Using process redesign to improve DoD's environmental security program: remediation program...

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,

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

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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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

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

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

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

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

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


performanceevaluationsofindividualsandgroups,withanemphasisonchange.

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

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

Pagexviii

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

SEC SecuritiesandExchangeCommission

SHE Safety,health,andenvironment

SWMUSolidwastemanagementunit

TRI Toxicreportinginventory

TSD Treatment,storage,anddisposal

VOC Volatileorganiccompound

VP Vicepresident

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

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

value,acorecriterionforevaluatingpollutionpreventionandother"beyondcompliance"initiatives,suggestsefficientproperty

1Throughoutthisreport,weusetheterm"remediation"ratherthantheterm"cleanup."Sitesarerarelyevercleanedtotheiroriginalstate,sothetermremediationbetterreflectstheprocessthatactuallyoccurs.2Someexamplesdoexist.SeeLangsethandLambe,1995;Baker,1995;andLawrenceandCerf,1995,pp.4854.

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,

theOfficeoftheDeputyUnderSecretaryofDefenseforEnvironmentalSecurityaskedRANDtostudytheenvironmentalmanagementpracticesofcommercialfirmsrecognizedashavingthebestpracticesinthatfieldtodrawlessonsthatDoDcouldusetoimproveitsownenvironmentalmanagementprocesses.

TheentirestudyfocusesonenvironmentalmanagementinfourDoDpolicyareas:weaponsystemdevelopmentandmodification,depot-

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

identifyprocessesthatcanenhanceDoD'sprogram.Thestudyisparticularlyinterestedinriskmanagementandprogram-leveldecisionprocesses,andtheinformationsystemssupportingthem.

Thisreportfocusesonthefortharea,remediationprogrammanagement.

Thecoreofourapproachistousein-depthindustrycasestudiestoanalyzeremediationprogrammanagementimplementationissuesincontextsrelevanttoDoD.Weidentifyinnovativeprivate-sectorprocessesthatcanbeadaptedtomeetDoD'sspecificmanagementchallenges.Casestudiesallowthein-depthexaminationofprocessesandimplementationproceduresnecessarytodrawusefullessonsforDoD.Pleasenotethatthecasestudiesprovideonlyasnapshotoftheinnovativeenvironmentalmanagementpracticesreflectedatthetimeofourinterviews.Thesecasestudiesaresupplementedbyacomprehensivereviewoftheliteratureanddiscussionswithindustryandgovernmentofficialsinvolvedinenvironmentalmanagementinthefourthareadescribedabove.

Weareparticularlyinterestedinunderstandingtherationaleforaprocess,andunderstandinghowimplementationactuallyworks,includingidentifyingprocessenablers.Wearealsointerestedinidentifyingconstraintsaffectingimplementationandunderstandinghowthoseconstraintsweremanaged.

Thecaseswereselectedbasedonseveralcriteria:

Alargeindustrialfirmwithmultiplebusinessunitslocatedinmultiplegeographicalareas.

Fullorpartialresponsibilityformanagingremediationatalargenumberofgeographicallydisbursedsites.

Acknowledgedasrepresentativeofindustrybestpracticeinremediationmanagement.

Coreelementsofthefirms'remediation-managementprogramresponsivetoDoD'sareasofprimaryinterest.

ThefirsttwocriteriaaremeanttoensurebroadcomparabilitywiththenatureofDoD'senvironmentalremediationchallenge.Thelasttwo

criteriaaremeanttoensurethatlessonsfromthecasestudiescanbeusefullyappliedtoareasofDoD'sprogramthatareconsideredimportantbyDoD'senvironmentalremediationcommunity.

OurresearchapproachnecessarilyraisesissuesoftransferabilitybetweenthepublicandprivatesectorsbetweenDoDandspecificindustrialsectorsinparticular.IssuesofparticularrelevancetotransferabilityofbestpracticesfromtheprivatesectortoDoDincludethe

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.

ChapterSixpresentsconclusionsandrecommendationsforactionsDoDcouldtaketoenhanceitsremediationprogram.

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.

Figure1OutlineoftheSuperfundCleanupProcess

ThefirstcolumnofactivitiesshowninFigure1concernssiteidentificationandlistingontheNationalPrioritiesList(NPL).TheseactivitiesaremostoftenperformedbytheEnvironmentalProtectionAgency(EPA),althoughindustrypotentiallyresponsibleparties(PRPs)andotherstakeholdersmaytracktheprocessandcommentondecisions.Thesecondcolumnofactivitiesconcernsinitialplanning,detailedsitecharacterization,andremedyselection.Riskassessmentcanplayarolehere.EPA,PRPs,orremediationserviceproviders(contractors)canperformboththesitecharacterizationandriskassessment.Ultimately,theremedyisformalizedinaRecordofDecision(ROD).ItisusuallyaftertheRODhasbeenpub-

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.

Changesinenvironmentallaw,regulations,andtheirapplication.

Scarcityofreliabledatapertainingtosites.

1PorterandvanderLinde,1995.2FromOlin1995AnnualReport,Norwalk,Conn.

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

AreviewofDoD'scurrentremediationprogramanddiscussionwithprogramofficialssuggestthatDoDhasthefollowingareasofspecial

3CongressionalBudgetOffice,1995.4SeethestatementofCleanSites,Inc.,president,EdwinH.Clark,1996;seealsoDepartmentofDefense,1996.

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

providingforfeedbackandcontinuousimprovement.

Interactingwithregulators.Thisincludesestablishingcleanupstandardsandremedyselectionprocessesandcriteria.

Whilethecasestudiesandliteraturereviewcoverallsixtopics,ourresearchfocusesonthree:managementprocesses,performancemonitoring,andinteractionswithregulators.

ChapterThreeOverviewofInnovativeCommercialRemediation-ManagementPracticesRemediationremainsoneofthelargestenvironmentalmanagementproblemsformanycommercialfirms,especiallyforlargechemical,petroleum,andmanufacturingfirmswithproductionactivitiesatmanysites.ThesefirmsofferareservoirofexpertiseonhowtoapplythenewapproachdiscussedinChapterTwotothemanagementofcleanupprograms.RemediationprogrammanagementpracticesintheprivatesectorprovidelessonsthatDoDcanusetoreducecostsandfutureliabilitiesthroughapplicationofcost-effectivestrategies.

SeveralaspectsofremediationprogrammanagementintheprivatesectorappeartobeapplicabletoDoD'sareasofpriorityinterest:

Theuseofinnovativeprogrammanagementinitiativesinspecificprocessareas.

Applicationofabusinessmanagementperspectivetocostandliabilityestimation.

Resourceallocationprocesses.

Monitoringandperformanceincentives.

Introductionofcoreorganizationalvaluesintotheremediationprogrammanagementprocesses.

Interactionswithregulatorsandlocal,state,andfederallevels.

Thischapterbrieflyreviewssomeofthelessonsonremediationprogrammanagementthatcanbedrawnfrompubliclyavailablesources.However,thetopic(remediationprogrammanagement)

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

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.

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.

Risk-baseddecisionmakingtoincreasethecost-effectivenessofremedies.

6U.S.DepartmentofEnergy,1993b.7ArthurD.Little,Inc.,1995.SeealsoLangsethandLambe,1995.

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-

termcostsassociatedwithremediationactivities,andimprovetheireffectiveness.Sincethecurrentregulatorystructureisnotsetuptofacilitatetheuseofnewtechnologies,thekeyistoworkcloselywithregulators,buildingonapositiverelationship.

Managingremediationactivitiesasabusinessprocessisperhapsthemostfundamentalandimportantelementofbestpractices,accordingtoADL.Thenotionistomoveawayfromthepurelytechnicalor

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

goalissystematicriskreduction.Bestpracticealsoincludesengag-

8GordonM.Davidson,presentationattheFederalFacilityCleanupConference,Washington,D.C.,May13,1996.9ArthurD.Little,Inc.,1995,pp.1526.

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)

managementcommitmentandadequateprovisionofresources

openandwell-definedprocessesthataccommodatestakeholderinvolvement.

Theseelementsofbestpracticesformthebasisfortheframeworkweuseinthenexttwochapterstodiscusstheremediationprogrammanagementcasestudies.

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.

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

businessunits,tosetpolicy,reviewperformance,andfacilitatechange.

"Itisthecompany'spolicytocomplyfullywithorexceedalllegalrequirementsworldwide."3Today,manyvoluntaryprogramsarein

3DuPont1994AnnualReport,Wilmington,Del.,p.34.

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.

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.

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.

10DuPontNewsRelease,Wilmington,Del.,December11,1995.11EPA,TexasNaturalResourceConservationCommission,LouisianaDepartmentofEnvironmentalQuality,andOhioEPAalladvocatethatdeepwelldisposalwastenotbeincludedinTRIsinceitmisleadsthepublicandisnotareleasetotheenvironment.ToobtainanEPAundergroundinjectionpermit,theownermustshowthattherewillbenoreleasetoshallowwateracquifersin10,000years.

(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,

Wilmington,Del.13Inthefollowingdiscussion,a"site"iscomposedofoneormoresolidwastemanagementunitsasspecifiedbyregulations.AsiteisroughlyequivalenttoaDoDinstallationasaunitofanalysis.14DuPont,letterattachment,Wilmington,Del.,August23,1994.

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.

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

costsanddiscontinuedbusinessesjustifiedcreatingaseparateunittocontrolcosts.Priortothis,operatingbusinessunitshandledtheirownremediation.

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,

researchanddevelopment(R&D),andfinancialfunctionssupplementCRGresourcesasneeded.

16BriefingchartsfromDuPont,March14,1996.[Thereisafourthgroup,ConocoEnvironmentalServicesDivision,whichappearstoprovidecapabilitiessimilartoDuPontEnvironmentalRemediationServicesforConoco.]

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.

Difficultytrackingallcostsofremediationonaregularbasis.

ContractorsmakingrecommendationsanddecisionswithoutguidancefromanoverallvisionfromDuPont.

17AgeneralruleofthumbsaysthatDuPontrequiresabout$1.5billioninsalestogenerateenoughrevenuestocover$150millioninremediationcosts.

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-

effectiveremediationstrategies,andprovideabusinessperspectivetoremediationmanagement.CRGwasalsotaskedwithdevelopinganinternalcost/liabilityallocationprocedure.DERSwasincludedaspartoftheCRGwithanin-housefocus.

CRGhastwokeycustomers,broadlydefined,eachwithdifferentinterests.Regulators,asasurrogateforthepublic,areonecritical

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.

Theremediationprojectmanagementteamforanoperatingsite(underRCRAcorrectiveaction)includesasitecoordinator(plantrepresentative),aDERSprojectmanager,anattorneyfromtheLegalDepartment,andtheRPMforthatregion.ThemanagementteamdifferssubstantiallyforSuperfundsites:Itgenerallydoesnothaveasitecoordinator,forlackofDuPontpresence,but,forlargersites,has

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-

18"CorporateRemediationGroup(CRG)Overview,"December29,1994,DuPontinternalmemo,Wilmington,Del.19Notethatmanagersremainresponsible[andliable]forotherenvironmentalissues.Wastewater,wastemanagement(includingpollutionprevention),airpollutionmanagement,andcommunityrelationsaretheothermainareas.

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

CoreResourceshasamixofresponsibilitiesrelatedtotechnicalandregulatoryexpertise.CRisresponsiblefordevelopingtechnologiesspecifictoDuPont'sneeds.CRmembersenterintopartnerships

20BriefingchartsfromDuPont,Wilmington,Del.,March14,1996.

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)

andotherprivate-sectorfirms(e.g.,Monsanto,GE,Dow).Thereareseveralspecificdevelopmentanddemonstrationprojectsunderwaythroughthispartnershipprogram.Resultsaredisseminatedamongthepartnersandcanbeusedatnocosttoparticipants.Othernonpartnerorganizationsneedtolicensethetechnologytobeabletouseit.LicensesareheldbytheRTDFgroupthatdevelopedthetechnology.

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

programistoachieve(atboththestateandfederallevel)leg-

21Ellisetal.,undated.22Ellis,undated.Thesavingsassumesa12percentdiscountrate,3percentinflation,anda30-yeartimehorizon.

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

decisionresultedinadownsizingoftheDERSorganizationfrom300+toabout160employees.Themainadvantageofanin-houseremediationserviceprovideristhealignmentwithcorporateobjectivesandstrategy.Insomecases,externalconsultantstoooftenfocusonbillablehours;thuscostscanincreasesignificantlyevenwhenthehourlyrateappearscompetitive.DERSperformsessentiallyatechnicalconsultantfunction,includingstudiesandanalyses,fieldtestsandsitecharacterization,remedydesign,andprocurementof

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

creationoftheCRG.Thenewcultureemphasizedidentifyingenvironmentalliabilitiesandthenmanagingthoseliabilitiesthroughcost-effective,risk-basedstrategies.Thischangewasfairlysignificant,intermsofboththeallocationofresponsibilitiesandassociatedincentivesfacingkeymanagersandcorporatecultureingeneral.This

changeappearstohavebeensuccessful.ThefollowingparagraphsdescribethekeystothesuccessofthechangetotheCRGprocess.

Onekeychangeinachievingacceptancebythebusinessunitswastheshiftinbudgetingresponsibilityforremediation.Inthepast,eachlocaleandrelatedbusinessunitbudgetedforremediationofitsownfacilities.In1992,CRGassumedresponsibilityforthesecosts.Thevariablecomponentofamanager'scompensationaccountsforasignificantportionoftotalcompensationandreflectsbothcorporatewideandbusiness-unitperformance.Whenbudgetingresponsibilityisshiftedfrombusinessunitstothecorporation,theeffectsofremediationperformanceontotalcorporateperformancebecomeremoteenoughthatlocalmanagersareexpectedtoandgenerallydofocustheirattentionontheactivitiesinthebusinessunitthatarewithintheircontroltoaffectandthusimprovebusinessresults.

CRGexperiencedsomeresistanceduringthetransitiontothisnewsystem.Lossofcontrolbyplantmanagementwasanissueatthreeorfourlocations.Somehadvestedpersonalinterestsintheremediestheyhadchosenandhaddifficultyrelinquishingcontrol.WhydidtheviewsoftheselocalmanagerscontinuetomattertothemevenaftertheshiftinresponsibilityandbudgettoCRG?DuPonthasatraditionofconsensusmanagementthatdiscouragesmanagersfrompushingissuestohigherlevelsforresolution.Managersareexpectedtoworkoutlocalsolutionsamongthemselves,anditwaslikelydifficultforsomemanagerstorelinquishthiscontrol.

ThesecondkeychangewasidentifyinganexperiencedprogrammanagerwhogrewuponthebusinesssidebutwhoalsohadplantandatechnicalbackgroundandwhowouldbeheldaccountableforbringingDuPont'scorevaluesintotheremediationarena.Thecorebusinessexperience,theseniority,andthevaluesusedtojudge

performanceareimportant,bothtothebusinessunitsandtotheCRG,insettingupandexecutinganewkindofapproach.PerseveranceandcreativityarevaluedattributesofagoodRPM,asareproblemsolvingandawillingnesstochallengeconventionalwisdomtoimplementsolutions.23RPMsmustfeelcomfortablewithuncertainty

23CRGvaluesagoodnegotiator,butnotesthedifferencesbetweentraditionalbusinessnegotiationandnegotiationwitharegulator.Inbusinessnegotiation,eitherpartycanalwaysstepaway,somutualagreementsaretheonlykindthatsurvivenego-

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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

implementitsenvironmentalpolicy.Itvaluescloseinteractionwithregulatorsandthepublicatlargetomakeitscase.Thisiswhatitmeansbybeingproactive.

(footnotecontinuedfrompreviouspage)

tiation.Inregulatorynegotiation,theregulatorwillnotandcannotgoaway.Thiscallsfordifferentskills,butCRGstillwantsRPMswholearnedtheirnegotiationskillsinbusiness,notregulation.

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

longrun,thebeststrategyistokeepthetotalcostdownforallresponsibleparties.

Insistonusingrealisticscientificevidenceandreasonableassumptionsindevelopingriskassessments.Collecttheinformationyouneedtomakeyourcase.TheCRG'sviewisifDuPont

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

thepreferredremedy,butagain,theriskassessmenthelpsdefinetheabilityofalternativeremediestoachievethedesiredriskreduction.

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.

Dollarsspent.ThegoalistodrivecostsdownoverthelongrunasSuperfundandRCRAcorrective-actionprogramsruntheircourse.

Avoidedcost.ThisistheprimarymetricandismeasuredattheDERSprojectlevel,althoughallteammembersmaycontributetoidentifyingalower-costsolution.

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

ordoesnotlikethewaytheregulationsareimplemented.Thus,DuPontwillinvestinup-frontactivitiesgoodscience,analyses,riskassessmentasleveragetousewithregulators.Insomecases,DuPontwill"overinvestigate"sitestodemonstrateamorecost-effective,risk-basedremedy.

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

beopen,consistent,andpatient.DuPontwantstocreateandretainanimageofanethicalcompanyandtasksitsplantmanagerstocommunicatewithneighborsandmonitorcommunityattitudes.CommunityinvolvementishighonsomeCERCLAsites,whereneighbors

24RCRAisnottheonlyconsiderationaffectingDuPont'smanagementofsuchplumes.Plumesthatmoveoff-sitecancausecommunityreaction.EvenintheabsenceofRCRA,DuPontwouldtrytomaintaincontainmenton-site.

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

Table2).Ingeneral,environmentalremediationcostsarechargedtoexpense.Environmentalcostsarecapitalizedifcostsincreasethevalueofthepropertyand/ormitigateorpreventpollutionfromfutureoperations.25

25DuPont1994AnnualReport,Wilmington,Del.,p.44.

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

wassetup.26Thatstudyidentifiedallknownsitesandprojectedthepotentialshareofcosts(liabilities)outtobetween30and40years.Thesejudgmentswerecrude,buttheycarriedenoughweightinside

26Proportioncalculationsareactuallymorecomplicated.Anestimateoffutureliabilityforeachplantsiteprovidesthebasisforacorporatereserve.CRGcandrawdownoraddtothatcorporatereserveeachyeartoironoutdifferencesbetweenexpectedandactualcostsoverthecourseofayear.Periodicreviewswithbothinternalandoutsideauditorsareheldtoensurethatthisprocessismanagedproperly.

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

billioninrevenue).DuPontusesthisroughcalculationtoinformallycompareitselfwithotherfirms.

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

backgroundcontaminatelevels,cleanupamoderatelylarge/complexsitetoagreed-upongenericstatestandards,orperformariskassessmentforamorecomplexsiteandchoosearemedybasedontheresultingunderstandingoftherisksposedbythecontaminantsthroughavailablepathwaystoareceptorpopulation.MostDuPontsitesarecomplexandDuPontclearlyprefersthelatter.

RiskassessmentisacoreelementofDuPont'sremediationstrategy.Thebasicnotionistoconsiderriskthepredominantfactorinbuild-

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.

Focusingontransportandfatedramaticallyreducestheuncertaintyassociatedwithriskassessments.Reasonableuncertaintiesabouttoxicityareprobablyhigherthanthoseanywhereelseinthesystemoftenspanningthreeordersofmagnitude.DuPonteffectivelycompromisesonsuchuncertainty,acceptingtheconservative95thpercentileestimatesfromEPA.Thefocusofriskassessmentsbecomesthetransportandfateofthecontaminantandrealisticexpo-

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

asaDOSexecutableprogramunderWindowsanduseshypertexttomovearoundamongsubjectareas,function,andfiles.AWebversionisunderdevelopment.

Substantively,HEARTcontainsawiderangeofmaterialpresentedinseveraldifferentways.Ithasa"logictree"function,whichactslikeacombinationdecisiontreeanddecisionsupportfunctionthatallows

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

hasnoformalmodelorformatfordocumentingcasestudies,butcaptureofexperienceisencouraged.

LessonsLearned

DuPontdrawsthefollowinglessonsfromitsremediationprogrammanagementexperience:

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.

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.

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.

4Environment,Health,andSafety:TheOlinRecord,Olin,Norwalk,Conn.,1995.5Environment,Health,andSafety:TheOlinRecord,Olin,Norwalk,Conn.,1995.

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

Program(ITP)(33/50voluntaryprogram),wastewater,listedreportableemissions,wastemanagementunits,andremediationsites.Goodperformanceisindicatedbyadownwardtrendinthemetrics.

6OlinCorporation1995AnnualReport,Norwalk,Conn.,p.4.7Environment,Health,andSafety:TheOlinRecord,Olin,Norwalk,Conn.,1995.

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

problems.

8Olinmadeheavyuseoftolling,inwhichitsendsintermediatechemicalstoafirmwithprocessingcapacityandpaystohavethesechemicalsconvertedintoafinalproduct.Olinretainsownershipofthechemicalsthroughthiswholeprocessandhenceisresponsibleforanywastegeneratedbytheprocess.Tollingisespeciallyimportantforpesticides.ApparentlyOlinwasadominantproducerofpesticides.9LangsethandLambe,1995,p.105.

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

resourcesacrosssites,beyondthecreationofsiteteams.

Olin'sformalcorporateenvironmentalpolicystatementincludesremediation:

10OlinRemediationProcessNotebook,Charleston,Tenn.,1996.

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-

11OlinCorporateResponsibleCareManual,"EnvironmentalHealthandSafety,"RCPolicyI-1,Norwalk,Conn.,April15,1996.12OlinRemediationProcessNotebook,Charleston,Tenn.,1996.13Baker,1995,pp.2021.

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

movement

14LangsethandLambe,1995,p.111.15Thisdiscussionisbasedonmaterialinthe"RolesandResponsibility"sectionoftheOlinRemediationProcessNotebook,Charleston,Tenn.,1996.

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

andincludestheexecutivevicepresident,thechieffinancialofficer,thevicepresidentsforPublicAffairsandManufacturing&Engineering(thelatterfromthechemicaldivision),thedeputygeneralcouncil,andtheER&Edirector.Thus,theRMBisaseniormanagementboardwithlegal,operations,financial,andpublicrelationsfunctionsrepresented.TheRMBrepresentsthebroadercorporateperspective

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

notionistoincludeconsiderationsofultimatedisposalinthedesignofproducts.Productstewardshipisoftendefinedas"cradletograve";thisdevelopingnotionwouldbetoinclude"whatgoesintothegrave"asadesignparameter.Asignificantelementofthiseffort

16Thedirector,ER&E,istheoverallprocessowner.Thesiteteamleaderistheprocessowneratthesitelevel.

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

characteristicsandneedsofthesite.Thecompositionoftheteam(mixofskillsandfunctions)variesdependingonsitecharacteristics.Bothteamsizeandcompositioncanvaryovertimeasthesite

17Ournotesindicate92sites/92teams,butthisisnotequalto169knownsitesless73inactive.

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

RMTorfunctionalmanagers.Suchproblemsarerelativelyinfrequent,giventhenumberofteamsOlinhasworkingatanyparticulartime.

18Olinidentifiesapproximately510newsitesperyear.

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

relevantgovernmentregulatoryagency.Stepsinimplementationincludedefiningthescopeoftheeffortandassociatedfundingrequirement,obtainingthoseresources(amanagementresponsibility),furtherinvestigationandidentificationofalternatives,recommendationofpreferredaction,andissuanceoftheROD(agencyresponsibility).IfadecisionismadetochallengetheremedyselectionintheROD,thesiteteam(withmanagementsupport)attemptstochangetheROD.Afterfinalagreementisreachedontheremedy,remedialdesignandactionareperformed.Oversightandmonitor-

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.

CategoryB:liabilitybetween$1million$10million.Thesesiteteamsincludeatleastthesiteleader,anenvironmentalspecialist,atechnicalperson,andlegalrepresentation.

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

previousprocess:Priorto1990,mostlegalworkwasconductedbyin-houselawyerswhotendedtobefairlyconservativewithrespecttorisktaking.

Oliniscurrentlyconsideringreducingthenumberofcontractorsonthepreferredlisttogenerateeconomy-of-scaleefficiencies,facilitate

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-

sitedisposal,butenoughtogettheirattention.

19OlinCorporateResponsibleCareManual,"WasteManagementUnitAssessment"RCPolicyIII-2,Norwalk,Conn.,April15,1996.

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

interactionswithstakeholders,includingagencies,community,PRPs,andcontractors.Informationflowsandtheconductofcontractorevaluationsareincluded.Theweightfactoris0.15.

Theactualresultsofthesiteteamsurveyareaggregatedandincludedasanindexnumber.Theweightfactoris0.05.

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

spendingto$30million$40millionannually,reducingthenumberofremediationsitesby5percentperyear,keepingdepartment(ERG)spendingwithinbudget,seniormanagementsurveyshowingcontinuousimprovement,siteteamsurveyshowingcontinuousimprovement,implementingqualityplan(conductingprocessreviewandcompletingactionitems),offeringnosurprisestotheRMB,anddemonstratingthatthevalue-addeditemsexceedOlindirectcostsforremediationby"multiples."

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.

Investigationcosts(M1a):costsofoutside(externalcontractor/consultant)siteinvestigations.Actualcostspersitevarywidely.ThetrendshouldbedownwardasOlinmovesthetotalpopulationofsitesthroughtheremediationlife-cycleandactivitiestransitionfrominvestigationtoremedialactions.

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.

Largesiteswithin25percentofbudget(M3):Percentageofsiteswithexpendituresgreaterthan$100,000thatcameinwithin25percentoftheirbudgets.SimilartoM2,thismetricsuggeststhedifficultyinestimatingsiteremediationcostsandannualexpenditures.

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

asksifOlincouldhavehandledthesebetter.

Siteteamsurvey(M9):thesiteteams'self-rating.Thismetricispartoftheincentivepaycalculation,andsothereissomeconcernofbiasintheresults.Theaggregatemeasureshouldtendtowardindicatingthattheteamisperformingwell.

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

processortechnology.ThesearenotedonthetablesgeneratedforthequarterlyRMTreview.

TheERGhasaminimumgoalofgenerating$8millioninvalue-addedperyear.Thisgoalrepresentsatwo-for-onereturnonthedirectcostsoftheERG(2$4millioninannualdirectcosts).Thisgoalisnotimposedfromaboveandappearstobesomewhat

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

1995.Thedevelopmentprocesswasiterativeasusefulmetricstomeasureindividualandsiteteamperformanceweredeveloped.

StakeholderInteractions

CommunityInteractions

Olinhasidentifiedthreegroupsofstakeholdersforremediation-managementprocesses:regulatoryagen-

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

includesidentificationofkeyaudiences,developmentofthekeymessagesthatOlinwishestoconvey,andnotionalquestionandanswers.Severalvehiclesofcommunicationcanbeused,eachfulfillingadifferentpurpose:

20CommunityOutreach,briefingcharts,Olin,Norwalk,Conn.,September18,1996.

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.

Olinalsohasaformalprocessforcommunityinteractionsthatisfoundedoncommunityadvisorypanels(CAPs).21ThemainpurposesoftheCAPincludeavoiding''surprises"withrespecttocom-

21TheseCAPsarenotthesameasthecommunityadvisorypanelsforoperatingplantsrequiredunderCMA'sResponsibleCareprogram.

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

carbonfiltrationunittoremediatethecontaminationtoawellusedfordrinkingwater,makingthisoneofthefewexamplesofcleanuptodrinkingwaterstandards.OlinandanotherPRPpaidforthisremedy.

OlinhasformalcommunityrelationstrainingprogramsforERGstaff.Thebasicnotionistoassumethatthesiteisinyourownbackyardandtoconsiderwhatinformationyouwouldrequiretobecomfortable.Thetrainingincludesamediacourseandarefreshermedia

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

easierandfaster.

VoluntaryactionisoneareainwhichOlin'seffortstobuildandmaintaingoodrelationshipswithregulatorsisimportant.Olin'srelationship-buildingeffortsincludesurveysofagencies,invitingregulatorstositeteammeetings,andperiodicmeetingswiththedeputyadministratorsoftherelevantEPAregions.Thepurposeofthesehigh-levelregionalmeetingsistointroduceOlin'sremediationpol-

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.

22ThereserveaccrualisforSECreportingpurposesonly;Olindoesnotusethoseestimatesformanagementpurposessince,byregulation,theydonotincludecertaincoststhatshouldbeincludedforcomprehensivemanagement.

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

millionforplantoperations.24Olingenerallyexpectsenvironmentalcashoutlaysof$85million$100millionannuallyoverthenextseveralyears.

23DraftdatedAugust23,1996.OlinRemediationProcessNotebook,Charleston,Tenn.,1996.24OlinCorporation1995AnnualReport,Norwalk,Conn.,p.22.

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

analysiscoststo16percent.27

ThedecreaseinremediationcostsshowninTable4from1993to1995isanaccuratereflectionofthevariabilityinannualremediation

25OlinCorporation1995AnnualReport,Norwalk,Conn.,p.21.26OlinCorporation1995AnnualReport,Norwalk,Conn.,p.21.27LangsethandLambe,1995,p.111.

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

for80percentoftotalliability.29Threeofthese11sitesareintheinvestigationstage,aROD(orequivalent)hasbeenissuedatanother3sites,andtheremaining5siteshavebothRODandinvestigatoryactivitiesongoingconcurrently.These11sitesareallformermanufac-

28OlinCorporation1995AnnualReport,Norwalk,Conn.,p.22.29OlinCorporation1995AnnualReport,Norwalk,Conn.,p.21.

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

eliminatefunctionalbarriersthroughtheuseofteams.

Priorto1990,Olin'sremediationprocesseswerefunctionallyoriented(legal,technical,etc.).Thefunctionsdidnotworkwellto-

30ThemostrecentprocessmapsaredatedJuly31,1996,andappeartoupdateearlier1992versions.OlinRemediationProcessNotebook,Charleston,Tenn.,1996.

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

rolesandresponsibilities,andincentivepay.

Thereappeartohavebeentwofactorsthatenabledthisfundamentalprocesschange.First,allrelevantresourceswere"owned"byasingleseniormanagerwhocoulddirectinitialchanges.Second,mostparticipantsatallorganizationallevelsandfunctionsweredissatisfiedwiththeexistingprocess.

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

aremediationprogram.ThiswaspartofalargerevaluationbyOlinfocusedondeterminingwhetherISO14000certificationmadesenseforthecorporation;theERGfollowed.Whenthecompanymadethedecisionnottopursuecertification,theERGdidnotexploretheconceptfurther.Thedecisionwasbasedonadeterminationthattherewasnovalueaddedtocertificationatthistime:EPAandstateagenciesarenotyetwillingtorelaxregulatoryoversightforcertifiedfirms,

andOlin'scustomers(regulators)arenotyetaskingforISO14000certification.31

LessonsLearned

ThemainlessonsthatcanbederivedfromOlin'sremediationprogramexperienceincludethefollowing:

Developmentandmaintenanceofgoodrelationshipswithregulatoryandotherstakeholdersfacilitatestheremediationprocess.

Performancemeasurementiscriticaltobothmonitoringstatusandensuringhighquality.Measuresshouldincludebothinternalprogram/projectandexternal(stakeholder)metricsandbetiedtobothteamandindividualperformanceevaluations.

Teammanagementandconsensusbuildingwillallowforasmootherprocess.Teamsshouldreflectallmanagementlevelsasappropriate.

Externalserviceproviderscanbecost-effectiveifcarefullymanaged.

Centralizedmanagementfacilitatesstrategycoordinationanddisseminationoflessonslearned.

31OlinisISO9000certified.

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

cost-effectiverisk-basedstrategiesthataddressallurgentrisksandoff-sitecontaminationimmediatelyandthenpressforcost-effectivecontainment.

ThecriticalcharacteristicsofOlin'sremediation-managementprograminclude

centralizedmanagementtoensurecoordinatedstrategyandcontinuousimprovement

abusinessprocessperspective,includingextensiveperformancemeasurement


developmentandmaintenanceofcooperativerelationshipswiththeregulatorycommunityandotherstakeholders

carefullymanageduseofexternalserviceproviders.

Theselistsofcriticalprogramcharacteristicsparallelthe''bestpractices"discussedpreviously.Inparticular,centralizedpolicymakingandresourceallocation,buildingstrongpositiverelationshipswiththeregulatorycommunity,risk-baseddecisionmaking,andbusinessmanagementarecommontoallthreelists.

Thecontrastbetweencentralizedanddecentralizedmanagementdeservesfurtherdiscussion,sincecentralizedmanagementisacoreelementofprogrammanagementinbothcases.Adecentralizedprogrammanagementstructure(i.e.,Exxon1)maybeappropriateformanagingaverylargenumberofgeographicallydisbursedsites.Financialandmanagementresponsibilityresideswiththebusinessunitthatcreatedtheproblem.Whilethisstructureallowsforincreasedresponsivenesstovariationinthestate/localregulatoryenvironment,thereisnocentralcontrol,coordination,orstandardizationof

processes.Acentralizedstructuresimplifiesresponsibilityforcostsandprovidesconsistencyinapproach.Centralizationdoesnotmeanisolationfromlinebusinessunitssiteandplantrepresenta-

1EachbusinessunitinExxonmanagesitsownremediationprogram(personalcommunicationwithRickHarley,TechnicalManager,SiteRemediation,Exxon,June5,1996).

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.

Usetheteammanagementconcept,similartotheintegratedproductteams(IPTs)inacquisitions.Thisincludesemphasizingteamperformanceinindividualperformanceevaluations.

Usethe"cost-as-an-independent-variable"policytohelpintroducebusinessvaluesintoremediationmanagement.Thispolicyessentiallyraisescosttoalevelcommensuratewithperformance

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


performanceevaluationsofindividualsandgroupsemphasizingchange.

Evidencefromthecasestudies,aswellasthegeneralimplementation

literature,suggeststhatestablishingandmaintainingtheseattributesatthebeginningofthechangeprogramwillfacilitatesuccessfulimplementationofthedesiredreforms.

2SeeRestorationAdvisoryBoardWorkshop,1994;andFederalFacilitiesEnvironmentalRestorationDialogueCommittee,1993.3SeeClark,1996.

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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