United States
Environmental Protection
Agency
Off ice of
Solid Waste and
Emergency Response
EPA
DIRECTIVE NUMBER: 9242.2-06
Superfund Contracts Management Issues
APPROVAL DATE:
EFFECTIVE DATE:
1/31/92
1/31/92
ORIGINATING OFFICE: OERR
FINAL
D DRAFT
LEVEL OF DRAFT
fj A — Signed by AA or DAA
(jj B — Signed by Office Director
O C — Review & Comment
REFERENCE (other documents):
OSWER OSWER OSWER
DIRECTIVE DIRECTIVE
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United States
Environmental Protection
Agency
Office of
Solid Waste and
Emergency Response
EPA
DIRECTIVE NUMBER: 9342.2-06
Superfund Contracts Management Issues
1/31/92
APPROVAL DATE:
EFFECTIVE DATE: 1/31/92
ORIGINATING OFFICE: 0ERR
FINAL
D DRAFT
LEVEL OF DRAFT
Q A — Signed by AA or DAA
fj 8 — Signed by Office Director
O C — Review & Comment
REFERENCE (other documents):
OSWER OSWER OSWER
DIRECTIVE DIRECTIVE
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^_^_ • _ United Stiles Environmental Protection Aq ency
*VCPA Washington. OC 20460
ocrM QSWER Directive initiation Reaues
Z Originator Information
Name of Contact Parson
John Coras tock
Mail Code Office
OS -240 Excellence Team
1. Directive Number
t 9242.2-06
Telephone Code
260-4026
3. Title
Superfund Contracts Management Issues
4. Summary of Directive (include brief statement of purpose)
A
This directive initiates new requirements regarding the development of independent
government cost estimates, review of contractor invoices, and the appropriate
participation on Performance Evaluation Boards.
5. Keywords
Program Policy and
6a. Does This Directive Supersede Pre
b. Does It Supplement Previous Oireci
7. Draft Level
A - Signed by AA/DAA
Adminis tration
•vious Oirecuva(s)? V A I I
|/>\j No Yes What directive (number, title) •
tive(s)? \J
jk"°
•
Yes What directive (number, title)
B - Signed by Office Director
C - For Review &
Comment 0 - In Development
8. Document to be distributed to States by Headquarters?
Yes
>
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
3 I
OSWER Directive 92
MEMORANDUM
SUBJECT^: Superfund Contracts Management Issues
FROM:
TO:
Don R. Clay, Assistant Administrator
Office of Solid Waste and Emerger
ristian Holmes, Acting Assis^an
Office of Administration and pesojurces Management
Regional Administrators
cy Response
^Administrator
PURPOSE
To initiate new requirements regarding the development of
independent government cost estimates (IGE), review of contractor
invoices, and the appropriate participation on Performance
Evaluation Boards.
BACKGROUND
Within the last 6 months, the EPA Inspector General, the
General Accounting Office and the Administrator's Task Force on
the Implementation of Superfund Alternative Remedial Contracting
Strategy (ARCS) have issued findings and recommendations
regarding several issues including deficiencies in the areas of
IGEs, the adequacy of our review of contractor invoices, and the
performance of the award fee process. While the comments were
directed at specific contracting programs within Superfund, they
affect and are a concern across all OSWER contracting programs.
This directive establishes new policy regarding these issues.
OBJECTIVE
Independent Government Cost Estimates
The Federal Acquisition Regulations require that IGEs be
prepared for each new contract or modification that is expected
to exceed $25,000. Currently, there is no Federal or Agency
policy that requires IGEs prior to the issuance of independent
work assignments under existing contracts. A recent GAO report
compared the work plan negotiation results for work assignments
where IGEs were prepared against results where IGEs were not
prepared. The conclusion of this comparison demonstrated that
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considerable negotiation leverage is achieved when realistic IGEs
are developed prior to work plan negotiation. In all cases where
an IGE was prepared, the negotiated amounts were considerably
below the initial work plan amounts presented by the contractor.
The exercise of developing independent government cost estimates
also demonstrates to our contractors that the government
negotiation team is fully prepared to discuss, and to negotiate
realistic costs for the work to be performed.
Both the GAO report and the -ARCS Report of the
Administrator's Task Force recommend that Regional Administrators
develop a capability for contract managers in generating
independent government cost estimates. The objective of this
Directive is to establish policy to implement this recommendation
across OSWER.
Review of Contractor Invoices
The objective of this directive is to clarify the role of
contract managers (POs, WAMs and RPMs) in the voucher review
process and to establish policy regarding these activities.
Under cost reimbursable contracts, allowable, allocable and
reasonable costs are paid up to the estimated cost of the
contract or the expenditure limit for the work assignment, as
appropriate. Contract managers are required to assure that the
direct costs on vouchers that they approve are appropriate and
reasonable for the work performed and that the amount of work
performed is reasonable for the task. Contracting Officers will
periodically look at a representative sample of the billed costs
and determine allowability and allocability. In addition,
professional auditors, at the request of the Contracting
Officers, perform annual comprehensive incurred cost audits and
provide recommendations to the CO. Any concerns raised by the
auditors will be conveyed to the appropriate Project Officer.
However, the contract manager, that person most familiar with,
and closest to the work being performed (e.g., RPM, WAM, PO,
etc.), has the ultimate responsibility for determining the
"reasonableness" of the costs being invoiced. A "reasonable"
cost is one that would seem to be justified and legitimate and
what a prudent person would pay under like circumstances in the
conduct of competitive business.
In reviewing the reasonableness of charges, contract
monitors are not expected to know the exact market values of
various direct costs; however, past experience and common sense
can assist in making a determination for each cost element
examined. If unreasonable charges are approved for payment, it
is doubtful that anyone reviewing the costs later will possess
the knowledge to disallow those costs. Therefore, the contract
manager is the most logical person to question, identify and
recommend disallowance of unreasonable charges.
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3
Participation on Performance Evaluation Boards
One of the benefits of an award fee contract is that it
provides a means of periodically involving senior contractor and
government management in the oversight of contractor performance.
To reinforce this position, the Environmental Protection Agency
Acquisition Regulations (EPAAR) require that the Performance
Evaluation Boards (PEB) be chaired at the division director level
of the program initiating the procurement. Any changes to the
chairperson appointment must be approved by the Fee Determination
Official.
The composition of personnel participating in the
performance evaluation process must represent those employees
most experienced and knowledgeable of contractor performance
issues. In many cases, first and second line supervisors
represent the most experienced managers and, as such, are
expected to take an active role in the performance evaluation
process. In addition, PEB chairpersonship is occasionally
delegated to positions below the Division Director level, or even
to the branch chief level. Both of these situations erode some
of the benefits of the award fee process. The objective of this
directive is to reinforce the intent of the EPAAR in the area of
roles and responsibilities associated with the performance
evaluation process.
IMPLEMENTATION
Independent Government Estimates
Effective February 1, 1992, an independent government cost
estimate must be developed by the technical program office (WAM
or RPM) generating the requirement prior to the issuance of any
work assignment estimated to exceed $25,000 under contracts that
utilize a work assignment/work plan administrative process. This
requirement is applicable to both new work assignments and to
increases in existing work assignments. The IGE will be
prepared, at a minimum, at the element of cost level (e.g.,
direct labor, subcontracts, equipment, other direct costs, etc.)
and by major task, when practicable. While the responsibility
for IGE development rests with the technical program office, it
is expected that the technical office will work in concert -with
the contract specialists in the management offices in this effort
and that the IGEs must be developed independently without inpuc
from the contractor receiving the work assignment. The IGE will
be used by the RPM/WAM, PO and CO as a tool in negotiating tr-.e
workplan budget with the contractor and for documenting the
resulting agreements in the contract file. We recognize that
additional guidance may be required to develop the best possible
IGEs. OSWER and PCMD will assess that need and assist in an/ ..*/
they can. However, in the meantime, it is expected that the
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Regions and Headquarters offices will proceed to implement this
policy.
In addition to estimating systems already developed in some
Regions and at Headquarters, you are reminded of two tools that
have been distributed to assist in preparing Superfund IGEs. The
first, the Superfund Cost Estimating Expert System, is a computer
model that uses site-specific data to develop independent
government estimates. The second, Scoper's Notes, is a guide to
RI/FS costing and is used to develop ballpark cost estimates.
You are encouraged to utilize these tools in developing your
estimating capability.
Review of Contractor Invoices
Effective immediately, those contract managers (WAM or RPM)
that are most familiar with the contractor work will be
responsible for reviewing monthly invoices as directed by the
Project Officers. Contract managers are responsible for
providing written recommendations on cost reasonableness or
unreasonableness to the Project Officers. When further
contractor documentation is required before a determination can
be made, payment of invoiced costs, or any portions thereof, may
be suspended by the Project Officer until the documentation is
submitted and a reasonableness determination can be made. When
charges are determined to be improper or unreasonable, the
Contracting Officer has the authority to disallow payment of
those charges. Contractor charges or portions of those charges
that are inadvertently paid and later determined to be improper
or unreasonable, should be disallowed on subsequent invoices.
Guidance on voucher review can be obtained from the
Contracting Officer, Project Officer or any member of the
Contract Operations Review and Assessment Staff (CORAS). Consult
the CORAS Bulletin series on Financial Oversight for additional
written guidance on the steps associated with the voucher review
process. More specifically, Issue No. 4, dated May of 1989,
contains an article on contractor voucher review. Contract
managers are encouraged to read this guidance and to use the
Invoice Review Checklist in Exhibit 1. Once the Checklist is
completed, it should be attached to the contract manager's copy
of the invoice to document the review. Copies of Issue No. 4 can
be obtained from Superfund Project Officers or from CORAS in OERR
at mail code OS-240.
Participation on Performance Evaluation Boards (PEBs)
Effective immediately, all official PEB chairpersons shall
review the membership of their PEBs and make whatever adjustments
are necessary to involve the most knowledgeable and experienced
personnel in the award fee process.
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Only in unusual circumstances, and when absolutely
necessary, may official chairpersons delegate their
responsibilities. In the event that delegation becomes
necessary, the official chairperson shall contact the Fee
Determination Official, prior to the convening of the PEB, and
obtain verbal approval to delegate. In no event will the
chairperson responsibilities be delegated below the Branch Chief
level.
Many tools have been provided over the years to address
these issues. They have taken the form of training, CORAS
Bulletins, guidance documents, Award Fee Guides, computer models,
exit conferences (conducted by GAO, IG and CORAS), program
conferences, and even IG audits and GAO reports. We feel that
the policy presented in this directive is critical to achieving
improvements to our contracts management activities, and
represents the first steps in implementing meaningful
recommendations presented in review documents. It is requested
that each region (a single coordinated response from each region)
inform us as to the action taken in regards to implementing this
Directive. It is requested that the implementation information
be submitted within 30 days from the date of this Directive to
the Superfund Acquisition Manager, OS-100, OSWER.
Any questions regarding this policy should be directed to
Ika Joiner, Acting Superfund Acquisition Manager, at FTS
260-0840.
cc: Regional Deputy Administrators
Assistant Regional Administrators
Henry L. Longest II, Director, Office of Emergency and
Remedial Response
Bruce M. Diamond, Director, Office of Waste Programs
Enforcement
Sylvia K. Lowrence, Director, Office of Solid Waste
David W. Ziegele, Director, Office of Underground
Storage Tanks
John C. Chamberlin, Director, Office of Administration
David J. O'Connor, Director, Procurement and Contracts
Management Division
Directors, Waste Management Division
Regions I, IV, V, and VII
Director, Emergency and Remedial Response Division
Region II
Directors, Hazardous Waste Management Division
Regions III, VI, VIII, IX, and X
Directors, Environmental Services Division
Regions I-VIII, and X
Chief, Environmental Services Branch
Region IX
Director, Hazardous Site Control Division (HSCD)
Director, Hazardous Site Evaluation Division (HSED)
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Director, Emergency Response Division
Director, Office of Program Management
Director, CERCLA Enforcement Division (CED)
Office of Waste Programs Enforcement
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