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OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
Existing Contracts Enabled EPA to
Quickly Respond to Hurricane Katrina;
Future Improvement Opportunities Exist
Report No. 2006-P-00038
September 27, 2006

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Report Contributors:
Michael Petscavage
Andres Calderon
Lorraine Fleury
Dana Short
Jean Bloom
Patricia Taylor
Abbreviations
EPA	U.S. Environmental Protection Agency
ERRS	Emergency Rapid Response Services
FAS	Fixed Assets System
FEMA	Federal Emergency Management Agency
OARM	Office of Administration and Resources Management
OIG	Office of Inspector General
OSWER	Office of Solid Waste and Emergency Response
START	Superfund Technical Assessment and Response Team
Cover photo: Trailers contracted for by EPA to temporarily house employees in
Metairie, Louisiana (EPA OIG photo).

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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
2006-P-00038
September 27, 2006
Why We Did This Review
We sought to determine
whether the U.S.
Environmental Protection
Agency (EPA), in its response
efforts related to Hurricane
Katrina, adequately designed
and effectively implemented
controls for expenditures,
paid a reasonable price for
products and services
obtained, and adequately
safeguarded purchased assets.
Background
On August 29, 2005,
Hurricane Katrina devastated
parts of Louisiana,
Mississippi, and Alabama.
EPA had existing emergency
response contracts in place at
the time Hurricane Katrina hit,
and used these contracts
extensively to support its
response efforts. The
response efforts involved
sending numerous personnel
to the area and purchasing
equipment and services to
support them.
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.qov/oiq/reports/2006/
20060927-2006-P-00038.pdf
Catalyst for Improving the Environment
Existing Contracts Enabled EPA to Quickly Respond to
Hurricane Katrina; Future Improvement Opportunities Exist
What We Found
EPA's existing contracts awarded for responding to natural disasters worked as
intended and allowed EPA to quickly respond to Hurricane Katrina. While
opportunities for future improvement exist, EPA's ability to operate under
catastrophic conditions was commendable. Almost immediately after Katrina,
EPA officials were in affected areas, assessing damage and formulating action
plans. As a result, EPA quickly began protecting human health and the
environment. Further, existing contracts limited cost risks, because EPA did not
have to quickly award a large number of noncompetitive sole source contracts.
EPA still needed to award some noncompetitive contracts valued at about
$9 million during its Katrina response efforts, and we noted areas where EPA can
make improvements for future disasters. Contracts need to be flexible, provide
sufficient detail on what is being obtained, avoid unnecessarily long periods of
performance, adequately support price reasonableness determinations, and ensure
procurements are used to address the disaster.
EPA needed to improve its review of contractor invoices to help prevent payment
of duplicate, unallowable, and/or unreasonable costs. Our review of a limited
number of invoices found that contractors overcharged EPA $18,298 in duplicate
payments, $54,734 by using inappropriate indirect cost and labor rates, and
$110,843 in inappropriate boat rental costs. During the course of our audit, EPA
initiated actions to have contractors repay those amounts. At our urging, EPA
placed greater emphasis on reviewing invoices, and its prompt actions eliminated
our concerns in this area.
EPA needs to improve plans for property management during catastrophic
emergencies. Almost 4 months after Katrina, EPA had in most cases not properly
placed decals on equipment and/or recorded equipment in its property system.
While this understandably happened because of the emergency situation, EPA
should attempt to improve controls for handling future disasters.
What We Recommend
Recognizing that EPA has begun a process to improve its response efforts for
future catastrophic events based on its Katrina experience, we made various
recommendations to help it prepare for such future events. EPA agreed to take
sufficient actions on all recommendations.

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OFFICE OF
INSPECTOR GENERAL
September 27, 2006
MEMORANDUM
SUBJECT:	Existing Contracts Enabled EPA to Quickly Respond to
Hurricane Katrina; Future Improvement Opportunities Exist
Report No. 2006-P-00038
TO:	Susan Parker B odine
Assistant Administrator for Solid Waste and Emergency Response
Luis A. Luna
Assistant Administrator for Administration and Resources Management
James I. Palmer, Jr.
Regional Administrator, Region 4
Richard E. Greene
Regional Administrator, Region 6
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). This report contains improvement opportunities
that OIG and EPA personnel have identified and recommendations that EPA should consider
when responding to future disasters. This report represents the opinion of the OIG and does not
necessarily represent the final EPA position. Final determinations on matters in this 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 $462,870.
Action Required
Your response to the draft report adequately addresses the recommendations in this report.
Therefore, we will close this report upon issuance and no further response to this report is
necessary. We have no objection to the further release of this report to the public. This report
will be available at http://www.epa.gov/oig.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460

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If you or your staff have any questions regarding this report, please contact me at 202-566-0847
or roderick.bill@epa.gov. or Carl Jannetti, the Product Line Director for Contract Audits, at
215-814-5800 or iannetti.carl@epa.gov.
Sincerely,
Acting Inspector General

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Existing Contracts Enabled EPA to Quickly Respond to Hurricane Katrina;
Future Improvement Opportunities Exist
Table of C
Chapters
1	Introduction		1
Purpose		1
Background		1
Scope and Methodology		3
Internal Control Structure		4
2	EPA Katrina Response Efforts Commendable;
Opportunities for Improvement Noted for Future Disasters		5
Contract Agreements Needed More Flexibility		5
Contract Requirements Needed More Detail		6
Contract Performance Periods Longer than Necessary		7
Price Reasonableness Determinations Inadequate		7
Non-Katrina Items Purchased Using Relaxed Authority		7
Procurements Often Rushed and Contracting Personnel Not Available		8
EPA Initiated Corrective Actions Promptly		8
Recommendations		9
Agency Response and OIG Comment		9
3	EPA Can Improve Reviews of Contractor Invoices		11
EPA Contracting Personnel Did Not Perform Sufficient Reviews		11
Duplicate Charges and Billing Errors Occurred		11
EPA Overcharged for Contractor-Owned Boats		12
EPA Needs Increased Review of Invoices during Catastrophes		13
Recommendations		14
Agency Response and OIG Comment		14
4	Property Management during a Disaster Challenging		16
Katrina Caused Problems in Property Management		16
Steps Taken to Safeguard Equipment during Katrina Response		18
Recommendation		18
Agency Response and OIG Comment		19
Status of Recommendations and Potential Monetary Benefits		21
Appendices
A Full Text of Agency Response	 22
B Distribution	 30

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Chapter 1
Introduction
Purpose
On August 29, 2005, Hurricane Katrina made landfall in southeast Louisiana,
causing catastrophic damage along the coastlines of Louisiana, Mississippi, and
Alabama. The U.S. Environmental Protection Agency (EPA) quickly deployed
emergency response personnel who, with the Federal Emergency Management
Agency (FEMA) and others, assessed the damage and initiated cleanup
operations. EPA largely used existing emergency response contracts for the
cleanup, and made other emergency purchases with purchase cards and/or
purchase orders. Our audit objectives were to determine whether EPA:
•	Adequately designed and effectively implemented controls for
authorizing, awarding, documenting, and approving expenditures.
•	Paid a reasonable price for goods and services obtained.
•	Adequately safeguarded purchased assets.
Background
After Hurricane Katrina struck, EPA responded to protect public health and the
environment. EPA dispatched first responders to Louisiana, Mississippi, and
Alabama, many of whom initially performed rescue operations. Subsequently,
first responders assessed damage; sampled the environment to ensure the public's
safety; and began cleaning up the hurricane debris, including hazardous materials.
The magnitude of the disaster required EPA to quickly supplement the first
responders with additional EPA personnel from across the Nation. Employees
from various regional offices volunteered to assist and went to the affected areas
for 2-3 week rotations. While the number of EPA employees fluctuated, the
temporary living arrangements that EPA established could accommodate as many
as 130 people. Residence logs indicated between 80 to 130 EPA employees used
these accommodations during each 2-3 week period. Additionally, EPA contracts
provided for about 1,000 contractor personnel for the relief efforts.
EPA's Region 4 office, which is headquartered in Atlanta, Georgia, and is
responsible for Alabama and Mississippi, established an Incident Command
Center in Biloxi, Mississippi. EPA Region 6, which is headquartered in Dallas,
Texas, and is responsible for Louisiana, established its Incident Command Center
in Metairie, Louisiana, on the grounds of the Louisiana Technical College. The
Metairie center utilized several of the college's buildings and surrounding
grounds, as well as 78 trailers for housing up to 130 EPA personnel.
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FEMA provided EPA approximately $750 million for response work needed as a
result of Hurricane Katrina and the subsequent Hurricane Rita. FEMA authorized
EPA to provide technical assistance and to recover, remove, and dispose of debris
and hazardous wastes. EPA also received $3.5 million from the U.S. Army Corps
of Engineers for similar work. EPA's financial system indicated that as of June
2006 it obligated about $530 million of the $750 million. EPA was responsible
for leading work performed by the U.S. Coast Guard, and the $530 million
included $107 million that EPA provided directly to the Coast Guard.
EPA's mission requires it to respond to disasters; each region has a cadre of
personnel specializing in this type of work. However, the magnitude of the 2006
hurricane response required EPA to purchase and receive significant amounts of
equipment and material under catastrophic conditions. The majority of the
purchases were made by Region 6 for Louisiana and Region 4 for Alabama and
Mississippi.
On September 9, 2005, EPA issued a Class Justification authorizing other-than-
full-and-open competition for Hurricane Katrina response requirements.
Although used in relatively few circumstances, the justification enabled EPA to
obtain contractor support on an urgent, compelling, and noncompetitive basis.
Although the justification enabled EPA contracting personnel to expedite the
contracting process, it contained several requirements. For example, the
contracting officers were required to determine whether the anticipated cost to the
Government would be fair and reasonable for each contract action.
Purchase card spending limits (micro-purchase authority) were also increased to
expedite hurricane relief. The Second Emergency Supplemental Appropriations
Act to Meet Immediate Needs Arising from the Consequences of Hurricane
Katrina (Public Law 109-62) raised the micro-purchase threshold from $2,500 to
$250,000 for procurements of property or services needed for Hurricane Katrina
rescue and relief operations. However, EPA only increased purchase card
holders' single purchase limits to $15,000.
On September 26, 2005, EPA submitted a Stewardship Plan for significant
acquisitions related to Hurricane Katrina rescue, recovery, and reconstruction
operations, to ensure the prudent use of taxpayer funds. The plan applied to all
EPA offices, including acquisition, finance, and program offices. It established a
Control Board comprised of Office of Acquisition Management Division
Directors (i.e., Chiefs of Contracting Offices), and a representative from the
Office of General Counsel, the Office of the Chief Financial Officer, and the
Office of the Chief Information Officer. The Office of Inspector General (OIG)
participated as a nonvoting member of the group.
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The plan required the Board to review "significant acquisitions" related to
Hurricane Katrina. Significant acquisitions were defined as:
•	Acquisitions in excess of $5,000,000.
•	Micro-purchases between $15,000 and $250,000.
•	Simplified acquisitions between $100,000 and $250,000.
•	Purchases of sensitive property, defined as nonexpendable items (such as
laptop computers, Blackberries, and cell phones) that may be converted to
private use or have a high potential for theft.
The EPA Control Board appointed a representative to review significant
transactions. The OIG reviewed many of these transactions collaboratively with
the Board's representative, as well as many transactions not covered by the
stewardship plan. The results of both reviews were reported to the Board, which
took corrective action in a timely manner. Many of the issues discussed in this
report resulted from this collaborative effort.
Scope and Methodology
We performed this audit from September 2005 to April 2006 in accordance with
Government Auditing Standards, issued by the Comptroller General of the United
States. We visited EPA Headquarters in Washington, DC; EPA regional offices
in Atlanta, Georgia (Region 4) and Dallas, Texas (Region 6); and the EPA
Incident Command Center in Metairie, Louisiana.
At the headquarters, regional, and field level locations, we interviewed EPA
officials in the Office of Solid Waste and Emergency Response (OSWER), Office
of Administration and Resources Management (OARM), and Regions 4 and 6.
We analyzed procurements to determine how they could be improved in the
future, and also reviewed documentation related to the following:
Contracts: EPA Regions 4 and 6 used existing Emergency Rapid Response
Services (ERRS) and Superfund Technical Assessment and Response Team
(START) contracts to perform hurricane relief, and we focused our review on
these contracts. We reviewed contractor invoices paid from October 2005
through March 2006 to determine whether the costs billed were allowable,
allocable, and reasonable, in accordance with the Federal Acquisition Regulations
and contract terms.
Purchase Orders: We reviewed documentation through February 2006 to ensure
that EPA procured products and/or services using appropriate acquisition methods
(such as sole source, full and open competition, and simplified acquisition
procedures), and that the prices paid were reasonable. In some cases, it was
difficult to determine the reasonableness of the price paid due to the unstable
market environment created by Hurricane Katrina.
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Purchase Cards: We reviewed a judgmental sample of purchase card
transactions initiated from August 29, 2005, when Katrina struck, through
October 2005. Specifically, we sampled purchase card transactions:
•	Greater than $10,000.
•	For purchases of sensitive items.
•	Possibly split to avoid purchase authority limitations.
•	For a large number of purchases by one person or to the same vendor.
•	For even dollar amounts.
Equipment Recording and Tracking: We reviewed all purchase order
transactions for equipment in EPA's consolidated reports as of January 6, 2006.
We also examined purchase card transactions made in September and October
2005 in support of Hurricane Katrina to identify equipment and property
purchased. We then compared this purchased equipment and property to the
information recorded in EPA's Fixed Assets System.
Internal Control Structure
In planning and performing our audit, we reviewed management controls related
to our objectives. We examined the Agency's Stewardship Plan issued on
September 26, 2005. This plan outlined EPA's controls and monitoring
procedures that would be used to review its costs incurred related to Hurricane
Katrina. We examined the Fiscal Year 2005 Federal Managers' Financial
Integrity Act Annual Assurance Letters issued to the EPA Administrator by
OARM.
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Chapter 2
EPA Katrina Response Efforts Commendable;
Opportunities for Improvement Noted for Future Disasters
EPA accomplished the majority of its Katrina response work using preexisting
contracts, although it did award a limited number of noncompetitive contracts,
valued at about $9 million. EPA made most of these procurements under
emergency conditions, and was often rushed because of the need to obtain
products and services quickly. While there were several opportunities for
improvement, EPA's ability to operate under catastrophic conditions was
commendable. Recognizing that EPA may have done things differently under
normal circumstances, Agency personnel now have experience to enable them to
better anticipate needs for future disaster responses. These experiences can also
be applied to other Federal agencies. For example, for future emergency
situations, EPA should attempt to ensure that:
•	Contract terms are flexible and adaptable to changing requirements.
•	Contracts provide sufficient detail on what is being bought and at what cost.
•	Periods of performance are not unnecessarily long.
•	Price reasonableness determinations are adequately supported.
•	Procurements made are actually used to address the disaster.
EPA personnel told us that having more contracting personnel in the disaster area
sooner might have mitigated these conditions; negotiations were often performed
by facility or response personnel without contracting officer involvement. In any
event, EPA took prompt action during the Katrina response to resolve the issues
that the Control Board and the OIG identified.
Contract Agreements Needed More Flexibility
Several contracts needed more flexible contract terms so that EPA could adapt
more easily to unforeseen circumstances and changing requirements. Given the
uncertainties surrounding an emergency response of this size, flexible contracts
are important to help protect the Government from obtaining unneeded services.
For example, EPA awarded a food service contract to provide meals to its
personnel in New Orleans. The contract stipulated, for a total of almost $750,000,
that the contractor would provide 3 meals a day to a minimum of 150 employees,
or a total of 450 meals each day. While the contract contained a provision for the
contractor to provide meals to more people, at an extra cost, it did not provide for
feeding fewer people. Had the contractor provided 3 meals each day to 150
people, the cost per person would be less than the allowable Government per
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diem. Our review of EPA's meal logs from October 13, 2005, through November
14, 2005, showed the average number of meals provided each day was 96 for
breakfast, 43 for lunch, and 66 for dinner. Ideally, in response to future disasters,
it would be advantageous to have a more flexible contract. With a more flexible
contract, EPA may have been able to reduce the number of meals provided by the
contractor and reduce costs.
EPA's contract to obtain 66 trailers and related services, valued at over
$4.5 million, also needed more flexibility. While EPA had the option to terminate
this 6-month contract for convenience, it had no flexibility to reduce the number
of trailers should the occupancy rates warrant a reduction, or if other
accommodations (such as hotels, motels, and apartments) became available. With
a more flexible contract, EPA could have perhaps saved money on housing and
related services by reducing the number of trailers or taking a less expensive
option if it became available. In the latter part of the 6-month period, the trailers
were not at full occupancy. During the 3-month period ended March 2006, the
occupancy rate for the trailers averaged about 63 percent. In March 2006, EPA
awarded a new contract for trailers that did include more flexible options.
Contract Requirements Needed More Detail
In several cases, EPA entered into contracts that did not have adequately defined
terms and conditions. These contracts did not adequately describe exactly what
services would be received, at what levels (e.g., frequency or type) the services
would be provided, or how much EPA would pay for individual services.
For example, EPA's aforementioned contract for trailers to house EPA personnel
in New Orleans bundled support services. This contract required EPA to pay
$200 per trailer for daily janitorial services, laundry services, toiletries, linens,
towels, pillows, and trash removal. These services were not individually priced.
Therefore, when trailers were vacant and janitorial, laundry, and linen services
were not needed or needed to be reduced, it was difficult to determine the proper
amount to be credited to the contract. Moreover, when services are bundled, it is
difficult to determine whether the prices paid were reasonable, and we were not
able to make such a determination.
Also, EPA's previously noted food service contract to provide meals needed more
detail. The contract stipulated 3 meals a day to 150 employees, for a total of 450
meals, at a total contract price of almost $750,000. However, the contract did not
specify either the type of food to be served or a price for each meal. This proved
problematic when EPA determined that lunch was unnecessary because many
employees traveled to distant work sites. EPA requested that the contractor stop
lunch. EPA's contracting officers consequently negotiated to have the contractor
increase the quality and quantity of breakfast and dinner rather than reduce the
contract price.
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Contract Performance Periods Longer than Necessary
Three procurements had performance periods that appeared unnecessarily long.
Understandably, it is necessary to pay a premium for emergency services
following a disaster. However, as conditions improve and the demand for
emergency services subsides, prices should decline. Negotiating emergency
services contracts with long periods of performance makes EPA vulnerable to
overpaying. Further, EPA entered into many of these early contracts as sole
source procurements, and lower rates could likely be obtained later through
competition.
For example, on September 10, 2005, EPA entered into a sole source contract for
helicopter services at a rate of $750 per hour. The original order and modification
did not specify a period of performance but a subsequent modification established
a 12-month period of performance through September 2006. Had this contract
remained in place, EPA could have paid the noncompetitive rate for up to 1 year.
However, the EPA Control Board representative expressed concern regarding the
length of this contract, and EPA ended the contract in November 2005.
Price Reasonableness Determinations Inadequate
On September 9, 2005, EPA issued a Class Justification for Other-Than-Full-and-
Open Competition. While this allowed EPA to more easily award contracts
needed for Katrina, EPA at times did not meet one important requirement of this
class justification. Contracting officers needed to determine that the anticipated
cost to the Government would be fair and reasonable. However, in approximately
half of the purchase orders reviewed by the OIG and EPA's Control Board
representative, price reasonableness determinations were either missing from the
file, documented well after the procurement, or inadequately supported.
We considered reasonableness determinations to be inadequately supported
because there was little evidence that the contracting officer attempted to check
the prices of other sources, such as the Internet, similar procurements, or General
Services Administration price lists. Many times the purchaser said it considered
prices reasonable based on the past experience or knowledge of the responders.
Non-Katrina Items Purchased Using Relaxed Authority
We found a few instances where EPA used the micro-purchase authority under
Hurricane Katrina to purchase items not related to the Katrina response. In most
cases, these appeared to be year-end purchases. An example was the purchase of
video conferencing equipment using EPA's appropriated funds. EPA bought
12 of the machines on a sole source basis on September 30, 2005, the last day of
the fiscal year. The documentation cited the Justification for Other-Than-Full-
and-Open Competition authority for Katrina response as the justification.
Eventually, three of these machines were in fact used in regions impacted by
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Katrina. However, the other nine machines were not. Four of the machines were
delivered to Research Triangle Park, North Carolina, while as of February 2006,
the remaining five machines remained in their boxes, unopened, in the basement
of EPA headquarters in Washington, DC.
Procurements Often Rushed and Contracting Personnel Not Available
Many conditions understandably occurred because of the extreme rush to obtain
equipment and services immediately after Hurricane Katrina occurred. However,
a contributing factor was that contracting personnel were not always involved in
the upfront negotiations. Instead, facility and response personnel sometimes
performed preliminary negotiations. EPA's Control Board representative also had
this same concern, noting "Documentation suggests that the contractual
negotiations are being performed by technical staff leaving various contracting
officers to craft contractual language after the fact and based on ambiguous
circumstances and agreements." This appeared to have occurred because
contracting officers initially sent to the affected area were overwhelmed with
work. In some cases, this is why price reasonableness determinations and other
documentation were completed after the procurement. Another contributing
factor was that the rotation of contracting officers added to workload. Generally
every 2 weeks, new contracting officers would arrive and have to review and
analyze ongoing procurements and initiate new procurements.
EPA Initiated Corrective Actions Promptly
Many of the contracting issues discussed in this chapter resulted from
collaborative reviews by the OIG and EPA's Control Board representative. These
issues were discussed with Control Board members, who agreed that contracts
needed more flexibility and details, and that periods of performance were at times
too long. As a result, EPA took prompt action while the Katrina response was
still in process. For example, EPA awarded new contracts for temporary housing
and food that contained more flexibility and details. Moreover, EPA terminated
several contracts with periods of performance that were considered too long.
While opportunities for improvement still need to be considered, during EPA's
response to Hurricane Katrina, personnel made a commendable effort in a major
crisis situation. EPA should consider its Katrina experiences to better prepare for
future disaster responses. In that light, EPA should consider increasing the
number of contracting officers in the field immediately after large disasters. It
should also consider having contracts in place for services, such as housing and
food service, that it will need to respond to future disasters. Region 6 personnel
indicated that, at their request, EPA headquarters has initiated a process to
establish these types of contracts.
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Recommendations
Recognizing that the Assistant Administrators for OSWER and OARM have
begun a process to improve EPA's response efforts for future catastrophic events
based on its Katrina experience, we recommend that the Assistant Administrators:
2-1 Develop a strategy/plan to deploy a sufficient number of contracting
officers and other support personnel to an emergency response area.
2-2 Develop predetermined lists of volunteers who are willing to be deployed
for time periods of 2 weeks or longer.
2-3 Continue exploring establishing advance agreements with vendors that are
flexible and detailed for the items EPA used substantially during its
Katrina response, such as housing, recreational vehicles, and food
services.
Agency Response and OIG Comment
EPA concurs with all of the recommendations in this chapter, and has initiated
actions to address the recommendations. EPA has developed and provided initial
training for a Response Support Corps list of EPA personnel willing and prepared
to deploy to future incidents of national significance. This list includes
contracting personnel. OARM is an active participant in the Government-wide
Chief Acquisition Officer Council Contracting Contingency Work Group, which
has a goal of creating a similar Government-wide list for use by all Federal
agencies in the event of future incidents of national significance. OARM is also
working with the Office of Management and Budget to develop a list of Federal
Government-wide acquisition professionals who can be called upon to support
emergency response efforts.
OARM is currently in the process of awarding two national blanket purchasing
agreements to provide emergency response technical support and logistical
services (food, housing, facilities, etc.). The terms and conditions of these
agreements will be as flexible as possible to address the lessons learned by EPA
responses to incidents of national significance, including Hurricanes Katrina and
Rita.
OARM, however, does not agree that negotiations were often performed by
facility or response personnel without contracting officer involvement. It stated
that no Region 6 facility/logistics personnel participated in negotiations without a
warranted contracting officer present.
OARM stated that it prefers the more flexible and detailed contract terms and
agreed these contract types would have been beneficial. However, due to the
circumstances, it believes they made the correct decisions. The EPA contracting
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officer negotiated the absolute minimum the vendor was willing to accept to plan
and prepare meals. Likewise, they contend they negotiated a daily rate for the
trailers that was considerably less than the FEMA-allowable per diem, in spite of
the lack of opportunity to build in flexibility within the initial emergency housing
contract. Moreover, as market conditions changed and flexibility could be built
into the solicitation, the trailer contracts were re-competed.
While the OIG did not observe the negotiations, a number of EPA personnel in
the disaster area who observed and participated in negotiations told us and EPA's
Control Board Representative that facility or response personnel performed
negotiations without contracting officer involvement. We agree that the housing
and food services contracts were negotiated and awarded under less than ideal
conditions. Our reporting that future contracts awarded under similar conditions
should be more detailed and flexible was not intended as a criticism of the
contracts awarded for the Katrina response or the price paid for each trailer. The
intent of our report is to offer suggestions for the future.
We made requested changes to the report when we deemed them appropriate.
The full text of EPA's response is in Appendix A.
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Chapter 3
EPA Can Improve Reviews of Contractor Invoices
EPA needed to improve its review of contractor invoices to help prevent payment
of duplicate, unallowable, and/or unreasonable costs. Our review of a limited
number of invoices found that contractors overcharged EPA:
•	$18,298 in duplicate payments.
•	$54,734 by using inappropriate indirect cost and labor rates.
•	$110,843 in boat rentals.
We brought these matters to EPA's attention during our review. EPA agreed with
all those overcharges and contractors have agreed to repay the Agency. The
overcharges often occurred because EPA did not assign an adequate number of
experienced contracting personnel to review contractor billings. We noted that
EPA promptly assigned more personnel to review contractor billings after we
brought this issue to their attention, eliminating our concerns in this area and
reducing EPA's vulnerability to further duplicate charges and erroneous billings.
EPA Contracting Personnel Did Not Perform Sufficient Reviews
During the initial stages of EPA's response to Hurricane Katrina, EPA contracting
personnel did not perform detailed reviews of amounts billed on the Region 4
START and ERRS contracts, as well as the Region 6 ERRS contracts. In many
cases, the contracting officers relied on reviews performed by response personnel
in the affected area who were directing the cleanup. Conversely, the contracting
officer and project officer for the Region 6 START contract did perform detailed
reviews of each invoice.
EPA policy requires contracting officers to perform one detailed review of a
contractor's invoices each year. Most contracting officers cited this policy as a
reason they performed limited invoice reviews. They also said they did not have
enough time to perform detailed reviews because the number of transactions and
the costs billed on the START and ERRS contracts increased significantly
because of Hurricane Katrina. However, this increased volume also escalated the
risk of errors, overcharges, and erroneous double billings to EPA.
Duplicate Charges and Billing Errors Occurred
Soon after EPA began its response to Hurricane Katrina, we reviewed the costs
submitted by the six ERRS contractors on their initial billings to verify the
accuracy of the amounts billed to EPA. Our review identified several duplicate
charges, as noted in Table 3-1. We brought these duplicate charges to the
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attention of EPA personnel during our review. The contractors concurred with
our review results and have agreed to repay EPA.
Table 3-1: Duplicate Charges
Contractor
Duplicate Charges
Amount
1
Labor (22 separate instances)
$14,003
1
Per Diem
669
2
Equipment (6 separate instances)
1,682
3
Labor
1,696
3
Equipment
248
Total

$18,298
Source: EPA OIG analysis of contractor invoices
As part of our review, we also verified the accuracy of direct labor rates charged,
labor categories used, and indirect rates billed. We noted various overcharges
(see Table 3-2), which we brought to EPA's attention during our review. The
contractors concurred with our review results and have agreed to repay EPA.
Table 3-2: Overcharges Related to Inappropriate Indirect Cost
and Labor Rates
Contractor
Overcharges for
Amount
1
General & Administrative Rate
$51,503
5
Labor Rate
2,888
6
Labor Category
343
Total

$54,734
Source: EPA OIG analysis of contractor invoices
EPA Overcharged for Contractor-Owned Boats
The ERRS contracts with all six contractors assisting with the Katrina response
specified that the maximum charge for each contractor-owned equipment item
used on a task order should not exceed the contractor's average purchase price or
the average value for all similar pieces of equipment in their inventory. When the
average purchase price is reached on a particular task order, a usage rate must be
negotiated with the contracting officer before additional amounts are billed. The
usage rate is to reimburse the contractor for operating costs such as maintenance,
license, and insurance.
We noted numerous instances where the contractor or its subcontractors either
billed, or had charges approved for invoices that would be submitted, for more
than the average purchase price of company-owned boats. In some cases, the
average purchase price was surpassed after just 21 days of usage. When we
informed Region 6 personnel about this issue they determined that the clause
limiting charges for contractor-owned equipment did not flow down to
subcontracts. Subsequently, the contractor agreed to implement this practice with
their subcontractors, and is currently working to reimburse EPA the amounts
charged in excess of average purchase prices. By our calculations, EPA has been
overcharged more than $110,000 for boat rentals, as shown in Table 3-3.
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Table 3-3: Overcharges Related to Boat Rentals

Task
Amount
Average
Amount
Boat Type
Order
Charged
Purchase Price
Overcharged
Boat 14/16 ft. JEC1
56
$10,598
$6,770
$3,828
Pontoon Boat ONYX-1
56
46,234
16,176
30,058
Pontoon Boat ONYX-2
56
46,234
16,176
30,058
Boat 21ft. 0555-11
56
46,234
16,176
30,058
16ft. Monarch 0255-04
52
7,895
6,770
1,125
20ft. Sea Ark 9855-02
52
28,070
16,176
11,894
24ft. Boatw/cabin 0155-05
52
16,512
16,176
336
26ft. Spill Boat 0555-07
52
17,338
16,176
1,162
28ft. Spill Boat 0555-06
52
17,338
16,176
1,162
G3 20ft. Boat 0555-11
52
17,338
16,176
1,162
Total



$110,843
Source: EPA OIG analysis of contractor invoices
EPA Needs Increased Review of Invoices during Catastrophes
We recognize that current procedures provide for EPA personnel to review, on a
daily basis, supporting documentation that contractors use to bill the Agency.
However, the personnel performing these initial reviews do not have the same
knowledge of the contract terms and requirements as the contracting personnel in
the regional office who are normally responsible for the contract, and do not
always review the same documentation. The initial field reviews can be rigorous,
and are performed on a daily basis, but are only of supporting documentation.
Contracting officer reviews normally evaluate the actual bill along with
supporting documentation in its entirety and in greater depth on a biweekly or
monthly basis.
Current procedures specify that contracting officers provide a detailed review of
one contractor invoice each year, with response personnel providing additional
reviews. However, EPA's response to incidents such as Hurricane Katrina
substantially increased the volume of transactions normally experienced. The
increased volume associated with catastrophic incidents significantly increases the
risk of errors, fraud, waste, and abuse. Under such conditions, EPA should
establish a plan that provides additional contracting personnel to review more
invoices than reviewed under normal circumstances.
During our review, we explained to EPA personnel the need for more detailed
invoice reviews by the contracting officers in the regional offices. Region 4
promptly provided additional contracting personnel to review invoices for
hurricane relief. Their subsequent reviews found numerous additional errors,
discrepancies, and overcharges. These reviews show the need for increased
attention by contracting personnel. Region 6 officials indicated they also
increased reviews of invoices.
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Recommendations
We recommend that the Assistant Administrator for OSWER, in conjunction with
OARM:
3-1 Establish a policy and procedures for reviewing contractor invoices
submitted during disasters that provide for additional contracting
personnel in the regional offices so that more billings can be reviewed
under each contract being used.
3-2 Ensure that contract clauses to limit charges for contractor-owned
equipment flow down from the prime contract to the subcontracts.
We further recommend that the Regional Administrator, Region 6:
3-3 Continue efforts to recoup the amounts overcharged by contractors for
boat rental that exceeded the average purchase price.
Agency Response and OIG Comment
EPA concurs with all of the recommendations in this chapter, and has initiated
actions to address the recommendations. EPA is currently reviewing applicable
guidance documents containing requirements and recommendations for personnel
to perform timely reviews of invoices at the deployment site. Further, selected
EPA contracting officers participated in an Incident Command System
symposium in August 2006 to address key response support issues, including
contract management and invoice approval. The Incident Command positions of
Finance Section Chief, Procurement Unit Leader, and Cost Unit Leader are being
further clarified to ensure roles and responsibilities are clearly established and
communicated (including invoice approvals). Additionally, EPA states that it will
review all affected contracts and ensure that the contract clauses limit charges for
contractor-owned equipment, and Region 6 will continue to work with the
contractor to ensure reimbursements or credits are received by EPA for boat
rentals that exceeded the average purchase price.
However, EPA believes its invoice review process was adequate, especially
considering the extraordinary nature of the incident. The review process evolved
and improved throughout the response. The team of field accountants that
reviewed the 1900-55 daily reports included experienced ERRS contracting
officers/contract specialists, and project officers from other regions. The process
evolved from line-by-line reviews of the daily reports, including identifying and
reporting deficiencies, to proactively reviewing invoices as they were being
prepared onsite. This practice enabled numerous corrections to be made before
the invoices were finalized. As the OIG review was concurrent with the EPA
invoice review, EPA was unable to verify, with the information provided, whether
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the charges identified by the OIG were in addition to the errors found during our
review process.
OARM's actions taken and planned meet the intent of our recommendations.
However, we do not agree with OARM's comment that its initial invoice review
process was adequate considering the extraordinary nature of the incident.
Because of the extraordinary nature of the hurricane response, more review
capacity was needed initially for invoices. Additional capacity was added after
OIG reviews highlighted errors and overcharges by the contractors. The
overcharges for boat rentals are one such overcharge the OIG identified. The
purpose of this chapter was to highlight the need for adding review capacity to
EPA's initial response actions when major disasters occur. Based on OARM's
response, it appears EPA will plan for this during future disasters.
We made requested changes to the report when we deemed them appropriate.
The full text of EPA's response is in Appendix A.
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Chapter 4
Property Management during a Disaster Challenging
EPA's procedures for managing property appeared to be generally adequate for
normal business situations, but EPA's response to Hurricane Katrina was far from
normal business. As a result, EPA property purchased for hurricane relief was not
initially safeguarded and recorded properly. After we and EPA's Control Board
representative highlighted this need, EPA took action to locate and record
equipment purchases. However, EPA's subsequent property management efforts
proved difficult and resource intensive. We recognize that it may not be possible
to eliminate all the challenges associated with property management when
responding to a disaster. Nonetheless, to better safeguard property, EPA needs to
revise its procedures for managing property during future disaster responses.
EPA personnel agreed, and while the Katrina response was still in process, they
formed a workgroup to determine how to improve property management
procedures for future disaster situations.
Katrina Caused Problems in Property Management
EPA defines property as nonconsumable items acquired specifically for the use of
a Government employee at the job site. They include such items as computers,
communication devices, and test equipment. Individual items purchased by EPA
for the Hurricane Katrina response cost as much as $82,500. EPA's procedures
stipulate that equipment costing $5,000 or more, as well as items on the
"Sensitive Items" lists, must have a bar code decal affixed to them and entered
into the Fixed Assets System (FAS) database. This system shows the location of
the item and assigns responsibility for safeguarding it. Normally, most
accountable property is received at a central EPA location, given a decal at the
time of delivery, and then entered into FAS before being put into use. EPA
guidance further provides that if equipment is delivered directly to the user, the
user must notify the custodial officer so that the item can be recorded in FAS.
EPA did not begin affixing decals and recording most items purchased for its
hurricane response until approximately 4 months after Katrina occurred. By that
time, identifying and locating the property purchased was difficult due to both the
volume of items acquired and the various methods used to acquire them. Large
portions of the equipment were purchased by personnel in regional offices and
delivered to the affected areas, and by EPA personnel in the devastated areas
usually via Government purchase cards. Equipment was delivered to various
locations within a three-State area either without property specialists available or
without them knowing the equipment was purchased and delivered. As a result,
equipment valued at about $6 million was initially pressed into service without
normal safeguards. Even several months after most items were decaled and
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recorded, we remained concerned as to whether EPA will be able to identify all
items purchased and verify whether they have been properly decaled and
safeguarded. During the Katrina response, which involved various States,
numerous locations received materials and equipment. Also, several EPA
personnel told us they believed having more property management specialists
earlier in the process may have helped. For future disasters, EPA managers
should try to determine whether they can minimize the number of locations where
materials and equipment are initially delivered, and also provide a sufficient
number of property management specialists.
There was much confusion about how equipment should be recorded in FAS.
Some responders were either not aware of EPA's property management
requirements, or used different "homegrown" methods. For example, Region 4
did not input equipment into the FAS. Instead, it planned to rely on temporary
log/data sheets maintained in the field until the equipment was returned to EPA
offices, at which time it planned to decal and enter equipment into FAS.
Similarly, an on-scene coordinator responsible for setting up 11 satellite dishes in
all three States, costing a total of almost $250,000, did not enter the items into
FAS, and instead entered them into a spreadsheet and used a map to keep track of
where the dishes were located. Initially, both Regions 4 and 6 used informal and
incomplete accountability methods during the aftermath of Hurricane Katrina.
There was also confusion about which items should be entered into FAS.
Normally, items costing less than $5,000 are not entered into FAS unless they are
considered sensitive items that are defined as having a "high potential for theft or
to be converted to private use." However, these rather vague terms caused
confusion among property management personnel. As a result, Region 4's three
separate accountable areas and Region 6 did not consider many similar items as
sensitive. Most regions had their own lists of which items they considered
sensitive. In early January 2006, EPA established a national sensitive items list.
EPA needs to ensure this list is widely disseminated throughout the Agency and
updated periodically, since most regions had their own sensitive items lists.
Further complicating the process, purchases made for Katrina relief using
purchase orders and purchase cards were not segregated. Rather, they were
commingled with all other purchases for normal business. We shared the
documents related to equipment purchases that we had obtained with Region 6,
where most of the equipment purchases were made, but the process of identifying
and recording equipment still proved tedious and very time consuming. Several
months later, Region 6 had limited assurances that all equipment purchased for
Katrina had been given decals and recorded into FAS. EPA needs to devise a
process to segregate the documentation for equipment purchased for disaster relief
from routine business equipment purchases. This will facilitate the recording and
decaling of equipment rushed into service. The Agency should determine the
feasibility of providing responders with emergency purchase cards issued only for
a specific disaster, as one method to segregate purchase documentation.
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Steps Taken to Safeguard Equipment during Katrina Response
When we brought the need to record and safeguard equipment to EPA's attention,
Region 4 personnel told us they planned to continue relying on the log sheets
being maintained in the field, and affix decals and record the equipment into FAS
after it was returned to the Region. While Region 4's process did not follow
EPA's procedures, it purchased insignificant amounts of equipment in comparison
to Region 6.
Conversely, when we informed personnel in Region 6, where the vast majority of
the equipment was purchased, they made an immediate and concerted effort to
identify purchased equipment. However, because Region 6 property managers
had not received much of the purchase order information and purchase card
receipts, they needed to search for supporting documentation or physically locate
items and then search for purchase records. Much of the equipment was
purchased using the Government purchase cards of numerous volunteers from
EPA offices across the Nation. When they returned to their regional offices, the
purchase card receipts went with them.
Delaying the decaling and recording of purchased property and equipment in FAS
placed significant amounts of EPA and FEMA property at risk of being lost or
stolen because no one was responsible for the items. Initially, differences
between regions impacted both the type of items to be decaled and recorded, as
well as when it would be recorded into the system. Incomplete information such
as this could hinder EPA's ability to obtain and use equipment needed to protect
public health and the environment in the event of a terrorist attack or other
nationally significant incident. Where possible, EPA should attempt to further
adapt and refine its existing property management requirements to accommodate
the unusual and unforeseen conditions experienced during its response to
Hurricane Katrina.
Recommendation
4-1 Recognizing that the Assistant Administrator for OSWER has begun a
process to improve EPA's response efforts for future catastrophic events
based on its Katrina experience, and that the Assistant Administrator for
OARM has initiated a similar process for safeguarding equipment, we
recommend that the Assistant Administrators for OSWER and OARM
consider:
•	Centralizing or reducing the number of locations for equipment
receipt.
•	Providing a sufficient number of property specialists in the affected
area early during the crisis.
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•	Ensuring that sensitive items included in the Agency's list are clearly
defined, updated periodically, and disseminated regularly.
•	Issuing purchase cards to responders for purchases during a specific
disaster.
•	Establishing a national custodial area in FAS for future large-scale
national disasters so that all equipment purchases can be recorded
more quickly and in a central location.
Agency Response and OIG Comment
OARM and OSWER concurred with all of our recommendations except one, and
provided several comments. Regarding its ability to centralize equipment receipt,
EPA stated that depending on the specific nature and scope of the incident, EPA's
response process will typically include a central location for equipment delivery
and recording/tracking. There may, however, be situations that warrant delivery
directly to noncentralized response sites. The Logistics Chief is responsible for
this determination, and EPA said the final version of the Incident Management
Handbook that addresses the Logistics Chief responsibilities will be completed by
December 31, 2006.
EPA agreed with the need to provide a sufficient number of property specialists to
a crisis area, and has provided initial training to Response Support Corps
personnel, including property specialists, who are willing to deploy to future
incidents of national significance. OSWER and OARM are developing a national
inventory tracking system to ensure consistent and accurate equipment tracking
and management. It is scheduled to be deployed in January 2007. OARM also
has drafted a new policy to clarify and communicate the appropriate process and
related requirements for property management during responses to incidents of
national significance. EPA said this document, which will include the OIG's
recommendation, should be completed by December 31, 2006.
EPA personnel did not agree to provide its emergency responders purchase cards
for use in any response. They indicated it would be problematic to wait for a
disaster to occur before issuing new cards to responders. They understand there is
a need to segregate and track purchases made in response to a specific disaster
situation. However, they believe this can be better accomplished through
electronic logs to capture and store information on such purchases. They plan on
developing and implementing this capability in Fiscal Year 2007.
EPA said the OIG report implies that property accountability was neglected
because EPA did not begin affixing decals and recording items purchased for its
hurricane response for approximately 4 months. EPA said the report should
reflect that 15 days after Hurricane Katrina, a task order was issued to the
Region 6 contractors to develop a property tracking data base. This tasking
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illustrates the Agency's recognition of the need to track property. Additionally, a
T-card system was established to track field equipment. These interim systems
initially utilized in lieu of decals did provide basic accountability for property and
equipment purchased for the immediate response.
In the early days of the response, there was understandable confusion regarding
recording accountable property information within FAS. EPA said the report
should accurately reflect that the responsibility for entering information on the 11
satellite dishes procured by EPA headquarters rested with each region's property
officers. This equipment belonged to EPA, and was not procured with FEMA
dollars. To immediately provide communications support for the Katrina
response, the equipment was drop-shipped to the field once it was procured, in
lieu of being sent to the regional offices for FAS entries by the responsible
parties. This immediate critical support requirement clearly illustrates why
interim property procedures were put in place until such time as the appropriate
accountable property personnel became involved.
We believe EPA's response meets the intent of all our recommendations. Its
reluctance to issue purchase cards to emergency responders is understandable.
We offered this as a recommendation, and EPA's alternative appears worthwhile.
We agree there was understandably confusion in the aftermath of Katrina.
However, we do not agree that EPA's interim property procedures were the
optimum method to cope with a disaster of this magnitude. The confusion
surrounding how and who should record the satellite dishes is evidence enough.
Stating that it took 4 months to begin recording purchases was not intended as a
criticism, but an indication that locating and recording equipment after the fact
with documentation scattered across a large response area should be avoided if
possible. It proved to be extremely labor-intensive for EPA personnel to record
equipment purchases after the equipment was pressed into use. EPA needs to
review what happened during Katrina with a view toward improving its responses
to future disasters.
We made requested changes to the report when we deemed them appropriate.
The full text of EPA's response is in Appendix A.
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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
2-1 9 Develop a strategy/plan to deploy a sufficient
number of contracting officers and other support
personnel to an emergency response area.
2-2 9 Develop pre-determined lists of volunteers who are
willing to be deployed for time periods of 2 weeks
or longer.
2-3	9 Continue exploring establishing advance
agreements with vendors that are flexible and
detailed for items that EPA used substantially
during its Katrina response, such as housing,
recreational vehicles, and food services.
3-1	14 Establish a policy and procedures for reviewing
contractor invoices submitted during disasters that
provide for additional contracting personnel in the
regional offices so that more billings can be
reviewed under each contract being used.
3-2 14 Ensure that contract clauses to limit charges for
contractor-owned equipment flow down from the
prime contract to the subcontracts.
Planned
Completion
Date
Claimed
Amount
Agreed To
Amount
Assistant Administrators for 12/31/06
OSWERand OARM
Assistant Administrators for 04/30/06
OSWERand OARM
Assistant Administrators for 09/30/06
OSWERand OARM
Assistant Administrators for 12/31/06
OSWERand OARM
Assistant Administrators for 12/31/06
OSWERand OARM
3-3 14 Continue efforts to recoup the amounts	O Regional Administrator, 12/31/06	$110.8 $110.8
overcharged by contractors for boat rental that	Region 6
exceeded the average purchase price.
Based on our recommendations during the course	-	$18.3	$18.3
of our review, EPA recovered $18,298 from
contractors in duplicate charges.
Based on our recommendations during the course	-	$54.7	$54.7
of our review, EPA recovered $54,734 from
contractors for overcharges related to indirect cost
and labor rates.
4-1 18 Consider centralizing or reducing the number of O Assistant Administrators for 12/31/06
locations for equipment receipt; providing a	OSWER and OARM
sufficient number of property specialists in the
affected area early during the crisis; ensuring that
sensitive items included in the Agency's list are
clearly defined, updated periodically, and
disseminated regularly; issuing purchase cards to
responders for purchases during a specific
disaster; and establishing a national custodial area
in FAS for future large-scale national disasters so
that all equipment purchases can be recorded
more quickly and in a central location.2
1	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
2	EPA agreed to take an acceptable alternative action in lieu of issuing purchase cards to responders
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Appendix A
Full Text of Agency Response
MEMORANDUM
SUBJECT: Response to Draft Audit Report: Existing Contracts Enabled EPA to Quickly
Respond to Hurricane Katrina; Future Improvement Opportunities Exist
FROM: Luis A. Luna
Assistant Administrator
TO:	Carl A. Jannetti
Director, Contract Audits
Thank you for the opportunity to submit comments on the draft report entitled, "Existing
Contracts Enabled EPA to Quickly Respond to Hurricane Katrina; Future Improvement
Opportunities Exist." We generally agree with the draft report's findings and recommendations,
but have attached specific and detailed comments below.
Should you have any questions, please contact Kerrie O'Hagan, Division Director of the
Policy, Training, and Oversight Division in the Office of Acquisition Management, at (202) 564-
4479.
cc: Chuck Gherardini
Kerrie O'Hagan
Cris Thompson
John Oliver
John Trefry
Johnsie Webster
Lucy Yarbrough
Brenda Durden
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Comments on Draft Audit Report - "Existing Contracts Enabled EPA to Quickly Respond
to Hurricane Katrina; Future Improvement Opportunities Exist"
General Comments on Report/Findings -
-	Chapter 1, Page 1, Background - 3rd paragraph, 1st line - Please change "EPA" to "EPA,
Region 6,". We had more than one Incident Command Center (ICC). The Metaire ICC was the
one established in Region 6. Another ICC was established in Region 4, first in Mobile, AL., then
moved to Biloxi, MS.
-	Chapter 2, Page 5, Background, 2nd full paragraph - The draft report states "negotiations were
often performed by facility or response personnel without contracting officer involvement." This
is not correct. Market research was performed by personnel other than procurement staff, an
acceptable contracting practice, but no Region 6 facility/logistics personnel participated in
negotiations without a warranted contracting officer present.
-	Chapter 2, Page 5, Contract Agreements Need More Flexibility - We agree that more flexible
contract terms for both food service and the trailers would have been beneficial. However, due
to the circumstances (extremely limited sources who could provide these items, coupled with the
vendors' unwillingness to accept less than a guaranteed amount/price), we believe we made the
correct decisions. The EPA contracting officer negotiated the absolute minimum the vendor was
willing to accept in order to plan meals and purchase the food required to prepare the meals.
Likewise, we negotiated a daily rate for the trailers that was considerably less than the FEMA
allowable per diem, in spite of the lack of opportunity to build in flexibility within the initial
emergency housing contract. Please note that, as market conditions changed and flexibility
could be built into the solicitation, the trailer contracts were re-competed.
-	Chapter 2, Page 6, Contract Requirements Need More Detail - 2nd paragraph - Although these
services were not individually priced, the continuous occupancy of the trailers required that the
services be performed daily. While it is normally preferable to separate custodial services, due
to the lack of available sources in the weeks following the disaster and the immediate need for
acceptable housing, it was determined to be in the best interest of the Government to combine
services.
-	Chapter 2, Page 8, Procurements Often Rushed and Contracting Personnel Not Available - The
draft report states "facility and response personnel sometimes performed preliminary
negotiations." As we stated above, the facility and response personnel performed market
research, not negotiations. When the time came to negotiate scope and price, Region 6
facility/logistics personnel never participated in negotiations without a warranted contracting
officer present.
-	Chapter 3, Page 12, EPA Overcharged for Contractor-Owned Boats - 1st paragraph, 2nd line -
After the sentence ending "...did not flow down to subcontracts," we would like to add the
following sentence: "However, the contractor has agreed to implement this practice with their
subcontractors, and is currently working on a reimbursement of amounts charged in excess of
average purchase prices."
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-	Chapter 3, Page 12, EPA Needs Increased Review of Invoices During Catastrophes - 2nd
paragraph - The review process evolved and improved throughout the response. The team of
field accountants that reviewed the 1900-55 daily reports included experienced ERRS
contracting officers/contract specialists, and project officers from other Regions. The process
evolved from line by line reviews of the daily reports, including identifying and reporting
deficiencies, to proactively reviewing invoices as they were being prepared on-site. This
practice enabled numerous corrections to be made before the invoices were finalized. In
addition, the normal program review took place on the invoices, utilizing the Removal Cost
Management System (RCMS) invoicing module. All discrepancies found were addressed and
resolved by the contractors, contracting officers, and project officers. As the OIG review was
concurrent with the EPA invoice review, EPA was unable to verify, with the information
provided, whether the charges identified by the OIG were in addition to the errors found during
our review process.
-	Chapter 3, Page 12, EPA Needs Increased Review of Invoices During Catastrophes - last
paragraph, 2nd sentence - Please add Region 6 to this sentence. Both Regions provided
additional contracting personnel for the invoice reviews.
-	Chapter 3, Page 13, EPA Needs Increased Review of Invoices During Catastrophes - Delete
the last sentence, starting "Region 6...." The last comment above addresses Region 6's action.
-	Chapter 4, Page 14, Katrina Caused Problems in Property Management - 1st paragraph -
Please change the term "custodial officer" to "property accountable officer (PAO)."
-	Chapter 4, Page 14, Katrina Caused Problems in Property Management - 2nd paragraph - The
draft report states that "EPA did not begin affixing decals and recording items purchased for its
hurricane response until approximately 4 months after Katrina occurred." This language implies
that property accountability was neglected. The report should accurately reflect that, on
September 12, 2005, fifteen days after Hurricane Katrina, a task order was issued to the Region 6
START contractors to develop a property tracking data base. This tasking illustrates the
Agency's recognition of the need to track property purchased in response to this disaster.
Additionally, the USCG T-card system was established to track field equipment for operational
decision-making purposes.
Although the draft report criticizes EPA for not affixing decals to accountable property
and entering information into the Fixed Asset System (FAS) as required under EPA property
guidelines, the report should recognize that the systems initially utilized in lieu of decals did, in
fact, provide basic accountability for property and equipment purchased for the immediate
response. These interim procedures were used while EPA Logistics personnel were continuing
to provide essentially needed support for responders. Once the critical first stages of the response
were brought under control, the purchase and delivery/receiving processes were brought on line
when Region 6 Logistical personnel became engaged in the response.
-	Chapter 4, Page 15, Katrina Caused Problems in Property Management - 2nd paragraph - In the
early days of the response, there was understandable confusion regarding recording accountable
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property information within FAS. The report should accurately reflect that the responsibility for
entering information on the 11 satellite dishes procured by HQ EPA through its National
Approach to Response (NAR 4) communications equipment contract, rested with each Region's
property accountable officers. This equipment belonged to EPA, and was not procured with
FEMA dollars. To immediately provide communications support for the Katrina response, the
equipment was drop shipped to the field once it was procured, in lieu of being sent to the
Regional Offices for FAS entries by the responsible parties. This immediate critical support
requirement clearly illustrates why interim property procedures were put in place until such time
as the appropriate accountable property personnel became involved.
-	Chapter 4, Page 16, Steps Taken to Safeguard Equipment during Katrina Response - 3rd
paragraph - We recommend replacing the third sentence with the following: "Incomplete
information such as this could hinder EPA's ability to maximize the effectiveness with which it
utilizes equipment for responding to disasters."
Comments on Recommendations -
2-1 - Recognizing that the Assistant Administrators for OSWER and OARM have begun a
process to improve EPA's response efforts for future catastrophic events based on its
Katrina experience, we recommend that the Assistant Administrators develop a
strategy/plan to deploy a sufficient number of contracting officers and other support
personnel to the emergency response area.
Response - We concur with this recommendation. We also suggest adding the words "or make
available" after "deploy, " as well as a new sentence to the Recommendation that reads: "This
should be a flexible strategy where the Region(s) can determine the deployment strategy based
on the individual requirements of the emergency."
OSWER and OARM have initiated the following to address this Recommendation:
-	EPA has developed and provided initial training for a Response Support Corps (RSC) list of
EPA Headquarters and Regional personnel willing and prepared to deploy to future incidents of
national significance (INS). This list includes contracting personnel. OSWER is working with
EPA's National Incident Coordination Team (NICT) and the Regional RSC coordinators to
develop national guidance that will identify and refine the training and exercise requirements for
the RSC. OARM/OAM is participating on the further development of this list, including
contracting officers. A National RSC Guidance document is expected to be available by
December 2006. Part of this guidance will include the requirement that personnel deploy for two
weeks or longer.
-	OARM/OAM has already prepared a Headquarters/Regional List of Contracting Officers
available to be deployed to support EPA response activities, as part of a Federal Government-
wide effort. This list was prepared in April 2006. OARM/OAM is an active participant in the
Government-wide Chief Acquisition Officer Council (CAOC) Contracting Contingency Work
Group, which has a goal of creating a similar Government-wide list for use by any and all
Federal agencies in the event of future incidents of national significance.
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- OARM/OAM is working with OMB to develop a list of Federal Government-wide acquisition
professionals that can be called upon by Federal agencies to support emergency response efforts.
This program includes providing emergency response training tailored to the contracting
functions that may be needed for responding to incidents of national significance.
2-2 - Recognizing that the Assistant Administrators for OSWER and OARM have begun a
process to improve EPA's response efforts for future catastrophic events based on its
Katrina experience, we recommend that the Assistant Administrators develop pre-
determined lists of volunteers who are willing to be deployed for periods of 2 weeks or
longer.
Response - We concur. Please see our comments above for Recommendation 2-1.
2-3	- Recognizing that the Assistant Administrators for OSWER and OARM have begun a
process to improve EPA's response efforts for future catastrophic events based on its
Katrina experience, we recommend that the Assistant Administrators continue exploring
establishing advance agreements with vendors that are flexible and detailed for the items
EPA used substantially during its Katrina response, such as housing, recreational vehicles,
and food services.
Response - We concur. OARM/OAM is leading the effort to address this issue, and is currently
in the process of awarding two national blanket purchasing agreements (BPAs) to provide
emergency response technical support and logistical services (food, housing, facilities etc.)
OARM/OAM estimates that the BP As will be in place by 9/30/06. The terms and conditions
will be as flexible as possible to address the lessons learned by EPA responses to incidents of
national significance, including Hurricanes Katrina and Rita.
3-1	- We recommend that the Assistant Administrator for OSWER, in conjunction with
OARM, establish a policy and procedures for reviewing contractor invoices submitted
during disasters that provide for additional contracting personnel in the regional offices so
that more billings can be reviewed under each contract being used.
Response - In general, we concur. We believe the invoice review and approval process during
the hurricane response was adequate (see comments above under General Comments on
Report/Findings), especially considering the extraordinary nature of the incident, and especially
with the major support contracts (ERRS and START). However, OARM and OSWER are
currently reviewing applicable guidance documents containing requirements and
recommendations for appropriate personnel to perform timely reviews of invoices at the
deployment site. Furthermore, OSWER, OARM/OAM, and Regional Contracting Officers
participated in an Incident Command System (ICS) symposium in August 2006 with a primary
goal of addressing key response support issues including contract management, invoice approval,
etc.
The ICS-established positions of Finance Section Chief, Procurement Unit Leader, and
Cost Unit Leader functions (including invoice approvals) are being further developed and
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clarified to ensure proper roles and responsibilities are clearly established and communicated.
The roles and responsibilities of these (and the other ICS) positions, which will report to and
work for OSWER, will be presented in the form of an Incident Management Handbook. A draft
document will be available October 1, 2006. The final version will be completed December 31,
2006.
3-2 - We recommend that the Assistant Administrator for OSWER, in conjunction with
OARM, ensure that contract clauses to limit charges for contractor-owned equipment flow
down from the prime contract to the subcontracts.
Response - We concur. OARM/OAM will review all affected contracts by the end if CY 2006,
in addition to future requirements, to ensure that such clauses are included.
3-3	- We further recommend that the Regional Administrator, Region 6, continue efforts to
recoup the amounts overcharged by contractors for boat rental that exceeded the average
purchase price.
Response - We concur. Region 6's contracting staff will continue to work with the contractor to
ensure that reimbursements or credits are received by EPA for boat rental that exceeded the
average purchase price. We will attempt to ensure that all related reimbursements or credits are
received by the end of CY 2006.
4-1	(Bullet 1) - Recognizing that the Assistant Administrator for OSWER has begun a
process to improve EPA's response efforts for future catastrophic events based on its
Katrina experience, and that the Assistant Administrator for OARM has initiated a similar
process for safeguarding equipment, we recommend that the Assistant Administrators for
OSWER and OARM consider centralizing or reducing the number of locations for
equipment receipt.
Response - We generally concur, but please see our notes below. EPA implements an incident
command system (ICS) when conducting responses to incidents of national significance. ICS
established clear roles and responsibilities for various response personnel/positions. The
Logistics Section Chief is responsible for the overall coordination and processing of equipment
needs, including working with the Procurement Unit Leader on procurement and with other
groups including the Operations Section on equipment needs. Based on the timing and location
of these identified needs, the Logistics Section Chief will help coordinate the scheduled delivery
of equipment. Depending on the specific nature and scope of the incident, the process will
typically include a central location for equipment delivery and recording/tracking.
There may, however, be situations that warrant delivery of equipment directly to non-centralized
response sites. This will be up to the Logistics Section Chief. The roles and responsibilities of
this and other ICS-established positions are in the process of being defined and clarified. The
final version of the Incident Management Handbook that will address the roles and
responsibilities will be completed by December 31, 2006.
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4-1 (Bullet 2) - Recognizing that the Assistant Administrator for OSWER has begun a
process to improve EPA's response efforts for future catastrophic events based on its
Katrina experience, and that the Assistant Administrator for OARM has initiated a similar
process for safeguarding equipment, we recommend that the Assistant Administrators for
OSWER and OARM consider providing a sufficient number of property specialists in the
affected area early during the crisis.
Response - We concur. EPA has developed and provided initial training to Response Support
Corps personnel, including property secialists, in Headquarters and the Regional offices. These
are personnel willing and prepared to deploy to future incidents of national significance (INS).
OSWER is working with EPA's NICT and the Regional Response Support Corps coordinators to
develop national guidance which will identify and refine the training and exercise requirements
for the RSC, including all necessary specialist requirements. A National RSC Guidance
document is anticipated by December 31, 2006.
4-1 (Bullet 3) - Recognizing that the Assistant Administrator for OSWER has begun a
process to improve EPA's response efforts for future catastrophic events based on its
Katrina experience, and that the Assistant Administrator for OARM has initiated a similar
process for safeguarding equipment, we recommend that the Assistant Administrators for
OSWER and OARM consider ensuring that sensitive items included in the Agency's list
are clearly defined, updated periodically, and disseminated regularly.
Response - We concur. OARM has drafted and is currently revising a new policy document to
clarify and communicate the appropriate process and related requirements for property
management during responses to incidents of national significance. This document, which will
include your recommendation, should be completed by December 31, 2006.
In addition to standard policy publication and dissemination processes, this effort will also be
coordinated and communicated via the National Approach to Response (NAR) Administration
and Finance Support Workgroup. Also, the property management process was one key item of
discussion at the Incident Command System (ICS) symposium in August 2006. The position of
Logistics Section Chief and related subordinate unit leaders are being further developed and
clarified to ensure proper roles and responsibilities during responses to incidents of national
significance, including clear guidelines for property management. The roles and responsibilities
of these (and the other ICS) positions will be presented in the form of an Incident Management
Handbook. A draft document will be available October 1, 2006. The final version will be
completed December 31, 2006.
4-1 (Bullet 4) - Recognizing that the Assistant Administrator for OSWER has begun a
process to improve EPA's response efforts for future catastrophic events based on its
Katrina experience, and that the Assistant Administrator for OARM has initiated a similar
process for safeguarding equipment, we recommend that the Assistant Administrators for
OSWER and OARM consider issuing purchase cards to responders for purchases during a
specific disaster.
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Response - We do not agree with this recommendation. EPA's emergency responders already
have purchase cards issued to them for use in any response. It would not only be unnecessary,
but problematic, to wait for a disaster to occur before issuing new cards to responders. We
understand that there is a need to segregate and track purchases made in response to a specific
disaster situation. We believe this can be better accomplished through obtaining electronic log
capability that could be used within the Incident Command Structure to capture and store
information on such purchases. We plan on developing and implementing this capability in FY
2007.
4-1 (Bullet 5) - Recognizing that the Assistant Administrator for OSWER has begun a
process to improve EPA's response efforts for future catastrophic events based on its
Katrina experience, and that the Assistant Administrator for OARM has initiated a similar
process for safeguarding equipment, we recommend that the Assistant Administrators for
OSWER and OARM consider establishing a national custodial area in FAS for future
large-scale national disasters so all equipment purchases can be recorded more quickly and
in a central location.
Response - We concur. OSWER and OARM property personnel are developing a national
inventory tracking system to ensure consistent and accurate equipment tracking and management
in future responses to incidents of national significance. This tracking system is scheduled to be
deployed in January 2007. OARM has drafted, and is currently revising, a new policy document
to clarify and communicate the appropriate process and related requirements for property
management during responses to incidents of national significance, including the use of this
tracking system.
In addition to standard policy publication and dissemination processes, this effort will also be
coordinated and communicated via the National Approach to Response (NAR) Administration
and Finance Support Workgroup. Also, the property management process was one key item of
discussion at the Incident Command System (ICS) symposium in August 2006. The position of
Logistics Section Chief and related subordinate unit leaders are being further developed and
clarified to ensure proper roles and responsibilities during responses to incidents of national
significance, including clear guidelines for property management. The roles and responsibilities
of these (and the other ICS) positions will be presented in the form of an Incident Management
Handbook. A draft document will be available October 1, 2006. The final version will be
completed December 31, 2006
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Appendix B
Distribution
EPA Headquarters
Office of the Administrator
Assistant Administrator for Solid Waste and Emergency Response
Assistant Administrator for Administration and Resources Management
Agency Followup Official
Agency Followup Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Audit Followup Coordinator, Office of Solid Waste and Emergency Response
Audit Followup Coordinator, Office of Administration and Resources Management
Acting Inspector General
EPA Region 4
Regional Administrator
Regional Audit Followup Coordinator
EPA Region 6
Regional Administrator
Regional Audit Followup Coordinator
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