Hazardous Waste:

Contractors Should Be Accountable for Environmental Performance

RCED-90-23: Published: Oct 30, 1989. Publicly Released: Nov 17, 1989.

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Pursuant to a congressional request, GAO reviewed the Department of Energy's (DOE) and the Department of Defense's (DOD): (1) payment of contractors' penalties and associated legal costs for noncompliance with the Resource Conservation and Recovery Act (RCRA); and (2) reductions of contractors' award fees when they failed to comply with environmental regulations.

GAO found that: (1) DOD generally held its contractors accountable for costs resulting from RCRA violations; (2) DOD limited its payment of contractors' fines and costs to cases where the contractors requested but did not receive compliance assistance from DOD; (3) DOE believed that it was responsible for shielding its contractors from virtually all financial risks and liabilities, and generally paid its contractors' costs associated with RCRA noncompliance; and (4) DOE did not pay contractors' costs in cases of criminal behavior by the contractor's top management. GAO also found that: (1) neither DOD nor DOE regulations or guidelines required consideration of contractors' environmental performance in award-fee determinations; (2) DOD and DOE both considered contractors' environmental performance to some extent in eight award-fee determinations GAO reviewed, with four of the determinations citing environmental performance as a distinct evaluation area; (3) DOD and DOE rated contractors' environmental performance as satisfactory or better in six of the eight determinations, although the contractors had been repeatedly cited for RCRA violations; and (4) contractors' entire award fees were withheld in the other two cases, primarily due to their poor environmental management.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To ensure that its contractors are held accountable for charged RCRA violations and resulting costs, the Secretary of Energy should, in consultation with appropriate congressional oversight committees, initiate a rulemaking to revise the current DOE policy and practice of paying for penalties, settlement agreements, and legal costs incurred by its contractors. Recognizing that there may be limited circumstances warranting such payment, the revised policy should include criteria that detail when such payments should or should not be allowed.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: On February 7, 1991, DOE issued an interim final rule that requires contractors to pay for their environmental penalties, settlement payments, and legal costs if they resulted from the contractors' actions or inactions.

    Recommendation: To help maximize award-fee contractors' incentives to comply with environmental laws and regulations, the Secretaries of Defense and Energy should initiate a rulemaking to revise DOD and DOE regulations to require all award-fee contracts to include environmental performance as a distinct evaluation area.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: On March 27, 1990, DOD issued a policy memo that encouraged consideration of contractors' environmental performace in all award-fee determinations.

    Recommendation: To help maximize award-fee contractors' incentives to comply with environmental laws and regulations, the Secretaries of Defense and Energy should initiate a rulemaking to revise DOD and DOE regulations to require all award-fee contracts to include environmental performance as a distinct evaluation area.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: On July 2, 1990, DOE issued a notice that required consideration of contractors' environmental performance in all award-fee determinations.

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