A support system for mediating brownfields redevelopment negotiations
| Date | 01 February 2005 |
| Published date | 01 February 2005 |
| DOI | https://doi.org/10.1108/02635570510583352 |
| Pages | 237-254 |
| Author | Jayavel Sounderpandian,Nancy Frank,Suresh Chalasani |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
A support system for mediating
brownfields redevelopment
negotiations
Jayavel Sounderpandian, Nancy Frank and Suresh Chalasani
University of Wisconsin-Parkside, Kenosha, Wisconsin, USA
Abstract
Purpose – To present a support system which will be useful to mediators of brownfield
redevelopment negotiations between government and industry representatives.
Design/methodology/approach – The support system optimizes a weighted utility function of the
parties involved in the negotiation. It provides not only the optimal solution but also some sensitivity
reports which the mediator can use to lead the negotiations in the most effective direction.
Findings – The spreadsheet technology is sufficient to solve the optimization problem and produce
sensitivity reports in real time. Consequently, a mediator equipped with a laptop computer can lead the
negotiations efficiently.
Research limitations/implications – It is possible to achieve Pareto optimal contingent contracts
among the stakeholders of brownfield redevelopment projects.
Practical implications – Many negotiations that were stalled in the past could be completed
successfully using the support system presented here. New negotiations might be completed more
efficiently than without the system.
Originality/value – This is the first paper to offer detailed guidance to mediators of brownfield
redevelopment projects.
Keywords Negotiating,Decision support systems, Redevelopment,Process analysis, Employees
Paper type Research paper
Introduction
“Brownfields” refers to “abandoned, idled or under-utilized industrial and commercial
sites where expansion or redevelopment is complicated by real or perceived
environmental contamination” (US EPA, 1997a). Because of the environmental and
health risks associated with such contamination, state and federal laws in the US and
some other countries require the owners of such properties to clean up the
contamination. As a result, real estate investors are cautious in acquiring forme r
industrial and commercial properties because the costs of cleaning up a site could
easily exceed the value of the property (Page and Rabinowitz, 1994). Consequently,
cities face numerous challenges in encouraging redeveloping of contaminated sites
because of additional costs and financial risks associated with environmental liability.
Properties that once were homes to prosperous manufacturing and commercial
activities possess a legacy of environmental contamination.
In order to successfully redevelop these properties, agencies of government (in the
US, usually local governments) need to engage the current owner and a potential
purchaser in negotiations to determine whether between the three parties (government,
owner, and purchaser) sufficient resources can be pooled to clean up and redevelop the
site. This paper develops a negotiation support tool which can be used by a mediato r to
assist in the trilateral negotiations leading to a “deal” to transfer ownership, clean-up,
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Support system
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Industrial Management & Data
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Vol. 105 No. 2, 2005
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DOI 10.1108/02635570510583352
and redevelop a brownfield property. The paper begins with a brief overview of the
scope of the brownfield problem, the parties involved in negotiations, and the leverage
that the government can bring to bear to encourage the other parties to cooperate in the
negotiation process. The paper then presents a negotiation support tool that seeks to
allocate costs over and above what any of the parties have indicated that they would be
willing to pay. The tool uses Microsoft Excel and its Solver macro to create an expert
system that can assist a mediator of the negotiations. Expert systems are widespread
in industrial management (Metaxiotis and Psarras, 2003), and many of them use
spreadsheet technology (Coles and Rowley, 1996). Spreadsheets find many industrial
applications other than expert systems (Pemberton and Robson, 2000), but out
emphasis here is on a negotiation support system.
Nature and scope of brownfields problem
The US General Accounting Office estimates that about 450,000 brownfield sites exist
in the US. State regulatory agencies have cataloged only a fraction of these sites. Costs
of clean-up for these sites are unknown, but some estimates have been made. The US
Environmental Protection Agency (EPA) estimates costs in the $30 billion to $40
billion range (US EPA, 1997a). One can imagine the size of the problem on a global
scale. Although this paper is written in the context of the US, the concepts should be
applicable in many countries.
Brownfields involve several uncertainties including:
.uncertainty about the extent and seriousness of contamination at a site;
.uncertainty in investigation and clean-up costs;
.uncertainty in the length of time that will elapse between commencement of the
investigation and the granting of permission to break ground for new
construction;
.uncertainty in financing the costs; and
.uncertainty in the buyer’s long-term financial liability in the event some
contamination remains following remediation.
Contaminants travel through soil and groundwater in three-dimensional space. The
costs of clean-up depend on how far the contaminants have traveled, whether they are
moving toward potential receptors (such as drinking water wells or surface wate rs), the
toxicity and concentration of contaminants, and site characteristics that impede
clean-up efforts. Environmental consultants are needed to collect data from soil and
groundwater to model the flow of contaminants.
“Surprises” are not uncommon. A contaminant plume that initially appears to be
fairly well localized on the site can turn out to have spread laterally, following old
utility trenches or other “weak spots” in the underground geology. Such surprises
bring the remediation to a temporary halt while environmental consultants conduct
further investigations to ascertain the extent of the contamination and recommend a
revised remediation plan. Meanwhile, the buyer suffers delays, which increases
financing costs. Finally, purchasers are cognizant of the possibility of further surprises
in the future. Although state voluntary clean-up programs have attempted to reduce
the liability risks to parties who voluntarily clean-up contaminated brownfields, many
uncertainties about future liability remain (Schworer, 1997). For example, state
IMDS
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