Under the traditional environmental cleanup model, a contractor is hired to
perform the cleanup, but the risk of cost overruns is borne largely if not
entirely by the site owner or other entity(ies) originally responsible for the
cleanup (owner). Under an IFC, the contractor guarantees a fixed price to cover
all environmental regulatory costs, regardless of whether those costs increase
due to unknown pollutants, regulatory changes, or other causes. The guarantee
is typically backed not only by the contractor's own indemnification but
also by a site-specific insurance policy. Thus, the contractor and insurer
assume the risk of overruns before the owner, and the owner need pay nothing
more unless all of the following protections fail: commutation account;
insurance policy; contractor indemnity.