Expert Commentary

Managing the Environmental Risk from Subcontractors

Unused lubricants, oils, diesel fuel from heavy equipment, and many other sealants, solvents, glues, etc., can end up buried on or off a construction site, often without the knowledge of the general contractor. But when remediation proves necessary, it is often the general contractor who pays. Environmentally managing the construction site before, during, and after construction can help to avoid this scenario.


Environmental
May 2004

It was a successful project, indeed. Your general contracting firm won the bid to renovate seven 4-story buildings that were over 75 years old in a large commercial complex located in a rural area in the south. Your staff of architects and engineers did the design, drew up the plans, and checked field shop drawings. Your project managers, superintendents, and foremen provided the field oversight. You hired some competent subcontractors to do the geotechnical, plumbing, heating, ventilation, air conditioning, electrical, roofing, masonry, drywall, and painting. Best of all, you came in 15 days under schedule and $50,000 under budget.

Per the contract, you kept a percentage of the windfall. Everybody celebrated this win, as the challenges were rather large, given the age of the structures and the old materials of construction that had to be managed, such as lead-based paint, asbestos, and even some historic masonry.

The celebration did not last long. Just 6 months after completion, the owner’s attorney called the project manager and informed him that during utility excavation for new road construction beyond where the work was done, a dozen leaking 5-gallon buckets of roofing tar, and 15 single gallon cans of paint solvent used to clean oil-based paint guns were uncovered in five different locations. There were even dozens of partially used cans of metallic paint buried in several other locations. Worse, the solvent leaked and had migrated through the sandy soils and porous limestone into the groundwater and was detected in two drinking water wells offsite. Not only was the property owner upset, the state environmental agency was banging on the owner's door, imminent endangerment papers in hand.

Could This Happen to You?

When we take on construction projects, we often wonder if there are any environmental concerns, especially if we are doing new construction with state-of-the-art materials and water-based latex paints and sealants. However, more often than not, the unused countless lubricants, oils, diesel fuel from heavy equipment, and many other sealants, solvents, glues, etc., can end up buried onsite—or offsite.

Sure, your contracts stipulate that all subcontractors must account for hazardous materials brought onsite, and taken offsite. You require extensive mass-balance calculations that measure: what HAZMAT came onsite, minus what stayed in/on the building, which equals what HAZMAT left the site. What if the subcontractor didn’t realize that the 5-gallon buckets of carpet adhesive contained solvent? Yes, I know he should have smelled it, but he did not account for it. Yes, I know the contract also requires proper disposal.

It’s funny how construction rubble, including illegally disposed hazardous materials, sometimes ends up buried on farmland at night. It’s not funny when the hazardous metals and chemicals in that construction rubble end up in drinking water wells. Guess what? If the products are tied back to your subcontractor and your construction site, you get to clean it up and pay for drinking water substitutes and pay fines and go to jail.

Environmentally Managing Subcontractors

If your field team does all it can to avoid environmental releases and exposures, that means the challenge may rest with some of your subcontractors. How can we environmentally manage our subcontractors? Here are a few tips.

  • Write contract language that requires that they account for any material that requires a material safety data sheet (MSDS) from the time it crosses the property boundary until it leaves.
  • Have the subcontractor provide you with a list of all materials that require a MSDS, so that you are prepared if a 5-gallon can of waste "ethyl methyl terrible" ends up in a ditch offsite. Maybe consideration should be given to the types of products that are being used on the jobsite. Can certain products be replaced with "environmentally safe" products? Has the subcontractor investigated the availability and cost associated with such products?
  • Hire a subcontractor that you trust, and who has already proven to be knowledgeable of hazardous material and hazardous waste minimization and management practices. Modify your subcontractor prequalification questionnaire to include issues involving environmental conditions.
  • Review the subcontract’s current protocol in the event waste or other hazardous materials are encountered. Do they have a mold management or response program? Have they developed a storm water runoff program? Do they have anything that looks like an environmental management program?
  • Are any of your subcontractors trained in accordance with hazardous materials handling—29CFR 1910.120—also known as HAZWOPER training? Someone within the organization should be responsible for identifying possible "red flags."
  • What about contractual risk transfer? The indemnity is only as good as the financial strength of the indemnitor, but it is a solid first line of defense. Ensure your indemnity is broad enough to encompass environmental conditions. Second, the contract should establish who will perform any environmental work when it arises. The contract should spell out whether the subcontractor is responsible for the remediation—hiring of a qualified subcontractor—or will you or the owner contract for that work?
  • What about requiring the subcontractor to evidence environmental insurance? It’s not going to prevent an incident, but it will pay for one. Nowadays, contractor’s pollution liability or CPL insurance is much more affordable and is much broader in scope of coverage than it was in prior years. Actually, if the subcontractor could evidence CPL coverage, that speaks volumes about the quality of the company since the environmental underwriting process is viewed by some as quite rigorous.

Conclusion

When it comes to environmental risk management, the construction industry has come a long way in the past 10 years. It appears contractors of all shapes and sizes have seen and witnessed the negative impact that environmental incidents could have on their reputations and their organizations. We are even starting to see the old "knock-on-wood" type of risk management disappear. However, prudent contractors still need to protect themselves, and without proper protocol in place, one small oversight could lead to one big mess. The cost to prevent such mess is minimal when compared to the catastrophic result it could bring.


Mitch Cohen, PE, is a Syndicator for Aon Environmental in Atlanta. He works with construction companies to help them manage environmental risk. Mr. Cohen can be contacted at (404) 452-8438 or via email.


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