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Handbook of
Procedures
Construction Grants Program
for Municipal Wastewater
Treatment Works
October 1, 1984
Municipal Construction Division
Water Program Operations
Office of Water
United States
Environmental Protection
Agency
Washington DC 20460
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TABLE OF CONTENTS
PAGE
LIST OF ILLUSTRATIONS 19
LIST OF ACRONYMS 21
CHAPTER I. INTRODUCTION 101
A. Introduction 103
B. Purpose 103
C. Methodology 104
D. Organization and Content 105
1. History 105
2. Organization 106
3. Format 106
4. Regulations 107
a. 40 CFR Parts 108
b. Other Regulations 109
5. Policy Memoranda 110
6. State Requirements 110
7. Related Materials 111
8. Updating 111
E. Legislative History 112
F. State Delegation 114
1. General 114
2. Delegation Agreements 115
a. Basic or "Umbrella" Agreement 116
b. Functional Agreements or
Subagreements 116
3. Delegated Functions 116
4. EPA Oversight 118
a. Developing the Plan for Oversight 118
b. Negotiating Annual Outputs 118
c. Monitoring and Evaluating Program
Performance 119
5. U.S. Army Corps of Engineers 119
CHAPTER II. WATER QUALITY PLANNING 201
A. Introduction 203
B. Defining Water Quality 203
1. Water Quality Goals and Standards 203
2. Water Quality Monitoring 204
3. Water Quality Report 205
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C. Water Quality Management Planning 205
1. General 205
2. Continuing planning Process 206
3. Water Quality Management Plans 207
4. Water Quality Management Funding and
Annual Work Program 210
D. Implementing the Water Quality Management Plan 211
1. National Municipal Policy 211
2. Municipal Permits 212
3. Facilities Plans 212
E. Funding the Construction Grants Program 213
1. General 213
2. Allotment of Funds 213
3. State Priority System and Project
Priority List 214
4. Reserves 217
a. Reserve for State Management Assistance 218
b. Reserve for Alternative Systems for
Small Communities 218
c. Reserve for Innovative or Alternative
Technologies 218
d. Reserve for Water Quality Management
Planning 219
e. Reserve for Advances of Allowance 219
F. Summary of the Planning Process 220
CHAPTER III. PREAPPLICATION MANAGEMENT 301
A. Introduction 303
B. Qualifications 304
1. Applicant Qualifications 304
2. Project Qualifications 305
C. Preapplication Project Management 306
1. Project Identification 306
2. Project Tracking 306
3. Grants Information and Control System 307
D. Preplanning Conference 308
1. Permits and Compliance Schedules 309
2. Procurement of Engineering Services 309
a. Procedures 309
b. Use of Small, Minority, Women's, and
Labor Surplus Area Businesses 310
c. Use of Debarred or Suspended Firms 310
3. Financial Considerations 311
a. State Priority System and Project
Priority List 311
b. Federal Grant Share 311
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c. Financial Assistance for Facilities
Planning and Design Work 311
d. Step 2+3 Grants 312
e. Preaward Costs 312
f. Phased or Segmented Projects 312
4. Limitations on Eligibility 312
a. Collection Systems 312
b. Individual Systems 313
c. Reserve Capacity 313
5. Intergovernmental Review 313
6. Technical Review 313
a. Water Quality Management Plan 313
b. Facilities Plan 313
c. Value Engineering 314
d. Intermunicipal Service Agreements 315
e. User Charge System 315
f. Sewer Use Ordinance 315
g. Plan of Operation 315
h. Project Performance Standards 315
7. Categorical Exclusion 316
8. Project Management 316
9. Publications 317
E. Advance of Allowance 317
CHAPTER IV. FACILITIES PLANNING 401
A. Introduction 403
B. Regulatory Requirements 403
1. Facilities Planning Regulations 403
2. National Environmental Policy Act 405
3. Water Quality Management Plans 406
4. Facilities Planning Review 407
C. Facilities Plan Contents 408
1. Summary; Conclusions, and Recommendations 408
2. Purpose and Need 408
2.1. Study Purpose 408
2.2. Need for the Project 409
3. Effluent Limitations 411
3.1. Secondary Treatment 412
3.2. Marine Discharge Waivers 413
3.3. Advanced Treatment 413
3.4. Land Application 414
4. Existing Environment 416
4.1. Existing Conditions in the
Planning Area 416
4.2. Existing Wastewater Flows and
Treatment System Performance 418
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4.3. Infiltration and Inflow 419
5. Future Conditions 423
5.1. Planning Period 424
5.2. Land Use Projections 425
5.3. Population Forecast 427
5.4. Industrial and Federal Facilities 428
5.5. Flow Reduction 430
5.6. Forecast of Flow and Waste Load 432
5.7. Reserve Capacity 434
5.8. Future Environment without the
Project 434
6. Development of Alternatives 434
6.1. Flow Reduction 435
6.2. Optimum Performance of Existing
Facilities 435
6.3. Unsewered Areas 437
6.4. Conventional Sewers 439
6.5. Alternative Conveyance Systems 441
6.6. Interceptor Sewers 442
6.7. Regiona1ization 444
6.8. Conventional Treatment 445
6.9. Innovative and Alternative
Technologies 447
6.10. Alternative Technologies 448
a. Effluent Treatment 448
b. Sludge 449
c. Energy Recovery 449
d. Small Alternative Wastewater
Systems 449
6.11. Land Application Systems 450
a. Site Selection 451
b. Loading Rates and Land Area 451
c. Estimated Costs 451
d. Preapplication Treatment 451
e. Environmental Effects 451
6.12. Innovative Technologies 452
6.13. Sludge Disposal 455
a. Composting 457
b. Landspreading 457
c. Distribution and Marketing 458
d. Methane Recovery 458
e. Self-sustaining Incineration 458
6.14. Identification of Principal
Alternatives 459
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7. Evaluation of Principal Alternatives 461
7.1. Monetary Evaluation 461
a. Sunk Costs 462
b. Present Worth 462
c. Useful Life 462
d. Escalation 463
e. Interest During Construction 464
f. Staging of Construction 464
g. Cost Preference for Innovative
or Alternative Technologies 465
h. Multiple Purpose Projects 466
i. User Costs 468
7.2. Engineering Evaluation 469
a. Reliability 469
b. Energy Use 469
c. Water Supply 470
d. Revenue Generating Applications 470
e. Open Space and Recreation 470
f. Disinfection 471
g. Process Complexity 471
7.3. Environmental Impacts 472
7.4. Public Involvement 472
7.5. Implementabi1ity 473
7.6. Plan Selection 474
8. Selected plan Description 475
8.1. Relevant Design Parameters 475
8.2. Financial and Managerial Capability 476
a. Cost Information 479
b. Cost Impacts on Users 479
c. Capital Financing Plan 480
d. Project Implementation 480
D. Facilities Plan Approval 481
1. Criteria for Preparing an Environmental
Impact Statement 482
2. Environmental Review Process 484
2.1. Historical and Archaeological Sites 484
a. Documentation and Strategy
Development Survey 485
b. Site Recognition Survey 486
c. Site Definition and Evaluation
Survey 487
2.2. Environmentally Sensitive Areas 489
a. Wetlands 489
b. Floodplains 490
c. Important Farm Lands 490
d. Coastal Zones 490
e. Wild and Scenic Rivers 491
f. Fish and Wildlife 491
g. Threatened or Endangered Species 492
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2.3. Air Quality 492
2.4. Drinking Water 493
3. Direct and Indirect Impacts 493
3.1. Direct Impacts 493
3.2. Indirect Impacts 494
4. Finding of No Significant Impact 495
5. Environmental Impact Statement 496
5.1. Notice of Intent 496
5.2. Preparation 497
6. Grant Award Exception 498
E. Supplemental Considerations 498A
1. Advanced Treatment 498A
2. Industrial Pretreatment 498D
3. Combined Sewer Overflow Projects 498H
CHAPTER V. DESIGN 501
A. Introduction 503
B. Predesign Conference 504
C. Review of Plans and Specifications 506
1. Administrative Review 507
a. Formal Advertising 507
b. Public Notice 508
c. Prequalification of Contractors
and products 508
d. Addenda 509
e. Bid Proposal 509
f. Basis for Award 509
g. Sole Source Procurement 510
h. Scope of Work 511
i. Responsibilities of Parties 511
j. Subagreement 512
k. Lower Tier Subagreements 512
1. Bonding and Insurance 512
m. Regulatory Provisions 513
n. Safety 514
o. Schedule 514
p. Permits 514
q. Wage Rate Determination 515
r. Liquidated Damages 515
s. Change Order Procedures 515
t. Payment Request Procedures 516
u. Retainage 516
v. Construction Incentive Clause 517
w. Small, Minority, Women's and Labor
Surplus Area Businesses 517
2. Technical Review 519
a. Project Performance Standards 519
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b. Mitigation of Adverse Environmental
Impacts 520
c. Chemical Storage and Hazardous Materials 521
d. Chlorine Safety 521
e. Wet and Dry Wells 523
f. Protection of Potable Water Supply 524
g. Reliability 524
h. Shellfish Waters 528
i. Electrical Power 528
j. Loadings 530
k. Hydraulic Profile 530
1. Land Application Systems 530
m. Sewers 531
n. Sewer Rehabilitation 531
o. Small Systems 531
p. Sludge Management 532
q. Bypassing during Construction 534
r. Ease of Maintenance 534
s. Emergency Alarms 534
t. Pretreatment 535
u. Aesthetics 535
v. Laboratory Facilities 536
w. Handicapped Design Considerations 536
x. Use of Mercury 537
y. Reconfirmation of Innovative or
Alternative Technology 539
z. Project Sign 539
aa. Buy American 539
bb. Nonrestrictive Specifications 540
cc. Subsurface Information 541
dd. Storage of Equipment and Materials 541
3. Biddability and Constructibility Review 541
a. Biddability 542
b. Constructibi1ity 542
4. Discrepancies 542
D. Value Engineering 543
1. Conduct of the Study 545
2. Implementation of Recommendations 545
E. User Charge System 546
F. Sewer Use Ordinance 549
G. Plan of Operation 551
1. Budget 551
2. Administrative Functions 551
3. Staffing and Training 552
4. Operation and Maintenance Manual 552
H. Intermunicipal Service Agreement 553
I. Industrial Wastes and Federal Facilities 555
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J. Design Acceptance 556
1. Plans and Specifications 556
2. Preparation for Grant Application 557
3. No Future Grant 558
CHAPTER VI. GRANT PROCESSING 601
A. Introduction 603
B. Application Contents 604
C. Application Review 607
1. Application Form 607
2. Facilities Plan 609
3. Public Participation 610
4. Notification of Advance of Allowance 610
5. Plans and Specifications 610
6. Project Schedule 611
D. Limitations on Award 613
1. Advanced Treatment 613
2. Water Quality Management Plans 613
3. Priority Determination 613
4. Financial and Managerial Capability 614
5. Utilization of Small, Minority, Women's,
and Labor Surplus Area Businesses 616
6. Unlawful Practices 617
7. Debarment and Suspension 617
8. Plan of Operation 618
9. Intermunicipal Service Agreement 618
10. Phased or Segmented Treatment Works 619
a. Conditions 620
b. Grantee Commitment 621
c. Reserve Capacity 621
i. Interceptor Awarded a Step 3
Grant before December 29, 1981 621
ii. Treatment Plant and/or Interceptor
Awarded a Step 3 Grant before
October 1, 1984 621
iii. Treatment Plant and/or Interceptor
Awarded a Step 3 Grant after
September 30, 1984 622
d. Federal Share 622
i. Before October 1, 1984 622
ii. After September 30, 1984 622
11. Revised Water Quality Standards 623
12. Environmental Review 624
13. Value Engineering 625
14. Collection System 625
15. Preaward Costs 627
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16. Infiltration and inflow 628
17. User Charge System and Sewer Use Ordinance 629
18. Reserve Capacity 630
19. industrial and Federal Facilities 634
E. Additional Considerations for Award 634
1. Small Alternative Wastewater Systems 634
2. Marine Discharge Waiver Applicants 637
3. Innovative or Alternative Technology
Reconfirmation 637
4. Pretreatment 637
5. Force Account 638
6. Intergovernmental Review 639
7. Procurement of Professional Services 640
8. General Grant Conditions 641
F. Step 2+3 Grants 643
1. Qualifications 643
2. Application Contents 643
3. Deferred Provisions 644
G. Combined Sewer Overflow Grants 645
1. Source of Funds 645
a. State's Regular Allotment 645
b. Governor's Discretionary Set-aside 645
c. Separate Appropriation for Marine
Projects 646
2. Project Requirements 646
a. State's Regular Allotment 646
b. Governor's Discretionary Set-aside 647
c. Separate Appropriation for Marine
Projects 648
H. Land Acquisition Grants 651
1. Grant Application 652
2. Deferred Provisions 653
3. Grant Conditions 654
4. Preaward Costs 654
I. Innovative or Alternative Technology Field
Testing Grants 655
1. Grant Application 655
2. Deferred Provisions 656
3. Grant Conditions 657
4. Preaward Costs 657
J. Innovative or Alternative Technology Modifi-
cation or Replacement Grants 658
K. Grants to States for Advances of Allowance 659
1. Defining the State Program 659
a. Qualified Communities 660
b. Application Procedure 661
c. Amount of Advance 661
d. Timing of Payments 661
e. Repayment of Advance 662
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2. Applying for the State Grant 662
L. Federal Grant Share 664
1. Total Allowable Project Cost 664
2. EPA Grant Share 667
a. Standard Grant Share 667
b. Uniform Lower Federal Share 667
c. Phased or Segmented Projects 667
d. Projects Using an Innovative or
Alternative Technology 667
e. Projects for the Modification or
Replacement of a Failed innovative
or Alternative Technology 668
f. Other Projects 668
M. Grant Award Procedures 668
1. State Procedures 669
2. Priority Certification 670
3. Project Certification by Delegated states 670
4. Grant Agreement/Amendment 670
5. General Grant Conditions 671
a. Effect of Approval 672
b. Step 2+3 672
c. Project Changes 672
d. Land Acquisition 672
e. Project Initiation 672
f. Quality Assurance Program 673
g. Project Performance Standards 673
h. Field Testing of Innovative or
Alternative Technologies 673
6. Special Grant Conditions 673
CHAPTER VII. CONSTRUCTION 701
A. Introduction 703
B. Procurement System Requirements 704
1. Procurement System Certification 704
2. Reporting Requirements 706
3. Public Notice Requirements 707
C. Procurement of Professional Services 708
1. Competitive Negotiation 708
a. Public Notice 709
b. Proposal Documents 709
c. Proposal Evaluation 710
d. Negotiation 710
e. Contract Award 710
2. Optional Method for Procuring Engineering
Services 710
a. Public Notice 711
b. Evaluation of Qualifications 711
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c. Proposal Request and Evaluation 711
d. Negotiation 711
3. Continuation of Engineering Services 711
a. Prior Grant 712
b. Prior Competitive Selection 712
c. Noncompetitive Negotiation 713
4. Small, Minority, Women's, and Labor Surplus
Area Businesses 714
5. Scope of Work 714
a. Engineering Services during Construction 714
b. Post-construction Engineering Services 714
6. Types of Subagreements and Required Provisions 716
7. Cost and Price Analysis 717
8. Additional Services 718
D. Procurement of Construction Contractors 719
1. Competitive Bidding 719
a. Public Notice 720
b. Bidding Documents 720
c. Addenda 721
d. Number of Bids 721
e. Bid Evaluation 721
f. Contract Award 721
2. Rejection of All Bids 722
3. Small, Minority, Women's, and Labor Surplus
Area Businesses 722
4. Grant Adjustment 722
a. Building Cost 723
b. Construction Contingency 723
c. Land Acquisition Cost 723
d. Allowance for Planning and/or Design 723
e. Grant Amendment 724
5. Contract Award 724
6. Protests 724
E. Small Purchases 726
P. Noncompetitive Procurement 727
G. Monitoring Construction 728
1. Preconstruction Conference 729
2. Project Management Conference 730
3. Interim Inspection 731
4. Construction Management Evaluation 732
a. Grant Management 733
b. Construction Management 733
5. Final Inspection 734
H. Management of Claims and Change Orders 736
1. Conditions that May Warrant a Change Order 737
a. Differing Site Conditions 738
b. Errors and Omissions 738
c. Regulatory Changes 738
d. Design Changes 739
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e. Overruns and Underruns 739
f. Time of Completion 739
2. Claims 740
a. Common Causes 741
b. Prevention 741
c. Resolution 742
d. Allowable Costs 742
3. Prior Approval 743
4. Submission 744
5. Change Order Review 745
I. Post-construction Activities 746
1. Engineering Services during the First Year
of Operation 746
a. Scope of Engineering Services 747
b. Procurement of Services 748
c. Payment Requests 749
d. Deficiencies 749
2. Project Performance After One Year 749
a. Certification 749
b. Corrective Action 750
CHAPTER VIII. COMPLETION, AUDIT, AND CLOSEOUT 801
A. Introduction 803
B. Step 1 and Step 2 Completions 804
1. Step 1 Projects Completed or near Completion 805
a. Projects Likely to Receive a Step 2+3
or a Step 3 Grant 805
b. Projects Unlikely to Receive a Step 2+3
or a Step 3 Grant 805
c. Review of Facilities Plans for Completeness 806
i. Facilities Planning Initiated
before May 1, 1974 806
ii. Facilities Planning Initiated
after April 30, 1974 and before
October 1, 1978 806
iii. Facilities Planning Initiated
after September 30, 1978 807
d. Step 1 Grant Increases 808
e. Reduction of Work Effort 808
i. Reduction in Planning Area 809
ii. Infiltration and inflow 809
iii. Public Participation 809
iv. Cultural Resources 809
v. Need Survey 809
vi. Alternatives 809
vii. Treatment Facilities 809
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viii. Sewer Design 809
ix. Sludge Disposal 810
x. Environmental Information Document 810
2. Step 2 Projects Completed or near Completion 810
a. Projects Likely to Receive a Step 3
Grant 810
b. Projects Unlikely to Receive a Step 3
Grant 810
c. Step 2 Grant Increases 811
d. Reduction of Work Effort 812
3. Delayed Step 1 and Step 2 Projects 812
4. Termination or Annulment 812
5. Other Step 1 and step 2 Projects 813
6. Final Audit Requests 813
C. Step 2+3 and Step 3 Completions 814
1. Project Schedule 815
2. Phased or Segmented Projects 815
3. Sewer System Rehabilitation 816
4. Special Grant Conditions 817
D. Completion and Closeout Process 817
a. Project Completion 817
b. Administrative Completion 818
c. Audit Process 819
d. Project Closeout 819
1. Final Inspection 820
2. Cut-off Date 821
3. Cost Summary and Documentation 822
4. Final Building Payment Request 823
5. Property Management 824
6. Completion Delays 824
7. Continuing Engineering Services 825
8. Project Officer Certification 825
a. Aesthetic Features 826
b. Flow Level 826
c. Abandoned, Unused, or Inoperable
Facilities 827
d. Project Files 827
9. File Retention 827
E. Audit Process 828
1. Request for Final Audit 830
2. Audit 831
3. Draft Audit Report 831
4. Final Audit Report 831
5. Resolution of Audit Exceptions 831
6. Review of Final Determination 832
7. Recovery of Funds 832
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CHAPTER IX.
FINANCIAL CONSIDERATIONS
901
A.
Introduction
903
B.
Payments
903
1.
Outlay Schedules
904
2.
Payment Requests
904
a. Standard Form 270
904
b. Standard Form 271
905
3.
Initial Payments
907
a. Preaward Costs
907
b. Estimated Allowance
907
i. Step 2+3 Grants
907
ii. Step 3 Grants
908
4.
Retainage
908
5.
Limitations
909
6.
Final Building Payment
909
7.
Final Grant Payment
910
8.
Special Purpose Grants
910
a. Land Acquisition Grants
910
b. Relocation Assistance Grants
910
c. Grants to States for Advances
of
Allowance
910
d. other Grants to States
911
9.
Grant Overpayment
912
10.
Grant Related Income
912
11.
Grants Information and Control System
912
C.
Grant Increases and Decreases
913
1.
Increases
913
a. Step 2+3 and Step 3 Grants
913
b. Step 1 and Step 2 Grants
914
c. Award Procedures
914
2.
Decreases
914
D.
Disputes
915
E.
Deviations
917
F.
Determination of Allowable Costs
918
1.
General
918
2.
Cost Principles
919
a. Allowability Factors for Government
Agencies
V
919
b. Allowability Factors for Commercial
Organizations
920
c. Allowability Factors for Othe
r Organizations
921
i. Hospitals
921
ii. Educational Institutions
922
iii. Other Nonprofit Institut
ions
922
d. Classification of Costs
922
i. Direct Costs
922
ii. Indirect Costs
923
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PAGE
3. Allowable and Unallowable Costs 925
4. 40 CFR Part 35, Subpart I, Appendix A 926
A. Costs Related to Subagreements 926
1. Allowable Costs 926
a. Building the Project 926
b. Complying with the Procurement
Requirements 927
c. Deciding Procurement Protests 927
d. Using Minority and Women's
Business Liaison Services 928
e. Conformance with the Design
Drawings and Specifications 928
f. Negotiating the Settlement of
a Claim 928
g. Change Orders 931
h. First Year Following Initiation
of Operation 935
i. Development of a Plan of Operation 935
j. Start-up Services 935
2. Unallowable Costs 935
a. Preparing a Facilities Plan and
the Design Drawings and Specifi-
cations 935
b. Services Necessary to Correct
Defects 936
c. Defending Against a Contractor
Claim 936
d. Bonus Payments 938
e. Costs of Delay 939
3. Other Costs 940
a. Liquidated Damages 940
b. Bid Bond Forfeiture 941
c. Public Liaison Services 941
d. Professional Liability Insurance 941
e. Services Required by Law 941
f. Field Surveys to Identify Cultural
Resources 942
g. Travel Costs 943
B. Mitigation 943
1. Allowable Costs 943
a. Direct, Adverse, Physical Impacts 943
b. Site Screening 943
c. Groundwater Monitoring Facilities 943
2. Unallowable Costs 944
a. Design Details which Require
Expensive Building Techniques 944
C. Privately or Publicly Owned Small and
Onsite Systems 945
15
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PAGF
1. Allowable Costs 945
a. Major Rehabilitation, Upgrading,
Enlarging, and Installing 945
b. Conveyance Pipes 946
c. Treatment and Treatment Residue
Disposal 946
d. Treatment or Pumping Units 946
e. Restoring Individual System
Building Sites 946
2. Unallowable Costs 946
a. Modification to Physical Structure 946
b. Conveyance Pipes 946
c. Wastewater Generating Fixtures 946
D. Real Property 947
1. Allowable Costs 947
a. Integral Part of the Treatment
Process 947
b. Complying with the Requirements
of Uniform Relocation Assistance
and Real Property Acquisition
Policies Act 947
c. Required Acquisition and/or
Relocation Services 949
d. Preparation of the Treatment
Works Site 949
e. Existing Publicly or Privately
Owned Wastewater Treatment Works 950
2. Unallowable Costs 950
a. Sewer Rights of Way, Waste
Treatment Plan Sites (Including
Small System Sites), Sanitary
Landfill Sites, and Sludge Dis-
posal Areas 950
b. Eligible Land in Excess of Just
Compensation 950
c. Removal, Relocation, or Replace-
ment of Utilities 950
E. Equipment, Materials, and Supplies 951
1. Allowable Costs 951
a. Reasonable Inventory of Laboratory
Chemicals and Supplies 951
b. Biological Seeding Materials 951
c. Shop Equipment 951
d. Safety Equipment 951
e. Collection System Maintenance
Equipment 952
f. Mobile Equipment 952
g. Replacement Parts 953
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PAGE
2. Unallowable Costs 953
a. Violation of the Procurement
Requirements 953
b. Office Equipment 953
c. Building Maintenance Equipment 953
d. Vehicles 954
e. Items of Routine "Programmed"
Maintenance 954
F. Industrial and Federal Users 954
1. Allowable Costs 954
2. Unallowable Costs 955
G. Infiltration/Inflow 955
1. Allowable Costs 955
2. Unallowable Costs 956
H. Miscellaneous Costs 956
1. Allowable Costs 956
a. Salaries, Benefits, and Expendable
Materials 956
b. Meeting Specific Federal Statutory
Procedures 9 56
c. Travel 957
d. Additions 957
e. Royalties 958
f. Multiple Purpose Projects 959
g. Training 959
2. Unallowable Costs 959
a. Ordinary Operating Expenses 959
b. Applications and Permits 959
c. Establishment of Special Depart-
ments, Agencies, Commissions,
Regions, Districts, or Other Units
of Government 959
d. Sale of Bonds 960
e. Reconstruction 960
f. Personal Injury Compensation 960
g. Fines and Penalties 960
h. Costs outside the Scope of the
Approved Project 960
i. Costs for Which Grant Payment Has
Been or Will Be Received from
Another Federal Agency 960
j. Control of Pollutant Discharges
from a Separate Storm Sewer System 960
k. Environmentally Sensitive Land 960
1. Corrective Action Report 961
3. Other Costs 961
a. Administration Building 961
b. Computers 962
INDEX . 1001
CONSTRUCTION GRANTS PROCESS 1101
17
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LIST OF ILLUSTRATIONS
PAGE
Figure 1.
Water Quality Planning and Management
222
Figure 2.
Construction Grants Process
1103
Table 1.
Wastewater Treatment System Reliability
524
Table 2.
Sludge Handling and Disposal System
Reliability
525
Table 3.
Electric Power System Reliability
526
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LIST OF ACRONYMS
Except for the most commonly used acronyms (e.g., EPA), each acronym,
when first introduced in a chapter of the Handbook, is preceded by
the unabbreviated phrase to which it corresponds. However, since the
Handbook is intended to function primarily as a reference document,
many users will not read it "cover to cover." For their convenience,
a list of all acronyms is provided below.
ACHP United States Advisory Council on Historic Preservation
ADBF Average daily base flow
AJE Alternative justifiable expenditure
AT Advanced treatment
B/C Biddability and constructibi1ity
BOD Biochemical oxygen demand
BOD5 Five day biochemical oxygen demand
BPWTT Best practicable waste treatment technology
CAPDET Computer Assisted Procedure for Design and Evaluation
of Wastewater Treatment Systems
CBOD5 Five day carbonaceous biochemical oxygen demand
CEO United states Council on Environmental Quality
CFR Code of Federal Regulations
CG Construction Grants (series of policy documents)
CI Construction incentive
CME Construction management evaluation
COD Chemical oxygen demand
COE United states Army Corps of Engineers
CPP Continuing planning process
21
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cso
Combined sewer overflow
CWA
Clean Water Act
DHHS
United States Department of Health and Human Services
DOL
United States Department of Labor
DOT
United states Department of Transportation
EID
Environmental information document
EIS
Environmental impact statement
EPA
United States Environmental Protection Agency
F/M
Food to micro-organism (ratio)
FMO
Financial Management Office
FONSI
Finding of no significant impact
FP
Facilities Planning (policy document)
FR
Federal Register
GICS
Grants Information and Control System
gpcd
Gallons per capita per day
GSA
United States General Services Administration
I/A
Innovative or alternative
I/I
Infiltration and inflow
MBE/WBE
Minority and women's business enterprises
mg/1
Milligrams per liter
MLSS
Mixed liquor suspended solids
M/R
Modification or replacement
N/A
Not applicable
NEPA
National Environmental Policy Act
NPDES
National Pollutant Discharge Elimination System
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OIG Office of the Inspector General
O&M Operation and maintenance
OMB United States Office of Management and Budget
OM&R Operation, maintenance, and replacement
PG Program Guidance Memorandum
pH Measure of acidity
PL Public Law
PMC Project management conference
POM Program Operations Memorandum
POTW Publicly owned treatment works
PRM Program Requirements Memorandum
RA Regional Administrator
RFP Request for proposals
RFQ Request for qualifications
SAWS Small alternative wastewater system
SF Standard Form
SHPO State Historic Preservation Officer
SPDES State Pollutant Discharge Elimination System
SS Suspended solids
SUO Sewer use ordinance
TM Transmittal Memorandum
UC User charge
VE Value engineering
WQM Water quality management
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CHAPTER I
INTRODUCTION
A. INTRODUCTION
B. PURPOSE
C. METHODOLOGY
D. ORGANIZATION AND CONTENT
E. LEGISLATIVE HISTORY
F. STATE DELEGATION
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A. INTRODUCTION
The organization and contents of the Handbook of Procedures
and its use in the administration of the construction grants
program are covered in this introductory chapter. In addition,
because of the vastly expanded role of State agencies in the
operation of the construction grants program, this chapter also
includes a discussion on delegation and EPA's role in overseeing
delegated activities.
Section B, Purpose, describes the purpose of the Handbook
and its intended uses.
Section C, Methodology, describes the procedures which were
used to develop the Handbook and to review its contents to
insure its accuracy and usefulness.
Section D, Organization and Content, discusses the history,
format, and content of the third edition of the Handbook.
Section E, Legislative History, outlines the legislative
developments which form the basis for the regulations, policies,
and procedures which govern the construction grants program.
Section F, State Delegation, describes the relationship
between EPA and the State agencies, to which most of the functions
described in this Handbook have been delegated.
B. PURPOSE
This Handbook of Procedures identifies and explains the many
procedures to be followed by project reviewers and other personnel
in State agencies and EPA Regional Offices who are responsible for
the conduct of the construction grants program. It is intended
to serve as a guide in processing grant applications for Step 2+3
and Step 3 projects as of October 1, 1984. A companion document,
"Construction Grants 1985" (CG-85), has been written for potential
grant applicants and grantees.
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The Handbook is not intended to introduce new requirements
into the construction grants program, since requirements are set
forth only in the EPA regulations. Rather, regulatory require-
ments and EPA program policies, necessary for effective
program management, have been restated so that they can be under-
stood in terms of operating procedures. Requirements and policies
are presented in a sequence which closely tracks the development
of a project, and are supplemented by suggested approaches and
procedures which historically have been effective in processing
and managing grant assisted projects. In the unlikely event of a
conflict between the Handbook and the regulations, the regulations
take precedence.
The operational tasks and procedures described throughout
the Handbook are applicable to the construction grants program as
a whole. They are intended to serve as a standard so that this
complex, multifaceted program can move forward as a national
program, uniformly administered. At the same time, the operational
tasks and procedures are patterned to provide flexibility, so that
State agencies and EPA Regional Offices may jointly administer an
effective program, with variations in State conditions reflected
in State/EPA delegation agreements.
Through the thoughtful application of the procedures described
in this Handbook, water pollution control goals, to which EPA and
the States are dedicated, can be more effectively achieved.
C. METHODOLOGY
The Handbook, including the revisions reflected in this edition,
was prepared under the direction of EPA's Office of Water Program
Operations, Municipal Construction Division.
The basic organization of the Handbook and the initial drafts
of its contents were prepared under contract by Roy F. Weston, Inc.,
through its subcontractor, A. T. Bowyer, Inc.
The initial drafts of each chapter were reviewed by a special
task force comprised of Headquarters, Regional, and state
representatives. Albert L. Pelmoter, Chief, Program Policy Branch,
Municipal Construction Division, was the project manager for the
preparation of the Handbook, served as chairman of the Handbook task
force, and was responsible for the Handbook's overall development,
review, and production. Thomas J. Moran, Senior Engineer, Program
Policy Branch, served as task manager and was responsible for
editing the Handbook and reviewing and incorporating comments
received during the reviewing process. Tod A. Gold, Attorney-
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Advisor, Program Policy Branch, verified the citations of reg-
gulations and policy documents, and also assisted in the review
and editing of its contents. Sheila Hoover, Grants Assistant,
Program Policy Branch, was responsible for formatting and typing
the final document for printing.
Membership on the task force included James Brooks (Region VIII),
Steven Burkett (Region VI), Preston Clark and Robert Hampston
(New York State), Jon Craig (Oklahoma), Kirk Lucius and Virginia
Tobin (Region IV), Earl Quance and John Milnor (Maryland), Richard
Salkie (Region II), and John Stetson (Washington State). As part
of their overall review efforts, this group met with the subcon-
tractor and the staff of the Program Policy Branch to develop uniform
positions on proposed new and revised procedures. In addition,
drafts of the chapters were reviewed by the other six EPA Regional
Offices, by several other States, and by numerous other EPA Head-
quarters offices.
D. ORGANIZATION AND CONTENT
1. History
The Handbook of Procedures (MCD-03) was first published in
February 1976, and took into account the laws, regulations, and
policies in effect as of July 1, 1975. Subsequently, three
transmittal memoranda (TMs), updating the Handbook, were issued
to reflect policy changes occurring after the original text was
published.
The second edition, published in 1980, reflected changes
brought about by the Clean Water Act of 1977 (PL 95-217), and
included laws, regulations, and policies in effect as of
October 1, 1979. No TMs were issued for the second edition.
On December 29, 1981, Congress enacted the Municipal Waste-
water Treatment Construction Grants Amendments of 1981 (PL 97-117),
which amended earlier legislation and mandated significant changes
in the conduct of the construction grants program. These changes
necessitated the publication of this completely revised third
edition of the Handbook.
This third edition of the Handbook of Procedures replaces
earlier editions and reflects laws, regulations, and EPA policies
in effect as of October 1, 1984.
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2. Organ i zat ion
Each chapter of the Handbook is intended to cover a general
review phase of a construction grant project and, to the extent
possible, is placed in the sequence in which the review takes
place. Chapter II, "Water Quality Planning," discusses those
planning activities conducted by the States which directly relate
to the construction grants program. This chapter also highlights
the new simplified water quality planning regulations (40 CFR
Part 130). Chapter III, "Preapplication Management," emphasizes
project management in addition to the dissemination of information
to potential grant applicants.
Although Step 1 and Step 2 grants are no longer awarded,
facilities planning and project design activities must still be
reviewed prior to the award of Step 3 grants. Accordingly,
review procedures for these areas are discussed in Chapter IV,
"Facilities Planning," and Chapter V, "Design".
Chapter VI, "Grant Processing," includes all requirements
for grant award, and discusses combined sewer overflows (CSOs),
land acquisition, field testing of innovative and alternative
(I/A) technologies, and i/A modification or replacement (M/R)
grants in separate sections. Chapter VII, "Construction,"
discusses all activities associated with building the project,
including procurement, monitoring of construction, and post
construction activities during the first year after project
completion.
Chapter VIII, "Grant Completion, Closeout and Audit,"
provides guidance on completing and closing out old as well
as new grants. Chapter IX, "Financial Considerations," includes
new sections on disputes and deviations, and, in the last sec-
tion, 40 CFR Part 35, Subpart I, Appendix A, "Determination of
Allowable Costs," is reproduced along with clarifying informa-
tion and examples where appropriate.
Cross-references are frequently made in the text to other
sections of the Handbook. A reference to "Section V.C.I.a,"
refers to Chapter V, Section C, Item l.a.
3. Format
Each function and activity described in this Handbook is an
integral part of the construction grants program and is necessary
to insure compliance with statutory or program requirements.
Individual functions are presented in the following format:
Purpose:
A brief explanation of the need for the function
is given.
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Discussion:
The function is placed in program perspective and
information is given on such topics as general
operating policy, important underlying issues, key
considerations in approaching the function under review,
and how the function relates to other aspects of the
construction grants program.
Procedures:
The procedures for reviewing documents submitted and
activities conducted by applicants and grantees are
briefly described. Frequently, for presentation purposes,
processing procedures for administrative and technical
functions are addressed separately. However, whenever
possible, the review of both functions should take place
simultaneously. Where specific program items are required,
they are listed. Other more general review items are also
included as a reminder. However, the review procedures
listed here are not substitutions for, nor do they super-
sede, the requirements described in the regulations. Check-
lists developed by State agencies or EPA Regional Offices
and contained in delegation agreements are also to be
used in performing the review process.
References:
Appropriate laws, regulations, guidelines, and technical
documents are cited. Copies of such reference material can
generally be found in EPA Regional or State agency offices.
Some of the review procedures are self-explanatory or do not
lend themselves to the above format. In these cases, the require-
ments or procedures are briefly described.
4. Regulat ions
This third edition of the Handbook is based on regulations
in effect as of October 1, 1984, primarily those contained in
Title 40 of the Code of Federal Regulations (CFR). The following
regulations are cited at appropriate locations in the Handbook:
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40 CFR Parts
4 - Implementation of the Uniform Relocation
Assistance and Real Property Acquisition
Policies Act of 1970
6 - Implementation of Procedures on the National
Environmental Policy Act
7 - Nondiscrimination in Programs Receiving
Federal Assistance from the Environmental
Protection Agency
15 - Administration of the Clean Air Act and the
Federal Water Pollution Control Act with
Respect to Federal Contracts, Grants, or Loans
25 - Public Participation in Programs Under the
Resource Conservation and Recovery Act, the
Safe Drinking Water Act, and the Clean Water Act
29 - Intergovernmental Review of the Environmental
Protection Agency Programs and Activities
30 - General Regulation for Assistance Programs
32 - Debarment and Suspension under EPA Assistance
Programs
33 - Procurement Under Assistance Agreements
35 - State and Local Assistance
Subpart A - Financial Assistance for
Continuing Environmental Programs
Subpart E - Grants for Construction of Treat-
ment Works - Clean Water Act
Subpart I - Grants for Construction of Treat-
ment Works
Subpart J - Construction Grants Program Delegation
to States
52 - Approval and Promulgation of Implementation Plans
60 - Standards of Performance for New Stationary Sources
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61 - National Emission Standards for Hazardous Air
Pollutants
122 - National Pollutant Discharge Elimination System
125 - Criteria and Standards for the National Pollutant
Discharge Elimination System
130 - Water Quality Planning and Management
131 - Water Quality Standards
133 - Secondary Treatment Information
141 - National Interim Primary Drinking Water Regulations
149 - Review of Projects Affecting the Edwards Underground
Reservoir, a Designated Sole Source Aquifer in the
San Antonio, Texas Area
257 - Criteria for Classification of Solid Waste Disposal
Facilities and Practices
261 - Identification and Listing of Hazardous Waste
403 - General Pretreatment Regulations for Existing
and New Sources of Pollution
b. Other Regulations
15 CFR Part 930 - Federal Consistency with Approved
Coastal Management Programs
36 CFR Part 63 - Determinations of Eligibility for
Inclusion in the National Register
of Historic Places
36 CFR Part 800 - Protection of Historic and Cultural
Propert ies
45 CFR Part 84 - Nondiscrimination on the Basis of
Handicap in Programs and Activities
Receiving or Benefiting from Federal
Financial Assistance
48 CFR Part 31 - Contract Cost Principles and Procedures
49 CFR Parts 171
through 177 - Hazardous Materials Regulations
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5. Policy Memoranda
Earlier editions of the Handbook included references to
Program Guidance Memoranda (PGs) and Program Requirements
Memoranda (PRMs). The PRM series replaced the PG series, and
was supplemented by Program Operations Memoranda (POMs), which
discussed internal EPA operational matters rather than policy
issues. In July 1982, "Construction Grants 1982" (CG-82) was
published and stated in its foreword, "Upon publication of
CG-82, all PRMs and POMs are cancelled . . . ." This statement
effectively terminated the codified field communication system
between Headquarters, Regions, and States and replaced it with
the periodic publication of the construction grants (CG) series.
Since both the CG series and the Handbook are based on
information contained in the same regulatory, policy, and
guidance documents, references in the Handbook seldom cite CG-85.
Rather, source documents, from which statements in both texts are
drawn, are cited to better assist project reviewers in their
research efforts.
6. State Requirements
The contents of the Handbook reflect only Federal require-
ments for the construction grants program. Many States have
laws, regulations, or policies which supplement Federal require-
ments, and in some cases may be more stringent. Where such cases
exist, it is assumed that during delegation negotiations,
differences will be resolved by the States and EPA to insure
that State requirements will not circumvent the spirit or intent
of Federal requirements. It is important for State project re-
viewers to be conversant with supplemental State requirements and
insure that they are carried out by grant applicants and grantees.
In general, supplemental State requirements may be approved
as judged appropriate by EPA as part of the delegation process,
except in the area of grantee procurement, where strict
requirements have been imposed on all Federal agencies by
Attachment 0 to Office of Management and Budget (OMB) Circular A-102.
The intent of Attachment 0 is to give grantees maximum flexibility
in the procurement of goods and services, and to generally eliminate
most advance approvals. Supplemental State requirements which
affect grantee procurement may only be approved by EPA if all of the
following conditions are met:
- the requirements are established by State law,
rather than by regulations or policy documents;
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- the requirements apply to all public construction
projects in the State, regardless of the source
of funds (e.g., a requirement that all public
projects be advertised as separate contracts for
mechanical, plumbing, electrical, and general
construction); and
- the requirements do not directly conflict with
Federal laws or regulations.
Those States which have supplemental State grant programs
may impose additional grantee requirements without regard to
the above restrictions, provided that:
- they do not directly conflict with Federal laws
and regulations, and
- they do not apply to Federal grantees who do not
receive a supplemental State grant.
7. Related Materials
The review procedures in this Handbook describe the essential
or minimum requirements necessary in processing construction grant
applications and related documents. More detailed information may
be obtained by reading the reference materials which are identified
throughout the text. Generally, references concerning technical
matters have been limited to EPA publications.
Although the processing steps set forth in the Handbook are
intended to bring about uniformity in the processing of construc-
tion grant applications nationwide, differences in the structure of
EPA Regional Offices, State agency offices, or delegation agreements
may require some adjustment in the manner in which various review
procedures are followed.
8. Updat ing
This Handbook reflects requirements contained in the regulations
as of October 1, 1984. The Handbook will be updated to reflect
changes in laws, regulations, and policies. Responsibility for
revising and updating the Handbook resides with the Program Policy
Branch, Municipal Construction Division, Office of Water Program
Operations, and revisions will be issued from that office.
Handbook revisions will be forwarded by a TM. Each TM will be
designated with a sequential number (e.g., TM 85-11), indicating
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the fiscal year and number of the issuance, and will provide
specific instructions for removal of obsolete and insertion of
new pages. In order for changes to be readily identified, text
revisions will be printed in italics. Additionally, each revised
page will show the number of the TM which transmitted the revision.
E. LEGISLATIVE HISTORY
The Federal Water Pollution Control Act of 1956 (PL 84-660)
represented the first authorization for Federal grants to assist
in the construction of waste treatment works. (A 1948 loan
program was authorized, but never funded.) Selection of projects
to be funded resided with the States, reflecting the policy of
Congress to recognize and preserve the primary responsibility
of the States to prevent and control water pollution. The 1956
Act authorized fifty million dollars per year, with grants limited
to 30 percent of the eligible project cost, not to exceed $250,000
per project.
Authorizations were increased during the early 1960's, with
major amendments occurring in 1965. At that time, authorizations
were again increased, the maximum dollar limitation on grants
was dropped, the Federal share was increased to a maximum of 55
percent, and provision was made for future reimbursement of State
or local funds used in lieu of Federal funds.
Between 1965 and 1972 other initiatives were undertaken,
the most important of which were the enactment of the National
Environmental Policy Act (NEPA) in 1969 and the creation of EPA
in 1970.
Enactment of the Federal Water Pollution Control Act Amendments
of 1972 (PL 92-500) resulted in extensive changes to the construc-
tion grants program. The Federal share was increased to 75 percent
and project eligibility was expanded to include sewage collection
systems, sewer system rehabilitation, and correction of CSOs. In
addition, the 1972 Amendments mandated a strong enforcement program,
statewide planning, areawide planning, ana the issuance of discharge
permi ts.
The 1972 Amendments also introduced the three-step grant
process (e.g., Step 1 - planning, Step 2 - design, and Step 3 -
building). Under the Act, grantees were required to provide a
minimum of secondary treatment to be eligible for a Federal
grant. New concepts were introduced such as facilities planning,
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infiltration/inflow (I/I) analysis, assessment of environmental
impacts, user charge (UC) systems, industrial cost recovery, cost
effectiveness, best practical waste treatment technology (BPWTT),
etc. The Act also authorized $18 billion over a five year period
to support the construction grants program and to provide for a
continuity of funding.
The Clean Water Act of 1977 (PL 95-217) contained mid-course
corrections to the 1972 legislation and authorized $24.5 billion
over a five year period in support of the construction grants
program. Several significant changes were introduced into the
construction grants program, one of which required grantees to
evaluate I/A technologies when planning their projects. The
mandatory I/A evaluations conveyed the desire of Congress to
bring about conservation through recycling and more efficient
energy use or recovery. For approved I/A projects, the Federal
grant share could be increased to 85 percent.
Another significant provision of the 1977 Amendments was the
encouragement of, and financial support for, States to administer
the construction grants program. Under this provision, the EPA
Regional Administrators (RAs) were able to negotiate delegation
agreements with the State agencies, detailing the staffing,
scheduling, functions, and procedures to be used by the State in
program administration.
The Municipal Wastewater Treatment Construction Grant Amend-
ments of 1981 (PL 97-117) eliminated Step 1 and Step 2 grants
after December 29, 1981, and replaced them with an allowance to
help defray the costs of planning and design. Other provisions
reduced the Federal grant share to 55 percent after September 30,
1984; eliminated grants for collection sewer systems, major sewer
rehabilitation, and correction of CSOs after September 30, 1984
(except under certain conditions); required States to reevaluate
their water quality standards; emphasized low cost alternatives,
particularly for small communities; limited the eligibility of
reserve capacity; required engineering services to be provided
for one year after project completion; and required each grantee
to certify, one year after initiation of operation, whether the
project is meeting its performance standards.
The Handbook reflects the provisions of the 1981 Amendments
and its implementing regulations. Projects receiving grants
prior to the 1981 Amendments are subject to the policies and
regulations in effect at the time of grant award and, therefore,
are not necessarily subject to the review procedures and regula-
tory requirements contained in this Handbook.
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Although the authorizing legislation for the construction
grants program is officially entitled the Federal Water Pollution
Control Act, Section 518 of the Act provides for the use of the
title Clean Water Act (CWA), and this latter title is used
throughout the Handbook.
F. STATE DELEGATION
1. General
The 1977 Amendments added Section 205(g) to the CWA,
authorizing EPA to use a portion of each State's annual allotment
of construction grants funds to award grants to the States to
administer the day-to-day operations of the construction grants
program. The grants are for 100 percent of the eligible opera-
tional costs. Under EPA regulations adopted in 1978, the execution
of a delegation agreement between an RA and a comparable level
State official provides the basis for a construction management
assistance grant (frequently called a 205(g) grant). The purpose
of the agreement is to describe, in specific terms, the relative
roles of the State and EPA in the management of the construction
grants program in that State.
Delegation agreements were developed and negotiated on a "phase
in" basis. That is, once the many specific functions of the program
to be delegated were identified, a timetable was established for
transferring (i.e., delegating) those functions. Each function was
delegated only after the Region determined that the State had trained
staff in sufficient numbers to effectively perform that function
without direct assistance from the Region.
All agreements describe the procedures to be followed in imple-
menting each function and the forms to be completed by the States
as evidence that each function has been fully performed. Period-
ically, EPA reviews each State's program and representative grant
projects, to insure that each function is being carried out in
accordance with the delegation agreement.
Since 1977, forty-nine States and the Commonwealth of Puerto Rico
have entered into delegation agreements with EPA. During those years,
considerable experience has been gained concerning the form of dele-
gation agreements, the respective roles of each agency, and the most
practical and efficient management implementation practices. Because
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of the attention to detail and mutual concern continuously exer-
cised by EPA Headquarters, the Regions, and the States during this
period of transition, the goal of achieving full delegation of the
construction grants program to the States is close to being realized.
Regulations implementing State delegation are found
primarily in three subparts to 40 CFR Part 35:
Subpart A - Financial Assistance for Continuing
Environmental Programs. This subpart
deals primarily with grants for State
water pollution control programs
under Section 106 of the CWA, for State
management of the construction grants
program under Section 205(g) of the CWA,
and for water quality management (WQM)
planning under Section 205(j) of the CWA.
Subpart I - Grants for Construction of Treatment
Works. This subpart deals with grant
requirements for building wastewater
treatment works.
Subpart J - Construction Grants Program Delegation
to States. This subpart addresses the
requirements for delegation agreements,
oversight, and grants to States to perform
delegated functions, in accordance with
Section 205(g) of the CWA.
In addition, "Construction Grants Delegation and Overview
Guidance," dated December 1983, was prepared by EPA to integrate
in one document the relevant regulatory requirements, policies,
and guidance for managing the delegated program. The sections
below briefly summarize relevant aspects of this publication.
Program managers responsible for delegation should consult
the text for specific details.
2. Delegation Agreements
Delegation agreements, which vary from Region to Region
with regard to specific procedural requirements, generally
contain two main parts:
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a. Basic or "Umbrella" Agreement
This part of the delegation agreement sets
forth the basic commitments between the State
and the EPA Regional Office, and defines the
operational framework for accomplishing those
commitments. In addition, it covers specific
operational items such as scheduling, cost
information, hiring and training, accounting
methods, and level of effort.
b. Functional Agreements or Subagreements
Along with the basic agreement are a series of
individual agreements describing each function or
activity (or group of activities) to be delegated.
These agreements contain information which State
reviewers are expected to be familiar with and use,
including the procedures to be followed in reviewing
project documents and conducting grant activities,
the interface with the Regional Office and other
Federal and State offices, and the criteria to be
used in evaluating the effectiveness of State grant
program activities. The format of functional agree-
ments may vary (e.g., checklists and/or evaluation
procedures may be separated from review documents,
and included separately as a supplement or appendix).
Functional agreements are critical to the operation of the
construction grants program and need to be kept current. That
is, as improvements in procedures are developed, as regulations
are revised, and as guidance documents are changed, modifications
to the agreements will be necessary. Such revisions can be formally
adopted by approvals at the State and EPA program manager's level
(e.g., Division Directors or Branch Chiefs). It should be noted
that one of the purposes of this Handbook is to help bring about
general agreement on current review procedures so that they can
be more uniformly practiced among the States.
Re: 40 CFR 35.3005, 35.3010
3. Delegated Functions
Earlier regulations included a listing of functions which
could be delegated to the States and those functions which
because of statutory requirements could not be delegated.
Current regulations do not contain these specific listings,
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but rather indicate that all functions may be fully delegated
to the States, except those for which EPA must retain
responsibility under Federal law. Statutory requirements
| continue to preclude full delegation of the following functions:
- approval of grant awards, grant amendments,
payments, and terminations;
- final determinations under Federal statutes and
Executive Orders (e.g., NEPA determinations, and
determinations of compliance with Title VI of the
Civil Rights Act);
- final resolution of audit exceptions;
- procurement determinations concerning procurement
system reviews and protests; and
- projects where an overriding Federal interest
requires greater Federal involvement.
However, States are encouraged to undertake all project-level
activities, including preliminary determinations for nondelegable
requirements. Preliminary determinations by States will usually
include the preparation of all documentation in anticipation of
EPA's approval and signature. A summary chart containing dele-
gable and shared activities, their legal or administrative
citations, and brief comments on State/EPA roles is contained in
Appendix A to EPA's publication "Construction Grants Delegation
and Overview Guidance," dated December 1983. That same publica-
tion, on pages 28 through 31, contains a clarification of the
delegability of those activities whose delegability previously
had been uncertain.
The EPA guidance also contains a partial listing of project
conditions for which there may be an overriding Federal interest,
thereby precipitating EPA involvement. The project conditions
include:
- projects subject to an Environmental Impact Statement
(EIS) ;
- projects subject to special and/or complex eligibility
considerations;
- projects which are the subject of unusually strong
Congressional interest;
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- projects involved in Federal court cases or sub-
ject to other directives (e.g., consent decrees,
ocean dumping restrictions, international agree-
ments) that EPA must administer despite delegation;
- projects involved in law enforcement investigations
or in allegations of waste, misuse, or mismanagement
of Federal funds;
- projects subject to review of advanced treatment
with an incremental cost in excess of $3 million;
- projects for which a marine discharge waiver request
has been submitted to EPA; and
- projects having interstate or international impacts
that go beyond state jurisdiction.
Re: 40 CFR 33.001(g), 35.3015(a) and (c)
4. EPA Oversight
EPA maintains overall responsibility for insuring that
Federal requirements are adhered to and that progress toward
national goals and objectives is maintained. in carrying out
this responsibility, EPA conducts an annual evaluation of
each delegated State program. The purpose of this evaluation
is to insure that both the delegated State and EPA efficiently
and effectively execute their respective fiscal and program
responsibilities.
The annual evaluation consists of three steps, namely:
a. Developing the Plan for Oversight
Each year EPA and the State establish,
in advance, priority objectives, key measures
of performance, and monitoring and evaluation
activities.
b. Negotiating Annual Outputs
In keeping with the oversight plan, EPA
and the State negotiate and agree upon specific
outputs which correspond to priority objectives
for the year.
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c. Monitoring and Evaluating Program Performance
As part of the oversight plan and to confirm
annual outputs, EPA monitors and evaluates each
State's performance under delegation. An onsite
evaluation is conducted annually, and additional
monitoring activities, as appropriate for each
delegated State, are conducted as needed.
Carefully structured and conducted, the annual evaluation
should help to solidify the sense of partnership existing
between EPA and the delegated States and effectively comple-
ment the ongoing dialogue between each State and the EPA Region
which is critical to the successful implementation of the dele-
gation program.
Re: 40 CFR 35.3025? EPA publication, "Construction Grants
Delegation and Overview Guidance," December 1983.
5. U.S. Army Corps of Engineers
EPA entered into an interagency agreement with the U.S.
Army Corps of Engineers (COE) at the national level, under which
the COE provides assistance in administering portions of the
construction grants program. The specific functions being
carried out by the COE are identified in regional interagency
agreements developed between EPA Regional Offices and the
corresponding COE Division offices. COE responsibilities and
procedures vary from Region to Region, and serve as a supple-
ment to a State's delegation agreement (i.e., in some States,
the COE performs functions which are not delegated to the State
until such time as the State is able to assume those functions,
while in other States, the COE performs functions which have
been delegated, but not yet assumed by the State).
COE functions may range from limited onsite inspection
services to total project management responsibilities which
begin as soon as the grantee has accepted the grant offer.
In many States, the COE conducts biddabi1ity/construetibi1ity
reviews of contract documents, including plans and specifi-
cations (see Section V.C.3). On very large projects or
clusters of projects (e.g., where the building costs exceed
$50 million), the COE may provide full-time onsite presence.
Project reviewers should be aware of the contents of EPA/COE
agreements in their respective States, including specific
procedures and documentation requirements.
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It is EPA's long term goal to have each delegated state
assume those activities now being performed by the COE as soon
as the State is able to do so. However, where temporary shortages
in staff resources exist in a delegated State, the State may
request, through EPA, COE assistance in carrying out program
functions for an interim period.
Re: EPA publication, "Operating Procedures for Monitoring
Construction Activities at Projects Funded under the
Environmental Protection Agency's Construction Grants
Program," September 1983; EPA publication, "Guidelines
for Overviewing Construction Grant Activities Conducted
under the Interagency Agreement with the Corps of
Engineers," February 1984.
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CHAPTER II
WATER QUALITY PLANNING
A. INTRODUCTION
B. DEFINING WATER QUALITY
C. WATER QUALITY MANAGEMENT PLANNING
D. IMPLEMENTING THE WATER QUALITY MANAGEMENT PLAN
E. FUNDING THE CONSTRUCTION GRANTS PROGRAM
F. SUMMARY OF THE PLANNING PROCESS
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A. INTRODUCTION
The discussion in this chapter is limited to those aspects
of water quality planning which are relevant to the construction
grants program. It is designed to provide the project reviewer
with background information and a general working knowledge of
the management and planning processes required by the Clean Water
Act (CWA) and its implementing regulations. The principle func-
tion of each planning activity is highlighted, placed in perspec-
tive, and related to its impact on the construction grants program.
Section B, Defining Water Quality, discusses the procedures
used in setting water quality goals and standards, in monitoring
water quality, and in relating current water quality to the goals
and standards.
Section C, Water Quality Management Planning, describes the
planning processes which are used to produce management plans for
achieving water quality goals and standards.
Section D, Implementing the Water Quality Management Plan,
describes the implementation of the plan through EPA's municipal
policy, permit program, and facilities planning requirement.
Section E, Funding the Construction Grants Program, discusses
the mechanisms for making funds available to the construction
grants program, for prioritizing projects, and for setting aside
funds in reserves for specific purposes.
Section F, Summary of the Planning Process, summarizes the
steps in the planning process in a list of activities, followed
by a schematic flow diagram.
B. DEFINING WATER QUALITY
1. Water Quality Goals and Standards
Water quality goals, which are the basis for all activities
authorized under the CWA, represent value judgements articulated
by Congress in Title I of the CWA. The water quality goals of
the CWA may be summarized as: protection and propagation of fish,
shellfish, and wildlife; provision for recreation in and on the
water wherever attainable; restoration and maintenance of the
chemical, physical, and biological integrity of the Nation's
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waters; prohibition of toxic substances in toxic amounts; pro-
tection of public health and welfare; and reduction of water
pollutants from nonpoint sources to the maximum extent feasible.
To translate water quality goals into objective, measurable
terms, water quality standards are established by the States.
Water quality standards implement the water quality goals for a
water body or portion thereof by setting standards necessary to
achieve these goals. These standards serve as the legal basis
for water pollution control decisions (e.g., treatment levels,
National Pollutant Discharge Elimination System (NPDES) permit
effluent limitations, and enforcement actions).
Water quality standards have been established by the States
and approved by EPA for practically all of the Nation's water
bodies. However, Section 24 of the 1981 CWA amendments required
the States to reevaluate their water quality standards and, where
necessary, to revise them to reflect current and realistic goals
and uses. Construction grant assistance may not be provided in
States which fail to conduct such water quality standards re-
evaluation by December 29, 1984 (see Section VI.D.ll). The
establishment and revision of water quality standards is subject
to the public participation requirements of 40 CFR Part 25.
Re: 40 CFR 130.0, 130.3; 40 CFR Part 131
2. Water Quality Monitoring
Once a State establishes water quality standards, the State
is required to implement a water quality monitoring program which
includes the collection and analysis of physical, chemical and
biological data on water quality. This data is used by the State
to evaluate the effectiveness of its water quality management (WQM)
program, to determine abatement and control priorities, to develop
or revise water quality standards, to develop total maximum daily
loads and wasteload allocations, to assess compliance with NPDES
permits, and to prepare reports which assess the trends in water
quality.
Water quality monitoring programs must include quality assur-
ance and quality control programs to insure that collected data
are scientifically valid. The monitoring program provides a
scientific basis for the preparation of abatement and control
reports and for the designation of priority water quality areas.
Re: 40 CFR 30.503, 130.4
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3. Water Quality Report
Section 305(b) of the CWA requires each State to report to
EPA the status of water quality within the State and the programs
underway or needed to attain water quality goals. The water
quality report (frequently called a 3.05(b) report) is prepared
every two years, and for the years submitted, fulfills the annual
water quality reporting requirements under Section 205(j) of the
CWA. For the years when the water quality report is not submitted,
States may satisfy the annual reporting requirements under Section
205(j) by certifying that the most recently submitted report is
current, or by submitting an update of the outdated sections of
the most recently submitted report.
The water quality report serves as the State's primary prob-
lem assessment document, and thus provides basic input to the
State's planning and implementation activities. The report must
include recommendations for current and future WQM activities
and other information needed to address problems in priority
water quality areas such as:
a. a description of present water quality and the
extent to which it meets the goals of the CWA;
b. an estimate of the extent to which control programs
have or will improve water quality;
c. an estimate of the environmental, economic, and
social costs and benefits of achieving the objec-
tives of the CWA and an estimate of the date of
such achievement; and
d. a description of the nature and extent of nonpoint
source pollution and recommendations for programs,
including costs, to control nonpoint sources.
Re: 40 CFR 130.8
C. WATER QUALITY MANAGEMENT PLANNING
1. General
The objective of this section is to acquaint project reviewers
with the many complex and interrelated planning activities which
impinge upon construction grants projects, and with the consider-
able information that very often has been developed for a project
or planning area before the construction grants process begins.
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By being aware of existing information or data, the project
reviewer can advise potential grant applicants of its existence,
thereby reducing planning costs and shortening the time required
for project completion.
The thrust of all WQM planning activities required under the
CWA is to improve water quality. WQM planning activities must
result in the development of optimum WQM plans, which will be
consistent with the need to protect public health and to achieve
the water quality goals of the CWA.
Although the States are primarily responsible for the
accomplishment of WQM planning, actual State involvement in the
planning process varies widely. In some States, the State agency
conducts all WQM planning activities directly, while in others,
planning activities are directed and coordinated by the State
agency, and are carried out by areawide, interstate, regional,
and/or local water quality planning agencies. In many States,
the State agency performs some of the planning activities, and
assigns others to areawide, interstate, regional, and/or local
agencies. EPA provides grant assistance for these activities,
and requires planning grant applicants to submit proposed work
plans, schedules, and budgets for EPA approval prior to grant
award, in order to insure efficient management and proper use of
grant funds.
2. Continuing Planning Process
The continuing planning process (CPP) describes the method-
ology used by each State in making water quality decisions,
including the development of:
a. effluent limitations and schedules of compliance;
b. elements of areawide waste management plans and
basin plans;
c. total maximum daily loads for pollutants;
d. revisions to WQM plans;
e. an inventory and ranking, in the order of their
priority, of needs for the construction of waste
treatment works;
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f. procedures for obtaining adequate authority for
municipalities which will build treatment facilities,
including mechanisms for obtaining intergovernmental
cooperation from subscriber communities;
g. procedures for the implementation of new or revised
water quality standards, including schedules of
compliance;
h. adequate controls over the disposition of all residuals
from water treatment processing.
The CPP is a process, not an end in itself. It allows new
or changed activities to be properly integrated into the entire
WQM program, while taking into account the activity's impact on
other programs and water quality control decisions.
The regulations emphasize the importance of effective pro-
cesses which contribute to managing the implementation of water
quality decisions. Since 1972, each State has maintained a CPP,
and has periodically updated it to meet changing needs and
regulatory requirements.
Re: 40 CFR 130.5
3. Water Quality Management Plans
WQM plans provide the framework for managing water quality
on an ongoing basis. They consist of initial plans produced in
accordance with Sections 208 and 303(e) of the CWA, as well as
approved updates to those plans. WQM plans were initially
required by the 1972 CWA Amendments. During the earlier years,
WQM plans resulted from the development of two separate but
interrelated plans, namely, a basin plan and an areawide waste
treatment management plan.
The basin plan, developed by the State, classified all stream
segments in the State as effluent limited or water quality limited.
A stream segment was classified as effluent limited if it was
projected to meet its water quality standards when all point sources
of pollutants were given secondary treatment. This designation
meant that construction grant applicants needed only to provide for
secondary treatment to qualify for grant assistance. On the other
hand, a stream segment was classified as water quality limited if
it was not projected to meet its water quality standards when all
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point sources were given secondary treatment. Classification
of a stream segment as water quality limited generally indicated
severe water quality problems and most often was found in indus-
trialized or urban areas. To solve the water quality problems,
mathematical models were developed and used to predict changes in
water quality resulting from various combinations of advanced treat-
ment for point sources, as well as control techniques for non-point
sources.
For each area of a State with substantial water quality problems,
the Governor designated a responsible agency to prepare an areawide
waste treatment management plan (frequently called a 208 plan). In
areas with less severe problems, States conducted limited areawide
planning to identify the problems and to propose implementation
measures necessary for achieving water quality standards. Among
the many outputs of these plans was the identification of local
agencies or municipalities which would implement construction of
publicly owned treatment works (POTWs).
Since 1972, the distinction between basin planning and area-
wide planning gradually became less clear, and the two planning
functions were eventually combined into one consolidated planning
activity, namely, WQM planning. Most WQM plans were completed
during the late 1970's or early 1980's. However, to insure that
WQM plans continue to provide effective frameworks for management,
WQM plans must be updated from time to time, to reflect changing
water quality conditions, the results of implementation activities,
and new regulatory requirements.
Ideally, WQM plans should address the following water quality
elements:
- total maximum daily loads;
- effluent limitations for water quality based stream
segments;
- anticipated municipal and industrial waste treatment
works, including treatment facilities for combined
sewer overflows (CSO's);
- nonpoint source management and control, including
identification of best management practices to con-
trol nonpoint source pollution;
- programs for the control of dredge or fill material;
- programs for control of groundwater pollution;
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- implementation measures necessary to carry out the
plan, including financing and scheduling;
- the economic, social, and environmental impacts of
implementing the plan;
- identification of relationship to earlier basin
plans; and
- identification of the agencies which will carry out
the plan.
In reality, however,
above elements.
Several elements
to construction gran
some WQM plans do not
include all of the
s igni f icance
in WQM plans are of particular
ts program personnel, namely:
- The identity of the specific agency or municipality
which will construct each needed wastewater treat-
ment works. Where a proposed project is located in
a WQM planning area, grant assistance may be awarded
only to the agency or municipality identified in the
WQM plan.
- The wasteload allocation assigned to a specific point
source. This will dictate the level of treatment
required by that discharge, and will be reflected in
the NPDES permit and the alternatives evaluated during
facilities planning.
- The description of the severity of the pollution
problems caused by a specific point source. This will
influence the project's ranking in the State's project
priority list (see Section E.3 below).
- Information which can be used by grant applicants in
preparing facilities plan. This will reduce costs and
shorten the time necessary for project completion.
Several recent changes in terminology or approaches to WQM
planning must be understood. For municipal point sources, the
term "technology-based effluent limitations" means secondary
treatment or its equivalent, as defined in 40 CFR Part 133.
"Water-quality-based effluent limitations" means treatment to a
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level, more stringent than secondary treatment, necessary to
achieve water quality standards. With regard to allowable waste
loadings for stream segments, the following definitions are
applicable:
- load or loading - an amount of matter or energy that
is introduced or transported into a receiving stream
from human activities (pollutant loading) or natural
sources (natural background);
- assimilative capacity - the greatest amount of loading
that a water body can receive without violating its
water quality standards;
- load allocation - the portion of a receiving water's
loading capacity that is attributed either to one of
its existing or future nonpoint sources of pollution
or to natural background sources;
- wasteload allocation - the portion of a receiving
water's loading capacity that is allocated to one of
its existing or future point sources of pollution; and
- total maximum daily load - the sum of wasteload allo-
cations for point sources and load allocations for non-
point sources and natural background.
The receiving water's loadings are included in the WQM plan.
The wasteload allocation is of particular importance to construc-
tion grants personnel, since it will determine the water quality
based effluent limitations and consequently the level of treat-
ment required for a specific project.
Re: 40 CFR 35.2023, 35.2102, 130.2, 130.6, 130.7, 130.12(b)
4. Water Quality Management Funding and Annual Work Program
EPA provides grant assistance to States to carry out the WQM
activities described in Sections B.l through B.3 and C.l through
C.3 above. As with all grants, States are required to provide a
work program (i.e., an annual program management document) as
part of the grant application package.
The work program reflects the
quality report and the WQM plans,
planning activities to be carried
problems described in the water
The work program specifies the
out during the period of the
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grant, the cost of the specified activities, the outputs to be
produced by each activity, and where applicable, schedules,for
the completion of each activity. Activities to be supported by
grant funds include major functions such as permitting, enforce-
ment, monitoring, planning and standards, nonpoint source imple-
mentation, management of construction grants, overseeing opera-
tion and maintenance (O&M) of treatment works, emergencytresponse,
and program management. The portion of the work program addressing
compliance with water quality standards by POTWs must be consistent
with the implementation of EPA's National Municipal Policy (see
Section D.l below).
Payment procedures for WQM planning grants are discussed in
Section IX.B.8.d.
Re: 40 CFR 130.8, 130.11
D. IMPLEMENTING THE WATER QUALITY MANAGEMENT PLAN
1. National Municipal Policy
The CWA requires all POTWs to meet statutory compliance dead-
lines necessary to achieve the water quality objectives of the CWA,
whether or not grant assistance is awarded. EPA's goal is to
obtain compliance by POTWs as soon as possible, but no later than
July 1,1988.
To implement this goal, EPA has focused on: (1) POTWs that
previously received grant assistance and are not currently in com-
pliance with their effluent limitations, (2) all other major POTWs
that are not in compliance, and (3) minor POTWs that are contri-
buting significantly to the impairment of water quality. Affected
municipalities are required to prepare either a composite correc-
tion plan (when its existing treatment facility is not in compli-
ance), or a municipal compliance plan (when a treatment facility
needs to be constructed). In either case, the plan must be com-
pleted by September 30, 1985, and must contain an enforceable
compliance schedule developed jointly by the affected municipality
and the enforcing agency (either EPA or the delegated State).
The compliance schedules and strategies resulting from imple-
mentation of the National Municipal Policy are to be integrated
into each State's overall WQM work program for the coming year
(see Section C.4 above).
Re: EPA notice of "National Municipal Policy," 49 FR 3832 and 3833
(January 30, 1984)
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2. Municipal Permits
The CWA established the NPDES permit program as the enforce-
ment mechanism for achieving water quality standards. A discharge
permit is issued under this system to all municipal and industrial
discharges. Where a WQM plan has been prepared and approved,
permits will require compliance with the approved plan. For
existing treatment facilities which, because of present or antici-
pated future inadequate treatment, will prevent achievement of
water quality standards, the NPDES permit may contain limitations,
conditions, or schedules which will prompt the municipality to
apply for a construction grant.
An applicant for a construction grant must comply with its
existing permit or obtain a new permit. In accordance with the
National Municipal Policy (see Item 1 above), reviewing agencies
must insure coordination between the construction grant and NPDES
permit programs.
Re: 40 CFR 35.2000(a), 35.2005(b)(15); 40 CFR Part 125
3. Facilities Plans
WQM planning develops recommended control measures which, when
implemented, are expected to result in the attainment of water
quality standards. A WQM plan generally addresses problems for a
large area, and may recommend the construction of one or more POTWs.
Where the construction of a POTW is recommended in a WQM plan, the
plan will also designate the implementing agency or municipality.
Only this municipality may apply for grant assistance to build the
recommended POTW. The first major step in the grant application
process is the preparation, by the municipality, of a facilities
plan.
Facilities planning may be considered as the final implementing
phase in water quality planning for POTWs. Within the framework
of the WQM plan, facilities planning considers specific wastewater
treatment processes, evaluates various alternatives, and selects
a cost-effective, environmentally sound project (see Chapter IV).
Subsequently, the selected project is designed, grant assistance
is awarded (assuming that all requirements for grant assistance are
met and sufficient funds are available), and the project is con-
structed .
Re: 40 CFR 35.2030, 130.12(b)
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E. FUNDING THE CONSTRUCTION GRANTS PROGRAM
1. General
In the case of POTWs, water quality planning is implemented,
in part, through the construction grants program. WQM plans
identify priority water quality areas and recommend actions neces-
sary to achieve water quality standards. NPDES permits may also
require actions necessary to maintain and enhance water quality.
Where such actions include the upgrading or expansion of existing
municipal treatment facilities or the construction of new
facilities, the municipalities may be considered potential grant
applicants and may qualify for grant assistance.
2. Allotment of Funds
The CWA authorizes funding of the construction grants program,
usually for a period of several years. However, funds only become
available for each fiscal year when Congress appropriates them.
The CWA specifies the formula to be used in computing each
State's annual allotment of the appropriated grant funds. (For
the purposes of the CWA, the term "State" includes the fifty
States, as well as the District of Columbia; the Commonwealths of
the Northern Marianas and Puerto Rico; the Territories of American
Samoa, Guam, and the Virgin Islands; and the Trust Territory of the
Pacific islands.) Generally, the allotment formula is based on
each State's population and the need for wastewater treatment works
in each State, as identified in the Needs Survey discussed below.
After the allotment formula has been used by EPA to compute each
State's annual allotment, the allotments are published in the
Federal Register (FR).
Every two years EPA, in cooperation, with the States, prepares
the "Needs Survey - Cost Estimates for Construction of Publicly-
Owned Wastewater Treatment Facilities." The needs survey ident-
ifies, by category, treatment works needed as of the date of the
survey, projected through the year 2000. The categories of need
correspond with the categories of projects used in the State's
priority system and project priority list (see Item 3 below). In
addition to cost estimates, the needs survey provides an inventory
of municipal facilities which may be eligible for grant assistance.
Re: 40 CFR 35.910-1 through 35.910-11, 35.2010; EPA "Notice of
Allotment," 47 FR 42024-42025 (September 23, 1982); EPA
"Notice of Allotment," 47 FR 56177 (December 15, 1982); EPA
"Notice of Allotment," 48 FR 51174 (November 7, 1983)
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3. State Priority System and Project Priority List
Purpose:
Establish a priority system and project priority list for
awarding grant assistance for specific projects.
Discuss ion;
The 1981 CWA amendments stress the importance of achieving
optimal water quality and protecting public health through the
construction grants program. The implementing regulations empha-
size that high priority should be given to projects in priority
water quality areas (i.e., specific stream segments or bodies of
water where municipal discharges have resulted in the impairment
of a designated use or significant public health risks, and where
the reduction of pollution from municipal discharges will sub-
stantially restore surface or ground water uses). The concept of
priority water quality areas is also used by the States for
scheduling revisions to water quality standards; computing total
daily maximum wasteloads; issuing major permits; and focusing
monitoring, enforcement, and reporting efforts on critical water
quality problems.
The methodology used to rate and rank proposed individual
municipal wastewater projects for grant assistance is the State
priority system. Using the State priority system and the criteria
contained therein, each State develops a list of projects, ranked
in the order of their importance, which are expected to qualify for
grant assistance. The priority system also includes administrative,
management, and public participation procedures required to develop
and revise the project priority list.
The concept of priority water quality areas is also embodied
in the development of the State priority system, and is reflected
in the criteria to be used in ranking individual proposed projects.
Some criteria are mandated by legislation or regulation, while
other criteria may be used at the discretion of the State. The
specific criteria mandated by regulation in the development of the
State's priority system are:
- the impairment of classified water uses resulting
from existing municipal pollutant discharges, and
- the extent of surface or ground water use restor-
ation or public health improvement which would
result from the reduction in pollution.
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Optional criteria include:
- higher priority for projects employing innovative
or alternative (I/A) technology;
- need to complete a waste treatment system for
which a grant for an earlier phase or segment was
previously awarded;
- category of need (e.g., treatment plant, inter-
ceptor, sewer rehabilitation, etc.); and
- existing population affected.
If the State includes new phased or segmented projects in
the priority list, the projects must meet certain conditions
(see Section VI.D.10).
All projects listed in the State's project priority list mu
fit into at least one of the categories of need described below
Note that the categories changed after September 30, 1984.
Categories of need be fore October 1 , 1984:
- secondary treatment,
- treatment more stringent than secondary,
- correction of excessive infiltration/inflow (I/I),
- major sewer system rehabilitation,
- new collector sewers and appurtenances,
- new interceptors and appurtenances, and
- correction of CSOs.
Categories of need after September 30, 1984:
- secondary treatment or any cost effective
alternative,
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- treatment more stringent than secondary or any
cost effective alternative,
- new interceptors and appurtenances, and
- correction of excessive I/I.
The effect of the change in categories of need is to eliminate
three categories of projects (new collection sewers, major sewer
rehabilitation, and correction of CSOs) as eligible for grant
assistance with two exceptions. After September 30, 1984, the
Governor of a State may elect to use up to 20 percent of the State's
annual allotment for any of the earlier (before October 1, 1984)
project categories. Also after September 30, 1984, the Governor may
elect to include a category of need for CSOs (i.e., to use more than
20 percent of the allotment), but only if those projects result in
the correction of impaired uses in priority water quality areas. The
State must demonstrate that the water goals of the CWA will not be
achieved without correcting these CSOs (see Section VI.G).
The project priority list contains two portions:
- the fundable portion, consisting of those projects
anticipated to be funded from the current allotment,
and
- the planning portion, consisting of projects antic-
ipated to be funded from future allotments.
Development of the State's priority system and project priority list
is subject to EPA's public participation requirements, and must be
be approved by the EPA Regional Office.
Review Procedures:
Each state must submit its priority system, as well as all sub-
sequent revisions, to the EPA Regional Office for review. The
Regional Office will review each document to insure that it:
- is consistent with the criteria and the categories of
need discussed above, and
- reflects adequate public participation in the develop-
ment of both the priority system and the project
priority list.
The Regional Office will complete its review, and will notify the
State in writing of its approval or disapproval, within 30 days
of its receipt of each document.
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By August 31 of each year, each State must submit a project
priority list for use in the following fiscal year. The Regional
Off ice will review each State's list, as well as any subsequent
revisions, to insure that each document:
- is consistent with the State's approved priority system;
- is properly divided into a fundable portion, which is
consistent with the amount of funds expected to be
available for grant awards in the following fiscal
year, and a planning portion;
- includes an estimate of the eligible cost of each project;
- reflects adequate public participation in the development
of the priority list; and
- contains only projects which will contribute to
compliance with the enforceable requirements of
the CWA, except for projects which are exempt from
this requirement as described below.
The Regional Office will complete its review, and will notify the
State in writing of its acceptance or rejection, within 30 days
of its receipt of each document. If the project priority list is
rejected because it contains projects which will not contribute
to compliance with the enforceable requirements of the CWA, the
Regional Office must hold a public hearing before requiring the
State to remove these projects from the priority list. Further-
I more, the Regional Office may not require the removal of any
project if:
- it is in one of the following categories: major
sewer rehabilitation, new collector sewers and
appurtenances, new interceptors and appurtenances,
and correction of CSOs; and
- the Federal share of the cost of projects in the
above categories does not exceed 25 percent of
the State's annual allotment.
Re: 40 CFR Part 25; 40 CFR 35.2015, 35.2024(a)
4. Reserves
Portions of each State's annual allotment of construction grant
funds are reserved for certain specific uses in accordance with EPA's
regulations. There are five reserves specified in the regulations:
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a.. Reserve for State Management Assistance
Section 205(g) of the CWA allows each delegated State
to reserve up to 4 percent of the State's allotment based
on the amount authorized to be appropriated, or $400,000,
whichever is greater, to pay for the State's administration
of the construction grants program. These funds are used
by EPA to award a grant to the State for the administration
of the program (see Section I.F). Once these funds are
obligated (as a grant to the State), they remain available
to the State until expended. However, if the entire reserve
is not obligated during the allotment period, the unobligated
funds are transferred by EPA, at the beginning of the next
fiscal year, to the State's regular allotment for construc-
tion grants.
Re: 40 CFR 35.2020(a)
b. Reserve for Alternative Systems for Small Communities
Each State with a rural population of 25 percent or more
must reserve 4 percent of its annual allotment for alterna-
tives to conventional treatment works for small communities.
All other States, at the option of the Governor, may also
reserve 4 percent for the same purpose. A small community,
for the purpose of this reserve, is any municipality with a
population of 3,500 or less, or a highly dispersed section
of a large municipality.
These funds are used to fund the base grant (normally 55
percent, unless a different rate is applicable, as described
in Section VI.L.2) for I/A projects which serve small communi-
ties. Funds for the increased grant for the use of an I/A
technology (normally 20 percent, except that the total Federal
share may not exceed 85 percent) must be taken from the reserve
for I/A technologies (see Item c below).
Re: 40 CFR 35.2005(b)(40), 35.2020(b)
c. Reserve for Innovative or Alternative Technologies
Each State must reserve at least 4 percent, but not more
than 7.5 percent of the State's annual allotment, to increase
the Federal grant share by an additional 20 percent for pro-
jects which use I/A wastewater treatment processes and tech-
niques (see Sections IV.C.6.9 through IV.C.6.13, V.C.2.y,
VI.E.3, VI.I, VI.J, VI.L.2.d, VI.L.2.e, and VI.M.5.h).
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Not less than 0.5 percent of this amount must be set aside
for projects using innovative processes or techniques. Note
that the reserve funds are used to increase the Federal share
(e.g., where a 55 percent grant is awarded from the general
allotment, a 20 percent increase is added from the I/A reserve,
bringing the total Federal share, in this instance, to 75 per-
cent) .
Re: 40 CFR 35.2020(c)
d. Reserve for Water Quality Management Planning
Section 205(j) of the CWA requires each State to reserve
at least 5100,000, but not more than 1 percent of the State's
annual allotment, to carry out WQM planning, (see Section C
above), except that the Commonwealth of the Northern Marianas,
the Territories of American Samoa, Guam, and the Virgin Islands,
and the Trust Territory of the Pacific Islands must reserve a
reasonable amount.
Re: 40 CFR 35.2020(d)
e. Reserve for Advances of Allowance
Each State must reserve a reasonable portion of its annual
allotment, not to exceed 10 percent, for advances of allowance
(see Sections III.E, VI.K, and IX.B.8.C). This requirement
may be waived by EPA where a State can demonstrate that such a
reserve is not necessary, either because:
i. no small communities in the State will
need financial assistance to complete
facilities planning or preparation of
plans and specifications; or
ii. reserve funds from prior allotments
remain available and are sufficient
to provide the necessary advances of
a 1lowance.
Re: 40 CFR 35.2020(e)
States may also establish other reserves (e.g., for grant
increases) which the State feels are appropriate. Unobligated
portions of all reserves, except the reserve for state management
assistance grants (see Item a above), are reallotted to other
219
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States if not obligated during the allotment period. However,
nonmandatory reserves and nonmandatory portions of mandatory
reserves (see Items b through e above) can be released from the
reserve and obligated for other purposes before the end of the
allotment period.
Re: 40 CFR 35.2010, 35.2020, 35.2021
F. SUMMARY OF THE PLANNING PROCESS
Water quality planning and management is a dynamic activity,
and is based on initial and continuing planning efforts directed
toward achieving the water quality goals of the CWA. The
activities involved in water quality planning may, at times, be
conducted separately, but eventually must be integrated into a
unified and goal-directed management program. A simplified
schematic flow diagram for water quality planning and management
is shown in Figure 1, and may be summarized by the following
steps:
a. water quality goals are established by the CWA;
b. uses and water quality standards are established
by the State to fulfill these goals;
c. water quality monitoring is conducted to mea-
sure progress toward meeting the standards;
d. WQM plans are developed to identify control
and implementation measures needed to achieve
the standards;
e. annual water quality report is prepared to assess
problems and progress and, when necessary, to
redirect planning efforts;
f. annual work program is prepared to define planning
activities during the year, based on the assess-
ment of the problems and progress;
g. grant assistance is provided to States to carry
out planning activities;
h. permits are issued and enforcement actions are
undertaken to insure compliance with water quality
standards;
220
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i. grant assistance is provided to municipalities
to construct POTWs; and
j. CPP is utilized to integrate all planning
activities described above.
Re: 40 CFR Part 130
221
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Continuing
Planning
Process:
Coordinates
Development of
All Planning
Activities and
Changes to
Completed
Plans;
Provides
Public
Input
Enforcement
Permits
Return to
top of page
EPA Grant
Assistance
EPA Grant
Assistance
National
Municipal
Policy
State Programs
Annual Work
Program
Water Quality
Monitoring
Water Quality
Standards
Industrial
Point and
Nonpoint
Controls
Construction
Grants
Program
Water Quality
Management
Plans
Clean Water Act Goals
Water Quality
Report (Problem
Assessment)
Every 2 Years
Annual Report
Alternate Years
Figure -1. Water Quality Planning and Management
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CHAPTER III
PREAPPLICATION MANAGEMENT
A. INTRODUCTION
B. QUALIFICATIONS
C. PREAPPLICATION PROJECT MANAGEMENT
D. PREPLANNING CONFERENCE
E. ADVANCES OF ALLOWANCE
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A. INTRODUCTION
This chapter discusses preapplication project management
activities which should be undertaken by reviewing agencies.
With the elimination of Step 1 and Step 2 grants, it is incum-
bent upon reviewing agencies to work with, and track the develop-
ment of projects by, potential grant applicants. Although in
theory, a potential grant applicant need not submit documentation
to the reviewing agency prior to formally submitting a Step 2 + 3 or
a Step 3 grant application, this course of action would not be
advisable, since it is possible that a project could be planned,
designed, and submitted to the reviewing agency, but because of
its failure to satisfy State and Federal regulatory requirements,
be denied grant assistance, or have its grant assisistance delayed
until all requirements were satisfied. To preclude this possibility
and in order to manage the construction grants program effectively,
most reviewing agencies have developed systems to identify potential
grant applicants, provide them with printed informational materials,
and conduct preapplication conferences.
This chapter begins by defining applicant and project qualifica-
tions for grant assistance, followed by recommendations for pre-
application project management. The next section recommends pro-
cedures for conducting preplanning conferences, including a summary
of the important topics which should be covered. The chapter con-
cludes with a discussion of advances of allowance for small com-
munities.
Section B, Qualifications, describes the conditions which must
be met, by a grant applicant and by its proposed projects, in order
to be eligible to receive a Step 2+3 or a Step 3 grant.
Section C, Preapplication Project Management, contains recom-
mendations for reviewing agency management of facilities planning
and design work by potential grant applicants, in order to insure
a high quality of planning and design outputs, and to preclude de-
lays in the grant award process due to an applicant's failure to
satisfy State and Federal regulatory requirements. It also dis-
cusses the use -of the Grants Information and Control System (GICS),
and highlights the effectiveness of this system as a management tool
Section D, Preplanning Conference, recommends procedures for con-
ducting preplanning conferences with potential grant applicants, and
includes a brief discussion of the important topics which should be
covered in these conferences. In most cases, this section includes
cross references to other chapters, where these topics are discussed
in more detail.
-------
Section E, Advances of Allowance, describes the circumstances
under which a potential grant applicant may qualify for an advance
of the allowance for facilities planning and/or design, and the
procedures to be followed by the States in making these advances
to potential grant applicants.
B. QUALIFICATIONS
The term "qualifications" is used in this section to describe
the conditions which must be satisfied by a grant applicant and its
proposed projects in order to be eligible to receive grant assist-
ance. Additional information on project qualifications is containei
in Section IX.F.l.
1. Applicant Qualifications
The primary purpose of the EPA construction grants program
is to assist municipalities in meeting the enforceable require-
ments of the Clean Water Act (CWA). The term "municipalities"
is broadly defined in the regulations as "a city, town, borough,
county, parish, district, association, or other public body
(including an intermunicipal agency of two or more of the fore-
going entities) created under State law, or an Indian tribe or an
authorized Indian tribal organization, having jurisdiction over
disposal of sewage, industrial wastes, or other waste, or a
designated and approved management agency under Section 208 of
the Act."
This definition includes State agencies and special districts
which have as one of their pri ncipal responsibilities the treatment
transportation, or disposal of domestic wastewater in a particular
geographic area. Airports, turnpikes, port facilities, municipal
utilities (e.g., electrical or water utilities), or other revenue
producing entities do not qualify for grant assistance except in
unusual circumstances. Similarly, prisons, school districts,
park districts, and other special purpose units of government,
which do not have responsibility for the treatment, transportation,
or disposal of an entire community's wastewater, do not qualify for
grant assistance. Refer to the definition of "municipality" in the
regulations for a more complete definition and for additional limi-
tations .
Re: 40 CFR 35.2000(a), 35.2005(b)(27) and (41)
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2. Project Qualifications
After September 30, 1984, all projects must fit into one of the
| following categories of need in order to qualify for grant assis-
tance :
a. secondary treatment, or any cost effective alternative;
b. treatment more stringent than secondary, or any cost
effective alternative;
c. new interceptors and appurtenances; and
d. infiltration and inflow (I/I) correction.
An exception to the above project qualifications may be made for
a limited number of projects if the Governor of a State elects to
include other categories of need which previously (i.e., before
October 1, 1984) qualified for grant assistance (i.e., major sewer
system rehabilitation, new collection sewers and appurtenances (see
Section VI.D.14) and correction of combined sewer overflows (CSOs).
The extent to which projects in these previously qualified categories
of need can be included in a State's project priority list is dis-
cussed in Section II.E.3. A complete discussion of funding sources
for marine and nonmarine CSO projects is included in Section VI.G.
Alternative technology collection systems serving small communi-
ties with populations of 3,500 or less, or serving highly dispersed
sections of larger municipalities, also qualify for grant assistance
(as "any cost effective alternative" shown in the first two categories
above) after September 30, 1984 (see Section VI.E.l).
Questions will arise concerning whether a sewer is an interceptor,
trunk, or lateral sewer, since after September 30, 1984, with the
exception noted above, only interceptor sewers qualify for grant
assistance. The definition of an interceptor in 40 CFR 35.2005(b)(24)
is very specific, and provides an answer to this question. In essence,
an interceptor may be defined as a sewer whose primary purpose is to
transport rather than collect wastes.
Re: 40 CFR 3 5.2005(b)(4), (b)(10)(iii), (b)(24), and (b)(40),
35.2015(b)
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C. PREAPPLICATION PROJECT MANAGEMENT
Effective project management requires that reviewing agencies
make every effort to identify and work with potential grant appli-
cants throughout the planning, design, and construction phases of
a project. Because of the high construction and operating cost of
wastewater treatment projects and their environmental impacts, it
is essential that they be carefully planned and designed. Also,
because wastewater treatment projects may be subject to more than
fifty Federal statutes and executive orders, as well as numerous
State laws and regulations, most grant applicants need consider-
able advice and guidance from the reviewing agency as they develop
and implement their construction projects.
1. Project Identification
Because of the requirement for a biennial needs survey (see
Section II.E.2), most potential grant applicants have already been
identified, and where appropriate, are included in the State's pro-
ject priority list. However, since 1981 some States have chosen to
limit their priority lists to include only those projects which are
ready or soon to be ready for construction.
Potential grant applicants may also be identified in completed
water quality management (WQM) plans, in a State's inventory of
municipal dischargers, or in a list generated by those responsible
for the issuance of National Pollutant Discharge Elimination System
(NPDES) permits or enforcement orders. Once potential grant appli-
cants are identified, they should be entered into the reviewing
agency's management and tracking system (see Items 2 and 3 below).
2. Project Tracking
Once a potential grant applicant has been identified, the
reviewing agency should:
a. estimate the time of Step 2+3 or Step 3 grant award,
based on the community's actual or expected relative
position on the State's project priority list;
b. estimate the amount of time necessary for the
community to complete the planning, design, and
related activities which are prerequisites to
Step 2+3 or Step 3 grant award;
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c. use the above information to set a time for con-
ducting a preplanning meeting with the potential
grant applicant (see Section D below);
d. enter the potential project into its management and
tracking system (see Item 3 below, along with a time-
table of important milestones in the project's develop-
ment, as agreed to by both the reviewing agency and the
grantee;
e. periodically contact the potential applicant to review
its progress in relation to the project timetable, to
review outputs for conformance with state and EPA
requirements, and to assist the potential applicant
with advice on technical, regulatory, and administra-
tive problems; and
f. use all of the above information to generate and revise
forecasts of the reviewing agency's future workload
and resource requirements.
3. Grants Information and Control System
GICS is a computerized system which is used to collect, edit,
and summarize essential information concerning EPA's construction
grants program. As such, it represents a significant administra-
tive tool which enables EPA and the delegated States to efficiently
manage the program. The system also provides for the retrieval of
information for use by program personnel at all levels, as well as
members of Congress and the public. The core of the system is the
computerized data bank which stores the following concerning a
project:
a. preapplication status,
b. stage of application review,
c. milestone during building, and
d. administrative progress through audit to closeout.
Once data is entered into the system, existing computer programs
are capable of producing reports ranging from the status of a single
project to statewide and nationwide trends. Typical reports include
the priority rating and ranking of all projects within a State, grant
application and milestone tracking, audit and closeout tracking, pay-
ment tracking, etc.
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The uses and limitations of GICS are described in the "Users
Manual," "Reports Library," and "Data Element Dictionary," which are
maintained by a GICS coordinator in each State, EPA Regional Office,
and EPA Headquarters. These documents provide a detailed description
of the system, a listing of available reports, a definition of data
elements, and coding instructions for data entry.
From the perspective of a project reviewer, GICS output can be
an effective tool in terms of tracking progress during construction,
thereby insuring timely inspections. Also, the project's progress
may be compared with the approved project schedule by mathematically
converting the sum of all grant payments to a percentage of the
grant award amount, which should be approximately equal to the pro-
ject's percentage of completion. Program managers may also use GICS
reports to forecast workloads for use in budget preparation and
resource allocation.
As with any computerized system, GICS is only as good as the
information contained therein, and the need to have construction
grants program personnel enter accurate and timely information into
the system cannot be overemphasized. In most States and Regions, one
person has been assigned the responsibility for maintaining GICS,
including the training of both project officers and clerical support
staff in its use.
Whenever the reviewing agency corresponds with a grant applicant
or a grantee regarding the submission or approval of project documents
or regarding other project milestones, an appropriate entry should be
made in GICS. In at least one State, GICS coding sheets are printed
on the reverse side of standard form letters, and typists have been
instructed not to address and mail the letters unless the coding
sheet has been completed.
GICS has been designed to help manage the construction grants
program effectively. Its usefulness depends largely on the construc-
tion grants program staff providing timely input of accurate informa-
tion.
D. PREPLANNING CONFERENCE
Purpose:
Meet with potential grant applicants and review major activities
which must be completed prior to applying for a Step 2+3 or Step 3
grant.
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Discussion:
While a preplanning conference is not required by the construc-
tion grants regulations, many State/EPA delegation agreements require
that the States conduct such conferences. The importance of a pre-
planning conference cannot be overemphasized. It provides an
opportunity for the reviewing agency to meet face-to-face with the
grant applicant and its staff and review the work to be accomplished
during facilities planning and design.
After determining that a project is likely to be ranked high
enough on the priority list to obtain a grant in the near future, a
potential grant applicant should be encouraged to prepare a plan of
study prior to the preplanning conference. A plan of study, while
not required by the EPA regulations, would serve as a useful basis
for discussion during the conference. A typical plan of study in-
cludes: a description of the work tasks to be performed during
facilities planning, a schedule for completing each major work task
and output, and an estimate of the work hours and costs necessary to
complete each task.
Procedures:
After a potential grant applicant has been identified, the
reviewing agency should contact the applicant and schedule a pre-
planning conference. At the same time, the reviewing agency should
encourage the grant applicant to prepare and submit a plan of study
which will serve as the basis for discussion during the conference.
The following major topics are typically discussed during the pre-
planning conference:
1. Permits and Compliance Schedules
Potential grant applicants are to be made aware that
existing projects must be in compliance with schedules
resulting from the implementation of EPA's National
Municipal Policy (see Section II.D.l), the NPDES per-
mit program, court orders, or State enforcement orders
(see Section VI.C.6).
2. Procurement of Engineering Services
a. Procedures
The procurement of engineering or other professional
services for facilities planning and/or design is not
subject to the EPA procurement regulations or to an EPA
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audit. However, if the grant applicant antici-
pates using the same engineer for Step 3 construc-
tion activities, and wishes to avoid advertising
and evaluating proposals for engineering services
during construction, it must have procured the
engineer for facilities planning and/or design
in accordance with EPA procurement requirements
(see Section VII.C.3).
Re: 40 CFR 33.715
b. Use of Small, Minority, Women's, and Labor
Surplus Area Businesses
Grant applicants are encouraged to utilize the
services of small, minority, women's, and labor
surplus area businesses (see Section V.C.l.w)
during facilities planning and design. At the time
of grant application, they will be required to re-
port the level of minority business enterprises
and women's business enterprises (MBE/WBE) partici-
pation in facilities planning and design. Some
States and municipalities may have established goals
for this purpose (see Section VI.D.5).
Re: 40 CFR 33.240; 35.2104(d)
c. Use of Debarred or Suspended Firms
Grant applicants should be advised not to use
individuals or firms included on EPA's list of
debarments and suspensions for facilities planning
or design work (see Section VI.D.7). Grant appli-
cants should also be advised to report any instances
of misconduct by their contractors (e.g., engineers,
construction firms, equipment suppliers, etc.) to
EPA's Office of the Inspector General (OIG), using
the hotline (800-4 24-4000 or 202-382-4977) estab-
lished for that purpose.
Re: 40 CFR 35.2105
310
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3 . F inancial Considerations
a. State Priority System and Project
Priority List
Grant applicants should have a clear understanding
of the State priority system and project priority list.
Proposed projects should be evaluated and an assessment
made as to the likelihood of receiving a future grant
(see Sections II.E.3 and VI.D.3).
Re: 40 CFR 35.2015, 35.2103
b. Federal Grant Share
Grant assistance is limited to 55 percent for most
projects, except for grants at 75 percent for projects
or portions of projects which use an innovative or
alternative (I/A) technology (see Sections VI.L.2.d
and VI.L.2.e) or which have received a 75 percent grant
for a previously funded phase or segment (see Section
VI.L.2.c). A lower Federal share may be set by the
Governor (see Section VI.L.2.b).
Re: 40 CFR 35.2152
c. Financial Assistance for Facilities
Planning and Design Work
Due to the elimination of Step 1 and Step 2 grants
by the 1981 CWA amendments, no grants for facilities
planning or design can be awarded after December 29,
1981. Instead, an allowance is provided to help off-
set planning and/or design costs (see Section E below,
and Section VI.K.I). In some cases, a portion of the
estimated allowance may be advanced to potential grant
applicants (see Section E below). The allowance and
advance of allowance should be explained and the grant
applicant, if qualified, should be instructed on how
to apply for an advance of allowance (see Section E
below).
Re: 40 CFR 35.2025
311
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d. Step 2 + 3 Grants
Qualifying municipalities should be advised to
apply for Step 2 + 3 grants (see Section VI.F.l).
Re: 40 CFR 35.2109
e. Preaward Costs
In certain cases, it may be cost effective (or
may be required by an emergency situation) for a
grant applicant to perform some preaward work which
is normally accomplished after grant award. To be
allowable for grant participation, such preaward
costs must be approved by the reviewing agency prior
to being incurred. The reviewing agency should explain
to the grant applicant the limitations which apply
to preaward costs (see Section VI.D.15), and should
remind the applicant that preaward costs are subject
to audit (see Section VIII.E).
Re: 40 CFR 35.2118
f. Phased or Segmented Projects
Projects whose cost is large in relation to the
State's annual allotment, and projects with expected
construction schedules of three years or more, may
require phasing or segmenting. If the reviewing
agency anticipates such a situation, the consequences
of phasing or segmenting should be explained to the
grant applicant (see Section VI.D.10).
Re: 40 CFR 35.2108, 35.2123, 35.2152(a) and (c)
4. Limitations on Eligibility
a. Collection Systems
No grant award may be made for a new sewage collec-
tion system in a community unless the bulk of the design
flow (generally two thirds) is attributable to the resi-
dential population which existed on October 18, 1972.
Unless elected by the Governor, no grants may be awarded
for new sewage collection systems after September 30,
1984 (see Sections II.E.3 and VI.D.14).
Re: 40 CFR 35.2015(b)(2)(ii), 35.2116
312
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b. Individual Systems
Costs for privately owned individual treatment
systems serving one or more principal residences
or small commercial establishments inhabited or
in use prior to December 27, 1977, qualify for
grant assistance (see Section VI.E.l).
Re: 40 CFR 35.2034
c. Reserve Capacity
Most reserve capacity is no longer eligible
for grant assistance (see Sections VI.D.18, and
VI.L.1).
5. Intergovernmental Review
Grant applicants should comply with the State intergovern-
mental review process as early as possible, but no later
than completion of facilities planning (see Sections
VI.B.8 and VI.E.6).
Re: 40 CFR Part 29; 40 CFR 35.2040(b)(2)
6. Technical Review
a. Water Quality Management Plan
Projects must comply with the approved WQM plan.
These plans may also contain information which can be
used by the grant applicant, thereby reducing costs
(see Sections II.C.l and II.C.3).
Re: 40 CFR 35.2023, 35.2102
b. Facilities Plan
The required contents of a facilities plan should
be reviewed (see Section IV.C). The reviewing agency
should discuss the level of detail required in the
facilities plan for the particular size and complexity
of the project. Clear and concise instructions should
be provided to the grant applicant concerning:
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i. documentation necessary to justify
the need for the project (see
Section IV.C.2.2);
ii. public participation requirements
which will allow the State to cer-
tify that there has been adequate
public participation based on State
and local statutes (see Sections
IV.C.7.4 and VI.C.3);
iii. population and waste loading projec-
tion techniques (see Section IV.C.5);
iv. effluent limitations (see Section IV.C.3);
v. advanced treatment (AT) review policy
(see Section IV.E.l);
vi. policy on elimination of excessive
I/I (see Sections IV.C.4.3, VI.D.16,
and IX.F.4, Paragraph G);
vii. environmental review, including the scope
of the environmental information document
(EID) or issuance of a categorical ex-
clusion (see Section IV.D, and Item 7 below)
viii. demonstration of financial and managerial
capability (see Section VI.D.4);
ix. requirements for alternative wastewater
systems (see VI.E.l);
x. limitations on eligibility of reserve
capacity (see Section VI.D.18); and
xi. cost-effectiveness analysis, including
evaluation of I/A technologies (see
Section IV.7.1).
Re: 40 CFR Part 6, Subpart E; 40 CFR 35.2030
c. Value Engineering
Where applicable, the grant applicant should be
advised of the need for a value engineering (VE)
study (see Section V.D).
Re: 40 CFR 35.2114
314
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d. Internumicipal Service Agreements
Where applicable, grant applicants should be made
aware of the need for executed intermunicipal service
agreements and the long lead times generally necessary
to negotiate such agreements (see Section V.H).
Re: 40 CFR 35.2107
e. User Charge System
The requirements for a user charge (UC) system should
be explained, particularly for multimunicipal projects
or those municipalities with an ad valorem tax based
system (see Section V.E).
Re: 40 CFR 35.2122, 35.2140, 35.2208
f. Sewer Use Ordinance
The requirements for a sewer use ordinance (SUO)
should be explained, especially if the municipality
will receive industrial wastes and possibly be sub-
ject to the pretreatment requirements (see Section V.F).
Re: 40 CFR 35.2122, 35.2130, 35.2208; 40 CFR Part 403
g. Plan of Operation
The requirements for a draft and a final plan of
operation, including an operation and maintenance
(O&M) manual, should be discussed (see Section V.G).
Re: 40 CFR 35.2106
h. Project Performance Standards
While project performance certification and
continuing engineering services are not required
until well after the project has been awarded a
grant, the grant applicant should be made aware
of these relatively new requirements (see
Sections V.C.2.a, VI.M.5.g, and VII.I.2.a).
I
315
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7. Categorical Exclusion
An environmental review must be conducted by the
reviewing agency, in accordance with 40 CFR Part 6, for
each project requesting grant assistance. The environ-
mental review may result in the issuance of a categorical
exclusion, a finding of no significant impact (FONSI),
or the need to prepare an environmental impact statement
(EIS). At the preplanning stage, it may be possible to
conclude that a categorical exclusion is warranted, or
alternatively that, because of the significant environ-
mental impacts resulting from the proposed project, an
EIS should be prepared simultaneously with the preparation
of the facilities plan (frequently called piggybacking).
The conditions under which a categorical exclusion
may be issued should be given consideration at the pre-
planning stage of a project's development. If issued,
a categorical exclusion will reduce the work required on
the part of the grant applicant in preparing a facilities
plan, thereby saving time and money. A categorical exclusion
from a substantitive environmental review is intended to apply
to projects which are small scale, minor, and routine. Such
projects may include replacement, minor rehabilitation, minor
expansion, or minor upgrading of facilities, which should
not result in increasing the overall design capacity of the
treatment works, nor the pipe size of interceptors or collec-
tion sewers. Where a categorical exclusion is granted by
EPA, an EID need not be prepared by the grant applicant.
However, if it is later found that conditions exist which
require the preparation of an EIS, the categorical exclusion
will be revoked by EPA, and the grantee will be required to
furnish an EID (see Section IV.D).
Re: 40 CFR 6.400(f), 6.506(c), 6.507(a), 35.2030(c)
8. Project Management
Special emphasis should be placed on organizing the grant
applicant's project team, particularly the selection of the
engineering consultant, and on the demonstration, by the
grant applicant, of its financial and managerial capability
(see Section VI.D.4). The grant applicant should also be
advised of the importance of developing a good record
keeping system, and of keeping adequate records to document
eligible project costs and to demonstrate compliance with
EPA requirements, including grant conditions.
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9. Publications
While the preplanning conference is an extremely useful
method of assisting potential grant applicants, publications
prepared by State agencies or EPA are also an effective tool
for guiding grant applicants. Most States have prepared
packets of information which are directed toward specific
aspects of the grant application process. Where these pac-
kets are available and contain current or updated material,
they should be used.
On the National level, the principal publication
prepared by EPA to assist potential grant applicants is
"Construction Grants 1985" (CG-85). The CG series will
be updated on a periodic basis to reflect current policies
and regulatory requirements. The CG series is intended to
serve as the principal guidance document for grant applicants
and grantees, throughout the entire grant processing period.
Other EPA guidance documents are published periodically,
addressing subjects such as financial and managerial cap-
ability, project performance standards, abandonment of
treatment works, failed treatment works, etc. The reviewing
agency is responsible for distributing the appropriate
guidance materials in a timely manner.
As the reviewing agency distributes guidance materials,
caution must be exercised to insure that the grant applicant
is not inundated with so much material, including regulations,
that the overwhelming volume causes the grant applicant to
be confused and frustrated. Rather, the reviewing agency
should be selective in the volume and timing of distribution
of guidance materials, and should point out to each grant
applicant the most important publication that coincides with
the current stage of development of its project.
E. ADVANCE OF ALLOWANCE
Purpose:
Provide financial assistance to small communities which would
otherwise be unable to complete facilities planning and/or project
des ign.
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Discussion:
The 1981 CWA amendments allow State agencies to apply to EPA
for a grant; under which the State can provide advances of allow-
ance to small communities which are potential grant applicants.
States in turn may request that the advance be paid directly by
EPA to designated potential grant applicants.
Several important limitations concerning advance of allowance
must be clearly understood by the grant applicant:
- The State is responsible for establishing the criteria
under which communities may qualify to receive an advance
of allowance (see Section VI.K.l.a)
- The allowance is estimated based on the procedures
outlined in 40 CFR Part 35, Subpart I, Appendix B.
- The amount of the advance may not exceed the Federal
share (generally 55 percent) of the estimated allowance
(see Section VI.L.2).
- The State will determine the percentage of the allow-
ance which will be advanced (not to exceed the Federal
share), and the timing of payments of the advance
(see Sections VI.K.l.c and VI.K.l.d).
- The allowance is based on the estimated allowable
building costs, including acquisition of eligible
land and force account, and excluding engineering,
fiscal, legal, and other costs not considered part of
the building costs (see Section VI.L.l).
- The allowance is not to be considered as a guide in
establishing engineering costs for facilities
planning and design. Rather, the portion of the
allowance which is advanced is intended to help
offset these costs.
- If the grant applicant subsequently receives a grant
award, the advanced funds will be subtracted from the
computed grant. " If a grant is not subsequently
awarded, the State agency may seek repayment of the
advance, on such terms and conditions as the State may
determine (see Section VI.K.l.e).
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Procedures:
Unlike most of the other activities described in this Handbook,
advances of allowance are administered by the State agency, regard-
less of whether or not it has signed a delegation agreement with
EPA. Thus, an applicant for an advance of allowance must follow
the procedural requirements established by the State agency. The
State reviewer is to insure that the applicant has:
1. applied for the advance using the form or format
specified by the State (see Section VI.K.l.b);
2. met the State's definition of a small community
(see Section VI.K.l.a.i);
3. met all other State criteria to qualify for an
advance (see Section VI.K.1.a.ii);
4. correctly computed the estimated allowable building
cost, which includes the estimated cost of:
a. the initial award of all prime sub-
agreements for building the project
(but not the cost of inspection and
other engineering services),
b. the initial approved force account
work to be performed in lieu of
awarding a subagreement for building
the project (but not in lieu of
awarding a subagreement for inspection
and other engineering services), and
c. the purchase of eligible real property;
5. correctly computed the "percentage of building cost" from
40 CFR Part 35, Subpart I, Appendix B, Table 1 (if no
Step 1 or Step 2 grant was previously awarded for the
project) or Table 2 (if a Step 1, but no Step 2 grant
was previously awarded for the project);
6. used the correct Federal share of 55 percent (unless
the project has been "grandfathered," or a lower
Federal share has been set by the Governor, with EPA
approval), plus an additional Federal share of up to
20 percent for I/A projects (see Sections VI.D.lO.d.ii
and VI.L.2);
319
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7. correctly computed the estimated allowance as the
product of the estimated allowable building cost
(see Item 4 above) and the "percentage of building
cost (see Item 5 above), and correctly computed
the maximum advance allowed under the EPA regulations
as the product of the estimated allowance and the
Federal share (see Item 6 above);
8. applied for either the maximum advance allowed under
the EPA regulations, or a lower amount mandated by
the State (see Section Vl.K.l.c); and
9. requested payment of the appropriate percentage of
the advance, or of the entire advance, depending on
State requirements (see Section VI.K.l.d).
Payment procedures for advances of allowance are discussed in
Section IX.B.8.C.
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CHAPTER IV
FACILITIES PLANNING
A. INTRODUCTION
R. REGULATORY REOUIPEMFNTS
C. FACILITIES PLAN CONTENTS
P. FACILITIES PLAN APPROVAL
F. SUPPLEMENTAL CONSIDERATIONS
401
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A. INTRODUCTION
This chapter describes the requirements and procedures for
reviewing facilities plans. Some sections provide complete details
for a specific subject, while other sections reference more detailed
discussions in other chapters.
Section B, Regulatory Requirements, describes regulations and
guidance documents which are applicable, based on the date that
facilities planning was initiated. This section also discusses
the relationship between facilities plans and water quality manage-
ment (WOM) plans, and provides a brief introduction to the general
requirements for facilities planning.
Section C, Facilities Plan Contents, representing the bulk of
the chapter, describes the procedures for reviewing facilities plans,
from the need for the project through evaluation of alternatives and
plan selection.
Section D, Facilities Plan Approval, primarily discusses the
National Fnvironmenta1 Policy Act (NEPA) and related environmental
laws which must be considered as the reviewing agency decides whether
or not to prepare an environmental impact statement (FIR).
Section F, Supplemental Considerations, describes three items
which are applicable to a limited number of projects: advanced
treatment reviews, industrial pretreatment, and combined sewer over-
flow (CSO) projects.
R. REGULATORY RFOUIRFMFNTS
1. Facilities Planning Regulations
Since 1972, three major sets of regulations describing the
requirements for facilities planning have been published by FPA.
These regulations and the corresponding edition of the Handbook of
Procedures in which they are discussed ae identified below.
Final regulations for facilities planning, implementing the
1972 Clean Water Act (CWA) amendments, were promulgated on
February 11, 1974, at 40 CFR 35.917. The first edition of the
Handbook of Procedures, dated February 1976, included procedures
for reviewing facilities plans in accordance with these regulations.
Regulations implementing the 1977 CWA amendments were promul-
gated on September 27, 1978, which revised the facilities planning
requirements at 40 CFR 35.917. The second edition of the Handbook
403
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of Procedures, dated 1980, included changes in the facilities
planning requirements and review procedures resulting from promul-
gation of the revised regulations.
The 1981 CWA amendments eliminated Step 1 (facilities planning)
and Step 2 (design) grants, replacing them with an allowance to help
defray costs in carrying out facilities planning and/or design work.
Extensive changes to the construction grants regulations were re-
quired to implement these amendments. Final regulations implementing
the 1981 amendments were promulgated on February 17, 1984, with
facilities planning requirements located at 40 CFR 35.2030. This
third edition of the Handbook of Procedures reflects changes in the
requirements and review procedures for facilities plans based on the
February 17, 1984 final regulations.
The preamble to the February 17, 1984 regulations (40 CFR
Part 35, Subpart I) reads in part, "This regulation is effective for
all grants awarded on or after February 17, 1984. Facilities plans
and design initiated under 40 CFR Part 35, Subpart E continue to be
subject to the requirements in Subpart E. Unless required by the
1981 amendments, no revisions to the facilities plan or design will
be required. Work done under Subpart E will be accepted for grant
awards under this subpart."
In addition to the three editions of the Handbook of Procedures,
for use by reviewing agency officials, EPA has published four
guidance documents for use by grantees and grant applicants. These
four guidance documents include detailed discussions of facilities
planning requirements, and reflect regulations and policies in
effect at the time of publication. "Guidance for Preparing a
Facility Plan, Revised May 1975" (MCD-46) was based on the Febru-
ary 11, 1974 regulations. "Facilities Planning 1981" (FP-81)
reflected the September 27, 1978 regulations. "Construction Grants
1982" (CG-82) provided guidance, including requirements for facili-
ties planning, between passage of the 1981 amendments and publica-
tion of the February 17, 1984, final regulations. "Construction
Grants 1985" (CG-85), the companion document to this third edition
of the Handbook of Procedures, includes guidance for grant appli-
cants in satisfying the requirements, including facilities planning,
of the February 17, 1984 final construction grants regulations.
Project reviewers are to insure that facilities plans, as well
as design and construction requirements, are reviewed in accordance
with the regulations, policies, and guidance applicable at the time
the work was initiated. Where facilities plans were prepared with
Step 1 grant assistance, the preamble statement above clearly indi-
cates that they are to be reviewed in accordance with the 40 CFR
Part 35, Subpart E regulations in effect at the time of grant award.
404
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However, prior to Step 3 grant award, older facilities plans
may require updating to reflect current data (e.g., existing
population, land uses, costs, etc.). The effect of the reduced
Federal grant share after September 30, 1984 (usually 55 percent),
and the resultant larger local share, may require additional public
disclosure and/or financial arrangements.
The review of facilities plans initiated by a grant applicant
without the benefit of grant assistance (most likely between
December 29, 1981 and February 17, 1984) requires judgement on the
part of the reviewing agency with regard to the application of
either Subpart E or the interim (May 12, 1982) Subpart I regulations
(see Sections VI.C.2 and VIII.B.l.c). Facilities planning initiated
by a grant applicant after February 16, 1984 is subject to the final
regulations published by EPA on February 17, 1984.
To assist construction grants personnel in identifying applicable
regulations and policies in effect at the time of initiating project
work, EPA has published the "Regulation and Policy Matrix - A Guide
to the Rules Governing Grants Awarded under the Construction Grants
Program", dated December 1983. Using this guide, the project re-
viewer has the ability to identify regulations, policies, and the
edition of the Handbook of Procedures applicable to the specific
project.
Re: Preamble to 40 CFR Part 35, Subpart I, 49 FR 6225
(February 17, 1984 ) .
2. National Environmental Policy Act
Regulations implementing NEPA represent the other major source
of requirements used in reviewing facilities plans. EPA1s regula-
tions implementing NEPA are located at 40 CFR Part 6.
Proposed regulations based on NEPA, Executive Order 11514, and
the Council on Environmental Quality (CEO) Guidelines, were first
published by EPA on January 20, 1972. They became interim regula-
tions on January 17, 1973, were revised as proposed on July 17, 1974
and were finalized on April 14, 1975. During this period the regu-
lations were expanded to include other Federal environmental laws
and executive orders. On June 18, 1979, EPA proposed to completely
revise Part 6, based on changes required by the promulgation of
CEQ's regulations (not guidelines as before).
The revised 40 CFR Part 6, published as interim regulations on
March 8, 1982 and interim/final on January 7, 1983, included changes
to the criteria for requiring preparation of an EIS; introduced a
procedure for excluding certain types of projects from substantive
405
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environmental review, called a categorical exclusion (see
Section III.D.7); and changed terminology to agree with the new
CEQ regulations. For example, a "negative declaration" was changed
to a "finding of no significant impact" (FONSI).
At the time of preparation of this third edition of the Handbook
of Procedures, EPA was in the process of revising 40 CFR Part 6 to
conform to the 1981 CWA amendments. Also, in 1980 the EPA Office of
Federal Activities prepared draft procedures for complying with
Section 106 of the National Historic Preservation Act. The draft
procedures were written as regulations intended for incorporation
into 40 CFR Part 6 as Subpart K. These proposed regulations were
intentionally delayed, pending revisions to the Advisory Council
on Historic Preservation (ACHP) regulations (36 CFR Part 800).
For a number of reasons, these regulations continue to be delayed.
In March 1984, EPA distributed its proposed Subpart K regulations
as non-binding guidance, to assist Regions and States in the review
of actions that could affect historic and archaeological properties,
and to fully integrate the statutory requirements ot the National
Historic Preservation Act into the NEPA review process.
Project reviewers are advised to monitor the status of the
pending changes to 40 CFR Part 6 as a project is being reviewed.
Re: 40 CFR 6.301
3. Water Quality Management Plans
A portion of the funds allotted to each State are reserved for
grants to carry out WQM planning (see Sections II.C.4 and II.E.4).
Among other things, WQM planning identifies cost effective and
locally acceptable facilities to achieve and maintain the appli-
cable water quality standards. WQM planning will also determine
which publicly owned treatment works (POTWs) should be constructed,
in which areas, and in what sequence.
Two limitations on award of grant assistance (see Section VI.D.2)
require a project to be consistent with the approved elements of any
applicable WQM plan, and the grant applicant to be the wastewater
management agency designated in that WQM plan.
A complete description of WQM planning is given in Chapter II.
As project reviewers are preparing to review facilities plans, they
should be aware of the WQM plan which has been prepared for the
project area, and insure that the facilities plan is consistent
with that WQM plan. Differences or inconsistencies may require
revision of either the facilities plan or the WQM plan.
Re: 40 CFR 3 5.2023(a)(1) and (a)(4), 35.2102
406
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4. Facilities Planning Review
Facilities planning is the first major activity undertaken by
a potential grant applicant as a prerequisite to grant award.
Facilities planning consists of those necessary plans and studies
which directly relate to treatment works needed to comply with
enforceable requirements of the CWA. Facilities planning investi-
gates the need for proposed facilities through a systematic evalua-
tion of alternatives that are feasible in light of the unique
demographic, topographic, hydrologic, and institutional character-
istics of the area; and demonstrates that the selected alternative
is cost effective. The regulations define "cost effective" as
"the most economical means of meeting the applicable effluent,
water quality, and public health requirements over the design life
of the facility while recognizing environmental and other non-
monetary considerations."
In order to further clarify the intent of facilities planning,
the regulations include a description of facilities plan contents
at 40 CFR 35.2030(b), which provides that a facilities plan must
describe both the proposed treatment works and the complete waste
treatment system of which it is a part. A facilities plan must
also include an adequate evaluation of the environmental impact of
alternatives, in accordance with 40 CFR Part 6. The two regulations
(i.e., 40 CFR Part fi and 40 CFR Part 35, Subpart I) are the primary
source documents which set forth the requirements for facilities
planning.
Facilities planning is considered by many to be the most com-
plex aspect of the construction grants program. Its complexity is
primarily related to the subjective interrelationships between
engineering feasibility, economic and environmental considerations,
public acceptance, and institutional arrangements necessary for
project implementation. The need to adequately address, evaluate,
and integrate these considerations very often requires expertise
from several disciplines. The importance of each consideration
may vary from project to project, and may be related to the size
and complexity of the project, its geographic location, and the
perceived values of the grant applicant.
While the regulations describe the contents of a facilities
plan, they do not specify the format for presentation of the re-
quired information. Recognizing that grant applicants needed
assistance in this area, EPA published "Guidance for Preparing a
Facility Plan" (MCD-46), which was revised in May 1975. This
publication contained a suggested outline designed to satisfy
regulatory requirements for facilities planning. Since 1975, EPA
has not found it necessary to revise the suggested outline, since
407
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it continues to present the required information in a sequence
corresponding to the logical preparation of a facilities plan.
EPA has, however, published other documents, targeted to grantees
or grant applicants, which address facilities planning (e.g.,
FP-81, CG-82, and CG-85). These documents incorporate new statu-
tory requirements and seek to clarify and elaborate many of the
considerations in facilities planning (see Section B.l above).
Re: 40 CFR 35.2030
C. FACILITIES PLAN CONTENTS
The following sections describe the contents of a facilities
plan, using a suggested outline for presentation of the required
information. However, a grant applicant may select his own method
or format.
The suggested outline uses a numerical system for chapters and
subheadings. Some of the information is self explanatory and is
so noted. Other information follows the general format of this
Handbook and is described by a Purpose, Discussion, Review Procedure,
and References.
1. Summary, Conclusions, and Recommendations
Self-explanatory.
2. Purpose and Need
2 .1 Study Purpose
A facilities plan is prepared as one component of an
application for grant assistance. The facilities plan
establishes the need for the project; evaluates alterna-
tive solutions; and selects a cost effective, environ-
mentally sound project. The facilities plan also repre-
sents a public record of decision-making and should be
written to provide the general public, municipal officials,
and regulatory officials with a clear understanding of the
problem, solutions, and consequences of the project. The
proposed project must satisfy all applicable Federal and
State laws and regulations.
408
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2.2 Need for the Project
Purpose;
A facilities plan must establish the need for the
proposed project and demonstrate how the project, or the
complete treatment system of which it is a part, will meet
the enforceable requirements of the CWA.
Discuss ion:
Demonstration of project need may range from a rela-
tively simple to a complex justification. Relatively simple
cases arise where an existing treatment works is in violation
of its National Pollutant Discharge Elimination System (NPDES)
permit, or the municipality is under a court or enforcement
order requiring corrective action. The need for the project
is represented by the regulatory directive to abate water
pollut ion.
An example of a more complex case, in terms of demon-
strating need, is where a municipality claims need based on
failing onsite systems. Since no discharge permit exists,
the facilities plan must demonstrate the need for the project
based on the extent of surface or ground water use restoration
or public health improvement resulting from the project. In
order to demonstrate project need, a grant applicant may be
required to document the number, frequency, type, and location
of failing onsite systems through the use of local health
department records, survey questionnaires, or house-to-house
surveys. Earlier EPA policy required this type of specific
documentation. However, present agency policy allows States
and EPA Regions to determine the type of documentation re-
quired to substantitate failing onsite systems on a case-by-
case basis.
Another relatively complex case, requiring judgement in
terms of demonstrating need, concerns proposed CSO projects.
Depending on the source of funding from the States' allotment,
the State may have to demonstrate that significant uses of the
water for fishing and swimming will not be possible without
the project, and that the project will result in substantial
restoration of an existing impaired use (see Sections II.E.3
and VI.G).
409
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Other types of eligible projects, (in States where
the Governor elects to include project categories not
normally eligible for grant assistance after September 30,
1984) for which a unique approach may be necessary to demon-
strate project need include: infiltration/inflow (I/I)
correction, major sewer system rehabilitation, and treatment
more stringent than secondary (see Section II.E.3).
A demonstration of project need is not necessarily an
easy task, and will require unique documentation depending
on the circumstances of a particular project. Project need
may also be demonstrated throughout many sections of a
facilities plan, rather than being presented in one chapter
or section. With regard to acceptance of the grant appli-
can't demonstration of project need, the principal respon-
sibility of project reviewers is to insure that the proposed
project, or the complete treatment system of which the project
is a part, meets the enforceable requirements except as noted
in the review procedures below.
Review Procedures:
A facilities plan must demonstrate project need in terms
of meeting the enforceable requirements of the CWA by:
a. including a copy of regulatory directives
(e.g., NPDES permit requirements, court
or enforcement orders, etc.) in the case
of existing treatment facilities; or
b. substantiating that the proposed project
will reduce pollution and result in sur-
face or ground water use restoration or
public health improvement.
An exception to this requirement may apply to certain "sewer
projects," as described in Section II.E.3.
Re: 40 CFR 35.2000(a), 35.2015(b) and (f), 35.2024(a),
35.2030(a)(1)
410
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3. Effluent Limitations
Purpose:
Effluent limitations establish the effluent characteristics
for surface water discharges, or the quality of groundwater to
be maintained for land application systems.
Discussion:
Effluent from a treatment works is either discharged to a
surface water body, recharged to groundwater, recycled for other
uses, or evaporated in containment ponds. For containment ponds,
assuming that the ponds are lined to prevent seepage into the
groundwater, no effluent limitations are required. Recycled
effluents must meet the characteristics necessary for their in-
tended use. However, if the recycled effluent is eventually dis-
charged to a surface water body or to groundwater, the recycled
effluent must satisfy the applicable effluent limitations.
Facilities plans are required to describe the Best Practicable
Wastewater Treatment Technology (BPWTT) applicable to each alter-
native under consideration. BPWTT is defined in the regulations
as the cost effective technology that can treat wastewater, CSOs,
and nonexcessive I/I to meet the applicable provisions of:
a. 40 CFR 122.44(d) - Water Quality Standards and
State Requirements;
b. 40 CFR Part 125, Subpart G - Criteria for Modifying
the Secondary Treatment Requirements under Section
301(h) of the Clean Water Act;
c. 40 CFR Part 133 - Secondary Treatment Information;
and
d. 41 FR 6190 (February 11, 1976) - Alternative Waste
Management Techniques for BPWTT (treatment and
discharge, land application techniques and utili-
zation practices, and reuse).
BPWTT defines a minimum level of treatment, as well as pro-
visions for higher levels, where necessary to achieve or maintain
water quality standards. Projects proposing higher levels of
treatment (i.e., advanced treatment) may be subject to EPA's
"Policy for Review of Advanced Treatment Projects" (see Item 3.3
below).
411
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40 CFR 35.2005(b)(7), 3 5.2030(b)(2)
3.1 Secondary Treatment
The 1981 CWA amendments added Section 304(d)(4)
to the CWA, which states that "such biological treat-
ment facilities as oxidation ponds, lagoons, and
ditches and trickling filters shall be deemed the
equivalent of secondary treatment." However, Section
304(d)(4) also requires "that water quality will not
be adversely affected by deeming such facilities as
the equivalent of secondary treatment."
In implementing these provisions of the CWA, EPA
conducted extensive studies of existing facilities to
determine the effluent characteristics required to
insure that water quality standards would not be vio-
lated. The investigation concluded that oxidation
ditches are appropriately classified as treatment
processes capable of providing secondary treatment.
Oxidation ponds and lagoons, referred to as waste
stabilization ponds in the regulations, and trickling
filters were classified as equivalent treatment pro-
cesses. All other biological treatment processes were
found to be capable of achieving secondary treatment.
EPA has defined the minimum level of effluent
quality attainable by secondary treatment in terms of
the parameters five-day biochemical oxygen demand
(BOD5), suspended solids (SS), and pH as:
- BOD5 and SS - 30 day average shall not
exceed 30 milligrams per liter (mg/1);
7 day average shall not exceed 45 mg/1;
30 day average percent removal shall not
be less than 85 percent; and
- pH - effluent maintained within the limits
of 6.0 to 9.0 (certain exceptions are
allowed).
States may also define secondary treatment in terms more
stringent than EPA's, as discussed below.
Treatment deemed equivalent to secondary treatment is
proposed to be defined in terms of the parameters BOD5, SS,
and pH as:
412
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- BOD5 and SS - 30 day average shall not
exceed 45 mg/1; 7 day average shall not
exceed 65 mg/1; 30 day average percent
removal shall not be less than 65 percent;
a nd
- pH - effluent maintained within the limits
of 6.0 to 9.0 (certain exceptions are
allowed).
The proposed regulations contain several cases which
may require special consideration. These cases involve
combined sewers; industrial wastes discharged into POTWs;
and possible changes to the SS levels for waste stabiliza-
tion ponds. Regulations providing for adjustment by the
State, with EPA approval, of equivalent treatment tor
trickling filters were proposed on November 16, 1983. In
these cases, the project reviewer is to refer to the
appropriate section of the proposed secondary treatment
regulations for specific requirements.
Project reviewers should also be aware that EPA is
proposing a transition period during which the effluent
parameter carbonaceous biochemical oxygen demand (CBOD5)
may be used in lieu of the more common BOD5. It has been
determined that CBOD5 more accurately reflects treatment
performance with regard to organic material than BOD5.
Where CBOD5 is used, the secondary treatment definition
will change for 30 and 7 day averages to 25 mg/1 and
40 mg/1 respectively. EPA has not proposed to allow the
same substitution for treatment processes deemed equiva-
lent to secondary treatment.
Re: Proposed amendment to 40 CFR Part 133, 48 FR 52258
(November 16, 1983)
3.2 Marine Discharge Waivers
Refer to Section VI.E.2 for a discussion of require-
ments applicable to projects with marine discharge waivers.
3.3 Advanced Treatment
Effluent limitations more stringent than secondary
treatment (i.e., advanced treatment) may be established
by a State for water-quality-limited stream segments.
413
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These effluent limitations are determined in the WQM
plan, and are based on the wasteload allocation for the
specific stream segment into which the effluent is dis-
charged (see Section II.C.3). Where advanced treatment
is required to achieve or maintain water quality
standards, and where the incremental costs exceed specific
limitations, such projects are subject to a more inten-
sive review by the State, EPA Regional Office, and possibly
EPA Headquarters. Refer to Section E.l below for a dis-
cussion of the review and processing procedures for such
projects.
3.4 Land Application
Wastewater effluent applied to land may either recharge
the groundwater, be collected for disposal to surface water
bodies, or a combination of both. Surface water discharges
are subject to the effluent limitations defined in Item 3.1
above. Effluents which recharge groundwater may not them-
selves be directly subject to effluent limitations. Rather,
the quality of groundwater is defined, depending on current
or potential uses, which in turn indirectly establishes the
effluent limitations for the applied wastewater.
EPA's definition of BPWTT for groundwater discharges
considers three cases:
a. groundwater which can potentially be used
for a drinking water supply,
b. groundwater which is used for a drinking
water supply, and
c. uses other than for a drinking water supply.
In the first two cases, the groundwater quality should not
exceed the National Interim Primary Drinking Water Regula-
tions (40 CFR Part 141) for organic and inorganic chemicals.
Where the groundwater is presently used for drinking water,
the groundwater should also satisfy the microbiological
contaminent levels of these regulations. The groundwater
quality for other uses is to be established jointly by the
State and EPA on a case-by-case basis.
414
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Review Procedures:
The project reviewer is to determine that the correct set of
effluent limitations has been identified for each alternative.
The effluent limitations may vary, depending on the location of
the surface water discharge or the treatment process employed.
Effluent limitations may be contained in NPDES permits for existing
facilities, and in WQM plans or EPA regulations for proposed new
facilities. Insure that:
a. effluent limitations for secondary treatment, or for
treatment deemed equivalent to secondary treatment,
are established for each surface water discharge
alternat ive;
Re: Proposed amendment to 40 CFR Part 133, 48 FR 52258
(November 16, 1983)
b. documentation supporting a request for a marine
discharge waiver meets regulatory requirements;
Re: 40 CFR 35.2112; 40 CFR Part 125, Subpart G
c. treatment more stringent than secondary treatment
is required based on water quality standards, and
the project has been or will be reviewed under
EPA's Advanced Treatment Policy;
Re: 40 CFR 35.2101; EPA notice "Policy for Review of
Advanced Treatment Projects," 49 FR 21462
(May 21, 1984)
d. CSO projects satisfy case-by-case determinations
for effluent limitations;
Re: 40 CFR 35.2024, 133.103(a)
e. projects proposing groundwater recharge identify
present and future groundwater uses, apply appli-
cable requirements of the National Primary Drinking
Water Regulations, and propose a monitoring program.
Re: 40 CFR Part 141
41,5
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4. Existing Environment
4.1 Existing Conditions in the Planning Area
Purpose:
Describe the existing conditions in the project
planning area in order to form a basis of comparison among
alternatives and to identify unique features of the planning
area which may influence the selection of the recommended
plan.
Discussion:
One alternative required to be discussed in a facilities
plan is "no action" (i.e., what happens to the planning area
if no wastewater project is built). The existing planning
area description, therefore, paints a picture (maps,
charts, or tables are also useful) which allows municipal
officials, the general public, and regulatory officials to
gain an understanding of the existing environment. It pro-
vides the basis from which to assess future conditions.
Review Procedures:
Suggested topics which describe the existing environ-
ment in the planning area are included below. The listing
serves as a guide to project reviewers to insure that all
relevant environmental features are included in the facili-
ties plan. Where appropriate, sources of information should
be cited or referenced:
a. surface and groundwater hydrology (quantity,
quality, and uses) ;
b. physiography, topography, geology, and soils;
c. precipitation, temperature, and prevailing
winds, if relevant;
d. air quali ty;
e. noise levels;
f. energy production and consumption;
g. population (both historical and present) and
socioeconomic conditions;
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h. land use and development, including zoning
and relationship between all governmental
agencies involved in the planning, financing,
construction, and operation of POTWs;
i. public facilities and services;
j. organizational context, including the role
and relationship between all governmental
agencies involved in the planning, financing,
construction, and operation of POTWs;
k. documented cases of septic system failures or
public health problems, fish kills, or well
contamination directly related to water
pollution;
1. related Federal, State, and other projects in
the planning area; and
m. other existing environmental conditions such as:
1.
wetlands,
i i .
flood plains,
ii i .
coastal zones,
iv.
wild and scenic rivers,
v.
important farm lands,
vi .
historic and archaeological sites,
vi i .
national and natural landmarks, and
v i i i .
plant and animal communities and habitats
which may be affected, especially those
on the threatened or endangered species
list.
The reviewer is to take special note of the under-
lined items above, since these items are the sub-
ject of Federal laws or executive orders, and will
require special review procedures (see Sections
D.l and D.2 below).
Re: 40 CFR 6.506(a), 6.507(c)(1) and (4)
417
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4.2 Existing Wastewater Flows and Treatment System
Performance
Purpose:
Describe the existing treatment facilities, their
performance, and the complete waste treatment system, to
provide an inventory of treatment facilities (including
onsite disposal systems), their interrelationships, and
the base line flow information from which future flows
will be forecast.
Discuss ion:
The information in the description should indicate
the conditions which limit the number of feasible alter-
natives or the severity of the pollution problem. The
performance of existing facilities should also be included
in the description. Many existing facilities, including
onsite systems, are not operated at their optimum efficiency.
The reasons for poor performance are numerous. However, it
is generally more cost effective and environmentally sound
to elevate existing facilities to optimum performance rather
than to abandon them. Even if existing facilities are not
capable of achieving the applicable effluent limitations,
portions of the system may be used as an alternative or
supplement to construction of new facilities.
Where the planning area includes a substantial number
of onsite systems, their performance, including the nature,
type, location, and frequency of failure, should also be
described (see Item 2.2 above).
Review Procedures;
In reviewing the description of existing facilities and
their performance, the reviewer is to note the conditions
which support the need for the project or limit the selec-
tion of feasible alternatives, and insure that an alterna-
tive which utilizes existing facilities has not been over-
looked. Items which may be included in the description
include:
a. the location of all treatment plants,
sludge management and pretreatment
facilities, pumping stations, and col-
lection systems;
418
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b. design capacity, existing flows, charac-
teristics of wastes, and overloaded con-
ditions ;
c. location and description of major industrial
discharges;
d. significantly developed areas served by
onsite systems;
e. an analysis of average, peak, and wet
weather flows (also see Item 4.3 below);
f. location of all bypasses and overflows;
g. extent of combined sewers;
h. treatment plant performance compared with
the NPDES permit;
i. operation and maintenance (O&M) program
(compare with operating reports submitted
to the State);
j. the effects of I/I (see Item 4.3 below); and
k. documentation of problems with onsite systems
(see Section 2.2 above).
Re: 40 CFR 35. 2030(b)(3)(iii )
4.3 Infiltration and Inflow
Purpose:
The facilities plan must demonstrate that each existing
sewer system discharging into the proposed treatment works
project is not or will not be subject to excessive I/I.
Discussion:
I/I represents extraneous flow. If I/I is discharged
into a treatment works, it utilizes capacity in sewer lines
and the treatment plant, dilutes the wastewater, requires
electrical power for pumping and treatment, and otherwise
419
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increases the cost of transport and treatment of wastes.
Infiltration is generally groundwater which leaks into the
sewer system through defective joints, house connections,
defective manhole connections, or broken sewer lines.
Inflow is generally related to storm events, and may result
from cross connections with storm sewers, illegal connec-
tions from down spouts, area drains, sump pumps, flooded
manholes, etc. Infiltration tends to be an average phenomena,
which varies during the year according to the fluctuations
in groundwater level. Inflow tends to be a peaking phenomena,
which varies with the frequency, duration, and intensity of
rain storms.
Excessive I/I is defined as the quantities of I/I which
can be economically eliminated from a sewer system, as deter-
mined in a cost effectiveness analysis that compares the costs
for correcting the I/I conditions to the total costs for trans-
portation and treatment of the I/I.
Earlier EPA construction grants regulations (40 CFR 35.927)
were procedurally specific with regard to a determination of
excessive I/I. These regulations required a sewer system
evaluation consisting of an I/I analysis, followed by a sewer
system evaluation survey, if required, and a sewer rehabilita-
tion program. Based on more than ten years of experience,
EPA has determined that less procedural specificity is desir-
able. Current regulations allow considerable flexibility in
determining if a sewer system contains excessive I/I. State
agencies should work with grant applicants to establish a
program for I/I investigations, which is tailored to the unique
characteristics of the project.
EPA has also determined that certain limiting criteria
may be used to determine nonexcessive I/I. Nonexcessive
infiltration is defined as the quantity of flow which is less
than 120 gallons per capita per day (gpcd), including both
domestic base flow and infiltration, or the quantity of
infiltration which cannot be economically and effectively
eliminated. Nonexcessive inflow is defined as the rainfall
induced peak inflow rate which does not result in chronic
operational problems related to hydraulic overloading of the
treatment works during storm events, such as surcharging,
backups, bypasses, and overflows. Various studies have found
that the domestic base flow and nonexcessive infiltration, plus
this inflow rate, is about 275 gpcd for most of the Nation's
wastewater treatment systems. Therefore, if a grant applicant's
average daily flow during rain storm events is less than 275
gpcd, it can generally be assumed that the wastewater treatment
system is not subject to excessive inflow.
420
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If a grant applicant can demonstrate that the domestic
base flow plus infiltration is less than 120 gpcd and that
no chronic operational problems are experienced during rain
events, no further I/I work is required. if the flow rate
is not significantly more than 120 gpcd, the grant appli-
cant may proceed, with reviewing agency approval, without
further study. However, in this case the allowable pro-
ject cost will be limited to the cost of a project with a
capacity of 120 gpcd for the existing residential population,
If a grant applicant cannot demonstrate these conditions,
further I/I investigations will be necessary, as briefly
described in the next paragraph. The criteria described
above is equally applicable to excessive inf iltration in
CSO projects, but inflow is never considered excessive in
CSO projects.
In determining if a sewer system contains excessive I/I,
the grant applicant will analyze the treatment plant flow
records, compare the sewage flows against water consumption
records, possibly conduct flow monitoring at selected man-
holes or pumping stations, and otherwise conduct a field
investigation, if necessary, to determine the quantity and
source of I/I. The comparison of estimated costs to elim-
inate portions of the I/I will determine if the I/I is ex-
cessive. Where a portion of the I/I is determined to be
excessive, the grant applicant must propose a sewer system
rehabilitation program to eliminate the excessive I/I.
Normally, sewer system rehabilitation is carried out after
grant award, and the excessive I/I to be eliminated becomes
part of the grantee's project performance standards (see
Sections VI.M.5.g and VII.I.2).
The facilities plan includes a demonstration of the non-
existence or possible existence of excessive I/I in the
sewer system. Data supporting the conclusion may be con-
tained in or appended to the facilities plan. It is impor-
tant to note that the results of the I/I investigation are
essentially two numbers, namely: the nonexcessive I/I and
the excessive I/I, if any. Nonexcessive I/I is added to
the existing domestic, commercial, and industrial base flow,
to establish a total existing flow for the proposed treat-
ment works. This flow is particularly important since after
September 30, 1984, construction grants are limited to the
capacity required to serve existing needs on the'date of
grant award (see Section VI.D.18).
421
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Review Procedures:
For grant applicants whose project includes existing
sewer systems, insure that the proposed treatment works
is not, and will not be, subject to excessive I/I though
a determination that:
a. An I/I study has been conducted which iden-
tifies the quantity of I/I.
b. Based on the criteria of 120 gpcd for domestic
base flow plus infiltration, and 275 gpcd for
domestic base flow plus infiltration and peak
inflow, it is concluded that:
i. excessive I/I does not exist, in
which case no further study is re-
quired; or
ii. excessive I/I may exist, in which
case the grant applicant must either:
- conduct further study, including
a cost effectiveness analysis, to
more accurately determine the ex-
istence of excessive I/I, and pro-
pose a sewer rehabilitation pro-
gram where appropriate; or
- propose that the treatment works
be designed to accomodate domestic
base flow plus infiltration which
is not significantly more than 120
gpcd, in which case the allowable
project cost will be limited to the
cost of a project with a capacity
of 120 gpcd.
c. The methods and data used in analyzing I/I are
sufficient to support the results and conclusions
in Items a and b above.
d. The quantity of nonexcessive I/I has been deter-
mined and is used as one component of the average
daily base flow.
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e. Where a sewer rehabilitation program is pro-
posed, the cost estimates, schedule, and
projected results are reasonable, and repre-
sent realistic expectations for excessive
I/I reductions which can be included in a
future grant agreement as part of the
project's performance standards. The
schedule must provide for completion of
sewer rehabilitation no later than one
year after project initiation, in order to
coincide with completion of the project
performance certification (see Section VII.I.2).
Project reviewers may find it helpful to read the "Hand-
book for Sewer System Evaluation and Rehabilitation," EPA
430/9-75-021 (formerly MCD-19), dated December 1975. While
the regulatory and procedural requirements in the Handbook
are out of date, the technical discussions and approaches
remain valid.
Re: 40 CFR 35.2005(b)(16), (b)(20), (b)(21), (b)(28), and (29);
35.2030(b)(4), 35.2120, 35.2218(c); 40 CFR Part 35, Sub-
part I, Appendix A, Paragraph G; EPA publication, "Determin-
ation of Excessive/Nonexcessive Inflow Rates," May 1984
5. Future Conditions
Future conditions in the planning area are described in order
to form a basis for identifying alternative wastewater systems
which will solve the water pollution problems. Future conditions
are also contrasted with the existing environment in order to
evaluate the environmental impacts of the proposed project. In
the description of future conditions, the grant applicant should
describe unique environmental characteristics of the planning
area which must be protected, and suggest mitigation measures
which may be employed to minimize adverse impacts. Where approp-
riate, the description should also include an analysis of the
potential open space and recreation opportunities associated with
the project.
The following sections describe several significant consider-
ations which are representative of future conditions.
Re: 40 CFR 35.2030(b)(1), (b)(3)(ii), and (b)(5)
423
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5.1 Planning Period
The cost effectiveness analysis, which is the core
of facilities planning, includes the evaluation of alter-
native wastewater systems designed to solve the water
pollution problems. The planning period for the cost-
effectiveness analysis is 20 years. Therefore, future
projections must be based on a 20 year planning period.
The planning period is distinguished from the
project's design life and the useful life of the project
and its components. Design life is the period for which
a treatment works is planned and designed to be operated.
Useful life is the period for which the components of a
treatment works are expected to operate, before needing
replacement.
The distinction between the planning period and the
design life of a project becomes important during
facilities planning. A grant applicant must consider
needs and compare alternatives based on a 20 year
planning period. However, in some circumstances the
project's design life may be for a shorter period, based
on the results of the cost effectiveness analysis, the
community's financial and managerial capability, projected
environmental impacts, or uncertainty surrounding popula-
tion or economic growth forecasts. In these cases,
staging or construction may be more financially and
environmentally sound. However, each stage must be a
part of the final 20 year facility and not an interim
facility. In other cases, such as the upgrading of an
existing treatment plant with no projected growth in the
planning area, existing needs may correspond with the 20
year planning period and the project's design life.
The distinction between the design and the useful
life may also be significant when reviewing the cost
effectiveness analysis and the user charge (UC) system.
As a part of the cost effectiveness analysis, the cost
of each alternative and its major components are esti-
mated. Some components may have a 40 year useful life
(e.g., concrete structure) while others may have a
15 to 20 year useful life (e.g., process equipment).
Land, on the other hand, has an indefinite life. As
alternatives are evaluated, the salvage value of the
treatment works and its major components are computed.
Also, replacement costs for process equipment during the
planning period must be considered in the cost effective-
ness analysis.
424
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Review Procedures:
During the review of the facilities plan, insure
that the grant applicant has:
a. projected future conditions and needs for
a 20 year planning period;
b. evaluated alternatives based on their cost
effectiveness over the 20 year planning
period, even though some alternatives may
have a design life shorter than 20 years;
c. for staged facilities, developed a schedule
and a financing plan for the construction
of all subsequent stages, to provide
adequate capacity for wastewater treatment
needs during the 20 year planning period;
d. assigned reasonable, useful lives to major
components of each alternative, and con-
sidered their salvage value at the end of
the planning period; and
e. considered the replacement costs of process
equipment over the 20 year planning period.
Re: 40 CFR 35.2005(b)(36) and (b)(50), 35.2030(b)(3)
5.2 Land Use Projections
Purpose:
Land use projections are used to establish future
needs, satisfy or direct future development, and identify
environmentally sensitive lands requiring protection from
development.
Discuss ion:
Section 101(b) of the CWA states that, "It is the policy
of Congress to recognize, preserve, and protect the primary
responsibilities and rights of States to prevent, reduce, and
eliminate pollution, to plan the development and use (including
restoration, preservation, and enhancement) of land and water
425
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resources" (underlining added). 40 CFR Part 35, Sub-
part I, Appendix A, Paragraph H.2.k, identifies as un-
allowable costs, "The cost of treatment works that would
provide capacity for new habitation or other establish-
ments to be located on environmentally sensitive land
such as wetlands or flood plains." EPA's regulations
implementing NEPA (40 CFR 6.506(c)(2)(v) and 6.507)
identify additional environmentally sensitive lands,
including important farm lands, acquifer recharge zones,
archaeological and historic sites, National and natural
landmarks, and habitats of endangered and threatened
species. Other environmentally sensitive lands may
include areas with steep slopes, drainage basins dis-
charging into unique water bodies, parks and recrea-
tional areas, and areas containing unique vegetation.
The facilities plan must identify environmentally sensi-
tive areas, and develop alternatives which will protect
them or which will provide mitigation of adverse environ-
mental impacts.
Land use development patterns are projected over the
20 year planning period. After eliminating environmentally
sensitive lands, the facilities plan projects development
patterns and the resulting needs based on existing land
use plans and zoning ordinances. The grant applicant
should consult with planning agencies in the area, or with
the State, to determine reasonable and environmentally
sound future land uses.
Review Procedures:
Typical items which should be reviewed with regard
to land use projections include:
a. present land uses as a means of identifying
developmental patterns over the 20 year
planning period;
b. identification and protection of environ-
mentally sensitive 'areas;
c. comparison of land use plans and zoning
ordinances against projected land uses
to insure compatabi1ity; and
426
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d. utilization of land use projections in
estimating future development and waste-
water flows.
Re: 40 CFR 6.506(c)(2)(v), 6.507, 35.2030(a)(1) and
(b)(6)? 40 CFR Part 35, Subpart I, Appendix A,
Paragraph H.2.k
5.3 Population Forecast
Purpose:
Accurately forecast population growth, which is the
source of future residential wastewater flows.
Discuss ion;
Future population growth over the 20 year planning
period represents one component of future wastewater flows.
EPA regulations require that population forecasting used
in the cost effectiveness analysis be consistent with the
current needs survey. The needs survey, prepared every
2 years by EPA, includes forecasts of statewide populations,
based on information from the Bureau of Economic Analysis,
U.S. Department of Commerce (see Section II.E.2). The
statewide population forecast is disaggreated into smaller
political subdivisions such as counties, municipalities,
townships, etc. The grant applicant is to use the approp-
riate disaggregated population forecast from the needs
survey, and compare this figure with that in the applicable
WQM plan. Since the facilities plan must be consistent
with approved elements of the applicable WQM plan, a pos-
sible conflict may arise between the population forecast
in the needs survey and the WQM plan, due to the level of
refinement in preparing the respective reports. If a
conflict does exist, the grant applicant must consult with
the reviewing agency in order to arrive at an approvable
forecast.
Most States have identified disaggregated population
forecasts for their respective political subdivisions.
These figures represent the maximum populations to be used
in facilities planning. Where disaggregated population
forecasts are not available for a particular facilities
planning area, the State should work with the grant applicant
to establish reasonable population projections.
427
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Review Procedures:
The facilities plan is to identify existing and future
residential population. Future population forecasts must:
a. be projected for the 20 year planning period;
b. be consistent with EPA's current needs survey
and approved elements of the applicable WQM
plan (conflicts are to be resolved by the
reviewing agency);
c. be consistent with disaggregated projections
for small political subdivisions, within the
State; and
d. be reasonable and acceptable to the State
in the absence of projections based on the
needs survey.
Re: 40 CFR 35.2030(b)(3), 35.2102
5.4 Industrial and Federal Facilities
Purpose;
Accurately forecast wastewater flows from industries
and Federal facilities located in the planning area, which
are potential wastewater contributors.
Discussion:
Wastewater discharged into a POTW from industries and
Federal facilities will influence the capacity of the pro-
posed project. Opportunities to reduce the volume of these
discharges should be considered during facilities planning.
Such industrial flows may also be subject to EPA's pre-
treatment requirements, which prohibit the discharge of
toxic wastes in toxic amounts, as well as the discharge
of wastes which limit the range of wastewater treatment
and sludge disposal alternatives (see Section E.2 below).
EPA regulations require that during facilities
planning, grant applicants obtain letters of intent from
significant industrial dischargers, and from all industries
intending to increase their flows or to relocate in the
project planning area. Such letters must document capacity
428
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needs and characteristics of existing and projected flows.
EPA grant assistance, however, may not be used to construct
facilities exclusively or almost exclusively to serve in-
dustrial users.
Grant applicants may include a reasonable forecast of
future unknown industrial flow, based on existing zoning.
However, this forecast should be supported by documentation
from industrial planning boards or other agencies concerned
with economic growth. As general guidance, future unknown
industrial flow exceeding 5 percent of the design flow or
25 percent of the existing industrial flow should be care-
fully reviewed and justified.
Proposed projects may also treat wastes from Federal
facilities. However, EPA grant assistance may not include
the costs for transport and treatment of wastes from Federal
facilities if the wastes are more than 250,000 gallons per
day, or 5 percent of the design flow, whichever is less.
Limitations concerning EPA grant assistance for the
transport and treatment of flows from industries and Federal
facilities are discussed in Sections V.I and VI.D.19.
During facilities plan review, concern with industrial and
Federal facilities is generally limited to projections of
future flows. To the extent that a grant applicant does
not understand the funding limitations associated with
industrial and Federal waste treatment, as reflected in the
financial section of the facilities plan, the project re-
viewer may wish to contact the grant applicant to discuss
necessary revisions.
Review Procedures:
The facilities plan is to document existing and future
flows from industries and Federal facilities. Documentation
must include:
a. letters of intent from significant industrial
users, and from all industries intending to
increase their flows or to relQcate in the
planning area (must include capacity needs
and characteristics for existing and pro-
jected flows) ;
b. recognition of grant funding limitation
concerning discharges from industries and
Federal facilities;
429
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c. evaluation of opportunities to reduce in-
dustrial discharges; and
d. justification for unknown future industrial
flows, based on zoning and economic develop-
ment plans.
Re: 40 CFR 35.2030(b)(3)(ii), 35.2125, 35.2127
5.5 Flow Reduction
Purpose;
Evaluate opportunities to reduce flows, thereby
reducing treatment plant capacity and costs.
Discussion:
Flow reduction analysis is an integral part of facil-
ities planning, and is required unless explicit conditions
for exemption are met. Wastewater flows determine the
capacity of the treatment works and consequently the cost.
Reductions in flow, therefore, reduce costs and contribute
towards more efficient treatment by preventing dilution of
wastewater. Flow reduction focuses on three areas: I/I
(see Section 4.3 above); flow from industries and Federal
facilities (see Section 5.4 above) and flows from residen-
tial and institutional contributors (see Section 5.3 above).
Construction grant regulations require an evaluation
of alternative flow reduction methods unless:
- the grant applicant demonstrates that the
existing average daily base flow from the
planning area is less than 70 gpcd, or
- the reviewing agency determines that the area
has an effective existing flow reduction program.
If these conditions are not met, the facilities plan must
evaluate opportunities, for flow reduction, taking into
account the costs of: administration of a flow reduction
program; public education and information programs; and
retrofitting existing buildings with water saving devices.
The evaluation should also consider savings realized through
reduced or deferred operating costs for water supply and
treatment systems, as well as wastewater treatment works.
430
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Typical areas of investigation which may result in
flow reduction include:
- changes in water and sewerage rates to promote
conservation and flow reduction;
- installation of water meters or retrofitting
existing homes.and institutions with water
saving devices; and
- changes in local ordinances or codes to require
installation of water saving devices in new
construct ion.
Where cost effective, the facilities plan should
describe actions necessary for implementation of the flow
reduction program.
Review Procedures:
Unless the average daily base flow is 70 gpcd or less
or the grant applicant has an effective existing flow
reduction program, the facilities plan must include an
evaluation of flow reduction methods such as:
a. public education and information;
b. installation of water meters or retrofitting
existing structures with water saving devices;
c. changes in water and sewer rates to encourage
conservation and reduction in flow; and
d. changes in local codes to require installation
of water saving devices in new construction.
Where cost effective, considering the costs of im-
plementation and the savings realized by water and waste-
water flow reduction, the facilities plan should describe
implementation steps.
Re: 40 CFR 35.2030(b)(3)(i); EPA publication,
Reduction - Methods, Analysis Procedures,
dated March 1981
" Flow
Examples,"
431
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5.6
Forecast of Flow and Waste Load
The forecast of future flows and wasteloads in the
planning area brings together several topics considered
earlier in the review of facilities plans. Future flows
and wasteloads result from existing and future residen-
tial (including existing onsite systems to be abandoned),
commercial, institutional, and industrial flows, all ad-
justed to reflect the results of the flow reduction pro-
gram, plus nonexcessive I/I. Flow and wasteload pro-
jections must reflect limitations imposed by environ-
mentally sensitive lands, or in some cases constraints
resulting from the implementation of air quality plans.
In projecting flows from future residential popula-
tions, one of two following methods is generally used:
Method 1 - an estimate is made of the existing average
daily base flow (ADBF). The ADBF is computed based on
reliable water supply records (ideally individual residen-
tial water meters), adjusted for consumption and other
losses (generally in the area of 15-25 percent). Alter-
natively, the ADBF is based on analysis of wastewater
flow records over extended dry periods, minus estimated
infiltration, industrial flows, or other (e.g. seasonal)
flows. The estimated ADBF is divided by the existing
sewered residential population to obtain the per capita
contribution. This figure is multiplied by the future
population and added to the ADBF to obtain the future flow
contributed by residential population. Experience has
shown that 70 gpcd is representative of residential flow
contributions. Per capita flows differing significantly
from this figure should be carefully reviewed to insure
that they are truly representative of existing flows.
Also, increases over time in per capita contributions
should not be allowed unless fully justified with supporting
documentat ion.
Method 2 - lacking reasonable water supply or wastewater
flow records, future flows may be estimated by multiplying
the following per capita contributions by the future popula-
tion. In areas where the population 10 years in the future
is projected to be 5,000 or less, a per capita contribution
of 60 to 70 gpcd should be used. For larger areas or where
the per capita contribution is greater than 70 gpcd, the
per capita contribution should be justified based on com-
parison with other similar communities in the surrounding
area or some other logical reationale.
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The figures presented in the description above are
not absolute, but are representative of program experience.
Where they are exceeded, the project reviewer will carefully
review flow projections to insure that they are reasonable
and acceptable.
Review Procedures:
The reviewer should focus on the methods used to fore-
cast future wasteloads and flows. The review should incor-
porate the following considerations:
a. residential future flows are based on an
analysis of water supply or wastewater
flow records and/or approximates 70 gpcd;
b. residential wastewater strength approximates
200 mg/1 BOD5 and SS or is otherwise justified;
c. known future industrial flows are supported
by letters of intent indicating flow volume
and waste strength characteristics;
d. unknown future industrial flows do not exceed
5 percent of the design flow or 25 percent
of the existing industrial flow unless justi-
fied;
e. flow projections for commercial and insti-
tutional facilities are reasonable and are
supported by documentation where appropriate;
f. future flow projections are made considering
limitations imposed by land use plans, other
regulatory constraints (e.g., air quality
implementation plans), flow reduction programs,
and the results of I/I studies; and
g. future flows and wasteloads are in agreement
with the applicable WQM plan.
Re: 40 CFR 6.506, 6.507, 35.2030(b)(3)(i) and (ii),
35.2102, 35.2125, 35.2127
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5.7 Reserve Capacity
After September 30, 1984, except for previously
phased or segmented projects, grant assistance will be
limited to the capacity necessary to serve existing needs
(including existing needs of residential, commercial,
industrial, and other users) on the date of the approval
of the Step 3 grant. In reviewing facilities plans,
project reviewers must insure that this limitation on grant
funding is understood by the grant applicant and reflected
in the financial analysis of the project. Because reserve
capacity is based on existing needs at the time of grant
approval, and because several years may elapse between the
completion of a facilities plan and the award of a grant,
the subject of reserve capacity is addressed in Section
VI.D.10 for phased and segmented projects and Section
VI.D.18 for other projects. The project reviewer should
evaluate the facilities plan to determine if the estimated
date of grant award and the corresponding projected existing
needs are reasonable.
Re: 40 CFR 35.2123
5.8 Future Environment Without the Project
EPA regulations implementing NEPA require that the
facilities plan describe the relevant future environmental
conditions without the project. This description is used
to evaluate the "no action" alternative (i.e., using the
descriptive items discussed in Section 4.1 above, the grant
applicant describes the future environment in the project
planning area assuming that the project is not constructed).
The description may help to demonstrate the need for the
project by indicating conditions which are unacceptable
(e.g., continued water pollution or public health hazards),
or may provide the basis for concluding that the project is
not warranted.
Re: 40 CFR 6.507(c)(2)
6. Development of Alternatives
The primary objective of facilities planning is to establish
the need for the project, and through a systematic evaluation of
alternatives, demonstrate that the selected alternative is cost
effective. Alternatives range from no action to the construction
434
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of a complete wastewater treatment system. Within the range
of alternatives, many options are available, including rehabil-
itation of existing systems, sewer alignments, wastewater treat-
ment processes, design life, and staging of construction. The
grant applicant must evaluate various alternatives, identify
those that are most feasible, and after detailed evaluation of
the principal alternatives, select the proposed project.
EPA regulations identify specific alternatives that must be
evaluated, as well as other more general alternatives that are
considered basic in the wastewater treatment field. Where
alternatives are considered and rejected, the reasons for rejec-
tion must be described, and must be based on sound reasoning.
As each alternative is evaluated, the grant applicant is to seek
opportunities that provide for:
a. reuse of effluent or sludge;
b. generation of revenue through the sale of
effluent, sludge, or other by-products;
c. recovery of or reduction in the use of energy; and
d. open space or recreational facilities.
The following sections describe specific alternatives to be
evaluated, as well as other regulatory requirements which must
be considered during facilities planning:
6.1 Flow Reduction
Facilities plans must evaluate the impacts of a
flow reduction program on all alternatives considered
(see Section 5.5 above).
6.2 Optimum Performance of Existing Facilities
Purpose:
Evaluate the extent to which improved effluent quality
is attainable by upgrading the operation and efficiency of
existing facilities, as an alternative or supplement to the
construction of new facilities.
435
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Discussion:
An investigation of existing facilities may reveal that
they can function more efficiently with the addition of new
equipment, operational changes, and the addition and training
of operating personnel, or it may establish that the facilities
are operating at their optimum efficiency. This evaluation not
only includes the performance of existing centralized treatment
plants, but also includes an evaluation of onsite disposal
systems. Whatever the results of the investigation, optimum
operation of existing facilities will determine what additions,
expansions, or replacements must be made, including improved
design and operation of onsite systems. The investigation
will also determine the extent to which existing facilities
can be used in the new system. Any improvements expected
as a result of future pretreatment by industrial dischargers,
elimination of excessive I/I, or reductions in total flow
should be considered in evaluating the optimum performance
of existing facilities.
Review Procedures:
In evaluating optimum performance of existing facilities,
the project reviewer is to insure that the facilities plan
considers the following items:
a. the optimum performance level possible with
the existing process design;
b. the age and reliability of existing equip-
ment and its remaining useful life;
c. the qualifications, number, and training of
operating personnel;
d. additional operating controls and laboratory
facilities needed to monitor and improve
operat ions;
e. possible process modifications (e.g., con-
version of conventional activated sludge to
contact stabilization, the addition of
mechanical aeration to waste stabilization
ponds, etc.);
f. the impact on performance of implementing
a pretreatment program for industrial dis-
chargers;
436
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g. the impact on performance of removing
excessive I/I or of other flow reduction
programs;
h. the effectiveness and suitability of existing
onsite disposal systems, and possible modifi-
cations for improving performance through
public education and public management.
Re: 40 CFR 35.2030(b)(3 ) (iii ) ; EPA publication, "Estimate
of Effluent Limitations to be Expected from Properly
Operated and Maintained Treatment Works"
6.3 Unsewered Areas
Purpose;
Evaluate the use of onsite systems for unsewered por-
tions of communities with a population of 10,000 or less.
Discussion:
This specific requirement for the evaluation of onsite
systems, while mandatory for communities with a population
of 10,000 or less, may also be applicable to any sparsely
populated area within the total planning area. While once
considered a poor waste disposal practice, onsite systems
offer safe, efficient, and economical waste disposal if
properly designed, installed, and operated. One principal
reason for the failure of onsite systems is improper O&M
by homeowners. A solution to this problem may be O&M by a
public body, coupled with a public education program. The
terms septage management is frequently used to describe O&M
of onsite systems by a public body.
To encourage consideration of septage management, the
CWA and its implementing regulations allow a public body to
apply for a grant to build privately owned onsite systems
which serve one or more principal residences or small
commercial establishments. A principal residence requires
habitation by a family or household for at least 51 percent
of the year. Second houses or recreational residences are
not considered a principal residence. Small commercial
establishments include private establishments (restaurants,
hotels, stores, filling stations, recreational facilities,
etc.) and non-profit organizations (churches, schools,
hospitals, charitable organizations, etc.) with dry weather
437
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wastewater flows less than 25,000 gallons per day.
Other grant restrictions applicable to privately owned
individual onsite systems include:
- a demonstration that the total cost and environ-
mental impact of building individual systems is
less than that of a conventional waste treatment
system, and
- certification that each principal residence and small
commercial establishment was constructed before
December 27, 1977.
While satisfaction of the above definitions and limita-
tions is required for grant assistance, this should not pre-
clude consideration by the public body of assuming manage-
ment responsibility for all onsite systems, regardless of
grant eligibility. Ideally, a public body would be able to
convince businesses and homeowners of the benefits of
septage management, and to negotiate public ownership of all
onsite systems. In reality, however, the public body may
not be able to own all systems, but may be able to operate
them.
Rehabilitation of publicly or privately owned onsite
systems is considered an alternative technology, and there-
fore qualifies for increased Federal grant assistance (see
Item 6.10 below).
The required comparison between the rehabilitation of
onsite systems and the construction of conventional collec-
tion sewers may point out possible adverse environmental
impacts associated with sewers. While sewers in the devel- .
oped areas may not cause adverse environmental impacts, the
transport of the collected wastes by a trunk or interceptor
sewer may subject environmentally sensitive areas to
developmental pressures. This condition could prevent
the award of grant assistance.
Review Procedures;
For unsewered portions of communities with a population
of 10,000 .or less, insure that the grant applicant has
considered rehabilitation and management of onsite systems.
The evalution is to include:
438
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a. identification of the number, type, and
location of onsite systems;
b. an analysis of the reasons for onsite
system failures;
c. cost estimates for rehabilitation and
the development and operation of a septage
management program;
d. an analysis of the methods by which all on-
site systems could become publicly managed,
or a listing of reasons why public management
is not feasible; and
e. a cost comparison with a conventional collec-
tion and treatment system, and an environ-
mental evaluation of both;
Re: 40 CFR 35. 2005(b)(31) and (b)( 39 ), 35 . 2030(a ) ( 1 ) , 35. 2034 ;
40 CFR Part 35, Subpart I, Appendix A, Paragraphs C and
H.2.k; EPA publication 625/1-80-012, "Design Manual -
Onsite Wastewater Treatment and Disposal Systems,"
October 1980
6 . 4 Conventional Sewers
Purpose:
Demonstrate the need for conventional collection sewers
for unsewered areas by evaluating all three methods of pro-
viding wastewater treatment services to such areas: conven-
tional sewers, rehabilitation of onsite systems, and small
diameter sewers.
Discuss ion:
Conventional collection sewers (i.e., 8 inch or larger
gravity sewers) represent one method of providing waste dis-
posal to developed areas. Other methods include rehabilita-
tion of onsite systems (see Section 6.3 above), or the use
of small diameter gravity, pressure, or vacuum sewers
carrying partially or fully treated wastewater (see Section
6.5 below). For unsewered communities or portions.thereof,
the facilities plan is to evaluate all: three methods of pro-
viding waste collection and disposal.
439
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After September 30, 1984, conventional collection
sewers do not qualify for grant assistance unless the
Governor of a State elects to use up to 20 percent of the
State's allotment to fund such projects (see Section II.E.3).
However, where the rehabilitation of onsite systems is con-
sidered, their total cost and environmental impact must be
compared with a conventional system (see Section 6.3 above).
In evaluating conventional sewers, the grant applicant
must demonstrate their need, based on an analysis of failing
onsite systems (see Section 2.2 above). Where conventional
collection sewers are justified, and are within a category of
projects eligible for grant assistance, other grant limitations
(e.g., date of residential occupancy and bulk of flow) must
be satisfied (see Section VI.D.14). Collection sewers are
also subject to the reserve capacity limitations described
in Section VI.D.18.
Conventional collection sewers are to be designed in
accordance with State design standards regarding minimum
pipe size, slope, allowable rates of infiltration, and
spacing between manholes.
Review Procedures:
Where conventional collection sewers are proposed as
one alternative to serve developed areas, insure that:
a. the need for sewers is justified and
documented;
b. other methods of collection and disposal
(e.g., onsite system rehabilitation and
alternative conveyance systems) are eval-
uated and compared to conventional sewers
with regard to total cost and environmental
impacts;
c. the sewers will not encourage the develop-
ment of environmentally sensitive areas;
d. cost estimates for grant participation re-
flect the eligibility or ineligibility of
sewers as a category, as well as grant
limitations concerning date of residential
habitation, quantity of existing flow, and
reserve capacity (see Sections VI.D.14 and
18); a nd
440
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e. preliminary designs and the resulting cost
estimates reflect State design standards.
Re: 40 CFR 35.2005(b)(10), 3 5.2015(b)(2), 35.2030(a)(1),
35.2034(b)(1), 35.2116, 35.2123(c); 40 CFR Part 35,
Subpart I, Appendix A, Paragraph H.2.k
6.5 Alternative Conveyance Systems
Purpose:
Provide an alternative method of collecting and trans-
porting wastewater.
Discussion;
An alternative conveyance system consists of small dia-
meter gravity, pressure, or vacuum sewers conveying treated
or partially treated wastewater. As a general guide, where
the population density is less than 6 persons, but at least
1.7 persons per acre (one household per 2 acres), both con-
ventional sewers and alternative conveyance systems should
be evaluated. Where the population density is less than 1.7
persons per acre, conventional sewers generally are not cost
effective, and only alternative conveyance systems should be
evaluated.
One common application for alternative conveyance
systems is to collect wastes from existing residential and
commercial structures presently served by onsite disposal
systems. If the problem with the onsite systems is the
failure of the absorption systems, it may be possible to use
the septic tanks to remove the settleable solids, and trans-
port the clarified effluent in small sewers. The conveyance
system may be small diameter gravity sewers (since settle-
able solids are removed), pressure sewers (where each septic
tank is equipped with a pump), or vacuum sewers with a
cluster vacuum station. If the septic tank is retained as
part of the system, a septage management program must be
established by the grant applicant to provide periodic
pump-outs and other routine maintenance. The collected
wastes may be transported either to a centralized conven-
tional treatment plant or to a relatively small soil absorp-
tion field.
441
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Alternative conveyance systems for small communities
are included within the definition of alternative technology,
and therefore qualify for increased Federal grant assistance
(see Item 6.10 below). Because of their potential cost
savings, alternative conveyance systems should be considered
as one method of collecting and transporting wastewaters.
Review Procedures:
For projects which include the construction of collec-
tion sewers, alternative conveyance systems should be
evaluated, particularly for isolated developed areas. The
evaluation includes:
a. justification of the need to abandon exist-
ing onsite systems (see Section 6.3 above);
b. consideration for using existing septic
tanks and conveyance of treated wastewater
by small diameter gravity, pressure, or
vacuum sewers;
c. comparison of costs and environmental impacts
between rehabilitation of existing onsite
systems and conventional collection sewers;
and
d. consideration of the development of a septage
management program.
Re: 40 CFR 35.2005(b)(4) and (b)(18), 35.2030(b)(3),
35.2032(a), 35.2034
6 .6 Interceptor Sewers
The location and size of intercepting and collection
sewers will influence growth in the planning area. Inter-
cepting sewers must be carefully planned, with consideration
given to staging of construction, in order to accommodate
future growth. Intercepting sewers should not extend into
environmentally sensitive areas, unless absolutely necessary
to eliminate existing raw sewage discharges or discharges
from existing treatment facilities which are to be abandoned.
442
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A problem arises with sizing intercepting sewers,
since the size of the pipe is only a relatively small part
of the total cost of construction. Very often a larger
interceptor which accommodates full development is more
economical than an initial small sewer and a future parallel
relief sewer. However, the larger interceptor may increase
pressure for future growth at a rate faster than that which
is planned, or in advance of other utilities and services.
It is therefore important that the grant applicant consider
the induced growth impacts when sizing and locating inter-
cepting sewers.
After September 30, 1984, except for previously phased
or segmented projects, grant assistance for intercepting
sewers is limited to the capacity necessary to serve existing
needs (including existing needs of residential, commercial,
industrial, and other users) on the date of grant approval.
Therefore, where reserve capacity is included in the proposed
interceptor, the financial analysis section of the facilities
plan must reflect the increased local share due to the limita-
tions on reserve capacity. Refer to Sections VI.D.10 and
VI.D.18 for a discussion of reserve capacity and a methodology
for proportioning costs.
For projects which include the construction of inter-
cepting sewers, insure that:
a. the alignment will not induce growth in
environmentally sensitive areas;
b. the size of the sewer reflects an accep-
table tradeoff between the initial cost
of construction to accommodate full
development, and the cost of staged con-
struction to limit potential induced
growth; and
c. the financial analysis reflects grant
assistance to serve only existing needs
on the date of grant award.
Re: 40 CFR 3 5.2030(b)(3), 35.2123; 45 CFR Part 35,
Subpart I, Appendix A, Paragraph H.2.k
443
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6.7 Regionalizat ion
Purpose:
Evaluate regionalization of wastewater treatment services
early in the facilities planning process, as one alternative
for solving the water pollution problems.
Discuss ion:
Regionalization may have been addressed in the applicable
WQM plan (see Section II.C.3). Where it has been addressed
in the WQM plan, the facilities plan must be consistent with
its recomniendations.
If a WQM plan has not been prepared or updated for the
planning area, the grant applicant should evaluate region-
alization. Regionalization may involve various arrangements
for construction and operation of the necessary facilities.
For example, several jurisdictions may form a regional auth-
ority to construct and operate one or more centralized treat-
ment facilities, as well as all interceptor and collector
sewers. Another approach to regionalization has one community
acting as the lead agency for construction and operation of the
centralized treatment facilities and the interceptors serving
each jurisdiction, while each jurisdiction maintains
responsibility for its own collection system.
Regionalization may, but need not, involve construction
of physically interconnected facilities. For example, in-
dividual jurisdictions may be responsible for construction
of local facilities, including any onsite systems, while the
regional authority may construct and operate other service
facilities, such as sludge treatment and disposal facilities.
Regionalization offers several advantages over smaller
separate facilities, including economies of scale in construc-
tion and purchasing, ability to afford and attract more ex-
perienced operators, better treatment performance, and fewer
treatment sites and discharge points. Disadvantages may
include longer design and construction periods, potential
for unplanned induced growth and its resultant adverse envir-
onmental impacts, depleted stream flow, and the need for
intermunicipal service agreements.
444
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Review Procedures:
Regionalization, while not explicitly identified in
the regulations as a required alternative for evaluation,
should be considered in the facilities plan. Where region-
alization is considered, insure that:
a. the regionalization alternative is consis-
tant with the recommendations of the applic-
able WQM plan;
b. the alternative considers the cost savings
realized through economics of scale and more
efficient operation;
c. the disadvantages of potential adverse en-
vironmental impacts due to induced growth
have been evaluated and found acceptable; and
d. the grant applicant recognizes the need to
execute intermunicipal service agreements
before award of grant assistance (see
Section V.H).
Re: 40 CFR 3 5.2030(b)(3) and (b)(6), 35.2102, 35.2107
6.8 Conventional Treatment
Conventional treatment as used in this context refers
to the treatment of wastewater at a centralized treatment
plant by means of biological or physical/chemical unit pro-
cesses, followed by direct point source discharge to surface
waters. The key words in defining conventional treatment
are underlined in this definition. Conventional treatment
is distinguished from innovative or alternative (I/A) tech-
nologies, which are described in later sections.
Conventional treatment processes and techniques are
primarily used to provide secondary treatment, ranging
from waste stabilization ponds to fixed media (e.g.,
trickling f ilters) or suspended growth (e.g.', . activated
sludge and its variations) processes. Conventional treat-
ment may also be used to provide the first stage of treat-
ment where advanced treatment processes are required.
445
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Where the receiving body of water is classified as
effluent limited and therefore only secondary treatment is
required (see Section 3.1 above), the facilities plan should
evaluate several conventional treatment processes appropriate
to the size and location of the community and the character
and volume of the waste. For sewered communities with a
population of 10,000 or less, the regulations require that
the facilities plan give consideration to low cost tech-
nologies such as facultative ponds, trickling filters,
oxidation ditches, or overland flow. Overland flow is
alternative technology, and is discussed in Item 6.9 below.
Larger communities may consider the same processes, as well
as other more sophisticated treatment alternatives (e.g.,
activated sludge and its variations). In evaluating con-
ventional processes and preparing preliminary cost estimates,
the grant applicant should use State design standards for
the sizing of various unit processes.
In evaluating treatment alternatives, the facilities
plan must consider one or more conventional treatment pro-
cesses. The project reviewer is to insure that:
a. appropriate effluent limitations for the
receiving stream have been used (see
Item 3 above);
b. the conventional treatment process eval-
uated is capable of providing secondary
or equivalent treatment (see Item 3 above);
c. sewered communities with populations of
10,000 or less have considered low cost
treatment technologies such as facultative
ponds, trickling filters, oxidation ditches,
and overland flow; and
d. the conventional treatment process is
appropriate to the size and location of
the community and the character and quan-
tity of the wastewater.
Re: 40 CFR 35.2005(b)(7) and (b)(14), 35.2030(b)(2)
and (b)(3)
446
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6.9 Innovative and Alternative Technologies
Facilities planning initiated after September 30, 1984
must include evaluation of I/A treatment processes. I/A
technologies provide inherent incentives, since they offer
an opportunity to conserve energy or resources, and to reduce
costs. To encourage serious consideration of I/A technologies,
the CWA provides additional incentives which include:
a. 20 percent increased grant assistance, not
to exceed a total Federal share of 85 per-
cent, with funds reserved from the State's
annual allotment to be used exclusively for
the increase in grant assistance (see
Section II.E.4.c);
b. a separate grant for field testing I/A
projects (see Section VI . I);
c. potential higher ranking, at the State's
option, on the State's project priority
list (see Section II.E.3);
d. 15 percent cost preference for I/A projects
when comparing the total present worth
costs to the cost of conventional treat-
ment processes (see Section 7.1.g below);
a nd
e. 100 percent modification or replacement
(M/R) grant for I/A projects which fail
within two years after the initiation of
operation (see Section VI.J).
In reviewing I/A technologies evaluated by the grant
applicant in the facilities plan, the project reviewer is
to insure that the grant applicant has given proper credit
to the I/A incentives in comparing various wastewater
alternatives. The project reviewer may also wish to read
EPA publication 430/9-78-009 (formerly MCD-53), "Innovative
and Alternative Technology Assessment Manual," dated
February 1980. While this publication does not reflect
current grant regulations, the discussions will provide the
project reviewer with a better technical understanding of
the subject.
447
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In addition each EPA Req ional Office and most. State
agencies have designated one person as the I/A coordinator.
This person will provide assistance in reviewing the I/A
sections of a facilities plan, and will provide liason
when contacting the Small Alternative Wastewater Technology
Clearinghouse at West Virginia University, or the technical
support group at EPA's Municipal Environmental Research
Laboratory in Cincinnati, Ohio.
Re- 40 CFF 35.2030(b)(3), 35.2032, 35.2040(e), 35.2152(b)
6.10 Alternative Technologies
Alternative technologies are defined in the regulations
as "proven wastewater treatment processes and techniaues which
provide for the reclaiming and reuse of water, productively
recycle wastewater constituents, or otherwise eliminate the
discharge of pollutants, or recover energy." The regulations
further define alternative technology as specific forms of
treatment or unit processes as follows?
a. Effluent Treatment
l .
land application (rapid infiltration,
slow rate irrigation, and overland
flow) :
11
aauifer recharge-
i i i . aguaculture:
IV .
direct reuse (nonpotable)r
v .
hor t iculture r
vi .
revegetation of disturbed lands?
vii. containment ponds: and
viii. preapplication treatment and storage
of treated effluent prior to land
treatment. ~
448
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b. Sludge
i. land application, and
ii. composting and drying prior to land
application.
c. Energy Recovery
i. self-sustaining incineration, and
ii. anaerobic digestion with greater
than 90 percent methane recovery
and use.
d. Small Alternative Wastewater Systems
i. onsite individual or cluster systems,
ii. septage treatment, and
iii. alternative collection and conveyance
systems.
Two alternative technologies are discussed above
(onsite systems in Item 6.3, and alternative conveyance
systems in Item 6.5), and two others (land treatment in
Item 6.11 and sludge disposal in Item 6.13) are discussed
below.
As part of facilities planning, the project reviewer
is to insure that the grant applicant has considered one or
more alternative technologies for wastewater collection and
treatment. In reviewing the discussions of alternative
technologies, the following items are to be considered:
- the proposed process is proven and is with-
in the definition of an alternative technology;
- expected treatment results are ,within normal
ranges for the process selected, and will meet
the criteria under BPWTT (see Item 3 above);
449
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- loading rates and other design criteria are
based on State design standards, and are
within the normal ranges recommended in EPA
publications for the process under consider-
ation; and
- where applicable, the I/A cost preference
has been properly applied to the project
(see Item 7.1.g below).
Re: 40 CFR 35.2005(b)(4), (b)(5), (b)(18), (b)(31),
(b)(39) and (b)(40), 35.2030(b)(3), 35.2032, 35.2034,
35.2152(b); 40 CFR Part 35, Subpart I, Appendix A,
Paragraphs C and D
6.11 Land Application Systems
Land application of wastewater effluent is encouraged
by both the CWA and EPA because of potential cost and energy
savings and the recycling and reclaiming of resources. Land
application of wastewater effluent is defined as an alter-
native technology, and therefore qualifies for the incentives
described in Item 6.9 above. Where land is used as an inte-
gral part of the treatment process, land costs (including
a reasonable buffer zone and land acquired for storage of
wastewater prior to land application) are allowable for grant
participation.
Land application of wastewater effluent is generally
grouped into three broad categories;
- slow rate irrigation or percolation,
- rapid infiltration, and
- overland flow.
Because of the significant advantages of land application,
EPA has conducted considerable research on the subject, and
has published many technical reports and manuals, including
EPA publication 625/1-81-013, "Process Design Manual, Land
Treatment of Municipal Wastewater", October 1981. This
manual describes a two phase approach to the evaluation of
land application systems. The first phase focuses on the
availability of suitable sites and preliminary cost estim-
ates to determine , if land application is competitive with
other treatment processes. The second phase is an in-depth
evaluation of sites and refinement of site specific design
factors.
4 50
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Grant applicants should give serious consideration
to land application systems as one alternative for waste-
water treatment. Where land application has been evaluated,
the project reviewer is to insure that the following key
factors have been adequately addressed in accordance with
EPA's process design manual:
a. Site Selection
The plan should identify suitable sites and
describe reasons for rejecting other sites.
Categorical elimination of land treatment
because of a lack of suitable sites is gen-
erally unacceptable, unless well documented.
b. Loading Rates and Land Area
Preliminary design values which conflict
with those in EPA's process design manual
should be justified by adequate supporting
data.
c. Estimated Costs
Preliminary costs for land treatment should
be comparable with those referenced in the
literature. Significant differences in
land costs should be well documented.
d. Preapplication Treatment
The need for preapplication treatment more
stringent than that recommended in EPA's
process design manual should be well docu-
mented.
Environmental Effects
,The benefits of land treatment, including
resource conservation and higher levels of
treatment, should be acknowledged. The plan
should discuss how the land application
process will satisfy BPWTT requirements
(see Item 3 above).
451
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Re: 40 CFR 3 5.2030(b)(3), 35.2032, 35.2040(e),
35.2152(b)
6.12 Innovative Technologies
Innovative technologies are defined in the regulations
as "developed wastewater treatment processes and techniques
which have not been fully proven under the circumstances of
their contemplated use, and which represent a significant
advancement over the state of the art" (underlining added).
The regulations provide examples of "significant advancement
over the state of the art" which include:
- significant reduction in life cycle costs,
- significant environmental benefits through
the reclaiming and reuse of- water;
- other methods of eliminating the discharge
of pollutants,
- utilization of recycling techniques such as
land treatment,
- more efficient use of energy and resources,
- improved or new methods of waste treatment
management for combined municipal and in-
dustrial systems, and
- confined disposal of pollutants so that they
will not migrate to cause water or other
environmental pollution.
This definition is similar to the definition of alter-
native technology in many ways (i.e., it emphasizes cost and
energy reduction and resource conservation). However, the
difference is that innovative technology is developed but
not fully proven, whereas alternative technology _is fully
proven. Innovative technology is not a specific treatment
process nor a group of processes. Rather, it is something
new which is not fully proven, but which appears promising
based on the results of research and demonstration projects.
Innovative technology includes an element of risk and a
corresponding benefit which outweighs the risk. It repre-
sents a departure from traditional conservative engineering
design practices.
452
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Since innovative technology is not a specific process,
either conventional concepts of treatment or alternative
technology processes are candidates for innovative classifi-
cation, provided that they satisfy certain conditions. The
first condition, and the most difficult to assess, is the
element of risk. A proposed innovative project which is not
developed and has not been the subject of a research or
demonstration project is generally not acceptable, since its
risk of failure may be too great. Conventional concepts of
treatment are not innovative because they are fully proven,
and therefore have no risk and offer no significant advance-
ment over the state of the art. Somewhere between these
extremes lies a developed process, not fully proven, offering
significant benefits, with a corresponding level of accept-
able risk. An analysis of the level of risk for a given
technology by the grant applicant and the project reviewer
requires professional engineering judgement and collaboration.
Project reviewers are encouraged to read Chapter IV of EPA's
I/A Assessment Manual (see Item 6.9 above) for a more com-
plete discussion of risk assessment.
Assuming that a proposed innovative project contains
an acceptable level of risk, the next condition which must be
satisfied is significant advancement over the state of the
art. Six criteria have been identified by EPA as represent-
ative of significant advancement. Briefly, these criteria
are:
- cost reduction (in the range of 15 percent
of life cycle costs),
- net primary energy reduction (in the range
of 20 percent),
- improved management of toxic substances,
- improved operational reliability,
- improved environmental benefits, and
- improved joint industrial/municipal
treatment.
The first two criteria, cost and energy reduction,
are quantative, while the other criteria are qualitative
and tend to be subjective, and therefore more difficult .
to review and assess.
453
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Where the cost or energy reduction criterion is used
as a basis for claiming innovative classification, the
proposed innovative project must be compared with a base
standard in order to measure the claimed reduction. The
base standard for comparison is the least costly or least
energy consuming noninnovative project which would have been
selected if no innovative process was considered. Note that
the least costly project and the least energy consuming pro-
ject are not necessarily the same. Additionally, the base
standard project also must be acceptable from an environmental
standpoi nt.
In applying the cost reduction criterion, the costs to
be compared are the present worth costs (i.e., capital costs
plus the present worth costs of operation, maintenance, and
replacement (OM&R), over the design life of the project, minus
the present worth cost of the project's salvage value.
In applying the energy reduction criterion, the energy
to be compared is the net primary energy, which is that which
crosses the treatment plant boundary (electricity or fossil
fuel). Net primary energy reduction is the difference bet-
ween the primary energy requirement for the least energy
consuming noninnovative alternative, minus the primary energy
for the proposed innovative project.
As part of facilities planning, the project reviewer
is to insure that the grant applicant has considered the
following items when a potential innovative technology is
evaluated:
a. the proposed process must be developed
but not fully proven;
b. the facilities plan must assess risk, and
must establish that the level of risk is
acceptable in light of the corresponding
benefits;
c. the proposed process must satisfy one of
the six innovative criteria described above;
d. where cost or energy reduction is claimed
as a basis for innovative classification,
the present worth costs or the net primary
energy must be compared with the least
costly or least energy consuming noninno-
vative project, respectively;
454
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e. cost reduction must be in the range of 15
percent, and net primary energy reduction
in the range of 20 percent;
f. where the risk of a promising technology
is relatively high, field testing of the
technology, either under a grant or as an
allowable preaward cost, must be used to
further evaluate the proposed project
(see Section VI.I); and
g. where applicable, the I/A cost preference
must be properly applied to the project
(see Item 7.1.g below).
Re: 40 CFR 35.2005(b)(14), (b)(17), (b)(23), 35.2030(b)(3),
35.2032, 35.2040(e), 35.2118(a)(1), 35.2211, 35.2262
6.13 Sludge Disposal
Purpose:
Dispose of sludge in a cost effective manner, while
avoiding adverse impacts on public health and the environ-
ment.
Discussion;
Sludge disposal must be evaluated and planned with as
much care as the wastewater treatment process. Many sludge
treatment and disposal methods are available for evaluation.
In general, these methods can be considered in two major
categor ies:
- treatment and volume reduction:
- incineration,
- digestion,
- composting, and
- surface impoundments;
455
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- ultimate utilization and disposal:
- landf ill,
- ocean dumping,
- land spreading, and
- distribution/marketing.
Some methods of sludge treatment and disposal may not
be feasible, by virtue of a project's size or location,
(e.g., incineration for a small community or land applica-
tion for a large metropolitan area). Sludge treatment and
disposal may also be subject to other Federal laws such as
the Clean Air Act (stack emissions from thermal reduction
methods) or the Resource Conservation and Recovery Act.
The implementing regulations for the Resource Conservation
and Recovery Act (40 CFR Part 261) state that:
- sewage sludge is considered a solid waste
in all cases;
- sewage sludge can be subject to control as
a hazardous waste;
- municipalities are to determine if their
waste is hazardous; and
- if the waste is hazardous, the municipality
must obtain a hazardous waste identification
number and a permit to treat, store, or dis-
pose of sludge in amounts greater than 100
kilograms per month.
In general, municipal sludge is not hazardous unless
industrial dischargers are major contributors to the waste-
water treatment system. In that case, the development and
implementation of a municipal pretreatment program (see
Section E.2 below) may eliminate the discharge of hazardous
industrial wastes.
Some of the intermediate sludge treatment processes
or ultimate sludge disposal methods are encouraged by the
CWA, and are defined as alternative technology (see Item
6.9 below). The discussion below briefly describes these
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alternative technology unit processes and disposal
methods, highlighting some important considerations
review:
for
a. Compost i ng
Composting stabilizes and disinfects
sludge, allowing public distribution
under a giveaway or sale program, or
application to land as a soil condi-
tioner or as a cover for landfills.
The most common composting technique
used in the United States uses open
air systems (e.g., aerated pile and
windrow), although more complex
systems (e.g., enclosed mechanical
systems) are being introduced. The
cost of land used for composting and
for the temporary storage of compost
residues is allowable for grant
part icipat ion.
Re: 40 CFR Part 35, Subpart I, Appendix A,
Paragraph D.1(a)(3)
b. Landspread ing
Properly treated sludge may be used in
agriculture, silviculture, turf grass
production, revegetation of strip mine
land, fertilization of roadside grasses,
and many other applications. Land-
spreading of sludge may be subject to
limitations imposed by State or local
law. Care must be exercised to preclude
adverse health and environmental impacts
from a buildup of heavy metals and toxic
organics. The cost of land used for land-
spreading may be allowable for grant par-
ticipation.
Re: 40 CFR Part 35, Subpart I, Appendix A,
Paragraph D.l(a)
457
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c. Distribution and Marketing
Like land spreading, distribution and
marketing involves the utilization of
the nutrients in sludge and its soil
conditioning properties. The sludge
must be very stable, disinfected, and
have a low moisture content. Where
packaged and sold, the sludge must
contain appropriate warnings and
instructions for its use. Proceeds
from sale must be used to offset user
charges (see Section V.E).
d. Methane Recovery
Anaerobic digestion employing methane
recovery and use is classified as an
alternative technology if 90 percent
or more of the methane is recovered.
The methane may be used for heating,
operation of blowers or pumps, or
conditioned and sold to nearby users.
e. Self-sustaining Incineration
To be classified as an alternative
technology, incineration must real-
ize a net energy gain (i.e., energy
produced must be greater than the
energy used to dewater and condition
the sludge).
Because of the importance and the complex nature of
sludge management, EPA has prepared several publications
which provide guidance on sludge disposal. Several of the
process design manuals are noted in Section V.C.2.p. EPA
publication 430/9-80-015 (formerly MCD-72), "A Guide to
Regulations and Guidance for the Utilization and.Disposal
of Municipal Sludge," dated September 1980, may also be
helpful during facilities plan review.
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Review Procedures:
In reviewing the sludge treatment and disposal sec-
tions of the facilities plan, the reviewer is to insure that:
- the grant applicant has given appropriate
consideration to sludge treatment and dis-
posal by evaluating several alternatives;
- alternatives evaluated by the grant applicant
are appropriate to the size and location of
the project;
- serious consideration has been given to sludge
treatment and disposal methods which recycle
or reclaim sludge (alternative technologies)
such as methane recovery, self-sustaining in-
cineration, and land application;
- proposed sludge treatment and disposal methods
comply with regulatory requriements of other
applicable Federal laws (e.g., Clean Air Act,
Resource Conservation and Recovery Act); and
- where applicable, the I/A cost preference has
been properly applied to the project (see
Item 7 .1 .g below).
Re: 40 CFR 3 5.2030(b)(3), 35.2032, 35.2040(e), 35.2152(b)
6.14 Identification of Principal Alternatives
Purpose:
After identifying and evaluating feasible alternatives,
systematically screen them to identify principal alternatives
capable of meeting Federal, State, and local requirements.
Discussion:
Ideally, the principal alternatives identified by the
grant applicant will include one or more conventional con-
cepts of treatment, one alternative technology and one pro-
ject proposed as innovative. While there is no prescribed
459
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methodology or procedure for screening alternatives, one
possible method employs monetary evaluation, followed by
evaluation of environmental impacts, engineering feasibility,
public acceptance, and implementability. The monetary eval-
uation is best considered first, because it tends to be more
quantitive than the other criteria. It is to be noted that
neither EPA regulations nor policy guidance suggests that one
criterion is more important than others in selecting the pro-
posed project. However, EPA policy does require that the
grant applicant give careful consideration to the financial
impact of the project upon the community, to insure that the
project is affordable (see Item 8.2 below).
In preparing preliminary cost estimates for each alter-
native, the grant applicant may use published cost estimating
techniques found in the literature, or the grant applicant's
engineer may generate unique estimates to reflect local con-
ditions. Another cost estimating technique, recommended for
use by grant applicants and available to States for comparison
purposes, is the Computer Assisted Procedure for Design and
Evaluation of Wastewater Treatment Systems (CAPDET). Avail-
able from the CAPDET Clearinghouse at Mississippi State
University, this computer program can be used to quickly
analyze the costs of a large number of alternatives. CAPDET
can also evaluate the cost of upgrading and expanding waste-
water treatment facilities, and can rank alternative treat-
ment systems by the present worth of capital and OM&R (in-
cluding energy) costs.
Using the preliminary cost estimates, the grant appli-
cant can apply the remaining criteria, considering factors
described in Item 7 below.
The primary difference between screening feasible
alternatives and analyzing principal alternatives is the
depth and level of detail. Principal alternatives are to
undergo a thorough cost effectiveness analysis, although the
level of detail in the analysis will depend on the size and
complexity of the project.
Review Procedures;
As feasible alternatives are screened for selection
of principal alternatives worthy of a more detailed analysis,
insure that the grant applicant has:
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a. selected a reasonable number of alter-
natives in light of the unique demographic,
topographic, hydrologic, and institutional
characteristics of the area;
b. considered conventional concepts of treat-
ment, as well as I/A technologies;
c. used a logical, systematic methodology which
considers costs, environmental impacts,
engineering feasibility, public involvement,
and implementabi1ity; and
d. listed sound reasons for rejecting alter-
natives not considered worthy of further
analys is.
Re: 40 CFR 35.2030(a)(1) and (a)(3)
7. Evaluation of Principal Alternatives
Item 6 above discussed the development of alternatives, and
described one method for screening them in order to identify a
workable number of principal alternatives. Principal alternatives
are to be thoroughly evaluated, using the criteria described in
Items 7.1 through 7.6 below to compare alternatives and to select
the cost effective, environmentally sound project.
7.1 Monetary Evaluation
Monetary evaluation of the principal alternatives is
one of the criteria used in selecting the proposed project.
The monetary evaluation procedure is the cost effectiveness
analysis, and includes the present worth or equivalent
annual value of all capital and OM&R costs. It is to be
noted that the cost effectiveness analysis does not identify
the source of funds, but compares costs uniformly for each
alternative over the 20 year planning period. The following
cost factors are associated with monetary evaluation:
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a. Sunk Costs
Sunk costs are any investments or financial
commitments made before or during facilities
planning. As sunk costs, they are not to be
included in the cost effectiveness analysis,
since they have already been committed re-
gardless of the alternative selected. Sunk
costs typically include the cost of existing
facilities and associated land, outstanding
bond indebtedness, and the cost of preparing
the facilities plan.
b. Present Worth
Present worth is the sum which, if invested
now at a given interest (discount) rate, would
provide exactly the funds required to pay all
present and future costs. Total project cost,
used to compare alternatives, is the sum of
the initial capital cost, plus the present
worth of OM&R costs, minus the present worth
of the salvage value at the end of the 20 year
planning period. The discount rate to be used
in computing present worth cost is established
by the U.S. Water Resources Council for each
fiscal year, and is published in the Federal
Reg ister (FR).
An alternative method of comparing costs is
the equivalent uniform annual cost. This
method, used less frequently than present
worth, is the expression of a nonuniform
series of expenditures as a uniform annual
amount. Either method is acceptable in per-
forming a cost effectiveness analysis.
Re: 40 CFR 35.2030(b)(3)
c. Useful Life
The planning period in a cost effectiveness
analysis is 20 years. At the end of this
period, portions of the project's structures
or equipment may have a salvage value. When
computing the present worth, the salvage
462
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value of structures or equipment is
determined by using straight line
depreciation. The present worth of
the salvage value is then computed
using the discount rate (see Item b
above). The useful life to be used
in a cost effectiveness analysis
should fall within the following
ranges:
i. land: permanent;
ii. wastewater conveyance
structures (collection
systems, outfalls, inter-
ceptors, force mains,
tunnels, etc.): 50 years;
iii. other structures (plant
buildings, concrete tanks,
basins, lift station
structures, etc.): 30 to
50 years;
iv. process equipment: 15 to
20 years; and
v. auxiliary equipment: 10
to 15 years.
Where the grant applicant assigns a
useful life of less than 20 years (the
planning period), the cost effective-
ness analysis must show the present
worth of the replacement cost at the
end of the useful life, and the pre-
sent worth of the salvage value of the
replacement at the end of the 20 year
planning period.
Escalation
Only energy costs a
be escalated in the
analysis. The cost
ment, and materials
since it is assumed
nd land value may
cost effectiveness
of labor, equip-
is not escalated,
that any increase
463
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will apply equally to all alternatives.
Different alternatives, on the other
hand, may use different fuel supplies,
or one alternative may use land appli-
cation and another may not. Escalation
of energy costs is to be based on data
periodically published by EPA, or on
historical data for the area, if justi-
field. Land prices should be escalated
at a uniform rate of 3 percent per year,
except for rights of way and easements.
Interest During Construction
If interest during construction is signi-
ficant and may influence the choice of
alternatives, it may be included in the
cost effectiveness analysis using one of
two methods. If expenditures are uniform
and the construction period is less than
4 years, interest is one half of the
product of the construction period (in
years), the total capital expenditures
(in dollars), and the discount rate
(see Item b above). Otherwise, interest
should be calculated on a yearly basis.
Staging of Construction
The planning period used in the cost
effectiveness ana lysis is 20 years.
However, in some circumstances the
design life may be for a lesser period.
If the grant applicant proposes a de-
sign life of less than 10 years, the
project must be carefully scrutinized,
since the actual design life (assuming
that several years elapse between facil-
ities planning and the initiation of
operation) may be considerably shorter.
This situation could possibly result in
problems, such as the need for future
expansion soon after project completion.
Nonetheless, staging of construction
may be cost effective, or the financial
and managerial capability analysis may
indicate that staging of construction
464
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is preferable. Other conditions which
may suggest staging of construction in-
clude uncertainties surrounding future
population and economic growth, future
treatment requirements which are more
stringent than secondary, or existing
facilities which are to be used for an
interim period and later phased out.
While the cost effectiveness analysis does
not consider the source of funding, staging
of construction may become a more realistic
consideration because of the reduced Federal
grant share and the limitation on reserve
capacity after September 30, 1984, which in
many cases will affect the community's
ability to afford the project. As a guide-
line, the staging period should be based
on the following:
Qf/Qj Ratio Staging Period (years)
less than 1.3 20
1.3 to 1.8 15
greater than 1.8 10
Where Of is the flow at the end of the 20 year
planning period and Qi is the flow at the
initiation of plant operation.
g. Cost Preference for Innovative or Alternative
Technolog ies
The cost effectiveness analysis establishes
the present worth cost for each alternative.
Normally, the lowest cost alternative is
selected as the proposed project, assuming
that other criteria (e.g., environmental,
public acceptance, etc.) are satisfied. The
CWA, however, provides that the present
worth cost of an I/A technology may be as
much as 15 percent greater than the cost of
the least costly non-I/A alternative and
still be considered equal from a monetary
465
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standpoint. Therefore, when an entire pro-
ject is classified as an I/A technology or
where the I/A components represent more than
50 percent of a proposed project, multiply
the present worth of the least costly non-
I/A alternative by 1.15 to establish an
upper ceiling. In order for an I/A project
to be cost effective, its present worth cost
may not exceed the ceiling figure.
If the present worth cost of the I/A com-
ponents is 50 percent or less of the pro-
posed I/A project, the 1.15 multiplier is
applied to the present worth cost of the
replaced components in the least costly
non-I/A project. The sum of the figure
so obtained, plus the present worth cost
of the components common to both alterna-
tives, establishes the upper ceiling as
described above.
Care must be exercised in reviewing the
grant applicant's use of the I/A cost
preference. The project reviewer may
wish to discuss this aspect of the cost
effectiveness analysis with the State or
EPA Regional I/A coordinator.
Re: 40 CFR 35.2032(b)
h. Multiple Purpose Projects
Multiple purpose projects combine water
pollution control practices required to
meet the enforceable requirements of the
CWA with other beneficial purposes (e.g.,
agricultural, codisposal of refuse and
sludge, etc.). They are encouraged by
EPA, based on the assumption that
achieving several worthwhile purposes at
the same time should be less costly than
achieving them separately.
Projects which are designed only to meet
the enforceable requirements of the CWA
are considered single purpose. For ex-
ample, a project which includes land
application as an integral part of the
466
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treatment process (an alternative tech-
nology) is considered single purpose.
If this same project, however, treated
the wastewater at the central treatment
facility to a level satisfactory for dis-
charge, but the effluent was used for
agricultural purposes, the project would
be considered multiple purpose.
When projects involve multiple purposes,
the allocation of costs to each purpose
will be based on the Alternative Justi-
fiable Expenditure (AJE) method as des-
cribed in 40 CFR Part 35, Subpart I,
Appendix A, Paragraph H.l.f. The basic
principle behind the AJE method is to
allocate the costs of a multiple purpose
project among its purposes, so that each
purpose shares the cost savings resulting
from the multiple purpose approach. In
addition, the use of the AJE method solves
the difficulty of determining the eligible
pollution control cost of a multiple pur-
pose project.
The AJE calculations provide the maximum
value that could justifiably be expended
on the pollution control function in the
multiple purpose project. With the use
of this method, however, the grant
eligibility for multiple purpose projects
will ordinarily be less than the eligibil-
ity of a single purpose project with the
same pollution control objectives.
If a multiple purpose project is the most
cost effective way of satisfying the en-
forceable requirements of the CWA (e.g.,
for a CSO), it should be treated as a
single purpose project to determine grant
eligibility. If the project is cost
effective, it is the preferred alterna-
tive regardless of what other purposes it
serves.
While projects that include recreation could
be considered as multiple purpose, they are
more appropriately a multiple use project,
467
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and are not subject to the AJE method.
Recreational components of a project
are not eligible and cannot be grant
funded. The project, however, would
be funded at the level of the most cost
effective single purpose alternative.
A multiple purpose project may have I/A
water pollution control components. If
so, those components are entitled to have
the I/A funding percentage applied against
the allowable percentage determined by
the AJE method calculation. Further, if
the multiple purpose project utilizes I/A
technology for the water pollution control
component, and the use of the 15 percent
cost preference makes the multiple purpose
project the most cost effective project,
then it will be considered a single pur-
pose project (see Item g above).
Revenues generated by multiple purpose
projects should not be deducted from OM&R
costs in the cost effectiveness comparison
with single purpose projects, except for
revenue from the sale of excess energy
(i.e., energy produced less the energy
that could have reasonably been used
within the water pollution control com-
ponents) from a cogeneration facility.
i. User Costs
Another aspect of the cost effectiveness
analysis is the computation of the total
cost of the project to users. Total cost
as used in this context includes capital
and financing costs, OM&R costs, and
other costs (e.g., sunk costs, hook-up
fees, front footage assessments, etc.)
The facilities plan is to estimate the
annual or monthly costs to residential
and industrial users for each alterna-
tive, and make this information available
to the public as part of the public par-
ticipation program (see Item 7.4 below).
This information will also be used in pre-
paring the financial and management cap-
ability analysis (see Item 8.2 below).
Re: 40 CFR 35.2030(b)(3)(vii)
468
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7 . 2 Engineering Evaluation
An engineering evaluation of the principal alternatives
is a second criterion used in the selection of the proposed
project. Engineering feasibility of alternatives is considered
throughout the entire facilities planning process. However,
several specific areas of engineering evaluation are required
by the regulations, as described below. Project reviewers are
to insure that the following areas have been adequately eval-
uated and addressed in the facilities plan:
a. Reliability
Each alternative is to be evaluated for its
reliability in terms of meeting and consistently
maintaining the applicable effluent limitations
throughout the project's useful life. Reliability
is of particular importance, as reflected in the
CWA's requirement that grantees certify after one
year of operation that the project is achieving
its performance standards (see Section VII.I.2).
Several approaches to evaluating and achieving
reliability are discussed in Section V.C.2.g.
Re: 40 CFR 35.2005(b)(48)
b. Energy Use
While one of the criteria for classification of
a project as innovative is net primary energy
reduction, the regulations require that each
alternative, whether conventional or I/A, be
evaluated for opportunities to recover, or
reduce the use of energy. As mentioned in
Item 6.13 above, the CAPDET program can be
used for this analysis. Where energy reduc-
tion is the basis for claiming that a process
is innovative, the energy evaluation will gen-
erally provide an indepth analysis.
Re: 40 CFR 35.2030(b)(3)(vi)
469
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c. Water Supply
The facilities plan is to evaluate the water
supply implications of the project, considering
both the impact of future growth upon the water
resources and the impact of alternatives in
terms of replenishing or depleting water supplies.
Re: 40 CFR 35.2030(b)(7)
d. Revenue Generating Applications
Each principal alternative is to be evaluated for
revenue generating application (e.g., the sale of
methane gas from anaerobic digestion, the sale of
effluent or sludge for agricultural purposes, etc.).
Revenue generating applications may possibly be con-
sidered multiple purpose projects (see Item 7.1.h
above). Revenues generated by the project must be
used to reduce OM&R costs (see Section V.E).
Re: 40 CFR 30.200, 35.2030(b)(3)(v)
e. Open Space and Recreation
Each principal alternative is to be evaluated for
potential open space or recreational opportunities.
In many cases, relevant information may be found
in the State Comprehensive Outdoor Recreation Plan,
or from the National Park Service, United States
Department of the Interior. The project reviewer
may wish to have the grant applicant contact the
appropriate agencies if the project has potential
open space or recreational opportunities. While
recreational or open space opportunities associated
with a water pollution control facility could de-
note a multiple purpose project, such facilities
are more appropriately a multiple use project
(see Item 7.1.h above). Typical recreational or
open space opportunities associated with waste-
water projects include:
-use of interceptor rights of way for
running, hiking, bicycling, or eques-
. . • trian trails;
470
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- use of project roadway for access
to waterways for canoeing, boating,
fishing, or swimming;
- provision for access to natural and
historic areas for camping, photo-
graphy, or nature appreciation;
- use of project site for sports such
as target shooting, archery, or field
sports;
- use of onsite facilities for educational
purposes; and
- use of effluent or sludge at onsite
locations to improve other recreational
areas.
Re: 40 CFR 35.2030(b)(5)
Disinfection
The facilities plan should evaluate the need for
processes capable of providing disinfection.
Disinfection of wastewater prior to discharge has
long been practiced, and in many cases is required
by State design standards to protect public health
Chlorination of effluent has been and continues to
be the most widely used method of disinfection.
Because of the potential toxic effects of chlorina
tion on aquatic wildlife, chlorination plus de-
chlorination or alternate disinfection methods
(e.g., azonation, ultraviolet radiation, etc.)
should be evaluated in the facilities plan for
environmentally sensitive areas. If disinfection
requirements are not stated in the NPDES permit,
they should be addressed during facilities plan-
ning and resolved in accordance with State design
requirements.
Process Complexity
The treatment process selected for the proposed
project should be appropriate to the size of the
community and the community's ability to attract
471
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and retain qualified operating personnel.
For example, a sophisticated activated sludge
process requiring complex monitoring and con-
trol would usually be inappropriate for a small
community.
7.3 Environmental Impacts
An evaluation of environmental impacts is the third
criterion used in the analysis of principal alternatives and
project selection. The grant applicant is to include within
the facilities plan an environmental information document (EID).
While the EID need not be a separate document, the environmental
information and each alternative's environmental impacts are
usually described in a separate chapter of the facilities plan.
The EID addresses the environmental issues described in 40 CFR
Part 6. These regulations not only describe the NEPA require-
ments, but also include the requirements of other Federal laws
and executive orders (e.g., protection of wetlands and coastal
zones).
An adequate environmental evaluation considers the short
and long term, direct and indirect, beneficial and adverse
impacts of each alternative. Environmental impacts are eval-
uated during the development of alternatives, the screening
of alternatives, and the analysis of principal alternatives.
After completing the review of a facilities plan, the
project reviewer is to prepare an environmental assessment
of the proposed project. The environmental assessment may
result in a FONSI, or a recommendation for the preparation
of an environmental impact statement (EIS). The project
reviewer may wish to review the detailed environmental con-
siderations which are described in Section D below, to insure
that during the evaluation of principal alternatives, the
grant applicant has considered all significant environmental
issues.
Re: 40 CFR 35.2030(b)(6)
7.4 Public Involvement
Public involvement is the fourth criterion used in the
evaluation of principal alternatives. Open discussion and
public involvement during facilities planning can help a
grant applicant develop a project that reflects the needs
and values of the community. Informing the public of the
472
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scope of facilities planning at an early stage and involving
them during the development and evaluation of alternatives,
can help identify issues to be addressed and resolved. EPA
is fully committed to public participation in all of its
programs, and has published detailed regulations (40 CFR
Part 25) which contain specific requirements for public
involvement. However, because the elimination of Step 1 and
2 grants effectively prohibit EPA involvement in facilities
planning and design, the requirements of 40 CFR Part 25 do
not apply to the activities of a potential grant applicant
prior to the submission of a grant application. Nevertheless,
grant applicants whose projects are being evaluated to deter-
mine compliance with NEPA are required to involve the public
in the environmental review process, in accordance with
40 CFR Part 25.
An application for grant assistance submitted to EPA
must contain a certification from the State that there has
been adequate public participation on the part of the grant
applicant, based on State or local statutes. Some States,
lacking specific State or local statutes, have elected to
require compliance by the grant applicants with 40 CFR Part 25.
Project reviewers are to be familiar with applicable State or
local statutes concerning public participation, insure that
the grant applicant has involved the public during the
preparation of the facilities plan, and that the facilities
plan reflects the results of those requirements. The
extent of public involvement is to be described in the
facilities plan in sufficient detail to allow the State
agency to certify to EPA that there has been adequate
public participation.
Re: 40 CFR 6.400, 35.2030(c), 3 5.2040(b)(2)
7 .5 Implementabi1i ty
Implementabi1ity is the fifth criterion used in the eval-
uation of principal alternatives and project selection. Imple-
mentability considers the legal, institutional, financial, and
managerial constraints of each alternative, as well as any
other aspects of the alternative necessary for design, construc-
tion, and successful operation. EPA regulations require that
the facilities plan include a concise description of the fin-
ancial, institutional, and managerial arrangements necessary
for successful implementation of the selected project. The
473
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project reviewer may wish to review Item 8.2 below to insure
that during evaluation ot principal alternatives, the grant
applicant has considered all significant aspects of project
implementation.
Re: 40 CFR 35. 2030(a), (b)(3), and "(b) (8)
7.6 Plan Selection
After evaluation and comparison of principal alterna-
tives, the grant applicant is to select a project which is
the most economical means of meeting the applicable effluent,
water quality, and public health requirements over the design
life of the facility, while recognizing environmental and
other non-monetary considerations.
As in the case of preliminary screening of alternatives,
there is no prescribed methodology or procedure for evaluating
principal alternatives and selecting the proposed project.
Using the criteria described in Items 7.1 through 7.5 above,
the grant applicant should be able to identify the cost
effective, environmentally sound alternative. Neither EPA
regulations nor policy guidance suggest that one criterion
is more important than the others in selecting the proposed
project. Grant applicants may, therefore, exercise their own
value judgements in the weight they assign to each of the
criteria. The project reviewer must insure that the reasons
for selecting the proposed project and rejecting other
principal alternatives are sound, and reflect the requirements
of all applicable Federal and State laws. Unless the proposed
project or the application of the evaluation criteria violate
or misapply Federal and State laws, the project reviewer is
not to substitute his judgement for that of the grant appli-
cant.
The project reviewer is to insure that the grant applicant
has:
a. evaluated a reasonable number of varied waste-
water management techniques;
b. used a logical, systematic methodology which
considers costs, environmental impacts, en-
gineering feasibility, public involvement,
and implementabi1ity; and
474
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c. listed sound reasons for selecting the pro-
posed project and rejecting other principal
alternat ives.
Re: 40 CFR 35.2030(a)(1)
8. Selected Plan Description
Once the proposed project is selected, the grant applicant is
to prepare a concise description, at an appropriate level of detail,
of at least the items noted in Items 8.1 and 8.2 below. This des-
cription includes both the proposed treatment works and the complete
waste treatment system of which it is a part.
Re: 40 CFR 35.2030(b)(1) and (b)(8)
8.1 Relevant Design Parameters
Purpose:
Review relevant design parameters to insure that all
major components of the system have been included, cost
estimates are reasonable, design parameters comply with State
standards, and the proposed process and design are capable of
meeting the applicable effluent limitations.
Discussion:
The level of detail describing relevant design parameters
varies from project to project, and depends on the project's
size and complexity. For example, the description of a stan-
dard package treatment plant will not require the same level
of detail as a pure oxygen system with phosphate removal and
sludge incineration. Representative design parameters to be
described include:
- major process features;
- unit processes and sizes;
- a schematic flow diagram;
- sewer lengths and sizes;
475
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- design criteria (e.g., detention times,
overflow rates, process loadings, computed
removal efficiencies, initial and design
flows, etc.);
- sludge management; and
- a schedule for design and construction.
Review Procedures:
Insure that the facilities plan describes relevant
design parameters at the appropriate level of detail, in
order to demonstrate that:
a. all major components of the system are
included;
b. cost estimates are reasonable;
c. design parameters comply with State
standards; and
d. the process and design are capable of
meeting the applicable effluent limita-
tions.
Re: 40 CFR 35.2030(b)(8)(i)
8.2 Financial and Managerial Capability
Purpose:
Demonstrate the grant applicant's legal, institu-
tional, managerial, and financial capability to insure
adequate building and operation of the proposed treatment
works.
Discuss ion:
The requirement stated above is a limitation that must
be satisfied before award of grant assistance. The initial
demonstration of financial and managerial capability is re-
flected in the facilities plan, and fulfills the requirements
to describe:
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- estimated capital construction and OM&R costs
(identifying Federal, State, and local shares);
- the manner in which local costs will be financed;
- estimated cost of future expansion and long term
needs for reconstruction of facilities following
their design life; and
- institutional and managerial arrangements
necessary for successful implementation.
EPA has published "Financial and Management Capability
for Construction, Operations, and Maintenance of Publicly
Owned Wastewater Treatment Systems; Final Policy" (49 FR
6254-6258, February 17, 1984). This final policy ties to-
gether many of the financial and managerial responsibilities
which must be satisfied by a grant applicant prior to the
award of grant assistance. In order to help grant appli-
cants, the policy statement includes sample "Wastewater
Facilities Financial Information Sheets." EPA has also
distributed its "Financial Capability Summary Foldout - A
Simplified Approach," which may be used by grant applicants.
The information sheets contain five basic questions,
supplemented by sub-questions, which when answered, will help
grant applicants evaluate their ability to proceed with the
proposed project. The five basic questions are:
- What Is Proposed in The Facilities Plan?
- What Roles And Responsibilities Will Local
Governments Have?
- How Much Will The Facilities Cost At Today's
Prices?
- How Will The Facilities Be Financed?
- What Are The Annual Costs Per Household?
The final policy states that the information sheets-and
their companion "Financial Capability Guidebook" are to be
provided to grant applicants to assist in facilities planning.
However, in order to account for unique aspects of State laws
governing local financing and institutional arrangements, all
States are encouraged to develop specific guidance and procedures
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for grant applicants to use in demonstrating their financial
capability. The sample information sheets may be used as
the basis for this guidance, and may be modified according
to the State's need.
The responses to the five questions must be viewed with-
in the overall context of the grant applicant's financial
condition, financial resources, legal constraints, and local
public policy. After answering the five questions, the grant
applicant must certify that it has the capability to finance
and manage the proposed facility. Before completing this
certification, the grant applicant is to consider additional
elements relating to its overall financial condition (see
below). These same factors should be considered by the pro-
ject reviewer during the review of the facilities plan:
- reasonableness of population projections
(see Item 5.3 above) relative to historic
trends (if new population growth will be
relied upon to help finance the proposed
system);
- total current outstanding indebtedness;
- State finance laws and legal debt limits;
- historic trends in the community's revenue
sources (e.g., changes in taxable assessed
property valuation with respect to popula-
tion; and
- current bond rating and its historic trend.
At the time of facilities plan review, the demonstration
of financial and managerial capability may not be as complete
as is necessary prior to grant award. Prior to awarding grant
assistance, the grant applicant may need to update the answers
to the five basic questions, since several years may have
elapsed between facilities planning and grant application.
During that same period, other application documents (e.g.,
intermunicipal service agreements, draft plan of operation,
UC system, sewer use ordinance (SUO), etc.) will have been
completed, providing further evidence of the applicant's
financial and managerial capability (see Section VI.D.4).
478
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Rev iew
Procedures:
The facilities plan must demonstrate that the grant
applicant has the financial and managerial capability necessary
to finance and implement the selected project. The demonstra-
tion should include a discussion of the items listed below,
either through the information in the "Wastewater Facilities
Information Sheets" or separate sections in the facilities plan.
a. Cost Information
i. capital construction and OM&R costs;
ii. source of funds (Federal, State, local); and
iii. manner in which costs will be financed.
b. Cost Impacts on Users
States must develop criteria for screening projects
on the basis of their per capita cost, technological
appropriateness, or potential financial impact. A
combination of several of the following criteria
should be used for this purpose:
i. size of community;
ii. extent of sewers to be built in presently
unsewered areas;
iii. type of technology proposed;
iv. total capital costs per household;
v. total annual household costs;
vi. total annual cost per household as a
percentage of median income;
vii. capital cost of treatment per 1,000
gallons per day of capacity; and
viii. other meaningful indicators.
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c. Capital Financing Plan
i. a projection of future wastewater treat-
ment services required during the 10 year
period after initial operations;
ii. a projection of the nature, extent, timing,
and costs of future expansion and reconstruc-
tion of the treatment works; and
iii. the manner in which future expansion and
reconstruction will be financed.
d. Project Implementation
i. identification of each participating agency,
and its jurisdiction and responsibilities;
ii. demonstration that each agency has the
ability and authority under State law (or
a reasonable expectation of obtaining such
authority) to finance, design, construct,
acquire access to, operate, and maintain
facilities within its jurisdiction;
iii. identification of referenda or public
elections necessary to implement the sel-
ected plan;
iv. adopted resolutions of plan acceptance by
participating agencies; where opposition
exists, a description of steps necessary
to reach agreement;
v. proposed intermunicipal service agreements
or memoranda of understanding (see section
V.H) ;
vi. a schedule of specific actions necessary
to implement the selected plan, which
agrees with the existing NPDES permit and
the schedule resulting from the National
Municipal Policy (see Sections II.D.l and
II.D.2).
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vii. a schedule of actions necessary to
implement a pretreatment program,
where appropriate (see Section E.2
be low);
viii. a schedule for the review of advanced
treatment projects (see Section E.l
below); and
ix. a schedule for securing property rights
(including easements and rights of way)
for projects which include land acquisi-
tion.
One aspect of project implementation is to insure that
other responsible agencies within the planning area have an
opportunity to comment on the proposed project. In accord-
ance with the intergovernmental review requirements (see
Section VI.E.6), the grant applicant should be encouraged to
submit the completed facilities plan to those agencies,
identified in the State process, for review and comment.
Adverse comments should be addressed and resolved, with the
resolution reflected in the facilities plan.
Re: 40 CFR 35.2030(b)(8), 35.2101, 35.2104(b), 35.2107;
40 CFR Part 29; "Financial and Management Capability
for Construction, Operations, and Maintenance of
Publicly Owned Wastewater Treatment Systems; Final
Policy," 40 FR 6254 through 6258 (February 17, 1984);
EPA publication, "Financial Capability Guidebook,"
March 1984; EPA publication, "Financial Capability
Summary Foldout - A Simplified Approach," undated.
}. FACILITIES PLAN APPROVAL
The grant applicant will have established the need for the
proposed project, evaluated alternative solutions to the problem,
and based on an evaluation of principal alternatives, selected the
project which is cost effective and environmentally sound. After
completing the review of the facilities plan, the project reviewer
nust decide to approve or disapprove the proposed project. In
naking this decision, the project reviewer will have determined if
:he grant applicant has satisfied all requirements for facilities
planning as described in Sections B and C above, and Section E below.
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One of the criteria used by the grant applicant to develop and
evaluate alternatives is the alternative's environmental impacts.
Although the grant applicant may have determined that the environ-
mental impacts associated with the proposed project are acceptable,
it is the reviewing agency's responsibility to insure that the
project's environmental impacts do not violate Federal and State
statutes, and represent an acceptable compromise between associated
adverse impacts and the maintenance or enhancement of water quality
EPA regulations describe the environmental impacts which must
be evaluated for wastewater treatment projects. The regulations
consolidate environmental considerations from NEPA, as well as othe
applicable Federal statutes and executive orders. The environ-
mental considerations, as described below, include criteria for
decision, definitions, coordination and consultation with other
agencies, and procedural requirements. While the environmental
considerations are consolidated here because of the reviewing
agency's regulatory responsibility for decision after the review
of a facilities plan, they are equally applicable in reviewing
the grant applicant's development and screening of alternatives
(see Section C.6 above) and evaluation of principal alternatives
(see Section C.7 above).
1. Criteria for Preparing an Environmental Impact Statement
Even if a project has previously been granted a categorical
exclusion (see Section III.D.7), the responsible official at EPA
must insure that an EIS will be issued when it is determined that
any of the following conditions exist:
a. The treatment works will induce significant changes
(either absolute changes or increases in the rate
of change) in industrial, commercial, agricultural,
or residential land use concentrations or distribu-
tions. Factors that should be considered in deter-
mining if these changes are significant include,
but are not limited to:
i. vacant land subject to increased
development pressure as a result of
the treatment works;
ii. increases in population which may be
induced;
iii. faster rate of change in population
or changes in population density;
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iv. potential for overloading sewage
treatment works;
v. extent to which landowners may benefit
from the areas subject, to increased
developme nt;
vi. nature of land use regulations in the
affected area and their potential
effects on development; and
vii. deleterious changes in the availability
of or the demand for energy.
b. The treatment works or collector system will have a
significant adverse effect on wetlands, including in-
direct (i.e., induced) effects, or a major part of the
treatment works will be located in wetlands.
c. The treatment works or collector system will signifi-
cantly affect a habitat on the U.S. Department of the
Interior's or the State's threatened or endangered
species lists, or the treatment works will be located
in such a habitat.
d. The treatment works may directly cause or induce changes
that significantly:
i. displace population;
ii. alter the character of an existing resi-
dential area;
iii. adversely affect a floodplain; or
iv. adversely affect significant amounts of
important farm land or agricultural
operations on such land.
e. The treatment works will have significant adverse direct
or indirect effects on park lands, or other public lands
or areas of recognized scenic, recreational, archaeological,
or historic value.
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f. The treatment works may directly or through induced
development have a significant adverse effect upon
local ambient air quality, local ambient noise levels,
surface or ground water quality or quantity, or on
fish, shellfish, wildlife, or their natural habitats.
g. The treated effluent is being discharged into a body
of water where the present classification is too lenient,
or is being challenged as too lenient to protect the pre-
sent or recent uses, and the effluent will not be of
sufficient quality or quantity to meet the requirements
of these uses.
In addition, to these factors, when the proposed treatment works
threatens a violation of Federal, State or local law, or require-
ments imposed for the protection of the environment, the responsible
official at EPA is to consider preparing an EIS.
Re: 40 CFR 6.506(a) and (b)
2. Environmental Review Process
The environmental review process applies the criteria described
in Item 1 above to determine whether to issue a FONSI or prepare an
EIS. The environmental review is conducted by the reviewing agency.
Although EPA retains final responsibility for decisions under NEPA,.
delegated States may prepare an environmental assessment of the
proposed project, with recommendations for the issuance of a FONSI
or the preparation of an EIS. The following additional information
concerning applicable Federal laws and executive orders, and con- .
sultation requirements with other agencies will assist project
reviewers in applying the criteria for preparing an EIS.
2.1 Historical and Archaeological Sites
The National Historic Preservation Act establishes
procedures for the identification, evaluation, and protection
of historical and archaeological properties (i.e., cultural
resources). It is EPA's policy to avoid affecting such re-
sources, through careful consideration and selection of
alternatives during planning and design. EPA must consult
with the ACHP when a.proposed project will affect a property
listed on, or eligible for listing on, the National Register
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of Historic Places. To comply with the ACHP regulations,
EPA has developed guidance that integrates the review of
cultural resources with the NEPA review process.
Under a delegation agreement, a State reviewing agency
may assume responsibility for cultural resources review
activities, including:
- assisting the grant applicant in determining
the boundaries of a project planning area and
the scope of cultural surveys;
- initiating consultation and providing infor-
mation to the State Historic Preservation
Officer (SHPO) concerning the project's nature
and scope; and
- making recommendations and preparing materials
for EPA's decision in the cultural resources
review process (e.g., NEPA documents, elig-
ibility determinations, submittals to the ACHP,
etc. )
As one component of the EID, the grant applicant is
responsible for conducting surveys to identify and evaluate
cultural resources. The State reviewing agency, using Depart-
ment of the Interior standards in consultation with the SHPO,
will assist grant applicants in identifying qualified profes-
sional consultants to conduct the surveys. The grant appli-
cant will provide documentation of survey results, to enable
the State and/or EPA to carry out its responsibilities under
NEPA and the National Historic Preservation Act.
Surveys consist of activities necessary to locate cultural
resources within the planning area, and where necessary, to
develop the information required to apply the National Regis-
ter of Historic Places eligibility criteria and the ACHP's
effect criteria. Three levels of survey are described in the
guidance, as briefly described below:
a. Documentation and strategy Development Survey
This initial level survey is designed to document
previously identified cultural resources and to
identify potential areas of historic and pre-
historic habitation. Information concerning the
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planning area's cultural sensitivity will be
used to screen and develop measures for mini-
mizing the project's direct and indirect impacts
on cultural resources. At a minimum, the survey
i ncludes:
i. a broad-based literature search;
ii. contact with, the SHPO, the State
archaeologist, historical and
archaeological societies, libraries,
museums, and universities;
iii. examination of published accounts,
models of settlement systems, and
geomorphology to predict the rela-
tive sensitivity of the area for
the discovery of undocumented
resources; and
iv. field inspection for familarization
with the planning area.
The resulting survey report is to contain
an explicit research design for any sub-
sequent site recognition survey, if appro-
priate.
Site Recognition Survey
This level of survey is designed to determine the
presence or absence of cultural resources in the
project's direct impact area, and to identify those
resources requiring further investigation. The
survey includes sampling the areas of cultural
sensitivity identified in the initial level of
survey. Subsurface testing to identify undocu-
mented archaeological sites should be required un-
less the presence or absence of resources can be
determined by direct observation. Survey methods
and field activities are to be documented by the
applicant and used, in part, to assess the poten-
tial impacts of possible project design modifica-
tions. If potential impacts cannot be avoided, or
if sufficient data on the resource is unavailable,
the applicant should conduct a site definition and
evaluation survey.
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c. Site Definition and Evaluation Survey
This level of survey consists of intensive
investigation of specific resources previously
identified as partially or entirely existing
in the project's direct impact area, or dis-
covered as a result of previous surveys. This
survey is undertaken when direct effects cannot
be avoided by reasonable project modification,
or when information (e.g., extent, depth,
significance) is insufficient to assess project
alternatives. This survey should, at a minimum,
provide data to allow a determination of National
Register of Historic Places eligibility. The
State reviewing agency or EPA, in consultation
with the SHPO, uses the survey data to:
- evaluate methods of avoiding adverse
impacts on the resources, or make a
"no effect" determination;
- assess the need to request a National
Register of Historic Places eligibility
determination from the National Park
Service, U.S. Department of the Interior;
- assess the effects of the project on the
resource;
- develop mitigating measures; and
- assess the need to request ACHP comments.
Should the review result in an adequately documented
determination of no effect, the project may proceed
as proposed. Should the review result in a deter-
mination of no adverse effect, the ACHP is to be
provided with the documentation in accordance with
its regulations. If the ACHP concurs or does not
object within 30 calendar days of the submittal,
the project may proceed.
Should the agency review result in a determination
of adverse effect, or if the ACHP objects within
30 calendar days to a determination of no adverse
effect, the ACHP is to be provided with documen-
tation for the full consultation procedure, accord-
ing to ACHP regulations, for the preparation of a
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memorandum of agreement. EPA, with the assis-
tance of the delegated State, will:
- prepare the preliminary case report,
formally requesting the comments of
the ACHP;
- notify the SHPO of this request; and
- proceed with the consultation process
(e.g., on-site visits, public informa-
tion meetings) as detailed in the ACHP
regula t ions.
During this consultation process, EPA will ex-
amine all feasible and prudent alternatives to
avoid adverse effects on cultural resources.
Examples include the examination of alternative
project sites, alternative designs, or no action.
Should EPA determine that alternatives to avoid
affecting cultural resources are not feasible,
measures to minimize the potential effects will
be developed in consultation with the SHPO and
the ACHP. Generally, the consultation should
result in a resolution of any adverse effects.
Specific conditions, including the agreed miti-
gating measures are to be included in the
memorandum of agreement signed by EPA, the ACHP
and the SHPO. EPA will not approve any action
having an adverse effect or no adverse effect
until the ACHP comments. Reasonable costs of
mitigating measures are eligible for grant
participation. EPA may condition any subsequent
grant to require mitigating measures to be under-
taken by the grantee.
It is the responsibility of the project reviewer
to insure that the above procedures are, or have
been, carried out. EPA retains the final re-
sponsibility for compliance with the ACHP regula-
tions. EPA will publish the review findings,
effect determinations, and consultation results
as part of the project's environmental assessment.
Re: 36 CFR Parts 63 and 800; 40 CFR 6.301, 30.600(a);
40 CFR Part 35, Subpart I, Appendix A, Paragraph
B.l.b.
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2.2 Environmentally Sensitive Areas
Whenever a proposed project will affect environmentally
sensitive areas, the consultations below should be addressed
by the grant applicant in the facilities plan. The reviewing
agency has the responsibility for carrying out these procedures,
but the grant applicant should be encouraged to do so during
preparation of the facilities plan. Whether the project will
have an acceptable adverse effect on these resources requires
prudent judgement on the part of the project reviewer:
a. Wetlands
Consult with:
i. the Fish and Wildlife Service,
U.S. Department of the Interior;
ii. the Soil Conservation Service,
U.S. Department of Agriculture;
and
iii. the U.S. Army Corps of Engineers
(COE).
Document consultation and obtain written comments
from each of these agencies where appropriate.
Where wetlands may be affected, adverse impacts
must be avoided to the extent practicable, and
the responsible official must prepare a flood-
plains/wetlands assessment as part of the
environmental assessment or the EIS.
If the proposed project will affect wetlands,
impact navigable waters, or cause the discharge
of dredge or fill materials, contact the COE
to determine whether a permit for the discharge
of dredge or fill material will be needed.
Re: 40 CFR 6.302(a); 40 CFR Part 6, Appendix A,
"Statement of Procedures on Floodplain Manage-
ment and Wetlands Protection;" Executive Order
11990, "Protection of Wetlands"
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b. Floodpla i ns
Floodplains and flood hazard areas are shown
on maps prepared by the U.S. Federal Emergency
Management Agency or the COE. Determine if
the grant applicant must participate in the
flood insurance program; determine if the
proposed project satisfies applicable flood-
plain statutes, regulations, and EPA guidance
with regard to location, elevation, or pro-
tection of structures. Where floodplains may
be affected, adverse impacts associated with
direct and indirect development should be
avoided to the extent possible, and a flood-
plains/wetlands assessment must be included
in an environmental assessment or EIS.
Re; 40 CFR 6.302(b); 40 CFR Part 6, Appendix A;
Executive Order 11988, "Floodplain Management"
c. Important Farm Lands
It is EPA policy to protect environmentally
significant farm lands from irreversible
conversion to uses which result in its loss
as an environmental or essential food produc-
tion resource. Identify important farm lands
by consulting with the Soil Conservation
Service, U.S. Department of the Interior.
If affected by the proposed project, evaluate
direct and indirect impacts to avoid or mit-
igate them to the extent possible.
Re: 40 CFR 6.302(c); EPA's "Policy to Protect
Environmentally Significant Agricultural Lands,"
44 FR 64181 (September 8, 1978)
d. Coastal Zones
Consult with:
i. the appropriate State agency, and
ii. the Office of Ocean and Coastal
Resource Management, U.S. Depart-
ment of Commerce
490
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Document consultation and obtain written
comments if the proposed project is located
in a coastal zone. If the State has an
approved coastal zone management plan, a
consistency determination must be made by
the State. The management plan may also
include provisions of the Coastal Barrier
Resources Act, which prohibits grant awards
to projects which encourage development
within the coastal barrier resources system,
which is made up of barrier islands and
related areas containing few manmade struc-
tures.
Re: 15 CFR Part 930; 40 CFR 6.302(d)
e. Wild and Scenic Rivers
Consult with:
i. the appropriate State agency, and
ii. the National Park Service, U.S.
Department of the Interior, or,
where National forest lands are
involved, the Forest Service,
U.S. Department of Agriculture
Determine if there are any wild and scenic
rivers in the planning area. Consult with
and obtain written comments from the approp-
riate agency. Projects which have a direct
and adverse impact are to be avoided. If
the impact cannot be avoided, the project
may not be approved without notification of
the Secretary of the appropriate Federal
agency, and of Congress, 60 days in advance
of approval.
Re: 40 CFR 6.302(e)
f. Fish and wildlife
If the project will result in the control or
structural modification of any stream or body
of water, consult with:
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i. the appropriate State agency, and
ii. the Fish and Wildlife Service,
U.S. Department of the Interior.
Document consultation and obtain written
comments from each of these agencies, where
appropriate.
Re: 40 CFR 6.302(f)
g. Threatened or Endangered Species
Consult with:
i. appropriate State agency;
ii. the Fish and Wildlife Service,
U.S. Department of the Interior;
and
iii. the National Marine Fisheries
Service, U.S. Department of
Commerce.
Where the proposed action will have an adverse
impact on a listed species or its habitat, mit-
igation measures must be undertaken.
Re: 40 CFR 6.302(g); 50 CFR Parts 23 and 402
2.3 Air Quality
The Clean Air Act requires that all Federally assisted
projects conform to the applicable State air quality implemen-
tation plan. The responsible official must assess the extent
of direct or indirect increases in emissions and the resultant
change in air quality for any proposed project which may signi-
ficantly affect air quality. Where applicable:
a. consult with State or local agencies having
responsibility for development and implementation
of the applicable implementation plan, to ascer-
tain whether the project plan conforms with the
implementation, including compliance with appli-
cable emission limitations or standards.
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b. submit the conformity determination to the
designated lead State or local agency for
concurrence. Lack of response by the lead
agency during the 30 day FONSI and 45 day
draft EIS review periods will be inter-
preted as concurrence.
c. EPA must provide in the FONSI or EIS a
response to non-concurrence, including
the basis on which conformity will be
assured. If EPA finds that non-concurrence
is unjustified, an explanation must be
included in the FONSI or EIS.
Re: 40 CFR 6.303; 40 CFR 30.600(c)
2.4 Drinking Water
The Safe Drinking Water Act prohibits EPA from awarding
grant assistance it a proposed project may contaminate a
sole source aquifer and result in a significant hazard to
public health. Determine if a sole source aquifer is located
in the project area, and if so, evaluate the potential impacts
(both direct and indirect) of the project on drinking water
quality.
Re: 40 CFR 30.600(1); 40 CFR Parts 141 and 149
3. Direct and Indirect Impacts
Environmental impacts are generally classified as direct or
i ndirect.
3.1 Direct Impacts
Direct impacts are caused by construction or operation
of the treatment works, and typically include:
a. disruption of traffic, businesses, or other
activities during construction;
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disturbance of sensitive ecosystems, such
as wetlands and habitats of endangered or
threatened species, during construction;
impact on water quality by the effluent
discharged from the treatment works;
displacement of households, businesses,
or services; and
destruction of, or a significant adverse
effect on, archaeological and historic
sites and similar nonrenewable resources.
3.2 Indirect Impacts
Indirect impacts are caused by development made possible
by the project, and typically include:
a. changes in the rate, density, location, or
type of development;
b. increased air, water, or noise pollution
from induced changes in population and
land use;
c. increased solid waste production or demand
for potable water from induced changes in
population and land use; and
d. socioeconomic pressures for the expansion
of existing facilities and services (e.g.,
housing, schools, highways, police, fire,
medical, energy) from induced changes in
population and land use.
As a facilities plan is reviewed, and as the environ-
mental review process is carried out, the project reviewer
is to note both the direct and indirect impacts of the
b.
c.
d.
e.
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proposed project. Special attention is to be given to
indirect impacts, to insure that induced changes will not
create other environmental problems. Additionally, many
of the criteria requiring the preparation of an EIS are
based on the induced or indirect impacts of the proposed
project.
Where direct or indirect adverse impacts are unavoid-
able, the facilities plan or the reviewing agency may suggest
methods to mitigate them. These methods may be structural
(e.g., changes in facility design, size, and location) or
nonstructural (e.g., staging facilities, developing and en-
forcing land use and environmental protection regulations,
etc.).
The project reviewer should record in the project files
the mitigation measures resulting from the environmental re-
view process, and use this information during plan and spec-
ification review. The requirement for such measures may also
be included in a subsequent grant award as a special grant
condition.
Re: 40 CFR 6.507(c)(5) through (c)(7)
4. Finding of No Significant Impact
If, after completion of the environmental review process a
preliminary determination is made that an EIS will not be required,
the EPA will prepare, announce publicly, and distribute a FONSI.
EPA will use appropriate means to advise the public and interest
groups (e.g., media advertisements, direct mail, etc.) of its
preliminary decision not to prepare an EIS, and will allow at least
30 days for public response. At the conclusion of the public notice
response period, and after fully considering all comments received,
EPA will decide either to finalize the FONSI or to prepare an EIS.
The FONSI is based on the environment assessment, which is a
summary of all potentially significant environmental impacts and
related factors, and which serves as the EPA's written record of
the reasons for not preparing an EIS. The environmental assessment
is either incorporated into, or attached to, the FONSI.
The FONSI lists any mitigation measures necessary to eliminate
significant adverse environmental effects and make the proposed plan
acceptable. Once a FONSI and environmental assessment have been
issued for a facilities plan and after the 30 day comment period has
elapsed, grant award may proceed (after completion and approval of
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le design), without preparation of an additional FONSI unless the
^viewing agency determines that the project has changed signifi-
intly from that described in the approved facilities plan.
For those States where the review of facilities plans has been
^legated, the State agency will prepare the preliminary environ-
?ntal assessment, which then serves as the basis for EPA's decision
d issue a FONSI or an EIS. However, the decision whether or not to
repare an EIS rests solely with EPA, since the ultimate decision
ider NEPA cannot be delegated.
Once a decision is made, the FONSI issued, and the 30 day comment
jriod has elapsed, the reviewing agency is to:
a. notify the grant applicant and the State that the
facilities plan has been appproved;
b. identify, in the official notification letter, any
special conditions resulting from the environmental
review which will be made a part of a subsequent
grant; and
c. advise the grant applicant that approval of the
facilities plan does not obligate EPA to the award
of future grant assistance.
5: 40 CFR 6.400(d), 6.507, 6.508
Environmental Impact Statement
5.1 Notice of Intent
If after completion of the environmental review process,
a determination is made to prepare an EIS, EPA will announce
publicly and distribute a notice of intent to prepare an EIS.
The notice of intent is based on the conclusion from the
environmental review that a significant environmental impact
may occur as a result of the proposed project. After the
notice is published in the Federal Register (FR), EPA will
initiate actions to begin the scoping process.
As soon as possible after publication of the notice of
intent, EPA will publicly announce and convene a meeting of
affected Federal, State, and local agencies, along with the
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grant applicant and interested parties, to determine the
scope of the EIS. At the scoping meeting, in consultation
with the other participants, EPA will:
a. determine the scope and significant issues
to be analyzed in the EIS;
b. identify those issues which are not sig-
nificant;
c. determine what information is needed from
cooperating agencies;
d. discuss the method for EIS preparation
and the public participation strategy;
e. identify consultation requirements based
on other environmental laws; and
f. determine the relationship between the EIS
and the facilities plan, and any necessary
coordinating arrangements between the
preparers of both documents.
Re: 40 CFR 6.105(e), 6.400(b), 6.507(f) and (g)
5.2 Preparat ion
After issuing the notice of intent and completing the
scoping process, EPA will prepare the EIS either by direct
use of agency staff, by contract with a qualified consultant,
or by utilizing the joint EID/EIS process (frequently called
piggybacking), in which the grant applicant enters into a
contract with a qualified consultant, subject to EPA con-
currence, to prepare both documents simultaneously.
EPA regulations (40 CFR Part 6) include detailed pro-
cedures to be followed in preparing an EIS. In general, a
draft EIS is prepared, during which time an active public
participation program is carried out by EPA in accordance
with 40 CFR Part 25. After completion, distribution, and
public review of the draft, the EIS is finalized by EPA.
497
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The EIS may:
a. conclude that grant assistance is not to
be awarded for the proposed project because
of significant adverse environmental. impacts;
b. recommend changes to the project or mitigation
measures; or
c. approve the project as proposed.
Re: 40 CFR 6.105, 6.507(h) and (i)
6. Grant Award Exception
EPA regulations allow the award of grant assistance before
facilities plan approval and certification by the State provided
that:
a. applicable statutory and regulatory requirements
(including 40 CFR Part 6) have been met;
b. facilities planning related to the project has been
substantially completed;
c. the project for which grant assistance is awarded
will not be significantly affected by the completion
of the facilities plan and will be a component part
of the complete waste treatment system; and
d. the grant applicant agrees to complete the facilities
plan on a schedule the reviewing agency accepts, and
such schedule is inserted as a special condition in
the grant agreement.
Re: 40 CFR 35.2030(a)(2)
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E. SUPPLEMENTAL CONSIDERATIONS
This section discusses three items (advanced treatment (AT),
pretreatment, and correction of CSO's) which, when applicable, are
an integral part of facilities planning. Because they are not
applicable to all projects, they are discussed separately below:
1. Advanced Treatment
Purpose;
Provide grant assistance to projects designed for treatment
more stringent than secondary treatment if the responsible official
determines that AT is required and will definitely result in sig-
nificant water quality and public health improvements.
Discuss ion:
All projects proposing treatment more stringent than secondary
treatment will be subject to an intensive review in accordance with
EPA's "Policy for Review of Advanced Treatment Projects," published
at 49 FR 21462 through 21469 (May 2, 1984). The AT review should
be conducted during or at the completion of facilities planning,
and prior to the initiation of project design.
EPA has defined the minimum level of effluent quality attain-
able by secondary treatment in terms of the parameters BOD5, SS,
and pH (see Section C.3 above). For purposes of the AT review
policy, except as described on the following page under "secondary
treatment processes," an AT project is defined as any project that:
- is designed to meet effluent limitations for BOD5 or
SS which are less than 30 mg/1 (30 day average); or
- is designed to meet effluent limitations for the
removal of ammonia, nitrogen, phosphorous, or other
pollutants; or
- is designed to provide stringent disinfection by means
of coagulation and filtration facilities.
498A
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Except for certain projects exempted as described below, this
policy shall apply to all AT projects prior to award of Step 2 + 3
or Step 3 grant assistance. In addition to projects meeting the
definition for AT above, two other special classes of projects are
also subject to this policy:
- projects other than AT projects which, because of
blanket AT or blanket zero discharge requirements tor
nearby waters, include long interceptors or outfalls
for discharge to distant receiving waters, and whose
total capital cost exceeds by more than $3-million
the capital cost of providing secondary treatment
with discharge to nearby waters; and
- projects featuring land treatment or other I/A tech-
nologies which include reuse or recycling of pollutants
that resulted from imposition of AT discharge require-
ments, a nd whose incremental present worth cost (i.e.,
beyond that of providing preliminary treatment prior to
land treatment or other I/Aprocess) exceeds $3 million.
Several categories of projects are exempt from the AT review:
- secondary treatment processes:
- designed to meet State definitions of secondary
treatment which are not more stringent than 20
mg/1 for BOD5 and SS and which require only
secondary treatment technologies to achieve
these levels; or
- featuring only the addition of commonly used
disinfection processes for pathogen inactivation
(e.g., chlorination/dechlorination, ozonation,
ultraviolet radiation).
- phosphorous removal:
- where required by international agreement in
the Great Lakes Basin or in the Upper Chesapeake
Bay; or
498B
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- where incremental AT costs are $3 million or
less, and where the total phosphorous effluent
limitation is not less than 1 mg/1, EPA may
exercise its option to exempt such projects.
- warm weather nitrification:
- where incremental AT costs are $3 million or
less the projects provide only for warm weather
(e.g., 20°C or greater) nitrification designed
to achieve effluent limitations requiring not
more than 90 percent removal of ammonia on
streams with designated fishery uses, and
effluent flows are greater than stream flows
at critical low flows, EPA may exercise its
option to exempt such projects.
All AT projects with an incremental AT capital cost over
$3 million, unless exempted, must be approved by the EPA Adminis-
trator prior to award of grant assistance. All AT projects with
an incremental AT capital cost of $3 million or less, unless ex-
empted, must be approved by the EPA Regional Administrator prior
to award of grant assistance. The Regional Administrator may
delegate his authority to the appropriate States for such deter-
minations. Incremental AT cost is defined as the difference in
total capital cost between the cost effective secondary treatment
facility and the proposed AT project.
It should be noted that the requirements for AT result from
existing NPDES permits or.water-quality-based effluent limitations
necessary to achieve water quality standards (see Sections II.B.l,
II.C.3, and II.D.2). Since all States are required to reevaluate
their water quality standards by December 29, 1984, the project
reviewer must insure that effluent limitations requiring treat-
ment more stringent than secondary treatment remain applicable to
the project. < : •
Review Procedures:
Because of the technical considerations surrounding the review
of proposed AT projects, the project reviewer is encouraged to read
EPA's AT review policy and AT review handbook, which are referenced
below, prior to conducting the review. In general, review procedures
should allow the project reviewer to:
498C
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a. determine if the proposed project meets the
definition of AT or is a special case requiring
AT review;
b. determine if the proposed project is subject to
exemption from AT review;
c. determine the incremental costs for AT:
i. if $3 million or less, conduct
the AT review in accordance with
EPA policy and Regional procedures;
or
ii. if more than $3 million, conduct
the AT review in accordance with
EPA policy and Regional procedures,
and prepare necessary documentation
for submission to EPA Headquarters.
Re: 40 CFR 35.2101; EPA's "Policy for Review of Advanced
Treatment Projects," 49 FR 21462 through 21469 (May 21,
1984); EPA publication, "Handbook of Advanced Treatment
Review Issues," June 1984
2. industrial Pretreatment
Purpose:
insure that industrial wastes discharging or proposed for
discharge to the treatment works do not interfere with the treat-
ment process or limit selection of the cost effective, environ-
mentally sound project for treatment and sludge disposal.
Discussion:
All owners of POTWs with a total design flow greater than 5
million gallons per day which receive industrial waste pollutants
which:
- pass through untreated,
- interfere with the operation of the treatment works, or
498D
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- are included in the National Pretreatment Standards
are required to develop a pretreatment program.
The requirements for developing and implementing a municipal
pretreatment program are administered through the NPDES permit
program for existing facilities. Where new treatment works are
proposed in a facilities plan, or where industries subject to pre-
treatment requirements are to be connected to a treatment works
proposed in a facilities plan, the grant applicant should develop
a pretreatment program in conjunction with the preparation of the
facilities plan.
The requirements for a pretreatment program are not applicable
to municipal treatment works with flows of 5 million gallons per
day or less unless circumstances (e.g., industrial discharges
which upset the treatment process, cause violation of NPDES permit,
or contaminate sludge) require the regulatory agency to impose
them. Two sets of National Pretreatment Standards are established
under the CWA. The first standard, entitled "prohibited dis-
chargers," identifies the characteristics of waste which may not
be introduced to a POTW. These characteristics include pollutants
which:
- create a fire or explosion hazard;
- cause corrosive structural damage?
- have a pH lower than 5.0:
- cause obstructions to the flow in sewers or other
interference with operations;
" - because ot volume or strength (e.g., BOD, SS, etc.)
cause interference with operations;
- because heat, inhibit biological activity, resulting
in interference with operations; or
- contain heat in such quantities that the influent
exceeds 40°C (i04°F).
The second set of National Pretreatment Standards, entitled
"categorical standards," specify the quantity and concentration
of pollutants or pollutant properties which may be introduced or
498E
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discharged into a POTW, from a source in a given industrial
category or subcategory (21 categories were identified for initial
development of the standards). Categorical standards also contain
numerical pollutant discharge limitations for each industrial sub-
category, based on the best available technology economically
achievable.
Where applicable, the grant applicant must identify industrial
contributors, determine the nature, quantity, and specific charac-
teristics of the industrial waste, determine if the wastes are
subject to National Pretreatment Standards, establish enforcement
authority and monitoring capability, and accomplish whatever else
is necessary to implement a pretreatment program. The development
and implementation of a pretreatment program by the grant applicant
is related to many other items in the grants process, such as
capacity requirements, including letters of intent from industries
(see Section C.5.4 above), eligible project costs (see Section IX.F),
UC system (see Section V.E), SUO (see Section V.F), and plan of
operation, including laboratory facilities to analyze wastes (see
Section V.G). During facilities planning, the grant applicant must
insure that industrial wastes discharging or proposed for discharge
to the treatment works do not interfere with the treatment process
or limit selection of the cost effective, environmentally sound
project for treatment and sludge disposal.
A complete pretreatment program will include the following
items:
- an industrial survey, identifying system users by
industrial category, location, and character and
volume of discharge;
- identification of prohibited discharges and those
industrial categories subject to categorical standards;
- negotiation and agreement with affected industries for
pretreatment prior to discharge into the treatment
works;
- an evaluation of the legal authority of the grant
applicant to enforce pretreatment standards, including
the development of new legislation (ordinances, codes,
etc.) where required;
- an evaluation of the revenue sources and financial
arrangements necessary to implement the pretreatment
program;
4 9 8 F
-------
- a determination of the technical information needed
to support development of an industrial waste enforce-
ment program which will insure compliance with the
NPDES permit and to incorporate new categorical
standards as they are promulgated by EPA;
- design of an enforcement monitoring program;
- a determination of pollutant removals in existing
facilities (a grant applicant may apply, on behalf
of industrial users, for removal credits for existing
treatment facilities; approval of removal credits is
made only after a technical review in accordance with
40 CFR 403.7(b); costs associated with preparing docu-
ments solely for requesting removal credits are un-
allowable for grant participation; and
- a determination of monitoring equipment (both sample
collection equipment and laboratory needs) required
at the POTW.
Because of the complex nature of the technical issues and the
broad range of regulatory requirements (Federal, State, and local),
the project reviewer may wish to consult with the pretreatment
specialist within the reviewing agency.
Review Procedures:
Where a facilities plan indicates that industrial contributors
are or will be connected to the treatment works, and where the
total design flow is greater than 5 million gallons per day, insure
that:
a. industrial dischargers have not limited the grant
applicant's alternatives for treatment and sludge
disposal (i.e., the proposed project would have been
selected in the absence of industrial discharges);
b. the grant applicant has carried out those elements
of a pretreatment program (see discussion above)
necessary for identifying the cost effective,
environmentally sound project as proposed in the
facilities plan; and
498G
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c. where appropriate, acceptable cost estimates and
implementation steps related to capacity, the UC
systems, the SUO, and the plan of operation are
included in the facilities plan.
Re: 40 CFR Part 35, Subpart I, Appendix A, Paragraph F;
40 CFR Part 403
3. Combined Sewer Overflow Projects
Grant requirements, including date and funding limitations,
for CSO projects are discussed in Section VI.G. However, regard-
less of whether a project is solely for CSO correction, or CSO's
are a part of the complete treatment system being evaluated in a
facilities plan, the CSO projects are to satisfy the facilities
planning requirements. This means that the project need must be
established, alternatives identified and evaluated (including
economic and environmental impacts), and a project selected which
is both cost effective and environmentally sound. The. project
reviewer must combine the requirements of Section VI.G and
Sections B through D above when reviewing CSO projects.
498H
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CHAPTER V
DESIGN
A. INTRODUCTION
B. PREDESIGN CONFERENCE
C. REVIEW OF PLANS AND SPECIFICATIONS
D. VALUE ENGINEERING
E. USER CHARGE SYSTEM
F. SEWER USE ORDINANCE
G. PLAN OF OPERATION
H. INTERMUNICIPAL SERVICE AGREEMENT
I. INDUSTRIAL WASTES AND FEDERAL FACILITIES
J. DESIGN ACCEPTANCE
501
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A. INTRODUCTION
This chapter discusses the review of activities which take place
during the design of the project. It begins with the predesign
conference, followed by a discussion of the administrative and tech-
nical review of the plans and specifications. It also discusses
other activities which are usually accomplished concurrently with
design, and which are prerequisites to grant award.
Section B, Predesign Conference, describes suggested issues
which may be discussed with the grant applicant and the design
eng i neer.
Section C, Review of Plans and Specifications, describes admin-
istrative items to be included in the specifications, based primarily
on construction procurement requirements, and technical requirements
and guidance which EPA feels represent sound engineering design princi
pies.
Section D, Value Engineering, describes those conditions
under which a separate value engineering (VE) study is required, the
methodology to be used in conducting the study, and provisions for
implementing the VE recommendations.
Section E, User Charge System, describes the requirements for
a user charge (UC) system, which must charge each user of the waste-
water treatment system a proportional share of the cost of pro-
viding treatment services.
Section F, Sewer User Ordinance, describes the requirements
for a sewer use ordinance (SUO), and its use in implementing EPA
requirements and other municipal requirements for effective
operation of the project.
Section G, plan of Operation, describes the requirements for an
effective plan of operation, including staffing, training, budgeting,
and the preparation of an operation and maintenance (O&M) manual.
Section H, Intermunicipal Service Agreement, describes the require
ments for an intermunicipal service agreement and its importance in
providing proper financial and institutional support for the project.
Section I, Industrial Wastes and Federal Facilities,
describes limitations on the eligibility of capacity to treat
industrial wastes and wastes from Federal facilities.
Section J, Design Acceptance, describes the effect of design
acceptance by the reviewing agency, and discusses other issues
which must be resolved prior to application submission.
503
| Preceding page blank
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I. PREDESIGN CONFERENCE
Purpose:
Meet with the grant applicant and the grant applicant's design
earn to review administrative and technical requirements for design,
is well as other activities that are usually accomplished concurrently
>ith design.
Discussion:
A predesign conference is not required by EPA regulations, but is
ncouraged for all projects whenever possible. A predesign conference
ffords an opportunity for the reviewing agency to meet with the grant
pplicant and the grant applicant's design team to review the many
ictivities which take place during project design. Practically all
eviewing agencies have developed specific procedures for arranging
nd conducting a predesign conference, frequently including a checklist
if items for discussion. The reviewer should use these procedures,
lodified as necessary for the specific project. Particular emphasis
ihould be placed on the significant changes in the construction grants
irogram which became effective on October 1, 1984.
Procedures:
As soon as possible after completion and approval of a facilities
ilan and prior to the initiation of design, the project reviewer
ihould. arrange a predesign conference with the grant applicant and the
lesign team. Major program requirements to be discussed include:
1. Technical design criteria, which must meet State
design standards and the EPA requirements and guidance
discussed in Section C.2 below. If the reviewing agency
requires the submission of an engineering design report,
tl^e format and timing for submission of the report by the
grantee should be discussed. Design parameters may
include items such as loadings, system head curves,
detention times, peaking factors, and the capacity of
various components.
2. Contract documents, which must comply with State and
EPA requirements (primarily 40 CFR Part 33),
as discussed in Section C.l below. These requirements '
include competitive selection, non-restrictive specifi-
cations, bonding, insurance, wage rates, labor standards,
and required subagreement clauses.
504
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3. Recent changes in the construction grants program,
such as:
a. reduced Federal grant share (see Section VI.L.2);
b. allowances (see Section VI.L.l) and advances of
allowance (see Section III.E);
c. revised definition of secondary treatment
or its equivalent (see Section IV.C.3.1);
d. infiltration/inflow (I/I) limitation (see
Sect ion IV.C.4.3);
e. limitations on the eligibility of reserve capacity
(see Section VI.D.18);
f. project performance certification, including sewer
rehabilitation, after one year of operation (see
Section VII.1.2.a);
g. limited eligibility of collection sewers, major
sewer system rehabilitation, and combined sewer
overflow (CSO) projects (see Section II.E.3).
d. Compliance with facilities plan and FONSI or EIS conditions
(see Sections IV.C.8 and iv.D).
e. UC system (see Section E below) and SUO (see Section F below).
f. Requirements for VE studies (see Section D below).
g. Preliminary and final plan of operation (see Section G below).
h. Acquisition of land, rights of way, and easements (see
Section VI.H).
i. Intermunicipal service agreements (see Section H below).
j. Service agreements with major industrial users (see
Section I below).
k. Additional I/I investigations which may be required (see
Sect ion VI.D.16).
1. Pretreatment (see Sections IV.E.2 and VI.E.4).
m. Design features associated with industrial flows (see
Section I below).
505
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n. Timing and arrangements for funding the municipal share
of project costs (see Section VI.D.4).
. REVIEW OF PLANS AND SPECIFICATIONS
Purpose;
Insure that the proposed project conforms with the selected
lternative in the facilities plan, satisfies State and EPA design
riteria and administrative requirements, is biddable and construc-
ible, and will satisfy discharge requirements in accordance with the
roject's National Pollutant Discharge Elimination (NPDES) or State
Dllutant Discharge Elimination System (SPDES) permit.
Pi scussion:
Contract documents, primarily the plans and specifications, are
repared by an engineer licensed in the State in which the project
s to be constructed. In designing the project, the engineer must
Dmply with State design standards, and the enforceable requirements
f the Clean Water Act (CWA). The engineer is responsible for employing
Dund engineering principles, as represented by his seal and signature
n the plans and specifications.
The reviewer is responsible for insuring that the project conforms
ith the selected alternative described in the facilities plan, in-
ludes special considerations which were noted in the facilities plan
e.g., mitigation of adverse environmental impacts), and in general
sets minimum technical and administrative State and EPA requirements,
jeally, periodic progress reviews should be conducted with the grant
pplicant and the design team to insure compliance with technical and
3ministrative requirements.
In performing the review of the plans and specifications, the
^viewer is to note and call to the attention of the design team,
trough the grant applicant, any apparant discrepancies with State or
PA requirements (e.g., oversized or unnecessary units, "gold plating,"
tc.). However, the review and acceptance of the plans and specifica-
ions by the State or EPA project reviewer does not relieve the grantee
r the design engineer of his legal responsibilities for the overall
ntegrity of the project (see Section J.l.c below).
In addition to reviewing the contract documents for technical and
3ministrative adequacy, the reviewer should note and resolve any
Dssible conflicts that could later result in contractor change orders
r claims. The most common conditions resulting in change orders
506
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include differing site conditions, errors and omissions in the con-
tract documents, State and Federal government regulatory changes,
design changes, overruns and underruns in quantities, and factors
affecting the time of completion of the project. Bearing these
conditions in mind, the reviewer should carefully review the plans
and specifications to insure that the information and details con-
tained therein will help to minimize future change orders and claims.
Review Procedures:
1. Administrative Review
The procurement of construction contractors must comply
with at least the minimum EPA requirements as set forth in
40 CFR Part 33. These minimum EPA requirements may be supple-
mented by additional State or local requirements provided they
do not conflict with EPA requirements nor in any other way
unduly restrict or eliminate competition (see Section I.D.6).
Practices considered to be unduly restrictive and therefore
not allowed include:
- noncompetitive practices between firms;
- organizational conflicts of interest;
- State and local laws, ordinances, regulations, or
procedures which give local or in-State bidders
preference over other bidders;
- unnecessary qualification requirements, such as
excessive experience or bonding in lieu of
experience;
- placing other unreasonable requirements on firms
in order for them to qualify to do business.
Re: 40 CFR 33.230
a. Formal Advertising
Except for very unusual circumstances, the formal
advertising procurement method must be employed.
Formal advertising procurement essentially consist of:
i. formal advertising or solicitation of bids
through a public notice,
507
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ii. public receipt and opening of bids, and
iii. award of the contract to the lowest
responsive, responsible bidder.
Items b through f below briefly describe EPA's admin-
istrative requirements for bidding documents and
procedures. See Sections VII.B and VII.D for a more
complete discussion.
Re: 40 CFR 33.405, 33.430
Public Notice
The public notice soliciting bids must state when
and how bidding documents, including plans and spec-
ifications, can be obtained or examined, and the time,
date, and location for receipt of bids. The public
notice must provide adequate time (normally 30 days)
between the date of public notice and the date for
receipt of bids.
The advertisement or invitation for bids is placed
in newspapers and trade journals, and in the case of
large projects, in publications with nationwide distri-
bution .
Re: 40 CFR 33.410, 33.415;
40 CFR Part 33, Appendix A
Prequalification of Contractors and Products
If allowed by State law, grant applicants may
use a prequalified list of contractors and/or
major items of equipment before receipt of bids
provided the following conditions are met:
i. prequalified list is updated at least
every six months;
ii. requests for inclusion on the list
made 30 days before bid opening are
considered and acted upon;
iii. adequate public notice of the pre-
qualification procedure is provided;
and
508
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iv. the procedure does not unnecessarily
restrict competition.
Re: 40 CFR 33.230(c) and (d)
d. Addenda
Prior to the receipt of bids, it is sometimes
necessary for the grantee to issue addenda to the plans
or specifications. Such addenda may be required to up-
date a wage rate determination (see Item q below) or to
clarify the plans or specifications. The proposal form
or other bid submission documents should include a
statement to be completed by bidders acknowledging receipt
of each addendum (see Section VII.D.l.c).
e. Bid Proposal
The bid proposal is a form which briefly describes
the required items of equipment, materials, and work to
be performed, and provides blank spaces to be completed by
the bidder, indicating the amount being bid for each bid
item. The amount will be a fixed price (lump sum), or in
the case of estimated quantities, unit prices. The price
is generally expressed in words and numbers, with a separate
price for each major item or system and a total for the
entire contract. The proposal is to be signed by an
authorized official of the Didding firm. The individual
items on the proposal form should set forth, in clear and
understandable terms, the limits of work for each item.
f. Basis for Award
The contract documents must clearly describe the method
of bidding, the method of evaluating bid prices, and the
method of awarding the contract. A contract-will be awarded
to the lowest responsive, responsible' bidder. The selection
of the successful bidder- is to be made principally on the
basis of price.
A responsible contractor is one' that has:
i. financial resources, technical qual-
ifications, experience, organization,
- and facilities adequate to complete
the project within the required schedule,
or a demonstrated ability to obtain these;
ii. a satisfactory performance record;
509
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iii. adequate accounting and auditing
procedures; and
iv. demonstrated compliance or willing-
ness to comply with the civil rights,
equal employment opportunity, labor
law, and other requirements of
40 CFR Part 30 .
A contract may not be awarded to a contractor,
nor a subcontract to a subcontractor, who has been-
suspended, debarred, or voluntarily excluded under
40 CFR Part 32, nor may any portion of the work be
performed at any facility listed on EPA's List of
Violating Facilities.
The contract documents should also include a
description of conditions under which all bids may
be rejected. Such conditions must be based on sound
business reasons which are in the best interests of the
construction•grants program.
Re: 40 CFR Part 15; 40 CFR 33. 220 / 33 . 250 , 33. 405 ,
33.420 ,' 33. 430
g. Sole Source Procurement
Noncompetitive negotiation is allowed when:
t - ....
i. it is necessary to test or demonstrate
a specific thing; such as equipment or
processes used' in innovative technology
¦ ' - " des igns;
i'i. an item is available only from a single
source;
i i i . a publ ic exigency or emergency exists
and the urgency will not permit delay,
or : : -
iv. after solicitation from a number of
sources, competition is inadequate
(e.g., after formal advertising, no
bids or only one bid is received).
Re: 40 CFR 33.605
510
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h. Scope of Work
The contract documents must include a clear
statement of work, especially where multiple
contracts may be awarded. The statement of work
must establish the limits of work for each con-
tract, in order to eliminate confusion or over-
lapping of work between contractors. To the extent
feasible, the limits of work for each contract
should also be indicated on each page of the design
drawings (i.e., plans). The statement of work must
also include a required performance schedule for
each contract and a requirement for coordination
between contractors.
Re: 40 CFR 33.420(a)
Responsibilities of Parties
The specifications should provide a clear descrip-
tion of the responsibilities of each party, including
the owner (grantee), the grantee's representative
(generally the engineer's project inspector), and the
construction contractor. The specifications should in-
dicate who may authorize a change in the work (procedures
for change orders are described in Section VII.H), who
is responsible for checking quantities and quality of
materials, who is authorized to allow extensions of time,
who is authorized to approve the construction contractor's
payment requests, who is authorized to interpret the plans
and specifications and resolve conflicts, and how disputes
are to be resolved. The specifications may also describe
the role of the State, EPA and/or the U.S. Army Corps of
Engineers (COE). In general, however, regulatory officials
are observers to help insure that the project is constructed
in accordance with the approved plans, specifications, and
change orders. Their recommendations for compliance are
provided only to and through the grantee.
Re: 40 CFR 33.210? EPA.publication "Operating Procedures
for Monitoring Construction Activities at Projects
Funded under the Environmental Protection Agency's
Construction Grants Program," September 1983
511
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Subagreement
The contract documents must include a proposed
subagreement which clearly sets forth the terms and
conditions of the subagreement including payment,
delivery schedules, points of delivery, and accep-
tance criteria. The subagreement must be a fixed
price (lump sum) or unit price subagreement and
shall incorporate by reference all contract docu-
ments, including plans, specifications, and addenda,
Re: 40 CFR 33.285, 33.420
k. Lower Tier Subagreements
The contract documents must require the prime
contractor to include specific requirements in any
lower tier subagreement awarded by the prime con-
tractor. This requirement will be satisfied by
inclusion in the contract documents of the required
provisions described in Item m below.
Re: 40 CFR 33.295
1. Bonding and Insurance
For construction contracts of $100,000 or less,
grantees may use local or State requirements for
bonding. For construction contracts in excess of
$100,000, the minimum EPA bonding requirements are:
i. bid guarantee (bond, certified check,
or other negotiable instrument) equal
to 5 percent of the bid price;
ii. performance bond for 100 percent of
the bid price; and
iii. payment bond for 100 percent of the
bid price.
Bonds obtained by bidders must be from companies holding
certificates of authority as acceptable sureties in the
State in which the project is located. It is recommended
that that performance and payment bonds remain in effect
for one year after contract completion.
512
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Contractors should be required to obtain ade-
quate construction insurance (e.g., fire and
extended coverage, workmen's compensation, public
liability and property damage, and all risk) in
accordance with local or State laws.
EPA regulations require that a grantee participate
in the National Flood insurance Program if the pro-
posed project involves construction or property acquisi-
tion in a flood hazard area. Adequate flood protection
insurance must be provided for structures such as new
or reconstructed surface structures which are walled or
roofed (e.g., control building or pumping station), have
a value of $10,000 or more, and are located in flood
hazard areas. Construction contractors must also obtain
adequate flood insurance during construction.
Re: 40 CFR 30.600(b), 33.265; Treasury Circular 570
m. Regulatory Provisions
The contract documents must include a copy of the
most recent EPA specification inserts, including
40 CFR 33.295 ("Subagreement Awarded by a Contractor"),
Subparts F ("Subagreement Provisions") and G ("Protests"),
and EPA Form 5720-4 ("Labor Standard Provisions for
Federally Assisted Contracts"). By including these in-
serts in the contract documents, many of the administra-
tive requirements will be satisfied.
Subpart F includes subagreement provisions such as
labor standards provisions, patents data and copyrights
clause, violating facilities clause, energy efficiency
clause and model subagreement clauses. The model sub-
agreement clauses include the Buy American requirements
(see Item 2.aa below) and the quality assurance require-
ments (see Section VI.5.M.f). With regard to the model
subagreement clauses, the grant applicant may use the
exact wording in 33.1030 or their equivalent, and should
exclude those clauses which are not applicable to cons-
truction contracts. Grant applicants should be encour-
aged to have their model subagreement or substitute
cluases reviewed by their legal counsel, to insure their
compatibility with State laws and prevailing legal prac-
tices.
Re: 40 CFR 30.302(d)(3), 30.503(f) and (h), 33.420(f),
33.710; 40 CFR Part 33 Subparts F and G
513
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n. Safety
Project specifications must require contractors
to comply with applicable regulations issued by the
Occupational Safety and Health Administration,
U.S. Department of Labor (DOL). In addition, where a
State has promulgated additional regulations concerning
safety in design of structures or safety during
construction, such regulations should be incorporated
into the specifications (generally by reference).
At the time of plan and specification review,
the reviewing agency should insure that the
specifications require contractor compliance with
applicable State and DOL safety requirements, as
well as the specific additional safety provisions
for chlorination facilities, wet and dry wells,
and other hazardous locations which are described
in Items 2.c through 2.e below.
o. Schedule
Each construction contract must include a
completion schedule and provisions for coor-
dination among contractors. Since the grant
applicant is required to submit a project schedule
with the grant application, the construction
schedule should be reviewed for reasonableness
and conformance with the project schedule, as well
as with any permits, compliance schedules, court
orders, or State administrative orders. The construc-
tion completion schedule is generally given in
calendar days from the date of the notice to proceed,
and forms the basis for assessing liquidated damages
against the contractor (see Item r below). Any
circumstances under which the completion schedule
would be amended should be clearly defined in the
contract documents, which should also indicate that
a formal change order is required in such cases.
Re: 40 CFR 33.420(a), 3 5.2040(b)(6)
p. Permi ts
The contract documents should require that, to the
extent possible, contractors obtain all necessary permits
for construction. (Some permits may be required to be
held by the owner of the project.)
514
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q.
Wage Rate Determination
Each EPA funded project with construction
contracts in excess of $2,000 must contain the
prevailing wage rate determination issued by DOL
under the Davis-Bacon Act. The wage rate determin-
ation will include the prevailing wages and fringe
benefits for various construction labor categories.
Contractors are required to pay employees at least
these prevailing wage rates. Since wage rate deter-
minations are periodically revised, provision should
be included in the contract document for updating
the determination by an addendum if the determination
is issued by DOL at least 10 days prior to bid receipt.
Where project-specific rates are requested from DOL,
this 10 day limitation does not apply, and the rates
are applicable regardless of the date of issuance by
DOL.
Re: 40 CFR 30.603(a), 33.420(e), 33.1016
r. Liquidated Damages
The assessment of liquidated damages by the grantee
is a potential source of disputes and contractor counter-
claims, and must therefore be carefully evaluated. EPA
regulations contain no provisions for liquidated damages.
However, many engineers include liquidated damages (e.g.,
$1,000 per day for each day of delay beyond the construc-
tion completion date) in the specifications. Where
liquidated damages are included in the contract documents,
they should be reviewed against applicable State laws and
court decisions. The amount of liquidated damages should
be adequate to cover additional costs which would be
incurred by the grantee as a result of delay (e.g., addi-
tional inspections, interest on borrowed funds, etc.).
Liquidated damages may affect allowable project costs
(see Section IX.F.4, Paragraph A.3.a).
s. Change Order Procedures
A clause for changes (Paragraph 3) is included in
the model subagreement clauses in 40 CFR 33.1030. How-
ever, the contract documents should also clearly describe
the specific procedures, including negotiation, for
reviewing and approving change orders (see Section VII.H).
515
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t. Payment Request Procedures
The contract documents should clearly describe
the procedures and timing for processing contractor
payment requests, including payment request forms,
documentation (e.g., paid invoices or inspector's
verification of work in place), retainage, and time
from receipt of payment request until payment.
u. Reta i nage
Many project specifications include a requirement
for retainage of a portion of a progress payment request
until the project is substantially or fully completed.
Typical retainage is 5 to 10 percent of the monthly
progress payment request until the project is substan-
tially complete (e.g., 90 percent completion). When the
project is substantially complete, the retainage is re-
duced to an amount at least equal to the value of any
uncompleted or deficient work. Retained amounts are
paid when remaining work items are satisfactorily com-
pleted .
Contract documents should clearly describe the
grantee's retainage policy in order to preclude future
disputes, and should be reviewed to ensure that the
retainage policy is in accordance with State laws and
requirements.
EPA regulations do not address retainage. However,
EPA will only pay the grantee the Federal share of
allowable project costs which are currently due and
payable to the grantee (i.e., costs incurred by the
grantee, minus any retainage). EPA may also withhold
grant payments otherwise due a grantee for failure to
comply with specific requirements and conditions of the
grant agreement, but only to the extent necessary to in-
sure compliance. In order to avoid any future cash flow
problems, grantees should be advised of EPA's withholding
policy (see Sections IX.B.2.b and IX.B.4).-
Re: 40 CFR 30.902
516
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v. Construction Incentive Clause
A construction incentive (CI) clause is an option
which may be included in the contract documents if
not prohibited by State and local laws. The CI clause
allows a contractor or subcontractor to propose changes
in the project which will:
i. provide at least a $50,000 gross capital
savi ngs,
ii. result in a net savings over the life
of the project as demonstrated in a
cost-effectiveness analysis, and
iii. not reduce the quality or integrity of the
project, including compliance with NPDES
or SPDES permit requirements.
Where a CI clause is included in the contract docu-
ments and the accepted CI proposal results in a savings
of $1 million or less, the contractor may receive up to
50 percent of the net capital savings. Above $1 million,
the contract may receive up to $300,000 plus 20 percent
of the net capital savings.
Care must be exercised in reviewing contract documents
which contain a CI clause to insure that it conforms with
EPA's model CI clause.
Re: EPA publication, "The Construction Incentive Program,"
1984
w. Small, Minority, Women's, and Labor Surplus Area Businesses
It is EPA policy that grantees award a fair share of
subagreements to small, minority, women's and labor surplus
area businesses. In doing so, EPA regulations require that
grantees and prime contractors which award subcontracts
take affirmative steps to assure that small, minority, and
women's businesses are used when possible as sources of
517
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supplies, construction, and services. However, EPA
no longer requires grantees to include goals in their
specifications, nor will EPA Regions set goals for
minority or women's business enterprises (MBE/WBE)
participation for a particular grant. Rather, EPA
Regions will negotiate a fair share and the procedures
for implementation with State reviewing agencies.
Grantees may also use their own goals, State goals, or
other standards if desired.
In reviewing project specifications, the reviewer
is to insure that the affirmative steps described below
are reflected in the specifications, public notice,
solicitation, or other activities which will be used by
the grant applicant to obtain contractors and suppliers.
In addition, the specifications must clearly indicate
that if a prime contractor awards a subcontract, he must
also follow these affirmative steps:
i. include qualified small, minority,
and women's businesses on
solicitation lists;
ii. insure that small, minority, and
women's businesses are solicited
whenever they are potential sources;
iii. divide total requirements, when
economically feasible, into smaller
tasks or quantities to permit
maximum participation of small,
minority, and women's businesses;
establish delivery schedules,
where requirements of the work
permit, which will encourage
participation of small, minority,
and women's businesses;
use the services and assistance
of the Small Business Administra-
tion and the Office of Minority
Business Enterprise of the U.S.
Department of Commerce as approp-
riate; and
vi. for projects which benefit American
Indians, give American Indians
preference in the award of sub-
agreements .
IV
v.
518
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EPA also
supplies and
f irms.
encourages grantees
services from labor
to procure
surplus area
Re: 40 CFR 30.600(j), 33.240; preamble to
40 CFR Part 33, 48 FR 12923, "Small, Minority,
Women's, and Labor Surplus Area Businesses"
(March 28, 1983)
2. Technical Review
Except in the case of approved marine discharge waiver
applicants, project designs must meet the minimum require-
ments for achieving secondary treatment or its equivalent,
as defined in EPA1s regulations (40 CFR Part 133), in order
to be eligible for grant assistance. Plans, specifications,
and contract documents must conform to State design criteria
and also meet the requirements for competitive bidding in
accordance with EPA's procurement regulations (40 CFR Part 33).
Based on past experience, EPA has established, as described
below, several basic policies concerning the design of treat-
ment works which are to be incorporated into the plans and
specifications. These items do not represent a complete
list of design standards, and should be used only to supplement
a State's design criteria.
a. Project Performance Standards
Grantees are required to certify, after one
year of operation, whether the project meets its
project performance standards. Therefore, at the
time of plan and specification review it is necessary
to establish the parameters which constitute project
performance standards and judge whether the proposed
project is likely to achieve a minimum of secondary
treatment or its equivalent, in accordance with
40 CFR Part 133.
Project performance standards are performance and
operational requirements applicable to the project,
including the enforceable requirements of the CWA and
the design upon which the specifications are based.
For projects which will contribute to compliance with
the enforceable requirements of the CWA, project per-
formance standards include design criteria (e.g.,
engineers design report, facilities plan, plans and
specifications) and effluent requirements. For
519
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projects which will not contribute to compliance
with the enforceable requirements of CWA, such as
interceptor sewers and pumping stations, project
performance standards include only the design criteria.
For projects which include sewer rehabilitation,
the quantity of excessive infiltration and inflow
which is to be eliminated is also considered a
component of the project performance standards.
During the technical review of the plans and
specifications, those parameters which constitute
project performance standards should be identified
and recorded in the project files and in the Grants
Information and Control System (GICS) for later use.
(This can usually be done even if a NPDES permit
has not been issued at the time of design, since
effluent limitations should have been established
during facilities planning.) It may also be prudent
to contact the grant applicant and reach agreement
concerning project performance standards as a basis
for future evaluation. At a minimum, the grant
applicant should be informed of the parameters which
have been identified as project performance standards
(see Sections VI.M.5.g and VII.I.2.a).
Re: 40 CFR 35.2005(b)(15) and (b)(33), 35.2218;
40 CFR Part 133
Mitigation of Adverse Environmental Impacts
Plans and specifications should be compared to the
facilities plan and the finding of no significant impact
(FONSI) or the environmental impact statement (EIS) pre-
pared for the project to insure that the project design
incorporates all measures for the mitigation of adverse
environmental impacts (i.e., measures to protect envir-
onmentally sensitive areas and cultural resources).
Mitigation measures may include a soil erosion and con-
trol plan, fencing of "off-limits" areas to avoid
physical disturbance, restrictions on hours of the day
or seasons of the year for construction activities,
backfilling and immediate seeding requirements, avoid-
ance of impacts on cultural resources, structural
designs for facilities located in floodplains or wet-
lands, etc.
Re: 40 CFR 6.509(b), 40 CFR 35.2030(b)
520
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c. Chemical Storage and Hazardous Materials
All chemicals are to be properly stored, with
curbs that would hold the entire volume in the
event of an accidental spill. Adequate safety
protection equipment (e.g., gas mask and self-
contained air supply, eye wash, showers) is to
be provided, placed in accessible locations, and
ready for emergency use.
Hazardous materials, such as chemicals used
in physical/chemical plants and chemicals used for
conditioning sludge prior to filtration, may be
subject to the provisions of the Resource Conser-
vation and Recovery Act and/or the Toxic Sub-
stances Control Act. Where the reviewing agency
anticipates that hazardous materials may be
utilized in the treatment project, contact should
be made with appropriate regulatory personnel to
determine the applicable State or Federal regulations.
d. Chlorine Safety
Where the use of gaseous chlorination is justified
(see Section IV.C.7.2.f), adequate safety provisions
must comply with Federal and State requirements. At a
minimum, these safety provisions should include the
followi ng:
i. Gas-tight partition separating the
chlorination room from other parts
of the building.
ii. Doors equipped with panic hardware,
opening to the outside at ground
level.
iii. Separate storage and feed areas.
iv. Clear, gas-tight glass window in
exterior door or interior wall
permitting viewing of the chlorina-
tion room without entering the room.
521
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v. Provision for heating feed and
storage areas and shielding
chlorine containers from direct
sunlight.
vi. Level rails or cradles designed
for the specific purpose of storing
chlorine cylinders.
vii. Forced mechanical ventilation of
chlorine areas providing a complete
air change every minute, with inlets
and outlets at opposite ends of the
room. Exhaust outlets should be at
floor level, since chlorine gas is
heavier than air. The system should
be activated by external switches or
automatic systems such as door
activated mechanisms.
viii. Emergency eye baths and showers located
external to but close by the chlorine
room.
ix. Chlorine cylinder emergency repair kits
readily available.
x. Strong solution of aqueous ammonia
(18° Baume or higher) readily available
for detecting sources of leak.
xi. Automatic chlorine detection system for
plants of 1 mgd or more capacity (optional
but encouraged for smaller plants) which
sound alarms, flash lights, or notify
operator or emergency response (police
or fire) teams.
xii. Delivery of chlorine must comply with
the U.S. Department of Transportation
(DOT) regulations (49 CFR Parts 171
through 177). Rail delivery requires
dead-end sidings used for chlorine
delivery only (49 CFR 174.204).
522
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xiii- Tank barqe delivery of chlorine
must comply with the COE and DOT
regulat ions .
xiv. Chlorination and storaqe facilities
must not be below qround level , and
storaqe cylinders must be secured
when not in use.
xv. Appropriate facilities and tools must
be provided to allow for the transport,
handling, and repair of chlorine
c ylinders.
xvi. At least two self-contained positive
pressure headqear units with self-
contained compressed air supply and
full face mask, located external
to but close by the chlorination room.
xvii. Color coding and labelinq of chlorine
pipinq and valves.
e . Wet and Dry We 1Is
Wet wells are subject to the introduction of hazardous
qases through the inadvertent discharge of volatile pro-
ducts or the possible production of sewer gases. Wet wells,
therefore, are classified under some circumstances as Class
I, Division I- Groups C and D areas under the National
Electrical Code. In such cases, the code reguirements may
be satisfied by the use of explosion-proof motors and non-
sparking electrical eguipment in these areas. Additionally,
all electrical motors, enclosures, and eguipment located in
such wet wells should be protected against potential ex-
plos ion -
Where adeguate protection has been made against the
introduction of hazardous gases, dry wells qenerally need
not be classified under the National Electrical Code.
Wet and dry wells should be properly ventilated, with
equipment activated by an external switch. Wet well
ventilation should be designed to provide the introduction
of fresh air into the wet well in such a way as to prevent
drawing in gases from the influent sewer. This may be
accomplished by using a fresh air supply fan rather than
an exhaust fan.
523
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f. Protection of Potable Water Supply
All potable water supplies must be protected
from possible contamination by wastewater cross-
connections by the use of approved reduced-
pressure zone backflow prevention devices. EPA
publication 4 30/9-7 3-002, "Cross-Connection Control
Manual," 1973, contains design objectives and per-
formance criteria, and may be used to evaluate the
acceptability of proposed backflow prevention
devices. All control devices must conform with
State design standards.
g. Reliability
Facilities must be designed to preclude direct
discharge of inadequately treated sewage, even
during periods of major repairs or maintenance.
Equipment, unit processes, and the overall treat-
ment system must be designed to provide reliable,
continuous service. Depending on the size and com-
plexity of the treatment plant, reliability may be
assured through an analysis considering risk, costs,
and benefits, or through the use of redundant components
or unit processes. Many State design standards require
the use of duplicate unit processes or the stocking of
spare or standby equipment. The class of reliability
designed into a project should take into account measures
which are necessary to:
i. protect the public health,
ii. achieve water quality standards for both
surface and groundwater discharges, and
iii. prevent environmental damage.
The class of reliability may also be determined by
the use of the receiving waters and the probable adverse
impact of an inadequately treated discharge upon them.
One system for establishing the reliability class depends
on the use of the receiving waters as follows:
Class I - discharge to waters that could
be permanently or unacceptably damaged by
inadequately treated effluent discharged for
only a few hours (e.g., drinking water supplies,
shellfish waters).
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Table 1 Wastewater Treatment System Reliability
KASTEWATEK TREATMENT SYSTEM
Features Common to Class I, II, III:
Trash removal or comminution
Grit removal - not applicable to treatment works which do not pump or dewater
sludge (e.g., stabilization ponds)
Provisions for removal of settled Eolids - applicable to channels, pump wells,
and piping prior to degritting or
primary sedimentation
Holding basin - applicable to Class I with adequate capacity for all flows
Unit operation bypass - not applicable where two or more units are provided
and operating unit can handle peak flow; applicable
to comminution regardless of number of units
Component Backup
Features
Class I
Class II
Class III
Backup bar screen
for mechanically
cleaned bar screen
or comr.inutor
Yes
Yes
Yes
Backup pump
Yesa
Yes"
Yesa
Primary seoimenta-
tion basins
Multiple basinsb
Multiple basi nsb
Minimum, two^
Trlck1lng filters
Multiple filters1-'
Multiple filters^'
No backup
Aeration basin
Minimum of two of
equal volume
Minimum of two of
equal volume
Ml niir.urr. of two
of equal volume
Aeration blowers or
mechanical aerators
Multiple units^
Multiple units^
Minimum, two1'
Air diffusers
Multiple sections6
Multiple sections6
Multiple sections'
Final sedimentation
bas ins
Multiple basinsc
Multiple basins'3
Minimum, two13
Chemical flash mixer
Minimum of two or
backup^
No backup
No backup
Chemical sedimentation
basins
Multiple basins0
No backup
No backup
Filters and activated
carbon columns
Multiple units0
No backup
No backup
Flocculation basins
Minimum, two
No backup
No backup
Disinfectant contact
basi ns
Multiple basinsc
Multiple basinsb
Multiple basinsb
aSufficient capacity of remaining pump to handle peak flow with one pump
out of service
^With largest unit out of service remaining units have capacity for at least
50 percent design flow
cWith largest unit out of service remaining units have capacity for at least
75 percent design flow
^With largest unit out of service remaining units able to maintain design
oxygen transfer; backup unit may be uninstalled
eWith largest section out of service oxygen transfer capability not
measurably impaired
flf only one basin, backup system provided with at least two mixing devices
(one may be uninstalled)
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Table 2 Sludge Handling and Disposal System Reliability
SLUDGE HANDLING AND DISPOSAL SYSTEM
Features Common to Class I, II, III:
Alternate methods of sludge disposal and/or .treatment - applicable
to unit operations without backup capability
Provisions for preventing contamination of treated wastewater
Component Backup Features Common to Class I, II, III;
Sludge holding tanks - permissible as alternative to backup capability
with adequate capacity for estimated time of
repair
Backup pump - sufficient capacity of remaining pumps to handle peak
flow with one pump out of service; backup pump may be
uninstalled
Anaerobic sludge digester
Digestion tanks - at least two digestion tanks
Sludge mixing equipment - backup equipment or flexibility of
system such that with one piece of
equipment out of service total mixing
capability is not lost; backup equip-
ment may be uninstalled
Aerobic sludge digester
Aeration basin - backup not required
Aeration blowers or mechanical aerators - at least two units:
permissible for less
than design oxygen
transfer with one unit
out of service; backup
unit may be uninstalled '
Air diffusers - with largest selection out of service oxygen
transfer capability not measurably impaired
Vacuum filter - multiple filters with capacity to dewater design sludge
flow with largest capacity filter out of service; each
filter serviced by two vacuum pumps- and two filtrate
pumps
Centrifuges - multiple centrifuges with capacity to dewater design
sludge flow with largest capacity centrifuge out of service
Incinerators - backup not required; backup required for critical
auxiliary components (e.g., center shaft cooling fan)
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Table 3 Electric Kwer Syston Reliability
ELBCTH1C RjMEK SYSTEM
Features Cannon to Class I, II, 111:
Power sources - two separate and independent electric ^jower sources tran either two separate utility substations
or one substation and one standby generator.
Capacity of backup power source
Class I
Class IIa
Class IIIa
Mechanical bar screen or ll—u rutora
Yes
Yes
Yes
Main pwps
Yes
Yes
Yes
Deyntting
Cptioral
No
No
Rriauy sedimentation
yes
Yes
Yes
Secondary treatment
yes
Optional
No
Pinal sedimentation
yes
Optional
No
Advanced waste treatment
Cptioral
Optional
No
Disinfection
Yes
Yes
yes
Slicige handling and treatment
C4>tioral
No
No
Critical lightirg and ventilation Yes yes yes
aAt least treatment equivalent to sedimentation (and disinfection it required to protect pifclic health),
unless a different level at treatment is required by the state agency.
-------
Class II - discharge into waters that
would not be permanently or unacceptable
damaged by short-term discharges of in-
adequately treated sewage, but could be
damaged by continued (several days) dis-
charge (e.g., recreational waters).
Class III - All other discharges not
included in Class I or Class II.
For each class, Tables 1 through 3 provide recommend
ations for backup or standby unit processes or equipment
Table 1 concerns the wastewater treatment system, Table
the sludge hauling and disposal system and Table 3 the
electrical power system. The reviewer must exercise
judgement with regard to evaluation of reliability and
should at least insure that the design complies with
minimum State requirements.
Re: EPA publication 4 30/99-74-001 (formerly MCD-05),
"Design Criteria for Mechanical, Electric, and
Fluid System and Component Reliability," 1974
Shellfish Waters
Projects which discharge into shellfish waters
may be subject to more stringent requirements with
regard to reliability, disinfection, or other pro-
tective design features. These projects may be
subject to requirements from the State water pollu-
tion control agency, State health agency, or inter-
state organizations, and should be reviewed against
such requirements.
Electrical Power
Treatment plants and pumping stations are to be
designed to preclude bypassing of inadequately treated
sewage. Depending primarily on the size of the facility
this may be accomplished through the use of high level
overflows, diversions to temporary storage facilities,
or alternate power sources during a period of power
outage. Where available, power should be supplied from
two independent power sources (e.g., two separate power
lines not on the same pole, which come from two differ-
ent major power substations, which in turn are supplied
from two independent sources), or supplemented by a
standby generator.
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Alternate power sources should be sufficient to
operate essential equipment (see Table 3 above), and
in the case of a treatment plant without temporary
storage, to provide at least sedimentation (and
disinfection, if required to protect public health),
unless a different level of treatment is required by
the State agency. Standby power may be either por-
table (for use with multiple small pumping stations)
or permanent (for larger pumping stations and treat-
ment facilities). Permanent standby generators may
be used to supplement normal power sources during
peak demand, and should be equipped with trickle
transformers and running clocks. Trickle trans-
formers allow the standby generator starting battery
to be continuously charged, and running clocks
(generally required as part of the warranty by
equipment manufacturers) display the number of hours
that the generator has operated.
Because of its high vulnerability to overturning,
all electrical power equipment (e.g., transformers,
generators, batteries, etc.) must be securely anchored
to prevent movement in the event of an earthquake.
(In some areas, more extensive seismic safety measures,
beyond the scope of this Handbook, will also be required.)
The plans and specifications should include a clear
explanation of the responsibilities of and coordination
between the utility company and various contractors. The
specifications should clearly identify:
i. the electrical utility company which
will supply electrical service to the
treatment works;
ii. the specific equipment or service to be
supplied by the utility company and
contractor which will result in a
complete and operable electrical system;
iii. the specific equipment or service to be
supplied by the mechanical and electrical
contractor in providing a complete operable
electrical power system for all mechanical
equipment, control systems, and instrument-
ation; and
529
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iv. the parties responsible for
providing temporary electrical
power during construction.
j . Load i ngs
The design loadings for various unit processes should
comply with State design standards and in the case of land
application systems, EPA's minimum requirements (see Item 1
below). Loadings such as surface settling rates, detention
times, food to microorganism (F/M) ratios, sludge return
rates, loadings on sludge dewatering equipment, pump capa-
cities, and peaking factors should be adequate for both
initial operation and the design flow, taking into account
diurnal variations in flow.
k. Hydraulic Profile
The hydraulic profile of the treatment plant must be
reviewed to insure that elevations are adequate, taking
into account head losses through pipes and channels.
Particular attention should be given to projects using
trickling filters with dosing siphons.
1. Land Application Systems
Land application systems for both the treatment and
disposal ot wastewater should be based on the applicable
loading and other design criteria discussed in EPA publi-
cation 625/1-81-013, "Process Design Manual, Land Treat-
ment of Municipal Wastewater," October 1981.
The specifications must describe the climatic condi-
tions under which construction may take place and the
specific size of construction equipment necessary to
protect soil integrity during construction.
Particular attention must be given to the level of
treatment and temporary storage prior to land application
of wastewater, as this may effect the eligibility of
portions of the treatment facilities. Extensive and un-
necessary treatment or storage capacity prior to land
application will not be eligible for grant assistance.
530
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m. Sewers
Sewers and interceptors should be adequately
sized to insure minimum scouring velocities and
reasonable peaking factors. Collection sewers
should conform with State standards and include
properly designed fittings for house connections.
Manhole spacing, grades, alignment, elevations,
materials of construction, and connections should
conform to State standards and be designed to
minimize possible sources of infiltration and
inflow. Bedding, backfill materials and compac-
tion requirements should be specified to insure
the integrity of the sewers for their useful life.
Infiltration and exfiltration testing by the
contractor should be required as a criteria for
acceptance.
n. Sewer Rehabilitation
Where sewer system rehabilitation is an
eligible part of the project, the specifications
should dictate the sequence of construction
(e.g., where necessary, sewer cleaning and
closed circuit television inspection with
possible air pressure testing of joints followed
by joint grouting, manhole grouting, slip lining,
or sewer replacement). Because of unforeseen
construction difficulties, bid prices for sewer
rehabilitation should be unit prices based on
estimated quantities. The specifications may
also include provisions for post testing as a
condition of acceptance after rehabilitation
of various sections. This may be particularly
important since grantees are required to certify
after one year of operation whether the project
is meeting its performance standards, including
the elimination of excessive infiltration/inflow.
o. Small Systems
Small wastewater treatment projects may range
from rehabilitation of failed onsite septic
systems to larger cluster systems using small
diameter gravity, vacuum, or pressure sewers.
Since long term experience with these systems
(excluding septic systems) is not readily
531
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available, the technical review of the plans
and specifications must carefully consider
both design and O&M criteria. Design should
conform with EPA's design manual (see Item 1
above) and with State standards for percolation
rates, distribution systems, and depth to ground-
water and bedrock. Where pressure systems are
employed using individual pumps, the specifica-
tions should provide for the stocking of a
reasonable number of replacement pumps or spare
parts. Small systems are also discussed in
Sections IV.C.6.10.d and VI.E.1.
Re: 40 CFR 35.2034, 35.2110? EPA publication
625/1-80-012, "Design Manual, Onsite
Wastewater Treatment and Disposal Systems,"
October 1980.
Sludge Management
In most cases, sludge must be disposed of in
one of three ways: land application, burial in a
secure landfill, or incineration. Design of
facilities for the disposal of sludge, including
intermediate steps such as conditioning, di-
gestion, dewatering, and composting, should be based
on the minimum requirements set forth in the follow-
ing EPA manuals:
i. EPA publication 625/1-83-016, "Process
Design Manual, Land Application of
Municipal Sludge," October 1983;
ii. EPA publication 625/1-79-011, "Process
Design Manual, Sludge Treatment and
Disposal," September 1979;
iii. EPA publication 625/1-78-010, "Process
Design Manual, Municipal Sludge Landfills,"
October 1978;
iv. EPA publication 6 25/1-82-014, "Process
Design Manual for Dewatering Municipal
Wastewater Sludge," October 1982;
v. EPA publication 430/9-81-011 (formerly
(MCD-79), "Technical Bulletin, Composting
Process to Stabilize and Disinfect Municipal
Sewage Sludge," June 1981; and
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vi. EPA publication 625/6-82-006, "Handbook for
Remedial Action at Waste Disposal Sites,"
June 1982.
For incineration or thermal reduction, the
Clean Air Act requires that the discharge gases
meet the requirements of an approved State
Implementation Plan (40 CFR Part 52), the New
Source Performance Standards (40 CFR Part 60),
and the National Emission Standards for Hazardous
Air Pollutants (40 CFR Part 61). Ash (residuals)
resulting from incineration must be disposed of
in a manner which protects the public health and
water quality (both surface and ground water).
An alternate means of sludge disposal is ocean
dumping. Ocean dumping of municipal sludge has
been the subject of considerable controversy and
litigation. Where ocean dumping is proposed by a
grant applicant, special review procedures beyond
the scope of this Handbook are to be employed.
Design of sludge disposal processes must comply
with applicable State and EPA standards. The use
of individual process units (e.g., centrifuges,
belt presses, vacuum filters, incinerators) should
not exceed manufacturers' recommended loadings.
Sufficient capacity must also be included to allow
for time lost to equipment startup and maintenance
(e.g., capacity based on a six hour day if only
one work shift is used).
Domestic sewage sludge is not listed as a
hazardous waste under the Resource Conservation
and Recovery Act. Furthermore, since grant
applicants must develop a pretreatment program if
industrial discharges are likely to interfere with
the treatment process or sludge disposal, it is
reasonable to assume that industrial wastes which
may cause sludge to be considered hazardous will
be prohibited from discharge into the sewer system.
However, if an existing facility, under very
unusual circumstances, is receiving industrial
wastes which may cause the sludge to be classified
as a hazardous waste, the storage, transport, and
disposal of sludge may be subject to EPA regulations.
It is the grant applicant's responsibility to deter-
mine if the sludge is a hazardous waste and if so, to
comply with the appropriate regulations and permit
procedures. In general, the characteristic most
533
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likely to cause sludge to be hazardous is the
toxicity level as determined by the extraction
procedure test, with cadmium being the most frequent
contaminant.
Re: 40 CFR 35.2005(b)(12)(iii); 40 CFR Part 257;
40 CFR Part 261, Subparts C and D; EPA
publication 430/9-80-015 (formerly MCD-72),
"A Guide to Regulations and Guidance for the
Utilization and Disposal of Municipal Sludge,"
1980? EPA publication 430/9-80-001 (formerly
MCD-61), "Evaluation of Sludge Management Systems,
Evaluation Checklist and Supporting Commentary,"
October 1979.
q. Bypassing during Construction
Bypassing of inadequately treated sewage
during construction is normally not allowed.
The construction sequence must be such that
wastes are provided a minimum of sedimentation
(and disinfection if required to protect public
health) during all phases of construction, unless
a different level of treatment is required by the
State agency. Where absolutely unavoidable, by-
passing may be employed for short periods, but
only after approval by the reviewing and
permitting agency.
r. Ease of Maintenance
Equipment which will require routine
maintenance (e.g., lubrication of bearings,
changing of oil and filters, replacement of belts)
should be designed and located in such a way to
provide ease of maintenance. Piping should be
color coded, with arrows indicating the direction
of flow. Valves and controllers should be readily
accessible, especially those used to control
routine operations. Adequate railings, guards,
and other safety devices should protect operating
personnel during routine maintenance.
s. Emergency Alarms
Emergency sirens, lights, or other alarms
should be provided, depending on the size and
complexity of the project. Emergency alarms
should notify operators or emergency personnel
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(e.q., police, fire, disaster coordinator, etc.)
in the event of failures such as power outaae,
major eauipment failure, chlorine leak, or
explosive gases in influent wastewater or
digestion facilities.
t - Pretreatjnent
In reviewing the plans and specifications, it
is necessary to compare the design considerations
against the municipal pretreatment program
developed by the'grant applicant in accordance
with 40 CFR Part 403 (see Section IV.E.2). Where
allowed, some nonresidential wastes may increase
pollutant or solids loadings (e.g., dairy process-
ing or pulp and paper mill wastes), thereby reguir-
ing special design for various unit processes. This
review may also help identify those portions of a
treatment plant, if any, which are not eligible for
grant participation.
u. Aesthet ics '
One area of particular difficulty in reviewing
treatment plant designs concerns the inclusion of
reasonable and compatible aesthetic features. It
is EPA policy that only essential structures, eguip-
ment, and unit processes necessary to meet the
projects performance standards are allowable for
grant participation. This policy, however, must,
be tempered by thoughtful consideration of the
project's location, visibility, and proximity
to nearby residential, commercial, and historic
properties. Reasonable aesthetic features such
as plantings in buffer zones, revegetation of dis-
turbed lands, compatible architectural features, etc.
may be considered allowable costs if approved by
the reviewing agency (see Section IX.P.4, Paragraph
B.2.a). Other features such as brick veneer on
process units, unusual building shapes, special
siding on buildings, covered walkways, fountains,
or office paneling must be questioned, and where
necessary, justified by an analysis similar to a
value engineering study.
Ret EPA Audit Resolution Board Decision 13/14,
"Criteria for Assessing the Allowability of
Aesthetic Features and Landscaping on EPA
Construction Grant Projects." February 24,
1984.
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v. Laboratory Facilities
Laboratory facilities and supplies should be
sufficient to provide for sampling and testing,
according to approved methods, that is necessary
tor daily operational control and for preparation
of reports submitted to State regulatory agencies
for those effluent parameters specified in the
NPDES or SPDES permit. Except where mandatory
implementation of the pretreatment program is
required for a major wastewater treatment works,
expensive and sophisticated tests should not be
performed. Where periodic expensive and
sophisticated tests are to be conducted (e.g.,
periodic checking on industrial waste discharges)
consideration should be given to contracting with
a nearby university laboratory facility, larger
adequately equipped treatment plant, or licensed
commercial testing firm in lieu of onsite facilities.
w. Handicapped Design Considerations
Design of wastewater treatment facilities
initiated after February 13, 1984 must comply with
EPA nondiscrimination regulations. These regulations
require wastewater treatment facilities to be designed
to provide accessibility to the maximum extent possible
to potential handicapped employees. In meeting these
accessibility requirements, a grant applicant is not
required to take any action that would result in a
fundamental alteration in the nature of the treatment
facility, or an undue financial or administrative
burden. Thus, accessibility for handicapped persons
would not have to be provided solely to allow all
members of the general public to tour all areas of
the facility. Similarly, accessibility would not
have to be provided to areas where, because of the
nature of the facility and the requirements of the
jobs there, it is unlikely that persons with parti-
cular handicaps could meet the physical requirements
for those jobs, even with reasonable accommodation.
For example, elevator access need not be provided
to those areas of a treatment plant in which full
mobility would be necessary to perform the essential
functions of the jobs in those areas. However,
administrative and laboratory areas must be access-
ible to persons in wheelchairs.
536
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Recent court decisions have limited the extent
to which these regulations can be enforced in certain
States. However, this limitation applies only to
grantee employment practices, and does not change the
design requirements for physical accessibility.
Any construction for which design was initiated
prior to February 13, 1984, must comply with the
U.S. Department of Health and Human Services (DHHS)
nondiscrimination regulations, or with equivalent
standards that ensure that the facility is readily
assessible to and usable by handicapped persons.
Both the EPA and DHHS regulations require that
alterations to existing facilities must, to the
extent feasible (both structurally and financially),
be designed and constructed to be readily accessible
to and usable by handicapped persons. If structural
changes are necessary, a transition plan must be
prepared by the grant applicant.
Designs conforming with the "American National
Standard Specifications for Making Buildings and
Facilities Accessible to and Usable by the Physically
Handicapped" published in 1980 by the American
National Standards Institute (ANSI A 117.1) constitute
compliance with both the EPA and DHHS regulations.
The principal areas of judgement are the extent to
which various areas of the treatment works must be
accessible and the classification of various
structures as either "existing" or "new".
Re: 40 CFR Part 7, Subpart C; 45 CFR Part 84,
Subpart C; preamble to 40 CFR Part 7,
49 FR 1656 and 1657 (January 12, 1984).
Use of Mercury
While EPA continues to have concerns about
safe use of mercury seals, the cost of process
equipment such as rotary distributors on trick
filters and comminutors that use mercury seals
no longer listed as an unallowable cost.
the
1 ing
is
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Mercury float switches or other such devices
using small quantities of mercury are acceptable
provided reasonable care is exercised by the use of
self contained, leak proof, or corrosion resistant
enclosures.
Where a project involves the rehabilitation of
existing facilities on which mercury seals have
been used, grantees are encouraged to replace
the mercury seals with other types of acceptable
(e.g., mechanical) seals. If significant
additional cost or operating and maintenance
problems will result from the conversion from
mercury seals, their continued use may be approved
provided the grant applicant:
i. agrees to comply with the applicable
provisions of the Toxic Substances
Control Act, Resource Conservation
and Recovery Act and Solid Waste
Disposal Act;
ii. acknowledges potential liability for
damages related to the discharge of
mercury contaminated effluent or
sludge;
iii. establishes a mercury spill monitoring
program, including an annual mercury
inventory;
iv. establishes an emergency response
program for the safe disposal of mercury
contaminated effluent or sludge and the
immediate notification of downstream
water users of possible mercury contamina-
tion ; a nd
v. requests modification of the NPDES or SPDES
permit to identify a potential mercury
contamination hazard.
Re: Preamble to 40 CFR Part 35, Subpart I,
49 FR 6232 (February 17, 1984).
538
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y. Reconfirmation of Innovative or Alternative Technology
While not specifically required by EPA regula-
tions, review of project design may also afford
an opportunity to reconfirm earlier decisions,
generally made on the basis of preliminary infor-
mation in the facilities plan, concerning the
classification of the project or project components
as innovative or alternative (I/A) technology (see
Section VI.E.3). Grant applicants should be notified
of any changes to the I/A classification, since this
will affect project financing.
z. Project Sign
The specifications must require the contractor
to provide and erect a project sign in accordance
with the project sign details found in the EPA
publication, "Construction Grants 1985" (CG-85), or
in accordance with alternative State requirements
which have been approved by EPA.
aa. Buy American
By inclusion of the model subagreement clauses
or their equivalent in the specifications (see
Item l.m above) the grant applicant has initially
satisfied the Buy American provision. However, the
regulations further clarify this issue by providing
that contractors must use domestic construction
material in preference to nondomestic material if
it is priced no more than 6 percent higher than the
bid or offered price of the non-domestic material,
including all costs of delivery to the construction
site and any applicable duty, whether or not assessed.
Where a product consists of domestic and nondomestic
materials the product shall be considered domestic
if the American manufactured components represent
50 percent or more of the product.
EPA may waive the Buy American provision based
upon relevant factors such as:
i. such use is not in the public interest,
ii. the cost is unreasonable,
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iii. available EPA resources are not sufficient
to implement the provisions (requires EPA
Headquarters approval),
iv. products are not reasonably available or of
satisfactory quality in the United States, and
v. provisions conflict with multilateral govern-
ment procurement agreements (requires EPA
Headquarters approval).
Re: 40 CFR 33.710? 40 CFR 33.1030, Paragraph 12
bb. Nonrestrictive Specifications
Specifications must be written to encourage
free and open competition. The specifications
shall contain a clear and accurate description
of the technical requirements for the material
or product. The description shall include
a statement of the qualitative nature of the
material or product and set forth those minimum
essential characteristics and standards to which
it must conform.
When, however, in the judgement of the grant
applicant it is impractical or uneconomical to
make a clear and accurate description of the
technical requirements, a "brand name or equal"
description may be used to define the performance
or other salient requirements of the material or
product. In so doing, the specifications must
clearly state the salient requirements which must
be met by the material or product.
With regard to materials such as pipe or grout,
it is preferable to use nationally recognized
performance specifications such as AWWA, ASTM, or
Federal specifications.
While the decision to use a "brand name or equal"
specification rests with the grant applicant, the
project reviewer is to insure that the exercise of
this provision does not frustrate the requirements
for free and open competition.
540
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An exception to the nonrestrictive specifications
requirement is allowed where the features of a
material or product are necessary to demonstrate
a specific thing, such as in the case of proposed
innovative technologies, or to provide for the
interchangeabi1ity of parts or equipment.
Where a grant applicant uses restrictive
specifications, it may be prudent to advise the
grant applicant that the project files should contain
a justification for such actions, developed prior to
the bid opening date, in the event of a future bid
protest.
Re: 40 Ct'R 33.255
cc. Subsurface Information
Adequate subsurface information (soil borings,
etc.) must be provided to allow each bidder to
accurately estimate the cost of excavation required
by the plans and specifications. Failure to provide
such information increases the probability of a
future contractor claim under the "differing site
conditions" clause.
dd. Storage of Equipment and Materials
The specifications should require that equip-
ment and materials delivered to the project site
are properly secured and stored in accordance
with the manufacturer's recommendations. If the
grantee purchases equipment directly from a
supplier, specific provisions must be made for
transfer of ownership of the equipment from the
grantee to the contractor.
3. Biddability and Constructibi1ity Review
In order to prevent unnecessary costs due to such problems
as unclear specifications or unusual construction techniques,
it is important that plans and specifications be reviewed for
biddability and constructibi1ity (B/C). While the B/C review
does not involve an evaluation of the adequacy of design to
achieve the required level of treatment, it does attempt to
insure that the plans and specifications are suitable for
bidding and that the project can be constructed as proposed.
541
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a. Biddabi1i ty - A "biddabi1ity" review esentially attempts
to i nsure tha t:
i. the bid documents are clear and understandable,
ii. all necessary information has been included,
iii. the project is divided into biddable packages
or contracts,
iv. specific bid items are clearly defined to
facilitate bidding and evaluation, and
v. the plans and specifications are sufficiently
detailed to allow reasonable bidding.
b. Constructibi1ity - A "constructibi1ity" review
evaluates the suitability of the proposed project
and its components in relation to the project site,
.including:
i. any potential construction constraints imposed
by the site,
ii. real or possible conflicts inherent in the
plans and specifications,
iii. compatabi1ity between plans and specifications,
iv. compatabi1ity of the plans and specifications
with construction procedures and equipment, and
v. other potential problems in constructing the
project.
Because this review requires an up-to-date knowledge
of current construction practices and the cost and availability
of various categories of labor and construction equipment, it
is usually performed by specialized personnel who maintain
this up-to-date knowledge. In some States, the COE performs
this review for the State agency, under an interagency
agreement with EPA (see Section I.F.5).
4. Discrepancies
Contract documents, plans, and specifications are reviewed
by the reviewing agency to insure that they meet minimum State
and EPA requirements concerning treatment level and competitive
bidding. Implicit in this review is the assumption that the
project, if constructed in accordance with the plans and
542
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specifications, will achieve the effluent limitations and
project performance standards required by the NPDES or SPDES
permit. The review is also to insure that sound engineering
design principles are employed, primarily with regard to
sanitary engineering process considerations. Structural,
electrical, and mechanical details of design are not normally
reviewed, as they are the responsibility of the engineer whose
seal appears on the plans and specifications. Obvious ir-
regularities, however, should be called to the attention of
the design team through the grant applicant.
Discrepancies or deviations from State or EPA require-
ments are to be noted and brought to the attention of the
grant applicant for resolution. Failure on the part of the
grant applicant to resolve discrepancies or to provide
documentation supporting a deviation from the requirements
may form the basis for denial of grant assistance.
The conduct of the review by the reviewing agency does not
relieve the design engineer or grantee of their legal liability
for the adequacy of the design. Neither EPA nor the State agency
is responsible for increased costs resulting"from defects in
the plans, design drawings and specifications, or other contract
documents.
D. VALUE ENGINEERING
Purpose:
A VE study is a specialized cost control technique which
identifies unnecessary high cost in a project and recommends
more economical means of satisfying performance requirements
without sacrificing quality or reliability.
Discussion:
A VE study is required for all projects which have not
received design (Step 2) grant assistance, from EPA and whose
total estimated building costs are;more than $10 million
(i nclud i ng sewers). A VE study is also required for all
projects which received a Step 2 grant after July 1, 1976 and
whose total estimated building cost (excludi ng interceptor and
collection sewers) is $10 million or more. A VE study is
encouraged for all other projects because of the potential
savings which may be realized.
543
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The reviewing agency should insure that the VE team and
the VE scope of work are commensurate with the size and
complexity of the project. At the time of plan and specific-
ations review, the reviewer is to note the VE recommendations
and whether or not these recommendations have been incorporated
into the project design.
A VE team consists of multidisciplinary design pro-
fessionals guided by a VE coordinator. Disciplines re-
presented on the team may include sanitary, electrical,
mechanical and civil/structural engineers, a treatment plant
operator and a cost estimator. The VE coordinator should have
demonstrated technical and managerial capability, have completed
a 40-hour VE workshop and have participated in at least two VE
studies on wastewater treatment projects. It is desirable for
the VE coordinator to be a Certified Value Specialist. Other
team members should be experienced professionals with VE
training, and ideally should have participated in other VE
studies on wastewater treatment projects. Because it is
essential that the VE team be independent and objective, it
is strongly recommended that a separate VE contractor be
employed in lieu of a subcontractor to the design firm. Where
it is necessary to have the same firm provide both the design
team and the VE team, specific measures must be taken to ensure
the independence of the VE team (e.g., no person can be a
member of both teams; teams work in separate offices; teams
report to two different vice presidents, etc.).
The scope of work for the VE study should be commensurate
with the sizo and complexity of the project, and should include
a review ot all components of the project. Depending on the
size and complexity of the project, the VE effort may vary from
one VE team and one review session to multiple teams and multiple
review sessions. The VE study for a large wastewater treatment
plant should include at least two review sessions: at the 20 to
30 percent design stage, an evaluation of plant layout, structural
design process units, and hydraulic capacity; and at the 65 to
75 percent design stage, an evaluation of the electrical and
mechancial systems.
The VE methodology will employ several phases of investi-
gation such as:
information phase,
speculative or creative phase,
evaluation and analytical phase,
investigation phase, and
developmant of recommendations.
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The VE study will conclude with a final report (intermediate
reports may also be issued) which incorporates:
accepted VE recommendations,
costs and schedules for implementing the accepted
recomme ndat ions,
rejected recommendations and reasons for rejection, and
net savings from the VE recommendations over the useful
life of the project.
In order to better understand the VE recommendations,
it may be helpful for the reviewer to attend key sessions
of the VE review. Grant applicants should be encouraged
to implement all feasible recommendations of the VE study,
and rejection of recommendations should be adequately
justified before acceptance of the study by the reviewing
agency. However, reviewing agencies must exercise reason-
able judgement in questioning those recommendations not
accepted by the grant applicant.
Review Procedures:
1. Conduct of the Study
During periodic progress reviews with the grant applicant,
revi ew:
a. the scope of the VE study to insure that it is
commensurate with the size and complexity of the
proj ect;
b. the qualifications of the VE coordinator and team
members;
c. the independence and objectivity of the VE team;
and
d. the methodology proposed or employed during the
study.
2. Implementation of Recommendations
At the completion of the VE study and during review of
the plans and specifications:
a. obtain a copy of the final VE report, noting
recommendations accepted and net cost savings
(both capital and O&M over the life ot the
project);
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b. insure that accepted recommendations are incor-
porated into the project design and reflected in
the plans and specifications; and
c. review VE recommendations rejected by the grant
applicant and the justification for rejection.
Re: 40 CFR 35.926, 35.2114; EPA publication 4 30/9-76-008,
"Value Engineering Workbook for Construction Grant
Projects," July 1976.
E. USER CHARGE SYSTEM
Purpose:
Develop a municipally enacted financial managment system
which provides for the collection of revenues from users in
proportion to their use. Collected revenues must be
sufficient to offset the costs of operation, maintenance, and
replacement of equipment (OM&R).
Discussion;
As a prerequisite to Step 3 grant award, the UC system
submitted by the grant applicant and by each subscriber
community must be approved by the reviewing agency. The UC
system provides for the collection of revenues from all system
users to offset OM&R costs, including salaries, supplies,
chemicals, utilities, insurance, and replacement of equipment
and accessories (e.g., pumps, motors, bearings, etc.) which are
necessary during the useful life of the project to maintain
capacity and performance. As a component of the UC system, the
term "replacement" does not include the replacement of the
treatment works at the end of its useful life. The UC system
mandated by EPA regulations also does not include charges
levied on customers to pay bond interest, retire bonds, or
amortize debt.
The charge to each user must be based on actual use, ad
valorem taxes, or a combination of both. A system based on
actual use (or estimated use during the first year for new
facilities) assumes that discharges are measured in some way,
such as through water meters (or sewage flow meters for
large industrial dischargers), and that each user or class
of users pays its proportionate contribution relative to the
total flow. Very often the basic UC will be proportionate
to the volume of discharge with a surcharge added for non-
domestic wastes, considering items such as sewage strength
and rate of discharge (e.g., peak flows). The UC system must
546
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also provide that each user which discharges pollutants that
cause an increase in the cost of managing effluent or sludge
pay for such increase based on the actual additional cost.
The use of ad valorem taxes as a basis for a UC system is
allowed under EPA regulations for a grant applicant which had
in existence on December 27. 1977, and in continuous use
thereafter, a system of dedicated ad valorem taxes for the
collection of revenues to offset wastewater treatment OM&R
costs. In most cases, the existing system will reauire
revision to meet EPA requirements. To be approvable, the
proposed UC system must distribute costs to residential and
small nonresidential users (including, at the grant applicant's
option, commercial and industrial users discharging no more
that the equivalent of 25,000 gallons per day of domestic
sanitary waste) in proportion to their use as a class, and must
charge each commercial and industrial user discharging more
than 25,000 gallons per day its share based upon actual use.
This last reguirement is normally met through the use of a
surcharge based on sewage strength and/or rate of discharge.
In some cases, rebates of property taxes may be reguired for
industries with large property taxes and proportionately
smaller wastewater loadings.
Communities with combined sewer systems, or with sinnificant
amounts of inflow into nominally separate sewer systems, may dis-
tribute the OM&R costs of treating this flow among all users based
either on actual use, or on a system which uses factors such as
flow, the land area of each user, or the number of hookups or
discharges (or property value for ad valorem systems). Projects
which generate revenues from the sale of wastewater byproducts
(e.g., sale of crops, sludge fertilizer, digestor gas, etc.) must
use the revenues to reduce all user charges proportionatelv.
The UC system represents part of the financial management
system developed by the grant applicant and must include an
accurate accounting of generated revenues, expenditures and
reserves for replacement. The financial management system
must provide for periodic revision to UC rates and an annual
notification to users, in conjunction with a regular bill,
of the UC rates (including surcharge rates) and the portion
of total charges attributable to wastewater treatment. If the
grant applicant will provide wastewater treatment services
to other subscriber communities, each such community must also
enact a UC system as described above. The UC system developed
in accordance with EPA regulations will take precedence over
any terms or conditions of other inconsistent agreements.
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Review Procedures;
The reviewer,of a'proposed UC system should:
1. Compare the proposed UC rates against those
presented to the public during facilities
planning. If a significant increase has occurred,
it may be necessary to provide for additional
public participation.
2. Insure that the budget upon which the user charges
are based include.reasonable OM&R costs. Debt,
bond costs, and other costs not associated with
OM&R are not subject to EPA regulations, and must
be separately identified by the grantee and
recovered separately from the UC system.
3. For systems based on actual use, insure that each
user or class, of users will pay its proportionate
share, and that a reasonable means of determining
actual use has been or will.be established.
4. For systems based on ad valorem taxes, insure
that the limitations described in the discussion
above are satisfied.
5. Insure that OM&R costs for treating I/I (and storm
water in systems with combined sewers) are proportioned
among all users based either on actual use, or on
factors such as flow volume, land, area of users, or
number of hookups or discharges (or property valuation
only for ad valorem systems).
6. Insure that the system provides for an accurate
accounting of revenues and expenditures, periodic
updating (first year may be baised on estimates
for new systems and ideally annual updating
thereafter).and annual notification to.users of
the UC. rates and portion.of charges for wastewater
treatment services. ".
7. For multijurisdictional projects, insure that each
participating community will enact a UC system.
8. Insure that the UC system will take precedence over
any other inconsistent agreement.
9. Insure that the UC system is in "a form which will
allow municipal enactment before the project is
placed in operation, and will continue for the life
of the project.
548
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Re: 40 CFR 35.2140, 35.2122, 35.2208; EPA publication
4 30/9-84-006, "User Charge Guidance Manual for
Publicly-Owned Treatment Works," June 1984; EPA
publication, "Utility Manager's Guide to Financial
Planning," May 1984.
F. SEWER USE ORDINANCE
Purpose:
Develop an ordinance which will limit the types and amounts of
materials discharged into the sewer system, preclude the intro-
duction of new inflow sources, and protect the integrity of the
wastewater treatment and disposal system.
Discussion:
As a prerequisite to Step 3 grant award, the reviewing agency
must approve the grant applicant's SUO or other legally binding
instrument. Regulatory requirements for the SUO include:
prohibition of new intlow sources;
proper design and construction of new sewers and
connections, and
prohibition of toxic waste or other pollutants in
amounts or concentrations that:
o endanger the public safety or the physical
integrity of the plant,
o cause violation of effluent limitations, or
o preclude the selection of the most cost effective
alternative for wastewater treatment and sludge
disposal.
While the three items above are required, the SUO may also be
used as a legal basis for other municipal requirements which
represent good management practices. These requirements may
include:
removal of illegal connections or rehabilitation of
deficient sewer connections as a condition of property
sale,
limitations on wastewater strength from non-domestic
users,
549
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prohibition against dilution,
notification procedures concerning accidental spills
discharge reporting requirements,
rights of all parties, including the right of the
municipality or authorized EPA/State personnel to
enter all properties for testing and measurement,
rights of industrial users, including protection of
trade secrets, and
safety requirements.
Subscriber communities must also enact SUOs, in order t
provide protection for the entire system. These subscriber
communities' ordinances must also be approved by the reviewi
agency.
Review Procedures:
An approved SUO must, at a minimum:
1. Prohibit new inflow sources.
2. Require the proper design and construction of
new sewers and sewer connections.
3. Prohibit toxic or other pollutants in amounts
or concentrations which:
a. endanger public safety or the physical
integrity of the treatment works,
b. cause a violation of effluent limita-
tions, or
c. preclude selection of the most cost
effective alternative for wastewater
treatment and sludge disposal.
4. Be adopted before the project is placed in
operation.
Re: 40 CFR 35.2122, 35.2130, 35.2208
550
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G. PLAN OF OPERATION
Purpose:
Develop a descriptive, chronological planning schedule for
the operation and maintenance of the treatment works which
considers activities necessary during construction, startup,
and continuing operations.
Discuss ion:
As a prerequisite to Step 3 grant award, a draft plan of
operation must be submitted by the grant applicant. The
plan of operation should include both a description of and a
schedule for significant actions required during construction,
startup, and the first year of operation. The plan of operation
should address the development and implementation of an operating
budget, .administrative procedures, staffing and training plans,
and an O&M manual. Since the dates for specific actions contained
in the plan of operation's schedule are not known at the time of
design, they may be related to a percentage of construction
completion. A final plan of operation must be approved before
more than 50 percent of the EPA grant may be paid (see Section
IX.B.5.a) .
Review Procedures:
The draft plan of operation shall consist of a descriptive
schedule which addresses the development and implementation of
the following items:
1. Budget
An adequate budget is needed to provide for
the efficient administration of the project. ' The
budget should .include estimates for salaries,
supplies, utilities, training, contract services,
replacement parts, and other items necessary for
operation and maintenance. The budget will form
the basis for computing user charges (see Section E
above). Particular attention should be directed at
estimated operator salaries and benefits to insure
that they are sufficient to attract and retain
qualified personnel.
2. Administrative Functions
These include procedures for submission of State
required operating reports, purchasing procedures,
and the development and implementation of a maintenance
system, a financial management system, and a property
management system.
551
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3. Staffing and Training
An adequate staffing plan (compatible with the
size and complexity of the facilities) should include
the organizational structure, job descriptions, salaries,
numbers of staff, and license requirements for operators.
The chief operator should be hired before construction
is 50 percent complete and hiring problems, if any,
should be identified 60 days before startup and resolved
within the next 30 days. Employee training in safety
and operations should begin 30 days prior to startup
and should continue during at least the first year of
operat ion.
4. Operation and Maintenance Manual
An adequate O&M manual is needed as a day-to-
day guide for operators. It includes items such as:
a. design information, including design
and peak flows, pump capacities,
detention times, F/M ratios, mixed liquor
suspended solids (MLSS) levels, and other
design criteria;
b. startup procedures for each unit process
and piece of equipment;
c. unit process monitoring and control
i nformation;
d. maintenance management system and
schedule for lubrication, oil and filter
changes, and other preventive and routine
ma i nte nance;
e. laboratory tests for monitoring and
controlling unit processes and specific
laboratory test reports to be sent to
State agencies;
f. safety procedures, with particular
emphasis on hazardous areas such as wet
and dry wells, chlorination facilities
or anaerobic digestors;
g. troubleshooting procedures for problems
which typically occur in treatment
facilities;
552
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h. emergency operating plan which anticipates
emergency conditions (e.g., power outage,
chlorine leak, excessive flows) and
designates officials to be notified and
procedures to be followed until normal
operations can be resumed.
The final O&M manual must be approved before more
than 90 percent of the grant may be paid (see Section
IX.B.5.b).
Re: 40 CFR 35.2106; EPA publication 430/9-74-001,
"Considerations for Preparation of Operation and
Maintenance Manuals," 1974.
H. INTERMUNICIPAL SERVICE AGREEMENT
Purpose:
Develop an intermunicipal agreement for projects serving two
or more municipalities, which legally defines each community's
responsibilities for financing, building, and operating the
proposed treatment works.
Discussion:
As a prerequisite to Step 3 grant award, an executed inter-
municipal service agreement must be submitted by the grant
applicant for projects serving two or more municipalities. The
agreement or other legally binding instrument describes, in
detail, the responsibilities of each community for financing,
building, and operating the project. At a minimum, the details
must include the basis upon which costs are allocated, the
formula by which costs are distributed, and the manner in which
the cost allocation system will be administered.
Other provisions of the agreement may include the frequency
and basis for periodic revision to proportionate costs, methods
for measuring flows or sewage strength, allocation of reserve
capacity, enactment and enforcement of sewer use ordinances,
implementation of the user charge system, implementation of
sewer system rehabilitation where applicable, conditions under
which the agreement may be changed, and procedures for resolving
intermunicipal disputes. The intermunicipal service agreement
therefore must include sufficient detail to form the basis for
project implementation and a long range working relationship
betweeen the communities.
553
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The requirements tor an intermunicipal service agreement
may be waived by the reviewing agency if certain conditions,
described below, are met. However, reviewing agencies should
waive these requirements with great care, since the undertaking
of a substantially increased role or financial burden has
frequently caused a strain in the relationship between a
grantee and a subscriber community. In the absence of an
intermunicipal service agreement, such a strain could seriously
impair the financial and institutional support for the waste-
water treatment facility.
Review Procedures:
1. An approvable intermunicipal service agreement must include
the following provisions:
a. the basis upon which costs are allocated,
including the value of existing facilities,
value of land, periodic capital requirements
for expansion, and costs for OM&R and adminis-
tration;
b. the formula by which costs are allocated, based
on such factors as quantity, strength, and rate
of flow; and
c. the manner in which the cost allocation system
will be administered (e.g., cost accounting
records, management systems).
2. The requirements for an intermunicipa1 service agreement may
be waived by the reviewing agency if the grant applicant can
demonstrate:
a. that such an agreement is already in place,
in which case a copy of the agreement must be
submitted and reviewed; or
b. evidence of:
i. historic service relationships for
water supply, wastewater, or other
services between affected communities
regardless of the existence of formal
agreements, and
ii. financial strength of the grant applicant
which is adequate to continue the project
even if the subscriber community which
lacks an intermunicipal agreement fails
or ceases to participate in the project.
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Re: 40 CFR 35.2104(b), 35.2107: EPA final policy
"Financial and Management Capability for Construction,
Operation and Maintenance of Publicly Owned Wastewater
Treatment Systems," 49 FR 6254 through 6258
(February 17, 1984)
I. INDUSTRIAL WASTES AND FEDERAL FACILITIES
Purpose:
Insure that grant funds are not utilized to construct a
project or portion thereof for the transport and treatment of
industrial wastes or wastes from Federal facilities unless
regulatory limitations are satisfied.
Discussion:
During the review of the plans and specifications, it is
necessary to insure that the capacity for the treatment works
does not include industrial wastes nor wastes from Federal
facilities unless specific conditions are satisfied. Grant
assistance may be awarded only when a project is included in a
complete waste treatment system, and the principal purpose of
both the project and the system is the treatment of domestic
wastewater of the entire community, area, region, or district
concerned. Where industries will discharge wastes to a project,
the significant industrial users and all industries intending
to increase their flows or relocate in the area must submit
"letters of intent" during facilities planning, documenting
capacity needs and characteristics for existing and projected
flows.
Since Federal law prohibits the use of EPA funds to support
the operations of other Federal agencies, the cost of construct-
ing significant treatment capacity for the use of other Federal
agencies must be avoided.
Review Procedures:
During review of the plans and specifications, identify
those process units or portions of capacity of the project which
are attributable to the transport and treatment of industrial
wastes. This information will be utilized in determining
allowable project costs, which must not include:
1. costs of interceptors or collector sewers or
other facilities constructed exclusively or
almost exclusively to serve industrial users;
and
555
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2. costs for control or removal of pollutants in
wastewater introduced by industrial users, unless
the grant applicant is also required to remove
such pollutants from nonindustrial users.
Similarly, the process units or portions of capacity of a
project attributable to the transport and treatment of wastes
from a Federal facility must be identified during the review of
the plans and specifications. This information also will be used
in determining allowable costs of the project. Grant assistance
will not include costs to transport and treat wastes from a
Federal facility if the wastes constitute more than 250,000 gallons
per day or five percent of the design flow, whichever is less.
The grant applicant should obtain funds for these costs directly
from the Federal facility which causes these limitations to be
exceeded.
Re: 40 CFR 35.2030(b ) (3 ) (ii ) , 35.2125 , 35.2127
J . DESIGN ACCEPTANCE
Purpose and Discussion:
After review of the contract documents, including plans and
specifications and other required documents, the grant applicant
should be notified in writing that specific items have been
accepted. In no instance should the grantee be informed that
the plans and specifications have been "approved," except at the
time of grant offer, since the CWA provides that such approval
constitutes a contractual obligation of EPA to financially assist
construction of the project.
In addition, it will be beneficial to advise the grant
applicant of other documents or actions necessary as part of the
grant application process. The procedure below suggests items
which should be communicated to the grant applicant.
Procedure:
1. Plans and Specifications
In the letter to the grant applicant accepting
plans and specifications, include language which conveys
the following:
a. Plan and specification acceptance does not
constitute a commitment for grant award.
b. Acceptance of plans and specifications by the
reviewing agency does not relieve the grantee and
the design engineer of their legal liability for
the adequacy of the design.
556
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c. The review of the plans and specifications is for
administrative purposes only, to assess the likelihood
that the project will achieve its wastewater treatment
purposes. The structural, mechanical, and electrical
aspects of the plans and specifications are not reviewed
in detail.
d. Contract documents are subject to regula-
tions in effect at the time of grant award,
and may require revision or updating (e.g.,
wage rate determination).
e. Identification of project performance
standards against which performance will be
measured.
f. Eligible capacity of treatment facilities is limited
to the capacity required to serve existing needs
(i.e., needs on the date of grant award), except
for interceptor segments for which the first segment
was awarded a grant before December 29, 1981.
Re: 40 CFR 35.2050
2. Preparation for Grant Application
In the letter to the grant applicant accepting items
discussed in Sections D through H above (e.g., UC system,
SUO, etc.), it will be beneficial to briefly review the
required items for a grant application (particularly the
limitations on award) in Sections VI.C through VI.J, and
identify those which are applicable to the specific
project. These items should be brought to the attention
of the applicant in order to preclude delays in processing
the application. Experience has shown that the following
items have caused undue delay and are generally worthy
of special note:
a. Reassessment of financial capability based on
revised cost estimates after completion of
construction drawings and specifications.
b. Method and timing of raising local shares of project
costs to insure that all construction subagreements
are awarded within 12 months after grant award.
c. Intermunicipal agreements.
d. Acquisition of land, rights of way, and easements.
e. MBE'/WBE participation requirements.
557
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No Future Grant
Where a project is unlikely to receive grant assistance
in the near future, the letter to the applicant should so
indicate. Comments concerning deficiencies in the plans,
specifications, or other items discussed in this Chapter
should be limited to.those which will be useful to the
municipality if the project is constructed without Federal
funds. Where appropriate, the project should be prepared
tor closeout (see Section VIII.B).
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CHAPTER VI
GRANT PROCESSING
A. INTRODUCTION
B. APPLICATION CONTENTS
C. APPLICATION REVIEW
D. LIMITATIONS ON AWARD
E. ADDITIONAL CONSIDERATIONS FOR AWARD
F. STEP 2+3 GRANTS
G. COMBINED SEWER OVERFLOW GRANTS
H. LAND ACQUISITION GRANTS
I. INNOVATIVE OR ALTERNATIVE TECHNOLOGY
FIELD TESTING GRANTS
J. INNOVATIVE OR ALTERNATIVE TECHNOLOGY
MODIFICATION OR REPLACEMENT GRANTS
K. GRANTS TO STATES FOR ADVANCES OF ALLOWANCE
L. FEDERAL GRANT SHARE
M. GRANT AWARD PROCEDURES
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A. INTRODUCTION
This chapter describes the documents which constitute a
Step 3 grant application package, the review procedures for each
document, and the limitations which must be satisfied before
grant award. Later sections describe Step 2 + 3 and other special
purpose grants and the limitations which must be satisfied before
these grants can be awarded. The final sections discuss the method-
ology for establishing the EPA grant amount and the procedures
associated with the award of a grant.
Section B, Application Contents, lists those items specif-
ically required by the regulations for a Step 3 grant application.
Section C, Application Review, describes the review of the
basic documents which constitute a Step 3 grant application. It
does not include limitations on award.
Section D, Limitations on Award, describes those limitations,
specifically required by the regulations, which must be satisfied
before grant award. This section also discusses phased and
segmented projects and limitations on the eligibility of reserve
capacity.
Section E, Additional Considerations for Award, describes
other considerations which may have to be satisfied before grant
award, but which are not listed under the specific heading
"Limitations on Award" in the construction grant regulations.
Section F, Step 2+3 Grants, describes the conditions under
which a Step 2+3 grant may be awarded.
Section G, Combined Sewer Overflow Grants, describes conditions
for the award of grants for both marine and nonmarine combined sewer
overflow (CSO) Step 3 projects.
Section H, Land Acquisition Grants, describes conditions and
limitations for the award of grants for the acquisition of eligible
land.
Section I, Innovative or Alternative Technology Field Testing
Grants, describes conditions and limitations for the award of grants
for field testing of an innovative or alternative (I/A) technology.
Section J, Innovative or Alternative Technology Modification
or Replacement Grants, describes the regulatory requirements which
must be satisfied before a 100 percent modification or replacement
(M/R) grant may be awarded for a failed i/A technology.
603
J Preceding Page Blank 1
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Section K, Grants to States for Advances of Allowance, describes
the procedures tor awarding a grant to a State, in order for the
State to provide advances of the allowance for facilities planning
and/or design to small communities.
Section L, Federal Grant Share, describes the methodology
tor computing the EPA grant share.
Section M, Grant Award Procedures, describes the procedures
for awarding grants and the circumstances under which special
grant conditions may be added to the grant agreement.
B. APPLICATION CONTENTS
The basic items to be included in a grant application pack-
age for a Step 3 grant are listed below. The requirements for
other grants (e.g., Step 2+3, correction of CSO, land acquisition,
etc.) are described later in this chapter. The items below are
only those submitted by the applicant, and do not include items
prepared by the State and submitted to EPA. The items are listed
here for quick reference, while the review procedures for each item
are described later. The reviewer is to make a preliminary review
of the application package to insure that all items are included
(some may be contained within the facilities plan), that all appli-
cable portions of the forms are completed, and that the documents
are signed by the appropriate officials. If items are missing or
an explanation is necessary, the reviewing agency should contact the
grant applicant; however, the review is to proceed as far as possible,
to minimize delays once corrections are made. A complete application
package includes:
1. application (EPA Form 5700-32), including the author-
izing resolution and site certificates;
2. facilities plan prepared in accordance with 40 CFR
Part 35, Subpart E or Subpart I as appropriate;
3. evidence of adequate public participation based on
State or local statutes;
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4. notification of any previous advance of allowance or
Step 1 or Step 2 grant received;
5. final design drawings (i.e., plans) and specifications;
6. project schedule;
7. evidence of compliance with the applicable
limitations on award, including:
a. advanced treatment review;
b. conformance with the approved water quality
management (WQM) plan;
c. demonstration and certification of financial
and management capability to build, operate,
and maintain the proposed project;
d. certification that the grant applicant has
not violated any Federal, State, or local law
relating to corrupt practices in connection
with facilities planning or design;
e. indication of the level of participation
for minority and women's business enter-
prises (MBE/WBE) during facilities planning
and design (EPA Form 6005-1);
f. indication of whether or not the grant
applicant has used the services of an
individual, organization, or unit of
government whose name appears on EPA's
master list of debarments, suspensions,
and voluntary exclusions;
g. draft plan of operation;
h. executed intermunicipal service agreements,
i. environmental review;
j. value engineering (VE) study;
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k. for collector sewers, evidence that either:
i. the existing collection system being
replaced or rehabilitated was not built
with Federal funds awarded on or after
October 18, 1972, or
ii. the new collection system will serve a
community which was in existence on
October 18, 1972;
1. prior approval of any preaward costs;
m. analysis of infiltration and inflow (I/I);
n. user charge (UC) system;
o. sewer use ordinance (SUO);
p. estimate of capacity required to treat current
needs, and amount of reserve capacity;
q. amount and nature of industrial and Federal
facility wastes to be treated; and
r. assurance of access to individual systems;
8. intergovernmental review;
9. procurement system certification (EPA Form 5700-48)
and related documents; and
10. certification of nondiscrimination (EPA Form 4700-4)
Re: 40 CFR Part 7; 40 Ct'R Part 29; 40 CFR Part 33;
40 CFR 35.2040, 35.2100 through 35.2140
606
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C. APPLICATION REVIEW
1. Application Form
Purpose:
Present information from the grant applicant which is necessary
for a grant award. The application also contains a list of assur-
ances from the applicant which are necessary to satisfy statutory
requirements. Additional assurances may also be necessary.
Discussion:
The application for grant assistance is submitted by the munic-
ipality designated in the approved WQM plan and in the facilities
plan for the project. The application must be signed by an official
of the municipality, and must be accompanied by a resolution from
the municipal governing body, designating this official as the
municipality's authorized representative.
Individual items in the application form are reviewed for
completeness and accuracy. In reviewing the application form, the
reviewer insures that the grant applicant:
has the legal, institutional, managerial, and
financial capability to insure adequate building
and operation of the project;
has the ability to expeditiously initiate procure-
ment and to complete the project in accordance
with the project schedule;
has complied with all applicable statutory and
regulatory requirements prior to grant application;
recognizes and agrees to comply with all other
applicable statutory and regulatory requirements
during construction and for the useful life of the
project; and
- provides documentation or narrative statements
supporting the cost estimates included in the
application.
During the review of the application form, particular atten-
tion should be given to the source of funds for the local share
of project costs (e.g., State grants, sale of bonds, other Federal
grants which are authorized by statute to be used as non-Federal
607
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funds on EPA-funded construction projects, etc.). In addition,
title to ineligible land, easements, and rights-of-way must be
acquired prior to application, or have progressed to the stage
where title or interest in the property may be obtained prior to
the award of construction contracts. Problems with local share
funding and land acquisition must be satisfactorily resolved prior
to grant award in order to prevent costly delays in building the
project. Condemnation proceedings, if required, are usually time
consuming, and therefore should be undertaken well in advance of
submitting the grant application.
Review Procedures:
Review the application form and insure that:
a. the name, project number, description of the
project, and grant amount requested agree with
the approved State project priority list;
b. the application form is signed by the municipality's
authorized representative, and a certified copy of
the authorizing resolution is attached;
c. documentation of the applicant's interest in the
project site, easements, and rights-of-way is
complete; the method of acquisition, including
relocation, complies with applicable provisions of
40 CFR Parts 4 and 30; and where land acquisition
costs are eligible for grant participation, the
Federal interest in the eligible land is protected
(sees Sections H.l.f, H.3.b, and M.5.d below);
d. the applicant can obtain funds for the balance of
project costs beyond the EPA grant to allow the
prompt initiation of construction;
e. the applicant has the legal, institutional.,
managerial, and financial capabilities to build,
operate, and maintain the project (see Section D.4
below);
f. the estimated project costs reasonably compare with
the costs in the facilities plan, the financial
capability analysis, and presentations to the public;
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g. estimated project costs are separated into allow-
able and unallowable costs, and allowable costs
are separated into the following cost categories:
construction, administration, legal, fiscal,
engineering services (both during construction
and for one year after the initiation of operation),
contingency allowance, allowance for facilities
planning and design, force account, and land acquisi-
tion and relocation;
h. the assurances section of the application is attached
to the application form; and
i. all items in the application form are either complete
or marked "not applicable" (may be abbreviated "N/A"),
Re: 40 CFR 30.302, 30.520, 30.535, 35.2040(b), 35.2104
35.2212
2. Facilities Plan
An approvable facilities plan which satisfies the requirements
of 40 CFR Part 35 must accompany the application for grant assis-
tance .
If work on facilities planning was initiated before May 12,
1982 (the effective date of 40 CFR Part 35, Subpart I), the
facilities plan must satisfy the requirements of 40 CFR Part 35,
Subpart E, rather than Subpart I. If the facilities plan was not
prepared under an EPA Step 1 grant, a grant applicant claiming
initiation of facilities planning before May 12, 1982 will need to
substantiate this claim with appropriate documentation. If
facilities planning was initiated prior to May 12, 1982, and meets
the requirements of Subpart E, no revisions to the facilities plan
will be required solely to satisfy the requirements of Subpart I.
However, if considerable time has elapsed since the completion of
the facilities plan, this work should be carefully reviewed and
updated as necessary, since it may have been based on information
(e.g., existing population, flows, costs, etc.) which is no longer
valid.
Facilities planning initiated after May 12, 1982 must satisfy
the requirements of 40 CFR Part 35, Subpart I, as described in
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Chapter IV. Where a facilities plan has been submitted, reviewed,
and approved by the reviewing agency prior to grant application, the
reviewer is to insure that the project described in the application
agrees with the selected plan in the approved facilities plan and
that the environmental review has been completed (see Section D.12
below) .
Re: 40 CFR 35.2040(b)(1)
3. Public Participation
State agencies, when certifying a project to EPA for grant award,
are required to certify that adequate public participation was pro-
vided by the grant applicant, based on applicable State and local
statutes. In making this certification, the State agency should
review the application documents, primarily the facilities plan, to
verify that this requirement was met (see Section IV.C.7.4 for a
full discussion of public participation requirements).
Re: 40 CFR 35.2040(b)(2)
4. Notification of Advance of Allowance
Where a State has made an advance of allowance to help a grant
applicant prepare a facilities plan and/or design documents, the
grant applicant must so indicate in the application, and state the
date and amount of the advance and any conditions attached to the
advance. Refer to Section III.E for procedures on providing an
advance of allowance to a potential grant applicant.
Re: 40 CFR 35.2025, 35.2040(b)(3)
5. Plans and Specifications
Approvable contract documents, including plans (i.e., final
design drawings) and specifications, must accompany the application
for grant assistance. The plans and specifications must comply with
all State requirements and EPA regulations and policies, and must be
consistent with the facilities plan and any mitigating measures as
a result of the project's environmental review (see Sections IV.C.7.3
and IV.D).
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Design work initiated after May 12, 1982 must satisfy the
requirements of 40 CFR Part 35, Subpart I, as described in
Section V.C. Where the plans and specifications have been sub-
mitted, reviewed, and accepted (i.e., found to be approvable) by
the reviewing agency prior to grant application, the reviewer is
to verify that the project described in the application agrees
with the previously approved plans and specifications.
If the design work was initiated before May 12, 1982 (the
effective date of 40 CFR Part 35, Subpart I), the design must sat-
isfy the requirements of 40 CFR Part 35, Subpart E, rather than
Subpart I. If the design work was not accomplished under a Step 2
grant (or in rare cases, a Step 2+3 grant which was terminated prior
to the initiation of construction), a grant applicant claiming
initiation of design work before May 12, 1982, will need to substan-
tiate this claim with appropriate documentation. If design work was
initiated prior to May 12, 1982, and meets the requirements of Sub-
part E, no revisions to the design work will be required solely to
satisfy the requirements of Subpart I. However, if considerable time
has elapsed since the completion of the design work, this work should
be carefully reviewed and updated as necessary, since it may be based
on information (e.g., site conditions, availability of construction
materials and labor, etc.) which is no longer valid.
In all cases, a current wage rate determination, current labor
standards provisions, and all current procurement requirements must
be incorporated into the contract documents.
Re: 40 CFR Part 33; 40 CFR 3 5.2040(b)(5)
6. Project Schedule
Purpose:
Set forth a timetable for key project events, provide for the
timely completion of the project, and insure compliance with permit
and compliance schedules, court orders, and State enforcement orders.
611
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Discussion:
A project schedule is an important part of the grant
application. It is to be reviewed carefully to verify that
the grant applicant has anticipated all key project events,
including procurement actions, construction initiation and
completion, implementation of the plan of operation, startup,
and engineering supervision during the first year of operation.
Since the date of grant award is not known at the time the
grant applicant prepares the schedule, the timetable may be
expressed in terms of the number of weeks from the date of
grant award.
The project schedule must be carefully reviewed for reason-
ableness, and may require review and coordination with other
sections within the State agency, EPA, or other Federal
agencies (e.g., National Pollutant Discharge Elimination
System (NPDES) permit section, U.S. Army Corps of Engineers
(COE), U.S. Fish and Wildlife Service, etc.). The project
schedule forms a part of the grant agreement, and significant
changes in the schedule require a formal grant amendment.
Review Procedures:
Review the project schedule to insure that:
a. the schedule includes key project events (e.g.,
procurement, initiation of construction, project
completion, startup, etc.), and that the timetable
is reasonable, considering the size and complexity
of the project;
b. the schedule agrees with other regulatory compliance
schedules (e.g., NPDES permits), court orders, and
State enforcement orders; and
c. the schedule is coordinated, as appropriate, with
the schedule in the draft plan of operation.
Re: 40 CFR 3 5.2040(b)(6), 35.2204(b)(3)
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D. LIMITATIONS ON AWARD
The following sections describe regulatory limitations to grant
award. At the time of grant application, the grant applicant must
provide evidence of compliance with the applicable limitations des-
cribed below. The documentation supplied by the grant applicant
forms a part of the application package.
1. Advanced Treatment
Projects which propose advanced treatment are subject to a
special EPA Regional or Headquarters review and approval prior to
grant award. Ideally, this review will have taken place during
facilities planning, or at least prior to the initiation of design.
Refer to Section IV. E.l for specific details concerning the advanced
treatment review. At the time of the application review, insure that
the proposed project and supporting documents agree with the results
of the advanced treatment review.
Re: 40 CFR 35.2101
2. Water Quality Management Plans
The proposed project must be consistent with the approved ele-
ments of the applicable WQM plan approved under Section 208 or
303(e) of the Clean Water Act (CWA). The grant applicant must be
the wastewater management agency designated in the WQM plan. Refer
to Section IV.B.3 for specific details.
Re: 40 CFR 35.2023, 35.2030, 35.2102
3. Priority Determination
Each State annually prepares a State project priority list
on the State's approved priority system. To be eligible for a
a project must be listed on the project priority list and must
within the fundable range for the State's current allotment.
At the time of the application review, insure that the scope of
the proposed project and the amount of the grant request agree with
the corresponding information on the project priority list. All
States have established internal processing procedures for insuring
based
grant,
be
613
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at the funds needed for grant award will not cause the State's
Lotment to be exceeded, and that the use of reserve funds (e.g.,
\ technologies, alternative systems for small communities, etc.)
properly noted and recorded. These procedures should be followed.
Eer to Section II.E.3 for a more complete discussion of the State
Lority system and project priority list.
: 40 CFR 35.2015, 35.2103
Financial and Managerial Capability
Purpose:
Insure that the grant applicant agrees to pay the non-Federal
jject costs, and has the legal, institutional, managerial, and
Tancial capability to insure the adequate building and operation
the project.
Discussion:
By signing the application and the grant agreement, the appli-
it agrees to pay the non-Federal share of project costs if a grant
offered. If, however, after review of the application package,
j reviewing agency determines that the grant offered will be signi-
;antly lower than the grant requested, it may be advisable to con-
:t the grant applicant and confirm that the grant applicant agrees
pay the increased non-Federal share. It may also be necessary to
assess the applicant's financial capability (see below).
The grant applicant is required to demonstrate its legal, insti-
:ional, managerial, and financial capability to insure the adequate
Llding and operation of the treatment works throughout the entire
2a to be serviced by the applicant. As part of the grant applica-
3n package, the grant applicant certifies that it has this capa-
Lity and has analyzed the local share of the estimated project cost,
eluding the financial impact on each community and the residents of
5 service area, and finds it to be affordable. The reviewing agency
31, however, be satisfied that the application and supporting docu-,
its do in fact demonstrate the applicant's capability.
The principal information necessary to demonstrate the applicant's
nancial and managerial capability is contained in the responses to
/e basic questions contained in EPA's "Financial and Management
^ability" policy statement. To assist grant applicants in answering
sse questions, EPA has prepared a sample format which suggests one
thod for displaying responses to the questions. The format, entitled
614
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"Wastewater Facilities Financial Information Sheet," is included
as Attachment A to the policy statement. Additional guidance is
provided to the applicant in a publication entitled "Financial
Capability Guidebook." While the five basic questions must be
answered, both the information sheet and the guidebook are only
guidance, and States are encouraged to modify them according to the
individual State's needs.
Other documents submitted by the grant applicant will also pro-
vide evidence of the applicant's financial and managerial capability.
In the case of a project serving more than one municipality, the
executed intermunicipal service agreement (see Section V.H) will be
an indication of the institutional and financial obligations of each
participating municipality. Additionally, the draft plan of opera-
tion (see Section V.G) will demonstrate that the applicant has con-
sidered the financial and managerial needs, including a staffing plan
and budget, for the operation of the facility. The UC system (see
Section V.E) will provide further evidence that the applicant will be
able to collect adequate revenues for operation, maintenance, and
replacement (OM&R). Finally, the SUO (see Section V.F) will demon-
strate that the grant applicant has considered the problems resulting
from extraneous or nonresidential wastes, and has the legal authority
to prevent or correct such problems.
The initial demonstration of financial and managerial capability
should have taken place either during or at the time of completion of
facilities planning. At the time of grant application, however, it
may be necessary to reevaluate this information and request that the
grant applicant update some of the information to reflect current
conditions. Such an update, combined with a review of the entire
application package (with particular emphasis placed on the items
cited above), will collectively allow the reviewing agency to deter-
mine whether or not the grant applicant has the financial and man-
agerial capability to finance, build, and operate the proposed project
successfully.
Review Procedures:
Review the application documents to insure that the grant appli-
cant has agreed to pay the non-Federal share of project costs. The
authorized representative's signature on the application form will
usually satisfy this requirement. However, more specific assurances
should be required from an applicant which has previously failed to
provide the non-Federal share in a timely manner, or when there are
other reasons to suspect that the applicant may not be able to pay
the non-Federal share.
615
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Review the applicant's demonstration that it has the legal,
institutional, managerial, and financial capability to adequately
build and operate the treatment works. Again, more specific assur-
ances should be required from an applicant which has previously
failed to adequately build and operate a treatment works or other
construction project, or when there are other reasons to suspect
that the grantee lacks the required capability.
Review the applicant's answers to the five basic questions con-
tained in the "Financial and Management Capability" policy statement.
These answers, combined with the information in the intermunicipal
service agreement, draft plan of operation, UC system, and SUO, must
demonstrate the applicant's financial and managerial capability.
The reviewing agency should have developed screening procedures
for identifying applicants whose projects need greater attention to
satisfy the above requirements (e.g., based on high cost per user,
the use of unusually complex technology, etc.), and should not approve
applications which do not adequately demonstrate that the project can
be successfully financed, constructed, and operated. Where an ade-
quate demonstration has not been made, the reviewing agency should
provide advice to the applicant on both the technical and financial
aspects of the proposed project, in order to help the applicant im-
prove its capabilities or decrease the complexities of the project
Re: 40 CFR 35.2104; EPA final policy on "Financial and
Management Capability for Construction, Operation
and Maintenance of Publicly Owned Wastewater Treatment
Systems," 49 FR 6254 through 6258 (February 17, 1984);
EPA publication, "Financial Capability Guidebook,"
March 1984
5. Utilization of Small, Minority, Women's, and Labor Surplus
Area Businesses
In order to increase the utilization of small, minority, women's,
and surplus area businesses during facilities planning and design, it
is EPA's policy to encourage potential grant applicants to adopt
procurement procedures which, at a minimum, include the six affirma-
tive steps in EPA's procurement regulations (see Section V.C.l.w)
for all activities of their construction program.
At the time of grant application, the grant applicant is required
to indicate to the reviewing agency the level of .MBE/WBE participa-
tion in facilities planning and design by completing EPA Form 6005-1.
This information will be used by EPA to meet its obligation to report
MBE/WBE participation in the construction grants program.
Re: 40 CFR 33.240, 35.2104(d)
616
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6. Unlawful Practices
The grant applicant is required to certify to the reviewing
agency that it has not violated any Federal, State, or local law
pertaining to fraud, bribery, graft, kickbacks, collusion, conflict
of interest, or other unlawful or corrupt practices in connection
with facilities planning or design work for the wastewater treatment
project. This certification will normally be in the form of a letter
signed by the authorized representative.
7. Debarment and Suspension
Purpose:
Determine if an individual, organization, or unit of government
which is listed on EPA's master list of debarments, suspensions, and
voluntary exclusions has performed facilities planning or design
work for the grant applicant, and if so, what remedial action may be
appropriate on the part of the State agency or EPA.
Discussion:
It is EPA policy to limit financial assistance and grant sub-
agreements to participants which properly use Federal funds, and to
deny participation in its programs to those who have been debarred
or suspended in accordance with 40 CFR Part 32. A grant applicant
is required to indicate whether it has used the services of an
individual, organization, or unit of government, which is listed in
EPA's master list, to perform facilities planning or design work
(the master list is printed in the Federal Register (FR) and updated
quarterly). If the grant applicant responds affirmatively, the
reviewing agency will closely examine the facilities plan and the
design work to determine whether to award a grant. EPA will also
determine whether the grant applicant should be found non-responsible
and therefore not eligible for a grant, and whether the grant appli-
cant should be debarred or suspended.
Review Procedures:
Review the application or separate submission to deter-
mine :
a. whether the grant applicant has used the services of
an individual, organization, or unit of government,
which is on EPA's master list of debarments and sus-
pensions for facilities planning and design work; and
617
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b. if the grant applicant answers affirmatively, deter-
mine whether to award a grant or whether to recommend
inclusion of the grant applicant on the master list.
Re: 40 CFR 30.301(d), 32.400, 32.500, 35.2105
1. Plan of Operation
A draft plan of operation is part of the application package,
rhe draft plan is to address the development of a plan to provide
adequate wastewater treatment during construction, an operation and
naintenance (O&M) manual, an emergency operating program, personnel
training, an adequate budget consistent with the UC system, operator
reports, laboratory testing capability, and an O&M program for the
:omplete waste treatment system of which the project is a part. The
Jraft plan may be in the form of a descriptive chronological schedule
tfhich provides a timetable for the preparation and submission of the
required documents and for actions to be taken by the grantee during
instruction. Refer to Section V.G for a more complete discussion.
*e: 40 CFR 35.2106
}. Intermunicipal Service Agreement
An executed intermunicipal service agreement is to accompany the
jrant application for projects which will serve more than one munic-
ipality. At a minimum, the agreement must include the following
L nformation:
a. the basis upon which costs are allocated,
b. the formula by which costs are allocated, and
c. the manner in which the cost allocation system
will be administered.
[n order to prevent costly delays in building the project (due to
i lack of funds to pay the grantee's non-Federal share), and later
Ln implementing necessary UC increases, the agreement should include
provisions for rapidly resolving disputes between the grantee and a
subscriber community. The intermunicipal service agreement may also
serve as the legal document which commits each participating munici-
pality to developing, enacting, and enforcing a UC system, a SUO
ind if required, a pretreatment program. The intermunicipa1 service
618
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agreement will provide partial evidence concerning the grant appli-
cant's legal, financial, institutional, and managerial capability.
See Item 4 above, and refer to Section V.H for a more complete dis-
cussion.
Re: 40 CFR 35.2107
10. Phased or Segmented Treatment Works
Purpose:
Provide grants to build a phase or segment of a treatment works
where such phasing or segmenting is justified, and where specific
regulatory conditions have been satisfied.
Discussion;
EPA regulations do not make a distinction between a treatment
works phase or segment. In practice, however, phasing is the term
used where an entire treatment works construction subagreement is
awarded to the selected contractor (e.g., the low bidder for a
formally advertised procurement), but the contractor is only author-
ized to proceed to construction on specific phases of the treatment
works. This practice has been used on a limited number of projects
where building took several years, and funding for the entire treat-
ment works was not available from a single year's allotment. While
this practice is not prohibited by EPA regulations, the inherent
potential problems are such that it is discouraged and, where pro-
posed, should be very carefully reviewed, especially with regard to
the applicant's financial capability to successfully build the entire
project.
Segmenting of projects is a more common practice, which involves
the building of the complete treatment works in segments, over a
period of time. The complete treatment works is described in a
facilities plan, but a separate grant agreement/amendment is issued,
and a separate subagreement is awarded, to build each segment.
Grants for phased or segmented treatment works may be awarded
provided that one or more of the conditions described in the review
procedures below are satisfied. In addition, the grantee must agree
to make the treatment works operational, in accordance with a schedul
which is acceptable to the reviewing agency, whether or not future
grant funding is available.
In "grandfathering" phased or segmented projects, problems often
arise in establishing allowable reserve capacity, and in determining
the initial and future Federal grant share, including grant increases
where a Governor has elected to provide a uniform lower Federal share
619
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The review procedures below describe how these problems are resolved
and suggest the order in which the review should proceed.
Finally, where a project involves more than two phases or seg-
ments, it is EPA policy that subsequent phases or segments be built
in the sequence that will first make previously funded phases or
segments operational and in compliance with the enforceable require-
ments of the Act, before other phases or segments are funded. For
example, where an interceptor segment has been built, the next seg-
ments to be funded will be those which make the interceptor opera-
tional. A segment of a different interceptor would not be funded
until this first interceptor is operational. Individual
phases or segments, however, do not in and of themselves have
to result in compliance with the enforceable requirements of
the Act, provided that the grantee agrees to complete the treatment
works, as described in the facilities plan, regardless of the avail-
ability of future Federal funding.
Review Procedures:
In reviewing applications for phased or segmented treatment
works, care must be exercised that the conditions and limitations
described below are satisfied.
a. Conditions
One or more of the following conditions must be in
existance before an award of grant assistance can be made
for a phased or segmented treatment works:
i. the Federal share of the cost of building
the entire treatment works would require
a disproportionate share of the State's
annual allotment relative to other needs,
or would require a major portion of the
State's annual allotment;
ii. the period to complete the building of
the treatment works will cover three years
or more; or,
iii. phasing.or segmenting is necessary to meet
the requirements of a Federal or State
court order.
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The first condition should be verified by reviewing
the State's project priority system and list; the second
by reviewing the project schedule, and the third by
reviewing appropriate court order, which usually can be
obtained from the reviewing agency's compliance group.
b. Grantee Commitment
The grantee must agree, in writing, to make the treatment
works, of which the phase or segment is a part, operational
and in compliance with the enforceable requirements of the
CWA, according to a schedule which is acceptable to the
reviewing agency, regardless of whether grant funding is
available for the remaining phases or segments. Prior to
awarding a grant, the reviewing agency should contact the
grant applicant to insure that it understands and agrees
to this commitment. If a grant is awarded, compliance
with this commitment is to be included as a grant condi-
tion in the grant agreement/amendment (see Section N.5
below).
c. Reserve Capacity
This discussion of reserve capacity is limited to
phased or segmented treatment works:
i. Interceptor Awarded a Step 3 Grant
Before December 29, 1981
Future grants for remaining interceptor
segments, which are included in the
approved facilities plan, may be awarded
with planned reserve capacity for as much
as 40 years.
i i. Treatment Plant and/or Interceptor Awarded
a Step 3 Grant Before October 1, 1984
Future grants for any remaining segments
included in the approved facilities plan
may be awarded with planned reserve cap-
ability for as much as 20 years.
621
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i i i. Treatment Plant and/or Interceptor Awarded
a Step 3 Grant After September 30, 1984
Where a previous grant was not awarded as
described in Item i or Item ii above, no
reserve capacity will be eligible for grant
assistance. Eligible costs will be limited
to the capacity necessary to serve existing
needs on the date of grant approval. Refer
to Item 18 below for a method of establishing
existing needs.
d. Federal Share
This discussion of the Federal share is limited to phased
or segmented treatment works, and does not include provisions
for I/A projects. Under the provisions of the 1981 CWA
amendments, the Governor of a State, with EPA approval, may
uniformly lower the Federal grant share for all categories
of projects. After approval by EPA, the lower Federal grant
share will prevail until revoked by the Governor. Where this
option has been exercised, the Federal grant share for phased
or segmented treatment works must be at the percentage pre-
vailing at the time of grant award for each subsequent phase
or segment (i.e., succeeding phases or segments of a treat-
ment works may have Federal grant percentages which differ
from that of the initial phase or segment). The Federal share
is based on the total allowable Step 3 costs, plus the allow-
ance for facilities planning and/or design (if applicable),
and shall be at the percentages indicated below:
i. Before October 1, 1984
The Federal grant share is 75 percent, or the
lower uniform rate if.set by the Governor.
i i. After September 30, 1984
The Federal grant share is 55 percent, or the
lower uniform rate if set by the Governor,
except that the Federal grant share is 75 per-
cent, or the lower uniform rate which existed
at the time ot the Step 3 grant award for the
initial phase or segment, if set by the
Governor, provided that:
622
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the treatment works being phased or
segmented is described in a facilities
plan which was approved by the reviewing
agency before October 1, 1984;
the Step 3 grant for the initial phase
or segment was awarded before October 1,
1984 ;
the phase or segment is a sequential
phase or segment of a primary, secondary,
or advanced treatment facility or its
interceptors, or I/I correction; and
the phase or segment is necessary to:
- make a previously funded phase
or segment operational and in
compliance with the enforceable
requirements of the CWA, or
- complete the treatment works, pro-
vided that all previously funded
phases or segments are operational
and in compliance with the enforce-
able requirements of the CWA.
Re: 40 CFR 35.2108 , 3b.2123 , 35.2152(a) and (c)
11. Revised Water Quality Standards
The 1981 CWA amendments require each State to review and revise,
as appropriate, its water quality standards by December 29, 1984.
After that date, no construction grants can be awarded for projects
which discharge into stream segments for which the State has failed
to review and revise, as appropriate, water quality standards within
the previous three years.
While the responsibility for reviewing and revising water quality
standards generally does not reside with the construction grants pro-
gram staff, the project reviewer should be aware of the status of
this review as it relates to a particular project and the stream seg-
ment into which it will discharge.
623
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After December 29, 1984, insure that no grant is awarded unless
the State has reviewed and revised, as appropriate, its water
quality standards within the last three years. This limitation on
award is satisfied if:
a. water quality standards for the entire State, or for
the particular stream segment into which the pro-
ject will discharge, have been reviewed and revised,
as appropriate, within the last three years and
approved by EPA; or
b. the State agency, in good faith, has submitted to
EPA the results of its review, with appropriate
revisions, but EPA has failed to act on them within
120 days of receipt.
Re: 40 CFR 35.2111; 40 CFR Part 131
12. Environmental Review
A facilities plan, which is a part of the grant application
package, is subject to an environmental review in accordance with the
EPA regulations implementing the National Environmental Policy Act
(NEPA). The environmental review may result in:
a. a categorical exclusion from further environmental
review;
b. a finding of no significant impact (FONSI); or
c. the need to prepare an environmental impact statement
( EIS ) .
The environmental review.is most often performed prior to the initia-
tion of design, and the grant applicant should have been informed of
the need for the review to be performed at that time, to prevent sub-
sequent delays in the award of grant assistance. At the time of
application review, insure that the environmental review has been
completed, and that the project described in the grant application
reflects the conclusions of, and is consistent with, the results of
the environmental review. In the absence of a previous environmental
review, and in the case of significant changes to the project since
the previous environmental review, the proposed project must be
reviewed in accordance with requirements described in Section IV.D.
Re: 40 CFR Part 6; 40 CFR 35.2113
624
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13. Value Engineering
If the proposed project has not received a Step 2 grant, and if
the total estimated cost of building the treatment works (including
sewers) is more than $10 million, the grant applicant must have con-
ducted a VE study, and the recommendations of the VE study must have
been implemented by the applicant to the maximum extent feasible.
Projects which were awarded a Step 2 grant are subject to the regula-
tions which were in effect at the time of grant award. Refer to
Section V.D for a complete discussion of value engineering.
Re: 40 CFR 35.926, 35.2114
14. Collection System
Purpose:
Insure that grant assistance is awarded only for collection
system projects which are eligible for grant assistance and which
satisfy the date and resident population limitations.
Discuss ion;
After September 30, 1984, projects involving new collector sewers
and appurtenances (other than small diameter I/A sewers), and major
sewer system rehabilitation (for reasons other than I/I correction),
are not eligible for grant assistance unless the Governor elects to
use a specific portion of the State's annual allotment for such
project categories (see Section II.E.3). If this option is exercised
by the State, these projects are subject to additional preaward
1imi tat ions.
The review procedures below address each project category and
limitations separately. However, many State/EPA delegation agreements
include specific details or additional criteria concerning documenta-
tion and justification for new sewers. The specific details may in-
clude documentation of septic system failures by survey questionnaire
or house-by-house surveys, minimum number of septic system failures
on a block-by-block basis for determining eligibility, continuity
of eligible collection lines, etc. Where delegation agreements in-
clude this type of detail and where the criteria or procedures do not
conflict with the grant regulations, they are to be followed.
625
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Review Procedures:
The reviewer must first verify that the project has been correctly
ncluded on the State's project priority list. New collector sewers
nd major sewer system rehabilitation are two categories of projects
hose eligibility for grant assistance was eliminated after
eptember 30, 1984. Such projects may nevertheless be included in
he State's project priority list under certain conditions. See
ection II.E.3 for a complete discussion of these conditions.
These procedures do not address the replacement of failed i/A
ollection sewers, and are limited to the regulatory requirements for
etermining the eligibility of other (non-I/A) collection systems,
fter September 30, 1984, collection system projects are eligible for
rant assistance provided that:
a. the project is for the replacement or major rehabili-
tation of an existing collection system which was not
built with Federal funds awarded on or after
October 18, 1972, and is necessary to the integrity
and performance of the complete waste treatment system;
or,
b. the project is for a new collection system which is
cost effective and will serve a community in existence
on October 18, 1972, and:
i. the community has sufficient existing or
planned capacity to treat the collected
wastes;
ii. the bulk (generally two thirds) of the
expected flow (i.e., the flow from
existing plus future residential users)
will be from the resident population
which existed on October 18, 1972;
iii. the collection and trunk sewers are sub-
ject to the same limitations on reserve
capacity as interceptor sewers (see
Item 18 below), except where minimum dia-
meters (generally 8 inches) are required
by State design standards; and
626
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iv. the grantee provides assurances that
if grant assistance is awarded, the
existing population will connect to
the collection system within a
reasonable time (as determined by
the reviewing agency) after project
complet ion.
Re: 40 CFR 35.2116
15. Preaward Costs
Purpose:
Provide grant assistance for the cost of work which was accom-
plished prior to the date of grant award, if such work is normally
accomplished after the award of a Step 3 grant, only if such work has
been approved in advance by the reviewing agency.
Discussion:
Where a potential grant applicant requests approval of prelimin-
ary work normally accomplished after the award of a Step 2+3 or a
Step 3 grant, approval may be given by the reviewing agency only in
an emergency or an instance where delay could result in a significant
cost increase, and only after completion of the environmental review
(see Item 12 above). Examples of the types of preliminary Step 3
3 work which may be approved are:
a. procurement of major equipment requiring long lead
t imes;
b. field testing of I/A technologies (see Section I
below);
c. minor sewer rehabilitation;
d. acquisition of eligible land or of an option for
the purchase of eligible land (see Section H
below); and
e. advance building of minor portions of treatment
works.
627
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Review Procedures:
Where the grant application requests EPA participation in the
:ost of preaward work which is normally accomplished after the award
df a Step 3 grant, insure that:
prior written approval by the reviewing agency has
been given;
the work is eligible for grant participation; and
associated procurement actions satisfy the require-
ments of 40 CFR Part 33, or in the case of acquisi-
tion of eligible real property, 40 CFR Part 4.
Where approval of preaward costs is given by the reviewing
agency, the potential grant applicant should be advised in writing
chat: approval is not an actual nor implied commitment of grant
assistance (i.e., that the applicant proceeds at its own risk);, and
:hat if a grant is awarded, this preaward work will be eligible only
if it was procured in accordance with 40 CFR Part 33 for services,
equipment, or supplies, or 40 CFR Parts 4 and 30 for the acquisition
df real property.
This limitation on preaward costs applies equally to Step 2+3
and Step 3 grants, but concerns only work which is normally accom-
plished after the award of a Step 3 grant. Work which is normally
accomplished before the award of a Step 3 grant is classified as
design-related work, whose cost is not directly eligible for grant
assistance, but instead is expected to be defrayed by the allowance
for facilities planning and/or design.
Re: 40 CFR 35.2118; 40 CFR Part 35, Subpart I, Appendix A,
Paragraph A.2.a, and Appendix B, Paragraph 3
16. Infiltration and Inflow
This limitation on award is applicable only to grant applicants
vith existing sewer systems. Before grant award, the grant applicant
nust demonstrate that the existing sewer system is not or will not be
subject to excessive I/I.
The analysis of the sewer system to determine the presence of
excessive or nonexcessive I/I is performed during the facilities
planning and is used to establish present and future flows. If a
628
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preliminary investigation indicates the possible presence of
excessive I/I, the grant applicant may conduct further investiga-
tions, either during facilities planning or concurrent with design.
It is recommended that as much work as possible be accomplished
during facilities planning, since the results may affect the design.
Where further sewer system evaluation confirms the presence of
excessive I/I, the grant applicant will propose a sewer system
rehabilitation program and prepare the necessary contract documents,
including construction drawings and specifications. During the
application review, it is necessary to determine that where needed,
a rehabilitation program has been proposed. Refer to Section IV.C.4.3
for a more complete discussion of I/I.
The documents supporting a grant application must demonstrate
that:
a. the sewer system discharging into the proposed treat-
ment works is not, or will not be, subject to excessive
I/I; and
b. where excessive I/I is present, a program for sewer
system rehabilitation has been proposed, and is des-
cribed in the contract documents, including plans and
spec i f icat ions.
Where total flow, including infiltration, does not significantly
exceed 120 gallons per capita per day (gpcd), the grant applicant may
propose and the reviewing agency may approve the project without
further study. In this case, however, the allowable project cost will
be limited to the cost of the treatment works with a capacity of
120 gpcd for the existing residential population.
Re: 40 CFR 3 5.2030(b)(4), 35.2120; 40 CFR Part 35,
Subpart I, Appendix A, Paragraph G
17. User Charge System and Sewer Use Ordinance
A UC system and a proposed or existing SUO must be approved by
the reviewing agency before grant award. The UC and SUO need not be
enacted as a municipal ordinance by the grant applicant at the time
of grant application, but must satisfy the content requirements des-
cribed in Sections V.E and V.F. The UC system and the OM&R costs
contained therein must be consistent with the grant applicant's draft
plan of operation (see Item 8 above), and must support the applicant's
demonstration of financial and managerial capability (see Item 4 above)
629
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If the applicant has a UC or SUO in effect, the qrant aoplica-
ion must demonstrate that the UC or SUO meets all EPA reauirements
nd is being enforced
e 4 0 CFR 35.212 2, 35-2130. 35-2140
8- Reserve Capacity
Purpose
Insure that qrant assistance is awarded after September 30, 1984,
nly for the wastewater treatment, transportation, and disposal cap-
ity which is reauired to serve existing needs.
Pi scuss ion:
The 1981 CVJA amendments restrict grant assistance awarded after
epteinber 30, 1984 to the capacity necessary to serve existing needs
n the date of grant approval, or on September 30, 1990, whichever is
artier. Two problems arise for proposed projects which include
eserve capacity (i.e., capacity not needed to serve existing needs),
he first concerns establishing the capacity which represents existing
eeds on the date of grant award, and the second concerns apportioning
osts between allowable and total treatment works capacity. This dis-
ussion does not include the allowable reserve capacity for phased or
egmented treatment works (see I tern 10 above).
In general, a facilities plan will have been prepared one year or
ore before the estimated date of grant award. In preparing the
acilities plan, the grant applicant is reauired to consider waste-
ater treatment needs over a 20 year planning period. In so doing,
he facilities plan may have "estimated wastewater flows for 5 year
ncrements, or may have used a straight line projection between the
resent (at the time of facilities plan preparation) and the esti-
ated future flow (at the end of the 20 year planning period). In
ither case, the existing needs on the date of grant award may be
stimated by noting the elapsed time between the date used for the
present" flow in the facilities plan and date of grant award. Care
ust be exercised in using this procedure, however, to insure that
he capacity projections are reasonable and are not unduly distorted,
ither by a large future residential or industrial development, or by
sewer connection or development ban which has reduced or eliminated
he projected growth in wastewater volume.
630
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For communities with existing treatment facilities, it will
usually be possible tor the grant applicant to provide the actual
current flow data, based on current records at the treatment
plant, adjusted to exclude excessive I/I. Anticipated flows from
failing onsite systems may be added to this figure. In the case of
communities without an existing centralized treatment plant, existing
flow is based on the population presently served by onsite systems
which are proposed to be connected to the project. For estimating
purposes, a figure of 70 gpcd should be used, plus a reasonable
allowance for infiltration. In no case, however, may the anticipated
domestic flows exceed 120 gpcd, excluding inflow during storm events
(see Section IV.C.4.3). Estimates of existing flow must be based on
studies which have been updated to the estimated date of grant award.
Once the capacity required to serve the existing needs has been
established, it is necessary to determine a cost ratio, using the
estimated building cost of the treatment works necessary to serve the
existing needs, divided by the estimated building cost for the pro-
posed project. The preferred method for determining the cost ratio
involves the use of the Computer Assisted Procedure for Design and
Evaluation of Wastewater Treatment Systems (CAPDET). Using CAPDET,
design and process parameters are entered into the program, and the
estimated cost of building the project is computed. By using the
existing needs and the total design capacity, two cost estimates may
be produced. The ratio of the cost estimates is applied to the total
project cost to determine the allowable cost.
When using CAPDET, it is important to note that while the cost
estimates generated by CAPDET may not agree with the design engineer's
cost estimates, the ratio of the two CAPDET cost estimates is reason-
ably accurate and therefore provides a fair method for determining
allowable costs. The cost ratio is used to apportion costs for
building the treatment works and other associated allowable costs
(i.e., construction, contingency allowance, engineering, legal, fis-
cal, administrative, future change orders, etc.).
At the present time, CAPDET does riot include cost estimates for
sewers. The recommended procedure for determining the cost ratio for
sewers is identical to that described above, except that cost curves
from the EPA publication, "Innovative and Alternative Technology
Assessment Manual" (MCD-53) or equivalent curves approved by EPA are
to be used.
The limitation on reserve capacity may have an effect on existing
Step 1 and Step 2 projects. Grantees may feel that they are entitled
to a grant increase because of the necessity to reevaluate their pro-
jects due to these limitations. The criteria discussed in Sections
VIII.B.3 and 5 are to be used in determining if a grant increase is
warranted.
631
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Review Procedures:
a. Grant assistance awarded after September 30, 1984 must be
limited to the capacity required to serve existing needs
(including existing needs of residential, commercial,
industrial, and other users) on the date of grant award,
or on September 30, 1990, whichever is earlier. To
establish the eligible project cost:
i. review the facilities plan to determine if
population and/or capacity projections are
provided over the 20 year planning period,
which will allow a reasonable estimate of
the capacity required to serve existing
needs;
ii. insure that the required capacity is
reasonable, does not include excessive
I/I, is supported by letters of intent
from significant industrial users, and
has not been distorted, subsequent to
facilities plan preparation, by events
such as lower-than-expected population
or industrial growth, sewer connection
restrictions, or development bans;
iii. in the absence of reasonable data from
the facilities plan which allows a
determination of the capacity required
to serve existing needs, request a
facilities planning amendment from the
grant applicant which, in the case of
existing facilities, should be based on
current records at the treatment plant
adjusted to exclude excessive I/I, and
if appropriate, to include anticipated
flows from failing onsite systems which
will be connected to the proposed project;
iv. determine a cost ratio, using the estimated
building cost for the capacity required to
serve the existing needs, divided by the
estimated building cost for the total pro-
posed project, with cost estimates from
CAPDET or the sewer cost curves;
632
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v. use the cost ratio to compute the total
allowable project costs, including
building, construction contingency,
engineering, legal, fiscal, and admin-
istrative ;
vi. also use the cost ratio to compute the
allowable costs for approved future
change orders; and
vii. compute the Federal grant share by
multiplying the allowable project cost
by the applicable grant percentage (see
Section L below).
Where the proposed project contains reserve capacity (i.e
capacity beyond that required to serve existing needs),
the following provisions apply to all projects, including
phased or segmented projects:
i. All incremental costs for capacity beyond that
required to serve existing needs or in the case
of phased or segmented projects, beyond that
allowed under Item 10 above, shall be paid by
the grant applicant (see Item 4 above). This
includes change order costs (see item a.vi above)
ii. The actual treatment works to be built (i.e.,
the entire proposed project) must satisfy
the NEPA regulations (40 CFR Part 6), as
well as all other applicable laws and regula-
tions (see Item 12 above).
iii. Plans, specifications, and cost estimates for
the entire proposed project must be approved
by the reviewing agency.
iv. The grant applicant must assure the reviewing
agency that it has assessed the financial
impacts of the entire proposed project, and
that it has the capability to finance and
manage the construction and operation of the
facilities (see Item 4 above).
v. The user charge system must apply to the entire
serve area.
633
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vi. The grantee must execute a grant agree-
ment which includes a grant condition
which releases the Federal Government
from any claim for any of the costs of
construction due to the additional capa-
city (see Section M.5 below).
Re: 40 CFR 35.2030(b)(3)(ii), 35.2123(c) and (d)
9. Industrial and Federal Facilities
Grant assistance is not to include the costs of sewers con-
itructed exclusively or almost exclusively to serve industrial users,
lor may the treatment facilities include process units for the re-
loval of pollutants from industrial discharges unless the grant appli-
:ant ir required to remove such pollutants from nonindustrial dis-
:harges. Grant assistance also may not include costs for the trans-
>ort and treatment of wastes from a Federal facility if the wastes
ire more than 250,000 gallons per day or constitute over five percent
>f the design flow, whichever is less. Refer to Section V.I for a
:omplete discussion of industrial and Federal discharges.
For projects which will treat industrial wastes, the grant appli-
:ant must submit letters of intent from significant industrial users,
md from all industries intending to increase their flows or to re-
ocate in the area. Such letters must document capacity needs and
wastewater characteristics for existing and projected flows.
te: 40 CFR 35.2030(b)(3)(ii) , 35. 2125 , 35.2127
I. ADDITIONAL CONSIDERATIONS 'FOR AWARD
The items listed below are additional considerations which must
>e satisfied, where applicable, prior to grant award. Some of the
.terns are considered limitations on award, but are listed separa-
bly here because they are not applicable to all projects.
Small Alternative Wastewater Systems
A small alternative wastewater system (SAWS) is characterized
>y onsite treatment and disposal, and/or alternative conveyance
systems (i.e., pressure, vacuum, or small diameter gravity sewers),
i SAWS project qualifies as an alternative technology, and may there-
lore receive a higher Federal grant share. A SAWS may be privately
634
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or publicly owned, but the responsibility for management and opera-
tion of the system must reside with the grant applicant. Where a
SAWS is proposed, it is necessary to insure that the grant applicant
recognizes and accepts the managerial responsibilities which are
unique to these projects.
Review Procedures:
The review procedures below assume that a SAWS was selected as
the cost effective alternative in the facilities plan. Much of the
information necessary to satisfy the limitations on award described
below may be found in the facilities plan or the applicant's demon-
stration of financial and managerial capability. The reviewing
agency is to insure that a SAWS project satisfies the following
conditions:
a. the limitations on award described in Section D
above;
b. as an alternative technology, is eligible for
an additional Federal grant share of 20 percent,
but not more than a total of 75 percent of the
allowable costs;
c. must serve communities with a population of 3500
or less, or highly dispersed sections of larger
municipal it ies;
d. may be either a privately owned treatment works
serving one or more principal residences (re-
quires habitation by a family or household for
at least 51 percent of the year, and does not
include second homes or vacation residences) or
small commercial establishments (restaurants,
hotels, stores, filling stations, recreational
facilities, churches, schools, hospitals, or
charitable organizations with dry weather waste-
water flows less than 25,000 gallons per day),
and/or a publicly owned treatment works (POTW);
e. for a privately owned individual system, the
facilities plan must demonstrate that the total
cost and environmental impact will be less than
that of a conventional system;
635
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the grant applicant must certify that each prin-
cipal residence or small commercial establish-
ment, for which grant assistance is requested,
was constructed and inhabited or in use on or.
before December 27, 1977;
the application must be on behalf of a number
of individual units to be served in the facil-
ities planning area;
where privately owned individual systems are
included in the project, the grant applicant
must certify that public ownership is not
feasible; must list the reasons for this,
which must be acceptable to the reviewing
agency; and must agree to provide access to
the systems at all reasonable times for such
purposes as inspection, monitoring, building,
operation, rehabilitation, and replacement;
the grant applicant must certify that the pro-
posed facilities will be properly operated and
maintained; and
the draft plan of operation must address the
development of an adequate O&M program for;
i. physical inspection of all onsite
systems in the planning area at
least every 3 years, or more
frequently if necessary to insure
proper operation;
ii. pumpouts, renovation, and replace-
ment as needed;
iii. routine maintenance and servicing
of mechanical and electrical com-
ponents ;
iv. testing of selected existing pot-
able water wells once a year;
v. additional monitoring of water
supply aquifers, if appropriate,
where substantial numbers of on-
site systems exist; and
636
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vi. a UC system reflective of the
system's OM&R costs.
Re: 40 CFR 35.2005(b)(31), (b)(39), and (b)(40),
35.2032(b), 35.2034, 35.2110
2. Marine Discharge Waiver Applicants
Section 301(h) of the CWA allows grant applicants which dis-
charge into marine waters to apply for a waiver from EPA's secondary
treatment requirements. The application for the waiver must be
accompanied by substantial documentation to support the request.
Waiver applications require special reviews and considerations beyond
the scope of this Handbook. However, if the marine discharge waiver
is approved the project design must include provisions for possible
future additions of treatment processes or techniques to meet
secondary treatment requirements. Such provisions may include suffi-
cient land for expansion, stubs in piping to allow future connections,
arrangement of unit processes or piping to accommodate future pro-
cesses, etc.
Re: 40 CFR 35.2112; 40 CFR Part 125, Subpart G
3. Innovative or Alternative Technology Reconfirmation
While not specifically required by EPA regulations, the review of
the grant application and supporting documents affords an opportunity
to reconfirm or revise earlier decisions concerning the classification
of a project or project components as I/A technology. In general, a
preliminary classification of a project or its components as I/A
technology will usually be made on the basis of information contained
in the facilities plan. This classification should be confirmed
prior to grant award. Refer to Section IV.D.6.9 for a discussion of
I/A technology.
4. Pretreatment
A project receiving grant assistance must not include components
for the control or removal of pollutants introduced into the treat-
ment works by industrial users, unless the grant applicant is re-
quired to remove these same pollutants from wastes introduced by non-
industrial users. An approvable SUO must prohibit the introduction
of wastewater into the treatment works which contains toxics or other
pollutants in amounts or concentrations that endanger public safety or
the physical integrity of the treatment works, cause violations of
637
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effluent or water quality limitations, or preclude the selection
of the cost effective alternative for wastewater treatment and
sludge disposal.
Grant applicants who presently treat or anticipate treating
industrial wastewaters should have evaluated the quantity and
character of the wastes and, where appropriate, have established
a pretreatment program which satisfies the requirements of EPA's
pretreatment regulations (40 CFR Part 403), and which will insure
compliance with the grantee's NPDES or State Pollutant Discharge
Elimination System (SPDES) permit. Refer to Section IV.E.2 for a
more extensive discussion of pretreatment.
Review Procedures;
At the time of grant application review, insure that:
a. where applicable, the grant applicant has developed
a pretreatment program in accordance with 40 CFR
Part 403;
b. estimated project costs associated with pretreatment
are allowable for grant participation and necessary
for implementation of the pretreatment program;
c. the pretreatment program will insure compliance
with the grantee's NPDES or SPDES permit.
Re: 40 CFR 35.2125(b)(2), 35.2130; 40 CFR Part 35,
Subpart I, Appendix A, Paragraph F
5. Force Account
Purpose:
Allow grantees to perform project work using their own employees
under certain circumstances.
Discuss ion:
While generally not encouraged by EPA, grant applicants may use
their own employees or equipment for construction or construction
related activities (e.g., resident .inspection services). This use.
of in-house forces is frequently called force account work. When
638
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proposed, and where the costs will exceed $25,000, it is necessary
for the grantee to obtain prior approval from the reviewing agency.
The reviewing agency may approve force account work as an allowable
project cost provided the conditions described in the review pro-
cedures below are satisfied. There are no restrictions on the use
of force account work for facilities planning, design, or design-
related work which is accomplished under an allowance (see
Section III.D.3.C) rather than a Step 1 or Step 2 grant.
Review Procedures:
a. The reviewing agency may approve force account construction
or construction related work provided that:
i. the grant applicant demonstrates that
municipal employees can complete the work
competently and more economically than
contractors; or
ii. an emergency circumstance arises which
makes the use of force account necessary.
b. Where force account work is approved by the reviewing agency,
the grant applicant should be advised that force account
costs are subject to audit, and that records or documents
supporting such costs must be maintained. Substantiating
records must include:
i. time sheets approved and signed by a
responsible supervisor, accounting for
all hours worked during the period,
showing separately the hours worked on
the EPA funded project and on all other
activities; and
ii. documentation of an approved indirect cost
rate (see Section lX.F.2.d.ii) where such
burden rate is to be applied to force account
work.
Re: 40 CFR 30.520
6. Intergovernmental Review
Under 40 CFR Part 29, States are encouraged to establish a State
process, which is the framework under which States and local officials
carry out intergovernmental review of proposed projects. The State
process replaces the clearinghouse review process previously required
639
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by Office of Management and Budget (OMB) Circular A-95 (frequently
called a-95 review), and allows States to select the EPA programs
which will be subject to intergovernmental review.
The regulations governing the establishment of the State process
are designed to allow the States considerable flexibility in estab-
lishing procedures, while still insuring that proposed projects re-
ceive adequate review by concerned or interested parties and agencies,
and that these parties and agencies are provided an opportunity to
comment on proposed projects. Because the details of the State pro-
cess will vary from State to State, only general review procedures
are described below.
Based on the intergovernmental review regulations and the State
process developed for a specific State, determine if the construction
grants program is subject to an intergovernmental review, and if so,
verify that the grant applicant has followed the specific procedures
and requirements of the State process, and that any problems have been
satisfactorily resolved.
Re: 40 CFR Part 29; 40 CFR 3 5.2040(b)(2)
7. Procurement of Professional Services
Procurement of professional services (e.g., engineering, construc-
tion management, legal, accounting, land appraisel, etc.) should be
undertaken only after EPA reviews the completed "procurement System
Certification" (EPA Form 5700-48). Note that the review of the
"Procurement System Certification" may not be delegated to State re-
viewing agencies. If the grant applicant procures professional ser-
vices before grant award, the costs associated with the procurement
action and any work performed under the subagreement prior to grant
award are unallowable for grant participation (see Sect ion IX.B.5.e),
unless approved as a preaward cost (see Section D.15 above). How-
ever, if this work is classified as facilities planning or design work,
it may be defrayed in part by an allowance for facilities planning
and/or design (see Section III.E), or may be an eligible cost under an
existing Step 1 or Step 2 grant. Preapplication review of the "Pro-
curement System Certification" is encouraged, and is described in
Section VII.B.1.
Re: 40 CFR 33.001(g), 33.110
640
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8 . General Grant Conditions
Along with the demonstration that the grant applicant has the
financial and managerial capability to build and operate the pro-
posed treatment works, the grant applicant is required to demonstrate
its ability to comply with 40 CFR Part 30.
Among other things, 40 CFR Part 30 addresses the requirements for
a grant application, payments, project management, deviations,
etc. At the time of grant application review, particular attention
should be given to property management standards and compliance with
other Federal laws. Compliance with some Federal laws will be satis-
fied initially by including the "Labor Standards Provisions for
Federally Assisted Construction Contracts" (EPA Form 5720-4) in the
contract documents. Compliance with other Federal laws will also be
fulfilled initially by the grant applicant's "assurance of compliance"
in the grant application form (see Section C.l above). The review
procedures below highlight some of the requirements from the general
grant regulations which may require special consideration during appli-
cation review.
Where applicable, insure that the grant applicant has or will have
the ability to fulfill the general grant requirements listed below:
a. property management standards;
Re: 40 CFR 30.530 through 30.537
b. compliance with the Flood Disaster Protection Act
(if the proposed project involves construction or
property acquisition in a special flood hazard area
and if the project is located in a community partic-
ipating in the National Flood Insurance Program, the
grant applicant must purchase flood insurance as a
a condition of receiving grant assistance);
Re: 40 CFR 30.600(b)
c. the grant applicant, may not propose the performance
of any work on the proposed project by a
facility on EPA's List of Violating Facilities,
which includes facilities which have violated either
the Clean Air Act or the CWA;
Re: 40 CFR 30.600(c) and (d)
641
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d. discrimination on the grounds of race, color,
national origin, age, sex, and handicap is pro-
hibited, and the grant applicant is required to
submit a certification of non-discrimination
(EPA Form 4700-4) with the grant application;
Re: 40 CFR 7.8(b), 30.600(d) through (g)
e. compliance with the Uniform Relocation Assistance
and Real Property Acquisition Policies Act, whether
or not the real property is eligible for grant
assistance (see Section VI.H).
Re: 40 CFR 30.600(i)
f. if the proposed project will benefit Indians,
compliance with the Indian Self-Determination and
Education Assistance Act, which requires that
Indians be given preference in training and employ-
ment opportunities;
Re: 40 CFR 30.600(j)
g. compliance with the Hatch Act, which requires State
and local government employees to comply with re-
strictions on political activities if their prin-
cipal employment activities are funded in whole or
part by Federal Assistance;
Re: 40 CFR 30.600(k)
h. compliance with the Safe Drinking Water Act, which
prohibits EPA grant assistance if the proposed pro-
ject may contaminate a sole source aquifer which
will result in a significant hazard 'to public
health; and
Re: 40 CFR 30.600(1 )
i. compliance with the reporting requirement's-.for MBE/WBE
utilization (see Sections B.7.E and D.5 above).
Re: 40 CFR 35.2104(d)
642
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F. STEP 2+3 GRANTS
Purpose:
Provide grant assistance for smaller projects (meeting specific
size and cost limitations) after completion of facilities planning
but prior to the completion of design.
Discussion:
Grant assistance may be provided to a community with a popula-
tions of 25,000 or less, for a project with an estimated building
cost of $8 million or less, prior to the completion of the design
work (i.e., a Step 2+3 grant). The grant is based on the estimated
allowable costs, derived from the facilities plan, plus the appro-
priate allowance for facilities planning and/or design. The pro-
cedure assists smaller communities in financing their design costs
and provides assurance that grant funds will be available (i.e.,
funds have been obligated) for building the project, assuming
successful completion of the design and the satisfaction of all other
requirements.
The review procedures below describe the conditions which must
be satisfied before a Step 2+3 grant can be awarded.
Review Procedures:
1. Qualif ications
Applicant and project qualifications for Step 2+3 grant award
include:
a. the population of the applicant's municipality is
25,000 or less, according to the most recent U.S.
Census;
b. the total building cost is estimated to be $8 million
or less; and
c. the project is not for a treatment works phase or
segment.
2. Application Contents
The application package for a Step 2+3 grant must include:
a. application, using EPA Form 5700-32 (see
Section C.l above);
643
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b.
facilities plan (see Section C.2 above);
c. State certification of adequate public participa-
tion (see Section C.3 above);
d. notification of any previous advance of allowance
or Step 1 grant received (see Section C.4 above);
e. evidence of compliance with all applicable limita-
tions on award described in Section D above, except
draft plan of operation, intermunicipal service
agreement, UC system, and SUO; and
f. evidence of compliance with all applicable addi-
tional considerations for award described in
Section E above.
3. Deferred Provisions
During the course of a Step 2+3 project, the grantee is required
to submit the following documents to the reviewing agency:
a. prior to initiating action to acquire eligible
real property, a plat which shows the legal
description of the property to be acquired, a
preliminary layout of the distribution and
drainage systems, and an explanation of the
intended method of acquiring the real property
(see Section H below) and
b. before initiating a procurement action for building
the project (i.e., advertising for bids):
i. contract documents, including plans
and specification (see Section C.5
above);
ii. a project schedule (see Section C.6
above);
iii. a draft plan of operation (see Section D.8
above) ;
iv. an executed intermunicipal service agree-
ment (see Section D.9 above);
v. a UC system (see Section D.17 above); and
vi. an SUO (see Section D.17 above).
Re: 40 CFR 35.2040(a), 35.2109, 35.2202
644
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G. COMBINED SEWER OVERFLOW GRANTS
Purpose:
Award grants to CSO projects which are designed to restore uses
of the receiving waters in priority water quality areas which have
been impaired by the impact of CSOs.
Discussion:
The 1981 CWA amendments and the implementing regulations make a
distinction between marine CSO and nonmarine CSO projects. The dis-
tinction is primarily related to the source of funding for such pro-
jects and the corresponding regulatory requirements which must be
satisfied prior to grant award. The most significant difference in
regulatory requirements, depending on the source of funding, is
whether or not the State must provide a special demonstration that
the proposed CSO project is necessary to restore impaired uses of the
receiving waters.
Procedures:
1. Source of Funds
Three potential funding sources for CSO projects are available:
a. State's Regular Allotment
After September 30, 1984, the Governor may include in
the State's priority system a category of projects needed
to correct CSOs which impair water uses in priority water
quality areas. Such projects require a special demonstra-
tion as described in Item 2a below. Funds from the State's
regular allotment may be used only for nonmarine CSO pro-
jects.
Re: 40 CFR 35.2015(b)(2)(iv), 35.2024
b. Governor's Discretionary Set-aside
After September 30, 1984, up to 20 percent of a State's
regular allotment, at the discretion of the Governor, may
be used to fund categories of projects which were previously
eligible for grant assistance before this date. Among the
previous categories of projects is the correction of CSOs,
either marine or nonmarine. For CSO projects funded from the
645
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Governor's discretionary set-aside, the State is not
required to provide the special demonstration described
in Item 2a below. However, this source of CSO funding
is subject to certain restrictions, as explained in
Sect ion 11.E.3.
Re: 40 CFR 35.2015(b)(2)(iii), 35.2024
c. Separate Appropriation for Marine Projects
After September 30, 1982, marine CSO projects may be
funded through a separate Congressional appropriation.
Unlike other construction grant appropriations, funds to
be used for marine CSO projects are not allotted to each
State, but instead are administered at EPA headquarters.
Hence, proposed projects are subject to a national (rather
than State) priority system. Projects awarded grant assist-
ance using the marine CSO fund are to address impaired uses
or public health risks in priority water quality areas in
marine bays and estuaries caused by the impacts of CSOs.
These projects require a special demonstration as described
in Item 2c below.
Re: 40 CFR 35.2024(b)
2. Project Requirements
The regulatory provisions which must be satisfied for CSO pro-
jects depend on the source of the funds which will be used for
providing grant assistance:
a. State's Regular Allotment
After September 30, 1984, nonmarine CSO projects
may be awarded grant assistance from the State's regular
allotment provided that:
i. the Governor has included this category
of projects in the State's priority system;
ii. the specific project is within the fundable
range on the State's project priority list;
646
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iii. the grant application includes the information in
Section C above, (i.e., facilities plan, plans and
specifications, etc.), and satisfies the applicable
limitations on award (see Section D above), the
applicable additional considerations for award (see
Section E above), the EPA procurement requirements
(see Sections VII.B through VII.F), and all other
applicable wastewater treatment project requirements.
iv. the State has demonstrated to EPA that the water
quality goals of the CWA will not be achieved in
a priority water quality area without correcting
the CSO, and specifically that, at a minimum:
- significant usage of the water for fishing
and swimming will not be possible without
the proposed project; and
- the project will result in substantial
restoration of an existing impaired use.
The State may, at its discretion, use the marine CSO guidance
(see Item c below) in preparing a demonstration for a nonmarine
CSO project, except that this demonstration would address fishing
rather than shel1fishing;
Re: 40 CFR 35. 2015(b)(2)(iv) , 35. 2024 (a)
b. Governor's Discretionary Set-aside
After September 30, 1984, marine or nonmarine CSO projects
may be awarded grant assistance from the Governor's discretion-
ary set-aside funds, provided that:
i. the Governor has included this category of
projects in the State's priority system
(see Item l.b above);
ii. the specific project is within the fundable
range on the State's project priority list;
iii. the grant application includes the informa-
tion described in Item a.iii above; and
647
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iv. the project falls within the 25 percent
limitation on "sewer projects" described
in Section II.E.3.
The State is not required to provide a special demonstra-
tion of project need beyond that required as a routine part
of facilities planning. If the need for the project can be
demonstrated as described in Item 2.a.iv above, it would be
eligible for funding from the State's regular allotment, and
would not be subject to the 25 percent limitation described
in Section II.E.3.
Re: 40 CFR 35.2015(b)(2)(iii)
c. Separate Appropriation for Marine Projects
After September 30, 1982, marine CSO projects may be awarded
grant assistance from a separate Congressional appropriation.
To be eligible for grant assistance, such projects must meet all
of the following requirements:
i. Funds must have been appropriated for
the marine CSO fund and must be avail-
able for obligation.
ii. The project must satisfy the priority
criteria established by EPA, which are
based on:
- the extent of water use benefits,
including swimming and shell-
fishing, that would result from the
project;
- the relationship of water quality
improvements to project costs; and
- the national and regional signifi-
cance of the project.
Re: 40 CFR 35.2024(b)(2)
iii. The State must demonstrate (see the
guidance referenced below for a tech-
nical discussion of this demonstration)
to EPA that the proposed project addresses
impaired uses or public health risks in
648
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priority water quality areas of marine bays
or estuaries which are due to the impacts
of the CSO, and specifically that, at a
minimum:
significant usage of the water for
shellfishing and swimming will not
be possible without the proposed
project; and
the proposed project will result in
substantial restoration of an
existing impaired use.
Re: 40 CFR 35.20 24(b)(2)
iv. The project must satisfy all applicable
limitations on award, grant conditions,
Federal grant share provisions, and
allowable cost provisions, except for:
allotment and reallotment
(see Sections II.E.2 and II.E.4);
State priority system and project
priority list (see Section II.E.3);
reserves and reallotment of reserves
(see Section II.E.4);
advances of allowance to potential
grant applicants (see Sections
II.E.4.e, III.D.3.C, III.E, VI.K,
and IX. B.8 . c ) ;
review of grant applications and
priority determinations (see
Sections VI.M.l through VI.M.3);
and
Step 2+3 projects (see Section VI.F).
Re: 40 CFR 35.2024(b)(4)
649
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v. Two regulatory provisions for marine CSO
projects vary slightly from those for other
construction grant projects:
final plans and specifications may,
but need not, accompany the grant
application; however, the grant
applicant must commit itself to
providing them by a date set by
the reviewing agency; and
if the proposed project is a phase
or segment described in the
facilities plan, the criteria used
to demonstrate the need for the
project (see Item ii above) must be
applied to the entire facilities
plan proposal and to each segment
proposed for funding.
Re: 40 CFR 35.2024(b)(3)
vi. Marine CSO project applications and supporting
documents are submitted to the State by the
grant applicant. The State reviews the pro-
ject, prepares the special demonstration des-
cribed in Item iii above, and submits the
project to the EPA Regional Office. The
Regional Office determines whether all Federal
requirements have been met, completes the
environmental review, prepares a statement of
regional and national significance, determines
the eligibility of the project for considera-
tion of funding, and submits the required
information to EPA Headquarters.
vii. Once a year, EPA Headquarters will prepare a
priority list, based on the criteria in
Item ii above, for proposed marine CSO pro-
jects.
viii. On the basis of the priority list described
in Item vii above, EPA headquarters will
provide obligating authority for grant award
to the appropriate EPA Regional Office.
650
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ix. Projects receiving marine CSO grant awards
will be administered by EPA Regional Offices
or, where delegated, state reviewing agencies.
Re: 40 CFR 35.2024(b), 35.2040(f); EPA publication,
"Guidance for the Preparation and Review of
Applications, Special Fund for Abatement of
Combined Sewer Overflow Pollution in Marine
Bays and Estuaries (The Marine CSO Fund),"
dated.January 1984
H. LAND ACQUISITION GRANTS
Purpose:
Provide grant assistance for the acquisition of real property
(i.e., land) which will be an integral part of the treatment process.
Discussion;
During facilities planning, the grant applicant will have eval-
uated various treatment alternatives, including land application of
wastewater or sludge, and selected the cost effective alternative.
Land associated with the proposed project may already be owned by the
the applicant, may be available for lease or purchase, or may be
available for use without payment. This section addresses only the
purchase of eligible land and assumes that other land use arrangements
(lease, easement acquisition, or use without payment) have been accom-
plished in accordance with State and local laws. It should be noted,
however, that the provisions of 40 CFR Part 4, "Implementation of the
Uniform Relocation Assistance and Real Property Acquisition Policies
Act of 1970," are applicable to the acquisition of real property for
EPA assisted projects whether or not the land so acquired is eligible
for grant assistance. Provisions of State and local law are appli-
cable only to the extent that they do not conflict with Federal law
(see Section I.D.6). Arrangements for lease, easement, and use with-
out payment need to be reviewed to insure that they are adequate for
the successful construction and operation of the project (e.g., that
they are not subject to an expiration or revocation which would pre-
vent the continuing operation of the project).
651
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Acquisition of eligible real property may generally be
accomplished in one of three ways under the construction grants
program:
- as a preaward cost,
- under a grant solely for land acquisition, or
- as a part of the grant for the construction
of the project.
In all cases, the provisions of 40 CFR Parts 4 and 30 are applicable,
and must be satisfied if the land and possibly the project are to be
eligible for grant assistance. 40 CFR Part 4 is separated into two
parts:
- requirements applicable when persons, businesses,
or farms will be displaced, and
- requirements for the acquisition of real property.
In view of the potentially high costs and legal fees associated
with land acquisition, grant applicants and reviewing agencies should
use professional personnel experienced in all phases of the acquisi-
tion process, including appraisals. The review procedures below
address the highlights of the regulatory requirements, but are not a
substitute for a detailed review by professional personnel to insure
compliance with 40 CFR Part 4. Eligibility of land acquisition and
associated costs is discussed in Section IX.F.4, Paragraph D, which
should be consulted prior to grant award.
Review Procedures:
1. Grant Application
A grant application which requests funds for the acquisition of
real property must include:
a. all applicable information and documents described
in Sections C through E above, .except that grant
applications solely for the acquisition of real
property need not include the information described
in Item 2 below;
b. a plat which includes the legal description of the
property to be acquired;
652
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c. a preliminary layout of the distribution and
drainage system;
d. an explanation o£ the intended method of acquiring
the real property in accordance with 40 CFR Parts 4
and 30;
e. a copy of the appraisal report for the property;
and
f. assurances that the property will be used only for
the purpose for which it is purchased, and that
EPA's interest in the property will be adequately
reflected and protected in compliance with all
recordation or registration requirements of appli-
cable local laws on real property (see Item 3.b
and Section M.5 below).
Re: 40 CFR 30.535, 30.600(i), 35.2040(b)
2. Deferred Provisions
Grant applications which request funds solely for land acquisi-
tion need not include information regarding the following items
whose submission may be deferred until the award of grant assistance
to build the project:
a. debarment and suspension (see Section D.7 above);
b. user charge system (see Section V.E and
Section D.17 above);
c. sewer use ordinance (see Section V.F and
Section D.17 above);
d. O&M manual payment limitations (see Section IX.B.5);
and
e. adoption of UC system and SUO (see Sections V.E and
V.F, and Section D.17 above).
Re: 40 CFR 35.2122, 35.2260
653
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Grant Conditions
Grant awards which include the acquisition of eligible real
roperty are to include grant conditions (see Section M.5.d below)
tating that:
a. real property must not be acquired until the
reviewing agency has determined, based on doc-
umentation submitted by the grantee, that the
applicable provisions of 40 CFR Parts 4 and
3D have been met; and
b. the Federal interest in the property to be
acquired must be protected by the inclusion of
the following language in the title or other
recordation instrument:
"Federal lien: Federal grant funds
have been used to purchase this pro-
perty. The Federal interest is
percent of the proceeds from any sub-
sequent sale thereof, or percent
of the fair market value of the pro-
perty on the date of the transaction
which removes it from the use for which
it was purchased. (See 40 CFR 30.535(e),
revised on September 30, 1983). A lien
to this effect and extent is hereby
asserted."
3: 40 CFR 30.535, 35.2210
Preaward Costs
Potential grant applicants requesting approval, as a preaward
DSt, of the acquisition of eligible land or of an option for the
jrchase of eligible land may receive such approval after completion
E the environmental review (see Section D.12). In addition, the
^viewing agency should request sufficient information from the
pplicant, such as that required for grant award in Items l.b through
.f above, to insure that the costs are likely to satisfy grant appli-
ation requirements for a subsequent grant. The approval letter from
~ie reviewing agency should include notification that the acquisition
E real property, to be eligible, must be procured in accordance with
ie applicable provisions of 40 CFR Parts 4 and 30. Refer to
sction D.15 above for additional warning language to be included in
ie approval letter.
2: 40 CFR 35.2118
654
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I. INNOVATIVE OR ALTERNATIVE TECHNOLOGY FIELD TESTING GRANTS
Purpose:
Provide grant assistance for field testing of higher risk I/A
projects which require verification of design parameters.
Discussion:
Field testing of I/A projects may be accomplished either as a
preaward cost (see Section D.15 above) or under a separate grant.
Field testing of I/A projects may be requested by the grant
applicant, or may be suggested by the reviewing agency. Prior
to making a decision concerning I/A field testing, the State I/A
coordinator should discuss the proposed project with the EPA
Regional I/A coordinator, and if necessary, seek the advice of
the I/A support group at EPA's Municipal Environmental Research
Laboratory in Cincinnati, Ohio.
Field testing of I/A projects is recommended for higher risk
technologies, in order to verify design parameters prior to
building the full scale project. Field testing is to be practical
and generally small scale, with the objective of verifying per-
formance, refining insufficiently tested design parameters, or
resolving technical uncertainties. Considerable professional
judgement is required to determine whether the field testing costs
represent a reasonable trade-off in comparison with the corres-
ponding risk of failure of the full scale project if field testing
is omitted. Project reviewers are encouraged to review the
"Innovative and Alternative Technology Assessment Manual" (MCD-53),
particularly Chapter 4, when making this judgement. The review
procedures below describe the regulatory requirements for I/A field
testing projects. Where specific State or EPA Regional procedures
have been developed, they should be followed.
Review Procedures:
1. Grant Application
A grant application which requests funds for I/A field testing
must include:
a. all applicable information and documents described
in Sections C through E above, except that grant
applications solely for I/A field testing need not
include the information described in Item 2 below;
and
655
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b. a field testing plan, which includes:
i. identification, including size,
of all principal components to be
tested;
ii. location of testing facilities in
relationship to full scale project
locat ion;
iii. critical design parameters and per-
formance variables that are to be
verified as the basis for I/A
determinations;
iv. schedules for construction of field
testing facilities and duration of
proposed testing;
v. capital and O&M cost estimate of
field testing facilities, with
documentation of cost effectiveness
of field testing approach; and
vi. design drawings, process flow dia-
grams, equipment specifications, and
related engineering data and informa-
tion, sufficient to describe the over-
all design and proposed performance
of the field testing facility.
Re: 40 CFR 35.2040(e)
2. Deferred Provisions
Grant applications which request funds solely for I/A field
testing need not include information regarding the following items,
whose submission may be deferred until the award of grant assistance
to build the approved full scale project:
a. debarment and suspension (see Section D.7 above);
b. draft plan of operation (see Section D.8 above);
c. UC system (see Section V.E, and Section D.17 above);
656
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d. SUO (see Section V.F, and Section D.17 above);
e. O&M manual payment limitations (see Section IX.B.5); and
f. adoption of UC system and SUO (see Sections V.E and V.F,
and Section D.17 above).
Re: 40 CFR 35.2122, 35.2262
3. Grant Conditions
Grant awards which include I/A field testing are to include
grant conditions which require the grantee to submit a quality
assurance program and a report which describes the procedure,
cost, results, and conclusions of field testing in accordance
with the schedule contained in the grant agreement (see
Section M.5 below).
Re: 40 CFR 30.302(d)(3), 30.503(f) and (h), 35.2211
4. Preaward Costs
Potential grant applicants requesting approval of I/A field
testing as a preaward cost may receive such approval after comple-
tion of the environmental review (see Section D.12). The reviewing
agency should obtain sufficient information from the applicant, such
as that required for grant award in Item l.b above, to substantiate
that the I/A field testing is warranted and is likely to satisfy
grant application requirements for a subsequent grant. The approval
letter from the reviewing agency should remind the applicant that
the procurement of services, supplies, and materials must comply
with 40 CFR Parts 30 and 33, and that the acquisition of real pro-
perty must comply with 40 CFR Parts 4 and 30, if such costs are to
be allowable for grant participation. Refer to Section D.15 for
additional warning language to be included in the letter.
Re: 40 CFR 35.2118
657
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J. INNOVATIVE OR ALTERNATIVE TECHNOLOGY MODIFICATION OR
REPLACEMENT GRANTS
Purpose:
Provide grant assistance to fund 100 percent of the allowable
;ost of the modification or replacement (M/R) of any project
Eunded with increased funds under the I/A technology provisions
Df the CWA and the implementing regulations.
Discussion:
The 1977 CWA amendments introduced I/A technology provisions
into the construction grants program. The I/A provisions were
designed to conserve resources and reduce costs for wastewater
treatment projects through the use of new or improved technologies,
tfhich are inherently subject to a greater than normal risk of failure.
\s an incentive for using I/A technology and accepting this higher
degree of risk, I/A projects were made eligible for increased grant
funding, and for 100 percent M/R grants in the event of failure.
The review procedures below address the regulatory provisions
applicable to 100 percent M/R grants. It is to be noted that I/A
projects which received grant assistance after December 29, 1981 are
subject to project performance standards, as required by the 1981
ZVlPi amendments.
Review Procedures:
Grant assistance, either as a grant amendment or a new grant,
to fund 100 percent of the allowable costs (including planning and
design costs) for the M/R of any I/A project, may be awarded only
if the reviewing agency determines that:
a. the I/A elements of the project have caused the
project, or significant elements of the complete
waste treatment system of which the project is a
part, to fail to meet the project performance
standards;
b. the failure has significantly increased O&M ex-
penditures for the project, or for the complete
waste treatment system of which the project is a
part, or requires significant additional capital
expenditures for corrective action;
658
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the failure has occured prior to two years after
the initiation of operation of the project; and
the failure is not attributable to negligence on
the part of any person.
The report or documentation necessary to substantiate the above
four items will vary from project to project, and will depend on the
extent and nature of the failure and the size, cost and complexity
of the project. Projects which satisfy Item a through d above are
also required to receive priority certification from the State agency.
It should be noted that some alternative technology projects which
received increased grant assistance may have included conventional
components which also received increased funding (e.g., treatment
prior to land application). It is intended that the conventional
components receive 100 percent M/R funding only if their failure was
caused by an I/A component of the project.
Re: 40 CFR 35.2032(c)
K. GRANTS TO STATES FOR ADVANCES OF ALLOWANCE
1. Defining the State Program
Purpose:
Provide financial assistance to small communities which would
otherwise be unable to perform planning and/or design work prior to
the award of a Step 2+3 or a Step 3 grant.
Discuss ion;
The 1981 CWA amendments provide for an advance of allowance to
certain potential grant applicants. State agencies are to identify
small communities, as defined by the State, which would be unable to
complete an application for a Step 2+3 or a Step 3 grant (i.e., to
perform facilities planning and/or design work) without such an
advance. States are also required to reserve a reasonable portion
of their annual allotment, up to 10 percent, for advances of allow-
ance, unless this requirement is waived by EPA (see Section ll.E.4.e).
The amount of funds provided to potential grant applicants is
computed in accordance with 40 CFR Part 35, Subpart I, Appendix B.
Note that the maximum amount of the advance is not the allowance,
but is the allowance times the appropriate EPA grant percentage (see
c.
d.
659
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Sections L.l and L.2 below). This advance may be less than this
maximum amount, at the discretion of the State. Also note that
the allowance is based on the estimated allowable building costs,
which do not include other associated step 3 costs such as
engineering, legal, accounting, etc.
Unless the total amount of the advance is small and the work
is to be performed in a short period of time (e.g., less than six
months), it may be advisable to divide the advance into two or more
payments (e.g., one for facilities planning, one at the initiation
of design, and the balance when 50 percent of the design work has
been completed).
If Step 2 + 3 or Step 3 grant assistance is subsequently awarded
to a community which received an advance, the amount of the advance
is subtracted from the grant amount. If Step 2+3 or Step 3 grant
assistance is not awarded, the State may seek repayment of the
advance on such terms and conditions as the State may determine.
Procedures:
Before applying for a grant for advances of allowance, a State
must define the following procedures for the administration of
advances of allowance:
a. Qualified Communities
Advances may be made only to small communities, as
defined by the State, which would otherwise be unable
to perform the necessary planning and/or design work.
The State must:
i. define a "small community" (e.g., by
population size), and
ii. set objective criteria by which it will
determine whether a community would be
"otherwise unable to perform" (e.g., by
income per capita in relation to the
estimated per capita cost of planning
and/or design).
Re: 40 CFR 35.2025(b)(3)
-------
b. Application Procedure
Application forms and their required contents, as
well as review and approval procedures, must be defined
by the State. At a minimum, the applicant for an advance
should be required to agree to complete the facilities
planning and/or design work for which the advance is
prov ided.
Re: 40 CFR 35.2025(b)(1)
c. Amount of Advance
The State is to determine the amount of each com-
munity's advance, subject only to the requirement that
the total advance cannot exceed the Federal share of the
estimated allowance (see Section III.E). The advance can
be equal to this maximum, or lower; the decision as to
whether it should be lower, and if so, how much lower,
must be defined by the State, in language that is objec-
tive and treats all communities equally.
In most States, all of the anticipated allotment for
the next several years could easily be consumed by high-
priority Step 3 projects which have already been designed.
Since advances in these States would reduce the amount of
money available for high-priority Step 3 projects, some
States may decide to limit each advance to a smaller
amount which would still meet the minimum needs of each
communi ty.
Re: 40 CFR 35.2025(b) (4 )
d. Timing of Payments
The advance can be paid at any time after the State
approves the community's application for an advance. The
advance can be paid in one lump sum, or in several partial
payments, depending on the procedures established by the
State. A State may decide to mandate multiple payments,
since expenses for planning and design are incurred over
a substantial period of time, and the payment of the
maximum allowable advance during the planning stage would
result in most of the funds being advanced long before the
expenses are incurred.
661
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State requirements for the timing of payments must
apply equally to all communities.
Re: 40 CFR 35.2025(b)(4)
e. Repayment of Advance
The State must define the conditions, if any, under
which a municipality which never receives a Step 2+3 or a
Step 3 grant would have to repay an advance of allowance.
The 1981 CWA amendments authorize, but do not require, the
State to seek repayment of the advance, "on such terms and
conditions as it may determine." The terms and conditions
for repayment may include the collection of interest, at
the discretion of the State, as long as all communities
are treated equally.
There is no Federal requirement for the collection of
interest, since once the State makes an advance to a third
party, the advance loses its character as Federal funds.
On the other hand, any funds recovered from a municipality
by the State (advance and/or interest) must be returned to
the grant account for re-use in advancing funds to other
municipalities. However, interest earned by the State on
funds received from EPA but not yet advanced to a munici-
pality (or recovered from a municipality but not yet
advanced to another municipality) may be retained by the
State for other uses, as specified in 40 CFR 30.526.
Re: 40 CFR 35.2025(b)(5)
2. Applying for the State Grant
Purpose:
Award Federal grant funds to the State, for the State to pro-
vide advances of allowance to small communities.
Discussion:
To acquire funds for making advances of allowance, the State
agency applies to EPA for a State grant which will be used for
providing advances to small communities. The application includes
662
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a list of small communities which, in the judgement of the State,
are eligible for the advance. The application may also include a
request by the State that payments under the grant be sent directly
from EPA to each community, after the State has approved the com-
munity's application from an advance (see Section IX.B.8.C).
Procedures:
In order to receive a grant for advances of allowance, a State
must:
a. submit an application, using EPA Form 5700-31;
Re: 40 CFR 35.2040(d)
b. define an acceptable program for the administration
of advances of allowance (see Item 1 above);
Re: 40 CFR 35.2025(b)
c. notify EPA of the basis for the grant amount re-
quested (normally, by submitting a list of the
small communities which are expected to receive
an advance, and the amount of the advance which
is expected to be provided to each community);
and
Re: 40 CFR 35.2040(d)(2)
d. include with the application a list of the com-
munities which received an advance of allowance
under the previous grant to the State, and the
amount of the advance received by each community.
Re: 40 CFR 35.2040(d)(1)
663
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L. FEDERAL GRANT SHARE
In order to compute the Federal grant share, several factors
must be taken into account. While the grant applicant will have
computed its grant request, the grant amount offered may be
different after the application package and supporting documents
have been reviewed. If the grant to be offered is less than that
requested, the grantee should be contacted to determine if further
clarifying information is available. The letter forwarding the
grant offer should clearly explain the reason for any difference
in the grant amount.
Procedures:
1. Total Allowable Project Cost
Total project cost consists of many elements of cost, not all of
which are allowable for grant participation. Allowable/unallowable
costs are determined in accordance with 40 CFR Part 35, Subpart I,
Appendix A, as discussed in Section IX.F.
One additional factor arises where the project includes unallow-
able reserve capacity. The allowable project costs for grants
awarded after September 30, 1984, must be limited to the treatment
capacity required to serve existing needs on the date of Step 3
grant approval. If the project includes ineligible reserve capacity,
it will be necessary to establish a cost ratio (see Section D.18
above). All Step .3 costs which are normally allowable for grant
participation are reduced, using the cost ratio. Phased and seg-
mented projects which received a previous Step 3 grant before
October 1, 1984 may be exempt from this limitation (see Section D.10
above). A suggested method for determining the total allowable pro-
ject cost is given below:
a. Establish an estimated total building cost, which
is the sum of the estimated award amount of all
prime subagreements for building the project, plus
amounts approved for force account work performed
in lieu of awarding a subagreement for building
the project, plus the estimated purchase price
of eligible real property. The estimated total
building cost so determined does not include pro-
ject components which are ineligible for grant
participation (e.g., collection sewers and related
pumping stations). The estimated total building
664
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cost so determined would be the estimated allow-
able building cost of the project, except for
projects which include ineligible reserve capacity
(see Item d below).
b. Establish the cost ratio for projects (treatment
plants, interceptors, and if eligible, collection
sewers) with capacity beyond that required to
serve existing needs. The cost ratio is the frac-
tion obtained by dividing the estimated building
cost to serve existing needs by the estimated total
building cost (see Section D.18 above).
c. Determine other allowable cost items associated with
the eligible project. If the items described below
are not clearly separated between eligible and in-
eligible project components, they should be distri-
buted proportionately. Allowable cost items include:
i. professional services during Step 3, such
as engineering cost (including services
for one year following initiation of
operation), construction management, legal,
and accounting;
ii. administrative costs;
iii. approved costs related to preaward
building costs (approved preaward
building costs are included in Item a
above);
iv. costs related to the acquisition of
eligible land, including relocation
(eligible land costs are included in
Item a above);
v. costs related to the direct purchase
of major items of equipment by the
grant applicant (eligible equipment
costs are included in Item a above);
665
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d. Where the project includes ineligible reserve
capacity, multiply the estimated building cost
(from Item a above) by the cost ratio (from
Item b above) to determine the estimated
allowable building cost.
e. Where the project includes ineligible reserve
capacity, multiply the total of other allowable
cost items (from Item c above) by the cost ratio
(from Item b above).
f. Where the project has not received both a Step 1
and a Step 2 grant, compute the allowance for
facilities planning and/or design, using the
appropriate table in 40 CFR Part 35, Subpart I,
Appendix B, based on the estimated allowable
building cost for the capacity required to serve
existing needs (see Item d above, or for projects
which do not include ineligible reserve capacity,
see Item a above). Note that the grantee does not
receive the full allowance, but only the appropriate
percentage (see Item 2 below).
g. The total estimated allowable project cost is the
sum of the estimated allowable building cost (see
Item d above, or for projects which do not include
ineligible reserve capacity, see Item a above),
the estimated allowable other costs (see Item e
above, or for projects which do not include in-
eligible reserve capacity, see Item b above), and
the estimated allowance for facilities planning
and/or design (see Item f above).
h. The EPA grant amount is calculated by multiplying
the total estimated allowable project cost by the
appropriate EPA grant percentage (see Item 2 below),
and subtracting the amount of any advance of
allowance previously paid to the grant applicant.
Re: 40 CFR 35.2123
666
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2. EPA Grant Share
In computing the EPA grant share, the project reviewer is to
examine the applicable conditions noted below to determine the EPA
grant percentage, and multiply this percentage by the total allow-
able project cost (see Item l.g above). The resulting figure,
minus any advance of allowance, is the EPA grant amount.
a. Standard Grant Share
After September 30, 1984 the EPA grant is 55
percent, except as described below.
b. Uniform Lower Federal Share
The Governor of a State may elect to uniformly
lower the EPA grant share for all categories of
projects. Except for I/A projects, the EPA grant
will be the percentage established by the Governor
and approved by EPA.
c. Phased or Segmented Projects
These projects are discussed in Section D.lO.d above.
d. Projects Using An Innovative or Alternative
Technology
The EPA grant share for eligible treatment works or
unit processes determined to meet the definition of an
I/A technology (including an I/A field testing project)
shall be increased by 20 percent of the total allowable
cost of the I/A project or the I/A portion of the pro-
ject, but in no event shall the total Federal share
exceed 85 percent. Only I/A components and unique
non-I/A components necessary to make the I/A components
operate may receive the additional grant percentage.
Where a State grant program exists, the State grant
percentage of the non-Federal share must not be
decreased for an I/A project. For example, assume an
EPA standard grant share of 55 percent, a State stan-
dard grant share of 10 percent, and a local standard
grant share of 35 percent, for a total non-Federal
share of 45 percent. The State share of the non-
Federal share is 10 divided by 45, or 22.2 percent.
667
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For an I/A project, the Federal share is 75 percent
and the non-Federal share is 25 percent. The State's
proportional contribution must be at least 22.2 per-
cent of the 25 percent non-Federal share (i.e., at
least 5.55 percent of the eligible I/A project cost.
This requirement is expected to be met in most States
by providing the same State percentage grant to all
projects (in this example, 10 percent), but the
State percentage grant may be reduced for I/A pro-
jects at the discretion of the State, provided that
all I/A projects are treated equally, (in this
example, to a share not lower than 5.55 percent).
e. Projects for the Modification or Replacement of
Failed Innovative or Alternative Technologies
The EPA grant is 100 percent of the allowable cost
of the M/R of failed I/A projects which meet the con-
ditions described in Section J above.
f. Other Projects
The EPA grant share does not change because a pro-
ject receives a Step 2+3, a land acquisition, or a CSO
(including a marine CSO) grant. The standard EPA grant
share for such projects is 55 percent, unless this per-
centage is changed as discussed in Items b through e
above.
Re: 40 CFR 35.2024(b), 35.2032(c), 35.2109, 35.2152
M. GRANT AWARD PROCEDURES
Detailed grant award procedures may vary from State to State,
depending on internal State procedures and the requirements of
the State/EPA delegation agreement. Fully delegated States may
only need to submit project and priority certifications to EPA
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(see Items 2 and 3 below), while those States without delegation
will need to submit complete application packages. In all cases,
however, a grant may only be awarded by EPA. The procedures below
are general, and are not a substitute for detailed procedures
established in each State and EPA Regional Office.
1. State Procedures
All States have developed internal grant approval procedures
which are to be followed prior to submission of the appropriate
documentation to EPA. Such procedures usually include:
a. preparation of a one-page project summary for
the head of the reviewing agency;
b. preparation of the State Priority Certification
(EPA Form 5700-28);
c. preparation of the letter of approval from the
State to EPA, including an explanation of any
differences between the grant amount requested
by the applicant and the grant amount approved
by the State;
d. approvals by other offices within the State
agency (e.g., compliance, permits, etc.);
e. approval by the State's fiscal office, to
verify that funds, including reserves if
appropriate (e.g., I/A, small communities),
are available;
f. preparation of the grant award input coding sheet
for the computerized Grants Information and Con-
trol System (GICS); and
g. preparation of a draft grant agreement/amendment
(EPA Form 5700-20A), with recommended general and/
or special grant conditions (see Items 5 and 6
below).
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2. Priority Certification
All States are to review each grant application to verify
that it is complete. If the project is listed on the State's
project priority list for the current fiscal year and is within
the fundable range, the State will complete the State Priority
Certification (EPA Form 5700-28) for submission to EPA.
Re: 40 CFR 35.2042(a), 35.2103
3. Project Certification by Delegated States
States which have been delegated authority to manage the
construction grants program must submit a written certification
to the EPA Regional Office for each project, stating that the
applicable Federal requirements, within the scope of authority
delegated to the State, have been met. The certification must
be supported by documentation retained by the State, which will
be made available to EPA upon request.
Upon receiving a certification covering all delegable preaward
requirements, EPA must either approve or disapprove the grant
within 45 calendar days. If disaproved, EPA will state the rea-
sons and have an additional 45 days to review any subsequent re-
vised submissions. If EPA fails to approve or disapprove within
45 days, the grant shall be deemed approved and EPA must issue the
grant agreement to the applicant.
Re: 40 CFR 35.2042(a) and (b)
4. Grant Agreement/Amendment
After receipt, review, and approval of the State certifications
and supporting documents, if any,.EPA will prepare the Grant Agree-
ment/Amendment (EPA Form 5700-20A) for the Regional Administrator's
signature. EPA will also complete the following actions or docu-
ments which may already have been prepared (or partially prepared)
by the delegated State:
a. briefing memorandum to the EPA Regional Administrator,
if required by Regional procedures;
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b. Commitment Notice (EPA Form 2550-9) for transmittal
to the appropriate EPA fiscal office;
c. preparation and entry of applicable information into
GICS (see Section III.C.3); and
d. Grant Agreement/Amendment (EPA Form 5700-20A):
i. the first page is to be data-
phoned to EPA Headquarters
immediately after signature by
the Regional Administrator (RA);
ii. the entire form, with a transmittal
letter, is mailed to the grant
applicant 5 days after EPA Head-
quarters data-phone notification
(not before); and
iii. the form must be signed by the
applicant's authorized represent-
ative (see Section C. l.b above)
and returned to the Regional Office
within 3 weeks of receipt by the
applicant.
5. General Grant Conditions
The Grant Agreement/Amendment contains award conditions which
require the grantee to comply with all applicable provisions of
40 CFR Chapter I, Subchapter B. (Subchapter B includes 40 CFR
Parts 30 through 35, and references all other applicable regulations,
including 40 CFR Parts 4, 6, 7, 25, and 29.)
The reviewing agency may wish to supplement these preprinted
grant conditions by adding grant conditions which emphasize specific
regulatory provisions. Although the inclusion of these additional
conditions does not increase the grantee's obligation to comply with
with these regulations, they are frequently added to increase the
grantee's awareness of its obligations under the regulations.
Representative samples of these conditions are identified below:
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a. Effect of Approval
Approval or certification of project documents (e.g.,
facilities plan, plans and specifications, etc.) by the
reviewing agency is for administrative purposes only, and
does not relieve the grantee of its responsibility for the
entire project.
Re: 40 CFR 35.2050
b. Step 2 + 3
The grantee must obtain reviewing agency approval before
initiating acquisition of eligible real property, procurement
of equipment, or selection of construction contractors.
Re; 40 CFR 35.2202
c. Project Changes
The reviewing agency must approve certain project changes,
as specified in 40 CFR 35.2204, by formal grant amendment.
Re: 40 CFR 35.2204
d. Land Acquisition
The reviewing agency must verify that the requirements
of 40 CFR Part 4 have been met before real property is ac-
quired, and the Federal interest in the property to be
acquired must be protected (see Section H.3.b above).
Re: 40 CFR 30.535, 35.2210
e. Project Initiation
The grantee shall expeditiously initiate and complete
the project in accordance with the schedule contained in
the application and the grant agreement. Failure to award
contracts and to issue notices to proceed for building all
significant elements of the project within 12 months of
grant award (or of final approval of plans and specifica-
tions, and the related documents described in Section F.3
above, under a Step 2+3 grant) may result in a limitation
on allowable costs or the imposition of sanctions (see
Sections VIII.B.4 and IX.F.4, Paragraph A.2.e).
Re: 40 CFR 30.900 through 30.906, 35.2212
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f. Quality Assurance Program
The grantee must submit a quality assurance program
within 30 days of grant award for projects which include
environmental studies, field testing of I/A technologies,
evaluation of wastewater treatment plant performance
(e.g., during the one year project performance period),
or other activities which entail gathering environmental
or environmentally related data.
Re: 40 CFR 3 0.302(d)(3), 30.503(f) and (h)
g. Project Performance Standards
The grantee should be informed of the parameters which
have been identified by the reviewing agency as project
performance standards (see Sections V.C.2.a and VII.I.2.a).
Re: 40 CFR 35.2218(c)
h. Field Testing of Innovative or Alternative Technologies
See Section 1.3 above.
6. Special Grant Conditions
Where there are compelling reasons, special grant conditions
may be included in the grant agreement. Unlike general grant con-
ditions, special grant conditions do not repeat EPA's regulatory
requirements, but rather are special conditions under which the
grant has been awarded, due to unusual circumstances. All proposed
special grant conditions should receive a technical and legal review,
to insure that their inclusion in the grant agreement/amendment is
appropriate.
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I
CHAPTER VII
CONSTRUCTION
A. INTRODUCTION
B. PROCUREMENT SYSTEM REQUIREMENTS
C. PROCUREMENT OF PROFESSIONAL SERVICES
D. PROCUREMENT OF CONSTRUCTION CONTRACTORS
E. SMALL PURCHASES
F. NONCOMPETITIVE PROCUREMENT
G. MONITORING CONSTRUCTION
H. MANAGEMENT OF CLAIMS AND CHANGE ORDERS
I. POST-CONSTRUCTION ACTIVITIES
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A. INTRODUCTION
This chapter begins with a discussion oE EPA requirements Eor
grantee procurement systems, and for the procurement of professional
and construction services. Later sections discuss activities which
take place during project construction, including project inspection
and management of change orders. The chapter concludes with a
discussion of the requirements for project performance during the
first year following initiation of operation. Payments, payment
limitations, and grant increase/decrease procedures are discussed
in Chapter IX.
Section B, Procurement System Requirements, describes certifi-
cation and reporting requirements for grantee procurement systems.
Section C, Procurement of Professional Services, describes
specific requirements for the procurement of engineering, legal,
accounting, and other professional services.
Section D, Procurement of Construction Contractors, describes
competitive bidding procedures, grant adjustment, and protests
concerning grantee procurement actions.
Section E, Small Purchases, describes EPA's simplified require-
ments for purchases costing $10,000 or less.
Section F, Noncompetitive Procurement, describes the limita-
tions and approvals necessary for this type of procurement.
Section G, Monitoring Construction, describes monitoring
activities, including preconstruction conferences, project management
conferences (PMCs), interim inspections, construction management eval-
uations (CMEs), and final inspections.
Section H, Management of Claims and Change Orders, describes
management activities which should be employed by grantees for
the effective control of claims and change orders, and reviewing
agency procedures for processing change orders.
Section I, Post-construction Activities, describes engineer-
ing services during the first year following project completion
and the requirements for the grantee's certification concerning
project performance standards.
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B. PROCUREMENT SYSTEM REQUIREMENTS
1. Procurement System Certification
In the interest of reducing the time and paperwork needed for
processing grant applications, each grant applicant is encouraged to
use its own procurement system, provided that the system meets all
applicable Federal, State, and local laws and regulations. Each
grant applicant is required to evaluate its procurement system,
compare the system against EPA's procurement regulations, and
complete the Procurement System Certification (EPA Form 5700-48)
before any procurement action is undertaken with EPA grant assistance.
Where the grant applicant affirmatively certifies that its
procurement system meets the intent of the requirements of
40 CFR Part 33, EPA will accept the applicant's certification
unless EPA or the State agency has reason to question it. Where
the grant applicant does not affirmatively certify, the grant appli-
cant is required to comply with the requirements of 40 CFR Part 33,
and to submit specific documentation to the reviewing agency.
It is to be noted that most review and approval activities re-
lated to grantee procurement actions may be delegated to the State
agency, including the review of a grantee's Procurement System
Certification (EPA Form 5700-48) and the authorization for a grantee
to use an innovative procurement method. However, EPA can not
delegate the actual review of a grantee's procurement system under
40 CFR 33.115, nor the resolution of protests of grantee procurement
actions under 40 CFR Part 33, Subpart G.
Review Procedures:
a. Each grant applicant is required to complete a
Procurement System Certification (EPA Form
5700-48), indicating whether its procurement
system meets the intent of all requirements
in the EPA procurement regulations (40 CFR
Part 33).
b. If the grant applicant affirmatively certifies, EPA
must accept the applicant's certification. However,
EPA reserves the right to review the procurement
system or any individual procurement action:
i. to determine if the EPA procurement
requirements are being met, or
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ii. if there is reason to believe that the
procurement system is unacceptable based
on:
- information from other Federal agencies
or from Congress,
- information from the applicant's cognizant
audit agency,
- information from State agencies or other
organizations,
- information contained in the certification
form,
- previous EPA experience with the applicant, or
- information from contractors or prospective
contractors.
c. Prior written approval must be received from the
reviewing agency, even though the applicant's procure-
ment system was previously certified, if the applicant
intends to:
i. use an innovative procurement method, or
ii. use the provisions of 40 CFR 33.715(a)(2)
to noncompetitively procure the services
of an engineer who provided facilities
planning or design services, but whose
selection for such previous work was not
accomplished in accordance with the then-
applicable EPA procurement regulations
(if the work was performed under a Step 1
or a Step 2 grant) or the provisions of the
current EPA procurement regulations which
are listed in 40 CFR 33.715(a)(3).
d. An applicant's affirmative certification is valid for
two years or for the length of the project period, which-
ever is longer, unless the procurement system is substan-
tially revised, or EPA determines that the intent of the
EPA procurement regulations is not being followed.
705
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e. If the grant applicant does not affirmatively certify,
the applicant is required to comply with the additional
requirements of 40 CFR Part 33, Appendix A, for all
procurement actions undertaken with EPA grant assistance.
These requirements are described in Items 2.b and 3 below.
Re: 40 CFR 33.001(g), 33.105, 33.110, 33.115
2. Reporting Requirements
a. All grantees must submit the following information
to the reviewing agency, in writing, within ten
calendar days of contract award, for all construc-
tion contracts whose cost is expected to exceed
$10,000 within.a 12 month period (e.g., a $15,000
contract with a 24 month performance period would
not be reportable, nor would a $7,000 contract
with a two month performance period):
i. name, address, telephone number, and
employer identification number of
the construction contractor;
ii. amount of the contract award;
iii. estimated starting and completion dates;
iv. project number, name, and site location; and
v. copy of the tabulation of bids or
offerors and the name of each bidder
or offeror.
This information will be sent by EPA to the U.S.
Department of Labor (DOL). In some States, the
State/EPA delegation agreement provides for the
State agency to perform this function.
Re: 40 CFR 33.110(e)(2), 33.211, 35.2212(d)
b. Grantees without a certified procurement system are
required by 40 CFR 33.110(b)(2) to allow the reviewing
agency to conduct a preaward review of all proposed
procurement actions. The manner, timing, and extent
to which this review is conducted is, therefore, at
the discretion of the reviewing agency. Some agencies
may require only a notice of intent from the grantee,
with the actual documents to be submitted only at the
request of the reviewing agency, while others will
706
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require the submission of complete documentation.
Unless otherwise instructed by the reviewing agency,
grantees without a certified procurement system must
submit the following information for all contracts
(not only construction contracts) in excess of $10,000
All other grantees must retain these documents
in their files, and make them available at the
request of the reviewing agency and/or auditing
agency:
i. basis for contractor selection;
ii. justification for the procurement
method selected, if other than competi-
tive bidding (i.e, formal advertising);
iii. justification for the use of any specifi-
cation which does not provide for maximum
free and open competition;
iv. justification for the type of contract,
if other than fixed price;
v. basis for the award cost or price, including
a copy of the cost or price analysis and
documentation of negotiations, if other
than a fixed price contract with the lowest
responsive, responsible bidder (includes
all contracts over $10,000 which are not
competitively bid; must include EPA Form
5700-41 for all contracts awarded by grantees
without a certified procurement system); and
vi. justification for the rejection of any or
all bids (see Section D.2 below).
Re: 40 CFR 33.250, 33.290(b); 40 CFR Part 33,
Appendix A
3. Public Notice Requirements
Except for grantees whose certified procurement systems
include provisions which meet the intent of EPA's public notice
requirements, all grantees must give adequate public notice of
all proposed procurement actions, as defined in the EPA procure-
ment regulations. These regulations require a notice of the
proposed procurement action to be published in professional
journals, newspapers, or publications of general circulation
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over a reasonable area (depending on the size of the project;
extremely large projects will usually warrant nationwide
advertisement), for at least 30 days prior to the deadline for
receipt of proposals or bids. Posted public notices or written
notifications mailed or delivered to interested persons, firms,
or professional organizations may also be used.
Re: 40 CFR 33.415, 33.510; 40 CFR Part 33, Appendix A,
Paragraphs (b)(4) and (b)(5)
C. PROCUREMENT OF PROFESSIONAL SERVICES
This section discusses the procurement of professional
services normally associated with Step 3 grant activities. The
term "professional services" is used to designate engineering,
architectural, construction management, legal, and accounting
services, as opposed to services provided by construction
contractors and equipment suppliers. Al1 procurements made
in whole or part with EPA grant assistance, however, are sub-
ject to EPA's procurement regulations (40 CFR Part 33), which
describe four types of procurement:
- formal advertising (i.e., competitive bidding),
- competitive negotiation,
- noncompetitive negotiation, and
- small purchases.
While formal advertising, with contractor selection based on
competitive prices, is the preferred method of procurement,
practically all professional services procurement is accomplished
using the competitive negotiation procedure. For this reason,
the discussion below is limited to procurement using the competi-
tive negotiation procedure.
1. Competitive Negotiation
Purpose:
Advertise, receive, and evaluate proposals, negotiate with
the best qualified offerors, and award a subagreement to the
responsible offeror whose proposal is determined to be the most
advantageous to the grantee, taking into account price and
other objective evaluation criteria.
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Discussion:
As with all procurements using EPA funds, procurement trans-
actions are to be conducted in a manner that provides maximum
open and free competition. The competitive negotiation method
of procurement applies equally to the procurement of engineering,
architectural, construction management, legal, and accounting
services. Competitive negotiation differs from competitive
bidding procurement primarily in the manner in which price is
considered. Price, while important, may be only one of several
criteria used to evaluate offers in competitive negotiation,
while in competitive bidding, price competition is the primary
consideration.
Procedures:
All grantees must follow the procedures described below,
except that grantees which have certified procurement systems
(see Section B.l above) may follow their own procedures, if
those procedures meet the intent of the procedures described
below:
a. Public Notice
When advertising a request for proposals (RFP),
the grantee must give adequate notice to the
public (see Section B.3 above). The public
notice must include adequate information to allow
interested parties to readily obtain the proposal
documents.
b. Proposal Documents
Proposal documents must include:
i. a copy of 40 CFR 33.295 and 40 CFR
Part 33, Subparts F and G;
ii. sufficient information to enable an
interested party to prepare a proposal;
iii. a description of all evaluation criteria
and the relative importance attached to
each;
iv. the objective basis which will be used to
select the firm to which the subagreement
will be awarded; and
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V.
the deadline and
of proposals.
the place for
submission
c. Proposal Evaluation
Proposals are to be uniformly and objectively
evaluated solely on the basis of the evaluation
criteria stated in the RFP.
d. Negot iation
Unless the request for proposals states that contract
award may be based on initial proposals alone, the
grantee must conduct meaningful negotiations with the
best qualified offerors (i.e., those which have sub-
mitted acceptable proposals within the competitive
range), and must permit these offerors to make revi-
sions to their proposals, in order to obtain the best
final offers. The best qualified offerors must have
equal opportunities to negotiate and to revise their
proposals. During negotiations, the grantee must not
disclose the identity of competing offerors, nor any
information from competing proposals.
e. Contract Award
A subagreement must be awarded to the responsible
offeror whose proposal is determined in writing
(see Section B.2.b above) to be the most advantageous
to the grantee, taking into consideration price
and other evaluation criteria stated in the RFP.
Re: 40 CFR 33.505, 33.510, 33.515, 33.520;
40 CFR Part 33, Appendix A
2. Optional Method for Procuring Engineering Services
The grantee may use the optional procedures described below
in lieu of the procedures described in Item 1 above, for the
procurement of engineering services. Grantees with a certified
procurement system may follow their own procedures, if those
procedures meet the intent of the procedures described below:
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a. Public Notice
The grantee must give adequate notice (see Item
l.a above) to develop a prequalified list (see
Section V.C.l.c) or to request statements of
quali f icat ions.
b. Evaluation of Qualifications
Either responses to the request for qualifications
(RFQ), or the information about firms in the pre-
qualified list, must be used to determine the
most technically qualified firms.
c. Proposal Request and Evaluation
After selecting and ranking the most qualified
firms, the grantee issues an RFP to request
technical proposals, and indicates in the RFP
the objective evaluation criteria to be used for
ranking proposals. The best technical proposal
is selected, based upon the criteria stated in
the RFP.
d. Negotiation
Negotiation of fair and reasonable compensation
is undertaken with the offeror which submitted
the best technical proposal. If agreement cannot
be reached, negotiations are formally terminated
(i.e., in writing), and new negotiations are begun
with the firm which submitted the next best proposal.
Once negotiations with an offeror have been formally
terminated, they cannot be reopened. if necessary,
the process continues with other firms which have
submitted proposals, in the order of their rank '
(see(/Item c above), until successful negotiations
have been completed.
3. Continuation of Engineering Services
Purpose:
Allow grantees to continue using the same engineering firm
which performed all or part of the facilities planning or design
work, without further public notice or evaluation of qualifications.
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Discuss ion:
Earlier EPA procurement regulations, in effect when separate
grants were provided for facilities planning (Step 1), design
(Step 2), and construction (Step 3), allowed grantees to continue
using the same engineering firm from one grant step to another
without further advertising, provided that certain limitations were
met. This option is to be continued, even though separate grants
are no longer awarded for facilities planning and design. The
regulations and review procedures below describe three circum-
stances under which a grantee may continue to use the same
engineering firm.
Review Procedures:
If the grantee is satisfied with the qualifications and
performance of the engineering firm which provided any or all
of the facilities planning or design services for the project,
that firm may be retained during the building of the project.
To do so, without further public notice and evaluation of qual-
ifications, the grantee must have documentation which provides
evidence that one of the following conditions has been met:
a. Prior Grant
The grantee received a facilities planning
(Step 1) or design (Step 2) grant, and selected
the engineering firm in accordance with the
EPA procurement regulations which were in effect
when the grant was awarded (generally 40 CFR
35.936, 35.937, and 35.939);
b. Prior Competitive Selection
The grantee did not receive a previous EPA grant,
but used a competitive selection procedure to obtain
previous engineering services, and can document that:
i. the initial RFP clearly stated the
possibility that the successful
offeror could later be awarded a
subagreement for services during
construct ion;
ii. the firm was selected for facilities
planning or design services using
procedures which satisfy the require-
ments of:
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- competition (40 CFR 33.230);
- documentation (40 CFR 33.250); and
- one of the following three procure-
ment methods:
- small purchases (40 CFR
33.305 through 33.315)f
- formal advertising
(40 CFR 33.405 through
33.430), or
- competitive negotiation
(40 CFR 33.505 through
33.525); and
iii. no conflicts of interest existed.
c. Noncompetitive Negotiation
Based on information submitted by the grantee, the
reviewing agency finds sufficient justification to
allow noncompetitive procurement for' reasons other
than simply using the same individual or firm which
provided facilities planning or design services.
Such justification must be based on sound business
reasons (e.g., emergency conditions, inadequate
competition, services available only from a single
source, etc.). This condition requires prior
approval from the reviewing agency (see Section F
below).
The procurement of engineering services for Step 3 work must also
satisfy all other provisions of the current EPA procurement regu-
lations (e.g., type of subagreement, cost and price analysis,
required subagreement clauses, etc.), and must comply with the
documentation and reporting requirements discussed in Section B.2
above.
Re: 40 CFR 33.715
713
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4. Small, Minority/ Women's, and Labor Surplus Area Businesses
The affirmative action steps described in Section V.C.l.w
are equally applicable to grantee actions in the procurement
of professional services. Evidence that the grant applicant
recognizes his responsibilities with regard to these businesses
should be submitted with the grant application. The reviewing
agency must insure that the affirmative steps were carried out,
and that the applicant complied with State or local goals or other
applicable standards.
Re: 40 CFR 33.240
5. Scope of Work
Purpose:
Provide sufficient detail to clearly define the nature,
scope, extent of work, time frame for completion, total
compensation, and payment provisions for grantee subagreements
for professional services.
Discuss ion:
a. Engineering Services during Construction
The scope of work will generally include:
i. those applicable services normally associated
with engineering supervision and inspection
during construction (e.g., interpretation of
plans and specifications, resolution of tech-
nical problems, preparation of estimates of
work in place, review of claims and change
orders, etc.); and
ii. preparation and implement
plan of operation, includ
of the operation and main
ation of the final
ing the preparation
tenance (O&M) manual.
b. Post-construction Engineering Services
The 1981 Clean Water Act (CWA) amendments require the
grantee to select the engineer or engineering firm
principally responsible for either supervising, or
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providing engineering services during construction
(i.e., facilities planning, design, and/or building
of the project), to provide engineering services
during the first year following initiation of opera-
tion. Such services should be reflected in the scope
of work and will generally include:
i. directing the operation of the project,
including both sewer projects and treat-
ment facilities, commensurate with the
type and complexity of the project;
ii. conducting studies regarding the elimina-
tion of excessive infiltration/inflow (I/I);
iii. revising the O&M manual as necessary to
accommodate actual operating experience;
iv. training, including the preparation of
curricula and training material, for
operating personnel; and
v. advising the grantee whether the project
is meeting the project performance
standards (see Section 1.2 below).
Procedures:
The scope of work of the subagreement is to be reviewed to
insure that it clearly defines:
the nature, scope, and extent of the work to be
performed;
the time frame or schedule for performance;
the total cost or compensation of the contractor;
and
payment provisions, including retainage, if any.
Re: 40 CFR 33.1015, 35.2218(b); preamble to 40 CFR
Part 35, Subpart I, 49 FR 6228, "Project Performance,"
and 49 FR 6231, "Building" (February 17, 1984)
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6. Types of Subagreements and Required Provisions
All professional services subagreements (contracts) must
include the applicable provisions and clauses described in
40 CFR Part 33, and must not include any provisions which are
prohibited by 40 CFR Part 33. The reviewing agency must
verify that the following subagreement requirements have been
satisfied:
a. Subagreements must be awarded only to responsible
contractors (see Section V.C.l.f).
b. Prohibited types of subagreements are the cost-
plus-percentage-of-cost {e.g., a multiplier which
includes profit) and the percentage-of-construction-
cost .
c. The type of subagreement selected should be based
on the nature of the work and the degree of risk
inherent in performing the work. Typical types of
subagreements used for professional services
include:
i. fixed price (lump sum), where the scope
of work is clearly defined; or
ii. cost-plus-fixed-fee, where the scope of
work is less clearly defined. These
subagreements include a cost ceiling
which may not be exceeded without
negotiation and the preparation of a
contract amendment (i.e., change order).
d. In addition to including provisions which define a
sound and complete subagreement (see Item 5 above),
all subagreements must include the applicable
provisions of 40 CFR Part 33 regarding labor
standards; patents, data and copyrights; violating
facilities; energy efficiency; and the model
subagreement clauses or their equivalent. The
grantee and the contractor must first determine
which of these provisions apply to the work to be
performed, and then create a contract clause to
address each requirement.
Re: 40 CFR 33.220, 33.285, 33.1005 through 33.1030
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7. Cost and Price Analysis
Purpose:
Insure that the total cost of a subagreement, including each
component of its cost, is reasonable, allowable, and commensurate
with the scope and complexity of the work.
Discuss ion:
The procurement regulations require the grantee to conduct
a cost analysis, based on information submitted by contractors
and subcontractors, of all negotiated change orders and negotiated
subagreem.ents in excess of $10,000. Cost analysis is the process
of examining, verifying, and evaluating cost data, and projecting
from the basic cost data to determine a reasonable estimated price
that will be representative of the total cost of performance of the
negotiated subagreement. To be allowable for grant participation,
cost must comply with the cost principles in 48 CFR Part 31,
"Contract Cost Principles and Procedures" (see Sections IX.F.l and
IX.F.2). Profit must be negotiated as a separate element of price
where there is no price competition, or where price is based on a
cost analysis.
In general, total cost consists of three elements: direct
costs (labor, materials, and supplies for a specific project),
indirect costs (overhead and/or general and administrative
burden such as rent, utilities, fringe benefits, employee taxes,
accounting costs, etc., where such costs cannot be directly
assigned to a specific project), and profit.
The estimated hours necessary to perform a specific task times
the hourly rate paid to the employees, which varies with their
level of skill, represents direct labor costs.
Some costs included in an indirect cost category are not
allowable for grant participation even though they are a cost of
doing business. Examples of these costs are interest on borrowed
capital, bad debts, advertising, entertainment, and business
development expenses. Indirect costs may be allocated to all
projects within the business, but must be reasonable and allocated
on a rational basis.
The last element of cost is profit. While the EPA regulations
do not discuss a specific level of profit, grantees are required
to negotiate a "fair and reasonable" profit. The determination
of a "fair and reasonable" profit requires judgement by all
parties, and may be guided by practices in the area and the
degree of risk incurred by the contractor. For example, a fixed
717
-------
price contract, assuming that the costs were accurately
exposes the contractor to a higher level of risk than a
fixed-fee contract.
est imated,
cost-plus-
Review Procedures;
For all negotiated subagreements in excess of $10,000, the
reviewing agency is to insure that the grantee has conducted a
cost analysis for all contractors and subcontractors and that:
a. estimates of work hours, level of required skills,
and direct labor rates are reasonable and commensurate
with the work to be performed;
b. indirect cost rates are reasonable, allocated on
a rational basis, conform with Federal cost
principles, and do not include any unallowable
costs; and
c. profit is negotiated as a separate element of
cost, and is commensurate with the complexity
of the work and the type of contract (i.e., the
level of risk assumed by the contractor).
Re: 40 CFR 33.235, 33.275, 33.290; 40 CFR Part 33,
Appendix A; 48 CFR Part 31
8. Additional Services
At times, additional professional services, beyond those
originally envisioned (either in scope or extent) at the time of
contract preparation, will be required by the grantee. Such
additional services are most frequently required for deciding pro-
curement protests filed by potential construction contractors and
equipment suppliers (see Section IX.F.4, Paragraph A.l.c), and for
assessing the merits and negotiating the settlement of claims
filed by construction contractors and equipment suppliers (see
Section IX.F.4, Paragraph A.l.f).
To be eligible for grant participation, the additional services
must be within the scope of the project (i.e., the work necessary
to construct the facility described by the facilities plan).
If the additional work is within both the scope of the project and
the scope of the existing contract for professional services
718
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(see Item 5 above), a change order may be issued to the con-
tractor by the grantee, with the price of the additional services
negotiated as an equitable adjustment to the contract. If the
change order requires prior approval by the reviewing agency
(see Section H.3 below, and Section IX.F.4, Paragraph A.l.f),
the review procedures described in Section H.5 below, modified
to suit contracts for professional services, should be used.
If the additional work is within the scope of the project, but
outside the scope of work of the existing contract, the additional
services must be procured through the procedures described in
Section C.l or C.2 above, unless the procedures described in
Section E or F below are appropriate.
Re: 40 CFR 33.1030, Paragraph 3(b)
D. PROCUREMENT OF CONSTRUCTION CONTRACTORS
The grantee is required to award subagreements and issue notices
to proceed for building all significant elements of the project as
soon as possible, but no later than 12 months, after grant award.
All grantees must submit limited information concerning each sub-
agreement award to the reviewing agency. Grantees without a certi-
fied procurement system must submit more detailed information.
1. Competitive Bidding
In almost all cases, procurement of construction contractors
and suppliers of equipment and materials must be done using the
competitive bidding method (referred to as formal advertising in
40 CFR Part 33). Competitive bidding involves advertising for bids,
receipt of sealed bids, public opening of bids, and the award of the
contract to the responsive and responsible bidder who submits the
lowest bid. in practically all cases (see Section B.2.a above), a
bid tabulation must be prepared by the grantee's engineer, showing
the prices bid by each contractor for each item in the contract
proposal form. The reviewing agency is to insure that all required
competitive bidding procedures were used, including:
719
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Public Notice
When advertising for bids under the formal
advertising (i.e., competitive bidding) method,
the grantee must give adequate notice to the
public. The public notice must include
sufficient information to enable bidders to
readily obtain and review bidding documents.
Bidding Documents
The bidding documents must include:
i. a copy of 40 CFR 33.295; 40 CFR
Part 33, Subparts F and G; and if
appropriate, "Labor Standard
Provisions for Federally Assisted
Contracts" (EPA Form 5720-4);
ii. a complete statement of the work
to be performed, including where
appropriate, design drawings,
specifications, and the required
performance schedule;
iii. the terms and conditions of the
subagreement to be awarded,
including payment, delivery
schedules, point of delivery,
and acceptance criteria;
iv. the place and deadline for sub-
mitting bids;
v. a clear explanation of the bidding
procedures and the method to be
used by the grantee to evaluate
bid prices and to award the sub-
agreement;
vi. the criteria to be used in
evaluating bidders' compliance
with the responsibility require-
ments; and
vii. the DOL prevailing wage rate
determination, if applicable.
720
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c. Addenda
Prior to bid opening, the grantee may have issued
addenda to correct errors, to clarify information in
the bidding documents, or to incorporate the current
wage rate determination. Contract proposal documents
should include a form for certification that the bidder
has received all addenda before the bid date. Where
addenda have been issued by the grantee, the reviewing
agency is to insure that receipt of such addenda is
acknowledged by each bidder, and that the addenda were
issued in a reasonable time (generally 5 days) before
the deadline for the receipt of bids (see Section V.C.l.d).
d. Number of Bids
Sufficient bids (two or more) must have been received.
If only one bid was received, the procurement action
becomes, by definition, a non-competitive procurement
(see Section F below). As an alternative to non-
competitive procurement, the grantee may reject all
bids if there are sound business reasons for doing so
(see Item 2 below).
e. Bid Evaluation
Evaluation of all bids must have been made using the
objective criteria described in the bidding documents.
All necessary bid bonds and certifications must have
been submitted, and all required forms completed and
signed. if only two responsive and responsible bids
were received and the low bid exceeded $10,000, the
grantee must have conducted a price analysis of the
winning bid and determined that it was reasonable.
f. Contract Award
A fixed price contract must be awarded to the lowest
responsive and responsible bidder (see Section V.C.l.f).
The contractor to which the contract is awarded must
not be on EPA's Master List of suspended and debarred
contractors.
Re: 40 CFR 33.211, 33.220, 33.235, 33.290(b), 33.405, 33.410,
33.415
721
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2. Rejection of All Bids
The grantee may reject all bids only if it has sound, docu-
mented business reasons for doing so. The reviewing agency may
approve such actions where justified as being in the best interests
of the construction grants program. Because of varying State
statutory requirements, it may be prudent to request that the
grantee's legal counsel submit documentation supporting such
actions under State law. If the grantee improperly rejects all
bids, any additional costs incurred (including a contract price
which is higher than the original low bid) will be ineligible
for grant assistance. It is therefore advisable for the grantee
to consult with the reviewing agency before rejecting all bids.
After rejection of all bids, the grantee may either readver-
tise using the competitive bidding method (see Item 1 above), or
negotiate the procurement (if appropriate) in accordance with
40 CFR 33.505 through 33.525 or 33.605.
Re: 40 CFR 33.430(c)
3. Small, Minority, Women's, and Labor Surplus Area Businesses
The reviewing agency is to insure that affirmative actions
have been taken by the grantee, and where appropriate, by the
grantee's contractors, to include small, minority, women's, and
labor surplus area businesses in the bidding process (see Section
V.C.l.w). Where State or local goals have been established,
the reviewing agency is to compare those goals against the
contract awards.
Re: 40 CFR 33.240
4. Grant Adjustment
Each grant award is originally based on the estimated
allowable costs of building the project, a reasonable construc-
tion contingency, the cost of eligible land, and the estimated
allowance for planning and/or design. After the receipt of
bids and the acquisition of eligible land, the costs of building
the project are more accurately known, and the grant should be
adjusted accordingly. Any grant adjustment requires a formal
grant amendment.
722
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a. Building Cost
The sum of all prime contracts and subcontracts
(including contracts for the direct purchase of
equipment, materials, or supplies by the grantee),
plus the cost of approved force account work in lieu
of awarding construction contracts, equals the total
allowable building cost. If the total allowable
building cost is less than the estimates used for
grant award, the grant is to be reduced accordingly
(see Section IX.C.2). If the total allowable building
cost is more than the estimated allowable building
cost plus the construction contingency, the grant may
be increased (see Section IX.C.1) if the bids are
judged reasonable, and sufficient funds are available
in the State's allotment (many States maintain a
reasonable reserve of grant funds for this purpose).
If bids are significantly higher than anticipated, it
may be necessary for the grantee to reevaluate its
financial capability in light of the higher costs.
Also, if bids are significantly higher, it may be
appropriate for the grantee to reevaluate the scope
of work, or when appropriate, reject all bids and
readvertise. This last course of action may only be
undertaken in accordance with State law and EPA pro-
curement regulations (see Item 2 above).
b. Construction Contingency
After receipt of bids, the construction contingency
is usually reduced to between 2 and 5 percent of the
total allowable building costs. The construction
contingency is available for unanticipated cost
increases (i.e., change orders) during construction.
c. Land Acquisition Cost
Assuming that the requirements of 40 CFR Parts 4 and
30 have been satisfied with regard to.the acquisition
of eligible land, the grant amount may require adjust-
ment after the actual cost of eligible land is known.
d. Allowance for Planning and/or Design
The final allowance for planning and/or design is deter-
mined only once, and is based on the initial allowable
award amount of all prime construction contracts
723
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(including contracts for the direct purchase of
equipment, materials, and supplies by the grantee),
plus the initial amount approved for force account
work in lieu of awarding construction contracts, and
the purchase price of eligible land. The amount of
the allowance does not change, even if the actual
building costs increase or decrease during the per-
formance of the work. The final allowance is com-
puted in accordance with 40 CFR Part 35, Subpart I,
Appendix B (see Section VI.L.l).
e. Grant Amendment
Any grant adjustment, as determined in Items a through
d above, requires the preparation of a formal Grant
Agreement/Amendment (EPA Form 5700-20A). States are
to verify that sufficient funds are available in the
State's allotment, certify the grant amendment and
other documents required by the State/EPA delegation
agreement, and submit the grant amendment to EPA for
approval (see Section VI.M).
Re: 40 CFR 30.700, 35.2204
5. Contract Award
Grantees are to award contracts and issue notices to proceed
for building all significant elements of the project as soon as
possible, but no later than 12 months, after grant award (see
Section IX.F.4, Paragraph A.2.e).
Re: 40 CFR 35.2212
6. Protests
A protest is a written complaint concerning the grantee's
solicitation or award of a subagreement, and may be filed with
the grantee only by a party with a direct financial interest
which has been adversely affected by the grantee's action.
Protests may be filed during the procurement of professional
services or construction services (including the direct purchase
of equipment, materials, and supplies by the grantee), and should
normally be submitted to the grantee prior to the closing date for
the receipt of proposals or bids.
724
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Grantees bear the primary responsibility for the resolution
of protests, and should establish procedures for their prompt
resolution. It is advisable that these procedures require pro-
tests involving allegations of improprieties in the grantee's
solicitation practices to be submitted to the grantee prior to
bid opening or the closing date for the receipt of proposals.
Upon receipt of a protest, the grantee should first determine
whether it is appropriate to defer the protested procurement
action. If the procurement action is not deferred, the protester
files an appeal with EPA, and EPA finds in favor of the protester,
the cost of the protested procurement action may be disallowed
for grant participation. Grantees should investigate the basis
for the protest, seek the advice of legal counsel, document all
meetings and actions, correspond by registered mail, and resolve
the protest promptly and equitably.
EPA regulations primarily address the procedures to be used
by EPA in considering a protest appeal. A protest appeal is a
written complaint filed with EPA by a party with a direct finan-
cial interest which has been adversely affected by the grantee's
decision on the initial protest. Protest appeals are to be filed
with the Office of Regional Counsel in the appropriate EPA Regional
Office (or for grants awarded by EPA Headquarters, the Assistant
General Counsel for Grants).
EPA will not accept a protest appeal unless the protester has
exhausted all administrative remedies at the grantee level. A
protest appeal is limited to:
a. issues arising under the procurement provisions
of 40 CFR Part 33 (e.g., an appeal concerning the
rejection of all bids);
b. alleged violations of State or local law, but only
where EPA determines that there is an overriding
Federal interest; and
c. issues arising over the award of a lower tier
subagreement (subcontract) by a prime contractor.
When the protester files appeal documents with the Office of
Regional Counsel (or for grants awarded by EPA Headquarters, the
Assistant General Counsel for Grants), all protest documents and
attachments must be concurrently transmitted by the protester to
all other parties with a direct financial interest which may be
adversely affected by the appeal.
725
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The EPA official designated to resolve the appeal will
consider only written appeals filed within seven calendar
days after the adversely affected party (initial protester or
other party) received the grantee's determination. This require-
ment can be met if the adversely affected party transmits a tele-
gram to EPA within the seven calendar days, indicating an intent
to file a protest appeal, and the complete protest appeal is
received by EPA within seven days thereafter.
When EPA receives a protest appeal and the grantee has not
deferred the procurement action, EPA will promptly request that
the grantee defer the protested procurement action with respect
to the subagreement or item at issue until the appeal is resolved.
EPA may summarily dismiss the appeal if:
- procurement issues are not involved,
- the appeal is otherwise not reviewable,
- procedural requirements (i.e., meeting deadlines)
have not been complied with,
- the protester does not agree to extend the bid and
bid bond period, or
- the appeal lacks merit.
If a review is warranted, EPA may arrange for the submission
of written arguments or participation in a conference by all
parties who may be adversely affected by the appeal. EPA will
then determine whether the protest has a rational basis. EPA's
determination will constitute the final action, from which there
is no further administrative appeal. State reviewing agencies may
not be delegated responsibility for the resolution of protest
appeal^ under EPA's procurement regulations.
Re: 40 CFR 33.001(g); 40 CFR Part 33, Subpart G
E. SMALL PURCHASES
Small purchase procurement procedures provide for a simpli-
fied method of procurement where the dollar value is relatively
small. Small purchases, however, must be conducted in such a way
as to insure competition, so that the product or service is the
best value for the lowest price. In reviewing small purchase
procurements, insure that:
726
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1. the aggregate amount of any one procurement does
not exceed $10,000, or a lower amount established
by State or local law;
2. the procurement was not divided into smaller amounts
to avoid the dollar limitation for small purchase
procurement; and
3. price or rate quotations were obtained and documented
from an adequate number of qualified sources.
Re: 40 CFR 33.305, 33.310, 33.315
F. NONCOMPETITIVE PROCUREMENT
Noncompetitive negotiation (i.e., sole source procurement) is
the least favored method of procurement, and may only be used if the
other three methods of procurement are inappropriate, or where the
requirements for continuation of engineering services have been
satisfied (see Section C.3.c above). Noncompetitive procurement for
the continuation of engineering services requires the prior written
approval of the reviewing agency.
Noncompetitive negotiation may only be used if the other three
procurement methods (i.e., competitive bidding, competitive negotia-
tion, and small purchase) are inappropriate because:
1. the item is available only from a single source;
2. a public exigency or emergency exists;
3. after solicitation from a number of sources,
competition is inadequate (e.g., after formal
advertising, only one responsive and responsible
bid is received); or
4. the reviewing agency authorizes noncompetitive
negotiation for continuation of engineering
services (see Section C.3.c above).
Re: 40 CFR 33.605, 33.715
727
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G. MONITORING CONSTRUCTION
Purpose:
Insure that the grantee manages the project in accordance with
the commitments made in the grant application and the grant accep-
tance, and that the project is constructed in accordance with the
approved plans, specifications, and change orders.
Discussion:
To insure adequate performance by all equipment vendors and
construction contractors, the reviewing agency must provide for
sufficient monitoring of construction activities. The reviewing
agency's monitoring program should begin with a preconstruction
conference, extend through interim construction monitoring
activities, and conclude with a final inspection. The extent and
frequency of monitoring will depend on the size and complexity of
the project, and the needs and performance of the grantee, the
resident inspection team, and the construction contractors. The
agency performing the monitoring activities will be designated
in the State/EPA delegation agreement, with monitoring activities
carried out by the State, EPA and/or the U.S. Army Corps of
Engineers (COE). In some States, one of these agencies has been
given the responsibility for all monitoring activities, while in
others, two or all three agencies share this responsibility.
Each agency is to follow the detailed monitoring procedures in
the State/EPA delegation agreement and/or the EPA/COE interagency
agreement.
To assist reviewing agencies in carrying out a thorough and
efficient monitoring program, EPA has prepared two guidance
documents which include a complete discussion of the specific
actions to be undertaken during construction monitoring:
"Operating Procedures for Monitoring Construction Activities at
Projects Funded under the Environmental Protection Agency's
Construction Grants Program," dated September 1983, and "Construc-
tion Management Evaluation and Project Management Conference
Manual," dated December 1983. The documents should be used in
conducting onsite construction monitoring activities. However,
reviewing agencies must also maintain off-site (i.e., in the
reviewing agency's office) construction monitoring through the
review of payment requests, inspection reports, change orders,
correspondence, and telephone communications. This information,
when compared with the project schedule in the grant agreement,
will provide an indication of the adequacy of construction
progress, and may form the basis for changing the frequency of
728
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onsite monitoring activities. The reviewing agency is to insure
that the grantee also submits quarterly reports (EPA Form 6005-1)
concerning the use of minority and women's business enterprises
(MBE/WBE).
For construction monitoring activities to be effective, it
is essential for the monitoring staff to carefully review the
project files for factual information prior to conducting onsite
monitoring activities, to carefully document all deficiencies
observed, to submit completed monitoring reports promptly, and to
take follow-up action to insure the correction of all deficiencies.
The procedures below briefly highlight the key activities which
take place during construction monitoring, but are not intended to
be a substitute for the detailed procedures in the two guidance
documents discussed above, and in the delegation and interagency
agreements.
Procedures:
1. Preconstruction Conference
After the award of construction contracts, the reviewing
agency is to insure that the grantee arranges a preconstruc-
tion conference. This conference may be conducted separately
by the grantee, or in combination with a preconstruction
conference conducted by DOL's Equal Employment Opportunity
Office (generally conducted only on projects of $1 million or
more). Where the reviewing agency plans to conduct a PMC
(see Item 2 below), the preconstruction conference should
concentrate on construction activities which directly
involve the construction contractors. In addition to
defining the role of the reviewing agency and establishing
procedures and responsibilities for interim inspections,
typical items to be clarified during the conference are:
a. points of contact for all parties?
b. lines of authority and responsibility;
c. interrelationships among the grantee, the engineer,
the construction contractors, the equipment
suppliers, the State, the COE, and the EPA Regional
Office;
d. periodic progress meetings;
e. access to the work for interim inspections;
729
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f. insuring adherence to the construction
schedule, and notification procedures for
excusable delays;
g. flow of documents such as payment requests,
change orders, and inspection reports;
h. change order review and approval process;
i. payment process, including development of
payment schedules;
j. contractor responsibilities with regard to
the project sign, posting of wage rate
determinations, compliance with the require-
ments of DOL's Occupational Safety and Health
Administration and the U.S. Equal Employment
Opportunity Commission, and compliance with EPA's
requirements for MBE/WBE and small business
subcontracting;
k. need for adequate documentation of the grantee's
procurement procedures and project costs; and
1. EPA and state audit requirements.
When the grantee conducts the preconstruction conference,
the reviewing agency should participate and insure that the
items listed above are discussed.
2. Project Management Conference
A PMC, which may be held immediately following the pre-
construction conference, should be conducted on virtually
all Step 2+3 and Step 3 projects. The primary purpose of
the PMC is to provide detailed guidance to the grantee and
the construction management team in overseeing and managing
the construction grant. A PMC generally should take one to
three days to complete, and can be conducted by either one
person or a team, depending on the size and complexity of the
project. The points of primary focus are:
a. grant management by the grantee:
i. regulatory requirements, including
procurement procedures and property
control;
730
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ii. special grant conditions (see
Section VI.M.6);
iii. resident inspection;
iv. recordkeeping (both fiscal and
correspondence), including the
need for adequate documentation
of procurement procedures and
project costs;
v. project performance certifica-
tion; and
vi. project closeout procedures,
including EPA and State audit
requirements;
b. construction management activities:
i. the engineer's responsibilities and
authority, including review of as-
built and shop drawings;
ii. resident inspection activities,
including insuring conformance
with the approved plans and
specifications, daily logs, and
materials testing;
iii. insuring adherence to the construc-
tion schedule;
iv. progress payments; and
v. change order procedures.
Re: EPA publication, "Construction Management
Evaluation and Project Management Conference
Manual," December 1983
3. Interim Inspection
Interim inspections are essential to insure that the
grantee, the construction management team, and the construc-
tion contractors are fulfilling their respective responsi-
bilities. The frequency of interim inspections should be
determined by the size and complexity of the project, the
rate of progress being achieved, and the nature of problems
731
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or issues arising during construction. Each project should
normally be inspected monthly, but where a project is
progressing well and the grantee has demonstrated a high
level of project management capability, bimonthly or
quarterly inspections may suffice. In unusual cases, such
as extremely large, complicated, or troublesome projects,
weekly or even daily inspections may be necessary. Regular
interim inspections may also provide an opportunity to focus
on one specific area at a time, such as materials testing,
fiscal records, project files, procurement, management of
claims and change orders, etc. Using this approach, all
significant aspects of grant management should be covered
over the life of the project. Where necessary, unannounced
interim inspections may also be conducted, based on the findings
of earlier inspections or other information brought to the
attention of the reviewing agency.
Principal areas of focus during interim inspections typic-
ally include:
a. grant management and recordkeeping;
b. compliance with grant and permit conditions;
c. contract administration, including claims
and change order management;
d. construction inspection activities and records,
including verification of work in place, material
testing, and replacement of defective work; and
e. implementation of the plan of operation, including
preparation of the O&M manual.
Re: EPA publication, "Operating Procedures for Monitoring
Construction Activities at Projects Funded Under the
Environmental Protection Agency's Construction Grants
Program," September 1983
4. Construction Management Evaluation
A CME is a comprehensive onsite review of the entire project,
including all phases of the grantee's and contractor's respon-
sibilities and performance. It is a more formalized inspection
procedure than an interim inspection, and differs primarily in
the depth, duration, and purpose of the review. A CME typically
ranges from 4 to 5 days for a medium sized project, up to 10
days for a large multi-contract project, and is generally
conducted when the project is 40 to 60 percent complete (20 to
40 percent if a PMC has not been conducted).
732
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The CME is conducted by a multi-disciplinary team, with
one member serving as the team leader. Team members must be
experienced in their areas of investigation, so that they can
detect inefficiencies and irregularities, and assist the
grantee in the successful completion of the project, including
preparation for project startup, operation, and audit.
A CME should begin with a formal entrance briefing, conclude
with an exit briefing, and be followed by the preparation of a
CME report. The objective of the CME is to evaluate the grantee's
grant management procedures, and through this process gain insight
into overall program management. Typical areas of review include:
a. Grant Management
i. grant requirements,
ii. procurement requirements,
iii. accounting systems, and
iv. recordkeeping systems.
Const
ruction Management
i.
inspection reports,
i i.
materials testing and certificates,
iii.
shop drawings;
iv.
as-built drawings?
v.
progress payments,
vi.
claims,
vi i.
change orders,
vii i
. correspondence,
ix.
labor requirements, and
x.
organizational requirements.
733
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At the conclusion of the CME, a formal report is prepared
under the direction of the team leader. A typical report will
will average 10 to 20 pages, and will generally be divided in-
to five parts: introduction, grant management, construction
management, action items, and conclusions. Of particular
importance are the action items, which may include actions by
the grantee to correct deficiencies; actions to be undertaken
by the reviewing agency to insure the successful completion
and audit of the project; and actions to be taken by EPA to
improve its regulations, guidance, or procedures to prevent
similar problems on future projects.
Re: EPA publication, "Construction Management Evaluation
and Program Management Conference Manual," December 1983
5. Final Inspection
A final inspection is generally made within 60 days after
the grantee notifies the reviewing agency that the building
of the project has been completed. The grantee must also
notify the reviewing agency of the actual date of initiation
of operation, which represents the beginning of the one year
performance period, at the conclusion of which the grantee
must certify whether or not the project meets its performance
standards. The depth and duration of a final inspection will
depend, to a large extent, on the quality and frequency of
earlier onsite monitoring inspections. The purpose of the
final inspection is to verify that the project has been
completed in accordance with the approved plans, specifica-
tions, and change orders; that all grant conditions and other
regulatory requirements have been satisfied; that the project
is operable; and that the grantee is prepared for audit. Once
these conditions have been verified, the final buiIding pay-
ment is to be made to the grantee (see Section VIII.D.4).
During final inspection insure that:
a. construction has been completed and conforms
with the approved plans, specifications, and
change orders;
b. all grant conditions have been satisfied;
c. all equipment has been delivered and installed,
and is operating properly;
d. all equipment manuals, guarantees, and
warranties have been assembled;
734
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e. all deficiencies noted during interim
inspections have been corrected;
f. records are complete and readily available
for audit;
g. the user charge (UC) system and sewer use
ordinance (SUO) have been enacted by
municipal ordinance, and are being imple-
mented and enforced by all participating
mun ic ipali t ies;
h. the plan of operation has been implemented,
including the hiring and training of all
personnel;
i. the O&M manual is complete and usable, and
copies are readily available for operating
personnel;
j. laboratory facilities are complete, stocked
with required supplies, and ready for use
in monitoring operations;
k. all change orders have been completed and
summarized, and all claims have been
satisfactorily resolved;
1. aesthetic features, flow level, and abandoned,
unused, or inoperable facilities are noted,
for use in preparing the project officer
certification (see Section VIII.D.8);
m. a property management system is in place;
n. the title to eligible land includes lan-
gauge which protects the Federal interest
in such land (see Sections VI.H.3.b and
VI.M.5.d).
o. continuing engineering services during the
first year of operation have been procured
and are being carried out;
p. final cut-off date for incurring allowable
project costs, except for continuing engin-
eering services during the first year of
operation, has been established; and
735
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q. any related projects, such as sewer system
rehabilitation or other project phases or
segments, are on schedule.
Re: 40 CFR 35. 2208 , 35. 2216 , 35. 2218; EPA publication ,
"Operating Procedures for Monitoring Construction
Activities at Projects Funded under the Environmental
Protection Agency's Construction Grants Program"
September 1983
H. MANAGEMENT OF CLAIMS AND CHANGE ORDERS
Purpose:
Insure that changes to the original contract documents are
necessary, reasonable, and managed in such a way as to maintain
the project's integrity, schedule, and costs.
Discussion:
A change order is a written document, issued by the grantee to
a contractor, which alters the price, time of completion, or any
other requirement of the original contract documents, but does not
increase the scope of work of the contract. Change orders may
originate from the contractor as a proposal or claim, or may be
initiated by the grantee. Historically, the lack of change order
management has caused considerable delay, increased costs, and in
some cases, lengthy and costly litigation. This section discusses
change orders for construction contracts. Change orders for
contracts for professional services are discussed in Section C.8
above.
To be eligible for grant participation, the change addressed
in the change order must be within the scope of the project. The
scope of the project is the work necessary to construct the facility
described in the approved facilities plan. If the change is within
the scope of the project, but outside the scope of work of existing
contracts on the project, the work required by the change must
be procured as a separate contract through formal advertising
procedures, (see Section D above), unless the procedures described
in Section E or F are appropriate. However, where the work required
by the change is within the scope of the project and the scope of
736
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work of an existing contract, a change order may be issued to the
contractor, and the price of the change negotiated as an equitable
adjustment to the contract.
Management of change orders by the grantee and the grantee's
construction management team is one of the principal areas of
discussion and review during the preconstruction conference and the
PMC. Regulatory provisions concerning project changes have been
included in all EPA funded projects, and are identified in 40 CF'R
33.1030, Paragraphs 3 through 9, for grants awarded on or after
May 12, 1982; comparable provisions are included in 40 CFR Part 35,
Subpart E, Appendix C-2, for grants awarded prior to May 12, 1982.
It is the reviewing agency's responsibility to insure that the
grantee has an operating change order management system in place,
and that the grantee reviews and acts upon all change orders
promptly. All State agencies, and particularly those with delega-
tion agreements, have developed detailed change order review check-
lists and reviewing procedures. These established procedures should
be followed. In order to prevent costly delays, a strong effort
should be made to review all change orders and issue approval/denial
decisions promptly.
EPA's guidance document, "Management of Construction Change
Orders - A Guide for Grantees," March 1983, includes a chapter
entitled "Reviewing Agency Procedures." Review of change orders
is also discussed in EPA's "Construction Management Evaluation and
Project Management Conference Manual," December 1983.
Procedures:
The procedures discussed below highlight considerations to be
taken into account by the grantee in managing claims and change
orders, and by the reviewing agency during the processing of change
orders:
1. Conditions that May Warrant a Change Order
The six conditions below are those which are most
frequently encountered as the basis for a change order.
The reviewing agency must carefully evaluate the circum-
stances surrounding the change and compare the proposed
change against the original contract documents, including
the plans and specifications. In some cases, the contractor
may be entitled to a change order under State contract law,
but the change may be ineligible for EPA grant assistance.
737
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a. Differing Site Conditions
When bidding, contractors generally
investigate site conditions and review
information in the contract documents
such as soil boring logs, quantities
of rock, depth to groundwater, etc.
After initiating construction, if the
site conditions significantly differ from
those described in the contract documents
or differ from those normally encountered
in construction, the contractor may be
entitled to a change in the contract price.
Judgement is required to determine whether
the contractor should have anticipated the
conditions as a normal risk in bidding the
the project.
b. Errors and Omissions
Errors and omissions are usually design or
drafting deficiencies in the plans and
specifications. Where the error or omission
would normally have been included in accurate
plans or specifications, and can be added to
the contract at approximately the same cost
as the work would have cost if included in
the original bidding documents, the change
order may be considered an allowable cost.
If the error or omission results in re-
construction or other additional effort
beyond that which would have been required
if the-work had been included in the
original bidding documents, the cost of
such additional work will not be allowable.
In such cases, the grantee may seek redress
from the designer or other responsible
parties. See Section IX.F.4, Paragraph A.l.g
(2)(i), for an additional discussion of the
allowability of the cost of correcting errors
and omissions.
c. Regulatory Changes
At times, new laws or regulations are enacted
by the local, State, or Federal government
requiring retroactive application of new
requirements (e.g., revised State water quality
738
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or design standards). Where applicable,
such statutory or regulatory changes
may warrant a change order, which may be
considered an allowable cost.
Design Changes
A design change is a modification to an
existing adequate design. In order to be
approved, it should be cost effective and
offer a net life cycle savings (i.e.,
including future O&M costs). Design changes
usually originate as proposals from a
construction contractor, based on the
construction incentive (CI) clause (see
Section V.C.l.v). Where a design change
other than a CI proposal represents a
substitution of equipment or material, care
should be exercised to insure that the non-
restrictive specifications or sole source
procurement provisions are not violated.
Overruns and Underruns
Bids for materials are often based on estimated
quantities and unit prices. Actual quantities
will usually differ, and the contract price
will be adjusted accordingly. Care must be
exercised to insure that quantities are con-
tinually monitored and where possible, signifi-
cant overruns are avoided. Many specifications
contain a clause which allows unit prices to be
renegotiated if the final quantity differs from
the estimated quantity by 15 percent or more.
(The term "renegotiated" is traditionally used,
even when the original price was bid, rather than
negotiated.)
Time of Completion
Because of the potential for claims and possible
litigation, special care must be exercised in
this area. Claims may arise with regard to the
time of completion because the contract provides
for the assessment of liquidated damages against
the contractor if the contract completion date
739
-------
is not met. Liquidated damages assess the
contractor a specific dollar amount for each
day of delay beyond the contract completion
date to cover the grantee's extra costs
(see Section IX.F.4, Paragraph A.3.a). How-
ever, the contract completion time may be
extended for cause (e.g., work added by
change orders, unusually adverse weather
conditions, etc.) by the grantee, thereby
reducing or eliminating the assessment of
liquidated damages.
Conditions which may arise with regard to
the time of completion include termination
(either for convenience or for default),
suspension of work, directed acceleration,
time extensions or constructive accelera-
tion. Each condition .has its own inherent
problems, and very often their use will be
guided by existing State law.
A change order which merits an extension of
the contract completion date must include a
provision for an appropriate extension of
that completion date. (When no time exten-
sion is required, the change order should
clearly document that both the grantee and
the contractor agree that no extension is
needed.) Such changes will usually extend the
time of project completion beyond the end of
the grant budget period, in which case the
change will also require the preparation of a
formal grant amendment.
Re: 40 CFR 33.1030; 40 CFR Part 35, Subpart I,
Appendix A, Paragraphs A.l.f, A.l.g, and
A.2.c.
2. Claims
When a disagreement arises between a contractor and a grantee,
a claim can result. If such claims are not addressed promptly
and in an objective manner, costs can escalate dramatically,
especially if the dispute leads to arbitration or litigation.
For this reason, it is imperative that grantees develop and
apply management techniques for the avoidance and quick
resolution of claims. When a claim is made, the grantee should
attempt to resolve the claim as promptly as possible, either
740
-------
by negotiating a change order if warranted, or by notifying
the contractor that the claim has been evaluated and found
to be without merit.
a. Common Causes
Claims most frequently result from the
conditions listed in Item 1 above, and less
often from other more unusual circumstances.
b. Prevent ion
A grantee must insure that good management
practices are employed throughout the pro-
ject cycle, even when tasks are performed
by others (e.g., grantee's engineer), since
the grantee remains solely responsible for
the planning, design, construction, and
operation of the treatment works. Specific
management techniques that have been shown
to prevent or at least minimize the occurence
of claims can be found in the "Claims Pre-
vention" section of the EPA publication,
"Claims Management Guidance," September 1984.
While all of the practices noted in that
section are important to know and apply,
grantees should be particularly encouraged
to follow the practices listed below, which
have been found to be critical to a well-
managed project:
i. Insure that a fully adequate sub-
surface investigation is made,
and that the results of the inves-
tigation are included in the final
plans and specifications (see
Section V.C.2.cc).
ii. Maintain close management control
over the construction project, and
act quickly to resolve problems
at the time they arise.
741
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iii. Insure that the plans and specifi-
cations are biddable and construc-
tible (see Section V.C.3), that all
conflicting language has been re-
moved, and that all ambiguities
have been clarified prior to adver-
tising for bids.
iv. Specify an adequate construction
schedule commensurate with the com-
plexity of the project.
v. Insure that the schedule provisions
are enforced, that the schedule is
periodically reviewed, and that
revisions are made (by change order)
whenever circumstances justify the
extension of the schedule dates.
c. Resolution
After a claim is filed, the grantee must insure
that everything possible is done to address the
issues raised, and to mitigate the future costs
of the claim. This usually entails making a
thorough analysis of each issue raised by the
claim, and negotiating a fair and equitable
settlement of the meritorious portions of the
claim, if any. Grant funding is available for
assessment and negotiation costs, but only if
prior approval is received from the reviewing
agency. A list of good management practices
leading to quick and effective resolution of
claims may be found in the "Claims Resolution"
section of the EPA publication, "Claims Manage-
ment Guidance," September 1984.
d. Allowable Costs
Certain claim related costs are allowable, pro-
vided that the proper procedural steps have been
followed. A detailed analysis and explanation
of the pertinent regulations may be found in
the "Claims Allowability" section of the EPA
publication, "Claims Management Guidance,"
September 1984. In summary, the following
rules apply:
742
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i. The reasonable costs of indepen-
dent assessment and negotiation of
costs (including legal, technical, and
administrative costs) are allowable,
but only if prior approval is
received from the reviewing agency
and certain other conditions, dis-
cussed in the "Claims Management
Guidance," are met.
ii. Meritorious contractor claims are
allowable, provided that all the
rules of change order approval have
been met, and the costs were not
caused by the grantee's mismanage-
ment or vicarious liability for the
improper actions of others (see
Section IX.F.4, Paragraph A.l.f,
A.1.g , and A.2.c).
iii. The reasonable costs (including
legal, technical, and administra-
tive costs) of defending against
a claim, or of prosecuting a claim
to enforce a subagreement, are
unallowable unless six specific
conditions, discussed in the "Claims
Management Guidance," are met, and
prior approval is received from the
reviewing agency.
A grantee may request technical or legal assistance
from the reviewing agency. Such assistance may be
provided, but generally is given only after all
possible sources of assistance at the local level
have been exhausted.
Re: 40 CFR 35.2350; 40 CFR Part 35, Subpart I,
Appendix A, Paragraphs A.l.f, A.l.g, and A.2.c
3. Prior Approval
Minor changes in the project work, consistent with the
objectives of the project and within the scope of the
grant agreement, do not require a formal grant amendment.
Prior approval by formal grant amendment is required
743
-------
for changes (either by change order or by initiating
a new procurement action) which:
a. increase grant funding (i.e., require
additional funds beyond that provided
in the contingency allowance);
b. transfer the project to another grantee
(includes a reorganization which forms a
new unit of government to build and/or
operate the project);
c. alter the project performance standards;
d. alter the type of wastewater treatment
provided by the project;
e. significantly delay or accelerate the
project schedule;
f. substantially alter the facilities plan,
design drawings and specifications, or the
location, size, capacity, or quality of any
major part of the project; or
g. require rebudgeting of amounts from one
activity to another (e.g., from construction
to non-construction activities, from in-
direct costs to direct costs, from employee
training to another cost category, etc.).
Re: 40 CFR 30.700, 30.705, 35.2204
4. Submiss ion
Change orders, other than those involving a formal
grant amendment as discussed in Item 3 above, do not have
to be submitted to the reviewing agency prior to execution
and implementation, regardless of whether or not the grantee
has a certified procurement system. However, grantees
should be encouraged to submit all change orders to the
reviewing agency in a timely manner, since eventually, any
cost increases (using part of the contingency allowance) or
decreases will have to be reconciled with the existing pro-
ject grant to determine the final grant amount. Also, it is
to the grantees advantage to have allowability of costs
determined by the reviewing agency prior to project closeout,
to provide a basis for the review of project costs by EPA's
Office of the Inspector General (OIG).
744
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Except for grantees whose certified procurement
systems include provisions which meet the intent of EPA's
change order requirements, all grantees must conduct a
cost or pricing analysis for negotiated change orders
exceeding $10,000, with profit negotiated as a separate
element of the price, and obtain cost or price data from
the contractor using EPA Form 5700-41, or a similar format
which provides the same information. The cost or pricing
analysis need not be submitted to the reviewing agency,
but must be maintained in the grantee's files for review
by the reviewing agency if desired.
Re: 40 CFR 33.235, 33.290, 35.2204; 40 CFR Part 33,
Appendix A
5. Change Order Review
Prior to change order approval, the reviewing agency
is to insure that:
a. Justification of the need for the change order
has been documented, and includes an evaluation
of alternate ways of achieving the same
objective.
b. A comparison has been made between the change
order and the approved contract's scope of
work, including plans and specifications, and
the model change order clauses in the contract
documents.
c. A method has been established for determining
the price of the change order, and any additional
time required for contract completion, including
grantee/contractor negotiations, price or cost
analysis, and comparison with the engineer's
independent estimates.
d. The effect of the change order on other, structures
and items of equipment (secondary effects), the
additional cost of extended engineering inspection
services, and the additional O&M costs over
the useful life of the project have been deter-
mined.
745
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e. The effect of the change order on the quality
of the work> including the project performance
standards and the capacity of the treatment
works, has been determined.
f. The change order will not circumvent EPA's
procurement regulations, including the require-
ment for competitive equipment specifications.
g. A comparison with the reviewing agency's on-
site inspection reports has been made.
h. The reviewing agency's legal counsel has
reviewed the change order.
i. The change order requires prior approval and/or
the preparation of a formal grant amendment
before implementation.
j. The cost of the change order is allowable for
grant participation, or a percentage of the
change order is allowable, excluding costs
associated with reserve capacity (see
Sect ion VI.D.18).
Re: 40 CFR 30.700, 30.705, 33.1030, 35.2050,
35.2204; EPA publication, "Management of
Construct ion Change Orders - A Guide for
Grantees," March 1983
I. POST-CONSTRUCTION ACTIVITIES
This section is concerned only with engineering services
during the first year of operation and the project performance
certification. Section G.5 above discusses the final project
inspection. Closeout of projects is discussed in Section VIII.D.
1. Engineering Services during the First Year of Operation
The 1981 CWA amendments require that the grantee procure the
services of the engineer or firm that provided engineering
services during construction, or the engineer or firm that super-
746
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vised construction, to assist in operating the project during its
first year of operation. The term "construction" includes planning,
design, and engineering services during the building of the project,
and is not to be confused with the term "building," which includes
only Step 3 activities. These terms are defined in^;40 CFR
35.2005(b)(8) and (b)(13). 1
The 1981 CWA amendments use the term "supervise," whereas the
regulations use the work "direct," when referring to the services to
be provided by the engineer. The word "direct" better reflects the
intent of the services, since it does not imply a daily "in charge"
presence at the treatment works, nor a role as employee supervisor
or chief operator.
a. Scope of Engineering Services
The regulatory requirements for the scope of
engineering services during the first year of
operation are described in Section C.5.b above.
In essence, the engineer is to direct the opera-
tion of the treatment works, particularly with
regard to problems which develop; revise the O&M
manual to reflect actual operating experience;
train employees; and provide engineering advice
to the grantee as to whether the treatment works
is meeting the project performance standards.
The intent of these requirements is that the
engineer with the most experience in the plan-
ning, design, and building of the project will
utilize this expertise to help the grantee in-
sure that the project meets its performance
standards. The engineering services will
normally include reviewing laboratory procedures,
including the frequency and results of tests to
control unit process operations; recommending ways
to maintain appropriate levels of solids or dis-
solved oxygen in the aeration tanks; determining
the best conditions for the withdrawal of sludge
from the digesters; etc.
Engineering services are also required for
projects which include only sewers (collection,
trunk, and/or interceptors) and pumpirtg stations.
Such services will be less extensive than those
required for a treatment plant, but will typically
include:
747
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i. for pumping stations, periodic site
visits to check operations (e.g., to
insure that float control mechanisms
are operating properly, that pump
cycling is the most efficient, that
seals are properly maintained and
not leaking, etc.);
ii. for sewers, opening and inspecting
manholes to observe signs of sur-
charging or sand deposits; after
storms, checking for inflow or
flooding; etc. If the project in-
cluded rehabilitation of sewers
to eliminate excessive I/I, the
engineering services may also
include a limited amount of flow
monitoring at sites within the
collection system, to supplement
flow measurements at the treat-
ment facility.
Engineering services during the first year of opera-
tion, therefore, are those necessary to insure the
efficient operation of the treatment works project,
and are directed toward achieving compliance with
the project performance standards. The extent of
such services will vary from project to project,
depending on the size, type, and complexity of the
project and the needs of the grantee's operating
staff.
Re: 40 CFR 35.2218(b)
b. Procurement of Services
The scope of work for the engineering contract for
inspection and supervision services during the building
of the project should also include engineering services
during the first year of operation. As an alternative,
the grantee may procure the engineering services re-
quired for the first year of operation as the construc-
tion of the project nears completion. Regardless of the
timing of procurement of engineering services, the
procurement must be conducted in accordance with.40 CFR
Part 33 (see Sections B, C, E, and F above). While a
fixed price contract is acceptable, because of uncer-
tainties during the first year, a cost-plus-fixed-fee
type contract may be more appropriate.
748
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c. Payment Requests
Payments for the Federal share of engineering services
during the first year of operation are to be processed
as discussed in Section IX.B. For fixed price contracts,
payment is related to the completion of specific tasks.
For cost-plus-fixed-fee contracts, payments are made as
the work is completed (generally no more frequently than
monthly).
d. Deficiencies
During the first year of operation, problems may develop
with regard to equipment, unit processes, or deficiencies
due to poor construction. The grantee is responsible for
correcting such deficiencies, using appropriate means
such as: invoking the provisions of equipment warranties,
construction contractor performance bonds, and guarantees
from the design engineer; initiating enforcement action
against industrial dischargers; etc.
As a part of good project management, reviewing agencies
should establish a program which tracks the performance
of completed projects during the first year of operation.
Such a program could include periodic onsite inspections
and a review of monthly operation reports submitted by
grantees. When onsite inspections or monthly reports
indicate that a project is experiencing difficulties
in meeting its project performance standards, the
reviewing agency should work with the grantee and offer
technical assistance or guidance as appropriate.
2. Project Performance After One Year
a. Certif ication
One year after the initiation of the operation of the
project, the grantee is required to certify to the
reviewing agency whether the project meets the project
performance standards. Project performance standards
are performance and operational requirements appli-
cable to the project, including the enforceable
requirements of the CWA, and the design criteria upon
which the plans and specifications are based. For
projects required to satisfy the enforceable require-
ments of the CWA, the performance standards include
749
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the design criteria (usually contained in the
engineer's design report and/or the facilities plan)
and the effluent limitations contained in the National
Pollutant Discharge Elimination System (NPDES) permit
(see Section II.D.2). For projects not required to
satisfy the enforceable requirements of the CWA (e.g.,
sewers and pumping stations), performance standards
include only the design criteria. For projects which
include sewer rehabilitation, the quantity of excessive
I/I to be eliminated is one of the project performance
standards.
Project performance standards will normally have been
established at the time of grant award, and should
have been included in the grant agreement as a grant
condition (see Section VI.M.5.g).
Where the grantee certifies that the project is meeting
its project performance standards and where all grant
conditions have been satisfied, the project may be
prepared for audit and closeout (see Section VIII.D).
If the grantee is unable to certify that the project
is meeting its performance standards, the grantee
must undertake corrective action as described in Item b
below.
Corrective Action
If the reviewing agency or the grantee concludes that
the project is not meeting its project performance
standards, the grantee is required to submit the
following:
i. a corrective action report which includes
an analysis of the cause of the project's
failure to meet the performance standards,
and an estimate of the nature, scope, and
cost of the corrective action necessary
to bring the project into compliance;
ii. a schedule for undertaking, in a timely
manner, the corrective action necessary
to bring the project into compliance; and
iii. the scheduled date by which the grantee
will be able to certify that the project
is meeting its performance standards.
750
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The reviewing agency is to insure that the proposed
schedule is in conformance with, or will become a
part of, the State-developed schedule for imple-
menting EPA's National Municipal Policy. For a
municipality whose project is not in compliance with
its NPDES permit, this policy requires that the com-
munity prepare a composite correction plan (see
Sect ion 11.D.1).
Except in the case of projects which qualify for a
100 percent grant for the modification or replace-
ment (M/R) of a faiLed innovative or alternative (I/A)
technology (see Section VI.J), or the extent allowed
by EPA's policy on project additions (see Section IX.F.4,
Paragraph H.l.d), the cost of preparing the corrective
action report and undertaking the corrective action
necessary to bring the project into compliance with
the project performance standards is not eligible for
grant participation.
Re: 40 CFR 35.2218(c) and (d); 40 CFR Part 35,
Appendix A, Paragraphs H.l.d (3)(b), H.2.e,
and H.2.1; EPA notice, "National Municipal
Policy," 49 FR 3832 and 3833 (January 30, 1984)
751
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CHAPTER VIII
COMPLETION, AUDIT, AND CLOSEOUT
A. INTRODUCTION
B. STEP 1 AND STEP 2 COMPLETIONS
C. STEP 2+3 AND STEP 3 COMPLETIONS
D. COMPLETION AND CLOSEOUT PROCESS
E. AUDIT PROCESS
801
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A. INTRODUCTION
This chapter describes basic considerations for completing
and closing out projects. It begins with a discussion of EPA's
policies and procedures for completing and closing out Step 1
and Step 2 projects, all of which were awarded grant assistance
prior to the enactment of the 1981 amendments to the Clean Water
Act (CWA), which eliminated Step 1 and Step 2 grants. EPA's
goal is to complete all Step 1 and Step 2 projects by
September 30, 1985, and to do so without grant increases unless
they are absolutely necessary.
Later sections describe the completion and closeout of
Step 2+3 and Step 3 projects. The chapter concludes with a
discussion of audits, including the resolution of audit excep-
tions .
Since the completion and closeout processes are based on
internal administrative procedures rather than EPA regulations,
there are relatively few regulatory citations in this chapter.
Therefore, although the procedures and sequence of events
described in this chapter represent basic considerations for
completing and closing out projects, specific step-by-step
procedures are to be developed by the EPA Regions and the
delegated States.
Section B, Step 1 and Step 2 Completions, describes EPA
policies and goals concerning the completion of Step 1 and Step
2 projects, and includes guidance on the level of review, the
conditions under which the work effort should be reduced, and
the conditions under which a grant increase should be awarded.
Section C, Step 2+3 and Step 3 Completions, describes con-
siderations for completing construction projects, with particular
emphasis on pre-1982 projects involving phased or segmented treat
ment works or sewer system rehabilitation.
Section D, Completion and Closeout Process, describes
activities leading up to closeout, including final inspection,
cutoff date, documentation, payments, property management, delays
engineering services, project officer certification, and file
retention.
Section E, Audit Process, describes procedures for requesting
and performing audits, and for resolving audit issues.
803
| Preceding page blank-'
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B. STEP 1 AND STEP 2 COMPLETIONS
Purpose:
Complete Step 1 and Step 2 projects by September 30, 1985.
Discuss ion:
The 1981 CWA amendments eliminated the award of Step 1 and
Step 2 grants after December 29, 1981. It is EPA policy to make
every effort to complete all Step 1 and Step 2 projects (except
large, complicated, or involved projects) by September 30, 1985.
In so doing, reviewing agencies are to insure that all applicable
regulatory requirements and EPA policies in effect on the date
of grant award are satisfied, and that all grant conditions
contained in the grant agreement are fulfilled. All of these
projects are subject to EPA regulations contained in 40 CFR
Part 35, Subpart E. However, since Subpart E has been amended
several times over the years, EPA has published the "Regulation and
Policy Matrix - A Guide to the Rules Governing Grants Awarded
under the Construction Grants Program," dated December 1983, to
assist project reviewers in identifying the regulations and policies
applicable to earlier projects. The "Regulation and Policy
Matrix" includes a summary of all revisions to 40 CFR Parts 30, 33,
and 35, as well as all other EPA regulations and policy documents
which pertain to the construction grants program. This publication
should be consulted to identify the applicable regulations and
policies in effect on the date of grant award.
In completing Step 1 and step 2 projects, problems can arise
with respect to requests for grant increases, evaluation of a
project's likelihood for receiving a future grant, and the depth
of review, primarily with regard to facilities plans. In all cases,
every effort should be made to complete the project within its
existing budget, without a grant increase, and in accordance with
any applicable compliance schedule.
Step 1 and Step 2 projects must be completed in conformance
with the approved scope of work in the grant agreement and the
regulations which were in effect at the time of grant award, and
are subject to audit to insure that these requirements have been
met (see Section E below). It is therefore essential that project
files document how decisions were made, and that proper value was
received for the funds expended.
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Review Procedures:
1. Step 1 Projects Completed or near Completion
a. Projects Likely to Receive a Step 2 + 3 or a
Step 3 Grant
i. Review the facilities plan against all
applicable regulations and grant conditions.
ii. Complete the environmental review.
iii. Advise the grantee to apply for a Step 2+3
grant, to request an advance of allowance
for design work, or to undertake design
using local funds, whichever is applicable.
iv. Make the final payment and administratively
complete the project up to the point of
audit request, but do not request an audit
unless unusual conditions warrant it (see
Item 6 below).
b. Projects Unlikely to Receive a Step 2+3 or a
Step 3 Grant
i. Review the facilities plan against all
applicable regulations and grant conditions
to insure that all required items are present
and complete (see Item c below).
ii. Limit review comments to those that are
substantive or will affect the plan
recommendat ions.
iii. Require the grantee to perform only the
work necessary for conformance with the
applicable regulations and grant conditions.
iv. Prepare a letter to the grantee, identifying
discrepancies which would have to be
corrected by an addendum to the facilities
plan if a grant were ever to be awarded in
the future.
v. Make final payment and administratively
complete the project.
vi. Request a final audit, if warranted (see
Item 6 below).
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c. Review of Facilities Plans for Completeness
In cases where a facilities plan is unlikely to
result in the award of a Step 2+3 or a Step 3 grant,
it is necessary for the facilities plan to be reviewed
for completeness (see Item b above). The minimum
requirements for completeness depend on the date of
initiation of facilities planning:
i. Facilities Planning Initiated before
May 1, 1974
Facilities plans initiated before May 1, 1974,
may be approved under the regulations published on
February 11, 1974, if a Step 2 grant was awarded
before April 1, 1980. In those cases where facilities
planning was initiated before May 1, 1974, but the
project failed to receive a Step 2 grant before
April 1, 1980, the facilities plan must comply with
the requirements described in Item ii below.
Re: 40 CFR 35.917(c)
i i. Facilities Planning Initiated after
April 30, 1974 and before October 1, 1978
If each of the following items is present and
complete in a facilities plan which was initiated
after April 30, 1974 and before October 1, 1978,
the facilities plan can be considered complete
for grant payment purposes:
- description of the treatment works
for which construction drawings and
specifications will be prepared,
including design flow and analysis;
- description of the entire waste
treatment system of which the proposed
treatment works is a part;
- infiltration and inflow (I/I) documentation;
- cost effectiveness analysis of alter-
natives including renovation, upgrading
operation and maintenance (O&M), and use
of on-site or non-conventional systems;
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- effluent discharge limitations and
National Pollutant Discharge Elimin-
tion System (NPDES) permit number,
if issued:
- comments or approvals of relevant
State, interstate, regional, and
local agencies;
- public participation summary;
- demonstration of the grantee's legal,
financial, institutional, and manage-
rial resources;
- resolution adopted by the grantee,
accepting the facilities plan;
- statement regarding grantee compliance
with the Civil Rights Act of 1964;
- municipal pretreatment program (if
required by 40 CFR 35.907);
- estimate of total project costs and
customer charges, which include both
user charge (UC) rates and debt service
costs;
- site availability and cost;
- environmental information document (EID);
and
- fulfillment of all grant conditions.
Re; 40 CFR 35.917-1
i ii. Facilities Planning Initiated after
September 30, 1978
To be considered complete for grant payment
purposes, a facilities plan which was initiated
after September 30, 1978, must include all of
the items described in item ii above. In addition,
each of the following items must be present and
complete:
807
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- analysis of innovative or alterna-
tive (I/A) treatment processes;
- analysis of net primary energy
requirements; and
- description of potential recreational
and open space opportunities.
Re: 40 CFR 35.917-1(j)
d. Step 1 Grant Increases
Grant increases may be awarded only to complete
work included in the original scope of the grant as
identified in the grant agreement, required by
40 CFR 35.917-1, and described in the plan of study.
Examples of items which may warrant a Step 1 increase
include:
i. cost overruns on cost-plus-fixed-fee
contracts;
ii. archaeological surveys;
iii. sewer system evaluation surveys;
iv. necessary "onsite" studies;
v. higher grant share for the use of an
I/A technology (see Section VI.L.2.d);
vi. management plans for sludge and
residuals; and
vii. replanning attributable to changes in
the CWA or its implementing regulations
(e.g., definition of secondary treatment,
ocean discharge, revised water quality
standards, etc.).
e. Reduction of Work Effort
Grant increases should not be awarded for projects
which are unlikely to receive a Step 2+3 or a Step 3
grant award. Where a grant increase is requested for
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such a project, the project should be reviewed with
the intent o£ rescoping or reducing the work effort
through one or more of the following mechanisms:
i. Reduction in Planning Area
Most applicable in rural areas, where work
can be focused on population centers.
i i . Infiltration and Inflow
Apply current limitations for nonexcessive
I/I (see Section IV.C.4.3), and reduce
field monitoring or other labor intensive
activities.
i i i. Public Participation
Reduce the work effort and the number of
meet ings.
iv. Cultural Resources
Reduce the scope, complete only work in
progress, and identify and document future
work which would be required if a grant
were ever to be awarded.
v. Need Survey
Consider eliminating house-to-house surveys.
vi. Alternatives
Reduce to only those which appear feasible,
and consider the revised definition of
secondary treatment or its equivalent (see
Section IV.C.3.1).
vi i. Treatment Facilities
Efforts in site planning and preliminary
design can be eliminated.
vi i i . Sewer Design
Detailed sewer routes and profile work
can be eliminated.
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ix. Sludge Disposal
Reduce the number of alternatives and the
level of detail at which the alternatives
are evaluated.
x. Environmental Information Document
Reduce the scope of the EID to correspond
with the reduced project scope.
2. Step 2 Projects Completed or near Completion
a. Projects Likely to Receive a Step 3 Grant
i. Review the plans and specifications and
other required documents (e.g., UC
system, sewer use ordinance (SUO), etc.)
to verify compliance with the applicable
regulat ions.
ii. Review the plans and specifications to
determine the percentage of the construction
work which would be grant eligible, and notify
the grantee that only this percentage of the
design cost is an eligible Step 2 cost.
b. Projects Unlikely to Receive a Step 3 Grant
i. Review Step 2 work against applicable regula-
tions to insure that all items are present
and complete. The biddability and construct-
ability (B/C) review of plans and specifications
(see Section V.C.3) will usually be omitted,
but may be performed as a service to the grantee
if the project is likely to proceed to construc-
tion without a Step 3 grant.
ii. Limit review comments to those that are
substantive, or will affect the capacity, cost,
treatment process, or other major items.
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Require the grantee to perform only the work
necessary to complete work in conformance
with the applicable regulations and grant
cond i t ions.
Prepare a letter to the grantee identifying
discrepancies which would have to be corrected
if a grant were ever to be awarded in the future.
Review the plans and specifications to determine
the percentage of the construction work which
would be grant eligible, and notify the grantee
that only this percentage of the design cost
is an eligible Step 2 cost.
Make final payment and administratively
complete the project (see Section D.b below).
Request a final audit, if warranted (see
Item 6 below).
c. Step 2 Grant Increases
Grant increases may only be made to complete work in-
cluded in the original scope of the grant. Examples of
items which may warrant a Step 2 increase include:
i. cost overruns to cost-plus-fixed-fee
contracts;
ii. archaeological surveys;
iii. additional environmental studies; .
iv. redesign attributable to changes in the CWA
and its implementing regulations (e.g.,
definition of secondary treatment, marine
discharge waivers, revised water quality
standards, etc.);
v. higher grant share for the use of an I/A
technology (see Section VI.L.2.d);
vi. value engineering (VE) studies required by
the regulations; and
vii. additional work on UC systems.
in.
iv.
v.
vi.
vii.
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d. Reduction of Work Effort
Grant increases should not be awarded for projects
which are unlikely to receive a Step 3 grant award.
Where a grant increase is requested, the project should
be reviewed with the intent of rescoping or reducing
the work effort, through one or more of the mechanisms
described in Item l.e above.
3. Delayed Step 1 and Step 2 Projects
A delayed project is any Step 1 or Step 2 project where the
work (i.e., facilities planning or preparation of construction
drawings and specifications) has been delayed for an excessive
period of time, generally for six months or more.
Grantees with delayed Step 1 or Step 2 projects should
be notified that they will be expected to complete the
scope of work described in the grant agreement. The notifi-
cation should include a time frame for requiring the grantee
to submit a revised project schedule, if one is needed.
4. Termination or Annulment
If a grantee cannot, or will not, meet the conditions
of the grant agreement, its grant may be terminated or
annuled in accordance with the regulations applicable at
the time of grant award. Termination results in a
financial settlement, and is reflected- in a grant amend-
ment. Annulment results in the repayment to the Federal
Government of all funds previously paid to the grantee.
If the regulatory criteria for annulment are not
satisfied, the grant may be terminated, based upon the
grantee's failure to comply with the terms and conditions
of the grant agreement. Negotiation of a termination
agreement with the grantee is the preferable method of
termination. However, if the grantee refuses to enter into
a termination agreement, EPA may unilaterally terminate the
grant. Upon termination, EPA must pay the grantee the
Federal share of the allowable costs for non-cancelable
obligations incurred by the grantee prior to the effective
date of termination.
The reviewing agency should use its best judgment in-
determining the most effective approach for annulling or
terminating grants and negotiating termination agreements.
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All termination agreements should provide assurances that
the Federal Government has received full value for the
funds expended. Any termination agreement that is
negotiated with a grantee must conform to EPA policies,
regulations, and guidelines, and must be supported by
factual data. All terminations require the concurrence
of the Regional Counsel (or, in the case of Headquarters-
awarded grants, the Assistant General Counsel for Grants).
Additionally, all terminated and annuled grants are
subject to audit (see Section E below). After completion
of the audit process, these grants are closed out in the
same manner as completed grants (see Section D.d below).
Re: For grants awarded prior to October 1, 1983,
40 CFR 30.920, 30.950; for grants awarded
after September 30, 1983, 40 CFR 30.903
through 30.905
5. Other Step 1 and Step 2 Projects
The circumstances described in Items 1 through 4 above
represent the most common conditions likely to be encountered
for Step 1 and Step 2 projects. However, other less common
circumstances may arise which do not fall within these
categories (e.g., phased, segmented, Step 2+3, large, or com-
plex projects). In these circumstances the reviewing agency
must exercise judgement on a case-by-case basis, taking into
account the availability of present and future grant funds,
the State's priority system, the project's contribution toward
improvement in priority water quality areas, and the likelihood
of the grantee receiving a Step 2+3 or a Step 3 grant at some
future time. As decisions are made for these projects, the
integrity of the construction grants program must be maintained,
and decisions must not circumvent the intent of the CWA (e.g.,
planning and design work for new projects should be accomplished
under an allowance, not a grant).
6. Final Audit Requests
Before they can be closed out, all Step 1 and Step 2 projects
must either be audited or be approved for closeout without an
audit. Accordingly, a Step 1 or Step 2 project for which the
claimed grant amount (i.e., the Federal share of allowable pro-
ject costs) exceeds $250,000, and for which a Step 2+3 or a
Step 3 grant is not expected to be awarded, should be forwarded
to EPA's Office of the Inspector General (OIG) with a request
813
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for a final audit. In addition, at the beginning of each
month, the reviewing agency should provide the OIG Divisional
Office with a list of Step 1 and Step 2 projects for which the
claimed grant amount does not exceed $250,000, as is done for
Step 2+3 and Step 3 projects. Within 30 days of the receipt
of this list, OIG will advise the reviewing agency, in writing,
which of these projects will be audited and which can be closed
out without an audit.
If a Step 2+3 or a Step 3 grant is expected to be awarded,
a final audit for the Step 1 or Step 2 project should not be
requested until all work on the Step 2+3 or Step 3 grant has
been completed, unless overriding circumstances require an
immediate audit.
C. STEP 2+3 AND STEP 3 COMPLETIONS
Purpose:
Complete Step 2+3 and Step 3 grants in a timely manner, in
accordance with the project schedule.
Discuss ion:
All Step 3 grants awarded under 40 CFR Part 35, Subpart I must
include a project schedule for key milestones, including the date
of project completion and initiation of operation. Step 2+3 and
Step 3 grants awarded under 40 CFR Part 35, Subpart E also should
have included a project schedule, and although the regulations do
not include a specific requirement for key milestones to be included
in the schedule, these should have been included as a good manage-
ment practice. Significant changes to all project schedules require
reviewing agency approval and the preparation of a formal grant
amendment (see Section VI.M).
Renewed emphasis is being placed on the timely completion of all
Step 2+3 and step 3 projects in accordance with their project sche-
dules. Timely completion will result in the earliest possible
achievement of water quality goals, and will allow projects to be
efficiently managed and closed out.
The review procedures below address several problems associated
with project completion and preparation for audit. The procedure
for closing out projects is discussed in Section D.d below.
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Review Procedures:
The subjects discussed below are those which have caused
axtended delays in completing projects. Each project, however,
has its own unique characteristics which will require careful
selection of the methods used to complete the project.
1. Project Schedule
Grant agreements for all projects must include a
project schedule, and work must be accomplished in such
a way as to maintain that schedule. Schedules should be
reasonable, and must conform with other compliance or
enforcement schedules, including those contained in
court or State enforcement orders.
Requests for significant changes to project schedules
must be critically reviewed, and only approved when
necessary and when coordinated with other applicable
schedules. Significant revisions to project schedules
must be accomplished by formal grant amendment. Failure
of a grantee to maintain a project schedule may form the
basis for grant termination or annulment (see Section B.4
above).
Re: 40 CFR 35.935-11, 3 5.2040(b)(6), 35.2204, 35,2212,
35.2214, 35.2216; for grants awarded prior to
October 1, 1983, 40 CFR 30.345-3, 30.900-1; for
grants awarded after September 30, 1983, 40 CFR
30 .700
2. Phased or Segmented Projects
One grant condition included in all phased or segmented
projects, with the possible exception of very old projects,
is a commitment from the grantee to complete the remaining
phases or segments in order to make the treatment works,
of which the phase or segment is a part, operational and in
compliance with the enforceable requirements of the CWA.
This commitment includes a schedule specified in the grant
agreement, and must be accomplished regardless of whether
grant funding is available for the remaining phases or segments.
This schedule should also be incorporated into the grantee's
NPDES permit.
815
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All phased or segmented projects should be periodically
reviewed by the reviewing agency to insure that the grantee
is performing according to the schedule. Where this is not
the case, and where negotiations with the grantee have failed
to accomplish compliance with the schedule, enforcement action
or action to initiate grant termination or annulment should be
undertaken (see Section B.4 above).
Re: 40 CFR 35.2108, 35.2214
3. Sewer System Rehabilitation
Step 2+3 or Step 3 grant awards may have been made for
projects which included both building of treatment facilities
and rehabilitation of sewer systems. In some of these cases,
the building of treatment facilities was completed, but the
grantee was permitted to continue sewer system rehabilitation
for a period of time after the treatment facilities became
operational. The grant agreement for each of these projects
contains a grant condition which requires the grantee to
complete the rehabilitation on a schedule contained in the
agreement.
A grantee whose project includes sewer system rehabilita-
tion, and whose grant was awarded after December 29, 1981, is
required to certify whether or not the project' meets its per-
formance standards after one year of operation (see Section
VII.1.2.a), including the elimination of excessive I/I
through rehabilitation. A grantee whose grant was awarded
before December 29, 1981 is not required to certify the pro-
ject's performance after one year of operation.
Reviewing agencies should periodically review all projects
which include sewer system rehabilitation (with special emphasis
on pre-1982 projects) to insure that the grantee is performing
according to the schedule in the grant agreement. Where this
is not the case, and where negotiations with the grantee have
failed to accomplish compliance with the schedule, enforcement
action or action to terminate or annul the grant should be under-
taken (see Section B.4 above).
An alternative action which may be appropriate in some
instances is the reduction in the allowable capacity of treat-
ment facilities and interceptors to the equivalent of 120 gallons
per capita per day (gpcd), based on the approved and allowable
design flow. if this option is considered, care must be
exercised that the project remains affordable, meets its NPDES
permit requirements, and has received a deviation under the
provisions of 40 CFR Part 30 (see Section IX.E).
816
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Re: 40 CFR 35.2214
4. Special Grant Conditions
Many grant agreements contain special grant conditions
(i.e., grant conditions unique to the project and beyond the
regulatory requirements which apply to all grants). Such
conditions may have addressed phased or segmented project
completions, a sewer system rehabilitation schedule, enactment
of ordinances forbidding connection to certain sewers (e.g.,
interceptors adjacent to environmentally sensitive or prime
agricultural land), etc. (see Section VI.M.6).
Before any project can be completed, the reviewing agency
must insure that all grant conditions have been fulfilled, with
particular attention given to special grant conditions. Refusal
by the grantee to fulfill all grant conditions may form the
basis for grant termination or annulment (see Section B.4 above).
Re: 40 CFR 35.2200
D. COMPLETION AND CLOSEOUT PROCESS
Purpose:
Insure that projects are completed on schedule, that all appli-
cable regulations and grant conditions have been satisfied, and that
project records are complete and available for audit.
Discussion:
The process of project completion and closeout will include many,
if not all, of the items discussed below in the review procedures,
which are presented in the order in which events should occur. How-
ever, because of unique circumstances surrounding each project, the
order of events may vary.
There are four major milestones in the completion and closeout
process:
a. Project Completion
A Step 1 project is considered physically complete
when the project reviewer determines that the scope of work
contained in the grant agreement has been accomplished and
is approvable.. For projects not expected to receive a
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Step 2+3 or a Step 3 grant, a Step 1 project is considered
physically complete when it has met the minimum require-
ments listed in Section B.l.c above.
A Step 2 project is considered physically complete when
the plans and specifications are either approved or judged
approvable (i.e., accepted) by the reviewing agency. For
projects not expected to receive a Step 3 grant, a Step 2
project is considered complete when it has met the minimum
requirements listed in Section B.2.b above.
A Step 2+3 or a Step 3 project is considered physically
complete when an official final inspection (see Item 1 below)
determines that:
i. All but minor components of the project
have been completed (e.g., landscaping)
in accordance with the approved plans,
specifications, and change orders.
ii. The facility is capable of functioning as
des igned.
iii. All equipment is operational and performing
sat isfactorily.
iv. Laboratory facilities are complete and
available to conduct appropriate tests.
All administrative requirements need not be satisfied at
the time of physical completion (e.g., final payment, change
order approval, fulfillment of grant conditions).
For Step 1 and Step 2 grants, project completion and physical
completion are synonymous. For Step 2+3 and Step 3 grants, pro-
ject completion, physical completion, and construction completion
are synonymous.
b. Administrative Completion
The administrative completion phase includes all activities
occurring after physical completion of the project. These
activities, which normally occur in the following order, include:
satisfaction of all grant conditions, resolution of all claims,
final building payment (excluding payment for engineering services
during the first year of operation), completion of engineering
services during the first year of operation, grantee's
818
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certification that the project meets its performance
standards, receipt of the grantee's final grant payment
request, and project officer certification. A project is
considered administratively complete when a final audit
is requested from OIG, or when the project is referred to
GIG for a determination of whether or not an audit will
be performed.
c. Audit Process
See Section E below for a detailed discussion of the audit
process.
d. Project Closeout
The project closeout phase includes all activities which
occur after the completion of the audit process (either the
conduct of an audit, or a determination by OIG that the project
can be closed out without an audit). The project closeout phase
includes the resolution of audit issues and the final financial
settlement, if any, with the grantee. A project is considered
to be closed out when a final closeout letter has been sent to
the grantee.
Review Procedures:
Once the final inspection has been completed (see Item 1
below), and the project has been found to be acceptable, the
grantee may submit its final building payment request, for pay-
ment of 100 percent of the allowable cost of construction (less
any previous payments). However, the grant cannot be closed out
until the completion of the first year of operation, the certifi-
cation by the grantee that the project is meeting its performance
standards (see Section VII.I.2.a), the submission of the grantee's
final grant payment request, and the submission of the project to
to OIG for audit.
Projects are to be managed by reviewing agencies in such a
way that project completion and closeout are accomplished as soon
as possible. EPA Directive 2750 (April 20, 1984) states that
audit resolution must occur within 180 days after completion of
the final audit. The Office of Water Accountability System
states that closeout is expected to occur within three months of
audit resolution. These time based goals also apply to Step 1
and Step 2 closeouts. If a final audit is not required, closeout
is expected to occur within six months of project completion.
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The items discussed below are primarily post-construction
activities, which must be completed before a project can be
considered administratively complete. In practically all cases,
reviewing agencies have developed checklists to be completed by
the project reviewer, and forms to be completed by the grantee,
which address these post-construction activities. These
procedures, forms, and checklists should be used.
1. Final Inspection
A final inspection is requested by the grantee
when building of the project has been completed.
The final inspection is generally accomplished
within 60 days from the date requested. The final
inspection insures that the project is completed
in accordance with the approved plans, specifica-
tions, and change orders, and that all necessary
records are complete and available for audit (see
Section VII.G.5). In addition, information is
gathered at the final inspection which will allow
the preparation, by the reviewing agency, of the
project officer certification concerning flow
level (75 percent or more of the anticipated initial
flow), aesthetic features, and abandoned, unused, or
inoperable facilities (see Item 8 below).
At the time of the final inspection, the reviewing
agency will usually establish a cut-off date, after
which any costs incurred by the grantee are unallowable
for grant participation (see Item 2 below).
At times, a grantee may request a final inspection,
but when the reviewing agency's inspector arrives at the
project site, conditions exist (e.g., unsatisfied grant
conditions, lack of flow data on which to base the pro-
ject officer certification, etc.) which prevent the
project from being considered administratively complete.
In such cases, the inspection should be conducted, but
the grantee should be informed, in writing, of the
deficiencies which prevented the conduct of a final
inspection, that the inspection which was conducted will
be considered an interim inspection, that a final inspec-
tion will be rescheduled after the grantee informs the
reviewing agency that the deficiencies which prevented the
conduct of a final inspection have been corrected, and
that the grantee's final grant payment will be withheld
until the final inspection has been conducted.
Re: 40 CFR 35.2216
820
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2. Cut-off Date
The establishment of a cut-off date is one of the
actions required to ready a project for administrative
completion. The basis for a cut-off date is found in
the definition of the project's budget period in 40 CFR
Part 30, since eligible project costs are limited to
those incurred during the budget period. The budget
period must start on or after the date of grant award,
and must be consistent with the project schedule
contained in the grant agreement.
A cut-off date may be established for the entire
project or for individual subagreements. The cut-off
date is the date by which all work and costs associated
with a particular subagreement will have been incurred,
and after which work or costs incurred are not allowable
for grant participation. In very unusual circumstances
it may be necessary to revise a cut-off date, if costs
were incurred by the grantee due to circumstances be-
yond its control. Where a cut-off date is established,
the "cut-off" letter to the grantee must clearly
document the specific work or subagreement to which the
cut-off date applies. This documentation will preclude
misunderstandings during audit. For Step 1 and Step 2
projects, the "cut-off" letter should also remind the
grantee that, since the 1981 CWA amendments prohibit
the award of new Step 1 and Step 2 grants, any future
revisions to the completed Step 1 or Step 2 project
will have to be performed without EPA assistance.
The cut-off date is generally established at the time
of final inspection, and usually with the agreement of
the grantee. However, if the grantee will not agree to
a cut-off date, the end of the project budget period should
be used, since by regulation, no costs can be incurred after
the end of the budget period. The cut-off date for all
costs (except startup services and- engineering services
during the first year of operation) will usually coincide
with the date of the final inspection, prior to which the
grantee will normally have accepted the project from the
construction contractor. If a project is essentially
complete except for minor punch list items, the reviewing
agency and the grantee may agree to a future cut-off date,
by which time the contractor will have completed the punch
list items.
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Another cut-off date which must be established and
documented in the project files concerns the termina-
tion of services provided by the engineer, including
inspection, start-up, and supervision of the first year
of operation. This cut-off date will almost always be
established as one year after the initiation of opera-
tion for the project, to provide for continuing
engineering services during the one year project per-
formance period.
Once a cut-off date is established, the grantee should
prepare cost summaries (relating to the work for which the
cut-off date has been established) for submission to the
reviewing agency (see Item 3 below).
Re: 40 CFR 35.2040(b)(6); for grants awarded
prior to October 1, 1984, 40 CFR 30.135-6;
for grants awarded after September 30, 1983,
40 CFR 30.200
3. Cost Summary and Documentation
The grantee is required to submit cost summaries for
all costs incurred during the project. The cost summary
for previous Step 1 or Step 2 projects which receive a
Step 3 grant should be in the project files and available
for audit. Cost summaries must be prepared for all
categories of work identified in the grant application
and the grant agreement, and typically include costs for:
a. administration,
b. subagreements for building the project,
c. engineering subagreements,
d. force account work,
e. land acquisition,
f. legal services, and
g. accounting services.
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Cost summaries should identify the initial costs for
each category of work and the final costs, including all
change orders and adjustments to cost-plus-fixed-fee type
contracts. If not previously submitted with a payment .
request or reviewed during the final inspection, documen-
tation such as paid invoices or vouchers must be provided
to support the cost summaries.
Construction contract cost summaries should be compared
with cost data in the project files to verify that all change
orders have been reviewed and acted upon by the reviewing
agency, and that a final change order adjusting estimated
quantities to actual quantities for unit price items is
included. Cost summaries for services (e.g., engineering,
legal, and accounting) should be compared against the
original subagreement to insure that all services have
been performed and that claimed costs are in agreement with
direct costs, indirect costs, and profit items in the sub-
agreement.
The unused portion of the construction contingency
allowance is omitted from final project cost summaries and
should be deobligated for use on other projects (see
Section IX.C.2).
4. Final Building Payment Request
Processing of payment requests is discussed in Section
IX.B. This section addresses only the final buiIding pay-
ment. While this payment is referred to as the final
building payment, since it represents the last payment for
building the project, additional payments will be made
during the first year of operation for appropriate
engineering services (see Section VII.I.1).
Payments are made to the grantee during the course of
the project for costs which have been incurred. When the
grantee requests the final building payment, such payment
is to be made promptly, and may only be delayed if it is
determined that the payment request includes unallowable
costs, or if information available or not available to the
reviewing agency (e.g., a final inspection report or lack
thereof) indicates a previous overpayment, a failure to
comply with all grant conditions, or other irregularities.
823
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If the grantee has received any grant related income
(e.g., refunds, rebates, credits, etc.) such amounts are
to be used to reduce the total project cost, thereby
reducing the amount of the grant (see Section IX.B.10).
Final payment is based on the cost summaries and
supporting documentation discussed in Item 3 above.
Re: 40 CFR 35.2300(a) and (b); for grants awarded
prior to October 1, 1983, 40 CFR 30.615-1,
30.620 through 30.620-3, 30.815; for grants
awarded after September 30, 1983, 40 CFR
30.400(a) and (b)(3), 30.526, 30.802
5. Property Management
Grantees are required to have a property management
system which identifies and traces property through its
useful life or until disposal. The property management
system must meet the minimum requirements in the regula-
tions, and must include both personal property (e.g.,
movable equipment) and real property (e.g., land and
structures). t 1
Before a project is administratively completed, the
reviewing agency must verify that the grantee has a
property management system in place. The review of the
property management system should take place during
project monitoring, and should be completed before the
final building payment is made.
Re: For grants awarded prior to October 1, 1983,
40 CFR 30.810 through 30.810-9; for grants
awarded after September 30, 1983, 40 CFR
30.530(b), 30.531, 30.532, 30.535, 30.536
6. Completion Delays
Completion delays most often occur where there is an
unresolved dispute between the grantee and the construc-
tion contractor, resulting in the contractor filing a
claim for additional construction costs (see Section VII.
Projects may not be considered administratively complete
until the claim is resolved either through negotiation,
824
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arbitration, or litigation. The reviewing agency is to
make every effort to assist the grantee in resolving
disputes and may, at the grantee's request, provide tech-
nical or legal assistance. However, the primary respon-
sibility for resolving disputes rests with th® grantee.
Costs associated with defense against contractor claims
may be allowable for grant participation provided certain
limitations are satisfied (see Sectio-n IX F.4, Paragraphs
A.1.f and A.2.c).
The reviewing agency is to insure that unresolved
disputes are settled as quickly and efficiently as possible.
Re: 40 CFR 35.2214, 35.2350
7. Continuing Engineering Services
A grantee which was awarded a Step 2+3 or a Step 3 grant
on or after December 29, 1981, is required to retain the
engineering firm which was principally r«sponsible for pro-
viding engineering services during construction to also
provide engineering services during the first year after
initiation of operation (see Section VII.I.1). The project
may not be considered administratively costplete until the
grantee affirmatively certifies, after on« yetr of operation,
that the project is meeting its performance standards (see
Section VII.I.2). During the first year fcf operation, the
engineer will submit invoices and the grantee will prepare
payment requests in the routine »anner (eee Section IX.B.2.b).
However, the cut-off date should have already been established
as the date at the end of the first year of operation (see
Item 2 above). The final grant payment, assuming affirmative
certification by the grantee, will be at the conclusion
of the project performance period.
Re: 40 CFR 35.2216, 35.2218
8. Project Officer Certification
Prior to requesting a final audit, the reviewing agency
is to prepare a project officer cert ification» This
certification is to accompany the request for a final audit,
and in essence confirm that:
825
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- funds have not been used for unnecessary
or unreasonable aesthetic features;
- the flow at the treatment facilities at
the time of final inspection was 75 per-
cent or more of the anticipated flow on
the date of initiation of operation;
- no facilities constructed with grant funds
are unused, abandoned, or inoperable; and
- the project files are complete and contain
all relevant documents necessary for the
conduct of an audit.
Detailed information on the four primary subjects of the
project officer certification is provided below:
a. Aesthetic Features
Aesthetic features must be reasonable and
necessary in order to be allowable for grant
participation (see Section IX.F.4, Paragraph
B.2.a). A determination of the allowability
of aesthetic features should have been made
during the review of plans and specifications
(see Section V.C.2.u). If aesthetic features
which were not included in the approved plans,
specifications, and change orders are dis-
covered during the final inspection, they will
be considered unallowable unless otherwise
justified.
Re: 40 CFR Part 35, Subpart I, Appendix A,
Paragraph B.2.a
b. Flow Level
Before requesting a final audit, the reviewing
agency is to determine whether the treatment
''f aci'l it'ies ¦¦( including sewers) are receiving 75
percent or more of the estimated initial flow.
If the flow is less than 75 percent, the
reviewing agency is to determine the cause, and
in preparing the project officer certification,
note the exception to the flow level.
826
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c. Abandoned, Unused, or Inoperable
Fac i1i t ies
For purposes of project officer certifica-
tion, this section deals with observations at
the time of final inspection. On-going State
programs are required to address abandoned,
unused, or inoperable facilities which occur
after a project is closed out but before the
end of the project's useful life.
If any equipment or facilities are abandoned,
unused, or inoperable at the time of final inspection,
the project officer is to prepare an explanation of
the circumstances, which is to be attached to the
project officer certification and forwarded to OIG
along with the request for an audit. In such cases,
grantees are required to seek redress from other
parties (e.g., design engineer, construction con-
tractor, equipment supplier, etc.) responsible for
such conditions, and to make every effort to make
the facilities useful and operational. Unless justi-
fied by the grantee, any abandoned, unused, or inoper-
able equipment will be considered unallowable for
grant participation.
Re: 40 CFR 35.2214
d. Project Files
Project files must be organized to facilitate the
location of documents during the project audit, and
must contain adequate documentation to support grantee
procurement actions and all project costs which have
been claimed for grant participation.
9. File Retention
Grantees and their contractors must maintain their pro-
ject files for a period of three years after final grant
payment (i.e., the payment which.is made after affirmative
certification by the grantee that the project meets its
performance standards).
827
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Reviewing agencies will maintain project files for a
period of three years after project closeout. At the con-
clusion of the three year period, project files are to be
stored in the U.S. General Services Administration (GSA)
Regional Federal Records Center in accordance with EPA/GSA
federal records management requirements. Since the con-
struction grants regulations now prohibit the use of grant
funds for the replacement of a facility during its design
life if the facility was constructed with grant assistance,
it will be necessary to store at least part of the project
file for the design life of the facility (normally 20 years).
EPA Regional Offices should establish a records tracking
system which will facilitate the retrieval and restorage of
project files.
Re: For grants awarded prior to October 1, 1983,
40 CFR 30.805; for grants awarded after
September 30, 1983, 40 CFR 30.501
1. AUDIT PROCESS
Purpose:
Review grantee records, and if necessary those of its contrac-
ors, to determine whether the costs claimed under the EPA grant
ire reasonable, allowable, and allocable to the grant project;
'hether the management controls exercised by the grantee were ade-
[uate to insure that costs claimed are allowable; and whether the
irantee has complied with all EPA regulations (including the appli-
cable procurement regulations) and grant conditions.
Discussion:
All completed construction grants projects are subject to a
inal audit. Audits may be conducted by EPA, by private sector or
Itate auditors under contract to EPA, or by another cognizant Federal
igency. Audits are generally performed after construction, and
phere Step 1 and Step 2 grants have been awarded, will include the
¦eview of records and costs for all three steps. Audits may also be
>erformed at the conclusion of a Step 1 or Step 2 grant, but
lenerally only in those instances where the project is unlikely to
>e awarded a Step 3 grant in the near future, or when unusual circum-
itances warrant an immediate audit.
828
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The decision to conduct a final audit of the grantee's
records will depend on the size and complexity of the project,
and the amount of grant funds involved. (Audits are not usually
conducted where claimed grant funds are $250,000 or less, unless
information available to the reviewing agency suggests that a
final audit is warranted.)
Historically, two problems arise during audits. The first
problem concerns the identification of the regulations and policies
which were in effect on the date of grant award, since audits may
take place anywhere from 5 to 10 years after the initial grant award.
In addition, a project which has progressed through the entire three
step grant process may have different regulations and policies
applicable to each of the three steps. In the case of phased or
segmented projects, even more grants will be involved. To identify
the regulations and policies in effect on the date of grant award,
EPA has published the "Regulation and Policy Matrix - A Guide to the
Rules Governing Grants Awarded under the Construction Grants Program,"
December 1983.
The "Regulation and Policy Matrix" traces the publication of all
EPA regulations which have a bearing on procurement and allowable
costs, from July 1, 1971 through September 30, 1983, and will be up-
dated periodically. The publication also includes matrices for all
EPA policy memoranda issued since January 1, 1970, as well as the
two earlier editions of the Handbook of Procedures, the decisions of
the Audit Resolution Board, and the decisions of the Board of
Assistance Appeals. Wherever a question arises concerning regulations
or policies in effect on the date of grant award, the "Regulation and
Policy Matrix" should be consulted.
The second problem concerns the decision as to whether a particu-
lar cost is eligible or allowable under the construction grants pro-
gram. EPA regulations, policy memoranda, and the Handbook of
Procedures have, over the years, provided guidance for decisions con-
cerning the most common allowable costs. However, by the very nature
and sheer number of construction grant projects, it is not possible
to anticipate all possible situations concerning allowable costs.
Therefore, in those "gray" areas where such costs are not clearly
defined in the applicable regulations or EPA policy documents,
construction grants personnel are responsible for making such
decisions. These decisions, and the rationale behind them, should be
documented in the project files, to prevent misunderstandings at the
time of audit.
Such documentation should explain the rationale for the decision
and cite the specific regulation or policy which provided the broad
or similar framework for the decision. Similarly, if an auditor
takes exception to a cost not otherwise clearly defined in the
829
-------
gulations or EPA policies as allowable, such exception should
so cite the specific regulation or policy which provides the
oad or similar framework for the exception. By the proper use
the "Regulation and Policy Matrix" to identify applicable regu-
tions and policies, and by the proper documentation and citation
specific regulations or policies, projects can be completed and
osed out with a minimum of delay.
Final EPA decisions concerning allowable costs may be decided
¦ the Audit Resolution Board if a difference of opinion cannot be
solved between OIG and the construction grants program.
The procedures below outline the major activities of the auditors,
antees, and construction grants staff in the audit process.
Procedures:
1. Request for Final Audit
After preparation of the project officer certifica-
tion (see Section D.8 above), the reviewing agency will
request an audit (or a determination that the project can
be closed out without an audit) from OIG. This is the
last action for administratively completing a project,
and is requested when all of the following conditions
have been met:
a. Construction is complete (see Section D.a above).
b. All administrative requirements have been
satisfied (see Section D.b above).
c. The final inspection has been performed (see
Section D.l above).
d. The plan of operation has been implemented, or
for projects awarded after December 29, 1981,
the project performance certification has been
received (see Section VII.I.2.a).
e. The "cut-off" letter has been issued to the
grantee (see Section D.2 above).
f. The final grant payment has been requested
(see Section IX.B.7).
830
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The criteria for selecting projects to be audited
(and for determining which projects can be closed out
without an audit) are discussed in Section B.6 above.
2. Aud i t
Unless the OIG Divisional Office has determined that
the project can be closed out without an audit, the
cognizant audit agency will conduct an onsite audit of
the grantee's records, followed by the preparation of a
draft audit report. At the completion of the onsite
audit, the auditor will conduct an exit interview with
the grantee, and will provide an opportunity for the
grantee to furnish additional documentation supporting
any costs which have been questioned or set aside by the
auditor (i.e., identified as unallowable for grant partic-
ipation) .
3. Draft Audit Report
The auditor will prepare a draft audit report for dis-
tribution to both the reviewing agency and the grantee.
Audit exceptions are to cite the specific regulation or
policy which forms the basis for the exception.
4. Final Audit Report
After evaluation of all comments received on the draft
audit report, the auditor will prepare the final audit
report for distribution to the grantee and the reviewing
agency. In the absence of an appeal by the grantee, the
project is then closed out, and the files are retained by
the reviewing agency and subsequently shipped to the
Federal Records Center (see Section D.9 above).
5. Resolution of Audit Exceptions
Audit exceptions, if any, are to be resolved between the
reviewing agency and the auditors at the lowest possible
level. The grantee should be involved in the resolution
process, since the grantee's financial interests are involved.
Decisions concerning the allowability of costs wfyich are not
clearly defined in regulation or policy (i.e., fall into the
"gray" area) should have been previously made and documented
by the construction grants staff. Unresolved issues are
831
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referred to the EPA Regional Administrator (or to EPA
Headquarters in the case of Headquarters awarded grants).
Where broad agency policy issues are involved, OIG may
request a review by the Audit Resolution Board.
6. Review of Final Determination
If the grantee disagrees with the decision of the
reviewing agency (other than a decision by the Audit
Resolution Board), it may file a request for review of
the decision in accordance with 40 CFR Part 30,
Subpart L.
(Note: The procedures in Subpart L are applicable
after September 30, 1983, regardless of when EPA awarded
grant assistance.)
7. Recovery of Funds
When the audit reveals an overpayment of grant funds,
and where this opinion is sustained in an appeal or
other proceedings, the grantee is required to refund the
amount of overpayment to the U.S. Treasury. The reviewing
agency bears the primary responsibility for the recovery
of the funds. Failure by the grantee to make payment
within 30 days after receipt of the final determination
will require the payment of interest on the unpaid debt.
Re: For grants awarded prior to October 1, 1983,
40 CFR 30.815; for grants awarded after
September 30, 1983, 40 CFR 30.802
832
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CHAPTER IX
FINANCIAL CONSIDERATIONS
A. INTRODUCTION
B. PAYMENTS
C. GRANT INCREASES AND DECREASES
D. DISPUTES
E. DEVIATIONS
F. DETERMINATION OF ALLOWABLE COSTS
901
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A. INTRODUCTION
This chapter discusses financial considerations in the construc-
tion grants program, including disputes and deviations, which usuall
arise with regard to financial issues.
Section B, Payments, discusses outlay schedules, payment request
forms, payments, payment limitations, retainage, and other items
related to grant payments.
Section C, Grant Increases and Decreases, describes procedures
for increasing ana decreasing grants, and the circumstances under
which they should be used.
Section D, Disputes, briefly describes the dispute resolution
procedures available to a grant applicant or grantee when a dis-
agreement occurs with the reviewing agency.
Section E, Dev iat ions, briefly describes procedures for re-
questing and reviewing deviations from the grant regulations.
Section F, Determination of Allowable Costs, describes the
Federal cost principles and their applicability, and reproduces
the EPA regulations on the determination of allowable costs (40 CFR
Part 35, Subpart I, Appendix A), supplemented by clarification and
examples for specific cost items.
B. PAYMENTS
Purpose:
Insure that grantees receive reimbursement for project expendi-
tures as promptly as possible, based on the receipt of adequately
documented payment requests from the grantee, fulfillment of
grant conditions, and satisfaction of payment limitations.
Discussion:
With the exception of certain eligible costs for relocation
assistance (see Item 8.b below) and grants which are made only to
States (see Items 8.c and 8.d below), EPA payments to grantees are
made only on a reimbursement basis (i.e., payments are made only
after costs have been incurred). The amount of the Federal payment
is a percentage (i.e., the EPA grant share) of those eligible proje
costs which the grantee has incurred, and is currently and legally
obligated to pay.
903
"Preceding page blank i
-------
It is the responsibility of the reviewing agency to insure that
each grantee, prior to incurring eligible costs, is apprised of the
payment procedures and of the documents needed to support payment
requests.
Review Procedures:
Payment requests are to be promptly reviewed and processed in
accordance with the procedures in the State/EPA delegation agree-
ment. Typical items to be considered during payment processing are
described below:
1. Outlay Schedules
Grantees are to prepare outlay schedules and update
them as necessary, in accordance with State or EPA Regional
Office requirements.
2. Payment Requests
Payment requests are to be made using the proper form
(see Items a and b below), and are to be accompanied by
the supporting documentation required by the EPA Regional
Office (e.g., engineer's certification of work in place,
invoices from contractors and suppliers, etc).
a. Standard Form 270
Payment requests for grants to States for
advances of allowance (see Sections II.E.4.e,
III.E, and VI.K, and Item 8.b below), State
management assistance (see Sections I.F and
II.E.4.a, and item 8.c below), and water
quality management (WQH) planning (see
Sections II.C.4 and II.E.4.d, and item 8.c
below), are to be made using Standard Form
270 (SF-270). Grantees (i.e., States) are
to submit the SF-270 to the EPA Regional
Office, which will review it to insure that:
i. the form has been properly completed,
and .
ii. the cof&putations are correct.
Payment to the State may be by letter of
credit, payment in advance, or reimbursement.
904
-------
Payments may not be assigned to a third party,
except that payments under a grant for advances
of allowance may be assigned to the small com-
munities which are to receive the advances
(see Item 8.c below).
Re: 40 CFR 30.400(b), 30.405, 35.2300(e)(1)
b. Standard Form 271
For all grants except those discussed in Item a
above, payment requests are to be made using
Standard Form 271 (SF-271). Routine payment re-
quests are reviewed to insure that:
i. the form has been properly completed,
ii. the computations are correct,
iii. all costs are eligible and allowable
for grant participation,
iv. only costs for approved change orders
are included,
v. costs are displayed by category
corresponding to the grant agreement,
and
vi. the amount requested is consistent with
the outlay schedule (see Item 1 above).
Specific grant payment processing procedures vary
from Region to Region, and should be detailed in
the State/EPA delegation agreements. In some
Regions, grantees submit the SF-271 simultaneously
to EPA's Regional Financial Management Office (FMO)
and to the State reviewing agency which, when de-
ficiencies or inaccuracies are found, acts to insure
that the next payment will reflect the necessary
correction. In other Regions, the SF-271 is sub-
mitted first to the State agency, where it receives
a priority review, and immediately thereafter, is
sent to the FMO. In either case, after processing
the SF-271, the FMO instructs the appropriate U.S.
Department of the Treasury disbursing office to
issue a check to the grantee in the amount approved
by the FMO. Payments may not be assigned to a third
party (e.g., engineer, construction contractor, equi-
valent supplier, bond or note holder, etc.).
905
-------
Grantees are expected to submit payment requests
no more than once a month, and routine payments
are expected to be processed without delay.
Certain requests for payment, however, which
occur at critical points in a project's progress,
require a program review before funds are dis-
bursed. Generally, these payments are:
- the initial request, to insure that the
allowance and the supporting documentation
are correct;
- the 50 and 90 percent grant payment requests,
which are governed by statutory requirements
for a plan of operation and an operation and
maintenance (O&M) manual; and
- the final payment request.
In addition, payment request issues may arise during
construction which would preclude the reviewing
agency from making prompt payment because:
- unallowable or ineligible items are included
in the request,
- project deficiencies exist,
- the grantee has failed to comply with Federal
or State reporting requirements, or
- the grantee has failed to comply with grant
• conditions or regulatory requirements.
In these instances, the grantee will be notified of
the deficiency, and either the State or the FMO will:
- deduct the unallowable or ineligible items,
- insure that the sums in question are excluded
from subsequent payment requests,
- withhold an amount sufficient to insure
compliance or correction of the deficiency, or
- disapprove the entire payment.
To further insure that grantee payment requests are in
keeping with construction progress, copies of these
requests, along with the engineer's certification of
906
-------
work in place, invoices from contractors and
suppliers, copies of approved change orders,
substantiation of force account work (see
Section VI.E.5) and administrative costs, etc.,
are to be made available to, and reviewed by,
construction field inspectors (see Section VII.G).
Field inspector observations, based on these
reviews, should be made available to the project
reviewers, so that they can better assess future
payment requests. This information should also
be made available to those responsible for devel-
oping State and Regional outlay projections.
Where grant payments include funds from reserves
(e.g., for innovative or alternative (I/A)
technologies, small community assistance, etc.),
State and EPA Regional Office procedures are to
insure proper accounting for these funds.
Re: 40 CFR 30.400(b)(3), 30.405, 35.2300
3. Initial Payments
Initial payment requests may include:
a. Preaward Costs
Approved preaward costs allowable for grant
participation (see Section VI.D.15).
b. Estimated Allowance
The Federal share of the estimated allowance for
facilities planning and/or design according to
the following schedule:
i. Step 2+3 Grants
If the grantee did not receive a
facilities planning (Step 1) grant,
30 percent of the estimated allowance
immediately after grant award, half
907
-------
of the remaining estimated
(or re-estimated) allowance when
design is 50 percent complete,
and the remainder of the actua1
allowance after award of all
prime contracts, approval of
all force account work in lieu of
awarding construction contracts,
and acquisition of all eligible
land.
If the grantee received a facil-
ities planning grant, 50 percent
of the estimated allowance when the
design is 50 percent complete, and
the remainder of the actual allow-
ance after award of all prime con-
tracts, approval of all force
account work in lieu of awarding
construction contracts, and
acquisition of all eligible land.
Re: 40 CFR Part 35, Subpart I,
Appendix B, Paragraph 9
i i. Step 3 Grants
50 percent of the estimated allowance
immediately after grant award, and the
remainder of the actual allowance after
award of all prime construction con-
racts, approval of all force account
work in lieu of awarding construction
contracts, and acquisition of all
eligible land.
Re: 40 CFR Part 35, Subpart I, Appendix B,
Paragraph 8
4. Reta inage
Payment requests are to include only costs which the
grantee is currently and legally obligated to pay. Therefore
if a construction contract allows the grantee to retain a
portion of its contractor's payment requests, the Federal
payment request is to reflect the same retainage policy (i.e.
if a contractor bills the grantee for $10,000 worth of work i
place, and the grantee is allowed by the contract to retain
10 percent, or $1,000, of the contractor's payment request,
908
-------
then the payment request must be based on the $9,000
legally required to be paid by the grantee.
Re: 40 CFR 30.400(b)(3), 35.2300
5. Limitations
Grant payments are limited by EPA regulations to the
Federal share of:
a. 50 percent of the total eligible project
costs, unless the final plan of operation
has been approved;
b. 90 percent of the total eligible project
cost, unless the O&M manual has been
approved;
c. for a phased or segmented project, 90
percent of the total eligible cost for
the entire treatment works (i.e., for
the sum of all phases or segments),
unless the O&M manual has been approved;
d. for a project in which a component has
been placed in operation before completion
of the entire project, no additional pay-
ment, unless the O&M manual for the
operating component has been approved; and
e. the allowable costs incurred within the
budget period for the project.
Re: 40 CFR 30.200, 35.2206
6. Final Building Payment
The final building payment is based on the grantee's
submission of the final building payment request. This is
not a final grant payment, since the grantee is required
to retain an engineer during the project's first year of
operation (see Section VII.I.1, and Item 7 below). A final
onsite inspection of the project by the reviewing agency
should be made before the final building payment is made
(see Sections VII.G.5 and VIII.D.l). The payment request
should be accompanied by the vouchers and cost summaries
909
-------
required by the reviewing agency (see Section VIII.D.3),
releases from the grantee and its contractors, and doc-
ments indicating that all grant conditions and limita-
tions, including the adoption and implementation of the
user charge (UC) system, and sewer use ordinance (SUO),
have been complied with (see Section VIII.D.4 for a
further discussion of the final building payment request).
7. Final Grant Payment
The final grant payment is made after the project's
first year of operation, provided that the grantee affir-
matively certifies that the project meets its project per-
formance standards (see Section VII.I.2). Payments made
during the first year of operation will be primarily for
engineering services performed during that period, and may
be made no more frequently than monthly.
8. Special Purpose Grants
a. Land Acquisition Grants
If a grant is awarded solely for the
acquisition of eligible land, grant pay-
ments are not subject to the limitations
listed in Items 5 and 6 above for a UC
system, SUO, plan of operation, or O&M
manual.
Re: 40 CFR 35.2260
b. Relocation Assistance Grants
Advance payment, as distinct from a
reimbursement payment, may be made for
projects which involve relocation
assistance, but only for the relocation
assistance costs.
Re: 40 CFR 4.502(c), 40 CFR 35.2300(d)
c. Grants to States for Advances of Allowance
For grants to States for advances of allow-
ance (see Sections II.E.4.e, III.E, and VI.K),
payments may be made to the State by letter
of credit, payment in advance, or reimbursement.
910
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Instead of receiving payments, however, the
State can request EPA to assign payment of
each advance directly to the small community
for which the State has approved an advance.
In this latter case, the following procedures
must be followed by the State:
i. a separate SF-270 must be used
for each community's advance;
ii. the community's name and mailing
address must be shown as the
payee on the SF-270;
iii. the State's accounting system
must treat the advance on an
accrua1, rather than a cash basis;
iv. the State must execute an agreement
with each community, authorizing
the State to request EPA to assign
payment directly to the community,
and must provide a copy of the
agreement to EPA;
v. the State must inform the community,
in writing, that the advance has
been approved; and
vi. the State must enter the approved
advance in its accounting system
as an obiigat ion of grant funds,
prior to submitting the SF-270,
requesting reimbursement from EPA
for the approved advance.
Re: 40 CFR 30.400(b), 30.405, 35.2025(b),
35.2300(e)
d. Other Grants to States
For State management assistance grants (see
Sections I.F and II.E.4.a) and State WQM plan-
ning grants (see Sections II.C.4 and II.E.4,d),
payments may be made to the State by letter of
credit, payment in advance, or reimbursement.
Payments may not be assigned to a third party.
Re: 40 CFR 30.400(b), 30.405
911
-------
9. Grant Overpayment
Where a grant has been overpaid, the grantee is required
to repay the United States Treasury within 30 days of EPA's
final decision that an overpayment has been made. After the
30 day period, EPA may charge interest on outstanding balances.
Re: 40 CFR 30.400(a), 30.802
10. Grant Related Income
All income received by a grantee as a result of its conduct
of the project (e.g., interest on grant funds received from EPA
but not paid to contractors, proceeds from the sale of bidding
documents, bid bond forfeitures (see Section F.4, Paragraph A.3.b
below), refunds, rebates, credits, discounts for prompt payment,
reimbursements, etc.) must be returned to the project account.
However, liquidated damages collected from a contractor are not
considered grant related income (see Section F.4, Paragraph A.3.a
below).
Normally, the grantee is not required to make a cash payment,
but rather to report the amount of grant related income in the
space provided on the SF-270 or SF-271. However, after the final
grant payment has been requested, the Federal share of any
remaining grant related income must be paid to the United states
Treasury, and credited to the State's current allotment.
An exception to this requirement is that interest earned by
States and American Indian Tribes is not considered grant related
income. Also, income which results from the operat ion of a
wastewater treatment system is not considered grant related in-
come, but is required to be used to offset operation, maintenance,
and replacement (OM&R) costs (see Section V.E).
Re: 40 CFR 30.525(b) through (d), 35.2300(b)
11. Grants Information and Control System
Each payment made to a grantee is to be entered into the
Grants Information and Control System (GICS) by the reviewing
agency which, under the State/EPA delegation agreement, has this
responsibility (see Section III.C.3).
912
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GRANT INCREASES AND DECREASES
Increases
a. Step 2+3 and Step 3 Grants
Step 2+3 and Step 3 grant increase requests most
often occur because:
- construction bids exceed the estimated
building costs,
- quantities for unit price items ex-
ceed those estimated in the bidding
documents, or
- change orders are required (see
Section VII.H.1).
Very often, minor increases in the cost of
building the project can be accommodated by the
construction contingency allowance. However,
where the contingency allowance is insufficient
to cover cost increases, and where the request
for a grant increase is justified and approved,
a grant increase may be made.
A grant increase can be approved only if:
i. the grantee's justification for the
increase is acceptable under Federal
regulat ions,
ii. the costs are allowable for grant
part ic ipat ion,
iii. the costs are for work which is with-
in the existing scope of work of the
project (see the "Discussion" portion
of Section VII.H),
iv. the increase can be funded from the
State's allotment, and
v. the State has certified the increase
for grant assistance.
913
-------
(Note; EPA has proposed a 5 percent cap on all grant
increases. Before processing any grant increase, the
project reviewer is to determine from EPA the current
status of this proposal.)
Re: 49 FR 6113 (February 17, 1984)
b. Step 1 and Step 2 Grants
Grant increases for Step 1 and Step 2 projects
are discussed in detail in Sections VIII.B.l.d
and VIII.B.2.c. As an alternative to a grant in-
crease for a project which is unlikely to receive
a Step 2+3 or a Step 3 grant, a reduction of the
current work effort may be preferable. Reductions
of work effort for Step 1 and Step 2 grants are
discussed in detail in Sections VIII.B.l.e and
VIII.B.2.d.
c. Award Procedures
Approval of a grant increase requires prepara-
tion of a formal grant amendment. Each State has
internal procedures which are to be followed in
processing the grant amendment. Grant increases
may only be awarded by EPA, and are subject to
the requirement for advance Congressional notifi-
cation. Refer to Section VI.M for a detailed
discussion of grant award procedures.
2. Decreases
Grant decreases most often occur when construction bids are
less than the estimated contract costs included in the grant
application. Grant decreases may also occur at the completion
of any project, including Step 1 and Step 2 grants. In most
instances, a request for a grant decrease is not made by the
grantee, but is initiated by the reviewing agency. Project
reviewers are to be alert for legitimate opportunities to reduce
grants, since recovered funds, after being returned to EPA, are
realloted to the same State for funding other projects on the
State's project priority list. Grant decreases require the pre-
paration of a formal grant amendment. Refer to Section VI.M for
a detailed discussion of grant award procedures.
914
-------
D. DISPUTES
In the construction grants program, a dispute is a disagree-
ment between a grant applicant or grantee and the reviewing agency
(either the State or EPA) concerning a decision by the reviewing
agency with regard to a grant requirement. Disputes are different
from protests or appeals of protests (see Section VII.D.6) and
claims (see Section VII.H.2), both of which arise between grantees
and their contractors and potential contractors.
Disputes which concern a State action are to be submitted to the
State, and reviewed by the State in accordance with its own pro-
cedures. The State will:
- review its initial decision,
- issue a final decision, labeled as such, and
- notify the applicant or grantee of its right to
request a review by the EPA Regional Office of the
State's final decision.
If the dispute involves an initial decision by EPA, it is to be
submitted directly to the EPA Regional Office (or for Headquarters-
awarded grants, to EPA Headquarters) as described below.
The formalized procedure for resolving disputes at the EPA
Regional Office level involves the designation of a Regional dis-
putes decision official (DDO), who reviews the grant applicant's or
grantee's request and issues a final decision. If the DDO is a
person other than the Regional Administrator (RA), the grant appli-
cant or grantee may request that the RA review the DDO's final
decision. If the DDO is the RA, the grant applicant or grantee may
request that the RA reconsider his final decision.
Where a State has established a disputes resolution procedure
which the EPA Regional Office determines to be equivalent to that
provided by the DDO, the State's final decision will be considered
equivalent to a DDO's final decision, and the grant applicant or
grantee will only be entitled to one review at the Regional level
(i.e., a review by the RA). Otherwise, the request for review of
a State's final decision should be submitted to the DDO.
If the grant applicant or grantee requests that the RA review
the State's final decision or reconsider the DDO's final decision,
the request must include:
- a copy of the final decision,
- a statement of the amount in dispute,
915
-------
- a description of the issues involved, and
- the grant applicant's or grantee's objection to
the final decision.
When the request for review or reconsideration is filed, the grant
ipplicant or grantee is entitled to:
- be represented by counsel,
- submit documentary evidence and briefs,
- participate in an informal conference with EPA
officials, and
- receive a written decision from the RA.
The RA will review the State's or the DDO's final decision, or
reconsider his own final decision, and issue a determination. if
:he grant applicant or grantee is dissatisfied with the RA's
letermination, it may file a petition for a discretionary review by
:he Assistant Administrator for Water at EPA Headquarters. The
petition must include a copy of the RA's determination, and a concise
statement of the grant applicant's or grantee's reasons for believing
:hat the determination is erroneous. The Assistant Administrator for
iater, upon examination of the dispute, will decide whether or not to
review the RA's determination. If the decision is not to review, the
assistant Administrator for Water will advise the grant applicant or
jrantee that the RA's determination remains the final EPA action.
:f the Assistant Administrator for Water decides to review the RA's
determination, the review will generally be limited to the written
record, although the grant applicant or grantee may be allowed to
submit briefs and/or to attend an informal conference. The decision
>f the Assistant Administrator for Water will be EPA's final action.
Several EPA decisions are exempt from the disputes process. Grant
ipplicants or grantees may not appeal EPA's decisions concerning:
1. disapprovals of deviations from regulatory require-
ments (see Section E below);
2. bid protest decisions made under 40 CFR Part 33,
Subpart G (see Section VII.D.6);
3. National Environmental Policy Act (NEPA) decisions
made under 40 CFR Part 6 (see Section IV.D.1);
916
-------
4. advanced wastewater treatment decisions made by
the EPA Administrator (see Section IV.E.l); and
5. decisions of the EPA Audit Resolution Board
(see Section VIII.E.5).
Re: 40 CFR Part 30, Subpart L; 40 CFR 35.3030
E. DEVIATIONS
A grant applicant, grantee, State agency, EPA Regional Office,
or EPA program office may request an exception to the regulations
(i.e., a deviation). Deviation requests are considered on a case-
by-case basis, although deviations will not be issued from those
regulations which implement statutory or executive order require-
ments. Deviation requests from a grant applicant, grantee, or State
agency are initially submitted to the EPA Regional Office, which in
turn forwards the request to the Director, Grants Administration
Division, at EPA Headquarters, with a recommendation, supported by
detailed reasons, for approval or disapproval. To facilitate the
concurrence process (see below), a copy of the entire deviation
request package should be sent to the Municipal Construction Division
at EPA Headquarters.
The deviation request is to include the following information:
1. the grantee's name, project number, date of grant
award, and grant amount;
2. identification of the section of the regulations from
which the deviation is requested;
3. a complete description of what the deviation will
accomplish and a justification of why the deviation
is necessary; and
4. a statement of whether the same or a similar deviation
has been previously requested, and if so, an explanation
of why it was requested and the outcome of the request.
The Director, Grants Administration Division, approves or
disapproves the deviation request after consultation with, and
concurrence by, the Director, Municipal Construction Division.
Deviations may be requested before or after grant award, although
approval before grant award does not guarantee an award. Decisions
on deviation requests may not be appealed under the disputes pro-
visions of 40 CFR Part 30, Subpart L (see Section D above).
Re: 40 CFR Part 30, Subpart J
917
-------
F. DETERMINATION OF ALLOWABLE COSTS
1. General
In the process of reviewing grant applications and payment
requests, the project reviewer is confronted with having to make
decisions concerning the eligibility or allowability of project
costs. The terms "eligible" and "allowable" are often used inter-
changeably by regulatory officials, grantees, and engineers when
discussing whether an incurred cost may be reimbursed under the
construction grants program. Although technically there is a
difference between these terms as defined below, their synonymous
use will not influence the outcome of a cost determination.
"Eligible costs" were defined in earlier regulations as, "those
costs in which Federal participation is authorized pursuant to
applicable statute" (40 CFR 30.135-8, prior to October 1, 1983;
current regulations do not contain a definition of eligible costs).
Allowable costs were and are defined as, "those project costs that
are: eligible, reasonable, necessary, and allocable to the project;
permitted by the appropriate Federal cost principles; and approved
by EPA in the assistance agreement" (40 CFR 30.200). An example
best illustrates the difference between the two terms.
Building of treatment works is authorized under Title II of the
Clean Water Act (CWA), and the costs are therefore eligible for
grant assistance. Building of highways, airports, dams, water
supply projects, etc. are not authorized in the CWA, and are there-
fore ineligible for grant assistance. Even within a generic
eligible category of projects (e.g., building of treatment works),
some subcategories associated with the eligible project may be
specifically authorized by statute and therefore described as an
eligible cost. For example, the CWA authorizes (i.e., makes eligible)
the cost of acquiring land which will be an integral part of the
treatment process. Therefore, where items of cost are specifically
cited in an applicable statute, the term "eligible cost" is used.
Within a generic eligible category of projects, costs may be
allowable or unallowable for grant participation. Using the same
example, engineering and legal costs associated with the acquisition
of eligible land are allowable for grant participation. These same
costs, if incurred for the acquisition of ineligible land (e.g.,
land on which a conventional technology treatment plant is built),
are unallowable for grant participation.
918
-------
2. Cost Principles
Allowable and unallowable costs are generally defined in two
ways: by cost principles applicable to all Federal agencies, and
by the regulations and policies of the agency responsible for the
implementation of a specific program.
In the case of EPA's construction grants program, two govern-
ment-wide cost principles are used:
- "Cost Principles for State and Local Governments,"
Office of Management and Budget (OMB) Circular A-87,
dated February 1981. These cost principles are used
in determining allowable costs incurred and claimed
by a grantee, but are not applicable to the grantee's
contractors (e.g., engineer, attorney, construction
ma nager , etc ) .
- "Federal Acquisition Regulations" (48 CFR Part 31,
Contract Cost Principles and Procedures), formerly
"Public Contracts and Property Management" (41 CFR
Part 1-15, Contract Cost Principles and Procedures).
These cost principles are applicable to most grantee
subagreements, with the exception of formally
advertised (i.e., competitively bid), fixed price
contracts where price is the primary factor in con-
tract award.
a. Allowability Factors for Government Agencies
OMB Circular A-87 describes factors affecting the
allowability of costs for State, local, and Federally-
recognized Indian tribal governments. In the absence
of guidance for a specific cost item described in Item 4
below, to be allowable under the construction grants
program, costs must meet the following general
criteria:
i. Be necessary and reasonable for the
proper and efficient administration
of the grant project, be allocable
to the project, and not be a general
expense required to carry out the
overall responsibilities of the unit
of government of which the grantee is
a part.
li. Be authorized or not prohibited under
State or local laws or regulations.
919
-------
iii. Conform to any limitations or
exclusions set forth in Federal
cost principles, Federal laws,
or other governing limitations
as to types or amounts of cost
i terns.
iv. Be consistent with policies,
regulations, and procedures that
apply uniformly to both Federally
assisted and other activities of
the unit of government of which
the grantee is a part.
v. Be accorded consistent treatment
through the application of generally
accepted accounting principles appro-
priate to the circumstances.
vi. Not be allocable to, or included as,
a cost of any other Federally
financed program in either the
current or a prior period.
Re: 40 CFR 30.410(a)
b. Allowability Factors for Commercial Organizations
Factors affecting the allowability of costs for
commercial organizations are similar to those in
OMB Circular A-87 (see Item a above). General factors
to be considered in determining the allowability of
individual cost items include:
i. reasonableness;
i i . allocabi1i ty;
iii. standards promulgated by the U.S.
Cost Accounting Standards Board, it
applicable; otherwise, generally
accepted accounting principles and
practices appropriate to the par-
ticular circumstances; and
iv. any limitations or exclusions set
forth in the regulations or other-
wise included in the contract as to
types or amounts of cost items.
920
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The regulations also include a discussion of
selected items of cost beyond the general factors
listed above. Representative items are:
- definition of reasonableness and
allocabi1i ty,
- advertising costs,
- bad debts,
- bidding costs,
- bonding costs,
- entertainment costs,
- fringe benefits,
- job-site expenses,
- field personnel,
- travel costs, and
- bidding and proposal costs.
Re: 40 CFR 30.410(d); 41 CFR Part 1-15;
48 CFR Part 31
c. Allowability Factors for Other Organizations
In rare instances, grantees may enter into
subagreements with other State or local govern-
ment agencies, hospitals, educational institutions,
or other nonprofit institutions. Allowable cost
factors for State and local governments are des-
cribed in Item a above. Allowable cost factors have
also been established for the following organi-
zations :
i. Hospitals
Described in 45 CFR Part 74,
Appendix E.
Re: 40 CFR 30.410(e)
921
-------
Educational Institutions
Described in OMB Circulars A-21
and A-88.
Re: 40 CFR 30.410(b)
i i i. Other Nonprofit Institutions
Described in OMB Circular A-122.
Re: 40 CFR 30.410(c)
d. Classification of Costs
The total allowable cost of a project includes
its allowable direct costs, plus its allocable por-
tion of allowable indirect costs, less applicable
credits (see Section B.10 above). There is no
universal rule for classifying certain costs as
either direct or indirect under every accounting
system (see Section VII.C.7). A cost may be direct
with respect to some specific service or function,
but indirect with respect to the grant or other
ultimate cost objective. For a given project, it
is essential that each cost item be treated con-
sistently , either as a direct or an indirect cost.
i. Direct Costs
Direct costs are those that can be
identified specifically with a
particular cost objective. Typical
direct costs are:
- compensation of employees
(including supervisory and
clerical personnel) for the
time and effort devoted spec-
ifically to the execution of
the funded project;
- cost of materials acquired,
consumed, or expended specifi-
cally for the funded project;
922
-------
- equipment and other approved
capital expenditures;
- other items of expense incurred
specifically to carry out the
grant agreement or the contrac-
tor's subagreement; and
- services furnished specifically
for the funded project by other
agencies, contractors, or sub-
contractors .
Indirect Costs
Indirect costs are those incurred
for a common or joint purpose bene-
fitting more than one cost objective,
and those not readily assignable to
the cost objectives specifically
benefited, without an effort which
is disproportionate to the results
achieved. Typical indirect costs
consist of general overhead items
such as:
- salaries of supervisory and
support personnel not working
directly on the project;
- office space and utilities,
- telephones and other communi-
cation services,
- office supplies and services
not readily assignable to the
project,
- administrative expenses,
- employee and general insurance,
a nd
- contributions to Social Security
and other pension plans.
923
-------
Indirect costs are allowable for grant
participation only if they are determined
on the basis of a negotiated indirect
cost agreement, which is incorporated
by reference in the grant agreement (in
the case of a municipality) or in a sub-
agreement (in the case of a contractor).
In general, the parties to a contract
(other than contractors procured through
competitively bid, fixed price contracts)
will negotiate an indirect cost rate for
the contract or project. The indirect
cost rate will usually be a percentage
of certain specified direct costs. For
example, an engineering firm may negotiate
an indirect cost rate which is 150 percent
of direct labor costs, while another firm's
indirect cost rate may be negotiated as
100 percent of total direct costs.
The negotiated indirect cost rate,
based on an annual budget, is con-
sidered provisional for the firm's up-
coming fiscal year. During negotia-
tions, an indirect cost rate ce i1i ng
(e.g., 160 percent), which may not be
exceeded in any case, may also be es-
tablished. At the conclusion of the
firm's fiscal year, the indirect cost
rate is finalized (based on actual
costs) and where appropriate, adjust-
ments are made to previous invoices
paid during the covered period. The
final indirect cost rate may be higher
(although it may not exceed the ceiling
rate) or lower than the provisional
rate. A new indirect cost rate is then
negotiated for the next fiscal year.
Grantees which claim indirect costs
associated with administrative or
force account work conduct similar
indirect cost rate negotiations with
EPA or another cognizant Federal agency.
924
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At the conclusion of the contract or
project, all costs, including indirect
costs and rates, are subject to audit
and consequent adjustments. It is
essential, therefore, that grantees
and their contractors (other than
contractors procured through competi-
tively bid, fixed price contracts)
develop and retain adequate documenta-
tion to support all costs claimed for
grant assistance (see Section VIII.D.9).
3. Allowable and Unallowable Costs
As described in Item 2 above, allowable and unallowable costs
are defined, within the framework of the applicable cost principles,
by EPA for the construction grants program. Allowable cost deter-
minations are based on regulations promulgated by EPA or on policies
representing sound fiscal and managerial practices.
Regulations implementing the construction grants program prior
to the 1981 CWA amendments (40 CFR Part 35, Subpart E) contained a
partial list of allowable and unallowable costs. The regulations
were supplemented by a listing titled "Allowability of Miscellaneous
Costs" in Chapter VII of the first and second editions of the Hand-
book of Procedures. Projects awarded grants prior to May 12, 1982
are subject to allowability determinations based on the provisions
of 40 CFR Part 35, Subpart E, and the appropriate earlier edition
of the Handbook.
Regulations implementing the 1981 CWA amendments (40 CFR
Part 35, Subpart I) were published in interim final form on
May 12, 1982, and in final form on February 17, 1984. Both sets
of regulations contain "Appendix A - Determination of Allowable
Costs." The February 17, 1984 Appendix A, which is a revised interim
final rule, is included verbatim in Item 4 below, supplemented by
clarification and examples for specific cost items. To distinguish
the exact reproduction of the regulations from the text of the
Handbook, the regulations are typed entirely in capital letters. To
aid the reader in locating specific provisions in the regulations,
underlining has been added to the major subject headings.
When a project reviewer is confronted with an item of cost whose
allowability is uncertain, the reviewer should take the following
actions, in the order in which they are listed:
a. review Item 4 below;
925
-------
b. review 40 CFR Parts 4, 30, and 33 for issues con-
cerning the costs of relocation and land acquisition,
general grant management, and procurement, respectively;
c. review the appropriate cost principles described
in Item 2 above; and
d. refer unresolved issues to the appropriate EPA Regional
Office or to EPA Headquarters for resolution.
40 CFR PART 35, SUBPART I, APPENDIX A, REVISED INTERIM FINAL
RULE - DETERMINATION OF ALLOWABLE COSTS
(a) PURPOSE. THE INFORMATION IN THIS APPENDIX REPRESENTS
AGENCY POLICIES AND PROCEDURES FOR DETERMINING THE
ALLOWABILITY OF PROJECT COSTS BASED ON THE CLEAN WATER
ACT, EPA POLICY, APPROPRIATE FEDERAL COST PRINCIPLES
UNDER PART 30 OF THIS SUBCHAPTER AND REASONABLENESS.
In order for these policies and procedures to be applied,
project costs must be supported by adequate documentation.
It is essential that project reviewers insure that grantees
establish and maintain adequate recordkeeping systems for
this purpose.
(b) APPLICABILITY. THIS COST INFORMATION APPLIES TO GRANT
ASSISTANCE AWARDED ON OR AFTER THE EFFECTIVE DATE OF
THIS REGULATION (FEBRUARY 17, 1984). PROJECT COST
DETERMINATIONS UNDER THIS SUBPART ARE NOT LIMITED TO
THE ITEMS LISTED IN THIS APPENDIX. ADDITIONAL COST
DETERMINATIONS BASED ON APPLICABLE LAW AND REGULATIONS
MUST OF COURSE BE MADE ON A PROJECT-BY-PROJECT BASIS.
THOSE COST ITEMS NOT PREVIOUSLY INCLUDED IN PROGRAM
REQUIREMENTS ARE NOT MANDATORY FOR DECISIONS UNDER
GRANTS AWARDED BEFORE THE EFFECTIVE DATE. THEY ARE
ONLY TO BE USED AS GUIDANCE IN THOSE CASES.
In making allowability determinations, project reviewers,
disputes officials, and auditors should consider the
reasonableness of commitments previously made to grantees
in the absence of pertinent statutes, regulations, or EPA
policy.
COSTS RELATED TO SUBAGREEMENTS
1. ALLOWABLE COSTS RELATED TO SUBAGREEMENTS INCLUDE:
a. THE COSTS OF SUBAGREEMENTS FOR BUILDING THE
PROJECT.
926
-------
The subagreements referred to here are the prime
contracts (including any subcontracts) for building
the project, including the direct purchase of equip-
ment and materials by the grantee.
b. THE COSTS OF COMPLYING WITH THE PROCUREMENT
REQUIREMENTS OF PART 33 OF THIS SUBCHAPTER,
OTHER THAN THE COSTS OF SELF-CERTIFICATION
UNDER §33.110.
To be allowable, the costs of complying with
Part 33 must be incurred after grant award, or
must be approved as a preaward cost (see
Section III.D.3.e). However, preaward costs are
limited to the procurement of major equipment re-
quiring long lead times, field testing, minor
rehabilitation or building, and land acquisition.
Other procurement costs incurred before grant
award are not allowable.
Normally, the only unallowable procurement costs
which the applicant would incur before grant
would be those associated with procuring services
(e.g., engineering services during construction,
legal services, etc). These procurement costs are
generally very small compared with the cost of
building the project or the cost of the services
themselves.
C. THE COST OF LEGAL AND ENGINEERING SERVICES INCURRED
BY GRANTEES IN DECIDING PROCUREMENT PROTESTS AND
DEFENDING THEIR DECISIONS IN PROTEST APPEALS UNDER
SUBPART G OF 40 CFR PART 33.
Services, such as legal and engineering, must be
procured in accordance with 40 CFR Part 33 (see
Sections VII.B, VII.C, VII.E, and VII.F). Normally,
a grantee's existing subagreements will include the
necessary services within the scope of work. How-
ever, the extent of the services may exceed that
originally defined in the existing subagreement, in
which case the grantee will be required to negotiate
a change order (see Section VII.C.8). The cost of the
legal and engineering services are allowable regard-
less of the outcome of the protest, provided there
was not a covert attempt by the grantee to violate or
circumvent EPA's procurement regulations.
927
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d. THE COSTS OF ESTABLISHING OR USING MINORITY AND
WOMEN'S BUSINESS LIAISON SERVICES.
Grantees are required to undertake affirmative
actions concerning the use of small, minority,
women's, and labor surplus area businesses (see
Sections V.C.l.w, VII.C.4 and VII.D.3). The cost
of establishing and using liaison services for
this purpose is allowable tor grant participation,
provided that the services are reasonable and
contribute towards EPA's goal of awarding a fair
share of contracts to such businesses. These ser-
vices may include establishing and maintaining a
list of qualified businesses, interviews with these
firms to establish their qualitications for specific
work, meetings with the grantee's contractors to make
them aware of the capabilities of qualified firms, pre-
paration of necessary reports (e.g., EPA Form 6005-1),
and other reasonable and necessary actions to further
EPA's goal.
e. THE COSTS OF SERVICES INCURRED DURING THE BUILDING
OF A PROJECT TO INSURE THAT IT IS BUILT IN CONFOR-
MANCE WITH THE DESIGN DRAWINGS AND SPECIFICATIONS.
These services are primarily engineering and con-
struction management services provided during the
building of the project, including inspection ser-
vices, materials testing (e.g., concrete strength,
soil compaction, etc.) required by the specifica-
tions, inspecting and expediting the delivery of
equipment and material purchased directly by the
grantee, review of shop drawings and as-built
drawings, etc.
f. THE COSTS (INCLUDING LEGAL, TECHNICAL AND ADMINIS-
TRATIVE COSTS) OF ASSESSING THE MERITS OF OR NEGO-
TIATING THE SETTLEMENT OF A CLAIM BY OR AGAINST A
GRANTEE UNDER A SUBAGREEMENT PROVIDED:
The reasonable costs incurred by a grantee to analyze
a claim and to negotiate a settlement can be charac-
terized as negotiation costs. Those costs which are
incurred prior to either party filing a complaint
with the courts or making a demand for arbitration
will be treated as explained in this paragraph and
its subparagraphs. Those costs which are incurred
928
-------
after the filing will be treated as described in
Paragraph 2.c below (i.e., unallowable unless
all six conditions listed in Paragraph 2.c are
met). The grantee must demonstrate that the
pre-filing costs were incurred as a result of a
timely and meaningful negotiation process and were
not caused by mismanagement.
The negotiation costs, which are allowable to the
extent explained below, are normally included with-
in the scope of the grantee's contract for construc-
tion management services, but the extent of the
services may require a change order (see Section
VII.C.8). If it is necessary to award a new sub-
agreement (e.g., for claim analysis), the require-
ments of 40 CFR Part 33 must be met. These regu-
lations require, among other things, access to
records, cost and pricing data, and separate
negotiation of profit (see Sections VII.B, VII.C,
VII.E, and VII.F).
Unless clearly allocable to allowable or unallowable
cost categories (see Sections F.2 and F.3 above),
negotiation costs are allowable to the same ex-
tent that the project is allowable, provided that:
(1) THE CLAIM ARISES FROM WORK WITHIN THE
SCOPE OF THE GRANT;
See the "Discussion" portion of Section
VII.H.
(2) A FORMAL GRANT AMENDMENT IS EXECUTED
SPECIFICALLY COVERING THE COSTS BE-
FORE THEY ARE INCURRED;
See Section VI.M, and Section C.l
above.
(3) THE COSTS ARE NOT INCURRED TO PREPARE
DOCUMENTATION THAT SHOULD BE PREPARED BY
THF CONTRACTOR TO SUPPORT A CLAIM AGAINST
THE GRANTEE; AND
929
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A claim presented by a contractor should
be complete and adequately documented. It
it is not, it should be returned with in-
structions to correct or augment the doc-
umentation. Costs for preparing documen-
tation or incurring administrative ex-
penses to assess an incomplete claim are
not allowable.
(4) THE REGIONAL ADMINISTRATOR DETERMINES
THAT THERE IS A SIGNIFICANT FEDERAL
INTEREST IN THE ISSUES INVOLVED IN THE
CLAIM.
A claim in this context is a disagree-
ment between the grantee and a con-
tractor which cannot be resolved in the
manner normally employed tor negotiating
change orders (see Section VII.H.2).
There is a signiticant Federal interest in
using a fair and timely negotiation process
to resolve claims, tnereby avoiding
lengthy and costly arbitration and/or
litigation. In general, EPA has a strong
interest in the assessment process used
to evaluate the merits of a claim.
Depending upon the results of the assess-
ment, the Federal interest may change.
The Federal interest will depend upon the
reviewing agency's evaluation of the
merits of the claim and the relative merits
of the parties' stated positions and their
negotiating posture.
Where an unresolved claim appears to be
headed for protracted negotiations or possibly
arbitration or litigation after all reasonable
attempts have been made at resolution, the
grantee must oDtain cost estimates for the
legal and technical services deemed necessary
for such proceedings (see Paragraph 2.c be-
low).
Re: 40 CFR 35.2350
930
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CHANGE ORDERS AND THE COSTS Of MERITORIOUS CON-
TRACTOR CLAIMS FOR INCREASED COSTS UNDER SUB-
AGREEMENTS AS FOLLOWS:
A meritorious contractor claim is a claim which
has been stripped of its spurious or nonvalid
parts (i.e., a meritorious claim is that portion
ot the total claim for whicn the grantee is
legally liable). The allowability of these costs
are determined in accordance with the following
rules:
(1) CHANGE ORDERS AND THE COSTS OF CON-
TRACTOR CLAIMS PROVIDED THE COSTS ARE:
(l) WITHIN THE SCOPE OF THE PROJECT;
See the "Discussion" portion of
Sect ion VII.H.
(ii) NOT CAUSED BY THE GRANTEE'S MIS-
MANAGEMENT; AND
The reviewing agency will eval-
uate the grantee's performance
during project construction,
noting such indications ot
grantee mismanagement as undue
delays in processing change
orders, the lack of adequate
supervision and control ot the
project at all times, etc.
(lii) NOT CAUSED BY THE GRANTEE'S VICAR-
IOUS LIABILITY FOR THE IMPROPER
ACTIONS OF OTHERS.
(2) PROVIDED THE REQUIREMENTS OF PARAGRAPH g(1)
ARE MET, THE FOLLOWING ARE EXAMPLES OF ALLOW-
ABLE CHANGE ORDERS AND CONTRACTOR CLAIM COSTS
(i) BUILDING COSTS RESULTING FROM DEFECTS
IN THE PLANS, DESIGN DRAWINGS AND
SPECIFICATIONS, OR OTHER SUBAGREEMENT
DOCUMENTS ONLY TO THE EXTENT THAT THE
COSTS WOULD HAVE BEEN INCURRED IF THE
SUBAGREEMENT DOCUMENTS ON WHICH THE
BIDS WERE BASED HAD BEEN FRtE OF1 THE
-------
DEFECTS, AND EXCLUDING THE COSTS OF
ANY REWORK, DELAY, ACCELERATION OR
DISRUPTION CAUSED BY SUCH DEFECTS;
Additional costs to correct detects
(i.e., errors and omissions in the
contract documents), and other costs
caused by the impact of such defects
on other portions o£ tne project, are
not allowable (see Section VII.H.l.b).
For example, if the construction
drawings had omitted return sludge
piping from the secondary clarifiers
to the aeration tanks (an actual case),
and the engineer or contractor de-
tected this before building was under-
taken, the cost of a change order to
include the piping would be an allow-
able cost, since:
- the piping would have been in-
cluded in the original bid,
- no additional construction or
rework was required (beyond
what would have been required
if the work had originally
been included), and
- there was no cost impact on
other portions of the project
(since construction work had
not begun).
If this omission had been realized
after substantial construction work
had been completed, and therefore
required rework, delay, or additional
work beyond that which would have been
required by detect free drawings, the
cost of the piping would still have
been allowable, but tne additional
cost of rework or delay would have
been unallowable.
The additional cost is measured as the
difference between the cost which would
have been included in the bid based on
932
-------
defect free drawings and the actual cost
of the change order. For example, if a
concrete tank had been constructed, and was
later found to be at an incorrect elevation
due to an error in the design drawings, and
if it was necessary to demolish the tank and
reconstruct it at the correct elevation, the
entire change order would be unallowable,
except for differences in excavation costs.
If additional excavation was required to
enable the tank to be constructed at the
correct elevation (i.e., the incorrect
elevation was too high), the cost of the
additional excavation would be allowable.
However, if too much excavation had been
undertaken, and fill was required to enable
the tank to be constructed at the correct
elevation (i.e., the incorrect elevation was
too low), both the entire change order and
the cost of the unnecessary excavation would
be unallowable. In these cases, the grantee
is free to seek remedial action from the
responsible parties involved.
Regardless of the allowability or unallow-
ability of construction costs to correct
errors and omissions, in no case are addi-
tional engineering costs allowable, except
for the cost of inspecting allowable con-
struction work, to the extent that such
inspection costs would have been incurred
to inspect the same construction if such
construction had originally been included in
defect free drawings.
Re: 40 CFR 33.1005(b)
(ii) COSTS OF EQUITABLE ADJUSTMENTS UNDER
CLAUSE 4, DIFFERING SITE CONDITIONS,
OF THE MODEL SUBAGREEMENT CLAUSES
REQUIRED UNDER §33.1030 OF THIS SUB-
CHAPTER.
933
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The reviewing agency must determine
tha t:
- an adequate site investigation was
performed,
- the results of the site investiga-
tion were included in the bidding
documents (see Section V.C.2.cc),
- costs were reasonable and necessary,
a nd
- the grantee was timely and efficient
in resolving tne change order to
minimize impact costs (i.e., the
costs caused by the impact of the
differing site conditions on other
portions of tne project).
If these conditions are met, EPA will
participate in both the direct and,
because of the Agency's risk-sharing
policy tor differing site conditions,
the impact costs arising from the
differing site conditions (see
Sect ion VII,H.1.a).
(3) SETTLEMENTS, ARBITRATION AWARDS AND COURT JUDGE-
MENTS WHICH RESOLVE CONTRACTOR CLAIMS SHALL BE
REVIEWED BY THE GRANT AWARD OFFICIAL AND SHALL
BE ALLOWABLE ONLY TO THE EXTENT THAT THEY MEET
THE REQUIREMENTS OF PARAGRAPH g(l), ARE REASON-
ABLE, AND DO NOT ATTEMPT TO PASS ON TO EPA the
COST OF EVENTS THAT WERE THE RESPONSIBILITY
OF THE GRANTEE, THE CONTRACTOR, OR OTHERS.
The grantee has the burden of substantiating
that the costs of settlements, arbitration
awards, and judgements are reasonable and
necessary, and are therefore allowable. This
substantiation includes a showing that tne in-
curred costs were not the result of mismanage-
ment by the grantee or the improper action of
others.
934
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If the claim seeks recovery for the costs of
delay, the grantee must demonstrate that the
delay impacted activities critical to timely
completion (i.e., that the delayed activities
affected the critical path for project comple-
tion ) .
h. THE COSTS OF THE SERVICES OF THE PRIME ENGINEER RE-
QUIRED BY §35.2218 DURING THE FIRST YEAR FOLLOWING
INITIATION OF OPERATION OF THE PROJECT.
The cost and the scope of these services are to be
reasonable and appropriate to the nature, size, and
complexity of the project (see Sections VII.C.5.b,
VII,I.1, and VIII.D.7, and Paragraph l.j below).
i. THE COST OF DEVELOPMENT OF A PLAN OF OPERATION IN-
CLUDING AN OPERATION AND MAINTENANCE MANUAL REQUIRED
BY §35.2106.
The cost of preparing the draft plan of operation,
which is required as part of the grant application
package, is not an allowable cost, but is part of the
preapplication work which is intended to be defrayed,
in part, by the allowance for facilities planning and/or
design (see Section VI.D.8).
j. START-UP SERVICES FOR ONSITE TRAINING OF OPERATING
PERSONNEL IN OPERATION AND CONTROL OF SPECIFIC TREAT-
MENT PROCESSES, LABORATORY PROCEDURES, AND MAINTENANCE
AND RECORDS MANAGEMENT.
While start-up services are an allowable cost, care
must be exercised to insure that there is not a
duplication of services, and therefore costs, bet-
ween start-up services and the engineering services
to be provided during the first year of operation
(see Sections VII.C.5.b, VII.I.1, and VIII.D.7, and
Paragraph l.h above).
2. UNALLOWABLE COSTS RELATED TO SUBAGREEMENTS INCLUDE:
a. THE COSTS OF ARCHITECTURAL OR ENGINEERING SERVICES
OR OTHER SERVICES INCURRED IN PREPARING A FACILITIES
PLAN AND THE DESIGN DRAWINGS AND SPECIFICATIONS FOR
A PROJECT.
935
-------
The costs of these services are part of the work which
is intended to be defrayed, in part, by the allowance for
facilities planning and/or design. Also, if the engineer
has provided services to prepare other documents supporting
the grant application (e.g., UC system, SUO, intermunicipal
agreements, draft plan of operation, value engineering (VE),
etc.), the costs associated with such services are not
allowable, but again are part of the work which is intended
to be defrayed, in part, by the allowance for facilities
planning and/or design (see Section III.D.3.C). However,
planning and design costs are allowable as part of a 100
percent grant for the modification or replacement (M/R) of
a failed I/A technology (see Section VI.J).
b. EXCEPT AS PROVIDED IN l.g ABOVE, ARCHITECTURAL OR
ENGINEERING SERVICES OR OTHER SERVICES NECESSARY TO
CORRECT DEFECTS IN A FACILITIES PLAN, DESIGN DRAWINGS
AND SPECIFICATIONS, OR OTHER SUBAGREEMENT DOCUMENTS.
An example of these unallowable costs would be the
engineering costs to update data in the facilities plan
(e.g., cost estimates, current population for determining
existing needs, etc.), or to evaluate a required alterna-
tive (e.g., I/A technology) which was not properly evalu-
ated in the facilities plan. Another example would be the
engineering costs of redesigning a treatment plant unit
process if the original design did not conform to State
design standards, was impractical, or was excessively
costly. However, revisions to a facilities plan, design
drawings and specifications, or other subaqreement docu-
ments which are necessary because of changes in EPA or
State standards are not considered defects under this sec-
tion, and are therefore allowable (see Section VII.H.l.c).
C. THE COSTS (INCLUDING LEGAL, TECHNICAL AND ADMIN-
ISTRATIVE) OF DEFENDING AGAINST A CONTRACTOR CLAIM
FOR INCREASED COSTS UNDER A SUBAGREEMENT OR OF
PROSECUTING A CLAIM TO ENFORCE ANY SUBAGREEMENT
UNLESS:
Defense and prosecution costs are those costs (in-
cluding legal, technical, and administrative costs)
incurred after any party files a complaint in court
or a demand for arbitration. When such action is
taken, or appears likely to be taken, the grantee
must obtain cost estimates for the legal and tech-
nical services deemed necessary for such proceedings.
936
-------
A description of the claim, the facts and issues
involved, and cost estimates for the proceedings must
be submitted through the State to EPA for approval and
the preparation of a grant amendment. This procedure
allows the State and EPA to review the claim and, where
appropriate, to utilize their experience and expertise
to attempt to obtain a resolution before expensive pro-
ceedings are undertaken. Where it is determined that
there is a significant Federal interest in the claim,
EPA wiii prepare a grant amendment for the reasonable
costs necessary for defense or prosecution, and if
requsted, may provide technical and legal assistance
(see Sections VII.H.3 and VII.H.5, Section C.l above,
and Paragraph l.f above).
40 CFR 35.2350
(1) THE CLAIM ARISES FROM WORK WITHIN THE SCOPE
OF THE GRANT;
See the "Discussion" portion of Section VII.H.
(2) A FORMAL GRANT AMENDMENT IS EXECUTED SPECIFI-
CALLY COVERING THE COSTS BEFORE THEY ARE
INCURRED;
After the grant amendment has been approved
(see Section VI.M, and Section C.l above),
the legal and technical services must be pro-
cured in accordance with EPA's procurement
requirements, as discussed in Section VII.C.8.
(3) THE CLAIM CANNOT BE SETTLED WITHOUT ARBITRA-
TION OR LITIGATION;
In order to determine whether the claim can be
settled without arbitration or litigation, the
reviewing agency should request and review the
following items from the grantee:
(i) Sufficient documentation that timely, good
taith efforts were made to pursue negotia-
tions in order to avoid arbitration or liti-
gation, such as:
937
-------
- a memorandum of negotiation (see EPA
publication, "Management of Construc-
tion Change Orders - A Guide for Grantees,
March 1983, page 10);
- timely analysis of the merits of the
claim by the grantee's construction
engineer (or other consultant) and
legal staff;
- proof of a timely response; and
- a record of attempts made to perform
timely and meaningful negotiations.
(ii) The engineer's independent estimate of the
value of the claim.
(iii) An independent consultant's report, where
appropriate.
(iv) Any other pertinent correspondence between
the contractor and the grantee and/or the
grantee's engineer.
(4) THE CLAIM DOES NOT RESULT FROM THE GRANTEE'S
MISMANAGEMENT;
(5) THE REGIONAL ADMINISTRATOR DETERMINES THAT
THERE IS SIGNIFICANT FEDERAL INTEREST IN THE
ISSUES INVOLVED IN THE CLAIM; AND
See Paragraph l.f above.
(6) IN THE CASE OF DEFENDING AGAINST A CONTRACTOR
CLAIM, THE CLAIM DOES NOT RESULT FROM THE
GRANTEE'S RESPONSIBILITY FOR THE IMPROPER
ACTION OF OTHERS.
BONUS PAYMENTS, NOT LEGALLY REQUIRED, FOR COMPLETION
OF BUILDING BEFORE A CONTRACTUAL COMPLETION DATE.
Many construction contracts provide that liquidated
damages will be assessed against a contractor for
failure to complete the project on schedule (see
Section VII.H.l.f). In some instances, contracts
938
-------
also provide monetary incentives (i.e., a bonus)
as an inducement to complete the project ahead of
schedule. Unless the bonus provision is required by
law, a bonus paid by the grantee is an unallowable cost.
e. ALL INCREMENTAL COSTS OF DELAY DUE TO THE AWARD OF ANY
SUBAGREEMENTS FOR BUILDING MORE THAN 12 MONTHS AFTER
THE STEP 3 GRANT AWARD OR FINAL STEP 2 + 3 APPROVALS.
If the grantee delays the award of any subagreements
for building the project beyond 12 months after the
date of the Step 3 grant award or the final Step 2+3
approvals, the incremental costs caused by the delay
are not allowable, even if the delay is justifiable
(e.g., due to circumstances beyond the grantee's
control). The incremental costs include building
costs, as well as other costs for services, such as
engineering supervision during construction and start-
up, and continuing engineering services for the first
year after the initiation of operation. The incremental
costs for building may be determined by using the ratio
of appropriate cost indices (e.g., the construction cost
index published in Engineering News Record, or the EPA
index published in the Journal of the Water Pollution
Control Federation) applied to the subagreement cost
awarded to the successful bidders. The numerator in
the ratio would be the index 12 months after the date
of the Step 3 grant award, or the final Step 2+3
approvals, and the denominator would be the index
nearest the date of subagreement award. The ratio,
assuming it is less than 1.0, is multiplied by the sub-
agreement amount to determine the allowable cost. This
same ratio is applied to other appropriate project costs
(e.g., engineering supervision) to determine the
allowable cost. The allowable building cost resulting
from this adjustment is used to determine the final
allowance for facilities planning and/or design (see
Sections III.D.3.C and VI.L.l.f).
The project reviewer should also be aware that failure
to promptly initiate and complete a project may result
in the imposition of sanctions, including termination,
pursuant to 40 CFR Part 30, Subpart I. While Paragraph e
above refers to the award of any subagreements for
building more than 12 months after Step 3 grant award or
final Step 2+3 approvals, the regulations at 40 CFR
35.2212(b) discuss the 12 month limitation in the context
939
-------
of subagreements for building all significant elements
of the project. Therefore, where the grantee has a
planned program (e.g., the use of an independent con-
struction manager to break a large contract into smaller
contracts to increase competition or to encourage partic-
ipation by small, minority, women's, and labor surplus
area businesses), and has justifiable reasons for
scheduling the award of contracts over a period of time,
the 12 month limitation on incremental costs will be
applicable to all contracts for building the project, but
penalties for failure to proceed to construction in a
timely manner (see Section VIII.B.4) will only be imposed
for failure to award subagreements for building all
significant elements of the project within the 12 month
period. The objective of both requirements is to award
contracts promptly, in order to accomplish the purpose of
the project (i.e., to improve water quality) and to prevent
unnecessary increases in construction costs due to in-
flation .
Where large or complex projects would require the award
of subagreements more than 12 months after the date of
Step 3 grant approval (a large project would not qualify
for a Step 2+3 grant), consideration should be given to
phasing or segmenting the project (see Section VI.D.10).
The approvals referred to for Step 2+3 projects are
listed at 40 CFR 35.2202, and include plans and spec-
ifications, project schedule, draft plan of operation,
intermunicipal service agreements, UC system, and SUO
(see Section VI.F.3).
Other Costs
The following items are not explicitly included in 40 CFR
art 35, Subpart I, Appendix A, but represent prudent fiscal and
anagement principles, and precedent cases:
a. Liquidated Damages
Monies recovered by grantees based on the assessment
of liquidated damages have no effect on the determination
of allowable costs (i.e., are not considered to be grant
related income). Moreover, any additional costs (e.g.,
building, engineering, legal, or administrative) incurred
940
-------
because of a contractor's lack of timely performance
are assumed to be offset by tne liquidated damages,
and therefore are unallowable, even in the event that
the grantee elects not to exercise its right to recover
liquidated damages, or the liquidated damages are in-
sufficient to cover the grantee's additional costs.
b. Bid Bond Forfeiture
All bid bond forfeitures are treated as a reduction
in the project's costs (i.e., are considered to be grant
related income). However, the allowance for facilities
planning and/or design continues to be based on the total
allowable building cost, without regard to the bid bond
forfe iture.
c. Public Liaison Services
Such services are unallowable, since they constitute
a type of public information service, and as such are
not directly related to, or necessary for, the building
of the project.
d. Professional Liability Insurance
Insurance premiums for a contractor (e.g., engineer,
construction manager, attorney, accountant, etc.) are
allowable only for insurance which the contractor main-
tains in connection with the general conduct ot its
business. The types and extent of coverage must be in
accordance with sound business practice, and the rates
and premiums must be reasonable under the circumstances.
The maintenance of professional liability insurance is
a sound business practice, and the premiums are allowable,
but only as part of the contractor's indirect cost agree-
ment. The cost ot add i t ional insurance (e.g., tor a
specific project), beyond that normally carried by the
contractor, is unallowable tor grant participation.
e. Services Required by Law
The cost of services, other than engineering services
during construction (see Paragraph l.e above), such as
railway or highway flagmen, or utility or highway inspec-
tors, required during the building ot the project, are
allowable for grant participation provided that:
941
-------
i. the agency responsible tor the affected
railway, highway, or utility requires
such services for all parties conducting
similar types of work, regardless ot the
source of construction funding for the
project;
ii. the project work requiring such services
is allowable, and is included in the scope
of the approved project;
iii. the cost ot such services has not been
included in the construction contractor's
bid price;
iv. the cost ot such services is incurred
directly by the grantee;
v. the cost is reasonable; and
vi. the services are required by State or
local law.
t. Field Surveys to Identify Cultural Resources
The costs ot field surveys to identi fy historical,
architectural, arcnaeological, and cultural resources
in the primary impact areas of the project are not
allowable costs, but are part of the preapplication
activities which are intended to be defrayed, in
part, by the allowance for facilities planning and/or
design. Where intensive surveys conducted during
facilities planning or design indicate a high probability
of discovering important cultural resources, and
where the proposed project may have an adverse impact
upon such cultural resources, the reasonable cost of
services requi red duri ng the building of the project
(i.e., costs to protect previously identified artifacts,
structures, etc.) are allowable. Such costs require
prior approval by the reviewing agency, and must be
supported by documentation justifying their need. The
allowability of such work and the associated costs are
determined on a case-by-case basis, and must be recom-
mended by the State Historic Preservation Officer (SHPO),
and in some cases, the Advisory Council on Historic Pre-
servation (ACHP).
942
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g. Travel Costs
The cost of local travel (i.e., commuting ex-
penses) Detween living quarters and the construc-
tion site for persons employed at the site (i.e.,
the grantee's and contractor's employees) is
generally not allowable.
B. MITIGATION
1. ALLOWABLE COSTS INCLUDE:
a. COSTS NECESSARY TO MITIGATE ONLY DIRECT, ADVERSE,
PHYSICAL IMPACTS RESULTING FROM BUILDING Of THE
TREATMENT WORKS.
b. THE COSTS OF SITE SCREENING NECESSARY TO COMPLY
WITH NEPA RELATED STUDIES AND FACILITIES PLANS,
OR NECESSARY TO SCREEN ADJACENT PROPERTIES.
Site screening is closely related to aesthetic
features (see Section V.C.2.U, and Paragraph 2.a
below), and the need tor such costs should De
established during facilities planning or design,
and confirmed during the review ot the grant
application. Site screening is one method of
maintaining the aesthetic character ot the project
location and will normally be used in lieu of other
aesthetic features. Site screening should also be
evaluated during the environmental review process
(see Section IV.D.2).
C. THE COST OF GROUNDWATER MONITORING FACILITIES NECESSARY
TO DETERMINE THE POSSIBILITY OF GROUNDWATER DETERIORA-
TION, DEPLETION OR MODIFICATION RESULTING FROM BUILDING
THE PROJECT.
Groundwater monitoring facilities are particularly
important to the operation of land application systems
for effluent or sludge, and as such are allowable costs.
The analysis of groundwater samples will determine if
the project is meeting its project performance standards
(see Sections VI.M.5.g and VII.I.2.a). Groundwater
monitoring facilities may also be warranted, and there-
fore allowable, for projects which include the rehabili-
tation of onsite systems, total containment ponds, or
943
-------
other waste stabilization ponds. The extent of the
allowable costs tor groundwater monitoring facilities
is decided on a case-by-case basis, and depends on the
size and complexity of the project and the present and
potential future use of the groundwater.
2. UNALLOWABLE COSTS INCLUDE:
a. THE COSTS OF SOLUTIONS TO AESTHETIC PROBLEMS, IN-
CLUDING DESIGN DETAILS WHICH REQUIRE EXPENSIVE
BUILDING TECHNIQUES AND ARCHITECTURAL FEATURES AND
HARDWARE, THAT ARE UNREASONABLE OR SUBSTANTIALLY
HIGHER IN COST THAN APPROVABLE ALTERNATIVES AND THAT
NEITHER ENHANCE THE FUNCTION OR APPEARANCE OF THE
TREATMENT WORKS NOR REFLECT REGIONAL ARCHITECTURAL
TRADITION.
A complete and exhaustive listing of allowable and
unallowable costs for aesthetic features for treat-
ment works would not be practical. In preparing such
a listing, it would be practically impossible to
address all situations. The following principles
are intended to provide guidance in making decisions
on the allowability of costs for aesthetic features.
In the design, construction, acquisition, and reno-
vation of wastewater treatment works, to the extent
possible and consistent with minimizing cost,
buildings should:
i. conform to or complement the scale of
existing or planned surrounding build-
ings;
ii. conserve energy;
iii. provide efficient and attractive interiors,
including limited public reception areas
where appropriate;
iv. provide parking space for motor vehicles
owned by the grantee, and essential for the
operation of the wastewater treatment facili-
ties, and for handicapped employees as
necessary, and such other parking space (tor
visitors and employees) as is consistent with
a general policy of transportation efficiency
and energy conservation, and with the
availaDility of public transportation in the
area;
944
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v. contain architectural details (including
hardware that is an integral part of the
structure) that are designed to enhance
the function and appearance of the building,
and to reflect regional architectural tra-
ditions; and
vi. facilitate the highest productivity
and efficiency of the treatment works
and its employees.
Decisions concerning the allowability of specific
item (particularly those associated with aesthetics)
are to be well documented in the project files and
made available to the grantee and the project auditor.
Allowability decisions which cannot be made using the
principles discussed above (see also Section v.C.2.u)
are to be submitted from the State to the EPA Regional
Office and, if necessary, to EPA Headquarters for review.
Re: EPA Audit Resolution Board Decision 13/14,
"Criteria for Assessing the Allowability of
Aesthetic Features and Landscaping on EPA
Construction Grant Projects," February 24, 1984
PRIVATELY OR PUBLICLY OWNED SMALL AND ONSITE SYSTEMS
1. ALLOWABLE COSTS FOR SMALL AND ONSITE SYSTEMS SERVING
RESIDENCES AND SMALL COMMERCIAL ESTABLISHMENTS IN-
HABITED ON OR BEFORE DECEMBER 27, 1977 INCLUDE:
(Note: There is a conflict between this paragraph and
40 CFR 35.2034. EPA has proposed amending this para-
graph to agree with the provision of 40 CFR 35.2034
that the requirement for habitation on or before
December 27, 1977 applies only to privately owned
small and onsite systems.)
a. THE COST OF MAJOR REHABILITATION, UPGRADING,
ENLARGING AND INSTALLING SMALL AND ONSITE
SYSTEMS, BUT IN THE CASE OF PRIVATELY OWNED
SYSTEMS, ONLY FOR PRINCIPAL RESIDENCES.
Major rehabilitation may include, as an
allowable cost, the demolition and removal
of an existing onsite system provided that:
i. the system, including the septic
tank, has failed beyond reasonable
repair, and the replacement system
945
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is more cost effective than
salvaging portions of the existing
system; and
ii. either:
- there is only one reasonable loca-
tion on the site for the new system,
and the use of that location requires
the removal of the existing system, or
the existing system constitutes
a real and present hazard to safety,
public health, or water quality,
which can only be abated by the
removal of the existing system.
The demolition and removal of an existing onsite
system for the convenience of the owner as a means
of increasing property value or property use is
unallowable for grant participation.
b. CONVEYANCE PIPES FROM PROPERTY LINE TO OFFSITE
TREATMENT UNIT WHICH SERVES A CLUSTER OF BUILDINGS.
c. TREATMENT AND TREATMENT RESIDUE DISPOSAL PORTIONS
OF TOILETS WITH COMPOSTING TANKS, OIL FLUSH MECH-
ANISMS, OR SIMILAR INHOUSE DEVICES.
d. TREATMENT OR PUMPING UNITS FROM THE INCOMING
FLANGE WHEN LOCATED ON PRIVATE PROPERTY AND
CONVEYANCE PIPES, IF ANY, TO THE COLLECTOR SEWER.
e. THE COST OF RESTORING INDIVIDUAL SYSTEM BUILDING
SITES TO THEIR ORIGINAL CONDITION.
2. UNALLOWABLE COSTS FOR SMALL AND ONSITE SYSTEMS INCLUDE:
a. MODIFICATION TO PHYSICAL STRUCTURE OF HOMES OR
COMMERCIAL ESTABLISHMENTS.
b. CONVEYANCE PIPES FROM THE HOUSE TO THE TREATMENT
UNIT LOCATED ON USER'S PROPERTY.
C. WASTEWATER GENERATING FIXTURES SUCH AS COMMODES,
SINKS, TUBS, AND DRAINS.
946
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D. REAL PROPERTY
1. ALLOWABLE COSTS FOR LAND AND RIGHTS-OF-WAY INCLUDE:
a. THE COST (INCLUDING ASSOCIATED LEGAL, ADMINISTRATIVE
AND ENGINEERING COSTS) OF LAND ACQUIRED IN FEE SIMPLE
OR BY LEASE OR EASEMENT UNDER GRANTS AWARDED AFTER
OCTOBER 17, 1972, THAT WILL BE AN INTEGRAL PART OF
THE TREATMENT PROCESS OR THAT WILL BE USED FOR THE
ULTIMATE DISPOSAL OF RESIDUES RESULTING FROM SUCH
TREATMENT PROVIDED THE REGIONAL ADMINISTRATOR APPROVES
IT IN THE GRANT AGREEMENT. THESE COSTS INCLUDE:
(1) THE COST OF A REASONABLE AMOUNT OF LAND, CON-
SIDERING IRREGULARITIES IN APPLICATION PAT-
TERNS, AND THE NEED FOR BUFFER AREAS, BERMS,
AND DIKES;
(2) THE COST OF LAND ACQUIRED FOR A SOIL ABSORP-
TION SYSTEM FOR A GROUP Of TWO OR MORE HOMES;
(3) THE COST OF LAND ACQUIRED FOR COMPOSTING OR
TEMPORARY STORAGE OF COMPOST RESIDUES WHICH
RESULT FROM WASTEWATER TREATMENT;
(4) THE COST OF LAND ACQUIRED FOR STORAGE OF
TREATED WASTEWATER IN LAND TREATMENT SYSTEMS
BEFORE LAND APPLICATION. THE TOTAL LAND AREA
FOR CONSTRUCTION OF A POND FOR BOTH TREATMENT
AND STORAGE OK WASTEWATER IS ALLOWABLE IF THE
VOLUME NECESSARY FOR STORAGE IS GREATER THAN
THE VOLUME NECESSARY FOR TREATMENT. OTHER-
WISE, THE ALLOWABLE COST WILL BE DETERMINED
BY THE RATIO OF THE STORAGE VOLUME TO THE
TOTAL VOLUME OF THE POND.
b. THE COST OF COMPLYING WITH THE REQUIREMENTS OF THE
UNIFORM RELOCATION ASSISTANCE AND REAL PROPERTY
ACQUISITION POLICIES ACT OF 1970 (42 U.S.C 4621
et.seq., 4651 et seq.), UNDER PART 4 OF THIS CHAPTER.
947
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The Uniform Relocation and Real Property Acquisition
Policies Act of 1970, as implemented by EPA under
40 CFR Part 4, is applicable to projects receiving
EPA grant assistance regard less of whether the land
so acquired is eligible or ineligible for grant
participation. The costs of complying with 40 CFR
Part 4 are allowable in all cases, and it is only
the cost of the land which may or may not be
eligible for grant participation.
Representative costs of complying with 40 CFR
Part 4 include services (e.g., legal, engineering,
administrative, appraisal, real estate agents, etc.)
or other expenses involved in the land acquisition,
including:
i. assisting displaced persons to relocate;
ii. surveying and preparing property plats;
iii. moving expenses for displaced persons;
iv. expenses incurred in searching for a
replacement dwelling, business, or farm;
v. actual losses incurred by business or
farm operations caused by relocation;
vi. legal costs associated with the pre-
paration and filing of documents and
court proceedings, including condemna-
tion;
vii. public notices, meetings, and negotia-
tions with displaced persons; and
viii. development of replacement housing.
Each of the representative costs listed above contain
limitations concerning reasonableness and allowability
which are more fully described in 40 CFR Part 4.
Re: 40 CFR 4.101, 4.201, 4.205, 4.400, 4.503
948
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C. THE COST OF CONTRACTING WITH ANOTHER PUBLIC AGENCY
OR QUALIFIED PRIVATE CONTRACTOR FOR PART OR ALL OF
THE REQUIRED ACQUISITION AND/OR RELOCATION SERVICES.
d. THE COST ASSOCIATED WITH THE PREPARATION OF THE TREAT-
MENT WORKS SITE BEFORE, DURING AND, TO THE EXTENT
AGREED ON IN THE GRANT AGREEMENT, AFTER BUILDING. THESE
COSTS INCLUDE:
(1) THE COST OF DEMOLITION OF EXISTING STRUCTURES
ON THE TREATMENT WORKS SITE (INCLUDING RIGHTS-
OF-WAY) IF BUILDING CANNOT BE UNDERTAKEN WITH-
OUT SUCH DEMOLITION;
Demolition of existing structures on the
treatment works site (including rights-of-way),
when not required for building the project, will
be considered to be an allowable cost only it the
existing structures constitute a real and pre-
sent hazard to safety, public health, or water
quality, which can only be abated by the removal
of the existing structures. The demolition of
an existing structure for the convenience of the
owner as a means ot increasing property value or
property use is unallowable for grant participa-
tion.
(2) THE COST (CONSIDERING SUCH FACTORS AS BETTER-
MENT, COST OF CONTRACTING AND USEFUL LIFE) OF
REMOVAL, RELOCATION OR REPLACEMENT OF UTILITIES,
PROVIDED THE GRANTEE IS LEGALLY OBLIGATED TO
PAY UNDER STATE OR LOCAL LAW; AND
(3) THE COST OF RESTORING STREETS AND RIGHTS-OF-WAY
TO THEIR ORIGINAL CONDITION. THE NEED FOR SUCH
RESTORATION MUST RESULT DIRECTLY FROM THE CON-
STRUCTION AND IS GENERALLY LIMITED TO REPAVING
THE WIDTH OF TRENCH.
Repaving beyond the trench width may be con-
sidered to be an allowable cost if uniformly
required by State or local law for all projects
involving road construction, regardless of the
source of project funding. Sometimes referred
to as "saw width," this provision requires that
the road surface and subsurface be cut one or two
teet beyond the trench width. This is not, how-
ever, to be interpreted as allowing the cost of
complete or partial repaving ot a road beyond
the "saw width."
949
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e. THE COST OF ACQUIRING ALL OR PART OF AN EXISTING
PUBLICLY OR PRIVATELY OWNED WASTEWATER TREATMENT WORKS
PROVIDED ALL THE FOLLOWING CRITERIA ARE MET:
(1) THE ACQUISITION, IN AND OF ITSELF, CONSIDERED
APART FROM ANY UPGRADE, EXPANSION OR REHABIL-
ITATION, PROVIDES NEW POLLUTION CONTROL BENEFITS;
(2) THE ACQUIRED TREATMENT WORKS WAS NOT BUILT WITH
PREVIOUS FEDERAL OR STATE FINANCIAL ASSISTANCE;
(3) THE PRIMARY PURPOSE
THE REDUCTION, ELIMI
OF PUBLIC OR PRIVATE
OF THE ACQUISITION IS NOT
NATION, OR REDISTRIBUTION
DEBT; AND
(4) THE ACQUISITION DOES NOT CIRCUMVENT THE REQUIRE-
MENTS OF THE ACT, THESE REGULATIONS, OR OTHER
FEDERAL, STATE OR LOCAL REQUIREMENTS.
2. UNALLOWABLE COSTS FOR LAND AND RIGHTS-OF-WAY INCLUDE:
a. THE COSTS OF ACQUISITION (INCLUDING ASSOCIATED LEGAL,
ADMINISTRATIVE AND ENGINEERING, ETC.) OF SEWER RIGHTS-
OF-WAY, WASTE TREATMENT PLANT SITES (INCLUDING SMALL
SYSTEM SITES), SANITARY LANDFILL SITES AND SLUDGE
DISPOSAL AREAS EXCEPT AS PROVIDED IN PARAGRAPH l.a.
OF THIS SECTION.
b. ANY AMOUNT PAID BY THE GRANTEE FOR ELIGIBLE LAND IN
EXCESS OF JUST COMPENSATION, BASED ON THE APPRAISED
VALUE, THE GRANTEE'S RECORD OF NEGOTIATION OR ANY
CONDEMNATION PROCEEDING, AS DETERMINED BY THE REGIONAL
ADMINISTRATOR.
c. REMOVAL, RELOCATION OR REPLACEMENT OF UTILITIES LOCATED
ON LAND BY PRIVILEGE, SUCH AS FRANCHISE.
950
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EQUIPMENT, MATERIALS AND SUPPLIES
1. ALLOWABLE COSTS OF EQUIPMENT, MATERIALS AND SUPPLIES INCLUDE
a. THE COST OF A REASONABLE INVENTORY OF LABORATORY
CHEMICALS AND SUPPLIES NECESSARY TO INITIATE PLANT
OPERATIONS AND LABORATORY ITEMS NECESSARY TO CONDUCT
TESTS REQUIRED FOR PLANT OPERATION.
A suggested list of equipment, supplies, and chemicals
for various sizes ot treatment plants is given in
Appendix B of EPA publication 4 30/9-74-002, "Estimating
Laboratory Needs tor Municipal Waste Water Treatment
Facilities," 1974. Large stocks of expendable materials
are, however, not allowable.
b. THE COSTS FOR PURCHASE AND/OR TRANSPORTATION OF
BIOLOGICAL SEEDING MATERIALS REQUIRED FOR EXPED-
ITIOUSLY INITIATING THE TREATMENT PROCESS OPERATION.
C. COST OF SHOP EQUIPMENT INSTALLED AT THE TREATMENT
WORKS NECESSARY TO THE OPERATION OF THE WORKS.
The need for installed shop equipment necessary for the
operation of the treatment works should be carefully
reviewed to insure that it is cost effective when
compared to the cost of equipment rental or the pro-
curement of a contractor to perform tne required work.
The need will depend on the specific item, its fre-
quency of expected use, and the size and complexity
of the treatment facility. Undoubtedly, larger
treatment facilities will have a greater need tor
installed shop equipment than smaller ones. For example,
a portable welding machine may be appropriate for a
large facility, whereas it may be more economical
for a smaller community to employ a local welder when
necessary. Also, smaller projects may not have the
staff (e.g., skilled machinists) necessary to operate
some of the equipment. Where the proposed items of
equipment are inappropriate to the size ot the treat-
ment works, the reviewing agency may determine that the
proposed installed shop equipment is unallowable tor
grant participation.
d.
THE COSTS OF NECESSARY SAFETY EQUIPMENT, PROVIDED THE
EQUIPMENT MEETS APPLICABLE FEDERAL, STATE, LOCAL OR
INDUSTRY SAFETY REQUIREMENTS.
-------
A PORTION OF THE COSTS OF COLLECTION SYSTEM MAINTENANCE
EQUIPMENT. THE PORTION OF ALLOWABLE COSTS SHALL BE THE
TOTAL EQUIPMENT COST LESS THE COST ATTRIBUTABLE TO THE
EQUIPMENT'S ANTICIPATED USE ON EXISTING COLLECTION
SEWERS NOT FUNDED ON THE GRANT. THIS CALCULATION SHALL
BE BASED ON:
(1) THE PORTION OF THE TOTAL COLLECTION SYSTEM
PAID FOR BY THE GRANT,
(2) A DEMONSTRABLE FREQUENCY OF NEED, AND
(3) THE NEED FOR THE EQUIPMENT TO PRECLUDE
THE DISCHARGE OR BYPASSING OF UNTREATED
WASTEWATER.
See Paragraph E.2.c below for a discussion of other
allowable maintenance equipment.
THE COST OF MOBILE EQUIPMENT NECESSARY FOR THE OPERA-
TION OF THE OVERALL WASTEWATER TREATMENT FACILITY,
TRANSMISSION OF WASTEWATER OR SLUDGE, OR FOR THE
MAINTENANCE OF EQUIPMENT. THESE ITEMS INCLUDE:
(1) PORTABLE STAND-BY GENERATORS;
(2) LARGE PORTABLE EMERGENCY PUMPS TO PROVIDE
"PUMP-AROUND" CAPABILITY IN THE EVENT OF
PUMP STATION FAILURE OR PIPELINE BREAKS:
AND
(3) SLUDGE OR SEPTIC TANKS, TRAILERS, AND OTHER
VEHICLES HAVING AS THEIR SOLE PURPOSE THE
TRANSPORTATION OF LIQUID OR DEWATERED WASTES
FROM THE COLLECTOR POINT (INCLUDING INDIVIDUAL
OR ONSITE SYSTEMS) TO THE TREATMENT FACILITY
OR DISPOSAL SITE.
Mobile equipment necessary for the operation of the
overall wastewater treatment facility may also include
vehicles necessary for the daily removal and disposal
of grit. While vehicles used for other purposes
(e.g., sludge tanks or trailers) would normally serve
tnis purpose, large facilities may have a sufficient
need to justify a separate vehicle to be used solely for
the transportation ana disposal of grit. Additionally,
for projects which involve the landspreading of sludge
as the method of ultimate sludge disposal, the necessary
952
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vehicles and equipment for proper sludge application
are allowaDle for grant participation.
REPLACEMENT PARTS IDENTIFIED AND APPROVED IN ADVANCE
BY THE REGIONAL ADMINISTRATOR AS NECESSARY TO ASSURE
UNINTERRUPTED OPERATION OF THE FACILITY, PROVIDED THEY
ARE CRITICAL PARTS OR MAJOR SYSTEMS COMPONENTS WHICH
ARE:
(1) NOT IMMEDIATELY AVAILABLE AND/OR WHOSE
PROCUREMENT INVOLVES AN EXTENDED "LEAD-TIME";
(2) IDENTIFIED AS CRITICAL BY THE EQUIPMENT
SUPPLIERS(S); OR
(3) CRITICAL BUT NOT INCLUDED IN THE INVENTORY
PROVIDED BY THE EQUIPMENT SUPPLIER(S).
2. UNALLOWABLE COSTS OF EQUIPMENT, MATERIALS, AND
SUPPLIES INCLUDE:
a. THE COSTS OF EQUIPMENT OR MATERIAL PROCURED IN VIOLA-
TION OF THE PROCUREMENT REQUIREMENTS OF 40 CFR PART 33
b. THE COST OF FURNISHINGS INCLUDING DRAPERIES, FURNITURE
AND OFFICE EQUIPMENT.
Because ot their wide range in price and their trans-
portability, office furnishings such as chairs, desks,
file cabinets, typewriters, coffee tables, pictures,
draperies, televisions, radios, telephones, tape
recording devices, office supplies, calculators, in-
door plants, copiers, book cases or shelves, lamps,
food preparation equipment, postage meters, and other
items of a similar nature are not allowable costs tor
grant participation.
C. THE COST OF ORDINARY SITE AND BUILDING MAINTENANCE
EQUIPMENT SUCH AS LAWNMOWERS AND SNOWBLOWERS.
953
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Site and building maintenance equipment also includes
rakes, shovels, Drooms, picks, nedge trimmers, and
other such equipment which is transportable and is
used for routine maintenance. Such equipment is not
allowable tor grant participation.
Hand tools (other than tnose which are specified by
the equipment supplier or manufacturer as special
purpose tools necessary for the repair and adjustment
of specific process components) such as screw drivers,
pliers, socket wrenches, electric drills or saws, etc.
are not allowable for grant participation.
d. THE COST OF VEHICLES FOR THE TRANSPORTATION OF THE
GRANTEES' EMPLOYEES.
This includes buses, trucks, cars, motorcycles, golf
carts, bicycles, etc. However, mobile training units
may be allowable for grant participation under State
training grants authorized by Section 109(b)(1) of
the CWA.
e. ITEMS OF ROUTINE "PROGRAMMED" MAINTENANCE SUCH AS
ORDINARY PIPING, AIR FILTERS, COUPLINGS, HOSE, BOLTS,
ETC .
F . INDUSTRIAL AND FEDERAL USERS
1. EXCEPT AS PROVIDED IN PARAGRAPH F.2.a, ALLOWABLE COSTS FOR
INDUSTRIAL AND FEDERAL FACILITIES INCLUDE DEVELOPMENT OF A
MUNICIPAL PRETREATMENT PROGRAM APPROVABLE UNDER PART 403 OF
THIS CHAPTER, AND PURCHASE OF MONITORING EQUIPMENT AND CON-
STRUCTION OF FACILITIES TO BE USED BY THE MUNICIPAL TREAT-
MENT WORKS IN THE PRETREATMENT PROGRAM.
The costs of developing a municipal pretreatment program
must De carefully examined, primarily in relation to the
timing of preparation. The subject of industrial pre-
treatment would normally De examined during facilities
planning (see Section IV.E.2), at which time the grant
applicant is able to consider alternative treatment pro-
cesses and sludge disposal techniques only if the charac-
teristics and flow rate of wastes are known. Similarly,
954
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a project may only be designed and construction drawings
prepared when the specific waste treatment requirements
are known. EPA regulations also require that the UC
system and the SUO be approved prior to grant award. Both
of these items require specific consideration of industrial
waste aischarges.
Where the costs of developing a pretreatment program have
been incurred prior to grant award, such costs are un-
allowable. Where the costs of development of a pretreatment
program are included in the grant application, approved by
the reviewing agency, and incurred after grant award, such
costs are allowable for grant participation.
2. UNALLOWABLE COSTS FOR INDUSTRIAL AND FEDERAL FACILITIES
INCLUDE:
a. THE COST OF DEVELOPING AN APPROVABLE MUNICIPAL PRETREAT-
MENT PROGRAM WHEN PERFORMED SOLELY FOR THE PURPOSE OF
SEEKING AN ALLOWANCE FOR REMOVAL OF POLLUTANTS UNDER
PART 403 OF THIS CHAPTER.
b. THE COST OF MONITORING EQUIPMENT USED BY INDUSTRY FOR
SAMPLING AND ANALYSIS OF INDUSTRIAL DISCHARGES TO
MUNICIPAL TREATMENT WORKS.
c. ALL INCREMENTAL COSTS FOR SLUDGE MANAGEMENT INCURRED AS
A RESULT OF THE GRANTEE PROVIDING REMOVAL CREDITS TO
INDUSTRIAL USERS UNDER 40 CFR 403.7 BEYOND THOSE SLUDGE
MANAGEMENT COSTS THAT WOULD OTHERWISE BE INCURRED IN THE
ABSENCE OF SUCH REMOVAL CREDITS.
G . INFILTRATION/INFLOW
1. ALLOWABLE COSTS INCLUDE:
a. THE COST OF TREATMENT WORKS CAPACITY ADEQUATE TO TRANS-
PORT AND TREAT NONEXCESSIVE INFILTRATION/INFLOW UNDER
§35.2120.
b. THE COSTS OF SEWER SYSTEM REHABILITATION NECESSARY TO
ELIMINATE EXCESSIVE INF ILTRATION/INFLOW AS DETERMINED
IN A SEWER SYSTEM STUDY UNDER §35.2120.
955
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2. UNALLOWABLE COSTS INCLUDE:
a. WHEN THE REGIONAL ADMINISTRATOR DETERMINES THAT THE FLOW
RATE IS NOT SIGNIFICANTLY MORE THAN 120 GALLONS PER
CAPITA PER DAY UNDER § 35. 2120(c ) (2 ) ( l l ) , THE INCREMENTAL
COST OF TREATMENT WORKS CAPACITY WHICH IS MORE THAN 120
GALLONS PER CAPITA PER DAY.
See Section IV.C.4.3 for a more complete discussion of
infi1tration/inflow (I/I).
I. MISCELLANEOUS COSTS
1. ALLOWABLE COSTS INCLUDE:
a. THE COSTS OF SALARIES, BENEFITS AND EXPENDABLE MATERIALS
THE GRANTEE INCURS FOR THE PROJECT.
In general, the salaries ana benefits referred to here
are tor the grantee's employees (other than elected and
appointed officials, as discussed in Paragraph 2.a
below), and may De either:
i. specifically identified administrative work
which is not a general expense of local
government, or
li. force account work (see Section VI.E.5) for
building or building related activities.
Such costs must be included in the grant application
and approved by the reviewing agency. Benefits (e.g.,
health insurance, vacation and holiday compensation,
etc.) are overhead items, and to be allowable for grant
participation, they must be included in a negotiated
indirect cost agreement (see Section F.2.d.ii above).
b. UNLESS OTHERWISE SPECIFIED IN THIS REGULATION, THE COSTS
OF MEETING SPECIFIC FEDERAL STATUTORY PROCEDURES.
956
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To be allowable, the costs of meeting Federal statutory
requirements must De either approved as a preaward cost,
or incurred alter grant award. Costs incurred to satisfy
statutory requirements for grant award (e.g., preparation
of a facilities plan, construction drawings and specifi-
cations, UC system, SUO, etc.) are not allowaDle for
grant participation, but are part of the preapplication
work which is intended to be defrayed, in part, by the
allowance for facilities planning and/or design.
COSTS FOR NECESSARY TRAVEL DIRECTLY RELATED TO ACCOMPLISH-
MENT OF PROJECT OBJECTIVES. TRAVEL NOT DIRECTLY RELATED
TO A SPECIFIC PROJECT, SUCH AS TRAVEL TO PROFESSIONAL
MEETINGS, SYMPOSIA, TECHNOLOGY TRANSFER SEMINARS, LECTURES,
ETC., MAY BE RECOVERED ONLY UNDER AN INDIRECT COST AGREE-
me nt.
THE COSTS OF ADDITIONS TO A TREATMENT WORKS THAT WAS
ASSISTED UNDER THE FEDERAL WATER POLLUTION CONTROL ACT
OF 1956 (PUB. L. 84-660), OR ITS AMENDMENTS, AND THAT
FAILS TO MEET ITS PROJECT PERFORMANCE STANDARDS PRO-
VIDED:
(1) THE PROJECT IS IDENTIFIED ON THE STATE PRIORITY
LIST AS A PROJECT FOR ADDITIONS TO A TREATMENT
WORKS THAT HAS RECEIVED PREVIOUS FEDERAL FUNDS;
(2) THE GRANT APPLICATION FOR THE ADDITIONS INCLUDES
AN ANALYSIS OF WHY THE TREATMENT WORKS CANNOT
MEET ITS PROJECT PERFORMANCE STANDARDS; AND
(3) THE ADDITIONS COULD HAVE BEEN INCLUDED IN THE
ORIGINAL GRANT AWARD AND:
(a) ARE THE RESULT OF ONE OF THE FOLLOWING:
(i) A CHANGE IN THE PROJECT PERFORMANCE
STANDARDS REQUIRED BY EPA OR THE
STATE:
(ii) A WRITTEN UNDERSTANDING BETWEEN
THE REGIONAL ADMINISTRATOR AND
GRANTEE PRIOR TO OR INCLUDED IN
THE ORIGINAL GRANT AWARD:
957
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(lli) A WRITTEN DIRECTION BY THE
REGIONAL ADMINISTRATOR TO DELAY
BUILDING PART OF THE TREATMENT
WORKS; OR
(IV) A MAJOR CHANGE IN THE TREATMENT
WORKS' DESIGN CRITERIA THAT THE
GRANTEE CANNOT CONTROL; OR
(b) MEET ALL THE FOLLOWING CONDITIONS:
(i) IF THE ORIGINAL GRANT AWARD WAS
MADE AFTER DECEMBER 28, 1981, THE
TREATMENT WORKS HAS NOT COMPLETED
ITS FIRST FULL YEAR OF OPERATION;
(ii) THE ADDITIONS ARE NOT CAUSED BY
THE GRANTEE'S MISMANAGEMENT OR
THE IMPROPER ACTIONS OF OTHERS;
(ili) THE COSTS OF REWORK, DELAY, ACCELER-
ATION OR DISRUPTION THAT ARE A RE-
SULT OF BUILDING THE ADDITIONS ARE
NOT INCLUDED IN THE GRANT; AND
(iv) THE GRANT DOES NOT INCLUDE AN
ALLOWANCE FOR FACILITIES PLANNING
OR DESIGN OF THE ADDITIONS.
(4) THIS PROVISION APPLIES TO FAILURES THAT OCCUR
EITHER BEFORE OR AFTER THE INITIATION OF OPERA-
TION. THIS PROVISION DOES NOT COVER A TREATMENT
WORKS THAT FAILS AT THE END OF ITS DESIGN LIFE.
e. COST OF ROYALTIES FOR THE USE OF OR RIGHTS IN A PATENTED
PROCESS OR PRODUCT WITH THE PRIOR APPROVAL OF THE
REGIONAL ADMINISTRATOR.
Reasonable royalties associated with the procurement of
the right to use, or the rights in, a patented product,
apparatus, or process are allowable costs, provided that
they are:
- necessary,
- cost effective,
958
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- based on a published fee schedule or on
reasonable tees charged to other users
under similar conditions, and
- receive prior written approval from the
reviewing agency.
Periodic payment of royalties for the right to operate
under a patent are considered operating costs, and are
unallowable for grant participation (see Section V.E
tor a discussion of operating costs).
f. COSTS ALLOCABLE TO WATER POLLUTION CONTROL PURPOSE OF
MULTIPLE PURPOSE PROJECTS AS DETERMINED BY APPLYING THE
ALTERNATIVE JUSTIFIABLE EXPENDITURE (AJE) METHOD DES-
CRIBED IN THE CG SERIES. MULTIPLE PURPOSE PROJECTS THAT
COMBINE WASTEWATER TREATMENT WITH RECREATION DO NOT NEED
TO USE THE AJE METHOD, BUT CAN BE FUNDED AT THE LEVEL OF
THE MOST COST-EFFECTIVE SINGLE-PURPOSE ALTERNATIVE.
See Section IV.C.7.1.h.
g. COSTS OF GRANTEE EMPLOYEES ATTENDING TRAINING WORKSHOPS/
SEMINARS THAT ARE NECESSARY TO PROVIDE INSTRUCTION IN
ADMINISTRATIVE, FISCAL OR CONTRACTING PROCEDURES REQUIRED
TO COMPLETE THE CONSTRUCTION OF THE TREATMENT WORKS, IF
APPROVED IN ADVANCE BY THE REGIONAL ADMINISTRATOR.
To be allowable, attendance at such training workshops
or seminars may only occur after grant award.
2. UNALLOWABLE COSTS INCLUDE:
a. ORDINARY OPERATING EXPENSES OF THE GRANTEE INCLUDING
SALARIES AND EXPENSES OF ELECTED AND APPOINTED OFFICIALS
AND PREPARATION OF ROUTINE FINANCIAL REPORTS AND STUDIES.
b. PREPARATION OF APPLICATIONS AND PERMITS REQUIRED BY
FEDERAL, STATE OR LOCAL REGULATIONS OR PROCEDURES.
c. ADMINISTRATIVE, ENGINEERING AND LEGAL ACTIVITIES ASSOC-
IATED WITfl THE ESTABLISHMENT OF SPECIAL DEPARTMENTS,
AGENCIES, COMMISSIONS, REGIONS, DISTRICTS OR OTHER UNITS
OF GOVERNMENT.
9 59
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d. APPROVAL, PREPARATION, ISSUANCE AND SALE OF BONDS OR
OTHER FORMS OF INDEBTEDNESS REQUIRED TO FINANCE THE
PROJECT AND THE INTEREST ON THEM.
e. THE COSTS OF REPLACING, THROUGH RECONSTRUCTION OR SUB-
STITUTION, A TREATMENT WORKS THAT WAS ASSISTED UNDER
THE FEDERAL WATER POLLUTION CONTROL ACT OF 1956 (PUB. L.
84-660), OR ITS AMENDMENTS, AND THAT FAILS TO MEET ITS
PROJECT PERFORMANCE STANDARDS. THIS PROVISION APPLIES
TO FAILURES THAT OCCUR EITHER BEFORE OR AFTER THE INITI-
ATION OF OPERATION. THIS PROVISION DOES NOT APPLY TO AN
INNOVATIVE AND ALTERNATIVE TREATMENT WORKS ELIGIBLE FOR
FUNDING UNDER §35 .2032(c) OR A TREATMENT WORKS THAT FAILS
AT THE END OF ITS DESIGN LIFE.
f. PERSONAL INJURY COMPENSATION OR DAMAGES ARISING OUT OF
THE PROJECT.
g. FINES AND PENALITIES DUE TO VIOLATIONS OF, OR FAILURE
TO COMPLY WITH, FEDERAL, STATE OR LOCAL LAWS, REGULATIONS
OR PROCEDURES.
h. COSTS OUTSIDE THE SCOPE OF THE APPROVED PROJECT.
i. COSTS FOR WHICH GRANT PAYMENT HAS BEEN OR WILL BE RECEIVED
FROM ANOTHER FEDERAL AGENCY.
j. COSTS OF TREATMENT WORKS FOR CONTROL OF POLLUTANT DIS-
CHARGES FROM A SEPARATE STORM SEWER SYSTEM.
k. THE COST OF TREATMENT WORKS THAT WOULD PROVIDE CAPACITY
FOR NEW HABITATION OR OTHER ESTABLISHMENTS TO BE LOCATED
ON ENVIRONMENTALLY SENSITIVE LAND SUCH AS WETLANDS OR
FLOODPLAINS.
After September 30, 1984, grant assistance is limited
to the capacity necessary to serve existing needs on the
date of grant award (see Section VI.D.18). Therefore,
the cost of providing capacity for new habitation is
unallowable in all cases. However, if a treatment
works includes any reserve capacity which could induce
development on environmentally sensitive lands (see
960
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Section IV.D.2.2), the cost of the entire treatment
works will be unallowable for grant assistance.
1. THE COSTS OF PREPARING A CORRECTIVE ACTION REPORT
REQUIRED BY §35. 2218(c).
See Section VII.I.2.b.
3. Other Costs
The following items are not explicitly included in 40 CFR
Part 35, Subpart I, Appendix A, but represent prudent fiscal
and management principles, based on statutory requirements,
regulations, and procedent cases:
a. Administration Building
Allowable costs for an administration building include
those portions of the building which are directly re-
lated to the project and necessary for operating per-
sonnel, including the laboratory, employee locker rooms
(separate locker rooms should be provided for men and
women), workshop area, storage facilities for operational
supplies, spare parts and equipment, necessary lavatory
facilities, operator office space, etc. Those portions
of an administration building which are not necessary
for the daily operation and maintenance of the project
are unallowable costs, including portions of the
building used for public works functions (other than
wastewater treatment), general accounting functions,
conference rooms with associated audio-visual equipment,
or other general uses not necessary for the operation
of the project. Where larger facilities include con-
ference rooms to be used exclusively for training of
employees, and such training is demonstrated to be a
part of the project's plan of operation, such space is
allowable if reasonable, and if approved by the reviewing
agency as part of the grant award.
Where unallowable building space is included in an other-
wise allowable administration building, the allowable
cost is determined by using the ratio of allowable floor
space divided by the total floor space in the building.
The costs of buildings and portions of buildings which are
unallowable are to be deducted from the allowable project
961
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building costs for grant computation purposes. Costs
associated with unallowable buildings and portions of
buildings (e.g., landscaping, driveways, parking spaces,
electrical service, and other utility costs) are also
unallowable, and must be deducted proportionately from
the allowable building costs.
b. Computers
Computers, display monitors, and computer software which
are designed into the control system for the daily opera-
tion of the treatment works, are allowable project costs,
but only to the extent that such equipment is dedicated
solely to the operation of the treatment works.
Portable or personal computers are normally not allow-
able for grant participation, unless justified by the
grantee and approved by the reviewing agency as necessary
for the operational control and analysis of the treatment
works. Examples of such allowable uses include the
scheduling of equipment maintenance and replacement, and
the operation of the grantee's pretreatment program,
including the scheduling of tests to verify industrial
compliance with pretreatment requirements. Where portable
and personal computers are intended to be used for
accounting and billing services as well as the operational
control of the treatment works, the costs are to be pro-
rated, based on the estimated use for each purpose.
The cost of computer programs (i.e., software) specifi-
cally designed for the operation and maintenance of the
treatment works is allowable for grant participation.
This includes the cost of developing unique operating
programs for the specific grant funded project.
962
<> U.S. GOVERNMENT PRINTING OFFICE
1985 0 - 473-203
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MATCH LINE'C MATCH LINE B
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CORRECTIVE
CORRECTIVE ACTION
PROJtCT
PROJECT PERFORMANCE
STANDARDS CERTIFICATION
Figure 2 Construction Grants Process
Legend
HOWrVER. GRANT APPLICANTS ARr FNCOURACFO to .SUBMIT I IS'
State /EPA.
Applicant/Grantee
U.S. Environmental Protection Agency
ON SCHEMATIC ri OW DIAGRAM
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TECHNICAL REPORT DATA
ll'lcasc read Instructions un the reverse before coinplelinn)
1 REPORT NO.
430/09-84-003
2.
3. RECIPIENT'S ACCESSIpf^NOntf*
m 5 20 &5WAS
i. TITLE AND SUBTITLE
Construction Grants Program for Municipal Wastewater
Treatment Works - Handbook of Procedures
5 REPORT DATE
October 1. 1984
6. PERFORMING ORGANIZATION CODE
7. AUTHORIS)
8 PERFORMING ORGANIZATION REPORT NO.
9. PERFORMING ORGANIZATION NAME AND ADDRESS
Program Policy Branch
Office of Municipal Pollution Control
Washington, DC 20460
10. PROGRAM ELEMENT NO.
1 1. CONTRACT/GRANT NO.
12. SPONSORING AGENCY NAME AND ADDRESS
Office of Water
Office of Municipal Pollution Control
Washington, DC 20460
13. TYPE OF REPORT AND PERIOD COVERED
14. SPONSORING AGENCY CODE
700/02
15 SUPPLEMENTARY NOTES
16. ABSTRACT
This Handbook of Procedures identifiies and explains the many procedures to
be followed by project reviewers and other personnel in State Agencies and EPA
Regional Offices who are responsible for the conduct of the Construction Grants
Program.^ ,
«
1 7.
KEY WORDS AND DOCUMENT ANALYSIS
J- DESCRIPTORS
b. IDENTIFIERS/OPEN ENDED TERMS
c. COSATi I icltl/Group
Construction Grants Program
18. Ol ST R I BUT ION STATEMENT
19 SECURITY CLASS (This Report)
unclassif ied
21. NO. OF PAGES
962
20 SECURITY CLASS (This pane}
unclassified
22. PRICE
EPA F oim 2220-1 (Ret. 4—77) previous coition is obsolete
\
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