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Loaded Lovers: Virginia Department of Transportation overspends on wetland mitigation bank

Whew, I’m relieved Restoration Systems isn’t following the Virginia Department of Transportation’s business plan for mitigation — we’d be out of business.

Travis Hamrick came across this TV news story revealing that VDOT had spent — get this — $5.1 million building a mitigation bank. Now that might be excusable if the agency had wetted up thousands of acres, or restored a river like RS did at Carbonton, but the story says the project yielded a mere mile of stream restoration and 36 acres of wetlands.

Let’s do some speculative math. If you split the spending equally between the two resource types, $2.5 mil to stream, and $2.5 mil to wetlands, it would work out to $473 per foot for restored creek and $70,000 per acre of restored wetland.

Those Virginia Lovers must be loaded!

Seriously, this is what happens when centralized government agencies perform environmental mitgation “in-house,” and contract out other parts only in a piecemeal fashion.

For instance, here is VDOT employee Randy M. Baker (obviously a good fellow) planting Willow stakes himself at the Eagle Rock Mitigation Bank. In our humble opinion, Virginia would have been better off if Randy had stayed in Richmond and administered a Full-Delivery Contract to have turn-key mitigation providers compete to provide the mitigation, and plant the trees, at a flat price for the lowest cost.

The Full-Delivery process has been an unqualified success in North Carolina. A foot of stream, in even the most difficult regions of the state, is regularly constructed for just over $300. I have never seen a bid accepted anywhere near the $573 we assume here for the VDOT work.  Wetlands vary, but only once in hundreds of offers have I ever seen a fresh water price meet or exceed the $80K paid here.

It is not that VDOT employees like Mr. Baker and others are incompetent or recklessly wasteful. It is just that VDOT has not discovered what the North Carolina, and recently South Carolina, DOT’s have realized: Mitigation is a complex multi-part exercise that lends itself to competitive Turn-Key “Full-Delivery” contracting — outside the mitigation banking framework — by regulated entrepreneurs.

For instance, land acquisition is inevitably more expensive and cumbersome when performed by the government agency in need of mitigation, rather than a private business approaching a landowner person-to-person.

Same goes for the dirt moving. The construction cost here was $3,339,140. RS has constructed over 35 mitigation sites of many different acreages and flavors but have never spent such a sum on the restoration construction.

An established mitigation provider who has won a qualitative low-bid, bonded, Full-Delivery performance contract from the state is going to more closely manage his construction partner (usually a long-term relationship) for cost overuns, than the government agency.

As for the design, that clocked in at…sit down…$845,209. Anyone reading this in the mitigation business knows what that means: They got fleeced.

Enough criticism. I have a suggestion. The Virginia Department of Transportation needs to call the doctor: Dr. David Robinson. Robinson is widely recognized as the father of “Full-Delivery” mitigation. Here is his website: http://www.full-delivery.com/

Robinson could give valuable advice (literally) to VDOT. Full-Delivery seems to be working in South Carolina, where more than a dozen competitive bids were recently received for large mitigation needs around Florence. It has long worked in North Carolina (as we know). It seems now is the time for VDOT…to give a shot….to Full-Delivery mitigation providers.

Dr. David Robinson: Father of Full-Delivery Mitigation

We just returned from the National Mitigation Banking Conference last week in Sacramento, where old friend David Robinson gave an excellent presentation on the benefits of “Full-Delivery” mitigation procurement systems. You can also view it here on his website:  http://www.full-delivery.com/

By way of background, as some readers will know, the NC Ecosystem Enhancement program is North Carolina’s unique, state-wide, non-regulatory, Fee Program. The NCEEP sells hundreds of millions of dollars of mitigation to the public and the government at government established rates. The NCEEP is the funnel through which the vast majority of mitigation in North Carolina flows.

The program develops the mitigation sold to the public in two ways.  ”In-House,” where the state identifies the land and purchases it themselves, then contracts with separate firms to design, construct, and care for the site, with no firm responsible for the entire project, and various state employees responsible for various parts.

Or, the NCEEP accomplishs the mitigation by conducting a bonded, public, low-bid system called “Full-Delivery.” In the Full-Delivery system, companies like Restoration Systems will identify and contract for the purchase of the land privately; and, if awarded, acquire, design, construct, and care for the site long term — with all resulting credits accruing to the state.

Back to Dr. Robinson. David was instrumental in the development of Full-Delivery mitigation as the preferred alternative for large state purchases of compensatory mitigation in North Carolina. He mid-wifed the birth of the innovative procurement system at the Department of Transportation in the 1990’s and has seen it adopted by other agencies, and other states, lately including South Carolina.

Robinson makes the case here that large government purchases of environmental mitigation should utilize a competitive “Full-Delivery” procurement model that lowers costs, reduces risk for the buyer and stimulates green jobs for the economy.

Take it away Dr. D….

Robinson on Full-Delivery mitigation for wetlands, streams and other natural assets

It Never Gets Old

Victory on Jones Street: New state law means big changes for mitigation in North Carolina

As poorly headlined in last Sunday’s Raleigh News and Observer [Legislature OK’s Rule on Streams 6/19/2011], our little state trade association, the North Carolina Environmental Restoration Association, had a huge legislative win in the just adjourned 2011 session of the North Carolina General Assembly.  It is not our way at RS to get out ahead of ourselves, so Stories from the Field wanted to wait until the Governor signed the bill before announcing this bit of good news for the ecological balance of the Tar Heel state and commercial mitigation.

She signed it last night.

SESSION LAW 2011-343 puts the state fee-program and private mitigation banks in much closer compliance with the 2008 Federal Mitigation Rule by establishing a statutory preference for mitigation bank credits in North Carolina in almost all cases, as well as establishing “Full-Delivery” turn-key mitigation as the preferred method for contracting for the state’s continuing fee-program obligations where banks are not yet available.

The law continues the wise policy taking hold nationwide of transferring responsibility for restoring and caring for compensatory ecosystems from governments to privately capitalized and bonded green firms like RS and our competitors.  It almost ensures that mitigation in North Carolina will continue its progress from a state monoply functioning with state mandated “static” prices, to a vibrant ecosystem services market with true-cost competitive pricing.

All progress in commercial mitigation is incremental.  A win in the legislative halls for the NCRA is a long way from the bottom line of any individual company. But this legislation may finally have turned the ship of state in North Carolina toward performing mitigation that is not established according to available funds — but priced according to true costs.

The former method, state production and pricing, has failed miserably as detailed in the recent News and Observer series, “Washed Away.”  The latter method endorsed by the new law – establishing mitigation and then market pricing it for sale — makes sure that someone (I hope RS) is taking personal economic and ecological responsibility for a given impact to the waters of the U.S. within our state.

The bill description below may read like a wonky little change to policy but it makes a huge difference on the ground. It allows the green shoots of true-cost restoration and advance mitigation to grow in Tar Heelia without fear of being plucked by the cold dead hand of The Leviathan.

I can’t let this post end without giving a shout-out to the NCERA lobbyist from McGuireWoods Raleigh office, Harry Kaplan.  It takes a special kind of patience to navigate legislation in a heretofore unknown field with desperate entrepreneurs nipping at your heels in the halls.

Here is Harry’s summary of the law:

Analysis of Senate Bill 425:

During their 2008 Regular Session, the North Carolina General Assembly enacted legislation to provide that, under certain circumstances, certain applicants for compensatory wetlands mitigation must seek that mitigation from a private wetlands mitigation bank before seeking that mitigation from the Ecosystem Enhancement Program (“EEP”) in the North Carolina Department of Environment and Natural Resources. During their 2009 Regular Session, the General Assembly enacted legislation to extend this preference for private mitigation to the areas of riparian buffer protection and nutrient offsets. Under the law prior to the enactment of Senate Bill 425, the preference for private mitigation and nutrient offset did not apply to the State, the federal government, or to local governments.

Section 1.1 of Senate Bill 425 amends the definition of “governmental entity” in GS 143-214.11 (Ecosystem Enhancement Program: compensatory mitigation) so that the preference for private mitigation and nutrient offsets now applies to local governments unless the unit of local government was a party to a mitigation banking instrument executed on or before July 1, 2011, notwithstanding subsequent amendments to such instrument executed after July 1, 2011. Section 1.1 defines a “private compensatory mitigation bank” as a site created by a private compensatory mitigation provider and approved for mitigation credit by State and federal regulatory authorities through execution of a mitigation banking instrument. No site owned by a government entity or unit of local government shall be considered a “private compensatory mitigation bank.” Section 1.1 also requires an existing local compensatory mitigation bank to comply with the requirements of Article 12 of Chapter 160A of the General Statutes governing the sale and disposition of property whenever it transfers any mitigation credits to another person.

Section 1.2 of Senate Bill 425 establishes a new process by which the EEP provides for compensatory mitigation. This new process creates a priority system for different types of programs for the procurement of compensatory mitigation – with “Full Delivery/Bank Credit Purchase Program” listed as the first priority. Under Senate Bill 425, EEP must first seek to meet compensatory mitigation procurement requirements through its Full Delivery program or by the purchase of credits from a private compensatory mitigation bank, as defined above.

Senate Bill 425 became effective when it became law on June 17, 2011 and applies to all projects and contracts awarded on or after that date.

Fee not Banks in Louisiana?

A friend sent me an interesting PowerPoint this morning.  I can’t say I agree with all the conclusions — particularly Slide 42 where NO negatives are identified with Fee Programs — but I am sympathetic with the authors. Louisiana is indeed woefully under-served by mitigation banks and professional delivery systems. The banks that are available seem (how can I put this delicately) kind of  “old school.”  Most of them, but not all, seem to be ad-hoc affairs where an enthusiastic landowner plopped down a bank at the best place — for him — land he owned.  In short, the banks seem to be located on available land — not ideal land.

I contend the state of Louisiana won’t do much better job than the private sector if they follow the traditional fee program path.  Fee Programs tend to get wrapped around the axle on certain matters, such as inappropriate government established “static” pricing of the mitigation credit, and the inablity of state employees to properly “wheel and deal” in the assemblage of the appropriate real estate.  The sad truth is, fee programs often end up over-or-under pricing their wares, and\or siting their project on state property or donated land — neither of which is ideal.

What to do?   If one must — simply must — establish a state clearing house for mitigation, the actual projects should be purchased\funded using the same model the North Carolina fee program operates:  Full Delivery.  Full Delivery mitigation projects are contracted “turn-key” restoration projects purchased to fulfill mitigaiton obligations, like those generated by a fee program.

Full Delivery operates  under a “two-envelope” bid system whereby a sealed technical proposal and a sealed cost proposal are solicited from qualified vendors to be opened at a date certain.  Full Delivery providers, such as Restoration Systems, respond to these bid advertisements with the following:

  • A Land Contract allowing the provider to “close” the necessary real estate (fee-simple or easement) if the bid is awarded.
  • A conceptual plan for the restoration of the subject property.
  • A justification of the project goals and location in light of state and federal planning efforts.
  • A commitment to obtain an A+ rated Surety Bond to guarantee success of the project.
  • A flat, not to exceed, per unit and total price.
  • Several dozen other commitments and determinations.

How Government Successfully Purchases Large Amounts of Wetland Mitigation and Environmental Restoration: T…

Above is a typical Request for Proposals from the North Carolina Ecosystem Enhancement Program

The technical envelope is opened first and the project is reviewed by state personnel from a quality standpoint alone, including a team visit to the site with the provider.  If the state wants, it can kick out any site it does not like at this stage — no questions asked.  Those that pass muster, however, are given a “technical score” that adjusts the final price so that higher quality project can have some chance of beating lower priced project.

Finally, those projects passing technical review and receiving scores have their “cost envelopes” opened.   The per unit cost is then  modified by the technical score, and awards are made.  I should stress that even AFTER the technical and cost proposals are opened and approved, the state can still reject any or all all  bids without explanation, if doing so is deemed in the interest of the state.  The entire cost to the state of generating dozens of qualified proposals for “turn-key” project under the Full Delivery is $0.  Yet the state is provided with multiple optinos for restoration at a price certain, with no chace of cost over-run.

Pretty cool, huh?  Literally hundreds of projects and dozens of firms have been funded in this manner by North Carolina, to the tune of several hundred million dollars. Billions of dollars are to be spent in Louisiana for compensatory mitigation of civil projects, such as state and federal levee construction, and relatively little thought has gone into best way to contract for the work.  This system works quite well and should, in my humble opinion, serve as the basis for the acquisition of  mitigation and coastal protection projects in the Pelican State.

NOTE:  The meat of the mitigation discussion begins on Slide 23.

Louisiana In-Lieu-Fee Wetland Mitigation Program Propsal