3EPA
United S*
Environmental Protection
Agency
Office oĞ
Solid Waste and
Emergency Response
DIRECTIVE NUMBER: 9375 .7-01
TITLE: Ensuring the Adequacy of Cost Share
Provisions in Superfund State Contracts
APPROVAL DATE: 3/29/93
EFFECTIVE DATE: 3/29/93
ORIGINATING OFFICE: QERR
D DRAFT
LEVEL OF DRAFT
D A Signed by AA or OAA
Q B Signed by Office Director
O C Review & Comment
REFERENCE (other documents):
OSWER OSWER OSWER
VE DIRECTIVE DIRECTIVE Dl
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UNITED STATES ENVIRONMENTAL PROTFCTION AGENCY
WASHINGTON, D.C. 20460
O' ^ iCt O1-
SGUO WASTP. AND EME. HGl:NC> RF.SI'ONltv
MAR 2 9 1993
OERR DIRECTIVE 9375.7-01
MEMORANDUM
SUBJECT: Ensuring the Adequacy of Cost Share provisions
in Superfund State Contracts
FROM: Henry L. Longest II, Director
Office of Emergency and Remedi
TO: Director, Waste Management Division
Regions I, IV, V, VII
Director, Emergency and Remedial Response Division
Region II
Director, Hazardous Waste Management Division
Region III, VI, VIII, IX
Director, Hazardous Waste Division
Region X
Director, Environmental Services Division
Regions I, VI, VII, x
PURPOSE
This memorandum requests Regional Offices to re-examine
existing Superfund State Contracts (SSCs) for Fund-financed
remedial actions to verify that they adequately reflect incurred
and projected remedial action costs. Specifically, you should
evaluate the adequacy of State cost share assurances with respect
to change orders or other likely additional costs. Furthermore,
you should also re-evaluate your tracking systems for remedial
action costs to assure that they provide timely site-specific
expenditure information which allows you to amend SSCs before
cost share provisions become inadequate.
BACKGROUND
Regional Offices have recently sought Headquarters
assistance in at least two instances where EPA-lead remedial
action costs were exceeding the amounts provided in the
corresponding SSCs. Such excess expenditures may constitute
breaches of the SSCs and may represent violations of existing
statutes and regulations which, in turn, could prevent EPA from
continuing remedial action at a site. Avoidance of these
Printed on Recycled Pap,
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problems is especially important in light of the Administrator's
concern that th4 Agency manage Federal resources well, as
expressed in her recent testimony before the Subcommittee on
Oversight and Investigations of the House Committee on Energy and
Commerce (copy attached).
Section 104(c)(3) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
(CERCLA), prohibits EPA from "provid[ing] any [Fund-financed]
remedial actions" unless the State "first enters into a contract
or cooperative agreement" with the Agency in which the State
makes certain, specified assurances. Section 300.510(a) of the
National Contingency Plan provides that a fund-financed remedial
action undertaken pursuant to CERCLA Section 104(a) cannot
proceed unless a State provides its applicable, required
assurances. Section 35.6800(a) of Subpart O further clarifies
that an SSC "is required before EPA can obligate or transfer
funds for an EPA-lead remedial action." Thus, EPA is precluded
from initiating an EPA-lead, Fund-financed remedial action until
a valid SSC is in place containing the necessary assurances.
This memorandum concerns the assurance that a State will
share in the cost of the remedial action. The SSC contains the
remedial action cost estimate, as well as the State's cost share
percentage/amount (among other assurances), and governs the
amount of funds the State is obligated to pay. Once all of the
funds identified in the SSC are obligated, EPA must not obligate
more funds until the SSC has been amended. Any expenditure by
EPA in excess of the estimated cost would be beyond the terms of
the SSC, and the State may not be contractually bound to share in
paying the additional cost. Without having the adequate cost
share provision in the SSC, EPA may have to interrupt an ongoing
cleanup and may also be in violation of CERCLA for conducting
remedial action without having a valid SSC.
In contrast, where EPA and the State have entered into a
State-lead, site-specific, cooperative agreement, such potential
problems do not exist. Under a cooperative agreement, the State
pays for the remedial action and EPA reimburses the State for
only the Federal portion of eligible costs. However, at an EPA-
lead site, where the Agency and the State enter into an SSC, EPA
pays for the remedial action, and the State subsequently pays EPA
its share of -the cost.
Whether due to change orders or other factors, the SSC's
estimated project costs will sometimes prove to be too low.
Regional Offices have also reported that the length of time
States require to secure all required approvals for revision to
an SSC varies greatly, with some States needing as long as six
months. Because of the difficulty in accurately estimating
project costs and the time required to negotiate a revised SSC,
Regional Offices must anticipate the need and begin the process
for negotiating SSC revisions as soon as it becomes clear that
the State cost share amount will be exceeded.
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IMPLEMENTATION ,
Regional Offices should take one immediate and one future
action to ensure that cost share assurances in SSCs are, and
continue to be, adequate:
Immediate. Review cost share assurances in SSCs for all
ongoing remedial actions to verify that current and
projected contract obligations (including contingencies) are
within the amounts specified in the SSCs.
Future. Evaluate tracking systems to ensure that they have:
1) effective monitoring of actual, planned, and projected
estimates of remedial action costs against the State cost
share specified in each site's SSC; and 2) effective early-
warning mechanisms to enable initiation of timely
negotiations of any SSC revisions necessary to conduct
uninterrupted cleanups. (You may wish to consult with your
policy and management office to assure the effectiveness of
your tracking systems.)
Your knowledge of, and experience with, your States' SSC
approval processes will dictate how far ahead SSC revision
negotiations should begin. To allow greater flexibility than
earlier SSCs had, most SSCs now include a reasonable cost
contingency provision to accommodate change orders during the
construction process. The use of contingency amounts must be
closely monitored, but it may help provide a buffer to allow time
for any necessary negotiations for SSC revisions to take place.
Please refer any questions on this memorandum to Murray
Newton, Chief of the State and Local Coordination Branch,
Hazardous Site Control Division (Mail Code 5203G), or Carolyn
Offutt, Chief of the State Involvement Section. Both may be
reached at 703/603-8840 (voice) or 703/603-9100 (facsimile).
Attachment
cc: Regional Waste Management Branch Chiefs
Regional Removal Managers
Assistant Regional Administrator for Management
Regions I - X
Regional Counsels
Earl Salo, OGC (LE-132S)
Steven Pressman, OGC (LE-132G)
William Cooke, FMD (PM-226F)
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STATEMENT OF
CAROL N. BROWNER
ADMINISTRATOR
0.8. ENVIRONMENTAL PROTECTION AGENCY
BEFORE THE HOUSE ENERGY AND COMMERCE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
MARCH 10, 1993
Mr. Chairman, I appreciate your invitation to testify today
about contract mismanagement at the Environmental Protection
Agency.
We have a very serious problem this problem goes far
beyond just contracts management. It goes to the very heart of
how the Agency operates.
Not only is taxpayer money being wasted, but the American
people's faith in their government is being undermined.
If we are to meet the demands of the public we serve, we
must go beyond mere compliance with the letter of the law. We
must do more than merely relieve the symptoms of government
mismanagement. We must go to the root of the problem,
reinvigorate the ideal of public service in all EPA employees,
and through this one Agency begin to restore people's faith in
the effectiveness and accountability of their government.
I cam* to EPA from the state of Florida, where I managed a
large state agency. Because of my experiences there I believe
that government, if it is to be successful over the long run, if
it is to retain public trust, must be accountable to the people
it serves.
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I am appalled by what I have learned about EPA's total lack
I
of management, accountability, and discipline. I have reviewed
audit reports and received briefings from staff that clearly
describe poor management practices, serious violations of rules,
and intolerable waste of taxpayers' money.
Last year this Subcommittee did much to illuminate EPA's
failure to manage its contracts. A number of recent audit
reports and surveys indicate similar mismanagement in the
Agency's assistance management programs, grants, cooperative
agreements, and interagency agreements. Internal assessments
have noted areas of weakness in our financial system as well. In
other words, accountability is in disrepair. Mismanagement of
extramural resources is widespread and deeply embedded.
While efforts have begun to redress many of these problems,
it is apparent to me that much more remains to be done. I am
committed to carrying out the recommendations of the Standing
Committee on Contracts Management. But creation of the Standing
Committee and implementation of its recommendations is only a
first step.
We must go beyond the procurement and management of
contracts. Good government principles and basic protection of
taxpayers' dollars demand that all extramural resources be well
managed. I am committed to fundamentally changing business-as-
usual at the Agency and rebuilding the ethic of good management
Agency-wide.
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It is qiear to me, Mr. Chairman, that if we are to solve the
problem facing this agency and change the culture that has
developed then we must pursue three courses of action. One,
construction of a rigorous system of accountability for the
management of our resources. Two, establishment of clear
standards for disciplinary action. Failure to meet these
standards must result in immediate discipline. And three,
development of an overall management scheme based on clear goals,
work plans and milestones for measuring success.
Let me detail some of my initiatives.
I. Accountability
Integrated Financial Management System
o We must remain committed to putting in place the
systems improvements that are needed. The Agency has
been criticized repeatedly because its integrated
financial management system does not provide managers
with key information needed to make decisions, evaluate
program benefits, and ensure sound financial management
practices. We are committed _o achieving these
enhancements.
Senior Resource Officials
o I will replace Senior Procurement Officials with Senior
Resources Officials (SROs) who are not only accountable
for contacts management, but for management of all
extramural resources in their Program or Region. SROs
will:
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Be selected jointly by the Assistant or Associate
Administrator (AA) or the Regional Administrator
(RA) and by the Chief Financial Officer (CFO).
Trained, along with their AAs and RAs, in their
responsibilities, including:
the rules and regulations governing the use
and management of extramural resources;
which aspects of their authorities can be
delegated and to whom; and
the disciplinary penalties for violations of
the rules, and regulations, both for
themselves and those to whom they delegate.
Required, along with their AAs or RAs to sign
forms that they have received SRO training, they
understand the rules, regulations, discipline,
authorities and delegations.
Report directly to the AA or RA, in an SES
position such as the Deputy Assistant or Associate
Administrator or the Assistant Regional
Administrator. Any exceptions must be approved by
the Administrator, and approvals must be renewed
annually.
The SRO may delegate appropriate functions, but
not accountability, to one individual reporting
directly to the SRO. Delegations of SRO
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, authorities must be approved by the AA or RA and
the CFO.
II. Discipline
o Our current disciplinary system does not send a clear
message to EPA managers and staff about the gravity of
resource management violations. We will establish
guidelines on deciding cases, determine who has
official responsibility, and speed up the process. The
disciplinary system, and the penalties for these types
of violations will be communicated clearly to every
employee so that EPA employees will be accountable for
resource management violations.
III. Management
We will undertake a Base Review.
o The Agency has over 17,000 full-time employees and a
budget of over $6 billion. These are not trivial
resources. Given my recent experiences in developing
the 1993 stimulus package as well as the 1994
President's budget, we intend to perform a thorough
review of how our money and FTEs are allocated as part
of the FY 1995 budget process. This review will help
me determine if there are areas in our current base
budget that can be redirected to help us solve some of
the problems discussed here today.
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Senior Management Strategy Council
o Because EPA's past actions often have been tactical
rather than strategic, I will establish a high-level
council of senior managers to not only integrate
management with mission, but also to integrate use of
all our various resource management tools. This
council will provide Agency-wide leadership and an all-
encompassing approach to the resolution of resource
management issues and dangers.
Senior Management Education
o Once my senior management team is in place, I will
establish an educational program for them to ensure
they are aware that good management is integral to our
mission, and to familiarize them with the rules and
regulations of all aspects of financial management. In
establishing this program, we will consult with the
General Accounting Office and our Office of Inspector
General to request their assistance.
Human Resources Initiatives
o To attract and retain good staff to jobs in which a
significant amount of time is dedicated to extramural
resources management, we wi11:
Make extramural resources management a desirable
ranking factor for promoting staff to GM-13s and
above.
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- , Assure that full-time project officers and other
program extramural resources managers have
promotion potential beyond the GS-13 level.
Employee Orientation
o Finally, we want to strengthen EPA's employee
orientation program by including a strong component
emphasizing the importance, responsibility, and
accountability of public service. It's not enough for
new EPA employees to understand our organization
structure and the laws we administer. They also have
to understand that they fill positions of public trust,
and that the public expects ethical behavior and
accountability. If we can begin inculcating these
values into EPA employees from their first day of
employment, then we will take a big step toward solving
our long-time problems.
Independent Public Policy Group
o We plan to commission an independent public policy
group to assess the balance between our intramural and
extramural resources. I expect this group to examine
how leveraged we are in the application and use of
extramural resources; determine, in the use of these
resources, the potential for performance of inherently
governmental functions; and identify Agency resource
requirements to adequately manage extramural resources.
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I am committed to taking this Agency to the point where our
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management and use of outside support not only follow prescribed
rules but is beyond reproach. I want it to be a model of
efficiency and accountability. Management integrity will be a
cornerstone of my administration. The country's taxpayers expect
and deserve no less than that.
Mr. Chairman, I look forward to working with you and members
of this subcommittee as we move forward in our efforts to solve
these very serious problems.
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