United States            Office of Emergency and     Publication: 9355.5-14 FS
                        Environmental Protection    Remedial Response
                        Agency                 Washington, DC 20460       May 1990


                                 EPA/USACE PAYMENT PROCESS
                         Direct Cite/Revised Reimbursement Methods


     Office of Emergency and Remedial Response                             Quick Reference Fact Sheet
     Hazardous Site Control Division    OS-220
Introduction

This Quick Reference Fact Sheet announces a new procedure for paying the U.S. Army Corps of Engineers (USAGE)
for their Superfund related activities. This fact sheet will first describe the current procedure and then outline the
changes the Office of Emergency and Remedial Response (OERR), Office of the Comptroller, Office of Administra-
tion and USAGE are implementing.

Background
                      ^

The U.S. Army Corps of Engineers (USAGE) provides engineering and construction management services to assist
U.S. Environmental Protection Agency (EPA) in the implementation of the Superfund program. USAGE services
include remedial design, remedial action, oversight of potentially responsible parties, and technical assistance. These
services have been provided since 1982 through several Memorandums of Understanding.

Currently, USAGE costs incurred while performing Superfund related activities are paid from USAGE appropriations
which are then in turn reimbursed by EPA. Prior to reimbursement, payment requests received a lengthy review and
approval process within EPA. This process begins with the submission of a contractor's invoice for work accomplished
under a contract or a standard form (SF) 1080 for USAGE in-house activities. The contractor's invoice is reviewed and
approved by the USAGE Project Manager. The invoice is sent by the USAGE Project Manager to a USAGE Finance
Office for payment with USAGE appropriations. USAGE Finance Office then submits a SF1080 for reimbursement of
contract and in-house costs. The SF1080 is  sent to the EPA Cincinnati Financial Management Center (CFMC). CFMC
in turn sends the SF1080 to the EPA Remedial Project Manager (RPM) for review and approval. The approved
SF1080 is returned to CFMC for EPA processing. Finally, CFMC sends the approved SF1080 to the Department of
the Treasury for reimbursement to USAGE. This reimbursement method is complex and significantly delays payment
to USAGE.

In an attempt to improve the payment process, a proposal entitled "Direct Cite/Modified Transfer Allocation Method for
Funding IAGS" was issued on October 14,1988. The direct cite method climates reimbursement to USAGE for
contractor costs by having EPA  make payments directly to the contractor in conformance with the prompt payment
act based on USAGE certification of contractor invoices. This allows the Federal Agency with direct knowledge of con-
tractor performance to approve the invoices  for payment. This method provides for the EPA review process to occur
after the payment is made and any corrective action taken on subsequent payment requests. A monthly transfer
allocation was proposed to cover USAGE in-house cost.

A demonstration project to test this method was conducted between January and June of 1989. The test was evalu-
ated in late June and results reported to the  evaluation team members in July. The report recommended and the
evaluation team concurred that the direct cite process be initiated for all new USAGE Superfund projects. The team
wanted additional time to further assess the  transfer allocation process for in-house costs before making any final
recommendations on this process. A revised reimbursement process was  recommended as an interim payment
process for in-house USAGE costs.

Implementing these new payment processes between EPA and USAGE will reduce the complexity of the payment


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process and the resulting payment delays to USAGE. The new direct cite process provides a mechanism for payment
to contractors in conformance with the prompt payment act based on USAGE payment certification. A copy of the
certified pay request will be forwarded by the USAGE Project Manager to the RPM for review and possible reconcili-
ation. This change will reduce the stress on the RPM to take immediate action on a payment request.

New Payment Procedures
OERR Directive Memorandum 9295.2-04, "EPA/U.S. Army Corps of Engineers Payment Process, Direct Cite/Revised
Reimbursement Methods," dated March 21,1990, formally initiated new payment procedures for EPA/USAGE
Superfund activities.

New Projects: The following payment processes will be used for all new USAGE projects.
                        Figure 1
     Direct Cite Payment Process for New Projects
                      CONTRACTOR
                    Submits Pay Request
                                EPA Regional Project Manager
                                                                Contractor Costs - In this direct cite process
                                                                (please refer to Figure 1) the remedial
                                                                design or remedial action contractor shall
                                                                submit a signed payment request to the
                                                                USAGE Project Manager. The request will
                                                                be reviewed and certified by USAGE and
                                                                forwarded to the EPA Cincinnati Financial
                                                                Management Center (CFMC).  CFMC will
                                                                make payment directly to the contractor in
                                                                conformance with the prompt payment act
                                                                upon receipt of the USAGE certified pay-
                                                                ment request. Monthly, USAGE will send
                                                                copies of all certified payment  requests to
                                                                the RPM for his review in conjuction with
                                                                the project status report. If the EPA RPM
                                                                detects any apparent discrepancies with the
                                                                payment request, the problem  shall be dis-
                                                                cussed and resolved with the USAGE Proj-
                                                                ect Manager.  Any changes required to sub-
                                                                sequent payment requests will be docu-
                                                                mented in a memorandum from the RPM to
                                                                the USAGE Project Manager.  CFMC will be
                                                                sent a copy of this memorandum. RPM re-
                                                                view and approval shall be obtained by
                                                                CFMC prior to making to the final contract
                                                                payment.

      	                                       USACE In-House Costs  - Compensation for
      ^^^^^^^^^^™                                       USACE in-house costs will continue to be
                                                                handled under a revised  reimbursement
process with the payment being made by CFMC upon receipt of a USACE certified request for payment (see Figure
2). In the monthly project status report, the USACE Project Manager shall provide a copy of the certified  bill (SF
1080) submitted to CFMC for their in-house costs. A brief explanation of all costs will be included in the report.  Reso-
lution of disagreements shall be handled in a similar fashion as the direct cite process. RPM review and approval shall
be obtained by CFMC prior to making the final project payment to USACE.

Existing Projects: To initiate the direct cite process for ongoing  projects, USACE contracts would have to be
amended, along with existing lAGs. Although complete implementation has merit, the retrofitting of existing projects
could be difficult. For this reason, the revised reimbursement payment process shall be implemented for all payment
requests made by USACE for existing projects (please refer to Figure 3).  USACE certified SF 1080 forms for reim-
bursement of contractor payments and in-house costs shall be sent directly to CFMC for payment.  If the  RPM dis-
agrees with a request, the problem shall be discussed and  resolved with the USACE Project Manager. Any changes
required to subsequent pay requests will be documented in a memorandum from the RPM to the USACE Project
Manager. CFMC will be sent a copy of this memorandum.  RPM review and approval shall be obtained by CFMC
     USAGE Project Manager
    Reviews & Certifies Pavmenl
                              Provided review copy of certified
                               payment request with project
                               status report.

                              Discuss and resolves any apparent
                              discrepancies with USACE Project
                               Manager.

                              Adjustments recommended by RPM
                               made on next voucher.
      Payment to Contractor

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                            Figure 2
Revised Reimbursement Payment for USAGE In-House Costs
         USAGE Project Manager
       SubmitsCertified Pav Reauest
 Reimbursement to USAC
                                     EPA Regional Project Manager
                                   Provided review copy of certified
                                   payment request (SF-1080) with
                                   project status report.

                                   Discuss and resolves any apparent
                                   discrepancies with USAGE Project
                                   Manager.
                           Figure 3
   Revised Reimbursement Payment for  Existing Projects
                    CONTRACTOR
                 Submits Pay Request

                USACE Project Manager
              Reviews & Certifies Payment
                    EPA FINANCE
                  Reimburses USAGE!
                        1
                                            EPA Regional Project Manager
        Provided review copy of certified
         payment request with project
         status report.

        Discuss and resolves any apparent
        discrepancies with USACE Project
         Manager.

        Adjustments recommended by RPM
         made on next voucher.
               Reimbursement to USAC
J
prior to the final project payment to
USAGE.

Implementation

Interagency Agreement: For any
individual Interagency Agreement
(IAG), the inclusion of the following
clause implements the direct cite
methodology for that IAG:

a. Payment to USAGE contractors
is contingent upon receipt of a
USAGE certified payment request.
Reimbursement to USAGE for in-
house costs is contingent upon
receipt of a USAGE certified reim-
bursement request (SF1080).
Final project payments for spe-
cific contracts and in-house cost
shall be reviewed and approved
by the EPA Regional program
office.

This clause provides the authorized
   mechanism to utilize the direct
       cite and revised reimburse-
       ment payment processes
       and should be inserted into
       the "Other EPA Involve-
       ment" section of the IAG.
       lAGs issued under the new
       payment procedures should
       indicate the dollar limina-
       tions applicable to the direct
       cite and reimbursable funds
       available.  This will assure
       the funds are obligated
       against the appropriate
       funding method and not the
       total amount of the IAG.
       When funding levels are
       exceeded for either portion
       of the IAG, amendments will
       be prepared increasing the
       funding level for that
       portion. A budget should
       also be prepared by USAGE
       and included in the IAG to
       help in the management of
       the project. Due to the
       variability of Superfund
       projects, strict adherence to
       each line item should not be
       a requirement; however,
       line item variations should
       not allow the total budget 1o

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be exceeded.  Preparation and inclusion of a budget should be considered a management tool to identify potential
problems.  This topic will be expanded upon later.

Financial Reporting from USAGE: In advising USAGE Project Managers of this new procedure, USAGE will direct
the Project Managers to provide a brief explanation of their cost to the RPM along with a copy of the payment
request(s) submitted to the EPA Cincinnati Financial Management Center. At a minimum the Project Manager should
discuss both USAGE in-house and contractor activities that comprise each item for which payment is requested.
Payment requests should be based on IAG budget and contract payment schedules. For this process to be success-
ful a good line of communication must be established and maintained between the RPM and the USAGE Project
Manager.

 Monthly Project Status Report:  On a monthly basis the USAGE Project Manager will provide a project status
report to the RPM.   This report shall consist of:

       • a one page narrative detailing project highlights, progress, problems and scheduled
         meetings for the next month.

       • copies of all certified payment requests submitted during the month.

       • a brief explanation of the cost associated with each payment request.

Payment Discrepancies: Payment discrepancies should be discussed between the RPM and USAGE Project
Manager.  If resolution cannot be reached at this level, the problem(s) should be referred up the chain of command.
When the resolution to the problem(s) requires a change in a subsequent payment request(s), the EPA RPM will
document the  action(s) to be taken in a memorandum to the USAGE Project Manager with a copy to EPA Cincinnati
Financial Management Center.

Budget Control: Preparation and adherence to a budget is key to managing any project. The preparation of a
project budget and its inclusion in the IAG provides budget control over the project by managing against the estab-
lished project budget.  The budget for a project should contain sufficient detail, without being burdensome, to enable
the EPA RPM  to evaluate the progress and management of the project.  The USAGE should be allowed to adjust
specific budget items as the project develops, as long as, they do not exceed the funding limits specified in the IAG.
For the EPA RPM, a budget can be used as a means to approximate project progress as well as an indicator to
highjlight potential problems.  Deviations from the budget could indicate a change or unexpected problem in the
project that warrants a closer look.

Summary

The direct cite and revised reimbursement payment procedures will eliminate reimbursement to USAGE for contractor
costs and expedite payments to USAGE offices engaged in Superfund related activities. The procedures remove the
pressure from  the RPM to do an immediate review of payment request. Project budget control will be maintained by
managing against the budget established in the IAG. Success of the procedures is dependent upon good communi-
cations between the RPM and USAGE Project Manager.  The USAGE Project Manager must effectively communicate
the status of the relationship between project progress, budget, and payments to contractors and USAGE.

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