QBteeOfThe
              Environmental Protection Administrator
21T-2001
October 1991
              Implementation of the
              Superf und • Alternative
              Remedial Contracting
              Strategy (ARCS)
              Report of the
              Administrator's Task Force
              1991
7,

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                          IMPLEMENTATION OF SUPERFUND
             ALTERNATIVE REMEDIAL CONTRACTING STRATEGY (ARCS)
               REPORT OF THE ADMINISTRATOR'S TASK FORCE -- 1991
                 LIST OF TABLES  .......................  ii

                 LIST OF FIGURES  ...................... iii

                 LIST OF ABBREVIATIONS  ................ iv


                 EXECUTIVE SUMMARY  ................. ix

                 TASK FORCE MEMBERSHIP .............. xxv

           I.     INTRODUCTION  .......................  1

           II.    BACKGROUND ........................  5

                 A.  Superfund Program Description  ............  5

                 B.  Remedial Contracting History  ............. 19

                 C.  ARCS Contract Characterization ............ 21

                 D.  Future of Superfund Contracting ............ 28

           III.   MAJOR ISSUES   ....................... 29

                 A.  ARCS Program Management  .............. 31

                 B.  ARCS Capacity and Utilization  ............ 40

                 C.  ARCS Contract Controls ................. 56

                 D.  ARCS Financial Audits and Reviews ......... 70

                 E.  ARCS Award Fee Process ................ 78

                 F.  EPA Management Processes and Organization  ... 92

           IV.   APPENDIX  .......................... 103


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                      LIST OF TABLES
1.     Percent of PRP Project Starts by Activity  	13

2.     State-Lead Project Starts by Activity
      and Fiscal Year	15

3.     Historical Summary:  Superfund Remedial
      Contracts	20

4.     Contract Sizes	25

5.     Distribution of Small and Large Contracts
      by Region/Zone	25

6.     Number and Distribution of ARCS Prime Contracts	27

7.     Distribution of ARCS Prime and Team
      Subcontractors	27

8.     OSWER Distribution Policy for RD/RA Projects	45

9.     Historical Workload Distribution
      for Federal-Lead RD/RA Projects	46

10.   Distribution of Federal-Lead Remedial Actions by Size  ....  53

11.   Common Issues From Regional Vulnerability
      Assessments	61

12.   ARCS Audits and Reviews	72

13.   Extramural Funding - FY90	  100
                                11

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                     LIST OF  FIGURES


1.     Superfund Screening Status	8

2.     Superfund Remedial Status	10

3.     Cumulative Value of PRP Response Settlements   	14

4.     Superfund Progress	17

5.     Dollars Spent for PM and Remedial Planning	36

6.     National Average Ratio of Program Management to
      Total Contract Outlays  	37

7.     ARCS LOE Capacity Analysis  	48

8.     Optional Distribution Policies for RD/RA Projects  	50

9.     Award Fee Process	81
                              in

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                     ABBREVIATIONS
AA

ACTS

A-E

ARCS

BUREC

CA

CERCLA


CIS

CLEANLAN

CLP

CO

CORAS

Corps

CPAF

CPFF

DCAA

DOD

DOE

EPA

ERCS
Assistant Administrator

ARCS Contract Tracking System

Architectural and Engineering

Alternative Remedial Contracting Strategy

Bureau of Reclamation

Cooperative Agreement

Comprehensive Environmental Response,
Compensation, and Liability Act of 1980

Contracts Information System

Clean Local Area Network

Contract Laboratory Program

Contracting Officer

Contract Operations Review and Assessment Staff

United States Army Corps of Engineers

Cost Plus Award Fee

Cost Plus Fixed Fee

Defense Contract Audit Agency

Department of Defense

Department of Energy

United States Environmental Protection Agency

Emergency Response Contract  Strategy
                              IV

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FACO

FACTS

FAR

FIT

FMFIA

FMR

FS

FY

G&A

GAO

GAD

HRS

HSCD

IAG

LOE

LTCS

MOU

NCP

NPL

OA

OARM
Financial Administrative Contracting Officer

Financial ARCS Computerized Tracking System

Federal Acquisition Regulations

Field Investigation Team

Federal Managers' Financial Integrity Act

Financial Monitoring Review

Feasibility Study

Fiscal Year

General and Administrative

General Accounting Office

Grants  Administration Division

Hazard Ranking System

Hazardous Site Control Division

Interagency Agreement

Level of Effort

Long-Term Contracting Strategy

Memorandum of Understanding

National  Contingency Plan

National  Priorities List

Office of the Administrator

Office of Administration and Resources
Management

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ODCs

OE

OERR


OGC

OIG

OMB

OPTS

ORD

OROSLR


OSC

OSWER

OWPE

PCMD

PM

PO

PRP

RA

RA

RAC

RD

RD/RA
Other Direct Costs

Office of Enforcement

Office of Emergency and Remedial Response
(Superfund)

Office of General Counsel

Office of the Inspector General

Office of Management  and Budget

Office of Pesticides and Toxic Substances

Office of Research and Development

Office of Regional Operations and State/Local
Relations

On-Scene Coordinator

Office of Solid Waste and Emergency Response

Office of Waste Programs Enforcement

Procurement and Contracts Management Division

Program Management

Project Officer

Potentially Responsible Party

Regional Administrator

Remedial Action

Remedial Action Contract

Remedial Design

Remedial Design/Remedial Action
                               VI

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REM            Remedial Contract

RI               Remedial Investigation

RI/FS            Remedial Investigation/Feasibility Study

ROD            Record of Decision

RPM            Remedial Project  Manager

SARA            Superfund Amendments and Reauthorization Act of
                 1986

SCAP            Superfund Comprehensive Accomplishments Plan

SMR            Superfund Management Review

TAT             Technical Assistance Team

TES             Technical Enforcement Support

TQM            Total Quality Management

WAM            Work Assignment Manager
                              vn

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                    EXECUTIVE  SUMMARY

                         INTRODUCTION

      Over the past  several months the Environmental Protection
Agency (EPA) has been subjected to serious and public criticism for its
management of the Superfund program.  EPA has been accused of
allowing certain  Superfund contractors to spend an inordinate amount of
public funds on  activities other  than the direct clean-up of contaminated
sites.

      Three particular charges have been leveled against EPA:

      •     Contractors operating under EPA's Alternative Remedial
            Contracting Strategy (ARCS) have been charging EPA  for
            inappropriate and unnecessary administrative items  like
            business cards, parking fees, and potted plants for
            contractor offices.

      •     EPA has paid contractors to open and operate offices
            before the contractors have been assigned any clean-up
            work.

      •     EPA's procedures  for ensuring effective contract
            administration and management have not been fully
            implemented, thus  allowing public funds to be wasted.

      In response to these allegations, EPA Administrator William
Reilly established a task force comprised of senior EPA managers and
analysts from EPA's  headquarters and regional offices.  The task force
was asked to address the following questions:

      •     Are the allegations of waste by ARCS contractors  fair  and
            accurate?

      •     Has EPA taken the necessary steps to assure  that any
            problems are corrected?  Is EPA's oversight of ARCS
            contractors adequate?  If not, how could such oversight be
            improved?

      •     Given that responsible parties are cleaning up many more
            Superfund sites  than was anticipated  when ARCS was
            created, is ARCS still an appropriate approach to
                                 IX

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            Superfund contracting?  Should the number, size, or length
            of ARCS contracts be adjusted?

      For the past three months the task force has reviewed ARCS
operations in all ten EPA regional offices, as well as at EPA
headquarters.  Besides interviewing EPA employees and ARCS
contractor representatives, the task force reviewed internal EPA
contract management practices and a variety of reports related to
Superfund contracting, including reports by the  General Accounting
Office (GAO) and EPA's Office of the Inspector General (OIG).  This
report presents the results of the task force review.
                          BACKGROUND

      EPA's Superfund program was created by the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA)
of 1980.  Among other things,  CERCLA gave EPA the responsibility
to clean up sites contaminated by toxic chemicals stored or abandoned
there.

      Superfund was originally intended  to be a short-term solution  to
a limited problem.  Within a few years, however, it became clear that
as many as 30,000 sites in the  United States were contaminated to
some extent by toxic chemicals.  EPA identified over 1200 sites for
priority clean-up.  As a result, in 1986 Congress reauthorized
Superfund, expanded its funding,  and gave new impetus to the  nation's
long-term clean-up efforts.  The Superfund program was reauthorized
again in 1990.

      After Superfund was reauthorized in 1986, EPA realized that —
for several reasons ~ it had to  improve its ability to contract for and
manage clean-up services.  During the first few years of Superfund's
existence, only a handful of private contractors had developed the
capability to clean  up contaminated sites.  After Superfund
reauthorization in  1986, EPA had to be prepared to manage more
extensive clean-up  activities at  more sites than it had once expected.
Consequently, the Agency  believed that it had to expand the Clumber of
contractors available, improve their technical capabilities, and Ithus
lower the cost  of  Superfund clean-ups.

      Moreover, EPA wanted to decentralize the management of its
Superfund contracts.  By managing Superfund contracts through its

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regional offices, EPA believed  it would be better able to link specific
clean-up sites with the specific capabilities of particular  contractors.
Decentralization would allow projects to be initiated and completed
more quickly by an expanded pool of contractors.  Decentralization also
would improve EPA's ability to reward good performance and penalize
poor performance by  its  Superfund contractors.

      Thus, in 1988  EPA established its Alternative Remedial
Contracting Strategy (ARCS).  Under ARCS, EPA awarded a total of
45 long-term contracts to 23 separate contracting firms to assist EPA in
cleaning up the country's worst hazardous  waste sites.  The contracts,
awarded between January 1988 and June 1989, were intended to remain
in force for up to  10 years, and they carried a potential full-term value
of approximately $6.6 billion.  As each contract was awarded, the
contractor was directed to incur costs for staff, facilities, and  equipment
in order to avoid lengthy start-up delays when site work was  assigned -
- a problem that had  plagued Superfund during its early years.

      The 45 ARCS  contracts  were distributed among the ten EPA
regions based on projections of their anticipated contractor needs.  Each
region or, in some cases, zone of multiple regions was allocated
between five and eight contracts.  Contract administration and
management responsibilities, including the  responsibility to assign and
oversee specific work assignments, were left with the  regions.

      At  approximately  the same  time that ARCS  was being
established, EPA was defining  its  "Enforcement First"  strategy for
Superfund.  That strategy, announced in the  Superfund Management
Review of May 1989, intended - whenever possible - to force the
parties responsible for site contamination to manage and pay for site
clean-up.  That strategy  has been remarkably successful.  Clean-up at
about 60 percent of active  Superfund sites  now  is being carried out by
potentially responsible parties  (PRPs) - not by EPA.

      The success of the "Enforcement First" strategy reduced the
number of projects that could be assigned  to EPA's ARCS contractors.
Although  ARCS contractors had incurred sizeable start-up costs under
the long-term contracts they had signed with EPA, some of the site
work they had expected  to perform was being carried  out by  PRPs.
This shift of site clean-up work from EPA to PRPs was one major
reason that, during the early years of the ARCS contracts,
administrative costs were a  relatively high  percentage  of the total costs
billed to EPA by its ARCS contractors.
                                 XI

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      However, as each year passes and ARCS contractors undertake
more work at Superfund sites, the ratio of administrative costs to
overall costs  under the ARCS contracts steadily declines.  In fiscal year
(FY)  1988 70 percent of total ARCS contract outlays was spent on
administrative activities.  In FY89 administrative costs were 42 percent
of total outlays, and  in FY90 they were 28 percent of total outlays.  It
is expected that administrative costs in FY91 will be  approximately 20
percent of the total contract outlays of EPA's ARCS  contractors.
                    GENERAL CONCLUSIONS

      The task force confirms that EPA in fact has been charged by
ARCS contractors for business cards, parking fees, and office plants.
EPA has been charged for office rental costs by contractors who were
starting up but had not yet performed any work related to a  Superfund
site.  The task force has identified other charges made by ARCS
contractors that appear inappropriate  or excessive.

      A critical question is whether  any of these charges  are
inconsistent with or unallowable under government contract law, federal
acquisition regulations, or the ARCS contracts.  This question can be
answered  in absolute terms only after completion of comprehensive
audits specifically designed to assess the reasonableness and  allowability
of direct and indirect costs charged to the government under the ARCS
contracts.

      Regardless of whether all the  charged costs are allowable in
strictly  legal terms, some of  the charges clearly do not support clean-up
activities at Superfund sites.  Although such charges are a very small
part of the total costs billed  under the ARCS contracts,  they are an
inappropriate use of federal funds.  Thus, this report includes several
recommendations to assist EPA's regions in eliminating those charges
which,  even if legal, are not essential to implement and support clean-
up  actions at Superfund sites.

      The task force also confirms that during the early stages of the
new ARCS contracts, program management costs were high relative to
the charges for site clean-up work.  As mentioned above, this is due in
part to  a conscious strategy of early investment to avoid subsequent
delays in  starting site work.  The variations among EPA regions and
ARCS contractors in the amount and percentage of this initial
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investment, however, suggest an absence of effective planning  and
control in some cases.  As the amount of clean-up work performed by
ARCS contractors has increased, the proportion of program management
costs  to clean-up costs has decreased.  To help reinforce this trend, this
report includes a series of recommendations to assist EPA's regions in
further monitoring and controlling program management costs.

      Finally, the task force concludes that EPA is  not conducting
effective contract administration and oversight.  This report documents
weaknesses in the way EPA assigns work to contractors, monitors
contractor performance and costs, prepares independent cost estimates,
and conducts audits. The more effective use  of oversight systems
already  in place, or required under the ARCS contracts, can improve
management of such contracts in the future.  This report includes
several recommendations to improve the use of existing EPA
management systems.

      At the same  time, the task force recognizes that EPA has to
improve its oversight without overwhelming its field staff and  ARCS
contractors with administrative paperwork. Just as too little EPA
management can lead to  higher project costs if contractors have to redo
their  site work, too  much EPA management can lead  to higher project
costs  if contractors  and EPA staff are burdened with excessive project-
related paperwork.   This report includes recommendations that  attempt
to balance EPA's management responsibilities so the costs of both
rework and micromanagement are minimized.
        SPECIFIC FINDINGS AND RECOMMENDATIONS

      Based upon extensive task force review and analysis, this report
identifies a series of issues and recommendations  that are grouped into
six categories:

      Program Management - contractor activities related to
      administration and technical support, as opposed to direct
      clean-up activities at Superfund sites.

      ARCS Capacity and Utilization - the extent of contractor
      capacity acquired under ARCS contracts and its  ultimate
      utilization at Superfund sites.
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      ARCS Contract Controls - the provisions of ARCS
      contracts that permit effective EPA oversight of contractor
      activities.

      ARCS Financial Audits and Reviews -- the processes used
      to ensure that charges under  ARCS contracts are accurate
      and allowable.

      Award Fee Process - the mechanism by which EPA
      evaluates and rewards contractor performance.

      EPA Management Processes  and Organization  - the
      organization, procedures, and staffing used by EPA to
      manage the work performed  under ARCS contracts.

      The task force urges the EPA Administrator to assign specific
EPA offices the responsibility for implementing  the following
recommendations.  Those offices should provide the Administrator with
quarterly status reports and a thorough evaluation at the end of one
year.  Specific assignments of responsibilities and detailed
recommendations  for future actions  are contained in the full task force
report.
                       Program Management

Findings

      For several reasons, costs for program management during the
first few years of the ARCS contracts were a large percentage of
overall contract costs.  Administrative costs usually tend to be higher at
the beginning of  long-term contracts because of one-time start-up costs.
This problem was exacerbated in the  case of the ARCS  contracts
because the site-specific workload was smaller than expected due to the
success of EPA's "Enforcement First" policy.

      Over time,  however, program management costs as a proportion
of total ARCS outlays have declined  from  70 percent to 20 percent.
Because program management costs within some contracts and at some
specific sites are  still relatively high,  EPA  needs to review them with
particular care.  Data tracking and cost  evaluation systems, which
currently are not  maintained  at a national level, are needed to assure
                                 xiv

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cost control and maintain EPA's ability to  aggregate and report
nationwide data.

Recommendations

      1.    EPA should establish a national target of 20 percent or
            less as the ratio of program management expenditures to
            total contract expenditures under ARCS contracts.

      2.    EPA regional offices should continue to pursue program
            management cost reductions and improve cost  controls.
            Contractor effectiveness in controlling costs should be
            given special weight when contractor performance is
            evaluated.

      3.    Within  120 days, EPA should develop guidance to support
            cost management activities. As part  of that guidance,
            EPA should:

            •     Describe program management activities mandated
                  by contract;

            •     Clarify contract requirements related to staffing;

            •     Discuss factors that promote efficiency when clean-
                  up activities slow down;  and

            •     Develop various indicators of administrative cost
                  control.

      4.    To track costs more accurately, within  120 days EPA
            should develop guidance for dividing program  management
            costs into two parts: administrative costs  and technical
            support costs.

      5.    By December 1991, EPA should complete guidance for
            allocating program management costs to specific sites so
            that costs can be recovered more accurately.

      6.    EPA should revise the program management concept so
            that start-up costs,  administrative costs, and other clean-up
            support costs are classified separately in future Superfund
            contracts.
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                  ARCS Capacity and Utilization

Findings

      As  originally designed,  the ARCS contracts provided a large
amount of contractor capacity  for planning, engineering design, and
clean-up activities at Superfund sites.  The actual use of this capacity
has been lower than expected  due to:

      •     The success of the EPA's "Enforcement First" policy,
            thanks to which private parties now are cleaning up about
            60 percent of Superfund sites;

      •     The continued use of the U.S. Army Corps of Engineers
            (Corps) for both  the design and construction of remedies
            at major Superfund sites; and

      •     Budget policy decisions that shifted emphasis from
            remedial investigations  and field studies  to design and
            construction.

      Because of these unforeseen changes in Superfund  operations,
ARCS contractors have more  capacity for site-specific construction and
clean-up activities than the current Superfund program needs. Yet a
decline in ARCS contractor involvement in construction work will not
necessarily result in a proportionate reduction in ARCS program
management costs, unless EPA acts  to ensure that this occurs.

      A balanced use of ARCS contractors and the Corps would
emphasize the unique strengths and capabilities of each.   Moreover,
greater  utilization of ARCS contractors for remedial design could  speed
the completion of site clean-ups under Superfund.

Recommendations

       1.    To encourage more effective use of available ARCS
            resources, within 60 days EPA  should revise Superfund
            policy to allow the regions to select ARCS contractors to
            do design work  at any site, and to carry out remedial
            actions with a value up to $15  million.  Under current
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      policy, ARCS cannot be selected to carry out remedial
      actions with  a value over $5 million.

2.    To facilitate  implementation of this revised policy, within
      90 days EPA should issue guidance to the regions to help
      them make assignments to ARCS contractors and the
      Corps.  This guidance should include:

      •     Site-specific technical, quality, and performance
            criteria;

      •     Emphasis on the Corps' ability to review the  design
            and construction activities of ARCS contractors; and

      •     Requirements that the Corps review the remedial
            designs of ARCS contractors when the Corps  will
            carry out the clean-up phase.

3.    EPA should  negotiate  an approximately $2 billion
      reduction in  the construction capacity of ARCS contracts
      to reflect the reduction in currently projected needs.

4.    To ensure a  balanced  construction  management system,
      EPA should  work with the  Corps to improve Corps
      responsiveness to  regional needs during project design,
      maintain effective communications between EPA and the
      Corps, and ensure  a substantial and predictable workload
      for the Corps to facilitate workload planning.

5.    In order to assess the  accuracy of  current workload
      assumptions, EPA  should continue to monitor the extent to
      which ARCS contractor capacity is utilized. If actual
      utilization differs substantially  from the projections, EPA
      should take action to correct under- or over-capacity
      problems.

6.    EPA should  assess the apparent excess capacity of ARCS
      contractors in the  western zone.  The Agency should
      consider selective  terminations and assess the feasibility of
      making excess capacity available to other regions that may
      have a capacity shortfall.
                           xvn

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                     ARCS Contract Controls

Findings

      Defined within each ARCS contract are a series of procedures
and controls intended to assure  effective EPA oversight of contractors.
These contract controls are augmented by defined  procedures to be
followed by EPA staff engaged in contract administration and program
management.

      Overall, the defined procedures and controls appear  to be
comprehensive.  But specific weaknesses  have been identified in the
implementation of these procedures.  Administrative weaknesses in the
areas of work assignment  management, invoice review, technical
performance management,  and independent government cost estimates
provide inadequate safeguards against waste and mismanagement.
These shortcomings should be reported under the Federal Managers'
Financial Integrity Act (FMFTA) to ensure senior management
accountability for and attention  to corrective actions.

      The ARCS contracts provide for contractors to purchase
necessary equipment on behalf  of the Federal government.  This
equipment is maintained and utilized by the contractor during the life
of the contract, but it is owned by the government. The task force
found no  evidence of violation  of EPA controls over equipment
purchases by contractors.  Other reviews  have identified instances when
ARCS contractors have not utilized available  government-furnished
equipment.  EPA currently is conducting  a comprehensive review of its
equipment control policies and  procedures.

Recommendations

      1.     EPA should  report ARCS contract management as a
             material weakness in its FY91 FMFIA submission.  In
             addition, the  EPA office responsible  for this report should:

             •      Implement corrective  actions;

             •      Establish a  formal tracking system that projects
                   action  dates and  monitors whether actions are taken
                   as scheduled;
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            •     Report quarterly to EPA's Senior Council on
                  Management Controls on the status of
                  implementation; and

            •     Convene a regional work group to evaluate regional
                  issues.

      2.    EPA should act immediately to establish a regional
            capacity for providing independent government cost
            estimates to ARCS contract managers.

      3.    EPA should take immediate steps to strengthen ARCS
            administrative process controls in those areas identified in
            regional vulnerability  assessments.   Two areas that deserve
            immediate attention are the need to assure  the optimal
            scope of work  assignments and the invoice review process.

      4.    EPA should implement the recommendations resulting
            from its ongoing study of the Agency's administrative
            controls over the government-owned equipment used by
            contractors at Superfund sites.

      5.    EPA should evaluate  the feasibility of establishing
            regional, government-owned, contractor-operated
            warehouses where all equipment not required on a regular
            basis can be stored and accessed by ARCS contractors.
                ARCS  Financial Audits and Reviews

Findings

      Financial audits of contractor records are the government's final
means for determining the allowability, allocability, and accuracy of
contractor charges  under cost-reimbursement contracts.  Due to the
relatively short time that the ARCS contracts have been in place, the
timing of audit cycles, and the division of audit responsibilities between
EPA's Office of the Inspector General (OIG) and the Defense Contract
Audit Agency (DCAA),  no final audits have been completed  on  ARCS
contracts.  Selected special audits have been completed when EPA
contract administrators have suspected problems.  EPA also conducts
periodic reviews of contractor financial management systems  to assure
compliance with contract requirements.
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      Because OIG operates under an independent appropriation,  the
EPA Administrator does not have independent authority to provide
funds to the OIG.  Consequently, the Administrator has requested that
Congress provide additional resources so the OIG can become the lead
audit agency for several additional ARCS contractors, and accelerate
audits at contractors for which the OIG already is the lead auditor.
The OIG recently assigned a high priority to  auditing Superfund
contracts in FY92.

Recommendations

      1.    The OIG should develop a strategy to  complete financial
            audits in accordance with existing requirements.
            Specifically, the OIG should:

            •      Define a full audit program for  the six contractors
                   for which the OIG is the  lead auditor;

            •      Continue to negotiate with DCAA on audit
                   coverage for the remaining  17 ARCS contractors
                   and  other EPA contractors;  and

             •      Evaluate audit coverage in order to consolidate the
                   number, type, and frequency of audits while still
                   preserving  audit integrity.

      2.     EPA should strengthen its financial monitoring review
             program by:

             •      Reviewing contractors on a one- to two-year cycle;
                   and

             •      Resolving problems identified during previous
                   reviews.

      3.    EPA should periodically  spot check contractors' financial
             records, vouchers, and other supporting documentation.
                                  xx

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                         Award Fee  Process

Findings

      The compensation structure in ARCS contracts was designed to
promote contractor effectiveness by awarding  higher fees for better
performance and reducing fees for lower quality work.   Moreover,
under ARCS the quality of a contractor's performance is supposed to
be a major consideration in the assignment of future work. This  dual
incentive concept is central to the Superfund contracting strategy.

      However, EPA's success in using the quality of contractor
performance as the basis for issuing new  work assignments is  uneven
at best. Some regions have used the strategy effectively; others have
not.  The  national pattern of performance ratings suggests that the use
of the  performance rating systems among regions is also uneven.

      Overall, fees awarded to ARCS contractors are significantly
lower than the maximum levels permitted by  contract.  On average,
they are also lower than the rates established  under other contract
forms (e.g., cost plus fixed fee).

Recommendations

       1.    EPA  should reinforce its  policy on the use of award fees
            to influence contractor performance  by:

            •      Suspending the issuance of new site assignments to
                   contracts who have performed unsatisfactorily  on
                   prior assignments;

            •      Imposing appropriate sanctions, including
                   termination, on contractors who persist in their
                   failure to correct deficiencies; and

            •      Assigning  new site work in FY92 to contractors
                   who have  performed well  in the past.

      2.    Contractors should be evaluated  on  the quality of both
            their  administrative and remedial work.  The ability  of
            contractors to reduce program management costs  and meet
            national targets should receive significant consideration  in
            the award fee process.
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      3.     Key EPA supervisors  should assist the staff charged with
            the routine operation of the award  fee process in their
            evaluations of ARCS  contractor performance.

      4.     EPA should establish  teams to evaluate and report  within
            120 days on ways to  streamline the award fee system,
            reduce the paperwork burden, and resolve issues of
            national consistency.  These teams also should examine
            the Performance Index Rating Score to determine if it is
            the best tool for evaluating performance,  and  then translate
            the index into a criterion for the assignment of new work.
           EPA Management Processes and Organization

Findings

      As  EPA's mission has increased in scope and complexity, so has
its dependence on outside parties.  In FY90, more than three-quarters
of EPA's  budget was applied to  contracts, grants, loans, cooperative
agreements, and interagency agreements.  However, EPA's system of
managing  these functions has not changed in  more than two decades,
and management responsibilities  are divided among different EPA
offices.

      The Superfund program relies upon a complex mix of these
extramural techniques to accomplish its mission.  However, no focal
point for coordinated management of these  techniques exists within
EPA.

      Overall, the decentralized  contracting process is working; over
900 active work assignments are underway.  Yet ARCS contracting
activities are not viewed systematically within EPA.  Ineffective
information flows, inadequate coordination, and the need for improved
staff training and development characterize  EPA's management of
ARCS contracts.

Recommendations

      1.     EPA should establish a Superfund Acquisition Program
             Manager who reports directly  to the Assistant
             Administrator responsible for overseeing Superfund
                                xxu

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      acquisition decisions and activities.  The initial major
      responsibility of the new manager should be to  address
      problems related to the management of ARCS contracts.

2.    EPA should examine the division of headquarters and
      regional management responsibilities to identify the steps
      needed to create an effective mechanism for monitoring,
      evaluation, and formulating ARCS policy.   An
      implementation plan based on the results of this
      examination should be submitted to  the Administrator
      within the next 120 days.

3.    Total Quality Management (TQM) concepts should be
      employed to establish an ARCS Council consisting of
      headquarters and regional personnel  and ARCS contractor
      representatives.  This council should meet  regularly to
      identify and implement improvements  in ARCS contract
      management.

4.    EPA should support successful ARCS contract
      management by creating regional management teams
      consisting of contracting  officers,  technical staff, and
      supervisors. These teams should be encouraged to report
      back to the ARCS Council with recommendations for
      increased efficiencies in ARCS contract management.

5.    EPA should establish a coordinated ARCS  management
      information program to serve regions and headquarters.
      This program should utilize  information systems  already
      existing or designed.

6.    EPA should direct the newly created Superfund
      Acquisition Program Manager to design and deliver to
      each region a tailored employee development/training
      program for ARCS personnel.  This program  should
      provide specific  skills and knowledge  that  the ARCS
      contracting officers, project officers, and remedial project
      managers must have to operate effectively  and efficiently.

7.    Following the Region V  model for utilizing the TQM
      process as  a training tool, Regional Administrators should
      form ARCS regional and contractor personnel into teams
                         xxm

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      that address ARCS issues from a unified,  strategic, quality
      improvement perspective.

8.     Within 60 days EPA should evaluate the feasibility of
      establishing an Office of Acquisition Management.
      Responsibilities of this office would include:

      •     Policy leadership, monitoring, operations,  systems
            evaluation,  and human resources development
            related  to procurement, financial assistance, and
            interagency agreements; and

      •     Policy leadership on major systems acquisition for
            the Agency.
                           xxiv

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                 TASK FORCE MEMBERSHIP
Chairman:  Thomas P. Dunne
            Acting Associate Administrator
            Office of Regional Operations and State/Local Relations

      Allyn M. Davis, Director
      Hazardous Waste Division, Region VI

      Scott Fulton, Senior Enforcement Counsel
      Office of Enforcement

      Richard Guimond, Deputy Assistant Administrator
      Office of Solid Waste and Emergency Response

      Edward J. Hanley, Deputy Assistant Administrator
      Office of Administration and Resources  Management

      Bernard (Chip) Landman, Special Assistant
      Office of the Administrator

      Patricia L. Meaney,  Assistant Regional Administrator
      Planning and Management, Region I

      Patrick M. Tobin, Deputy Regional Administrator
      Region IV

      Anna H. Virbick, Deputy Inspector General
      Office of the Inspector General

      Gerald H. Yamada, Principal Deputy General Counsel
      Office of General Counsel

ex officio:   Henry L. Longest II,  Director
            Office of Emergency  and Remedial Response,
            Office of Solid Waste and Emergency Response

            David J. O'Connor, Director
            Procurement and Contracts Management Division,
            Office of Administration and Resources  Management
                               xxv

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Thomas L. Hadd
Stephen E. Martin
Jessica Barren
Inez L. Artico

Anthony Audia
Fredella F. Baylor
Eve Boss
Celestina J. Browne
John Comstock

Robert G. Courson
Bernadine Davis

Bettina B. Fletcher
Carl S. Gagliardi
Linda L. Garczynski
Frederick C. Garman
Ulrike A. Joiner
Paul A. Martin
Barbara S. McDonough
Paul F. Nadeau
Thomas L. Super
Carolyn Thompson
Chris  C.  Tirpak

William R. Topping
Betty  Waldron
Mark  H. Walker
Alan L. Wehmeyer
Nancy W. Wentworth
Steven E. Young
Avital G. Zemel
David Zeni
 PROJECT STAFF

Project Coordinator
Office of Research and Development

Deputy Project Coordinator
Office of Research and Development

Principal Editor
Office of Administration and Resources
Management, Cincinnati

Office of Regional Operations and State/Local
Relations (OROSLR)
Region V Planning and Management Division
OROSLR
Region VI Hazardous Waste Division
OROSLR
Office of Solid Waste and Emergency Response
(OSWER)
Region X Environmental Services Division
Office of Administration and Resources
Management (OARM)
OROSLR
Office of Communications and Public Affairs
OSWER
OARM
OARM
OARM
OSWER
OSWER
Office of the Administrator
Region IV Waste Management Division
Office of Pesticides and Toxic Substances
(OPTS)
OARM
Office of Research and Development (ORD)
OARM
Region VII Waste Management Division
ORD
OPTS
Office of General  Counsel
Region I Planning and Management Division
We would like to acknowledge the extensive support received by the task
force from the EPA regional offices, headquarters offices and the Washington
Information Center.
                                 xxvi

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                           SECTION I
                        INTRODUCTION

      In June 1991, a task force was established to address allegations
about the U.S. Environmental Protection Agency's management of
contracts developed under the Alternative Remedial Contracting Strategy
(ARCS), a contract strategy designed to correct deficiencies in an
earlier generation of Superfund contracts (see Section II —
Background).  The allegations suggested that excessive program
management costs had been incurred during the life of the ARCS
contracts; that the capacity built into these  contracts predisposed them
toward certain abuses; that control and audit functions designed into the
system to protect against fraud, waste,  and abuse had been either
misapplied or under-utilized; and that the award fee mechanism
structured into these contracts to reward superior  performance was not
working  to realize this goal.

      The task force was directed to address the following questions:

      1.    Are the  allegations of waste which have been
            reported fair and accurate?  Is a fuller,  more
            detailed  inquiry warranted?

      2.    To the extent that any alleged problems  were or are
            evident,  has the Agency taken the necessary  steps
            to assure that the problems are fully addressed?  Is
            the oversight and monitoring of ARCS adequate?
            If not, what steps  does the task force recommend?

      3.    Given the success of EPA's "enforcement first"
            strategy  and the corresponding increase in
            responsible party performance of Superfund
            cleanups, is ARCS still an appropriate approach for
            the Superfund program?   Are adjustments to the
            size of the program appropriate?

      The organization established to respond to  these questions
consisted of a task force of ten senior  career Agency officials
representing headquarters and the regions and a project staff of
professional career personnel from across the Agency.

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      The pertinent issues were assessed to determine what information
was  needed for the Agency's response.  The issues fell into three
primary categories:

      •      Processes used  to manage and  oversee the contracts
             and the contractors;

      •      Relative distribution  of expenditures to:

             a.     contractor program management;

             b.     level of effort (LOE) assigned to
                   remedial work; and

             c.     use of subcontracting; and

      •      Alternative approaches to providing  the support
             currently provided by the ARCS contractors.

      Because the task force members wanted to perform  a thorough
review of the issues related  to the ARCS contracts, they briefed the
relevant Congressional committees on the concerns that had been
identified and solicited additional  issues to be incorporated into the
study design.  The task force also met with senior officials at  the
General Accounting Office (GAO) to  learn about the results of their
reviews of the Superfund contracting program and any issues that GAO
felt should be addressed in this study.

      The task force recognized that the information needed to respond
to many of the identified issues would be found in the EPA regions,
and  arrangements were made for project staff to visit each of the
regional  offices.  Prior to  the regional  visits, the  project staff developed
an interview guide that outlined the information necessary  for a
response to the issues, including definitions  of roles and responsibilities
and  processes for managing  administration and utilization of these
contracts.

      The project staff scheduled interviews with regional personnel
who play significant roles in management and oversight of the ARCS
contracts.  In each region, meetings were held with:

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      •     The Regional Administrator, Deputy Regional
            Administrator, and Associate Regional  Administrator
            (the senior Agency decision-makers);

      •     The Hazardous Waste Division director and
            Superfund branch chief (who are responsible for the
            region's implementation of the Superfund program
            and the ARCS  contracts);

      •     The contracting officers (who  are responsible for
            contract administration):

      •     The project officers (who are  responsible for the
            technical management of the contract):

      •     Work assignment managers  (generally remedial
            project managers, who are responsible  for the site-
            specific remedial projects and  have major
            interactions  with the ARCS  contractors); and

      •     Selected ARCS contractors.

Across the country, the project staff met  with over  100 regional
personnel and  12 of the ARCS contractors.

      The discussions with  the regional staff were designed to obtain
information that would respond to the interview  guide questions in an
interactive manner; the guide was not used as a questionnaire but as a
framework for the interviews, the goal being to  keep the interview
structure flexible enough to  capture important information on program
management controls and innovations that were  not directly addressed
by the guide.

      The regional visits yielded a  wealth  of information on how
ARCS contracts were designed and  are being implemented across the
country.   Discussions were also held with personnel in the Office of
Emergency and Remedial Response (OERR)  and the Procurement and
Contracts Management Division  (PCMD), Office of Administration and
Resources Management to learn  about the processes they had
established for national oversight of the ARCS program.  The
information gained from  these exchanges reveals the complexity of the
system of ARCS contracts and points up the need for thorough  analysis

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of ARCS contract design  and evaluation of management processes
supporting the program.

      This report is organized to present the context of ARCS, to
address each of the issues in detail, to highlight the findings, and to
propose recommendations. Section II describes the background of
ARCS and places this contract strategy in the context of the entire
Superfund program.   Section III addresses each of the substantive
issues identified in the task force review.  The subsections are devoted
to program management, capacity and  utilization, controls, financial
audits and reviews, award fee process, and management processes and
organization.  Findings and recommendations are highlighted.  Section
IV, the Appendix, provides data used by the task force.

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                         SECTION  II
                        BACKGROUND
A. SUPERFUND PROGRAM  DESCRIPTION

Statutory Authority

      The Comprehensive Environmental Response, Compensation, and
Liability  Act (CERCLA) gives the U.S. Environmental Protection
Agency (EPA) the authority and necessary tools to respond directly to
releases or threatened releases of hazardous substances that may
endanger public health, welfare  or the environment or to take legal
action to compel parties responsible for causing the contamination to
clean up  those sites or  reimburse the Superfund for the costs of clean-
up.  If those responsible for site contamination cannot be found or are
unwilling or unable to  clean up a  site, EPA can use monies from the
Superfund trust fund to clean  it up.

      The law authorizes two kinds of response actions:

      •     Short-term removals  where actions may be taken to
            address releases or threats of releases requiring prompt
            response;  and

      •     Long-term remedial responses that permanently and
            significantly reduce the danger associated with releases of
            hazardous substances that are serious but not immediately
            life threatening.

Remedial and removal  responses include, but are not limited to:

      •     Destroying, detoxifying or immobilizing the hazardous
            substances on the site through incineration or other
            treatment  technologies;

      •     Containing the substances  on site  so that  they can safely
            remain there and present no future threat;

      •     Removing the materials from the  site to an EPA-approved,
            licensed hazardous waste facility for treatment,
            containment, or destruction; and

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      •     Identifying and restoring contaminated ground water,
            halting  further spread of the contaminants, or, in some
            circumstances, providing an alternate  source of drinking
            water.

      When CERCLA was passed, it was intended as a direct and
limited effort to clean up the nation's hazardous waste sites.   Congress
recognized that EPA could not address all sites, and therefore directed
it to set priorities for federal action under Superfund.  At the time, it
was expected that the $1.6 billion Superfund was sufficient to clean up
the priority sites.  Few realized the size  of the problem until EPA
began the process of site  discovery and site evaluation.  Not hundreds,
but thousands  of potential hazardous waste sites existed, and they
presented  some of the most complex pollution problems the nation had
ever faced.

      As  site  discoveries grew, cost estimates rose.  Realizing the
long-term nature  of the  problem and the enormous job ahead, Congress
reauthorized the program  in 1986 for another five  years, adding $8.5
billion to  the Fund.  The law, amended by the Superfund Amendments
and Reauthorization  Act (SARA), was stricter, broader in scope,  and
required that "to  the maximum extent practicable"  solutions  make use
of alternative or resource recovery technologies and be  permanent.
SARA:

      •     Expanded EPA's enforcement authority for compelling
            participation by potentially responsible parties;

      •     Strengthened the partnership between the federal
            government  and state and local  authorities, establishing a
            minimum level of state participation in all phases of
            CERCLA responses;

      •     Added  a section dealing with  release of hazardous
            substances at federal facilities, clarifying that Superfund
            applies to  federal agencies;

      •     Established goals for the various components of the
            Superfund  program; and

      •     Required remedies  at Superfund sites to comply with  other
            environmental laws and requirements.

-------
      Superfund was again reauthorized without substantial changes in
1990, extending funding through 1994.
Identifying Hazardous Waste Sites and Setting Priorities

      Short-term threats from hazardous substances are often
emergencies, ranging from accidental spills to serious public health or
environmental threats posed by long-standing hazardous waste problems.
EPA established and maintains response capabilities to these threats
under the Superfund removal program.  The program may entail
removing contaminants  from the area for treatment or disposal in a
safe, approved manner or reducing or eliminating immediate threats
from contamination of the ah", soil, and water; it may also  involve
reducing the cost of any necessary long-term clean-up by controlling
the migration of contaminants.  To date EPA  has performed more than
2,400 emergency clean-ups.

      In addition to responding to emergencies, pursuant to CERCLA,
EPA established a National Priorities List (NPL) to identify the worst
sites and set priorities for clean-up.  Although the  Superfund program
responds to hazardous substance emergencies wherever they occur, only
sites listed on the NPL  are eligible for  clean-up under the Superfund
remedial program.

      The NPL sets clean-up priorities  from among the  approximately
34,000 potential hazardous waste sites identified to date  by EPA, states,
communities and citizens.  Once  a site  is discovered, it enters the
Superfund  screening process for evaluation and, if warranted, action.
Historically about 2,000 new sites are added to the evaluation inventory
each year.   The screening  process, the status of which is shown  in
Figure 1, begins with a preliminary assessment and if needed (about  40
percent of the sites are  eliminated from further consideration at this
point) progresses to  a more detailed site investigation.  This can result,
again if warranted, in a package of data used to  "score" the site with
the Hazard Ranking  System, EPA's method of ranking the  relative
hazard at sites for placement on the NPL. Relatively few (about 5
percent of the 21,000 sites that have been fully assessed to date) make
it onto the NPL and move forward into the long-term clean-up
program.

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CD
                                 8

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The Remedial Process

      Figure 2 shows  the remedial process that ensues when a site is
listed on the NPL.  (See Appendix for a regional profile.) In the first
phase, called the Remedial Investigation/Feasibility Study (RI/FS),
detailed investigations  are conducted to assess what contaminants are
present, how serious the contamination is, and what potential risks there
are to the community.   Studies are also done to determine which clean-
up methods may be most effective.  This process can take 18 to 39
months, and the average cost of a study  is about $1  million.  Before
beginning the RI/FS, EPA negotiates with potentially responsible parties
(PRPs) to encourage them to perform the RI/FS under EPA oversight.

      Based upon the  RI/FS, EPA considers alternatives and develops
a proposed plan in  which clean-up alternatives  are described  and
compared.  Once the studies are complete there is a public comment
period on EPA's proposed clean-up plan. The remedy is then selected
by EPA and documented  in the Record of Decision (ROD).

      The period following the signing of the ROD is one of
negotiation with PRPs  regarding who will conduct the remedy at the
site.  EPA issues Special  Notice letters to PRPs at this time, beginning
a formal period of  negotiation  with the PRPs for site clean-up.  The
special notice letter establishes  a 60- to 120-day moratorium  during
which EPA will not begin cleaning up the site.  If PRPs decline to
participate, or the time for negotiating a  settlement runs  out,  EPA may
issue a unilateral administrative order for clean-up or begin cleaning up
the site using trust  fund money.

      After negotiations with the PRPs,  a remedial design (RD) is
prepared outlining the  plans and specifications to implement the clean-
up technology chosen  in the ROD.  Development of this design takes
12 to 18 months and costs an  average of $1 million.   Actual clean-up,
called remedial action  (RA), follows. Depending on the method  used,
construction, shakedown and operation may take from  one to  six years.
Restoring ground water may take longer.

      Even after clean-up, many sites require the maintenance of in-
place technologies,  e.g., caps or leachate treatment systems.   Deletion
from the NPL is the final step  in  the remedial  process.  In a
requirement separate from NPL deletion, certain sites are reviewed after

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                            Figure 2
            SUPERFUND  REMEDIAL STATUS
      National Priorities List:                               1207*
      (NPL Sites)

      Engineering Studies Started:                          1096
      (Remedial Investigation/Feasibility Study)

      Remedies Selected:                                    590
      (Record of Decision Signed)

      Remedial Designs Started:                              478

      Construction Started:                                   320

      Remedial Action Projects Completed:                     149

      Total Construction Work at NPL Sites Completed:           6 3

  *  Proposed and Final Sites

Source: OSWER National Perspective: Superfund 3/91
                              10

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five years to ensure that the clean-up technologies applied to them
continue to meet objectives.  EPA attempts to recover all expenditures
at a site at the completion of clean-up activities.

      The federal government has historically been criticized for not
involving the public in many of the projects it has undertaken;
therefore, Congress included requirements for public participation in
most steps of the Superfund program.  Tentative decisions regarding a
site are issued for public comment and many are made in concert with
the communities surrounding a site.
Managing the Superfund Program

      EPA's organizational structure for dealing with  Superfund
involves a headquarters office in Washington to establish policy and
provide national program direction; the implementation of the program
is delegated to EPA's  ten regions.  During the first years of the
program, the majority  of decisions were made at headquarters or
required headquarters concurrence.  As the program matured and more
sites made their way into the Superfund pipeline, the workload
increased.  The decision was then made to delegate more authority to
the regions in order to speed up the program; e.g., Records of Decision
could be signed by the Regional Administrator, eliminating what was
sometimes a  lengthy headquarters review.  Delegation  of more authority
to the regions also  placed implementation decisions in the hands of
staff involved in day-to-day site activities.
Options for  Remedial Project Implementation

Option  1:  Potentially  Responsible Parties

      CERCLA (Section  104) authorized that potentially responsible
parties perform remedial projects as  part of the  comprehensive
liability/enforcement provisions.   Specific language authorizes the
President to take action "unless ... remedial action will be done
properly" by an PRP.  These provisions were initially implemented  for
remedial design and remedial action (RD/RA) projects based on  the
Agency's selection  of  remedy decision.  The approach was
subsequently expanded to include the RI/FS phase, with the Agency
retaining selection of remedy authority.  This approach was further
endorsed by  SARA (Section 12.2 - Settlements), which  requires  the
                                 11

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President to "act to facilitate settlements" with PRPs.  SARA
introduced special notice procedures and formal moratorium periods for
negotiations with PRPs before  initiating Fund-financed RI/FS and
RD/RA projects, as well as other tools to encourage PRP participation.

      The Agency's stance in  implementing this approach was
manifested  in the Superfund Management Review (SMR), also called
the 90-day  Study (prepared in  1989), which strongly emphasizes
enforcement to  induce PRPs to conduct more clean-ups.  The SMR
also establishes a "One  Superfund Program" philosophy,  in which  PRP
commitments are sought first but Fund dollars are spent  if the PRPs
are unwilling or unable  to perform the work.   Finally, the SMR
encourages the  use of the  tools provided in SARA to encourage
settlements without compromising environmental goals.

      Responsibility for monitoring PRP projects is split in
headquarters between the Office  of Waste Programs Enforcement
(OWPE) and the Office of Emergency and Remedial Response
(OERR).  OWPE oversees projects from the RI/FS phase through  the
selection of remedy.  OWPE, in  consultation with the Office of
Enforcement, is also responsible  for all enforcement policy and for
monitoring all negotiations, including those  for RD/RA settlements.
OERR is responsible for oversight  and compliance monitoring  of
RD/RA projects.  This split was  made in 1988  to centralize
construction management expertise  in  one organization.  This  distinction
does not exist in the regions, where management of Fund and  PRP
projects is vested in  the same  division, and often with the same
remedial project managers (RPMs).

      PRPs perform projects under several  types of agreement that
define scopes of work, EPA and PRP roles and responsibilities, and
other provisions.  Generally, projects are actually performed by
contractors (consultants, Architectural and Engineering (A-E) firms, and
constructors) under the direction  of the PRPs.  Oversight of the PRP
work is required by  SARA (Section 104) and is performed by regional
offices.  Oversight support is available from Technical Enforcement
Support (TES)  contracts during the RI/FS phase and from ARCS or the
US Army Corps of Engineers  (Corps) during  the RD/RA phase.
Monitoring may include on-site examination of the work, review of all
reports, and parallel  sampling and analysis to ensure accuracy. OWPE
and OERR have each issued guidance on oversight requirements for the
regions.
                                 12

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      The value of work performed by PRPs has increased annually
since the enactment of SARA.  Figure 3 shows the value of PRP
settlements achieved annually for fiscal year (FY) 87 through FY90.
Table 1 shows the percent of projects that PRPs have initiated by type
of project and fiscal year.  Expected accomplishments for FY91 should
show PRP starts in the 60-70 percent range for each  activity.  This
probably reflects a steady state  that can be expected over the next
several years.


TABLE 1. PERCENT OF PRP PROJECT STARTS BY ACTIVITY
ACTIVITY
RI/FS
RD
RA
FY87
30%
27%
38%
88
43%
31%
32%
89
52%
65%
46%
90
49%
62%
57%
(From: CERCLIS: MGMNT 06; Federal Facility and Other Sites Excluded)

Option 2:  States

      The Superfund statute mandates  a direct role for the States in the
remedial process.  CERCLA (Section 104(c)) required three state
assurances as a precondition for Fund-financed remedial action.  SARA
(Section  121(f)) expanded the CERCLA requirements to include a
"...substantial and  meaningful involvement by each State in initiation,
development, and  selection of remedial actions to be  undertaken in  that
State."  States can also assume the lead for conducting RI/FS and
RD/RA projects.  Most requests for state lead are approved by the
regions, and  support mechanisms have been implemented to help states
build participation in the  remedial process.

      The majority  of NPL sites are discovered by state officials and
states have a vested interest in seeing that  sites in their locale are
cleaned up.  Many sites that do  not make the NPL are addressed by
states. In addition,  states are financially tied to Superfund, because the
law requires  them to contribute at least 10 percent of EPA's costs for
remedial action at NPL sites within their borders.  States also conduct
the operation and  maintenance required after a site is remediated and
play a crucial role in identifying clean-up standards and reviewing
                                  13

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proposed remedies.  Some states have developed either their own
Superfund programs or sufficient capability to expand  their role in the
Superfund process.  As a result, EPA expects that states will continue
to enhance their participation in the Superfund program.

      State-lead projects  are performed  under a  cooperative  agreement
(CA) which is jointly  executed with EPA.  The  CA describes the work
to be performed by the state, the project budget and schedule, and a
series of special conditions that guide the performance of the work.
Projects are executed by contractors retained  by  the state, generally for
that  specific site.  Oversight is maintained by the cognizant  regional
office to ensure conformance with  the CA and consistency with
program policy and guidance.  EPA retains the responsibility for the
selection of remedy decision, although states  can assist with preparation
of the Record of Decision and provide a recommendation for EPA
concurrence.

      The number of state-lead projects has  fluctuated since the
enactment of CERCLA.  Table 2 reflects the post-SARA data, which
indicate a gradual decrease in  state-lead projects.  These trends are
supported by anecdotal information suggesting that the states are
increasingly focusing their resources on  non-NPL sites or state
enforcement sites  where there  is less overlap with EPA activities.
Efforts are underway to define which long-term  state roles affect the
level of state-lead activity.

TABLE 2. STATE-LEAD PROJECT STARTS BY ACTIVITY AND FISCAL YEAR
ACTIVITY
RI/FS
RD
RA
' Projections only
FY87
22
22
11

88
16
15
9

89
11
10
12

90
10
4
7

91*
5
11
5

Option  3:  EPA-Lead Projects

      EPA-lead has  become the project delivery option  "of last resort"
after providing opportunities for potentially responsible parties and
states to assume a project lead.  However, it has been the most
frequently  used option for remedial projects to date.  EPA-lead projects
                                  15

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are conducted through contracts managed directly  by the Agency, and
through interagency agreements with other federal agencies.  These
vehicles are discussed in detail in subsequent sections of this report.
EPA also has experimented with performing remedial projects with in-
house employees.  Efforts to date have focused primarily on the RI/FS
phase of the process.  Although very resource intensive, these projects
have served as a useful training opportunity for Agency remedial
project managers.
Superfund Progress

      In the early days of Superfund, progress was slow,  as policies
and procedures were developed and the identification and
characterization of sites began.  Expertise in hazardous waste clean-up
was limited,  and  clean-up technologies were virtually non-existent.
After he was appointed the head of the Superfund program in 1984,
Lee Thomas  made key decisions to speed up the  program. Delays in
CERCLA's reauthorization by  Congress severely curtailed  Superfund
activities in  1985 and  1986, as taxing authority ran out and remaining
funds were carefully rationed.

      Following  reauthorization in October 1986, EPA faced a growing
list of increasingly complex sites in a situation characterized by
incomplete knowledge, immature technology, and  relentless pressure on
limited  resources. However, earlier efforts  began to deliver results.
Figure 4 indicates that more clean-ups were started in 1987, after the
Superfund law was  amended, than in  any previous year and that it
takes approximately  ten years for a site to go from discovery through
the clean-up  phase.  Although interim steps  have  been completed,  it is
only within the last  few years that sites have come out the other end
of the "pipeline"  of  NPL sites awaiting final clean-up.

      In  1989, EPA Administrator William  K. Reilly commissioned an
evaluation of Superfund which became known as  the 90-day  Study. It
established a new Superfund strategy, including the use of "enforcement
first" to compel private-party  responses, make sites safer by controlling
acute threats immediately, make sites  cleaner by addressing the worst
sites and  worst problems first, and develop new technologies for more
effective clean-ups.
                                  16

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      The new strategy has  resulted in the following:

      •      All Superfund sites have been assessed for immediate risk,
             and  action has been taken where necessary.

      •      Work has begun at almost 90 percent of over  1,200
             Superfund sites on the National Priorities List  (NPL).

      •      Almost 700 construction projects at 500 NPL sites are
             being readied for start-up.  Each year, 150 projects
             representing 100 sites join the construction pipeline.

      •      Roughly  350 clean-up  projects are  being designed.

      •      PRPs are now doing about 60 percent of new  clean-ups,
             under EPA supervision.

      •      Treatment technologies are being employed in  over 70
             percent of the projects to control hazardous waste sources.

Overall, work has accelerated and the pipeline is full.

      As Superfund enters the nineties, the challenges  facing it include:

      •      Forecasting  and planning the investigation and clean-up
             workload in the Superfund pipeline to maintain a steady
             program;

      •      Finding the right technologies to address  site
             contamination;

      •      Continuing to refine and institutionalize the clean-up
             process in order to perform work as efficiently as
             possible;

      •      Reducing overall time required for site investigation and
             remediation by two to three years;

      •      Using the first ten  years of Superfund experience to
             achieve more in the next ten; and
                                  18

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            Improving public communication  on the scope and
            administration of the program.
B. REMEDIAL CONTRACTING HISTORY

      Contractors have conducted  the bulk of the pre-remedial,
remedial and removal projects that comprise the Superfund pipeline.
The decision to rely on contractors for project execution was made in
1981 and was predicated on the belief that Superfund would be a  short-
term program (it was authorized for five years initially) that did not
warrant the  buildup of a large federal workforce. Private contractors
are used for several reasons.  First, they provide a flexible workforce
that can  be  adjusted to meet changing  needs, both technically and  in
size.  Second, contracts make accessible expertise unavailable within
the government workforce; e.g., a  specialized firm may have the know-
how needed to implement a particular technology at  a hazardous waste
site.  Third, using contractors to perform work may be less expensive
than using an in-house workforce;  e.g.,  a contractor may already have
made capital expenditures, thereby reducing the cost  of doing business,
whereas  EPA would need to make  such  capital expenditures before
performing the work itself.

      Specific Superfund contract  programs include:  the Field
Investigation Team  (FIT) for conducting pre-remedial preliminary
assessments  and site inspections; Technical Assistance Teams (TAT) for
removal  assessment and oversight support;  Emergency Response
Contract Strategy (ERCS) for removal  actions; Technical Enforcement
Support (TES) for enforcement support and oversight of potentially
responsible parties;  Contract Laboratory Program (CLP) for analyzing
samples; and the Remedial (REM) and Alternative Remedial
Contracting  Strategy (ARCS) for remedial projects.
Remedial (REM) Contracts

      In 1981, the first three Interim Remedial Contracts were awarded
in order to conduct RI/FSs and provide limited remedial design support
pending a decision on a long-term contracting approach and on the
involvement of the Corps.  Each  contract was assigned  to a specific
group of regions  or zones.  Specifics on these contracts are provided in
Table 3.
                                 19

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      The two REM/FIT contracts awarded in 1982 were the first
major contracts to support the remedial program.  These combined the
remedial (REM)  and pre-remedial (FIT) components to generate
"economies of scale" and to promote a smooth transition between pre-
remedial and remedial projects.  These contracts proved effective;
however, as  the program grew it became unwieldy to combine both
functions within  single contracts, and a decision  was made to split the
remedial and FIT requirements for purposes of recompetition.

      In 1984, the REM contracts followed and REM 2 was awarded
to meet a capacity  shortfall on the remedial side of the REM/FIT
contracts.  This contract was designed to work in all ten regions.  The
REM 3 and  4 contracts  were  awarded in 1985 and  replaced the
remedial portion  of the REM/FIT contracts. Follow-on FIT contracts
were awarded in 1986.  The three large REM contracts were
augmented by two  small contracts (REM 5 and 6),  which were
awarded to minority business  enterprises.

      REM  contracts  were designed principally to investigate and
characterize  hazardous waste sites and examine viable clean-up
alternatives (conduct the RI/FS).   They also included limited capability
for preparing design specifications (RDs) and implementing construction
(RAs) of selected remedies.  RD/RA capability was  limited, as most of
the program's RD/RA work was performed by the Corps.   EPA
anticipated using REMs  for RD/RA  only in emergencies, e.g. for
installation of a water main for  residents whose well water had been
contaminated.
C. ARCS CONTRACT CHARACTERIZATION

Purpose and Program Objectives

      The ARCS represents a new approach designed to mitigate
problems experienced under the REMs and to improve project and
program management.

      The following principal goals were incorporated  into the ARCS
contract structure:

      1.    Provide full service capability to allow project
            continuity from RI/FS through RA;
                                21

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      2.    Increase competition  for contract awards and
            involve more firms in the program;

      3.    Delegate contract responsibility and authority to the
            regions; and

      4.    Establish incentives to foster superior performance.

These four goals are described in  the following subsections.

Project  Continuity

      The REM approach required a transfer of projects from EPA
contractors to  Corps contractors, resulting in clean-up delays that  were
attributable to the need of follow-on contractors to familiarize
themselves with previous work performed.  The ARCS contracts were
designed to correct this problem by limiting hand-offs from contractor
to contractor and reinforcing accountability.  ARCS contracts offer a
full-service capability from RI/FS  through RD and construction
management.

Competition for Contract Award

      The REM contracts were among the  largest in EPA's history.
Each had a potential value between  100 million and 200 million dollars
and  required extensive geographical coverage.  Given the magnitude of
these contracts,  only large engineering firms with extensive capability
could handle them.

      From FY83 through FY88,  the remedial program obtained
engineering support  from five REM contracts held by four contractors
and  the Corps.  Continual expansion  of sites on the NPL, together with
the passage of the Superfund Amendments  and Reauthorization Act in
FY87,  caused the program to experience a  severe contract capacity
shortage and a need to broaden its base of  firms  which could perform
hazardous waste remediation.

      The ARCS contracts addressed this situation in several  ways.
First, where possible, contracts were awarded on  a regional basis.  In
those regions  where the projected workload was not sufficient to
support dedicated contracts, regions were combined to form zones.
Second, within each region or zone, multiple contracts were awarded.
                                  22

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Since the strategy looked toward removing contractors from the
program for deficient performance, contracts were  awarded in excess of
projected workload needs.  This approach was also thought to be  a
potential palliative to future capacity shortages.  Third, to effectively
increase competition, two different size contracts were offered, one for
small to mid-size firms and one for large firms. Further, all firms
were instructed to propose  on only one contract size per region or
zone.  Thus, no contractor  could receive  more than one contract in a
given region or zone.  Finally, the evaluation criteria for contractor
selection were structured  to minimize the advantages of incumbency,
yet obtain qualified  contractors.

Delegation to the Regions

      Management of the REMs was centralized at EPA headquarters,
where contract management oversight responsibilities were  retained.
Among these were the authority to assign and fund all work, approve
all subcontracts, issue contract modifications, determine the quality of
contractor performance through the award fee evaluation process, and
balance competing regional needs for additional contract capacity.
Even though regional offices were involved in these activities to some
degree,  they did not possess contracting officer or  project officer
authority. The regions primarily managed site-specific contractor
performance and  reported its quality  to headquarters.  This approach
required constant coordination between regional, headquarters, and
contractor staff, forced contractors to be  accountable to two clients,  and
distanced decision making and responsibility from  the source of
information  and the end user respectively.

      The ARCS contracts were predicated on the complete delegation
of contract management  authority and responsibility to the  regional
offices.  Specifically, each  regional office or zone  would receive
contracting officer and project officer authority, would be responsible
for all aspects of contract management, and would determine the
quality  of contractor performance.

Enhanced Performance Incentives

      In  July 1988, the  GAO completed an extensive review of the
REM contracts.   GAO's findings demonstrated  a need for EPA to
exercise better control over costs and improve the  award fee process to
maximize contractor performance.  Long  before release of  this report,
                                  23

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Agency managers were aware of GAO's findings based upon auditor
inquiries and requests for documentation and explanations.

      ARCS contracts were designed to address these problems.  One
primary objective of the  ARCS was  the establishment of a dual-track
incentive program which is effected  through an award fee process  that
documents the quality and efficiency of contractor performance and
exercises options for additional work based on high performance.  The
ARCS program also transferred the award-fee decision process to the
regions in order to  facilitate a more  accurate determination of the
quality and value of contractor services.
ARCS Contract Structure

      ARCS contracts contain two principal areas of activity:  program
management and remedial activities.  Program management constitutes
those technical and administrative  functions which are required to
support the  delivery of the technical hours.  Remedial activities are
those associated with site management, remedial investigations/
feasibility studies, and all engineering services in design and execution
of a remedy.  These areas will be discussed specifically in Section III.
A summary of the planned expenditures under the ARCS  contracts is
shown in the Appendix.
Contract Sizes

       One of the primary goals of ARCS was to enhance competition
and  increase the  number of remedial action  contractors available to the
Agency.  Given the regional nature of the ARCS procurements, the
Agency sought to enhance the opportunity of smaller, regionally based
A-E firms to participate in the competitive process.  Thus, each
solicitation requested that offerers propose on  smaller and larger
contracts.  The actual sizes  of these in terms of level-of-effort  (LOE)
hours  to be procured varied among the solicitations depending  on  the
individual annual LOE needs of each region/zone.

       The smaller contract  provided for  a minimum delivery amount in
LOE hours  that was  half of the minimum delivery amount provided in
the matching large contract.  The annual maximum LOE delivery  rate
for the small contract varied by region/zone from one quarter to one
half of the annual delivery for the matching large contract.  Finally, the
                                 24

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total maximum LOE amount to be delivered under the small contract
varied by region/zone from about  one half to one quarter of the total
maximum LOE amount under the  matching large contract.

       Table 4 indicates the  actual sizes of the  small and large contracts
procured in each  region/zone.  The variance in region/zone needs  is
reflected in the two sizes of "small" contracts and the three sizes  of
"large" contracts procured.  Table  5 shows the  distribution  of small and
large contracts procured in each region/zone and  the maximum annual
delivery rate of LOE hours available to each region/zone.
TABLE 4. CONTRACT SIZES
Region/
Zone
IV
V

ARCS-Central

ARCS-West
             Small
      Contract In LOE Hours
    MinVAnnual max/Total max

      25,000  25,000 145,000
      25,000  25,000 145,000

      25,000  25,000 145,000
      25,000  25,000 145,000
      25,000  25,000 145,000

      25,000  25,000 145,000

      35,000  35,000 200,000
                       Large
                Contract In LOE Hours
              MinJAnnual max/Total max

               50,000   50,000  300,000
               50,000  100,000  560,000

               50,000  100,000  560,000
               50,000   50,000  300,000
               50,000  100,000  560,000

               50,000   50,000  300,000

               70,000  140,000  780,000
TABLE 5. DISTRIBUTION OF SMALL AND LARGE CONTRACTS BY REGION/ZONE
No. of
Region/Zone

I
IV

V

ARCS-Central

ARCS-West

TOTALS
    No. of
Large Contracts

      3

      3

      2

      5

      5

      7

      4

      29
Total Annual Max
 Small Contracts

       4

       3

       3

       1

       2

       1

       2

       16
      Base
  Capacity (LOE)

 250,000 HOURS

 375,000 HOURS

 275,000 HOURS

 275,000 HOURS

 550,000 HOURS

 375,000 HOURS

 630,000 HOURS

2,730,000 HOURS
                                   25

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ARCS Procurement Cycles

      The ARCS were procured in three individual cycles from the
issuance of the first solicitation in May 1987 to the award of the final
ARCS contract in June 1989.

      Cycle I  included solicitations for Regions III and V.  The
solicitations were issued on May 8, 1987 and offers were received  on
June 8, 1987.  In Region III, five ARCS contracts were awarded
between January 1,  1988 and June 29, 1988. In Region V, seven
ARCS contracts  were awarded between February 1, 1988 and June 29,
1988.

      Cycle II included solicitations for Regions I and II and the zone
of Regions VI, VII  and VIII (ARCS-Central).  These  were issued on
October 23, 1987 and offers were received on November 23,  1987. In
Region I,  seven  ARCS contracts were awarded between September 16,
1988  and  April 15,  1989.  In Region II, six contracts were awarded
between September  6, 1988 and May 26,  1989.  In ARCS-Central,
eight  contracts were awarded between September  13,  1988 and  May 26,
1989.

      Cycle III included solicitations for Region IV and the zone of
Regions IX and  X (ARCS-West).  These were issued on April  8, 1988
and offers were  received on May 8, 1988.   In Region IV, six contracts
were  awarded  between May 25, 1989 and June 22, 1989.  In ARCS-
West,  six  contracts  were awarded between March  10,  1989 and June
28, 1989.

       Completion of the three cycles of ARCS procurements  resulted
in the award of  45  contracts to  23  prime contractors.  The prime
contracts provided for the potential participation of 115 team
subcontractors, 49 of which were small businesses or  small
disadvantaged  business enterprises.

       Table 6 identifies the ARCS prime contractors  and indicates the
number and distribution of prime contracts by region/zone. Table  7
shows the number and distribution  of ARCS prime contractors and
potential team subcontractors by region/zone and identifies the number
of large businesses, small businesses  and small disadvantaged business
enterprises participating as team subcontractors.
                                26

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TABLE 6. NUMBER AND DISTRIBUTION OF ARCS PRIME CONTRACTORS
                         No. of
ARCS Prime Contractors  Contracts

1.  COM Federal Programs      4
2.  Ebasco Services, Inc.       3
3.  Arthur D. Little             1
4.  Metcalf & Eddy             1
5.  NUS Corporation           2
6.  TRC Companies           1
7.  Roy F. Weston             6
8.  ICF Technology            2
9.  Malcolm Pirnie             1
10. TAMS Consultants          1
11. Black & Veatch, Inc.        3
12. CH2M  Hill, Inc.             5
13. Ecology & Environment      3
14. Tetra Tech,  Inc.            1
15. Bechtel Environmental      2
16. Donohue &  Associates      1
17. PRC Corporation           1
18. WW Engineering           1
19. Fluor Daniel, Inc.           1
20. Jacobs Engineering         1
21. Morrison Knudson          1
22. Sverdrup                 1
23. URS Consultants           2
                    Dist. By Region/Zone

                     , II, IV. ARCS-Central
                     , II, IV
                      II, IV, V, ARCS-Central, ARCS-West
                      ARCS-West
                    III, IV, V
                    III, IV, V, ARCS-Central, ARCS-West
                    III, V, ARCS-West
                    III
                    IV, ARCS-West
                    V
                    V
                    V
                    ARCS-Central
                    ARCS-Cenlral
                    ARCS-Central
                    ARCS-Central
                    ARCS-Central, ARCS-West
TOTAL ARCS PRIME CONTRACTORS: 23, TOTAL ARCS CONTRACTS: 45
TABLE 7. DISTRIBUTION OF ARCS PRIME AND TEAM SUBCONTRACTORS
Region/Zone
II
III
IV
V
ARCS-Central
ARCS-West

TOTAL
  No. of ARCS
Prime Contractors

      7
      6
      5
      6
      7
      8
      6

      45
       No. of
Team Subcontractors

25 (15LB/9SB/1SDBE)[*]
   17 (10LB/6SB/1SDBE)
     4 (2LB/2SB/OSDBE)
   18 (12LB/4SB/2SDBE)
    14 (7LB/6SB/1SDBE)
  25 (14LB/10SB/1SDBE)
    12 (6LB/6SB/OSDBE)
                  115
* (Large Business/Small Business/Small Disadvantaged Business)
                                      27

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      The Appendix identifies all ARCS prime contractors and
potential team subcontractors  by region/zone and provides the size of
each concern in terms of large business, small business or small
disadvantaged business enterprise.  It also contains a list of awarded
ARCS contracts which identifies each ARCS prime contractor and
provides information regarding individual contract numbers, potential
contract values, and performance periods.
D. FUTURE OF SUPERFUND CONTRACTING

      As Superfund approached its tenth year, managers began looking
into the next decade to plan the future of Superfund contracting.  EPA
completed a Long-Term Contract Strategy (LTCS) which provides the
framework for Superfund contracting through the 1990s.  The LTCS
was formulated with the recognition that the day-to-day  activities of
Superfund have been delegated to the regions and thus the majority of
Superfund contracts should be regional contracts designed to meet
regional  needs and managed and overseen by regional staff.  In
addition, the LTCS addressed potential vulnerabilities caused by the
lack of flexibility in the current contract structure, changes in program
direction, and the level of competition for Superfund contracts.

      The LTCS Task Force delivered a final strategy document in
September 1990, and in December 1990 a joint strategy for
implementation was jointly issued by  the key affected offices.
Comprehensive implementation plans are being developed for each
contract  component. The implementation plans demonstrate an acute
awareness of the need  to carefully plan the new contracts and reduce
vulnerabilities.  Actions are specified  by the implementation plans to
strengthen Superfund contracting in the areas of: training; definition of
roles and responsibilities; provision of policy, guidance and oversight;
automated information  management; and contracting-specific issues
(e.g., award fee, size, number and types of contracts, program
management structure and costs, etc.).   A headquarters and regional
advisory committee is  monitoring the  implementation progress.
                                 28

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                          SECTION m
                         MAJOR ISSUES
INTRODUCTION
      This section addresses each of the issue areas in a separate
subsection, presents findings and conclusions, and lays the background
for task force recommendations.

      Subsection A, "ARCS Program Management," defines the
activities and appropriate costs that fall within this major category of
the ARCS contracts.  It describes contractual obligations, invoicing,  and
base and option funding.  It projects the long-term trend of program
management costs within ARCS  contracts as compared to similar costs
in earlier Superfund contracts.

      Subsection B, "ARCS Capacity and Utilization," describes the
context  of the decision to build excess capacity into the ARCS
contracts, analyzes the capacity of the subcontract pool, and explains
the options built into  the contract vehicle.

      Subsection C, "ARCS Contract Controls,"  deals with contract
management and administration in the decentralized ARCS setting,  with
cost and technical performance monitoring,  with  the Federal Managers'
Financial Integrity Act (FMFTA), with management of government
property, and with appropriate roles and responsibilities for all who  are
involved with  the contract vehicle.

      Subsection D, "ARCS Financial Audits and Reviews," defines
appropriate audits and reviews for the ARCS setting, describes how and
why ARCS has caused a growth in audit responsibility, and indicates
mechanisms for addressing this expanded responsibility.

      Subsection E, "Award Fee Process,"  describes cost-plus-award-
fee contracts and their function in ARCS, the roles and responsibilities
of each participant in the contractor performance evaluation process, the
major components of performance evaluation, and the effectiveness of
this contract type.

      Subsection F, "EPA Management Processes and Organization,"
describes the effect of decentralization on the exercise of
responsibilities  under  ARCS, the skill mix,  training, and communication
                                 29

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necessary for effective administration of ARCS, and ARCS  in the
broader context of acquisition management within the Agency.

      The  Assistant Administrators for OSWER and OARM should be
directed to  develop a  detailed implementation plan for the
recommendations outlined in each subsection below and report  quarterly
to the Administrator on the status of implementation.
                                 30

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A.  ARCS PROGRAM MANAGEMENT

Background

      Each ARCS contract contains two elements for definition of
work to be provided by the contractors and  to be used for the billing
of direct and indirect costs.  These elements are  "Program
Management" and "Remedial Planning."  The program management
element was created to  support the site-specific remedial work and
capture  all costs that  applied to multiple sites.

      The program management component of the  ARCS contracts
provides all support functions  necessary to perform remedial site
activities under the contract on an ongoing basis  for the  duration of the
contract.  Program management, as a contract element, is intended to
promote quicker turnaround on work assignments, encourage efficient
resolution of overall contract and site-specific problems,  focus priorities,
and maximize resource  sharing over all the  work assignments.

      The multi-site support costs incurred under program management
are to be  allocated back to site-specific work assignments for purposes
of Superfund cost recovery.  Because all appropriate clean-up costs
need to be recovered from responsible parties, the ARCS contracts
require contractors to review costs incurred  under program management
annually and submit an allocation  of appropriate  costs to individual
sites.  Allocation will allow cost recovery to include an  equitable
portion  of support costs as well as the site-specific clean-up costs.

      Program management costs  are invoiced  as direct  costs,  e.g.,
labor, travel, and supplies, and as  indirect costs, e.g., fringe benefits
and proportional corporate costs.  The ARCS contracts generally
identify two types of indirect  costs:  overhead and  G&A (general and
administrative).  The  rates and bases for applying the rates  are
specified in each contract.  Indirect costs are billed under each of the
ARCS  contract elements.

      The task force addressed two issues related to program
management:
                                 31

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Issue 1

      The term program management implies that all expenditures
billed to the program management cost category under the ARCS
contracts are for administrative or "overhead" activities.

Discussion

      Program management constitutes an account under which all
costs not directly incurred  on a remedial work assignment are
accumulated, billed and  reported, allowing distribution  of routine
remedial activity support costs over more than one site.  These costs
can be segregated into contract administration support and technical
support.  The contract administration activities are often referred to as
management costs in the private sector.  The technical support activities
under ARCS contracts are actions that support Superfund remedial site
work but  that benefit several  sites rather than just one site.

      ARCS contract administration support activities are basically
managerial and  administrative in nature, including:

      •     Progress reporting;

      •     Invoicing and cost documentation;

      •     Required conflict of interest reviews;

      •     Management  of team subcontractors;

      •     Records management to support cost recovery; and

      •      Subcontracting support; e.g., establishing prequalified
             bidders  lists for  specialty services  such  as well drilling,
             surveying,  security, small business and  minority business
            participation.

      The following are examples of ARCS technical  support actions
that benefit remedial site work and  apply to multiple sites:

      •      Quality assurance project reviews and audits;

      •      Equipment purchases, maintenance, storage and inventory;
                                  32

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      •      Health and safety training and medical monitoring of
            employees;

      •      Standard operating procedures to direct remedial activities;
            and

      •      Pollution liability insurance.

      ARCS contracts require contractors to review program
management costs annually to determine reasonableness and
appropriateness for allocation back to the remedial sites. EPA requested
the deferment of annual allocation submissions from the ARCS
contractors to allow for the revision of the contract clause that addresses
allocation. Revision of the clause was necessary to improve both the
accounting policies and the documentation concerning program
management costs.

Finding

      In ARCS contracts, program management refers to a cost
accounting center  that includes administrative and technical costs and was
established to support Superfund cost recovery and to  focus management
attention on keeping such costs to a minimum.

Recommendations

      •      To provide for more accurate tracking of costs,
            within 120  days, OSWER, in concert with OARM
            and  the regions, should develop guidance on
            division of program management costs into
            administrative and technical support.

      •      OARM should  take the necessary actions to
            complete, by  December 1, 1991, guidance required
            to allocate program management costs to site-
            specific work assignments for purposes of cost
            recovery.

      •      The  Agency should revise the program
            management concept for future contracts.  Future
            contracts should provide for separate accounting
                                33

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            of start-up costs, contract administrative costs,
            and other remedial support costs.
Issue 2
      The amounts expended by contractors under program management
are high compared to current remedial work load and total contract
expenditures.

Discussion

      Program management expenditures will be billed throughout the
life of these contracts and are incurred before and during remedial site
work. Initial program management expenditures compared to the
remedial planning expenditures were expected to be high while
contractors were preparing for remedial work assignments, to decline
after contract start-up, and then to fluctuate as the amount of remedial
work conducted varied.  However, major equipment purchases or
purchase of pollution liability insurance can skew the anticipated trend
toward reduced costs.

      The contractors had to be ready to perform shortly after contract
award.  Therefore, start-up costs were incurred for the following
purposes:

      •      Organization and staffing;

      •      Standard plans for management, quality assurance, and
             health and safety;

      •      Insurance and indemnification procedures;

      •      Negotiation and award of subcontracts;

      •      Development of field equipment needs  and inventory
             control guidelines; and

      •      Purchase of baseline equipment.

      Actual expenditures for program management activities were
compiled nationally for this review. (See Appendix).  The data were
                                 34

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compiled as of May 31,  1991, and although the data base may be
incomplete, the general trends and overall conclusions suggested by the
data are considered to be valid.

      The ARCS contracts were  negotiated with a guaranteed base
amount of technical LOE hours in the remedial  planning contract
element.  It was expected that the base LOE hours would be delivered
within two years.  An estimated level  of program management
expenditures, calculated to support delivery of the base LOE hours, is
contained in the Appendix.  By May  31, 1991, almost every contract
had been in place  for two years or more, yet only about half of the
contracts had met the base LOE.  This discrepancy is explained by the
lower-than- anticipated amount of work given to ARCS.  The program
management expenditures show a reduction below  base value estimates
(36 percent), but not a full corresponding 50 percent. This may be due
in large measure to start-up costs. The base value for program
management did not consider the front end start-up costs.

      As  stated previously,  the funds needed for program management
are expected  to decline after start-up and then to fluctuate with LOE
activity.  This is demonstrated by billing data and is displayed in
Figure 5, which shows expected curves of program management and
remedial costs incurred over time for a typical contract.  The value of
program management dollars spent per total contract dollars spent  may
be the most useful indicator  of successful cost control.  Figure 6 shows
the ratio of program management costs to total contract costs declining
rapidly as ARCS contract program management  costs per year  decline
and remedial activity increases.

      The  Appendix shows contract-specific curves by region,
displaying the change in the ratio of program management to total
contract outlays over time.  These charts and Figure 6 illustrate the
ratio based on yearly costs.   If the same ratio of program management
cost to total contract outlay is calculated for cumulative costs, the
FY91 value changes from 20 to 28.   The cumulative ratio  is
"burdened" with the front-end costs.   It will take steady reduction in
program management costs and increase in remedial work to bring the
cumulative ratio down.

      For purposes of analysis, the following indicators were also
evaluated:  program management dollar per remedial dollar and
program management direct labor dollar per remedial direct labor  dollar
(see Appendix). Data collected by the task force indicate that the
                                 35

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program management expenditure ratios have decreased for most
individual contracts.  This finding is consistent with expectations.  The
trend should level off or decline slowly as routine is established in
program management activities and remedial activity increases.

      Although costs have been reduced significantly, further reductions
in program  management expenses  are desirable.  Several contractors
have more than one ARCS contract, and significant  savings may be
realized by  merging some program management functions by  contractor
instead  of maintaining separate activities for each contract.

      Additionally, program  management is structured with estimated
base amounts of expenditures in years one and two  and multiple
options  in each following year.  The award of options will be based on
EPA's assessment of the need for additional support.  Establishing clear
expenditure objectives with expenditure targets for program management
activities is critical for further cost control.

      Under REM, contractors were often called upon  to provide
program analysis and technical support on behalf of the Agency.
These activities are not a component of ARCS contracts.  Much of the
management responsibility addressed by REM contractors will be taken
on by the Agency, in particular, by the regions. It is anticipated that
the ARCS contracts will,  upon completion,  incur less program
management per total outlays than  the REM contracts (See the
Appendix for specific cost comparison information).  Finally,  it is  noted
that  the ARCS program management/total contract outlays ratio will  be
significantly affected by the  use or lack of use of the subcontracting
pool in the remedial  planning portion of the contract.  The initial
ARCS total contract estimate, based on full use of the  subcontracting
pool, was that program management would total  11  percent of overall
costs.  The current cumulative ratio is 28 percent, reflecting both start-
up costs and low  use of the  subcontracting pool.

Finding

      Costs for program management during start-up were high in
comparison to costs for assigned remedial work.  Front-end start-up
costs and a lower than expected remedial workload  contributed to  this
problem.  Program management costs have generally declined as a
proportion of costs for  remedial work, but specific outliers need
management review.  Data tracking and cost evaluation systems are  not
                                 38

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currently maintained at a national level and are needed to  assure
maximum cost control and national reporting ability.

Recommendations

      •     A national target of 20 percent or less for program
            management expenditures compared to total contract
            expenditures for ARCS contracts should  be adopted by
            OSWER and OARM.  To accomplish this  level,
            contract-specific cost expenditure targets, and
            contractor-specific targets where a contractor has more
            than one contract, should be developed by regions with
            the  assistance of OSWER and OARM.

      •     Regions should continue to pursue cost reductions for
            program management and strengthen cost  controls.
            Contractor effectiveness in controlling costs should be
            routinely considered as a significant factor in the
            award fee evaluation process.

            OSWER, with OARM  and the regions, should within
            120 days develop guidance to support cost management
            activities, including:

            a.     description of program management activities
                  mandated by contract  requirements;

            b.     clarification of requirements on the contractor
                  related to staffing levels or positions;

            c.     reiteration of requirements on EPA for
                  exercising options for  funding program
                  management activity;

            d.     discussion of factors for consideration in
                  promoting efficiency during periods of relatively
                  low remedial work activity; and

            e.     development of various indicators  of
                  administrative cost control.
                               39

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B.  ARCS CAPACITY AND UTILIZATION

Background

       Federal-lead remedial planning, design and construction projects
are conducted through contracts  managed directly by EPA and through
interagency  agreements (lAGs) with other federal agencies with EPA
oversight.  The decision to use EPA contracts and lAGs was  made in
1981, and recognized the Agency's lack of experience in construction
management.  The scenario called for Agency contracts (REM and
ARCS) to perform the environmental studies (RI/FSs) leading up to the
remedy selection decision, and use of the U.S. Army Corps of
Engineers (Corps) to  conduct the design and construction projects to
implement the selected remedies.  This  approach had the dual benefit
of allowing EPA to focus on the environmental issues while taking
advantage of the existing engineering design and construction
management experience and infrastructure residing in the Corps.

       Specific advantages with involving the Corps in Superfund
include the  Corps' ability to  act as a "Federal Agent" to oversee the
expenditure of federal funds on  large design and construction projects;
the availability of a cadre of experienced resident engineers to maintain
an on-site Federal presence to monitor the execution of the work; and a
comprehensive infrastructure  that includes real estate acquisition, dispute
resolution mechanisms for construction  change orders and  claims, and
other expertise  to help ensure the successful completion  of projects.

       The ARCS program includes a total of 45 contracts awarded to
23 different firms across  the ten regions. The contracts provide a
potential capacity of  over 15 million LOE hours to perform RI/FS and
RD studies, construction management, oversight of remedial work
performed by responsible parties, and other technical support.  The
contracts also provide a subcontract pool capacity of $4.2 billion to
support field investigations (e.g. well drilling, soil borings, and
analytical support) and to perform remedial action projects.

       ARCS LOE and subcontract pool capacity needs projections were
developed for each region during 1986-87.  The projections were
predicated on a Fund-financed program that  included over 100 RI/FS
starts per year.  From this base,  estimates were developed on the
number of design and construction projects that would likely  flow to
the ARCS contracts rather than  the other alternatives — potentially
responsible parties, the states, or the Corps.  Additional  LOE hours and
                                 40

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subcontract pool capacity were included to cover sites and projects
transitioning from the expiring  REM contracts, potentially responsible
party oversight projects, and community relations and other technical
support activities.  Finally, contingencies were added to accommodate
potential program growth and  to ensure adequate excess capacity to
allow for the termination of contractors in the event of poor
performance.  A target LOE capacity was then specified for each
region, and multiple contracts  were awarded to achieve the target level.
(Subcontract pool capacity  was not a factor in establishing the number
of contracts to be awarded in  each region.)

      The  utilization pattern for ARCS envisioned starting new  RI/FS
projects and follow-on RD/RA projects from  the REM contracts during
years one through four following award. The remaining capacity would
be reserved to conduct RD/RA projects emanating from the RI/FS s
during years five through ten.   New contracts would be competed as
needed to commence about year five to pick  up new RI/FS starts.

      As contracts  were being awarded from January 1988 through
June 1989, the nature of the program was changing. A sharp increase
in the number of projects  being performed by potentially responsible
parties, budget constraints  resulting from an increased emphasis  on
RD/RA work, and continued use of the Corps resulted in a reduced
workload for ARCS.  The  primary impact was on the number of RI/FS
starts, which traditionally provided the primary ARCS workload.  RI/FS
starts were reduced to 78 in FY90, and the target for FY91 is 13
(actual FY91 performance may exceed this target).  RD/RA work for
ARCS increased slightly to 34 in FY90, but this  small increase  did not
offset the workload impact of the RI/FS  reduction on use of  the ARCS
contracts.

      To compensate for these changes, a  number of adjustments to
the ARCS utilization plan are  being implemented. First, as a result of
the Superfund Long-Term Contract Strategy, pre-remedial activities
done under the FIT contracts and  oversight of potentially responsible
party RI/FS projects done under the TES contracts will  be transferred
to ARCS.  The pre-remedial work will be done for a two-year
transition period pending the development of a new contract  structure,
while the RI/FS oversight work will be phased in permanently as the
TES contracts expire.  Second, the program plans to use the  ARCS
contracts for RI/FS  starts beyond year four commensurate with
available capacity,  thereby  delaying action to add new contracts  until
                                 41

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additional capacity is needed.  The results of these adjustments are
summarized below under LOE Capacity Analysis.
US Army Corps of Engineers (Corps)

      As stated above,  the primary mechanism chosen for
implementation of remedial design and construction projects was the
Corps.  The decision  to involve the Corps  in the remedial program was
made by the incumbent Administrator in 1981.  The agreement was
consummated in a memorandum of understanding (MOU), which was
subsequently amended in 1984.  Decisions  were made to issue work
assignments to  the Corps through site-specific lAGs, and at  the
direction of the Office of Management and Budget  (OMB),  the Corps
was to contract out all design and construction projects (the latter  to
appease the concerns  of interested contractors that the Corps would
perform the work, particularly the remedial design,  with in-house
forces).  The Corps receives  staff resources directly from  OMB based
on  the projected Superfund workload, while both intramural and
extramural costs are reimbursed by EPA.

      The pre-SARA years were marked by  considerable  tension
between EPA and the Corps.  From the Corps perspective, the RD/RA
workload did not materialize  to  the levels projected, which caused staff-
size planning problems.  Further, the Corps was never comfortable with
the high level of oversight exerted by the EPA regions, preferring a
"Mission Assignment" approach with minimal oversight and occasional
reporting.  Finally, the Corps believed the  accounting and paperwork
burdens imposed by the demands for cost recovery to be  excessive.
Conversely, the EPA  regions wanted to maintain control over the
projects for which they felt accountable.  Also, the regions were
concerned with the logistical problems resulting from the  Corps
decision to centralize all design work in the Omaha and Kansas City
district  offices, with the Corps' perceived reluctance to share project
information, and with the excessive delays  to initiate engineering design
activities resulting from the Corps' site-specific contracting approach.
Finally, the regions raised concerns about the Corps' minimal
experience base with  hazardous  waste problems, which caused start-up
difficulties in some sites.

      One of the primary underlying causes  of tension was a lack of
mutual  understanding of the  two agencies'  needs and operating
                                 42

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procedures (e.g. procurement procedures, terminology, schedule
constraints and public expectations), particularly at a project level.
These strained relations were largely responsible for the large
construction capacity built into the  ARCS program  to ensure a backup
capability should the MOU  be terminated or curtailed.

      Post-SARA relations  between the two agencies improved through
the direct intervention of senior management within the Department of
Army and the Corps.  The rallying point for improved  relations became
EPA's goal of meeting  the SARA-mandated target of initiating  175
remedial action projects over the three-year period from October 1986
to October 1989.  The Corps  implemented oversight procedures and
more innovative contracting strategies to ensure the timely completion
of Corps assigned projects.  They also expanded their service base to
include  new support functions (e.g. real estate acquisition) needed by
the regions.  EPA supported the development of the Clean local area
network (CLEANLAN) system, which allows the Corps to interact with
the official EPA management system.  Once fully operational,
CLEANLAN should allow the Corps to develop workload planning
projections while allowing EPA to  monitor  the status of individual
Corps projects.  Also, EPA  revised procedures for payment of Corps
invoices to ensure prompt reimbursement of Corps  costs, and provided
guidance and support for record-keeping requirements.  Both agencies
focused on team-building initiatives including a series of retreats which
served to  air issues, improve mutual understanding  of the other
agency's needs, and identify action items to resolve problems.   Finally,
the Corps has begun to decentralize design  support activities to other
qualified districts (e.g. New England and Seattle) to improve
communications with the regions.   These actions have been successful,
but issues remain to be addressed.

      Ongoing performance can be divided into two areas.  First,
remedial design support continues to be an  area of concern.  One of
the primary irritants to the regions  is the amount of time needed for
the site-specific  procurement of contractors  to perform the remedial
design.  This process can take several months to complete, and on
occasion has resulted in the selection of a  contractor already available
to the region under the ARCS program.  The Corps has awarded
indefinite  delivery contracts for remedial design, but these contracts
also can experience delays while negotiating fixed-price work
assignments. Traditionally,  the Corps has maintained a strong
preference to use site-specific contracts, particularly where project
schedules  appear to allow sufficient time or where  specialized  design
                                 43

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expertise may be required.  Several regions have countered this
problem by using ARCS to perform the remedial design, with the
intention of assigning the construction phase to the Corps.  This
approach has proven successful when proper coordination and Corps
involvement are maintained during design.  Corps future performance
may change, as the Corps  now agrees that there is a need for more
responsive contract mechanisms for both EPA and Department of
Defense projects.

      The second area of  performance is the remedial action phase.
This appears to be  a strong point in the relationship, as  the regions
continue to provide generally positive  feedback on Corps performance.
The Corps has successfully addressed  several complex issues  related to
bond requirements, bid protests, change orders, and claims, in support
of EPA.  The Corps' resident engineer also has proven effective in
maintaining an on-site government presence to monitor the conduct of
the work.  However, the Corps can not manage all aspects of the RA
projects assigned to it;  the regions are finding a need to stay involved
during the RA to assist the Corps on environmental issues and with
interpretations of the Record of Decision, and to serve as  an
intermediary with external organizations (e.g. states) and the local
citizens.  A similar level of regional involvement is required  on
responsible party and ARCS construction projects.

      Although use of the Corps remains the primary vehicle for
implementing remedial design and construction, some adjustments have
been made.  First, as mentioned above, RD/RA capability has been
built into the EPA  contracts.  Each ARCS contract has a subcontract
pool to finance a variety of project activities, including remedial
construction.  The size of  the pool ranges from $40 million in  the
small contracts  to $150 million in the largest contracts.  The
cumulative value of the subcontract pools, $4.2 billion, is 64 percent of
the total value of all the ARCS contracts.  The ARCS construction
capability  was established  for several reasons:  (1) to provide capability
to supplement that available from the  Corps; (2) to provide added
flexibility  to accelerate the implementation of smaller projects;  and  (3)
to build an experience  base in construction management within the
regions.  Second, the Bureau of Reclamation (BUREC)  was added to
the program in  1987, to provide additional  construction  management
capability  in the western regions and to provide technical  assistance.
To take best advantage of each mechanism and to provide for national
consistency,  a distribution  policy for RD/RA projects was issued in
December 1987. The policy is summarized in Table 8.
                                  44

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TABLE 8. OSWER DISTRIBUTION POLICY FOR RD/RA PROJECTS
RA Value Less Than                ARCS or CORPS/BUREC
      $5 Million                  performs RD and RA

RA Value between                  ARCS or CORPS/BUREC
      $5-15 Million                performs RD; CORPS/BUREC
                               must perform RA

RA Value more than                CORPS/BUREC must perform
      $15 Million                 RD and RA
      This policy has resulted in the majority of the RA budget being
assigned to the Corps.  Current data illustrating the distribution  of
RD/RA work between the Corps and ARCS are provided in Table 9.
Using FY90  as an example,  the Corps received approximately $190
million  of RD/RA work,  while the ARCS contracts received about $43
million.  The dollar value of construction projects proposed for  ARCS
over FY91 and 92 ranges from $100,000 to $10 million.  Included are
projects for which headquarters concurrence was given to exceed the
policy threshold of $5 million.  The dollar value  of Corps  projects over
the same years ranges from $1 million to $78 million.  Several  of the
small Corps projects are actually segments  of larger projects.  Trends
indicate that  ARCS is receiving the majority of remedial design
assignments and nearly half the construction projects,  while the  Corps
continues to receive the large construction projects,  as evidenced by  a
$15 million average cost  in FY92.

Issue

      It is a commonly held perception that the ARCS  contracts
contain  excess capacity, given  the current and projected remedial
workload.  This situation  is the result of (1) the decision to build
excess capacity into ARCS; (2) the subsequent decision to  continue  our
relationship with  the Corps in the area of remedial design and
construction management;  (3) the subsequent decision to adopt an
"enforcement first"  strategy as  a key component of Superfund
implementation;  and (4) budget policy decisions  shifting more resources
to remedial  design and construction accounts.  These decisions  have
reduced the volume  of work available for ARCS.  The  apparent effect
of these decisions has led to questions  about whether the contracts are
being used efficiently, whether the Agency is maintaining essentially
duplicate capability in the area of design and construction,  and whether
the ARCS program management costs are excessively high.

                                 45

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Discussion

LOE Capacity Analysis

      OERR,  working with PCMD and the regions, has completed an
analysis of ARCS Level of Effort capacity versus expected program
needs.  The purpose of the analysis was to (1) revise  the original
workload projections to reflect current program expectations and  include
the new pre-remedial and RI/FS oversight work,  and (2) compare the
projections against the current available ARCS capacity.  The analysis
was based on  the following assumptions:

      •     All level of effort hours available in the  ARCS contracts
            were considered in the analysis.  (This assumes that all
            level of effort options  available in the ARCS contracts
            will be exercised.)

      •     FIT level of effort was based on the annual pre-remedial
            budget, with phase-in work beginning in  FY91, and full
            pre-remedial work accommodated in FY92 and 93. A
            phase-out allocation in FY94 was not calculated but is
            likely to require some additional hours.   Annual level of
            effort equals 384,000 hours during FY91, and 591,000
            hours during FY92 and 93.

      •     RI/FS  oversight  was assumed to phase in beginning in
            FY92, with all work transitioned by FY94.  Level of
            effort estimates were provided by the Office of Waste
            Programs Enforcement based on the number of expected
            responsible party RI/FS starts.  Annual level of effort
            equals 119,000 hours during FY92,  238,000 hours during
            FY93, and 357,000 hours  during FY94 and beyond.

      •     Traditional remedial workload  was estimated by escalating
            the actual FY90 ordering rate by 30 percent.  The 30
            percent escalation  was based on a higher average  level of
            effort delivery rate noted early during FY91 as compared
            with FY90.  The FY91 workload was used for each
            subsequent year.  Annual level of effort equals 1,574,000
            hours during FY91 and beyond.

      The results of the analysis are shown in Figure 7.  The  length of
the bar for each region depicts  the last year during which new projects
                                47

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                                    48

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could be assigned to ARCS.  The results show that the zone of
Regions VI, VII, and VIII (ARCS-Central) will run out of capacity
during FY94, while Region IV  and  the zone of Regions IX  and X
(ARCS-West) will not use all the available LOE capacity  during the
ten-year period of performance.  Based on this analysis, follow-up
actions can be planned with each region.  For example, Region IV
currently is taking action to terminate two ARCS contracts,  which will
reduce available capacity, so  that it likely will be consumed by FY97.
With  the exception  of ARCS-West,  the remaining regions  appear to
have an acceptable  capacity balance, and contract terminations solely to
reduce capacity do  not appear warranted.  Follow-up will  be required in
ARCS-West to determine an  appropriate course of action.  In addition,
OERR plans to monitor actual utilization against the planned workload
over the next several years and adjust the projections as appropriate.
Such  monitoring will be  important if changes are made in the actual
use of the ARCS contracts.

Subcontract Pool Capacity Analysis

      As noted above, the  cumulative value of the ARCS
subcontracting pool ($4.2 billion) represents 64 percent of the total
value of the ARCS contracts. Over the first three years of  ARCS,  this
resource has been significantly  underutilized, as a result of the  success
of the enforcement  first policy  and  the current RD/RA distribution
policy which shifts  a majority of the construction work to the Corps.
Minimal use of the subcontract pool capacity has contributed to the
higher than originally planned ratio  of program management costs to
total costs for the ARCS contracts.  Because many of the program
management costs are fixed costs that continue to  be incurred
regardless of the level of work  performed, the lower the use of the
LOE  and subcontract pool, the  higher becomes the proportion of
program management cost to total contract cost. Further,  the regions
have  argued for additional flexibility in  making design and construction
assignments to  ARCS and the Corps.  As a result, the Task Force
developed three options to  the current RD/RA workload distribution
policy.  The options are  shown on Figure 8 and described below.
                                 49

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      The first option involves maintaining the current policy for RAs,
but removing the restrictions on RDs.  This  would allow the regions to
use ARCS for any design regardless  of the estimated RA value (which
has been the primary area of concern with Corps performance), while
maintaining a strong Corps role in construction management.
However, this option would not increase the use of the ARCS  sub-
contracting pool.

      The second option involves raising  the current ceiling for RAs to
$15 million while also removing the  restrictions on RDs.  This option
allows for larger  projects to be done under ARCS to take better
advantage of the  available capacity and to maintain project continuity
as envisioned in the ARCS strategy,  while retaining  a threshold that
ensures a substantive and predictable construction workload  for the
Corps.  However, there are two potential drawbacks  with increasing the
ARCS RA distribution ceiling.  First, the  Agency does not have
extensive experience or infrastructure in managing large-scale RA
contracts.  The second concern is that  if any claims  arise that  can not
be settled by the regional contracting officer, they are referred  to the
state court system for resolution.  Regional performance  would need to
be monitored and assistance provided as needed.

      The third option further increases the  construction ceiling to $30
million while retaining the  concept of no ceiling on  the design phase.
Option  3 provides more flexibility  to the regions to make workload
allocation decisions based on the needs of the project and the resources
available to the region.  It  allows large RA projects  (up  to $30 million)
to be performed under ARCS  where  the capability and capacity exists
to complete the work.  Also, it maintains  the option to use  the Corps
when the proposed remedy is complex or  where there is a high degree
of uncertainty (e.g. where there are highly-variable subsurface
conditions) and the backup of  the Corps infrastructure (e.g.  claims
resolution) or Federal on-site presence  (e.g. resident  engineer) is
warranted.  Because of the  high proposed construction ceiling for
ARCS, guidelines integrating specific project needs,  and  quality and
performance considerations  would be developed  to assist the regions in
making assignments between ARCS and the Corps.  Examples of
appropriate criteria would include:

      •      Evaluation  of  site characteristics:

             a.     size  of  site;
             b.     location of site;
                                 51

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            c.     proximity to industrial, commercial and residential
                   populations;
            d.     proximity to ecologically sensitive areas; and
            e.     level of uncertainty in extent of soil and
                   groundwater contamination and waste quantities;

      •     Evaluation of selected remedy:
            a.     amount of soil excavation required;
            b.     need for major earth construction such as slurry
                   walls and clay caps;
            c.     on-site soil treatment or stabilization;
            d.     groundwater treatment or plume containment;
            e.     use of innovative technologies and  uncertainties in
                   technical performance;  and
            f.     need for continuous federal on-site  presence;

      •     Evaluation of local/public interest:
            a.     citizen/environmental group activity; and
            b.     state/local  government concerns;

      •     Evaluation of federal ability to manage site with  defined
            characteristics:
            a.     EPA experience  and capability;  and
            b.     Corps district office experience  and capability;

      •     Evaluation of ARCS contractors'  and potential  Corps
            contractors' ability to manage and perform construction  at
            site with defined characteristics;  and

      •     Site needs for unique Corps construction management
            procedures:
            a.     exposure to significant change orders and claims;
            b.     need for long-term continuity at site;
            c.     real estate acquisition needs; and
            d.     special contract administration issues.

      Implementation of these options will have an impact on ARCS
capacity.  Table  10 summarizes the  affect of these options on the FY92
RD/RA workload.  Each option would result in an  increase  in  LOE use
as more RD projects  are assigned to ARCS.  The likely impact would
be approximately 100,000 hours per year.  Options  2 and 3  also  could
affect use of the subcontract pool if the regions decide to move more
                                 52

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construction to ARCS.  Construction obligations likely would exceed
$100 million per year, which would consume $1  billion, or 25 percent,
of the total subcontract pool capacity.

      Option 2 provides a useful compromise by allowing more work
to flow to the  ARCS contracts while retaining a strong role for the
Corps on the larger projects.   Quality criteria similar to the examples
provided  under option 3, which focus on the  specific needs of a
project, should be developed to assist the regions in making project
assignments.

Recommendations

      •      To  provide for more effective use of available
            ARCS resources, within 60 days OSWER should
            revise the Fund-lead remedial  design/remedial
            action (RD/RA)  distribution policy to allow the
            regions to select the Corps or  ARCS contracts to
            perform remedial  designs for RAs  of any value
            and allow the regions to select Corps or ARCS
            contractors to perform remedial actions of up to
            $15 million in value.

      •     To  facilitate  implementation of the revised
            RD/RA policy, within 90 days  OSWER should
            issue  guidelines  to the regions  to assist in
            making RD/RA  assignments  to ARCS and Corps.
            The guidelines should include:

            a.    technical,  quality, and performance
                  criteria focusing on  the  specific
                  needs of the site;

            b.    recognition of the Corps' capabilities
                  in construction oversight and
                  constructability and biddability
                  reviews of ARCS  designs; and

            c.    requirements  to ensure a substantive
                  Corps  role during ARCS RD
                  projects where the Corps will take
                  the lead for the RA phase.
                                54

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OSWER should monitor implementation of the
guidelines by the  regions.

OSWER and PCMD should take  action to
reduce approximately $2 billion in contract
capacity from the ARCS construction sub-pool to
reflect current projections of need.

To ensure a balanced construction management system
that  capitalizes on the strengths of both the Corps and
ARCS, OSWER should continue to work with the
regions and Corps to address performance issues.
Discussions should focus on improving the
responsiveness of  the Corps during the design phase to
better  serve the needs of the regions, maintaining
effective communications with the Corps, and ensuring
a substantive and predictable workload for the Corps
to facilitate workload planning.

OSWER should continue to monitor capacity
utilization under  ARCS annually  to assess the
accuracy of the current workload assumptions.
If actual utilization differs  substantially from the
projections, OSWER should take  the  necessary
actions with OARM and the affected region(s) to
correct under or  over-capacity problems.

OSWER should initiate discussions  with regions
IX and X and OARM regarding  the apparent
excess capacity in the ARCS-West zone.  Options
should include selected terminations and
assessing the feasibility of making excess capacity
available to other regions  (e.g.,  the  ARCS-
Central zone) that may have a  capacity shortfall.
                   55

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C. ARCS CONTRACT CONTROLS

Background

      Contract administration includes all functions from the award  of
the contract until final payment and close out.  The Federal Acquisition
Regulations (FAR) identify 66 contract administrative functions which
can be placed in 15  separate categories (See Appendix).  Effective
contract administration requires coordination by a team comprised of
the contracting officer (CO),  the project officer (PO), and the work
assignment manager  (WAM).  Each team member should have well-
defined, specific roles  and responsibilities in the process.

      ARCS contracts are a  form of  cost-reimbursement contract in
which the contractor assumes the performance risk and the government
assumes the cost risk.  This type of contract requires a great deal of
government control over and involvement with the contractor and
results in  significant administrative costs in  recordkeeping and reporting.
The basic obligation of the government is to pay the contractor
reasonable and allowable costs incurred during performance as well  as
appropriate fees.  The contractor  is required to demonstrate "best
efforts" to perform as  the government desires.

Roles and Responsibilities

      The regions manage ARCS contracts  and are entirely responsible
for assigning and overseeing work. Headquarters guides, directs,
supports,  monitors and evaluates  implementation. The Appendix
displays the organizational alignment.

      The CO verifies that  contracting  activities are performed as
authorized by laws, regulations, and the terms and conditions of  the
contract.  Specific responsibilities include reviewing  and signing  the
initial work assignment and any subsequent action that affects total
scope or budget of the basic contract; determining award fee; and
resolving  disputes regarding performance or costs.

      The PO manages and  directs activities performed under the
contract.  Specific responsibilities include contract surveillance;
recordkeeping; work assignment distribution; and invoice approval and
certification.
                                 56

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      The WAM is typically a remedial project manager, the EPA
official who monitors and directs all ARCS contractor activities
conducted at project sites.  The WAM assists the PO in contract
management activities.

      Although the government's contract  administration roles and
responsibilities  tend to be emphasized, the  contractor also has equally
important contract administration responsibilities.  Whereas the
government monitors, reviews, approves and  certifies, the contractor
"implements."  That is, the government requires and pays for the
contractor to establish  and maintain an internal system for planning,
scheduling, budgeting,  accounting, cost estimating, work authorization,
cost accumulation  and  performance measurement.  Under ARCS, the
design and maintenance of the multi-site management control systems
are part of the  program management component.  EPA audits these
management control systems to determine whether they are in place
and evaluates whether  they are functioning as intended.

Cost Monitoring

      Under ARCS  contracts, the contractor  is reimbursed for all
reasonable and  allowable costs incurred.  Because most of the risk that
work will be performed adequately is borne by the government, a great
deal of oversight is required.  Each month the contractor submits a
combined monthly technical and financial progress report and an
invoice/voucher.  These reports form the basis for the PO to review
costs  and certify the invoice for payment.  Payments made under
ARCS are provisional  — subject to final audit to  determine their
allowability, allocability, and reasonableness.

Technical Performance Monitoring

      Under ARCS, diligent contract monitoring  is important and
timely government action is crucial.  Documentation of contract
monitoring is extremely important, as it forms the basis for discussing
deficiencies and taking appropriate action, possibly disallowing costs,  as
well as reinforcing positive performance.

      The technical monitoring roles of the PO and WAM are
important in assuring that the contractor understands the work
requirements and produces quality results within the time required.
Once the work assignment is issued and the  work plan submitted and
                                 57

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approved, it is up to the PO and WAM to monitor the contractor to
ensure that EPA obtains the agreed-to performance.

Issuance of Work Assignments

      Work under an ARCS contract is specified in written work
assignments prepared by the WAM and PO and  issued by the CO. The
key elements of a work assignment are the period of performance; level
of effort (estimated  number of person-hours required to perform the
assignment); the statement of work (a clear, detailed description of the
work to be performed); and an  independent government cost estimate.
The  WAM/PO may choose to set an expenditure limit for work
assignments, which  allows for their phasing, management, and
execution.

      The CO forwards  the work  assignment and a contract
modification to the  contractor.  After accepting the modification, the
contractor develops  a Work Plan Memorandum,  which describes  the
contractor's approach to the overall work plan for the assignment.   The
Memorandum is intended to save time by granting the PO  interim
authorization to  allow the contractor to begin work, and therefore incur
costs, before the work plan is approved. The work plan must include a
budget description,  an  estimated number of  person-hours required to
perform  the assignment,  and staffing and methodology for completing
all tasks in the statement of work.  It  must contain enough detail to
allow the PO to determine whether the approach and costs are realistic
and  reasonable.

Federal Managers' Financial Integrity Act

      The Federal Managers' Financial Integrity  Act (FMFTA) requires
that  executive agencies evaluate their systems  of internal administrative
controls  annually and submit annual statements to the President and the
Congress on the status of these internal control systems.  OMB
Circular A-123,  Internal  Control Systems, prescribes policies and
procedures to be followed in establishing, maintaining,  evaluating,
improving, and reporting on internal controls.

Issue

      EPA management of ARCS contracts is vulnerable in areas of
invoice review,  technical performance  monitoring, independent
government cost estimates, and work assignment issuance.  Not
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recognizing the need to examine ARCS contract administration as a
discrete process and not identifying a process owner has contributed to
ARCS management weakness.

Discussion

Reviews

      Since the award of the first ARCS  contract in January 1988,
four major reports  have addressed the need to improve contract
administration-Superfund Contracts:  EPA needs to Control  Contractor
Costs. My 1988, GAO/RCED - 88182; Contracts Management :   The
People and the Process. November 1988, EPA, Office of Administration
and Resources Management, Office of Administration, Management and
Organization Division; Civilian Agency Procurement. September  1989,
GAO/RCED - 89109; and Region II Alternative Remedial Contracting
Strategy Contracts. April 1991 (Draft), GAO.  In addition to these, the
EPA Office of the Inspector General (OIG) has issued  a report which
addresses ARCS contract administration, Survey of the Alternative
Remedial Contracting Strategy:  Contract Bidding and Award Process.
April 1990, EPA/OIG - EISGB9-11-0021-100274.  All of these reports
have alluded to a need to improve contract management.   Regarding
ARCS,  weaknesses were noted in invoice reviews and independent
government cost estimates.

      EPA's own  study, Contracts Management: the People  and  the
Process, noted that the Agency's  culture needs to be changed to
emphasize sound contract management; senior managers are  only
minimally involved with contract management in their organizations;
technical skills of POs and  WAMs need to be balanced with essential
administrative  skills; project officer and contract administration courses
need to be revamped to emphasize day-to-day management issues such
as cost  estimating  and financial and workload tracking; central
databases are needed; and contract managers  need to know how  to deal
with contractors who perform poorly.

      Within the Office of Emergency and Remedial Response,  the
Hazardous Site Control Division (HSCD)  and the Contract Operations
Review and Assessment Staff (CORAS) provide oversight and
assessment of  Superfund contracts. (See Appendix.)  In April, 1989,
CORAS performed an ARCS assessment in response to the  Superfund
90-Day Study.  It  was based on a review at  Regions III and V,  which
concluded that contract management resources are potentially not being
                                59

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allotted for proper oversight; contractor selection based on performance
documentation needs to be more clearly defined and applied; and there
is a specific need for guidance on how to prepare independent
government cost estimates and a general need for additional training
and guidance.

      In response to the need for additional guidance, the CORAS
Bulletin was developed.  From September 1988 through December
1990, CORAS published ten issues that cover a range of contract
administration topics-e.g. guidance for organizing ARCS contract files,
invoice review, contractor work plan review and contractor financial
reports review.

      PCMD  conducts ARCS Contract Management Reviews at the
regional contracting offices, which may cover a full range of contract
administration responsibilities, including compliance with contract
clauses.  From November 1989 to August 1990, PCMD conducted its
first round of reviews.  These covered only file documentation
associated with the issuance of work assignments and  approval  of work
plans and documentation related  to the award fee process.  Problems
were  noted at all ten regions in  the areas  of file documentation and
contractors working beyond the 45-day stop work provision without
work plan  approval.  PCMD  is conducting another round of regional
reviews, the scope of which is similar to the first one.  The results of
these reviews  are currently not available.

FMFIA Submissions

       No reference was made to ARCS contract administration controls
in the FY88-90 OARM and OSWER FMFIA submissions.  However,
both OARM  and OSWER submissions referred to scheduling reviews
of contract management.

Regional Visits

       The following themes developed from the interviews with
regional personnel in contract administration:

       a.    Invoice format and review ~ not enough time to review
            invoices in detail; want standard invoice  format;
            inadequate review performed; no  consistency across
            contractors;
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      b.     Timing  of invoices and progress reports — invoice out of
             phase with reports;

      c.     Cost estimating ~ done poorly because of lack of
             experience; need guidance;

      d.     Effectiveness of work plans - takes long time to get work
             plan approved; many iterations; not experienced enough to
             review;

      e.     Work assignment scoping -- micromanaging; paying for
             rework; function of type  of contract;

      f.     Roles and responsibilities - not completely clear; overlap;
             friction; not working as  a team; and

      g.     Technical reviews - level of review depends on
             individual WAM; technical reviews spotty; weak
             negotiating skills.

Regional Vulnerability Assessments

      Each Regional Administrator was asked to prepare an assessment
to identify potential risks in ARCS contract administration that require
corrective action or further investigation. Table 11 below is a
compendium of the responses, summarized  by major issues.
TABLE 11. COMMON ISSUES FROM REGIONAL VULNERABILITY ASSESSMENTS


                                        Number of Regions
Summary of Issues                          Identifying Issue

Invoice detail, format,  timing with
monthly progress report                               7

EPA project management and oversight                   6

Financial contract audits                               6

Equipment purchase and utilization                       5

Independent Government cost estimates                   4
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      The regions have devoted much time, effort and energy to
managing the ARCS administrative process. They have developed
policies and procedures, training modules and guidance.
Notwithstanding these efforts, EPA can still improve the ARCS contract
administration process.

      When ARCS was first developed, OARM and OSWER focused
on creating a contract vehicle, awarding contracts, and ensuring the
availability of clean-up contractors.  However, because this was a major
acquisition system and because decentralizing the contract
administration functions was a new concept, the associated risk was
high.  An early indicator of this was the unsuccessful effort to hire
regional contracting officers who had in-depth cost-reimbursement
contract experience as well as experience in environmental clean-up
programs.

      The system of internal controls in the ARCS contract
administration process does not provide reasonable assurance that
Superfund contracting program resources are protected against waste
and  inefficiency. Documented weaknesses in cost monitoring, technical
performance monitoring, independent government cost estimate
preparation and work assignment issuance have been present since the
inception  of the ARCS program.  The continuing nature of these
problems, coupled with the inadequate financial contract audit coverage,
support identifying ARCS contract management as a material weakness
in the FY91 FMFIA submission.

      To date  the FMFIA process has not adequately functioned as  the
mechanism for surfacing ARCS contract management weaknesses. This
may be due to a lack of recognition on the part of OARM and
OSWER that ARCS contract administration is a process with shared
responsibilities.  Each organization has focused on its part of the
process, because the FMFIA implementation guidance EPA gives its
managers segments the organization into assessable units that follow
organizational subdivisions.  Each manager is then asked to perform a
vulnerability assessment of a particular unit.  OMB Circular A-123,
which prescribes the guidelines for FMFIA implementation,  allows for
segmentation into administrative activities.

      The following issues warrant attention, as they represent a
compilation of the results from the prior reports of review, regional
interviews, regional vulnerability assessments and concerns expressed by
Agency management.
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      Work Administration/Processing -- Work assignment issuance,
work assignment amendments, work plan negotiation, and work plan
approval are time and resource intensive.  Both rework of a work
assignment and attempts to exeft tighter control through
micromanagement may drive up administration and support costs.

      Invoicing — Regions  have differing invoice back-up formats in
their contracts;  some are highly  detailed; some are inadequate.
Reconciliation to monthly reports is not always possible, and
determining "reasonableness" of charges is often difficult.

      Some contractors are  not  providing the necessary voucher back-
up information  required by the contract or requested by the PO, making
determinations of reasonableness difficult.

      POs lack knowledge to determine the appropriateness of costs.
This can lead to mistaken determinations on  invoices,  which may  cause
an increase in overall contract costs.  They may also lack training in
ways to evaluate "reasonable" contractor charges.  This may lead to
approval of inappropriate charges, causing unnecessary increased costs
to the contract.

      Undefined roles and responsibilities in financial oversight for
COs, POs, and WAMs leads to  overlapping reviews of financial
information, causing inefficient use of resources.

      Management of Work Assignment Costs - The work  ordering
and  amendment process is resource intensive and cumbersome, leading
to multiple modifications and potential increases in costs.  This is due
to the use  of the work assignment/work plan approval process  as a
management tool for monitoring and control  of the contractor.
Personnel are not fully knowledgeable of methods and details required
for scoping work for the ordering process.

      Training of POs  and WAMs - Current  contract administration
training programs do not adequately provide  detailed instruction in
specific Superfund contract management requirements or roles and
responsibilities, leading  to a weak management structure for contracts
and inconsistent application  of contract management techniques.

      POs and WAMs  are not adequately trained  in negotiation tactics
and  skills,  which places them at a disadvantage when  negotiating with
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contractors.  This leads to unnecessary technical and cost tradeoffs
caused by more effective contractor negotiation training.

      POs and WAMs need specialized  training in numerous areas
such as paperwork management, independent cost estimation, workplan
review and approval, project management, U.S. Army Corps of
Engineers and Bureau of Reclamation processes, and confidentiality of
information.  This lack of training  hinders POs and RPMs  from
optimum performance, which is reflected as less than maximum
efficiency and effectiveness in  contract administration.

      ARCS Contract Management Reviews -- PCMD and OERR,
jointly,  are not conducting completely adequate oversight reviews of the
regional contract administration activities.

      Each of the Regional  Administrators identified areas within their
organization that need strengthening. For those that have not already
been addressed, we recommend that they take immediate steps  to
address those concerns.  Documentation  of the assessments and any
subsequent corrective actions and implementation plans should be
included as part  of the regional FMFIA  process.

      Other government  clean-up contracting programs have grown
substantially since the inception of ARCS.  In particular, the
Department of Defense (DOD) and the Department of Energy (DOE)
learned from EPA when  they designed their  programs, and, in fact,
their programs parallel EPA's.  They have, however, incorporated
changes which resulted in improvements.

      In implementing the Superfund Long-Term Contracting Strategy,
EPA should review DOE's,  DOD's, and other government contract
strategies.  Through such review, EPA's managers will be  exposed to
new ways  of doing things which may permit the Agency to adapt the
characteristics of successful  approaches for improving EPA's contract
system  effectiveness.

      The Interagency Committee  on Hazardous Waste Clean-Up
Contracting Strategy was formed as an outgrowth  of EPA's Long-Term
Contracting Strategy.  This committee, whose members include
representatives from EPA, DOE, DOD, the Corps, Navy, and Air
Force, is working toward establishing a  more consistent  government-
wide approach to hazardous waste clean-up contracting.
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Finding

      Defined within each contract are a series of procedures and
control points intended to permit effective EPA oversight and control of
contractor activity.  These contract controls are augmented by defined
resource management procedures to be followed by EPA staff engaged
in contract administration and program management.

      Overall, the defined procedures and controls appear to be
comprehensive.  However, specific potential weaknesses have been
identified in  implementing  these procedures.  Significant weaknesses in
administrative contract controls  in areas of work assignment
management, invoice review, technical performance management, and
independent  government  cost estimates, provide inadequate safeguards
against waste and mismanagement, and should be reported as a material
weakness under the FMFTA.

Recommendations

      •     ARCS contract management should  be  identified
            by OSWER as a  material weakness  to be
            reported  in the Fiscal Year 91 FMFIA
            submission (due by December 31).  In addition,
            an ARCS contract management  process owner
            should  be designated upon the recommendation
            of the Assistant Administrators for OARM and
            OSWER, accountable for  preparing  the FMFIA
            submission.  The  process owner should develop a
            structured  ongoing vulnerability identification
            and assessment process for ARCS.

            The process owner should  be  instructed to:

            a.    implement corrective actions;

            b.    establish a  formal follow-up system that records
                 and tracks  actions, projected action dates, and
                 monitors whether the changes are made as
                 scheduled; and

            c.    report quarterly to  the  Senior Council on
                 Management Controls on status of
                 implementation.
                               65

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            The Regional Administrators should act
            immediately to establish a capacity  for providing
            independent government cost estimates to ARCS
            managers.

            The Regional Administrators should take
            immediate steps to strengthen ARCS
            administrative process controls for those areas
            identified in regional vulnerability assessments.
            Two areas that deserve immediate attention are
            the  need to assure the optimal scope of work
            assignments  and the invoice review  process.

            The process owner, with  assistance  from OARM,
            OSWER and the  regions, should  convene a work
            group to evaluate the issues raised  in the
            regional interviews, vulnerability  assessments and
            previous reviews.   The results of this work
            group effort will meet the FMFIA corrective
            action and follow-up requirements.
Background on Government Property Management

    ARCS contracts contain  a "Designation of Property Administrator"
clause.  A Property Administrator located in EPA headquarters, Office
of Administration and Resources Management, Facilities Management
Services Division, is responsible for the management and control of
Government property under a contract.  The contract also includes other
clauses by reference that address government property:

Federal Acquisition Regulations (FAR)  (48 CFR Chapter 1)

Number     Date              Title

52.245.1     April 1984         Property Records

52.245-5    January 1986      Government Property

52.245-19   April 1984         Government Property
                              Furnished "As Is"
                               66

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      After award of a contract, the Property Administrator forwards a
"Guide for Control of Government Property by Contractor" to each
contractor.  Contractors are required to follow the same policies and
procedures as EPA personnel with  regard to property classification,
(i.e., nonexpendable, noncapitalized, or supplies)  annual inventories,
property  records, decals, utilization, and disposal and transfer.

      The contractor is required to maintain written control procedures
that communicate the organization's standards,  techniques, and
instructions to operational personnel for uniform  application.  The
Property  Administrator reviews and approves these procedures.
Contractor records of government property established and maintained
under the contract are the government's official property records.
According to the FAR,  duplicate official records shall not be
maintained by government personnel.  Further, the contractor is
required  to review and provide justification for retaining government
property  not currently in use.

Issue

      Government property is allegedly under-utilized and mismanaged.

Discussion

      As a follow-up to the allegations of under-utilized property,
compliance reviews were conducted by the  OARM Facilities
Management and Services Division of the contractors' property control
systems.   The reviews disclosed a  low utilization rate of field
equipment.  The equipment was purchased anticipating that a sufficient
number of work assignments would be issued to justify the purchases.
The project officers will review equipment utilization based upon
projected workload and make appropriate recommendations.

     Equipment  is purchased under the contract and billed either as a
part of program management or remedial planning (site-specific).   The
equipment billed under  program management is equipment that will be
utilized across numerous work assignments.  Equipment billed as part
of remedial planning was purchased specifically for a particular work
assignment.  At the conclusion of the  work assignment, a decision will
be made on the disposition  of the equipment.  Under the contract, the
assumption  was  made that the majority of the equipment would be
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purchased under program management.  The contractor would be
responsible to track and monitor the equipment among the various sites.

      Based  on information supplied by PCMD, as of May  31,  1991,
the contractors have billed for equipment in the total amount of
approximately $9.6 million.  Of that amount, approximately  $8.2
million was billed under program management and $1.4 million  was
billed under remedial planning.  (See Appendix).

      All charges to the contract for acquisition of equipment and
material must have been previously authorized within the contract.
Acquisition of nonexpendable property  in excess of $1,000 and
sensitive items in excess of  $300 must be individually itemized  on EPA
form  1730-1,  "Report of Nonexpendable Government Property Acquired
by  Contractor," to show the required personal property management
infoirnation.  The Project Officer approves  contractor-acquired
government property with the review of the reimbursement vouchers.

      The Property  Administrator performs an  annual Compliance
Review on all contractors' property systems that have inventories
valued greater than $500,000.   These reviews include a physical
inventory, reconciling the inventory with contractor's acquisition
records, an assessment of equipment utilization  records, and
recommendations.

      The ARCS equipment is currently managed independently under
each of the contracts.  There is no  central property warehouse or
national distribution system.  Several regions have discussed  the
feasibility of maintaining an ARCS equipment warehouse to  store,
maintain,  and distribute equipment.   If feasible, central equipment
management  could reduce equipment costs  and  increase utilization of
the equipment.

Finding

      The ARCS contracts provide for contractors to purchase
necessary equipment on behalf of the government.  This equipment is
maintained and utilized by the  contractor during the life of the contract,
but it is owned by the government.  The task force found no evidence
of violation of EPA controls for prior  approval of all equipment
purchases by contractors.  Other reviews have identified instances of
under-utilization of government-furnished equipment by ARCS
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contractors. OARM is currently conducting a comprehensive review of
EPA equipment control policies and procedures.

Recommendations

      •     ARCS-related recommendations resulting from
           the OARM property system review should be
           immediately adopted by OARM and  OSWER.

           OSWER, in conjunction with OARM, should
           evaluate the feasibility of establishing a
           government-owned, contractor-operated depot or
           warehouse where all equipment not required on
           a regular basis can be stored and accessed by
           the ARCS contractors.
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D. ARCS FINANCIAL  AUDITS AND REVIEWS

Background

      Payments made under the ARCS cost-reimbursement contracts
are provisional, subject to final audit to determine the allowability,
allocability,  and reasonableness of the costs paid.  Based on audit
results, payments made to a contractor may be reduced by amounts that
do not constitute allowable costs  or adjusted for prior overpayments or
underpayments.  EPA's financial  audit and review program provides
EPA management with assurance that contractor's costs are allowable
and that contract dollars  are safeguarded against waste, loss and abuse.

      EPA's current financial audit and review program  with respect  to
the ARCS contracts is built around the  following framework:

      1.    Monthly review and certification of vouchers;

      2.    Financial Monitoring Review;

      3.    Interim Direct Cost  Audit;

      4.    Incurred Cost Audit; and

      5.    Close Out Audit.

      The ARCS contractors perform work for other federal  agencies
in addition to  EPA.  The FAR prescribes policies and procedures for
obtaining  and  providing interagency audit services to avoid or eliminate
overlap and duplication of government efforts and to provide more
consistent treatment of contractors. OMB Circular No. A-73, Audit of
Federal Operations and Programs, states executive branch policy on
audit cross-servicing arrangements.  Multiple reviews, inspections and
examinations of a contractor  by several agencies are to be eliminated to
the maximum practicable extent through the use of cross-servicing
arrangements.   These arrangements identify the "cognizant" agency
responsible for providing  audit services.

      The Appendix  identifies the cognizant audit agency for each of
the ARCS contracts and  the dollar amount billed as of May 31, 1991,
for each contractor and regional contract.
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Audit and Review Types

      Financial Monitoring Reviews (FMRs) are performed by the
PCMD Financial  Analysis Staff on individual active contracts in excess
of $5 million.  Current PCMD policy  stipulates that the reviews should
be scheduled for  each appropriate contract after at least 6 months of
performance has been completed.  Reviews should be scheduled for
each contract at least once every two years of performance thereafter.
The FMR is a  review of contractor billings associated with an
individual contract to ensure compliance with contract requirements and
to ensure that billed costs are adequately supported by  appropriate
systems and records.   It is not the objective of this review to determine
the allowability of costs incurred. Reports  are issued to the CO and
the Financial Administrative Contracting Officer (FACO) for resolution
of findings. The CO is responsible for resolving contract-specific
issues while the FACO is responsible  for resolving cross-cutting issues
affecting multiple EPA contracts (to assure  consistent treatment on all
contracts).  The reviews are also provided to the EPA OIG for their
information.

      An Interim Direct Cost Audit may be conducted for a specific
contract during the  performance period of the contract.   This audit may
be requested by PCMD or the EPA OIG, based upon concern  about the
reliability of the costs claimed, a suspicion  that there may be problems
with contract performance, or upon completion and determination of
need as a result of  an FMR.  The audit is performed by the EPA  OIG
or the cognizant agency and is conducted to assess,  at  a minimum, the
allowability of  costs claimed or reported under the contract and to
ensure compliance with applicable statutes,  regulations, and terms and
conditions of the  award.  Generally, the audit effort involves verifying
that the amounts  billed agree with the contractor's records and  are
allowable to the contract  under its terms and conditions.

      The Annual Incurred Cost Audit is a comprehensive audit of a
contractor.  The review includes  an audit of direct and indirect costs
for all government contracts and is performed for each of the
contractor's fiscal years.  Each contractor must submit  an incurred cost
report within 90 days of the end of the  contractor's fiscal year.
Timely submission  should be monitored by PCMD.   Upon receipt of
the submission, the EPA  OIG will arrange for an audit by the
cognizant audit agency.  The audit report is used by  PCMD's  Indirect
Cost Rate negotiator  to negotiate the final indirect rates.  Audit results
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on direct costs are furnished to the CO for resolution of any questioned
or unsupported costs.

      A close-out audit is an audit of the total costs, direct and
indirect, of a specific contract and is performed at the end  of the
contract performance period.  This evaluation is conducted  to assess the
allowability of costs claimed or reported under the contract and to
ensure compliance with applicable statutes, regulations,  and terms and
conditions  of the award.  Generally, the effort involves verifying that
the amounts billed agree with  the contractor's records, are allowable
under existing regulations, are reasonable, and are allocable to the
contract.  Such an audit does not generally involve new audit effort.  It
usually consists of a recap of audit findings from the annual incurred
cost audits. Thus, no close-out audit  can be completed until after  com-
pletion  of  the incurred  cost audit.  Accordingly, the cycle of close-out
audits  will be at least two years behind actual contract  performance.

      The close-out audit is used to establish the final  price of cost-
reimbursement type contracts.  For  the ten-year  ARCS program, close-
out audits  will be requested  annually after receipt of the contractor's
submission, and the contract costs will be settled on an annual  basis.
This audit is requested by the CO upon receipt  of all necessary
documentation.  When  the audit report is received,  PCMD provides the
report  and any added recommendations to the CO for final settlement
with the contractor.

       Table 12 summarizes  the universe of Government audits
currently required by the ARCS contract, FAR,  or Agency  policy.
Additional information  on these audits is shown in  the  Appendix.

TABLE 12.  ARCS AUDITS AND REVIEWS
Type
Financial Monitoring Review
Interim Direct Cost/Special
Incurred Cost
Close Out
Cognizance
EPA PCMD
EPA DIG or
DCAA
EPA OIG or
DCAA
EPA OIG or
DCAA
Cycle
2-yr Performance
Period
Upon Request
Contractor's
Fiscal Year
Annual Performance
Period
Audit
Scope1
Contract
Contract
Contractor
Contract
123 ARCS contractors; 45 ARCS contracts.


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Discussion

Financial Monitoring Reviews

      To determine whether PCMD conducted FMRs in accordance
with the prescribed guidance  and whether PCMD resolved identified
deficiencies with contractor billed costs in a timely manner, the report
entitled "Status of Financial Monitoring Reports"  was examined.  This
report is maintained by PCMD and identifies,  by contract and review
report date, issues noted from the reviews and  whether  the issues
currently are open or closed.

      PCMD conducted FMRs on 36 of the 45 ARCS  contracts after
an average of 15 months of performance had been completed.  The
guidance establishes a  goal of conducting reviews on all contracts after
a six-month performance period.  The  nine contracts that did not
receive  an  initial review were EBASCO Environmental  (Regions I and
IV); Metcalf and  Eddy, Inc.,  (Region I); ICF Technology, Inc.,
(Regions II and IX-X); NUS Corporation  (Region III); Black and
Veatch, Inc., (Region IV); Morrison-Knudson Environmental Services
(Regions VI-VIII); and Ecology & Environment,  Inc., (Regions IX-X).

      PCMD is currently conducting the second round  of FMRs  which
should occur when a contract has completed 30 months of performance.
Overall, PCMD is not  meeting the schedule goal for these reviews.  As
of this date, eight contracts have been  completed, 18 contracts  have
reports in  process, seven contracts have been scheduled during
September  1991, and 12 contracts are pending.  One of the pending
contracts, ICF Technology, Inc., did not have  an  initial  FMR.   This
contract is  in its twenty-sixth month of performance with approximately
$2.4 million of billed costs.

      The  initial round of FMRs identified problems with each of the
36 contracts reviewed.   Problems were disclosed  in the  areas of
timekeeping (20 of 36); timesheets and travel  (21 of 36); indirect  rates
and costs (29 of 36); other direct costs (22 of 36);  billing systems (14
of 35);  and accounting  systems (6 of 36).  These deficiencies and
weaknesses reduce EPA's level of assurance that contract dollars  are
safeguarded against waste, loss or abuse.  Further, a portion of
identified problems still remain unresolved.  PCMD's internal FMR
tracking and monitoring system indicates that over half  of the
deficiencies and weaknesses are still being reported as open.
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Preliminary results from the eight contracts that have undergone a
second review identify recurring problems.

Financial Cost Audits

      Using the results from the initial round of FMRs, PCMD
requested the EPA OIG to initiate  nine interim direct cost audits
(Ecology & Environment, Inc.,  Donohue & Associates, Jacobs
Engineering Group, Inc., EBASCO Environmental, Roy F. Weston, Inc.,
WW Engineering & Science, Black and Veatch (two contracts) and
CH2M Hill) and one "special audit," CH2M Hill.  Audit reports are
available on six of the interim  direct cost  audits.  The range  of elapsed
time to produce an audit report from the date of request  was two to
fourteen months, with an average of eight months.  The EPA OIG has
audit cognizance for Ecology & Environment, Inc.,  Donohue  &
Associates, WW Engineering & Science, and CH2M Hill.  The
EBASCO Environmental and Roy  F. Weston, Inc., requests are
outstanding (the Defense Contract  Audit Agency (DCAA) has audit
cognizance for both contractors) and CH2M Hill's interim and special
audits are outstanding (EPA OIG has audit cognizance).

       Based on a review of the six audit reports, the interim direct
cost audits adequately addressed the referred  issues  from the  FMRs.  In
most instances, the issues appear to be resolved.  However, some
additional follow-up action is required by  PCMD.

       As of this date, no incurred cost audits or annual close-out audits
have been completed on the ARCS contracts, which account  for total
aggregate billings  of $248.1 million as of May 31,  1991.  PCMD has
requested the cognizant audit agencies to perform incurred cost audits
on ARCS contractors. However, given the slow start-up of the ARCS
contracts and the almost two-year  cycle to initiate and complete
incurred cost audits, the cognizant agencies should only now  be
completing work on the $3.2 million  of costs incurred in FY88.
PCMD has not issued detailed  procedures to  guide  contractor
submission of their annual completion claims.  Such procedures will be
required to allow audit of annual claims, once the incurred cost audits
are completed.

       Of the 23 contractors and 45 contracts under ARCS, EPA OIG
has audit cognizance for six of the contractors and  13  of the contracts.
These 13 contracts account for 30 percent of the current total billings.
EPA OIG has had audit cognizance for one of the  contractors, CH2M
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Hill, since the inception of ARCS and acquired the audit cognizance
for the other five from DC A A since March 1991.

      A substantial growth in audit responsibility and workload resulted
from implementation of ARCS.  Under the REM contracts audit
requirements were an annual incurred cost audit  for each of the three
contracts and a final close-out audit at the end of each contract
performance period.  EPA currently estimates an annual need for 23
incurred  cost audits, 45 annual close-out audits and potentially  eight-ten
annual interim direct cost audits.

Findings

      The DCAA and  the EPA OIG, cognizant  audit agencies  for
ARCS contracts, have  provided  little or no financial audit coverage of
these  contracts.  Without this independent  audit coverage, EPA is
unable to give reasonable assurances that contractor billings are
appropriate and that contract dollars are  safeguarded against waste, loss
or abuse.

      The EPA OIG has developed a strategy that  would allow it to
provide audit coverage  for its six  ARCS contractors.  In addition, EPA
OIG has entered into negotiations with DCAA in an effort to accelerate
the audits for the other 17 contractors.  Part of that strategy would
have DCAA transfer audit cognizance for  six of the 17 ARCS
contractors to the EPA OIG.  With the additional six contractors, the
EPA OIG  would  have audit cognizance for 12 contractors and  28
contracts.  These 28 contracts would account for approximately 60
percent of the current  total billings.

      However, implementation of the strategy is contingent on the
EPA OIG  receiving additional resources  in FY92 and 93.  The EPA
OIG's total funding needs are $3.6 million and  6 positions for  both
fiscal years.  This would permit them to have audit cognizance for 12
contractors and to eliminate audit  backlog  and be current on audit
requests.

      Increased annual audit coverage of the twenty-three ARCS
contractors offers better assurance that the costs  billed by the
contractors are  "accurate." Increasing audit coverage will also  provide
reasonable assurance that contract dollars are safeguarded  against waste,
loss or abuse.
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      Because financial audit coverage is limited and because any new
coverage is likely to be slow in developing, PCMD's FMRs become an
important capability and deterrent.  Absent any contract audit presence,
FMRs provide needed financial oversight.  As acceptable audit
coverage is provided in accordance with contract requirements, PCMD
should reevaluate the FMR review cycle.

      Regions, depending on capability, have an opportunity to further
strengthen financial controls by undertaking periodic surveillance
reviews of contractors' financial records and back-up documents to  the
monthly  vouchers.  This added control will provide an additional
deterrent and the results of these reviews should be forwarded  to
PCMD and the EPA OIG.  Regional Administrators, working  with
PCMD and EPA OIG, should ensure that this process does not
duplicate others  or interfere with ongoing audit efforts.
Recommendations

            The EPA OIG should develop a strategy to
            conduct incurred cost and close out audits in
            accordance with contract  requirements.
            Specifically, he  should:

            a.    finalize a program to address the six
                  contractors for which the EPA OIG
                  has audit cognizance;

            b.    continue to negotiate with DCAA on
                  audit coverage for the remaining  17
                  ARCS contractors and other Agency
                  contractors; and

            c.    in conjunction with PCMD, evaluate
                  audit coverage with  a view  towards
                  consolidating number, type  and
                  frequency of audits while still
                  preserving audit integrity.

       •     PCMD should strengthen the Financial
            Monitoring Review program to:
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a.     Conduct reviews of the contracts on
      a one to two year cycle;  and

b.     Resolve identified weaknesses
      disclosed  from previous reviews.

Regional Administrators, working with PCMD
and EPA OIG, should develop  a process to
periodically spot check contractor's financial
records and monthly voucher supporting
documentation.
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E. ARCS AWARD FEE PROCESS

Background

      ARCS called for the use of a cost-plus-award-fee contract type.
Under this type of contract, the fee is comprised of a base fee portion
and an award fee portion.  To provide added incentive for high-quality
contractor performance, the amount of the award fee is keyed to merit.
The base fee, on  the other hand, does not vary with quality of
performance, and compensates the contractor for risk, allows  for those
charges not accommodated under standard government contracts, such
as financing costs, and provides  (possibly) a minimal margin of profit.

      A formal performance evaluation procedure  has been established
to implement the incentive concept.  The procedure requires the work
assignment-responsible RPMs/WAMs and the contractor-responsible POs
to write performance reviews and determine performance quality ratings
for specific categories  of contractor performance.   The merit  ranking
system that accompanies the performance review process is a
consideration in allocating additional work.  More  assignments are
intended to go to highly-rated contractors, all other things being equal.
The potential financial rewards thus  provide a double incentive to
excellence.  The contractor also  prepares a self-evaluation describing
overall program management performance and technical performance
summaries for each site.

Roles and  Responsibilities

      The regional contract administration team is comprised  of the
RPMs/WAMs, POs, and COs who each monitor contract performance.
Each  has  a slightly different role.  In addition, the team's  supervisors
and members of the Performance Evaluation Board and the Fee
Determination Official all participate in this process.

      The effectiveness of the contractor performance evaluation
process is  dependent upon adequate  staffing and a full recognition by
all parties  of their roles and responsibilities  within the process. The
ability of all parties to serve as  a team is crucial to the success of the
management of the cost-plus-award-fee contract.

      Every RPM/WAM directs and monitors a contractor's  technical
performance on individual assignments. The RPM/WAM maintains
day-to-day contact with the contractor, providing regular feedback  on
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performance.  At the end of each performance evaluation period, on
notice from the responsible PO, each RPM/WAM prepares  a rating
report covering  the contractor's work, addressing both strengths and
weaknesses, using standard forms.  The WAM/RPM reviews this
information with both his supervisor and the PO.

      The PO is specifically responsible for:

•     Organizing the ARCS contracts management  team, providing
      technical oversight,  and providing feedback to the contractor and
      the RPM/WAM on  the award fee process;

•     Monitoring performance and  preparing a rating report covering
      the contractors' program management operation;

•     Calling for RPM/WAMs and contractors to prepare technical
      reviews;

•     Reviewing the RPM/WAMs' and contractor's evaluations and
      conferring with the  RPM/WAMs  to resolve performance
      differences;

•     Preparing a summary report on the contractors' site-related
      performance,  seeking fair grades  for the general and  specific
      areas of performance at different sites from different
      RPMs/WAMs;

•     Integrating the RPM/WAMs', contractors' and the PO's own
      evaluations;

•     Determining recommended performance ratings for the contractor;

•     Assembling and indexing the performance exhibits by contractor;

•     Preparing the final Performance Index Rating Scores following
      the Performance Evaluation Board meeting; and

•     Summarizing the Board decisions in an Award Fee
      Recommendation Report with the concurrence of Board
      members.

      As the legally responsible manager for the contract,  the CO's
duties in performance evaluation include:
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•     Collaboration with the PO on the program management
      evaluation;

•     Preparation of the draft and final award fee matrices for
      Performance  Evaluation Board deliberations on actual fee
      amounts;

•     Issuance of the fee award letter and award fee package for the
      Fee Determination Official's consideration;

•     Notification to the contractors of the amount of award; and

•     Issuance of the contract modifications to allow the contractors to
      bill EPA for the  amount of the award fee.

      The Performance Evaluation Board is comprised of Waste
Management Division staff working at the section chief, branch chief or
division director level, along with representatives of the Assistant
Regional  Administrator  or Management Division.  The function of the
Board is to assist the Fee Determination Official by establishing the
basis for  the award fee finalization. The Board reviews and critiques
exhibits assembled  and  presented by the POs and agrees on
performance quality ratings for each contractor across all of the
contractor's sites within the region or zone.

      The National Fee Determination  Official, located  in PCMD
headquarters, is responsible for the ultimate fee decision.  From  the
Award Fee Recommendation Report, the Fee Determination Official
determines the soundness of  the decisions  and may overrule the
recommendations for reasons of bias, arbitrariness, inconsistency,
procedural irregularities, false or irrelevant data, incomplete information
or other issues contrary to professional practice or to the terms and
conditions of the contract.  The decision of the Fee Determination
Official is independent, final, and may  not be appealed.

Performance Evaluation Process

      The contractor's  performance is evaluated against a set of criteria
which have been defined within each region or zone. The typical
process used to evaluate contractor performance is shown  in Figure 9.
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                             Figure 9
                        Award Fee Process
                          ARCS Contract

                        Contract Requirements
          On-going Reviews by Remedial Project Managers (RPMs)


                Project Officer (PO) Call for Technical and
                  Program Management (PM) Reviews
     Contractor
   Self Evaluation
    RPM/WAM
    Appraisal
Contracting Officer (CO)
 Program Management
      Appraisal
                                             PO & CO Finalize
                                               PM Appraisal
                         Project Officer
                   Preparation and Distribution
                  of PEB Packages to Membership
Waste Management
 Division Director
Branch or Section Chiefs   Contracting Officer
                        Performance Evaluation
                            Board Meeting

               Performance Evaluation Board's Determinations
                                T
                  Award Fee Recommendation Report
                    Performance Index Rating Score
                          Award Fee Matrix
                   National Fee Determination Official


                        Award Fee Decisions
                        Contracting Officers
                    Issue Contract Modifications
                         Contractors Invoice
                         EPA for Award Fee
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RATINGS.  A five-tier rating system is established whereby the quality
of performance is scored on a scale  of one to five as follows:

      5 --  Outstanding
      4 —  Exceeds Expectations
      3 --  Satisfactory
      2 —  Marginal
      1 -  Unsatisfactory

      These scores translate into recommended award amounts drawn
from the available award fee pool; a rating of one or less results in no
award fee and a score of five may result in the maximum amount of
award fee.  The setting of the score is an exercise in consistency.
Often the burden of establishing consistency and uniformity falls to  the
PO, who works with a  number of WAM/RPMs overseeing more than
one contractor.

PERFORMANCE CRITERIA.  Technical or remedial performance
categories or criteria to which quality grades  are to be assigned include
project planning; technical competence; effectiveness and innovation;
schedule,  cost and quality control; reporting; communications; resource
utilization/operational efficiency; and effort.

      Program management focuses on the extent to  which the
contractor has structured and initiated effective project management
systems, resource identification and deployment systems, sub-contracting
and consultant procurement procedures, regional coordination
procedures,  assembly and organization of a responsive program
management team,  screening  for organizational conflict of interest,
development and adherence to a management plan and quality
assurance plan, establishment and utilization of an effective
management information system and cost/schedule control system,
adherence to contract specified goals, and development of a realistic
equipment and materials list with effective control and deployment
procedures.  The individual grades for these criteria are combined to
obtain an overall score  for the contractor for each work assignment  and
for program management.

      Award  fee determinations are made under ARCS on  a trimester
or semester (after October 1990) basis in the two distinct areas of
contractor performance, program management  and remedial  planning.
The fees for program management consist of a base fee of  three
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percent of the program management costs incurred plus an award  fee of
up to seven percent of the program management costs incurred.

      The  fee structure for remedial planning activities also consists of
a base fee  of up to three  percent and an award  fee of up to  seven
percent.  However, the award fee pool for remedial planning is not
based on cost incurred but rather upon LOE hours delivered.  For
example, if a contract provides for  100 hours of effort at an estimated
cost of $1,000 with a maximum available award fee of $70,  then  for
each hour of effort delivered, the contractor is eligible to receive  a
maximum award fee of 70 cents per LOE hour.

      The  total award fee pool for remedial planning is further divided
into two phases, Phase I and Phase II.  Phase I award fee consists of
40 percent  of the available award fee pool for an evaluation period and
is determined by the Performance Evaluation Board's evaluation of the
contractor's remedial planning performance for ongoing work, with the
approval of the Fee Determination Official.  This Phase II award  fee is
granted when a work assignment is completed and represents the
remaining 60 percent of the total available award fee pool.  Since most
work assignments  have not been completed to date, listed values for
remedial award fees  do not yet include any significant Phase II award
fee portions.

      The  award fee is calculated using the performance score  and the
LOE to which the performance applies.  As  of the end of May 1991,
the total fees (base plus award) paid over the life of the ARCS
contracts have been approximately five percent of the total costs,  well
under the ten percent maximum fee possible under the contracts.   The
total fee which could have been earned by the contractors, based  on the
work performed (base fee plus award fee pool)  would have been
approximately eight percent. The five percent fee paid is significantly
less than the six to seven percent fee typically paid under EPA's  cost-
plus-fixed fee contracts.

      Critics of this form of contract have characterized the award fee
as a bonus.  While any definition is arguable, it is  the  clear intent of
these contracts that the award fee be a performance-driven incentive
which is to be earned by  the contractor.
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Issue

      In the implementation of the award fee process across regions
and zones, the systems are highly  variable and performance has become
only one among a number of criteria for the allocation of assignments
for work on new sites.  There is no clear indication that the award fee
or the performance based assignment of new work is demonstrating the
ability to directly leverage superior performance  from remedial
contractors.

Discussion

      As much  as  four years into  the ARCS contracts, we have
examined potential  theoretical indicators of the success of the award
fees.  Dollar values associated with award fees over all work
assignments for  a given contractor are not extremely high.   However,
when considered in the aggregate across multiple regions or zones, the
dollars earned in award fees over the life  of the contracts to date  are
considerable, averaging approximately $520,000.  For one contractor,
award fees to date  have reached over $2 million.  (See Appendix.)
These dollars are believed by regional interviewees to be of greater
importance to the corporate offices than to the contractor staff directly
involved in site  work.  Both contractors and regional staff  expressed
the belief that the qualitative narrative ratings used to describe
contractor performance  offered more leverage than the dollars in the
award.  Contractors are sensitive to  the impact which their reputation
with EPA  may have with other  potential clients.

      Numeric ratings are developed within the region or zone for
each  work assignment for each contractor in a document known as the
Regional Evaluation Summary.   Ratings from all active work
assignments by  a contractor within a region are  aggregated and divided
by the number of LOE hours for that period to  provide relative ratings
of performance  expressed as a percent known as the Rating Period
Performance Index Rating Score.  The Performance Index Rating
Scores from one fiscal  year are  combined and similarly weighted
against  the number of LOE hours  to determine the Year-End
Performance Index Rating Scores,  which should control the allocation
of work assignments  over the subsequent year.  Program management
was designed to have been included in work assignment distribution as
well  by a  method determined by the PO.
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      Under this system, contractors performing unsatisfactorily should
receive no new work assignments for the year under review and should
be considered for future work assignments only if performance on
existing work improves.  Conversely, contractors who perform in a
superior manner should receive a proportionately larger share of the
work assignments for the new year.

      An examination of the relationship between the Performance
Index Rating Score over one rating period and the percentage of work
assignments received by contractors in the subsequent rating period
provided no clear positive correlation.  Because of the small  number of
performance periods to date, it was infeasible to look for annual
relationships.  Rather,  data were examined across a  number of regions
for a cause-effect relationship between the Performance Index Rating
Scores for one rating period and the percentage of the overall work
assigned,  which was received by the specific contractor.  (See
Appendix.)  In other words, while  we would expect to be able to  find
a direct relationship between score and percentage of available  work
assigned,  it could not be  established from the available data.
Interviews in all regions and zones  indicated that performance is a
strong element of the consideration  for the assignment of new work
assignments.   However, other criteria such as a test of conflict of
interest, location of the contractor's office in relation to the site,
capacity available under the  theoretical maximum yearly usage  rate, and
demonstrated expertise  on similar sites clearly are strong controlling
factors as well.

      Performance Index Rating Scores (see Appendix) show examples
of similar frequency distribution patterns across the  regions and zones
with a series of generally bell-shaped curves centering at about the
sixtieth percentile with a  general absence of extreme values.  Since the
Performance  Index  Rating Score is composed of a  series of averages,
the numbers  which are assigned on a given  work assignment reflecting
either poor or superior performance are  rapidly averaged out.  This
seems to  be a general problem with using the Performance Index
Rating Score as a gauge of performance.  It is insensitive to small or
short-term changes  in contractor performance.  The  Performance Index
Rating Score reflects  the  performance of the contractor overall  rather
than on individual work assignments.  The score is  not designed to be
radically changed by performance on a single site.

      EPA personnel are very aware of the  resources involved in
changing  to a new  contractor on a site.   Not only are there the direct
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contract costs associated with a possible termination but also the less
tangible resources  involved in bringing a new organization up to speed
on a complex array of conditions typical of a Superfund remedial
project.  The PO and RPM/WAMs usually go to great lengths  to work
with the contractors and bring about a mutually satisfactory result on
the sites.  The EPA staff relate in interviews that they are more reliant
upon one-on-one interactions with contractor staff to bring about
resolution of issues than they are upon  the formal contractual
mechanisms available to leverage the contractor as  a consequence of
poor performance.

      The importance of keeping good records throughout the  rating
period cannot be overemphasized.   By developing the score all  along
through the trimester  or semester one can avoid the possibility  of
events later in the rating period  skewing the final  score for that work
assignment.  Further,  there is great value in providing timely feedback
to the contractors. Interviews with contractors, corroborated by
discussions with the regions, indicate that the contractor community
wants to do effective work on the sites. Prompt and effective  feedback
of a consistent high quality and  level of detail (e.g., Performance Event
Reports for good and flawed performances and meetings with the
contractors following  the Performance Evaluation Board meetings) were
cited as significant levers for greater attention to issues and improved
performance by the contractors.

Finding

      The process in the regions for the award of  new work
assignments is highly variable.  The regions stated during the
interviews that poor performance limits the  award of new work to  a
contractor.  However, there is no clear  evidence that there is a  positive
relationship between good performance  and  the award of new work in
the subsequent rating period.  Therefore, it is unlikely that the  award
fee process, in its current implementation, is a significant lever for
superior performance  from the contractors as had been the intent of the
designers of the ARCS.

Recommendation

      The Assistant  Administrators of the Office of Solid Waste
      and Emergency Response  and the Office of Administration
      and Resource  Management should  issue an endorsement of
      the Agency's policy on the use of award fee as a prime tool
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      to leverage contractor performance by instituting a two
      phased approach:

      •     Suspend the issuance of new site assignments to
            contractors with unresolved  unsatisfactory
            performance on work assignments; and

      •     Take appropriate sanctions,  including
            termination, against contractors  who persist in
            their failure to correct  deficiencies.
Issue
      Because of the slow availability of remedial work under the
early phases of many of the ARCS contracts, a number of contracts
have still not received assignments for their base  quantity of hours.
During this period,  which was originally anticipated to have been two
years, work assignments were to have been made on a roughly
rotational basis with regard to criteria other than performance until all
contractors had received their base LOE hours.  There is a highly
variable status and interpretation of this base period by the regions and
zones.  In some cases, new  site assignments are still made on the basis
of an even distribution without regard to contractor performance on
prior work.  In others, performance has been considered throughout all
work assignments.

Discussion

      The  ARCS theory of  allocation of work assignments across
contractors within regions or zones was based upon the distribution of
contract minimum or base LOE hours to contractors over the first two
years  of the contract.  This early  period in the contract was designed to
allow contractors who were  inexperienced in Superfund remedial  work
to come up to speed and compete on an even footing with the larger
firms who had worked with the Agency under REM.  Further,  this
initial period was designed to provide the Agency, through regular
evaluations, with a  track record on the contractors' performance for
future allocation of  work. During the base period, ARCS guidance
called for work assignments to be allocated to the contractors on  the
basis of the size of the contract awarded,  the location of the
contractors' offices  within the region or zone, potential conflict of
interest, and any unique  experience or capability possessed by a given
contractor or site manager.  ARCS guidance stated that, to the  extent
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practical, the Agency would allocate initial work assignments to
contractors in proportion to the size of their contracts.

      However, after the base LOE hours had been  assigned to the
contractor, the number of new work assignments to be made to ARCS
contractors was to be based upon their relative technical and program
management  performance.

      In the execution of ARCS, expectations were  not fully realized.
The LOE work did not materialize in the time frame expected.  All of
the contracts have been in place for a minimum of thirty months.
Nonetheless,  a number of contractors  have not yet invoiced or  obligated
their base LOE hours.  (See Appendix.)  The regions and zones have
developed detailed decision trees, matrices and algorithms to assist
them in their work assignment allocations and increase the
standardization  of their processes across contractors.  Examples of these
regional tools are shown on the  Appendix.  Almost  all of the regions
utilize  performance as one of the decision criteria in the assignment of
new work, regardless of their formal  standing with respect to the base
period.

Finding

      One firm contract stipulation appears to be the guarantee of a
base number of LOE hours  to the contractors.  Regions are likely to be
held to this requirement to some degree.  However,  the regions and
zones must move immediately to a performance-based  system for the
allocation of new work assignments, if contractors are  to be given
greater incentive for quality performance.

Recommendation

      FY92  work assignments  for new sites should  be assigned to
      contractors in relation to their  overall performance within
      the  constraints of the contract.

Issue

      Program management is not included as a consistent element
across  all regions and zones in the development of the Performance
Index Rating Score.  Therefore,  the efficiency and effectiveness of the
contractors' program management activities  are not routinely reflected
in these rating  scores.

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Discussion

      How program management is factored into the calculation of the
Performance Index Rating Score for the allocation of new work
assignments is variable across the regions.  Only Region II and the
ARCS-Central zone currently include program management scores in
the calculation of their Performance Index Rating Scores.  Since
program management is such a  significant element of contractor
performance,  it is logical that it should be a  determining factor in the
allocation  of new work.

Recommendation

      Contractors' performance should be evaluated on the basis of
      the quality  of the work  in  both  the  program management
      and remedial elements of their assignments across all regions
      and zones.  Contractors' accomplishments with regard to
      lowering program management costs and adherence  to
      national targets should receive significant consideration in the
      award fee process.

Issue

      The principal players  in the  regional and  zonal award fee process
include the RPM/WAM, the PO, the CO and the Performance
Evaluation Board.  The challenges  presented by the engineering,
contractual, legal and administrative aspects of this complex program
demand involvement from supervisory personnel who can add depth to
the knowledge of the immediate team and ensure full participation from
all parties.

Discussion

      ARCS processes differ in each region.  Some regions have
supervisory sign-off on the full  evaluation paper trail associated with
ARCS.  Others have only limited involvement of first line supervisors
except when  problems  arise.  The  highly complex nature of remedial
efforts on Superfund sites and the  ARCS processes to support these
activities demand direct involvement of experienced personnel. As  the
Superfund remedial program came  on line, the pool  of personnel
experienced  in remedial site activities was extremely  small.  Both
Agency and contract firms drew from this limited pool.  As a result,
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the remedial program required the hiring of numerous individuals to
reach the necessary staffing levels.  Some of these individuals were
highly skilled in a related field and were able to quickly transfer their
knowledge.  In other cases, as with many of the Remedial Project
Managers  hired in accordance with the findings of the 90-Day Study,
staff were hired with academic credentials but limited experience.   In
many cases, experienced project managers sought advancement from
site management to supervisory positions.

Finding

       Supervisors in many cases represent the experienced site
managers  from previous remedial projects.  These individuals must
carry direct responsibility for detailed oversight.  They should
participate fully in all aspects of the ARCS award fee process and  be
directly accountable  for its effective and knowledgeable implementation.

Recommendation

       Key supervisory management personnel should be held
       accountable as full participants in the implementation  and
       oversight of the  ARCS performance evaluation process to
       supplement the  knowledge base available  to the staff charged
       with the routine operation of the award fee process.

Issue

       The ARCS  award fee process was designed to leverage superior
performance from the contractors. Two  to four years into the
decentralized management of the ARCS, the multiple steps in this
labor-intensive  process and the associated paperwork have been
described  by some as excessive and beyond the requirements of other
related cost-plus-award-fee contracts.

Discussion

       Regional and  headquarters personnel identify the award fee
process as a labor intensive effort when  viewed in the aggregate of all
steps across all of the players.  As the processes vary significantly in
their intensity and levels  of documentation, quantitative estimates of the
amount of time spent in each region or zone are difficult to establish.
A national program  was established through guidelines offered by
OSWER and PCMD of the Office of Administration and Resources
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Management.  The implementation of ARCS in this decentralized
program has been a regional decision.  Some common threads come
from the guidance manual and periodic national meetings.  However,
there are clearly at least seven different systems.  For the benefit of
ARCS  in its present and future configurations, findings of the
individual teams should be shared in a national forum.

      The amount of effort required for  the contractor to develop the
contractually-required self-assessment of performance is considerable.
The contractors interviewed felt it was a valuable exercise. The self-
evaluations are used by the POs to detect differences between the
RPMs  and the contractors.  The POs see the merit in these packages,
while they were largely questioned for their utility by the
RPMs/WAMs.  EPA pays for the development of the self-assessments
and they seem to be a useful tool which provides balance to  the
system. Nonetheless, the costs and benefits of this package should be
reviewed by each team and revised according to regional or zonal
needs.

Finding

      The desire for continuous improvement drives  the  need to look
for the value-added elements of the award  fee process and work to
eliminate those parts which are not considered worth the  cost.

Recommendation

      Regional Administrators,  in cooperation with the Office of
      Administration and Resources Management  and the  Office  of
      Solid  Waste and Emergency Response, should establish
      regional or zonal teams to evaluate and report  within 120
      days on recommendations to streamline the award fee system
      with particular attention  to the paperwork burden and issues
      of national consistency.  Teams should also  be charged to
      examine the  Performance Index  Rating  Score to determine if
      it is the best tool to capture performance and translate it
      into a criterion  for the assignment of new work.
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F.  EPA MANAGEMENT PROCESSES AND ORGANIZATION

Introduction

      The foregoing analysis focused in large measure on issues
specifically related to ARCS contract operations.  However, a broader
set of management factors  influences both how Superfund managers
and EPA as a whole respond to increasingly complex mission
responsibilities.  These management factors range from ARCS-specific
processes, to the Superfund decision structure, to Agency-wide policy.
Due to their wide impact, the successful resolution  of these issues will
contribute directly to resolving  most of the previously discussed
problems.  For ease of discussion, these issues have been grouped into
the following areas: Superfund  acquisition structure, decentralization,
management information, workforce development, and Agency
acquisition structure.

Superfund Acquisition Structure

Issue

      Individual acquisition decisions for major Superfund programs
are not handled as integral parts of a larger system.

Discussion

      The ARCS contracts represent the largest system of contracts in
EPA and  one of the largest in  the civilian portion of the federal
government.  Going  further, the ARCS contracts are a subset of an
overall system  of contracts  for  meeting Superfund mission  needs.  In
turn, the EPA-administered Superfund contracts are but one mechanism
within an even broader system for  accomplishing the clean-up  of
Superfund sites.  Other components of the broader  acquisition  system
include  states, other federal agencies, and PRPs.

      Although Superfund acquisition is a system,  the task force found
no evidence that it has been managed as one.  No  single focal point  of
responsibility exists for managing acquisition; instead, responsibility is
fragmented among various components of the program office, PCMD,
other headquarters offices,  and  the  regions.  No individual is granted
authority, empowered with resources, and charged with accountability to
ensure that the Superfund contracts and other acquisition mechanisms
are best utilized to meet mission needs.
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      Given the reliance of the Superfund program on the services of
outside parties, the management of the acquisition of those services is
of unique importance.  A systems management approach takes an
integrated view of the human, information,  and financial resources
required to support the program.  The systems management approach
also  takes an integrated view of the processes required to support the
program, including such diverse components as budget,  financial
management, information management, and procurement.

      The Agency should now recognize the unique importance of the
Superfund acquisition system and take the necessary measures to
establish a systems approach.  The system management concept will
maximize confidence that mission needs are being  met in a strategic,
fully integrated way, using a conscious decision process that addresses
the alternatives for acquisition.

Recommendation

            The Assistant Administrator of OSWER should
            establish a Superfund Acquisition Program
            Manager reporting  directly to the Assistant
            Administrator responsible for overseeing
            Superfund acquisition decisions and  activities.
            The initial major responsibility should be to
            focus on the ARCS system and its related
            activities.
Decentralization/Centralization

Issue

      The balance of ARCS-related authorities and responsibilities as
distributed between headquarters and the regions and the exercise of
those responsibilities may not be operating in an optimal fashion.

Discussion

      As the Agency established ARCS, it was recognized that this
program would operate more effectively if it were decentralized.
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      The success of such decentralization presupposes that certain
minimum oversight authorities and responsibilities remain centralized.
These central  oversight functions include: maintenance of national
monitoring systems,  performance of program evaluation, and
formulation of national policy and guidance.

      EPA's experience has shown  that the difficulty with effective
decentralization usually stems from problems in identifying and
maintaining the proper balance between  firm central oversight and
effective regional authority to make decisions.  In the case of ARCS,
indications are that the Agency  has  successfully placed full authority in
the hands of appropriate regional officials.  Each region exercises
programmatic and administrative responsibilities relatively  independent
of the other regions, consulting  with headquarters when a  question
arises concerning a legal issue or consistency with national policy.

      Headquarters  does not oversee or coordinate these individual
regional decisions and, in general, has not maintained an aggressive
ongoing monitoring  and evaluation system of both program and
administrative aspects  of ARCS.  Such a monitoring system is critical
to support policy formulation and therefore responsive program
adjustments.

      Further impeding headquarters from guiding ARCS  centrally is
the fact that ARCS  was initially implemented without imposing  major
structural changes to either the  regional  or the headquarters
organizations.  The  additional functions  and responsibilities were
accompanied by resources which were absorbed largely within existing
organizations.  Such an approach obscures the identification of ARCS
as a separate  program requiring focused management attention and
resources.

       Since ARCS  is not uniformly recognized as a national  program
requiring a focus of national management attention, it has not been
managed in headquarters or frequently in the regions as a system.
There needs to be a concerted effort to  maintain an ongoing integrated
understanding of the status of the regional elements of ARCS and to
control the program nationally without damaging the regional flexibility
built into the decentralization model.
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Recommendations
           The Assistant Administrator (AA) for OARM, in
           concert with the AA for OSWER, should
           examine the headquarters  and regional
           responsibility assignments  to identify the actions
           necessary  for creating a strong, central program
           monitoring, evaluation, and policy formulation
           role for ARCS  in order to support a controlled
           evolution of program policy.  An implementation
           plan based on the results  of that examination
           should be submitted to the Administrator within
           the next 120 days.

           Total Quality Management (TQM) concepts
           should be employed to establish  an  "ARCS
           Council" consisting of headquarters and regional
           personnel and ARCS contractor  representatives,
           to identify and  implement improvements to
           ARCS contract management on a continuous
           basis.  This team must include regional
           management officials to assure the integration of
           technical/program considerations and contracts
           management issues  and  to provide the continuing
           top level management ownership of and
           involvement in  the  process.

           Regional Administrators should ensure the
           utilization of a  team approach to ARCS
           management, bringing together contracting
           officers, technical staff and supervisors in the
           regions and headquarters  representatives, as
           appropriate, to ensure successful contract
           management.  Regional  teams should be
           encouraged to report back to the ARCS Council
           with recommendations for increased efficiencies
           in ARCS  contract management.
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Management Information Systems

Issue

      The existing national and regional management information
systems are not optimally constructed or operated in  a manner to best
support the administrative and programmatic aspects of the ARCS
program.

Discussion

       A major program such as  ARCS clearly has informational needs
in order to be under the  effective control of headquarters and regional
management and to facilitate  regional staff operation.

      Headquarters requires information that represents a national
perspective with sufficient detail to identify problems, trends, and
successes, in order to support policy  formulation and to satisfy national
information dissemination requests.  (Not so much detail, however, that
headquarters staff is  in the position of micromanaging — making
decisions  that are better made at the  regional level under the
decentralized model.) This applies to programmatic data as  well as
contract management information.

      The regions, on the other hand, have informational needs that
relate to decisions on individual contracts, sites, regional
resources/staffing, and work assignments.  All levels  of regional
management and staff have information needs to support them.  Absent
central systems, local ones will be established.

      Centrally, the  ARCS Contract  Tracking System (ACTS), an
automated contract tracking system, was developed by PCMD to
provide Regional  Contracting Officers with a tool to  monitor and
manage the 45  ARCS contracts.  The system tracks the scheduled
submission and approval of work assignments/work plans, and invoices,
calculates award fee pools, and retrieves data through a variety of
reports.

      In  addition, OSWER designed the Financial ARCS Computerized
Tracking  System (FACTS), a menu-driven national data base to meet
programmatic needs  of ARCS, but deferred implementation due to  the
creation of ACTS.  FACTS was designed  to  provide informational
support primarily to  the PO and WAMs in the regions and to the
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headquarters staff.  The system was to consist of three related
databases: a contracts database containing general information about the
individual contracts; a technical support database containing work
assignment information including total, monthly, and budget LOE
hours; and a program management database containing cost information
relating  to the program management categories.

      The Contracts Information System (CIS),  maintained and used
exclusively by PCMD,  provides contracts management data nationally
but primarily focuses on the process leading up  to and through award.

      Those who would use ARCS data have concluded that current
systems are inadequate and a national system is needed that serves the
administrative, programmatic, and oversight needs of headquarters and
the operating needs of  the regions.

Recommendation

      •     The Assistant Administrator for OARM,  in
            concert with OSWER, should commission an
            effort to establish a coordinated management
            information program for ARCS to serve  regions
            and headquarters,  program and administration.
            This should focus on utilizing existing and
            designed  systems (ACTS, FACTS, CIS, regional
            systems, etc.).
Workforce Development/Distribution

Resource Distribution

      Each region should have an appropriate mix of COs, POs, and
RPMs to handle the  work load in the most efficient manner for that
particular region.  That mix may vary according to number/size of
contracts and work assignments, geographic distribution of sites, type of
work being performed, skills/experience of regional staff, and regionally
unique structures, processes and procedures.  Even with these
influencing factors, the mix should only vary within certain acceptable
ranges, or operation of the program may be hampered.  The Appendix
contains information  on the numbers of regional ARCS staff and
responsibilities.
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Issue -- Training

      For EPA  staff involved in ARCS, much of the training offered
or required is general ~ e.g., the contracts administration course.
Regional technical staff are faced with learning much about federal
contracts administration that does not apply to them and must sort out
that which is important to  the performance of their function as POs or
RPMs.  In addition, the team problem solving approach using TQM
provides an opportunity both to focus on particular problems/issues and
to establish a cooperative team rather than an individual office oriented
approach.

Discussion

      Assuring  that EPA staff  had the appropriate experience and
training to oversee  contractors has been  a concern and  has been
addressed in previous ARCS and contracts management studies.  To
address high turnover of regional staff, the grades were raised to
journeyman level GS-13, training courses were designed for ARCS
staff, and other  actions such as  establishing user  groups were taken.
While these actions have had some effect, there is still a relatively new
staff in the regions. The following is the proportion of regional staff
with less than three years  of relevant experience:

                   RPMs       53% (271 of 511)
                   POs        61% (14 of 23)
                   COs        74% (17 of 23)

      Additional information on the experience levels of the regional
ARCS workforce is contained in the Appendix.

      To overcome the problems associated  with relatively
inexperienced staff with responsibility for significant activities in a
"mission critical" program, both PCMD  and  OSWER have designed
training packages for ARCS regional staff.

      PCMD conducts two courses for program  staff (POs and RPMs):

      •      Project Officer Course - required for all staff
             before they can qualify as POs; and the

       •      Contract Administration Course — required for all
             staff before they can qualify as POs or WAMs.
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      OSWER conducts courses for RPMs under the On-Scene
Coordinator (OSC)/RPM Basic Training Academy.  These are delivered
in three two-week sessions and a week long session devoted to health
and safety. Additionally, the  Superfund University  Training Institutes
program conducts advanced training on current critical interest topics
designed to integrate academic technical knowledge and practical
experience.

      Contracting Officers are required to complete a series of training
requirements and meet minimum experience levels to qualify for the
various contracting warrants.

      To  supplement these training activities,  some regions have
designed and  conducted other courses to  meet special requirements.
For instance,  Region V conducted a TQM course with  its COs, POs,
and RPMs (and some contractor personnel) to address particular issues
identified  as problem areas  and to integrate the staff into a team using
cooperative approaches  to problem  solving.  This proved so successful
that Region V has been asked by other regions to share the course
design.

Recommendations

            The Assistant Administrator for OSWER, in
            conjunction with OARM, should direct  the newly
            created Superfund Acquisition Program Manager
            to design  and deliver to each region a tailored
            employee  development/training  program  for
            ARCS personnel which  focuses on providing
            specific skills/knowledge that  the ARCS
            Contracting Officers, Project Officers, and
            Remedial Project Managers must have to
            operate effectively and efficiently.

      •     Following the Region V model  of utilizing the
            TQM process as a training tool, Regional
            Administrators  should take the necessary steps  to
            mold the  ARCS regional and contractor
            personnel into "teams"  that address ARCS issues
            from a unified, strategic, quality improvement
            perspective.
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Agency Acquisition Structure

Issue

      Acquisition Management — i.e. policy and guidance on how EPA
gets its mission accomplished through a wide range of contracts,
construction  grants,  program  support grants, and interagency agree-
ments - lacks a clear focal point within the Agency.   Lack of
integrated management in this area can impede accomplishment of
EPA's multiple, complex missions.

Discussion

      At its creation in 1970 and for the next decade, EPA was
oriented toward regulation  development, delegation of operations and
enforcement to states, supporting state environmental activities through
program grants, and monitoring  state operations with EPA regional
personnel.  Major support for wastewater treatment facilities was
provided through project grants  to localities.

      In  the 1980s, these activities continued, augmented by  significant
new roles in toxics  and pesticides control, direct design and
construction at Superfund sites,  direct support to schools for asbestos
removal, and the conduct of extensive environmental research and
monitoring  activities -- a radical expansion in responsibilities, with
continuing constraints on EPA staffing.  For  both policy and  staffing
reasons, EPA is increasingly dependent upon  extramural organizations
and financial arrangements (See Table 13).

TABLE 13.  EXTRAMURAL FUNDING -- FY90

Assistance Awards
  Grants, loans, cooperative agreements                         $853 million
  Construction grants                                      $1,953 million
  Interagency Agreements                                   $300 million
   (disbursements)
Procurement Contracts                                    $1,130 million
Total                                                  $4,236 million
Approximate Total EPA  FY90 Budget                         $5,462 million
       Overall, more than three-quarters of the financial resources
provided annually to EPA are deployed through extramural transactions/

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instruments.  In addition, some individual multi-year major acquisitions
such as ARCS entail the planned expenditures of billions of dollars.

      Procurement contracts, grants  and interagency agreements each
operate under separate,  distinct sets  of rules that vary in specificity and
focus.   Frequently, significant discretion is available to EPA managers
in the  selection and  use of the three instruments.  At present,  use  of
those instruments is  not managed within a common framework that
guides the efficient,  effective and economical use of acquisition
mechanisms.

Organizational Arrangements

      The present organizational structure was created in response to
conditions existing two decades ago, when the role  of procurement was
of lesser importance in accomplishing  Agency missions and the mix of
assistance activities was substantially less complicated. During the
intervening years, marginal adjustments have  been made to respond to
new policy initiatives (e.g., government-wide  suspension/debarment) or
new patterns of business (loans to schools for asbestos removal; large
interagency transfers to support Superfund; expanded procurements and
assistance support to the environmental research program).

      The combination of these significant program changes and the
major  realignment of procurement responsibilities reflected  in
decentralization of contracting to the regions  calls for a broad-gauged
reassessment of EPA's  organization  for acquisition management.
Operational functions for assistance/IAGs are distributed among twelve
offices, while procurement operations are performed at thirteen separate
centers.  PCMD monitors selected contractor  financial systems and
advises on indirect cost rates for both  contracts and grants.  The Grants
Administration Division (GAD) provides leadership  on debarment  and
suspension for both  grants and contracts. Policy functions  are divided
between PCMD and two branches in GAD.   Quality assurance and
performance monitoring are the responsibility of several staffs that have
little interaction.

      From a management perspective, the increasing complexity of
Agency operations is forcing greater management integration of
extramural activities in the regional  offices, EPA laboratories and
many headquarters program offices.  Similar  integration of policy  and
monitoring functions would be appropriate.
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Status of Acquisition Management

      The organizational fragmentation and division/branch level status
of acquisition management functions is not congruent with  the
significance of  acquisition activities for the accomplishment of EPA
missions.  At the Department of Energy, the acquisition management
function is directly supervised by the Deputy Secretary; at  NASA, an
Assistant Administrator reporting directly to the Agency head is  directly
responsible for  the function.  In contrast, at EPA the function is
divided into two organizations at the division level, three levels
removed  from the Administrator.  The presence of a high level office
to organize and interject  acquisition issues into EPA policy
deliberations could be  a significant positive force in  designing program
strategies.

Recommendation

      •      The  Administrator should direct the  Assistant
            Administrator for OARM to provide within 60
            days an evaluation of the  feasibility of
            establishing an Office of Acquisition  Management
            reporting directly to  the AA.  Responsibilities of
            the Office would include:

            1.    policy leadership, monitoring, operations,
                 evaluation and human  resources development
                 related to procurement, assistance (grants,
                 cooperative  agreements, loans) and interagency
                 acquisition transactions; and

            2.    policy leadership on major systems acquisition for
                 the  Agency.
                                 102

-------
                         APPENDIX

NPL Profile  	A-l

ARCS Planned Expenditures	A-2

ARCS Contractors and Subcontractors by Region	A-3

Summary of the ARCS Contracts by Region	  A-10

ARCS Invoice Analysis	  A-13

ARCS Contracts Overview by Region	  A-38

Ratios of Program Management to Total Contract Outlays  ....  A-44

Comparison of ARCS and REM III/IV Program
Management Costs  	  A-53

Contract Administration Process	  A-54

Current ARCS  Organizational Reporting Relationship  	  A-55

ARCS Equipment Purchases 	  A-56

ARCS Contractors Cognizant Audit Agencies  	  A-57

ARCS Contractors Total Dollars Billed  	  A-58

Audit Cycle  	  A-61

Summation of Award Fees by Contractor	  A-62

Correlation Between  Performance Index Rating Scores and
Subsequent Work Assignments Received by Contract
(Regions  I, III, IV, and V)	  A-64

Performance Index Rating Scores (Regions I, II, III, IV, V, and
ARCS-Central)	  A-67

ARCS Award Fee Tracking System  	  A-71

Work Assignment Decision Tree  	  A-86


                              103

-------
ARCS Contractor Performance Criteria Matrix	  A-87




ARCS Contract Award Cycle  	  A-88




Regional ARCS Workforce Survey	  A-89



Experience Levels of Regional Workforce  	  A-90
                              104

-------
                                                                  2-Oct-91

                                 NPL Profile*
             Chart displays the number of NPL sites in each stage of the pipeline.
                       An NPL site may be in more than one stage.

Region
I
II
III
IV
V
VI
VII
VIII
LX
X
Total

iNPL**
84
199
149
153
260
69
59
43
100
68
1184
J*re
RI/FS
14
3
4
15
34
2
1
2
7
11
93

RI/FS
40
113
91
80
132
23
32
27
65
45
648

RD
25
58
34
31
59
18
14
21
15
8
283
4
RA
11
47
27
26
39
28
11
16
13
10
228
  * Source: CERCLIS (9/23/91)
** Final NPL sites only. Does not include proposed and deleted sites.
   Federal Facilities included
   Sites that have more than one type of remedial activity are counted once, and only
   once, under each activity.
                                     A-l

-------
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                            A-2

-------
         ARCS Contractors and Subcontractors  by Region
                            Region  I

Prime:      CDM Federal Programs Corporation
Affiliate:    Camp, Dresser & McKee, Inc.
Subs:       Barry Lawson Associates, Inc.
            Cambridge Analytical Associates, Inc.
            Geotechnical Corporation
            Gradient Corporation
            Rizzo Associates, Inc.
            Project Management Associates, Inc.

Prime:      Authur D. Little, Inc.
Subs:       Havens & Emerson, Inc.
            Remediation Technologies, Inc.

Prime:      Metcalf & Eddy
Subs:       CompuChem Laboratories, Inc.
            Enseco, Inc.
            Guild Drilling Co.,  Inc.
            ICF Technology, Inc.
            New England Boring Contractors of CT

Prime:      Ebasco Services, Inc.
Subs:       SEA Consultants, Inc.
            Weston Geophysical Corporation

Prime:      NUS Corporation
Subs:       Badger Engineers, Inc.
            GHR  Engineering Associates, Inc.

Prime:      TRC Companies, Inc.
Affiliate:    Alliance Technologies, Inc.
            TRC Environmental Consultants, Inc.
Subs:       Jordan Communications, Inc.
            TAMS Consultants
            PEI Associates,  Inc.

Prime:      Roy F. Weston, Inc.
Subs:       ICAIR Life Systems, Inc.
            Jordan Communications, Inc.
Size
 L
 L
 SB
 L
 SB
 SB
 SB
 SB

 L
 L
 SB

 L
 L
 L
 L
 L
SDB

 L
 L
 L

 L
 L
 L

 L
 L
 L
 SB
 L
 L

 L
 SB
 SB
      The  size refers to the size of the business,  i.e., L= Large,
SB= small  business, SDB= small disadvantaged business.

                                  A-3

-------
              ARCS Contractors and Subcontractors
                            Region II
                                                        Size
Prime:      TAMS Consultants, Inc.                         L
Subs:       TRC Companies, Inc.                           L
            Gradient Corporation                            L

Prime:      Ebasco Services Incorporated                     L
Subs:       IT Corporation                                 L
            Wehran Engineering                            L

Prime:      CDM Federal Programs Corporation               L
Affiliate:    Camp, Dresser & McKee, Inc.                   L
Subs:       Burns & Roe Industrial Services Company         L
            Dynamac Corporation                           L
            Holt & Ross, Inc.                              SB
            C. C. Johnson & Malhotra,  P. C.               SDB
            Nanco Environmental Services                  SB
            Project Management Associates                  SB

Prime:      Roy F. Weston, Inc.                            L
Subs:       Helen Neuhaus Associates                      SB
            R. E. Saniera Associates                        SB
            ICAIR Life Systems, Inc.                       SB

Prime:      Malcom  Pirnie                                 L
Subs:       CH2M Hill, Inc.                                L

Prime:      ICF Technology                                L
Subs:       Gibbs & Hill, Inc.                              L
            Nanco Labs, Inc.                                L
      The  size refers to the size  of  the  business, i.e., L= Large,
SB= small  business, SDB= small disadvantaged business.

                                 A-4

-------
              ARCS Contractors and Subcontractors

                           Region III
                                                        Size
Prime:     NUS Corporation                              L
Subs:      Gannett Fleming Environmental Engineers,
           Inc.                                          L

Prime:     CH2M Hill                                    L
Subs:      None

Prime:     Ecology & Environment, Inc.                    L
Subs:      None

Prime:     Black & Veatch, Inc.                           L
Subs:      Earth Technology Corporation                   L

Prime:     Tetra Tech, Inc.                                L
Subs:      GeoTrans, Inc.                                SB
           Wapora, Inc.                                  SB
      The  size refers  to  the  size of the business, i.e.,  L=  Large,
SB= small  business, SDB= small disadvantaged business.

                                 A-5

-------
              ARCS Contractors and Subcontractors
                           Region IV
Prime:
Subs:

Prime:
Subs:

Prime:
Affiliate:
Subs:
Prime:
Subs:
Prime:
Subs:
Prime:
Subs:
CH2M Hill
None
Bechtel
ICF Technology, Inc.

COM Federal Programs Corporation
Camp, Dresser & McKee, Inc.
Lee Wan & Associates, Inc.
Project Management Associates, Inc.
S&ME, Inc.
Life  Systems, Inc.
C. C. Johnson & Malhorta

Ebasco Services, Inc.
IT Corporation
Sinine Environmental

Roy  F. Weston, Inc.
Life  Systems, Inc.
Butler-Ackerman Public Relations

Black & Veatch
Radian Corp.
EDGe Group
Jammal & Associates
Ensafe
Size
 L
 L
 L

 L
 L
SDB
 SB
 L
 SB
SDB

 L
 L
 L

 L
 SB
 SB

 L
 L
 L
 L
 L
      The size refers to the size of the business,  i.e., L=  Large,
SB= small business,  SDB= small disadvantaged business.
                                 A-6

-------
              ARCS Contractors and Subcontractors

                            Region V

                                                        Size
Prime:      CH2M Hill                                    L
Subs:       none

Prime:      WW Engineering & Science                     L
Subs:       Limno Tech, Inc.                              SB
            Akderink & Associates                         SB
            Jay  Goodman, Ph.D.                           SB

Prime:      Black & Veatch, Inc.                           L
Subs:       Warzyn Engineering, Inc.                       L

Prime:      PRC Corporation                              L
Subs:       ICF Technology, Inc.                           L

Prime:      Donohue & Associates                         L
Subs:       Ebasco  Services, Inc.                           L
            ICAIR Life Systems, Inc.                       SB
            STS Consultants, Ltd.                          L
            John Mathis & Associates, Inc.                  SB

Prime:      Ecology & Environment, Inc.                    L
Subs:       none

Prime:      Roy F.  Weston, Inc.                           L
Subs:       Dames  & Moore                              L
            Engineers International, Inc.                    SDB
            Hubbell Roth & Clark, Inc.                     L
            Reed, Queeb, Allison, Wilcox & Associates,Inc.   L
            Sexton  Associates                              L
            ICAIR  Life Systems, Inc.                       SB
      The  size refers  to the size of  the  business,  i.e., L= Large,
SB= small  business, SDB= small disadvantaged business.

                                 A-7

-------
              ARCS Contractors and Subcontractors

                Zone of Regions VI, VII and VIII
                        (ARCS-Central)

Prime:      Morrison Kundsen Engineers
Subs:       ICF Technology, Inc.

Prime:      CH2M Hill, Inc.
Subs:       none

Prime:      Roy F. Weston, Inc.
Subs:       HRD Engineering
            ICAIR Life Systems, Inc.

Prime:      Sverdrup Corporation
Subs:       Camp, Dresser & McKee, Inc.
            Los Alamos Technical Associates
            ICAIR Life Systems, Inc.

Prime:      Jacobs Engineering Group
Subs:       Terracon
            McClelland Engineers

Prime:      CDM Federal Programs Corporation
Affiliate:    Camp, Dresser & McKee, Inc.
Subs:       Sverdrup Corporation
            Los Alamos Technical Associates
            Kellog Group
            CC Johnson & Malhorta
            Gradient Corporation

Prime:      Fluor Daniel, Inc.
Subs:       IT Corporation
            PEI Associates, Inc.
            ICAIR Life Systems, Inc.

Prime:      URS Corporation
Subs:       Brown & Caldwell
            Harza Environmental
            Donohue Associates
            Shannon & Wilson Eugene
            A. Hickock & Associates
            Western Research Institute COHBI
            Black & Veatch Architect-Engineers
            Black & Veatch Waste Science
            Med Tox
Size
 L
 L
 L
 L
 SB

 L
 L
 SB
 SB

 L
 SB
 L

 L
 L
 L
 SB
 L
SDB
 SB

 L
 L
 L
 SB

 L
 L
 L
 L
 L
 L
 L
 SB
 SB
 SB
      The  size refers to the  size of the business,  i.e., L=  Large,
SB= small  business, SDB= small disadvantaged business.
                                 A-8

-------
             ARCS Contractors and Subcontractors

                   Zone of Regions IX and X
                         (ARCS-West)

                                                       Size
Prime:     ICF Technology                               L
Subs:      Kaiser Engineers                              L

Prime:     Ecology & Environment, Inc.                   L
 Subs:     none

Prime:     CH2M Hill, Inc.                               L
Subs:      none

Prime:     URS Consultants, Inc.                         L
Subs:      Black & Veatch Architect-Engineers             SB
           Black & Veatch Waste Management             SB
           Med Tox                                     SB
           Hanson                                      L
           Shannon & Wilson                            L

Prime:     Bechtel Environmental, Inc.                     L
Subs:      ICF Technology, Inc.                          L

Prime:     Roy F. Weston, Inc.                           L
Subs:      LSA Associates, Inc.                          SB
           Dames &  Moore, Inc.                         L
           Life Systems, Inc.                             SB
           HDR  Engineering                             L
           Hall & Associates,  Inc.                         SB
      The  size refers  to  the  size of the business, i.e., L= Large,
SB= small  business, SDB= small disadvantaged business.

                                A-9

-------
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-------
ARCS  Invoice  Analysis
The following spreadsheets present contract-specific information
provided by the Procurement and Contracts Management Division
(PCMD). The invoice data were compiled for the ARCS task force
review.  The contract-specific data were obtained as cumulative
values from the invoice vouchers and recorded by PCMD for FYs 88,
89,90 and 91.  The FY91 data were cumulative as of May 31,1991.

The charts are organized by fiscal year and grouped by remedial and
program management categories of cost.  Various abbreviations are
used in the charts:

     K = Contract
     PM = Program Management
     REM = Remedial
     G&A =  General and Administrative
     ODCs = Other Direct Costs

For the purposes of analysis by the task force, contract-specific data
were used in a variety of analyses. During the analysis process,
several errors  in the data were identified and diligent attempts were
made to adjust analyses appropriately. The data have not been
audited, and the possibility exists that additional errors are present.
                            A-13

-------
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ARCS Contracts  Overview - by  Region
This chart presents contract specific information provided by the
Procurement and Contracts Management Division (PCMD) and
three ratios derived from the data. The ARCS contracts were
designed with a guaranteed base number of LOE hours — see "Base
LOE (Technical)." The base level of LOE hours was estimated to
require two years for delivery. The base period timeframe is given in
the columns, "Award Date" and "End of 2 Year Base Period."

For this review, PCMD calculated a value for the program
management base for each contract using the total contract program
management estimated value, including all options, divided by the
total LOE hours. The resulting PM/LOE value was multiplied by the
base LOE to derive an estimated value for the program management
base allocation — see "$ Value of Base for PM (w/o equip)."

The last three columns of the chart are calculated ratios to allow
analysis of expenditure data  against initial contract estimates:

     "Ratio of LOE hours  to  Base LOE hours" ~ indicates how
     actual LOE relates to the established base LOE.

     "Ratio of PM $ to PM Base $ (w/o equipment)" - indicates how
     actual expenditures relate to an estimated value for
     expenditures. (Equipment cost estimates were not included in
     the calculation of base program management value, so
     equipment was deleted from the actual program management
     costs. Given the variability in reporting of equipment cost, this
     comparison could have significant flaws.)

     "Ratio of PM $ to Total Contract $" - indicates how much of
     contract expenditures have been spent on program
     management.

Data used to prepare Part A were provided by PCMD (see Appendix,
ARCS Invoice Analysis). Part B was provided by PCMD.
Discrepancies due to data transfer or calculation may exist.

                            A-38

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Ratios  of  Program Management to  Total
Contract  Outlays
Notes on the Charts:

The following charts depict the ratios of program management
outlays to total contract outlays for the contracts in each region or
zone, by fiscal year. The source data were provided by the
Procurement and Contracts Management Division and were current
through May 31,1991 (as of September 20,1991 dataset).

The software used to produce the charts automatically assigns y-axis
scales based on the data values. Thus, the scale for the Region 2 plot
is slightly different than the others. The scale for the national
average plot in the body of the report is also different.

Minor discrepancies may exist in the source data for a number of
reasons, including subsequent corrections, rounding, and so forth.
                               A-44

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-------
COMPARISON OF ARCS AND REMIII/IV PROGRAM MANAGEMENT COSTS
                         ARCS Contract Summary

Total ARCS charges invoiced as of March 1991

Total Program Management (PM) costs through
March 1991

Total ARCS LOE hours delivered
     as of March 1991
     ($31 PM/LOE hour)

                       REM III/IV Contract Summary

Total contract cost (with subpool)
Total contract cost (without subpool)

Total Program Management costs

Total REM LOE hours delivered
     ($27.50 PM/LOE hour)
                      $227.9 M (28.9% is PM)


                       $65.9 M

                         1.88 million hours
                      $383.2 M (19% is PM)
                      $308.5 M (24% is PM)

                       $72.6 M

                         2.64 million hours
                  Program Management Costs by Category

                           ARCS            REM III/IV

                      S Million (% PM)     S Million (% PM)
Overhead /Indirect

Direct Labor

Equipment

Fees (Base and Award)

Other Direct Costs

Subcontracts
Travel
26.4 (40%)
18.5 (28%)
7.9 (12%)
4.6 (7%)
3.9 (6%)
3.3 (5%)
1.3 (2%)
24.6 (34%)
17.5 (24%)
6.2 (9%)
4.4 (6%)
7.6 (10%)
9.8 (14%)
2.5 (3%)
             Total
65.9 (100%)
72.6 (100%)
                                     A-53

-------
       CONTRACT ADMINISTRATION PROCESS
      ASSIST IN CONTRACT
          CUDSEOUT   15
                                              PREPARE WORK
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                                                   RECOMMENDTHEUSE
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                                                                  3
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                             CONFERENCE
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                           MONITOR STATUS
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                                                 MONITOR USE OF
                                                  GOVERNMENT
                                                    PROPERTY
                                                     REVIEW
                                                  CONTRACTORS
                                                   TECHNICAL
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            REVIEW
             KEY
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                                            REJECT
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                                          DELIVERABLE
                                  A-54

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                      ARCS CONTRACTORS
                 COGNIZANT AUDIT AGENCIES [1]
Number of
Contractor Contracts
1. Bechtel Environmental, Inc. 2
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
Black & Veatch, Inc.
CDM Federal Programs Corp.
CH2MH1U
Donohue & Associates
EBASCO Environmental
Ecology & Environment, Inc.
Fluor Daniel, Inc.
ICF Technology, Inc.
Jacobs Engineering Group, Inc.
Arthur D. Little
Malcolm Pirnie, Inc.
Metcalf & Eddv, Inc.
Morrison Knudson Env'l Services
NUS Corporation
PRC Env'l Management, Inc.
Sverdrup Corporation
TAMS Consultants, Inc.
Tetra Tech, Inc.
TRC Companies
URS Consultants, Inc.
Rov F. Weston, Inc.
WW Engineering & Science
3
4
5
1
3
3
1
2
1
1
1
1
1
2
1
1
1
1
1
2
6
1
Cognizant
Audit Agency
DCAA
DCAA
DCAA
EPA/OIG
EPA/OIG
DCAA
EPA/OIG
DCAA
EPA/OIG
DCAA
DCAA
DCAA
DCAA
DCAA
DCAA
EPA/OIG
DCAA
DCAA
DCAA
DCAA
DCAA
DCAA
EPA/OIG
                             TOTAL   45

[1]    Information supplied by EPA Office of the Inspector General, as of September 20,1991.
DCAA
OIG
Defense Contract Audit Agency
Office of the Inspector General
                                   A-57

-------
                                      TABLE
                                 ARCS CONTRACTORS
                               TOTAL DOLLARS BILLED
                               AS OF MAY 31, 1991
CONTRACTOR/ FY 88
REGIONAL TOTAL K $
CONTRACT AWARD DATE INVOICED
BECHTEL 4 22-Jun-89
BECHTEL 9-10 21-Jun-89
Subtotal 0
BLACK&V 3 29-Jun-88 23,764
BLACK&V 4 2-Jun-89
BLACK&V 5 1-Mar-88 360,467
Subtotal 384,231
COM 1 15-Apr-89
COM 2 15-Mar-89
COM 4 9-Jun-89
COM 6-8 23-Mar-89
Subtotal 0
CH2MHILL 3 3-Jun-88 180,087
CH2MHILL 4 25-May-89
CH2MHILL 5 1-Feb-88 525,810
CH2MHILL 6-8 13-Sep-88 5,642
CH2MHILL 9-10 24-Mar-89
Subtotal 711,539
DONOHOE 5 29-Jun-88 179,000
Subtotal 179,000
EBASCO 1 23-Mar-89
EBASCO 2 06-Sep-88
EBASCO 4 18-Jun-89
Subtotal 0
E&E 3 6-May-88 179,093
E&E 5 6-May-88 120,003
E&E 9-10 10-Mar-89
FY 89 FY 90
TOTAL K $ TOTAL K$
INVOICED INVOICED
144,135 1,031,180
322,138 2,080,168
466,273 3,111,348
1,490,204 11,485,895
21,228 543,718
2,006,734 2,153,445
3,518,166 14,183,058
315,241 890,501
1,045,436 3,850,315
174,361 1,179,757
1,086,035 5,807,307
2,621,073 11,727,880
2,250,118 2,625,615
134,168 1,011,235
4,389,358 3,021,518
2,163,275 3,601,511
376,226 5,123,611
9,313,145 15,383,490
1,770,077 2,701,478
1,770,077 2,701,478
198,916 1,895,226
3,912,104 5,100,153
263,860 997,452
4,374,880 7,992,831
2,047,935 3,735,485
923,574 1,049,192
491,547 1,037,310
FY 91
TOTAL K$
INVOICED
701,620
2,336,456
3,038,076
10,472,528
832,120
1,267,047
12,571,695
1,258,431
2,330,553
714,128
2,461,830
6,764,942
1,712,040
684,770
1,835,475
1,632,456
5,935,637
11,800,378
2,739,165
2,739,165
1,863,210
4,800,752
1,858,679
8,522,640
282,943
1,353,667
1,171,512

CUMULATIVE
SUBTOTALS
1,876,935
4,738,762
6,615,697
23,472,391
1,397,066
5,787,693
30,657,150
2,464,173
7,226,304
2,068,246
9,355,172
21,113,895
6,767,860
1,830,173
9,772,161
7,402,884
11,435,474
37,208,552
7,389,720
7,389,720
3,957,352
13,813,009
3,119,991
20,890,351
6,245,456
3,446,436
2,700,369
Subtotal
                       299,096    3,463,056  5,821,987    2,808,123    12,392,262
                                         A-58

-------
                                              TABLE
                                         ARCS CONTRACTORS
                                      TOTAL DOLLARS  BILLED
                                       AS OF MAY  31,  1991

CONTRACTOR/                   FY 88        FY 89         FY  90         FY 91
REGIONAL                  TOTAL K $      TOTAL K  $   TOTAL  K$      TOTAL K$  CUMULATIVE
CONTRACT      AWARD DATE   INVOICED      INVOICED    INVOICED      INVOICED  SUBTOTALS
FLUOR 6-8     6-Jan-89                     889.235   1,283,365     1,899,571    4,072,171

      Subtotal

ICF 2         30-Sep-88
ICF 9-10      28-Jun-89

      Subtotal

JACOBS 6-8    30-Sep-88

      Subtotal

LITTLE 1      28-Sep-88

      Subtotal

MALCOLM 2     26-May-89

      Subtotal

METCALF 1     01-Apr-89

      Subtotal

MK 6-8        31-Mar-89

      Subtotal

NUS 1         16-Sep-88
NUS 3         1-Jan-88

      Subtotal

PRC 5         28-Apr-88

      Subtotal

SVERDRUP 6-8  24-Mar-89

      Subtotal
0

0

0

0

0

0

0
893,310
893,310
181,706
181,706

0
889,235
881,567
142,296
1,023,863
1,646,092
1,646,092
928,254
928,254
508,530
508,530
202,752
202,752
417,807
417,807
1,108,533
5,018,480
6,127,013
2,370,756
2,370,756
540,071
540,071
1,283,365
1,299,330
1,238,726
2,538,056
5,020,773
5,020,773
1,339,559
1,339,559
3,681,385
3,681,385
1,962,139
1,962,139
1,308,915
1,308,915
2,805,766
6,229,584
9,035,350
3,176,028
3,176,028
1,155,498
1,155,498
1,899,571
1,620,315
1,046,707
2,667,022
711,491
711,491
1,005,129
1,005,129
3,096,926
3,096,926
3,449,698
3,449,698
1,676,125
1,676,125
1,814,244
2,987,621
4,801,865
1,992,288
1,992,288
1,333,159
1,333,159
4,072,171
3,801,212
2,427,729
6,228,941
7,378,356
7,378,356
3,272,942
3,272,942
7,286,841
7,286,841
5,614,589
5,614,589
3,402,847
3,402,847
5,728,543
15,128,995
20,857,538
7,720,778
7,720,778
3,028,728
3,028,728
                                               A-59

-------
        TABLE
   ARCS  CONTRACTORS
TOTAL  DOLLARS BILLED
 AS OF MAY 31, 1991
CONTRACTOR/ FY 88 FY 89
REGIONAL TOTAL K $ TOTAL K $
CONTRACT AWARD DATE
TAMS 2 01-Feb-89
Subtotal
TETRA TECH 3 22-Jun-88
Subtotal
TRC 1 24-Mar-89
Subtotal
URS 6-8 26-May-89
URS 9-10 9-Jun-89
Subtotal
WESTON 1 22-Feb-89
UESTON 2 10-Mar-89
WESTON 4 16-Jun-89
WESTON 5 1-Jun-88
WESTON 6-8 10-Feb-89
WESTON 9-10 1-May-89
Subtotal
W&W 5 31-Mar-88
Subtotal

INVOICED INVOICED
674,841
0 674,841
107,595 716,117
107,595 716,117
83,967
0 83,967
218,345
260,754
0 479,099
265,979
657,270
33,886
271,691 1,180,932
891,000
408,661
271,691 3,437,728
156,243 1,180,095


156,243 1,180,095
FY 90
TOTAL K$
INVOICED
2,130,634
2,130,634
999,969
999,969
602,802
602,802
3,325,253
1,614,207
4,939,460
490,806
941,229
77,703
1,671,185
2,017,924
1,796,621
6,995,468
1,552,101


1,552,101
FY 91
TOTAL K$ CUMULATIVE
INVOICED SUBTOTALS
2,159,207
2,159,207
1,922,231
1,922,231
1,125,681
1,125,681
2,714,723
2,194,212
4,908,935
453,672
356,028
660,566
1,537,895
1,675,018
3,039,598
7,722,777
755,330


755,330
4,964,682
4,964,682
3,745,912
3,745,912
1,812,450
1,812,450
6,258,321
4,069,173
10,327,494
1,210,457
1,954,527
772,155
4,661,703
4,583,942
5,244,880
18,427,664
3,643,769


3,643,769
             GRAND TOTAL
248,053,330
          A-60

-------
                               AUDIT CYCLE
             Individual
             Contract (45)
             [1]
  Financial Monitoring
  Review
  Interim Direct
  Cost Audit (as needed)
 • Financial Monitoring
  Review
 • Close Out Audit
 • Interim Direct
  Cost Audit (as needed)
  Close Out Audit
 • Financial Monitoring
  Review
 • Close Out Audit
 • Interim Direct
  Cost Audit (as needed)
                                  Contract Award
  JTyear of
performance
                                      1 year of
                                    performance
                                     1.5 years of
                                    performance
  2 years of
performance
                                     2.5 years of
                                    performance
  3 years of
 performance
                                     3.5 years of
                                     performance
  4 years of
 performance
                     Individual
                     Contractor (23)
                     [2]
Example: End of
Contractor's fiscal year
Initiate incurred cost
audit
                                                              Incurred cost audit
                           Incurred cost audit
                                                              Incurred cost audit
[1] All reviews and audits based on individual
   contract period of performance
                  [2] Audits based on annual
                     period of performance from
                     start of fiscal year
                                            A-61

-------
          SUMMATION OF AWARD FEES BY
                     CONTRACTOR
     This table displays the summation of base and award fees for
program management and remedial elements for each contractor across
all regions and zones.  These data are cumulative from the start of the
contracts through May 1991.
                           A-62

-------
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                                                                                     A-63
S§
0.  O

-------
 CORRELATION BETWEEN PERFORMANCE INDEX
     RATING SCORES AND SUBSEQUENT WORK
  ASSIGNMENTS RECEIVED BY  CONTRACT (AS A
 PERCENTAGE OF THE TOTAL WORK AVAILABLE
   WITHIN A REGION/ZONE IN THE SUBSEQUENT
                    RATING PERIOD)

     The following figures represent the correlation between PIRS
scores and award of work as a percentage of the total work available
within a region or zone in the subsequent rating period.  Data were
examined across a number of regions/zones for a cause-effect
relationship between the Performance Index Rating  Scores for one
rating period  and the percentage of the overall work assigned which
was received  by the specific contractor.  The line drawn through the
plotted  data points marked by crosses is  the linear regression solution
of the relationship between  score and subsequent award of work as a
percentage of the total work available across all contractors for that
time period in that region or zone.  The line therefore illustrates the
best fit solution of this direct relationship.  If there were a strong
correlation between the scores and the percentage of available work
awarded in a subsequent  period, the crosses would  be clustered around
the line and more evenly distributed above and below the line.

     The limited amount of data available  within  a region or zone
due to  the short period of time these contracts have been in place make
this analysis difficult.  The  limited number of rating periods precluded
the analysis of PIRS data from full one year and comparing it against
the work allocation in the subsequent year which would reflect the way
the awards are actually made.  As time proceeds, the additional rating
periods will permit the examination of correlations  on an inter-annual
basis.
                            A-64

-------
I
o
X
      80
      70 -
      60 -
50 -
      30 -
                             REGION  I

                             WER ALL PERIODS
                                                             24
o
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g
     100
90 -



BO -



7Q -



60 -



50 -



40 -



30 -



20 -



10 -
        •12
                           REGION   I I  I

                            ALL RATING PERIODS
                                24       2B


                               PIRS SCORES
                                    A-65

-------
      80
                             REGION  IV

                             ALL RATING PERIODS
      70 -
I
      60 -
      50 -
3
O
30 -
                        10
                                14      18

                                PIRS SCORES
                                                       26
                                                              30
      80
                              REGION  V

                             ALL RATING PERIODS
I
      60 -
      SO -
5
O
      40 -
30 -
                            13         15

                                PIRS SCORES
                                               17
                                                         19
                                                                   21
                                     A-66

-------
       PERFORMANCE INDEX RATING  SCORES

      These figures look at the relative frequencies of the ranges of
scores e.g. 0-10, 11-20, 21-30, 31-40, 41-50, 51-60,  61-70, 71-80, 81-
90 and 91-100.  Region for Regions I, II, III, IV, V and the Central
Zone.  Western Zone Performance Index Rating Scores were not
available in the ARCS Award Fee Tracking System.  Regional
frequencies are displayed beside the aggregate national frequencies for
purposes of comparison.
                             A-67

-------
     PERFORMANCE  INDEX  RATING  SCORES
60
                   REGIONS AS SHOWN
50 -
40 -
30 -
20 -
ID -
                         71
                             I/
                              A
                               X
                              Z^


    0   10    20   30






       FREQ.  ALL REGIONS
                     40    50



                      SCORES
                              60
                                       SO
                                       REG
                                            3D
                                                100
     PERFORMANCE  INDEX  RATING  SCORES
                    REGIONS AS SHOWN
ou —
50 -

40 -

30 -


20 -

10 -


n












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SCORES
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60 10 80 90 -100

  [771 FREQ. ALL REGIONS
                                   FREQ. REG II
                          A-68

-------
     PERFORMANCE  INDEX RATING SCORES
60
                    REGIONS AS SHOWN
50 -
40 -
30 -
20 -
                         V\
                     \A

                              71
                                  /\
        10
             20
                 30
                      40   50
                       SCORES
                                   70
                                        80
                                            90
                                                100
     FREQ. ALL REGIONS
                                  FREQ.  REG III
     PERFORMANCE  INDEX RATING SCORES
                    REGIONS AS SHOWN

50 -


40 -

30 -



20 -


1D -


0 -















r/n
l/i\l r/j-^-,
7
y
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\

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N

0 10 20 30 40 50
SCORES

















/
/
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V\
/
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60 70 80 90 100

  [771 FREQ. ALL REGIONS
fV\l FREQ. REG IV
                          A-69

-------
       PERFORMANCE  INDEX RATING  SCORES
                     REGIONS AS SHOWN
50 -

•40 -
30 -
20 -
in -
0 -






[7]
r7\ I/I
7
/
/


\i
7
4
^
^
^
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/
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^
^
0 10 20 30 40 50
SCORES
V7\ FREQ. ALL REGIONS







71
X
/
^
^
/






^

60







r-,
^
^
/
/
/
/



M
^^
\ /Xl I7l
i i
70 80 90 100
[V\] FREQ. REG V
       PERFORMANCE  INDEX RATING  SCORES
                     REGIONS AS SHOWN

50 -



40 -




30 -

20 -


10 -

n

















[71 \A
7
/

/
/
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VI
7
/
/
/

y
/
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^
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/
















\1
^1
/
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y
y
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y
y
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^
^






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/
y
y
y
y
/
y
/
/
/
/







/\
/\
XI /\
X /\
\ /\ F71
      0   10   20

V~A FREQ. ALL REGIONS
                   30
40   50
 SCORES
                                60
                                    70
                                        80
                                             30
                               FREQ. CENTRAL ZONE
                                                 100
                           A-70

-------
        ARCS AWARD FEE TRACKING SYSTEM

      This table displays the Performance Index Rating Scores (PIRS)
available under  the Procurement and  Contracts Management Division
Tracking System.  Data are displayed by region by contractor.  Rating
periods started from the time the contract was issued.  In some regions
not all contracts were issued at the same time. For purposes of data
analysis within  a region, the rating periods with the same dates were
given the same  number.  Therefore, in many cases there may be no
entries for the first or second rating periods for any given contractor.
Most remedial projects have not yet been completed so there are few
remedial Phase  II ratings listed.  These data were  used to develop the
PIRS frequency distributions provided for the  Award Fee section.
                              A-71

-------
                           ARCS AWARD  FEE TRACKING SYSTEM
                                    REGION  1
     RATING PERIOD

1.  09/16/88 - 03/31/89
2.  04/01/89 - 07/31/89
3.  08/01/89 - 11/30/89
4.  12/01/89 - 03/31/90
5.  04/01/90 - 07/31/90
6.  08/01/90 - 11/30/90
     RATING PERIOD

1.
2.  03/24/89 - 07/31/89
3.  08/01/89 - 11/30/89
4.  12/01/89 - 03/31/90
5.  04/01/90 - 07/31/90
6.  08/01/90 - 11/30/90
     RATING PERIOD

1.
2.  02/22/89 - 07/31/89
3.  08/01/89 - 11/30/89
4.  12/01/89 - 03/31/90
5.  04/01/90 - 07/31/90
6.  08/01/90 - 11/30/90

PM RATING
45.00%
47.00%
35.00%
70.00%
80.00%
73.00%

PM RATING
10.00%
45.00%
55.00%
45.00%

PM RATING
50.00%
50.00%
31.00%
0.00%
31.00%
RP RP
PHASE I PHASE II
100.00%
72.00%
41.00%
100.00%
100.00%
100.00%
RP RP
PHASE I PHASE II
100.00%
100.00%
100.00%
100.00%
RP RP
PHASE I PHASE II
100.00%
100.00%
100.00%
100.00%
100.00%
PIRS

 65.69%
 49.56%
 30.46%
 62.99%
 68.00%
 68.00%
PIRS
 46.30%
 59.99%
 56.00%
 66.00%
PIRS
 52.78%
 60.45%
 50.00%
 39.60%
 48.14%
                                           A-72

-------
ARCS AWARD FEE TRACKING SYSTEM
         REGION 1
RATING PERIOD
1.
2. 04/15/89 -
3. 08/01/89 -
4. 12/01/89 -
5. 04/01/90 -
6. 08/01/90 -


07/31/89
11/30/89
03/31/90
07/31/90
11/30/90

RATING PERIOD
1.
2. 03/23/89 -
3. 08/01/89 -
4. 12/01/89 -
5. 04/01/90 -
6. 08/01/90 -


07/31/89
11/30/89
03/31/90
07/31/90
11/30/90

RATING PERIOD
1. 09/28/88 -
2. 04/01/89 -
3. 08/01/89 -
4. 12/01/89 -
5. 04/01/90 -
6. 08/01/90 -

03/31/89
07/31/89
11/30/89
03/31/90
07/31/90
11/30/90

RATING PERIOD
1.
2. 04/01/89 -
3. 08/01/89 -
4. 12/01/89 -
5. 04/01/90 -
6. 08/01/90 -

07/31/89
11/30/89
03/31/90
07/31/90
11/30/90
PM RATING


45.00%
61.00%
72.00%
61.00%

PM RATING

75.00%
80.00%
60.00%
66.00%
66.00%

PM RATING
31.00%
61.00%
70.00%
55.00%
65.00%
70.00%

PM RATING

NO FORMAL
75.00%
61.00%
75.00%
80.00%
RP RP
PHASE I PHASE II


100.00%
100.00%
100.00%
100.00%
RP RP
PHASE I PHASE II

100.00%
100.00%
100.00%
100.00%
100.00%
RP RP
PHASE I PHASE II
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
RP RP
PHASE I PHASE II


100.00%
100.00%
100.00%
100.00%
                                         PIRS
                                          51.53%
                                          54.70%
                                          60.93%
                                          57.68%
                                         PIRS
                                          65.00%
                                          57.80%
                                          56.40%
                                          61.05%
                                          61.91%
                                         PIRS
                                          62.05%
                                          64.51%
                                          54.10%
                                          50.96%
                                          53.50%
                                          55.00%
                                         PIRS
                                          74.90%
                                          58.16%
                                          52.93%
                                          67.60%
                                          68.25%
                 A-73

-------
                           ARCS  AWARD  FEE TRACKING SYSTEM
                                    REGION  II
     RATING PERIOD

1.
2.  03/15/89 - 06/30/89
3.  07/01/89 - 10/31/89
4.  11/01/89 - 02/28/90
5.  03/01/90 - 06/30/90
6.  07/01/90 - 10/31/90
     RATING PERIOD
1.  09/06/88 - 02/28/89
2.  03/01/89 - 06/30/89
3.  07/01/89 - 10/31/89
4.  11/01/89 - 02/28/90
5.  03/01/90 - 06/30/90
6.  07/01/90 - 10/31/90
     RATING PERIOD

1.  09/30/88 - 02/28/89
2.  03/01/89 - 06/30/89
3.  07/01/89 - 10/31/89
4.  11/01/89 - 02/28/90
5.  03/01/90 - 06/30/90
6.  07/01/90 - 10/31/90
     RATING PERIOD

1.
2.
3.  05/26/89 - 10/31/89
4.  11/01/89 - 02/28/90
5.  03/01/90 - 06/30/90
6.  07/01/90 - 10/31/90

PM RATING
40.00%
75.00%
77.00%
70.00%
70.00%

PM RATING
75.00%
83.00%
77.00%
90.00%
80.00%
70.00%

PM RATING
45.00%
40.00%
65.00%
55.00%
50.00%
60.00%

PM RATING
75.00%
55.00%
45.00%
60.00%
RP
PHASE I
100.00%
100.00%
100.00%
93.00%
100.00%
RP
PHASE I
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
RP
PHASE I
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
RP
PHASE I
100.00%
100.00%
100.00%
100.00%
RP
PHASE II





RP
PHASE II






RP
PHASE II



16.50%


RP
PHASE II




PIRS
 57.00%
 52.00%
                                                                    PIRS
 69.00%
 58.00%
PIRS
 59.00%
 62.00%
                                                                     PIRS
 69.00%
 58.00%
                                           A-74

-------
                           ARCS  AWARD  FEE TRACKING SYSTEM
                                    REGION  II
     RATING PERIOD         PM  RATING
  RP
PHASE I
1.
2.  02/01/89 - 06/30/89       55.00%      100.00%
3.  07/01/89 - 10/31/89       55.00%      100.00%
4.  11/01/89 - 02/28/90       60.00%      100.00%
5.  03/01/90 - 06/30/90       55.00%      100.00%
6.  07/01/90 - 10/31/90       80.00%      100.00%
   RP
PHASE II
                                                                    PIRS
                             56.00%
                             66.00%
     RATING PERIOD         PM  RATING
1.
2.  03/10/89 - 06/30/89       50.00%
3.  07/01/89 - 10/31/89       35.00%
4.  11/01/89 - 02/28/90       55.00%
5.  03/01/90 - 06/30/90       45.00%
6.  07/01/90 - 10/31/90
  RP
PHASE I
   RP
PHASE II
                                                                    PIRS
 100.00%
 100.00%
 100.00%
 100.00%
   80.00%
                 50.00%
                 60.00%
                                           A-75

-------
                           ARCS AWARD FEE  TRACKING SYSTEM
                                    REGION III
     RATING PERIOD

1.  06/29/88 - 10/31/88
2.  11/01/88 - 02/28/89
3.  03/01/89 - 06/30/89
4.  07/01/89 - 10/31/89
5.  11/01/89 - 02/28/90
6.  03/01/90 - 06/30/90
7.  07/01/90 - 10/31/90
     RATING PERIOD
1.
2.  06/03/88
3.  11/01/88
4.  03/01/89
5.  07/01/89
6.  11/01/89
7.  03/01/90
8.  07/01/90
10/31/88
02/28/89
06/30/89
10/31/89
02/28/90
06/30/90
10/31/90
     RATING PERIOD
1.
2.  05/06/88
3.  11/01/88
4.  03/01/89
5.  07/01/89
6.  11/01/89
7.  03/01/90
8.  07/01/90
10/31/88
02/28/89
06/30/89
10/31/89
02/28/90
06/30/90
10/31/90

PM RATING
50.00%
75.00%
65.00%
20.00%
40.00%
60.00%
80.00%

PM RATING
30.00%
90.00%
95.00%
35.00%
60.00%
60.00%
75.00%

PM RATING
RP RP
PHASE I PHASE
NO COSTS SUBMITTED
100.00%
85.00%
100.00%
100.00%
100.00%
100.00%
RP RP
PHASE I PHASE
50.00%
100.00%
100.00%
100.00%
100.00% 95
100.00%
100.00% 85
RP RP
PHASE I PHASE

II








II




.00%

.00%

II
   55.00%       100.00%
   75.00%       100.00%
[ALL  SCORES DEFERRED UNTIL PD. #4]
   75.00%       100.00%
   67.00%       100.00%
   60.00%       100.00%
   35.00%       33.00%
                                                                     PIRS
                                                       78.00%
                                                       79.00%
                                                       74.00%
                                                       78.00%
                                                       84.00%
                                                       83.00%
                                                                     PIRS
                                          30.00%
                                          78.00%
                                          81.00%

                                          79.00%
                                          80.00%
                                          70.00%
                                                                     PIRS
45.00%
71.00%

66.00%
65.00%
84.00%
71.00%
                                           A-76

-------
                           ARCS  AWARD  FEE TRACKING SYSTEM
                                   REGION III
     RATING PERIOD

1.  01/01/88 -  06/30/88
2.  07/01/88 -  10/31/88
3.  11/01/88 -  02/28/89
4.  03/01/89 -  06/30/89
5.  07/01/89 -  10/31/89
6.  11/01/89 -  02/28/90
7.  03/01/90 -  06/30/90
8.  07/01/90 -  10/31/90
PM RATING
96.00%
70.00%
100.00%
75.00%
75.00%
80.00%
70.00%
60.00%
RP RP
PHASE I PHASE II
100.00%
100.00%
100.00%
100.00%
100.00%
100.00% 95.00%
100.00% 100.00%
95.00%
PIRS


91.00%
81.00%
90.00%
78.00%
73.00%
64.00%
RATING PERIOD
1.
2.
3.
4.
5.
6.
7.
8.

06/22/88 -
11/01/88 -
03/01/89 -
07/01/89 -
11/01/89 -
03/01/90 -
07/01/90 -

10/31/88
02/28/89
06/30/89
10/31/89
02/28/90
06/30/90
10/31/90
PM RATING

50.00%
70.00%
60.00%
75.00%
60.00%
55.00%
80.00%
RP RP
PHASE I PHASE II

NO COSTS SUBMITTED
100.00%
100.00%
100.00%
100.00%
81.00%
75.00%
                                                                    PIRS
                                                                     76.00%
                                                                     64.00%
                                                                     67.00%
                                                                     63.00%
                                                                     64.00%
                                                                     68.00%
                                           A-77

-------
                           ARCS  AWARD  FEE TRACKING SYSTEM
                                    REGION  IV
1.
2.
3.
4.
1.
2.
3.
4.
 RATING PERIOD

06/22/89 - 10/31/89
.11/01/89 - 02/28/90
03/01/90 - 06/30/90
07/01/90 - 10/31/90
 RATING PERIOD

06/02/89 - 10/31/89
11/01/89 - 02/28/90
03/01/90 - 06/30/90
07/01/90 - 10/31/90
1.
2.
3.
4.
 RATING PERIOD

06/09/89 - 10/31/89
11/01/89 - 02/28/90
03/01/90 - 06/30/90
07/01/90 - 10/31/90
 1.
 2.
 3.
 4.
  RATING  PERIOD

 05/25/89 -  10/31/89
 11/01/89 -  02/28/90
 03/01/90 -  06/30/90
 07/01/90 -  10/31/90
 1.
 2.
 3.
 4.
  RATING PERIOD

 06/18/89 -  10/31/89
 11/01/89 -  02/28/90
 03/01/90 -  06/30/90
 07/01/90 -  10/31/90

PH RATING
60.00%
80.00%
80.00%
35.00%

PH RATING
100.00%
50.00%
80.00%
80.00%

PH RATING
50.00%
80.00%
80.00%
80.00%

PH RATING
31.00%
20.00%
0.00%
40.00%

PH RATING
60.00%
40.00%
0.00%
70.00%
RP
PHASE I
100.00%
100.00%
94.00%
77.00%
RP
PHASE I
100.00%
9.30%
100.00%
100.00%
RP
PHASE I
100.00%
100.00%
100.00%
100.00%
RP
PHASE I
100.00%
47.00%
11.00%
90.00%
RP
PHASE I
100.00%
95.00%
35.00%
98.00%
RP
PHASE II




RP
PHASE II




RP
PHASE II




RP
PHASE II




RP
PHASE II




PIRS

 57.00%
 54.00%
 58.00%
 43.00%
PIRS

 53.00%
 23.00%
 45.00%
 46.00%
PIRS

 63.00%
 57.00%
 53.00%
 57.00%
PIRS

 66.00%
 43.00%
 35.00%
 49.00%
 PIRS

  75.00%
  47.00%
  25.00%
  52.00%
                                            A-78

-------
                          ARCS AWARD FEE TRACKING SYSTEM
                                   REGION IV
                                          RP           RP
     RATING PERIOD         PM RATING     PHASE I     PHASE II         PIRS
1.  06/16/89 -  10/31/89       20.00%      100.00%                     50.00%
2.  11/01/89 -  02/28/90       25.00%       63.07%                     41.00%
3.  03/01/90 -  06/30/90       60.00%      100.00%                     55.00%
4.  07/01/90 -  10/31/90       20.00%      100.00%                     50.00%
                                           A-79

-------
ARCS AWARD  FEE TRACKING SYSTEM
         REGION V
RATING PERIOD
1.
2.
3.
4.
5.
6.
7.
8.


05/06/88 -
11/01/88 -
03/01/89 -
07/01/89 -
11/01/89 -
03/01/90 -
07/01/90 -


10/31/88
02/28/89
06/30/89
10/31/89
02/28/90
06/30/90
10/31/90

RATING PERIOD
1.
2.
3.
4.
5.
6.
7.
8.


04/28/88 -
11/01/88 -
03/01/89 -
07/01/89 -
11/01/89 -
03/01/90 -
07/01/90 -


10/31/88
02/28/89
06/30/89
10/31/89
02/28/90
06/30/90
10/31/90

RATING PERIOD
1.
2.
3.
4.
5.
6.
7.
8.

06/01/88 -
11/01/88 -
03/01/89 -
07/01/89 -
11/01/89 -
03/01/90 -
07/01/90 -

10/31/88
02/28/89
06/30/89
10/31/89
02/28/90
06/30/90
10/31/90
PM RATING

45.00%
35.00%
40.00%
50.00%
50.00%
45.00%
50.00%

PM RATING

55.00%
60.00%
55.00%
60.00%
60.00%
50.00%
60.00%

PM RATING

20.00%
31.00%
45.00%
50.00%
40.00%
50.00%
31.00%
RP RP
PHASE I PHASE II

100.00%
100.00%
73.00%
100.00%
100.00%
100.00%
100.00%
RP RP
PHASE I PHASE II

100.00%
100.00%
100.00%
100.00%
100.00% 90.00%
100.00% 42.00%
100.00% 70.00%
RP RP
PHASE I PHASE II

N/A NO WORK ASSIGNED
100.00%
82.00%
100.00%
100.00%
100.00%
100.00% 15.00%
PIRS

60.00%
60.00%
47.10%
62.78%
50.00%
47.00%
48.00%

PIRS

66.00%
80.64%
84.08%
83.72%
64.00%
66.00%
64.00%

PIRS

N/A
61.04%
62.05%
64.74%
56.00%
54.00%
48.00%
RATING PERIOD
1.
2.
3.
4.
5.
6.
7.
8.
03/31/88
07/01/88
11/01/88
03/01/89
07/01/89
11/01/89
03/01/90
07/01/90
- 06/30/88
- 10/31/88
- 02/28/89
- 06/30/89
- 10/31/89
- 02/28/90
- 06/30/90
- 10/31/90
PM RATING
60.00%
80.00%
50.00%
80.00%
70.00%
60.00%
60.00%
65.00%
RP RP
PHASE I PHASE II
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
                                         PIRS

                                          75.00%
                                          77.20%
                                          70.20%
                                          65.60%
                                          75.80%
                                          50.00%
                                          58.00%
                                          71.00%
                 A-80

-------
                           ARCS  AWARD  FEE TRACKING SYSTEM
                                    REGION V

1.
2.
3.
4.
5.
6.
7.
8.
RATING
03/01/88
07/01/88
11/01/88
03/01/89
07/01/89
11/01/89
03/01/90
07/01/90
PERIOD
- 06/30/88
- 10/31/88
- 02/28/89
- 06/30/89
- 10/31/89
- 02/28/90
- 06/30/90
- 10/31/90
PM RATING
60.00%
45.00%
55.00%
50.00%
50.00%
45.00%
55.00%
45.00%
RP RP
PHASE I PHASE II
100.00%
82.60%
100.00%
100.00%
81.30%
100.00%
100.00%
100.00% 65.00!
                                                                    PIRS

                                                                     75.00%
                                                                     64.85%
                                                                     77.60%
                                                                     74.20%
                                                                     68.42%
                                                                     54.00%
                                                                     55.00%
                                                                     56.00%
RATING PERIOD
1.
2.
3.
4.
5.
6.
7.
8.
02/01/88 -
07/01/88 -
11/01/88 -
03/01/89 -
07/01/89 -
11/01/89 -
03/01/90 -
07/01/90 -
06/30/88
10/31/88
02/28/89
06/30/89
10/31/89
02/28/90
06/30/90
10/31/90
PM RATING
50.00%
70.00%
61.00%
55.00%
55.00%
55.00%
61.00%
55.00%
RP RP
PHASE I PHASE II
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00% 57.00
                                                                    PIRS

                                                                     70.00%
                                                                     71.00%
                                                                     82.00%
                                                                     72.50%
                                                                     72.04%
                                                                     70.00%
                                                                     71.00%
                                                                     60.00%
     RATING PERIOD
                           PM RATING
                                           RP
                                         PHASE  I
                RP
             PHASE II
                             PIRS
1.
2.  06/29/88 - 10/31/88       35.00%
3.  11/01/88 - 02/28/89       45.00%
4.  03/01/89 - 06/30/89       35.00%
5.  07/01/89 - 10/31/89       45.00%
6.  11/01/89 - 02/28/90       31.00%
7.  03/01/90 - 06/30/90       50.00%
8.  07/01/90 - 10/31/90       31.00%
N/A NO WORK ASSIGNED           N/A
  100.00%                     60.28%
   80.70%                     54.80%
  100.00%                     63.85%
  100.00%                     53.00%
   88.12%       88.12%        43.00%
   77.00%                     52.00%
                                           A-81

-------
ARCS AWARD FEE TRACKING SYSTEM
    REGIONS VI, VII,  & VIII
RATING PERIOD
1.
2. 03/31/89
3. 07/01/89
4. 11/01/89
5. 03/01/90
6. 07/01/90


- 06/30/89
- 10/31/89
- 02/28/90
- 06/30/90
- 10/31/90

RATING PERIOD
1.
2. 03/24/89
3. 07/01/89
4. 11/01/89
5. 03/01/90
6. 07/01/90


- 06/30/89
- 10/31/89
- 02/28/90
- 06/30/90
- 10/31/90

RATING PERIOD
1.
2.
3. 05/26/89
4. 11/01/89
5. 03/01/90
6. 07/01/90



- 10/31/89
- 02/28/90
- 06/30/90
- 10/31/90

RATING PERIOD
1.
2. 02/10/89
3. 07/01/89
4. 11/01/89
5. 03/01/90
6. 07/01/90

- 06/30/89
- 10/31/89
- 02/28/90
- 06/30/90
- 10/31/90
PM RATING

31.00%
50.00%
50.00%
50.00%
56.00%

PM RATING

31.00%
90.00%
80.00%
84.00%
84.00%

PM RATING


56.00%
50.00%
61.00%
73.00%

PM RATING

31.00%
64.00%
50.00%
43.00%
50.00%
RP
PHASE I

100.00%
100.00%
100.00%
100.00%
77.60%
RP
PHASE I

0.00%
100.00%
100.00%
100.00%
100.00%
RP
PHASE I


0.00%
100.00%
100.00%
100.00%
RP
PHASE I

100.00%
100.00%
100.00%
100.00%
100.00%
RP
PHASE II PIRS

72.00%
53.00%
59.00%
55.00%

RP
PHASE II PIRS

45.00%
76.00%
81.00%
84.00%

RP
PHASE 11 PIRS


NO WORK ASSIGN 0.00%
76.00%
80.00%

RP
PHASE II PIRS

60.00%
65.00%
60.00%
58.20%

                A-82

-------
                           ARCS AWARD FEE  TRACKING  SYSTEM
                               REGIONS VI,  VII,  & VIII
     RATING PERIOD

1.
2.  03/23/89 - 06/30/89
3.  07/01/89 - 10/31/89
4.  11/01/89 - 02/28/90
5.  03/01/90 - 06/30/90
6.  07/01/90 - 10/31/90
     RATING PERIOD
1.  09/13/88 - 01/31/89
2.  02/01/89 - 06/30/89
3.  07/01/89 - 10/31/89
4.  11/01/89 - 02/28/90
5.  03/01/90 - 06/30/90
6.  07/01/90 - 10/31/90

PM RATING
45.00%
64.00%
80.00%
82.00%
76.00%

PN RATING
60.00%
45.00%
80.00%
80.00%
80.00%
84.00%
RP RP
PHASE I PHASE II
100.00%
100.00%
100.00%
100.00%
100.00%
RP RP
PHASE I PHASE II
100.00%
0.00%NO WORK
100.00%
100.00%
100.00%
100.00%

PIRS
63.00%
55.00%
81.00%
75.00%


PIRS
79.00%
45.00%
55.00%
65.00%
67.50%

     RATING PERIOD

1.
2.  01/06/89 - 06/30/89
3.  07/01/89 - 10/31/89
4.  11/01/89 - 02/28/90
5.  03/01/90 - 06/30/90
6.  07/01/90 - 10/31/90
     RATING PERIOD
 1.  09/30/88 - 01/31/89
 2.  02/01/89 - 06/30/89
 3.  07/01/89 - 10/31/89
 4.  11/01/89 - 02/28/90
 5.  03/01/90 - 06/30/90
 6.  07/01/90 - 10/31/90

PM RATING
0.00%
10.00%
50.00%
64.00%
67.00%

PM RATING
40.00%
18.00%
64.00%
80.00%
59.00%
70.00%
RP RP
PHASE I PHASE II
100.00%
100.00%
100.00%
100.00%
100.00%
RP RP
PHASE I PHASE II
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
PIRS
 56.00%
 69.00%
 76.00%
 69.50%
PIRS

 70.00%
 70.00%
 69.00%
 73.00%
 63.00%
                                           A-83

-------
                           ARCS AWARD  FEE TRACKING SYSTEM
                           REGIONS  IX  & X
     RATING PERIOD

1.
2.  06/21/89 - 10/31/89
3.  11/01/89 - 02/28/90
4.  03/01/90 - 06/30/90
5.  07/01/90 - 10/31/90
     RATING PERIOD

1.
2.  03/24/89 - 10/31/89
3.  11/01/89 - 02/28/90
4.  03/01/90 - 06/30/90
5.  07/01/90 - 10/31/90
     RATING PERIOD

1.  03/10/89 - 06/30/89
2.  07/01/89 - 10/31/89
3.  11/01/89 - 02/28/90
4.  03/01/90 - 06/30/90
5.  07/01/90 - 10/31/90
     RATING PERIOD

1.
2.  06/28/89 - 10/31/89
3.  11/01/89 - 02/28/90
4.  03/01/90 - 06/30/90
5.  07/01/90 - 10/31/90

PM RATING
53.00%
61.00%
65.00%
65.00%

PH RATING
65.00%
71.00%
75.00%
70.00%

PH RATING
62.00%
55.00%
75.00%
70.00%
50.00%

PH RATING
90.00%
75.00%
75.00%
70.00%
RP
PHASE I
100.00%
100.00%
100.00%
77.60%
RP
PHASE I
100.00%
100.00%
100.00%
100.00%
RP
PHASE I
100.00%
100.00%
100.00%
93.50%
79.30%
RP
PHASE I
0.00%
100.00%
100.00%
100.00%
RP
PHASE II




RP
PHASE II




RP
PHASE II





RP
PHASE II
NO WORK



                                                                    PIRS
 69.00%
                                                                    PIRS
PIRS

 70.30%

 40.00%
                                                                     PIRS
                                           A-84

-------
                           ARCS AWARD  FEE  TRACKING SYSTEM
                           REGIONS  IX  & X
1.
2.
3.
4.
5.
     RATING PERIOD
06/09/89 - 10/31/89
11/01/89 - 02/28/90
03/01/90 - 06/30/90
07/01/90 - 10/31/90
                           PM  RATING
50.00%
65.00%
50.00%
75.00%
                                      RP
                                    PHASE  I
                          RP
                       PHASE  II
                                                                    PIRS
  0.00%
100.00%
 48.00%
100.00%
NO WORK ASSIGN
1.
2.
3.
4.
5.
     RATING PERIOD
05/01/89 - 10/31/89
11/01/89 - 02/28/90
03/01/90 - 06/30/90
07/01/90 - 10/31/90
                           PM RATING
                                      RP
                                    PHASE  I
                          RP
                       PHASE II
                                                                    PIRS
 0.00%
35.00%
31.00%
25.00%
100.00%
 65.00%
 63.00%
 63.00%
                                           A-85

-------
       WORK  ASSIGNMENT
          DECISION TREE
                AWARD,

                 WA
     If
   all else
   is equal,
'proportional
 distribution
should be made
 among good
 performers.
                            ROTATIONAL
           How does the site
          location compare with
         the contractors location
       of his people and equipment'
          Has the minimum base
           LOE been ordered?
     What are the problems and needs
      of the site vs. the contractors
     available technical disciplines and
           areas of expertise?

  If any contractors previously performed
  any work at the site for EPA, what is the
      value of continuing with them?

   Relative technical and PM performance
            based on PIRS.

    Does contract have enough capacity?
  Does contractor have capacity to perform
     the additional work assignment?

    Have any contractors or their subs
 worked on the site for responsible parties?
Have any contractors or their subs worked for
                     LOCATION
                      BASE HOURS EXPENDED/
                     ORDERED

                        SPECIFIC TECHNICAL
                        EXPERTISE
                          CONTINUITY

                             DEMONSTRATED
                             PERFORMANCE

                               CAPACITY
                                 CONFLICT OF
                                  NTEREST
              new
              WA
             to be
            issued
             At Start-up of New Contract and
             Throughout Contract Period of Performance
                            A-86

-------
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                       A-87

-------
                 ARCS Award Cycle
              June 1987 through June 1989
                                     NUMBER OF
CYCLE	REGION	CONTRACTS
First Cycle             III                   5
June 1987-June 1988    V                   7
Second Cycle            I                    7
October 1987 - May 1989  II                   6
                       ARCS Central        8

Third Cycle             IV                  6
April 1988 - March 1989   ARCS West           6
In total, 45 prime contracts were issued to 23 contractors.
                            A-88

-------











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WA=Work Assignment




































WAM=Work Assignment Manage
A-89

-------




Region 1







ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers


ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs

Region 2

ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers






ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs


Region 3





ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers


ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs

Region 4




ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers


ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs


Region 5





ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers


ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs


Region 6





ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers


ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs

Region 7

ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers






ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs


Region 8





ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers


ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RFMs





< 1 yr exp.






5
5






1
1
5
1
1








1






2


14
7






2


2
2









1

1



1

1

2
2









c
3


EXPERIENCE LEVEL OF THE REGIONAL ARCS WORKFORCE


1-3 yrs. exp


3

1
2
20
18
2



3

1
2
47
39
1








25
24




1
2
2

19
12





2

4

43
39
4




1

1

12
6
1



1



10
8
1




1
1
2

20
15
1



>3-5 yrs ext


1



7
7
3







25
18









25
15








5
4









18
14
3




1



10
6
1







8
7









(
(
1



> 5 vis exp.




1

7
7




1

1

10
10
1




2
2
2

6
6








12
9









17
17
1








4
4
t







12
c









i
6






























































































4
0
2
2
39
37
5

Total

4
0
3
3
87
68
3


Total

2
2
2
0
57
45
0

Total

1
4
2
0
50
32
0


Total

2
2
4
0
80
72
8


Total

2
0
1
0
27
16
6

Total

2
0
1
0
32
26
1


Total

1
1
il
0
43
32
i



Experience in Years —
Weighted Average (*)

2.50

4.50
2.00
3.06
3.12
3.20

Weighted Average (*)

3.25

3.17
1.50
3.06
3.24
3.17


Weighted Average (*)

7.00
7.00
7.00

3.38
3.33


Weighted Average (»)

2.00
1.25
2.00

2.98
3.33



Weighted Average (*)

2.00
0.50
2.00

3.48
3.53
3.38


Weighted Average (»)

3.00

2.00

3.43
4.0C
4.58

Weighted Average (*)

1.25

0.50

4.28
4.15
2.00


Weighted Average (*)

2.00
2.00
2.00

3.29
3.41
3.00


Regional Staff
ixpenence as
% of National
Average

88%

118%
96%
89%
88%
82%



114%

83%
72%
89%
91%
81%




246%
286%
183%

98%
94%




70%
39%
52%

87%
94%





70%
20%
52%

101%
99%
86%




105%

52%

100%
113%
117%



44%

13%

125%
117%
51%




70%
82%
52%

96%
96%
76%

A-90

-------

Region 9




ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers


ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs


Region 10





ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers


ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs

National Summary




ARCS Contracting Officers
ARCS Contract Specialists
ARCS Project Officers


ARCS Deputy Project Officers
Total Population of RPMs in Region
RPMs who are ARCS WAMs
ARCS WAMs who are not RPMs

















10
4









3
1
1



1
4
2
1
48
24
3








3

1

20
18
1




1



7
2




16
3
12
4
223
181
11







1
IS
14





1



9
5




3
0
0
1
131
99
»






1

15
12
5






3

17
10




3
2
9
0
109
90
10


































Total

3
0
3
1
60
48
6


Total

2
0
3
0
36
18
1

Total

23
9
23
6
511
394
32


Weighted Average (*)

2.00

5.33
4.00
3.50
3.71
6.17


Weighted Average (*)

3.00

7.00

4.74
5.25
0.50

Weighted Average (»)

2.85
2.44
3.83
2.08
3.44
3.55
3.92

* Weighted average calculated by counting <1 vr as .5; 1-3 as 2; 3-5 as 4; and >5 as 7





















70%

139%
192%
102%
104%
157%




105%

183%

138%
148%
13%















U.S. Government Printing Office   1991 -312-014/40013
                                                     A-91

-------