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If you don’t know about the surface and subsurface conditions of your site before construction, you will when your project is being built. While the conditions of the site are unlikely to change during construction, the cost of dealing with any issues only goes up with time, and the number of available solutions only goes down. The earlier you can discover potential issues, the more successful your project will be. That’s where dirt diligence comes in.
What is “dirt diligence”?
Dirt diligence is an informal term for the portion of the due diligence process focused on uncovering existing condition risks in the land itself rather than any structures that may be on the land.
What types of environmental risks does dirt diligence uncover?
Existing condition risks in the land fall into five main categories: geotechnical, environmental, survey, planning, and infrastructure.
1. Geotechnical Risks
Geotechnical risk is associated with the physical characteristics and content of the soils on the site. Understanding the quality and types of soils is critical to understanding what types of buildings are suitable to build on that site. It also helps a developer understand what level of soil improvement or foundation design is required to build the desired project.
If grading and excavation are required on a project―which is often the case―having an understanding of the presence and depth of rock on the site is also critical. Rocky soils make it more difficult and expensive to dig. If layers of rock are present and close enough to the surface to cause impacts to the project, blasting or other physical means of removing the rock are often required, at higher cost to the project team.
One of the main challenges with rock is that the presence of rock is not always consistent, but testing every square inch of soil is impractical and cost prohibitive.
While a building foundation can be shifted in design to avoid rocky soils, utility lines present another issue. Certain utilities need to be located underground, and with larger sites the amount of rocky soil removed for a long trench can be expensive.
Another geotechnical risk is unsuitable soil. Unsuitable soil can mean naturally occurring soft soils with a high level of organic materials or non-naturally occurring soils or fill material that were placed on site by a previous owner. On older sites in populated areas or farmland, it’s not uncommon to find unregistered trash dumps buried on site.
2. Environmental Risks
Environmental risks can include soil and groundwater contamination, stream and wetland impacts, flooding, and endangered species.
Soil & Groundwater
Soil contamination is often the result of a previous use for the site where a spill or a failure in an existing buried storage tank occurred. As mentioned above, sometimes other items like trash are buried on site that can cause contamination. Some soil and groundwater contamination is caused by known factors, while other contamination is caused by agents that at the time of use were thought to be harmless.
Contaminated soil can also impact the groundwater on site. Contaminated soil and/or groundwater can restrict a developer’s ability to use a drinking or irrigation well on site. Vapor intrusion as a result of contaminants found in soil and/or groundwater can also infiltrate the building envelope and cause issues for the occupants.
Streams & Wetlands
To keep our streams and waterways clean and healthy there are often limits put in place to limit the impact of our built environment on these waterways. In addition to understanding what those limits are, it’s critical to understand where any streams or wetlands may exist, and to further understand how those streams and wetlands will be classified by regulators. Different classifications have different limits, both physical and regulatory.
Floodplains
Another aspect of water that has a profound impact on land use patterns in our city is the location and regulation of floodplains. Not only do the regulations surrounding development in the floodplains change over time, but with climate change and sea level rise, the locations and impact of floodplains change over time.
Endangered Species
Like many other items on our due diligence list, the presence of endangered or protected species on your site can have a profound impact on how, what, and when you can build your project. The presence of migratory animals can also change throughout the year, so it’s best to get a firm understanding of the risk and impacts early on in the process.
3. Boundary & Topography Risks
With a survey you can understand the physical boundary of a site as well as measure the shape of the surface of the land. You can also measure and map various aspects of the existing conditions, like building footprints, underground utilities and storage tanks, the location of wetlands, and the location and density of tree coverage.
Surveys also make the unseen visible. A physical survey can show the location and boundaries of existing property lines and easements. Records research―which can involve physical records, digital records, or both―can reveal other legal restrictions and agreements that may encumber a property. These constraints may exist only in legal agreements and on deeds, but they can absolutely impact the future physical design and layout of a project. Disputed property boundaries can grind work to a halt while the parties determine the rightful owner.
4. Planning Risks
Looking at the current land use regulation on the site as well as understanding the future land use plans and other planning efforts that may impact the site can help reduce risk when it comes to getting entitlements for your development. Having appropriate zoning for your use is helpful, but there are likely many other regulations in the development ordinances or Unified Development Ordinance (UDO) that can impact your project.
Some of these regulations include street frontage requirements, setbacks, parking regulations, building height, and other open space requirements.
In addition to the existing requirements, a rezoning or variance may be required to build the desired project.
5. Infrastructure Risks
Infrastructure, particularly utility infrastructure, is like the cardiovascular system in the human body. Much of it remains unseen, but no building or project can survive long term without access to water, sewer, power, transportation, and other infrastructure.
For sewer infrastructure, gravity systems are ideal. The catch is that gravity systems depend heavily on the physical characteristics of a site and adjacent sites, as gravity only moves sewage in one direction: downhill. When gravity is not on your side, pump stations can help move wastewater where it needs to go, but they do represent an additional cost to engineer and construct.
Having a strong understanding of not only your access to existing infrastructure but also how your site may play a role in providing access to the same is critical to the success of a project.
How can developers measure and evaluate risk?
Risk has two dimensions: the likelihood of a negative outcome and the magnitude of a negative outcome. Risk can be understood as the product of these two values multiplied together.
If a situation has a low likelihood of happening and a low level of impact, then it can be defined as low risk. Alternatively, if the situation has a high likelihood of happening and a high level of impact, then it is a high risk.
To evaluate risk, developers can use a risk matrix. The columns represent the likelihood that a negative outcome will occur. The rows represent the magnitude of the negative outcomes. Columns and rows intersect in cells that represent a specific, quantifiable level of risk. The matrix uses bands of color to show different levels of risk: green means low risk, yellow means moderate risk, orange means high risk, and red means extreme risk.
Low- and high-risk events can be pretty simple to understand. The more challenging aspects of risk are usually in the middle. Also, while some risks operate on a spectrum between high and low impact and probability, some risks are binary, meaning they either happen or they don’t.
How can developers mitigate the environmental risks revealed by dirt diligence?
Developers act as risk mitigation strategists. The more a developer understands the risks in a project, the more flexibility and options they have. Fortunately, one of the unique differences about risk in due diligence is that the level of risk is limited because the developer doesn’t yet own the land.
Understanding the risk factors with a new project can be a daunting task, but there are three steps developers can take to demystify the process:
- Start the due diligence process as early as possible. Many risk factors can be discovered with time and resources, but the key to success is often understanding how much due diligence is required to reduce your risk to a comfortable level. It’s almost impossible to reduce all risk.
- Work with local experts who have boots-on-the-ground knowledge of the site. Hiring a consultant with institutional knowledge of a site and market can help frame the appropriate level of due diligence. A consultant who understands your desired development program can create a team that sees opportunities where others see obstacles.
- Prepare to adjust financial projections based on risk. The more risk in a project, the more financially conservative the developer’s projections need to be if they want the project to be financially viable.
The bottom line
Understanding the existing conditions of your site is a critical part of the due diligence process. Getting the appropriate amount of information on your site before starting construction while trying to limit your financial exposure and maintaining a tight schedule can be a challenge. Engaging a consulting team early in the process, one who has a strong understanding of the site, area, and applicable regulations, is critical to a smooth due diligence period.
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