The process of and barriers to environmentally-oriented real estate development : examining the role of organizational structure, project delivery methods and contracts in low impact development

Abstract

Low Impact Development (LID) is a site planning approach that limits the environmental impact of development on the local hydrological regime. By preserving and mimicking natural landscape features, LID introduces a new site planning and stormwater management paradigm to mainstream real estate development and represents a product innovation in the industry. Through the examination of three case studies, this thesis explores the sources of innovation and the risks of implementation. It then examines whether changes to delivery and contract structures might be necessary to redistribute risks and incentives among members of the development team in order to realize LID practices. The investigation finds that the private sector plays an integral role in advancing LID. Often developers are the first adopters of this innovation. The success of their projects motivates municipalities to encourage the innovation through regulation and training. The projects that present the most innovative approach institute small, integrated, multi-disciplinary corporate and project team structures. Examining the process of implementing LID practices reveals that innovation does not introduce new sources of risk; rather it exacerbates existing sources of risk at each phase of development.

(cont.) Much of this increase in risk is related to the innovation's nascent stage of adoption and is related to informational or educational lags in the industry. Incremental process innovation is crucial to proper implementation of LID practices. The design phase should incorporate environmental analysis, include a diverse in-house team with environmental backgrounds, and encourage collaboration between generalists and specialized consultants. Other process innovations should be structured to educate industry professionals about the principles and practices unique to LID. The appropriate project delivery and contract arrangement is dependant on the extent to which a project adopts the full suite of LID practices. In instances of moderate product innovation, developers focus on process innovation and seek unilateral control through the multiple primes delivery method and time & material contracts. These structures place the most risk and incentives with the developer, who is best-suited to lead the process. Conversely, in projects that focus on product innovation and adopt the breath of LID's technical practices, the developer relinquishes control of the process, assigning the risk (and associated incentives) of delivery to specialized consultants who are better able to realize the innovation.