mtf*
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20410
II 9Q iQpo OFFPCE o*
*AA. t* l^W THE iNSF-ECTOR GENERA,.
MEMORANDUM
SUBJECT: Audit Report E5EH7- 11-0043-81554
Resolution of Superfund Contract Audit Reports
FROM: i^ Kenneth D. Hockman W10&L. Q.
f Divisional Inspector General for Audit
U Internal Audit Division (A-109)
TO: David J. O'Connor, Director
Procurement and Contracts
Management Division (PM-214)
Attached is a copy of our report entitled "Resolution of
Superfund Contract Audit Reports", Audit Report E5EH7-11-
0043-81554 . This report provides important findings and
recommendations regarding the procedures used to resolve audits
of costs claimed under contracts to perform emergency cleanups
at hazardous waste sites.
As the action official, you are requi-ed under EPA Directive
2750 to provide this office a written, response to the audit
report within 90 days of the audit report date. " addition,
the Director, Resource Management Division in EPA Headquarters
requests that you forward a copv of your response to the Agency
Internal Control Official (PM-2:5): c/o Resource Management
Division, and to your organization's Audit Followup Coordinator
Should you or your staff have any questions or need additional
information, please contact Melissa Heist of my staff on
475-P206.
Attachment
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T-A£lii.. -..-*• CONTENTS
SCOPE AND OBJECTIVES ........................................ 1
SUMMARY OF FINDINGS ...................................... 3
ACTION REQUIRED .............................................. 5
BACKGROUND [[[ 5
FINDINGS AND RECOMMENDATIONS ................................. 6
1. MORE COMMUNICATION NEEDED BETWEEN CONTRACTING OFFICERS
AND AUDITORS ............................................. 6
2. NEGOTIATION MEMORANDUMS NEED TO BE WRITTEN MORE CAREFULLY
AND COMPLETELY ........................................... 8
3. IMPROVEMENTS IN EFA CONTRACTOR'S ACCOUNTING SYSTEM
NOT MADE IN A TIMELY MANNER ............................... 11
4. CONTRACTORS TOOK ADVANTAGE OF AMBIGUOUS CONTRACT
CLAUSES .................................................. 14
EXHIBIT A - SAMPLE OF TEN AUDITS OF SUPERFUND CONTRACTS ...... 17
EXHIBIT B - AUDIT REPORTS ISSUED ON ONE CONTRACTOR ........... 18
APPENDIX 1 - JUNE 29, 1988, RESPONSE TO DRAFT AUDIT REPORT
FROM THE DIRECTOR OF THE PROCUREMENT AND
CONTRACTS MANAGEMENT DIVISION .................... 20
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. O.C. 204CO
JUL 29 BBS
THE
iCE OP
GENERAL
MEMORANDUM
SUBJECT:
FROM:
TO:
L
£
Audit Report E5EH7-11-0043-81554
Resolution of Superfund Contract Audit Reports
. Kenneth D. Hockman j&Mditrrl <1 -
Divisional Inspector General for Audit
Internal Audit Division (A-109)
David J. O'Connor, Director
Procurement and Contracts
Management Division (PM-214)
SCOPE AND OBJECTIVES
We have completed an audit of the procedures used to resolve
audits of costs claimed under contracts to perform emergency
cleanups at hazardous waste sites. Our audit objectives were
to: (1) determine whether contracting officers made appropriate
decisions to resolve issues addressed in the audit reports; (2)
identify the areas of disagreement between the auditors and
contracting officers concerning questioned or set aside costs;
and (3) reconcile differences between the auditors and contract-
ing officers.
Our field work was performed from August 3, 1987 to January 8,
1988. We evaluated the resolution of ten audit reports that
addressed costs claimed under emergency cleanup services
contracts. The ten audit reports were selected from a universe
of 25 audit reports issued by the Office of Audit from October 1,
1985 to June 15, 1987. We used this time period because we were
more interested in the resolution of audit reports applicable
to the emergency response cleanup services zone contracts than
the notices to proceed that were utilized before the zone con-
tracts. The reports were not randomly selected because at the
time we started our audit work, the Procurement and Contracts
Management Division (PCMD) had closed only four audit reports
from our universe that contained questioned or set aside costs.
Therefore, we included these four audit reports in our sample,
plus the next six audit reports with questioned or set aside
costs that PCMD closed. Exhibit A identifies the audit reports
in our sample.
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Most of our audit work was performed at PCMD, in Headquarters,
where the contracting officers responsible for resolving the
audit reports .were located. We reviewed PCMD's pre- and post-
negotiation memorandums and other documents from the contract
files that explained how the ten audit reports in our sample
were resolved. We also obtained additional information through
discussions with the appropriate contracting officers. In
addition, we visited cur audit offices in Atlanta and Chicago
to discuss the auditors' concerns on the resolution of the
audit reports.
Our audit was conducted in accordance with the Standards For
Audit of Governmental Organizations. Programs. Activities, and
Functions (1981 Revision) issued by the Comptroller General of
the United States. Internal control weaknesses, disclosed as a
result of our audit, are included in the Findings and Recommen-
dations section of this report. We had no indication that
items not tested would disclose further weaknesses beyond those
described .
SUMMARY OF FiniHIGS
Our analysis of the ten audit reports in our sample showed that
of the $782,475 questioned L/ and the $546,900 set aside zy
by the auditors, contracting officers attempted, during negotia-
tions, to recover $495,910 from the contractors. The contracting
officers actually recovered $148,512 or 11.2 percent of the
questioned or set aside costs. In most instances, contracting
officers either did not attempt to recover or failed during
negotiations to recover questioned or set aside costs because:
(1) contractors provided the contracting officers documentation
not made available to the auditors; (2) contracting officers
consulted with an on-scene coordinator who stated that they had
approved the cost; (3) contracting officers performed price
analyses to establish a final rate for equipment with a provi-
sional billing rate; or (4) PCMD's legal counsel advised the
contracting officers that under the terms of the contract the
Agency was obligated to pay the costs.
The following paragraphs summarize our findings concerning
contracting officers' resolution of the questioned and set
aside costs.
i_/ Auditors questioned costs they concluded should not be
reimbursed by the government because they were not allow-
able under the provisions of applicable laws, regulations,
policies, cost principles or terms of the contract.
2.X Auditors set aside costs they could not accept without
additional information or evaluations and approvals by
responsible program officials.
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1- MORE COMMUNICATION NEEDED BETWEEN CONTRACTING OFFICERS
AND AUDITORS
Contracting officers accepted $134,789 of questioned and set
aside costs based on additional supporting documentation provided
by the contractor, but not made available to the auditors during
their field work. Although auditors were in the best position
to determine if this information adequately supported questioned
or set aside costs, contracting officers often relied on this
information without obtaining feedback from the auditors on the
adequacy and accuracy of the documentation. Also, contracting
officers ignored cost information provided by the auditors in
arriving at a fair and reasonable price for provisional rate
equipment. Auditors did not, receive 12 of the 18 pre-negotia-
tions memorandums in our sample before final negotiations were
held with the contractor. More communication between contracting
officers and auditors before and during negotiations would have
ensured that contracting officers and auditors agreed on the
resolution of questioned and set aside costs and that contracting
officers entered neg ^iations in the best possible negotiation
position. We are recommending that contracting officers discuss
significant differences between their pre-negotiation position
and the recommendations made by the auditors before they hold
final negotiations with contractors. We are also recommending
that contracting officers obtain feedback from the auditors on
additional supporting documentation provided by the contractor
but not made available to the auditors during their audit field
work.
2. NEGOTIATION MEMORANDUMS NEED TO BE WRITTEN MORE CAREFULLY
AND COMPLETELY
Twelve of the 18 post-negotiation memorandums we reviewed
were either incomplete or contained errors. As a result, the
negotiation memorandums did not adequately document the results
of negotiations. The primary purpose of a negotiation memoran-
dum is to document how the contracting officer determined or
negotiated the final cost of a delivery order or a contract.
These memorandums may be used in cost recovery cases or as a
precedent in future contract negotiations. Therefore, memoran-
dums should be carefully written so that readers can clearly
understand how the final cost was negotiated. Problems with
negotiation memorandums were partly caused by PCMD hurrying to
complete the negotiations for several audit reports before the
end of fiscal 1987. The format for the negotiation memorandums
was also a contributing factor. Consequently, we are recommend-
ing that improvements be made in the format of the negotiation
memorandums and that PCMD's Quality Assurance Staff expand their
annual contract review to include a special review of negotiation
memorandums.
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3. IMPROVEMENTS IN EPA CONTRACTOR'S ACCOUNTING SYSTEM
NOT MADE IN A TIMELY MANNER
•»
The Agency paid one EPA contractor $141,082 for handling, and
general and administrative expenses without assuring that the
amount was fair and reasonable, Auditors questioned or set
aside these costs because the contractor's accounting system
could not support the costs. PCMD was not aggressive in requir-
ing the contractor to improve its accounting system even though
they had been aware of deficiencies in the system since November
1983. Despite these deficiencies PCMD continued to make awards
to the contractor, and as of September 30, 1987, the Agency had
more than $72 million obligated against open contracts with the
contractor. Since the contractor recently made improvements in
its accounting system, we are not making any further recommenda-
tions .
4. CONTRACTORS TOOK ADVANTAGE OF AMBIGUOUS CONTRACT CLAUSES
The Agency paid $42,047 more for labor under ten delivery orders
and one notice to proceed than they would have been required to
pay had the contracts been better worded. Contractors billed
the Agency at labor rates that exceeded the straight time rate
even though they did not pay their employees the overtime or
holiday premium. Auditors questioned the difference between
the premium rate billed to the Agency and the rate paid to the
employees. However, the Agency's legal counsel, in an oral
opinion, stated that since the contract language was ambiguous
the contractors did not have to pay the premiums as a precondi-
tion to billing the Agency at the premium rates. PCMD personnel
told us that since they cannot rec^'e the premium costs, they
are asking contractors to pay the applicable employees and to
submit certifications that employees were paid. , are recommenc-
ing that contracting officers obtain documentation from contractors
to support the certifications.
PCMD COMMENTS AND OIQ EVALUATION
The Director, Procurement and Contracts Management Division
provided formal written comments on our draft audit report in a
memorandum dated June 29, 1988. In addition, an exit conference
was held with the Associate Director for Superfund/RCRA Procure-
ment Operations on July 11, 1988, to discuss the report's
findings and recommendations and PCMD's comments. At the exit
conference, the Associate Director provided additional informa-
tion about actions either already taken or planned to implement
the recommendations contained in the draft audit report. We
have summarized PCMD's position at appropriate locations in the
report and included the complete response as Appendix 1.
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ACTION REQUIRED
In accordance.with EPA Directive 2750, the action official is
required to provide this office a written response to the audit
report within 90 days of tne audit report date.
BACKGROUND
Since passage of the Comprehensive Environmental Response. Com-
pensation, and Liability Act of 1980 (CERCLA), commonly referred
to as Superfund, the Agency has awarded contracts for the cleanup
of hazardous substances at locations throughout the United States.
Many of the Superfund activities were short-term cleanups designed
to alleviate imminent threats to the public health and welfare.
To obtain contractors for these cleanups, the Agency initially
used letter contracts activated by a notice to proceed. The
contract terms were negotiated after the contractor had started
and, in many cases, completed the work.
Beginning in fiscal 1984, contracts were awarded that covered
all short-term cleanup activities in a particular geographic
area. These contracts are referred to as zone contracts.
Contractors were required to furnish the necessary personnel,
materials and equipment at sites specified in delivery orders.
The Agency reimbursed the contractors for the cleanup services
ordered on a time and material basis. For managing the cleanup
activities in the area, the Agency reimbursed the contractors
on a cost-plus-fixed-fee basis.
The Office of Audit has audited costs claimed for notices to
proceed, delivery orders, and management efforts to assist
contracting officers in determining the amount to be paid to
contractors. Specifically, the objectives of these audits were
to determine the allowability of costs claimed; to confirm the
quantities billed; and to determine whether the contractor com-
plied with the terms of the contract. During the period January
1982 through June 1987, the Office of Audit issued 91 reports
covering costs claimed for Superfund work. Of the $52,000,992
claimed by contractors, auditors questioned $4,307,599 (8.3
percent) and set aside $7,790,588 (15 percent). Only 11 of the
91 reports accepted all of the audited costs. As of December 31,
1987, 75 of the 91 audit reports were reported closed in the
Office of Audit's audit tracking and control system. For these
75 reports, the contracting officers recovered $915.740 (10.5
percent) of the $8,717,315 questioned or set aside by the
auditors.
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FINDINGS AND RECOMMENDAT|Q|fJ§
1. MORE COMMUNICATION NEEDED BETWEEN CONTRACTING OFFICERS
AKD AUDITORS
We found that contracting officers did not always consult with
auditors before and during negotiations or use cost information
provided in audit reports. As a result, disagreements existed
between contracting officers and auditors about the resolution
of questioned and set aside costs. Also, contracting officers
had limited assurance that information and supporting documenta-
tion provided by the contractor, but not made available to the
auditors during their field work, were reasonable and accurate.
Some of the disagreements between contracting officers and
auditors could have been resolved if contracting officers had
provided auditors with copies of the pre-negotiation memoran-
dums before final negotiations were held with contractors.
Twelve of the 18 pre-negotiation memorandums in our sample
were not provided to the auditors before final negotiations
were held with the contractors. If the auditors had reviewed
the memorandums, they would have been able to clarify audit
issues. In addition, the auditors would have been able to
provide information on the contractor's accounting system and
overall operations. Thus, contracting officers would have
entered negotiations more knowledgeable and in a better position
to negotiate with the contractor. More communication between
contracting officers and auditors before and during negotiations
could ultimately result in a greater recovery of questioned and
set aside costs.
Contracting officers accepted $134.789 of questioned and set
aside costs based on information and supporting documentation
provided by the contractor, but not made available to the
auditors during their field work. Contracting officers often
relied on this information without receiving assurance from the
auditors that the information was reasonable or accurate. Auditors
could have provided valuable feedback on this information because
they were knowledgeable of the contractors' accounting systems and
why costs were questioned or set aside.
For two audit reports in our sample, E9CT6-05-0273-79007 and
E9CT6-05-0143-79013, auditors provided cost information to
assist the contracting officer in negotiating a fina. cost for
provisional rate equipment. The contracting ^ff.cers arrived
at their negotiation positions using price analysis rather than
the cost information provided by the auditors. Contracting
officers did not document in their negotiation memorandums why
the cost information was not used, even though there was a large
difference between the cost and price information. For example,
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auditors developed an estimated cost of $26.85 per hour for one
piece of equipment. The contracting officers ignored this cost
information and accepted the contractor's provisional rate of
$360 per day based on other contractors price lists that showed
a rate of between $345 and $351 per day. The cost information
provided by the auditors was not used by the contracting officer
in arriving at a fair and reasonable rate for the equipment even
though it was the best information available.
More communication between auditors and contracting officers
before negotiations is needed to ensure that contracting
officers have adequately addressed questioned and set aside
costs in developing their negotiation positions. In addition,
contracting officers should obtain feedback from the auditors
on additional supporting documentation provided by the contractor.
Also, more communication between auditors and contracting officers
would help ensure that contracting officers enter negotiations
with the best information available.
PCMD's COMMENTS AND PIG EVALUATION
In the June 29, 1988, response to the draft report, tr.e Director
agreed that discussions between contracting officers and auditors
at the time pre-negotiation objectives were being established
might be helpful or desirable, but he did not believe that
submission of these objectives to the auditors for review prior
to entering into negotiations was appropriate. The Director
stated that such a review process would be contrary to the
intent of procurement regulations and might cloud or imperil
contracting officer's decision making responsibilities. At the
exit conference, the Associate Director for Superfund/RCRA
Procurement Operations indicated that the Director, PCMD would
issue a memorandum to contracting officers strongly encouraging
them to discuss with the auditors any significant differences
between the contracting officers pre-negotiation position and
the recommendations made by the auditors.
We do not believe that submission of the contracting officer's
pre-negotiation memorandum to the auditors is inappropriate,
nor do we believe that it is contrary to the intent of the
procurement regulations since contracting officers would still
maintain full authority to negotiate with the contractor.
However, PQflD's proposed action does meet the intent of our
recommendation, which was to ensure that disagreements between
contracting officers and auditors were resolved prior to holding
negotiations with contractors. Therefore, we are revising our
recommendation.
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RECOMMENDATIONS
We recommend J.hat the Director. Procurement and Contracts
Management Division -.-r. ~->urage contracting officers to:
-- discuss differences between the contracting officers
pre-negotiation position and the recommendations mad'j
by the auditors, and
~- obtain feedback from the auditors on additional
supporting documentation provided by the contractor
that was net providva to the auditors during their
field work.
2. NEGOTIATION MEMORANDUMS NEED TO BE WRITTEN MORE CAREFULLY
AND COMPLETELY
Twelve of the 18 post-negotiation memorandums we reviewed did not
adequately document the results of negotiations between PCMD
and the contractor. The memorandums contained errors, did not
address all audit issues, or did not explain how the contracting
officer negotiated a final cost. Since these memorandums may
be used in future cost recovery cases or as a precedent in
future contract negotiations, they should contain sufficient
information to completely explain how the contracting officer
negotiated the final cost. Also, since auditors rely on these
memorandums in closing audits and in performing future audit
work, they should be complete and accurate.
The requirements for negotiation memorandums are set forth
in Title 48 CFR l-15.808(a). This regulation requires that
negotiation memorandums include a summary of the reasons for
any pertinent variances from the audit recommendations. It
also requires the memorandum to include significant facts or
considerations controlling the establishment o: the pre-negotia-
tion price objectives and the negotiated price, including an
explanation of any significant differences between the two
positions.
The post-negotiation memorandums we reviewed were difficult to
understand because they contained incomplete information or
errors. The problems with the negotiation memorandums were
partly caused by PCMD hurrying to complete the negotiations for
several audit reports before the end of fiscal 1987. The
format for the negotiation memorandums was also a contributing
factor.
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A. Post-Negotiation Memorandums Contained Errors
Five of the 18 post-negotiation memorandums we reviewed contained
errors. The errors were generally inaccurate mathematical calcula-
tions or transposition errors. Post-negotiation memorandums for
audit reports E9CT6-05-0273-79007 and E9CT5-04-0044-61561 contain
illustrations of the types of errors we found.
The first of these audit reports, E9CT6-05-0273-79007, covered
costs claimed under delivery order 6894-05-030 from contract
68-01-6894. During our review of the post-negotiation memoran-
dum, we fou.-.d the following errors.
1. The "Labor" total under "Negotiated Agreement" from
the summary table, page 4 of the memorandum, does not
include $1,880 for overtime accepted by the contracting
officer.
2. The total credit due the Agency for provisional rate
equipment, shown on page 3 of the post-negotiation
memorandum, should be $857 not $939.
3. The three percent handling charge was incorrectly
calculated. The handling charge should be $15,573
rather than $15,469.
The post-negotiation memorandum associated with audit report
E9CT5-04-0044-61561 contains examples of typographical and
transposition errors. The audit report covered costs claimed
for nine delivery orders under contract 68-01-6859. For delivery
order 6859-04-007, the auditors questioned $4,795 in overtime
claimed by the contractor but not pau to its employees, $6,57C
for travel and subsistence claimed in excess of *'- •? maximum
allowed, and $3,039 for handling charges. The contract specialist
mistakenly picked up $1,058 fo1- the overtime questioned, $6,756
for the travel and subsistence questioned, and $3,037 for the
handling charge questioned. Similar errors were found in the
post-negotiation memorandums for delivery orders 6859-04-034
and 6859-04-035.
B. Negotiation Memorandums Were Incomplete and Disorganized
The negotiation memorandums we reviewed did not adequately
address all audit issues. For three memorandums, we needed to
contact the contracting officer to obtain additional informa-
tion before we could understand how questioned and set aside
costs were resolved. In one instance, the contracting officer
could not explain how he arrived at th3 total negotiated amount
for travel and subsistence. If the contracting officer had
included more detail in the post-negotiation memorandum, he
would have remembered how he had arrived at the negotiated
amount.
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The Office of the Inspector General's Northern Audit Division
has also noted that negotiation memorandums are incomplete.
They requested PCMD to submit a revised memorandum for audit
report E9CT6-05-0143-79013 so that the auditors could close the
audit. PCMD provided the auditors with a supplement to the
post-negotiation memorandum; however, the supplement still did
not explain why some questioned and set aside costs were accepted,
In addition to the negotiation memorandums being incomplete we
found them difficult to follow and analyze because of the irrmat
used. The contracting officer's determination could be located
in as many as four separate sections of the memorandum: the pre-
negotiation narrative, the summary schedule, the price analysis,
and the post-negotiation narrative. PCMD's Quality Assurance
Staff has also found the content and format of negotiation
memorandums to be a problem. However, higher priority projects
have prevented them from working with contracting officers to
develop a more acceptable format.
Thirteen of the 18 negotiation memorandums in our sample were
completed at the end of fiscal 1987. At that time PCMD was
attempting to close out audit reports before the fiscal year
end. Therefore, the memorandums we reviewed may not be repre-
sentative- of all memorandums prepared by PCMD. However, all
memorandums, regardless of when they are prepared, should be
complete and accurate.
CONCLUSION
We found post-negotiation memorandums were incomplete and
contained errors. Since the primary purpose of a negotiation
memorandum is to document how the contracting officer deter-
mined or negotiated the final cost of a delivery order or a
contract, the memorandum should be carefully written so that
readers can clearly understand how the final cost was negoti-
ated. The memorandums we reviewed may, at some time in the
future, be used for cost recovery cases or as a precedent in
contract negotiations. Therefore, the memorandums need to
contain enough information to explain how costs were negotiated.
In addition, they need to be accurate because auditors rely on
the memorandums in closing out audits and in performing future
audits.
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PCMD'a COMMENTS AND QJG EVALUATION
In his memorandum of June 29, 1988, the Director, Procurement
and Contracts Management Division agreed that the negotiation
memorandums were not written as well as they could have been.
He stated that the Emergency Response Branch had definitized a
limited number of delivery orders under the Emergency Response
Program, and PCMD.was attempting to train and sensitize its
staff to recognize issues important to this effort—including
audit issues. At the exit conference, the Associate Director
for Superfund/RCRA Procurement Operations informed us that PCMD
has issued a draft revision tc the Acquisition Handbook. This
revision deals with preparation of negotiation memorandums. We
are pleased to see that PCMD has initiated actions to improve
the quality of negotiation memorandums.
The Director's memorandum also stated that PCMD's Quality
Assurance Staff reviews negotiation memorandums as part of its
annual review process. Although the Quality Assurance Staff's
review does include negotiation memorandums, we believe a special
review emphasizing the area is needed to ensure that the
deficiencies we noted in the memorandums are corrected.
RECOMMENDATIONS
We recommend that the Director, Procurement and Contracts
Management Division:
-- Develop a negotiation memorandum format that will
assist contracting officers in presenting the results
of negotiations in a clear and orderly manner.
-- Expand the Quality Assurance Staff's annual contract
review to include a special review of a sample of
negotiation memorandums. The special review should
concentrate on determining if the negotiation memo-
randums are accurate and clearly explain the rationale
for resolving questioned and set aside costs.
3. IMPROVEMENTS IN EPA CONTRACTOR'S ACCOUNTING SYSTEM
NOT MADE IN A TIMELY MANNER
The Agency paid one contractor $141,082 for handling, and
general and administrative expenses which were questioned or
set aside by auditors in three of the sample avdi~ reports.
Auditors questioned or set aside these costs because the con-
tractor's accounting system could not support them. During
negotiations PCMD's contracting officers accepted these costs.
Considering the auditors' findings concerning these costs, we
question how the contracting officer could have determined that
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the costs were fair and reasonable. Auditors from the Office
of the Inspector General's Northern Audit Division, who per-
formed the audits, reported that they could not determine a
general and administrative expense rate for the contractor
because the contractor's accounting system was not adequate for
determining such a rate. Similarly, the auditors stated they
could not determine a rate for handling charges because the
contractor's accounting system could not identify the costs
associated with the charge.
PCMD received numerous audit reports outlining deficiencies
in the contractor's accounting system. (See Exhibit B for a
list of these audit reports.) However, PCMD continued to
make awards to the contractor even though deficiencies in the
contractor's accounting system were corrected only recently.
For example, as of September 30, 1987, the Agency had three
open contracts with the contractor with obligated funds
totaling more than $72 million.
A. PCMD Was Aware of Deficiencies in the Contractor's
Accpur. r^ng System
PCMD was informed of deficiencies in the contractor's account-
ing system in 1983. In a November 1983 report, the Defense
Contract Audit Agency (DCAA) stated that the contractor
was working with its accounting firm to implement accounting
changes to conform with the indirect expense pools used in
making indirect cost projections. The contractor indicated
that the changes would be implemented for its fiscal year
ending March 31, 1984, if it was awarded a contract. DCAA
recommended that until these changes were made, initial vouchers
be audited prior to payment in order to ensure that accounting
changes had been implemented. PCMD's Washington Cost Advisory
Operations reviewed DCAA's report and had similar conclusions.
In a memorandum dated September 13, 1985, the former Director
of PCMD also acknowledged that after awarding the emergency
response cleanup contracts, PCMD discovered that contractors'
accounting systems did not support the proposed handling charge
rate. However, PCMD decided to leave the handling charge issue
open until it received audit reports providing details on the
contractors' accounting practices. Although PCMD received
numerous audit reports (see Exhibit B) questioning and setting
aside costs based on the contractor's accounting system, the
deficiencies were not corrected in a timely manner. PCMD
personnel told us that they are working with the contractor to
make improvements in the contractor's accounting system. It
appears that the contractor has made improvements in its accoun-
ting system. A financial monitoring review of the contractor,
completed by PCMD on May 6, 1988, did not find any evidence of
significant problems with the contractor's accounting system.
In addition, a recent audit report from the Office of the
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Inspector General stated that, as of March 31, 1987, the contractor'
accounting system was, in general, adequately designed to estimate,
identify and accumulate Federal contract costs. This audit
report (P9AH7-05-0655-81203) was issued by the Northern Audit
Division on June 1, 1968.
B. Examples of Questioned Handling Charges
Our sample included two audit reports which covered costs claimed
by the contractor under contract 68-01-6893. The contractor
billed the Agency $53,663 for handling charges under delivery
order 6893-01-005 and $62.546 for handling charges under delivery
order 6893-01-006. Northern Audit Division auditors questioned
these costs because the contractor's accounting system did not
separately identify handling costs, and it was not clear whether
such costs were removed from the indirect cost pools. PCMD con-
cluded that since the handling rate was lower than the general
and administrative rate, it was more cost effective to accept
the handling charge rather than risk paying the higher general
and administrative rate. However, PCMD had no assurance that
the handling rate was fair and reasonable.
Title 41 CFR l-3.406(a) states "Material handling costs may be
included in the charge for 'material at cost,' to the extent
they are clearly excluded from any factor of the charge computed
against direct labor hours." Since the contractor could not
show it excluded handling costs from its indirect cost pools
nor could it support a handling cost pool, the contracting
officer should not have accepted these costs.
C. Examples of Set Aside General and Administrative
Expenses
The same contractor acted as a subcontractor under contract
68-01-6894. Under three delivery orders from this contract and
contract 68-01-6893, the contractor charged $24,568 for general
and administrative expenses related to travel expenses and
security services. Both contracts allowed general and admini-
strative expenses, if applicable, to be included in travel
claims. However, Northern Audit Division auditors set aside
these costs because the contractor's accounting system was not
adequate for determining a general and administrative expense
rate.
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Title 41 CFR 1-15.201-1 states "The total cost of a contract is
the sum of the allowable direct and indirect costs allocable to
the contract,mincurred or to be incurred . . . ." Since the
contractor's accounting system cannot support a general and
administrative expense rate, the Agency cannot be sure the
contractor properly allocated the general and administrative
costs it claimed.
PCMD's COMMENTS AND PIG EVALUATION
In his response, the Director, Procurement and Contracts
Management revision stated that PCMD has for some time been
aware of deficiencies in contractors' accounting systems. He
also stated that PCMD believes that they have made considerable
progress in requiring contractors to correct these deficiencies.
In July 1987, a Financial Analysis Section was created within
PCMD. The responsibilities of this section include performing
limited reviews of the billing and accounting processes under
individual contracts.
The Director agreed that there had been problems associated
with handling charges. Since the contracts allowed handling
charges, it was necessary to negotiate charges with the
contractors. However, handling charges have been eliminated
entirely from subsequent contracts which provide for
reimbursement of indirect costs in accordance with individual
contractors' accounting systems.
We believe that the necessary improvements have been made to the
contractor's accounting system. Therefore, we are making no
further recommendations.
4. CONTRACTORS TOOK ADVANTAGE OF AMBIGUOUS CONTRACT CLAUSLS
Three of the five contractors in our audit sample billed the
Agency at labor rates exceeding i^e straight time rate even
though they did not pay their employees the overtime, Sunday or
holiday premium (overtime premium). The contractors contended
that the contract provisions did not require them to pay the
premiums in order to bill the Agency at the premium rates. The
auditors questioned the difference between the premium rate
billed ^o the Agency and the rate paid to the employees. They
questioned this amount based on the premise that costs must be
incurred in order to be allowable. However, the Agency's legal
counsel concluded that the contract language was ambiguous and
the contractors did not have to pay their employees the premiums
as a precondition to billing the Agency at the premium rates.
As a result, the Agency paid $42,047 more for labor than it
would have been required to pay, had the contract provision
been more carefully worded.
14
-------
EPA contractors would not have been able to charge the Agency
for costs not incurred, if PCMD had taken more care in writing
and negotiating the clause that deals with overtime premiums.
Title 48 CFR'1.602-2 r^^-'.ir^z contracting officers to safeguard
the government's interests, i.^ contractual agreements.
Auditors questioned the
1-15.201-1 which states
allowable costs allocabl
to be incurred", The au
their position based on
the former Director of '?
for Audit. The mcrmorand
subcontractors are not p
their labor costs have n
more than straight time
overtime premium based on Title 41 CFR
that, the cost of a contract is the
•= t •„' the contract that are "incurre: ,r
ditors believed PCMD would support
.j September 13, 198t>, memorandum from
CMI> tu the Assistant Inspector General
um stated; "If the contractor or his
ayir.a- their employees premium pay, then
ot changed and they should not be allowed
fixed rates."
We found that PCMD did not negotiate questioned overtime premium
costs based on the September 13, 1985, memorandum. Rather,
FCMD discussed this issue with its legal counsel. PCMD's legal
counsel provided an oral opinion stating that based on the
contract language, the Agency was obligated to pay the overtime
premium for all overtime hours worked and claimed. The pertinent
contract clause stated "... After eight hours of work, overtime
premium shall apply. Thus, the contract language did not require
contractors to reimburse their employees an overtime premium as
•a precondition to billing the Agency the overtime premium rate.
PCMD recognized the problem and modified zone contracts to more
clearly state the Agency's position on payment of overtime
premiums. For the three zone contracts covered by our sample
{68-01-6894, 68-01-6893, and 68-01-6859), the modifications were
issued January through July 1986. In addition, we were told
that future emergency response cleanup contracts would require
that employees be paid premium rates before the Agency would
reimburse the contractor at the premium rate. According to the
contracting officer, the modifications are not retroactive and
the overtime premiums incurred before the modifications were
issued cannot be recovered. PCMD personnel told us that since
they cannot recover the premium costs, they are asking the
contractors to pay the applicable employees and to submit certi-
fications that employees were paid.
FCMD's COMMENTS AND 01(3 EVALUATION
In his response to the draft report, the Director stated that
PCMD had made substantial improvements in contract language
since the first generation cleanup contracts. The second
generation contracts as well as the Regional contracts contain
Ib
-------
a requirement that the contractors actually pay their employees
overtime premiums before submitting a claim for reimbursement.
These contracts also require that the contractors maintain
records to track and support the costs. We agree that these
improvements should prevent contractors form being able to
recover overtime premiums from the Agency, if the premiums were
not paid to the employees.
We recommended in the draft report that PCMD's contracting
officers obtain documentation from contractors to support
certifications that employees were paid overtime premiums
before they accept the costs for the overtime premiums. At the
exit conference, the Associate Director for Superfund/RCRA
Procurement Operations expressed concern about getting supporting
documentation for all the certifications. She agreed that the
contracting officers should obtain documentation to support a
sample of the certifications made by each contractor. We believe
that this is an acceptable means of ensuring that contractors
who certified that they had paid their employees overtime actually
did make the payments.
RECOMMENDATION
We recommend that the Director, Procurement and Contracts Manage-
ment Division require contracting officers obtain documentation
to support a sample of the certifications made by each contractor
that employees were paid overtime premiums before they accept
the costs for the overtime premiums.
16
-------
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-------
APPENDIX 1
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20400
JUN 29
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MEMORANDUM
SUBJECT: Draft Audit Report E5EH7-11-0043, Resolution of
Super fund Contract Audit Reports
FROM: David J. O'Connor, Di
Procurement and Contracts
Management Division (PM-214F)
TO: Kenneth D. Hockman
Divisional Inspector General for Audit
Internal Audit Division (a-109)
Thank you for the opportunity to comment on the subject
report. The specific comments below are arranged to
parallel the findings and recommendations set forth in the
subject draft report.
1. MORE COMMUNICATION
AND AUDITORS
NEEDED BETWEEN CONTRACTING OFFICERS
We agree that more communication between contracting
officers and auditors is needed. We will make a concerted
effort improve this communication in the future.
By regulation, contracting officers are assigned final
accountability -for the contracts they place to fulfill the
Agency's Removal Program mission. The contracting officer
"•» the obligation and ultimate responsibility to determine
fair *nd reasonable pricing. The audit report is one of
many tools available to him to fulfill this duty. He must
exercise business judgement, And weigh all other information
available to him before making a final determination.
While discussion with auditors at the time
prenegotiation objectives are being established may be
helpful or desirable, we do not believe that submission
of
20
-------
these objectives to the auditors -for review prior to
entering into negotiations is appropriate. In o'jr
judgement, the proposed review process would b« contrary to
the intent of procurement regulations. Communication does
not necessarily assure that there will be agreement between
the contracting o-f-ficer and auditor. Creation o-f a review
procedure might cloud or imperil contracting of-ficer
decision making responsibilities.
2. NEGOTIATION MEMORANDA NEED TO BE WRITTEN HQRE
CAREFULLY AND COMPLETELY
Our Polic:/ en in the
first generation ERCS as a result of the 1C -eports. Since
the contracts allowed handling charges, it was necessary to
negotiate changes with the contractors. Handling charges
were eliminated entirely from subsequent contracts which
provided for reimbursement of indirect costs in ac.-or dance
with individual contractor's accounting ^-sterns.
21
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4. CONTRACTORS TQQK ADVANTAGE DF AMBIGUOUS CONTRACT CLAUSES
The reference to ambiguous contract clauses pertains to
the absence of an express requirement in the first
generation ERCS contract requiring that contractor's
actually pay overtime premiums as a prerequisite to billing
EPA at the fi::ed overtime rates in the contract. We have
made substantial improvements in contract language since the
•first generation ERCS contracts. The second generation ERCS
contracts as well as the Regional ERCS contracts contain a
requirement that the contractors actually pay their
employees overtime premium before submitting a claim for
reimbursement. These contracts also require that the
contractors maintain records to track and support the costs.
Me look forward to continued cooperation b=>*t»"=en our
two groups.
22
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APFENLIX i
DISTRIBUTION
Action Cifi:.al Director, Procurement'
and Contracts Management Division (PM-214F) 3
Director, Office of Administration (PM-217) 1
Assistant Administrator for Administration
and Resources Management (PM-208) 1
Agency Followup Official: Director, Resource
Management Division (FM-225) 1
23
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
NOV2I 1988
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
SUBJECT:
FROM:
TO:
Audit Report E5EH7-11-0043-81554 , Resolution of
Superfund Contract Audit Reports
David J. O'Connor, Director
Procurement and Contracts
Management Division (PM214-F)
d Q ' 0 '£
a
/
Kenneth D. Hockman
Divisional Inspector General for Audit
Internal Audit Division (A-109)
The following supplemental information is furnished in
support of our response to the subject audit. The numbers below
correspond to the numbers in our response.
1. MORE COMMUNICATION NEEDED BETWEEN CONTRACTING OFFICERS AND
AUDITORS
Attachment 1 is a copy of the memo issued to Contracting
Officers encouraging them to send the auditors copies of
prenegotiation objectives, to discuss with the auditors any
significant differences between the contracting officer's
position and the recommendations made by the auditors, and to
obtain feedback from the auditors on additional supporting
documentation provided by the contractors but not made available
to the auditors during their audit field work.
2. NEGOTIATION MEMORANDA NEED TO BE WRITTEN MORE CAREFULLY AND
COMPLETELY
Attachment 2 is a copy of the revision to the Acquisition
Handbook which implements the use of the new formats for
prenegotiation objectives and summaries of negotiations.
-------
Annual reviews by the Quality Assurance Staff of major
contracting operations will include a sampling of contracts under
which final audits have been performed. Prenegotiation
objectives and summaries of negotiations using the new formats
will be included in the review. If major deficiencies are found,
and it is determined that a special review may be required, such
review will be initiated.
4. CONTRACTORS TOOK ADVANTAGE OF AMBIGDOOS CONTRACT CLADSES
All delivery orders under the 1st Generation EFCS contracts
require definitization. This effort is currently underway. In
negotiating final costs under these delivery orders where
significant amounts of overtime are involved, supporting
documentation of actual payment will be required. Attachment 3
is a copy of the memo issued to contracting officers requiring
certifications and supporting documentation.
Attachments
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Attachment 1
Page 1 of 12
MEMORANDUM
SUBJECT:
FROM:
Revised Unit Three of tne Acquisition Handboox,
"fiegotiation Procedures"
David J. O'Connor, Directqjfcvid J- O'Connc*
Procurement and Contracts Management Division
TO: Associate Directors
PMSS Staff Director
PCMD Brancn and Staff Chiefs
Douglas Richmond, RTF
William Bailey, CINN
Richard Feldman, OGC
Regional Contracting Officers
Attached for your information and compliance is a revised
Unit Three of the Acquisition Handbook, "Negotiation Procedures.1
The revised unit distinguishes more clearly between
prenegotiation and postnegotiation activities. Separate
requirements and documentation are now prescribed for tne
prenegotiation plan and the postnegotiation summary. Addi-
tionally, responsibilities associated with the negotiation
procedures are better defined in the revised unit. Th« unit
incorporates comments received on tne draft version previously
submitted for your review.
The revised unit results from an inspector General report
that recommended improvements in documenting tne results of
negotiations.
Separata distribution of the unit is being made,to members
of your staff. Zf you need further information, please contact
Joe Nemargut at 475-9790.
Attachment
PM214?:Nemargut:9/8/88:Di3k Nemargut Lexitype item 66
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Attachment 1
Page 2 of 12
ACQUISITION HANDBOOK - TRANSMITTAL NO. 25
1. PURPOSE; This transmittal revises Unit Three, "Negotiation
Procedures" to the Handbook.
2. EFFECTIVE DATE; Upon receipt.
3. EXPLANATION; Unit Three has been revised to distinguish
more clearly the procedures and documentation for pcene-
gotiation and postnegotiation activities.
4. FILING; File this'transmittal in the back of the
Acquisition Handbook.
REMOVE
Page (i), Contents
Unit Three in its entirety,
INSERT
Page (i), Contents
Unit Three in its entirety,
JO,
Date
David J.
-------
0. S. ENVIRONMENTAL PROTECTION AGENCY
ACQUISITION HANDBOOK
»
CONTENTS
Attachment 1
Page 3 of 12
SOLICITATION/CONTRACT FORMAT AND LANGUAGE
Volume I - Builders Checklists
Volume II - Clauses and Provisions
Volume III - Blanket Purchase Agreement
QUICK CLOSEOUT PROCEDURES
NEGOTIATION PROCEDURES*
COST ADVISORY FUNCTIONS
REVIEWS, CONCURRENCES, AND APPROVALS
ANNOUNCEMENT OF CONTRACT AWARD
PROTESTS AGAINST AWARD
SMALL PURCHASES—DATA MANAGEMENT
1. PURCHASE ORDER NUMBERING SYSTEM
2. STANDARD PROCUREMENT LEADTIME
INDIRECT COST RATE AGREEMENT
CONTRACT FUNDING CITATIONS
INDEX OF EPA FORMS
EQUAL EMPLOYMENT OPPORTUNITY CLEARANCE PROCEDURES
DEOBLIGATION AND RBCCRTIFICATION OF CONTRACT FUNDS
CONTRACT ADMINISTRATION
ACQUISITION CAREER MANAGEMENT PROGRAM
SERVICE CONTRACT ACT DIRECTORY OF OCCUPATIONS
CONTRACT MANAGEMENT REPORTING REQUIREMENTS
APDS RELATED CHANGE PROCEDURES
ADP PROCUREMENT AUTHORITY
Unit Number
(See Unit One)
TWO
THREE
FOUR
FIVE
SIX
SEVEN
EIGHT
NINE
TEN
ELEVEN
TWELVE
THIRTEEN
FOURTEEN
FIFTEEN
SIXTEEN
SEVENTEEN
EIGHTEEN
NINETEEN
TN-25
(i)
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Attachment 1
Page 4 of 12
UNIT THREE
NEGOTIATION PROCEDURES
A. The following negotiation procedures apply to all negoti-
ated acquisitions over $25,000. (For fixed-price acquisitions
for supplies, see B. below).
1. Preliminary Review. After receipt of proposals submitted
in response to an RFP, the contract specialist, cost analyst,
Contracting Officer, or Business Evaluation Panel shall perform
a review of the proposals to determine whether each offerer
has followed the RFP directions for preparing business proposals.
The review of the cost proposal should include a review of the
number of hours, labor categories, and other direct costs.
»
2. Performance of Cost or Price Analysis. On procurements
of $500,000 or less, the Contracting Officer is authorized to
perform the cost or price analysis. If the action is over
3500,000, the Contracting Officer shall forward the proposals
to the local cost advisory operations unless information
available to the Contracting Officer is adequate to determine
the reasonableness of the proposed cost or price. The cost
advisory operations shall either request audits on the proposals,
perform an appropriate audit, or recommend to the Contracting
Officer that audit be waived because data is available through
other means to perform a detailed analysis in-house. Termi-
nation settlement proposals shall be referred for audit when
the proposal exceeds $25,000 (see FAR 49.107).
3. Prenegotiation Plan. Based on the results of the technical
evaluation, a review of the proposals, and either audits or
cost advisory reports, the contract specialist shall prepare
a prenegotiation plan for inclusion in the contract file
using the format in Attachment 1. The plan shall address the
planned disposition of all questioned and set-aside costs
resulting from an audit. If a firm is selected for award
without negotiations, the contract specialist shall document
the price or cost analysis that was performed and state the
exception in FAR 15.610 that authorizes an award without
discussions.
EPAAR 1515.610-70(b) authorizes the Contracting Officer,
instead of full cost and technical negotiations with all
firms in the competitive range, to conduct limited cost/full
technical discussions with firms in the competitive range,
and final in-depth negotiations with one or more firm(s)
still within the competitive range after evaluation of revised
proposals. Use of Attachment 1 is not required prior to
limited cost/full technical discussions.
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Attachment 1
Page 5 of 12
-2-
The Chief of the Contracting office nay 'issue procedures
that do not require a formal prenegotiation plan in accordance
with Attachment 1. The procedures shall require as a minimum
that the contract specialist discuss all significant objectives
with the Contracting Officer or applicable branch chief or
section head prior to initiating negotiations. The contract
specialist shall document the contract file as to the results
and date of the discussion.
4. Postnegotiation Summary. At the conclusion of each nego-
tiation, the contract specialist shall promptly prepare a
summary of the principal elements of the negotiation, using
the Postnegotiation Summary format (Attachment 2). The
summary shall address ,the disposition of all questioned and
set-aside costs resulting from an audit. The memorandum
shall be included in the contract file.
5. Approvals. The Contracting Officer shall approve the
prenegotiation plan prior to the start of negotiations. The
Contracting Officer shall approve the postnegotiation summary
prior to submitting the proposed contract award for review.
6. Distribution. The contract specialist shall provide the
cost advisory group with a copy of the postnegotiation summary
for each offeror who was audited. After completion of the
negotiations, the cost advisory group shall distribute a copy
of the postnegotiation summary to both the EPA Audit Division
and the office performing the audit. The cost advisory group
shall provide the Contracting Officer with a record of the
transmittal for insertion into the official contract file.
7. postaward Audits. The Contracting Officer is responsible
for notifying the appropriate EPA Audit Division on the dis-
position of the final audit report. If desired, the Chief of
the Contracting Office may delegate this responsibility to
the cost advisory group. If the final audit report makes no
recommendations, no response is necessary.
B. The following procedures apply to fixed-price acquisitions
for supplies.
The contract specialist shall follow the procedures in
paragraphs 1 through 5 above, except for the following:
1. The preliminary review of proposals will not include a
review of the number of hours, labor categories, and other
direct costs.
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Attachment 1
Page 6 of 12
-3-
2. The contract specialist need not prepare the prenegotia-
tion position and the postnegotiation abstract in accordance
with the formats prescribed in Attachments 1 and 2. The
Contracting Officer shall ensure that the prenegotiation
position and the postnegotiation abstract explain and support
all significant negotiation objectives, and the results
achieved in negotiations.
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Attachment 1
Page 7 of 12
PRENEGOTIATION PLAN
1,
2,
3,
4.
5,
6.
7,
8.
11.
12.
13.
14.
RFP f:
Date Issued:
Date Closed:
Brief description of work:
Explanation of why sealed bidding was not used:
Proposed type of contract: _____
Period of performance/delivery schedule (list option periods
separately):
Amount of funds available:
Date synopsized in CBD: _
., or exception:.
Procurement set-aside (small business, labor surplus area,
8 (a)):
Number of firms solicited:
No. responding:
Late proposals and disposition:
Name of firms in competitive range:
Clearances required/obtained: _____
Unique features of acquisition:
Technical Evaluation Reports (title and date):
15. Narrative: (Include a brief discussion of each element of
cost for each proposal using the prenegotiation position
form. The discussion shall explain and support the Govern-
ment's prenegotiation objectives, including the proposed
resolution of any questioned costs or costs set-aside in
an audit. The CO/specialist shall attach a copy of the
profit/fee objective using EPA Form 1900-2 with a brief
description of the weights assigned.)
16. Other objectives: (Discuss any special provisions, such as
cost-sharing, data rights, deviations to contract clauses,
any provisions challenged by the offeror, technical discus-
sions, etc.)
17. Socioeconomic Requirements: (Discuss whether incentives or
subcontracting goals are involved.)
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Attachment 1
Page 8 of 12
18. Subcontracts: (Discuss any anticipated subcontractor
problems and any special subcontract provisions.)
19. Government-furnished property: { Is property to be
authorized in the contract? Here proper justifications
prepared?)
20. Method of Payment: (progress payments, letter of credit
advance payment, incremental funding, pre-contract costs
authorized.)
21. Summary of audit reports received:
Name of
Offeror
Audit
Report No.
Name/Address
of Audit Office
Questioned/
Set-Aside Costs
Remarks
22. Other information:
Prepared by:
Signature:
Date:
Approval:
Signature:
Date:
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Attachment 1
Page 9 of 12
PRENEGOTIATION POSITION
Offerer
A. Base Period
1.
2.
3.
4.
5.
6.
7.
8.
9.
1.
2.
3.
4.
5.
6.
7.
8.
9.
C.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Cost Element
Proposed Objective
Narrative (may be set
forth in footnotes}
Subtotal
Fee/Profit
Total
B. Option Period 1
Cost Element
Proposed Objective Narrative
Subtotal
Fee/Profit
Total
Option Period 2
Cost Element
Proposed Objective Narrative
Subtotal
Fee/Profit
Total
D. Total (maximum contract all options)
1. Total Est. Cost
2. Fee/Profit
3. Total Including
Fee/Profit
(NOTE: a separate sheet is required for each offerer in the
competitive range)
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1,
2,
3,
4,
5.
POSTNEGOTIATION SUMMARY
Name of Offerer:
RFP Number:
Date of Negotiation: Opened:
Purpose of Negotiation:
Attachment 1
Page 10 of 12
Closed:
Name, position and organization of government employees
involved in negotiation:
Name, position and organization of contractor employees
involved in negotiation:
Status of contractor's purchasing system (if applicable)
8. Was certified cost or pricing data required?
If yes, date certified as accurate, complete, andcurrent;
if no, refer to attached waiver:
10
11
12
9. Was this data relied on in negotiating cost/price?
If not, why not?
Did members of Congress, other agencies or higher level
officials, not normally involved in the award and review
process have significant effect on this action?
If yes, explain.
Basis for determining the profit or fee if different from
the prenegotiation objective: ^_____„__
Are subcontracts/consultants to be approved in the contract
document? If yes, list subcontractors/consultants:
13. Was subcontractor certified price data received (cite waiver
if applicable}:
14. Best and Final Offer received?
Date:
Explain any variance from negotiated agreements:
15. Have all required representations and certifications been
completed?
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16.
17,
18,
Attachment 1
Page 11 of 12
Narrative: (Include a discussion for each cost element
where the final agreed to cost element differs from the
Government's prenegotiation objective. The discussion
shall provide a thorough rationale for arriving at the
negotiated amount.)
Technical negotiations: (Include a discussion of any
technical negotiations held.)
Name of selected offerer:
SELECTED OFFEROR ONLY
19. Is offerer debarred, ineligible or suspended?
20.
Has the Equal Employment Opportunity program been
approved?
21,
Does the offerer meet the responsibility standards of
FAR Subpart 9.1?
22. Other information:
Prepared by:
Signature:
Date:
Approval:
Signature:
Date:
-....: .-.i^L '.' .. : •. \-f
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Attachment 1
Page 12 of 12
POSTNEGOTIATION ABSTRACT
Offerer
A. Base Period
Cost Element
1.
2.
3.
4.
5.
6.
7.
8.
9.
B.
1.
1.
2.
3.
4.
5.
6.
7.
8.
9.
D.
1.
2.
3.
Proposed Objective Negotiated
Narrative (.a
be set forth
in footnotes)
Subtotal
Fee/Profit
Total
Option Period 1
Cost Element
Proposed Objective Negotiated Narrative
2.
3.
4.
5.
6.
7.
8.
9.
C.
Subtotal
Fee/Profit
Total
Option Period
2
Cost Element
Proposed Objective Negotiated Narrative
subtota
Fee/Profit
Total
Total (maximum contract -all options)
Total Est. Cost
Fee/Profit
Total Including
Fee/Profit
(NOTE: a separate sheet is required for each offeror in the
competitive range)
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Attachment 2
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
NQV2I see
OFFICE OF
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MRMQRAMDOM
SOBJBCT: Discussion of Prenegotiation Objectives with
Auditors
FROM: David J. O'Connor, Director
Procurement and Contracts Management Division
TO: PCMD Staff
Several recent IG Audit reports have criticized EPA for
lack of communication between auditors and contracting
officers. We have committed to making a concerted effort to
improve this communication.
Contracting Officers (C.O.e) are strongly encouraged
where an audit has been performed and time permits, to send
the auditors a copy of the prenegotiation objectives.
C.O.c are also encouraged to discuss with the auditors
any significant differences between the C.O.'s
prenegotiation position and the recommendations made.by the
auditors. When supporting documentation is provided by the
contractor but not Bade available to the auditors during
their audit field work, C.O.s are encouraged to obtain
feedback fro* the auditors.
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Attachment 3
Page 1 of 2
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C. 20460
NOV2I 1968
OFFICE OP
ADMINISTRATION
AND RESOURCES
MANAGEMENT
MKHOBAMPOM
SOBJBCT: Definitization of let Generation ERCS Delivery
FROM:
TO: Emergency Response Branch
alyanne
Superfund/
rper, Aasocat
RA Frocuremen
rector
perations
As part of the resolution of the recent Superfund
Contract Audit Report, we agreed to attempt to obtain
certifications from 1st generation ERCS contractors that
overtime billed under the contracts was actually paid to the
contractor's employees. We also agreed to obtain
documentation on actual payment of overtime on a sampling of
the certifications.
Attached is a sample certification which should be
included as supporting documentation to the summaries of
negotiations for definitizatlon of ERCS 1st generation
delivery orders. Documentation on actual payment of'
overtime should be obtained from the contractor where
significant amounts of overtime are involved. If you are
unable to obtain the certification or supporting
documentation, this should be addressed in the summary of
negotiations.
-------
Attachment 3
Page 2 of 2
Certification of Overtime Payment
I hereby certify that all overtime billed to the
Government under Delivery Order No.
has
been paid to individual employees working under the
delivery order.
Signature:
Date:
Typed Name:
Title:
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