Superfund:

EPA Has Not Corrected Long-Standing Contract Management Problems

RCED-92-45: Published: Oct 24, 1991. Publicly Released: Nov 4, 1991.

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Pursuant to a congressional request, GAO reviewed the Environmental Protection Agency's (EPA) response to prior GAO recommendations that EPA strengthen its management of Superfund contracts, focusing on recommendations that EPA: (1) control contractor costs; (2) set contractor indemnification and conflict-of-interest policy; and (3) develop a plan to reduce its backlog of unaudited Superfund contracts.

GAO found that EPA: (1) still does not require its regional offices to prepare cost estimates of cleanup studies and as a result the regions are too dependent on the contractors' own cost proposals; (2) does require Superfund managers to review contractor invoices for reasonableness, but contracting officials in two of the four regions examined estimated that project managers were conducting invoice reviews for only about half of their contracter's invoices; (3) has not corrected the problem of excessive contractor indemnification and is still not tracking the contractors' efforts to obtain private insurance; (4) established a four-person conflict-of-interest unit to develop agency policy and guidance, but most of the previously reported problems continued to exist; (5) is developing a plan to increase contract audits and has requested increased funding to reduce a backlog, but due to proposed staffing and budget cuts, increased coverage is doubtful; and (6) has acknowledged many of the problems GAO has reported, but has not addressed them sufficiently to actually correct the problems.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: EPA has established a new policy which: (1) requires that remedial project managers review a representative sample of their billed costs for allowability and allocability; and (2) clarifies the roles of the managers. However, while EPA is also reviewing its current training, it is unclear whether the agency will provide additional training in this area.

    Recommendation: The Administrator, EPA, should establish controls to ensure that remedial project managers review contract invoices, develop more complete written guidance on remedial project managers' responsibilities for invoice review, and provide training to all project managers on how to meet those responsibilities.

    Agency Affected: Environmental Protection Agency

  2. Status: Closed - Not Implemented

    Comments: EPA will continue to allow contract managers to determine the "reasonableness" of contractor charges based on the information currently submitted.

    Recommendation: The Administrator, EPA, should develop minimum standards for the information that contractors should submit to justify their invoiced charges.

    Agency Affected: Environmental Protection Agency

  3. Status: Closed - Implemented

    Comments: On July 29, 1993, EPA issued final guidelines that require documentation of Independent Government Estimates negotiations.

    Recommendation: The Administrator, EPA, should require contracting officials to document negotiations with contractors on the price of remedial studies, explaining the basis of the agreed-upon price and any significant deviations from the government's estimate.

    Agency Affected: Environmental Protection Agency

  4. Status: Closed - Implemented

    Comments: EPA has modified these contracts so that award fees can be denied with less than satisfactory performance.

    Recommendation: The Administrator, EPA, should require that all regions attempt to negotiate amendments to Alternative Remedial Contracts Strategy (ARCS) contracts to implement the EPA policy of denying award fees to contractors with less than satisfactory performance ratings.

    Agency Affected: Environmental Protection Agency

  5. Status: Closed - Not Implemented

    Comments: EPA is proceeding with assignment of field investigation work to ARCS contractors.

    Recommendation: With respect to ARCS contractors' program management costs, the Administrator, EPA, should determine the cost-effectiveness of assigning additional work to ARCS contractors.

    Agency Affected: Environmental Protection Agency

  6. Status: Closed - Implemented

    Comments: EPA has worked with its contractors to reduce these costs from 29 percent in fiscal year (FY) 1990 to 15 percent in FY 1992 of the contracts' annual costs as directed by Congress. The reductions in FY 1991 and FY 1992 totalled $30,169,434.

    Recommendation: With respect to ARCS contractors' program management costs, the Administrator, EPA, should terminate or reduce the scope of any ARCS contracts with excessive program management costs.

    Agency Affected: Environmental Protection Agency

  7. Status: Closed - Implemented

    Comments: On January 25, 1993, EPA published final indemnification guidelines that address all parts of the recommendation.

    Recommendation: A 1989 report on contractor indemnification recommended that the Administrator, EPA, should limit the potential exposure facing Superfund by: (1) placing a dollar limit on new indemnification agreements and attempting to negotiate limits on existing agreements; (2) identifying and testing options for providing indemnification that include incentives making it competitively unattractive to obtain more indemnification than is needed; and (3) enforcing the Superfund Amendments and Reauthorization Act's (SARA) requirements for proof of uninsurability to obtain and retain indemnification. GAO believes that these recommendations should be implemented.

    Agency Affected: Environmental Protection Agency

  8. Status: Closed - Implemented

    Comments: EPA is continuing to check contractors' compliance with its COI requirements through COI reviews. Since the report, EPA has performed 3 additional reviews. EPA has been working individually with contracting officers to ensure they are documenting resolution of COI issues and has begun new reviews that check COI documentation in regional files. EPA has provided additional COI guidance in a draft final rule.

    Recommendation: A 1989 report on preventing contractor conflicts of interest recommended that EPA: (1) check compliance with EPA requirements for avoiding, neutralizing, and mitigating conflicts of interest as part of its review of contractors' performance; (2) direct contracting officers to follow requirements for documenting actions taken to resolve conflicts and actions taken on contractors' requests to work for private parties; and (3) provide contractors and contracting officers with additional written guidance for avoiding conflicts, including guidance on the information that contractors should include in their requests for private-party work and the importance that contracting officers should place on this information when evaluating these requests. These recommendations should also be implemented.

    Agency Affected: Environmental Protection Agency

  9. Status: Closed - Implemented

    Comments: EPA has developed an implementation plan which addresses the recommendation and calls for subsequent followup.

    Recommendation: To ensure that the contract management problems discussed in this report are given top management attention and GAO recommendations are fully implemented, the Administrator, EPA, should develop an action plan with goals and specified regional and headquarters accountability, and follow up to implement GAO recommendations.

    Agency Affected: Environmental Protection Agency

  10. Status: Closed - Implemented

    Comments: In 1992, EPA has reported Superfund contract management as a material weakness under FMFIA.

    Recommendation: To ensure that the contract management problems discussed in this report are given top management attention and GAO recommendations are fully implemented, the Administrator, EPA, should report Superfund contract management as a material weakness under the Federal Managers' Financial Integrity Act until the recommendations are implemented.

    Agency Affected: Environmental Protection Agency

  11. Status: Closed - Implemented

    Comments: EPA is implementing a new policy which requires that contracting officials prepare an independent cost estimate of contractor work assignments. These estimates will then be used as leverage in future negotiations with contractors.

    Recommendation: A 1988 report on EPA contractor cost control recommended that the EPA Administrator direct Superfund and procurement officials to develop cost information for remedial studies and require remedial project managers to use it to assess the reasonableness of contractor cost proposals. GAO continues to believe that this recommendation should be implemented.

    Agency Affected: Environmental Protection Agency

  12. Status: Closed - Implemented

    Comments: EPA has established a "Superfund Acquisition Program Manager" to oversee the management of EPA contracts in the regions. The Manager will work through councils consisting of headquarters and regional personnel.

    Recommendation: To ensure that regional offices effectively administer Superfund contracts and adhere to contract management policy, the Administrator, EPA, should increase headquarters monitoring of regional office contract management.

    Agency Affected: Environmental Protection Agency

 

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