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Preface
Managing a successful wastewater
treatment works construction project is
no small undertaking. Any one who has
done so could give valuable advice on
management techniques. This guidance
is a summary of that kind of experience.
Based on a review of particular
approaches that worked well in the U.S.
Environmental Protection Agency (EPA)
construction grants program and
specific areas where care must be
exercised, this guidance discusses
techniques that can help a municipal
official responsible for a project to avoid
problems that others have encountered.
This guidance recommends the use of
a project manager, a management team
concept and the development of a
management plan. It also suggests ways
for the project manager to handle
project activities by anticipating them in
the management plan. The guidance
deals with preparing for the final audit
of the project, which is a test of how
well the project has been managed. The
term construction project in the EPA
construction grants program extends
from the planning of a facility through
design, building and start-up. This
guidance relates to the part of the
process where the facility is actually
built and the majority of project dollars
are spent. The most effective
construction project management system
will only succeed if adequate planning
and design have been done. The project
will only be worth constructing if there
is adequate preparation for operating the
new facility. For a more extensive
discussion of the entire construction
grants process, a copy of the latest
edition of the EPA publication
Construction Grants 1985, July 1984,
should be requested.
This guidance has been prepared for
the municipal official responsible for
the project and much of it can also serve
as a reference for the project manager. It
is intended to present highlights and
leave the extensive detail on project
management to the many other available
texts on the subject. Much of this
guidance is also applicable to
wastewater treatment works
construction projects which have not
received EPA grant assistance.
(40 CFR 30.200]
U.S. Environmental Protection Agency
R-j«i«n 5, Library (5PL-H)
230 S. Dearborn Street, Rooc 1670
Cfelca**, IL 60604
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Contents
Introduction 1
The Management Plan 1
The Project Management Concept 1
Municipal Accountability 1
References to Federal Regulations 1
Duties and Responsibilities of the Participants 2
Authorized Representative 2
Project Manager 2
Construction Manager 3
Administrative Support 3
Technical Advisor and Support 4
Resident Engineer 4
Inspectors 5
Financial Advisor and Support 5
Legal Advisor 5
Construction Contractor and Subcontractors 6
Equipment Suppliers 6
The Reviewing Agency 6
Preparing for Construction Contract Award 7
Organizing the Project Management Team 7
Field Personnel and Testing 7
Procurement 7
Municipal Coordination 9
Records 10
Accounting and Financial Control 11
Cash Flow 11
Permits 12
Bonding and Insurance 12
Worksites 12
Managing the Project During Construction 13
Project Communications 13
Preconstruction Conference 13
Project and Contract Schedules 14
Monitoring Construction Progress 14
Enforcing the Construction Progress Schedule 14
Contract Administration 14
Management of Construction Contractor Payments and Requests
for Reimbursement 14
Processing Change Orders 15
Management of Claims 16
General Construction Management Activities 16
Coordination of Utilities 16
Traffic Control 16
Safety Considerations 16
Site Security 16
Conferences with the Reviewing Agency 17
Project Management Conference 17
Interim Inspections 17
Construction Management Evaluation 17
Preparing to Operate the Facility and Closing Out
Construction 18
Releasing the Construction Contractor 18
Completing the Final Inspection 18
Certifying Project Performance 18
Preparing for the Final Audit 20
Records Needed 20
Common Audit Problems 20
Appendix A: Management Plan Worksheets 23
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Introduction
EPA's goal, as part of its mandate to
protect America's waters, is to ensure
that its construction grants funds are
being used to complete properly
designed, well constructed wastewater
treatment systems. In that regard, the
Agency has identified two concepts
which are generally associated with the
successful use of grant funds. These are:
(I) that good project management and
management planning has proven most
likely to result in a successful
construction project, and (2) that the
purpose of a construction grant is most
likely to be achieved when the
municipal official responsible for the
project is held strictly accountable for
expenditures and ultimate performance
of the new facilities.
The Management Plan
EPA regulations require on construction
grants awarded after May 12, 1982, that
the municipality demonstrate the
capability to manage construction of the
project. The reviewing agency (EPA or
delegated State agency) will review and
approve the municipality's project
management capability demonstration
as a part of grant oversight. This
guidance identifies management issues
and ways in which they can be planned
for and addressed. It also includes
appended Management Plan Worksheets
which can be used to document the
municipal project management system.
Since there are many ways to document
management capability, use of these
worksheets is optional.
[40 CFR 30.301(5), 35.2104]
The Project Management
Concept
The key to good project management is
to designate a project manager to
represent the municipal interests by
taking charge of all grant and
project-related activities. This person
should be readily available full-time as
part of the municipal government to
deal with project matters, given the
necessary authority to oversee and
coordinate all project activities, and
may, depending on the size and
complexity of the project, be supported
by a team of professionals who provide
advice and assistance in specialized
areas. A qualified project manager must
be available full-time or project
management responsibilities will be
divided and lack coordination.
[40 CFR 30.301(aJ(l), 30.309J
Municipal Accountability
EPA pays for a large share of wastewater
treatment system construction through
its construction grants program.
However, a substantial municipal share
of costs can become even larger if costs
for which reimbursement is requested
are disallowed at final audit due to
inadequate management practices.
These can lead to such problems as cost
overruns, unsafe work sites,
construction errors, failure to meet
performance requirements, increased
user costs or construction delays.
Mismanagement may also result in EPA
sanctions such as a stop-work order,
which in cases of a serious problem
would require stopping the work or
activities identified in the order and
taking all reasonable steps to minimize
costs of the work. If the problem cannot
be resolved, EPA could ultimately
terminate or annul the grant agreement
if, for example, there is no substantial
progress on the project or project
completion is inordinately delayed
without good cause, or the grant is
obtained by fraud, misrepresentation or
improper administrative procedures.
[40 CFR 30.610, 30.900, 35.2005]
References to Federal
Regulations
EPA regulations cited where applicable
in the text are found in Title 40 of the
Code of Federal Regulations (40 CFR).
References from the cited regulations in
Part 30 (General Grant Regulations)
were published on September 30, 1983;
Part 33 (Procurement Regulations) on
March 28, 1983; and Part 35
(Construction Grants Regulations) on
February 17, 1984. The municipal
official responsible for the project
should contact the State construction
grants agency for the regulatory
references which are appropriate for the
date of the grant award and obtain
copies of all three regulations for review
prior to commencing work and for
reference.
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Duties and Responsibilities
of the Participants
The project manager's function is that of
general manager who leads the project
management team of specialists
providing the administrative, technical,
financial, and legal support for
management of the project. The
construction manager and field
personnel, including a resident engineer
and inspectors, support the management
team. The construction contractor,
subcontractors and suppliers would not
be considered part of the municipality's
project management team.
The size of the project management
team structure will vary to suit each
situation. However, the project
management support functions required
are the same on small or large projects
and are common to all successful
project management teams.
Because the staff in a small
municipality is likely to become
overloaded when project-related duties
are incorporated into their routines,
temporary employees or consultants
may be needed to provide the required
support.
An example of a relatively small
project management team organization
is where the project manager does the
administrative support work and much
of the financial work either personally
or with temporary help. Technical
support would be provided by a
technical advisor, probably the
consulting engineer who designed the
project, and who would also provide
one or more inspectors. Legal advice
and the balance of financial work and
advice would be provided by the
municipal counsel and municipal
financial officer respectively.
On the other hand, the larger
municipality with a more complex
government structure may already have
the specialized personnel needed to
manage wastewater treatment project
construction. The project manager and
support team members may be available
by reassignment within the municipal
government.
An example of a very large project
might be one managed by the project
manager using a construction
management services firm for the more
complex project monitoring.
Administrative support could be a
department of clerks supervised by an
office manager. Technical support might
still be provided by one or more
consulting engineers, depending on the
number of contracts, supported by field
personnel including resident engineers,
inspectors, specialized testing personnel
and field office clerical help. Financial
support could be a department of
bookkeepers working for the financial
advisor. Legal support might be
provided by one or more law firms
coordinated by the municipal counsel.
The project manager can help
organize the project management team
and should be designated by the time
the bidding documents are being
completed. The municipality may want
to consider designating the project
manager earlier for design coordination
and assistance in preparing the grant
application.
Specific responsibilities should be
assigned to each party active in the
project through written agreements
which clearly define the specific
services expected and the
responsibilities of each party. This can
be accomplished by employment
agreements with municipal employees
or by professional contracts with
outside parties.
The project manager function is an
allowable cost in the construction grants
program, if it receives prior approval.
For this reason, the municipal official
responsible for the project may wish to
discuss it with the State construction
grants agency before obtaining or
assigning the project manager. In order
for it to be considered an allowable cost,
it is essential that the project manager's
responsibilities be specifically defined
and differentiated from those of the
technical advisor and construction
manager.
[40 CFR 30.302, 30.308, 35.2040, 35.2115]
Authorized
Representative
The authorized representative is the
municipal official ultimately responsible
for the project and therefore the
management of the construction
process.
The authorized representative can
reduce the possibility of problems
which would keep the project from
meeting its performance standards by
incorporating assurances into the project
management team's employment
agreements or professional contracts.
Similar protection can be provided by
incorporating warranties or indemnity
clauses in the construction contracts,
although extended warranty periods
may result in costs unallowable for EPA
participation. The critical factor is that
one person must be in control of the
entire project. If a project manager is not
designated, the authorized
representative should be prepared to
assume the project manager role
full-time.
[40 CFR 30.301fa}(3), 30.610, 35.2214]
Project
Manager
The project manager is responsdble for
overall supervision and coordination of
the project on behalf of the
municipality, so that the project
manager should be a municipal
employee if possible. One alternative,
particularly on small projects where the
additional expense would be
proportionately high, is to seek a project
manager from an existing State or
regional organization. Another would be
to use qualified retired people who
might be willing to work for a token
salary to cover expenses.
Candidates should be given a
complete description of the
responsibilities associated with this
position. In many cases, it may be
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possible to offer the project manager the
management of the completed facility.
The person selected, whether an
existing municipal employee or
obtained specifically for the project,
should preferably have experience in
dealing with regulatory agencies,
Federal grants, construction projects,
and should have the ability to
coordinate the project management team
effectively.
The project manager does not need to
be an engineer or a specialist in any of
the other fields of the project
management team, although some
related managerial experience
appropriate to the size of the project is
expected. However, the individual must
have the ability to effectively use
technical, legal, and financial advice;
have proven administrative capabilities;
be self-motivated and stimulated by
challenges; recognize when the advice
of a specialist is needed and use it to
help resolve problems; and have enough
knowledge of accounting practices to
oversee the financial functions.
The project manager's responsibilities
include:
Coordinating with the reviewing
agency for clarification of grant program
requirements.
Recommending an organizational
structure and organizing and actively
leading the project management team in
meeting responsibilities established in
the management plan.
Developing, monitoring, updating and
reporting on the project budget and
schedule.
Ensuring that a proper recordkeeping
system is in place to facilitate project
management and audit.
Expediting correspondence and other
paperwork for necessary actions through
the management structure.
Upon receiving notice, instituting the
investigation and documentation of the
facts surrounding construction
contractor claims, obtaining technical,
financial and legal advice, responding
in writing as outlined in applicable
contract provisions, and preparing for
timely resolution of claims through
negotiations, arbitration or litigation.
Processing change orders
expeditiously and assuring timely
issuance of the Notice to Proceed, if
required, for each change order.
Reviewing and taking necessary
action on reviewing agency inspection
and construction management
evaluation reports.
Ensuring preparation of and
reviewing periodic progress reports to
the municipality and the reviewing
agency.
Ensuring preparation of the invitation
for bids.
Providing financial information to
enable the municipality to finance and
recover its share of project costs and set
user charges which will adequately
cover operation, maintenance and
replacement of the facilities being
constructed.
Ensuring that receipts and
disbursements are processed and grant
reimbursement requests are prepared
and forwarded in a timely manner.
Ensuring that financing is available to
provide adequate cash flow.
Ensuring that contract provisions
specifically define services expected
and responsibilities of the construction
contractor, and applicable liability,
performance and warranty requirements.
Ensuring fulfillment of construction
contractor responsibilities.
Ensuring that all land titles,
easements, rights-of-way, licenses, and
permits are obtained in a timely manner
and in accordance with State and
Federal requirements.
Ensuring that procurement
requirements are met.
Performing or overseeing construction
management.
Any other actions required for overall
project management.
Construction
Manager
While the project manager must provide
the basic construction management
direction for any project, many of the
detailed cost estimating, schedule
monitoring, and quality control systems
on large or complex projects may justify
retaining a construction manager. Many
engineering and construction firms offer
construction management services
which help in monitoring the project.
It is important to recognize the
difference between the role and
responsibilities of a construction
manager and the support provided by
the technical advisor during the
building of the project. A construction
manager assists the project manager to
control project costs and keep the work
on schedule by:
Developing and updating an overall
project schedule within which the
construction contractors must develop
their detailed schedules and complete
their work.
Evaluating the construction
contractor's detailed schedules and
workplans that optimize progress by
taking into account necessary sequences
and the critical path of construction
activities.
Reviewing construction contractor
staffing plans to ensure that labor
allocation is sufficient to enable the
project to stay on schedule.
Providing advice on trade practices,
and the suitability and availability of
various construction materials.
Making recommendations concerning
bid packaging to increase competition.
Expediting delivery of equipment
which the municipality is
prepurchasing directly.
Coordinating claims management.
Any other actions required to support
overall project management.
Administrative
Support
The project manager may delegate
certain administrative functions to a
staff member in cases where the project
size or complexity warrants it. These
responsibilities include the following:
Helping to prepare invitations for
bids and contracts.
Assisting in the development of a
recordkeeping system.
Maintaining project and contract
records.
Preparing progress reports.
Preparing and forwarding grant
reimbursement requests to the reviewing
agency.
Maintaining a schedule of project
reports to ensure timely submission.
Providing other administrative
support as assigned.
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Technical Advisor
and Support
It is common practice for municipalities
to procure a consulting engineering firm
to act in the capacity of the technical
advisor. The selection of a competent
and experienced technical advisor is an
important decision to ensure that the
project is well constructed, completed
on time and satisfies applicable State
and Federal requirements. The technical
advisor may be the engineer that
designed the project or another one
procured through the competitive
negotiation process. The technical
advisor does not need to be located at
the project site but must be readily
available to the project manager and
resident engineer or inspectors. The
traditional technical advisory and
support services provided during the
building of a project include:
Overseeing inspection of the
construction to ensure completion and
conformance with the construction
drawings and specifications including
review of shop drawings.
Interpreting the intent of the plans
and specifications.
Providing expert opinion to the
project manager on changes to the
project, including the preparation of
independent cost estimates.
Overseeing the resident engineer and
inspectors.
Assisting the project manager with
overseeing and updating the overall
project schedule when there is no
construction manager.
Providing detailed documentation on
construction progress in periodic
progress reports to allow the project
manager to perform oversight functions.
Breaking down construction costs by
eligible and ineligible categories to
provide the project manager with the
documentation needed to record costs
appropriately.
Certifying construction contractor
work performed for progress payments.
Establishing procedures for shop
drawing submittal and review.
Maintaining current record drawings
(sometimes called as-built) and shop
drawings at the project site. Record
drawings are those on which the field
personnel continuously mark changes
which may be made as construction
progresses.
Overseeing contractor performance by
periodic review of plans and
specifications, shop drawings, and
construction schedules.
Preparing adequate documentation,
independent cost estimates and
cost/pricing analyses of change orders.
Negotiating change order scope and
cost with the construction contractor if
delegated by the project manager.
Reporting any disagreements with
contractors over current or potential
change orders or claims.
Providing technical support in
disputes negotiations or litigation.
Periodically auditing construction
contractor payrolls for Davis-Bacon
compliance.
Maintaining a listing of warranties
that are to be transferred to the
municipality.
Estimating operating costs, resource
needs, and timing of plant start-up as
well as operation and maintenance
needs such as direct and indirect
staffing, materials, utilities.
Assisting in direct prepurchase of
major equipment or systems and
coordinating installation by the
construction contractor.
Overseeing plant start-up.
Supervising the one-year operator
training and performance certification
period.
Providing advice or support requiring
a professional engineer.
[40 CFR 35.2204(b)]
Resident
Engineer
The resident engineer is the technical
advisor's on-site engineering
representative, oversees inspection and
quality control, handles field
communications with the construction
contractor, supervises and coordinates
the work of the inspectors and is
responsible for periodic reports to the
project manager. The resident engineer
is generally a registered professional
engineer, with experience in contract
administration and field engineering on
the type of project being built. The
resident engineer would usually be an
employee of the technical advisor.
Because of the difficulty of hiring
qualified resident engineers and
inspectors for a limited term, using
municipal employees for these function;
is not generally recommended.
Municipalities managing medium to
large construction projects should use a
resident engineer to perform the
technical advisor's field functions,
while on smaller projects the technical
advisor might supervise the inspectors
more closely and perform the resident
engineering field functions as needed.
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Inspectors
The grant application includes an
assurance that the municipality will
provide and maintain competent and
adequate inspection of the project
during all significant events. Inspection
services should usually be provided by
employees of the technical advisor. The
project manager should ask the
technical advisor how many inspectors
are needed and require at least one,
generally full-time.
The inspector is responsible for
preparing the daily inspection reports
which should include at least the
following, preferably on a standardized
form:
Description and location of the work.
Construction personnel and
equipment on-site and description of
activity, including idle personnel or
equipment.
Quantities of work performed,
equipment received/installed and
materials consumed, including a report
of none if appropriate.
What was inspected or tested and by
whom.
What was or was not in compliance
with the contract documents and who it
was reported to.
Notices to the construction contractor
for improper work not corrected that
day and any corrective actions taken.
Visitors.
Weather conditions.
Enough detail that project events can
be reconstructed to adequately resolve
all construction contractor claims.
[40 CFR 35.2204(b)J
Financial Advisor
and Support
The financial advisor should make sure
that financial information is presented
in a way that supports decision making
and facilitates audits. The project
manager serving a small municipality
might personally assume part of this
function while in a larger one the chief
financial officer will probably provide
this function.
Specific responsibilities include:
Identifying short and long term
financing capability, and sources of
funding.
Arranging financing of the
municipality's share of project costs
with the assistance of financing
specialists if necessary.
Assisting in developing project
budget, cash flow and financial
accounting and reporting systems.
Reviewing financial transactions,
budget/expense reports, and fund levels
to ensure that adequate funds are
available to complete the project.
Reviewing change order cost/pricing
analyses.
Ensuring adequate internal checks
and balances.
Accounting for eligible and ineligible
costs.
Providing budgetary analysis.
Financial support should be under the
general supervision of the financial
advisor. Specific duties of the support
personnel include:
Keeping the financial accounting
books.
Preparing cash flow projections.
Processing receipts.
Preparing vouchers and
disbursements.
Creating a system to integrate project
and municipal accounts.
Providing early warning on potential
cost overruns.
Assisting in meeting financial
reporting requirements.
Providing any support requiring an
accountant.
[40 CFR 30.301 (aj(4jj
Legal Advisor
An attorney may only need to be
committed part time to a wastewater
treatment construction project of any
size. The bulk of the legal advice
needed is in the area of contract law,
although a lawyer may also have to be
consulted on issues of legal authority,
acquiring property and easements,
procurement, and resolution of disputes.
If a legal firm is retained, the
assignment of a designated attorney
should be sought in order to maintain
continuity of claims management and
consistent interpretation of all contracts.
The legal advisor should be familiar
with contracting procedures on
Federally assisted projects and be
accessible to the project manager when
unforeseen needs arise.
The legal advisor should have
responsibility for the following
activities:
Establishing legal authority for
financing, contracting, construction and
operations.
Engaging and overseeing the work of
bond counsel in financing the
municipality's share of project costs.
Reviewing bids for insurance
coverage, bonds, minority and women's
business enterprise requirements.
Assisting in developing and
negotiating contract provisions and
reviewing for potential legal problems
and compliance with EPA regulations,
State and local laws.
Reviewing the procurement process.
Advising on land titles, easements,
permits, licenses, appraisal
arrangements, significant change orders,
work stoppage, schedule enforcement,
disputes, and cost overrun claims.
Securing property titles.
Assisting in ensuring fulfillment of
contractor responsibilities, and
protection of the municipality against
potential liability.
Periodically making project reviews
with the project manager to assess
potential areas of claims or litigation
and recommending corrective action.
Assisting in negotiation of disputes.
Litigating non-negotiable contract and
grant disputes.
Any support requiring an attorney.
[40 CFR 30.30 l(aJ(7]J
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Construction Contractor
and Subcontractors
The construction contractor and
subcontractors are responsible for
building the facility and installation of
equipment in compliance with the
contract documents which consist of the
construction contract and attachments,
plans and specifications. The contract
documents should include provisions
for:
An agreement that the construction
contractor will perform all work in
accordance with the plans and
specifications.
A requirement to guarantee that work
is free from all defects due to faulty
materials, equipment, or workmanship
for a period of at least one year from the
date of substantial completion of the
work performed.
An agreement to promptly remedy
any defects and damage that may result
from such defects.
A requirement for maintaining a
current construction schedule with the
level of detail based on project size and
complexity.
Recordkeeping requirements for
demonstrating that the work conforms
to Federal regulations in effect at the
time of grant award.
Provisions relating to liability and
performance requirements and avenues
of recourse in cases of non-compliance
Primary attention should be on the
quality of the work, not the method or
order of performing it. Directing the
construction contractor should only be
done as a last resort and directly by the
project manager, because it may lead to
claims of interference, increased costs
and the municipality's assumption of
liability.
Subcontracts between the
construction contractor and
subcontractors to perform specific
construction tasks are the responsibility
of the construction contractor. Thus, the
municipality should expect the
construction contractor to act in cases of
subcontractor non-compliance and
should not deal directly with
subcontractors.
Construction contractors must be
selected through an open competitive
bidding process in accordance with
State law and Federal regulations.
[40 CFR 33.295, 33.1030(13J]
Equipment Suppliers
Equipment suppliers are responsible to
the construction contractor for
fabricating and delivering equipment,
providing warranties or bonds for
product performance, furnishing the
shop drawings for equipment specified
and providing a comprehensive listing
of supplies and equipment parts needs.
Suppliers should send shop drawings to
the construction contractor or
subcontractor for forwarding to the
construction contractor, who is
responsible to approve and forward
them to the technical advisor for review
and approval.
Equipment and supplies procurement
are a matter between the construction
contractor and equipment suppliers
except for major equipment or systems
which the municipality prepurchases
directly.
Performance warranties required in
the specifications to cover equipment
through early operation must be
assignable to the municipality.
Although extended warranties are
available, the cost of warranties are
grant allowable only through startup
and the one year performance period if
the costs are reasonable and necessary
for ensuring achievement of an
affirmative certification.
[40 CFR 33.1030(13)]
The Reviewing
Agency
While EPA maintains overall
responsibility for ensuring that the
municipality adheres to Federal
requirements, EPA has delegated much
of the responsibility for the day-to-day
management and administration of the
construction grants programs to the
States under a delegation agreement.
Some activities such as grant awards,
final audit determinations, final
resolution of disputes and bid protest
appeals remain the responsibility of
EPA. Most of the direct project activities
are either delegated to a State which is
then the reviewing agency, or performec
by the U.S. Army Corps of Engineers
(CoE) under an interagency agreement
with EPA.
The reviewing agency will make a
number of different visits which are
intended to provide oversight, help
improve project management, and
protect State and Federal interests. The}
include a Project Management
Conference (PMC), Construction
Management Evaluation (CME) of
selected projects and interim
inspections. These are described under
CONFERENCES WITH THE
REVIEWING AGENCY. The reviewing
agency is the municipality's contact
point for information or guidance on
any issues or problems that may arise in
the administration and management of
the construction grants project. While
the reviewers will endeavor to work
with the project manager regarding the
project, the municipality remains
ultimately responsible to see that it
satisfies the requirements of the grant
and the Clean Water Act.
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Preparing for
Construction Contract Award
Preparation for the construction phase
of the project should start with
organizing the project manager's support
team and field personnel. In addition,
the following items were identified as
important areas for the project
management team's attention before
construction contract award when
project management performance was
analyzed nationwide:
Procurement
Municipal Coordination
Records
Accounting and Financial Control
Cash Flow
Permits
Bonding and Insurance
Worksites
Organizing the
Project Management Team
When the project management team
members have been selected, they
should be briefed as a group by the
project manager. At the meeting, the
project manager should provide each
team member with a summary of their
major responsibilities and duties, an
organizational chart, the project
schedule, names, addresses, and
telephone numbers of key contacts. This
information should already be in the
management plan. The project
management plan and organizational
structure should be reviewed in detail
to ensure that all team members have
the same information and understand
their roles and the types of interaction
that will occur later, such as responding
to requests for information or advice.
The project manager should make
sure that team members understand the
lines of communication. For example,
payment requests, change orders, and
quality control actions should originate
in the field. Claims procedures should
provide for opinions by the designer
and resident engineer. Change orders
should include review by the designer
so that they do not compromise the
intent of the design.
The project manager should make
sure that everyone who should
participate in resolving an issue is kept
involved, and not become
overcommitted in problems that could
be resolved by others. For example, if a
subcontractor comes to the project
manager with a complaint, the
subcontractor should be required to seek
a solution from the construction
contractor who can then solve the
problem or bring it to the attention of
the project manager if necessary.
[40 CFfl 30.302, 30.308, 35.2040, 35.2118]
Field Personnel
and Testing
The project manager must ensure that
work in process by construction
contractors is inspected for conformance
with the plans and specifications. If
work is performed without inspection,
its quality cannot be assured. If errors
are not found and later result in
damage, the construction contractor may
avoid responsibility for repairs.
All construction inspection personnel
should conduct their activities in
accordance with inspection guides
provided by the technical advisor and
keep detailed records of observations.
Foundations of buildings and other
structures as well as the placement of
reinforcing steel, all concrete pours,
pipe jointing and pressure tests, and
equipment startup require special
attention.
Testing of materials for conformance
to the specifications should be
conducted by an independent certified
laboratory wherever practical. Where
testing must be conducted by
construction inspection personnel, they
should be certified and thoroughly
familiar with test procedures. Under no
circumstances should any portion of the
quality control testing be conducted by
the contractor or subcontractor. Costs
for inspection and testing are generally
grant eligible if included in the grant.
[40 CFR 35.2204fbjJ
Procurement
The EPA procurement regulation is
specific and detailed, so that the project
manager needs to understand it
thoroughly including the relationship to
the date of grant award.
The municipality has the option of
self-certifying its current procurement
system if it meets the intent of EPA's
procurement regulation.
Different types of procurement
procedures and contracts are commonly
used for procuring engineering, legal or
other professional services than are used
for construction contractors.
[40 CFR 33.205J
Self-Certifying
Procurement Procedures
The project manager should review the
municipality's procurement system
against EPA's procurement regulation,
which should be obtained from the
reviewing agency. If the authorized
representative believes that the
procurement system meets the intent of
EPA's procurement regulation, this may
be self-certified by completing, in the
affirmative, the Procurement System
Certification Form (EPA Form 5700-48).
This action allows the project manager
to undertake procurement actions
without prior review, but if there is a
failure to comply with all procedural
requirements, the problem may not be
identified until audit when it would be
too late to make corrections. Failure to
comply with the procurement regulation
may mean that costs of contracts not
properly procured will be disallowed.
If the authorized representative
chooses not to certify the municipal
procurement system, proposed
procurement actions are subject to the
EPA procurement regulation and
pre-award review. The reviewing agency
will determine the manner, timing, and
extent of its review and the
municipality must submit procurement
-------
information requested by the reviewing
agency on all contracts greater than
$10,000. However, all procurement
actions should be documented, as they
are subject to audit.
[40 CFR 33.110]
Procuring
Professional Services
The authorized representative must
decide on the methods to be used for
selecting any professional services firms
for technical advisor, legal advisor,
construction manager, or others. The
EPA procurement regulation does not
apply to selection of new municipal
employees to fill project management
team roles.
The engineer that planned or
designed the project has the advantage
of being thoroughly familiar with the
project, but that firm may or may not
offer the most suitable or cost effective
technical advisory services.
The engineering firm that provided
facility planning or design services may
be retained if:
The municipality received a facilities
planning or design grant and selected
the engineer for it in accordance with
EPA's procurement regulation which
was in effect at the time of grant award;
or,
The reviewing agency approves
noncompetitive procurement in
accordance with the current
procurement regulation for reasons
other than the municipality simply
wanting the same firm; or,
The authorized representative is able
to document and certify that the
following conditions have been met:
The initial Request for Proposals
(RFP) clearly stated the possibility
that a subagreement could be
awarded for engineering services
during building of the project; and
The firm was selected for facilities
planning or design in accordance
with the requirements for
competition with documentation, and
using either the EPA small purchase,
formal advertising or competitive
negotiation procedures; and
No conflict of interest exists with the
engineer.
If the authorized representative
chooses to solicit proposals for
professional services, a public notice
of the need for services, the scope of
work, and a request for proposals are
needed. The proposals must be
evaluated according to the criteria
published in the request for
proposals. Criteria should be based
on experience of the firm and the
staff to be assigned to the project in
providing the services needed, a
discussion of contract management
skills and proposed methods, a
listing of similar contracts, and the
price for the proposed services.
Depending on which method was
specified in the request for proposals,
the award may be based on initial
offers or negotiated equally with all
best qualified firms to allow them to
present their best and final offers.
The contract is to be awarded to the
responsible firm whose proposal is
most advantageous to the
municipality considering price and
other factors stated in the public
notice.
The alternative to this procedure is
for unpriced proposals to be
requested from firms selected from a
prequalified list or from a request for
qualifications. The list must be
updated every six months and meet
certain other regulatory requirements.
Based on evaluation of technical
proposals, they must be ranked and
an attempt made to negotiate
compensation with the most qualified
firm. If unsuccessful at agreeing on
the compensation, negotiations must
be terminated and negotiations
started with the next most qualified
firm, never going back up the list.
Noncompetitive negotiation
requires prior approval from the
reviewing agency and is acceptable
only under very limited
circumstances.
[40 CFfl 33.505, 33.525, 33.605, 33.715J
Procuring
Construction Contracts
The project manager and technical
advisor will need to decide on the
number, size and timing of construction
contracts and direct prepurchase
actions.
With a single contract, one
construction contractor handles the
entire construction process. The
contract is awarded to the lowest,
responsive, responsible bidder. A
responsive bidder is one whose bid
responds to the requirements in the
bidding documents. A responsible
bidder is one who has the financial and
technical resources, satisfactory
performance record, adequate
accounting procedures and is willing to
comply with Federal labor
requirements. The contractor then is
given access to the site and
responsibility for coordination with
existing facilities, if any. The
construction contractor has
responsibility for management of
subcontractors, and is expected to
follow through to the specified
completion date. However, construction
cannot begin until all design arid
contract documents are complete.
Multiple prime construction contracts
may be awarded for different portions of
the project, such as site work, concrete,
structures, mechanical or electrical
work. This is required by State law in
some States. It may provide additional
competition and it may be set up to
match the sequence of construction
work. In addition, since each prime
construction contractor is only
responsible for its own portion of the
work, the municipality has much greater
responsibility for overall project
coordination. Special contract clauses
are needed outlining limits of liability
and responsibilities of the various
parties. If one construction contractor
delays others, overall completion time
may be affected. For this reason, the
more detailed Critical Path Method
(CPM) of project scheduling may be
needed for multiple prime contracts.
They work best where individual
construction contractors are working on
different sites and have little impact on
each other.
Equipment prepurchase involves
purchase of major equipment before a
general construction contract is
awarded. It requires some special
grant-related actions which the project
manager needs to discuss with the
reviewing agency, and may not be done
until either the grant or prior approval
is received. Prepurchase allows
specially manufactured equipment with
long lead times to be started early so
construction delays are minimized.
Warranties may be a problem, as is the
need for storage and insurance. This
option may be used in conjunction with
the other construction contracting
methods discussed above.
[40 CFR 33.405]
Preparing Bid Documents
for Construction Contracts
EPA procurement regulations require
that the bidding documents include the
following:
A copy of EPA regulations 40 CFR
33.295 (subagreements awarded by a
contractor); 40 CFR Part 33, Subparts F
(subagreement provisions) and G
(protests); and if appropriate, "Labor
Standard Provisions for Federally
Assisted Contracts "(EPA Form 5720-A).
-------
A complete statement of the work to
be performed, including where
appropriate, design drawings,
specifications, and the requirement for a
performance schedule.
The terms and conditions of the
contract to be awarded, including
payment, delivery schedules, point of
delivery, and acceptance criteria.
The place and deadline for submitting
bids.
A clear explanation of the bidding
procedures and the method to be used
by the municipality to evaluate bid
prices and to award the contract.
The criteria to be used in evaluating
bidders' compliance with the
responsibility requirements.
Any minority, women's or labor
surplus area requirements (40 CFR
33.240).
The prevailing wage rate
determination under the Davis-Bacon
Act, on each subagreement exceeding
$2,000 (40 CFR 30.603(a)).
When the formal advertising method
(i.e., competitive bidding) is used, an
advertisement for bids is required to
give adequate notice, generally not less
than 30 days, to the public. Information
in the public notice must tell bidders
where to obtain or review bidding
documents. Including a list of the
supporting documents which will be
required from the low bidder will
expedite subsequent award of the
contract.
[40 CFR 33.420J
Procedures for
Receiving and Reviewing Bids
Before bid opening, the project manager
may have issued addenda to correct
errors, to clarify information in the
bidding documents, or to incorporate
the current wage rate determination.
Copies should be delivered to all
bidders and contract proposal
documents should include a form for
certification that the bidder has received
all addenda before the bid date. The
project manager should ensure that
receipt of such addenda is
acknowledged by each bidder.
Procedures for handling bids should
include opening all bids at the same
time and rejecting immediately those
that are not responsive. Bid forms must
be completely and properly filled out,
dated and signed and a bid bond or
deposit attached.
The project manager should log all
bids, including date and time received.
At the bid opening, the project manager
should have the technical advisor read
all bids including alternatives, tabulate
bids and determine responsiveness to
the conditions in the request for bids
including any required bid security,
check all bids for correctness of
arithmetic and subsequently provide a
tabulation of bids and recommendation
on award of the contract. In case only
one bid is submitted, advice should be
sought from the reviewing agency and
legal advisor, before bid opening if
possible. If it is decided to return the
bid and start the process again, it is
advisable to return it unopened because
publication of the bid price may make
obtaining subsequent bids more difficult
and upset the competitive bidding
process.
Award of the
Construction Contract
The contract must be awarded to the
lowest responsive and responsible
bidder, except that award cannot be
made to a contractor who appears on
EPA's list of suspended and debarred
contractors. The award must be based
on the method of bidding, evaluating
bid prices and awarding the
construction contract described in the
contract documents.
[40 CFR 33.430J
Small Purchases
Small purchase procedures are
acceptable if the cost will be less than
$10,000 and applicable EPA small
purchase regulations must be followed.
[40 CFR 33.305]
Force Account
If municipal personnel or equipment are
to be used to perform eligible project
work under force account (engineering
or project inspection), approval must be
obtained from the reviewing agency and
work-hours and expenditures
documented carefully. A force account
is a financial record in which the cost of
labor, materials and overhead provided
by the municipality and chargeable to
the project are accounted for. If
documentation is not adequate or
authorization has not been obtained,
costs may be disallowed at audit. Force
account work must be more economical
or necessitated by emergency and it
must be shown that municipal
personnel have the necessary
competence to do the work. Prior
written approval is required if total
costs will exceed $25,000.
Force account documentation
requirements include: Hourly time
records signed by both employee and
supervisor; description, location and
type of work performed; materials,
equipment, and items purchased for
work; and municipally owned
equipment (type, size, time used,
standby time, hourly costs based on
actual cost). Time records should
consist of a daily log and should
identify all time worked, not just
eligible time. Estimates of percentages
must not be used.
[40 CFR 30.520J
Documenting
Procurement Actions
Regardless of the method used, the
following actions related to procurement
on an EPA grant project must be
documented:
The basis for contractor selection.
Justification for procurement method
selection.
Strong reasons for use of any
specification that does not provide for
maximum free and open competition
and reviewing agency prior approval.
Justification for the type of contract.
Basis for contract price, including
cost analysis and negotiations.
Justification and reviewing agency
prior approval for rejection of bids.
Municipal
Coordination
The project manager should inform all
departments (police, fire, public works)
in the municipality, local utilities and
the State Department of Transportation
of the plans and schedule for the project
and advise them that the costruction
contractor will have responsibility for
permits and coordination of
construction. This will help prevent
construction delays and disruption of
services, such as turning off water and
detouring traffic. The project manager
should also work out continuity of
operations with the chief plant operator
if the project is at an existing plant, and
be sure that there are necessary services
at the project site, such as power
supply, field office, storage areas and
trash collection.
-------
Records
The project manager should plan and
implement the recordkeeping and filing
system before construction begins, stress
its importance to the management team,
and back up this philosophy by
centralizing the system and controlling
access to the central files. This is to
improve monitoring of project progress,
minimize delays in project completion
and cost over-runs, expedite project
audits and minimize the amount of
project costs that may be determined
ineligible because of lack of
documentation.
Circulation of records should be kept
to a minimum. If project staff members
need to retain certain records, they
should be provided with working copies
of those documents. Copies of
documents that are traditionally kept in
the files of the technical advisor or legal
advisor should be kept in the central
system.
Two main objectives of a good
recordkeeping system are
documentation and organization.
Documentation means having written
accounts of all transactions, meetings,
negotiations, procurements, agreements,
construction activities and telephone
conversations. The complexity of the
project files will be determined by the
size of the project, but for all projects
should contain information on at least
the following topics:
Grant Information
Project Handbook and Staffing
Information
Correspondence File and Log
Grant Request/Application
State Priority Certificate
Grant Offer/Agreement/Amendment
Plan of Action for the Project Manager
CoE Grant Monitoring Reports
Internal Memoranda of Management
Team
Financial Records
Written Narrative of Accounting System
Source of Financing
Project Procurement Procedures in
Force
Certificate of Local Financing
Outlay Projections
Cash Flow Plan
Reimbursement Requests and Log
Invoices (Engineering, inspection, other)
Professional Services Agreements
Contractor's Pay Estimates
Force Account Payroll Records
Administrative Expenses
Approval Warrants
Cancelled Checks
Periodic Audit Reports
Personal Property Inventory
Engineering
Correspondence File and Log
Engineering Agreements/Amendments/
Subagreements
Procurement Procedures Used in
Selection
Telephone Log
Approved Shop Drawings
Construction
Correspondence File and Log
Telephone Log
Bidding Information
Approved Plans and Specifications
Addendums
Bid Bond
Performance Bond
Notice of Award
Notice to Proceed
Contract Agreements (each contractor)
List of Subcontracts
Right-of-Way Easements
Construction Permits
Change Orders File and Log
Claims Log
Resident Inspection Reports
Deficiency Log
Material Certifications and Test Reports
Construction Progress Schedule
Lien Waivers
MBE/WBE Contracts and Status Reports
Certified Payrolls and Labor Interviews
Submittal Register and Approved Shop
Drawings
As-Built Notes and Marked-up Plans
Photographs
EPA Milestone Requirements
Facilities Plan and NEPA Requirements
State NPDES Permit
Preliminary and Final Plan of Operation
User Charge System/Sewer Use
Ordinance
Operation and Maintenance Manual
Chief Operator's Employment
Agreement
Sludge Disposal Permit
Flood and Other Insurance Policies
Grant Close-Out
Correspondence File and Log
Final Inspection Reports and Follow-Up
Memos
Project Performance Certification
Final Invoice Summaries-Construction/
Engineering/ Administration
An organized filing system stiould be
complete, logically constructed, well
indexed, readily accessible and
safeguarded. It should be protected from
fire, theft, and other potential damage.
An organized approach to
recordkeeping is based on the following
guidelines:
Separating the grant files from or
clearly identifying them in the
municipal files.
Organizing records on a grant and
subject basis, and labeling files clearly
with descriptive titles.
Documenting every financial
transaction made during the project.
Keeping a correspondence log,
preferably in chronological order, which
records and keeps track of every piece
of correspondence coming in and going
out of the project manager's office. The
log entries should include an indication
of whether the correspondence is
incoming or outgoing, a chronological
serial number, who it was sent to or
received from, the subject of the
correspondence, and the file location
assigned to it.
Creating a master index that provides
three different points of reference to
each document: the file folder name or
number, a brief description that clearly
identifies the main subject of the
document and a chronological serial
number.
Avoiding the temptation to frequently
create new file topics after the file
system is created.
There are many commercially
available recordkeeping packages in
book and computer software form. The
reviewing agency can also make
recommendations.
[40 CFR 30.500J
10
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Accounting and
Financial Control
The purpose of a financial management
system is for the accountability and
control of all project funds, property,
and other assets, and to ensure and
document that all grant funds and assets
are used solely for their authorized
purpose. The following are some
commonly accepted minimum standards
for an adequate accounting system:
The accounting system must identify
all project costs and differentiate
between eligible and ineligible,
allowable and unallowable, and direct
and indirect costs. The purpose for
which each disbursement was made
should be recorded and
cross-referenced.
Recording of transactions pertaining
to the construction project should be
all-inclusive, timely, verifiable, and
supported by source documentation.
The accounting system should be on
a double entry basis with a general
ledger in which all transactions are
recorded in detail, with summary from
subsidiary accounts.
The system must show the receipt
and use of all EPA funds received in
support of the project as well as
identification of matching funds. This
includes purchases of goods and
services as administrative costs.
Minimum standards for financial
control procedures, which use the
project accounting records as a basis,
are as follows:
The project manager should have
responsibility for use of project funds.
There should also be an adequate
separation of responsibilities such that
no one person controls all phases of a
transaction involving expenditure of
funds. For example, an administrative
assistant could oversee and approve
payment vouchers with the project
manager being the only one allowed to
actually sign checks.
Responsibility for accounting and
control must be kept separate from
project operations. The accounting
system and related procedures should
be described in writing for consistent
application.
Accounts should be set up to identify
each organizational unit, function or
task providing services to the
construction project. This will provide
basic data for developing and
monitoring indirect cost allocations.
A method of comparing budgeted
against actual costs by task, schedule
and performing organization should be
incorporated into the system. This
should be done monthly to allow the
project manager to better understand
fiscal trends, which will assist in
financial planning decisions.
Financial reports should be prepared
monthly and annually to provide the
project manager with a timely and
accurate status of the construction
project costs incurred. Such reports
should be reconcilable to the basic
accounting records.
There should be a periodic
reconciliation between the grant
accounting records, claims for
reimbursement, and the general ledger.
Inventories of non-expendable
property and equipment (other than
land and buildings) should be
maintained in subsidiary records
controlled by the general ledger and
should be verified by physical inventory
at least biannually. Each item should be
identified by a description,- serial or
identification number, source, owner,
purchase date and cost, Federal share of
purchase cost, location, use, condition
and date the information was recorded.
These standards can be met by
actively maintaining the following basic
accounting documents:
A cash receipts journal for recording
and identification of the source of all
monies received.
A cash disbursements journal for
recording and identifying all checks and
expenditures.
Journals for payroll and purchases.
A general ledger as the central
document in an accounting system. In a
small project, the general ledger will
probably meet accounting needs.
Subsidiary ledgers for larger projects.
Examples of subsidiary ledgers include
accounts receivable, accounts payable
and non-expendable property.
The financial advisor on the
management team should set up the
appropriate account titles. Further
information on accounting and financial
control can be found in the EPA
publication, Accounting Guide for
Construction Grants October 1977,
[40 CFfl 30.200, 30.301fa)(6J, 30.510, 30.530,
30.531, 30.800]
Cash Flow
The purpose of developing a cash flow
projection is to determine that there will
be sufficient funds available throughout
the project to meet all obligations. To do
this, the financial advisor should first
identify, estimate and chart the timing
of project expenditures. These include
professional services for construction
project management (estimates can be
obtained from potential sources of those
services); construction (estimates should
be obtained from the project designer);
legal, administrative, and accounting
functions (needs and costs should be
reviewed with appropriate municipal
departments); contingencies (based on
the total estimated project cost to cover
potential change orders, cost overruns
and unforeseen expenditures).
Next, the financial advisor should
estimate and chart the timing of
anticipated receipts from project
financing and reimbursements from EPA
for the Federal share of eligible
expenses. The final local share costs
consist of the portion of allowable costs
above the EPA grant percentage and all
unallowable costs.
Because of the contractor payment
and grant reimbursement cycle, the
amount of funds needed generally peaks
around the middle of the project and
will often be greater at that point than
the final local share. If there are delays
at project close-out, this may result in
EPA reimbursement delays until the
problems are resolved Thus, the
financial advisor should consider
adding a contingency to the amount of
local share to cover the peak cash flow
needs.
Then, the financial advisor should
assess the need for project funding,
determine how much of it is long-term
financing and the source of short-term
and interim funds.
Long-term financing may come from
grants or loans from other Federal
agencies, such as the Farmers Home
Administration (FmHA). Some States
have grants programs, make low-interest
loans, or have a mechanism such as a
bond bank or State revolving fund. In
addition, the municipality may be able
to issue local bonds for long-term
financing.
To meet short-term cash flow needs,
the financial advisor may consider
revenue anticipation notes or obtain
bank loans based on expected grant or
bond issue funds. These are called grant
anticipation notes (GANs) or bond
anticipation notes (BANs). An advantage
of such interim financing is that
long-term financing is deferred until
11
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final project costs are known and until
revenue from the use of the new
facilities starts to be received. Another
advantage is potentially lower
short-term interest rates. However, a
disadvantage is that financial difficulties
can result if delays are encountered in
long-term financing.
The financial advisor may also
consider whether to use interim
financing if interest rates are
unfavorable for long-term financing and
if it appears that the market will be
more favorable in the future or not use
it if the opposite conditions exist. The
financing decision for the project may
also be affected by the rate structure or
if the project is constructed in
multi-year segments with a series of
EPA grants.
[40 CFR 30.307, 30.400, 30.410]
Permits
The technical advisor should develop a
checklist of permits and indicate
whether the municipality or the
construction contractor is responsible
for obtaining them, establish target
dates, and track progress in obtaining
them. Additional costs due to delays in
obtaining permits will generally not be
eligible for EPA grant reimbursement.
Federal permits include, as necessary,
those for disposal of dredged or fill
material from the Corps of Engineers,
discharge of treated wastewater under
the National Pollutant Discharge
Elimination System (NPDES) from EPA,
and hazardous waste disposal under
the Resource Conservation and Recovery
Act (RCRA) from EPA, or which may be
handled at the State level.
The necessary permits and permitting
agencies differ in every State. Examples
of State permits include State Health
Department approval, State highway
opening, public service agency for
setting rates, and possibly additional
State requirements for effluent discharge
and sludge handling or disposal.
Local permits may include local
health department approval, building,
road opening, blasting and permission
to cross utilities.
Private utilities owners and railroads
may want to review plans to see if the
proposed method of crossing meets their
criteria. Railroad right-of-way crossing
permits generally require very long lead
times. Railroads may also require a
bond or insurance and sometimes
require use of their own work forces or
inspectors.
Bonding and Insurance
The reviewing agency will accept the
municipality's bonding requirements for
construction contracts greater than
$100,000, if it determines that they
adequately protect the Federal interest.
Otherwise minimum bonding
requirements are a bid guarantee
equivalent to five percent of the bid
price and performance and payment
bonds for one hundred percent of the
contract price.
EPA regulations give the municipality
responsibility for setting requirements
for construction contracts equal to or
less than $100,000.
A bid guarantee, which is a firm
commitment such as a bid bond,
certified check or other negotiable
instrument, is to be submitted by each
bidder as assurance that the bidder will,
upon acceptance of the bid, execute
such contracts as may be required
within the time specified.
Performance and payment bonds are
to be provided by the selected
construction contractor to secure
fulfillment of all its obligations under
the contract The performance bond
gives the municipality a means to insure
project completion in the event of
construction contractor default.
However, the method of completing the
work under a defaulted contract must be
left to the bonding company. The
payment bond ensures that all persons
supplying labor and materials are paid
as required by law in order to avoid a
lien on the project. This is particularly
useful in cases of construction
contractor or subcontractor bankruptcy.
The technical advisor should make
sure that these provisions are included
in the bidding and contract documents.
In all cases, required bonds must be
obtained by the bidders or construction
contractor from companies holding
certificates of authority as acceptable
sureties
Flood insurance on insurable
structures is a Federal requirement
when a project is located in a flood
hazard area as defined by the Flood
Disaster Protection Act of 1973 and as
discussed in EPA regulations. Flood
insurance is available under a program
of the Federal Emergency Management
Agency (FEMA).
In addition, the financial advisor
needs to consider property and liability
insurance and other insurance needs as
required by State law. The municipality
should require the construction
contractor to carry insurance to protect
against fire, theft, and other perils
during construction. The municipality
may need insurance during
construction, as well, depending on
what the contractor policy covers and
excludes. The financial advisor can seek
advice from an insurance agency that
specializes in owner's protective
insurance. If the municipality is
self-insured, the financial advisor
should review the project needs and
discuss with the legal advisor whether
any additional purchased insurance is
needed for adequate coverage.
[31 CFR 223; 40 CFR 33.265]
Worksites
The legal advisor should acquire the
treatment plant construction site, the
sites for sewer lines, the rights to cross
roads and railroads, temporary working
easements and land for sludge disposal
with as much lead time as possible. The
location of each parcel of land to be
acquired will be determined during
design.
If worksites are not available by the
time they are needed for construction
work, the resulting delays can cause
increased costs which are generally not
allowable for grant participation. If
acquisition of potentially grant eligible
land must begin before grant award,
prior approval from the reviewing
agency should be requested.
There are several ways to acquire the
land needed for construction including
purchasing land outright, obtaining a
purchased or donated easement,
obtaining rights to the land permanently
or for the period during which it is
needed, or leasing the land.
The reviewing agency can advise
about eligibility, appraisal and
acquisition requirements. Land
acquisition requirements for EPA
funded projects, regardless of whether
the land is eligible, are found in EPA
regulations and in Uniform Appraisal
Standards for Federal Land Acquisition,
(GPO#052-059-000-20j. These explain
the need for supporting documentation,
including an appraisal and records of
negotiation or condemnation
proceedings.
[40 CFR 35.2210]
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Managing the Project
During Construction
During construction, the project
manager should use the project
management team to assure that the
project is constructed in accordance
with the approved construction
drawings and specifications, approved
addenda, change orders, the NPDES
permit and grant conditions. EPA
grantee experience indicates that the
following areas are those which have
had the greatest need for project
management attention once construction
is underway;
Project Communications
The project manager should maintain
communications such as weekly
coordination meetings as well as the
routine written and oral
communications required to manage a
construction contract. Regular on-site
weekly meetings between the technical
advisor or resident engineer and the
construction contractors are
recommended to deal with actual
progress in the previous week as
summarized from inspectors' daily
inspection reports and expected activity
for the following week. The progress
schedule should be discussed to analyze
problems and get the project back on
track. However, measures for meeting
the contract completion date should
remain the responsibility of the
construction contractor. If any work has
been rejected, there should be
agreement on what must be done. The
status of proposed and potential
changes may be reviewed so that
everyone agrees on the actions to be
taken. Provisions for special events such
as holidays, tie-ins to existing systems
and tours of the project can be made in
the weekly meeting. A memorandum
summarizing the meeting should be
distributed to all participants and the
project manager.
There should also be a monthly
management meeting between the
project manager, technical advisor and
resident engineer to review progress.
Prior to the meetings, the project
manager should require either the
technical advisor or construction
manager to prepare a monthly report
summarizing the status of project costs,
schedule and contract administration
items such as change orders and
payments, potential problems and
recommended preventive or corrective
actions. This monthly report should
summarize the information from the
on-site weekly meetings.
Much of the written communication
during construction concerns questions
about plans and specifications. Each
question and answer should be put in
writing and a copy forwarded to the
project manager. The use of a
break-apart carbon form for questions
and answers has saved typing and filing
time on many projects. The
administrative support staff would be
responsible for tracking,
cross-referencing and filing them after
review by the project manager They
should be tracked until they are
resolved or become change order
proposals.
The project manager may use
standard distribution lists for routing of
correspondence, reports and written
communications. Some recipients may
only need to be sent, for example,
weekly reports and change order
proposals which will save unnecessary
reading and filing.
Preconstruction Conference
The preconstruction conference is held
after contract award and prior to the
beginning of construction. This is the
first meeting which will be attended by
everyone involved in the construction of
the project except the reviewing agency.
Another preconstruction conference
should also be arranged with the Equal
Employment Opportunity Office (EEO)
of the U.S. Department of Labor,
generally where building costs exceed
$1 million, to ensure that contractors
understand and comply with the
Federal EEO requirements.
Attendees should include the project
manager, construction manager if used,
members of the project management
team, field personnel, all construction
contractors, appropriate municipal
officers and representatives from public
and private utilities. Major
subcontractors may be included at the
option of the construction contractors.
The purpose of the preconstruction
conference is for the municipality, the
project management team and the
construction contractors to coordinate
schedules, review regulatory
requirements, resolve questions, and set
the ground rules for working together
during construction.
The project manager should have a
checklist of items to discuss at the
preconstruction conference. Listed
below are some suggested topics for the
checklist:
Organization, responsibilities and
authority of each participant.
Communications and contact points
between all participants.
Overall project and detailed
construction contractors' schedules and
coordination between construction
contractors.
Questions on plans, specifications
and contract documents.
Payment requests from construction
contractors' forms, timing, methods of
establishing quantities, documentation,
retainage.
Change order requests,
documentation, approval levels.
Minimum wage and posting of wage
rate determination.
Compliance with local, State and
Federal laws on such topics as
occupational safety, equal employment
opportunity, minority and women
owned enterprises, and small business.
Worksite topics such as earthwork
locations and removal, storage areas,
inspection and testing procedures,
responsibility for layout and staking,
traffic control and signs, environmental
protection, worker and public safety,
fire and blasting protection,
coordination with utilities, ar. i cleanup.
[40 CFR 30.603J
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Project and Contract Schedules
The technical advisor should prepare an
overall project schedule. Lead times and
deadlines should be reasonable and
construction methods and procedures
should not be influenced or dictated
with unnecessary schedule constraints.
The contract documents should make
the construction contractors responsible
for developing and updating contract
schedules for construction and for
meeting the time for completion
established in the overall project
schedule. Each contract schedule should
be delivered shortly after the
construction contract is signed.
The project manager, with advice
from the technical advisor or
construction manager, must decide
whether to require a Critical Path
Method (CPM) schedule, a bar chart or
other type of schedule in the contract
documents. As a rule of thumb,
contracts with over 25 activities will
benefit from the more detailed schedule
control provided by a CPM schedule.
Any activity over 15 days duration
should generally be broken down into
subactivities.
The CPM is a system where all the
construction operations which have to
be done in sequence are shown on a
line diagram. The diagram shows the
sequence and length of time it takes to
complete each operation by representing
each operation with an arrow. By
tracing along the various paths of the
series of arrows, the construction
contractor can determine which path
establishes the minimum time to
complete the work. That path is called
the critical path and changes in the
timing of operations along it normally
affect the time of completion.
A bar chart will show a few major
activities more clearly, but not show the
relationship between various activities.
It is not unusual to use a bar chart for
the overall project schedule of key
events included in the grant application,
yet require CPM contract schedules.
When more than one construction
contractor is on a site or coordination is
required to maintain the operation of
existing facilities, an overall project
CPM schedule is strongly advised. ]f
either a project or contract schedule is
too complex for the people expected to
use it, it will not be effective and project
scheduling will not be under control.
For projects where a contract CPM
schedule will be required, the following
are minimum requirements:
The schedule must meet any
intermediate milestone dates and the
time for completion of the overall
project schedule as given in the
specifications.
The schedule should include all
submittals defined in the specifications.
Receipt and the installation of
specialized equipment should be clear
in the schedule.
The schedule must identify the
critical path to allow evaluation of a
claim for delay on a noncritical activity
or assessment of the need to accelerate
construction in order to meet deadlines.
Many commercial CPM analysis
systems and scheduling specialists are
available. The technical advisor or
construction manager will probably
have CPM capabilities available.
Monitoring Construction Progress
Schedules are effective management
tools only if they are regularly
monitored and updated through field
personnel to reflect necessary changes.
Cost and time of work remaining should
be compared with the contract funds
balance and time remaining.
Updates and revisions should be
made from records of construction
progress and inspections which also
provide communication checks among
field personnel, information needed to
resolve disputes quickly and support of
construction change orders and the final
EPA audit. Therefore, inspector's diaries
and daily reports should be stored
securely, either on the job site or in the
technical advisor's office.
Documentation should include
inspector's diaries, daily reports, and
photographs of the job site. Particular
attention should be given to changed
conditions. The daily report should
contain the items listed under DUTIES
AND RESPONSIBILITIES OF THE
PARTICIPANTS. Photographs, including
those of deficient work, are among the
most helpful ways of establishing job
progress on a routine basis and should
be used to supplement inspectors daily
reports. Descriptions and dates should
be written on the prints and they should
be securely filed.
Enforcing the Construction Progress
Schedule
The construction contractor should be
given every opportunity to keep the
project on schedule, while maintaining
the specified quality and cost of the
work. However, if relations with the
construction contractor break down
completely to the point of default, the
project manager should discuss the
problem with the legal advisor and
promptly contact the bonding company,
which then can determine whether to
replace the construction contractor or
take other actions. Failure to put the
bonding company on notice and
exercise the schedule enforcement,
default and remedies clauses exactly as
in the construction contractor's contract
may result in loss of the municipality's
avenues of legal recourse and ability to
recover any funds or finish the project
within budget.
As a practical matter, the construction
progress schedule should be enforced as
effectively as possible by frequent and
meaningful communications and
decision-making, prompt payment for
work in place and increased retainage
for unsatisfactory progress.
[40 CFH 30.301(dJ(2), 30.306, 35.2005, 35.2212]
Contract Administration
Management of Construction Contractor
Payments and Requests for
Reimbursement
Prompt payments to construction
contractors are necessary and often
required by provisions in the contract
documents. While several States have
laws or are considering legislation that
requires payment of interest penalties to
construction contractors for late
payment of legitimate invoices, Federal
law prohibits the use of grant funds for
such interest payments. Thus, the
project manager should expedite
construction contractor payments.
Use of proper payment procedures
should motivate construction
contractors to finish tasks on time while
minimizing capital requirements. The
municipality should not overpay a
construction contractor in order to avoid
the possibility of being unable 1o
recover overpayments in the event of
construction contractor default.
Contract documents should describe
the procedures and timing for
processing construction contractor
payment requests. The contract
documents should also describe the
municipality's retainage policy for
processing construction contractor
14
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payment requests, which must be in
accordance with State law. If the
construction contractor is making
satisfactory progress and there is no
other specific reason for withholding a
portion of the progress payments,
retainage should only be that amount
necessary to assure completion of the
project. While EPA regulations no
longer specifically address retainage,
EPA will only pay the Federal share of
allowable costs which are currently due
and payable by the municipality, which
means deducting any retainage held
against the construction contractor. EPA
regulations prior to March 28, 1983,
limited the amount of retainage to 10
percent of cumulative payments up to
50 percent project completion, and
reduction to 5 percent until substantial
completion unless there were specific
reasons justifying a greater percentage of
retention. At that time, all retainage
would be paid except that amount
specifically required to ensure
completion of the contract. As with late
payments, some States may require
payment of interest on retainage held
out from payments to construction
contractors.
One common method of determining
the amount of each partial payment to
the construction contractor is a contract
breakdown by subcontracts and
equipment suppliers, by trades, or any
other convenient division. The resident
engineer or technical advisor and the
construction contractor's superintendent
then agree on a percentage complete for
each line item in the breakdown each
month and from this an estimate of
value in place is calculated. Another
method involves estimating the
quantities of equipment and materials
that are in place at the end of each
month. For unit price contracts, the
estimated quantities multiplied by the
unit prices in the bid schedule will
determine the progress payment. For a
lump sum contract, the project manager
and construction contractor must
initially agree on a set of unit prices to
be used for equipment and materials.
Still another method is to agree on
values for the individual activities in a
detailed construction schedule. Payment
is then based on the percentage
completed of each activity each month.
If interim payment is being made in
accordance with the contract documents
for equipment being specifically
fabricated for the project, the project
manager should arrange for inspection
of the equipment while it is in the
manufacturing plant. To protect against
default by the supplier, a performance
bond adapted to this situation is
recommended.
Whatever the method used in
establishing the value of partial
payments to the construction contractor,
it should be established at the start of
the project. For any method the
payment request should include the
following:
Required appropriate breakdowns of
the contract into project items.
Required invoices from the supplier
or manufacturer with cost of the item
shown for stored materials.
Records of stored items previously
paid with installation date and balance
of items to be installed.
List of approved change orders with
amounts.
Field quantity calculation worksheets.
Update of the contract progress
schedule.
The resident engineer or technical
advisor should provide a separate
verification of work in place.
The technical and financial advisors
should establish a time of the month to
determine value of work in place and a
processing sequence that results in
prompt payment to the construction
contractor, taking the disbursing
patterns of the municipality into
consideration. Many municipalities are
limited by the timing of governing board
meetings to approve disbursements, or
by prearranged accounting cycles. The
request for payment should be timed so
that it can be reviewed, processed, and
disbursed in the shortest possible time.
The system should also assure that the
financial advisor is given prompt notice
of variance from anticipated payments
to construction contractors and others
so that cash flow projections can be
updated. While procedures for
submitting interim payment requests
(EPA Form 271, Outlay Report and
Request for Reimbursement for
Construction Programs) vary from State
to State, the following is some of the
supporting documentation that may be
required to accompany requests for
reimbursement:
Invoices for services.
Construction contractor's payment
request.
Separation of eligible from ineligible
and innovative/alternative (which are
eligible for reimbursement at a different
Federal share) from conventional project
items.
Change orders approved by the
reviewing agency.
Authorization of request for
reimbursement.
[40 CFR 30.400, 33.280]
Processing Change Orders
A change order is a written document
which is issued to a construction
contractor in order to alter the price,
time of completion, or any other
requirement of the original contract
documents, as long as it does not
increase the scope of work of the
contract. Change orders may originate
from the construction contractor as a
proposal or claim, or may be initiated
by the municipality. Since it may alter
the competitively established price of a
contract awarded to a low bidder,
change order negotiations need to be
conducted in a manner which will
preserve the benefits of the original
low-bid price. If the change is within
the scope of the project, but outside the
scope of work of existing contracts on
the project, it may be necessary to
procure the work required by the
change as a separate contract through
formal advertising.
The municipality must formally agree
to any change in the conditions of the
construction contract. The project
manager should:
Determine whether a change order is
warranted.
Negotiate a fair and reasonable price
and time extension for required
changes, or authorize the technical
advisor to do so.
Maintain cost basis records for the
change, including records of
negotiation.
Maintain current and accurate fiscal
projections of contract and project
completion costs.
Resolve disputes which may have
arisen as a result of a proposal for a
change.
Notify the reviewing agency in
writing of events or proposed changes
that require a grant amendment.
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The project manager should require
the technical advisor to:
Provide an opinion on whether a
change is needed and, if so, why.
Prepare a fair and reasonable
independent cost and time estimate on
the proposed change to verify that the
cost and time extension estimate
prepared by the construction contractor
is fair and reasonable.
Negotiate change orders if authorized.
The project manager should require the
construction contractor to:
Provide and certify cost and time
extension data needed for review of
their necessity and reasonableness and
of the eligibility and allowability of
costs proposed.
Submit change order proposals within
the time allowed by the contract and
enter into meaningful negotiations on a
necessary contract change.
Comply with EPA recordkeeping and
accounting requirements for change
orders.
If a change order will significantly
affect project performance or costs,
written approval should be obtained
from the reviewing agency before work
is started on the change. To minimize
construction contractor delays, advance
notice should be given to the reviewing
agency for prior approvals.
The municipality is financially
responsible for any non-Federal share of
the costs added as the result of a
change. Furthermore, the reviewing
agency will make a detailed review of
each change order and if it determines
that a change order cost is not allowable
for EPA participation, the entire change
order cost would be considered
non-Federal costs.
Additional information on change
orders can be found in the EPA
publication, Management of
Construction Change Orders, A Guide
for Grantees, March 1983.
[40 CFR 30.700, 35.2204]
Management of Claims
A claim is a construction contractor's
request for relief, alleging that the
municipality's action, inaction or
misrepresentation in the contract
documents has caused an involuntary
change in the cost or time of performing
the contract.
Techniques that can help the project
manager to minimize the occurrence
and effect of claims can be found in the
EPA publication Claims Management
Guidance, March 1985. Some of these
are to:
Closely monitor the construction
project in order to anticipate problems
and be prepared to resolve them as
quickly as they arise.
Make a fully adequate subsurface
investigation and include the results in
the bidding documents.
Ensure that the plans and
specifications are biddable and suitable
for construction, that all conflicting
language has been removed and that
ambiguities have been clarified before
advertising for bids.
Specify an adequate construction
schedule for the complexity of the
project.
Periodically review the construction
schedule, enforce its provisions and
revise it by change order whenever
circumstances justify extension of the
schedule dates.
If a claim is filed, the project manager
should address the issues raised and
control the future costs of the claim by
having the technical and legal advisors
analyze each issue. Then, a fair and
equitable settlement of the meritorious
portions of the claim, if any, should be
negotiated.
Claim assessment and negotiation
costs may be eligible for grant assistance
if prior approval by grant amendment is
received from the reviewing agency.
Technical or legal assistance from the
reviewing agency is generally given only
after all possible sources of assistance at
the municipal level have been explored.
[40 CFR 30.700, 35.2204]
General Construction
Management Activities
Coordination of Utilities
The project manager should make sure
that all utility needs during the
construction process and for operation
of the project are planned for,
coordinated with local utilities and in
accordance with any applicable State
laws. Rights of way necessary to install
water, gas and electric lines for
temporary service during construction
and for any permanent hook-ups or
substations needed for operation should
be obtained and arrangements made to
secure these services from utilities in
the time frame necessary to mee;t the
project schedule. Responsibility for
installation and payment for temporary
utilities is generally given to the
construction contractor in the contract
documents.
Traffic Control
The project manager should make sure
that the construction contractor has
arranged with local and State authorities
for detours or traffic restrictions because
of construction in public roads,
designation of truck routes through
populated areas to minimize impacts,
and general control of entrances to and
exits from construction areas. Traffic
police may need to be assigned
accordingly and a traffic control plan
approved before any construction
begins.
Safety Considerations
The project manager should ensure that
contract documents require construction
contractor compliance with local, State,
and Federal (OSHA) safety
requirements. Contract documents
should also require that the construction
contractor have a contingency pilan for
handling on-site injuries if they do
occur and post emergency numbers and
directions to a hospital. The field
personnel should include in its reports
all instances where the construction
contractor has been notified that an
unsafe condition is detected by anyone
and any corrective actions taken.
Site Security
The project manager also needs to plan
in advance to guard against potential
public safety hazards. This includes
ensuring that the construction
contractor erects fencing at the site,
institutes site security and visitor
precautions, and safely stores chemicals
and explosives, all of which should be
in the contract documents.
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Conferences with the
Reviewing Agency
During the construction process, the
following conferences, inspections and
evaluations will be conducted by the
reviewing agency to assure that the
project is being managed effectively and
being built in accordance with the plans
and specifications.
Project Management Conference
The Project Management Conference
(PMC) by the reviewing agency should
preferably be scheduled before the
preconstruction conference since many
of the PMC topics will be discussed at
the preconstruction conference. The
purpose is to provide the project
manager and management team with
detailed guidance for overseeing and
managing the construction project.
The PMC begins in the municipality
with a briefing by the reviewing agency
representative for the project manager,
members of the management team and
appropriate members of the field staff.
The main points to be covered are:
Project management including
management and processing of change
orders and claims, processing of
payment requests, maintenance of
adequate records for subsequent audit,
schedule for sewer system rehabilitation
if necessary, adoption of a sewer use
ordinance and implementation of a user
charge system before the treatment
works is placed in operation,
development and implementation of the
final plan of operation.
Grant management including
regulatory requirements for procurement
procedures and property control, special
grant conditions, recordkeeping, project
performance certification and project
closeout procedures, EPA and State
audit requirements.
Construction management activities
including the technical advisor's
responsibilities and authority, resident
engineering and inspection activities,
ensuring conformance with the
approved plans and specifications, daily
reports, materials testing and ensuring
adherence to the construction schedule.
Interim Inspections
Scheduled interim inspections are
conducted by the reviewing agency to
ensure that the project management
team and the construction contractor are
fulfilling their respective
responsibilities. The frequency of
interim inspections is determined by the
size and complexity of the project, the
rate of progress being achieved, and the
nature of problems or issues arising
during construction. A project may be
inspected as often as monthly, but
where a project is progressing'well and
there is a demonstrated high level of
project management capability,
inspections may be bimonthly or
quarterly. On extremely large or
complicated projects, more frequent
inspections can be expected.
Regular interim inspections also
provide the reviewing agency with an
opportunity to focus on one specific
area at a time such as fiscal records,
project files, procurement, or
management of claims and change
orders. Using this approach, all
significant aspects of grant management
would be covered over the life of the
project. Where necessary, unannounced
interim inspections may also be
conducted, based on the findings of
earlier inspections or other information
brought to the attention of the reviewing
agency.
Principal areas of focus during
interim inspections typically include
grant management and recordkeeping,
compliance with grant and permit
conditions, contract administration
including claims and change order
management, Labor Standards and
MBE/WBE compliance, construction
progress and schedule, construction
quantity and quality, and
implementation of the plan of operation
including preparation of the Operation
and Maintenance manual.
Construction Management
Evaluations
A Construction Management Evaluation
(CME) is a comprehensive on-site
review of selected projects by the
reviewing agency. It covers the entire
project, including all phases of the
project management team's
responsibilities and performance. It is a
more formalized procedure than an
interim inspection, and differs primarily
in the depth, duration, and purpose of
the review.
The objective of the CME is to
evaluate project management
procedures, and through this process
gain insight into overall management of
the EPA construction grants program.
Typical areas of review include:
Grant Management, including
adherence to grant requirements,
procurement requirements, and the
adequacy of accounting and
recordkeeping systems.
Construction Management, including
the adequacy of inspection reports,
materials testing and certificates, shop
drawings, record drawings, and progress
payment procedures, as well as the
handling of claims, change orders,
correspondence, labor requirements, and
other organizational requirements.
At the conclusion of the CME, the
reviewing agency presents an exit
briefing and prepares a formal report. Of
particular importance are the action
items which may include actions that
need to be taken by the project manager
to correct deficiencies and actions to be
undertaken by the reviewing agency to
assist in the successful completion and
audit of the project.
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Preparing to Operate the
Facility and Closing out
Construction
Releasing the Construction
Contractor
As the final step before the construction
contractor is released, the project
manager should conduct a final
walk-through with the technical advisor,
resident engineer and chief facility
operator to assure that all work has been
completed. This is done after all
equipment has been tested and
generally after a startup period in which
equipment and processes have been test
run. The project manager should have
the legal advisor examine the project
and contract records, and the financial
advisor examine financial records
pertaining to the contract. The project
manager should also ensure that all
work under each contract has been
successfully performed by the
construction contractor in accordance
with the plans, specifications, and
change orders which have been
previously approved by the reviewing
agency, and that all legal obligations
including all payments to
subcontractors and suppliers have been
satisfactorily met.
In addition, the project manager
should ensure that specified contract
requirements for bonds, warranties,
guarantees, and assurances have been
met. Before release, copies of all
warranties should be obtained from the
construction contractor, legally
transferred to the municipality, and
filed.
[40 CFR 30.800, 33.1030(14)]
Completing the Final Inspection
The reviewing agency will conduct a
project final inspection to establish to
the satisfaction of EPA that construction
of the project is completed in
accordance with approved plans,
specifications, and change orders. Final
inspection may occur before or after
release of the construction contractor.
Specifically, the final inspection is to
determine for the contract or project if
all but minor components of the project
such as landscaping have been
completed in accordance with the
approved plans, specifications, and
change orders; the facility is capable of
functioning as designed; all equipment
is operational and performing
satisfactorily; and laboratory facilities
are complete and available to conduct
appropriate tests.
The municipality must request this
project final inspection by notifying the
reviewing agency that construction is
complete. The reviewing agency will,
shortly after this request, schedule and
conduct the inspection, usually at a
mutually agreeable date. The project
manager should lead the group
supporting the reviewing agency's final
inspection.
Generally the reviewing agency will
establish a cut-off date at the time of
final inspection, which may be from 30
to 60 days later to allow correction of
miscellaneous items. Costs incurred
after the cut-off date are not allowable
except costs for startup and engineering
services during the one-year
certification period. Revisions to the
cutoff date are the exception to the rule,
so that construction should be complete
before the final inspection.
If the reviewer arrives at the project
site to conduct the final inspection and
conditions exist that prevent it from
being completed, a written statement of
the deficiencies should be provided. For
example, there may be unsatisfied grant
conditions or lack of flow data on
which to certify the project as operable.
After these problems are resolved, the
project manager must inform the
reviewing agency of their correction so
the final inspection can be rescheduled.
[40 CFR 35.2216]
Certifying Project Performance
The one-year project certification period
starts when the municipality notifies the
reviewing agency in writing of its intent
to initiate operation of the project. At
the end of the period, the authorized
representative must certify to t.he
reviewing agency whether or not it
meets certain standards. Discharging
projects must meet design specifications
and effluent standards under design
year equivalent flows and loads as well
as under initial year flows and loads.
Nondischarging projects such as
interceptor sewers and pumping station;
must meet design specifications only.
Sewer rehabilitation projects must meet
standards for quantity of infiltration anc
inflow eliminated.
In order to accomplish this, either the
engineer who was responsible for desigi
or the engineer providing technical
advisory services during project
construction must be selected as the
prime engineer for the project
certification period.
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The prime engineer should be
required to direct the operation of the
project, including:
Reviewing the operation of the unit
processes and equipment that make up
the treatment works.
Briefing municipal officials and plant
personnel on the status of the project
performance program and overall
project operation.
Reviewing adequacy and
appropriateness of user charges,
budgets, salaries, and other financial
management items to meet the short and
long term needs of operating the facility.
Providing assistance with setting up
and tracking warranty files so that they
are stored in an organized manner for
easy retrieval.
Reviewing personnel systems, record
development, laboratory procedures,
process systems, and safety and
emergency systems.
Providing training of operating
personnel.
Preparing curricula and training
materials for operating personnel.
Revising the final Operation and
Maintenance manual to accommodate
actual operating experience.
Advising the authorized
representative whether the project is
meeting its performance standards and,
if not, providing a report recommending
corrective actions.
The prime engineer should keep the
project manager informed of any overall
management issues during the project
certification period including:
The capability and performance of
operating personnel to effectively and
efficiently operate and maintain the
facility under normal, alternate, and
emergency modes of operation.
The capability and performance of the
municipal organization to effectively
accomplish necessary administrative,
utility management, and financial
functions.
Actual and estimated future costs of
operation and maintenance in relation
to prior estimates of costs, the adequacy
of revenue sources, and actual charges
necessary to meet revenue requirements.
To ensure that these activities are
being properly conducted, the project
manager can request weekly updates
from the prime engineer on the
performance of all personnel and
equipment, and conduct spot checks to
confirm these reports. Regular staff
briefings can be scheduled monthly to
inform other project personnel and
municipal officials of project
performance.
A schedule for training sessions
should be set up by the prime engineer
well before the project certification
period begins on at least the following
topics:
Operation and control of specific unit
processes and equipment during normal
and abnormal conditions.
Flow measurement and sampling
procedures.
Laboratory procedures.
Maintenance management systems.
Preventive and corrective
maintenance measures.
Effective use of the Operation and
Maintenance manual.
Records management.
Financial management.
An adequate course should
completely train operating personnel
early in the one-year performance
period. Then, during the year, operating
personnel should improve their
operating skills under the direction of
the prime engineer until they
demonstrate that they can operate the
facility on their own. This should be
accomplished well before the end of the
performance period.
During the one-year performance
certification period, the list of supplies
needed for operation and maintenance
listed in the Operation and Maintenance
manual should be reviewed to ensure
that adequate supplies are available for
routine operation of the project. Also, a
competitive procurement method
should be documented in the files for
obtaining and assuring that adequate
supplies will be available when needed.
Frequently used suppliers for each
required item should be listed, with
appropriate telephone numbers and
current prices.
[40 CFR 35.2218]
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Preparing for the Final
Audit
In accepting an EPA construction grant,
the authorized representative has agreed
to make all project-related books,
documents, records, and papers
accessible to the reviewing agency for
audit purposes. The objective of the final
audit is to determine: which claimed
costs are eligible, allowable, reasonable
and allocable to the project; that the
project is put to its intended use; and
that all applicable laws, regulations, and
grant conditions have been complied
with.
When the auditors arrive, they should
be introduced to the project manager
and appropriate administrative and
financial personnel, and each person's
primary responsibilities outlined. The
authorized representative may wish to
designate the project manager as the
main point of contact for the auditors.
The auditors can be expected to
review the project accounting practices
including accounting records;
supporting documents to verify claims;
traceability of transactions; the proper
segregation of costs into
eligible/ineligible, allowable/allowable
and direct/indirect categories; internal
financial controls and accounting
reports. The auditors will also review
the records supporting force account
claims, procurement management
practices on professional and
construction contracts, and project
management practices for cost and
schedule control. Other materials
subject to review may include flood
insurance, the property control system,
compliance with the facility's NPDES
permit and readiness to operate the
facility. This includes a look at the
facility's permanent record file, staffing
and laboratory.
Records Needed
Preparing for the audit requires ensuring
that the project records have been
maintained, are up to date and are
easily accessible. Project management
records generally needed during the
final audit include the following:
Copies of the original grant
agreement, any amendments to it and
the grant application.
Records of procurement actions.
Records and accounts covering
receipt and disbursement of project
funds.
Copies of contracts awarded for work
under the project.
Copies of periodic reports of project
progress.
Vouchers paid from project funds.
Time and attendance records for
employees paid from project funds for
both administration and force account.
Records of personal property such as
equipment not included in construction
contracts and charged to project funds.
Documentation of project travel
expenses.
Copies of facility plans, user charge
systems, Operation and Maintenance
manuals and other documents required
by EPA regulations or grant conditions.
Copies of interim and final requests
for reimbursement of grant funds.
Project bank account statements and
cancelled checks.
Copies of plans, specifications,
change orders, and record drawings.
Copies of public notices of property
acquisition programs, and records of
appraisals, offers, and payments for real
property interests including easements
acquired for the project.
Copies of public notices of relocatior
assistance programs and records
supporting payments to persons
displaced from their homes, businesses
or farms by the project.
[40 CFfl 30.540]
Common Audit Problems
A review of EPA audit reports show the
some problems recur on a great many
projects. These frequently identified
audit problems are:
Costs Claimed Which an Accounting
System Cannot Document or Support
The most common problem is the lack
of an adequate recordkeeping and
financial management system which
provides for accountability and control
of all property, funds, and other assets.
Generally, municipalities maintained
records that were adequate to satisfy
their own needs, but Federal
requirements often exceed those needs.
Every entry in the accounting records
should have been supported by
appropriate documentation and in
accordance with Federal and State
recordkeeping and audit requirements.
This might be an incoming document
such as an invoice, or it could be an
internally generated document such as i
payroll list. In many cases, several
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different documents would be necessary
to support a single transaction. For
example, a purchase of materials should
have a purchase request, purchase
order, and receiving report in addition
to an invoice. It might also involve
requests for proposals, contracts,
governing board resolutions, progress
reports, and progress payments.
The files of supporting documents
should contain all information
necessary to explain every transaction
completely. Files should be
cross-referenced in such a way that
transactions can be traced from any
document dealing with the transaction
back to the initiation of that transaction
and forward to the bookkeeping entry or
entries concerned with that transaction.
All too often funds spent on the
project cannot be accounted for; records
are not supported by source
documentation; the costs are not
segregated into eligible and ineligible,
allowable and unallowable categories;
and requests for reimbursement are
substantially overstated or understated.
Items most frequently identified were:
lack of time card types of records, lack
of cancelled checks, and inadequate task
descriptions in contracts.
Costs Claimed in Excess of Grant or
Contract Limitations
A common audit problem is engineering
costs which appear to be outside the
scope of the contract. Municipalities are
responsible to ensure that engineers
perform in accordance with the terms,
conditions, and specifications of their
contracts. The engineering contracts
should provide that no services be
furnished for which additional
compensation could be charged without
written authorization.
Costs Claimed Which Have Been
Previously Determined Ineligible or
Unallowable
Municipalities sometimes claim costs
that are ineligible, unallowable, or that
have been denied on previous payment
requests and must be recovered at final
audit.
The municipality should try to
resolve adverse eligibility decisions on
which there is a reasonable basis for
disagreement with the reviewing
authority when they arise. This will
expedite the final decisions on
outstanding issues before they are
brought up during the final audit and
delay the closeout process.
Costs Incurred After the Authorized
Construction Contract Completion Date
If project records do not adequately
identify the actual engineering tasks
performed, the auditor may question the
technical services incurred after the
construction completion date including
any approved time extensions as
inspection services for delinquent
construction activities. Project records
should show whether the costs incurred
were for such items as record drawings,
Operation and Maintenance manual
completion, change order processing,
claims management or normal contract
closeout procedures.
Redesign or Rework Costs
Costs for any rework are generally not
allowable unless they resulted from
changes in Federal requirements, since
such costs are not considered necessary
or reasonable. If the project was
replanned or redesigned, the
municipality should be prepared to
document the change in Federal
requirements making the rework
necessary and approval from the
reviewing agency for the rework.
Force Account/Administrative
Expenses/Indirect Costs
Common force account audit problems
are due to not having received prior
written approval, having exceeded the
funding limitation, and not having
maintained adequate records to support
the force account and administrative
costs claimed. An estimate of the
percentage of an employee's time spent
on project work is not an adequate
record for this purpose.
Reimbursement of indirect costs can
be made when a provisional indirect
cost rate has been approved by the
reviewing agency and specifically
provided for in the grant agreement. The
most common indirect cost audit
exceptions are due to not having
received provisional approval of the
indirect cost rate and not being able to
substantiate the claim for indirect cost
reimbursement at the time of audit. EPA
regulations and guidance are available
to assist in accounting for indirect costs.
Unapproved or Unallowable Change
Order Costs
A common audit problem is
reimbursement requested for change
orders before they have been approved
by the reviewing agency. The best
opportunity for obtaining full
allowability of change orders is by
submitting them for approval as soon as
executed.
Non-Compliance With Procurement
Regulations
Areas of common audit problems due to
procurement non-compliance are
improper methods used in selecting a
professional services firm, lack of
procurement documentation especially
regarding utilization of minority and
women owned businesses, lack of
contract negotiation documentation,
services performed without an executed
bilateral written agreement, and cost
ceilings of contracts exceeded without
prior written authorization and written
amendment to the contract.
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Appendix
Management Plan Worksheets
Grantee Name: Date Prepared:
Grant Number: Prepared By:
Project Type (Plant, Interceptors, other):
Project Description:
Eligible Cost:
Project Management
1. Project Manager:
Status of Position (Filled? Full-time?):
Major Responsibilities and Duties:
Name:-
Type of Position (Employee, other):_
Location (In project office, in municipal department, other and phone number):
Construction Manager:
Status of Position (To be used?, Filled? Full-time?):
Major Responsibilities and Duties:.
Name:_
Type of Position (Employee, consultant, other):
Location (In project office, in municipal department, other and phone number):.
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24
2. Project Management Support
Technical Advisor:
Status of Position (Retained?, Same as Designer?):
Major Responsibilities and Duties:.
Name:_
Type of Position (Employee, consultant, other):_
Firm Name and Address (If applicable):-
Work Location (In project office, in municipal department, other and phone number):
Financial Advisor:
Status of Position (Filled or Retained? Full-time?) :_
Major Responsibilities and Duties :_
Name:_
Type of Position (Employee, other):.
Work Location (In project office, in municipal department, other and phone number):.
Accountant:
Status of Position (Filled? Full-time?):.
Major Responsibilities and Duties:.
-------
Name:
Status (Employee, other):.
Work Location (In project office, in municipal department, other and phone number):.
Legal Advisor:
Status of Position (Filled or retained?, Full-time?):.
Major Responsibilities and Duties:.
Name:_
Type of Position (Employee, on retainer, other):_
Work Location (In project office, in municipal department, other and phone number):
Grant Administration, Contract Administration and Procurement:
Depending on project size and team organization, these duties may be delegated across the
management team, as appropriate, or assigned to additional staff.
Name Full or Work Location
Part-Time
Grant Administration:
Contract Administration:
Procurement:
3. Field Personnel
Based on the size and complexity of the project, field personnel will include (resident engineer,
number of inspectors):
Source:.
Resident Engineer (full or part-time):_
Inspectors (number, assignments, full or part-time):-
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4. How will the project management team be organized?
(Attach an organizational chart including names and vacancies):
Preparing for Construction Contract Award
1. Organizing the Project Management Team
When is the organizational meeting? Who will attend?
2. Recordkeeping
Who will manage and maintain the filing system? (Name, full or part-time, work location and phone
number):
What file categories will be used? (Attach copy):
How will files be indexed and cross-referenced?
What management procedures will be used to make sure that records, documents, logs, and ledgers ai
secure, complete, and up-to-date?
How will it be ensured that the project management team and construction contractors are
maintaining their files?
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3. Accounting
Who will be responsible for establishing and managing the accounting procedures? (Name, full or
part-time, work location and phone number):
Attach a chart of accounts:.
4. Project Funding/Cash Flow Planning
Estimate average schedule of payments and grant reimbursements.
Payments Reimbursements Net Cumulative Outlay
$/month
Because not all of this will be reimbursed by the grant and because grant payments will lag behind
project payments, some interim financing will be needed.
Total additional amount to be financed
If interim financing is to be obtained from a variety of sources:
Source Amount of Total Date Available
5. Permits
Permits that will be needed:
Federal State Local
Who has the responsibility for obtaining permits necessary for this project?
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6. The Procurement Process
Self Certification:
If self-certification is being considered for the procurement process, what steps are being taken to
ensure conformance with EPA procurement regulations?
Procuring Professional Services:
Indicate the method to be used in procuring professional services to oversee construction (competitive
procurement, use of same engineer, non-competitive procurement, force account):
If using the engineer that performed planning and design, reasons for this approach:
If using non-competitive negotiation, reasons for this approach:
If using municipal employees (force account), reasons for this approach:
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Securing A Construction Contractor:
Which types of construction contract are to be used? (Single contracts, multiple prime contracts,
equipment prepurchase, other):
For the following reasons:
Preparing and Reviewing Bids:
Outline of the procedures established for receiving and evaluating bids from construction contractors:
7. Testing Services:
The following arrangements for testing services have been or are being made:
Type Status
8. Bonding and Insurance
The following bonds and insurance will be required in the construction contract documents:
Contract Contract Amount Type/Amount of Bonds and
Insurance
The following additional municipal insurance coverage will be obtained:
Type Amount
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9. Worksite Acquisition
The following worksites need to be acquired:
Status
Plant construction site
Railroad crossings
Easements
Sludge disposal sites
Other
Managing the Project During Construction
1. Field Oversight and Reporting
Reporting requirements to be established (reports, meetings, briefings) from:
Type of Reporting Frequency
Construction Manager
(if applicable)
Technical Advisor
Resident Engineer
Construction
Contractor(s)
Others
Where will the main set of construction files be maintained?
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2. Project Schedule Control
What techniques will be used for tracking progress against the construction contractors' schedules (bar
chart, CPM, other) and why selected?
Who will be responsible for tracking construction progress against the construction contractors'
progress schedules?
3. Management of Payments and Requests for Reimbursement
How is value in place to be estimated? (Breakdown of total contract amount at beginning of job,
estimation of quantities of materials in place at the end of each month, values assigned to individual
construction activities in detailed project schedules, other):
What municipal disbursement patterns must be taken into account when planning a schedule for
making progress payments?
Attach a flow chart describing the timing of monthly payment schedule activities:_
If retainage is to be employed, what is the basis of the policy? (State or local laws, other):
How will construction contractors be informed of the requirements for submission of payment
requests and the municipal retainage policy?
4. Processing Change Orders
Who will represent the municipality in negotiating construction change orders? (Project manager,
construction manager, technical advisor, legal advisor, other:
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Who will prepare the change order documentation? (Project manager or technical advisor):
Who will have the authority to approve negotiated construction change orders for the municipality?
(Authorized representative, project manager):
What time limit has been set for completing change orders?
5. Management of Claims
Who will represent the municipality in responding to construction claims for the municipality?
(Project manager, construction manager, technical advisor, legal advisor, other):
What time limit has been set for responding to claims?
6. Other Construction Management Activities
What State and local utilities and municipal departments have been contacted about the proposed
project and their cooperation obtained in meeting needs for construction and operations?
Status
Electric
Gas
Water
Department of Public Works
Department of Transportation
Telephone
Police Department
Other
What provisions have been made to ensure that on-site safety and security requirements are being
complied with?
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Preparing to Operate the Facility, Closing Out Construction and
Preparing for Final Audit
Who will represent "the municipality at final inspection?
Who will represent the municipality at final audit?
Who has been designated the prime engineer for the one-year project performance certification period
after start-up?
Who will manage the activities of the prime engineer during the project performance certification
period?
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60604
1670
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Acknowledgements
The contribution of the following
participants in the development of this
guidance is gratefully acknowledged.
EPA Project Officer
Eliot Tucker - Municipal Construction
Division
Peer Reviewers
Rodney Dahl - Central Valley Water
Reclamation Facility, Salt Lake City,
Utah
Raymond Smit - McNamee, Porter &
Seeley, Engineers, and The National
Society of Professional Engineers,
Alexandria, Virginia
Robert Smith - Wickwire, Gavin &
Gibbs, Attorneys, and The National
Society of Professional Engineers,
Alexandria, Virginia
Work Group Participants and Technical
Reviewers
Bert Anker - EPA Office of the Inspector
General
Michael Asher - U.S. Army Corps of
Engineers, Huntington District
James Ashworth - U.S. Army Corps of
Engineers, Huntington District
William Buhnan - Water Management
Division. EPA Region 3
Donald Carothers - U.S. Army Corps of
Engineers, South Pacific Division
William Colony - EPA Office of the
Inspector General
Anthony DiLodovico - Water
Management Division, EPA Region 2
Roger Duwart - Water Management
Division, EPA Region 1
James Ewing - EPA Office of the
Inspector General
Kent Holland, Jr. - EPA Office of
General Counsel
Spain James - Northeast Ohio Regional
Sewer District, Cleveland, Ohio, and
the Association of Metropolitan
Sewerage Agencies
Clifford Johnson - Maryland Department
of Health and Mental Hygiene
Richard Johnson - EPA Grants
Administration Division
Donald Kunkoski - EPA Municipal
Construction Division
Scott McMoran - EPA Grants
Administration Division
Lee Pasarew - EPA Municipal Facilities
Division
William Puhl - Maryland Department of
Health and Mental Hygiene
Patrick Rankin - Office of Regional
Counsel, EPA Region 6
William Renfroe - U.S. Army Corps of
Engineers, Portland District
David Schachterle - Office of Regional
Counsel, EPA Region 8
Norman Sievertson - Water Division,
EPA Region 10
George Wallace - New York State
Department of Environmental
Conservation
David Welch - EPA Municipal
Construction Division
Contract support provided by
The Synectics Group, Inc.
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