Transmittal Memorandum 89-1
Handbook Of Procedures
Construction Grants Program
For Municipal Wastewater
Treatment Works
Municipal Construction Division
Office of Municipal Pollution Control
Office of Water
Printed on Recycled Paper
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
§ WASHINGTON. D.C. 20460
OFFICE OF
WATER
Transmittal Memorandum
TM 89-1
MEMORANDUM
SUBJECT: Updating of Handbook of Procedures
FROM: James A. Hanlon, Director! /,
Municipal Construction Division (WH-547)
TO: Handbook Users
Attached is a copy of the fourth updating of the Handbook of
Procedures, TM 89-1. As is evident, this update is considerably
more voluminous than those of the past. However, a large
majority of the revisions are citation notations and additions
brought about by the promulgation of 40 CFR Part 31 which, for
construction grants awarded after September 30, 1988, replaces
40 CFR Parts 30 and 33. A discussion of how these revisions were
dealt with in the text of the TM is provided of page 112.
As with previous Transmittal Memoranda, replacement pages
are marked "TM 89-1" on the bottom right side to distinguish them
from both the originals and those revised in the previous
updatings. Revised or added text material has been underlined so
that the latest changes are readily recognized. All previous
underlinings on the TM 89-1 pages have been removed. The TM
noted pages without underlinings contain either shifted material,
to accommodate lengthy insertions on adjacent pages, or
clarifications which are primarily editorial.
Also attached is a summary chart listing each revised page
and the reason for the revision.
For persons interested in maintaining continuous records, it
is suggested the this memorandum, the summary chart and the
replaced pages be filed at the end of the Handbook behind the
flow chart.
Attachment
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July 1989
SUMMARY OF HANDBOOK OF PROCEDURES CHANGES IN TM 89-1
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list.
Comment on Pt.31; Add drug free work-place
& debarment/suspension.
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Written agreement on eligible cost between
EPA and applicant.
Add drug free workplace.
Add debarment/suspension certification.
Expand guidance on liquidated damages.
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User charge systems & low income residential
users.
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PAGE
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{users.
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x [Remove requirement for document; now
{included as certification on applic. form.
x [Debarment/suspension guidance revised
[to reflect current regs.
x [Drug free workplace and Brooks-Murkowski
[amendment added to review procedures.
x [Remove requirement for document; now
[included as certification on applic. form.
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[Drug Free Workplace.
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] Brooks Murkowski Amendment .
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[Add 49CFR Part 24.
x [Change outline designation; correct form n
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x [Design-build grants.
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[Uniform Act Amendments of 1987.
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Correct application form number.
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100% M/R grants for RBCs.
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11 " " " " " ; add Step 7 .
Written agreement between EPA and grantee
on eligible costs.
n H ii ii ii ii
NOTE: increase in reporting minimum from
$10,000 to $25,000 under 40 CFR Pt.31.
Add Step 7
n n n
n n n
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III
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Update of discussion of Regulation &
Policy Matrices.
n n n n n n
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Add Uniform Act regulations cites.
Credit grantee refunds to allowable cost.
Update of guidance on requesting deviation
Add reference to A-87. 4
" " " "
Failed RBCs.
Add Step 7.
"Note" : Removed erroneous implication re
application of 12/27/77 date to privately
owned small onsite systems.
Add 49 CFR Part 24.
Guidance on reconnection of
service laterals.
n n n n n n
n n n n n n
M/R costs of failed RBCs.
IV
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TABLE OF CONTENTS
LIST OF ILLUSTRATIONS
LIST OF ACRONYMS
CHAPTER I. INTRODUCTION 101
A. Introduction 103
B. Purpose 103
C. Methodology 104
D. Organization and Content 105
1. History 105
2. Organization 106
3. Format 106
4. Regulations 107
a. 40 CFR Parts 108
b. Other Regulations 109
5. Policy Memoranda 110
6. State Requirements 110
7. Related Materials 111
8. Updating 111
9. Impact of Issuance of 40 CFR Part 31 112
E. Legislative History 113
F. State Delegation 115
1. General 115
2. Delegation Agreements 117
a. Basic or "Umbrella" Agreement 117
b. Functional Agreements or
Subagreements 117
3. Delegated Functions 118
4. EPA Oversight 120
a. Developing the Plan for Oversight 120
b. Negotiating Annual Outputs 120
c. Monitoring and Evaluating Program
Performance 120
5. U.S. Army Corps of Engineers 121
G. Information Management 122
CHAPTER II. WATER QUALITY PLANNING 201
A. Introduction 203
B. Defining Water Quality 203
1. Water Quality Goals and Standards 203
2. Water Quality Monitoring 204
3. Water Quality Report 205
TM 89-1
(86-1)
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PAGE
C. Water Quality Management Planning 205 "
1. General 205
2. Continuing Planning Process 206
3. Water Quality Management Plans 207
4. Water Quality Management Funding and
Annual Work Program 210
D. Implementing the Water Quality Management Plan 211
1. National Municipal Policy 211
2. Municipal Permits 212
3. Facilities Plans 212
E. Funding the Construction Grants Program 213
1. General 213
2. Allotment of Funds 213
3. State Priority System and Project
Priority List 214
4. Reserves 217
a. Reserve for State Management Assistance 218
b. Reserve for Alternative Systems for
Small Communities 218
c. Reserve for Innovative or Alternative
Technologies 218
d. Reserve for Water Quality Management :
Planning 219
e. Reserve for Advances of Allowance 219
F. Summary of the Planning Process 220
CHAPTER III. PREAPPLICATION MANAGEMENT 301
A. Introduction 303
B. Qualifications 304
1. Applicant Qualifications 304
2. Project Qualifications 305
C. Preapplication Project Management 306
1. Project Identification 306
2. Project Tracking 306
3. The Uses of GIGS Data 307
D. Preplanning Conference 308
1. Permits and Compliance Schedules 309
2. Procurement of Engineering Services 309
a. Procedures 309
b. Use of Small, Minority, Women's, and
Labor Surplus Area Businesses 309
c. Use of Debarred or Suspended Firms 310
3. Financial Considerations 310
a. State Priority System and Project
Priority List 310
b. Federal Grant Share 311
TM 86-1
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PAGE
b. Mitigation of Adverse Environmental
Impacts 520
c. Chemical Storage and Hazardous Materials 521
d. Chlorine Safety 521
e. Wet and Dry Wells 523
f. Protection of Potable Water Supply 524
g. Reliability 524
h. Shellfish Waters 528
i. Electrical Power 528
j. Loadings 530
k. Hydraulic Profile 530
1. Land Application Systems 530
m. Sewers 531
n. Sewer Rehabilitation 531
o. Small Systems 531
p. Sludge Management 532
q. Bypassing during Construction 534
r. Ease of Maintenance 534
s. Emergency Alarms 534
t. Pretreatment 535
u. Aesthetics 535
v. Laboratory Facilities 536
w. Handicapped Design Considerations 536
x. Use of Mercury 537
y. Reconfirmation of Innovative or
Alternative Technology 539
z. Project Sign 539
aa. Buy American 539
bb. Nonrestrictive Specifications 540
cc. Subsurface Information 541
dd. Storage of Equipment and Materials 541
3. Biddability and Constructibility Review 541
a. Biddability 542
b. Constructibility 542
4. Discrepancies 542
D. Value Engineering 543
1. Conduct of the Study 545
2. Implementation of Recommendations 545
E. User Charge System 546
F. Sewer Use Ordinance 549
G. Plan of Operation 551
1. Budget 551
2. Administrative Functions 551
3. Staffing and Training 552
4. Operation and Maintenance Manual 552
H. Intermunicipal Service Agreement 553
I. Industrial Wastes and Federal Facilities 555
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PAGE
J. Design Acceptance 556
1. Plans and Specifications 556
2. Preparation for Grant Application 557
3. No Future Grant 558
CHAPTER VI. GRANT PROCESSING 601
A. Introduction 603
B. Application Contents 604
C. Application Review 607
1. Application Form 607
2. Facilities Plan 609
3. Public Participation 610
4. Notification of Advance of Allowance 610
5. Plans and Specifications 610
6. Project Schedule 611
D. Limitations on Award 613
1. Advanced Treatment 613
2. Water Quality Management Plans 613
3. Priority Determination 613
4. Financial and Managerial Capability 614
5. Utilization of Small, Minority, Women's,
and Labor Surplus Area Businesses 616
6. Unlawful Practices 617
7. Debarment and Suspension 617
8. Plan of Operation 618
9. Intermunicipal Service Agreement 618
10. Phased or Segmented Treatment Works 619
a. Conditions 620
b. Grantee Commitment 621
c. Reserve Capacity 621
i . Interceptor Awarded a Step 3
Grant before December 29, 1981 621
ii. Treatment Plant and/or Interceptor
Awarded a Step 3 Grant before
October 1, 1984 621
iii. Treatment Plant and/or Interceptor
Awarded a Step 3 Grant after
September 30, 1984 622
d. Federal Share 622
i. Before October 1, 1984 622
ii. After September 30, 1984 622
11. Revised Water Quality Standards 623
12. Environmental Review 624
13. Value Engineering 625
14. Collection System 625
15. Preaward Costs 627
16. Infiltration and Inflow 628
17. User Charge System and Sewer Use Ordinance 629
18. Reserve Capacity 630
19. Industrial and Federal Facilities 634
20. Pick-Up Projects 634A
8 TM 89-1
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PAGE
21. Drug Free Workplace 634B
22. Brooks Murkowski Amendment 634D
E. Additional Considerations for Award 634F
1. Small Alternative Wastewater Systems 634F
2. Marine Discharge Waiver Applicants 637
3. Innovative or Alternative Technology
Reconfirmation 637
4. Pretreatment 637
5. Force Account 638
6. Intergovernmental Review 639
7. Procurement of Professional Services 640
8. General Grant Conditions 641
F. Step 2+3 Grants and Design/Build Grants 643
1. Step 2+3 Grants 643
a. Qualifications 643
b. Application Contents 643
c. Deferred Provisions 644
2. Design/Build (Step 7) Grants 644A
a. Qualifications 644A
b. Application Contents 644B
c. Deferred Provisions 644D
d. Special Restrictions 644D
G. Combined Sewer Overflow Grants 645
1. Source of Funds 645
a. State's Regular Allotment 645
b. Governor's Discretionary Set-aside 645
c. Separate Appropriation for Marine
Projects 646
2. Project Requirements 646
a. State's Regular Allotment 646
b. Governor's Discretionary Set-aside 647
c. Separate Appropriation for Marine
Projects 648
H. Land Acquisition Grants 650
1. Grant Application Review 653
2. Grant Application Contents 653
3. Deferred Provisions 654
4. Grant Conditions 654A
5. Preaward Costs 654A
6. Project Management 654B
I. Innovative or Alternative Technology Field
Testing Grants 655
1. Grant Application 655
2. Deferred Provisions 656
3. Grant Conditions 657
4. Preaward Costs 657
J. Innovative or Alternative Technology Modifi-
cation or Replacement Grants 657
K. Grants to States for Advances of Allowance 660
1. Defining the State Program 660
a. Qualified Communities 661
TM 89-1
(87-1)
(86-1)
9 (85-1)
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PAGE
b. Application Procedure 661
c. Amount of Advance 661
d. Timing of Payments 662
e. Repayment of Advance 662
2. Applying for the State Grant 663
L. Federal Grant Share 664
1. Total Allowable Project Cost 664
2. EPA Grant Share 667
a. Standard Grant Share 667
b. Uniform Lower Federal Share 667
c. Phased or Segmented Projects 667
d. Projects Using an Innovative or
Alternative Technology 667
e. Projects for the Modification or
Replacement of a Failed Innovative
or Alternative Technology 668
f. Other Projects 668
M. Grant Award Procedures 668
1. State Procedures 669
2. Priority Certification 670
3. Project Certification by Delegated States 670
4. Grant Agreement/Amendment 670
5. General Grant Conditions 671
a. Effect of Approval 672
b. Step 2+3 672
c. Project Changes 672
d. Land Acquisition 672
e. Project Initiation 672
f. Quality Assurance Program 673
g. Project Performance Standards 673
h. Field Testing of Innovative or
Alternative Technologies 673
6. Special Grant Conditions 673
CHAPTER VII. CONSTRUCTION 701
A. Introduction 703
B. Procurement System Requirements 704
1. Procurement System Certification 704
2. Reporting Requirements 706
3. Public Notice Requirements 707
C. Procurement of Professional Services 708
1. Competitive Negotiation 708
a. Public Notice 709
b. Proposal Documents 709
c. Proposal Evaluation 710
d. Negotiation 710
e. Contract Award 710
2. Optional Method for Procuring Engineering
Services 710
a. Public Notice 711
b. Evaluation of Qualifications 711
10 TM 89-1
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PAGE
viii. Sewer Design 809
ix. Sludge Disposal 810
x. Environmental Information Document 810
2. Step 2 Projects Completed or near Completion 810
a. Projects Likely to Receive a Step 3
Grant 810
b. Projects Unlikely to Receive a Step 3
Grant 810
c. Step 2 Grant Increases 811
d. Reduction of Work Effort 812
3. Delayed Step 1 and Step 2 Projects 812
4. Termination or Annulment 812
5. Other Step 1 and Step 2 Projects 813
6. Final Audit Requests 813
C. Step 2+3 and Step 3 Completions 814
1. Project Schedule 815
2. Phased or Segmented Projects 815
3. Sewer System Rehabilitation 816
4. Special Grant Conditions 817
D. Completion and Closeout Process 817
a. Project Completion 817
b. Administrative Completion 818
c. Audit Process 819
d. Project Closeout 820
1. Final Inspection 820
2. Cut-off Date 821
3. Cost Summary and Documentation 823
4. Final Building Payment Request 824
5. Property Management 824
6. Completion Delays 825
7. Continuing Engineering Services 825
8. Project Officer Certification 826
a. Aesthetic Features 827
b. Flow Level 827
c. Abandoned, Unused, or Inoperable
Facilities 827
d. Project Files 828
9. File Retention 828
E. Audit Process 829
1. Request for Final Audit 830
2. Audit 831
3. Draft Audit Report 831
4. Final Audit Report 832
5. Resolution of Audit Exceptions 833
6. Review of Final Determination 834
7. Recovery of Funds 834
TM 89-1
(87-1)
13 (86-1)
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PAGE
CHAPTER IX. FINANCIAL CONSIDERATIONS 901
A. Introduction 903
B. Payments 903
1. Outlay Schedules 904
2. Payment Requests 904
a. Standard Form 270 904
b. Standard Form 271 905
3. Initial Payments 907
a. Preaward Costs 907
b. Estimated Allowance 907
i. Step 2+3 Grants 907
ii. Step 3 Grants 908
4. Retainage 908
5. Limitations 909
6. Final Building Payment 909
7. Final Grant Payment 910
8. Special Purpose Grants 910
a. Land Acquisition Grants 910
b. Relocation Assistance Grants 910
c. Grants to States for Advances of
Allowance 910
d. Other Grants to States 911
9. Grant Overpayment 912
10. Grant Related Income 912
11. Grants Information and Control System 913
C. Grant Increases and Decreases 913
1. Increases 913
a. Step 2+3 and Step 3 Grants 913
b. Step 1 and Step 2 Grants 914
c. Award Procedures 914
2. Decreases 914
D. Disputes 915
E. Deviations 917
F. Determination of Allowable Costs 918
1. General 918
2. Cost Principles 919
a. Allowability Factors for Government
Agencies 919
b. Allowability Factors for Commercial
Organizations 920
c. Allowability Factors for Other Organizations 921
i. Hospitals 921
ii. Educational Institutions 922
iii. Other Nonprofit Institutions 922
d. Classification of Costs 922
i. Direct Costs 922
ii. Indirect Costs 923
14 TM 86-1
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PAGE
h. Flow Metering Devices Used for
Billing 955
2. Unallowable Costs 955
a. Violation of the Procurement
Requirements 955
b. Office Equipment 955
c. Building Maintenance Equipment 955
d. Vehicles 956
e. Items of Routine "Programmed"
Maintenance 956
F. Industrial and Federal Users 956
1. Allowable Costs 956
2. Unallowable Costs 957
G. Infiltration/Inflow 957
1. Allowable Costs 957
2. Unallowable Costs 958
H. Miscellaneous Costs 958
1. Allowable Costs 958
a. Salaries, Benefits, and Expendable
Materials 958
b. Meeting Specific Federal Statutory
Procedures 958
c. Travel 959
d. Additions 959
e. Royalties 960
f. Multiple Purpose Projects 961
g. Training 961
h. Replacing or Modifying Failed RBCs 961
2. Unallowable Costs 961
a. Ordinary Operating Expenses 961
b. Applications and Permits 961
c. Establishment of Special Depart-
ments, Agencies, Commissions,
Regions, Districts, or Other Units
of Government 962
d. Sale of Bonds 962
e. Reconstruction 962
f. Personal Injury Compensation 962
g. Fines and Penalties 962
h. Costs outside the Scope of the
Approved Project 962
i. Costs for Which Grant Payment Has
Been or Will Be Received from
Another Federal Agency 962
j. Control of Pollutant Discharges
from a Separate Storm Sewer System 962
k. Environmentally Sensitive Land 962
1. Corrective Action Report 963
TM 89-1
(87-1)
17 (86-1)
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PAGE
3. Other Costs 963
a. Administration Building 963
b. Computers 964
c. Abandonment of Wastewater
Treatment Works Funded by the
Municipal Treatment Works
Construction Grants Program 964
d. Income Generation from Processed
Sludges and Crops 966
INDEX 1001
CONSTRUCTION GRANTS PROCESS 1101
18 TM 87-1
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Discussion;
The function is placed in program perspective and
information is given on such topics as general
operating policy, important underlying issues, key
considerations in approaching the function under review,
and how the function relates to other aspects of the
construction grants program.
Procedures;
The procedures for reviewing documents submitted and
activities conducted by applicants and grantees are
briefly described. Frequently, for presentation purposes,
processing procedures for administrative and technical
functions are addressed separately. However, whenever
possible, the review of both functions should take place
simultaneously. Where specific program items are required,
they are listed. Other more general review items are also
included as a reminder. However, the review procedures
listed here are not substitutions for, nor do they super-
sede, the requirements described in the regulations. Check-
lists developed by State agencies or EPA Regional Offices
and contained in delegation agreements are also to be
used in performing the review process.
References;
Appropriate laws, regulations, guidelines, and technical
documents are cited. Copies of such reference material can
generally be found in EPA Regional or State agency offices.
Some of the review procedures are self-explanatory or do not
lend themselves to the above format. In these cases, the require-
ments or procedures are briefly described.
4. Regulations
This third edition of the Handbook is based on regulations
in effect as of October 1, 1984, primarily those contained in
Title 40 of the Code of Federal Regulations (CFR). The following
regulations are cited at appropriate locations in the Handbook:
107
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a. 40 CFR Parts
4 - Implementation of the Uniform Relocation
Assistance and Real Property Acquisition
Policies Act of 1970
6 - Implementation of Procedures on the National
Environmental Policy Act
7 - Nondiscrimination in Programs Receiving
Federal Assistance from the Environmental
Protection Agency
15 - Administration of the Clean Air Act and the
Federal Water Pollution Control Act with
Respect to Federal Contracts, Grants, or Loans
25 - Public Participation in Programs Under the
Resource Conservation and Recovery Act, the
Safe Drinking Water Act, and the Clean Water Act
29 - Intergovernmental Review of the Environmental
Protection Agency Programs and Activities
*30 - General Regulation for Assistance Programs
3^1 - Uniform Administrative Requirements for Grants and
Cooperative Agreements to State and Local Governments
32 - Debarment and Suspension under EPA Assistance
Programs
*33 - Procurement Under Assistance Agreements
35 - State and Local Assistance
Subpart A - Financial Assistance for
Continuing Environmental Programs
Subpart E - Grants for Construction of Treat-
ment Works - Clean Water Act
Subpart I - Grants for Construction of Treat-
ment Works
Subpart J - Construction Grants Program Delegation
to States
52 - Approval and Promulgation of Implementation Plans
60 - Standards of Performance for New Stationary Sources
*Do not apply after September 30, 1988.
108 TM 89-1
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- the requirements apply to all public construction
projects in the State, regardless of the source
of funds (e.g., a requirement that all public
projects be advertised as separate contracts for
mechanical, plumbing, electrical, and general
construction); and
- the requirements do not directly conflict with
Federal laws or regulations.
Those States which have supplemental State grant programs
may impose additional grantee requirements without regard to
the above restrictions, provided that:
- they do not directly conflict with Federal laws
and regulations, and
- they do not apply to Federal grantees who do not
receive a supplemental State grant.
7. Related Materials
The review procedures in this Handbook describe the essential
or minimum requirements necessary in processing construction grant
applications and related documents. More detailed information may
be obtained by reading the reference materials which are identified
throughout the text. Generally, references concerning technical
matters have been limited to EPA publications.
Although the processing steps set forth in the Handbook are
intended to bring about uniformity in the processing of construc-
tion grant applications nationwide, differences in the structure of
EPA Regional Offices, State agency offices, or delegation agreements
may require some adjustment in the manner in which various review
procedures are followed.
8. Updating
This Handbook reflects requirements contained in the regulations
as of October 1, 1984. The Handbook will be updated to reflect
changes in laws, regulations, and policies. Responsibility for
revising and updating the Handbook resides with the Program Policy
Branch, Municipal Construction Division, Office of Water Program
Operations, and revisions will be issued from that office.
Handbook revisions will be forwarded by a TM. Each TM will be
designated with a sequential number (e.g., TM 85-11), indicating
111
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the fiscal year and number of the issuance, and will provide
specific instructions for removal of obsolete and insertion of ^
new pages. In order for changes to be readily identified, text m
revisions will be printed in italics. Additionally, each revised
page will show the number of the TM which transmitted the revision.
2« Impact of Issuance of 40 CFR Part 31
The promulgation of 40 CFR Part 31, "Uniform Administrative
Requirements for Grants and Cooperative Agreements to State and
Local Governments", on March 11, 1988, has brought about a
considerable number of Handbook changes. (See TM 89-1.) This
is because 40 CFR Part 31, for the purpose of construction grants,
supersedes 40 CFR Parts 30 and 33 which markedly impact the
administration of the construction grants program. Part 31 applies
only to grants and grant increases awarded after September 30/ 1988;
hence, its provisions have little to do with the large mass of
projects which were active as of that date.
Accordingly, the advent of Part 31 has created a dichotomy in
the application of the Handbook to construction grant projects.
To enable the user to deal with the two conditions, Parts 30 and
33 citations have not been removed. Instead, they are asterixed
(*) in reference sections and bracketed ([]) where they appear in
the text. Where comparable (often identical) provisions appear in
the Part 31 regulations, they have been inserted immediately after
the Parts 30 and 33 notations.
Except in a few instances, differences between the provisions
of Part 31 and the older Parts 30 and 33 have not been discussed.
The reasons are; (1) time and resources did not permit that
extensive a rewrite; (2) we did not want to substantially increase
the size of the Handbook; (3) the final decision on the contents
of Part 31 has not been made. (That is, EPA has been negotiating
with OMB to reinsert provisions of Parts 30 and 33 which were"
eliminated in the March 1988 edition of Part 31); and (4)
recognizing that the Handbook is "guidance," even though a number
of procedural steps in Parts 30 and 33 were deleted from Part 31,
most remain useful suggestions for project managers to followT
Hence, their standing as guidance in the Handbook has not been
diminished by their absence in Part 31.
112 TM 89-1
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E. LEGISLATIVE HISTORY
The Federal Water Pollution Control Act of 1956 (PL 84-660)
represented the first authorization for Federal grants to assist
in the construction of waste treatment works. (A 1948 loan
program was authorized, but never funded.) Selection of projects
to be funded resided with the States, reflecting the policy of
Congress to recognize and preserve the primary responsibility
of the States to prevent and control water pollution. The 1956
Act authorized fifty million dollars per year, with grants limited
to 30 percent of the eligible project cost, not to exceed $250,000
per project.
Authorizations were increased during the early 1960's, with
major amendments occurring in 1965. At that time, authorizations
were again increased, the maximum dollar limitation on grants
was dropped, the Federal share was increased to a maximum of 55
percent, and provision was made for future reimbursement of State
or local funds used in lieu of Federal funds.
Between 1965 and 1972 other initiatives were undertaken,
the most important of which were the enactment of the National
Environmental Policy Act (NEPA) in 1969 and the creation of EPA
in 1970.
Enactment of the Federal Water Pollution Control Act Amendments
of 1972 (PL 92-500) resulted in extensive changes to the construc-
tion grants program. The Federal share was increased to 75 percent
and project eligibility was expanded to include sewage collection
systems, sewer system rehabilitation, and correction of CSOs. In
addition, the 1972 Amendments mandated a strong enforcement program,
statewide planning, areawide planning, and the issuance of discharge
permits.
The 1972 Amendments also introduced the three-step grant
process (e.g., Step 1 - planning, Step 2 - design, and Step 3 -
building). Under the Act, grantees were required to provide a
minimum of secondary treatment to be eligible for a Federal
grant. New concepts were introduced such as facilities planning,
infiltration/inflow (I/I) analysis, assessment of environmental
impacts, user charge (UC) systems, industrial cost recovery, cost
effectiveness, best practical waste treatment technology (BPWTT),
etc. The Act also authorized $18 billion over a five year period
to support the construction grants program and to provide for a
continuity of funding.
The Clean Water Act of 1977 (PL 95-217) contained mid-course
corrections to the 1972 legislation and authorized $24.5 billion
over a five year period in support of the construction grants
program. Several significant changes were introduced into the
construction grants program, one of which required grantees to
evaluate I/A technologies when planning their projects. The
113 TM 89-1
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mandatory I/A evaluations conveyed the desire of Congress to
bring about conservation through recycling and more efficient
energy use or recovery. For approved I/A projects, the Federal
grant share could be increased to 85 percent.
Another significant provision of the 1977 Amendments was the
encouragement of, and financial support for, States to administer
the construction grants program. Under this provision, the EPA
Regional Administrators (RAs) were able to negotiate delegation
agreements with the State agencies, detailing the staffing,
scheduling, functions, and procedures to be used by the State in
program administration.
The Municipal Wastewater Treatment Construction Grant Amend-
ments of 1981 (PL 97-117) eliminated Step 1 and Step 2 grants
after December 29, 1981, and replaced them with an allowance to
help defray the costs of planning and design. Other provisions
reduced the Federal grant share to 55 percent after September 30,
1984; eliminated grants for collection sewer systems, major sewer
rehabilitation, and correction of CSOs after September 30, 1984
(except under certain conditions); required States to reevaluate
their water quality standards; emphasized low cost alternatives,
particularly for small communities; limited the eligibility of
reserve capacity; required engineering services to be provided
for one year after project completion; and required each grantee
to certify, one year after initiation of operation, whether the
project is meeting its performance standards.
The Handbook reflects the provisions of the 1981 Amendments
and its implementing regulations. Projects receiving grants
prior to the 1981 Amendments are subject to the policies and
regulations in effect at the time of grant award and, therefore,
are not necessarily subject to the review procedures and regula-
tory requirements contained in this Handbook.
Although the authorizing legislation for the construction
grants program is officially entitled the Federal Water Pollution
Control Act, Section 518 of the Act provides for the use of the
title Clean Water Act (CWA), and this latter title is used
throughout the Handbook.
In February 1987, PL 100-4, the Water Quality Act of 1987,
which amended the Clean Water Act, was enacted. Significant among
the provisions of this legislation was that it provided for the
gradual changing of the method of assistance used by the Federal
government to encourage municipalities to build needed wastewater
treatment projects and, in the process, the State was established
as the (eventual) sole manager of the operations of the construction
program. Under Title VI of that Act, State allotments of Federally
appropriated funds could be used for establishing a Revolving Fund
in each State (SRF) which would make loans (also guarantee or insure
indebtedness) to municipalities for constructing WWT facilities.
Repayments, principal and interest, would return to the SRFs for use
in making other loans to meet additional WWT needs ("revolving""'
concept). The new statute provided for allowing the States to
transfer portions of their FY 87 and FY 88 construction grantTs
114 TM 89-1
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allotments to their SRF programs. In FY 89 and 90, half the
appropriations were for grants to capitalize State Revolving
funds and nearly all of the other half (Title II funds) could
be used for Title VI purposes. Beginning October 1, 1990,
appropriations are for Title VI activities only.
Details regarding the implementation of SRF programs can be
found~in "Initial Guidance for State Revolving Funds", January
1988, the State Water Pollution Control Revolving Fund Management
Manual, the "Clarifying and Supplementing Requirements in the
Initial Guidance for State Revolving Funds" memorandum issued
September 30, 1988, and in the interim final regulations expected
to be published in September 1989.
As of May 1989, twenty-four States had established revolving
loan programs and have been awarded Title VI grants to capitalize
their revolving funds. By 1990, neatly all of the States ar₯
expected to receive capitalization grants. (It should be noted
that, in addition to funding the construction of WWT projects,
nonpoint source management programs and estuary conservation and
management plans are also eligible for assistance under SRF.)
Although projects assisted under Title VI are not required to
meet all of the requirements which Title II (construction grant)
projects must meet, basically, the general review and approval
process for both types of assistance will tend to be similar.
And, since the same staff will be conducting technical reviews
of both grant and loan projects, and their ultimate purpose is
not effected by method of funding, such reviews will have far
more steps in common than they will have differences.
Since the guidance contained in the Handbook represents both
an adherance to regulatory requirements as well as a best,
experienced judgement in managing a program of constructing WWT
projects from conception to completion, its underlying precepts
remain a useful standard for reviewers of Title VI as well as
Title II projects.
F. STATE DELEGATION
1. General
The 1977 Amendments added Section 205(g) to the CWA,
authorizing EPA to use a portion of each State's annual allot-
ment of construction grants funds to award grants to the States
to administer the day-to-day operations of the construction
grants program. The grants are for 100 percent of the eligible
operational costs. Under EPA regulations, the execution of a
delegation agreement between an RA and a comparable level State
official provides the basis for a construction management
assistance (CiMA) grant (frequently referred to as a 205 (g)
grant). The purpose of the agreement is to describe, in specific
terms, the relative roles of the State and EPA in the management
of the construction grants program in that Stats.
115 TM 89-1
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Delegation agreements were developed and negotiated on a
"phase in" basis. That is, once the many specific functions of
the program to be delegated were identified, a timetable was
established for transferring (i.e., delegating) those functions.
Each function was delegated only after the Region determined
that the State had trained staff in sufficient numbers to
effectively perform that function without direct assistance from
the Region.
All agreements describe the procedures to be followed in
implementing each function and the forms to be completed by the
States as evidence that each function has been fully performed.
Periodically, EPA reviews the State's program and representative
grant projects, to insure that the delegated functions are being
carried out in accordance with the delegation agreement.
Since 1977, all fifty States and the Commonwealth of
Puerto Rico have entered into delegation agreements with EPA.
During those years, considerable experience has been gained con-
cerning the form of delegation agreements, the respective roles
of each agency, and the most practical and efficient management
implementation practices. Because of the attention to detail
and mutual concern continuously exercised by EPA Headquarters,
the Regions, and the States during this period of transition, the
goal of achieving full delegation of the construction grants
program to the States is close to being realized.
Regulations implementing State delegation are found
primarily in three subparts to 40 CFR Part 35:
Subpart A - Financial Assistance for Continuing
Environmental Programs. This subpart
deals primarily with grants for State
water pollution control programs
under Section 106 of the CWA, for State
management of the construction grants
program under Section 205(g) of the CWA,
and for water quality management (WQM)
planning under Section 205(j) of the CWA.
Subpart I -
Grants for Construction of Treatment
Works. This subpart deals with grant
requirements for building wastewater
treatment works.
116
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Subpart J - Construction Grants Program Delegation
to States. This subpart addresses the
requirements for delegation agreements,
oversight, and grants to States to perform
delegated functions, in accordance with
Section 205(g) of the CWA.
Guidance on the general use of CMA grant funds and, more
particularly, on the conditions under which Section 205(g) funds
may be used to support the costs of conducting certain water
quality management and permitting activities, is presented in the
Office of Water issuance of April 17, 1985, titled "Use of 205(g)
Funds for Construction Grants Management and Nonconstruction
Grants Activities."
In addition, "Construction Grants Delegation and Overview
Guidance," dated December 1983, was prepared to integrate in one
document the relevant regulatory requirements, policies, and
guidance for managing the delegated program. The sections below
briefly summarize relevant aspects of this publication. Program
managers responsible for delegation should consult the text for
specific details.
2. Delegation Agreements
Delegation agreements, which vary from Region to Region
with regard to specific procedural requirements, generally
contain two main parts:
a. Basic or "Umbrella" Agreement
This part of the delegation agreement sets
forth the basic commitments between the State
and the EPA Regional Office, and defines the
operational framework for accomplishing those
commitments. In addition, it covers specific
operational items such as scheduling, cost
information, hiring and training, accounting
methods, and level of effort.
Functional Agreements or Subagreements
Along with the basic agreement are a series of
individual agreements describing each function or
activity (or group of activities) to be delegated.
These agreements contain information which State
reviewers are expected to be familiar with and use,
including the procedures to be followed in reviewing
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project documents and conducting grant activities,
the interface with the Regional Office and other
Federal and State offices, and the criteria to be
used in evaluating the effectiveness of State grant
program activities. The format of functional agree-
ments may vary (e.g., checklists and/or evaluation
procedures may be separated from review documents,
and included separately as a supplement or appendix).
Functional agreements are critical to the operation of the
construction grants program and need to be kept current. That
is, as improvements in procedures are developed, as regulations
are revised, and as guidance documents are changed, modifications
to the agreements will be necessary. Such revisions can be formally
adopted by approvals at the State and EPA program manager's level
(e.g., Division Directors or Branch Chiefs). It should be noted
that one of the purposes of this Handbook is to help bring about
general agreement on current review procedures so that they can
be more uniformly practiced among the States.
Re; 40 CFR 35.3005, 35.3010
3 . Delegated Functions
Earlier regulations included a listing of functions which
could be delegated to the States and those functions which
because of statutory requirements could not be delegated.
Current regulations do not contain these specific listings,
but rather indicate that all functions may be fully delegated
to the States, except those for which EPA must retain
responsibility under Federal law. Statutory requirements
continue to preclude full delegation of the following functions:
- approval of grant awards, grant amendments,
payments, and terminations;
- final determinations under Federal statutes and
Executive Orders (e.g., NEPA determinations, and
determinations of compliance with Title VI of the
Civil Rights Act);
- final resolution of audit exceptions;
- procurement determinations concerning procurement
system reviews and protests; and
- projects where an overriding Federal interest
requires greater Federal involvement.
118 TM 89-1
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However, States are encouraged to undertake all project-level
activities, including preliminary determinations for nondelegable
requirements. Preliminary determinations by States will usually
include the preparation of all documentation in anticipation of
EPA's approval and signature. A summary chart containing dele-
gable and shared activities, their legal or administrative
citations, and brief comments on State/EPA roles is contained in
Appendix A to EPA's publication "Construction Grants Delegation
and Overview Guidance," dated December 1983. That same publica-
tion, on pages 28 through 31, contains a clarification of the
delegability of those activities whose delegability previously
had been uncertain.
The EPA guidance also contains a partial listing of project
conditions for which there may be an overriding Federal interest,
thereby precipitating EPA involvement. The project conditions
include:
- projects subject to an Environmental Impact Statement
(EIS);
- projects subject to special and/or complex eligibility
considerations;
- projects which are the subject of unusually strong
Congressional interest;
- projects involved in Federal court cases or sub-
ject to other directives (e.g., consent decrees,
ocean dumping restrictions, international agree-
ments) that EPA must administer despite delegation;
- projects involved in law enforcement investigations
or in allegations of waste, misuse, or mismanagement
of Federal funds;
- projects subject to review of advanced treatment
with an incremental cost in excess of $3 million;
- projects for which a marine discharge waiver request
has been submitted to EPA; and
- projects having interstate or international impacts
that go beyond State jurisdiction.
Re: 40 CFR 33.001(g)*f 35.3015(a) and (c), 31.4, 31.36
119 TM 89-1
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4. EPA Oversight
EPA maintains overall responsibility for insuring that
Federal requirements are adhered to and that progress toward
national goals and objectives is maintained. In carrying out
this responsibility, EPA conducts an annual evaluation of
each delegated State program. The purpose of this evaluation
is to insure that both the delegated State and EPA efficiently
and effectively execute their respective fiscal and program
responsibilities.
The annual evaluation consists of three steps, namely:
a. Developing the Plan for Oversight
Each year EPA and the State establish,
in advance, priority objectives, key measures
of performance, and monitoring and evaluation
activities.
b. Negotiating Annual Outputs
In keeping with the oversight plan, EPA
and the State negotiate and agree upon specific
outputs which correspond to priority objectives
for the year.
c. Monitoring and Evaluating Program Performance
As part of the oversight plan and to confirm
annual outputs, EPA monitors and evaluates each
State's performance under delegation. An onsite
evaluation is conducted annually, and additional
monitoring activities, as appropriate for each
delegated State, are conducted as needed.
In developing and conducting monitoring programs, extensive
use should be made of the data contained in the Grants Information
and Control System (GIGS) (See Section I.G. below). GIGS data
allows program managers and analysts to identify critical or
emerging problems and to develop timely plans for alleviating them.
For example, data on State workload (e.g., number of projects
awaiting administrative completion), can be used in developing
State commitments (e.g., number of administrative completions to
be performed), and in subsequently monitoring the State's progress
against these commitments.
120 TM 89-1
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Carefully structured and conducted, the annual evaluation
should help to solidify the unity of effort between EPA and the
delegated States which is critical to the successful impleraenta-*
tion of the delegation program.
By memorandum dated May 31, 1985, the Administrator issued a
Policy on Performance-Based Assistance to establish "an Agency-wide
approach which links EPA's assistance funds for continuing State
environmental programs to recipient performance." Within the con-
struction grants program, the Policy applies only to Construction
Management Assistance (CMA) grants awarded under Section 205(g).
Guidelines to assist the Regional Offices in applying the Policy to
CMA grants were issued by an OMPC memorandum dated January 6, 1986,
Subject: Construction Grants Program Guidelines for the Policy on
Performance-Based Assistance.
Re; 40 CFR 35.3025; EPA publication, "Construction Grants
Delegation and Overview Guidance," December 1983.
5. U.S. Army Corps of Engineers
EPA entered into an interagency agreement with the U.S.
Army Corps of Engineers (COE) at the national level, under which
the COE provides assistance in administering portions of the
construction grants program. The specific functions being
carried out by the COE are identified in regional interagency
agreements developed between EPA Regional Offices and the
corresponding COE Division offices. COE responsibilities and
procedures vary from Region to Region, and serve as a supplement
to a State's delegation agreement (i.e., in some States, the COE
performs functions which are not delegated to the State until such
time as the State is able to assume those functions, while in other
States, the COE performs functions which have been delegated, but
not yet assumed by the State).
COE functions may range from limited onsite inspection services
to total project management responsibilities which begin as soon as
the grantee has accepted the grant offer.
In many States, the COE conducts biddability/constructibility
reviews of contract documents, including plans and specifications
(see Section V.C.3). On very large projects or clusters of pro-
jects (e.g., where the building costs exceed $50 million), the COE
may provide full-time onsite presence. Project reviewers should be
aware of the contents of EPA/COE agreements in their respective
States, including specific procedures and documentation requirements
It is EPA's long term goal to have each delegated State assume
those activities now being performed by the COE as soon as the
State is able to do so. However, where temporary shortages in staff
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resources exist in a delegated State, the State may request, through
EPA, COE assistance in carrying out program functions for an interim
period.
Re: EPA publication, "Operating Procedures for Monitoring
Construction Activities at Projects Funded under the
Environmental Protection Agency's Construction Grants
Program," September 1983; EPA publication, "Guidelines
for Overviewing Construction Grant Activities Conducted
under the Interagency Agreement with the Corps of
Engineers," February 1984.
G. INFORMATION MANAGEMENT
The Grants Information and Control System (GIGS) is a
computerized system which is used to collect, edit, and
summarize essential information concerning EPA's construction
grants program. As such, it represents a significant administra-
tive tool which enables EPA and the delegated States to efficiently
manage the program. They system also provides for the retrieval of
information for use by program personnel at all levels, as well as
members of Congress and the public. The core of the system is the
computerized data bank which stores data related to a project pre-
application status, stage of application review, milestones during
building, and administrative progress through audit to closeout.
Once data is entered into the system, existing computer programs
are capable of producing reports ranging from the status of a single
project to statewide and nationwide trends. Typical reports include
the priority rating and ranking of all projects within a State,
grant application and milestone tracking, audit and closeout tracking,
payment tracking, etc.
The uses and limitations of GIGS are described in the "Users
Manual," "Reports Library," and "Data Element Dictionary," which are
maintained by a GIGS coordinator in each State, EPA Regional Office,
and EPA Headquarters. These documents provide a detailed description
of the system, a listing of available reports, a definition of data
elements, and coding instructions for data entry.
From the perspective of a project reviewer, GIGS output can be
an effective tool in terms of tracking progress during construction,
thereby insuring timely inspections. Also, the project's progress
may be compared with the approved project schedule by mathematically
converting the sum of all grant payments to a percentage of the
grant award amount, which should be approximately equal to the pro-
ject's percentage of completion. Program managers may also use GIGS
reports to forecast workloads for use in budget preparation and
resource allocation.
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As with any computerized system, GIGS is only as good as the
information contained therein, and the need to have construction
grants program personnel enter accurate and timely information into
the system cannot be overemphasized. To help ensure the accuracy of
the inputed data, an edit has been built into the system which will
inhibit obviously erroneous data from entry. In addition, a GIGS
Audit Report is run monthly for the purpose of detecting other data
errors.
In most States and Regions, one person has been assigned the
responsibility for maintaining GIGS, including the training of both
project officers and clerical support staff in its use. Also,
annually, the system is examined and, as needed, upgraded through
user group meetings and the formally conducted meetings of the GIGS
Executive Committee which is comprised of State and EPA Regional and
Headquarters construction grants program staffs.
Whenever the reviewing agency corresponds with a grant applicant
or a grantee regarding the submission or approval of project documents
or regarding other project milestones, an appropriate entry should be
made in GIGS. In at least one State, GIGS coding sheets are printed
on the reverse side of standard form letters, and typists have been
instructed not to address and mail the letters unless the coding
sheet has been completed.
GIGS has been designed to help manage the construction grants
program effectively. Its usefulness depends largely on the construc-
tion grants program staff providing timely input of accurate informa-
tion .
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A. INTRODUCTION
The discussion in this chapter is limited to those aspects
of water quality planning which are relevant to the construction
grants program. It is designed to provide the project reviewer
with background information and a general working knowledge of
the management and planning processes required by the Clean Water
Act (CWA) and its implementing regulations. The principle func-
tion of each planning activity is highlighted, placed in perspec-
tive, and related to its impact on the construction grants program,
Section B, Defining Water Quality, discusses the procedures
used in setting water quality goals and standards, in monitoring
water quality, and in relating current water quality to the goals
and standards.
and standards.
the
for
Section C, Water Quality Management Planning, describes t
planning processes which are used to produce management plans
achieving water quality goals and standards.
Section D, Implementing the Water Quality Management Plan,
describes the implementation of the plan through EPA's municipal
policy, permit program, and facilities planning requirement.
Section E, Funding the Construction Grants Program, discusses
the mechanisms for making funds available to the construction
grants program, for prioritizing projects, and for setting aside
funds in reserves for specific purposes.
Section F, Summary of the Planning Process, summarizes the
steps in the planning process in a list of activities, followed
by a schematic flow diagram.
B. DEFINING WATER QUALITY
1. Water Quality Goals and Standards
Water quality goals, which are the basis for all activities
authorized under the CWA, represent value judgements articulated
by Congress in Title I of the CWA. The water quality goals of
the CWA may be summarized as: protection and propagation of fish,
shellfish, and wildlife; provision for recreation in and on the
water wherever attainable; restoration and maintenance of the
chemical, physical, and biological integrity of the Nation's
203
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waters; prohibition of toxic substances in toxic amounts; pro-
tection of public health and welfare; and reduction of water
pollutants from nonpoint sources to the maximum extent feasible.
To translate water quality goals into objective, measurable
terms, water quality standards are established by the States.
Water quality standards implement the water quality goals for a
water body or portion thereof by setting standards necessary to
achieve these goals. These standards serve as the legal basis
for water pollution control decisions (e.g., treatment levels,
National Pollutant Discharge Elimination System (NPDES) permit
effluent limitations, and enforcement actions).
Water quality standards have been established by the States
and approved by EPA for practically all of the Nation's water
bodies. However, Section 24 of the 1981 CWA amendments required
the States to reevaluate their water quality standards and, where
necessary, to revise them to reflect current and realistic goals
and uses. Construction grant assistance may not be provided in
States which fail to conduct such water quality standards re-
evaluation by December 29, 1984 (see Section VI.D.ll). The
establishment and revision of water quality standards is subject
to the public participation requirements of 40 CFR Part 25.
Re; 40 CFR 130.0, 130.3; 40 CFR Part 131
2. Water Quality Monitoring
Once a State establishes water quality standards, the State
is required to implement a water quality monitoring program which
includes the collection and analysis of physical, chemical and
biological data on water quality. This data is used by the State
to evaluate the effectiveness of its water quality management (WQM)
program, to determine abatement and control priorities, to develop
or revise water quality standards, to develop total maximum daily
loads and wasteload allocations, to assess compliance with NPDES
permits, and to prepare reports which assess the trends in water
quality.
Water quality monitoring programs must include quality assur-
ance and quality control programs to insure that collected data
are scientifically valid. The monitoring program provides a
scientific basis for the preparation of abatement and control
reports and for the designation of priority water quality areas.
Re: 40 CFR 30.503*, 130.4, 31.45
$
204 TM 89-1
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1. Permits and Compliance Schedules
Potential grant applicants are to be made aware that
existing projects must be in compliance with schedules
resulting from the implementation of EPA's National
Municipal Policy (see Section II.D.l), the NPDES per-
mit program, court orders, or State enforcement orders
(see Section VI.C.6).
2. Procurement of Engineering Services
a. Procedures
The procurement oE engineering or other pro-
fessional services for facilities planning and/or
design is not subject to the EPA procurement regula-
tions or to an EPA audit. However, if the grant
applicant anticipates using the same engineer for
Step 3 construction activities, and wishes to avoid
advertising and evaluating proposals for engineering
services during construction, it must have procured
the engineer for facilities planning and/or design
in accordance with EPA procurement requirements
(see Section VII.C.3).
Re: 40 CFR 33.715*, 31.36(d)
b. Use of Small, Minority, Women's, and Labor
Surplus Area Businesses
Grant applicants are encouraged to utilize the
services of small, minority, women's, and labor
surplus area businesses (see Section V.C.l.w)
during facilities planning and design. At the time
of grant application, they will be required to re-
port the level of minority business enterprises
and women's business enterprises (MBE/WBE) partici-
TM 89-1
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pation in facilities planning and design. Some
States and municipalities may have established goals
for this purpose (see Section VI.D.5).
Re; 40 CFR 33.240*, 35.2104(d), 31.36(e); OMB Circular
A-102 T7.d. (3/3/88)
c. Use of;Debarred or Suspended Firms
Grant applicants should be advised not to use
individuals or firms included on the General Services
Administration's Lists of Parties Excluded from
Procurement or Npnprocurement Programs (GSA List) for
facilities planning or design work(see Section VI.D.7)
Grant applicants should also be advised to report any
instances of misconduct by their contractors (e.g.,
engineers, construction firms, equipment suppliers,
etc.) to EPA's Office of the Inspector General (OIG),
using the hotline (800-424-4000 or 202-382-4977)
established for that purpose.
Re: 40 CFR 35.2105, 32.200
3. Financial Considerations
State Priority System and Project
Priority List
Grant applicants should have a clear understanding
of the State priority system and project priority list.
Proposed projects should be evaluated and an assessment
made as to the likelihood of receiving a future grant
(see Sections II.E.3 and VI.D.3).
Re: 40 CFR 35.2015, 35.2103
TM 89-1
310 (86-1)
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7 . 2 Engineering Evaluation
An engineering evaluation of the principal alternatives
is a second criterion used in the selection of the proposed
project. Engineering feasibility of alternatives is considered
throughout the entire facilities planning process. However,
several specific areas of engineering evaluation are required
by the regulations, as described below. Project reviewers are
to insure that the following areas have been adequately eval-
uated and addressed in the facilities plan:
a. Reliability
Each alternative is to be evaluated for its
reliability in terms of meeting and consistently
maintaining the applicable effluent limitations
throughout the project's useful life. Reliability
is of particular importance, as reflected in the
CWA's requirement that grantees certify after one
year of operation that the project is achieving
its performance standards (see Section VII.I.2).
Several approaches to evaluating and achieving
reliability are discussed in Section v.C.2.g.
Re: 40 CFR 35.2005(b)(48)
b. Energy Use
While one of the criteria for classification of
a project as innovative is net primary energy
reduction, the regulations require that each
alternative, whether conventional or I/A, be
evaluated for opportunities to recover, or
reduce the use of energy. As mentioned in
Item 6.13 above, the CAPDET program can be
used for this analysis. Where energy reduc-
tion is the basis for claiming that a process
is innovative, the energy evaluation will gen-
erally provide an indepth analysis.
Re: 40 CFR 35.2030(b)(3)(vi)
469
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c. Water Supply
The facilities plan is to evaluate the water
supply implications of the project, considering
both the impact of future growth upon the water
resources and the impact of alternatives in
terms of replenishing or depleting water supplies.
Re: 40 CFR 35.2030(b)(7)
d. Revenue Generating Applications
Each principal alternative is to be evaluated for
revenue generating application (e.g., the sale of
methane gas from anaerobic digestion, the sale of
effluent or sludge for agricultural purposes, etc.),
Revenue generating applications may possibly be con-
sidered multiple purpose projects (see Item 7.1.h
above). Revenues generated by the project must be
used to reduce OM&R costs (see Section V.E).
Re: 40 CFR 30.200*, 35.2030(b)(3)(v), 31.25
Open Space and Recreation
Each principal alternative is to be evaluated for
potential open space or recreational opportunities.
In many cases, relevant information may be found
in the State Comprehensive Outdoor Recreation Plan,
or from the National Park Service, United States
Department of the Interior. The project reviewer
may wish to have the grant applicant contact the
appropriate agencies if the project has potential
open space or recreational opportunities. While
recreational or open space opportunities associated
with a water pollution control facility could de-
note a multiple purpose project, such facilities
are more appropriately a multiple use project
(see Item 7.1.h above). Typical recreational or
open space opportunities associated with waste-
water projects include:
- use of interceptor rights of way for
running, hiking, bicycling, or eques-
trian trails;
470 TM 89-1
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c. Site Definition and Evaluation Survey
This level of survey consists of intensive
investigation of specific resources previously
identified as partially or entirely existing
in the project's direct impact area, or dis-
covered as a result of previous surveys. This
survey is undertaken when direct effects cannot
be avoided by reasonable project modification,
or when information (e.g., extent, depth,
significance) is insufficient to assess project
alternatives. This survey should, at a minimum,
provide data to allow a determination of National
Register of Historic Places eligibility. The
State reviewing agency or EPA, in consultation
with the SHPO, uses the survey data to:
- evaluate methods of avoiding adverse
impacts on the resources, or make a
"no effect" determination;
- assess the need to request a National
Register of Historic Places eligibility
determination from the National Park
Service, U.S. Department of the Interior;
- assess the effects of the project on the
resource;
- develop mitigating measures; and
- assess the need to request ACHP comments.
Should the review result in an adequately documented
determination of no effect, the project may proceed
as proposed. Should the review result in a deter-
mination of no adverse effect, the ACHP is to be
provided with the documentation in accordance with
its regulations. If the ACHP concurs or does not
object within 30 calendar days of the submittal,
the project may proceed.
Should the agency review result in a determination
of adverse effect, or if the ACHP objects within
30 calendar days to a determination of no adverse
effect, the ACHP is to be provided with documen-
tation for the full consultation procedure, accord-
ing to ACHP regulations, for the preparation of a
487
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memorandum of agreement. EPA, with the assis-
tance of the delegated State, will:
- prepare the preliminary case report,
formally requesting the comments of
the ACHP;
- notify the SHPO of this request; and
- proceed with the consultation process
(e.g., on-site visits, public informa-
tion meetings) as detailed in the ACHP
regulations.
During this consultation process, EPA will ex-
amine all feasible and prudent alternatives to
avoid adverse effects on cultural resources.
Examples include the examination of alternative
project sites, alternative designs, or no action.
Should EPA determine that alternatives to avoid
affecting cultural resources are not feasible,
measures to minimize the potential effects will
be developed in consultation with the SHPO and
the ACHP. Generally, the consultation should
result in a resolution of any adverse effects.
Specific conditions, including the agreed miti-
gating measures are to be included in the
memorandum of agreement signed by EPA, the ACHP
and the SHPO. EPA will not approve any action
having an adverse effect or no adverse effect
until the ACHP comments. Reasonable costs of
mitigating measures are eligible for grant
participation. EPA may condition any subsequent
grant to require mitigating measures to be under-
taken by the grantee.
It is the responsibility of the project reviewer
to insure that the above procedures are, or have
been, carried out. EPA retains the final re-
sponsibility for compliance with the ACHP regula-
tions. EPA will publish the review findings,
effect determinations, and consultation results
as part of the project's environmental assessment.
Re; 36 CFR Parts 63 and 800; 40 CFR 6.301, 30.600(a)*;
40 CFR Part 35, Subpart I, Appendix A, Paragraph
B.l.b.
488 TM 89-1
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submit the conformity determination to the
designated lead State or local agency for
concurrence. Lack of response by the lead
agency during the 30 day FONSI and 45 day
draft EIS review periods will be inter-
preted as concurrence.
c. EPA must provide in the FONSI or EIS a
response to non-concurrence, including
the basis on which conformity will be
assured. If EPA finds that non-concurrence
is unjustified, an explanation must be
included in the FONSI or EIS.
Re: 40 CFR 6.303; 40 CFR 30.600(c)*, 31.13(a)
2.4 Drinking Water
The Safe Drinking Water Act prohibits EPA from awarding
grant assistance if a proposed project may contaminate a
sole source aquifer and result in a significant hazard to
public health. Determine if a sole source aquifer is located
in the project area, and if so, evaluate the potential impacts
(both direct and indirect) of the project on drinking water
quality.
Re: 40 CFR 30.600(1)*, 31.13(c); 40 CFR Parts 141 and 149
3. Direct and Indirect Impacts
Environmental impacts are generally classified as direct or
indirect.
3 .1 Direct Impacts
Direct impacts are caused by construction or operation
of the treatment works, and typically include:
a. disruption of traffic, businesses, or other
activities during construction;
493 TM 89-1
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b. disturbance of sensitive ecosystems, such
as wetlands and habitats of endangered or
threatened species, during construction;
c. impact on water quality by the effluent
discharged from the treatment works;
d. displacement of households, businesses,
or services; and
destruction of, or a significant adverse
effect on, archaeological and historic
sites and similar nonrenewable resources,
3.2 Indirect Impacts
Indirect impacts are caused by development made possible
by the project, and typically include:
a. changes in the rate, density, location, or
type of development;
b. increased air, water, or noise pollution
from induced changes in population and
land use;
increased solid waste production or demand
for potable water from induced changes in
population and land use; and
d. socioeconomic pressures for the expansion
of existing facilities and services (e.g.
housing, schools, highways, police, fire,
medical, energy) from induced changes in
population and land use.
As a facilities plan is reviewed, and as the environ-
mental review process is carried out, the project reviewer
is to note both the direct and indirect impacts of the
494
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A. INTRODUCTION
This chapter discusses the review of activities which take place
during the design of the project. It begins with the predesign
conference, followed by a discussion of the administrative and tech-
nical review of the plans and specifications. It also discusses
other activities which are usually accomplished concurrently with
design, and which are prerequisites to grant award.
Section B, Predesign Conference, describes suggested issues
which may be discussed with the grant applicant and the design
engineer.
Section C, Review of Plans and Specifications, describes admin-
istrative items to be included in the specifications, based primarily
on construction procurement requirements, and technical requirements
and guidance which EPA feels represent sound engineering design princi-
ples .
Section D, Value Engineering, describes those conditions
under which a separate value engineering (VE) study is required, the
methodology to be used in conducting the study, and provisions for
implementing the VE recommendations.
Section E, User Charge System, describes the requirements for
a user charge (UC) system, which must charge each user of the waste-
water treatment system a proportional share of the cost of pro-
viding treatment services.
Section F, Sewer User Ordinance, describes the requirements
for a sewer use ordinance (SUO), and its use in implementing EPA
requirements and other municipal requirements for effective
operation of the project.
Section G, Plan of Operation, describes the requirements for an
effective plan of operation, including staffing, training, budgeting,
and the preparation of an operation and maintenance (O&M) manual.
Section H, Intermunicipal Service Agreement, describes the require-
ments for an intermunicipal service agreement and its importance in
providing proper financial and institutional support for the project.
Section I, Industrial Wastes and Federal Facilities,
describes limitations on the eligibility of capacity to treat
industrial wastes and wastes from Federal facilities.
Section J, Design Acceptance, describes the effect of design
acceptance by the reviewing agency, and discusses other issues
which must be resolved prior to application submission.
503
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B. PREDESIGN CONFERENCE
Purpose;
Meet with the grant applicant and the grant applicant's design
team to review administrative and technical requirements for design,
as well as other activities that are usually accomplished concurrently
with design.
Discussion;
A predesign conference is not required by EPA regulations, but is
encouraged for all projects whenever possible. A predesign conference
affords an opportunity for the reviewing agency to meet with the grant
applicant and the grant applicant's design team to review the many
activities which take place during project design. Practically all
reviewing agencies have developed specific procedures for arranging
and conducting a predesign conference, frequently including a checklist
of items for discussion. The reviewer should use these procedures,
modified as necessary for the specific project. Particular emphasis
should be placed on the significant changes in the construction grants
program which became effective on October 1, 1984.
Procedures;
As soon as possible after completion and approval of a facilities
plan and prior to the initiation of design, the project reviewer
should arrange a predesign conference with the grant applicant and the
design team. iMajor program requirements to be discussed include:
1. Technical design criteria, which must meet State
design standards and the EPA requirements and guidance
discussed in Section C.2 below. If the reviewing agency
requires the submission of an engineering design report,
the format and timing for submission of the report by the
grantee should be discussed. Design parameters may
include items such as loadings, system head curves,
detention times, peaking factors, and the capacity of
various components.
2. Contract documents, which must comply with State and
EPA requirements (primarily 40 CFR [Part 33] 31.36,
as discussed in Section C.I below. These requirements
include competitive selection, non-restrictive specifi-
cations, bonding, insurance, wage rates, labor standards,
drug free workplace, debarement/suspension, and [required
subagreement clauses.](NOTE; Many of these subagreement
clauses are addressed sporadically in Part 31; also,
efforts are currently underway to obtain OMB approvaT for
including these clauses, verbatim, in Part 31.)
504 TM 89-1
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3. Recent changes in the construction grants program,
such as:
a. reduced Federal grant share (see Section VI.L.2);
b. allowances (see Section VI.L.I) and advances of
allowance (see Section III.E);
c. revised definition of secondary treatment
or its equivalent (see Section IV.C.3.1);
d. infiltration/inflow (I/I) limitation (see
Section IV.C.4.3);
e. limitations on the eligibility of reserve capacity
(see Section VI.D.18);
f. project performance certification, including sewer
rehabilitation, after one year of operation (see
Section VII.I.2.a);
g. limited eligibility of collection sewers, major
sewer system rehabilitation, and combined sewer
overflow (CSO) projects (see Section II.E.3).
d. Compliance with facilities plan and FONSI or EIS conditions
(see Sections IV.C.8 and IV.D).
e. UC system (see Section E below) and SUO (see Section F below)
f. Requirements for VE studies (see Section D below).
g. Preliminary and final plan of operation (see Section G below)
h. Acquisition of land, rights of way, and easements (see
Section VI.H).
i. Intermunicipal service agreements (see Section H below).
j. Service agreements with major industrial users (see
Section I below).
k. Additional I/I investigations which may be required (see
Section VI.D.16).
1. Pretreatment (see Sections IV.E.2 and VI.E.4).
m. Design features associated with industrial flows (see
Section I below).
n. Timing and arrangements for funding the municipal share
of project costs (see Section VI.D.4).
505 TM 89-1
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C. REVIEW OF PLANS AND SPECIFICATIONS
Purpose;
Insure that the proposed project conforms with the selected
alternative in the facilities plan, satisfies State and EPA design
criteria and administrative requirements, is biddable and construc-
tible, and will satisfy discharge requirements in accordance with the
project's National Pollutant Discharge Elimination (NPDES) or State
Pollutant Discharge Elimination System (SPDES) permit.
Discussion;
Contract documents, primarily the plans and specifications, are
prepared by an engineer licensed in the State in which the project
is to be constructed. In designing the project, the engineer must
comply with State design standards, and the enforceable requirements
of the Clean Water Act (CWA). The engineer is responsible for employing
sound engineering principles, as represented by his seal and signature
on the plans and specifications.
The reviewer is responsible for insuring that the project conforms
with the selected alternative described in the facilities plan, in-
cludes special considerations which were noted in the facilities plan
(e.g., mitigation of adverse environmental impacts), and in general
meets minimum technical and administrative State and EPA requirements.
Ideally, periodic progress reviews should be conducted with the grant
applicant and the design team to insure compliance with technical and
administrative requirements.
In performing the review of the plans and specifications, the
reviewer is to note and call to the attention of the design team,
through the grant applicant, any apparant discrepancies with State or
EPA requirements (e.g., oversized or unnecessary units, "gold plating,"
etc.). Reviews should also be conducted with a cost conscious eye;
and, items judged not to be reasonably required and necessary for the
proper operation and maintenance of the facility and the attainment
of effluent limits, or required to mitigate adverse environmental
benefits, should be recommended for reevaluation and possible
elimination. However, the review and acceptance of the plans and
specifications by the State or EPA project reviewer does not relieve
the grantee or the design engineer of his legal responsibilities for
the overall integrity of the project (see Section J.l.c below).
In addition to reviewing the contract documents for technical and
administrative adequacy, the reviewer should note and resolve any
possible conflicts that could later result in contractor change orders
or claims. The most common conditions resulting in change orders
include differing site conditions, errors and omissions in the con-
tract documents, State and Federal government regulatory changes,
design changes, overruns and underruns in quantities, and factors
affecting the time of completion of the project. Bearing these
conditions in mind, the reviewer should carefully review the plans
and specifications to insure that the information and details con-
tained therein will help to minimize future change orders and claims.
506 TM 89-1
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In addition, and consistent with Section 203(a)(2) of the
Water" Quality Act of 1987, the reviewing (and approving^ Agency
must enter into a written agreement with the applicant, that.
establishes which items of the proposed project are eligible for
Federal participation. Once established, the Agency cannot unilat-
erally modify the agreement unless the items specified in the
eligibility agreement are found to be in violation of Federal
statutes or regulation. Details on implementing this requirement
are described in Section VI,M,6.
Review Procedures;
1. Administrative Review
The procurement of construction contractors must comply
with at least the minimum EPA requirements as set forth in
40 CFR [Part 33] 31.36 for recipients other than State
governments. These minimum EPA requirements may be supple-
mented by additional State or local requirements provided they
do not conflict with EPA requirements nor in any other way
unduly restrict or eliminate competition (see Section I.D.6).
Practices considered to be unduly restrictive and therefore
not allowed include:
- noncompetitive practices between firms;
- organizational conflicts of interest;
- State and local laws, ordinances, regulations, or
procedures which give local or in-State bidders
preference over other bidders;
- unnecessary qualification requirements, such as
excessive experience or bonding in lieu of
experience;
- placing other unreasonable requirements on firms
in order for them to qualify to do business.
Re: 40 CFR 33.230*, 31.36
a. Formal Advertising
Except for very unusual circumstances, the formal
advertising procurement method must be employed.
Formal advertising procurement essentially consist of:
i. formal advertising or solicitation of bids
through a public notice,
507 TM 89-1
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ii. public receipt and opening of bids, and
iii. award of the contract to the lowest
responsive, responsible bidder.
Items b through f below briefly describe EPA's admin-
istrative requirements for bidding documents and
procedures. See Sections VII.B and VII.D for a more
complete discussion.
Re: 40 CFR 33.405*, 33.430*, 31.36(d)
b. Public Notice
The public notice soliciting bids must state when
and how bidding documents, including plans and spec-
ifications, can be obtained or examined, and the time,
date, and location for receipt of bids. The public
notice must provide adequate time (normally 30 days)
between the date of public notice and the date for
receipt of bids.
The advertisement or invitation for bids is placed
in newspapers and trade journals, and in the case of
large projects, in publications with nationwide distri-
bution .
Re; 40 CFR 33.410*, 33.415*, 31.36(d)(2)(ii ) ;
40 CFR Part 33, Appendix A*
c. Prequalification of Contractors and Products
If allowed by State law, grant applicants may
use a prequalified list of contractors and/or
major items of equipment before receipt of bids
provided the following conditions are met:
i. prequalified list is updated [at least
every six months];
ii. requests for inclusion on the list
made [30 days] before bid opening are
considered and acted upon;
iii. adequate public notice of the pre-
qualification procedure is provided;
and
508 TM 89-1
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iv, the procedure does not unnecessarily
restrict competition.
Re: 40 CFR 33.230(c)* and (d)*, 31.36(c)(4)
d. Addenda
Prior to the receipt of bids, it is sometimes
necessary for the grantee to issue addenda to the plans
or specifications. Such addenda may be required to up-
date a wage rate determination (see Item q below) or to
clarify the plans or specifications. The proposal form
or other bid submission documents should include a
statement to be completed by bidders acknowledging receipt
of each addendum (see Section VII.D.l.c).
e. Bid Proposal
The bid proposal is a form which briefly describes
the required items of equipment, materials, and work to
be performed, and provides blank spaces to be completed by
the bidder, indicating the amount being bid for each bid
item. The amount will be a fixed price (lump sum), or in
the case of estimated quantities, unit prices. The price
is generally expressed in words and numbers, with a separate
price for each major item or system and a total for the
entire contract. The proposal is to be signed by an
authorized official of the bidding firm. The individual
items on the proposal form should set forth, in clear and
understandable terms, the limits of work for each item.
f. Basis for Award
The contract documents must clearly describe the method
of bidding, the method of evaluating bid prices, and the
method of awarding the contract. A contract will be awarded
to the lowest responsive, responsible bidder. The selection
of the successful bidder is to be made principally on the
basis of price.
A responsible contractor is one that has:
i. financial resources, technical qual-
ifications, experience, organization,
and facilities adequate to complete
the project within the required schedule,
or a demonstrated ability to obtain these;
ii. a satisfactory performance record;
509 TM 89-1
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iii. adequate accounting and auditing
procedures;
iv. demonstrated compliance or willing-
ness to comply with the civil rights,
equal employment opportunity, labor
law, and other requirements of
40 CFR [Part 30] 31.36(i)(3); and
v. certified that a drug free workplace
will be itiaintainedT
A. contract may not be awarded to a contractor,
nor a subcontract to a subcontractor, who has been
suspended, debarred, or voluntarily excluded under
40 CFR Part 32, nor may any portion of the work be
performed at any facility listed on EPA's List of
Violating Facilities.
The contract documents should also include a
description of conditions under which all bids may
be rejected. Such conditions must be based on sound
business reasons which are in the best interests of the
construction grants program.
Re; 40 CFR Part 15; 40 CFR 33.220*, 33.250*, 33.405*,
33.420*, 33.430*, 31.36(b) through (i)
Sole Source Procurement
Noncompetitive negotiation may be used when small
purchases, formal advertising and competitive negotiation
are inappropriate becauseT
[i. it is necessary to test or demonstrate
a specific thing, such as equipment or
processes used in innovative technology
designs;] or
ii. an item is available only from a single
source; or
iii. a public exigency or emergency exists
and the urgency will not permit delay,
or
iv. after solicitation from a number of
sources, competition is inadequate
(e.g., after formal advertising, no
bids or only one bid is received).
Re: 40 CFR 33.605*, 31.36(d)(4)(i)
510 TM 89-1
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h. Scope of Work
The contract documents must include a clear
statement of work, especially where multiple
contracts may be awarded. The statement of work
must establish the limits of work for each con-
tract, in order to eliminate confusion or over-
lapping of work between contractors. To the extent
feasible, the limits of work for each contract
should also be indicated on each page of the design
drawings (i.e., plans). The statement of work must
also include a required performance schedule for
each contract and a requirement for coordination
between contractors.
Re: 40 CFR 33.420(a)*, 31.36(c)(3)
"- * Responsibilities of Parties
The specifications should provide a clear descrip-
tion of the responsibilities of each party, including
the owner (grantee), the grantee's representative
(generally the engineer's project inspector), and the
construction contractor. The specifications should in-
dicate who may authorize a change in the work (procedures
for change orders are described in Section VII.H), who
is responsible for checking quantities and quality of
materials, who is authorized to allow extensions of time,
who is authorized to approve the construction contractor's
payment requests, who is authorized to interpret the plans
and specifications and resolve conflicts, and how disputes
are to be resolved. The specifications may also describe
the role of the State, EPA and/or the U.S. Army Corps of
Engineers (COE). In general, however, regulatory officials
are observers to help insure that the project is constructed
in accordance with the approved plans, specifications, and
change orders. Their recommendations for compliance are
provided only to and through the grantee.
Re; 40 CFR 33.210*; EPA publication "Operating Procedures
for Monitoring Construction Activities at Projects
Funded under the Environmental Protection Agency's
Construction Grants Program," September 1983
j. Subagreement
The contract documents must include a proposed subagree-
ment which clearly sets forth the terms and conditions of
the subagreement including payment, delivery schedules,
points of delivery, and acceptance criteria. The subagree-
ment must be a fixed price (lump sum) or unit price sub-
agreement and shall incorporate by reference all contract
documents, including plans, specifications, and addenda.
Re: 40 CFR 33.285*, 33.420*, 31.36(d)
511 TM 89-1
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[k. Lower Tier Subagreements
The contract documents must require the prime contrac-
tor to include specific requirements in any lower tier
subagreement awarded by the prime contractor. This require-
ment will be satisfied by inclusion in the contract docu-
ments of the required provisions described in Item m below.]
Re: 40 CFR 33.295*
1. Bonding and Insurance
For construction contracts of $100,000 or less, grantees
may use local or State requirements for bonding. For con-
struction contracts in excess of $100,000, the minimum EPA
bonding requirements are:
i. bid guarantee (bond, certified check, or other
negotiable instrument) equal to 5 percent of
the bid price;
ii. performance bond for 100 percent of the bid
price; and
iii. payment bond for 100 percent of the bid price.
Bonds obtained by bidders must be from companies holding
certificates of authority as acceptable sureties in the
State in which the project is located. It is recommended
that performance and payment bonds remain in effect for
one year after contract completion.
Contractors should be required to obtain adequate
construction insurance (e.g., fire and extended cover-
age, workmen's compensation, public liability and pro-
perty damage, and all risk) in accordance with local or
State laws.
EPA regulations require that a grantee participate in
the National Flood Insurance Program if the proposed pro-
ject involves construction or acquisition of insurable
structures (i.e., four walls and a roof, principally above
ground), with a value of $10,000 or more and located in a
flood hazard area. Flood protection insurance adequate to
protect the grantee's financial interest must be provided
for structures as soon as the walls and roof exist. Insurance
must be provided during construction and maintained by the
grantee thereafter. Building materials for the insurable
structure can also be insured if stored on the premises in
an enclosed building.
Re: 40 CFR 30.600(b)*, 33.265*, 31.36(h); Treasury
Circular 570; Flood Disaster Protection Act of 1973,
PL 93-234
TM 89-1
512 (87-1)
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m. Regulatory Provisions
The contract documents must include [a copy of the most
recent EPA specification inserts, including 40 CFR 33.295
("Subagreement Awarded by a Contractor"), Subparts F
("Subagreement Provisions") and G ("Protests"),] or, the
contract provisions of 40 CFR 31.36(i); and, EPA
Form 5720-4("Labor Standard Provisions for Federally
Assisted Contracts"). [By including these inserts in the
contract documents, many of the administrative reguirements
will be satisfied.] In addition, the grant applicant must
certify regarding debarment, suspension and other responsT-
bility matters.
[Subpart F] and, as applicable, 40 CFR 31.36(1) includes
Subagreement provisions such as labor standards provisions,
patents data and copyrights clause, violating facilities
clause, energy efficiency clause and model Subagreement
clauses. The model Subagreement clauses include the Buy
American requirements (see Item 2.aa below) and the quality
assurance requirements (see Section VI.5.M.f). [With regard
to the model Subagreement clauses, the grant applicant
may use the exact wording in 33.1030 or their equivalent,
and should exclude those clauses which are not applicable
to construction contracts.] Grant applicants should be
encouraged to have their model Subagreement or substitute
clauses reviewed by their legal counsel, to insure their
compatibility with State laws and prevailing legal practices
Also, see "NOTE" in V.B.2.
Re: 40 CFR 30.302(d)(3)*, 30.503(f) and (h)*, 33.420(f)*f
33.710*, 31.36(c)(5), 31.36(1); 40 CFR Part 33
Subparts F* and G*, $) CFR 32.510
n. Safety
Project specifications must require contractors to
comply with applicable regulations issued by the Occupa-
tional Safety and Health Administration, U.S. Department
of Labor (DOL). In addition, where a State has promulgated
additional regulations concerning safety in design of
structures or safety during construction, such regulations
should be incorporated into the specifications (generally
by reference).
At the time of plan and specification review, the re-
viewing agency should insure that the specifications require
contractor compliance with applicable State and DOL safety
requirements, as well as the specific additional safety pro-
visions for chlorination facilities, wet and dry wells, and
other hazardous locations which are described in Items 2.c
through 2.e below.
Re: 40 CFR 31.36(1)(6)
TM 89-1
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513 (85-1)
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Schedule
Each construction contract must include a completion
schedule and provisions for coordination among contractors.
Since the grant applicant is required to submit a project
schedule with the grant application, the construction
schedule should be reviewed for reasonableness and confor-
mance with the project schedule, as well as with any permits,
compliance schedules, court orders, or State administrative
orders. The construction completion schedule is generally
given in calendar days from the date of the notice to pro-
ceed, and forms the basis for assessing liquidated damages
against the contractor (see Item r below). Any circumstances
under which the completion schedule would be amended should
be clearly defined in the contract documents, which should
also indicate that a formal change order is required in such
cases.
Re: 40 CFR 33.420(a)*, 35.2040(b)(6)
P_e r m i t s
The contract documents should require that, to the extent
possible, contractors obtain all necessary permits for con-
struction. (Some permits may be required to be held by the
owner of the project.)
Wage Rate Determination
Each EPA funded project with construction contracts in
excess of $2,000 must contain the prevailing wage rate
determination issued by DOL under the Davis-Bacon Act.
The wage rate determination will include the prevailing
wages and fringe benefits for various construction labor
categories. Contractors are required to pay employees at
least these prevailing wage rates. Since wage rate deter-
minations are periodically revised, provisions should be
included in the contract document for updating the deter-
mination by an addendum if the determination is issued by
DOL at least 10 days prior to bid receipt. Where project-
specific rates are requested from DOL, this 10 day limita-
tion does not apply, and the rates are applicable regard-
less of the date of issuance by DOL.
Since January 3, 1986, Davis-Bacon general wage deter-
minations have been published in a new special purpose docu-
ment, "General Wage Determinations Issued Under The Davis-
Bacon And Related Acts" and is available through subscription
or at Regional Depository Libraries. At the same time, pub-
lication of these wage determinations in the Federal Register
ceased. However, weekly Federal Register notice of new
general wage determinations, and those being modified or
superseded will continue.
TM 89-1
514 (87-1)
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An amendment to DOL wage rate regulations requires that,
if a change to the wage decision is received less than 10
days before bid opening and the agency finds that there is
not enough time to add by addendum, a report of such deter-
mination shall be kept in the contract file. Also if a con-
tract is not awarded as the result of the solicitation within
90 days after bid opening, any modification to the wage deter-
mination published before contract award shall apply to the
resulting contract (add by Change Order), unless an extension
request is approved by DOL.
Re: 40 CFR 30.603(a)*, 33.420(e)*, 33.1016*, 31.36(i)(5)
29 CFR Part 1; 50 FR 49822 (December 4, 1985)
Liquidated Damages
The assessment of liquidated damages by the grantee is
a potential source of disputes and contractor counter-claims,
and must therefore be carefully evaluated. EPA regulations
contain no provisions for liquidated damages. However, many
engineers include liquidated damages (e.g., $1,000 per day
for each day of delay beyond the construction completion
date) in the specifications. Where liquidated damages are
included in the contract documents, they should be reviewed
against applicable State laws and court decisions. The
amount of liquidated damages should be adequate to cover
additional costs which would be incurred by the grantee as
a result of delay (e.g., additional inspections, interest on
borrowed funds, etc.). Liquidated damages may affect allow-
able project costs (see Section IX.F.4, Paragraph A.3.a).
It is important to note that in contracts containing
liquidated damages provisions, such provisions will only be
enforced by courts as long as the amount fixed is not found
to be a penalty nor a measure of injury actually suffered.
In addition, a term fixing unreasonably large liquidated
damages would be void in states which have adopted the
Uniform CommercialCode.
Change Order Procedures
[A clause for changes (Paragraph 3) is included in the
model subagreement clauses in 40 CFR 33.1030.] However,
the contract documents should also clearly describe the
specific procedures, including negotiation, for reviewing
and approving change orders (see Section VII.H).
TM 89-1
515 (87-1)
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t. Payment Request Procedures
The contract documents should clearly describe the
procedures and timing for processing contractor payment
requests, including payment request forms, documentation
(e.g., paid invoices or inspector's verification of work
in place), retainage, and time from receipt of payment
request until payment.
u. Retainage
Many project specifications include a requirement for
retainage of a portion of a progress payment request until
the project is substantially or fully completed. Typical
retainage is 5 to 10 percent of the monthly progress payment
request until the project is substantially complete (e.g.,
90 percent completion). When the project is substantially
complete, the retainage is reduced to an amount at least
equal to the value of any uncompleted or deficient work.
Retained amounts are paid when remaining work items are
satisfactorily completed.
Contract documents should clearly describe the grantee's
retainage policy in order to preclude future disputes, and
should be reviewed to ensure that the retainage policy is
in accordance with State laws and requirements
EPA regulations do not address retainage. However, EPA
will only pay the grantee the Federal share of allowable
project costs which are currently due and payable to the
grantee (i.e., costs incurred by the grantee, minus any
retainage). EPA may also withhold grant payments otherwise
due a grantee for failure to comply with specific require-
ments and conditions of the grant agreement, but only to the
extent necessary to insure compliance. In order to avoid
any future cash flow problems, grantees should be advised of
EPA's withholding policy (see Sections IX.B.2.b and IX.B.4).
Re: 40 CFR 30.902*, 31.12
v. Construction Incentive Clause
A construction incentive (CI) clause is an option
which may be included in the contract documents if
not prohibited by State and local laws. The CI clause
allows a contractor or subcontractor to propose changes
in the project which will:
i. provide at least a $50,000 gross capital
savings (a lower amount may be specified by
the grantee, if it can demonstrate that a
smaller CI proposal can be cost-effectively
reviewed by the grantee),
TM 89-1
516 (87-1)
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Re; 40 CFR 30.600(j)*, 33.240*; preamble to 40 CFR
Part 33*, 48 FR 12923, "Small, Minority, Women's,
and Labor Surplus Area Businesses" (March 28, 1983),
40 CFR Part 31.36
x. Selecting City Engineer as Consultant for EPA Funded Work
The practice of utilizing a firm as a "city engineer"
and as a consultant is fairly common in smaller municipal-
ities. This practice is acceptable provided that the grantee
follows the applicable EPA regulations concerning procure-
ment and code of conduct. If questioned, the grantee must
document to the Agency's satisfaction that applicable pro-
curement regulations were followed and that no conflict of
interest exist. Accordingly, when a firm is selected to
serve in the dual role of "city engineer" and prime con-
sultant on EPA funded projects, it is strongly recommended
that the responsible city officials certify that they are
aware of EPA's regulations governing conflict of interest
and that the award of a contract to the firm was made in
accordance with these regulations.
2. Technical Review
Except in the case of approved marine discharge waiver
applicants, project designs must meet the minimum requirements
for achieving secondary treatment or its equivalent, as defined
in EPA's regulations (40 CFR Part 133), in order to be eligible
for grant assistance. Plans, specifications, and contract docu-
ments mast conform to State design criteria and also meet the
requirements for competitive bidding in accordance with EPA's
procurement regulations (40 CFR Part [33], 31.36. Based on past
experience, EPA has established, as described below, several
basic policies concerning the design of treatment works which
are to be incorporated into the plans and specifications. These
items do not represent a complete list of design standards, and
should be used only to supplement a State's design criteria.
a' Project Performance Standards
Grantees are required to certify, after one year o£
operation, whether the project meets its project performance
standards. Therefore, at the time of plan and specification
review it is necessary to establish the parameters which
constitute project performance standards and judge whether
the proposed project is likely to achieve a minimum of
secondary treatment or its equivalent, in accordance with
40 CFR Part 133.
TM 89-1
519 (87-1)
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Project performance standards are performance and opera-
tional requirements applicable to the project, including the
enforceable requirements of the CWA and the design upon
which the specifications are based. For projects which will
contribute to compliance with the enforceable requirements
of the CWA, project performance standards include design
criteria (e.g., engineers design report, facilities plan,
plans and specifications) and effluent requirements. For
projects which will not contribute to compliance with the
enforceable requirements of CWA, such as interceptor sewers
and pumping stations, project performance standards include
only the design criteria. For projects which include sewer
rehabilitation, the quantity of excessive infiltration and
inflow which is to be eliminated is also considered a com-
ponent of the project performance standards.
During the technical review of the plans and specifica-
tions, those parameters which constitute project performance
standards should be identified and recorded in the project
files and in the Grants Information and Control System
(GICS) for later use. (This can usually be done even if a
NPDES permit has not been issued at the time of design, since
effluent limitations should have been established during
facilities planning.) It may also be prudent to contact the
grant applicant and reach agreement concerning project per-
formance standards as a basis for future evaluation. At a
minimum, the grant applicant should be informed of the para-
meters which have been identified as project performance
standards (see Sections VI.M.S.g and VII.I.2.a).
Re: 40 CFR 35 . 2005(b)(15) and (b)(33), 35.2218;
40 CFR Part 133
b. Mitigation of Adverse Environmental Impacts
Plans and specifications should be compared to the
facilities plan and the finding of no significant impact
(FONSI) or the environmental impact statement (EIS) prepared
for the project to insure that the project design incorporates
all measures for the mitigation of adverse environmental im-
pacts (i.e., measures to protect environmentally sensitive
areas and cultural resources). Mitigation measures may
include a soil erosion and control plan, fencing of "off-
limits" areas to avoid physical disturbance, restrictions
on hours of the day or seasons of the year for construction
activities, backfilling and immediate seeding requirements,
avoidance of impacts on cultural resources, structural designs
for facilities located in floodplains or wetlands, etc.
Re: 40 CFR 6.509(b), 40 CFR 35.2030(b)
520 TM 87-1
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y. Reconfinflation of Innovative or Alternative Technology
While not specifically required by EPA regula-
tions, review of project design may also afford
an opportunity to reconfirm earlier decisions,
generally made on the basis of preliminary infor-
mation in the facilities plan, concerning the
classification of the project or project components
as innovative or alternative (I/A) technology (see
Section VI.E.3 ). Grant applicants should be notified
of any changes to the I/A classification, since this
will affect project financing.
z. Project Sign
The specifications must require the contractor
to provide and erect a project sign in accordance
with the project sign details found in the EPA
publication, "Construction Grants 1985" (CG-85), or
in accordance with alternative State requirements
which have been approved by EPA.
aa. Buy American
By inclusion of the model subagreement clauses
or their equivalent in the specifications (see
Item l.m above) the grant applicant has initially
satisfied the Buy American provision. However, the
regulations further clarify this issue by providing
that contractors must use domestic construction
material in preference to nondomestic material if
it is priced no more than 6 percent higher than the
bid or offered price of the non-domestic material,
including all costs of delivery to the construction
site and any applicable duty, whether or not assessed.
Where a product consists of domestic and nondomestic
materials the product shall be considered domestic
if the American manufactured components represent
50 percent or more of the product.
EPA may waive the Buy American provision based
upon relevant factors such as:
i. such use is not in the public interest,
ii. the cost is unreasonable,
539
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iii. available EPA resources are not sufficient
to implement the provisions (requires EPA
Headquarters approval),
iv. products are not reasonably available or of
satisfactory quality in the United States, and
v. provisions conflict with multilateral govern-
ment procurement agreements (requires EPA
Headquarters approval).
Re; 40 CFR 33.710*, 33.1030, Par. 12*, 31.36(c)(5)
bb. Nonrestrictive Specifications
Specifications must be written to encourage
free and open competition. The specifications
shall contain a clear and accurate description
of the technical requirements for the material
or product. The description shall include
a statement of the qualitative nature of the
material or product and set forth those minimum
essential characteristics and standards to which
it must conform.
When, however, in the judgement of the grant
applicant it is impractical or uneconomical to
make a clear and accurate description of the
technical requirements, a "brand name or equal"
description may be used to define the performance
or other salient requirements of the material or
product. In so doing, the specifications must
clearly state the salient requirements which must
be met by the material or product.
With regard to materials such as pipe or grout,
it is preferable to use nationally recognized
performance specifications such as AWWA, ASTM, or
Federal specifications.
While the decision to use a "brand name or equal"
specification rests with the grant applicant, the
project reviewer is to insure that the exercise of
this provision does not frustrate the requirements for
free and open competition.
540 TM 89-1
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An exception to the nonrestrictive specifications
requirement is allowed where the features of a
material or product are necessary to demonstrate
a specific thing, such as in the case of proposed
innovative technologies, or to provide for the
interchangeability of parts or equipment.
Where a grant applicant uses restrictive
specifications, it may be prudent to advise the
grant applicant that the project files should contain
a justification for such actions, developed prior to
the bid opening date, in the event of a future bid
protest.
Re: 40 CFR 33.255*, 31.36(c)(3)
cc. Subsurface Information
Adequate subsurface information (soil borings,
etc.) must be provided to allow each bidder to
accurately estimate the cost of excavation required
by the plans and specifications. Failure to provide
such information increases the probability of a
future contractor claim under the "differing site
conditions" clause.
dd. Storage of Equipment and Materials
The specifications should require that equip-
ment and materials delivered to the project site
are properly secured and stored in accordance
with the manufacturer's recommendations. If the
grantee purchases equipment directly from a
supplier, specific provisions must be made for
transfer of ownership of the equipment from the
grantee to the contractor.
3. Biddability and Constructibility Review
In order to prevent unnecessary costs due to such problems
as unclear specifications or unusual construction techniques,
it is important that plans and specifications be reviewed for
biddability and Constructibility (B/C). While the B/C review
does not involve an evaluation of the adequacy of design to
achieve the required level of treatment, it does attempt to
insure that the plans and specifications are suitable for
bidding and that the project can be constructed as proposed.
541 TM 89-1
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a. Biddability - A "biddability" review esentially attempts
to insure that:
i. the bid documents are clear and understandable,
ii. all necessary information has been included,
iii. the project is divided into biddable packages
or contracts,
iv. specific bid items are clearly defined to
facilitate bidding and evaluation, and
v. the plans and specifications are sufficiently
detailed to allow reasonable bidding.
b. Constructibility - A "constructibility" review
evaluates the suitability of the proposed project
and its components in relation to the project site,
i ncluding:
i. any potential construction constraints imposed
by the site,
ii. real or possible conflicts inherent in the
plans and specifications,
iii. compatability between plans and specifications,
iv. compatability of the plans and specifications
with construction procedures and equipment, and
v. other potential problems in constructing the
project.
Because this review requires an up-to-date knowledge
of current construction practices and the cost and availability
of various categories of labor and construction equipment, it
is usually performed by specialized personnel who maintain
this up-to-date knowledge. In some States, the COE performs
this review for the State agency, under an interagency
agreement with EPA (see Section I.F.5).
4. Discrepancies
Contract documents, plans, and specifications are reviewed
by the reviewing agency to insure that they meet minimum State
and EPA requirements concerning treatment level and competitive
bidding. Implicit in this review is the assumption that the
project, if constructed in accordance with the plans and
542
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The VE study will conclude with a final report (intermediate
reports may also be issued) which incorporates:
accepted VE recommendations,
- costs and schedules for implementing the accepted
recommendations,
rejected recommendations and reasons for rejection, and
net savings from the VE recommendations over the useful
life of the project.
In order to better understand the VE recommendations,
it may be helpful for the reviewer to attend key sessions
of the VE review. Grant applicants should be encouraged
to implement all feasible recommendations of the VE study,
and rejection of recommendations should be adequately
justified before acceptance of the study by the reviewing
agency. However, reviewing agencies must exercise reason-
able judgement in questioning those recommendations not
accepted by the grant applicant.
Review Procedures;
1. Conduct of the Study
During periodic progress reviews with the grant applicant,
review:
a. the scope of the VE study to insure that it is
commensurate with the size and complexity of the
project;
b. the qualifications of the VE coordinator and team
members;
c. the independence and objectivity of the VE team;
and
d. the methodology proposed or employed during the
study.
2. Implementation of Recommendations
At the completion of the VE study and during review of
the plans and specifications:
a. obtain a copy of the final VE report, noting
recommendations accepted and net cost savings
(both capital and O&M over the life of the
project);
545
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b. insure that accepted recommendations are incor-
porated into the project design and reflected in
the plans and specifications; and
c. review VE recommendations rejected by the grant
applicant and the justification for rejection.
Re: 40 CFR 35.926, 35.2114; EPA publication 430/9-76-008,
"Value Engineering Workbook for Construction Grant
Projects," July 1976.
E. USER CHARGE SYSTEM
Purpose;
Develop a municipally enacted financial managment system
which provides for the collection of revenues from users in
proportion to their use. Collected revenues must be
sufficient to offset the costs of operation, maintenance, and
replacement of equipment (OM&R).
Discussion:
As a prerequisite to Step 3 grant award, the UC system
submitted by the grant applicant and by each subscriber
community must be approved by the reviewing agency. The UC
system provides for the collection of revenues from all system
users to offset OM&R costs, including salaries, supplies,
chemicals, utilities, insurance, and replacement of equipment
and accessories (e.g., pumps, motors, bearings, etc.) which are
necessary during the useful life of the project to maintain
capacity and performance. As a component of the UC system, the
term "replacement" does not include the replacement of the
treatment works at the end of its useful life. The UC system
mandated by EPA regulations also does not include charges
levied on customers to pay bond interest, retire bonds, or
amortize debt.
The charge to each user must be based on actual use, ad
valorem taxes, or a combination of both. A system based on
actual use (or estimated use during the first year for new
facilities) assumes that discharges are measured in some way,
such as through water meters (or sewage flow meters for
large industrial dischargers), and that each user or class
of users pays its proportionate contribution relative to the
total flow. Very often the basic UC will be proportionate
to the volume of discharge with a surcharge added for non-
domestic wastes, considering items such as sewage strength
and rate of discharge (e.g., peak flows). The UC system must
also provide that each user which discharges pollutants that
cause an increase in the cost of managing effluent or sludge
pay for such increase based on the actual additional cost.
546 TM 89-1
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In conjunction with the above, a provision in the 1987 amend-
ment^ to the Clean Water Act allows grantees to include in their
UC systems an optional class of low income residential users
(LIRUs) and charge these users lower user rates. An LIRU is any
residence with a household income below the Federal poverty level
as defined in 45 CFR 1060.2 or any residence designated as low
income under State law or regulation. Grantees receiving construc-
tion grants after March 1, 1973 may implement this provision after
providing for public notice and hearing and receiving the delegated
State or Regional approval.
The use of ad valorem taxes as a basis for a UC system is
allowed under EPA regulations for a grant applicant which had in
existence on December 27, 1977, and in continuous use thereafter,
a system of dedicated ad valorem taxes for the collection of revenues
to offset wastewater treatment OM&R costs. In most cases, the
existing system will require revision to meet EPA requirements. To
be approvable, the proposed UC system must distribute costs to
residential and small nonresidential users (including, at the grant
applicant's option, commercial and industrial users discharging no
more that the equivalent of 25,000 gallons per day of domestic
sanitary waste) in proportion to their use as a class, and must
charge each commercial and industrial user discharging more than
25,000 gallons per day its share based upon actual use. This last
requirement is normally met through the use of a surcharge based on
sewage strength and/or rate of discharge. In some cases, rebates
of property taxes may be required for industries with large property
taxes and proportionately smaller wastewater loadings.
Communities with combined sewer systems, or with significant
amounts of inflow into nominally separate sewer systems, may dis-
tribute the OM&R costs of treating this flow among all users based
either on actual use, or on a system which uses factors such as
flow, the land area of each user, or the number of hookups or dis-
charges (or property value for ad valorem systems). Projects which
generate revenues from the sale of wastewater byproducts (e.g.,
sale of crops, sludge fertilizer, digester gas, etc.) must use the
revenues to reduce all user charges proportionately.
The UC system represents part of the financial management
system developed by the grant applicant and must include an accurate
accounting of generated revenues, expenditures and reserves for
replacement. The financial management system must provide for
periodic revision to UC rates and an annual notification to users,
in conjunction with a regular bill, of the UC rates (including
surcharge rates) and the portion of total charges attributable to
wastewater treatment. If the grant applicant will provide waste-
water treatment services to other subscriber communities, each such
community must also enact a UC system as described above. The UC
system developed in accordance with EPA regulations will take
precedence over any terms or conditions of other inconsistent
agreements.
547 TM 89-1
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Review Procedures:
The reviewer of a proposed UC system should:
1. Compare the proposed UC rates against those presented
to the public during facilities planning. If a significant
increase has occurred, it may be necessary to provide for
additional public participation.
2. Insure that the budget upon which the user charges are
based include reasonable OM&R costs. Debt, bond costs,
and other costs not associated with OM&R are not subject
to EPA regulations, and must be separately identified by
the grantee and recovered separately from the UC system.
3. For systems based on actual use, insure that each user
or class of users will pay its proportionate share, and
that a reasonable means of determining actual use has
been or will be established.
4. For systems based on ad valorem taxes, insure that the
limitations described in the discussion above are
satisfied.
5. Insure that OM&R costs for treating I/I (and storm water
in systems with combined sewers) are proportioned among
all users based either on actual use, or on factors such
as flow volume, land area of users, or number of hookups
or discharges (or property valuation only for ad valorem
systems).
6. Insure that the system provides for an accurate accounting
of revenues and expenditures, periodic updating (first year
may be based on estimates for new systems and ideally annual
updating thereafter) and annual notification to users of the
UC rates and portion of charges for wastewater treatment
services.
1_. Insure that the user rate for LIRUs is defined as a uniform
percentage of the user charge rate charged other residential
users and that the amount of any cost reductions afforded
the low income residential class is proportionately
absorbed by all other user classes so that the total revenues
for OM&R are not reduced as a result of establishing a low
income residential classT
8. For multijurisdictional projects, insure that each
participating community will enact a UC system.
9. Insure that the UC system will take precedence over
any other inconsistent agreement.
548 TM 89-1
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10. Insure that the UC system is in a form which will allow
municipal enactment before the project is placed in
operation, and will continue for the life of the project.
Re: 40 CFR 35.2140, 35.2122, 35.2208; EPA publication
430/9-84-006, "User Charge Guidance Manual for
Publicly-Owned Treatment Works," June 1984; EPA
publication, "Utility Manager's Guide to Financial
Planning," May 1984; FR 15821, 5/4/88.
F. SEWER USE ORDINANCE
Purpose;
Develop an ordinance which will limit the types and amounts of
materials discharged into the sewer system, preclude the intro-
duction of new inflow sources, and protect the integrity of the
wastewater treatment and disposal system.
Discussion;
As a prerequisite to Step 3 grant award, the reviewing agency
must approve the grant applicant's SUO or other legally binding
instrument. Regulatory requirements for the SUO include:
prohibition of new inflow sources;
- proper design and construction of new sewers and
connections, and
prohibition of toxic waste or other pollutants in
amounts or concentrations that:
o endanger the public safety or the physical
integrity of the plant,
o cause violation of effluent limitations, or
o preclude the selection of the most cost effective
alternative for wastewater treatment and sludge
disposal.
While the three items above are required, the SUO may also be
used as a legal basis for other municipal requirements which
represent good management practices. These requirements may
include:
- removal of illegal connections or rehabilitation of
deficient sewer connections as a condition of property
sale,
limitations on wastewater strength from non-domestic
users,
549 TM 89-1
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prohibition against dilution,
notification procedures concerning accidental spills,
- discharge reporting requirements,
rights of all parties, including the right of the
municipality or authorized EPA/State personnel to
enter all properties for testing and measurement,
rights of industrial users, including protection of
trade secrets, and
safety requirements.
Subscriber communities must also enact SUOs, in order to
provide protection for the entire system. These subscriber
communities' ordinances must also be approved by the reviewing
agency.
Review Procedures;
An approved SUO must, at a minimum:
1. Prohibit new inflow sources.
2. Require the proper design and construction of
new sewers and sewer connections.
3. Prohibit toxic or other pollutants in amounts
or concentrations which:
a. endanger public safety or the physical
integrity of the treatment works,
b. cause a violation of effluent limita-
tions, or
c. preclude selection of the most cost
effective alternative for wastewater
treatment and sludge disposal.
4. Be adopted before the project is placed in
operation.
Re: 40 CFR 35.2122, 35.2130, 35.2208
550
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A. INTRODUCTION
This chapter describes the documents which constitute a
Step 3 grant application package, the review procedures for each
document, and the limitations which must be satisfied before
grant award. Later sections describe Step 2+3 and other special
purpose grants and the limitations which must be satisfied before
these grants can be awarded. The final sections discuss the method-
ology for establishing the EPA grant amount and the procedures
associated with the award of a grant.
Section B, Application Contents, lists those items specif-
ically required by the regulations for a Step 3 grant application.
Section C, Application Review, describes the review of the
basic documents which constitute a Step 3 grant application. It
does not include limitations on award.
Section D, Limitations on Award, describes those limitations,
specifically required by the regulations, which must be satisfied
before grant award. This section also discusses phased and
segmented projects and limitations on the eligibility of reserve
capacity.
Section E, Additional Considerations for Award, describes
other considerations which may have to be satisfied before grant
award, but which are not listed under the specific heading
"Limitations on Award" in the construction grant regulations.
Section F, Step 2+3 Grants, describes the conditions under
which a Step 2+3 grant may be awarded.
Section G, Combined Sewer Overflow Grants, describes conditions
for the award of grants for both marine and nonmarine combined sewer
overflow (CSO) Step 3 projects.
Section H, Land Acquisition Grants, describes conditions and
limitations for the award of grants for the acquisition of eligible
land.
Section I, Innovative or Alternative Technology Field Testing
Grants, describes conditions and limitations for the award of grants
for field testing of an innovative or alternative (I/A) technology.
Section J, Innovative or Alternative Technology Modification
or Replacement Grants, describes the regulatory requirements which
must be satisfied before a 100 percent modification or replacement
(M/R) grant may be awarded for a failed I/A technology.
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Section K, Grants to States for Advances of Allowance,
describes the proceduresfor awarding a grant to a State, in
order for the State to provide advances of the allowance for
facilities planning and/or design to small communities.
Section L, Federal Grant Share, describes the methodology
for computing the EPA grantshare.
Section M, Grant Award Procedures, describes the procedures
for awarding grants and the circumstances under which special
grant conditions may be added to the grant agreement.
B. APPLICATION CONTENTS
The basic items to be included in a grant application
package for a Step 3 grant are listed below. The requirements
for other grants (e.g., Step 2+3, Step 7, correction of CSO, land
acquisition, etc.) are described later in this chapter. The
items below are only those submitted by the applicant, and do
not include items prepared by the State and submitted to EPA.
The items are listed here for quick reference, while the
review procedures for each item are described later. The
reviewer is to make a preliminary review of the application
package to insure that all items are included (some may be
contained within the facilities plan), that all applicable
portions of the forms are completed, and that the documents
are signed by the appropriate officials. If items are missing
or an explanation is necessary, the reviewing agency should
contact the grant applicant; however, the review is to proceed
as far as possible, to minimize delays once corrections are
made. A complete application package includes:
1. application (EPA Form 5720-12);
2. facilities plan prepared in accordance with 40 CFR
Part 35, Subpart E or Subpart I as appropriate;
3. evidence of adequate public participation based on
State or local statutes;
TM 89-1
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4. notification of any previous advance of allowance or
Step 1 or Step 2 grant received;
5. final design drawings (i.e., plans) and specifications;
6. project schedule;
7. evidence of compliance with the applicable limitations
on award, including:
a. advanced treatment review;
b. conformance with the approved water quality
management (WQM) plan;
c. demonstration and certification of financial and
management capability to build, operate, and
maintain the proposed project;
d. certification that the grant applicant has not
violated any Federal, State, or local law relating
to corrupt practices in connection with facilities
planning or design;
e. indication of the level of participation for
minority and women's business enterprises (MBE/
WBE) during facilities planning and design (EPA
Form 6005-1);
f. certification regarding debarment, suspension
and other responsibility matters - i.e., that
the grantee and its principals are not presently
debarred or suspended, etc. and have not, in th"e
past three years, been involved in fraud or other
criminal offenses regarding public contracts or
had a public transaction terminated for cause "or
defaultT
g. draft plan of operation;
h. executed intermunicipal service agreements,
i. environmental review;
j. value engineering (VE) study;
k. for collector sewers, evidence that either:
i. the existing collection system being
replaced or rehabilitated was not built
with Federal funds awarded on or after
October 18, 1972, or
ii. the new collection system will serve a
community which was in existence on
October 18, 1972;
605 TM 89-1
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1. prior approval of any preaward costs;
m. analysis of infiltration and inflow (I/I);
n. user charge (UC) system;
o. sewer use ordinance (SUO);
p. estimate of capacity required to treat current
needs, and amount of reserve capacity;
q. amount and nature of industrial and Federal
facility wastes to be treated; and
r. assurance of access to individual systems;
s. certification that the grant applicant will
take steps to provide'and maintain a drug free
workplace in accordance with the Drug Free
Workplace Act of 1988.
t. assurance that the requirements of the Brooks-
Murkowski Amendment, which related to restrictions
on contracting with firms of countries (viz Japan)
wTTich deny fair and equitable market opportunities
for U.S. products and services, will be met on
grants awarded between December 22, 1987 and
September 30,
8. intergovernmental review;
9. procurement system certification (EPA Form 5700-48)
and related documents; and
10. certification of nondiscrimination (EPA Form 4700-4)
Re; 40 CFR Part 7; 40 CFR Part 29; 40 CFR Part 33*;
40 CFR 35.2040, 35.2100 through 35.2140, 40 CFR 32.600
and 32.510; 40 CFR Part 31.
606 TM 89-1
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C. APPLICATION REVIEW
1. Application Form
Purpose;
Present information from the grant applicant which is necessary
for a grant award. The application also contains a list of assur-
ances from the applicant which are necessary to satisfy statutory
requirements. Additional assurances may also be necessary.
Discussion;
The application for grant assistance is submitted by the munic-
ipality designated in the approved WQM plan and in the facilities
plan for the project. The application must be signed by an official
of the municipality, and must be accompanied by a resolution from
the municipal governing body, designating this official as the
municipality's authorized representative.
Individual items in the application form are reviewed for
completeness and accuracy. In reviewing the application form, the
reviewer insures that the grant applicant:
has the legal, institutional, managerial, and
financial capability to insure adequate building
and operation of the project;
has the ability to expeditiously initiate procure-
ment and to complete the project in accordance
with the project schedule;
has complied with all applicable statutory and
regulatory requirements prior to grant application;
recognizes and agrees to comply with all other
applicable statutory and regulatory requirements
during construction and for the useful life of the
project; and
provides documentation or narrative statements
supporting the cost estimates included in the
application.
During the review of the application form, particular atten-
tion should be given to the source of funds for the local share
of project costs (e.g., State grants, sale of bonds, other Federal
grants which are authorized by statute to be used as non-Federal
607
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funds on EPA-funded construction projects, etc.)- In addition,
title to ineligible land, easements, and rights-of-way must be
acquired prior to application, or have progressed to the stage
where title or interest in the property may be obtained prior to
the award of construction contracts. Problems with local share
funding and land acquisition must be satisfactorily resolved prior
to grant award in order to prevent costly delays in building the
project. Condemnation proceedings, if required, are usually time
consuming, and therefore should be undertaken well in advance of
submitting the grant application.
Review Procedures;
Review the application form and insure that:
a. the name, project number, description of the
project, and grant amount requested agree with
the approved State project priority list;
b. the application form is signed by the municipality's
authorized representative;
c. documentation of the applicant's interest in the
project site, easements, and rights-of-way is
complete; the method of acquisition, including
relocation, complies with applicable provisions of
40 CFR Parts 4, [30] and 49 CFR Part 24; and where
land acquisition costs are eligible for grant
participation, the Federal interest in the eligible
land is protected (sees Sections H.l.f, H.3.b, and
M.5.d below);
d. the applicant can obtain Eunds for the balance of
project costs beyond the EPA grant to allow the
prompt initiation of construction;
e. the applicant has the legal, institutional,
managerial, and financial capabilities to build,
operate, and maintain the project (see Section D.4
below);
f. the estimated project costs reasonably compare with
the costs in the facilities plan, the financial
capability analysis, and presentations to the public;
608 TM 89-1
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g. estimated project costs are separated into allow-
able and unallowable costs, and allowable costs
are separated into the following cost categories:
construction, administration, legal, fiscal,
engineering services (both during construction
and for one year after the initiation of operation),
contingency allowance, allowance for facilities
planning and design, force account, and land acquisi-
tion and relocation;
h. the assurances section of the application is attached
to the application form; and
i. all items in the application form are either complete
or marked "not applicable" (may be abbreviated "N/A").
Re: 40 CFR 30.302*, 30.520*, 30.535*, 35.2040(b), 35.2104,
35.2212, 31.10, 31.31(a) and (b)
2. Facilities Plan
An approvable facilities plan which satisfies the requirements
of 40 CFR Part 35 must accompany the application for grant assis-
tance .
If work on facilities planning was initiated before May 12,
1982 (the effective date of 40 CFR Part 35, Subpart I), the
facilities plan must satisfy the requirements of 40 CFR Part 35,
Subpart E, rather than Subpart I. If the facilities plan was not
prepared under an EPA Step 1 grant, a grant applicant claiming
initiation of .facilities planning before May 12, 1982 will need to
substantiate this claim with appropriate documentation. If
facilities planning was initiated prior to May 12, 1982, and meets
the requirements of Subpart E, no revisions to the facilities plan
will be required solely to satisfy the requirements of Subpart I.
However, if considerable time has elapsed since the completion of
the facilities plan, this work should be carefully reviewed and
updated as necessary, since it may have been based on information
(e.g., existing population, flows, costs, etc.) which is no longer
valid.
Facilities planning initiated after May 12, 1982 must satisfy
the requirements of 40 CFR Part 35, Subpart I, as described in
609 TM 89-1
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Chapter IV. Where a facilities plan has been submitted, reviewed,
and approved by the reviewing agency prior to grant application, the
reviewer is to insure that the project described in the application
agrees with the selected plan in the approved facilities plan and
that the environmental review has been completed (see Section D.12
below).
Re: 40 CFR 35.2040(b)(1)
3. Public Participation
State agencies, when certifying a project to EPA for grant award,
are required to certify that adequate public participation was pro-
vided by the grant applicant, based on applicable State and local
statutes. In making this certification, the State agency should
review the application documents, primarily the facilities plan, to
verify that this requirement was met (see Section IV.C.7.4 for a
full discussion of public participation requirements).
Re: 40 CFR 35.2040(b)(2)
4. Notification of Advance of Allowance
Where a State has made an advance of allowance to help a grant
applicant prepare a facilities plan and/or design documents, the
grant applicant must so indicate in the application, and state the
date and amount of the advance and any conditions attached to the
advance. Refer to Section III.E for procedures on providing an
advance of allowance to a potential grant applicant.
Re: 40 CFR 35.2025, 35.2040(b)(3)
5. Plans and Specifications
Approvable contract documents, including plans (i.e., final
design drawings) and specifications, must accompany the application
for grant assistance. The plans and specifications must comply with
all State requirements and EPA regulations and policies, and must be
consistent with the facilities plan and any mitigating measures as
a result of the project's environmental review (see Sections IV.C.7.3
and IV.D).
610
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Design work initiated after May 12, 1982 must satisfy the
requirements of 40 CFR Part 35, Subpart I, as described in
Section V.C. Where the plans and specifications have been sub-
mitted, reviewed, and accepted (i.e., found to be approvable) by
the reviewing agency prior to grant application, the reviewer is
to verify that the project described in the application agrees with
the previously approved plans and specifications.
If the design work was initiated before May 12, 1982 (the
effective date of 40 CFR Part 35, Subpart I), the design must sat-
isfy the requirements of 40 CFR Part 35, Subpart E, rather than
Subpart I. If the design work was not accomplished under a Step 2
grant (or in rare cases, a Step 2+3 grant which was terminated prior
to the initiation of construction), a grant applicant claiming
initiation of design work before May 12, 1982, will need to substan-
tiate this claim with appropriate documentation. If design work was
initiated prior to May 12, 1982, and meets the requirements of Sub-
part E, no revisions to the design work will be required solely to
satisfy the requirements of Subpart I. However, if considerable time
has elapsed since the completion of the design work, this work should
be carefully reviewed and updated as necessary, since it may be based
on information (e.g., site conditions, availability of construction
materials and labor, etc.) which is no longer valid.
In all cases, a current wage rate determination, current labor
standards provisions, and all current procurement requirements must
be incorporated into the contract documents.
Re; 40 CFR Part 33*; 40 CFR 35.2040(b)(5), 31.36
6. Project Schedule
Purpose ;
Set forth a timetable for key project events, provide for the
timely completion of the project, and insure compliance with permit
and compliance schedules, court orders, and State enforcement orders.
Discussion;
A project schedule is an important part of the grant appli-
cation. It is to be reviewed carefully to verify that the grant
applicant has anticipated all key project events, including pro-
curement actions, construction initiation, building milestones
and completion, implementation of the plan of operation, startup,
pretreatment program actions (where needed), engineering super-
vision during the first year of operation and project certification.
Since the date of grant award is not known at the time the grant
TM 89-1
611 (87-1)
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applicant prepares the schedule, the timetable may be expressed in
terms of the number of weeks from the date of grant award.
The major component of a Step 2+3 or a Step 3 project schedule
is the construction schedule. Realistic and reliable construction
schedules will facilitate meeting the 1988 compliance deadline for
new POTWs and avoid extra costs associated with poor scheduling
practices. To assist project reviewers in evaluating construction
schedules, OMPC issued guidance to the Regional Office by memorandum
dated May 20, 1986. The emphasis in the guidance is intended to
be on the many and diverse factors which should be considered in
evaluating a construction schedule rather than on specific numerical
values.
The project schedule must be carefully reviewed for reasonable-
ness, and may require review and coordination with other sections
within the State agency, EPA., or other Federal agencies (e.g.,
National Pollutant Discharge Elimination System (NPDES) permit
section, U.S. Army Corps of Engineers (COE), U.S. Fish and Wildlife
Service, etc.). The project schedule forms a part of the grant
agreement, and significant changes in the schedule require a formal
grant amendment.
Review Procedures:
Review the project schedule to insure that:
a. the schedule includes key project events (e.g., procure-
ment, initiation of construction, building milestones,
project completion, startup, certification, etc.), and
that the timetable is reasonable, considering the size
and complexity of the project;
b. the schedule agrees with other regulatory compliance
schedules (e.g., NPDES permits), court orders, and
State enforcement orders; and
c. the schedule is coordinated, as appropriate, with the
schedule in the draft plan of operation and, where
appropriate, with the schedule for the development of
a pretreatment program.
Re: 40 CFR 35.2005(35), 35.2040(b)(6), 35.2204(b)(3)
TM 87-1
612 (36-1)
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"Wastewater Facilities Financial Information Sheet," is included
as Attachment A to the policy statement. Additional guidance is
provided to the applicant in a publication entitled "Financial
Capability Guidebook." While the five basic questions must be
answered, both the information sheet and the guidebook are only
guidance, and States are encouraged to modify them according to the
individual State's needs.
Other documents submitted by the grant applicant will also pro-
vide evidence of the applicant's financial and managerial capability.
In the case of a project serving more than one municipality, the
executed intermunicipal service agreement (see Section V.H) will be
an indication of the institutional and financial obligations of each
participating municipality. Additionally, the draft plan of opera-
tion (see Section V.G) will demonstrate that the applicant has con-
sidered the financial and managerial needs, including a staffing plan
and budget, for the operation of the facility. The UC system (see
Section V.E) will provide further evidence that the applicant will be
able to collect adequate revenues for operation, maintenance, and
replacement (OM&R). Finally, the SUO (see Section V.F) will demon-
strate that the grant applicant has considered the problems resulting
from extraneous or nonresidential wastes, and has the legal authority
to prevent or correct such problems.
The initial demonstration of financial and managerial capability
should have taken place either during or at the time of completion of
facilities planning. At the time of grant application, however, it
may be necessary to reevaluate this information and request that the
grant applicant update some of the information to reflect current
conditions. Such an update, combined with a review of the entire
application package (with particular emphasis placed on the items
cited above), will collectively allow the reviewing agency to deter-
mine whether or not the grant applicant has the financial and man-
agerial capability to finance, build, and operate the proposed project
successfully.
Review Procedures;
Review the application documents to insure that the grant appli-
cant has agreed to pay the non-Federal share of project costs. The
authorized representative's signature on the application form will
usually satisfy this requirement. However, more specific assurances
should be required from an applicant which has previously failed to
provide the non-Federal share in a timely manner, or when there are
other reasons to suspect that the applicant may not be able to pay
the non-Federal share.
615
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Review the applicant's demonstration that it has the legal,
institutional, managerial, and financial capability to adequately
build and operate the trea-tment works. Again, more specific assur-
ances should be required from an applicant which has previously
failed to adequately build and operate a treatment works or other
construction project, or when there are other reasons to suspect
that the grantee lacks the required capability.
Review the applicant's answers to the five basic questions con-
tained in the "Financial and Management Capability" policy statement.
These answers, combined with the information in the intermunicipal
service agreement, draft plan of operation, UC system, and SUO, must
demonstrate the applicant's financial and managerial capability.
The reviewing agency should have developed screening procedures
for identifying applicants whose projects need greater attention to
satisfy the above requirements (e.g., based on high cost per user,
the use of unusually complex technology, etc.), and should not approve
applications which do not adequately demonstrate that the project can
be successfully financed, constructed, and operated. Where an ade-
quate demonstration has not been made, the reviewing agency should
provide advice to the applicant on both the technical and financial
aspects of the proposed project, in order to help the applicant im-
prove its capabilities or decrease the complexities of the project
Re: 40 CFR 35.2104; EPA final policy on "Financial and
Management Capability for Construction, Operation
and Maintenance of Publicly Owned Wastewater Treatment
Systems," 49 FR 6254 through 6258 (February 17, 1984);
EPA publication, "Financial Capability Guidebook,"
March 1984
5. Utilization of Small, Minority, Women's, and Labor Surplus
Area Businesses
In order to increase the utilization of small, minority, women's,
and surplus area businesses during facilities planning and design, it
is EPA's policy to encourage potential grant applicants to adopt
procurement procedures which, at a minimum, include the six affirma-
tive steps in EPA's procurement regulations (see Section V.C.l.w)
for all activities of their construction program.
At the time of grant application, the grant applicant is required
to indicate to the reviewing agency the level of MBE/WBE participa-
tion in facilities planning and design by completing EPA Form 6005-1.
This information will be used by EPA to meet its obligation to report
MBE/WBE participation in the construction grants program.
Re; 40 CFR 33.240*, 35.2104(d), 31.36(e); OMB Circular A-102,
117.d. (3/3/88)
616 TM 89-1
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6. Unlawful Practices
The grant applicant is required to certify to the reviewing
agency that it has not violated any Federal, State, or local law
pertaining to fraud, bribery, graft, kickbacks, collusion, conflict
of interest, or other unlawful or corrupt practices in connection
with facilities planning or design work for the wastewater treatment
project. This certification will normally be in the form of a letter
signed by the authorized representative.
7. Debarment and Suspension
Purpose:
Determine if an individual, organization, or unit of government
which is listed on the General Services Administration's Lists of
Parties Excluded from Procurement or Nonprocurement Programs^ (GSA
List) has performed facilities planning or design work forthe
grant applicant, and if so, what remedial action may be appropriate
on the part of the State agency or EPA.
Discussion;
It is EPA policy to limit financial assistance and grant sub-
agreements to participants which properly use Federal funds, and to
deny participation in its programs to those who have been debarred
or suspended in accordance with 40 CFR Part 32.
A grant applicant is required to indicate whether it has
used the services of an individual, organization, or unit of
government, which is listed on the GSA List, to perform
facilities planning or design work.Any indivudual, organiza-
tion, or unit of government whose name~appears on the GSA List
may be excluded throughout the Federal Government from receiving
Federal contracts or federally approved subcontracts and from
certain types of Federal financial and nbnfinancial assistance
and benefitsT
Review Procedures;
Review the application or separate submission to deter-
mine :
a. whether the grant applicant has used the services of
an individual, organization, or unit of government,
which is on the GSA Lists for facilities planning
and design work; and
617 TM 89-1
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b. if the grant applicant answers affirmatively, deter-
mine whether to award a grant or whether the applicant
should be found non-responsible.
Re: 40 CFR 30.301(d)*, 32.200, 32.500, 32.510, 35.2105, 31.35
8. Plan of Operation
A draft plan of operation is part of the application package.
The draft plan is to address the development of a plan to provide
adequate wastewater treatment during construction, an operation and
maintenance (O&M) manual, an emergency operating program, personnel
training, an adequate budget consistent with the UC system, operator
reports, laboratory testing capability, and an O&M program for the
complete waste treatment system of which the project is a part. The
draft plan may be in the form of a descriptive chronological schedule
which provides a timetable for the preparation and submission of the
required documents and for actions to be taken by the grantee during
construction. Refer to Section V.G for a more complete discussion.
Re; 40 CFR 35.2106
9. Intermunicipal Service Agreement
An executed intermunicipal service agreement is to accompany the
grant application for projects which will serve more than one munic-
ipality. At a minimum, the agreement must include the following
information:
a. the basis upon which costs are allocated,
b. the formula by which costs are allocated, and
c. the manner in which the cost allocation system
will be administered.
In order to prevent costly delays in building the project (due to
a lack of funds to pay the grantee's non-Federal share), and later
in implementing necessary UC increases, the agreement should include
provisions for rapidly resolving disputes between the grantee and a
subscriber community. The intermunicipal service agreement may also
serve as the legal document which commits each participating munici-
pality to developing, enacting, and enforcing a UC system, a SUO
and if required, a pretreatment program. The intermunicipal service
618 TM 89-1
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iv. the grantee provides assurances that
if grant assistance is awarded, the
existing population will connect to
the collection system within a
reasonable time (as determined by
the reviewing agency) after project
completion.
Re; 40 CFR 35.2116
15. Preaward Costs
Purpose;
Provide grant assistance for the cost of work which was accom-
plished prior to the date of grant award, if such work is normally
accomplished after the award of a Step 3 grant, only if such work has
been approved in advance by the reviewing agency.
Discussion;
Where a potential grant applicant requests approval of prelimin-
ary work normally accomplished after the award of a Step 2+3 or a
Step 3 grant, approval may be given by the reviewing agency only in
an emergency or an instance where delay could result in a significant
cost increase, and only after completion of the environmental review
(see Item 12 above). Examples of the types of preliminary Step 3
3 work which may be approved are:
a. procurement of major equipment requiring long lead
times;
b. field testing of I/A technologies (see Section I
below);
c. minor sewer rehabilitation;
d. acquisition of eligible land or of an option for
the purchase of eligible land (see Section H
below); and
e. advance building of minor portions of treatment
works.
627
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Review Procedures;
Where the grant application requests EPA participation in the
cost of preaward work which is normally accomplished after the award
of a Step 3 grant, insure that:
prior written approval by the reviewing agency has
been given;
the work is eligible for grant participation; and
associated procurement actions satisfy the require-
ments of 40 CFR [Part 33] 31.36, or in the case of
acquisition of eligible real property, 40 CFR Part 4.
Where approval of preaward costs is given by the reviewing
agency, the potential grant applicant should be advised in writing
that: approval is not an actual nor implied commitment of grant
assistance (i.e., that the applicant proceeds at its own risk);, and
that if a grant is awarded, this preaward work will be eligible only
if it was procured in accordance with 40 CFR [Part 33] 31.36 for
services, equipment, or supplies, or 40 CFR Parts 4, [30], 49 CFR
Part 24 and 40 CFR 31.31 for the acquisition of real property.
This limitation on preaward costs applies equally to Step 2+3
and Step 3 grants, but concerns only work which is normally accom-
plished after the award of a Step 3 grant. Work which is normally
accomplished before the award of a Step 3 grant is classified as
design-related work, whose cost is not directly eligible for grant
assistance, but instead is expected to be defrayed by the allowance
for facilities planning and/or design.
Re: 40 CFR 35.2118; 40 CFR Part 35, Subpart I, Appendix A,
Paragraph A.2.a, and Appendix B, Paragraph 3
16. Infiltration and Inflow
This limitation on award is applicable only to grant applicants
with existing sewer systems. Before grant award, the grant applicant
must demonstrate that the existing sewer system is not or will not be
subject to excessive I/I.
The analysis of the sewer system to determine the presence of
excessive or nonexcessive I/I is performed during the facilities
planning and is used to establish present and future flows. If a
628 TM 89-1
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20. Pick-Up Projects
Projects which are ready for a construction grant, but are
not high enough on a State's priority list to be funded, but high
enough to expect to be funded in a following fiscal year, may
elect to initiate bidding and construction in advance of an ex-
pected grant. This would be done with the understanding that, as
soon as State allotted funds become available, a grant would be
awarded for the unfinished portion of the project. (E.g., if the
project were 30% complete at the time funds are available, it would
receive a grant based on 70% of the project's eligible cost.) In
addition, an allowance for planning and design costs would not be
reduced by the (percent of the) portion of the project completed
prior to the pick-up award.)
For a project to be awarded a grant on a "pick-up" basis, it
must satisfy, at the time of grant award, all of the same grant
and post award approvals reguired of a regularly funded grant pro-
ject .
Accordingly, potential pick-up grant projects must undergo
the same facility planning, plans and specifications, bidding
and contract award review and approval as a fully funded pro-
ject in order to be eligible for a post initiation of construc-
tion grant. Unless, at the time the pick-up grant is requested,
there is documented evidence in State files clearly indicating
that such reviews were satisfactorily completed, the pick-up
grant award cannot be made. In addition, grant anticipating
municipalities must maintain complete construction records so
that an audit trail of invoices and expenditures are accessible
enabling ineligible pre-award and eligible post award costs
to be readily determined.
When a partially funded project rises to the fundable
portion of a State's priority list, construction grant funds
may be awarded for the remaining unconstructed portion
regardless of the status of construction contracts involved.
At such time as funding can occur, the cost of the completed
portion of the project must be determined. This may be accom-
plished indirectly by obtaining percent of construction-in-place
documents for the months before and after the grant award date
and interpolating or directly by dispatching Federal or State
construction inspectors to the site to establish the amount of
construction-in-place and on-site materials stored. Preferably
photographs should also be taken on the site to further
634A TM 87-1
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establish the project's status. A. grant would be awarded for
the balance or uncompleted eligible portion of the project.
Upon awarding a pick-up grant, the grantee must be notified
in writing that any and all expenses accrued before the award
date are and will remain ineligible for construction grant
funding.
Re; 40 CFR 35.2118; Memorandum, 5/29/86 "Initiation of Con-
struction and Grant Eligibility" from M. Quigley
21. Drug Free Workplace
Purpose
To assure that grantees provide for, and take the necessary
steps to maintain, a drug free workplace in accordance with
the provisions of Federal statutes and regulatiohsT
Discussion
As a result of the passage of the Drug Free Workplace Act
of 1988, beginning March 18, 1989, every applicant is required
to certify to EPA, prior to receiving a grant, that it will take
steps to provide and maintain a drug free workplace in accordance
with the provisions of the Act. Regulations pertaining to this
Act have been incorporated in 40 CFR Part 32 and failure to
comply with its provisions may result in penalities as
described in the debarment and suspension regulations.
Review Procedures
Review the application or separate submission to determine
that the grantee has met the statutory requirements for a drug
free workplace by certifying that it has or will:
a. Publish a drug free workplace policy statement
"~ notifying employees that unlawful drug related
activity is prohibited, and specifiying actions
to be taken against violating employees;'
TM 89-1
634B (87-1)
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Establish a drug free awareness program to
include information on the dangers of
drug abuse, the grantees drug free policy,
available drug counseling and rehabilitation
programs, and penalties for violater'iT
Issue a copy of the policy statement to all
employees working under'the assistance
agreement;
Notify employees that they must abide by the
terms of the policy statement as a condition
of employment under the grant including
notifying their employer of any criminal
drug statute conviction in the workplace
within five days of being;convicted;
' Notify the EPA Regional Administrator of any
employees who have been^ criminally convicted
of a drug offense occurring in the workplace
within 10 days of the conviction;
Take appropriate personnel action against, or
require satisfactory participation in a drug
abuse rehabilitation program by any employee
convicted of a drug offense occurring in the
workplace within 30 days of receiving notice"
of the occurrence; and
Make a good faith effort to continue maintaining
a drug free Workplace program.
Re: 54 FR 4946 "Drug Free Workplace Requirements; Notice and
Interim Final Rules" (January 31, 1989); 40 CFR Part 32.
634C TM 89-1
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22. Brooks-Murkowski Amendment
Purpose
To assure that the'provisions of the Brooks-Murkowski
Amendment will be applied to all grants awarded between
December 22, 1987 and September 30, 1988.
Discussion
The Brooks-Murkowski Amendment, enacted by Congress on
December 22, 1987, prohibited obligation or expenditure of
Federal funds in FY 1988 for public works contract awards
to firms of countries which deny fair and equitable market
opportunities for United States products and services in
major foreign construction projects. The restriction's
apply to contract awards using funds obligated in FY 1988
(after 12/21/87^) regardless of the contract award dateT
The only country affected by the Brooks-Murkowski Amendment
is Japan. A Japanese contractor or subcontractor affected
by this provision is a citizen or national of Japan or a
firm which is controlled directly or indirectly by citizens
of nationals of Japan.
The law applies to (a) architect, engineering, and
construction services and any other services directly
related to the preparation for or performance of the con-
struction, alternation, or repair; (b) and product used
in the construction, alteration, or repair if more than 50%
of the total cost of the product is allocable to production"
or manufacture in Japan. The law does not apply to construc-
tion equipment or vehicles which do not become part of ~a~
delivered structure, product or project.'
Review Procedures
To implement this requirement, the reviewing official
must assure that construction grants awarded in the defined
FY 1988 period include the following special conditions'';
634D TM 89-1
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The recipient agrees that no subagreement
(contract or subcontract) for construction,
alteration, or repair of a public building
or public work will be awarded to (1) a
Japanese citizen or natural; (2) a firm
controlled directly or indirectly by Japanese
citizens or nationals, or (3) a supplier
of any product if more than 50% of the total
cost of the product is allowable to production
or manufacture in Japan.
The recipient further agrees that no subagreement
for architect, engineering, or other services
directly related to the preparation for "or
performance of such construction, alteration, or
repair will be awarded to a Japanese citizen
or national or a firm controlled directly or
indirectly by Japanese citizens or nationals'.
All public notices requesting proposals for bids
must state' that bids or proposals from such firms
or suppliers shall be deemed nonresponsive and
rejected.
d. The recipient may request the EPA Administrator,-
~~ through State and Regional channels, to waive
this condition where the recipient believes
s"uch a waiver to be in the public interest.
Re; Section 109, PL 100-202 (Brooks-Murkowski Amendment);
OMB^ Memorandum M-88-17 (3/17/88) ; Memorandums, Brooks-
Murkowski Compromise, Grants Administration Division
(4/1/88) and (3/31/89).
634E TM 89-1
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E. ADDITIONAL CONSIDERATIONS FOR AWARD
The items listed below are additional considerations
which must be satisfied, where applicable, prior to grant
award. Some of the items are considered limitations on
award, but are listed separately here because they are not
applicable to all projects.
1. Small Alternative Wastewater Systems
A small alternative wastewater system (SAWS) is charac-
terized by onsite treatment and disposal, and/or alternative
conveyance systems (i.e., pressure, vacuum, or small diameter
gravity sewers). A SAWS project qualifies as an alternative
technology, and may therefore receive a higher Federal grant
share. A SAWS may be privately or publicly owned, but the
responsibility for management and operation of the system
must reside with the grant applicant. Where a SAWS is proposed,
it is necessary to insure that the grant applicant recognizes
and accepts the managerial responsibilities which are unique
to these projects.
Review Procedures;
The review procedures below assume that a SAWS was
selected as the cost effective alternative in the facilities
plan. Much of the information necessary to satisfy the
limitations on award described below may be found in the
facilities plan or the applicant's demonstration of financial
and managerial capability. The reviewing agency is to insure
that a SAWS project satisfies the following conditions:
634F TM 89-1
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proposed, and where the costs will exceed $25,000, it is necessary
for the grantee to obtain prior approval from the reviewing agency.
The reviewing agency may approve force account work as an allowable
project cost provided the conditions described in the review pro-
cedures below are satisfied. There are no restrictions on the use
of force account work for facilities planning, design, or design-
related work which is accomplished under an allowance (see
Section III.D.S.c) rather than a Step 1 or Step 2 grant.
Review Procedures:
a. The reviewing agency may approve force account construction
or construction related work provided that:
i. the grant applicant demonstrates that
municipal employees can complete the work
competently and more economically than
contractors; or
ii. an emergency circumstance arises which
makes the use of force account necessary.
b. Where force account work is approved by the reviewing
agency, the grant applicant should be advised that force
account costs are subject to audit, and that records
or documents supporting such costs must be maintained.
Substantiating records must include:
i. time sheets approved and signed by a
responsible supervisor, accounting for
all hours worked during the period,
showing separately the hours worked on
the EPA funded project and on all other
activities; and
ii. documentation of an approved indirect cost
rate (see Section IX.F.2.d.ii) where such
burden rate is to be applied to force account
work.
Re; 40 CFR 30.520*, 35.936-14
6. Intergovernmental Review
Under 40 CFR Part 29, States are encouraged to establish a
State process, which is the framework under which States and
local officials carry out intergovernmental review of proposed
projects. The State process replaces the clearinghouse review
process previously required
639 TM 89-1
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by Office of Management and Budget (OMB) Circular A-95 (frequently
called A-95 review), and allows States to select the EPA programs
which will be subject to intergovernmental review.
The regulations governing the establishment of the State process
are designed to allow the States considerable flexibility in estab-
lishing procedures, while still insuring that proposed projects re-
ceive adequate review by concerned or interested parties and agencies,
and that these parties and agencies are provided an opportunity to
comment on proposed projects. Because the details of the State pro-
cess will vary from State to State, only general review procedures
are described below.
Based on the intergovernmental review regulations and the State
process developed for a specific State, determine if the construction
grants program is subject to an intergovernmental review, and if so,
verify that the grant applicant has followed the specific procedures
and requirements of the State process, and that any problems have been
satisfactorily resolved.
Re: 40 CFR Part 29; 40 CFR 35.2040(b)(2)
7. Procurement of Professional Services
Procurement of professional services (e.g., engineering, construc-
tion management, legal, accounting, land appraisel, etc.) should be
undertaken only after EPA reviews the completed "Procurement System
Certification" (EPA Form 5700-48). Note that the review of the
"Procurement System Certification" may not be delegated to State re-
viewing agencies. If the grant applicant procures pxpfessional ser-
vices before grant award, the costs associated with the procurement
action and any work performed under the subagreement prior to grant
award are unallowable for grant participation (see Section IX.B.S.e),
unless approved as a preaward cost (see Section D.15 above). How-
ever, if this work is classified as facilities planning or design work,
it may be defrayed in part by an allowance for facilities planning
and/or design (see Section III.E), or may be an eligible cost under an
existing Step 1 or Step 2 grant. Preapplication review of the "Pro-
curement System Certification" is encouraged, and is described in
Section VII.B.I.
Re: 40 CFR 33.001(g)*, 33.110*, 31.36(g)(3)(ii)
640 TM 89-1
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8. General Grant Conditions
Along with the demonstration that the grant applicant has the
financial and managerial capability to build and operate the pro-
posed treatment works, the grant applicant is required to demonstrate
its ability to comply with 40 CFR Part [30] 31.
Among other things, 40 CFR Part [30] 31 addresses the require-
ments for a grant application, payments, project management,
deviations, etc. At the time of grant application review, particular
attention should be given to property management standards and
compliance with other Federal laws. Compliance with some Federal
laws will be satisfied initially by including the "Labor Standards
Provisions for Federally Assisted Construction Contracts" (EPA
Form 5720-4) in the contract documents. Compliance with other
Federal laws will also be fulfilled initially by the grant appli-
cant's "assurance of compliance" in the grant application form
(see Section C.I above). The review procedures below highlight
some of the requirements from the general grant regulations which
may require special consideration during application review.
Where applicable, insure that the grant applicant has or will
have the ability to fulfill the general grant requirements listed
below:
a. property management standards;
Re: 40 CFR 30.530* through 30.537*, 40 CFR Parts 31 and 32
b. compliance with the Flood Disaster Protection Act
(if the proposed project involves construction or
property acquisition in a special flood hazard area
and if the project is located in a community partic-
ipating in the National Flood Insurance Program, the
grant applicant must purchase flood insurance or commit
to purchase it at the appropriate time as a condition
of receiving grant assistance) (see Section V.C.1.1);
Re; 40 CFR 30.600(b)*; 40 CFR Part 6, Appendix A
c. the grant applicant may not propose the performance
of any work on the proposed project by a
facility on EPA's List of Violating Facilities,
which includes facilities which have violated either
the Clean Air Act or the CWA;
Re; 40 CFR 30.600(c)* and (d)*, 31.36(i)(12)
TM 89-1
641 (85-1)
-------
d. discrimination on the grounds of race, color,
national origin, age, sex, and handicap is pro-
hibited, and the grant applicant is required to
submit a certification of non-discrimination
(EPA Form 4700-4) with the grant application;
Re; 40 CFR 7.8(b), 30.600(d) through (g)*, 31.36(i)(3)
e. compliance with the Uniform Relocation Assistance
and Real Property Acquisition Policies Act, as amended,
whether or not the real property is eligible for
grant assistance (see Section VI.H).
Re: 40 CFR 30.600(i)*, 40 CFR Part 4, 40 CFR Part 24
f. if the proposed project will benefit Indians,
compliance with the Indian Self-Determination and
Education Assistance Act, which requires that
Indians be given preference in training and employ-
ment opportunities;
Re: 40 CFR 30.600(j)*, PL 93-638, 25 USC Sec. 450e(b)
g. compliance with the Hatch Act, which requires State
and local government employees to comply with re-
strictions on political activities if their prin-
cipal employment activities are funded in whole or
part by Federal Assistance;
Re: 40 CFR 30.600(k)*, Hatch Act of 1939, 5 USC Sec.
1501.08, 7320-28, 5 CFR Part 151
h. compliance with the Safe Drinking Water Act, which
prohibits EPA grant assistance if the proposed pro-
ject may contaminate a sole source aquifer which
will result in a significant hazard to public
health; and
Re; 40 CFR 30.600(1)*, PL 93-523 Sec. 1424(e), 42 USC
Sec. 300h-3(e), 40 CFR Part 149
i. compliance with the reporting requirements for MBE/WBE
utilization (see Sections B.7.E and D.5 above).
Re: 40 CFR 35.2104(d)
642 TM 89-1
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F. STEP 2+3 GRANTS AND DESIGN/BUILD GRANTS
1. Step 2+3 Grants
Purpose;
Provide grant assistance for smaller projects (meeting specific
size and cost limitations) after completion of facilities planning
but prior to the completion of design.
Discussion;
Grant assistance may be provided to a community with a popula-
tions of 25,000 or less, for a project with an estimated building
cost of $8 million or less, prior to the completion of the design
work (i.e., a Step 2+3 grant). The grant is based on the estimated
allowable costs, derived from the facilities plan, plus the appro-
priate allowance for facilities planning and/or design. The pro-
cedure assists smaller communities in financing their design costs
and provides assurance that grant funds will be available (i.e.,
funds have been obligated) for building the project, assuming
successful completion of the design and the satisfaction of all other
requirements.
The review procedures below describe the conditions which must
be satisfied before a Step 2+3 grant can be awarded.
Review Procedures;
a. Qualifications
Applicant and project qualifications for Step 2+3 grant award
include:
(1) the population of the applicant's municipality is
25,000 or less, according to the most recent U.S.
Census;
(2) the total building cost is estimated to be $8 million
or less; and
(3) the project is not for a treatment works phase or
segment.
b. Application Contents
The application package for a Step 2+3 grant must include:
(1) application, using EPA Form 5700-12 (see
Section C.I above);
643 TM 89-1
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(2) facilities plan (see Section C.2 above);
(3) State certification of adequate public participa-
tion (see Section C.3 above);
(4) notification of any previous advance of allowance
or Step 1 grant received (see Section C.4 above);
(5) evidence of compliance with all applicable limita-
tions on award described in Section D above, except
draft plan of operation, intermunicipal service
agreement, UC system, and SUO; and
(6) evidence of compliance with all applicable addi-
tional considerations for award described in
Section E above.
c. Deferred Provisions
During the course of a Step 2+3 project, the grantee is required
to submit the following documents to the reviewing agency:
(1) prior to initiating action to acquire eligible
real property, a plat which shows the legal
description of the property to be acquired, a
preliminary layout of the distribution and
drainage systems, and an explanation of the
intended method of acquiring the real property
(see Section H below) and
(2) before initiating a procurement action for building
the project (i.e., advertising for bids):
i. contract documents, including plans
and specification (see Section C.5
above);
ii. a project schedule (see Section C.6
above);
iii. a draft plan of operation (see Section D.8
above);
iv. an executed intermunicipal service agree-
ment (see Section D.9 above);
v. a UC system (see Section D.17 above); and
vi. an SUO (see Section D.17 above).
Re: 40 CFR 35.2040(a), 35.2109, 35.2202
644 TM 89-1
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2. Design/Build (Step 7) Grants
Purpose;
Provide grant assistance for smaller projects that utilize
specific processes and'meet cost limitations. "Grant assistance
may include participation'of pre-bid package, design, construc-
tion, related construction'and'post construction services and an
allowance for facility planning; if the'applicantdid not receive
a Step 1 grant.
Discussion;
The Water Quality Act of 1987 (PL 100-4) amended the Clean
Water~Act (CWA) at section 203(f) to provide for funding of design/
build (D/B) projectsT
There are two similarities between the Step 2+3 grant'and the
new Step 7 grant. Both of these grants are limited to projects
with total estimated costs of $8,000,000, and both involve a
single grant (agreement) to provide'Federal support for the"pre-
paration of construction plans and'specifications'and for the
building of the treatment works.' Beyond these two similarities
there are many differences.
The Step 2+3 grant is a special case within the established
grant award procedures. It combines the Step 2 grant foF
preparation of design drawings and specifications and the Step 3
grant for building a treatment works (including related services
and suppplies) into a single'Step 2+3 award, but with two separate
contracts (for design and building). The Regional Administrator
must review and approve, in writing, the plans and specifications
for these Step 2+3 grants.
The new Step 7 grant is also a single grant agreement, which
sets~r'orth an amount agreed to as the maximum Federal contribu-
tion and which provides for one fixed price contract for both
design and building. Other limitations and requirements for~
Step 7 grants are itemized in the review procedures below.
Review Procedures;
a. Qualifications
(1) The total building cost cannot exceed $8,000,000.
(2) The proposed treatment works must be'an aerated
lagoon, trickling filter, waste stabilization
pond, land application system (wastewater or
sludge), slow rate (intermittent) sand filter
or subsurface disposal systelnT
644A 89-1
-------
(3) The treatment works must be an operable unit.
b. Application Contents
The application for a step 7 grant award is submitted in
two phases. The first submission is to establish eligibility
and provide an estimated project cost. In the second, the
maximum eligible project cost is determined and a grant amend-
ment, establishing^ that maximum cost, is awarded.
(1) Phase I
The application package for a Step 7 grant must
include;
LL application, using EPA Form 5700-32,
(see section C.I, above);
ii. facilities plan (see Section C.2. above);
iii. Pre-bid package; Before initiating procure-
ment action for designing and building the
?roject (i.e., advertising for design/build
>ids), the pre-bid package must be submitted
to the reviewing agency (see Section C below)
13
The information included in the pre-bid
package should be sufficiently detailed to
insure that bids received for the D/B work
are complete, accurate and comparable and
will result in a cost effective, operable
facility. Included should be, e. g., cost
of preliminary borings and site plan, concept
and layout drawings, schematic, general "
material and major component lists, instruc-
tion to builders, general and special con-
ditions, specifications, project performance
standards and permit limits, applicable State
and other design standards, requirements to
be included in the bid tablulation and
analysis and other contract documents, forms
or certificates;
iv. State certification of adequate public
Participation (see Section C.3. aboveT;
Y_l notification of any previous advance of
allowance or Step 1 grant received (see
Section C.4. above); (NOTE; If neithe?
was received, therequest should include
funds for a facilities planning allowance
644B TM 89-1
-------
based on the allowance table in Attachment
1 of FR 158.22 dated 5/4/88 plus funds to
cover the cost of the pre-bid package. If
these costs are not itemized for this grant,
they may be included in the phase II request.);
vi. evidence of compliance with all applicable
limitations on award described in Section D
above, except draft plan of operation, inte'r-
municipal service agreement, UC system, and
SUP;
yii. funds requested must be those appropriated
after February 3, 1987;
viii. no more than 20% of the State's allotments
are obligated for D/B projects;
IX
evidence that the project will meet permit
requirements within one year after completion;
and
evidence of compliance with all applicable
additional considerations for award described
in Section E above.
(2) Phase II
After a Step 7 grant is awarded, the grant will subsequently
be amended once, after bids are taken but before the D/B work:
is begun, to establish an amount agreed to as the maximum
Federal contribution. Increases to this amount are unallowable.
Information to be submitted to amend the grant agreement:
include;
£. facilities plan; If Phase I contains an
allowance to prepare a facilities plan,~
then the completed plan must be submitted
to the reviewing authority before beginnTng
work on the pre-bid package (see Section C
below)T
ii. Pre-bid package; If Phase I contains costs
to prepare a pre-bid package, then the
completed package must be submitted to the
reviewing authority before taking bids for
the D/B work (see Section C below).
iii. the lowest responsive, responsible bid
and documents indicating that grantee
entered into a single fixed price contract
to design and build the project and that
the procurement provisions of Part 33 were
644C
TM 89-1
-------
followed in selecting the bidder. (NOTE;
the D/B contractor must not have provided
the facilities planning or pre-bid services.)
iv. a description of the construction management,
contract and project administration services.
(NOTE; the A/E that prepares the facilities
plan can also prepare the pre-bid package
and/or conduct the constraction management
and/of contract administration activities,
providing the provisions of 40 CFR L30.52Q]
35.936.14, [33.715] and 31.36(k) are met.)
v.' a lump sum estimate for the necessary and
reasonable costs of ii. above including
contingencies -- up to 5%.
vi. a building schedule to'include start and
completion dates; and a Federal payment '
scheduler
vii. evidence that the grantee obtained a bond
from thecontractor;in an amount'adequate
to protect the Federal'interest in the
treatment works. (40 CFR-L33.265J 31.36(h))
c. Deferred Provisions
During the course of a Step 7 project, the grantee is
reguITed to submit the'same documents'(including the pre-bid
package? to the reviewing agency as are required for the
Step 2+3 project, (see F.l.c above)'except'--detailed con-
struction plans and specifications are not submitted prio"r~
to initiating a procurement;action. 'In addition, if the
facilities plan was not submitted with the Phase I appli-
cation, the completed plan'must be submitted to the reviewing
agency as required for Step 2+3'projects (see Section C.2
above) before work on the pre-bid package is begunT
d. Special Restrictions
!_L no more than 95% of the grant can be paid until
after the building is completed and the RA gives
his final approval.
ii. if the grantee fails to comply with the conditions
of the grant agreement, the" RA, may recover the
amount of the grant.
iii. excess funds at the close of the project must be
recovered.
644D TM 89-1
-------
iv. no further Title II funds can be awarded for
a project which has received a Step 7 grant.
G. COMBINED SEWER OVERFLOW GRANTS
Purpose;
Award grants to CSO projects which are designed to restore uses
of the receiving waters in priority water quality areas which have
been impaired by the impact of CSOs.
Discussion;
The 1981 CWA amendments and the implementing regulations make a
distinction between marine CSO and nonmarine CSO projects. The dis-
tinction is primarily related to the source of funding for such pro-
jects and the corresponding regulatory requirements which must be
satisfied prior to grant award. The most significant difference in
regulatory requirements, depending on the source of funding, is
whether or not the State must provide a special demonstration that
the proposed CSO project is necessary to restore impaired uses of the
receiving waters.
Procedures;
1. Source of Funds
Three potential funding sources for CSO projects are available:
a. State's Regular Allotment
After September 30, 1984, the Governor may include in
the State's priority system a category of projects needed
to correct CSOs which impair water uses in priority water
quality areas. Such projects require a special demonstra-
tion as described in Item 2a below. Funds from the State's
regular allotment may be used only for nonmarine CSO pro-
jects .
Re: 40 CFR 35.2015(b)(2)(iv)f 35.2024
b. Governor's Discretionary Set-aside
After September 30, 1984, up to 20 percent of a State's
regular allotment, at the discretion of the Governor, may
be used to fund categories of projects which were previously
eligible for grant assistance before this date. Among the
previous categories of projects is the correction of CSOs,
either marine or nonmarine. For CSO projects funded from the
645 TM 89-1
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Governor's discretionary set-aside, the State is not
required to provide the special demonstration described
in Item 2a below. However, this source of CSO funding
is subject to certain restrictions, as explained in
Section II.E.3.
Re: 40 CFR 35.2015(b)(2)(iii), 35.2024
c. Separate Appropriation for Marine Projects
After September 30, 1982, marine CSO projects may be
funded through a separate Congressional appropriation.
Unlike other construction grant appropriations, funds to
be used for marine CSO projects are not allotted to each
State, but instead are administered at EPA headquarters.
Hence, proposed projects are subject to a national (rather
than State) priority system. Projects awarded grant assist-
ance using the marine CSO fund are to address impaired uses
or public health risks in priority water quality areas in
marine bays and estuaries caused by the impacts of CSOs.
These projects require a special demonstration as described
in Item 2c below.
Re: 40 CFR 35.2024(b)
2. Project Requirements
The regulatory provisions which must be satisfied for CSO pro-
jects depend on the source of the funds which will be used for
providing grant assistance:
a. State's Regular Allotment
After September 30, 1984, nonmarine CSO projects
may be awarded grant assistance from the State's regular
allotment provided that:
i. the Governor has included this category
of projects in the State's priority system;
ii. the specific project is within the fundable
range on the State's project priority list;
646
-------
priority water quality areas of marine bays
or estuaries which are due to the impacts
of the CSO, and specifically that, at a
minimum:
significant usage of the water for shell-
fishing and swimming will not be possible
without the proposed project; and
the proposed project will result in sub-
stantial restoration of an existing impaired
use.
Re: 40 CFR 35.2024(b)(2)
iv. The project must satisfy all applicable limita-
tions on award, grant conditions, Federal grant
share provisions, and allowable cost provisions,
except for:
allotment and reallotment (see Sections
II.E.2 and II.E.4);
State priority system and project priority
list (see Section II.E.3);
reserves and reallotment of reserves (see
Section II.E.4);
advances of allowance to potential grant
applicants (see Sections II.E.4.e, III.D.3.C,
III.E, VI.K, and IX.B.S.c);
review of grant applications and priority
determinations (see Sections VI.M.I through
VI.M.3); and
Step 2+3 projects (see Section VI.F).
Re: 40 CFR 35.2024(b)(4)
v. Two regulatory provisions for marine CSO projects
vary slightly from those for other construction
grant projects:
final plans and specifications may, but need
not, accompany the grant application; however,
the grant applicant must commit itself to
providing them by a date set by the reviewing
agency; and
if the proposed project is a phase or segment
described in the facility plan, the criteria
used to demonstrate need for the project
649 TM 89-1
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(see Item ii above) must be applied
to the entire facilities plan proposal
and to each segment proposed for funding.
Re: 40 CFR 35.2024(b)(3)
vi. Marine CSO project applications and supporting
documents are submitted to the State by the
grant applicant. The State reviews the pro-
ject, prepares the special demonstration des-
cribed in Item iii above, and submits the
project to the EPA Regional Office. The
Regional Office determines whether all Federal
requirements have been met, completes the
environmental review, prepares a statement of
regional and national significance, determines
the eligibility of the project for considera-
tion of funding, and submits the required
information to EPA Headquarters.
vii. Once a year, EPA Headquarters will prepare a
priority list, based on the criteria in
Item ii above, for proposed marine CSO projects.
viii. On the basis of the priority list described in
Item vii above, EPA headquarters will provide
obligating authority for grant award to the
appropriate EPA Regional Office.
ix. Projects receiving marine CSO grant awards
will be administered by EPA Regional Offices
or, where delegated, State reviewing agencies.
Re; 40 CFR 35.2024(b), 35.2040(f); EPA publication,
"Guidance for the Preparation and Review of
Applications, Special Fund for Abatement of
Combined Sewer Overflow Pollution in Marine
Bays and Estuaries (The Marine CSO Fund),"
dated January 1984
H. LAND ACQUISITION GRANTS
Purpose:
Provide grant assistance for the acquisition of real property
(i.e., land) which will be an integral part of the treatment process
or provide for ultimate disposal of residuals and assure grantee
compliance with land acquisition regulations for all land acquired
for the project.
TM 89-1
650 (85-1)
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Discussion;
During facilities planning, the grant applicant will have eval-
uated various treatment alternatives, including land application of
wastewater or sludge, and selected the cost effective alternative.
Land associated with the proposed project may already be owned by the
applicant, may be available for lease or purchase, or may be avail-
able for use without payment. Since most acquisitions are fee simple
purchases of eligible land, this section will generally deal with
that acquisition method. Other types of acquisitions methods for
eligible land (e.g., long-term lease, permanent easements) are also
grant eligible and should be considered where appropriate. Regard-
less of the acquisition method, acquisition must be accomplished in
accordance with the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (The Uniform Act) and EPA's imple-
menting regulations, 40 CFR Part 4 and 49 CFR Part 24. The Uniform
Act and regulations are applicable to the acquisition of real pro-
perty necessary for EPA assisted projects whether or not the land
so acquired is eligible for grant assistance. Regardless of the
method of acquisition, owners must be fully informed by the grantee,
in writing, of their rights under The Uniform Act. After being
informed of these rights, landowners may voluntarily waive their
right to an appraisal and may donate their land or easements. Such
waivers should be in writing and include a statement that the land-
owner has read and understood the summary of his rights under The
Uniform Act. Pursuant to the Uniform Act Amendments of 1987 an
acquiring agency may waive the requirement for an appraisal if the
estimated cost of the land or easement is $2,500 or less, in cases'
involving land that is being purchased or donated (49 CFR 24.102
(c)(2)")." However, if the owner requests; an appraisal it'must be
provided as stated in the preface to the regulation published 3/"2/89.
Arrangements for long-term lease, permanent easement, and use
without payment of the treatment site need to be reviewed to insure
that they are adequate for the successful construction and operation
of the project (e.g., that they are not subject to an expiration or
revocation which would prevent the continuing operation of the
project).
Acquisition of eligible real property may generally be accom-
plished in one of three ways under the construction grants program:
- under authorization to proceed as a preaward cost
- under a grant solely for land acquisition, or
- as a part of the grant for the construction of the project.
In any of the above situations, the provisions of 40 CFR
Part 4 or 49 CFR Part 24 for land acquired on or after 4/2/89,
must be satisfied if theland is to be eligible for grant assistance.
40 CFR Part 4 in essence is separated into two parts:
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- requirements for the acquisition of real property, and
- requirements applicable when persons, businesses or farms
will be displaced as a result of such acquisition.
In view of the potentially high costs and legal fees associated
with land acquisition, grant applicants and reviewing agencies
should use personnel experienced in all phases of the acquisition
process, including qualified appraisers. The reviewing agency
should provide guidance to the grantee in the selection of qualified
appraisers. For example, the selected appraiser should: have
experience in appraising property similar to the subject property;
be familiar with Federal appraisal standards and acceptable pro-
cedures; and, preferably, be affiliated with a professional organi-
zation. A list of professional appraisal organizations can be found
in Appendix G of CG-85. In some areas, other Federal agencies main-
tain lists of appraisers experienced in appraisal work for Federal
projects (e.g., General Services Administration, Corps of Engineers,
Housing and Urban Development and Department of Transportation.
Note that revised 40 CFR Part 4 regulations were issued in late
February 1986 to be effective in May 1986. Many of the new require-
ments are incorporated herein. These new requirements are not retro-
active. Government wide final regulations implementing the Uniform
Act Amendments of 1987 were issued March 2, 1989 to be effective
April 2, 1989. EPA adopted the Government Wide Regulation, 49 CFR
24, on December 17, 1988, to be effective April 2, 1989. The
changes in the law did not become mandatory until April 2, 1989,
therefore, the regulation is not to be applied retroactively.
All appraisals must be reviewed. Review of appraisals must be
conducted by a qualified review appraiser who is either under con-
tract to the grantee, or an employee of, or under contract to, a
State agency (e.g., transportation department). In some cases, it
may be appropriate to use qualified review appraisers working
for a Federal agency.
The review procedures below address the highlights of the regula-
tory requirements, but are not a substitute for a detailed review by
professional personnel to insure compliance with 40 CFR Part 4 or
40 CFR Part 24, as applicable. Eligibility of land acquisition~and
associated costsis discussed in Section IX.D which should be
consulted prior to grant award.
The Uniform Act Amendments of 1987 designated the Federal High-
way Administration to be the lead agency for implementing arid
enforcing the Uniform Act as amended. Its duties are discussed in
part under 49 CFR Part 24, Subpart G. Among the lead agencies
duties, it will approve a grantee's application to comply with" state
law rather than the Uniform Act, after_ it determines that the state
law will accomplish the purpose and effect of the Uniform Act. The"
procedure that grantees, federal agencies and the lead agency are to
follow are discussed at Subpart G of 49 CFR 24."
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Because few wastewater construction grant projects result in
displacement, regulatory requirements and recommended management
procedures on this topic are not discussed. Should a displacement
problem arise, the land acquisition coordinator in the EPA Regional
Office or, as needed, the Office of Municipal Pollution Control and
provide assistance.
Re: 4.101, 4.102, 4.103, 4.104, 4.108
Review Procedures;
1. Grant Application Review
In reviewing the grant application, the reviewing agency should
determine that:
a. only land required directly for treatment works is
determined to be eligible for cost participation;
b. methods less costly than fee-simple acquisition were
considered;
c. the proposed acquisition method provides sufficient
control for project purposes;
d. the proposed acquisition schedule is realistic; and
e. projected land purchase and 40 CFR Part 4 compliance
costs are realistic.
2 . Grant Application Contents
A grant application which requests funds for the acquisition of
real property must include:
a. all applicable information and documents described in
Sections C through E above, except that grant applications
solely for the acquisition of real property need not include
the information described in Item 2 below;
b. a plat map which includes the legal description of the pro-
perty to be acquired as well as other land being acquired
for project purposes. In addition, the map should differ-
entiate between lots which are fully and partially acquired,
(i.e., landholding split by project land acquisition);
lally
isitic
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c. a preliminary layout of the distribution and drainage*
system (in lieu of design and specifications if not
available, applies to pre Step 3 authorizations/grants
only for eligible land purchases);
d. an identification of the interest in real property to be
acquired (e.g., fee simple purchase, long-term lease,
permanent easement). If available, lease agreements must
be included;
e. a copy of the appraisal reports for the property, including
a review appraisal if conducted by the grantee;
f. information demonstrating that the project is still cost-
effective if land costs significantly exceed estimates in
the approved facilities plan;
g. assurances that the property will be used only for the
purpose for which it is purchased, and that EPA's interest
in the property will be adequately reflected and protected
in compliance with all recordation or registration require-
ments of applicable local laws on real property (see CFR
Part 30; Item 3.b and Section M.5 below);
h. information showing funds requested for land purchase
separate from those for 40 CFR Part 4, or 49 CFR Part 24
as applicable, compliance activities; and
i. assurances of compliance with The Uniform Act.
Re: 40 CFR 30.535*, 30.600(i)*, 35.2040(b), 31.31
40 CFR Part 4, Subpart B, 49 CFR Part 24
3. Deferred Provisions
Grant applications which request funds solely for land acquisi-
tion need not include information regarding the following items
whose submission may be deferred until the award of grant assistance
to build the project:
a. debarment and suspension (see Section D.7 above);
b. user charge system (see Section V.E and Section D.17
above);
c. sewer use ordinance (see Section V.F and Section D.17
above);
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d. O&M manual payment limitations (see Section IX.B.5);
e. adoption of UC system and SUO (see Sections V.E and
V.F, and Section D.17 above); and
f. final design drawings and specifications.
Re: 40 CFR 35.2122, 35.2260, 35.2040
4. Grant Conditions
Grant awards which include the acquisition of eligible real
property are to include grant conditions (see Section M.5.d below)
stating that:
a. real property must not be acquired until the reviewing agency
has determined, based on documentation submitted by the
grantee, that the applicable provisions of 40 CFR Part 4,
or 49 CFR Part 24, as applicable, have been or will be met ;
b. consistent with 40 CFR [Part 30] 31.31, the Federal interest
in the property to be acquired must be protected by the
inclusion of the following language in the title or other
recordation instrument:
"Federal lien: Federal grant funds have been
used to purchase this property. The United
States interest is _; ' percent (depending
on the Federal share at the time of grant award)
of the proceeds from any subsequent sale or
current fair market value of the property on the
date of the transaction which removes it from
the use for which it was purchased. [(See 40 CFR
30.535(e), revised on September 30, 1983).] A lien
to this effect and extent is hereby asserted."
c. all land necessary for the project will be acquired prior
to the initiation of construction.
In addition, it is recommended that the grantee provide a land
acquisition management schedule indicating key activities and
target dates.
Re; 40 CFR 30.535*, 35.2210, 31.31, 40 CFR Part 4, 49 CFR Part 24
5. Preaward Costs
Potential grant applicants requesting approval, as a preaward
cost, of the acquisition of eligible land or of an option for the
purchase of eligible land may receive such approval after completion
of the environmental review (see Section D.12). In addition, the
reviewing agency should request sufficient information from the
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applicant, such as that required for grant award in Items 2.b through
2.g above, to insure that grant application requirements will be met
for a subsequent grant. The approval letter from the reviewing
agency should include notification that the acquisition of real pro-
perty, to be eligible, must be procured in accordance with the appli-
cable provisions of 40 CFR Parts 4, 49 CFR Part 24 and [30.]
The approval letter should note that these costs will only be
reimbursed if a grant is subsequently made and thus does not repre-
sent a commitment of funds. Grantees should be advised that certain
costs incurred prior to grant award may not be deemed allowable if
specific authorization for preaward costs was not obtained. Refer
to Section D.15 above for additional warning language to be included
in the approval letter. In order to reduce project costs and main-
tain construction schedules, reviewing agencies may encourage the
early acquisition of real property.
Re; 40 CFR 35.2118
6. Project Management
After grant award (or pre-award authorization), the grantee is
required to manage its acquisition activities in compliance with
40 CFR Part 4 regulations and submit to the reviewing agency appro-
priate documentation of such compliance. Reviewing agencies are
encouraged to:
a. provide guidance to grantees on their responsibilities
to comply with 40 CFR Part 4 and 49 CFR Part 24;
b. provide assistance to grantees in the selection of
appraisers and guidance regarding appropriate level of
detail and standards for appraisal work;
c. establish procedures for conducting review appraisals;
d. establish minimum standards for project file documenta-
tion (e.g., checklists, standard letters);
e. establish procedures to assure that site certificates
are submitted and compliance with 40 CFR Part 4 and 49 CFR
Part 24 requirements are documented prior to grant reim-
bursement; and
f. establish procedures for approving amounts of just
compensation, requiring updated appraisals when necessary
and conducting administrative settlements to approve
payments higher than just compensation when negotiated
purchase is unsuccessful.
Re: 40 CFR 4.102(d), 4.102(g), 4.102(1), 4.103(b), 4.103(e),
4.103(f), 4.104, 49 CFR 24.102(d),(g) and d)/ 24.103(a),(d)
and (e), 24.104 for real property acquired on or after 4/2/"§9.
TM 89-1
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3. Grant Conditions
Grant awards which include I/A field testing are to include
grant conditions which require the grantee to submit a quality
assurance program and a report which describes the procedure,
cost, results, and conclusions of field testing in accordance
with the schedule contained in the grant agreement (see
Section M.5 below).
Re; 40 CFR 30.302(d)(3)*, 30.503(f)* and (h)*, 35.2211, 31.45
4. Preaward Costs
Potential grant applicants requesting approval of I/A field
testing as a preaward cost may receive such approval after comple-
tion of the environmental review (see Section D.12). The reviewing
agency should obtain sufficient information from the applicant, such
as that required for grant award in Item l.b above, to substantiate
that the I/A field testing is warranted and is likely to satisfy
grant application requirements for a subsequent grant. The approval
letter from the reviewing agency should remind the applicant that
the procurement of services, supplies, and materials must comply
with 40 CFR Part [30 and 33] 31.36 and that the acquisition of real
property must comply with 40 CFR Parts 4 and [30] 31, if such costs
are to be allowable for grant participation. Refer to Section D.15
for additional warning language to be included in the letter.
Re: 40 CFR 35.2118, 40 CFR Part 31
J. INNOVATIVE OR ALTERNATIVE TECHNOLOGY MODIFICATION OR
REPLACEMENT GRANTS
Purpose;
Provide grant assistance to fund 100 percent of the allowable
cost of the modification or replacement (M/R) of any project
funded with increased funds under the I/A technology provisions
of the CWA and the implementing regulations.
Discussion:
The 1977 CWA amendments introduced I/A technology provisions
into the construction grants program. The I/A provisions were
designed to conserve resources and reduce costs for wastewater
treatment projects through the use of new or improved technologies,
which are inherently subject to a greater than normal risk of failure
As an incentive for using I/A technology and accepting this higher
degree of risk, I/A projects were made eligible for increased grant
funding, and for 100 percent M/R grants in the event of failure.
TM 89-1
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The review procedures below address the regulatory and
program guidance provisions applicable to 100 percent M/R grants,
It is to be noted that I/A projects which received grant assis-
tance after December 29, 1981 are subject to project performance
standards, as required by the 1981 CWA amendments.
The requirements for project performance (40 CFR 35.2218)
apply equally to all projects, including those projects where
an I/A funded process or unit has been identified as the reason,
or part of the reason, preventing the grantee from certifying
the project's performance. When a prospective I/A failure is
documented under 40 CFR 35.2032(c), grantees are encouraged
to independently remedy the problem to prevent such failure
through minor modifications such as the corrective action
activities described in §35.2218. Where such minor modifica-
tions are not successful or possible, the corrective action
analysis required by §35.2218 will be an integral element of
the documentation of an I/A failure which has occurred within
two-years after initiation of operation of the project.
One hundred percent M/R grants must be viewed as a one-time
correction for a failed system. For this reason, innovative
technologies generally should not be used to modify or replace
a failed I/A system.
(NOTE; As a result of the 1987 amendments to the Clean Water
Act,~Section 202(a)(3) has been amended to allow EPA to fund all
of the costs of modifying or replacing rotating biological con-
tactors if they fail to meet design performance specifications.)
Review Procedures:
a. Grant assistance, either as a grant amendment or a new
grant, to fund 100 percent of the allowable costs (including
planning and design costs) for the M/R of any I/A project, may
be awarded only if the reviewing agency determines that:
(1) the I/A elements of the project have caused the
project, or significant elements of the complete
waste treatment system of which the project is a
part, to fail to meet the project performance
standards;
(2) the failure has significantly increased O&M ex-
penditures for the project, or for the complete
waste treatment system of which the project is a
part, or requires significant additional capital
expenditures for corrective action;
(3) the failure has occured prior to two years after
the initiation of operation of the project; and
TM 89-1
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(4) the failure is not attributable to negligence on
the part of any person.
The report or documentation necessary to substantiate the above
four items will vary from project to project, and will depend on
the extent and nature of the failure and the size, cost and com-
plexity of the project. Projects which satisfy Items (1) through
(4) above are also required to receive priority certification
from the State agency. It should be noted that some alternative
technology projects which received increased grant assistance may
have included conventional components which also received in-
creased funding (e.g., treatment prior to land application). It
is intended that the conventional components receive 100 percent
M/R funding only if their failure was caused by an I/A component
of the project.
OMPC and WERL are working jointly on a phased assessment and
advisory procedure to keep State and EPA regional staff apprised
of current developments. This procedure is described in the
November 1985 and July 1986 I/A Updates. Project reviewers should
check the status of 100% M/R activities with their local I/A
coordinator when reviewing projects with I/A technology components.
Re: 40 CFR 35.2032(c)
b. A grant for 100 percent of the cost, including planning
and design costs, of modification or replacement of RBCs which
have failed to meet design performance specifications can be
awarded providing the applicant for an M/R grant clearly
demonstrates to the Regional Administrator's satisfaction that;
(1) the RBC failure is not due to the negligence of any
person, including the owner of the POTW, the appli-
cant, its engineers, contractors, equipment manufac-
turers, or suppliers;
(2) for projects built using plans and specifications
completed after September 1984, that the design con-
sidered the results of information published by EPA
in May and September 1984 related to RBC failuresT
(3) the RBC failure has significantly increased the
project's capital or operation and maintenance costs;
(4) the M/R project meets all requirements of EPA's
construction grant and other applicable regulations;
(5) the M/R project is included within the fundable
range of the State's annual project priority list;
and
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(6) the State certifies the project for funding from its
(i-e., nonreserve) allotments and from funds
appropriated after February 4, 1987.
Re; FR 15820-22, May 4, 1988
K. GRANTS TO STATES FOR ADVANCES OF ALLOWANCE
1. Defining the State Program
Purpose;
Provide financial assistance to small communities which would
otherwise be unable to perform planning and/or design work prior
to the award of a Step 2+3, a Step 3, or Step 7 grant.
Discussion;
The 1981 CWA amendments provide for an advance of allowance
to certain potential grant applicants. State agencies are to
identify small communities, as defined by the State, which would
be unable to complete an application for a Step 2+3, a Step 3
or Step 7 grant (i.e., to perform facilities planning and/or
design work) without such an advance. States are also required
to reserve a reasonable portion of their annual allotment, up
to 10 percent, for advances of allowance, unless this requirement
is waived by EPA (see Section II.E.4.e).
The amount of funds provided to potential grant applicants
is computed in accordance with 40 CFR Part 35, Subpart I,
Appendix B. Note that the maximum amount of the advance is
not the allowance, but is the allowance times the appropriate
EPA grant percentage (see Sections L.I and L.2 below). This
advance may be less than this maximum amount, at the discretion
of the State. Also note that the allowance is based on the
estimated allowable building costs, which do not include other
associated Step 3 costs such as engineering, legal, accounting,
etc.
Unless the total amount of the advance is small and the work
is to be performed in a short period of time (e.g., less than six
months), it may be advisable to divide the advance into two or more
payments (e.g., one for facilities planning, one at the initiation
of design, and the balance when 50 percent of the design work has
been completed).
660 TM 89-1
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If Step 2+3, Step 3 or Step 7 grant assistance is subsequently
awarded to a community which received an advance, the amount of the
advance is subtracted from the grant amount. If Step 2+3, Step 3
or Step 7 assistance is not awarded, the State may seek repayment of
the advance on such terms and conditions as the State may determine.
Procedures;
Before applying for a grant for advances of allowance, a State
must define the following procedures for the administration of
advances of allowance:
a. Qualified Communities
Advances may be made only to small communities, as
defined by the State, which would otherwise be unable
to perform the necessary planning and/or design work.
The State must:
i. define a "small community" (e.g., by
population size), and
ii. set objective criteria by which it will
determine whether a community would be
"otherwise unable to perform" (e.g., by
income per capita in relation to the
estimated per capita cost of planning
and/or design).
Re: 40 CFR 35.2025(b)(3)
b. Application Procedure
Application forms and their required contents, as well
as review and approval procedures, must be defined by the
State. At a minimum, the applicant for an advance should
be required to agree to complete the facilities planning
and/or design work for which the advance is provided.
Re: 40 CFR 35.2025(b)(1)
c. Amount of Advance
The State is to determine the amount of each community's
advance, subject only to the requirement that the total
advance cannot exceed the Federal share of the estimated
allowance (see Section III.E). The advance can be equal
to this maximum, or lower; the decision as to whether it
should be lower, and if so, how much lower, must be defined
by the State, in language that is objective and treats all
communities equally.
661 TM 89-1
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In most States, all of the anticipated allotment for the
next several years could easily be consumed by high priority
Step 3 projects which have already been designed. Since
advances in these States would reduce the amount of money
available for high-priority Step 3 projects, some States
may decide to limit each advance to a smaller amount which
would still meet the minimum needs of each community.
Re; 40 CFR 35.2025(b)(4)
d. Timing of Payments
The advance can be paid at any time after the State
approves the community's application for an advance. The
advance can be paid in one lump sum, or in several partial
payments, depending on the procedures established by the
State. A State may decide to mandate multiple payments,
since expenses for planning and design are incurred over
a substantial period of time, and the payment of the
maximum allowable advance during the planning stage would
result in most of the funds being advanced long before the
expenses are incurred.
State requirements for the timing of payments must
apply equally to all communities.
Re; 40 CFR 35.2025(b)(4)
e. Repayment of Advance
The State must define the conditions, if any, under which
a municipality which never receives a Step 2+3, Step 7 or a
Step 3 grant would have to repay an advance of allowance.
The 1981 CWA amendments authorize, but do not require, the
State to seek repayment of the advance, "on such terms and
conditions as it may determine." The terms and conditions
for repayment may include the collection of interest, at
the discretion of the State, as long as all communities are
treated equally.
There is no Federal requirement for the collection of
interest, since once the State makes an advance to a third
party, the advance loses its character as Federal funds.
On the other hand, any funds recovered from a municipality
by the State (advance and/or interest) must be returned to
the grant account for re-use in advancing funds to other
municipalities. However, interest earned by the State on
funds received from EPA but not yet advanced to a munici-
pality (or recovered from a municipality but not yet
advanced to another municipality) may be retained by the
State for other uses, as specified in 40 CFR 30.526.
Re: 40 CFR 35.2025(b)(5)
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2. Applying for the State Grant
Purpose;
Award Federal grant funds to the State, for the State to pro-
vide advances of allowance to small communities.
Discussion;
To acquire funds for making advances of allowance, the State
agency applies to EPA for a State grant which will be used for
providing advances to small communities. The application includes
a list of small communities which, in the judgement of the State,
are eligible for the advance. The application may also include a
request by the State that payments under the grant be sent directly
from EPA to each community, after the State has approved the com-
munity's application for an advance (see Section IX.B.S.c).
Procedures;
In order to receive a grant for advances of allowance, a State
must:
a. submit an application, using EPA Form SF-424;
Re: 40 CFR 35.2040(d)
b. define an acceptable program for the administration
of advances of allowance (see Item 1 above);
Re: 40 CFR 35.2025(b)
c. notify EPA of the basis for the grant amount re-
quested (normally, by submitting a list of the
small communities which are expected to receive
an advance, and the amount of the advance which
is expected to be provided to each community);
and
Re; 40 CFR 35.2040(d)(2)
d. include with the application a list of the com-
munities which received an advance of allowance
under the previous grant to the State, and the
amount of the advance received by each community.
Re: 40 CFR 35.2040(d)(1)
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L. FEDERAL GRANT SHARE
In order to compute the Federal grant share, several factors
must be taken into account. While the grant applicant will have
computed its grant request, the grant amount offered may be
different after the application package and supporting documents
have been reviewed. if the grant to be offered is less than that
requested, the grantee should be contacted to determine if further
clarifying information is available. The letter forwarding the
grant offer should clearly explain the reason for any difference
in the grant amount.
Procedures:
1. Total Allowable Project Cost
Total project cost consists of many elements of cost, not all of
which are allowable for grant participation. Allowable/unallowable
costs are determined in accordance with 40 CFR Part 35, Subpart I,
Appendix A, as discussed in Section IX.F.
One additional factor arises where the project includes unallow-
able reserve capacity. The allowable project costs for grants
awarded after September 30, 1984, must be limited to the treatment
capacity required to serve existing needs on the date of Step 3
grant approval. If the project includes ineligible reserve capacity,
it will be necessary to establish a cost ratio (see Section D.18
above). All Step 3 costs which are normally allowable for grant
participation are reduced, using the cost ratio. Phased and seg-
mented projects which received a previous Step 3 grant before
October 1, 1984 may be exempt from this limitation (see Section D.10
above). A suggested method for determining the total allowable pro-
ject cost is given below:
a. Establish an estimated total building cost, which
is the sum of the estimated award amount of all
prime subagreements for building the project, plus
amounts approved for force account work performed
in lieu of awarding a subagreement for building
the project, plus the estimated purchase price
of eligible real property. The estimated total
building cost so determined does not include pro-
ject components which are ineligible for grant
participation (e.g., collection sewers and related
pumping stations). The estimated total building
664
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2. EPA Grant Share
In computing the EPA grant share, the project reviewer is to
examine the applicable conditions noted below to determine the EPA
grant percentage, and multiply this percentage by the total allow-
able project cost (see Item l.g above). The resulting figure,
minus any advance of allowance, is the EPA grant amount.
a. Standard Grant Share
After September 30, 1984 the EPA grant is 55 percent,
except as described below.
b. Uniform Lower Federal Share
The Governor of a State may elect to uniformly lower
the EPA grant share for all categories of projects. Except
for I/A projects, the EPA grant will be the percentage
established by the Governor and approved by EPA.
c. Phased or Segmented Projects
These projects are discussed in Section D.lO.d above.
d. Projects Using An Innovative or Alternative
Technology
The EPA grant share for eligible treatment works or
unit processes determined to meet the definition of an
I/A technology (including an I/A field testing project)
shall be increased by 20 percent of the total allowable
cost of the I/A project or the I/A portion of the pro-
ject, but in no event shall the total Federal share
exceed 85 percent. Only I/A components and unique
non-I/A components necessary to make the I/A components
operate may receive the additional grant percentage.
Where a State grant program exists, the State grant
percentage of the non-Federal share must not be decreased
for an I/A project. For example, assume an EPA standard
grant share of 55 percent, a State standard grant share
of 10 percent, and a local standard grant share of 35
percent, for a total non-Federal share of 45 percent.
The State share of the non-Federal share is 10 divided by
45, or 22.2 percent. For an I/A project, the Federal
share is 75 percent and the non-Federal share is 25 per-
cent. The State's proportional contribution must be at
least 22.2 percent of the 25 percent non-Federal share
(i.e., at least 5.55 percent of the eligible I/A project
cost. This requirement is expected to be met in most States
by providing the same State percentage grant to all projects
(in this example, 10 percent), but the State percentage
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grant may be reduced for I/A' projects at the discretion of the
State, provided that all I/A projects are treated equally, (in
this example, to a share not lower than 5.55 percent).
e. Projects for the Modification or Replacement of
Failed Innovative or Alternative Technologies
The EPA grant is 100 percent of the allowable cost
of the M/R of failed I/A projects, including specific planning
and design costs incurred on these projects funded under
§35.2032(c), which meet the conditions described in Section J
above.
The source of funds for 100% M/R grants can be determined
as follows:
- When a failed I/A technology system is being modified
or replaced with an innovative or an alternative
technology, as a minimum, an amount equal to the uniform
Federal share for the State for conventional technology
projects (i.e., 55% or a reduced share amount set in
accordance with 40 CFR 35.2152(c) must come from the
regular portion of the State's allotment (which includes
the Governor's discretionary fund). The remaining
portion of the grant to bring the Federal share to 100%
can come from the I/A set-aside, the regular portion of
the allotment or any combination of the two. The
"regular portion of the State's allotment" can include
the reserve for alternative systems for small communities
if the community qualifies.
When a failed I/A system is being modified or replaced
with a conventional technology, the entire grant amount
must come from the regular portion of the State's
allotment.
f. Other Projects
(1) The EPA grant share does not change because a project
receives a Step 2+3, a Step 7, a land acquisition, or a CSO
(including a marine CSO)grant. The standard EPA grant share
for such projects is 55 percent, unless this percentage is
changed as discussed in Items b through e above.
(2) As noted in Section VI.J above, RBCs which fail to
meet design performance specifications may be eligible for
100% M/R grantsT
Re; 40 CFR 35.2024(b), 35.2032(c), 35.2109, 35.2152
M. GRANT AWARD PROCEDURES
Detailed grant award procedures may vary from State to State,
depending on internal State procedures and the requirements of
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the State/EPA delegation agreement. Fully delegated States may
only need to submit project and priority certifications to EPA
(see Items 2 and 3 below), while those States without delegation
will need to submit complete application packages. In all cases,
however, a grant may only be awarded by EPA. The procedures below
are general, and are not a substitute for detailed procedures
established in each State and EPA Regional Office.
1. State Procedures
All States have developed internal grant approval procedures
which are to be followed prior to submission of the appropriate
documentation to EPA. Such procedures usually include:
a. preparation of a one-page project summary for
the head of the reviewing agency;
b. preparation of the State Priority Certification
(EPA Form 5700-28);
c. preparation of the letter of approval from the
State to EPA, including an explanation of any
differences between the grant amount requested
by the applicant and the grant amount approved
by the State;
d. approvals by other offices within the State
agency (e.g., compliance, permits, etc.);
e. approval by the State's fiscal office, to
verify that funds, including reserves if
appropriate (e.g., I/A, small communities),
are available;
f. preparation of the grant award input coding sheet
for the computerized Grants Information and Con-
trol System (GIGS); and
g. preparation of a draft grant agreement/amendment
(EPA Form 5700-20A), with recommended general and/
or special grant conditions (see Items 5 and 6
below).
h. preparation of innovative/alternative (I/A) facility
technology file data base entry form OMB No. 2040-
0095 for all step 3 and step 2+3 grant awards for
I/A projects including 100% modification/replacement
and field testing of I/A technology. (See I/A
Facility Technology File Data Base Users Manual for
sample form).
TM 89-1
669 (86-1)
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2. Priority Certification
All States are to review each grant application to verify
that it is complete. If the project is listed on the State's
project priority list for the current fiscal year and is within
the fundable range, the State will complete the State Priority
Certification (EPA Form 5700-12^) for submission to EPA.
Re: 40 CFR 35.2042(a), 35.2103
3. Project Certification by Delegated States
States which have been delegated authority to manage the
construction grants program must submit a written certification
to the EPA Regional Office for each project, stating that the
applicable Federal requirements, within the scope of authority
delegated to the State, have been met. The certification must
be supported by documentation retained by the State, which will
be made available to EPA upon request.
Upon receiving a certification covering all delegable preaward
requirements, EPA must either approve or disapprove the grant
within 45 calendar days. If disaproved, EPA will state the rea-
sons and have an additional 45 days to review any subsequent re-
vised submissions. If EPA fails to approve or disapprove within
45 days, the grant shall be deemed approved and EPA must issue the
grant agreement to the applicant.
Re: 40 CFR 35.2042(a) and (b)
4. Grant Agreement/Amendment
After receipt, review, and approval of the State certifications
and supporting documents, if any, EPA will prepare the Grant Agree-
ment/Amendment (EPA Form 5700-20A) for the Regional Administrator's
signature. EPA will also complete the following actions or docu-
ments which may already have been prepared (or partially prepared)
by the delegated State:
a. briefing memorandum to the EPA Regional Administrator,
if required by Regional procedures;
670 TM 87-1
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b. Commitment Notice (EPA Form 2550-9) for transmittal
to the appropriate EPA fiscal office;
c. preparation and entry of applicable information into
GIGS (see Section III.C.3); and
d. Grant Agreement/Amendment (EPA Form 5700-20A)
i. the first page is to be data-
phoned to EPA Headquarters
immediately after signature by
the Regional Administrator (RA);
ii. the entire form, with a transmittal
letter, is mailed to the grant
applicant 5 days after EPA Head-
quarters data-phone notification
(not before); and
iii. the form must be signed by the
applicant's authorized represent-
ative (see Section C. l.b above)
and returned to the Regional Office
within 3 weeks of receipt by the
applicant.
5. General Grant Conditions
The Grant Agreement/Amendment contains award conditions which
require the grantee to comply with all applicable provisions of
40 CFR Chapter I, [Subchapter B] Parts 31, 32, 34 and 35.
(Subchapter B includes 40 CFR Parts 30 through 35, and references
all other applicable regulations, including 40 CFR Parts 4, 6, 7,
25, and 29; and 49 CFR Part 24.) (40 CFR 31.12 deals with special
conditions for"high risk" grantees.)
The reviewing agency may wish to supplement these preprinted
grant conditions by adding grant conditions which emphasize specific
regulatory provisions. Although the inclusion of these additional
conditions does not increase the grantee's obligation to comply with
with these regulations, they are frequently added to increase the
grantee's awareness of its obligations under the regulations.
Representative samples of these conditions are identified below:
671 TM 89-1
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a. Effect of Approval
Approval or certification of project documents (e.g.,
facilities plan, plans and specifications, etc.) by the
reviewing agency is for administrative purposes only, and
does not relieve the grantee of its responsibility for the
entire project.
Re; 40 CFR 35.2050
b. Step 2+3/Step 7
The grantee must obtain reviewing agency approval before
initiating acquisition of eligible real property, procurement
of equipment, or selection of construction contractors.
Re: 40 CFR 35.2202
c. Project Changes
The reviewing agency must approve certain project changes,
as specified in 40 CFR 35.2204, by formal grant amendment.
Re; 40 CFR 35.2204, 31.30(a), (b), and (c)
d. Land Acquisition
The reviewing agency must verify that the requirements
of 40 CFR Part 4 or 49 CFR Part 24, as applicable, have been
met before real property is acquired,and the Federal interest
in the property to be acquired must be protected (see Section
H.3.b above).
Re; 40 CFR 30.535*, 35.2210, 31.31
e. Project Initiation
The grantee shall expeditiously initiate and complete
the project in accordance with the schedule contained in
the application and the grant agreement. Failure to award
contracts and to issue notices to proceed for building all
significant elements of the project within 12 months of
grant award (or of final approval of plans and specifica-
tions, and the related documents described in Section F.3
above, under a Step 2+3 or Step 7 grant) may result in a
limitation on allowable costs or the imposition of sanctions
(see Sections VIII.B.4 and IX.F.4, Paragraph A.2.e).
Re: 40 CFR 30.900* through 30.906*, 35.2212, 31.43(a)
672 TM 89-1
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f. Quality Assurance Program
When environmentally related measurements or data gener-
ation are involved in a project, the grantee must develop and
implement a quality assurance program which will assure that
quality data will be produced and a minimum of data will be
lost through out of control conditions or malfunctions. If
a grant condition requires the grantee to gather environmental
related data, a schedule for developing a quality assurance
project plan must be submitted within 30 days of a grant award.
Field testing of I/A technologies and evaluation of wastewater
treatment plant performance (e.g., during the one year project
performance period) are examples of activities which may entail
gathering environmental or environmentally related data.
Re: 40 CFR 30.302(d)(3)*, 30.503(f)* and (h)*, 31.45
g. Project Performance Standards
The grantee should be informed of the parameters which
have been identified by the reviewing agency as project
performance standards (see Sections V.C.2.a and VII.I.2.a).
Re: 40 CFR 35.2218(c)
h. Field Testing of Innovative or Alternative Technologies
See Section I.3 above.
Special Grant Conditions
a. Where there are compelling reasons, special grant condi-
tions may be included in the grant agreement. Unlike
general grant conditions, special grant conditions do
not repeat EPA's regulatory requirements, but rather
are special conditions under which the grant has been
awarded, due to unusual circumstances. All proposed
special grant conditions should receive a technical
and legal review, to insure that their inclusion in
the grant agreement/amendment is appropriate.
b. A special grant condition which is an exception to the
above, is the one required by the 1987 amendments tc>
Section 203 of the Clean Water Act. Section 203(a)(2)
requires EPA to enter into a written eligibility
agreement with applicants who submit final plans,
specifications and estimates to the State for Step 3,
TM 89-1
673 (85-1)
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Step 2+3 or design/build grant awards or amendments on
or after April 6, 1987. This agreement must state that
only those items specified in the project description
(scope) portion of the grant agreement are eligible Tor
Federal participation. Accordingly, a clear,detailed
and specific description of the project' mast " be included
in the grant agreement.
Re; 40 CFR 31.12; Memorandum dated March 3, 1987 from Director,
Municipal Construction Division -'"water Quality Act of 1987
Agreement on Eligible Items."
674 TM 89-1
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A. INTRODUCTION
This chapter begins with a discussion of EPA requirements for
grantee procurement systems, and for the procurement of professional
and construction services. Later sections discuss activities which
take place during project construction, including project inspection
and management of change orders. The chapter concludes with a
discussion of the requirements for project performance during the
first year following initiation of operation. Payments, payment
limitations, and grant increase/decrease procedures are discussed
in Chapter IX.
Section B, Procurement System Requirements, describes certifi-
cation and reporting requirements for grantee procurement systems.
Section C, Procurement of Professional Services, describes
specific requirements for the procurement of engineering, legal,
accounting, and other professional services.
Section D, Procurement of Construction Contractors, describes
competitive bidding procedures, grant adjustment, and protests
concerning grantee procurement actions.
Section E, Small Purchases, describes EPA's simplified require-
ments for purchases costing $10,000 or less.
Section F, Noncompetitive Procurement, describes the limita-
tions and approvals necessary for this type of procurement.
Section G, Monitoring Construction, describes monitoring
activities, including preconstruction conferences, project management
conferences (PMCs), interim inspections, construction management eval-
uations (CMEs), and final inspections.
Section H, Management of Claims and Change Orders, describes
management activities which should be employed by grantees for
the effective control of claims and change orders, and reviewing
agency procedures for processing change orders.
Section Ir Post-construction Activities, describes engineer-
ing services during the first year following project completion
and the requirements for the grantee's certification concerning
project performance standards.
703
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B. PROCUREMENT SYSTEM REQUIREMENTS
1. Procurement System Certification
In the interest of reducing the time and paperwork needed for
processing grant applications, each grant applicant is encouraged to
use its own procurement system, provided that the system meets all
applicable Federal, State, and local laws and regulations. Each
grant applicant is required to evaluate its procurement system,
compare the system against EPA's procurement regulations, and
complete the Procurement System Certification (EPA Form 5700-48)
before any procurement action is undertaken with EPA grant assistance.
Where the grant applicant affirmatively certifies that its
procurement system meets the intent of the requirements of
40 CFR [Part 33] 31.36, EPA will accept the applicant's certification
unless EPA or the State agency has reason to question it. Where
the grant applicant does not affirmatively certify, the grant appli-
cant is required to comply with the requirements of 40 CFR Part [33],
31.36 and to submit specific documentation to the reviewing agency.
It is to be noted that most review and approval activities re-
lated to grantee procurement actions may be delegated to the State
agency, including the review of a grantee's Procurement System
Certification (EPA Form 5700-48) and the authorization for a grantee
to use an innovative procurement method. However, EPA can not
delegate the actual review of a grantee's procurement system under
[40 CFR 33.115], nor the resolution of protests of grantee procurement
actions under [40 CFR Part 33, Subpart G].
Review Procedures;
a. Each grant applicant is required to complete a
Procurement System Certification (EPA Form
5700-48), indicating whether its procurement
system meets the intent of all requirements
in the EPA procurement regulations (40 CFR
[Part 33] 31.36).
b. If the grant applicant affirmatively certifies, EPA
must accept the applicant's certification. However,
EPA reserves the right to review the procurement
system or any individual procurement action:
i. to determine if the EPA procurement
requirements are being met, or
704 TM 89-1
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ii. if there is reason to believe that the
procurement system is unacceptable based
on:
- information from other Federal agencies
or from Congress,
- information from the applicant's cognizant
audit agency,
- information from State agencies or other
organizations,
- information contained in the certification
form,
- previous EPA experience with the applicant, or
- information from contractors or prospective
contractors.
Re: 40 CFR 31.36(g)(3)(ii)
Prior written approval must be received from the
reviewing agency, even though the applicant's procure-
ment system was previously certified, if the applicant
intends to:
i. use an innovative procurement method, or
ii. use the provisions of 40 CFR [33.715(a)(2)]
31.36(d)(i)(C), to noncompetitively procure
the services of an engineer who provided
facilities planning or design services, but
whose selection for such previous work was not
accomplished in accordance with the then-
applicable EPA procurement regulations (if
the work was performed under a Step 1 or a
Step 2 grant) or the provisions of the current
EPA procurement regulations which are listed
in 40 CFR [33.715(a)(3)3 31.36.
An applicant's affirmative certification is valid for
two years or for the length of the project period, which-
ever is longer, unless the procurement system is substan-
tially revised, or EPA determines that the intent of the
EPA procurement regulations is not being followed.
705 TM 89-1
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e. If the grant applicant does not affirmatively certify,
the applicant is required to comply with the additional
requirements of 40 CFR [Part 33, Appendix A] Part 31,
for all procurement actions undertaken with EPA grant
assistance. These requirements are described in
Items 2.b and 3 below.
Re: 40 CFR 33.001(g)*, 33.105*, 33.110*, 33.115*, 31.36
2. Reporting Requirements
a. [All grantees must submit the following information
to the reviewing agency, in writing, within ten
calendar days of contract award, for all construction
contracts whose cost is expected to exceed $10,000
within a 12 month period (e.g., a $15,000 contract
with a 24 month performance period would not be
reportable, nor would a $7,000 contract with a two
month performance period): (NOTE; Under Part 31,
the $10,000 base has been raised to $25,000.)
i. name, address, telephone number, and
employer identification number of
the construction contractor;
ii. amount of the contract award;
iii. estimated starting and completion dates;
iv. project number, name, and site location; and
v. copy of the tabulation of bids or
offerers and the name of each bidder
or offerer.
This information will be sent by EPA to the U.S.
Department of Labor (DOL). In some States, the
State/EPA delegation agreement provides for the
State agency to perform this function.]
Re: 40 CFR 33.110(e)(2)*, 33.211*, 35.2212(d), 31.36(g)
b. Grantees without a certified procurement system are
required by 40 CFR [33.110(b)(2)] 31.36(g)(2) to allow
the reviewing agency to conduct a preaward review of
all proposed procurement actions. The manner, timing,
and extent to which this review is conducted is, there-
fore, at the discretion of the reviewing agency. Some
agencies may require only a notice of intent from the
grantee, with the actual documents to be submitted only
at the request of the reviewing agency, while others will
706 TM 89-1
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require the submission of complete documentation.
Unless otherwise instructed by the reviewing agency,
grantees without a certified procurement system must
submit the following information for all contracts
(not only construction contracts) in excess of [$10,000]
$25,000. All other grantees must retain these documents
in their files, and make them available at the request
of the reviewing agency and/or auditing agency:
i. basis for contractor selection;
ii. justification for the procurement
method selected, if other than competi-
tive bidding (i.e, formal advertising);
iii. justification for the use of any specifi-
cation which does not provide for maximum
free and open competition;
iv. justification for the type of contract,
if other than fixed price;
v. basis for the award cost or price, including
a copy of the cost or price analysis and
documentation of negotiations, if other
than a fixed price contract with the lowest
responsive, responsible bidder (includes
all contracts over [$10,000] $25,000, which are
not competitively bid; must include EPA Form
5700-41 for all contracts awarded by grantees
without a certified procurement system); and
vi. justification for the rejection of any or all
bids (see Section D.2 below).
Re: 40 CFR 33.250*, 33.290(b)*, 31.36(d); 40 CFR Part 33,
Appendix A*
3. Public Notice Requirements
Except for grantees whose certified procurement systems
include provisions which meet the intent of EPA's public notice
requirements, all grantees must give adequate public notice of
all proposed procurement actions, as defined in the EPA procure-
ment regulations. These regulations require a notice of the
proposed procurement action to be published in professional
journals, newspapers, or publications of general circulation
707 TM 89-1
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over a reasonable area depending on the size of the project;
extremely large projects will usually warrant nationwide
advertisement [for at least 30 days prior to the deadline for
receipt of proposals or bids]. Posted public notices or written
notifications mailed or delivered to interested persons, firms,
or professional organizations may also be used.
Re: 40 CFR 33.415*, 33.510*, 31.36(d); 40 CFR Part 33,
Appendix A, Paragraphs (b)(4) and (b)(5)*
C. PROCUREMENT OF"PROFESSIONAL SERVICES
This section discusses the procurement of professional
services normally associated with Step 3 grant activities. The
term "professional services" is used to designate engineering,
architectural, construction management, legal, and accounting
services, as opposed to services provided by construction
contractors and equipment suppliers. All procurements made
in whole or part with EPA grant assistance, however, are sub-
ject to EPA's procurement regulations (40 CFR Part [33] 31),
which describe four types of procurement:
- formal advertising (i.e., competitive bidding, sealed bids)
- competitive negotiation, proposals
- noncompetitive negotiation, proposals, and
- small purchases.
While formal advertising, with contractor selection based on
competitive prices, is the preferred method of procurement,
practically all professional services procurement is accomplished
using the competitive negotiation procedure. For this reason,
the discussion below is limited to procurement using the competi-
tive negotiation procedure.
1. Competitive Negotiation, Proposals
Purpose;
Advertise, receive, and evaluate proposals, negotiate with
the best qualified offerers, and award a subagreement to the
responsible offeror whose proposal is determined to be the most
advantageous to the grantee, taking into account price and
other objective evaluation criteria.
708 TM 89-1
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Discussion:
As with all procurements using EPA funds, procurement trans-
actions are to be conducted in a manner that provides maximum
open and free competition. The competitive negotiation method
of procurement applies equally to the procurement of engineering,
architectural, construction management, legal, and accounting
services. Competitive negotiation differs from competitive
bidding procurement primarily in the manner in which price is
considered. Price, while important, may be only one of several
criteria used to evaluate offers in competitive negotiation,
while in competitive bidding, price competition is the primary
consideration.
Procedures;
All grantees must follow the procedures described below,
except that grantees which have certified procurement systems
(see Section B.I above) may follow their own procedures, if
those procedures meet the intent of the procedures described
below:
Public Notice
When advertising a request for proposals (RFP),
the grantee must give adequate notice to the
public (see Section B.3 above). The public
notice must include adequate information to allow
interested parties to readily obtain the proposal
documents.
b. Proposal Documents
Proposal documents must include:
i. a copy of [40 CFR 33.295 and 40 CFR
Part 33, Subparts F and G;]
ii. sufficient information to enable an
interested party to prepare a proposal;
iii. a description of all evaluation criteria
and the relative importance attached to
each;
iv. the objective basis which will be used to
select the firm to which the subagreement
will be awarded; and
709 TM 89-1
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v. the deadline and the place for submission
of proposals.
Proposal Evaluation
Proposals are to be uniformly and objectively
evaluated solely on the basis of the evaluation
criteria stated in the RFP.
d. Negotiation
Unless the request for proposals states that contract
award may be based on initial proposals alone, the
grantee must conduct meaningful negotiations with the
best qualified offerers (i.e., those which have sub-
mitted acceptable proposals within the competitive
range), and must permit these offerers to make revi-
sions to their proposals, in order to obtain the best
final offers. The best qualified offerers must have
equal opportunities to negotiate and to revise their
proposals. During negotiations, the grantee must not
disclose the identity of competing offerors, nor any
information from competing proposals.
e. Contract Award
A subagreement must be awarded to the responsible
offerer whose proposal is determined in writing
(see Section B.2.b above) to be the most advantageous
to the grantee, taking into consideration price
and other evaluation criteria stated in the RFP.
Re: 40 CFR 33.505*, 33.510*, 33.515*, 33.520*,
31.36(d)(3); 40 CFR Part 33, Appendix A*
2. Optional Method for Procuring Engineering Services
The grantee may use the optional procedures described below,
in lieu of the procedures described in Item 1 above, for the
procurement of engineering services. Grantees with a certified
procurement system may follow their own procedures, if those
procedures meet the intent of the procedures described below7:
710 TM 89-1
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- competition (40 CFR [33.230] 31.36(c)
and (d)(3));
- documentation (40 CFR [33.250]
31.36(b)(9)); and
- one of the following three procure-
ment methods:
- small purchases (40 CFR [33.305
through 33.315] 31.36(d)(1)),
- formal advertising
(40 CFR [33.405 through
33.430] 31.36(d)(2)), or
- competitive negotiation,
proposal (40 CFR [33.505
through 33.525] 31.36(d)(3));
and
iii. no conflicts of interest existed.
c. Noncompetitive Negotiation
Based on information submitted by the grantee, the
reviewing agency finds sufficient justification to
allow noncompetitive procurement for reasons other
than simply using the same individual or firm which
provided facilities planning or design services.
Such justification must be based on sound business
reasons (e.g., emergency conditions, inadequate
competition, services available only from a single
source, etc.). This condition requires prior
approval from the reviewing agency (see Section F
below).
The procurement of engineering services for Step 3 work must also
satisfy all other provisions of the current EPA procurement regu-
lations (e.g., type of subagreement, cost and price analysis,
required subagreement clauses, etc.), and must comply with the
documentation and reporting requirements discussed in Section B.2
above.
Re: 40 CFR 33.715*, 31.36(d)(4)
713 TM 89-1
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4. Small, Minority, Women's, and Labor Surplus Area Businesses
The affirmative action steps described in Section V.C.l.w
are equally applicable to grantee actions in the procurement
of professional services. Evidence that the grant applicant
recognizes his responsibilities with regard to these businesses
should be submitted with the grant application. The reviewing
agency must insure that the affirmative steps were carried out,
and that the applicant complied with State or local goals or other
applicable standards.
Re; 40 CFR 33.240*, 31.36(e); OMB Circular A-102, 1T7.d. (3/3/88)
5. Scope of Work
Purpose;
Provide sufficient detail to clearly define the nature,
scope, extent of work, time frame for completion, total
compensation, and payment provisions for grantee subagreements
for professional services.
Discussion:
a. Engineering Services during Construction
The scope of work will generally include:
i. those applicable services normally associated
with engineering supervision and inspection
during construction (e.g., interpretation of
plans and specifications, resolution of tech-
nical problems, preparation of estimates of
work in place, review of claims and change
orders, etc.); and
ii. preparation and implementation of the final
plan of operation, including the preparation
of the operation and maintenance (O&M) manual
Post-construction Engineering Services
The 1981 Clean Water Act (CWA) amendments require the
grantee to select the engineer or engineering firm
principally responsible for either supervising, or
714 TM 89-1
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providing engineering services during construction
(i.e., facilities planning, design, and/or building
of the project), to provide engineering services
during the first year following initiation of opera-
tion . Such services should be reflected in the scope
of work and will generally include:
i. directing the operation of the project,
including both sewer projects and treat-
ment facilities, commensurate with the
type and complexity of the project;
ii. conducting studies regarding the elimina-
tion of excessive infiltration/inflow (I/I);
iii. revising the O&M manual as necessary to
accommodate actual operating experience;
iv. training, including the preparation of
curricula and training material, for
operating personnel; and
v. advising the grantee whether the project
is meeting the project performance
standards (see Section 1.2 below).
Procedures;
[The scope of work of the subagreement is to be reviewed to
insure that it clearly defines:
- the nature, scope, and extent of the work to be
performed;
the time frame or schedule for performance;
the total cost or compensation of the contractor;
and
payment provisions, including retainage, if any.]
Re: 40 CFR 33.1015*, 35.2218(b); preamble to 40 CFR
Part 35, Subpart I, 49 FR 6228, "Project Performance,"
and 49 FR 6231, "Building" (February 17, 1984)
715 TM 89-1
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6. Types of Subagreements and Required Provisions
All professional services subagreements (contracts) must
include the applicable provisions and clauses described in
40 CFR Part [33] 31, and must not include any provisions which
are prohibited by 40 CFR Part [33] 31. The reviewing agency must
verify that the following subagreement requirements have been
satisfied:
a. Subagreements must be awarded only to responsible
contractors (see Section V.C.l.f).
b. Prohibited types of subagreements are the cost-
plus-percentage-of-cost (e.g., a multiplier which
includes profit) and the percentage-of-construction-
cost .
c. The type of subagreement selected should be based
on the nature of the work and the degree of risk
inherent in performing the work. Typical types of
subagreements used for professional services
include:
i. fixed price (lump sum), where the scope
of work is clearly defined; or
ii. cost-plus-fixed-fee, where the scope of
work is less clearly defined. These
subagreements include a cost ceiling
which may not be exceeded without
negotiation and the preparation of a
contract amendment (i.e., change order).
d. In addition to including provisions which define a
sound and complete subagreement (see Item 5 above),
all subagreements must include the applicable
provisions of 40 CFR Part [33] 31.3(d)(i) regarding
labor standards; patents, data and copyrights; violating
facilities; energy efficiency; and the model sub-
agreement clauses or their equivalent. The grantee
and the contractor must first determine which of these
provisions apply to the work to be performed, and then
create a contract clause to address each requirement.
Re; 40 CFR 33.220*, 33.285*, 33.1005* through 33.1030*,
31.36
716 TM 89-1
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7. Cost and Price Analysis
Purpose;
Insure that the total cost of a subagreement, including each
component of its cost, is reasonable, allowable, and commensurate
with the scope and complexity of the work.
Discussion;
The procurement regulations require the grantee to conduct a
cost analysis, based on information submitted by contractors and
subcontractors, of all negotiated change orders and negotiated
subagreements in excess of [$10,000] $25,000. Cost analysis is the
process of examining, verifying, and evaluating cost data, and
projecting from the basic cost data to determine a reasonable
estimated price that will be representative of the total cost of
performance of the negotiated subagreement. To be allowable for
grant participation, cost must comply with the cost principles
in 48 CFR Part 31, "Contract Cost Principles and Procedures"
(see Sections IX.F.I and IX.F.2). Profit must be negotiated as
a separate element of price where there is no price competition,
or where price is based on a cost analysis.
In general, total cost consists of three elements: direct
costs (labor, materials, and supplies for a specific project),
indirect costs (overhead and/or general and administrative
burden such as rent, utilities, fringe benefits, employee taxes,
accounting costs, etc., where such costs cannot be directly
assigned to a specific project), and profit.
The estimated hours necessary to perform a specific task times
the hourly rate paid to the employees, which varies with their
level of skill, represents direct labor costs.
Some costs included in an indirect cost category are not
allowable for grant participation even though they are a cost of
doing business. Examples of these costs are interest on borrowed
capital, bad debts, advertising, entertainment, and business
development expenses. Indirect costs may be allocated to all
projects within the business, but must be reasonable and allocated
on a rational basis.
The last element of cost is profit. While the EPA regulations
do not discuss a specific level of profit, grantees are required
to negotiate a "fair and reasonable" profit. The determination
of a "fair and reasonable" profit requires judgement by all
parties, and may be guided by practices in the area and the
degree of risk incurred by the contractor. For example, a fixed
717 TM 89-1
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price contract, assuming that the costs were accurately estimated,
exposes the contractor to a higher level of risk than a cost-plus-
fixed-fee contract.
Review Procedures:
For all negotiated subagreements in excess of [$10,000] $25,000,
the reviewing agency is to insure that the grantee has conducted a
cost analysis for all contractors and subcontractors and that:
a. estimates of work hours, level of required skills,
and direct labor rates are reasonable and commensurate
with the work to be performed;
b. indirect cost rates are reasonable, allocated on
a rational basis, conform with Federal cost
principles, and do not include any unallowable
costs; and
c. profit is negotiated as a separate element of
cost, and is commensurate with the complexity
of the work and the type of contract (i.e., the
level of risk assumed by the contractor).
Re; 40 CFR 33.235*, 33.275*, 33.290*, 31.36(d) and (f)(2);
40 CFR Part 33, Appendix A*; 48 CFR Part 31;
OMB Circular A-87
8. Additional Services
At times, additional professional services, beyond those
originally envisioned (either in scope or extent) at the time of
contract preparation, will be required by the grantee. Such
additional services are most frequently required for deciding pro-
curement protests filed by potential construction contractors and
equipment suppliers (see Section IX.F.4, Paragraph A.l.c), and for
assessing the merits and negotiating the settlement of claims
filed by construction contractors and equipment suppliers (see
Section IX.F.4, Paragraph A.l.f).
To be eligible for grant participation, the additional services
must be within the scope of the project (i.e., the work necessary
to construct the facility described by the facilities plan).
If the additional work is.within both the scope of the project and
the scope of the existing contract for professional services
718 TM 89-1
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(see Item 5 above), a change order may be issued to the con-
tractor by the grantee, with the price of the additional services
negotiated as an equitable adjustment to the contract. If the
change order requires prior approval by the reviewing agency
(see Section H.3 below, and Section IX.F.4, Paragraph A.l.f),
the review procedures described in Section H.5 below, modified
to suit contracts for professional services, should be used.
If the additional work is within the scope of the project, but
outside the scope of work of the existing contract, the additional
services must be procured through the procedures described in
Section C.I or C.2 above, unless the procedures described in
Section E or F below are appropriate.
Re: 40 CFR 33.1030, Paragraph 3(b)*, 31.30
D. PROCUREMENT OF CONSTRUCTION CONTRACTORS
The grantee is required to award subagreements and issue notices
to proceed for building all significant elements of the project as
soon as possible, but no later than 12 months, after grant award.
All grantees must submit limited information concerning each sub-
agreement award to the reviewing agency. Grantees without a certi-
fied procurement system must submit more detailed information.
1. Competitive Bidding
In almost all cases, procurement of construction contractors
and suppliers of equipment and materials must be done using the
competitive bidding method (referred to as [formal advertising]
competititve proposal in 40 CFR [Part 33] 31.36(d)(3)). Competitive
bidding involves advertising for bids, receipt of sealed bids,
public opening of bids, and the award of the contract to the
responsive and responsible bidder who submits the lowest bid.
In practically all cases (see Section B.2.a above), a bid
tabulation must be prepared by the grantee's engineer, showing
the prices bid by each contractor for each item in the contract
proposal form. The reviewing agency is to insure that all required
competitive bidding procedures were used, including:
719 TM 89-1
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a. Public Notice
When advertising for bids under the formal adver-
tising (i.e., competitive bidding) method, the
grantee must give adequate notice to the public.
The public notice must include sufficient infor-
mation to enable bidders to readily obtain and
review bidding documents.
b. Bidding Documents
The bidding documents must include:
i. a copy of 40 CFR [33.295; 40 CFR
Part 33, Subparts F and G]; and if
appropriate, "Labor Standard
Provisions for Federally Assisted
Contracts" (EPA Form 5720-4);
ii. a complete statement of the work to
be performed, including where appro-
priate, design drawings, specifica-
tions, and the required performance
schedule;
iii. the terms and conditions of the sub-
agreement to be awarded, including
payment, delivery schedules, point of
delivery, and acceptance criteria;
iv. the place and deadline for submitting
bids;
v. a clear explanation of the bidding
procedures and the method to be used
by the grantee to evaluate bid prices
and to award the subagreement;
vi. the criteria to be used in evaluating
bidders' compliance with the respon-
sibility requirements; and
vii. the DOL prevailing wage rate determin-
ation, if applicable.
Addenda
Prior to bid opening, the grantee may have issued
addenda to correct errors, to clarify information in
the bidding documents, or to incorporate the current
wage rate determination. Contract proposal documents
TM 89-1
720 (85-1)
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should include a form for certification that the bidder
has received all addenda before the bid date. Where
addenda have been issued by the grantee, the reviewing
agency is to insure that receipt of such addenda is
acknowledged by each bidder, and that the addenda were
issued in a reasonable time (generally 5 days) before
the deadline for the receipt of bids (see Section V.C.l.d).
d. Number of Bids
Sufficient bids should have been received. If only one bid
is received, the grantee should analyze the reasons for
receipt of only one bid. If the grantee determines that the
specifications were written in a manner which discouraged
bidding, or that some other situation existed which caused
the lack of bidders, the grantee must correct these problems
and rebid the project.
If the grantee determines that there was a sufficient number
of responsible contractors within the area that could have
bid on the project, and that there is valid justification
for receiving only one bid, the grantee may accept the bid
provided that he conducts a price analysis, if the bid
exceeded [$10,000] $25,000, and determines that the bid is
reasonable (i.e., it compares favorably with the engineer's
estimate or some other basis for a price comparison).
If the bid price significantly exceeds the engineer's
estimate, the grantee may reject the bid as explained in
Item 2 below.
Bid Evaluation
Evaluation of all bids must have been made using the ob-
jective criteria described in the bidding documents. All
necessary bid bonds and certifications must have been sub-
mitted, and all required forms completed and signed. If
less than three responsive and responsible bids were
received and the low bid exceed [$10,000] $25,000, the
grantee must have conducted a price analysis of the winning
bid and determined that it was reasonable.
TM 89-1
721 (85-1)
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f. Contract Award
A fixed price contract must be awarded to the lowest
responsive and responsible bidder (see Section V.C.l.f).
The contractor to which the contract is awarded must not
be on EPA's Master List of suspended and debarred con-
tractors .
Re: 40 CFR33.211*, 33.220*, 33.235*, 33,290(b)*, 33.405*,
33.420*, 33.415*, 31.36
2. Rejection of All Bids
The grantee may reject all bids only if it has sound, docu-
mented business reasons for doing so. The reviewing agency may
approve such actions where justified as being in the best interests
of the construction grants program. Because of varying State
statutory requirements, it may be prudent to request that the
grantee's legal counsel submit documentation supporting such
actions under State law. If the grantee improperly rejects all
bids, any additional costs incurred (including a contract price
which is higher than the original low bid) will be ineligible
for grant assistance. It is therefore advisable for the grantee
to consult with the reviewing agency before rejecting all bids.
After rejection of all bids, the grantee may either readver-
tise using the competitive bidding method (see Item 1 above), or
negotiate the procurement (if appropriate) in accordance with
40 CFR [33.505 through 33.525 or 33.605] 31.36(d)(3) and (4).
Re: 40 CFR 33.430(c)*, 31.36(d)
3. Small, Minority, Women's, and Labor Surplus Area Businesses
The reviewing agency is to insure that affirmative actions
have been taken by the grantee, and where appropriate, by the
grantee's contractors, to include small, minority, women's, and
labor surplus area businesses in the bidding process (see Section
V.C.l.w). Where State or local goals have been established,
the reviewing agency is to compare those goals against the
contract awards.
Re; 40 CFR 33.240*, 31.36(e); OMB Circular A-102, 1T7.d. (3/3/88)
4. Grant Adjustment
Each grant award is originally based on the estimated
allowable costs of building the project, a reasonable construc-
tion contingency, the cost of eligible land, and the estimated
TM 89-1
722 (85-1)
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allowance for planning and/or design. After the receipt of bids
and the acquisition of eligible land, the costs of building the
project are more accurately known, and the grant should be adjusted
accordingly. Any grant adjustment requires a formal grant amendment
a. Building Cost
The sum of all prime contracts and subcontracts
(including contracts for the direct purchase of
equipment, materials, or supplies by the grantee),
plus the cost of approved force account work in lieu
of awarding construction contracts, equals the total
allowable building cost. If the total allowable
building cost is less than the estimates used for
grant award, the grant is to be reduced accordingly
(see Section IX.C.2). If the total allowable building
cost is more than the estimated allowable building
cost plus the construction contingency, the grant may
be increased (see Section IX.C.I) if the bids are
judged reasonable, and sufficient funds are available
in the State's allotment (many States maintain a
reasonable reserve of grant funds for this purpose).
If bids are significantly higher than anticipated, it
may be necessary for the grantee to reevaluate its
financial capability in light of the higher costs.
Also, if bids are significantly higher, it may be
appropriate for the grantee to reevaluate the scope
of work, or when appropriate, reject all bids and
readvertise. This last course of action may only be
undertaken in accordance with State law and EPA pro-
curement regulations (see Item 2 above).
b. Construction Contingency
After receipt of bids, the construction contingency is
usually reduced to between 2 and 5 percent of the total
allowable building costs. The construction contingency
is available for unanticipated cost increases (i.e.,
change orders) during construction. However, as a result
of regulations revised in November 1985, for grants awarded
on or after February 10, 1986, the maximum allowable
project cost is equal to the allowable project costs plus
5% excluding an allowance. For grants awarded prior to
that date, see Section IX.C.I.
c. Land Acquisition Cost
Assuming that the requirements of 40 CFR Parts 4 and 30
have been satisfied with regard to the acquisition of
eligible land, the grant amount may require adjustment
after the actual cost of eligible land and allowable
costs of complying with 40 CFR Part 4 are known.
TM 86-1
723 (85-1)
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d. Allowance for Planning and/or Design
The final allowance for planning and/or design is deter-
mined only once, and is based on the initial allowable
award amount of all prime construction contracts.
(including contracts for the direct purchase of
equipment, materials, and supplies by the grantee),
plus the initial amount approved for force account
work in lieu of awarding construction contracts, and
the purchase price of eligible land. The amount of
the allowance does not change, even if the actual
building costs increase or decrease during the per-
formance of the work. The final allowance is com-
puted in accordance with 40 CFR Part 35, Subpart I,
Appendix B (see Section VI.L.I).
e. Grant Amendment
Any grant adjustment, as determined in Items a through
d above, requires the preparation of a formal Grant
Agreement/Amendment (EPA Form 5700-20A). States are
to verify that sufficient funds are available in the
State's allotment, certify the grant amendment and
other documents required by the State/EPA delegation
agreement, and submit the grant amendment to EPA for
approval (see Section VI.M).
Re; 40 CFR 30.700*, 31.30, 35.2204; 40 CFR 35.2205
5. Contract Award
Grantees are to award contracts and issue notices to proceed
for building all significant elements of the project as soon as
possible, but no later than 12 months, after grant award (see
Section IX.F.4, Paragraph A.2.e).
Re: 40 CFR 35.2212
6. Protests
A protest is a written complaint concerning the grantee's
solicitation or award of a subagreement, and may be filed with
the grantee only by a party with a direct financial interest
which has been adversely affected by the grantee's action.
Protests may be filed during the procurement of professional
services or construction services (including the direct purchase
of equipment, materials, and supplies by the grantee), and should
normally be submitted to the grantee prior to the closing date for
the receipt of proposals or bids.
TM 89-1
724 (86-1)
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Grantees bear the primary responsibility for the resolution
of protests, and should establish procedures for their prompt
resolution. It is advisable that these procedures require pro-
tests involving allegations of improprieties in the grantee's
solicitation practices to be submitted to the grantee prior to
bid opening or the closing date for the receipt of proposals.
Upon receipt of a protest, the grantee should first determine
whether it is appropriate to defer the protested procurement
action. If the procurement action is not deferred, the protester
files an appeal with EPA, and EPA finds in'favor of the protester,
the cost of the protested procurement action may be disallowed
for grant participation. Grantees should investigate the basis
for the protest, seek the advice of legal counsel, document all
meetings and actions, correspond by registered mail, and resolve
the protest promptly and equitably.
EPA regulations primarily address the procedures to be used
by EPA in considering a protest appeal. A protest appeal is a
written complaint filed with EPA by a party with a direct finan-
cial interest which has been adversely affected by the grantee's
decision on the initial protest. Protest appeals are to be filed
with the Office of Regional Counsel in the appropriate EPA Regional
Office (or for grants awarded by EPA Headquarters, the Assistant
General Counsel for Grants).
EPA will not accept a protest appeal unless the protester has
exhausted all administrative remedies at the grantee level. A
protest appeal is limited to:
a. issues arising under the procurement provisions of
40 CFR Part [33] 31 (e.g., an appeal concerning the
rejection of all bids);
b. alleged violations of State or local law, but only
where EPA determines that there is an overriding
Federal interest; and
c. issues arising over the award of a lower tier
subagreement (subcontract) by a prime contractor.
When the protester files appeal documents with the Office of
Regional Counsel (or for grants awarded by EPA Headquarters, the
Assistant General Counsel for Grants), all protest documents and
attachments must be concurrently transmitted by the protester to
all other parties with a direct financial interest which may be
adversely affected by the appeal.
725 TM 89-1
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The EPA official designated to resolve the appeal will
consider only written appeals filed within seven calendar
days after the adversely affected party (initial protester or
other party) received the grantee's determination. This require-
ment can be met if the adversely affected party transmits a tele-
gram to EPA within the seven calendar days, indicating an intent
to file a protest appeal, and the complete protest appeal is
received by EPA within seven days thereafter.
When EPA receives a protest appeal and the grantee has not
deferred the procurement action, EPA will promptly request that
the grantee defer the protested procurement action with respect
to the subagreement or item at issue until the appeal is resolved.
EPA may summarily dismiss the appeal if:
- procurement issues are not involved,
- the appeal is otherwise not reviewable,
- procedural requirements (i.e., meeting deadlines)
have not been complied with,
- the protester does not agree to extend the bid and
bid bond period, or
- the appeal lacks merit.
If a review is warranted, EPA may arrange for the submission
of written arguments or participation in a conference by all
parties who may be adversely affected by the appeal. EPA will
then determine whether the protest has a rational basis. EPA's
determination will constitute the final action, from which there
is no further administrative appeal. State reviewing agencies may
not be delegated responsibility for the resolution of protest
appeals under EPA's procurement regulations.
Re; 40 CFR 33.001(g)*, 31.36(b)(ll) and (12); 40 CFR Part 33,
Subpart G*
E. SMALL PURCHASES
Small purchase procurement procedures provide for a simpli-
fied method of procurement where the dollar value is relatively
small. Small purchases, however, must be conducted in such a way
as to insure competition, so that the product or service is the
best value for the lowest price. In reviewing small purchase
procurements, insure that:
726 TM 89-1
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1. the aggregate amount of any one procurement does not
exceed [$10,000] $25,000, or a lower amount established
by State or local law;
2. [the procurement was not divided into smaller amounts
to avoid the dollar limitation for small purchase
procurement]; and
3. price or rate quotations were obtained and documented
from an adequate number of qualified sources.
Re: 40 CFR 33.305*, 33.310*, 33.315*, 31.36(d)(l)
F. NONCOMPETITIVE NEGOTIATION
Noncompetitive negotiation (i.e., sole source procurement) is
the least favored method of procurement, and may only be used if the
other three methods of procurement are inappropriate, or where the
requirements for continuation of engineering services have been
satisfied (see Section C.3.c above). Noncompetitive negotiation for
the continuation of engineering services requires the prior written
approval of the reviewing agency.
Noncompetitive negotiation may only be used if the other three
procurement methods (i.e., competitive bidding, competitive negotia-
tion, and small purchase) are inappropriate because:
1. the item is available only from a single source;
2. a public exigency or emergency exists;
3. after solicitation from a number of sources,
competition is inadequate (e.g., after formal
advertising, only one responsive and responsible
bid is received) (see Section D.l.d above); or
4. the reviewing agency authorizes noncompetitive
negotiation for continuation of engineering
services (see Section C.3.c above).
Re: 40 CPR 33.605*, 33.715*, 31.36(d)(4)
TM 89-1
(86-1)
727 (85-1)
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G. MONITORING CONSTRUCTION
Purpose;
Insure that the grantee manages the project in accordance with
the commitments made in the grant application and the grant accep-
tance, and that the project is constructed in accordance with the
approved plans, specifications, and change orders.
Discussion;
To insure adequate performance by all equipment vendors and
construction contractors, the reviewing agency must provide for
sufficient monitoring of construction activities. The reviewing
agency's monitoring program should begin with a preconstruction
conference, extend through interim construction monitoring
activities, and conclude with a final inspection. The extent and
frequency of monitoring will depend on the size and complexity of
the project, and the needs and performance of the grantee, the
resident inspection team, and the construction contractors. The
agency performing the monitoring activities will be designated
in the State/EPA delegation agreement, with monitoring activities
carried out by the State, EPA and/or the U.S. Army Corps of
Engineers (COE). In some States, one of these agencies has been
given the responsibility for all monitoring activities, while in
others, two or all three agencies share this responsibility.
Each agency is to follow the detailed monitoring procedures in
the State/EPA delegation agreement and/or the EPA/COE interagency
agreement.
To assist reviewing agencies in carrying out a thorough and
efficient monitoring program, EPA has prepared two guidance
documents which include a complete discussion of the specific
actions to be undertaken during construction monitoring;
"Operating Procedures for Monitoring Construction Activities at
Projects Funded under the Environmental Protection Agency's
Construction Grants Program," dated September 1983, and "Construc-
tion Management Evaluation and Project Management Conference
Manual," dated December 1983. The documents should be used in
conducting onsite construction monitoring activities. However,
reviewing agencies must also maintain off-site (i.e., in the
reviewing agency's office) construction monitoring through the
review of payment requests, inspection reports, change orders,
correspondence, and telephone communications. This information,
when compared with the project schedule in the grant agreement,
will provide an indication of the adequacy of construction
progress, and may form the basis for changing the frequency of
728
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be issued to the contractor, and the price of the change negotiated
as an equitable adjustment to the contract.
Management of change orders by the grantee and the grantee's
construction management team is one of the principal areas of
discussion and review during the preconstruction conference and the
PMC. Regulatory provisions concerning project changes have been
included in all EPA funded projects, and are identified in 40 CFR
[33.1030, Paragraphs 3 through 9] 31.30, for grants awarded on or
after May 12, 1982; comparable provisions are included in 40 CFR
Part 35, Subpart E, Appendix C-2, for grants awarded prior to
May 12, 1982.
It is the reviewing agency's responsibility to insure that the
grantee has an operating change order management system in place,
and that the grantee reviews and acts upon all change orders
promptly. All State agencies, and particularly those with delega-
tion agreements, have developed detailed change order review check-
lists and reviewing procedures. These established procedures should
be followed. In order to prevent costly delays, a strong effort
should be made to review all change orders and issue approval/denial
decisions promptly.
EPA's guidance document, "Management of Construction Change
Orders - A Guide for Grantees," March 1983, includes a chapter
entitled "Reviewing Agency Procedures." Review of change orders
is also discussed in EPA's "Construction Management Evaluation and
Project Management Conference Manual," December 1983.
Procedures;
The procedures discussed below highlight considerations to be
taken into account by the grantee in managing claims and change
orders, and by the reviewing agency during the processing of change
orders:
1. Conditions that May Warrant a Change Order
The six conditions below are those which are most
frequently encountered as the basis for a change order.
The reviewing agency must carefully evaluate the circum-
stances surrounding the change and compare the proposed
change against the original contract documents, including
the plans and specifications. In some cases, the contractor
may be entitled to a change order under State contract law,
but the change may be ineligible for EPA grant assistance.
TM 89-1
737 (86-1)
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a. Differing Site Conditions
When bidding, contractors generally
investigate site conditions and review
information in the contract documents
such as soil boring logs, quantities
of rock, depth to groundwater, etc.
After initiating construction, if the
site conditions significantly differ from
those described in the contract documents
or differ from those normally encountered
in construction, the contractor may be
entitled to a change in the contract price,
Judgement is required to determine whether
the contractor should have anticipated the
conditions as a normal risk in bidding the
the project.
b. Errors and Omissions
Errors and omissions are usually design or
drafting deficiencies in the plans and
specifications. Where the error or omission
would normally have been included in accurate
plans or specifications, and can be added to
the contract at approximately the same cost
as the work would have cost if included in
the original bidding documents, the change
order may be considered an allowable cost.
If the error or omission results in re-
construction or other additional effort
beyond that which would have been required
if the work had been included in the
original bidding documents, the cost of
such additional work will not be allowable.
In such cases, the grantee may seek redress
from the designer or other responsible
parties. See Section IX.F.4, Paragraph A.l.g
(2)(i), for an additional discussion of the
allowability of the cost of correcting errors
and omissions.
Regulatory Changes
At times, new laws or regulations are enacted
by the local, State, or Federal government
requiring retroactive application of new
requirements (e.g., revised State water quality
738
-------
or design standards). Where applicable, such
statutory or regulatory changes may warrant
a change order, which may be considered an
allowable cost.
d. Design Changes
A design change is a modification to an existing
adequate design. In order to be approved, it
should be cost effective and offer a net life
cycle savings (i.e., including future O&M costs),
Design changes usually originate as proposals
from a construction contractor, based on the
construction incentive (CI) clause (see
Section V.C.l.v). Where a design change other
than a CI proposal represents a substitution
of equipment or material, care should be
exercised to insure that the nonrestrictive
specifications or sole source procurement
provisions are not violated.
e. Overruns and Underruns
Bids for materials are often based on estimated
quantities and unit prices. Actual quantities
will usually differ, and the contract price will
be adjusted accordingly. However, grant payments
for such adjustments may be. limited. (See
Section IX.C.I.a.) Care must be exercised to
insure that quantities are continually monitored
and where possible, significant overruns are
avoided. Many specifications contain a clause
which allows unit prices to be renegotiated if
the final quantity differs from the estimated
quantity by 15 percent or more. (The term
"renegotiated" is traditionally used, even when
the original price was bid, rather than
negotiated. )
Time of Completion
Because of the potential for claims and possible
litigation, special care must be exercised in
this area. Claims may arise with regard to the
time of completion because the contract provides
for the assessment of liquidated damages against
the contractor if the contract completion date
739 TM 86-1
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is not met. Liquidated damages assess the contrac-
tor a specific dollar amount for each day of delay
beyond che contract completion date to cover the
grantee's extra costs (see Section IX.F.4, Para-
graph A.3.a). However, the contract completion time
may be extended for cause (e.g., work added by change
orders, unusually adverse weather conditions, etc.)
by the grantee, thereby reducing or eliminating the
assessment of liquidated damages.
Conditions which may arise with regard to the time
of completion include termination (either for con-
venience or for default), suspension of work,
directed acceleration, time extensions or
constructive acceleration. Each condition has its
own inherent problems, and very often their use will
be guided by existing State law.
A change order which merits an extension of the
contract completion date must include a provision
for an appropriate extension of that completion
date. (When no time extension is required, the
change order should clearly document that both the
grantee and the contractor agree that no extension
is needed.) Such changes will usually extend the
time of project completion beyond the end of the
grant budget period, in which case the change will
also require the preparation of a formal grant
amendment.
Re; 40 CFR 33.1030*, 31.30; 40 CFR Part 35, Subpart I,
Appendix A, Paragraphs A.l.f, A.l.g, and
A.2.C.; 40 CFR 35.2205.
2. Claims
When a written demand (voucher, invoice or other request
for payment) or a written assertion (seeking money or an
adjustment, interpretation or relief from contract terms)
is submitted by a contracting party it is NOT a claim.
However, when such a request is rejected or otherwise
disputed by the recipient, it becomes a claim. If such
claims are not addressed promptly and in an objective
manner, costs can escalate dramatically, especially if
the dispute leads to arbitration or litigation. For this
reason, it is imperative that grantees develop and apply
management techniques for the avoidance and quick resolution
of claims. When a claim is made, the grantee should
attempt to resolve the claim as promptly as possible, either
TM 89-1
740 (86-1)
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i. The reasonable costs of indepen-
dent assessment and negotiation of
costs (including legal, technical, and
administrative costs) are allowable,
but only if prior approval is
received from the reviewing agency
and certain other conditions, dis-
cussed in the "Claims Management
Guidance," are met.
ii. Meritorious contractor claims are
allowable, provided that all the
rules of change order approval have
been met, and the costs were not
caused by the grantee"s mismanage-
ment or vicarious liability for the
improper actions of others (see
Section IX.F.4, Paragraph A.l.f,
A.I.g , and A.2.c) .
iii. The reasonable costs (including
legal, technical, and administra-
tive costs) of defending against
a claim, or of prosecuting a claim
to enforce a subagreement, are
unallowable unless six specific
conditions, discussed in the "Claims
Management Guidance," are met, and
prior approval is received from the
reviewing agency.
A grantee may request technical or legal assistance
from the reviewing agency. Such assistance may be
provided, but generally is given only after all
possible sources of assistance at the local level
have been exhausted.
Re; 40 CFR 35.2350; 40 CFR Part 35, Subpart I,
Appendix A, Paragraphs A.l.f, A.l.g, and A.2.C;
40 CFR 35.2205; and "Prevention and Resolution of
Contractor Claims," March 1985.
3. Prior Approval
Minor changes in the project work, consistent with the
objectives of the project and within the scope of the
grant agreement, do not require a formal grant amendment.
Prior approval by formal grant amendment is required
743 TM 86-1
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for changes (either by change order or by initiating a
new procurement action) which:
a. increase grant funding (i.e., require
additional funds beyond that provided
in the contingency allowance);
b. transfer the project to another grantee
(includes a reorganization which forms a
new unit of government to build and/or
operate the project);
c. alter the project performance standards;
d. alter the type of wastewater treatment
provided by the project;
e. significantly delay or accelerate the
project schedule;
f. substantially alter the facilities plan,
design drawings and specifications, or the
location, size, capacity, or quality of any
major part of the project; or
g. require rebudgeting of amounts from one
activity to another (e.g., from construction
to non-construction activities, from in-
direct costs to direct costs, from employee
training to another cost category, etc.).
Re: 40 CFR 30.700*, 30.705*, 31.30, 35.2204
4. Submission
Change orders, other than those involving a formal
grant amendment as discussed in Item 3 above, do not have
to be submitted to the reviewing agency prior to execution
and implementation, regardless of whether or not the grantee
has a certified procurement system. However, grantees
should be encouraged to submit all change orders to the
reviewing agency in a timely manner, since eventually, any
cost increases (using part of the contingency allowance) or
decreases will have to be reconciled with the existing pro-
ject grant to determine the final grant amount. Also, it is
to the grantees advantage to have allowability of costs
determined by the reviewing agency prior to project closeout,
to provide a basis for the review of project costs by EPA's
Office of the Inspector General (OIG).
744 TM 89-1
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Except for grantees whose certified procurement
systems include provisions which meet the intent of EPA's
change order requirements, all grantees must conduct a
cost or pricing analysis for negotiated change orders
exceeding a net change of [$10,000] $25,000, (i.e., both
additive and deductive changes), with profit negotiated as
a separate element of the price, and obtain cost or price
data from the contractor using EPA Form 5700-41, or a
similar format which provides the same information. The
cost or pricing analysis need not be submitted to the
reviewing agency, but must be maintained in the grantee's
files for review by the reviewing agency if desired.
Re: 40 CFR 33.235*, 33.290*, 31.30, 31.36(g)(2)(v), 35.2204;
40 CFR Part 33, Appendix A*
5. Change Order Review
Prior to change order approval, the reviewing agency
is to insure that:
a. Justification of the need for the change order
has been documented, and includes an evaluation
of alternate ways of achieving the same
objective.
A comparison has been made between the change
order and the approved contract's scope of
work, including plans and specifications, and
the model change order clauses in the contract
documents.
A method has been established for determining
the price of the change order, and any additional
time required for contract completion, including
grantee/contractor negotiations, price or cost
analysis, and comparison with the engineer's
independent estimates.
d. The effect of the change order on other structures
and items of equipment (secondary effects), the
additional cost of extended engineering inspection
services, and the additional O&M costs over
the useful life of the project have been deter-
mined .
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e. The effect of the change order on the quality
of the work, including the project performance
standards and the capacity of the treatment
works, has been determined.
f. The change order will not circumvent EPA's
procurement regulations, including the require-
ment for competitive equipment specifications.
g. A comparison with the reviewing agency's on-
site inspection reports has been made.
h. The change order requires prior approval and/or
the preparation of a formal grant amendment
before implementation.
The cost of the change order is allowable for
grant participation, or a percentage of the
change order is allowable, excluding costs
associated with reserve capacity (see
Section VI.D.18).
Re; 40 CFR 30.700*, 30.705*, 33.1030*, 31.30,
35.2050, 35.2204; EPA publication, "Management
of Construction Change Orders - A Guide for
Grantees," March 1983
I. POST-CONSTRUCTION ACTIVITIES
This section is concerned only with engineering services
during the first year of operation and the project performance
certification. Section G.5 above discusses the final project
inspection. Closeout of projects is discussed in Section VIII.D.
1. Engineering Services during the First Year of Operation
The 1981 CWA amendments require that the grantee procure the
services of the engineer or firm that provided engineering
services during construction, or the engineer or firm that super-
TM 89-1
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vised construction, to assist in operating the project during its
first year of operation. The term "construction" includes planning,
design, and engineering services during the building of the project,
and is not to be confused with the term "building," which includes
only Step 3 activities. These terms are defined in 40 CFR
35.2005(b)(8) and (b)(13).
The 1981 CWA amendments use the term "supervise," whereas the
regulations use the word "direct," when referring to the services to
be provided by the engineer. The word "direct" better reflects the
intent of the services, since it does not imply a daily "in charge"
presence at the treatment works, nor a role as employee supervisor
or chief operator.
a. Scope of Engineering Services
The regulatory requirements for the scope of
engineering services during the first year of
operation are described in Section C.S.b above.
In essence, the engineer is to direct the opera-
tion of the treatment works, particularly with
regard to problems which develop; revise the O&M
manual to reflect actual operating experience;
train employees; and provide engineering advice
to the grantee as to whether the treatment works
is meeting the project performance standards.
The intent of these requirements is that the
engineer with the most experience in the plan-
ning, design, and building of the project will
utilize this expertise to help the grantee in-
sure that the project meets its performance
standards. The engineering services will
normally include reviewing laboratory procedures,
including the frequency and results of tests to
control unit process operations; recommending ways
to maintain appropriate levels of solids or dis-
solved oxygen in the aeration tanks; determining
the best conditions for the withdrawal of sludge
from the digesters; etc.
Engineering services are also required for projects
which include only sewers (collection, trunk, and/
or interceptors) and pumping stations. Such services
will be less extensive than those required for a
treatment plant, but will typically include:
747 TM 86-1
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i. for pumping stations, periodic site
visits to check operations (e.g., to
insure that float control mechanisms
are operating properly, that pump
cycling is the most efficient, that
seals are properly maintained and
not leaking, etc.);
ii. for sewers, opening and inspecting
manholes to observe signs of sur-
charging or sand deposits; after
storms, checking for inflow or
flooding; etc. If the project in-
cluded rehabilitation of sewers
to eliminate excessive I/I, the
engineering services may also
include a limited amount of flow
monitoring at sites within the
collection system, to supplement
flow measurements at the treat-
ment facility.
Engineering services during the first year of opera-
tion, therefore, are those necessary to insure the
efficient operation of the treatment works project,
and are directed toward achieving compliance with
the project performance standards. The extent of
such services will vary from project to project,
depending on the size, type, and complexity of the
project and the needs of the grantee's operating
staff.
Re; 40 CFR 35.2218(b)
b. Procurement of Services
The scope of work for the engineering contract for
inspection and supervision services during the building
of the project should also include engineering services
during the first year of operation. As an alternative,
the grantee may procure the engineering services re-
quired for the first year of operation as the construc-
tion of the project nears completion. Regardless of the
timing of procurement of engineering services, the
procurement must be conducted in accordance with 40 CFR
Part [33] 31.36 (see Sections B, C, E, and F above).
While a fixed price contract is acceptable, because of
uncertainties during the first year, a cost-plus-fixed-fei
type contract may be more appropriate.
748 TM 89-1
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A. INTRODUCTION
This chapter describes basic considerations for completing
and closing out projects. It begins with a discussion of EPA's
policies and procedures for completing and closing out Step 1
and Step 2 projects, all of which were awarded grant assistance
prior to the enactment of the 1981 amendments to the Clean Water
Act (CWA), which eliminated Step 1 and Step 2 grants. EPA's
goal is to complete all Step 1 and Step 2 projects by
September 30, 1985, and to do so without grant increases unless
they are absolutely necessary.
Later sections describe the completion and closeout of
Step 2+3, Step 3 and Step 7 projects. The chapter concludes with
a discussion of audits,including the resolution of audit excep-
tions .
Since the completion and closeout processes are based on
internal administrative procedures rather than EPA regulations,
there are relatively few regulatory citations in this chapter.
Therefore, although the procedures and sequence of events
described in this chapter represent basic considerations for
completing and closing out projects, specific step-by-step
procedures are to be developed by the EPA Regions and the
delegated States.
Section B, Step 1 and Step 2 Completions, describes EPA
policies and goals concerning the completion of Step 1 and Step
2 projects, and includes guidance on the level of review, the
conditions under which the work effort should be reduced, and
the conditions under which a grant increase should be awarded.
Section C, Step 2+3, Step 3 and Step 7 Completions, describes
considerations for completing construction projects,with particular
emphasis on pre-1982 projects involving phased or segmented treat-
ment works or sewer system rehabilitation.
Section D, Completion and Closeout Process, describes
activities leading up to closeout,including final inspection,
cutoff date, documentation, payments, property management, delays,
engineering services, project officer certification, and file
retention.
Section E, Audit' Process, describes procedures for requesting
and performing audits,and for resolving audit issues.
803 TM 89-1
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B. STEP 1 AND STEP 2 COMPLETIONS
Purpose;
Complete Step 1 and Step 2 projects by September 30, 1985.
Discussion;
The 1981 CWA amendments eliminated the award of Step 1 and
Step 2 grants after December 29, 1981. It is EPA policy to make
every effort to complete all Step 1 and step 2 projects (except
large, complicated, or involved projects) by September 30, 1985.
In so doing, reviewing agencies are to insure that all applicable
regulatory requirements and EPA policies in effect on the date
of grant award are satisfied, and that all grant conditions
contained in the grant agreement are fulfilled. All of these
projects are subject to EPA regulations contained in 40 CFR
Part 35, Subpart E. However, since Subpart E has been amended
several times over the years, EPA has published the "Regulation and
Policy Matrix - A Guide to the Rules Governing Grants Awarded
under the Construction Grants Program," dated December 1983, to
assist project reviewers in identifying the regulations and policies
applicable to earlier projects. The "Regulation and Policy
Matrix" includes a summary of all revisions to 40 CFR Parts 30, 33,
and 35, as well as all other EPA regulations and policy documents
which pertain to the construction grants program. This publication
should be consulted to identify the applicable regulations and
policies in effect on the date of grant award.
In completing Step 1 and Step 2 projects, problems can arise
with respect to requests for grant increases, evaluation of a
project's likelihood for receiving a future grant, and the depth
of review, primarily with regard to facilities plans. In all cases,
every effort should be made to complete the project within its
existing budget, without a grant increase, and in accordance with
any applicable compliance schedule.
Step 1 and Step 2 projects must be completed in conformance
with the approved scope of work in the grant agreement and the
regulations which were in effect at the time of grant award, and
are subject to audit to insure that these requirements have been
met (see Section E below). It is therefore essential that project
files document how decisions were made, and that proper value was
received for the funds expended.
804
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Review Procedures;
1. Step 1 Projects Completed or near Completion
a. Projects Likely to Receive a Step 2+3, Step 3
or Step 7 Grant
i. Review the facilities plan against all
applicable regulations and grant conditions.
ii. Complete the environmental review.
iii. Advise the grantee applying for a Step 2+3
grant, to request an advance of allowance
for design work, or to undertake design
using local funds, whichever is applicable.
iv. Make the final payment and administratively
complete the project up to the point of
audit request, but do not request an audit
unless unusual conditions warrant it (see
Item 6 below).
b. Projects Unlikely to Receive a Step 2+3, Step 3
or Step "7 Grant
i. Review the facilities plan against all
applicable regulations and grant conditions
to insure that all required items are present
and complete (see Item c below).
ii. Limit review comments to those that are
substantive or will affect the plan
recommendations.
iii. Require the grantee to perform only the
work necessary for conformance with the
applicable regulations and grant conditions.
iv. Prepare a letter to the grantee, identifying
discrepancies which would have to be
corrected by an addendum to the facilities
plan if a grant were ever to be awarded in
the future.
v. Make final payment and administratively
complete the project.
vi. Request a final audit, if warranted (see
Item 6 below).
805 TM 89-1
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-- c. Review of Facilities Plans for Completeness
In cases where a facilities plan is unlikely to
result in the award of a Step 2+3/ Step 3 or Step 7
grant, it is necessary for the facilities plan to be
reviewed for completeness (see Item b above). The
minimum requirements for completeness depend on the
date of initiation of facilities planning:
i. Facilities Planning Initiated before
May 1, 1974
Facilities plans initiated before May 1, 1974,
may be approved under the regulations published on
February 11, 1974, if a Step 2 grant was awarded
before April 1, 1980. In those cases where facilities
planning was initiated before May 1, 1974, but the
project failed to receive a Step 2 grant before
April 1, 1980, the facilities plan must comply with
the requirements described in Item ii below.
Re: 40 CFR 35.917(c)
ii. Facilities Planning Initiated after
April 30, 1974 and before October T, 1978
If each of the following items is present and
complete in a facilities plan which was initiated
after April 30, 1974 and before October 1, 1978,
the facilities plan can be considered complete
for grant payment purposes:
- description of the treatment works
for which construction drawings and
specifications will be prepared,
including design flow and analysis;
- description of the entire waste
treatment system of which the proposed
treatment works is a part;
- infiltration and inflow (I/I) documentation;
- cost effectiveness analysis of alter-
natives including renovation, upgrading
operation and maintenance (O&M), and use
of on-site or non-conventional systems;
806 TM 89-1
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The reviewing agency should use its best judgment in
determining the most effective approach for annulling or
terminating grants and negotiating termination agreements.
All termination agreements should provide assurances that
the Federal Government has received full value for the
funds expended. Any termination agreement that is
negotiated with a grantee must conform to EPA policies,
regulations, and guidelines, and must be supported by
factual data. All terminations require the concurrence
of the Regional Counsel (or, in the case of Headquarters-
awarded grants, the Assistant General Counsel for Grants).
Additionally, all terminated and annuled grants are
subject to audit (see Section E below). After completion
of the audit process, these grants are closed out in the
same manner as completed grants (see Section D.d below).
Re; For grants awarded prior to October 1, 1983, 40 CFR
30.920*, 30.950*; for grants awarded after September 30,
1983, 40 CFR 30.903* through 30.905*; for grants awarded
after September 30, 1988, 40 CFR 31.43
5. Other Step 1 and Step 2 Projects
The circumstances described in Items 1 through 4 above
represent the most common conditions likely to be encountered
for Step 1 and Step 2 projects. However, other less common
circumstances may arise which do not fall within these
categories (e.g., phased, segmented, Step 2+3, Step 7, large,
or complex projects). In these circumstances the reviewing
agency must exercise judgement on a case-by-case basis,
taking into account the availability of present and future
grant funds, the State's priority system, the project's
contribution toward improvement in priority water quality
areas, and the likelihood of the grantee receiving a Step
2+3, Step 3 or Step 7 grant at some future time. As
decisions are made for these projects, the integrity of
the construction grants program must be maintained, and
decisions must not circumvent the intent of the CWA
(e.g., planning and design work for new projects should
be accomplished under an allowance, not a grant).
6. Final Audit Requests
Before they can be closed out, all Step 1 and Step 2
projects must either be audited or be approved for closeout
without an audit. Accordingly, a Step 1 or Step 2 project
for which the claimed grant amount (i.e., the Federal share
of allowable project costs) exceeds $250,000, and for which
a Step 2+3, Step 3 or Step 7 grant is not expected to be
awarded, should be forwarded to EPA's Office of the
Inspector General (OIG) with a request for a final audit.
TM 89-1
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In addition, at the beginning of each month, the reviewing
agency should provide the OIG Divisional Office with a
list of Step 1 and Step 2 projects for which the claimed
grant amount does not exceed $250,000, as is done for Step
2+3, Step 3, and Step 7 projects. Within 30 days of the
receipt of this list, OIG will advise the reviewing agency,
in writing, which of these projects will be audited and which
can be closed out without an audit.
If a Step 2+3, Step 3 or Step 7 grant is expected to be
awarded, a final audit for the Step 1 or Step 2 project should
not be requested until all work on the Step 2+3, Step 3 o_r
Step 7 grant has been completed, unless overriding circumstances
require an immediate audit.
C. STEP 2+3, STEP 3 AND STEP 7 COMPLETIONS
Purpose;
Complete Step 2+3, Step 3 and Step 7 grants in a timely manner,
in accordance with the project schedule.
Discussion;
All Step 3 grants awarded under 40 CFR Part 35, Subpart I must
include a project schedule for key milestones, including the date
of building completion and initiation of operation. Step 2+3,
Step 3 and Step 7 grants awarded under 40 CFR Part 35, Subpart E
also should have included a project schedule, and although the
regulations do not include a specific requirement for key miles-
stones to be included in the schedule, these should have been
included as a good management practice. Significant changes to
all project schedules must be consistent with the schedule
contained in the NPDES permit and, before changes are made,
reviewing agency approval is required and a formal grant amend-
ment must be prepared (see Section VI.M).
Renewed emphasis is being placed on the timely completion of all
Step 2+3, Step 3 and Step 7 projects in accordance with their project
schedules. Timely completion will result in the earliest possible
achievement of water quality goals, and will allow projects to be
efficiently managed and closed out.
The review procedures below address several problems associated
with completing a project and preparing it for audit. The procedure
for closing out projects is discussed in Section D.d below.
TM 89-1
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Review Procedures;
The subjects discussed below are those which have caused
extended delays in completing projects. Each project, however,
has its own unique characteristics which will require careful
selection of the methods used to complete the project.
1. Project Schedule
Grant agreements for all projects must include a project
schedule, and work must be accomplished in such a way as to
maintain that schedule. Schedules should be reasonable, and
must conform with other compliance or enforcement schedules,
including those contained in court or State enforcement orders
(see VI.C.6).
Requests for significant changes to project schedules must
be critically reviewed. Approval cannot be given without
coordinating the proposed changes with NPDES permit require-
ments and with those of other applicable schedules. Significant
revisions to project schedules can only be made by using a formal
grant amendment. Failure of a grantee to maintain its project
schedule may form the basis for grant termination or annulment
(see Section B.4 above).
Re: 40 CFR 35.935-11, 35.2040(b)(6), 35.2204, 35,2212,
35.2214, 35.2216; for grants awarded prior to
October 1, 1983, 40 CFR 30.345-3*, 30.900-1*; for
grants awarded after September 30, 1983, 40 CFR
30.700*; for grants awarded after September 30, 1988,
40 CFR Part 31 and OMB Circular A-102, 1F6.C (3/3/88)
2. Phased or Segmented Projects
One grant condition included in all phased or segmented
projects, with the possible exception of very old projects,
is a commitment from the grantee to complete the remaining
phases or segments in order to make the treatment works, of
which the phase or segment is a part, operational and in com-
pliance with the enforceable requirements of the CWA. This
commitment includes a schedule specified in the grant agree-
ment, and must be accomplished regardless of whether grant
funding is available for the remaining phases or segments.
This schedule must also be incorporated into the grantee's
NPDES permit.
TM 89-1
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All phased or segmented projects should be periodically
reviewed by the reviewing agency to insure that the grantee
is performing according to the schedule. Where this is not
the case, and where negotiations with the grantee have failed
to accomplish compliance with the schedule, enforcement action
or action to initiate grant termination or annulment should be
undertaken (see Section B.4 above).
Re: 40 CFR 35.2108, 35.2214
3. Sewer System Rehabilitation
Step 2+3 or Step 3 grant awards may have been made for
projects which included both building of treatment facilities
and rehabilitation of sewer systems. In some of these cases,
the building of treatment facilities was completed, but the
grantee was permitted to continue sewer system rehabilitation
for a period of time after the treatment facilities became
operational. The grant agreement for each of these projects
contains a grant condition which requires the grantee to
complete the rehabilitation on a schedule contained in the
agreement.
A grantee whose project includes sewer system rehabilita-
tion, and whose grant was awarded after December 29, 1981, is
required to certify whether or not the project meets its per-
formance standards after one year of operation (see Section
VII.I.2.a), including the elimination of excessive I/I
through rehabilitation. A grantee whose grant was awarded
before December 29, 1981 is not required to certify the pro-
ject's performance after one year of operation.
Reviewing agencies should periodically review all projects
which include sewer system rehabilitation (with special emphasis
on pre-1982 projects) to insure that the grantee is performing
according to the schedule in the grant agreement. Where this
is not the case, and where negotiations with the grantee have
failed to accomplish compliance with the schedule, enforcement
action or action to terminate or annul the grant should be under-
taken (see Section B.4 above).
An alternative action which may be appropriate in some
instances is the reduction in the allowable capacity of treat-
ment facilities and interceptors to the equivalent of 120 gallons
per capita per day (gpcd), based on the approved and allowable
design flow. If this option is considered, care must be
exercised that the project remains affordable, meets its NPDES
permit requirements, and has received a deviation under the
provisions of 40 CFR [Part 30] 31.6 (see Section IX.E).
816 TM 89-1
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R6! 40 CFR 35.2214
4. Special Grant Conditions
Many grant agreements contain special grant conditions
(i.e., grant conditions unique to the project and beyond the
regulatory requirements which apply to all grants). Such
conditions may have addressed phased or segmented project
completions, a sewer system rehabilitation schedule, enactment
of ordinances forbidding connection to certain sewers (e.g.,
interceptors adjacent to environmentally sensitive or prime
agricultural land), etc. (see Section VI.M.6).
Before any project can be completed, the reviewing agency
must insure that all grant conditions have been fulfilled, with
particular attention given to special grant conditions. Refusal
by the grantee to fulfill all grant conditions may form the
basis for grant termination or annulment (see Section B.4 above)
Re: 40 CFR 35.2200
D. COMPLETION AND CLOSEOUT PROCESS
Purpose:
Insure that projects are completed on schedule, that all appli-
cable regulations and grant conditions have been satisfied, and that
project records are complete and available for audit.
Discussion t
The process of project completion and closeout will include many,
if not all, of the items discussed below in the review procedures,
which are presented in the order in which events should occur. How-
ever, because of unique circumstances surrounding each project, the
order of events may vary.
There are four major milestones in the completion and closeout
process :
a Project Completion
A Step 1 project is considered physically complete
when the project reviewer determines that the scope of work
contained in the grant agreement has been accomplished and
is approvable. For projects not expected to receive a
817
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Step 2+3, Step 3 or Step 7 grant, a Step 1 project is con-
sidered physically complete when it has met the minimum
requirements listed in Section B.l.c above.
A Step 2 project is considered physically complete when
the plans and specifications are either approved or judged
approvable (i.e., accepted) by the reviewing agency. For
projects not expected to receive a Step 3 grant, a Step 2
project is considered complete when it has met the minimum
requirements listed in Section B.2.b above.
A Step 2+3, Step 3 or Step 7 project is considered
physically complete when an official final inspection (see
Item 1 below) determines that:
i. All but minor components of the project
have been completed (e.g., landscaping)
in accordance with the approved plans,
specifications, and change orders.
ii. The facility is capable of functioning as
designed.
iii. All equipment is operational and performing
satisfactorily.
iv. Laboratory facilities are complete and
available to conduct appropriate tests.
All administrative requirements need not be satisfied at
the time of physical completion (e.g., final payment, change
order approval, fulfillment of grant conditions).
For Step 1 and Step 2 grants, project completion and physical
completion are synonymous. For Step 2+3, Step 3 and Step 7
grants, project completion, physical completion, and construc-
tion completion are synonymous.
b. Administrative Completion
The administrative completion phase includes all activities
occurring after physical completion of the project. These
activities, which normally occur in the following order, include:
completion of minor components, satisfaction of all grant condi-
tions, resolution of all claims, final building payment (excluding
payment for engineering services during the first year of opera-
tion), completion of engineering services during the first year of
operation, grantee's certification that the project meets its
TM 89-1
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in accordance with the approved plans, specifica-
tions, and change orders, and that all necessary
records are complete and available for audit (see
Section VII.G.5). In addition, information is
gathered at the final inspection which will allow
the preparation, by the reviewing agency, of the
project officer certification concerning flow
level (75 percent or more of the anticipated initial
flow), aesthetic features, and abandoned, unused, or
inoperable facilities (see Item 8 below).
At the time of the final inspection, the reviewing
agency will usually establish a cut-off date, after
which any costs incurred by the grantee are unallowable
for grant participation (see Item 2 below).
At times, a grantee may request a final inspection,
but when the reviewing agency's inspector arrives at the
project site, conditions exist (e.g., unsatisfied grant
conditions, lack of flow data on which to base the pro-
ject officer certification, etc.) which prevent the
project from being considered administratively complete.
In such cases, the inspection should be conducted, but
the grantee should be informed, in writing, of the
deficiencies which prevented the conduct of a final
inspection, that the inspection which was conducted will
be considered an interim inspection, that a final inspec-
tion will be rescheduled after the grantee informs the
reviewing agency that the deficiencies which prevented the
conduct of a final inspection have been corrected, and
that the grantee's final grant payment will be withheld
until the final inspection has been conducted.
Re; 40 CFR 35.2216
2. Cut-off Date
The establishment of a cut-off date is one of the
actions required to ready a project for administrative
completion. The basis for a cut-off date is found in
the definition of the project's [budget] funding period
in 40 CFR [Part 30] 31.23, since eligible project costs
are limited to those incurred during the [budget] funding
period. The [budget] funding period must start on or
after the date of grant award, and must be consistent
with the project schedule contained in the grant
agreement.
TM 89-1
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A cut-off date may be established for the entire
project or for individual subagreements. The cut-off
date is the date by which all work and costs associated
with a particular subagreement will have been incurred,
and after which work or costs incurred are not allowable
for grant participation. In very unusual circumstances
it may be necessary to revise a cut-off date, if costs
were incurred by the grantee due to circumstances be-
yond its control. Where a cut-off date is established,
the "cut-off" letter to the grantee must clearly document
the specific work or subagreement to which the cut-off date
applies. This documentation will preclude misunderstandings
during audit. For Step 1 and Step 2 projects, the "cut-off"
letter should also remind the grantee that, since the 1981
CWA amendments prohibit the award of new Step 1 and Step 2
grants, any future revisions to the completed Step 1 or
Step 2 project will have to be performed without EPA assis-
tance .
The cut-off date is generally established at the time
of final inspection, and usually with the agreement of
the grantee. However, if the grantee will not agree to
a cut-off date, the end of the project budget period should
be used, since by regulation, no costs can be incurred after
the end of the [budget] funding period. The cut-off date
for all costs (except startup services and engineering
services during the first year of operation) will usually
coincide with the date of the final inspection, prior to
which the grantee will normally have accepted the project
from the construction contractor. If a project is
essentially complete except for minor punch list items,
the reviewing agency and the grantee may agree to a future
cut-off date, by which time the contractor will have com-
pleted the punch list items.
Another cut-off date which must be established and
documented in the project files concerns the termination
of services provided by the engineer, including inspection,
start-up, and supervision of the first year of operation.
This cut-off date will almost always be established as one
year after the initiation of operation for the project, to
provide for continuing engineering services during the one
year project performance period.
Once a cut-off date is established, the grantee should
prepare cost summaries (relating to the work for which the
cut-off date has been established) for submission to the
reviewing agency (see Item 3 below).
TM 89-1
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Re; 40 CFR 35.2040(b)(6); for grants awarded
prior to October 1, 1983, 40 CFR 30.135-6*;
for grants awarded after September 30, 1983,
40 CFR 30.200*, for grants awarded after
September 30, 1988, 40 CFR Part 31
3. Cost Summary and Documentation
The grantee is required to submit cost summaries for
all costs incurred during the project. The cost summary
for previous Step 1 or Step 2 projects which receive a
Step 3 grant should be in the project files and available
for audit. Cost summaries must be prepared for all
categories of work identified in the grant application
and the grant agreement, and typically include costs for:
a. administration,
b. subagreements for building the project,
c. engineering subagreements,
d. force account work,
e. land acquisition,
f. legal services, and
g. accounting services.
Cost summaries should identify the initial costs for
each category of work and the final costs, including all
change orders and adjustments to cost-plus-fixed-fee type
contracts. If not previously submitted with a payment
request or reviewed during the final inspection, documen-
tation such as paid invoices or vouchers must be provided
to support the cost summaries.
Construction contract cost summaries should be compared
with cost data in the project files to verify that all change
orders have been reviewed and acted upon by the reviewing
agency, and that a final change order adjusting estimated
quantities to actual quantities for unit price items is
included. Cost summaries for services (e.g., engineering,
legal, and accounting) should be compared against the
original subagreement to insure that all services have
been performed and that claimed costs are in agreement with
direct costs, indirect costs, and profit items in the sub-
agreement .
TM 89-1
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The unused portion of the construction contingency
allowance is omitted from final project cost summaries and
should be deobligated for use on other projects (see
Section IX.C.2).
4. Final Building Payment Request
Processing of payment requests is discussed in Section
IX.B. This section addresses only the final building pay-
ment. While this payment is referred to as the final
building payment, since it represents the last payment for
building the project, additional payments will be made
during the first year of operation for appropriate
engineering services (see Section VII.I.I).
Payments are made to the grantee during the course of
the project for costs which have been incurred. When the
grantee requests the final building payment, such payment
is to be made promptly, and may only be delayed if it is
determined that the payment request includes unallowable
costs, or if information available or not available to the
reviewing agency (e.g., a final inspection report or lack
thereof) indicates a previous overpayment, a failure to
comply with all grant conditions, or other irregularities.
If the grantee has received any grant related income
(e.g., refunds, rebates, credits, etc.) such amounts are
to be used to reduce the total project cost, thereby
reducing the amount of the grant (see Section IX.B.10
and 40 CFR 31.25(g)). Final payment is based on the
cost summaries and supporting documentation discussed
in Item 3 above.
Re; 40 CFR 35.2300(a) and (b); for grants awarded
prior to October 1, 1983, 40 CFR 30.615-1,
30.620* through 30.620-3*, 30.815*; for grants
awarded after September 30, 1983, 40 CFR
30.400(a)* and (b)(3)*, 30.526*, 30.802*; for
grants awarded after September 30, 1988, 40 CFR
31.21 and 31.41
5. Property Management
Grantees are required to have a property management
system which identifies and traces property through its
useful life or until disposal. The property management
TM 89-1
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system must meet the minimum requirements in the regula-
tions, and must include both personal property (e.g.,
movable equipment) and real property (e.g., land and
structures).
Before a project is administratively completed, the
reviewing agency must verify that the grantee has a
property management system in place. The review of the
property management system should take place during
project monitoring/ and should be completed before the
final building payment is made.
Re; For grants awarded prior to October 1, 1983,
40 CFR 30.810* through 30.810-9*; for grants
awarded after September 30, 1983, 40 CFR
30.530(b)*, 30.531*, 30.532*, 30.535*, 30.536*;
for grants awarded after September 30, 1988,
40 CFR 31.31, 32 and 33
6. Completion Delays
Completion delays most often occur where there is an
unresolved dispute between the grantee and the construc-
tion contractor, resulting in the contractor filing a
claim for additional construction costs (see Section VII.H)
Projects may not be considered administratively complete
until the claim is resolved either through negotiation,
arbitration, or litigation. The reviewing agency is to
make every effort to assist the grantee in resolving
disputes and may, at the grantee's request, provide tech-
nical or legal assistance. However, the primary respon-
sibility for resolving disputes rests with the grantee.
Costs associated with defense against contractor claims
may be allowable for grant participation provided certain
limitations are satisfied (see Section IX F.4, Paragraphs
A.1.f and A.2.c).
The reviewing agency is to insure that unresolved
disputes are settled as quickly and efficiently as possible
Re: 40 CFR 35.2214, 35.2350
7. Continuing Engineering Services
A grantee which was awarded a Step 2+3, Step 3 or Step 7
grant on or after December 29, 1981, is required to retain the
TM 89-1
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engineering firm which was principally responsible for pro-
viding engineering services during construction to also
provide engineering services during the first year after
initiation of operation (see Section VII.I.I). The project
may not be considered administratively complete until the
grantee affirmatively certifies, after one year of operation,
that the project is meeting its performance standards (see
Section VII.I.2). During the first year of operation, the
engineer will submit invoices and the grantee will prepare
payment requests in the routine manner (see Section IX.B.2.b).
However, the cut-off date should have already been established
as the date at the end of the first year of operation (see
Item 2 above). The final grant payment, assuming affirmative
certification by the grantee, will be made at the conclusion
of the project performance period. However, when the final
grant payment request is unjustifiably delayed, the grantee
should be notified, in writing (certified mail, return receipt
requested) that it should submit the final payment request
within 90 days (or a similar reasonable time period), and
that, if the final payment request is not received within
the specified time, the last payment request will be con-
sidered as the final request and remaining unexpended grant
funds will be deobligated. Where this action is taken,
immediately after the deobligation, normal procedures would
be followed in certifying the project and in requesting and
resolving the audit.
Re: 40 CFR 35.2216, 35.2218
8. Project Officer Certification
Prior to requesting a final audit, the reviewing agency
is to prepare a project officer certification. This
certification is to accompany the request for a final audit,
and in essence confirm that:
- funds have not been used for unnecessary
or unreasonable aesthetic features;
- the flow at the treatment facilities at
the time of final inspection was 15 per-
cent or more of the anticipated flow on
the date of initiation of operation;
- no facilities constructed with grant funds
are unused, abandoned, or inoperable; and
- the project files are complete and contain
all relevant documents necessary for the
conduct of an audit.
826 TM 86-1
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Detailed information on the four primary subjects of the
project officer certification is provided below:
a. Aesthetic Features
Aesthetic features must be reasonable and
necessary in order to be allowable for grant
participation (see Section IX.F.4, Paragraph
B.2.a). A determination of the allowability of
aesthetic features should have been made during
the review of plans and specifications (see
Section V.C.2.u). If aesthetic features which
were not included in the approved plans, specifi-
cations, and change orders are discovered during
the final inspection, they will be considered un-
allowable unless otherwise justified.
Re; 40 CFR Part 35, Subpart I, Appendix A,
Paragraph B.2.a
b. Flow Level
Before requesting a final audit, the reviewing
agency is to determine whether the treatment
facilities (including sewers) are receiving 15 per-
cent or more of the estimated initial flow. If the
flow is less than 75 percent, the reviewing agency
is to determine the cause, and in preparing the
project officer certification, note the exception
to the flow level.
c. Abandoned, unused, or Inoperable Facilities
For purposes of project officer certification,
this section deals with observations at the time
of final inspection. On-going State programs are
required to address abandoned, unused, or inoperable
facilities which occur after a project is closed
out but before the end of the project's useful life.
If any equipment or facilities are abandoned,
unused, or inoperable at the time of final inspection,
the project officer is to prepare an explanation of
the circumstances, which is to be attached to the
project officer certification and forwarded to OIG
along with the request for an audit. In such cases,
grantees are required to seek redress from other
parties (e.g., design engineer, construction con-
tractor, equipment supplier, etc.) responsible for
TM 87-1
827 (86-1)
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such conditions, and to make every effort to make the
facilities useful and operational. Unless justified
by the grantee, any abandoned, unused, or inoperable
equipment will be considered unallowable for grant
participation. (See Section IX.H.3.c)
When inoperable facilities are covered by a correc-
tive action report (CAR), the project officer's certi-
fication should clearly identify that the project is
not currently meeting its performance criteria but that
an acceptable CAR has been submitted by the grantee and
is being implemented.
Re: 40 CFR 35.2214
d. Project Files
Project files must be organized to facilitate the
location of documents during the project audit, and
must contain adequate documentation to support grantee
procurement actions and all project costs which have
been claimed for grant participation.
9. File Retention
Grantees and their contractors must maintain their pro-
ject files for a period of three years after final grant
payment (i.e., the payment which is made after affirmative
certification by the grantee that the project meets its
performance standards).
Reviewing agencies will maintain project files for a
period of three years after project closeout. At the con-
clusion of the three year period, project files are to be
stored in the U.S. General Services Administration (GSA)
Regional Federal Records Center in accordance with EPA/GSA
federal records management requirements. Since the con-
struction grants regulations now prohibit the use of grant
funds for the replacement of a facility during its design
life if the facility was constructed with grant assistance,
it will be necessary to store at least part of the project
file for the design life of the facility (normally 20 years).
EPA Regional Offices should establish a records tracking
system which will facilitate the retrieval and restorage of
project files.
Re: For grants awarded prior to October 1, 1983, 40 CFR
30.805*; for grants awarded after 9/30/83, 40 CFR 30.501*;
EPA Records Management Manual; for grants awarded after
September 30, 1988, 40 CFR 31.42
TM 89-1
(87-1)
828 (86-1)
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E. AUDIT PROCESS
Purpose;
Review grantee records, and if necessary those of its contrac-
tors, to determine whether the costs claimed under the EPA grant
are reasonable, allowable, and allocable to the grant project;
whether the management controls exercised by the grantee were ade-
quate to insure that costs claimed are allowable; and whether the
grantee has complied with all EPA regulations (including the appli-
icable procurement regulations) and grant conditions.
Discussion;
All completed construction grants projects are subject to a
final audit. Audits may be conducted by EPA, by private sector or
State auditors under contract to EPA, or by another cognizant Federal
agency. Audits are generally performed after construction, and
where Step 1 and Step 2 grants have been awarded, will include the
review of records and costs for all three steps. Audits may also be
performed at the conclusion of a Step 1 or Step 2 grant, but
generally only in those instances where the project is unlikely to
be awarded a Step 3 grant in the near future, or when unusual circum-
stances warrant an immediate audit.
The decision to conduct a final audit of the grantee's records
will depend on the size and complexity of the project, and the
amount of grant funds involved. (Audits are not usually conducted
where claimed grant funds are $250,000 or less, unless information
available to the reviewing agency suggests that a final audit is
warranted.)
Historically, two problems arise during audits. The first
problem concerns the identification of the regulations and policies
which were in effect on the date of grant award, since audits may
take place anywhere from 5 to 10 years after the initial grant award.
In addition, a project which has progressed through the entire three
step grant process may have different regulations and policies
applicable to each of the three steps. In the case of phased or
segmented projects, even more grants will be involved. To identify
the regulations and policies in effect on the date of grant award,
EPA has published the "Regulation and Policy Matrices - A Guide to
the Rules Governing Grants Awarded under the Construction Grants
Program," April 1985.
The "Regulation and Policy Matrices" traces the publication of
all EPA regulations which have a bearing on procurement and allowable
costs, from July 1, 1971 through September 30, 1984, and is_ updated
annually. The publication also includes matrices for all EPA policy
memoranda issued since January 1, 1970, as well as the three editions
of the Handbook of Procedures and their updates (TMs), the decisions
TM 89-1
829 (86-1)
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of the Audit Resolution Board, and the Board of Assistance
Appeals. With the elimination of the appeals process, a "Disputes .
Case" section has been added to the Matrices. It contains a~(
chronological listing of those disputing grantees or applicants
whose cases were decided by Regional Administrators along with a
"Subject Index" indicating the issues disputed and the grantees
or applicants involved.Wherever a question arises concerning
regulations or policies in effect on the date of grant award, the
"Regulation and Policy Matrices" should be consulted.
The second problem concerns the decision as to whether a particu-
lar cost is eligible or allowable under the construction grants pro-
gram. EPA regulations, policy memoranda, and the Handbook of
Procedures have, over the years, provided guidance for decisions con-
cerning the most common allowable costs. However, by the very nature
and sheer number of construction grant projects, it is not possible
to anticipate all possible situations concerning allowable costs.
Therefore, in those "gray" areas where such costs are not clearly
defined in the applicable regulations or EPA policy documents,
construction grants personnel are responsible for making such
decisions. These decisions, and the rationale behind them, should be
documented in the project files, to prevent misunderstandings at the
time of audit.
Such documentation should explain the rationale for the decision
and cite the specific regulation or policy which provided the broad
or similar framework for the decision. Similarly, if an auditor
takes exception to a cost not otherwise clearly defined in the
regulations or EPA policies as allowable, such exception should
also cite the specific regulation or policy which provides the
broad or similar framework for the exception. By the proper use
of the "Regulation and Policy Matrices" to identify applicable regu-
lations and policies, and by the proper documentation and citation
of specific regulations or policies, projects can be completed and
closed out with a minimum of delay.
Final EPA decisions concerning allowable costs may be decided
by the Audit Resolution Board if a difference of opinion cannot be
resolved between OIG and the construction grants program.
The procedures below outline the major activities of the auditors,
grantees, and construction grants staff in the audit process.
Procedures:
1. Request for Final Audit
After preparation of the project officer certifica-
tion (see Section D.8 above), the reviewing agency will
request an audit (or a determination that the project can
TM 89-1
830 (86-1)
-------
report date. The DIGA will advise the
reviewing agency of issues where disagreement
occurred on final determination letters not
requiring concurrence.
Where a Corrective Action Report (CAR) is being imple-
mented, the requirement that CAR implementation be continued
in accordance with the approved plan and schedule should
be highlighted in the final determination letter, with the
possible sanctions for failure to implement the CAR (e.g.,
grant annulment) clearly articulated.
In the absence of an appeal by the grantee under the
disputes provisions of the regulations or by the OIG to the
ARB, the project is then closed out. Projects which are
still undergoing corrective action cannot be closed out
until a positive certification has been received from the
grantee. The files for these projects should be retained
by the reviewing agency until all grant requirements have
been satisfied. After positive certification has been
received and the reviewing agency has determined that all
grant conditions have been satisfied, the project should
be closed out and the file shipped to the Federal Records
Center(see Section D.9 above).
5. Resolution of Audit Exceptions
Audit exceptions, if any. are to be resolved between
the reviewing agency and the auditors at the lowest possible
level. The grantee should be involved in the resolution
process, since the grantee's financial interests are involved
Decisions concerning the allowability of costs which are not
clearly defined in regulation or policy (i.e., fall into the
"gray" area) should have been previously made and documented
by the construction grants staff.
TM 87-1
833 (86-1)
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6. Review of Final Determination
If the grantee disagrees with the decision of the reviewing \
agency (other than a decision by the Audit Resolution Board),
it may file a request for review of the decision in accordance
with 40 CFR [Part 30, Subpart L] Part 31, Subpart F. (The
procedures in Subpart [L] F are applicable after September 30,
[1983] 1988, regardless of when EPA awarded grant assistance.)
Unresolved issues arising prior to receiving a final deter-
mination letter (based upon an audit) may be appealed by the
grantee to the program office level at the State or Regional
Office. A Disputes Decision Official's determination (see
Section IX.D.) may be appealed to the Regional Administrator.
The Regional Administrator's decision is the final agency
action, although the grantee may petition the Assistant
Administrators for review of the Regional Administrator's
decision. However, after receiving a final determination
letter, the grantee must appeal directly to the RA and then,
if needed, to Headquarters.
7. Recovery of Funds
When the audit reveals an overpayment of grant funds, and
where this opinion is sustained in an appeal or other proceedings,
the grantee is required to refund the amount of overpayment to
the U.S. Treasury.
If the grantee fails to pay what is owed within 30 days after
receiving a final decision from a dispute decision official (see
Section IX.D.), interest will be assessed on the unpaid debt at
a rate established by the U.S. Treasury, even if a review of that
decision is requested. However, should, under a review, the
amount of the debt be reduced, EPA will refund the interest paid
on the amount restored.
Upon repayment, the total grant award is reduced by the
principal amount of the overpayment and, the deobligated
funds are reallotted to the State's construction grant account.
However, the interest portion of the overpayment remains with
the U.S. Treasury.
Re: For grants awarded prior to October 1, 1983, 40 CFR
30.815*; for grants awarded after September 30, 1983,
40 CFR 30.802* and 30.1230* amended February 21, 1986;
for grants awarded after September 30, 1988, 40 CFR
31.50 and 51
TM 89-1
834 (87-1)
(86-1)
-------
Payments may not be assigned to a third party,
except that payments under a grant for advances
of allowance may be assigned to the small com-
munities which are to receive the advances
(see Item 8.c below).
Re: 40 CFR 30.400(b)*, 30.405*, 31.21, 35.2300(e)(1)
b. Standard Form 271
For all grants except those discussed in Item a
above, payment requests are to be made using
Standard Form 271 (SF-271). Routine payment re-
quests are reviewed to insure that:
i. the form has been properly completed,
ii. the computations are correct,
iii. all costs are eligible and allowable
for grant participation,
iv. only costs for approved change orders
are included,
v. costs are displayed by category
corresponding to the grant agreement,
and
vi. the amount requested is consistent with
the outlay schedule (see Item 1 above).
Specific grant payment processing procedures vary
from Region to Region, and should be detailed in
the State/EPA delegation agreements. In some
Regions, grantees submit the SF-271 simultaneously
to EPA's Regional Financial Management Office (FMO)
and to the State reviewing agency which, when de-
ficiencies or inaccuracies are found, acts to insure
that the next payment will reflect the necessary
correction. In other Regions, the SF-271 is sub-
mitted first to the State agency, where it receives
a priority review, and immediately thereafter, is
sent to the FMO. In either case, after processing
the SF-271, the FMO instructs the appropriate U.S.
Department of the Treasury disbursing office to
issue a check to the grantee in the amount approved
by the FMO. Payments may not be assigned to a third
party (e.g., engineer, construction contractor, equi-
valent supplier, bond or note holder, etc.).
905 TM 89-1
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Grantees are expected to submit payment requests
no more than once a month, and routine payments
are expected to be processed without delay.
Certain requests for payment, however, which
occur at critical points in a project's progress,
require a program review before funds are dis-
bursed. Generally, these payments are:
- the initial request, to insure that the
allowance and the supporting documentation
are correct;
- the 50 and 90 percent grant payment requests,
which are governed by statutory requirements
for a plan of operation and an operation and
maintenance (O&M) manual; and
- the final payment request.
In addition, payment request issues may arise during
construction which would preclude the reviewing
agency from making prompt payment because:
- unallowable or ineligible items are included
in the request,
- project deficiencies exist,
- the grantee has failed to comply with Federal
or State reporting requirements, or
- the grantee has failed to comply with grant
conditions or regulatory requirements.
In these instances, the grantee will be notified of
the deficiency, and either the State or the FMO will:
- deduct the unallowable or ineligible items,
- insure that the sums in question are excluded
from subsequent payment requests,
- withhold an amount sufficient to insure
compliance or correction of the deficiency, or
- disapprove the entire payment.
To further insure that grantee payment requests are in
keeping with construction progress, copies of these
requests, along with the engineer's certification of
906
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work in place, invoices from contractors and
suppliers, copies of approved change orders,
substantiation of force account work (see
Section VI.E.5) and administrative costs, etc.,
are to be made available to, and reviewed by,
construction field inspectors (see Section VII.G)
Field inspector observations, based on these
reviews, should be made available to the project
reviewers, so that they can better assess future
payment requests. This information should also
be made available to those responsible for devel-
oping State and Regional outlay projections.
Where grant payments include funds from reserves
(e.g., for innovative or alternative (I/A)
technologies, small community assistance, etc.),
State and EPA Regional Office procedures are to
insure proper accounting for these funds.
Re: 40 CFR 30.400(b)(3)*, 30.405*, 31.21, 35.2300
3. Initial Payments
Initial payment requests may include:
Preaward Costs
Approved preaward costs allowable for grant
participation (see Section VI.D.15).
b. Estimated Allowance
The Federal share of the estimated allowance for
facilities planning and/or design according to
the following schedule:
Step 2+3 and Step 7 Grants
If the grantee did not receive a
facilities planning (Step 1) grant,
30 percent of the estimated allowance
immediately after grant award, half
907 TM 89-1
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of the remaining estimated
(or re-estimated) allowance when
design is 50 percent complete,
and the remainder of the actual
allowance after award of all
prime contracts, approval of
all force account work in lieu of
awarding construction contracts,
and acquisition of all eligible
land.
If the grantee received a facil-
ities planning grant, 50 percent
of the estimated allowance when the
design is 50 percent complete, and
the remainder of the actual allow-
ance after award of all prime con-
tracts, approval of all force
account work in lieu of awarding
construction contracts, and
acquisition of all eligible land.
Re; 40 CFR Part 35, Subpart I,
Appendix B, Paragraph 9
ii. Step 3 Grants
50 percent of the estimated allowance
immediately after grant award, and the
remainder of the actual allowance after
award of all prime construction con-
racts, approval of all force account
work in lieu of awarding construction
contracts, and acquisition of all
eligible land.
Re: 40 CFR Part 35, Subpart I, Appendix B,
Paragraph 8
4. Retainage
Payment requests are to include only costs which the
grantee is currently and legally obligated to pay. Therefore,
if a construction contract allows the grantee to retain a
portion of its contractor's payment requests, the Federal
payment request is to reflect the same retainage policy (i.e.,
if a contractor bills the grantee for $10,000 worth of work in
place, and the grantee is allowed by the contract to retain
10 percent, or $1,000, of the contractor's payment request,
908
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then the payment request must be based on the $9,000
legally required to be paid by the grantee.
Re: 40 CFR 30.400(b)(3)*, 31.21(g)(3), 35.2300
5. Limitations
Grant payments are limited by EPA regulations to the
Federal share of:
a. 50 percent of the total eligible project
costs, unless the final plan of operation
has been approved;
b. 90 percent of the total eligible project
cost, unless the O&M manual has been
approved;
c. for a phased or segmented project, 90
percent of the total eligible cost for
the entire treatment works (i.e., for
the sum of all phases or segments),
unless the O&M manual has been approved;
d. for a project in which a component has
been placed in operation before completion
of the entire project, no additional pay-
ment, unless the O&M manual for the
operating component has been approved; and
e. the allowable costs incurred within the
budget period for the project.
Re: 40 CFR 30.200*, 31.21(g)(2), 35.2206
6. Final Building Payment
The final building payment is based on the grantee's
submission of the final building payment request. This is
not a final grant payment, since the grantee is required
to retain an engineer during the project's first year of
operation (see Section VII.I.I, and Item 7 below). A final
onsite inspection of the project by the reviewing agency
should be made before the final building payment is made
(see Sections VII.G.5 and VIII.D.I). The payment request
should be accompanied by the vouchers and cost summaries
909 TM 89-1
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required by the reviewing agency (see Section VIII.D.3),
releases from the grantee and its contractors, and doc-
ments indicating that all grant conditions and limita-
tions, including the adoption and implementation of the
user charge (UC) system, and sewer use ordinance (SUO),
have been complied with (see Section VIII.D.4 for a
further discussion of the final building payment request).
7. Final Grant Payment
The final grant payment is made after the project's
first year of operation, provided that the grantee affir-
matively certifies that the project meets its project per-
formance standards (see Section VII.1.2). Payments made
during the first year of operation will be primarily for
engineering services performed during that period, and may
be made no more frequently than monthly.
8. Special Purpose Grants
a. Land Acquisition Grants
If a grant is awarded solely for the
acquisition of eligible land, grant pay-
ments are not subject to the limitations
listed in Items 5 and 6 above for a UC
system, SUO, plan of operation, or O&M
manual.
Re; 40 CFR 35.2260
b. Relocation Assistance Grants
Advance payment, as distinct from a
reimbursement payment, may be made for
projects which involve relocation
assistance, but only for the relocation
assistance costs.
Re; 40 CFR 4.502(c) (1974 regulation), 40 CFR 207(c) and
4.403(e) (1986 regulation), 49 CFR 24.207(c) and
24.403(d) (1989 regulation), 40 CFR 35.2300(d)
Grants to States for Advances of Allowance
For grants to States for advances of allow-
ance (see Sections II.E.4.e, III.E, and VI.K),
payments may be made to the State by letter
of credit, payment in advance, or reimbursement.
910 TM 89-1
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Instead of receiving payments, however, the
State can request EPA to assign payment of
each advance directly to the small community
for which the State has approved an advance.
In this latter case, the following procedures
must be followed by the State:
i. a separate SF-270 must be used
for each community's advance;
ii. the community's name and mailing
address must be shown as the
payee on the SF-270;
iii. the State's accounting system
must treat the advance on an
accrual, rather than a cash basis;
iv. the State must execute an agreement
with each community, authorizing
the State to request EPA to assign
payment directly to the community,
and must provide a copy of the
agreement to EPA;
v. the State must inform the community,
in writing, that the advance has
been approved; and
vi. the State must enter the approved
advance in its accounting system
as an obligation of grant funds,
prior to submitting the SF-270,
requesting reimbursement from EPA
for the approved advance.
Re; 40 CFR 30.400(b)*, 30.405*, 31.20 and 21,
35.2025(b), 35.2300(e)
^ * Other Grants to States
For State management assistance grants (see
Sections I.F and II.E.4.a) and State WQM plan-
ning grants (see Sections II.C.4 and II.E.4,d),
payments may be made to the State by letter of
credit, payment in advance, or reimbursement.
Payments may not be assigned to a third party.
Re: 40 CFR 30.400(b)*, 30.405*, 31.20
911 TM 89-1
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9. Grant Overpayment
Grantees must repay interest earned on Federal grant funds.
Therefore, if a grantee received overpayments and deposited them
in interest-bearing accounts, actual interest or estimated actual
interest earned on the funds must be repaid to EPA. But, if a
grantee kept its overpayments in an interest-bearing account and
can demonstrate that it promptly used them to pay the Federal
share of allowable project costs incurred since the date of its
most recent payment request so that no interest was earned on the
overpayment, then no payment of interest is due EPA.
If overpayments are received but the grantee did not earn
interest on them, no interest repayment is due. Overpayments
must be repaid to the United States Treasury within 30 days of
EPA's final decision that an overpayment has been made. After
the 30 day period, EPA may charge interest (or additional
interest) on outstanding balances.
Re; 40 CFR 30.400(a)*, 30.802*, 31.51 and 31.52
10. Grant Related Income
All income received by a grantee as a result of its conduct
of the project (e.g., interest on grant funds received from EPA
but not paid to contractors, proceeds from the sale of bidding
documents, bid bond forfeitures (see Section F.4, Paragraph A.3.b
below), refunds, rebates, credits, discounts for prompt payment,
reimbursements, etc.) must be returned to the project account.
Refunds accruing to a grantee directly, or indirectly through
one of its contractors, must be credited to the total allowable
project cost on which the federal share is computed.However,
liquidated damages collected from a contractor are not considered
grant related income (see Section F.4, Paragraph A.3.a below).
Normally, the grantee is not required to make a cash payment,
but rather to report the amount of grant related income in the
space provided on the SF-270 or SF-271. However, after the final
grant payment has been requested, the Federal share of any
remaining grant related income must be paid to the United States
Treasury, and credited to the State's current allotment.
An exception to this requirement is that interest earned by
States and American Indian Tribes is not considered grant related
income. Also, income which results from the operation of a
wastewater treatment system is not considered grant related in-
come, but is required to be used to offset operation, maintenance,
and replacement (OM&R) costs (see Section V.E).
Re: 40 CFR 30.525(b)* through (d)*, 31.25, 35.2300(b)
TM 89-1
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D. DISPUTES
In the construction grants program, a dispute is a disagree-
ment between a grant applicant or grantee and the reviewing agency
(either the State or EPA) concerning a decision by the reviewing
agency with regard to a grant requirement. Disputes are different
from protests or appeals of protests (see Section VII.D.6) and
claims (see Section VII.H.2), both of which arise between grantees
and their contractors and potential contractors.
Disputes which concern a State action are to be submitted to the
State, and reviewed by the State in accordance with its own pro-
cedures. The State will:
- review its initial decision,
- issue a final decision, labeled as such, and
- notify the applicant or grantee of its right to
request a review by the EPA Regional Office of the
State's final decision.
If the dispute involves an initial decision by EPA, it is to be
submitted directly to the EPA Regional Office (or for Headquarters-
awarded grants, to EPA Headquarters) as described below.
The formalized procedure for resolving disputes at the EPA
Regional Office level involves the designation of a Regional dis-
putes decision official (DDO), who reviews the grant applicant's or
grantee's request and issues a final decision. If the DDO is a
person other than the Regional Administrator (RA), the grant appli-
cant or grantee may request that the RA review the DDO's final
decision. If the DDO is the RA, the grant applicant or grantee may
request that the RA reconsider his final decision.
Where a State has established a disputes resolution procedure
which the EPA Regional Office determines to be equivalent to that
provided by the DDO, the State's final decision will be considered
equivalent to a DDO's final decision, and the grant applicant or
grantee will only be entitled to one review at the Regional level
(i.e., a review by the RA). Otherwise, the request for review of
a State's final decision should be submitted to the DDO.
If the grant applicant or grantee requests that the RA review
the State's final decision or reconsider the DDO's final decision,
the request must include:
- a copy of the final decision,
- a statement of the amount in dispute,
915
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- a description of the issues involved, and
- the grant applicant's or grantee's objection to
the final decision.
When the request for review or reconsideration is filed, the grant
applicant or grantee is entitled to:
- be represented by counsel,
- submit documentary evidence and briefs,
- participate in an informal conference with EPA
officials, and
- receive a written decision from the RA.
The RA will review the State's or the DDO's final decision, or
reconsider his own final decision, and issue a determination. If
the grant applicant or grantee is dissatisfied with the RA's
determination, it may file a petition for a discretionary review by
the Assistant Administrator for Water at EPA Headquarters. The
petition must include a copy of the RA's determination, and a concise
statement of the grant applicant's or grantee's reasons for believing
that the determination is erroneous. The Assistant Administrator for
Water, upon examination of the dispute, will decide whether or not to
review the RA's determination. If the decision is not to review, the
Assistant Administrator for Water will advise the grant applicant or
grantee that the RA's determination remains the final EPA action.
If the Assistant Administrator for Water decides to review the RA's
determination, the review will generally be limited to the written
record, although the grant applicant or grantee may be allowed to
submit briefs and/or to attend an informal conference. The decision
of the Assistant Administrator for Water will be EPA's final action.
Several EPA decisions are exempt from the disputes process. Grant
applicants or grantees may not appeal EPA's decisions concerning:
1. disapprovals of deviations from regulatory require-
ments (see Section E below);
2. bid protest decisions made under [40 CFR Part 33,
Subpart G], 40 CFR 31.36(b)(11) and (12) (see
Section VII.D.6);
3. National Environmental Policy Act (NEPA) decisions
made under 40 CFR Part 6 (see Section IV.D.I);
916 TM 89-1
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4. advanced wastewater treatment decisions made by
the EPA Administrator (see Section IV.E.I); and
5. decisions of the EPA Audit Resolution Board
(see Section VIII.E.5).
Re; 40 CFR Part 30, Subpart L*, 40 CFR Part 31, Subpart F;
40 CFR 35.3030
E. DEVIATIONS
A grant applicant, grantee, State agency, EPA Regional Office,
or EPA program office may request an exception to the regulations
(i.e., a deviation). Deviation requests are considered on a case-
by-case basis, although deviations will not be issued from those
regulations which implement statutory or executive order require-
ments. Deviation requests from a grant applicant, grantee, or State
agency are initially submitted to the EPA Regional Office, which in
turn forwards the request to the Director, Grants Administration
Division (GAD), at EPA Headquarters, with a recommendation, supported
by detailed reasons, for approval or disapproval. To facilitate the
concurrence process (see below), a copy of the entire deviation
request package should be sent to the Municipal Construction Division
(MCD) at EPA Headquarters.
The deviation request is to include the following information:
1. the grantee's name, project number, date of grant
award, and grant amount;
2. identification of the section of the regulations from
which the deviation is requested;
3. a complete description of what the deviation will
accomplish and a justification of why the deviation
is necessary;
^. a statement of the recommendation of the Regional Office
and, if applicable, the State; and
5. a statement of whether the same or a similar deviation
has been previously requested, and if so, an explanation
of why it was requested and the outcome of the request.
The Director, GAD, approves or disapproves the deviation
request after consultation with, and concurrence by, the Office of
General Counsel and the Director, MCD. Deviations may be requested
before or after grant award, although approval before grant award
does not guarantee an award. Decisions on deviation requests may
not be appealed under the disputes provisions of 40 CFR [Part 30,
Subpart L] Part 31, Subpart F, (see Section D above).
Re; 40 CFR Part 30, Subpart J*, 40 CFR 31.6
917 TM 89-1
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F. DETERMINATION OF ALLOWABLE COSTS
1. General
In the process of reviewing grant applications and payment
requests, the project reviewer is confronted with having to make
decisions concerning the eligibility or allowability of project
costs. The terms "eligible" and "allowable" are often used inter-
changeably by regulatory officials, grantees, and engineers when
discussing whether an incurred cost may be reimbursed under the
construction grants program. Although technically there is a
difference between these terms as defined below, their synonymous
use will not influence the outcome of a cost determination.
"Eligible costs" were defined in earlier regulations as, "those
costs in which Federal participation is authorized pursuant to
applicable statute" ([40 CFR 30.135-8], prior to October 1, 1983;
current regulations do not contain a definition of eligible costs) .
Allowable costs were and are defined as, "those project costs that
are: eligible, reasonable, necessary, and allocable to the project;
permitted by the appropriate Federal cost principles; and approved
by EPA in the assistance agreement" ([40 CFR 30.200] 40 CFR 31.22).
An example best illustrates the difference between the two terms.
Building of treatment works is authorized under Title II of the
Clean Water Act (CWA), and the costs are therefore eligible^ for
grant assistance. Building of highways, airports, dams, water
supply projects, etc. are not authorized in the CWA, and are there-
fore ineligible for grant assistance. Even within a generic
eligible category of projects (e.g., building of treatment works),
some subcategories associated with the eligible project may be
specifically authorized by statute and therefore described as an
eligible cost. For example, the CWA authorizes (i.e., makes eligible)
the cost of acquiring land which will be an integral part of the
treatment process. Therefore, where items of cost are specifically
cited in an applicable statute, the term "eligible cost" is used.
Within a generic eligible category of projects, costs may be
allowable or unallowable for grant participation. Using the same
example, engineering and legal costs associated with the acquisition
of eligible land are allowable for grant participation. These same
costs, if incurred for the acquisition of ineligible land (e.g.,
land on which a conventional technology treatment plant is built),
are unallowable for grant participation.
918 TM 89-1
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The regulations also include a discussion of
selected items of cost beyond the general factors
listed above. Representative items are:
- definition of reasonableness and
allocability,
- advertising costs,
- bad debts,
- bidding costs,
- bonding costs,
- entertainment costs,
- fringe benefits,
- job-site expenses,
- field personnel,
- travel costs, and
- bidding and proposal costs.
Re: 40 CFR 30.410(d)*, 31.22; 41 CFR Part 1-15;
48 CFR Part 31; OMB Circular A-87
Allowability Factors for Other Organizations
In rare instances, grantees may enter into
subagreements with other State or local govern-
ment agencies, hospitals, educational institutions,
or other nonprofit institutions. Allowable cost
factors for State and local governments are des-
cribed in Item a above. Allowable cost factors have
also been established for the following organi-
zations :
i. Hospitals
Described in 45 CFR Part 74,
Appendix E.
Re: 40 CFR 30.410(e)*; OMB Circular A-110
921 TM 89-1
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ii. Educational Institutions
Described in OMB Circulars A-21
and A-88.
Re: 40 CFR 30.410(b)*, 31.22
iii. Other Nonprofit Institutions
Described in OMB Circular A-122.
Re: 40 CFR 30.410(c)*, 31.22
d. Classification of Costs
The total allowable cost of a project includes
its allowable direct costs, plus its allocable por-
tion of allowable indirect costs, less applicable
credits (see Section B.10 above). There is no
universal rule for classifying certain costs as
either direct or indirect under every accounting
system (see Section VII.C.7). A cost may be direct
with respect to some specific service or function,
but indirect with respect to the grant or other
ultimate cost objective. For a given project, it
is essential that each cost item be treated con-
sistently, either as a direct or an indirect cost.
i. Direct Costs
Direct costs are those that can be
identified specifically with a
particular cost objective. Typical
direct costs are:
- compensation of employees
(including supervisory and
clerical personnel) for the
time and effort devoted spec-
ifically to the execution of
the funded project;
- cost of materials acquired,
consumed, or expended specifi-
cally for the funded project;
922 TM 89-1
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3. Allowable and Unallowable Costs
As described in Item 2 above, allowable and unallowable costs
are defined, within the framework of the applicable cost principles,
by EPA for the construction grants program. Allowable cost deter-
minations are based on regulations promulgated by EPA or on policies
representing sound fiscal and managerial practices.
Regulations implementing the construction grants program prior
to the 1981 CWA amendments (40 CFR Part 35, Subpart E) contained a
partial list of allowable and unallowable costs. The regulations
were supplemented by a listing titled "Allowability of Miscellaneous
Costs" in Chapter VII of the first and second editions of the Hand-
book of Procedures. Projects awarded grants prior to May 12, 1982
are subject to allowability determinations based on the provisions
of 40 CFR Part 35, Subpart E, and the appropriate earlier edition
of the Handbook.
Regulations implementing the 1981 CWA amendments (40 CFR
Part 35, Subpart I) were published in interim final form on
May 12, 1982, and in final form on February 17, 1984. Both sets
of regulations contain "Appendix A - Determination of Allowable
Costs." The February 17, 1984 Appendix A, which is a revised interim
final rule, is included verbatim in Item 4 below, supplemented by
clarification and examples for specific cost items. To distinguish
the exact reproduction of the regulations from the text of the
Handbook, the regulations are typed entirely in capital letters. To
aid the reader in locating specific provisions in the regulations,
undelining has been added to the major subject headings.
When a project reviewer is confronted with an item of cost whose
allowability is uncertain, the reviewer should take the following
actions, in the order in which they are listed:
a. review Item 4 below;
b. review 40 CFR Parts 4, [30] 31, and [33] for issues con-
cerning the costs of relocation and land acquisition,
general grant management, and procurement, respectively;
c. review the appropriate cost principles described in
Item 2 above; and
d. refer unresolved issues to the appropriate EPA Regional
Office or to EPA Headquarters for resolution.
TM 89-1
925 (87-1)
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4. 40 CFR PART 35, SUBPART I, APPENDIX A, REVISED INTERIM FINAL
RULE - DETERMINATION OF ALLOWABLE COSTS
(a) PURPOSE. THE INFORMATION IN THIS APPENDIX REPRESENTS
AGENCY POLICIES AND PROCEDURES FOR DETERMINING THE
ALLOWABILITY OF PROJECT COSTS BASED ON THE CLEAN WATER
ACT, EPA POLICY, APPROPRIATE FEDERAL COST PRINCIPLES
UNDER PART [30] 31 OF THIS SUBCHAPTER, OMB CIRCULAR A-87
AND REASONABLENESS.
In order for these policies and procedures to be applied,
project costs must be supported by adequate documentation.
It is essential that project reviewers insure that grantees
establish and maintain adequate recordkeeping systems for
this purpose.
(b) APPLICABILITY. THIS COST INFORMATION APPLIES TO GRANT
ASSISTANCE AWARDED ON OR AFTER THE EFFECTIVE DATE OF
THIS REGULATION (FEBRUARY 17, 1984). PROJECT COST
DETERMINATIONS UNDER THIS SUBPART ARE NOT LIMITED TO
THE ITEMS LISTED IN THIS APPENDIX. ADDITIONAL COST
DETERMINATIONS BASED ON APPLICABLE LAW AND REGULATIONS
MUST OF COURSE BE MADE ON A PROJECT-BY-PROJECT BASIS.
THOSE COST ITEMS NOT PREVIOUSLY INCLUDED IN PROGRAM
REQUIREMENTS ARE NOT MANDATORY FOR DECISIONS UNDER
GRANTS AWARDED BEFORE THE EFFECTIVE DATE. THEY ARE
ONLY TO BE USED AS GUIDANCE IN THOSE CASES.
(c) Affirmative Management Decisions. EPA principles and
criteria for assessing the allowability of costs in the
context of a project audit are:
i. The Agency's review and approval of a project
does not commit EPA to share in unreasonable
or otherwise unallowable costs.
ii. Evidence of affirmative management decisions by
EPA or a delegated State on the specific item
questioned by audit should carry great weight
in the decision whether to allow the relevant
questioned costs.
iii. Evidence of affirmative action is an insufficient
basis on which to allow costs questioned by audit
if the action was demonstrably:
TM 89-1
926 (87-1)
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a Outside the limits of managerial dis-
cretion, including actions that are
arbitrary and unreasonable; and/or
b. In violation of statutes and regulations
in existence at the time of the adminis-
trative approval.
A. COSTS RELATED TO SUBAGREEMENTS
1. ALLOWABLE COSTS RELATED TO SUBAGREEMENTS INCLUDE:
a. THE COSTS OF SUBAGREEMENTS FOR BUILDING THE PROJECT.
The subagreements referred to here are the prime
contracts (including any subcontracts) for building
the project, including the direct purchase of equip-
ment and materials by the grantee.
b. THE COSTS OF COMPLYING WITH THE PROCUREMENT REQUIREMENTS
OF PART [33] 31 OF THIS SUBCHAPTER, OTHER THAN THE COSTS
OF SELF-CERTIFICATION UNDER §[33.110] 31.36(g)(3)(ii).
To be allowable, the costs of complying with Part [33]
31 must be incurred after grant award, or must be
approved as a preaward cost (see Section III.D.3.e).
However, preaward costs are limited to the procurement
of major equipment requiring long lead times, field
testing, minor rehabilitation or building, and land
acquisition. Other procurement costs incurred before
grant award are not allowable.
Normally, the only unallowable procurement costs which
the applicant would incur before a grant is awarded
would be those associated with procuring services
(e.g., engineering services during construction,
legal services, etc.). These procurement costs are
generally very small compared with the cost of
building the project or the cost of the services
themselves.
c. THE COST OF LEGAL AND ENGINEERING SERVICES INCURRED
BY GRANTEES IN DECIDING PROCUREMENT PROTESTS AND
DEFENDING THEIR DECISIONS IN PROTEST APPEALS UNDER
SUBPART G OF 40 CFR PART [33] 31.
Services, such as legal and engineering, must
be procured in accordance with 40 CFR Part [33]
31, and OMB Circular A-87 (see Sections VII.B,
VII.C, VII.E, and VII.F). Normally, a grantee's
existing subagreements will include the necessary
services within the scope of work. However,
TM 89-1
927 (87-1)
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the extent of the services may exceed that originally
defined in the existing subagreement, in which case
the grantee will be reguired to negotiate a change
order (see Section VII.C.R). The cost of the legal
and engineering services are allowable regardless of
the outcome of the protest, provided there was not a
covert attempt by the grantee to violate or circumvent
EPA's procurement regulations.
d. THE COSTS OF ESTABLISHING OR USING MINORITY AND
WOMEN'S BUSINESS LIAISON SERVICES.
Grantees are reguired to undertake affirmative
actions concerning the use of small, minority,
women's, and labor surplus area businesses (see
Sections V.C.l.w, VII.C.4 and VII.D.3). The cost
of establishing and using liaison services for this
purpose is allowable for grant participation, pro-
vided that the services are reasonable and contribute
towards EPA's goal of awarding a fair share of con-
tracts to such businesses. These services may in-
clude establishing and maintaining a list of gualified
businesses, interviews with these firms to establish
their qualifications for specific work, meetings with
the grantee's contractors to make them aware of the
capabilities of qualified firms, preparation of
necessary reports (e.g., EPA Form 6005-1), and other
reasonable and necessary actions to further EPA 's
goal.
e. THE COSTS OF SERVICES INCURRED DURING THE BUILDING OF
A PROJECT TO INSURE THAT IT IS BUILT IN CONFORMANCE
WITH THE DESIGN DRAWINGS AND SPECIFICATIONS.
These services are primarily engineering and construc-
tion management services provided during the building
of the project, including inspection services,
materials testing (e.g., concrete strength, soil
compaction, etc.) required by the specifications,
inspecting and expediting the delivery of equipment
and material purchased directly by the grantee,
review of shop drawings and as-built drawings, etc.
f. THE COSTS (INCLUDING LEGAL, TECHNICAL AND ADMINIS-
TRATIVE COSTS) OF ASSESSING THE MERITS OF OR NEGO-
TIATING THE SETTLEMENT OF A CLAIM BY OR AGAINST A
GRANTEE UNDER A SUBAGREEMENT PROVIDED:
928 TM 87-1
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The reasonable costs incurred by a grantee to analyze
a claim and to negotiate a settlement can be charac-
terized as negotiation costs. Those costs which are
incurred prior to either party filing a complaint with
the courts or making a demand for arbitration will be
treated as explained in this paragraph and its sub-
paragraphs. Those costs which are incurred after the
filing will be treated as described in Paragraph 2.c
below (i.e., unallowable unless all six conditions
listed in Paragraph 2.c are met). The grantee must
demonstrate that the pre-filing costs were incurred
as a result of a timely and meaningful negotiation
process and were not caused by mismanagement.
The negotiation costs, which are allowable to the
extent explained below, are normally included with-
in the scope of the grantee's contract for construc-
tion management services, but the extent of the
services may require a change order (see Section
VII.C.8). If it is necessary to award a new subagree-
ment (e.g., for claim analysis), the requirements of
40 CFR Part [33] 31 must be met. These regulations
require, among other things, access to records, cost and
pricing data, and separate negotiation of profit (see
Sections VII.B, VII.C, VII.E, and VII.F).
Unless clearly allocable to allowable or unallowable
cost categories (see Sections F.2 and F.3 above),
negotiation costs are allowable to the same extent
that the project is allowable, provided that:
(1) THE CLAIM ARISES FROM WORK WITHIN THE SCOPE OF
THE GRANT;
See the "Discussion" portion of Section VII.H.
(2) A FORMAL GRANT AMENDMENT IS EXECUTED SPECIFI-
CALLY COVERING THE COSTS BEFORE THEY ARE
INCURRED;
See Section VI.M, and Section C.I above.
(3) THE COSTS ARE NOT INCURRED TO PREPARE DOCUMEN-
TATION THAT SHOULD BE PREPARED BY THE CON-
TRACTOR TO SUPPORT A CLAIM AGAINST THE GRANTEE;
AND
TM 89-1
929 (87-1)
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A claim presented by a contractor should
be complete and adequately documented. If
it is not, it should be returned with in-
structions to correct or augment the doc-
umentation. Costs for preparing documen-
tation or incurring administrative ex-
penses to assess an incomplete claim are
not allowable.
(4) THE REGIONAL ADMINISTRATOR DETERMINES
THAT THERE IS A SIGNIFICANT FEDERAL
INTEREST IN THE ISSUES INVOLVED IN THE
CLAIM.
A claim in this context is a disagree-
ment between the grantee and a con-
tractor which cannot be resolved in the
manner normally employed for negotiating
change orders (see Section VII.H.2).
There is a significant Federal interest in
using a fair and timely negotiation process
to resolve claims, thereby avoiding
lengthy and costly arbitration and/or
litigation. In general, EPA has a strong
interest in the assessment process used
to evaluate the merits of a claim.
Depending upon the results of the assess-
ment, the Federal interest may change.
The Federal interest will depend upon the
reviewing agency's evaluation of the
merits of the claim and the relative merits
of the parties' stated positions and their
negotiating posture.
Where an unresolved claim appears to be
headed for protracted negotiations or possibly
arbitration or litigation after all reasonable
attempts have been made at resolution, the
grantee must obtain cost estimates for the
legal and technical services deemed necessary
for such proceedings (see Paragraph 2.c be-
low) .
Re: 40 CFR 35.2350
930
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defect free drawings and the actual
cost of the change order. For
example, if a concrete tank had been
constructed, and was later found to
be at an incorrect elevation due to
an error in the design drawings, and
if it was necessary to demolish the
tank and reconstruct it at the
correct elevation, the entire change
order would be unallowable, except for
differences in excavation costs. If
additional excavation was required to
enable the tank to be constructed at
the correct elevation (i.e., the
incorrect elevation was too high),
the cost of the additional excavation
would be allowable. However, if too
much excavation had been undertaken,
and fill was required to enable the
tank to be constructed at the correct
elevation (i.e., the incorrect eleva-
tion was too low), both the entire
change order and the cost of the
unnecessary excavation would be
unallowable. In these cases, the
grantee is free to seek remedial
action from the responsible parties
involved.
Regardless of the allowability or
unallowability of construction costs
to correct errors and omissions, in
no case are additional engineering
costs allowable, except for the cost
of inspecting allowable construction
work, to the extent that such inspec-
tion costs would have been incurred
to inspect the same construction if
such construction had originally been
included in defect free drawings.
Re: 40 CFR 33.1005(b)*
(ii) COSTS OF EQUITABLE ADJUSTMENTS UNDER
CLAUSE 4, DIFFERING SITE CONDITIONS,
OF THE MODEL SUBAGREEMENT CLAUSES
REQUIRED UNDER §[33.1030] OF THIS SUB-
CHAPTER.
933 TM 89-1
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The reviewing agency must determine
that:
- an adequate site investigation was
performed,
- the results of the site investiga-
tion were included in the bidding
documents (see Section V.C.2.cc),
- costs were reasonable and necessary,
and
- the grantee was timely and efficient
in resolving the change orde'r to
minimize impact costs (i.e., the
costs caused by the impact of the
differing site conditions on other
portions of the project).
If these conditions are met, EPA will
participate in both the direct and,
because of the Agency's risk-sharing
policy tor differing site conditions,
the impact costs arising from the
differing site conditions (see
Section VII.H.I.a).
(3) SETTLEMENTS, ARBITRATION AWARDS AND COURT JUDGE-
MENTS WHICH RESOLVE CONTRACTOR CLAIMS SHALL BE
REVIEWED BY THE GRANT AWARD OFFICIAL AND SHALL
BE ALLOWABLE ONLY TO THE EXTENT THAT THEY MEET
THE REQUIREMENTS OF PARAGRAPH g(l), ARE REASON-
ABLE, AND DO NOT ATTEMPT TO PASS ON TO EPA the
COST OF EVENTS THAT WERE THE RESPONSIBILITY
OF THE GRANTEE, THE CONTRACTOR, OR OTHERS.
The grantee has the burden ot substantiating
that the costs ot settlements, arbitration
awards, and judgements are reasonable and
necessary, and are therefore allowable. This
substantiation includes a showing that the in-
curred costs were not the result of mismanage-
ment by the grantee or the improper action of
others.
934
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If the claim seeks recovery for the costs of
delay, the grantee must demonstrate that the
delay impacted activities critical to timely
completion (i.e., that the delayed activities
affected the critical path for project comple-
tion) .
h. THE COSTS OF THE SERVICES OF THE PRIME ENGINEER RE-
QUIRED BY §35.2218 DURING THE FIRST YEAR FOLLOWING
INITIATION OF OPERATION OF THE PROJECT.
The cost and the scope of these services are to be
reasonable and appropriate to the nature, size, and
complexity of the project (see Sections VII.C.5.b,
VII,I.I, and VIII.D.7, and Paragraph l.j below).
i. THE COST OF DEVELOPMENT OF A PLAN OF OPERATION IN-
CLUDING AN OPERATION AND MAINTENANCE MANUAL REQUIRED
BY §35.2106.
The cost of preparing the draft plan of operation,
which is required as part of the grant application
package, is not an allowable cost, but is part of the
preapplication work which is intended to be defrayed,
in part, by the allowance for facilities planning and/or
design (see Section VI.D.8).
j. START-UP SERVICES FOR ONSITE TRAINING OF OPERATING
PERSONNEL IN OPERATION AND CONTROL OF SPECIFIC TREAT-
MENT PROCESSES, LABORATORY PROCEDURES, AND MAINTENANCE
AND RECORDS MANAGEMENT.
While start-up services are an allowable cost, care
must be exercised to insure that there is not a
duplication of services, and therefore costs, bet-
ween start-up services and the engineering services
to be provided during the first year of operation
(see Sections VII.C.5.b, VII.I.I, and VIII.D.7, and
Paragraph l.h above).
k. THE SPECIFIC AND UNIQUE COSTS OF FIELD TESTING AN
INNOVATIVE OR ALTERNATIVE PROCESS OR TECHNIQUE, WHICH
MAY INCLUDE EQUIPMENT LEASING COSTS, PERSONNEL COSTS,
AND UTILITY COSTS NECESSARY FOR CONSTRUCTING, CONDUCTING,
AND REPORTING THE RESULTS OF THE FIELD TEST.
It should be noted that normal operation and maintenance
costs, as defined in §35.2005(b)(30), are not allowable
as construction costs of a field test.
935 TM 86-1
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UNALLOWABLE COSTS RELATED TO SUBAGREEMENTS INCLUDE:
a. THE COSTS OF ARCHITECTURAL OR ENGINEERING SERVICES
OR OTHER SERVICES INCURRED IN PREPARING A FACILITIES
PLAN AND THE DESIGN DRAWINGS AND SPECIFICATIONS FOR
A PROJECT. THIS PROVISION DOES NOT APPLY TO PLANNING
AND DESIGN COSTS INCURRED IN THE MODIFICATION OR RE-
PLACEMENT OF AN INNOVATIVE OR ALTERNATIVE PROJECT
FUNDED UNDER §35.2032(c) or of a failed rotating
biological contactor under Section 202(a)(3) of the
Clean Water Act.
The costs of these services are part of the work
which is intended to be defrayed, in part, by the
allowance for facilities planning and/or design.
Also, if the engineer has provided services to
prepare other documents supporting the grant appli-
cation (e.g., UC system, SUO, intermunicipal agree-
ments, draft plan of operation, value engineering
(VE), etc.), the costs associated with such services
are not allowable, but again are part of the work
which is intended to be defrayed, in part, by the
allowance for facilities planning and/or design
(see Section III.D.S.c). However, specific
planning and design costs are allowable as part
of a 100 percent grant for the modification or
replacement (M/R) of a failed I/A technology (see
Section VI.J).
b. EXCEPT AS PROVIDED IN l.g ABOVE, ARCHITECTURAL OR
ENGINEERING SERVICES OR OTHER SERVICES NECESSARY TO
CORRECT DEFECTS IN A FACILITIES PLAN, DESIGN DRAWINGS
AND SPECIFICATIONS, OR OTHER SUBAGREEMENT DOCUMENTS.
An example of these unallowable costs would be the
engineering costs to update data in the facilities
plan (e.g., cost estimates, current population for
determining existing needs, etc.), or to evaluate a
required alternative (e.g., I/A technology) which was
not properly evaluated in the facilities plan. Another
example would be the engineering costs of redesigning
a treatment plant unit process if the original design
did not conform to State design standards, was im-
practical, or was excessively costly. However,
revisions to a facilities plan, design drawings
and specifications, or other subagreement documents
which are necessary because of changes in EPA or State
standards are not considered defects under this section,
and are therefore allowable (see Section VII.H.l.c).
c. THE COSTS (INCLUDING LEGAL, TECHNICAL AND ADMINISTRA-
TIVE) OF DEFENDING AGAINST A CONTRACTOR CLAIM FOR
INCREASED COSTS UNDER A SUBAGREEMENT OR OF PROSECUTING
A CLAIM TO ENFORCE ANY SUBAGREEMENT UNLESS:
TM 89-1
936 (86-1)
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also provide monetary incentives (i.e., a bonus)
as an inducement to complete the project ahead of
schedule. Unless the bonus provision is required by
law, a bonus paid by the grantee is an unallowable cost,
ALL INCREMENTAL COSTS DUE TO THE AWARD OF ANY SUBAGREE-
MENTS FOR BUILDING SIGNIFICANT ELEMENTS OF THE PROJECT
MORE THAN 12 MONTHS AFTER THE STEP 3 GRANT AWARD OR
FINAL STEP 2+3 OR STEP 7 APPROVALS UNLESS SPECIFIED
IN THE PROJECT SCHEDULE APPROVED BY THE REGIONAL
ADMINISTRATOR AT THE TIME OF GRANT AWARD.
If the grantee delays the award of any subagreements
for building significant elements of the project be-
yond 12 months after the date of the Step 3 grant
award or the final Step 2+3 or Step 7 approvals:
(1) the Region should analyze the impact of this delay
upon the completion dates of other significant elements
of the project as proposals which delay the completion
dates of those other elements are not acceptable; and
(2) the incremental costs caused by the delay are not
allowable, even if the delay is justifiable (e.g., due
to circumstances beyond the grantee's control) unless
the delay was specified in the project schedule
approved by the Regional Administrator when the grant
was awarded. The incremental costs include building
costs, as well as other costs for services, such as
engineering supervision during construction and start-
up, and continuing engineering services for the first
year after the initiation of operation. The incremental
costs for building may be determined by using the ratio
of appropriate cost indices (e.g., the construction
cost index published in Engineering News Record, or
the EPA index published in the Journal of the Water
Pollution Control Federation) applied to the sub-
agreement cost awarded to the successful bidders.
The numerator in the ratio would be the index 12
months after the date of the Step 3 grant award,
or the final Step 2+3 or Step 7 approvals, and the
denominator would be the index nearest the date of
subagreement award. The ratio, assuming it is less
than 1.0, is multiplied by the subagreement amount
to determine the allowable cost. This same ratio
is applied to other appropriate project costs (e.g.,
engineering supervision) to determine the allowable
cost. The allowable building cost resulting from
this adjustment is used to determine the final
allowance for facilities planning and/or design
(see Sections III.D.3.C and VI.L.l.f).
TM 89-1
939 (86-1)
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The project reviewer should also be aware that
failure to promptly initiate and complete a
project may result in the imposition of sanctions,
including termination, pursuant to [40 CFR Part 30,
Subpart I] 40 CFR 31.43. The objective of this
requirement is to improve water quality as quickly
as possible and to prevent unnecessary increases
in construction costs due to inflation.
(Note: Where (1) a grantee opens bids on a significant
element of a project prior to the project schedule date
and (2) all bidders agree to hold their bids firm until
after the date in its project schedule, no grant penalty
would be assessed for the delay. The reason being that,
through the hold firm agreement, the before and after
schedule costs would be the same. However, any increase
in ancillary costs (A/E sevices, administrative expenses,
legal costs, etc.) attributable to the grantee delay
would not be eligible for grant participation.)
3. Other Costs
The following items are not explicitly included in 40 CFR
Part 35, Subpart I, Appendix A, but represent prudent fiscal and
management principles, and precedent cases:
a. Liquidated Damages
Monies recovered by grantees based on the
assessment of liquidated damages have no effect on
the determination of allowable costs (i.e., are not
considered to be grant related income). Moreover, any
additional costs (e.g., building, engineering, legal,
or administrative) incurred because of a contractor's
lack of timely performance are assumed to be offset
by the liquidated damages, and therefore are unallow-
able/ even in the event that the grantee elects not to
exercise its right to recover liquidated damages, or
the liquidated damages are insufficient to cover the
grantee's additional costs.
TM 89-1
940 (86-1)
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v. contain architectural details (including
hardware that is an integral part of the
structure) that are designed to enhance
the function and appearance of the building,
and to reflect regional architectural tra-
ditions; and
vi. facilitate the highest productivity
and efficiency of the treatment works
and its employees.
Decisions concerning the allowability of specific
item (particularly those associated with aesthetics)
are to be well documented in the project files and
made available to the grantee and the project auditor.
Allowability decisions which cannot be made using the
principles discussed above (see also Section V.C.2.u)
are to be submitted from the State to the EPA Regional
Office and, if necessary, to EPA Headquarters for review.
Re:; EPA Audit Resolution Board Decision 13/14,
"Criteria for Assessing the Allowability of
Aesthetic Features and Landscaping on EPA
Construction Grant Projects," February 24, 1984
b. THE COST OF LAND ACQUIRED FOR THE MITIGATION OF
ADVERSE ENVIRONMENTAL EFFECTS"IDENTIFIED PURSUANT
TO AN ENVIRONMENTAL REVIEW UNDER NEPA.
Section 212(2) of the Act states that only two
categories of land are included in the definition of
treatment works; Land that will be used as an integral
part of the treatment'process;and land that will be
used for the ultimate disposal of residues resulting
from such treatment. Because land acquired to mitigate
adverse environmental effects is not included in the
definition of treatment works, the cost of that land
purchase is not allowable. However, although the cost
Of land purchased to mitigate adverse environmental
impacts is unallowable, it does not affect the require-
ment to mitigate. 40 CFR Part 6 requires that effective
mitigation measures be developed and'implemented. Also,
ILities p]
cost-effectiveness analysisTof the~feasible alterna-
the applicant must provide 'in the facilities plan a
cost-effectiveness analysis of the feasible alteri
tives, including the purchase;of ineligible land.
945 TM 86-1
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PRIVATELY OR PUBLICLY OWNED SMALL AND ONSITE SYSTEMS
ALLOWABLE COSTS FOR SMALL AND ONSITE SYSTEMS SERVING
RESIDENCES AND SMALL COMMERCIAL ESTABLISHMENTS IN-
HABITED ON OR BEFORE DECEMBER 27, 1977 INCLUDE:
a. THE COST OF MAJOR REHABILITATION, UPGRADING,
ENLARGING AND INSTALLING SMALL AND ONSITE SYSTEMS,
BUT IN THE CASE OF PRIVATELY OWNED SYSTEMS, ONLY
FOR PRINCIPAL RESIDENCES.
Major rehabilitation may include, as an allowable
cost, the demolition and removal of an existing
onsite system provided that:
i. the system, including the septic tank,
has failed beyond reasonable repair, and
the replacement system is more cost
effective than salvaging portions of the
existing system; and
ii. either:
- there is only one reasonable location
on the site for the new system, and the
use of that location requires the re-
moval of the existing system, or
- the existing system constitutes a real
and present hazard to safety, public
health, or water quality, which can
only be abated by the removal of the
existing system.
The demolition and removal of an existing onsite
system for the convenience of the owner as a means
of increasing property value or property use is
unallowable for grant participation.
b. CONVEYANCE PIPES FROM PROPERTY LINE TO OFFSITE
TREATMENT UNIT WHICH SERVES A CLUSTER OF BUILDINGS,
TREATMENT AND TREATMENT RESIDUE DISPOSAL PORTIONS OF
TOILETS WITH COMPOSTING TANKS, OIL FLUSH MECHANISMS,
OR SIMILAR INHOUSE DEVICES
TM 89-1
946 (86-1)
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ii. necessary services associated with the
acquisition such as title search; documen-
tation relating to just compensation/offer
amount; purchase negotiations; preparation
of purchase agreement (including options
if applicable), proposed deed convenants,
legal description, lease agreements and
related legal documents;
iii. related costs such as legal notices, closing
costs (e.g., transfer tax, evidence of title,
recording fee), mortgage prepayment penalties
and certain pro-rata prepaid property taxes;
iv. certain legal and other costs relating to
abandoned or unsuccessful condemnation pro-
ceedings or inverse condemnation proceedings
decided in favor of the landowner;
v. advice on relocating and on moving and related
expenses for displaced persons, businesses and
farms;
vi. replacement housing payments for displaced
persons; and
vii. other administrative costs of complying with
The Uniform Act.
Each of the above cost limitations are more fully
described in 40 CFR Part 4 or 49 CFR Part 24, as
applicable. The reviewing agency should inform
grantees regarding their potential eligibility
for reimbursement of these costs; and should
determine the adequacy of documentation prior
to making reimbursement.
Re; 40 CFR 4.3, 4.102(c), 4.102(f), 4.102(g), 4.106, 4.107,
4.207, 4.301 et. seq. (Subpart D), 4.401 et. seq.
(Subpart E)
THE COST OF CONTRACTING WITH ANOTHER PUBLIC AGENCY
OR QUALIFIED PRIVATE CONTRACTOR FOR PART OR ALL OF
THE REQUIRED ACQUISITION AND/OR RELOCATION SERVICES.
TM 89-1
(86-1)
949 (85-1)
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d. THE COST ASSOCIATED WITH THE PREPARATION OF THE TREAT-
MENT WORKS SITE BEFORE, DURING AND, TO THE EXTENT
AGREED ON IN THE GRANT AGREEMENT, AFTER BUILDING. THESE (
COSTS INCLUDE: ^
(1) THE COST OF DEMOLITION OF EXISTING STRUCTURES
ON THE TREATMENT WORKS SITE (INCLUDING RIGHTS-
OF-WAY) IF BUILDING CANNOT BE UNDERTAKEN WITH-
OUT SUCH DEMOLITION;
Demolition of existing structures on the
treatment works site (including rights-of-way),
when not required for building the project, will
be considered to be an allowable cost only if the
existing structures constitute a real and pre-
sent hazard to safety, public health, or water
quality, which can only be abated by the removal
of the existing structures. The demolition of
an existing structure for the convenience of the
owner as a means of increasing property value or
property use is unallowable for grant participa-
tion .
(2) THE COST (CONSIDERING SUCH FACTORS AS BETTER-
MENT, COST OF CONTRACTING AND USEFUL LIFE) OF
REMOVAL, RELOCATION OR REPLACEMENT OF UTILITIES,
PROVIDED THE GRANTEE IS LEGALLY OBLIGATED TO
PAY UNDER STATE OR LOCAL LAW; AND
(3) THE COST OF RESTORING STREETS AND RIGHTS-OF-WAY
TO THEIR ORIGINAL CONDITION. THE NEED FOR SUCH
RESTORATION MUST RESULT DIRECTLY FROM THE CON-
STRUCTION AND IS GENERALLY LIMITED TO REPAVING
THE WIDTH OF TRENCH.
Repaving beyond the trench width may be con-
sidered to be an allowable cost if uniformly
required by State or local law for all projects
involving road construction, regardless of the
source of project funding. Sometimes referred
to as "saw width," this provision requires that
the road surface and subsurface be cut one or two
feet beyond the trench width. This is not, how-
ever, to be interpreted as allowing the cost of
complete or partial repaving of a road beyond
the "saw width."
(4) Reconnection of Service Laterals
When the publicly owned portion of a service
lateral is disconnected as a result of either
sewer rehabilitation or combined sewer separa-
tion work,the cost of reconnection would be
TM 89-1
950 (86-1)
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allowable for that portion of work which ocurred
within the public right-of-way. Reconnection is
the connecting of an existing or new service
lateral to a new or rehabilitated sanitary sewer
because the existing service lateral had to be
disconnected in order to construct the EPA
funded project.
e. THE COST OF ACQUIRING ALL OR PART OF AN EXISTING
PUBLICLY OR PRIVATELY OWNED WASTEWATER TREATMENT WORKS
PROVIDED ALL THE FOLLOWING CRITERIA ARE MET:
(1) THE ACQUISITION, IN AND OF ITSELF, CONSIDERED
APART FROM ANY UPGRADE, EXPANSION OR REHABIL-
ITATION, PROVIDES NEW POLLUTION CONTROL BENEFITS;
(2) THE ACQUIRED TREATMENT WORKS WAS NOT BUILD WITH
PREVIOUS FEDERAL OR STATE FINANCIAL ASSISTANCE;
(3) THE PRIMARY PURPOSE OF THE ACQUISITION IS NOT
THE REDUCTION, ELIMINATION, OR REDISTRIBUTION
OF PUBLIC OR PRIVATE DEBT; AND
(4) THE ACQUISITION DOES NOT CIRCUMVENT THE REQUIRE-
MENTS OF THE ACT, THESE REGULATIONS, OR OTHER
FEDERAL, STATE OR LOCAL REQUIREMENTS.
2. UNALLOWABLE COSTS FOR LAND AND RIGHTS-OF-WAY INCLUDE:
a. THE COSTS OF ACQUISITION (INCLUDING ASSOCIATED LEGAL,
ADMINISTRATIVE AND ENGINEERING, ETC.) OF SEWER RIGHTS-
OF-WAY, WASTE TREATMENT PLANT SITES (INCLUDING SMALL
SYSTEM SITES), SANITARY LANDFILL SITES AND SLUDGE
DISPOSAL AREAS EXCEPT AS PROVIDED IN PARAGRAPH l.a.
AND b. OF THIS SECTION.
Costs of complying with the Uniform Relocation Assistance
and Real Property Acquisition Policies Act of 1970 are
allowable even if the property being acquired is not (see
Section D l.b above). Costs for property surveys and the
preparation of legal boundary descriptions are not
allowable where land costs are not allowable.
b. ANY AMOUNT PAID BY THE GRANTEE FOR ELIGIBLE LAND IN EXCESS
OF JUST COMPENSATION, BASED ON THE APPRAISED VALUE, THE
GRANTEE'S RECORD OF NEGOTIATION OR ANY CONDEMNATION PRO-
CEEDING, AS DETERMINED BY THE REGIONAL ADMINISTRATOR.
An amount higher than the determination of just compensa-
tion may be found allowable through an administrative
settlement if the grantee provides sufficient written
documentation to the Regional Administrator prior to the
TM 89-1
(86-1)
951 (85-1)
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actual acquisition. Such an administrative settlement may
be appropriate where negotiated purchase is unsuccessful
and where a condemnation action may entail a long delay
or excessive costs. Administrative settlements may be used
when it is reasonable, prudent and in the public interest.
Documentation may include evidence of purchase negotiations,
real property sales data, estimated court settlement and
legal costs based on previous condemnation proceedings.
Such documentation may form the basis of an administrative
settlement with Regional Administrator approval.
c. REMOVAL, RELOCATION OR REPLACEMENT OF UTILITIES LOCATED
ON LAND BY PRIVILEGE, SUCH AS FRANCHISE.
(1) These costs are not allowable unless the grantee
is required to pay such costs under State or
local law, or the grantee has documented that
these costs~are "extra ordinary" expenses for
that utility.
(2) Service lateral reconnection costs that occur
outside the public right-of-way are not allowable
costs. Additionally, the costs of reconnecting
privately owned services laterals located withTn
the public right-of-way are not allowable.
E. EQUIPMENT, MATERIALS AND SUPPLIES
1. ALLOWABLE COSTS OF EQUIPMENT, MATERIALS AND SUPPLIES INCLUDE:
a. THE COST OF A REASONABLE INVENTORY OF LABORATORY
CHEMICALS AND SUPPLIES NECESSARY TO INITIATE PLANT
OPERATIONS AND LABORATORY ITEMS NECESSARY TO CONDUCT
TESTS REQUIRED FOR PLANT OPERATION.
A suggested list of equipment, supplies, and chemicals
for various sizes of treatment plants is given in
Appendix B of EPA publication 430/9-74-002, "Estimating
Laboratory Needs for Municipal Waste Water Treatment
Facilities," 1974. Large stocks of expendable materials
are, however, not allowable.
b. THE COSTS FOR PURCHASE AND/OR TRANSPORTATION OF
BIOLOGICAL SEEDING MATERIALS REQUIRED FOR EXPED-
ITIOUSLY INITIATING THE TREATMENT PROCESS OPERATION.
c. COST OF SHOP EQUIPMENT INSTALLED AT THE TREATMENT
WORKS NECESSARY TO THE OPERATION OF THE WORKS.
The need for installed shop equipment necessary for the
operation of the treatment works should be carefully
reviewed to insure that it is cost effective when
TM 89-1
(86-1)
952 (85-1)
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- necessary,
- cost effective,
- based on a published fee schedule or on
reasonable fees charged to other users
under similar conditions, and
- receive prior written approval from the
reviewing agency.
Periodic payment of royalties for the right to operate
under a patent are considered operating costs, and are
unallowable for grant participation (see Section V.E
for a discussion of operating costs).
COSTS ALLOCABLE TO WATER POLLUTION CONTROL PURPOSE OF
MULTIPLE PURPOSE PROJECTS AS DETERMINED BY APPLYING THE
ALTERNATIVE JUSTIFIABLE EXPENDITURE (AJE) METHOD DES-
CRIBED IN THE CG SERIES. MULTIPLE PURPOSE PROJECTS THAT
COMBINE WASTEWATER TREATMENT WITH RECREATION DO NOT NEED
TO USE THE AJE METHOD, BUT CAN BE FUNDED AT THE LEVEL OF
THE MOST COST-EFFECTIVE SINGLE-PURPOSE ALTERNATIVE.
See Section IV.C.7.1.h.
COSTS OF GRANTEE EMPLOYEES ATTENDING TRAINING WORKSHOPS/
SEMINARS THAT ARE NECESSARY TO PROVIDE INSTRUCTION IN
ADMINISTRATIVE, FISCAL OR CONTRACTING PROCEDURES REQUIRED
TO COMPLETE THE CONSTRUCTION OF THE TREATMENT WORKS, IF
APPROVED IN ADVANCE BY THE REGIONAL ADMINISTRATOR.
To be allowable, attendance at such training workshops
or seminars may only occur after grant award.
All of the cost of replacing or modifying failed
rotating biological contactors. See Section VI.J.
2. UNALLOWABLE COSTS INCLUDE:
a. ORDINARY OPERATING EXPENSES OF THE GRANTEE INCLUDING
SALARIES AND EXPENSES OF ELECTED AND APPOINTED OFFICIALS
AND PREPARATION OF ROUTINE FINANCIAL REPORTS AND STUDIES,
b. PREPARATION OF APPLICATIONS AND PERMITS REQUIRED BY
FEDERAL, STATE OR LOCAL REGULATIONS OR PROCEDURES.
TM 89-1
961 (86-1)
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C. ADMINISTRATIVE, ENGINEERING AND LEGAL ACTIVITIES ASSOC-
IATED WITH THE ESTABLISHMENT OF SPECIAL DEPARTMENTS,
AGENCIES, COMMISSIONS, REGIONS, DISTRICTS OR OTHER UNITS
OF GOVERNMENT.
d. APPROVAL, PREPARATION, ISSUANCE AND SALE OF BONDS OR
OTHER FORMS OF INDEBTEDNESS REQUIRED TO FINANCE THE
PROJECT AND THE INTEREST ON THEM.
e. THE COSTS OF REPLACING, THROUGH RECONSTRUCTION OR SUB-
STITUTION, A TREATMENT WORKS THAT WAS ASSISTED UNDER
THE FEDERAL WATER POLLUTION CONTROL ACT OF 1956 (PUB. L.
84-660), OR ITS AMENDMENTS, AND THAT FAILS TO MEET ITS
PROJECT PERFORMANCE STANDARDS. THIS PROVISION APPLIES
TO FAILURES THAT OCCUR EITHER BEFORE OR AFTER THE INITI-
ATION OF OPERATION. THIS PROVISION DOES NOT APPLY TO AN
INNOVATIVE AND ALTERNATIVE TREATMENT WORKS ELIGIBLE FOR
FUNDING UNDER §35.2032(c) OR A TREATMENT WORKS THAT FAILS
AT THE END OF ITS DESIGN LIFE.
f. PERSONAL INJURY COMPENSATION OR DAMAGES ARISING OUT OF
THE PROJECT.
g. FINES AND PENALITIES DUE TO VIOLATIONS OF, OR FAILURE
TO COMPLY WITH, FEDERAL, STATE OR LOCAL LAWS, REGULATIONS
OR PROCEDURES.
h. COSTS OUTSIDE THE SCOPE OF THE APPROVED PROJECT.
i. COSTS FOR WHICH GRANT PAYMENT HAS BEEN OR WILL BE RECEIVED
FROM ANOTHER FEDERAL AGENCY.
COSTS OF TREATMENT WORKS FOR CONTROL OF POLLUTANT DIS-
CHARGES FROM A SEPARATE STORM SEWER SYSTEM.
k. THE COST OF TREATMENT WORKS THAT WOULD PROVIDE CAPACITY
FOR NEW HABITATION OR OTHER ESTABLISHMENTS TO BE LOCATED
ON ENVIRONMENTALLY SENSITIVE LAND SUCH AS WETLANDS OR
FLOODPLAINS.
After September 30, 1984, grant assistance is limited
to the capacity necessary to serve existing needs on the
date of grant award (see Section VI.D.18). Therefore,
962 TM 86-1
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generally be avoided. However, when confronted with
an abandonment situation, responsible program managers
should be guided by the following principles in
arriving at their decisions.
- Municipalities are expected to effectively
operate and maintain grant funded waste-
water treatment works over the useful life
of the facilities consistent with section
204 of the Clean Water Act. If a grantee
abandons a grant-funded facility or process,
EPA will determine whether to seek recovery
of grant funds.
- Functional replacement at other than EPA
expense of abandoned treatment works is
acceptable without recovery. The replace-
ment must meet NPDES permit limitations and
there must be no indication of mismanagement
in the selection of the grant funded alterneT-
tive.
- Abandonment of treatment works which are no
longer needed at a POTW because of revised
NPDES permit limits is acceptable without
grant recovery. Grantees should request dis-
position instructions per 40 CFR 30.532(b).
Abandonment of treatment works or significant
portions of treatment works because of a
failure to serve areas which the treatment
works was designed and constructed to serve
requires grant recovery.
(NOTE: A significant portion is one which, if
it had not been included in the design, would
have changed the design capacity of the funded
treatment works.)
- Abandonment of any treatment works requires a
disposition decision which must be documented
in the project file. The analysis supporting
such a decision must consider scrap value as
an alternative to leaving the facility idle
where no future use is projected.
965 TM 87-1
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- The principal objective of the construction
grants program is the construction of treat-
ment works to achieve compliance with the
water quality and public health goals of the
Clean Water Act. The management of all grant
funded property must take place in accordance
with that objective and in the best financial
interest of the Government.
The abandonment of any grant funded treatment works
should be thoroughly analyzed and documented in the
project file to clearly articulate the reasons for
the abandonment and the basis for the action taken
by the reviewing agency.
Re: Memorandum, 5/2/86 "Abandonment of Wastewater Treat-
ment Works Funded by the Municipal Treatment Works
Construction Grants Program"; 40 CFR 30.532(b)*
31.31, 32 and 33
d. Income Generation from Processed Sludges and Crops
Wastewater land treatment and sludge utilization
processes are vigorously encouraged. These processes,
which have the potential for generating project income
to offset O&M costs, must be intensively reviewed to
ensure unreasonable increases in construction costs
are not allowed.
The guidance that follows applies specifically to
stabilized and processed sludges which are to be
managed for income generation, and to crops which are
grown for sale as an integral part of the wastewater
land treatment or sludge utilization process.
Facilities built for processing crops grown on land
to which sludge or wastewater has been applied may
be an allowable cost if the municipality has financial
interest in the crop and if those facilities are
necessary and reasonable to prepare the crop for prompt
delivery to its market. Crop processing facilities
could involve grain drying or fermenting. Facilities
and equipment for transporting the crop to market or
storing the crop to await more favorable market prices
are unallowable.
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