Is Speed More Important Than Price?
Are Firms Charging for Faster Phase I ESA Reports?
“You want it when?”
Ask environmental due diligence consultants what their top challenges are in today’s market, and chances are that you’ll hear about the intense pressure for faster delivery of Phase I environmental site assessment reports.
“The emphasis with real estate deals right now is on speed and quality. I get calls from clients now saying ‘I want to close in 2 weeks. Who can get the job done well?’”
Grady Shields, Attorney, Wyrick Robbins Yates & Ponton LLP in Raleigh, NC at EDR’s Due Diligence at Dawn workshop, December 2015
The squeeze on efficiency is due in part to pressures to close commercial real estate deals quickly, and in part to technological advances that are improving the efficiency of all types of business processes.
In November 2015, EDR Insight launched the Commercial Property Due Diligence Benchmark Survey. The survey sample included 528 environmental due diligence professionals representing 45 U.S. states and Puerto Rico. The distribution by firm size is as follows:
- Local firms 25%
- Regional firms 40%
- National firms 23%
- International firms 9%
- Other 3%
“Our clients are under intense competitive pressure and so consequently, we are, too. This pressure often translates to quicker turnarounds or requesting a “verbal” prior to report issuance. This pressure flows to the staff who are seeking the time necessary to provide quality consulting.”
Holly Neber, President, AEI Consultants
Key findings of the benchmark survey included:
- The average turnaround time for a basic Phase I ESA (no non-scope issues) was 14.4 business days, with little variation by firm size.
- “10 business days” and “15 business days” were the most common answers.
- A significant 42 percent of respondents indicated that clients are requesting an even faster two-week turnaround time 50 percent of the time—or more.
- Sixty-eight percent of respondents work at firms that charge a premium for the effort required to complete reports faster (typically less than 20 percent of the standard fee), although this decision can be a function of the firm’s workload at the time or whether the project is being done for a top client.
- Nearly one-third (or 29 percent) believe that speed is more important than price in winning projects.
“I’d agree that our clients need reports quicker, for whatever reason, but still want quality and are willing to pay for it.”
Michael T. Kulka, Founder and CEO, PM Environmental, Inc.
FOR MORE INFORMATION
The full set of survey results related to turnaround time pressures can be found in the infographic below. These results were shared with Affiliate Members of the Environmental Bankers Association at its winter conference in Long Beach the week of January 18, 2016.
Part I of the Commercial Property Due Diligence Survey results related to the market forecast for 2016 were published before the holidays.
Part III will be posted next week with the latest benchmarks on regulatory file requests, incomplete data, extension requests and more.