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Effective Contracting
Approaches for Operating
Pump and Treat Systems
IS AND CONDITIONS
COST/LEVEL OF EFFORT
SCOPE OF WORK
SCHEDULE
FIXED PRICE
COST REIMBURSEMENT
TIME & MATERIALS
One of a Series on Optimization
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Office of Solid Waste OSWER 9283.1-21FS
and Emergency Response EPA 542-R-05-009
(5102G) April 2005
www.cluin.org
www.epa.gov/superfund
Effective Contracting Approaches for
Operating Pump and Treat Systems
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DISCLAIMER
This document provides references to models and processes in use by outside parties and other Federal Agencies.
Mention of these models and processes does not imply endorsement for specific purposes.
This fact sheet is not intended to be a detailed instruction manual. In addition, this fact sheet is not a regulation;
therefore, it does not impose legally binding requirements on EPA, States, or the regulated community, and may
not apply to a particular situation based upon the circumstances. The document offers technical recommendations
to EPA, States and others who manage or regulate ground water pump and treat systems as part of the Superfund
program or other cleanup programs. EPA and State personnel may use other approaches, activities and
considerations, either on their own or at the suggestion of interested parties. Interested parties are free to raise
questions and objections regarding this document and the appropriateness of using these recommendations in a
particular situation, and EPA will consider whether or not the recommendations are appropriate in that situation.
This fact sheet may be revised periodically without public notice. EPA welcomes public comments on this
document at any time and will consider those comments in any future revision of this document.
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PREFACE
This fact sheet summarizes key aspects to consider for contracting to operate pump and treat (P&T) systems. It is
part of a series of fact sheets that the EPA Office of Superfund Remediation and Technology Innovation (OSRTI)
is preparing as guidance to the ground water remediation community on effectively and efficiently designing and
operating long-term ground water remedies. This series is available at www.cluin.org/optimization and consists
of the following fact sheets plus others that will be available in the future.
• Elements for Effective Management of Operating Pump and Treat Systems
OSWER 9355.4-27FS-A, EPA 542-R-02-009, December 2002
• Cost-Effective Design of Pump and Treat Systems
OSWER 9283.1-20FS, EPA 542-R-05-008, April 2005
• Effective Contracting Approaches for Operating Pump and Treat Systems
OSWER 9283.1-21FS, EPA 542-R-05-009, April 2005
• O&M Report Template for Ground Water Remedies (with Emphasis on Pump and Treat Systems)
OSWER 9283.1-22FS, EPA 542-R-05-010, April 2005
In addition, access to a wider range of EPA documents is available at www.cluin.org.
The recommendations contained in this series of fact sheets are based on professional experience in designing
and operating long-term ground water remedies and on lessons learned from conducting Remediation System
Evaluations (RSEs) at Superfund-fmanced P&T systems. The results of the first 20 RSEs conducted at
Superfund-financed P&T systems are summarized m Pilot Project to Optimize Superfund-Financed Pump and
Treat Systems: Summary Report and Lessons Learned (EPA 542-R-02-008a), and the site-specific
recommendations from the evaluations are available in the individual RSE reports (EPA 542-R-02-008b through
542-R-02-008u). The content of these fact sheets is relevant to almost any P&T system. Therefore, these
documents may serve as resources for managers, contractors, or regulators of any P&T system, regardless of the
regulatory program. In some organizations, contracting options may be limited. In such cases, some of the
information in this document may not be applicable. In addition, environmental professionals in some
organizations may have specific contracting personnel that should be contacted to follow appropriate contracting
procedures. For example, government contracting includes specific roles for designated contracting officers.
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A. INTRODUCTION
Remediation System Evaluations (RSEs) conducted at
20 Superfund-financed pump and treat (P&T) systems
identified contracting issues at some sites that
potentially affected the effectiveness and/or cost of the
remedy. The lessons learned from these RSEs pertain
to P&T systems in any regulatory program. Therefore,
this document provides an overview of effective
contracting approaches for any operating P&T system
An example is provided in Appendix A to highlight
items that are presented in the document.
A contract to operate a P&T remedy governs the
relationship between the customer, who is responsible
for the remediation, and a contractor performing
remediation services. A good contract is beneficial to
both parties, and promotes cost-effective services that
enable the P&T system to achieve its remedial goals.
A good contract fosters a customer/contractor
relationship that emphasizes clear expectations and
roles and responsibilities, which, in turn, enhances
performance and timely problem resolution.
The customer generally prefers the following:
• performance that follows the specifications and
schedule, with all work performed in accordance
with applicable laws, regulations, and accepted
industry practices
• contract terms that define and limit costs, and
reduce exposure to cost overruns
• flexibility to allow for optimization to improve
remedy effectiveness and/or reduce costs, based
on changing site conditions, newly available
technologies, or other developments
The contractor generally prefers the following:
• a clear scope of work that accurately defines the
services associated with the cost proposal
• a project schedule that reflects the scope of work
and is flexible to accommodate unforeseen items
• contract terms that fairly address financial risk
associated with the given scope of work
• fair and timely payment for services rendered
In this document, the term "O&M" refers to activities
associated with operation and maintenance of a P&T
system, and does not refer to any specific period of
time or regulatory status associated with the remedy.
For example, Superfund refers to the first 10 years of
a Fund-lead P&T system as Long-Term Response
Action (LTRA), and the subsequent period as
"O&M". However, in this document both of those
time periods are considered to be types of O&M.
B. ESSENTIAL CONTRACT
COMPONENTS
In general, a contract is likely to include the
components listed below.
Scope of Work. Specifies the technical work product
and/or services expected from the contractor.
Schedule and Deliverables. Defines the timing,
nature, and quantity of work products (e.g., O&M
reports) associated with the scope of work.
Level of Effort and/or Pricing. Provides the estimated
cost and, in some cases, the number of labor hours, to
complete the scope of work. The amount of detail
depends on the contract type.
Period of Performance. Defines the contract duration.
Terms and Conditions. Includes clauses that
accomplish the following:
• bind the contractor work quality to acceptable
standards (warranty, indemnification, etc.)
• establish bonding and insurance requirements
TABLE OF CONTENTS
A. INTRODUCTION 1
B. ESSENTIAL CONTRACT COMPONENTS . 1
C. OPTIONS FOR CONTRACT TYPE 2
D. CONSIDERATIONS SPECIFIC TO
CONTRACTS FOR OPERATING P&T
SYSTEMS 3
E. REMEDY OPTIMIZATION 8
APPENDIX A 11
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• define payment terms and invoicing requirements
• specify inspection and acceptance clauses, and
allow the customer and contractor reasonable
rights to terminate the agreement
Points of Contact. Establishes points of contact
between the contractor and the customer.
Procedures for Contract Changes. Defines the manner
in which changes to the contract are to be made.
Special Clauses. Any other clauses that may be
required by either party. Examples include clauses
related to conflict of interest, use of subcontractors, or
ownership of property associated with the remedy.
C. OPTIONS FOR CONTRACT TYPE
Contracts for O&M are generally grouped into one of
three broad categories, as follows:
• fixed-price
• cost-reimbursement
• time-and-materials (T&M)
Each of these broad categories is discussed below.
Variations of fixed-price contracting and cost-
reimbursement contracting are also briefly described.
Exhibit 1 compares and contrasts, in general terms,
fixed-price contracting versus cost-reimbursement or
T&M contracting.
Fixed-Price
Fixed-price contracts provide the customer with a
defined cap on the expenditure. An advantage for the
customer is that detailed review of invoices and
related backup material is generally not required. The
customer can still divide the work into some discrete
tasks (with associated fixed-prices per task) for
tracking purposes and/or to simplify potential scope
reductions during the contract performance period.
A fixed-price contract requires the contractor to
assume additional risk relative to cost-reimbursement
contracts because the contractor has to complete the
scope regardless of the costs incurred. However, the
contractor also has a chance for greater reward if the
work is completed more efficiently than expected. To
reduce the risks of fixed-price contracting, the
contractor generally insists on a very clearly defined
scope so that any cost increases due to unknown or
poorly defined circumstances do not become their
responsibility. If, during the performance of the
contract, work is required that falls outside of the
scope, the contractor can then request a change order
(which could ultimately result in increased costs to the
customer). Fixed-price contracts typically provide the
contractor with timely payments based on pre-
established terms and/or milestones.
Exhibit 1
Fixed-Price Contracts versus Cost-Reimbursement or T&M* Contracts
Consideration
risk to contractor
definition of tasks
contractor incentive
invoice information
risk to customer
Fixed-Price
higher risk - contractor is required to
finish scope regardless of actual cost
more appropriate for tasks with
predictable components
encourages contractor to work
efficiently to avoid overruns and earn
a higher profit
customer only sees total cost on
invoice - fewer details on invoices
mean fewer accounting and invoicing
procedures
lower risk
Cost-Reimbursement or T&M*
lower risk - work is only performed
until estimated cost is incurred
more appropriate for tasks with
unpredictable components
no incentive within contract for
contractor to work efficiently
customer sees component costs
(hours, unit costs, etc.) and total costs
on invoice - more details on invoices
means more accounting and invoicing
procedures
higher risk
*T&M primarily differs from cost-reimbursement by using fixed billing rates for labor that incorporate profit
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Fixed-price contracts are preferable for work that is
well defined, but are not well suited for items that are
poorly defined because the contractor will either have
to bear a greater risk of a cost overrun or make
assumptions that increase cost to the customer.
Common fixed-price variations are as follows:
Firm-Fixed-Price. This generally refers to a specific
scope of work for a specific price, without change.
Options can be included for additional items on a unit-
price basis.
Fixed-Price with Economic Price Adjustment. This
provides for price adjustments based on an index (e.g.,
consumer price index) or some other contingency as
defined in the contract. It is suitable for contracts of
long duration. These adjustments limit risk to the
contractor, and can reduce the overall cost to the
customer because the contractor does not need to build
as much contingency into the fixed-price bid.
Fixed-Price Incentive. This generally consists of a
target cost, target profit, and price ceiling above the
expected cost. It also includes a formula for
establishing actual profit to be paid. If the work costs
less than the target, the customer and contractor share
the benefit based on contract terms. If the work
exceeds the expected cost, the contractor generally
becomes responsible for some of that additional
expense based on contract terms, reducing the
contractor's overall profit on the job.
Cost-Reimbursement
Cost-reimbursement contracts are used when
uncertainties do not allow the effective use of fixed-
price contracts. Cost-reimbursement contracts reduce
the risk to the contractor, because work is only
performed until the estimated cost is actually incurred,
whether or not performance on the scope of work is
completed. They also generally require much more
detailed accounting and invoicing procedures on the
part of the contractor, to serve as a basis for the
incurred costs.
The risk to the customer is higher for cost-
reimbursement contracts than for fixed-price contracts
because of the potential for the contractor to work
inefficiently or do more work than is actually required.
This can be mitigated by adding incentives (discussed
below). Greater administrative effort is also generally
required by the customer to process and review
invoices, compared to fixed-price contracts.
Common cost-reimbursement variations are as
follows:
Cost-Plus-Fixed-Fee (CPFF). Allows the contractor to
be paid for all allowable costs, plus a fee that is fixed
regardless of actual costs incurred. The contractor
assumes little risk, and is guaranteed a fee. However,
there is little or no incentive within the contract for the
contractor to perform efficiently. There are two basic
types, completion form and term form. The
completion form, which is generally preferred, is used
when there is a clear goal with a defined end product,
and delivering the specified end product is a condition
for paying the entire fixed fee. The term form is used
when a specified level of effort is required over a
stated time period, and providing that level of effort
over the specified period is a condition for paying the
entire fixed fee.
Cost-Pius-Incentive-Fee (CPIF). Allows the
contractor to be paid for all allowable costs, plus a fee
that varies with the actual costs incurred. Generally a
minimum and maximum fee are set, with a formula
that determines the actual profit paid to the contractor
based on costs actually incurred. This adds an
incentive for efficient performance.
Cost-Plus-Award-Fee (CPAF). Allows the contractor
to be paid for all allowable costs, plus a fixed fee, and
a potential additional fee awarded for excellent
performance in areas such as timeliness and quality of
work. The additional fee is generally awarded based
on a subjective evaluation, and again adds incentive
for efficient performance.
Time and Materials (T&M)
In a T&M contract, labor is billed according to fixed
billing rates that incorporate profit. Materials and
other costs are reimbursed to the contractor (in the
private sector, a fee may be added to these materials
and other costs). T&M contracts typically include a
"not-to-exceed" cost ceiling. Like cost-reimbursement
contracts, the use of T&M contracts provide little
incentive for the contractor to work efficiently.
D. CONSIDERATIONS SPECIFIC TO
CONTRACTS FOR OPERATING P&T
SYSTEMS
Operation of P&T systems has the following
characteristics:
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• It is a long-term activity (often measured in
decades) that generally comprises the large
majority of the remedy life-cycle costs.
• The conditions surrounding an operating P&T
system may change. Changes may occur in the
site conditions (e.g., decreasing concentrations),
available technologies, regulatory climate, or
social/political climate.
• Despite the changing conditions surrounding an
operating P&T system, there are a number of
routine O&M items. These routine items often
include project management, monitoring,
reporting, and operator labor.
Given these characteristics, a contract for operating a
P&T system will ideally separate the routine, defined
components from the non-routine components and
allow for flexibility to address changing conditions.
However, in some cases the contracting options may be
limited by an existing "master contract".
Develop an Appropriate Scope of Work for Baseline
O&M Activities
Baseline or defined O&M includes project
management, utilities, materials, labor, and analytical
costs that are necessary to keep a system running
effectively and efficiently. Baseline O&M does not
include items such as additional investigations,
piloting of innovative technologies, and new
evaluations of nearby receptors, which can often
match or exceed the cost of baseline O&M expenses.
Tracking Costs. By clearly distinguishing between
baseline O&M costs and other costs, and having the
contractor invoice according to cost categories, the
customer can better compare the costs of the operating
remedy against potential alternatives. It is important
for the customer to review invoices and reports to
determine if current costs are consistent with previous
periods, and if not, to understand the reason for the
change. Example 1 demonstrates how tracking
baseline O&M costs obtained from contractor invoices
Example 1
Advantages of Breaking Out Baseline O&M Costs from Other Costs of P&T System Operation
The table below uses two approaches to tracking annual costs (from invoices) during four years of P&T operation:
Approach 1 - with cost of baseline O&M and additional items separated (recommended)
Approach 2 - with cost of baseline O&M and additional items combined
Year
1
2
3
4
General Tasks
• Baseline O&M
• Non-routine maintenance
• Community relations
• Wetlands evaluation
• Baseline O&M
• Non-routine maintenance
• Decommission specific wells
• Indoor air evaluation
• Baseline O&M
• Non-routine maintenance
• Community relations
• Source area soil investigation
• Baseline O&M
• Non-routine maintenance
• Community relations
• New technology evaluation
Approach 1
(recommended)
$125,000
$35,000
$25,000
$40,000
$150,000
$10,000
$30,000
$30,000
$175,000
$0
$5,000
$45,000
$205,000
$3,000
$2,000
$15,000
Approach 2
$225,000
$220,000
$225,000
$225,000
Approach 2 suggests that total operating costs are relatively constant over time, at approximately $225,000per year.
In reality baseline O&M costs are increasing at a rate higher than would be expected due to inflation, while non-
baseline items are decreasing. Approach 1 would reveal the high rate of increase in baseline O&M costs per year, and
lead the customer to ask questions about the contractor's efficiency. Approach 2 would not allow the customer to
distinguish the high rate of increase in baseline O&M costs per year.
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may help the customer determine if baseline O&M
costs are increasing at a higher than expected rate. The
costs for baseline O&M tend to remain relatively
consistent from year to year, but the costs for some
baseline O&M items are more predictable than others.
For this reason, fixed-price contracting is more
appropriate for some items and cost-reimbursement or
T&M contracting is more appropriate for others.
Typical items in a baseline O&M scope of work are
described below, and Exhibit 2 summarizes what is
generally considered the more appropriate contracting
approach for each item. These items should be tracked
as separate line-items by the contractor and customer so
that costs can be easily and effectively evaluated.
Project Management. Project management should
generally be limited to budget tracking, management of
labor, invoicing, and routine correspondence. Because
these items are routine and rather predictable, project
management is often suitable for fixed-price
contracting. For most systems, project management for
P&T system operation can often be provided for $2,000
to $4,000 per month (2003 dollars). Other items
beyond these routine services, such as community
relations and meetings, should be separate line items.
Reporting/Data Analysis. The scope of work should
clearly identify the reporting and data analysis
requirements, and should also clearly establish which
party is responsible for the interpretation of collected
data. Some reports may be required for compliance
and others for informing the customer of the remedy
performance with respect to its goals. More frequent
reporting (e.g., quarterly) may be appropriate during
the first few years of system operation when changes in
site conditions are greatest, and less frequent reporting
(e.g., annually) may be more appropriate when changes
in site conditions are more gradual. The costs for such
reports depend on the complexity of the site, but for
many sites will range from $5,000 to $25,000 per
report (2003 dollars). Any requirements for providing
data in electronic format should be established.
Because the costs are predictable, data analysis and
reporting are suitable for fixed-price contracting.
Operating Labor/Routine Maintenance. For simple
systems, this may include weekly or biweekly site visits
to check the status of the system and less frequent, but
regular, visits to clean treatment components, clean
wells that would foul without routine attention, or
perform other routine maintenance. For complex
systems, such as those with metals precipitation, labor
may include one or two full-time employees to clean
equipment, monitor the system, operate a filter press,
and accept deliveries of materials. Ideally, a contract
Exhibit 2
Contracting Approaches for Typical
Baseline O&M Items
Fixed-Price (More Predictable Items)
• project management
* reporting/data analysis
* operating labor and routine maintenance
* process monitoring/analysis (fixed-price by unit)
• ground water monitoring/analysis (fixed-price by unit)
Cost-Reimbursement or T&M {Less Predictable Items)
• utilities
* unpredictable non-utility consumables
* disposal
will allow the contractor the flexibility to quickly
replace or repair minor system components such as
valves, flow meters, pumps, switches and controls by
having a set-aside sum (generally cost-reimbursement)
that the contractor can access without delay. The
contract need not specify the number of staff required
but should specify performance requirements (e.g.,
allowable downtime, or volume of water to be treated
per month).
Operating labor and routine maintenance costs are
predictable and are often a large percentage of the
overall operating costs, so consideration of fixed-price
contracting for labor is appropriate. The costs for
O&M labor depend heavily on the type of treatment
components and rule-of-thumb estimates are not
provided in this document. The reader is referred to
Elements for Effective Management of Operating
Pump and Treat Systems (EPA 542-R-02-009). The
maintenance parts and materials can be included as
cost-reimbursement with the maximum value of such
items (per item and/or per year) established in the
contract. Labor and materials in this category should
not include more costly non-routine maintenance
items.
Process Monitoring/Analysis. Process monitoring
consists of measurements required by discharge
permits and might also include monitoring of
treatment plant process water that is necessary to
operate the plant effectively and efficiently. Because
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the process monitoring is routine and predictable, the
cost can be included as a fixed-price per unit item that
allows the number of samples to change. Contracting
should not be an excuse for conducting too much or too
little process monitoring. The contract may require
modification if permit requirements change overtime.
Ground Water Monitoring/Analysis. Ground water
monitoring should provide the necessary data to
evaluate the system performance. It is not simply a
continuation of monitoring that was conducted during
the remedial investigation or design. In the first few
years of system operation, substantial changes in site
monitoring may merit relatively frequent (i.e.,
quarterly) ground water monitoring. However, site
conditions often stabilize within the first few years of
operation, and less frequent sampling (e.g., annually) or
sampling from fewer locations may be appropriate. As
with process monitoring, the cost for ground water
monitoring can be provided as unit price that allows the
number of wells sampled and frequency of sampling to
decrease or increase.
Utilities. Due to the potential for fluctuations in gas or
electricity rates, utilities can be unpredictable over the
long-term, especially with deregulation. Therefore, the
customer may prefer to pay for the utilities directly or
to have the contractor include them as a cost-
reimbursement item, rather than including them in a
firm-fixed price contract. Paying the utility bills
directly also prevents the contractor from adding a fee
to the actual cost. If energy usage is predictable and a
long-term utility rate can be arranged, including it as a
fixed-price item would be appropriate.
Non-Utility Consumables. These include materials and
chemicals that are used as part of the routine O&M,
such as granular activated carbon, chemicals for pH
adjustment, and chemicals for well maintenance and
equipment cleaning. The use and relative cost of non-
utility consumables is site-specific. The customer
should determine those items that are predictable and
those that are unpredictable at their site, and then use
the appropriate contracting approach. Fixed-prices or
unit prices are best for predictable items and cost-
reimbursement is best for unpredictable items.
Disposal. Disposal refers to discharging of water to a
publicly-owned treatment works (POTW) as well as
disposing of recovered product and treatment plant
wastes such as sludge filter cake, spent filters, and
used personal protective equipment. Disposal costs are
rarely a large percentage of the total operating costs,
but disposal of large volumes of waste can be costly,
especially if classified as hazardous waste. Customer
involvement is appropriate for selection and
negotiation with waste disposal facilities and/or the
discharge location for treated water. It is often
preferable for disposal to be a cost-reimbursement
item, unless the disposal cost is relatively small (i.e.,
less than $1,000 per month).
List Non-Routine O&M Items Separately
Other items are often needed during system operation
that are additional to the baseline O&M. These
additional items might include non-routine
maintenance, system optimization, additional
investigations, piloting innovative technologies, and
updating evaluations of nearby receptors. These items
should be listed separately from those items that are
part of baseline O&M, and in many cases, they are
best accomplished under different contracts.
The following typical additional items might be
included as separate line items in the same contract:
Non-Routine Maintenance. This item should either be
funded as the need arises or with a defined set-aside
sum to be used for items as they occur. Regardless,
non-routine maintenance should be tracked separately
from baseline O&M. Each significant task should be
evaluated and paid on a cost-reimbursement or T&M
basis. If additional maintenance items (e.g., extraction
well rehabilitation) are needed on a regular basis, they
should be added to the routine maintenance line item
with a fixed-price.
Meetings. The contractor is often requested to attend
meetings with the customer and/or regulators.
Depending on the type of meeting, preparation may be
required. For many meetings, the costs are predictable
and meeting preparation and attendance can be costed
together on a unit price per person per meeting. For
example, $2,000 per person per meeting may be
appropriate at some sites (2003 dollars). This would
translate to a total cost of $4,000 for the meeting
(including preparation) if two people attend and
$2,000 (including preparation) if one person attends.
Community Relations. The need for community
relations is site-specific. Community involvement
may be substantial at some sites and relatively limited
or non-existent at others. At some sites, the customer
may not want the contractor involved at all. These
costs (generally cost-reimbursement) should be
tracked separately from project management so that
the customer can easily determine the costs of
community involvement and distinguish them from the
management costs required to run the system.
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Select an Appropriate Contract Duration
Contracting can be a lengthy and expensive process.
Therefore, re-competing contracts for P&T operation
more frequently than every three years should not be
considered unless a contractor is incapable of
performing to expectations. On the other hand,
competition encourages quality and efficiency, and
rebidding contracts for P&T operation allows for
competition. Therefore, contracts often have a five-
year maximum duration. Additional reasons to keep
contracts for P&T operation no longer than five years
are listed below.
During the first few years of system operation, site
conditions may change substantially due to the
P&T remedy. As a result, the scope of work for
system operation (or the actual components of the
remedy) may be substantially different after
several years of operation than in the first year of
operation.
Improvements in technology may allow
substantial changes in the scope of work for P&T
operation or the remedy.
Optimization and/or a five-year review may result
in recommended changes to the P&T system
operation.
The use of option years is often appropriate, where the
contract is awarded for two years, with three option
years that can be exercised if performance meets
expectations and the scope of work is still appropriate.
Example 2 uses a hypothetical P&T system to illustrate
the benefits of a short-term contract with option years.
Consider the Remedy Goals When Including
Performance-Based Awards or Incentives
"Performance-based" or "incentive-based" contracts
offer rewards for good performance and penalties for
poor performance. The rewards for such contracts
should consider the goals of the remedy.
In a remedy in which hydraulic containment is the
primary goal, the key requirement is limiting system
downtime and maintaining the design extraction rate
(treatment of excess water will not improve the system
performance in relation to the containment goal).
Therefore, the contract performance incentives or
penalties should focus on limiting downtime and
decreases in extraction. In a remedy in which the
treated water is used as an industrial or municipal water
supply, the key requirement is typically meeting water
Example 2
Using a Short-Term Contract with Option
Years for the Early Years of P&T Operation
Hypothetical P&T system at beginning of operation
• system addresses VOCs from a former metal
finishing facility and treatment is not required for
hazardous metals
• current iron levels are sufficient to foul the air
stripper
• design includes a temporary metals removal system
to remove iron and allow the air stripper to function
• routine O&M is $ 150,000 per year without metals
removal and $300,000 with metals removal
• metals removal would not be necessary if influent
iron concentrations decrease sufficiently
Contracting Approach 1: contract is for two years
Contracting Approach 2: contract is for five years
Contracting Approach 3: contract is for two years with
up to three option years
If metals removal is required for the long-term, then the
contract from Approach 1 needs to be rebid after two
years, even though the scope of work and costs of the
current contract are likely appropriate.
If metals removal is not required for the long-term, then
the contract from Approach 2 is over-scoped and needs
to be terminated or the scope needs to be substantially
modified.
Approach 3 allows the current contract to continue after
two years if metals removal is still needed, but provides
an opportunity to rebid the contract if metals removal is
no longer necessary.
quality limits. The contract incentives and penalties
should focus on effluent quality.
In a remedy in which aquifer restoration is the primary
goal, the key requirement is typically maximizing
contaminant mass removal (although minimizing
system downtime should also be a priority). It is
difficult to focus a performance contract on mass
removed because mass removal will often decrease
over time. The contractor may have little control of
the mass removed unless extraction points can be
added or other remedial actions can be implemented,
which may be costly compared to the incentive
provided.
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Contract Additional Evaluations, Investigations, and
Remedial Activities Separately
Monitoring during P&T operation provides additional
information that was not available at the time the
remedy was designed. In addition, new or improved
technologies are often developed. As a result,
additional evaluations, investigations, or even remedial
actions may be merited. These items should be
contracted separately, and proposals for more costly
items should likely be peer-reviewed before
contracting.
E. REMEDY OPTIMIZATION
Exhibit 3
Although a contractor may work to continually
optimize a system, the customer should recognize that
the contractor may not be motivated to make
recommendations that decrease their level of effort, and
such recommendations may be more likely from a
third-party optimization evaluation. This section
describes both internal and third-party optimization
evaluations.
Incentives and Internal Optimization
It is often unnecessary to set aside a separate line item
for optimization by the contractor operating the system.
Rather, it is appropriate to use a contract award
program for the contractor to share any cost savings
from improvements they recommend, such as in "value
engineering" approaches in Federal contracts as
described in the Office of Management and Budget
(OMB) Circular No. A-131, May 1993. When setting
up such a program, procedures should be followed to
ensure funds have been appropriated to cover the
payments required by the contract.
This type of program should be carefully conceived. It
requires thorough planning, management involvement,
and clearly defined outcomes with agreed-on baselines
from which to measure savings. Furthermore,
elimination of unnecessary services (i.e., simple
reductions in scope) should not result in an award.
Rather, the contract should be flexible to allow such
scope reductions (whether recommended by the
contractor, customer, or a third party) to be
implemented and for cost savings to be realized without
disputes. Some items can be broken down into units
(e.g., well sampling) without renegotiation. Reducing
other items (e.g., project management, reporting, and
operating labor) may require a new fixed-price
contract. Exhibit 3 distinguishes between items that
Distinguishing Between Scope Reduction and
Contractor Recommendations that Merit
Incentive Awards
Scope Reduction
Over the course of P&T operation, some items are no
longer needed or are not needed to the same degree. The
scope of work can be reduced to eliminate or reduce
these items without providing an award to the contractor
(even if the contractor recommends the scope reduction).
The following are examples:
reducing ground water monitoring from quarterly to
semi-annually due to established trends
reducing process monitoring because the system
efficiency has been established
* reducing operator labor because the remedy operates
effectively and tasks are easily completed within a
shorter amount of time
• discontinuing metals removal because the metals in
the plant influent meet the effluent criteria and do not
foul the other process equipment
Technical Recommendations that Merit Awards
Contractors may suggest a new technology or approach
that simplifies the P&T system and reduces cost. By
providing an award for such recommendations (e.g., a
portion of the cost savings) contractors have added
incentive to make such recommendations. The following
are examples:
* using a new oxidant will increase the efficiency of
the metals removal system and will reduce the cost
of materials and the cost of sludge disposal
including new equipment to further automate the
system and reduce necessary operator labor
are scope reductions and items that are
recommendations deserving of an award.
Use Third-Party Evaluations for Comprehensive
Optimization
Periodic third-party (or independent) expert reviews of
P&T operation and performance provide the
following benefits:
an unbiased, external review of system operation
and costs
expertise in hydrogeology and engineering
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• specific knowledge and experience with new or
alternative technologies
• experience gained from designing, operating, or
reviewing other systems
• a fresh perspective on the problems at hand and
the current remedy
As a result, these evaluations can be more effective at
identifying improvements that increase protectiveness
and reduce costs, and in general, should be used in
place of internal optimization efforts. The results of 20
such reviews conducted at Superfund-fmanced P&T
systems are summarized in Pilot Project to Optimize
Superfimd-FinancedPump and Treat Systems:
Summary Report and Lessons Learned (EPA
542-R-02-008a).
The scope of the review should be commensurate with
the complexity, sensitivity and cost of the system. The
cost of the review is generally small relative to the
annual cost to operate the system. Such reviews are
beneficial every three to five years for most systems,
and can be performed in conjunction with a five year
review. These reviews are particularly useful prior to
rebidding a contract for P&T operation.
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APPENDIX A
Example Contract Highlights for Operation of a Hypothetical P&T System
Description of Hypothetical Site
A P&T system has been designed and installed. The construction contractor has operated the system for six months
demonstrating that the system performs to acceptable standards. The contaminants of concern are primarily VOCs but
natural arsenic concentrations range from 9 ug/L to 15 ug/L, and the discharge criteria is 10 ug/L. The flow rate is
approximately 25 gpm. VOCs are treated with an air stripper, and a temporary metals removal system is present to
reduce arsenic concentrations below the discharge standard. Vapor phase GAC is used to treat the air stripper off-gas.
Ground water monitoring and capture zone evaluations are conducted quarterly. Progress reports are prepared quarterly.
It is expected that the arsenic influent concentration will decrease as the remedy progresses due to the changing oxidative
state of the aquifer that results from continuous pumping. It is expected that trends will be sufficiently established in two
years and that the monitoring and reporting frequencies will decrease to either semi-annually or annually and that some
sampling locations will be eliminated.
Contract Highlights:
Scope of Work. The contractor shall perform the services and provide the products described in the scope of work in
Attachment A (not shown here because details are not pertinent to this example).
Schedule and Deliverables. A schedule is provided in Attachment A (not shown here because details are not pertinent to
this example).
Level of Effort and/or Pricing. As presented in the cost schedule (see next page) some tasks are fixed-price while others
shall be performed on a time-and-materials basis in accordance with the unit rates provided in Attachment B (not shown).
Period of Performance. The period of performance is October 1, 2003 through September 30, 2004. The period of
performance can be extended on a yearly basis through September 30, 2008, upon mutual agreement between the
customer and contractor. If the period of performance is extended, the unit rates on Attachment B will be increased by
2.5% per year to account for inflation.
Payment Terms. Invoices shall be no more frequent than once per month and will be payable within 30 days after receipt
of a proper invoice. Invoices shall be prepared according to cost categories specified in the contract cost schedule (see
next page).
Points of Contact. The points of contact and their contact information are provided in Attachment C (not shown).
Optimization. The contractor is encouraged to recommend technical improvements that result in lower operating costs or
greater system effectiveness. Recommendations shall be provided in a proposal outlining the recommendation, a
suggested approach to implementation, and a cost estimate for implementing the recommendation. For those technical
improvements recommended by the contractor that result in cost savings, the contractor shall receive 50% of the cost
savings incurred over two years after the cost of implementation has been considered. The shared savings are based on
agreed-on baselines from which to measure savings, and the savings do not apply to recommendations provided by other
parties or to recommendations by the contractor that result in eliminating items or costs that are simply no longer
necessary. Funds have been set aside to ensure associated shared-in-savings payments can be made according to this
contract.
Note: Other contract items might include clauses that
• bind the contractor to work quality to acceptable standards (warranty, indemnification, etc.)
• establish bonding and insurance requirements
• specify inspection and acceptance clauses
• mandate disclosing conflicts of interest
• establish procedures for contract changes
• provide appropriate conditions for either the customer or contractor to terminate the contract
• designate who provides and owns the property associated with the remedy
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APPENDIX A (continued)
Example Contract Highlights for Operation of a Hypothetical P&T System (continued)
Contract Cost Schedule (per year):
Item
Basis
Unit Rate
# of Units
Estimated Cost
Baseline Items
Project Management
O&M Labor
O&M Parts and Materials
Vapor Phase GAC Replacement
Waste Disposal (including transportation)
Ground Water Sampling (quarterly with
the potential to reduce)
Ground Water Analysis 8260b (including
QA/QC samples)
Reports
Process Sampling and Analysis 8260b
and 6010 (including QA/QC samples)
Utilities (paid by customer)
FP
FP
T&M
T&M
FPU
FPU
FPU
FPU
FPU
N/A
$24,000
$125,000
varies
$2. 50 per pound
$200 per drum
$150 per well
$110 per sample
$8,000 per
report
$160 per sample
N/A
Ijob
Ijob
varies
up to 8,000 pounds
up to 10 drums
up to 20 wells per
event, up to 4 events
up to 25 samples per
event, up to 4 events
1 report per sampling
event, up to 4 events
up to 3 samples per
month
N/A
Total Estimated Baseline Cost (without utilities)
$24,000
$125,000
up to $10,000
$20,000
$2,000
$12,000
$11,000
$32,000
$5,760
N/A
$241,760
Additional Items
Non-Routine Maintenance
Community Relations
Meetings (including preparation)
T&M
T&M
FPU
upon authorization
upon request by customer
$2,000 per
meeting,
per person
upon request by
customer
T&M- time and materials
FP -fixed-price
FPU -fixed-price by unit
Notes on Example:
Because the system is new and metals removal may not be required after the first year, system operation is
contracted for one year only with up to four option years. If metals removal is still required and contractor
performance is acceptable, the option years can be exercised. If metals removal is not required, a third-party
evaluation may be conducted to evaluate the best approach for the remedy, and a new contract can be entered into.
The cost schedule includes both fixed-price and cost-reimbursement terms, depending on the item.
GAC is required for off-gas treatment and requires replacement when breakthough occurs. The frequency of
replacement is unpredictable, especially for the first year of system operation. GAC is, therefore, addressed on
a cost-reimbursement basis, and an estimate is provided in the cost schedule.
Costs for sampling and analysis are fixed-price on a per unit basis so that reductions can be implemented.
Utilities are also variable and are paid directly by the customer.
Baseline and additional items are provided separately.
Internal optimization is encouraged through awards but is not funded.
Separate investigations, evaluations, and actions are contracted separately (i.e., not included).
Costs presented are the contracted costs, presumably based on a contractor proposal.
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NOTICE:
The U.S. Environmental Protection Agency funded the preparation of this document by GeoTrans, Inc. under General Service
Administration Contract GS06T02BND0723 to S&K Technologies, Inc., Bremerton, Washington; EPA Contract No. 68-C-
02-092 to Dynamac Corporation, Ada, Oklahoma; and EPA Contract No. 68-W90-0065 to ICF Consulting, Inc., Fairfax,
Virginia. Mention of trade names or commercial products does not constitute endorsement or recommendation for use.
This document may be downloaded from EPA's Clean Up Information (CLUIN) System at http://www.cluin.org. Hard copy
versions are available free of charge from the National Service Center for Environmental Publications (NSCEP) at the
folio wing address:
U.S. EPA NSCEP
P.O. Box 42419
Cincinnati, OH 45242-2419
Phone: (800) 490-9198 or (513) 489-8190
Fax:(513)489-8695
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