbettertobeproactivewhenusingthisapproach.ThisaggressivestancehasyieldedfruitinTexas,whereDuPont,inakeysupportrolewiththeChemicalIndustryCouncil,hasbeensuccessfulinpersuadingthestatetoadoptmore-realisticregulations.UndertheTexasapproach,firmsdooneofthreethings:cleanupasiteto
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backgroundcontaminatelevels,cleanupamoderatelylarge/complexsitetoagreed-upongenericstatestandards,orperformariskassessmentforamorecomplexsiteandchoosearemedybasedontheresultingunderstandingoftherisksposedbythecontaminantsthroughavailablepathwaystoareceptorpopulation.MostDuPontsitesarecomplexandDuPontclearlyprefersthelatter.
RiskassessmentisacoreelementofDuPont'sremediationstrategy.Thebasicnotionistoconsiderriskthepredominantfactorinbuild-
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ingtheremediationstrategyforasite.Thisincludesexaminingallpossiblepathwaysforcontaminantmovement.Riskassessmentandremedyselectionareconductedasholisticallyaspossible.Totheextentpossible,remediesarelinkedacrossmedia(migratorypathways)andwithinmediaacrosscontaminanttypes(asingleremedyaddressesmorethanonecontaminant).Riskassessmentappliesmainlytothesecondstepofthetwo-partprocess:
1.Addressgroundwaterplumesthatcouldmoveoff-site.
2.Executearisk-basedcontainmentstrategyforremainingon-sitewaste.
Therisk-assessmentprocessandproductsDuPontusesmeetstandardacademic/peerreviewcriteriaforvalidity.
Therisk-assessmentprocessisusedtoorganizedataandfacilitatedecisionmaking.Therearetwoelementstothis.First,identifythenatureoftherisk.Istherearelease?Whatkind?Howmuch?Howdoesitmigrate?Second,determinethedataneedsinsupportofallstakeholderconcernsanddevelopadatacollectionstrategy.Theprocessincludesiterativedatacollectionandsampling.Thesecondelementensurescorporatewide(oratleastCRG-wide)coordination,reducesduplication,andreduceslast-minuteadditionsoradd-ons.
Whenpursuingaformalriskassessment,DuPontconsidersanyregulatoryassumptionfairgameforachallenge,particularlyifitisoverlyconservative.
Forthemostpart,DuPontwillchallengetheassumptionsunderlyingtoxicityindicesforaparticulartypeofchemicalingeneral,butnotonasite-by-sitebasis.Whenregulatorsdecidetomodifythetoxicitystandardsforachemical,DuPontdesignatesa"chemicalleader"toprovideinputtoEPAandotherrelevantagencies.
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Focusingontransportandfatedramaticallyreducestheuncertaintyassociatedwithriskassessments.Reasonableuncertaintiesabouttoxicityareprobablyhigherthanthoseanywhereelseinthesystemoftenspanningthreeordersofmagnitude.DuPonteffectivelycompromisesonsuchuncertainty,acceptingtheconservative95thpercentileestimatesfromEPA.Thefocusofriskassessmentsbecomesthetransportandfateofthecontaminantandrealisticexpo-
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surescenariosforreceptors(e.g.,whoisexposedandwherethereceptorislocated).Theriskassessmentprovidesamechanism,similartosensitivityanalysis,tochallengetheassumptionsunderlyingpathwaymechanisms,receptorbehavior,etc.
InformationSystems
DuPontusesadatabasetocharacterizesolidwastemanagementunits(SWMUs)and"areasofconcern"(AOCs).TheseareidentifiedatplantsitesunderthefirststepoftheRCRAprocessasiteassessment.Thisrelationaldatabaseofsitecharacteristicsfacilitatessortingandprovidesasummaryforanumberofareasthatmayhavetobeaddressed.Thedatabaseisusedtoreportthestatus(processstep)oftheRCRAcorrectiveactionprocess.
DuPontalsomaintainsadatabaseofbasicinformationonallitsSuperfundsites.
HEART(HavingEverythingAboutRemediationTechnologies)isaCD-ROM-basedinformationsystemandtechnicallibrarydevelopedandmaintainedbyCR.ItiswritteninTurbo-PASCALandhashypertextcapability.ItsprimarypurposeistomaketechnicalinformationavailabletotechnologyteamsandDERSprojectstaff.HEARThelpsensureconsistencyandcapturesbothinternallyandexternallygeneratedinformationrelevanttoremediationtechnology.Italsohelpsbringnewstaffuptospeedquickly.
HEARTcontainsmanylevelsofinformation,frombriefoverviewsoftechnologiestospecifictechnicalorengineeringinformationonparticularaspectsofagiventechnologyapplication.TherangeofinformationinHEARTincludestheminutesfromtechnologyteammeetingsandpublishedjournalarticles.HEARTisamixoftextandgraphicalfiles.Ithasadatabasesearchcapability,atutorial,anon-linehelpfunction,andalimitedsummarystatisticalcapability.Itruns
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asaDOSexecutableprogramunderWindowsanduseshypertexttomovearoundamongsubjectareas,function,andfiles.AWebversionisunderdevelopment.
Substantively,HEARTcontainsawiderangeofmaterialpresentedinseveraldifferentways.Ithasa"logictree"function,whichactslikeacombinationdecisiontreeanddecisionsupportfunctionthatallows
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ausertodeterminewhetheraparticulartechnologycanbeusefullyappliedtoasitewithcertaincharacteristics.Foreachtechnologyteam/substantivearea,HEARTincludestechnologyinitiatives,costs,theregulatorybasisforthetechnology,relevantDERSprojects,andreferenceandtechnicaldocuments(bothinternalandexternal).Thetechnologyteamsdecidewhatinformationgoesintothesystem.
Oneusefulfunctionisatechnologyselectionmatrix.Giventhebasiccharacteristicsofasiteandtheproposedremedyinsituversusexsitu;aerobicversusanaerobicprocessesthematrixlistsapplicabletechnologiesforagivenmedium(soil,groundwater,etc.)andcontaminanttype(volatileorganiccompounds(VOCs),organicchemicals,etc.).
Thistechnologyselectionmatrixcanbecomepartoftheremedyselectionprocessforasite.AftertheDERSprojectteamselectsatechnicalremedy,theassumptionsunderlyingthedecisionandthealternativesconsideredarediscussedwiththeRPM.
BecauseHEARTcontainsbothinternalproprietaryinformationandexternalcopyrightedinformation,somesystemsecurityisrequired.ThenumberofCD-ROMdiskshasbeenlimitedto100.Alltextfilesareencrypted.AspecialhardwarekeyisalsorequiredtousetheCD.
ThedominantusergroupsappeartobeDERSprojectmanagementstaffandtheCRtechnologyteams.RPMsdonotusethesystembecausethetypeofinformationandlevelofdetailarenotrequiredfortheirfunction.Userfeedbackappearsgenerallypositive.Systemupgradesattempttoincorporateusersuggestions.
AcasehistoryreviewisDuPont'smostvaluablelearningtool.Thenotionistocapturepastexperience.HEARThassomecasestudiesbutisnotintendedasamanagementtool.Casestudiesincludethefullremediationstrategy,technology,andregulatoryinteractions.DuPont
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hasnoformalmodelorformatfordocumentingcasestudies,butcaptureofexperienceisencouraged.
LessonsLearned
DuPontdrawsthefollowinglessonsfromitsremediationprogrammanagementexperience:
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1.Maintainclearlinesofcommunicationwiththeregulatorandbuildandmaintainmutualcredibilityandtrust.
2.Recognizethesignificantflexibilityintheprocess.Thefollowingareexamples:
WaiversontheARARs.
Interpretationofresponsestonaturalresourcedamage.
Designofremediationsolutionstomeetregulatoryneeds.
Interpretationofthescientificevidencetodefendapointofview.
3.Avoidsurpriseswhereverpossible.TheyunderminetrustandhurtanyefforttodeveloparelationshipinwhichEPAiswillingtonegotiate.
4.Donothesitatetointroduceideasfortechnicalchangeearly.Givetheregulatortimetolivewiththeideassoitcangetcomfortablewiththem.
5.Bepersistentaboutseekingimprovement.Itisnevertoolatetosuggestachangethatwillbemutuallyattractive.
6.Usegoodscience(credible,objectiveresearchandevidence)appliedtotheparticularcircumstancesatthesite.Thisiswhatmakeseffectivewin-winnegotiationwiththeregulatorpossible.
7.Lookforeveryopportunitytonegotiateawiserdeal.Constantlyquestionthestatusquo.Thisiswherethematurebusinesspersonismostimportanttothisprocess.
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ChapterFiveCase2:RemediationProgramManagementatOlinCorporationOlinCorporationisa104-year-oldFortune500companyproducinghigh-performancechemicals,microelectronicmaterials,metals,sportingammunition,anddefenseandaerospaceproducts.Olin'sbusinessphilosophyistoconductoperationsinanethicalandresponsiblemanner.In1995,Olinhadsalesvaluedat$3.1billionand13,000employees.1
AnewseniormanagementteamtookofficeinJanuary1996.AspartofastudyofOlin'scorebusinesses,thedecisionwasmadetospinofftheordnanceandaerospacedivisionsasaseparateentity.2
ThefollowingsectionongeneralcorporateenvironmentalmanagementisintendedtoprovidesomecontextforunderstandingthedetailsofOlin'sremediationprogram.TheelementsofOlin'sremediationprogramthatwarrantparticularattentionincludeoverallprogrammanagementstructureandorganization,processmapping,theuseofateammanagementapproach,andperformancemeasurement.Customerfeedbackmechanisms,continuousprocessimprovementstrategies,andtherationalebehindtherestructuringofOlin'sremediationprogramarealsoofinterest.
1OlinCorporation1995AnnualReport,Norwalk,Conn.2FormallyannouncedOctober10,1996.
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CorporateEnvironmentalManagementPolicyandPerformance
Olin'sformalcorporateenvironmentalpolicystatementisfairlybroad,coveringitemsrelatingtoensuringthehealthandsafetyofworkersandcommunities,minimizingenvironmentalharm,andensuringregulatorycompliance.3Olin'scorporateenvironmentalmanagementphilosophyandprogramappeartobecloselybasedonresponsiblecareinitiatives.TheseincludeaproductstewardshipprogramthatrequireschemicaldistributorsdoingbusinesswithOlintohaveaformal''responsibledistribution"process,thusextendingthestewardshipconceptstosmallercustomers.4ConcernaboutitsdownstreamexposureunderproductliabilitylawshaspromptedOlintostopsalestofirmsthatuseitsproductsunsafely.Olinisincreasinglyparticipatinginthe"rent-a-chemical"business.Forexample,Olinprovidessuper-puresulfuricacidtocompaniesthatuseitintheirownprocessesandthenreturnittoOlinforreprocessing.Olindeliversthechemicaldirectlytothevesselwhereitisappliedandremovesitafterward,takingfullenvironmentalliabilityresponsibilityforthechemicalthroughouttheoperation.Olinhasinstitutedwasteminimizationandpollutionpreventionprogramsatitsmanufacturingsitestoreducethecostsofcompliancewithvariousfederal,state,andlocalenvironmentalregulations.
Olin'spollutionpreventionprogramincludesthetraditionalhierarchyofsourcereduction,includingprocessandproductredesigntominimizewaste,recycling,treatment,andoff-sitedisposalasalastresort.5Table3summarizesOlin'swastehandlingflowsfor31facilities,asof1994.Olinrecyclesandtreatsapproximately77millionpoundsofmaterialandreleasesatotalof3.4millionpoundsofmaterialtotheenvironment.
3OlinCorporateResponsibleCareManual,"EnvironmentalHealthandSafety,"RCPolicyI-1,Norwalk,Conn.,April15,1996.
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4Environment,Health,andSafety:TheOlinRecord,Olin,Norwalk,Conn.,1995.5Environment,Health,andSafety:TheOlinRecord,Olin,Norwalk,Conn.,1995.
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Table3OlinWasteStreams,1994
Recycling/Treatment(inpounds)
ReleasedtoEnvironment(inpounds)
On-siterecycling 477,000On-sitetreatment 59,000,000Off-siteenergyrecovery
34,000
Off-siterecycling 17,000,000Off-sitetreatment 480,000Releasedtoair 1,100,000Releasedtowater 165,000Releasedtoland 2,154,000Total 76,991,000 3,419,000SOURCE:Environment,Health,andSafety:TheOlinRecord,Olin,Norwalk,Conn.,1995.
OlinhasreduceditstotalreleasesofEPA-reportableemissionsby61percentfrom1987to1994,includinga70percentreductioninairemissions.Thevoluntarycorporategoalisan80percentreductionintotalemissionsby1998.6
OlinwasoneofthefirstfirmstoparticipateinEPA'sVoluntaryIndustrialToxicsReductionprogram(33/50program).By1994,Olinachieveda70percentreductioninreleasesofthe17chemicalsincludedintheprogram,earninganEPAEnvironmentalAchievementRecognitionCertificate.Thecurrentgoalisnowavoluntaryreductionof85percentinreleasesforthe17chemicalsby1998.7
Olintrackseightcorporatemeasuresofenvironmentalperformance,oneofwhichrelatestoremediation.TheseareSuperfundAmendmentsandReauthorizationActof1986(SARA)releases(air),SARAreleases(allmedia),solidwaste(hazardous),IndustryToxics
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Program(ITP)(33/50voluntaryprogram),wastewater,listedreportableemissions,wastemanagementunits,andremediationsites.Goodperformanceisindicatedbyadownwardtrendinthemetrics.
6OlinCorporation1995AnnualReport,Norwalk,Conn.,p.4.7Environment,Health,andSafety:TheOlinRecord,Olin,Norwalk,Conn.,1995.
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RemediationPolicy
ContextandGeneralManagementPhilosophy
Olindefinestheuniverseofremediationsitesintotwocategories"known"sitesandpotentialsites.Knownsitesincludeactive,closed/active,andclosed/inactivewastesites.Asof1996,Olinhasidentified182knownsites,eitherthroughcompanyinvestigation,regulatorynotice,orlawsuits(toxictortsorthird-partysuits).Eighty-fouroftheseareinactiveor"closed,"definedaseitheracompletedremedialactionoradeterminationthatnoremainingliabilityexists.Regulatorsmaydisagreewiththesejudgments;EPAcontinuestoreviewclosedsitesonceeveryfiveyears.Fifteensitesontheclosed/activelistrequirelong-termoperationandmonitoring,includingpumpandtreatoperations.Theremaining83sitesareactive.
PotentialsitesincludeallothersitesthatOlinhasowned,whereithasoperatedmanufacturingfacilities,orwhereithasdisposedofwaste:jointventures,tollingarrangements,8oldfacilities,transportoperations,andlandfills(municipalorother).Olindoesnothaveacompletelistofthesepotentialsites,butthecompanyisconductingasurveyofpotentialsitesthroughlegalandotherdocumentsearches.Sitevisitsarealsomadetopotentialsitesforafirst-cutcharacterizationofrisk.
Theapparentpurposeofthissurveyofpotentialsitesistoensurethatthecompanyunderstandstheextentofanypotentialliabilitiesandcanhandlethemeffectively.9Thecurrentremediationmanagementprogramstrategyplacesapositivevalueonidentifyingpotentialproblemsbeforetheybecomeactualproblems.Olin'sremediationsitesmostlyfallunderCERCLA.RCRACorrectiveActionsaremostlycompleted,andoperatingdivisionsareresponsibleforfuture
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problems.
8Olinmadeheavyuseoftolling,inwhichitsendsintermediatechemicalstoafirmwithprocessingcapacityandpaystohavethesechemicalsconvertedintoafinalproduct.Olinretainsownershipofthechemicalsthroughthiswholeprocessandhenceisresponsibleforanywastegeneratedbytheprocess.Tollingisespeciallyimportantforpesticides.ApparentlyOlinwasadominantproducerofpesticides.9LangsethandLambe,1995,p.105.
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Olinhasasetofcriteriafordeterminingactionatpotentialsites,whichincludesindicationofrisktopublichealthortheenvironment,theabilitytoavoidcommunityorpublicrelationsproblems,theabilitytoavoidgovernmentagencyenforcementactions,andtheabilitytomitigatethird-partyhealthordamageclaims.10Olinwilltakevoluntaryactionatpotentialsitesifaproblemoradvantageinanyoftheseareasisidentified,evenintheabsenceofaregulatoryrequirement.Tojustifyvoluntaryactions,Olinbelievesthattheproblematthesitehastobewellunderstood,andregulatoryagencyapprovalmustbeobtained.Thisappearstobeafairlyproactivestancethatplacesvalueonearlyidentificationofsitesandassociatedrisks.Olinhasvoluntaryactionsunderwayatsixtosevensitestoday.Olinrecognizesapotentialdownsidetovoluntaryactionsinthattheregulatoryagenciesmayaskformore.AnexampleisasiteatwhichOlinbeganabioremediationprojecttoavoidtheinstallationofamoreexpensivepump-and-treatsystem.TheregulatorrequiredOlintodobothratherthansubstitutingoneforanother.
Occasionally,regulatorsencourageavoluntaryactionthatshiftsjurisdictionfromoneregulatortoanotherormitigatesaproblemenoughtoavoidformalregulation.Inonecase,eventhoughOlinhadnorelationshipwiththestateregulators,theyapproachedOlintotakeadditionalactionatasitethatwouldallowthestatetocertifyariskassessmentthatverifiedarelativelackofrisk,andtherebykeepitofftheNPLlist.Olintookthisaction.
Olin'sbasicremediationpolicyisthatrealoff-siteriskbeaddressedimmediately.Olinbelievesthatitscurrentlyidentifiedsitesdonotposeanyriskstohumanhealthandtheenvironment;allidentifiedriskshavebeenaddressed.Olinmakesnoefforttoprioritizesites.Typically,eachlocalehasonlyonesite(operableunit),andcircumstancesateachsitedrivethebasicstrategyandresourcesneeded.Trade-offsoccuramongstrategiesatasitebutnotabout
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resourcesacrosssites,beyondthecreationofsiteteams.
Olin'sformalcorporateenvironmentalpolicystatementincludesremediation:
10OlinRemediationProcessNotebook,Charleston,Tenn.,1996.
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FocustechnologyandresourcesatOlinremediationsitestoreducepresentandfutureriskstohumanhealthandtheenvironment;andconductlongtermcorrectiveactionspursuanttoapplicablelawsandregulations.11
Olin'svisionisthat"theenvironmentalremediationorganizationandprocesswillberecognized,bothinternallyandexternally,asthe'bestofthebest.'"ThemissionoftheenvironmentalremediationgroupistodefineOlin'sresponsibilitiesandliabilities,andcost-effectivelymanagethefirm'senvironmentalremediationexposure.Thegoalistomanageriskatminimumlong-termcosttothecompany,whilecomplyingwithallrelevantregulationsandwithregardtostakeholderinterests.12
Olin'sformervicepresidentforEnvironmentandRegulatoryAffairs,ChuckNewton,hasstatedthatviewingremediationasanongoingbusinessprocessiscriticaltosuccessfullymanagingremediationactivitiesandreducingcosts.13Thiswasrecognizedasasignificantculturalchangefromthepastlitigation-basedapproachthatmostcompanieshadadopted,includingOlin.Mostcompanies,againincludingOlin,didnotgothroughthisculturalchangeuntilseveralyearsago.Thefocusoncost-effectiveremediationsolutionshasreducedOlin'sestimatedliabilitiesby30percentoverthepastfiveyears.
Olin'sremediation-managementstrategyincludesassigningamultidisciplinaryteam(legal,projectmanagement,remediationexperience)tomanageremediationactivitiesatsitesestimatedtocostover$200,000.Olinhasmappeditsremediationdecisionprocesstoidentifydecisionmakersandtimeframes,andreduceoverlappingefforts.Olinhasalsoestablished15metricsandmechanisms,rangingfromsurveystomilestones,formeasuringprogressandreportingthatprogresstostakeholders.Thesemetricsarealsousedinannualreportstotheboardofdirectorsregardingremediationprogramper-
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11OlinCorporateResponsibleCareManual,"EnvironmentalHealthandSafety,"RCPolicyI-1,Norwalk,Conn.,April15,1996.12OlinRemediationProcessNotebook,Charleston,Tenn.,1996.13Baker,1995,pp.2021.
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formance.14AnimportantpartofOlin'sstrategyistoidentifywhotheremediationcustomersareforanyparticularactivity.
ProgramManagementStructure,Roles,andResponsibilities15
ThedirectorofEnvironmentalRemediationandEngineering(ER&E)hasprimaryremediationprogrammanagementresponsibility.HereportstotheseniorvicepresidentforCorporateAffairs,whointurnreportstoOlin'schiefexecutiveofficer(CEO).ER&EisnotpartofthecorporateEnvironment,Health,andSafety(EH&S)organization,butratherisatthesamelevelinthemanagementstructureandreportstothesameoffice.
TheER&Eincludesfourgroups:
TheEnvironmentalTechnologyGrouphasastaffoffiveandappearstoincludesomeadministrativefunctionsthatarerelevanttoallofER&E.
TheEnvironmentalRemediationGroup(ERG)hasastaffof11.Mostoftheenvironmentalremediationspecialistsarelocatedinthisgroupandprovideremediationexpertisetositeteams.
CentralGroupEngineeringhasastaffof13.Thisgroupiscomposedofprojectengineerswhoprovideprojectengineeringexpertisetothesiteteams.
EnvironmentalSiteshasastaffof17whoprovideoperationsandmonitoringservices(e.g.,runningpump-and-treatoperations).
TotalER&Estaffing,includingthedirector,is47.Thirty-sevenofthese,includingfourfromtheengineeringgroup,workremediationissuesfulltime.Thisgroupof37isalsoknownastheERG.Interestingly,ERG'sformalgoalistoperformitselfoutofbusinessbyaddressingandresolvingallcorporateremediationissues.Staffreductionshavealreadybeenprogrammedinexpectationof
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movement
14LangsethandLambe,1995,p.111.15Thisdiscussionisbasedonmaterialinthe"RolesandResponsibility"sectionoftheOlinRemediationProcessNotebook,Charleston,Tenn.,1996.
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towardthisgoal,andstafftrainingincludesskillsthatarevaluedelsewhereinthecompany.Itisunderstood,however,thatremediationissueswillneverbefullyresolved,sothemore-practicalexpectationisthatstaffassignedfulltimetoremediationwillbecomesignificantlyreducedoverthelongrun.
TheOlinorganizationsandindividualswhoplaykeyrolesintheremediation-managementprocessinclude(inorderofprecedence)
theCorporateResponsibilityCommittee(acommitteeoftheBoard)
thechairman,president,andCEO
theRemediationManagementBoard(RMB)
theRemediationManagementTeam(RMT)
thesiteteams.
ERGinteractionswithseniorOlinmanagement(theCorporateResponsibilityCommittee,thepresident,andtheCEO)aremostlyinformationalandincludediscussionsofthemajorsites,regulatoryreformactivities,andotherregulatoryactivitiesofconcern.ThepurposeofERGinteractionswithseniormanagementisthreefold:
DemonstratethatOlinhasawell-definedprocessforremediationmanagement,thusmakingseniormanagerscomfortablewiththeoverallprocess.
Makeseniormanagementawareoftherisksfacingthecompanywithrespecttoremediationactivities.
TheresultoftheseinteractionsappearstobeconsistentsupportforERGactivitiesandappropriateproblem-solvingattentionwhenneeded.
TheRMBischairedbytheseniorvicepresidentforCorporateAffairs
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andincludestheexecutivevicepresident,thechieffinancialofficer,thevicepresidentsforPublicAffairsandManufacturing&Engineering(thelatterfromthechemicaldivision),thedeputygeneralcouncil,andtheER&Edirector.Thus,theRMBisaseniormanagementboardwithlegal,operations,financial,andpublicrelationsfunctionsrepresented.TheRMBrepresentsthebroadercorporateperspective
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andensuresintegrationofremediationmanagementwithothercorporateactivitiesandprocesses.TheRMBprovidesoversight,assistsindevelopingremediationpolicy,reviewsandprovidesdirectionforstrategicdecisions(risk,costs,andbenefits)atsignificantsites,andadvisestheremediationprocessowner.16TheRMBplaysastrategicroleandactsasasoundingboardforsitestrategies.Itdoesnotdirectlyaddressriskissuesveryoften.Itmeetsquarterly,andforspecialconcernsoreventsasrequired.
TheRMTistheprimarygroupresponsibleforremediationprogrammanagement.ItischairedbytheER&EdirectorandincludesallER&Egroupmanagers,thechiefcounsel(environmental),andtheseniorvicepresident(VP)forCorporateAffairs.TheRMTisresponsibleforensuringperformancemeasurement,continuousimprovement,stakeholdercommunication,andregularprocessmonitoringtomakeOlin'sprocessthe"bestofthebest."AllindividualsontheRMTalsoactassiteleadersforatleastonesite.Thus,theRMThasconsiderablepracticalexperienceinsite-levelremediationmanagement.
TheRMTmeetsforatwo-dayperiodeachmonth.Thefirstdayisageneralstaffmeeting.Theseconddayinvolvesstrategyandoversightoflargersites.TheseniorVPforCorporateAffairssitsinfortheseconddayofthesemeetings.Themeetingsareopentoallinremediation,whogenerallyattendwhentheyareintownandatopicconcerningthemisunderdiscussion.Thesemonthlymeetingsareanimportantvehicleforcontinuousprocessimprovement,raisingissues,andidentifyingsolutions.TheRMTreviewsenableandenforceabusinessperspectiveinsitemanagementstrategies.
ThereareseverallinksbetweenremediationactivitiesandotherEH&Sprograms.AdevelopingrolefortheERGistobecomemoreinvolvedinOlin'slife-cycle/productstewardshipprograms.The
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notionistoincludeconsiderationsofultimatedisposalinthedesignofproducts.Productstewardshipisoftendefinedas"cradletograve";thisdevelopingnotionwouldbetoinclude"whatgoesintothegrave"asadesignparameter.Asignificantelementofthiseffort
16Thedirector,ER&E,istheoverallprocessowner.Thesiteteamleaderistheprocessowneratthesitelevel.
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wouldbetoeducatetheproductdivisionsregardingup-frontversusfuturecosts.
AsofJanuary1997,operatingfacilitiesarebeingheldresponsibleforanyon-oroff-sitewaste,includingremediationliabilities.TheERGwillconsultandeducatebutwillnotbeformallyresponsibleforremediationactivitiesatoperatingfacilities.TheERGwillfocusexclusivelyon"orphan"sites(siteswithnocurrentOlinowner).
Thesiteteamleaderisthedesignatedprocessownerandisresponsibleforteaminteractions,decisionmaking,andoverallperformance,aswellasinteractingwiththeRMT.SiteteamleadersmaycomefromanyorganizationorfunctionwithinOlinanddonotnecessarilyneedextensiveremediationexperience.Teamleadersareselectedbasedontheuniquesituationandneedsofthesiteandinthepasthaveincludedpurchasingandplantmanagementpersonnel.Theteamleadermustdevelopthesiteremediationstrategy,includingstakeholderrelations,andrequestfundingforactivities.
Thesiteteamisresponsiblefordefininghowtoimplementtheremediationstrategy,executesthatplan,managesexternalandinternalresources(fundsandstaffexpertise),andforecastscosts.Thesiteteamisalsoresponsibleforunderstandingandrespondingtocustomerexpectations.Siteteammembersareexpectedtoperformwithinateammanagementframework,whichincludesfullparticipationinteamresponsibilitiesandrepresentingfunctionalexpertise(notthefunctionalorganization).Teamsareself-directedaftertheinitialauthorization(approvalofstrategy)andaregivenconsiderableauthoritytoperform.MilestoneorfundingchangesarereportedtotheRMT.Teamsarenotnecessarilylocatedonthesite.
Eachofthe96activesites(active/activeandclosed/activecategories)thatOlinhasidentifiedhasasiteteam.17Afewteamsmanageseveralsimilarsites.Teamsizerangesfrom1to7members,dependingonthe
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characteristicsandneedsofthesite.Thecompositionoftheteam(mixofskillsandfunctions)variesdependingonsitecharacteristics.Bothteamsizeandcompositioncanvaryovertimeasthesite
17Ournotesindicate92sites/92teams,butthisisnotequalto169knownsitesless73inactive.
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progressesthroughstagesofremediation.AtOlin-ownedsites(generallylargersites),theteamwillconsistofatleastaprojectengineer,environmentalassessmentspecialist,andpublicrelationspersonnel,aswellasthesiteteamleader.Legalrepresentation(fromanoutsidefirm)isincludedifneeded.Onmultipartysites,theteammaybesmaller.TeammemberswillparticipateonboththesteeringandtechnicalcommitteesofthePRPgroup.
Newteamsneedtobesetupforabout5to10newsitesayear.18Individualsareassignedtomajorsitesbasedonexperience,skills,andstaffdevelopmentconcerns.Thereisahighcross-fertilizationofvalue-addedinformationandideasbecauseindividualsworkonmultipleteamsandcarrylessons-learnedinformation.Further,areviewofasite'sstrategyisperformedbytheRMTperiodically,providinganopportunitytoconveylessonsformanagementandvalue-addedideas.
TheERG/CentralEngineeringorganizationsprovidemodesttechnicalcapabilitytothesiteteams.Technicalspecialistsareincludedonsiteteamsasneededandoftenworkwithcontractors(e.g.,designofsitecap).
Corporatefunctionalmanagersensurethatcompetentexpertiseisavailable,promoteteamworkbyunderstandingotherfunctions'roles,andempowersiteteammembers.Thisappearstobeamanagementandresourcesupportrole,inwhichfunctionalmanagers"own"thepersonnelwhogetmatrixedintositeteams.
ThefoundationofOlin'sremediation-managementprocessisitsteamstructure.Theteammanagementconceptisbasedonreachingconsensus-baseddecisions,whereallteammembersatleast"agreetodisagree"onaparticularaction.Inotherwords,allteammembersmustsupportadecision,eitheractivelyorinthesenseofnotobjecting.Inabilitytoreachagreementisresolvedeitherthroughthe
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RMTorfunctionalmanagers.Suchproblemsarerelativelyinfrequent,giventhenumberofteamsOlinhasworkingatanyparticulartime.
18Olinidentifiesapproximately510newsitesperyear.
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Keyprocesselementsincludemanagementteamandmanagementboardconcepts,empowermentofteamsandteammembers,emphasizingtheprocessoverfunctionalorganizations,mechanismsforconflictresolution,aformalmeasurementscheme(seebelow),identifiedcustomerswithfeedbackmechanisms,andindividualperformanceevaluationstiedtoperformancewithintheteam.Theprocessiscomposedoftwosequentialprocesses:strategydevelopmentandimplementation.
Remediationstrategydevelopmentisinitiatedintwoways.OnewaybeginswithmanagementreviewofthelistofpotentialsitesandassignmentofasiteorsetofsitestoanindividualorteamwithintheERGforfurtherinvestigation.Basedonthisinvestigation,theERGmakesarecommendationtomanagement,whichdecideswhetherfurtheractionisrequired.Thesecondwaystrategydevelopmentisinitiatedisthroughformalagencynotificationofasite.ThenoticegoestotheinternalcorporatelegaldepartmentandisdistributedtoappropriateorganizationswithinOlin(theremediation-managementteamandthesiteteam(ifitexists)).TheERGandtheLegalDepartmentthenreviewthenoticeandmakearecommendationforfurtheraction.
Afterinitiation,theprocessisessentiallythesameforallsites.Ifasiteteamisneeded,managementeitherassignstheresponsibilitytoanexistingteamordevelopsanewteamwhodevelopsastrategyforaction.Ifasiteteamisnotneeded,thentheERGreviewteamdevelopsastrategydirectly.Inbothcases,managementreviewsthestrategyandobtainsbusinessagreementsandRMBapprovalifneeded.Oncethestrategyisapproved,theimplementationprocessbegins.
Implementationistheresponsibilityofthesiteteam.Theprocessincludesoversightandapprovalbycompanymanagementandthe
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relevantgovernmentregulatoryagency.Stepsinimplementationincludedefiningthescopeoftheeffortandassociatedfundingrequirement,obtainingthoseresources(amanagementresponsibility),furtherinvestigationandidentificationofalternatives,recommendationofpreferredaction,andissuanceoftheROD(agencyresponsibility).IfadecisionismadetochallengetheremedyselectionintheROD,thesiteteam(withmanagementsupport)attemptstochangetheROD.Afterfinalagreementisreachedontheremedy,remedialdesignandactionareperformed.Oversightandmonitor-
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ingcontinuetoensuretheeffectivenessoftheremedyortodevelopalternativesiftheremedyprovesineffective.
SiteManagement
Olinrecognizesthattheinvestigationphasestronglyinfluencesremedyselection.Olinstructurestheinvestigationtocollectdataanddefineriskstosupportthepreferredremedy.Theinvestigationphaseisthusconsideredanimportantpartofthesiteremediationstrategy.Detailedmodelingmaybeusedduringthisphase.Sincetheselectedremedyisoftenbasedonspecificassumptions,Olinpersonnelareencouragedtoquestionthoseassumptionsandthesolutions(remedies)theyleadto.Sincecontractorsareoftenusedfortheinvestigationphase,Olinsometimesbringsinconsultantsasamechanismtomonitorthecontractorandalsoquestionassumptions.
IfOlindeterminesthatthereisapotentialforcontaminationofprivatewells,samplesaretakenfromeachwellandtestedovernight.Ifcontaminationisfound,alternativesuppliesareprovided.Iffeasible,Olinappliescarbonfilterstothewellsimmediately.AnyprivatewellbetweentheOlinsiteandanOlintestwellthatdisplayscontaminationisassumedtobecontaminatedandsuitableforfiltering.Thisisanexampleofaproactiveresponsetoapotentialproblem.
AgeneraloperatingruleforOlinistoavoidsurprises.Thismeansproactivesiteidentification,useofgoodassumptionsforplanningandestimating,andpromptlyinformingtheRMTorRMBofmajorchangestoasitestrategy.
Olin'sremediation-managementprocessincludesarankingofsitesbasedonestimatedliability.Higher-liabilitysiteshaverelativelylargersiteteamswiththefullmixoffunctions.
CategoryA:liabilitygreaterthan$10million.Thesesiteshavefullsitemanagementteams.
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CategoryB:liabilitybetween$1million$10million.Thesesiteteamsincludeatleastthesiteleader,anenvironmentalspecialist,atechnicalperson,andlegalrepresentation.
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CategoryC:liabilitybetween$100,000and$1million.Theseteamsconsistofanenvironmentalspecialistandlegalrepresentation.
CategoryD:liabilitylessthan$100,000.Theseteamsconsistofanenvironmentalspecialistandlegalrepresentation.
CategoryE:noinformationavailabletoestimateliabilities.
Asarule,Olindoesnotbelievethatdeferralofcostsoractionisaneffectivecomponentofstrategy.Delaygenerallydegradesregulatoryrelationships.Thecostofcarryingattorneysandconsultants,eitherinternalorexternal,outweighsanypotentialbenefits.
UseofExternalSourcesforServices
Olin'sculturefavorsaggressiveuseoftheexternalmarket.Olinappearsverycomfortablecontractingoutsignificantaspectsofitsremediationprogram,includinglegalfunctionsandsomestudiesandanalyses.Olinusescontractorsfordetailedtasksandactivities,includingdetailedremedialdesign,riskassessment,andconstruction.Olindevelopedapreferredlistofcontractorsin1992,brokendownbyfunctionalspecialty.Thelistincludesthreetofourcontractorsforeachsubstantivearea(investigation,design,construction,treatment,andriskassessment).Siteteamsmayuseanycontractortheywishthatisonthepreferredlist.Waivers,documentingastrongrationale,mustbeobtainedtousecontractorsnotonthelist.ContractorsonthelistgenerallyhaveanumbrellacontractwithOlin,andsiteteamssimplyrequestworkunderthatmechanismandnegotiatethespecifictask.Olinusesa''fixedbid"foraspecificscopeofworktomitigatethecostmaximizationincentiveoftenfoundinremediationservicescontracting.Olincarriesenvironmentalimpairmentinsurancepoliciesthatcoverallcontractors.
Alllegalfunctionsarecontractedout.TheERGhasonlyoneinternallegalstaffmemberwhositsontheRMT.Thisisachangefromthe
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previousprocess:Priorto1990,mostlegalworkwasconductedbyin-houselawyerswhotendedtobefairlyconservativewithrespecttorisktaking.
Oliniscurrentlyconsideringreducingthenumberofcontractorsonthepreferredlisttogenerateeconomy-of-scaleefficiencies,facilitate
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standardizingOlin'spractices,provideforadeeperunderstandingofOlin'sneedsineachcontractor,andfacilitatetransferofideasandlessonsacrosssites.Olinisbringinginallcontractorsonthecurrentlistandaskingthemtoidentifytheirvalue-addedcontributiontoOlinandtocandidlycritiqueOlin'sremediationprocess.
Interestingly,OlinhasobservedthatthechoiceofcontractorsorconsultingfirmsmatterstotheEPAregions.Overtime,credibilitybetweencontractorsandEPAregionalpersonnelhasdeveloped.Olinissensitivetosuchconsiderationsinchoosingcontractorsforparticularjobs.
Olinhasaformalpolicystatementthatspecifiesthecriteriausedtoselectoff-sitewastedisposalorganizationsandfacilities.Thecriteriaincludevalidpermits,nodeep-wellinjection,andnouseofsitesontheNPLlist.TheproceduresandassociatedcriteriaallowOlintocontinuallyassessoff-sitewasteserviceprovidersandlimitOlin'slong-termliabilityrelatedtowastehandlinganddisposal.19
Olin'sformaloff-sitedisposalpolicyincludesalistofapprovedsitesandcontractors.Financialviabilityanalysisandinspections/auditsarepartoftheprocessthroughwhichcontractorsareratedforapproval.Thedecisiontouseoff-sitedisposalismadeatthedivision(product)level;remediationmanagementisnotdirectlyinvolved.Nevertheless,thecorporategoalistoreducethenumberofsitesusedfordisposal,thusminimizingthenumberofsiteswithpotentialfutureliability.Olinuses"iron-clad"contractsforindemnificationtominimizerisk.Olinbelievesthatoff-sitedisposalshouldbeminimized,butcarefuluseundertheformalpolicypresentsnoaddedrisk.
ThedirectorofEnvironmentalRemediationandEngineeringisdevelopingproposalstogivedivisionsincentivestoreducetheuseofoff-sitedisposal.Forinstance,afeecouldbechargedtothedivisions.Anominalfeemightbe$100,000peruse,notenoughtopreventoff-
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sitedisposal,butenoughtogettheirattention.
19OlinCorporateResponsibleCareManual,"WasteManagementUnitAssessment"RCPolicyIII-2,Norwalk,Conn.,April15,1996.
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PerformanceMeasurementandIncentives
Olinplacesahighvalueonmeasuringandtrackingtheperformanceoftheremediationprogram.Performancemeasuresareusedbothasawaytoidentifyprocessareasneedingimprovementaswellastodirectlyaffecttheperformanceevaluationsusedasinputtoincentivepaycalculations.
EveryoneinER&Ereceivesaportionoftheirpayasvariablepaybasedontwofactors:thetotalsizeof"economicvalueadded"forOlinasawholeandtheirperformancerelativetoothersatOlin."Economicvalueadded"isafter-taxprofitslessdebtandequitycapitalcharges.AnyactionthatanyoneinER&EtakestoreducecostsforOlinincreasesthisnumber.
Thevariablepayportionofanindividual'ssalaryrepresents78percentofbasepay.Olin'scorporateperformanceaccountsfor20percentoftheincentivepay,remediationgroupperformancefor30percent(thisisER&Egenerally),andsiteteamperformancefor50percent.Therearesevensetsoffactors,eachwithspecifiedrelativeweights,usedtoevaluatesiteteamperformance:
Costmanagementincludessubfactorsofqualityofassumptions,identificationofplannedactivities,andqualityofspendingprojections.Relativeweightsfortheseare0.20,0.15,and0.10,respectively.Inpractice,thesefactorsrelatetothequalityofup-frontplanning.Thequalityofassumptionsisweightedthehighestofanyindividualfactor.
Managementofspendingprojectionchangescomparesactualspendingtobudgetandtotalyearestimatesonaquarterlybasis,andalsoevaluatesthetimelinesswithwhichtheteamrecognizedtheneedforchange.Theweightfactoris0.15.
Communicationandeffectiverelationshipsassesstheteams
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interactionswithstakeholders,includingagencies,community,PRPs,andcontractors.Informationflowsandtheconductofcontractorevaluationsareincluded.Theweightfactoris0.15.
Theactualresultsofthesiteteamsurveyareaggregatedandincludedasanindexnumber.Theweightfactoris0.05.
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Publicityincidents,bothpositiveandnegative,communityoutreach(ifapplicable),andanassessmentofwhetheranynegativepublicitywaspreventable.Theweightfactoris0.05.
Significantaccomplishments,includinginnovativeapproaches,value-addeditems,andcostrecovery.Theweightfactoris0.10.
Extraordinaryadverseeventsincludeunanticipatedlawsuits,noticesofviolation(NOVs),andpublicoutcryagainstOlin'sinterest.Theteamisexpectedtomanagetheseappropriately.Theweightfactoris0.05.
Theweightsheavilyfavormore-accuratemanagementofcosts.Theygivelittledirectattentiontoactualvalueaddedbytheteams.Valueaddedaffectscompensationveryindirectlybyaffectingeconomicvalueadded(EVA).Thatis,remediationpeopleshareanyvalueaddedtheycreatewitheveryoneparticipatingintheEVAvariablepay.Sinceremediation-relatedactivitiesareaverysmallfractionofthefirmasawhole,theconnectionbetweenperformanceandpaythroughthischannelisnearzero.
Qualityplanning,effectiveandtimelycommunication,andvalue-addedcontributionsareratedmoreheavilyandsoareassumedtoberelativelymoreimportanttoOlin.Theformalprocessforevaluatingsiteteamperformanceandincorporatingtheresultsintoincentivepaycalculationsisrelativelyunique.ItappearstobequiteeffectiveinmotivatingdesirableemployeebehaviorandensuringthatOlin'sremediationpolicyandprocessareeffectivelyexecuted.NotethatmanyofthesefactorsarerelateddirectlytoOlin'sperformancemeasurementsystemusedtomonitoroverallremediationgroupperformance.
TheERGperformancemetricsaresimilartothesiteteammetricsbutareevaluatedatadifferentlevel.Objectivesincludemanaging
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spendingto$30million$40millionannually,reducingthenumberofremediationsitesby5percentperyear,keepingdepartment(ERG)spendingwithinbudget,seniormanagementsurveyshowingcontinuousimprovement,siteteamsurveyshowingcontinuousimprovement,implementingqualityplan(conductingprocessreviewandcompletingactionitems),offeringnosurprisestotheRMB,anddemonstratingthatthevalue-addeditemsexceedOlindirectcostsforremediationby"multiples."
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TheincentivepayprovisionrelatestoOlin'sEVAdecisioncriterionappliedtoallcompanyactivities.ApoolisgeneratedbasedonEVAoutcomes,andtheincentivepayisallocatedasapercentageofthepool.Thus,actualdollaramountscanberelativelylargerorsmallerdependingonEVAperformance.Ineffect,siteteamscompeteagainsteachotherforaportionoftheincentivepool.
Thefirstyearofincentivepoolpayoutwas1996.Theconcept,thoughidentifiedearlyinthereengineeringprocessasuseful,wasnotimplementedimmediatelyinordertoavoiddisincentivesaffectingindividualswhoarenotasreadilyadaptabletotheteamcultureasothers,andtodevelopappropriatemechanismsformeasuringteamperformance.Aninitialpilottotestimplementationoftheincentivepayconceptin1995wasabortedbecauseofambiguityinmeasuresrelatingtositeteamperformance.
Thereisarecognitionthatnosetofmeasuresperfectlycapturesthemanagementgoalsoftheprogram:riskreductionandeffectiveandefficientexpenditureoffunds.Olincontinuouslyreviewstheadequacyofitsperformancemetricsanddropsoraddsmeasuresasneeded.Olin'sperformancemetricsaregenerallyconsidered"diagnostic"metricssincetheyrelatetothestatusofremediationprocesses;theyaremeasuresofhowtheprocessisworking.Thosemetricsthataffecttheincentivepaycalculationcanalsobeconsideredasinputstoamotivationalmetric.
ThefollowingisabriefdescriptionofeachofthecurrentmeasuresthatOlinusesandexpectationsregardingthepreferreddirectionofchange.Costs(M1a-M1gbelow)arecalculatedasafour-monthrollingaverage.Theexpectationforthedirectionofchangeincosttrendsvariesasafunctionofthespecificmetricandalsothelife-cyclestageoftheprocessatanygivensite.Olin'ssiteswillbeinvariousstagesofcleanupatanygiventime.
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Investigationcosts(M1a):costsofoutside(externalcontractor/consultant)siteinvestigations.Actualcostspersitevarywidely.ThetrendshouldbedownwardasOlinmovesthetotalpopulationofsitesthroughtheremediationlife-cycleandactivitiestransitionfrominvestigationtoremedialactions.
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Remediationcosts(M1b):costsofoutside(contractor)remedialactions.Olinexpectsthesetoincreaseintheneartomediumtermasmoresitestransitionfromtheinvestigationphase.
Legalexpenses(M1c):costsofoutsidelegalsupport.OlinexpectsthesecoststodecreasesinceitisOlin'spolicytobecooperativeandusealternativedisputeresolutionorbusinesssettlementswheneverpossible.Olinhasnotobservednetbenefitstoalegalisticapproachtoremediationdisputes.Currenttrendisupbecauseofonebadcase(lawsuit).
Directcosts(M1d):Olininternalcosts,includingERG,projectmanagement,siteteamleaders(whodonotnecessarilyworkintheERG),andotherprocesscosts.Olinexpectsandintendstoreducethesecostsovertimethroughcompletionofremedialactions,eliminationofstaffandnon-ERGsiteteamleaders,andchangestotheERGandremediation-managementprocesses.
Subtotalremediationcosts(M1e):aggregateofM1aM1d.Calculatedasafour-monthrollingaverage.Itisnotapparentwhetherthismetricshouldtrendupordown,giventhemixofinputs.Itissimplyusedtotrackcosts,notsetgoals.
Operatingandmonitoringcosts(M1f):costsassociatedwithlong-termoperationsofremedialactions(e.g.,pumpandtreatsystemsandperiodicsiteevaluations).Thegoalistodrivethesecostsdownovertime.
Totalcosts(M1g):totalofM1aM1f.Olinexpectsthesecoststofalloverthelongterm.
Costversusbudget(M2):environmentalcostsversusestimatedbudget,comparedonaquarterlybasis.Thismetricisintendedtomeasuretheabilitytoforecastcosts.Resultssofarindicatethatcalendaryearexpendituresarehardtopredict.
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Largesiteswithin25percentofbudget(M3):Percentageofsiteswithexpendituresgreaterthan$100,000thatcameinwithin25percentoftheirbudgets.SimilartoM2,thismetricsuggeststhedifficultyinestimatingsiteremediationcostsandannualexpenditures.
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Numberofclosedsitesreopened(M4):"reopened"inthesensethatspendinghasoccurredafterthesitewasclosed(remedialactioncomplete).Olin'sgoalistokeepthisnumberverylow.
Sitereduction(M5):numberofsitesmovedintotheinactive(closed)categoryfromthe1989baseline.Thebaselineisadjustedfornewsites.Theexpectationisanincreasingtrend,withagoalestablishedaspartofOlin'sResponsibleCareprogramof45percentreductionby1998.
Recoveredcost(M6):cashinhandrecoveredfrombuyoutsettlements,litigation,insurance,andsalesofremediationservicestothirdparties(otherPRPs).Olin'sgoalistoincreasethisnumberovertime.
Valueadded(M7):perhapsthemostimportantperformancemeasureandtheonlyonetieddirectlytoOlin'sbottomlineandEVAcalculations.Valueaddedfallsintooneofthreecategories:
Costavoidance:changestoplansandactionsthatreducecostsovertheoriginalplan.Achangemadetoavoidanexpenditure.
Costsavings:actionsthatreducethecostofimplementinganexistingplan.Thesearecostsincludedinthebudgetbutthatwerenotspent.
Costrecovery:third-partyrecoveryofcosts(e.g.,insuranceandotherPRPs).
Printmediacoverage(M8):numberofpositive(neutral)andnegativementionsofOlinsitesintheprintmedia.Calculatedonafour-monthrollingaveragebasis,themetricyieldsalistofcitationswithafavorable/unfavorableratingoneachone.ThismetricisusedasanindicatorofwhatOlincouldhavedonetoimprovetheprocess.Foreachbadarticle,Olintracksthearticlebacktospecificinstancesand
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asksifOlincouldhavehandledthesebetter.
Siteteamsurvey(M9):thesiteteams'self-rating.Thismetricispartoftheincentivepaycalculation,andsothereissomeconcernofbiasintheresults.Theaggregatemeasureshouldtendtowardindicatingthattheteamisperformingwell.
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Managementsurvey(M10):Resultsshouldindicatethesatisfactionofseniormanagementwiththeprocessandresults.ThepurposeofthesurveyistounderstandwhethertheERGisadequatelycommunicatingtheprocessandrisk.Theformofthesurveyandpeoplesurveyedisstillchangingovertimetofocustherecipientsandmakesuretheygettheinformationtheyneedonremediation.
Agencysurvey(M11):senttoindividualswithintheregulatoryagenciesdesignatedbythesiteteam.Theaggregateresultsshouldtrendtowardindicatingthattheagenciesaresatisfiedwithsiteteamperformanceandcommunication.
Olinevaluationofcontractor(M12):performedbythesiteteamforeachphaseoftheprojectandusedtomonitorperformanceofcontractors.
Forthethreesurveyslistedabove,aggregatemeasuresareformallytracked.TheRMTusesthemoredetailedsurveyresultsaspartoffeedbackandprocessimprovementefforts.
Value-addedmetricsaregivenparticularemphasisatOlin.Siteteamsproposevalue-addeditemsatquarterlyreviews.Toclaimavalue-addeditem,ateamsubmitsaone-pagesummaryoftheactionwithasimplejustificationofthesavings.Thesimplestitemsuseacopyofachecktodocumentthesavings.Othersdescribetheactionandresultsonaspreadsheetcalculation.Eachisdifferent;nostandardformatisrequired.TheRMTprovidesacriticalreviewoftheseproposalsbasedontherationaleforthecalculationofvalueadded.Thisensuresthecredibilityofthevalue-addednumbers.Whilecostsavingsandcostrecoveryamountsaremoretractable,costavoidanceisanestimate,generallybasedonpastexperience.Forinstance,Olinhasobservedthatonaverage,litigationatmostsitescostsabout$100,000.Thisvalueisusedastheestimateformostlitigation-avoidancevalue-addeditems.Somevalue-addedactivitiesareinnovativeintermsof
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processortechnology.ThesearenotedonthetablesgeneratedforthequarterlyRMTreview.
TheERGhasaminimumgoalofgenerating$8millioninvalue-addedperyear.Thisgoalrepresentsatwo-for-onereturnonthedirectcostsoftheERG(2$4millioninannualdirectcosts).Thisgoalisnotimposedfromaboveandappearstobesomewhat
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informal.Thetargetvaluehasbeenconsistentlyexceeded,oftenbyasignificantamount.
Strategiestogeneratethevalue-addeditemsareproposedinitiallyinthesitemanagementstrategy.Thesestrategiesindicatetheactionsneededtogeneratethevalueadded.Theincentivesforasiteteamtogeneratevalueaddedincludejobsecurity(needtodemonstratevalueaddedtothecorporation),additiontotheEVApool(affectsincentivepay),andtheinclusionofthevalue-addedmetricinsiteteamevaluationsandincentivepaycalculations.
Examplesofvalue-addeditemsinclude
avoidedlitigation($100,000)
avoidedallocationpayment($40,000)
reducedfinalconstructioncosts($100,000)
reducedsedimentamountandnoincineration($600,000)
reductionofassignedallocation($170,000)
reducedremedialscope($5,000,000)
useofnaturalattenuation($991,000)
RODremedywithnoexcavation/stabilization($14,900,000).
The1995and1996value-addeditemsarepredominantlycostavoidance,usuallyintheformofeitheravoidedlitigationorchangesintheremedy.Costsavingsaregeneratedthroughprocesschangesinexecutinganexistingremedy.Therearegenerallyfewcost-recoveryitemslisted.
OlinhasanincentivepaypolicyapplicabletoallER&Emanagersandstaff.Theideaforthepolicycameoutofthe1990remediationprogramreengineeringeffort,butitwasnotfullydevelopeduntil
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1995.Thedevelopmentprocesswasiterativeasusefulmetricstomeasureindividualandsiteteamperformanceweredeveloped.
StakeholderInteractions
CommunityInteractions
Olinhasidentifiedthreegroupsofstakeholdersforremediation-managementprocesses:regulatoryagen-
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ciesatfederal,state,regional,andlocallevels;communitiesaffectedbyspecificsites;andcompanyshareholders.Thecompanyitself(e.g.,seniormanagementatcorporateordivisionheadquartersandfacilities)isnotdirectlyidentifiedasastakeholder.Rather,therealrepresentativesofOlininterestsaretheshareholders,andtheirinterestsarerepresentedbyEVA.Nevertheless,thesurveyofseniorcorporatemanagementconductedaspartoftheperformancemeasureschemeimpliesthatseniormanagementisusedtorepresenttheinterestsofshareholders.
PartofOlin'sremediation-managementprocessisstakeholderoutreach.Thenotionhereistobeproactive,anticipatefuturechanges,andbuildtrustandcredibilityovertime.StakeholderoutreachincludesquarterlyEPAregionmeetings,agencysurveys(partofperformancemeasurementscheme),andcommunityadvisorypanels.
Olin'sremediationsitemanagementteamsareencouragedtohaveacommunityoutreachprogramifthecircumstanceswarrant.Aswithmostsitemanagementissues,thereisconsiderableflexibilityinOlin'sgeneralremediationpolicytotailortheoutreachprogramtosite-specificcharacteristics.However,theRMTdoesreviewtheneedforacommunityoutreachprogramaspartofasite'sstrategicreview,andeffectivecommunicationwiththecommunityisacomponentofthesiteteamevaluationusedintheincentivepaycalculations.
AbriefingdocumentsOlin'sbasicapproachtocommunityoutreachandidentifiesspecificcomponentsofanoutreachprogram.20Theoutreachprogramsaresitespecific.Thepurposesoftheprogramincludemaintainingcommunicationwiththecommunity,avoidingsurprises,andassuringcommunitysupportwhenneeded.Astrategyisdevelopedthatexplicitlyidentifiesthegoalsoftheprogram,therolesofthekeyplayers,andtheprocessesforobtainingandconveyinginformation.Aworkplanisdevelopedtoimplementthestrategy.This
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includesidentificationofkeyaudiences,developmentofthekeymessagesthatOlinwishestoconvey,andnotionalquestionandanswers.Severalvehiclesofcommunicationcanbeused,eachfulfillingadifferentpurpose:
20CommunityOutreach,briefingcharts,Olin,Norwalk,Conn.,September18,1996.
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targeteddialogmeetingsforone-on-onediscussionwithkeycommunityleaders
factsheetstoquicklysummarizerelevantinformation
newsletterstoreportstatusandcurrentissues
publicmeetings
communityliaisonpanels,whichmightincludeaprofessionalfacilitator
mediabriefingsandpressreleasestokeepmediainformedanduptodate
preparedvisuals(charts,drawings,andphotographs)tobeusedinapresentationorashandouts.
Contingencyplansandamediaworkplanarealsodeveloped.Olinencouragesperiodicassessmentoftheeffectivenessofthecommunityoutreachprogramthroughtelephoneormailsurveys,focusgroups,andothersources.Suchanassessmentisanintegralpartofthesiteteamevaluation.Siteteamscandrawonarangeofresourcestodevelopandimplementanoutreachprogram,includingOlin'sinternalpublicaffairsandgovernmentaffairsstaff,consultantsandoutsideexperts,legaladvisors(generallyoutsidefirms),andagencypersonnel.
Siteteamsareencouragedtotakeanactiveinterestinthecommunitybecausethecommunityaffectsremedyselectionandtheremedyisthedominantcostdriver.Olin'sexperiencehasbeenthatcommunityinvolvementresultsinalower-costremedybeingselected.Generally,thecommunityjustwantstobeassuredthattheyareprotectedfromrisksassociatedwiththesiteandremediationactivities.Communitiesgenerallydonotfavorincinerators,forinstance.
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Olinalsohasaformalprocessforcommunityinteractionsthatisfoundedoncommunityadvisorypanels(CAPs).21ThemainpurposesoftheCAPincludeavoiding''surprises"withrespecttocom-
21TheseCAPsarenotthesameasthecommunityadvisorypanelsforoperatingplantsrequiredunderCMA'sResponsibleCareprogram.
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munityinterests,developinglong-termrelationshipsandbuildingcredibility,andconveyinggoodtechnicalinformationintoremedydiscussions.
TheprocessfordevelopingaCAPincludescontactingcommunityleadersandaskingforeithertheirdirectparticipationorrecommendationsofotherindividuals.Acoregroupofindividualsrepresentinganappropriatecrosscutofcommunityinterestsisidentifiedandinvitedtoparticipate.Atthediscretionofthegroup,athird-partyfacilitatormaybeinvolvedinbothgroupformulationandoperation.EachCAPdevelopsitsownbylaws:memberrotation,meetingfrequency,publishingminutes,etc.OlinpaysfortheCAPbutdoesnotrunorleadthegrouporsettheagenda.EachCAPrunsindependentlybasedontheuniqueinterestsandconcernsofthecommunity.EachCAPsetsitsownagenda.OlinallowsonlyonecompanyrepresentativeonaCAP,whoisselectedbythesiteteamandwhocouldbeeitheratechnicalorpublicrelationsperson,dependingontheneedsoftheCAPandsitecharacteristics.OlinconsidersitsroleontheCAPtoprovidequalityinformation;itisjustoneofmanyparticipants.ThefactthatCAPsareintegraltothesitedecisionmakingprocessputsOlinattheforefrontofcommunityrelations.
Olingathersitsfacilitators,projectmanagers,andsitemanagersonceayeartodiscussCAPpolicyataconference.EPAhaschosennottobecomeapermanentmemberoftheCAPsbutdoesmakepresentationsasneeded.
ThevalueofCAPsandgoodcommunityrelationsisillustratedbythefollowingexample.Theremedyselectedforaparticularsiteincludedincinerationofwastes.However,thecommunitywasconcernedaboutthetruckstransportingthewastesratherthanincinerationperse.Inaddition,thecommunityreceivedapprovalfromregulatorstoinstalla
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carbonfiltrationunittoremediatethecontaminationtoawellusedfordrinkingwater,makingthisoneofthefewexamplesofcleanuptodrinkingwaterstandards.OlinandanotherPRPpaidforthisremedy.
OlinhasformalcommunityrelationstrainingprogramsforERGstaff.Thebasicnotionistoassumethatthesiteisinyourownbackyardandtoconsiderwhatinformationyouwouldrequiretobecomfortable.Thetrainingincludesamediacourseandarefreshermedia
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courseeverytwoyears.Thecourseincludeson-camerabehavior,pressrelations,andconductingpanels.ThereisalsoacommunitydialogcourseforCAPparticipants.
Olinconsidersgoodrelationswithregulatorscriticaltoasuccessfulremediationprogram,andconsiderableeffortisexpendedtodevelopandmaintainthesegoodrelations,aswellastomanageproblemswithofficials.RegulatoryinteractionsareguidedbytheprincipleofprovidingcompleteinformationtohelptheregulatormakedecisionsfavorabletoOlin.Closeinteractionwiththecommunityalsofacilitatesfavorabledecisions.
RegulatorInteractions
OlinconsiderstheEPAprojectmanageratasitethekeyofficial,recognizingthesignificantflexibilitythisofficialhasinenforcingregulations.MaintaininggoodrelationswiththeEPAprojectmanageriscritical.OlinconductsagencysurveysofindividualregulatorsinvolvedinparticularsitesandholdsperiodicmeetingswiththedeputyadministratoroftheEPAregionswhereOlinhasfacilities.Theseareimportanteffortsatbuildingandmaintaininggoodrelations.Nevertheless,Olinwillchallengeanagencyonoccasion.Forinstance,atonecappedsite,sincenoleachingisoccurringandthereisnorisktogroundwater,Olinhasmountedamajorcampaignchallengingtheremedyselectedforthissite.
Ingeneral,OlinperceivesthatthereareadvantagestoworkingwithstateregulatoryagenciesratherthanEPA.Thereislessoversightandassociatedcosts,andmoreflexibilityintheregulationsandinenforcement.
Brownfieldremediationprogramscreatepositiveadvantagestocleanupundertraditionalstateregulations.Cleanupstandardsareusuallylower,giventheplannedlanduse,andtheprocessisgenerally
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easierandfaster.
VoluntaryactionisoneareainwhichOlin'seffortstobuildandmaintaingoodrelationshipswithregulatorsisimportant.Olin'srelationship-buildingeffortsincludesurveysofagencies,invitingregulatorstositeteammeetings,andperiodicmeetingswiththedeputyadministratorsoftherelevantEPAregions.Thepurposeofthesehigh-levelregionalmeetingsistointroduceOlin'sremediationpol-
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icyandprocesstoseniorregulators;thisisnottheforuminwhichgrievancesorotherregulatoryproblems/issuesareaired.
FinancialCosts
Olinbudgetsonaquarterlybasisandfiveyearsintothefuture.Totheextentthatexpensesbeyondfiveyearsinthefutureareknown,budgetsincludetheseaswell.Inthisbudgetingactivity,Olinusesastrictsetofrules.Thefollowingareexamples:
Donotincludeaclaimuntilyouknowtheliability.Somefirmsprojectlikelyliabilities;Olindoesnot.
Donotcreditacostrecoveryuntilyouhaveitinhand(disclosurerule).
Budgetnumbersareusedtomanagethreeprocesses:
Cashmanagement,especiallytowardtheendoftheyear.
Updatinganddrawdownofthe"cashreserve."TheSecuritiesandExchangeCommission(SEC)requiresthatOlinmaintainacashreservethatreflectspotentialfutureliabilities.Olinmanagesitscashwithoutregardtohowitmightbeusedinanyparticularyear.ButmanaginganaccountthattracksareservehelpsOlincomplywithSECregulationsaboutfutureliabilitiesandalsohelpsitplanforlonger-termcashmanagement.
Supportingsiteteameffortstoimprovetheirplanningactivities.
Therearetwobudgetsrequiringmanagementattention.Thefirstisthebudgetforsite-levelactivities.Thisrepresentsthebulkofthefundingneedsinanygivenyear.Thebudgetisanaggregateofsiteteamestimates.Fundingcomesfromreserveaccrualinprioryears.22TheOlincomptroller,CEO,andgeneralcounselgenerallysignfundingrequests.
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22ThereserveaccrualisforSECreportingpurposesonly;Olindoesnotusethoseestimatesformanagementpurposessince,byregulation,theydonotincludecertaincoststhatshouldbeincludedforcomprehensivemanagement.
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Thesecondbudgetisthedepartmentbudget(theERGandCentralEngineering).Thisincludeswages,travel,etc.andrequiresformalapproval.
Olinhasrecentlymappeditsremedialprojectcostmanagementprocess.23Thisprocessmapalsoassignsrolesandresponsibilitiesforestimatingandapprovingremediationcosts.
Allremediationspendingischargedtothereserve.Thereserveaccountisfundedbya"remediationassessment"paidbytheproductdivisions.Theallocationformulaisverycomplicatedandnotreallyrationalsincetheamountpaidisnotnecessarilyassociatedwiththeliabilitiesresultingfrompastwastepracticesorabilitytopayfororphansites.Thereisamonthlyaccrualtothereserveandanend-of-yearadjustmentbasedonthedifferencebetweenexpendituresandbudgetestimatestokeepthereservebalancedandreflectingOlin'stotalliabilities.
Olingiveshighattentiontothedifferencebetweenbudgetedandactualcost.Anytimeadifferenceexists,ateammustexplainwhy.Ifgoodreasonsexist,theyareoffthehook;ifnot,itaffectstheteam'sperformanceassessment,especiallyiftheyusedthewrongassumptions.Olinweightsplanningproblemsequallywithexecutionproblems.Thesameteamisresponsibleforbothandisheldaccountableforfailureateitherend.Buttheemphasisongettingassumptionsrightandotherdiscussionssuggestthattherealemphasisisondoinggoodenoughplanningtoavoidsurprisesdowntheroad.
Table4summarizesOlin'senvironmentalexpendituresforthelastthreeyearsandprovidesanestimatefor1996.Remediationcostsasapercentageoftotalenvironmentalcostswere47percent,45percent,and35percentin1993,1994,and1995,respectively.Totalenvironmentalcashoutlaysin1996areestimatedtobe$85million:$34millionforremediation,$17millionforcapitalprojects,and$34
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millionforplantoperations.24Olingenerallyexpectsenvironmentalcashoutlaysof$85million$100millionannuallyoverthenextseveralyears.
23DraftdatedAugust23,1996.OlinRemediationProcessNotebook,Charleston,Tenn.,1996.24OlinCorporation1995AnnualReport,Norwalk,Conn.,p.22.
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Table4Olin'sEnvironmentalExpenditures(inmillionsofnominaldollars)
1993 1994 1995 1996Remedialandinvestigatory 44 37 25 34Capitalspending 11 11 9 17Plantoperations 38 34 36 34Total 93 82 70 85SOURCE:OlinCorporation1995AnnualReport,Norwalk,Conn.,p.21.
Capitalandplantoperationsenvironmentalcostsarechargedtoincomeintheyearexpensesareincurred.Thesecostsareassociatedwithwastedisposalandtheoperationandmaintenanceofpollutioncontrolequipmenttoensurecompliance.Olinhashistoricallypaidforcompliancecoststhroughcashflowandexpectstocontinuethisfundingmechanism.25
Remediationandsiteinvestigationcostsare"providedforinaccordancewithgenerallyacceptedaccountingprinciplesgoverningprobabilityandtheabilitytoreasonablyestimatefuturecosts."26Muchofthe$44millionspentin1993wasassociatedwiththediscoveryofadditionalcontaminationatoneparticularsiteundergoingremediation,andmore-definitivedataregardingthenatureandextentofcontaminationatothersites.Cashoutlaysforremediationarenotchargedtoincome,butrathertoareserveestablishedtocoversuchcostsidentifiedandexpensedtocorporateincomeinprioryears.Suchprioryearchargeswere$85million,$17million,and$25millionin1993,1994,and1995,respectively.
Overtheperiod1986to1993,Olinincreasedspendingon"constructionandremediation"activitiesfrom60percentto70percentoftotalremediationbudgets,whileholdingstudiesand
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analysiscoststo16percent.27
ThedecreaseinremediationcostsshowninTable4from1993to1995isanaccuratereflectionofthevariabilityinannualremediation
25OlinCorporation1995AnnualReport,Norwalk,Conn.,p.21.26OlinCorporation1995AnnualReport,Norwalk,Conn.,p.21.27LangsethandLambe,1995,p.111.
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costs,asistheincreasein1996.Thevariationisdrivenbyafewlargesitesandtheuncertaintyassociatedwithactualexpendituresinanyoneyear.Estimated1996expendituresincluded$36millionforremedialactions,$4millionforlegalexpenses,and$3millionforplantdemolition.
Onaverage,Olinestimatesannualexpendituresof$30million$40millionperyear.Actualannualcostsmayvarysignificantlyfromthisestimateasaresultoftheinherentuncertaintyoftheremediationprocess.Inparticular,thetimingofagencyapprovalsforactionsisdifficulttopredict.Also,onlycertaincostscanreasonablybeestimatedatcertainpointsintheprocess.Forinstance,duringpreliminaryinvestigations,thecostsofremedialactionscannotbedeterminedsinceappropriateremedieshavenotyetbeenidentified.
Futureremediationcostsaresubjecttoadditionaluncertainties,includingidentificationofnewsites,advancesintechnology,changesinlawsandregulations,changesinhowthoseregulationsareapplied,datascarcityandreliabilityproblems,thedifficultyofestimatingthefinancialresponsibilityofotherinvolvedparties,andtheabilitytoobtainthosefinancialcontributionsfromotherparties.28Asaresultoftheseuncertainties,Olinhasestimatedadditionalcontingentliabilitiesasof1995at$28million.
Despitetheinherentuncertainty,budgetandcostestimatingprocessesandoutputsareusedbothforplanningpurposesandasmanagementtools.Budgetnumbersareusedforcashflowdeterminationsandreserveaccounting(annualaccrual).Theaccuracyofcostestimatesareconsideredaspartofateam'sperformanceevaluation.Thecostestimatingprocessalsoforcesateamtothinkthoughprocesses,uncertainties,andassumptions.
Olin'senvironmentalliabilityattheendof1995wasassociatedwith74sites.Thirty-fouroftheseareontheNPL,and11oftheseaccount
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for80percentoftotalliability.29Threeofthese11sitesareintheinvestigationstage,aROD(orequivalent)hasbeenissuedatanother3sites,andtheremaining5siteshavebothRODandinvestigatoryactivitiesongoingconcurrently.These11sitesareallformermanufac-
28OlinCorporation1995AnnualReport,Norwalk,Conn.,p.22.29OlinCorporation1995AnnualReport,Norwalk,Conn.,p.21.
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turingfacilitiesordisposalsitescontainingwastegeneratedbythosefacilities.
Futureenvironmentalremediationliabilitieswereestimatedat$111millioninboth1994and1995.ThesefutureliabilitiesarecarriedonOlin'sfinancialbalancesheetanddonottakeintoaccountdiscounting,third-partyrecoveries,orfutureadvancesintechnology.Asarule,thisestimateincludesknownliabilitiesonly;contingencyliabilityestimatesarenotincluded.
Aprobabilisticcost/liabilityestimatingmodeldevelopedbyWoodward-Clydeiscurrentlybeingconsideredasameanstoenhancethebudgetandcostestimatingprocesses.Themodelusescommerciallyavailablesoftware(CrystalBallandExcel).Themodel,appropriatelytailoredtoOlin'ssitecharacteristicsandplanningassumptions,canbeusedasasensitivityanalysistoolformanagementandprovidesinsightintotheprobabilitiesassociatedwithdifferentcostoutcomes.OlinisworkingwithWoodward-Clydetodevelopimprovedcostestimatingforsites,includingimprovedaccuracyandtakingprobabilitiesintoaccount.
Therearethreeperceivedbenefitsfromthismodel:(1)determiningsitecostsandassociatedprobabilities,(2)identifyingissues/costdriversatasite,and(3)aggregatingsitecoststototalprogramcostsandassociatedprobabilities.Themodelalsoforcesthesiteteamtothinkthroughassumptionsatboththegeneral-modelandsite-specificlevel.
OrganizationalChange
Olinhasformallymappeditsremediationprocess,specifyingactors(internalandexternalagency),roles,responsibilities,anddecisionpoints.30ProcessmappingwasdoneatotherOlinorganizationsaswell,aspartofacorporatewidereengineeringeffort.Thegoalwasto
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eliminatefunctionalbarriersthroughtheuseofteams.
Priorto1990,Olin'sremediationprocesseswerefunctionallyoriented(legal,technical,etc.).Thefunctionsdidnotworkwellto-
30ThemostrecentprocessmapsaredatedJuly31,1996,andappeartoupdateearlier1992versions.OlinRemediationProcessNotebook,Charleston,Tenn.,1996.
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gether.Forinstance,therewereconflictsbetweentheprojectengineeringandenvironmentalgroups.Poorcommunicationandfrequentsurprisescharacterizedtheprocess.Remediationspendingwasincreasingwithonlylimitedvisibilityintowhatitwasbeingspenton,whythespendingwasnecessary,andwhatbenefitswerebeingproduced.Therewasnocoherentstrategyandnoforecastingcapability.Theseproblems,togetherwiththe"reengineering"managementinitiativeofthelate1980s,createdaclimateforafundamentalchangeinOlin'sapproachtoremediationmanagement.OlinhadalsotakenISO9000seriously.Interestingly,therewasnoperceivedexternalorregulatorypressuretochange,andonlymoderatecompetitivepressure(todomorewithless).
Olinbeganreengineeringitsremediationprocessesin1990.Thefirststepwastodecidetooperateasateam.Thebasicbeliefwasthatgroupdecisionmakingleadstobetter-qualitydecisions.ThisledtothenotionofconsensusthatunderliesOlin'steaminteractions.Ultimately,thiswouldrequirefindingindividualswhowerecomfortableoperatinginthenewteamculture,averydifferentworkenvironmentthaninthepreviousprocess.Anotherpremiseunderlyingthereengineeringeffortwastheneedtosplittheremediationfunctionoutoftheenvironmental,health,andsafetygrouptoprovidemorevisibility.Aninitialtaskforceof12wascreatedin1990todevelopthenewprocessesandassociatedstructures.Thisgroupincludedrepresentativesofallthefunctionswhoparticipateinremediation:siteleaders,andlegal,publicrelations,environmentalassessment,andconstructionandengineeringspecialists.Notionally,thegoalwastosetupremediationasabusinessfunctionwiththeobjectiveofeventuallyachievingzerospending.ThebasicideasdevelopedbythetaskforcewerereviewedbytheversionoftheRMTinexistenceatthattime.Thekeycharacteristicsoftherevisedmanagementprogramwouldincludeformalprocessmapping,teammanagementwithclear
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rolesandresponsibilities,andincentivepay.
Thereappeartohavebeentwofactorsthatenabledthisfundamentalprocesschange.First,allrelevantresourceswere"owned"byasingleseniormanagerwhocoulddirectinitialchanges.Second,mostparticipantsatallorganizationallevelsandfunctionsweredissatisfiedwiththeexistingprocess.
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Thenewprocesswasnotwellreceivedbyallaffectedstaff.Therewerepersonalityconflicts,andthenewculturedemandedbehavioralchangesthatrequireddifficultadaptations.Ittookseveralyearsforthenewprocesstobecomeaccepted.Implementationincludedteamdynamicstraining,teamdiscussionsinrepetitivemeetingsdefiningrolesandstrategy,andmanagementsupportinthesenseofdemonstratingopennessandconsensusbuilding,coreelementsofthenewculture.Introducingabusinessperspectiveintoremediationmanagementafundamentalgoaloftheprocesschangewasaccomplishedthroughpersonnelassignments:ThedirectorofER&Eisaformerplantmanager,andinitialsiteteamleadershadgeneralbusinessmanagementexperience.
Moregenerally,Olin'sremediationprocesschangesreflectastronginterestinimprovinggeneralbusinesspractices.Thechangeinremediationpolicyin1990reflectsabroadercorporateinterestinbusinessprocessreengineering.
Olin'sremediationprocessesarecontinuallychangingasmoreislearnedaboutwhatworksbestandasregulatoryandotherenvironmentalfactorschange.Themotivationfortheongoing1996changewasinpartdrivenbyachangeinseniormanagementatOlin,andinpartbytheperceivedopportunityforimprovementthatthechangeallowed.
OlinisanISO9000firmandhasinvestigatedISO14000forallitsenvironmentalmanagementprocesses,includingremediation.OlinbelievesthatthereisnoreasontodistinguishremediationfromanyotherpartofEH&Sintermsofmanagementapproachandapplies"responsiblecare"conceptstoremediation,eventhoughresponsiblecarehasnoformalremediationprogram.
OlinistheonlyfirmwehaveidentifiedthathasthoughtaboutapplyingISO14000EnvironmentalManagementSystemstandardsto
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aremediationprogram.ThiswaspartofalargerevaluationbyOlinfocusedondeterminingwhetherISO14000certificationmadesenseforthecorporation;theERGfollowed.Whenthecompanymadethedecisionnottopursuecertification,theERGdidnotexploretheconceptfurther.Thedecisionwasbasedonadeterminationthattherewasnovalueaddedtocertificationatthistime:EPAandstateagenciesarenotyetwillingtorelaxregulatoryoversightforcertifiedfirms,
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andOlin'scustomers(regulators)arenotyetaskingforISO14000certification.31
LessonsLearned
ThemainlessonsthatcanbederivedfromOlin'sremediationprogramexperienceincludethefollowing:
Developmentandmaintenanceofgoodrelationshipswithregulatoryandotherstakeholdersfacilitatestheremediationprocess.
Performancemeasurementiscriticaltobothmonitoringstatusandensuringhighquality.Measuresshouldincludebothinternalprogram/projectandexternal(stakeholder)metricsandbetiedtobothteamandindividualperformanceevaluations.
Teammanagementandconsensusbuildingwillallowforasmootherprocess.Teamsshouldreflectallmanagementlevelsasappropriate.
Externalserviceproviderscanbecost-effectiveifcarefullymanaged.
Centralizedmanagementfacilitatesstrategycoordinationanddisseminationoflessonslearned.
31OlinisISO9000certified.
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ChapterSixConclusionsAlthougheachofthecasespresentedherereflectsdifferencesintheimplementationofremediation-managementprocesses,thesubstantialsimilaritiesofthetwofirm'sremediationprogramsareclearlyapparent.Manyofthedifferencescanbeattributedtodifferencesinmanagementstyleandculturebetweenthetwofirms.Despitethesedifferences,theunderlyingremediationpoliciesandgoals,managementprocesses,andkeycharacteristicsoftheimplementationprocessesaresimilar.Wedonotadvocateorarguethatoneapproachisbetterthananother,onlythatthesedifferentapproachesarebasedonfundamentallysimilarprinciples.Ultimately,thespecificimplementationprocessesmustbetailoredtotheorganizationalenvironmentandcultureoftheimplementingorganization.Thus,itisthefundamentalprinciplesunderlyingthefirms'remediationprocessesthatshouldbeofconcerntoDoD.LessonsdrawnfromtheseprinciplescanbetailoredandappliedtoDoD'senvironmentalremediationprogram.
ThecriticalprogramcharacteristicsofDuPont'sremediation-managementprocessesinclude
centralizedmanagement,withsomedecentralizedexecution
integrationofabusinessmanagementperspectiveandapproach
useofrisk-assessmentandscience-basedevidencetoinfluenceremedyselection
developmentandmaintenanceofcooperativerelationshipswiththeregulatorycommunitybybuildingtrustandcredibilityandusingatechnicaladvocacyprogram
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cost-effectiverisk-basedstrategiesthataddressallurgentrisksandoff-sitecontaminationimmediatelyandthenpressforcost-effectivecontainment.
ThecriticalcharacteristicsofOlin'sremediation-managementprograminclude
centralizedmanagementtoensurecoordinatedstrategyandcontinuousimprovement
abusinessprocessperspective,includingextensiveperformancemeasurement
ateammanagementapproach
developmentandmaintenanceofcooperativerelationshipswiththeregulatorycommunityandotherstakeholders
carefullymanageduseofexternalserviceproviders.
Theselistsofcriticalprogramcharacteristicsparallelthe''bestpractices"discussedpreviously.Inparticular,centralizedpolicymakingandresourceallocation,buildingstrongpositiverelationshipswiththeregulatorycommunity,risk-baseddecisionmaking,andbusinessmanagementarecommontoallthreelists.
Thecontrastbetweencentralizedanddecentralizedmanagementdeservesfurtherdiscussion,sincecentralizedmanagementisacoreelementofprogrammanagementinbothcases.Adecentralizedprogrammanagementstructure(i.e.,Exxon1)maybeappropriateformanagingaverylargenumberofgeographicallydisbursedsites.Financialandmanagementresponsibilityresideswiththebusinessunitthatcreatedtheproblem.Whilethisstructureallowsforincreasedresponsivenesstovariationinthestate/localregulatoryenvironment,thereisnocentralcontrol,coordination,orstandardizationof
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processes.Acentralizedstructuresimplifiesresponsibilityforcostsandprovidesconsistencyinapproach.Centralizationdoesnotmeanisolationfromlinebusinessunitssiteandplantrepresenta-
1EachbusinessunitinExxonmanagesitsownremediationprogram(personalcommunicationwithRickHarley,TechnicalManager,SiteRemediation,Exxon,June5,1996).
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tivescanbeincludedinmanagementteams,aswellasothercorporatefunctions(e.g.,R&Dandlegal).
ThedistributionofresponsibilitiesbetweenthecentralmanagementgroupandthedecentralizedexecutionteamssuggestedbythecasestudiesissignificantlydifferentfromDoD'scurrentprocesses.Inparticular,intheprivatesector,thecentralorganizationmaintainsstrictcontrolovercostsandfunding;incontrast,DoD'scurrentpolicyallowsthemilitaryservicesanddefenseagenciestomaintaincontrolofthemajorityofremediationfunding.Thecurrentremediationfundingpolicydevolutionwasinitiatedtofacilitateservicebuy-inandaccountabilityforfundingallocationdecisions,andtoimprove"end-user"(remediationagency)discretioninactivityprioritization.ThecasestudiesargueforretractingDoD'srecentlyimplemented"devolvement"strategy.
Manyofthespecificapproachesdiscussedinthecasestudiesarepotentiallyapplicableandappropriate,inaslightlymodifiedform,toDoD'sremediationprogram.Theseincludecentralizedmanagementwithdecentralizedexecution(DoDalreadyhasthisstructure,butnotthespecificdistributionofresponsibilitiessuggestedbythecasestudies),abusinessprocessapproach,performancemeasurement,proactiveidentificationandmanagementofpotentialliabilities,andstakeholderinteractions.
WemakethefollowingrecommendationstoenhanceDoD'sremediationprogram:
Centrallymanageresourcestoremovecounteractiveincentivesatallorganizationalandfieldlevels.Thisincludespolicymakingandresourceallocationprocesses.Theresultwouldbeamoreconsistentapplicationofbestpractices(embodiedinnewlycreatedstandardoperatingprocedures)andaprioritizedsetofprogramobjectives.
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Usetheteammanagementconcept,similartotheintegratedproductteams(IPTs)inacquisitions.Thisincludesemphasizingteamperformanceinindividualperformanceevaluations.
Usethe"cost-as-an-independent-variable"policytohelpintroducebusinessvaluesintoremediationmanagement.Thispolicyessentiallyraisescosttoalevelcommensuratewithperformance
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andencouragescost-performancetrade-offstoobtainthemostcost-effectivestrategy.
Maintainanassertive,proactiverelationshipwiththeregulatorycommunitybasedonhigh-qualityscience.
Fullyandopenlyincorporaterelevantstakeholdersintodecisionprocesses.ThisrecommendationsupportsDoD'salreadysignificanteffortandaccomplishmentsinthisarea.2
TheserecommendationsaresimilartothoseemergingfromaseparatestudyconductedbyCleanSitesfortheDeputyAssistantUnderSecretaryofDefense(Cleanup).3
DoD'sremediationprogramisverylargeandcomplex;thereisconsiderableorganizationalinertiaandpoliticalintereststhatarebarrierstoeffectiveimplementation.SimilarproblemsofimplementingchangewereencounteredatbothOlinandDuPont.Thefirmsbothovercamesuchbarriersinsimilarways.Observedimplementationprocessenablersinclude
areasonablyclearvisionofthedesiredfuturestate
strongleadershipsupport
centrallymanagedresourcesandproblemsolvingintheinitialphasesofimplementation
iterativeprocessimprovements,incorporatingfeedbackfromemployeesandexternalstakeholders
ateammanagementapproach
performanceevaluationsofindividualsandgroupsemphasizingchange.
Evidencefromthecasestudies,aswellasthegeneralimplementation
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literature,suggeststhatestablishingandmaintainingtheseattributesatthebeginningofthechangeprogramwillfacilitatesuccessfulimplementationofthedesiredreforms.
2SeeRestorationAdvisoryBoardWorkshop,1994;andFederalFacilitiesEnvironmentalRestorationDialogueCommittee,1993.3SeeClark,1996.
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However,DoDcannotmerelytransferlessonsfromtheprivatesectorbecauseDoDfacesspecificmanagementchallengesasapublic-sectororganization.Thesechallengesinclude
thecongressionalbudgetprocessandannualreviewoftheprogram
multiple,conflictingprogramgoals4andchangesinpublicpriorities
aconservativeregulations-basedorganizationalculture
thelackofmarketforcesfacilitatingmeasurementoforganizationaleffectiveness
adispersedownershipofproblems,resources,andaccountability.
Thesechallengesmakeitdifficult,butnotimpossible,toapplysomeofthemajorlessonsfromourreviewofbestpracticesfromtwocommercialfirms.Nevertheless,thesameprocessenablers(listedabove)thathelpedthefirmsimplementchangestotheirremediationprogramcanbeeffectiveintheDoDoperatingenvironmentaswell.
4SeeRubensonandAnderson,1995.
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