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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
09-P-0229
September 9, 2009
Catalyst for Improving the Environment
Why We Did This Review
The Office of Inspector
General (OIG) conducted an
audit of how the U.S.
Environmental Protection
Agency (EPA) uses
independent government cost
estimates (IGCEs) to control
contract costs and receive the
best value for dollars
expended. This report is being
issued to address a specific
issue regarding the sharing of
labor hours with contractors;
another report will follow.
Background
An IGCE is a detailed estimate
of what a reasonable person
should pay to obtain the best
value for a product or service.
IGCEs are an essential tool to
ensure the best value is
obtained for dollars expended.
For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202)566-2391.
To view the full report,
click on the following link:
www.epa.gov/oig/reports/2009/
20090909-09-P-0229.pdf
EPA Should Stop Providing Estimates of
Total Labor Hours to Contractors
What We Found
For 6 of the 22 contracts we reviewed, EPA provided the contractor with the
government's estimate for total labor hours prior to receiving the contractor's
proposal. The Federal Acquisition Regulation provides that the government may
use various cost analysis techniques to ensure a fair and reasonable price,
including comparing proposed prices with IGCEs. Since EPA is providing total
labor hours to the contractor prior to receiving the proposal, EPA may be
diminishing its ability to obtain a fair and reasonable price.
Contract management and program staff indicated that providing the total labor
hours is common practice under level-of-effort-type contracts. Some informed us
they provide contractors with estimated labor prior to receiving the proposal to
indicate to the contractor the level of effort EPA anticipates will be associated
with the work assignment. Office of Acquisition Management managers pointed
out that EPA's Acquisition Regulation (EPAAR) requires that estimated labor
hours be provided to contractors for contracts in which work is ordered through
work assignments. Yet, an Office of Acquisition Management guide states that
information from the IGCE should not be provided to the contractor.
We found that for most of the Superfund contracts reviewed, EPA did not
routinely provide total labor hours to the contractor before receiving the proposal.
Some EPA staff informed us they did not provide the total labor hours because
doing so would undermine the negotiation process. When EPA provides its
estimate of total labor hours before receiving the proposal, the contractor does not
have an incentive to seek a more efficient or innovative approach to meet the
government's requirement.
What We Recommend
We recommend that EPA revise EPAAR to eliminate the requirement that EPA
include total estimated labor hours in work assignments or identify specific
circumstances in which the requirement should apply. EPA agreed with our
recommendations to modify EPAAR and will communicate new guidance to
contracting staff and those who prepare IGCEs.
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