RISK ASSESSMENTRISK ASSESSMENTRISK ASSESSMENT RISK ASSESSMENT &&RETURN ON INVESTMENTRETURN ON INVESTMENTRETURN ON INVESTMENTRETURN ON INVESTMENT

for Mitigation Customersfor Mitigation Customersgg

MINIMIZING MINIMIZING ANGANG$$TTANGANG$$TT

DEFINITIONSCustomerCustomer

• Private Developer ProducerProducer

• In Lieu Fee Program p• Private Company  • Local, state, regional or federal development agency

g(in‐house)

• Mitigation Bank• Full Delivery Contractorfederal development agency 

• In Lieu Fee Program(out‐source)

• Full Delivery Contractor• Design/ConstructionContractor

InvestmentInvestment• Market costs

RiskRisk• Funds not well‐spent

• Staff Resources• Partnerships• Reputation

• Permits and otherconsequences of notproducing Reputation producing

TEMPUS FUGIT

NC

WETLANDS, STREAMS,BUFFERS & NUTRIENTSBUFFERS & NUTRIENTS

RISK TO CUSTOMERDeveloper or In Lieu Fee Program

RISK TO CUSTOMER

ILF

↓

MB

↓

ILFor

MB

MBor

DBBor

DBBor

FD

indicates presence of risk customer’s responsibility is overh id dto customer when money paid to producer

NCEEP’s Mitigation Procurement Systems

DesignDesign‐‐BidBid‐‐BuildBuildLand Acquisition by State;Land Acquisition by State;Design, Build, & Monitoring Design, Build, & Monitoring g , , gg , , gServices contracted outServices contracted out

and

Full DeliveryFull DeliveryRFP & Competitive SelectionRFP & Competitive SelectionRFP & Competitive SelectionRFP & Competitive Selection

among Full Delivery Contractorsamong Full Delivery Contractors

EXAMPLE:EXAMPLE: NCEEP’s NCEEP’s STAFFINGSTAFFING(50 = 100%)

Production*                                                29  (58%)Production*                                                29  (58%)incl. Full Delivery Administration    2  (4%)

Executive Administrative 21 (42%)Executive Administrative 21 (42%)Executive, Administrative,                       21  (42%)Executive, Administrative,                       21  (42%)Science, and Asset ManagementScience, and Asset Management

Yet, contract value awarded between 2002 and 2010:Design‐Bid‐Build     $  70M (<$3m/production employee) 29%Full Delivery            $174M ($87m/production employee)  71%y $ ($ /p p y )

* “Production” comprises watershed planning, securing permits, and project management through all phases and methods

260NCEEP Annual Mitigation NCEEP Annual Mitigation 

220

260

Orders  Orders  (FY’04 = 100)(FY’04 = 100) FY 08

180

220

FY 09

140

100FY 10•

602001‐02 02‐03 03‐04 04‐05 05‐06 06‐07 07‐08 08‐09 09‐10 10‐11

FY 11EEP begins

2001‐02 02‐03 03‐04 04‐05 05‐06 06‐07 07‐08 08‐09 09‐10 10‐11

INVESTMENTINVESTMENT (I)(I) RISKRISK (R)(R) FLEXIBILITYFLEXIBILITY (F)(F)INVESTMENT INVESTMENT (I)(I), RISK , RISK (R)(R), FLEXIBILITY , FLEXIBILITY (F)(F)Customer  Customer   I           R           F

D l‐ Developer‐ ILFH

H

H H

H

L

M

BankerBanker HH H

DesignerDesigner HM L

Constr. ContractorConstr. Contractor HM M

“Bad” “Good” H = High    M = Medium    L = Low

RISK ASSUMPTION 90

100

CURVESCUSTOMER

GREATER

60

70

80

sk

CUSTOMER(eg, ILF)

40

50

60

t  of R

is

20

30

Extent

PRODUCER(eg, Banker)

0

10

0 10 20 30 40 50 60 70 80 90 100

LOWER

0 10 20 30 40 50 60 70 80 90 100

Out‐Sourced  %

Return on Investment influenced byReturn on Investment influenced by

Q lit f Miti tiQuality of MitigationQuantity of MitigationQ y gCredit Availability ScheduleO i i l ibiliOrganization Flexibility

and subject to risks taken/assumed

10

HIGHER

8

9

turn

6

7

 of  Re

t

4

5

e Ra

te 

RETURN ON 2

3

Relativ

INVESTMENT CURVES

0

1

0 10 20 30 40 50 60 70 80 90 100

R

LOWER

Out‐Sourced  % →

CONCLUSIONSCONCLUSIONSCUSTOMER CUSTOMER BUSINESS MODEL BUSINESS MODEL IS IS KEY TO SUCCESSKEY TO SUCCESS

1. HIGH IN‐HOUSE PRODUCTIONNeed staff that includes individuals with naturalresources education & training, and individualsresources education & training, and individuals with project management skills; larger staff

2 HIGH OUT SOURCED PRODUCTION2. HIGH OUT‐SOURCED PRODUCTIONNeed staff of individuals with natural resources education & training, plus project management g, p p j gskills; fewer staff

CONCLUSIONS CONCLUSIONS (continued)(continued)

3. CUSTOMERS SHOULD DECIDE ON PRIMARY PRODUCTION METHODNot a QUALITY vs. QUANTITY QUALITY vs. QUANTITY issue, both are achievable either method and transition from in‐house to out‐sourcemay be challenging but is possiblemay be challenging but is possible

4. OUT‐SOURCING OFFERS MOST FLEXIBILITYIn temporary economic downturn, production staffhave skills to manage and evaluate smaller program

THE ENDTHE ENDTHE ENDTHE END

David RobinsonDavid Robinsondcr@fulldcr@full‐‐delivery.comdelivery.com

www.fullwww.full‐‐delivery.com/contact.htmldelivery.com/contact.html