United States
Environmental Protection
Agency
Office of Solid Waste and
Emergency Response
OS-420 (WF)
EPA 500-F-92-002
May 1992
vvEPA
Controlling LIST Cleanup Costs
Fact Sheet 2:
Negotiating The Contract
Build Trust
As a business person, you know that in business
agreements there is almost always room for bargaining.
Like the other contracts you've worked out, site assessment
and cleanup contract negotiations start as a series of
questions. Remember, contractors want to work with you.
and answering your questions is part of getting the job.
The contract serves as a blueprint for the site assessment
and cleanup, and it shows both you and the contractor
where you've agreed to spend your money. Remember, you
can use the same or different contractors for the site
assessment and cleanup jobs. Understanding and
evaluating the bids from all contractors is your
responsibility.
Get It in Writing
Most contracts will have a scope of work; that scope of
work should include four kinds of
basic information:
• Details of the tasks to be
performed (for example,
the number of wells to be
drilled)
• Specifics on the training;
of staff required to
perform those tasks
Schedule of when the
tasks are to be performed
• Costs of each of the
tasks to be performed
Make sure you understand
all of the components.
Control the Project
• Know Regulations: Before you hire a contractor, learn
your State's Underground Storage Tank (UST) program
regulations. Most States have a fund to help UST owners
pay for cleaning up tank leaks. The fund is generally
managed by a State Fund Administrator. Check with your
State Fund Administrator to see if you're eligible to receive
the funds and to learn about other requirements (for
example, invoices) you need to understand before you hire
a contractor. Make sure the contractor follows these
requirements.
• Take Charge: Manage the contractor; don't let the
contractor manage you. Make certain that the contractor
answers to you. Remember, the State holds you responsible
for the cleanup of your spill.
Three Types of Contracts
Generally, three types of contracts
are worked out for
site assessment and cleanup
management: time-and-
materials. fixed-price, and
unit-price.
Time-and-Materials
Contract
> Charged Hourly:
This contract buys
you hours of ser-
vice, not a com-
pleted cleanup.
Though not as
common as the
fixed-price
contract, this
type of
Recycled/Recyclable
Printed on paper that contains
at least 50% recycled fiber
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deal is negotiated if you're uncertain of the type of work
needed. Time-and-materials contracts involve loaded rates,
which typically include the contractor's salary, fringe
benefits, and overhead. (See Fact Sheet 3 on billing for a
more detailed discussion of loaded rates.)
Fixed-Price Contract
• One Price: In a fixed-price contract, one price covers
the whole site assessment or cleanup from beginning to
end. This includes person hours, equipment hours, and
all fees and services. You control costs by letting the
contractor know that you will not pay for work beyond
the scope of work unless you specifically agree to it. You
need to be careful that contractors don't take shortcuts in
completing work.
Unit-Price Contract
• Charged by Specific Task: In a unit-price contract, a
project is divided into specific tasks called work units, and
a price is attributed to each. Examples of work units are:
• Taking soil borings (per foot or other unit)
• Sampling and analyzing groundwater from a
monitoring well
• Excavating contaminated soil (per cubic yard or
other unit)
The unit price includes labor (salary, fringe benefits, and
overhead) and materials necessary to properly complete
the task. Profit is included in the unit price. An advantage
to the unit-price contract is that you are not required to pay
for uncompleted tasks or inefficiencies on the part of the
contractor. As with fixed-price contracts you need to be
careful that contractors don't take short cuts in completing
work.
Cost-Cutting Tips
• Check Bargains: Don't let the lowest bidder fool you.
The lowest bid may appear cheapest, but you might end up
paying for expensive mistakes or redoing work that wasn't
done right the first time. Select an experienced contractor
who provides high-quality work.
• Hire Experience: Contact your State UST program
about their experience with contractors. You're better off
with a contractor with a lot of State experience and good
reviews on cost-effectiveness and timeliness. Make sure
the contractor has insurance and access to the proper
equipment.
• Monitor Budget: Show cost limits for specific tasks in
the contract. Require the contractor to tell you when he/she
has reached certain points (for example, 25 percent of tasks
and costs, 50 percent, 75 percent). Make sure your
contractor sticks to a schedule and informs you when
he/she cannot.
• Condition Payments: Connect payment for services to
the satisfactory completion of necessary work. Stipulate a
policy on payment for idle time. (For example, delays in
obtaining equipment caused by the contractor's poor
planning should not be charged to you.)
• Watch Closely: Negotiate a price ceiling into the
contract and monitor charges and performance. Make
notification of any changes in the scope of work mandatory
for payment. Be sure that you are paying for completed
work, not projected work. Make sure that you preapprove
all overtime.
• Promote Quality: Make it clear that you will not pay
for substandard work.
• Stay Home: Encourage on-site treatment of soils. On-
site treatment is often cheaper than hauling the soil to a
landfill or treating it at an off-site facility. Check with your
State UST program to see if this is an acceptable practice.
And Remember: The sooner a spill is cleaned up. the
better. The longer you wait, the more the damage will
spread and the more the cleanup will cost.
Fact Sheet 2 was developed by the Environmental
Protection Agency's Office of Underground Storage
Tanks in conjunction with State Fund Administrators.
It is one of a series; the others are: Hiring a
Contractor, Interpreting the Bill, Managing the
Process, and Understanding Contractor Code Words.
For copies of these fact sheets or more information,
contact your State Fund Administrator for USTs
and/or your State Underground Storage Tank
program.
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