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\ Office of Inspector General
At a Glance
Catalyst for Improving the Environment
Why We Did This Review
We sought to determine
whether the acquisition
planning process for the
Environmental Protection
Agency's (EPA's) Office of
Air and Radiation (OAR) and
Office or Water (OW) used
knowledge gained from prior
acquisitions to limit the use of
cost reimbursable Level-of-
Effort (LOE) contracts. EPA
could reduce its risk and
potentially save money by
using other contract types.
LOE contracts are cost-plus-
fixed-fee contracts that span
multiple years. Generally,
they are not performance
based - where the contractor
is compensated for results
rather than effort or process.
LOE contracts require the
contractor to provide only
required hours over a specified
time, with no final product or
deliverable required.
For further information,
contact our Office of
Congressional and Public
Liaison at (202) 566-2391.
To view the full report,
click on the following link:
EPA Office of Air and Radiation and Office of Water
Can Further Limit Use of Level-of-Effort Contracts
What We Found
OAR and OW need to improve efforts to limit the use of LOE contracts. By
maximizing available opportunities to use other than LOE contracts, OAR and
OW can reduce EPA's financial risk, increase the possibility for greater
competition and cost savings, and improve the Agency's ability to increase the use
of performance-based contracts. Federal regulations indicate such cost-type
contracts are the least preferred method for acquiring services.
Based on the active list of OAR and OW contracts as of June 15, 2004, we
determined that 83 of those 169 contracts were LOE contracts. Significantly,
$288 million of the $383 in cumulative obligations for those 169 contracts, or
75 percent, were for LOE contracts:
Cumulative Obligations (millions)
Office	All Contracts	LOE Contracts
OAR	$235	$174
OW	148	114
Totals	$383	$ 288
In a judgmental sample of 14 cost-plus-fixed-fee contracts awarded for OAR and
OW, totaling approximately $105 million, we found that 61 of the 217 work
assignments, or 28 percent, could have been contracted out as other than LOE
procurements. These involve such projects as planning meetings and conferences
and maintaining computer systems.
What We Recommend
We recommend that OAR and OW require their program offices to reduce
reliance on cost reimbursable LOE contracts by improving acquisition planning
and increasing efforts to identify opportunities for performance-based acquisitions.
We also recommend that the Office of Administration and Resources
Management, which is responsible for contracts, work with OAR and OW to
better define contract requirements to make greater use of performance-based
contracts, and better enable contract officers to share best practices. The Agency
generally agreed with the findings and recommendations in the draft report and
has identified steps taken and planned to further reduce EPA's reliance on LOE
contracts and increase performance-based service acquisitions.