1990 STRATEGY PAPER The Role of EPA in Construction Grants Program Evaluation Division Office of Planning and Management June 5, 1930 **DRAFT* * ------- CHAPTER 1 THE QUESTION OF ROLES In support of EPA's need to explore new directions in the treatment of municipal wastewater in the 1980's, this paper examines several alternative roles which EPA might play during that period. In partnership with other principal actors in the Nation's effort to clean up "municipal effluant- the States, the localities and the U.S. Amy of Corps of Engineers—EPA finds itself at a turning point. At issue is whether the Agency should continue to stress its direction and control of the Construction Grants program, even as the States assume more and more responsibility for day to day operations, or move into more broadly defined environmental protection functions, aimed at improving our Nation's ability .to construct, operate, maintain, and replace a national sewag treatment system over time. Both objectives are worthy, but one cannot be fully addressed except at the expense of the other. This is especially true in light of the trend to reduce Federal spending across broad areas of the President's budget, a development which might well affect the Clean Water Act profoundly. An era of unstable, or even gradually reduced appropriations forces EPA into a clearer choice than it might otherwise make between traditional programs and new direction We offer this paper as a touchstone for the debate which is certain to characterize our work together over the next, several months. In it we outline three major alternative program models which we believe cover many of the possible features oi! a fully developed or revised Construction Grants Program in the age of delegation. V7e have portrayed these models as "ideal types," that is, as portraits of the program as it might be designed ideally to reflect a given role which EPA might adopt. In practice> of course, features of one model might appropriately fit with those of another model to forift a composite which is more attractive than either of its parents. We have also included in these models a sampling of potential innovations to the current program structure. We have placed each feature in the model where it seems to fit most naturally, but a number stand apart from any single role as potentially better, or at least different, ways of doing business which we suggest might make fuller use of EPA's strengths, while also emphasizing the special roles of the States, the localities, and the Corps. The appendix provides brief, individual descriptions of a fuller range of ideas. ------- In preparing this paper we have drawn on the experience and opinions of scores of water program experts at all levels. Based on their familiarity with the program, coupled with their deep concern about its current and future effectiveness, they have suggested many of the major ideas included here. ASSUMPTIONS- In considering the future of the Construction Grants Program we have been guided by several operating assumptions. Objective. We assume that the main objective of the program will remain to ensure the efficient, timely construction of high quality, maintainable municipal wastewater treatment facilities. EPA's Responsibility. We assume that even though individual functions may vary as to performer or priority, the Administrator of EPA will remain responsible for the ultimate fiscal and environ- mental quality of the program. Delegation To Be Stable Policy. We assume that delegation is a stable, continuous, long term policy for the Construction Grants Program, and that our challenge is to design the most efficient and effective division of labor under delegation. Freedom to Change. We assume, for the purposes of this review, that the Agency is willing to consider and propose whatever change may be necessary to promote the most effective and efficient program model. We recognize that some of the program features discussed here will be controversial; we have put them forth in order to help spark the constructive debate which will allow consideration of full range of program direc- tion options, and the ultimate best choice. FUNCTIONS OF THE AGENCY In maintaining responsibility for the final achievement of the Construction Grants Program, EPA must ensure that certain basic functions of program formulation, management, and revision take place appropriately. Depending upon which model we consider, EPA may take a greater or lesser part in carrying out or supervising these functions. We have built our discussion of EPA's role around several key functions, displayed in Table 1. ------- TABLE 1 MAJOR PROGRAM FUNCTIONS Interpret Objectives Determine the will of Congress, based on legislative history- Design The Program Determine the essential functions and action logic by which the program will pursue its'objectives Set Policy Guide management decisions at all levels of the program. In Construction Grnats, use regulations, guidelines, program requirement memoranda, program operations memoranda Plan The Program Set budget and staffing levels, and set achievement targets over time Manage The Program Apply resources day to day to achieve results planned for program Evaluate The Program Measure program performance against its objectives, and determine changes needed in program design, policy, planning, or management Revise The Program Prepare legislative initiatives and imple- ment needed changes in program MAJOR PROGRAM SUPPORT FUNCTION Lead - Develop technology, financing, and methods The Field of administration to improve state of the program art ------- In considering how EPA's functions might change under different conceptions of its role, there is little variation in the need for the Agency to interpret legislative objectives, design the program, or plan and budget for program outcomes. Further, EPA must continue to set policy, although, under different designations of State and Corps authority, the Agency might refrain from some of the detailed operational guidance which characterizes its policy making in the current program. Two other functions which will remain generally unaffected are to evaluate the success of the program in meeting its stated objectives, and to propose modifications, either in legislation, policy, or resources. We reserve discussion of a program evaluation strategy for another paper. The major functions which are likely to vary substantially under differing models of the Construction Grants Program, are program management and leadership in the field. Whether in the mode of direct operations or delegation, EPA must set management priorities and determine how best to achieve them. Whatever EPA's approach to delegation, the basic integrity of the program must be a decisive consideration. Whether to emphasise environmental vs. fiscal objectives, and how strongly to insist upon administrative procedures designed to reinforce either end, are matters which we may appropriately debate. Whether, where, and with how much vigor EPA should oversee or intervene in State or local decisions on project selection, sizing, design, or construction quality are likewise key areas which we may review in light of alternative roles. Much of the body of this paper is concerned, therefore, with drawing out the principles of EPA management and oversight tactics implied by each of the major role alternatives. Leadership in the field of municipal facility design and construction is a technology stimulation function. In it, all those associated with the program, both public and private, attempt to push forward the state of the art in technical, financial, and administrative areas. This function is in essence a research and development enterprise, conceiving, ^testing, and introducing to the field new and better ways of doing business. Alth.ough EPA maintains a major responsibility in the development and transfer of technology under any conception of its role, the Agency will place more or less emphasis on this function depending upon the extent of its investment in detailed program management. ROLES OF EPA As stated earlier, we will be treating EPA's roles as "ideal types" in this paper. The term "role" is difficult ------- 4 - to pin down. The dictionary defines it as one's "expected behavior in a social situation." For the purposes of our analysis we have arrived at specified roles from two opposing directions. One approach is by way of the organizing concept, . the simple descriptive title which summarizes the Agency's image of itself as its acts within the program. Stated according to this method, the three major roles we shall discuss ares EPA the Supervisor; EPA the Franchiser; and EPA the Regulator. In the Supervisor role, EPA continues .to follow its current program course, delegating gradually and carefully, while conducting strict oversight of State activities. In this model, EPA emphasizes State adherence not only to program objectives, but also to consistent procedures laid out by EPA to ensure uniformity from State to State. In the Franchiser role, EPA encourages States to manage the program as their own investment. EPA ensures that State procedures are adequate to achieve program success, but encourages variation among State systems.. Meanwhile, EPA concentrates on developing new and better ways of engineering, financing and administering the program. In the Regulator role, EPA cedes to the States responsi- bility for managing the construction program. Under new legislation, EPA sets production targets and encourage States to meet them by spending current 201 funds within a very broad range of sewage management activities,including construe-, tion, rehabilitation, enforcement, emergency maintenance, and others. EPA would allot funds on the basis of performance and need but would not interfere with State management of its internal allotment. The other approach to roles is to consider each as the sum of the functions'which make it up. Although in each role EPA participates in all standard program functions (described in Table. 1 earlier), as EPA's management becomes less direct, the participation of its partners in the program—States, localities, and the Corps—becomes more so. In general, as EPA gives up concentration on the specific procedures to be followed within each of the management functions, it becomes more invested in fitting construction grants into a larger system of municipal wastewater treatment and water quality , management both now and in the future. The range of options moves us from detailed concern with the design and construction of individual plants in the first case, to a more general concern in the last with production standards for the develop- ment and operation of sewage treatment for improved stream quality for the nation, a system in which POTW construction is but one component. ------- - 5 - ROLES AND THE PROSPECTS FOR CHANGS The succeeding sections of this paper - present portraits of the role models we have developed for consideration at this point in the development of the 1990 Strategy. In each chapter, we describe a role and its differences from the current program; its policy function; its management function; the role of Headquarters vs. that of the Regions; the roles of the States and the Corps; and, finally, the types of staff which will be necessary to enact it. An appendix to this paper describes a number of opportunities for change which have arisen during the course of preparing this paper. ------- CHAPTER 2 EPA'S ROLEs THE SUPERVISOR I In this role EPA views itself as the direct manager of the Construction Grants Program# with the responsibility to delegate tasks to the States and to supervise their performance of those, tasks. The Corps perforins in the role of a colleague who, because of special expertise, acts as a surrogate manager for the construction portions of the program. Since management has been defined as "getting things done through others," EPA gradually increases the independence and responsibility of the States in performing their functions, but takes care that the State can successfully perform the work assigned to it before completely delegating responsibility for.a given function, and in any case requires that States adhere to a set of uniform procedures. In this role, EPA concerns itself not only with final pro- ducts, but with the quality and efficiency of the process which States perform to achieve their results. In this role, too, EPA retains the supervisor's prerogative to select out certain high priority projects for special review or even co-management by Agency personnel. How This Alternative Differs from the Current Program? In essence, this alternative entails little change from the current direction of the program, in that it (1) assigns an increased role in the administrative processing of construction grants to States, (2) assigns to the States much of the job of managing and overseeing the fiscal and environmental integrity of grant projects under close EPA supervision, and 3) sets aside a class of "super-projects" which for technical or administrative reasons justify the day-to-day involvement of EPA in Step 1 pro- ject management. This role leaves open the possibility of change in the division of labor between States and grantees, but only under conditions pre- scribed in advance by EPA. Such major changes as certification by grantees and State administration of grants to small locality could be incorporated into this model. Policy Focus - In this role EPA's policy function would focus on providing detailed guidance to the States on program operations. Under this option, EPA would concern itself with major issues, such as estab- lishment of eligibility standards (AWT, sewer rehabilitation, etc.), but would also continue to issue PRM's and POM's on lesser matters, 6 ------- such as the criteria for initiating value engineering. The Agency could become increasingly flexibile in these requirements over time, but need not provide such flexibility now. In line with with the States' increasing prominence in the program, EPA would negotiate most major policy issuances with the States, which will implement them. The purpose of EPA's maintenance of detailed policy responsibilities are: to maintain comparability and ac- countability among State programs, to ensure ease of correction should problems emerge in State program management, and to guaran- tee to EPA the means to account to the Congress for the environ- mental and fiscal integrity of all aspects of the program's operation. Management Focus Under this role, EPA would continue to delegate to the States operational responsibility for processing construction grants, but would proceed cautiously. As now, either the Corps or willing States would oversee Step 3 operations. States would take over most Step 2 activities as early as possible. Step 1, the most environmentally and fiscally influential activity, would be delegated last, and only to those States which demonstrate substantial investment in managing the program according to EPA standards. Emphasizing the close involvement of EPA in program operations,- the Agency would also retain the right to participate in direct project manage- ment for certain Step 1 projects which present particularly complex environmental or jurisdictional problems on which the State needs more than routine support. An example of this approach exists in Region I where a senior engineer has been assigned to participate in the management of the extremely complicated Boston Harbor clean-up. In this role, EPA would conduct substantial oversight of State operations, but would target its review to achieve the greatest environmental, financial, and management effect. EPA would continue to exercise close scrutiny over the Environmental Assessment/EIS process" to maintain its leadership role in NEPA implementation, and also ensure that other general Federal require- ments (such as MBE) are respected. The Agency would continue to sample State actions with respect to such major factors as plant site and size, collector and interceptor eligibility, sewer re- habilitation decisions based on SSES findings, and soon, to detect trends in State application of EPA eligibility standards. EPA would also review State actions on such items as user charge systems and plans of operation to assess the State's dedication to encouraging A/E's to design efficient, functional plants. As a given State demonstrated that it could and would operate under EPA guidelines, the need to oversee State operations would diminish, and EPA could divert resources to reviewing programs of other States or to technical support areas. However, when the Agency issued a substantial policy change, it would monitor State adoption of the policy for a reasonable period to ensure successful .ransfer. 7 ------- For the most part, EPA's interest in project reviews would be designed to detect correctible trends in State programs, not to prompt EPA action to overturn State decisions on a given project. EPA would move to invalidate a given State action only if the State had violated the law or regulations governing that decision. It would be the function of EPA's Regional Water Management to discourage technical staff from "second-guessing" States on judg- mental grounds." On the basis of trends found in accumulated individual project reviews, EPA would seek to adjust State program management in periodic meetings to review State performance. In order to ensure that our largest, most visible, and most politically and technically complicated projects received an extra measure of careful design, however, SPA would assign a senior engineer to participate with the State in the review and approval of a small number of "super projects." As staff was saved due to State programs coming on line, EPA could then begin to manage at two levels: oversight of State programs and program components which have been delegated, and management of,direct operations where components have not been delegated. As more and more of the program was delegated, there would be less need to maintain a critical mass of technical per- sonnel for direct operations in each Region. Rather, a few .Regions might manage project functions for all States not yet managing the program under delegation. Some of the resources saved through delegation could also be used to set up small consulting staffs in several Regions to specialize in developing and testing new program methods and to consult on difficult or uncommon problems at the request of State or Regional operations staffs. Because EPA retains a deep commitment in this role to promot- ing uniform State management of the program, there would be little opportunity to experiment broadly with technical, financial, or administrative innovation as a major priority. Instead, technical innovation would continue to be fostered by some form of the I/A incentive, while financial and administrative change would come about on the basis of analysis and enactment across the entire program, rather than through careful and varied experiments in a number of States and projects. Headquarters vs. Regional Role In this role, the Headquarters unit would retain most of its current functions; interpretation of Congressional objectives, policy formulation, program planning and budgeting. It might take on the added function of devising training materials with national application which might then be used by Regional tech- nical support centers. Regional Offices would manage non-delegated program elements, review EIS and MBS compliance, oversee and adjust State program management, provide technical support to other Regional staff and States, and participate in the direct management of major inter- jurisdictional Step 1 grants. " S ------- Role of the States and the Corps Under this option, the role of the States and the COE would change little. The States would gradually take over direct management of the program, but with the close supervision and consultation of EPA. States with neither the interest nor the current capacity might never undertake more than token program activity. The Corps of Engineer's would maintain its current functions in Step 3 and in biddability/constructabiliiy review in Step 2, where States agree to forego these functions. In certain cases States might wish the Corps to take over still more" of Step 2 functions, but they would have to clear such a proposal through EPA and the Corps, and reference the current Interagency Agreement. Resources Needed In this role, EPA staff mix would change somewhat, emphasizing administrative, financial, and environmental science skills, as well as engineering skills. A major difference would be that, for the most part, those engineers who now review projects for technical quality would have to learn a set of management skills which would make State program management the subject of their review, rather than individual engineering decisions. Those engineers who would retain concern with technical decisions on a given project would be among the-most senior members of a Region's engineering staff. 9 ------- CHAPTER 3 EPA'S ROLE: THE FRANCHISER In this role, EPA takes a giant step away from direct participation in day to day program operations. States become more clearly the immediate managers of the program, under guidelines laid out by EPA. As a sign of the States' responsibility in this program model, they become immediately responsible, at a minimum, for management of Steps 2 and 3, as well as Step 1 in those States capable of immediate assump- tion. All States would take over Step 1 within a limited nationa transition period. States would be encouraged to design procedures to manage the program within their boundaries, and adequacy—not uniformity—would be the basis of EPA's approval of each State's management system. The Corps of Engineers would continue to conduct its work in Step 3, and would also be available, at the State's option, to manage work in Step 2. "Step 1, however, would remain- first EPA's, and subsequently the State's non-assignable management responsibility. As resources are saved through accelerated delegation and reduced oversight, EPA would expand its leadership rola in developing and transferring new program and project management techniques. EPA would be figuratively a "franchiser," setting conditions on the priorities and options available for new projects, setting up and reviewing standards for State program quality and performance, providing new technology to improve the efficiency of the system, and taking broad-based corrective action, but refraining from intervening in individual program transactions after the decision to award a Step 1 grant. How This Option^Differs From the Current Program Under this role, EPA's work would be substantially different from that in the current program. Direct project management would quickly stop, and the Agency's principal functions would be to set policy and standards for the program and to create new technical resources to improve State perfor- mance. Oversight would be oriented to ensuring the quality of program management procedures designed by each State. States could become "laboratories", experimenting with manage- ment methods appropriate to its situation and potentially applicable to States, with similar grants. EPA's principal 'environmental intervention would take place prior to origination 10 ------- of a Step 1 grant, rather than during the planning, design, and construction process. EPA's principal fiscal interventions would take place before the fact, through analysis of municipal financing needs, and after the fact, through more efficient financial auditing. Policy Focus: Under this role, EPA would retain responsibility for making and enforcing major strategic choices about the program. By the issuance of guidelines and regulations, EPA would control the major directions, categories, and criteria for program choices, while leaving to the States the authority to apply those criteria in empirical conditions. Because this role will afford substan- tially greater latitude to States than now exists, the States would tend to be substantially more persuasive in the policy- making process than they are now. This increased participation, coupled with EPA's withdrawal from detailed review of State decisions, will have the effect of raising EPA's policy making to broader levels of guidance and definition than now. Detailed procedural guidances will become less frequent. For example, EPA's policy guidance might encourage or prohibit awards for certain categories of projects, but not lay out mandatory procedures for their management, such as Value Engineering or Plan of Study Review. Management Focus: Under this option, the pace of delegation v/ould be substan- tially quickened. In fact, if a legal means can be found to accomplish it, all States would be required to manage Steps 2 and 3 immediately, and to sign an agreement accepting responsi- bility for Step 1 within a short period, say, 2 years. In this way the program would become clearly and irretrievably a State function, defined and conditioned by EPA, but managed in all essential respects by the States. With EPA assistance, the State would prepare a management plan for each Step, using the Corps of Engineers or State staff funded under 2 05(g), at the State's discretion. If a State chose not to file such a plan acceptable to EPA, the Agency would temporarily reallocate 201 funds to other States cooperating with this policy. Under the direction of EPA guidance, each State would negotiate a set of procedures in a new delegation agreement which would govern its work in the program. For fully dele- gated States, EPA would encourage multi-track procedures, based on the complexity of different project types, so that, the State could dramatically speed up the term of a given 11 ------- project from inception to completion. EPA would review and • approve State program procedures for compliance with EPA guidelines, and the State would then operate those portions for the program for which it has accepted responsibility. Every two years (or other appropriate period), the State would renegotiate program procedures through a revised dele- gation agreement with EPA. Virtually all program operations except those which we are expressly forbidden to delegate ,(e .g., EIS, .MBE, audit) would be within the State's province. In this role, the Agency would undertake some limited pro- cess oversight, but only to ensure that States were adhering to their own management plans. Rather, EPA would invest the bulk of its staff resources in such a way as to optimize the environmental effect of our involvement. For example, we would emphasize review of municipal needs before a grant was awarded. There is substantial reason for concern that many plants now being designed may be beyond the capability of. their communities to maintain and operate into the future. Since many of EPA's review activities in the current program may be viewed as "too little, too late," EPA could invest in technical support which adequately assesses a community's treatment needs and ability to pay long 'before their number comes up on the priority list. With certain treatments prescribed, or endorsed as within the range of approval, and the community educated as to its needs and fiscal capabilities, EPA would improve its ability to affect the longterm environ- mental and fiscal quality of the program. One other oversight feature would be strenghtened in this role: audits. Although we rely on the States to manage a self- selected process, approved by EPA, we need greater assurance- of the fiscal integrity of such fully decentralized management. Strengthening and expanding our audit resources would be a prime means of providing this assurance. Although we may not formally delegate audit responsibility to States,.EPA might expand our capacity to audit grantees by emphasizing, more than we do now, standardization and training of CPA and State auditors in those procedures. We could then allow States to carry out or supervise, and certify the completeness and quality of audit staff work assigned to the State. EPA would exercise quality control through a system of random detailed follow-up audits, modelled after IRS's tax audit approach. EPA would respond to State requests for consultation and support in projects where the State has need of external exper- tise to strengthen its position. Other than that,, and those 12 ------- situations turned up by way of audits, EPA would not intervene in State management of projects. In this role, EPA would substantially expand its technical support function to maintain and advance the state of the art of management by States, and technical and fiscal planning by grantees. As a franchiser, the Agency defines the business, sets up expectations and productivity goals, and guides the selection of efficient procedures, while encouraging initiative and creativity by individual States. What the Agency can do, which the States cannot, is to amass sufficient specialized resources to develop the "science" of wastewater facility construction. What a State or grantee might shun as a risky adventure, EPA might adopt and support as a worthwhile iexperi- ment in which new procedures (engineering, financial, admini- strative) are tried, evaluated, replicated, and then adopted through a technology transfer process. In this role, EPA would see itself as in part an R&D and technology transfer Agency, setting aside funds to underwrite novel approaches through the experimental stage, and combining available innovative procedures with appropriate, incentives to encourage their, adoption where appropriate. If a State or grantee chose to try something quite different from standard practice, but with promise of wider application for improved program efficiency, EPA might provide 100% funding of the effort by considering it R&D, and also indemnify the State or grantee against the most harmful consequences of failure. In this way the Agency would make use of the "natural laboratories" provided by the more ambitious and innovative participants in the program. In line with this, EPA would support teams of technology transfer experts, packaging information on alternative engi- neering, financing, and administration so that busy practitioners would know their options and find ready help in determining whether and how to apply them. As a beginning strategy, EPA might target a number of States and grantees experiencing sub- stantial difficulty in managing the program and work with them to "lift the bottom level" of program performance. Average and good State programs would thereby achieve greater independence, while EPA strove to improve poor programs at least to the level of the average performers. Promoting success through novel approaches, where traditional approaches have failed, may well be the quickest and most effective way (in terms of overall program outcomes) to promote the adoption of improved wastewater treatment management. 13 ------- Headquarters vs. Regional Role; In this role, Headquarters staffs would set policy and procedural guidelines for State programs, and conduct the traditional head office functions of program planning and budgeting. In addition, Headquarters would become deeply- invested in setting the R&D agenda, analyzing experimental results, and formulating and packaging technical and pro- fessional development tools for use by technology transfer " teams, and for dissemination to target audiences by means of . journals or information sheets. . Regional functions would include project consultation, negotiation of State management plans, and periodic evaluation and renegotiation of State program procedures. Regions would also house specialized technology transfer teams to provide the States with detailed technical, fiscal, and administrative guidance and training in techniques developed through Rf«D. Each Region would specialize in one or two areas as experts for all of EPA. Role of States and COS; As indicated above,' the States, would become immediate program managers for Steps 2 and 3, with the possibility of negotiating with the Corps of Engineers for services under Step 3, or Steps 2 and 3. Many" States would also become managers of Step 1, and all States would take this on within a short time.. The Corps retains its role of master engineer, available to serve in Step 2 and 3, but. would not be a participant in Step 1, where the most significant environmental and fiscal decisions would be made by the parties which must finally live with the results of the project after the Corps has completed its work. Resources Needed: Once again, the types of personnel required in this role are different from current, staffing. In this role the change is more dramatic in the direction of managers, financial analysts, researchers, and auditors. ' There is substantially less need for numerous engineers in this option, but the seniority and expertise of those engineers employed must be greater than in the current staffing mix. Fewer EPA staff would be required under this role than under the first role, EPA as Supervisor. 14 ------- CHAPTER 4 EPA'S ROLE: THE REGULATOR In this chapter we present two distinct alternatives indicat- ing how EPA might remove itself almost entirely from day to day operation of the construction grants program. In each of the two alternatives, we describe how EPA might reasonably delegate virtually all administrative responsibilities to the States and yet hold States accountable for the results of their actions. In Alternative A, which could be implemented fairly readily in the near term, each State would be held accountable for the annual increase in available wastewater treatment capacity. At the same time, localities would be held accountable for meeting discharge limits specified in their permits. In Alternative 3, which could evolve from Alternative A over a period of 10 to 1 5 years, the State would become accountable for observable improvement in water quality. It would be up to each State to use construction grants, together with the other fiscal 'support and regulatory tools available to it, to bring targeted streams, lakes and coastal waters into compliance with water quality standards in accordance with a mutually agreed-upon schedule for achieving them. ALTERNATIVE A: A Possible Model For The Near Future EPA's Role: The Regulator, Managing For Improved Wastewater Treatment In this role EPA would relinquish concern with either the State's specific decision-making on individual projects or with the process through which the State manages the program. Instead, EPA would focus solely on results: was the State making effective use of grant funds to add to available treatment capacity? Further- more, EPA would insist that all completed plants comply with the discharge limits in their permits. Either the State or.EPA would go to court to force appropriate remedial action when a POTW is out of compliance and the operator is unwilling or unable to cor- rect the underlying problem. How This Alternative Differs From the Current Program? This option would require new legislation designating the construction grant funds going to each State as a block grant for POTW construction. EPA's oversight would be limited to negotiating with each State a schedule showing for each of the subsequent 5 to 10 years the amount of new treatment capacity at each level (i.e., secondary, advanced secondary, advanced) to be brought on line in each year. It would then be up to the State to marshal 15 ------- its staff and financial resources (including the allocate! block grant funds) to ensure that objectives are met. EPA would "enforce the negotiated completion schedule for new treatment capacity by exercising fiscal sanctions against non-performing States. At the same time EPA would provide technical support to the State to help it overcome whatever deficiencies in its program led to the short- fall. Policy Focus; EPA would be involved in setting policy only at the most gen- eral level— by establishing clearly the role of POTW's in helping to meet the Nation's water quality goals and, possibly, by estab- lishing a series of five year milestones indicating how much of an increase in treatment capacity EPA would expect to come on line at that time. Within such general policy guidance, each State would be free to establish its own priorities and plan of action, subject to EPA concurrence that the proposed State schedule of accomplishments is consistent with what might reasonably be expected of a State conducting a vigorous POTW construction program. At the same time EPA would establish the clear policy that all completed POTW's must comply with the discharge limits specified in their permits. Management Focus Within this framework, the State would bear full responsi-. bility for construction program management and would not be answerable to EPA for specific actions or decisions or even for its management process or systems. The State would instead be accountable only for the results achieved. In the event that the targeted accomplishments were not achieved, the State would risk that its block grant for the next year would be reduced according to the extent of the performance shortfall. Experience over time would increase the reliability, with which the State and EPA could predict the likely results from the application of a given level of resources. EPA could in any case make allowances for unforeseeable and uncontrollable circumstances that night artificially detract from or enhance the State's apparent level of accomplishment. While the State would bear full responsibility for managing POTW construction, EPA would retain responsibility for reinforcing State programs to ensure that completed POTWs comply with permit conditions. EPA would do so by ensuring that up States use suffi- cient 205(g) or 106 funds to support careful compliance monitoring, followed by corrective action when noncompliance is detected. ------- {This would require legislative change to readjust formula allot- ments to allocate 205(g) funds more in line with State by State needs.) EPA would increase its own enforcement staff to support and complement.State compliance efforts. In cases of significant noncompliance, which the POTW operator was unable or unwilling to .correct# the State (or EPA) would obtain a court order requiring an independent consultant to determine the reason for non-compli- ance. If the cause were a mechanical problem or a design defect, the locality would be required to correct it. (The locality could sue its contractors or suppliers for compensation if the problem is due to defective design, workmanship or materials, or, failing that, petition the State for emergency 2 01 support for redesign where practical.) If the cause were inadequate C&M, EPA would seek a court order requiring localities to devote the necessary resources to O&M, and would provide technical assistance to clear up OocM problems unrelated to funding. For common State needs, EPA would continue to conduct R&D and to provide technical consultation on program matters. As States become more expert, however, SPA would do more "peer match" arrange- ments than direct technical assistance.. EPA would also continue to place strong emphasis on improving the technical basis for State water quality standards and adjusting them as appropriate, and on research and development to improve the state-of-the-art in water quality modelling. The purpose of these activities would be to make it possible for States, at their option, to change the nature of the results toward which they must manage their municipal construction block grant. A State so choosing might, on an experimental basis, establish as its annual objective the improvement of water quality on specified stream segments or lakes (rather than putting in place a specified amount of treat- ment capacity). To compensate for the additional risk of failure associated with managing toward these "environmental results," which are one step further removed from the administrative actions the State directly controls, a State choosing this option might be given increased flexibility in disbursing its block grant funds. For example, EPA might initially make 5%, 10% or 15% of these funds available for water quality improvement activities other than POTW construction (e.g.: measurement and control of non-point sources). If over time an increasing number of States were to apply this approach successfully, the EPA role would gradually evolve to that described below as Alternative 3. . Headquarters vs. Recional Role EPA Headquarters (OWPO) would hava the general responsibility for establishing program policy and would normally do so after extensive consultation with the Office of Water Planning and Standards and the Regions. 17 ------- The Regions, in turn, would be responsible each year for rene- gotiating with the States their proposed schedule of accomplishments for the next year, for determining in consultation with each State whether the specified objectives have been met during the previous year, and for determining, for States with significant shortfalls, the appropriate degree of reallocation of the next year's funds. The Regions would also be responsible for backing up the States in monitoring the compliance of POTW's with permit conditions, seeking corrective actions from localities with non-complying POTW's, and going to court to obtain the corrective actions de- scribed above in the case of recalcitrant localities. The Regions would also provide technical support to the States on construction program operations. Roles of States and COE States would quickly assume total responsibility for program direction and management subject to only the most general policy guidance from HQ/EPA and subject to their ability to convince the EPA Region that the proposed accomplishments are consistent with vigorous application of the available staff and financial resources. The Corps would continue to be available to support States wishing to make use of it, and a large portion of the States would probably do so. Resources Required HQ/EPA {0V7P0) would take on a much stronger policy-oriented - focus. Policy-oriented staffing would increase substantially, as would technical staff devoted to developing water quality modelling techniques. Most operational activities v/ould wind down. The Regions generally would focus on negotiating accomplish- ment targets with the States with regard to treatment capacity to be brought on line as well as MBE and other similar targets. Regional enforcement staffs would be increased. Most other operational activities would wind down and staff would become available for other water quality activities. Those Regions with States that choose to manage against water quality objectives would begin to oversee those States' program plans and accomplishments in terms of projected and achieved changes in water quality. The Regions construction grant staffs would therefore take on more of a water-quality monitoring focus and would work much more closely with the water quality monitoring staffs in the States and with the Regions' Surveillance and Analysis 18 ------- Divisions. Again, most operational activities would wind down and the staff previously engaged in such activities would become available for other Water Program activities. A SECOND ALTERNATIVE Over time, as the number of States sfetting objectives in terms of^improved water quality increased; the alternative des- cribed above could gradually evolve into a second alternative. Alternative B: A Possible Model For The 1990 EPA Role: The Regulator, Managing For Improved Water Quality As in Alternative A, in this option EPA would also focus solely on results. The difference wuld be in the type of results to be obtained: was the State making effective use of grant funds in combination with regulatory mechanisms to ensure attainment and maintenance of good water quality? How This Alternative Differs From Alternative A In this option block grant funds would be available at the State's option {subject to upper limits set by EPA) for any legi- timate water quality related investments or activities, including construction, maintenance, or enforcement of wastewater treatment, as well as control of non-point source pollution. Even so, we should expect that States will find that the greatest water quality benefit will come from devoting a substantial majority of such funds to the construction of POTW's. EPA's oversight would be limited to negotiating with each State a schedule showing for each of the subsequent 5 to 10 years the spe- . cific stream segments, lakes, estuaries or coastal waters to be targeted for improvement and the degree of improvement to be achieved on each. It would then be up to the State to marshal its staff and financial resources (including the allocated block grant funds)' to ensure that the agreed upon objectives are met. As in Option A EPA would "enforce" the negotiated schedule of improvements by reallocat- ing from a future year's funds a portion of the block grant related to the shortfall in meeting the previous year's objectives. Policy Focus: EPA would again be involved in setting policy only at a general level, this time by establishing clearly the ultimate water quality goals and objectives for the Nation and possibly by establishing five year milestones along the way. EPA might also express its sense of the relative priority among the possible benefits to be 19 ------- achieved by improving water quality. For example, EPA night indicate that the mitigation of significant health related problems should, in general, take priority over the improvement of recreational or aesthe- tic values. Futhermore, to help ensure an orderly transition from the POTW- limited block grant program described in Alternative A to a general water quality block grant, EPA might establish its own five year schedule, gradually increasing the upper limits on the percentage of the block grant which may be used for water quality activities other than POTW planning, design and construction. (For example, EPA might specify that 5% may be used for other purposes in.the first year, 10% in the second year, 15% in the third year, and so on, with the allowed amount increasing to a final upper limit of, say, 20% or 30%.) But within such general policy guidance, the States would be free to establish their own priorities and plan of action to pur- sue a vigorous water quality improvement program. Management Focus EPA would manage this option much as it would Alternative A. As the block grant program matures, EPA should anticipate considerable experimentation by States with innovative mechanisms, for achieving the targeted water quality improvements. Such innovations might includes o increased State involvement, in oversight (and possibly funding) of the operation and maintenance of POTV/'s. o new inspection and enforcement procedures to increase POTW compliance with permit conditions. o increased State concern with the relative contri- bution of non-point sources to water quality problems and greater focus on the required use of best manage- ment practices (3MPs) by non-point sources, especially in urban areas. o increased State emphasis on pretreatment. EPA would continue to support such innovations directly through research and development into technical questions and indirectly by gradually making an increasing portion of the block grant funds available for activities other than construction of POTW's. - 20 ------- Headquarters vs. Regional Role Under this alternative the functions of the HQ OWPO and OWPS would gradually merge, as water quality standards became more than ever the fulcrum for EPA's leverage on the program. The Regions would be responsible each year for re-negotiating the proposed schedule of accomplishments with the States; for determining in consultation with each State whether the specified objectives have been met; for determining the appropriate degree of realloca- tion in the case of States with significant shortfalls; and for assistance to States, at their request, in correcting the underlying program deficiencies that lead to performance shortfalls. Roles of States and COE - States would quickly assume total responsibility for program direction and management, similar to that outlined under Alternative A. Many States will probably choose to continue to make use of the Corps in construction projects. Resources Required Resources in this Alternative would also be similar to those outlined under Alternative A, with an even heavier emphasis on modelling and monitoring staff, and with monitoring extended to include water quality as well as POTW compliance. 21 ------- APPENDIX OPPORTUNITIES FOR CHANGE This paper is designed to lay out clearly defined roles which EPA might adopt between now and 1990. A change in role implies changes in functions and in the specific tasks which make up those functions. Although there is much thinking and debating to do before the Agency chooses a new plan of action for the 80's and beyond, many participants and observers of the Construction Grants program have been formulating ideas as to how the program must change if it is to be finally successful. This appendix presents, in a loose compilation,' summaries of a number of suggestions for modifying how we now think of and manage the Construction Grants program. Few of the ideas have yet received serious analytic attention as to practicality or cost, either financial or political. But they represent thinking culled from numerous conversations with EPA, State, and municipal personnel close to the program. Although an individual reader might find grounds for debate in any of these ideas or their implications, it is important that we consider them openly and carefully so that our final choice is made wisely, with reference to all the options available to us. For convenience, we have grouped the ideas loosely into three categories. In the first category we have placed ideas which, however fundamentally they might modify "business as usual," do not substantially change EPA's role in the program. Group II calles for moderate change in EPA's role; Group III, substantial change. While these categories relate generally to the three role concepts presented later in the body of this paper, the relationship is by no means congruent. Ideas in one group might well be combined with ideas in another to form what is pragmatically a more satisfying set of EPA or State functions. ' 22 ------- GROUP I EPA A PARTNER IN PROJECT MANAGEMENT Although. States and major grantees can normally manage projects through Steps 2 and 3 without direct EPA involve- ment, Step 1 presents a more complex challenge, since this is where the most politically, environmental, and fiscally sensitive issues get raised and resolved. In some cases other EPA program elements besides 2 01 are directly affected (as in cases where sludge disposal requires land application or incineration). Occasionally there are project decisions to make which will affect multi-State water pollution control efforts. In still others there may be political pressures on a municipality which push it toward inappropriate solutions, and the State agency may lack sufficient authority to resist these pressures on its own. Each of these factors takes on an added dimension of sensitivity when the project involved is large, expensive, highly visible, and central to clean-up efforts for a major stream segment or other water body. Such situations suggest grounds for direct EPA involvement in project management, or, more precisely, for EPA participation in environmental decision-making within the context of a given project. In such situations, EPA could assign a senior environ- mentalist to coordinate all relevant EPA programs, to represent the Administrator in interpreting Agency regulations and guide- lines, and to ensure that the State and grantee agree on an environmentally sound treatment plan, whatever external pressure there might be. Although examples of this work exist* we should should care carefully explore our obligation to intervene in such a way routinely in certain categories of projects. MULTI-REGIONAL DIRECT OPERATION TEAMS . As staff is saved due to State programs coming on line through delegation, EPA could begin to manage at two distinct levels: over- sight of delegated State programs and program components and conduct of direct operations where components have not been delegated. As more and more of the program is delegated, there would be less need to maintain a critical mass of administrative and technical personnel to manage direct operations for one or two States in each Region. Rather, the Agency could achieve economies of scale by massing re- sources to manage undelegated functions for all States at a single location, or for many States at a few strategic locations. For *For example, the Boston Harbor Project is a complex web, in- volving EPA's water, air, and solid and hazardous waste disposal programs. In 1ight of this complexity, and the centrality of the project, Region I has assigned a senior engineer to work with the State, the City, and the Metropolitan District Commission. 23 ------- example, we might create a Western projects office in Denver or San Francisco which would take over management of Step 2 functions for all Western states lacking Step 2 delegation. In one option, the prime (current) Region could approve the Facility Plan, then transfer the project to a Multi-Region Center. In another option, a Multi-Region Center would manage all undelegated program functions, including Step 1. ' TECHNICAL SUPPORT CENTERS EPA could create technical support centers to centralize and focus expertise now scattered throughout, or unavailable to EPA Regions, States and grantees. Each Region could specialise in two or three technical or financial skills to manage research and ex- perimentation to develop new technical knowledge and skills, and to serve as a unique source of consultation to other Regional staff, the States or Grantees. Currently, each Region attempts to maintain a staff of broadly skilled engineers and administrators whose backgrounds and training fit them to deal with most of the challenges posed in project review. However, the need to maintain these general skills ensures that there is little that EPA review can add to the work of competent State staff, whose credentials are often similar to those of EPA personnel. Technical support centers would allow EPA staff to concentrate on detailed problem solving in skill areas not normally available in the current facility planning and review process. FISCAL ASSESSMENT ' Sound fiscal assessment is fundamental to achieving'and main- taining clean water in a tight economy. A community must have the ability to fund the capital expense of a POTW, including bond servicing, and the community must be able to pay for the operation and maintenance of a particular treatment alternative over time. It is also desirable for a community to be in a posture to totally •fund future expansion of a. POTW to meet growth needs. To accom- plish this, local communities should carry out a fiscal assessment of total anticipated costs for water quality improvement, based upon a range of available treatment alternatives. This will accomplish a number of goals. First, it will help the community recognize the best treatment choice from a fiscal perspective. Second it will be a strong indicator of the real costs of O&M and will help tie user charges more closely to O&M costs. Third it will force communities to look at pretreatment as an option vital to their economic self-interest. Lastly, it will point out the revenue needs for future expansion of a POTW brought on by forseeable community.growth. .24 ------- The fiscal analysis would fit into the Step 1 stage in the current process. Each grantee would plan- a balanced annual sewage treatment budget, with an adequate capital" program, and an annual rate structure based, for example, on the following: o Total annual revenue should equal or exceed operating and capital expenses; o The revenue for capital expenditures, excluding interest, should equal or exceed the annual depreciation of the total capital plant; o Plant replacement costs would be a budgeted item, paid for from either user charges or a special bond account. ANALYSIS TO SOLVE PROCESS PROBLEMS A number of Regions have reported unsolved problems with operational activities such as delays in payments processing, delay and confusion in grantee audits, a suspected net of loss due to'inflation overwhelming presumed savings Value Engineering, and others. Regional Water Division staff, in some cases, feel unable to resolve such problems because of staffing and organisa- tional constraints — payments, for example, are ordinarily processed by a separate grants administration branch, while audits are performed by an entirely separate group which is not even located in the Regional Office. The work of OWWM is highly segregated by reference to indi- vidual paragraphs of the Clean Water Act. That is, there is a staff for 201, 208, 402, and so on. The pressure of operational work has limited the ability of the Agency to amass analytic resources to solve problems within and across "paragraph," and even program lines. Headquarters should consider where and how to place staff dedicated to analyzing and solving such nettlesome problems. STATE ADMINISTRATION OF SMALL GRANTS Many grantees represent small communities with scant exper- ience or expertise to manage a project as large and as complex, both technically and administratively, as a Construction Grant. Much time and energy must be spent by the conscientious grantee, inching up the learning curve to acquire and apply knowledge and skills which may never be needed again. Still other grantees succumb to- the perceived futility of mastering their role in the program, and allow their consultants to make decisions almost independently. A substantial amount of State and EPA review 25 ------- time must be spent correcting errors which creep into project administration under these conditions, and the cost, in terms of project delays inflation, disallowed expenses and politically significant grantee resentment, is heavy. Under current law, the grants must be awarded to'the juris- diction which will ultimately manage and maintain the facility; therefore, a locality must remain the grantee in most cases. Yet it makes sense to charge.the State with many of the details of grant administration, and to remove from the locality the burden of all but those functions for which the grantee is best fitted by means of placement, skill, and experience to perform. Under such a system the State would be a party to, not simply a reviewer of, contract negotiations and technical decisions; and State staff could maintain auditable accounts for a number of small grantees simultaneously. Because this notion will be more or less controversial, given the political relationship between localities and States in different areas, EPA would have to re- quire such a procedure to ensure its widespread adoption. MUNICIPAL CERTIFICATION IN STEPS 2 AND 3 Many grantees are equipped by means of competent staff and prior experience to conduct design and construction work in the absence of careful oversight by either EPA or the State. Yet these grantees are subject to review which creates substantial delays and consequent costs due to inflation. EPA could set guidelines and, with the State, identify grantees who could manage Step 2 and 3 functions without routine overview. Depend- ing on the qualifications and experience of the grantee, more or less latitude could be granted in an individual "Certification Agreement." Since more and more of our 2 01 funds will go into major municipal areas in the coming years, this proposal may serve to speed completion of a substantial portion of our biggest investment projects.* O&M START UP Operations and maintenance after plant start-up is now left entirely to grantees. If an exceptionally good job of design, construction, and start-up of the POTW is carried out, and if an unusually useful operations and maintenance manual is developed, no major problems should be anticipated when the treatment *For a more detailed explanation of this concept, see Steve Allbee's paper, dated January 28, 1980. ------- facility begins to function. Unfortunately, this is not the pre- valent situation. It seems that there is usually a shakedown period for the treatment systems to go through before proper operation is achieved. This usually involves minor adjustments as re-engineering parts of the system. The effect can be to require changes to the O&.M manual, retraining of plant operators, equipment changes, replacing inventories of back-up parts, etc. A way to approach this problem would be to require the A&E firm that designs the POTW to actually participate in operating it for a minimum amount of time before it is turned over completely to a municipality. During this time the following would occur: 1) The O&H manual would be written in final (draft submitted before start-up) after actual plant operating experience is incorporated into the manual. The operator would participate in designing the manual according to a format and content he or she finds suit- able for daily use. 2} The plant superintendant (chief operator) and his staff could be trained to most efficiently run the facility. 3) The system bugs could be worked out by the design engineers. 4) The plant would have to meet permit guidelines for a specified period of time before the design engineers would be released from responsibility to work on the system. 27 ------- GROUP II PRIOR APPROVAL OP PROCESS Under this proposal, EPA sets general policy regarding program outputs and operations, but does not insist on pro- cedural symmetry among the States. The Agency, instead, limits its guidance to requiring that the State institute procedures of its own choice to achieve project quality and efficiency at least as high as in the currently prescribed system. EPA would review and approve a State process, much as we approve State Implementation Plans in the Air Program. EPA would then periodically (e.g., once every two years) review a State's overall process. If EPA finds this process results in systematic defects or biases in decision-making, EPA will then negotiate needed changes' in the process. Never- theless, no individual project decisions will be overturned unless actual violatins of law or regulation are involved. REDUCE MONITORING TO COVER ONLY THOSE ITEMS IN WHICH EPA CAN HAVE A DEMONSTRABLE £NVIRONMEHTAL OR FISCAL IMPACT Some observers claim that much current EPA effort is expended on activities that have rarely if ever resulted in substantive modification of prior State or local decisions. Among such monitoring activities, which we might reduce or eliminate are: \ o Review of State Priority Lists o Review of User Charge Plan o Review of O&M Plans o Review of Change Orders This is not to say that EPA should abandon concern with the program function which these reviews are intended to ensure. Rather, since the reviews themselves appear to have proven largely inconsequential, the Agency should turn itself to alternate methods of promoting these program features. STATE.CONTROL OF PAYMENTS AND AUDITS One option for handling payments and audits would be for EPA to allot a State's entire construction grants share to the responsible State agency for projects to be administered almost completely by the State. The State would then be responsible for handling all payment requests for grantees, ensuring that a 28 ------- applicable requirements for payments are met, auditing grantees to see if payments were properly used and applied to eligible. costs, and recovering any excess funds awarded to a grantee. EPA would then focus its principal audit on State agencies, to ensure that construction grants funds went to POTW construction and were not systematically diverted into other areas. To provide addi- tional safety, EPA could conduct its own detailed project audits on a sample (say 20%), rather than the universe of projects, in order to ensure that national standards of probity and good management are in effect. STATE CERTIFICATION OF PONSI/EIS/MBE NEPA and M5E requirements for construction grants projects are not generally considered delegable since they are imposed by legislation other than the Clean Water Act. However, in both areas, EPA could shift a substantial portion of the work to the States now, even if final authority remained with EPA. States could recommend which projects need a full-blown EIS; oversee the preparation of and review environmental assess- ments? and prepare draft FONSI1 s and circulate them for public comment. Following the decision to prepare an EIS, a State could oversee its preparation, review, and submission for public comment, as well as ensure that projects respond to the concerns by the EIS. Cn M3E, a Regional office could choose to certify a State MBE program as adequate, concentrat- ing its effort on reviewing the results produced by the state program rather than on reviewing individual projects. PRE-APPLICATION MARKETING ' The Agency could invest construction grants resources heavily at the front end of the process for early environmental influence in the program. In doing so we v/ould try to affect the planning of potential grantees while they are still on the priority list and before funding. We would spend agency resources investigating problems to condition the_ subsequent consideration of treatment alternatives in Step 1. Progressive States could participate in this analysis, and, over time, re- sponsibility for this work could be cautiously delegated. Grantee Education: EPA (or the State) could talk to potential grantees about their plans and expectations as they near Step 1 funding on the priority lists. We should attempt to influence a grantee decision invest in out a water quality improvement before the application for Step 1 funding is made. We should inform the grantee of treatment alternatives that are better suited to a particular problem than traditional POTW construction, making them aware of the costs and environmental consequences of different 29 ------- treatment alternatives. We should try to influence an increase of environmental cleanup projects over typical interceptor pipe, or drainage basin pump-over projects. Cur goal should be to make a State's grantees very aware of the choices they will be faced with, and the consequences of those choices, before they reach the Step 1 point. Problem Anticipation: The Agency should strengthen the 305(bl process, helping States survey the condition of a State's surface water, identify major trouble spots, and try to influence clean-up of those areas. We should try to better anticipate where major problems will be emerging and consider ways of combating them. An example would be to use aerial survey techniques to identify water quality problems from septic system failure such as the current Region V effort. We should be developing strategies to deal with anticipated problems which could then be brought under the State-EPA Agreement process, for instance. Early Environmental Assessments: Preliminary environmental assessments should be carried out before Step 1. The Agency could require that environmental assessments of first time facility plan grants should be carried out while still on the priority list but close to the fundable level. By requiring early environmental assessments we bring the environmental aspects of the construction grant program up front where the environmental information can make a difference. The assess- ment will be available 1 ) before preconceived ideas for treatment alternatives have been formed; 2) before the EA and EIS process can cause delay and add expense to a project; 3) and in time to allow an A&E firm to better site an alternative treatment facility at a,particular location. The basic payoff is that with this information up front the facility planning effort should go more smoothly, and be developed in the context of an environmental data base.. The EIS process, if it were determined to be necessary, could run concurrently with the Step 1 process and everyone—EPA, the State, the grantee—would know before Step 1 that an EIS is needed. They could therefore adjust the facility planning effort to include EIS recommendations. The EIS and Facility plan would then represent a synthesis of concerns rather than be at loggerheads with each other. R&D AND TRAINING EPA must reinforce its role in R&D in technical, financial, and administrative areas. This becomes especially important as EPA allows more and more latitude to States to manage the detailed 30 ------- construction as they ,see fit. Individual States are unlikely to push forward the state of the art in these three key areas unless there is a conscious and controlled encouragement of the entre- preneurial spirit. Technically, we have at least two historical models to pro- mote innovation: the formal R&D program for POTW technology which emphasized public sector development during PL 84-660 and the early PL 92-500, and the feature of the 1977 Amendments to 92- 500 which provides a 10% incentive for private sector initiative in proposing innovative technologies. While Federal policy has identified responsibility for technical innovation, first with EPA/ and then with the private sector, there is no such clear leadership in the areas of financial or administrative procedures.- The development of novel and increasingly efficient ways to finance an intergovernmental effort to clean up municipal wastewater, and to administer the planning, design, and construction of facilities is not now a clear assignment to anyone. Rather, we bypass the experimental stage and put into place financial and administrative procedures on a nationwide basis, sink or swim. The 1990 effort provides an opportunity for us to survey whether and where we might afford to introduce testing and development of improved finan- cial and administrative, as well as technical, approaches to POTW construction. In the area of technological improvement, R&D must be married to incentives to promote the adoption of new technologies. The current i/A bonus can meet this need if EPA takes the lead in de- veloping and identifying innovative technologies which will be eligible for the 10% bonus. Perhaps a better way would be to eliminate "innovative" from the I/a set-aside, funding only alternative treatment by means of this bonus. Truly innovative engineering could then be considered R&D, and funded at 100% during its experimental stage, and then under the 10% bonus when it had proven out as a successful alternative to traditional treatment. The agency also needs to exert greater effort in devising and testing innovative ways of identifying and planning for the long-term financing of municipal facilities. EPA could reinforce such a function, by setting aside sufficient staff, a budget, and a set of incoming projects to which novel financing schemes could be experimentally applied. The States, provide laboratories for administrative innovation. EPA might encourage, several peer leaders among the States to apply new administrative models which could be tested and evaluated for efficiency and effectiveness in managing the State program. 31 ------- Finally, EPA.could take the lead in discerning successful approaches, packaging them for dissemination, and devising strategies for appropriate adoption. In some cases this will mean coordinating peer match programs, technical publications, and training sessions. 32 ------- GROUP III ENVIRONMENTAL PRODUCTION TARGETS Until now, EPA's role in the Construction Grants program has dealt almost exclusively with ensuring financial integrity, planning, and process management. For a variety of reasons, both technological and pragmatic, the Agency has emphasized accountability for the quality of each major step in the process of planning, design, and construction. But SPA has not set explicit, accountable production standards for bringing projects on line within a certain period. We have monitored production, even issued report cards to our Regions to emphasize the need for efficiency, but we have not moved to require the achievement of a set amount of new treatment capacity as an annual target. One means to address this situation becomes more available as one actor#EPA, removes itself from the review (and delay) chain. EPA might set certain performance standards for State programs, negotiating with the State a given amount of treatment capacity to be brought on line within a given fiscal year. Top priority projects could be weighted to provide an extra measure of success to a State program as they are completed, and States could be "scored" each year against annual performance targets. States could then be rated on the basis of their performance, matching their actual score versus their target, and funds for -subsequent years could be apportioned, at least in part, on .his basis. States failing to meet their target by a substan- tial margin would be subject to a diagnosis of their administrative process, with technical assistance provided, to improve their capability, and to allow restoration of full funding for future years... This proposal suggests a way of emphasizing production, rather than processing, as the basic means of determining State program success, and suggests a simple but direct reward/sanction system to reinforce the objective of completing projects in order to realize their environmental benefits. EPA REGULATOR - MUNICIPALITY PERMIT COMPLIANCE The Agency posture on discharge permit standards would be to vigorously enforce against violators. When violations are detected, the State (or, if necessary, EPA) would notify the violator and re- quest that the violator inform the State (or EPA) of the cause of the' violation. If the violator is reluctant to provide the informa- tion we would request a court order directing that the information be provided. 33 ------- If it is determined that the violation was caused by a minor problem or an accident, we would require immediate corrective action and possibly impose a fine. However, if the violation is determined to be from: (1) a treatment system design defect; (2) too much influent; or (3) poor operation and. maintenance causing poor quality effluent, then we would-ask the courts to order the plant operator to take corrective action. The corrective action could include the following: Re-design =nd reconstruction of the treatment system. Replacement of worn out treatment system equipment. Expansion of plant capacity. Change in operation and maintenance. Training of municipal treatment personnel. Changing the user charge system to more adequately reflect true costs of operation and maintenance. The Agency would be primarily' concerned that the discharge permit standards were being met. Inadequacies in plant size, system design, operation and maintenance procedures, and finan- cing are all the responsibility of the operating municipality; therefore corrective action would also be solely a municipal responsibility. 1. 2. 3. 4. 5. 6. 34 ------- |