I VMfS ? U.S. ENVIRONMENTAL PROTECTION AGENCY
\OFFICE OF INSPECTOR GENERAL
EPA Should Increase
Fixed-Price Contracting for
Remedial Actions
Report No. 13-P-0208
March 28, 2013

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Report Contributors:	Michael Petscavage
Melinda Burks
David Penman
Doug LaTessa
Abbreviations
CO
Contracting Officer
CPFF
Cost-Plus-F ixed-F ee
EAS
EPA Acquisition System
EPA
U.S. Environmental Protection Agency
FAR
Federal Acquisition Regulation
GAO
U.S. Government Accountability Office
IDIQ
Indefinite-Delivery/Indefinite-Quantity
LTRA
Long Term Remedial Action
OAM
Office of Acquisition Management
OARM
Office of Administration and Resources Management
OIG
Office of Inspector General
OMB
U.S. Office of Management and Budget
OSRTI
Office of Superfund Remediation and Technology Innovation
OSWER
Office of Solid Waste and Emergency Response
QAP
Quality Assessment Plan
RAC
Remedial Action Contract
RI/FS
Remedial Investigation/Feasibility Study
T&M
Time-and-Materials
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail: OIG Hotline@epa.gov	write: EPA Inspector General Hotline
phone: 1-888-546-8740	1200 Pennsylvania Avenue, NW
fax:	202-566-2599	Mailcode 2431T
online:
http://www.epa.gov/oiq/hotline.htm
Washington, DC 20460

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*. U.S. Environmental Protection Agency	13-P-0208
Office of Inspector General	March 28 2013
/ rn

\.o At a Glance
Why We Did This Review
We conducted this review to
determine if the U.S.
Environmental Protection
Agency (EPA) is reducing the
amount of high risk contracting
activities for remedial actions.
In the cleanup of Superfund
sites, EPA uses a variety of
instruments (such as contracts,
cooperative agreements, and
interagency agreements) to
obtain Superfund remedial
services. One such instrument
used in procuring these
services is the Remedial Action
Contract (RAC). The Agency
had expenditures of almost
$570 million for remedial
actions under RAC contracts
for fiscal years 2007 through
2011.
This report addresses the
following EPA Goals or
Cross-Cutting Strategies:
	Cleaning up communities
and advancing sustainable
development.
	Strengthening EPA's
workforce and capabilities.
EPA Should Increase Fixed-Price Contracting
for Remedial Actions
For further information, contact
our Office of Congressional and
Public Affairs at (202) 566-2391.
The full report is at:
www.epa.aov/oia/reports/2013/
20130328-13-P-0208.pdf
What We Found
EPA continues to rely on high risk cost-reimbursement contracts and time-and-
materials task orders in the Superfund remedial program. The President, U.S.
Office of Management and Budget, Congress, and U.S. Government
Accountability Office have called for a reduction in high risk contracts. Resistance
to change, regional program office pressure, lack of leadership, and lack of trained
qualified staff have contributed to the reliance on high risk contracts. Reducing the
reliance on these contracts can result in numerous benefits, including cost
savings, increased competition, and achievement of socio-economic goals.
Additionally, the EPA Acquisition System (EAS) contains inaccurate contract and
task order types. Specifically, 5 of 17 contracts and 22 of 60 task orders and work
assignments reviewed had an incorrect contract or award type listed in EAS. The
inaccurate data in EAS is due to the lack of a specific EAS data quality plan and a
decentralized quality assessment process. As a result, EPA is misreporting
contract and spending information to the public.
Recommendations and Planned Agency Corrective Actions
We recommend that EPA require written acquisition plans for cost reimbursement
RAC contracts be approved by the Head of the Contracting Activity. We also
recommend that EPA develop performance measures and goals for each region
for the use of fixed-price contracts and task orders, and recommend that EPA
provide training to staff on how and when less risky contracts and task orders
should be used. Finally, we recommend that EPA determine whether staffing
changes are needed in each region to ensure that staff have the skills to manage
the increased use of fixed-price contracts and task orders and develop a data
quality plan for EAS to ensure the adequacy of data across all regions.
EPA agreed in principle to the objectives of the report - to improve acquisition
planning and increase the use of fixed price contracts where appropriate. EPA
concurred with two of our recommendations but disagreed or did not respond to
four others. EPA did agree to provide training on how and when less risky
contracts and tasks orders are appropriate. EPA indicated that the decision on
contract type must be made on a case-by-case basis and did not agree with
requiring certain contract types or setting performance measures for fixed price
contracting. We revised one of the draft report recommendations to not require a
certain contract type, but to elevate the responsibility for approving future cost-
reimbursable RAC contracts.
Noteworthy Achievements
EPA Region 7 is implementing the vision of the original Contracts 2000 Strategy to
increase the use of fixed price contracting for Superfund remedial actions.

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We have no objections to the further release of this report to the public. We will post this report
to our website at http://www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact Melissa Heist,
Assistant Inspector General for Audit, at (202) 566-0899 or heist.melissa@epa.gov; or
Janet Kasper, Product Line Director, at (312) 886-3059 or kasper.ianet@epa.gov.

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EPA Should Increase Fixed-Price Contracting
for Remedial Actions
13-P-0208
Table of C
Chapters
1	Introduction		1
Purpose		1
Background		1
Noteworthy Achievements		4
Scope and Methodology		4
2	EPA Continues to Rely on High Risk Contracts for Remedial Actions		8
Federal Government Encouraged to Limit High Risk Contracts		8
EPA Continues Reliance on High Risk Contracts and Task Orders
for Remedial Actions		9
EPA Culture Encourages Status Quo		10
EPA Missing Out on the Benefits of Fixed-Price Contracting		14
Recommendations		15
Agency Response and OIG Evaluation		16
3	Inaccurate Contract Data		18
OMB's Open Government Directive Requires Data Quality		18
Incorrect Contract and Task Order Types Listed in EAS		19
Lack of a Specific Data Quality Plan for EAS and a Decentralized
QAP Process Led to Data Integrity Issues 		19
EPA Is Misreporting Vital Contract and Spending Information		20
Recommendations		20
Agency Response and OIG Evaluation		20
Status of Recommendations and Potential Monetary Benefits		22
Appendices
A Sampled Contracts, Task Orders, and Work Assignments for
Data Integrity		23
B Agency Response to Draft Report and OIG Evaluation		25
C Distribution		37

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Chapter 1
introduction
Purpose
In recent years, the President, U.S. Office of Management and Budget (OMB),
Congress, and U.S. Government Accountability Office (GAO) have raised
concerns or called for a reduction in high risk contracts. The U.S. Environmental
Protection Agency (EPA) Office of Inspector General (OIG) conducted this audit
to determine whether EPA is reducing the amount of high risk contracting
activities for remedial actions.
Background
Superfund Cleanup Process
Congress enacted the Comprehensive Environmental Response, Compensation,
and Liability Act, commonly referred to as "Superfund," to address threats to
human health or the environment resulting from releases or potential releases of
hazardous substances. EPA has primary responsibility for managing cleanup and
enforcement activities under Superfund.
EPA's Superfund cleanup process can be lengthy; it can sometimes take decades
to clean up the contamination. The cleanup process involves a series of steps
during which specific activities take place or decisions are made (figure 1).
Figure 1: Superfund cleanup phases
Milestones
Phases
Preliminary Site
assessment inspection
Source: GAO analysis of EPA dala.
Source: GAO Report GAO-12-109, January 2012,
During the site assessment process, EPA and states collect data to identify,
evaluate, and rank hazardous waste sites based on Hazard Ranking System
criteria. Using these criteria, EPA conducts a preliminary assessment and, if
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warranted, a site inspection to determine whether the site warrants short- or long-
term cleanup attention. Sites that EPA determines are among the nation's most
seriously contaminated hazardous waste sites are placed on the National Priorities
List for attention under the Superfund program.
After a site is placed on the National Priorities List, the remedial process begins
with a two-part study of the site: (1) a remedial investigation to characterize site
conditions and assess the risks to human health and the environment, and (2) a
feasibility study to evaluate various options to address the problems identified
through the remedial investigation. The culmination of these studies is a record of
decision, which identifies the selected remedy for addressing the site's
contamination and a cost estimate for implementing the remedy. EPA or the
primary responsible party may develop preliminary estimates of construction
costs and, as the site moves from the study phase into the remedial action phase, a
more accurate cost estimate may be developed. The method of implementation for
the selected remedy is then developed during remedial design and implemented
during the remedial action phase, when actual cleanup of the site occurs.
When all construction of the cleanup remedy at a site is finished, all immediate
threats have been addressed, and all long-term threats are under control, EPA
generally considers the site to be "construction complete." Sites where additional
work is required after construction is completed then enter into the post
construction phase, which includes actions such as operation and maintenance and
conducting 5-year reviews. When EPA determines that no further site response is
appropriate, it deletes the site from the National Priorities List.
Remedial Action Contracts (RACs)
In the cleanup of Superfund sites, EPA uses a variety of instruments such as
contracts, cooperative agreements, and interagency agreements to obtain services
to assist in the remediation of Superfund sites. EPA awards contracts for remedial
services using RACs, which are full service contracts that provide all services
needed in the Superfund cleanup process. The services include program support
(management); remedial investigation and feasibility studies; engineering services
to design remedial actions; and engineering services for construction oversight.
RAC contractors may also provide technical and management services supporting
EPA's coordination and/or oversight of remedial activities performed by a State,
the U.S. Army Corps of Engineers, or responsible parties identified in
enforcement actions. Overall, the Agency had expenditures of almost $570
million for remedial actions under RAC contracts for fiscal years 2007 through
2011.
Contracts 2000 Strategy
The Office of Solid Waste and Emergency Response (OSWER), in conjunction
with the Office of Acquisition Management (OAM) within the Office of
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Administration and Resources Management (OARM), developed the Superfund
Contracts 2000 Strategy Report (Contracts 2000 Strategy) to formulate the
structure of the Superfund contracting program for the year 2000 and beyond. The
central purpose of the strategy was to develop a portfolio of contracts for the
future that best met program needs while using the best procurement practices.
The strategy established the following goals:
	Balance national consistency with regional flexibility.
	Introduce more competition into the contracting process.
	Increase small-, minority-, and women-owned business participation in the
Superfund contracting program.
	Adopt new contracting vehicles and methods such as performance-based,
multiple award, and fixed-price contracting.
While the strategy kept most of the existing contract infrastructure in place, it
shifted away from large, full service contracts such as RACs to functionally
focused contracts for design and construction services. The Agency stated that
functional contracts sized and focused on specific activities should reduce
infrastructure costs and allow for greater competition.
The Agency stated in the Contracts 2000 Strategy that it planned to split up the
requirements previously consolidated under the RACs to allow more firms,
especially small businesses, to participate in the program and increase
competition. The rationale was that smaller contracts can be more readily
adaptable to changing program requirements and increase opportunities for the
use of fixed-price, completion form, and performance-based contracting.
Subsequent to issuing the Contracts 2000 Strategy, the Agency changed the
strategy to a menu approach, allowing regions to choose from a variety of contract
methods and types, including the full service RACs.
Contracts 2010 Strategy
As the successor to the Contracts 2000 Strategy, OSWER and OAM established
the Contracts 2010 Strategy in March 2011. This strategy has seven goals,
incorporating those highlighted in the previous Contracts 2000 Strategy and
adding others that reflect new program directions and heightened government-
wide concerns for efficiency and procurement process improvements. This
strategy sets the Agency's framework for acquisitions in support of the Superfund
program activities for the next 10 years. The seven goals are:
	Balance national consistency with local flexibility.
	Ensure that there is appropriate competition in the contracting process.
	Increase participation of all socio-economic concerns in the Superfund
contracting program.
	Implement green policies and procedures.
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	Identify and implement opportunities and initiatives for process and cost
efficiencies.
	Identify the full range of vehicles or instruments available for obtaining
services for the Superfund cleanup programs.
	Mitigate high risk contracting practices.
To achieve the goal of mitigating high risk contracting practices, the Agency
identified funding obligated to high risk contacts. The intent is to identify new and
existing acquisitions that may be converted to less risky vehicles. To mitigate
risks associated with high risk contracts, the Agency identified as a best practice
issuing fixed-priced orders against indefinite-delivery/indefinite-quantity (IDIQ)
contracts, when possible.
Noteworthy Achievements
Region 7 implemented the vision of the original Contracts 2000 Strategy. For
example, the region is breaking out the construction portion of the remedial action
and contracting for it directly instead of having the RAC contractor manage it.
This allows the region to compete each remedial action, taking advantage of
increased competition. Region 7 has trained and hired the staff needed to award
and manage fixed-price contracts for remedial actions. As of May 2012, Region 7
had awarded 38 site specific contracts since 2005. We reviewed all of these
contracts and determined that only one was not a fixed-price type contract.
Region T s transition to site specific contracts has resulted in fewer high risk
contracts, increased competition, and greater achievement of socioeconomic
contracting goals.
Scope and Methodology
We conducted this audit from September 2011 to January 2013 in accordance
with generally accepted government auditing standards. Those standards require
that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
We visited Regions 4, 7, and 9, and headquarters (which administers the RAC
contracts for Regions 1 and 8). Regions 1, 4, and 9 use IDIQ RAC contracts,
while Region 8's RAC contracts are cost-plus-fixed-fee (CPFF). Region 7 uses
mostly fixed-price contracts for remedial actions. Our goal was to gain a broad
perspective of contracting for remedial actions across the country, which includes
providing audit coverage of regions using IDIQ, cost-reimbursement, and fixed-
price contracts. Including audit coverage of Regions 1, 4, 7, 8, and 9 gave us the
broad perspective needed to form sound conclusions on the Agency's remedial
action contracting as a whole.
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We interviewed contracting and program staff in each of these five regions to
document the processes used to select a contract type for remedial services and to
discuss the types of remedial work performed. We also surveyed Superfund and
contracting staff in the other regions to help us identify similar work across the
country that could possibly be done as fixed-price or could be compared with
similar work that we know has been done fixed-price elsewhere. In addition, we
performed the following to answer our audit objective:
	Determined the type of RAC contracts in existence prior to the current
RAC contracts and compared to the most recent RAC contracts.
	Determined the number of fixed-price site specific remedial action
contracts since 2002.
	Determined the universe of IDIQ and cost-reimbursable RAC contracts.
	Determined the universe of RAC task orders or work assignments for
those regions we visited.
	Interviewed regional management and staff regarding their perspectives on
fixed-price and IDIQ contracts.
	Met with OSWER's Office of Superfund Remediation and Technology
Innovation (OSRTI) and OAM to gain their perspectives on contract type,
and to obtain and discuss performance measures or goals related to RAC
contracts or the overall reduction of risky contract types.
	Determined how Regions 4 and 7 have overcome institutional resistance
and other barriers to using fixed-price contracting.
	Obtained additional information from Region 4 regarding its multiple
award solicitation.
	Obtained and analyzed acquisition plans for the RAC contracts.
	Determined if similar remedial actions existed within a region where EPA
used both a fixed-price and time-and-materials (T&M) contract or task
order to perform the selected remedy.
For all five regions reviewed, we obtained a listing of task orders or work
assignments awarded and developed a judgmental sampling methodology for each
contract. We selected the task orders and work assignments for review if they met
the following criteria: (1) the award was a remedial action; or (2) if there were
less than five remedial action task orders or work assignments, then long term
remedial actions (LTRA), remedial investigation/feasibility studies (RI/FS),
remedial designs, oversight task orders, and 5-year reviews were also
judgmentally selected for review. We also included in the sample fixed-price
contracts awarded by Region 7. The following provides specific details on each
region and the contracts, task orders, and work assignments selected for review.
	Region 1. Region 1 has two IDIQ RAC contracts. For contract EP-S1-06-
01, we judgmentally reviewed 8 of 53 task orders. The target population
was remedial action task orders. Because there were only three remedial
actions, we also judgmentally reviewed three LTRA task orders and two
remedial action oversight task orders to enlarge the sample size. For
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contract EP-S1-06-03, we reviewed 8 of 64 task orders. We reviewed
three remedial actions and judgmentally reviewed four LTRA task orders
and one remedial design task order.
	Region 4. Region 4 has two IDIQ RAC contracts. For contract EP-S4-09-
02, we judgmentally reviewed 21 of 64 task orders. In addition to the 14
remedial action task orders, we judgmentally reviewed one 5-year review,
one removal support, one remedial action oversight, and four LTRA task
orders to enlarge the sample size. For contract EP-S4-08-03, we
judgmentally reviewed 4 of 25 task orders. Since there was only one
remedial action, we also reviewed one RI/FS task order, one remedial
design task order, and one risk assessment task order to enlarge the sample
size.
	Region 7. Because Region 7 was the one region implementing the
Contracts 2000 Strategy, we reviewed all 38 site specific contracts issued
between June 2005 and May 2012.
	Region 8. Region 8 has two cost-reimbursement RAC contracts. For
contract EP-W-06-006, we judgmentally reviewed three of the four
remedial action work assignments. For contract EP-W-05-049, we
reviewed the only two remedial action work assignments issued under the
contract.
	Region 9. Region 9 has two IDIQ RAC contracts. Since there was only
one remedial action for contract EP-S9-08-03, we also judgmentally
reviewed two LTRA task orders and two 5-year reviews to enlarge the
sample size. For contract EP-S9-08-04, we reviewed all five remedial
action task orders and judgmentally reviewed one 5-year review.
For the above contracts, task orders, and work assignments reviewed, we
determined whether the type was cost-reimbursement or fixed. We documented
the type of work being performed and determined if similar scopes of work
existed on fixed-price task orders or contracts. We also performed steps to review
data quality issues discovered during preliminary research. These steps entailed
comparing the contract, task order, and work assignment type within EPA's
systems to the type identified in the contract files for each contract, task order,
and work assignment reviewed during our audit. We determined controls
governing correct entry of this data and discussed with staff and management the
reasons behind any discrepancies. Because we relied on source documentation,
the data quality issues identified did not impact our conclusion regarding our
primary audit objective.
We reviewed internal and management controls in the context of the Agency's
process for selecting contract type in the remedial program. We obtained an
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understanding of this process through analysis of the laws, regulations, and
guidance, as well as interviews.
We also reviewed the most recent Federal Managers' Financial Integrity Act
assurance letters for OSWER and OARM, as well as GAO and OIG management
challenges documents. EPA did not identify internal control weaknesses directly
related to our audit objectives.
Prior Audit Coverage
EPA OIG
In OIG Report No. 2005-P-00001, Response Action Contracts: Structure and
Administration Need Improvement, dated December 6, 2004, the OIG
recommended that the Agency develop and implement a plan for RACs that
increases use of IDIQ and site specific contracts, and conduct a lessons learned
analysis of the new IDIQ contracts. We followed up on this prior report during
this audit and determined that the Agency did not fully implement these
recommendations.
GAO
In GAO Report No. GAO-09-921, Contract Management: Extent of Federal
Spending under Cost-Reimbursement Contracts Unclear and Key Controls Not
Always Used, issued in September 2009, GAO reported that federal agencies
obligate billions of dollars annually using cost-reimbursement contracts. GAO
stated that this type of contract involves high risk for the government because of
the potential for cost escalation and because the government pays a contractor's
costs of performance regardless of whether the work is completed. Additionally,
GAO stated that cost-reimbursement contracts are suitable only when the cost of
the work to be done cannot be estimated with sufficient accuracy to use fixed-
price contracts. GAO made recommendations to OMB's Office of Federal
Procurement Policy aimed at encouraging timely analysis to determine if a
transition can be made to contracts with a firmer pricing basis.
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Chapter 2
EPA Continues to Rely on High Risk Contracts
for Remedial Actions
EPA continues to rely on high risk cost-reimbursement contracts and T&M task
orders in the Superfund remedial program. The President, OMB, Congress, and
GAO have called for a reduction in high risk contracts. Resistance to change,
regional program office pressure, lack of leadership, and lack of trained qualified
staff have contributed to the overreliance on high risk contracts. Reducing
reliance on these contracts can result in numerous benefits, including cost savings,
increased competition, and achievement of socioeconomic goals.
Federal Government Encouraged to Limit High Risk Contracts
Presidential and OMB Memorandums
On March 4, 2009, President Obama issued a memo regarding federal contracting
practices. The memo stated that cost-reimbursement contracts create a risk that
taxpayer funds will be spent on contracts that are wasteful, inefficient, subject to
misuse, or otherwise not well designed to serve the needs of the federal
government or the interests of the American taxpayer. The memo directed OMB
to issue guidance to govern the appropriate use and oversight of all contract types
in full consideration of the agency's needs, and to minimize risk and maximize
the value of government contracts. On July 29, 2009, OMB issued a memo
providing guidance to agencies to reduce high risk contracts. The memo stated
that cost-reimbursement, T&M, and labor-hour contracts pose a risk because they
provide no direct incentive to the contractor for cost control. However, a
subsequent OMB memo provided examples of when cost-reimbursement
contracts are appropriate (e.g., when there is considerable uncertainty about the
resources that will be necessary to achieve the government's objective).
Congressional Action
Section 864 of the Duncan Hunter National Defense Authorization Act for Fiscal
Year 2009, PL 110-417, required that the Federal Acquisition Regulation (FAR)
be revised to address the use of cost-reimbursement contracts. Specifically, the
FAR addresses the following:
	When and under what circumstances cost-reimbursement contracts are
appropriate.
	The acquisition plan findings necessary to support a decision to use cost-
reimbursement contracts.
	The acquisition workforce resources necessary to award and mange cost-
reimbursement contracts.
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FAR 16.1
The FAR groups contract types into two broad categories: fixed-price contracts
and cost-reimbursement contracts. It further states that specific contract types
range from firm-fixed-price, in which the contractor has full responsibility for the
performance costs and resulting profit (or loss), to CPFF, in which the contractor
has minimal responsibility for the performance costs and the negotiated fee
(profit) is fixed. The FAR also states that contracting officers (COs) should avoid
protracted use of a cost-reimbursement or T&M contract after experience
provides a basis for firmer pricing.
FAR 16.3
The FAR states that the CO shall use cost-reimbursement contracts only when:
(1) circumstances do not allow the agency to define its requirements sufficiently
to allow for a fixed-price type contract, or (2) uncertainties involved in contract
performance do not permit costs to be estimated with sufficient accuracy to use
any type of fixed-price contract. Further, a cost-reimbursement contract may be
used only when specific factors have been considered and adequate government
resources are available to award and manage a contract other than firm-fixed-
price.
EPA Continues Reliance on High Risk Contracts and Task Orders for
Remedial Actions
Despite urging from the President, OMB, Congress, and EPA internal strategies
(Contracts 2000 and 2010 Strategies), only EPA Regions 4 and 7 have reduced
high risk contracting activities in the Superfund remedial program.1 As of June
2012, there were 24 RAC contracts. Of those 24 contracts, 12 (50 percent) were
high risk, CPFF contracts and 12 (50 percent) were IDIQ contracts. The 12 high
risk CPFF contracts were awarded from four EPA regional offices (Regions 2, 3,
5, and 8). Despite the inherent risks associated with these contracts, these four
EPA regional offices have not transitioned to IDIQ contracts.
The advantage of IDIQ contracts is that they allow for the possibility of awarding
fixed-price task orders. We found that only Region 4 is significantly issuing
fixed-price task orders. We reviewed 25 Region 4 task orders and found that 18
were firm-fixed-price type task orders. These task orders were for remedial
actions, including some long-term remedial actions. We reviewed 30 additional
task orders from Regions 1 and 9 (which also have IDIQ contracts) and found that
29 were high risk T&M task orders. We confirmed through interviews with both
EPA headquarters and regional program and contracts staff that EPA does not
award a significant amount of lower risk, task orders for remedial action activities
1 OMB defines high risk contracting activities as noncompetitive contracting, cost-reimbursement contracts, T&M
contracts, and labor hour contracts.
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outside of Region 4. Therefore, while some regions have converted their RAC
contracts to IDIQ, most continue to rely on high risk task order types.
Region 7 has awarded 38 site specific contracts since 2005, the majority of which
were for remedial actions. We reviewed all 38 and determined that 37 were fixed-
price type contracts. Region 7 contracts with the construction contractor directly,
using regional contracting staff to award and administer the contracts, and
remedial project managers to oversee the construction contractor.
EPA Strategies to Reduce High Risk Contracting Not Successful
EPA's Contracts 2000 Strategy encouraged shifting away from large umbrella
contracts (such as the full service RACs that perform all pipeline activities from
site assessment to cleanup) to functionally focused contracts for design and
construction services. This shift was done in part to increase opportunities for the
use of fixed-priced, performance-based contracting and to reduce the over-
reliance on cost-reimbursement contracts. However, the plan allowed for
flexibility when awarding contracts. This flexibility allowed regions to continue
to use and rely heavily on high risk CPFF contracts and high risk task orders
pursuant to their IDIQ contracts.
In 2011, EPA published its Contracts 2010 Strategy Report, which sets the
framework for acquisitions in support of the Superfund program activities for the
next 10 years. One of the goals of the Contracts 2010 Strategy is to mitigate high
risk contracting practices. In order to achieve the lowest level of high risk
contracts possible, EPA identified several tasks to reduce the number of these
high risk contracts. However, this plan lacks specifics and once again allows for
regional flexibility. Without increased specificity and goals, this strategy may also
be ineffective in reducing high risk contracts and task orders.
EPA Culture Encourages Status Quo
EPA Regional Program Staff Resistant to Change
Most EPA regional program offices have resisted the use of fixed-price
contracting in the remedial program for more than a decade. EPA regional
program offices prefer the full service RAC cost-reimbursement contracts or IDIQ
contracts utilizing T&M task orders because they provide flexibility in structuring
projects at various stages of the remedial program. The full service RAC contracts
allow EPA to leverage its resources, as EPA project managers are used to oversee
multiple sites and act as the focal point of communications and coordinate project
team efforts, ensuring that project participants work together to accomplish the
goals of the project.
The regions' resistance to change is well documented through the years and was
continually communicated to the OIG during this audit. One of the earliest
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examples of resistance from the regions came when EPA tried to implement the
Contracts 2000 Strategy. The original Contracts 2000 Strategy called for dividing
the design and construction portions of the RAC contracts so that the construction
portion could possibly be fixed-price. However, the regions did not like this
mandate because of the Agency's limited experience and in-house resources to
directly contract and manage construction projects. Therefore, Contracts 2000
was ultimately implemented using a menu approach emphasizing regional
flexibility and only encouraged the use of fixed-price contracts. The menu
approach allowed regions to choose from several options when developing their
contracts. Those options included use of site specific contracts, RACs, remedial
design contracts, and interagency agreements. The menu approach has allowed
the status quo to continue for more than a decade. When discussing why fixed-
price contracting is not being implemented with OAM headquarters, regional
contracting staff, and OSRTI headquarters, the overall response was because of
regional program office resistance.
More recently, OAM and OSWER developed the Contracts 2010 Strategy. This
strategy once again emphasized regional flexibility. Superfund program and
contracting representatives are working on Phase 2 of the Contracts 2010
Strategy. While this plan is not complete, the OIG obtained a draft of the plan and
it is also not specific with regard to contract types and allows for continuing
flexibility for the regions. When we discussed with OAM and OSRTI staff the
lack of specificity regarding contract type, regional program resistance was cited
as the reason why more progress is not being made in reducing high risk
contracting.
EPA Staff Believe that Remedial Actions Do Not Lend Themselves to
Fixed-Price Type Contracts
One of the reasons EPA regional staff cited for not using fixed-price contracts is
that there are too many unknown and unforeseen factors associated with
subterranean construction. Both program and contracting staff in EPA regions
informed us that in order to award fixed-price type contracts, the work to be
performed must not be complex, or there must be few unknowns so that the
activities can be well-defined. While the OIG agrees that fixed-price contracts
lend themselves to a well-defined scope of work and not all tasks can be fixed-
price, we do not agree that remedial actions do not lend themselves to fixed-
pricing. Both Region 4 and Region 7 regularly award fixed-price type contracts or
task orders for remedial actions and have done so for several years. When
identifying the types of activities funded with fixed-price type contracts in
Regions 4 and 7, we found similar types of activities in other regions that do not
use fixed-price contracting.
In addition, EPA's RAC contractors award fixed-price type subcontracts to
accomplish the remedial actions. These RAC contractors are generally architect
and engineering firms and usually do not perform the remedial action themselves.
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Instead, these firms subcontract out the performance of the selected remedy. We
reviewed several of these subcontracts or proposed subcontract agreements
between architectural and engineering firms and their subcontractors, and all of
the subcontracts reviewed were fixed-price type subcontracts. The types of fixed-
price type subcontracts awarded were for various services, including the
following:
	Dredging and related services.
	Drilling services.
	In-situ chemical oxidation.
	In-situ thermal treatment.
	Removal of access roads, and enhancements to stream banks, roads, and
fencing.
	Removal of contaminated tailings and soil.
Program Office Pressure
The CO has ultimate responsibility for determining contract type. COs are
responsible for safeguarding the interests of the United States in its contractual
relationships. In order to perform this responsibility, COs should be allowed wide
latitude to exercise business judgment. At the same time, the program offices are
the CO's customer, resulting in a situation that can create a conflict for the CO
between satisfying the customer and determining the appropriate contract type
based on the statement of work and other related data. Contracting staff stated that
the program offices wield significant influence on the selection of the contract
type. One CO stated that he was surprised at how much influence the program
office has on contract type at EPA, while another CO stated that the program
office essentially dictates the contract type. In other cases, the discussion of the
task order type is not even taking place between the program office and the CO.
It is assumed that the task order type will be T&M and a discussion of whether
certain tasks can be fixed does not take place.
Lack of Leadership and Lack of Performance Measures
Overcoming the barriers that have prevented EPA from moving away from high
risk contracting requires strong leadership. In the past, however, OAM and
OSRTI have not always displayed strong leadership. For example, the original
Contracts 2000 Strategy called for dividing the design and construction portions
of the RAC contracts to provide more opportunity for fixed-price contracting.
EPA regions essentially rejected this approach, and management allowed the plan
to be changed to a more flexible menu approach which allowed regions flexibility
and choices. In fact, regions were allowed to keep the same contracting practices
and continue to operate as in the past. Again in April 2004, another EPA
Superfund study2 highlighted discussions about whether the existing contracts are
2 EPA, SUPERFUND: Building on the Past, Looking to the Future, April 22, 2004
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used effectively and whether different contract types should be used more
frequently (e.g., performance-based and site specific contracts). This same study
stated that site specific and task order contracts can result in significant cost
savings to the program. However, EPA has awarded almost no site specific
contracts outside of Region 7, nor fixed-price task orders outside of Region 4.
With the Contracts 2010 Strategy, the leadership strategy of allowing regional
flexibility continues to be advocated resulting in continued use of high risk
contracting strategies. OAM management informed us that they have a number of
initiatives that they believe will address the issue. Some of these initiatives
include:
	Institutionalizing a more disciplined acquisition planning process.
	Implementing management controls and oversight mechanisms to ensure
the performance of the required analysis and documentation for the
selection of appropriate contract types.
However, it is too early to evaluate the impact of any of these initiatives.
Neither the Contracts 2000 nor Contracts 2010 Strategies included performance
goals or measures for assessing progress toward using fixed-price contracting.
The Government Performance and Results Act of 1993 emphasized the use of
goals for program performance and measuring results. The Government
Performance and Results Modernization Act of 2010 reemphasized the use of
goals and measures to improve outcomes. Performance goals can help programs
achieve results. Performance measures may assist the Agency in moving toward
fixed-price contracting. In fact, the EPA Director of Small Business Programs
stated that performance measures have helped EPA become one of the top
agencies in meeting small business goals.
EPA Officials and Staff Cite Lack of Personnel as Barrier to Fixed-
Price Contracting
EPA officials and staff stated that they do not have personnel with the right skill
mix or experience to award, administer, and manage fixed-priced contracts. While
this may be the case, the Agency has had more than a decade since its Contracts
2000 Strategy to train and hire the staff needed to implement fixed-price
contracting in the remedial program, and with the exception of Region 7, has
chosen not to do so.
In 2005, OSWER initiated the Superfund Workload Assessment. The primary
purposes of the Superfund Workload Assessment were to:
	Better understand how Superfund personnel resources are being used
across the program relative to the future long-term workload.
	Establish a baseline of current workload distribution and resource
constraints.
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 Explore opportunities to continue to improve the program's use of its
personnel resources.
OMB Guidance Memorandum M-09-26, Managing the Multi-Sector Workforce,
instructs agencies to determine the mix of skills and amount of labor needed for
the agency to perform efficiently and effectively. According to the guidance,
agencies should take into account the mission, functions, desired performance
standards, and workload. While the Superfund Workload Assessment did examine
the workforce on board at the time of the assessment, it did not identify the mix of
skills needed for the agency to implement the Contracts 2000 Strategy.
EPA staff contended that a fixed-priced contract is more labor intensive than a
cost-reimbursement contract and requires adequate, experienced personnel to
award, administer, and manage a fixed-priced contract. While fixed-pricing work
does require more upfront planning such as developing a well defined scope of
work, this makes the stages after award easier to administer and manage.
Moreover, cost-reimbursement contracts require increased government
surveillance. FAR 16.301-3 states that a cost-reimbursement contract can only be
used when adequate government resources are available to award and manage a
contract other than firm-fixed-priced. This includes appropriate government
surveillance during performance to provide reasonable assurance that efficient
methods and effective cost controls are used. This point was reiterated in OMB's
memorandum in response to the President's directive concerning high risk
contracting, which stated that cost-reimbursement and T&M contracts are often
used without an appropriate basis or sufficient management and oversight to limit
taxpayer risk.
EPA Missing Out on the Benefits of Fixed-Price Contracting
The reliance on high risk contracts and task orders provides little incentive to the
contractor to control costs. As a result, EPA is not reaping the benefits of cost
savings related to fixed-price contracting. Fixed-price contract savings can
sometimes be difficult to calculate, since projects are often unique. We found one
instance in Region 7 where EPA was cleaning up residential yards in the same
county using two different contractors. One contract was a T&M contract, and the
other contract was awarded by paying the contractor a fixed price per ton of
remediated land. Tasks performed for each contract were similar. We used a
conversion rate to convert tons to cubic yards and found the cost per cubic yard
for the T&M contract was $80.16, while the cost per cubic yard for fixed price
type contract was $32.74. EPA awarded the first contract using a high risk T&M
contract. It later awarded the second contract using a fixed price per ton because
of several concerns, one of which was the cost being incurred to clean up the
yards using the T&M contract. By moving to the fixed-price type contract,
Region 7 saved $13,828,003 for the 261,607 cubic yards removed by the fixed-
price contractor.
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Region 7's use of fixed-price type contracts has also resulted in increased
socioeconomic participation. Region 7 has continually had the highest percentage
of contracts awarded as "small business" from 2006 through 2011. In fact,
Region 7 has led in almost each category for small business concerns during that
time period. The EPA Director of the Office of Small Business Programs
informed us that Region 7 is the premier regional office in terms of meeting
EPA's small business goals.
Another benefit of Region 7's use of site specific contracting is competition. We
reviewed 38 Region 7 site specific contracts. Of those, 30 were awarded
competitively. The average number of bids for the 30 competitive contracts was
8.4, and the number of bids ranged between 3 and 17. For 4 of the 30 competitive
contracts, the range of bids was over $24 million. Other regions are not able to
take advantage of the benefits of competition since they do not competitively
award task orders or work assignments under RAC contracts.
Recommendations
We recommend that the Assistant Administrator for the Office of Administration
and Resources Management:
la. Require that written acquisition plans for future cost-reimbursement RAC
contracts be approved by the Head of the Contracting Activity.
lb. For current cost reimbursement RAC contracts, at the end of the base
period, require written acquisition plans be prepared and approved by the
Head of the Contracting Activity.
We recommend the Assistant Administrators for both the Office of
Administration and Resources Management and the Office of Solid Waste and
Emergency Response:
2.	Develop performance measures for each region for the use of fixed-price
contracts and task orders for remedial actions. The performance measures
should be implemented in a way that holds the regions accountable (both
the Superfund program staff and contracting staff) for decreasing the use
of high risk contracts and task orders.
3.	As part of the implementation of the Contracts 2010 Strategy, provide
training to both Superfund program and contracting staff on how and
when less risky contracts and task orders should be used in the Superfund
remedial program.
4.	Determine whether staffing changes are needed in each region to ensure
that staff have the skills to manage the increased use of fixed-price
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contracts and task orders, and develop a plan for addressing the staffing
needs.
Agency Response and OIG Evaluation
EPA agreed in principle to the objectives of the report - to improve acquisition
planning and increase the use of fixed price contracts where appropriate.
However, the Assistant Administrators did not agree with some of the
recommendations, and provided specific comments to passages in the report.
Our responses to the specific comments can be found in Appendix B.
A recurring comment in the response to the draft report is that the draft did not
provide a balanced view of fixed-price contracting and that it might not always be
appropriate for Superfund work. We agree that OMB guidance states that when
there is considerable uncertainty regarding what is needed a cost reimbursable
contract may be more effective. The OMB memorandum goes on to state that,
over time, experience should generally enable the agency to address the
uncertainties, making it possible to convert to fixed-price contracting. While
subsurface and underwater activities are difficult to characterize, there are other
types of remediation activities that the EPA has past experience with and
converting to fixed-price contracting should be considered.
In the draft report, the first recommendation was that the EPA replace all current
cost-reimbursement RAC contracts at the end of the current base or option period
with IDIQ contracts to allow the use of fixed-price task orders when appropriate.
EPA did not agree with recommendation 1, and stated that OAM recently
published Interim Policy Notice 12-03 on Acquisition Planning. EPA stated that
the processes, procedures, and oversight associated with the interim policy notice
are intended to institutionalize more informed and collaborative decision making
throughout the acquisition planning process, which includes contract type. The
Agency also stated that due to the requirements of the recently established
Remedial Acquisition Framework, EPA plans to review all of the Agency's
contracts in support of the Superfund Remedial Program in order to determine the
appropriate time to re-compete under the new proposed remedial model described
in the framework.
Based on available information, the Agency's proposed action will not address the
recommendation. We reviewed the interim policy notice for acquisition planning
and it requires that FAR Part 7 requirements must be met for all EPA acquisitions.
It does require the contract team to document the rationale for the contract type
proposed. However, this would not be applied to the RAC contracts until the
current contracts expire. As for the remedial action framework, the EPA was
unable to provide a copy to review. Until we are able to review the framework
and determine that it adequately addresses replacing the RAC contracts that only
allow for cost reimbursement task orders, we cannot accept the alternate
correction action.
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Based on the EPA's response to the draft report, we revised recommendation 1.
We recognize that the revised acquisition policy does require that the rationale for
the contract type be documented. Due to the size of the RAC contracts and the
issues in the audit report regarding program office pressure and resistance to
change, we are recommending that the written acquisition plan be approved by
the Head of the Contracting Activity, as opposed to the Chief of the Contracting
Office. For the current cost-reimbursable RAC contracts we are recommending
that the agency re-evaluate whether cost-reimbursable is the appropriate form of
contract at the end of the base contract periods. RAC contracts generally have
5 option years, making the expiration date of some of the current cost-
reimbursable contracts as 2018 and 2019. We believe that action should be taken
sooner than that. The audit resolution process will be used to resolve this
recommendation.
For recommendation 2, the Agency did not agree with establishing performance
measures. The Agency stated that it would develop guidelines for use when
selecting the most appropriate type of contract and task order, considering the
results of the Remedial Acquisition Framework and the Centers of Expertise
Study. The proposed guidelines are not available for the OIG to evaluate, in
particular whether it includes a method for evaluating the effectiveness of the
guidelines in increasing the use of fixed-price contracting vehicles. The audit
resolution process will be used to resolve this recommendation.
EPA agreed with recommendation 3 and committed to providing training to both
Superfund program and contracting staff. The training will include how to
document the analysis leading up to the contract type selection. The targeted
completion date is November 30, 2013. The Agency actions, when implemented,
should address the recommendation.
For recommendation 4, the Agency agreed to continue to ensure that staff have
the skills necessary to manage all types of contracts. The ongoing Centers of
Expertise study is assessing the staffing needs associated with implementing new
business processes, such as prescriptive acquisition planning requirements. In
responding to the draft report, the Agency acknowledged that it will require
additional resources and infrastructure to perform direct construction activities.
While the Agency agreed that it should maximize the use of fixed-price
contracting as appropriate, it has not addressed how it will develop the
infrastructure needed to support fixed-price contracting. Therefore, we consider
this recommendation unresolved and will initiate the audit resolution process.
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Chapter 3
Inaccurate Contract Data
The EPA Acquisition System (EAS) contains inaccurate contract and task order
information. Specifically, 5 of 17 contracts and 22 of 60 task orders and work
assignments had an incorrect contract or award type listed in EAS. EPA's Open
Government Data Quality Plan 1.0 states that each of the 13 major EPA
contracting offices is responsible for overseeing the quality of its acquisition
operations through its Quality Assessment Plan (QAP). Additionally, EPA's
Acquisition Handbook states that by using the QAPs, EPA verifies and validates
that the information in EPA's procurement system is consistent with the official
contract files. The inaccurate data in EAS is due to the lack of a specific EAS data
quality plan and a decentralized QAP process. EAS data is made available to the
public through the Federal Procurement Data System. As a result, EPA is
misreporting contract and spending information to the public.
OMB's Open Government Directive Requires Data Quality
In February 2010, OMB issued an Open Government Directive regarding the
quality of federal spending information. The directive cited duplication of data,
missing transactions and data elements, and inaccurate or untimely data as the
challenge with regards to the accuracy of federal spending data. The directive also
stated that agencies should ensure that information on federal spending is
objective and of high quality. OMB directed agencies to submit data quality plans
by April 14, 2010. Additionally, OMB required the Senior Accountable Official
of each agency to certify its plan.
To comply with OMB's directive, EPA issued its Open Government Data Quality
Plan 1.0 on May 18, 2010. This plan states that each of the 13 major EPA
contracting offices is responsible for overseeing the quality of its acquisition
operations through its QAP. Each QAP should contain internal control and
integrity requirements to ensure that acquisition rules and regulations are
followed, files and records are kept to document the acquisition processes and
procedures, and sufficient efforts are taken to perform pre- and post-award
reviews of transactions to ensure that controls are working as intended. Each QAP
also directly places the responsibility for data quality and integrity on the contract
specialists and contracting officers.
In order to maintain visibility of all Agency QAPs, OAM requires a current
repository of the plans for all primary contracting organizations. Based on this
requirement, all current QAPs shall be submitted to OAM for review and
concurrence. Thereafter, all primary contracting organizations must submit their
QAP to OAM for review when the plans have been modified.
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EPA's Acquisition Handbook states that by using the QAPs, EPA verifies and
validates that the information in EPA's procurement system is consistent with the
official contract files. It further states that a summary of the validation is required
to be documented for the record.
Incorrect Contract and Task Order Types Listed in EAS
Five of 17 (29 percent) contracts reviewed had incorrect contract types listed in
EAS when compared to the individual contract file. Additionally, 22 of 60
(37 percent) task orders and work assignments reviewed had award types listed in
EAS that did not match the individual task order or work assignment file.
In response to finding outlines provided to EPA, OAM stated that the "Contract
Type Per File" and "EAS Contract Type" do not represent coding inconsistencies,
as both data entries are correct. OAM asserts that contracts may be both IDIQ and
T&M. IDIQ refers to the contract type and T&M refers to the pricing arrangement
for the task order. OAM believes both contract types may accurately describe one
contract in terms of type and pricing, and OAM sees no error in this reporting.
Nonetheless, OAM believes that consistency in how such data is reported is
important for effective contract management and will consider developing policy
guidance to facilitate consistency in how such data is reported. We disagree with
OAM regarding the use of the pricing arrangement for the contract type. The
contract type refers to the overall contract and the pricing arrangement applies to
the task orders issued under that contract. Pricing arrangement under an IDIQ
contract may allow for many different task order types. For example, the pricing
arrangement for one region's contracts allows for three different types of task
orders to be issued. Therefore, these contracts should be reported as IDIQ
contracts.
Our analysis resulted in a lower accuracy rate than what EPA certified to OMB.
EPA's certification to OMB for fiscal year 2011 had an 88.3 percent accuracy rate
for the correct contract type and a 99.5 percent accuracy rate for the correct award
type when comparing EAS to the individual contract or task order file. EPA's data
is based on a contractor's review, and we did not review the contractor's scope
and methodology.
The analysis for both the 17 contracts and 60 task orders and work assignments
are detailed in appendix A.
Lack of a Specific Data Quality Plan for EAS and a Decentralized
QAP Process Led to Data Integrity Issues
EPA does not have a specific data quality plan for EAS. Instead, EPA relies on its
overall data quality plan, EPA's Open Data Quality Plan 1.0, for acquisitions. The
plan states that data integrity is the responsibility of the contract specialist and CO
and that specific data integrity requirements are contained in each of EPA's major
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contracting offices' QAPs. Because of the absence of a specific data plan for EAS
and the decentralized reliance on QAPs, EPA does not have a consistent
methodology for reviewing and maintaining contract data integrity in EAS.
We reviewed six QAPs and found that all had the basic requirements of a QAP as
defined in EPA's Acquisition Handbook. However, in some cases the QAPs
lacked detailed instructions on how to accomplish the data validation. We also
found that Region 1 is operating on an unapproved QAP, further highlighting the
inconsistent methods for validating the integrity of contract data through the QAP
process. In response to why there were errors concerning contract type and award
type in EAS, contracting officers from Regions 1, 4, and 9 stated they were due to
input errors.
EPA Is Misreporting Vital Contract and Spending Information
Federal spending information is designed to inform the public on how and where
tax dollars are being spent to provide transparency to the federal government's
operations. EAS data is made available to the public through the Federal
Procurement Data System. As a result, EPA is certifying inaccurate contract data
in required annual submissions to the OMB.
Recommendations
We recommend that the Assistant Administrator for the Office of Administration
and Resources Management:
5.	Develop and implement a data quality plan for EAS to ensure the
adequacy of data across all regions. The plan should include detailed
instructions for ensuring contract types and task order pricing
arrangements are input in EAS correctly and that procedures are
established to verify the accuracy of the information.
6.	Ensure that Region 1 has an approved QAP and members of Region l's
contracting staff are aware of the QAP's contents and requirements.
Agency Response and OIG Evaluation
In response to recommendation 5, the EPA agreed that data quality is important and
would evaluate the source of discrepancies and implement appropriate corrective
action. After the exit conference, OAM revised its response to the recommendation
to include additional activities that it is conducting. In 2011 and 2012, OAM
provided training to contracting staff targeted at correcting past errors. In FY 2013,
OAM will continue training and is planning on conducting quarterly data quality
reviews. Through its self-assessment and peer review programs, OAM will also
conduct file reviews, which include data reporting. As the Regional Acquisition
Framework progresses, OAM will identify opportunities to ensure consistency in
EPA's reporting on associated contracting vehicles, and will implement the policy
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or training necessary to improve agency-wide acquisition report. The response did
not address development of a data quality plan or provide an explanation as to why
it was not needed. The response relies upon QAPs that the audit found lacked
detailed instructions on how to accomplish the data validation. The Remedial
Action Framework is not completed and available for us to assess the adequacy of
the actions EPA plans to take. The additional information did not provide an
adequate response to the recommendation and the audit resolution process will be
used to resolve the recommendation.
In response to recommendation 6, the Agency stated that the Region 1 QAP has
been approved and staff are aware of the QAP's contents and requirements. The
Agency's action addressed the recommendation. Therefore, we consider the
corrective action completed.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
Planned
Completion
Date
Claimed
Amount
Ag reed-To
Amount
1a 15 Require that written acquisition plans for future
cost-reimbursement RAC contracts be approved by
the Head of the Contracting Activity.
1b 15 For current cost-reimbursement RAC contracts, at
the end of the base period, require written
acquisition plans be prepared and approved by the
Head of the Contracting Activity.
2	15 Develop performance measures for each region for
the use of fixed-price contracts and task orders for
remedial actions. The performance measures
should be implemented in a way that holds the
regions accountable (both the Superfund program
staff and contracting staff) for decreasing the use of
high risk contracts and task orders.
3	15 As part of the implementation of the Contracts
2010 Strategy, provide training to both Superfund
program and contracting staff on how and when
less risky contracts and task orders should be used
in the Superfund remedial program.
15 Determine whether staffing changes are needed in
each region to ensure that staff have the skills to
manage the increased use of fixed-price contracts
and task orders, and develop a plan for addressing
the staffing needs.
20 Develop and implement a data quality plan for EAS
to ensure the adequacy of data across all regions.
The plan should include detailed instructions for
ensuring contract types and task order pricing
arrangements are input in EAS correctly and that
procedures are established to verify the accuracy
of the information.
20 Ensure that Region 1 has an approved QAP and
members of Region 1 's contracting staff are aware
of the QAP's contents and requirements.
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for
Administration and
Resources Management,
and Assistant Administrator
for Solid Waste and
Emergency Response
Assistant Administrator for 11/30/13
Administration and
Resources Management,
and Assistant Administrator
for Solid Waste and
Emergency Response
Assistant Administrator for
Administration and
Resources Management,
and Assistant Administrator
for Solid Waste and
Emergency Response
Assistant Administrator for
Administration and
Resources Management
Assistant Administrator for 03/04/13
Administration and
Resources Management
O = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is unresolved with resolution efforts in progress
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Appendix A
Sampled Contracts, Task Orders, and
Work Assignments for Data Integrity
RAC Contracts and Region 7 Site Specific Contracts
Region
Contract
EAS contract type
Contract type as listed
in the contract
Contract
Type same
Contract
Type
different
Region 1
EP-S1-06-03
T&M
IDIQ

X
Region 1
EP-S1-06-01
T&M
IDIQ

X
Region 4
EP-S4-09-02
T&M
IDIQ

X
Reqion 4
EP-S4-08-03
T&M
IDIQ

X
Region 7
EP-S7-09-02
Fixed-Price
Fixed-Price
X

Region 7
EP-R7-08-14
Fixed-Price
Fixed-Price
X

Region 7
EP-S7-11-07
IDIQ
IDIQ
X

Region 7
EP-S7-11-01
Fixed-Price
Fixed-Price
X

Region 7
EP-R7-08-12
IDIQ
IDIQ
X

Region 7
EP-S7-07-10
Fixed-Price
Fixed-Price
X

Region 7
EP-S7-11-04
IDIQ
IDIQ
X

Region 7
EP-S7-10-03
Fixed-Price
Fixed-Price
X

Region 8
EP-W-05-049
CPFF
CPFF
X

Region 8
EP-W-06-006
CPFF
CPFF
X

Region 9
EP-R9-09-01
T&M
IDIQ

X
Region 9
EP-S9-08-03
IDIQ
IDIQ
X

Region 9
EP-S9-08-04
IDIQ
IDIQ
X

RAC Contract Task Orders and Work Assignments
Region
Contract
TO/WA
EAS Contract
/TO/WA Pricing
Pricing per TO/WA
in EPA files
EAS and EPA
file the same
EASand EPA
file different
for TO/WA
type
Region 1
EP-S1-06-03
1
T&M
T&M
X

Region 1
EP-S1-06-03
5
T&M
T&M
X

Region 1
EP-S1-06-03
12
T&M
T&M
X

Region 1
EP-S1-06-03
17
multiple3
T&M

X
Region 1
EP-S1-06-03
22
multiple
T&M

X
Region 1
EP-S1-06-03
37
T&M
T&M
X

Region 1
EP-S1-06-03
38
multiple
T&M

X
Region 1
EP-S1-06-03
45
T&M
T&M
X

Region 1
EP-S1-06-01
3
T&M
T&M
X

Region 1
EP-S1-06-01
8
multiple
T&M

X
Region 1
EP-S1-06-01
28
multiple
T&M

X
Region 1
EP-S1-06-01
31
multiple
T&M

X
Region 1
EP-S1-06-01
41
multiple
T&M

X
3 Task order contains multiple line items with differing award types (i.e. cost-type, T&M, FP, etc.)
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Region
Contract
TO/WA
EAS Contract
/TO/WA Pricing
Pricing per TO/WA
in EPA files
EAS and EPA
file the same
EASand EPA
file different
for TO/WA
type
Reg
on 1
EP-S1-06-01
42
T&M
T&M
X

Reg
on 1
EP-S1-06-01
52
multiple
T&M

X
Reg
on 1
EP-S1-06-01
53
T&M
T&M
X

Reg
on 4
EP-S4-09-02
1
multiple
FFP

X
Reg
on 4
EP-S4-09-02
2
T&M
T&M
X

Reg
on 4
EP-S4-09-02
9
Multiple
FFP

X
Reg
on 4
EP-S4-09-02
10
Fixed-Price
FPP
X

Reg
on 4
EP-S4-09-02
11
Fixed-Price
FFP
X

Reg
on 4
EP-S4-09-02
12
Fixed-Price
T&M

X
Reg
on 4
EP-S4-09-02
14
T&M
FFP

X
Reg
on 4
EP-S4-09-02
15
T&M
T&M
X

Reg
on 4
EP-S4-09-02
16
T&M
FFP

X
Reg
on 4
EP-S4-09-02
20
T&M
FFP

X
Reg
on 4
EP-S4-09-02
24
T&M
FFP

X
Reg
on 4
EP-S4-09-02
27
T&M
FFP

X
Reg
on 4
EP-S4-09-02
28
T&M
FFP

X
Reg
on 4
EP-S4-09-02
33
cost
FFP

X
Reg
on 4
EP-S4-09-02
42
T&M
FFP

X
Reg
on 4
EP-S4-09-02
46
Fixed-Price
FFP
X

Reg
on 4
EP-S4-09-02
51
Fixed-Price
FFP
X

Reg
on 4
EP-S4-09-02
56
Fixed-Price
FFP
X

Reg
on 4
EP-S4-09-02
59
Fixed-Price
FFP
X

Reg
on 4
EP-S4-09-02
61
T&M
FFP

X
Reg
on 4
EP-S4-09-02
62
T&M
FFP

X
Reg
on 4
EP-S4-08-03
6
T&M
T&M
X

Reg
on 4
EP-S4-08-03
8
T&M
T&M
X

Reg
on 4
EP-S4-08-03
11
T&M
T&M
X

Reg
on 4
EP-S4-08-03
15
Fixed-Price
T&M

X
Reg
on 8
EP-W-05-049
209
CPFF
CPFF (LOE)
X

Reg
on 8
EP-W-05-049
212
CPFF
CPFF (LOE)
X

Reg
on 8
EP-W-06-006
107
CPFF
CPFF (LOE)
X

Reg
on 8
EP-W-06-006
108
CPFF
CPFF (LOE)
X

Reg
on 8
EP-W-06-006
115
CPFF
CPFF (LOE)
X

Reg
on 9
EP-R9-09-01
1
T&M
T&M
X

Reg
on 9
EP-R9-09-01
2
T&M
T&M
X

Reg
on 9
EP-S9-08-03
8
T&M
T&M
X

Reg
on 9
EP-S9-08-03
17
T&M
T&M
X

Reg
on 9
EP-S9-08-03
36
T&M
T&M
X

Reg
on 9
EP-S9-08-03
41
T&M
T&M
X

Reg
on 9
EP-S9-08-03
50
T&M
T&M
X

Reg
on 9
EP-S9-08-04
7
T&M
T&M
X

Reg
on 9
EP-S9-08-04
43
T&M
T&M
X

Reg
on 9
EP-S9-08-04
45
T&M
T&M
X

Reg
on 9
EP-S9-08-04
48
T&M
T&M
X

Reg
on 9
EP-S9-08-04
50
T&M
T&M
X

Reg
on 9
EP-S9-08-04
53
T&M
T&M
X

Reg
on 9
EP-S9-08-04
65
Fixed-Price
Fixed-Price
X

Source: OIG analysis of contract files and EAS data.
13-P-0208	24

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Appendix B
Agency Response to Draft Report and OIG Evaluation

PRO^
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D C. 20460
MAR 4 2013
MEMORANDUM
SUBJECT: Response to Office of Inspector General Draft Report No. OA-FY11-0594
EPA Must Increase Fixed-Price Contracting in the Remedial
Program, Dated January 8, 2013
Thank you for the opportunity to respond to the issues and recommendations in the subject
draft audit report. Following is a summary of the agency's overall position, along with its
position on each of the report's recommendations. For those report recommendations with
which the agency agrees, we have provided either high-level intended corrective actions and
estimated completion dates to the extent we can or reasons why we are unable to provide high-
level intended corrective actions and estimated completion dates at this time. For those report
recommendations with which the agency does not agree, we have explained our position and
proposed alternatives to recommendations.
Overall Comments
The Assistant Administrators for OSWER and OARM agree in principle to the objectives of
this report, which are to improve acquisition planning and oversight and to maximize the use
of firm fixed price contracts when appropriate. However, we are not in agreement with some
13-P-0208	25
FROM:	Craig E. I looks
Assistant Administrator for Administration and Resources Management
Mathy Stanislaus
Assistant Administrator for Solid Waste and Emergency Response
TO:
Melissa Heist
Assistant Inspector General for Audit

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of the recommendations offered in the OIG's draft Report. OSWER and OARM support the
Administration's call to reduce vulnerabilities related to "high risk" contracts by using more
fixed rate and fixed price contracts. We are committed to mitigating high risk contracts
through improved acquisition planning, management and oversight of the contracts, and we
are committed to identifying opportunities to fix price new contracts. Evaluating and
proposing the most efficient and appropriate contracting vehicle is a component of the
Superfund Remedial program's current effort to implement the Contracts 2010 Strategy effort.
The Superfund remedial program is preparing its next generation contracting strategy
implementing Contracts 2010, called the Remedial Acquisition Framework. It is currently
being developed by a workgroup of program and acquisition representatives as a guide to
remedial acquisitions in a reduced budget climate. As part of this effort, EPA is examining its
program operations and future workload to identify areas that may yield efficiencies and cost
savings. EPA is evaluating the use of fixed price contracts for certain types of work, such as
ongoing monitoring of five year reviews. The goals of the Remedial Acquisition Framework
will be balanced with the best approach to achieve the Superfund remedial cleanup mission in
the most efficient and effective manner. The OIG findings in this report, and the subsequent
recommendations, seemed to have ignored the Superfund Program's use of fixed price
subcontracts in the remedial construction program. Although Remedial Action Contracts
(RACs) may be cost reimbursement at the contract level, the RAC contractor awards
subcontracts for construction as fixed price. Additionally, on statements regarding fixed price
construction, the cost of federal construction oversight must be factored into any calculations
of acquisition effort.
OIG Response 1: As we discuss on page 12 of the report, EPA's RAC contractors award fixed-
price type subcontracts to accomplish the remedial actions. The use of fixed-price type
subcontracts is one of the reasons we believe that more opportunities exist for EPA to use
fixed-price contracts and task orders.
Specific Comments
Our staff conducted an extensive review of the report and has significant concerns about the
lack of data supporting the report's assertions and conclusions. The report's title and "At a
Glance" section focus on fixed price contracting in the remedial program; however, it only
provides anecdotal generalizations regarding one segment of the remedial program, remedial
action construction. It ignores significant parts of the remedial program that are components
of the contracts examined, namely: Site Assessment/Characterization, Remedial
Investigation and Feasibility Studies, Risk Assessment, Remedy Selection, Remedial Design,
and Post Construction. In addition, the report only addresses a small portion, not necessarily a
representative sample, of the remedial program's universe of existing acquisition vehicles,
excluding work performed by the US Army Corps of Engineers and States.
OIG Response 2: Our audit focused on remedial construction activities funded through RAC
and site specific contracts, but also looked at other activities that were purchased under the RAC
contracts. Our conclusion was that remedial construction had the greatest opportunities for use of
fixed-price type contracts. Unless specifically stated in the report, the term remedial action refers
to the remedial construction activities.
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As a result, OSWER and OARM believe that the draft report fails to provide a balanced
portrayal of fixed rate contracting. The report states that fixed price contracts must be used
without explaining the benefits, downsides or conditions under which they should be used.
Furthermore, the report appears to use varying terms to describe fixed priced contracting,
such as firm fixed price type and fixed rate, and thus it is unclear the type of fixed price
contract the OIG is recommending. We currently use fixed rate contracts and task orders
throughout the program. For example, as mentioned above, the subcontracts for
construction under RAC contracts are fixed price. EPA also uses the Emergency and Rapid
Response Services (ERRS) contracts, which are fixed rate time and material (T&M) for less
complex construction projects.
OIG Response 3: We agree that fixed-price contracting cannot be used in all circumstances and
state that in the report. We revised the report to ensure it did not imply that fixed price
contracting must always be used. To avoid any confusion between fixed-price and fixed rate, we
changed the reference to a specific Region 7 contract at the end of chapter 2 to state "fixed price
per ton."	
The Superfund program utilizes contract vehicles appropriate for the uncertain conditions that
exist at its sites. The contract types used are based on many factors, including, but not limited
to: resources, site conditions and characteristics, unforeseen risks and site cleanup objectives.
While fixed rate and fixed price contracting has a place in the Superfund remedial program,
such an approach has significant disadvantages that the report fails to appropriately
acknowledge. We recommend that the report include a discussion of the undue risks to the
Government and failures (e.g., cost increases from uncertain site conditions, change orders,
and claims) of firm fixed priced type contracts with respect to subsurface and under water
construction projects. What may work in Region 7, e.g., for above ground projects, may not
work for complex projects in other regions, such as ground water sites.
OIG Response 4: We agree that fixed-price contracting is not suitable for all remedial actions.
However, we found the types of remedial actions that Region 4 and 7 funded with fixed-price
type contracts were similar to activities that other regions funded with other than fixed-price type
contracts. Region 4 did fund activities related to the treatment of ground water through fixed-
price task orders. Costs can increase beyond what was originally anticipated in both fixed-price
and CPFF contracts. For example, both types of contracts can be adjusted if unforeseen site
conditions exist. For the 12 RAC contracts that are CPFF, the discussion of whether a fixed-price
task order can be used to fund the activities is not occurring because the contract does not allow
for fixed-price. With an IDIQ contract, which is what we advocate in recommendation 1, fixed-
price task orders can be considered.	
Several regions have attempted to replicate the Region 7 site specific model with mixed
success. While Region 4 did attempt a fixed price project, additional contamination was
uncovered at the site, increased oversight was required to oversee the removal of the
additional contamination, and the ultimate price of the project was higher than projected.
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Furthermore, remedial funding allocations late in the fiscal year make it extremely difficult to
prepare and award fixed price contracts by September 30.
OMB recognized that fixed price contracts might not be appropriate for projects similar to
Superfund remedial cleanup work
The purpose of the report states that the OIG conducted the audit in order to determine
whether EPA is reducing the amount of high risk contracting activities, which include not
only cost reimbursement and time and materials type contracts, but also non-competitive
and sole source contracts awarded when only one bid or offer is received. The report
identifies the initial OMB memorandum calling for Departments and Agencies to reduce
their "high risk" contracting but only mentions the OMB memorandum dated October 27,
2009, entitled "Increasing Competition and Structuring Contracts for Best Results", which
acknowledges that, in some cases, where uncertain circumstances are present, it may be
appropriate to use a "high risk" contract.
Although OMB issued a caution regarding high risk contracts and directed Federal Agencies to
decrease their use by ten percent, OMB did not direct the use of firm fixed price contracts in
lieu of cost reimbursement or time and materials contracts.
Conversely, OMB's implementing guidelines, included in the above memorandum, says "The
President's Memorandum further states that government contracts should be structured to
'minimize risk and maximize value' for the taxpayer. In most cases, fixed-price contracts will
be best suited for achieving this goal because they provide the contractor with the greatest
incentive for efficient and economical performance. In circumstances where there is
considerable uncertainty regarding the requirements, however, cost-reimbursement contracts
or, in more limited circumstances, time-and- materials or labor-hour (T&MILH) contracts may
provide for a more effective allocation of risk between the government and the contractor."
EPA selects the most appropriate contracts depending on the risk, in accordance with OMB's
guidance. Recommending what would effectively be subjective performance measures for
firm fixed price contracting, and holding staff accountable to those measures, is the equivalent
of requiring the selection of a contract type irrespective of the judgment of the acquisition
staff or the reasonableness of the approach. EPA, therefore, does not agree with the
recommendation for performance measures, instead EPA will focus on strengthening the
acquisition planning process to ensure the appropriate contract type is properly determined
including firm fixed price type contracts where appropriate.
OIG Response 5: We agree that where there is considerable uncertainty regarding the
requirements, a cost reimbursement or other high risk contract may be appropriate. We
disagree, however, with the Agency's statement that EPA selects the most appropriate
contract depending on the risk. We identified RAC contracts with identical statements of
work, which according to the EPA's guidance, is a basis for determining contract type. One
of these contracts is a CPFF contract, while the other is an IDIQ contract. Because the
statements of work are identical, the contract type should also be identical. For CPFF
contracts, there is no ability to issue fixed-price work assignments, meaning the discussion
of whether to use a fixed-price vehicle for remedial actions cannot occur.
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Benchmarking against the initial Contracts 2000 Strategy rather than the revised strategy
is erroneous, and stating that revisions were due to a lack of leadership is subjective.
References to the first Contracts 2000 Strategy and statements that a lack of leadership
prevented EPA from moving away from high risk contracts are subjective. Although the initial
Contract 2000 Strategy recommended dividing Superfund design, construction and oversight
activities into two types of functional contracts, the strategy was amended with the Contracts
2000  Design Construction Decision. This is the document to which the OIG should refer
when referencing Contracts 2000. In the amendment EPA clearly states the rationale for
implementing a menu approach-"centered around the Agency's limited experience base to
directly contract for and manage construction projects, and the in-house resources that would
be needed to place and manage construction projects". A workgroup of EPA employees
evaluated options and presented them for senior management's consideration and decision.
The draft report improperly and without support characterizes that process as "management
OIG Response 6: Our conclusions regarding the past lack of leadership are supported by
adequate evidence, including numerous interviews, and past management action or inaction.
When the Contract 2000 report was issued in 1999, it stated that there were opportunities for
the use of fixed-price, completion form, and performance-based contracting in the Superfund
program. The decision to allow a menu approach, as described in the Contracts 2000 -
Design/Construction Contracts memorandum was premised on all contracts being structured to
encourage the increased use of completion form, fixed-price, and performance based
approaches to ordering work. The 2004 Superfund study recommended that OAM and OSWER
work together to encourage the use of alternative contract types, such as performance based and
site specific contracts. Despite these recommendations, our report found the EPA has generally
continued to rely upon cost reimbursable type contracts and task orders for remedial actions.
allowed the plan to be changed" or as a lack of leadership.
The report creates an unsubstantiated correlation between firm fixed price contracts
and increased competition, achieving socioeconomic goals, and cost savings.
All contracts that are competed, including cost reimbursement contracts, can be structured to
encourage small businesses' proposals and enhance competition. We encourage the OIG to
be less definitive about the link between firm fixed price contracts and increased competition
and the achievement of socio economic goals as other contracts types, e.g., the time and
materials ERRS contracts, have achieved socioeconomic goals. Although certain fixed price
contracts might make it easier to achieve competition or socioeconomic goals, all contract
types can achieve these results.
OIG Response 7: Since 2006, Region 7 has continually had the highest percentage of
contracts awarded as "small business." Region 7 staff informed us that the region's use of
site-specific contracting is a major contributor to its small business achievements. EPA
headquarters staff told us that Region 7 is instrumental in helping EPA achieve its small
business goals.
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There is risk associated with any type of contract, and this report does not provide an accurate
picture of the risks associated with using a fixed price contract or other type of contract
vehicle. When competing work that is well defined, using fixed-price contracts may result in
lower cost. Many of the projects addressed in Region 7 as site specific contracts are in this
category. Uncertainty in site conditions, inherent at certain Superfund sites, may lead to
uncertainty in project scope and higher costs under a fixed price scenario due to the contractor
building in costs associated with the higher risk.
Projects that involve subsurface and underwater actions, including groundwater remediation
and sediment remediation, are difficult to characterize and uncertainties and findings of
additional contamination may lead to more expensive cleanups if performed fixed price as
contractors increase price to account for these uncertainties. While the Superfund program
has performed site cleanups for over thirty years, each site and its unique topography and
contaminant characteristics means that-each remedial action (RA) project is different and
does not fit the mold of repetitive type work that is typical of fixed price contracts. In
addition, change orders and claims may affect the final price of a contract, obviating
potential cost savings anticipated at the beginning of the project. Region 4 encountered this at
the Tower Chemical site, where the final costs after accounting for increased quantities and
contaminants found onsite, in addition to the costs of the oversight contractor, resulted in
costs similar to what had originally been anticipated under the RAC contract.
Given the constrained budget facing the Superfund Remedial program, the funding
requirements related to fixed price contracting presents a significant obstacle. An additional
disadvantage to using fixed price contracts in a fiscally constrained environment is that fixed
price contracts must be funded up front. When EPA awards direct construction contracts,
such as Region 7's site specific contracts, EPA must set aside the full value of the contract
and is unable to leverage the funding. That is, in many situations, because of the manner in
which funding is allocated to the Agency (e.g. under a continuing resolution), the Superfund
Remedial program must incrementally fund construction projects. Funding remedial action
construction cost reimbursement type contracts allows for incremental funding which
stretches the limited Superfund dollars available for cleanup.
Direct construction using fixed price contracts may require additional resources for EPA to
oversee construction and handle change orders and claims. Region 7 designed and followed a
human resource acquisition and development strategy that could be difficult for other
Regions to implement. Region 7 uses its On Scene Coordinator's (OSCs) to assist the
Remedial Project Managers (RPMs) in performing construction oversight. These resources to
perform construction oversight may not be available in other Regions with multiple large,
complex projects, such as Region 2 or 8. Current EPA full time equivalents (FTE) resources
constrain hiring of sufficient RPMs and Contracting Officers for EPA to perform a high
volume of fixed price construction projects. Given current budget constraints and likely
reductions in FTEs, it will be difficult, if not impossible for other Regions to achieve Region
7's level of technical capability and technical experience. Limited resources were one
rationale behind the change in implementation of the Contracts 2000 Strategy.
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OIG Response 8: Our report does not recommend that EPA Regional offices adopt the
Region 7 model, but does recommend that EPA look for increased opportunities to use
fixed-price type contracts and assess the resources needed to achieve that goal. In fact, the
Design/Construction Contracts Decision Memorandum stated that all contracts would be
structured to encourage the use of fixed-price approaches when ordering work.
RAC construction contracting and Site-Specific contracting are not equal and
should not be compared.
Statements in the report indicate a lack of understanding of how Superfund performs its
remedial action construction and the Region 7 Site Specific approach. EPA uses the
Remedial Action Contracts (RACs) to purchase the services of a contractor to serve as the
construction manager of a project. Region 7 has developed the capability to perform
construction management in-house, and thus like the RAC contractor, procures the remedial
action construction contracts directly. Region 7 provides all of the oversight capabilities
with Region 7 staff, including staff that perform field oversight, address contract change
orders and handle contract claims. In order to provide an equal comparison between site
specific contracts and RACs, the costs associated with construction oversight must be
considered when site specific contracts are utilized. Furthermore, the report should
recognize that construction, either subcontracted by a RAC or procured directly under a site
specific contract are procured predominantly as a firm fixed price (under RACs) or a fixed
unit price (under a site specific contract). So in many respects the Superfund Remedial
program is benefiting from and using a fixed-price approach, albeit at a Subcontractor level.
While Region 7 is to be commended for its success in developing the infrastructure to
conduct direct construction contracting, their practices should not be used as a basis to apply
it nationwide. The development of the infrastructure to perform direct construction
activities is intensive and requires extra resources, training and FTE. Lessons gained from
other regions' attempts to firm fix price construction projects indicate that it takes more than
adjusting the contract type to be successful. We must also have the proper infrastructure and
available funding to fully fund the contract. In fact, the decision to not develop a nationwide
direct construction infrastructure at EPA was made at the inception of program in 1980;
instead, EPA chose to collaborate with the US ACE and use their existing infrastructure for
cleaning up Superfund remedial projects. Although EPA may not be able to achieve a
nationwide shift to fixed price construction contracting, we do anticipate more fixed price
projects. Many of the five-year review projects are being performed via fixed rate task
orders, and Regions are examining their work type and oversight workload to determine if
other types of projects, such as long-term remedial projects, might have components of the
work that can be fixed price. EPA anticipates that the guidance provided from both the
program and OAM will continue a shift to fix pricing work where possible and appropriate.
Data Analysis Approach is flawed
The "judgmental sample methodology" approach calls into question the validity of the data
sample selected. It is not clear what "judgmental" means and how or why the additional
projects were selected. The OIG reviewed half of EPA's Regions using judgmental
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sampling. Both the random sample and sample methodology bring into question statements
the OIG makes in the next chapter that "only" one Region is performing any particular
activity. Without the data to support these statements, the OIG should be consistent and not
make broad conclusions based on interviews covering 50% of the universe. Region 7 has two
RAC contracts called Architect and Engineering Services (ACE). For consistency, it would
have been appropriate to collect data from these contracts, when other Regions' RACs were
being evaluated for activities other than remedial action.
OIG Response 9: A judgmental sample is a nonrandom sample selected based on the
opinion of auditors. As discussed in the Scope and Methodology, we reviewed contracts and
task orders from Regions 1, 4, 7, 8, and 9. We surveyed other regional offices and received
survey responses from Regions 2, 3, 5, 6, and 10. We also reviewed data on fixed-price site
specific contracts and RAC contracts awarded across all regions. Our goal was to gain a
broad perspective of contracting for remedial actions across the country, and we believe that
was accomplished via our methodology. In our opinion, our methodology and conclusions
ensure compliance with the Inspector General Act of 1978 and the December 2011 revision
of the Government Auditing Standards.
The use of oninions instead of data to exnlain how fixed nrice contracts are used in the
Snnerfnnd Program is flawed.
The initial Contracts 2000 strategy for design and constructions was not implemented; it is
disingenuous to state that it is not successful when it was amended and not used.
Furthermore, the change to the Contracts 2000 strategy is not an example of the Regions'
resistance to change. The Regions were legitimately concerned about funding uncertainties
and the lack of necessary infrastructure to directly procure and manage multi-million dollar
projects. Although the expertise to conduct direct procurement and management of
construction contracts could be developed, it would cost more in funding, FTE, and time than
the Agency had at that time, especially in light of the resources available through the USACE.
The federal government has come to recognize these alliances through strategic sourcing
initiatives, and OMB has issued directives to not recreate what is already available elsewhere
in the government. Referring to the original report and stating that it was rejected and
management allowed the plan to be changed dismisses the work performed in evaluating the
possibility of implementing the plan and the rationale for why it was not.
The RAC contracts were awarded several years prior to the President's and OMB's emphasis
on reducing the use of high risk contracts, thus they should not be measured against an
initiative that was not in place when they were awarded. In addition the statement that only
Regions 4 and 7 have reduced high risk contracting activities in the remedial program is not
based on fact. Without having looked at all Regions, it is not accurate to say "only" as the data
is for 50% of the universe. In addition, the OIG looks only at remedial actions when referring
to the remedial program, a much broader universe.
The statement "most EPA Regional offices have resisted the use of fixed price" is
subjective. Regional offices have not rejected the use of fixed pricing per se, but rather have
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chosen not to pursue firm fixed price approaches under direct construction contracting
vehicles for the reasons cited previously.
The statements that EPA "hands over responsibility" and "simply oversees" are a gross
misstatement. Remedial Project Managers (Remedial Project Manager) and Contracting
Officers hold the ultimate responsibility for each project and ensure that the outcome of the
project protects the public from the harm of hazardous materials. Projects are not "simply
overseen" by the RPM, but monitored on a daily basis to ensure that all components of the
project are proceeding appropriately.
OIG Response 10: We changed the language regarding the responsibilities of EPA
Remedial Project Managers.
Points Requiring Clarification
On page 4, the first paragraph. This paragraph needs additional language to differentiate the
discussion from Contracts 2010. This is the EPA's response to OMB's directive in 2009 to
reduce high risk contracts by 10%.
OIG Response 11: We identified this language in the Contracts 2010 Strategy Report,
page 20 (Intended Result), and page 21 (Examples of How to Get There).
On pagl2, we are unfamiliar with the references to the April 2004 Superfund study.
Please provide citations.
OIG Response 9: U.S. EPA Study: SUPERFUND: Building on the Past, Looking to the
Future; April 22, 2004. Page 92 (bottom of page), and Page 93 (2nd full paragraph). We
provided EPA a copy of the study.
In the attached tables clarify if the contract or task order was site specific, RAC or ERRS.
Responses to Recommendations
2-1 Replace all current cost-reimbursement RAC contracts at the end of the current
base or option period with IDIQ contracts to allow the use of fixed-price task orders
when appropriate.
2-1 The Agency does not fully agree with this recommendation. Per FAR 16.1, selecting
contract type is a matter for negotiation and requires the exercise of sound judgment. Factors
that should be considered in this negotiation are risk, complexity of the requirement, expected
price competition, urgency of the requirement, period of performance of the requirement
(the longer the more risk), and the contractor's technical capability and financial
responsibility. The FAR also states the objective is to negotiate a contract type and price that
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will result in reasonable contractor risk and provide the contractor with the greatest incentive
for efficient and economical performance. President Obama's March 4, 2009,
memorandum is not intended to supersede either the afore-mentioned regulatory guidance or
the contracting officer's business judgment in selecting the appropriate contract type.
However, the Agency does agree that contract files should reflect appropriate analysis and
contain adequate support and justification for the contract type selected.
Accordingly, as the Agency's current cost reimbursement remedial action contracts were in
place prior to the issuance of the President's and OMB 2009 memoranda, EPA does not
intend to modify our existing cost reimbursement remedial contracts at this time, before
performing the analysis set forth in FAR 16.1. However, the Assistant Administrators for
OARM and OSWER agree that the Agency should endeavor to decrease the number of cost-
reimbursement contracts to the maximum extent possible, where appropriate, and will
implement processes to ensure the required analysis is conducted to determine the
appropriate contract type, and the results of that analysis are documented in the contract file.
To that end, OAM recently published Interim Policy Notice (1PN) 12-03 on Acquisition
Planning. The processes, procedures, and oversight associated with this 1PN are intended to
institutionalize more informed and collaborative decision making throughout the
acquisition planning process, which includes the decision on contract type. Additionally, as
anticipated by the requirements of the recently established Remedial Acquisition
Framework, the Agency plans to review all of the Agency's contracts in support of the
Superfund Remedial program in order to determine the appropriate time to re-compete
under the new proposed remedial model described in the framework. The Agency has
targeted completion of this review by June 2013.
2-2 Develop performance measures for each region for the use offixed-price contracts
and task orders for remedial actions. The performance measures should be
implemented in a way that holds the regions accountable (both the Superfund
program staff and contracting staff) for decreasing the use of high risk contracts and
task orders.
2-2 The Assistant Administrators of both OARM and OSWER agree that there may be
opportunities to replace existing contracts to allow for more fixed price vehicles within the
Remedial program. It should be noted that President Obama's March 4, 2009, memorandum
is not intended to supersede either the regulatory guidance or the contracting officer's
business judgement in selecting the appropriate contract type. The Agency cautions the OIG
against assuming that all cost-type contracts impose greater risk on the Government than other
contract types, including firm fixed price type contracts in certain situations. In order to
reduce the risk associated with contracts other than fixed price, the Agency is currently
implementing a process to improve acquisition planning, practicing due diligence in terms of
identifying the best contract type for the work required and documenting the basis for
determining the contract type selected. To that end, OSWER and OARM will develop
guidelines for use when selecting the most appropriate type of contract and task order, as
applicable, considering results from the Acquisition Planning process, the Remedial
Acquisition Framework, and the Centers of Expertise Study. Given the significant effort this
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will entail, OSWER and OARM have targeted completion of effort this by September 30,
2013.
2-3 As part of the implementation of the Contracts 2010 Strategy, provide training to both
Superfund program and contracting staff on how and when less risky contracts and task
orders should be used in the Superfund remedial program.
2-3 The Assistant Administrators of OARM and OSWER agree that additional training is
necessary and are committed to providing that training to both Superfund program and
contracting staff. Training developed will consider results from the Acquisition Planning
process, the Remedial Acquisition Framework, and the Centers of Expertise Study, and will
include when and how less risky contracts and task orders should be used, including how to
document the analysis leading up to the contract type selection, in the Superfund Remedial
Program. OARM and OSWER have targeted completion of this effort. by November 30,
2013.
2-4 Determine whether staffing changes are needed in each region to ensure that staff have
the skills to manage the increased use of fixed-price contracts and task orders, and develop
a plan for addressing the staffing needs.
2-4	as indicated in 2-3 above, the Assistant Administrators of both OARM and OSWER
agree to continue to ensure that staff possesses the skills necessary to manage all types of
contracts ranging from cost reimbursement to firm fixed price. A recently initiated and
ongoing Centers of Expertise study is assessing staffing needs associated with
implementation of new business processes such as prescriptive Acquisition Planning
requirements. OARM and OSWER will monitor progress on these efforts on an ongoing
basis through a robust training program and regular Contracts Management Assessment
Team (CMAT) MAT reviews.
3-5	Develop and implement a data quality plan for EAS to ensure the adequacy of data
across all regions. The plan should include detailed instructions for ensuring contract
types and task order pricing arrangement are input in EAS correctly and that
procedures are established to verify the accuracy of the information.
3-5 The Assistant Administrator for OARM agrees that data quality is important for
effective contract management. OARM will evaluate the source of the discrepancies in the
EAS data and, depending on the evaluation results, the Agency will implement appropriate
corrective action to address proper coding on contract and task order pricing arrangements
in EAS. The OARM will complete this by June 2013.
3-6 Ensure that Region I has an approved QAP and members of Region 1 's
contracting staff are aware of the QAP's contents and requirements.
3-6 Region l's August 2012 QAP has been approved and posted on the OAM policy web-
site, and staff are aware of the QAP's contents and requirements.
Thank you for your review. If you have questions regarding these comments, please contact
John Bashista in OARM or James Wool ford in OSRTI.
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cc: J ohn B asfai sta, OARM/OAM
James Woolford,
OSWER/OSRTI Nigel Simon,
OSWER/OPM
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Appendix C
Distribution
Office of the Administrator
Assistant Administrator for Solid Waste and Emergency Response
Assistant Administrator for Administration and Resources Management
Principal Deputy Assistant Administrator for Solid Waste and Emergency Response
Deputy Assistant Administrator for Solid Waste and Emergency Response
Principal Deputy Assistant Administrator for Administration and Resources Management
Agency Follow-Up Official (the CFO)
Agency Follow-Up Coordinator
General Counsel
Deputy General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Audit Follow-Up Coordinator, Office of Solid Waste and Emergency Response
Audit Follow-Up Coordinator, Office of Administration and Resources Management
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