^ t<5ai!JU *    * M'fice n! Inspector
-. 4^i^ ••

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Inspector General Divisions

 Northern Division:                   Robert Bronstrup
                                    Leah Nikaidoh
                                    Mike Davis
                                    Tim Roach
                                    Ann Weiland

 Central Division:                    Randy Holthaus
                                    Angela Bennett
                                    Dan Howard
Regions Covered:                     Regions 2, 5, 6, and 7
Program Offices Involved:             Office of Solid Waste and Emergency
                                    Response

                                    Office of Administration and Resources
                                    Management

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                UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                         OFFICE OF THE INSPECTOR GENERAL
                                NORTHERN DIVISION
                            71 WEST JACKSON BOULEVARD
                               CHICAGO, IL 60604-3590
MEMORANDUM
                                   June 22,2001
Report No. 2001-P-0001 1
Superfund Interagency Agreements Audit
                              71
SUBJECT:
FROM:       Leah L. Nikaidoh
             Audit Manager
             Northern Audit Division

TO:          Michael Shapiro
             Acting Assistant Administrator
             Office of Solid Waste and Emergency Response (OSWER)

             David O'Connor
             Acting Assistant Administrator
             Office of Administration and Resources Management (OARM)

             David Ullrich
             Acting Regional Administrator
             Region 5

      Attached is our report entitled Superfund Interagency Agreements. We discussed our
findings with your staff and issued a draft report. We summarized your comments in the final
report and included your complete responses in Appendices 1, 2, and 3.

      We appreciate the cooperation of your staff and the assistance provided throughout the
audit. The staff exhibited a genuine interest in working with us to improve Superfund
interagency agreements and helped add value to this audit. The proactive participation and
cooperation of officials in OSWER, OARM, and Regions 2, 5, 6 and 1 throughout the audit
greatly helped us in completing this national review timely.

ACTION REQUIRED

      In accordance with EPA Order 2750, you, as the action official, are required to provide
this office a written response to the audit report within 90 days of the final audit report date. For
corrective actions planned but not completed by the response date, reference to specific milestone
dates will assist in deciding whether to close this report.  Region 5, in its response, provided

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corrective actions and milestone dates. Therefore, no further response is required for Region 5.
Region 5 should track any actions planned, but not yet completed, in its management tracking
system.

       This audit report contains findings that the Office of Inspector General (OIG) has
identified and corrective actions OIG recommends. This audit report represents the opinion of
OIG, and the findings in this audit report do not necessarily represent the final EPA position.
Final determinations on matters in this audit report will be made by EPA managers in accordance
with established EPA audit resolution procedures.

       We have no objection to the release of this report to the public.  If you have any
questions, please contact me at (513) 487-2365, or Mike Davis at (513) 487-2363. Please refer
to the report number 2001-P-00011.

Attachment

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                              Table of Contents
Abbreviations	iii

Introduction	1

      Purpose	1

      Background  	1

      Summary of Results	2

      Scope and Methodology	3

Findings and Recommendations	4

      1: Regions Could Improve the Process for Reviewing
             Qualifications of Servicing Agencies and Their Contractors  	4

      2: LAG Terms and Conditions Generally Defined the
             Responsibilities of EPA and its Servicing Agencies	10

      3: EPA Generally Monitored LAGs
             in a Consistent and Effective Manner  	12

      4: The 1991 OSWER Directive
             Was Inconsistently Implemented	13

      5: Memorandums of Understanding
             with Federal Agencies Need Improvement .	15

Exhibits

      A:     Environmental Accomplishments	18

      B:     IAG Cost Summary	21

      C:     Details on Scope and Methodology	22
                                                              ' Report No. 2001-P-00011

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Appendices




       1:     OSWER Response to Draft	24




       2:     OARM Response to Draft	26




       3:     Region 5 Response to Draft	28




       4:     Report Distribution 	30
                                         ii                     ' Report No. 2001-P-00011

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                               Abbreviations
EPA        Environmental Protection Agency




IAG        Interagency Agreements




Manual      Project Officer Manual




MOU   -*•  Memorandum of Understanding




OARM      Office for Administration and Resources Management




OIG        Office of Inspector General




OSWER     Office of Solid Waste and Emergency Response




RMD       Resource Management Directives




USAGE     U.S. Army Corps of Engineers
                                       in
Report No. 2001-P-00011

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                                   Introduction
Purpose
Background
The Superfund program had almost $3.5 billion in active or
recently completed Interagency Agreements (lAGs) obligated as of
September 2000 for removal and remedial activities. Our overall
audit objective was to determine whether the U.S. Environmental
Protection Agency (EPA) had effective controls in place to ensure
its Superfund LAGs achieve expected environmental results in a
timely, cost-effective, and efficient manner. The three specific
sub-objectives designed to answer the overall objective were:

•  Does EPA (a) determine qualifications of servicing agencies
   and contractors, and (b) ensure the LAG terms and conditions
   define the responsibilities of EPA and its servicing agencies?

•  Does EPA monitor LAGs hi a consistent and effective manner?

•  Is the 1991  Office of Solid Waste and Emergency Response
   (OSWER) Directive regarding assignment of remedial actions
   between EPA contracts and the U.S. Army Corps of Engineers
   (USAGE) practical for planning Superfund remedial activities?
                          Congress established the Superfund program by passing the
                          Comprehensive Environmental Response, Compensation, and
                          Liability Act in 1980 to locate, investigate, and clean up the worst
                          uncontrolled or abandoned hazardous waste sites nationwide. To
                          clean up these sites EPA uses a variety of extramural instruments '
                          (such as contracts, assistance agreements, and lAGs) to perform
                          specific Superfund remedial and removal activities. An LAG is a
                          written agreement between Federal agencies in which one agency
                          needing supplies or services obtains them from another Federal
                          agency (the servicing agency) on a reimbursable basis. EPA may
                          also sign Memorandums of Understanding (MOUs) with servicing
                          agencies to formally specify responsibilities, as well as establish
                          the policies and set the framework for the funded LAGs.

                          EPA has two .offices that are responsible for administering
                          Superfund lAGs: (1) OSWER, and (2) the Office for
                          Administration and Resources Management (OARM). The
                          OSWER is responsible for overall management of the Superfund
                                          1
                                       'Report No. 2001-P-00011

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                          program at EPA. Within each Region, Project Officers and
                          Remedial Program Managers monitor specific Superfund lAGs to
                          ensure goods and services paid for by EPA are received. The
                          OARM is responsible for issuing IAG policy and guidance.

                          EPA has issued two Resource Management Directives (RMDs)
                          that pertain to EPA's Superfund lAGs.  RMD 2550C addresses the
                          policies and procedures that govern the relationship between EPA
                          and its servicing agencies under an IAG. RMD 2550D contains
                          specific information on the use of LAGs in the Superfund program,
                          and provides requirements relating to cost documentation, project
                          specific conditions, and billing conditions.

Summary of Results
                          EPA generally had effective controls in place to ensure its
                          Superfund LAGs achieve expected environmental results in a
                          timely, cost-effective, and efficient manner. The terms and
                          conditions in the individual LAGs defined the roles and
                          responsibilities of EPA and its servicing agencies, and most
                          Regions reviewed and monitored lAGs in a consistent and effective
                          manner. However, there are areas in which EPA could make
                          enhancements to the LAG process to ensure it receives the products
                          and services paid for. Specifically:

                          •   Regions did not consistently determine the qualifications of
                              servicing agencies and their contractors.

                          •   Region 5 did not include hi its LAGs all required terms and
                              conditions, and did not monitor lAGs on a consistent basis.

                          •   The 1991 OSWER Directive was out of date and inconsistently
                              used by Regions to assign Superfund work between EPA
                              contractors and lAGs with the USAGE.

                          Additionally, we noted that three MOUs between EPA and other
                          agencies excluded important terms and  conditions needed for
                          safeguarding the Superfund Trust Fund.
                                                                  Report No. 2001-P-00011

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Agency Comments
and OIG Evaluation
Scope and
Methodology
OSWER, OARM, and Region 5 all generally concurred with our
findings and recommendations, and their planned corrective
actions were responsive to our recommendations. Both OSWER
and OARM expressed concern that discussing servicing agency
and contractor qualifications could lead to a potential de facto
debarment of contractors. We conducted an exit conference on
June 20, 2001 to discuss concerns with the draft report. As a
result, we revised our findings and recommendations in this final
report to mitigate the concern of a potential de facto debarment.
We reviewed a total of 18 active or recently completed LAGs from
Regions 2, 5, 6, and 7 to accomplish our objectives.  Exhibit A lists
environmental accomplishments related to these lAGs; exhibit B
provides a cost summary for each IAG; and, exhibit C provides
additional details on our audit scope and methodology.
                                                                  TReport No. 2001-P-00011

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                                                          U.S. EPA Headquarters Library
                                                                Wlclll CGUc? 3201
                                                          1200 Pennsylvania Avenue NW
                      Findings and Recpmmendation^ashington DC 2046°
         Finding 1:  Regions Could Improve the Process for Reviewing
          Qualifications of Servicing Agencies and Their Contractors

                          EPA Regions did not consistently determine and/or document the
                          qualifications of servicing agencies and their contractors in
                          accordance with EPA guidance. Also, the Regions did not check
                          on servicing agency/contractor performance in other Regions to
                          learn if they had incurred any problems. These conditions
                          generally occurred due to a lack of effective processes.
                          Consequently, there was an increased risk that a servicing agency
                          and/or contractor with known performance problems in one Region
                          could be awarded work in other Regions, which could result in
                          EPA paying excessive amounts and/or receiving inadequate
                          service.
Guidance Emphasizes
Importance of
Qualifications
Servicing Agency
Qualifications
Not Consistently
Determined or
Documented
EPA guidance emphasizes the importance of determining servicing
agency qualifications. The Project Officer Manual (Manual)
requires every Decision Memorandum to include an explanation as
to why the servicing agency was selected. The Manual also states:

   Although the relationship under an IAG is with another
   Federal agency, inadequate performance should be
   considered in deciding -whether to undertake future
   cooperative efforts with that agency.  Project Officers
   should also report poor performance (in writing) to the
   Grants Management Office.

Regions 6 and 7 formally documented the selection of the servicing
agency in the Decision Memorandums, which explain why the
servicing agencies were selected.  In contrast, Regions 2 and 5 had
no information in any of the 10 LAG Decision/Action
Memorandums that we reviewed (5 for each Region) that
documented the qualifications and reasons for selecting the
servicing agency. Specifically:

•  Although Region 2 officials conducted reviews, they did not
   document the reasons for selection in individual LAG
   Decision/Action Memoranda (based upon such factors as past
                                                                Report No. 2001-P-00011

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Information Needs
to Be Shared
Among Regions
   performance, technical ability, etc.), primarily because they had
   been using the same servicing agency for a number of years.
   Based on a 1983 MOU between EPA and the USAGE, as well
   as a 1991 OSWER Directive1, they considered that to be
   sufficient basis for using USAGE.

•  Region 5 project managers said they were unaware of the
   requirement to include a justification for selecting a particular
   servicing agency.  Additionally, servicing agency qualifications
   were not always determined.

EPA has no effective process to report and disseminate
servicing agency performance information among Regions.  Only
4 of the 18 project managers (Project Officers, Remedial Program
Managers, and on-scene coordinators) for our review indicated
they asked other Regions about qualifications of servicing
agencies.  The four project managers, however, had no
documentation of such discussions in any of then- respective IAG
files. The absence of an effective process to evaluate servicing
agency qualifications beyond regional boundaries could result in
poor-performing servicing agencies being awarded additional work
in other Regions.

For example, we noted a specific instance in which a servicing
agency with a history of contract management and contractor
performance problems successfully marketed services that it was
not able to deliver. In an EPA Office of Inspector General (OIG)
audit report issued January 22,1996,2 we reported contractor
management problems with the five lAGs that the Department of
Interior's Bureau of Reclamation - the servicing agency - had at
EPA Region 8's Summitville site. The OIG identified problems
with the Bureau's ability to ensure that the appropriate contracting
decisions were made to monitor and control costs. In our report,
we indicated that the Department of Interior-OIG had identified
$5.8 million in contractor overpayments, under a separate
Department of Interior-OIG audit. The EPA-OIG recommended
that EPA reevaluate the suitability of the Bureau to continue
       11991 OSWER Directive encourages EPA to assign remedial activity over $15 million,to USAGE.

       2EPA Report No. 6400019, "Region 8 Needed to Further Improve Interagency Agreement Oversight to
Ensure Efficient Summitville Superfund Site Cleanup." This audit report was the result of a March 1995
Congressional request, in which a Congressman expressed concerns with the Bureau's contractor and the Bureau's
oversight of the contractor at the Summitville site.

                                            5                       iReport No. 2001-P-00011

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Two EPA Councils
Could be Used to Share
Information Nationally
managing Region 8 cleanup sites and any future EPA Superfund
cleanup activities. However, on September 23,1996, eight months
after the EPA-OIG report was issued, Region 5 officials (without
knowledge of the EPA-OIG audit report) awarded an LAG to the
Bureau and the same contractor to perform removal activities at the
Benton Harbor site, where problems in monitoring and controlling
costs were also encountered.

The absence of EPA having a national process for reporting poor
performing servicing agencies may have contributed to the Benton
Harbor LAG  exceeding its estimated cost and tune for completion.
A better process may have resulted in the selection of another
contractor to perform the work at Benton Harbor.  The Benton
Harbor LAG, which involved radiation cleanup, was expected to
cost $2.7 million and take 2 years to complete.  This LAG had a
final cost of $7.08 million, and the cleanup is still not complete.
Region 5 let  the period of performance for the IAG expire, and
plans to finish the site cleanup with an EPA contractor.

EPA has two national councils hi place that could be used to
share information on lAGs and servicing agencies between the
Regions:

•  Superfund Senior Regional Management and Acquisition
   Council: The mission of this council is to provide guidance
   and direction to Superfund program managers implementing
   recommended improvements in management processes that
   promote consistent approaches to managing high quality
   cleanup projects. One of the council's emphases is to serve as
   a conduit for information transfer.

•  Grants Customer Relations Council:  The mission of this
   council is to provide a forum for discussing matters relating to
   the administrative management of assistance agreements. An
   objective of the council is to continually improve the Agency's
   assistance agreement processes and systems, emphasizing a
   preventative approach.

Although the Superfund Senior Regional Management and
Acquisition Council concentrates on contracting issues facing
Superfund, and the Grants Customer Relations Council focuses on
assistance agreements, little tune is devoted to LAG issues as part
of either workgroup. Since the Superfund program had almost
                                                                  Report No. 2001-P-00011

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EPA Participated
in Contractor
Qualifications
Process
$3.5 billion awarded in active lAGs as of September 2000,
incorporating lAGs and servicing agency qualifications as part of
those two council's missions c.  another TAG focus group could
better ensure that qualification issues are timely and fully resolved.

The Regions participated in the  contractor selection process with
USAGE, in accordance with RMD 2550D, which encourages
Remedial Program Manager participation. For example, Region 2
established a Contract Advisory Panel for the purpose of
discussing and selecting contractors that would be working on
Superfund lAGs with USAGE.  The Contract Advisory Panel
consisted of the USAGE Program Manager and the EPA Remedial
Program Manager. The Remedial Program Manager's
participation in this process is important to ensuring the IAG is
successfully completed. However, this process did not include
obtaining easily accessible contractor performance data.

The Regions did not obtain contractor performance data, in part
because the Directive does not specify how, or to what extent, the
Remedial Program Manager should participate in the contractor
selection process.  Additionally, the Directive does not identify
what sources are available to obtain contractor performance
information. There are two sources that Remedial Program
Managers could consider:

•   contractor performance results from other EPA Regions, and

•   contractor information used  by the servicing agency as part of
    its contract management function.

EPA project managers should obtain information on contractor
performance so they can: (1) ensure the contractor is capable of
performing specific tasks required in the LAGs, and (2) address and
resolve any identified performance issues prior to awarding lAGs.
Such information, which should be maintained either by EPA or its
servicing agency, would include:

•   audit reports of the contractor and/or servicing agency contract
    officials,

•   contractor evaluations prepared by the servicing agency, and
                                                                  'Report No. 2001-P-00011

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Conclusion
Recommendations
                          •   performance problems that are formally reported to Regional
                              Grants Management Offices by EPA project managers.

                          An additional source of information on prior contractor
                          performance is the National Institutes of Health Contractor
                          Performance System. This is a tool used by Federal agencies for
                          researching qualifications and performance history of contractors.
                          EPA Project Officers and Remedial Program Managers may detect
                          contractors with a prior history  of performance problems if they
                          begin using this system.
                          There is an increased risk that EPA could award LAGs to servicing
                          agencies with a history of poor performance unless Regions begin
                          using more available research tools. As previously noted, Region 5
                          selected the Bureau of Reclamation and its contractor for work at
                          Benton Harbor without taking into account performance problems
                          experienced with that servicing agency and contractor by another
                          Region. The Benton Harbor IAG was expected to take 2 years and
                          cost $2.7 million to complete, but the IAG cost $7.08 million and
                          the project is still not completed.  Although we did not determine
                          how much of the overrun was due to legitimate reasons versus poor
                          performance, some of the more than $4 million hi additional costs
                          could have been put to better use if qualifications (of both the
                          servicing agency and contractor) were confirmed prior to awarding
                          the LAG.
                          We recommend that OARM and OSWER:

                          1-1  Establish processes to: (a) review servicing agency
                               qualifications, (b) discuss LAG issues and servicing agency's
                               ability to monitor and control contractor performance, and (c)
                               report poor performance to the appropriate authorities.

                          1 -2  Direct Regions to follow guidance to document selection of
                               servicing agencies under their LAGs.
                                                                 ' Report No. 2001-P-00011

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Actions Taken
by Region
Agency Comments
and OIG Evaluation
As a result of our discussions, Region 2 agreed to document the
justification for selecting a servicing agency in all future Superfund
lAGs.  The Region 5 Section Chief for Remedial Response also
agreed that including such information was reasonable.

Further, Region 5 agreed to standardize their IAG format to include
documentation of the rationale used to select an LAG versus a
contract. Region 5 also agreed to document the requirement in an
internal control memo for distribution and use in training within
the Superfund Division. We believe these steps are positive, but
additional actions need to be taken to fully implement the
recommendations.
Although OSWER asserted that project officers should closely
monitor work under LAGs, they disagreed with the
recommendation to discuss contractor performance among Regions
because such discussions could lead to a potential de facto
debarment situation. OSWER considered evaluating the
performance of another Federal agency's contracting operations
and the performance of the other agency's contractor to be beyond
the scope and authority of project officers. It is OSWER's
contention that EPA was only responsible for justifying the
selection, not qualifications, of the servicing agency in its decision
memorandums.

OARM agreed with the underlying premises of the
recommendation that EPA needs to pay greater attention to
contractor performance on lAGs. However, OARM was also
concerned that such a process, if not properly structured, would
result in a de facto debarment of contractors outside of the
government-wide debarment and suspension system. OARM
warned that de facto debarment could result in contractors filing
lawsuits against Agency officials in then: individual capacities
alleging violations of due process rights.

We modified the report and recommendations after considering the
comments from OARM and OSWER, and consultation with our
legal counsel: We recognize that: (1) lAGs are agreements EPA
directly into enters with another agency and not the other agency's
contractor, and (2) contractors are entitled to due process of their
rights. However, EPA is not prohibited from discussing a

                9                      'Report No. 2001-P-00011

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                  servicing agency's ability to monitor and control contractor
                  performance among Regions.  If such discussions identify poor
                  performance, it should be shared among the Regions and reported
                  to the appropriate authorities for resolution without resulting in a
                  de facto debarment. Such discussions among the Regions are
                  important since EPA has the ultimate fiduciary responsibility to
                  safeguard the Superfund trust fund. In addition, there are tools
                  (i.e., audit reports, contractor evaluations prepared by servicing
                  agencies, performance problems reported to Regional Grants
                  Management Offices, etc.) that are available and could be
                  furnished to project officers hi order to evaluate another Federal
                  agency's contracting operations and the performance of the other
                  agency's contractor. These evaluations do not exceed the scope
                  and authority of project officers. Also, the EPA's IAG Project
                  Officer manual requires decision memorandums to include an
                  explanation of why the other agency was selected, and we believe
                  it is reasonable and prudent to expect a servicing agency's
                  qualifications to be part of such an explanation.
 Finding 2: IAG Terms and Conditions Generally Defined the
	Responsibilities of EPA and its Servicing Agencies         	

                  LAG terms and conditions generally defined the responsibilities of
                  EPA and its servicing agencies for all 18 lAGs reviewed. Also, all
                  of the RMD 2550D-required reporting requirements were included
                  in the lAGs in Regions 2, 6, and 7. However, the Region 5 LAGs
                  did not consistently include the following reporting requirements:

                  •   Weekly status reports
                  •   Upcoming activities
                  •   Budgeting on task-by-task basis
                  •   Key Problems

                  This resulted hi Region 5 not receiving necessary information to
                  manage projects.

                  RMD 2550D requires that specific project reporting requirements
                  be included hi each LAG, including: (1) holding weekly status
                  updates, and,- (2) submitting monthly progress rep'orts to EPA with
                  important information on work being accomplished under the LAG
                  (such as scheduled and completed work, cost, problems resolved,
                  key personnel changes, deliverables submitted, upcoming

                                  10                     'Report No. 2001-P-00011

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Recommendation
                           events/activities, and budget data on a task-by-task basis). The
                           information required under RMD 2550D is needed for the Project
                           Officer and Remedial Program Manager to actively plan and
                           manage their projects.

                           Regions 2, 6, and 7 included the required terms and conditions in
                           their lAGs because they had processes in place to ensure that the
                           terms and conditions were included. For example, these Regions
                           used standard language that incorporated all of the RMD 2550D
                           requirements as an IAG attachment. Region 5, however, has no
                           process to ensure that all requirements are  included in the IAG
                           prior to issuance. Region 5 Remedial Program Managers were
                           unaware of RMD 2550D and therefore did not include all of the
                           required terms and conditions in their lAGs.  As a result, they do
                           not receive needed information for monitoring assigned projects.
                           2-1   We recommend that Region 5 implement a process to ensure
                                that all of its lAGs contain the RMD 2550D elements.
Actions Taken
by OSWER
Agency Comments
and OIG Evaluation
OSWER stated that it also intends to work with the Grants
Administration Division to improve IAG and MOU terms and
conditions to address performance and oversight issues. We
believe OSWER's actions will further strengthen EPA's
administration and oversight of lAGs.
Region 5 concurred with our rinding and recommendation. Region
5 plans to make Superfund LAG project officers and technical staff
aware of the requirements of RMD 2550D by including the
requirements in an internal control memo and training to be
developed by a workgroup. The workgroup will be established in
the third quarter of Fiscal Year 2001 and the internal control memo
and training will be completed by the end of the first quarter of
Fiscal Year 2002.  We believe Region 5's comments and planned
corrective actions are responsive to our recommendation.
Therefore, no further response is required for Region 5.
                                          11
                                       'Report No. 2001-P-00011

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Finding 3:  EPA Generally Monitored lAGs
    in a Consistent and Effective Manner
        The Regions monitored their lAGs in a consistent and effective
        manner, with the exception of Region 5.  Three of the five lAGs in
        Region 5 were not monitored on a consistent basis, due to the lack
        of a process to ensure that monthly progress reports are sent to the
        Project Officer by the servicing agency. Without regular reviews,
        Region 5 is less likely to identify questionable billings and resolve
        other discrepancies hi a timely manner.

        RMD 2550C, requires that the servicing agency provide monthly
        progress and cost reports to the Project Officer. The Project
        Officer has the responsibility to use this data for monitoring,
        reviewing cost information, and resolving discrepancies identified
        hi the reports.

        For Region 5, Remedial Program Managers were directly receiving
        monitoring reports instead of Project Officers hi some instances,
        and thus Project Officers could not perform the required reviews.
        In other instances, neither the Project Officer nor Remedial
        Program Manager received the required reports. Region 5 had not
        clearly and formally established a process to ensure that the
        required reports are sent to Project Officers by the servicing
        agency.

        In 1998 Region 5's Contracts and Assistance Agreement Section
        recognized that there were problems with receiving monitoring
        information from USAGE.  The section chief worked with USAGE
        to correct the problem. However, monitoring reports are still not
        received on a timely and consistent basis by the Project Officer.

        Other Regions have used the monitoring reports to resolve
        discrepancies. For example, Region 2 identified costs that were
        inappropriately billed and paid to a servicing agency. A
        subsequent review determined that the incorrect billings occurred
        because of a problem with the servicing agency's accounting
        system, and the incorrect charges were resolved by crediting future
        billings.
                       12                       Report No. 2001-P-00011

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Recommendation
                           3-1   We recommend that Region 5 establish a process that ensures
                                monitoring reports are received and reviewed by both the
                                Project Officers and Remedial Program Managers.
Agency Comments
and OIG Evaluation        Region 5 concurred with our finding and recommendation.
                           Region 5 plans to establish a workgroup in the third quarter of
                           Fiscal Year 2001 that will review how to improve the monitoring
                           process of lAGs in a consistent and effective manner. The
                           workgroup will consider other Regional processes and implement
                           its new process by the end of the first quarter of Fiscal Year 2002.
                           We believe R5's comments and planned corrective actions are
                           responsive to our recommendations. Therefore, no further
                           response is required for Region 5.
                      Finding 4: The 1991 OSWER Directive
                         Was Inconsistently Implemented	.

                           The 1991 OSWER Directive3, which provides policy on assigning
                           remedial work, was out of date and not consistently used by the
                           Regions.  This 10-year-old policy was not consistently used due to
                           ambiguities and the implementation of new EPA Superfund
                           procurement strategies.

                           The purpose of the 1991 OSWER Directive was to provide a
                           policy for the Regions to use when assigning remedial work
                           between EPA's remedial contractors and USAGE through lAGs.
                           The policy states that: (1) remedial actions over $15 million should
                           be assigned to USAGE; and, (2) assignment of projects to the
                           Alternative Remedial Contracting Strategy or USAGE should not
                           be based solely on remedial action value.  Subsequently, OSWER
                           and OARM introduced a new Contracts 2000 strategy that outlined
                           a new menu approach that allowed Regions discretion when
                           selecting a procurement option.
       3The OSWER Directive is entitled, "Revisions of Policy Regarding Superfund Project Assignment between
Alternative Remedial Contracting Strategy Contractors and the U.S. 'Army Corps of Engineers."

                                          13,                     'Report No. 2001-P-00011

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Recommendation
                           Our review showed the four Regions did not consistently use the
                           Directive. For example:

                           •   Region 6 considered the Directive as a planning option.
                              Nonetheless, they submitted waivers to OSWER that justified
                              why they did not use USAGE for projects over $15 million.

                           •   Region 7 used the Directive as a planning tool, but did not use
                              it as the sole basis for awarding lAGs to USAGE.

                           •   Region 2 believed the Contracts 2000 Strategy superseded the
                              Directive's dollar thresholds.

                           •   Region 5 did not find the Directive relevant to its current work,
                              since it did not have active lAGs exceeding the $15 million
                              threshold.

                           OSWER officials stated the Contracts 2000 Strategy did not
                           supersede its 1991  Directive. They said the 1991 Directive was
                           intended to provide flexibility in how Superfund remedial work
                           was assigned.  OSWER explained that its Directive listed factors
                           (such as dollar value) that needed to be considered when assigning
                           Superfund work. However, it did not require work to be assigned
                           to USAGE based solely on dollar thresholds.

                           The ambiguity of the Directive, in conjunction with the new
                           procurement strategies in the Contracts 2000 Strategy, resulted in
                           Regions inconsistently implementing the Directive. It is a good
                           business practice to periodically review issued policies to ensure
                           that such policies will meet the goals and strategies of its
                           organization.
                           4-1  We recommend that OSWER review and update its 1991
                               OSWER Directive to ensure its goals and strategies are met.
Action Taken
by OSWER
During our monthly meetings with the OSWER and the Regions,
OSWER agreed that the Directive should be reviewed and updated.
                                                                  'Report No. 2001-P-00011

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Agency Comments
and OIG Evaluation       OSWER concurred with our finding and recommendation.
                          OSWER established a subgroup under the Design/Construction
                          Phase II workgroup to revise the 1991 OSWER directive entitled
                          "Revisions of Policy Regarding Superfund Project Assignment
                          between Alternative Remedial Contracting Strategy Contractors
                          and U.S. Army Corps of Engineers." We believe OSWER's
                          comments and planned corrective actions are responsive to our
                          recommendations. However, we believe a date for when such
                          action will be completed is needed to ensure its successful
                          implementation.
                  Finding 5: Memorandums of Understanding
                   with Federal Agencies Need Improvement	

                          The Memorandums of Understanding (MOUs) that EPA entered
                          into with three servicing agencies to establish terms and conditions
                          for the management of Superfund IAGs did not include some terms
                          and conditions that would be useful for safeguarding the Superfund
                          Trust Fund. This condition occurred because EPA has no
                          applicable guidance governing MOUs for Superfund lAGs. As a
                          result of these omissions, the EPA Superfund Trust Fund is at risk
                          of not being reimbursed when a servicing agency or contractor
                          performs poorly.

                          For example, there were no terms and conditions that required:

                          •   Audits of the servicing agency's contractor upon completion of
                             the Superfund LAG.

                          •   Regular meetings between EPA and the servicing agency on a
                             national level to discuss IAG performance issues.

                          •   The servicing agency to identify recent reviews and audits of its
                             contracting practices, and a contractor performance system
                             used to evaluate contractors.

                          Since the ultimate fiduciary responsibility of safeguarding the
                          Superfund Trust Fund remains with EPA, a condition of recourse
                          for poor performance should be included in all MOUs entered with
                          servicing agencies performing under a Superfund IAG.
                                         15                     'Report No. 2001-P-00011

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Recommendations
Agency Comments
and OIG Evaluation
                          Currently, the MOU with the U.S. Coast Guard is the only MOU
                          that included a condition for recourse when a servicing agency
                          poorly performed its duties. For example, the MOU with the U.S.
                          Coast Guard stated that:

                             If, based on an audit by the Department of Transportation
                             Inspector General, the  U.S. Coast Guard determines that
                             any direct or indirect costs charged to Superfund are
                             unallowable, the U.S. Coast Guard will immediately notify
                             the EPA and promptly reimburse Superfund.

                          During our review, we also noted that the Assistant Administrator
                          for OSWER signed MOUs with the USAGE in  1983, the Bureau of
                          Reclamation in 1987, and the U.S. Coast Guard in 1994. Since the
                          Assistant Administrator for OARM issues IAG policy, we believe
                          the MOU process could be strengthened by also having that
                          Assistant Administrator review and approve the MOUs.
                          We recommend that OARM and OSWER:

                          5-1  Update all MOUs for Superfund lAGs to ensure that the
                               language is consistent.

                          5-2  Require the signature of both the OSWER and OARM
                               Assistant Administrators on all MOUs.

                          5-3  Develop terms and conditions to be included in all MOUs
                               that ensure:  (a) final contractor audits will be performed of
                               all individual LAGs, and unallowable costs are reimbursed to
                               EPA; (b) periodic meetings are held by national servicing
                               agency officials to address any LAG performance issues; and,
                               (c) servicing agencies will provide audit and other pertinent
                               contract information to EPA, upon request, including
                               contractor information from its contractor performance
                               system.
OSWER concurred with our finding and recommendations.
OSWER initiated a plan to revise the MOUs between EPA and
other Federal Agencies. OARM, however, did not respond to the
finding and recommendations.  We believe OSWER's comments
and planned corrective actions meet the intent of our
                                         16
                                      ' Report No. 2001-P-00011

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recommendations.  However, OSWER should establish milestones
that designate when the corrective action will be completed. In
addition, these corrective actions should be coordinated as a joint
effort between OSWER and OARM to ensure the revised MOUs
Incorporate critical elements of both Superfund cleanup activities
and prudent IAG management practices.
                17                     'Report No. 2001-P-00011

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                                        Exhibit A:
                        Environmental Accomplishments
Part of our activity during this audit focused on identifying the environmental benefits that
occurred with each IAG.  We defined "environmental accomplishments" as the specific activities
that were included as part of each site's remedial action, as defined under the Record of
Decision. Generally, these were output events.  If possible, we included expected environmental
outcomes as part of site remediation.  All 18 lAGs accomplished improvements to the
environment according to EPA records.  Below, in matrix form,  is a summary of
accomplishments that were recorded hi each Region:

Region 2
                                 ^ v  Łf   **/%Ł"•-  " f  & '  *'•*    t "     >   /'%.
                                    ,.' \t Environmental Accomplishments
 U.S. Radium
34,000 cubic yards of radium contaminated material was removed.
 Lipari Landfill
Extracted and treated approximately 100 million gallons of on-site landfill leachate.
Treated approximately 105 million gallons of off-site ground water.
Excavated 128,000 tons of contaminated soils for the Chestnut Branch Marsh and
backfilled the excavated area with clean fill.
Dredged and removed more than 85,000 tons of sediments from Alcyon Lake.
Reduced the landfill leachate migration to off-site areas by 95%.
 GCL Tire & Treat
Excavated and treated over 82,000 cubic yards of contaminated soil and debris.
Decontaminated and disposed of two 30,000 gallon steel treatment tanks.
Decontaminated and disposed of 5,800 gallons of free product.
Decontaminated and disposed of asbestos containing material.
Decontaminated and disposed of 1,900 tons of creosote treated wood chips.
Decontaminated and disposed of recycled 85 used tires.
 Grand Street
Relocation of all residents
 Latex Industries
Recycled or treated over 130,000 gallons of contaminated liquids (including flammable
organic liquids and PCB liquid wastes).
Removed over 1,200 drums and 22 underground tanks.
Destroyed 1,525 shock-sensitive materials.
Removed 37 truckloads of non-hazardous combustible trash.
Incinerated 12,048 gallons of flammable PCB solids.
Sent 113,050 gallons of non-flammable PCB solids to an off-site landfill.
Demolished 2 contaminated buildings (39,400 square feet) and disposed of the debris
off-site.
Removed and disposed of 30 processing vats.
                                              18
                                                    Report No. 2001-P-00011

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Region 5
    IAG Name
                                                                                          Exhibit A
                                                                                         Page 2 of3
                     Environmental Accomplishments
 Ott Story/Cordova
1,397,220 pounds of contaminants removed from 1,524,240,000 gallons treated.
 Arcanum Iron &
 Metal
30,000 tons of battery casings removed from the site.
Lead levels at the start of project were 20,000 ppb - 72,000 ppb and now are under 400
ppb (which is the maximum level for residential use).
Fanners grow soybeans on the backfilled soil.
 Benton Harbor
200 5-gal containers of laquer and other organics removed.
56 drums of radium-painted gauges removed.
82 roll-offs of shredded material below 5 picoCuries/gm for radium shipped for disposal.
24 roll-offs of shredded debris exceeding  5 picoCuries/gram (Ra-226) that were
hazardous waste (cadmium) shipped for disposal.
 Allied Paper
150,000 cubic yards of PCB-contaminated residual pulp waste, soil and sediment was
removed from the 22 acre site.
Approximately 8 million gallons of contaminated water were treated and discharged.
271,000 tons of clean backfill material were imported and placed within the excavation
limits.
 Rapid Response
44,836 tons of contaminated soil and sediment were excavated from Pettibone Creek,
plus 38,094 tons of contaminated soil were stabilized.
A water pipeline to a nearby community was completed.
1,200 cubic yards of soil were excavated and sent to a landfill. Pollutant levels in water
samples were lowered, which resulted in not needing municipal water hookups at well
water homes.
                                                 19
                                                       'Report No. 2001-P-00011

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                                                                                          Exhibit A
                                                                                         Page 3 of 3
Region 6
    lAGName
                    _, Environmental Accomplishments
 Ouachita-Nevada
 Wood Treaters
Contaminated soils were excavated, removed, and disposed of properly.
Contents of drum waste were mixed with the excavated site soils and disposed of
properly.
Ground storage tanks were also emptied, decontaminated, and scrapped.
 Bayou Bonfbuca
Excavation and onsite incineration of creosote waste piles and heavily contaminated
bayou sediment.
A Resource Conservation and Recovery Act cap was placed over residues from the
incinerator and residual surface soils.
Pump/ treatment/re-injection of contaminated groundwater.
 Agriculture Street
 Landfill
The latest Pollution Report prepared by the On-Scene Coordinator, for the week of
September 18,2000, noted that Operable Units 1 and 3 were completed in Phase I.
Operable Unit 2, residential area, had 42 homes remaining for cleanup.  Of the 42 homes,
27 had been given recent access for cleanup. Construction/cleanup of these 27 homes was
expected to take 14 weeks.  The latest USAGE Project Report, dated December 2000,
noted that 31 access agreements had been secured, with 25 homes completed by
Christmas.
 Southern
 Shipbuilding
The incineration for Southern Shipbuilding was completed and all equipment associated
with the remedial action was demobilized hi December 1996.
 American Creosote
 Works
56,544 tons of PCB and creosote-contaminated soil incinerated.
In-situ biological treatment of contaminated soil, and 26.7 million gallons of contaminatec
groundwater.
Remedy will reduce groundwater contamination to an acceptable level.
Region 7
lAG.Name,,
Oronogo-
Duenweg
Cherokee
County
Omaha Lead
',"-,-, , /*-v>-> >" ,-,: ,-„; *t . 2 /*•• - . / v sr ' • ', *
"f r'f~ ;*Ť ', Environmental Accomplishments • ,*.,'"Ł•"' , VŤr ^! i * ,
• 1,998 properties have been excavated for lead-contaminated soil.
• A total of 602 residential homes had been remediated, thereby reducing public exposure to
soils with elevated lead and cadmium concentrations, thus reducing public exposure to soils
with elevated lead and cadmium concentrations.
• 135 properties have been excavated and backfilled, and have been planted with sod.
• Lead impacted soils have been removed from thirty properties.
• Preliminary screening by EPA indicated that some 211 properties out of the 348 tested had
elevated lead concentrations.
                                                 20
                                                       Report No. 2001-P-00011

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     Exhibit B:
IAG Cost Summary

fReglori&^j^S *





Region 5





Region-'d , ',_""





Region? -"„""



Total, ^ ;.-

?$-' '.^?3Ž&'$"S%&%
U.S. Radium
Lipari Landfill
GCL Tire & Treat
Grand Street
Latex Industries
./ 'i'i '•$••> 3k &Ť~
Ott Story/Cordova
Arcanum Iron & Metal
Benton Harbor
Allied Paper
Rapid Response
*Ť. •>" *~ •*"*"% ;V ^ x\
t1-' * ?
Ouachita-Nevada
Wood Treaters
Bayou Bonfouca
Agriculture Street Landfill
Southern Shipbuilding
American Creosote Works
- y : -$ %7 '
Oronogo-Duenweg
Cherokee County
Omaha Lead
'-; , v",;."-*"*,^. • • -\L
.; 'V> *-&: &*J
^^j^aKtOJ CCt^W U ID Dfefe^tis?--
^^PSSS^**1 - *^<-w^f rj-^sse^-W^JJfSa^.*^ :
*?-fi::^ -'-^ •-Ť%'.
^"'v. ,- ^f -';'•' -- .' ,"i-'-,i ' •
DW 9694 1732-01
DW 9694 1594-01
DW 9694 1783-01
DW 9694 1785-01
DW 9694 178 1-01
,•!;. * "!^~-^ '.
DW 96947932-01
DW 96947813-01
DW 96947782-01
DW 96947885-01
DW 96947840-01
^ •* * "*"„ -^j* ' *
. • t,'
~t*
DW 14950232-01
DW 96934070-01
DW 96950261-01
DW 969502 10-01
DW 96950 15 1-01
' Kx -. ť> s ,<> > V
*"""/ v l •><•>
DW 96952 114-01
DW 96952 11 1-01
DW 96952 155-01
. *•" c ' ' ^ „- #i, '/ •-
J -' ' i- '*' " * '
'K$tiiii!miliwn's)|
!,V^,- *Z3f3W?';.-?Z%!&SŽrJr>
i.?: !^ c^| :$
$ 85.12
40.94
17.00
12.48
27.00
>-* ,:•'
6.00
.08
7.08
9.50
6.05
-
2.20
133.00
23.00
22.67
19.10
i f^^A **
^ ^^""r1 .''•Ť*
27.31
12.48
3.59
1-V^;,;$?45A4:60-
         21
Report No. 2001-P-00011

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                                   Exhibit C:
                     Details on Scope and Methodology
Fieldwork was conducted by EPA-OIG's Central and Northern Divisions in Regions 2, 5, 6, and
7 from October 2000 to February 2001, and consisted of the following:

Documentation review and analysis

•  EPA Resource Management Directive 2550C
•  EPA Resource Management Directive 2550D
•  EPA lateragency Agreement Policy and Procedures Compendium
•  Agency Government Performance and Results Act Goals 5 and 10
•  Regions 2 and 5 Federal Managers' Financial Integrity Act Reports for 1998 and 1999
•  Region 6 Fiscal Year 2000 Mid-Year Report, and Region 7 Fiscal Year 2000 Report
•  LAG file documentation: Records of Decision, progress reports, Action Memoranda, and
   correspondence
•  Regional Superfund Division organization charts

Personnel Interviewed

•  EPA personnel: On-Scene Coordinators, Remedial Program Managers, Project Officers, and
   supervisors located in the Regions and at Headquarters.
•  Other personnel:  Servicing agency personnel.

Sample Selection

We reviewed a total of 18 active or recently completed lAGs as part of this audit. The LAGs in
each Region were selected based upon the following criteria:

1. High dollar value of the LAGs
2. Variety of servicing agencies

We initially selected 20 LAGs from EPA's Grants Information Control System data base, which
listed a total of 915 LAGs with a combined value of about $3.5 billion. We discussed our sample
selection with each Region's management, and adjusted our sample to ensure the LAGs we
selected met our criteria and provided results that would answer our objectives. To help us
address our objectives, we reviewed three MOUs, between EPA and the USAGE, Bureau of
Reclamation, and U.S. Coast Guard, as they pertained to lAGs.

We conducted our audit work at OSWER and OARM, and at Regions 2, 5,6, and 7. We also
made a site visit to the Benton Harbor Superfund site hi Michigan.
                                        22                      Report No. 2001-P-00011

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                                                                             Exhibit C
                                                                            Page 2 of2

The audit was performed in accordance with the Government Auditing Standards issued by the
Comptroller General of the United States as they relate to economy and efficiency and program
results audits. We reviewed internal controls as required by the Government Auditing Standards.

Prior Audit Coverage

EPA OIG Report No. 6400019, "Region 8 Needed to Further Improve Interagency Agreement
Oversight to Ensure Efficient Summitville Superfund Site Cleanup," was the result of a March
1995 Congressional request, in which a Colorado Congressman expressed concerns with the
Bureau's contractor and the Bureau's oversight of the contractor at the Summitville site. While
Region 8 had reduced the hazardous waste risks to the environment and the public, EPA did not
adequately oversee and monitor its servicing agency (the Bureau) to control costs and ensure
efficient cleanup.  The report recommendations included that EPA evaluate the suitability of the
Bureau's Upper Colorado Regional Office to manage the Summitville site and any other future
EPA Superfund cleanup activities.

EPA OIG Report No. 2000-P-000004, entitled "Timely Deobligation of Interagency Agreement
Funds," reviewed the Agency's ability to timely deobligate unliquidated LAG balances for
reprogramming for use by other EPA programs. While EPA had policies and procedures in place
to timely deobligate funds, the program offices and the cognizant grant offices did not
consistently follow the procedures. This resulted in IAG funds remaining obligated to projects
that were either completed or cancelled.

EPA OIG Report No. 2000-P-000029, entitled "Follow-Up on Headquarters Interagency
Agreements," reported that project officers were adequately monitoring work under their lAGs.
However, the Project Officers needed to: (1) ensure they adequately documented goods and
services received, and (2) obtain more detailed payment information under disbursement lAGs.
Also, OIG observed that the Agency's directives needed to be updated and/or consolidated, and
that training related to managing lAGs needed to be expanded to adequately cover the material in
lAG-related directives.
                                          23                      'Report No. 2001-P-00011

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                                 Appendix 1:
                      OSWER Response to Draft
                                                                                Page 1 of2
               UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                              WASHINGTON, DC 20460

                                   MAY 31 2001
                                                                      OFFICE OF
                                                             SOLID WASTE AND EMERGENCY
                                                                     RESPONSE
MEMORANDUM

SUBJECT:      Response to OIG Draft Audit Report
               "Superfund Interagency Agreements Audit"

FROM:         Michael H. Shapiro
               Acting Assistant Administrator

TO:            Leah L. Nikaidoh, Audit Manager
               Northern Audit Division

        The Office of Solid Waste and Emergency Response appreciates the opportunity to
comment on the subject draft report. The monthly conference calls were very helpful hi keeping
us informed of the status of the audit, and we appreciated seeing an advanced copy of the draft
report for review and comment. The Grants Administration Division, Office of Administration
and Resources Management, will be forwarding their comments separately.

        We are pleased that your summary of audit findings  state that we have effective controls
in place to ensure that Superfund Interagency Agreements (LAGs) achieve expected
environmental results in a timely, cost-effective, and efficient manner. We do, however,
continue to have concerns about your suggested enhancements to our LAG process, specifically
the recommendation to determine the qualifications of servicing agencies and then- contractors
and to discuss LAG issues and servicing agency/contractor performance information among
regions.  While monitoring the performance of work performed is crucial to good project
management, barring contractors from work based on informal discussions could lead a project
officer into a defacto debarment situation. In addition, the report is asking LAG project officers
to exceed the scope of their authority in both evaluating the performance of another federal
agency's contracting operations and the performance of the other agency's contractors.

        EPA uses other agencies to perform work because of their expertise and the  cost savings
of using their established infrastructure.  We expect that the other agency is capable of
performing the work. We only justify our selection, not the qualifications, of the other agency in
our decision memorandum. This is in line with EPA guidance. Every Federal Agency has
responsibilities delegated to them under Law and Executive Order 12580. EPA cannot mandate
how another agency performs its work, including how it awards and manages contracts. Even
though we cannot tell another agency how to do its work, there is no doubt that our project

                             Internet Address (URL) • http://www.epa.gov
           Recycled/Recyclable • Printed with Vegetable Oil Based Inks on Recycled Paper (Minimum 30% Posteonsumer)
          Note: The original was signed by Stephen D. Luftig for Michael H. Shapiro.
        U.S. EPA Headquarters Library  24                         Report No. 2001-P-OOOll
                Mail code 3201
        1200 Pennsylvania Avenue NW
            Washington  DC 20460

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                                                                                Appendix 1
                                                                                 Page 2 of2
officers should be monitoring the performance of the work under their LAGs closely and
reporting any issues and concerns to their IAG specialist and the Federal agency involved. What
we can, and will do, is ensure that at our meetings with other Federal agencies, including the U.S.
Corps of Engineers, we will review the performance of ongoing work and raise any performance
issues to the other Federal Agency's management. Also, we intend to work with the Grants
Administration Division to improve LAG and memorandums of understanding (MOU) terms and
conditions to address performance and oversight issues.

        We agree that the 1991 OSWER Directive entitled "Revisions of Policy Regarding
Superfund Project Assignment between Alternative Remedial Contracting Strategy Contractors
and the U.S. Army Corps of Engineers" needs to be revised, and we established a subgroup under
the Design/Construct Phase II workgroup to do so. We also agree that the memorandums of
understandings between EPA and other Federal Agencies should be revised, and we will begin
establishing a plan to revise them.

         I am attaching the comments we submitted on the preliminary draft report for your
reference. The following two corrections should be made to the final report: 1) it should be
noted in the background section that the project officers and remedial program managers are
within the regions, not OSWER; and 2) the workgroups referenced in the first finding are not
workgroups, but councils. I am also attaching comments we received from the Bureau of
Reclamation.

        If you have any questions concerning this response, please contact Barbara McDonough
of the Acquisition Resources Management Staff at 202-260-6674 or Johnsie Webster, OSWER
Audit Liaison, at 202-260-4475.

Attachments

cc:
David O'Connor
Barbara McDonough
Ken Skahn
John Riley
Rich Troast
Scott McMoran
David Ullrich
Joe Rauscher
                                         25                         'Report No. 2001-P-00011

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                                 Appendix 2:
                       OARM Response to Draft
                                                                                Page 1 of2
               UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
 ^M^ g                      WASHINGTON, DC 20460

                                    JUN162001
                                                                       OFFICE OF
                                                                    ADMINISTRATION
                                                                    AND RESOURCES
                                                                      MANAGEMENT

MEMORANDUM

SUBJECT:      Comments on Draft Report-Superfund Interagency Agreements Audit

FROM:         David J. O'Connor
               Acting Assistant Administrator
               Office of Administration and Resources Management

TO:            Leah L. Nikaidoh
               Audit Manager
               Northern Audit Division

       Thank you for the opportunity to comment on the Superfund Interagency Agreements
(LAGs) draft audit report issued on April 27,2001. I understand that the Office of Solid and
Hazardous Waste has provided separate comments on the report.

       I am very encouraged by the report's finding that the Agency is generally managing
Superfund LAGs in an effective manner. I have one comment on Recommendation 1-1, which
proposes, in part, that EPA establish a process to review Superfund contractors' performance and
qualifications and share the information among Regions.

       I agree with the premise underlying Recommendation 1-1 that EPA needs to pay greater
attention to contractor performance to ensure that it receives the goods and services it orders
through LAGs. At the same time, I am concerned that the proposed process, if not properly
structured, would result in the "de facto" debarment of contractors outside of the government-
wide debarment and suspension system. This could prompt contractors to file lawsuits against
Agency officials in their individual capacities alleging violations of due process rights.

       Under these circumstances, I believe that the process proposed under Recommendation 1-
1 should be revised to address potential "de facto" debarment issues, including integrating the
process with EPA's debarment and suspension program. Staff from the Office of Grants and
Debarment are available to work with you to develop the necessary changes.

       If you have any questions about these comments, please contact Howard Corcoran on
(202) 564-1903,  Scott McMoran on (202) 564-5376, or Robert Meunier, EPA's Debarring and
Suspending Official, on (202) 564-5399.

                             Internet Address (URL) • http://www.epa.gov
          Recycled/Recyclable • Printed with Vegetable Oil Based Inks on Recycled Paper (Minimum 30% Postconsumer)
                   Note: The original was signed by David J. O 'Connor.


                                        26                        ' Report No. 2001-P-00011

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                                                                         Appendix 2
                                                                          Page 2 of 2
cc: Jane Moore
   Marty Monell
   Sandy Womack-Butler
   Paige Peck
   Judy Davis
   Barbara McDonough
   Mike Shapiro
   Mark Bialek
   ^Howard Corcoran
   Scott McMoran
   Robert Meunier
   John Showman
   David Osterman
                                     27                      'Report No. 2001-P-00011

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                                Appendix 3:
                      Region 5 Response to Draft
                                                                             Page 1 of2
               UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                                    REGION 5
                          77 WEST JACKSON BOULEVARD
                              CHICAGO, IL 60604-3590

                                  30 MAY 2001

                                                   REPLY TO THE ATTENTION OF
MEMORANDUM

SUBJECT: Response to Draft Audit Report on
          Superfund Interagency Agreements

FROM:    David A. Ullrich
          Acting Regional Administrator

TO:       Leah L. Nikaidoh, Audit Manager
         Northern Audit Division

Thank you for the opportunity to review and comment on the subject draft audit report. Our
response to the specific audit recommendations pertaining to Region 5 is attached.  I would also
like to thank you for the opportunity for my staff to meet regularly with your audit team in person
or on conference calls as the audit progressed.

If you have any questions about this response, please contact Cindy Wakat at (312) 886-7338.
                                            David A. Ullrich
Attachment

cc:  Michael Shapiro, Acting Assistant Administrator (OSWER)
    David O'Connor, Acting Assistant Administrator (OARM)
          Recycled/Recyclable • Printed with Vegetable Oil Based Inks on Recycled Paper (Minimum 30% Postconsumer)
         Note: The original was signed by Norman Niedergang for David A. Ullrich.


                                       28                       /Report No. 2001-P-00011

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                                                                                Appendix 3
                                                                                 Page 2 of 2
                      REGION 5 RESPONSE TO DRAFT AUDIT
          REPORT ON SUPERFUNDINTERAGENCY AGREEMENTS flAGs)

Recommendation 1-2:  Direct Regions to follow guidance to document selection of servicing
agencies under the LAGs.

Planned Corrective Actions:

We~plan to standardize our format to include documentation of the rationale used to select an
IAG versus a contract. We will also document the requirement in an internal control memo for
distribution and use in training within the Superfund Division.  We will establish a workgroup
during the third quarter of Fiscal Year (FY) 2001 that will include these tasks and complete the
revised format and internal control memo by the end of the first quarter of FY 2002.
Recommendation 2-1:  We recommend that Region 5 implement a process to ensure that all of its
lAGs contain the RMD 2550D elements.

Planned Corrective Actions:

Region 5 will make Superfund IAG project officers and technical staff aware of the requirements
of RMD 2550D by including the requirements in an internal control memo and training to be
developed by the workgroup referred to in our response to Recommendation 1-2. As stated
above, the workgroup will be established in the third quarter of FY 2001 and the internal control
memo and training will be completed by the end of the first quarter of FY 2002.
Recommendation 3-1:  We recommend that Region 5 establish a process that ensures monitoring
reports are received and reviewed by both the project officers and remedial program managers.

Planned Corrective Actions:

The same workgroup referred to in the planned corrective actions above will also be directed to
review how to improve Region 5's monitoring of lAGs in a more consistent and effective manner.
The workgroup  will consider other regions' processes and develop a process that will work
within the structure and context of Region 5.  The expected time frame for completion is the same
as stated hi our responses above.
                                         29                         'Report No. 2001-P-00011

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                                  Appendix 4:
                              Report Distribution
Office of Inspector General
      Inspector General

Headquarters Office
      Assistant Administrator for Office of Solid Waste and Emergency Response (5101)
      Assistant Administrator for Office of Administration and Resources
             Management (3101)
      Agency Followup Official (2710A)
      Agency Audit Followup Coordinator (2724A)
      Audit Followup Coordinator for Office of Solid Waste and Emergency Response (5103)
      Audit Followup Coordinator for Office of Administration and Resources
             Management (3102)
      Associate Administrator for Congressional and Intergovernmental Relations (1301A)
      Director, Office of Regional Operations (1108 A)
      Associate Administrator for Communications, Education, and Media Relations (1101 A)
      Director, Grants Administration Division (3903A)

EPA Region 5
      Director, Resources Management Division
      Director, Superfund Division

Regional Offices
      Regional Administrators
      Regional Public Affairs Offices
      Audit Followup Coordinator for Regions 2,5,6, and 7

Note: Report distribution -was done electronically. Each action official was also provided with
a hard copy of this report. Additional hard copies are available, upon request.
                                         30                     'Report No. 2001-P-00011

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