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OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
EPA Can Improve Its Managing of
Superfund Interagency Agreements
with U.S. Army Corps of Engineers
Report No. 2007-P-00021
April 30, 2007
Sevenson
US Army Corps
of Engineers
SUPERFUND PROJECT
FEDERAL CREOSOTE
SUPERFUNO SITE REMEDIATION
LAGOON A. MANVILLE, NJ
AN EQUAL EMPLOYMENT
OPPORTUNITY PROJECT

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Report Contributors:
Mike Davis
Heather Layne
Abbreviations
EPA	U.S. Environmental Protection Agency
IAG	Interagency Agreement
IP AC	Intra-governmental Payment and Collection
M&S	Management and Support
OARM	Office of Administration and Resources Management
OIG	Office of Inspector General
OSWER	Office of Solid Waste and Emergency Response
RPM	Remedial Project Manager
The Corps	U.S. Army Corps of Engineers
Cover photo: Sign located at the entrance to the Federal Creosote Superfund Site in
Manville, New Jersey, managed by the U.S. Army Corps of Engineers under
an EPA Interagency Agreement (EPA OIG photo).

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U.S. Environmental Protection Agency	2007-P-00021
Office of Inspector General	April 30 2007

At a Glance
Catalyst for Improving the Environment
Why We Did This Review
In Fiscal Year 2006, the U.S.
Environmental Protection
Agency (EPA) made about
$255 million in Superfund
Interagency Agreement (IAG)
payments to the U.S. Army
Corps of Engineers (the
Corps). We sought to
determine the effectiveness of
EPA's selection of the Corps
to perform cleanup, as well as
EPA's effectiveness in
monitoring Corps-conducted
cleanups.
Background
The goal of the Superfund
program is to clean up
hazardous waste sites that
pose risks to human health and
the environment. EPA
accomplishes Superfund goals
through a variety of
mechanisms, including IAGs.
An IAG is a written agreement
in which one Federal agency
(such as EPA) obtains supplies
and services from another
agency (such as the Corps) on
a reimbursable basis.
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:
www.epa.aov/oia/reports/2007/
20070430-2007-P-00021 .pdf
EPA Can Improve Its Managing of Superfund Interagency
Agreements with U.S. Army Corps of Engineers
What We Found
EPA needs to better justify and support its decisions to enter into Superfund IAGs
with the Corps. Decision memorandums used to justify awarding Superfund IAGs
to the Corps did not contain comparisons of alternatives considered. Further, EPA
did not develop independent cost estimates. This occurred because EPA generally
believes the Corps has more construction and contracting expertise to manage
Superfund projects than its own personnel. As a result, EPA has limited assurance
that the Superfund IAGs it awards to the Corps are based on sound decisions.
EPA regions have initiated some corrective actions, but further steps are needed.
EPA also needs to improve its monitoring of IAGs with the Corps to better
manage cost, timeliness, and quality. Specifically, the Agency needs to:
Ensure the Corps improves the quality and timeliness of monthly invoices
and progress reports it submits to EPA.
•	Ensure it knows what services the Corps is being paid for and that the
amount billed is based on clear supporting documentation.
•	Include terms and conditions in IAGs that establish criteria against which
the Corps" performance will be evaluated.
EPA regions indicated they were generally very satisfied with the majority of the
work performed by the Corps. Nonetheless, EPA needs to better monitor the more
than $250 million it pays to the Corps each fiscal year to clean up Superfund sites.
Improved monitoring would also eliminate $2.5 million in excess and idle
Management and Support fees that EPA paid the Corps that could be put to better
use in the Superfund program.
What We Recommend
EPA needs to develop its own independent cost estimates for Corps in-house costs,
conduct cost analysis of alternatives when determining whether to use the Corps,
and document actions taken. EPA also needs to require the Corps to improve the
format of its monthly reports, use the Intra-governmental Payment and Collection
System to reimburse the Corps for its in-house costs, address the $2.5 million in
Management and Support fees being held by the Corps, include terms in future
IAGs to allow better monitoring, and develop a plan on using feedback reports.
EPA agreed with all but one of our recommendations, and for this
recommendation it proposed an alternative action that meets the intent of our
recommendation.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
April 30, 2007
MEMORANDUM
SUBJECT:	EPA Can Improve Its Managing of Superfund Interagency
Agreements with U.S. Army Corps of Engineers
Report No. 2007-P-00021
y/\ va
FROM:	Melissa M. Heist
Assistant Inspector General for Audit
TO:	Susan Parker Bodine
Assistant Administrator
Office of Solid Waste and Emergency Response
Luis A. Luna
Assistant Administrator
Office of Administration and Resources Management
This is our final report on the subject audit conducted by the Office of Inspector General (OIG)
of the U.S. Environmental Protection Agency (EPA). This audit report contains findings that
describe the issues the OIG has identified and corrective actions the OIG recommends. This
audit report represents the opinion of the OIG and the findings contained in this report do not
necessarily represent the final EPA position. Final determinations on matters in this audit report
will be made by EPA managers in accordance with established audit resolution procedures.
The estimated cost of this report - calculated by multiplying the project's staff days by the
applicable daily full cost billing rates in effect at the time - is $216,840
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days of the date of this report. You should include a corrective action
plan for agreed upon actions, including milestone dates.
If you or your staff have any questions regarding this report, please contact me at
202-566-0899 or heist.melissa@epa.gov; or Carl Jannetti, Product Line Director, at
215-814-5800 or iannetti.carl@epa.gov.
' A ¦
¦ ml!
\ PR0^°

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EPA Can Improve Its Managing of Superfund Interagency Agreements with
U.S. Army Corps of Engineers
Table of C
Chapters
1	Introduction		1
Purpose		1
Background		1
Noteworthy Achievements		2
Scope and Methodology		2
Prior Reports		4
2	IAG Award Process Could be Further Improved		5
Regional Decisions Need Better Justification		5
OSWER Requirements Not Followed		7
Recommendations		9
Agency Comments and OIG Evaluation	 9
3	EPA Needs to Improve Monitoring of Superfund lAGs
Awarded to the Corps 		10
Timeliness of Corps Monthly Reports Needs Improvement		10
Quality of Corps Monthly Reports Also Needs Improvement		12
Payment Process Needs Change		12
EPA Needs to Improve Oversight of Management and Support Fees		13
EPA Needs Criteria to Evaluate Corps Performance		14
Recommendations		15
Agency Comments and OIG Evaluation		15
Status of Recommendations and Potential Monetary Benefits		17
Appendix
A Feedback Reports	 18
B Agency Response to Draft Report 	 19
C Distribution 	 29

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Chapter 1
Introduction
Purpose
In Fiscal Year 2006, the U.S. Environmental Protection Agency (EPA) made about
$255 million in Superfund Interagency Agreement (IAG) payments to the U.S.
Army Corps of Engineers (the Corps). We conducted this audit to determine:
The effectiveness of EPA's analysis and selection of the Corps to perform
cleanup versus an EPA contractor, a State, or the Bureau of Reclamation.
The effectiveness of EPA's activities to ensure cleanups conducted by the
Corps are accomplished on time, within budget, and to quality standards.
Background
The Superfund program was authorized under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980. The goal of the program is
to clean up uncontrolled hazardous waste sites that pose unacceptable risks to
human health and environment. EPA accomplishes its Superfund goal through a
variety of mechanisms that include contracts, partnerships with States, and IAGs.
An IAG is a written agreement between Federal agencies in which one agency
(such as EPA) needing supplies or services obtains them from another Federal
agency (such as the Corps) on a reimbursable basis. An IAG can take a variety of
forms. The work can be performed directly by the Corps staff on behalf of EPA,
or the Corps can have the work performed by a contractor on behalf of EPA.
EPA's Grants Administration Division, within the Office of Administration and
Resources Management (OARM), is authorized to enter into and execute IAGs
for the Agency. The Office of Solid Waste and Emergency Response (OSWER)
sets policies for managing Superfund sites. EPA policy requires decision
memorandums to justify the award of IAGs.
Remedial Project Managers (RPMs) in regional offices manage Superfund IAGs.
RPMs recommend the mechanisms (e.g., another Federal agency such as the
Corps) for cleaning up the site. RPMs have to work with EPA contracting
officers and contractors when using EPA contracts. When RPMs use the Corps
via IAGs, they have fewer contracting duties because they transfer to the Corps
most of the administrative tasks for awarding and managing the cleanup contracts.
EPA said that the Corps also offers unique strengths to the Agency in the areas of
design, construction, claims, and independent government cost estimates.
Further, RPMs have to monitor the contractor's cost and work when EPA
contracts are used, while the Corps monitors cost and work of the contractors
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when IAGs are used. The RPM is responsible for monitoring the cost and work
of the Corps through site visits, monthly reports, and conference calls.
In Fiscal Years 2005 and 2006, EPA paid the Corps over $261 million and
$255 million, respectively, for Superfund IAGs (see Table 1-2). These payments
were for costs of the Corps oversight (in-house) as well as the cost for the Corps'
contractor that performed the work.
Table 1-2: Payments for Superfund IAGs Awarded to the Corps
Fiscal Year 2005
Non Direct Site Charges
EPA Direct Site Payments to Corps' Contractors
Total
$86,591,000
$174,652,000
$261,243,000
33%
67%
Fiscal Year 2006
Non Direct Site Charges
EPA Direct Site Payments to Corps Contractors
Total
$74,759,000
$180,905,000
$255,664,000
29%
71%
Source: EPA Cincinnati Finance Center
Noteworthy Achievements
Regions 1, 2, and 3 demonstrated unique and notable achievements related to IAG
management:
•	Region 1 designed and instituted a decision matrix to evaluate specific
factors surrounding Superfund sites when deciding whether the best option
for cleaning the site was to use the Corps or EPA's response action
contractors.
•	Region 2 compared the cost of services for the Corps to that of EPA's
response action contractors to determine, in general, whether IAGs with
the Corps or response action contractors were more economical.
•	Region 3 established a regional management team, consisting of executive
level managers, to review RPMs' decisions to use the Corps or EPA's
response action contractors.
Scope and Methodology
We performed this audit from July to December 2006 in accordance with
Government Auditing Standards, issued by the Comptroller General of the United
States. We selected IAGs for review, based on dollar amount or award date.
Using these criteria, we reviewed 26 IAGs that Regions 1, 2, and 3 awarded to the
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Corps valued at $1 billion from a universe of 223 IAGs valued at almost
$1.9 billion.
We visited EPA headquarters in Washington, DC; Region 1 in Boston,
Massachusetts; Region 2 in New York, New York; and Region 3 in Philadelphia,
Pennsylvania. At headquarters we met with OSWER and OARM personnel to
discuss Superfund IAG policies and review documents. During our site visits in
the regions, we interviewed personnel and reviewed documents used for justifying
and managing Superfund IAGs.
To accomplish our first objective, we reviewed 12 IAGs valued at almost
$30 million awarded after January 2002. We limited the sample to IAGs awarded
after January 2002 to ensure applicability with OARM's policy on decision
memorandums issued in 2002. We interviewed RPMs, project officers, and
others to determine why awarding an IAG to the Corps was the best alternative.
We also reviewed decision memorandums and other documents to determine the
justification cited for awarding IAGs to the Corps.
To answer our second objective, we interviewed OARM and OSWER personnel
responsible for establishing and implementing policy for managing IAGs with the
Corps. In the regions we interviewed RPMs, project officers, and other managers
responsible for monitoring IAGs. We reviewed statements of work, monthly
progress reports and invoices, and other documents used to monitor the 26 IAGs
in our sample. However, we only reviewed monthly reports for 17 of the 26
sample IAGs because the remainder were unavailable.
We reviewed management controls related to our objectives. As part of this
review, we examined EPA's Fiscal Years 2005 and 2006 Integrity Act Annual
Assurance Letters for OSWER and the Fiscal Year 2005 letter for OARM.
OWSER did not report any material weaknesses pertaining to Superfund IAGs.
OARM continued to report on its progress in addressing the Agency level
weakness of Grants Management.
On October 29, 2004, in response to EPA OIG report 2005-P-00001, OSWER
indicated its Superfund Contracts Regional Review Program would review how
regions document decisions for entering into IAGs with the Corps. On August
19, 2005, OSWER reported in its 2005 Annual Assurance Letter that it had not
collected enough data to determine whether clarifying guidance was needed.
OSWER's 2006 Annual Assurance Letter did not comment on this topic.
Other controls we reviewed included the feedback reports submitted by all 10
EPA regions. OSWER developed an electronic feedback form to determine the
degree of the RPMs' satisfaction with the Corps and its contractors for all active
Superfund projects managed under IAGs. We focused on the reports from
Regions 2, 3, and 9 since they had comments that pertained to our review.
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EPA responded to our draft report on March 28, 2007. We summarized their
response and included our evaluation at the end of Chapters 2 and 3.
Prior Reports
We researched prior EPA OIG, Government Accountability Office, and other
reports and noted two pertinent EPA OIG reports:
•	EPA OIG Report No. 2005-P-00001, Response Action Contracts:
Structure and Administration Need Improvement, December 2004:
We reported that EPA regions do not consistently document the rationale
for deciding which procurement option to use for Superfund cleanups. We
also noted that EPA does not have a process to measure and disseminate
information on the Corps' past performance in support of EPA.
•	EPA OIG Report No. 2001-P-00011, Superfund: Superfund
Interagency Agreements, June 2001: We reported that EPA generally
had effective controls to ensure its Superfund IAGs achieve expected
environmental results timely and efficiently. However, we noted areas in
which EPA could make improvements. In particular, the 1991 OSWER
Directive 9242.3-08 Revision of Policy Regarding Superfund Project
Assignment Between Alternative Remedial Contracting Strategy
Contractors and the U.S. Army Corps of Engineers was superseded, but
still used to assign Superfund work between EPA contractors and IAGs
with the Corps.
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Chapter 2
IAG Award Process Could be Further Improved
EPA needs to better justify and support its decisions to enter into Superfund IAGs
with the Corps. Eleven of the 12 decision memorandums we reviewed for
projects awarded to the Corps contained no comparisons of alternatives. Further,
EPA did not develop its own independent cost estimates. This occurred because
EPA generally believes the Corps has more construction and contracting expertise
to manage Superfund projects than its own personnel. Also, OSWER and OARM
did not hold regions accountable to follow policies for awarding and justifying
IAGs. As a result, EPA has limited assurance that the approximately
$255 million that EPA paid to the Corps in Fiscal Year 2006 to manage
Superfund IAGs was based on sound decisions. Prior to our audit, some EPA
regions had initiated corrective measures, such as developing a decision matrix
(Region 1) and establishing a regional management team to evaluate alternatives
(Region 3). While we believe these are worthwhile processes, further
improvements to these processes would make them more effective.
Regional Decisions Need Better Justification
In January 2002, OARM's Grants Administration Division issued IAG Guidance
on Use of Interagency Agreements that requires EPA to prepare decision
memorandums that include:
•	Information on alternatives to IAGs.
•	Determinations that costs are reasonable based on an independent estimate
of costs or other appropriate cost information developed by EPA.
•	An explanation as to why the other Agency was selected.
The decision memorandum is the key document that EPA uses and reviews to
justify awarding the IAG.
Of the 26 IAGs we sampled, 12 were awarded by Regions 1, 2, and 3 after
OARM issued its January 2002 guidance. Our review of these 12 IAGs, valued at
almost $30 million, determined that:
•	Only one decision memorandum discussed alternatives to the Corps.
•	The files for another five of these IAGs (but not the decision
memorandums) showed the region considered alternatives to the Corps.
•	For the remaining six IAGs, there was no documented evidence to indicate
that regional offices considered alternatives before using the Corps.
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See Table 2-1 for a breakdown. Moreover, none of the 12 decision
memorandums contained an EPA-developed cost estimate of the Corps' costs.
(Region 3 did develop a cost estimate for one IAG but did not discuss it in the
decision memorandum.) As a result, EPA spent approximately $28 million to
procure the services of the Corps and its contractors without preparing its own
cost estimate to ensure the prices proposed by the Corps were reasonable.
Table 2-1: Details on 12 lAGs Reviewed



Documentation in
Decision Memo
Alternative
Considered
Region
Site Name
Award
Amount
EPA
Cost
Estimate
Alternative
Considered
But Not in
Decision
Memo
1
Atlas Tack
$14,340,000
No
No
Yes
1
Elizabeth Mine
3,200,000
No
No
Yes
1
Eastland Wools Mills
3,500,000
No
No
Yes
1
Selresim
900,000
No
No
Yes
2
Hooker I
75,000
No
No
No
2
Hooker II
75,000
No
No
No
3
Westinghouse
250,000
No
No
No
3
William Dick Lagoon
306,000
No
No
Yes
3
Eastern Diversified
80,000
No
No
No
3
Safety Light
2,000,000
No1
Yes
NA
3
Big John Salvage
4,590,000
No
No
No
3
RCRA
525,000
No
No
No
$29,841,000
Source: EPA's IAG Database and Decision Memorandums
Instead of referring to a cost estimate, the Region 2 decision memorandums stated
"the projected budget furnished by [the Corps] ... has been reviewed by EPA staff
and has been determined to be reasonable in relation to the level of [the Corps] ...
involvement expected at this site." The Region 1 decision memorandums
showed total estimated cost, but did not include further breakdown of costs
needed for an adequate cost estimate. Moreover, there was no indication of how
or who developed the Region 1 estimates, and two Region 1 RPMs told us they
relied on the Corps to provide cost estimates. We agree there are instances for
which EPA may want to utilize the Corps because of specialized expertise. For
example, Superfund activities that involve unexploded ordinance is an area in
which the Corps has unique expertise. However, without comparing the Corps'
cost estimate to an EPA-developed cost estimate, EPA cannot be assured that the
cost proposed by the Corps is reasonable or appropriate.
Several RPMs told us that they often relied on the Corps to prepare the estimates.
OSWER personnel also believed EPA could rely on the Corps' estimates without
performing its own formal analysis. They said they believed the Corps was less
1 Independent cost estimate developed by Region 3 but not discussed in decision memorandum.
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expensive and better suited to manage the remedial Superfund activities than its
own regions. However, an EPA cost estimate should still be developed and
considered to determine if the costs proposed by the Corps are reasonable.
In Fiscal Year 2004, EPA reported that it obligated approximately 56 percent of
its remedial action funding to IAGs, 36 percent to contracts, and 8 percent in
grants to States. Over the past 20 years, EPA policy has evolved to provide EPA
regions the latitude to manage most cleanups, no matter what the dollar value.
However, many EPA personnel still believe the Corps is better suited to manage
Superfund cleanups. In 1984, EPA signed a Memorandum of Understanding with
the Corps indicating the Corps will manage all cleanups paid for with Superfund
money unless the Corps cannot provide necessary support. In 1988, EPA issued
another memorandum that required only cleanups exceeding $5 million to be
assigned to the Corps. In December 1991, EPA again revised its policy to require
EPA to assign only remedial actions costing more than $15 million to the Corps.
The latest policy, dated May 2003, removed all dollar thresholds and permitted
EPA to manage all cleanups, no matter what the dollar value. However, the latest
policy still encouraged the continued use of the Corps for larger projects, and
EPA regions continue to rely heavily on the Corps.
EPA's 2004 internal study, Superfund: Building on the Past, Looking to the
Future, also known as the "120-Day Study," noted there is a perception in EPA
that some regions are using IAGs as a default vehicle, instead of deliberately
choosing an IAG, because of the Corps' unique capabilities. This study
recommended that regional senior management should be involved in selecting
the cleanup mechanism (other Federal agency, remedial action contractor, or State
agency) to ensure effective use of funds. However, we found the decision
memorandums RPMs prepared did not include cost estimates and information
pertaining to alternatives, when considered. EPA personnel often believed the
expertise, resources, and experience of the Corps were more important than cost.
In addition, the 2006 Performance Plan for RPMs did not include any critical job
elements that pertained to the management of IAGs, lessening the incentive for
following guidance.
OSWER Requirements Not Followed
In addition to removing dollar thresholds when deciding to award IAGs to the
Corps, OSWER's May 2003 Superfund Policy for Assigning Work to the US
Army Corps of Engineers identified seven factors that regions should consider and
document when deciding whether to use either response action contracts or the
Corps. This policy stated, "As with all procurements, analysis should be
conducted to select the appropriate contracting vehicles.... All analyses should be
documented in the site or contract file. The documentation should outline the
reason behind the selection, especially any factors that were used to make the
decision."
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Although Regions 1 and 3 had potential best practices in this area, improvements
could be made. Region 1 utilized and documented a decision matrix, while
Region 3 developed a Site Advisory Outline for the Regional Management Team
process. The Region 1 decision matrix listed factors the RPM should consider
that were similar to those required in the May 2003 policy. The Region 3
Regional Management Team process consisted of involving executive level
managers in the decision making to ensure an RPM's desire to award an IAG to
the Corps is justified. However, these processes did not consider all seven factors
required by the 2003 policy, as shown in Table 2-2.
Table 2-2: Factors Considered by Potential Best Practices
Potential Best Practice

May 2003 Policy
Source Selection Factors
Region 1
Decision Matrix
Region 3
Site Advisory
1.
Site Characteristics
Yes
Yes
2.
Remedy Characteristics
No
Yes
3.
Local/Public Interest
No
Yes
4.
Experience/Regional Infrastructure
Yes
No
5.
Capability/Capacity of Contractors
Yes
No
6.
Conflict of Interest
Yes
No
7.
Unique Site Needs
Yes
Yes
Source: EPA Policy and IAG Files
Also, a selection factor in the Region 1 decision matrix was outdated. The
decision matrix asked, "Is the work a Remedial Action with an estimated cost of
more [than] ... $15 million? ... .If yes, then ... [the Corps] contractor support is
strongly suggested (1991 Guidance memo)" This factor became outdated when
OSWER's 2003 policy removed the dollar threshold. The Region 1 and 3
processes are tools that have potential to support the justifications of all regions
for decisions made when awarding IAGs. However, the documents need to be
more comprehensive to ensure that all the factors from the May 2003 policy are
included and that Agency cost estimates are developed and considered.
EPA OIG Report No. 2005-P-00001 recommended that OSWER issue clarifying
guidance to regional offices about documenting its rationale for what entity will
perform cleanup. However, as of November 2006, EPA was still evaluating how
to clarify its guidance, but told us that they had verbally recommended that all
regional offices should consider using the Region 1 decision matrix. The issues
reported in this chapter demonstrate that the regions continued to utilize their own
processes, which are not in full compliance with established guidance. OSWER
needs to act expeditiously to clarify its guidance and ensure regions follow it.
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Recommendations
We recommend that the Assistant Administrators for OSWER and OARM:
2-1 Require that regional offices develop an EPA independent cost estimate
for the Corp's oversight of IAGs.
2-2 Require that regional offices conduct a cost analysis of alternatives when
determining whether to award an IAG and evaluate the analysis against an
EPA-developed cost estimate.
2-3 Develop a process for holding regional offices and RPMs accountable for
complying with OSWER's 2003 policy for assigning remedial work, and
OARM's 2002 guidance to document in decision memorandums
justifications for IAGs based on an analysis of alternatives and EPA-
developed cost estimates.
Agency Comments and OIG Evaluation
EPA concurred with our recommendations and is revising the OSWER May 2003
policy to ensure that, prior to entering an IAG with the Corps, regional offices
will prepare their own estimates for Corps in-house cost. The updated policy will
require regional offices to conduct a cost analysis when determining whether to
award an IAG to the Corps versus another alternative. The revised policy will
also require improved documentation of regional decisions to award IAGs to the
Corps versus other mechanisms. This documentation will include specific
information on alternatives considered, why the IAG was selected, why the costs
are considered reasonable based on an independent EPA estimate of Corps
in-house costs, other factors considered, and what involvement regional
management had in the decision.
Instituting these requirements in a revised OSWER policy meets the intent of our
recommendations. However, OSWER needs to ensure the new policy has a
mechanism to hold regional offices accountable for compliance.
EPA's complete response is in Appendix B. OSWER's response to this final
report should include milestone dates indicating when its planned actions will be
completed.
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Chapter 3
EPA Needs to Improve Monitoring of
Superfund lAGs Awarded to the Corps
EPA needs to improve its monitoring of IAGs awarded to the Corps to better
manage cost, timeliness, and quality. In October 2005, EPA recognized the need
to improve its monitoring of Superfund IAGs awarded to the Corps and made
changes to do so. However, the Agency still needs to:
•	Ensure the Corps improves the quality and timeliness of monthly invoices
and progress reports it submits to EPA.
•	Ensure it knows what services the Corps is being paid for and that the
amount billed is based on clear supporting documentation.
•	Include terms and conditions in IAGs that establish criteria against which
the Corps' performance will be evaluated.
The need to improve monitoring of IAGs awarded to the Corps still exists because
EPA generally believes the Corps is another Federal agency that is more qualified
to manage Superfund construction projects than EPA. EPA regions indicated they
were generally very satisfied with the majority of the work performed by the
Corps. Nonetheless, EPA needs to better monitor the more than $250 million it
pays to the Corps each fiscal year to clean up Superfund sites. Improved
monitoring would also eliminate $2.5 million in excess Management and Support
fees that EPA paid the Corps.
Timeliness of Corps Monthly Reports Needs Improvement
EPA Resources Management Directive 2550D, Financial Management of the
Superfund Program Superfund Interagency Agreements, issued in 1988, requires
EPA to obtain from the Corps monthly progress reports, within the first 10 days
of the following month. The reports are to include information about timeliness,
cost, and quality of cleanups. The directive also requires the Corps to provide
documentation that supports all direct and indirect costs.
The EPA Remedial Design Remedial Action Handbook, EPA 540/R-95/059,
issued in 1995, states that the Corps is to provide monthly progress reports to
RPMs as a tool for gauging site progress. EPA implemented this guidance in
statements of work we reviewed by specifying that the Corps must submit
monthly reports to EPA. For example, the terms and conditions in the statement
of work for one IAG we reviewed, valued at over $178 million, specified that
each month the Corps must provide the RPM:
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•	Summaries of work performed for the current period.
•	Estimates of the percentage of the project completed.
•	An accounting of funds expended for the reporting period and project
to date.
•	Summaries of all problems or potential problems encountered.
•	Projected work for the next month.
•	Copies of all... requests for reimbursement (SF 1080) for all Corps
in-house costs submitted to EPA for payment that month.
We reviewed monthly reports for 17 of the IAGs in our sample. For eight of
these IAGs, the Corps submitted late monthly reports to EPA, with some reports
submitted as late as a year after the Corps performed the work (see Table 3-1). In
total, we reviewed 40 monthly reports for the 17 IAGs and found that the Corps
submitted 19 of them to EPA late.
Table 3-1: IAGs with Late Monthly Reports
IAG
Number of
Late Reports
Lateness of Reports
(in Months)
944216-01-0
1
2
944170-01-0
5
CD
I
CM
944173-01-0
4
1 - 12
944162-01-0
1
5
944174-01-0
4
cn
I
941732-01-0
1
2
934141-01-0
2
1 -3
934140-01-0
1
3
Source: Monthly Reports Regions Received from the Corps
While five of the eight IAGs with late reports were awarded by Region 3, it was
not because that region did not attempt to rectify the condition. Interviews with
the RPMs responsible for the six IAGs awarded by Region 3 disclosed all were
dissatisfied with the Corps' monthly reports. Further, documentation in these
RPM files contained correspondence expressing this dissatisfaction. For example,
in a September 2005 email to the Corps, the RPM states:
It seems that no matter how we at EPA plead, cajole, beg, and
point out [the Corps' reporting requirements under the IAGs],
[the Corps ] financial reporting to the RPMs continues to be
abominable.
In feedback reports, Region 9 RPMs also expressed frustration with the timeliness
of the Corps' reports. For example, they wrote in feedback reports that the Corps
sometimes went a year without submitting reports. They also noted they did not
always get billings or monthly reports. Further examples of displeasure noted in
feedback reports from Region 2, 3, and 9 RPMs are included in Appendix A.
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Quality of Corps Monthly Reports Also Needs Improvement
Our review of the monthly reports that the Corps submitted to Regions 1, 2, and 3
disclosed problems with quality. Regions 2 and 3, along with Region 9, had
previously noted these problems in feedback reports.
RPMs routinely identified in feedback reports problems with the Corps' monthly
reports. RPMs did not always understand the charges on the Corps's monthly
invoices because reports did not give detailed information for labor billings.
These same RPMs expressed concern over an inability to determine from the
reports who charged to the project and what work they performed. For example,
one feedback report, for an IAG valued at almost $109 million, stated: "The
reports do not give very detailed cost breakdowns, for example I cannot determine
who is charging to the project and what work is accomplished by those who
charge to the project." See Appendix A for more examples.
Besides labor, the Corps' invoices include many other charges, such as
departmental overhead, general and administrative overhead, and a headquarters'
Management and Support fee. Despite Agency requirements to verify indirect
Corps costs, EPA could not provide any evidence to indicate that any audit
organizations reviewed how the Corps developed its indirect costs. Moreover,
EPA did not prepare detailed estimates for the cost of the Corps' staff hours and
associated overhead and compare them to the actual costs billed. EPA policy
requires program offices to prepare cost estimates for IAGs and ensure that all
direct and indirect costs are supported.
While the composition of these Corps indirect costs could not be clearly
accounted for and explained, some headquarters and regional personnel indicated
they were not concerned with the ambiguity because the Corps is another Federal
agency. They said the Corps, like EPA, is responsible for efficiently managing
Federal funds and is not in business to make money.
Without timely and quality progress reports, EPA cannot effectively assess work
progress, as well as evaluate the reasonableness of the Corps' actual costs.
Payment Process Needs Change
There is no incentive for the Corps to provide EPA clear, detailed monthly reports
in a timely manner because it is paid for the work performed before the reports
are submitted. Except for final payments, the RPM does not approve the Corps'
invoice before or after payment is made. EPA's payment office reimburses the
Corps solely based on the invoice submitted by the Corps. The statement of work
for one IAG stated, "Upon receipt of the [Corps] certified bill, [Cincinnati
Finance Center] processes payment to [the Corps], Payment will be made within
5 days of receipt and without certification by the EPA Regional program offices
except for final billings."
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The current payment process is unique within EPA and is only used for Corps
Superfund IAGs. Under this process, EPA cannot charge back payments the
program office disputes once the payments have already been made to the Corps.
Instead, credits must be made against future Corps billings.
All other EPA IAGs with other Federal agencies, including those for Superfund,
are paid using the Intra-governmental Payment and Collection (IPAC) System.
Under IP AC, the RPMs would approve payments to the Corps after payment is
made. However, IP AC provides a more effective process to dispute payments.
The process allows the RPM to input a "chargeback" (refund) if it is determined
the payment was unjustified. As part of its fiduciary responsibility, EPA needs to
ensure payments for Corps IAGs using its Superfund trust fund are justified.
Therefore, EPA should use the more effective IP AC system for Corps IAGs.
EPA Needs to Improve Oversight of Management and Support Fees
EPA headquarters has shifted oversight of Management and Support (M&S) fees
to the Corps. EPA pays the Corps for managing cleanups on a monthly basis, as
work is performed. Each monthly invoice contains billings for the work the
Corps district office performed managing the cleanup, and includes an M&S fee
based on the project costs billed. This M&S fee is currently set at 1.8 percent,
and is placed into a revolving fund that is managed by the Corps. These funds are
used to pay the Corps for work it performs at the request of EPA headquarters,
such as:
•	Resolving issues between Corps district offices.
•	Assisting with 5-year reviews.
•	Developing and providing technical guidance for EPA and the Corps.
•	Conducting annual joint EPA and Corps Superfund conferences.
•	Preparing and managing the M&S budget.
This cycle continues throughout the year, and the Corps maintains the accounting
of the M&S fees it holds for EPA. When we requested information from EPA
staff about how much was in the M&S revolving account, they needed to obtain
that information from the Corps. After we obtained this information, we
determined that more than $2.5 million remained in the fund at the end of Fiscal
Year 2006. Even though the funding may eventually be used, it represents funds
that are sitting idle. Therefore, the $2.5 million represents idle funds that could be
put to better use. The balance in this account will continue to grow unless annual
plans are developed for using the funds. As of October 2006, EPA had not
established any specific plans for how and when the excess M&S fees would be
used. EPA headquarters needs to improve its oversight for these funds. This will
enable EPA to manage the M&S fund balance fees and ensure excess funds are
not provided to the Corps.
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EPA Needs Criteria to Evaluate Corps Performance
In 2003, EPA issued the Evaluation of the Performance of the Corps of Engineers
In Support of EPA 's Superfund Program (referred to as the "Quigley report").
This report recommended including criteria in IAGs to evaluate the Corps'
performance. The suggested criteria included elements for cost control, quality,
timeliness of reporting, and project completion.
Subsequent observations in EPA's 2004 report, Superfund: Building on the Past,
Looking to the Future (referred to as the "120-Day Study"), further supported the
evaluation criteria called for in the Quigley report. Specifically, it included
findings and recommendations that indicated:
•	EPA needs to manage IAGs better, particularly billing and oversight.
•	The overhead rates charged by the Corps appear to vary widely.
•	Frustration with the IAG billing process is widespread.
•	OSWER and OARM should analyze how much EPA is paying other
Federal agencies for indirect costs and other costs. For Corps IAGs, these
costs should be analyzed at the district level, not just the national level.
In October 2005, in lieu of including criteria in the IAGs as recommend in the
Quigley report, EPA instituted feedback reports that RPMs can complete to assess
the cost, timeliness, and quality of the Corps' work. However, EPA has not
defined or formalized how the feedback reports will be used. The Corps'
performance will be difficult to evaluate until EPA develops a formalized plan on
how to use feedback reports.
For example, according to documentation in an award fee review report, one of
the 26 IAGs we reviewed, valued at almost $88 million, experienced poor Corps'
oversight of its contractor. This resulted in a small corner of a building
foundation collapsing due to over excavation. In addition, poor oversight resulted
in problems with the contractor's performance regarding the bypass of sewer
lines, poor planning, inaccurate costs estimates, and untimely work. Although the
Corps and its contractor performed poorly, the Corps' contractor received over
$400,000 in questionable award fees during periods of poor performance. EPA
also paid the Corps over $3 million despite insufficient oversight of its contractor.
As a result of the lack of performance criteria in the IAGs, the Corps can perform
poorly with no consequences. Further, other EPA offices may not be aware of the
problems being experienced. Without a method to record occurrence of
problems, the potential for a reoccurrence exists. This type of information is
essential to manage IAGs.
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Recommendations
We recommend that the Assistant Administrators for OSWER and OARM:
3-1 Require the Corps to improve the format of its monthly reports so that
costs and activities correlate and can be clearly understood. RPMs must
be able to determine who in the Corps worked on the IAG, for how long,
the costs charged EPA, and what work was accomplished and remains to
be completed.
3-2 Use the IP AC system to reimburse the Corps' in-house costs for work
accomplished under IAGs.
3-3 Develop a specific plan for using the $2.5 million in M&S fees held by the
Corps or require the Corps to refund these fees to EPA, and continue to
develop plans on an annual basis to address future fees.
3-4 Require future IAGs awarded to the Corps to include terms and conditions
that will enable RPMs to monitor the Corps' cost, quality, and timeliness.
3-5 Develop a policy on how and when the feedback reports will be used as an
oversight tool to monitor and improve the cost, quality, and timeliness of
the Corps' performance.
Agency Comments and OIG Evaluation
OSWER concurred with all recommendations except for Recommendation 3-2.
OSWER formed a joint EPA/Corps workgroup to improve, among other potential
areas, format and timeliness of the Corps' monthly reports. EPA developed a
plan for using the $2.5 million in M&S fees that is anticipated to use the
remaining balance by September 2008. OSWER and OARM will jointly
determine whether generic terms and conditions should be added to improve
monitoring cost, quality, and timeliness of Superfund IAGs awarded to the Corps.
Moreover, OSWER is developing a plan for how and when the feedback reports
will be used to improve monitoring the cost, quality, and timeliness of the Corps'
performance.
Concerning Recommendation 3-2, OSWER explained that it will assess whether
IP AC should be used to reimburse the Corps for its in-house costs for the work its
staff performed under the IAGs. However, OSWER does not intend to use IP AC
to reimburse the Corps' contractors.
EPA's actions taken and planned, including for Recommendation 3-2, should help
improve its monitoring of IAGs awarded to the Corps. Our recommendation to
use IP AC was intended to improve the monthly reports the Corps submits to EPA.
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The IP AC system has better controls than the current method of reimbursement to
ensure such monthly reports are provided to the regions.
EPA's complete response is in Appendix B. OSWER's response to this final
report should include milestone dates indicating when its planned actions will be
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
Agreed To
Amount
2-1 9 Require that regional offices develop an EPA
independent cost estimate for the Corp's oversiqht
of I AGs.
2-2 9 Require that regional offices conduct a cost
analysis of alternatives when determining whether
to award an IAG and evaluate the analysis against
an EPA-developed cost estimate.
2-3	9 Develop a process for holding regional offices and
RPMs accountable for complying with OSWER's
2003 policy for assigning remedial work, and
OARM's 2002 guidance to document in decision
memorandums justifications for lAGs based on an
analysis of alternatives and EPA-developed cost
estimates.
3-1	15 Require the Corps to improve the format of its
monthly reports so that costs and activities
correlate and can be clearly understood. RPMs
must be able to determine who in the Corps
worked on the IAG, for how long, the costs charged
EPA, and what work was accomplished and
remains to be completed.
3-2 15 Use the IPAC system to reimburse the Corps for
work accomplished under lAGs.
3-3 15 Develop a specific plan for using the $2.5 million in
M&S fees held by the Corps or require the Corps to
refund these fees to EPA, and continue to develop
plans on an annual basis to address future fees.
3-4 15 Require future lAGs awarded to the Corps to
include terms and conditions that will enable RPMs
to monitor the Corps' cost, quality, and timeliness.
3-5 15 Develop a policy on how and when the feedback
reports will be used as an oversight tool to monitor
and improve the cost, quality, and timeliness of the
Corps' performance.
Assistant Administrators for
OSWERand OARM
Assistant Administrators for
OSWERand OARM
Assistant Administrators for
OSWERand OARM
Assistant Administrators for
OSWERand OARM
Assistant Administrators for
OSWERand OARM
Assistant Administrators for 09/30/2008
OSWERand OARM
Assistant Administrators for
OSWERand OARM
Assistant Administrators for
OSWERand OARM
$2,500
$2,500
"I
O = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
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Appendix A
Feedback Reports

IAG Number
Region
$ Value
RPM Comment
1.
DW96934140
2
$108,763,660
The reports do not give very detailed cost
breakdowns, for example I cannot determine who is
charging to the project and what work is accomplished
by those who charge to the project.
2.
DW96934141
2
93,400,000
I cannot determine who is charging to the project and
what work they have accomplished.
3.
DW96943877
3
15,108,613
We need to have status reports submitted
monthly.
4.
DW96943802
3
287,207
If you don't know how to do a detailed cost estimate
with net present worth calculations, don't tell us you
can.
5.
DW96943841
3
340,000
Revise the financial reporting at least to the level of
mere adequacy!
6.
DW96943873
3
375,000
PPMD (Project Planning and Management Division)
support non-existent at times. In-house District costs
too high (vs. field support costs which were very
reasonable).
7.
DW96944085
3
61,059
Other than cost tracking for the IAG, the monthly
report narratives are not extremely useful. Reports
are consistently late.
8.
DW96944162
3
306,145
Monthly reports are continuously submitted late.
Currently the reports are four months behind.
9.
DW96955430
9
3,470,000
The format of the monthly reports provided to me by
the [Corps] is not very informative. I think monthly
written reporting overall is the major weakness of the
[Corps], A new format is needed to solve this
weakness.
10.
DW96955441
9
9,010,175
I didn't get any monthly reports. In spite of repeated
requests, including above mentioned visit, no reports.
The [Corps] went a year without submitting any
reports then delivered a data dump: coded printouts
about 2-inches thick, and that was supposed to
explain all expenditures for last year.
11.
DW96955635
9
120,000
Provide useful financial reports in a timely manner, on
a monthly basis. The reports need to specify the
Corps personnel who charged time to the project, the
number of hours charged, and the cost of those hours.
The reports also need to state what was done during
the reporting period.
12.
DW96955584
9
526,444
There seems to be a huge amount of overhead
expended in tracking down the accounting and
resolving accounting issues.
13.
DW96955587
9
247,193
Never got a billing. The amount we were originally
told this project would cost ($80 - 100 K) turned into
340 K.
14.
DW96955588
9
250,000
Given how tight Superfund dollars are the Corps
needs to assist EPA in projecting, monitoring, and
controlling costs.
Source: EPA Feedback Reports Completed by RPMs
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Appendix B
Agency Response to Draft Report
March 28, 2007
MEMORANDUM
SUBJECT: OSWER Response to Draft Audit Report" EPA Can Improve its
Managing of Superfund Interagency Agreements with U.S. Army
Corps of Engineers" Project No. 2006-001265
FROM:
Susan Parker Bodine/s/
Assistant Administrator
TO:	Bill A. Roderick
Acting Inspector General
Thank you for your evaluation of Superfund Interagency Agreements (IAGs) with the
U.S. Army Corps of Engineers (USACE) and for the opportunity to review the draft audit report
"EPA Can Improve its Managing of Superfund Interagency Agreements with U.S. Army Corps
of Engineers." We will use your recommendations to continue to improve the IAG award and
monitoring process.
The comments below represent a consolidated response from the Office of
Administration and Resources Management (OARM) and the Office of Solid Waste and
Emergency Response (OSWER). First, we provide historical context to EPA's use of the
USACE for Superfund work. Second, we address each of the recommendations and provide
information about planned or initiated actions related to those recommendations. Third, we
provide additional comments to ensure that the final audit report contains accurate and current
information.
I. Background:
We would first like to provide historical context to EPA's use of the USACE for
Superfund work. At the inception of the Superfund, EPA recognized the need to develop a
construction program to address site cleanup projects. EPA determined that developing and
maintaining the infrastructure of construction expertise (including cost estimators, contract
administrators, and contract and claims attorneys) would be expensive, and that construction
expertise was available through the use of another federal agency - the Army Corps of
Engineers. The process of obtaining construction expertise from the USACE and their
contractors was revisited as part of the Superfund Contracts 2000 Strategy, and workgroup
members again found that the cost of developing this expertise within EPA was prohibitive.
Thus, for over 25 years, EPA has partnered with the USACE to provide Superfund with
construction expertise.
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In addition to the USACE, EPA also uses EPA awarded contracts for smaller projects.
These contracts, currently named the Remedial Action Contracts (RACs), are primarily used for
smaller and less complex projects. As projects increase in scope and complexity, EPA has found
that in most cases a Federal construction manager is necessary. Thus the USACE, with their
ability to maintain a federal presence on site, are selected for these projects. The Regions are
delegated authority to enter into IAGs with the USACE for the management of site-specific
work, and the bulk of the funds awarded under IAGs to the USACE are Regional IAGs. The
EPA/USACE partnership has been integral in helping EPA accomplish over 1000 construction
completions at Superfund sites.
II. OIG RECOMMENDATIONS AND EPA RESPONSE:
OIG Recommendation 2-1: Require that regional offices develop an EPA independent cost
estimate for the USACE oversight of IAGs.
EPA Response:
OSWER agrees that EPA should prepare and document an estimate of anticipated
USACE staff hours and costs prior to entering into an IAG with USACE.
OSWER will reissue EPA's May 2003 policy on assigning work to USACE. In this
updated policy, OSWER will require that Regions prepare a budget for anticipated USACE Full
Time Equivalent (FTE) hours/costs, travel and other direct costs prior to entering into an IAG
with USACE. This budget estimate would be prepared by the remedial project managers
(RPMs) or project officers before commencing IAG scoping discussions with USACE (e.g.,
before USACE procures a contractor for remedial design (RD) or remedial action (RA) work).
This estimate is limited to anticipated USACE staff hours and costs for USACE in-house design
or construction services. This estimate is separate from the detailed Independent Government
Cost Estimate (IGCE) that will be prepared by USACE and reviewed by EPA for work
performed by contractors on site-specific RD or RA projects, or for technical support (e.g., PRP
oversight, real estate acquisitions, etc.). The IGCE would be prepared by skilled USACE cost
estimators before procuring the RD or RA contractor.
OIG Recommendation 2-2 Require that regional offices conduct a cost analysis of alternatives
when determining whether to award an IAG and evaluate the analysis against an EPA-developed
cost estimate.
EPA Response:
OSWER has agreed that EPA Regions should prepare and document an estimate of
anticipated USACE staff hours and costs prior to entering into an IAG with USACE to let and
manage design or construction contracts under Superfund.
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When OSWER updates the May 2003 policy on assigning work to USACE, OSWER will
require that Regions prepare a budget for anticipated USACE Full Time Equivalent (FTE)
hours/costs, travel and other direct costs prior to entering into an IAG with USACE. OSWER
also will require improved documentation of Regional decisions regarding use of USACE vs.
other mechanisms in this updated policy. This updated policy should bring Regions into
compliance with Office of Administration and Resources Management's (OARM) 2002
guidance for documenting justifications for IAGs based on an analysis of alternatives and EPA-
developed cost estimates.
OIG Recommendation 2-3: Develop a process for holding regional offices and RPMs
accountable for complying with OSWER's 2003 policy for assigning remedial work, and the
Office of Administration and Resources Management's (OARM) 2002 guidance to document in
decision memorandums justifications for IAGs based on an analysis of alternatives and EPA-
developed cost estimates.
EPA Response:
OSWER agrees that improvements are needed in documenting decisions on assigning
remedial work. OSWER will reissue EPA's May 2003 policy on assigning work to USACE, and
will include the following requirements for improving documentation of Regional decisions
regarding use of USACE vs. other mechanisms:
•	Regions should document all alternatives to the IAG considered by the Regions, why the
IAG mechanism with the USACE was selected, and why estimated USACE staff hours and
costs for the proposed work are considered to be reasonable, based on an EPA estimate of
anticipated USACE staff hours and costs developed for use in negotiating the IAG with the
USACE.
•	Regions normally consider several selection factors when making these decisions; these
factors will be further described in the policy to be reissued.
•	Regions shall document Regional management involvement in decisions.
OIG Recommendation 3-1: Require the Corps to improve the format of its monthly reports so
that costs and activities correlate and can be clearly understood. RPMs must be able to
determine who in the Corps worked on the IAG, for how long, the costs charged EPA, and what
work was accomplished and remains to be completed.
EPA Response:
OSWER agrees that the format and timeliness of USACE monthly reports should be
improved. A joint EPA/USACE workgroup has recently been formed which will further assess
issues associated with monthly reports and invoices, areas for improvement, and recommended
follow-up actions.
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OIG Recommendation 3-2: Use the IP AC system to reimburse the Corps for work
accomplished under IAGs.
EPA Response:
OSWER does not agree that the Intra-governmental Payment and Collection (IPAC)
system should be used to reimburse contractors under the Direct Cite Process for work
accomplished under IAGs. OSWER will further assess and consider whether to use the IP AC
system to reimburse the USACE for payment of USACE staff work accomplished under IAGs.
In the report, the OIG does not, but should, distinguish between EPA direct payments to
the USACE construction contractor under the Direct Cite Process, and payment of USACE
invoices for USACE in-house costs.
Regarding the Direct Cite Process, as the project manager and holder of the contract, the
USACE reviews contractor invoices and approves the charges. If the USACE has issues with the
invoice, the USACE follows standard contracting procedures and may suspend or disallow costs.
The USACE forwards request for payment to the EPA Cincinnati Finance Center for prompt
payment using Superfund funds. Payment of the contractor invoice by the EPA Cincinnati
Finance Center constitutes the Direct Cite Process.
Regarding payment of USACE in-house invoices for staff work accomplished under
IAGs, OSWER will further assess and consider whether to change to the IP AC system to
reimburse the USACE for these costs. As discussed earlier, the USACE in-house invoices to be
reviewed in this assessment would not include invoices for payments to contractors, since such
payments are considered part of the Direct Cite Process.
OSWER also recognizes the need to improve the timely receipt of appropriate
documentation associated with monthly invoices for work conducted under site-specific IAGs.
A joint EPA/USACE workgroup has recently been formed which will further assess issues
associated with monthly reports and invoices, areas for improvement, and recommended follow-
up actions.
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OIG Recommendation 3-3: Develop a specific plan for using the $2.5 million in Management
and Support (M&S) fees held by the Corps or require the Corps to refund these fees to EPA, and
continue to develop plans on an annual basis to address future fees.
EPA Response:
OSWER has an established plan in place for use of the $2.5 million in M&S fees held by
USACE and will update this plan to address expanded technical support activities to be funded
with these fees. The accrual of $2.5 million in M&S fees was a one-time occurrence in the first
year of converting from a centrally managed M&S fee system to a fee system that distributed
M&S fees to individual IAGs. The collection and use of M&S fees is carefully monitored by
OSWER on a quarterly basis, and the annual M&S budget is reviewed and compared against
actual expenditures. OSWER plans to draw down the remaining M&S fees through funding
work that would normally be paid for from Superfund's annual budget. To date, less than $1.6
million of the $2.5 million remains to be distributed. OSWER anticipates that these remaining
funds will be completely utilized by the end of FY-08.
OIG Recommendation 3-4: Require future IAGs awarded to the Corps include terms and
conditions that will enable RPMs to monitor the Corps' costs, quality, and timeliness.
EPA Response:
OSWER and OARM agree with this recommendation. We are committed to ensuring
that our RPM's and project officers have the tools necessary to properly oversee USACE work.
OSWER will work with OARM to review current IAGs for terms and conditions relating to EPA
monitoring of USACE costs, quality, and timeliness. Upon review of these IAGs, OSWER and
OARM will consider whether to recommend development of generic Superfund terms and
conditions.
OIG Recommendation 3-5 Develop a policy on how and when the feedback reports will be
used as an oversight tool to monitor and improve the cost, quality, and timeliness of the Corps'
performance.
EPA Response:
OSWER will develop a plan for how and when the feedback reports will be used as an
oversight tool to monitor and improve the cost, quality, and timeliness of USACE performance.
OSWER developed the feedback system as a means to collect performance data on active
IAG projects assigned to USACE by EPA Regions. OSWER has been working on ways to more
fully utilize the data and believes that this new tool will provide useful information on areas that
are working well and will help to pinpoint the relatively few individual projects that need
improvement. Review of all feedback reports, beyond the negative reports presented by the IG,
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shows that currently most respondents are very satisfied with the overall project management of
US ACE and with the quality of products or services provided by US ACE contractors.
TTT. OTHER EPA COMMENTS:
Prior to this OIG report, OSWER identified a number of the areas for improvement in
EPA's use of USACE and efforts have begun to help address these areas. This OIG report will
reinforce these ongoing efforts.
Specific Comments
Chapter 1, Introduction:
1) Pages 1 and 2. third paragraph under 'Background':
"Remedial Project Managers (RPMs) in regional offices manage Superfund I AGs. RPMs
recommend the mechanisms (e.g., another Federal agency such as the Corps) for
cleaning up the site. RPMs have to work with EPA contracting officers and contractors
when using EPA contracts. When RPMs use the Corps via I AGs, they have less work
because they transfer most administrative tasks to the Corps for awarding and managing
the cleanup contracts. EPA explained the Corps also offers unique strengths to the
Agency in areas of design, construction, claims, and independent government cost
estimates. Also, RPMs have to monitor the contractor's cost and work when EPA
contracts are used, while the Corps monitors cost and work of the contractors when I AGs
are used. The RPM is responsible for monitoring the cost and work of the Corps through
site visits, monthly reports, and conference calls..."
EPA Response:
We recommend that the fourth sentence in the above paragraph be changed to read,
"When RPMs use the Corps via IAGs, they have fewer contracting duties loss work because they
transfer most administrative tasks to the Corps for awarding and managing the cleanup
contracts."
The above paragraph incorrectly states that RPMs have less work when they use the
USACE under an IAG. The amount of work that RPMs have is unrelated to whether they are
using the USACE under an IAG. Use of the USACE relieves the RPM of many of the
contracting duties, freeing up the RPM to focus on other responsibilities in the site remediation
process. RPMs are generally assigned a large amount of work that is commensurate with their
skills, expertise and experience.
Even when using the USACE, the work can be substantial. After the initial planning is
completed and the RD/ RA begins, the RPM is responsible for ensuring that the project
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progresses on schedule and within budget. To do so, the RPM manages and monitors US ACE
activities through a multitude of activities, including:
•	Initiating and maintaining frequent communications with project participants via conference
calls
•	Conducting regular meetings to discuss RD and RA progress
•	Identifying issues and taking corrective actions as necessary
•	Documenting meetings and conference calls
•	Ensuring timely review of key deliverables
•	Organizing and managing activities of a Technical Review Team within EPA that will assist
in the review of project deliverables
•	Establishing a communications strategy for the site
•	Coordinating with the state and the public regarding site progress
•	Helping to ensure that all applicable or relevant and appropriate requirements (ARARs) are
identified and incorporated into RD and RA activities
•	Helping to ensure that the record of decision's remedial action objectives, environmental and
health-based requirements, and cleanup goals are met during RD/RA activities
•	Helping to ensure that quality assurance/quality control requirements for data collection and
analyses, and documentation within deliverables are followed
Upon completion of the RD/RA, the RPM also helps to ensure that all appropriate
procedures for closing out the IAG with US ACE are followed.
2) Page 2. fourth paragraph under 'Background':
"In Fiscal Years 2005 and 2006, EPA paid the Corps over $261 million and $255
million, respectively for Superfund IAGs (see Table 1-2). These payments were for costs
of the Corps oversight (in-house) as well as the cost for the Corps' contractor that
performed the work.
Table 1-2: Superfund IAG Payments to the Corps
Fiscal Year 2005
In-House
Contractor
$86,591,000
$174,652,000
$261,243,000
33%
67%
Total
Fiscal Year 2006
In-House
Contractor
$74,759,000
$180,905,000
$255.664.000
29%
71%
Total
Source: EPA Cincinnati Finance Center"
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EPA Response:
The above text description and Table 1-2 regarding "Superfund IAG Payments to the
Corps" is inaccurate.
•	Table 1-2 should label "In-house" as "Non Direct Cite Charges"
USACE's "In-house" charges noted in Table 1-2 include payments for a number of
activities in addition to US ACE contractor oversight for RD/RA projects. These
activities include US ACE staff work in conducting project management, field
investigations, remedial investigation / feasibility studies (RI/FS), enforcement oversight
support, operation and maintenance, real estate relocations and acquisitions, cost
estimating and Five-Year Reviews. These activities also include USACE contractor
work on 'non-construction' activities (such as contractor support on RI/FS, operation and
maintenance, laboratory analyses, site access support, property acquisition and relocation
activities, litigation support, radiological waste disposal, and field investigation
activities).
•	Table 1-2 should label "Contractor" as "EPA Direct Cite Payments to USACE
contractors"
Chapter 2, IAG Award Process Could be Further Improved
1) Page 5, first paragraph:
"EPA needs to better justify and support its decisions to enter into Superfund I AGs with
the Corps. Eleven of the 12 decision memorandums we reviewedfor projects awarded to
the Corps contained no comparisons of alternatives. Further, EPA did not develop its
own independent cost estimates. This occurred because EPA generally believes that the
Corps is more capable of managing Superfund projects. Also, OSWER and 0ARM did
not hold regions accountable to follow policies for awarding andjustifying I AGs. As a
result... "
EPA Response:
We recommend that the fourth sentence be deleted and the fifth sentence modified to
read: " This occurred because OSWER and 0ARM did not hold the regions accountable to follow
policies for awarding andjustifying I A Gs."
The fourth sentence as currently written does not accurately reflect the reasons why the
EPA often decides to use the Corps. It is the Corp's construction and contracting expertise, not
their Superfund project management expertise that often makes the Corps an attractive
alternative in the Superfund program.
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Chapter 3, EPA Needs to Improve Monitoring of Superfund IAGs Awarded to the Corps:
1) Page 14. fourth paragraph:
"For example according to documentation in an awardfee review report, 1 of the 26
IAGs we reviewed, valued at almost $88 million, experienced poor Corps' oversight of its
contractor that resulted in the collapse of a building due to over excavation. In addition,
poor oversight resulted in sewer lines being broken, poor planning, inaccurate costs
estimates, and untimely work. Although the Corps and its contractor performed poorly,
the Corps' contractor received over $400,000 in questionable awardfees during periods
ofpoor performance. EPA also paid the Corps over $3 million for insufficient oversight
of its contractor."
EPA Response:
First sentence in above text:
This sentence is not accurate. A small corner of the building foundation collapsed.
US ACE severely reprimanded the RA contractor. The contractor did not bill the Government for
the repair of the building.
Second sentence in above text:
This sentence is not accurate. The sewer system in this area was over 75 years old and in
very poor condition. There were some problems with the RA contractor's performance
regarding the bypass of the sewer lines. Numerous quality control deficiencies were reported
and letters were issued to the contractor by the USACE requesting improved performance (see
comment below). Furthermore, as a consequence of the contractor's poor performance, the
contractor performance award fee for the period was significantly reduced.
Third sentence in above text:
This sentence is not accurate, and EPA strongly disagrees that the USACE performed
poorly. USACE identified the performance problems with the RA contractor in a very timely
manner. USACE's first step was to request a change in the RA contractor's site superintendent,
then a few months later, the RA contractor's site project manager. After the project manager was
replaced, the RA contractor's performance significantly improved. Because of their poor
performance, the RA contractor lost over $660,000 in potential award fees.
Fourth sentence in above text:
This sentence noting that USACE can perform poorly with no consequences is not
accurate.
As discussed further in comments to Chapter 1, EPA's RPMs manage and monitor
USACE's activities and performance on IAGs through a number of other mechanisms, and
issues that arise are usually worked out through a variety of mechanisms.
• If issues arise regarding poor USACE performance, RPMs usually communicate these issues
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directly to USACE project managers and discuss options to resolve these issues on a day-to-
day basis.
•	RPMs conduct a variety of oversight functions when managing IAGs, including the
following activities:
o Initiate and maintain frequent communications with project participants via
conference calls
o Conduct regular meetings to discuss RD and RA progress
o Identify issues and corrective actions as necessary
o Document meetings and conference calls
o Ensure timely review of key deliverables
o Organize and manage activities of a Technical Review Team within EPA who assist
in the review of project deliverables.
•	If issues are not resolved at the RPM/USACE project manager level, RPMs elevate the issue
to EPA Regional and USACE District office management. USACE and EPA Headquarters
staff may also be contacted to help resolve issues.
•	If EPA Regions remain dissatisfied with USACE performance, Regions may choose to
transfer work to RACs contractors, States, or to in-house EPA contracting mechanisms.
Thank you for the opportunity to review the draft report. If you have any questions
regarding our comments please contact Ken Skahn at 703-603-8801, Barbara McDonough at
703-603-9042 or Johnsie Webster, OSWER Audit Liaison at (202) 566-1912.
cc: James Woolford
Howard Corcoran
Johnsie Webster
Joan Harrigan-Farrelly
Elizabeth Southerland
Barbara McDonough
Regional Superfund Remedial Branch Chiefs
Regional IAG Coordinators
Ken Skahn
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Appendix C
Distribution
Office of the Administrator
Assistant Administrator, Office of Solid Waste and Emergency Response
Assistant Administrator, Office of Administration and Resources Management
Agency Followup Official (the CFO)
Audit Followup Coordinator
Director, Office of Grants and Debarment
Audit Followup Coordinator, Office of Solid Waste and Emergency Response
Audit Followup Coordinator, Office of Administration and Resources Management
Regional Administrators (Regions 1, 2, 3, and 9)
Regional Audit Followup Coordinators (Regions 1, 2, 3, and 9)
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
General Counsel
Acting Inspector General
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