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Pursuant to a congressional request, GAO analyzed the relationship between the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Department of Defense's (DOD) provisions for allocating responsibility for payment of environmental cleanup costs. GAO noted that: (1) under CERCLA, DOD shares liability with its contractors for hazardous waste cleanup at sites where DOD hazardous wastes are processed or disposed; (2) DOD and its contractors are not likely to avoid liability for cleanup costs, since damages result in the course of normal cleanup operations; (3) there are no specific provisions in the applicable laws or regulations governing the allowability of costs incurred by a government contractor in complying with various environmental laws and regulations; (4) a contractor can recover its CERCLA cleanup costs if its contract contains cost reimbursement provisions; (5) cleanup costs are allowable if they meet federal acquisition regulation criteria; and (6) fines and penalties for violating environmental laws are not considered allowable costs unless they result from contract compliance.

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