vvEPA
             United States
             Environmental Protection
             Agency
           Office of
           Solid Waste and
           Emergency Response
DIRECTIVE NUMBER:  9225.1-01
TITLE: Procurement Under Preauthorization/Mixed Funding
              APPROVAL DATE:
              EFFECTIVE DATE:
              ORIGINATING OFFICE
              0 FINAL
              D DRAFT
               STATUS:
              REFERENCE (other documents):
            4/19/89
            4/19/89
            -  Office of Solid Waste
 OSWER     OSWER     OSWER
/£   DIRECTIVE   DIRECTIVE   Di

-------
                             •jnitea Slues environmental ?iieciion Agency
                                    Wasmngton. DC 20*60
                   OSWER Directive Initiation Request
                                   2. Ortqtniter information
                                                               ' Directive Ngmoer
                                                                 9225.1-01
       Name of Comae: Person
                Bill Ross
                               Man Cooe
                               : OS-230
                                                                    i leteoncre Coce
HSCD
       3. r.ne
                Procurement Under Preauthorization/Mixed Funding
       4. Summary of Directive (inciuoe onei statement ot purpose;
                Assists regions  in clarifying procurement procedures that claimants (1) woulc
                be required to implement under forthcoming kCERCLA Response Claims
                Procedures; and  (20 may used in order  to assure that the costs for
                which their claims are made against the Hazardosu Substance Sukperfund
                           ._
       5. Keyworos  Superf urd , CERZLA, SARA
oa. Does This Directive Superseae Previous Qirecuve(S)?


b. Does It Supplement Previous Oireaive(s)?
                                              No
                                              No
     Yes   What directive (number, title)



     Yes   What directive (number, title)
        Draft Level
           A - Signed by AA/OAA
                          8 - Signed by Office Director
      C - For Review & Comment
0 - In Development
8.
Document
to
be
distributed
to
States
a
by Headquarters?
X

v« n
No
      Thl> H«qu««t Meete OSWER Directive* System Format SUntKraa,
      9. Signature ol Lead Office Directives Coordt»4t
                              'V&'
                 Betti C. Van^SpsOERR DirectfiXfes' Coordinator
                                                              Date
                                                                    4/19/89
      10. N»me »na Title ol Aoprovmg OHioai                                        iDatt
                 H. Longest & Bruce Diaironcl, Office Directors, OERR & o|jPE   4/19/89
      EPA Form 1315-17 (Rev. 5-67) Previous eCitions are oosoiete.
   OSWER           OSWER                OSWER               O
VE     DIRECTIVE          DIRECTIVE         DIRECTIVE

-------
 r—,~  *
5SSZ/
*
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
           WASHINGTON, O.C. 20460
                             APR I 9 1989
                                                           OFFICE OF
                                                   SOLID WASTE AND EMERGENCY RESPON!
  MEMORANDUM
  SUBJECT:
  FROM:
  TO:
Procurement Under Preauthorization/Mixed Funding
OSWER Directive  9225.1-01
Henry L. Longest  II,  Director
Office of Emergency and  Remedi
                                                Response
Bruce M. Diamond,  Director;
Office of Waste  Programs  Enforcement

Regional Administrators
Regions I-X
  PURPOSE

       The purpose of this interim guidance is to  assist  the  Regions
  in clarifying procurement procedures that claimants:  (1) would be
  required to implement under the forthcoming CERCLA Response Claims
  Procedures; and  (2) may use in order to. assure that the costs  for
  which their claims are made against the Hazardous Substance
  Superfund  (the Fund) will be reimbursed by EPA.

  INTRODUCTION AND BACKGROUND

       Section 111 of the Comprehensive Environmental Response,
  Compensation, and Liability Act of 1980 (CERCLA), as  amended,
  authorizes certain persons to seek reimbursement for  response  costs
  incurred in carrying out the National Contingency Plan  (NCP).
  Section 112 of CERCLA directs the President  (later delegated to EPA
  by Executive Order 12580) to establish the forms and  procedures for
  filing claims against the Fund.  The proposed CERCLA  Response
  Claims Procedures are not expected to- be published in the Federal
  Register until later in 1989 and will not be final until the final
  NCP is effective.  Since we intend to preauthorize claims in the
  interim, EPA is  issuing this guidance to clarify various pro-
  curement procedures that potential claimants may use  in planning

-------
                                        OSWER Directive 9225.1-01

and carrying out preauthorized response actions.   Until the CERCLA
Response Claims Procedures are promulgated,  EPA will establish the
terms and conditions for reimbursement of individual claims through
a Preauthorizatipn Decision Document (PDD).   These PDDs govern all
"claimants" including potentially responsible parties (PRPs),- other
non-PRP private parties, and States or their political
subdivisions submitting claims as PRPs.

     Preauthorization of a claim under the authority of section
lll(a)(2) of CERCLA creates neither a Federal contract with, nor
Federal assistance to a claimant.  Accordingly, neither Federal
acquisition regulations regarding procurements nor procurement
regulations applicable to recipients of grants or cooperative
agreements apply to claimants.  EPA requires only that claimants'
procurement practices be consistent with sound business judgement
and good administrative practices, and that they maintain all
records, documents, and other evidence that supports claimed costs.
These records shall be maintained in accordance with generally
accepted accounting principles and practices consistently applied.
However, pending promulgation of the Response Claims Procedures,
both current and future PDDs hold claimants to three major
principles: (1) Their procurement transactions must provide to the
maximum practicable extent open and free competition in selecting
contractors, must not unduly restrict or eliminate competition,
and, where applicable, must select the lowest responsive,
responsible bidder; (2) They may award contracts to persons on the
List of Parties Excluded from Federal Procurement, or Non-
Procurement only with EPA's prior approval; and (3) They must
include in all fixed-price contracts for construction a "differing
site conditions" clause, unless EPA waives the requirement.

     Claimants and potential claimants have asked for guidance on
the meaning of "sound business judgement and good administrative
practices," or other aspects of the above principles in an effort
to reduce the risk that EPA may subsequently find their costs
ineligible for reimbursement.  Unless expressly provided in the
PDD, claimants are not required to follow the procurement
procedures described below in order to receive reimbursement from
the Fund.  The procedures are offered only as a model and are the
same as those reflected in EPA procurement guidance for State-lead
response actions.  See "Procurement Under Superfund Remedial
Cooperative Agreements," OSWER Directive 9375.1-11 (June 1988)
 (hereinafter referred to as the "State Procurement Guidance").
Claimants may be guided by these procedures in proposing
procedures in their request for preauthorization and in carrying
out their own procurements once the response action is
preauthorized by EPA.  Each procurement method e.nd contract type
may be used under the appropriate circumstances.   OERR is develop-

-------
                                        OSWER Directive 9225.1-01
ing further guidance for potential claimants which explains the
factors to be considered and the limitations of each type and
method.

METHODS OF PROCUREMENT

     In carrying out preauthorized removals, remedial
investigation/feasibility studies (RI/FSs), remedial designs, and
remedial actions or related activities, potential claimants should
select qualified contractors on a competitive basis. The following
guidance-identifies procurement methods that, may be used to achieve
EPA procurement objectives, and discusses some of the reasons why
EPA believes each method of procurement is appropriate for specific
stages of the response action.  The selection of a method is
dependent on:  (1) whether the procurement is for supplies,
equipment,  or architectural and engineering or construction
services; (2) the certainty with which the quantity and quality of
work can.be described; and (3) the performance and cost and price
factors that should be considered.  The advantages and
disadvantages of each method of procurement are described more
fully in the State Procurement Guidance.

     o Small Purchase Procurement Method - Potential claimants
       should consider negotiating 'purchases and contracts using
       this method if the aggregate amount, including overhead and
       profit, is not expected to exceed $25,000.  More
       information both on small purchase as a procurement method
       and on the situations in which this type of procurement may
       be used is found in Chapter II of the State Procurement
       Guidance.

     o Formal Advertising  (Sealed Bidding) Procurement Method -
       Formal advertising should be considered for procurements
       over $25,000 when the potential claimant can provide a
       complete, adequate and realistic specification or purchase
       description; two or more responsible bidders are willing
       and able to compete; the procurement lends itself to the
       award of a fixed-price contract; and the selection of the
       successful bidder can .be made principally on the basis of
       price.  Formal advertising is characterized by public
       solicitation and opening of sealed bids followed by the
       award of a fixed-price agreement going to the lowest
       responsive, responsible bidder.  Formal advertising may be
       used for non-time-critical removal and remedial
       construction.  More information on procuring construction
       using formal advertising can be found in Chapters II and V
       of the State Procurement Guidance.

-------
                                        OSWER Directive 9225.1-01
     o Two-Step Formal Advertising (Sealed Bidding)  - A variant of
       formal advertising is two-step formal advertising (i.e., a
       request for a technical proposal (RFTP)  in the first step
       and an invitation for bids (IFB) in the  second step only
       from those who submitted acceptable technical proposals).
       This method is designed to obtain the benefits of formal
       advertising when adequate and complete specifications are
       not available.  The differences between  the two types of
       formal advertising and the procedures for the two-step
       process are discussed in greater detail  in Chapter V and
       Appendix A of the State Procurement Guidance.

     o Competitive Negotiation (Competitive Proposals) Procurement
       Method - A potential claimant should use the competitive
       negotiation method of procurement only if the requirements
       for formal advertising are not met.  This method may be used
       for remedial design and-remedial actions.  Another method of
       competitive negotiation, which may be used to procure
       architectural and engineering services,  is the
       qualifications based method where selection is based upon
       qualifications rather than price.  Additional information on
       the procurement of engineering services  and competitive
       negotiation can be found in Chapter III  of the State
       Procurement Guidance.

     o Noncompetitive (Sole Source)  Procurement Method - The
       noncompetitive method of procurement should be used only if
       the conditions of the first three methods of procurement are
       not met.  For example, if an emergency situation arises,
       such as an imminent threat of contamination to a drinking
       water supply requiring a time-critical removal, the
       noncompetitive negotiation method may be used for the
       response action.

TYPES OF CONTRACTS

     Under several of the procurement methods above, the... potential
claimant may propose one of three principal types of contracts or
variants for the performance of different types of work.

     o Fixed-Price Contract:  Fixed-price type  contracts provide
       for a firm price (lump sum, unit price or combination), or
       under appropriate circumstances may provide for an
       adjustable price, for the supplies or services being
       acquired.  Consideration of a fixed-price contract is
       recommended where' the scope of work can  be clearly defined
       such as for construction and certain non-time-critical

-------
                                        OSWER Directive 9225.1-01
       removals.  Additional information can be found in Chapter II
       of the State Procurement Guidance.

     o Cost-Reimbursement Contract:  The cost-reimbursement type
       contract provides for the payment to the contractor of all
       (or sometimes a portion of) its allowable costs.  Cost-
       reimbursement contracts establish an estimate of total costs
       and a cost ceiling.  Consideration of a cost-reimbursement
       contract is recommended for the services of an architect or
       engineer.  Additional information can be found in Chapter
       II of the State Procurement Guidance.

     o Time-and-Materials Contract:  The time and materials type
       contract provides for the acquisition of supplies and
       services on the basis of direct labor hours at specified
       hourly rates and materials at cost.  This type of contract
       usually contains.a ceiling price which the contractor
       exceeds at its own risk.  Consideration of time and
       materials contracts may be appropriate for response actions
       of unknown quantity and duration  (e.g., in carrying out
       certain removal actions).

OTHER PROCUREMENT CONSIDERATIONS

     Potentially responsible party claimants, in particular,
should be aware that certain past activities may affect their
ability to provide for full, open and free competition and thereby
meet EPA procurement objectives.   When first presented with the
prospect of being potentially liable for cleanup of a site, it is
not unusual for a PRP to hire a contractor to evaluate the RI/FS
and cost estimates and to provide advice on the financial and/or
technical implications of implementing the cleanup.  Such an
original procurement, as a practical matter, would have been
entered into prior to any determination that mixed funding may be
appropriate.  If the PRPs' original procurement was awarded through
open and free competition and the notice and subsequent contract
provided for follow-on work of the nature proposed by the PRPs in a
formal application for preauthorization, EPA may agree to the
continued participation by such a qualified firm.   However, if the
original contract was not awarded through free e.nd open competition
which provided for follow-on work, it may be inconsistent with the
open competition principle for this contractor to perform the
follow-on work without an open competition and selection for that
follow-on worx.

     In any case where the PRP claimant has previously hired the
contractor, EPA would want to evaluate the capabilities of the
contractor; the proposed role of such a contractor; the initial

-------
                                        OSWER Directive 9225.1-01
procurement methods used to secure the contractor;  the general
scope of the original contract; and any other information that
would assist the Agency in determining whether the  procurement
principles have been satisfied.  If the potential claimant
believes that costs for services of a contractor subsequent to
preauthorization should be reimbursed, the potential claimant
should be prepared to provide documentation that the contractor
was initially selected using open and free competition.  To avoid
any difficulties, the potential claimant should carefully evaluate
the available options and should propose an implementation strategy
to EPA in keeping with the approach and intent of the procurement
guidelines discussed above.

     If you have questions regarding the appropriateness of mixed
funding, please contact Deborah Swichkow in OWPE (475-7026).   If
you have questions regarding preauthorization requirements,
contact William 0. Ross in OERR (382-4645).

-------