B-166506, JUL 1, 1974

B-166506, JUL 1, 1974

REGULATIONS AUTHORIZING AWARD OF SINGLE GRANT FOR BOTH DESIGN AND CONSTRUCTION STEPS OF WATER POLLUTION FACILITY ARE INCONSISTENT WITH PROVISIONS OF FEDERAL WATER POLLUTION CONTROL ACT, AS AMENDED, AND MUST BE CHANGED PRIMARILY BECAUSE STATUTE AUTHORIZES GOVERNMENT COMMITMENT TO PAY SHARE OF COSTS OF PARTICULAR STAGE ONLY UPON APPROVAL OF PLANS, SPECIFICATIONS AND ESTIMATES WHICH ARE LACKING FOR CONSTRUCTION PORTION AT TIME OF GRANT AWARD. ALSO, CONGRESS WISHED TO ELIMINATE MAKING LARGE CHARGES AGAINST STATE ALLOTMENT PRIOR TO NECESSITY THEREFOR. GRANTS TO WHICH GOVERNMENT IS ALREADY COMMITTED NEED NOT BE ANNULLED. B-166506, FEBRUARY 4, 1974, 53 COMP. GEN. , IS AFFIRMED.

MORE EFFICIENTLY UTILIZED BY NOT CONTINUING THE PREVIOUS PRACTICE OF

LEGAILITY OF ENVIRONMENTAL PROTECTION AGENCY:

THIS DECISION TO THE ADMINISTRATOR OF THE ENVIRONMENTAL PROTECTION AGENCY IS IN RESPONSE TO A REQUEST BY THE ASSISTANT ADMINISTRATOR FOR ENFORCEMENT THAT WE RECONSIDER OUR DECISION OF FEBRUARY 4, 1974, B 166506, 53 COMP. GEN. , IN WHICH WE HELD THAT THE ENVIRONMENTAL PROTECTION AGENCY (EPA) MAY NOT IN ONE AWARD MAKE A SO-CALLED STEP 2 STEP 3 GRANT FOR WATER TREATMENT WORKS UNDER THE FEDERAL WATER POLLUTION CONTROL ACT (FWPCA), AS AMENDED BY PUBLIC LAW 92-500, OCTOBER 18, 1972, 33 U.S.C. 1251. A STEP 2 STEP 3 GRANT IS ONE GRANT WHICH INCLUDES FUNDS FOR BOTH THE DESIGN AND CONSTRUCTION STAGES OF THE PROJECT.

IT IS EPA'S VIEW THAT NEITHER THE STATUTE NOR ITS LEGISLATIVE HISTORY PRECLUDE THE AWARD OF A STEP 2 STEP 3 GRANT FOR A WASTE TREATMENT WORKS PROJECT. WHEN IT APPROVES SUCH A GRANT, EPA CONTENDS, IT IS FISCALLY OBLIGATING THE ENTIRE AMOUNT OF THE FEDERAL SHARE OF THE TWO STAGES OF THE PROJECT BUT IS NOT CONTRACTUALLY OBLIGATED TO PAY ITS SHARE OF THE CONSTRUCTION STAGE UNTIL, AS A CONDITION PRECEDENT, IT HAS APPROVED THE DESIGNS (I.E., THE DETAILED PLANS, SPECIFICATIONS AND ESTIMATES) DEVELOPED UNDER THE STEP 2 PORTION OF THE GRANT. THE CONGRESSIONAL CONCERN IN EPA'S VIEW, WAS TO IMPROVE THE PAYMENT PROCEDURES UNDER THE PRE-1972 VERSION OF THE FWPCA; TO AUTHORIZE THE UTILIZATION OF A MORE FLEXIBLE GRANT PROGRAM; AND TO FOLLOW THE MODEL PRESENTED BY THE FEDERAL-AID HIGHWAY ACT. EPA STATES IT HAS COMPLIED WITH THE INTENT OF THE CONGRESS IN THESE MATTERS. INSOFAR AS THE CONGRESSIONAL INTENT THAT THE AUTHORIZED FUNDS BE OBLIGATING THE ENTIRE AMOUNT OF A TREATMENT WORKS PROJECT, EPA STATES THAT IT INTENDS TO USE THE STEP 2 STEP 3 AUTHORITY ONLY FOR A NUMBER OF LOW- DOLLAR GRANT AWARDS MADE FOR RELATIVELY MINOR BUT NECESSARY TREATMENT WORKS CONSTRUCTION WHICH COULD BE, DESPITE THE LOW COST, OF CRITICAL IMPORTANCE TO THE COMMUNITY AND FOR EMERGENCY SITUATIONS. EPA BELIEVES THAT UNDER THESE CIRCUMSTANCES THE AWARD OF SUCH GRANTS WILL BE IN ACCORD WITH THE CONGRESSIONAL INTENT.

WE CANNOT AGREE WITH EPA'S POSITION ON STEP 2 STEP 3 GRANTS. WE ARE UNABLE TO SEE A DISTINCTION BETWEEN A FISCAL OBLIGATION AND A CONTRACTUAL OBLIGATION WITH RESPECT TO THIS PARTICULAR GRANT PROGRAM. NOR CAN WE AGREE WITH EPA THAT ITS APPROVAL OF STEP 3 IS SUBJECT TO A CONDITION PRECEDENT THAT IT APPROVE THE PLANS, SPECIFICATIONS AND ESTIMATES (PS&E) DEVELOPED IN THE STEP 2 PORTION OF THE STEP 2 STEP 3 GRANT.

PROSPECTIVE GRANTEES MUST SUBMIT TO EPA THE PS&E WITH THE APPLICATION FOR EACH STAGE (I.E., STEP) OF THE PROJECT. SECTION 203 OF THE FWPCA STATES THAT EPA'S APPROVAL OF THE PS&E "SHALL BE DEEMED A CONTRACTUAL OBLIGATION OF THE UNITED STATES FOR THE PAYMENT OF ITS PROPORTIONAL CONTRIBUTION TO SUCH PROJECT." IN OUR VIEW EPA'S PURPORTED "FISCAL OBLIGATION" OF A GRANT FOR BOTH STEP 2 AND STEP 3 WOULD HAVE THE EFFECT OF CONTRACTUALLY OBLIGATING THE GOVERNMENT TO PAY ITS SHARE OF BOTH THE STEP 2 AND THE STEP 3 STAGES OF THE PROJECT PRIOR TO EPA'S APPROVAL OF THE PS&E FOR STEP 3, SUBJECT ONLY TO THE DEFEASANCE OF STEP 3 IF THE GRANTEE FAILS TO SUBMIT APPROVABLE PS&E (DEVELOPED, OF COURSE, IN STEP 2) FOR THAT PROJECT. OTHER WORDS WE BELIEVE THAT THE PROCEDURE NOW AUTHORIZED BY EPA'S REGULATION, IN EFFECT, CONTRACTUALLY OBLIGATES THE UNITED STATES TO PAY ITS SHARE OF BOTH THE DESIGN AND CONSTRUCTION STAGES OF THE PROJECT PROVIDED THE GRANTEE COMPLIES WITH ALL GRANT REQUIREMENTS. IN OUR VIEW EPA'S RETENTION OF THE RIGHT TO ANNUL OR TERMINATE THE STEP 3 PORTION OF THE GRANT IF APPROVABLE PS&E ARE NOT SUBMITTED TO AND APPROVED BY EPA, IS NO DIFFERENT FROM THE RIGHT IT RETAINS TO ANNUL OR TERMINATE THE GRANT IF OTHER GRANT REQUIREMENTS ARE NOT MET BY THE GRANTEE. THUS, WE FEEL THAT THE AWARD OF ONE GRANT FOR BOTH PROJECT STAGES IS IN DEROGATION OF THE STATUTORY PROVISION THAT THE GOVERNMENT WILL BECOME OBLIGATED TO PAY ITS SHARE OF PROJECT COSTS ONLY UPON EPA'S APPROVAL OF THE PS&E OF THAT PARTICULAR PROJECT STAGE.

WE AGREE WITH EPA THAT IN 1972 THE CONGRESS WISHED TO ESTABLISH A MORE FLEXIBLE PROGRAM THAN THAT WHICH EXISTED UNDER THE PRIOR VERSION OF THE FWPCA AND IN PARTICULAR IT WISHED TO IMPROVE THE PAYMENT PROCEDURES WHICH HAD PREVIOUSLY REQUIRED EPA TO MAKE ITS FIRST PAYMENT ONLY AFTER 25 PERCENT OF THE ACTUAL CONSTRUCTION WAS COMPLETED AND TIED THE REMAINING FEDERAL PAYMENTS INTO THE PERCENTAGE OF COMPLETION OF THE ENTIRE WASTE TREATMENT FACILITY. ALSO WE DO NOT QUESTION THAT IT WAS SUGGESTED BY THE CONFERENCE REPORT THAT THE FEDERAL-AID HIGHWAY ACT BE USED AS A MODEL. FOR OUR PURPOSES HERE IT APPEARS THAT EPA HAS COMPLIED WITH THE AFOREMENTIONED INTENDED CHANGES IN THE ADMINSTRATION OF THE FWPCA WATER POLLUTION GRANT PROGRAM ALTHOUGH, AS EPA HAS INFORMALLY INDICATED, BASIC STATUTORY AND PROGRAMMATIC DIFFERENCES DO NOT ALLOW, OF COURSE, FOR THE FWPCA AND THE HIGHWAY PROGRAM TO BE IDENTICAL.

AS WE NOTED IN OUR FEBRUARY 4 DECISION, THE CONGRESS WISHED TO DISCONTINUE THE PRIOR PRACTICE OF MAKING UNNECESSARY CHARGES AGAINST A STATE'S ALLOTMENT AT ONE TIME FOR A SINGLE OR A FEW LARGE TREATMENT WORKS IN ORDER THAT CONSTRUCTION OF TREATMENT WORKS PROJECTS COULD PROCEED ON A BROAD FRONT. EPA DOES NOT APPEAR TO DISAGREE WITH THIS VIEW OF THE LEGISLATIVE INTENT. HOWEVER, IT STATES THAT THE CIRCUMSTANCES IN WHICH IT PLANS TO USE THE STEP 2 STEP 3 GRANT WILL NOT POSE THIS PROBLEM SINCE IT INTENDS TO USE THIS AUTHORITY IN ONLY TWO SITUATIONS: (1) WHERE THE GRANT AMOUNT IS SMALL BUT THE PROJECT IS VITAL TO THE COMMUNITY AND (2) WHERE AN EMERGENCY HAS NECESSITATED SWIFT ACTION TO HAVE A TREATMENT FACILITY OPERATIONAL.

EPA'S REGULATIONS DO NOT ATTEMPT TO DEFINE A SMALL PROJECT BUT WE HAVE BEEN INFORMALLY ADVISED BY MEMBERS OF ITS STAFF THAT IT WAS THINKING IN THE $500,000 RANGE. WHILE WE ARE UNAWARE OF THE NATURE OF EACH PROJECT, WE HAVE NOTED THAT EPA HAS AWARDED SEVERAL STEP 2 STEP 3 GRANTS IN AMOUNTS OVER $5 MILLION INCLUDING A FEW IN THE $16 TO $18 MILLION RANGE. IN ANY EVENT THERE IS NOTHING IN THE STATUTE WHICH DIFFERENTIATES BETWEEN LARGE AND SMALL PROJECTS AND WE ARE NOT AWARE OF ANY MEANS BY WHICH TO DRAW SUCH A DISTINCTION. THUS, IN OUR OPINION, THE STEP 2 STEP 3 GRANT MECHANISM MAY NOT BE USED FOR EITHER LARGE OR SMALL PROJECTS.

EPA'S REGULATIONS SIMILARLY DO NOT DEFINE EMERGENCIES. HOWEVER, MEMBERS OF EPA'S STAFF HAVE INFORMALLY ADVISED US THAT AN EMERGENCY IS A SITUATION WHERE PROMPT ACTION NEEDS TO BE TAKEN AS A RESULT OF A NATURAL DISASTER OR SIMILAR TYPE SITUATION AND NOT A MERE FAILURE TO MEET WATER QUALITY STANDARDS PER SE (EVEN WHERE SUCH FAILURE PLACES THE GRANTEE INVOLVED UNDER AN EPA COMPLIANCE ORDER OR A COURT ORDER TO TAKE IMMEDIATE ACTION).

EAP CONTENDS THAT THE UTILIZATION OF THE STEP 2 STEP 3 GRANT IN NATURAL DISASTER EMERGENCY SITUATIONS IS AUTHORIZED BY SECTION 205 OF THE DISASTER RELIEF ACT OF 1970, PUBLIC LAW 91-606, DECEMBER 31, 1970, 84 STAT. 1748, 42 U.S.C. 4415. THAT SECTION PROVIDES THAT ANY FEDERAL AGENCY WHICH ADMINISTERS A FEDERAL GRANT-IN-AID PROGRAM MAY WAIVE FOR THE DURATION OF ANY MAJOR DISASTER PROCLAMATION "SUCH ADMINISTRATIVE PROCEDURAL CONDITIONS FOR ASSISTANCE AS WOULD OTHERWISE PREVENT THE GIVING OF ASSISTANCE UNDER SUCH PROGRAMS IF THE INABILITY TO MEET SUCH CONDITIONS IS A RESULT OF THE DISASTER."

WE DO NOT BELIEVE THAT SECTION 20K IS AVAILABLE IN THIS SITUATION FOR TWO REASONS. FIRST, THE REQUIREMENT THAT EPA APPROVE THE PS&E OF THE PROJECT STAGE BEFORE THE UNITED STATES BECOMES OBLIGATED TO PAY ITS SHARE OF THE COSTS THEREOF IS A STATUTORY REQUIREMENT RATHER THAN AN "ADMINISTRATIVE PROCEDURAL CONDITION." SECOND, THE INABILITY OF THE GRANTEE TO COMPLY WITH THE SUBJECT REQUIREMENT OF HAVING PS&E APPROVED BY EPA PRIOR TO ITS RECEIVING AN AWARD OF A STEP 3 AWARD IS NOT THE RESULT OF THE DISASTER.

OUR UNDERSTANDING FROM DISCUSSIONS WITH EPA OFFICIALS IS THAT THE CHIEF PROCEDURAL DISTINCTION BETWEEN THE AWARD OF A STEP 2 GRANT FOLLOWED, UPON EPA'S APPROVAL OF THE PS&E DEVELOPED IN THE STEP 2 GRANT, BY THE AWARD OF A STEP 3 GRANT AND THE SINGLE AWARD OF A GRANT FOR BOTH STEP 2 AND STEP 3, WHICH ALSO REQUIRES EPA APPROVAL OF THE PS&E DEVELOPED IN STEP 2, IS THE DELAY ENTAILED BY THE STATES UNDER THE FORMER PROCEDURE IN PLACING THE STEP 3 GRANT ON THEIR PRIORITY LISTS. THE FWPCA PROVIDES THAT THE STATES SHALL ESTABLISH, WITH EPA'S APPROVAL, A PROCEDURE FOR SETTING PRIORITIES AMONG THE GRANT APPLICATIONS THE STATE RECEIVES AND THAT THE AWARDS SHALL BE MADE FROM THOSE APPLICATIONS GIVEN THE HIGHEST PRIORITY BY THE STATE. EPA STATES THAT THERE IS NOTHING IN THE STATUTE TO PRECLUDE STATES THAT WISH TO HANDLE SMALL PROJECTS AND EMERGENCY PROJECTS AS EXPEDITIOUSLY AS POSSIBLE FROM ADOPTING PROCEDURES PLACING THE GRANTS FOR BOTH STEPS ON THE PRIORITY LIST AT THE SAME TIME AND HENCE ELIMINATING THE NEED TO UTILIZE COMPLICATED TIME-CONSUMING PROCEEDINGS (INCLUDING PUBLIC HEARINGS, ETC.) BETWEEN THE DEVELOPMENT OF PS&E IN STEP 2 AND SUBMITTING A GRANT APPLICATION FOR STEP 3. THIS WOULD APPARENTLY, AS A PRACTICAL MATTER, ELIMINATE MOST, IF NOT ALL, OF THE DELAY INVOLVED IN PROCESSING THE TWO STEPS.

EPA FURTHER INDICATES THAT AN IMPORTANT FACTOR TO BE KEPT IN MIND IS THAT THE STATES, AND NOT EPA, DETERMINE THE UTILIZATION OF THE STEP 2 STEP 3 PROJECT AND THAT A NUMBER OF STATE AGENCIES HAVE EXPRESSED TO EPA THEIR STRONG INTEREST IN RETAINING THIS TYPE OF AWARD AUTHORITY AS AN OPTION TO BE USED IN CERTAIN CIRCUMSTANCES. WE TAKE NO POSITION WITH RESPECT TO WHETHER THE USE OF A STEP 2 STEP 3 GRANT WOULD BE ADVANTAGEOUS OR DESIRABLE. RATHER IT IS OUR POSITION THAT THE PROVISIONS OF THE FWPCA REQUIRE THAT EPA APPROVE THE PS&E FOR EACH PROJECT STAGE BEFORE THE GOVERNMENT MAY BECOME OBLIGATED TO PAY ITS SHARE OF THE STAGE OF THE PROJECT'S COSTS. THEREFORE, SINCE AN APPLICATION FOR A STEP 2 STEP 3 GRANT OBVIOUSLY WILL NOT CONTAIN PS&E FOR STEP 3, EPA IS LEGALLY PRECLUDED FROM AWARDING SUCH A GRANT OR OBLIGATING THE GOVERNMENT, IN ANY WAY, TO PAY ITS SHARE OF THE COSTS OF STEP 3 PRIOR TO ITS APPROVAL OF THE CONSTRUCTION PS&E.

THE QUESTION THEN ARISES AS TO THE EFFECT OUR DECISION IS TO HAVE ON THE APPROXIMATELY 200 STEP 2

STEP 3 GRANTS AWARDED BY EPA. WE NOTE THAT THE GRANTEES IN THOSE SITUATIONS APPARENTLY RELIED IN GOOD FAITH UPON EPA'S REGULATIONS IN APPLYING FOR THEIR GRANTS AND PRESUMABLY COMPLIED FULLY WITH ALL OTHER GRANT REQUIREMENTS SET FORTH IN THE STATUTE AND ADMINISTRATIVE REGULATIONS. IN VIEW OF THIS WE CAN SEE NO PURPOSE IN PENALIZING THESE GRANTEES FOR GOOD FAITH RELIANCE ON AN ERRONEOUS INTERPRETATION BY EPA OF THE FWPCA'S PROVISIONS. MOREOVER, TO REQUIRE THE ANNULMENT OR TERMINATION OF THESE GRANTS COULD RESULT IN THE GOVERNMENT'S INCURRING SUBSTANTIAL EXPENSES AND WOULD CERTAINLY DELAY THE PROGRESS OF THE CONGRESSIONALLY MANDATED WATER POLLUTION CONTROL PROGRAM. ACCORDINGLY, UNDER THE CIRCUMSTANCES, WE WOULD NOT REQUIRE EPA TO ANNUL OR TERMINATE THOSE STEP 2 STEP 3 GRANTS TO WHICH THE GOVERNMENT IS ALREADY COMMITTED. HOWEVER, NO SUCH GRANTS SHOULD, IN THE FUTURE, BE AWARDED WITHOUT OBTAINING STATUTORY AUTHORIZATION THEREFOR.

IN LIGHT OF THE FOREGOING OUR DECISION OF FEBRUARY 4, 1974, B-166506, 53 COMP. GEN. , IS AFFIRMED.