Office of Inspector General
Special Report
THE NATIONAL ENFORCEMENT
INVESTIGATIONS CENTER COULD IMPROVE
LITIGATION SUPPORT SERVICES
ADMINISTRATION
E1SFG6-08-0024-7400004
October 29,1996
EPA
350/
1996.11
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Inspector General Division
Conducting die Audit:
Central Audit Division
Kansas City, Kansas
Program Offices involved:
National Enforcement
Investigations Center
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
CENTRAL AUDIT DIVISION
726 MINNESOTA AVENUE
KANSAS CITY. KANSAS 66101
913-551-7878
FAX: 912-551-7837
October 29, 1996
BRANCH OFFICES
144= ROSS AXEN.'E SJ'E'2-OC
FAX 2.-i-6£5-^5S5
999 16T1- STR5E* SJ "£ 50C
DENVER. C3-ORADC 80JTCr-24C5
30?-?'2-6672
FAX 303-312-6063
MEMORANDUM
SUBJECT:
FROM:
The National Enforcement
Investigations Center Could Improve
Litigation Support Services Administration
Report Number El SFG6-08-0024-7400004
Bennie S. Salem
Divisional Inspector General
for Audit
TO:
Dianna Love
Director, National Enforcement Investigations Center
We have completed our survey of the National Enforcement Investigations Center's
(NEIC) litigation support services. Although NEIC's administration of litigation support
services was generally good, NEIC had not fully documented its decision to use the
Department of Justice Interagency Agreement. NEIC should periodically assess the need for a
contractor representative in each region, prepare independent Government estimates apart
from contractor input, and ensure the Department of Justice's contractor is not unnecessarily
paying taxes on procured goods.
ACTION REQUIRED
In accordance with Environmental Protection Agency (EPA) Order 2750, you, as the
action official, are required to provide us a written response to this special report within 90
days. For corrective actions planned but not yet completed by the response date, reference to
specific milestone dates will assist us in deciding whether to close this report.
This special report contains findings that describe problems the Office of Inspector
General (OIG) has identified. The special report represents the opinion of OIG. Final
determinations on matters in this special report will be made by EPA managers in accordance
with established EPA audit resolution procedures. Accordingly, the findings described in this
special report do not necessarily represent the final EPA position.
RECYCLE/*
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We have no objections to the release of this report to the public. Thank you for the
courtesy and assistance that you and your staff provided our auditors. Should you or your
staff have any questions, please contact me at (913) 551-7831 or Jeff Hart, Audit Manager in
our Denver office, at (303) 312-6872.
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EXECUTIVE SUMMARY
BACKGROUND
The National Enforcement Investigations Center (NEIC) provides
enforcement and investigative support services for complex and
nationally significant enforcement and investigative cases. As
part of its mission, NEIC obtains litigation support for the
Environmental Protection Agency (EPA) through an Interagency
Agreement (IAG) with the Department of Justice (Justice). NEIC
had about 130 staff in fiscal 1995 and operated on a budget of
$16.5 million. NEIC was recently placed under the Office of
Enforcement and Compliance's Office of Criminal Enforcement,
Forensics, and Training. Our general survey objective was to
assess the adequacy of NEIC's overall management of litigation
support services.
WE FOUND THAT
Although the Director did not sign the fiscal 1995 Federal
Managers' Financial Integrity Act assurance letter, NEIC's
administration of litigation support services was generally good.
Its case managers were actively involved in the management and
performance of work assignments and maintained project files.
However, NEIC did not fully document its decision and rationale
for using an IAG and did not prepare independent Government
estimates apart from contractor input. It should continue to assess
the need for contractor personnel in each EPA region. Finally,
NEIC may have unnecessarily paid taxes on goods purchased by
the Justice contractor.
WE RECOMMENDED
THAT
The NEIC Director should fully document the decision and cost
effectiveness for using an IAG and show how it was in the best
interest of the Government. The Director should require case
managers to develop independent Government estimates apart
from contractor input. The Director should continue to evaluate
the cost effectiveness of having a contractor employee in each
region and have Justice adjust staffing levels where appropriate.
Also, the Director should ensure that Justice's contracting officer
has provided tax exemption certificates to the contractor.
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TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY i
PURPOSE 1
BACKGROUND 1
SCOPE AND METHODOLOGY 2
PRIOR AUDIT COVERAGE 3
RESULTS OF REVIEW 3
CONCLUSIONS 9
RECOMMENDATIONS 9
APPENDICES
APPENDIX I ABBREVIATIONS 10
APPENDIX II DISTRIBUTION 11
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PURPOSE
Our general survey objectives were to understand the National
Enforcement Investigations Center's (NEIC) mission and its role in
providing litigation support services. Our specific objectives were
to assess the adequacy of litigation support services contract
administration, determine the reasonableness of litigation support
costs, and assess the impact of litigation support services provided
by other Environmental Protection Agency (EPA) contracts.
BACKGROUND
NEIC provides enforcement and investigative support services
under the supervision of the Office of Criminal Enforcement,
Forensics, and Training, a division of the Office of Enforcement
and Compliance Assurance (OECA). It provides technical
expertise for field investigations, technical and regulatory analysis,
forensic laboratory analysis, information services (including
facility profiles, corporate compliance assessments, and Superfund
financial assessments), and litigation support services. Litigation
support services include organizing documents, creating document
management systems, labeling documents, and performing
transactional history analyses.
NEIC obtains litigation support services through a Department of
Justice (Justice) Interagency Agreement (IAG). The IAG provides
NEIC access to Justice's contractor staff. Twenty contractor staff
work exclusively on EPA litigation support cases. Ten contractor
employees are located at the Denver Federal Center in Lakewood,
Colorado, and 1 employee is located in each of EPA's 10 regional
offices. All work assignments and contract changes are issued by
Justice's contracting officer (CO).
NEIC's fiscal 1995 budget included 130 staff and $16.5 million.
Its work supported all areas of EPA programs. NEIC conducted
much of its work through the use of contractors and lAGs that
allowed it to use other agencies' contractors. NEIC's litigation
support service contract obligations for fiscal 1994 totaled about
$5.5 million; fiscal 1995 totaled just over $1 million. Much of the
decline can be attributed to the replacement of NEIC's previous
contractor with the Justice IAG and a reduction in services
provided.
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SCOPE AND
METHODOLOGY
We performed survey work at NEIC in Lakewood, Colorado;
Region 8 in Denver, Colorado; Region 7 in Kansas City, Kansas;
and OECA and the Office of Acquisition Management (OAM)
within the Office of Administration and Resources Management in
Washington, D.C., from February 1996 through August 1996.
To assess the adequacy of litigation support services
administration, we interviewed NEIC's project officer and case
managers. We interviewed work assignment managers (WAM)
and the Justice contractor's employees in Regions 7 and 8 and at
NEIC. We interviewed OECA and OAM contracting officials in
Washington to discuss the services obtained under the Justice IAG.
To test internal controls, we reviewed NEIC litigation support
project files, NEIC's project tracking system, and case files. We
also reviewed contractor time charges to determine the amount of
administrative time the contractor charged to NEIC. We reviewed
management system documentation for NEIC's new organization.
To determine the cost reasonableness of litigation support services,
we met with other potential customers of litigation support services
and compared the cost of services provided by NEIC to the cost of
similar services provided through other contracts.
To identify other sources of litigation support services, we sent a
questionnaire to EPA regional offices. We were unable to fully
assess the relationship of other litigation support vehicles to that of
the NEIC IAG.
We designed our survey to identify potential weaknesses in
NEIC's litigation support services program. Our survey was more
limited in scope than an audit and, as such, did not necessarily
comply with all Government Auditing Standards. We performed
our review in accordance with the provisions of Office of Inspector
General (OIG) Manual Chapter 150, Reports of Review. Other
than the issues discussed below, no other significant issues came to
our attention that warranted expanding the scope of our review.
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PRIOR AUDIT
COVERAGE
A March 1995 OIG audit report, Interagency Agreements: Off-
Loading at EPA Headquarters, reported that EPA had not
adequately considered costs in determining when to use Economy
Act lAGs rather than its own procurement process. The audit
found that cost comparisons would ensure that program offices
focus on cost reasonableness, not just convenience. The use of
lAGs in lieu of contracts would result in the loss to EPA of the
benefits of its own competition. Justifications based solely on
convenience would not be able to stand up to congressional or
public scrutiny. Without obtaining cost reasonableness
information prior to executing lAGs, EPA could not demonstrate
that it had spent its limited resources in the most economical way
possible.
A September 1995, OIG audit report, EPA's Acquisition of
Analytical Support, reported EPA had not planned an overall
analytical support services contracting strategy. Federal
Acquisition Regulations require agencies to perform advance
planning to develop item descriptions and performance
requirements, conduct market research, and consider Government
versus contractor performance when planning major acquisitions.
The audit found EPA did not sufficiently evaluate its acquisition
history to define its requirements. The report stated that analysis
of EPA uses of analytical services should provide a better base for
decisions and allow EPA to obtain products and services fairly and
economically.
RESULTS OF REVIEW
NEIC's Administration of
Litigation Support Services
Was Generally Good
NEIC's administration of litigation support services was generally
good. NEIC case managers were actively involved in the
management of work assignments. Case managers worked with
regional WAMs from the initiation of a project. They helped
define work tasks and ensure tasks were appropriate for inclusion
under the Justice IAG. They reviewed cost estimates, worked
with the requestor to ensure they were satisfied with the cost of
the service to be performed, and negotiated a cost that was
acceptable to NEIC and the contractor.
NEIC case managers were also very involved in the performance
of each work assignment. They monitored progress through
weekly status reports and periodic discussions with WAMs and
contractor representatives. They also monitored project cost and
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compared expenditures to work progress to determine if the work
would be completed within estimated costs. Case managers
worked with the Justice CO technical representative to increase or
decrease work assignment budgets as appropriate.
Case managers maintained project files. Prior to February 1,
1996, file contents were inconsistent. However, NEIC recently
published Litigation Information Technology Support (LITS)
Project Documentation Guidelines, dated October 1995, that, if
followed, should improve file contents. For example, some files
generated prior to February 1,1996, the effective date of the
guidelines, did not contain project closeout letters. The guidelines
defined the purpose, audience, and contents for both
administrative and system documentation requirements.
Beginning February 1, 1996, the guidelines required that the
contractor write a project closeout letter 30 days after project
completion. The closeout letter certifies that all work assignment
tasks were completed and become part of NEIC's cost recovery
documentation.
According to the Federal Managers' Financial Integrity Act
(FMFIA) coordinator, NEIC completed 19 of the 25 internal
control reviews it planned for fiscal 1995. Reviews conducted in
fiscal 1995 included a management systems review, imprest fund
audits, property inventory, and internal timekeeping procedures
review. In addition, NEIC staff reviewed EPA-wide weaknesses
to determine if any applied to NEIC.
Because NEIC's director was new and not yet familiar with
NEIC's operation, she did not sign NEIC's fiscal 1995 FMFIA
assurance letter. The director sent a memorandum to the Assistant
Administrator, OECA, explaining that she had only become the
director on September 3, 1995, and was in the process of taking
steps to "...evaluate and insure that our internal control policies
are in place..." Because OECA reorganized on October 1, 1995
(fiscal 1996), NEIC's annual FMFIA assurance letter is no longer
the responsibility of the NEIC director. Beginning in fiscal 1996,
the Office of Criminal Enforcement, Forensics, and Training is
responsible for NEIC's annual assurance. Office of Criminal
Enforcement, Forensics, and Training representatives have
completed their mid-year review for FMFIA and will include
NEIC in their annual report to OECA.
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NEIC Did Not Fully NEIC did not fully document its decision and rationale for using
Document Its Rationale for an IAG to obtain litigation support services, its basis for
the Justice IAG determining that the IAG was in the best interest of the
Government, or its evaluation of cost reasonableness. NEIC did
not maintain an IAG file that contained all the pertinent
information about its decision to enter into an IAG. According to
EPA's Interagency Agreement Policy and Procedures
Compendium, dated September 1988, a working file would
typically contain records of discussion, a list of potential sources,
the decision memorandum, commitment notices, the signed
agreement, transmittal letters, and other important documents.
The decision memorandum should summarize how the proposed
IAG is consistent with EPA's mission, discuss alternatives that
NEIC considered, and explain why it selected the IAG. In
addition, procurement under Economy Act lAGs should be based
on fair and reasonable prices for the required work, not just
convenience. In this case, NEIC's IAG file should have contained
full documentation of its evaluation of the Justice IAG cost. This
evaluation should have included a cost comparison of the Justice
IAG with the cost of issuing a new contract and the cost and
feasibility of using existing EPA contracts.
NEIC representatives told us that they conducted lengthy
discussions, presented the results of their discussions to
management, and analyzed other options regarding the pros and
cons of contracting directly versus using an IAG. Discussions
revolved around the following points:
Justice invited NEIC to buy into an existing contract
giving NEIC access to three contractors and ease of
technology application transfers;
the Justice contract provided access to 100 contractor
temporaries for immediate large scale support;
NEIC reduced its contracting staff levels and the IAG
avoided EPA's 32-point, 18-month contract award
process; and
NEIC discontinued its onsite laboratory audit program that
had been run by NEIC's previous contractor.
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NEIC representatives noted that they believed using the IAG was
easier and administratively less costly than using EPA's
contracting process. They also noted that a significant number of
NEIC's litigation support products (such as databases) were
passed on to Justice for litigation and that using Justice's
contractor made case transition easier, resulting in additional
savings for the Government's overall case development. NEIC's
project officer and case managers told us that they were more
satisfied with the services provided under the IAG than those
provided under the previous contract for litigation support
services.
NEIC case managers also discussed the cost implications of an
IAG but were unaware of the need to initially provide a decision
memorandum fully documenting their cost evaluation. NEIC
representatives were unable to locate anyone at EPA to help
ensure they entered into the IAG properly or to locate IAG
training. NEIC did document the rationale for its decision in its
fiscal 1996 IAG funding document but has not yet analyzed,
compared, and documented the IAG cost with that of alternatives.
NEIC representatives did not fully analyze and document the cost
advantage of using the Justice IAG rather than contracting for
services or using existing EPA contracts. They discussed the
administrative cost of different options and believed that the IAG
was administratively less burdensome and less costly. They told
us that conducting a meaningful cost comparison would have been
difficult during their initial decision process because they did not
have historical information to evaluate the Justice contractor.
They now intend to perform a cost analysis and noted that it
should be useful in deciding whether or not to renew the IAG with
Justice, contract for services themselves, or use some other
vehicle to obtain litigation support services. Fully documenting
their decision will help confirm that the decision was also based
on efficiency and permit future decisionmakers to benefit from the
results of NEIC's analysis.
Finally, NEIC may not be satisfying all of the stated purposes in
the IAG. One of the purposes of EPA's IAG with Justice was to:
...use resources effectively; avoiding the potential
duplication of effort incurred with multiple
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Independent Government
Estimates Were Not
Prepared Apart From
Contractor Input
NEIC Should Continue to
Monitor Staff Requirements
contracts and management employing the concept
of fixed price, whenever possible.
The Justice IAG does, to some degree, duplicate services available
in other EPA contracts. For example, the Superfund program
used Environmental Service Support contracts, the Resource
Conservation and Recovery Act program used its own contracts.
and some regions used 8(a) contracts that provided similar
litigation support services. As a result, the Agency used multiple
contracts that required additional contract management staff to
procure similar services. Fully documenting its decision would
have helped NEIC analyze administrative costs under various
options and identified the cost of all options.
NEIC's independent Government estimates (IGE) were not
prepared apart from contractor input. NEIC's Memorandum of
Understanding with Justice stated that IGEs will be generated for
each work assignment. EPA guidance, Independent Government
Estimates, dated March 3, 1993, required an IGE for each
procurement action greater than $25,000. It also stated that,
"Contractors must not participate in the development of an IGE."
Although NEIC prepared IGEs for all work assignments (not just
those greater than $25,000), it did so only after receiving the
contractor estimate. Preparing the IGE after receiving the
contractor's estimate could impair the Government's ability to
maintain its objectivity and its ability to provide a truly
independent estimate.
We reviewed nine files and found no evidence that NEIC had
prepared cost estimates prior to receiving the contractor estimate.
NEIC case managers stated that they informally estimated how
much time a project would take and how much it should cost.
They approved an estimate when they signed the contractor's
estimate. According to the case managers, the signed contractor's
estimate reflected negotiations that had taken place between NEIC
and the contractor. NEIC developed a computerized estimating
form that will make it easier to estimate the cost of individual
work orders. In the future, case managers intend to fully
document their estimate, the original contractor estimate, and the
final negotiated amount for each project.
While we recognize the intangible benefits of maintaining a
contractor representative in each region (such as case familiarity,
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NEIC May Have Paid
Unnecessary Sales Taxes
the unwillingness of most EPA attorneys to allow files to leave
the region, quick response to in-house projects, and enhanced
working relationship with the WAM and client), some regional
workloads may not support a contractor representative in each
region. NEIC reviewed contractor time charges monthly and had
Justice reduce contractor staff levels in one region. NEIC had
Justice reduce staff in Region 3 from three employees to one
because the workload was less than expected.
We reviewed four timesheets from each regional contractor
representative's time charges between October 1, 1995, and May
12, 1996. We found that the average staff time charged directly to
EPA projects was 69 percent. Direct time charges ranged from 98
percent in one region to 27 percent in another. Conversely, 31
percent of contractor time charges were for administrative (21
percent) and leave (10 percent) time. While we only reviewed
four pay periods, the results of our review did highlight the need
to continue to monitor contractor usage rates and reduce or
increase staff levels where appropriate.
NEIC may have paid unnecessary sales taxes on goods procured
by the Justice contractor. We reviewed nine case files and found
that five invoices NEIC approved for reimbursement of goods
procured by the Justice contractor included sales tax. The Justice
contract stated:
Supplies and services procured on behalf of the
Government under this contract will generally be
exempt from State and local taxes. The contracting
officer will provide a completed Standard Form
1094, U.S. Tax Exemption Certificate where
appropriate.
NEIC staff should determine if the Justice CO provided a tax
exemption certificate to its contractor. If not, NEIC should ask
the CO to do so. If the CO provided such a certificate, NEIC
should ask that the CO require its contractor to use the tax
exemption whenever possible. We did not estimate how much
NEIC may have paid in unnecessary sales tax.
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CONCLUSIONS
NEIC's case managers were significantly and meaningfully
involved in monitoring work performed under NEIC's IAG with
Justice. Although NEIC representatives told us they conducted
lengthy discussions regarding the pros and cons of entering into an
IAG to use Justice's contractor, they did not fully document the
results of their discussions and analysis and did not compare the
cost of the IAG with other options. NEIC representatives did not
thoroughly investigate other options or other contracts in place at
EPA that could have provided litigation support services and did
not prepare IGEs independent of contractor input. Although
maintaining a contractor representative in each region has
intangible benefits, NEIC needs to continue to analyze regional
workload requirements and assess the benefit of maintaining a
contractor representative in each region. Finally, NEIC may be
paying unnecessary sales taxes on goods procured by the Justice
contractor.
RECOMMENDATIONS The Director should:
1. Fully document the decision and cost effectiveness for
using an IAG and the basis for determining that this IAG is
in the best interest of the Government.
2. Require case managers to develop IGEs independent of
information provided by the Justice contractor.
3. Require case managers to continue to monitor contractor
billings to evaluate the cost effectiveness of having a
contractor representative in each region and request Justice
to modify regional staff levels where appropriate.
4. Ensure Justice's CO has provided tax exemption
certificates to the contractor where appropriate and instruct
Justice's CO to ensure its contractor uses the tax exemption
whenever possible.
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APPENDIX I
ABBREVIATIONS
CO Contracting Officer
EPA Environmental Protection Agency
FMFIA Federal Managers' Financial Integrity Act
IAG Interagency Agreement
IGE Independent Government Estimate
Justice Department of Justice
NEIC National Enforcement Investigations Center
OAM Office of Acquisition Management
OECA Office of Enforcement and Compliance Assurance
OIG Office of Inspector Genera]
WAM Work Assignment Manager
10
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APPENDIX II
DISTRIBUTION
Office of Inspector General
Inspector General (2410)
Deputy Assistant Inspector General for
Internal and Performance Audits (2424)
Deputy Assistant Inspector General for
Acquisition and Assistance Audits (2421)
EPA Headquarters Office
Assistant Administrator, Office
of Enforcement and Compliance Assurance (2201 A)
Director, Office of Acquisition Management (3 80 IF)
Headquarters Library (3304)
11 El SFG6-08-0024-7400004
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