UniwdSt
Environmental Protection
Agency
Office of
Solid Waste and
Emergency Response
3EPA
DIRECTIVE NUMBER: 9375.7-02
TITLE: Obligation of Funds Under Superfund
State Contracts
APPROVAL DATE: 8/5/93
EFFECTIVE DATE: 8/5/93
ORIGINATING OFFICE: OES1
Q FINAL
LEVEL OF DRAFT
Q C Review & Comment
REFERENCE (other documents):
OSWER OSWER OSWER
VE DIRECTIVE DIRECTIVE Dl
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United States
Environmental Protection
Agency
Office of
Solid Waste and
Emergency Response
EPA
DIRECTIVE NUMBER: 9375.7-02
TITLE: Obligation of Funds Under Superfund
State Contracts
APPROVAL DATE: 8/5/93
EFFECTIVE DATE: 8/5/93
ORIGINATING OFFICE: OERR
Q FINAL
D DRAFT
LEVEL OF DRAFT
ri *"
LJ A Signed by AA or DAA>--
fj B Signed by Office Director
LJ C Review & Comment
REFERENCE (other documents):
OSWER OSWER OSWER
DIRECTIVE DIRECTIVE
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&ER&
Q9 ciiviiunmeiiiai rroiVCUOn i
Washington. DC 20460
OSWER Directive Initiation Request
1. Directive Number
9375.7-02
2. Originator Information
>Jtme of Contact Person
Betti VanEpps
Office
OERR
Telephone Code
260-9760
3. Title
Obligation of Funds Under Superfund State Contracts
4. Summary of Directive (include bnef statement of purpose)
This memorandum clarifies EPA's interpretation of 40 CFR Part
35, Subpart 0, regarding the relationship between cost share
assurances in Superfund State Contracts (SSCs) and the
obligation of remedial action funds.
5. Keywords
40 CFR Part 35, Subpart 0, and remedial action funds
SA. Does i nia Directive supersede rrevious uirecttve(S)'
b Does it Supplement Previous Oirective(s)?
No
X No
Yes What directive (number, title)
Yes What directive (number, title)
7 Draft Level
A - Signed by AA/OAA
B - Signed by Office Director
C - For Review & Comment
0 - in Development
8. Document to be distributed to States by Headquarters?
Yes
X
No
This Request Meets OSWER Directives System Format Standards.
9. Signature of Lead Office Directives Coordinator
Date
10. Name and Title of Approving
Daw
Henry L. Longesdll, OERR
EPA Form 1315-17 (RĞv. 5-87) Previous editions are obsolete.
OSWER OSWER OSWER O
VE DIRECTIVE DIRECTIVE DIRECTIVE
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
AUG 5 1993
OERR DIRECTIVE 9375.7-02
OFFICE OF
SOLID WASTE AND EMERGENCY RESPONSE
MEMORANDUM
SUBJECT: Obligation of Funds Under Supe
FROM:
Henry L. Longest H, Director
Office of Emergency and Reme
.te Contracts
use
TO:
Director, Waste Management Division
Regions L IV, V, VH
Director, Emergency and Remedial Response Division
Region n
Director, Hazardous Waste Management Division
Region m, VI, VBtt, IX
Director, Hazardous Waste Division
Region X
Director, Environmental Services Division
Regions I, VI, VH
PURPOSE
This memorandum clarifies EPA's interpretation, of 40 CFR Part 35, Subpart O,
regarding the relationship between cost share assurances in Superrund State Contracts
(SSCs) and the obligation of remedial action funds. EPA's policy is that remedial design
monies may be obligated to another Federal agency to initiate the procurement process
for a remedial action contract before an SSC is executed. However, the memorandum
also reiterates Agency policy that an SSC must be in place before funds may be
obligated for initiating or continuing remedial action.
BACKGROUND
General
Section 104(c)(3) of the Comprehensive Environmental Response, Compensation,
and Liability Act (CERCLA), as amended, states that "[t]he President shall not provide
any remedial action...unless the State in which the release occurs first enters into a
contract or cooperative agreement with the President providing [various specified]
assurances../ The National Contingency Plan interprets this statutory provision to
require that the "assurances must be provided by the State prior to the initiation of
Printed on Recycled Paper
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OERR DIRECTIVE 9735.7-02
remedial action pursuant to a Superfund State Contract..." (40 CFR § 300.510, emphasis
added).
Regional Offices have indicated that State processes to approve or amend SSCs
are sometimes slow and cumbersome. This memorandum addresses two questions
Regional Offices have raised as possible ways to avoid project delays because of the
State approval process:
1) Can EPA obligate funds to another Federal agency or contractor before an
executed SSC is in place?
2) Can EPA use the Subpart O reconciliation clauses during financial
settlement of a remedial action in lieu of amending an SSC whose cost
share provisions have been exceeded?
Obligation of Funds
rs
Section 35.6800(a)(l) of the final 40 CFR Part 35, Subpart O, states that an "SSC
with a State or Indian Tribe isjequired before EPA can obligate or transfer funds for an
EPA-lead remedial action" (emphasis added).1 The preamble to Subpart OĞ(55 FR .
22994, at 23005, June 5,1990) noted that one commenter had objected that requiring
executed SSCs before EPA initiates a remedial action delays the start of such actions up
to two months." The EPA response to this comment was:
When the State is not the lead agency for a response action, the State must
still provide its CERCLA section 104(c) assurances in an SSC before EPA
can obligate Trust Fund monies for the remedial action. Delays while an
SSC is being developed are a management problem that should be
addressed earlier in the process. Procurement activities through the bid
process and up to the contract award may be considered part of remedial
design rather than remedial action. Therefore, all such actions can
proceed before the SSC is in place. Id.
The preamble discussion of procurement activities has led to some questions about
exactly when EPA can "obligate or transfer" funds to another agency.
lrrhe interim final rule provided, "An SSC ...is required before EPA initiates remedial
action during an EPA-lead remedial response." 40 CFR § 35.6800(a)(l), 54 F.R. 4132, at
4149 (January 27, 1990). The preamble explained that "a two-party SSC between EPA
and the State ...is required ...to obtain the State's CERCLA 104 assurances before
Federal-lead remedial action can begin." 54 F.R. at 4133.
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OERR DIRECTIVE 9735.7-02
Amending SSCs and Using Reconciliation Provisions
At some sites, changed conditions leading to a change order, higher than expected
bids, or other circumstances could result in the costs of a project exceeding the estimated
cost identified in an SSC, thus affecting the cost share the State initially agreed to pay.
Section 35.6805(1)(1) requires formal amendments to an SSC "when alterations to
CERCLA-funded activities are necessary or when alterations impact the State's
assurances pursuant to the National Contingency Plan and CERCLA, as amended."
In order to prevent interruption of cleanup at a site when circumstances change,
some Regional Offices have inquired whether the SSC reconciliation provisions in
Subpart O permit EPA to continue conducting remedial action work without having to
formally amend an SSC. These provisions, at 40 CFR §§ 35.6805(k) and 35.68050')(3),
allow some flexibility for States to pay some of their share of project costs during final
reconciliation of response costs. Section 35.6805(k) requires an SSC to contain a
provision which states that "the SSC remains in effect until the financial settlement of
project costs... to ensure that both EPA and the State have satisfied the cost share ,
requirement...11 Section 35.6805(j)(3) requires that a State make final payment of its cost
share "by completion of all activities in the site-specific Statement of Work...." Exempt
from this deadline are "any change orders and claims handled* during reconciliation of-
the SSC [§ 35.6805(j)(3)]," which has led to the questions raised by some Regional
Offices.
IMPLEMENTATION
Obligation of Funds
As explained above, Subpart O does not permit EPA to obligate or transfer
remedial action monies to any party (e.g., another Federal agency or a contractor) prior
to an SSC being signed. However, EPA may obligate remedial design funds to another
Federal agency through an interagency agreement to allow initiation of the procurement
process up to the point of soliciting for contract bids. In cases of extreme urgency, a
solicitation (for bids on remedial action work) may be issued before an SSC is signed.
The solicitation must notify prospective bidders that the availability of funds for the
remedial action contract is contingent on EPA and the State concluding an SSC, and that
if the SSC is not signed before the bid opening, (1) the solicitation may be cancelled, or
(2) the bid opening date may be postponed (giving bidders an opportunity to withdraw,
modify, or submit new bids). To ensure that Fund monies are effectively used,
procurement activities should be initiated with remedial design funds only when the
Region is confident the SSC will be signed before bids are opened.
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OERR DIRECTIVE 9735.7-02
Amending SSCs and Using Reconciliation Provisions
The March 29, 1993, directive, "Ensuring the Adequacy of Cost Share Provisions
in Superfund State Contracts" (Directive No. 9375.7-01), explains that once all the funds
identified in an SSC are expended, "EPA must not obligate more funds until the SSC is
amended." To prevent cleanups from being interrupted, Regional Offices must monitor
expenditures under each SSC and begin negotiations to modify the cost provisions of an
SSC as soon as it becomes apparent that a shortfall could occur before project
completion.
The reconciliation clauses of §§ 35.6805(j)(3) and (k) are to be used only at the
time of project closeout, and must not be used as a substitute for amending an SSC
when cost increases become apparent substantially before the end of the project. The
reconciliation provisions are intended to allow EPA and the State to adjust actual cost
share amounts to a level of precision possible only after all project costs are fully known.
Thus, Section 35.6805(j)(3) applies only to those change orders and claims which cannot
be completely determined before project completion,
/
Please refer any questions on this memorandum to Murray Newton, Chief of the
State and Local Coordination^ranch, 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).
cc: Richard Guimond
Sallyanne Harper, OARM
Howard Corcoran, OGC
Lisa Friedman, OGC
Regional Waste Management Branch Chiefs
Regional Removal Managers
Assistant Regional Administrator for
Planning and Management Division, Region I
Assistant Regional Administrator for
Planning and Management, Region V
Assistant Regional Administrator for
Policy and Management, Region n, ffl, IV, Vfl,
VHLDC,X
Assistant Regional Administrator for
Management, Region VI
Regional Counsels
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