U.S. ENVIRONMENTAL PROTECTION AGENCY (EPA) & MAJOR PARTNERS'
    LESSONS LEARNED FROM IMPLEMENTING EPA's PORTION OF THE
           AMERICAN RECOVERY AND REINVESTMENT ACT:
    FACTORS AFFECTING IMPLEMENTATION AND PROGRAM SUCCESS

                     FUNDS MANAGEMENT
                          SEPTEMBER 2013
                          EPA-100-K-13-006
                           PREPARED FOR
                   U.S. ENVIRONMENTAL PROTECTION AGENCY
                    OFFICE OF THE CHIEF FINANCIAL OFFICER
                         WASHINGTON, DC

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                                  ACKNOWLEDGEMENTS
        This study could not have been possible without the help and cooperation of the many
        U.S. Environmental Protection Agency (EPA) employees  at Headquarters and Regional
        offices  who agreed  to  be  interviewed, state  staff  and funding  recipients who
        participated in lively focus group sessions, and the many other EPA and state staff who
        graciously provided answers  to  follow-up questions after the interviews and  focus
        groups were completed. The Science Applications International Corporation (SAIC) Team
        appreciates the time given to share experiences  beyond all the  other  audits and
        questions. The recollections of those 'working in the trenches' during the intense period
        of American Recovery and Reinvestment Act (ARRA)  implementation were invaluable in
        this study.
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                                TABLE OF CONTENTS
EXECUTIVE SUMMARY	1
  PURPOSE	1
  METHODOLOGY	1
  FINDINGS	1
    Challenges and Successful Approaches	2
    Recommendations	3
SECTION 1.    INTRODUCTION	5
  1.1    PURPOSE/OBJECTIVES OF THIS STUDY	5
    1.1.1    Additional ARRA Mandates	6
    1.1.2    Selection of Grants Management Process Topics for the Study	7
  1.2    BACKGROUND	8
    1.2.1    Types of Funding Mechanisms	8
  1.3    STUDY QUESTIONS	9
SECTION 2.    METHODOLOGY	11
  2.1    DATA GATHERING	11
    2.1.1    Step 1: Review and Analyze Information and Documents	11
    2.1.2    Step 2: Interview EPA Personnel	12
    2.1.3    Step 3: Conduct State Focus Groups	14
  2.2    STUDY LIMITATIONS	16
SECTIONS.    INVESTIGATIONS OF SPECIFIC FUNDS MANAGEMENT TOPICS	17
  3.1    TIMELY OBLIGATION/EXPENDITURE OF FUNDS	22
    3.1.1    Background	22
    3.1.2    Findings - EPA Perspective - Timely Obligation/Expenditure of Funds	23
    3.1.3    Findings - State/Funding Recipient Perspectives - Timely Obligation/
            Expenditure of Funds	29
    3.1.4    Summary-Timely Obligation/Expenditure of Funds	36
  3.2    BUY AMERICAN MANDATE	36
    3.2.1    Background	36
    3.2.2    Findings-EPA Perspective-Buy American Mandate	39
    3.2.3    Findings - State/Funding Recipient Perspectives - Buy American Mandate	42
    3.2.4    Summary-Buy American Mandate	45
  3.3    DAVIS-BACON MANDATE	45
    3.3.1    Background	45
    3.3.2    Findings - EPA Perspective - Davis-Bacon Mandate	47
    3.3.3    Findings - State/Funding Recipient Perspectives - Davis-Bacon Mandate	50
    3.3.4    Summary-Davis-Bacon Mandate	54
  3.4    SECTION 1512 REPORTING	54
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    3.4.1    Background	54
    3.4.2    Findings-EPA Perspective-Section 1512 Reporting	57
    3.4.3    Findings - State/Funding Recipient Perspectives - Section 1512 Reporting	58
    3.4.4    Summary-Section 1512 Reporting	61
  3.5   GREEN PROJECT RESERVE	62
    3.5.1    Background	62
    3.5.2    Findings-EPA Perspective-Green Project Reserve	64
    3.5.3    Findings-State/Funding Recipient - Green Project Reserve	68
    3.5.4    Summary-Green Project Reserve	72
  3.6   WHITE HOUSE AND CONGRESSIONAL NOTIFICATION	72
    3.6.1    Background	72
    3.6.2    Findings - EPA Perspective - White House and Congressional Notification	73
    3.6.3    Summary- White House and Congressional Notification	74
  3.7   WORKLOAD SHARING	75
    3.7J    Background	75
    3.7.2    Findings - EPA/State Perspectives - Workload Sharing	75
    3.7.3    Summary- Workload Sharing	77
  3.8   OPEN GRANT FINDINGS	78
    3.8.1    Background	78
    3.8.2    Findings - EPA Perspective - Open Grant Findings	78
    3.8.3    Summary -Open Grant Findings	79
  3.9   OVERSIGHT MONITORING	79
    3.9.1    Background	79
    3.9.2    Findings - EPA/State Perspectives - Oversight Monitoring	79
    3.9.3    Summary - Oversight Monitoring	81
  3.10    PROCESS EFFICIENCIES	81
SECTION 4.    RECOMMENDATIONS TO EPA	85
  4.1   SYNTHESIS OF RECOMMENDATIONS FROM THE STUDY	85
  4.2   How EPA USED THE PRELIMINARY FINDINGS OF THE ARRA STUDY	86
REFERENCES	89
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                                       TABLES
TABLE 1. ARRA MANDATES	6
TABLE 2. SPECIFIC GRANT MANAGEMENT PROCESSES SELECTED FOR STUDY	7
TABLES. OFFICES, PROGRAMS AND FUNDING MECHANISMS EVALUATED	9
TABLE 4. FUNDS MANAGEMENT STUDY QUESTIONS	9
TABLE 5. Focus GROUP PARTICIPANTS BY EPA PROGRAM (FUNDING RECIPIENTS LISTED IN PARENTHESES)	15
TABLES. FUNDS MANAGEMENT EVALUATION QUESTIONS WITH BIG PICTURE FINDINGS	18
TABLE?. ARRA OBLIGATION DEADLINES FOR EPA PROGRAMS	22
TABLES. SRF SUBSIDY GIVEN IN Focus GROUP STATES	34
TABLE 9. PROGRAMS MOST LIKELY TO TRIGGER BUY AMERICAN MANDATE	39
TABLE 10. APPLICABILITY OF THE DAVIS-BACON ACT TO EPA PROGRAMS	46
TABLE 11. DAVIS-BACON ACT RESPONSIBILITIES BY PARTY	47
TABLE 12. 'GREEN' DEFINITIONS PER EPAGUIDANCE	62
TABLE 13. EXAMPLES OF TYPES OF PROJECTS THAT QUALIFIED FOR GPR	63
TABLE 14. FINAL STATE GPR DISTRIBUTION FOR SRF PROGRAMS	63
TABLE 15. PERCENTAGE REQUIREMENT FOR SRF PROJECTS FOR ARRA AND PosT-ARRA	64
TABLE 16. TEMPLATE FOR WHITE HOUSE NOTIFICATION OF PENDING AWARDS	73
TABLE 17. SUMMARY OF PROCESS EFFICIENCIES	82



FIGURE 1. ARRA FUNDING BY EPA PROGRAM	8
FIGURE 2. EPA INTERVIEWS BY REGION AND HEADQUARTERS	13
FIGURES. EPA INTERVIEWS BY PROGRAM	13
FIGURE 4. Focus GROUP PARTICIPANTS BY EPA PROGRAM	15
FIGURES. BUY AMERICAN WAIVER PROCESS	37
FIGURE 6. RECIPIENT REPORTING TIMELINE	56




APPENDIX 1: FOCUSGROUP PROJECT AND FUNDING INFORMATION	APPENDIX 1-1
APPENDIX 2: ADDITIONAL COMMENTS FROM EPA INTERVIEWS	APPENDIX 2-1
APPENDIX 3: ADDITIONAL COMMENTS FROM Focus GROUPS	APPENDIX 3-1
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EXECUTIVE SUMMARY
PURPOSE

This study seeks to capture the lessons from the U.S. Environmental Protection Agency (EPA), states,
tribes, localities and other fund recipients' management efforts related to the $7.2 billion American
Recovery and Reinvestment Act (ARRA) funds appropriated to EPA. The scale, scope and new
requirements posed daunting management challenges to all of these stakeholders requiring new
guidance, processes and systems. Although there is no proposal before Congress for another major
investment similar to ARRA, EPA and its partners periodically face challenges managing substantial
funding for many projects with new terms, requirements and conditions, such as for Hurricane Sandy, and
have already used some of these lessons.

METHODOLOGY

Enacted in 2009, ARRA bolstered the economy, in part, by funding six EPA programs. These programs
included drinking water and clean water infrastructure projects through the State Revolving Funds (SRFs)
and environmental initiatives through Superfund, Diesel Emissions Reduction Act (DERA), Leaking
Underground Storage Tank (LUST) and Brownfields programs. The EPA contracted with Science
Applications  International Corporation (SAIC), and their subcontractor Toeroek Associates, Inc.,  to review
the activities and process for funds distribution, management, and reporting for each of the six  programs
that received ARRA funding. The objective of the review was to capture, verify and analyze the critical
lessons learned and successful strategies related to ARRA funds management. To achieve this objective,
the SAIC Team gathered information on three specific aspects: timely obligation and expenditure of funds;
additional mandates of ARRA (Section 1512 reporting requirements, Section 1605 Buy American mandate,
Section 1606 Davis-Bacon Prevailing Wage mandate and Green Project  Reserve mandate); and grants
management processes for the previously mentioned programs.

The data collection method used interviews with EPA staff and state focus groups, combined with
additional information from literature, websites and databases. SAIC and Toeroek gathered the majority
of the information from 47 EPA staff interviews and 12 state focus groups, which included 108 state
personnel and 9 funding recipients or funding recipient consultants/contractors.

EPA distributed approximately 86 percent of  its $7.2 billon ARRA funding to individual  states through
capitalization grants based on an allocation calculation. This was approximately twice EPA's historical
annual grants per fiscal year for the SRF drinking and clean water programs. Each state met the
accelerated, first ever imposed deadline of its kind, by surmounting difficult barriers and addressing
unforeseen challenges. All funds were obligated without any re-obligation within the 1-year timeframe;
more than 90percent of the funds were expended within the three-year or specific programmatic
deadlines.

FINDINGS

In this study, the SAIC team discerned several important aspects  of ARRA funds management
processes. Following the Executive Summary, the full report presents the findings in three major
categories: Challenges, Successful Approaches, and Recommendations.


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The report addresses:

    •   Changes in policies, processes and procedures, and evolution and response to those changes.
    •   Factors that helped or hindered, as well as the challenges affecting different outcomes among
        the programs, Regions, states and projects.
    •   Successful approaches to addressing conflicts and implementing the ARRA-funded programs
CHALLENGES AND SUCCESSFUL APPROACHES

Based on the perspectives from all stakeholders, below are summaries of the major challenges described
and some successful approaches used.

    •   Scale - Overall, the additional workload from the sheer magnitude of the ARRA funding amounts,
        coupled with the work associated with the four mandates, produced serious demands on EPA
        and state staff. Everyone from EPA to states to local vendors worked above and beyond usual
        schedules to meet ARRA goals. EPA Regions and states who overcame their initial reluctance to
        hire new staff with ARRA Management and Oversight funds fared better in handling the
        additional workload than EPA Regions and states who did not hire additional staff. Early and
        frequent communication among stakeholders, with regularly-scheduled meetings and webinars
        that began before ARRA was even passed helped to form solid working relationships. The
        enhanced communication and collaboration between EPA, states and funding recipients were
        critical factors in navigating this intense period. Innovative, streamlined management
        approaches were developed out of necessity, but remain today as permanent program
        improvements. The ARRA 1512 reporting requirements helped states prepare for requirements
        of the Federal Funding Accountability and Transparency Act.
    •   Regional and State Variation - During ARRA implementation, it became clear that there were 51
        distinct SRF programs; any changes made at the national level affected these 51 programs
        differently. Existing, established processes and procedures served as a good foundation on which
        to incorporate ARRA requirements. Modifying existing processes made the changes easier to
        implement. The fast-paced nature of ARRA implementation encouraged federal, state, and local
        organizations to 'flatten out their management process' by eliminating unnecessary reviews at
        multiple levels, allowing for simultaneous rather than sequential reviews, and providing
        information and updates to everyone at the same time, ideally through web postings, to
        eliminate the time required for information to trickle down from one level to the next. Some
        improvements have been incorporated; some remain as future goals. For example, some states
        have shortened the period from application submission to contract award.
    •   Additional Requirements - The four additional mandates that came with ARRA funding - Davis-
        Bacon labor requirements, Buy American stipulations for iron, steel and manufactured goods,
        Section 1512 reporting on expenditures, and the designation of 20 percent of ARRA funds for
        'green' projects - created extensive challenges for EPA, states and funding recipients. The
        provisions were complex, guidance was often changing, and the workload associated with the
        mandates alone was significant. Some states opted to designate specialists to remain up to date
        on the mandates and process the necessary paperwork. EPA Headquarters (HQ) and Regions
        endeavored to provide training and guidance  to work through complex issues.
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    •   Inexperienced Funding Recipients - Many states widened their customary range of grant
        recipients to include new communities in an effort to 'spread the wealth.' These new funding
        recipients faced difficulties with the unfamiliar program requirements and the accelerated
        schedules and the sizes of the awards. Communities without sufficient management experience,
        especially small towns with little or no town staff, turned to their state program offices for
        assistance. The towns were very appreciative of the new activity in their communities; in some
        instances, ARRA funding kept businesses from going bankrupt or laying off personnel. State
        offices admitted though that their personnel were overextended in managing projects for
        entities without sufficient staff or experience.
    •   Conflicting Goals - The fundamental ARRA goal to inject money quickly into the economy
        sometimes conflicted with EPA's goal to fund projects that would yield the greatest
        environmental benefit. The need to find 'shovel-ready' projects meant that sometimes higher
        priority projects were passed over in favor of other projects that were ready to implement.
        Despite this conflict, ARRA funds enabled the completion of beneficial projects  that would  never
        have been done otherwise. ARRA funded projects that yielded environmental and public health
        benefits. The requirement to include 'green' projects encouraged engineers to add water and
        energy efficiency technologies into their drinking water and clean water projects.
RECOMMENDATIONS

The numerous discussions with stakeholders in the funds management processes generated
recommendations for going forward. Recommendations in the following summary are not listed in any
priority order and are presented as guideposts for EPA and states' existing programs and any new
initiatives for the existing programs.

    •   Think strategically about information that will be needed in the future. Involve all stakeholders
        (multi-disciplinary and multi-organizational)  in assessing what information will be needed to
        measure outcomes or results. Identify and agree on specific monitoring data needs prior to
        implementation; collect the necessary data to track incremental milestones that measure the
        progress or status of activities.
    •   Work as a team to achieve process efficiencies. Collaborate with all stakeholders through
        working groups to develop plans, policies and guidance prior to and throughout implementation.
        Attempt full transparency in communication; share information with everyone simultaneously to
        avoid unnecessary delays as information slowly spreads. Communicate with one voice to avoid
        conflicting messages from different federal agencies.  Create short-term working groups focused
        on specific issues or processes.
    •   Follow a strategy with clearly defined goals; eliminate conflicting goals. Clarify primary and
        secondary goals so that states do not have to wrestle with tough choices. Consider incorporating
        new requirements as incentives or goals instead of mandatory requirements where possible.
        Provide for  flexibility at the state and local level to allow for adjustments to the local situation.
        Delegate the decisions to the local level as much as possible because the local situation will
        dictate what or how to apply requirements. Simplify requirements to enable quick
        implementation and better compliance. Target oversight to ensure that states with historical
        program or financial management issues receive attention early in the process.
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    •   Use effective tools and processes. Develop and maintain a website to provide one central place
        for updated policies and guidance; remove obsolete guidance to avoid confusion. Use the
        website to disseminate successful approaches developed by stakeholders. Provide reasonable
        deadlines and establish internal indicators to alert managers of potential problems/delays.
        Provide sufficient resources to handle the increased workload. Dedicate experienced staff to the
        effort; reassign staff from other program areas. Make temporary hires and use contractors.

Some of the lessons learned from ARRA implementation have already been applied by EPA managers in
their regular programs and in response to funding for Hurricane Sandy recovery. Experience with ARRA
provided managers insight on what questions to ask. The lessons about early and frequent
communications among all stakeholders led EPA to create a communications network that enables
questions to be  posed and discussed. The Hurricane Sandy Task Force crafted guidance and policy to
make guidance clearer initially and reduce the need for re-work. This included specifying clear financial
deadlines and clarifying crucial definitions.
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SECTION 1.    INTRODUCTION
In February of 2009, Congress passed ARRA, aimed primarily at making new jobs and saving old ones,
stimulating economic activity and long-term growth, and fostering accountability and transparency in
government spending. Of the $787 billion authorized in the Recovery Act, EPA was given $7.2 billion. EPA
distributed the majority of its ARRA funds to states in grants and contracts to support clean water and
drinking water projects, diesel emissions reductions, leaking underground storage tank cleanups,
Brownfields development, and Superfund cleanups. This was a massive undertaking for EPA. The
administration of the funds, which were to be injected into the economy at an unprecedented pace,
required that EPA develop or revise policies, processes and automated information systems. In the fall of
2011, EPA tasked SAIC, and its subcontractor Toeroek Associates, to design and conduct a study to
examine several components of EPA's implementation of ARRA. The SAIC Team studied three
management topics - Cost Estimating processes, Funds Management processes, and Systems
enhancement and development. The Team also looked at three topics geared more towards outcomes
than management processes. These include the Green Project Reserve initiative, the use of ARRA funds to
spur Innovative Technologies, and the use of ARRA funds to Leverage Local Economic Benefits.  After
completion of the research phase, the SAIC Team produced a series of six reports, each covering one of
the six topics noted above. The Team also prepared a separate overarching summary report with an
Executive Summary, containing highlights of each of the six reports, as well as a description of the goals
and methodology for the entire study.

1.1     PURPOSE/OBJECTIVES  OF THIS STUDY

This report, one of six, covers funds distribution and management processes. The study effort focused on
three particular aspects of EPA's ARRA funds management:

    •   Timely obligation and expenditure of funds.
    •   Additional mandates of ARRA: Section 1512 reporting requirements, Section 1605 Buy American
        mandate, Section 1606 Davis-Bacon Prevailing Wage mandate, and the Green Project Reserve
        (GPR) for State Revolving Funds (SRF) programs.
    •   Several grants management topics.

The primary objective of this task was to capture, verify and analyze the critical lessons learned and
successful approaches related to ARRA funds management.

This report presents the SAIC Team's findings. The report is presented in the following sections:
    •   Section 1 Introduction
    •   Section 2 Methodology
    •   Section 3 Investigations of Specific Funds Management Topics
           o  Timely Obligation
           o  Buy American Mandate
           o  Davis-Bacon Mandate
           o  Section  1512 Reporting
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            o   Green Project Reserve
            o   White House and Congressional Notification
            o   Workload Sharing
            o   Open Grant Findings
            o   Oversight Monitoring
            o   Process Efficiencies
    •   Section 4 Recommendations to EPA

For most of the topics in Section 3, the report includes:
    •   Background,
    •   Findings from the EPA Perspective, and
    •   Findings from the State/Funding Recipient Perspective.

Each section  of Findings covers Major Challenges, Successful Approaches, and Recommendations, such
that the cycle of challenges, successful approaches, and recommendations is repeated many times to
cover all of the topics  in the study.
1.1.1   ADDITIONAL ARRA MANDATES

As noted above, one of the primary objectives of this study was to review the implementation of
additional mandates included in the ARRA statute. Table 1 provides a list and description of the mandates
included in this study. EPA also had additional reporting responsibilities to the Recovery Act Transparency
Board; these reporting requirements were not included in the scope of this study.

                              TABLE 1. ARRA MANDATES

MANDATE
Buy American mandate
(Section 1605)
Davis-Bacon Act mandate
(Section 1606)
Reporting requirements
(Section 1512)
Green Project Reserve

DESCRIPTION
Projects funded by ARRA for construction, alteration, maintenance or repair of a
public building or public works must use American-made iron, steel, and
manufactured goods, with some exemptions (US Congress, 2009).
All laborers and mechanics employed by contractors and subcontractors working on
projects funded directly by or assisted in whole or in part by ARRA must be paid
wages at rates not less than those prevailing for corresponding work on similar
projects. The prevailing local rates are established by the Secretary of Labor (US
Congress, 2009).
ARRA funding recipients must submit quarterly reports detailing status of funds use.
(US Congress, 2009).
Title VII, Interior, Environment, and Related Agencies, State and Tribal Assistance
Grants specified that 20 percent of the ARRA funds for CWSRF and DWSRF programs
were to be awarded to projects that address green infrastructure, water and/or
energy conservation and efficiency, or other environmentally innovative activities.
(US Congress, 2009).
Since ARRA, Congress has made the Davis-Bacon a permanent requirement for the SRF programs. With
regard to the Green Project Reserve mandate, Congress has applied this to some appropriations for EPA,
but not all. Congress has not incorporated Buy American or 1512 Reporting into any appropriations since
ARRA. According to EPA, due to the challenges with 1512 Reporting and Buy American, Congress has
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currently steered away from making these particular requirements permanent.  However, the information
for each of these mandates is still determined to be useful since these additional requirements may be
added to appropriations bills in the future.
1.1.2   SELECTION OF GRANTS MANAGEMENT PROCESS TOPICS FOR THE STUDY

The awarding of ARRA funds required EPA grants management staff to modify their existing processes or
develop new processes to manage the increased workload, additional ARRA mandates, and new or
shorter deadlines. EPA wanted to compile the major lessons learned and process efficiencies from the
improvements instituted particularly in the development and use of Model Funding Recommendations
and the White House and Congressional notification of pending awards. Since the grants management
process covers all aspects of the award and management of thousands of grants and cooperative
agreements and many modifications were made during ARRA implementation, the SAIC Team focused on
the Model Funding Recommendations, the White House and Congressional notification of ARRA awards,
and three existing tools (Workload Sharing, Open Grant Findings and Partial and Conditional Awards) that
were available to improve the grants management process during this period of intense activity. In
addition, the SAIC Team included Oversight Monitoring at EPA's suggestion. These six specific topics are
described below in Table 2.

The Model Funding Recommendations and Partial and Conditional Awards were identified as Successful
Approaches and are discussed in Section 3.1. White House and Congressional Notification of ARRA
Awards, Workload Sharing, Open Grant Findings, and Oversight Monitoring are discussed below in
Sections 3.6 through 3.9, respectively.

    TABLE 2. SPECIFIC GRANT MANAGEMENT PROCESSES SELECTED FOR STUDY
PROCESS

Model Funding
Recommendations
White House and Congressional
Notification of ARRA Awards
Workload Sharing
Open Grant Findings
Partial and Conditional Awards
Oversight Monitoring
DESCRIPTION

OGD approved model funding recommendations that were loaded into IGMS. Program
offices copied these funding recommendations for individual grants.
EPA defined all ARRA grants as "significant" and was required to notify the White
House and Congress prior to awards.
EPA prepared temporary delegations of authority to allow workload sharing between
EPA Regions and between EPA Regions and EPA Headquarters (HQ).
Awards can be made to funding recipients with audit findings that have not been
resolved at the time of the award. (EPA continued to address audit issues after award.)
Partial award. Used when applicant submitted partially complete work plan containing
activities/projects that could be timely initiated, and all other application
requirements met. Requires submission of remainder of work plan by specified time.
Conditional award. Used when application had basic skeleton of a work plan but
needed additional time to develop full work plan, and all other application
requirements met. Requires submission of full work plan by specified time. Recipient
cannot draw down grant funds until full work plan submitted and approved.
EPA increased its oversight monitoring of state programs and projects during ARRA.
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1.2     BACKGROUND

ARRA's $7.2 billion to EPA was the largest single investment of dollars in EPA's history and is almost twice
EPA's historical annual grants awards of approximately $4 billion each fiscal year (EPA, Final ARRA Plans
2010). Figure 1 shows the breakdown of ARRA funding received by each of the six EPA programs.

The SAIC Team primarily focused on Clean Water State Revolving Funds (CWSRFs) and Drinking Water
State Revolving Funds (DWSRFs) because of the larger funding amounts that were allocated to them. The
SAIC Team evaluated the Superfund, Brownfields, Leaking Underground Storage Tanks (LUST) and Diesel
Emissions Reduction Act (DERA) programs, but to a lesser degree.

                      FIGURE  1. ARRA FUNDING BY EPA PROGRAM
                       DERA              LU5T            Brownfields
                 $294 Million (4%)^ $197 Mllllon (3%) ^$96.5 Million (2%)

          Superfund
       $582 Million (8%)
                                                                            .CWSRF
          DWSRF7      \^                                             $4 Billion (56%)
        $1.95 Billion
          (27%)

    Source: EPA, 2010a
1.2.1   TYPES OF  FUNDING MECHANISMS

EPA distributed ARRA funds using eight different funding mechanisms: revolving loan funds, cooperative
agreements, formula grants (with a matching fund requirement), competitive grants, contracts,
interagency agreements, Tribal agreements/grants, and management and oversight (M&O) funds. Each
funding mechanism had its own programmatic, technical and legal requirements.

In this study, the SAIC Team included projects funded through the first five funding mechanisms listed
above because they were used for the largest proportion of EPA ARRA dollars. The SAIC Team did not
review EPA management and oversight (M&O) funds, interagency agreements and Tribal
agreements/grants. Relatively few dollars were distributed through interagency agreements and Tribal
agreements. EPA used management and oversight funds for non-project specific ARRA tasks.  See Table 3
Offices, Programs, and Funding Mechanisms Evaluated.
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       TABLE 3. OFFICES, PROGRAMS AND FUNDING MECHANISMS  EVALUATED
OFFICE OF WATER
CWSRF DWSRF
Revolving Loan
Funds
OFFICE OF SOLID WASTE AND EMERGENCY RESPONSE
SUPERFUND
Contracts and
Cooperative
Agreements
BROWNFIELDS
Competitive
Grants
LUST
Cooperative
Agreements
•OFFICE OF AIR AND
RADIATION
DERA
Formula Grants and
Competitive Grants
1.3     STUDY QUESTIONS
The SAIC Team developed questions to frame and guide this study. Table 4, Study Questions, presents the
overarching questions and the more detailed questions associated with the evaluation questions. The
findings are presented in Section 3 of this report.

                   TABLE 4. FUNDS MANAGEMENT STUDY QUESTIONS
  OVERARCHING STUDY
       QUESTIONS
     DETAILED STUDY
        QUESTIONS
EXAMPLE INTERVIEW/Focus GROUP TOPICS
Policies, processes and
procedures
What funds management
policies, processes and
procedures helped/
hindered ARRA
implementation efforts,
and why?
The goal is to identify why
policies, processes and
procedures helped or
hindered ARRA
implementation efforts and
to identify factors that
influenced the outcomes.
Changed Process. How did
changes made to policies,
processes and procedures
affect the grants
management process, and
why?
Evolution of policies,
processes and procedures.
Why and how did the ARRA
policies, processes and
procedures evolve over the
course of implementation?
Response to change. What
was the response to changes
that helped/hindered
implementation?
  Changes to policies, processes and
  procedures. Changes in the areas of workload
  sharing, awards to funding recipients with open
  grant findings, use of partial and conditional
  awards, use of pre-loaded model funding
  recommendations in the Integrated Grants
  Management System (IGMS), quarterly
  monitoring, and White House/Congressional
  notification.
  Timely obligation of funds by EPA and states to
  funding recipients.
  Timely expenditure of funds by funding
  recipients.
  ARRA mandates. Buy American, Davis-Bacon,
  reporting requirements and Green Project
  Reserve.
Factors that
helped/hindered
What factors helped and/or
hindered implementation
of policies, processes and
procedures, and why?
The goal is to identify how
and why factors influenced
the outcomes and the
challenges that were
encountered in
implementation.
Different Outcomes. What
factors contributed to
different outcomes among
programs, regions, states and
projects?
Challenges. What factors
created challenges to
implementation of policies,
processes and procedures?
  Implementation. Factors influencing
  implementation of policies, processes and
  procedures:
      Program differences.
      Regional differences.
      State differences.
  Meeting deadlines for obligation and
  expenditure of funds. Factors influencing
  meeting deadlines for timely obligation and
  expenditure of funds, and why
      Schedules: delays or changes to schedules.
      Project Selection: results of project
      selection process modifications vs.
      traditional selection process.
      Funding Mechanisms (e.g., grants,
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  OVERARCHING STUI
       QUESTIONS
      IETAILED STUD^
        QUESTIONS
XAMPLE INTERVIEW/Focus GROUP TOPICS
                                                                 contracts): challenges, barriers, and/or
                                                                 benefits with existing funding mechanisms
                                                                 for ARRA funds management (i.e.,
                                                                 maximized contract values forced re-
                                                                 solicitation on an earlier schedule).
                                                              Additional mandates. Factors influencing
                                                              implementing Buy American, Davis-Bacon,
                                                              Green Project Reserve and reporting
                                                              requirements, and why:
                                                                 Funding recipient project factors such as
                                                                 type, size, location, new or existing project.
                                                                 Different types and frequencies of reports.
                                                              Capacity/resource needs. How
                                                              capacity/resource needs and issues associated
                                                              with the ARRA workload were addressed.
Successful Approaches to
Challenges
How were challenges to
implementation of policies,
processes and procedures
overcome?
The goal is to identify what
approaches proved useful
in overcoming
barriers/obstacles in
implementation.
Addressing challenges. How
were challenges associated
with new/changed policies,
processes and procedures
identified and addressed
(e.g., conflicting policies,
processes and procedures;
evolving needs; and
requirements)?
Different responses to
challenges. How did response
to challenges vary across
programs, regions, states and
projects, and why?
 Timing and evolution. Timing and evolution of
 policies, processes, and procedures.
 Barriers to funding certifications. Barriers to
 certifying the projects met ARRA requirements
 for timely obligation and expenditure of funds.
 Barriers to Buy American certification and
 waivers.
 Reporting and Quarterly monitoring.
 Frequency, completeness, accuracy and
 improvements over time.
 Green Project Reserve. Barriers to identifying
 shovel-ready green projects.
September 2013
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SECTION 2.    METHODOLOGY
2.1     DATA GATHERING

The review method primarily used interviews and focus groups, combined with additional information
from literature, websites and databases to address the study questions. The majority of the information
was gathered from 47 EPA staff interviews and 12 state focus groups which also included ten funding
recipients or funding recipient consultants/contractors. It should be noted that EPA's previous ARRA
studies did not systematically involve conversations with funding recipients but only with EPA staff. Other
than the formal agency audits (e.g., from OIG), this is the only study that provides feedback from two
levels of funding recipients, the State level and local/municipality level.

The SAIC Team implemented the study methodology in the following three steps, which are described in
more detail below:

    •   Reviewed and analyzed information and documents from EPA managers, EPA websites and EPA
        databases.
    •   Interviewed a select number of EPA personnel.
    •   Conducted focus groups of selected states, which included funding recipients.

The SAIC Team used these data collection methods across the focus areas: timely obligation and
expenditure, additional ARRA mandates and grants management processes.
2.1.1   STEP 1:  REVIEW AND ANALYZE INFORMATION AND DOCUMENTS

The SAIC Team started the study by reviewing the background literature pertaining to the study areas for
each of the EPA programs--CWSRF, DWSRF, Superfund, Brownfields, LUST and DERA. The SAIC Team also
reviewed background literature pertaining to specific projects under these programs. This background
material included program descriptions, guidance documents, policy documents, publications and
database descriptions.

The SAIC Team reviewed and analyzed information and data from the following sources:

    •   Existing studies: EPA's ARRA implementation activities have been reviewed within EPA by OIG
        and by outside agencies such as the U.S. Government Accountability Office (GAO). In addition,
        the EPA Office of Water, the Environmental Center at Syracuse University, the IBM Center for the
        Business of Government, and the U.S. Department of Energy also prepared reports on ARRA
        implementation. The SAIC Team reviewed these reports and extracted relevant information as a
        resource of background material on improvements, lessons learned and successful approaches
        prior to conducting interviews  and focus groups. The report excerpts are compiled in a separate
        deliverable for the Office of the Chief Financial Officer (OCFO). While these studies provided
        helpful background and context for SAIC's study, they did not contribute to SAIC's analysis of
        data or development of conclusions. During ARRA implementation, many of the OIG reports
        provided the impetus to make  changes in implementation processes and policies. SAIC's study
        assesses the response to these changes by EPA and state programs.
September 2013                                                                            11

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    •   EPA ARRA policies and guidance: The SAIC Team reviewed many ARRA documents including, but
        not limited to: policy documents; rules and regulations reported in the Federal Register; EPA
        Memoranda regarding implementation of policy and guidance; EPA ARRA guidance factsheets;
        PowerPoint presentations developed by EPA HQ offices and webinar presentations.
    •   EPA and state websites: The SAIC Team searched and reviewed documents posted on EPA and
        state websites that address ARRA implementation strategies or approaches or lessons learned.
    •   EPA databases (federalreporting.gov, CWSRF Benefits Reporting System (CBR), DWSRF Project
        and Benefits Reporting System (PBR)): The SAIC Team analyzed data downloaded from EPA
        databases to identify patterns, funding amounts and award dates among EPA Regions and states
        for criteria to select states for focus groups.
2.1.2   STEP 2:  INTERVIEW  EPA PERSONNEL

Information resides with EPA personnel who implemented the changes and have knowledge of what
worked, where problems occurred and what improvements were seen. The SAIC Team first developed a
list of key EPA personnel to interview, striving to represent all EPA Regional, program and Headquarters
(HQ) staff including EPA subject matter experts (SMEs). Participation was voluntary and some staff were
not available for interviews due to scheduling difficulties. From the EPA HQ interviewees, the SAIC Team
developed an understanding of the intended processes, procedures and policies developed and executed
from the EPA HQ offices for ARRA. Prior to an interview, the SAIC Team provided the interviewee with the
interview topic summary to aid in preparation. The interviews were approximately one hour in length.
During a few EPA interviews, an EPA OCFO representative was present. The interviewees were specifically
asked and agreed to the OCFO representative's presence.

In all, the SAIC Team interviewed 47 EPA personnel spanning all ten EPA Regions, Headquarters, and all six
EPA Programs. Of the 47 interviewees, 15 participants were from EPA HQ, while 32 participants were
from the Regions. Figure 2 shows the specific numbers and percentage of interviews in each Region and
HQ. It was the SAIC Team's intent to interview close to an equal amount from each Region, and in
particular include at least one staff from grants management (note: percentages do not add up to 100
because of rounding). Oftentimes invited EPA staff brought along other EPA staff to participate; thus
representation is not equally distributed across the Regions, but the additional participants enriched the
conversation.
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             FIGURE 2. EPA INTERVIEWS BY REGION AND HEADQUARTERS
                 Region 8:
                  3 (6%)
                          Region 9
                           3 (6%)
Region 10:
 ,4(9%)
             Region 7:
              2 (4%)
               Region 6:
                6 (13%)
                   Region 5
                    3 (6%)
                                                              HQ: 15 (32%)
                                       Region 4:
                                        3 (6%)
          Region 3:
           3 (6%)
                           Region 1:
                            2(4%)
                     Region 2:
                      3 (6%)
While there were 47 EPA interviewees in total, these individuals often represented multiple EPA
programs. For instance, a Regional grant specialist handled grants for all EPA programs, and many HQ
personnel often worked with more than one program. In these cases, the SAIC Team counted such
individuals as representing both programs, so the total number of programs represented exceeds the 47
total interviews. As shown in Figure 3 below, the two SRF programs were represented by 60 percent of
EPA interviews, while LUST and Superfund program representatives were interviewed the least.
                       FIGURE 3. EPA INTERVIEWS BY PROGRAM
               Superfund: 8
                  (9%)
                                LUST: 8
                                 (9%)
                 DWSRF: 29
                   (33%)
           DERA: 9
            (10%)
       Brownfields: 12
            (12%)
                                              CWSRF: 24
                                                (27%)
September 2013
                                                13

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2.1.3   STEP 3: CONDUCT STATE FOCUS GROUPS

The SAIC Team utilized a focus group approach with states and funding recipients to obtain information
on lessons learned and successful approaches. Conversations with state and funding recipients revealed
what factors in on-the-ground project implementation affected their ability to comply with the mandates
and spend funds expeditiously. Focus group sessions were facilitated discussions that allowed participants
to engage in these topics without adhering to a specific set of questions. The format encouraged
participants to volunteer information about their experiences with ARRA implementation. The SAIC Team
conducted focus group discussions in 12 states based on the pre-determined selection criteria shown
below. The SAIC Team gathered information about candidate states from EPA databases and websites.

    •   At least one state in each Region1.
    •   States with a large number of ARRA projects.
    •   States that included Superfund-managed ARRA projects.
    •   States that obligated funds expeditiously.
    •   States that applied for Buy American waivers.
    •   States that obligated funds slower than others and nearest to the deadline.
    •   States that received larger amounts of funding.

This report also includes information on funds management gathered from focus groups conducted as
part of two related SAIC ARRA studies, one addressing ARRA Cost Estimating processes and one
addressing the secondary benefits of the Green Project Reserve projects.

The SAIC Team discovered that the experiences and lessons learned revealed during the Cost Estimating
and Green Project Reserve  focus groups were interrelated with the funds management process and
decided it was appropriate to include them in this Funds Management report. It is important to note that
the participants from the five Cost Estimating and Green Project Reserve focus groups were all from the
CWSRF and DWSRF programs and did not include any Superfund, LUST, DERA, or Brownfields projects.

In all, 108 state personnel and 10 funding recipients participated in the 12 focus groups listed in Table 5
below and also provided the SAIC Team with additional funding and project information  details in
Appendix 1.  The level of EPA program representation at the 12 focus groups varied widely, with 96 out of
118 participants coming from the SRFs, 9 from LUST, 6 from DERA, 5 from Brownfields and only 2
participants from the Superfund  program. Table Sand Figure 4 below show the breakdown of focus group
participants by EPA program. Funding recipients, shown in parentheses in the table, are municipal, utility,
or private contractor staff. The participation for each focus group varied, ranging from 4 participants in
North Carolina to 14 in New York.
 Due to scheduling and availability conflicts or the lack of ARRA staff still available, the SAIC Team was only able to
reach states in eight of the ten EPA Regions (i.e., Regions 1,2,3,4,6,7,8 and 10).
September 2013                                                                             14

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             TABLE 5. FOCUS GROUP PARTICIPANTS  BY EPA PROGRAM
                  (FUNDING RECIPIENTS LISTED IN PARENTHESES)
••
^E*j£^^^l
Colorado
Iowa
Louisiana
Missouri
Montana
New Hampshire
New York
North Carolina
Oklahoma
Texas
Virginia
Washington
Total
SRFS LUST BROWNFIELDS DERA SUPERFUND TOTAL
2
8(1)
4
7
8(2)
6(4)
14
3(1)
11* (1)
11
4
9
96



2

1




3
2(1)
9
1


1

1




1
1
5
1


2

1



1
1

6
1




1






2
5
9
4
12
10
14
14
4
12
12
9
13
118
 *0ne participant provided feedback over the phone.

The focus group participant pool also largely reflected the amount of funding that each EPA program
received.  For instance, 81 percent of participants were from the SRF programs and just under 85 percent
of EPA ARRA funding went to the SRFs. The SAIC Team found that most states were not very involved with
the Superfund ARRA projects, as these were largely managed by EPA, which likely explains the small
number of state focus group participants who managed ARRA Superfund projects.

               FIGURE 4. FOCUS GROUP PARTICIPANTS BY EPA PROGRAM
                                Brownfields
                                   4%
Superfund
September 2013
                                     15

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2.2     STUDY LIMITATIONS

The following limitations are noted with regard to this study:

Lack of an Information Collection Request (ICR) specific to this evaluation. The SAIC Team's collection of
data from sources outside of EPA (such as state staff and funding recipients) was limited because there
was no Information Collection Request (ICR) for this study. The SAIC Team addressed this limitation
through state focus groups where a large number of state participants discussed their ARRA experience.
The findings in this study, therefore, are based on responses from focus groups and are not necessarily
representative of the entire population of states with ARRA projects.

Uncertainty introduced in the collection of subjective information. The interview and focus group
process introduces uncertainty through the collection of subjective information provided by individuals
relaying recollections/memories of activities conducted three years ago. The SAIC Team minimized the
impact of the variability of individual responses on the overall data collection and analysis effort by
conducting a large number of interviews and focus groups, and compiling and aggregating similar
responses to identify patterns and themes.

Limited state perspectives on Superfund awards. In the 12 state focus groups, only 2 of the 118
participants represented the Superfund program and these individuals indicated that EPA (and not the
state) managed the ARRA-funded Superfund sites.  Please note that while state perspectives on Superfund
were limited, the SAIC Team interviewed eight EPA Superfund staff.

Limited funding recipient perspectives. In the  12 state focus groups, only 10 of the 118 participants
represented funding recipients (e.g. municipal staff, contractors). Funding recipients were invited by state
representatives if they were local in proximity to the state focus group discussion and were available.

Lack of review by interviewee and focus group participants. This report summarizes the results of
interviews and group discussions in the focus groups. The interviewers took  notes but did not tape record
the meetings. The findings in this report are based  on comments from the participants but may not be the
exact or actual words used  by the participants. The findings represent the compilation, aggregation and
summarization of one or multiple comments. Additionally, nothing in this report represents the official
views of the agencies or organizations with which the participants are affiliated. While the SAIC Team
contacted some states to seek clarifications on specific points after focus group meetings, there was no
comprehensive review of the report findings by all  focus group participants.  The degree to which the
report matches comments heard in focus groups or interviews cannot be quantitatively or qualitatively
measured.
September 2013                                                                              16

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SECTION  3.    INVESTIGATIONS OF SPECIFIC FUNDS MANAGEMENT TOPICS
Table 6 summarizes big picture findings for each evaluation question. The big picture findings are based
on information gathered from interviews with 47 EPA headquarters and Regional staff and focus groups
with representatives from 12 states. The sections of the report following the table include a thorough
discussion of the findings.

After the Table 6 presentation of big picture findings, the text discussion is organized by specific funds
management topics:

    •   Timely Obligation/Expenditure of Funds.
    •   Buy American Mandate.
    •   Davis-Bacon Mandate.
    •   Section 1512 Reporting.
    •   Green Project Reserve.
    •   White House and Congressional Notification.
    •   Workload Sharing.
    •   Open Grant Findings.
    •   Oversight Monitoring.
    •   Process Efficiencies.

For most of the ten topics in Section 3, the report includes:
    •   Background
    •   Findings from the EPA Perspective ( Major Challenges, Successful Approaches, and
        Recommendations)
    •   Findings from the State/Recipient Perspective ( Major Challenges, Successful Approaches, and
        Recommendations)

All sections are organized similarly but there are some variations depending on the specific topic. As
noted in the list of topics above, Section 3 includes recommendations throughout from EPA and state
participants in the study. Section 4 presents a big picture list of recommendations that SAIC developed
based on the many discussions with those participating in the study. These recommendations may be
helpful in addressing some of the major challenges identified by stakeholders participating in this study.
September 2013                                                                             17

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TABLE 6. FUNDS  MANAGEMENT EVALUATION QUESTIONS WITH  BIG  PICTURE FINDINGS
              OVERARCHING EVALUATION QUESTION - POLICES, PROCESSES AND PROCEDURES
 Policies, processes and procedures
 What funds management policies, processes and procedures helped/ hindered ARRA implementation efforts, and
 why?
 The goal is to identify why policies, processes and procedures helped or hindered ARRA implementation efforts and to
 identify factors that influenced the outcomes.
      DETAILED EVALUATION
           QUESTIONS
                                                         BIG PICTURE FINDINGS
Changed Process. How did initial*
changes made to policies,
processes and procedures affect
the grants management process,
and why?

*lnitial was added to this original
detailed evaluation question to
clarify that the researchers
investigated the earliest changes.
                                       The existing processes and procedures served as a good foundation.
                                       These served as a base in which to incorporate and implement the ARRA
                                       requirements as they were proven effective over years of
                                       implementation. Modifying existing processes made the changes easier
                                       to incorporate/implement.
                                       Planning and development of overall strategy kept efforts focused on
                                       the goals. EPA and state management conducted planning sessions that
                                       developed ARRA implementation strategies that guided the overall
                                       activities and kept the focus on the goals.
                                       Early and frequent communication ensured quick information
                                       exchange.  Pre-ARRA coordination meetings jumpstarted identification of
                                       shovel-ready projects. Early (and frequent) communication among EPA
                                       HQ/Regions, states and funding recipients prior to ARRA being signed
                                       and throughout implementation helped to ensure quick information
                                       exchange to each entity regarding guidance and policy development  and
                                       changes.
                                       Regular collaboration between EPA and states promoted sharing of
                                       lessons learned and rapid adjustments. Regular collaboration through
                                       multi-group conference calls and working groups with EPA and state
                                       participants ensured transfer of lessons learned, early resolution of
                                       issues and  faster development of workable solutions.
                                       Early EPA webinars and distribution of guidance provided for upfront
                                       planning and easy and instant access. EPA teams provided ARRA
                                       guidance early and updated it as necessary for implementation.  Online
                                       trainings/webinars ensured EPA and state staff nationwide had access to
                                       the new and often changing ARRA requirements; however, not all state
                                       staff heard about these in a timely manner.
                                       New and modified databases were crucial to implementation efforts.
                                       New and modified databases were developed to manage the
                                       information and track implementation efforts.
 Evolution of policies, processes
 and procedures. Why and how did
 the ARRA policies, processes and
 procedures evolve over the course
 of implementation?
                                       Guidance evolved throughout implementation. EPA issued revised
                                       guidance to address issues and questions from states and funding
                                       recipients. OIG reports also prompted EPA to revise processes.
                                       New templates streamlined workloads. EPA and state staff developed
                                       templates and checklists to achieve greater streamlining of processes
                                       thus creating efficiencies.
                                       New tracking systems improved data capture. EPA and state staff
                                       modified existing or developed new tracking systems to capture the
                                       more detailed project status information required by ARRA.
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Response to change. What was the
response to changes that
helped/hindered implementation?
EPA and state feedback resulted in better guidance and more efficient
processes.
Rewriting of contracts to incorporate changed language/policy hindered
obligation and expenditure of funds.
EPA's changing of guidance on Davis-Bacon, Buy American, and Green
Project criteria caused delays and more work for EPA and state staff.
ARRA requirements forced some states to re-prioritize SRF project lists.
States follow a standardized process for project selection that ultimately
ranks projects in priority based on public benefit. However, some states
re-prioritized their lists and some projects that were shovel-ready were
funded over priority (public health) projects.
Factors that helped/hindered
What factors helped and/or hindered implementation of policies, processes and procedures, and why?
The goal is to identify how and why factors influenced the outcomes and the challenges that were encountered in
implementation.
     DETAILED EVALUATION
          QUESTIONS
                   BIG PICTURE FINDINGS
Different Outcomes. What factors
contributed to different outcomes
among programs, regions, states,
and projects?
Superfund program adapted easily to ARRA deadlines and
requirements. Superfund faced fewer and smaller challenges in
implementing ARRA than the other EPA programs because of its existing
ready-to-proceed projects waiting for funding; existing large-capacity
contracts with experienced contractors that could rapidly ramp up; Davis-
Bacon requirement processes already in place; and no purchase  of goods
subject to Buy American.
SRF Programs met greater challenges with one year obligation and
additional mandates. Both the DWSRF and CWSRF programs were most
impacted by the challenges of ARRA implementation. For these
programs, the additional mandates, in particular Buy American and Davis-
Bacon requirements, were new to the programs.
Existence of inventory of shovel-ready projects in some states limited
challenges. States that had a sufficient existing inventory of shovel-
ready projects that could use all of the ARRA funds were less impacted.
Intra-agency collaboration assisted in expediting implementation.  EPA
and states that were able to collaborate with the Department of Labor
reduced delays associated with Davis-Bacon.
Assigning experienced and knowledgeable staff led to greater
efficiencies. Departments or offices who assigned seasoned staff with
relevant knowledge experienced greater efficiencies. States that
designated  subject matter experts for specific tasks (e.g.,  Davis-Bacon
specialist) navigated through new requirements more efficiently.
New funding recipients required more EPA and state assistance on
projects. Many small communities or new funding recipients unfamiliar
with EPA program requirements,  unaccustomed to managing projects
and/or without qualified staff resulted in some states and EPA providing
more staff assistance with project management.
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     DETAILED EVALUATION
          QUESTIONS
                    BIG PICTURE FINDINGS
Different Outcomes. What factors
contributed to different outcomes
among programs, regions, states,
and projects?
(continued)
States varied processes for funding projects lead to different
programmatic consequences.  States that directed the funds to a few
projects experienced less workload burden than those that funded many
projects. Some states distributed the funds to as many local communities
as possible while others focused the funds on fewer but larger projects.
Both approaches yielded different programmatic consequences.
The type of project determined the degree of challenge that the funding
recipient faced in meeting ARRA requirements.  The large complex
construction projects were subject to the new ARRA mandates of Buy
American and Davis-Bacon whereas site cleanup projects typically did not
trigger these particular requirements.
Challenges. What factors created
challenges to implementation of
policies, processes and
procedures?
New ARRA mandates created the greatest challenges for states and EPA.
The greatest challenges experienced by EPA, states, and funding recipients
were related to the four new mandates applied to all projects, in
particular in the SRF programs.
Changes to guidance caused more work and delays. EPA and state staff
struggled to keep up with changes or new interpretations of policy and
guidance regarding the mandates thus resulting in delays.
Lack of sufficient existing shovel-ready projects resulted in award delays.
To meet the eligibility criteria, EPA and states solicited or re-solicited for
project applications resulting in extra work and delays in  awarding funds.
The large increase in funding coupled with the short obligation deadline
strained states' capacity levels. Many states received more than double
or triple their usual SRF annual funding allocations at a time when staffing
was constrained by recessionary budgets and the normal timeframe for
obligation was reduced.
States/funding recipients expedited processes only to end up waiting for
EPA decisions. The pre-ARRA planning invigorated states to expedite
processes to meet tight deadlines, but they ended up waiting for EPA
decisions, such as Buy American waiver approvals, GPR business case
approvals or Brownfields project approvals.
Additional ARRA oversight strained EPA and state resources. The
amount of extra oversight was a resource  burden to the states and EPA in
that time spent in reporting on progress, providing information to
auditors/inspectors and responding to audits did not always add value to
the process.  However, in a few instances, oversight clarified some grant
policies and procedures.
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             OVERARCHING EVALUATION QUESTION - SUCCESSFUL APPROACHES TO CHALLENGES
Successful Approaches to Challenges
How were challenges to implementation of policies, processes and procedures overcome?
The goal is to identify what approaches/strategies proved useful in overcoming barriers/obstacles in implementation.
     DETAILED EVALUATION
          QUESTIONS
                   BIG PICTURE FINDINGS
Addressing challenges. How were
challenges associated with new/
changed policies, processes and
procedures identified and
addressed (e.g., conflicting policies,
processes and procedures;
evolving needs; and
requirements)?
To ensure all ARRA funding was awarded, first time SFR applicants were
sought. To find projects, states promoted the SRF programs that pulled
in new localities ('clients') who were previously unaware of the potential
benefits of SRF for their communities.
To ensure all ARRA funds were obligated within their state, waiting lists
of eligible projects were developed. To ensure that all ARRA funds
would be obligated and expended, some states maintained a waiting list
of projects that could receive the ARRA funds if funded projects did  not
use all the estimated ARRA funds.
Rapid and frequent communication by EPA increased its level of
responsiveness to the needs and queries of the states and funding
recipients.
To meet the workload  and short obligation deadlines, everyone from
EPA to states to local vendors worked above and beyond  usual
schedules to meet ARRA goals.  The additional workload at all levels was
handled primarily through round the clock manpower and  sheer
dedication to the success of the program. Some EPA offices and states
dedicated senior personnel to ARRA implementation, making ARRA
projects the chief priority.
The workload and short obligation deadlines necessitated EPA and
states develop program efficiencies and successful approaches. The
ARRA implementation challenges forced EPA and some states to assess
existing programs, develop more efficient processes, alter staffing and
workloads and reprioritize activities. New processes and practical new
ideas were developed within many of the EPA and state programs.
To meet implementation challenges, EPA simplified or streamlined
some aspects of the ARRA requirements to ease burdens  on states and
funding recipients. EPA implemented 'fixes' such as a national waiver to
address a specific product for Buy American and a standardized template
for GPR business case applications.
Different responses to challenges.
How did response to challenges
vary across programs, regions,
states and projects, and why?
Some states modified project selection criteria and approaches. Some
states used existing inventory of projects and reprioritized adding in new
criteria to meet ARRA requirements, while others solicited a broader
range of localities, as well as seeking new innovative projects for Green
Project Reserve requirements.
States varied the timing of contract awards. Some states made
determinations, decisions and awards using EPA's initial policies and
guidance, then were frustrated when policies and guidance changed
causing more work to incorporate latest modifications. Other states
waited to award funds nearer the deadline to incorporate latest policies
and guidance thereby avoiding much of the re-work.
EPA and states used a variety of approaches to address the increased
workload. EPA and many states were reluctant to hire new staff. The
various approaches to the workload issue included altering project
prioritization, dedicating experienced staff to ARRA, assigning one point
of contact, using contractors, and in some cases, making new hires.
States used varied approaches to meet Green Project Reserve
requirements.  Some states required business cases for all GPR projects
even though they were not required for the CWSRF program.
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3.1     TIMELY OBLIGATION/EXPENDITURE OF FUNDS
3.1.1  BACKGROUND

Congress intended for ARRA to quickly stimulate economic activity and therefore placed a 4- or 18-month
deadline on the EPA programs for obligation of funds. The varying obligation deadlines are described in
Table 7 below for each program. For some programs, such as Superfund, this was the first time a deadline
was imposed for obligation of funds. For the CWSRF and DWSRF programs, this shortened their historical
timeframe from two years to one year. The SRF programs encountered the largest timely obligation
burden, as they were responsible for obligating approximately 85 percent of all EPA ARRA funding (EPA,
2010a).2
             TABLE 7. ARRA OBLIGATION DEADLINES FOR EPA PROGRAMS
  SRF (CWSRF & DWSRF)
                                                    OBLIGATION DEADLINES
Projects had to meet the 'timely obligation of funds' mandate, which was defined
as being 'under contract' or 'under construction' by February 17, 2010, one year
after ARRA was signed into law. If a state was unable to ensure that all project
funds were either under contract or under construction by February 17, 2010,
funds were to be reallocated to states that could quickly commit the funds to
projects ready to proceed. All states were able to meet the deadline and all
CWSRF and DWSRF projects were put under contract by the February 17, 2010
deadline so that no funds had to be reallocated to other states (EPA, 2011).
  Superfund
Methods of financial awards included contracts, interagency agreements and
cooperative agreements. All funds had to be obligated by September 30, 2010.
  DERA
The obligation deadline varied depending on the source of the funding (e.g. State
Clean Diesel Grant Program, National Clean Diesel Program, Emerging
Technologies Program, etc.) but all awards needed to be made by June 2009
(EPA, 2010a).
  LUST
States were required to obligate 35% and spend 15% of their ARRA grant awards
within 9 months of the grant award date (by November 17, 2009) (EPA-OIG,
2010).
  Brownfields
ARRA-funded Brownfields cooperative agreements had to demonstrate they had
made sufficient progress within one year of receiving ARRA funds (by Summer
2010). EPA defined sufficient progress to be "reasonable expectations of the
progress that the typical recipient would make in one year." Documentation of
sufficient progress was to be made in quarterly reports, due starting July 30,
2010, with  brief statements backed up with relevant data confirming how they
met criteria for the funding mechanisms used in the Brownfields Program3.
 The CWSRF and DWSRF SRF programs received approximately $6 billion (CW $4 billion and DW $2 billion) or 83
percent out of the entire $7.2 billion in EPA ARRA funding allocations. Brownfields received approximately $100
million; LUST received approximately $200 million; DERA received approximately $300 million; and Superfund
received approximately $600 million (See Figure 1).

 Per Guidance, EPA had to determine by September 1, 2010, if any funding recipients were not  making adequate
progress and take appropriate action under 40 CFR 30.61 and/or 30.62 or 40 CFR 31.43 to enforce the sufficient
progress term and condition.
September 2013
                                                                     22

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 For ARRA, SRFs used their normal process for obligating funds for the CWSRF and DWSRF programs. This
 included state agencies establishing the ranking and prioritization of projects that would receive funding.
 The states' lists of projects typically went through a public review process and were then submitted to the
 EPA Region and EPA HQ. EPA then obligated funds to the states through assistance agreements and states
 provided funding through the loan  program to the projects on the list.  For ARRA, some states had to re-
 prioritize their lists based on shovel-ready criteria.

 In the Superfund and Brownfields programs, for ARRA, EPA Regions essentially coordinated with EPA HQ
 who led the obligation, funds distribution and site selection process. For Superfund, the EPA Regions
 proposed shovel- ready projects to HQ, which finalized the list of Superfund sites to receive ARRA funding.
 For Brownfields and DERA programs, EPA HQ administered national grant solicitations and chose projects
 that fit the requirements of ARRA.

 Finally,  in the LUST program, state agency representatives worked to compile a list of projects for EPA
 Regions to  award ARRA funds.

 As noted above, each EPA program followed a different process for selecting projects and obligating
 funds. It is  important to note, in particular for the CWSRF and DWSRF programs, that the states each  had
 their own way of administering their programs as they were managing them, relatively independently of
 EPA for more than 20 years. ARRA required some changes in processes and procedures, with  both positive
 and negative consequences. EPA and the state perspectives on the consequences are discussed below in
 the Findings sections.

[TIMELY EXPENDITURES

 During data collection relating  to funds expenditure deadlines, the SAIC Team found that both EPA and
 state general understanding of when ARRA funds needed to be spent differed. Some participants were
 unaware of any expenditure deadlines, while others were under the impression that all funds had to  be
 spent by September 2012. Mid-way through the ARRA process, the Office of Management and Budget
 (OMB) announced an expenditure deadline of September 30, 2013; states that did  not expect to meet this
 deadline were required to submit a request for an extension by September 2012. The majority of
 participants in all EPA programs stated that they had already spent more than 90 percent of their funds,
 and some have applied for an extension request for their remaining funds. A small amount of funds have
 been returned to the United States Treasury, in particular from the Superfund program mainly due to
 reduced costs from expedited schedules.
 3.1.2   FINDINGS - EPA PERSPECTIVE -TIMELY OBLIGATION/EXPENDITURE OF
 FUNDS

! MAJOR CHALLENGES - EPA PERSPECTIVE

 The following provides an overview of the major challenges the SAIC Team heard consistently. Appendix 2
 lists additional challenges specifically mentioned by an EPA interviewee but not reflected in this section.

 Completing a large volume of work in a short timeframe: The interviewees noted the main challenge for
 EPA Regions was the sheer volume of work necessary to obligate the ARRA funds, often with no extra
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staffing resources. Not only did most staff have to work extra hours, but their non-ARRA base projects
usually were second priority after the ARRA projects. However, the bulk of the workload seemed to have
fallen on the state agencies, according to EPA Regions. Lastly, interviewees reported that some programs
such as Brownfields and LUST were not accustomed to having tight funding deadlines, so the obligation
requirements were often onerous for these programs.

Distributing ARRA information as quickly as possible to states: EPA staff interviewees indicated that
Regions were stressed and 'under the gun' to complete the ARRA obligations. It was critical to get ARRA
information out as quickly as possible to state recipients. All the administrative details were counted
against the one-year clock. Interviewees noted the states had to set up schedules for public review, final
lists and systems checks to reach their milestones. The EPA Regional staff commented that HQwas
responsive in sending guidance out quickly, and likewise the Regions distributed the information quickly
through emails and conference calls.

Tracking financial progress:  Regional staff reported that the need to continuously check in with grantees
on the progress of obligation was resource intensive. At the same time, EPA Regional staff had to respond
to HQ when there was no apparent progress. This project status inaccuracy was due to a  HQ status
tracking system that was not designed to capture smaller milestones of progress, such  as obtaining the
environmental permit, approval of engineering plans and other phases prior to award that were occurring
at the state level.

Identifying shovel-ready projects: EPA interviewees spoke of the emphasis on selecting 'shovel-ready'
projects for ARRA awards across all programs, with the presumption that these projects could begin to
use ARRA funds quickly. However, many EPA Regions interviewed found that truly shovel-ready projects
rarely existed for programs like the SRFs for which construction was required and Brownfields. EPA HQ
encouraged Regional interviewees to spread the ARRA awards around more equally and fund entirely new
projects in areas with no previous federal grant experience, rather than existing projects that were
actually shovel-ready. It was noted that the goals of funding shovel-ready projects and  funding new
projects were at odds with each other.

Managing inexperienced Brownfields contractors: HQ selected the projects from previous recent
competitive processes and selected the projects that rated highest for ARRA, but not all of the funding
recipients were experienced EPA Brownfields recipients. This presented challenges with regards to
meeting schedules and mandates as these  new contractors had to become familiar with the general
Brownfields EPA federal contracting process, while accommodating the expedited processes and new
conditions. The EPA Regions indicated that they had to provide more assistance to these  new funding
recipients.

Educating states on LUST project eligibility: Normally federal funds in the base grants were used for state
staff salaries in the LUST program, but the ARRA funds were initially allocated for site cleanups only.
States were not familiar with site eligibility criteria, and EPA had to spend extra resources to identify
appropriate sites. For example, the site had to be abandoned or the owner had to demonstrate
bankruptcy to be eligible for ARRA funds.

Showing sufficient progress for expenditures: EPA interviewees noted that it was difficult for funding
recipients, and for the Regions, to demonstrate to EPA HQ sufficient progress in expending project funds
quickly. For example, it is difficult to demonstrate quick progress on a completely new  Brownfields
project; it generally takes two to  three years in normal situations. An already established  Brownfields

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program could have shown progress much more easily in six months, but most projects were new. An EPA
DERA staff member explained that invoices are not submitted and paid until all the work is completed so
few expenditures were seen in the first and second quarters. One Region reported that in an SRF
program, a state identified and awarded projects early but then encountered a three-month delay while
the contracts were amended to incorporate modified conditions for the Davis-Bacon requirements. Other
factors that impacted expenditure rates for all the programs included construction stoppage in winter
months from November to March in some areas and failure of contractors to submit invoices regularly.

Meeting ARRA mandates slowed award process: Regional interviewees noted that their states had
shovel-ready projects before or shortly after ARRA was signed, but awards could not be made until EPA
had developed policies and guidance on the mandates for Buy American, Davis-Bacon, Green Project
Reserve and 1512 reporting. For the LUST program, the Davis-Bacon and Buy American mandates did not
apply to most of the projects, but waiting for EPA guidance to finalize the associated contract
requirements slowed the process for awarding and expending the funds.

Losing shovel-ready status while waiting for award: Regional interviewees commented on feedback from
states that the delays in EPA approval or waiting for EPA policies and guidance on the mandates for Buy
American, Davis-Bacon, Green Project Reserve, and 1512 reporting meant that they lost some shovel-
ready projects that could not wait months for the funding. The Brownfields program experienced delays
in obligation because EPA had to amend contracts to incorporate new mandates as guidance continued to
change; therefore some project assessments and plans had to be updated. These formerly shovel-ready
projects lost their shovel-ready status.

Contending with unanticipated economic barriers to Brownfields projects: HQ placed most of the
Brownfields funds in the Revolving Loan Fund (RLF) assuming that the RLF had the biggest potential for
new jobs. According to EPA interviewees, the Brownfields program expenditure rate was the lowest  of the
programs and attributed this to the lack of interest in site cleanup because the lackluster economy
reduced the demand for re-development.

Meeting deadlines while waiting for pending approvals or decisions: Despite the push to obligate funds
as quickly as possible, EPA Regions recounted that they often had to wait on decisions from EPA HQ. For
example, EPA Regions were required to notify HQ of each ARRA pending award and had a five-day waiting
period before making the award. However, a few EPA Region interviewees commented that they
experienced up to a two-week delay in notifications from HQthat they could proceed. In addition, in
several instances, EPA Regions had to delay their approval of Brownfields projects when OMB released
revised Davis-Bacon guidance; Regions could resume their review and approval only after states revised
their contract language to reflect the new guidance.
September 2013                                                                             25

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                                        ORCHALLENGES-E
                            TIMELY OBLIGATION/EXPENDITURE OF FUNDS
             Completing a large volume of work in a short timeframe
             Distributing ARRA information as quickly as possible to recipients
             Tracking financial progress
             Identifying shovel-ready projects
             Managing Inexperienced Brownfields contractors
             Educating states on LUST project eligibility
             Showing sufficient progress for expenditures
             Meeting ARRA mandates slowed award process
             Losing shovel-ready status while waiting for award
             Contending with unanticipated economic barriers to Brownfields projects
             Meeting deadlines while waiting for pending approvals or decisions
SUCCESSFUL APPROACHES - EPA PERSPECTIVE

The following successful approaches are a summary of those the SAICTeam heard consistently among the
participants.. Appendix 2 lists additional successful approaches specifically mentioned by a participant as
efficient or useful that were not captured in this section.

Existing inventory of projects: By taking projects from the previous year's competition, one Region was
able to have potential project recipients lined up for the DERA program. Superfund used its existing
National Priorities List to fund existing projects that were shovel-ready and new projects that were
waiting for funding. The Brownfields program used a recent competition to identify projects since
typically the program has more projects than funds.

Conditional and partial awards: Some Regions found conditional or partial awards useful to obligate the
funds, while they were continuing to work through issues with the states. Other Regions preferred to
delay the award until the  issues were resolved. A few Regions indicated they do not use conditional or
partial awards; they do not consider these types of awards to be efficient because the staff must continue
following up on the unresolved issues. One Region favored the use of partial funding when everything was
complete except the state's GPR list. So the partial award was set at 80 percent and the Region awarded
the remaining 20% when the state had identified GPR projects for the 20 percent. Another Region
preferred conditional awards that enabled the Region to obligate all of the funds but prevented the state
from drawing down the money until conditions were met.

New tracking tools: A few EPA Regions commented on the development of new tracking systems to help
organize and track the progress of awards. These systems allowed EPA Regional offices  to monitor
recipient milestone completion dates and to 'connect' the EPA Project Officer with the projects
themselves for the first time in a new, efficient way, which in turn helped obligate funds quickly.
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                  Successful Approach Focus: Region 6 - New Tracking Tools

 Existing EPA project status tracking systems were unable to capture milestones that occurred prior to
 award obligation, which inspired Region 6 staff to develop an internal tracking system and procedures
 for monitoring ARRA project status. This new system tracked the projected dates for loan closings,
 contracts executed and construction starts, allowing project officers to identify changes in project
 schedules, recognize milestone dates at which point projects should be entered into the national
 database, and make determinations as to when contingency  plans should be initiated. In addition, this
 new tracking system identified several issues that states and  funding recipients were dealing with that
 may not have otherwise been communicated to Region 6 and EPA Headquarters.
Model funding recommendations: Model funding recommendations were loaded into EPA's Integrated
Grants Management System (IGMS). EPA Project Officers used these pre-populated forms with built-in
template language to process grants. The use of templates had been in practice in some Regions but was
further developed and used throughout EPA for ARRA. The benefits noted by EPA staff included
consistency, efficiency and reduction in errors because of the use of standard language. Another tool
mentioned by DERA staff was a Project Officer tool kit. The tool kit was essentially a large checklist of
procedures to follow in making an award.  It was a comprehensive tool and included links to references on
issues such as Buy American and Davis-Bacon.

Increased communication with states:  According to many EPA interviewees early communication
started during the fall/winter of 2008, prior to ARRA being signed. The early distribution of information
that funneled through to the state levels allowed the states to initiate planning for ARRA and start
identifying shovel-ready projects. EPA Regional  interviewees spoke of weekly meetings during the
obligation period to discuss funds distribution and almost daily communication with the states to answer
questions as they arose. According to EPA interviewees, initiating an open communication channel
between EPA and the states from the start of ARRA implementation was crucial in discussing and
resolving delays in the timely obligation of funds. Most EPA Regions reported that the increased
communication and collaboration with their states improved the Region-state relationship and provided
the Regions with a better understanding of how the states operated their programs. A few EPA
interviewees reported a temporary strain between EPA HQ and EPA Regions or states because of the
constant requests for reports or data.

Retroactive date for cost reimbursements: EPA established the October 1, 2008, date (before ARRA was
signed) to enable costs incurred from that date  to be reimbursed. This allowed projects already in the
pipeline to continue forward rather than be stalled until ARRA was signed.

'Assembly line' to process grants: The DERA HQ office created an 'assembly line' approach to implement
ARRA and assigned  different people different responsibilities, based on each person's skills in order to
process grants quickly, without disrupting normal operations.
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                                   "CESSFUL APPROACHES - E
                            TIMELY OBLIGATION/EXPENDITURE OF FUNDS
              Existing inventory of projects
              Conditional and partial awards
              New tracking tools
              Model funding recommendations
              Increased communication with states
              Retroactive date for cost reimbursements
              'Assembly line' to process grants
! RECOMMENDATIONS - EPA PERSPECTIVE

 The following recommendations are a summary of those the SAICTeam heard consistently among the
 EPA interviewees. Appendix 2 lists additional recommendations reported by EPA but not reflected in this
 section.

 Focus awards towards experienced grantees or existing projects: While the idea of distributing the
 funding as equally as possible may be a favored political strategy, the reality of trying to find shovel-ready
 projects in a pool of applicants that have never worked with federal grants before was extremely difficult,
 particularly for the CWSRF, DWSRF and Brownfields programs. Thus, the participants recommended
 providing grants to recipients that have experience with federal applications or to existing projects that
 can handle additional funding. For example, the Superfund program  had almost no  issues with meeting
 the obligation deadlines, as half of its projects were ongoing. New Superfund projects were shovel-ready
 due to preexisting records of decisions (RODs) and/or because contracts and contractors were already in
 place. For the Superfund program, additional funding expedited remediation schedules without disrupting
 the project.

 Provide more realistic deadlines for 'shovel-ready': While the majority of participants appreciated the
 concept of the obligation deadlines as it forced programs to ensure reasonable productivity, most felt that
 the obligation deadlines were unreasonable. For SRF construction-based projects, the participants
 recommended allowing timeframes that ensure new projects are able to accommodate environmental
 reviews, public hearings, land acquisitions and design. Many EPA interviewees commented that they were
 able to accommodate the majority of these important phases within a two-year time period.

 Finalize guidance upfront: According to some interviewees, one of the reasons for delays in funds
 obligation and expenditure was the need to rewrite contracts based  on  new guidance from EPA HQ and
 OMB. The actual shovel-ready projects were essentially hurt the most by the late guidance, as they had to
 scramble  to change their grant terms with projects already in process and some near completion. It would
 have been easier for EPA Regions to obligate funds in a timely manner if they had received finalized
 guidance  prior to the start of the one-year award period.

 Develop a more detailed tracking system: As mentioned in the  Challenges section,  EPA Regional staff had
 to constantly check in on the progress of award obligations at the state level, as EPA HQ was continually
 requesting status updates from the Regions. EPA interviewees from one EPA program office lamented  the
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 lack of a more detailed funds obligation tracking system, with interim milestones in the obligation process
 at the local level. Tracking progress with interim milestones could have averted the frequent follow-up
 activities that impacted staff daily workloads.
                                    RECOMMENDATIONS - EPA
                            TIMELY OBLIGATION/EXPENDITURE OF FUNDS
              Focus awards towards experienced grantees or existing projects
              Provide more realistic deadlines for 'shovel-ready'
              Finalize guidance upfront
              Develop a more detailed tracking system
 3.1.3   FINDINGS - STATE/FUNDING RECIPIENT PERSPECTIVES -TIMELY
 OBLIGATION/EXPENDITURE OF FUNDS
| MAJOR CHALLENGES - STATE/FUNDING RECIPIENT PERSPECTIVE

 The following provides an overview of the challenges SAIC heard consistently from state focus group
 participants. Appendix 3 provides additional challenges state/recipient stakeholders reported but that are
 not reflected in this section.

 Finding truly shovel-ready projects: Most state respondents mentioned that finding enough projects that
 would be shovel-ready by the obligation deadline (and that would use all of the funds) was a challenge.
 Any type of construction or remediation project for EPA programs such as the SRFs, LUST, and Brownfields
 required extensive planning, preparation of engineering designs, environmental reviews to meet state
 and federal regulations, land acquisitions, resolution of property easement issues, and public hearings.
 For these reasons, regular base program project funds were rarely obligated within one year. For
 instance, the planning phase for CWSRF and DWSRF projects normally lasted two years, with some up to
 five years or more; Brownfields projects could take up to five years or longer. Local governments are
 reluctant to commit resources to planning and engineering a major capital project prior to guaranteed
 funding. Additionally, some projects that would have been more beneficial in terms of environmental and
 human health impacts were not shovel-ready.

 Delays due to additional ARRA mandates: Some states had to develop new contracts to include the
 mandate requirements. Other states had to seek legislative changes to provide state agencies with the
 authority to award subsidies instead of loans. The Buy American mandate required additional approval
 processes on top of the requirements, delaying it further. In addition, shovel-ready projects required
 design specification changes to meet the Buy American mandate. For the Davis-Bacon requirement, the
 government did not have wage determinations for all geographic areas in which funding recipients were
 located. A state participant commented on the effect of ARRA mandates, "Implementing ARRA mandates
 is like adding more gas in the tank (the ARRA funds), reducing the speed limit (adding more
 requirements), and then telling me I need to reduce my travel time by two-thirds!"

 Impediments to obligation caused by existing regulatory requirements: In addition to ARRA mandates
 such as Buy American and Davis-Bacon, some focus group participants noted that they faced several other
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regulatory requirements that impeded timely obligation of funds. For instance, some Brownfields projects
could not move forward before addressing Section 106 of the National Historic Preservation Act, and
many LUST and SRF projects were subject to public comment periods that took weeks or months to
complete. LUST projects at private property sites required additional time for addressing legal ownership
issues before the projects could be deemed shovel-ready.

Inexperienced funding recipients: Many states expressed a preference to distribute the ARRA awards
across the state as equitably as possible, recommending that awards be made to communities that had
never before received federal grants. However, due to the complexity of the federal grant process, and
ARRA grants in particular, state staff across all EPA program areas had to guide inexperienced recipients
through the entire process from application to construction. Without the resources or experience to
manage such projects, sometimes small rural projects faced considerable challenges in meeting the
obligation deadline.

Changes to project selection process: States making changes to their project selection  process
encountered delays because of these changes. A few states did not have sufficient inventory of projects to
use all the funds provided so they had to solicit new projects that often were not 'shovel-ready.' Many
states that elected to distribute the ARRA funds to as many communities as possible received
unexpectedly large number of applications that required time to review and process.

Identifying 'green' projects delayed obligation: The state focus group participants noted that the DWSRF
program was most affected by the requirement to use 20 percent of their ARRA funds on 'green' projects
because this requirement was often at odds with the program's mission of addressing public health as a
priority. The challenge for both CWSRF and DWSRF programs was made more difficult by a lack of
consistent guidance on which types of projects could be considered green. For example, EPA hired
consultants to assist CWSRF and DWSRF projects on site in one state. Sometimes these consultants
informed the SRF program that a certain project met the Green Project Reserve qualifications, while EPA
staff would later decide otherwise, creating delays in funds obligation. In addition, one state commented
that waiting for the EPA Regional approval of their green projects caused delays in issuing the awards.

Waiting for EPA approval: Delays in awarding grants due to waiting for EPA HQ project approval occurred
more often in the Brownfields and LUST programs than other EPA programs.

Increase in number of applications and bids: This challenge applied to both the states and the funding
recipients. The states were receiving a much larger than normal number of applications (one state
received 10 times more than average) and the funding recipients were receiving a huge increase in the
number of bids for the construction work. This significant increase in applications made meeting the
timely obligation mandate much more difficult, as most states and funding recipients did not hire
additional staff to handle the extra workload.
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                           AJOR CHALLENGES - STATES/FUNDING RECIPI
                           TIMELY OBLIGATION/EXPENDITURE OF FUNDS
             Finding truly shovel-ready projects
             Delays due to additional ARRA mandates
             Impediments to obligation caused by existing regulatory requirements
             Inexperienced funding recipients
             Changes to project selection process
             Identifying 'green' projects delayed obligation
             Waiting for EPA approval
             Increase in number of applications and bids
SUCCESSFUL APPROACHES - STATE/FUNDING RECIPIENT PERSPECTIVES

The following successful approaches are a summary of those the SAICTeam heard consistently among the
focus group participants. Appendix 3 provides additional successful approaches state/recipient
stakeholders reported but that are not reflected in this section.

Established efficiencies for base SRF programs: To make their respective programs more efficient, many
state participants found new ways to reduce the time it took to obligate funds. Examples include
switching to electronic applications, and developing new forms, checklists, and tracking databases. One
state mentioned the use of red flags on the ARRA project files to denote priority and another state used
green paper to denote ARRA projects for expedited review and approval. One state now conducts some
environmental and plan reviews concurrently instead of sequentially to save time in the review process.
For example, allowing the  project to proceed with plans and specifications or other application activities
while the environmental review is being conducted.
       Successful Approach Focus: North Carolina 'Revamped' SRF Program Processes

North Carolina used ARRA as an opportunity to 'revamp' its SRF program process, which included
developing more efficient application processes, forms and checklists. In addition, the State
implemented an outreach program through professional organizations and firms to promote the SRF
program and to solicit projects. The North Carolina SRF program acknowledged that under their
previous system, projects often required multiple years of preparation prior to funds obligation. As a
result of improving its processes during ARRA, North Carolina was able to shorten the obligation time
from years to months for the majority of their projects.
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Collaborated with Governors' Office: Some states worked closely with their Governors' Office during the
project selection process for their SRF programs. Some Governors' offices suggested the SRFs spread the
ARRA funds out to as many communities as possible per the spirit of the Recovery Act. This collaborative
effort allowed for some expansion into economically disadvantaged areas, as was a common goal for
Governors, while still meeting the priorities of SRF programs.

Screened projects on readiness to proceed: To address the challenge of finding shovel-ready projects,
some SRF programs conducted a survey of projects on their readiness to proceed. One state developed a
spreadsheet containing the milestones of readiness for each project to help track the progress towards
the demanding timeline. This allowed them to track  the status of each project  and move forward with
those most ready to proceed. Additionally, some states made the decision that they would not make a
commitment to any project until the funding recipient could prove that they had an executed
construction contract. Also, one state reduced the number of applications to review in detail by first
screening for readiness to proceed. Only those applicants demonstrating shovel-readiness received
further review.

Coordinated and communicated early and often: The state participants remarked that strengthened
relationships and collaborative efforts were key factors in meeting the timely obligation deadlines across
all EPA program areas.  Additional opportunities for training and teleconferences created more of a 'hands
on' approach in assisting funding recipients in completing their application or reporting packages. State
focus group respondents noted a closer working relationship with the EPA was established through
periodic meetings, conference calls, conferences and training events that addressed issues and questions
from funding recipients. All of the state focus group  participants commented on their EPA Regions' quick
responsiveness to their questions and issues. However, a few commented that ARRA projects and issues
continued for several years after ARRA but EPA's attention  to these issues did  not appear to be a priority.
                   Successful Approach Focus: Texas Coordinated Task Force

 As soon as they heard about ARRA, the Texas SRF programs put together a task force of engineers,
 financial analysts and attorneys, and developed a plan to tackle ARRA's short obligation deadline. The
 State decided to use their most experienced existing staff on ARRA projects and hired new temporary
 staff to cover their base program. This experienced ARRA SRF team was able to focus on the additional
 ARRA requirements and time constraints in a very efficient manner.
Identified 'rehabilitation' or upgrade-type projects and making provisional awards: One state pursued
rehabilitation projects, as these did not require environmental review or significant design input because
they were primarily replacing pipes. In order to assure that they expended all ARRA funds, the state also
made provisional awards. If extra money became available for whatever reason, this state awarded that
money to projects on their provisional award list.

Developed a back-up list of ARRA projects: Many SRF programs received far more project proposals
during their solicitation than they could possibly fund. However, many projects were completed under
budget due to an extremely competitive bidding environment in the economic recession. In anticipation
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 of some projects not achieving shovel-ready status by the obligation deadline or coming in lower than
 expected, one state prepared a back-up list of projects to meet ARRA's complex requirements in the
 event that funds became available. This allowed one state to redistribute funds quickly to the next project
 on the back-up list, and eliminated the need for EPA to re-obligate any unused funds.

 Distributing ARRA funds as subsidies: Many states created  an  incentive program to assist in meeting the
 obligation deadlines. One state indicated that by providing all ARRA funds as a subsidy, the state did not
 have to conduct credit reviews, thus saving time and resources. In addition some states decided to award
 100 percent principal forgiveness to the first projects to get under contract as a way to provide  an
 incentive for funding recipients to proceed more quickly.

 Reserving obligation until guidance was finalized: Some states lined up their DERA and LUST projects and
 awarded the contracts once they received final guidance from  HQ. This practice prevented the need for
 numerous  contract amendments.
                           CESSFUL APPROACHES - STATES/FUNDING RECIPIEI
                            TIMELY OBLIGATION/EXPENDITURE OF FUNDS
              Established new efficiencies for base SRF programs
              Collaborated with Governor's Office
              Screened projects on readiness to proceed
              Coordinated and communicated early and often
              Identified 'rehabilitation' or upgrade-type projects and making provisional awards
              Developed a back-up list of ARRA projects
              Distributing ARRA funds as subsidies
              Reserved obligation until guidance was finalized
I RECOMMENDATIONS - STATE/FUNDING RECIPIENT PERSPECTIVES

 The following recommendations are a summary of those the SAIC Team heard consistently among the
 focus group participants. Appendix 3 lists additional recommendations reported by focus group
 participants but not reflected in this section.

 Establish reasonable obligation deadline: While the states understood that ARRA funds were meant to
 stimulate the economy, the obligation deadline was seen as arbitrary and 'insane' when coupled with
 reduced state staff levels due to years of budget reductions, the large increase in funds (and projects),
 and the additional new and complicated mandates. A few states questioned whether it would have been
 better for the economy to have a longer sustained stimulus by allowing the funds to be obligated over
 two years rather than one year. One state with a limited number of prime contractors saw the bids
 increase over time as these few contractors were 'in demand' and could bid higher on the later projects.
 The state felt this cost increase would not have happened if the projects were spread over two years.

 Provide EPA guidance on funds distribution: Many states struggled with how to allocate ARRA funds with
 regards to providing part or whole as a subsidy versus the loan. The states stated that they would have
 appreciated guidance on the amounts for principal forgiveness. Some states provided 100 percent
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principal forgiveness funding, while some states allocated it differently. Table 8 shows principal
forgiveness policies for the focus group states. States could have benefited from knowing what other
states were doing.

               TABLE 8.  SRF SUBSIDY GIVEN IN FOCUS GROUP STATES
B
Colorado
Iowa
Louisiana
Missouri
Montana
New
Hampshire
New York
North
Carolina
Oklahoma
Texas
Virginia
Washington
PRINCIPAL FORGIVENESS ALLOCATION
50% of ARRA funding as principal forgiveness
(both SRFs).
50% of their ARRA funding as principal
forgiveness (both SRFs).
100% of funds as principal forgiveness (CW),
30% per project (DW).
Slightly more than 50% of ARRA funding as
principal forgiveness.
$750,000 per project (both SRFs).
100% of ARRA funds as principal forgiveness,
with 50% of each project being funded by
ARRA, while the other 50% as principal
forgiveness with base program funds (both
SRFs).
Most projects received 50% principal
forgiveness.
Approximately 50% of ARRA funding as
principal forgiveness (CW).
30% per project (both SRFs).
50% of projects received 100% principal
forgiveness, 50% received low interest loans
(both SRFs).
100% of funds as principal forgiveness (CW),
most projects received 50% (DW).
60% of ARRA funding as principal
forgiveness, 50% to financial hardship
projects, and 10% to GPR projects (CW). 55%
of ARRA funding as principal forgiveness
(DW).
MAXIMUM CAP ON TOTAL ARRA
FUNDS/PROJECTS (IF APPLICABLE)
Maximum principal forgiveness of $2 million per
project (both SRFs).
Maximum principal forgiveness of $2 million per
project, or $1 million for GPR eligible projects
(both SRFs).
No cap (CW), $1 million maximum per project
(DW).
Each project could receive 50% of project cost as
principal forgiveness up to $3 million (CW)/$2
million (DW), while disadvantaged communities
received 75% of their project cost as principal
forgiveness up to $3 million (CW)/$2 million
(DW).
$750,000 maximum per project (both SRFs).
No cap.
No cap.
Maximum principal forgiveness of $3 million per
project (CW + DW consolidation projects), and
$1.5 million per project (DW non-consolidation
projects).
$2.5 million maximum per project (both SRFs)
No cap.
No cap.
Maximum principal forgiveness for financial
hardship projects was calculated based on
medium household income. For GPR projects, the
maximum was 50% of project cost (CW). No cap
for projects that received principal forgiveness
(DW).
Source: Focus Group Participants

Lessen statutory mandates for faster obligation: States and funding recipients indicated that the Buy
American, Davis-Bacon, and Green Project Reserve mandates slowed down the funds obligation process.
Every state and every program agreed that the best way to get money obligated in the least amount of
time would be to reduce the contracting requirements, rather than including additional requirements.
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Some states recommended assessing the mandates to determine if they could be made voluntary, as
incentives to achieve certain goals.

Provide flexibility and decision-making authority to the states: As one state participant explained, the
success of the existing SRF program over the past two decades is due to the flexibility and independence
the state has in implementing the program. With ARRA states had less flexibility; had to wait for EPA
approval  and decisions and many EPA ARRA processes conflicted with the states' existing processes.
Flexibility is important because it allows each state to tailor the program to the needs of its local
communities.

Finalize guidance before rolling out program: All states recommended that in order to obligate funds as
quickly as possible, guidance must not change after the process has begun. Changes in guidance required
adjustments to contract language, causing delays in obligation. If another ARRA-like spending measure is
implemented in the future, EPA and OMB should finalize all aspects of program guidance before initiating
the program.

Grandfather decisions if policy/guidance must change: All state participants commented on the
frustration with extra workloads and delays caused by the changing nature of the guidance on meeting
ARRA's additional requirements. New interpretations of guidance delayed the initiation or completion of
projects,  especially if contracts were already signed or construction had already begun. While most states
understood that EPA was doing its best to convey new guidance published by OMB, they felt that work
already completed and contracts finalized prior to the publication of new guidance should be
grandfathered to avoid time-consuming contract modifications.

Manage expectations of potential additional funds: Several states commented on their disappointment
in not receiving additional funds after they identified additional projects at EPA's suggestion. The states
were encouraged by their EPA Regions to identify additional projects that could be funded should other
states not meet their obligation deadlines. The EPA Regions, aware of the requirement to re-obligate the
funds, wanted to have projects lined up for the re-obligated funds.

Consider advising states to alter their loan program to shorten the period of time when funds are
unobligated or unspent: Since ARRA one state has changed its loan program to reduce its unobligated
funds time period by separating out the planning and design stage from the construction stage. Now
there is a two-step funding  process in which the state provides a smaller loan for the planning and design
phase of the project and then when the project is ready to proceed with construction, the state issues the
larger construction loan. Another state had a similar program in existence prior to ARRA. This may be a
helpful approach for other states.
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                          ECOMMENDATIONS- STATES/FUNDING RECIPIENT
                           TIMELY OBLIGATION/EXPENDITURE OF FUNDS
             Establish reasonable obligation deadline
             Provide EPA guidance on funds distribution
             Lessen statutory mandates for faster obligation or use mandates as incentives
             Provide flexibility and decision-making authority to the states
             Finalize guidance before rolling out program
             Grandfather decisions if policy/guidance must change
             Manage expectations of potential additional funds
             Consider advising states to alter their loan program to shorten the period of
             unobligated or unspent funds
3.1.4   SUM MARY-TIM ELY OBLIGATION/EXPENDITURE OF FUNDS

EPA and states were remarkably successful in obligating and encouraging expenditure of funds to meet
demanding ARRA schedules, despite many challenges. Identifying 'shovel-ready' projects was difficult in
some states. Some states maintained back-up lists of shovel-ready projects to have ready substitutes if
necessary. Bringing aboard new funding recipients unfamiliar with SRF processes required additional
guidance and oversight. Adjusting to tight obligation deadlines and evolving guidance on funding
deadlines and other ARRA mandates were problems mentioned by numerous study  participants. States
streamlined their program application and approval processes to expedite awards. States recommended
that deadlines be made more reasonable, with guidance finalized before the obligation effort began.
Because some of the ARRA mandates slowed down the funding process, states recommended assessing
the mandates to determine if they were necessary or if they could be made voluntary, as incentives to
achieve certain goals.
3.2
BUY AMERICAN  MANDATE
3.2.1   BACKGROUND

Section 1605 of ARRA, commonly known as the 'Buy American' provision, requires the use of American
iron, steel, and manufactured goods for the construction, alteration, maintenance, or repair of a public
building or public work. Buy American allows for certain exceptions, where 1) using American-made goods
would be inconsistent with the public interest, 2) American-made goods are not produced in the United
States in sufficient and reasonably available quantities, or 3) using American-made goods would increase
the overall cost of the project by more than 25 percent. EPA released guidance on how projects were to
comply with Buy American and how to apply for a waiver if necessary (OMB, 2009a).

SUBSTANTIAL TRANSFORMATION

While determining whether a raw material was made in the United States was rather straightforward,
determining whether a manufactured good is American-made was much more complicated. A
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 manufactured good consists of a combination of multiple raw materials, which may or may not have all
 been American-made. OMB's guidance for verifying whether a manufactured good was American-made
 required determining whether the good had undergone 'substantial transformation' within the United
 States. EPA released a nine-page guide on the determination of'substantial transformation.' The guidance
 states that a manufactured good that contains foreign-made materials can still be eligible under Buy
 American if the good has been substantially transformed in the United States into "a new and different
 manufactured good distinct from the materials from which it was transformed." The guidance document
 offers some examples and outlines the responsibility of the recipients to make substantial transformation
 determinations (EPA, 2009a).
 USE OF "DE MINIM IS" COMPONENTS

 To assist the SRF programs in meeting the Buy American requirements, EPA issued a national waiver for
 SRF projects allowing the use of non-American iron, steel, and manufactured goods when they occur as de
 minimis incidental components in ARRA-funded projects where such components cumulatively comprise
 no more than a total of five percent of the total cost of materials used in and incorporated into a project.
 In this case, incidental was defined as miscellaneous in character, low cost individually and typically
 procured in bulk. EPA issued this waiver after ARRA had already been enacted, as initial feedback made it
 clear that such a waiver was practical (EPA, 2009b).

| BUY AMERICAN  AND INTERNATIONAL TRADE AGREEMENTS

 The Recovery Act provides that Buy American requirements "be applied in a manner consistent with U.S.
 obligations under international agreements," meaning that Buy American did  not need to be applied
 when an entity (country, state, city) was party to an international agreement for projects with a  total cost
 of $7,443,000 or more (OMB, 2009a). OMB's official guidance published in the Federal Register (FR)
 included 12 pages of information on each state's trade agreement applicability, including the World Trade
 Organization  Government Procurement Agreement, North American Free Trade Agreement (NAFTA) and
 several other free trade agreements that the United States has in place with other countries. However,
 because the CWSRF and DWSRF programs are not direct procurement programs, international trade
 agreements did not apply, except for seven individual cities that entered into their own agreements.
 BUY AMERICAN WAIVER PROCESS

 EPA established a multistep waiver approval process for projects needing a waiver for any of the three
 reasons listed above. This approval process, outlined in Figure 5 below, is a sequential review process that
 starts when the funding recipient submits a waiver application to their EPA Regional office for a
 completeness review. The EPA Regional office sends the complete waiver to an EPA HQ contractor for a
 technical review. A technical review report is sent back to the EPA Region and if a waiver can be granted,
 the EPA Region prepares the draft FR waiver notice. The draft FR waiver notice then goes sequentially to
 EPA HQ, the Office of General Counsel (OGC), the EPA Grants Office, and then to the Office of
 Administration and Resource Management (OARM). Then it is returned to the Region for FR publication.
 EPA set a goal of two weeks from receipt of a completed waiver package to complete this waiver process.

 Because Buy American only applies to iron, steel, and manufactured goods, this mandate affected certain
 EPA programs significantly more than others. For instance, the CWSRF and DWSRF projects almost always
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required the use of manufactured goods for projects like the construction of wastewater/water treatment
plants, pipe replacements and sewer system upgrades. Brownfields and LUST programs mostly dealt with
remediation projects, though manufactured goods were needed in small quantities, so a few of these
projects needed to abide by the Buy American mandate. During the data collection process, the SAIC
Team did not hear of any situations where Superfund and DERA projects were subject to Buy American
requirements. Table 9  below indicates the likelihood of the Buy American mandate applicability to
proposed projects in each EPA program. The SAIC Team reviewed all 92 Buy American waiver approvals
(out of approximately  100 applications in total of the approximately 3,000 projects as of the end of 2012),
from both the CWSRF and DWSRF programs and discerned no general pattern with regard to type, size, or
location of projects most likely to request a waiver.
                        FIGURE 5. BUY AMERICAN WAIVER PROCESS
                              Product requires waiver
                                     T
                 | Recipient prepares waiver application with justification |
           Waiver application sent to EPA Region to be reviewed for completeness
        EPA Region sends waiver application to EPA HQ contractor for technical review^
       Contractor writes up technical approval of waiver and sends to EPA Region and HQ |
           The Region prepares waiver notice for the Federal Register, the Regional
        Administrator reviews waiver for concurrence, and then sends draft to EPA HQ
       | EPA HQ reviews draft waiver notice and then forwards it to the OGC for review |
                OGC sends waiver notice to the EPA Grants Office for review
            EPA Grants Office sends waiver notice to the Office of Administration
                   and Resource Management (OARM) for concurrence
Approximately
   2 weeks
               After OARM approval, waiver notice is sent back to EPA Region
                           and published in Federal Register
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      TABLE 9. PROGRAMS MOST LIKELY TO TRIGGER BUY AMERICAN MANDATE
             CWSRF/DWSRF
                                           LIKELIHOOD OF APPLICABILITY OF
                                              BUY AMERICAN MANDATE
Very High
             Superfund
  Low
             DERA
                                                       Low
             LUST
                                                       Low
             Brownfields
                                                       Low
3.2.2   FINDINGS - EPA PERSPECTIVE - BUY AMERICAN MANDATE
MAJOR CHALLENGES - EPA PERSPECTIVE

The following provides an overview of the major challenges the SAIC Team heard consistently. Appendix 2
lists additional challenges reported by the Regions but not reflected in this section.

Developing new processes and guidance for a new complex requirement: Buy American was challenging
for both EPA and funding recipients because (1) significant research was required for someone proposing
a project that used steel, iron, or manufactured materials; (2) EPA had to develop a waiver process
because it did not have one in place; and (3) EPA had to define/interpret ARRA terminology such as
'substantial transformation' and 'percent of composition.' In addition some EPA staff commented on the
challenge of drafting and issuing the guidance in a timely manner as it required so much research and
legal analysis.

Ensuring consistent interpretation of guidance: Most EPA Regional staff commented that the biggest
difficulty in  implementing the Buy American mandate was interpreting the guidance consistently for all
programs and stakeholders. For example, states and funding recipients had to use judgment in
interpreting what constituted 'substantial transformation,' which could lead to inconsistent decisions.
Although the process was set up to approve/disapprove waiver requests, there were instances in which a
funding recipient had expected  approval, only to have the waiver request rejected at the EPA HQ level
some time later. At the same time, OIG made Buy American-related decisions during their audits that
conflicted with EPA Regional staff and/or HQ staff decisions. This increased confusion and further delayed
the completion of SRF projects.

Developing guidance for each EPA program: While the Buy American mandate applied largely to CWSRF
and DWSRF projects, there were a few instances in which the mandate applied to LUST and Brownfields
projects. These other EPA programs were not as involved as the SRF programs in the guidance updates
and discussion meetings.
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                                        ORCHALLENGES-E
                                         BUY AMERICAN
              Developing new process and guidance for a new complex requirement
              Ensuring consistent interpretation of guidance
              Developing guidance tailored to each EPA program
! SUCCESSFUL APPROACHES - EPA PERSPECTIVE

 The following successful approaches are a summary of those the SAICTeam heard consistently among
 EPA participants. Appendix 2 provides additional successful approaches reported  by EPA but not reflected
 in this section.

 Buy American Working Group: EPA HQ organized a 'Buy American Working Group' consisting of Regional
 staff that met regularly to share information related to complying with the Buy American mandate. Many
 EPA interviewees stated that these calls were very helpful, as they allowed different Regions to
 collaborate and 'hash out' the most challenging issues.

 National waiver for a product common to several projects: In monitoring waivers received by the
 funding recipients for several projects, EPA HQ recognized that at least eight waivers dealt with a small
 motor of low horsepower that was not available in United States. EPA grouped these waivers together to
 issue one national waiver.
           Successful Approach Focus: EPA Headquarters - Waiver Tracking System

 EPA HQ designed and updated a weekly tracking spreadsheet table to identify delays and to monitor
 projects requiring waivers. This table was updated and used by various contractors working at EPA and
 was distributed through its own email inbox. Whenever a project's waiver status was updated, the
 system automatically sent a new email so all recipients knew there were updates. This was especially
 helpful because staff/contractors moved in and out of the process. Additionally, EPA staff could use this
 tracking sheet when making decisions on requests, in particular if a product previously received a
 waiver.
 Traveling to states and project sites to assist funding recipients: EPA Regional staff used the M&O funds
 to travel to state offices and project sites to provide guidance on the Buy American provisions. Many EPA
 interviewees commented on the usefulness of this face-to-face communication in meeting the unique
 demands of ARRA-funded projects. Interviewees stated that the meetings limited possible non-
 compliance and strengthened relationships between EPA and the states, further improving the
 collaborative work effort throughout ARRA implementation.
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                                   UCCESSFUL APPROACHES - EP/
                                         BUY AMERICAN
             Buy American Working Group
             National waiver for a product common to several projects
             Waiver Tracking System
             Traveling to states and project sites to assist funding recipients
RECOMMENDATIONS - EPA PERSPECTIVE

The following key recommendations are a summary of those the SAICTeam heard consistently among the
participants. Appendix 2 provides additional recommendations reported by EPA but not reflected in this
section.

Clearly defined guidance: Several Regions recommended a clearly defined set of guidelines for
interpreting Buy American issues enabling all stakeholders (e.g., OIG, EPA Regions, EPA HQ, contractors
and funding recipients) to make consistent decisions, resulting in less confusion and projects moving more
quickly.

Streamlined waiver review process: The Buy American waiver review process involved multiple reviews
at several hierarchical levels and sometimes took longer to complete than EPA's two-week goal..  One EPA
program interviewee recommended that the waiver review process be streamlined to allow for a  much
faster waiver process. This would not only reduce the effort required to produce a waiver, but would also
assist the SRF programs in completing their projects in a timelier manner.

Ability for Regions to view waiver request information in all Regions: The Regions noted that it would
have been useful to have access to all the waiver requests.  HQ researched each product to ensure no U.S.
product was available;  if they found a U.S. supply, they communicated this information to the specific
Region. Such information would have helped staff in other Regions, who were receiving and/or assisting
the states with similar  Buy American waiver  requests.
             Clearly defined guidance
             Streamlined waiver review process
             Ability for Regions to view waiver request information in all Regions
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 3.2.3   FINDINGS - STATE/FUNDING RECIPIENT PERSPECTIVES - BUY AMERICAN
 MANDATE

| MAJOR CHALLENGES - STATE/FUNDING RECIPIENT PERSPECTIVES

 The following provides an overview of the major challenges SAIC heard consistently from state focus
 group participants. Appendix 3 provides additional challenges reported by states and funding recipients
 but not reflected in this section.

 Implementing Buy American without guidance: Every state focus group expressed frustration with trying
 to understand the guidance for the Buy American mandate. First, the guidance did not come out until
 three months after the CWSRF and DWSRF programs had started the funds obligation process. Without a
 proper understanding of the Buy American requirements, contractors found it difficult to produce final
 design specifications and issue requests for bids. Once guidance was released, several project design
 specifications and contracts that had already been signed needed to be changed.

 Interpreting the guidance: EPA provided webinars and training sessions through a contractor, but several
 aspects of Buy American such as 'substantial transformation' were not clearly defined during these
 trainings. The webinar presenters did not appear to  understand the terms completely and could not
 answer questions. In October 2009, EPA released a nine-page explanation on determining whether
 substantial transformation had occurred in a manufactured good. In the explanation, EPA states that the
 responsibility of determining whether substantial transformation had occurred was placed solely on the
 CWSRF and  DWSRF funding recipients, and that EPA would not make any determinations. Placing the
 burden of such a complicated determination directly on recipients resulted in a variety of interpretations
 with recipients not fully understanding the concept.

 Responding to inconsistent interpretations by EPA: State participants commented that
 contractors/consultants hired by EPA to provide on-site assistance to SRF projects approved products as
 compliant under Buy American, only to have the product later rejected in an EPA HQ review process. In
 other instances, the Regional EPA office made determinations that were different than that of compliance
 review contractors and EPA HQ. As the SAIC Team was holding focus groups, some states were still
 undergoing  or had recently completed OIG compliance reviews in which OIG identified non-compliance
 with Buy American in instances that had been previously approved by EPA HQ.

 Understanding international trade agreements applicability: All focus group state participants did not
 understand  initially how the requirements were affected by adherence to international trade agreements.
 While OMB  published a six-page table in the FR that attempted to define whether states and local
 municipalities were subject to certain international trade agreements, the information was so confusing
 that participants simply adhered to the Buy American rules in order to avoid non-compliance. Many focus
 group participants acknowledged that they understood after  rounds of interpretation from EPA and
 experts post-ARRA. Several focus group participants also stated that EPA Regional staff were unable to
 answer questions related to trade agreements.

 Additionally, participants near the U.S. border with Canada had long-term relationships with Canadian
 manufacturers that were impacted by the sudden change in policy. On February 16,  2010, the United
 States reached an agreement with Canada  that allowed Canadian-made goods to qualify under Buy
 American for ARRA-funded projects. However, this agreement came one day before the end of the SRF
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award obligation deadline, and thus had little impact on the majority of projects in which all funds were
already obligated.

Losing clients: Many states reported that some project applicants walked away from the ARRA funding
opportunity or indicated they would not return due to the burdens of this mandate. They stated that
compliance with Buy American (and Davis-Bacon) added costs to the projects and many former clients
turned to the private market for low interest loans. It is important to note that this sentiment was not
universal, as some states also experienced increased  interest in their loan program, especially when
principal forgiveness was involved.

Experiencing a strain on limited resources: The states and funding recipients were challenged by the
paperwork required by EPA to prove a product's conformance with the Buy American mandate, including
vendor certifications, steel mill logs and waiver requests. In order to meet these requirements, the states
often consulted  several different types of staff, including engineers, lawyers and finance experts within
EPA and their own organizations. EPA initially committed to a two-week turnaround for waiver
determination, but state participants remembered situations taking months for a determination. In
addition, a few state participants noted that other federal agencies did not require as much paperwork as
EPA with regard to the burden of proof required for a product's Buy American eligibility. This fact was
evident in several CWSRF and DWSRF projects that were funded jointly by EPA and the United States
Department of Agriculture's Rural Development Agency or other federal agencies funded by ARRA.

Dealing with negative consequences of decision to purchase American products only: Some states and
funding recipients found the Buy American waiver process or determining whether a product met the
definition of substantial transformation or de minimis was simply too resource intensive. As a result, these
states and funding recipients made every effort to only purchase American-made products, even if foreign
alternatives were less expensive or of better quality. Several states mentioned that contractors at times
used a substandard American-made product in place of a higher quality foreign-made product due to  the
restrictive Buy American requirements. A few states commented on the negative long-term impacts
having already received notices from funding recipients of certain products failing or needing
maintenance due to the lower quality. One state reported at least one product failure and replacement of
parts. In these cases, the product was not cheap enough to fall under de minimis waiver, did not readily
fall under the realm of any of the other waiver categories, or the time and cost required for submitting a
waiver was prohibitive.  However, as shown in the "Leveraging Funds Report", many  recipients took the
opposite perspective and used Buy American requirements as an economic opportunity, such as opening
U.S. supply houses of products.
                          MAJOR CHALLENGES - STATE/FUNDING RECIPIENT
                                         BUY AMERICAN
            Implementing Buy American without guidance
            Interpreting the guidance
            Responding to inconsistent interpretations by EPA
            Understanding international trade agreements applicability
            Losing clients
            Experiencing a strain on limited resources
            Dealing with negative consequences of decision to purchase American products only
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 SUCCESSFUL APPROACHES - STATE/FUNDING RECIPIENT PERSPECTIVES

 Overall, state participants did not highlight any major successful approaches at the state and recipient
 level as related to the Buy American mandate but did identify at least one approach used to ensure
 implementation.

 Exclude the purchase of electronics with ARRA funds: Some funding recipients, after being unable to find
 American-made electronic equipment that worked for a project, modified the project so that the
 electronic, foreign-made equipment was excluded from the ARRA project design and was purchased
 separately at a later date, after the ARRA project was completed. This allowed the contractor to save the
 time and resources needed to apply for a waiver and complete the job on time.
                        SUCCESSFUL APPROACHES - STATE/FUNDING RECIPIENT
                                         BUY AMERICAN
              Exclude the purchase of electronics with ARRA funds
! RECOMMENDATIONS - STATE/FUNDING RECIPIENT PERSPECTIVES

 The following recommendations are a summary of those the SAICTeam heard consistently among the
 focus group participants. Appendix 3 lists additional recommendations reported by focus group
 participants but not reflected in this section.

 Make Buy American apply to iron, steel and other major materials only: A recommendation echoed in
 several states was to have Buy American only apply to major construction materials such as iron, steel and
 cement, since these materials are readily available in the United States, and make up the bulk of a
 construction project. High technology products that were difficult to find in the United States, such as
 pumps, computers and gauges were usually just a small percentage of the material input for a project, but
 often cost more than the de minimis threshold of 5 percent, and were therefore subject to the Buy
 American requirements.

 Develop a pre-approved list of products: Almost every state recommended that EPA maintain a website
 with a list of pre-approved Buy American products. Such a site would save time and resources, as well as
 assist funding recipients with estimating project costs.

 Increase de minimis waiver threshold to minimum 10 percent: Several focus group participants
 commented on the usefulness of the de minimis waiver but recommended that the threshold for
 requesting a de minimis waiver should have been higher than 5 percent of the project cost, perhaps at
 least 10 percent of the project cost. Many electronic goods were not available in the United States but
 represented more than 5 percent of the project cost. A higher de minimis threshold would allow projects
 to proceed without the time-consuming waiver request process.

 Waiver for product not project: The Buy American rules applied to only a  specific  project, not universally
 to the product itself. As a result,  even if one funding recipient received a waiver for one project's
 products, another funding recipient using that same product would still need  to apply for a separate
 waiver. A few focus group participants recommended that Buy American waivers be applied for products
 themselves and not be project-specific. HQ realized this early on, but explained that a product-specific
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waiver was not always possible, because of the nature of the statutory exemptions. For example, one
statutory exception allows the use of non-American goods if using American-made goods would increase
the overall cost of the project by more than 25 percent. Twenty-five percent of one project may be a very
different figure from 25 percent of another project; therefore, a blanket product exemption would not
necessarily comply with the statutory exemptions. The use of the more expensive American-made
product in one project may result in a 25 percent increase in project costs, but in another project, the use
of the American product may not trigger the 25 percent exemption threshold.

Make Buy American a goal not a  requirement: Some focus group participants stated that they
understood Congress including Buy American as a way to promote American jobs, but they felt that it
should have been a goal and not a requirement. The participants noted many instances in which the Buy
American requirements were so resource intensive and time consuming that projects were delayed
simply to meet the requirement.
                                        BUY AMERICAN
             Make Buy American apply to iron, steel and other major materials only
             Develop a pre-approved list of products
             Increase de minimis waiver threshold to minimum 10%
             Waiver for product not project
             Make Buy American a goal not a requirement
3.2.4   SUMMARY-BUY AMERICAN MANDATE

While support for the concept of buying American-made products was strong, many participants in the
study noted that the process to comply with the Buy American mandate was very complicated and time-
consuming. In addition, changing guidance added to the frustration. Some states chose to buy only
American-made products, even if they were of lower quality or more expensive, to avoid the potential
time delays associated with the waiver process. States made several suggestions on possible
improvements, such as excluding 'manufactured goods,' excluding electronic items, maintaining a website
with an approved projects list, and making Buy American a goal rather than a mandate.
3.3
DAVIS-BACON MANDATE
3.3.1   BACKGROUND

Section 1606 of ARRA, the Davis-Bacon Act mandate, applies to federally-funded projects in excess of
$2,000 that involve construction, alteration or repair of public buildings. Agencies must include this
provision in federal contracts, requiring that contractors or sub-contractors are paid no less than the local
prevailing wages and fringe benefits to laborers and mechanics working on the projects.  Because each
state had a different state prevailing wage law, there were differences in challenges and  outcomes for
each state.
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  Prior to ARRA, only two EPA programs - Brownfields and Superfund - applied Davis-Bacon requirements.
  The CWSRF, DWSRF, LUST and DERA programs did not have Davis-Bacon requirements built into their
  appropriations until ARRA. Table 10 below provides a summary of Davis-Bacon Act applicability. While
  DERA is subject to Davis-Bacon, most DERA projects did not trigger the requirements because they did not
  involve construction.

        TABLE 10. APPLICABILITY OF  THE DAVIS-BACON ACT TO EPA PROGRAMS

EPA PROGRAM
SRFs
LUST
Brownfields
Superfund
DERA

APPLICABILITY TO PROJECTS
Projects that involve construction, alteration or repair of public buildings.
Projects that involve installation of piping to connect businesses or households to public water
supply systems.
Soil excavation when undertaken in conjunction with the installation of such public water lines.
Soil excavation or concrete pouring that occurs in conjunction with tank removal or concrete
replacement.
Projects that involve sites contaminated with hazardous substances and require construction,
alteration or repair activity including:
• Excavation and removal of hazardous substances;
• Construction of caps, barriers, and structures which house treatment equipment;
• Installation of piping to connect households or businesses to public water systems;
and/or
• Soil excavation or concrete pouring that occurs in conjunction with tank removal or
concrete replacement.
Infrequent, but whenever construction is required.
Infrequent, but whenever construction is required.
Source: EPA Interim Davis-Bacon Guidance, Undated. [Note: This is the most recent guidance published on EPA's website.]
 ! ARRA AUDITING REQUIREMENTS

  The ARRA mandate also required auditing of Davis-Bacon documentation and information. EPA and state
  staff were responsible for auditing documentation to ensure that funding recipients paid prevailing wages
  to laborers and mechanics. Documentation review consisted of comparing worker pay stubs to the
  Department of Labor (DOL) wage lists via an on-line wage determination query tool called Wage
  Determinations OnLine website at wdol.gov. Users entered their location, construction type or wage
  determination (WD) number, and the website provided the prevailing wage for a certain job type in a
  certain county. Each state has its own unique set of hundreds of WD numbers for each type of labor, but
  there are only four construction types under Davis-Bacon: Building, Heavy, Highway and Residential. The
  website did not allow the user to search by labor category, only by county and construction type, so a
  user was required to scroll through the database if they were not already familiar with the numbers
  system. In instances where wdol.gov did not have a wage determination for a specific locale, EPA
  instructed recipients to contact DOL for additional assistance.

  After making wage determinations, contractors and subcontractors were required to post the wage
  determinations at the work site along with a DOL Davis-Bacon poster in a prominent and accessible
  location. States needed to retain weekly certified payrolls from all contractors employing laborers and
  mechanics identified by DBA as requiring a prevailing wage for at least three years. States also needed to
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  periodically review the contractors' certified payrolls and interview workers to ensure payroll accuracy.
  States were required to immediately report any violations to the EPA DBA coordinator (EPA,  Undated).
  Table 11 below displays a summary of each involved party's responsibilities related to the DBA
  requirements.

                TABLE 11.  DAVIS-BACON  ACT RESPONSIBILITIES BY PARTY
  DDL
Maintain on-line wage determination website
Troubleshoot wage determination issues
  EPA
Provide guidance to funding recipients
Receive reports of Davis-Bacon violations
  States/Primary
  Recipients
Provide guidance to funding recipients and contractors
Ensure Davis-Bacon requirements are written into award and construction contracts
Obtain wage determinations from wdol.gov
Retain weekly certified payrolls records for three years
Periodically review payroll records
Interview workers for payroll record accuracy
Report Davis-Bacon violations to EPA
  Funding
  Recipients/
  Contractors
Ensure workers are being paid correct prevailing wages as determined by the DOL wdol.gov
website
Retain certified payroll records
Participate in interviews
Post wage determinations and DOL Davis-Bacon poster in prominent location at job site
Source: EPA, Undated. [Note: This is the most recent guidance published on EPA's website.]
  3.3.2   FINDINGS - EPA PERSPECTIVE -  DAVIS-BACON MANDATE
  MAJOR CHALLENGES - EPA PERSPECTIVE

  The following provides an overview of the major challenges the SAIC Team heard consistently or were
  specifically mentioned by interview participants. Appendix 2 lists additional challenges reported by the
  participants but not reflected in this section.

  Developing new processes and guidance for a new complex requirement: EPA interviewees noted that
  Davis-Bacon was a new requirement for the CWSRF, DWSRF, LUST and DERA programs that required new
  guidance and policy from EPA. Many EPA interviewees indicated that the task of providing guidance on all
  of the additional requirements was one of the bigger challenges of ARRA.  Much of the guidance came
  from EPA HQ. The LUST and DERA program interviewees indicated that, because of the nature of project
  work performed (e.g., no construction, alteration or repair),  Davis-Bacon did not present the challenges
  that their colleagues in the CWSRF and DWSRF programs encountered. Participants from the CWSRF and
  DWSRF programs commented that the Davis-Bacon requirements were difficult to apply because of the
  diversity and complexity of the project work performed. EPA interviewees expressed frustration with
  regards to understanding existing Davis-Bacon regulations from the DOL that had  never been applied to
  the SRF, DERA, and LUST programs, as well as with responding to the states/funding recipients' questions.
  September 2013
                                                                              47

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 One interviewee commented that interpretations of Davis-Bacon seemed counter-intuitive. For example,
 it might apply to Superfund sites for excavation activities, but might not apply to a LUST site excavation
 unless concrete was removed. In addition, interviewees observed confusion and project delay when trying
 to determine whether it applied to LUST projects that had cleanup components, which might trigger the
 requirements.

 Interpreting Davis-Bacon guidance from HQto states: EPA respondents found it challenging to interpret
 new complicated policy from OMB and DOL to states that were also new to this provision. Interviewees
 mentioned that EPA Project Officers were not always experienced with Davis-Bacon requirements and
 had to work with the DOL on specific issues; furthermore, the DOL had no previous guidance on how
 Davis-Bacon applied to CWSRF and DWSRF projects. States and funding recipients were not always
 available for webinars,  and on-line documents were complex and confusing to some state employees.

 Coordinating with Department of Labor: EPA interviewees reported that coordinating with a separate
 federal agency to obtain key information such as wage rates was complicated and difficult at times.
 Regions (and states) differed with their experiences, but the majority of respondents encountered
 difficulties in obtaining information in the timely manner needed to meet their ARRA obligation deadlines.
 Some Regional interviewees had positive experiences. In one Region the DOL regional office provided
 training to funding recipients. One interviewee noted that a DOL staff member assisted the LUST program
 with  DB labor categories for individual projects. Another interviewee mentioned feedback from states
 that on-site ARRA project visits by DOL were very helpful in explaining Davis-Bacon  requirements and
 appropriate documentation.

 Waiting for labor categories and wage determinations for mostly rural areas: EPA interviewees noted
 that the DOL did not have all labor categories available on  their websites. EPA, states and funding
 recipients had to wait for the DOL to provide labor categories and wages information, which caused
 delays, primarily in rural areas. The DOL websites still do not list every location.
                                    MAJOR CHALLENGES - EPA
                                          DAVIS-BACON
             Developing new processes and guidance for a new complex requirement
             Interpreting Davis-Bacon guidance from HQto states
             Coordinating with Department of Labor
             Waiting for missing labor categories and wage determinations for mostly rural areas
! SUCCESSFUL APPROACHES - EPA PERSPECTIVE

 The following successful approaches are a summary of those the SAICTeam heard consistently among the
 EPA interviewees. Appendix 2 provides additional successful approaches reported from the EPA
 interviews but reflected in this section.

 Re-directing staff for Davis-Bacon specific tasks: EPA delegated staff for specific ARRA responsibilities.
 Each Regional office usually assigned one person dedicated to Davis-Bacon issues. This provided states
 with a point of contact for specific questions and concerns related to Davis-Bacon.
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48

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Early training by HQ: EPA contractors provided training to EPA, states, funding recipients and contractors
on how to modify their processes to incorporate Davis-Bacon requirements.
                   Successful Approach Focus: SRF Region 4 - On-site Visits

EPA Region 4 used ARRA M&O funding to conduct on-site project visits to assist recipients in meeting
DBA requirements. During on-site visits, DBA documentation was reviewed and concerns were
discussed. EPA staff were able to establish and/or build closer relationships with their states and
funding recipients, which provided a platform for more open communication and better understanding
of DBA issues.
Checklists for state recipients: Checklists from the DOL and EPA were tangible tools that states could
work with to implement Davis-Bacon requirements. EPA Regional staff used these checklists during on-
site visits with states to clarify Davis-Bacon issues and guidance. States were thus equipped to perform
their own funding recipient site visits after receiving instruction during EPA Regional visits.

Productive relationship with Department of Labor: Interviewees from one Region reported that they did
not have much experience with Davis-Bacon requirements (similar to many other Regions), but they
developed a productive relationship with a contact at the DOL who provided extremely helpful and timely
assistance in dealing with Davis-Bacon questions. The EPA HQ Davis-Bacon contact was so busy with other
requests that responses could take time, so the strong relationship with  DOL was an excellent resource.
                                 SUCCESSFUL APPROACHES - EPA
                                         DAVIS-BACON
             Re-directing staff for Davis-Bacon specific tasks
             Early training by HQ
             On-site visits and checklists for state recipients
             Productive relationship with Department of Labor
RECOMMENDATIONS - EPA PERSPECTIVE

The following key recommendations are a summary of those the SAICTeam heard consistently among the
EPA interviewees. Appendix 2 provides additional recommendations reported by EPA but not reflected in
this section.

Provide better guidance and Davis-Bacon procedures from HQ: Almost every EPA interviewee
recommended that guidance be simplified for Davis-Bacon for EPA projects. EPA Regions were expected
to implement and interpret the policy and guidance independently on a regulation that they were not
overly familiar with and in an expeditious fashion. Efficiencies could be gained if EPA HQ could coordinate
early in the process with DOL to identify potential issues and data gaps (e.g., rural wage rates) and provide
a single, consistent set of guidelines, rather than Regions, states and funding recipients contacting DOL for
information.
September 2013
49

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 Ensure labor categories/wages available: EPA interviewees agreed that the federal government should
 provide more labor classifications and wage rate determinations for all localities. In rural areas, where
 many localities received new funding, the DOL website did not include all the labor classifications. EPA
 interviewees reported that the missing information caused delays in contract completion.

 Release guidance prior to implementation: Several EPA Regional interviewees recommended that EPA
 release any guidance prior to implementation. Many staff commented that they did not receive guidance
 on Davis-Bacon implementation from HQ until several states had already signed some ARRA award
 contracts. (Many states signed contracts very early, then received notice about the new Davis-Bacon
 requirement and lost two to three months of execution while amending contracts.)

 Provide appropriate level of EPA oversight for Davis-Bacon: Some EPA Regions stated that fewer
 resources would have been expended if HQ had lessened its oversight of Davis-Bacon implementation.
 Davis-Bacon requirements were already being implemented in some EPA programs (Superfund and
 Brownfields), but the level of oversight for ARRA projects was significantly increased.
                                    RECOMMENDATIONS - EPA
                                         DAVIS-BACON
              Provide better guidance and Davis-Bacon procedures from HQ
              Ensure labor categories/wages available
              Release guidance prior to implementation
              Provide appropriate level of EPA oversight for Davis-Bacon
 3.3.3   FINDINGS - STATE/FUNDING RECIPIENT PERSPECTIVES - DAVIS-BACON
 MANDATE
| MAJOR CHALLENGES - STATE/FUNDING RECIPIENT PERSPECTIVES

 The following provides an overview of the major challenges SAIC heard consistently from state focus
 group participants. Appendix 3 provides additional f challenges states and funding recipients reported but
 not reflected in this section.

 Applying the federal wage rate classifications: State agency staff participating in focus groups said they
 experienced challenges with the federal labor classifications and wage rate determinations. Funding
 recipients stressed that the federal government's wage rate database was incomplete and did not include
 many of the labor positions needed forSRF projects. Consequently, time and effort was spent
 determining which labor category was correct, and caused delays in issuing bids and finalizing contracts.
 Contractors could not bid on a project until they received the government's labor classification and wage
 rates. Federal agencies responsible for assisting funding recipients determine wage rates and labor
 positions were seen as uncooperative and unresponsive. One state focus group commented that almost
 every project had to go to the DOL for wage determination. For one project, the state waited up to one
 month to obtain a wage determination for a painter working two days on-site at the project.
 September 2013
50

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Collecting information: State and funding recipient focus group participants stated that Davis-Bacon was
a new process and document collection proved burdensome. Issues included collecting certified payroll
information from contractors and classifying labor categories. Participants added that the tasks were
particularly difficult when either labor categories were not yet available from DOL or when the state could
not find a classification that fit the labor category. The large project funding levels and time constraints in
ARRA added to the difficulties. Those who had never worked with Davis-Bacon before found deciphering
the language confusing. Interviewing contractors and trying to retrieve the correct information was time
consuming. In addition, ensuring certified payrolls were correct and conducting interviews as part of
oversight caused further delays and frustration.

Managing changing guidance: Almost all focus group states said that inconsistent guidance was a major
challenge to the timely obligation of funds and Davis-Bacon compliance. Some states tried to identify and
plan SRF projects as far in advance as possible. However, the changing Davis Bacon guidance disrupted
planning and affected priority ranking for projects if Davis-Bacon issues were not resolved. Guidance also
came in after projects were awarded grants, which resulted in contract modifications after funding
obligations. For example, one state needed to modify contracts because of changes in guidance and at
one point had to issue a change order across all contracts due to a guidance change. Each state
consistently reported that more work was created due to changing guidance.

Issuing/managing contract amendments: One state focus group participant (and an EPA interviewee)
commented that states had existing contractors for cleanup of LUST sites. However, these contracts did
not contain the DB requirements and the states could not just amend the contracts. The states had to
issue new requests for proposals, reviews the bids and issue new contracts; this process took time and
resources.

Losing clients: As was the case with the Buy American provision, many states indicated that some project
applicants declined ARRA funding opportunities or said they did not want additional ARRA projects, due to
the burdens of the Davis-Bacon mandate. They cited added costs from Davis-Bacon compliance efforts.
They reported that many former clients turned to the private market for low interest loans. Some states,
however, also experienced increased interest in their loan program. They attribute the increased interest
to their marketing efforts to find shovel-ready projects, to include as many communities as possible,
and/or to the principal forgiveness offered.

Adjusting state process to meet federal guidelines: Many states were using their own fair labor wage
standards. Once ARRA was enacted, these states were forced to adjust their process to meet federal
Davis-Bacon requirements. In states with state wage rates higher than the federal wage rates, the extra
work to meet the Davis-Bacon mandate was seen as wasted effort.
September 2013                                                                              51

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                  MAJOR CHALLENGES - STATE/FUNDING RECIPIENT MAJOR CHALLE
                                          DAVIS-BACON
              Applying the federal wage rate classifications
              Collecting information
              Managing changing guidance
              Issuing/managing contract amendments
              Losing clients
              Adjusting state process to meet federal guidelines
              Accommodating oversight
| SUCCESSFUL APPROACHES - STATE/FUNDING  RECIPIENT PERSPECTIVES

 The following successful approaches are a summary of those the SAIC Team heard consistently among
 focus group participants. Appendix 3 provides additional successful approaches reported by the
 participants but not reflected  in this section.

 Addition of a Davis-Bacon specialist: A few states either hired temporary staffer re-assigned existing
 staff as a 'specialist' to help specifically with implementing Davis-Bacon. These 'specialists' were given
 specialized tasks, such as managing EPA audits or reporting. They were able to focus their efforts on
 additional guidance and/or lessons learned from HQ as well as establish relationships with DOL and work
 solely on the queries from their funding recipients. Some participants noted that if they had known the
 amount of time and difficulty associated with implementing the Davis-Bacon requirements, they would
 have budgeted for a dedicated staff person.
        Successful Approach Focus: New Hampshire - Additional Coordination with EPA

 Better communication and coordination helped New Hampshire Department of Environmental Services
 programs address Davis-Bacon challenges. For the first year of ARRA implementation, weekly meetings
 allowed New Hampshire staff to speak with the EPA and with their counterparts in other states to
 discuss questions and concerns.  In addition, New Hampshire hired a person to work primarily on Davis-
 Bacon issues. The specialist made sure all documentation and restitutions were correct,  and that all
 interviews were being conducted. This allowed the remaining staff to focus on other duties. The Davis-
 Bacon specialist became the point of contact for all Davis-Bacon questions and concerns.
 Communication helped states understand Davis-Bacon requirements: State participants noted that
 communication with funding recipients was a key factor for any successes related to Davis-Bacon
 requirements. Municipalities familiar with Davis-Bacon used existing Department of Labor documents
 from other state agencies (such as the Department of Transportation) they had previously received prior
 to ARRA, and worked with the DOL state representatives in the State Labor Offices. Interviewing funding
 recipients for documentation was a new concept for some state staff, but direct communication was a
 success. If EPA guidance was not adequate,  investing time and resources to prepare for contract
 September 2013
52

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 document compilations was helpful. Additionally, state respondents commented they appreciated EPA
 Regional staff who maintained continued communication or made an effort to check in regularly
 regarding Davis-Bacon issues.
                         'UCCESSFUL APPROACHES - STATE/FUNDING RECIPIENT
                                          DAVIS-BACON
              Addition of a Davis-Bacon specialist
              Additional coordination with EPA
              Communication helped states understand Davis-Bacon requirements
| RECOMMENDATIONS - STATE/FUNDING RECIPIENT PERSPECTIVES

 The following recommendations are a summary of those the SAICTeam heard consistently among focus
 group participants. Appendix 3 provides additional recommendations reported by focus group
 participants but not reflected in this section.

 Improve guidance consistency and clarity: The most frequent recommendation from state and funding
 recipient focus group participants was to improve guidance consistency and reduce confusing Davis-Bacon
 language. Some states and funding recipients were familiar with the requirements; however, all states
 and funding recipients complained about the onerous and confusing Davis-Bacon process. State focus
 group participants recommended clarifying all definitions, labor categories and jobs definitions. The DOL
 categories and  databases need more clarity as well. In addition, rate determinations should include more
 positions, especially in rural areas. There were times when states had positions such as paving operators
 and flaggers that were not covered in labor categories, and it delayed construction to wait for
 confirmation. State focus group participants stated that streamlining this process would cut down on
 delays and confusion.

 Allow Davis-Bacon waivers for states with higher prevailing wages or when Davis-Bacon will not result
 in significant wage increases: Many states suggested that there should be waivers for states with current
 prevailing wages equal to or greater than federal Davis-Bacon wages. States voiced their opinion that the
 Davis-Bacon did not result in higher wages or that the benefits of a slightly higher wage rate did not justify
 the money spent to document and verify that the requirements were being met.

 Use prime contractors as points of contact: One state indicated that they would have preferred to use
 the prime contractor on a construction project as the point of contact for all project subcontractors for
 Davis-Bacon documentation. When dealing with large construction projects that involve multiple
 construction tasks and multiple subcontractors,  using a prime contractor for all document collection
 would have been efficient. For example, prime contractors have more command of labor laws than
 subcontractors and are available for the duration of the project. Subcontractors could complete their
 work and leave before the state site inspection occurs.
 September 2013
53

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                           1ECOMMENDATIONS - STATE/FUNDING RECIP
                                          DAVIS-BACON
             Improve guidance consistency and clarity
             Allow waivers for states with higher prevailing wages or when Davis-Bacon will not
             result in significant wage increases
             Use prime contractors as points of contact
3.3.4  SUMMARY-DAVIS-BACON MANDATE

The Davis-Bacon mandate was new to most EPA programs and states, although some states had their own
fair labor wage standards. Guidance on the new mandate was confusing and sometimes counter-intuitive.
The involvement of another federal agency, the Department of Labor, added to the difficulty in securing
consistent guidance in a timely manner. Some EPA Regional offices and some states found it helpful to
appoint Davis-Bacon specialists who could focus on the complexities of the requirements. On-site training
on the application of Davis-Bacon, with checklists to add consistency to the process, was helpful. Trained
state contacts could then help funding recipients with their Davis-Bacon requirements. Recommendations
included issuing consistent guidance earlier and filling missing labor categories prior to implementation,
particularly for rural areas.
3.4
SECTION 1512 REPORTING
3.4.1   BACKGROUND

Section 1512 of ARRA, also known as the "Jobs Accountability Act," required that each 'prime recipient4'
or 'sub-recipient5' (referred to as 'funding recipients' elsewhere in this report)that received ARRA funds
submit a report detailing the use of the funds on the projects funded by the Recovery Act. These reports
were published on www.Recovery.gov for the purpose of transparency. Specifically, Section 1512
required recipients to report data, categorized into four areas as shown below, into a nationwide data
collection system at the website www.FederalReporting.gov that was aimed at "reducing the information
reporting burden on recipients by simplifying reporting instructions and providing a user-friendly
mechanism for submitting required data." (OMB, 2009b)

    •   The total amount of ARRA funds received;
    •   The total amount of ARRA funds that have already been spent or obligated to projects and
        activities;
    •   A detailed list of all projects and activities funded by name to include:
 Prime recipients are non-Federal entities that receive Recovery Act funding as Federal awards in the form of grants,
loans, or cooperative agreements, such as states.

 Sub-recipients are defined as non-Federal entities that are awarded Recovery funding from the prime recipient such
as a local government.
September 2013
                                                                                     54

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            o   Description;
            o   Completion status; and
            o   Estimates on jobs created or retained;
    •   Details on sub-awards or sub-grants and other payments.

While the above list appears concise, OMB's guidance and instructions for entering this data into
www.FederalReporting.gov were more complicated. Each prime recipient (or sub-recipient if delegated
by prime recipient) was required to enter data on each project by the tenth day after each calendar
quarter. Vendors, as defined as a dealer, distributor, merchant or other seller providing goods or services
that are required for the conduct of the federal program were not subject to the reporting requirements,
but the prime and/or sub-recipients were required to report on the activities of the vendors used.

Each prime and sub-recipient were required to complete more than 30 data fields including narratives on
job creation, project descriptions, infrastructure expenditure, and rationales. While most of these data
elements were relatively straightforward and familiar, the 'number of jobs created' field was new;
guidance from OMB on the method of calculating this number changed throughout ARRA
implementation. The method for calculating the number of jobs revolved around determining the number
of 'full-time equivalents,' or, 'FTEs,' which is calculated as total hours worked  in a job created or retained
divided by the number of hours in a full-time schedule. The definition of 'a job created or retained' by
ARRA was often challenging to interpret itself, and OMB's 2009 guidance alone consisted of five pages to
explain the calculation.

Section 1512 required that federal agencies, such as EPA, provide guidance to recipients on how to meet
the reporting requirements in a user-friendly manner. EPA Regions were also expected to review the
recipient-submitted reports to assure proper compliance. OMB set up the aforementioned website,
www.FederalReporting.gov, for use by all recipients and agencies to submit, review and track the
quarterly reports required by Section 1512. Registration for and use of the website was mandatory for all
prime recipients (and sub-recipients if delegated reporting by prime recipient) and EPA Regions.

In most cases, states entered data in www.FederalReporting.gov on behalf of their sub-recipients so that
data could be consistent and accurate, but a few states delegated reporting to the sub-recipients.
According to OMB's reporting guidance, the state-level prime recipients were ultimately responsible for
assuring that reporting was completed each quarter. In many states, the state-level prime recipients
submitted the data directly to the State Governors' offices for reporting entry into
www.FederalReporting.gov or entered the data themselves and provided their reports to the Governor's
office. Many Governors' offices took responsibility for ARRA 1512 reporting. The states were responsible
for reviewing and  submitting their funding recipients' data to EPA within 20 days after the end of each
quarter. EPA then had 10 days to review the reporting data and send it back to the states for corrections if
necessary. The data were then published on www.Recovery.gov 30 days after the end of each quarter.
Figure 6 below, published  in OMB's reporting guidance memo dated June 22,  2009, shows the reporting
process. All EPA programs needed to report on their projects quarterly.
September 2013                                                                              55

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                                          FIGURE 6. RECIPIENT REPORTING TIMELINE
                                                       Recipient Reporting Timeline
No less than 35 days prior to 1-10 days after end of
the end of the quarter Quarter



Prime and Sub

P
Registration



Prime
Recipients &
Delegated Subs
Enter Draft
Reporting Data
^^^r ^^^L



Initial
Submission

11 -21 days after end of
Quarter


Prime
Recipients
Review Data
Submitted By
Sub(s)
T*






BylOdays
after end
of Quarter




pfj^na

Recipi
Subs

ents &
22-29 days after end
Quarter
of
30 days after end 90 days after end
of Quarter of Quarter
Agency Review
of Data
Submitted
>I




Make


f \

'
Agency "View Only"
Dr'tr- m if i r-it D/\r\rM*fr A H 11 if tmnntc1 Dr»


.


prjrna

Recipi
Subs

ents &
Make
C tinnc

f
Recipient
Reports
Published on
recovery.gov
o

V

Next quarterly
reporting cycle



T
/
Agency Comment Period
r-fiKI/i



reflected
cumulatively


 Source: OMB, 2009b
FINAL- September 2013
56

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 3.4.2   FINDINGS - EPA PERSPECTIVE - SECTION 1512 REPORTING

 This section presents the major challenges, successful approaches, and recommendations from EPA
 interviews related to the 1512 reporting mandate. As the majority of the reporting burden fell upon states
 and funding (or sub-) recipients, EPA Regional staff had limited comments about the challenges and
 successful approaches they experienced themselves. EPA HQ (and sometimes the Regions) performed a
 review of funding recipient data for completeness and errors and notified states if changes were needed.
 Interviewees acknowledged that the reporting timeline was extremely tight and burdensome on states
 and funding recipients.
I MAJOR CHALLENGES - EPA PERSPECTIVE

 The following provides an overview of the major challenges the SAIC Team heard consistently. Appendix 2
 lists additional challenges reported by EPA interviewees but not reflected in this section.

 Quickly communicating changes to guidance: The interviewees stated that while EPA Regions did not
 have to perform any 1512 reporting themselves, they were required to communicate guidance received
 from EPA HQ and OMB, which was modified multiple times during ARRA implementation. Each time the
 guidance changed, Regions needed to communicate HQ's guidance to states in a format that was easy to
 understand, which was difficult because the new guidance came ten days before the quarterly reports
 were due. Ten days was insufficient time to discuss the new guidance with states.

 Reviewing duplicative data/reporting: The interviewees noted that most data were being obtained by
 existing program reporting requirements and entered into existing EPA databases. As a result, EPA not
 only needed to review reporting data that states had entered into www.FederalReporting.gov they also
 needed to review their existing  databases such as CWSRF Benefits Reporting (CBR), DWSRF Project and
 Benefits Reporting System (PBR), and the Brownfields Assessment, Cleanup and Redevelopment Exchange
 System (ACRES). Some EPA interviewees while acknowledging the benefits of transparency expressed
 concern that the general public was not necessarily interested in the details of the financial information
 the website provided. Their perception was that the general  public was likely not reviewing 90 percent of
 the reporting data  that was required of funding recipients and states. One interviewee noted that when
 the reporting was finally posted on the internet, it was already outdated.
                                    MAJOR CHALLENGES - EPA
                                        1512 REPORTING
              Quickly communicating changes to guidance
              Reviewing duplicative data/reporting
 September 2013
57

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SUCCESSFUL APPROACHES - EPA PERSPECTIVE

Checklists for review of 1512 reports: A few EPA interviewees mentioned using checklists for review of
1512 reports enabled the reviews to be concise, consistent and complete.

Existing system to meet ARRA reporting: Region 2 used its 'Quick Reports System/ a web-based database
that extracts data from IGMS to help with its baseline monitoring. The database system was already in
place prior to ARRA. Region 2 was able to deploy this system for ARRA-funded projects.
                                       1512 REPORTING
             Checklists for review of 1512 reports
             Existing system to meet ARRA reporting
RECOMMENDATIONS - EPA PERSPECTIVE

EPA interviewees mentioned no specific recommendations, other than feedback from their states or
funding recipients, and this feedback is captured below in the State and Funding Recipient Perspectives
section.
3.4.3   FINDINGS - STATE/FUNDING  RECIPIENT PERSPECTIVES - SECTION  1512
REPORTING
MAJOR CHALLENGES - STATE/FUNDING RECIPIENTS PERSPECTIVES

The following provides an overview of the major challenges SAIC heard consistently from state focus
group participants. Appendix 3 provides additional f challenges states and funding recipients reported but
not reflected in this section.

Different reporting requirements for multiple agencies: The state focus group participants stated that
the most difficult challenge was the need to fulfill 1512 reporting requirements in addition to reporting to
various other agencies including each State Governor's Office and their respective EPA program base
reporting system. LUST focus group participants stated that EPA required monthly in addition to quarterly
reporting. States noted that these different reporting mechanisms were often redundant and time
consuming, but that the requirements were always slightly different, so the same report could not simply
be submitted to each agency.

Guidance on jobs calculation changed and was unclear: Another challenge for states was that OMB's
guidance for the 'number of jobs created' calculation arrived several months after projects started. As a
result, most states were very confused about the job calculation for the first quarterly report. Once
guidance came from EPA, it changed multiple times as OMB attempted to improve the job calculation.
Each time the guidance changed, the states needed to learn the new method, and then pass that
information onto their funding recipients.
September 2013
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Reporting timeline unreasonably tight: Recipients needed to compile their quarterly reports by the tenth
day after the end of each calendar quarter. This resulted in a hectic rush for states attempting to compile
the reporting data from their recipients every three months. Most states required their funding recipients
to report directly to them, and then the states would complete the report template on
Federalreporting.gov. However, there were always a small number of contractors and subcontractors who
submitted their jobs data late.  Furthermore, when some of the ten-day report compilation period
included two full weekends, states ended up working overtime and on weekends to complete their
reports each quarter.

Websites www.FederalReporting.gov and www.Recovery.gov not user-friendly: Many focus group
participants commented that www.FederalReporting.gov was difficult to use. For instance, if a recipient
submitted a report and there were errors, the website would reject the report due to the errors, but it did
not highlight the relevant fields that contained the errors. As a result, recipients would need to comb
through the entire report to find the error, which was time-consuming. Other participants noted that
ARRA's public website, www.Recovery.gov, was very hard to navigate, as some recipients had trouble
finding their own project reports on the website. These participants also questioned the utility of
www.Recovery.gov to the general public.

Duplication of data entry for ARRA reporting in multiple EPA databases: Most focus group participants
noted that the data they were  required to enter into www.FederalReporting.gov was being obtained
through existing program reporting requirements  and entered into other existing EPA databases, such as
CBR, PBRF and ACRES. The participants felt they were doing double and triple entry on a regular basis
when they were already stretched for time and  resources.
                          MAJOR CHALLENGES - STATE/FUNDING RECIPI
                                        1512 REPORTING
             Different reporting requirements for multiple agencies
             Guidance on jobs calculation changed and was unclear
             Reporting timeline unreasonably tight
             Websites www.FederalReporting.gov and www.Recovery.gov not user-friendly
             Duplication of data entry for ARRA reporting in multiple EPA databases
SUCCESSFUL APPROACHES - STATE/FUNDING RECIPIENT PERSPECTIVES

The following successful approaches are a summary of those the SAICTeam heard consistently among
focus group participants. Appendix 3 provides additional successful approaches from participants but not
reflected in this section.

Tying reporting requirements to disbursements: Many states struggled to get all of their funding
recipients to submit their jobs data in time. Some states had more success in this area  because they
included a clause in their contracts that tied the reporting requirements to disbursements. If a funding
recipient failed to submit its quarterly reporting data, the state delayed reimbursement. These states
found this method to be very effective in ensuring timely reporting data from funding  recipients.
September 2013
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       Successful Approach Focus: Washington Used a Dedicated Reporting Coordinator

  The State of Washington employed a full time Reporting Coordinator for their CWSRF program to
  manage the reporting requirements for ARRA. In addition to the 1512 reporting, the Reporting
  Coordinator handled the reporting requirements related  to EPA's CBR reporting system for the CWSRF
  base program, the Washington Department of Ecology's monthly fiscal reports, and the Federal
  Transportation and Infrastructure Committee's ARRA reporting. The Washington state focus group
  participant believed having a single reporting coordinator responsible for all reporting ensured
  consistent accurate data across all reporting systems, thus avoiding time-consuming corrections.
 Spending the ARRA funds first: Many state focus group participants noted that their projects had funding
 from multiple sources, not just ARRA. However, the 1512 reporting requirements applied only to ARRA
 funds, so some states decided to expend all of their ARRA funds as quickly as possible, which allowed
 them to stop their ARRA quarterly reporting sooner.

 Developing new tools for reporting: Several state focus group participants stated that they developed
 new internal tools to assist with  the 1512 reporting process. Texas, for example, hired a contractor to
 analyze OMB's  reporting guidance and developed a user-friendly handbook for state and funding
 recipient staff use. In addition, Virginia created a jobs reporting form that they distributed to funding
 recipients, creating a simplified and uniform way for funding recipients to submit their jobs reporting
 data.

 Improving existing databases or creating new databases: According to a state focus group participant the
 state's DERA program developed a better database to track bus  engines because of ARRA's reporting
 requirements; this database is now being used in  the base program.
                        SUCCESSFUL APPROACHES - STATE/FUNDING RECIPIENT
                                        1512 REPORTING
              Tying reporting requirements to disbursements
              Using a dedicated reporting coordinator
              Spending the ARRA funds first
              Developing new tools for reporting
              Improving existing databases or creating new databases
| RECOMMENDATIONS - STATE/FUNDING RECIPIENT PERSPECTIVES

 The following recommendations are a summary of those the SAIC Team heard consistently among focus
 group participants. Appendix 3 provides additional recommendations reported by focus group
 participants but not reflected in this section.

 Revise'job' definition to more accurately reflect reality: The majority of focus group states noted that
 they felt the calculation for determining the number of jobs created often resulted in a lower number
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than was realized. For example, jobs were not counted for work on ARRA projects with multiple funding
sources. These projects likely would never have gotten off the ground without the ARRA funding, yet a
portion of the jobs created was not being captured by the reporting system. Focus group participants
recommended that OMB revise their calculation to more accurately count the number of jobs created by
ARRA.

Allow a more reasonable time table for reporting: Every focus group participant whose job included 1512
reporting requirements recommended that the deadline to submit recipient quarterly reports be longer
than ten days. A longer deadline would allow states to complete their quarterly reports in a reasonable
manner without rushing for ten days every three months.

Reassess data required: Focus group participants recommended that the government (OMB and EPA)
examine the required data and determine if these data could have been obtained from existing reports.
                          RECOMMENDATIONS - STATE/FUNDING RECIPIENT
                                       1512 REPORTING
             Revise 'job' definition to more accurately reflect reality
             Allow a more reasonable time table for reporting
             Reassess data required
3.4.4   SUMMARY - SECTION 1512 REPORTING

State representatives and funding recipients noted that many of the 1512 reporting requirements were
duplicative of existing reporting requirements. Guidance on the specific requirements, such as the
calculation of jobs created, was delayed and also changed during the course of ARRA implementation. The
tight deadline for gathering information from all the funding recipients was stressful for state offices.
Many state representatives believed that much of the reported data recorded on recovery.org was not
reviewed by the public, so had limited utility. Many states acknowledged however that while they did not
appreciate the time-consuming nature of the 1512 reporting requirements the experience made them
much better prepared to deal with the requirements of the Federal Funding Accountability and
Transparency Act (FFATA). New awards are subject to the FFATA, and the ARRA reporting process
provided good training for future statutory transparency requirements. States improved and/or created
better reporting tools and databases. They recommended that EPA re-examine the jobs definition and
calculation, extend deadlines for reporting, and re-assess data requirements and data systems to
eliminate duplicative work.
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 3.5
GREEN  PROJECT RESERVE
 3.5.1  BACKGROUND

 ARRA required that at least 20 percent of each state's CWSRF and DWSRF capitalization grants be used to
 fund projects that address green infrastructure, water efficiency, energy efficiency or other
 environmentally innovative activities. EPA refers to this requirement as the Green Project Reserve. Under
 the Green Project Reserve, either entire projects or identifiable components of larger projects could be
 considered for inclusion. This Green Project Reserve mandate was new to the CWSRF and DWSRF
 programs.

 The Office of Water provided guidance on the Green Project Reserve GPR on March 2, 2009, as part of a
 broader guidance document for the entire SRF programs and this included definitions to identify projects
 as shown in Table 12 below.

                   TABLE 12. 'GREEN' DEFINITIONS PER EPA GUIDANCE
 Water Efficiency
             The use of improved technologies and practices to deliver equal or better services with less
             water.
 Energy Efficiency
             The use of improved technologies and practices to reduce the energy consumption of
             water quality projects, including projects to reduce energy consumption or produce clean
             energy used by a treatment works.
 Green Infrastructure
             Practices at multiple scales that manage and treat stormwater and that maintain and
             restore natural hydrology by infiltrating, evapotranspiring, and capturing and using
             stormwater. On a regional scale, green infrastructure is the preservation  and restoration of
             natural landscape features, such as forests, floodplains, and wetlands, coupled with policies
             such as infill and redevelopment that reduce overall imperviousness in a watershed.
 Innovation
             Projects that demonstrate new and/or innovative approaches to managing water resources
             in a more sustainable way, including projects that achieve pollution prevention or pollutant
             removal with reduced costs and projects that foster adaptation of water protection
             programs and practices to address climate change.
Source: EPA, 2009c

 The guidance was subsequently revised four times over the next year. Some types of projects required
 states to write up a justification as to why the project could be counted as 'green' towards the 20 percent
 GPR requirement. This justification was referred to as a 'business case.' Other projects qualified towards
 the 20 percent GPR requirement because they were entirely and explicitly framed as a green
 infrastructure or a water or energy efficiency project. These 'categorically' qualified projects did not
 require the submission of a business case justification for the SRF program, and minimized submissions
 for the DWSRF program. The small exceptions for the DWSRF program as detailed in EPA's guidance as
 green projects include the installation of water meters, gray water recycling systems, leak detection
 equipment and energy efficient retrofits to pumps. See Table 13 below for a more complete list of types
 of projects eligible to meet the GPR requirements, as published in the final guidance on January 4, 2010,
 approximately one month prior to the obligation deadline.
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         TABLE 13. EXAMPLES OF TYPES  OF PROJECTS THAT QUALIFIED FOR GPR
  WATER EFFICIENCY     ENERGY EFFICIENCY      GREEN INFRASTRUCTURE
                                                          INNOVATION
  Water meter
  installation

  Water fixture
  replacement

  Gray water recycling

  Rain water collection
Pump efficiency upgrades

Clean power production
for treatment systems

Leak detection
equipment

Distribution line
replacement or
rehabilitation (may
require business case)
Implementation of'Green
Streets/ sustainable
stormwater management that
also contributes to community
redevelopment

Downspout disconnection to
remove stormwater from
combined sewers

Wet weather management
system for parking areas

Hydro modification to restore
riparian buffers
Wetland restoration

Decentralized wastewater
treatment to replace failing
existing systems

Water reuse projects that
reduce energy use

Projects that use water balance
approaches to preserve site
hydrology
Source: EPA, 2009c

  In addition, managers of other types of traditional projects that had green benefits could develop a
  business case to seek qualification as 'green' for a project or project component. These projects needed
  to demonstrate substantial benefits or savings compared to the existing equipment, and these savings
  needed to be a substantial part of the rationale detailed in the business case. Documentation typically
  referenced a preliminary engineering report or other planning document that clearly identified the GPR
  benefits, and clearly estimated the cost, energy or water savings from the project. EPA Regions became
  the main point of contact and determined whether a project or component met requirements. Table 14
  below shows the final state GPR distribution for each SRF program for the states included in this study.

             TABLE 14.  FINAL STATE GPR DISTRIBUTION FOR SRF PROGRAMS

Colorado
Iowa
Louisiana
Missouri
Montana
New Hampshire
New York
North Carolina
Oklahoma
Texas
Virginia
Washington
FINAL CWSRF
DISTRIBUTION % TO GPR
PROJECTS
26%
22%
20%
38%
28%
33%
37%
21%
26%
27%
21%
28%
FINAL DWSRF
DISTRIBUTION % TO GPR
PROJECTS
29%
23%
25%
34%
49%
23%
34%
20%
23%
20%
38%
33%
              Sources: EPA, 2010b; EPA, 2010c
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 GPR requirements continued post ARRA for the regular base SRF programs into the 2010, 2011 and 2012
 funding appropriations. Post-ARRA, EPA further amended the ARRA GPR guidance for use in the base
 programs and has issued revised guidance every year since. See Table 15 below for a summary of GPR
 percentage requirements by SRF program.

TABLE 15. PERCENTAGE REQUIREMENT FOR SRF PROJECTS  FOR ARRA AND POST-ARRA
HH
ARRA
2010
2011
2012
2013
Hurricane Sandy
Supplemental
CWSRF GRP DWSRF GRP
REQUIREMENT REQUIREMENT
20%
20%
20%
10%
10%
None
20%
20%
20%
States' Discretion
States' Discretion
None
APPROVAL AND/OR BUSINESS CASE
REQUIREMENTS
CWSRF: No Business Case required if
'categorical.'
DWSRF: No Business Case required if met
'categorical' exemptions. A business case
required EPA Region approval for all
projects.
CWSRF: No Business Case required if
'categorical.'
DWSRF: No Business Case required if met
'categorical' exemptions. Business Case
posted on website. Regions to review.
CWSRF: No Business Case required if
'categorical.'
DWSRF: No Business Case required if met
'categorical' exemptions. Business Case
posted on website. Regions to review.
CWSRF: No Business Case required if
'categorical.'
DWSRF: n/a
CWSRF: No Business Case required if
'categorical.'
DWSRF: n/a
n/a
 3.5.2   FINDINGS - EPA PERSPECTIVE - GREEN PROJECT RESERVE
 I MAJOR CHALLENGES - EPA PERSPECTIVE

  The following provides an overview of the major challenges the SAIC Team heard consistently or were
  specifically mentioned by an EPA interviewee.

  Developing guidance for a new requirement: As noted with the other mandates, GPR was a new
  requirement requiring policy and guidance development for the SRF programs. EPA acknowledged that
  the GPR guidance for the DWSRF program was given a back seat to developing the Buy American
  guidance, due to balancing the resources available. HQ and EPA Region interviewees indicated that GPR
  guidance for both the CWSRF and DWSRF programs was an evolving process during the obligation period,
  and that HQ chose to change guidance in response to specific instances arising during implementation.
  For example, the DWSRF initially provided a method for determining energy efficiency, but realized it was
  not practical and then switched to the CWSRF method.
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Providing and interpreting new guidance when it arrived late: EPA Regions stated that policies were
difficult to interpret and apply to each of the CWSRF and  DWSRF programs, specifically the energy and
water efficiency definitions (e.g., defining energy and water savings). It appears that the DWSRF program
struggled more than the CWSRF program. There were no benchmarks or precedence in  the program for
what 'green' meant, which made it difficult initially for EPA to assist the states with their implementation
questions. Additionally, guidance came late in the process, and the states had already submitted their
green project lists. Some projects did not fit the criteria in the latest guidance, and EPA  Region had to
reject the projects.

Altering DWSRF program priorities to accommodate GPR mandate: Several EPA staff mentioned it was
more difficult to identify 'green' shovel-ready projects for the DWSRF program than the CWSRF program.
Historically, the CWSRF program had emphasized water and energy efficiency projects due to a decade or
more of growing attention to energy self-sustaining facilities because tertiary treatment was energy
intensive. Also, CWSRF had green infrastructure initiatives in place, such as low impact development to
keep stormwater on site. However, DWSRF did not historically have this emphasis within its program as
the priority has always been public health. EPA staff admitted it was slow in assisting its stakeholders to
shift their thinking with regards to incorporating non-priority projects (e.g., fixing leaking pipes) or in
helping the states think innovatively to ensure these types of projects were incorporated into the needs
ranking criteria used by DWSRF. Leaking pipes were always a concern, but it was difficult to obtain local
funding support. Therefore these projects never ranked high under DWSRF's public health needs ranking
criteria. Every water facility has leaking pipes so once states received approval from EPA to consider pipe
replacement as an energy efficient green project that could easily be shovel-ready, they identified
sufficient projects for the 20 percent GPR.

Addressing shifting decisions regarding water metering as acceptable project: EPA staff acknowledged
that EPA flipped back and forth on whether water meter projects would be considered a categorical GPR
project or would require development of a business case.

Confusing GPR approval process for projects: EPA Headquarters was not clear in informing the Regions
that they needed to approve all GPR projects. This was later changed to require the Regions to approve
the GPR component of projects. Therefore some Regions accepted GPR projects that had been selected
by the states, and the projects were awarded ARRA funds before the latest EPA guidance was established.
There was also confusion in the DWSRF program regarding the responsibility for approving business cases.
The Regions eventually took on the role of approving business cases.

Balancing flexibility and consistency: Some EPA Regions noted that they provided their states with
flexibility. However, flexibility resulted in inconsistencies among the states and EPA Regions in identifying
green projects. A green project in one Region/state would not necessarily be considered green in  another
Region/state that had different criteria or interpretation of 'green.' The Regions received feedback that
the decisions were 'unfair' and had to respond to the stakeholders about these apparent inconsistencies.
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                                         OR CHALLENGE- E
                                     GREEN PROJECT RESERVE
              Developing guidance for a new requirement
              Providing and interpreting new guidance when it arrived late
              Altering DWSRF program priorities to accommodate GPR mandate
              Addressing shifting decisions regarding water metering as acceptable project
              Confusing GPR approval process for projects
              Balancing flexibility and consistency
! SUCCESSFUL APPROACHES - EPA PERSPECTIVE

 The following successful approaches/successes are a summary of those the SAIC Team heard consistently
 among the EPA interviewees or were specifically mentioned by a participant as efficient or useful.

 Created Regional and National GPR Workgroups: Region 6 developed a task team to address the GPR
 requirements that evolved into a GPR working group involving the Region 6 states. The working group
 held weekly meetings and correspondence with all the Region 6 states. This Regional GPR working group
 encouraged EPA HQ to implement a nation-wide GPR working group to clarify the GPR requirements and
 maintain consistency on projects throughout the states.
            Successful Approach Focus: Region 6 - Dedicated GPR Staff and Panel

Region 6 established a coordinated process for evaluating GPR ARRA projects by dedicating two staff
members (the Region ARRA Green Coordinator and Chief Green Engineer) to review all GPR projects
proposed by the states and convene a panel of subject matter experts if the staff were unsure of a green
qualification of a proposed project. This helped all their states exceed the 20 percent requirement and
ensured consistency with regards to projects qualifying as 'green'.
 Conducted post-ARRA listening sessions: With GPR continued in 2010 and 2011, EPA HQ conducted
 listening sessions with states and Regions and developed better guidance in 2010. EPA acknowledged that
 it was not practical or necessary to review every GPR project from the states; instead it left the
 determination of whether a project qualified as 'green' to the states. However, the states were required
 to post the GPR projects and business cases on their websites every quarter for transparency. EPA Regions
 were to then review these projects and business cases and provide feedback to the states, if necessary.

 Developed one-page format for business case: The DWSRF program required the funding recipients to
 develop a business case so EPA could determine if the project met the 'green' criteria. Part-way through
 the process, EPA HQ developed a one-page template that simplified the documentation and reduced the
 review time by obtaining concise  and consistent information from the recipients for review by EPA.
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Provided HQ-funded contractors to identify green projects: EPA HQ sent contractors to some states to
assist in identifying what projects could qualify as green. Participants in the state focus groups expressed
their appreciation of the usefulness of these extra resources.
                                  SUCCESSFUL APPROACHES - EPA
                                     GREEN PROJECT RESERVE
             Created Regional and National G PR Workgroups
             Conducted post-ARRA listening sessions
             Developed one-page format for business case
             Provided HQ-funded contractors to identify green projects
RECOMMENDATIONS - EPA PERSPECTIVE

The following key recommendations are a summary of those the SAIC Team heard consistently among the
EPA interviewees or were specifically mentioned by a participant as efficient or useful.

Share issues and successful approaches between Regions: EPA interviewees recommended more
communication between the Regions to discuss the issues and share the types of projects their Regions
were identifying. They noted this communication could have assisted their own states/funding recipients,
especially during the periods before the guidance was released as well as when it was modified.

Ensure draft guidance is reviewed by stakeholders prior to finalizing: Indirectly, the EPA participants
suggested the usefulness and efficiency of having users (states and funding recipients) review draft
guidance prior to finalizing. Many EPA interviewees acknowledged that the deficiencies of the initial
guidance were discovered after they received many questions from the states and reviewed the types of
projects that the states were identifying as green. Some green projects in one Region/state would not
have been approved as a green project  by another Region/state. EPA continued to develop more specific,
clear guidance as ARRA implementation continued and post-ARRA when the Green Project  Reserve was
continued.

Provide outreach on how public health can be green: EPA interviewees acknowledged that some drinking
water projects that address key public health issues can also be considered 'green.' One interviewee
suggested developing an outreach program to identify and educate states and funding recipients on these
types of projects and dedicating resources to assist states when needed. Additionally, publicizing the
benefits of the completed ARRA green projects would also help raise awareness with states and funding
recipients and prompt them to think innovatively, while addressing  the priority public health issues.
                                       OMMENDATIONS - E.
                                     GREEN PROJECT RESERVE
             Share issues and successful approaches between Regions
             Ensure draft guidance reviewed by stakeholders prior to finalizing
             Provide outreach on how public health can be green
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 3.5.3   FINDINGS - STATE/FUNDING RECIPIENT - GREEN PROJECT RESERVE

| MAJOR CHALLENGES - STATE/FUNDING RECIPIENT PERSPECTIVES

 The following section lists key challenges that the SAIC Team heard consistently among the state focus
 group participants or were specifically mentioned by a participant as efficient or useful.

 Managing without guidance: As noted in the EPA Major Challenges section above, the states and funding
 recipients also struggled with ensuring GPR requirements were met for a new concept requiring quick
 adjustment to the program, without complete guidance at the start of ARRA (although the CWSRF
 program included some emphasis for identifying water and energy efficiency projects prior to ARRA).
 Some state SRF programs began soliciting and identifying what they perceived were green projects
 without clear guidance from the EPA. According to an DIG report (February 2010) some states, after
 receiving EPA's guidance, re-solicited for green projects, and other states re-examined their lists of green
 projects.

 Implementing GPR with unclear and changing guidance: According to focus group participants,
 understanding GPR was a challenge for states and funding recipients on multiple levels, and it was
 exacerbated  as guidance evolved. For example, projects designed to mitigate 'water loss' (e.g., leaking
 pipes) were not considered 'green' under EPA's early guidance, even though states argued that their
 traditional projects like water line replacements were categorically 'green.' As noted above, the energy
 efficiency definitions changed for the DWSRF program during the course of ARRA; this forced states to
 adjust their project designs after projects were already awarded and/or underway. In  addition, definitions
 were often unclear; states did not always receive prompt feedback on whether or not a project had
 'green' components. States then were unsure about providing guidance to funding recipients because EPA
 had to make  the final decision, and at times guidance from EPA came too late or was inconsistent. Many
 funding recipients relied on engineers or other contractors to identify green projects or components.
 Many state participants felt they were 'driving blind' as they were forced to move ahead, not knowing
 confidently that some of their projects would be accepted as green. Further, some states commented that
 EPA's blanket guidance conflicted with state  regulations at least on one occasion. For example, according
 to the guidance, EPA would have accepted as green a project that used wastewater to recharge aquifers,
 but this conflicted with at least one state's use/re-use regulations.

 Preparing business cases for each project: The majority of state participants and funding recipients
 commented that the business cases were time consuming and often caused delays in  meeting obligation
 deadlines.  In  addition, many 'green' projects were shovel-ready, but were put on hold because the states
 didn't know if EPA would qualify them as 'green.' Several states hired consultants or contractors who
 could complete a business case and/or complete the administrative work of relatively simple GPR projects
 quickly. More complex projects were passed  over, even if they had greater public health benefits, because
 their business cases required too much time  and/or resources to prepare.  Some states mentioned that
 they had additional green projects funded by ARRA, but since they had already met their 20 percent, they
 stopped drafting the business cases because it was resource intensive. Thus these projects were not
 included in the count of green projects funded by ARRA.

 Finding 'green' shovel-ready projects: Again, the majority of participants said it was extremely difficult to
 identify green, shovel-ready projects. Both CWSRF and DWSRF programs had shovel-ready projects but
 many projects, particularly the DWSRF projects, were not 'green' or did not have a 'green' component.


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Some states commented that they were able to find sufficient 'green' projects on their existing prioritized
lists, while other states commented that they had difficulty finding sufficient projects that qualified for
the Green Project Reserve. Some states that actively solicited green projects, received applications, but
many of these projects were not shovel-ready.

Funding non-traditional 'green' projects: Some CWSRF programs sought non-traditional projects but
were faced with the barrier that SRFs can only fund local governments and not lend to private institutions.
Many of the non-traditional projects selected included partnerships with universities and libraries. For
example, one state funded a green roof and rain garden pilot project with a university. These projects also
served as additional educational opportunities for the states.

Understanding how 'green' differs from basic principles of SRF: Many focus group participants from both
CWSRF and DWSRF programs found the 20 percent GPR requirement confusing and frustrating. They
consider all of their SRF projects 'green' in that they increase efficiency of use, are based on
environmental statutes, improve drinking water quality, etc. The unintended message from the ARRA GPR
requirement was that their traditional SRF projects were not green. State personnel, disheartened by this,
found it frustrating to single out specific projects that met the ARRA definition of 'green.' The confusion
and frustration detracted from  state personnel's efficiency in addressing ARRA projects.

Complying with the GPR mandate required forgoing some public health priority projects: As noted in
Section 3.1 Timely Obligation of this report, states found a conflict in trying to meet shovel-ready
deadlines and also meet the GPR requirement. Almost all DWSRF state participants commented that in
order to meet the 20 percent requirement, many higher priority public health projects were bypassed.
This created conflict at the state and local level as all projects are ranked and publicized; local public
officials needed to justify the selected projects to the public.

Funding non-traditional water  projects attracted negative publicity: Several states used ARRA as an
opportunity to fund non-traditional green projects either as a way to expand their program or to fulfill
their SRF GPR requirements.  Project examples included stream bank restoration, rain gardens and green
roofs. Many of these projects also served as educational platforms allowing for the funding recipients to
increase local awareness of green, energy-wise projects. However, these projects also captured negative
public attention and some recipients were highlighted  in the local press as not allocating ARRA funds
responsibly, especially during a  deep recession. In addition, some states' SRF programs felt that their
programs were not using their funding the way they were originally intended to, such as for priority clean
water or drinking water projects.
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                              OR CHALLENGES - STATE/FUNDING RECIP
           Managing without guidance
           Implementing GPR with unclear and changing guidance
           Preparing business cases for each project
           Finding 'green' shovel-ready projects
           Funding non-traditional 'green' projects
           Understanding how 'green' differs from basic principles of SRF
           Complying with the GPR mandate required forgoing some public health priority projects
           Funding non-traditional water projects attracted negative publicity
SUCCESSFUL APPROACHES - STATE/FUNDING RECIPIENT PERSPECTIVES

The following successful approaches are a summary of those the SAICTeam heard consistently among the
participants or were specifically mentioned by a participant as efficient or useful.

Posted business cases on web to inform other applicants: Since there was minimal guidance from EPA on
business cases for green projects, the Oklahoma CWSRF program posted all of their business cases on
their website to serve as templates for other applicants. Many CWSRF participants also mentioned that
project delays are reduced since they now have the responsibility to approve the business cases (post-
ARRA). (DWSRF programs do not have a GPR requirement post-ARRA.)
      Successful Approach Focus: New York- Developed New Green Innovation Program

Approximately ten percent of New York's CWSRF ARRA funds were set aside for a new grant program,
called the Green Innovation Grant Program or GIGP. Creating this new program allowed shovel-ready,
GPR-eligible CWSRF projects that were not initially listed on the Intended Use Plan (IUP) to access ARRA
funds. Creation of the GIGP provided an opportunity to support projects that simultaneously protect
water quality, conserve energy resources and reduce greenhouse gas emissions. The response to the
GIGP solicitation was overwhelming, with 209 applications received, totaling $346 million in requests for
CWSRF/ARRA funds. Ultimately, $38 million in grants were provided to 35 GIGP CWSRF projects with up
to 90 percent funding. Sixteen of these were GPR energy efficiency projects and four were
environmental innovation projects. Combined, these 20 projects provided an estimated 13.6 million
kWh in avoided electrical use or generation (EPA, 2010d).
Actively solicited for green projects: States actively solicited for green projects in both the CWSRF and
DWSRF programs. According to an OIG report (February 2010), approximately 70 percent of all 50 states
solicited for both clean water and drinking water projects. The state focus group participants initiated a
variety of means for solicitation, including coordinating meetings with local organizations, placing
information on their websites, advertising to environmental groups, and reaching out to  contractors and
consultants with contacts at the municipal levels.
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                           CCESSFUL APPROACHES - STATE/FUNDING RECIPIE
                                     GREEN PROJECT RESERVE
              Posted business cases on web to inform other applicants
              Developed new green innovation program
              Actively solicited for green projects
| RECOMMENDATIONS - STATE/FUNDING RECIPIENT PERSPECTIVES

 The following recommendations are a summary of those the SAIC Team heard consistently among the
 participants or were specifically mentioned by a participant as efficient or useful.

 Propose GPR as incentive-based rather than mandatory: Some states thought that GPR should have been
 an incentive-based option and not a mandate. States indicated that obtaining viable 'green' projects for
 base SRF loans year after year for 20 percent of the funds may be difficult. Some state participants
 expressed concern that continuing GPR would siphon funds away from higher priority projects and
 compromise the fundamental public health goals of the DWSRF program. For example, projects that had
 priority based on public health needs were shelved to focus on 'green' projects such as automatic meter
 readers.

 Provide consistent, clear guidance from the start: State and funding participants' primary
 recommendation was the need to clearly define 'green' components and to ensure the guidance does not
 change throughout the process.

 Consider 'grandfathering7 previous decisions if guidance changes: If guidance requires changes, a few
 state participants recommended that EPA 'grandfather' previous decisions, if possible, to avoid re-work,
 lost work, delays, and frustrations for EPA, states, and funding recipients.

 Consider tradeoffs of CWSRF requirements for GPR:_A few state and funding recipients noted that a GPR
 project may provide the  least or fewer water quality benefits in that the projects may not improve water
 quality, but only conserve energy. To this end, the participants suggested EPA consider these
 consequences in the future. To meet GPR requirements, states had to bypass projects that would bring
 systems into compliance with state water quality regulations.

 Incorporate a consistent requirement for GPR: Many participants recommended that EPA set a
 consistent GPR funding percentage requirement (for CWSRF) if it is going to continue post-ARRA. As
 shown in the Background section of this report, the percentage of funding for GPR has shifted since ARRA.
 Maintaining a set percentage will assist states in their planning processes.

 Expanding SRF programs to be green: Many states commented that the GPR requirement could be a
 mainstay for the program and began the process of officially classifying these kinds of projects in the base
 program - even going so far as launching new 'green' programs. Some states reported that the Green
 Project Reserve encouraged engineers to think innovatively when designing projects to incorporate water
 and energy efficient technology in their projects.
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                          1ECOMMENDATIONS - STATE/FUNDING RECIP
                                    GREEN PROJECT RESERVE
             Propose GPR as incentive-based rather than the mandatory
             Provide consistent, clear guidance from the start
             Consider 'grandfathering' previous decisions if guidance changes
             Consider tradeoffs for CWSRF requirements for GPR
             Incorporate a consistent requirement for GPR
             Expanding SRF programs to be green
3.5.4   SUMMARY - GREEN PROJECT RESERVE

As with the other mandates, the new requirements caused some confusion and delays, as everyone
worked with changing guidance on specifics of the Green Project Reserve initiative, such as whether
metering projects met the definition of 'green.' Business case documentation for non-categorical projects
was time-consuming. State SRF programs needed to make several adjustments to identify projects that
met the ARRA definition of 'green.' Finding shovel-ready green projects was challenging. EPA and state
representatives cited the value of openly sharing information about GPR projects to share successful
strategies. State participants noted that EPA should consider making the Green Project Reserve initiative a
voluntary rather than mandatory program; states want to have the option of choosing the optimal project
that will provide the most environmental and public health benefits.
3.6
WHITE HOUSE AND CONGRESSIONAL NOTIFICATION
3.6.1   BACKGROUND

EPA was required to notify the White House and Congress in advance of grant award. Prior to ARRA, EPA
was required to provide advance notice of all energy-related grants and all grants over $1 million. Under
ARRA, EPA was also required to provide advance notice of any 'significant' grants. EPA decided that all
ARRA grants would be considered 'significant' and thus were included in the advance notices to the White
House and Congress.

EPA's process for grant award notification to the White House and Congress remained largely unchanged
from the process in place prior to ARRA. Grants management officers in the EPA Regional offices and at
HQ sent grant award information to a specific staff person in OARM's Office of Grants and Debarment by
email using a Word document template developed by OGD that contained the needed information
(shown in Table 16 below). According to OGD  staff, some Regions had one contact person who collected
and entered the data for multiple grants into the template and emailed this information to the OGD staff.
Other EPA Regions had individual grant specialists send the grant notifications for their respective grants.
Sometimes the information for one individual award would  be sent in the body of an email (and the
template not used). The Regional grant specialists had until  close of business on Mondays to send the
notifications of any grants ready to be awarded to OGD; they could then issue the awards five business
days later.
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A two-person team would copy and paste the information from the grant specialists' submissions into two
reports that were submitted by noon Tuesday to the EPA White House liaison in the Office of the
Administrator in addition to EPA staff in OGD and OARM. One report, known as the "Regular Report' lists
all of the grants without congressional earmarks. The other report, known as the "City Report" includes
everything in the Regular Report but also includes the congressional earmarks grants, with the relevant
receiving congressional district and city noted. The reports are organized alphabetically by state. These
reports then become a section in a larger report that is sent weekly to the White House and Congress.
Grantors must wait five days after the White House receives the grant notification report before awarding
the grant.

   TABLE 16. TEMPLATE FOR WHITE HOUSE NOTIFICATION OF PENDING AWARDS
RECIPIENT NAME
State
City
Congressional District
EPA Award Amount
Program Code
Grant Number
Description
Earmark
FULL NAME, AS ,T APPEARS ON THE AWARD
Self-explanatory
Self-explanatory
This should be the Congressional District for the funded project, NOT for the
recipient.
Use district numbers, not names of Congressional representatives.
If all districts in a state, then enter "Statewide."
If the project crosses state boundaries, be sure to show districts by state. For
example: WA-4, 5; ID -2. Or: WA-4,5; ID -statewide. Or: NV-statewide; UT:
statewide.
The full amount of the award, not incremental funding amounts.
Self-explanatory
Self-explanatory
A brief description - use or modify the one on the FR.
Make sure acronyms are spelled out.
Yes No
3.6.2   FINDINGS - EPA PERSPECTIVE - WHITE HOUSE AND CONGRESSIONAL
NOTIFICATION

This section presents the major challenges, successful approaches and recommendations from EPA
interviews related to White House and Congressional notification. Notification of pending awards to the
White House and Congress was not a topic of discussion at the state focus groups so there are no
comments or observations from the state perspective.
MAJOR CHALLENGE - EPA PERSPECTIVE

Informing the White House and Congress of a huge number of pending awards promptly: The EPA staff
were very busy every Monday and Tuesday compiling the reports because of the volume of grants
awarded during ARRA. There were a few instances when they missed the noon Tuesday deadline but were
able to submit the report by that afternoon.
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                                      OR CHALLENGES- E
                        WHITE HOUSE AND CONGRESSIONAL NOTIFICATION
          Informing the White House and Congress of a huge number of pending awards promptly
SUCCESSFUL APPROACHES - EPA PERSPECTIVE

Combined notification to White House and Congress: EPA waived the normal five-day holding period for
the White House to decide prior to Congressional notification whether to announce the award or hold an
event; White House and Congress were notified simultaneously about impending awards.

Shared email inbox for notifications of pending awards: One improvement made in February 2012 was
that grant specialists sent the notifications to a shared email inbox that could be accessed by multiple
staff at OGD, thus preventing delays in compiling the report because of the absence of a key staff.
                                SUCCESSFUL APPROACHES - EPA
                        WHITE HOUSE AND CONGRESSIONAL NOTIFICATION
            Combined notification to White House and Congress
            Share email inbox for notifications of pending awards
RECOMMENDATION - EPA PERSPECTIVE

Automated report function developed in IGMS: According to staff interviewed, they considered
developing an automated report function to obtain the information from the IGMS such that staff could
'click on a button' once a week to create the report. This would eliminate the individual grant notifications
from the grant specialists and manual compilation of the report. However, this solution was not pursued
during the ARRA period, in part, due to staff turnover.
                                  RECOMMENDATIONS - EP.
                        WHITE HOUSE AND CONGRESSIONAL NOTIFICATION
            Automated report function developed in IGMS
3.6.3   SUMMARY - WHITE HOUSE AND  CONGRESSIONAL NOTIFICATION

Informing the White House and Congress of pending ARRA awards was time-consuming, given the large
number of awards made under ARRA. EPA achieved some efficiencies by combining the two notification
processes and by sending notifications to a shared e-mail address, accessible by all EPA staff responsible
for notifications. Additional improvements could be made by adding an automated report function to the
IGMS database.
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 3.7    WORKLOAD SHARING
 3.7.1   BACKGROUND

 The ARRA appropriations resulted in increased funds that were double or triple the normal funding
 amounts. This huge increase in funds coupled with the short time frame caused an enormous workload
 for existing EPA and state staff at a time where budgets for several years had been stagnant or declining.
 EPA staffing levels were lean and many state staff were in furlough working conditions. EPA Regional staff
 acknowledged that the state SRF staff bore the brunt of the workload. One EPA Regional staff member,
 commenting on the states' long and hard work, noted that on one occasion she sent an email at 4 a.m.
 one day and received two responses shortly afterward from the states. Both EPA and states were
 provided with M&O funds that could be used to hire staff or contractors.

 As part of ARRA, EPA OGD worked with Office of General Counsel to prepare temporary delegations of
 authority to allow workload sharing between EPA Regions and between EPA Regions and EPA HQ. The
 theory was that overburdened Regions would be able to use workload sharing to spread the increased
 ARRA workload around to Regional offices with fewer ARRA tasks, thus maximizing the workload potential
 of all EPA staff across the country.
 3.7.2   FINDINGS - EPA/STATE PERSPECTIVES - WORKLOAD SHARING

 This section presents the major challenges, successful approaches and recommendations from EPA
 interviews and state focus groups related to workload.

| MAJOR CHALLENGES - EPA/STATE PERSPECTIVES

 Responding to uneven workload: EPA Regions interviewed commented that some programs such as the
 SRF programs had a greater workload than others such as Superfund because of the larger number of
 projects and greater challenges posed by the ARRA mandates. States that decided to fund as many
 projects as possible created more workload for themselves than states that funded a few projects.
 Though a few Regions and states hired temporary staff and initiated other actions to meet this workload,
 the bulk of the workload was borne by existing EPA and state staff who labored through long days and
 nights, weeks and weekends, and month after month. While proud of what they accomplished and
 welcoming of more funds again, none wanted to repeat the workload burden.

 Overcoming obstacles to workload sharing: Interviewees from seven out the ten EPA Regions stated that
 they did not use workload sharing during ARRA. Some Regional staff were not aware of the workload
 sharing process and some expressed reservations about the process. Staff-on-loan would not  be familiar
 with the Region's states, processes and procedures and resources would be required to train those who
 had no experience working on  projects in their Region.  Others said it would have been difficult and a little
 discomforting to have a grant managed in a different Region. One interviewee also stated that there was
 a sentiment among high level management to have each program's best and most experienced staff
 working on ARRA projects, and it would have been difficult for Regions to meet this expectation with
 workload sharing. Lastly, some Regions mentioned that they experienced employee turnover  during
 ARRA, which made project coordination and communication with other Regions - aspects of funds
 management necessary to effectively implement workload sharing - more difficult.


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Overcoming obstacles to hiring: Though M&O money was provided to EPA Regions and states, only a few
EPA Regions and states hired new staff according to interviewees. Reasons cited for not hiring: hiring
process takes too long, training new staff would take time away from existing staff's ability to work on
ARRA, would take too long for new staff to be trained and productive, and job would only be temporary.
Those EPA Regions and states that did hire new temporary staff were pleased with the new hires, some of
whom were able to find permanent job positions. Funding projects in small communities increased
states' workload: According to a few states, there are disadvantages to awarding loans and grants to
small communities that had never dealt with the SRF program, loans or grants or construction projects.
States commented that typically these  small communities had few staff, part-time staff or volunteers and
had no experience managing construction projects. This placed extra burden on the state staff that
became 'de facto' project managers for the small communities.
MAJOR CHALLENGES -EPA/
STATE

WORKLOAD SHARING
Responding to uneven workload
Overcoming obstacles to workload sharing
Overcoming obstacles to hiring
Funding projects in small communities increased states' workload
SUCCESSFUL APPROACHES - EPA/STATE PERSPECTIVES

Prioritized the work: All non-ARRA work became secondary. Projects closer to shovel-ready received
more attention than those that lagged.

Dedicated experienced staff to ARRA: Many programs assigned their more senior or more experienced
staff to ARRA, while junior or less experienced staff handled less complicated grants or base programs.

Pulled in staff from other program areas: Resources were thin in EPA and many offices pulled in help
from other programs to help with ARRA (e.g., engineers were borrowed to assist in making decisions on
Buy American waiver requests). At the Regional level, some offices pulled in people from the field to assist
with reviews.

Made temporary hires: Hiring retired experienced former EPA employees minimized training.  Qualified
new hires paired with experienced co-workers or supervisors were found to be productive as they
received on-the-job training. The DERA HQ office also created a training program for temporary
employees and set up initiatives to ensure that tasks were completed on time. They were able to use the
ARRA travel allowance to enhance the training, which included meeting with states, walking the project
areas and meeting with funding recipients.

Established single point of contact for ARRA: Many EPA programs or offices assigned one person  to be
the single point of contact for a specific ARRA mandate, such as Buy American or Davis-Bacon or to
manage a part of the program itself.  For example, the Brownfields HQ office assigned monitoring of all
budgets and grants performance to one person,  later referred to as the 'ARRA Tsar'; this job was
challenging but provided consistency.
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Centralized responsibilities: Where possible, EPA offices and programs centralized responsibilities,
including issuing one national HQ Request for Proposals (RFP) for the DERA program, instead of 10
Regional RFPs.

Hired contractors to conduct training, identify green projects and conduct inspections: Contractors were
used by some Regions and states to help review Buy American waivers, identify green projects, or conduct
inspections.
                              SUCCESSFUL APPROACHES - EPA/STAT
                                      WORKLOAD SHARING
           Prioritized the work
           Dedicated experienced staff to ARRA
           Pulled in staff from other program areas
           Made temporary hires
           Established single point of contact for ARRA
           Centralized responsibilities
           Hired contractors to conduct training, identify green projects and conduct inspections
RECOMMENDATION - EPA/STATE PERSPECTIVES

Promote hiring at EPA and state levels: One recommendation was that EPA should strongly encourage
and actively promote the use of the M&O funds to hire additional staff (even if temporary) at the EPA and
state levels.
                                RECOMMENDATIONS - EPA/STATE
                                      WORKLOAD SHARING
             Promote hiring at EPA and State levels
3.7.3   SUMMARY - WORKLOAD SHARING

EPA and state representatives found different ways to address the workload burden during ARRA
implementation. Most Regions did not take advantage of workload sharing options between Regions,
citing that it would be too difficult to accomplish efficiently. Instead, Regions borrowed staff from other
programs, appointed mandate specialists (e.g., Buy American) to avoid training multiple staff, and
assigned experienced staff to ARRA projects. Those few states and Regions that used M&O funds to hire
additional staff were pleased with the results; they encouraged EPA to more openly promote this option if
a similar workload burden occurs again.
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 3.8     OPEN GRANT FINDINGS
 3.8.1   BACKGROUND

 EPA's existing policy provides that if an applicant has open, adverse findings from DIG audits, Single Audits
 or EPA pre-award or post-award reviews, but findings do not call into question the applicant's ability to
 properly manage funds, grants management officers can proceed with award, provided it contains special
 terms and conditions imposed under either 40 CFR 30.14 or 40 CFR 31.12 requiring the recipient to take
 necessary corrective action within a specified period of time.
 3.8.2   FINDINGS - EPA PERSPECTIVE - OPEN GRANT FINDINGS

 This section presents the major challenges and successful approaches and recommendations from EPA
 interviews related to open grant findings.  EPA interviewees did not provide any recommendations.

 Open Grant Findings were not a topic of discussion at the state focus groups so there are no comments or
 observations from the state perspective.

| MAJOR CHALLENGE - EPA PERSPECTIVE

 Open grant findings can delay awards: Delays can be encountered in awarding cooperative agreements,
 contracts and grants to states or other recipients if previous audits reported findings that are not resolved
 by the time of the award.  EPA's existing policy and processes enable the Agency to award the funds with
 the stipulation that the findings must be addressed. This enables activities to continue or projects to
 proceed while the audit findings are being resolved.
                                    MAJOR CHALLENGES - EPA
                                     OPEN GRANT FINDINGS
              Open grant findings could delay awards
! SUCCESSFUL APPROACHES - EPA PERSPECTIVE

 Flagged states with funding management issues as high risk: Only a few Regional staff commented on
 awarding grants to states with open grant findings. One EPA interviewee explained that states with past
 funding management issues are flagged as high risk. Awarding grants to these high risk states involves a
 very detailed process that requires extra work and review but it allows these states to receive the funds.
 The states are required to submit substantial expenditure documentation first that is then reviewed by
 EPA and if approved, the states receive reimbursement. One EPA Regional interviewee described a past
 experience with a state  that was unable to operate in the reimbursement mode because it financially did
 not have its own funds to spend. In this specific case, which did not necessarily involve ARRA funds, the
 state was required to submit a detailed request list of proposed expenditures to the Region. After the
 Region and state agreed  upon the request list, the state could then draw down funds.
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                                   UCCESSFUL APPROACHES - EP/
                                     OPEN GRANT FINDINGS
              States with funding management issues are flagged as high risk
 3.8.3   SUMMARY-OPEN GRANT FINDINGS

 Regions that make awards to states with open grant findings (states with a record of past funding
 management issues) have to follow a more detailed process with more review. Having a policy that
 allows awards to states or funding recipients with open grant findings means that no state is precluded
 from the benefits of receiving federal funds, whether from a special stimulus appropriation or from
 customary federal grant programs. The increased scrutiny helps to ensure responsible funds
 management.

 3.9     OVERSIGHT MONITORING
 3.9.1   BACKGROUND

 Increased oversight included review of weekly financial and activity reports, semi-annual instead of
 annual review of state programs that included test transactions, and review of more ARRA project files
 than required in the base programs.
 3.9.2   FINDINGS - EPA/STATE PERSPECTIVES - OVERSIGHT MONITORING

 This section presents the major challenges, successful approaches and recommendations from EPA
 interviews and state focus groups related to oversight monitoring.

| MAJOR CHALLENGES - EPA/STATE PERSPECTIVES

 Unnecessary amount of oversight: Many EPA interviewees and all state focus group participants
 commented that the amount of oversight required by ARRA at all levels seemed unnecessary. While the
 participants understood the need for increased oversight, most asserted that the frequency of reviewing,
 monitoring, inspecting and auditing the mandate requirements was excessive during a critical time when
 resources were stretched. Some  EPA interviewees questioned the need for the increase in the frequency
 of oversight activities in programs that had good internal controls. A few EPA interviewees did add that
 some of the oversight activities improved their understanding of program policies and procedures as well
 as increased their knowledge of the projects. Some state focus group participants pointed out a positive
 consequence: the increased monitoring frequency helped spot potential issues earlier in the grant rather
 than later, thus preventing issues from becoming more serious problems.

 Increased review of fund expenditures unnecessary for some projects: Some respondents involved in the
 LUST and Brownfields program commented that the increased review of fund expenditures was
 inappropriate for their projects. Historically these projects do not expend the funds in the first or second
 quarter after award. Although activities are occurring, large expenditures are not seen until the latter part
 of the project period when invoices and reimbursement requests are submitted because the work is

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completed. The low expenditure reports triggered reviews and questions; project managers and state
LUST and Brownfields coordinators had to repeatedly explain that expenditures were lagging in the
beginning because of the nature of the projects.
                                MAJOR CHALLENGES - EPA/STATE
                                   OVERSIGHT MONITORING
             Unnecessary amount of oversight
             Increased review of fund expenditures unnecessary for some projects
SUCCESSFUL APPROACHES - EPA/STATE PERSPECTIVES

Checklists developed for inspectors and auditors: Some EPA Regions and states commented on the
usefulness of inspection and audit checklists that contained ARRA-specific requirements. These checklists
helped inspectors and auditors ensure that specific ARRA documentation was reviewed and their findings
recorded.
                             SUCCESSFUL APPROACHES - EPA/STATE
                                   OVERSIGHT MONITORING
             Checklists developed for inspectors and auditors
RECOMMENDATIONS - EPA/STATE PERSPECTIVES

Develop a strategic, risk-based approach: Representatives from EPA OGD noted that the monitoring
might have been more frequent than necessary, and expressed the need for EPA to develop a strategic,
risk-based approach to monitoring.

Provide more immediate feedback from federal authorities conducting audits: Many states expressed
disappointment in the lack of feedback regarding ARRA audits. To accommodate an audit, states
reassigned staff and/or pulled staff from existing ARRA activities to provide site tours, prepare and review
files and participate in interviews. Understanding whether they were in compliance with the ARRA
regulations was of extreme importance to the states and since ARRA was a 'fast burn' appropriation,
immediate feedback was needed to make any required changes to other projects. States recommended
that EPA and other federal authorities provide some sort of immediate feedback from their audits and
investigations to the states and funding  recipients.
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                                  COMMENDATIONS - EPA/STA
                                    OVERSIGHT MONITORING
             Develop a strategic, risk-based approach
             Provide more immediate feedback from federal authorities conducting audits
3.9.3   SUMMARY - OVERSIGHT MONITORING

Most state and EPA representatives participating in the study noted that oversight monitoring was more
rigorous than it needed to be, particularly when staff resources were stretched. Participants
recommended that EPA follow a more risk-based approach to focus on areas of anticipated problems.
States also suggested that federal auditors provide more immediate feedback to let state personnel know
whether their ARRA management processes needed adjustments.

3.10    PROCESS EFFICIENCIES

Many EPA interviewees and state focus group participants described in general terms or provided specific
examples of the modifications made to their existing processes to obtain greater efficiencies. These
process efficiencies have been identified as Successful Approaches in Sections 3.1 through 3.9 of this
report and compiled into Table 17 below. Additional process efficiencies mentioned by EPA and state
respondents are provided  below.

Training

    •    Webinars for reaching large number of people: While state and EPA staff appreciated all
        training, some commented that the early webinars raised more questions than they answered.
        Posting the training webinars on the website was helpful except when guidance changed and
        obsolete information that was not deleted from the online resources created confusion.

    •    EPA HQ contractor training at EPA Regional and state offices: Regions and states reported that
        this face-to-face training was valuable.

Tracking Tools

    •    EPA developed an Executive Dashboard to enable EPA management to track grant awards and
        expenditures.
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                      Successful Approach Focus: Region 6 Process Efficiencies

    EPA Region 6 created an assembly line approach in their DERA program to implement ARRA and
    assigned different people different responsibilities based on each person's skills to process grants
    quickly without disrupting normal operations. Region 6 also created a chart with multiple types of
    information that could be requested by outside officials and then responded to each request using the
    information from the chart, as well as developed a 'book' that listed all of Region 6 procedures. This 'go
    to' source of information was extremely useful for new hires and existing staff and became the first stop
    for auditors.
Modifications to Financial Processes

    •   Consolidating money transfers: Money was previously handled in individual Regions first, and
        then given to the Indian Health Service or Army Corps of Engineers. EPA streamlined the process
        by having the money go straight from HQ to IMS or to the Army Corps of Engineers.

    •   Single invoicing: One state Brownfields program switched from monthly invoices to just one
        invoice for each project. The state acknowledged that this was easier but made tracking the
        expenditures more difficult.

Table 17 below lists the process efficiencies identified by EPA interviewees and/or state focus group
participants as Successful Approaches in Sections 3.1 through 3.9 in this report.

                   TABLE 17. SUMMARY OF  PROCESS  EFFICIENCIES

PROCESS EFFICIENCY
Using conditional and partial awards
Developing new award status tracking tools
Using model funding recommendations
Switching to electronic grant applications
Developing new forms/checklists for grant applications
Developing new project status tracking tools
Conducting concurrent instead of sequential reviews
Screening for readiness to proceed to reduce number of
applications that receive a detailed review
Developing a backup list of projects
Issuing a national waiver for small motors
Developing a waiver tracking system
Using DOL checklists for Davis-Bacon implementation
Developing review checklists for 1512 reports
Using a dedicated reporting coordinator

SECTION
Timely Obligation
Timely Obligation
Timely Obligation
Timely Obligation
Timely Obligation
Timely Obligation
Timely Obligation
Timely Obligation
Timely Obligation
Buy American
Buy American
Da vis- Bacon
Reporting
Reporting
GPR

PARTICIPANT
EPA
EPA
EPA
States
States
Both
States
States
States
EPA
EPA
EPA
EPA
States
EPA
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                   CESS EFFICI
                                                    Grants Management
                                                                           Both
Developing new reporting
Reporting
States
Developing a one-page business case template
GPR
                        EPA
Conducting training webinars
Grants Management
                        EPA
Using checklists for inspectors and auditors that
addressed ARRA-specific requirements
Grants Management
                        Both
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SECTION 4.    RECOMMENDATIONS TO EPA
4.1     SYNTHESIS OF RECOMMENDATIONS FROM THE STUDY

The SAIC Team heard hundreds of recommendations from EPA, states and funding recipients relating to
ARRA implementation. The SAIC Team reviewed all of the recommendations and summarized below those
which reflect the approaches found to be successful during ARRA implementation or alternative
approaches that might prove more successful in meeting the challenges. These recommendations are not
listed in any priority order and are offered as guideposts for EPA and states' existing programs and any
new initiatives for the existing programs.

Work as a team

    •   Collaborate with all stakeholders (federal agencies, states, local governments, contractors and
        other funding recipients) through working groups to develop plans, policies and guidance.
        Convene multi-disciplinary and multi-organization discussions to ensure all viewpoints are
        included. Develop guidance and policy with input from all the stakeholders before rolling it out.
        Minimize changes to the guidance and policy after they are issued and consider grandfathering
        to avoid rework. Continue collaboration with all the stakeholders throughout the process to
        discuss and resolve issues.
    •   Communicate frequently with one voice (not different messages from the different federal
        agencies). Begin communication early (prior to roll-out of the funds) with the stakeholders. Use
        all communication avenues - meetings, webcasts, websites, emails, etc. Stay in frequent
        communication with all the stakeholders and be responsive to problems and issues raised by the
        funding recipients.
    •   Create short-term working groups focused on specific issues or processes. These short-term
        working groups promote stakeholder involvement and consensus solutions.
    •   Be responsive to the questions and issues from the stakeholders. Avoid delays in decisions and
        feedback.
    •   Target and coordinate oversight by the different responsible agencies to minimize the disruption
        and increased workload experienced by the states and funding recipients that can adversely
        impact progress. Provide rapid feedback and disseminate issues and solutions to others to
        prevent similar errors. Develop a risk-based approach to oversight to ensure that states with
        historical program or financial management issues receive more attention than programs with
        historically good internal management controls.

Follow a strategy

    •   Clearly define the goals and eliminate conflicting goals. For example, the stakeholders had to
        meet new mandates with shorter deadlines. EPA should identify the primary and secondary
        goals. If the primary goal is to obligate funds quickly, then minimize any new time-consuming
        requirements as much as possible.
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    •   Consider incorporating new requirements as incentives where possible as a transition. When
        adding additional requirements (such as Buy American and GPR), consider proposing these as
        incentives or goals instead of mandatory requirements.
    •   Simplify requirements to enable quick implementation and better compliance. Make the effort
        to standardize all federal agency forms (applications, checklists, reports) into one that serves all
        the federal agencies. Allow states to implement their requirements (in lieu of the federal
        requirements) if these requirements are equal to or more stringent than federal requirements.
    •   Provide for flexibility at the state and local level. Allow for adjustments to the situation at the
        local level.  One size does not fit all. Delegate the decisions to the local level as much as possible
        as the local situation will dictate what or how to apply requirements.

Use effective tools and processes
    •   Streamline federal agencies' review and approval processes. Allow for concurrent reviews
        rather than sequential reviews and reduce hierarchical levels of review. For example,
        environmental assessment and reviews involved in beach rebuilding may involve many agencies.
        Work together for a coordinated approach.
    •   Agree and  identify the specific monitoring data needs prior to implementation. Identify data
        requirements upfront for all reporting, up and down the programmatic chain, to track the
        incremental milestones that measure the progress or status of activities and to measure the
        outcomes or results.
    •   Provide reasonable deadlines and establish internal indicators to alert managers of potential
        problems/delays.
    •   Provide sufficient resources to handle the increased workload. Dedicate experienced staff to the
        effort; reassign staff from other program areas; make temporary hires; use contractors.
    •   Provide concise training and education  for all stakeholders. Use all forms of training to reach all
        stakeholders. Provide sufficient resources to enable on-the-ground assistance visits at the
        beginning of projects as these can increase the funding recipients'  knowledge and understanding
        of the requirements and prevent future  problems.

4.2     HOW EPA  USED THE PRELIMINARY  FINDINGS OF THE  ARRA STUDY

SAIC shared preliminary results of its evaluation analyses to help EPA manage ongoing programs and in
particular inform strategies to support EPA's Hurricane Sandy Recovery efforts.  EPA used these analyses
to help organize its efforts, develop long range strategies and inform stakeholders.

Similar to ARRA, the Hurricane Sandy Supplemental provided funds to an existing program with  some
changed and additional conditions under a tight timeframe. To help meet these planning goals,  EPA used
the following preliminary analyses:

Need many, varied  skills.  Organize multi-disciplinary teams from the agency and major partners to
identify major problems. To do so quickly, add on to existing frameworks rather than starting from
scratch.
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    •   For Hurricane Sandy, EPA used the grants office's planning process to coordinate groups. To
        facilitate this planning, EPA managers delegated authorities early on to allow process-holders to
        engage directly.

Obtain input from all stakeholders. Ensuring state and recipient input into policy and planning helped
identify issues. Even prior to final legislation passage EPA Regional personnel met with state and local
officials about potential projects and challenges.

    •   EPA shared preliminary guidance, definitions and other major documents with state planners and
        obtained their feedback.
    •   EPA worked closely with other federal agencies to try to minimize duplication of efforts between
        federal agencies.

Changing guidance causing re-work. Changing OMB, Recovery Act Transparency Board and other agency
guidance created significant additional work for all parties.

    •   EPA worked actively with the Hurricane Sandy Task Force to help craft guidance and policy to
        make initial guidance clearer and reduce the need for re-work. This included specifying clear
        financial deadlines and clarifying crucial definitions.

Capturing Data. Preliminary analyses of technology and economic impacts showed anecdotally that
wastewater and drinking water projects could have substantial local economic, employment,
environmental and quality of life impacts.  However, these analyses also revealed that EPA could not
capture or quantify many of these benefits because EPA had not enhanced its systems' reporting
capabilities to capture this data.

    •   EPA used this lesson learned by engaging with the Hurricane Sandy States early in planning to
        discuss what data all parties wanted to capture,  and to begin planning how to capture it.

Although preliminary data cannot provide managers with final answers, it helped EPA managers know
what questions to ask. In planning for the Hurricane Sandy response, this proved invaluable. EPA
managers knew they needed to create a communications network that allowed for questions to be
posted and a forum for discussion of possible solutions and their costs and benefits.
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Environmental Protection Agency. 2009a. "Determining Whether 'Substantial Transformation' of
   Components into a 'Manufactured Good' has occurred in the U.S.: Analysis, Roles, and
   Responsibilities." Available online at
   http://water.epa.gov/aboutow/eparecovery/upload/2009 12  13 eparecovery 10 23 09 Substantial
    Transformation memo  Final.pdf

Environmental Protection Agency. 2009b. "Notice of Nationwide Waiver of Section 1605 (Buy American
   Requirement) of American Recovery and Reinvestment Act of 2009 (ARRA) for the de minimis
   Incidental Components of Projects Financed Through the Clean of Drinking Water State Revolving
   Funds Using Assistance Provided Under ARRA." Federal Register Vol. 74, No. 104. Available online at
   www.gpo.gov/fdsys/pkg/FR-2011-01-06/pdf/2011-19.pdf (EPA, Federal Register, 2009).

Environmental Protection Agency. 2009c. "Memorandum re: Award of Capitalization Grants with Funds
   Appropriated by P.L 111-5, the 'American Recovery and Reinvestment Act of 2009.'" Available online
   at http://water.epa.gov/aboutow/eparecovery/upload/Final ARRA SRF  Guidance   03  02  09.pdf

Environmental Protection Agency. 2010a. "American Recovery and Reinvestment Act of 2009:
   Environmental Protection Agency Recovery Act Plan: A Strong Economy and a Clean Environment."
   Available online at www.epa.gov/recovery/pdfs/2010-EPA-ARRA-Plans.pdf

Environmental Protection Agency. 2010b. "Clean Water State Revolving Fund Green  Project Reserve
   Funding Status." Available online at
   http://water.epa.gov/aboutow/eparecovery/upload/GPR  Funding Status 3-17-2010 Final.pdf

Environmental Protection Agency. 2010c. "Drinking Water State Revolving Fund Green Project Reserve
   Funding Status." Available online at
   http://water.epa.gov/aboutow/eparecovery/upload/GPR  Summary Report Revised.pdf

Environmental Protection Agency. 2010d. "Increasing Energy Efficiency Through ARRA Funding: New York
   State Wastewater Initiatives." Available  online at
   http://water.epa.gov/infrastructure/sustain/upload/10504-ll-NYState-case-study v4  highres l.pdf

Environmental Protection Agency. 2011. "Implementation of the American Recovery and Reinvestment
   Act of 2009, Clean Water & Drinking Water State Revolving Fund Programs." Available online at
   http://water.epa.gov/aboutow/eparecoverv/upload/epa-WEB-ar-arra-May2011.pdf

Environmental Protection Agency. Undated. "Interim Davis-Bacon Act Guidance." Available online at
   www.epa.gov/ogd/davis  bacon/Davis Bacon Interim  Guidance sec.pdf

Environmental Protection Agency Office of  Inspector General. 2010. "Leaking Underground Storage Tank
   Recovery Act Grants Contained Requirements but Priority Lists Need More Oversight." Available online
   atwww.epa.gov/oig/reports/2011/20101122-ll-R-0018.pdf
September 2013                                                                             89

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Office of Management and Budget. 2009a. "Requirements for Implementing Sections 1512,1605, and
   1606 of the American Recovery and Reinvestment Act of 2009 for Financial Assistance Awards."
   Federal Register Vol. 74, No. 77. Available online at www.gpo.gov/fdsys/pkg/FR-2009-04-23/pdf/E9-
   9073.pdf

Office of Management and Budget. 2009b. "Memorandum re: Implementing Guidance for the Reports on
   Use of Funds Pursuant to the American Recovery and Reinvestment Act of 2009." Available online at
   www.whitehouse.gov/sites/default/files/omb/assets/memoranda fy2009/m09-21.pdf

US Congress. 2009. "American Recovery and Reinvestment Act of 2009." Available online at
   www.gpo.gov/fdsys/pkg/BILLS-lllhrlenr/pdf/BILLS-lllhrlenr.pdf (US Congress, 2009)
September 2013                                                                           90

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APPENDIX 1: FOCUS GROUP PROJECT AND FUNDING INFORMATION

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FOCUS GROUP FUNDING AND PROJECT INFORMATION
*[Note: New York is listed twice in the table to show that the participants provided discussion on both topics of Funds
Management and Cost Estimating/GPR.]
STATE


Colorado
(EPA Region 8)
State for Pilot
Study





Missouri
(EPA Region 7)






New Hampshire
(EPA Region 1)






New York
(EPA Region 2)






Texas
(EPA Region 6)



SRF SUPERFUND BROWNFIELDS LUST DERA
- 12 CWSRF, 22 DWSRF
projects
- $64.4 M
- No Buy American waivers
- First SRF obligation:
8/29/2009
- Last SRF obligation:
12/31/2009
- 44 CWSRF, 18 DWSRF
projects
- $138.8 M
- 2 Buy American waivers
- First SRF obligation:
6/15/2009
- Last SRF obligation:
2/10/2010
- 45 CWSRF, 49 DWSRF
projects
- $54.7 M
- 4 Buy American waivers
- First SRF obligation:
6/17/2009
- Last SRF obligation:
2/1/2010
- 80 CWSRF, 29 DWSRF
projects
- $502.3 M
- 1 Buy American waiver
- First SRF obligation:
2/20/2009
- Last SRF obligation:
2/16/2010
- 21 CWSRF, 25 DWSRF
projects
- $326.1 M
- 1 Buy American waiver
- First SRF obligation:
11/10/2009
- Last SRF obligation:
2/11/2010



- 2 projects
-S19.2M






- 1 project
-$2.5M






- 1 project
-S1.8M






- 2 projects
- $14.7 M






- 1 project
-$6M






- 1 project
- $200,000






- 4 projects
- $800,000






- 1 project
- $400,000






- none






- 2 projects
- $432,200






$2.5M






$3.3M






$1.3 M






$9.2 M






$10.8 M






$1.73 M






$1.73 M






$1.73 M






$1.73 M






$1.73 M



September 2013
Appendix 1-1

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 Virginia
 (EPA Region 3)
- 35 CWSRF, 17 DWSRF
 projects
- $97.8 M
- 2 Buy American waivers
- First SRF obligation:
 7/1/2009
- Last SRF obligation:
 2/12/2010
                                                  'ERFUND
                                            BROWNFIELDS     LUST
                                              DERA
- 1 project
-$3.7M
• 1 project
• $200,000
$4.6 M
$1.73 M
  Washington
  (EPA Region 10)
-17 CWSRF, 21 DWSRF
 projects
- $103.6 M
- 8 Buy American waivers
- First SRF obligation:
 5/1/2009
- Last SRF obligation:
 2/12/2010
- 2 projects
- $7.6 M
• 2 projects
• $432,200
$3.4 M
$1.73 M
  Focus Groups for Cost Estimating & GRP Study
  Iowa
  (Region 7)
- 47 CWSRF, 32 DWSRF projects
- $77.3 M
-1 Buy American waiver
- First SRF obligation: 5/26/2009
- Last SRF obligation: 2/16/2010
  Louisiana
  (Region 6)
- 53 CWSRF, 28 DWSRF projects
- $70.4 M
- 2 Buy American waivers
- First SRF obligation: 7/24/2009
- Last SRF obligation: 2/11/2010
  Montana
  (Region 8)
- 31 CWSRF, 33 DWSRF projects
-$36.9M
- No Buy American waivers
- First SRF obligation: 4/8/2009
- Last SRF obligation: 2/11/2010
  New York
  (Region 2)
See above
  North Carolina
  (Region 4)
• 56 CWSRF, 74 DWSRF projects
•$132.7M
• 2 Buy American waivers
• First SRF obligation: 2/19/2009
• Last SRF obligation: 2/2/2010
  Oklahoma
  (Region 6)
• 33 CWSRF, 24 DWSRF projects
• $60.6 M
• No Buy American waivers
• First SRF obligation: 5/15/2009
• Last SRF obligation: 1/12/2010
September 2013
                                                                      Appendix 1-2

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APPENDIX 2: ADDITIONAL COMMENTS FROM EPA INTERVIEWS

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ADDIITONAL COMMENTS  FROM  EPA INTERVIEWS
The SAIC Team captured hundreds of comments, many duplicative or similar in nature, from the EPA
interviews. This list contains additional comments not fully captured in the main portion of the report. Any
duplicate comments or observations are not repeated.  Therefore, some of these comments represent a
compilation of several duplicative or similar comments. It was the goal of the writers to present a
condensed, yet comprehensive picture of the experiences and perspectives of the interviewees. The
comments below are directly from notes and have not been edited to match the style of the main report.
                              CHALLENGES RELATED TO TIMELY OBLIGATION
 Conflicting goals with ARRA: There were conflicting goals of the Recovery Act, which drove the Superfund project
 selection. They wanted shovel-ready projects that could be awarded quickly, but they also wanted to issue new
 contracts that benefited disadvantaged communities and small businesses. These two goals were at odds; would
 have taken 11/2 years to get a new contract issued.  In the end, the executive administration ended choosing the
 projects and which existing contracts to use (for Superfund), so it didn't matter.
 High turnover at EPA affected timely obligations: One grant had 4 different POs, which made coordination and
 communication difficult.
 The requirement to continuously check in with grantees was particularly cumbersome:  It was a lot of work
 meeting with the community to get project started.
 Obligation deadline confusion: There was some bickering over what deadlines were and felt some were a
 "moving target." Everyone knew that the onus was on them to perform. The Region and/or grantees felt deadlines
 were arbitrary; Brownfields in the Midwest by nature are not really shovel-ready.
 One person responsible for monitoring grants was not enough:  Having one person monitoring budgets and
 grants performance was not enough. Base programs are almost two or three people's staff. Generally, HQ doesn't
 deal as much with management and oversight requirements. This is handled at the Regions. Overall have a hard
 time with accountability.
 Diversity of projects:  Every project was different and every recipient had different issues that were challenging.
 Didn't know how much ARRA money until legislation was passed: We didn't know how much money was coming
 down the pipeline until legislation was passed.
 Congressional appropriation delays: Tended to affect how much funds the Region wanted to offer recipients. If
 there was uncertainty about budgets and allocation, the Region could be reluctant to offer more competitions.
 Back up from Katrina: Some states were still working to expend funds from Katrina (caused some USTs to leak),
 which slowed things down, as they were still trying to clean up after Katrina.
 Programs received multiple times more funds than baseline funds: Region received approximately 4 times the
 regular amount of funding for LUST. Some states that were normally granted ~$500K received ~$1.5m. One state
 that usually receives ~$1.5m received ~$10m.
 Only One PO: On EPA's side, the only thing that slowed things down was that there was one person doing the
 work.
 LUST response to large funding (lack of resources):  A large majority of ARRA LUST funded grants were allocated
 to direct field work projects. Generally states had an inventory of sites (100,000 nationally) but some states
 struggled to find 'eligible' sites. A small portion of the funds were allocated to staff members. This proportion did
 not represent normal allocation.
 Additional subsidization in future appropriations: Congress wanted to grant additional (higher) subsidizations in
 2010 and 2011, but EPA was concerned that the original SRF fund will not grow without the loans as opposed to
 grants that are not reimbursed. The actual percentage of ARRA SRF funds for additional subsidization was closer to
 70-75% instead of the mandated 50%. In the last two congressional appropriations, funds for CWSRF and DWSRFs
 decreased; $2 billion in 2010, and $1.5 billion in 2011. Given the yearly decrease in appropriations along with
 additional subsidization, the EPA had concerns that they may not be able to pay back the fund.
 Difficulty with state governments: At times, states had more bureaucratic issues with their own state
 governments.
 Each state was a different challenge: States were used to doing things the way they always have, and each
September 2013                                                                         Appendix 2-1

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 program was different; difficult to change the mold. Each state has its own unique program and state statutes that
 needed to be considered. You're dealing with 51 individual state programs (including Puerto Rico), with two
 different legislative programs (CW and DW).
 Most work fell on mid-level state officials: Higher-level state officials probably thought the process was beneficial;
 however, mid-level state officials were probably not in favor of the system because of its complexities and timely
 requirements.
 There was an absence of political leadership: There was virtually no one in place from the new administration to
 implement the Act's policies. Much of the demanding policies took place at the Office Director level. Senior
 management was reluctant to make policy decisions but the tight timeframe required quick decision making. Staff
 members were given remarkable autonomy, as well as the opportunity for creativity in order to  meet the statutory
 requirements.
 Understaffed: There was a huge resource issue. Not enough staff. ARRA took control and was the #1 priority, and
 as a result, there were a lot of things that just didn't get done. They worked an extreme number of hours, non-
 stop, just to get the grants out.
 Other program work suffered: Staff that normally worked on congressional earmarks were pulled to work on
 ARRA. Congressional earmarks were put on a four to five month hold, and some were not completed.
 Congressional earmarks require a more hands-on approach by EPA staff members to complete a community
 project. When ARRA was in place, that hands-on approach was not available, and some community projects
 weren't completed.
                        SUCCESSFUL APPROACHES RELATED TO TIMELY OBLIGATION
 ARRA forced Program to streamline its process:  ARRA was good at streamlining the process, and making sure
 everything was on track.  It helped the Brownfields program become a more efficient and streamlined program,
 despite the slow start, it served the grantee well. Developed checklists and teams to move projects through.
I
 Good existing relationships: Benefited from having a good working relationship with the grants officers. Worked
 together to develop reports that were put out on a monthly basis. Also had a strong relationship with the admin
 officers. It was very helpful to have this coordination.
 ARRA provide more funding for direct cleanup: With ARRA they were able to put more direct grant money onto a
 site for cleanup. In base program, only a percentage of the funding is used for direct cleanup and ARRA allowed
 for 100%.
 Helped DERA train for baseline work:  DERA is relatively new and the ARRA process helped train for tight
 deadlines and large funds. The program seemed to do better once ARRA was in place.
 Training Program for Temps: Created a training program for temp employees (they were inexperienced GS-7's)
 and set up initiatives to ensure that tasks were completed on time.  Were able to use the ARRA travel allowance to
 enhance this training. Met with recipients, walked the grounds, met with sub-recipients.
 Preparation improved efficiency:  CW and DW staff met together on daily basis weeks in advance of passage of
 the Act. A meeting was held every morning to discuss what we needed to do and to explore possible bottlenecks.
 Travel money: Travel funds were very helpful to meet with our states one on one. Having an unprecedented
 amount of resources available to assist the states was a huge help. The interaction and team-building really helped
 as well. States didn't have money to travel to do training, so fortunately EPA had the resources to go to the states.
 Environmental review post cards: The Region would send out a "post card" or notification to other federal and
 state environmental agencies (e.g. the Army Corps of Engineers) about their ARRA projects. This was to ensure
 they received all documentation in order to proceed with the project. It was template that ensured all
 documentation was in place. It was something they could send out to the other agencies to make sure they are
 doing everything right.
 Because projects moved so fast, costs actually went down:  Costs actually went down because of the speed at
 which the projects developed. Superfund sites usually take several years to get moving and approved, and some
 can even take up to 10 years.
 Good training tool for current baseline programs: It helped Region S's current Superfund grant award
 procedures. ARRA made the program take a closer look at its own procedures. It also gave the RPM's better
 expertise on how to run the program in the future.
September 2013                                                                          Appendix 2-2

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                             COMMENDATIONS RELATED TO TIMELY OBLIGATIO
 Treat ARRA like an emergency Fund:  One lesson learned from ARRA is that we should compare it to other
 emergencies, like Katrina relief. The skeletal structure of ARRA was essentially an emergency measure. Future
 stewardship plans of emergencies should learn from this.
 Communication with HQ could still have improved:  Increased and coordinated communication at all levels was
 helpful in the overall ARRA process, and could have been improved even more.
 Need more advanced planning: Would have been to have had even more advanced planning before ARRA took
 effect.
 Utilize more technology: Programs can always take more advantage of technology; but that takes money, and
 more resources to maintain it.
 Improve relationship with DOL: There should have been a lot more coordination and policy exchange between
 DOL and EPA. They're still not there today.
 Better coordination for EPA-specific initiatives: OMB was trying to make all of the federal agencies uniform.
 While a noble idea, it was put together too quickly, and it was duplicative.
 Have an approach to funding disadvantaged communities: DWSRF has historically had set-aside money (30% of
 funds) for disadvantaged communities in the form of no/low interest or principle forgiveness. Targeting funds to
 disadvantaged communities within the 1 year deadline was difficult to quickly develop a political strategy. Most, if
 not all, states gave every project some ARRA subsidization funds as well as a loan. CWSRF didn't have
 disadvantage community component so there was no existing process for identifying and targeting disadvantage
 communities for ARRA funds, no definition or criteria for 'affordability'. This is a continuing challenge for CWSRF.
 Collaboration tools: Should explore use of shared document editing and shared work places that enhance
 collaboration.
 More communication between Regions: Additional communication between the Regions would have proved
 beneficial. For example, many were not even aware of the workload sharing option.
 Make documentation easier for states: There were some difficulties in the documentation side of the process,
 and HQ could have done a better job to make that process easier.
 Should be a better way for DIG to do their oversight: It was overkill, and they didn't understand the way each
 program worked.
                            CHALLENGES RELATED TO ADDITIONAL MANDATES
 Had to bring in attorneys to determine whether a waiver was needed:  Buy American didn't come into play so
 much with Brownfields, but it was difficult to determine when it was applicable. They needed to bring in lawyers to
 determine whether a waiver was needed.
 Too many bureaucratic levels with the Buy American waivers: There were even too many people beyond DW's
 office that had to look at them. Technical review, legal, and the OARM/OGD then had to review and sign off.
 Each project was different, making each waiver different: The same product used in different projects could be
 used differently, so it might get a different ruling.
 Timeliness of waivers increased as ARRA went on:  Some definitely took longer than two weeks. After mid-way
 through, they took longer because we were changing guidance ourselves. As ARRA moved on it took longer.
 Davis-Bacon became an administrative burden that took away from core program missions:  Overall, there was
 too much time spent on issues that did not reflect LUST's core mission, i.e. stopping the release of leaking
 underground storage tanks across the United States. Most states had fair labor wage standards in place but had to
 tweak to meet federal Davis-Bacon, and ARRA Davis-Bacon issues became an administrative burden and may not
 have resulted in increased wages. A representative from the U.S. Department of Labor assisted the LUST program
 with Davis-Bacon and approved the labor standard for individual projects; however, Davis-Bacon was not in any
 existing state contracts and more time and labor was required to make sure requirements were satisfied.
 Some recipients were not familiar with Davis-Bacon: They were not familiar with the interview forms in the
 checklists (DOL or EPA forms), the finer details, and the labor classifications. Recipients would usually leave forms
 blank until the EPA assisted.
 Difficult to calculate number of jobs and changing guidance:  How do I calculate number of jobs? What are the
 definitions for each term? Eventually it got better, but there were always calls around reporting time. Could have
 also done a better job publicizing accomplishments, all they read in the newspaper was that EPA spent X dollars,
September 2013                                                                          Appendix 2-3

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 and created temporary jobs (which seemed low), which doesn't take into account money spent on all non-labor
 costs, such as construction materials.
 Constant HQ 'badgering' and EPA's heavy-handedness:  Felt they were constantly badgered by EPA HQ to get the
 information from communities.  But, EPA programs felt pressure to "badger" recipients since HQwas "badgering"
 them. Sometimes HQ would call recipients directly and inquire not knowing that the recipient had already
 communicated with the region on a particular reporting requirement or issue.
 Regional staff more concerned about the program's mission: The Regional staff usually doesn't place high priority
 on reporting. They care about the reuse of the properties and how it will benefit the community. This hurt the base
 programs. Some recipients didn't come back for funding because of the onerous reporting requirements.
 Excessive reporting requests by outside organizations/agencies:  Biggest challenge was reporting to many
 different agencies and EPA offices and people. Different officers wanted different information at different times.
 This info could have very easily been pulled from the 1512 reports, but it was still requested, and created a burden
 on them and the recipient. It was repetitive and unnecessary.
 State resources were constrained: Reporting was a burden. A lot of the states were undergoing budget crunch
 and crisis. Many employees were on furloughs, while at the same time offices were being reduced to fewer hours
 because of budget cuts.
                            SSFUL APPROACHES RELATED TO ADDITIONAL MANDATES
 Viewing waivers instantaneously as they arrived via email: We were able to see all waiver requests coming into
 Regions, as everything was CC'd to HQ. We were trying to track all waivers for consistency, which in turn helped us
 discuss national waivers. We had about 15 waiver requests for small motors, so we did our own research and
 found American manufactures didn't produce a small (under 40) horsepower engine specific for many projects,
 and then we issued a national waiver.
                                                                                                    -
 Using a Buy American contact person: Regions usually had a Buy American contact person. When emails came
 into that one person, it really helped us organize. Some of them were short term ARRA people, but some are still
 around. Had regular calls with Regional Buy American coordinators.
 Developed Relationship with DOL:  One Region didn't have much experience with Davis-Bacon requirements, but
 they developed an excellent relationship with someone at DOL who provided priceless help in dealing with DB
 issues. Wouldn't hear from EPA HQ DB person until maybe 6 months later, so this DOL contact was an excellent
 resource.
 One contact person for Davis-Bacon helpful: In one state there was one person on Davis-Bacon and it was very
 helpful. She did such a good job that the state agency hired her full time because Davis-Bacon became a part of the
 program.
                        RECOMMENDATIONS RELATED TO ADDITIONAL MANDATES
 Maintain consistent requirements: There could have been more coordination and legal input from HQ on BA
 issues in a consistent manner. OIG would sometimes conduct review of BA compliance. They would come out into
 the field and have a different interpretation than the Region or state, especially when dealing with the term
 "substantial transformation." There was uncertainty on who was to make the ultimate decision. Region would say
 yes, it meets the requirement, and then OIG would come in and say no, it doesn't. They kept second guessing EPA
 decisions.
 Using a pre-approved Buy American product list and more research: Developing a list of pre-approved products
 to eliminate work for everyone would help in the long run. Recipients could view the products before contracts are
 formed. We have a good start from ARRA - if the next bill has a set aside money for us, we can find manufactures,
 or even call-out specific American manufacturers.
 Include Regions in developing guidance:  ARRA guidance on Buy American was developed at HQwith not much
 input from Regions. In the future we should bring in the Regions for guidance assistance. EPA HQ can benefit from
 this institutional knowledge.
 Process would prove better if there were fewer requirements: The perception out in small towns is that there
 are too many requirements related to Buy American. Many of these 3,000 to 4,000 town populations, they don't
 have the resources to perform these requirements.
 Use state Davis-Bacon requirements if already in place: States with Davis-Bacon already worked into programs
 were required to have EPA's Davis-Bacon wording: It would have been easier if these states did not need to rewrite
 their contracts to accommodate ARRA Davis-Bacon language.
September 2013                                                                         Appendix 2-4

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 Less frequent reporting would have helped the Region in terms of workload: Quarterly reporting would have
 been equally effective had it been semi-annual; and monthly reporting ('drawdowns') would have been equally
 effective had it been quarterly. In addition to the quarterly reports, recipients had drawdown reports, ACRES
 reporting, and some others. This was too much reporting to do as a brand new recipient of federal funding.
 Don't make a uniform reporting system for all agencies: OMB was trying to make all of the federal agencies
 uniform, while a noble idea, it was put together too quickly, and it was duplicative.
 Wrong questions were asked during reporting - ask questions pertaining to environmental or human health
 improvements: Didn't seem like the questions were as relevant or reflective of the current project work. The
 questions focused largely on job creation, when they should have also addressed the long term benefits of ARRA
 projects - especially in the Superfund program (e.g. stopping re-occurring hazardous waste pollution).
                                      OTHER GENERAL COMMENTS
 Having two distinct programs needing to move together (CW and DW) was difficult:  Trying to force CW and DW
 to 'march and lock step' was difficult. DW didn't have a data system in place, CW had CBR. DW then developed
 PER, but after ARRA passed. Then there were issues with how many site visits. Had daily meetings for months (30
 people), then it was weekly for another year. The decisions on how to move forward came out of these meetings.
 A lot of decisions were made, but under the pressure of time, which doesn't always lead to the right decision
 getting made. They erred on the side of not collecting enough info, which forced them to catch up later.
 Stewardship Plan should improve:  It would have worked better to have a well-thought-out stewardship plan with
 less detail, particularly where EPA has no control. Some of the steps in the stewardship plan should have been
 eliminated. The document formalized how EPA would meet the objections of ARRA and track performance. Had 20
 internal controls, but this could have been cut down to 8 or 9. Would have been more effective if tailored to EPA's
 strategic plan. More collaboration during the development of the plan with more regional staff whom actually
 implement the plan might have produced a better version
 Initiated re-examination of current allocation formula:  EPA LUST staff commented some reviewed the allocation
 formula as a result of ARRA.
September 2013                                                                          Appendix 2-5

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APPENDIX 3: ADDITIONAL COMMENTS FROM FOCUS GROUPS

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ADDITIONAL COMMENTS  FROM  FOCUS  GROUPS
The SAIC Team captured hundreds of comments, many duplicative or similar in nature, from the EPA
interviews. This list contains additional comments not fully captured in the main portion of the report. Any
duplicate comments or observations are not repeated.  Therefore, some of these comments represent a
compilation of several duplicative or similar comments. It was the goal of the writers to present a
condensed, yet comprehensive picture of the experiences and perspectives of the interviewees. The
comments below are directly from notes and have not been edited to match the style of the main report.
                             CHALLENGES RELATED TO TIMELY OBLIGATION
Contract changes: ARRA Superfund sites required different contract mechanisms to get them approved in time.
Fear of losing funds: There was the general fear that they had to get the grants processed really quickly or EPA
would take money away.
We didn't have a backlog in projects: We didn't really know all that was out there. Couldn't pull from a list of
projects.
Local approvals needed to proceed: Many smaller communities needed to get a town approval for the matching
component of non-ARRA funded portion.
ARRA funding only temporary: Had there been a steady stream of money, it would have helped more.
Unfortunately, just about the time that everyone got to know the program, it was over and the money was spent.
Lack of consistent communication with EPA Headquarters:  States were unable to move forward without HQ
approval and assistance and this delayed obligation.
It would have been nice to fund one really problematic site:  But there was internal and political pressure to
parcel funding out. Challenging to 'marry' the internal and political pressures together.
There was a lot of uncertainty about which LUST projects were eligible:  EPA got very restrictive on municipalities
"taking" projects if any evidence that the municipality owned it, as they may be an operator/liable party. Issues
with liability, dealing with liable parties and cost recovery were difficult to manage with ARRA funds.
Delays in issuing RFPs: Until the final guidance was submitted, we couldn't get the RFP out there.
'Arbitrary' deadlines: We struggled to meet the 30% expenditure deadline (did meet obligation deadline). Felt it
was arbitrary.
Different requirements for LUST than other EPA programs: Were told they couldn't apply ARRA requirements to
non-ARRA projects in order to simplify their processes, as the SRF program was able to do.
Required to develop new contracts for LUST: LUST could not use existing contracts because they didn't have
David Bacon language, so they decided to do mostly water line projects instead with new contracts.
Winter construction shut down: Impacted funds obligation.
Governor's offices held up projects for public relations benefits: Sometimes a press release sent out before
informing recipients and/or all award information had to be funneled through Governor's office slowing down the
process.
'Principal Forgiveness' created conflict: These grants caused political infighting and lobbying with regards to
distributing the funds. Created delays in awards.
Inadequate number of staff: Since ARRA was seen as a one-time funding increase, we did not add staff, as would
have been laid off later.
Hard to be ready pre-ARRA: Had a sense that ARRA was coming in fall 2008, but it was hard to pre-market without
knowing how much money was coming, and what the additional requirements would be. Until ARRA was actually
signed, it was difficult to do much to prepare.
Base projects put on hold: Catching up now (3 years later).
Clean Water Act enacted stricter standards during ARRA: Some states had recently implemented/passed
environmental standards now stricter than the national standards and this was a double 'hit' with the ARRA
provisions at the same time - struggle to address new standards and obligation funds expeditiously.
September 2013
Appendix 3-1

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Disbursements frozen when issues came up: Whenever there were questions on how to proceed with a project
mid-stream, the state would freeze the disbursements, which ended up compounding the sub-recipients' worries,
and potentially created tension with their best clients, but they saw no other way to handle it.
Additional requirements slowed funds expenditure: The additional requirements prevented them from disbursing
funds quickly, which hurt communities.
Demand for contractors and products created shortages or delays.
                       SUCCESSFUL APPROACHES RELATED TO TIMELY OBLIGATION
Created a scoring matrix: Looked at economic ranking of the state, if the project was proposed in the north, less
affluent, got a higher ranking. Trade association of market parts, they put together a formula for job creation
because EPA did not have such a formula. Funded 19 proposals out of about 40.
EPA allowed independence: with regard to project selection.
DERA received a needed exposure and ARRA funding provided needed progress on projects: Process was made
easier because EPA handled most of the heavy lifting.
Streamlining the process:  The 'green paper grants' [proposed projects on special green paper indicating stimulus
grant projects] helped streamlined priority projects.
Strengthened State-recipient relationships:  ARRA forced state staff to do their jobs a bit differently, work more
closely with the contractors, and not just for oversight, but collaboratively.
Some states chose to allocate funds to fewer but larger projects:  This aggravated a lot of communities, but it
reduced the challenges to the state, which was implementing the program.
Funding construction costs only: Chose to fund the construction costs with ARRA funds, but asked that projects
fund their own engineering costs. Allowed them to funds more projects.
Incentives to complete projects: The projects that were completed/expended first received ARRA funds - until the
ARRA funds ran out.  There were more ARRA-managed projects than funding provided for to ensure funds
expended and as expeditiously as possible.
Spread the money to help a wide range of recipients: Capped projects with ARRA funds in order to spread out the
funding, allowing many small communities to upgrade and fix their water systems and/or come into compliance;
which were things they never would have been able to do without ARRA.
Amended specific ranking criteria to meet ARRA conditions: Added "hardship" and "readiness to proceed." If
applicants met these two criteria, then application moved into the normal priority system.
ARRA "grant" component served as a successful marketing tool: New recipients and projects emerged that likely
otherwise wouldn't have. It was great for localities to finally achieve upgrades with new and more efficient water
systems.
Used provisional awards to make use of all funding: In order to assure that they expended every last cent of the
ARRA money, they started making provisional awards. If extra money was freed up for whatever reason, they
would award that money to projects on their provisional award list.
ARRA made programs more efficient: Have had repeat ARRA clients come back with offers for new projects that
they claim they can do more quickly, and at lower costs due to their prior experience with dealing with ARRA.
Shovel-ready is the new norm: As a result of ARRA, projects are now actually becoming shovel-ready prior to
asking for money.
Did not solicit new projects: (DW program only) used only their existing list, which really helped with the timely
obligation.
Reallocated funding to allow for more project awards: Often took money from projects that came in under their
bid and transferred it to other projects waiting in line. They essentially over committed ARRA funds so they could
make sure that they would get rid of it all. They offered people to be on a "B" list for ARRA funds. They told these
people that they had to start getting ARRA ready if they wanted to get this money.
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                         RECOMMENDATIONS RELATED TO TIMELY OBLIGATION
Slow pace down to keep people employed for a longer time. It would have kept more jobs if they had a longer
time to get things done. We pushed this through fast, and it would have been better to slow things down -
keeping more jobs.
Simplify the mandates.
Extend obligation deadlines to a minimum of 18-24 months.
Require all property/easement issues to be resolved or exclude land acquisitions.
Award only 100% grants: Would mean that credit reviews, financial statements and bond counsels would not be
required.
Have reasonable deadlines: If there's ever another ARRA, don't have such unreasonably tight deadlines.
If there's another ARRA, consider funding fewer projects at higher amounts. The effort involved and dealing with
all of the requirements for so many projects was overly cumbersome.
The best way to get money out quickly is with less regulation: Can understand needing the regulations for new
programs, but the CW and DW programs are already successful, well-established programs, and they really didn't
need all of these extra regulations in place.
                            HALLENGES RELATED TO ADDITIONAL MAN DA
Never got a response for help with Buy American: For one project, we never got a formal answer from EPA, and it
was a big project.
Buy American enforced aggressively: Some of our communities already had Buy American requirements and
contractors certainly know about it, but the compliance was different for ARRA and much more intense.
Unfamiliar American products: Many of the contractors were unfamiliar with some of the American-made
products and/or didn't have a good relationship with the manufacturer/supplier, thus requiring more effort to
purchase the products.
Buy American guidance came very late: There were projects that were finished before they received the final
guidance on Buy American.
Everyone now accepts that Davis-Bacon is here to stay, but people still panic when they hear about Buy
American.
Funds spent complying with Buy American: There was a lot of money spent on trying to find American-made
products.
Despite efforts to clarify guidance, process seemed disorganized: We can't place the blame all on EPA Regional
folks for the poor guidance, as they were working hard to answer our questions with EPA HQ. However, the
process still felt disorganized.
DOE and DOT processes for the ARRA projects were completely different: Those agencies were just interested in
American steel. But for the EPA, we were chasing down a bunch of miscellaneous parts, and it became quite a
frustration.
Buy American was probably the worst thing: It almost became impossible. Don't know if it really helped American
jobs or not.
They never received the detailed guidance on Buy American: LUST usually didn't have to deal with Buy American,
so they never received the guidance, but it applied to some projects.
Categorically 'green' definition inconsistent: Water line replacements were supposed to be categorically 'green,'
but in the application process, EPA required that they submit a business case anyway.
Some contractors now use two bid numbers: One with Davis-Bacon taken into account, and one without Davis-
Bacon. They say that because of the extra requirements, an increase of 4 - 6% is necessary.
We asked EPA about David Bacon, and at times they didn't have the guidance we needed: We used the HUD
process that we had for another federal grant instead, and that worked for the time being,  until the audits found it
unacceptable.
The LUST program was surprised how none of the localities had worked with Davis-Bacon before: Had they
known how difficult it would be to comply with additional requirements, they would have budgeted for a new
person, but they found  out too late.
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Late reporting caused by Governor's office: State agencies had to send reporting data to the governor's office,
which compiled all of the quarterly reports in the state, and submitted them to EPA. They were often late, and EPA
would ask where the reports were.
The multiple reporting was incredibly cumbersome: They had to report to the comptroller, EPA, PBR/CBR, and all
of these different agencies had different requirements.
Vendors founding reporting difficult: We struggled with vendors, had sub-grantees that dropped out because of
the reporting requirements.
Hard to get all sub-contractors to submit reporting data: There were always one or two sub-contractors that
didn't submit their payroll data, which made the quarterly reporting more difficult.
The definition for the reporting of the number of jobs was hard to understand and changed during the process:
What did a 'job' really mean? Trying to get a clear definition took a while. After the first couple of reports it fell
into place. Number of jobs created is 'more of an art than a science.'
Reporting tough for rural communities: It was hard to communicate reporting requirements to local rural
communities that weren't as tech savvy.
Getting the reporting requirements into contracts was hard to do in a short timeline.
EPA put LUST on a monthly reporting requirement instead of quarterly: The deadlines seemed arbitrary, but
Regional staff were very helpful and responsive.
                     SUCCESSFUL APPROACHES RELATED TO ADDITIONAL MANDATES
Started with a focus on "green" projects: Some projects might have been ready to go, but weren't 'green,' so they
skipped them and tried to focus on only GPR eligible projects in order to meet that requirement first, then they'd
move on to other shovel-ready projects.
Added incentives for GPR, such as lower interest rates:  They've also taken a new look at their prioritization
process. It helped point out their weaknesses, which they can now work on.
Northbridge provided ARRA training: Several hundred people participated, including contractors, state recipients
etc., to discuss the ARRA process. This was very helpful. Discussed Davis-Bacon, Buy American, and reporting
requirements.
Created reporting spreadsheets: The reporting spreadsheets provided were too complex, so we created our own
that were simpler to use.
No reporting, no money: They included a clause in all of their contracts that if a recipient didn't report, they didn't
get reimbursed, which helped ensure timely reporting from sub-recipients.
                       RECOMMENDATIONS RELATED TO ADDITIONAL MANDATES
Should make Buy American a good faith effort: Not a requirement. Should also provide incentives.
EPA should spend less time and effort on oversight: To the state it seemed like EPA didn't care about the
environmental benefits or how the money was spent, all it seemed EPA cared about was Davis-Bacon, Buy
American, and reporting compliance.
                                     OTHER GENERAL COMMENTS
No net increase in funding: The substantial appropriation of ARRA funds to state programs didn't necessarily lead
to a net increase in their overall cumulative funding. One state commented that because of the decrease in SRF
funding in the 3-5 years prior to 2009 the ARRA funding in 2009 essentially brought their coffers back to parity.  In
another state, the  state legislature did not appropriate money into a state fund in 2009 knowing the ARRA federal
funds were being appropriated.
Worked hard to distribute funds as widely as possible.
ARRA road signs perceived as a huge waste of money: Every project needed a sign prominently advertising it as
ARRA funded. But it needed special language, colors, placement location.  It was time consuming and expensive.
Felt really good to award all of the funding to essential projects: This is why we do our jobs.
We did get a lot of tanks out of the ground that would have never been taken out, which are now community
gardens: ARRA helped us make headway in project backlogs.
Ability to fund large, expensive projects: Great opportunity to get extra funds into big projects that would
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Appendix 3-4

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otherwise not have been completed.
Recipients and communities felt 'withdrawal' after ARRA grants. They wanted/expected more grant monies and
became used to those 'entitlements.' Some states will not see those 'customers' again.
Political barriers to publicizing positive effects of projects:  Since ARRA ran into a presidential election year, some
states were 'encouraged' to not publicize the positive aspects of the local ARRA projects if the local politicians did
not support the incumbent presidential party. This negative attitude worked against ARRA's purpose, and
prevented the public from learning about ARRA's success stories. It also frustrated the state staff who were proud
of the environmental accomplishments achieved by the ARRA funds.
Buy American not needed for LUST: We don't tend to buy many products for our project as we mostly do
remediation, so Buy American wasn't much of an issue.
Buy American did not apply: Brownfields projects mostly involved excavation of soils, which didn't fall under the
Buy American requirements.
Davis-Bacon was not a problem: They have always had to deal with it as part of their base program.
The GPR requirement kick-started efficiency programs across the state.
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