Superfund Contracts:

EPA Needs to Control Contractor Costs

RCED-88-182: Published: Jul 29, 1988. Publicly Released: Sep 13, 1988.

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Pursuant to a congressional request, GAO reviewed contractor performance at 43 hazardous waste sites to determine if the Environmental Protection Agency (EPA) had established adequate controls to ensure high-quality, cost-effective, and timely work under its Superfund remedial study contracts.

GAO found that EPA: (1) lacked adequate information to evaluate contractors' work plans and proposed costs; (2) did not adequately monitor contractors' expenditures; (3) did not always perform required contract administration duties, such as reviewing contractor invoices and maintaining complete work assignment files; (4) believed that inadequate contractor performance resulted in cost increases at 22 sites, but challenged cost increases at only 4 sites; (5) believed that cost challenges were difficult and time-consuming and that the contracts required it to pay for costs the contractor incurred; (6) focused on timeliness and quality of remedial studies, rather than their costs; and (7) had options for dealing with increased costs, including negotiating with the contractor to absorb costs, authorizing the increase but not a corresponding increase in the base or award fee, not authorizing the increase, terminating the contract, or disallowing the questionable cost. GAO also found that the award fee process EPA used with remedial study contractors: (1) allowed a contractor to earn the majority of an award during the first phase of the award fee process, before it completed the study and before EPA could assess its quality; and (2) contributed to overall contracting difficulties, since EPA performance evaluation criteria did not require assessment of subcontracting management.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: EPA has no plans to rate subcontract management as a separate factor, since it is addressed under another factor. However, EPA has made the ARCS contract phase I award fee provisional on the overall satisfactory rating, which will address the intent of parts two and three of this recommendation. GAO will review the award fee practice in an ongoing review.

    Recommendation: To improve the award fee plans for the remedial contracts, the Administrator, EPA, should: (1) amend the remedial contracts award fee evaluation criteria to require a separate rating on subcontractor management; (2) amend the award fee structure to shift a greater proportion of the total award fee available from the phase I fee to phase II; and (3) determine, for each new alternative remedial contract awarded, the appropriate split between the phase I and II award fees on the basis of the contractor's performance and record.

    Agency Affected: Environmental Protection Agency

  2. Status: Closed - Implemented

    Comments: EPA has not conducted a study on the issue of contract hours. GAO will followup on the second part of this recommendation in an ongoing review.

    Recommendation: The Administrator, EPA, should direct that the Office of Administration and Resources Management and the Office of Solid Waste and Emergency Response take the following steps to improve EPA specific oversight of remedial contractor performance and expenditures: (1) resolve the issue of why EPA consistently exhausts contract hours, but not dollars, on the remedial contracts; and (2) require that EPA personnel comply with internal control standards, specifically that remedial project managers review contractor costs and that they establish and maintain complete and accurate work assignment records.

    Agency Affected: Environmental Protection Agency

  3. Status: Closed - Implemented

    Comments: In a few months, GAO will be issuing a congressional report on EPA action on this recommendation.

    Recommendation: The Administrator, EPA, should direct that the Office of Administration and Resources Management and the Office of Solid Waste and Emergency Response take the following steps to improve EPA specific oversight of remedial contractor performance and expenditures: (1) complete development of cost-range information for remedial study tasks and require remedial project managers to use this information to assess the reasonableness of the contractor cost proposals and subsequent cost increases; (2) reemphasize the need for contracting and program officers to challenge questionable contractor expenditures; and (3) reinforce existing policy in writing to employees and remedial contractors that contractors are not to incur costs above the amounts EPA has authorized in the work assignments, and require remedial project managers to monitor contractor expenditures, both dollars and hours.

    Agency Affected: Environmental Protection Agency

  4. Status: Closed - Implemented

    Comments: EPA revised its position description for contracting officers on November 30, 1988, and has established model performance standards for program staff involved in contract management. GAO is performing a review which will followup on action taken on these recommendations.

    Recommendation: The Administrator, EPA, should affirm his overall commitment to cost control in two ways: (1) communicate the importance of balancing timeliness, quality, and costs on remedial studies by incorporating explicit language in EPA contracting and project officer guidance; and (2) require that remedial contracting and project officers and remedial project managers diligently monitor and control contractor expenditures throughout the duration of remedial study work assignments.

    Agency Affected: Environmental Protection Agency

  5. Status: Closed - Implemented

    Comments: EPA has not established firm time tables for ARCS contractors to have an acceptable subcontracting system, and it is not using the award fee process to hold contractors accountable. GAO will revisit this issue in an ongoing assignment.

    Recommendation: To expedite subcontracting reviews, the Administrator, EPA, should negotiate with prime contractors to establish firm timetables for implementing acceptable subcontracting systems and hold these contractors accountable for these time frames under the award fee process.

    Agency Affected: Environmental Protection Agency

 

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