United States
           Environmental Protection
            Office of Water
            Program Operations (WH-547)
            Washington, DC 20460
June 1979
Program Requirements

Municipal Wastewater
Treatment Works
Construction Grants Program

                         WASHINGTON, D.C.  20460
     Because the material  contained in the "Manual  of References"  is
obsolete, further printing and distribution will  cease.   However,  the
program policy documents incorporated in that manual, and subsequently
updated by the publication of supplemental issuances  of  new and revised
Program Requirements Memoranda (PRMs), will continue  to  be made available
to that segment of the public involved in various aspects of the
Construction Grants Program.   Hence, holders of the MCD-02 will  continue
to receive copies of Program Requirements Memoranda (MCD-02.00) as they
are printed.  So that PRM recipients are kept apprised of the completeness
of their policy document library, a full index of PRMs issued will be
included with each printing.

                  Municipal  Wastewater Treatment Works
                     Construction Grants Program
                           Table of Contents
MCD 02.1

PRM 75-1

PRM 75-2
PRM 75-3
PRM 75-4
PRM 75-5
PRM 75-6
PRM 75-7
PRM 75-8
PRM 75-9

PRM 75-10
PRM 75-11

PRM 75-12

PRM 75-13
PRM 75-14
PRM 75-15

PRM 75-16

PRM 75-17
Use of Revenue Sharing Funds for Waste               6/25/73
Treatment Projects
Experience Clauses for Equipment Suppliers           7/11/73
Waste Stabilization Ponds                            9/11/73
Standardized Construction Contract Documents         4/15/75
Non-Restrictive Specifications                        8/8/75
Adequacy of Treatment Certification                  11/8/73
Sewer System Evaluation and Rehabilitation            2/7/74
Flood Disaster Protection Act of 1973                 3/1/74
Supplement to PG No, 25; Flood Disaster              11/4/74
Protection Act of 1973 (PL 93-234)
User Charges and Industrial Cost Recovery System      4/5/74
Approval of Reimbursement Projects Not               4/17/74
Previously Serviced by EPA
Obligation, Recovery and Reallotment of Contract     5/13/74
Authority Funds
Management of Construction Grants Funds              4/19/74
Grant Funds and Project Segmenting                   5/10/74
Class Deviation—Use of Force Account Work            5/7/74
on Construction Grant Projects
Title II Regulations, Section 35.915(1)—             6/3/74
Reserve for Step 1 and Step 2 Projects
Construction of Pretreatment or Treatment             6/5/74
Facilities for Municipal Utilities

PRM 75-18

PRM 75-19

PRM 75-20

PRM 75-21

PRM 75-22

PRM 75-23

PRM 75-24

PRM 75-25

PRM 75-26

PRM 75-27

PRM 75-28

PRM 75-29

PRM 75-30

PRM 75-31

PRM 75-32

PRM 75-33

PRM 75-34

PRM 75-35

PRM 75-36
Eligibility of Wastewater Treatment Facilities       9/17/74
at Municipally Owned Water Treatment Works for
Construction Grants
Cancelling PG-28 - User Charges and Industrial        7/9/74
Cost Recovery System

User Charge Systems                                  7/15/74

Overruns, Reserves and Priority Lists               10/16/74

Policy Re Retention of Payments                     11/18/74

Escalation Clauses in Construction Grant             12/9/74

Large City Problems in State Priority Lists           1/9/75

Eligibility of Land Acquisition Costs for Land
Treatment Processes

Consideration of Secondary Environmental Effects      6/6/75
in the Construction Grants Process                 (.

Field Surveys to Identify Cultural Resources          7/2/75
Affected by EPA Construction Grants Projects       ^

Flood Insurance Requirements Effective                7/8/75
July 1, 1975

EPA Procedures in Initiating Debarment Actions        8/5/75
Against Grantee Contractors

Cost Control                                          9/8/75

Facilitating EIS Preparation with Joint                 9/75
EIS/Assessments (Piggybacking)

Compliance with Title VI in the Construction         2/11/76
Grants Program

Discount Rate                     •                   8/11/75

Grants for Treatment and Control of Combined        12/16/75
Sewer Overflows and Stormwater Discharges

Allowable Costs for Construction of Treatment       12/29/75
Works that Jointly Serve Municipalities and
Federal Facilities

Value Engineering in the EPA Construction            1/20/76
Grants Program

PRM 75-37

PRM 75-38

PRM 75-39

PRM 75-40

PRM 76-1

PRM 76-2
User Charge System: Plan and Schedule

Relationship Between 201 Facility Planning
and Water Quality Management (WQM) Planning

Eligibility of Land Acquisition Costs for the
Ultimate Disposal of Residues from Wastewater
Treatment Processes

Priority List Supplement to FY 1977
Construction Grants Guidance

Construction Grants Program Issuances

Cancellation of Certain Program Guidance
Memoranda (PGM)





MCD 02.2
PRM 76-3

PRM 76-4

PRM 76-5
Presentation of Local Government Costs of
Wastewater Treatment Works in Facility Plans

Coordination of Construction Grants Program
with EPA-Corps of Engineers Section 404/
Section 10 Permit Programs

Flood Insurance Requirements


MCD 02.3
PRM 77-1

PRM 77-2

PRM 77-3

PRM 77-4

PRM 77-5
Treatment Works for Recreational Parks, Industrial  11/23/76
Parks and Institutions

Grant Eligibility of Start-up Services              11/29/76

Plan of Operation for Municipal Wastewater          11/29/76
Treatment Facilities

Cost Allocations for Multiple Purpose Projects       12/3/76

Grant Eligibility of Land Acquisition by Lease-     12/15/76
holds or Easements for Use in Land Treatment
and Ultimate Disposal of Residues

MCD 02.4
PRM 77-6
PRM 77-7
PRM 77-8
Management of State Project Priority Lists
Funding of Sewage Collection System Projects
MCD 02.5
PRM 77-9
PRM 78-1

PRM 78-2
PRM 78-3
PRM .78-4

PRM 78-5

PRM 78-6
PRM 78-7

PRM 78-8

PRM 78-9
PRM 78-10
Reallotment of Recovered Funds                        8/5/77
Erosion and Sediment Control in the Construction    12/29/77
Grants Program
Discount Rate                                        1/26/78
Buy American                                         2/17/78
Grant Eligibility of Land Acquired for Storage       2/17/78
in Land Treatment Systems
Interim Management of FY 1978 State Priority         2/17/78
Lists Under the 1977 Amendments
Industrial Cost Recovery—Interim Guidance           2/17/78
Combined Step 2 and Step 3 Construction Grant        2/17/78
Awards (Step 2+3)
Rejection of All Bids: Guidance for EPA              2/13/78
Concurrence Function
Funding of Sewage Collection System Projects          3/3/78
Infiltration/Inflow Program Guidance                 3/17/78
MCD 02.6
PRM 78-11

PRM 78-12
Toxicity of Chemical Grouts for Sewer
Preconstruction Lag Management

 MCD  02.7
 PRM 78-13

 PRM 79-1

 PRM 79-2

 PRM 79-3

 PRM 79-4

 PRM 79-5

 PRM 79-6
 Interim Priority  List  Guidance  for  the                6/29/78
 Development and Management  of FY  1979 State
 Priority Lists

 Safety Requirements  for  the Design  and  Operation     10/23/78
 of Chlorination Facilities  Using  Gaseous  Chlorine

 Royalties for Use of or  for Rights  in Patents        11/13/78

 Revision of Agency Guidance for Evaluation of        11/15/78
 Land Treatment Alternatives Employing Surface

 Discount Rates                                       11/17/78

 Construction  Incentive Program                       12/28/78

 Priority  List Guidance for  the Development            1/8/79
 and Management of FY 1980 State Project
 Priority  Lists
MCD 02.8

PRM 79-7

PRM 79-8

PRM 79-9
Grant Funding of Projects Requiring Treatment
More Stringent than Secondary

Small Wastewater Systems

Outlay Management in the Construction Grants



     ?                      WASHINGTON. D.C. 20460

SUBJECT:  Grant Funding of Projects Requiring Treatment
          More Strijjgen# than Secondary                  Construction  Grants
                         /J&t                        Pvnnram Rpmn' rpmpnt*;  Mpr
                                                     Program Requirements Memorandum
FROM:     Thoma's /LUo^ling (                         PRM #79-7
          Assistant Adfninisl|rator for Water and Waste Management (WH-556)

TO:       Water Division Directors,
          Regions I-X


     This memorandum sets forth Agency policy and procedures for Headquarters
and regional review of wastewater treatment projects designed to meet
effluent requirements more stringent than secondary treatment.   It also
groups such projects into two categories—advanced secondary treatment
(AST) and advanced waste treatment (AWT) and defines these terms.   In
addition, this memorandum provides a standard for reviewing the financial
impact of advanced projects upon small communities.

     We anticipate that the review process will result in the development
of improved national guidance on wasteload allocations and the water
quality standards-setting process.  Thus, these review requirements will
be supplemented in the future by such guidance.


     The Agency has in the past expressed growing concern with the high
cost and energy consumption of publicly-owned treatment works in many
communities.  These high costs and energy demands are frequently attribu-
table to optimistic projections of anticipated growth or sophisticated
extra unit processes.  Funding facilities with these conditions with
limited grant funds results in fewer projects being funded overall,
delay in accomplishing basic secondary treatment goals, and, particularly
in smaller communities, the financial burden of high operation and
maintenance as well as construction costs.

     Consequently, the Agency has to take a hard look at the number and
types of projects that are planned for treatment more stringent than
secondary to achieve the Clean Water Act goals.  Regions and States are
reminded in this connection of the checklist procedure for all  Step 2
and Step 3 projects that was instituted in the June 8, 1978, joint memo
from Rhett/Davis.  The checklist procedure and the independent justifica-
tion described in the following sections are meant to supplement, not
replace, the review of cost-effectiveness and appropriateness of facility
design normally given to projects.

     In action approving the FY 79 appropriation for the Construction
Grants Program, the Appropriations Conference Committee agreed  "that
grant funds may be used for construction of new facilities providing
treatment greater than secondary...only if the incremental cost of  the
advanced treatment is $1 million or less, or if the Administrator person-
ally determines that advanced treatment is required and will  definitely
result in significant water quality .and public health improvements."

     All advanced projects with an incremental capital cost over $1
million that are recommended for funding by the regions or States must
be reviewed at EPA Headquarters after completion of basic facility  plan
review and collection of supplementary materials by the regions or
States.  All other projects more stringent than secondary but with  an
incremental capital cost of $1 million or less shall receive a  comparably
intensive review at the regional/State level.

     Clarification is needed for terminology used in review of  projects.
The Agency has defined secondary treatment as a treatment level meeting
effluent limitations for Biochemical Oxygen Demand (BOD)  and Suspended
Solids (SS) of 30/30 mg/1 on a maximum monthly average basis or 85  percent
removal of these parameters, whichever is more stringent.  The  group of
projects requiring treatment more stringent than secondary can  be divided
into two groups: advanced secondary treatment (AST) and AWT.

     To arrive at the above distinctions the Agency reviewed about  6,300
projects shown in the 1976 Needs Survey as requiring treatment  more
stringent than secondary.  Of the 6,300, 1,200 projects as yet  unbuilt
will be required to meet very stringent levels of treatment of  BOD  less
than 10 mg/1 and/or nitrogen removal.  Additional analysis by the Agency
showed distinct cost increases and shifts to more sophisticated technology
to achieve these levels.  Therefore, the popularized term "AWT" should
only be used to refer to treatment levels providing for maximum monthly
average BOD/SS less than 10 mg/1 and/or total nitrogen removal  of greater
than 50 percent.  ("Total Nitrogen removal" = TKN plus nitrite+nitrate).
These projects are subject to especially intensive review and require
independent justification.  Other projects requiring treatment  more
stringent than secondary but not to AWT levels can be referred  to as
"advanced secondary treatment."  Review procedures for these projects
are somewhat less rigorous.

     A treatment facility designed to meet effluent limitations of
BOD/SS 30/30 mg/1 or 85 percent removal with just disinfection  processes
shall be considered as a secondary rather than advanced secondary treatment
facility for purposes of this PRM.  Other definitions of secondary
treatment (e.g., 25/30 or 20/20) may be used if included in approved
State criteria, if secondary treatment technologies would be used to
achieve these levels, and if any extra costs (present worth)  beyond
those for meeting 30/30 limits would be a very small percentage of  the
present worth costs of the entire treatment facility.  Secondary treatment
facilities with just phosphorus removal add-ons with a capital  cost more

than $1 million and derived from the international  agreement for  the
Great Lakes basin shall  be considered advanced  secondary,  but not subject
to Headquarters review.

     The policy of the Agency is to encourage land  treatment facilities
and other alternative technologies which provide for  reuse of wastewater
or recycling of nutrients and other pollutants.   Such projects usually
afford water quality enhancement beyond  the minimum established in
permits, and water management benefits as well.   Accordingly, where land
treatment or other reuse/recycling technologies  are designed to meet
effluent limitations more stringent than secondary, the procedures
herein would allow such projects to proceed without special  review
unless their costs were found to be excessive.   Excessive  costs are
defined as those which would exceed the  high cost criterion presented in
section 3 of this memorandum or the average present worth  costs of AST
and AWT projects (roughly estimated at 25 percent above secondary for
the former category and 50 percent for the latter).

     Some AWT projects, particularly those featuring  waste stabilization
ponds plus filtration, may not cost more than AST projects.   Thus, AWT
projects with a present worth cost not exceeding that for  secondary
treatment by more than 25 percent may be reviewed under procedures
established herein for AST projects.

     The cost of treatment - secondary as well  as more stringent  than
secondary - can have severe local fiscal impacts.  The latest Title II
regulations give more emphasis to alternative or individual  systems and
require a cost-effectiveness analysis that could result in lower  project
costs, especially to small communities.   This emphasis, along with
increased review, should help ensure that projects  with excessive capacity
for growth or unnecessarily designed to  meet effluent requirements more
stringent than secondary, with capital or operations  and maintenance
costs that may place an intolerable financial burden  upon  the community,
do not receive grant funds.

     Additional guidance on coordination of reviews of advanced treatment
projects with the interim municipal enforcement policy will  be developed
in conjunction with the EPA Office of Water Enforcement.


     The Agency will conduct a rigorous  review  of projects designed for
treatment more stringent than secondary.  The incremental  additional
capital costs of a project that are attributable to effluent limitations
or water qualityfcrequirements more stringent than secondary must  be
based on a justification showing significant receiving water quality
improvement and mitigation of public health problems  where they exist.
In addition, projects requiring treatment more stringent than secondary
should be evaluated for their financial  impact upon the community.
Also, the inflationary costs for delay should be considered in project

reviews.  The regions will review all such projects.  They will  decide
how to proceed in accordance with this PRM for projects having incremental
costs beyond secondary of $1 million or less, and for other projects
explicitly designated in this PRM for final regional decision.  Headquarters
review and decision on how to proceed will follow preliminary regional
review for the remaining projects with incremental capital costs beyond
secondary greater than $1 million.

     For projects with an incremental cost of $1 million or less, the
review is a delegable function under the 205(g) delegation agreements.
For projects with an incremental cost of greater than $1 million, States
may do the initial review but regions must concur with the State's
conclusions before transmitting the project to Headquarters.

     Beginning in FY 1980, the delegation of that group of project
reviews now conducted by Headquarters to those regional offices  demon-
strating capability to perform such reviews well will be considered.

     Review of the projects should proceed as outlined below:


     Preliminary steps in the review should be 1) determination  of the
explicit effluent requirements for the project and identification as
secondary, advanced secondary or AWT, and 2) determination of incremental
capital cost of advanced treatment, as more or less than $1 million.

1.  Review of Projects Identified as AST

     If a project is identified as having to meet advanced secondary
treatment standards (more stringent than secondary but not AWT), the
checklist should be used to review the project.

     For project approval, the review must determine that:

     1.   seasonal operation has been evaluated;

     2.   the land treatment alternative has been considered; and

     3.   the advanced secondary portions of the project will definitely
          result in significant water quality improvements and mitigation
          of public health problems where they exist.

     Reviews of project costs and local financial impacts must comply
with section 3.  If the checklist review demonstrates that the required
level of treatment is not well justified, Federal funding of all or part
of the project should be postponed until the project is redesigned (if
necessary) or the level of treatment is fully justified.

     If the project involves land treatment or other innovative/alternative
technologies featuring wastewater reuse or recycling of pollutants,  does
not exceed the high cost criterion given in section 3 below and  its
incremental present worth cost does not exceed 25 percent of the cost of
a new secondary treatment plant, then the project should proceed without
further review.  If the project does exceed the high cost or present
worth criteria, the procedures prescribed herein for AST projects shall

     a.   Incremental  cost of AST is $1 million or less.

     Regions should follow the criteria and procedures given above.   The
decision will be made at the regional level.

     b.   Incremental  cost of AST is greater  than $1 million.

     If, after the above review, the Regional  Administrator wants to
proceed with funding,  the project must receive approval  from the
Administrator in EPA Headquarters.  The following material  should be
sent to the Office of Water Program Operations: attention Michael B.
Cook, USEPA, Facility Requirements Division (WH 595), 401  M Street,
S.W., Washington, D.C.  20460, telephone (202)  426-9404,  for final
review and approval:

          (1) facility plan (draft or final)  including supporting
documentation on alternatives considered with  region's review and comments;
          (2) completed checklist with detailed answers  to supplement
checked responses;
          (3) region's evaluation of water quality and public health
benefits that will result from advanced secondary treatment based upon
data submitted concerning the project;
          (4) region's evaluation of seasonal  operation  of AST portion
of project; and
          (5) the major documents summarizing  the establishment  of water
quality standards and  effluent limitations for the project.

     Headquarters has  developed procedures for the internal review of
advanced secondary projects which rely heavily upon regional/State
evaluations.  Advanced secondary projects without complex issues are
expected to be reviewed within 25 working days of receipt of the project
at Headquarters.

2.  Review of Projects Identified as AWT

     Regions should assist grantees and the State in developing  the  data
needed for an independent justification of AWT.  This should include at
a minimum:

          (1) facility plan (draft or final)  and supporting documents,
particularly on alternatives considered with  region's review and comments.

           (2)  completed  checklist with  detailed answers to supplement
 checked responses;
           (3)  region's evaluation of water  quality and public health
 benefits that will  result from both secondary  treatment and the additional
 treatment beyond secondary based  upon data  submitted for the project;
           (4)  the major  documents summarizing  the establishment of water
 quality standards and effluent limitations  for the project;
           (5)  an identification and review  of  the need for each proposed
 unit process included in the proposed treatment facility for meeting the
 effluent limitation identified in item  (4). Particular attention should
 be given to an assessment of the  impact on  beneficial uses of dropping
 one or a few treatment processes  (or redesigning one or more treatment
 processes to provide a lesser degree of treatment) and the cost savings
 associated with these options:
           (6)  a detailed review of land treatment and seasonal operation
 alternatives;  and
           (7)  if the item 5 and 6 review indicates'a more cost-effective
 option, an estimate for  the 20-year planning period of the capital,
 operation and  maintenance, and total present worth costs of that option.

      The review of  an AWT project must  determine whether the project
 meets all of the following criteria:

           (1)   The  beneficial uses established for the receiving water
 can be attained or, if not, lesser uses can be achieved when the effluent
 limits are met, and industrial sources  meet their pretreatment and
 permit conditions.   Where Best Management Practices for nonpoint source
 control are required to  achieve standards not  now being attained, these
 controls must be in place or part of a  draft or an EPA approved water
 quality management plan.  The differences must be significant between
 water quality and beneficial uses attained  or  enhanced by the proposed
 project compared with water quality and uses attainable from the project
•with one or a few treatment processes beyond secondary dropped or modified
 and with less stringent effluent  limitations reflecting their omission
 or modification.

           (2)   State laws or requirements or criteria within State water
 quality standards are not more stringent than  the Red Book criteria
 unless fully justified as essential to  achieve and sustain the beneficial

      An exception to this criterion may be  allowed if a project is
 necessary to prevent degradation  of the following types of "national
 resources waters":

      a.   National  Parks

      b.   National  Wildlife Refuges

      c.   National  Seashores

      d.   National  Monuments

     e.   National  Marine Sanctuaries

     f.   National  Estuarine Sanctuaries

     Funding necessary to prevent degradation of other waters  of national,
rather than regional  or State, importance may be allowed on a  case-by-
case basis if both the following conditions are met:

     a.   The water is of truly national, rather than regional  or State

     b.   Federal  legislation or regulations are directed toward protecting
the specific body of water from degradation.

          (3)  The wasteload allocations or other analysis resulting in
the effluent limitations, along with the assumptions  on which  the analysis
is based, are scientifically supported by intensive water quality
surveys or appropriate field investigations conducted on the water
bodies in question, and calibrated and verified models or other technically
sound analyses.

          (4)  The treatment processes are the most cost-effective means
of meeting the prescribed effluent limitations.

          (5)  The community is aware of the project's costs for treatment
and reserve capacity.  Cost information on total capital costs, local
financing, and annual or monthly operating and debt service costs should
be presented at a public hearing as required in PRM 76-3.  Review of
project costs and local financial impacts must comply with section 3.

          (6)  Land treatment has been fully evaluated.

     If the above conditions are not met, either the  entire project or
its AWT elements (if they can be separated out) should not be  funded
pending further action.

     Federal funding of all or the unjustified part of the project
should be postponed until the project (if necessary)  is redesigned or
the level of treatment is fully justified.  The advanced wastewater
treatment increment of the project that is not justified should not be
funded unless and until the project will result in significant water
quality and public health improvements.

     Should the review show that AWT cannot be justified, but that some
treatment greater than secondary can be justified under the rules for
review of AST projects, then the justified portion should be funded.
The project should be segmented to permit funding of the justified
portion and that section should be designed, if practicable, to allow
addition of the other segment at a later date after further analyses.


     Projects may be excepted from the AWT review procedures  under  the
following circumstances:

     (1)  Project features land treatment or other innovative/alternative
technologies affording wastewater reuse or recycling of pollutants  where
the project's cost would not exceed the high cost criterion described in
section 3.  Also, the incremental present worth cost of such  a project
must not exceed 50 percent of the present worth cost of a new secondary
treatment project.  If these criteria are met, the project may proceed
without further review.

     (2)  The AWT project's incremental present worth cost does not
exceed 25 percent of the present worth cost of a new secondary treatment
facility.  Project review must, nevertheless, conform with AST review

     a. Incremental cost of AWT is $1 million or less.

     Regions should follow the criteria and procedures given  above. The
decision will be made at the regional level.

     b. Incremental capital cost of AWT is greater than $1 million.

     If the Regional Administrator is satisfied that the project meets
all of the required criteria and wants to proceed with funding, the
project must receive approval from the Administrator in EPA Headquaters.
The region shall furnish a report covering all of the criteria listed in
section 2 and forward each of the documents listed in section 2 to  the
Office of Water Program Operations: attention Michael B.  Cook, Director,
Facility Requirements Division (WH 595), United States Environmental
Protection Agency, 401 M Street, S.W., Washington, D.C.  20460, telephone
(202)426-9404, as soon as possible after the need for Headquarters
review is identified.

     Headquarters has developed internal procedures for a task force
review of complex AST and AWT projects that will review the major  issues
and questions intensively based upon the material sent in by  regions and
States.  Decisions will be made on the basis of the criteria  outlined
above.  It is planned for the Administrator's decision on the project to
be made within 45 to 60 working days of receipt of the project at Head-
quarters.  This decision will be communicated to the regions.

3.  Local Financial Impacts

     All projects designed to achieve treatment more stringent than
secondary must be evaluated in terms of financial impact upon the  community.
This evaluation should supplement the display and disclosure  of financial
information and local costs required of all facility plans and described
in PRM 76-3.  Total annual costs to a typical domestic user comprise
both the existing preproject costs and the increase attributable to the

proposed new facilities.  A project shall  be considered high-cost when
the total average annual cost (debt service, operation and  maintenance,
connection costs) to a domestic user exceeds the following  percentage of
median household incomes:

     1.50  percent when the median income  is under $6,000

     2.00 percent when the median income is $6,000 -  $10,000

     2.50 percent when the median income is over $10,000

     If review shows that a project is high cost, try to determine which
elements of the project are responsible.  Determine whether it is the
treatment processes selected, excessive reserve capacity, new sewer
construction, or other factors in the physical  setting that may cause
excessive costs in either construction or  operation of the  facility.
Work with the grantee and the State to revise the facility  plan or
redesign the project to reduce the costs,  or obtain assistance from the
Farmer's Home Administration (FmHA) or another  source with  the local
share.  There is agreement between FmHA, EPA and Economic Development
Administration for all to use the above rule-of-thumb in review of
projects.  Regions should proceed with a project determined to be high
cost under this criterion only after consulting with  the Facility Require-
ments Division in Headquarters.


     This policy shall be implemented immediately as  follows.   Regions
shall advise States of the policy of strict review in the regions and
Headquarters of treatment more stringent than secondary (advanced secondary
and AWT).  They should also be advised of  the Agency's policy not to
fund such projects if not justified.  The  policy should be  applied to
all projects prepared for Step 2 or 3 funding.

                          WASHINGTON. D.C.  20460
                                                                  9   1979

                                                           OFFICE OF WATER AND
                                                          HAZARDOUS MATERIALS
                                              PROGRAM REQUIREMENTS MEMORANDUM
                                              PRM# 79-8

SUBJECT:  Small Wastewater Systems

FROM:     John T. Rhett, Deputy Assistant Administrator

limited conveyance systems serving clusters of households and small
commercial establishments and pressure and vacuum sewers.  These
alternative sewers are specifically exempted from the collection sewer-
interceptor designations when planned for small communities and are not
subject to the collection system policy.  These systems also include
other treatment works which employ alternative technologies listed in
Appendix E, 40 CFR 35, and serve communities of 3,500 population or less
or the sparsely populated areas of larger communities.

     A conventional system is a collection and treatment system consisting of
minimum-size (6 or 3 inches) or larger gravity collector sewers, normally with
manholes, force mains, pumping and lift stations and interceptors leading to
a central treatment plant employing conventional concepts of treatment as
defined in Section 5, Appendix E, 40 CFR 35.

     Small alternative wastewater systems may be publicly or privately owned.
Privately owned systems (called "individual systems" in the Act and 40 CFR 35)
may serve only one or more principal residences or small commercial establish-
ments.  Publicly owned systems may serve one or more users.  Perpetual or
life-of-project easements or other binding convenant running with the land
affording complete access to and control of wastewater treatment works on
private property are tantamount to ownership of such works.

     High wastewater user costs exceeding $200, $300, and even $500 annually
for households in some communities under 10,000 in population have resulted
from debt retirement costs for new collection systems or from high operation
and maintenance costs of new sophisticated plants.  Extremely high cost
projects have culminated in political upheaval, refusal to connect into or
to pay after connecting into central sewers, violence at public meetings,
requests for injunctions, and filing suits against several parties, including
EPA.  In most cases, all of the feasible alternatives were not considered in
the cost-effectiveness analysis and some systems were overdesigned by using
inflated population projections and excessive water usage data.  In the past,
it has been difficult during facility plan review to pinpoint those projects
that have severe financial impacts.

     Previous policy and facility planning guidance have called for verification
by the grantee that that community is able to raise the local share.  PRM 76-3
requires the estimated operation and maintenance and debt retirement costs to
each user to be presented in clear, understandable terms at the facility
planning public meeting.  In his letter of December 30, 1976, the Administrator
asked the Regional Administrators to pay careful attention to facility plans
where average local debt retirement costs per household exceed 1 percent of
annual median income and for which local debt retirement costs plus operation
and maintenance costs exceed 2 percent.

     Guidelines modifying the 1 percent to 2 percent guide have been included
below to assist in identification of expensive projects for further analysis.
We are preparing a format with instructions for municipal officials and State
and Federal reviewers to use to determine the size of project the municipality
can afford using readily available local financial data.


     Loan and grant programs of several Federal agencies for construction of
wastewater treatment works in the past usually have been handled individually
with little coordination among the agencies.  This has resulted in unnecessary
paperwork, duplication, federally imposed administrative burdens, construction
of inappropriate or too sophisticated, costly facilities, fostering of
development on rural land, and poor structuring of local share debt financing.

     Under the Interagency Agreement for Rural Water and Sewer Projects,
Environmental Protection Agency (EPA), Farmers Home Administration (FmHA),
Economic Development Administration (EDA), Housing and Urban Development (HUD),
and Community Services Administration (CSA) will coordinate their efforts to  '
improve the delivery of Federal water and sewer programs to rural and semi-rural
communities.  Major features include:

     °Emphasis on alternatives that may have lower per capita capital and
      operating costs and require less sophisticated technology and skill
      to operate than conventional collection and treatment facilities;

     °A regular exchange of information among the agencies involved in
      funding the project, including meeting periodically and using the
      Federal Regional Councils;

     °The facilitating of application and disbursement of funds for rural
      water and sewer projects and informing communities of the range of
      funding and other assistance available to them;

     °The establishment of a universal data base for national wastewater
      disposal and treatment needs;

     °The more efficient use of the A-95 process of review by clearinghouse

     °Use'of the same criteria to evaluate the financial impact of the pro-
      posed system upon the community;

     "Coordination of the review of facility plans between EPA and FmHA and
      use of the plans by FmHA as their feasibility report to the extent

     °The demonstration of compliance with Federal requirements under specific
      statutes only once when communities are using funds from more than one
      program with identical compliance requirements.  Where agency regulations
      differ in compliance requirements, agencies will work together to ensure
      individual or coordinated review as appropriate.

     Facility planning in some small communities with unusual or inconsistent
geologic features or other unusual conditions may require house-to-house
investigations to provide basic information vital to an accurate cost-effectiveness
analysis for each particular problem area.  One uniform solution to all
the water pollution problems in a planning area is not likely and may not be
desirable.  This extensive and time-consuming engineering work will normally


result in higher planning costs which are expected to be justified by the
considerable construction and operation and maintenance cost savings of small
systems over conventional collection and treatment works.

     Though house-to-house visits are necessary in some areas, sufficient
augmenting information may be available from the local sanitarian, geologist,
Soil Conservation Service representative or other source to permit preparation
of the cost-effective analysis.  Other sources include aerial photography and
boat-carried leachate-sensing equipment which can be helpful in locating
failing systems.  Detailed engineering investigation, including soil profile
examination, percolation tests, etc., on each and every occupied lot should
rarely be necessary during facility planning.

III. Policy

     A.   Funding of Publicly and Privately Owned Small Alternative Wastewater

          1.   Minimum Standards and Conditions

               The Clean Water Act and the regulations implementing the Act
          impose no restrictions on types of sewage treatment systems.  These
          alternative systems are eligible for funding for State approved
          certified projects when the following minimum standards and
          conditions are met:

               a.   For both publicly and privately owned systems, the
                    public body must meet the requirements of 40 CFR 35.918-1
                    (b), (c), (e) through (j); 35.918-2 and 35.918-3.

                    A comprehensive program for regulation and inspection
               of these systems must be established prior to EPA approval
               of the plans and specifications.  Planning for this compre-
               hensive program shall be completed as part of the facility
               plan.  The program shall include, at a minimum, the
               physical inspection of all on-site systems in the facility
               planning area every three years with pumpouts and systems
               renovation or replacement as required.  The program shall also
               include, at a minimum, testing of selected existing potable
               water wells on an annual basis.  Where a substantial number
               of on-site systems exist, if necessary, appropriate
               additional monitoring of the aquifer(s) in the facility
               planning area shall be provided.

                    For privately owned systems the applicant must demonstrate
               in the facility plan that the solution chosen is cost-effective
               and selected in accordance with the cost-effectiveness
               guidelines for the Construction Program,  (Appendix A,
               40 CFR Part 35).  These systems are not eligible for a
               15 percent cost preference for the alternative and innovative
               processes and techniques in the cost-effectiveness analysis.
               Publicly owned systems, however, are eligible for the 15 percent
               cost preference.

     b.    In addition to the conditions in paragraph A.I,  privately
          owned systems must meet the requirements of 40 CFR 35.918-1(a)
          and (d)  and the following:

          (1)  Provide facilities only for principal residences,
               (see 40 CFR 35.918(a)(2))  and small commercial
               establishments (i.e.,  those with annual  or  seasonal,
               if  not operated throughout the year, dry weather flows
               of  less than 25,000 gpd and more than one user
               equivalent per day; e.g. 300 gpd).   Not included
               are second homes,  vacation or recreation residences;

          (2)  Require commercial users to pay back the Federal
               share of the cost  of construction with no moratorium
               during the industrial  cost recovery study.   The
               25,000 gpd exemption does  not apply for those
               commercial establishments;

          (3)  Treat nonprofit and non-governmental institutional
               entities such as churches, schools, hospitals and
               charitable organizations,  for purposes of this special
               authority, generally the same as small commercial

2.   Other Eligible and Ineligible Costs

     In addition to the costs identified  in the Construction Grants
Regulations, 40 CFR 35.918-2, the following costs are also grant

     (a)  Vehicles and associated capital equipment required for
          servicing of the systems such as septage pumping trucks
          and/or dewatered residue haul vehicles.

          (1)  Vehicles purchased under the grant must have as
               their sole purpose, the transportation of liquid or
               dewatered wastes from the collection point
               (e.g., holding tanks, sludge-drying, beds) to the
               treatment or disposal  facility.  (Other mobile
               equipment is allowable for grant participation as
               provided for on pages VII-12 and 13, "Handbook of
               Procedures, Construction Grants Program for Municipal
               Wastewater Treatment Works.")

          (2)  If vehicles or equipment are purchased the
               grantee must maintain property accountability in
               accordance with OMB Circular A-102 and 40 CFR 30.810.


     (b)  Septage treatment plants (eligible for 85 percent
          grant funding as part of an alternative system).

     (c)  Planning for establishment of small alternative
          wastewater systems management districts, including public
          hearings to discuss district formation.  The "mechanics" of
          establishing the districts such as legal and other costs for
          drafting of ordinances and regulations, elections, etc., are
          a normal function of government and are not grant eligible,
          (Construction Grants Program Handbook of Procedures, VII-6).

     (d)  Rehabilitation, repair or replacement of small alternative
          wastewater systems as provided for by 40 CFR 35.908(c).

3.   Grant Funding of Small Alternative Wastewater Systems

     Small alternative wastewater systems are eligible for 85 percent
grants; 75 percent of the Federal grant may be funded from the
4 percent set-aside.  The 10 percent grant increase must be funded
from the 2 percent set-aside (3 percent in FY 1981).  The 10 percent
grant increase can also be applied to small alternative wastewater
systems where 4 percent set-aside funds are not available (i.e.,
in States where there is no 4 percent set aside or States where
4 percent set-aside funds have been depleted).

4.   Use of Prefabricated or Preconstrueted Treatment Components

     The use of prefabricated or preconstrueted treatment components
such as septic tanks, grinder pump/tank units, etc., normally is
more economical than construction in place and should be carefully
considered.  In the case of very small systems, prefabricated or
preconstructed units should in most instances be the most cost-
effective.  For somewhat larger systems of standard design,
prefabricated or preconstructed units may also be cost-effective and
should be carefully considered in the facility plan.

5.   Useful Life of Small Alternative Wastewater Systems

     Whenever conditions permit, these alternative treatment works
including soil absorption systems, shall be designed to ensure a
minimum useful life of twenty years.

6.   Comparison of Small Alternative Wastewater Systems with
     Collection Systems in Cost-Effective Analysis

     The present worth of small alternative wastewater systems for
future development permitted by the cost-effectiveness guidelines,
(40 CFR 35, Appendix A) may be compared with the costs of alternative
and conventional collection systems for the same planning area.  In
each instance both eligible and ineligible costs shall be considered
including service line costs from residence to collector, connection
fees and service to the on-site units.


IV.  Determination of the Economic Impact of the Project

     When total user charges for wastewater treatment services, including
debt service and operation and maintenance, for the average user in the
service area, exceed the following percentages of annual household
median incomes:

          1.50 percent when the median income is under $6,000;
          2.00 percent when the median income is between $6,000-$10,000;
          2.50 percent when the median income is over $10,000.

the projects shall be considered expensive and shall receive further intensive
review to determine, at a minimum:

     1.  the adequacy and accuracy of the cost-effective analysis,
         particularly noting whether all the feasible alternatives
         have been considered and if the cost estimates are reasonable;

     2.  the soundness of financing of the local share, and

     3.  whether the grant applicant has sought out all the sources of
         supplemental funding.

(Costs of an expensive project can sometimes be reduced by additional facility
planning effort, including reduction in scope.)

     A format, instructions and criteria for determination of the financial
capability of the public body to carry the debt load of a new project are being
prepared and will be promulgated at an early date.  This process will be
tailored for the use of municipal authorities and State and EPA reviewing

V.   Interagency Coordination and Streamlining the Review and Approval of Grants
     or Loans for Construction of Wastewater Treatment Works in Sparsely Populated

     A.   Coordination with Farmers Home Administration (FmHA)

          Communities should be encouraged to contact FmHA during the development
     of their facility plans to receive informal comments before the plans are
     finalized and submitted for review.

          Upon receipt of State certified facility plans for communities under
     10,000 population, the Region shall send a copy of each plan to State
     FmHA officials for their review concurrently with regional review.  FmHA
     will provide comments normally within 30 days to the Region on the
     financial capability of the community to carry the project, the structuring
     of the local share debt, the viability of the selected alternative and
     other matters in which FmHA is interested.  The comments are for each
     Regional Administrator's information and appropriate action, if received
     within the 30-day period.  They are not FmHA's official comments to the
     community on its plan.  Close cooperation between FmHA and regional
     reviewers is encouraged.  For States which are delegated final facility
     plan review, the above coordination shall be between the State and State
     FmHA officials.


     B.    Exchange of Information Among FmHA. HUD, EDA. CSA and EPA Through
          Joint Meetings

          The agencies shall meet periodically during the year using the Federal
     Regional Councils.  Meetings shall be initiated by any of these organizations
     and one of these meetings will take place at least 120 days before the
     beginning of each new fiscal year.  These'meetings may include:

          1.   Review of status of projects being jointly or concurrently

          2.   Discussion of future projects in common;

          3.   Exchange of information on current and new administrative
               or substantive procedures or requirements; and

          4.   Review of action items such as:

               a.   One year priority or project lists to identify
                    combined funding possibilities;

               b.   Existing project lists to  identify overlapping
                    projects or funding;.and

               c.   Construction and inspection schedules to identify
                    areas of coordination.

               Regular meetings between respective state-level agencies
are encouraged for similar purposes of coordination.

     C.   Encouragement of Alternatives to Conventional Collection and
          Treatment of Wastewater

          Alternatives to conventional wastewater collection and treatment
     facilities that may have lower per capita capital, operating and main-
     tenance costs and require less sophisticated technology and skill to
     operate shall be encouraged.

     D.   Provision of Funding and Other Assistance  Information to Small Communities

          Regional offices and other sources will provide, on request, information
     on the range of funding and other assistance for rural sewer projects.
     Technical information may be obtained from the  Environmental Research
     Information Center (ERIC), Cincinnati, Ohio 45268, telephone number
     (513) 684-7394, or the Small Wastewater Flows Clearinghouse, West
     Virginia University, Morgantown, West Virginia  26506, telephone number
     (800) 624-8301.


E.   Establishment of a Universal Data Base for National Wastewater Disposal
     and Treatment Needs

     The EPA biennial Needs Survey will be used as the initial data base for
all agencies involved in funding rural facilities.

F-   More Efficient Use of the A-95 Process of Review

     Notification of intent to apply for grant funds submitted to A-95
clearinghouses should indicate the intention to apply for joint or combined
funding and identify the prospective assisting agencies.

     The A-95 agency needs to conduct only one review of the actual project
for each plan of study and Step 1 grant (except for special circumstances)
which will meet the requirements for all agencies involved.

     The use of the A-95 process and Water Quality Management Planning
process under section 208 to identify projects that may be eligible for
funding should be promoted.

     Regions should encourage the clearinghouses to use the A-95 process
to evaluate the rural and urban impact of jointly funded projects.

6.   Acceptance of One-Time Demonstration or Assurance of Compliance with
     Federal Requirements for Jointly Funded Projects

     The Regions and States where responsibility has been delegated should
accept evidence of compliance with requirements of the following when they
apply in an identical manner to the programs of each agency:

     1.   Uniform Relocation and Real Property Acquisition Policies
          Act of 1970;

     2.   Civil Rights Act of 1964; Civil Rights Act of 1968;
          Executive Order No. 11246;

     3.   Davis-Bacon Fair Labor Standards Act;

     4.   The Contract Work Hours Standards Act;

     5.   The Copeland (Anti-Kickback) Act;

     6.   The Hatch Act;

     7-   The Coastal Zone Management Act of 1972;

     8.   The Archaeological and Historic Preservation Act of 1974;

     9.   The National Flood Insurance Act of 1968, as amended by  the
          Flood Disaster Protection Act of 1973, and regulations and
          guidelines issued thereunder;

          10.  The Wild and Scenic Rivers Act of 1968;

          11.  The Endangered Species Act of 1973;

          12.  The Clean Air Act;

          13.  Executive Order No. 11988 on floodplains management;

          14.  Executive Order No. 11990 on wetlands protection;

          15.  The National Historic Preservation Act of 1966, and
               Executive Order No. 11593;

          16.  The Safe Drinking Water Act of 1974.

          Further guidance in this area will be issued after detailed review
     and discussion by all agencies of regulations and requirements  imple-
     menting each of the above statutes.

VI.  Implementation

     This policy should be emphasized through Step 1 preapplication  conferences,
contacts through municipalities and the States and reviews of Steps  1 and 2
grant applications.  This PRM is effective for facility plans started after
May 31, 1979, except as follows:

     a.   The determination of economic impact is applicable to facility
          plans review commencing 90 days after issuance of this guidance.

     b.   Review of facility plans by FmHA should commence on facility
          plans received for review 60 days after issuance of this guidance.

     c.   Joint meetings to exchange information using the Federal Regional
          Councils should commence prior to May 31, 1979.  At least  one of the
          future meetings should take place at least 120 days before the
          beginning of each new fiscal year that follows.

     d.   The more efficient use of the A-95 review above shall commence
          as soon as practicable, but not later than May 31, 1979.

                           WASHINGTON. D.C.  20460
      MAY  1  \  1979
      w                                Program Requirements Memorandum
                                        PRM # 79-9
SUBJECT:  Outlay Management in the Construction Grants Program
FROM:     ThomasX^l JOTllaAyft&fifetakt Administrator
          for Water and WaJrte Manage^nt  (WH-556)

TO:       Regional Administrators


     This memorandum sets forth policy on outlay management in the
Environmental Protection Agency's construction grants program.


     It is the policy of the Environmental Protection Agency to establish
and maintain a comprehensive system of outlay planning and management in
the construction grants program.  Regional Offices will be responsible
for developing realistic outlay estimates, and for meeting approved
outlay plans on a monthly basis.

     In furtherance of this policy, Regional Offices are to pursue a
program of active outlay management, at both the project and the con-
tract levels, for all large construction grants projects designated by
the Regional Administrator.  For all such projects outlay schedules are
to be developed for all major construction and A/E contracts at the time
of contract award.  This requirement replaces the need for the grantee
to submit the proposed payment schedule prior to grant award that is
normally made part of the grant agreement.  For any contracts not
awarded within six months of grant award, the grantee must furnish a
schedule of projected start and completion dates for each contract.  The
method for submitting this information to the Region will be determined
by the Regional Administrator.

     The outlay schedules are to be revised annually by July 1st, for
input into the federal budget process, and whenever actual project
performance strays significantly (-5% or +10%) from the schedule.  Each
project is to be inspected at least quarterly (on a continuing resident
or monthly basis for large or complex projects) to monitor performance
against these schedules, and to resolve problems before they lead to
project delays.


     To provide the Region with the necessary information for developing
outlay estimates, and to provide a basis for subsequent project/contract
management, the grantee must submit the following information for each
major construction or A/E contract by July 1st of each year:

     o    EPA project identification (grant) number.
     o    Grantee name.

     o    Contract identification (name or number).

     o    Contract award date.

     o    Projected contract completion date.
     o    Total eligible contract amount.

     o    Quarterly payment schedule (75% EPA share) for last quarter of
          current fiscal year and all of the following fiscal year, and
          an annual estimate for the succeeding fiscal year.  (The
          Regional Administrator may request a monthly payment schedule
          for contracts that may have a significant impact on Regional
          outlay projections.)

     o    Other information required by the Regional Administrator for
          effective contract management.

For new contracts awarded after July 1st, or for contract schedules that
must be revised during the year because actual performance differs from
the projection, the grantee should submit, along with the other adminis-
trative information, projections only for the quarters that remain in
the year, plus the annual projection for the succeeding year.

     On an annual basis these contract level outlay schedules are to be
aggregated, modified as appropriate, and combined with outlay projections
for Step 1, Step 2, small Step 3 and 4, Section 206(a), and P.L. 84-660
projects, as well as expected outlays for future obligations and drawdowns
of Section 205(g) State delegation agreements, to become the Region's
annual outlay conmitment.  This ccomitment will be in the form of a
monthly projection, by State and Regional total, of the outlay demand
for the upcoming fiscal year; and a annual projection, by State and
Regional total, for the following (budget) year.  The conmitment is due
to Headquarters by August 10th of each year.  Upon approval by Headquarters,
the Regions will be required to meet their conmitment to within ±5% of
the cumulative projection on a monthly basis.  Regional performance will
be tracked only against the total Regional monthly conmitment.  The
State breakdown and the annual budget year projection will only be
considered activity indicators.



     This policy is being implemented by EPA for two purposes:  to
develop more  accurate fiscal estimates for the President's budget,  and
to initiate a comprehensive program of project management in the post-
Step 3 phase  of the construction grants process.  Accurate budget
estimates are required for this program because of its size  and impact
on federal budget decisions.  Effective project management is essential
to assure that fiscal estimates are achieved, and that construction
grants projects proceed on schedule to achieve the primary goal of  clean
water at the  earliest possible date and at minimum cost.  The program
being adopted by EPA  is designed to attain these objectives.
                                           »D.S. COVEKNMEHT PRINTING OFFICE: 1979 — 677-070/1103 REGION NO. 8