AN EVALUATION OF THE DELEGATED CONSTRUCTION GRANTS PROGRAM IN EPA REGION VIII Prepared for THE ENVIRONMENTAL PROTECTION AGENCY OFFICE OF WATER PROGRAM OPERATIONS Larry Walker Associates October 1980 ------- 11V AN EVALUATION OF THE DELEGATED CONSTRUCTION GRANTS PROGRAM IN EPA REGION VIII Prepared for THE ENVIRONMENTAL PROTECTION AGENCY OFFICE OF WATER PROGRAM OPERATIONS Larry Walker Associates October 1980 ------- TABLE OF CONTENTS fiSi INTRODUCTION 1 STATUS OF DELEGATION 2 REGION'S ADMINISTRATION OF THE PROGRAM 3 Organization 3 Pesources 10 Management 10 Grants Processing Procedures 13 Processing Times 21 Monitoring of State Performance 22 ASSESSMENT OF THE REGION'S PERFORMANCE 24 Progress Towards Delegation 25 Organizational Structure and Resources .... 27 Management 28 Grants Processing Procedures 31 Processing Tines 35 Monitoring of State Performance 36 Overall Regional Performance 37 ------- AN EVALUATION DELEGATED CONSTRUCTION IN EPA REGION OF THE GRANTS VIII PROGRAM INTRODUCTION This evaluation was conducted as a part of EPA's Office of Water Program Operations effort to monitor the status and effectiveness of the delegated construction grants program. The purposes of the eva- luation were to determine the status of delegation within each region and delegated state, to assess the performance of the delegated states and the regions as it relates to delegation, and to identify any pro- blems or needs associated with management or operation of the delegated program. This specific report contains the evaluation of delegation within EPA Region VIII. An accompanying report contains an evaluation of dele- gation within the State of Montana. The contractor spent two days in the EPA Region VIII offices, interviewing the management staff of the Water Division. One day (July 15) was spent in the Region VIII, field operations office located in Helena, Montana. The other day (July 18) was spent in the Denver regional office. In interviewing regional staff, focus was given to managers and operations associated with the State of Montana construction grants program. The individuals interviewed were as follows: -1- ------- Harvey Hormberg Sam Berman Max Dodson Jim Boyter Steve Potts Director, Office of Public Facilities and Grants Chief, Engineering Operations Branch, Office of Public Facilities and Grants Water Coordinator, Montana Office Project Officer for Construction Grants, Montana Office Assistant Project Officer for Contruction Grants, Montana Office In conjunction with these interviews, the contractor spent two days at the State of Montana offices interviewing the state's management staff associated with the construction grants program. STATUS OF DELEGATION Within Region VIII, all six states have entered in delegation agreements with the region: South Dakota Wyoming Montana North Dakota Colorado Utah April 6, 1979 May 21, 1979 July 9, 1979 August 17, 1979 September 27, 1979 September 27, 1979 The delegation agreements for all six states are similar in terms of the general agreement, but the appendices which describe the delegated functions and the procedures to be followed by the states in administering each function vary from state to state. The region generally gave each state latitude in deciding how to group the delegated functions in the appendices and in developing the procedures to be followed. -2- ------- In the case of Montana, eighteen delegable functions were described in the appendices to the general delegation agreement. Table 1 identifies the current status of delegation in each of the six states within the Region at the time of this evaluation. Montana is farthest along in assuming full delegation. Montana has taken over responsibi1ty for review and certification of all grants as well as facilities plans and plans and specifications. In several months, when Montana and the region complete revisions to the existing delegation agreement, the state will assume responsibility for all dele- gable functions except those to be administered by the Corps of Engineers. These include biddabi1ity/constructabi1ity reviews on plans and specifi- cations, interim construction inspections, and final project inspections. The State of Montana expects to assume responsibility for those functions currently administred by the Corps in fiscal year 1982. Within Region VIII the Corps of Engineers is performing similar functions in all six states. They are conducting hiddabi1ity/construct- ability reviews, interim inspections, and final inspections. In addi- tion they are reviewing and approving change orders in all states except Montana. REGION'S ADMINISTRATION OF THE PROGRAM Organi zation The Region VIII Water Division, the division responsible for the construction grants program is organized as shown in Figure 1. The Office of Public Facilities and Grants is responsible for performing all EPA construction grants activities within the Region, except for certain activities performed by the Montana Operations Office. -3- ------- Table 1 STATUS OF DELEGATION IN EPA REGION VIII3 Functi on Col o. Mont. No. Dak. So. Dak. Utah Wyo. Preapplication Confs. D D D D D Step 1 Applications D D D , Step 2 Applications D Step 3 Applications D Faci1ity Plans D Change Orders D User Charges/ICR 9/81 Plans and Specifications D D n P Payments 9/80 OflM Manuals D n D D D Plan of Operation D Site Title Opinion 9/80 Rid Documents 82 D Preconstruction Confs. 9/80 Construction Inspections 82 Fi les 9/80 Public Participation D Federal Grant Offer 9/80 a Status as of July 1980 D = Delegated 9/80 = Date at which full delegation projected -4- ------- Figure 1 ORGANIZATIONAL STRUCTURE/RESOURCES - REGION VIII WATER DIVISION ------- The immediate office of the director is responsible for the review of user charge/ICR systems, sewer use ordinances, and environmental assesments, and for the issuance of findings of no significant impact (FNSI). In the cases where the states are not yet preparing the environmental assesment, the director's office will prepare the assessment. For states which are preparing the draft environmental documents, this office will finalize those documents. In the case of Montana projects, the draft environmental assessments are prepared by the state and finalized by the Montana Operations Office. These documents are then sent to the director's office in Denver for review prior to signature by the regional administrator. The Grants Administration Branch within the Office of Public Facili- ties and Grants is responsible for processing all grants from an admin- istrative standpoint. This office processes not only construction grants but also other grants such as the Section 106 grants, Section 208 grants, Clean Lake grants, etc. Relative to construction grants, this office pro- cesses payments, reviews applications from the administrative standpoint, performs cost analyses on A/E contracts, takes the lead in resolving audit exceptions, and keeps track of the various accounts from which grant awards are made. Finally this office is in charge of the files. Under a fully delegated mode of operation, it is expected that this office will still be responsible for receiving certified applications from delegated states and processing them as well as being involved in audit resolutions. In addition this office will have the responsibility for monitoring delegated states from an administrative standpoint, under the general direction of the Engineering Operations Branch. -6- ------- The Engineering Operations Branch, prior to delegation, was responsible for processing construction grants in all areas except the administrative areas, which were handled by the Grants Administration Branch. Cur- rently the region is in transition between a non-delegated and fully delegated mode of operation, and in many states this branch is still active in administration of non-delegated functions. Relative to the State of Montana projects, the Engineering Operations Branch plays no role, given the fact that the Montana Operations Office processes the projects certified by the State of Montana. The Control and Technology Branch is responsible for all operation and maintenance related activitives associated with the construction grants progran, for AST/AWT review, and for innovative and alternative tech- nology. Again, as the region is currently in transition and most states are not yet fully delegated, the people in this branch are still reviewing operations and maintenance manuals and other operation related documents. Under a fully delegated mode of operation this group would be responsible for monitoring the performance of the state in these areas, under the direction of the engineering operation branch. It is expected that even under a fully delegated mode, that the branch will continue to have responsihilty for AST/ AWT reveiw and inno- vative and alternative technology. The organizational structure of the Montana Operations Office of EPA Region VIII is shown in Figure 2. As can be seen there are two major groups of activities associated with the Montana office; water related activities and air, pesticides and solid waste related activities. It should be pointed out that the recent creation of this office is considered -7- ------- Figure 2 ORGANIZATIONAL STRUCTURE/RFSOURCES - MONTANA OPERATIONS OFFICE, EPA REGION VIII ------- an experiment by Region VIII. It is not certain at this time whether the office will continue in existence. Relative to the construction grants program in the State of Montana, the Montana Operations Office has considerable res ponsiblity. The Opera- tions Office staff processes the state certification packages and prepares the federal grant offers. It is interesting to note that whereas the Water Division Director signs all construction grant awards in other states, the the director of the Montana Operations Office signs the grant awards for Montana projects. The construction grants group within the Montana field office is also responsible for performing all non-delegated activites associated with the Montana construction grants program. For example they review the preliminary environmental assestment prepared by the state, and prepare a final assessment and a final FNSI. This latter package is then forwarded to the Denver Regional Office for signature by the regional administrator. It should be noted that the environmental assessments and the FNSI's prepared by the construction grants project officers within the Operations Office are reviewed for consistency with regional policy by the National Environmental Policy Act group within the operations office. Other groups within the Montana office do not generally participate or get involved with construction grants projects in Montana. Within the Denver Pegional Office, several of the branches outside of the Office of Public Facilities and Grants also are involved in the construction grants program. In all states except Montana, five of the six branches within the water division perform what is called a team review of facility plans. The branches included are the Planning and Management Branch, the Environmental Evaluations Rranch, the Grants Administration Branch, the Engineering Operations Rranch, and the Control -9- ------- and Technology Branch. In addition where a federal environmental impact statement is to be prepared relative to a construction grants project, it is prepared by the Environmental Evaluations Branch within the Water Di visi on. Resources The Region VIII Water Divison currently has ninety-four permanent full-time positions and eighteen non-permanent positions. Forty-two of the positions, permanent and non-permanent, are charged to the construc- tion grants program. The bulk of these positions are located within the Office of Public Facilities and Grants. The major exception is six posi- tions located within the Environmental Evaluation Branch. The breakdown of positions by major organizational unit within the Water Division is shown in Figure 1. In addition, the Corps of Engineers provides considerable manpower resources towards administration of the construction related activities associated with the grants program. The Corps provides approximately 13.5 positions towards constructions related activities within the Region. The manpower resources currently being used by the region, by the Corps of Engineers, and by the six states in the region toward admini- stration of construction grants program, are shown in Table 2. Management The director of the Office of Public Facilities and Grants has over- all responsiblity for managing the construction grants program within the Region. The director and his management staff utilize a number of manage- ment tools to assist them with management of the program. First they use a number of regularly produced reports to identify the program's status. -10- ------- Table 2 RESOURCES APPLIED TO THE CONSTRUCTION GRANTS PROGRAM IN EPA REGION VIIIa State Agency Colorado Montana No. Dakota So. Dakota Utah Wyoming Total EPA Region 2 2.5 1.5 1.5 1.3 1.3 10.1 Corps of Engineers 5 1.5 1.5 2 2 1.5 13.5 States 14 11.5 6 7 7 8 53.5 Total 21 15.5 9 10.5 10.3 10.8 77.1 a Includes resources applied directly to administration of grant projects in each state. Does not include regional management level personnel in the director's office or in the branch offices. -11- ------- For example, on a monthly basis, the Region produces a status report on construction grant funds for each of the states within the Region. This report identifies the amount of grant funds which has been obligated from each of the fiscal years and the remaining balances. It also identifies the projects within each state which have received grant awards during the previous month. Finally it identifies grants appli- cations and increases which are pending approval. In addition to this report the Region also produces a monthly report summarizing the obligations made by month in each state since the start of the current federal fiscal year. This same report also identifies construction grant payments (outlays) made for each previous month since January of 1978. Finally this report contains projections of obligations, outlays, and grant awards over the next quarter. These projections are actually negotiated, in the case of the State of Montana, between the project officer for construction grants in the EPA Operations Office and the state construction grants program manager. These pro- jections are used by both the EPA Operations Office and the state as targets towards which to direct their review activities. Several other management tools are utilized by the regional office. For example semi-annually, the director of the Public Facilities and Grants Office and his management staff meet with all of the delegated states within the Region and discuss various program policies and issues. In addition, the Montana Operations Office meets with the State of Montana construction grants staff (the entire staff) on a monthly basis for the purpose of conducting training sessions for the state staff. In these sessions the EPA staff may instruct the state staff in the performance of specific construction grants activities or they may brief the state on -12- ------- new policies, regulations, or guidelines that have been issued by EPA pertaining to the construction grants program. Grants Processing Procedures This section describes the region's involvement in the processing of grants for the state of Montana. As previously indicated the pri- mary responsibility for processing grant certifications issued by the State of Montana lies with the EPA Montana Operations Office, though the Denver regional office does get involved in certain aspects of the pro- cessing of individual grant projects. Table 3 identifies the documents received by the Montana Operations Office from the State of Montana on individual grant projects, and the action taken by the Operations Office relative to each of the documents recei ved. The Region's first involvement in terms of individual grant projects is when the operations office recieves a Step 1 application package from the state. This package includes the state certification and numerous accompanying documents identified in Table 3. The operations office staff, and more particularly one of the two grants project officers, reviews the package to determine that all required documents are contained therein and, in addition, reviews certain of those attachments to determine whether or not they are adequately executed. For example, checksheets are reviewed to determine if all of the boxes are checked and A/E suhagreements are re- viewed to determine whether or not they meet certain requirements imposed by the federal government. In the case of A/E contracts for over $100,000, the suhagreements are sent to the Denver regional office for review and approval. While the state has received delegation of A/E subagreement review, the state does not feel it has the expertise to perform the -13- ------- Table 3 DOCUMENTS RECEIVED FROM STATE ON INDIVIDUAL GRANT PROJECTS Documents Received Action Taken Step 1 Application Package State Certification Review check Sheets Step 1 Application Plan of Study A/E Subagreement Subagreement Review Check Sheet Reasonableness of A/E Cost Summary Resolution of Authorized Representative A95 Clearance Assurance of Compliance Form Compliance Peport During Step 1 Phase Public Participation Work Plan Copies of all Correspondence Environmental Documents Preliminary Environmental Assessment Draft Facilities Plan Facilities Plan Checklist A95 Clearinghouse Comments State comment letter on draft plan Grantee's response, submittals Process Payment Requests Check presence Review to see if all boxes checked Route copy to Denver for files Review to extent needed to prepare offer Review to see if EIS necessary If under $100K, review several aspects If over $100K, send to Denver for approval Review to see if all boxes checked Check presence Check presence Check presence Check for grantee signature Send to Denver for approval Prepare grant offer, sign, send copy to Denver File Review, file Review, finalize, prepare FNSI Review to extent questions on PEA Review to extent questions on PEA Review to extent questions on PEA Review to extent questions on PEA Review to extent questions on PEA Route EA, FNSI to Denver Reviewed for consistency, siqned by R.A. Check for compliance with condi- tions, send to Denver for pro- cessi ng -14- ------- Table 3 (contd.) DOCUMENTS RECEIVED FROM STATE ON INDIVIDUAL GRANT PROJECTS Documents Received Action Taken Step 2 Application Package State Certification Application Review Check Sheets Step 2 Application A/E Subagreement Subagreement Review Check Sheets Reasonableness of A/E Cost Summary Assurance of Compliance Form Compliance Report Initial I/A Determination* During Step 2 Process Copies of all correspondence Progress Payment Requests* Proposed User Charge System Preliminary Plan of Operation, State Certification Preliminary Plans and Specifications B/C comments by Corps State Comments on Plans and Spec i ficati ons Check presence Peview to see if all boxes checked Route copy to Denver for files Review to extent needed to prepare offer If under $ 100K, review general aspects If over $100K, send to Denver for approval Review to see if all boxes checked Check presence Check for grantee signature Send to Denver for approval Send to Denver for review Prepare grant offer, sign send copy to Denver Review, file Check for compliance with conditions Send to Denver for processing Send to Denver for approval File Send to Corps for R/C review Review, transmit to State Quick review, file Step 3 Application Package State Certification Check presence Certification P&S approvable Check presence -15- ------- Table 3 (contd.) DOCUMENTS RECEIVED FROM STATE ON INDIVIDUAL GRANT PROJECTS Documents Received Application Review Check Sheets Step 3 Application A/E Subagreement Subagreement Review Check Sheet Reasonableness of A/E Cost Summary Assurance of Compliance Form Compliance Report During Step 3 Plans and Specifications Package Final Plans and Specifications State Check Sheets Grantees response to State, Corps Bid Documents* Notification of Preconstruction Conference Process Payment Requests Change Orders and State Approval Draft O&M Manual, State Certification Sewer Use Ordinance Final Plan of Operation, State Certification Final OftM Manual, State Certification Corps Interim Inspection Reports Corps Final Inspection Report Final Payment Request Action Taken Review to see if all boxes checked Send copy to Denver for files Review to extent needed to prepare offer If under $100K, review several aspects. If over $100K, send to Denver for approval Review to see if all boxes checked Check presence Check for grantee signature Send to Denver for approval Prepare grant offer, sign send copy to Denver File, send copy to Corps Fi le Fi 1 e Send MBE info to Denver Review, issue ATA Check with Corps Check for compliance with condi ti ons, Send to Denver for processing Review to ensure acceptable Fi le Send to Denver for Approval File File File Review, file Request audit, resolve exceptions Request final payment from Denver * These functions have not yet been delegated to the state. -16- ------- detailed review required for contracts over $100,000. Neither does the operations office have this expertise, so the contracts are transmitted to Denver where a single individual reviews all such contracts within the Pegion. The Step 1 application itself is reviewed to the extent that the project officer needs to prepare the federal grant offer (not yet dele- gated). In addition, the compliance report is sent to the Denver regional office for approval by the Region VIII civil rights officer. When everything is in order, the EPA grants project officer in the operations office prepares the federal grant offer, submits it to the director of the field office for signature, and sends a copy of the executed grant offer to the Denver office for its files. During the faciliites planning process the Montana field office receives numerous field documents from the state relative to individual construction grants projects. Approximatley 45 days after the Step 1 award, the field office will receive a public participation work plan. Since public participation has been delegated to the State of Montana, the field office staff will not review this work plan; rather they will just place it in the appropriate project files. During the planning phase of the program, the field office will also receive copies of all correspondence between the state and the grantee or its consultant. This correspondence will be reviewed by one of the two field office project officers more or less in a general way and then filed. The purpose of this review is just to keep the FPA project officers up-to-date as to what is going on relative to individual projects within the State of Montana. A major package which comes in during the Step 1 process is the en- -17- ------- vironmental documents package. This contains the preliminary environmental assessment prepared by the State of Montana as well as the draft facilities plans, numerous checklists and related correspondence. The assigned project officer within the Montana operations office will review the preliminary environmental assessment and prepare a final environmental assessment and FNSI. To the extent questions arise, the project offi- cer may review the facility plan and other documents submitted with the environmental package or he may contact the state for answers to his questions. When the project officer has drafted the final environ- mental assessment and the FNSI, it is submitted to the National Environ- mental Policy Act person within the field office for a review to deter- mine consistency with Pegion VIII policy. Finally, it is submitted to the regional office in Denver for signature by the Regional Admin- i strator. Also during the Step 1 planning process, the operations office will receive payment requests from the state. While the state has not been delegated authority to process payment requests they are in fact doing the bulk of the processing and the operations office checks the pay- ment requests in a general way. When the operations office is satis- fied that the payment request is appropriate, they transmit it to the Denver regional office for processing. Within the Denver regional office the payments are first processed by the Grants Administration Branch within the Water Division and then forwarded to the Financial Management Unit for payment. The Region's next involvement is when the Montana operations office receives the Step 2 application packaqe from the state. This includes the state certification, the Step 2 application, the A/E subagreement, -18- ------- and numerous other documents. These documents are reviewed in a sim- ilar manner to the review of the Step 1 application package. When everything is in order, the grants project officer in the operations office prepares the federal grant offer and submits it to the director of the office for signature. He then sends a signed copy to the Denver regional office for filing. During the Step 2 process, the Montana field office will receive copies of correspondence, payment requests, proposed user charge systems, preliminary plans of operations, and preliminary plans and specifications. Since user charge systems have not been delegated to the state and since all user charge systems within the Region are reviewed by a single individual, the field office will transmit the proposed user charge system to Denver for review and approval. The preliminary plan of operation is just filed in the Montana field office and the preliminary plans and specifications are sent to the Corps of Fngineers so that they can perform a biddabi1ity/con- structabi1ity review. The Montana operations office also receives the Corps' biddabi1ity/constructabi1ity review comments, reviews those com- ments and transmits them to the state. Finally, during the Step 2 process, the operations office will receive the state's comments on plans and specifications. These will be quickly reviewed by the regional staff, more or less to keep up-to-date on individual projects, and then filed. Next, the operations office will receive the Step 3 application package. This will include the state certification, the Step 3 appli- cation, and numerous other documents. Again, this package is reviewed in a manner similar to the Step 1 application package. When every- thing is in order the EPA project officer prepares a federal grant offer, -19- ------- submits it to the director of the field office for signature, and when signed, transmits a copy to Denver for their files. During Step 3, the Montana operations office will also receive numerous documents. First the operations office will receive the plans and speci- fications package, including the final plans and specifications, the state checksheets, and the grantee's response to the state and Corps of Engineers comments. These will not generally be reviewed but will just he filed. One copy of the plans and specifications will be sent to the Corps for construc- tion inspections. Next during Step 3, the field office will receive the bid documents. These will be sent to the Denver field office for the purpose of reviewing the proposed minority business enterprise (MBE) participation associated with the low bidder's proposal. Subsequent to review and approval of the MBE participation, the regional office will issue the approval to award. Next during the Step 3 process, the operations office will receive notification of the pre-construction conference. They will not attend this conference, but they will check to ensure that the Corps plans to attend. Also during Step 3, the Region receives progress payment requests which are processed in a similar manner to that previously described. Change orders and state approval letters relative to change orders will also be recieved by the operations office. These will be reviewed in a general way to determine that the state approval of the change orders is appropriate and then they will be filed. Draft operation and main- tenance manuals received by the operations office will not be reviewed prior to filing. Sewer use ordinances received during Step 3-will be sent to Denver for review and approval since this function is not dele- -20- ------- gated. The final plan of operation and the final O&M manual will also be received and filed in the appropriate project files. The Corps of Engineers interim construction inspection reports will also be received by the field office staff and will be filed, as will the Corps' final inspection report. The operations office staff will generally review the final inspection report, however, prior to filing. The final involvement of the Region in the course of an individual construction grant project is when they receive the final payment request from the state. The field office will then request an audit of the pro- ject, be involved in assisting in the resolution of audit exceptions, and when all of the exceptions are taken care of, will request final payment from the Denver regional office. Region VIII has not formally chosen to use that section of the EPA delegation regulations which allows the Region to play a stronger role in administering projects having "overriding federal interest". The Region basically treats all grant projects within the State of Montana the same, with the exception of the Poseman project, for which a federal environmental impact statement is being prepared. On the Boseman project, the assigned project officer in the field office will routinely attend meetings which are associated with the federal EIS. This is the only federal environmental impact statement being prepared within the State of Montana on a construction grants project. Processing Times The Region has four major reviews it has to make relative to in- dividual projects in delegated states. Three relate to the acceptance of state certifications and the award of grants for Step 1, Step 2 and Step 3. In addition, the Region must review the environmental aspects -21- ------- of each project and issue the FNSI prior to the certification of the Step 2 application by the state. The review times for the Region relative to the award of grants on Montana projects over the last four years is shown in Table 4, both prior to and after delegation. The review times required for the issuance of FNSI1s are not kept by the regional office so information was not readily available in this regard. However, a tabulation of actual times from information kept by the State of Montana indicates that, on the average, EPA is taking about two months to issue the FNSI subsequent to the receipt of the preliminary environmental assessment from the state. Monitoring of State Performance The responsibility for monitoring the performance of delegated states currently lies within the Engineering Operations Branch of the Office of Public Facilities and Grants, in all states except Montana. In the case of Montana, the responsibility for monitoring lies with the construction grants group in the Montana Operations Office. To date, neither the Engineering Operations Branch or the Montana Operations Office has conducted any moni- toring of delegated states. In a way however, the Montana field office is monitoring the performance of the State of Montana on an on-goino basis, given the fact that many of the documents received by the state in asso- ciation with state certifications are reviewed by the field office staff to determine the adequacy of the state's reviews. The field office staff acknowledges that this is a temporary measure expected to continue until they feel comfortable with the performance of the State. At that time they will go to an after-the-fact type of monitoring program. -22- ------- Table 4 REGION VIII AVERAGE APPROVAL TIMES FOR GRANT AWARDS IN THE STATE OF MONTANA Fiscal Year Average Approval Times in Days3 Step 1 Step 2 Step 3 1977 32(13) 37(16) 88(6) 1978 47(11) 15(2) 43(16) 1979 Pre Delegation 44(6) 85(4) 41(6) 1979 Post Delegation to Date^ 17(16) 11(7) 11(5) a Number of awards made are shown in parentheses. b Includes all projects for which grant offers made subsequent to date of Delegation AGreement (July 9, 1979) through June 30, 1980. -23- ------- The regional office does routinely conduct mid-year evaluations of the states and end of the year reviews. In addition, the regional office program managers meet quarterly with each state to review the state's progress in each program area, including construction grants. ASSESSMENT OF THE REGION'S PERFORMANCE The Region's performance, in terms of administering the delegated construction grants program, was evaluated in the following areas: Progress Towards Delegation Organization and Resources Management Grants Processing Procedures Processing Times Monitoring of State Performance The contractor's analysis of Region VIII' s performance in each of these areas is discussed in the following paragraphs. One general observation is offered prior to the contractor's assessment of Region VIII in each of the above areas. That observation is that it is somewhat difficult to judge Region VIII's performance under dele- gation in that the Region is not yet operating in a fully delegated mode. While all six states within the Region have received delegation, only the State of Montana has progressed very far into delegation and that has only happened within the last six months. Even in this case, as pointed out previously, the Montana Operations Office operates more in a transi- tion type of operation rather than in a true delegation mode of operation, because of the newness of the state program. One other general observation is that the contractor's assessment of Pegion VIII will focus on the EPA operation relative to the the State -24- ------- of Montana, though some observations will relate to the Region's per- formance relative to other states. Progress Towards Delegation It appears to the contractor that Region VIII has made reasonable progress towards implementation of delegation within the region. All six states within the region have entered into delegation agreements with the regional office and almost all of these were completed more than a year ago. The fact that most of the states have not moved very far into delegation, or at least have not assumed responsibility for the more significant program activities, appears excuseable given the snail staffs which existed in those state programs prior to delegation and given the fact that most of those states had only limited previous experience with the program. The contractor only has one comment relative to the progress made by Region VIII towards delegation. While Region VIII appears dedicated towards delegating the construction grants program to the six states within the region, they also appear somewhat reluctant to let go of the individual functions associated with the program. For example, even though Montana had been delegated authority for application review, facility plans review and plans and specifications review for nore than six months, and even though these delegations were preceded by a training period, the Montana Operations Office continues to provide reviews of many of the documents received from the state under delegation. There does not appear to be any indication that their reviews will cease in the immediate future, though the Montana Operations Office does indicate that this this is not a permanent mode of operation. -25- ------- Another example that indicates a reluctance on the part of the Region to turn over delegated functions fully to the states relates to exception- ally long training periods on certain functions where such long training periods appear inappropriate. For example, the Denver regional office indicated the probability of a one-year training period for most of the states in the Region relative to the review and approval of plans and specifications. The contractor feels that such a long training period is inappropriate given the fact that the states for years have been reviewing and approving plans and specifications under delegation agreements that existed prior to the 205(g) delegations. Also the Region has not re- viewed plans and specifications for several years because of these prior delegation agreements. Given this situation it seems inappropriate for the Region to require any training period at all for state takeover of these functions, let alone a year long training period. The Region is also proposing that the State of Montana have a one-year training period relative to the state review and approval of user charge/ ICR systems. Again, the contractor feels such a long training period for an activity like this is inappropriate given the relative simplicity of the review of these systems compared to the bulk of the reviews already per- formed by Montana. The contractor believes that it would be of considerable benefit to the Region and to the states if the Region would take care of training during the training period and once the training period is over, rely on after-the-fact monitoring to determine whether or not the state is performing in accordance with the delegation agreement. Until the Region gets to this mode of operation, the advantages of delegation (elimination of duplication, savings of manpower, etc.) will not be -26- ------- reali zed. The contractor also notes that the training provided by Region VIII to delegated states prior to delegation of specific functions appears to be on the light side. Though this is not unusual when compared to the practices of other regions, the contractor believes considerable benefit, primarily faster state takeover of the program, would result if a more intensive training program was to be conducted by the Region prior to dele gation of specific functions. Organizational Structure and Resources The present organizational structure utilized by Region VIII for administration of the construction grants program may be adequate for the present situation, but will undoubtedly have to be re-evaluated under a full delegated program, i.e. when all states within the Pegion are fully administering all delegated functions. Region VIII is the first region visited by the contractor which has a field office to deal with a particular state. While there are pros and cons associated with the field office concept, the contractor was impressed with it. The primary reason for this is that the contractor feels that communications between EPA regions and the delegated states are extremely critical to the success of delegation. Without something like a field office, given the great distance between the state and regional offices, it would be more difficult to maintain good communications between the Region and the state. While good communications would be possible even with the great distances involved, the contractor believes shortening that distance to the distance existing in the State of Montana greatly en- hances the ability of the state and the Region to communicate with each ------- other. At the same time, of course, this removal of the field office from the central regional office presents communications problems and some control problems between the region and the field office. The contractor believes that the central regional office has to deal with this problem by establishing a mechanism to review the work and the performance of the field office. The contractor did not make an in-depth evaluation of the resources utilized by the Region for administration of the grants program. It would have been very difficult to make judgements as to the adequacy of those resources under delegation given the fact that the Pegion is not operating in a totally delegated mode as yet. Rather, the Region is in a transition mode of operation fully administering some functions which have not yet been delegated and overseeing state administration of delegated functions. Given this situation, the contractor did not see any obvious excesses or shortages of resources, either in the Denver regional office or in the Montana field office insofar as the grants program is concerned. Management The contractor believes several management tools are critical to successful regional management of the delegated construction grants pro- gram. These tools include an adequate reporting mechanism that allows the Region's management to stay on top of and track the progress of the program, an effective means of communications with delegated states, and an effective monitoring program to assure sound state administration of the program. Again, given the fact that Region VIII is not very far into delegation and has not yet developed its monitoring program, it is some- -28- ------- what difficult to judge the Region's performance in this area. Still there are some practices employed by Region VIII that the contractor found impressive. The contractor was impressed with the monthly status report developed and utilized by the region for each state. He was also impressed with the monthly report of past obligations and outlays and of projected obligations, outlays and awards. At the operations office he was impressed with the fact that the EPA construction grants project officer and the state's construction grants manager sit down on a monthly basis and negotiate outputs for the future months. Related to this, he was especially impressed with the enthusiasm exhibited by the state towards meeting those negotiated outputs. The contractor also was impressed with the monthly training sessions conducted by the Montana Operations Office for the state construction grants staff. Finally, the contractor was impressed with the semi-annual meetings that the region's construction grants staff holds with all delegated states. Still there are some additional management tools and practices that the contractor feels would enhance Region VIII's administration of the delegated construction grants program. First, while the region has a good start on a reporting system, the contractor suggests that this be expanded to include additional information. The contractor suggests along these lines that the region's management staff identify the types of information that they will need to stay on top of a program that basically is being administered by the states within the regi on. A second recommendation in the area of management is that the region establish formal communication systems with each delegated -29- ------- state. The contractor would suggest either monthly or bi-monthly meetings between the management people in the regional office respon- sible for a given state and that state's construction grants managers. These meetings should have formalized agendas and should provide a mechanism for the EPA staff to update the state staff on new develop- ments in the federal program, they should allow the state to do the same thing relative to EPA management and they should provide a forum for joint discussion of problems and issues encountered. These same meetings could also be utilized to discuss important actions scheduled over the coming month or months and to update the EPA staff on projects or issues that they have an interest in. Relative to the communications between the State of Montana and the EPA Operations Office, the contractor believes that the existing training sessions which are held on a monthly basis could be modified slightly to accomplish what the contractor has recommended above. In other words, by broadening the scope of the monthly training sessions, these sessions can become a formal means of communication related to all grants program activities between the state and the regional office. While the Montana Operations Office may not feel the need for such formal communications mechanisms at the present time, the contractor suggests that this is because there is almost continual communications between the operations office and the state in association with the operations office reviews of state certification packages and other documents. Once the operations office starts operating in a truly delegated mode, those day-to-day communications associated with individual projects will cease and some substitute communication mechanism will be needed. The contractor has found that good -30- ------- communications are extremely important to the success of a delegated construction grants program and, if anything, EPA and delegated states should err on the side of too much communications rather than too little. The final recommendation that the contractor has in the area of man- agement is that the region's management staff proceed to initiate an effective monitoring program. At the present time little effort has gone towards the development of such a program and, again, the con- tractor feels that this is an essential tool to assist the region in the management of the delegated program. Grants Processing Procedures The contractor focused primarily on the procedures utilized relative to Montana construction grants projects, but to some extent he also con- sidered proposed operating procedures identified by the Denver regional office relative to other states. Based on the review of the processing procedures utilized by the Montana operations office, the contractor con- cludes that the operations office is not operating in a delegated mode. It is the contractor's opinion that under delegation, the EPA regional office should identify in the delegation agreement exactly what it wants the states to do in terms of performing a particular function, the state should certify to the regional office with each grant submittal that it has complied with the terms of the delegation agreement, the region should accept the State's certification without reviewing it, and the region should monitor a certain percentage of state activities after-the-fact to determine if the state has, in fact, complied with the terms of the delegation agree- ment. In Montana the contractor observed two problems with how EPA is operating. First, the operations office is getting far more information -31- ------- than it needs under a delegated mode of operation. Basically, it appears that the field office is receiving from the state every document and piece of correspondence that the state gets relative to individual construction grants projects. The second problem with the Montana field office operation is that state certifications are not being accepted without review. Rather the EPA project officers are reviewing every project action to one degree or another. The maximum review appears to come relative to the facilities planning process (with the primary access for this review being through the environmental documents finalization). The minimum review involves reviewing packages primarily to see if they look okay or to allow the EPA personnel to stay on top of current developments on individual projects. In fairness to the Montana Operations Office, the office personnel acknow- ledge that they are not operating in the delegated mode, but they consider the present method of operation as an extended, unofficial training period. They intend to utilize this training approach until they feel comfortable with the ability of the state to administer the program. Outside of the activities of the Montana Operations Office, in dis- cussions with personnel in the Denver regional office, the contractor also got the impression that the region intends to review documents in other states rather than just accepting state certification. The contractor believes that the region should abandon its present effort to review project certification packages submitted by the State of Montana. At the same time the contractor feels that this office should put more effort towards developing and implementing an after-the-fact monitoring program. In conjunction with this the contractor believes -32- ------- that the Montana office should significantly reduce the amount of material that it receives from the state relative to individual grant projects. The contractor recommends that only those documents necessary to allov/ the region to carry out required functions under a delegated program should be received. The contractor would suggest that the region, both in Montana and in its other states, receive only five submittals from state: a plan of study to determine whether or not a federal EIS may be required, a Step 1 certification, a preliminary environmental assess- ment to allow the EPA to fulfill its responsibilities under NEPA (which cannot be delegated), a Step 2 certification and a Step 3 certification. Relative to the grant certifications, the contractor believes that many of the documents presently attached to the certification packages are not necessary for the region to receive. Again the region is supposed to accept on face value the state certification and make the grant offer. The contractor suggests that items such as user charge/ICR systems, operation and maintenance manuals, sewer use ordinances, etc. do not have to be received at all by the regional office. No action by the region is taken upon receipt of these documents and the only regional involvement with these documents at all is to review them after-the-fact to determine whether state reviews are consistent with the terms of the delegation agreement. The documents do not have to be transmitted to the regional office for this purpose. Rather they can be reviewed by a monitoring team in the state offices. In reviewing the files in the state of Montana, the contractor also identified at least one instance where the EPA field office appeared to be questioning state decisions relative to facilities planning reviews through the environmental assessment review process. To elaborate on -33- ------- this, NEPA responsibilities cannot be delegated by the region and there- fore EPA must thoroughly review environmental assessments before finalizing them and issuing the FNSI. At the same time, under delegation the region is supposed to accept the state's review of the facilities plans. There is a fine line between what areas constitute environmental issues and what areas constitute technical, procedural and administrative issues in the facilities plan. It is the contractor's opinion, based upon one set of comments prepared by the EPA field office, that some of the questions that were arising in the EPA staff review of the environmental documents were really facilities planning issues and were beyond the bounds of EPA's responsibility under NEPA. One example noted was EPA questioning of the basis of population projections utilized in one facilities plan. It is the contractor's opinion that under NEPA, EPA's role is to evaluate the environmental impact associated with those population projections, not to question the technical basis for those projections. It is the contractor's opinion that this is a facilities planning issue not an environmental issue, although obviously there may be environmental impacts if the technical method of projecting population is incorrect. Still, if this approach is taken by EPA in reviewing environmental documents, the entire facilities planning process is open to re-review by EPA in the course of its environmental review. One other comment that the contractor would make relative to the grants processing procedures employed by Region VIII relates to a criticism levied by the state. The state has indicated that the regional office is imposing its own interpretations of grant regulations, historically practiced with- in the region, on the state under delegation. It is the state's opinion that regulations offer a significant range of interpretations and as long -34- ------- as EPA guidance does not exist to the contrary, they are free to make their own interpretations. The EPA regional office, on the other hand, believes that under the concept of delegation, they still have the perogative of determining the interpretations of regulations that are to be utilized by the delegated states. On this particular issue the contractor sides with the state's position. The contractor believes that the states should have the responsibility for interpreting EPA regulations relative to their pro- jects, unless a proposed interpretation has national policy implications, in which case EPA headquarters should resolve the issue. The contractor does not believe the ten EPA regions should impose their own individual interpretations, outside of interpretations made at the national level, on delegated states. Processing Times The contractor was impressed with the short processing times exhibited by the Montana Operations Office in terms of signing grant offers subsequent to state certification. Generally, these appear to be in the order of two weeks and often less for Step 1, Step 2 and Step 3 grant awards. This is one of the best processing time records that the contractor has seen in the seven EPA regions visited to date. The contractor would also note that the construction grants staff in the operations office appears to have a great deal of concern about making grant awards as rapidly as possible. That staff noted that when state certifications came in the door they basically drop all other activities to prepare the federal grant offer and put it through the signature chain and get it signed. The record for EPA issuance of FNSI's is not as good. The information available indicate that these approvals are taking about two months. It is the contractor's opinion that these documents could be issued in one month's time. -35- ------- While the Montana office has a very good record in terms of processing times on grant awards and a fair record in terms of processing FNSI's, the contractor believes there are several things the regional office could do that would lead to reduced turnaround times throughout the region. First, the contractor suggests that the region establish turnaround time goals for each of its major review activities, namely grant awards and FNSI's. The contractor would suggest a goal of between five and ten days for the signing of grant offers subsequent to receipt of state certifications, and thirty days for issuance of FNSI's. Further, the contractor recommends that the region develop a system for monitoring actual staff performance in each delegated state against these turnaround time goals. Finally, the regions management should feed back to the staff when performance is inconsistent with the region's processing time goals. Monitoring of State Performance Region VIII has not yet initiated its monitoring effort nor has it put very much thought into how it might go about this. Hence, it is im- possible to judge the region's performance in this area other than to make the observation that the region has not yet fulfilled it's responsibility to monitor the performance of delegated states. The contractor would offer several thoughts for the region's considera- tion relative to monitoring. First, the contractor believes it is important that the region's monitoring program be a true after-the-fact type of monitoring, that the region randomly select projects for monitoring, and that the region use a team approach with qualified people having various areas of expertise. Further the contractor believes that the -36- ------- region's monitoring program should focus on four different areas, namely state procedural compliance with the terms of the delegation agreement, quality of state reviews, timeliness of state reviews, and the state's overall management of the delegated program. Finally, the contractor believes that the region should utilize its monitoring program as a con- structive tool to assist each state with improving its overall management of the construction grants program. Overall Regional Performance On an overall basis Region VIII 's performance in terms of admin- istering the delegated construction grants program has to be rated as good. The region has made considerable progress towards implementation of dele- gation in that all states within the region are currently delegated. Further the region is employing some fairly sophisticated management tools to oversee delegation, including a monthly status reporting system and regularly scheduled meetings with delegated states as well as, in the case of Montana, monthly training sessions with the state. The other strength of the Region VIII program, as exemplified by its operations relative to Montana projects, is the rapid time in which the region processes state certification packages. Though the region's performance has to be rated as good, there are a number of things that the contractor feels the region could do to enhance its overall performance relative to administration of the delegated con- struction grants program. First the contractor believes that the region should move more rapidly towards turning over individual functions to delegated states, as opposed to implementing long training periods and holding back certain functions. The region should also increase its training effort on individual functions for delegated states. -37- ------- Further the contractor feels the region could benefit by expanding some of its management tools. Particularly the contractor believes it would be advantageous for the region to expand the scope of its monthly report on each state, establish formal communications mechanisms with each delegated state, and initiate its monitoring program. In terms of grants processing procedures, the contractor believes that the region is getting more information than it needs and is stopping stopping short of accepting state certifications without review. The contractor recommends in the case of the State of Montana, that the region reduce the amount of documents that it receives from the state on individual projects to a bare minimum, that the region accept state certifications on face value without review, and that the region use the after-the-fact monitoring program to insure adequate state compliance with the terms of the delegation agreement. In terms of processing times, the contractor thinks that while the pro- cessing times in Region VIII are very good, the implementation of certain measures could insure good processing time relative to all of the states within the region, not just Montana. The recommended measures include the establishment of time based goals for each significant regional approval activity under delegation, monitoring actual staff performance against those goals, and feeding back to staff where performance deviates substantially from the region's processing time goals. In terms of monitoring, the contractor recommends that the region implement an after-the-fact monitoring program for the delegated states that focuses on procedural compliance with the terms of the delegation agreement, the quality of state reviews, the timeliness of state reviews, and the overall state management of the delegated program. Finally, in -38- ------- this regard the contractor recommends that the region use its monitoring program as a constructive tool to assist the states in improving their overall management of the construction grants program. -39- ------- |