United States
Environmental Protection
Agency
Office of Water (WH-557)
Washington DC 20460
March 1986
Transmittal Memorandum 86-1
Handbook of Procedures
Construction Grants Program
for Municipal Wastewater
Treatment Works
Municipal Construction Division
Office of Municipal Pollution Control
Office of Water
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460
OFFICE OF
WATER
Transmittal Memorandum
TM 86-1
MEMORANDUM
SUBJECT: Updating of Handbook
FROM: James A. Hanlon, Director
Municipal Construction Divifeion (WH-547)
/'
TO: Users of Handbook of Procedures
jj
H
Attached is a copy of the second*updating to the Handbook
of Procedures. The replacement pages are marked "TM 86-1" on the
bottom right side to distinguish them from both the originals and
those revised in the first updating (TM 85-1). Revised or added
text material has been underlined so that the latest changes are
readily recognized. All previous underlinings on the TM 86-1
pages have been removed. The TM noted pages without underlinings
contain either shifted material, to accommodate lengthy insertions,
on adjacent pages, or clarifications which are primarily editorial.
Also attached is a summary chart listing each revised page,
its location and the reason for the change.
For persons interested in maintaining continuous records,
it is suggested that this memorandum, the summary chart and the
replaced pages be filed behind the flow chart.
Attachments
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TRANSMITTAL MEMORANDUM (TM) 86-1
HANDBOOK OF PROCEDURES
SUMMARY OF REVISIONS
PAGE
LOCATION AND REASON FOR CHANGE
109 Par. b; added regulation cited.
119 2nd par; use of GICS in overseeing delegated activities added.
120 Par. G "Information Management". Discussion of GICS moved from
Chapter III to end of Chapter I.
121 2nd & 3rd pars; discussion of GICS expanded.
307 Last par. Use of GICS in tracking projects in preapplication stage
discussed.
308- Space Accommodation (SA) — due to transferring of GICS discussion
312 to Chapter I.
316 2nd par.; "EA" and "FNI" added as a condition for disallowing a
categorical exclusion. Last par; importance of project schedule in
project management added.
405 Space accommodation (SA)
406 1st & 2nd pars.; rewritten to update status of NEPA regulations and
guidance.
407 SA
408 SA
409 2nd par.; explanation of need for a project clarified.
412 Last par.; editorial changes.
413 2nd par.; verb change to reflect publication of regulations in final
form.
420 4th par.; edit to clarify non-excessive inflow.
421 1st par.; edit to clarify I/I.
424 2nd par.; revision of definition of useful life.
448 1st par.; added information for I/A reviewers.
456 2nd par.; elimination of certain action by grantee when sludge
found to be hazardous.
459 4th par.; proposed sludge treatment required to comply with additional
Acts.
472 SA
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PAGE
LOCATION AND REASON FOR CTANGE
473
506
612
631
638
651
652
653
654
654A
654B
656-7
658
659
667
668
669
723
724
727
730
731
736
737
739
1st and 2nd pars.; NEPA regulatory cite added for guidance on public
participation activities.
4th par.; statement added to call attention to need for more cost
conscious reviews of plans and specs.
1st & last pars.; phrases added to call attention to need for considering
the status of pretreatment programs in reviewing project schedules.
3rd par; use of CAPDBT for determining cost ratios of sewers and punping
stations added.
2nd par.; (see 612).
Additions and revisions made regarding grantee land acquisition
activities to reflect changes brought about by the publication of
Part IV (The Uniform Act) regulations in final form on 2/27/86.
SA
Par. 3; points up need to consider program guidance in reviewing I/A
projects. Par. 4; Guidance an one year certification vs two year
limit to declare I/A failure added.
Par. 2; indicates availability of assistance in conducting I/A reviews.
SA
Par. 2; added phase on allowability of planning and design costs
when modifying or replacing failed I/A projects. Par. 3; guidance
on source of funds for 100% M/R grants aded.
Last par.; added to note need to corplete data base form on I/A
projects.
Par. 3; added to note recent regulation limiting cost overruns to 5%.
Par. 2; cite new regulation (see 723).
Par. F.3.; back reference on single bids added.
Par. 2; phrase added on timing of Project Management Conference.
SA
Last par.; words and phrases added to clarify when change orders can
be negotiated rather than be formally advertised.
SA
Par. e; sentence added to reflect 5% cost overrun ceiling.
II
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PAGE
LOCATION AND REASON FOR CHANGE
740 3rd par.; 5% ceiling regulation cite added.
742 Last par.; sentence added on exemption provision (differing site
conditions) of 5% cost ceiling regulation.
743 4th par.; two cites added: new 5% cost ceiling and recent publication
on contractor claims.
745 1st par.; phrases added to clarify requirement on conducting cost or
pricing analysis on change orders.
746 Requirement that agency's legal counsel review all change orders dropped.
747 2nd par.; spelling error corrected ("word" not "work".)
808 Step 1 and Step 2 grant increases modified to reflect EPA policy
811 (issued 9/27/85) on managing these grants.
812
814 4th par. NPDES permit tied to project schedule.
815 3rd par. (See 814)
818 Last par; administrative completion steps clarified,
819 1st par; NOTE 1; administrative completion of segments; NOTE 2; separation
of certain claims to facilitate close-outs.
820-22 SA
823 Error in cite date corrected.
824-25 SA
826 First par; procedure for managing certain final payments added.
827-30 SA
831 Last par; edited for clarity.
832 1st par; expanded procedures on handling draft audit reports. 3rd and
4th pars; expanded procedures on handling final audit reports. Last
par; appeals concept expanded.
833 3rd par; expanded procedures on handling final determination letters.
4th par; last sentence expanded to relate interest payments on debts,
not paid within 30 days, to disputes process per regulations issued
2/21/86. Last par; expanded procedures on recovering grantee
overpayments determined at completion of audit.
912 1st & 2nd pars.; policy on interest earned on grant overpayment clarified.
913 Last par.; 5% ceiling on cost overruns added.
Ill
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PAGE
LOCATION AND REASON FOR CHANGE
914 1st par.; exception (for differing site conditions) to 5% overrun ceiling
noted. Last par.; deobligation procedure expanded to clarify sequence
of approvals prior to reallotment.
935 Last pars.; new regulations on the allowability of field testing on I/A
projects added.
936 1st par.; new regulation added on the allowability of planning and design
costs re M/R costs on I/A projects.
937 SA
939 2nd and 3rd pars.; new regulation added, and explanatory paragraph
modified to note that increased costs incurred as a result of awarding
contracts on significant elements of a project more than a year after the
Step 3 grant awarded, are unallowable unless approved in advance by RA.
940 1st par; continuation of 939 above. 2nd par; guidance an awarding bids
after project schedule date when bidders agree to hold prior bids firm.
941 SA
945 Last par.; new regulation added disallowing the cost of land purchased
to mitigate adverse environmental impacts.
946 SA
947 2.b. - regulation revision added to clarify unallowability of certain
small and onsite system conveyance pipes.
948 2nd par.; statement added re allowability of partially acquired property:
par. b; regulatory phrase added to clarify allowability statement, b.i.;
surveying costs allowable only on allowable land.
949 v.; revised to clarify wording: 7th par.; added review guidance per
grantee activities re The Uniform Act: 8th par.t new citation added.
950 SA
951 2.a.: 1st par.: regulation correction. 2nd par.; unallowability of surveys
and preparation of legal boundary descriptions added.
952-3 SA
954 (3); regulation correction
955 1st par.; allowability of flow meters used for billing added.
956-7 SA
958 2nd par; the unallowability of the cost of grouting structurally
damaged sewers under I/I added.
959-64 SA
IV
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TABLE OF CONTENTS
LIST OF ILLUSTRATIONS
LIST OF ACRONYMS
CHAPTER I. INTRODUCTION 101
A. Introduction 1°3
B. Purpose 103
C. Methodology 104
D. Organization and Content 105
1. History 105
2. Organization 106
3. Format 1°6
4. Regulations 1°7
a. 40 CFR Parts 108
b. Other Regulations 109
5. Policy Memoranda HO
6. State Requirements HO
7. Related Materials HI
8. Updating HI
E. Legislative History 112
F. State Delegation H4
1. General 114
2. Delegation Agreements 115
a. Basic or "Umbrella" Agreement 116
b. Functional Agreements or
Subagreements 116
3. Delegated Functions 116
4. EPA Oversight H8
a. Developing the Plan for Oversight 118
b. Negotiating Annual Outputs 118
c. Monitoring and Evaluating Program
Performance H9
5. U.S. Army Corps of Engineers 119
G. Information Management 120
CHAPTER II. WATER QUALITY PLANNING 201
A. Introduction 203
B. Defining Water Quality 203
1. Water Quality Goals and Standards 203
2. Water Quality Monitoring 204
3. Water Quality Report 205
TM 86-1
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C. Water Quality Management Planning 205
1. General 205
2. Continuing Planning Process 206
3. Water Quality Management Plans 207
4. Water Quality Management Funding and
Annual Work Program 210
D. Implementing the Water Quality Management Plan 211
1. National Municipal Policy 211
2. Municipal Permits 212
3. Facilities Plans 212
E. Funding the Construction Grants Program 213
1. General 213
2. Allotment of Funds 213
3. State Priority System and Project
Priority List 214
4. Reserves 217
a. Reserve for State Management Assistance 218
b. Reserve for Alternative Systems for
Small Communities 218
c. Reserve for Innovative or Alternative
Technologies 218
d. Reserve for Water Quality Management
Planning 219
e. Reserve for Advances of Allowance 219
F. Summary of the Planning Process 220
CHAPTER III. PREAPPLICATION MANAGEMENT 301
A. Introduction 303
B. Qualifications 304
1. Applicant Qualifications 304
2. Project Qualifications 305
C. Preapplication Project Management 306
1. Project Identification 306
2. Project Tracking 306
3. The Uses of GICS Data 307
D. Preplanning Conference 308
1. Permits and Compliance Schedules 309
2. Procurement of Engineering Services 309
a. Procedures 309
b. Use of Small, Minority, Women's, and
Labor Surplus Area Businesses 309
c. Use of Debarred or Suspended Firms 310
3. Financial Considerations 310
a. State Priority System and Project
Priority List 310
b. Federal Grant Share 311
TM 86-1
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c. Financial Assistance for Facilities
Planning and Design Work 311
d. Step 2+3 Grants 311
e. Preaward Costs 312
f. Phased or Segmented Projects 312
4. Limitations on Eligibility 312
a. Collection Systems 312
b. Individual Systems 313
c. Reserve Capacity 313
5. Intergovernmental Review 313
6. Technical Review 313
a. Water Quality Management Plan 313
b. Facilities Plan 313
c. Value Engineering 314
d. Intermunicipa1 Service Agreements 315
e. User Charge System 315
f. Sewer Use Ordinance 315
g. Plan of Operation 315
h. Project Performance Standards 315
7. Categorical Exclusion 316
8. Project Management 316
9. Publications 317
E. Advance of Allowance 317
CHAPTER IV. FACILITIES PLANNING 401
A. Introduction 403
B. Regulatory Requirements 403
1. Facilities Planning Regulations 403
2. National Environmental Policy Act 405
3. Water Quality Management Plans 406
4. Facilities Planning Review 407
C. Facilities Plan Contents 408
1. Summary, Conclusions, and Recommendations 408
2. Purpose and Need 408
2.1. Study Purpose 408
2.2. Need for the Project 409
3. Rfflu.-nt Limitations 410
3.1. Secondary Treatment 411
3.2. Marine Discharge Waivers 413
3.3. Advanced Treatment 414
3.4. Land Application 414
4. Existing Environment 416
4.1. Existing Conditions in the
Planning Area 416
4.2. Existing Wastewater Flows and
Treatment System Performance 418
TM 86-1
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4.3. Infiltration and inflow 419
Future Conditions 423
5.1. Planning Period 424
5.2. Land Use Projections 425
5.3. Population Forecast 427
5.4. Industrial and Federal Facilities 428
5.5. Flow Reduction 430
5.6. Forecast of Flow and Waste Load 432
5.7. Reserve Capacity 434
5.8. Future Environment without the
Project 434
Development of Alternatives 434
6.1. Flow Reduction 435
6.2. Optimum Performance of Existing
Facilities 435
6.3. Unsewered Areas 437
6.4. Conventional Sewers 439
6,5. Alternative Conveyance Systems 441
6.6. Interceptor Sewers 442
6.7. Regionalization 444
6.8. Conventional Treatment 445
6.9. Innovative and Alternative
Technologies 447
6.10. Alternative Technologies 448
a. Effluent Treatment 448
b. Sludge 449
c. Energy Recovery 449
d. Small Alternative Wastewater
Systems 449
6.11. Land Application Systems 450
a. Site Selection 451
b. Loading Rates and Land Area 451
c. Estimated Costs 451
d. Preapplication Treatment 451
e. Environmental Effects 451
6.12. Innovative Technologies 452
6.13. Sludge Management 455
a. Composting 457
b. Landspreading 457
c. Distribution and Marketing 457
d. Methane Recovery 458
e. Self-sustaining Incineration 458
6.14. Identification of Principal
Alternatives 459
TM 85-1
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16. Infiltration and Inflow 628
17. User Charge System and Sewer Use Ordinance 629
18. Reserve Capacity 630
19. Industrial and Federal Facilities 634
E. Additional Considerations for Award 634
1. Small Alternative Wastewater Systems 634
2. Marine Discharge Waiver Applicants 637
3. Innovative or Alternative Technology
Reconfirmation 637
4. Pretreatment 637
5. Force Account 638
6. Intergovernmental Review 639
7. Procurement of Professional Services 640
8. General Grant Conditions 641
F. Step 2+3 Grants 643
1. Qualifications 643
2. Application Contents 643
3. Deferred Provisions 644
G. Combined Sewer Overflow Grants 645
1. Source of Funds 645
a. State's Regular Allotment 645
b. Governor's Discretionary Set-aside 645
c. Separate Appropriation for Marine
Projects 646
2. Project Requirements 646
a. State's Regular Allotment 646
b. Governor's Discretionary Set-aside 647
c. Separate Appropriation for Marine
Projects 648
H. Land Acquisition Grants 651
1. Grant Application Review 653
2. Grant Application Contents 653
3. Deferred Provisions 654
4. Grant Conditions 654A
5. Preaward Costs 654A
6. Project Management 654B
I. Innovative or Alternative Technology Field
Testing Grants 655
1. Grant Application 655
2. Deferred Provisions 656
3. Grant Conditions 657
4. Preaward Costs 657
J. Innovative or Alternative Technology Modifi-
cation or Replacement Grants 657
K. Grants to States for Advances of Allowance 659
1. Defining the State Program 659
a. Qualified Communities 660
b. Application Procedure 661
c. Amount of Advance 661
d. Timing of Payments 661
e. Repayment of Advance 662
9 TM 86-1
(85-1)
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PAGE
2. Applying for the State Grant 662
L. Federal Grant Share 664
1. Total Allowable Project Cost 664
2, EPA Grant Share 667
a. Standard Grant Share 667
b. Uniform Lower Federal Share 667
c. Phased or Seqmented Projects 667
d. Projects Using an Innovative or
Alternative Technology 667
e. Projects for the Modification or
Replacement of a Failed Innovative
or Alternative Technoloqy 668
f. Other Projects 668
M. Grant Award Procedures 668
1. State Procedures 669
2. Priority Certification 670
3. Project Certification by Delegated States 670
4. Grant Agreement/Amendment 670
5. General Grant Conditions 671
a. Effect of Approval 672
b. Step 2+3 672
c. Project Changes 672
d. Land Acquisition 672
e. Project Initiation 672
f. Quality Assurance Program 673
g. Project Performance Standards 673
h. Field Testing of Innovative or
Alternative Technologies 673
6. Special Grant Conditions 673
CHAPTER VII. CONSTRUCTION 701
A. Introduction 703
B. Procurement System Requirements 704
1. Procurement System Certification 704
2. Reporting Requirements 706
3. Public Notice Requirements 707
C. Procurement of Professional Services 708
1. Competitive Negotiation 708
a. Public Notice 709
b. Proposal Documents 709
c. Proposal Evaluation 710
d. Negotiation 710
e. Contract Award 710
2. Optional Method for Procuring Engineering
Services 710
a. Public Notice 711
b. Evaluation of Qualifications 711
10
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c. Proposal Request and Evaluation 711
d. Negotiation 711
3. Continuation of Engineering Services 711
a. Prior Grant 712
b. Prior Competitive Selection 712
c. Noncompetitive Negotiation 713
4. Small, Minority, Women's, and Labor Surplus
Area Businesses 714
5. Scope of Work 714
a. Engineering Services during Construction 714
b. Post-construction Engineering Services 714
6. Types of Subagreements and Required Provisions 716
7. Cost and Price Analysis 717
8. Additional Services 718
D. Procurement of Construction Contractors 719
1. Competitive Bidding 719
a. Public Notice 720
b. Bidding Documents 720
c. Addenda 720
d. Number of Bids 721
e. Bid Evaluation 721
f. Contract Award 722
2. Rejection of All Bids 722
3. Small, Minority, Women's, and Labor Surplus
Area Businesses 722
4. Grant Adjustment 722
a. Building Cost 723
b. Construction Contingency 723
c. Land Acquisition Cost 723
d. Allowance for Planning and/or Design 724
e. Grant Amendment 724
5. Contract Award 724
6. Protests 724
E. Small Purchases 726
F. Noncompetitive Negotiation 727
G. Monitoring Construction 728
1. Preconstruction Conference 729
2. Project Management Conference 730
3. Interim Inspection 731
4. Construction Management Evaluation 732
a. Grant Management 733
b. Construction Management 733
5. Final Inspection 734
H. Management of Claims and Change Orders 736
1. Conditions that May Warrant a Change Order 737
a. Differing Site Conditions 738
b. Errors and Omissions 738
c. Regulatory Changes 738
d. Design Changes 739
TM 86-1
11 (85-1)
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PAGE
e. Overruns and Underruns 739
f. Time of Completion 739
2. Claims 740
a. Common Causes 741
b. Prevention 741
c. Resolution 742
d. Allowable Costs 742
3. Prior Approval 743
4. Submission 744
5. Change Order Review 745
Post-construction Activities 746
1. Engineering Services during the First Year
of Operation 746
a. Scope of Engineering Services 747
b. Procurement of Services 748
c. Payment Requests 749
d. Deficiencies 749
2. Project Performance After One Year 749
a. Certification 749
b. Corrective Action 751
CHAPTER VIII. COMPLETION, AUDIT, AND CLOSEOUT 801
A. Introduction 303
B. Step 1 and Step 2 Completions 804
1. Step 1 Projects Completed or near Completion 805
a. Projects Likely to Receive a Step 2+3
or a Step 3 Grant 805
b. Projects Unlikely to Receive a Step 2+3
or a Step 3 Grant 805
c. Review of Facilities Plans for Completeness 806
i. Facilities Planning Initiated
before May 1, 1974 806
ii. Facilities Planning initiated
after April 30, 1974 and before
October 1, 1978 806
iii. Facilities Planning Initiated
after September 30. 1978 807
d. Step 1 Grant Increases 808
e. Reduction of Work Effort SOB
i. Reduction in Planning Area 809
ii. Infiltration and Inflow 809
iii. Public Participation 809
iv. Cultural Resources 809
v. Need Survey 809
vi. Alternatives 809
vii. Treatment Facilities 809
12 TM 85-1
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viii. Sewer Design 809
ix. Sludge Disposal 810
x. Environmental Information Document 810
2. Step 2 Projects Completed or near Completion 810
a. Projects Likely to Receive a Step 3
Grant 810
b. Projects unlikely to Receive a Step 3
Grant 810
c. Step 2 Grant increases 811
d. Reduction of Work Effort 812
3. Delayed Step 1 and Step 2 Projects 812
4. Termination or Annulment 812
5. Other Step 1 and Step 2 Projects 813
6. Final Audit Requests 813
Step 2+3 and Step 3 Completions 814
1. Project Schedule 815
2. Phased or Segmented projects 815
3. Sewer System Rehabilitation 816
4. Special Grant Conditions 817
Completion and Closeout Process 817
a. Project Completion 817
b. Administrative Completion 818
c. Audit Process 819
d. Project Closeout 820
1. Final inspection 820
2. Cut-off Date 821
3. Cost Summary and Documentation 823
4. Final Building Payment Request 824
5. Property Management 824
6. Completion Delays 825
7. Continuing Engineering Services 825
8. Project Officer Certification 826
a. Aesthetic Features 827
b. Flow Level 827
c. Abandoned, unused, or Inoperable
Facilities 827
d. Project Files 828
9. File Retention 828
Audit Process 829
1. Request for Final Audit 830
2. Audit 831
3. Draft Audit Report 831
4. Final Audit Report 832
5. Resolution of Audit Exceptions 832
6. Review of Final Determination 833
7. Recovery of Funds 833
13 TM 86-1
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PAGE
CHAPTER IX. FINANCIAL CONSIDERATIONS 901
A. Introduction 903
B. Payments 903
1. Outlay Schedules 904
2. Payment Requests 904
a. Standard Form 270 904
b. Standard Form 271 905
3. Initial Payments 907
a. Preaward Costs 907
b. Estimated Allowance 907
i. Step 2+3 Grants 907
ii. Step 3 Grants 908
4. Retainage 908
5. Limitations 909
6. Final Building Payment 909
7. Final Grant Payment 910
8. Special Purpose Grants 910
a. Land Acquisition Grants 910
b. Relocation Assistance Grants 910
c. Grants to States for Advances of
Allowance 910
d. Other Grants to States 911
9. Grant Overpayment 912
10. Grant Related Income 912
11. Grants Information and Control System 913
C. Grant Increases and Decreases 913
1. Increases 913
a. Step 2+3 and Step 3 Grants 913
b. Step 1 and Step 2 Grants 914
c. Award Procedures 914
2. Decreases 914
D. Disputes 915
E. Deviations 917
F. Determination of Allowable Costs 918
1. General 918
2. Cost Principles 919
a. Allowability Factors for Government
Agencies 919
b. Allowability Factors for Commercial
Organizations 920
c. Allowability Factors for Other Organizations 921
i. Hospitals 921
ii. Educational Institutions 922
iii. Other Nonprofit Institutions 922
d. Classification of Costs 922
i. Direct Costs 922
ii. Indirect Costs 923
14 TM 86-1
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PAGE
3. Allowable and Unallowable Costs 925
4. 40 CFR Part 35, Subpart I, Appendix A 926
A. Costs Related to Subagreements 926
1. Allowable Costs 926
a. Building the Project 926
b. Complying with the Procurement
Requirements 927
c. Deciding Procurement Protests 927
d. Using Minority and Women's
Business Liaison Services 928
e. Conformance with the Design
Drawings and Specifications 928
f. Negotiating the Settlement of
a Claim 928
g. Change Orders 931
h. First Year Following Initiation
of Operation 935
i. Development of a Plan of Operation 935
j. Start-up Services 935
k. Field Testing I/A Process of Technique 935
2. Unallowable Costs 936
a. Preparing a Facilities Plan and
the Design Drawings and Specifi-
cations 936
b. Services Necessary to Correct
Defects 936
c. Defending Against a Contractor
Claim 936
d. Bonus Payments 938
e. Costs of More Than 12 Months Delay 939
3. Other Costs 940
a. Liquidated Damages 940
b. Bid Bond Forfeiture 941
c. Public Liaison Services 941
d. Professional Liability Insurance 941
e. Services Required by Law 941
f. Field Surveys to Identify Cultural
Resources 942
g. Travel Costs 943
B. Mitigation 943
1. Allowable Costs 943
a. Direct, Adverse, Physical Impacts 943
b. Site Screening 943
c. Groundwater Monitoring Facilities 943
2. Unallowable Costs 944
a. Design Details which Require
Expensive Building Techniques 944
b. Land Acquired for Mitigation of
Adverse Environment Effects 945
C. Privately or Publicly Owned Small and
Onsite Systems 946
15 TM 86-1
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PAGE
1. Allowable Costs 946
a. Major Rehabilitation, Upgrading,
Enlarging/ and Installing 946
b. Conveyance Pipes 946
c. Treatment and Treatment Residue
Disposal 946
d. Treatment or Pumping Units 947
e. Restoring Individual System
Building Sites 947
2. Unallowable Costs 947
a. Modification to Physical Structure 947
b. Conveyance Pipes 947
c. Wastewater Generating Fixtures 947
Real Property 947
1. Allowable Costs 947
a. Integral Part of the Treatment
Process 947
b. Complying with the Requirements
of Uniform Relocation Assistance
and Real Property Acquisition
Policies Act 948
c. Required Acquisition and/or
Relocation Services 949
d. Preparation of the Treatment
Works Site 950
e. Existing Publicly or Privately
Owned Wastewater Treatment Works 951
2. Unallowable Costs 951
a. Sewer Rights of Way, Waste
Treatment Plan Sites (Including
Small System Sites), Sanitary
Landfill Sites, and Sludge Dis-
posal Areas 951
b. Eligible Land in Excess of Just
Compensation 951
c. Removal, Relocation, or Replace-
ment of Utilities 952
Equipment, Materials, and Supplies 952
1. Allowable Costs 952
a. Reasonable Inventory of Laboratory
Chemicals and Supplies 952
b. Biological Seeding Materials 952
c. Shop Equipment 952
d. Safety Equipment 953
e. Collection System Maintenance
Equipment 953
f. Mobile Equipment 953
g. Replacement Parts 954
h. Flow Metering Devices Used for
Billing 955
16 TM 86-1
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2. Unallowable Costs 955
a. Violation of the Procurement
Requirements 955
b. Office Equipment 955
c. Building Maintenance Equipment 955
d. Vehicles 956
e. Items of Routine "Programmed"
Maintenance 956
F. Industrial and Federal Users 956
1. Allowable Costs 956
2. Unallowable Costs 957
G. Infiltration/Inflow 957
1. Allowable Costs 957
2. Unallowable Costs 958
H. Miscellaneous Costs 958
1. Allowable Costs 958
a. Salaries, Benefits, and Expendable
Materials 958
b. Meeting Specific Federal Statutory
Procedures 958
c. Travel 959
d. Additions 959
e. Royalties 960
f. Multiple Purpose Projects 961
g. Training 961
2. Unallowable Costs 961
a. Ordinary Operating Expenses 961
b. Applications and Permits 961
c. Establishment of Special Depart-
ments, Agencies, Commissions,
Regions, Districts, or Other Units
of Government 962
d. Sale of Bonds 962
e. Reconstruction 962
f. Personal Injury Compensation 962
g. Fines and Penalties 962
h. Costs outside the Scope of the
Approved Project 962
i. Costs for Which Grant Payment Has
Been or Will Be Received from
Another Federal Agency 962
j. Control of Pollutant Discharges
from a Separate Storm Sewer System 962
k. Environmentally Sensitive Land 962
1. Corrective Action Report 963
3. Other Costs 963
a. Administration Building 963
b. Computers 964
INDEX 1001
CONSTRUCTION GRANTS PROCESS 1101
17 TM 86-1
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61 - National Emission Standards for Hazardous Air
Pollutants
122 - National Pollutant Discharge Elimination System
125 - Criteria and Standards for the National Pollutant
Discharge Elimination System
130 - Water Quality Planning and Management
131 - Water Quality Standards
133 - Secondary Treatment Information
141 - National interim Primary Drinking Water Regulations
149 - Review of Projects Affecting the Edwards Underground
Reservoir, a Designated Sole Source Aquifer in the
San Antonio, Texas Area
257 - Criteria for Classification of Solid Waste Disposal
Facilities and Practices
261 - Identification and Listing of Hazardous Waste
403 - General Pretreatment Regulations for Existing
and New Sources of Pollution
Other Regulations
7 CFR Part 658 - Farmland Protection Policy Act
15 CFR Part 930 - Federal Consistency with Approved
Coastal Management Programs
36 CFR Part 63 - Determinations of Eligibility for
Inclusion in the National Register
of Historic Places
36 CFR Part 800 - Protection of Historic and Cultural
Properties
45 CFR Part 84 - Nondiscrimination on the Basis of
Handicap in Programs and Activities
Receiving or Benefiting from Federal
Financial Assistance
48 CFR Part 31 - Contract Cost Principles and Procedures
49 CFR Parts 171
through 177 - Hazardous Materials Regulations
109 TM 86-1
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5. Policy Memoranda
Earlier editions of the Handbook included references to
Program Guidance Memoranda (PCs) and Program Requirements
Memoranda (PRMs). The PRM series replaced the PG series, and
was supplemented by Program Operations Memoranda (POMs), which
discussed internal EPA operational matters rather than policy
issues. In July 1982, "Construction Grants 1982" (CG-82) was
published and stated in its foreword, "Upon publication of
CG-82, all PRMs and POMs are cancelled ...." This statement
effectively terminated the codified field communication system
between Headquarters, Regions, and States and replaced it with
the periodic publication of the construction grants (CG) series.
Since both the CG series and the Handbook are based on
information contained in the same regulatory, policy, and
guidance documents, references in the Handbook seldom cite CG-85.
Rather, source documents, from which statements in both texts are
drawn, are cited to better assist project reviewers in their
research efforts.
6. State Requirements
The contents of the Handbook reflect only Federal require-
ments for the construction grants program. Many States have
laws, regulations, or policies which supplement Federal require-
ments, and in some cases may be more stringent. Where such cases
exist, it is assumed that during delegation negotiations,
differences will be resolved by the States and EPA to insure
that State requirements will not circumvent the spirit or intent
of Federal requirements. It is important for State project re-
viewers to be conversant with supplemental State requirements and
insure that they are carried out by grant applicants and grantees.
In general, supplemental State requirements may be approved
as judged appropriate by EPA as part of the delegation process,
except in the area of grantee procurement, where strict require-
ments have been imposed on all Federal agencies by Attachment 0 to
Office of Management and Budget (OMB) Circular A-102. The intent
of Attachment 0 is to give grantees maximum flexibility in the
procurement of goods and services, and to generally eliminate most
advance approvals. Supplemental State requirements which affect
grantee procurement may only be approved by EPA if all of the
following conditions are met:
- the requirements are established by State law,
rather than by regulations or policy documentsj
110
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c. Monitoring and Evaluating Program Performance
As part of the oversight plan and to confirm
annual outputs, EPA monitors and evaluates each
State's performance under delegation. An onsite
evaluation is conducted annually, and additional
monitoring activities, as appropriate for each
delegated State, are conducted as needed.
In developing and conducting monitoring programs, extensive
use should be made of the data contained in the Grants Information
and Control System (GIGS) (See section I.G. below). GIGS data
allows program managers and analysts to identify critical or
emerging problems and to develop timely plans for alleviatTng them.
For example, data on State workload (e.g., number of projects
awaiting administrative completion), can be used in developing
State commitments (e.g., number of administrative completions to
be performed), and in subsequently monitoring the State's progress
against these commitments.
Carefully structured and conducted, the annual evaluation
should help to solidify the unity of effort between EPA and the
delegated States which is critical to the successful implementa-
tion of the delegation program.
Re; 40 CFR 35.3025; EPA publication, "Construction Grants
Delegation and Overview Guidance," December 1983.
5. U.S. Army Corps of Engineers
EPA entered into an interagency agreement with the U.S.
Army Corps of Engineers (COE) at the national level, under which
the COE provides assistance in administering portions of the
construction grants program. The specific functions being
carried out by the COE are identified in regional interagency
agreements developed between EPA Regional Offices and the
corresponding COE Division offices. COE responsibilities and
procedures vary from Region to Region, and serve as a supplement
to a State's delegation agreement (i.e., in some States, the COE
performs functions which are not delegated to the State until such
time as the State is able to assume those functions, while in other
States, the COE performs functions which have been delegated, but
not yet assumed by the State).
COE functions may range from limited onsite inspection services
to total project management responsibilities which begin as soon as
the grantee has accepted the grant offer.
119 TM 86-1
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In many States, the COE conducts biddability/constructibility
reviews of contract documents, including plans and specifications
(see Section V.C.3). On very large projects or clusters of pro-
jects (e.g., where the building costs exceed $50 million), the COE
may provide full-time onsite presence. Project reviewers should be
aware of the contents of EPA/COE agreements in their respective
States, including specific procedures and documentation requirements.
It is EPA's long term goal to have each delegated State assume
those activities now being performed by the COE as soon as the
State is able to do so. However, where temporary shortages in staff
resources exist in a delegated State, the State may request, through
EPA, COE assistance in carrying out program functions for an interim
period.
Re; EPA publication, "Operating Procedures for Monitoring
Construction Activities at Projects Funded under the
Environmental Protection Agency's Construction Grants
Program," September 1983; EPA publication, "Guidelines
for Overviewing Construction Grant Activities Conducted
under the Interagency Agreement with the Corps of
Engineers," February 1984.
G. INFORMATION MANAGEMENT
The Grants Information and Control System (GICS) is a
computerized system which is used to collect, edit, and
summarize essential information concerning EPA's construction
grants program. As such, it represents a significant administra-
tive tool which enables EPA and the delegated States to efficiently
manage the program. They system also provides for the retrieval of
information for use by program personnel at all levels, as well as
members of Congress and the public. The core of the system is the
computerized data bank which stores data related to a project pre-
application status, stage of application review, milestones during
building, and administrative progress through audit to closeout.
Once data is entered into the system, existing computer programs
are capable of producing reports ranging from the status of a single
project to statewide and nationwide trends. Typical reports include
the priority rating and ranking of all projects within a State,
grant application and milestone tracking, audit and closeout tracking,
payment tracking, etc.
The uses and limitations of GICS are described in the "Users
Manual," "Reports Library," and "Data Element Dictionary," which are
maintained by a GICS coordinator in each State, EPA Regional Office,
and EPA Headquarters. These documents provide a detailed description
of the system, a listing of available reports, a definition of data
elements, and coding instructions for data entry.
120 TM 86-1
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From the perspective of a project reviewer, GIGS output can be
an effective tool in terms of tracking progress during construction,
thereby insuring timely inspections. Also, the project's progress
may be compared with the approved project schedule by mathematically
converting the sum of all grant payments to a percentage of the
grant award amount, which should be approximately equal to the pro-
ject's percentage of completion. Program managers may also use GIGS
reports to forecast workloads for use in budget preparation and
resource allocation.
As with any computerized system, GICS is only as good as the
information contained therein, and the need to have construction
grants program personnel enter accurate and timely information into
the system cannot be overemphasized. To help ensure the accuracy of
the inputed data, an edit has been built into the system which will
inhibit obviously erroneous data from entry. In addition, a GICS
Audit Report is run monthly for the purpose of detecting other data
errors.
In most States and Regions, one person has been assigned the
responsibility for maintaining GICS, including the training of both
project officers and clerical support staff in its use. Also,
annually, the system is examined and, as needed, upgraded through
user group meetings and the formally conducted meetings of the GICS
Executive Committee which is comprised of State and EPA Regional and
Headquarters construction grants program staffs.
Whenever the reviewing agency corresponds with a grant applicant
or a grantee regarding the submission or approval of project documents
or regarding other project milestones, an appropriate entry should be
made in GICS. In at least one State, GICS coding sheets are printed
on the reverse side of standard form letters, and typists have been
instructed not to address and mail the letters unless the coding
sheet has been completed.
GICS has been designed to help manage the construction grants
program effectively. Its usefulness depends largely on the construc-
tion grants program staff providing timely input of accurate informa-
tion.
121 TM 86-1
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use the above information to set a time for con-
ducting a preplanning meeting with the potential
grant applicant (see Section D below);
enter the potential project into its management and
tracking system (see Item 3 below, along with a time-
table of important milestones in the project's develop-
ment, as agreed to by both the reviewing agency and the
grantee;
periodically contact the potential applicant to review
its progress in relation to the project timetable, to
review outputs for conformance with State and EPA
requirements, and to assist the potential applicant
with advice on technical, regulatory, and administra-
tive problems; and
f. use all of the above information to generate and revise
forecasts of the reviewing agency1s future workload
and resource requirements.
3. The Uses of GICS Data
GIGS (See Section I.G) is used by managers at all levels for
the tracking and management of construction projects. This system
is especially useful because its reports can provide detailed
information on the makeup and status of an individual project, or
can display selected types of information on a larger number of
projects for purposes of comparative analysis or evaluation at the
State, Regional, or national level. For example, a project reviewer
can use GICS to track project progress during the preapplication
^e to ensure
imely manner.
£ __, .
stage to ensure that they move from priority list to grant award in
staq<
a tii
307 TM 86-1
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D. PREPLANNING CONFERENCE
Purpose:
Meet with potential grant applicants and review major activities
which must be completed prior to applying for a Step 2+3 or Step 3
grant.
Discussion;
While a preplanning conference is not required by the construc-
tion grants regulations, many State/EPA delegation agreements require
that the States conduct such conferences. The importance of a pre-
planning conference cannot be overemphasized. It provides an
opportunity for the reviewing agency to meet face-to-face with the
grant applicant and its staff and review the work to be accomplished
during facilities planning and design.
After determining that a project is likely to be ranked high
enough on the priority list to obtain a grant in the near future, a
potential grant applicant should be encouraged to prepare a plan of
study prior to the preplanning conference. A plan of study, while
not required by the EPA regulations, would serve as a useful basis
for discussion during the conference. A typical plan of study in-
cludes: a description of the work tasks to be performed during
facilities planning, a schedule for completing each major work task
and output, and an estimate of the work hours and costs necessary to
complete each task.
Procedures;
After a potential grant applicant has been identified, the
reviewing agency should contact the applicant and schedule a pre-
planning conference. At the same time, the reviewing agency should
encourage the grant applicant to prepare and submit a plan of study
which will serve as the basis for discussion during the conference.
The following major topics are typically discussed during the pre-
planning conference:
308 TM 86-1
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Permits and Compliance Schedules
Potential grant applicants are to be made aware that
existing projects must be in compliance with schedules
resulting from the implementation of EPA1s National
Municipal Policy (see Section II.D.I), the NPDES per-
mit program, court orders, or State enforcement orders
(see Section VI.C.6).
2. Procurement of Engineering Services
a. Procedures
The procurement of engineering or other pro-
fessional services for facilities planning and/or
design is not subject to the EPA procurement regula-
tions or to an EPA audit. However, if the grant
applicant anticipates using the same engineer for
Step 3 construction activities, and wishes to avoid
advertising and evaluating proposals for engineering
services during construction, it must have procured
the engineer for facilities planning and/or design
in accordance with EPA procurement requirements
(see Section VII.C.3).
Re: 40 CFR 33.715
b. use of Small, Minority, Women's, and Labor
Surplus Area Businesses
Grant applicants are encouraged to utilize the
services of small, minority, women's, and labor
surplus area businesses (see Section V.C.l.w)
during facilities planning and design. At the time
of grant application, they will be required to re-
port the level of minority business enterprises
and women's business enterprises (MBE/WBE) partici-
309 TM 86-1
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pation in facilities planning and design. Some
States and municipalities may have established goals
for this purpose (see Section VI.D.5).
Re: 40 CFR 33.240; 35.2104(d)
Use of Debarred or Suspended Firms
Grant applicants should be advised not to use
individuals or firms included on EPA's list of
debarments and suspensions for facilities planning
or design work (see Section VI.D.7). Grant appli-
cants should also be advised to report any instances
of misconduct by their contractors (e.g., engineers,
construction firms, equipment suppliers, etc.) to
EPA's Office of the inspector General (OIG), using
the hotline (800-424-4000 or 202-382-4977) estab-
lished for that purpose.
Re: 40 CFR 35.2105
3. Financial Considerations
a. state Priority System and Project
Priority List
Grant applicants should have a clear understanding
of the State priority system and project priority list.
Proposed projects should be evaluated and an assessment
made as to the likelihood of receiving a future grant
(see Sections II.E.3 and VI.D.3).
Re: 40 CFR 35.2015, 35.2103
310 TM 86-1
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b. Federal Grant Share
Grant assistance is limited to 55 percent for most
projects, except for grants at 75 percent for projects
or portions of projects which use an innovative or
alternative (I/A) technology (see Sections VI.L.2.d
and VI.L.2.e) or which have received a 75 percent grant
for a previously funded phase or segment (see Section
VI.L.2.C). A lower Federal share may be set by the
Governor (see Section VI.L.2.b).
Re: 40 CFR 35.2152
c. Financial Assistance for Facilities
Planning and Design Work
Due to the elimination of Step 1 and Step 2 grants
by the 1981 CWA amendments, no grants for facilities
planning or design can be awarded after December 29,
1981. Instead, an allowance is provided to help off-
set planning and/or design costs (see Section E below,
and Section VI.K.I). In some cases, a portion of the
estimated allowance may be advanced to potential grant
applicants (see Section E below). The allowance and
advance of allowance should be explained and the grant
applicant, if qualified, should be instructed on how
to apply for an advance of allowance (see Section E
below).
Re: 40 CFR 35.2025
d . Step 2+3 Grants
Qualifying municipalities should be advised to
apply for Step 2+3 grants (see Section VI.F.I).
Re: 40 CFR 35.2109
311 TM 86-1
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e. Preaward Costs
In certain cases, it may be cost effective (or
may be required by an emergency situation) for a
grant applicant to perform some preaward work which
is normally accomplished after grant award. To be
allowable for grant participation, such preaward
costs must be approved by the reviewing agency prior
to being incurred. The reviewing agency should explain
to the grant applicant the limitations which apply
to preaward costs (see Section VI.D.15), and should
remind the applicant that preaward costs are subject
to audit (see Section vill.E).
Re; 40 CFR 35.2118
f. Phased or Segmented Projects
Projects whose cost is large in relation to the
State's annual allotment, and projects with expected
construction schedules of three years or more, may
require phasing or segmenting. If the reviewing
agency anticipates such a situation, the consequences
of phasing or segmenting should be explained to the
grant applicant (see Section VI.D.10).
Re: 40 CFR 35.2108, 35.2123, 35.2152(a) and (c)
4. Limitations on Eligibility
a. Collection Systems
No grant award may be made for a new sewage collec-
tion system in a community unless the bulk of the design
flow (generally two thirds) is attributable to the resi-
dential population which existed on October 18, 1972.
Unless elected by the Governor, no grants may be awarded
for new sewage collection systems after September 30,
1984 (see Sections II.E.3 and VI.D.14).
Re: 40 CFR 35.2015(b)(2)(ii), 35.2116
312 TM 86-1
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d. intermunicipal Service Agreements
Where applicable, grant applicants should be made
aware of the need for executed intermunicipal service
agreements and the long lead times generally necessary
to negotiate such agreements (see Section V.H) .
Re: 40 CFR 35.2107
e • User Charge System
The requirements for a user charge (UC) system should
be explained, particularly for mult imunicipal projects
or those municipal it ies with an ad valorem tax based
system (see Section V.E).
Re: 40 CFR 35.2122, 35.2140, 35.2208
f . Sewer ysje Ordinance
The requirements for a sewer use ordinance (SUO)
should be explained, especially if the municipality
will receive industrial wastes and possibly be sub-
ject to the pretreatment requirements (see Section V.F)
Re: 40 CFR 35.2122, 35.2130, 35.2208; 40 CFR Part 403
g . Plan of Operation
The requirements for a draft and a final plan of
operation, including an operation and maintenance
(O&M) manual, should be discussed (see Section V.G) .
Re: 40 CFR 35.2106
h. Project Performance Standards
While project performance certification and
continuing engineering services are not required
until well after the project has been awarded a
grant, the grant applicant should he made aware
of these relatively new requirements (see
Sections V.C.2.a, VT.M.S.q, and VII.1.2.a).
315
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7. Categorical Exclusion
An environmental review must be conducted by the
reviewing agency, in accordance with 40 CFR Part 6, for
each project requesting grant assistance. The environ-
mental review may result in the issuance of a categorical
exclusion, a finding of no significant impact (FNSI),
or the need to prepare an environmental impact statement
(EIS). At the preplanning stage, it may be possible to
conclude that a categorical exclusion is warranted, or
alternatively that, because of the significant environ-
mental impacts resulting from the proposed project, an
EIR should be prepared concurrently with the preparation
of the facilities plan (freguently called piggybacking).
The conditions under which a categorical exclusion may
be issued should be given consideration at the pre-planning
stage of a project's development. If issued, a categorical
exclusion will reduce the work required on the part of the
grant applicant in preparing a facilities plan, thereby
saving time and money. A categorical exclusion from a sub-
stantitive environmental review is intended to apply to pro-
jects which are small scale, minor, and routine. Such pro-
jects may include replacement, minor rehabilitation, minor
expansion, or minor upgrading of facilities, which should
not result in increasing the overall design capacity of the
treatment works, nor the pipe size of interceptors or collec-
tion sewers. Where a categorical exclusion is granted by
EPA, an RID need not be prepared by the grant applicant.
However, if it is later found that conditions exist which
require the preparation of an EA, FNSI or KIS, the categorical
exclusion will be revoked by EPA, and the grantee will be
required to furnish an BID (see Section IV.D).
Re: 40 CFR 6.400(f), 6.506{c), 6.507(a), 35.2030(c)
8. Project Management
Special emphasis should be placed on organizing the grant
applicant's project team, particularly the selection of the
engineering consultant, and on the demonstration, by the
grant applicant, of its financial and managerial capability
(see Section VI.D.4). The grant applicant should also be
advised of the importance of developing and maintaining a
good record keeping system, with particular emphasis on
records documenting eligible project costs and demonstrating
compliance with EPA requirements, including grant conditions.
In addition, the applicant should be advised of the need to
develop and maintain a project schedule (See Section VI.C.6)
and that failure to meet dates contained in that schedule
could be cause for an enforcement action.
316 TM 86-1
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However, prior to Step 3 grant award, older facilities plans
may require updating to reflect current data (e.g., existing
population, land uses, costs, etc.). The effect of the reduced
Federal grant share after September 30, 1984 (usually 55 percent),
and the resultant larger local share, may require additional public
disclosure and/or financial arrangements.
The review of facilities plans initiated by a grant applicant
without the benefit of grant assistance (most likely between
December 29, 1981 and February 17, 1984) requires judgement on the
part of the reviewing agency with regard to the application of
either Subpart E or the interim (May 12, 1982) Subpart I regulations
(see Sections VI.C.2 and VIII.B.l.c). Facilities planning initiated
by a grant applicant after February 16, 1984 is subject to the final
regulations published by EPA on February 17, 1984.
To assist construction grants personnel in identifying applicable
regulations and policies in effect at the time of initiating project
work, EPA has published the "Regulation and Policy Matrix - A Guide
to the Rules Governing Grants Awarded under the Construction Grants
Program", dated December 1983. Using this guide, the project reviewer
has the ability to identify regulations, policies, and the edition of
the Handbook of Procedures applicable to the specific project.
Re: Preamble to 40 CFR Part 35, Subpart I, 49 FR 6225
(February 17, 1984).
2. National Environmental Policy Act
Regulations implementing NEPA represent the other major source
of requirements used in reviewing facilities plans. EPA's regula-
tions implementing NEPA are located at 40 CFR Part 6.
Proposed regulations based on NEPA, Executive Order 11514, and
the Council on Environmental Quality (CEQ) Guidelines, were first
published by EPA on January 20, 1972. They became interim regula-
tions on January 17, 1973, were revised as proposed on July 17, 1974
and were finalized on April 14, 1975. During this period the regu-
lations were expanded to include other Federal environmental laws
and executive orders. On June 18, 1979, EPA proposed to completely
revise Part 6, based on changes required by the promulgation of
CEQ's regulations (not guidelines as before).
The revised 40 CFR Part 6, published as interim regulations on
March 8, 1982 and interim/final on January 7, 1983, included changes
to the criteria for requiring preparation of an EIS; introduced a
procedure for excluding certain types of projects from substantive
environmental review, called a categorical exclusion (see Section
III.D.7); and changed terminology to agree with the new CEQ regula-
tions. For example, a "negative declaration" was changed to a
"finding of no significant impact" (FNSI).
405 TM 86-1
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On January 7, 1983 , EPA issued a proposed rule to revise Sub-
part E of the 40 CFR Part 6 regulations to reflect the substantial
changes in the construction grants program that were brought about
by the 1981 Amendments to the Clean Water Act and subsequent changes
to the construction grants program regulations (40 CFR Part 35).
When the interim-final rule was published on 6/25/85, it contained
several construction grants related changes that had not been included
in the proposed rule. At the time of this updating of the Handbook,
EPA was in the process of incorporating its responses to comments
received on the interim final rule into a draft of the final rule.
Until the final rule is published, the interim final rule remains in
effect and is supplemented by a guidance memorandum ("Guidance on
40 CFR 6 Subpart E"), dated 12/13/85, from the Office of Federal
Activities (OFA) to the Regional NEPA Compliance Coordinators. Pro-
ject reviewers are advised to monitor the status of the final Part 6
rule.
In 1980r OFA proposed regulations describing procedures for com-
plying with Section 106 of the National Historic preservation Act
(NHPA). These proposed regulations, intended for incorporation into
40 CFR Part 6 as Subpart K, were delayed for several years, however,
pending revisions to the corresponding Advisory Council on Historic
Preservation (ACHP) regulations (36 CFR Part 800). In March 1984,
in the absence of revised ACHP regulations, EPA distributed its pro-
posed Subpart K rule as non-binding guidance to assist Regions and
States in reviewing actions that could affect historic and archaeo-
logical properties, and to fully integrate the statutory requirements
of the NHPA into the NEPA review process. On 8/1/85, the ACHP issued
draft guidelines for taking into consideration the cultural value of
historic properties in reviews carried out under Section 106 of the
NHPA, and on 10/15/85, the awaited revisions to the ACHP's Part 800
regulations were proposed. At the time of this Handbook updatingT"
the ACHP was reviewing comments received on both the proposed guide-
lines and the proposed regulatory revisions. Until these documents
are published in final form, the existing ACHP regulations (36 CFR
Part 800) and the aforementioned EPA non-binding guidance remain in
effect. Project reviewers are advised to monitor the status of the
ACHP regulatory revisions.
Re; 40 CFR 6.301
3. Water Quality Management Plans
A portion of the funds allotted to each State are reserved for
grants to carry out WQM planning (see Sections II.C.4 and II.E.4).
Among other things, WQM planning identifies cost effective and
locally acceptable facilities to achieve and maintain the appli-
cable water quality standards. WQM planning will also determine
which publicly owned treatment works (POTWs) should be constructed,
in which areas, and in what sequence.
406 TM 86-1
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Two limitations on award of grant assistance (see Section VI.D.2)
require a project to be consistent with the approved elements of any
applicable WQM plan, and the grant applicant to be the wastewater
management agency designated in that WQM plan.
A complete description of WQM planning is given in Chapter II.
As project reviewers are preparing to review facilities plans, they
should be aware of the WQM plan which has been prepared for the pro-
ject area, and insure that the facilities plan is consistent with
that WQM plan. Differences or inconsistencies may require revision
of either the facilities plan or the WQM plan.
Re: 40 CFR 35.2023(a)(1) and (a)(4), 35.2102
4 . Facilities Planning Review
Facilities planning is the first major activity undertaken by
a potential grant applicant as a prerequisite to grant award.
Facilities planning consists of those necessary plans and studies
which directly relate to treatment works needed to comply with
enforceable requirements of the CWA. Facilities planning investi-
gates the need for proposed facilities through a systematic evalua-
tion of alternatives that are feasible in light of the unique
demographic, topographic, hydrologic, and institutional character-
istics of the area; and demonstrates that the selected alternative
is cost effective. The regulations define "cost effective" as "the
most economical means of meeting the applicable effluent, water
quality, and public health requirements over the design life of the
facility while recognizing environmental and other non-monetary
considerations."
In order to further clarify the intent of facilities planning,
the regulations include a description of facilities plan contents
at 40 CFR 35.2030{b), which provides that a facilities plan must
describe both the proposed treatment works and the complete waste
treatment system of which it is a part. A facilities plan must
also include an adequate evaluation of the environmental impact of
alternatives, in accordance with 40 CFR Part 6. The two regulations
{i.e., 40 CFR Part 6 and 40 CFR Part 35, Subpart I) are the primary
source documents which set forth the requirements for facilities
planning.
Facilities planning is considered by many to be the most com-
plex aspect of the construction grants program. Its complexity is
primarily related to the subjective interrelationships between
engineering feasibility, economic and environmental considerations,
public acceptance, and institutional arrangements necessary for
project implementation. The need to adequately address, evaluate,
and integrate these considerations very often requires expertise
from several disciplines. The importance of each consideration
may vary from project to project, and may be related to the size
and complexity of the project, its geographic location, and the
perceived values of the grant applicant.
407 TM 86-1
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While the regulations describe the contents of a facilities
plan, they do not specify the format for presentation of the re-
quired information. Recognizing that grant applicants needed
assistance in this area, EPA published "Guidance for preparing a
Facility Plan" (MCD-46), which was revised in May 1975. This
publication contained a suggested outline designed to satisfy
regulatory requirements for facilities planning. Since 1975, EPA
has not found it necessary to revise the suggested outline, since
it continues to present the required information in a sequence
corresponding to the logical preparation of a facilities plan.
EPA has, however, published other documents, targeted to grantees
or grant applicants, which address facilities planning (e.g.,
FP-81, CG-82, and CG-85). These documents incorporate new statu-
tory requirements and seek to clarify and elaborate many of the
considerations in facilities planning (see Section B.I above).
Re: 40 CFR 35.2030
C. FACILITIES PLAN CONTENTS
The following sections describe the contents of a facilities
plan, using a suggested outline for presentation of the required
information. However, a grant applicant may select his own method
or format.
The suggested outline uses a numerical system for chapters and
subheadings. Some of the information is self explanatory and is
so noted. Other information follows the general format of this
Handbook and is described by a Purpose, Discussion, Review Procedure,
and References.
1. Summary, Conclusions, and Recommendations
Self-explanatory.
2. Purpose and Need
2.1 Study Purpose
A facilities plan is prepared as one component of an appli-
cation for grant assistance. The facilities plan establishes
the need for the project; evaluates alternative solutions; and
selects a cost effective, environmentally sound project. The
facilities plan also represents a public record of decision-
making and should be written to provide the general public,
municipal officials, and regulatory officials with a clear
understanding of the problem, solutions, and consequences of
the project. The proposed project must satisfy all applicable
Federal and State laws and regulations.
408 TM 86-1
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2 . 2 Need. foe the Project
Purpose :
A facilities plan must establish the need for the
proposed project and demonstrate how the project, or the
complete treatment system of which it is a part, will meet
the enforceable requirements of the CWA.
Demonstration of project need may range from a rela-
tively simple to a complex justification. M«my^ cases arise
where an existing treatment works is in violation of its
National Pollutant Discharge Elimination System (NPDES) permit,
or the municipality is under a court or enforcement order re-
quiring corrective action. The need for the project is based
on an assessment that a structural solution is required to abate
water pollution, i.e., that upgraded operation and maintenance
or a program of flow reduction wil 1 be insufficient.
An example of a more complex case , in terms of demon-
strating need, is where a municipality claims need based on
failing onsite systems. Since no discharge permit exists,
the facilities plan must demonstrate the need for the project
based on the extent of surface or ground water use, restoration
or public health improvement resulting from the project. In
order to demonstrate project need, a grant applicant may be
required to document the number, frequency, type, and location
of failing onsite systems through the use of local health
department records, survey questionnaires, or house-to-house
surveys. Earlier EPA policy required this type of specific
documentation. However, present agency policy allows States
and EPA Regions to determine the type of documentation re-
quired to substantitate failing onsite systems on a case-by-
case basis. Guidance on evaluating need is presented in "How
to Conduct A Sanitary Survey" which is contained in Appendix R
of CG-85.
Another relatively complex case, requiring judgement in
terms of demonstrating need, concerns proposed CSO projects.
Depending on the source of funding from the States' allotment,
the State may have to demonstrate that significant uses of the
water for fishing and swimming will not be possible without
the project, and that the project will result in substantial
restoration of an existing impaired use (see Sections II. E. 3
and VI. G) .
Other types of eligible projects for which a unique approach
may be necessary to demonstrate project need include: infiltra-
tion/inflow (I/I) correction, treatment more stringent than
secondary and ( in States where the Governor elects to include
TM 86-1
409 (85-1)
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project categories not normally eligible for grant assistance
after September 30L 1984) major sewer system rehabilitation
(see Section II.E.3).
A demonstration of project need is not necessarily an
easy task, and will require unique documentation depending
on the circumstances of a particular project. Project need
may also be demonstrated throughout many sections of a
facilities plan, rather than being presented in one chapter
or section. With regard to acceptance of the grant appli-
cant demonstration of project need, the principal respon-
sibility of project reviewers is to insure that the proposed
project, or the complete treatment system of which the project
is a part, meets the enforceable requirements except as noted
in the review procedures below.
Peview Procedures:
A facilities plan must demonstrate project need in terms
of meeting the enforceable requirements of the CWA by:
a. including a copy of regulatory directives
(e.g., NPDES permit requirements, court
or enforcement orders, etc.) in the case
of existing treatment facilities; or
b. substantiating that the proposed project
will reduce pollution and result in sur-
face or ground water use restoration or
public health improvement.
An exception to this requirement may apply to certain "sewer
projects," as described in Section II.E.3.
Re: 40 CFR 35.2000(a), 35.2015(b) and (f), 35.2024(a),
35.2030(a)(1)
3. Effluent Limitations
Purpose;
Effluent limitations establish the effluent characteristics
for surface water discharges, or the quality of groundwater to
be maintained for land application systems.
Discussion:
Effluent from a treatment works is either discharged to a
surface water body, recharged to groundwater, recycled for other
uses, or evaporated in containment ponds. For containment ponds,
assuming that the ponds are lined to prevent seepage into the
410 TM 85-1
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groundwater, no effluent limitations are required. Recycled
effluents must meet the characteristics necessary for their in-
tended use. However, if the recycled effluent is eventually dis-
charged to a surface water body or to qroundwater, the recycled
effluent must satisfy the applicable effluent limitations.
Facilities plans are required to describe the Best Practicable
Wastewater Treatment Technology (BPWTT) applicable to each alter-
native under consideration. BPWTT is defined in the regulations
as the cost effective technology that can treat wastewater, CSOs,
and nonexcessive I/I to meet the applicable provisions of:
a. 40 CFR 122.44(d) - Water Quality Standards and
State Requirements;
b. 40 CFR Part 125, Subpart G - Criteria for Modifying
the Secondary Treatment Requirements under Section
301(h) of the Clean Water Act?
c. 40 CFR Part 133 - Secondary Treatment Information;
and
d. 41 FR 6190 (February 11, 1976) - Alternative Waste
Management Techniques for BPWTT ( treatment and
discharge, land application techniques and utili-
zation practices, and reuse).
BPWTT defines a minimum level of treatment, as well as pro-
visions for higher levels, where necessary to achieve or maintain
water quality standards. Projects proposinq higher levels of
treatment (i.e., advanced treatment) may be subject to EPA1 s
"Policy for Review of Advanced Treatment Projects" (see Item 3.3
below).
Re: 40 CFR 35.2005(b)(7), 35.2030(b)(2)
3 .1 Secondary Treatment
The 1981 CWA amendments added Section 304(d)(4) to
the CWA, which states that "such biological treatment
facilities as oxidation ponds, lagoons, and ditches and
trickling filters shall be deemed the equivalent of
secondary treatment." However, Section 304(d)(4) also
requires "that water quality will not be adversely affected
by deeming such facilities as the equivalent of secondary
treatment."
In implementing these provisions of the CWA, EPA con-
ducted extensive studies of existing facilities to determine
the effluent characteristics of various treatment processes.
411 TM 85-1
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The investigation concluded that oxidation ditches are
appropriately classified as treatment processes capable of
providing secondary treatment. Oxidation ponds and lagoons,
referred to as waste stabilization ponds in the regulations,
and trickling filters were classified as equivalent treat-
ment processes. All other biological treatment processes
were found to be capable of achieving secondary treatment.
EPA has defined the minimum level of effluent quality
attainable by secondary treatment in terms of the parameters
five-day biochemical oxygen demand (8005), suspended solids
(SS) , and pH as:
and SS - 30 day average shall not exceed
30 milligrams per liter (mg/1); 7 day average
shall not exceed 45 mg/1; 30 day average percent
removal shall not be less than 85 percent; and
- pH - effluent maintained within the limits of
6.0 to 9.0 (certain exceptions are allowed).
Treatment deemed equivalent to secondary treatment (i.e.,
ponds and trickling filters not capable of meeting the 30/30
mg/1 effluent limits) is defined in terms of the parameters
8005, SS, and pH as:
- 8005 and SS - 30 day average shall not exceed
45 mg/1; 7 day average shall not exceed 65
mg/1; 30 day average percent removal shall not
be less than 65 percent (less stringent SS limits
are allowed for waste stabilization ponds where
alternative values have been determined by the
State and approved by EPA); and
- pH - effluent maintained within the limits of 6.0
to 9.0 (certain exceptions are allowed).
Adjusted effluent limits for existing trickling filters and
waste stabi zation ponds deemed equivalent to secondary treatment,
are to be set on a case-by-case b sis based on the performance
or design capabilities of the facility to prevent backsliding. The
effluent limits are not automatically adjusted to 45 mg/1. Adjust-
ments of limits for equivalent treatment must assure that water
quality is not adversely affected. A State must develop an appro-
priate set of effluent limits for new facilities using trickling
filters or ponds. The regulations also provide for less stringent
limits to be set by the State, with EPA approval, of the equivalent
treatment requirements for existing trickling filters and ponds
(i.e., "Alternative State Requirements"). In these cases, the pro-
ject reviewer is to refer to the appropriate section of the secondary
treatment regulations for specific requirements.
412 TM 86-1
(85-1)
-------
Project reviewers should also be aware that the effluent
parameter carbonaceous biochemical oxygen demand (€8005) may
be used in lieu of the more common 8005 under the revised
secondary treatment regulations. It has been determined that
CBOD5 more accurately reflects treatment performance with
regard to organic material than 3005. Where CBOD5 is used,
the secondary treatment definition changes for 30 and 7 day
averages to 25 mg/1 and 40 mg/1 respectively. For treatment
processes deemed equiv ent to secondary treatment, the CBOD5
limits for 30 and 7 day averages are 40 mg/1 and 60 mg/1
respectively.
Re; Final amendment to 40 CFR Part 133, 49 FR 36986
(September 20, 1984).
The percent removal provision of the secondary treatment
regulations has been revised to allow more flexibility in terms
of adjusting percent removal requirements for individually
justifiable cases. The revised regulations allow a lower per-
cent removal requirement or a mass loading limit if:
- The treatment works is consistently meeting or will
meet (for new plants) its permit effluent concentra-
tion limits (e.g., 30 mg/1 8005 and TSS for secondary
treatment; 45 mg/1 0005 and TSS for equivalent tech-
nologies except ponds with approved less stringent
limits, but its percent removal requirements cannot
be met due to less concentrated influent wastewater.
- To meet the percent removal requirements, the treatment
works would have to achieve significantly more strin-
gent limitations than would otherwise be required by
the concentration-based standards (e.g., at least 25
mg/1 8005 and TSS for secondary treatment) or would
force significant construction or capital expenditure.
- The less concentrated influent wastewater is not the
result of excessive I/I. Definition of excessive I/I
is based on that used in the construction grants
regulations (i.e., 20 gpcd dry weather flow and 275
gpcd during storm events).
Re; Final amendments to 40 CFR Part 133.103(d), 50 FR 23387
(June 3, 1985). Technical correction to 40 CFR Part
133.103(d)f 50 FR 36880 (September 10, 1985).
3.2 Marine Discharge Waivers
Refer to Section VI.E.2 for a discussion of requirements
applicable to projects with marine discharge waivers.
TM 86-1
413 (85-1)
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3.3 Advanced Treatment
Effluent limitations more stringent than secondary
treatment (i.e., advanced treatment) may be established
by a State for water-quality-limited stream segments.
These effluent limitations are determined in the WQM
plan, and are based on the wasteload allocation for the
specific stream segment into which the effluent is dis-
charged (see Section II.C.3). Where advanced treatment
is required to achieve or maintain water quality
standards, and where the incremental costs exceed specific
limitations, such projects are subject to a more inten-
sive review by the State, EPA Regional Office, and possibly
EPA Headquarters. Refer to Section E.I below for a dis-
cussion of the review and processing procedures for such
projects.
3.4 Land Application
Wastewater effluent applied to land may either recharge
the groundwater, be collected for disposal to surface water
bodies, or a combination of both. Surface water discharges
are subject to the effluent limitations defined in Item 3.1
above. Effluents which recharge groundwater may not them-
selves be directly subject to effluent limitations. Rather,
the quality of groundwater is defined, depending on current
or potential uses, which in turn indirectly establishes the
effluent limitations for the applied wastewater.
EPA1s definition of BPWTT for groundwater discharges
considers three cases:
a. groundwater which can potentially be used
for a drinking water supply,
b. groundwater which is used for a drinking
water supply, and
c. uses other than for a drinking water supply.
In the first two cases, the groundwater quality should not
exceed the National Interim Primary Drinking Water Regula-
tions (40 CFR Part 141) for organic and inorganic chemicals.
Where the groundwater is presently used for drinking water,
the groundwater should also satisfy the microbiological
contaminent levels of these regulations. The groundwater
quality for other uses is to be established jointly by the
State and EPA on a case-by-case basis.
414 TM 85-1
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b. design capacity, existing flows, charac-
teristics of wastes, and overloaded con-
ditions;
c. location and description of major industrial
discharges;
d. significantly developed areas served by
onsite systems;
e. an analysis of average, peak, and wet
weather flows (also see Item 4.3 below);
f. location of all bypasses and overflows;
g. extent of combined sewers;
h. treatment plant performance compared with
the NPDES permit:
i. operation and maintenance (O&M) program
(compare with operating reports submitted
to the State) ;
j. the effects of I/I (see Item 4.3 below); and
k. documentation of problems with onsite systems
(see Section 2.2 above).
Re: 40 CFR 35.2030(b)(3)(iii)
4.3 Infiltration and Inflow
The facilities plan must demonstrate that each existing
sewer system discharging into the proposed treatment works
project is not or will not be subject to excessive I/I.
D i s.c_ujss_i.on;
I/I represents extraneous flow. If I/I is discharged
into a treatment works, it utilizes capacity in sewer lines
and the treatment plant, dilutes the wastewater, requires
electrical power for pumping and treatment, and otherwise
419
-------
increases the cost of transport and treatment of. wastes, infil-
tration is generally groundwater which leaks into the sewer
system through defective joints, house connections, defective
manhole connections or broken sewer lines. inflow is generally
related to storm events, and may result from cross connections
with storm sewers, illegal connections from down spouts, area
drains, sump pumps, flooded manholes, etc. Infiltration tends
to be an average phenomena, which varies during the year
according to the fluctuations in groundwater level. Inflow tends
to be a peaking phenomena, which varies with the frequency,
duration, and intensity of rain storms.
Excessive I/I is defined as the quantities of I/I which can
be economically eliminated from a sewer system, as determined in
a cost effectiveness analysis that compares the costs for elimin-
ating the I/I from the sewer system to the total costs for trans-
portation and treatment of the I/I.
Earlier EPA construction grants regulations (40 CFR 35.927)
were procedurally specific with regard to a determination of
excessive I/I. These regulations required a sewer system evalu-
ation consisting of an I/I analysis, followed by a sewer system
evaluation survey, if required, and a sewer rehabilitation
program. Based on more than ten years of experience, EPA has
determined that less procedural specificity is desirable. Current
regulations allow considerable flexibility in determining if a
sewer system contains excessive I/I. State agencies should work
with grant applicants to establish a program for I/I investiga-
tions, which is tailored to the unique characteristics of the
project.
EPA has also determined that certain screening criteria may
be used to determine nonexcessive I/I. Nonexcessive infiltration
is defined as the quantity of flow which is less than 120 gallons
per capita per day (gpcd), including both domestic base flow and
infiltration J^7 day average during peak groundwater period and
non-storm events)T^or the quantity of infiltration which cannot
be economically and effectively eliminated. Nonexcessive inflow
is defined as the rainfall induced peak inflow rate which does
not result in chronic operational problems related to hydraulic
overloading of the treatment works during storm events, or which
does not result in a total flow of more than 275 gallons per
per capita per day. Chronic operational problems may include
backups,"bypasses and overflows. Various studies have found that
tfie domestic base flow and nonexcessive infiltration, plus this
inflow rate, is about 275 qpcd for most of the Nation's waste-
water treatment systems. Therefore, if a grant applicant's
average daily flow during rain storm events is less than 275
gpcd or there are no chronic operational problems, it can gener-
ally be assumed that the wastewater treatment system is not sub-
ject to excessive inflow.
420 TM 86-1
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If a grant applicant can demonstrate that the domestic
base flow plus infiltration is less than 120 gpcd and that no
chronic operational problems are experienced or the total daily
flow does_not jexceed 2/75 gpcd during rain events, no further I/I
work~is "required. ' if the~flow rate is not significantly more
than 120 gpcd, the grant applicant may proceed, with reviewing
agency approval, without further study. However, in this case
the allowable project cost will be limited to the cost of a
project with a capacity of 120 gpcd for the existing residential
population. Anv_ex£essive_ inflow must be identified and elimin-
ated- in addTtion, the grant applicant must show that the pro-
ject is cost-effective and sufficient funds are available for
the local share of higher costs, including capital and operating
costs. If a grant applicant cannot demonstrate these conditions,
further I/I investigations will be necessary, as briefly des-
cribed in the next paragraph. if facilities are planned for the
specific storage and/or treatment of inflow, a cost effective
analysis shall be required. The criteria "described above is
equally applicable to excessive infiltration in combined sewers,
but inflow is never considered excessive in combined sewers.
In determining if a sewer system contains excessive I/I, the
grant applicant will analyze the treatment plant flow records,
compare the sewage flows against water consumption records,
possibly conduct flow monitoring at selected manholes or pumping
stations, and otherwise conduct a field investigation, if
necessary, to determine the quantity and source of I/I. The
comparison of estimated costs to eliminate portions of the I/I
will determine if the I/I is excessive. Where a portion of the
I/I is determined to be excessive, the grant applicant must pro-
pose a sewer system rehabilitation program to eliminate the ex-
cessive I/I. Normally, sewer system rehabilitation is carried
out after grant award, and the excessive I/I to be eliminated
becomes part of the grantee's project performance standards (see
Sections VI.M.S.g and VII.I.2).
The facilities plan includes a demonstration of the non-
existence or possible existence of excessive I/I in the sewer
system. Data supporting the conclusion may be contained in or
appended to the facilities plan. It is important to note that
the results of the I/I investigation are essentially four numbers,
namely: the nonexcessive infiltration, nonexcossive inflow and
the excessive infiltration (if any) and excessive inflow (if any).
Nonexcessive I/I is added to the existing domestic, commercial,
and industrial base flow, to establish a total existing flow for
the proposed treatment works. Accordingly, the grantee should
size the project to include _suffie lent capacity to transport and
treat any exi s t ing"( nonexce'ssiyel^injEi 1 tir atj.on^ This flow is
particularfy"important since after September 30, 1984, construc-
tion grants are limited to the capacity required to serve
existing needs on the date of grant award (see Section VT.D.18).
TM 86-1
421 (85-1)
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Review Procedures;
For grant applicants whose project includes existing
sewer systems, insure that the proposed treatment works
is not, and will not be, subject to excessive I/I though
a determination that:
a. An I/I study has been conducted which iden-
tifies the quantity of I/I.
b. Based on the criteria of 120 gpcd for domestic
base flow plus infiltration, and 275 gpcd for
domestic base flow plus infiltration and peak
inflow, it is concluded that:
i. excessive I/I does not exist, in
which case no further study is re-
quired; or
ii. excessive I/I may exist, in which
case the grant applicant must either:
- conduct further study, including
a cost effectiveness analysis, to
more accurately determine the ex-
istence of excessive I/I, and pro-
pose a sewer rehabilitation pro-
gram where appropriate; or
- propose that the treatment works
be designed to accomodate domestic
base flow plus infiltration which
is not significantly more than 120
gpcd, in which case the allowable
project cost will be limited to the
cost of a project with a capacity
of 120 gpcd.
c. The methods and data used in analyzing I/I are
sufficient to support the results and conclusions
in Items a and b above.
d. The quantity of nonexcessive I/I has been deter-
mined and is used as one component of the average
daily base flow.
422
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e. Where a sewer rehabilitation program is pro-
posed, the cost estimates, schedule, and
projected results are reasonable, and repre-
sent realistic expectations for excessive
I/I reductions which can be included in a
future grant agreement as part of the
project's performance standards. The
schedule must provide for completion of
sewer rehabilitation no later than one
year after project initiation, in order to
coincide with completion of the project
performance certification (see Section VII.I.2).
Project reviewers may find it helpful to read the "Hand-
book for Sewer System Evaluation and Rehabilitation," EPA
430/9-75-021 (formerly MCD-19), dated December 1975. While
the regulatory and procedural requirements in the Handbook
are out of date, the technical discussions and approaches
remain val id .
Re: 40 CFR 35.2005(b)(16), (b)(20), (b)(21), (b)(28), and (29);
35.2030(b)(4), 35.2120, 35.2218(c); 40 CFR Part 35, Sub-
part I, Appendix A, Paragraph G; EPA publication, "Determin-
ation of Excessive/Nonexcessive Inflow Rates," May 1984
5. Future Conditions
Future conditions in the planning area are described in order
to form a basis for identifying alternative wastewater systems
which will solve the water pollution problems. Future conditions
are also contrasted with the existing environment in order to
evaluate the environmental impacts of the proposed project. In
the description of future conditions, the grant applicant should
describe unique environmental characteristics of the planning
area which must be protected, and suggest mitigation measures
which may be employed to minimize adverse impacts. Where approp-
riate, the description should also include an analysis of the
potential open space and recreation opportunities associated with
the project.
The following sections describe several significant consider-
ations which are representative of future conditions.
Re: 40 CFR 35.2030(b)(1) , (b)(3)(ii), and (b)(5)
423
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5.1 Planning Period
The cost effectiveness analysis, which is the core
of facilities planning, includes the evaluation of alter-
native wastewater systems designed to solve the water
pollution problems. The planning period for the cost-
effectiveness analysis is 20 years. Therefore, future
projections must be based on a 20 year planning period.
The planning period is distinguished from the
project's design life and the useful life of the project
and its components. Design life is the period for which
a treatment works is planned and designed to be operated.
Useful life is the period of time during which a treatment
works or a component of a waste treatment management system
operates.
The distinction between the planning period and the
design life of a project becomes important during facilities
planning. A grant applicant must consider needs and compare
alternatives based on a 20 year planning period. However,
in some circumstances the project's design life may be for
a shorter period, based on the results of the cost effec-
tiveness analysis, the community1.s financial and managerial
capability, projected environmental impacts, or uncertainty
surrounding population or economic growth forecasts. In
these cases, staging or construction may be more financially
and environmentally sound. However, each stage must be a
part of the final 20 year facility and not an interim
facility. In other cases, such as the upgrading of an
existing treatment plant with no projected growth in the
planning area, existing needs may correspond with the 20
year planning period and the project's design life.
The distinction between the design and the useful life
may also be significant when reviewing the cost effective-
ness analysis and the user charge (UC) system. As a part
of the cost effectiveness analysis, the cost of each
alternative and its major components are estimated. Some
components may be estimated to have a 40 year useful life
(e.g., concrete structure) while others may be estimated
to have a 15 to 20 year useful life (e.g., process equip-
ment). Land, on the other hand, has an indefinite life.
As alternatives are evaluated, the salvage value of the
treatment works and its major components are computed. Also,
replacement costs for process equipment during the planning
period must be considered in the cost effectiveness analysis
424 TM 86-1
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6.9 innovative and Alternative Technologies
Facilities planning initiated after September 30, 1984
must include evaluation of I/A treatment processes. I/A
technologies provide inherent incentives, since they offer
an opportunity to conserve energy or resources, and to reduce
costs. To encourage serious consideration of I/A technologies,
the CWA provides additional incentives which include:
a. 20 percent increased grant assistance, not
to exceed a total Federal share of 85 per-
cent, with funds reserved from the State's
annual allotment to he used exclusively for
the increase in grant assistance (see
Section II.E.4.c);
b. a separate grant for field testing I/A
projects (see Section VI.I);
c. potential higher ranking, at the State's
option, on the State's project priority
list (see Section II.E.3);
d. 15 percent cost preference for I/A projects
when comparing the total present worth
costs to the cost of conventional treat-
ment processes (see Section 7.1.g below);
and
e. 100 percent modification or replacement
(M/R) grant for I/A projects which fail
within two years after the initiation of
operation (see Section VI.J).
In reviewing I/A technologies evaluated by the grant
applicant in the facilities plan, the project reviewer is
to insure that the grant applicant has given proper credit
to the I/A incentives in comparing various wastewater
alternatives. The project reviewer may also wish to read
EPA publication 430/9-78-009 (formerly MCD-53), "Innovative
and Alternative Technology Assessment Manual," dated
February 1980. While this publication does not reflect
current grant regulations, the discussions will provide the
project reviewer with a better technical understanding of
the subject.
447
-------
In addition, each EPA Regional Office and most State
agencies have designated one person as the I/A coordinator.
This person will provide assistance in reviewing the I/A
sections of a facilities plan, and will provide liason
when contacting the Small Alternative Wastewater Technology
Clearinghouse at West Virginia University, or the technical
support group at EPA's Municipal Environmental Research
Laboratory in Cincinnati, Ohio. Also, to avoid recurrent
funding of poorly performing I/A technologies, project
reviewers should have current information on the status of
100% M/R activities. (See §VI-J).
Re: 40 CFR 35.2030(b)(3), 35.2032, 35.2040(e), 35.2152(b)
6.10 Alternative Technologies
Alternative technologies are defined in the regulations
as "proven wastewater treatment processes and techniques which
provide for the reclaiming and reuse of water, productively
recycle wastewater constituents, or otherwise eliminate the
discharge of pollutants, or recover energy." The regulations
further define alternative technology as specific forms of
treatment or unit processes as follows:
a. Effluent Treatment
i. land application (rapid infiltration,
slow rate irrigation, and overland
flow);
ii. aquifer recharge;
iii. aquaculture;
iv. direct reuse (nonpotable) ;
v. horticulture;
vi. revegetation of disturbed lands;
vii. containment ponds; and
viii. preapplication treatment and storage
of treated effluent prior to land
treatment.
448 TM 86-1
-------
e. cost reduction must be in the range of 15
percent, and net primary energy reduction
in the range of 20 percent:
f. where the risk of a promising technology
is relatively high, field testing of the
technology, either under a grant or as an
allowable preaward cost, must be used to
further evaluate the proposed project
(see Section VI.I); and
g. where applicable, the I/A cost preference
must be properly applied to the project
(see Item 7.1.g below).
Fe: 40 CFR 35.2005(b)(14), (b)(17), (b)(23), 35.2030(b)(3),
35.2032, 35.2040(e), 35 .211*(a)(1) , 35.2211, 35.2262
6.13 Sludge Management
Purpose t
Use and disposal of sludge in a cost effective manner,
while avoiding adverse impacts on p'ublic health and the environ-
me.D t • EPA actively promotes management practices which provide
for the beneficial use of sludge, as stated in the policy on
municipal"sludge management (49 FR 24358, June 12, 1984) .
Discussion:
Sludqe management must be evaluated and planned with as
much care as the wastewater treatment process. Many sludge
treatment, utilization and disposal methods are available for
evaluation. In general, those methods can be considered in two
major categories-
- treatment and volume reduction:
- incineration,
- digestion,
- composting, and
- surface impoundments;
- ultimate utilization and disposal:
- landfill,
- ocean dumping,
455 TM 85-1
-------
- land spreading, and
- distribution/marketinej.
Some methods of sludge treatment, utilization and
disposal may not be feasible, by virtue of a project's size
or location, (e.g., incineration for a small community).
Sludge treatment, utilization and disposal is subject to
Section 405 of the Clean Water Act and may also be subject to
other Federal laws such as the Clean Air Act (stack emissions
from thermal reduction methods) or the Resource Conservation
and Recovery Act (RCRA) (hazardous and non-hazardous wastes).
Domestic sewage sludge is not listed as a hazardous
waste under RCRA. However, specific municipal sewage sludges
will be considered hazardous if they exhibit any one of the
four characteristics of hazardous wastes — ignitability,
corrosivity, reactivity, and toxicity (see 261.21 through
261.24). In general, the characteristic most likely to cause
sewage sludges to be hazardous is toxicity. Since grant
applicants must develop pretreatment programs (see Section E.2
below), it is reasonable to assume that commercial/industrial
wastes which may cause the grantee's sludge to be considered
hazardous will not be discharged into the sewer system, under
RCRA, wastewater treatment authorities have the responsibility
to determine whether or not their sludge is hazardous. If the
wastewater treatment authority (grantee) suspects that
commercial or industrial discharges to its sewerage system may
cause its sludge to be classified as hazardous, it is respon-
sible for the appropriate testing of its sludge. If the testing
indicates the sludge is hazardous, the generation, treatment,
storage, and disposal of the grantee's sludge is subject to the
RCRA subtitle C regulations (see 260 through 270).
Some of the intermediate sludge treatment processes or
ultimate sludge utilization and disposal methods are encouraged by
the CWA, and are defined as alternative technology (see Item 6.9
above). The discussion below briefly describes these alternative
technology unit processes and disposal methods, highlighting some
important considerations Cor review?
TM 86-1
456 (85-1)
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the grant applicant has given appropriate
consideration to sludge treatment, utilization
and disposal by evaluating several alternatives;
alternatives evaluated by the grant applicant
are appropriate to the size and location of
the project;
serious consideration has been given to sludge
treatment and disposal methods which recycle
or reclaim sludge (alternative technologies)
such as methane recovery, self-sustaining in-
cineration, and land application;
proposed sludge treatment, utilization and disposal
methods comply with applicable local, State and
Federal requirements including those under the
Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act and the Marine
Protection Research and Sanctuaries Act; and
where applicable, the I/A cost preference has been
properly applied to the project (see Item 7.1.g
below).
Re: 40 CFR 35.2030{b)(3), 35.2032, 35.2040(e), 35.2152{b)
and 40 CFR 257
6.14 Identification of Principal Alternatives
Purpose;
After identifying and evaluating feasible alternatives,
systematically screen them to identify principal alternatives
capable of meeting Federal, State, and local requirements.
Discussion;
Ideally, the principal alternatives identified by the
grant applicant will include one or more conventional con-
cepts of treatment, one alternative technology and one pro-
ject proposed as innovative. While there is no prescribed
TM 86-1
459 (85-1)
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methodology or procedure for screening alternatives, one
possible method employs monetary evaluation, followed by
evaluation of environmental impacts, engineering feasibility,
public acceptance, and implementability. The monetary eval-
uation is best considered first, because it tends to be more
quantitive than the other criteria. It is to be noted that
neither EP*v regulations nor policy guidance suggests that one
criterion is more important than others in selecting the pro-
posed project. However, EPA policy does reauire that the
grant applicant give careful consideration to the financial
impact of the project upon the community, to insure that the
project is affordable (see Item 8.2 below).
In preparing preliminary cost estimates for each alter-
native, the qrant applicant may use published cost estimating
techniques found in the literature, or the grant applicant's
engineer may generate unique estimates to reflect local con-
ditions. Another cost estimating technique, recommended for
use by grant applicants and available to States for comparison
purposes, is the Computer Assisted Procedure for Design and
Evaluation of Wastewater Treatment Systems (CAPDET). Avail-
able from the CAPDET Clearinghouse at Mississippi State
University, this computer program can be used to quickly
analyze the costs of a large number of alternatives. CAPDET
can also evaluate the cost of upgrading and expanding waste-
water treatment facilities, and can rank alternative treat-
ment systems by the present worth of capital and OM&R (in-
cluding energy) costs.
Using the preliminary cost estimates, the grant appli-
cant can apply the remaining criteria, considering factors
described in Item 7 below.
The primary difference between screening feasible
alternatives and analyzing principal alternatives is the
depth and level of detail. Principal alternatives are to
undergo a thorough cost effectiveness analysis, although the
level of detail in the analysis will depend on the size and
complexity oF the project.
Review Procedures:
As feasible alternatives are screened for selection
of principal alternatives worthy of a more detailed analysis,
insure that the grant applicant has:
460
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- use of project roadway for access
to waterways for canoeing, boating,
fishing, or swimming;
- provision for access to natural and
historic areas for camping, photo-
graphy, or nature appreciation;
- use of project site for sports such
as target shooting, archery, or field
sports;
- use of onsite facilities for educational
purposes; and
- use of effluent or sludge at onsite
locations to improve other recreational
areas.
Re: 40 CFR 35.2030(b)(5)
f. Disinfection
The facilities plan should evaluate the need for
processes capable of providing disinfection.
Disinfection of wastewater prior to discharge has
long been practiced, and in many cases is required
by State design standards to protect public health
Chlorination of effluent has been and continues to
be the most widely used method of disinfection.
Because of the potential toxic effects of chlorina-
tion on aquatic wildlife, chlorination plus de-
chlorination or alternate disinfection methods
(e.g., azonation, ultraviolet radiation, etc.)
should be evaluated in the facilities plan *oic
environmentally sensitive areas. If disinfection
requirements are not stated in the NPDES permit,
they should be addressed during facilities plan-
nine! and resolved in accordance with State design
requirements.
g . Process Complexity
The treatment process selected for the proposed
project should be appropriate to the size of the
community and the community's ability to attract
471
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and retain qualified operating personnel.
For example, a sophisticated activated sludge
process requiring complex monitoring and con-
trol would usually be inappropriate for a small
community.
7.3 Environmental Impacts
An evaluation of environmental impacts is the third
criterion used in the analysis of principal alternatives and
project selection. The grant applicant is to include within
the facilities plan an environmental information document (BID).
While the EID need not be a separate document, the environmental
information and each alternative's environmental impacts are
usually described in a separate chapter of the facilities plan.
The EID addresses the environmental issues described in 40 CFR
Part 6. These regulations not only describe the NEPA require-
ments, but also include the requirements of other Federal laws
and executive orders (e.g., protection of wetlands and coastal
zones).
An adequate environmental evaluation considers the short
and long term, direct and indirect, beneficial and adverse
impacts of each alternative. Environmental impacts are eval-
uated during the development of alternatives, the screening
of alternatives, and the analysis of principal alternatives.
After completing the review of a facilities plan, the
project reviewer is to prepare an environmental assessment
of the proposed project. The environmental assessment may
result in a FONSI, or a recommendation for the preparation
of an environmental impact statement (BIS). The project
reviewer may wish to review the detailed environmental con-
siderations which are described in Section D below, to insure
that during the evaluation of principal alternatives, the
grant applicant has considered all significant environmental
issues.
Re: 40 CFR 35.2030(b)(6)
7.4 Public involvement
Public involvement is the fourth criterion used in the
evaluation of principal alternatives. Open discussion and
public involvement during facilities planning can help a
grant applicant develop a project that reflects the needs
and values of the community. informing the public of the
scope of facilities planning at an early stage and involving
them during the development and evaluation of alternatives,
can help identify issues to be addressed and resolved. EPA
472 TM 86-1
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is fully committed to public participation in all of its pro-
grams- and has published detailed regulations (40 CFR Part 25)
which contain Agency-wide requirements for public involvement.
. _ . . - -8— — "*• • _. .. .•• — . • • * I _
set forth""in the Agency' s~"N~EPA' regulations (40 CFR 6.513)
However" because the elimination of Step 1 and 2 grants effec-
tively prohibits EPA financial involvement in facilities
planning and design, the requirements of 40 CFR Parts 6 and 25
do not apply to the activities of a potential grant applicant
prior to the submission of a grant application. Nevertheless,
grant applicants whose projects are being evaluated to deter-
mine compliance with NEPA are required to involve the public
in the environmental review process, in accordance with both
40 CFR Part 25 and 40 CFR 6 .513 .
An application for grant assistance submitted to EPA, in
addition to the public participation activities required by
§6.513, must contain a certification from the State that there
has been adequate public participation on the part of the grant
applicant, based on State or local statutes. Some States,
lacking specific State or local statutes, have elected to
require compliance by the grant applicants with 40 CFR Part 25.
Project reviewers are to be familiar with applicable State or
local statutes concerning public participation, insure that
the grant applicant has involved the public during the
preparation of the facilities plan, and that the facilities
plan reflects the results of those requirements. The
extent of public involvement is to be described in the
facilities'plan in sufficient detail to allow the State
agency to certify to EPA that there has been adequate
public participation.
Re: 40 CFR 6.400, 6.513, 35.2030(c), 35.2040(b)(2)
7.5 Imp1ernen t ab i1i ty
Implementability is the fifth criterion used in the eval-
uation of principal alternatives and project selection. Imple-
mentability considers the legal, institutional, financial, and
managerial constraints of each alternative, as well as any
other aspects of the alternative necessary for design, construc-
tion, and successful operation. EPA regulations require that
the facilities plan include a concise description of the fin-
ancial, institutional, and managerial arrangements necessary
for successful implementation of the selected project. The
473 TM 86-1
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project reviewer may wish to review Item 8.2 below to insure
that during evaluation of principal alternatives, the grant
applicant has considered all significant aspects of project
implementation.
Re: 40 CFR 35.2030(a), (b)(3), and (b)(8)(v)
7.6 Plan Selection
After evaluation and comparison of principal alterna-
tives, the grant applicant is to select a project which is
the most economical means of meeting the applicable effluent,
water quality, and public health requirements over the design
life of the facility, while recognizing environmental and
other non-monetary considerations.
As in the case of preliminary screening of alternatives,
there is no prescribed methodology or procedure for evaluating
principal alternatives and selecting the proposed project.
Using the criteria described in Items 7.1 through 7.5 above,
the grant applicant should be able to identify the cost
effective, environmentally sound alternative. Neither EPA
regulations nor policy guidance suggest that one criterion
is more important than the others in selecting the proposed
project. Grant applicants may, therefore, exercise their own
value judgements in the weight they assign to each of the
criteria. The project reviewer must insure that the reasons
for selecting the proposed project and rejecting other
principal alternatives are sound, and reflect the reguirements
of all applicable Federal and State laws. Unless the proposed
project or the application of the evaluation criteria violate
or misapply Federal and State laws, the project reviewer is
not to substitute his judgement for that of the grant appli-
cant.
The project reviewer is to insure that the grant applicant
has ?
a. evaluated a reasonable number of varied waste-
water management techniques;
b. used a logical, systematic methodology which
considers costs, environmental impacts, en-
gineering feasibility, public involvement,
and implementability; and
474
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3. Recent changes in the construction grants program,
such as:
a. reduced Federal grant share (see Section VI.L.2)?
b. allowances (see Section VI.L.I) and advances of
allowance (see Section III.E);
c. revised definition of secondary treatment
or its equivalent (see Section IV.C.3.1);
d. infiltration/inflow (I/I) limitation (see
Section IV.C.4.3)r
e. limitations on the eligibility of reserve capacity
(see Section VI.D.18)-
f. project performance certification, including sewer
rehabilitation, after one year of operation (see
Section VII.I.2.a)r
g. limited eligibility of collection sewers, major
sewer system rehabilitation, and combined sewer
overflow (CSO) projects (see Section II.E.3).
d. Compliance with facilities plan and FONSI or EIS conditions
(see Sections IV.C.8 and IV.D).
e. UC system (see Section E below) and SUO (see Section F below)
f. Requirements for VE studies (see Section D below).
g. Preliminary and final plan of operation (see Section G below)
h. Acquisition of land, rights of way, and easements (see
Section VI.H).
i. Intermunicipal service agreements (see Section H below).
j. Service agreements with major industrial users (see
Section I below).
k. Additional I/I investigations which may be required (see
Section VI.0.16).
1. Pretreatment (see Sections IV.E.2 and VI.E.4).
m. Design features associated with industrial flows (see
Section I below).
505
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n. Timing and arrangements for funding the municipal share
of project costs (see Section VI.D.4).
C. REVIEW OF PLANS AND SPECIFICATIONS
Purpose;
Insure that the proposed project conforms with the selected
alternative in the facilities plan, satisfies State and EPA design
criteria and administrative requirements/ is biddable and construc-
tible, and will satisfy discharge requirements in accordance with the
project's National Pollutant Discharge Elimination (NPDES) or State
Pollutant Discharge Elimination System (SPDES) permit.
Discussion;
Contract documents, primarily the plans and specifications, are
prepared by an engineer licensed in the State in which the project
is to be constructed. In designing the project, the engineer must
comply with State design standards, and the enforceable requirements
of the Clean Water Act (CWA). The engineer is responsible for employing
sound engineering principles, as represented by his seal and signature
on the plans and specifications.
The reviewer is responsible for insuring that the project conforms
with the selected alternative described in the facilities plan, in-
cludes special considerations which were noted in the facilities plan
(e.g., mitigation of adverse environmental impacts), and in general
meets minimum technical and administrative State and EPA requirements.
Ideally, periodic progress reviews should be conducted with the grant
applicant and the design team to insure compliance with technical and
administrative requirements.
In performing the review of the plans and specifications, the
reviewer is to note and call to the attention of the design team,
through the grant applicant, any apparent discrepancies with State or
EPA requirements (e.g., oversized or unnecessary units, "gold plating,"
etc.). Reviews should also be conducted with a cost conscious eye;
and, items judged not to be reasonably required and necessary for the
proper operation and maintenance of the facility and the attainment
of effluent limits, or required to mitigate adverse environmental
benefits, should be recommended for reevaluation and possible
elimination. However, the review and acceptance of the plans and
specifications by the State or EPA project reviewer does not relieve
the grantee or the design engineer of his legal responsibilities for
the overall integrity of the project (see Section J.l.c below).
In addition to reviewing the contract documents for technical and
administrative adequacy, the reviewer should note and resolve any
possible conflicts that could later result in contractor change orders
or claims. The most common conditions resulting in change orders
506 TM 86-1
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Design work initiated after May 12, 1982 must satisfy the
requirements of 40 CFR Part 35, Subpart I, as described in
Section V.C. Where the plans and specifications have been sub-
mitted, reviewed, and accepted (i.e., found to be approvable) by
the reviewing agency prior to grant application, the reviewer is
to verify that the project described in the application agrees
with the previously approved plans and specifications.
If the design work was initiated before May 12, 1982 (the
effective date of 40 CFR Part 35, Subpart I), the design must sat-
isfy the requirements of 40 CFR Part 35, Subpart E, rather than
Subpart I. If the design work was not accomplished under a Step 2
grant (or in rare cases, a Step 2+3 grant which was terminated prior
to the initiation of construction), a grant applicant claiming
initiation of design work before May 12, 1982, will need to substan-
tiate this claim with appropriate documentation. Tf design work was
initiated prior to May 12, 1982, and meets the requirements of Sub-
part E, no revisions to the design work will be required solely to
satisfy the requirements of Subpart I. However, if considerable time
has elapsed since the completion of the design work, this work should
be carefully reviewed and updated as necessary, since it may be based
on information (e .q., site conditions, availability of construction
materials and labor, etc.) which is no longer valid.
In all cases, a current wage rate determination, current labor
standards provisions, and all current procurement requirements must
be incorporated into the contract documents.
Re: 40 CFR Part 33; 40 CFR 35.2040(b)(5)
6 . Project Schedule
Purpose;
Set forth a timetable for key project events, provide for the
timely completion of the project, and insure compliance with permit
and compliance schedules, court orders, and State enforcement orders,
611
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Discussion;
A project schedule is an important part of the grant
application. It is to be reviewed carefully to verify that
the grant applicant has anticipated all key project events,
including procurement actions, construction initiation,
building milestones and completion, implementation of the plan
of operation, startup, pretreatment program actions (where
needed) , engineering supervision during the first year of
operation and project certification. Since the date of grant
award is not known at the time the grant applicant prepares the
schedule, the timetable may be expressed in terms of the number
of weeks from the date of grant award.
The project schedule must be carefully reviewed for reason-
ableness, and may require review and coordination with other
sections within the State agency, EPA, or other Federal agencies
(e.g., National Pollutant Discharge Elimination System (NPDES)
permit section, U.S. Army Corps of Engineers (COE), U.S. Fish
and Wildlife Service, etc.). The project schedule forms a part
of the grant agreement, and significant changes in the schedule
require a formal grant amendment.
Review Procedures!
Review the project schedule to insure that:
a. the schedule includes key project events (e.g.,
procurement, initiation of construction, building
milestones, project completion, startup, certifica
tion, etc.), and that the timetable is reasonable,
considering the size and complexity of the project;
b. the schedule agrees with other regulatory compliance
schedules (e.g., NPDES permits), court orders, and
State enforcement orders; and
c. the schedule is coordinated, as appropriate, with
the schedule in the draft plan of operation and,
where appropriate, with the schedule for the develop-
ment of a pretreatment program.
Re: 40 CFR 35.2005(35), 35.2040(b)(6) , 35.2204(b)(3)
612 TM 86-1
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For communities with existing treatment facilities, it will
usually be possible for the grant applicant to provide the actual
current flow data, based on current records at the treatment
plant, adjusted to exclude excessive I/I. Anticipated flows from
failing onsite systems may be added to this figure. In the case of
communities without an existing centralized treatment plant, existing
flow is based on the population presently served by onsite systems
which are proposed to be connected to the project. For estimating
purposes, a figure of 70 gpcd should usually be used (see
Section IV.C.5.6), plus a reasonable allowance for infiltration.
In no case, however, may the anticipated domestic flows exceed
120 gpcd, excluding inflow during storm events (see Section IV.
C.4.3). Estimates of existing flow must be based on studies
which have been updated to the estimated date of grant award.
Once the capacity required to serve the existing needs has been
established, it is necessary to determine a cost ratio, using the
estimated building cost of the treatment works necessary to serve the
existing needs, divided by the estimated building cost for the pro-
posed project. The preferred method for determining the cost ratio
involves the use of the Computer Assisted Procedure for Design and
Evaluation of Wastewater Treatment Systems (CAPDET). Using CAPDET,
design and process parameters are entered into the program, and the
estimated cost of building the project is computed. By using the
existing needs and the total design capacity, two cost estimates may
be produced. The ratio of the cost estimates is applied to the total
project cost to determine the allowable cost.
The recommended procedure for determining the cost ratio for
sewers and pumping stations is identical to that described above,
except that where the existing need could be met by sewers smaller
than the minimum size required by the State, the required minimum
size (usually 8 inches) will constitute the capacity required to
serve the existing needs.
When using CAPDET, it is important to note that while the cost
estimates generated by CAPDET may not agree with the design engineer's
cost estimates, the ratio of the two CAPDET cost estimates is reason-
ably accurate and therefore provides a fair method for determining
allowable costs. The cost ratio is used to apportion costs for
building the treatment works and other associated allowable costs
(i.e., construction, contingency allowance, engineering, legal, fis-
cal, administrative, future change orders, etc.).
The limitation on reserve capacity may have an effect on existing
Step 1 and Step 2 projects. Grantees may feel that they are entitled
to a grant increase because of the necessity to reevaluate their pro-
jects due to these limitations. The criteria discussed in Sections
VIII.B.3 and 5 are to be used in determining if a grant increase is
warranted.
631 TM 86-1
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Review Procedures?
a. Grant assistance awarded after September 30, 1984 must be
limited to the capacity required to serve existing needs
(including existing needs of residential, commercial,
industrial, and other users) on the date of grant award,
or on September 30, 1990, whichever is earlier. To
establish the eligible project cost:
i. review the facilities plan to determine if
population and/or capacity projections are
provided over the 20 year planning period,
which will allow a reasonable estimate of
the capacity required to serve existing
needs;
ii. insure that the required capacity is
reasonable, does not include excessive
I/I, is supported by letters of intent
from significant industrial users, and
has not been distorted , subsequent to
facilities plan preparation, by events
such as lower-than-expected population
or industrial growth, sewer connection
restrictions, or development bans;
iii. in the absence of reasonable data from
the facilities plan which allows a
determination of the capacity required
to serve existing needs, request a
facilities planning amendment from the
grant applicant which, in the case of
existing facilities, should be based on
current records at the treatment plant
adjusted to exclude excessive I/I, and
if appropriate, to include anticipated
flows from failing onsite systems which
will be connected to the proposed project;
iv. determine a cost ratio, using the estimated
building cost for the capacity required to
serve the existing needs, divided by the
estimated building cost for the total pro-
posed project, with cost estimates from
CAPDET or the sewer cost curves;
632
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vi. a UC system reflective of the
system's OM&R costs.
Re: 40 CFR 35.2005(b)(31)f (b)(39), and (b)(40),
35.2032(b), 35.2034, 35.2110
2• Marine Discharge Waiver Applicants
Section 301(h) of the CWA allows grant applicants which dis-
charge into marine waters to apply for a waiver from EPA1s secondary
treatment requirements. The application for the waiver must be
accompanied by substantial documentation to support the request.
Waiver applications require special reviews and considerations beyond
the scope of this Handbook. However, if the marine discharge waiver
is approved the project design must include provisions for possible
future additions of treatment processes or techniques to meet
secondary treatment requirements. Such provisions may include suffi-
cient land for expansion, stubs in piping to allow future connections,
arrangement of unit processes or piping to accommodate future pro-
cesses, etc.
Re: 40 CFR 35.2112; 40 CFR Part 125, Subpart G
3. Innovative or Alternative Technology Reconfirmation
While not specifically required by EPA regulations, the review of
the grant application and supporting documents affords an opportunity
to reconfirm or revise earlier decisions concerning the classification
of a project or project components as I/A technology. In general, a
preliminary classification of a project or its components as I/A
technology will usually be made on the basis of information contained
in the facilities plan. This classification should be confirmed
prior to grant award. Refer to Section IV.D.6.9 for a discussion of
I/A technology.
4. Pretreatment
A project receiving grant assistance must not include components
for the control or removal of pollutants introduced into the treat-
ment works by industrial users, unless the grant applicant is re-
quired to remove these same pollutants from wastes introduced by non-
industrial users. An approvable SUO must prohibit the introduction
of wastewater into the treatment works which contains toxics or other
pollutants in amounts or concentrations that endanger public safety or
the physical integrity of the treatment works, cause violations of
637
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effluent or water quality limitations, or preclude the selection
of the cost effective alternative for wastewater treatment and
sludge disposal.
Grant applicants who presently treat or anticipate treating
industrial wastewaters should have evaluated the quantity and
character of the wastes and, where appropriate, have established
a pretreatment program which satisfies the requirements of EPA's
pretreatment regulations (40 CFR Part 403), and which will insure
compliance with the grantee's NPDES or State Pollutant Discharge
Elimination System (SPDES) permit. Refer to Section IV.E.2 for a
more extensive discussion of pretreatment.
Review Procedures;
At the time of grant application review, insure that:
a. where applicable, the grant applicant has developed
a pretreatment program in accordance with 40 CFR
Part 403;
b. estimated project costs associated with pretreatment
are allowable for grant participation and necessary
for implementation of the pretreatment program;
c. the pretreatment program will insure compliance
with the grantee's NPDES or SPDES permit.
d. where applicable, the pretreatment program develop-
ment schedule is incorporated into the project
schedule.
Re: 40 CFR 35.2125(b)(2), 35.2130; 40 CFR Part 35,
Subpart I, Appendix A, Paragraph F
5. Force Account
Purpose;
Allow grantees to perform project work using their own employees
under certain circumstances.
Discussion;
While generally not encouraged by EPA, grant applicants may use
their own employees or equipment for construction or construction
related activities (e.g., resident inspection services). This use
of in-house forces is frequently called force account work. When
638 TM 86-1
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Re; 40 CFR 35.2024(b), 35.2040(f); EPA publication,
"Guidance for the Preparation and Review of
Applications, Special Fund for Abatement of
Combined Sewer Overflow Pollution in Marine
Bays and Estuaries (The Marine CSO Fund),"
dated January 1984
H. LAND ACQUISITION GRANTS
Purpose;
Provide grant assistance for the acquisition of real property
(i.e., land) which will be an integral part of the treatment process
or provide for ultimate disposal of residuals and assure grantee
compliance with land acquisition regulations for all land acquired
for the project.
Discussion;
During facilities planning, the grant applicant will have eval-
uated various treatment alternatives, including land application of
wastewater or sludge, and selected the cost effective alternative.
Land associated with the proposed project may already be owned by the
applicant, may be available for lease or purchase, or may be avail-
able for use without payment. Since most acquisitions are fee simple
purchases of eligible land, this section will generally deal with
that acquisition method. Other types of acquisitions methods for
eligible land (e.g., long-term lease, permanent easements) are also
grant eligible and should be considered where appropriate. Regard-
less of the acquisition method, acquisition must be accomplished in
accordance with the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (The Uniform Act) and EPA's imple-
menting regulations, 40 CFR Part 4. The Uniform Act and regulations
are applicable to the acquisition of real property necessary for EPA
assisted projects whether or not the land so acquired is eligible for
grant assistance. Regardless of the method of acquisition, owners
must be fully informed by the grantee, in writing, of their rights
under The Uniform Act. After being informed of these rights, land-
owners may voluntarily waive their right to an appraisal. Such
waivers should be in writing and include a statement that the land-
owner has read and understood the summary of his rights under The
Uniform Act.
Arrangements for long-term lease, permanent easement, and use
without payment of the treatment site need to be reviewed to insure
that they are adequate for the successful construction and operation
of the project (e.g., that they are not subject to an expiration or
revocation which would prevent the continuing operation of the
project).
TM 86-1
651 (85-1)
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Acquisition of eligible real property may generally be accom-
plished in one of three ways under the construction grants program:
- under authorization to proceed as a preaward cost
- under a grant solely for land acquisition, or
- as a part of the grant for the construction of the project.
In any of the above situations, the provisions of 40 CFR Part 4
must be satisfied if the land is to be eligible for grant assistance.
40 CFR Part 4 in essence is separated into two parts:
- requirements for the acquisition of real property, and
- requirements applicable when persons, businesses or farms
will be displaced as a result of such acquisition.
In view of the potentially high costs and legal fees associated
with land acquisition, grant applicants and reviewing agencies
should use personnel experienced in all phases of the acquisition
process, including qualified appraisers. The reviewing agency
should provide guidance to the grantee in the selection of qualified
appraisers. For example, the selected appraiser should: have
experience in appraising property similar to the subject property;
be familiar with Federal appraisal standards and acceptable pro-
cedures; and, preferably, be affiliated with a professional organi-
zation. A list of professional appraisal organizations can be found
in Appendix G of CG-85. In some areas, other Federal agencies main-
tain lists of appraisers experienced in appraisal work for Federal
projects (e.g., General Services Administration, Corps of Engineers,
Housing and Urban Development and Department of Transportation.
Note that revised 40 CFR Part 4 regulations were issued in late
February 1986 to be effective in May 1986. Many of the new require-
ments are incorporated herein. These new requirements are not retro-
active.
All appraisals must be reviewed. Review of appraisals must be
conducted by a qualified review appraiser who is either under con-
tract to the grantee, or an employee of, or under contract to, a
State agency (e.g., transportation department). In some cases, it
may be appropriate to use qualified review appraisers working
for a Federal agency.
The review procedures below address the highlights of the regula-
tory requirements, but are not a substitute for a detailed review by
professional personnel to insure compliance with 40 CFR Part 4.
Eligibility of land acquisition and associated costs is discussed in
Section IX.D which should be consulted prior to grant award.
TM 86-1
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Because few wastewater construction grant projects result in
displacement, regulatory requirements and recommended management
procedures on this topic are not discussed. Should a displacement
problem arise, the land acquisition coordinator in the EPA Regional
Office or, as needed, the Office of Municipal Pollution Control and
provide assistance.
Re: 4.101, 4.102, 4.103, 4.104, 4.108
Review Procedures;
1. Grant Application Review
In reviewing the grant application, the reviewing agency should
determine that;
a. only land required directly for treatment works is
determined to be eligible for cost participation;
b. methods less costly than fee-simple acquisition were
considered;
c. the proposed acquisition method provides sufficient
control for project purposes;
d. the proposed acquisition schedule is realistic; and
e. projected land purchase and 40 CFR Part 4 compliance
costs are realistic.
2 . Grant Application Contents
A grant application which requests funds for the acquisition of
real property must include:
a. all applicable information and documents described in
Sections C through E above, except that grant applications
solely for the acquisition of real property need not include
the information described in Item 2 below;
b. a plat map which includes the legal description of the pro-
perty to be acquired as well as other land being acquired
for project purposes. In addition, the map should differ-
entiate between lots which are fully and partially acquired,
(i.e., landholding split by project land acquisition);
fc
TM 86-1
653 (85-1)
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c. a preliminary layout of the distribution and drainage
system (in lieu of design and specifications if not
available, applies to pre Step 3 authorizations/grants
only for eligible land purchases);
d. an identification of the interest in real property to be
acquired (e.g., fee simple purchase, long-term lease,
permanent easement). If available, lease agreements must
be included;
e. a copy of the appraisal reports for the property, including
a review appraisal if conducted by the grantee;
f. information demonstrating that the project is still cost-
effective if land costs significantly exceed estimates in
the approved facilities plan;
g. assurances that the property will be used only for the
purpose for which it is purchased, and that EPA's interest
in the property will be adequately reflected and protected
in compliance with all recordation or registration require-
ments of applicable local laws on real property (see CFR
Part 30; Item 3.b and Section M.5 below);
h. information showing funds requested for land purchase
separate from those for 40 CFR Part 4 compliance activities;
and
i. assurances of compliance with The uniform Act.
Re: 40 CFR 30.535, 30.600(i), 35.2040(b)
40 CFR Part 4, Subpart B
3. Deferred Provisions
Grant applications which request funds solely for land acquisi-
tion need not include information regarding the following items
whose submission may be deferred until the award of grant assistance
to build the project:
a. debarment and suspension (see Section D.7 above);
b. user charge system (see Section V.E and Section D.17
above);
c. sewer use ordinance (see Section V.F and Section D.17
above);
TM 86-1
654 (85-1)
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d. O&M manual payment limitations (see Section IX.B.5);
e. adoption of UC system and SUO (see Sections V.E and
V.F, and Section D.17 above); and
f. final design drawings and specifications.
Re; 40 CFR 35.2122, 35.2260, 35.2040
4. Grant Conditions
Grant awards which include the acquisition of eligible real
property are to include grant conditions (see Section M.S.d below)
stating that:
a. real property must not be acquired until the reviewing
agency has determined, based on documentation submitted
by the grantee, that the applicable provisions of 40 CFR
Part 4 have been or will be met;
b. consistent with 40 CFR Part 30, the Federal interest in
the property to be acquired must be protected by the
inclusion of the following language in the title or other
recordation instrument:
"Federal lien: Federal grant funds have been
used to purchase this property. The United
States interest is percent (depending
on the Federal share at the time of grant award)
of the proceeds from any subsequent sale or
current fair market value of the property on the
date of the transaction which removes it from
the use for which it was purchased. (See 40 CFR
30.535(e), revised on September 30, 1983). A lien
to this effect and extent is hereby asserted."
£. all land necessary for the project will be acquired prior
to the initiation of construction.
In addition, it is recommended that the grantee provide a
land acquisition management schedule indicating key activities
and target dates.
Re; 40 CFR 30.535, 35.2210
5. Preaward Costs
Potential grant applicants requesting approval, as a preaward
cost, of the acquisition of eligible land or of an option for the
purchase of eligible land may receive such approval after completion
of the environmental review (see Section D.12). In addition, the
reviewing agency should request sufficient information from the
TM 86-1
654A (85-1)
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applicant, such as that required for grant award in Items 2.b through
2.g above, to insure that grant application requirements will be met
for a subsequent grant. The approval letter from the reviewing
agency should include notification that the acquisition of real pro-
perty, to be eligible, must be procured in accordance with the appli-
cable provisions of 40 CFR Parts 4 and 30.
The approval letter should note that these costs will only be
reimbursed if a grant is subsequently made and thus does not repre-
sent a commitment of funds. Grantees should be advised that certain
costs incurred prior to grant award may not be deemed allowable if
specific authorization for preaward costs was not obtained. Refer
to Section D.15 above for additional warning language to be included
in the approval letter. In order to reduce project costs and main-
tain construction schedules, reviewing agencies may encourage the
early acquisition of real property.
Re; 40 CFR 35.2118
6. Project Management
After grant award (or pre-award authorization), the grantee is
required to manage its acquisition activities in compliance with
40 CFR Part 4 regulations and submit to the reviewing agency appro-
priate documentation of such compliance. Reviewing agencies are
encouraged to;
a^ provide guidance to grantees on their responsibilities
to comply with 40 CFR Part 4;
b_. provide assistance to grantees in the selection of
appraisers and guidance regarding appropriate level of
detail and standards for appraisal work;
£. establish procedures for conducting review appraisals;
d. establish minimum standards for project file documenta-
tion (e.g., checklists, standard letters);
£. establish procedures to assure that site certificates
are submitted and compliance with 40 CFR Part 4 require-
ments is documented prior to grant reimbursement; and
f_. establish procedures for approving amounts of just
compensation, requiring updated appraisals when necessary
and conducting administrative settlements to approve
payments higher than just compensation when negotiated
purchase is unsuccessful.
Re; 40 CFR 4.102(d), 4.102(q), 4.102(i), 4.103(b), 4.103(e),
4.103(f), 4.104.
654B TM 86-1
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1• INNOVATIVE OR ALTERNATIVE TECHNOLOGY FIELD TESTING GRANTS
Purpose;
Provide grant assistance for field testing of higher risk I/A
projects which require verification of design parameters.
Discussion;
Field testing of I/A projects may be accomplished either as a
preaward cost (see Section D.15 above) or under a separate grant.
Field testing of T/A projects may be requested by the grant
applicant, or may be suggested by the reviewing agency. Prior
to making a decision concerninq I/A field testing, the State I/A
coordinator should discuss the proposed project with the EPA
Regional I/A coordinator, and if necessary, seek the advice of
the I/A support group at EPA1s Municipal Environmental Research
Laboratory in Cincinnati, Ohio.
Field testing of I/A projects is recommended for higher risk
technologies, in order to verify design parameters prior to
building the full scale project. Field testing is to be practical
and generally small scale, with the objective of verifying per-
formance, refining insufficiently tested desiqn parameters, or
resolving technical uncertainties. Considerable professional
judgement is required to determine whether the field testing costs
represent a reasonable trade-off in comparison with the corres-
ponding risk of failure of the full scale project if field testing
is omitted. Project reviewers are encouraged to review the
"Innovative and Alternative Technology Assessment Manual" (MCD-53),
particularly Chapter 4, when making this judgement. The review
procedures below describe the regulatory requirements for I/A field
testing projects. Where specific State or EPA Regional procedures
have been developed, they should be followed.
Review Procedures:
1. Grant Application
A grant application which requests funds for I/A field testing
must include:
a. all applicable information and documents described
in Sections C through E above, except that grant
applications solely for I/A field testing need not
include the information described in Item 2 below;
and
655
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b. a field testing plan, which includes:
i. identification, including size, of all principal
components to be tested;
ii. location of testing facilities in relationship
to full scale project location;
iii. critical design parameters and performance
variables that are to be verified as the basis
for I/A determinations;
iv. schedules for construction of field testing
facilities and duration of proposed testing;
v. capital and O&M cost estimate of field testing
facilities, with documentation of cost effective-
ness of field testing approach; and
vi. design drawings, process flow diagrams, equipment
specifications, and related engineering data and
information, sufficient to describe the overall
design and proposed performance of the field
testing facility.
Re; 40 CFR 35.2040(e)
2. Deferred Provisions
Grant applications which request funds solely for I/A field
testing need not include information regarding the following items,
whose submission may be deferred until the award of grant assistance
to build the approved full scale project:
a. debarment and suspension (see Section D.7 above);
b. draft plan of operation (see Section D.8 above);
c. UC system (see Section V.E, and Section D.17 above);
d. SUO (see Section V.F, and Section D.17 above);
e. O&M manual payment limitations (see Section IX.B.5); and
f. adoption of UC system and SUO (see Section V.E and V.F,
and Section D.17 above).
Re; 40 CFR 35.2122, 35,2262
656 TM 86-1
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3. Grant Conditions
Grant awards which include I/A field testing are to include
grant conditions which require the grantee to submit a quality
assurance program and a report which describes the procedure,
cost, results, and conclusions of field testing in accordance
with the schedule contained in the grant agreement (see
Section M.5 below).
Re: 40 CFR 30.302{d)(3), 30.503(f) and (h), 35.2211
4. Preaward Costs
Potential grant applicants requesting approval of I/A field
testing as a preaward cost may receive such approval after comple-
tion of the environmental review (see Section D.12). The reviewing
agency should obtain sufficient information from the applicant, such
as that required for grant award in Item l.b above, to substantiate
that the I/A field testing is warranted and is likely to satisfy
grant application requirements for a subsequent grant. The approval
letter from the reviewing agency should remind the applicant that
the procurement of services, supplies, and materials must comply
with 40 CFR Parts 30 and 33, and that the acquisition of real pro-
perty must comply with 40 CFR Parts 4 and 30, if such costs are to
be allowable for grant participation. Refer to Section D.15 for
additional warning language to be included in the letter.
Re; 40 CFR 35.2118
J. INNOVATIVE OR ALTERNATIVE TECHNOLOGY MODIFICATION OR
REPLACEMENT GRANTS
Purpose;
Provide grant assistance to fund 100 percent of the allowable
cost of the modification or replacement
-------
The review procedures below address the regulatory and program
guidance provisions applicable to 100 percent M/R grants. It is to
be noted that I/A projects which received grant assistance after
December 29, 1981 are subject to project performance standards, as
required by the 1981 CWA amendments.
The requirements for project performance (40 CFR 35.2218) apply
equally to all projects, including those projects where an I/A funded
process or unit has been identified as the reason, or part of the
reason/ preventing the grantee from certifying the project's per-
formance. When a prospective I/A failure is documented under
40 CFR 35.2032(c), grantees are encouraged to independently remedy
the problem to prevent such failure through minor modifications such
as the corrective action activities described in §35.2218. Where
such minor modifications are not successful or possible, the
corrective action analysis required by §35.2218 will be an integral
element of the documentation of an I/A failure which has occurred
within two-years after initiation of operation of the project.
One hundred percent M/R grants must be viewed as a one-time
correction for a failed system. For this reason, innovative
technologies generally should not be used to modify or replace
a failed I/A system.
Review Procedures;
Grant assistance, either as a grant amendment or a new grant,
to fund 100 percent of the allowable costs (including planning and
design costs) for the M/R of any I/A project, may be awarded only
if the reviewing agency determines that:
a. the I/A elements of the project have caused the
project, or significant elements of the complete
waste treatment system of which the project is a
part, to fail to meet the project performance
standards;
b. the failure has significantly increased O&M ex-
penditures for the project, or for the complete
waste treatment system of which the project is a
part, or requires significant additional capital
expenditures for corrective action;
c. the failure has occured prior to two years after
the initiation of operation of the project; and
d. the failure is not attributable to negligence on
the part of any person.
658 TM 86-1
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The report or documentation necessary to substantiate the above
four items will vary from project to project, and will depend on the
extent and nature of the failure and the size, cost and complexity
of the project. Projects which satisfy Item a through d above are
also required to receive priority certification from the State agency
It should be noted that some alternative technology projects which
received increased grant assistance may have included conventional
components which also received increased funding (e.g., treatment
prior to land application). It is intended that the conventional
components receive 100 percent M/R funding only if their failure was
caused by an I/A component of the project.
OMPC and WERL are working jointly on a phased assessment and
advisory procedure to keep State and EPA regional staff apprised
of current developments. Project reviewers should check the status
of 100% M/R activities with their local I/A coordinator when
reviewing projects with I/A technology components.
Re: 40 CFR 35.2032(c)
K. GRANTS TO STATES FOR ADVANCES OF ALLOWANCE
1. Defining the State Program
Purpose;
Provide financial assistance to small communities which would
otherwise be unable to perform planning and/or design work prior to
the award of a Step 2+3 or a Step 3 grant.
Discussion:
The 1981 CWA amendments provide for an advance of allowance to
certain potential grant applicants. State agencies are to identify
small communities, as defined by the State, which would be unable to
complete an application for a Step 2+3 or a Step 3 grant (i.e., to
perform facilities planning and/or design work) without such an
advance. States are also required to reserve a reasonable portion
of their annual allotment, up to 10 percent, for advances of allow-
ance, unless this requirement is waived by EPA (see Section II.E.4.e)
The amount of funds provided to potential grant applicants is
computed in accordance with 4U CFR Part 35, Subpart I, Appendix B.
Note that the maximum amount of the advance is not the allowance,
but is the allowance times the appropriate EPA grant percentage (see
659 TM 86-1
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Sections L.I and L.2 below). This advance may be less than this
maximum amount, at the discretion of the State. Also note that
the allowance is based on the estimated allowable building costs,
which do not include other associated Step 3 costs such as
engineering, legal, accounting, etc.
Unless the total amount of the advance is small and the work
is to be performed in a short period of time (e.g., less than six
months), it may be advisable to divide the advance into two or more
payments (e.g., one for facilities planning, one at the initiation
of design, and the balance when 50 percent of the design work has
been completed).
If Step 2+3 or Step 3 grant assistance is subsequently awarded
to a community which received an advance, the amount of the advance
is subtracted from the grant amount. If Step 2+3 or Step 3 grant
assistance is not awarded, the State may seek repayment of the
advance on such terms and conditions as the State may determine.
Procedures:
Before applying for a grant for advances of allowance, a State
must define the following procedures for the administration of
advances of allowance:
a . Qualified Communities
Advances may be made only to small communities, as
defined by the State, which would otherwise be unable
to perform the necessary planning and/or design work.
The State must:
define a "small community" (e.g., by
population size), and
ii. set objective criteria by which it will
determine whether a community would be
"otherwise unable to perform" (e.g., by
income per capita in relation to the
estimated per capita cost of planning
and/or design).
Re: 40 CFR 35.2025(b)(3)
660
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2. EPA Grant Share
In computing the EPA grant share, the project reviewer is to
examine the applicable conditions noted below to determine the EPA
grant percentage, and multiply this percentage by the total allow-
able project cost (see Item l.g above). The resulting figure,
minus any advance of allowance, is the EPA grant amount.
a. Standard Grant Share
After September 30, 1984 the EPA grant is 55 percent,
except as described below.
b. Uniform Lower Federal Share
The Governor of a State may elect to uniformly lower
the EPA grant share for all categories of projects. Except
for I/A projects, the EPA grant will be the percentage
established by the Governor and approved by EPA.
c. Phased or Segmented Projects
These projects are discussed in Section D.lO.d above.
d. Projects Using An Innovative or Alternative
Technology
The EPA grant share for eligible treatment works or
unit processes determined to meet the definition of an
I/A technology (including an I/A field testing project)
shall be increased by 20 percent of the total allowable
cost of the I/A project or the I/A portion of the pro-
ject, but in no event shall the total Federal share
exceed 85 percent. Only I/A components and unique
non-I/A components necessary to make the I/A components
operate may receive the additional grant percentage.
Where a State grant program exists, the State grant
percentage of the non-Federal share must not be
decreased for an I/A project. For example, assume an
EPA standard grant share of 55 percent, a State stan-
dard grant share of 10 percent, and a local standard
grant share of 35 percent, for a total non-Federal
share of 45 percent. The State share of the non-
Federal share is 10 divided by 45, or 22.2 percent.
For an I/A project, the Federal share is 75 percent and the
non-Federal share is 25 percent. The State's proportional
contribution must be at least 22.2 percent of the 25 percent
non-Federal share (i.e., at least 5.55 percent of the eligible
667 TM 86-1
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I/A project cost. This requirement is expected to be met in
most States by providing the same State percentage grant to all
projects (in this example, 10 percent), but the State percentage
grant may be reduced for I/A projects at the discretion of the
State, provided that all I/A projects are treated equally, (in
this example, to a share not lower than 5.55 percent).
e. Projects for the Modification or Replacement of
Failed Innovative or Alternative Technologies
The EPA grant is 100 percent of the allowable cost
of the M/R of failed I/A projects, including specific planning
and design costs incurred on these projects funded under
§35.2032(c), which meet the conditions described in Section J
above.
The source of funds for 100% M/R grants can be determined
as follows;
- When a failed I/A technology system is being modified
or replaced with an innovative or an alternative
technology, as a minimum, an amount equal to the uniform
Federal share for the State for conventional technology
projects (i.e., 55% or a reduced share amount set in
accordance with 40 CFR 35.2152(c) must come from the
regular portion of the State's allotment (which includes
the Governor's discretionary fund). The remaining
portion of the grant to bring the Federal share to 100%
can come from the I/A set-aside, the regular portion of
the allotment or any combination of the two. The
"regular portion of the State's allotment" can include
the reserve for alternative systems for small communities
if the community qualifies.
_ When a failed I/A system is being modified or replaced
with a conventional technology, the entire grant amount
must come from the regular portion of the State's
allotment.
f. Other Projects
The EPA grant share does not change because a pro-
ject receives a Step 2+3, a land acquisition, or a CSO
(including a marine CSO) grant. The standard EPA grant
share for such projects is 55 percent, unless this per-
centage is changed as discussed in Items b through e above.
Re; 40 CFR 35.2024(b), 35.2032(c), 35.2109, 35.2152
M. GRANT AWARD PROCEDURES
Detailed grant award procedures may vary from State to State,
depending on internal State procedures and the requirements of
the State/EPA delegation agreement. Fully delegated States may
only need to submit project and priority certifications to EPA
668 TM 86-1
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(see Items 2 and 3 below), while those States without delegation
will need to submit complete application packages, in all cases,
however, a grant may only be awarded by EPA. The procedures below
are general, and are not a substitute for detailed procedures
established in each State and EPA Regional Office.
1. State Procedures
All States have developed internal grant approval procedures
which are to be followed prior to submission of the appropriate
documentation to EPA. Such procedures usually include:
a. preparation of a one-page project summary for
the head of the reviewing agency?
b. preparation of the State Priority Certification
(EPA Form 5700-28);
c. preparation of the letter of approval from the
State to EPA, including an explanation of any
differences between the grant amount requested
by the applicant and the grant amount approved
by the State;
d. approvals by other offices within the State
agency (e.g., compliance, permits, etc.);
e. approval by the State's fiscal office, to
verify that funds, including reserves if
appropriate (e.g., I/A, small communities),
are available;
f. preparation of the grant award input coding sheet
for the computerized Grants Information and Con-
trol System (GICS); and
g. preparation of a draft grant agreement/amendment
(EPA Form 5700-20A) , with recommended general and/
or special grant conditions (see Items 5 and 6
below).
h_^ preparation of innovative/alternative (I/A) facility
technology file data base entry form OMB No. 2040-
0095 for all" step 3 and step 2+3 grant awards for
I/A projects"including 100% modification/replacement
and field testing of I/A
'technology. ~Tsee I/A
ty Technology File
sample
Facility Technology File Data Base users Manual for
form).
669 TM 86-1
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2. Priority Certification
All States are to review each grant application to verify
that it is complete. If the project is listed on the State's
project priority list for the current fiscal year and is within
the fundable range, the State will complete the State Priority
Certification (EPA Form 5700-28) for submission to EPA.
Re: 40 CFR 35.2042(a), 35.2103
3. Project Certification by Delegated States
States which have been delegated authority to manage the
construction grants program must submit a written certification
to the EPA Regional Office for each project, stating that the
applicable Federal requirements, within the scope of authority
delegated to the State, have been met. The certification must
be supported by documentation retained by the State, which will
be made available to EPA upon reguest.
Upon receiving a certification covering all delegable preaward
reguirements, EPA must either approve or disapprove the grant
within 45 calendar days. If disaproved, EPA will state the rea-
sons and have an additional 45 days to review any subsequent re-
vised submissions. Tf EPA fails to approve or disapprove within
45 days, the grant shall be deemed approved and EPA must issue the
grant agreement to the applicant.
Re: 40 CFR 35.2042(a) and (b)
4. Grant Agreement/Amendment
After receipt, review, and approval of the State certifications
and supporting documents, if any, EPA will prepare the Grant Agree-
ment/Amendment (EPA Form 5700-20A) for the Regional Administrator's
signature. EPA will also complete the following actions or docu-
ments which may already have been prepared (or partially prepared)
by the delegate-1 State:
a. briefing memorandum to the EPA Regional Administrator,
if required by Regional procedures:
670
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allowance for planning and/or design. After the receipt of bids
and the acquisition of eligible land, the costs of building the
project are more accurately known, and the grant should be adjusted
accordingly. Any grant adjustment requires a formal grant amendment
a. Building Cost
The sum of all prime contracts and subcontracts
(including contracts for the direct purchase of
equipment, materials, or supplies by the grantee),
plus the cost of approved force account work in lieu
of awarding construction contracts, equals the total
allowable building cost. If the total allowable
building cost is less than the estimates used for
grant award, the grant is to be reduced accordingly
(see Section IX.C.2). If the total allowable building
cost is more than the estimated allowable building
cost plus the construction contingency, the grant may
be increased (see Section IX.C.I) if the bids are
judged reasonable, and sufficient funds are available
in the State's allotment (many States maintain a
reasonable reserve of grant funds for this purpose).
If bids are significantly higher than anticipated, it
may be necessary for the grantee to reevaluate its
financial capability in light of the higher costs.
Also, if bids are significantly higher, it may be
appropriate for the grantee to reevaluate the scope
of work, or when appropriate, reject all bids and
readvertise. This last course of action may only be
undertaken in accordance with State law and EPA pro-
curement regulations (see Item 2 above).
b. Construction Contingency
After receipt of bids, the construction contingency is
usually reduced to between 2 and 5 percent of the total
allowable building costs. The construction contingency
is available for unanticipated cost increases (i.e.,
change orders) during construction. However, as a result
of regulations revised in November 1985, for grants awarded
on or after February 10f 1986, the maximum allowable
project cost is equal to the allowable project costs plus
5% excluding an allowance. For grants awarded prior to
that date, see Section IX.C.I.
c. Land Acquisition Cost
Assuming that the requirements of 40 CFR Parts 4 and 30
have been satisfied with regard to the acquisition of
eligible land, the grant amount may require adjustment
after the actual cost of eligible land and allowable
costs of complying with 40 CFR Part 4 are known.
TM 86-1
723 (85-1)
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d. Allowance for Planning and/or Design
The final allowance for planning and/or design is deter-
mined only once, and is based on the initial allowable
award amount of all prime construction contracts.
(including contracts for the direct purchase of
equipment, materials, and supplies by the grantee) ,
plus the initial amount approved for force account
work in lieu of awarding construction contracts, and
the purchase price of eligible land. The amount of
the allowance does not change, even if the actual
building costs increase or decrease during the per-
formance of the work. The final allowance is com-
puted in accordance with 40 CFR Part 35, Subpart I,
Appendix B (see Section VI.L.I).
e. Grant Amendment
Any grant adjustment, as determined in Items a through
d above, requires the preparation of a formal Grant
Agreement/Amendment (EPA Form 5700-20A). States are
to verify that sufficient funds are available in the
State's allotment, certify the grant amendment and
other documents required by the State/EPA delegation
agreement, and submit the grant amendment to EPA for
approval (see Section VI.M).
Re: 40 CFR 30.700, 35.2204; 40 CFR 35.2205
5. Contract Award
Grantees are to award contracts and issue notices to proceed
for building all significant elements of the project as soon as
possible, but no later than 12 months, after grant award (see
Section IX.F.4, Paragraph A.2.e).
Re; 40 CFR 35.2212
6. Protests
A protest is a written complaint concerning the grantee's
solicitation or award of a subagreement, and may be filed with
the grantee only by a party with a direct financial interest
which has been adversely affected by the grantee's action.
Protests may be filed during the procurement of professional
services or construction services (including the direct purchase
of equipment, materials, and supplies by the grantee), and should
normally be submitted to the grantee prior to the closing date for
the receipt of proposals or bids.
724 TM 86-1
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1. the aggregate amount of any one procurement does
not exceed $10,000, or a lower amount established
by State or local law;
2. the procurement was not divided into smaller amounts
to avoid the dollar limitation for small purchase
procurement; and
3. price or rate quotations were obtained and documented
from an adequate number of qualified sources.
Re: 40 CFR 33.305, 33.310, 33.315
F. NONCOMPETITIVE NEGOTIATION
Noncompetitive negotiation (i.e., sole source procurement) is
the least favored method of procurement, and may only be used if the
other three methods of procurement are inappropriate, or where the
requirements for continuation of engineering services have been
satisfied (see Section C.3.C above). Noncompetitive negotiation for
the continuation of engineering services requires the prior written
approval of the reviewing agency.
Noncompetitive negotiation may only be used if the other three
procurement methods (i.e., competitive bidding, competitive negotia-
tion, and small purchase) are inappropriate because:
1. the item is available only from a single source;
2. a public exigency or emergency exists;
3. after solicitation from a number of sources,
competition is inadequate (e.g., after formal
advertising, only one responsive and responsible
bid is received) (see Section D.l.d above); or
4. the reviewing agency authorizes noncompetitive
negotiation for continuation of engineering
services (see Section C.3.c above).
Re: 40 CFR 33.605, 33.715
TM 86-1
727 (85-1)
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G . MOW I TOR I NG_ CON ST RU CTI ON
Purpose:
Insure that the grantee manages the project in accordance with
the commitments made in the grant application and the grant accep-
tance, and that the project is constructed in accordance with the
approved plans, specifications, and change orders.
Discussion!
To insure adequate performance by all ecjuipment vendors and
construction contractors, the reviewing agency must provide for
sufficient monitoring of construction activities. The reviewing
agency's monitoring program should begin with a preconstruction
conference, extend through interim construction monitoring
activities, and conclude with a final inspection. The extent and
frequency of monitoring will depend on the size and complexity of
the project, and the needs and performance of the grantee, the
resident inspection t^am, and the construction contractors. The
agency performing the monitoring activities will be designated
in the State/EPA delegation agreement, with monitoring activities
carried out by the State, E^A and/or the U.S. Army Corps of
Engineers (COE). In some States, one of these agencies has been
given the responsibility for all monitoring activities, while in
others, two or all three agencies share this responsibility.
Each agency is to follow the detailed monitoring procedures in
the State/EPA delegation agreement and/or the EPA/COE interagency
agreement.
To assist reviewing agencies in carrying out a thorough and
efficient monitoring program, EPA has prepared two guidance
documents which include a complete discussion of the specific
actions to be undertaken during construction monitoring:
"Operating Procedures for Monitoring Construction Activities at
Projects Funded under the Environmental Protection Agency's
Construction Grants Program," dated September 1933, and "Construc-
tion Management Evaluation and Project Management Conference
Manual," dated December 1983. The documents should be used in
conducting onsite construction monitoring activities. However,
reviewing agencies must also maintain off-site (i.e., in the
reviewing agency's office) construction monitoring through the
review of payment requests, inspection reports, change orders,
correspondence, and telephone communications. This information,
when compared with the project schedule in the grant agreement,
will provide an indication of the adequacy of construction
progress, and may form the basis for changing the frequency of
728
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onsite monitoring activities. The reviewing agency is to insure
that the grantee also submits quarterly reports (EPA Form 6005-1)
concerning the use of minority and women's business enterprises
(MBE/WBE).
For construction monitoring activities to be effective, it
is essential for the monitoring staff to carefully review the
project files for factual information prior to conducting onsite
monitoring activities, to carefully document all deficiencies
observed, to submit completed monitoring reports promptly, and to
take follow-up action to insure the correction of all deficiencies,
The procedures below briefly highlight the key activities which
take place during construction monitoring, but are not intended to
be a substitute for the detailed procedures in the two guidance
documents discussed above, and in the delegation and interagency
agreements.
Procedures:
1 • Precqn_struetion Conference
After the award of construction contracts, the reviewing
agency is to insure that the grantee arranges a preconstruc-
tion conference. This conference may be conducted separately
by the grantee, or in combination with a preconstruction
conference conducted by DOL's Equal Employment Opportunity
Office (generally conducted only on projects of $1 million or
more). Where the reviewing agency plans to conduct a PMC
(see Item 2 below), the preconstruction conference should
concentrate on construction activities which directly
involve the construction contractors. In addition to
defining the role of the reviewing agency and establishing
procedures and responsibilities for interim inspections,
typical items to be clarified during the conference are:
a. points of contact for all parties;
b. lines of authority and responsibility;
c. interrelationships among the grantee, the engineer,
the construction contractors, the equipment
suppliers, the State, the COE, and the EPA Regional
Office;
d. periodic progress meetings;
e. access to the work for interim inspections;
729
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f. insuring adherence to the construction
schedule, and notification procedures for
excusable delays;
g. flow of documents such as payment requests,
change orders, and inspection reports;
h. change order review and approval process;
i. payment process, including development of
payment schedules;
j. contractor responsibilities with regard to
the project sign, posting of wage rate
determinations, compliance with the require-
ments of DOL's Occupational Safety and Health
Administration and the U.S. Equal Employment
Opportunity Commission, and compliance with EPA1s
requirements for MBE/WBE and small business
subcontracting;
k. need for adequate documentation of the grantee's
procurement procedures and project costs; and
1. EPA and State audit requirements.
When the grantee conducts the preconstruction conference,
the reviewing agency should participate and insure that the
items listed above are discussed.
2. Project Management Conference
A PMC, which may be held any time between the pre bidding
period and initiation of construction, should be conducted on
virtually all Step 2+3 and Step 3 projects. The primary
purpose of the PMC is to provide detailed guidance to the
grantee and the construction management team in overseeing
and managing the construction grant. A PMC generally should
take one to three days to complete, and can be conducted by
either one person or a team, depending on the size and com-
plexity of the project. The points of primary focus are:
a. grant management by the grantee:
i. regulatory requirements, including
procurement procedures and property
control;
ii. adherence to the project schedule;
730 TM 86-1
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iii. special grant conditions (see
Section VI.M.6);
iv. resident inspection;
v. recordkeeping (both fiscal and
correspondence), including the
need for adequate documentation
of procurement procedures and
project costs;
vi. project performance certifica-
tion; and
vii. project closeout procedures,
including EPA and State audit
requirements;
b. construction management activities:
i. the engineer's responsibilities and
authority, including review of as-
built and shop drawings;
ii. resident inspection activities,
including insuring conformance
with the approved plans and
specifications, daily logs, and
materials testing;
iii. insuring adherence to the construc-
tion schedule;
iv. progress payments; and
v. change order procedures.
Re; EPA publication, "Construction Management
Evaluation and Project Management Conference
Manual," December 1983
3. Interim Inspection
Interim inspections are essential to insure that the
grantee, the construction management team, and the construc-
tion contractors are fulfilling their respective responsi-
bilities. The frequency of interim inspections should be
determined by the size and complexity of the project, the
rate of progress being achieved, and the nature of problems
731 TM 86-1
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or issues arising during construction. Each project should
normally be inspected monthly, but where a project is
progressing well and the grantee has demonstrated a high
level of project management capability, bimonthly or
quarterly inspections may suffice. In unusual cases, such
as extremely large, complicated, or troublesome projects,
weekly or even daily inspections may be necessary. Regular
interim inspections may also provide an opportunity to focus
on one specific area at a time, such as materials testing,
fiscal records, project files, procurement, management of
claims and change orders, etc. Using this approach, all
significant aspects of grant management should be covered
over the life of the project. Where necessary, unannounced
interim inspections may also be conducted, based on the findings
of earlier inspections or other information brought to the
attention of the reviewing agency.
Principal areas of focus during interim inspections typic-
ally include:
a. grant management and recordkeeping;
b. compliance with grant and permit conditions;
c. contract administration, including claims
and change order management;
d. construction inspection activities and records,
including verification of work in place, material
testing, and replacement of defective work: and
e. implementation of the plan of operation, including
preparation of the O&M manual .
Re; EPA publication, "Operating Procedures for Monitoring
Construction Activities at Projects Funded under the
Environmental Protection Agency's Construction Grants
Program," September 1983
4. Construction Management Evaluation
A CME is a comprehensive onsite review of the entire project,
including all phases of the grantee's and contractor's respon-
sibilities and performance. It is a more formalized inspection
procedure than an interim inspection, and differs primarily in
the depth, duration, and purpose of the review. A CME typically
ranges from 4 to 5 days for a medium sized project, up to 10
days for a large multi-contract project, and is generally
conducted when the project is 40 to 60 percent complete (20 to
40 percent if a PMC has not been conducted) .
732
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e. all deficiencies noted during interim
inspections have been corrected;
f. records are complete and readily available
for audit;
g. the user charge (UC) system and sewer use
ordinance (SUO) have been enacted by
municipal ordinance, and are being imple-
mented and enforced by all participating
municipalities;
h. the plan of operation has been implemented,
including the hiring and training of all
personnel:
i. the O&M manual is complete and usable, and
copies are readily available for operating
personnel;
j. laboratory facilities are complete, stocked
with required supplies, and ready for use
in monitoring operations;
k. all change orders have been completed and
summarized, and all claims have been
satisfactorily resolved;
1. aesthetic features, flow level, and abandoned,
unused, or inoperable facilities are noted,
for use in preparing the project officer
certification (see Section VIII.D.8);
m. a property management system is in place;
n. the title to eligible land includes Ian-
gauge which protects the Federal interest
in such land (see Sections VI.H.3.b and
VI.M.S.d).
o. continuing engineering services during the
first year of operation have been procured
and are being carried out;
p. final cut-off date for incurring allowable
project costs, except for continuing engin-
eering services during the first year of
operation, has been established; and
735
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q. any related projects, such as sewer system
rehabilitation or other project phases or
segments, are on schedule.
Rej 40 CFR 35.2208, 35.2216, 35.2218? EPA publication,
"Operating Procedures for Monitoring Construction
Activities at Projects Funded under the Environmental
Protection Agency's Construction Grants Program"
September 1983
H. MANAGEMENT OF CLAIMS AND CHANGE ORDERS
purgose:
Insure that changes to the original contract documents are
necessary, reasonable, and managed in such a way as to maintain
the project's integrity, schedule, and costs.
Discussion;
A change order is a written document, issued by the grantee to
a contractor, which alters the price, time of completion, or any
other requirement of the original contract documents, but does not
increase the scope of work of the contract. Change orders may
originate from the contractor as a proposal or claim, or may be
initiated by the grantee. Historically, the lack of change order
management has caused considerable delay, increased costs, and in
some cases, lengthy and costly litigation. This section discusses
change orders for construction contracts. Change orders for
contracts for professional services are discussed in Section C.8
above.
To be eligible for grant participation, the change addressed
in the change order must be within the scope of the project. The
scope of the project is the work necessary to construct the facility
described in the approved facilities plan. If the change is within
the scope of the project, but outside the general scope of work of
existing contracts on the project, the work required by the change
must be procured as a separate contract through formal advertising
procedures, (see Section D above), unless the procedures described
in Section E or F are appropriate. However, where the work required
by the change is within the scope of the project and the general
scope of work of an existing contract, i.e., the proposed change is
within the "general quantity" of the existing contract and is con-
sistent with the existing contractor's "trade", a change order may
736 TM 86-1
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be issued to the contractor, and the price of the change negotiated
as an equitable adjustment to the contract.
Management of change orders by the grantee and the grantee's
construction management team is one of the principal areas of
discussion and review during the preconstruction conference and the
PMC. Regulatory provisions concerning project changes have been
included in all EPA funded projects, and are identified in 40 CFR
33.1030, Paragraphs 3 through 9, for grants awarded on or after
May 12, 1982; comparable provisions are included in 40 CFR Part 35,
Subpart E, Appendix C-2, for grants awarded prior to May 12, 1982.
It is the reviewing agency's responsibility to insure that the
grantee has an operating change order management system in place,
and that the grantee reviews and acts upon all change orders
promptly. All State agencies, and particularly those with delega-
tion agreements, have developed detailed change order review check-
lists and reviewing procedures. These established procedures should
be followed. In order to prevent costly delays, a strong effort
should be made to review all change orders and issue approval/denial
decisions promptly.
EPA's guidance document, "Management of Construction Change
Orders - A Guide for Grantees," March 1983, includes a chapter
entitled "Reviewing Agency Procedures." Review of change orders
is also discussed in EPA's "Construction Management Evaluation and
Project Management Conference Manual," December 1983.
Procedures;
The procedures discussed below highlight considerations to be
taken into account by the grantee in managing claims and change
orders, and by the reviewing agency during the processing of change
orders:
1. Conditions that May Warrant a Change Order
The six conditions below are those which are most
frequently encountered as the basis for a change order.
The reviewing agency must carefully evaluate the circum-
stances surrounding the change and compare the proposed
change against the original contract documents, including
the plans and specifications. In some cases, the contractor
may be entitled to a change order under State contract law,
but the change may be ineligible for EPA grant assistance.
737 TM 86-1
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a . Di_f.feeing Site Conditions
When bidding, contractors generally
investigate site conditions and review
information in the contract documents
such as soil boring logs, quantities
of rock, depth to groundwater, etc.
After initiating construction, if the
site conditions significantly differ from
those described in the contract documents
or differ from those normally encountered
in construction, the contractor may be
entitled to a change in the contract price
Judgement is required to determine whether
the contractor should have anticipated the
conditions as a normal risk in bidding the
the project.
b. Errors and Omissions
Errors and omissions are usually design or
drafting deficiencies in the plans and
specifications. Where the error or omission
would normally have been included in accurate
plans or specifications, and can be added to
the contract at approximately the same cost
as the work would have cost if included in
the original bidding documents, the change
order may be considered an allowable cost.
If the error or omission results in re-
construction or other additional effort
beyond that which would have been required
if the work had been included in the
original bidding documents, the cost of
such additional work will not be allowable.
In such cases, the grantee may seek redress
from the designer or other responsible
parties. See Section IX.F.4, Paragraph ^.l.g
(2)(i) , for an additional discussion of the
allowability of the cost of correcting errors
and omissions.
c. Regulatory Changes
At times, new laws or regulations are enacted
by the local. State, or Federal government
requiring retroactive application of new
requirements (e.g., revised State water quality
738
-------
or design standards). Where applicable, such
statutory or regulatory changes may warrant
a change order, which may be considered an
allowable cost.
d. Design Changes
A design change is a modification to an existing
adequate design. In order to be approved, it
should be cost effective and offer a net life
cycle savings (i.e., including future O&M costs),
Design changes usually originate as proposals
from a construction contractor, based on the
construction incentive (CI) clause (see
Section V.C.l.v). Where a design change other
than a CI proposal represents a substitution
of equipment or material, care should be
exercised to insure that the nonrestrictive
specifications or sole source procurement
provisions are not violated.
e. Overruns and Underruns
Bids for materials are often based on estimated
quantities and unit prices. Actual quantities
will usually differ, and the contract price will
be adjusted accordingly. However, grant payments
for such adjustments may be limited. (See
Section IX.C.I.a.) Care must be exercised to
insure that quantities are continually monitored
and where possible, significant overruns are
avoided. Many specifications contain a clause
which allows unit prices to be renegotiated if
the final quantity differs from the estimated
quantity by 15 percent or more. (The term
"renegotiated" is traditionally used, even when
the original price was bid, rather than
negotiated.)
f. Time of Completion
Because of the potential for claims and possible
litigation, special care must be exercised in
this area. Claims may arise with regard to the
time of completion because the contract provides
for the assessment of liquidated damages against
the contractor if the contract completion date
739 TM 86-1
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is not met. Liquidated damages assess the contrac-
tor a specific dollar amount for each day of delay
beyond the contract completion date to cover the
grantee's extra costs (see Section IX.F.4, Para-
graph A.3.a). However, the contract completion time
may be extended for cause (e.g., work added by change
orders, unusually adverse weather conditions, etc.)
by the grantee, thereby reducing or eliminating the
assessment of liquidated damages.
Conditions which may arise with regard to the time
of completion include termination (either for con-
venience or for default), suspension of work,
directed acceleration, time extensions or
constructive acceleration. Each condition has its
own inherent problems, and very often their use will
be guided by existing State law.
A change order which merits an extension of the
contract completion date must include a provision
for an appropriate extension of that completion
date. (When no time extension is required, the
change order should clearly document that both the
grantee and the contractor agree that no extension
is needed.) Such changes will usually extend the
time of project completion beyond the end of the
grant budget period, in which case the change will
also require the preparation of a formal grant
amendment.
Re; 40 CFR 33.1030; 40 CFR Part 35, Subpart I,
Appendix A, Paragraphs A.l.f, A.l.g, and
A.2.C.; 40 CFR 35.2205.
2. Claims
When a written demand (voucher, invoice or other request
for payment ) or a written assertion (seeking money or an
adjustment, interpretation or relief from contract terms)
is submitted by a contracting party it is NOT a claim.
However, when such a request is rejected or otherwise
disputed by the recipient, it becomes a claim. If such
claims are not addressed promptly and in an objective
manner, costs can escalate dramatically, especially if
the dispute leads to arbitration or litigation. For this
reason, it is imperative that grantees develop and apply
management techniques for the avoidance and quick resolution
of claims. When a claim is made, the grantee should
attempt to resolve the claim as promptly as possible, either
740 TM 86-1
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by negotiating a change order if warranted, or by notifying
the contractor that the claim has been evaluated and found
to be without merit.
a. Common Causes
Claims most frequently result from the
conditions listed in Item 1 above, and less
often from other more unusual circumstances.
b. Prevention
A grantee must insure that good management
practices are employed throughout the pro-
ject cycle, even when tasks are performed
by others (e.g., grantee's engineer), since
the grantee remains solely responsible for
the planning, design, construction, and
operation of the treatment works, specific
management techniques that have been shown
to prevent or at least minimize the occurence
of claims can be found in the "Claims Pre-
vention" section of the EPA publication,
"Claims Management Guidance," September 1984.
While all of the practices noted in that
section are important to know and apply,
grantees should be particularly encouraged
to follow the practices listed below, which
have been found to be critical to a well-
managed project;
i. insure that a fully adequate sub-
surface investigation is made,
and that the results of the inves-
tigation are included in the final
plans and specifications (see
Section V.C.2.cc).
ii. Maintain close management control
over the construction project, and
act quickly to resolve problems
at the time they arise.
741
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iii. Insure that the plans and specifi-
cations are biddable and construc-
tible (see Section V.C.3), that all
conflicting language has been re-
moved, and that all ambiguities
have been clarified prior to adver-
tising for bids.
iv. Specify an adequate construction
schedule commensurate with the com-
plexity of the project.
v. Insure that the schedule provisions
are enforced, that the schedule is
periodically reviewed, and that
revisions are made (by change order)
whenever circumstances justify the
extension of the schedule dates.
c. Resolution
After a claim is filed, the grantee must insure
that everything possible is done to address the
issues raised, and to mitigate the future costs
of the claim. This usually entails making a
thorough analysis of each issue raised by the
claim, and negotiating a fair and equitable
settlement of the meritorious portions of the
claim, if any. Grant funding is available for
assessment and negotiation costs, but only if
prior approval is received from the reviewing
agency. A list of good management practices
leading to quick and effective resolution of
claims may be found in the "Claims Resolution"
section of the EPA publication, "Prevention
and Resolution of Contractor Claims," March 1985.
d. Allowable Costs
Certain claim related costs are allowable, pro-
vided that the proper procedural steps have been
followed. However, grant payments for claim
costs, except for differing site conditions,
cannot exceed the regulation controlling
such payments. (See Section IX.C.I.a.) A
detailed analysis and explanation of the
pertinent regulations may be found in the "Claims
Allowability" section of the EPA publication,
"Prevention and Resolution of Contractor Claims,"
March 1985. In summary, the following rules
apply:
742 TM 86-1
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i. The reasonable costs of indepen-
dent assessment and negotiation of
costs (including legal, technical, and
administrative costs) are allowable,
but only if prior approval is
received from the reviewing agency
and certain other conditions, dis-
cussed in the "Claims Management
Guidance," are met.
ii. Meritorious contractor claims are
allowable, provided that all the
rules of change order approval have
been met, and the costs were not
caused by the grantee's mismanage-
ment or vicarious liability for the
improper actions of others (see
Section IX.F.4, Paragraph A.l.f,
A.I .g , and A.2.c).
iii. The reasonable costs (including
legal, technical, and administra-
tive costs) of defending against
a claim, or of prosecuting a claim
to enforce a subagreement, are
unallowable unless six specific
conditions, discussed in the "Claims
Management Guidance," are met, and
prior approval is received from the
reviewing agency.
A grantee may request technical or legal assistance
from the reviewing agency. Such assistance may be
provided, but generally is given only after all
possible sources of assistance at the local level
have been exhausted.
Re; 40 CFR 35.2350; 40 CFR Part 35, Subpart I,
Appendix A, Paragraphs A.l.f, A.l.g, and A.2.C;
40 CFR 35.2205; and "Prevention and Resolution of
Contractor Claims," March 1985.
3. Prior Approval
Minor changes in the project work, consistent with the
objectives of the project and within the scope of the
grant agreement, do not require a formal grant amendment.
Prior approval by formal grant amendment is required
743 TM 86-1
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for changes (either by change order or by initiating a
new procurement action) which:
a. increase grant funding (i.e., require
additional funds beyond that provided
in the contingency allowance);
b. transfer the project to another grantee
(includes a reorganization.which forms a
new unit of government to build and/or
operate the project);
c. alter the project performance standards?
d. alter the type of wastewater treatment
provided by the project;
e. significantly delay or accelerate the
project schedule;
f. substantially alter the facilities plan,
design drawings and specifications, or the
location, size, capacity, or quality of any
major part of the project; or
g. require rebudqeting of amounts from one
activity to another (e.q., from construction
to non-construction activities, from in-
direct costs to direct costs, from employee
training to another cost category, etc.).
Re: 40 CFR 30.700, 30.705, 35.2204
4. Submission
Change orders, other than those involving a formal
grant amendment as discussed in Item 3 above, do not have
to be submitted to the reviewing agency prior to execution
and implementation, regardless of whether or not the grantee
has a certified procurement system. However, grantees
should be encouraged to submit all change orders to the
reviewing agency in a timely manner, since eventually, any
cost increases (using part of the contingency allowance) or
decreases will have to be reconciled with the existing pro-
ject grant to determine the final grant amount. Also, it is
to the grantees advantage to have alienability of costs
determined by the reviewing agency prior to project closeout,
to provide a basis for the review of project costs by EPA's
Office of the Inspector General (DIG) .
744
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Except for grantees whose certified procurement
systems include provisions which meet the intent of EPA's
change order requirements, all grantees must conduct a
cost or pricing analysis for negotiated change orders
exceeding a net change of $10,000, (i.e., both additive
and deductive changes),with profit negotiated as a separate
element of the price, and obtain cost or price data from
the contractor using EPA Form 5700-41, or a similar format
which provides the same information. The cost or pricing
analysis need not be submitted to the reviewing agency,
but must be maintained in the grantee's files for review
by the reviewing agency if desired.
Re; 40 CFR 33.235, 33.290, 35.2204; 40 CFR Part 33,
Appendix A
5. Change Order Review
Prior to change order approval, the reviewing agency
is to insure that:
a. Justification of the need for the change order
has been documented, and includes an evaluation
of alternate ways of achieving the same
objective.
A comparison has been made between the change
order and the approved contract's scope of
work, including plans and specifications, and
the model change order clauses in the contract
documents.
A method has been established for determining
the price of the change order, and any additional
time required for contract completion, including
grantee/contractor negotiations, price or cost
analysis, and comparison with the engineer's
independent estimates.
The effect of the change order on other structures
and items of equipment (secondary effects), the
additional cost of extended engineering inspection
services, and the additional O&M costs over
the useful life of the project have been deter-
mined.
745 TM 86-1
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The effect of the change order on the quality
of the work, including the project performance
standards and the capacity of the treatment
works, has been determined.
f. The change order will not circumvent EPA's
procurement regulations, including the require-
ment for competitive equipment specifications.
A comparison with the reviewing agency1s on-
site inspection reports has been made.
h- The change order requires prior approval and/or
the preparation of a formal grant amendment
before implementation.
The cost of the change order is allowable for
grant participation, or a percentage of the
change order is allowable, excluding costs
associated with reserve capacity (see
Section VI.D.18).
Re: 40 CFR 30.700, 30.705, 33.1030, 35.2050,
35.2204; EPA publication, "Management of
Construction Change Orders - A Guide for
Grantees," March 1983
I. POST-CONSTRUCTION ACTIVITIES
This section is concerned only with engineering services
during the first year of operation and the project performance
certification. Section G.5 above discusses the final project
inspection. Closeout of projects is discussed in Section VIII.D.
1. Engineering Services during the First Year of Operation
The 1981 CWA amendments require that the grantee procure the
services of the engineer or firm that provided engineering
services during construction, or the engineer or firm that super-
746 TM 86-1
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vised construction, to assist in operating the project during its
first year of operation. The term "construction" includes planning,
design, and engineering services during the building of the project,
and is not to be confused with the term "building," which includes
only Step 3 activities. These terms are defined in 40 CFR
35.2005(b)(8) and (b)(13).
The 1981 CWA amendments use the term "supervise," whereas the
regulations use the word "direct," when referring to the services to
be provided by the engineer. The word "direct" better reflects the
intent of the services, since it does not imply a daily "in charge"
presence at the treatment works, nor a role as employee supervisor
or chief operator.
a. Scope of Engineering Services
The regulatory requirements for the scope of
engineering services during the first year of
operation are described in Section C.S.b above.
In essence, the engineer is to direct the opera-
tion of the treatment works, particularly with
regard to problems which develop; revise the O&M
manual to reflect actual operating experience;
train employees; and provide engineering advice
to the grantee as to whether the treatment works
is meeting the project performance standards.
The intent of these requirements is that the
engineer with the most experience in the plan-
ning, design, and building of the project will
utilize this expertise to help the grantee in-
sure that the project meets its performance
standards. The engineering services will
normally include reviewing laboratory procedures,
including the frequency and results of tests to
control unit process operations; recommending ways
to maintain appropriate levels of solids or dis-
solved oxygen in the aeration tanks; determining
the best conditions for the withdrawal of sludge
from the digesters; etc.
Engineering services are also required for projects
which include only sewers (collection, trunk, and/
or interceptors) and pumping stations. Such services
will be less extensive than those required for a
treatment plant, but will typically include:
747 TM 86-1
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i. for pumping stations, periodic site
visits to check operations (e.g., to
insure that float control mechanisms
are operating properly, that pump
cycling is the most efficient, that
seals are properly maintained and
not leaking, etc.);
ii. for sewers, opening and inspecting
manholes to observe signs of sur-
charging or sand deposits; after
storms, checking for inflow or
flooding; etc. If the project in-
cluded rehabilitation of sewers
to eliminate excessive I/I, the
engineering services may also
include a limited amount of flow
monitoring at sites within the
collection system, to supplement
flow measurements at the treat-
ment facility.
Engineering services during the first year of opera-
tion, therefore, are those necessary to insure the
efficient operation of the treatment works project,
and are directed toward achieving compliance with
the project performance standards. The extent of
such services will vary from project to project,
depending on the size, type, and complexity of the
project and the needs of the grantee's operating
staff.
Re: 40 CFR 35.2218{b)
b. Procurement of Services
The scope of work for the engineering contract for
inspection and supervision services during the building
of the project should also include engineering services
during the first year of operation. As an alternative,
the grantee may procure the engineering services re-
quired for the first year of operation as the construc-
tion of the project nears completion. Regardless of the
timing of procurement of engineering services, the
procurement must be conducted in accordance with 40 CFR
Part 33 (see Sections B, C, E, and F above). While a
fixed price contract is acceptable, because of uncer-
tainties during the first year, a cost-plus-fixed-fee
type contract may be more appropriate.
74R
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- effluent discharge limitations and
National Pollutant Discharge Elimin-
tion System (NPDES) permit number,
IE issued:
- comments or approvals of relevant
State, interstate, regional, and
local agencies;
- public participation summary;
- demonstration of the grantee's legal,
financial, institutional, and manage-
rial resources;
- resolution adopted by the grantee,
accepting the facilities plan;
- statement regarding grantee compliance
with the Civil Rights Act of 1964:
- municipal pretreatment program (if
required by 40 CFR 35.907);
- estimate of total project costs and
customer charges, which include both
user charge (UC) rates and debt service
costs;
- site availability and cost;
- environmental information document (BID);
and
- fulfillment of all grant conditions.
Re: 40 CFR 35.917-1
iii. Facilities Planning initiated after
September 30, 1978
To be considered complete for grant payment
purposes, a facilities plan which was initiated
after September 30, 1978, must include all of
the items described in Item ii above. in addition,
each of the following items must be present and
complete:
807
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- analysis of innovative or alterna-
tive (I/A) treatment processes;
- analysis of net primary energy
requirements; and
- description of potential recreational
and open space opportunities.
Re; 40 CFR 35.917-Hj)
d. Step 1 Grant Increases
Grant increases may be awarded only to complete
work included in the original scope of the grant as
identified in the grant agreement, required by 40 CFR
35.917-1, and described in the plan of study. However,
if the project is already physically complete, it cannot
be "reopened" with a grant amendment for any reason, in
addition, an amendment can only be approved if the work
proposed will not interfere with bringing the project to
physical and administrative completion by the end of
Fiscal Year 1987. Examples of items which may warrant a
Step 1 increase include:
i. cost overruns on cost-plus-fixed-fee
contracts;
ii. archaeological surveys;
iii. sewer system evaluation surveys;
iv. necessary "onsite" studies;
v. higher grant share for the use of an
I/A technology (see Section VI.L.2.d);
vi. management plans for sludge and
residuals; and
vii. replanning attributable to changes in
the CWA or its implementing regulations
(e.g., definition of secondary treatment,
ocean discharge, revised water quality
standards, etc.).
e. Reduction of Work Effort
Grant increases should not be awarded for projects
which are unlikely to receive a Step 2+3 or a Step 3
grant award. Where a grant increase is requested for
808 TM 86-1
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iii. Require the grantee to perform only the work
necessary to complete work in conformance with
the applicable regulations and grant conditions.
iv. Prepare a letter to the grantee identifying
discrepancies which would have to be corrected
if a grant were ever to be awarded in the future,
v. Review the plans and specifications to determine
the percentage of the construction work which
would be grant eligible, and notify the grantee
that only this percentage of the design cost is
an eligible Step 2 cost.
vi. Make final payment and administratively complete
the project (see Section D.b below).
vii. Request a final audit, if warranted (see Item 6
below).
c. Step 2 Grant Increases
Grant increases may only be made to complete work in-
cluded in the original scope of the grant. However, if the
project is already physically complete, it cannot be "re-
opened" with a grant amendment for any reason, in addition,
an amendment can only be approved if the work proposed will
not interfere with bringing the project to physical and
administrative completion by the end of Fiscal Year 1987.
Examples of items which may warrant a Step 2 increase
include:
i. cost overruns to cost-plus-fixed-fee
contracts;
ii. archaeological surveys;
iii. additional environmental studies;
iv. redesign attributable to changes in the CWA
and its implementing regulations (e.g.,
definition of secondary treatment, marine
discharge waivers, revised water quality
standards, etc.);
v. higher grant share for the use of an I/A
technology (see Section VI.L.2.d);
811 TM 86-1
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vi. value engineering (VE) studies required by
the regulations; and
vii. additional work on UC systems.
d. Reduction of Work Effort
Grant increases should not be awarded for projects
which are unlikely to receive a Step 3 grant award.
Where a grant increase is requested, the project should
be reviewed with the intent of rescoping or reducing
the work effort, through one or more of the mechanisms
described in Item l.e above.
3. Delayed step 1 and step 2 Projects
A delayed project is any Step 1 or Step 2 project where the
work (i.e., facilities planning or preparation of construction
drawings and specifications) has been delayed for an excessive
period of time, generally for six months or more.
Grantees with delayed Step 1 or Step 2 projects should be
notified that they will be expected to complete the scope of
work described in the grant agreement. The notification should
include a time frame for requiring the grantee to submit a re-
vised project schedule, if one is needed, and a reminder of the
FY-87 physical and administrative completion deadline.
4. Termination or Annulment
If a grantee cannot, or will not, meet the conditions
of the grant agreement, its grant may be terminated or
annuled in accordance with the regulations applicable at
the time of grant award. Termination results in a
financial settlement, and is reflected in a grant amend-
ment. Annulment results in the repayment to the Federal
Government of all funds previously paid to the grantee.
If the regulatory criteria for annulment are not
satisfied, the grant may be terminated, based upon the
grantee's failure to comply with the terms and conditions
of the grant agreement. Negotiation of a termination
agreement with the grantee is the preferable method of
termination. However, if the grantee refuses to enter into
a termination agreement, EPA may unilaterally terminate the
grant. Upon termination, EPA must pay the grantee the
Federal share of the allowable costs for non-cancelable
obligations incurred by the grantee prior to the effective
date of termination.
812 TM 86-1
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The reviewing agency should use its best judgment in
determining the most effective approach for annulling or
terminating grants and negotiating termination agreements.
All termination agreements should provide assurances that
the Federal Government has received full value for the
funds expended. Any termination agreement that is
negotiated with a grantee must conform to EPA policies,
regulations, and guidelines, and must be supported by
factual data. All terminations require the concurrence
of the Regional Counsel (or, in the case of Headquarters-
awarded grants, the Assistant General Counsel for Grants).
Additionally, all terminated and annuled grants are
subject to audit (see Section E below). After completion
of the audit process, these grants are closed out in the
same manner as completed grants (see Section D.d below).
Re: For grants awarded prior to October 1, 1983,
40 CFR 30.920, 30.950; for grants awarded
after September 30, 1983, 40 CFR 30.903
through 30.905
5. Other Step 1 and Step 2 Projects
The circumstances described in Items 1 through 4 above
represent the most common conditions likely to be encountered
for Step 1 and Step 2 projects. However, other less common
circumstances may arise which do not fall within these
categories (e.g., phased, segmented, Step 2+3, large, or com-
plex projects). in these circumstances the reviewing agency
must exercise judgement on a case-by-case basis, taking into
account the availability of present and future grant funds,
the State's priority system, the project's contribution toward
improvement in priority water quality areas, and the likelihood
of the grantee receiving a Step 2+3 or a Step 3 grant at some
future time. As decisions are made for these projects, the
integrity of the construction grants program must be maintained,
and decisions must not circumvent the intent of the CWA (e.g.,
planning and design work for new projects should be accomplished
under an allowance, not a grant) .
6. Final Audit Requests
Before they can be closed out, all Step 1 and Step 2 projects
must either be audited or be approved for closeout without an
audit. Accordingly, a Step 1 or Step 2 project for which the
claimed grant amount (i.e., the Federal share of allowable pro-
ject costs) exceeds $250,000, and for which a Step 2+3 or a
Step 3 grant is not expected to be awarded, should be forwarded
to EPA's Office of the Inspector General (OIG) with a request
813 TM 86-1
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for a final audit. In addition, at the beginning of each
month, the reviewing agency should provide the OIG Divisional
Office with a list of Step 1 and Step 2 projects for which the
claimed grant amount does not exceed $250,000, as is done for
Step 2+3 and Step 3 projects. Within 30 days of the receipt
of this list, OIG will advise the reviewing agency, in writing,
which of these projects will be audited and which can be closed
out without an audit.
If a Step 2+3 or a Step 3 grant is expected to be awarded,
a final audit for the Step 1 or Step 2 project should not be
requested until all work on the Step 2+3 or Step 3 grant has
been completed, unless overriding circumstances require an
immediate audit.
C. STEP 2+3 AND STEP 3 COMPLETIONS
Purpose;
Complete Step 2+3 and Step 3 grants in a timely manner, in
accordance with the project schedule.
Discussion;
All Step 3 grants awarded under 40 CFR Part 35, Subpart I must
include a project schedule for key milestones, including the date
of building completion and initiation of operation. Step 2+3 and
Step 3 grants awarded under 40 CFR Part 35, Subpart E also should
have included a project schedule, and although the regulations do
not include a specific requirement for key milestones to be included
in the schedule, these should have been included as a good manage-
ment practice. Significant changes to all project schedules must be
consistent with the schedule contained in the NPDES permit and, re-
quire reviewing agency approval and the preparation of a formal grant
amendment (see Section VI.M).
Renewed emphasis is being placed on the timely completion of all
Step 2+3 and Step 3 projects in accordance with their project sche-
dules. Timely completion will result in the earliest possible
achievement of water quality goals, and will allow projects to be
efficiently managed and closed out.
The review procedures below address several problems associated
with completing a project and preparing it for audit. The procedure
for closing out projects is discussed in Section D.d below.
814 TM 86-1
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Review Procedures;
The subjects discussed below are those which have caused
extended delays in completing projects. Each project, however,
has its own unique characteristics which will require careful
selection of the methods used to complete the project.
1. Project Schedule
Grant agreements for all projects must include a project
schedule, and work must be accomplished in such a way as to
maintain that schedule. Schedules should be reasonable, and
must conform with other compliance or enforcement schedules,
including those contained in court or State enforcement orders
Requests for significant changes to project schedules must
be critically reviewed. Approval cannot be given without
coordinating the proposed changes with NPDES permit require-
ments and with those of other applicable schedules. Significant
revisions to project schedules must be accomplished by formal
grant amendment. Failure of a grantee to maintain a project
schedule may form the basis for grant termination or annulment
(see Section B.4 above).
Re: 40 CFR 35.935-11, 35.2040(b)(6) , 35.2204, 35,2212,
35.2214, 35.2216; for grants awarded prior to
October 1, 1983, 40 CFR 30.345-3, 30.900-1; for
grants awarded after September 30, 1983, 40 CFR
30.700
2. Phased or Segmented Projects
One grant condition included in all phased or segmented
projects, with the possible exception of very old projects,
is a commitment from the grantee to complete the remaining
phases or segments in order to make the treatment works, of
which the phase or segment is a part, operational and in com-
pliance with the enforceable requirements of the CWA. This
commitment includes a schedule specified in the grant agree-
ment, and must be accomplished regardless of whether grant
funding is available for the remaining phases or segments.
This schedule must also be incorporated into the grantee's
NPDES permit.
815 TM 86-1
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All phased or segmented projects should be periodically
reviewed by the reviewing agency to insure that the grantee
is performing according to the schedule. Where this is not
the case, and where negotiations with the grantee have failed
to accomplish compliance with the schedule, enforcement action
or action to initiate grant termination or annulment should be
undertaken (see Section B.4 above).
Re: 40 CFR 35.2108, 35.2214
3. Sewer System Rehabilitation
Step 2+3 or Step 3 grant awards may have been made for
projects which included both building of treatment facilities
and rehabilitation of sewer systems. In some of these cases,
the building of treatment facilities was completed, but the
grantee was permitted to continue sewer system rehabilitation
for a period of time after the treatment facilities became
operational. The grant agreement for each of these projects
contains a grant condition which requires the grantee to
complete the rehabilitation on a schedule contained in the
agreement.
A grantee whose project includes sewer system rehabilita-
tion, and whose grant was awarded after December 29, 1981, is
required to certify whether or not the project meets its per-
formance standards after one year of operation (see Section
VII.I.2.a), including the elimination of excessive I/I
through rehabilitation. A grantee whose grant was awarded
before December 29, 1981 is not required to certify the pro-
ject's performance after one year of operation.
Reviewing agencies should periodically review all projects
which include sewer system rehabilitation (with special emphasis
on pre-1982 projects) to insure that the grantee is performing
according to the schedule in the grant agreement. Where this
is not the case, and where negotiations with the grantee have
failed to accomplish compliance with the schedule, enforcement
action or action to terminate or annul the grant should be under-
taken (see Section B.4 above).
An alternative action which may be appropriate in some
instances is the reduction in the allowable capacity of treat-
ment facilities and interceptors to the equivalent of 120 gallons
per capita per day (gpcd), based on the approved and allowable
design flow. if this option is considered, care must be
exercised that the project remains affordable, meets its NPDES
permit requirements, and has received a deviation under the
provisions of 40 CFR Part 30 (see Section IX.E).
816
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Re: 40 CFR 35.2214
4 . §£®_cia.l Grant Conditions
Many grant agreements contain special grant conditions
(i.e., grant conditions unique to the project and beyond the
regulatory requirements which apply to all grants). Such
conditions may have addressed phased or segmented project
completions, a sewer system rehabilitation schedule, enactment
of ordinances forbidding connection to certain sewers (e.g.,
interceptors adjacent to environmentally sensitive or prime
agricultural land), etc. (see Section VI.M.6).
Before any project can be completed, the reviewing agency
must insure that all grant conditions have been fulfilled, with
particular attention given to special grant conditions. Refusal
by the grantee to fulfill all grant conditions may form the
basis for grant termination or annulment (see Section B.4 above)
Re: 40 CFR 35.2200
D. COMPLETION AND CLOSEOUT PROCESS
Purpose;
Insure that projects are completed on schedule, that all appli-
cable regulations and grant conditions have been satisfied, and that
project records are complete and available for audit.
Discussion;
The process of project completion and closeout will include many,
if not all, of the items discussed below in the review procedures,
which are presented in the order in which events should occur. How-
ever, because of unique circumstances surrounding each project, the
order of events may vary.
There are four major milestones in the completion and closeout
process:
a. Project Completion
A Step 1 project is considered physically complete
when the project reviewer determines that the scope of work
contained in the grant agreement has been accomplished and
is approvable. For projects not expected to receive a
817
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Step 2-1-3 or a Step 3 grant, a Step 1 project is considered
physically complete when it has met the minimum require-
ments listed in Section B.l.c above.
A Step 2 project is considered physically complete when
the plans and specifications are either approved or judged
approvable (i.e., accepted) by the reviewing agency. For
projects not expected to receive a Step 3 grant, a Step 2
project is considered complete when it has met the minimum
requirements listed in Section B.2.b above.
A Step 2+3 or a Step 3 project is considered physically
complete when an official final inspection (see Item 1 below)
determines that:
i. All but minor components of the project
have been completed (e.g., landscaping)
in accordance with the approved plans,
specifications, and change orders.
ii. The facility is capable of functioning as
designed.
iii. All equipment is operational and performing
satisfactorily.
iv. Laboratory facilities are complete and
available to conduct appropriate tests.
All administrative requirements need not be satisfied at
the time of physical completion (e.g./ final payment, change
order approval, fulfillment of grant conditions).
For Step 1 and Step 2 grants, project completion and physical
completion are synonymous. For Step 2+3 and Step 3 grants, pro-
ject completion, physical completion, and construction completion
are synonymous.
b. Administrative Completion
The administrative completion phase includes all activities
occurring after physical completion of the project. These
activities, which normally occur in the following order, include:
completion of minor components, satisfaction of all grant condi-
tions, resolution of all claims, final building payment (excluding
payment for engineering services during the first year of opera-
tion), completion of engineering services during the first year of
operation, grantee's certification that the project meets its
818 TM 86-1
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performance standards, receipt of the grantee's final grant
payment request, and project officer certification. A project
is considered administratively complete when a final audit is
requested from OIG.
(NOTES; (1) There are many instances where the completion/
close-out process can be initiated before final resolution of
all claims. Steps in this direction will have to be taken very
carefully on a project-by-project basis. In some cases the
nature of the claim will prevent any close-out action until
after the claim is resolved. However, where the claim is
clearly separable from the rest of the grant, and the limits of
grant participation can be determined, the reviewing agency needs
to deobligate and audit around the claim to more efficiently
manage the close-out process.
After it has been determined that the claim is separable,
then the grantee should be requested to submit a final payment
request contingent on resolution of the claim. Upon receipt of
the request, adjust the grant to include an estimate of possible
Federal exposure and then the audit procedure can be followed.
It is essential that the reviewing agency makes it absolutely
clear to the grantee that the purpose of this action is to imple-
ment management steps to facilitate auditing the grant in a timely
manner and that a determination of the validity of the claim is
not being made. When the claim is resolved, the grantee must
then submit a grant amendment request identifying elements of work
requested for allowability in accordance with EPA claims guidance.
The amended request will then be audited after which time the
entire project will be closed out.
Factors critical to making this process work are;
0 A careful examination of the nature of the claim to ascertain
whether this procedure is applicable; and
0 A record of communication to the grantee assuring that the
grant will remain open until all claims are resolved.
(2) A project may also be considered administratively com-
plete when it is a segment of a group of projects and ready for
audit-but-is not being sent to audit until other segments of that
group are also administratively complete.)
c. Audit Process
See Section E below for a detailed discussion of the audit
process.
819 TM 86-1
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d. Project Closeout
The project closeout phase includes all activities which
occur after the completion of the audit process (either the
conduct of an audit, or a determination by OIG that the project
can be closed out without an audit) . The project closeout phase
includes the resolution of audit issues and the final financial
settlement, if any, with the grantee. A project is considered
to be closed out when a final closeout letter has been sent to
the grantee.
Review Procedures;
Once the final inspection has been completed (see Item 1
below), and the project has been found to be acceptable, the
grantee may submit its final building payment request, for pay-
ment of 100 percent of the allowable cost of construction (less
any previous payments). However, the grant cannot be closed out
until the completion of the first year of operation, the certifi-
cation by the grantee that the project is meeting its performance
standards (see Section VII.I.2.a), the submission of the grantee's
final grant payment request, and the submission of the project to
to OIG for audit.
Projects are to be managed by reviewing agencies in such a
way that project completion and closeout are accomplished as soon
as possible. EPA Directive 2750 (April 20, 1984) states that
audit resolution must occur within 180 days after completion of
the final audit. The Office of Water Accountability System
states that closeout is expected to occur within three months of
audit resolution. These time based goals also apply to Step 1
and Step 2 closeouts. If a final audit is not required, closeout
is expected to occur within six months of project completion.
The items discussed below are primarily post-construction
activities, which must be completed before a project can be
considered administratively complete. In practically all cases,
reviewing agencies have developed checklists to be completed by
the project reviewer, and forms to be completed by the grantee,
which address these post-construction activities. These
procedures, forms, and checklists should be used.
1. Final Inspection
A final inspection is requested by the grantee
when building of the project has been completed.
The final inspection is generally accomplished
within 60 days from the date requested. The final
inspection insures that the project is completed
820 TM 86-1
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in accordance with the approved plans, specifica-
tions, and change orders, and that all necessary
records are complete and available for audit (see
Section VII.G.5). In addition, information is
gathered at the final inspection which will allow
the preparation, by the reviewing agency, of the
project officer certification concerning flow
level (75 percent or more of the anticipated initial
flow), aesthetic features, and abandoned, unused, or
inoperable facilities (see Item 8 below).
At the time of the final inspection, the reviewing
agency will usually establish a cut-off date, after
which any costs incurred by the grantee are unallowable
for grant participation (see Item 2 below).
At times, a grantee may request a final inspection,
but when the reviewing agency's inspector arrives at the
project site, conditions exist (e.g., unsatisfied grant
conditions, lack of flow data on which to base the pro-
ject officer certification, etc.) which prevent the
project from being considered administratively complete.
In such cases, the inspection should be conducted, but
the grantee should be informed, in writing, of the
deficiencies which prevented the conduct of a final
inspection, that the inspection which was conducted will
be considered an interim inspection, that a final inspec-
tion will be rescheduled after the grantee informs the
reviewing agency that the deficiencies which prevented the
conduct of a final inspection have been corrected, and
that the grantee's final grant payment will be withheld
until the final inspection has been conducted.
Re; 40 CFR 35.2216
2. Cut-off Date
The establishment of a cut-off date is one of the
actions required to ready a project for administrative
completion. The basis for a cut-off date is found in
the definition of the project's budget period in 40 CFR
Part 30, since eligible project costs are limited to
those incurred during the budget period. The budget
period must start on or after the date of grant award,
and must be consistent with the project schedule
contained in the grant agreement.
821 TM 86-1
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A cut-off date may be established for the entire
project or for individual subagreements. The cut-off
date is the date by which all work and costs associated
with a particular subagreement will have been incurred,
and after which work or costs incurred are not allowable
for grant participation. in very unusual circumstances
it may be necessary to revise a cut-off date, if costs
were incurred by the grantee due to circumstances be-
yond its control. Where a cut-off date is established,
the "cut-off" letter to the grantee must clearly document
the specific work or subagreement to which the cut-off date
applies. This documentation will preclude misunderstandings
during audit. For Step 1 and Step 2 projects, the "cut-off"
letter should also remind the grantee that, since the 1981
CWA amendments prohibit the award of new Step 1 and Step 2
grants, any future revisions to the completed Step 1 or
Step 2 project will have to be performed without EPA assis-
tance.
The cut-off date is generally established at the time
of final inspection, and usually with the agreement of
the grantee. However, if the grantee will not agree to
a cut-off date, the end of the project budget period should
be used, since by regulation, no costs can be incurred after
the end of the budget period. The cut-off date for all
costs (except startup services and engineering services
during the first year of operation) will usually coincide
with the date of the final inspection, prior to which the
grantee will normally have accepted the project from the
construction contractor. If a project is essentially
complete except for minor punch list items, the reviewing
agency and the grantee may agree to a future cut-off date,
by which time the contractor will have completed the punch
list items.
Another cut-off date which must be established and
documented in the project files concerns the termination
of services provided by the engineer, including inspection,
start-up, and supervision of the first year of operation.
This cut-off date will almost always be established as one
year after the initiation of operation for the project, to
provide for continuing engineering services during the one
year project performance period.
Once a cut-off date is established, the grantee should
prepare cost summaries (relating to the work for which the
cut-off date has been established) for submission to the
reviewing agency (see Item 3 below).
822 TM 86-1
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Re; 40 CFR 35.2040(b)(6); for grants awarded
prior to October 1, 1983, 40 CFR 30.135-6;
for grants awarded after September 30, 1983,
40 CFR 30.200
3. Cost Summary and Documentation
The grantee is required to submit cost summaries for
all costs incurred during the project. The cost summary
for previous Step 1 or Step 2 projects which receive a
Step 3 grant should be in the project files and available
for audit. Cost summaries must be prepared for all
categories of work identified in the grant application
and the grant agreement, and typically include costs for:
a. administration,
b. subagreements for building the project,
c. engineering subagreements,
d. force account work,
e. land acquisition,
f. legal services, and
g. accounting services.
Cost summaries should identify the initial costs for
each category of work and the final costs, including all
change orders and adjustments to cost-plus-fixed-fee type
contracts. If not previously submitted with a payment
request or reviewed during the final inspection, documen-
tation such as paid invoices or vouchers must be provided
to support the cost summaries.
Construction contract cost summaries should be compared
with cost data in the project files to verify that all change
orders have been reviewed and acted upon by the reviewing
agency, and that a final change order adjusting estimated
quantities to actual quantities for unit price items is
included. Cost summaries for services (e.g., engineering,
legal, and accounting) should be compared against the
original subagreement to insure that all services have
been performed and that claimed costs are in agreement with
direct costs, indirect costs, and profit items in the sub-
agreement .
823 TM 86-1
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The unused portion of the construction contingency
allowance is omitted from final project cost summaries and
should be deobligated for use on other projects (see
Section IX.C.2).
4. Final Building Payment Request
Processing of payment requests is discussed in Section
IX.B. This section addresses only the final building pay-
ment. While this payment is referred to as the final
building payment, since it represents the last payment for
building the project, additional payments will be made
during the first year of operation for appropriate
engineering services (see Section VII.I.I).
Payments are made to the grantee during the course of
the project for costs which have been incurred. When the
grantee requests the final building payment, such payment
is to be made promptly, and may only be delayed if it is
determined that the payment request includes unallowable
costs, or if information available or not available to the
reviewing agency (e.g., a final inspection report or lack
thereof) indicates a previous overpayment, a failure to
comply with all grant conditions, or other irregularities.
If the grantee has received any grant related income
(e.g., refunds, rebates, credits, etc.) such amounts are
to be used to reduce the total project cost, thereby
reducing the amount of the grant (see Section IX.B.10).
Final payment is based on the cost summaries and
supporting documentation discussed in Item 3 above.
Re; 40 CFR 35.2300(a) and (b); for grants awarded
prior to October 1, 1983, 40 CFR 30.615-1,
30.620 through 30.620-3, 30.815; for grants
awarded after September 30, 1983, 40 CFR
30.400(a) and (b)(3), 30.526, 30.802
5. Property Management
Grantees are required to have a property management
system which identifies and traces property through its
useful life or until disposal. The property management
824 TM 86-1
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system must meet the minimum requirements in the regula-
tions, and must include both personal property (e.g.,
movable equipment) and real property (e.g., land and
structures).
Before a project is administratively completed, the
reviewing agency must verify that the grantee has a
property management system in place. The review of the
property management system should take place during
project monitoring, and should be completed before the
final building payment is made.
Re; For grants awarded prior to October 1, 1983,
40 CFR 30.810 through 30.810-9; for grants
awarded after September 30, 1983, 40 CFR
30.530(b), 30.531, 30.532, 30.535, 30.536
6. Completion Delays
Completion delays most often occur where there is an
unresolved dispute between the grantee and the construc-
tion contractor, resulting in the contractor filing a
claim for additional construction costs (see Section VII.H).
Projects may not be considered administratively complete
until the claim is resolved either through negotiation,
arbitration, or litigation. The reviewing agency is to
make every effort to assist the grantee in resolving
disputes and may, at the grantee's request, provide tech-
nical or legal assistance. However, the primary respon-
sibility for resolving disputes rests with the grantee.
Costs associated with defense against contractor claims
may be allowable for grant participation provided certain
limitations are satisfied (see section IX F.4, Paragraphs
A.I.f and A.2.c).
The reviewing agency is to insure that unresolved
disputes are settled as quickly and efficiently as possible.
Re: 40 CFR 35.2214, 35.2350
7. Continuing Engineering Services
A grantee which was awarded a Step 2+3 or a Step 3 grant
on or after December 29, 1981, is required to retain the
825 TM 86-1
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engineering firm which was principally responsible for pro-
viding engineering services during construction to also
provide engineering services during the first year after
initiation of operation (see Section VII.I.I). The project
may not be considered administratively complete until the
grantee affirmatively certifies, after one year of operation,
that the project is meeting its performance standards (see
Section VII.I.2). During the first year of operation, the
engineer will submit invoices and the grantee will prepare
payment requests in the routine manner (see Section IX.B.2.b).
However, the cut-off date should have already been established
as the date at the end of the first year of operation (see
Item 2 above). The final grant payment, assuming affirmative
certification by the grantee, will be made at the conclusion
of the project performance period. However, when the final
grant payment request is unjustifiably delayed, the grantee
should be notified, in writing (certified mail, return receipt
requested) that it should submit the final payment request
within 90 days (or a similar reasonable time period) , and
that, if the final payment request is not received within
the specified time, the last payment request will be con-
sidered as the final request and remaining unexpended grant
funds will be deobligated. Where this action is taken,
immediately after the deobligation, normal procedures would
be followed in certifying the project and in requesting and
resolving the audit.
Re: 40 CFR 35.2216, 35.2218
8. Project Officer Certification
Prior to requesting a final audit, the reviewing agency
is to prepare a project officer certification. This
certification is to accompany the request for a final audit,
and in essence confirm that:
- funds have not been used for unnecessary
or unreasonable aesthetic features;
- the flow at the treatment facilities at
the time of final inspection was 75 per-
cent or more of the anticipated flow on
the date of initiation of operation;
- no facilities constructed with grant funds
are unused, abandoned, or inoperable; and
- the project files are complete and contain
all relevant documents necessary for the
conduct of an audit.
826 TM 86-1
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Detailed information on the four primary subjects of the
project officer certification is provided below:
a. Aesthetic Features
Aesthetic features must be reasonable and
necessary in order to be allowable for grant
participation (see Section IX.F.4, Paragraph
B.2.a). A determination of the allowability
of aesthetic features should have been made
during the review of plans and specifications
(see Section V.C.2.u). If aesthetic features
which were not included in the approved plans,
specifications, and change orders are dis-
covered during the final inspection, they will
be considered unallowable unless otherwise
justified.
Re; 40 CFR Part 35, Subpart I, Appendix A,
Paragraph B.2.a
b. Flow Level
Before requesting a final audit, the reviewing
agency is to determine whether the treatment
facilities (including sewers) are receiving 75
percent or more of the estimated initial flow.
If the flow is less than 75 percent, the
reviewing agency is to determine the cause, and
in preparing the project officer certification,
note the exception to the flow level.
c. Abandoned, Unused, or inoperable
Facilities
For purposes of project officer certifica-
tion, this section deals with observations at
the time of final inspection. On-going State
programs are required to address abandoned,
unused, or inoperable facilities which occur
after a project is closed out but before the
end of the project's useful life.
If any equipment or facilities are abandoned,
unused, or inoperable at the time of final inspection,
the project officer is to prepare an explanation of
the circumstances, which is to be attached to the
project officer certification and forwarded to OIG
827 TM 86-1
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along with the request for an audit. In such cases,
grantees are required to seek redress from other
parties (e.g., design engineer* construction con-
tractor, equipment supplier, etc.) responsible for
such conditions, and to make every effort to make
the facilities useful and operational. Unless justi-
fied by the grantee, any abandoned, unused, or inoper-
able equipment will be considered unallowable for
grant participation.
Re: 40 CFR 35.2214
d. Project Files
Project files must be organized to facilitate the
location of documents during the project audit, and
must contain adequate documentation to support grantee
procurement actions and all project costs which have
been claimed for grant participation.
9. File Retention
Grantees and their contractors must maintain their pro-
ject files for a period of three years after final grant
payment (i.e., the payment which is made after affirmative
certification by the grantee that the project meets its
performance standards).
Reviewing agencies will maintain project files for a
period of three years after project closeout. At the con-
clusion of the three year period, project files are to be
stored in the U.S. General Services Administration (GSA)
Regional Federal Records Center in accordance with EPA/GSA
federal records management requirements. Since the con-
struction grants regulations now prohibit the use of grant
funds for the replacement of a facility during its design
life if the facility was constructed with grant assistance,
it will be necessary to store at least part of the project
file for the design life of the facility (normally 20 years),
EPA Regional Offices should establish a records tracking
system which will facilitate the retrieval and restorage of
project files.
Ret For grants awarded prior to October 1, 1983,
40 CFR 30.805; for grants awarded after
September 30, 1983, 40 CFR 30.501
828 TM 86-1
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E. AUDIT PROCESS
Purpose;
Review grantee records, and if necessary those of its contrac-
tors, to determine whether the costs claimed under the EPA grant
are reasonable, allowable, and allocable to the grant project;
whether the management controls exercised by the grantee were ade-
quate to insure that costs claimed are allowable; and whether the
grantee has complied with all EPA regulations (including the appli-
icable procurement regulations) and grant conditions.
Discussion;
All completed construction grants projects are subject to a
final audit. Audits may be conducted by EPA, by private sector or
State auditors under contract to EPA, or by another cognizant Federal
agency. Audits are generally performed after construction, and
where Step 1 and Step 2 grants have been awarded, will include the
review of records and costs for all three steps. Audits may also be
performed at the conclusion of a Step 1 or Step 2 grant, but
generally only in those instances where the project is unlikely to
be awarded a Step 3 grant in the near future, or when unusual circum-
stances warrant an immediate audit.
The decision to conduct a final audit of the grantee's records
will depend on the size and complexity of the project, and the
amount of grant funds involved. (Audits are not usually conducted
where claimed grant funds are $250,000 or less, unless information
available to the reviewing agency suggests that a final audit is
warranted.)
Historically, two problems arise during audits. The first
problem concerns the identification of the regulations and policies
which were in effect on the date of grant award, since audits may
take place anywhere from 5 to 10 years after the initial grant award.
In addition, a project which has progressed through the entire three
step grant process may have different regulations and policies
applicable to each of the three steps. In the case of phased or
segmented projects, even more grants will be involved. To identify
the regulations and policies in effect on the date of grant award,
EPA has published the "Regulation and Policy Matrices - A Guide to
the Rules Governing Grants Awarded under the Construction Grants
Program," April 1985.
The "Regulation and Policy Matrices" traces the publication of
all EPA regulations which have a bearing on procurement and allowable
costs, from July 1, 1971 through September 30, 1984, and will be up-
dated periodically. The publication also includes matrices for all
829 TM 86-1
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EPA policy memoranda issued since January 1, 1970, as well as the
three editions of the Handbook of Procedures, the decisions of the
Audit Resolution Board, and the decisions of the Board of Assistance
Appeals. Wherever a question arises concerning regulations or
policies in effect on the date of grant award, the "Regulation and
Policy Matrices" should be consulted.
The second problem concerns the decision as to whether a particu-
lar cost is eligible or allowable under the construction grants pro-
gram. EPA regulations, policy memoranda, and the Handbook of
Procedures have, over the years, provided guidance for decisions con-
cerning the most common allowable costs. However, by the very nature
and sheer number of construction grant projects, it is not possible
to anticipate all possible situations concerning allowable costs.
Therefore, in those "gray" areas where such costs are not clearly
defined in the applicable regulations or EPA policy documents,
construction grants personnel are responsible for making such
decisions. These decisions, and the rationale behind them, should be
documented in the project files, to prevent misunderstandings at the
time of audit.
Such documentation should explain the rationale for the decision
and cite the specific regulation or policy which provided the broad
or similar framework for the decision. Similarly, if an auditor
takes exception to a cost not otherwise clearly defined in the
regulations or EPA policies as allowable, such exception should
also cite the specific regulation or policy which provides the
broad or similar framework for the exception. By the proper use
of the "Regulation and Policy Matrices" to identify applicable regu-
lations and policies, and by the proper documentation and citation
of specific regulations or policies, projects can be completed and
closed out with a minimum of delay.
Final EPA decisions concerning allowable costs may be decided
by the Audit Resolution Board if a difference of opinion cannot be
resolved between OIG and the construction grants program.
The procedures below outline the major activities of the auditors,
grantees, and construction grants staff in the audit process.
Procedures;
1. Request for Final Audit
After preparation of the project officer certifica-
tion (see Section D.8 above), the reviewing agency will
request an audit (or a determination that the project can
830 TM 86-1
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be closed out without an audit) from OIG. This is the last
action for administratively completing a project, and is re-
quested when all of the following conditions have been met:
a. Construction is complete (see Section D.a above).
b. All administrative requirements have been
satisfied (see Section D.b above).
c. The final inspection has been performed (see
Section D.I above).
d. The plan of operation has been implemented, or
for projects awarded after December 29, 1981,
the project performance certification has been
received (see Section VII.T.2.a).
e. The "cut-off" letter has been issued to the
grantee (see Section D.2 above).
f. The final grant payment has been requested
(see Section IX.B.7).
The criteria for selecting projects to be audited (and
for determining which projects can be closed out without an
audit) are discussed in Section B.6 above.
2. Audit
Unless the OIG Divisional Office has determined that the
project can be closed out without an audit, the cognizant
audit agency will conduct an onsite audit of the grantee's
records, followed by the preparation of a draft audit report.
At the completion of the onsite audit, the auditor will
conduct an exit interview with the grantee, and will provide
an opportunity for the grantee to furnish additional documen-
tation supporting any costs which have been questioned or set
aside by the auditor (i.e., identified as unallowable for
grant participation).
3. Draft Audit Report
The auditor will prepare a draft audit report for distri-
bution to both the reviewing agency and the grantee. Where
audit exceptions are noted, the specific regulation or policy
which forms the basis for the exception is to be cited.
831 TM 86-1
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Upon receipt of the draft audit report, the project officer
should review the findings and respond to the auditing office
on those findings which appear to be incorrect. At the same
time, the project officer should ensure that the grantee has
also received a copy of the audit report and, as appropriatef
the grantee also sends written comments to the auditing office
on matters of issue.
4. Final Audit Report
After evaluating all comments received on the draft audit
report, the auditor will prepare the final audit report for
distribution to the qrantee and the reviewing agency.
When the reviewing agency is in full accord with the audit
findings, it sends a final determination letter to the grantee
indicating that the final audit has been conducted and that
any funds due and payable to the U.S. Government must be paid.
The letter will also indicate that the grantee has certain
rights under Subpart L of the grant regulations to dispute any
statements made in the audit and that dispute should be filed
within a 30 day period from the date of the final determination
letter. (See Section IX.P.).
Where a final determination differs from the auditors
findings, the reviewing agency must address each finding or
recommendation (this includes both questioned and set aside
costs) either in the final determination letter or in separate
correspondence to the Divisional Inspector General for Audit
(PICA), including references to supporting documentation, legal
basis and/or precedent. If the total questioned costs in the
audit report ares
(1) equal to or exceed $100,000, the final determi-
nation letter must receive PICA concurrence.
The PICA has 15 days to act. During that period,
the PICA can (a) concur, (b) allow the period to
elapse after which concurrence is automatic,
(c) attempt to resolve any differences with the
reviewing agency or, (4) elevate the problem
to Office of the Assistant Inspector General
for" Audit's (OAIGA). The OAIGA has 45 days'to
resolve the issue with the Headquarters program
office. If resolution has not happended in that
period it may be elevated to the Audit Resolution
Board (ARB). If it is not raised to the ARB, it
is considered resolved.
(2) less than 100,000, the final determination letter
must be issued within 150 days of the final audit
832 TM 86-1
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report date. The PICA will advise the reviewing
agency of issues where disagreement occurred
on final determination letters not requiring
concurrence.
In the absence of an appeal by the grantee under the disputes
provisions of the regulations or by the PIG to the ARE, the pro-
ject is then closed out, and the files are retained by the
reviewing agency and subsequently shipped to the Federal Records
Center (see Section D.9 above).
5. Resolution of Audit Exceptions
Audit exceptions, if any, are to be resolved between the
reviewing agency and the auditors at the lowest possible level.
The grantee should be involved in the resolution process, since
the grantee's financial interests are involved. Decisions con-
cerning the allowability of costs which are not clearly defined
in regulation or policy (i.e., fall into the "gray" area) should
have been previously made and documented by the construction
grants staff.
6. Review of Final Determination
If the grantee disagrees with the decision of the reviewing
agency (other than a decision by the Audit Resolution Board),
it may file a request for review of the decision in accordance
with 40 CFR Part 30, Subpart L. (The procedures in Subpart L
are applicable after September 30, 1983, regardless of when EPA
awarded grant assistance.)
Unresolved issues arising prior to receiving a final deter-
mination letter (based upon an audit) may be appealed by the
grantee to the program office level at the State or Regional
Office. A Disputes Decision Official's determination (see
Section IX.D.) may be appealed to the Regional Administrator.
The Regional Administrator's decision is the final agency
action, although the grantee may petition the Assistant
Administrators for review of the Regional Administrator's
decision. However, after receiving a final determination
letter, the grantee must appeal directly to the RA and then,
if needed, to Headquarters.
7. Recovery of Funds
When the audit reveals an overpayment of grant funds, and
where this opinion is sustained in an appeal or other proceedings,
the grantee is required to refund the amount of overpayment to
the U.S. Treasury.
If the grantee fails to pay what is owed within 30 days after
receiving a final decision from a dispute decision official (see
Section IX.P.), interest will be assessed on the unpaid debt at
833 TM 86-1
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a rate established by the U.S. Treasury, even if a review of that
decision is requested. However, should, under a review, the
amount of the debt be reduced, EPA will refund the interest paid
on the amount restored.
Upon repayment, the total grant award is reduced by the
principal amount of the overpayment and, the deobligated
funds are reallotted to the State's construction grant account.
However, the interest portion of the overpayment remains with
the U.S. Treasury.
Re; For grants awarded prior to October 1, 1983, 40 CFR
30.815; for grants awarded after September 30, 1983,
40 CFR 30.802 and 30.1230 amended February 21, 1986.
834 TM 86-1
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Instead of receiving payments, however, the
State can request EPA to assign payment of
each advance directly to the small community
for which the State has approved an advance.
In this latter case, the following procedures
must be followed by the State;
i. a separate SF-270 must be used
for each community1s advance;
ii. the community's name and mailing
address must be shown as the
payee on the SF-270;
iii. the State's accounting system
must treat the advance on an
accrual, rather than a cash basis;
iv. the State must execute an agreement
with each community, authorizing
the State to request EPA to assign
payment directly to the community,
and must provide a copy of the
agreement to EPA;
v. the State must inform the community,
in writing, that the advance has
been approved; and
vi. the State must enter the approved
advance in its accounting system
as an obligation of grant funds,
prior to submitting the SF-270,
requesting reimbursement from EPA
for the approved advance.
Re: 40 CFR 30.400(b), 30.405, 35.2025(b),
35.2300
-------
9. Grant Overpayment
Grantees must repay interest earned on Federal grant funds.
Therefore^__iJE_a_grantee_received overpayments and deposited them
in interest-bearing accounts, actual Interest or estimated actual
interest earned on the funds must be'repaTd to EPA. But, if a
grantee kept its overpayments in an interest-bearinq account and
can demonstrate that it promptly used them to pay the Federal
share of allowable project costs Tncurred since the date of its
most recent payment request so that no interest was earned on the
overpayment, then no payment of interest is due EPA.
If overpayments are received but the grantee did not earn
in t e r_es t_£n_ them, no interest repaymen t i s due. Overpayments
must be repaid to the United States Treasury within 30 days of
EPA's final decision that an overpayment has been made. After
the 30 day period. EPA may charge interest (or additional
interest) on outstanding balances.
Re: 40 CFR 30.400(a), 30.802
10. Grant Related Income
All income received by a grantee as a result of its conduct
of the project (e.g., interest on grant funds received from EPA
but not paid to contractors, proceeds from the sale of bidding
documents, bid bond forfeitures (see Section P.4, Paragraph A.3.i
below), refunds, rebates, credits, discounts for prompt payment,
reimbursements, etc.) must be returned to the project account.
However, liquidated damages collected from a contractor are not
considered grant related income (see Section F.4, Paragraph A.3.a
below).
Normally, the grantee is not required to make a cash payment,
but rather to report the amount of grant related income in the
space provided on the SF-270 or SF-271. However, after the final
grant payment has been requested, the Federal share of any
remaining grant related income must be paid to the United States
Treasury, and credited to the State's current allotment.
An exception to this requirement is that interest earned by
States and American Indian Tribes is not considered grant related
income. Also, income which results from the operation of a
wastewater treatment system is not considered grant related in-
come, but is required to be used to offset operation, maintenance,
and replacement (OM&R) costs (see Section V.E).
Re: 40 CFR 30.525(b) through (d), 35.2300(b)
912 TM 86-1
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11. Grants Information and Control System
Grantee payments are to be entered into the Grants Informa-
tion and Control System (GIGS) by the responsible reviewing
agency per State/EPA delegation agreement (see Section III.C.3).
C. GRANT INCREASES AND DECREASES
1. Increases
a. Step 2+3 and Step 3 Grants
Increase requests on these grants most often occur when:
- construction bids exceed estimated building costs,
- quantities for unit price items exceed those esti-
mated in bidding documents, or
- change orders are required (see Section VII.H.I).
Often, minor increases in building costs can be accom-
modated by the construction contingency allowance. Where
this allowance is insufficient to cover cost increases,
and where the request for a grant increase is justified
and approved, a qrant increase may be made if:
i. the grantee's justification for the increase
is acceptable under Federal regulations:
ii. the costs are allowable for grant participation;
iii. the costs are for work which is within the
existing scope of work of the project (see
the "Discussion" portion of Section VII.H):
iv. the increase can be funded from the State's
allotment; and
v. the State has certified the increase for grant
assistance.
However, for Step 2+3 and Step 3 grants awarded on or after
February 10, 1986, increases in the allowable costs of the
project will be limited to five (5) percent of the sum of
the initial award amount of prime subagreements, the initial
amount approved for force account work, the purchase price
of eligible real property, and the initial amount approved
for other project costs, excluding amounts approved for
facilities planning and design allowances. For grants
awarded prior to 2/10/86, the 5% limit also applies to
contracts awarded after that date — expect that contracts
(on these grants) finally advertised or otherwise awarded
before 2/10/86 are NOT subject to the 5% increase limit.
913 TM 86-1
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(Note; Costs of equitable adjustments for differing
site conditions are exempt from the 5% limitation
provided the requirements of Section IX.F.4.A.1.g.
and all other applicable laws and regulations have
been met.)
Re; 50 FR 218 (November 12, 1985)
b. Step 1 and Step 2 Grants
Grant increases for Step 1 and Step 2 projects
are discussed in detail in Sections VIII.B.l.d
and VIII.B.2.c. As an alternative to a grant in-
crease for a project which is unlikely to receive
a Step 2+3 or a Step 3 grant, a reduction of the
current work effort may be preferable. Reductions
of work effort for Step 1 and Step 2 grants are
discussed in detail in Sections VIII.B.l.e and
VIII.B.2.d.
c. Award Procedures
Approval of a grant increase requires prepara-
tion of a formal grant amendment. Each State has
internal procedures which are to be followed in
processing the grant amendment. Grant increases
may only be awarded by EPA, and are subject to
the requirement for advance Congressional notifi-
cation. Refer to Section VI.M for a detailed
discussion of grant award procedures.
2. Decreases
Grant decreases most often occur when construction bids are
less than the estimated contract costs included in the grant
application. Grant decreases may also occur at the completion
of any project, including Step 1 and Step 2 grants. In most
instances, a request for a grant decrease is not made by the
grantee, but is initiated by the reviewing agency. Project
reviewers are to be alert for legitimate opportunities to reduce
grants, since recovered funds, after being returned to EPA, are
realloted to the same State for funding other projects on the
State's project priority list. Grant decreases require the pre-
paration of a formal grant amendment. Once this amendment has
been approved by the Regional Administrator, a copy is sent to
the Regional Financial Management Officer who deobligates the
funds and, subsequently, arranges for their reallotment to the
State. Refer to Section VI.M for a detailed discussion of grant
award procedures.
914 TM 86-1
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If the claim seeks recovery for the costs of
delay, the grantee must demonstrate that the
delay impacted activities critical to timely
completion (i.e., that the delayed activities
affected the critical path for project comple-
tion ).
h. THE COSTS OF THE SERVICES OF THE PRIME ENGINEER RE-
QUIRED BY §35.2218 DURING THE FIRST YEAR FOLLOWING
INITIATION OF OPERATION OF THE PROJECT.
The cost and the scope of these services are to be
reasonable and appropriate to the nature, size, and
complexity of the project (see Sections VII.C.5.b,
VII,I.I, and VIII.D.7, and Paragraph l.j below).
i. THE COST OF DEVELOPMENT OF A PLAN OF OPERATION IN-
CLUDING AN OPERATION AND MAINTENANCE MANUAL REQUIRED
BY §35.2106.
The cost of preparing the draft plan of operation,
which is required as part of the grant application
package, is not an allowable cost, but is part of the
preapplication work which is intended to be defrayed,
in part, by the allowance for facilities planning and/or
design (see Section VI.D.8).
j. START-UP SERVICES FOR ONSITE TRAINING OF OPERATING
PERSONNEL IN OPERATION AND CONTROL OF SPECIFIC TREAT-
MENT PROCESSES, LABORATORY PROCEDURES, AND MAINTENANCE
AND RECORDS MANAGEMENT.
While start-up services are an allowable cost, care
must be exercised to insure that there is not a
duplication of services, and therefore costs, bet-
ween start-up services and the engineering services
to be provided during the first year of operation
(see Sections VII.C.5.b, VII.I.I, and VIII.D.7, and
Paragraph l.h above).
k. THE SPECIFIC AND UNIQUE COSTS OF FIELD TESTING AN
INNOVATIVE OR ALTERNATIVE PROCESS OR TECHNIQUE, WHICH
MAY INCLUDE EQUIPMENT LEASING COSTS, PERSONNEL COSTST
AND"UTILITY COSTS NECESSARY FOR~CONSTRUCTING, CONDUCTING,
AND REPORTING THE RESULTS OF THE FIELD TEST.
It should be noted that normal operation and maintenance
costs, as defined in §35.2005(b)(30 ), are not allowable
as construction costs of a field test.
935 TM 86-1
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2. UNALLOWABLE COSTS RELATED TO SUBAGREEMENTS INCLUDE:
a. THE COSTS OF ARCHITECTURAL OR ENGINEERING SERVICES
OR OTHER SERVICES INCURRED IN PREPARING A FACILITIES
PLAN AND THE DESIGN DRAWINGS AND SPECIFICATIONS FOR
A PROJECT. THIS PROVISION DOES NOT APPLY TO PLANNING
AND DESIGN COSTS INCURRED IN THE MODIFICATION OR RE-
PLACEMENT OF AN INNOVATIVE OR ALTERNATIVE PROJECT
FUNDED UNDER §35.2032(c).
The costs of these services are part of the work which
is intended to be defrayed, in part, by the allowance for
facilities planning and/or design. Also, if the engineer
has provided services to prepare other documents supporting
the grant application (e.g., UC system, SUO, intermunicipal
agreements, draft plan of operation, value engineering (VE)f
etc.), the costs associated with such services are not
allowable, but again are part of the work which is intended
to be defrayed, in part, by the allowance for facilities
planning and/or design (see Section III.D.S.c). However,
specific planning and design costs are allowable as part
of a 100 percent grant for the modification or replacement
(M/R) of a failed I/A technology (see Section VI.J).
b. EXCEPT AS PROVIDED IN l.g ABOVE, ARCHITECTURAL OR
ENGINEERING SERVICES OR OTHER SERVICES NECESSARY TO
CORRECT DEFECTS IN A FACILITIES PLAN, DESIGN DRAWINGS
AND SPECIFICATIONS, OR OTHER SUBAGREEMENT DOCUMENTS.
An example of these unallowable costs would be the
engineering costs to update data in the facilities plan
(e.g., cost estimates, current population for determining
existing needs, etc.), or to evaluate a required alterna-
tive (e.g., I/A technology) which was not properly evalu-
ated in the facilities plan. Another example would be the
engineering costs of redesigning a treatment plant unit
process if the original design did not conform to State
design standards, was impractical, or was excessively
costly. However, revisions to a facilities plan, design
drawings and specifications, or other subagreement docu-
ments which are necessary because of changes in EPA or
State standards are not considered defects under this sec-
tion, and are therefore allowable (see Section VII.H.l.c).
C. THE COSTS (INCLUDING LEGAL, TECHNICAL AND ADMIN-
ISTRATIVE) OF DEFENDING AGAINST A CONTRACTOR CLAIM
FOR INCREASED COSTS UNDER A SUBAGREEMENT OR OF
PROSECUTING A CLAIM TO ENFORCE ANY SUBAGREEMENT
UNLESS:
936 TM 86-1
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Defense and prosecution costs are those costs (in-
cluding legal, technical, and administrative costs)
incurred after any party files a complaint in court
or a demand for arbitration. When such action is
taken, or appears likely to be taken, the grantee
must obtain cost estimates for the legal and tech-
nical services deemed necessary for such proceedings.
A description of the claim, the facts and issues
involved, and cost estimates for the proceedings must
be submitted through the State to EPA for approval and
the preparation of a grant amendment. This procedure
allows the State and EPA to review the claim and, where
appropriate, to utilize their experience and expertise
to attempt to obtain a resolution before expensive pro-
ceedings are undertaken. Where it is determined that
there is a significant Federal interest in the claim,
EPA will prepare a grant amendment for the reasonable
costs necessary for defense or prosecution, and if
regusted, may provide technical and legal assistance
(see Sections VII.H.3 and VII.H.5, Section C.I above,
and Paragraph l.f above).
Re; 40 CFR 35.2350
(1) THE CLAIM ARISES FROM WORK WITHIN THE SCOPE
OF THE GRANT;
See the "Discussion" portion of Section VII.H.
(2) A FORMAL GRANT AMENDMENT IS EXECUTED SPECIFI-
CALLY COVERING THE COSTS BEFORE THEY ARE
INCURRED;
After the grant amendment has been approved
(see Section VI.M, and Section C.I above),
the legal and technical services must be pro-
cured in accordance with EPA's procurement
requirements, as discussed in Section VII.C.8.
(3) THE CLAIM CANNOT BE SETTLED WITHOUT ARBITRA-
TION OR LITIGATION;
In order to determine whether the claim can be
settled without arbitration or litigation, the
reviewing agency should request and review the
following items from the grantee:
(i) Sufficient documentation that timely, good
faith efforts were made to pursue negotia-
tions in order to avoid arbitration or liti-
gation, such as:
937 TM 86-1
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- a memorandum of negotiation (see EPA
publication, "Management of Construc-
tion Change Orders - A Guide for Grantees,"
March 1983, page 10);
- timely analysis of the merits of the
claim by the grantee's construction
engineer (or other consultant) and
legal staff;
- proof of a timely response; and
- a record of attempts made to perform
timely and meaningful negotiations.
(ii) The engineer's independent estimate of the
value of the claim.
(iii) An independent consultant's report, where
appropriate.
(iv) Any other pertinent correspondence between
the contractor and the grantee and/or the
grantee's engineer.
(4) THE CLAIM DOES NOT RESULT FROM THE GRANTEE'S
MISMANAGEMENT;
(5) THE REGIONAL ADMINISTRATOR DETERMINES THAT
THERE IS SIGNIFICANT FEDERAL INTEREST IN THE
ISSUES INVOLVED IN THE CLAIM; AND
See paragraph l.f above.
(6) IN THE CASE OF DEFENDING AGAINST A CONTRACTOR
CLAIM, THE CLAIM DOES NOT RESULT FROM THE
GRANTEE'S RESPONSIBILITY FOR THE IMPROPER
ACTION OF OTHERS.
d. BONUS PAYMENTS, NOT LEGALLY REQUIRED, FOR COMPLETION
OF BUILDING BEFORE A CONTRACTUAL COMPLETION DATE.
Many construction contracts provide that liquidated
damages will be assessed against a contractor for
failure to complete the project on schedule (see
Section VII.H.l.f). In some instances, contracts
938
-------
also provide monetary incentives (i.e., a bonus)
as an inducement to complete the project ahead of
schedule. Unless the bonus provision is required by
law, a bonus paid by the grantee is an unallowable cost.
ALL INCREMENTAL COSTS DUE TO THE AWARD OF ANY SUBAGREE-
MENTS FOR BUILDING SIGNIFICANT ELEMENTS OF THE PROJECT"
MORE THAN 12 MONTHS AFTER THE STEP 3 GRANT AWARD OR
FINAL STEP 2+3 APPROVALS UNLESS SPECIFIED IN THE PRO-
JECT SCHEDULE APPROVED BY THE REGIONAL ADMINISTRATOR
AT THE TIME OF GRANT AWARD.
If the grantee delays the award of any subagreements
for building significant elements of the project be-
yond 12 months after the date of the Step 3 grant
award or the final Step 2+3 approvals.' (1) the Region
should analyze the impact of this delay upon the
completion dates of other significant elements of the
project as proposals which delay the completion dates
of those other elements are not acceptable; and (2) the
incremental costs caused by the delay are not allowable
allowable, even if the delay is justifiable (e.g., due
to circumstances beyond the grantee's control) unless
the delay was specified in the project schedule approved
by the Regional Administrator when the grant was awarded.
The incremental costs include building costs, as well
as other costs for services, such as engineering super-
vision during construction and start-up, and continuing
engineering services for the first year after the
initiation of operation. The incremental costs for
building may be determined by using the ratio of approp-
riate cost indices (e.g., the construction cost index
published in Engineering News Record, or the EPA index
published in the Journal of the Water Pollution Control
Federation) applied to the subagreement cost awarded to
the successful bidders. The numerator in the ratio would
be the index 12 months after the date of the Step 3 grant
award, or the final Step 2+3 approvals, and the denomin-
ator would be the index nearest the date of subagreement
award. The ratio, assuming it is .less than 1.0, is
multiplied by the subagreement amount to determine the
allowable cost. This same ratio is applied to other
appropriate project costs (e.g., engineering supervision)
to determine the allowable cost. The allowable building
cost resulting from this adjustment is used to determine
the final allowance for facilities planning and/or design
(see Sections III.D.3.C and VI.L.l.f).
939 TM 86-1
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The project reviewer should also be aware that
failure to promptly initiate and complete a
project may result in the imposition of sanctions,
including termination, pursuant to 40 CFR Part 30,
Subpart I. The objective of this requirement is to
improve water quality as quickly as possible and
to prevent unnecessary increases in construction
costs due to inflation.
(Note; Where (1) a grantee opens bids on a significant
element of a project prior to the project schedule date
and (2) all bidders agree to hold their bids firm until
after the date in its project schedule, no grant penalty
would be assessed for the delay. The reason being that,
through the hold firm agreement, the before and after
schedule costs would be the same. However, any increase
in ancillary costs (A/E sevices, administrative expenses,
legal costs, etc.) attributable to the grantee delay
would not be eligible for grant participation.)
3. Other Costs
The following items are not explicitly included in 40 CFR
Part 35, Subpart I, Appendix A, but represent prudent fiscal and
management principles, and precedent cases:
a. Liquidated Damages
Monies recovered by grantees based on the
assessment of liquidated damages have no effect on
the determination of allowable costs (i.e., are not
considered to be grant related income). Moreover, any
additional costs (e.g., building, engineering, legal,
or administrative) incurred because of a contractor's
lack of timely performance are assumed to be offset
by the liquidated damages, and therefore are unallow-
able, even in the event that the grantee elects not to
exercise its right to recover liquidated damages, or
the liquidated damages are insufficient to cover the
grantee's additional costs.
940 TM 86-1
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b. Bid Bond Forfeiture
All bid bond forfeitures are treated as a reduction
in the project's costs (i.e., are considered to be grant
related income). However, the allowance for facilities
planning and/or design continues to be based on the total
allowable building cost, without regard to the bid bond
forfeiture.
c. Public Liaison Services
Such services are unallowable, since they constitute
a type of public information service, and as such are
not directly related to, or necessary for, the building
of the project.
d. Professional Liability Insurance
Insurance premiums for a contractor (e.g., engineer,
construction manager, attorney, accountant, etc.) are
allowable only for insurance which the contractor main-
tains in connection with the general conduct of its
business. The types and extent of coverage must be in
accordance with sound business practice, and the rates
and premiums must be reasonable under the circumstances.
The maintenance of professional liability insurance is
a sound business practice, and the premiums are allowable,
but only as part of the contractor's indirect cost agree-
ment. The cost of additional insurance (e.g., for a
specific project), beyond that normally carried by the
contractor, is unallowable for grant participation.
e. Services Required by Law
The cost of services, other than engineering services
during construction (see Paragraph l.e above),.such as
railway or highway flagmen, or utility or highway inspec-
tors, required during the building of the project, are
allowable for grant participation provided that:
941 TM 86-1
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affected
the agency responsible for the affect
railway, highway, or utility requires
«nr»h services for all parties conducting
ilar types of work, regardless of the
rce of construction funding for the
such
simil
similar types or work, regardless or t
source of construction funding for the
project;
ii. the project work requiring such services
is allowable, and is included in the scope
of the approved project;
iii. the cost of such services has not been
included in the construction contractor's
bid price;
iv . the cost of such services is incurred
directly by the grantee;
v. the cost is reasonable; and
vi. the services are required by State or
local law.
f. Field Surveys to Identify Cultural Resources
The costs of field surveys to identify historical ,
architectural, archaeological, and cultural resources
in the primary impact areas of the project are not
allowable costs, but are part of the preapplication
activities which are intended to be defrayed, in
part, by the allowance for facilities planning and/or
design. Where intensive surveys conducted during
facilities planning or design indicate a high probability
of discovering important cultural resources, and
where the proposed project may have an adverse impact
upon such cultural resources, the reasonable cost of
services required during the building of the project
(i.e., costs to protect previously identified artifacts,
structures, etc.) are allowable. Such costs require
prior approval by the reviewing aqency, and must be
supported by documentation justifying their need. The
allowability of such work and the associated costs are
determined on a case-by-case basis, and must he recom-
mended by the State Historic Preservation Officer (SHPO),
and in some cases, the Advisory Council on Historic Pre-
servation (ACHP).
942
-------
v. contain architectural details (including
hardware that is an integral part of the
structure) that are designed to enhance
the function and appearance of the building,
and to reflect regional architectural tra-
ditions; and
vi. facilitate the highest productivity
and efficiency of the treatment works
and its employees.
Decisions concerning the allowability of specific
item (particularly those associated with aesthetics)
are to be well documented in the project files and
made available to the grantee and the project auditor.
Allowability decisions which cannot be made using the
principles discussed above (see also Section V.C.2.u)
are to be submitted from the State to the EPA Regional
Office and, if necessary, to EPA Headquarters for review.
Re; EPA Audit Resolution Board Decision 13/14,
"Criteria for Assessing the Allowability of
Aesthetic Features and Landscaping on EPA
Construction Grant Projects," February 24, 1984
b. THE COST OF LAND ACQUIRED FOR THE MITIGATION OF
ADVERSE ENVIRONMENTAL EFFECTS IDENTIFIED PURSUANT
TO AN ENVIRONMENTAL REVIEW UNDER NEPA.
Section 212(2) of the Act states that only two
categories of land are included in the definition of
treatment works; Land that will be used as an integral
part of the treatment process and land that will be
used for the ultimate disposal of residues resulting
from such treatment. Because land acquired to mitigate
adverse environmental effects is not included in the
definition of treatment works, the cost of that land
purchase is not allowable. However, although the cost
of land purchased to mitigate adverse environmental
impacts is unallowable, it does hot affect the require-
ment to mitigate. 40 CFR Part 6 requires that effective
mitigation measures be developed and implemented. Also,
the applicant must provide in the facilities plan a
cost-effectiveness analysis of the feasible alterna-
tives, including the purchase of ineligible land.
945 TM 86-1
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C. PRIVATELY OR PUBLICLY OWNED SMALL AND ONSITE SYSTEMS
1. ALLOWABLE COSTS FOR SMALL AND ONSITE SYSTEMS SERVING
RESIDENCES AND SMALL COMMERCIAL ESTABLISHMENTS IN-
HABITED ON OR BEFORE DECEMBER 27, 1977 INCLUDE:
(Note; There is a conflict between this paragraph and
40 CFR 35.2034. EPA has proposed amending this paragraph
to agree with the provision of 40 CFR 35.2034 that the
requirement for habitation on or before December 27, 1977
applies only to privately owned small and onsite systems.)
a. THE COST OF MAJOR REHABILITATION, UPGRADING,
ENLARGING AND INSTALLING SMALL AND ONSITE SYSTEMS,
BUT IN THE CASE OF PRIVATELY OWNED SYSTEMS, ONLY
FOR PRINCIPAL RESIDENCES.
Major rehabilitation may include, as an allowable
cost, the demolition and removal of an existing
onsite system provided that:
i. the system, including the septic tank,
has failed beyond reasonable repair, and
the replacement system is more cost
effective than salvaging portions of the
existing system; and
ii. either:
- there is only one reasonable location
on the site for the new system, and the
use of that location requires the re-
moval of the existing system, or
- the existing system constitutes a real
and present hazard to safety, public
health, or water quality, which can
only be abated by the removal of the
existing system.
The demolition and removal of an existing onsite
system for the convenience of the owner as a means
of increasing property value or property use is
unallowable for grant participation.
b. CONVEYANCE PIPES FROM PROPERTY LINE TO OFFSITE
TREATMENT UNIT WHICH SERVES A CLUSTER OF BUILDINGS.
C. TREATMENT AND TREATMENT RESIDUE DISPOSAL PORTIONS OF
TOILETS WITH COMPOSTING TANKS, OIL FLUSH MECHANISMS,
OR SIMILAR INHOUSE DEVICES
946 TM 86-1
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d. TREATMENT OR PUMPING UNITS FROM THE INCOMING FLANGE
WHEN LOCATED ON PRIVATE PROPERTY AND CONVEYANCE PIPES,
IF ANY, TO THE COLLECTOR SEWER.
6. THE COST OF RESTORING INDIVIDUAL SYSTEM BUILDING SITES
TO THEIR ORIGINAL CONDITION.
2. UNALLOWABLE COSTS FOR SMALL AND ONSITE SYSTEMS INCLUDE:
a. MODIFICATION TO PHYSICAL STRUCTURE OF HOMES OR
COMMERCIAL ESTABLISHMENTS.
b. CONVEYANCE PIPES FROM THE HOUSE TO THE TREATMENT UNIT
LOCATED ON USER'S PROPERTY OR FROM THE HOUSE TO THE
PROPERTY LINE IF THE TREATMENT UNIT IS NOT LOCATED ON
THAT USER'S PROPERTY.
C. WASTEWATER GENERATING FIXTURES SUCH AS COMMODES, SINKS,
TUBS, AND DRAINS.
D. REAL PROPERTY
1. ALLOWABLE COSTS FOR LAND AND RIGHTS-OF-WAY INCLUDE:
a. THE COST (INCLUDING ASSOCIATED LEGAL, ADMINISTRATIVE
AND ENGINEERING COSTS) OF LAND ACQUIRED IN FEE SIMPLE
OR BY LEASE OR EASEMENT UNDER GRANTS AWARDED AFTER
OCTOBER 17, 1972, THAT WILL BE AN INTEGRAL PART OF
THE TREATMENT PROCESS OR THAT WILL BE USED FOR THE
ULTIMATE DISPOSAL OF RESIDUES RESULTING FROM SUCH
TREATMENT PROVIDED THE REGIONAL ADMINISTRATOR APPROVES
IT IN THE GRANT AGREEMENT. THESE COSTS INCLUDE:
(1) THE COST OF A REASONABLE AMOUNT OF LAND, CON-
SIDERING IRREGULARITIES IN APPLICATION PATTERNS,
AND THE NEED FOR BUFFER AREAS, BERMS, AND DIKES:
(NOTE; Buffer areas are designed as part of the
rit
project to screen sites from public view to con-
trol public access, to improve aesthetics and to
meet other prescribed State regulatory require-
ments if applicable.)
(2) THE COST OF LAND ACQUIRED FOR A SOIL ABSORPTION
SYSTEM FOR A GROUP OF TWO OR MORE HOMES:
(3) THE COST OF LAND ACQUIRED FOR COMPOSTING OR
TEMPORARY STORAGE OF COMPOST RESIDUES WHICH
RESULT FROM WASTEWATER TREATMENT;
TM 86-1
947 (85-1)
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(4) THE COST OF LAND ACQUIRED FOR STORAGE OF TREATED
TREATED WASTEWATER IN LAND TREATMENT SYSTEMS
BEFORE LAND APPLICATION. THE TOTAL LAND AREA
FOR CONSTRUCTION OF A POND FOR BOTH TREATMENT
AND STORAGE OF WASTEWATER IS ALLOWABLE IF THE
VOLUME NECESSARY FOR STORAGE IS GREATER THAN
THE VOLUME NECESSARY FOR TREATMENT. OTHERWISE,
THE ALLOWABLE COST WILL BE DETERMINED BY THE
RATIO OF THE STORAGE VOLUME TO THE TOTAL VOLUME
OF THE POND.
Where properties are only partially acquired for pro-
ject purposes, it may be necessary to compensate pro-
perty owners for the reduced value of their remaining
land. The appraisal reports should provide findings
on the value of property to be acquired as well as
compensatory damages due to partial land takings.
b. THE COST OF COMPLYING WITH THE REQUIREMENTS OF THE
UNIFORM RELOCATION ASSISTANCE AND REAL PROPERTY
ACQUISITION POLICIES ACT OF 1970 (42 U.S.C 4621
et.seq., 4651 et seq.), UNDER PART 4 OF THIS CHAPTER
FOR LAND NECESSARY FOR THE BUILDING OF TREATMENT WORKS,
The Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (The Uniform Act),
as implemented by EPA under 40 CFR Part 4, is appli-
cable to the acquisition of land necessary for pro-
jects receiving EPA grant assistance regardless of
whether the land so acquired is eligible for grant
assistance (e.g., sewer easements). The cost of
complying with 40 CFR Part 4 is allowable; it is
only the cost of the land itself which may or may
not be eligible for grant assistance.
Representative costs of complying with the Uniform
Relocation Assistance and Real Property Acquisition
Policies Act of 1970 include:
cost of appraisal and review appraisal
(including supplemental engineering or other
studies necessary to properly value improve-
ments, minerals, timber or other resources
on the property); costs for surveys and legal
boundary descriptions are allowable only where
land costs are allowable.
TM 86-1
948 (85-1)
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ii. necessary services associated with the
acquisition such as title search; documen-
tation relating to just compensation/offer
amount; purchase negotiations; preparation
of purchase agreement (including options
if applicable), proposed deed convenants,
legal description, lease agreements and
related legal documents;
iii. related costs such as legal notices, closing
costs (e.g., transfer tax, evidence of title,
recording fee), mortgage prepayment penalties
and certain pro-rata prepaid property taxes;
iv. certain legal and other costs relating to
abandoned or unsuccessful condemnation pro-
ceedings or inverse condemnation proceedings
decided in favor of the landowner;
v. advice on relocating and on moving and related
expenses for displaced persons, businesses and
farms;
vi. replacement housing payments for displaced
persons; and
vii. other administrative costs of complying with
The uniform Act.
Each of the above cost limitations are more fully
described in 40 CFR Part 4. The reviewing agency
should inform grantees regarding their potential
eligibility for reimbursement of these costs; and
should determine the adequacy of documentation prior
to making reimbursement.
Re: 40 CFR 4.3, 4.102(c)t 4.102(f), 4.102(q), 4.106, 4.107,
4.207, 4.301 et. seq. (Subpart D) , 4.401 et. seq.
(Subpart E)
C. THE COST OF CONTRACTING WITH ANOTHER PUBLIC AGENCY
OR QUALIFIED PRIVATE CONTRACTOR FOR PART OR ALL OF
THE REQUIRED ACQUISITION AND/OR RELOCATION SERVICES.
TM 86-1
949 (85-1)
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d. THE COST ASSOCIATED WITH THE PREPARATION OF THE TREAT-
MENT WORKS SITE BEFORE, DURING AND, TO THE EXTENT
AGREED ON IN THE GRANT AGREEMENT, AFTER BUILDING. THESE
COSTS INCLUDE:
(1) THE COST OF DEMOLITION OF EXISTING STRUCTURES
ON THE TREATMENT WORKS SITE (INCLUDING RIGHTS-
OF-WAY) IF BUILDING CANNOT BE UNDERTAKEN WITH-
OUT SUCH DEMOLITION;
Demolition of existing structures on the
treatment works site (including rights-of-way),
when not required for building the project, will
be considered to be an allowable cost only if the
existing structures constitute a real and pre-
sent hazard to safety, public health, or water
quality, which can only be abated by the removal
of the existing structures. The demolition of
an existing structure for the convenience of the
owner as a means of increasing property value or
property use is unallowable for grant participa-
tion.
(2) THE COST (CONSIDERING SUCH FACTORS AS BETTER-
MENT, COST OF CONTRACTING AND USEFUL LIFE) OF
REMOVAL, RELOCATION OR REPLACEMENT OF UTILITIES,
PROVIDED THE GRANTEE IS LEGALLY OBLIGATED TO
PAY UNDER STATE OR LOCAL LAW; AND
(3) THE COST OF RESTORING STREETS AND RIGHTS-OF-WAY
TO THEIR ORIGINAL CONDITION. THE NEED FOR SUCH
RESTORATION MUST RESULT DIRECTLY FROM THE CON-
STRUCTION AND IS GENERALLY LIMITED TO REPAVING
THE WIDTH OF TRENCH.
Repaving beyond the trench width may be con-
sidered to be an allowable cost if uniformly
required by State or local law for all projects
involving road construction, regardless of the
source of project funding. Sometimes referred
to as "saw width," this provision requires that
the road surface and subsurface be cut one or two
feet beyond the trench width. This is not, how-
ever, to be interpreted as allowing the cost of
complete or partial repaving of a road beyond
the "saw width."
950 TM 86-1
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e. THE COST OF ACQUIRING ALL OR PART OF AN EXISTING
PUBLICLY OR PRIVATELY OWNED WASTEWATER TREATMENT WORKS
PROVIDED ALL THE FOLLOWING CRITERIA ARE MET:
(1) THE ACQUISITION, IN AND OF ITSELF, CONSIDERED
APART FROM ANY UPGRADE, EXPANSION OR REHABIL-
ITATION, PROVIDES NEW POLLUTION CONTROL BENEFITS;
(2) THE ACQUIRED TREATMENT WORKS WAS NOT BUILD WITH
PREVIOUS FEDERAL OR STATE FINANCIAL ASSISTANCE;
(3) THE PRIMARY PURPOSE OF THE ACQUISITION IS NOT
THE REDUCTION, ELIMINATION, OR REDISTRIBUTION
OF PUBLIC OR PRIVATE DEBT; AND
(4) THE ACQUISITION DOES NOT CIRCUMVENT THE REQUIRE-
MENTS OF THE ACT, THESE REGULATIONS, OR OTHER
FEDERAL, STATE OR LOCAL REQUIREMENTS.
2. UNALLOWABLE COSTS FOR LAND AND RIGHTS-OF-WAY INCLUDE:
a. THE COSTS OF ACQUISITION (INCLUDING ASSOCIATED LEGAL,
ADMINISTRATIVE AND ENGINEERING, ETC.) OF SEWER RIGHTS-
OF-WAY, WASTE TREATMENT PLANT SITES (INCLUDING SMALL
SYSTEM SITES), SANITARY LANDFILL SITES AND SLUDGE
DISPOSAL AREAS EXCEPT AS PROVIDED IN PARAGRAPH l.a.
AND b. OF THIS SECTION.
Costs of complying with the Uniform Relocation Assistance
and Real Property Acquisition Policies Act of 1970 are
allowable even if the property being acquired j.s not (see
Section D l.b above). Costs for property surveys and the
preparation of legal boundary descriptions are not
allowable where land costs are not allowable.
b. ANY AMOUNT PAID BY THE GRANTEE FOR ELIGIBLE LAND IN EXCESS
OF JUST COMPENSATION, BASED ON THE APPRAISED VALUE, THE
GRANTEE'S RECORD OF NEGOTIATION OR ANY CONDEMNATION PRO-
CEEDING, AS DETERMINED BY THE REGIONAL ADMINISTRATOR.
An amount higher than the determination of just compensa-
tion may be found allowable through an administrative
settlement if the grantee provides sufficient written
documentation to the Regional Administrator prior to the
TM 86-1
951 (85-1)
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actual acquisition. Such an administrative settlement may
be appropriate where negotiated purchase is unsuccessful
and where a condemnation action may entail a long delay
or excessive costs. Administrative settlements may be used
when it is reasonable, prudent and in the public interest.
Documentation may include evidence of purchase negotiations,
real property sales data, estimated court settlement and
legal costs based on previous condemnation proceedings.
Such documentation may form the basis of an administrative
settlement with Regional Administrator approval.
c. REMOVAL, RELOCATION OR REPLACEMENT OF UTILITIES LOCATED
ON LAND BY PRIVILEGE, SUCH AS FRANCHISE.
These costs are not allowable unless the grantee is re-
quired to pay such costs under State or local law.
E. EQUIPMENT, MATERIALS AND SUPPLIES
1. ALLOWABLE COSTS OF EQUIPMENT, MATERIALS AND SUPPLIES INCLUDE:
a. THE COST OF A REASONABLE INVENTORY OF LABORATORY
CHEMICALS AND SUPPLIES NECESSARY TO INITIATE PLANT
OPERATIONS AND LABORATORY ITEMS NECESSARY TO CONDUCT
TESTS REQUIRED FOR PLANT OPERATION.
A suggested list of equipment, supplies, and chemicals
for various sizes of treatment plants is given in
Appendix B of EPA publication 430/9-74-002, "Estimating
Laboratory Needs for Municipal Waste Water Treatment
Facilities," 1974. Large stocks of expendable materials
are, however, not allowable.
b. THE COSTS FOR PURCHASE AND/OR TRANSPORTATION OF
BIOLOGICAL SEEDING MATERIALS REQUIRED FOR EXPED-
ITIOUSLY INITIATING THE TREATMENT PROCESS OPERATION.
C. COST OF SHOP EQUIPMENT INSTALLED AT THE TREATMENT
WORKS NECESSARY TO THE OPERATION OF THE WORKS.
The need for installed shop equipment necessary for the
operation of the treatment works should be carefully
reviewed to insure that it is cost effective when
TM 86-1
952 (85-1)
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compared to the cost of equipment rental or the pro-
curement of a contractor to perform the required work.
The need will depend on the specific item, its fre-
quency of expected use, and the size and complexity
of the treatment facility. Undoubtedly, larger
treatment facilities will have a greater need for
installed shop equipment than smaller ones. For example,
a portable welding machine may be appropriate for a
large facility, whereas it may be more economical
for a smaller community to employ a local welder when
necessary. Also, smaller projects may not have the
staff (e.g., skilled machinists) necessary to operate
some of the equipment. Where the proposed items of
equipment are inappropriate to the size of the treat-
ment works, the reviewing agency may determine that the
proposed installed shop equipment is unallowable for
grant participation.
d. THE COSTS OF NECESSARY SAFETY EQUIPMENT, PROVIDED THE
EQUIPMENT MEETS APPLICABLE FEDERAL, STATE, LOCAL OR
INDUSTRY SAFETY REQUIREMENTS.
e. A PORTION OF THE COSTS OF COLLECTION SYSTEM MAINTENANCE
EQUIPMENT. THE PORTION OF ALLOWABLE COSTS SHALL BE THE
TOTAL EQUIPMENT COST LESS THE COST ATTRIBUTABLE TO THE
EQUIPMENT'S ANTICIPATED USE ON EXISTING COLLECTION
SEWERS NOT FUNDED ON THE GRANT. THIS CALCULATION SHALL
BE BASED ON:
(1) THE PORTION OF THE TOTAL COLLECTION SYSTEM
PAID FOR BY THE GRANT,
(2) A DEMONSTRABLE FREQUENCY OF NEED, AND
(3) THE NEED FOR THE EQUIPMENT TO PRECLUDE
THE DISCHARGE OR BYPASSING OF UNTREATED
WASTEWATER.
See Paragraph E.2.c below for a discussion of other
allowable maintenance equipment.
f. THE COST OF MOBILE EQUIPMENT NECESSARY FOR THE OPERA-
TION OF THE OVERALL WASTEWATER TREATMENT FACILITY,
TRANSMISSION OF WASTEWATER OR SLUDGE, OR FOR THE
MAINTENANCE OF EQUIPMENT. THESE ITEMS INCLUDE:
953 TM 86-1
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(1) PORTABLE STAND-BY GENERATORS;
(2) LARGE PORTABLE EMERGENCY PUMPS TO PROVIDE
"PUMP-AROUND" CAPABILITY IN THE EVENT OF
PUMP STATION FAILURE OR PIPELINE BREAKS:
AND
(3) SLUDGE OR SEPTAGE TANKERS, TRAILERS, AND OTHER
VEHICLES HAVING AS THEIR SOLE PURPOSE THE
TRANSPORTATION OF LIQUID OR DEWATERED WASTES
FROM THE COLLECTOR POINT (INCLUDING INDIVIDUAL
OR ONSITE SYSTEMS) TO THE TREATMENT FACILITY
OR DISPOSAL SITE.
Mobile equipment necessary for the operation of the
overall wastewater treatment facility may also include
vehicles necessary for the daily removal and disposal
of grit. While vehicles used for other purposes
(e.g., sludge tanks or trailers) would normally serve
this purpose, large facilities may have a sufficient
need to justify a separate vehicle to be used solely for
the transportation and disposal of grit. Additionally,
for projects which involve the landspreading of sludge
as the method of ultimate sludge disposal, the necessary
vehicles and equipment for proper sludge application
are allowable for grant participation.
REPLACEMENT PARTS IDENTIFIED AND APPROVED IN ADVANCE
BY THE REGIONAL ADMINISTRATOR AS NECESSARY TO ASSURE
UNINTERRUPTED OPERATION OF THE FACILITY, PROVIDED THEY
ARE CRITICAL PARTS OR MAJOR SYSTEMS COMPONENTS WHICH
ARE:
(1) NOT IMMEDIATELY AVAILABLE AND/OR WHOSE
PROCUREMENT INVOLVES AN EXTENDED "LEAD-TIME";
(2) IDENTIFIED AS CRITICAL BY THE EQUIPMENT
SUPPLIERS(S); OR
(3) CRITICAL BUT NOT INCLUDED IN THE INVENTORY
PROVIDED BY THE EQUIPMENT SUPPLIER(S).
954 TM 86-1
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n• Flow metering devices used for billing purposes.
The costs of constructing or installing sewage
flow metering devices used for billing inter-
municipal flows are eligible costs. Meters
construe ted or installed for the primary purpose
of billing individual Fesidential, commercial or
TndustrTal users are not eligible.
{NOTE: Prior to this update to the Handbook, there
was no clear national program position regarding the
eligibility of flow meters for billing purposes.
Therefore, prior Regional/State"decisions regarding
allowability on these items will "stand as long as they
are clearly documented.)
2. UNALLOWABLE COSTS OF EQUIPMENT, MATERIALS, AND
SUPPLIES INCLUDE:
a. THE COSTS OF EQUIPMENT OR MATERIAL PROCURED IN VIOLA-
TION OF THE PROCUREMENT REQUIREMENTS OF 40 CFR PART 33
b. THE COST OF FURNISHINGS INCLUDING DRAPERIES, FURNITURE
AND OFFICE EQUIPMENT.
Because of their wide range in price and their trans-
portability, office furnishings such as chairs, desks,
file cabinets, typewriters, coffee tables, pictures,
draperies, televisions, radios, telephones, tape
recording devices, office supplies, calculators, in-
door plants, copiers, book cases or shelves, lamps,
food preparation equipment, postage meters, and other
items of a similar nature are not allowable costs for
grant participation.
C. THE COST OF ORDINARY SITE AND BUILDING MAINTENANCE
EQUIPMENT SUCH AS LAWNMOWERS AND SNOWBLOWERS.
Site and building maintenance equipment also includes
rakes, shovels, brooms, picks, hedge trimmers, and
other such equipment which is transportable and is
used for routine maintenance. Such equipment is not
allowable for grant participation.
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Hand tools (other than those which are specified by
the equipment supplier or manufacturer as special
purpose tools necessary for the repair and adjustment
of specific process components) such as screw drivers,
pliers, socket wrenches, electric drills or saws, etc.
are not allowable for grant participation.
d. THE COST OF VEHICLES FOR THE TRANSPORTATION OF THE
GRANTEES' EMPLOYEES.
This includes buses, trucks, cars, motorcycles, golf
carts, bicycles, etc. However, mobile training units
may be allowable for grant participation under State
training grants authorized by Section 109(b)(l) of
the CWA.
e. ITEMS OF ROUTINE "PROGRAMMED" MAINTENANCE SUCH AS
ORDINARY PIPING, AIR FILTERS, COUPLINGS, HOSE, BOLTS,
ETC.
F. INDUSTRIAL AND FEDERAL USERS
EXCEPT AS PROVIDED IN PARAGRAPH F.2.a, ALLOWABLE COSTS FOR
TREATMENT WORKS SERVING INDUSTRIAL AND FEDERAL FACILITIES
INCLUDE DEVELOPMENT OF A MUNICIPAL PRETREATMENT PROGRAM
APPROVABLE UNDER PART 403 OF THIS CHAPTER, AND PURCHASE
OF MONITORING EQUIPMENT AND CONSTRUCTION OF FACILITIES TO
BE USED BY THE MUNICIPAL TREATMENT WORKS IN THE PRETREAT-
MENT PROGRAM.
The costs of developing a municipal pretreatment program
must be carefully examined, primarily in relation to the
timing of preparation. The subject of industrial pre-
treatment would normally be examined during facilities
planning (see Section IV.E.2), at which time the grant
applicant is able to consider alternative treatment pro-
cesses and sludge disposal techniques only if the charac-
teristics and flow rate of wastes are known. Similarly,
a project may only be designed and construction drawings
prepared when the specific waste treatment requirements
are known. EPA regulations also require that the UC
system and the SUO be approved prior to grant award. Both
of these items require specific consideration of industrial
waste discharges.
956 TM 86-1
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.Where the costs of developing a pretreatment program have
been incurred prior to grant award, such costs are un-
allowable. Where the costs of development of a pretreatment
program are included in the grant application, approved by
the reviewing agency, and incurred after grant award, such
costs are allowable for grant participation.
2. UNALLOWABLE COSTS FOR TREATMENT WORKS SERVING INDUSTRIAL
AND FEDERAL FACILITIES INCLUDE:
a. THE COST OF DEVELOPING AN APPROVABLE MUNICIPAL PRETREAT-
MENT PROGRAM WHEN PERFORMED SOLELY FOR THE PURPOSE OF
SEEKING AN ALLOWANCE FOR REMOVAL OF POLLUTANTS UNDER
PART 403 OF THIS CHAPTER.
b. THE COST OF MONITORING EQUIPMENT USED BY INDUSTRY FOR
SAMPLING AND ANALYSIS OF INDUSTRIAL DISCHARGES TO
MUNICIPAL TREATMENT WORKS.
C. ALL INCREMENTAL COSTS FOR SLUDGE MANAGEMENT INCURRED AS
A RESULT OF THE GRANTEE PROVIDING REMOVAL CREDITS TO
INDUSTRIAL USERS UNDER 40 CFR 403.7 BEYOND THOSE SLUDGE
MANAGEMENT COSTS THAT WOULD OTHERWISE BE INCURRED IN THE
ABSENCE OF SUCH REMOVAL CREDITS.
G. INFILTRATION/INFLOW
1. ALLOWABLE COSTS INCLUDE:
a. THE COST OF TREATMENT WORKS CAPACITY ADEQUATE TO TRANS-
PORT AND TREAT NONEXCESSIVE INFILTRATION/INFLOW UNDER
§35.2120.
b. THE COSTS OF SEWER SYSTEM REHABILITATION NECESSARY TO
ELIMINATE EXCESSIVE INFILTRATION/INFLOW AS DETERMINED
IN A SEWER SYSTEM STUDY UNDER §35.2120.
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2. UNALLOWABLE COSTS INCLUDE:
a. WHEN THE REGIONAL ADMINISTRATOR DETERMINES THAT THE FLOW
RATE IS NOT SIGNIFICANTLY MORE THAN 120 GALLONS PER
CAPITA PER DAY UNDER §35.2120(c)(2)(ii) , THE INCREMENTAL
COST OF TREATMENT WORKS CAPACITY WHICH IS MORE THAN 120
GALLONS PER CAPITA PER DAY.
See Section IV.C.4.3 for a more complete discussion of
infiltration/inflow (I/I).
b. The cost of chemical grouting of sewers having structural
problems including longitudinally and otherwise badly
cracked pipes.
H. MISCELLANEOUS COSTS
1. ALLOWABLE COSTS INCLUDE:
a. THE COSTS OF SALARIES, BENEFITS AND EXPENDABLE MATERIALS
THE GRANTEE INCURS FOR THE PROJECT.
In general, the salaries and benefits referred to here
are for the grantee's employees (other than elected and
appointed officials, as discussed in Paragraph 2.a
below), and may be either:
i. specifically identified administrative work
which is not a general expense of local
government, or
ii. force account work (see Section VI.E.5) for
building or building related activities.
Such costs must be included in the grant application
and approved by the reviewing agency. Benefits (e.g.,
health insurance, vacation and holiday compensation,
etc.) are overhead items, and to be allowable for grant
participation, they must be included in a negotiated
indirect cost agreement (see Section F.2.d.ii above).
b. UNLESS OTHERWISE SPECIFIED IN THIS REGULATION, THE COSTS
OF MEETING SPECIFIC FEDERAL STATUTORY PROCEDURES.
To be allowable, the costs of meeting Federal statutory
requirements must be either approved as a preaward cost,
958 TM 86-1
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or incurred after grant award. Costs incurred to satisfy
statutory requirements for grant award (e.g., preparation
of a facilities plan, construction drawings and specifi-
cations, UC system, SUO, etc.) are not allowable for
grant participation, but are part of the preapplication
work which is intended to be defrayed, in part, by the
allowance for facilities planning and/or design.
COSTS FOR NECESSARY TRAVEL DIRECTLY RELATED TO ACCOMPLISH-
MENT OF PROJECT OBJECTIVES. TRAVEL NOT DIRECTLY RELATED
TO A SPECIFIC PROJECT, SUCH AS TRAVEL TO PROFESSIONAL
MEETINGS, SYMPOSIA, TECHNOLOGY TRANSFER SEMINARS, LECTURES,
ETC., MAY BE RECOVERED ONLY UNDER AN INDIRECT COST AGREE-
ment.
THE COSTS OF ADDITIONS TO A TREATMENT WORKS THAT WAS
ASSISTED UNDER THE FEDERAL WATER POLLUTION CONTROL ACT
OF 1956 (PUB. L. 84-660), OR ITS AMENDMENTS, AND THAT
FAILS TO MEET ITS PROJECT PERFORMANCE STANDARDS PRO-
VIDED:
(1) THE PROJECT IS IDENTIFIED ON THE STATE PRIORITY
LIST AS A PROJECT FOR ADDITIONS TO A TREATMENT
WORKS THAT HAS RECEIVED PREVIOUS FEDERAL FUNDS;
(2) THE GRANT APPLICATION FOR THE ADDITIONS INCLUDES
AN ANALYSIS OF WHY THE TREATMENT WORKS CANNOT
MEET ITS PROJECT PERFORMANCE STANDARDS; AND
(3) THE ADDITIONS COULD HAVE BEEN INCLUDED IN THE
ORIGINAL GRANT AWARD AND:
(a) ARE THE RESULT OF ONE OF THE FOLLOWING:
(i) A CHANGE IN THE PROJECT PERFORMANCE
STANDARDS REQUIRED BY EPA OR THE
STATE :
(ii) A WRITTEN UNDERSTANDING BETWEEN
THE REGIONAL ADMINISTRATOR AND
GRANTEE PRIOR TO OR INCLUDED IN
THE ORIGINAL GRANT AWARD:
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(iii) A WRITTEN DIRECTION BY THE
REGIONAL ADMINISTRATOR TO DELAY
BUILDING PART OF THE TREATMENT
WORKS; OR
(iv) A MAJOR CHANGE IN THE TREATMENT
WORKS' DESIGN CRITERIA THAT THE
GRANTEE CANNOT CONTROL; OR
(b) MEET ALL THE FOLLOWING CONDITIONS:
(i) IF THE ORIGINAL GRANT AWARD WAS
MADE AFTER DECEMBER 28, 1981, THE
TREATMENT WORKS HAS NOT COMPLETED
ITS FIRST FULL YEAR OF OPERATION;
(ii) THE ADDITIONS ARE NOT CAUSED BY
THE GRANTEE'S MISMANAGEMENT OR
THE IMPROPER ACTIONS OF OTHERS;
(ill) THE COSTS OF REWORK, DELAY, ACCELER-
ATION OR DISRUPTION THAT ARE A RE-
SULT OF BUILDING THE ADDITIONS ARE
NOT INCLUDED IN THE GRANT; AND
(iv) THE GRANT DOES NOT INCLUDE AN
ALLOWANCE FOR FACILITIES PLANNING
OR DESIGN OF THE ADDITIONS.
(4) THIS PROVISION APPLIES TO FAILURES THAT OCCUR
EITHER BEFORE OR AFTER THE INITIATION OF OPERA-
TION. THIS PROVISION DOES NOT COVER A TREATMENT
WORKS THAT FAILS AT THE END OF ITS DESIGN LIFE.
e. COST OF ROYALTIES FOR THE USE OF OR RIGHTS IN A PATENTED
PROCESS OR PRODUCT WITH THE PRIOR APPROVAL OF THE
REGIONAL ADMINISTRATOR.
Reasonable royalties associated with the procurement of
the right to use, or the rights in, a patented product,
apparatus, or process are allowable costs, provided that
they are:
960 TM 86-1
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- necessary,
- cost effective,
- based on a published fee schedule or on
reasonable fees charged to other users
under similar conditions, and
- receive prior written approval from the
reviewing agency.
Periodic payment of royalties for the right to operate
under a patent are considered operating costs, and are
unallowable for grant participation (see Section V.E
for a discussion of operating costs).
COSTS ALLOCABLE TO WATER POLLUTION CONTROL PURPOSE OF
MULTIPLE PURPOSE PROJECTS AS DETERMINED BY APPLYING THE
ALTERNATIVE JUSTIFIABLE EXPENDITURE (AJE) METHOD DES-
CRIBED IN THE CG SERIES. MULTIPLE PURPOSE PROJECTS THAT
COMBINE WASTEWATER TREATMENT WITH RECREATION DO NOT NEED
TO USE THE AJE METHOD, BUT CAN BE FUNDED AT THE LEVEL OF
THE MOST COST-EFFECTIVE SINGLE-PURPOSE ALTERNATIVE.
See Section IV.C.7.1.h.
COSTS OF GRANTEE EMPLOYEES ATTENDING TRAINING WORKSHOPS/
SEMINARS THAT ARE NECESSARY TO PROVIDE INSTRUCTION IN
ADMINISTRATIVE, FISCAL OR CONTRACTING PROCEDURES REQUIRED
TO COMPLETE THE CONSTRUCTION OF THE TREATMENT WORKS, IF
APPROVED IN ADVANCE BY THE REGIONAL ADMINISTRATOR.
To be allowable, attendance at such training workshops
or seminars may only occur after grant award.
2. UNALLOWABLE COSTS INCLUDE:
a. ORDINARY OPERATING EXPENSES OF THE GRANTEE INCLUDING
SALARIES AND EXPENSES OF ELECTED AND APPOINTED OFFICIALS
AND PREPARATION OF ROUTINE FINANCIAL REPORTS AND STUDIES,
b. PREPARATION OF APPLICATIONS AND PERMITS REQUIRED BY
FEDERAL, STATE OR LOCAL REGULATIONS OR PROCEDURES.
961 TM 86-1
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C. ADMINISTRATIVE, ENGINEERING AND LEGAL ACTIVITIES ASSOC-
IATED WITH THE ESTABLISHMENT OF SPECIAL DEPARTMENTS,
AGENCIES, COMMISSIONS, REGIONS, DISTRICTS OR OTHER UNITS
OF GOVERNMENT.
d. APPROVAL, PREPARATION, ISSUANCE AND SALE OF BONDS OR
OTHER FORMS OF INDEBTEDNESS REQUIRED TO FINANCE THE
PROJECT AND THE INTEREST ON THEM.
THE COSTS OF REPLACING, THROUGH RECONSTRUCTION OR SUB-
STITUTION, A TREATMENT WORKS THAT WAS ASSISTED UNDER
THE FEDERAL WATER POLLUTION CONTROL ACT OF 1956 (PUB. L.
84-660), OR ITS AMENDMENTS, AND THAT FAILS TO MEET ITS
PROJECT PERFORMANCE STANDARDS. THIS PROVISION APPLIES
TO FAILURES THAT OCCUR EITHER BEFORE OR AFTER THE INITI-
ATION OF OPERATION. THIS PROVISION DOES NOT APPLY TO AN
INNOVATIVE AND ALTERNATIVE TREATMENT WORKS ELIGIBLE FOR
FUNDING UNDER §35.2032(c) OR A TREATMENT WORKS THAT FAILS
AT THE END OF ITS DESIGN LIFE.
f. PERSONAL INJURY COMPENSATION OR DAMAGES ARISING OUT OF
THE PROJECT.
g. FINES AND PENALITIES DUE TO VIOLATIONS OF, OR FAILURE
TO COMPLY WITH, FEDERAL, STATE OR LOCAL LAWS, REGULATIONS
OR PROCEDURES.
h. COSTS OUTSIDE THE SCOPE OF THE APPROVED PROJECT.
i. COSTS FOR WHICH GRANT PAYMENT HAS BEEN OR WILL BE RECEIVED
FROM ANOTHER FEDERAL AGENCY.
j. COSTS OF TREATMENT WORKS FOR CONTROL OF POLLUTANT DIS-
CHARGES FROM A SEPARATE STORM SEWER SYSTEM.
k. THE COST OF TREATMENT WORKS THAT WOULD PROVIDE CAPACITY
FOR NEW HABITATION OR OTHER ESTABLISHMENTS TO BE LOCATED
ON ENVIRONMENTALLY SENSITIVE LAND SUCH AS WETLANDS OR
FLOODPLAINS.
After September 30, 1984, grant assistance is limited
to the capacity necessary to serve existing needs on the
date of grant award (see Section VI.D.18). Therefore,
962 TM 86-1
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the cost of providing capacity for new habitation is
unallowable in all cases. However, if a treatment
works includes any reserve capacity which could induce
development on environmentally sensitive lands (see
Section IV.D.2.2), the cost of the entire treatment
works will be unallowable for grant assistance.
1. THE COSTS OF PREPARING A CORRECTIVE ACTION REPORT
REQUIRED BY §35.2218(c).
See Section VII.I.2.b.
3. Other Costs
The following items are not explicitly included in 40 CFR
Part 35, Subpart I, Appendix A, but represent prudent fiscal
and management principles, based on statutory requirements,
regulations, and procedent cases:
a. Administration Building
Allowable costs for an administration building include
those portions of the building which are directly re-
lated to the project and necessary for operating per-
sonnel, including the laboratory, employee locker rooms
(separate locker rooms should be provided for men and
women), workshop area, storage facilities for operational
supplies, spare parts and equipment, necessary lavatory
facilities, operator office space, etc. Those portions
of an administration building which are not necessary
for the daily operation and maintenance of the project
are unallowable costs, including portions of the
building used for public works functions (other than
wastewater treatment), general accounting functions,
conference rooms with associated audio-visual equipment,
or other general uses not necessary for the operation
of the project. Where larger facilities include con-
ference rooms to be used exclusively for training of
employees, and such training is demonstrated to be a
part of the project's plan of operation, such space is
allowable if reasonable, and if approved by the reviewing
agency as part of the grant award.
Where unallowable building space is included in an other-
wise allowable administration building, the allowable
cost is determined by using the ratio of allowable floor
963 TM 86-1
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space divided by the total floor space in the building.
The costs of buildings and portions of buildings which are
unallowable are to be deducted from the allowable project
building costs for gcant computation purposes. Costs
associated with unallowable buildings and portions of
buildings (e.g., landscaping, driveways, parking spaces,
electrical service, and other utility costs) are also
unallowable, and must be deducted proportionately from
the allowable building costs.
b. Computers
Computers, display monitors, and computer software which
are designed into the control system for the daily opera-
tion of the treatment works, are allowable project costs,
but only to the extent that such equipment is dedicated
solely to the operation of the treatment works.
Portable or personal computers are normally not allow-
able for grant participation, unless justified by the
grantee and approved by the reviewing agency as necessary
for the operational control and analysis of the treatment
works. Examples of such allowable uses include the
scheduling of equipment maintenance and replacement, and
the operation of the grantee's pretreatment program,
including the scheduling of tests to verify industrial
compliance with pretreatment requirements. Where portable
and personal computers are intended to be used for
accounting and billing services as well as the operational
control of the treatment works, the costs are to be pro-
rated, based on the estimated use for each purpose.
The cost of computer programs (i.e., software) specifi-
cally designed for the operation and maintenance of the
treatment works is allowable for grant participation.
This includes the cost of developing unique operating
programs for the specific grant funded project.
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