9202.1-20
PB94-963401
EPA540-R-93-085
March 1994
COST MANAGEMENT
MANUAL FOR THE
SUPERFUND REMEDIAL
AND ENFORCEMENT PROGRAMS
Office of Solid Waste and Emergency Response
Office of Acquisition Management
U.S. Environmental Protection Agency
Washington, DC 20460
U.S. Environmental Protection Agency
Region 5, Library (PL-12J)
77 West Jackson Boulevard, 12th Floor
Chicago, IL 60604-3590
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
If you wish to purchase additional copies of this document, contact:
National Technical Information Service (NTIS)
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(703) 487-4650
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Contents
PAGE
Table of Contents iii
List of Exhibits iv
List of Acronyms vi
Foreword viii
Chapter 1 - Overview
1.1 Chapter Introduction 1-1
1.2 Background Information 1-1
1.3 The Superfund Remedial and Enforcement Programs 1-4
1.4 Contracting in the Remedial and Enforcement Programs 1-5
Chapter 2 - Project Scoping
2.1 Chapter Introduction 2-1
2.2 Establishing Project Files 2-1
2.3 Identifying Work Assignment Objectives 2-1
2.4 Developing the Work Assignment Package 2-3
Chapter 3 - Estimating Costs and Independent Government Cost Estimates
3.1 Chapter Introduction 3-1
3.2 Preliminary Procedures for Estimating Costs 3-1
3.3 Independent Government Cost Estimates 3-3
3.4 Preparing Independent Government Cost Estimates 3-5
Chapter 4 - Initiating Work Assignments and Reviewing Work Plans/Cost Estimates
4.1 Chapter Introduction 4-1
4.2 Initiating Work Assignments 4-1
4.3 Reviewing the Contractor Work Plan 4-1
4.4 Reviewing the Contractor Cost Estimate 4-2
4.5 Contractor Negotiations 4-4
4.6 Documentation 4-4
Chapter 5 - Controlling Contract Costs
5.1 Chapter Introduction 5-1
5.2 Monitoring Contractor Performance 5-1
5.3 Monitoring Contractor Costs 5-7
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Contents (Cont'd)
Page
5.4 Documenting Contractor Costs for Cost Recovery 5-14
5.5 Reviewing Contractor Invoices 5-15
5.6 Contractor Claims and Change Orders 5-20
Chapter 6 - Closeout of Contract Work Assignments, Annual Closeouts and
Final Contract Closeouts
6.1 Chapter Introduction 6-1
6.2 The EPA Work Assignment Close-out Process 6-1
6.3 Annual Closeouts of ARCs Contracts 6-7
6.4 Final Closeout of ARCs Contracts 6-10
Appendices
A References
B OSWER Directive 9242.2-06, Superfund Contract Management Issues
C OSWER Directive 9242.6-02, Guidance for Organizing ARCS Contract Files
D OSWER Directive 9202.1-12, Guidance on Preparing Independent Government Cost Estimates
(IGCEs)
E OSWER Directive 9242.06a, Resources for Preparing Independent Government Estimates for
Remedial Contracting Work Assignments
F Guidance on Program Management Activities Under ARCs
G Public Voucher Validation Procedures for Regional Contracting Officers
H. Final Instructions and Procedures for Implementing ARCS Annual Closeouts
Exhibits
PAGE
Exhibit 1-1: Cost Management Flowchart: Roles and Responsibilities 1-2
Exhibit 2-1: Document Organization 2-2
Exhibit 2-2: Comparative Costs of In-House and Contracting-Out Performance of Products
and Services 2-3
Exhibit 2-3: Checklist for Identifying Work Assignment Objectives 2-4
Exhibit 2-4: Components of the Work Assignment Package 2-4
Exhibit 2-5: Checklist for Reviewing a Work Assignment 2-5
Exhibit 2-6: Work Assignment Form 2-7
Exhibit 2-7: Scheduling of Tasks 2-8
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibits (Cont'd)
Page
Exhibit 3-1: Procedures for Preparing an Independent Government Cost Estimate 3-7
Exhibit 3-2: Computational Example for an Independent Government Cost Estimate 3-7
Exhibit 4-1: Components of a Work Plan Memorandum 4-1
Exhibit 4-2: Checklist for Reviewing Contractor Work Plans 4-3
Exhibit 4-3: Checklist for Reviewing Contractor Cost Estimates 4-3
Exhibit 5-1: Phone Log 5-3
Exhibit 5-2: Meeting Record 5-4
Exhibit 5-3: Sample Contractor Performance Evaluation Form 5-5, 5-6
Exhibit 5-4: Monthly Technical Progress Report 5-9, 5-10
Exhibit 5-5: Monthly Financial Progress Report 5-12, 5-13
Exhibit 5-6: Sample Contractor Invoice : 5-16
Exhibit 5-7: Sample Contractor Invoice Supplemental Report for Program Management 5-17
Exhibit 5-8: Invoice Review Flowchart 5-19
Exhibit 5-9: Monthly Invoice Review Checklist 5-21
Exhibit 6-1: The EPA Work Assignment Completion Report 6-2, 6-3, 6-4
Exhibit 6-2: Evaluation Criteria for Work Assignments 6-6
Exhibit 6-3: Summary of Costs Claimed 6-8
Exhibit 6-4: Billing Summary 6-9
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Acronyms
ARCS Alternative Remedial Contracting Strategy
BuRec Bureau of Reclamation
CERCLA Comprehensive Environmental Response, Compensation, and Liability Act
CO Contracting Officer
CPAF Cost-Plus-Award-Fee Contract
CPFF Cost-Plus-Fixed-Fee Contract
DOJ Department of Justice
EPA Environmental Protection Agency
EPAAR EPA Acquisition Regulations
FAB Financial Analysis Branch
FACO Financial Administrative Contracting Officer
FAR Federal Acquisition Regulations
FDO Fee Determination Official
FMD Financial Management Division, EPA
G&A General & Administrative Costs
GAO General Accounting Office
HQ Headquarters, EPA
IGCE Independent Government Cost Estimate
LOE Level of Effort
LTCS Long Term Contracting Strategy
NCP National Oil and Hazardous Substances Pollution Contingency Plan
OAM Office of Acquisition Management (formerly the Procurement and
Contracts Management Division)
ODC Other Direct Cost
OIG Office of Inspector General, EPA
OERR Office of Emergency and Remedial Response, OSWER, EPA
OSWER Office of Solid Waste and Emergency Response, EPA
PEB Performance Evaluation Board
PO Project Officer
PRP Potentially Responsible Party
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Acronyms (Cont'd)
RA Remedial Action
RAC Response Action Contractor
RD Remedial Design
RI/FS Remedial Investigation/Feasibility Study
ROD Record of Decision
RPM Remedial Project Manager
SACM Superfund Accelerated Cleanup Model
SARA Superfund Amendments and Reauthorization Act
SCEES Scheduling and Cost Estimating Expert System
SOW Statement of Work
SRO Superfund Revitalization Office
USAGE U.S. Army Corps of Engineers
WA Work Assignment
WACR Work Assignment Completion Report
WAM Work Assignment Manager
Vll
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
FOREWORD
To carry out its responsibilities under the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA), as amended by die Superfund Amendments and Reauthorization Act (SARA),
the U.S. Environmental Protection Agency (EPA) relies on various contractors to perform much of die
work. Recent attention has been focused on the Agency's progress in cleaning up sites and its ability to
effectively oversee its contractors and ensure cost-effective work.
The purpose of this Manual is to enumerate a universal set of cost management practices and procedures
for EPA personnel who have responsibility for managing Work Assignments under contracts where EPA
Contracting Officers (COs), EPA Project Officers (POs), and Work Assignment Managers (WAMs) are
co-located (e.g., ARCS contracts and RAC contracts, as well as otlier Long-Term Contracting Strategy
(LTCS) contracts under which remedial work is done and that use Work Assignments as the ordering
document). The Manual presents cost management techniques that can be employed by EPA officials at
each step in the life of a Work Assignment.
In general, the Manual is designed to improve oversight of EPA contractors without creating an unneces-
sary administrative burden on WAMs, POs, and COs. Checklists and sample forms are included in the
Manual to assist EPA personnel in monitoring contractor's costs.
The policies and procedures established in diis document are intended solely for the guidance of govern-
ment personnel. They are not intended, and cannot be relied upon, to create any rights, substantive or
procedural, enforceable by any party in litigation with the United States of America. The Agency reserves
the right to act at variance with these policies and procedures and to change them at any time without
public notice.
The guidance and procedures presented herein reflect CERCLA policy and guidelines under the National
Oil and Hazardous Substances Pollution Contingency Plan (NCP) of 1990, and the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) of 1980, as amended by the
Superfund Amendments and Reauthorization Act (SARA) of 1986.
Questions, comments, and recommendations on this manual are welcomed, and should be forwarded to:
Mr. Kenneth Adams
Superfund Revitalization Office
Office of Solid Waste and Emergency Response
U.S. Environmental Protection Agency
401 M St., SW (5104)
Washington, DC 20460
(202) 260-7927
(202) 260-0482 facsimile
[ EMAIL BOX: Adams.K ]
van
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 1 - OVERVIEW
1.1 Chapter Introduction
1.2 Background Information
1.3 The Superfund Remedial and Enforcement Programs
1.4 Contracting in the Remedial and Enforcement Programs
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 1 - OVERVIEW
1.1 CHAPTER INTRODUCTION
This chapter explains the purpose of the Manual,
describes its organization, and identifies its
intended audience. To provide users with a sense
of the context in which the Manual was devel-
oped, this chapter includes a brief overview of
CERCLA and SARA legislation, focusing on the
Remedial and Enforcement Program components
and highlights recent changes to the contracting
mechanisms that support the Superfund Program.
These changes are a result of the Superfund Long-
Term Contracting Strategy (LTCS) and the
Superfund Accelerated Cleanup Model (SACM).
Both current and planned remedial and enforce-
ment contracts are discussed.
1.2 BACKGROUND INFORMATION
1.2.1 Setting
Over the years, a number of studies have criticized
EPA for its contracts management practices and
identified numerous deficiencies in the Agency's
implementation and management of contracts.
The Superfund program is particularly vulnerable
to fraud, waste, and abuse because of its large size
— one quarter of EPA's budget — and its exten-
sive use of cost-reimbursement contracts. Al-
though appropriate for some work, this type of
contract can expose the government to excessive
costs and give the contractors little incentive to
control costs if adequate safeguards are not
imposed.
A broad range of improvements have been recom-
mended via internal EPA studies as well as by
groups external to the Agency. Key recommenda-
tions from these studies concluded that EPA
should:
• Prepare detailed Statements of Work for
individual Work Assignments;
• Develop standard procedures for Independent
Government Cost Estimates (IGCEs);
• Conduct a more thorough review of contrac-
tor invoices;
• Focus more attention on contract capacity and
utilization;
• Reduce program management costs;
• Apply more stringent contract controls; and
• Streamline the award fee process.
The Agency subsequently increased its emphasis
on improving contract management, particularly
for those contracts awarded, implemented, and
managed within the Superfund program. For
example, on January 31, 1992 the Office of Solid
Waste and Emergency Response (OSWER)
released Directive 9242.2-06 (Appendix B). The
Directive initiated new requirements regarding
development of IGCEs, review of contractor
invoices, and the appropriate participation of EPA
employees in Performance Evaluation Boards.
As a means of adopting many of the recommenda-
tions offered by the internal and external groups,
the OSWER Deputy Assistant Administrator
directed the Superfund Revitalization Office
(SRO) to coordinate the development of this Cost
Management Manual for the Superfund Remedial
and Enforcement Programs. Cost management
refers to the process of planning the costs of site
clean-up objectives, and tracking and controlling
costs to ensure they are commensurate with
accomplishments. Cost management also involves
documenting the planning and monitoring of
activities in a legally defensible manner for use, if
appropriate, in the cost recovery process.
1.2.2 Organization
The six chapters of this Manual are presented in
an order that corresponds to the chronological
lifecycle of a typical EPA Work Assignment (i.e.,
project scoping, review/approval of the contractor
work plan, monitoring contractor performance,
and project closeout, as illustrated in Exhibit 1-1).
See Appendix A for the references used in the
Manual and the sources from which the user can
obtain copies.
Chapter 1 presents background information on
the Superfund Remedial and Enforcement
Programs, as well as an overview of the current
1-1
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
contracting environment within the Superfund
program. This chapter provides readers with a
sense of the context in which the Manual was
developed.
Chapter 2 outlines project scoping activities,
which run the gamut from identifying the project
objectives and developing the Work Assignment
Statement of Work, to creating the Work Assign-
ment timetable and establishing the Work Assign-
ment files.
Chapter 3 on estimating costs contains guidance
primarily on the roles and responsibilities of
Agency personnel involved in the contracting
process, preparation of IGCEs, as well as guidance
and procedures on review of contractor work
plans.
Chapter 4 contains information on initiating a
Work Assignment, focusing principally on review
of contractor work plans and cost proposals.
The largest chapter and "heart" of the Manual is
Chapter 5, which presents techniques for control-
ling contractor costs.
In the context of cost management, the last
chapter of this document Chapter 6 addresses
several "closeout" issues; specifically, closeout of
individual Work Assignments, EPA's Annual
Closeout Process, and the Agency's contract
closeout process.
1.2.3 Intended Audience
This Manual presents some basic guidelines on
cost management practices and procedures for
EPA personnel who have responsibility for
managing Work Assignments under contracts that
support the Superfund Program. It is applicable to
those contracts where Contracting Officers,
Project Officers and Work Assignment Managers
are co-located (i.e., ARCs contracts and RAC
contracts, as well as other Long Term Contracting
Strategy (LTCS), contracts under which remedial
work is done, and contracts that use Work
Assignments as the ordering document).
1.3 THE SUPERFUND REMEDIAL
AND ENFORCEMENT PROGRAMS
The Comprehensive Environmental Response,
Compensation, and Liability Act of 1980
(CERCLA), as amended by the Superfund
Amendments and Reauthorization Act (SARA) of
1986, authorized EPA to compel parties respon-
sible for contaminating hazardous waste disposal
sites, such as industrial generators of hazardous
wastes and landfill operators, to cleanup the sites
or reimburse the government for clean-up costs.
The traditional system for Superfund cleanups was
divided into two programs — removal and
remedial. Sites under the removal program are
reported through Federal, State, and local govern-
ments, potentially responsible parties, and the
public because of reporting confidentiality (i.e.,
involving the National Response Center). Some
are "screaming emergencies," while others are
prioritized for short-term action as money be-
comes available. On the other hand, remedial
activities consist of a series of steps to define and
address long-term clean-up sites on the National
Priorities List (NPL). Although many of the risks
and response actions associated with the two
programs are similar, the depth of investigation
and cost and time expended to clean up a site are
generally greater under the remedial process than
for a removal action, since there are statutory
restrictions on removal costs.
CERCLA also created the "Superfund" to finance
cleanups when financially viable parties could not
be found. Since CERCLA's enactment, Congress
has reauthorized the program twice, with spending
authorizations totalling $ 15 billion dollars. There
are approximately 1,200 sites on Superfund's
National Priorities List. The Agency expects to
spend $40 billion cleaning up these sites and to
add about 900 sites to the NPL during the 1990s.
EPA has not quantified the average cost for a
remedial site, but estimates the cost to implement
clean-up remedies at $25 million per site.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
When a site is selected for cleanup and placed on
the NPL, EPA or the parties responsible for the
contamination begin a remedial investigation and
feasibility study (RI/FS) to determine the clean-up
method. The remedial investigation assesses the
type and extent of contamination at the site, and
the health and environmental risks presented by
the contamination. The feasibility study uses data
developed in the remedial investigation to evaluate
various clean-up alternatives and assess their cost
effectiveness. These studies are typically conducted
as one project and referred to as the "remedial
investigation/feasibility study" or remedial study.
Under the Superfund Accelerated Cleanup Model,
however some portions are part of the integrated
assessment.
Following a remedial study, EPA selects the final
remedy and documents it in a Record of Decision
(ROD). The selected remedy, which can include
removing or covering contaminated soil and
building water treatment facilities, is then de-
signed and implemented. A remedial design
documents the site conditions and outlines
specifications for the remedy; the remedial action
is the actual construction work necessary to
implement the selected remedy.
One of Superfund's major goals is to have respon-
sible parties pay for and conduct cleanups at
abandoned or uncontrolled hazardous waste sites.
The foundation of the program's enforcement
program is CERCLA's strict, joint and several
liability standard. Under this standard, each
potentially responsible party (PRP) — those
owners and operators, waste generators, and
transporters at a site — may be held fully liable for
all site clean-up costs regardless of waste share or
fault.
Any one PRP can be fully liable, but not every
PRP. A PRP can seek contribution for costs not
attributable to its activities.
When CERCLA was reauthorized and amended
by SARA in 1986, Congress reinforced and
significantly strengthened the law's enforcement
provisions. SARA provided enforcement tools to
facilitate settlement negotiations, and enhanced
the enforcement measures available to EPA in the
event that responsible parties do not settle. In
addition, the Superfund Management Review
Team established the "enforcement first" concept
to encourage or compel responsible party clean-
ups rather than using the Trust Fund, and to
integrate all EPA response and enforcement
activities.
EPA can negotiate settlements with responsible
parties to have them conduct or pay for site
cleanups. If negotiations fail, EPA issues orders to
responsible parties to complete site cleanup. EPA
also can use Trust Fund monies to cover clean-up
costs and attempt to recover the costs later
through litigation. To conserve Trust Fund dollars
for "orphan" sites, those where no liable, finan-
cially-viable PRPs exist, EPA's top priority is to
use all its enforcement tools and reach settlement
agreements with responsible parties.
1.4 CONTRACTING IN THE REMEDIAL
AND ENFORCEMENT PROGRAMS
1.4.1 Overview of Superfund Contracts
Contract support to the Federal Superfund
program falls into five basic categories: (1) removal
activities; (2) remedial response; (3) support
services; (4) technical enforcement support; and
(5) policy, program management, and administra-
tive services.
Removal action contracts provide EPA Regional
offices with two categories of support: (1) techni-
cal and management assistance for the removal
program financed by the Hazardous Substance
Response Trust Fund, the corrective action
program financed by the Underground Storage
Tank (UST) Trust Fund, and the oil spill preven-
tion program under the Clean Water Act; and (2)
clean-up personnel, equipment, and materials for
removal program and corrective actions financed
by the UST Trust Fund.
Remedial response action contracts provide EPA
Regional offices with technical assistance and
resources for clean-up activities, support of
enforcement actions, and community relations
activities.
Support services contracts provide special techni-
cal support services to EPA Regional offices and
Headquarters personnel. Contracts cover safety
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
and technical training, demonstration of new or
novel technology, laboratory analysis and sample
control, quality assurance, aerial survey and
mapping, and remote sensing.
Enforcement support contracts provide technical
support to EPA Headquarters and Regional office
personnel to enforce CERCLA.
Advisory and assistance, program management,
and administrative services contracts support
formulation of Superfund policy and implementa-
tion, as well as development and maintenance of
automated data processing (ADP) systems and
data handling services at EPA Headquarters and
the Regional offices.
EPA uses private contractors, the U.S. Army
Corps of Engineers (USAGE), and the U.S.
Department of the Interior's Bureau of Reclama-
tion (BuRec) to perform Superfund clean-up work
paid for by the government (Trust Fund and
general revenues). The private contractors perform
remedial studies, design remedies, and manage the
construction of the remedies generally of less than
$15 million. USAGE designs and manages
remedies generally in excess of $ 15 million
through an Interagency Agreement (IAG) with
EPA. The Agency also has an IAG with the U.S.
Bureau of Reclamation to review contractor cost
estimates, and designs, and perform special
analyses.
Contractors generally work under two primary
types of contracts: fixed-price and cost-reim-
bursement. Fixed-price contracts require a con-
tractor to assume responsibility to perform the
agreed-upon work within an established price.
Cost-reimbursement contracts are used because
they offer Agency managers flexibility in respond-
ing to emergencies, and are appropriate when the
scope and nature of the work to be performed are
uncertain or subject to change. Because they
reimburse contractors for all allowable costs, cost-
reimbursement contracts:
• Place high risk on the government and
minimum risk on the contractor;
• Provide the contractor with little incentive to
control costs; and
• Place a large administrative burden on both
the government and the contractor to oversee,
control, and identify contract costs.
EPA's Office of Acquisition Management (EPA's
Agency-wide contracting unit), the Office of
Emergency and Remedial Response (the
Superfund program office), and personnel in the
EPA Regional offices are responsible for managing
Superfund contracts. Contracting Officers (CO)
and their technical assistants in the Regional
offices are responsible for the day-to-day manage-
ment of contracts to ensure contractor compliance
with their provisions and the Agency's contract
policies and procedures. The CO is the only
official authorized to commit the government to a
contract and to modify contract terms. Technical
assistants include the Project Officer (PO) and the
Work Assignment Manager (WAM). EPA Re-
gional Project Officers (RPOs) assign work to
contractors, approve work assignment budgets,
approve contractor invoices, and evaluate their
work. The PO provides technical direction and
oversees the contractor's work at all sites assigned
under a contract. The WAM is responsible for
managing and overseeing clean-up work at
individual sites, and provides feedback to the CO
on contractor cost, performance, and scheduling.
1.4.2 Alternative Remedial Contracting
Strategy Contracts
EPA began its present remedial contracting
strategy in 1988. By July 1989, the Agency had
awarded 45 contracts across the country to 23
architecture/engineering firms to implement this
system, called the Alternative Remedial Contract-
ing Strategy (ARCS). The Strategy decentralized
remedial contract management to the EPA
Regional offices, and was intended to improve
competition for clean-up work and improve
contractor performance. The ARCS contracts
replaced three large remedial contracts, called
REM contracts, under which contractors con-
ducted clean-up studies and investigations under
one nationwide contract and two large zone
contracts — each zone covering one-half of the
United States.
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The cost-reimbursement ARCS contracts are
contracts with a ten-year period of performance
and an original aggregate value in excess of $6.6
billion dollars.' Contractors are issued work under
Work Assignments issued by EPA. The contractor
Work Plan must be approved by the Agency
before work can begin at a site. The contracts
reimburse contractors for all allowable costs and
offer an award fee, or incentive payment, for
performance excellence. Allowable costs fall into
two categories: (1) site-specific costs; and (2)
program management costs, which are costs that
cannot be immediately linked with a specific site
(i.e., multiple site use equipment, QA/QC plans,
administrative costs, etc.). Continuing concerns
about the amount of contract dollars devoted to
non-site specific clean-up costs have led to Con-
gressional limits on program management costs.
The Agency's Office of Administration and
Resources Management (OARM) issued guidance
(Guidance on Program Management Activities
Under ARCS, February 11, 1993) that divided
program management costs into administrative
support costs and technical clean-up costs. In
addition, OSWER's Office of Emergency and
Remedial Response (OERR) sets annual target
ceilings for ARCS contract program management
costs in response to Congressional guidelines.
ARCS contracts support site assessment, remedial
planning, and remedial action activities at Na-
tional Priorities List (NPL) sites. ARCS contracts
incorporate performance incentives designed to
give incentives based on performance throughout
the period of performance. In addition, ARCS
contracts promote continuity in site project
management and execution. These provisions are
intended to optimize the quality, timeliness, and
cost efficiency of remedial activities. EPA has
established a pool of contractors in each Region or
multi-Region "zone" (e.g., EPA Regional offices in
Dallas, Kansas City, and Denver have been
aggregated into one zone, as have the offices in
San Francisco and Seattle) by awarding as many as
eight ARCS contracts in each area. Awards were
made through the standard "Brooks Act" archi-
tect/engineering competitive process, and the
subsequent allocation of work assignments to
contractors in each Region or zone is accom-
plished through a structured decision making
process. Performance is the principle criteria used
to determine the quantity of work assigned to each
contractor.
1.4.3 Technical Enforcement Support
Contracts
The Technical Enforcement Support (TES)
contracts provide analytical, technical, and
management services for EPA's Office of Waste
Programs Enforcement (OWPE) to plan, develop,
implement, and evaluate programs, strategies,
guidance, and regulations under the Agency's
CERCLA/SARA and RCRA/HSWA enforcement
programs. There are nine TES contracts currently
in effect ("TES V" through "TES XIII"). TES
XIII was awarded in February 1991 and is used by
EPA Headquarters staff to acquire assistance in
developing and evaluating nationwide implemen-
tation strategies, monitoring Regional and State
activities, and providing enforcement support.
In addition to TES XIII, the Agency awarded
eight Regional contracts, for which Headquarters
provides oversight. Tasks for these contracts
include providing expert witnesses, searching for
parties responsible for problems at hazardous
waste sites, evaluating comprehensive ground-
water monitor data, and inspecting RCRA
facilities and reviewing closure plans.
1.4.4 Enforcement Support Services Contracts
The new generation of enforcement support
contracts are being procured to replace the
expiring TES contracts. These Enforcement
Support Services (ESS) contracts provide assis-
tance to EPA in the management of enforcement
activities at Superfund sites. Each Region has
awarded an ESS contract on a cost-plus-fixed-fee
(CPFF) contract. This type of contract provides
for payment of (1) incurred costs and (2) a fee
fixed at inception of the contract. Headquarter's
role is to oversee and monitor all the ESS contracts
on a national basis and to provide technical
assistance on an as-needed basis.
The ESS contracts provide a wide range of services
including potentially responsible party (PRP)
Some options can no longer be exercised, therefore the value is decreasing every year.
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searches and reports function. These contracts also
allow the Regions to acquire support during
negotiations; expert/litigation; cost recovery; as
well as management and project support.
1.4.5 Long-Term Contracting Strategy for
Superfund
In 1990, EPA developed the Long-Term Con-
tracting Strategy (LTCS) (OSWER Directive
9242.6-07) for the Superfund program. The
purpose of the strategy was to analyze the long-
term contracting needs of the program and design
a portfolio of Superfund contracts to meet the
program's needs over the next ten years. This
strategic planning effort was implemented in
response to a recommendation in the 1989
Agency report, A Management Review of the
Superfund Program.
In analyzing those requirements, the Agency
highlighted several issues. Among them were the
need for program integration, streamlining project
management by minimizing contractor handoffs,
flexibility in responding to changing program
priorities and budgets, and enhanced competition.
The issues, analyses, and decisions contained in
the strategy are the products of an Agency-wide
task force comprising representatives from the
EPA Regional offices, OSWER, OARM, and the
Office of Small and Disadvantaged Business
Utilization. The task force developed several
contracting options, analyzed them, and selected
elements of the options that best served each of
the Superfund program functions.
The LTCS for Superfund is built on several key
principles:
• The strategy supports an integrated "one
program" approach to enforcement and site
cleanup;
• The strategy enhances the competitive
environment by reducing the size of contracts
and creating more opportunities for small and
disadvantaged businesses; and
• The strategy provides mechanisms for greater
flexibility and improved oversight and cost
• management by giving EPA Regional offices
full responsibility for contracts management.
The second important phase of LTCS is imple-
mentation. The LTCS Task Force developed an
Implementation Framework (OSWER Directive
9242.6-09) that outlines the approach and
timeframes for implementation to ensure an
orderly transition to a decentralized contracting
system without program disruption. The imple-
mentation phase entails full planning for the
phase-in of new contracts and monitoring of the
award and administration of these contracts.
A structure consisting of three groups, each with
distinct roles and responsibilities, was developed to
serve as the framework to manage and coordinate
implementation efforts. The LTCS Advisory
Committee2 coordinates and oversees overall
implementation, Designated Leads plan and
oversee Regional administration of each Strategy
component, and Regional Liaisons serve as points
of contact in each Region to facilitate implementa-
tion across Regional organizations. This frame-
work provides the structure for implementation
and problem resolution of the LTCS as the new
contracts are initiated over the next five years.
Under the LTCS, a variety of new contracts will
be awarded beginning in FY 1994. These con-
tracts will provide maximum flexibility to the EPA
program offices by structuring contracts on a
functional basis rather than a program-specific
basis (e.g., remedial and removal). LTCS is
ongoing, and recent emphasis has focused on its
interaction and integration with the concepts of
SACM, designed to accelerate clean-up actions,
and to mitigate threats to human health and the
environment.
1.4.6 Response Action Contracts
In concert with its "one program" approach to
enforcement and response, LTCS recommended
integrating remedial and enforcement oversight
responsibilities into a single response action
contracting structure. Under this plan, all remedial
activities, enforcement oversight, and non-time-
critical removals will be combined under a single
Recently incorporated into the Superfund Regional Management and Acquisition Council (SRMAC).
1-8
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Regional contracting mechanism. These activities
are presently contracted through three resources:
remedial activities are performed under the
Alternative Remedial Contracting Strategy
(ARCS) contracts; enforcement oversight is done
under the Technical Enforcement Support (TES)
contracts; and non-time-critical removals are done
through the Emergency Response Clean-up
Services (ERCS) contracts.
The Response Action Contracts (RACs) are
intended to play a major role in the effective
implementation of SACM. The purpose of SACM
is to streamline and accelerate Superfund site
cleanups. SACM supports early action to remove
immediate risk to human health and the environ-
ment. This will be accomplished through integra-
tion of remedial and removal activities, with focus
on eliminating redundancies in the site assessment
process and creating a one-step site screening and
risk assessment process. In line with this effort, the
Response Action Contracts have been designed to
accomplish non-time-critical removals as well as
traditional Superfund remedial actions.
The one-program approach is expected to reduce
handoffs, promote program integration, and give
the EPA Regional offices flexibility to pursue
various enforcement options. Two or three
response action contracts, available to each
Region, will provide flexibility to respond to
potential conflict of interest problems, and
enhance post-award competition based on con-
tractor performance. Based on Regional projec-
tions, the first ARCS contracts will expire in late
1994. Contract planning is underway to ensure
that the new Response Action Contracts will be in
place by that time.
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COST MANAGEMENT MANUAL FOR THE SUPERPUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 2 - PROJECT SCOPING
2.1 Chapter Introduction
2.2 Establishing Project Files
2.3 Identifying Work Assignment Objectives
2.4 Developing the Work Assignment Package
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 2 - PROJECT SCOPING
2.1 CHAPTER INTRODUCTION
This chapter presents an approach to scoping
work. Topics include establishing project files,
identifying project objectives, and developing the
Work Assignment Statement of Work (WA
SOW). There are many tools available to assist the
WAM with project scoping. In addition to
systems developed in the Regional offices, EPA
Headquarters created the Superfund Cost Estimat-
ing Expert System (SCEES), a computer model that
uses site-specific data for scoping. Also available is
the Scoper's Notes, a guide to RI/FS costing that
develops ballpark cost estimates.
2.2 ESTABLISHING PROJECT FILES
The foundation of an effective cost management
system includes utilization of good records
management practices. Creating a project filing
system is a logical first step in the project scoping
process because it initiates the storage of docu-
ments (such as technical directives, monthly
progress reports, and invoices) in a manner that
enables easy retrieval for cost management pur-
poses.
Creating and maintaining a good filing system also
supports the Superfund cost recovery and enforce-
ment programs. These programs depend upon the
ability of Agency personnel to store and retrieve
information in a legally-defensible manner.
Contact the OSWER Records Management
Officer or Regional Records Center for more
information on the Agency-wide records manage-
ment program, including applicable directives and
guidance on records creation, retention, and
disposition.
A model filing system is delineated in OSWER
Directive 9242.6-02, "Guidance for Organizing
ARCS Contract Files" (Appendix C). This
directive recommends use of a standardized
contract management filing system in every
Region to avoid unnecessary duplication of
records. The system serves three functions:
• Simplifying access and retrieval. The first
document file will be an index listing the file
contents. Other documents should be catego-
rized and arranged in separate file sections or
subsections.
• Providing continuity. Documents related to
costs, site activity, contract management, and
contractor performance should be retained.
An organized filing system provides access and
continuity if personnel turn over.
• Facilitating review. Good file organization
will facilitate contract management oversight
and site reviews.
Documents should be organized in five files. Each
file should contain an index listing each section
(first document in each file); sections and subsec-
tions (clearly labeled); and single category docu-
ments filed together in separate sections or
subsections in reverse chronological order (most
recent documents first). See Exhibit 2-1 for
guidance on file organization.
2.3 IDENTIFYING WORK ASSIGNMENT
OBJECTIVES
The next step in the scoping process is evaluating
the overall merits of and support for the Work
Assignment concept, including verifying that the
proposed activities could not be performed "in-
house" by the Government. The WAM may wish
to evaluate the possibility of using in-house
resources, considering available personnel, staff
expertise, necessary technologies, materials and
equipment, and associated costs. These cost
related elements which should be used in compar-
ing in-house and contracting-out costs are illus-
trated in Exhibit 2-2. In addition, the contract
vehicle selected must have resources (i.e., level of
effort hours) remaining to perform the work, and
the proposed Work Assignment concept must fall
within the scope of the contract. Exhibit 2-3 will
assist the WAM in identifying Work Assignment
objectives.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 2-1
Document Organization
/\
Equipment Lists
.
/\ Close-out Documentation
/\ Contract Options /
/\ Work Distribution Documen^/
| Management Plans ^/
General Contract Management.
Contains contracts, contract
modifications, management plans,
contract options, and routine
contract documents.
Modifications
Contract
Index
General Contractor
Management File
/\
A.
Work Assignment Management.
Contains the Work Assignment,
Amendments, Work Plans, activity
reports, all correspondence, and
procurement requests.
Amendments
Work Assignment
Index
Work Assignment
Management File
A
/I Annual Allocation Reports /
A Monthly Progress Reports ~/
/\ Invoices /
Financial and Progress
Documentation. Contains
monthly progress reports, invoices,
annual allocation reports, and annual
analytical service reports.
Index
Financial and
Progress Report
Documentation File
Award Fee Modifications /
Plan I Award Fees /
Performance Evaluation
Reports
/\ Performance Event Reports /
*\ Regional Evaluation Reports /
Performance
Evaluation. Contains
all EPA and contractor
documents regarding
performance.
Index
Confidential
File
Confidential.
Contains all
confidential
information such as
contractor pricing.
2-2
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
2.4 DEVELOPING THE WORK
ASSIGNMENT PACKAGE
Monitoring contractor costs begins with the
initiation of a Work Assignment Package. Under
cost-reimbursement contracts, the Work Assign-
ment Package consists of the SOW (divided into
tasks/subtasks), estimate of the level of effort
(expressed in labor hours), products and
deliverables warranted under the Work Assign-
ment, Work Assignment timetable/period of
performance, and an Independent Government
Cost Estimate (IGCE). Exhibit 2-4 displays the
Work Assignment components.
The Work Assignment should clearly and com-
pletely oudine the task requirements because it
will be used as the foundation upon which the
contractor will develop the Work Plan and, will
consequently drive all future activity under the
Work Assignment. Exhibit 2-5 is designed to assist
the WAM in assembling a Work Assignment
Package. The following subsections describe in
detail the components of a Work Assignment
Package.
In preparing a Work Assignment, remember the
underlying question: Has the Government
provided enough information to enable the
contractor to develop a detailed Work Plan/Cost
Proposal?
2.4.1 Work Assignment Form
The Work Assignment Form (WAF) prepared by
EPA is the document which accompanies the
Work Assignment Package from Work Assign-
ment issuance to Work Assignment close-out. The
WAF is a summary cover sheet containing the
contract and Work Assignment title; number; and
purpose; authorized level of effort (LOE), period
of performance, authorizing EPA signatures, and
contractor acceptance. WAFs may vary between
contracts, although they should include this basic
information. See Exhibit 2-6 for an example of an
Office of Emergency and Remedial Response
(OERR) Work Assignment Form.
Exhibit 2-2
Comparative Costs of In-House and Contracting-Out
Performance of Products and Services
In-House Performance
Direct Material
Material Overhead
Direct Labor
Fringe Benefits
Other Direct Costs
General and Administrative
Inflation
Cost of Capital
One-Time New-Start Costs
Deductions
Other Costs
Total
Performance by Contracting-Out
Contract Price
Transportation
Contract Administration
Government-Furnished Property
Standby Maintenance
Other Costs
General and Administrative
Costs of Capital on GFP
Utilization of Government Capacity
One-Time Conversion Costs
Deductions
General Income Taxes
Net Proceeds from Disposal of Assets
Other Costs
Total
52-028-30
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 2-3
Checklist for Identifying Work Assignment Objectives
Are the tasks, services and large segments of the work necessary to accomplish the project mission
identified?
Are all the major tasks and services identified and further defined into smaller tasks?
Are these tasks written in terms of: (1) "input" (what is needed); (2) the steps required to do the job; and
(3) "output" (what the work will produce)?
Does the Work Assignment specify as to whether the Government or the contractor will furnish facilities,
equipment and material?
Does the Work Assignment identify special qualifications, skills, certifications, educational
accomplishments, and experience, determined by task?
Does the Work Assignment adhere to the various EPA procedures, regulations, and laws that may have a
bearing on the work to be done?
Is the Work Assignment detailed so that the cost of each task can be determined?
Exhibit 2-4
Components of the Work Assignment Package
I Work I
I Assignment
I Timetable
| Level of '
Effort I
' Estimate '
I J
Work
Assignment
Package
Work
Assignment
Form
J Products I
and I
I Deliverables I
I J
51-028-4A
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 2-5
Checklist for Reviewing a Work Assignment
Statement of Work
O Is the SOW specific enough to permit the Government and the contractor to estimate the probable cost,
required levels of expertise, personnel, and other resources needed to accomplish the tasks?
O Are specific duties/tasks/obligations stated? Will the Government be able to determine whether the
contractor is complying with the SOW?
O Is the SOW written so that it is clear what the contractor's obligations/tasks are and when they must be
accomplished?
O Is the appropriate reference document cited? Is the reference correct? Is all of it pertinent to the task, or
should only portions be referenced?
O Has extraneous material been eliminated?
O Have all requirements for data been specified separately in the Contract Data Requirements List (CDRL)?
O Have appropriate technical experts reviewed draft copies of the SOW? Have recommendations from these
reviews been included in the SOW?
O Has travel been considered in all tasks?
Products and Deliverable*
O Has the contractor been given enough information to specify products and deliverables?
O Are all deliverables identified in the SOW?
0 Are interim deliverables considered (where applicable)?
Timetable
O Are potential problems and/or constraints identified?
O Are deadlines and milestones identified?
O Is enough time allotted for predictable activities?
Independent Government Cost Estimates (IGCEs)
O Are costs based on historical and/or cost estimating tools?
O Are cost estimating relationships and results used effectively?
O Are SOW tasks broken down by labor category, summed, and multiplied by hourly rate?
O Are G&A, overhead, and fee rates established?
O Are other direct costs identified?
Level of Effort
O Is the Work Assignment cost effective?
O Does the Work Assignment define a reasonable division of senior- and junior-level staff?
O Does the Work Assignment give the contractor enough information to identify ODCs?
52-028-6C
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
The LOE reported in the WAF is important for
the purposes of cost management. Any modifica-
tion in the Work Assignment LOE must be noted
on this form. The WAF should always reflect up-
to-date information and display the original LOE
plus any addition or deletion to diat LOE. See
section 5.6 for more information on contractor
claims and modifications.
2.4.2 Statement of Work
The Statement of Work prepared by EPA is the
heart of the procurement action. While the
Agency is free to tailor the individual WA SOW
to a particular activity, the scope of the WA SOW
must be within the overall scope of the contract.
The purpose of the SOW is to provide a detailed
description of specific requirements needed to
fulfill the goals of the Agency. It also serves as the
basis for determining both the contract and
Government cost, and ensures comparability and
equity in the cost analysis. Failure to adequately
describe what the Government needs via the SOW
may encourage a contractor to build in costly
contingency allowances and disparity with the
Government's cost estimate. When preparing the
SOW, it is especially important to carefully define
tasks that fall within the sensitive contracting areas
defined by the Agency (i.e., activities deemed
inherent governmental functions).
The SOW includes a work breakdown structure,
duties and tasks, frequency of performance of
repetitive functions, ground rules in estimating
assumptions, preliminary equipment and Govern-
ment Furnished Equipment requirements, and a
Work Assignment schedule. The following items
should also be incorporated in an SOW:
• A clear and complete description of the
project objectives;
• Background information relevant to the
requirement (sources);
• Any special technical considerations;
• A detailed description of technical and
management requirements; and
• A description of the deliverable items (struc-
ture, form, etc.).
The Statement of Work should clearly state
WHAT is to be done without prescribing HOW
it is to be done.
Products and Deliverable*
Because it has such a tangible payoff, preparing a
deliverable can be one of the most enjoyable and
satisfying parts of task management. To ensure
production of final deliverables that are of high
quality and are submitted to EPA in a timely
fashion, the WAM must identify the series of tasks
and subtasks that culminate with preliminary and
final products/deliverables. Questions to consider
in developing the list of deliverables include:
• What type of products are most appropriate?
A report or a briefing? A workshop? A data-
base? Guidance? Who is the target audience?
The type of deliverable selected will affect the
amount, pricing, and mix of resources re-
quired;
• When should interim and final deliverables be
planned? Considering interim products as well
as final ones will help the WAM conceptualize
the phasing and pacing of the work. If an
interim product is: (1) critical to proper
formulation for the final deliverable; (2)
essential to decision making; or (3) will receive
widespread scrutiny, include it in the Work
Assignment; and
• Who should review the interim and final
products? Have the procedures for acceptance
of contractor deliverables been clearly pre-
sented? For example, senior management in a
Regional office may require review and
approval of major deliverable prior to their
formal approval.
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COST MANAGEMENT MANUAL FOR THE SUPERPUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 2-6
Work Assignment Form
Contract Number: Contractor:
Work Assignment Number:
Amendment Number:
Contract Period:
Purpose: U Initiate New Work Assignment
Q Amend Work Assignment
O SOW
O LOE
Q Other
Comments:
Work Assignment Title:
Level of Effort (LOE) Authorized:
Previous $
This Action $
Total $
Period of Performance: From: To:
*Effective date of this action is Contracting Officer's signature date unless otherwise specified.
Approvals
(Signature) (Date) (Mail Code) (Phone #)
Work Assignment Manager
Branch Approval
Division Approval
(Funds are available from Division Allocation)
Project Officer
Contracting Officer
Contractor's Acceptance
(Required within five (5) days after receipt from the Contracting Officer)
Signature: Date:
Title:
2-7
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Although the product!deliverable planned is
rarely abandoned for a completely different one,
reshaping is often necessary.
Exhibit 2-7
Scheduling of Tasks
The Work Assignment Timetable/Period of
Performance
Many variables affect the Work Assignment
timetable. Some can be controlled by the WAM,
others cannot. It is impossible to extract "rules of
thumb" on how long various activities should take
to complete — the variables involved are too
diverse. The timetable for these activities is not
easily predicted (i.e., modification of deliverables,
internal reviews, QA/QC). On the other hand,
certain activities are generally predictable and will
cause a task to take more time. In developing the
Work Assignment timetable the WAM should
consider the scheduling constraints and identify
any internal deadlines or milestones that
deliverables or closeouts should meet (e.g., SCAP
submission, Regional on-site review, legislative
deadlines, budget cycle input). The Work Assign-
ment timetable should also be designated to allow
for predictable contractual activities. Exhibit 2-7
illustrates some of these activities and provides
completion time estimates.
2.4.3 Independent Government Cost
Estimates (IGCEs)
According to OSWER Directive 9242.2-06,
effective January 31, 1992, an independent
government cost estimate (IGCE) must be
developed by the WAM, in concert with the cost
estimators, for any Work Assignment estimated to
exceed $25,000 under contracts that utilize a
Work Assignment administrative process. This
requirement is applicable to both new Work
Assignments and increases in existing Work
Assignments. The IGCE will be used by the
WAM as a tool in negotiating the Work Plan
budget with the contractor, and for documenting
the resulting agreements in the contract file. This
cost estimate is a top down cost analysis used to
analyze the reasonableness of the contractor's cost
proposals and subsequent cost increases.
Activity
Holidays and vacations
State review
Regional review
EPA review
Other agency review
Red border/rulemaking
review
Public participation
Large events with complex
logistics
Contract cycle
GPO or EPA printing
Time
Allotment
2 weeks
1 month
3 weeks
2 weeks
1 month
varies
6 weeks
3-5 months
varies
4-6 weeks*
Based on previous experience.
51-028-5A
NOTE: The IGCE must be developed independently,
by government employees, without input from any
contractor. The IGCE shall not be forwarded to any
contractor. For more information on cost estimat-
ing and IGCEs see chapter 3.
Level of Effort
To determine the level of effort necessary to
complete the Work Assignment, the WAM should
prepare an estimate of the staffing mix, keeping in
mind how many hours are needed for oversight,
research, data development, etc. The staff mix
should be divided into senior and junior level
categories and when added together, reflect the
total estimate. Areas identified in section 2.3 will
assist the WAM in evaluating the cost effectiveness
of a Work Assignment. Attempting to answer the
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
questions listed below may be a useful method in
estimating the level of effort:
• Is the task cost effective? What are the full
range of resources needed to complete the
task?
• How many technical hours are necessary to
complete the task?
• How much participation is necessary from the
senior contractor staff? From junior levels?
When scoping level of effort, determine the
length of time necessary for one or two seasoned
professionals with ideal expertise to complete the
task. Then put in some slack for realities:
start-up costs, learning curves, ups and downs of
staff allocation, time for EPA review, and time
for QA/QC. All these factors increase the time
and resources needed for task implementation.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 3 - ESTIMATING COSTS AND INDEPENDENT
GOVERNMENT COST ESTIMATES
3.1 Chapter Introduction
3.2 Preliminary Procedures for Estimating Costs
3.3 Independent Government Cost Estimates
3.4 Preparing Independent Cost Government Estimates
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 3 - ESTIMATING COSTS AND
INDEPENDENT GOVERNMENT COST ESTIMATES
3.1 CHAPTER INTRODUCTION
This chapter presents an approach to cost estimat-
ing. Topics include procedures for project
scoping/estimating costs and procedures for
preparing an Independent Government Cost
Estimate (IGCE) for remedial and enforcement
Work Assignments in the Superfund Program.
The chapter also outlines tools available to assist
the cost estimator in collecting and assembling
data.
For more information on IGCEs, see the Office of
Solid Waste and Emergency Response (OSWER)
Directive 9202.1-12 in Appendix D.
This guidance provides information and estab-
lishes minimum requirements regarding the roles
and responsibilities of WAMs, POs, and COs for
preparing IGCEs, performing reviews of the
contractor's Work Plan and budget, and conduct-
ing and documenting negotiations.
3.2 PRELIMINARY PROCEDURES
FOR ESTIMATING COSTS
Before estimating contract costs, a complete
project plan is necessary. In order to estimate the
cost of a project it is important to have a clearly
defined Statement of Work (SOW) and detailed
specifications. With the project being clearly
defined it is then possible to estimate the costs by
preparing an IGCE as described in section 3.3.
(For more information on the components of a
project plan, see section 2.4.) There is no formal
procedure for preparing an IGCE. Although, a
step-by-step process; planning, organizing and
conducting a project in the same manner as a
contractor will produce a reliable IGCE. A general
approach to cost estimating is described in the
following steps.
3.2.1 Define the Work Assignment
The cost estimator must define and thoroughly
understand the contract work in detail; the scope
of work, the Work Breakdown Structure (WBS),
the schedule, the milestones and data require-
ments. This will ensure that the cost estimate is in
compliance with the SOW.
3.2.2 Collect and Assemble Data
The cost estimate is only as good as the data upon
which it is based. All data that are related to the
contract work should be assembled. This includes
comparative data from similar past or current
Work Assignments. The data should cover as wide
a spectrum as possible, financial and non-finan-
cial, quantitative and non-quantitative, historical
and non-historical. OSWER Directive 9242.2-06a
provides information regarding the availability of
tools, databases, and assistance for developing
IGCEs for remedial work assignments. This
Directive is included as Appendix E.
Some of these tools that are useful in preparing an
IGCE include the Superfund Cost Estimating
Expert System (SCEES), a computer model that
uses site-specific data to develop an IGCE and the
Scoper's Notes, a guide to RI/FS costing that
develops ballpark cost estimates. Other cost
estimating software models which may be helpful
include:
• Granular Activated Carbon: This program
shows granular activated carbon costs and
performance for the remediation of hazardous
waste sites or drinking water treatment.
• Air Stripping: This program shows air
stripping costs and performance for the
remediation of hazardous waste sites or
drinking water treatment. This program is
also used for cost comparisons of the treat-
ment technologies.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
• M-CACES Gold: This engineering or bot-
toms up program is used for estimating
construction costs. The databases include unit
price, crews, assemblies, labor rates, equip-
ment rates, and models.
• Envest Estimating Software: This parametric
or top down program is used to model and
estimate the cost of remediation work. The
package contains a RI/FS model, a RD model,
RA technology models, and site work and
utility models.
3.2.3 Cost Estimating Methodologies
To arrive at a total scope of work cost estimate,
you must determine die cost estimate of every task
(element) and subtask (sub-element) defined in
your WBS and SOW as well as present the
rationale behind every estimate. There are four
cost estimating methodologies available to assist
the estimator: Analogy, Engineering, Parametric,
and Extrapolation.
• Analogy Method: The Analogy method
compares a new Work Assignment (scope of
work) with an existing Work Assignment, for
which we have accurate cost and technological
data.
Uncertainty in an analogy cost estimate is due
to the subjective evaluations made by the
technical staff and cost estimators. In most
cases, actual technical comparisons can be
made. The problem is to develop a cost
relationship based on technical differences.
The estimator does not have to use only one
analogous Work Assignment to compare with
the Work Assignment being estimated. For
example, you may estimate the cost of an
RI/FS TASK 1 Project Planning by finding a
previous Work Assignment for the Work Plan
that describes the Community Relations Plan
(CRP), Field Sampling Plan (FSP), Quality
Assurance Project Plan (QAPP), and the
Health and Safety Plan (HSP), etc. The key is
to make a single comparison for each Work
Assignment task or subtask evaluation. The
total estimate will involve many single analo-
gous cost estimates.
Engineering Method: The engineering
method involves the examination and defini-
tion of separate task elements at the lowest
work breakdown structure (WBS) detail level
and the application of factors for non-
estimated elements, such as quality assurances,
project management, etc. In other words, the
estimator starts at the lowest level of identifi-
able work with the EPA CERCLA Guidance
and specifications, identifies each labor task,
tools, production operations, and materials
required to accomplish the work. General
factors are then added based on the direct
labor estimated. The individual items are then
added together forming the "bottoms-up" cost
estimate.
The technique(s) used in discrete work
element estimates may be any one of the
techniques available. For example, the estima-
tor may use an analog for a like element of
work, or a parametric cost estimate from a
general industry database of like work ele-
ments. The estimator may also use a set of
work standards based on work activities such
as drilling a 2" hole, 5 feet deep in 2 minutes,
hauling 8 tons of soil per mile, geological
surveys of comparable acres with lead con-
taminants, etc.
The greatest uncertainty in this type of cost
estimate is due to the effect of the added
multiplicative factors on the estimated direct
labor base. The compounding effect can result
in large errors at the summation of the
estimated elements. This is the reason why the
government requires that a "Price Analysis" be
conducted after a "Cost Analysis" has been
performed.
Parametric Method: The parametric method
uses a database of like elements and generates
an estimate based on some selected task
performance or design characteristic. This
assumes that there is a relationship between
some performance parameter such as timeli-
ness, comprehensiveness, thoroughness
(independent variables) and the Work
Assignment's cost (dependent variable).
The most significant factor in parametric cost
estimating is the requirement for a database.
Technology enhancements that are not
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
reflected in the database, but which are
embodied in the Work Assignment will lead
to erroneous cost estimates. Attempting to
estimate the cost of a single contaminated site
using a multi-contaminated (surface, subsur-
face, aquifer, and air) database would yield a
much higher cost estimate on our current
Work Assignment.
• Extrapolation Method: Extrapolation is the
preferred estimating method. This technique
develops estimates by extrapolating from
actual costs, usually from a previous Work
Assignment in the same series (types of RI/FS,
RA, RD, etc.). It is probably the more accu-
rate estimating methodology.
The accuracy of the extrapolation method
depends on the assessment of die differences
between the Work Assignment (Work Plan or
site) being estimated and the prior Work
Assignment (Work Plan or site). Obviously,
the closer the two Work Assignments are
alike, the less uncertainty.
Comparisons to a previous Work Assignment
(Work Plan or project site) will require
adjustments to compensate for changes in the
current Work Assignment (Work Plan or
site). These differences can be factored
accurately into die estimate using historical
information from previous Work Assign-
ments; Contractors Monthly Cost/Perfor-
mance Reports, trade magazines, journals,
industry specific estimating handbooks
(construction), etc.
3.2.4 Use Cost Estimating Relationships to
Develop the Estimate
The information in the SOW and the data
collection is used to develop relationships between
the cost of something dependent on a certain set
of variables. An estimate or a series of estimates is
then developed involving judgement and discre-
tion. These quantitative relationships are a
combination of information based on the state-
ment of work and the non-qualitative data
collected in the data collection step described in
section 3.2.2 and the cost estimating methodolo-
gies described in section 3.2.3.
3.2.5 Present Results
The best estimate of cost may be ineffective if it is
presented in a manner that cannot be understood.
The method of presentation depends on the
nature of the work. For example, if uncertainty
exists in the work and a best estimate cannot be
made, present the cost estimate as a series of
ranges rather than a single point estimate. All
assumptions made in preparing the estimate
should be documented in the project files for
future reference.
3.2.6 Determine Government Objectives
The objective of this procedure is to obtain the
commitment of the Program Office to manage the
work widiin the Government's estimate. The
estimate should not be used as absolute, instead it
should be compared with other government
estimates and contract cost experiences.
3.3 INDEPENDENT GOVERNMENT COST
ESTIMATES
OSWER Directive 9242.2-06, dated January 31,
1992, requires the development of an IGCE for
any new Work Assignment or Work Assignment
modification expected to exceed $25,000. An
IGCE is the Government's internal estimate of the
cost to accomplish the SOW or solicitation
specifications. It will be used by the Work Assign-
ment Manager (WAM), Project Officer (PO), and
Contracting Officer (CO) as a tool in negotiating
the Work Plan budget with the contractor and for
documenting the resulting agreements in the
contract file. This cost estimate is also used to
analyze the reasonableness of the contractor's cost
proposals and subsequent cost increases.
The IGCE shall be developed independently by
EPA personnel without input from any
contractor and shall not be forwarded or
otherwise made available to any contractor.
IGCEs shall be marked "CONFIDENTIAL-FOR
OFFICIAL USE ONLT'.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
The WAM is responsible for the development of
the IGCE. Where in-house cost estimators are
available, the WAM may utilize these individuals
when developing the IGCE. If the WAM intends
to extensively involve cost estimators in the IGCE
process, it is essential that estimators be kept
informed and involved from the earliest time
possible.
IGCEs generally fall into two categories: those
consisting mostly of level of effort (LOE) hours,
and those that not only contain LOE but need to
estimate the anticipated cost of construction as
well. OSWER has issued guidance on contractor
program management costs under ARCS contracts
(Appendix F).
3.3.1 Level of Effort Estimates
LOE estimates shall be based on supporting data
such as historical information from previously
completed work, cost estimating guidelines,
engineering standards, or professional judgement.
All assumptions, including rationale, used in
developing the IGCE shall be clearly defined in
writing and shall be part of the IGCE package.
Estimates must, at a minimum, be broken out by
task and subtask as outlined in the SOW, and by
cost element such as labor, travel, other direct cost,
subcontract expense, overhead, general and
administrative (G&A), and fee. The estimate shall
be realistic of the resources necessary to accom-
plish the tasks detailed in the SOW. The estimate
shall not be structured to equal the funding
document accompanying the Work Assignment
Form (WAF).
One of the most important elements in the
Government cost estimate is the estimate for labor
hours. Labor hours must be estimated by skill
category, professional (P) level and technical (T)
level, as defined in the contract, and by task.
The IGCE must be prepared before the CO will
accept the procurement request. This IGCE can
be considered a preliminary estimate prior to
having a technical scoping meeting widi the
contractor if desired, or a final estimate when no
scoping meeting is required. A preliminary
estimate is defined as the total LOE and dollar
amount for all work anticipated in the SOW. The
major assumptions and rationale shall be included
with the preliminary estimate. If a technical
scoping meeting is required (limited solely to the
technical aspects of the assignment, and not
involving cost) the preliminary estimate must be
revised to reflect any changes made to the SOW
and then it will be considered the final estimate.
In all cases, the final IGCE shall be completed
prior to receipt of the Work Plan. In the event
that a technical scoping meeting is not held, the
IGCE shall accompany the SOW and shall be
forwarded to die CO as part of initiation of the
Work Assignment. Estimates shall be signed and
dated by the WAM and the estimator/coordinator
or PO (if involved in the IGCE preparation).
Where the contract SOW presents a WBS with
specific, standardized tasks, the tasks presented in
the SOW and the IGCE shall be organized,
structured, and presented in a manner consistent
and comparable with the contract SOW.
When the SOW and IGCE expand the activities
or increase the level of effort to be performed in an
approved Work Plan, the tasks in the SOW and
IGCE shall be organized, structured, and pre-
sented in a manner consistent and comparable
with the tasks presented in the approved Work
Plan.
Current procedures for expanding LOE to an
approved Work Plan include revising the IGCE to
include old LOE plus the new LOE. It is impor-
tant to keep the original LOE separate from any
additional LOE. The procedures for expanding
LOE include WAM determination that an
increase is necessary. The WAM prepares a WAF
(Amendment to Final Work Plan Approval) and a
Procurement Request (PR). A PR will be necessary
only if there is a change in dollars. The PO
reviews and concurs with the WAF and submits it
to the CO for approval. When the contractor
makes an initial request for increased LOE, the
WAM should ask for back-up information to
support die request.
3.3.2 Construction Cost Estimates
Estimates for the Remedial Action are developed
first at the RI/FS stage, amended during the
Remedial Design (RD) process, and finalized
based upon the solicitation/specification package.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
The estimate at the RI/FS stage is a preliminary .
estimate which may range as much as plus or
minus 50 percent. Construction cost estimates
(CCEs) are developed later in the process. The
CCE is a detailed estimate itemizing the principle
elements of the cost to the contractor (including
indirect costs and profit) to perform the work
required by the specifications. The CCE is
developed by EPA or other Federal or A&E
contractor sources as discussed in this section.
Detailed CCEs are developed using a step-by-step
process, planning the project in the same manner
as a contractor would plan, organize, and conduct
it. They are based on the type and quantities of
labor, equipment, and material required to
perform the work. Consideration should be given
to production rates, projected weather delays,
schedule impacts, site accessibility, safety, haul
routes and distance, and availability of narrative
addressing site visits and the facts and assumption
used in the preparation of the estimate, as well as
specific references to source material used.
OSWER Directive 9355.5-01/FS, dated Septem-
ber 1989, provides guidance on processing ARCS
construction contract modifications.
The A&E contractor to whom the remedial design
is awarded may or may not be specifically tasked
to develop a detailed CCE as part of the design
process. Listed below are the alternative methods
that the Regions should use in the development of
CCEs.
Use of EPA Staff. For EPA Regions having in-
house applicable construction experience and
technical expertise, the CCEs should be developed
using available staff resources. This will serve as
EPA's official CCE for the Remedial Action. If
this approach is taken, the A&E contractor should
not be tasked to develop a CCE (such duplication
of the effort would not be cost effective). This
CCE will become the subcontract portion of the
Remedial Action IGCE if it is provided to the
prime for subcontracting.
Use of Other Federal Agencies to Review A&E
Contractor CCE. If Regional staff require assis-
tance because of work load or lack of technical
expertise in project construction, the A&E
contractor will prepare the CCE and the WAM
should access the technical expertise and knowl-
edge of other federal agencies, such as the Bureau
of Reclamation (BuRec) or U.S. Army Corps of
Engineers (USAGE), through inter-agency
agreements, to assist in reviewing the A&E
contractor's estimate. Once the contractor's CCE
has been reviewed, modified if necessary, and
approved by the EPA, it shall serve as the EPA's
official CCE. This CCE will become the subcon-
tract portion of the Remedial Action IGCE if it is
provided to the prime for subcontracting.
Use of other Federal Agencies to Develop CCE.
If Regional staff require assistance because of work
load or lack of technical expertise in project
construction, the WAM should access the techni-
cal expertise and knowledge of other federal
agencies, such as the BuRec or USAGE, through
inter-agency agreements, to develop a CCE based
upon the A&E contractor's solicitation/specifica-
tion package. Once the other agency's CCE has
been reviewed, modified if necessary, and ap-
proved by the EPA, it shall serve as the EPA's
official CCE. If this approach is taken, the A&E
contractor should not be tasked to develop a CCE
(such duplication of effort would not be cost
effective).
When the WAM chooses to use another federal
agency to develop the Remedial Design, the
responsibility for the development of the detailed
CCE is incorporated as part of the SOW and
Interagency Agreement (LAG). This CCE will
become the subcontract portion of the Remedial
Action IGCE if it is provided to the prime for
subcontracting.
3.4 PREPARING INDEPENDENT
GOVERNMENT COST ESTIMATES
To arrive at a total Work Assignment cost esti-
mate, the cost estimator must determine the cost
of every task/subtask defined in the Work Assign-
ment WBS/SOW and the rationale for that
estimate. Contractors incur costs in two broad
categories, direct costs and indirect costs. Direct
costs are costs that can be directly associated with
a particular project or contract. Examples of direct
costs include direct labor, materials, travel,
equipment, and other direct costs (ODCs).
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Indirect costs are not directly associated widi a
particular contract but are necessary for the work
to be done. Examples of possible indirect costs
include General and Administrative expenses
(G&A) (e.g. management salaries, utilities, office
supplies, telephone, etc.) and overhead. Each
element (labor hours, travel, material, equipment,
ODCs, etc.) is broken down into costs for the
services needed for that task. Because such a large
percentage of EPA's contracts are labor intensive, a
good estimate for labor is fundamental to a clear,
concise and complete IGCE.
Exhibit 3-1 presents the fundamental components
and basic procedure for preparing an IGCE, while
Exhibit 3-2 illustrates a computational example for
an IGCE.
3.4.1 Labor Hours
Identify the number of labor hours needed by
professional labor category for each task and
subtask in the Work Assignment. This estimate
includes all labor hours regardless of labor cat-
egory.
3.4.2 Travel
Identify all travel requirements for each task.
Travel may be estimated based on historical
averages by travel area and adjusted for any
additional travel projected for the specific Work
Assignment and for any increased costs due to
inflation.
3.4.3 Material
Identify material requirements for each task.
Material may be estimated based on historical
material needed and averages (such as non-CLP
testing costs, subcontractor costs for hauling soils,
etc.). It should be adjusted for any unique needs
specified in the SOW. Estimates for material
requirements also may be adjusted for inflation.
When applicable, lease versus purchase analysis is
performed for determining the best price for die
Government.
3.4.4 Government Furnished Property
Identify government furnished property (GFP) for
each task. GFP should be estimated based on
historical records maintained by Government
Property Administrators.
3.4.5 Construction Costs
Identify costs to perform the solicitation specifica-
tions considering weather delays, schedules,
production rates, safety, haul routes and distances,
and site visits. These costs should reflect all direct
and indirect charges to die project plus profit.
3.4.6 Other Direct Costs (ODCs)
Identify other direct costs (ODCs) for each task.
ODCs may be estimated using historical averages
from similar activities and adjusted for any known
specific needs and for inflation.
3.4.7 Indirect Costs and Fee or Profit
Identify any indirect costs and fee or profit.
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COST MANAGEMENT MANUAL FOR THE SUPERPUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 3-1
Procedures for Preparing an Independent Government Cost Estimate
1. Estimate hours required to perform each WA task by labor category. Sum total hours, across
all WA tasks, for each labor category in each work assignment type = Total hours per labor
category
2. Multiply hours per labor category x hourly rate per category = Total costs per labor category
3. Sum the costs for all labor categories = Total WA labor costs (unloaded, i.e., no overhead)
4. Multiply labor costs x contract overhead rate (e.g., 50%) = Estimated overhead
5. Estimate other direct costs for the Work Assignment (e.g., consultants, subcontractors, travel,
photocopying, computers) = Estimated Total ODCs
6. Multiply sum of labor costs plus other direct costs x contract G&A (e.g., 10% for general and
administrative costs) = Estimated G&A
7. Multiply estimated cost x fee (e.g., 7%) = Estimated WAfee
51-028-15C
Exhibit 3-2
Computation Example for an Independent Government Cost Estimate
Direct Labor $5,000
Overhead (@ 50% of Direct Labor) $2,500
Other Direct Costs $750
Subtotal $8,250
General & Administrative (@ 10%) $825
Estimated Cost $9,075
Fee (@ 7%) $635
Total Work Assignment Fee $9,710
51-028-32
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 4 - INITIATING WORK ASSIGNMENTS AND
REVIEWING WORK PLANS/COST ESTIMATES
4.1 Chapter Introduction
4.2 Initiating Work Assignments
4.3 Reviewing the Contractor Work Plan
4.4 Reviewing the Contractor Cost Estimate
4.5 Negotiations
4.6 Documentation
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS *$$?
CHAPTER 4 - INITIATING WORK ASSIGNMENTS AND
REVIEWING WORK PLANS/COST ESTIMATES
4.1 CHAPTER INTRODUCTION
This chapter identifies the activities necessary to
initiate a Work Assignment, including review of
contractor Work Plans and Cost Estimates.
Checklists are included to assist the Work Assign-
ment Manager (WAM) in reviewing these docu-
ments, as well as to promote a standardized review
process across the Agency.
4.2 INITIATING WORK ASSIGNMENTS
The completed Work Assignment Package; which
includes at a minimum the Work Assignment, the
Statement of Work (SOW), Work Assignment
Form (WAF) and the Independent Government
Cost Estimate (IGCE), is transmitted by the
WAM to the EPA PO for review of completeness
and accuracy. The PO forwards the Package to the
CO who reviews the Package, assigns a Work
Assignment number, and signs the Work
Assignment Form and Procurement Request. The
CO then forwards complete copies of the
approved Work Assignment Package to the EPA
Project Officer and WAM, and transmits the
Package minus the IGCE to the contractor. The
contractor acknowledges acceptance of the Work
Assignment Package by signing the cover page and
returning the original to the CO.
When there is an immediate need to begin work
upon receipt of the Work Assignment Package,
the contractor may be required to prepare a Work
Plan Memorandum (WPM). The WPM is a 5-6
page document used in place of a Work Plan due
within 15 days of receipt of Work Assignment. It
includes a proposed level of effort (LOE), pro-
posed total cost (budget description), proposed
schedule, proposed staffing, and technical ap-
proach (methodology). Exhibit 4-1 demonstrates
the components of a WPM. The WPM is not
widely used in the Regions and is, therefore, an
optional procedure.
If the WAM concurs with the course of action
proposed by the contractor and detailed in the
WPM, the WAM forwards the memorandum to
the EPA CO for review and approval. Only the
CO can authorize the contractor to begin work,
(i.e., incur costs), prior to approval of the overall
Work Plan.
4.3 REVIEWING THE CONTRACTOR
WORK PLAN
The Work Plan is the contractor's response to the
Government Work Assignment and details how
contractor staff will conduct work during the life
of the Work Assignment. The Work Plan de-
scribes the project goals, the technical approach to
be used by the contractor, the tasks and
Exhibit 4-1
Components of aVCbrk Plan Memorandum
Total Cost
(Budget
Description)
Level of
Effort
Work Plan Memorandum
/
Staffing
Technical
Approach
51-028-8
4-1
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
deliverables, the proposed personnel, and any
issues that warrant clarification. The WAM should
review the contractor Work Plan to control costs
with the following questions in mind:
• Are tasks and subtasks planned rationally and
evenly?
• Do the identified tasks/subtasks in the Work
Plan match those in the SOW?
• Are the responsibilities of all parties clearly
delineated?
• Is the schedule timely and realistic?
• Is staffing well thought out?
• Are products clearly defined, well scheduled,
and appropriate?
• Is the manner in which the contractor and the
WAM will communicate specified?
Work Plans must be reviewed by the WAM and/
or the Contract Management Team (CMT) to
ensure that the contractor understands the project,
follows the structure and organization of the
SOW, and has proposed an acceptable approach
to accomplish the effort within the scope of die
original Work Assignment Statement of Work
(WA SOW). In addition, the proposed level of
staffing and resources should be appropriate,
sufficient, and reasonable given the tasks to be
performed. The CMT, at a minimum, consists of
the WAM, PO, CO and others, such as contract
specialist (CS), cost estimator, technical experts,
the Bureau of Reclamation (BuRec) or U.S. Army
Corps of Engineers (USAGE).
The WAM should assess the reasonableness of the
proposed contractor staffing plan by comparing it
to the original WA SOW — and noting any
discrepancies between the two documents in a
technical review memorandum. This memoran-
dum outlines reasonable tasks and those which
need to be negotiated, and is forwarded to the PO
and CO. For example, the contractor may propose
a higher proportion of senior personnel than
needed, or contemplate a more expansive scope,
thereby increasing the total cost of the project to
the Government. The WAM should be aware of
contractor understaffing — proposing too few or
too junior staff— which may lead to under-
budgeting and interruption of work in mid-task
should additional funding need to be authorized
by the Agency. The staffing and skill mix needs to
be examined to ascertain if the contractor has
proposed both the proper blend of expertise,
enough senior level hours for oversight and review,
and enough junior level hours for research and
data development. Exhibit 4-2 will assist the
WAM in reviewing and evaluating a contractor
Work Plan. For more information on Reviewing
Contractor Work Plans see Appendix D.
i.4 REVIEWING THE CONTRACTOR
COST ESTIMATE
The Cost Estimate is the contractor's proposed
budget for the Work Assignment. The contractor
should prepare this document in detail to clearly
present labor and other costs entailed in Work
Assignment performance. This cost estimate
provides a benchmark for future cost comparison
efforts and analyses by the Government. The
major elements of the Cost Estimate are:
• Labor Costs, including notation of Profes-
sional Level, level of effort (number of hours),
and hourly labor rates;
• Overhead Costs, usually expressed as a
percentage of direct labor;
• Other Direct Costs (ODCs), such as supplies
and equipment;
• Travel and Transportation Costs;
• General and Administrative Costs (G&A),
usually expressed as a percentage of direct
labor and ODCs; and
• Profit and fee.
The WAM should review the cost estimate against
Exhibit 4-3 and the Independent Government
Cost Estimate (IGCE). Comparing contractor
proposed costs with the costs of previously
completed contractor studies is not sufficient in
evaluating the estimate, since controls over
contractor costs in the past may have been inad-
equate. During this review, the Government
should document all unreasonable or excessive
costs on the evaluation checklist for contractor
price estimates. This checklist is forwarded to the
PO and CO and will be helpful when negotiating
the final cost of the Work Assignment with the
contractor.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 4-2
Checklist for Reviewing Contractor Work Plans
Q Are the major tasks of the entire Work Assignment and the steps to be undertaken to complete each task
described?
Qj Did the contractor indicate how many weeks after Work Assignment kickoff it will take to complete each
task (or use actual dates)?
Q Is the schedule for interim and final deliverables shown?
Q Did the contractor set a reasonable schedule for getting the work done and build in enough slack for
contingencies?
Q Are detailed responsibilities for the contractor and the Government defined?
Q Are key contractor staff and their roles identified?
Q Did the contractor include any assumptions that may affect execution of work?
Q Are protocols as to how the contractor and Work Assignment Manager will communicate for the duration
of the Work Assignment identified?
Q Do tasks in the Work Plan match those in the SOW?
51-028-9B
Exhibit 4-3
Checklist for Reviewing Contractor Cost Estimates
Are the hours and rates appropriate and reasonable?
Are the costs broken down into specific areas?
Is the labor mix appropriate?
Are the indirect cost rates those which have already been negotiated and are stated in the contract?
Are the subcontractor services necessary? Can they be justified?
Is the proposed amount of travel acceptable?
Did the contractor provide a breakdown of ODCs? Is each component reasonable?
Are proposed subcontractors/consultants already approved?
Will approval of the Work Plan require a ceiling increase of any proposed subcontractor/
consultant?
Is any government furnished property involved, and has it been authorized in the contract?
51-028-1 OB
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
In addition, Cost Estimates should be evaluated
qualitatively and quantitatively (i.e., skills mix,
number of hours, consultant effort, amount of
travel, etc.). The importance of the evaluation
activity cannot be overemphasized. If the Work
Plan/Cost Estimate is signed without adequate
analysis of the costs, the contractor is allowed to
expend these funds during the period of perfor-
mance. Therefore, at this stage there is a need for
intense scrutiny. The checklist in Exhibit 4-3 will
assist the WAM in reviewing a contractor cost
estimate. For more information on Reviewing
Contractor Cost Estimates see Appendix D.
The WAM should evaluate the subcontractor
proposal with the same criteria as the prime
contractor, (see Exhibits 4-2 and 4-3). If questions
or discrepancies arise the WAM should discuss the
subcontractor proposal with the prime contractor,
who in turn will discuss the problems with the
subcontractor. The Government should not
conduct discussions directly with the subcontrac-
tor.
4.5 CONTRACTOR NEGOTIATIONS
The Contracting Officer (CO)/Contracting
Specialist (CS) should discuss with the CMT the
need for negotiations. The CO/CS is responsible
for leading the team in developing its negotiation
objective(s). In no event are negotiations to be
delegated to the WAM or PO. Although each team
member should assure that all issues are properly
addressed and properly documented, the CO/CS
is ultimately responsible for ensuring that docu-
mentation of the negotiation outcome is adequate.
Once negotiations are completed, and an agree-
ment has been reached, the work plan is approved
by the CO/CS. In the event that no negotiations
are required, the documentation for work plan
approval shall be processed.
Upon receipt of the contractor's work plan, any
significant changes in the terms and conditions,
schedule or budget are accomplished through
negotiations between the Agency and the contrac-
tor. The Contracting Officer shall conduct nego-
tiations. When determined by the CO/CS, the
appropriate personnel (WAM, PO, E/C, etc.) will
also participate in the negotiations.
The following is a brief summary of the recom-
mended roles and responsibilities of WAMs, POs,
and COs/CSs in the negotiations process; however
the specific roles and responsibilities may differ
from Region to Region.
Work Assignment Manager provides technical
expertise to the PO and CO/CS for negotiation
session and prepares technical documentation
solicited by CO/CS and/or PO.
Project Officer assists in strategy development,
documentation and negotiations with other
members of the CMT, when determined appro-
priate by the CO.
Contracting Officer/Contract Specialist ensures
the pre-and-post negotiation documentation is
adequate, meets with CMT members to establish
negotiations strategy, and conducts negotiations
or approves negotiations conducted by a contract
specialist. For more information on negotiation
and roles and responsibilities for negotiations, see
EPA Directive 9202.1-12 in Appendix D.
4.6 DOCUMENTATION
Throughout the entire process, the CMT shall
maintain adequate written documentation of the
significant differences and acceptability between
the Government's position and the contractor's
work plan and budget. Particular attention should
be paid to documenting the Government's
negotiating position and the results of the actual
negotiations between the government and contrac-
tor.
4.6.1 Pre-Negotiation Documentation
The pre-negotiation documentation summarizes
the Agency's position and objective it hopes to
accomplish during negotiations with the contrac-
tor. Objectives should be based upon the review of
the contractor's work plan, the IGCE and other
information available regarding the work to be
performed. The document shall show the work
assignment number, contractor's name, contract
number, site name, a summary of the contractor's
proposal and the IGCE, and present the Agency's
position upon entering negotiations. A target
position for the major cost elements shall be
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
included. The pre-negotiation memorandum shall
be prepared by the CO/CS with input from other
members of the CMT prior to negotiations and
used as a guide during the negotiations. The pre-
negotiation memorandum shall be signed and
dated by the CO/CS.
4.6.2 Post-Negotiation Documentation
The post-negotiation documentation summarizes
and documents negotiation with the contractor
with emphasis on the resolution of differences
between the IGCE and the contractor's Work
Plan. It is prepared by the lead CO with input
from other CMT members. The memorandum
should include the following information:
• The purpose of the negotiations;
• A description of the work, including the
contract number, work assignment number
and site name;
• The name, position, and organization of each
person representing the contractor and the
Government in the negotiations;
• The date, time, and place of the negotiations;
• The summary of the negotiated items (e.g.,
cost, technical scope and schedule), and a
narrative justifying the agreements reached
particularly if they differ significantly from the
Agency's pre-negotiation position. The task
breakdown, costs, hours and skill mix, the
contractor's initial proposal, and the final
negotiated items should be presented in
matrix format for easy reference and compari-
son; and
• A statement to the effect that the negotiated
agreement is determined to be fair and
reasonable.
The post-negotiation memorandum must be
signed and dated by the CO/CS.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 5 - CONTROLLING CONTRACT COSTS
5.1 Chapter Introduction
5.2 Monitoring Contractor Performance
5.3 Monitoring Contractor Costs
5.4 Documenting Contractor Costs for Cost Recovery
5.5 Reviewing Contractor Invoices
5.6 Contractor Claims and Change Orders
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 5 - CONTROLLING CONTRACT COSTS
5.1 CHAPTER INTRODUCTION
The purpose of this chapter is to present the
Agency's approach to controlling Work Assign-
ment costs following review and approval of the
contractor Work Plan and Cost Estimate. This
chapter addresses the following topics: monitoring
contractor performance, monitoring contractor
costs, reviewing contractor invoices, and process-
ing contractor claims/change orders.
5.2 MONITORING CONTRACTOR
PERFORMANCE
Federal employees have a responsibility to monitor
the efforts of contractors in order to prevent waste
of public funds and obtain the required services
within the amount budgeted in the approved
Work Plan. The goal in contractor monitoring is
to be aware of all situations under the contract.
Proper and timely action on the part of EPA
technical personnel gives the Government the
time and opportunity to make decisions and
adjustments as problems arise.
The unique problems associated with Superfund
sites require the Work Assignment Manager
(WAM) to play a key role in ensuring quality
performance from the contractor. Since the WAM
is the Government's primary technical representa-
tive with its contractors he/she should be knowl-
edgeable in the work performed under the Work
Assignment, and be available to assist the contrac-
tor when difficulties or questions arise. Areas in
which the WAM needs expertise include:
• Sampling and analysis of contaminated media;
• Environmental fate and transport analysis;
• Risk and exposure assessment;
• Evaluation of remedial technologies;
• Environmental impact evaluation;
• Cost estimation;
• Remedial design and construction consider-
ations; and
• Environmental regulations and policies.
Several effective methods exist (discussed in
sections 5.2.1 through 5.2.8) for the WAM to
monitor contractor performance including:
• Inspection of work;
• Review of progress reports;
• Meetings and telephone communications with
contractor personnel;
• Comparison of progress with work plan
schedule of tasks and deliverables;
• Review of financial management reports;
• Evaluation of contractor performance;
• Review of invoices; and
• Ensuring quality through facilitation.
5.2.1 Monitoring by Inspection of Work
Inspection clauses in the contract give the Govern-
ment the right to inspect and test the work
performed (at the work site, if possible) under the
contract. This right can be exercised at any stage
and place of work performance. The decision to
use inspection as a tool for contractor monitoring
depends upon many facts including: type of work,
type of contract, location of performance, and
feasibility of performing an inspection. As dis-
cussed earlier, cost-reimbursement type contracts
frequently require a high level of monitoring.
5.2.2 Monitoring by Reviewing Contractor
Technical Progress Reports
The contractor must comply with the reporting
provisions incorporated in the contract. Contrac-
tor-prepared progress reports enable the Govern-
ment to track project performance and determine
whether the tasks are being completed in a timely
and effective fashion. The information presented
by the contractor in its monthly technical progress
report is described in section 5.3.2. If necessary,
the Government may request additional informa-
tion to obtain a more thorough understanding of
the report.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
5.2.3 Monitoring by Meeting with Contractor
Personnel
The WAM should conduct meetings on a regular
basis — the agenda topics for those meetings can
be specific to certain aspects of the performance or
can cover the entire Work Assignment. The
Contracting Officer (CO) should always be
notified of the meetings and provided an opportu-
nity to attend. If the contractor is not locally
available, it might be more efficient to hold
teleconferences. However, major issues and
problems will best be resolved in face-to-face
meetings. The proceedings from these meetings
(teleconferences or face-to-face) should be well
documented and distributed to the contractor and
the CO. This will ensure that all parties under-
stand the status of the Work Assignment, the
activities discussed and the decisions made. The
WAM may also obtain work status updates and
troubleshoot via telephone calls with contractor
management. The phone log in Exhibit 5-1 may
be used to record the subject of all calls. Exhibit
5-2 may be used to record the activities at contrac-
tor meetings.
5.2.4 Monitoring by Comparing Actual
Progress to Work Plan Schedule
Comparing the contractor's monthly progress
report with its Work Plan can be a useful tool in
monitoring progress. The Work Plan should
contain a schedule identifying each step required
in the Work Assignment, the period of time
needed to accomplish the tasks, and key
deliverables. The WAM should elicit the support
of technical personnel, if needed, to identify delays
and problems in actual progress. In addition, the
Work Plan deliverable schedule should be updated
to reflect changes in estimates for completion of
individual task elements as well as the overall
Work Assignment.
Tracking Superfund project schedules can be
conducted using milestone, bar chart, and critical
path method (CPM) scheduling techniques. These
techniques can be used to ensure that critical
milestones of the current project are met, as well
as foresee delays that could potentially affect the
schedule and budget decisions in follow-up work.
These techniques, however, should not be substi-
tuted for frequent communication with the
contractor.
• Milestone scheduling is appropriately used for
monitoring key response activities that can be
conducted independently of other activities.
This method is most suitable for monitoring
performance.
• Bar charts and/or CPM scheduling networks
can be used when durations of sequential
activities are related and delays in earlier tasks
can impact follow-up tasks. These methods
are most suitable for identifying critical dates
on related tasks that must be met in order to
adhere to the overall project schedule.
5.2.5 Monitoring by Reviewing Financial
Management Reports
The degree of financial monitoring is directly
related to the type of contract and the amount of
risk assumed by the Government. Under cost-
reimbursement contracts, the contractor has little
incentive to control costs, as its compensation is
based on expenditures associated with doing the
work — barring a determination that costs are
unreasonable or unallowable. In level of effort
contracts, therefore, WAM review of financial
management reports is an important element in
ensuring efficient contract performance and cost
control. For additional information on monitoring
contractor costs, see section 5.3.
5-2.6 Monitoring by Evaluating Contractor
Performance
It is recommended that contractor performance be
evaluated periodically and feedback provided to
the contractor. During the evaluation, the WAM
should indicate specific contractor problems and
give examples of correct performance in these
situations. The contractor should be notified of
perceived performance problems immediately so
that future work is performed according to the
scope of work. The Government should keep
records of the time and date of the feedback and
provide a summary memo for the contractor. It is
also important to indicate positive performance.
Exhibit 5-3 is a sample of a contractor perfor-
mance evaluation form.
In cost plus award fee contracts, evaluation of
contractor performance is done periodically
(usually semi-annually) by a Performance Evalua-
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Exhibit 5-1
Phone Log
Phone Log
Name: Date:
Company: Subject of Call:
Phone Number:
Address:
Follow-up
Needed Summary of Conversation
51-028-16A
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 5-2
Meeting Record
Meeting Record
Attendees:
Date:
Subject:
Discussion:
Decisions:
Action Items:
51-028-17A
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 5-3
Sample Contractor Performance Evaluation Form
Contractor:
Contract Number:
Work Assignment Manager:
Project Officer:
Period Covered:
I. Technical Performance
Criteria:
Level of creative contribution
Effective application of relevant statutes/
regulations/guidelines
Resourcefulness
Adherence to scope of work
Effectiveness of project planning
Overall Rating for Technical Performance
Rankings:
Excellent
5
5
5
5
5
% of Work
Completed:
(Circle one per criterion)
V. Good Avg.
4 3
4 3
4 3
4 3
4 3
Poor
2
2
2
2
2
Unsatis.
1
1
1
1
1
Narrative Evaluation:
II. Personnel
Criteria:
Technical competence appropriate to
project
Commitment to the project
Effective interaction, responsiveness
Appropriate mix of professional levels
Overall Rating for Personnel
Rankings:
Excellent
5
5
5
5
5
(Circle one per criterion)
V. Good Avg.
4 3
4 3
4 3
4 3
4 3
Poor
2
2
2
2
2
Unsatis.
1
1
1
1
1
Narrative Evaluation:
51-028-18B
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 5-3
Sample Contractor Performance Evaluation Form (cont'd)
Contractor:
Contract Number:
Work Assignment Manager:
Project Officer:
Period Covered:
III. Deliverables
Criteria:
Quality of product, thoroughness, adequate
technical detail
Minimal corrections/revisions required
Quality assurance by contractor
Adherence to schedule
Overall Rating for Technical Performance
Rankings: (Circle one per criterion)
Excellent V Good Avg. Poor
5 432'
5 432
5 432
5 432
Unsatis.
1
1
1
1
Narrative Evaluation:
IV Budget
Criteria:
Cost Effectiveness
Efforts to keep within budget
Early notification of potential overruns
Overall Rating for Budget
Rankings: (Circle one per criterion)
Excellent V. Good Avg. Poor
5 432
5 432
5 432
5 432
Unsatis.
1
1
1
1
Narrative Evaluation:
V. Overall Rating for Work Assignment 5 432
1
VI. Comments/ Recommendations
51-028-18,18
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
tion Board (PEB) according to a written Award
Fee Plan. The Award Fee Plan includes detailed
performance evaluation categories and criteria.
The amount of fee awarded to the contractor is
based on the recommendation of the PEB, but
determined by the Fee Determination Official.
Under cost-reimbursement contracts, the Govern-
ment may have to reimburse the contractor for
work performed, even if it is unsatisfactory. In
these situations, the Government can request that
the work be corrected. In these situations the
award fee should be zero. The Government can
also refuse payment if the contractor exceeds the
scope of work, charges hours not spent, proceeds
in bad faith, or other similar circumstances.
5.2.7 Monitoring by Reviewing Contractor
Invoices
Monitoring monthly contractor vouchers or
invoices is a fundamental way the WAM can
control contractor costs and monitor contractor
performance. Invoices detail the contractor's
monthly expenditures by cost element (i.e, direct
labor, materials, subcontracts, indirect expenses,
etc.) making it possible to spot high levels of
expenditures. The invoice should be accompanied
by an invoice backup report (Standard Form
1035-Invoice Continuation) that provides detailed
costs for invoice line items. If additional informa-
tion is needed to support the invoiced amounts,
such as copies of vendor invoices, the WAM
should ask for back-up documentation from the
contractor. For more information on invoice
review, see section 5.5.
The WAM should also be aware of the Limitation
of Cost clause. This clause, which appears in all
cost-reimbursement contracts unless they are
incrementally funded, specifically limits the
obligation of the Government to the amount
stated in the contract as the total estimated cost of
the contract. Due to unforeseen circumstances, the
actual cost to complete a Work Assignment may
exceed the estimated cost reflected in die
contractor's Work Plan and Cost Estimate. The
contractor should not exceed the budgeted
amount for the Work Assignment without
approval from the CO. This clause provides that
the contractor has no obligation to continue work
unless the Government's CO agrees to increase the
total estimated cost. The Limitation of Cost clause
also requires the contractor to notify the CO —
and provide revised estimates in writing — when:
• The expected costs incurred in the next 60
days plus costs already incurred will exceed 75
percent of the total estimated costs; and/or
• The total cost of performance will exceed or
be substantially less that the total estimated
cost of the Work Assignment.
5.2.8 Monitoring Activities at Multiple Levels
Generally, as the project budget increases in value,
the more important it is for the WAM to perform
his/her project communication and coordination
functions. To promote efficient and effective
contractor performance, the WAM needs to
monitor project activities at several levels includ-
ing:
• Internal programs that provide services to the
project (e.g., analytical data reviews);
• Office of General Counsel (OGC);
• Office of Acquisition Management (OAM);
• Offices responsible for other environmental
laws (RCRA and TSCA);
• Organizations external to EPA (USAGE and
ATSDR); and
• States.
Similar to ensuring quality, the WAM must
monitor activities at these levels ensuring that all
"bases are covered" and preventing problems
before they adversely impact the project. This
approach facilitates input from several levels at
various project decision points.
WAMs should also communicate amongst
themselves since innovative solutions to complex
problems have been developed through experi-
ences at various sites.
5.3 MONITORING CONTRACTOR COSTS
Using cost-reimbursement contracts for response
studies gives EPA the flexibility to change contrac-
tor tasks and authorize additional funds to deal
expeditiously with the uncertainties that occur in
remedial and enforcement work. Cost-reimburse-
ment contracts, however, give contractors limited
incentive to control either costs or use of profes-
sional labor hours.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Federal regulations, EPA guidance, and specific
contracts give EPA an array of management
controls to use in planning, authorizing, monitor-
ing, restricting, and evaluating contractor expendi-
tures. Effective monitoring of contractor costs by
the WAM ensures that Work Assignment activi-
ties are being accomplished according to the
planned schedule and within the budget ceiling.
Effective monitoring also enables the WAM to
identify when budget variances occur that require
contractor concessions, Work Plan revisions, stop
work orders, or additional project funding.
Monitoring actions can lead to significant savings
by ensuring that:
• All work performed is consistent with the
Work Assignment; and
• The contractor used equipment and personnel
in the most effective manner
The CO/CS has several sources of information at
his/her disposal to monitor contractor costs
including the ARCS Contract Tracking (ACT)
System, and the contractor monthly technical and
financial progress reports. The WAM, on the
other hand, does not have access to the ACT
system.
5.3.1 Monitoring through the ARCS Contract
Tracking System
Effective cost monitoring depends on the availabil-
ity of reliable indicators of contractor perfor-
mance. These indicators and others, which may be
available from the ARCS Contract Tracking
(ACT) System, are the following:
• Expenditures. Provides basic information on
total sums actually expended. Program data
will be divided into administrative support
and technical cleanup costs.
• Obligations. Shows amounts obligated by
Work Assignment and total program manage-
ment obligations. Useful for fiscal planning
purposes and should be compared to expendi-
tures to avoid excessive funding.
• Administrative Support Costs vs Total
Contract Cost, Technical Cleanup Costs vs
Total Contract Costs, Program Management
Costs vs Total Contract Costs. Displays total
costs associated with these elements as per-
centages of total contract costs based on actual
expenditures. Insurance liability costs and
equipment costs may be segregated from other
administrative and technical cleanup costs.
• Administrative Support Costs per Level of
Effort (LOE) Hour Delivered, Technical
Cleanup Costs per LOE Hours Delivered,
Program Management Costs per LOE Hours
Delivered. Measures the cost-effectiveness of
program management operations. Individual
contract rates can be analyzed, compared, and
contrasted.
5.3.2 The Contractor Technical Progress
Report
Under cost-reimbursement contracts, contractors
are required to submit a monthly technical
progress report. Level of effort contractors are
required to include the following information each
month in the report:
• Summary of activities and deliverables
completed during the month;
• Work projected for the following month;
• Potential problems;
• Proposed corrective actions; and
• Follow-up actions taken to address previous
problems
If one or more of these items is omitted from the
report, the WAM should immediately notify the
contractor of the omission and request that the
item(s) be included in the next report. Exhibit 5-4
outlines the components of a monthly technical
progress report.
5.3.3 The Contractor Financial Progress
Report
Under cost-reimbursement contracts, contractors
are required to submit a monthly financial
progress report to the Agency. Level of effort
contractors are required to include the following
information, at a minimum each month:
• Cumulative costs and direct labor hours
expended from the effective date of the
contract through the last day of the current
reporting month. A cumulative incurred cost
per direct labor hour average computation
(actual "loaded" contract cost per labor hour)
will be included, with a comparison of the
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 5-4
Monthly Technical Progress Report
Date of Report:
Contractor:
EPA WA Manager
Prepared by:
Parti:
Part II:
Part III:
Part IV:
PartV:
Part VI:
Monthly Technical Progress Report
Period of
EPA Contract No.:
EPA Work Assignment No.:
Activities undertaken during the month. (Provide DETAILED summary of
activities, by task, and include any out of town travel.)
Deliverables submitted during the month. (Include draft and final submissions
listed by title and date submitted.)
Difficulties encountered and actions taken during the month.
(Detailed summary of contractor/subcontractor difficulties and actions taken by
contractor or EPA.)
(Identify activities being held up pending EPA approvals, comments, decisions,
etc.; include dates as appropriate.)
Activities anticipated during the next month.
(DETAILED summary, including dates and titles of any deliverables to be
completed.)
(Provide an estimate of next month's hours.)
Estimate substantial lagging costs for the month.
(Provide DETAILS on any discrepancies and substantial subcontractor lagging
costs. Give estimate of subcontractors' total labor hours expended; can be based on
telephone inquiry to the subcontractor/consultant.)
(Identify prime and subcontractor SUBSTANTIAL lagging direct cost
expenditures, particularly travel costs.)
Changes in personnel, if any, assigned to the Work Assignment during the month.
NOTE: The prime should require each subcontractor to submit the same level of information per Work
Assignment and include it as backup to the prime's report.
51-028-19
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 5-4
Monthly Technical Progress Report (cont'd)
Monthly Technical Progress Report
Period of
Work Assignment No.
List of Total Labor Hours Charged
By Work Assignment, Professional Level, and Employee Name
P-Level/
T-Level
Employee
Name
Total
Labor Hours
Total LOE/
Total Clerical
Total Professional Hours:
Total Technical Hours:
Total Labor Hours:
Total Hours:
51-028-19,1
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
result to the cumulative average cost per direct
labor hour derived from the estimated cost of
the contract;
• Actual costs and direct labor hours expended
during the current reporting month;
• Estimated costs and direct labor hours to be
expended during the following month; and
• Actual costs and direct labor hours incurred
for each Work Assignment issued and esti-
mates of costs and staff hours required to
complete each Work Assignment.
If one or more of these items is omitted from the
report, the WAM should immediately notify the
contractor of the omission and request that the
item(s) be included in the next report. Additional
financial reporting requirements can be specified
in the Work Assignment. Exhibit 5-5 outlines the
components of a monthly financial progress
report.
5.3 A Monitoring by Comparing the Contrac-
tor Technical and Financial Progress
Reports
The monthly technical and financial progress
reports should be reviewed by the WAM immedi-
ately upon receipt. This approach will:
• Give immediate feedback to the contractor;
• Enable the contractor to promptly respond to
the Government's concerns;
• Anticipate and solve any discrepancies or
problems; and
• Assure actual expenditures have been properly
reported and recorded (quality assurance).
Failing to consistently and fully challenge ques-
tionable contractor costs may, in effect, convey a
message to the contractor that the Government is
willing to accept all costs regardless of the level of
performance provided by the contractor. Such an
approach lessens the contractor's incentive to
control costs. The WAM can employ three types
of progress report review to control costs. Since all
three reviews may not be necessary every month,
they should be used in a hierarchical manner (each
review incorporates more detail). For example, if
the contractor's costs are well documented,
reasonable, and within the Cost Estimate, the
higher levels of review would not be necessary.
Compare the Contractor's Monthly Technical
Progress Report to the Monthly Financial
Progress Report
The contractor's technical and financial progress
reports should be comparatively examined to
determine whether or not the technical progress
matches the contractor's claimed costs. Using
historical data, the WAM should analyze the
completed tasks to assure that the level of effort
and associated costs are reasonable. The WAM
should identify any costs that seem excessive and
ask the contractor for additional information to
justify them.
Compare the Contractor's Monthly Technical
and Financial Progress Report to the Previous
Month's Progress Report
A fundamental responsibility of the WAM is to
verify that the contractor has actually performed
the work as projected in the previous technical
progress reports. This can be accomplished by
examining reports from prior months and deter-
mining if planned accomplishments match actual
performance. Estimated costs and labor hours to
be expended for the current period and the next
period are presented in every contractor financial
progress report. Each month the WAM can
backtrack and verify if the contractor stayed
within his/her estimated budget. The WAM
should document major discrepancies in projected
and actual costs and ask the contractor to rectify
any problems.
Compare the Contractor's Monthly Financial
Progress Report to the Work Assignment Cost
Estimate
It may also be necessary to examine the
contractor's monthly financial progress report on a
more global scale. The WAM can cross-reference
the projected costs in the Work Assignment Cost
Estimate with the data in the monthly financial
report. This will enable the WAM to gain a clear
picture of funds expended and funds remaining in
the Work Assignment.
After reviewing the monthly progress reports, the
WAM and/or Project Officer (PO) or CO, as
determined appropriate in the situation, should
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Exhibit 5-5
Monthly Financial Progress Report
Monthly Financial Progress Report
Period of
(To be completed for each Work Assignment)
Contract No.
m.No.
I. General
Total Budget $
Total Budget Hrs.
Expenditures
Current
Cumulative
Explanation
WP approved budget
WP approved hrs.
II. Direct Labor
* Total Professional Labor
* Total Professional Labor Hrs.
Total Technical Labor $
Total Technical Labor Hrs.
Total Clerical Labor $
Total Clerical Labor Hours
Fringe Benefits
Labor Overhead
Automation Rate
prime only
P1-P4 and Total
P1-P4 and Total
all levels
all levels
secretarial
secretarial
based on all above
based on all above
as negotiated and applicable
III. Other Direct Costs
Total Travel
Postage/Freight
Computer
Property/Equipment
Telephone/Long Distance
Photocopying
Temporary Help
Delivery
Materials/Supplies
Other Direct Expense
Total ODCs
details on request
details on request
computer rime
purchased/leased
applicable charges
within limitations
applicable charges
applicable charges
applicable charges
details on request
total all ODCs
By P Level
51-028-20
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Exhibit 5-5
Monthly Financial Progress Report (cont'd)
Monthly Financial Progress Report
Period of
(To be completed for each Work Assignment)
Contract No.
mNo.
Subcontractor/Consultant
Subcontractor(s) $
Subcontractor(s) Travel
Subcontractor(s) Hrs.
Expenditures
Current
Cumulative
Explanation
P1-P4 and Total
details on request
IV Total Direct Costs
G&A (Prime)
Subcontractors' G&A
Total Costs (No Re)
Base (fixed) fee
primes only
total all subcontractors
costs only without fees
total amt. fixed fee
Total Cost Plus Base Re
Total LOE
Total $ Remaining
Total Hrs. Remaining
$ ftrcent Complete
Hrs. Rsrcent Complete
WPAverage Hourly Rate
Actual Average Hourly Rate
Est. $ for Next Month
Est. $ for Next Month
cost plus fixed fee
total hours
balance of approved budget
balance of approved hours
percent of budget spent
percent of hours spent
from approved W.P
from actual costs
from actual costs
costs for next month
51-028-20,1
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
present the contractor with verbal and written
feedback to emphasize the immediate concerns of
the Government as well as to set a precedent for
the future — that contractor reports will undergo
a thorough examination each month.
5.4 DOCUMENTING CONTRACTOR
COSTS FOR COST RECOVERY
Proper documentation during the process of
contractor monitoring will ensure that the govern-
ment is able to recover costs incurred during
response activities. These costs include:
• EPA site-specific payroll costs;
• EPA site-specific travel expenditures;
• Interagency Agreement expenditures;
• Cooperative Agreement expenditures; and
• Costs incurred under EPA contracts with
private contractors.
These are direct costs to the Agency. Indirect costs
incurred by EPA (i.e., overhead and G&A) are
also recoverable, and should be included as a
separate item.
The activities during site assessment form the
framework for the cost recovery claim. All costs
and activities that relate to the performance of the
response action and that describe the technical
aspects of the response action must be fully
documented. A key element of this documenta-
tion is the Administrative Record developed as
part of the RI/FS process that identifies and
justifies the selected remedy.
Since it is not known at the start of the process
whether cost recovery will proceed to judicial
action, it is of paramount importance to ensure
that documentation prepared initially is complete
and is prepared in compliance with Agency
guidelines. EPA must document its clean-up
expenses in order to successfully recover them in
subsequent cost recovery actions. The National
Contingency Plan (NCP) requires that EPA's
documentation be "sufficient to provide the source
and circumstances of the release, the identity of
the responsible parties, the response action taken,
accurate accounting of federal, state, or private
party costs incurred for response actions, and
impacts and potential impacts to the public health
and welfare and the environment." According to
EPA, this requirement led to excessive documenta-
tion being provided to courts and to PRPs. To
correct this situation, EPA has implemented a new
cost recovery rule that requires the Agency to
provide information that falls into two categories:
documentation that covers the actual response
action taken, and documentation that describes
the technical aspects of the implementation of the
response action. The WAM is responsible for
ensuring that complete and accurate documenta-
tion is compiled.
EPA may recover its oversight costs when PRPs
perform work. This will include extramural costs,
such as contracts and interagency agreements, and
intramural costs, such as EPA payroll and travel.
The Regional personnel should track reimburse-
ment, and contact the Regional Financial Manage-
ment Officer to set up an accounts receivable file
in the Integrated Financial Management System
(IFMS) for the receipt of oversight costs. EPA
should continue to account separately for all other
site-specific costs not attributable to oversight in
the event that a judicial action occurs.
The documentation of activities and accounting of
costs must take place regardless of whether a site is
EPA-, state-, or PRP-lead. Documents that are
critical to cost recovery include:
• Timesheets/timecards and payroll expenses;
• Travel vouchers and receipts;
• Treasury schedules;
• Contracts/letters of agreement;
• Purchase orders and receipts;
• Paid processed invoices and vouchers;
• Data on PRP liability;
• Information relating to the selection of the
response action; and
• Activity and cost documentation.
If the Region decides to proceed with a judicial
cost recovery action, all documents relevant to the
case must be assembled. This should simply
require updating information previously gathered
during the cost recovery process. The documents
must show that:
• The site is a facility;
• There was either an actual or threatened
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
release of a hazardous substance;
EPA incurred costs as a result of this actual or
threatened release; and
The defendant is in one of the categories of
liable parties listed in CERCLA Section
107(a):
- Current owners or operators of facilities or
vessels;
- Owners or operators of a facility at the time
hazardous substances were disposed of;
- Persons who arranged for treatment or
disposal of hazardous substances that went
to the site; and
- Persons who accepted hazardous substances
for transport to disposal or treatment sites
of their selection.
5.5 REVIEWING CONTRACTOR INVOICES
It is the responsibility of the EPA PO and WAM
to review contractor invoices/vouchers each month
and approve them for payment. Government
personnel have an obligation to process these
documents for payment in a timely fashion. EPA
must transmit payment to its contractors within
30 days of invoice submission to avoid assessment
of interest charges as prescribed in the Prompt
Payment Act (Public Law 97-177). A sample
contractor invoice is shown in Exhibit 5-6.
The invoice review process gives the WAM the
opportunity to directly apply cost management
practices to the Work Assignment. Calculation of
several key cost ratios will enable the WAM to
gain a good financial picture of an individual
Work Assignment and/or die contract as a whole:
• Workhours Proposed vs. Actual vs. Estimated
to Completion;
• Funds Budgeted vs. Actual (Period vs. Cumu-
lative) vs. Estimated to Completion (By Task)
and Variance; and
• Average Cost per Hour (Estimated vs. Actual).
Review of contractor monthly invoices, which are
the basis for periodic contract payment, is an
important factor in controlling contractor costs.
The purpose of invoice review is to determine
whether charges are commensurate with services
performed, certify that work for which payments
are claimed actually has been performed, and
provide a check on possible contractor oversights
and/or abuses. Further, when contractors are
aware that the Government is keeping close watch
on their costs, there is more incentive for them to
manage their work effectively. The level of
financial risk to the Government, and thus the
level of financial monitoring necessary, varies with
the type of contract. Reporting and invoice
requirements are standardized in order to simplify
the process.
Each contract and Work Assignment contains
specific limits on total costs and labor hours, and
the WAM should ensure that these limits are not
or will not be exceeded. In addition, individual
Work Assignments provide estimates of hours that
will be needed to conduct the work. If it appears
that the contractor will exceed the estimated
hours, the WAM should discuss the situation with
the PO and determine the appropriate action to be
taken.
5.5.1 Invoice Review Requirements
Superfund contractors are required to submit
monthly invoices/vouchers (Standard Form 1034/
1035) for reimbursement of costs incurred. These
cost items include direct labor hours, travel,
equipment, subcontracts, and any associated
indirect costs.
In cost plus award fee contracts, evaluation of
contractor performance is done periodically
(usually semi-annually) by a PEB according to a
written Award Fee Plan. The Award Fee Plan
includes detailed performance evaluation catego-
ries and criteria. The amount of fee awarded to the
contractor is based on the recommendation of the
PEB and the determination by the Fee Determina-
tion Official.
Contractors are also required to submit an addi-
tional document with their invoices. The Contrac-
tor Invoice Supplemental Report for Program
Management, which is designed to meet the
objective of both Congress and EPA to reduce
program management costs, provides a summary
level report of these costs by cost element. A
sample of this document is provided in Exhibit
5-7.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 5-6
Sample Contractor Invoice
Invoice Number:
Invoice Date:
Category
Prime Labor Costs
Indirect Costs
G&A
Other Direct Costs
Pollution Liability Insurance
Travel
Equipment
Lab Services
Mobile Lab Costs
Team Subcontractors
Pool Subcontractors
Base Fee
Award Fee
Total $ Invoiced
Suspended Amounts
Total Approved for Payment
Period Start Date:
Period End Date:
Notes
Base Labor
Other Than G&A
Excludes Travel, Equipment,
Lab Services, and Mobile
Labs
Base Value
Does Not Include Relocation
(Included in ODC Line)
Base Value
Base Value
Base Value
Included all Fees Charges to
Prime
Included all Fees Charges to
Prime
Includes FCCM
Prime Only
Automatically Calculated
See Notes Below
Total $ Invoiced Less
Suspended
Prime LOE
Team Subcontractor LOE
Total LOE
Values
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 5-7
Sample Contractor Invoice Supplemental Report
for Program Management
Invoice Number: Period Start Date:
Invoice Date: Period End Date:
Category
Prime Labor Costs
Indirect Costs
G&A
Other Direct Costs
Pollution Liability Insurance
Travel
Equipment
Lab Services
Mobile Lab Costs
Team Subcontractors
Pool Subcontractors
Base Fee
Award Fee
Total $ Invoiced
Suspended Amounts
Total Approved for Payment
Notes
Base Labor
Other Than G&A
Excludes Travel, Equipment,
Lab Services, and Mobile
Labs
Base Value
Does Not Include Relocation
(Included in ODC Line)
Base Value
Base Value
Base Value
Included all Fees Charges to
Prime
Included all Fees Charges to
Prime
Includes FCCM
Prime Only
Automatically Calculated
See Notes Below
Total $ Invoiced Less
Suspended
Values
51-028-22
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
An additional measure has been undertaken by the
Office of Solid Waste and Emergency Response to
reduce program management costs, in establishing
targets for these costs under ARCS contracts (11
percent for FY94), and announcing a new process
for tracking and reporting them. Under this new
process, program management costs will now be
segregated into administrative and technical
support costs. Invoices will include two separate
accounts with different activity codes for the two
categories.
To assist in this process, the following definitions
have been developed.
• Administrative support costs are non-site-
specific costs necessary for managing the
overall contract regardless of the amount of
specific site work.
• Technical support costs are non-site-specific
costs for technical activities that cover mul-
tiple sites, and are related to the site-specific
work conducted under the contract.
There are several types of activities that may fall
into both categories. Contractors should be made
aware of this, and should adhere to the following
guidelines. Subcontracting issues that are not site-
specific will be classified as administrative support
costs. Equipment, travel, and other direct costs
should be allocated between administrative
support and technical support areas for tracking
purposes. Actual equipment costs will be catego-
rized as technical support costs, as will labor costs
associated with the justification and approval of
equipment purchases. Travel and other direct costs
can fall into either category, and should be
monitored carefully. Clerical support should also
be segregated by cost and be classified appropri-
ately.
5.5.2 The Monthly Invoice Review Process
This section presents a brief chronological descrip-
tion of the invoice review process, beginning with
the contractor submitting an invoice to the
Agency, and concluding with a payment by EPA
to the contractor. A flowchart outlining the
process, a description of the steps involved, and a
discussion of the roles and responsibilities of key
individuals in this process is presented in Exhibit
5-8.
Steps Explained in Detail
(1) The contractor submits an invoice to EPA's
National Contracts Payment Division in
Research Triangle Park, NC (NCPD-RTP) in
detailed form as specified by the contract.
(2) The PO receives a copy of the invoice from
NCPD-RTP, and forwards it to the WAM
for review.
(3) The WAM and/or PO reviews the monthly
invoice and compares it with the contractor's
progress report to verify that the claimed
contractor's services have been actually
rendered and that the invoice dollar amount
appears reasonable for the work performed.
The WAM and/or PO documents the review
of the invoice on the Monthly Invoice Review
Checklist (Exhibit 5-9), and prepares a
written statement offering his/her recommen-
dation on the reasonableness or unreasonable-
ness of contractor invoiced costs. If all or part
of the claimed costs on the invoice are found
to be unreasonable, the WAM works with the
PO to resolve the situation. The PO should
suspend payment of invoiced costs, or any
portion thereof, until documentation is
submitted by the contractor and the CO can
make a reasonableness determination.
(OSWER Directive 9242.2-06).
(4) If the claimed costs are found to be reason-
.able, the PO approves the invoice by signing
Form 2550-19 and returns it to the servicing
finance office (NCPD-RTP) for further
processing.
OR
If the claimed costs are found to be in some
part unreasonable, the PO attempts to resolve
the problem with the contractor and makes
every effort possible to try to obtain a ratio-
nale and backup supporting the expenditures
from the contractor. If charges are found to be
unreasonable by both the WAM and PO, the
PO may write a recommendation to the CO
that the costs be disallowed.
(5) All vouchers should be reviewed, certified and
returned to the Financial Management
Division-RTP by the PO within one week of
receipt to provide timely payments to the
contractor.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 5-8
Invoice Review Flowchart
Contractor
RTF
If valid, logs invoice
routes to PO
If invalid, returns to
Contractor
I
PO
Reviews invoice,
documents
prepares written
recommendation
Reviews
recommendation
and decides if
invoice is
reasonable
WAM
5.5.3 Participants in the Invoice Review
Process
In addition to the Agency's NCPD-RTP, the
responsibility for conducting an effective and
timely invoice review rests on the shoulders of
three key individuals: die PO, the WAM, and the
CO. The PO is responsible for invoice review,
approval, and return to NCPD-RTP for payment.
The WAM, however, is in a better position to
determine if invoices are reasonable because of first
hand knowledge of a project, and will therefore
make recommendations to the PO. The CO is
ultimately responsible for all contract and pay-
ment issues. Together these three officials com-
plete a process which insures prompt payment of
contractor invoices.
Project Officer's Role in Reviewing Invoices
Prior to payment of invoices submitted by the
contractor, the PO must review the invoices and
certify that to the best of his/her knowledge the
payment is in accordance with the contract terms
and limitations and that either: 1) sufficient
progress has been made by the contractor, costs
appear to be reasonable and appropriate, or 2)
goods or services have been delivered in full from
the contractor. A thorough review of an invoice
requires a level of familiarity with detailed project
activities that a PO may not have. Consequently,
the PO should work closely with the WAM, who
may be more familiar with the technical and
financial status of a project.
Work Assignment Manager's Role in Reviewing
Invoices
As noted above, review of contractor monthly
invoices by the WAM is particularly important
because of this official's direct interaction with the
contractor. It is therefore critical that WAMs have
the necessary knowledge to conduct consistent and
thorough reviews of contractor invoices. To ensure
diis, EPA requires all WAMs to complete a
Superfund contract management course which
includes an invoice review module.
The individual closest to the work being per-
formed is ultimately responsible for determining
whether costs contained in an invoice are "reason-
able." OSWER Directive 9242.2-06 states, a
"reasonable" cost is "one that would seem to be
justified and legitimate and what a prudent person
would pay under like circumstances in the con-
duct of competitive business." The person most
familiar with the costs being charged is the most
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
logical choice to perform the invoice review, since
past experience and common sense will assist in
this process. In most cases, this person is the
WAM. Exhibit 5-9 provides a summary checklist
that can be used by the WAM in reviewing
invoices.
Contracting Officer's Role in Reviewing Invoices
While the CO may not play an active role in the
monthly review of contractor invoices/vouchers,
this official does have the authority to:
• Suspend and disallow payment;
• Periodically review a representative sample of
the billed costs and determine allowability and
allocability as directed by OSWER Directive
9242.2-06; and
• Request professional auditors to perform
annual comprehensive incurred cost audits
and provide recommendations.
Public voucher validation procedures for Regional
Contracting Officers are delineated in Appendix G.
5.5.4 Suspending and Disallowing Contractor
Costs
If certain claimed contractor costs on the monthly
invoice or voucher are deemed to be unreasonable,
the PO can recommend either suspension of the
cost(s), or payment of the vouchers less the
suspended cost. Payment may also be suspended
until clarification of subcontractor costs can be
made. Prior to recommending suspension of costs,
every effort should be made by the PO to obtain
the rationale and back-up supporting the expendi-
ture from the contractor. Lacking either the back-
up or an acceptable rationale, the suspension
should be recommended.
It is important to emphasize that only the CO can
disallow costs. A cost is disallowed when the CO
has made a final determination that the Govern-
ment will not pay the cost. Costs may also be
questioned on previously paid invoices, when the
WAM did not have an adequate opportunity to
conduct an in-depth review. If these costs are
suspended, or disallowed, the amount can be
deducted from the contractor's current invoice. If
the contractor has completed die work and all
invoices have been paid, the CO has the authority
to require reimbursement of the disallowed
charges. The ability of the Government to suspend
and disallow costs is an important cost manage-
ment tool.
5.6 CONTRACTOR CLAIMS AND CHANGE
ORDERS
Changes to the terms and conditions of a contract
often become necessary after work has already
commenced. These changes are made through a
process called contract modification. Contractor
cost management is an integral part of modifying a
contract or a work assignment. EPA personnel
must review the contractor's performance and
determine if the costs claimed, to date, are com-
mensurate with performance. Only at this time
can the government determine if the contract or
work assignment should be modified, thus
allowing die contractor to continue work. This
review process must ensure the government that it
is spending its money wisely and receiving die
services for which it has contracted.
Specific cost management principles should be
applied during this procedure to ensure that costs
are commensurate with performance. The PO and
WAM have significant responsibilities in process-
ing contract modifications and work assignment
amendments, even though only the CO has the
power to issue them. Since the PO and WAM
monitor contractor performance they are in the
best position to know when a change is required
and what effect that change will have on the
Government. The WAM should also determine a
reasonable cost for the change, and the possible
effects of the change on the contract. The respon-
sibilities of the CO in this process are final
determination when a change is needed, process-
ing change orders, monitoring contractor perfor-
mance, and verifying allowable and reasonable
costs. After a change order has been issued, the PO
is responsible for assuring that the contractor is
implementing the correct procedures.
The PO and WAM should apply similar cost
monitoring principles as used in the invoice review
process to determine if the contractor performance
warrants a modification or amendment. These
include reviewing the following key cost ratios.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 5-9
Monthly Invoice Review Checklist
This checklist contains a standard list of questions that will assist the WAM in determining the
reasonableness of the contractor's monthly costs through verification of invoice summary data.
Q Is the contract number valid?
Q Is the account number of Work Assignment number valid?
Q Is the LOE charged commensurate with progress?
Q Do the labor hours appear to be appropriate?
Q Does the labor mix appear to be appropriate?
Q Are the hours charged by category within the ceilings or estimate?
Q Was overtime charged?
Q If overtime was charged, was it charged at premium rates and was it preapproved?
Q Are local travel expenses warranted and reasonable?
Q Is the purpose of out-of-town travel documented and consistent with project needs?
Q Was the travel conducted by the appropriate number of people?
Q Was a lease-versus-purchase analysis for equipment conducted and documented?
Q Is the quality of the equipment commensurate with the needs of the project?
Q Were the quantities of equipment purchased reasonable?
Q Is EPA Form 1730 attached to the invoice?
Q Are photocopying charges commensurate with the magnitude of'deliverables?
Q Are communications charges commensurate with the needs of the project?
Q If present, do the "miscellaneous" charges seem reasonable and commensurate with the work performed?
Q Have subcontractors received appropriate EPA approval to perform work on the contract?
Q Is the level of effort charged by subcontractors commensurate with the level of progress made?
Q Are the subcontractors' costs appropriate for the type of activities and progress made?
Q If the subcontract is cost reimbursement, has the prime contractor provided a breakdown of charges by
element of cost?
52-028-24A
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
• Work hours proposed vs. actual
• Funds budgeted vs. actual (period vs. cumula-
tive)
• Average costs per hour (estimated vs. actual)
This section describes the types of contract
modifications that may be made, defines the roles
and responsibilities of EPA personnel, and dis-
cusses the kinds of changes that may be required.
5.6.1 Contract and Work Assignment
Modifications
The need or request for a modification can result
from:
• Changing EPA needs;
• Inadequate specifications that resulted in
inadequate deliverables;
• The need to increase or decrease funds;
• Exercise of options to continue work;
• Extensions to provide additional time;
• Suspension of work; and
• Equitable adjustments.
There are two types of contract modifications:
unilateral and bilateral. Unilateral modifications
require only the signature of the CO. They are
authorized for: (1) administrative changes, such as
the designation of a new PO; (2) changes which
the contract itself allows the Government to issue
unilaterally; and (3) incremental funding. Bilateral
modifications require the signature of both the
CO and the contractor. They are authorized for:
(1) new legal obligations, such as contractor
mergers and name changes; (2) new procurement
that increases the scope or quantity of work; (3)
inspection and correction of defects; and (4)
equitable adjustment of fees.
The criteria to determine whether a modification
can be executed unilaterally or bilaterally is
whether it is administrative or substantive.
Administrative changes are those that do not affect
the substance of the contract or the rights of either
party. These changes can be made with a unilateral
modification. Substantive changes affect the price,
quantity, quality, delivery, or terms and conditions
of the contract. These changes require a bilateral
modification.
5.6.2 Change Orders
The "Changes" Clause in Government contracts
provides that the CO may unilaterally direct a
change, within the scope of the contract, in one or
more of the following cases:
Contracts far Supplies:
• Drawings, designs, or specifications;
• Method of shipment or packing; and
• Place of inspection, delivery, or acceptance.
Contracts far Services:
• Description of services to be performed;
• Time of performance; and
• Place of performance.
Change orders must be issued in writing by the
EPA CO. They may be directed without the
consent of the contractor, who is then obliged to
follow them. If there is an impact on any contrac-
tual aspect, such as schedule or cost, the contractor
may submit a claim for an equitable adjustment of
fees within 30 days of receipt of the change order.
The contractor's proposal for an equitable adjust-
ment must be reviewed carefully by the WAM and
the CO. Equitable adjustments should cover only
the cost impact of a change order.
The PO and the WAM have significant responsi-
bilities in processing change orders, even though
only the CO has the power to issue them. Since
these two officials monitor contractor perfor-
mance, they will know when a change is required
and how that change will benefit the Government.
The WAM should also determine a reasonable
cost for the change, and the possible effects of the
change on the contract. After a change order has
been issued, the PO is responsible for assuring that
the contractor is implementing the correct proce-
dures.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 6 - CLOSEOUT OF CONTRACT WORK ASSIGNMENTS,
ANNUAL CONTRACT CLOSEOUTS,
AND FINAL CONTRACT CLOSEOUTS
6.1 Chapter Introduction
6.2 The EPA Work Assignment Close-out Process
6.3 Annual Closeouts of Remedial Contracts
6.4 Final Closeout of Remedial Contracts
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
CHAPTER 6 - CLOSEOUT OF CONTRACT WORK
ASSIGNMENTS, ANNUAL CONTRACT CLOSEOUTS,
AND FINAL CONTRACT CLOSEOUTS
6.1 CHAPTER INTRODUCTION
This chapter provides information and guidelines
on the closeout process for individual contract
Work Assignments, procedures to conduct annual
closeouts of contracts, and general procedures for
final contract closeouts. The procedures for Work
Assignment closeouts are similar among remedial
contracts, but the ARCS, TES, ESS, and RAC
contracts have contract-specific requirements for
Work Assignment closeout in terms of conducting
the award or performance fee process. Users will
be referred to contract-specific work assignment
closeout procedures that are provided in various
guidance manuals for these contracts. The proce-
dures for annual contract closeouts and final
contract closeouts are generic to remedial and
enforcement contracts.
6.2 THE EPA WORK ASSIGNMENT
CLOSEOUT PROCESS
A work assignment completion report (WACR) is
prepared for every remedial work assignment upon
completion of the projects specified in the State-
ment of Work (SOW). The WACR provides a
concise review of the contractor's project perfor-
mance that can be used by EPA Regional and
Headquarter's personnel to provide feedback to
the contractor concerning performance areas
requiring improvement and identify trends or
recurring difficulties relating to the conduct of
Work Assignment activities. In addition to the
WACR, other Work Assignment closeout activi-
ties may include file storage, microfiche, micro-
film, or other EPA-approved data storage technol-
ogy-
A Work Assignment is considered "complete"
upon approval of the final deliverable by the Work
Assignment Manager (WAM) and upon receipt of
the final invoice for the Work Assignment. The
WAM usually receives the final invoice and work
assignment completion report within 60 days of
Work Assignment completion. The WACR is
prepared by the EPA WAM or other appropriate
EPA personnel (e.g., enforcement or community
relations staff) who were responsible for monitor-
ing the activities performed by the contractor or
subcontractor. The WAM forwards the completed
WACR to the PO for review and approval. The
contractor also completes a WACR (appropriately
altering the title and signature blocks of the form)
and submits the completed form to the PO.
6.2.1 Work Assignment Completion Report
(Remedial Program)
The WACR is a three-page form for the Remedial
Program (see Exhibit 6-1) and the format may be
individualized for other programs. For example,
the WACR shown in Exhibit 6-1 is from ARCS
and has entries necessary for recording informa-
tion on Phase I and Phase II fees.
Page one includes the body of the performance
report. It is signed by the WAM and PO and
presented to the Performance Evaluation Board
(PEB). The WAM should refer to the cost and
schedule information worksheet (page two of the
WACR) to describe any performance deviations
from the approved Work Plan. Page two provides
a worksheet for summarizing the cost and schedule
information associated with the completion of the
Work Assignment. Page three of the WACR is a
performance criteria rating worksheet that the
WAM uses to rate overall Work Assignment
performance. This worksheet is based on the
category descriptions, evaluation criteria, and
rating guidelines that appear in the contract award
fee plan. Contractor performance evaluation
criteria generally include:
• Project Planning: This includes developing
Work Plans, project cost estimates and
schedules, and screening for organizational
conflicts of interest.
• Technical Competence and Innovation: This
includes developing alternative courses of
action, the thoroughness of analyses, ingenu-
6-1
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 6-1
EM Work Assignment Completion Report (WACR)
Page 1 of 3
EDV Work Assignment Completion Report
Contract No.
Work Assignment No.
EPA Region
Contractor/Subcontractors)
Contractor Site Manager (Name and Phone Number)
RPM (Name and Phone No)
Work Location (Site Name dr State)
Briefly Describe Scope of Work:
Describe Contractors Performance:
Unusual Problems/Occurrences Affectiong Contractors Performance
Phase I Available
Phase I Paid
Phase II Available
Phase II Award Recommended?
Q No
Recommended Size: %
(0-100%)
State Specific Reasons for Recommendation for Phase II Award:
(Additional pages may be attached if necessary)
RPM
Signature dr Date
PO
Signature dr Date
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 6-1 (cont'd)
Page 2 of 3
EM W)rk Assignment Completion Report (VKVCR)
Fart II: Project Schedule and Cost Information Vfbrksheet
Contract No.
Approved Work Plan
and WA Amendment
Dates
Work Plan Approval Date
Amendment 1
Amendment 2
Amendment 3
Total Planned Cost
Total Actual Cost
Variance
LOE&
Expense
Cost
Work Assignment No.
Subcon-
tracting
Pool Cost
Total
Planned
Cost
EPA Region
Planned
Completion
Date
Actual
Completion
Date
51-028-26.1A
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 6-1 (cont'd)
Page 3 of 3
EPA Work Assignment Completion Report (WACR)
Part II: Project Schedule and Cost Information Worksheet
Contract No.
Work Assignment No.
EPA Region
Performance Criteria
Rating
Supporting Comments
Project Planning
• Organizing (e.g., Work Plan development, data
review)
• Scheduling
• Budgeting
_5
_4
_3
_2
1
Technical Competence & Innovation
• Effectiveness of Analyses
• Meet Plan Goals
• Support USAGE, State, Enforc.
• Adhere to Regs. & Procedures
• Approach Creativity/Ingenuity
• Expert Testimony
_5
_4
_3
_2
1
Schedule & Cost Control
• Budget (Hours & Cost) Maint.
• Priority/Schedule Adjustments
• Cost Minimization
Reporting
• Timeliness of Deliverables
• Clarity
• Thoroughness
Resource Utilization
• Staffing
• Subcontracting
• Equipment, Travel, etc.
Effort
• Responsiveness
• Mobilization
• Day-to-Day
• Special situations (e.g., adverse/dangerous conditions)
_5
_4
3
_2
1
51-028-26.2A
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
ity, and adherence to Agency, State, and other
Federal and local standards.
• Schedule and Cost Control: This includes the
ability to minimize costs, maintain planned
budgets and schedules, and adjust priorities or
schedules.
• Resource Utilization: This includes the
effective use of resources, the suitability of
staffing, recruiting, and training of personnel,
and the ability to effectively manage
subcontractor's costs and resources.
• Reporting: This includes the timeliness,
thoroughness, and clarity of deliverables.
• Effort: This includes the ability to identify
and resolve problems, and maintaining a
regular communication link with Agency
personnel.
The WAM should use die detailed listing of
performance evaluation criteria (see Exhibit 6-2).
All recommendations must be clearly supported
and cite specific examples where the contractor's
performance is rated above or below satisfactory.
Additional supporting documents may be attached
as appropriate. Every Region should implement
procedures to track and record performance on
work assignments to ensure an equitable evalua-
tion on die WACR. In award fee contracts, the
award fee plan specifies periodic contractor
performance evaluation. The results of the evalua-
tions should be considered when preparing the
WACR.
6.2.2 Work Assignment Form
(Enforcement Program)
Upon approval of the final report, die WAM
notifies the PO who prepares a new Work Assign-
ment Form (WAF) closing out the WA. This
document (close-out WAF) need not come
through the CO for signature, as it is for internal
file documentation only. Only in instances where
the actual LOE hours/dollars are 10 percent
different from the current work assignment budget
should the close-out WAF be formally processed
dirough die CO for signature. For a more detailed
discussion on the WAF see section 2.4.1 and
Exhibit 2.6.
Should die final report be disapproved or ap-
proved subject to changes, it is necessary to apply
cost management principles. The final invoiced
amount for die WA should not be approved. EPA
personnel should compare the LOE hours or
dollars that were expended on the assignment to
the approved work plan budget. If the two do not
match, a WA amendment must be initiated by the
WAM.
To best assist in work assignment closeout and
prevent cost overruns, it is suggested that the
WAM and/or PO contact the contractor to
confirm WA closeout and review the budget
status, expected expenditures, and anticipated
closeout costs.
6.2.3 Work Assignment Closeout and Fee
Evaluation
The work assignment closeout process plays a
critical role in the fee evaluation for the Alterna-
tive Remedial Contract Strategy (ARCS), Techni-
cal Enforcement Support (TES) contracts, En-
forcement Support Services (ESS) contracts, and
the Response Action Contracts (RACs). The fee
evaluation is an important management function
diat helps ensure contract compliance and encour-
ages high-quality contractor performance. The
ARCS, and TES contracts use a Cost-Plus-Award-
Fee (CPAF) structure that provides a "base" fee
percentage of the cost of the contract. Each
contractor is guaranteed the base fee, but must
earn all or part of the award fee through demon-
strated performance. RACs also uses the CPAF
structure, but employs the term "performance fee"
rather than "award fee." The base fee is paid
mondily on a provisional basis and is retained by
the contractor as long as a satisfactory rating is
maintained. The contractor only qualifies for
performance fee if the overall Work Assignment
rating on the WACR is "exceeds expectations" or
"outstanding."
6.2.4 Contract-specific Fee Evaluation
Processes
ARCS Contracts and the Award Fee Process. A
detailed discussion of the ARCS award fee process
can be found in sections 3.14 - 3.22 of the "ARCS
Work Assignment Management Field Guide,
January 1989," and chapter 3 of the "ARCS Users
Manual, August 1989."
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 6-2
Evaluation Criteria for Work Assignments
Project Planning
• Ability to set schedules and priorities for the accomplishment of all work under the work assignment.
• Regular and effective communication with Agency personnel.
• Compliance of contract and work assignment requirements.
• Development of work plan.
Technical Competence and Innovation
• Technical quality of deliverables.
• Effectiveness and thouroughness of analyses.
• Ability to meet work plan goals and objectives.
• Creativity and ingenuity in approach.
• Adherence to regulations, procedures, and guidelines.
• Ability to support other organizations involved at site.
Schedule and Cost Control
• Development and maintenance of planned schedules and budgets for deliverables provided by the work
assignment.
• Ability to minimize and control the cost.
• Elimination of duplication of effort.
• Quality and timeliness of deliverables.
Resource Utilization
• Effective use of resources.
• Appropriateness of professional mix to ensure quality of work while minimizing cost and time
expenditures.
• Ability to effectively manage subcontractors' costs and resources, eliminate cost duplication by
subcontractors.
• Ability to assure contract compliance by subcontractor.
• Adherence to subcontracting plan.
• Ability to effectively monitor subcontractor performance.
Reporting
• Timeliness of deliverables.
• Clarity and thouroughness of reports and documents.
• Accuracy and completeness of data.
Effort
• Ability to identify and resolve problems.
• Maintains regular communication link with Agency personnel and provides appropriate information
enabling Agency perfonnel to keep abreast of work assignment progress.
• Thouroughness in dealing with all aspects of the project.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
TES Contracts and the Award Fee Process. A
detailed discussion of the TES award fee process is
found in chapter V of the "TES V+ Users Manual,
April 1992."
ESS Contracts and the Award Fee Process. A
detailed discussion of the ESS award fee process
can be found in the "Regional ESS Users
Manual."
RACs and the Award Fee Process. A RACs Users'
Guide Manual is due to be completed in June of
1994. The Manual will describe the application of
performance fee procedures in RACs.
6.3 ANNUAL CLOSEOUTS OF ARCs
CONTRACTS
Alternative Remedial Contracts (ARCs) are
incrementally closed out on an annual basis. In
1989, EPA amended the language in the Federal
Acquisition Regulations (FAR) for Clause 52.216-
7, "Allowable Cost and Payment." This FAR
amendment requires annual closeouts of total
costs and fee claimed for each completed fiscal
year of a contract. This process is consistent with
EPA's objective to provide stronger contract cost
surveillance on a more current basis. Final
instructionss and procedures for implementing
ARCs annual closeouts are delineated in Appendix
H.
6.3.1 Contractor Responsibilities for ARCS
Annual Closeouts
Each contractor is required to submit a schedule
of direct and indirect costs claimed for each fiscal
year to the applicable EPA Contracting Officer
(CO) no later than 150 days from the end of each
contract fiscal year. The submitted schedule is
entitled Summary of Contract Costs Claimed for
FYE, 19XX(see Exhibit 6-3). This schedule details
the direct and indirect costs claimed by cost
element and applicable base and award fee for the
subject fiscal year. The schedule is further broken
out by claimed program management and reme-
dial costs. The schedule's format should be
adjusted as needed to reflect each cost element
recognized by the contractor's accounting system
and the contract. The contract cost data should
match the information included in the
contractor's Incurred Cost Submission due within
90 days from the end of each contract fiscal year.
Contractors are required to provide fiscal year
contract costs claimed by Work Assignment
because EPA accounts for each contract Work
Assignment separately. Contractors must provide a
supporting schedule to the Summary of Contract
Costs Claimed for FYE, 19XXthat details the
contract cost claimed by cost element and Work
Assignment. In addition, contractors must simul-
taneously submit a schedule entitled Contract
Billing Summary for FYE, 19XX(see Exhibit 6-4)
that summarizes contract costs and fee billed by
voucher number for the fiscal year. If variances
exist between the claimed/booked amounts and
those amounts already billed, the contractor must
include a fully documented reconciliation. The
reconciliation should clearly outline a description
and the amounts for all components of the
variance broken out by cost element and Work
Assignment.
Timing Issues. The contractor's fiscal year claim
should be consistent with the contractor's In-
curred Cost Submission and consist of all the costs
incurred and recorded in the subject fiscal year.
Subcontractor costs received by the end of the
prime contractor's fiscal year should be included
in the prime contractor's claim. Subcontractor
invoices received after the end of the prime
contractor's fiscal year should be recognized as
incurred/claimed costs for the following fiscal year.
Any variance between billed indirect cost rates and
the unaudited actual rates claimed for the subject
fiscal year represents a claim for the fiscal year in
which authority to bill the variance is prescribed
under the terms of the contract. The billing of any
difference between the claimed and negotiated
costs of a prior year is a claim for the fiscal year in
which the billing adjustment is made.
Billing for Prior Fiscal Year Adjustments. Any
invoices for prior year adjustments should be
submitted on a separate invoice from current
monthly costs. The separate invoice should
identify the appropriate time period for which the
costs are applicable and contain an explanation
and any documents that support the occurrence of
the event causing the adjustment. The invoice
should be numbered and show current and
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 6-3
Summary of Costs Claimed for FYE XX
Contractor Name:
Contract Number:
Fiscal Year Ended XX
Total Costs
Claimed for FYXX
Program Mgt.
Claimed for FYXX
Remedial Claimed
forFYXX
Cost Elements
Direct Labor
Fringe
Overhead
ODCs
Travel
Materials
Equipment
Subtotal
G&A
Subcontract Pool Costs
(Attachment)*
Subcontract Costs
Team Sub A
Team Sub B
G&A on Subcontracts
Total Costs
Base Fee
Award Fee
Total Claimed
Less Total Billed
(See Attachment 1E)
Variance
51-028-28
cumulative costs by cost element similar to current
period invoices. Accordingly, a separate public
voucher should be submitted for billings related to
prior year indirect rate variances. A copy of the
executed EPA Indirect Rate Agreement should be
attached to the invoice.
6.3.2 Contract Officer Responsibilities in
ARCS Annual Closeouts
The CO is responsible for ensuring that contrac-
tors are aware of annual closeout requirements and
that they submit annual claims as required by the
contract clause. The CO reviews the contractor's
claim for completeness to assure that information
required at the contract and Work Assignment
levels and any necessary reconciliations are
consistent with each other. The CO also verifies
that any necessary contractor, CO, or PO explana-
tions or concerns are identified and attached to the
claim. Upon satisfactory review, the CO will
forward the contractor's claim with a request for
audit to the Chief, Financial Analysis Branch
(FAB).
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Exhibit 6-4
Billing Summary for FYE XX
Invoice Date
Costs Billed for
FYE XX
Fee Billed for
FYE XX
Total Billed for
FYE XX
Voucher #
Voucher #
Voucher #
Voucher #
Voucher #
Voucher #
Voucher #
Voucher #
Voucher #
Voucher #
Voucher #
Total
Last Column on this Schedule must equal total Billed on Attachment 1C- Summary of
Costs Claimed
Dates Submitted to EPA
Contract Person - Name
Phone Number
51-028-29
The FAB reviews the claim to verify the accept-
ability of the contractor's Summary of Contract
Costs Claimed for FYE, 19XX. If the data in the
contractor's schedule is not in the appropriate
format, the FAB will advise the CO and contrac-
tor to resolve these problems. The FAB will also
compare the submitted schedules for consistency
with the Contractor's Incurred Cost Submission.
If the annual direct and indirect Incurred Cost
Audit for the fiscal year has not been requested by
the Cost Policy and Rate Negotiation Branch
(CPRNB), when the contractor's claim is received
by the FAB, the FAB will coordinate an audit of
the claim with the CPRNB. If the CPRNB has
already issued the direct and indirect incurred cost
audit request for the subject fiscal year, the FAB
will issue a supplemental request to the cognizant
audit office that will include the contractor's fiscal
year claim and appropriate audit instructions.
Resolution of Audit Results. After receipt of the
audit report by the CPRNB, they will determine
which cost issues are to be resolved or negotiated
by the Financial Administrative Contracting
Officer (FACO). The audit report will be trans-
mitted to the CO by the FAB identifying which
questioned costs must be settled by the CO and
which questioned costs will be settled by the
FACO.
The FACO will negotiate the indirect costs and
direct costs that are not contract specific in nature.
An example of such a direct cost would be a
computer billing rate applied to all cost objectives.
The CO will be responsible for negotiating all
other direct costs. The CO and/or FACO should
resolve any questioned direct or indirect costs
immediately because any questioned costs will be
in the EPA Inspector General's Audit Tracking
System. The resolution of the questioned contract
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
costs must be resolved by the CO and FACO
within 150 days along with a transmittal to the
FAB, detailing the disposition of the audit report
and including a summary of negotiations and
appropriate correspondence reflecting the negoti-
ated cost for the year. The CO is also responsible
for providing the Management Audit Tracking
System form summarizing the disposition of
questioned costs within the 150 days.
Billing for Negotiated Cost Adjustments. After
the costs are negotiated by the responsible official,
the contractor may bill (debit or credit) on a
separate invoice for any variances between claimed
and negotiated costs related to the applicable fiscal
year costs as authorized by the CO. The contrac-
tor will submit a release statement to the CO after
the negotiation of direct and indirect costs are
completed. The release statement should be
reviewed for accuracy and reasonableness by the
CO, and to assure that it reconciles to the
contractor's Summary of Contract Costs Claimed
For FYE, 19XX, and to the negotiated cost
amounts for the year. Any list of estimated/
unsettled cost items outlined in the contractor's
release statement must be reviewed for reasonable-
ness by the CO. After the release statement is fully
executed, the subject fiscal year will be considered
closed. A copy of the release statement and any
correspondence applicable to the release should
also be sent to the FAB by the CO for follow-up
audit considerations.
6.4 FINAL CLOSEOUT OF CONTRACTS
In order to adhere to cost management principles,
it is necessary for EPA personnel to terminate a
contract in a cost effective and expeditious man-
ner. Procedures similar to those of work assign-
ment closeout should be followed. To best assist in
terminating a contract and prevent cost overruns,
it is suggested that the WAM and/or PO contact
the CO to confirm the termination of the contract
and review the budget status, expected expendi-
tures, and anticipated termination costs. This
section describes the contract termination process
and outlines the roles and responsibilities of EPA
personnel in this process as well as discusses
management techniques to administer cost
management standards.
The contract closeout process entails all actions
required to ensure that die Government has
received goods or services under the contract, the
contractor has been paid the correct amount, all
Government property is accounted for, all re-
quired reports have been received, and the file is
properly documented and transmitted to the
records center. Excess funding must be returned to
the Treasury Department. Contracts that are
physically complete must be administratively
closed out. This process involves the settlement of
all outstanding contractual issues and complete
documentation of the file. The CO is responsible
for closing out the contract with the assistance of
the PO. The contract is considered complete
when:
• All deliverables are delivered and accepted/or;
• All services are performed and accepted; and
• The period of performance including that of
all exercised option provisions has expired.
The Federal Acquisition Regulations Guidelines
(FAR) set forth the following deadlines for closing
out contract files:
• Firm Fixed Price Contracts: Six months from
the date that the Contracting Officer receives
documentation of physical completion.
• Cost Reimbursement and Indefinite Quan-
tity Contracts Requiring Settlement of
Indirect Cost Rates: 36 months from the date
that the Contracting Officer receives docu-
mentation of physical completion.
• All Other Contracts: 20 months from the
date that the Contracting Officer receives
documentation of physical completion.
Timely closeout of contracts is important because
completed contracts that remain open can foster
late claims and disputes.
6.4.1 Contracting Officer Responsibilities in
Contract Closeout
The CO requests that the contractor submit a
completion voucher summarizing all costs claimed
A completion voucher is not required for firm fixed price contracts because the voucher submitted after the items are
accepted specifies the fixed price of the contract.
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
throughout the contract period once all services
are rendered and/or items delivered1. The comple-
tion voucher is the basis for requesting a final
audit that provides a report on the contractor's
actual costs and serves as the basis for negotiating a
final cost settlement. The CO then determines the
allowability, allocability, and reasonableness of
costs claimed and enters into negotiations with the
contractor. A final cost estimate is negotiated and
a final payment is made to the contractor. The
final voucher submitted by the contractor is
certified by the CO and is subject to all provisions
of the Prompt Payment Act.
6.4.2 Project Officer Responsibilities in
Contract Closeout
POs assist in the following tasks of the work
assignment closeout process:
• Certifying that all technical requirements of
the contract are satisfied, that the products or
services are satisfactorily completed within the
contract amount, and that the final report and
all deliverables are received and accepted;
• Reviewing and determining the accuracy of
the contractor's report on inventions;
• Examining the completion voucher for cost-
reimbursement contracts; and
• Evaluating the contractor's performance under
the contract.
The CO will request that most of these activities
take place in writing so that the PO only needs to
respond to this written request. POs need to
conduct a thorough contractor evaluation that is
backed up by documentation because the evalua-
tions serve as the basis for evaluating past perfor-
mance of a potential contractor in consideration
for award of future competitive requirements.
6.4.3 Termination of Contracts
In addition to final expiration of a contract, the
laws that give the government power to enter into
contracts also give it the right to terminate such
contracts. Most contracts allow the government to
terminate contracts for one of two reasons: default
of the contractor or convenience of the Govern-
ment. The ability to terminate a contract is a
unilateral right of the government; the contractor
does not have any such rights. Terminations may
be complete or partial. A complete termination
requires the contractor to stop all work under the
contract, while a partial termination discontinues
only a portion of the uncompleted work. The
decision to terminate a contract partially or
completely is dependent on the exact circum-
stances surrounding the decision to terminate. It is
preferable to work out possible solutions to
contracting problems before resorting to contract
termination. Terminations are often costly, time-
consuming, and end up in litigation.
Termination for Convenience
Under the termination for convenience clause, the
government has a right to cancel work under a
contract whenever it determines that it is in its
best interest. This decision is a unilateral right of
the government, but should not be decided
without considerable evaluation. Cancellation of
the work under a contract is an expensive and
undesirable course of action because there is an
extensive administrative effort involved on the part
of the government to complete the termination.
Generally, termination for convenience occurs
because of changes in government requirements or
because contract funding is not available. Other
circumstances such as an unavoidable organiza-
tional conflict of interest or a decision that
working in-house could be more cost-effective
may also make termination advisable.
The first step in a termination for convenience is
written notification to the contractor by the CO.
The notice clearly indicates that the contract is
being terminated for the convenience of the
government. The notice also provides:
• An effective date for the termination (usually
the date of the notice);
• The extent of the termination identifying
what portion, if any, should be continued;
and
• Any special instructions.
Upon receipt of the notice, the contractor is
obligated to comply with the termination clause
and the terms of the notice that generally includes:
• Stopping work on the terminated portion of
the contract;
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
• Terminating related subcontracts;
• Continuing with the unterminated portion
and promptly requesting any equitable
adjustment in price on the continued portion;
• Taking action to protect and preserve any
government property or to return it as
directed by the CO; and
• Promptly submitting its own claim for
settlement (the contractor has up to one year
to submit such a*claim).
The CO should direct the actions of the contrac-
tor, review the settlement proposal, and promptly
negotiate a settlement. One of the CO activities in
which the PO may participate is the settlement
conference. The CO or PO will be responsible for
the following activities at the settlement confer-
ence:
• Explaining the general principles governing
settlements under the relevant clause, includ-
ing the contractor's obligations with respect to
subcontracts;
• Determining the status of the work, and if
necessary, clarifying the extent of the termina-
tion;
• Determining the subcontracts that will be
terminated and identifying who is responsible
for handling them for the contractor;
• Making all arrangements for proper handling
and disposition of government property;
• Discussing the form of the settlement pro-
posal and the required accounting data; and
• Establishing a tentative schedule for negotia-
tion of the settlement.
In addition to possibly making a recommendation
to terminate for convenience, the PO will be
involved in settlement conferences, advising the
CO on the disposition of property and evaluating
the reasonableness (quantitatively and qualita-
tively) of the contractor's settlement proposal.
Termination for Default
The government has a contractual right to termi-
nate, in whole or in part, the contractor's right to
proceed with the work, when the contractor fails
to perform their contractual obligations. The
decision to terminate is discretionary and the CO
should exhaust all reasonable efforts to prevail
upon the contractor to correct whatever problems
exist.
If a contract is terminated for default, but it is
determined afterwards that the contractor was not
in default and that the default was "excusable", the
termination will be considered to be for the
convenience of the government. If the CO
determines that it is in the best interests of the
government, the contract may be reinstated by
mutual agreement. The government's right to
terminate for default is based on the contractor's
failure to :
(1) Perform on time, as provided in the contract.
(2) Perform any other provision of the contract.
(3) Make progress, to the extent that the delay
endangers contract performance. Although
not expressly provided for in the default
clause, the government may immediately
terminate for default if the contractor defi-
nitely exhibits an intention not to perform
within the time fixed in the contract.
Prior to taking any default action, the CO will
normally take action on one of the following
remedies short of termination. At this time, the
CO should also determine:
• Whether it would be effective to withhold
payment until satisfactory performance is
demonstrated;
• Whether there is an alternative source of
supply if default action is taken;
• Whether the contractor is in a financial
position to reimburse the government for the
excess costs of repurchase;
• Whether default would impact the
contractor's ability to liquidate progress
payments or continue to perform under other
government contracts;
• Whether continued performance under a
revised delivery schedule would be more in
the government's interest;
• Whether the government's interest would be
better served by offering advance payments or
some other financing agreements;
• Whether an arrangement to have the contract
performed by a capable subcontractor may be
an appropriate solution;
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COST MANAGEMENT MANUAL FOR THE SUPERFUND REMEDIAL AND ENFORCEMENT PROGRAMS
Whether, where a capable organization
declines to perform as a subcontractor, a
novation agreement can be arranged whereby
the desired performance can be obtained
from that organization while the original
contractor remains legally liable for the
contract;
Whether there is a surety or trustee in bank-
ruptcy who would be willing to take over the
responsibility for performing the contract; and
Whether a no-cost termination agreement
should be executed (this occurs when the
requirement for the supplies or services no
longer exists and the contractor is not liable to
the government for damages.
The CO, with the assistance of the PO, has a
reasonable amount of time to determine if it is in
the Agency's best interests to exercise its right to
terminate a contract for default. The definition of
a reasonable period depends upon the facts of each
case and will vary from case to case. The contract
file must be fully documented to explain the
reason(s) for default and the Agency's rationale for
evoking the default provision.
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APPENDIX A
-------
APPENDIX A
REFERENCES
REFERENCES FROM THE OFFICE OF SOLID WASTE AND EMERGENCY RESPONSE
1. Memorandum from Henry Longest (Director, OSWER/OERR) Regarding Program
Management Costs Under ARCS. February 11,1993.
The purpose of this memorandum is to notify EPA Regional Division Directors in the
Superfund program of the Fiscal Year 1993 Congressionally-mandated target for ARCS
contracts program management costs. The document also previews a new process
(to be delineated in forthcoming guidance) for tracking and reporting project
management costs.
2. Letter to Gerald M. Clifford (USEPA/OSWER/HSCD) from Michael H. Fellows (U.S.
Army Corps of Engineers). October 15, 1992.
This letter discusses joint USAGE and U.S. EPA efforts to develop improved methods
and procedures for estimating remediation costs for hazardous waste cleanup projects,
including the availability of USAGE to review EPA contractor-prepared cost estimates.
Attached to this letter is a model "Scope of Work" that could be used by U.S. EPA
Regional offices to establish agreements with Corps field offices for this purpose.
REFERENCES FROM THE ENVIRONMENTAL PROTECTION AGENCY HEADQUARTERS' LIBRARY
3. Contracts Management at EPA - Recommendations of the Standing Committee on
Contracts Management. Decembers, 1992.
This document summarizes 40 recommendations of the Standing Committee on
Contracts Management and provides background, specific milestones, validation, and
current status for each recommendation. Of particular interest are the following
recommendations:
#22 Develop Training Course on How to Manage Contracts, Control Costs, etc.
#24 Index Existing Procurement-related Guidance Documents
#25 Prepare Cost Estimate Guide/Data Bases to Assist in Developing IGCEs
#26 Issue Uniform Contract Management Guidance
#36 Develop Policy on Allowable/Unallowable Indirect Costs
A-1
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4. Alternative Remedial Contracting Strategy (ARCS Contracts) Instructions and
Procedures for Implementing the Annual Close-Outs. July 1992.
This guidance document provides instructions and procedures for implementing ARCS
Annual Closeouts of total costs and fees claimed.
5. Superfund Accelerated Cleanup Model (SACM). March 1992.
This document describes the new "paradigm" or approach developed by the Office of
Emergency and Remedial Response to increase the efficiency of the Superfund
program by streamlining cleanup efforts at Superfund sites. The SACM strategy
includes: a single, integrated assessment function; early actions; long-term
remediation; Regional Decision Teams; and appropriate integration of enforcement,
community relations, and public participation throughout the process. Distinctions
between remedial and removal programs are eliminated, and instead are viewed as
separate legal authorities with different, but complimentary application at Superfund
sites.
6. Guidance on Program Management Activities Under ARCS. February 26, 1992.
This guidance document addresses two of the six specific recommendations identified
by the Administrator's Task Force. The document provides insight on the issues of
administrative and technical support cost tracking, and cost management activities that
would clarify, and discuss various aspects of program management.
7. EPA Contract Administration Training Course Manual, Chapter 11 (Financial
Management of Contracts). December 1989.
This chapter of the training text provides guidance to Agency Project Officers, Work
Assignment Managers, etc. on financial management of various types of Agency
contracts.
8. Financial Management Procedures for Documenting Superfund Costs. September
1986.
This handbook is written primarily for EPA's Financial Management Offices (FMOs),
which are responsible for documenting Superfund costs and providing copies of the
cost documentation to EPA counsel. The handbook includes an overview of the cost
recovery process, the filing and reconciliation procedures, and guidelines and
procedures for documenting Superfund costs for cost recovery purposes.
A-2
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REFERENCES FROM THE GENERAL ACCOUNTING OFFICE
9. Superfund Contracts - EPA Needs to Control Contractor Costs. (GAO/RCED-88-182),
July 1988.
This report primarily discusses the need for EPA to exercise sufficient cost control over
remedial contractors. It also offers suggestions to improve the award fee process and
strengthen prime contractor/subcontractor procedures. While this is not an EPA
document, we have included it on this list because it specifically addresses cost
management of Superfund contracts. Agency comments on the audit findings are
included throughout the document.
REFERENCES FROM THE NATIONAL TECHNICAL INFORMATION SERVICE
10. Resources for Preparing Independent Government Estimates for Remedial Contracting
Work Assignments. (OSWER Directive 9242.2-06a), August 5, 1992.
This document provides information regarding the availability of tools, data bases, and
assistance for developing independent government estimates of the cost of work to
be performed by contractors for remedial work assignments (RI/FS, RD, and RA).
11. Superfund Contract Management Issues. (OSWER Directive 9242.2-06), January 31,
1992.
The purpose of this directive is to initiate new requirements regarding the development
of independent government cost estimates, review of contractor invoices, and the
appropriate participation on Performance Evaluation Boards.
72. Administrative Guidance for the FIT to ARCS Transition. (OSWER Directive 9242.2-
03), November 1991.
This directive provides administrative guidelines for assigning site assessments
previously done by the FIT contractors to the ARCS contractors. Cost reporting,
invoice review, cost documentation, and cost recovery are addressed.
A-3
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13. Implementation of the Superfund Alternative Remedial Contracting Strategy (ARCS),
Report of the Administrator's Task Force 1991. (OSWER Directive 9242.2-05),
November 27, 1991.
The scope of this directive encompasses the entire spectrum of remedial contract
management issues, and offers 32 recommendations that are segregated into six
categories. They include: program management; ARCS capacity and utilization; ARCS
contract controls; ARCS financial audits and reviews; the award fee process; and EPA
management processes and organizations.
14. Approval of Long Term Contracting Strategy for Superfund. (OSWER Directive
9242.6-07), September 9, 1990.
This directive summarizes the issues, findings, analysis, and recommendations for the
Superfund Long Term Contracting Strategy (LTCS) which was developed to analyze
the long-term contracting needs of the Superfund Program and to design a portfolio of
Superfund contracts to meet those needs over the next ten years. This strategy builds
upon a "One Program" approach to enforcement, as it supports project management
from site discovery through remedy construction, builds in flexibility, responds rapidly
to immediate risks, and decentralizes contracts management.
15. Scoper's Notes-An RI/FS Costing Guide. (EPA/540/G-90/002), February 1990.
This handbook is intended for use by RPMs during RI/FS scoping activities to assist
them in identifying those options and decisions within the scoping process that may
have significant impact on project budgets.
16. The Enforcement Project Managers' Handbook, Cost Recovery Chapter. (OSWER
Directive 9837.2), July 1989.
This chapter provides RPMs/OSCs with an overview of the central components of cost
recovery actions including removal, remedial, and oversight costs. The information is
organized to follow the chronology of tasks.
17. Site-Specific Contracting for Removals. (OSWER Directive 9242.2-02), April 1989.
This memorandum provides direction on the use of site-specific contracts for removal
actions and is intended to encourage site-specific contracts in as many actions as
possible. These contracts, where applicable, lead to getting the best cleanup price
possible for removal actions.
A-4
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18. The Superfund Cost Recovery Strategy. (OSWER Directive 9832.13), July 20, 1988.
This guidance document is intended to provide a framework for planning and initiating
actions to recover Federal funds expended by EPA or a State in CERCLA response
actions (removal and remedial). It discusses general cost recovery program priorities,
identifies case selection guidelines, and identifies activities required to support the
development of cost recovery actions.
19. Removal Cost Management Manual. (OSWER Directive 9360.0-02B), April 1988.
This policy and procedural manual is designed to provide comprehensive cost
management procedures for use by the EPA at removal actions authorized by CERCLA.
This document should be used by the On-Scene Coordinator (OSC) and other on-site
personnel designated by the OSC when performing cost management at a Superfund
removal site.
20. Remedial Action Costing Procedures Manual. (EPA/600/8-87/049), October 1987.
This manual provides specific procedures for the cost estimating and economic
analysis steps required for preparing engineering cost estimates for selecting remedial
action alternatives in response to the requirements of CERCLA. Detailed procedures
are provided for generating estimated capital and annual operating costs, calculating
annual costs and present worth, and performing sensitivity analyses of the cost
estimates to determine the impact of changes to various cost input parameters.
21. Emergency Response Cleanup Services Contracts (ERCS) Users' Manual. (OSWER
Directive 9242.2-01B), October 1987.
This users' manual establishes a standard set of operating and management
procedures to assist EPA Headquarters and Regional personnel, and personnel from
other Federal agencies authorized to use the ERCS contracts, in using the contracts
efficiently and effectively. In addition, the manual discusses coordinating the use of
the ERCS contracts with other entities involved with the Superfund program. The
manual can also be used to train and/or inform parties who regularly interact with or
who are interested in the ERCS program. Cost issues addressed include invoice
certification and cost documentation.
A-5
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22. Technical Assistance Team (TAT) Contracts Users' Manual. (OSWER Directive
9242.4-01 A), September 1987.
This users' manual provides information and guidance on management and
implementation of EPA's "Technical Assistance Teams (TAT) for Emergency Response,
Removal, and Prevention" contracts. Its primary purpose is to assist Regional and
Headquarters personnel in understanding their roles and responsibilities under the
contracts and to describe the necessary procedures and requirements that should be
followed in managing the contracts, including financial management. The manual is
also intended to be helpful to TAT contractors.
23. The RPM Primer, An Introductory Guide to the Role and Responsibilities of the
Superfund Remedial Project Manager. (OSWER Directive 9355.1-02), September
1987.
This directive is used to familiarize RPMs with their roles and responsibilities in the
Superfund remedial program. The Primer leads the RPM through all aspects of the
remedial response process from site discovery to cost recovery action.
24. Policy on Recovering Indirect Cost in CERCLA Section 107 Cost Recovery Actions.
(OSWER Directive 9832.5), June 27, 1986.
This directive clarifies EPA's policy regarding the recovery of indirect costs in CERCLA
cost recovery actions, stating that the decision whether to seek indirect costs in
existing cases will be made by the Regions after consultation with the Department of
Justice and with the concurrence of EPA's Office of Enforcement Compliance and
Monitoring and Office of Waste Programs Enforcement.
25. Cost Recovery Actions Under CERCLA. (OSWER Directive 9832.1), August 26,1983.
This directive describes the essential elements that the government will probably be
called upon to prove in a cost recovery action: the assembly and maintenance of a
file, some examples of appropriate documentation for each element of the cause of
action, procedures for processing and negotiating cost recovery claims, and the
mechanics of repayment of any recovery to the Fund.
26. Cost Recovery Referrals. (OSWER Directive 9832.0), August 3, 1983.
This directive discusses procedures for Regional staff in handling and documenting
upcoming CERCLA Section 107 cost recovery referrals in order to meet Department
of Justice requirements.
A-6
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APPENDIX B
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON DC 20460
JAN 3
OSWER Directive 92
MEMORANDUM
SUBJECT,: Superfund Contracts Management Issues
FROM:
TO:
Don R. Clay, Assistant Administrator
Office of Solid Waste and Emergen
ristian Holmes, Acting Assisran
Office of Administration and pesojurcee Management
Regional Administrators
cy Response
t Administrator
PURPOSE
To initiate new requirements regarding the development of
independent government cost estimates (IGE), review of contractor
invoices, and the appropriate participation on Performance
Evaluation Boards.
BACKGROUND
Within the last 6 months, the EPA Inspector General, the
General Accounting Office and the Administrator's Task Force on
the Implementation of Superfund Alternative Remedial Contracting
Strategy (ARCS) have issued findings and recommendations
regarding several issues including deficiencies in the areas of
IGEs, the adequacy of our review of contractor invoices, and the
performance of the award fee process. While the comments were
directed at specific contracting programs within Superfund, they
affect and are a concern across all OSWER contracting programs.
This directive establishes new policy regarding these issues.
OBJECTIVE
Independent Government Cost Estimates
The Federal Acquisition Regulations require that IGEs be
prepared for each new contract or modification that is expected
to exceed $25,000. Currently, there is no Federal or Agency
policy that requires IGEs prior to the issuance of independent
work assignments under existing contracts. A recent GAO report
compared the work plan negotiation results for work assignments
where IGEs were prepared against results where IGEs were not
prepared. The conclusion of this comparison demonstrated that
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considerable negotiation leverage is achieved when realistic IGEs
are developed prior to work plan negotiation. In all cases where
an IGE was prepared, the negotiated amounts were considerably
below the initial work plan amounts presented by the contractor.
The exercise of developing independent government cost estimates
also demonstrates to our contractors that the government
negotiation team is fully prepared to discuss, and to negotiate
realistic costs for the work to be performed.
Both the GAO report and the ARCS Report of the
Administrator's Task Force recommend that Regional Administrators
develop a capability for contract managers in generating
independent government cost estimates. The objective of this
Directive is to establish policy to implement this recommendation
across OSWER.
Review of Contractor Invoices
The objective of this directive is to clarify the role of
contract managers (POs, WAMs and RPMs) in the voucher review
process and to establish policy regarding these activities.
Under cost reimbursable contracts, allowable, allocable and
reasonable costs are paid up to the estimated cost of the
contract or the expenditure limit for the work assignment, as
appropriate. Contract managers are required to assure that the
direct costs on vouchers that they approve are appropriate and
reasonable for the work performed and that the amount of work
performed is reasonable for the task. Contracting Officers will
periodically look at a representative sample of the billed costs
and determine allowability and allocability. In addition,
professional auditors, at the request of the Contracting
Officers, perform annual comprehensive incurred cost audits and
provide recommendations to the CO. Any concerns raised by the
auditors will be conveyed to the appropriate Project Officer.
However, the contract manager, that person most familiar with,
and closest to the work being performed (e.g., RPM, WAM, PO,
etc.), has the ultimate responsibility for determining the
"reasonableness" of the costs being invoiced. A "reasonable"
cost is one that would seem to be justified and legitimate and
what a prudent .person would pay under like circumstances in the
conduct of competitive business.
In reviewing the reasonableness of charges, contract
monitors are not expected to know the exact market values of
various direct costs; however, past experience and common sense
can assist in making a determination for each cost element
examined. If unreasonable charges are approved for payment, it
is doubtful that anyone reviewing the costs later will possess
the knowledge to disallow those costs. Therefore, the contract
manager is the most logical person to question, identify and
recommend disallowance of unreasonable charges.
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3
Participation on Performance Evaluation Boards
One of the benefits of an award fee contract is that it
provides a means of periodically involving senior contractor and
government management in the oversight of contractor performance.
To reinforce this position, the Environmental Protection Agency
Acquisition Regulations (EPAAR) require that the Performance
Evaluation Boards (PEB) be chaired at the division director level
of the program initiating the procurement. Any changes to the
chairperson appointment must be approved by the Fee Determination
Official.
The composition of personnel participating in the
performance evaluation process must represent those employees
most experienced and knowledgeable of contractor performance
issues. In many cases, first and second line supervisors
represent the most experienced managers and, as such, are
expected to take an active role in the performance evaluation
process. In addition, PEB chairpersonship is occasionally
delegated to positions below the Division Director level, or even
to the branch chief level. Both of these situations erode some
of the benefits of the award fee process. The objective of this
directive is to reinforce the intent of the EPAAR in the area of
roles and responsibilities associated with the performance
evaluation process.
IMPLEMENTATION
Independent Government Estimates
Effective February 1, 1992, an independent government cost
estimate must be developed by the technical program office (WAM
or RPM) generating the requirement prior to the issuance of any
work assignment estimated to exceed $25,000 under contracts that
utilize a work assignment/work plan administrative process. This
requirement is applicable to both new work assignments and to
increases in existing work assignments. The IGE will be
prepared, at a minimum, at the element of cost level (e.g.,
direct labor, subcontracts, equipment, other direct costs, etc.)
and by major task, when practicable. While the responsibility
for IGE development rests with the technical program office, it
is expected that the technical office will work in concert with
the contract specialists in the management offices in this effort
and that the IGEs must be developed independently without input
from the contractor receiving the work assignment. The IGE will
be used by the RPM/WAM, PO and CO as a tool in negotiating the
workplan budget with the contractor and for documenting the
resulting agreements in the contract file. We recognize that
additional guidance may be required to develop the best possible
IGEs. OSWER and PCMD will assess that need and assist in any way
they can. However, in the meantime, it is expected that the
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4
Regions and Headquarters offices will proceed to implement this
policy.
In addition to estimating systems already developed in some
Regions and at Headquarters, you are reminded of two tools that
have been distributed to assist in preparing Superfund IGEs. The
first, the Superfund Cost Estimating Expert System, is a computer
model that uses site-specific data to develop independent
government estimates. The second, Scoper's Notes, is a guide to
RI/FS costing and is used to develop ballpark cost estimates.
You are encouraged to utilize these tools in developing your
estimating capability.
Review of Contractor Invoices
Effective immediately, those contract managers (WAM or RPM)
that are most familiar with the contractor work will be
responsible for reviewing monthly invoices as directed by the
Project Officers. Contract managers are responsible for
providing written recommendations on cost reasonableness or
unreasonableness to the Project Officers. When further
contractor documentation is required before a determination can
be made, payment of invoiced costs, or any portions thereof, may
be suspended by the Project Officer until the documentation is
submitted and a reasonableness determination can be made. When
charges are determined to be improper or unreasonable, the
Contracting Officer has the authority to disallow payment of
those charges. Contractor charges or portions of those charges
that are inadvertently paid and later determined to be improper
or unreasonable, should be disallowed on subsequent invoices.
Guidance on voucher review can be obtained from the
Contracting Officer, Project Officer or any member of the
Contract Operations Review and Assessment Staff (CORAS). Consult
the CORAS Bulletin series on Financial Oversight for additional
written guidance on the steps associated with the voucher review
process. More specifically, Issue No. 4, dated May of 1989,
contains an article on contractor voucher review. Contract
managers are encouraged to read this guidance and to use the
Invoice Review Checklist in Exhibit 1. Once the Checklist is
completed, it should be attached to the contract manager's copy
of the invoice to document the review. Copies of Issue No. 4 can
be obtained from Superfund Project Officers or from CORAS in OERR
at mail code OS-240.
Participation on Performance Evaluation Boards (PEBs)
Effective immediately, all official PEB chairpersons shall
review the membership of their PEBs and make whatever adjustments
are necessary to involve the most knowledgeable and experiencea
personnel in the award fee process.
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Only in unusual circumstances, and when absolutely
necessary, may official chairpersons delegate their
responsibilities. In the event that delegation becomes
necessary, the official chairperson shall contact the Fee
Determination Official, prior to the convening of the PEB, and
obtain verbal approval to delegate. In no event will the
chairperson responsibilities be delegated below the Branch Chief
level.
Many tools have been provided over the years to address
these issues. They have taken the form of training, CORAS
Bulletins, guidance documents, Award Fee Guides, computer models,
exit conferences (conducted by GAO, IG and CORAS), program
conferences, and even IG audits and GAO reports. We feel that
the policy presented in this directive is critical to achieving
improvements to our contracts management activities, and
represents the first steps in implementing meaningful
recommendations presented in review documents. It is requested
that each region (a single coordinated response from each region)
inform us as to the action taken in regards to implementing this
Directive. It is requested that the implementation information
be submitted within 30 days from the date of this Directive to
the Superfund Acquisition Manager, OS-100, OSWER.
Any questions regarding this policy should be directed to
Ika Joiner, Acting Superfund Acquisition Manager, at FTS
260-0840.
cc: Regional Deputy Administrators
Assistant Regional Administrators
Henry L. Longest II, Director, Office of Emergency and
Remedial Response
Bruce M. Diamond, Director, Office of Waste Programs
Enforcement
Sylvia K. Lowrence, Director, Office of Solid Waste
David W. Ziegele, Director, Office of Underground
Storage Tanks
John C. Chamberlin, Director, Office of Administration
David J. O'Connor, Director, Procurement and Contracts
Management Division
Directors, Waste Management Division
Regions I, IV, V, and VII
Director, Emergency and Remedial Response Division
Region II
Directors, Hazardous Waste Management Division
Regions III, VI, VIII, IX, and X
Directors, Environmental Services Division
Regions I-VIII, and X
Chief, Environmental Services Branch
Region IX
Director, Hazardous Site Control Division (HSCD)
Director, Hazardous Site Evaluation Division (HSED)
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Director, Emergency Response Division
Director, Office of Program Management
Director, CERCLA Enforcement Division (CED)
Office of Waste Programs Enforcement
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APPENDIX C
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. O.C. 20460
JAN 3 I9S9
OFC'CE OF
SOUO WAS'E ANO SMgCGENC''
OSWER DIRECTIVE 9242.6-02
MEMORANDUM
SUBJECT: Guidance for Organizing ARCS ContJpax/t Files
FROM: /Henry L. Longest II, Director
(f Off ice of Emergency and RemediB.1 Response
TO: Director, Waste Management Division
Regions I, IV, V, VII, VIII
Director, Emergency and Remedial Response Division
Region II
Director, Hazardous Waste Management Division
Regions III, VI
Director, Toxic and Waste Management Division
Region IX
Director, Hazardous Waste Division, Region X
Purpose;
To transmit to you the attached Guidance for Organizing ARCS
Contract Files.
Background:
The attached guidance was previously transmitted to you for
comment via a memo from Clem Rastatter and Russ Wyer dated
November 3, 1988, and was more recently incorporated into the
CORAS Bulletin which was released in December.
Objective;
To attain a degree of consistency in the filing of ARCS
contract documents.
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- 2 -
I mo 1 ement at i on!
It is recognized that there tends to be some variation among
Regions in their approach to a file management system. The
recommended system seeks to retain the flexibility needed to meet
the varying needs of Regional Project Officers (RPOs). There is
also the need for some standardization given the number of reviews
which will continue to be conducted (EPA IG, GAO, etc.) as well as
periodic visits by Headquarters representatives.
I expect the principles of the attached system to be followed
in order to assure a minimal level of consistency among Regions in
this area.
Any questions concerning the above or the attached guidance
may be addressed to Ken Adams or Debbie Dietrich, Acting Director,
Contract Operations, Review and Assessment Staff (CORAS) at
475-9337.
Attachment
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OSWER DIRECTIVE #9242.6-02
GUIDANCE FOR ORGANIZING ARCS CONTRACTS FILES
This guidance recommends a standardized ARCS contracts file management
system for Regional Project Officers (RPOs). A standard and consistent file
organization in every Region is necessary because of the quantity and complexity
of the documents that will be generated by the ARCS contracts. A standard
system should serve several important functions:
• Simplify access and retrieval. Access and
retrieval will be simplified. The first document
in each file will be an index listing the file
contents. Other documents in the file will be
categorized and arranged in separate file sections
or subsections, by category. For example, in the
work assignment management file, the first section
may include all work assignments for a given site
arranged in chronological order.
• Provide continuity. As a kind of "institutional
memory,* a standard organization will ensure that
all necessary documents related to costs, site
activity, contract management, and contractor
performance are retained and retrievable. Thus,
even if personnel turnover occurs, key information
will continue to be available as long as required.
• Facilitate review. A standard organization will
facilitate contract management oversight and site
review activities of Congress, the General
Accounting Office (GAO), the EPA Inspector
General, and other Agency groups.
The recommended organization serves these functions while retaining the
flexibility necessary to meet the varying needs of Projects Officers (POs).
Exhibit 1 lists the majority of the documents that will have to be
maintained in ARCS contract files and briefly describes their functions.
The list of documents in Exhibit 1 is not exhaustive. Some of the documents
included in the file illustrations below are not discussed. These are routine
contract documents that are not ARCS-specific, such as procurement requests and
equipment lists. Also, substantive programmatic documents such as preliminary
assessment or RI/FS reports, for example, are not included. These documents
form part of the administrative record supporting site decision-making and will
be retained in the administrative record file. There may be additional
documents that are part of the dec is ion-making process, but are also pertinent
to work assignment management, e.g., certain technical directives. Such
documents should be retained in both the administrative record and the ARCS work
assignment management file.
ARCS documents should be organized in five files:
A. A general contract management file, organized by
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OSWER DIRECTIVE -v'92-42 . 6-02
C.
D.
E.
contract;
A work assignment management file, which may be
site-specific;
A financial and progress report file;
A performance evaluation file; and
A confidential file.
Each file may occupy a file drawer, a portion of a drawer, or several
drawers. The files, however, must be divided into the recommended sections.
Each file section should be clearly identified and labeled. An index listing
the sections should be the first document in each file. All documents in a
single category should be filed together in a separate section or subsection,
e.g., all work assignments or work assignment completion reports. Within each
section, where practicable, documents should be arranged in chronological order
with the most recent documents filed at the front of the section. The length
of the retention period for each category of documents will be determined by the
PO and Contracting Officer, pursuant to the Federal Acquisition Regulation (see
48 CFR 4.8, October 1, 1987 ed.).
The following file illustrations show the documents that should be
included in each file and the recommended sequence of document sections.
A. Contract Management File
CONTRACT
MANAGEMENT
RLE
For each ARCS contract,the
contract management file will
contain documents directly
related to the ARCS contract,
such as the contract itself,
contract modifications,
management plans, documentation
relating to work distribution
and the exercise of contract
options, and routine contract
documents that are not ARCS-
specific, such as equipment
lists.
B. Vork Assignment Management File
WORK ASSIGNMENT
MANAGEMENT
FILE
(can be site-specific)
UCTON
The work assignment
management file may be site-
specific. It will contain all
work assignments and work
assignment amendments,
workplans, activity reports, and
all correspondence (including
cover letters from deliverables)
related to a given site. Routine
contract documents, such as
procurement requests, will also
be included in the work
assignment management file.
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USWER
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C. Financial and Progress Report File
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FINANCIAL AND
PROGRESS REPORT
DOCUMENTATION
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The financial and progress
report documentation file will'
contain monthly progress reports
and other cost-related documents
such as invoices, annual
allocation reports, and annual
analytical service reports.
D. Performance Evaluation File
_L
PERFORMANCE
EVALUATION
RLE
The performance evaluation
file will contain all contractor
and EPA prepared documents
regarding contractor performance
under each ARCS contract.
E. Confidential File
>NFIDENTIAL
RLE
The confidential file is
a limited access file that will
contain any document that must
be kept confidential, for
example, contractor pricing
information. Confidential
documents should be organized
by ARCS contract.
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OSWER DIRECTIVE #9242.6-02
Regional contract management personnel who identify additional ARCS or
routine contract documents that have not been included in this recommended plan,
or have questions or suggestions regarding file management, should notify Ken
Adams of the Contract Operations Review and Assessment Staff, FTS #8-475-9337,
EPA mail code OS-240, EPA electronic mailbox EPA 5240.
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OSWER DIRECTIVE //9242.6-02
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OSWER DIRECTIVE
-------
APPENDIX D
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
JUL 29B93
OfFICEOf
SOLID WASTE AND EMERGENCY
RESPONSE
O8WBR Directive 9202.1-12
MEMORANDUM
SUBJECT:
FROM:
TO:
Guidance on Preparing Independent? Government Cost
Estimates (IGCEs)
Timothy Fields Jr., Director
Superfund Revitalization Office
Betty L. Bailey, Director
Office of Acquisition Management
Director, Waste Management Division
Regions I, IV, v, VII
Director, Emergency and Remedial Response Division
Region II
Director, Hazardous Waste Management Division
Regions III, VI, VIII, IX
Director, Hazardous Waste Division
Region X
Director, Environmental Services Division
Regions I, VI, VII, X
Assistant Regional Administrators
Regions I - X
PURPOSE
The purpose of this memorandum is to transmit the guidance
on roles and responsibilities for preparing Independent
Government Cost Estimates (IGCEs) for remedial and enforcement
work assignments, and for conducting and documenting work plan
negotiations in the Superfund program.
BACKGROUND
As you are aware, OSWER Directive No. 9242.2-06, issued on
January 31, 1992, required independent government cost estimates
ftocyctod/ftocyclabto
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-2-
to be developed by the technical program office prior to the
issuance of any work assignment estimated to exceed $25,000.
This provision is applicable to contracts that utilize a work
plan/work assignment administrative process.
In recognition of the need for guidance in this area, the
Superfund Revitalization Office (SRO) began work on this
Directive in the summer of 1992. A cost estimating workgroup,
consisting of POs, COs, RPMs, and Estimators/Coordinators in the
Regions, was formed to assist in drafting the guidance and reach
consensus on a wide array of issues relating to IGCEs. In
addition, the SRO obtained, through an interagency agreement, the
services of a cost estimator from the Bureau of Reclamation.
This person (Ken Beebe) was the lead for this effort at
Headquarters.
Significant issues raised by the Office of Inspector General
(OIG) and the Office of Acquisition Management (0AM) resulted in
appropriate changes to the guidance to reflect agreements
reached. During the guidance development process, there were
several opportunities for Regional and Headquarters Offices to
comment on drafts of the guidance. All comments received were
considered and discussed at higher management levels as
appropriate. The resulting document reflects decisions reached.
This guidance represents the culmination of efforts of many
different people, and especially significant are the
contributions of Regional personnel who worked tirelessly to help-*
resolve issues and finalize the document.
IMPLEMENTATION
This guidance should not have a major impact on Regional
operations since all Regions have been preparing IGCEs for some
time now. All Regions should utilize this guidance effective
immediately in preparing IGCEs and conducting work plan
negotiations.
Questions concerning the guidance should be addressed to Ika
Joiner, Superfund Acquisition Manager, at (202) 260-0840.
Attachment
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-3-
cc: Rich Guimond
Ika Joiner
Henry Longest, OERR
Jerry Clifford, OWPE
Diane Balderson, 0AM
Regional SF Branch Chiefs
Reg. Contracting Officers' Supervisors
Attendees of 1st Cost Estimators' Meeting
Marty Cook, OAM
Don Hambric, OAM
Pat Patterson, OAM
Rick Thurston, OAM
Marlene Suit, OS-HOW
Superfund Documents Center
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JULY 27, 1993 OSWER Directive 9202.1-12
GUIDANCE ON ROLES AMP RESPONSIBILITIES FOR PREPARING INDEPENDENT
GOVERNMENT COST ESTIMATES flGCEsl FOR REMEDIAL AND ENFORCEMENT
WORK ASSIGNMENTS. AND CONDUCTINQ AND DOCUMENTING WORK PLAN
NEGOTIATIONS IN THE SUPERFUND PROGRAM
I. PURPOSE
The Office of Solid Waste and Emergency Response (OSWER)
Directive 9242.2-06, dated January 31, 1992, requires the
development of IGCEs for any new work assignment or work
assignment modification expected to exceed $25,000. This
requirement, along with other procedures discussed in this
guidance, are being implemented to improve contract management
within the agency.
The purpose of this guidance is to provide information and
establish minimum requirements regarding the roles and
responsibilities of the Work Assignment Manager (WAM), Project
Officer (PO), and Contracting Officer (CO) for: 1) preparing
Independent Government Cost Estimates (IGCEs) for remedial and
enforcement work assignments in the Superfund program; 2)
performing reviews of the contractor's work plan and budget, and
3) preparing for, conducting and documenting negotiations with
the contractor for the work plan and budget. This guidance is
applicable to those enforcement contracts where COs, POs, and
WAMs are co-located and all regional and zone remedial contracts-
(i.e., ARCS contracts as well as the Long-term Contracting
Strategy (LTCS) contracts that use Work Assignments as the
ordering document and are managed in the Regions). Regions may
supplement this guidance with policies which address specific
needs and which provide detailed instructions incorporating
specific Regional requirements. These policies however, cannot
contradict or supersede this guidance.
This document does not provide detailed guidance on how to arrive
at specific costs but does give an overview of what should be
considered in the preparation of IGCEs, review of the Work Plan,
and resolution of pricing issues through negotiations. For more
guidance on this subject, please refer to the document "EPA
INDEPENDENT GOVERNMENT COST ESTIMATING GUIDE" prepared and issued
by the Office of Acquisition Management (OAK). The OAM guide
provides a thorough overview for preparing an IGCE, references
for confirmation and information on indirect rates, and sample
forms and examples.
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II. BASIC CONSIDERATIONS
A. CONTRACT MANAGEMENT TEAM (CMT1
In order to ensure an effective and efficiently run
Superfund program for each project, it is essential that the
CMT be properly structured with the necessary
interdisciplinary skills. Therefore, at a minimum, the CMT
should consist of the Work Assignment Manager (WAM), the
Project Officer (PO), and the Contracting Officer (CO).
Others, such as contract specialist, cost estimator/
coordinator, technical experts, the Bureau of Reclamation
(BOR) or U.S. Army Corps of Engineers (USAGE) may be
included as team members.
The ability of the CMT to function as a team is essential
and each team member plays an important supporting role.
Good communications are necessary for effective operations
of the CMT.
B. STATEMENT OF WORK (SOW!
The single most important component in the successful
development of an IGCE is a clearly defined SOW and detailed
specification. Model SOWs should serve as the basis for
developing more detailed SOWs which are then customized for
the particular site. Standard tasks from the contract
specifications being utilized should be used as much as
practicable in describing the work to be performed. All
assumptions should be included in the SOW. The SOW should
clearly define what the Government desires from a product,
project or service. It should provide information on the
product/service required along with the schedule
(milestones) and location of the deliverables. An accurate
and defendable IGCE cannot be prepared without a clear,
complete and concise SOW and detailed specifications. The
SOW is the basis for both the IGCE and the evaluation of the
contractor's proposal. A good SOW should provide the
necessary foundation for EPA to obtain the goods and
services it contracts for at a fair and reasonable cost and
to get the best product, project or service on time and
within the budget.
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III. iq^E DEVELQPMEMT
A. DEFINITION
An IGCE is the Government's estimate of what the government
thinks it should cost to accomplish the SOW or solicitation/
specifications. The IGCE shall not be divulged to the
potential contractor and shall be marked "CONFIDENTIAL - FOR
OFFICIAL USE ONLY". All assignments or amendments that
require an IGCE, generally fall into two categories: those
consisting mostly of Level Of Effort (LOE) hours, and those
that not only contain LOE but need to estimate the
anticipated cost of construction (CCE) as well.
B. LOE ESTIMATES
The WAM is responsible for the development of the IGCE.
Where in-house cost estimators/coordinators are available,
the WAM may utilize these individuals when developing the
IGCE. If the WAM intends to extensively involve the cost
estimator/coordinator in the IGCE process, it is essential
that estimators/coordinators be kept informed and involved
from the earliest time possible.
The IGCE must be based on supporting data such as historical
information from previously completed work, cost estimating
guidelines, engineering standards, or professional
judgement. All assumptions, including rationale, used in
developing the IGCE shall be clearly defined in writing and
shall be part of the IGCE package. Estimates must, at a
minimum, be broken out by task and subtask as outlined in
the SOW, and by cost element such as labor, travel, other
direct cost, subcontract expense, overhead & G&A expense,
and fee. The estimate shall not be structured to equal the
funding document accompanying the Work Assignment Form
(WAF). The estimate shall be realistic of the resources
necessary to accomplish the tasks detailed in the SOW. One
of the most important elements in the Government cost
estimate is the estimate for labor hours. Labor hours must
be estimated by skill category (P level) as defined in the
contract, and by task.
The IGCE shall be prepared before the CO will accept the
Procurement Request (PR). This IGCE can be considered a
preliminary estimate prior to having a technical scoping
meeting with the contractor if desired, or a final estimate
when no scoping meeting is required. A preliminary estimate
is defined as the total LOE and dollar amount for all work
anticipated in the SOW. The estimates can be based on
historical costs for similar work. The major assumptions
and rational shall be included with the preliminary
estimate. If a technical scoping meeting is required, the
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preliminary estimate must be revised to reflect any changes
made to the SOW and then will be considered the final
estimate, but in all cases, it shall be completed prior to
receipt of the work plan. If a technical scoping meeting is
required, it shall be limited solely to the technical
aspects of the assignment, and not involve cost. In the
event that no technical scoping meeting is held, the IGCE
shall accompany the SOW and shall be forwarded to the CO as
part of initiation of the work assignment. Estimates shall
be signed and dated by the WAM and the estimator/coordinator
or PO (if involved in the IGCE preparation).
When the contract SOW presents specific, standardized
tasks, the tasks presented in the SOW and the IGCE
shall be organized, structured and presented in a
manner consistent with and comparable to the contract
SOW.
When an approved workplan is modified and expands/
decreases the activities, or increases/decreases the
LOE, the tasks in the modification and the IGCE shall
be organized, structured and presented in a manner
consistent and comparable with the tasks presented in
the approved work plan.
C. CONSTRUCTION ESTIMATES
A preliminary construction cost estimate (CCE) for the
Remedial Action is developed first at the RI/FS stage. A
more detailed CCE is developed during the Remedial Design
process and then finalized based upon the
solicitation/specification package. The CCE shall be a
detailed estimate itemizing the principle elements of the
cost to the contractor (including indirect costs, and the
addition of profit) to perform the work required by the
specifications. Detailed estimates are developed using a
step-by-step process, planning the project in the same
manner as a contractor would plan, organize, and conduct it.
They are based on the type and quantities of labor,
equipment, and material required to perform the work.
Consideration should be given to production rates, projected
weather delays, schedule impacts, type of technology to be
used, site accessibility, safety, haul routes and distances,
and availability of materials and equipment. Supporting
documentation should include narratives addressing the site
visit, pre-bid conference, the facts and assumptions used ir.
the preparation of the estimate, as well as specific
references to source material used.
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1. REMEDIAL DESIGN BY A&E CONTRACTOR
The A&E contractor to whom the Remedial Design is
awarded may or may not be specifically tasked to
develop a detailed CCE as part of the design process.
Listed below are the alternative methods that the
Regions should use in the development of CCEs.
a. - Use of EPA Staff To Develop CCE:
For those EPA Regions having in-house
construction experience and technical
expertise, the CCEs should be developed using
available staff resources. This will serve
as EPA's official CCE for the Remedial
Action. If this approach is taken, the A&E
contractor should not be tasked to develop a
CCE (such duplication of effort would not be
cost effective).
b. - Use of Other Federal Agencies to Review A&Es CCE:
If Regional staff require assistance because
of work load or lack of technical expertise
in project construction, the A&E contractor
will prepare the CCE and the WAM shall avail
him/her self of the technical expertise and
knowledge of other federal agencies, such as
the Bureau of Reclamation or the U.S. Army
Corps of Engineers, through inter-agency
agreements, to assist in reviewing the A&E
contractor's estimate. Once the contractor's
CCE has been reviewed, modified if necessary,
and approved by the EPA, it shall serve as
EPA's official CCE. This CCE will become the
subcontract portion of the Remedial Action
IGCE if it is provided to the prime for
subcontracting.
c. - Use of Other Federal Agencies to Develop the CCE:
If regional staff require assistance because
of work load or lack of technical expertise
in project construction, the WAM shall, avail
him/her self of the technical expertise and
knowledge of other federal agencies, such as
the Bureau of Reclamation or the U.S. Army
Corps of Engineers, through inter-agency
agreements, to develop a CCE based upon the
A&E contractor's solicitation/specification
package. Once the other agency's CCE has
been reviewed, modified if necessary, and
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approved by the EPA, it shall serve as EPA's
official CCE. This CCE will become the
subcontract portion of the Remedial Action
IGCE. If this approach is taken, the AS.E
contractor should not be tasked to develop a
CCE (such duplication of effort would not be
cost effective).
REMEDIAL DE.SIGN BY OTHER FEDERAL AGENCIES
When the WAM chooses to use another federal agency to
develop the Remedial Design, the responsibility for the
development of the detailed CCE is incorporated as part
of the SOW and Interagency Agreement (IAG). That CCE
will become the IGCE for the Remedial Action.
3. ARCS CONSTRUCTION CONTRACT MODIFICATION
OSWER Directive 9355.5-01/FS, dated September 1989,
provides guidance on how ARCS construction contract
modifications shall be processed (copy attached).
IV. REMEDIAL ACTIOH
For Remedial Action work assignments, an IGCE for the A&E
contractor's efforts associated with the award, management and
oversight of the construction subcontractor must be completed.
For this portion of the Remedial Action, the LOE estimate
guidance noted earlier should be followed. The CCE developed
during the Remedial Design phase, as outlined in III, c. 1. a.,
b., c., and 2, shall be incorporated as part of the overall
Remedial Action IGCE.
V. WORK PLAM REVIEW
Upon receipt of the contractor's work plan and proposed budget,
members of the CMT shall perform a technical and cost analysis.
A. Technical Analysis;
A technical analysis means the examination and evaluation by
personnel having knowledge, skills, experience,, or capability in
engineering, science, or management of proposed quantities and
kinds of materials, labor, and processes, and associated factors
set forth in the proposed work plan. This analysis will
determine and report on the need for reasonableness of the
proposed resources.
During the technical review it may be necessary to have fact
finding discussions with the contractor. These discussions do
not include negotiation or resolution of differences with the
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contractor in the total work plan or individual elements.
Instead, the results of this discussion should be used to provide
the CO with sound recommendations for establishing the Pre-
Negotiation Objectives. These recommendations should include a
narrative for: (1) reconciling the IGCE and the contractor's
cost estimate based on fact finding; and (2) a summary of any
remaining differences for negotiation.
A fact finding discussion is only for use in understanding the
contractor's basis in developing the Work Plan/Cost Estimate.
The individual conducting the fact finding shall inform the CO
that such a discussion is warranted and the CO shall inform them
if she/he will participate.
B. Cost Analysis;
A cost analysis means the review and evaluation of the separate
cost elements of (a) the contractor's work plan and (b) the
judgmental factors applied in developing the work plan budget/
estimate. This analysis will enable the reviewer to form an
opinion on the degree to which the proposed work plan cost
estimate represents and what the cost of the SOW should be,
assuming reasonable economy and efficiency.
The CMT should compare the technical aspects of the work plan
with the SOW and evaluate the differences between the IGCE and
the contractor's proposal. Special emphasis should be given to
the total hours and dollars, hours and skill mix per task,
subcontract costs, and schedule. It should again be emphasized
that the WAM should call upon the expertise of other technical
disciplines to aid in review of the work plan.
C. Roles and Responsibilities for Work Plan Review;
The following is a brief summary of the recommended roles and
responsibilities of WAMs, POs, and COs in the work plan review
process; however, the specific roles and responsibilities may
differ from region to region.
1. Work Assignment Manager (WAM)
• reviews work plan to determine if work plan is
appropriate, reasonable, and complete;
• provides quality control role within the work plan
review process;
• determines if contractor's work plan is responsive to
SOW;
• reviews number of hours and skill mix to determine
appropriateness for tasks;
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8
• reviews proposed schedule, equipment, health & safety
requirements, travel/ODCs, deliverables, subcontract
needs/use;
• reviews qualifications of contractor personnel for
appropriateness;
• determines if tasks fit SOW, that no excess work is
proposed, and costs proposed for tasks are reasonable;
• identifies issues that require CO/PO attention;
• initiates, conducts and documents fact
finding discussions if needed; and
• summarizes comments in a work plan memorandum to the PO
and CO on a task/subtask level, including a comparison
of the contractor's cost proposal with the IGCE and
makes recommendations regarding variances between the
two.
Project Officer (PO)
• reviews work plan to determine if it is appropriate,
reasonable, and complete;
• provides quality control role within the work plan
review process;
• reviews project planning and project management
activities;
• reviews qualifications of contractor personnel for
appropriateness;
• reviews schedule(s) and deliverables;
• reviews equipment requirements - prepares 7 point
justifications as appropriate;
• compares work plan with IGCE and SOW;
• initiates, conducts and documents fact finding
discussions if needed; and
• reviews the WAM's technical review memorandum and/or
provides additional comments as appropriate.
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3. Contracting Officer (CO)
• reviews proposed labor, ODCs, indirect rates, and fees;
• compares work plan with IGCE and SOW;
• reviews need for overtime premium, if proposed;
• reviews for appropriate use of subcontracting;
• reviews for compliance with contract, FAR, etc.;
• reviews work plan for personal services and/or
inherently governmental functions;
• requests clarification(s) from CMT members, when
necessary;
• reviews role/responsibility of team subcontractors;
• reviews work plan for special contract provisions;
• initiates, conducts and documents fact finding
discussions and participates in them if initiated by
WAMs and POs when warranted;
• receives, reviews, and supplements the technical review
memorandum as a basis for subsequent discussions with
the contractor or possible future pre-negotiation and
negotiation documentation; and
• approves the work plan.
If necessary, a designated member of the CMT shall consolidate
the work plan comments and send only the technical comments
without any cost related issues to the contractor through the CO
for the contractor's review with a request to provide a response
within a reasonable time frame. Cost estimators/coordinators,
contract specialists or other technical experts that assisted in
the preparation of the IGCE may also provide assistance during
review of the contractor's work plan and/or negotiations. If the
CMT determines that the work plan is to be approved as submitted,
the proper documentation supporting the CMT's decision shall be
prepared.
VI. NEGOTIATIONS
The CO discusses with the CMT the need for negotiations. The CO
is responsible for leading the team in developing its negotiation
objective(s). In no event are negotiations to be delegated to
the WAM or PO. Although each team member should assure that all
issues are properly addressed and properly documented, the CO is
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10
ultimately responsible for ensuring that documentation of the
negotiation outcome is adequate. Once negotiations are completed
and an agreement has been reached, the work plan is approved by
the Contracting Officer. In the event that no negotiations are
required, the documentation for work plan approval shall be
processed.
Upon receipt of the contractor's work plan, any significant
changes in the tasks, schedule or budget are accomplished through
negotiations between the Agency and the contractor. The
Contracting Officer shall conduct those negotiations. When
determined by the CO, the appropriate personnel (WAM, PO, E/C,
etc.) will also participate in the negotiations.
Roles and Responsibilities for Negotiations:
The following is a brief summary of the recommended roles and
responsibilities of WAMs, POs, and COs in the negotiation
process; however, the specific roles and responsibilities may
differ from region to region.
1. Work Assignment Manager (HAM)
• provides technical expertise to PO and CO for
negotiation session.
• prepares technical documentation solicited by CO and/or
PO.
2. Project Officer (PO)
• coordinates with other members of the CMT.
3. Contracting Officer (CO)
• ensures pre-negotiation documentation is adequate.
• meets with CMT members to establish negotiation
strategy.
• conducts negotiations or approves negotiations
conducted by contract specialist.
• ensures post-negotiation documentation is adequate.
If negotiations are held, the following provides a framework
for documentation.
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11
VII. DOCUMENTATION
Throughout the entire process, the CMT shall maintain adequate
written documentation of the significant differences and
acceptability between the Government's position and the
Contractor's work plan and budget. Particular attention should
be paid to documenting the Government's negotiating position and
the results of the actual negotiations between the government and
contractor.
A. PRE-NEGOTIATION DOCUMENTATION
The pre-negotiation documentation summarizes the Agency's
position and objectives it hopes to accomplish during
negotiations with the contractor. Objectives should be
based upon the review of the contractor's work plan, the
IGCE and other information available regarding the work to
be performed. The document shall show the work assignment
number, contractor's name, contract number, site name, a
summary of the contractor's proposal and the IGCE, and
present the Agency's position upon entering negotiations. A
target position for the major cost elements shall be
included. The document shall be prepared by the CO/CS with
input from other members of the CMT prior to negotiations
and is used as a guide during the negotiations. The pre-
negotiation memorandum shall be signed and dated by the
Contracting Officer.
B. POST-NEGOTIATION DOCUMENTATION
The post-negotiation documentation summarizes and documents
negotiations with the contractor with emphasis on the
reconciliation of differences between the IGCE and the
contractor's work plan, pre-negotiation position and the
negotiated agreement. It is prepared by the contracting
officer with input from other CMT members. The memorandum
should include the following information:
1. The purpose of the negotiations.
2. A description of the work, including the
contract number, work assignment number and site name.
3. The name, position, and organization of each person
representing the contractor and the Government in the
negotiations.
4. The date, time, and place of the negotiations.
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12
5. The summary of the negotiated items (cost, technical
scope and schedule), and justification for agreement to
estimated costs or statement of work significantly
different from the Agency's pre-negotiation position.
The task breakdown, costs, hours and skill mix of the
government objective, the contractor's initial proposal
and the final negotiated items should be presented in
matrix format for easy reference and comparison.
6. A statement to the effect that the negotiated agreement
is determined to be fair and reasonable.
The post-negotiation memorandum must be signed and dated by
the Contracting Officer.
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Environmental Protection
Ag«ncy
of E.Ti«fg«ney and
Raspons*
Washington. OC 20460
Owa.v* 5355 5: '
S«0(«mo«r 1989
&EPA
Supcrfund
7W£ HAZARDOUS SITE CONTROL DIVISION'S
DESIGN AND CONSTRUCTION MANAGEMENT GUIDE SERIES
ARCS CONSTRUCTION CONTRACT
MODIFICATION PROCEDURES
During the performance of « construction project it a often necessary 10 inodty the contract a> allow changes in the work
which are required by actual cotxtitions at the site. These contract modifications are accomplished either through bilateral
nKxtirkattons. which itsoltta'supplemer^
result in 'change orders* to the ooojtractor •> accomplish the work.
This document describes (be contracting relationship!, as well as technical reviews and adraiiiisnacve procedures required
supplemental agr
change onkn for clwged work in ReniedM Ac
to pro
are subcontracts under EPA's ARCS contracts. Tbe« procedures are orientated towanb fixed price contracts. Comract
modificatiomb time and material* contracts will differ. These procedkaesdotiotcaveTte situation where the need for the
change is in dispute. DispotesaiMiclaiimwiU be presented in a subsequent foio^nce. Assistance with the implementation
of these procedural may be requeued from die Design and Constracion Manafement Branch in HSCD.
RESPONSIBILITIES AND AUTHORITIES
The construction connctinf relationship under ARCS in-
volves two distinct spheres of authority. The first is the
contractual relationship between the ARCS prime conirac-
tor and the subcontractor for construction. For the sake of
simplicity, the subcontractor for construction will be called
the "Constructor." The second sphere of authority is the
contractual relationship between the ARCS prime contrac-
tor and the Federal Government. All chanfes to ARCS
construction work will involve actions at both the subcon-
tract and the prime contract levcL
Within the first sphere of authority at the subcontracting
level, the authority 10 approve changes 10 the work will
reside with a designated senior member in the ARCS firm.
The Federal government is not a direct party to any ARCS
subcontract, and therefore cannot direct or order the Con-
structor to accomplish changed work.
The procedures used by the ARCS Construction Manage-
mem Team for processing chanfes will also vary depend-
ing on the size and complexity of the construction project
and will reflect the mien^rranagement structure of ARCS
firm. On large construction projects the team may include
a Construction Manager, a Resident Engineer, a Construc-
tion Representative or Construction Inspector, various
technical review and design engineers, and other support
staff. In a «t
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CHANGES IN CONSTRUCTION
There are fa* primary reasons for changes in Construction Concocts within the genenl scope of the work:
(1) To provide the ABCSConsinictian Manager (be n«ibUitytoaccoowuxl»ieactu«l&fclcoixliDonjorimeT»euuioajof
the plans and ipBriflrations as they are encountered during the progress of me work. Thii flexibility may include ac-
celeration of performance.
(2) To allow the ARCS Cbnstmctian Manager the means to order changes, or to allow the Constructor UK means for
proposing changes which will result in more efficient performance, or in a finished product which is of an unproved
quality.
(3) To allow for the purchase of additional work within the fewriJscar^ of die contract whkh will meet the government's
needs in obtaining t reaedy u the site.
(4) To provide ibe means by which the Constructor may obtain equiubleadji
changes.
for costs resulting from constructive
To be "within scope" the wort (1) should be esseno^y the same as die r^ of work origmaJryOT
««»mplMM
alter the nature of die thing to be constructed.
Atltam
Cncumst
ces wiO sometimes require me ARCS firm to direct the Constructor to
proceed with work u> address an inunediaie need at the site. Thu need may itsuU from emergency situations or be required
to avoid incurring delay com. In these drcumstsnces me ARCS CorunucdojiKfanagemem Team wdl order the Construcox
to proceed with actions mat are needed on an immediate basil, white u^ standard CooiraaModirkaoxxi process a carried
forward in the oorma) manner. The approval procedure for using die Reserve Fond »addre« circumstances which require
immediate action is described in Step 4 of me Construction Gooinct Modificacxn Approval Procedures section.
ARCS DESIGN AND CONSTRUCTION ADVISOR (DCA)
The DC A will be the Contracting Officer's construction en-
gineering technical expert and advisor. As such, the DC A
will provide to EPA engineering judgments, reviews and
advice on technical decisions regarding construction is-
sues including, but not limited to, the review and analysis
of changes to the work that may arise in die course of con-
struction. In situations where high coatt or complex con-
ditions exist, the DCA will obtain other resources neces-
sary to provide the analysts. TheDCAwultraveltDihesue
on short notice when constroctioa issues warrant it Inad-
dition, the DCA win attend appropriate milestone events
such as the pre-consowtioa conference, and die pre-finel
and final
The education and experience of die DCA should be
heavily weighted in construction. The individual should be
a degreed and registered Professional Engineer since die
Government position needs to be based on professional
engineering judgments to meet the standards of evidence
that is likely to be submitted to an appeals board. Sources
of DCAs for ARCS construction projects include:
- EPA REGIONAL SUPERFUND STAFF: If me Elf A
Regional office has staff with the appropriate qualifica-
tions, then these individuals could be assigned as DC As,
taking into consideration that due to the nature of active
construction, die DCA duties would sometimes have to
take precedence over all other duties.
• U.S. BUREAU OF RECLAMATION: The Bureau of
Reclamation has "yfr a commitment to make available
construction engineers as DCAs in support of ARCS
r^HitiPKt^1** nf**tfr an Interagency Agreement Addi-
tionally die Bureu has agreed 10 provide access to their
Claims Analysis Section in die Construction Division of
the Denver Office. This Section is composed of a staff
of IS with a broad base of construction experience.
change order analysis arid claim resolution. The CUuns
Analysis Section will perform analyses of changes.
tioa of negotiating positions.
• ALTERNATE AAE FIRMS: Aa independent A&E
firm, e.g. an ARCS firm widt construction management
experience which is not involved with the design or
construction work assignment, REM 5 or REM 6 could
provide DCA services faraspecific site or across several
sties. This approach will be further evaluated through
pilots during FY 90.
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TECHNICAL AND COST ANALYSIS OF PROPOSED CHANGES
Changes will be subject to technical and cost analyses at both (he ARCS subcontract level and within the context of the Wort
Assignment at the prime contract level. A discussion of these functions at each level follows:
/. ARCS TECHNICAL AND COST ANALYSIS: Changes in construction work will be subject to an internal ARCS
analysis. In simple, low-cost changes, the analysis may merely involve review of the engineering estimate and the definition
of the work which was developed by the ARCS Construction Management Team.
For higher cost, more complex changes, the ARCS firm may use additional technical review and design engineers to analyze
the proposed changed work during the development of the engineering estimate and definition of the work. These individual^
may help develop and coordinate the negotiating position of the ARCS Construction Management Team. These activities
will be accomplished in parallel with an analysis of the proposed change by EPA within the context of the Work Assignment
at the prime contract level.
2. EPA TECHNICAL AND COST ANALYSIS: All changed work must be analyzed for approval by the EPA Contracting
Officer. The Contracting Officer will rely on the RPM and the Design and Construction Advisor to provide these analyses.
In the case of routine, tow-cost changes, the analysis will be in the form of a quick turn-around review and approval of the
change as negotiated by the ARCS firm with the Constructor. This will occur at Step 9. as described in the Construction
Contract Modification Approval Procedures section.
For higher cost, more complex changes, the RPM will task the Design and Construction Advisor to initiate an analysis of the
changed work and develop an Independent Government Estimate in parallel with the ARCS firm's actions to define and
specify the work in preparation for negotiations. This process would be initiated at Step 5 of the Construction Contract
Modification Approval Procedures section. The Design and Construction Advisor wifl utilize whatever resources are
necessary to accomplish the analysis. If the changed work is of sufficient cost or complexity to warrant an in-depth analysis,
then the Design and Construction Advisor may submit the change to the Claims Analysis Section of the Bureau of
Reclamation Construction Division Office in Denver. Colorado.
WORK ASSIGNMENT MANAGEMENT AND ENVIRONMENTAL REVIEW
Within ARCS constractioa project!. iB changes will be When hijfa COM chanfes occur that exceed the amount of
reviewed by the RPM to insure that me environmental criteria, funds in the Reserve Fond, then me Remedial Project Officer
of the Remedial Action an maintained. Those changes win winreviseteWorkA^gnineatandarnmgefortheobaga-
alsoberevkwedfc*irapa«soniheWcfkAs»giunerubudget tion of the additional ftmds necessary to pay far the change
and schedule. and replenish the Reserve Fund if necessary.
RESERVE FUNDS
When an ARCS constroction contract is executed. EPA will adjust the Work Assigmnent funds to provide a Reserve Fund
that equals 15% of the contracted price fa the work. These Reserve Funds are set aside exclusively to cover the costs of
changes to work under conditions discussed in this document and in accordance with (be Qianfesclaasei of the subconoicL
The approval to use Reserve Funds will be given to the ARCS firm by way of a Work Assignment Form which increases
the expenditure limit For situations that require immediate action, verbal approval to draw $25,000 or less will be given to
UK ARCS Construction Management Team by the E? A Competing Officei or representative with die undemanding tlut
the appropriate paperwork will follow as soon as possible.
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CHANGE ACTIVITIES
Exhibit 1 represents the activities thai take
place between a Construction Manage-
ment Team and aConsmjctor when change
is made in a construction contract These
activities begin with the identification and
appraisal of the change, including a deci-
sion as 10 whether or not immediate action
is required. The change is then defined by
way of an engineering design. A proposal
is the basis of negotiations to reach a final
price and schedule for the work, and the
Contract Modification is issued. For a
small change, such as clearing and grub-
bing a small piece of land, all the activities
could take place in a matter of hours. Very
large, complex changes could require days
or weeks to process because they require a
greater effort to define and negotiate.
In all changes the same fundamental ac-
tions take place as shown in the chart. The
ARCS Contract Modification Procedures
described below is designed to tap into
these actions at the appropriate times to
provide Government oversight, approval
and funding.
Request Chang*
Conduct Field Appraisal
Constructor to Start
with S25K C«iling
Prepare Design and
Engineering Estimate
Prepare Proposal
Request Proposal
| Submit Proposal
Review Proposal
EXHIBIT 1. CHANGE PROCESS
CONSTRUCTION CONTRACT MODIFICATION APPROVAL PROCEDURES
The procedure is an expansion of the process shown in Exhibit 1 arid iiKludesd^spptovab necessary »insure the appropriate
management of changes and to provide an adequate amount of control to EPA in (he funding and execution of changes m the
work. Ten steps in die procedure are shown in the flow chart in Exhibit 2 and are described below.
/. REQUEST OR IDENTIFICATION OF REQUIRED CHANGE: A recognition of the need for a change can originate
with either the Constructor air the Construction Management Team's representative, usually the Resident Engineer. The
Constructor may encounter conditions at the site which will require a change or the Resident Engineer, through normal
tracking of the consmctionuBlcs, may obserrcccfltf^ At this stage the Resident
Engineer will inspect the field conditions or other circumstances that have been identified as a potential change to the work.
2. FIELD APPRAISAL: In the second step the Resident Engineer develops a ReWAppraisil of the scope and cost of the
potential change. ForsmaUchangesthismightbeasimpkengineeringjudgrnent For larger changes it would, at most, entail
an informal estimate of the adjustments that would be required with regard to cost and schedule.
3. SCOPE DETERMINATION: This step actually occurs concurrently with the initial observation and appraisal of the
potential change. The Resident Engineer evaluates the change with regard 10 the scope of the project If the change is out
of scope, then it would be directed to the RPM as a basis of a possible new or revised Work Assignment, but it would not be
accomplished under the current convict
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4. IMMEDIATE ACTION DETERMINATION: For changes thai require immediate action, the ARCS Construcuon
Management Team will be permitted by verbal approval, or through a prearranged notification procedure with the EPA
Contracting Officer, to draw increments of up to $25 .000 from the Reserve Fund with which to initiate the wort. The Con-
structor will then be ordered to proceed with actions that are needed on an immediate basis. While the work is progressing.
the standard contract modification process will be earned forward in the normal manner. If the Constructor expends the
initial 525.000 on a large change order before the total change is defined and negotiated, then subsequent increments of
funds can be requested for circumstances that require the actions to continue.
5. INDEPENDENT GOVERNMENT ESTIMATE: Changes that are expectedto cost less than $25.000 will not require
an Independent Government Estimate. These changes will be reviewed and concurred with by the Contracting Officer
with the support of the RPM and OCA after a price has been negotiated with the Constructor. This will occur at step 9
and will result in the issue of a Work Assignment Form permitting the ARCS Construction Management Team to draw
down the Reserve Fund to pay for the work. The ARCS management of these small changes will be evaluated as pan of
the performance evaluation for award fee and for the assignment of future work.
Changes that will cost more than $25,000 will require an Independent Government Estimate. The Contracting Officer
will rely on Design and Construction Advisor to either develop the estimate independently, or. if the change is large
enough, to submit it to the Bureau of Reclamation Claims Analysis Section for analysis. The results of the analysis will
be submitted to the EPA Contracting Officer. This Independent Government Estimate will serve as the basis for
negotiations between EPA and the ARCS firm for the revision of the work assignment cost and schedule to accomodate
the changed work.
6. ARCS ENGINEERING ESTIMATE: For changes estimated to be under $25.000. an ARCS engineering design and
estimate of the work will be the sole basis for requesting and negotiating a proposal for the work from the constructor.
For changes estimated to cost over $25,000, the ARCS engineering design and estimate will be developed in parallel with
the Independent Government Estimate. Differences between the ARCS estimate and the Government estimate will be
negotiated between the ARCS firm and EPA. These negotiations should be completed before a final price is negotiated
by the ARCS firm with the constructor.
7. REQUEST AND REVIEW OF PROPOSAL: The next step is for the Construction Management Team to submit the
design to the Constructor 10 requ: i; .-*xposal for the work. The Constructor then prepares and submits his own proposal
and estimate for the work for a pre-negotiation review.
8. NEGOTIATIONS: It is during this Step that the Construction Management Team attempts to negotiate an acceptable
price and an equitable adjustment to the project schedule to accornimxlaie the changed work. When agreement is reached,
the ARCS firm will prepare the modification to the subcontract. Thu would be in the form of a supplemental agreement
which will be signed by both a representative of the ARCS firm and the Constructor for concurrence by the EPA Con-
tracting Officer with the support of the RPM and DCA.
If agreement is not reached, the the ARCS firm will prepare a Change Order (unilateral nwdifkation) which would be in
the same fonrm of a supplememalagreenieM but would not required The Constructor
would be directed » accomplish the work at the schedule and cost determined by the ARCS firm. The unresolved price
and sc hedule would become the subject of a Claim to the ARCS firm if the Oxisttuctor wished ID pursue the tnaoer further.
9. ACTION RECOMMENDATION: Atfeendofftef)egotiaiimperiod.theSapi>kn)enrt
is submitted to the Contracting Officer through the RPM for concurrerice and veruVatx»c€ funding 10 cover the agreed
to price.
10. APPROVAL AND MODIFICATION OF CONSTRUCTION CONTRACTS: The Contracting Officer reviews and
concurs. If there are adequate funds in the Reserve Fund, the RPM win issue a Work Asaipiinem Form permitting the
ARCS firm to draw down the Reserve Fund and issue the change to the subcontract
IDA. MODIFICATION OF ARCS CONTRACT: If there are not adequate funds in Reserve to cover me negotiated cost,
then the RPM will process a Work Assignment Fora, with a Procurement Requeu to ouiiftte aufflctent funds for UK
change and to replenish the reserve for future changes.
-------
EXHIBIT 2 -CO*
CONSTRUCTOR
1
2
Request
Change
3
4
Constructor To
Start With $25k -
Ceiling
5
6
7
8
Prepare Proposal }•
f
Submit Proposal {<
ISTRUCTION CONK
ARCS FIRM
Identify
Change
2.
Conduct
^ Reid
Appraisal
vx»iS\N8
S^ope?/""
xS,Action?X/^
^V-
^&L
1
Prepare Design
Estimate
'f
•j Request Proposal j
•j Review Proposal j
i
Negotiate
9
10
10A
•
Proceed
With Work "*"
COTR - Contracting
Design and Consta
>
Recommend _
Action
Issue Change
— Notice To «-
Proceed
1 Officer's Technical Rei
iction Advisor (OCA), s:
tACT MODIFICATIC
COTR'
New Work
Assignment
Independent
»• Qovt '
Estimate ~
1
t
Change
1 Analysis
— - 'X^deomte^v^
T
Approve
- Recommended
Action
&
>/V PROCEDURES [
CONTRACTING OFFICER 1
CO will be kept appraised
of change order activities
at all times.
Phone
$25k
Review
1 *" Govt.
[ Estimate
^ Review
Change Order
Analysis
^M
Review and
» . ConcurwrthUse
of Reserve Funds
i
Revise WA Mod
Process PR ARCS
i
presentative • Can include Project Officer. RPM. and I
s appropriate. 1
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APPENDIX E
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
SOLID WASTE AND EMERGENCY RESPONSE
AUG 5 1992
OSWER Directive 9242.2-06a
MEMORANDUM
SUBJECT: Resources for Preparing Independent Government
Estimates for Remedial Contracting. Wgmk Assignments
FROM: Henry L. Longest II, Director
Office of Emergency and Reinediaresponse (OS-200)
TO: Director/ Waste Management Division
Regions I, IV, V, VII
Director, Emergency and Remedial Response Division
Region II
Director, Hazardous Waste Management Division
Regions III, VI, VIII, IX
Director, Hazardous Waste Division
Region X
Director, Environmental Services Division
Regions I, VI, VII
PURPOSE
To provide information regarding the availability of tools,
data bases, and assistance for developing independent government
estimates (IGEs) of the cost of work to be performed by
contractors for remedial work assignments (RI/FS, RD, and RA).
BACKGROUND
The Office of Solid Waste and Emergency Response (OSWER)
Directive 9242.2-06, dated January 31, 1992, requires that the
technical program office develop an independent government cost
estimate prior to the issuance of any new work assignment (or
increase to an existing work assignment) expected to exceed
$25,000. The IGE is then to be used by the Remedial Project
Manager/ Work Assignment Manager (RPM/WAM), Project Officer, and
Contracting Officer to negotiate the work plan budget with the
contractor and as documentation to support the resulting
negotiated agreements.
Printed on Recycled Paper
-------
-2-
OBJECTIVE
The objective of this memorandum is to provide information
about the resources that are available for use in preparing IGEs
for remedial contracting work assignments.
IMPLEMENTATION
The accuracy of an independent government estimate will
depend greatly upon the level of detail used to develop a
statement of work and the estimating tools and data used to
prepare the estimate. IGEs can be developed for contract work
assignments using tools such as computer models and guidance,
working with regional IGE Coordinators, or by obtaining
estimating services from the U.S. Army Corps of Engineers (USAGE)
or U.S. Bureau of Reclamation (USER). These resources are
available and should be utilized. The resources are further
described below.
Estimating Tools and Data Bases
A number of tools and data bases (of specific relevance to
the Superfund remedial program) are available for use in
preparing IGEs for contractor work assignments. Each tool or
data base is listed in the following table according to the phase
(RI/FS, RD, or RA) of the activity that would be assigned to the
contractor. Other tools are being developed; the table will be
updated as they become available for your use.
PHASE
TOOL/DATA BASE
INFORMATION
CONTACT
RI/FS
Scoper's Notes
(guidance document)
EPA/54O/G-90/002
February 1990
(available in
Regions)
Randy Breeden
HSCD/ROGB
(703) 308-8368
RI/FS
Scheduling and Cost
Estimating Expert
System (SCEES)
(computer model)
OSWER Directive
9355.0-29
August 13, 1990
(distributed to
Regions)
Randy Breeden
HSCD/ROGB
(703) 308-8368
RD
Remedial Design
Scoping
(guidance document)
Being developed
by HSCD (draft to
Regions by
October 1992)
Kenneth Skahn
HSCD/DCMB
(703) 308-8355
RA
M-CACES Gold
(computer model)
Being distributed
to Regions
Thomas Whalen
HSCD/DCMB
(703) 308-8345
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RA
RI/FS
RA
RA
RI/FS
RD
RA
Bid Tabulation Data
Base
HAZRISK Cleanup
Models (computer
models used to
validate cost
estimates)
Drinking Water and
Groundwater
Remediation Cost
Evaluation:
Granular Activated
Carbon
and/or
Air Stripping
(computer models)
Unit Price Book
(prices for
equipment,
mater ial s , etc . )
Data base is
being updated w/
prices from
recent bids and
is available upon
request
Privately
developed
(EPA may acquire
license within
the year)
Available for
purchase under a
Federal
Technology
Transfer Act
agreement from
Lewis Publishers,
Inc.
Chelsea, MI 48118
Included with
M-CACES Gold
Kenneth Skahn
HSCD/DCMB
(703) 308-8355
Thomas Whalen
HSCD/DCMB
(703) 308-8345
Lewis Rossman
ORD/RREL
(513) 569-7603
Thomas Whalen
HSCD/DCMB
(703) 308-8345
IGE Coordinators
We believe it should be the responsibility of the WAM to
develop the IGE with assistance from the Region's IGE
Coordinator. A number of Regions (III, IV, V and VI) have cost
estimators (as IGE Coordinators) to assist RPMs/WAMs in preparing
IGEs and to provide cost estimating training where appropriate.
An advantage in having cost estimators available to assist
RPMs/WAMs in developing cost estimates is in the ability to
achieve uniformity and quality in the end product, particularly
for large or complex projects. In other Regions, Project
Officers are available to assist the RPMs/WAMs. We recommend
cross-Regional coordination between IGE Coordinators to compare
notes on the tools and data bases and to develop strategies for
improvement. The following is a list of the Regional IGE
Coordinators or Project Officers who can be contacted for
assistance:
REGION
1
2
REGIONAL IGE COORDINATOR/
PROJECT OFFICER
Rick Leighton
Keith Moncino
PHONE NUMBER
(617) 573-9654
(212) 264-9300
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3
4
5
6
7
8
9
10
Lisa Marino
Bob Stewart
Tom Short
Rich Warrell
Glenn Celerier
Debi Morey
Jeff Mashburn
Rob Stern
Ken Erickson
Joanne LaBaw
(215) 597-8183
(404) 347-2930
(312) 353-8826
(214) 655-6720
(214) 655-8523
(913) 551-7593
(303) 294-7156
(415) 744-2339
(415) 744-2324
(206) 553-2594
To make the process more effective, the RPM/WAM should first
develop a detailed Statement of Work (SOW) and team with the IGE
Coordinator who then will review the SOW and suggest
improvements. When the draft SOW is close to being final, the
RPM/WAM should contact the IGE Coordinator for assistance in
development of the IGE. In addition to being more experienced
and able to point out some of the items of work that an RPM/WAM
might initially overlook, the IGE Coordinator will be able to
provide and/or track regional and contract specific trends in
costs associated with site surveys, sampling and analysis,
treatability studies, and other direct costs such as travel,
computer time, telephone, or equipment. Above all, the IGE
Coordinator may be familiar with the cost estimating tools and
data bases that can best fit the circumstances.
Interaencv Agreements
Both USAGE and USBR have a number of experienced estimators
available to EPA for use in either developing cost estimates or
reviewing RA cost estimates that have been prepared by the design
contractors. Simple lAGs can be drafted to obtain their
assistance for all phases of remedial projects. The USAGE and
USBR have provided help in reviewing RD cost estimates prepared
by ARCS designers, and in estimating the cost of construction
change orders for ARCS supervised remedial action projects.
Regions are encouraged to make use of these resources. Blanket
agreements can be developed that would eliminate the need to
process a separate IAG for each assignment. Regional
Coordinators in the Design and Construction Management Branch can
help to establish the initial contact with the USACE or USBR.
If you have any questions on the resources available for use
in preparing IGEs for remedial contracting work assignments, or
can suggest any additions to the resources listed above, please
contact Kenneth Skahn at (703) 308-8355.
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-5-
cc: Don R. Clay, Assistant Administrator, OSWER
Richard J. Guimond, Deputy Assistant Administrator, OSWER
Timothy Fields, Jr., Director, SRO
Bruce Diamond, Director, OWPE
Sylvia Lowrance, Director, OSW
Walter Kovalick, Jr., Director, TIO
James Makris, Director, CEPPO
David O'Connor, Director, PCMD, OA
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06/15/93
FACT SHEET
TOOLS/DATA BASES FOR INDEPENDENT GOVERNMENT ESTIMATES
PHASE
RI/FS
RI/FS
RI/FS
RD
RA
RA
RA
RA
RI/FS
RD
RA
TOOL/ DATA BASE
Scoper's Notes
(guidance document)
Scheduling and Cost
Estimating Expert
System (SCEES)
(computer model)
RACER
(computer model)
Remedial Design
Scoping
(guidance document)
M-CACES Gold
(computer model)
Bid Tabulation Data
Base
HAZRISK Cleanup
Models (computer
models used to
validate cost
estimates)
Drinking Water and
Groundwater
Remediation Cost
Evaluation:
Granular Activated
Carbon
and/ or
Air Stripping
(computer models)
Unit Price Book
(prices for
equipment,
materials , etc . )
INFORMATION
EPA/540/G-90/002
February 1990
OSWER Directive
9355.0-29
August 13, 1990
Developed for
USAF (Regions 6
and 8 have had
the training)
Being developed
by HSCD (Draft
sent to Regions
on May 21, 1993)
Already
distributed to
Regions
Data base is
being updated w/
prices from
recent bids
Privately
developed
(EPA may acquire
license within
the year)
Available for
purchase under a
Federal
Technology
Transfer Act
agreement from
Lewis Publishers,
Inc.
Chelsea, MI 48118
Included with
M-CACES Gold
CONTACT
Randy Breeden
HSCD/ROGB
(703) 603-8753
Randy Breeden
HSCD/ROGB
(703) 603-8753
Kenneth Skahn
HSCD/DCMB
(703) 603-8801
Kenneth Skahn
HSCD/DCMB
(703) 603-8801
Thomas Whalen
HSCD/DCMB
(703) 603-8807
Kenneth Skahn
HSCD/DCMB
(703) 603-8801
Thomas Whalen
HSCD/DCMB
(703) 603-8807
Lewis Rossman
ORD/RREL
(513) 569-7603
Thomas Whalen
HSCD/DCMB
(703) 603-8807
-------
APPENDIX F
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 204«0
FEB
1993
MEMORANDUM
SUBJECT: Guidance on Program
FROM:
Activities Urder ARCS
OFFICE OF
AOMMISTRM10N
AND RESOURCES
MANAGEMENT
TO:
Richard Guimond
Assistant Surgeon G^neralMlSPH
Deputy Assistant Administrator
Offjce of Solid Waste arid Emergency Response
//dJZ&G^J^^
'Sallyanne J^arper, Deputy/Assistant Administrator
for Finance and Acquisition
ARCS Contracting Officers and Project Officers
I. BACKGROUND/PURPOSE
In July 1991, Administrator Reilly established a task force of senior EPA
managers and analysts to address concerns regarding the Agency's Alternative
Remedial Contracting Strategy (ARCS) contracts. In the area of program
management the task force made six specific recommendations. This guidance
document addresses two of those recommendations: 1) division of program
management costs into administrative support costs and technical cleanup
costs and 2) development of guidance on cost management activities. The
guidance is to be implemented beginning with ARCS contract invoice*
submitted for March, 1993.
In order to improve the ability of the Government to track program
management costs, the task force directed that all costs currently characterised
as program management costs be segregated into two functional ar
administrative support costs and technical cleanup costs. Section II of
guidance addresses this recommendation.
Printed a* ^r>r«« »«pw
-------
The task force also directed that the Agency develop guidance on cost
management activities that would assist the Regions in their efforts to control
program management costs. Sections III through V address this recommenda-
tion.
Finally, Section VI provides specific instructions which will implement the
recommendations.
Whereas this guidance provides direction on segregating program
management costs, it should be noted that during contract negotiations
contractors were encouraged to maximize site-specific program management
wherever such costs could be legitimately associated with a single site. This
should continue to be encouraged.
II. SEGREGATING PROGRAM MANAGEMENT COSTS
Each ARCS contract provides for the delivery of architect/engineering
services for the remediation of hazardous waste sites. The contracts provide
for two centers against which all costs will be reimbursed (excluding the Special
Subcontracting Pool for Construction). The first cost center is designated as
remedial planning activities and consists of all site-specific contract costs, that
is, all cost directly associated with activities on specific hazardous waste sites
assigned to the ARCS contractor for remediation. The second cost center is
designated as program management activities which consist of all non-site
specific contract costs. Typically, program management costs support and
benefit the remedial sites on which a contractor is performing in the aggregate
but cannot be attributed to a specific site.
Program Management, as defined in the ARCS contracts, "Is deemed to
constitute those technical, management, administrative, clerical and secretarial
activities to be performed by the Program Management Office (PMO) and thost
support functions to be performed by the corporate office which are allocab*
to the PMO."
Currently, program management costs are tracked and reported on tht
basis of an aggregate amount. In order to improve the tracking, reporting and
analysis of these costs, program management costs will henceforth IM
segregated into administrative and technical cleanup costs on all contract
invoices. Invoices shall include two separate accounts with different activity
-------
codes for administrative and technical cleanup costs. Attachment II, Technical
and Administrative Costs Tracked By Activity Code, provides specific
instructions on the use of these codes.
Program management activities are non-site-specific in nature, that is,
they support more than one site or support general contract activities. Program
management does not constitute any portion of the LOE hours stipulated for
remedial planning activities.
To assist in improving the tracking and monitoring of these costs, the
following definitions have been developed to segregate the program manage-
ment costs into administrative and technical cleanup cost categories. The
ARCS Contract Tracking (ACT) System will be modified concurrently with
implementation of this guidance to reflect the segregation of program
management into administrative and technical cleanup costs. Invoices and the
ACT system reports should reflect the same dollar amounts for administrative
and technical cleanup costs.
A. Administrative Support Costs are non-site-specific costs necessary fof
managing the overall contract regardless of the amount of specific site work.
Administrative support activities are necessary to enable the contractor
to perform remedial site work as well as keeping the Government informed of
overall contract activity.
The following examples will assist in determining which activities fail into
the administrative support category. Because activities vary under each ARCS
contract, this is not a definitive list of all administrative support activities wlwcfi
might be required.
Contract Mobilization (development of field equipment
and inventory control guidelines)
Personnel Management
Preparation of Monthly Reports (Progress and Financial)
(The compilation of site specific progress and financial
should be charged site-specifically)
Meetings concerning contract operations
-------
Financial Accounting Activities
Computer Support
Invoicing/Voucher Preparation
Updates to Management, Health and Safety and Quality
Assurance/Control Plans
Routine Communication/Coordination between
EPA/Contractor
Audit Support
Preparation of Contractor's Program Management Summary
Evaluation Reports (SER)
Team Subcontractor Management Activities (Pool subcon-
tract management activities should be charged to remedial
planning.)
Labor Standards Compliance (Service Contract Act/
Davis-Bacon Act)
Maintenance of Corporate Conflict of Interest Plan
and System Support
Annual Contract Close-Out Activities
Clerical Activity in Support of Administrative Functions
Other Administrative Activities (library and other reference
activities, annual allocation reporting, non-site-specific
records retention activities, etc.)
Staffing
Each contractor proposed staffing positions necessary to perform program
management functions. Specific staffing plans were negotiated prior to
contract award. The final approved staffing plans can be found in th«
Confirmation of Negotiations in the pre-award contract file. These staffing
-------
positions are not part of the labor provided under the level of effort capacity of
the contract; they are a unique labor pool available to provide specific program
management functions. Since each of the contractors' staffing plans contain
unique staff descriptions, the examples of staffing shown for administrative and
technical cleanup are used only to indicate staff activities and not specific titles;
they are not provided to indicate staffing patterns for any contract. They are
sample categories of disciplinary expertise and management oversight
necessary for the contract operation. However, any activities performed by the
program management staff for site specific activities should be charged to
remedial planning activities.
Examples of staffing that might be used to accomplish administrative
activities are:
Program Manager Reports Manager
Accountant Subcontract Manager
Contract Administrator Secretary/Data Entry Clerk
B. Technical Cleanup Costs are non-site-specific costs for technical
activities that cover multiple sites, and are related to the site-specific
work conducted under the contract.
Most technical cleanup activities under program management
performed as a result of requirements from multiple sites. These costs will vary
with the number of sites assigned under the contract.
Examples of technical cleanup activities are provided to assist «
determining which activities to include in the technical cleanup category
Again, this is not a definitive catalogue of these activities.
Equipment/Warehouse Management (Including cost o*
equipment maintenance, calibration and inventory)
Meetings concerning technical issues relevant to multipte
work assignments
Health and Safety
Quality Assurance/Quality Control
-------
Technical Guidance
Pollution Liability Insurance (Site-specific PLI should be
invoiced as a site-specific cost)
Mobile Lab
Training (Requires PO and CO approval)
Limitation on Future Contracting
Preliminary Conflict of Interest investigations for potential
work assignments
The following are examples of staffing that might be used to accomplish
technical cleanup activities:
Program Manager QA Officer
Contracts Manager Equipment Manager
Sample Coordinator Analytical Coordinator
Health and Safety Officer
Clerical Support for these activities
Health and safety, QA/QC and coordination of CLP/analytical service*
should be charged to site specific activities when possible.
C. Activities Containing Components of Both Administrative and
Technical Cleanup Costs
The following activities may fall into both administrative and technical
categories. As a result the contractor should be advised that depending on tha
nature of the activity, staff time and related costs should be classified under ttw
definitions for administrative and technical cleanup costs.
Subcontracting (e.g. Basic Ordering Agreements)
Any subcontracting activities that are not site-specific will be classified
as an administrative support cost.
Standard Operating Procedures
-------
Standard Operating Procedures (SOP) which deal with overall contract
administration will be classified as an administrative support cost. SOPs
developed for multiple site work will be classified as a non-site-specific
technical cleanup cost.
Equipment/Travel/Other Direct Costs (ODQ/Clerical Support
ODC, equipment, and travel pools for program management should be
allocated between administrative support and technical cleanup areas for
purposes of tracking the costs.
In implementing the segregation of program management costs, actual
equipment costs will be classified as a technical cleanup cost. Labor costs
associated with the justification and approval of equipment purchases will also
be classified as a technical cleanup cost. Travel and OOC costs can be either
administrative or technical cleanup costs and should be monitored, analyzed
and reported under each discrete element.
Clerical support should be similarly segregated by cost into the specific
element supported, either administrative or technical cleanup.
Site-Specific Program Management
Program management costs, both administrative support and technical
cleanup, may be site-specific in nature. Site-specific program management is
also called project management when the activity is part of a site-specific work
plan. Where such costs can be associated with a single site, they must b«
included within the approved budget for the individual work assignment. Nota
that during contract negotiations contractors were encouraged to maximize sita-
specific program management wherever such costs could be legitimately
associated with a single site.
III. CONTRACT COST INDICATORS
Effective contract management depends on the availability of reliabto
indicators of contractor performance. This guidance establishes a number of
key indicators which will be used by regional and headquarters management m
monitoring and analyzing ARCS contract costs.
-------
The primary beneficiaries of this management data will be the managers
directly responsible for the administration and oversight of ARCS contracts.
Trends can be spotted and cost comparisons can be made to other contracts.
Manual collection of data will be required far less frequently.
All of the information required can be gathered from the ARCS Contract
Tracking (ACT) System. Because critical decisions will be based on the
information provided by these management indicators, regional personnel must
enter data in a timely, accurate, and comprehensive manner. Quarterly reports
will be utilized by headquarters and the Regions in reaching these decisions.
The following indicators are included as examples which can be used to
improve the analysis of contract costs. These indicators and others are
currently available from the ACT System. New indicators will be developed to
meet future needs for trend analyses of contractor performance. Individual
regions may likewise develop additional cost indicators to solve specific
management problems in their own regions.
Expenditures. This indicator provides basic information on total
sums actually expended. The program management data will be displayed in
total and subdivided into administrative support and technical cleanup costs.
Obligations. This indicator will show amounts obligated by work
assignment and total program management obligations. It will provide useful
information for fiscal planning purposes and should be compared to expendi-
tures to avoid excessive funding (i.e. banking money).
Administrative Support Costs vs Total Contract Cost,
Technical Cleanup Costs -vs Total Contract Costs,
Program Management Costs vs Total Contract Cost. Theee
indicators will display total costs associated with these elements as percencaf-
es of total contract cost. They will be calculated on the basis of
expenditures by region, and by contract. The objective will be to assess
relative efficiency of program management. To provide consistency
analyses, pollution liability insurance costs and equipment costs msy
segregated from other administrative and technical cleanup costs.
Administrative Support Costs per LOE Hour Delivered,
Technical Cleanup Costs per LOE Hour Delivered,
Program Management Cost p«r LOE Hour Delivered.
indicators will measure the cost-effectiveness of program
8
-------
operations. They will provide individual contract rates which can be analyzed,
compared and contrasted.
IV. COST EFFICIENCIES DURING WORK SLOWDOWN
During periods of low contract activity, support costs should be carefully
monitored. Contracting officers and project officers should take the initiative to
assure that contractors incur only absolutely essential costs. Evaluation of
contractor performance under the award fee process during these periods
should focus on the efficiency with which the contractor manages contract
support costs. To insure consistency among ARCS contracts, changes made
to required reports, deliverables or other contract activities should be coordinat-
ed with the Office of Acquisition Management (OAM) and HSCD.
Congress has mandated that the Agency achieve a national target for
program management expenditures compared to total contract expenditures for
ARCS contracts. In FY92, this target was 15%. Future targets may be
adjusted by Congressional action.
V. PROGRAM MANAGEMENT OPTIONS
One of the principal goals of ARCS is to provide incentive to the
contractors to perform in an outstanding manner. To achieve this goal, in
addition to the award fee structure of the contracts, EPA designed the
contracts to have a small base level-of-effort (LOE) with an extended option
structure. Contractors performing in a manner superior to other contractors in
a given region/zone would be rewarded with additional work and contractors
performing less well would receive correspondingly less work.
To complement this option structure for increased quantity of LOE hours,
a corresponding option structure for program management was created. Th«
difference between the two is that remedial planning options are calculated in
numbers of LOE hours and program management options were calculated a*
dollars estimated to support the delivery of the LOE hours.
Contract options for both remedial planning activities and program
management are exercised by the contracting officer at the request of the
-------
project officer. Note that ARCS contract option structures are variable
depending on the capacity of individual ARCS contracts.
The relative dollar value negotiated for each type of option is based on an
estimated labor mix and an estimated annual delivery rate of LOE. Because the
actual labor mix and annual delivery rate for each ARCS contract are unique,
the ratio between LOE options and program management options has changed
since the contracts were negotiated. It is the responsibility of the contracting
officer and project officer to analyze these changes to assure that adequate
program management support is provided while closely monitoring the overall
costs.
VI. IMPLEMENTATION GUIDANCE
Implementation of this guidance will require a change in the preparation
of supporting documentation utilized in the award fee evaluation. These
changes, addressed in detail below, should be implemented in the next
evaluation period. Implementation will also require the standardization of
selected invoice and reporting requirements among all ARCS contracts. Revised
invoices should be submitted for costs incurred in March, 1993.
A. Roles and Responsibilities
Contractors are responsible for the accumulation and categorization of
program management contract expenditures into administrative and technical
cleanup costs and for the submission of this information in monthly invoice*
through the use of the Contractor Invoice Supplemental Report for Prognm
Management provided as Attachment I to this guidance. In addition, contractor
invoices should reflect the segregation of administrative and technical cleanup
costs through the use of the two separate activity codes provided in Attach-
ment II, Technical and Administrative Costs Tracked By Activity Code.
Project Officers are responsible for reviewing and approving the
segregated costs as part of the invoice review process and for the evaluaOen
of these separate activities as part of the award fee process. In addition, Project
Officers are responsible ensuring that the contractor invoices contain the proper
activity codes provided in Attachment II and that the Contractor Invoice
10
-------
Supplemental Reports submitted reflect the same amounts for administrative
and technical cleanup services as are reflected in the invoice account coding.
Contracting Officers are responsible for the contractual implementation
of this guidance, evaluation of these separate activities as part of the award fee
process as well as conducting informal reviews not less than semi-annually to
insure that the guidance is being implemented correctly and consistently under
all ARCS contracts. A separate review will be conducted as part of the routine
Financial Management Reviews conducted by OAM.
B. Award Fee
Program management is one of the two areas under which ARCS con-
tractors are evaluated. Contracting officers prepare a Summary Evaluation
Report (SER) on contractor activity in the program management area. These
evaluations are incorporated in the final SER prepared by the project officers
to support overall recommendations to the Performance Evaluation Board (PEB).
The Fee Determination Official (FOO) determines the final amount of fee to be
awarded to contractors based upon the findings and recommendations of the
PEB.
The segregation of program management costs into administrative and
technical cleanup costs will result in a change to the supporting documentation
provided. Contracting officers and projects officers, in preparing ths«r
evaluations of contractor performance, should, address administrative and
technical cleanup costs as discrete elements in determining overall contractor
performance in providing program management activities.
Because the relative value of administrative and technical cleanup costs
may vary during each evaluation period, no specific ratio between the two
elements can be developed. The project officer, in consultation with tn»
contracting officer, will need to determine the relationship between the two
elements and incorporate that determination into the SER on program
management.
Implementation of these changes to the award fee evaluation process w*
not require a formal change to the award fee plan incorporated in the ARCS
contracts. However, contracting officers and project officers will discuss tho
changes in the program management evaluation process with their ARCS
11
-------
contractors focusing on the need to improve the tracking and control of
program management costs.
ARCS award fee plans contain general guidance on evaluating program
management activities. The following are some additional areas to be consid-
ered when evaluating the contractor:
In the area of administrative support:
Scheduling, coordinating, and executing all individual work
assignments within the region/zone.
Predicting resource requirements, properly staffing and
training personnel.
Development and adherence to the management plan,
including the health and safety plan and quality assurance/
quality control plans.
Establishing and effectively utilizing the management infor-
mation and cost/schedule monitoring systems and ongoing
analysis for costs and LOE utilization.
Maintaining good communication channels with Regional EPA
officials involved in the Superfund program as well as
responding to regional priorities in a cooperative environment.
Efficient, cost effective management of team subcontractors
and timely placement and efficient, cost effective manage-
ment of pool subcontractors with emphasis on realistic
efforts in meeting the Small Business/Small Disadvantage*)
Business Enterprises (SB/SDBE) goals specified in the
contract.
Timeliness and quality of monthly progress and financial
reports.
Timeliness and quality of invoices with particular emphasis
on the adequacy and reasonableness of invoice support
documentation.
12
-------
Compliance with all contract terms and conditions.
In the area of technical cleanup:
Effective utilization of contract lab program (CLP) and non-
CLP lab support where applicable in meeting the program
commitment.
Cost effective acquisition and utilization of equipment and
adherence to a property control system.
Timely implementation of corrective action plans affecting
multiple sites where applicable.
Timely development and modification of health and safety
plans.
Management of corporate COI issues related to the limitation
on future contracting activity.
Diligent efforts to secure non-site-specific PLI
C. Invoicing and Reporting Requirements
In order to effectively monitor costs incurred for both administrative
support and technical cleanup costs, an adjustment in the method by which a
contractor invoices program management costs must be made. The ARCS
contracts already require contractors to supply detailed cost element invoiong
in accordance with the contract clause entitled "Submission of Invc
(EPAAR 1552.232-70). The contractor is required to provide cost
support on all major cost elements such as direct labor, travel, equipment
subcontracts as well as any associated indirect costs.
On January 13, 1992, the Office of Administration and Resource*
Management (OARM) issued a memorandum signed by David O'Connor.
Director of PCMD, and Henry Longest, Director of OERR, addressing mandatory
invoice tracking elements under ACT. The memorandum provided ae an
attachment a Contractor Invoice Supplemental Report for Program Manag****
indicating the minimum invoice data elements to be reported by the contractor
This invoice supplement does not require any additional information then «
13
-------
already required by the contract and by FAR 52.232-25. As a result of the
segregation in program management however, this guidance provides revisions
to the invoice supplement contained in the January 13th memorandum. In as
much as this type of invoice reporting detail is already a contract requirement,
modifications to existing ARCS contracts will not be necessary.
The revised Contractor Invoice Supplemental Report for Program
Management is included as Attachment I to this guidance. This revised
attachment requires the contractor to provide a summary level report of
program management by cost element. Beginning with the invoices submitted
for March, 1993, the ARCS contractors will be required to use this form when
invoicing their program management administrative and technical cleanup costs.
In determining whether to report a program management cost as administrative
support or technical cleanup the contractor must follow this guidance.
Please note that the invoice for program management/administrative
support costs does not include the cost elements for Pollution Liability
Insurance (PL!), Equipment, Lab Services and Mobile Lab Services as part of the
cost elements on the administrative program management invoice. The actual
cost of purchasing any PLI (premiums), equipment, or lab/mobile lab services
as well as labor costs associated with the procurement of these goods and
services will be reported under technical cleanup costs.
Requiring the ARCS contractors to utilize the Invoice Supplemental Report
will facilitate the subsequent input of this data into the ACT system and
promote standardization and national consistency.
D. Other Implementation Guidance
Attachment II, Technical and Administrative Costs Tracked by Activity
Code, provides specific implementation instructions regarding the use by ARCS
contractors of separate activity codes within account numbers in invoicing for
administrative and technical support under the ARCS contracts. The attach-
ment also provides, a point of contact within the Superfund Accounting Branch
of the Financial Management Division to answer questions regarding the proper
use of these new activity codes.
A Guide to Program Management Cost Allocations is provided M
Attachment III to this memorandum. This will simplify the analysis of costs by
the CO and PO.
14
-------
ATTACHMENT I
CONTRACTOR INVOICE SUPPLEMENTAL REPORT
SUMMARY PROGRAM MANAGEMENT INVOICE
1 of 3
INVOICE NUMBER:
INVOICE DATE:
PERIOD START DATE:
PERIOD END DATE:
CATEGORY
PRIME LABOR COSTS
INDIRECT COSTS
G&A
OTHER DIRECT COSTS
POLLUTION LIABILITY
INSURANCE
TRAVEL
EQUIPMENT
LAB SERVICES
MOBILE LAB COSTS
TEAM SUBCONTRACTORS
OTHER SUBCONTRACTORS
BASE FEE
AWARD FEE
TOTAL * INVOICED
NOTES
BASE LABOR (STRAIGHT
SALARY WITHOUT FRINGE)
OTHER THAN G&A (INCLU-
DING FRINGE)
EXCLUDES TRAVEL, EQUIP-
MENT, LAB SVCS, & MOBILE
LABS
UNLOADED VALUE
DOES NOT INCLUDE RELO-
CATION (INCLUDED IN ODC
LINE)
UNLOADED VALUE
UNLOADED VALUE
UNLOADED VALUE
INCLUDES ALL FEES
CHARGED TO PRIME
INCLUDES ALL FEES
CHARGED TO PRIME
INCLUDES FCCM
PRIME ONLY
VALUES
-------
CONTRACTOR iNVQICE SUPPLEMENTAL REPORT
PROGRAM MANAGEMENT INVOICE
ADMINISTRATIVE SUPPORT
2 of 3
INVOICE NUMBER:
INVOICE DATE:
PERIOD START DATE:
PERIOD END DATE:
CATEGORY
PRIME LABOR COSTS
INDIRECT COSTS
G&A
OTHER DIRECT COSTS
TRAVEL
TEAM SUBCONTRACTORS
OTHER SUBCONTRACTORS
BASE FEE
AWARD FEE
TOTAL * INVOICED*
NOTES
BASE LABOR (STRAIGHT
SALARY WITHOUT FRINGE)
OTHER THAN G&A (INCLU-
DING FRINGE
EXCLUDES TRAVEL, EQUIP-
MENT, LAB SVCS, & MOBILE
LABS
DOES NOT INCLUDE RELO-
CATION (INCLUDED IN ODC
LINE)
INCLUDES ALL FEES
CHARGED TO PRIME
INCLUDES ALL FEES
CHARGED TO PRIME
INCLUDES FCCM
PRIME ONLY
VALUES
* Total must agree with total amount invoiced under activity code 9.'
-------
CONTRACTOR INVOICE SUPPLEMENTAL REPORT
PROGRAM MANAGEMENT INVOICE
TECHNICAL CLEANUP COSTS
Paoe 3 of 3
INVOICE NUMBER:
INVOICE DATE:
PERIOD START DATE:
PERIOD END DATE:
CATEGORY
PRIME LABOR COSTS
INDIRECT COSTS
G&A
OTHER DIRECT COSTS
POLLUTION LIABILITY
INSURANCE
TRAVEL
EQUIPMENT
LAB SERVICES
MOBILE LAB COSTS
TEAM SUBCONTRACTORS
OTHER SUBCONTRACTORS
BASE FEE
AWARD FEE
TOTAL $ INVOICED*
NOTES
BASE LABOR (STRAIGHT
SALARY WITHOUT FRINGE)
OTHER THAN G&A (INCLU-
DING FRINGE)
EXCLUDES TRAVEL, EQUIP-
MENT, LAB SVCS, & MOBILE
LABS
UNLOADED VALUE
DOES NOT INCLUDE RELO-
CATION (INCLUDED IN ODC
LINE)
UNLOADED VALUE
UNLOADED VALUE
UNLOADED VALUE
INCLUDES ALL FEES
CHARGED TO PRIME
INCLUDES ALL FEES
CHARGED TO PRIME
INCLUDES FCCM
PRIME ONLY
VALUES
Total must agree witntotal amount invoiced under activity code a.
-------
TECHNICAL 6 ADMINISTRATIVE COSTS TRACKED BY ACTIVITY CODE
EPA will be able to track and report the technical and
administrative contract expenses in its accounting systea through
the use of account numbers. FMD has designated activity cod* "9"
for administrative costs as defined in the guidance and activity
code "A" for technical cleanup as defined in the guidance.
Contractors should use these activity codes in the account codes
on the invoice site distribution sheets. Project Officers are
responsible for ensuring that the correct codes are used. If
there are any questions about the account codes or activity
codes, please contact the Chief, Superfund Accounting Branch, FMD
at (202) 260-9268.
11
USE ACTIVITY CODE "9" FOR ADMINISTRATIVE COSTS PORTION OF PROGRAM
MANAGEMENT
NON-SITE
ACCOUNT
NUMBER
FOR
AOMIN.
SUPPORT
3
APPN.
YEAR
TFA
PROGRAM
72
ALLOW
HOLDER
F
9
RESP
CENTS!
00
ACTIVITY
CODE
StTE/SPIU
CENT.
USE ACTIVITY CODE "A" FOR TECHNICAL COSTS PORTION OF PROGRAM
MANAGEMENT
NON-SITE
ACCOUNT
NUMBER
FOR
TECHNICAL
SUPPORT
3
1
APPN.
YEAR
TFA
PROGRAM
72
ALLOW
•WLDEfl
F
A
RESP.
CENltfl
00 i
*CTMn
CODE
SITE/SPILL
CENT.
o 8TH DIGIT REPRESENTS ACTIVITY CODE.
o 9TH AND 10 DIGIT REPRESENTS SITE NUMBER. FOR ADMINISTRATIV1
OR TECHNICAL CLEANUP, USE "00" SITE, UNLESS THE ACTIVITY
BE TRACED TO A SITE SPECIFIC SSID.
O CONTACT THE SUPERFUND ACCOUNTING BRANCH IN FMD AT
(202) 260-9268.
-------
ATTACHMENT III
GOIDB TO PROGRAM MANAGEMENT COST ALLOCATIONS
The purpose of this guide is to assist the Regional CO* and POs in evaluating
the program management costs for segregation into administrative or technical
categories.
Currently, program management costs are tracked and reported on the
basis of an aggregate amount. In order to improve the tracking/ reporting and
analysis of these costs, program management costs will be segregated into
administrative and technical cleanup costs.
To assist in improving the tracking and monitoring of these costs, the
following definitions have been developed to segregate the program manage-
ment costs into administrative and technical activities. Examples cannot be
provided for every program management cost you may encounter, however, the following
may assist in your determination.
A. Administrative Support Costs are non-site-specific costs necessary for
managing the overall contract regardless of the amount of specific site work. The
following are examples of administrative support costs:
Contract Mobilization (development of field equipment needs and
inventory control guidelines)
Personnel Management
Preparation of Monthly Reports (Progress and Financial)
(The compilation of site-specific progress and financial
data should be charged site-specifically)
Meetings (concerning contract operations)
Financial Accounting Activities
Invoicing/Voucher Preparation
Computer Support
Updates to Management, Health and Safety, and Quality Assurance/Control
Plans
Routine Communication/Coordination between EPA/Contractor
Audit Support
Preparation of Contractor's Program Management Summary Evaluation
Reports (SSR)
Team Subcontractor Management Activities (Pool subcontract management
activities should be charged to remedial planning.)
Maintenance of Corporate Conflict of Interest Plan and System Support
Labor Standards Compliance (Service Contract Act/Davis Bacon Act)
Annual Contract close-Out Activities
Clerical Activity in Support of Administrative Functions
-------
-2-
Other Administrative Activities (library and other reference activities,
annual allocation reporting, non-site-specific record* retention
activities, etc.)
Staffing - Bach contractor proposed staffing positions necessary to
perform program management functions. Specific staffing plans were
negotiated prior to contract award. The final approved staffing plans
can be found in the Confirmation of Negotiations in the pre-award
contract file. These staffing positions are not part of the labor
provided under the level of effort capacity of the contract; they are a
unique labor pool available to provide specific program management
functions. Since each of the contractors' staffing plans contain unique
staff descriptions, the examples of staffing shown for administrative
and technical cleanup are used only to indicate staff activities and not
specific titles; they are not provided to indicate staffing patterns for
any contract. They are sample categories of disciplinary expertise and
management oversight necessary for the contract operation. However, any
activities performed by the program management staff for site specific
activities should be charged to remedial planning activities.
Examples of staffing that might be used to accomplish administrative
activities are:
Program Manager Reports Manager
Accountant Subcontract Manager
Contract Administrator Secretary/Data Entry Clerk
B. Technical Cleanup Costs are non-site-specific costs for technical
activities that cover multiple sites, and are related to the site-specific work
conducted under the contract.
Most technical cleanup costs under program management are incurred as
a result of requirements from multiple sites. Thus the amount of these costs
will vary with the number of sites assigned under the contract.
Examples of technical cleanup activities are provided to assist in
determining which activities to include in the technical support category.
Again, this is not a definitive catalogue of these activities.
Equipment/Warehouse Management (Including cost of equipment main
calibration and inventory)
Meetings concerning technical issues relevant to multiple work
assignments
Health and Safety
Quality Assurance/Quality Control
Technical Guidance
, Pollution Liability Insurance (Site-specific PLI should be invoi
as a site-specific cost)
Mobile Lab
Training (Requires PO and CO approval)
-------
-3-
LImitation on Future Contracting
Preliminary Conflict of Interest investigations for potential work
assignmenta
The following are examples of staffing that might be used to accomplish
technical support activities:
Program Manager Sample Coordinator
QA Officer Analytical Coordinator
Contracts Manager Health and Safety Officer
Equipment Manager Clerical Support for these activities
Health and safety, QA/QC and coordination of CLP/analytical services
should be charged to site-specific activities when possible.
C. Activities Containing Components of Both Administrative and
Technical Cleanup Costs
The following activities may fall into both administrative and technical
categories depending on the nature of the activity:
Subcontracting (e.g. Basic Ordering Agreements) - Any subcontracting
activities that are not site specific will be classified as an
administrative support cost.
Standard Operating Procedures (SOP) which deal with overall contract
administration will be classified as an administrative support cost.
SOPs developed for multiple site work will be classified as a non-site
specific technical cleanup cost.
Equipment/Travel/Other Direct Costs (OOC)/Clerical Support
ODC, equipment, and travel pools for program management should be
allocated between administrative support and technical cleanup area* for
purposes of tracking the costs.
In implementing the segregation of program management costs, actual
equipment costs will be classified as a technical cleanup cost. Ltssr
costs associated with the justification and approval of equipment
purchases will also be classified as a technical cleanup cost. Trawl
and OOC costs can be either administrative or technical cleanup coe«e
and should be monitored, analyzed and reported under each discrete
element.
Clerical support should similarly be segregated by cost into the
specific element supported, either administrative or technical cleao»«y
Site-Specific Program Management - Program management costs, both
administrative support and technical cleanup, may be site-specific in nature.
Site-specific program management is also called project management when the acti
is part of a site-specific work plan, where such costs can be associated wit* a
single site, they must be included within the approved budget for the individual
work assignment. Note that during contract negotiations contractors were encow*e«je
to maximize site-specific program management wherever such costs could legitlmete.r
be associated with a single site.
-------
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-------
APPENDIX G
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C. 20460 '
OFFICE Of
ADMINISTRATION
FR I 0 1332 AND RESOURCES
r_ u i^<_ MANAGEMENT
MEMORANDUM
SUBJECT: Public Voucher Validation Procedures for Regional Contracting Officers
FROM: David J. O'Connor, Director fJ/flMd ^J ' £
Procurement and Contracts Management/Division (PM-214-F)
TO: See Below
The purpose of this memorandum is to provide guidance and outline procedures
for performing public voucher validation reviews for EPA Regional Contracting Officers.
The attached procedures (Attachment A) apply to EPA's Alternative Remedial
Contracting Strategy (ARCS), Emergency Response Cleanup Services (ERCS), and other
types of contracts with cost-reimbursable provisions. This guidance is prepared in
response to the Administrator's Task Force on Implementation of the ARCS which
recommended spot checks of contractor vouchers. It is important that the reviews are
performed using a consistent approach which is coordinated with our invoice review,
financial monitoring and audit processes. As with any new procedure, certain
implementation problems may arise, and we will work with you to resolve them.
These reviews, in combination with other financial management tools such as
financial monitoring reviews and voucher audits (Attachment B) that will be requested
from the Defense Contract Audit Agency and the Office of Inspector General will result
in better managed contracts. It is important for all of us to work together and to
communicate the findings from these validation reviews to the Headquarters Financial
Analysis Section. The results of these public voucher validation reviews will be very
beneficial in planning and performing financial monitoring reviews, annual incurred cost
audits and voucher reviews performed by the cognizant auditor.
Pnnfed on Recycled Paper
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If you have any questions regarding this issue or the following procedures, please
call Dale Roberson, Chief of the Financial Analysis Section at (ITS) 260-3194.
Attachments
Addressees;
Hillary Kelley, Chief, Superfund Contracts, Region I
Ted Riverso, Chief, Contracts Section, Region H
Frank Snock, Chief, Superfund Financial Management Section, Region m
Jane Singley, Chief, Contract Negot.,and Mgt. Section, Region IV
Patricia Bamford, Chief, Contracts Section, Region V
Shirley Bruce, Chief, Procurement Section, Region VI
Alma Eaves, Director, Superfund Contracts Office, Region Vn
Martha Nicodemus, Chief, Grants Management Branch, Region VID
Tom Warner, Chief, Contracts Management Section, Region IX
Jonell Allamano, Chief, Support Services, Region X
William Topping, Chief, Regional Contract Placement Branch, (FM-214-F)
Pat Patterson, Staff Chief, Superfund/RCRA Program Management Staff (PM-214-F)
William Wilfong, Chief, Superfund/RCRA Headquarters Operation Branch (PM-214-F)
Sue Anderson, Acting Chief, Regional Contract Management Branch (PM-214-F)
Tom McEntegart, Chief, Procurement Operations Branch (PM-214-F)
Ilka- Joiner, Acting Superfund Acquisition Program Manager (PM-214-F)
Joan Barnes, Contract Operations Review and Assessment Staff
Ken Ayers, Design and Construction Management Branch
cc: Assistant Regional Administrators Patricia L. Meaney, Region I
Herbert Barrack, Region n William J. Wisnkwski, Region HI
Joseph R. Franzmathes, Region IV Robert L. Springer, Region V
William Hathaway, Region VI Susan C. Gordon, Region VH
Kerrigan G. Clough, Region VHI Nora L. McGee, Region IX
Barbara F. McAllister, Region X Mark KeUerman, CINN
John Gherardini Mike Bower, RIP
Edward Hanky John Chamberlin
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ATTACHMENT A
PAGE 1 OF 3
PUBLIC VOUCHER VALIDATION REVIEW PROCEDURES
The following is an outline of procedures and guidelines for Contracting Officers
or their representatives to follow when performing a public voucher validation review
under EPA's ARCS, ERCS and other contracts with cost-reimbursement provisions. The
primary scope of the review involves limited testing of costs on invoices to ensure that
billings are prepared in accordance with contractual terms and are adequately supported
with accounting books and records. The extent of the review should depend upon the
invoiced amount, timeliness, and degree of known issues or concerns as well as the
reviewer's judgement and familiarity with the contractor's billing operations.
In those cases where the reviewer is satisfied that the contractor's cost
documentation and records are reliable, it will generally be sufficient to limit the
verification to the procedures listed. In other instances, where the reviewer or EPA has
no prior experience with the contractor, or situations arise where there is reason to
question the validity or accuracy of the contractor's public voucher, the reviewer should
notify the Financial Analysis Section who will request an audit of the contractor's
accounting system and billing procedures. In addition to these voucher reviews, other
types of audits and reviews are being performed as shown on Attachment B. All
requests for audits should be sent to EPA's Chief of the Financial Analysis Section
located at Headquarters.
Review procedures for public voucher validation reviews are as follows:
OBJECTIVE
The objective of the review is to periodically ensure that billings are made in
accordance with contractual terms and are adequately supported The objective of the
voucher validation review differs from the current monthly voucher review and approval
process performed by Project Officers and Contracting Officers. A major difference is
the depth of the reviews. For marimnm coverage it is recommended that these reviews
be performed on-site at the contractor's offices to verify costs to contemporaneously
available source documents and accounting
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ATTACHMENTA
PAGE 2 OF 3
records (i.e. invoices, labor distribution, payroll register, job cost ledgers, accounts
payable, vendor Tiles, subcontract files, etc.). However, in many cases the reviews will
need to be performed as desk reviews using information mailed/faxed to the reviewer
due to lack of travel funds or available staff resources.
TIMING
These reviews should be performed when questions arise from the Project Officer
or from other sources which suggest the need for validating invoiced costs and other
sources of invoice review are not available (financial monitoring reviews, voucher audits
by DC A A or OIG, current annual incurred cost audits, etc.).
SELECTION OF VOUCHERS
1) One or more public vouchers per contract should be selected for review. A
sample of costs from all cost elements where amounts billed are material
should be reviewed.
2) The public vouchers selected for review should not be the same vouchers
reviewed by the Financial Analysis Section (FAS) in the financial
monitoring report or DCAA's voucher review requested by FAS. A copy of
reports from these reviews will be sent to regional CO's and PO's within 1
to 2 months after the review. CO's should send copies to the PO's.
SCOPE OF REVIEW
After invoices for review have been selected, but prior to invoice review, special
considerations should be given to reviewing transactions involving: 1) any unusual
items being claimed or any costs that stick out as unusual based on the scope of work
being performed, 2) high dollar items, and 3) testing transactions from each cost
element from multiple WA's.orDO's. In reviewing the reasonableness of charges, the
reviewer is not expected to know exact market values of various direct costs; however,
past experience and common sense can assist in confirming the reasonableness of
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ATTACHMENT A
PAGE 3 OF 3
charges for each cost element examined. Invoices are to be reviewed on a sample basis
only; it is not the intent of these procedures to suggest that a 100% review is needed.
We have identified specific areas and line items that should be examined when reviewing
an invoice.
REPORTING
All findings or problems discovered as a result of the voucher validation review
should be reported by or thru the Contracting Officer to the Chief, Financial Analysis
Section (FAS). The CO should also notify the Project Officer of findings and any action
required during the monthly voucher payment approval process.
Actions taken or proposed by the CO should be included in the report along with
a time frame for resolution. Cross cutting issues affecting multiple contracts may be
referred to the Financial Administration Contracting Officer (FACO) through the Chief,
FAS. Questions regarding these procedures should be referred to the Chief of the
Financial Analysis Section. Copies of the report and related documents must be
maintained in the official contract file.
DOCUMENTATION
Attachment A is a review checklist which should be used to document
performance of the review. The completed checklist along with the review report and
any workpapers should be retained together as part of the contract file.
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CHECK LIST FOR VOUCHER VALIDATION REVIEW
CONTRACTING
CONTRACTOR NANS! PROGRAM:
CONTRACT NO.: REGION:
REVIEWERS NAME: REVIEW COMPLETION DATE:
VOUCHER NUMBER(8) REVIEWED:
VOUCHER PERFORMANCE PERIOD(8):
STEP
PERFORMED REVIEWERS
fY/N) INITIALS DATE
REVIEW PROCEDURES
1) Review the public voucher for
completeness (i.e. company name, total
costs, signatures, dates, contract
number, period of performance, etc.) and
determine if costs are presented in the
format required by the contract and
billed in accordance with government
regulations. Also determine the
following:
a. Are individual cost elements
adequately shown?
b. Are cumulative costs
adequately shown?
c. How often are vouchers submitted
for payment?
d. Is there evidence in the
contract file that the voucher
was reviewed and approved by the
PO?
2) Ascertain that claimed costs have
been incurred, or actually paid,
dependent upon the terms of the payment
clause of the contract. Also determine
if the contractor maintains adequate
supporting records for all claimed
costs.
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CONTRACTOR MAKE:
CONTRACT NO.
STEP
PERFORMED
(Y/N1
REVIEWERS
INITIALS
DATE
3) Make a quick check of the
mathematical accuracy of the public
voucher.
4) verify that billed costs were
incurred within the period of
performance authorized under the
contract/delivery order/etc.
5) Review cumulative costs claimed/ to
assure that the amount claimed does not
exceed the total estimated cost
(excluding fee) authorized under the
contract, WA or DO if appropriate.
6) Review and verify that indirect
costs claimed are being billed at
contractually established rates. Assure
that you have the latest rate agreement
issued by the Cost Policy and Rate
Negotiation Section for the contractor.
7) Verify that the fee billed is in
accordance with contractual provisions
and that fee withheld complies with
requirements of the contract.
8) Review any special contract
provisions for payment restrictions such
as ceilings/ etc.
9) Review and determine if site
specific costs are correctly accumulated
and billed.
10) Review and determine whether there
are or has been a history of suspended
or disallowed billings/ if so/ what is
the current status?
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CONTRACTOR NAME: CONTRACT NO.:
LABOR
Specific emphasis should be given to labor costs. The
reviewer should assure answers to the following questions.
STEP
PERFORMED REVIEWERS
(Y/N) INITIALS DATE
1) Will the total LOE be exceeded
before the contract performance period
expires?
2) Did the contractor charge premium
for overtime worked? Was it authorized
by the Contracting Officer in advance?
Was it charged consistent with the
contractor's established practice?
3) Are the hours charged within the
estimates specified in the work
plan/delivery order?
4) Do the employees billed meet the
contract requirements for the category
in which they are billed? (You can ask
the contractor for specific employee's
resumes and compare them to the labor
category requirements)
5) Does the labor mix appear to be
appropriate.
6) Are labor hours and rates supported
by timesheets and the payroll register?
7) Are there any dollars being charged
to direct labor that are not being
charged to LOE? (clerical & mgmt)
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4
ONTRACTOR MAKE: CONTRACT HO.:
TRAVEL
STEP
PERFORMED REVIEWERS
(Y/N) INITIALS DATE
1) Determine that travel expenses are
adequately justified by supporting
documentation and were related
specifically to a contract requirement.
2) Determine if the sample travel
expenses reviewed comply with
contractual limitations, the
contractor's policies and the Government
Travel Regulations (GTR).
OTHER DIRECT COSTS
In the area of ODC's the reviewer must thoroughly review
supporting documentation to ensure that all ODC's sampled are adequately
upported and do not exceed any contract dollar ceilings. Also review any
subcontract ODC's for ceiling limitations. In addition determine the
following:
STEP
PERFORMED REVIEWERS
(Y/N) INITIALS DATE
1) Carefully sample any charges in the
miscellaneous and transactions in other
categories.
2) Ascertain whether the contractor
charges similar costs direct to all
other clients.
3) Determine if any expenses that
should have been charged to overhead
were charged as ODC expenses.
4) Validate direct purchases of
supplies, materials, equipment, etc. and
determine whether property has been
purchased and properly approved under
the contract.
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ONTRACTOR NAME:
STEP
PERFORMED
(Y/N)
REVIEWERS
INITIALS
DATE
CONTRACT NO.:
5) Review the purchase document
(purchase order, etc.) to see who
authorized the purchase.
6) Compare the purchase document with
the vendor's invoice. This should then
be compared with the contractor's
voucher to EPA. Determine the reason
for any differences.
SUBCONTRACTS
STEP
PERFORMED
(Y/N)
REVIEWERS
INITIALS
DATE
1) Verify a sample of subcontract costs
claimed. Ascertain that items and
services claimed were purchased directly
for the contract, verify that
subcontractor's costs are properly shown
on the prime contractor's vouchers.
Assure that the contractor monitors
subcontractor costs by cost element as
well as by entity. Assure that indirect
cost rates on subcontracts are
periodically adjusted to reflect actual
rates incurred. Validate support for
subcontractor invoices.
2) Assess the adequacy of the Prime
Contractor's monitoring of the
performance of subcontractors.
3) Determine whether the subcontractors
sampled have been properly approved by
the Contracting Officer or appropriately
notified to the CO in accordance with
the terms of the contract. Review the
contract agreement between the prime and
subcontractor. Be aware of any
potential conflicts of interest.
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APPENDIX H
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. O.C. 20460
SEP 2 1 see
OFFICE OF
ADMINISTRATION
AND RE SOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: FINAL Instructions and Procedures for Implementing ARCS
Annual Close-Outs
FROM: William R. Topping, Acting Associate Director,
for Superfund (PM-214-F)
TO: Addressees
The final instructions and procedures for implementing the ARCS Annual Close-Outs
are attached. A draft of this final document was previously distributed for comment in a
memorandum dated July 25, 1992. Comments received were incorporated into this final
document as appropriate.
The ARCS contractors shall be requested to submit a separate claim in accordance
with the instructions and procedures, and revised contract clause attached, for each
completed contractor fiscal year from the inception of each contract. Since more than one
fiscal year has already expired on all of the ARCS contracts, this will result in up to several
claims to be submitted originally. These claims should be submitted by the ARCS
contractors to the respective Contracting Officers no later than January 30, 1993. Therefore,
it is necessary for each Contracting Officer to modify/remodify the ARCS contracts and
distribute this policy document to every ARCS contractor as soon as possible. Please assure
that all ARCS contracts are modified to include the revised clause no later than October 30,
1992. If you are unable to meet this date, please submit a justification and expected
completion date to Sue Anderson, by October 20, 1992, on a contract by contract basis.
It is understood that the modification/remodification of the ARCS contracts to
incorporate the revised ARCS annual close-out clause (See Attachment IB foi the clause to
be incorporated by modification) and the efforts involved by the ARCS Contracting Officers,
the Financial Analysis Branch, and the ARCS Contractors will require additional effort.
However, it is consistent with EPA's objective to provide stronger contract cost surveillance
on a more current basis.
Pnrt«d an oa
*•«: 75% •
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Any questions on this guidance should be directed to Thomas DeHoff (202) 260-6427
or Dale Roberson (202) 260-3194, of EPA's Financial Analysis Branch (FAB).
Attachments
Addressees:
Sue Anderson, Acting Chief, Regional Contract Management Branch (PM-214-F)
Ed Murphy, Chief, Procurement Policy Staff (PM-214-F)
Hillary Kelley, Chief, Superfund Contracts, Region I
Ted Riverso, Chief, Contracts Section, Region II
Frank Snock, Chief, Superfund Financial Management Section, Region III
Jane Singley, Chief, Contract Negot., and Mgt. Section, Region IV
Patricia Bamford, Chief, Contracts Section, Region V
Shirley Bruce, Chief, Procurement Section, Region VI
Alma Eaves, Director, Superfund Contracts Office, Region VII
Martha Nicodemus, Chief, Grants Management Branch, Region Vin
Tom Warner, Chief, Contracts Management Section, Region IX
Jonell Allamano, Chief, Support Services, Region X
Bill Topping, Acting Assoc. Director of Superfund (PM-214-F)
Scott Fredericks, Design and Construction Management Branch
Ika Joiner, Superfund Acquisition Manager
Debbie Dietrich, Director, Emergency Response Division
Gerald Clifford, Director, Hazardous Site Control Division
Larry Reed, Director, Hazardous Site Evaluation Division
Joan Barnes, Director, Contract Operations Review and Assessment Staff
John Walsh, Chief, Financial and Compliance Audit Unit, OIG
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ATTACHMENT 1
Alternative Remedial Contracting Strategy
(ARCS Contracts)
Instructions and Procedures for Implementing
the Annual Close-Outs
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BACKGROUND AND PURPOSE
The Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (CERCLA), as amended, under Section 9619, Response Action Contractors
(CERCLA), Section 119 addresses the subject of release or threatened release of hazardous
substances, pollutants, or contaminants by any potentially responsible party who, as
determined, will be held responsible ultimately for reimbursement to the Government for the
costs of the complete clean-up of hazardous waste sites.
In order to achieve this objective, a number of EPA contracts have been awarded,
which have been designated Alternative Remedial Contracting Strategy (ARCS) Contracts, to
provide the remedial site clean-up response of selected uncontrolled hazardous waste sites.
The ARCS contracts are cost reimbursable level of effort contracts with a potential
performance period of 10 years. In order for EPA to improve its management of the ARCS
contracts for this extended performance period, the contracts will be incrementally closed-out
henceforth on an annual basis, or as currently as possible, in accordance with EPA OARM
Memorandum dated December 22, 1989, Subject: Incremental Close-out of ARCS
Contracts, and the FAR class deviation of Clause 52.216-7, "Allowable Cost and Payment,"
Paragraph (h), Incremental Settlement of Allowable Costs, incorporated in the ARCS
contracts (See Attachment 1A). This clause has now been revised as shown in Attachment
IB.
CONTRACTOR REQUIREMENTS AND PROCEDURES
SUBMISSION OF ANNUAL COSTS CLAIMED
Since dissemination of the FAR clause deviation to all ARCS Contracting Officers in
the ten (10) Regions, all ARCS contracts awarded either have been modified or should be
modified expeditiously in conformance with the approved class deviation clause specifying
annual close-outs of total costs and fee claimed for each completed fiscal year of the specific
ARCS contract.
Each ARCS contractor is required to submit, to the applicable EPA Contracting
Officer, no later than 150 days from the end of each contractor fiscal year end for the
duration of each ARCS contract, a schedule of direct and indirect costs claimed for each
fiscal year. The schedule to be submitted will be entitled Summary of Contract Costs
Claimed For FYE . 19XX (See Attachment 1C). This schedule details the direct and
indirect costs claimed by cost element and applicable base and award fee for the subject
fiscal year. The format of this schedule should be adjusted as needed to reflect each cost
element recognized by the contractor's accounting system and the contract. It is further
broken down by program management and remedial costs claimed. The contract cost data in
this schedule should match that included in the contractor's Incurred Cost Submission due
within 90 days from each contractor fiscal year end.
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Because EPA accounts for each ARCS work assignment separately, it will be
necessary for the contractor to also provide fiscal year contract costs claimed by cost element
by work assignment. Therefore, it will be necessary for the contractor to provide a
supporting schedule to the Summary of Contract Costs Claimed for FYE . 19XX
(Attachment 1C) which details the contract costs claimed by cost element and further by
work assignment (See Attachment ID for the basic format).
In addition to the schedule of costs claimed under the contract, at the contract and
work assignment level, the contractor must also submit, simultaneously, a schedule entitled
Contract Billing Summary For FYE . 19XX (See Attachment IE) which summarizes
contract costs and fee billed by voucher number for the subject contractor's fiscal year.
Where variances exist between claimed/booked amounts and those amounts already
billed, the contractor shall include a fully documented reconciliation, which outlines, clearly,
the description and amounts of all components of the variance by cost element and by work
assignment. (See the bottom of Attachment 1C and ID).
TIMING ISSUES
^ .
The contractor's fiscal year claim shall be consistent with the contractor's Incurred ' '.. >
Cost Submission and consist of all costs incurred and recorded in the subject fiscal year, i
(which is required by the FAR contract clause 52.216-7(d) Allowable Cost and Payment - J^1'
Final Indirect Cost Rates). Where the prime contractor has received subcontractor invoices
by prime contractor fiscal year end, the subcontractor costs shall be included in the prime ^
contractor's claim. Subcontractor invoices that are not received by the prime contractor by v^'
fiscal year end, should be recognized as incurred/claimed costs of the following fiscal year. *
\'
The variance between billed indirect cost rates and the unaudited actual rates claimed
for the subject fiscal year represents a claim for the fiscal year in which authority to bill the
variance is given under the terms of the contract. The billing of any difference between the '
claimed and negotiated costs of a prior year is a claim for the fiscal year in which the billing \ >
adjustment is made.
BILLING FOR PRIOR FISCAL YEAR ADJUSTMENTS
Any invoices for prior year adjustments should be submitted on a separate invoice
from current monthly costs. The separate invoice should identify the appropriate time period
for which the costs are applicable and contain an explanation and any supporting documents
that support the occurrence of the event causing the adjustment. The invoice should be
numbered and show current and cumulative costs by cost element similar to current period
invoices. Accordingly, a separate public voucher should be submitted for billings related to
prior year indirect rate variances, i.e., where there are differences between a prior year
claimed indirect rate and the negotiated indirect rate. A copy of the executed EPA Indirect
Rate Agreement should be attached to the invoice.
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RELEASE STATEMENT
After an audit of the direct and indirect costs claimed for the subject fiscal year has
been performed by the cognizant audit office, and the costs have been negotiated by the
appropriate EPA Contracting Officer, the ARCS contractor will be required to submit a
Release Statement (EPA Form 1900-6) which will release the Government of liability of
payment for additional costs claimed in the subject fiscal year. The total release amount will
be the equivalent to the contractor's claimed amount for the subject fiscal year after adjusting
for any questioned costs sustained as a result of the audit and negotiation process. The
Release Statement will also list any estimated claims or items not settled/released for which
the EPA is not released from liability. However, since the release statement submittal will
take place after the audit and negotiation process, generally several fiscal years later, any
unknown or unsettled cost items should be minimal.
EPA PROCEDURES & RESPONSIBILITIES FOR PROCESSING
OF ANNUAL CLAIMS
It will be the responsibility of the Contracting Officer to assure that the ARCS
contractor is aware of the requirements of this document and submits annual claims as
required by the contract clause.
REVIEW OF CLAIM
The Contracting Officer, after receipt of the contractor's claim, shall review the claim
for completeness and to assure that the Summary of Contract Costs Claimed for FYE t
19XX. at the contract and work assignment level, and the Contract Billing Summary are
included along with any necessary reconciliations and that the documents submitted are
complete, are consistent with each other, and that any necessary contractor, Contracting
Officer or Project Officer explanations or concerns are identified and attached. Once the
Contracting Officer is satisfied with the contractor's claim, the Contracting Officer should
forward the claim along with a request for audit to the Chief, Financial Analysis Branch
(FAB).
After receipt of the contractor's claim from the Contracting Officer, the Financial
Analysis Branch will review the claim to assure that the contractor's schedule of Summary of
Contract Costs Claimed For FYE . 19XX is acceptable. If the data in the contractor's
schedule is not in the appropriate format (See Attachment 1C, ID, and IE), the FAB will
advise the Contracting Officer and contractor to resolve such problems. The FAB will
compare the schedules submitted for consistency with the Contractor's Incurred Cost
Submission.
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If the annual direct and indirect Incurred Cost Audit for the fiscal year has not been
requested by the Cost Policy and Rate Negotiation Branch (CPRNB), when the contractor's
claim is received by FAB, the FAB will coordinate an audit of the claim with the CPRNB.
If the CPRNB has already issued the direct and indirect incurred cost audit request for the
subject fiscal year, the FAB will issue a supplemental request to the cognizant audit office
which will include the contractor's fiscal year claim and appropriate audit instructions.
RESOLUTION OF AUDIT RESULTS
After receipt of the audit report by the CPRNB, they will determine which cost issues
are to be resolved/negotiated by the Financial Administrative Contracting Officer (FACO).
The audit report will be transmitted to the Contracting Officer by the FAB identifying which
questioned costs must be settled by the Contracting Officer and also identifying which
questioned costs will be settled by the (FACO).
The (FACO) will negotiate the indirect costs and any direct costs that are not contract
specific in nature. An example of such a direct cost would be a computer billing rate applied
to all cost objectives. The Contracting Officer will be responsible for negotiating all other
direct costs. The Contracting Officer and/or FACO should resolve any questioned direct or
indirect costs immediately, as any questioned costs will be in the EPA IG's Audit Tracking
System. The resolution of the questioned contract costs must be resolved by the Contracting
Officer and FACO within 150 days along with a transmittal to the FAB, detailing the
disposition of the audit report and including a Summary of Negotiations and appropriate
correspondence reflecting the negotiated cost for the year. The Contracting Officer will also
be responsible for providing the Management Audit Tracking System form summarizing the
disposition of questioned costs within the 150 days.
BILLING FOR NEGOTIATED COST ADJUSTMENTS
After the costs have been negotiated by the responsible official, the contractor may
bill (debit or credit) on a separate invoice for any variances between claimed and negotiated
costs related to the applicable fiscal year costs as authorized by the Contracting Officer. See
BILLING FOR PRIOR FISCAL YEAR ADJUSTMENTS above.
As discussed above under RELEASE STATEMENT, the contractor will submit a
Release Statement to the Contracting Officer after the negotiation of direct and indirect costs
has been completed. The Release Statement must be reviewed for accuracy and
reasonableness by the Contracting Officer, and to assure that it reconciles to the contractor's
Summary of Contract Costs Claimed for FYE . 19XX. and to the negotiated cost amounts
for the year. Any list of estimated/unsettled cost items outlined in the contractor's Release
Statement must be reviewed for reasonableness by the Contracting Officer. After the Release
Statement has been fully executed, the subject fiscal year will be considered closed. A copy
of the Release Statement and any correspondence applicable to the release should also be sent
to the FAB by the Contracting Officer for follow-up audit considerations.
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ATTACHMENT IA
PAGE 1 OF 2
(h) Incremental Settlement of Allowable Costs. (1) The Government and the Contractor
intend that annual final determination be made on allowable costs of this contract on
as current a basis as possible. In order to meet this objective, the Contractor shall,
within 150 days after the expiration of each of its fiscal years or by a later date
approved by the Contracting Officer, submit to the Contracting Officer a fiscal year
completion voucher, prepared in the format required by the clause entitled
"Submission of Invoices" (EPAAR 1552.232-70). The voucher shall set forth the
actual allowable costs incurred during the fiscal year for which reimbursement is
claimed under the contract. Following receipt of the fiscal year completion voucher,
the Contracting Officer shall request from the cognizant audit activities audits of the
costs claimed by the Contractor, and where appropriate, by its subcontractors.
(2) Within a reasonable time after receipt of the audit report (including any audits
of subcontractor), the Contracting Officer shall determine the allowable costs
for each fiscal year. If the Contractor has not reached a final agreement with
all of its subcontractors for the fiscal year, or other pending claims from third
parties remain unresolved, the determination will specifically identify cost
areas not covered. Within ninety days after these pending claims are resolved,
the Contractor shall submit to the Contracting Officer a final claim. The
Government shall make a written final determination on these costs.
(3) After the Government determination of the total allowable costs for each fiscal
year, but before final payment, the Contractor shall provide to the Contracting
Officer, the following for the period covered by the determination:
(i) An assignment to the Government, in form and substance satisfactory
to the Contracting Officer, of refunds, rebates, credits, or other
amounts (including interest, if any) properly allocable to costs for
which the Contractor has been reimbursed by the Government under
this contract; and
(ii) A release discharging the Government, its officers, agents, and
employees from all liabilities, obligations, and claims arising out of or
under this contract, except -
(A) Specified claims stated in exact amounts or in estimated amounts when
the exact amounts are not known;
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ATTACHMENT 1A
PAGE 2 OF 2
(B) Claims (including reasonable incidental expenses) based upon liabilities
of the Contractor to third parties arising out of the performance of this
contract; provided, that the claims are not known to the Contractor on
the date of the execution of the release, and that the Contractor gives
notice of the claims in writing to the Contracting Officer within 6 years
following the release date or notice of final payment date, whichever is
earlier; and
(C) Claims for reimbursement of costs, including reasonable incidental
expenses, incurred by the Contractor under the patent clauses of this
contractor, excluding however, any expenses arising from the
Contractor's indemnification of the Government against patent liability.
(4) The Contractor shall made annual final cost determinations on cost
reimbursement subcontracts, whenever practicable.
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ATTACHMENT IB
PAGE 1 OF 2
INCREMENTAL SETTLEMENT OF ALLOWABLE COSTS (REVISED)
Annual Settlement of Allowable Costs. (1) The Government and the Contractor
intend that annual final determination be made on allowable direct and indirect costs of this
ARCS contract on as current a basis as possible. In order to meet this objective, the
Contractor shall, within 150 days after the expiration of each of its fiscal years, submit to the
Contracting Officer a summary of the direct and indirect costs claimed, by cost element, for
the subject contractor's fiscal year. The Contractor, in addition to providing claimed
contract costs by cost element, must provide a supporting schedule which details the claimed
costs by cost element and by work assignment. It is also necessary for the contractor to
provide with the above schedules, a billing summary for the fiscal year which outlines the
cost and fee billed by individual voucher. These schedules shall .be prepared in accordance
with the ARCS Instructions and Procedures for Implementing the Annual Close-Outs. The
ARCS annual claim and supporting schedules shall set forth the unaudited actual allowable
costs incurred during the fiscal year for which reimbursement is claimed under the contract.
Following receipt of the fiscal year claim, the Contracting Officer shall request, through
EPA's Financial Analysis Branch (FAB) an audit of the direct and indirect costs claimed by
the Contractor, and where applicable, by its subcontractors.
(2) After receipt of the direct and indirect cost audits of the contractor and any
applicable subcontractors, the Financial Administrative Contracting Officer (FACO) within
the Cost Policy and Rate Negotiation Branch (CPRNB) will negotiate the indirect costs and
any direct costs that are not contract specific in nature. Negotiation of any contract specific
direct costs will be the responsibility of the Contracting Officer. The Contracting Officer
and/or FACO will resolve any questioned direct or indirect costs within 150 days if possible,
or as soon thereafter as practicable.
(3) After the Government's determination of the total allowable costs for each fiscal
year, the Contracting Officer will authorize the contractor to invoice for the amount of any
difference between negotiated and billed costs. The Contractor shall then provide to the
Contracting Officer the following for the period covered by the determination:
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ATTACHMENT IB
PAGE 2 OF 2
(i) An assignment to the Government, in form and substance satisfactory to
the Contracting Officer, of refunds, rebates, credits, or other amounts
(including interest, if any) properly allocable to costs for which the Contractor
has been reimbursed by the Government under this contract; and
(ii) a release discharging the Government, its officers, agents, and employees
from all liabilities, obligations, and claims arising out of or under this
contract, except
a) Specified claims stated in exact amounts or in estimated
amounts when the exact amounts are not known.
b) Claims (including reasonable incidental expenses) based upon
liabilities of the Contractor to third parties arising out of the
performance of this contract; provided, that the claims are not
known to the Contractor on the date of the execution of the
release, and that the Contractor gives notice of the claims in
writing to the Contracting Officer within 6 years following
notice of final payment under the contract.
c) Claims for reimbursement of costs, including reasonable
incidental expenses, incurred by the Contractor under the patent
clauses of this contract, excluding, however, any expenses
arising from the Contractor's indemnification of the Government
against patent liability.
(4) The Contractor shall make annual final cost determinations on cost
reimbursement subcontracts, after obtaining approval for the proposed
settlement by the Contracting Officer. Materiality of the claim and evidence
of the reliability of the subcontractor's accounting system should be considered
during the decision making process.
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ATTACHMENT 1C
SUMMARY OF COSTS CLAIMED FOR FYE XX
Contractor Name
Contract Number
Fiscal Year Ended XX
TOTAL COSTS PROGRAM MGT. REMEDIAL
CLAIMED FOR CLAIMED FOR CLAIMED FOR
COSTS ELEMENTS FY XX FY XX FY XX
Direct Labor
Fringe
Overhead
ODC's
Travel
Materials
Equipment
Subtotal
G&A
Subcontract Pool Costs
(Attachment)*
Subcontract Costs
Team Sub A
Team Sub B
G&A on Subcontracts
Total Costs
Base Fee
Award Fee
Total Claimed
Less Total Billed
(See Attachment IE)
Variance **
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ATTACHMENT ID
SUMMARY OF COSTS CLAIMED FOR FYE XX BY WORK ASSIGNMENT
Contractor Name
Contract Number
Fiscal Year Ended XX
WORK WORK TOTAL
ASSIGNMENT ASSIGNMENT ALL WORK
COSTS ELEMENTS t 1 # 2 ASSIGNMENTS
Direct Labor
Fringe
Overhead
ODC's
Travel
Materials
Equipment
Subtotal
G&A
Subcontract Pool Costs
Subcontract Costs
Team Sub A
Team Sub B
G&A on Subcontracts
Total Costs
Base Fee
Award Fee
Total Claimed
Less Total Billed
(See Attachment IE)
Variance
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ATTACHMENT IE
BILLING SUMMARY FOR FYE XX
Invoice
Date
Costs
Billed
for FYE XX
Fee
Billed
for FYE XX
Total
Billed
for FYE XX
Voucher #
Voucher f
Voucher #
Voucher #
Voucher t
Voucher #
Voucher #
Voucher #
Voucher #
Voucher #
Voucher #
Total
Last Column on this Schedule must equal total Billed on
Attachment 1C - Summary of Costs Claimed
Dated Submitted to EPA
Contract Person - Name
Phone Number
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DNTRACTOR NAME: ____ CONTRACT HO.:
ftEPQRT PREPARATION
STEP
PERFORMED REVIEWERS
(Y/N1 INITIALS DATE
1) Summarize the results of the review.
2) Discusa results with the Contracting
Officer, Chief of the Financial Analysis
Section and FACO (when applicable ) for
assurance of a thorough understanding of
the issues.
3) Disclose financial and contracting
issues that need interpretation or
clarifications.
4) Prepare file notes for
identification of problem areas to be
included in future and follow-up
reviews.
5) Prepare draft report and obtain
necessary approval of the draft.
6) Prepare and issue the final report.
DOCUMENTATION
STEP
PERFORMED REVIEWERS
CY/M1 INITIALS DATE
1) Complete the review checklist.
2) Package the report, checklist,
correspondence and workpapers into a
file to be maintained as part of the
contract file.
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ATTACHMENT B
PAGE 1 OF 2
THEPQST-AWARD AUDIT PROCESS
Financial Monitoring Review (FMR)
The FMR is a review of contractor billings associated with an
individual contract to ensure compliance with contract
requirements and to ensure that billed costs are adequately
supported by appropriate systems and records. Reports are
issued to the CO and the Financial Administrative
Contracting Officer (FACO) for resolution of findings. These
reviews are performed by the PCMD Financial Analysis
Section on contracts in excess of $5 million. Current PCMD
policy stipulates that the reviews should be scheduled for
each appropriate contract after at least 6 months of
performance has been completed.
Incremental closeout audit - (ARCS contracts only)
These audits, once the instructions and procedures have been
agreed to and finalized, will be performed incrementally
when the final incurred cost audits are completed for a given
contractor fiscal year. The audit will provide the Contracting
Officer with the recommended allowable direct and indirect
contractor fiscal year costs claimed by the contractor for the
particular ARCS contract The objective of the close- out
audits will be to close the ARCS contracts incrementally so
that after the 10 year performance period, there will not be a
need to close out contractor fiscal years all at once.
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ATTACHMENT B
PAGE 2 OF 2
Annual Incurred Cost Audits -
The Annual Incurred Cost Audit is a comprehensive audit of a contractor.
The review includes an audit of the allowability of direct and indirect costs
for all government contracts and is performed for each of the contractor's
fiscal years. Upon receipt of the contractor's submission, the Cost Policy
and Rate Negotiation Section (CPRNS) will arrange for an audit by the
cognizant audit agency. The audit report from the cognizant audit agency
is used by CPRNS to negotiate the final indirect rates. The incurred cost
audit is also used, as discussed above, as a basis for the ARCS
annual/incremental close-out audit report received from the cognizant
audit office.
Voucher Audits -
A voucher audit may be conducted by the cognizant audit
activity for a specific contract during the performance period
of the contract This audit may be requested by PCMD's
Financial Analysis Section, based upon concern about the
reliability of the costs claimed, a suspicion that there may be
problems with contractor performance, or upon completion
and determination of need as a result of an FMR. We will
be requesting voucher audits on each ARCS contract as
appropriate.
Contract Audit Cosing Statement
The closing statement, sometimes called a final audit, is a summarization
of the amounts claimed and accepted in the annual incurred cost audits for
the contract Normally, no added audit work is performed
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3 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
/ WASHINGTON. D.C. 20460
AIJ6 2 6 1991
of ict OF
SOLID WASTE AND EMERGENCY RESPONSE
MEMORANDUM
FROM: VyDon R. Clay
Assistant Administrator jfbs-lOO)
SUBJECT: Request for Financial /AudUt Assistance to the Superfund
Program
TO: \John C. Martin
[nspector General(A-109)
Purpose: The purpose of this memorandum is to request your
support in performing fiscal financial audits of all prime
contractors supporting the Superfund program.
Background: The Superfund program is under continuous
scrutiny by Congress, the General Accounting Office, the Office
of the Inspector General and the public. Considerable resources
are expended in performing audits and reviews of the program,
preparing and issuing reports, preparing responses to these
documents and, implementing recommendations. Many of these
reports criticize our use and management of contractors, and our
lack of financial monitoring and oversight. We depend upon the
Procurement and Contracts Management Division and your office to
provide the financial audit support necessary to assist us in
identifying allowable, allocable and questioned costs charged by
our contractors. Because Superfund manages a significant number
of multi-million dollar contracts, we require timely, current
financial audits in order to maintain a high level of management
oversight and to avoid the public consequences of lax contract
administration.
Objective: I understand that annual financial audits are
routinely requested on the Agency's largest contracts. I also
understand that you are experiencing serious audit backlogs and
that some of our major, prime contractors have not undergone a
complete financial audit since the inception of the Superfund
program. This situation has exposed the program to needless
criticism and concern and, I think you will agree, is
unacceptable. While experiencing these backlogs, your office has
directed considerable resources to numerous programmatic audits.
Many of the programmatic audits have revealed a heightened need
for more effective financial oversight. A flexible balance
Printed on Recycled Paper
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between these activities needs to be struck such that the audit
back load is reduced while maintaining a sufficient level of
program oversight.
Implementation: In an effort to overcome these problems and
to achieve a timely, proactive program of contractor financial
audits, we must, obviously, first take whatever action is
necessary to alleviate the backlog of audit requests, assess the
need for additional incurred cost audics and, as a minimum,
perform financial audits on all major Superfund contracts. It is
imperative that we promptly eliminate existing roadblocks to this
activity and aggressively pursue these audits.
I realize that action plans are being, or have already
been, developed. However, I feel compelled to communicate my
thoughts regarding audit priority for the Superfund program. Our
priorities regarding financial audits are articulated below:
Priority Group 1:
Priority Group 2:
Priority Group 3:
o
o
Audits resulting from
investigations (e.g. Fraud, etc)
Pre-award audits of contractor
proposals.
Audits requested as a result of
problems discovered in an audit
survey, I.G. report, GAO report or,
other financial monitoring
activity.
Interim incurred cost audits of all
major Superfund contracts.
Oldest contracts since last audit
first.
Contractors with multiple
contracts.
Fiscal indirect cost rate audits.
Contract close-out audits
I am requesting that these audits proceed with utmost haste
utilizing all resources at your command even if it requires
redirecting certain resources from other, lower priority
activities. I look forward to working with you to resolve these
issues.
cc: Christian Holmes, PM-208
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