United States Office of
Environmental Protection Inspector General
Agency 401 M Street, SW
Washington, DC 20460
Report of Internal and
Management Audit
May 6, 1983
Audit Report E5eH3-03-0057-30994
Report of Audit on the
Review of Superfund Emergency Response Actions
Initiated by Region III as of September 30, 1932
-------
UNITED STATES ENV RON VENTA.L FRCTECTiCN AGENCY
May 6, 1983
SUBJECT:
FROM:
TO:
Audit Report E5eH3-03-0057-30994
Report of Audit on the
Review of Superfund Emergency Response Actions
Initiated by Region III
P. Ronald Gandolfo
Divisional Inspector Gene/al
Peter N. Bibko
Regional Administrator
for Audits
Transmitted are three copies of the subject report. We have no objection to
the further release of this report at the discretion of the addressee.
Your office is designated "Action Office" for this report in accordance with
EPA Order No. 2750.2A. Accordingly, report on action taken should be sent to
this office within 120 days. The Internal Audits Staff of the Office of the
Inspector General will use this report to prepare a consolidated report to the
Assistant Administrator for Solid Waste and Emergency Response.
If you have any questions concerning this report contact Mr. P. Ronald Gandolfo,
Divisional Inspector General for Audits, Mid Atlantic Division at 597-0497.
Enclosure
cc: Steven McNamara, Chief, Internal Audits Staff
Robert Reed, Comptroller, Office of the Comptroller
-------
-iL PRG^ECTiCN AGENCY
May 6, 1983
Audit Report E5eH3-03-0057-30994
Report of Audit on the
Review of Superfund Emergency Response Actions
Initiated by Region III as of September 30, 1982
PURPOSE AND SCOPE OF AUDIT
We completed an audit of Superfund Emergency Response Actions initiated by
Region III under the Comprehensive Environmental Response Compensation and
Liability Acf of 1980 (CERCLA), commonly referred to as "Superfund". Our
audit was initiated as a result of the request made by the Regional Adminis-
trator and also to comply with the approved workplan of the EPA Office of
the Inspector General. The findings and recommendations contained in this
report are based on the review of Immediate Removal Actions at the Chemical
Metals Industries (CMI) site in Baltimore, Maryland and the ABM-Wade site
in Chester, Pennsylvania.
The objective of our audit was to determine whether:
1. The Environmental Services Division (ESD) and the On Scene
Coordinators (OSC) fulfilled their duties in accordance
with prescribed policies and procedures.
2. Response actions were referred to the Enforcement Division
for identification of the responsible parties and if
necessary steps were taken to recover cleanup costs.
We performed our audit in accordance with the Standards for Audit of Govern-
mental Organizations, Programs, Activities and Functions issued by the Comp-
troller General of the United States and included tests of the accounting
records and other auditing procedures we considered necessary.
-------
BACKGROUND
CERCLA requires EPA to provide emergency and long-term cleanups for releases
of hazardous substances and abandoned waste sites. Two types of removal
actions are carried out by EPA in its emergency response program: immediate
removals and planned removals. An immediate removal is a first aid approach
to an emergency. It involves cleaning up the hazardous site as necessary to
protect life and human health, stop the hazardous release and minimize damage
to the environment. Specifically, immediate removals may include: collecting
and analyzing samples; controlling the release; removing hazardous substances
and storing, treating or destroying them. A planned removal occurs when the
hazard is substantial and imminent but constitutes something less than an
immediate emergency. Such a removal -assumes that time is available to plan
an appropriate response even though the situation is deteriorating. A planned
removal is performed after analyzing removal alternatives to determine the
quickest and least costly approach. Immediate and planned removals are
limited to six months in duration or one million dollars. Remedial actions
address the permanent resolution of the release and involve a planned engi-
neering solution to the problem. A remedial action usually requires a longer
time and possibly more expense to implement than immediate or planned removal
actions. Remedial actions are not subject to the six month or one million
dollar limitation.
The OSC is responsible to determine if contractual support is needed to
contain or remove a hazardous substance release. In such emergency situa-
tions, the OSC is granted contracting authority to $50,000 for awarding
contracts for immediate removal actions. The OSC is responsible for the
selection of the contractor, the maintenance of records for each site, the
coordination of activities and monitoring of contractor performance.
Chemical Metals Industries (CMI) operated two sites separated by 20 occupied
private residences. Investigations by EPA and the Maryland Office of Environ-
mental Programs personnel during September, 1981 revealed the existence of
hundreds of drums containing hazardous materials. Consequently, Region III
received authorization from EPA Headquarters to undertake emergency Superfund
activities on October 19, 1981. All removal activities undertaken by the
EPA, State and several contractors were completed in December, 1981.
The ABM-Wade site is a three acre parcel located in the industrial area of
Chester, Pennnsylvania, only one block from a residential area of the city.
The site was used for storage and disposal of over 4,000 drums of toxic
industrial waste. These chemicals were either stored on the property or had
been poured directly onto the ground. During a fire at the site in February,
1978, it became evident that the waste was flammable and explosive. In 1979
and 1980, the State spent over $800,000 for fencing and removal of 2400
drums from the site. During the period October, 1981 through March, 1982,
Region III removed additional drums and volatile liquids under an EPA author-
ized emergency action. The State plans to complete the cleanup of the site
with the $1.7 million recovered by EPA from the parties liable for the site.
-------
SUMMARY OF AUDIT RESULTS
We found chat only one of the five cleanup contractors selected was from the
source list established by the Procurement and Contracts Management Division
(P&CMD). Additionally, the required justifications were not prepared by the
OSC stating the reasons for selecting "Off-List" contractors. Discussions
with the Region III OSCs disclosed that the "Off-List" contractors were
selected primarily because of their familiarity with the ABM-Wade site or
because the "On-List" contractors were not technically qualified in the
OSC's opinion.
Additionally, we believe that the monitoring procedures of the OSCs need to
be improved. Our comparison of amounts invoiced and obligated disclosed that
on three occasions the OSCs incurred costs in excess of contract amounts
before the contract modifications were processed. These overexpenditures
were $12,000 and $23,000 for the CMI site and $30,000 for ABM-Wade. Costs
were incurred after the contract completion date; the required incident
obligation log was not maintained for the ABM-Wade and maintained inaccurately
for the CMI site; and contractors did not submit the required costs reports
daily.
More details concerning these findings are presented in the Results of Audit
section of this report.
MANAGEMENT RESPONSE
We provided a draft copy of our audit report, dated January 20, 1983, to the
Regional Administrator for his review and consideration. Based on his response
dated, February 15, 1983, we revised our draft report. The revised draft was
issued March 11, 1983 and a second response from the Deputy Regional Adminis-
trator was received on May 3, 1983 and these comments are noted. Region III
in this response stated, "We wish to point out that the ABM-Wade and CMI pro-
jects were among the first three immediate removal projects undertaken by
Region III, and were completed prior to the promulgation of most of the pri-
mary regulations and guidances that apply to Superfund- removal-- proj-eets".
The exit conference was conducted on May 6, 1983 with the responsible
officials.
INSPECTOR GENERAL'S COMMENTS
We incorporated Region Ill's response and our comments after each finding.
Based on our evaluation of the response and the review of additional inform-
ation we modified our report. The comments received from Region III were
responsive to our finding on Contractor Selection. Region III generally did
not concur with our finding and recommendations on Monitoring.
-------
RESULTS OF AUDIT
CONTRACTOR SELECTION
Only one of the five cleanup contractors selected was from the source list
established by the Procurement and Contracts Management Division (P&CMD).
Additionally, the required justifications were not prepared by the OSC
stating the reasons for selecting "Off-List" contractors. Discussions with
the Region III OSCs disclosed that the "Off-List" contractors were selected
primarily because of their familiarity with the ABM-Wade site or because the
"On-List" contractors were not technically qualified in the OSC's opinion.
We do not believe that a contractor's familiarity with a waste site should
be the primary reason for awarding a $267,500 contract. Additionally, we
found no indication that the OSCs performed any technical evaluations of the
contractors on the source list.
Interim Emergency Procurement Procedures for Hazardous Substance Response
Program dated July, 1981 establishes that when an emergency arises for which
the OSC determines that contractual support is needed, the OSC selects a
contractor from a list prepared by P&CMD. The OSC shall use his best judge-
ment in selecting a contractor from this list. The OSC shall consider such
factors as proximity of the contractor to the release, type of release, and
capabilities of the contractor, in determining which contractor to use for
the response effort. All contractors on the source list shall be given an
equal opportunity to provide services. Therefore, the OSC shall attempt to
rotate the contractors used to respond to releases or threats of releases,
and shall not select contractors on the basis of purely personal preference.
This reference provides that in extenuating circumstances, a contractor not
included on the source list may be selected to provide services. However,
the maximum dollar amount of a contract with an "Off-List" contractor shall
be limited to $2,500. This reference was amended by the Interim Emergency
Procurement Procedures, Revision Number One, dated December, 1981. It estab-r
lishes that commercial sources other than those on the source list may be
awarded a contract after the OSC has determined that no qualified contractors
from the source list are available to respond to the release or potential
release. In those cases where an "Off-List" contractor is to be awarded a
contract, the OSC shall justify in writing the reason for not selecting a
contractor from the source list.
Recommendat ion
We recommend that EPA Region III ensure that contractor selections for future
procurements are in accordance, with EPA's Emergency Procurement Procedures
for Hazardous Substance Response Program.
-------
REGION III RESPONSE
The audit found that the OSC selection of an "Off-List" contractor was not in
accordance with the July, 1981, Interim Emergency Procurement Procedures for
the Hazardous Substance Response Program. We concur with the finding, although
we believe the OSC's decision was based on sound technical judgement and was
in the spirit of revised procedures issued during the Wade action. The
OSC's selection of a company that the Region had earlier submitted for the
revised list, and the cost in excess of $2500, were both verbally authorized
by P&CMD, which issues the contract guidance. Although the OSC neglected to
submit a justification, his actions were not inconsistent with either the
National Contingency Plan or Federal Procurement Regulations. We concur in
the recommendation and have in place a management review procedure and con-
tractor justification checklist to ensure consistency with existing Agency
procedures.
INSPECTOR GENERAL'S COMMENTS
Region III concurrence is noted; however, with or without P&CMD's verbal
approval the OSC violated Federal Procurement Regulations by not completing
the required justifications and technical evaluations. Additionally, without
them Region III can not be assured the price charged by the contractor was
fair and reasonable. Consequently, our position remains unchanged and we
believe the required justifications and evaluations should now be included
in the Agency's procurement files.
-------
MONITORING
The monitoring procedures of the OSCs need to be improved. Our comparison
of amounts invoiced and obligated disclosed that on three occasions the OSCs
incurred costs in excess of contract amounts before the contract modifications
were processed. These overexpenditures were $12,000 and $23,000 for the CMI
site and $30,000 for ABM Wade. The Interim Emergency Procurement Procedures
for Hazardous Response Program, Part 4, establishes that whenever the OSC
anticipates that funds in excess of the amount obligated on contracts will
be required to complete the work, the additional funds will be provided by
'submitting a Procurement Requisition to P&CMD.
Additionally, at one site the OSC allowed the contractor to perform services
valued at $10,800 after the contract completion date. The OSC did not have
the authority to extend the contract completion and should have notified the
contracting officer of the change prior to authorizing the work.
Also, records were not maintained to indicate the amount of EPA intramural
costs (salaries, benefits and travel cost of EPA employees) expended for the
sites. Our review of intramural costs disclosed that only $1,000 was charged
to the Hazardous Substance Response Trust Fund. We estimate that approximately
$57,000 of intramural salary costs were expended for the cleanup efforts at
CMI.
Additionally, we found that: (1) an "Incident Obligation Log" was not main-
tained for expenditures incurred at the ABM Wade site; (2) the "Incident
Obligation Log" maintained at the CMI site was inaccurate; (3) Contractor
Cost Reports were not obtained from three contractors required to submit
them for cleanup efforts at the CMI site; (4) the Contractor Cost Reports from
two contractors were not obtained timely; (5) differences between Contractor
Cost Reports and invoices for the ABM Wade site were not reconciled.
Interim Superfund Removal Guidance, Part G, establishes that Intramural costs
incurred by EPA are chargeable to the Regional allocation of the Hazardous
Substance Response Trust Fund. The OSC User Manual for Financial Reporting
in the Hazardous Substance Response Program, Section IV dated July, 1981,
establishes that the "Incident Obligation Log" provides the OSC with an
instant reference to all spending actions as well as a running balance of
available funds. This log should be initiated whenever the OSC invokes the
Hazardous Substance Response Trust Fund. Section VI of this same reference
further states in part, that the OSC is responsible for reviewing and certi-
fying invoices submitted by the contractor for payment. The daily Contractor
Cost Reports and the Incident Obligation Logs are to be used as a basis for
reviewing invoices. Invoices must be approved and certified within two
workdays after receipt and forwarded to the Regional Hazardous Substance
Response Office. The OSC should forward any invoices for which he/she ques-
tions costs, to the P&CMD to resolve the discrepancy. When the discrepancy
is resolved, P&CMD will forward the invoice back to the OSC for certification.
-------
RecomnendatIons
We recommend that EPA Region III:
1. Accurately prepare the Incident Obligation Log.
2. Obtain and process Contractor Cost Reports on a
daily basis.
3. Record all Intramural costs expended by EPA.
4. Amend the period of performance for cleanup contracts
as appropriate.
5. Ensure that all contract ceiling increases are approved by
the Director of OERR and contracts are appropriately
amended before funds are expended.
-------
REGION III RESPONSE
This section of Che audit deals with records and contracting procedures that
were used or should have been used at the CMI and Wade projects.
The first problem mentioned in this section is that the OSCs incurred costs
in excess of contract amounts before contract modificatons were processed.
The audit report cites the Procurement Guidelines as requiring OSC to submit
requisitions (PRs) when additional funds will be required.
These procedures as referenced in the guidelines were verbally superceded
during a national Superfund conference because of the slowness in getting PRs
approved. Such delays can cause work stoppage or require contractors to go to
standby status, thereby jeopardizing EPA's ability to handle emergencies, and
increasing overall costs. The procedure currently in use is that the OSC must
notify the program office in Headquarters when additional funds are needed.
The program office prepares the PR and secures the necessary funding approval
from P&CMD. This approval is relayed to the OSC by telex. The OSC's requested
additional funds prior to incurring any costs in excess of contract amounts
for the 12,000, 23,000 and 30,000 expenditures referenced in the audit. The
OSC's received written approval to spend these funds; therefore no overexpend-
itures occured. As stated previously, the procurement requests for these
funds were developed and processed entirely within EPA Headquarters. When
additional funds are requested, the OSC should not be responsible for
determining the status of procurement requests initiated by Headquarters once
Headquarters gives written approval to the OSC's funding request.
The audit report cites one example of an OSC allowing a contractor to perform
service valued at $10,800 after the contract compeletion date. As you know,
emergency contracts are time and materials; therefore, the final cost of the
project is unknown until all the invoices are in and the contract is defini-
tized. In this case, the OSC had a number of drums staged on site for removal
but was very close to his ceiling limitation. In order not to go over his
ceiling, he waited until all inovices were in before removing any more drums.
During this time the contract completion date elapsed. The OSC then proceeded
to remove the drums with the remaining monies left in his ceiling. While
this may be a technical violation of the guidance, it was done for a good
purpose. Going over the ceiling limitiation (unauthorized procurement) is a
more serious problem.
The audit report states that the OSC's did not maintain records to indicate
the amount of EPA intramural costs (salaries, benefits, travel costs of EPA
employees). During a Superfund removal operation, a variety of EPA employees
are involved in different phases of work associated with the site. The
OSC cannot accurately account for the total staff time devoted to the project.
Consequently, EPA uses a time accounting system whereby each employee reports
by project time allocated for Superfund activities. The travel expenditures,
man-hours of effort (salaries), and benefits of each employee are tracked by
using site specific account numbers which are fed into a Regional data system.
Because these were the initial Superfund projects, Regional data for intra-
mural costs are probably less accurate than data currently put into the
system. Staff are now more familiar with Superfund charging and discrepancies
are less likely to occur.
-------
The audit report states that: 1) an Incident Obligation Log was not maintained
at the ABM Wade Site; 2) the Incident Obligation Log maintained at CMI was
inaccurate; 3) Contractor Cost Reports were not obtained from three contrac-
tors at CMI; 4) Contractor Cost Reports from two contractors at CMI were not
obtained in a timely fashion; 5) differences between Contractor Cost Reports
and invoices for the ABM Wade Site were not reconciled.
The OSC for the Wade project maintains that an Incident Obligation Log was
used to track expenditures at the Wade Site, but we cannot find this log in
our records. The inaccuracy in the CMI Incident Obligation Log, as indicated
in the audit report, is due primarily to the fact that intramural costs were
not tracked. Intramural costs were not being applied against the project
ceiling, and the purpose of the Incident Obligation Log is to track cleanup
expenditures against the project ceiling allocation.
Contractor cost reports or "dailies" are daily accounts submitted by the
prime cleanup contractor showing the amount of materials, individuals, and
workhours expended on scene (including subcontractor efforts). They also
include a cost estimate. The dailies are reviewed and signed off on by the
OSC. EPA uses a standard form for these cost reports. During the last phases
of the CMI cleanup, the State was left to manage the operation. They accepted
cost reports from three contractors that were not on EPA's standard form. The
problem is not the lack of cost reports for these contractors, but the fact
that the EPA standard form was not used. Contractor cost reports are submitted
to the OSC on a daily basis; however when the OSC sees a problem in the
reports, he sends them back unsigned to the contractor for correction.
Because of time delays in making the corrections to the cost reports, the OSC
may receive the corrected report several days after the contractor performed
the service, or the contractor may submit batches of the corrected reports
for the OSC's signature at one time. At CMI, the OSC always saw daily reports
although many of them needed correction. Only the corrected or final versions
are included in our files and the OSC's signature date would imply that he was
not receiving them daily.
OSC's are responsible for reviewing an certifying invoices submitted by
contractors for payment. The daily contractor cost reports and the incident
obligation logs are used as a basis for certifying the invoices. Using the
contractor reports, the OSC can certify to the correctness of the time and
material quotes in the invoices; however, since the contractor costs reports
contain only cost estimates, these cannot be used to verify the final costs
quoted in the inovices. The final cost to the government is determined by the
contracting officer after the invoices are reviewed and the contract is
definitized. In summary, the OSC can verify time and material quotes in the
invoices, but not price.
The audit report states that invoices must be approved and certified within
two workdays after receipt and forwarded to the Regional Hazardous Substance
Response Office. This statement is incorrect. According to "Interim Emer-
gency Procurement Procedures for Hazardous Substance Response Program -
Revision 1" the OSC shall certify the invoice and forward the certified copy
of the invoice or voucher to the paying office within seven (7) calendar
days of receipt of the invoice or voucher.
-------
INSPECTOR GENERAL'S COMMENTS
Your comment that guidelines were verbally superceded during a national
Superfund conference does not alleviate or obviate our finding. Based on
your response, the guidance published by EPA needs to be revised. In our
consolidated Report to the Assistant Administrator for Solid Waste an Emer-
gency Response this will be noted.
We do not agree with the OSC's justification which allowed a contractor to
perform services after the completion date. The contract should have been
amended for time or the ceiling increased.
The comments concerning the Regional Data base are noted. Additionally, we
believe that when cost reports (dailies) are returned to a contractor for
correction the files should be so annotated or a transmittal prepared.
Your comments concerning price verification are noted. However, the Region
should ensure that time, material and price are verified. It is immaterial
who performs the verification, but that it is accomplished.
The comment stating that the OSC must certify and forward invoices to the
paying office within seven calendar days is noted. Regardless of the revised
reference (7 calendar days) or the previous reference (2 workdays), the Region
failed to reconcile the differences between cost reports and invoices.
P. Ronald Gandolfo
For the Inspector General
10
------- |