assessing contractor use in superfund

7/30/2019 Assessing Contractor Use in Superfund

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Assessing Contractor Use in Superfund

January 1989

NTIS order #PB89-154116


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Recommended Citation:U.S. Congress, Office of Technology Assessment, Assessing Contractor Use inSuperfund--A Background Paper, OTA-BP-ITE-51 (Washington, DC: U.S. Govern-ment Printing Office, January 1989).

Library of Congress Catalog Card Number 89-600700

For sale by the Superintendent of DocumentsU.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)


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OTA Project Staff-Assessing Contractor Use in Superfund

Lionel S. Johns, Assistant Director, OTAEnergy, Materials, and International Security Division

Audrey B. Buyrn, ManagerIndustry, Technology, and Employment Program

Joel S. Hirschhorn, Project Director

Kirsten U. Oldenburg, Deputy Project Director

Vickie B. Boesch, Analyst

Karen L. Jordan, Research Assistant

Administrative Staff

Christopher N. Clary, Administrative Assistant

Diane D. White, Administrative Secretary


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Superfund Implementation Advisory Panel

DavidMarks, Chairman

Massachusetts Instituted Technology

Kirk BrownTexas A&M University

Richard BrownellMalcolm Pirnie, Inc.

William ChildIllinois Environmental ProtectionAgency

Henry ColeClean Water Action and NationalCampaign Against Toxic Hazards

E. William ColglazierWaste Management InstituteUniversity of Tennessee

William B. DeVilleLouisiana Department of Environmental

Quality

Deborah HankinsGeneral Electric Corporation

Bob HarrisENVIRON Corporation

William N. HedemanBeveridge & Diamond, P.C.

Robert G. KissellEl. DuPont de Nemours& Company, Inc.

Steve LesterCitizens Clearinghouse for

Hazardous Waste

William LibrizziNew Jersey Instituteof Technology

George MuhlebachCiba-Geigy Corporation

Robert N. OggCH2M Hill

Robert B. PojasekChemCycle Corporation

Frank J. Veale, Jr.Texas Instruments, Inc.

James N. WelshJohn Zink Company

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory panel mem-bers. The panel does not, however, necessarily approve, disapprove, or endorse this paper. OTA assumes full responsibilityfor the report and the accuracy of its contents.


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CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . qq q 1

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . q. q q 3

Five Key Questions . . . . . . . . . . . . . . . . . . . . . . . . . . q q 3Future Directions . . . . . . . . . . . . . . . . . . . . . . . . . . q . 7

First Key Issue: To What Extent is Superfund Dependent on Contractors? . . . . . . . .11

Alternative Remedial Contracts Strategy . . . . . . . . . . . . . . . . . . . . . . . . . .14

Second Key Issue: Why Depend on Contracting to Such a Great Extent? . . .......21

Third Key Issue: Is the Extent of Superfunds Dependence on Contracting Appropriate? 23

Superfund Activities and Contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Needed: Independent Contractor Work and Independent Government Capability .24Superfund: Five Years? Twenty Years? Or, More? . . . . . . . . . . . . . . . . . . . .25

Fourth Key Issue: Does the Extent of Superfunds Dependence on Contracting Reduce

Environmental Effectiveness? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Technical Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Examples of Contractor Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Supply and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Infrastructure Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Fifth Key Issue: Is Superfunds Heavy Dependence on Contracting Cost Effective? . . .39

Cost Effectiveness of Contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40Government v. Private Sector Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . q q . 42Administrative Complexity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Dependent Bureaucracies . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Boxes

Box A.--Excerpts from an EPA Contractor Study . . . . . . . . . . . . . . . . . . . . . 5Box B.--Examples of Tasks in Current Policy Support Contracts . . . . . . . . . . . .26

Tables

1. Total Superfund Program Appropriations v. Administrative Cap . . . . . . . . . .112. ARCS Contractor Tasks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133. New Technical Enforcement Support (TES) Contracts . . . . . . . . . . . . . . . .14

4. Regional ARCS Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .q

. . 17Figures

1. Superfund Program: Contracting v. Internal Staff Funding . . . . . . . . . . . . . . 42. RPM Salary Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33


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Introduction

This background document presents somepreliminary findings from OTAs ongoingSuperfund Implementation assessment; the

final report will be issued later this year.(Previously, OTA examined Superfund in its1983 report Technologies and ManagementStrategies for Hazardous Waste Control andits 1985 report Superfund Strategy.)

To a large extent, the U.S. EnvironmentalProtection Agencys Superfund program at-tempts to manage environmental cleanupsby managing contractors. As Superfundbudgets have grown, dependence on con-tractors has grown. Contracting means that

the private sector works for the governmentand sometimes even conducts the businessof the government. OTAs continuing workon Superfund has become focused on twokey contractor issues:

1) Does large scale contracting in Super-fund compromise environmental perfor-mance and is it cost effective?

2) Is there a good balance between using

contractors and government workers in Su-perfund implementation?

In principle, privatization of governmentprograms is not in conflict with the public in-terest, but only if there is effective govern-ment management and oversight. Indeed,the latter point is a critical Superfund issue.The effectiveness and efficiency of Super-fund contracting depends in large part onhow well government workers, careerprofessionals, and political appointees

design, administer, and review contractwork. And because Superfund activities are

so technical, good contract management re-quires independent technical expertise ofgovernment workers. Inevitably, therefore,

discussing Superfund contractors means ad-dressing workforce issues in the Environ-mental Protection Agency (EPA).

To put the contractor issue in perspective,it is instructive to take a long-term view ofcleanups of chemically contaminated sites inthe United States. In our 1985 report Super-

fund Strategy we estimated the cost of futurecleanups at about $300 billion by govern-ment and industry over about 50 years.Today, with new information on how many

sites require cleanup and on cleanup costs,that estimate looks low. OTA believes thata more realistic estimate is perhaps $500 bil-lion in cleanup costs facing American societyover at least 50 years. However, until nowgovernment and industry have probablyspent between $5 and $10 billion oncleanups--only 1 to 2 percent of what theymay ultimately spend. In a sense, the earlyexperiences with Superfund have been ex-perimental and there is still time to learn

from them in order to refine and improve Su-perfund and other cleanup programs. In thelarger debate on Superfund that will inten-sify during the coming months prior to thenext congressional reauthorization,reexamination of the roles of governmentand contractors could yield a large benefit.

After the program was reauthorized in1986 by Congress for five years at $8.5 bil-lion, Henry Longest, Superfund program

I This estimate does not include projections for clean up of Department of Energy facilities.


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director, addressed the use of the greatly in-creased funding:

A major portion of these resources . . . are to beallocated for extra-mural contracts. Conse-quently, successful pursuit of the Agencys Su-

perfund objectives will depend in large part uponthe Programs ability to direct and manage con-tractor resources effectively.

2

For many tasks, there really is no alterna-tive to using contractors for Superfund im-plementation. Originally, Superfund couldnot have been implemented as quickly as itwas without major use of contractors, espe-cially for emergency responses and initialsite studies. Superfund will always use con-tractors, and OTA is not suggesting that the

government can do away with contractors inSuperfund implementation. However, aserious discussion of the role of contractorsin Superfund is needed.

Even though contractors in general arehighly professional and want to do a first rateenvironmental job, how well the public inter-est is served depends on how well a programis managed by the government. If thegovernment does not demand, measure, and

reward quality contractor work, it will not getit. And our research on Superfund since1980 agrees with findings of the General Ac-counting Office (GAO), EPAs InspectorGeneral (IG), and environmental groupsthat poor technical performance has been aproblem, not all of the time, but all too fre-quently. Much of this results from the rapidinitiation and expansion of the program andthe enormous pressures imposed by thepublic and Congress on the program to per-form quickly. The limited number, limited

experience, and high turnover of EPAs staffhas made it very difficult for EPA to assurethe environmental performance andeconomic efficiency of Superfunds contrac-tors all of the time. And the problem is com-

pounded by the inexperience and highturnover of workers for contractors, result-ing from the explosive growth of that in-dustry driven by the higher spendingappropriated by Congress.

Understanding the role of contractors inSuperfund means looking beyond what con-tractors do with equipment in the field, atspecific sites. Contractors conduct so manyprogram activities that, taken as a whole,the contracting industry has enormous in-fluence over Superfund, perhaps more thanCongress, the public, environmental groups,the news media, and other institutions.

Superfunds contractors do much morethan detailed, engineering work. In a multi-tude of various work assignments, they playa major role in conceiving, analyzing, andstructuring the policies and tasks whichmake up the Superfund program. In largemeasure the government (EPA, other

Federal agencies, and State programs)depends on contractors for key information,analyses, insights, and management. Manyof the governments most experiencedworkers have become senior managers forcontractors and therefore may now beproviding advice to more junior governmentworkers. This contractor system is largelyhidden from public scrutiny and account-ability.

U.S. Environmental Protection Agency, Office of Solid Waste and Emergency Response, OSWER Directive 9242.3-07, memorandumfrom J. Longest to division directors, (date unclear; March or May 1987).


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Summary

This background paper explores five keyquestions about contracting in the Super-fund program. Here we give a capsule sum-mary of our findings for each key issue andthen present some thoughts about the use ofSuperfund contractors in the future.

3A.

more detailed discussion of congressionalpolicy options will be given in theassessments final report. In the followingsections, we explore the key issues in moredetail and include several specific examplesof contract and contractor problems.

Five Key Questions

First, to what extent is the programdependent on contractors?

During the last eight years, the Superfundprogram has been increasingly dependent oncontractors, who have received between 80and 90 percent of its funds each year. Overthat time, private contractors have received$4 billion from the Superfund program.

Program funds for external spending in-creased 27 percent in 1989 over 1988, from$946 million to $1.24 billion. For internal,administrative expenses in fiscal year 1989,the Superfund program has $8 million morethan it had in fiscal year 1988--an increase of4 percent, from $182 to $190 million; that is,no real increase in constant dollars. Figure 1shows how money for contracting (over 80percent of external funds) has escalatedsharply between 1982 and 1989 while, incomparison, funding for EPA staff (about 65percent of administrative funds) hasremained flat.

Low funding for EPA staff in general hasresulted in low salaries for key Superfundpeople. Remedial Project Managers(RPMs), for example, who are on thefrontline of Superfund implementation, canmake less than $20,000 a year while beingresponsible for several sites, each involvingmultimillion dollar contractor studies andcleanups. They also have little in-housetechnical, legal, and administrative supportbecause of limits on EPA staff. A recentcontractor study for EPAs Office ofResearch and Development documents Su-perfund implementation problems caused

by heavy dependence by EPA staff on con-tractors working for EPA and responsibleparties (see box A). To illustrate contractingissues in Superfund, we later discuss the newremedial cleanup Alternative RemedialContracts Strategy (ARCS) contracts.

Second, why depend on contracting to sucha great extent?

The dependence on contracting is an out-come of both congressional and EPAdecisions in the early 1980s. Originally,there was general agreement that Superfundhad to be implemented quickly and would beonly a short-term program and that thenecessary technical expertise existed in theprivate sector. Therefore, heavy reliance oncontractors seemed to make economic andenvironmental sense. But we now know thatSuperfund will be needed for many decades.And it has become clear that the technicaldifficulties in cleaning up many different

types of chemically contaminated siteswere--and to some extent remain--quite

No discussion of contractor liability is included here. Although contractors and some others believe this to be an important issue, OTAhas not seen evidence to connect contractors concerns about their liabilities with their willingness to enter or stay in the market or theirperformance. More and more large and small firms of all types have entered the Superfund market. Either contractor have found ways toaddress their liabilities (e.g., self-insurance, subsidiaries, indemnification, protect ion by State laws) or the profit potential is great enough tooffset concerns.

3


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Figure 1

Superfund ProgramContracting v. Internal Staff Funding

$ Millions1400

82 83 84 85 80 87

Fiscal Year

Source: OTA, from EPAs direct obligations budget, as sub-mitted annually to Congress. The amounts on this

figure are a subset of those in table 1.

novel compared to past environmentalefforts, such as applying air and water pollu-tion control technologies at industrialfacilities.

Moreover, the rapid growth of the nation-al cleanup effort, both in Superfund andmany other cleanup programs, has meantthat technical experience and expertise inthe private sector has likely been spread verythin. Before Superfund, there were probab-ly only a few hundred technical people work-ing on cleanups. Now there are probablyabout 20,000 technicians, engineers, andscientists. Currently, there are not enoughappropriately trained and experienced en-gineers and scientists to implement a highquality and expanding national cleanupprogram. Moreover, there has been a steadydrain of people with experience and exper-

tise away from government to contractorsthat compromises the environmental perfor-mance of Superfund because it makes it har-der for EPA to supervise contractorsadequately. For example, EPAs Region 2told OTA that, because of two new, largecontracts, they expect to lose 20 percent oftheir technical staff. All of this suggests thatit is now time for Congress to reexamine the

use and management of contractors in Su-p e r f u n d .

Third, is this degree of dependence oncontractors appropriate?

Superfund could not exist without contrac-tors. The issue is how much they do, how thegovernment manages them, and whether

contract work is consistent with traditionalviews on what should be contracted out. Forexample, developing policies and regula-tions and providing management and over-sight seem the least appropriate activities forcontracting out, but contractors do a lot ofwork in these areas for Superfund that seemto go far beyond supportive information andanalysis. (Policy, program, and analytic sup-port contracts total about $75 million over1987 to 1991.) Government workers hold on

to official decisionmaking. But, themobility, limited experience, and highworkload of the government workforce cancause a subtle shift from control and use ofcontractor expertise and services to depend-ence on them (and may well have alreadydone so).


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BOX A.--Excerpts from an EPA Contractor Study

RPMs [Remedial Project Managers] are dedicated, enthusiastic, and energetic, but they

feel burdened by their intense site responsibilities, and are aware of a wide gap betweentheir level of skills and knowledge and the requirements of the job. RPMs suggest they lackthe resources and support needed to adequately represent and defend EPAs position at thesite specific level. They indicate tremendous frustration in that they perceive they, alone,are responsible for critical and costly site decisions. They blame this frustration, along withtheir low pay (relative to that of private contractors), for the high turnover rates in the RPMposition. Provision of technical support and assistance, particularly in the form of stand-ards, guidelines and techniques, is crucial for bridging the gap between RPMs skills andtechnical knowledge and their job requirements.

While RPMs report extensive reliance on EPA contractors for providing TA/TS, [techni-

cal assistance/technical support] they are often uncertain about the quality of thecontractors work and the appropriateness of the contractors suggestions and would likeguidance from EPA in these cases.

... Of the [EPA] scientists in this group some indicate that when problems with technol-ogy transfer occur, it is because the RPM lacks the expertise needed to interpret theirmaterials. As one [EPA] lab scientist expressed it: You expect a certain level of expertiseand you find its just not there.

... Many of the RPMs believe that the PRPs [potentially responsible parties] often seekthe least expensive, rather than the best, clean-up techniques and are willing to expend con-siderable amounts of money in attempts to establish justification for the less expensiveclean-up procedures.

Two statements attributed to RPMs by the study are:q The best and the brightest are working for the PRPs.q One of my PRPs has a contract with the best geologist in the state . . . so Im going

against that person . . . I dont have the resources to come back against some of theircomments and concerns.

Source: U.S. Environmental Protection Agency, Outreach Initiative on Superfund RemedialInvestigation/Feasibility Study (RI/FS), contractor report prepared by Barri A. Braddy andJudy A. Honey, Research Triangle Institute, Summer 1988.


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Indeed, some contractor activities seem tobe activities that the Office of Managementand Budget has described as inappropriatefor contracting out because they are in-herently governmental and require either

the exercise of discretion in applyingGovernment authority or the use of value

judgement in making decisions for theGovernment.

4At the other end of the

spectrum, testing at sites (e.g., to measurecontamination and delineate the hydrogeol-ogy) and the actual physical cleanup workappear to be the most appropriate activitiesfor contracting out.

Fourth, does this degree of dependence oncontracting reduce environmentaleffectiveness?

Because of poor quality technical work,this high dependence on contracting is prov-ing to be at odds with the environmental mis-sion of the program (i.e. timely, permanent,and complete cleanups) and desires for acost-effective program. OTAs work andthat by the General Accounting Office andEPAs Inspector General provide evidenceof poor environmental performance in Su-

perfund. For example, OTAs June 1988reportAre We Cleaning Up? 10 SuperfundCase Studies found that Superfund remainslargely ineffective and inefficient. Morerecently GAO concluded that Programs to. . . clean up waste from old, inactive wastesites have not been well managed.

5Among

those forces which can jeopardize the qualityof contractor work are:

. the lack of development of internal EPA ex-pertise, which results in poor contract

management and oversight;qmore interest in controlling contractor costs

than concern about the environmental per-formance of contractors;

. a mobile workforce whose perspective on

quality, needs, and accountability can shiftas it moves from the government--a pur-chaser of services--to and among contrac-tors--a seller of services; and

q conflicts of interest that arise because work-ing for the government may affect future

work in the private sector.

Fifth, is the dependence on contracting costeffective?

There is no data which proves whether somuch contracting, covering so many dif-ferent activities, is cost effective or not. Adetailed independent study would be useful,especially in light of growing concerns abouthow much cleanups are costing, questionsabout whether Superfund is needed, and in-terest in having more cleanups done byresponsible parties. Such a study should beconducted by an independent group, be-cause the contracting industry has become aconstituency benefiting from a large Super-fund program. (Many firms active in thecleanup business have had increases ofseveral hundred percent in revenues andeven larger increases in net incomes over thepast five years.)

Definitive information may not exist aboutthe cost effectiveness of Superfund contract-ing, but some trends are clear. First, becausedemand for cleanup services has grownfaster than supply, the government will faceincreasing costs resulting from inefficiencies(e.g., poorly done work which must berepeated). Also, many people are leavingEPA for higher salaries and better workingconditions as contractors. And prime con-tractors are paid for supervising subcontrac-

tors. Thus, with the explosive growth indemand for talent and services outstrippingsupply, how can the current high spendinglevels on contractors be the most cost-effec-tive policy?

4Office of Management and Budget, Circular A-76 (revised), Aug. 4, 1983.

5U.S. Congress, General Accounting Office,. .

MD: General Accounting Office, November 1988).


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There is another point to consider. Com-pared to cleanups managed by responsibleparties, EPA probably pays lower unit costs(lower average hourly costs and lower profitmargins), but other factors, leading to low ef-ficiency and low contractor productivity,transform low unit costs into high total costs.Constant changes escalate costs; for ex-ample, high turnover of Remedial ProjectManagers, demands for more extensivedocumentation, changing governmentpolicies affecting the analysis and selectionof sites and cleanups, and changing of con-tractors with significant repeating of work.Also, because of regulatory, enforcement,and litigation concerns, government con-

tractors are likely to rely more heavily on ex-pensive worker protection equipment andquality controls for data than contractorsworking on private cleanups. From lookingat actual costs and speaking to contractorsand companies which also use contractorsfor their private cleanups, OTA concludesthat it is not uncommon for the governmentto spend from 100 to 500 percent more thana private client would spend to accomplishthe same site study or cleanup. A clearer un-

derstanding of how much of this higher costbuys abetter cleanup and how much does notwould be very useful, particularly from theperspective, shared by many people, thatmore cleanups ought to be done by theresponsible parties, with oversight bygovernment. More enforcement and settle-ments and more cleanups by industry,however, mean more demands on EPA staffand more demand for workers by contrac-tors.

Future Directions

There are no easy or quick solutions tothese problems. Contractors in Superfundand the other Federal cleanup programs willremain necessary. It seems clear, however,that if Congress wants to achieve major im-provements in Superfund it will benefit from

rethinking the role of contractors. Doing soalso means addressing EPAs Superfundworkforce and is, therefore, integral tostrengthening EPAs Superfund program.

Simply pouring more money into Super-fund and placing more emphasis on enfor-cement and privately financed cleanupswould not necessarily improve the environ-mental performance of the system. Withoutaddressing how EPA uses, selects, and su-pervises contractors, these actions--like somany cleanups we have examined--are like-ly to prove an impermanent solution to whatwe believe are the core problems of poor en-vironmental performance and low cost effec-

tiveness in Superfund.

Some opportunities for congressional ex-amination are:

1. Reducing the Dependence on Contractors

For a long-term Superfund program,should some current contractor activities beshifted totally or in part to the government?Answering this question means assessingwhat tasks make sense for a permanent

Federal cleanup program and deciding whatfunding and government personnel insteadof contractors are needed to perform thesetasks. The analysis of policies and creationof policy options, evaluation of contractorand EPA regional performance, develop-ment of implementation plans for newpolicies and technical guidance, com-munication with communities, maintenanceof data bases and hot lines, evaluating newtechnologies and operating technology

transfer programs, decisions on need for andextent of cleanup, and using data from con-tractors to prepare key decision documents(e.g., Records of Decision) and reports toCongress seem to be the kinds of activitieswhich government workers could performdirectly.

More significant than a shift in spendingfrom contractors to EPA, which would still


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be small compared to total spending on con-tractors, would be the shift in responsibilityfrom contractors to EPA. Even in highlytechnical areas, most amenable to using con-tractors, there would be substantial benefit

from having a small portion of the work doneby government workers. Only in this way, bydirectly doing technical work, will govern-ment workers truly learn the most importanttechnical aspects of the program.

Reducing dependence on contractors re-quires addressing workforce issues in EPA,such as the number, experience level, com-pensation, morale, and technical supportsystems (i.e., databases, access to technicaladvice, and continued education) for

government professionals. To make key, in-dependenttechnical decisions governmentworkers need to understand site contamina-tion and risks, cleanups, and contractorwork. The government needs to devise adetailed plan, inevitably meaning somehigher costs (see option 3), to attract andkeep the best and most experienced techni-cal specialists and program managers.Otherwise, contractors will lure them awaywith higher salaries and other inducements.

2.Improving Government Management ofContractors

How can people in EPA regional offices,where most Superfund implementation willalways occur, exercise tighter management,quality control, and reviews of contractor ac-tivities done directly for the government andfor PRPs? Doing so requires more technicalpeople in site project management closelymonitoring the substance of contractor

work. At EPA headquarters, technical staffwith regional experience could inde-pendently monitor ongoing regional con-tractor activities. Early checks forconsistency and technical quality are critical

to improve the efficiency and effectivenessof Superfund. This need increases as the Su-perfund program moves toward spendingmore of its money on site cleanups, whichcost much more than site studies. This toomeans addressing the recruitment and reten-tion of EPAs technical professionals tostrengthen the program.

3. Shifting Superfund Spending

Can government bring demand for talent

and services back into better balance withsupply?

6To improve the near- and long-

term environmental performance of theprogram, Congress can consider temporari-ly decreasing, for perhaps five years, annualSuperfund spending for contractors by 30percent to 50 percent (roughly $400 millionto $600 million per year). In the longer term,however, there may well be need for in-creased spending for contractors. But long-term performance could be improved if, in

the near term, money was made available forincreasing governmentstaff to strengthenEPAs Superfund program by addressing theprevious two options.

7Indeed, improving

environmental performance by cutting con-tractor spending requires improving and ex-panding EPAs workforce. Moreover, forimproving the king-term national cleanupprogram, other important ways to use someof the money diverted from contractors inthe near term include:

6 Theamount cut from contractor spending would be about 10 times greater than the increase for internal EPA spending to address theprevious two options. The impact on the consulting would be mitigated by the expected increases during the next five years in thecleanup area by other cleanup programs, States, and private Conversely, the current demand/supply imbalance could getworse if Superfund spending remained constant (or increased) and if there was a marked increase in enforcement which caused moreresponsible party cleanups.

Increasing just money would not be sufficient. the and the quality of the the number of allowablefull-time equivalents in EPA headquarters and each region would also have to be raised, and the average pay level per wouldhave to increase, ultimately raising the average pay levels in the program. The increase in numbers of government staff would be much smallerthan the decrease in contractor This difference would help cause some shift of people to EPA if working conditions at EPA arealso improved.


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substantial increases in government R&Dand support of private sector R&D toprovide more cost-effective cleanup tech-nologies for particularly difficult sites, likelarge landfills, and to reduce long-termprogram costs;support for educational programs to trainand increase the engineering and scientificworkforce for increased contractor ac-tivities in the future;more support for basic research on healtheffects of hazardous substances to supportmore accurate risk assessments; andmore money for assessing how many sitesrequire cleanup.

4.Rethinking Cleanup Priorities

Public support for option 3 critically re-quires confidence that environmentalprotection will not suffer. ReexaminingSuperfunds priorities means under-standing what kinds of current high costcontractor activities could be postponedwithout threatening public health and en-vironment, versus those which truly arenecessary to address urgent site problems.Establishing better defined and more clear-ly understood priorities for Superfund meritsmuch more attention for its own sake butespecially if shifts in spending are consideredand if more private party cleanups aresought. For example, some site cleanups arebeing justified on the basis of speculative fu-ture uses of land or water and hypothesizedfuture risky exposures to hazardous substan-ces. (This is one of a number of issues to bediscussed in the full report of this assess-ment.) In contrast, other sites pose sig-

nificant risks to people under present condi-tions. And for many sites in the formercategory, costly cleanups involve imper-manent remedies because permanent onesare not yet available. Would waiting to clean

up sites which do not pose reasonably certainpresentdangers make sense? (See OTAs1985 report Superfund Strategy.)

5. Increasing Inspector General Activities

Provide increased resources for substan-tially more auditing and investigation by theEPAs Inspector General office of contrac-tor activities. John C. Martin, EPAs Inspec-tor General, recently said:

Our Superfund resources have not kept pacewith the increasing size and complexity of theprogram and the new mandatory requirementsimposed upon us by SARA. We have had to

defer audit coverage of many significant aspectsof EPA management of Superfund in order tofulfill statutory requirements and provide auditsupport for burgeoning Superfund procurement.Superfund is particularly sensitive to fraud,waste and abuse, requiring a substantial invest-ment in training and the development of newaudit and investigative approaches [emphasisadded].

8

These and other options will be discussedfurther in the full report, due later this year.

U.S. Environmental Protection Agency, Office of Inspector General, the .

September 1988.


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First Key Issue:

To What Extent is Superfund Dependent onContractors?

The Superfund program has over $1 bil-lion to spend in fiscal year 1989 to buy con-tractor and consulting services. Thatamount is 87 percent of EPAs Superfundbudget of $1.425 billion. The balance of theappropriated funds for fiscal year 1989--$190million--will pay for EPAs administrativeexpenses: the overhead and staff to manageand oversee the contractors work.

Each year, Congress, through appropria-

tions, reconfirms the policy to contract outthe Superfund program. In the first Super-fund appropriation (fiscal year 1982) Con-gress set a capon administrative expenses of21 percent ($41.6 million). Between 1982and 1989, as the total Superfund budget grewover600percent, Congress allowed EPAsadministrative expenses to grow by only 360percent (see table 1). Until 1987 the per-centage of the cap steadily declined to 10percent or $135 million. In 1988 the cap rose

to 16 percent ($182 million) before itdeclined again in 1989 to 13 percent. If thepercentage of the cap had remained constantsince 1982 at 21 percent, EPA would have anadditional $109 million for internal spendingin 1989--a 60 percent increase. As it is, theSuperfund program has $8 million more--anincrease of 4 percent--to spend internally in1989 than it did in 1988; that is, no increasein constant dollars. Meanwhile, external

Table 1 .Total Superfund Program Appropriationsv. Administrative Cap

Fiscal Appropriatedyear funds ($ roll)

1982 . . . . . . 2001983 . . . . . . 2101984 . . . . . . 4101985 . . . . . . 6201986 . . . . . . 9001987 . . . . . . 1,4111988 . . . . . . 1,1281989 . . . . . . 1,425

cap asAdministrative percent of

cap ($ roll) total funds

41.6 2137.4 1864.0 1687.6 1490.0 10

135.0 10182.4 16190.0 13

SOURCE: Fiscal year appropriations acts. The administrative aa, more than . . . of funds shall be for administra-tive

(mostly contracting) funds have increased 27percent in 1989 over 1988; a substantialgrowth rate for any industry.

Indeed, data from annual reports forpublic companies active in the cleanupmarket frequently show growths in annualrevenues of from 200 to 300 percent over thepast five years from 1984 through 1988, withnet incomes often rising at a much higherrate than revenues.9 Such growth has alsomeant sudden, large increases in technicalstaffs. Although much of this growth hasbeen from Superfund work, a lot of moneyhas been coming from other Federal cleanupprograms (which are expected to increase),State work, and private cleanups. In the pastyear, the financial community has been dis-cussing the bright future for environmental

9 The following examples taken primarily from company reports illustrate the state of this contractor industry; the companies are longtime major Superfund contractors: 1) Ecology and Environment, Inc., net earnings rose 204 percent from 1984 through 1988, while net income

rose 365 percent; as the fraction of earnings from Environmental Protection Agency contracts rose from 60 percent to 70 percent from 1986through 1988, net income per common share rose SO percent. 2) Roy F. Weston, Inc. earnings rose 240 percent from 1983 through 1987, whilenet income rose 970 percent and earnings per share rose 600 percent. Weston said that Fifty percent of the Companys growth has been dueto remedial investigations and front-end studies of hazardous waste sites, which require design, construction management and cleanupactivities. Moreover, there was a 72 percent increase in staff from 1986 to 1987 an increase of 774 people in one year. 3) ICF sales increased216 percent from 1983 to 1987, and from 1987 to are expected to double (no data on profits available). 4) Environmental Treatmentand Technology net revenues rose 230 percent from 1983 to 1987, while net income rose 160 percent. In the first half of 1987, the companyadded over 200 employees for a 25 percent increase. 5) CH2M Hill sales 25 from 1985 to 1987 while net income increased82 percent.

11


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12

services firms, in large measure because ofthe government cleanup business.

Over the eight-year history of Superfund,some private sector consulting and engineer-ing firms have also, inevitably, gained con-siderable influence over the direction andcontent of the Superfund program, whilegovernment controls have not kept pace.These firms together perform literally allprogram activities. They develop policypositions for the program; analyze legisla-tion; implement the SITE technologydemonstration program; evaluate potentialSuperfund sites and, through their analyses,determine whether they qualify for fund-

financed cleanup. Contractors analyzecleanup technologies, perform risk assess-ments, identify feasible cleanup alternatives,and draft Records of Decisions. They designcleanups and do the physical job of cleaningup Superfund sites. Rarely does one con-tractor do all these tasks.

Contractors write government requestsfor proposals and scopes of work for newgovernment contracts. Contractors par-ticipate in the management and evaluation

of other contractors.

Contractors also help EPA deal with thepublic. They operate the Superfundtelephone Hotline that responds to ques-tions from the public--a $9 million contractover 1987 to 1989. They sometimes repre-sent EPA at technical conferences and fre-quently coauthor papers with EPA staff.Public participation programs are designedand run by contractors; contractors repre-

sent EPA at citizen participation meetings,and they sometimes prepare the responsive-ness summary for site Records of Decision.Contractors develop and run Superfundtraining sessions and write Superfund publi-

cations, including guidance documents thattranslate the National Contingency Plan(NCP) regulatory instrument into operatingprinciples. The NCP itself results from ex-

tensive contractor work. Contractors re-search and write reports to Congress forEPA and provide other analyses that Con-gress and others use to evaluate the Super-fund program. Table 2, which is from thestatement of work for ARCS contractors, il-lustrates the broad range of activities in theremedial part of the program.

A small portion of Superfunds externalfunds go to States through cooperativeagreements. States then use the funds to

contract out much of the Superfund work forwhich they have taken responsibility.

Each component of the Superfundprogram has its own set of prime contractors(not including many more firms which carryout field activities and others which are sub-contractors in specialized areas). Theremedial program has field investigationteam (FIT) contractors and remedial con-tractors (REM and ARCS). The removalprogram has emergency removal contractors

(ERCS and mini-ERCS), technical assis-tance teams (TAT) contractors, and environ-mental services assistance teams (ESAT)contractors. The enforcement program hastechnical enforcement support (TES) con-tractors, whose work is nearly invisible to thepublic. While subcontractors greatly multi-ply the number of firms participating in theSuperfund program, Superfund contractmoney is funneled through a few large firms.Of the total value of active Superfund con-

tracts (of all types), about 70 percent --$3 bil-lion--is split among six prime contractors.10

In 1988 EPA revised its contract conceptsfor the three components of Superfund.

firms and the total value of their prime contracts are: CH2M Hill ($829 million), ($S04 million), NUS ($492million), CDM million), Weston ($388 million), and Ecology and Environment ($364 million). Sometimes significant amounts of moneygo to subcontractors, although the prime contractor typically makes a fee on those amounts. Also, these same firms may be significant

subcontractors on other prime contracts.


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Table 2.-ARCS Contractor Tasks

1. SITE-SPECIFIC PROJECT MANAGEMENTa Site Planningb. Project Monitoring and Control

c. Project Coordination

2. REMEDIAL PLANNINGProject Planning

b. Community Relationsc. Field investigationd. Sample Analysis and Validatione. Data Evacuationf. Assessment of Risksg. Treatability Study/Pilot Testingh. Remedial Investigation Reports

3. REMEDIAL DESIGNa. Project Planningb. Community Relationsc. Data Acquisitiond. Sample Analysis/Validatione. Data Evacuation

f. Treatability Study/Pilot Testing4. REMEDIAL IMPLEMENTATION

a. Procurement Supportb. Construction Managementc. Technical Engineering Services

5. OTHER TECHNICAL AND MANAGEMENT ASSISTANCEa. Remedial Oversightb. Enforcement Supportc. Community Relationsd. Data Managemente. Analytical Supportf. Other Technical Support

SOURCE: U.S. Environmental Protection Agency, from the ARCS Contractor Statement of Work

i. Remedial Alternatives Screeningj. Remedial Alternatives Evacuationk. Feasibility Study/Rl/FS ReportsI. Post RI/FS Supportm. Enforcement Supportn. Miscellaneous Supporto. Expedited Response Action

g. Preliminary Designh. Equipment/Services Procurementi. Intermediate Design

j. Prefinal/Final Designk. Post Remedial Design Support

While the trend is toward increasing thenumbers of contracts and giving the regionaloffices more contracting control, the im-petus for the changes differ among the com-

q

ponent programs.

q

q

In the remedial program, regional ARCScontracts, as discussed below, are phasingout national REM contracts. They will in-crease the number and total value of primecontracts and will constitute a layer ofproject management contractors between

EPA and site cleanups. EPA has statedthat the ARCS contracts are to improvecompetition and continuity in and provideperformance based incentives for remedialcontract work.The Superfund enforcement office changedits two national TES contracts ($57 millioneach) into eight, five-year TES contracts ini-tially valued at $131 million each. The en-forcement program claims that projected in-

creased cleanups placed into that division,

instead of fund-financed cleanups, will re-quire more money. As of January 1989, sixof the contracts were awarded (see table 3).The removal program has begun to addregional mini-ERCS contractors to its exist-ing national zone ERCS contractors. AnEPA IG report in 1987 on ERCS contrac-tors found excessive costs being chargedand suggested that lack of contractor com-petition was a reason. EPA responded incongressional hearings in April 1987 thatthe number of ERCS contractors would in-

crease from four to 25 and that 17 of themwould be selected that year. One year afterthe hearings, only eight had been selectedfor three of 10 regions. This reflects the ad-ministrative difficulties faced by EPA in at-tempting to spend appropriated funds. Thetotal value of active ERCS contracts isabout $500 million.


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14

Table 3.New Technical Enforcement Support (T ES) Contracts (as of January 1989)

Maximum ContractEPA Value Hours

Zone Regions Contractors($ roil) (1,000s)One . . . . . . . . . 1,2 Alliance Technology 136 2,460

CDM 124 2,460Two . . . . . . . . . 3,4 CDM 118 2,480

Dynamac 107 2,480Three . . . . . . . . 5,6,7Four . . . . . . . . . 8,9,10 117 2,480

SAIC 109 2,480

Total value, $ mil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711NOTE: TES Contractors support both Superfund end RCRA enforcement.

SOURCE: OTA from information by EPA.

Alternative Remedial ContractsStrategy

ARCS contracts, for the heart of the Su-perfund program--remedial cleanups--arenew, major project management contracts.Therefore, OTA has examined ARCS con-tracts in greater detail to illustrate currentcontracting issues.

ARCS was preceded by the REM con-

tracts started early in the program.11

Underthe REM system, seven national contractshave been awarded. The major REM con-tracts have been held by four firms: NUSCorp.; CDM; Ebasco Services, Inc.; andCH2M Hill. Total contract value through1990 is $829 million. Two minority-ownedcontracting firms have also been awardedsmall REM contracts, totaling $42 million.

Organized by region or combination ofregions (zones), ARCS contracts are ex-pected to number many more than the oldREM contracts, because of multiple con-tracts in regions or zones and the growth of

12Superfund. Each contract will have a

potential value of from $60 to $250 million,or more.

The ARCS contracts were designed tohave wide ranging responsibility for theremedial phase of Superfund--from sitestudies to complete cleanup. The REM con-tractors were engaged for individual, dis-crete tasks, such as an RemedialInvestigation/Feasibility Study (RIFS) orcommunity relations plan, but not necessari-

ly all tasks for a site. For specific sites, theARCS contractors will: 1) manage siteprojects, 2) plan and design remedial actions,3) implement remedial work, and 4) provideother technical and management assistance(see table 2). ARCS contracts, like REMs,will also oversee subcontractors who dopieces of the project work, a practice whichis not necessarily ineffective or avoidable.However, the ARCS contractors are sup-posed to exercise much more control of sub-contractors and have more responsibility for

their technical work. This is a positivechange.

J. Winston Porter, Assistant Ad-ministrator of EPAs Office of Solid Waste

The official name for REM contracts is: Enforcement and Remedial Planning Activities at Uncontrolled Substance DisposalSites.

Initially 30 to 40 contracts were planned; less will probably be awarded.


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15

and Emergency Response, has describedARCS as a new initiative under a speed thepace theme for Superfund:

. . . We are looking at site cleanup from aproject management perspective. This ap-proach should pay benefits through greater ef-ficiency and accountability. Phases of theprocess such as developing the [RIFS], design en-gineering, and construction management could

all be accomplished by one firm or organizationwith proven expertise in project management.Specialized work and opportunities for smallerbusinesses could be obtained through sub-contract from the project management firm . . .

13

The project management approach, ofwhich the ARCS forms the cornerstone, waslaid out in an August 1987 memo by Porter.

The memo identifies problems in theremedial program of pace, accountability,and continuity. But while the memo explicit-ly mentions timeliness 12 times, cleanupquality only appears twice. The memobegins, The Administrator and I have madethe completion of current projects the highestnear-term priority within the Superfundprogram. Porter then discusses the existingsystem that has involved a large number ofpass-offs and downtimes, culminating inlengthy project execution periods. The

memo concludes that having so many or-ganizations [REMs, the Corps and engineer-ing firms, contract labs, EPA reviews]involved, we have had difficulty in fixing ac-countability and responsibility.

Porter states that the objective of theproject management concept is: ... to haveone management organization with overallday-to-day responsibility for the technicalexecution of the work. This projectmanagement organization would be underthe direction of EPAs project manager, butEPA acknowledges that the ARCS contrac-tor, not EPA managers, would be account-

able and responsible. Thus, from Portersperspective, EPAs role is to overview, makefundamental decisions, and be the basicspokesman to the public, governments, andCongress.

According to another EPA document, theARCS concept is aimed at increasing com-petition, incentivizing [sic] performance,and promoting project continuity. EPAhas also described ARCS as furtherdecentralization of program responsibility toEPA regions, as the contracts will beawarded and managed by regions, ratherthan by EPA headquarters.

Project management in the public interestby government workers is imperative for Su-perfund. Moving project management out-side the government, however, adds anotherlayer of contractors between EPA and thesite problems the agency is charged withidentifying and remediating. It avoids fixinga flaw in the current program: not enough in-ternal EPA technical and project manage-ment expertise, even with extensivecontractor support. Porters memo (seeabove) laying out the project managementconcept recognizes this internal deficiency.

He states, I believe this [project manage-ment] concept also recognizes the fact thatwe will likely have difficulty in maintaining alarge cadre of experienced engineering andconstruction managers in our organization.This is the crux of the issue.

But Porter says contractor projectmanagement organizations will eliminateEPAs need to pull all the pieces together.In other words, contractors instead ofgovernment workers will manage contrac-tors; contractors will manage projects in-stead of someone in the governmentmanaging the projects. The critical issue will

Winston Porter, U.S. Environmental Protection Agency, Superfund Progress and Prospects, remarks prepared for at the Materials Cent rol Research Institute conference, Washington, DC, Nov. 16, 1987, p. 10.

Contracting, an undated EPA document given to OTA in late 1987, p. 1.


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remain under ARCS: How will EPA ensureeffective quality control of contractor workand consistency among contractors?

Will ARCS Increase Competition?

Whether ARCS will increase competitionin the remedial program can be evaluated byanswering two, related questions. First, hasthe system been opened up to a wider varietyof contractors? And, second, do regionalstaff have a larger contracting pool fromwhich to draw? OTAs review of the ARCScontracts awarded as of January 1989 showsthat the system is pulling in some differentregional contracting firms that were notvisible under the REM system but the effec-tive pool of contractors remains about thesame as before.

In some regions EPA staff will have moreprime contractors to call upon than they didunder the REM contracting system. And,while increased numbers of prime contrac-tors implies increased competition and per-haps more EPA control, it does not tell thewhole story. Much of the remedial contractwork to date has been performed by sub-contractors rather than prime contractors.

Thus, the real contracting pool under theREM system was as large as it will be underARCS contracts if both prime and sub-contractors are considered.

By January 1989, ARCS contracts hadbeen awarded for Regions 1,2,3 and 5 andthe zone comprising Regions 6, 7, and 8.Contracts for Region 4 and the zone forRegions 9 and 10 are still under negotiationand signed ARCS contracts are expected thisyear. Table 4 lists ARCS contracts awarded

as of January 1989, including the prime con-tractors, team subcontractors, and the dollarvalue of the contracts. The 18 contractsawarded so far have a total potential value of$2.7 billion over 10 years (which is really arelatively small amount for the next 10 yearsof Superfund).

For the 18 new contracts, 13 firms wereselected as primes (three firms won twoeach, and one firm won three). Of the 13firms, 9 have had or have national Superfundcontracts (four have had REM contracts).Of the 4 new firms in the system, 2 have

teamed up with other firms (called teamsubs) that have had or have national Super-fund contracts. OTA estimates that about 20percent of the total money will go to firmsnew to the Superfund system (counting bothprimes and team subcontractors).

Will ARCS's Performance Incentives Work?

Competition on the basis of quality workaftercontracts have been awarded is moreuncertain than competition before firms getthe work. Incentive to perform well has beensupposedly built into ARCS contractsthrough the awarding of multiple contractorsby region and award fees. Thus, RPMs willultimately be able to pick and choose amongthe available ARCS contractors, assumingthat at any time there is significant unusedcontractor capacity. Judgments as to whichARCS contractors are performing betterthan others will take some time, and evalua-tions will be made prior to completion of

major pieces of work (such as RIFSs whichtake at least a couple of years to complete orcomplete cleanups which take several moreyears). Meanwhile, EPA staff plans to even-ly distribute work or to make judgments onthe basis of their past experiences with thesame contractors under the REM system orthrough personal knowledge.

Under the REM system, a judgement thata contractor was not performing well was dif-ficult to substantiate bureaucratically. Al-

though there are some very experienced andcapable RPMs, all too frequently a relative-ly inexperienced, often young, RPM has togo up against experienced contractors. Evensome experienced RPMs have found chal-lenging a REM contractor a difficult and in-timidating task. Contractors believe that


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17

Table 4. Regional ARCS Contracts (signed as of January 1989)

Maximum ContractValue Hours

Region Prime Contractors ($ (1,000s) Team Subcontractors

One* . . . . . . . . . . . . . . NUS 146 300 Badger, JHRArthur D. Little 69 145 Remediation Tech, Havens &

Emerson, Inc.Two* . . . . . . . . . . . . . . Ebasco Services 223 560 IT Corp., Wehran Eng, Hitman-Ebasco

ICF Technology 63 145 Gibbs & HillThree . . . . . . . . . . . . . NUS 216 560 Gannett-Fleming

Four*Five . . . . . . . . .

Six and Seven .

Ecology & EnvironmentCH2M HillTetraTechBlack & Veatch

. . . . . CH2M HillBlack & VeatchWW Engineering & Science

PRCEcology & EnvironmentRoy F. Weston

Donohue & Assoc.

. . . . . CH2M Hill

63223

6565

227220

58

21261

222

227

152

145560145145

560560145

560145560

560

300

nonenoneWapora, GeoTransEarthTech

noneWarzyn EngineeringLimno Tech, Dr. J. Goodman, Alderink

& Assoc.ICF, VersarnoneDames & Moore, Engineers Intl., Life

Systems, Hubble Roth Clark, Reed

Quebe Allison Wilcox & Assoc.Ebasco, STS Consultants, John MathesAssoc., Life System/lcair

noneJacobs Engineering 150 300 McClellands, Terracon

Eight, Nine, and Ten*

Total Value, $ mil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,662Contracts still under negotiation.

SOURCE: OTA from information provided by EPA.

RPMs can and do give contractors criticalevaluations. The ARCS system will not

change the technical expertise level ofRPMs, but the criteria for contractormanagers is quite stringent and they are like-ly to be considerably older and more ex-perienced than most RPMs. In fact, overtime ARCS contracts could decrease RPMexpertise relative to that of the contractorsbecause ARCS puts great emphasis on con-tractor site managers, giving ARCS contrac-tors increased importance. Unless there issubstantial internal support for and reliance

on RPM judgement, making a poor perfor-mance rating on ARCS contractors may bemore difficult to accomplish--the stakes arehigher under ARCS than the REM system.

As a result, the project management conceptcould undermine independent government

control of contract work unless there is in-creased emphasis on EPA staffing needs.

Underlying the whole notion that ARCSwill breed competition after firms win con-tracts and lead to higher quality work, ac-cording to EPA, is that 50 percent excessaggregate capacity has been built into thecontracts. EPA says, This excess capacity isessential to the performance incentives inARCS since contractors are not assured of

receiving orders that will meet the full con-tract capacity.15

But will this calculationover the 10-year life of ARCS contracts beaccurate? Or, like previous contracting

Smith, et al., ARCS: A Performance Based Strategy, conference proceedings (Silver Spring, MD: Hazardous MaterialsControl Research Institute, November 1988). Although the lead author for EPA, other two authors of this paper which describesthe design and operation of ARCS work for one of Superfunds major program support contractors. Of 36 presentations at by

personnel, two-thirds were coauthored with contractors.


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18

programs, will there be such a high demandby EPA for contractor work that essentiallyall ARCS contractors will receive the maxi-mum and not the guaranteed minimumamount of work--perhaps long before 10years? It would be very useful for EPAs IGto monitor the initial flow of work assign-ments to ARCS contractors during the nextyear or two to check this critical design fea-ture of ARCS contracts.

Finally, the performance award fee systemused in ARCS has been used in other majorcontracts and, based on our studies, has notresulted in a consistent high level of qualitycontractor work, although many observersthink that there have been definite improve-

ments over time. A November 1986 surveyof six EPA regions found about one half ofthe 32 respondents (mostly RPMs) sayingthat the award fee approach was not effec-tive.

l6

q

q

q

q

Some specific comments were:

There are few, if any, incentives built intothe REM contract that discourage theproduction of mediocre to low-quality docu-ments. The award-fee is not an effectivetool to correct problem areas in the RI/FSprocess; this has the potential to cause (andin several cases it actually has) project over-runs.Non-effective--the only meaning it has tothe contractors is if it is not average orabove. Dollar values are too small to bemeaningful.Not effective enough. The contract en-courages mediocrity and not excellence.It is not [effective]. Its just gravy to REMcontractors already making too muchmoney for low quality work. LOE (level ofeffort) contracts favor using as many hoursas possible. No incentive to do good quality

work at a reasonable cost.Although, theoretically, better perfor-

mance results in higher award fees, cost con-trol objectives by contract managers maylimit award incentives for improved work.Also, it should be noted that giving a contrac-

tor a low or a high performance rating, whichEPA staff say has the most impact on con-tractors, requires considerable work by EPAstaff. There is a built-in incentive to givecontractors average or above averageratings. Also, there is considerable uncer-tainty from the contractors perspective onhow award fees will be decided, since somuch depends on individual judgments byEPA staff.

Will the Project Management ApproachAssure Continuity?

Project continuity as a site moves throughremedial phases is an important goal andrecognition of a lack of it in the program is

commendable. But the ARCS solution maynot help much.

There has been considerable attentionunder the REM system to delays caused byhandoffs; that is, contractor changes be-tween project phases. And when a new con-tractor lacks confidence in a previouscontractors work, these delays multiply.Since the ARCS contractors will be assign-ing the same discrete tasks among sub-contractors, handoffs will still occur.

Another aspect of project continuity ispeople. One contract firm may have a siteproject management contract throughout anumber of phases of a site project. But thisdoes not guarantee that the same people willbe involved or will manage the site throughthe period of the contract. First, as statedabove, different subcontractors will be han-dling different phases of work. Second, EPArequires that senior key contractor person-

nel work on a contract for a minimum of 120days. After this period many of these peopleare likely to be moved to other, probablynewer, contracts to help win them. Third,given the high mobility of the Superfundworkforce (driven by high demand) and the

Environmental Protection Agency, Improvement Analysis, contractor study by CDM, July 1987.


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length of site projects, there is no reason tobelieve that, even within ARCS contractors,the managers and technical staffs will remainin place throughout the full cycle of siteremediation--or even a significant fraction

of it. And, it is people, not solely organiza-tions, that provide institutional memory orcontinuity. 17 One major PRP has a policy ofmoving a project to the new firm when a keyproject manager moves there, something thegovernment cannot do. Moreover, highturnover of EPA people means that projectcontinuity is also jeopardized from the in-side.

And, lastly, the project management con-cept is at risk because of the high overall costof running a site project through theremedial planning, design, and implementa-tion phases. The award levels of the ARCScontracts may not be large enough to coverthat overall cost. For instance, the smallercontracts have maximum potential valuesaround $60 million over 10 years. Turningover just three small sites could consume anentire ARCS contract. This phenomena isalready causing one region to assign onlyRIFSs to ARCS contractors and to await

knowledge of the cost of the cleanup beforedetermining whether the ARCS contractorsor the Corps of Engineers is assigned the ac-tual remediation. In fact, it is our under-standing that, in general, ARCS contractorsmay only handle the actual cleanup if es-timated costs are below $5 million, leavingmost cleanups contracted through the Corpsof Engineers. This is the same process usedunder the old REM strategy. And, it il-lustrates the conflict between the project

management and competition goals of

ARCS. In order to award multiple contractsper region, individual ARCS contract valueshave been kept too low to accommodate thetrue cost of taking a significant number ofsites through the entire process and to

provide 50 percent excess capacity.

WillDecentralizing Contracting to RegionsImprove Management?

On the face of it, giving regions greatercontrol over the contractors who do theirwork seems efficient and appropriate. It as-sumes, however, that the expertise to select,negotiate with, and manage contractors isavailable in the regions. Regional staff willnot only have to be able to make technical

judgments of contractor performance butalso administer increased numbers of highervalue contracts. Not only will technical andadministrative expertise be required at theregional level but decentralizing to regionswill also mean added regional costs.

Does significant management expertise tomanage the ARCS exist in EPA regions?Regions have been responsible for managingState cooperative agreements, and in a cap-

ping report on State cooperative agreementsin 1988, EPAs IG concluded that EPAregions have not been effective managers ofState contracts. States have been allowed tofall behind on schedules and not reach goalsor objectives. States have been experiencingsignificant problems completing [RIFSs].And, monitoring of State pre-remedial workhas been inadequate. The IG foundwidespread noncompliance with procure-ment requirements by States, which means

that States were not adhering to Federalstandards in awarding Superfund contracts.

Some contractors are saying that the turnover of key site project management people is really not that important. But site evaluationsand cleanups seem to a fundamental of effort--project based--which has always been recognized to require stable direction overreasonably long periods. Like making motion pictures, constructing large buildings, or performing technology assessments, cleaning up toxicwaste sites will be more efficient if the same people are in charge from beginning to end.


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Overall, the IG said, Regions were not ef-fectively performing their oversight respon-sibilities."

18

Additional evidence of regional shortcom-

ings comes from another IG report whichconcluded:

Contracting methods . . . did not follow estab-lished Agency procurement policies and proce-dures. Also, EPA personnel allowed contractorsto start work prior (up to 8 months) to signingdelivery orders and did not subject the technol-ogy manufacturers to the normal competitivebidding process.

19

EPA Administrator Lee Thomas toldCongress in April 1987 that expanding com-

petition in contracting services would re-quire increased numbers of contract

managers. Referring to removal staff, hesaid, We will double the number of contractmanagers we have on that staff to look atthose projects, oversee those projects, froma financial management point of view this

,,20 -

year. Doubling contract managers fornew removal contracts and doubling con-tract managers for new remedial contractswill double the cost of administering con-tracts. But, as noted earlier, as a result ofcongressional action, there will be no real in-crease for EPAs spending on the ad-ministration of Superfund.

U.S. Environmental Protection Agency, Office of Inspector General, Capping Report on EPA, Office of the Inspector General, Auditsof Cooperative Agreements for Fiscal Years 1985 through 1987, March 29, 1988, p. 4.

19 U.S. Environmental Protection Agency, Office of Inspector General, Review of Region 4s Management of Significant

Removal Actions, September 1988, p. 6.

U.S. Congress, S. Hrg. 100-261, hearings before the Senate Subcommittee on and Environmentalof the Committee on Environment and Public Works, April 14, 1987, p. 150.


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Second Key Issue:

Why Depend On Contracting To Such A Great Extent?

Originally, there was congressional con-

cern that Superfund could become a large,unwieldy public works program. Inex-perience with uncontrolled hazardous wastesites in 1980, as well as the desire to get aquick start, also fed into the contractingpolicy decision. Embedded in the statutewas also a heavy responsibility for govern-ment to identify responsible parties and seekprivate cleanups and cost recovery forgovernment-funded cleanups.

In 1980, many people thought that clean-ing up uncontrolled hazardous waste siteswas a short-term problem, to be solved rela-tively quickly with known engineering tech-niques. A short-term program had no needfor a huge internal government bureaucracythat would gain a life of its own, and Con-gress wanted the money to be spent on clean-ing up sites instead of building abureaucracy. Also, EPA--a regulatory agen-cy--had no expertise in running a majoroperational, engineering program. There

was, as well, a crisis atmosphere. Congressand EPA assumed that contracting wouldenable EPA to get the program started fasterthan if the agency had to first develop inter-nal structure and expertise. These congres-sional concerns and actions, aided by theReagan administrations policy to acceleratethe privatization of the Federal Govern-ment, have led to the current large scale de-pendence on contractors in the Superfundprogram.

it

Regarding its contracting policy and how

came about, EPA told OTA:. . . The real deciding factor on how to effective-

ly operate and manage the Superfund programwas made early in the program and is a result ofboth Congressional intent and Agency manage-ment decisions. Congress envisioned theprogram to be overseen and managed by theAgency. Agency managers set up the currentstructure as the most cost effective and efficient.

The restriction is an end result of the budgetdevelopment process and is included in the Su-perfund appropriation as an assurance to Con-

gress that resources provided will be expended on

The Agency believes that management and

waste sites is a prudent and appropriate role. Thestructure necessary to establish a major construc-tion workforce in EPA for Superfund site workwould exceed the role intended by Congress forthe Agency and would unnecessarily duplicateservices readily available in the public sector [em-

21phasis added].

The relative merits of contracting out ver-sus the use of in-house government staff is anold issue, the pros and cons of which will notbe extensively explored here.

22But, the

points usually debated--whether contractingout is cost effective and efficient, results inquality work, and is appropriate for thegovernment activity being contracted out--are questions that Congress might ask of theSuperfund program. These are the samequestions Congress has been asking aboutgovernment defense programs. The keyissue is the extentof contracting and par-ticularly its growth versus building an effec-

U.S. Environmental Protection Agency response to an letter, Sept. 29, 1987.

For a quick review of the issue, see Congress, Congressional Research service, Contracting Out: Some Basic Policy Questions forthe DOD and Other Government Agencies, Report No. 83-142 F, Sept. 19, 1983.

21


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22

tive government workforce to ensure thatcontractors provide high quality and cost-effective services.

What was a reasonable policy decisioneight years ago may not make as much sensetoday. First, the Superfund program and re-lated cleanup programs are and will not beshort-term Federal programs whoseproblems can be easily solved. Second, largescale contracting under Superfund has notnecessarily been--nor has any attempt beenmade to show that it is--cost effective and ef-ficient, and it has not yet assured that fundsare expended on site cleanup and relatedactivities, as EPA states above. Third, con-tracting has not avoided the development of

dependent bureaucracies. Fourth, emphasison contract management does not lead to thedevelopment of an infrastructure and tech-nical capability that drives EPA up the learn-ing curve. Fifth, the large pool of contractingmoney creates a pulling force on personnel--out of the Federal (and State) system andinto the private sector. And, sixth, Super-

fund contracting contains a potential for con-flict between public and private interests.

There has been little reconsideration ofthe immediacy of environmental threats

from most Superfund sites. If there is, infact, not a crisis situation to deal with (only atiny fraction of Superfunds resources arespent on true emergency situations), then aslower pace of spending on contracting couldbe justified.

But, as we have shown, the trend is towardincreased funding for contracting; some-times, not intentionally. For instance, theimposition of mandated schedules for attain-ing certain levels of activities has also con-

tributed to increased dependence oncontractors. The policy of mandatedschedules was a reaction to a slow program,but Congress gave little consideration to whowould do the work and whether the require-ments might worsen an already heavyworkload for a largely inexperienced con-tractor and EPA workforce.


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Third Key Issue:

Is the Extent of Superfunds Dependence on

Contracting Appropriate?

Do the functions of the Superfundprogram fit traditional criteria for ap-propriate contracting out? Is the large scaledependence on contractors an appropriateway to manage a long-term, probably 50-year, cleanup program which will span anumber of career lifetimes? Or, could thegovernment workforce itself conduct moreSuperfund work? The latter is an importantpolicy option today.

Superfund Activities andContracting

Superfund program activities can bebroken down into six categories: policydevelopment, regulation development andenforcement, program oversight andmanagement, information collection, siteanalysis, and the physical work of cleanup.All are contracted out in varying degrees,even oversight and management which EPAclaims is the most appropriate role for theagency. Contracting of project managementis due to increase under the ARCS systemand oversight of PRP (potentially respon-sible party) takeovers is routinely contractedout (as was suggested by Congress in Section104(a)(l) of CERCLA).

Federal rules for contracting are issued byOffice of Management and Budget (OMB).OMB has exempted, as inappropriate forcontracting out, activities that are inherent-ly governmental because they are:

. . . intimately related to the public interest . . .These functions include those activities which re-quire either the exercise of discretion in applyingGovernment authority or the usc of value judge-ment in making decisions for the Government.23

And GAO has said:. . . a key consideration in evaluating any func-

tion [for contracting] is whether its performanceby an outside contractor interferes with an

agencys control of policy, decision-making, ormanagerial function which are basic to its mis-sion.24

Using the GAOs criteria, each Superfundactivity can be evaluated separately. Testingand information collection at sites and actualphysical cleanup work appear to be most ap-

propriate activities for contracting out.

The areas of policy, regulation, manage-ment, and oversight have the attributesGAO cited and seem the least appropriateactivities for contracting out. EPA officialsmaintain that contractors do not makepolicy, but if contractors provide virtually allthe information and analyses, have staff

Office of Management and Budget, Circular A-76 (revised), op. cit. Circular A-76 covers commercial/industrial Circular A-120

covers consulting services.U.S. Congress, Senate Committee on Veterans to A-7& 97th Congress,

Session, Nov. 5, 1981, p. 118.

23


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24

more experienced than EPA, and write keyinitial drafts, there is certainly a lot of oppor-tunity for contractors to shape policies. In-deed, OTA has examined a number ofcontractor studies which later became the

basis for program policies, including workdone to revise the IFS process and the pre-

Eremedial process.

Site analysis, as well as physical sitecleanup, is technical in nature. But siteanalysis leads to critical policy decisions,such as whether a site does in fact requirecleaning up or whether the Federal systemwill pay for the cleanup. Thus, using GAOcriteria, not all steps in the initial site analysisphase may be appropriate for contractingout. Records of Decision (RODS) areprobably an example of an inappropriatestep. The ROD incorporates not only tech-nical analysis but embodies policy decisionsand has a legal bearing on EPAs ability torecover costs under the enforcementprovisions of CERCLA.

Overall, few nonfield, report producingSuperfund activities appear eminently ap-propriate for contracting out. The most ap-

propriate Superfund activities to contractout--the physical examination, testing, andremediation of sites--are the most expensive,but so far most of the work has not been ac-tual remediation. (This will change as theprogram matures.) As of June 1988, 103sites were at the remedial action stagewhereas 641 were still undergoing RIFSs.Under current policy, with only 13 percent ofthe budget in fiscal year 1989 to be spent in-ternally, all of that critical analysis on over

600 sites will be done by contractors.

Needed: Independent ContractorWork and Independent Government

Capability

When communities, PRPs, OTA, andother groups have raised questions aboutcontractor work at specific sites, EPA hasoften paid more money either to the originalcontractor to reexamine the work or toanother contractor to repeat the work. Al-though there are some very experienced andexpert staff in EPA, for the most part thereis very little internal government capability,both expertise and time, to independentlycheck contested contractor work.

Another issue is that the same contractorswho do the policy and program support workalso do the field engineering work. Does thispractice encourage fresh thinking and criti-cal analysis of past work to develop more ef-fective policies? The good side of thispractice is that the contractors bring to thepolicy and program support area real worldexperience. But the other side is that EPAis not getting independent evaluations of thework of the contractors who are implement-

ing the program. Often EPA hires a contrac-tor that is implementing a technical task forthe program to discuss how to improve thattask and to suggest policy changes. One ofEPAs major contractors in the policy andmanagement area, who has played a key rolein the development of Superfund, has nowbranched out; most of its major recentgrowth has been from winning engineeringand project management ARCS contracts toimplement the programs it helped create.

Did it have a special competitive ad-26vantage?

testimony, hearing before Subcommittee on and Environmental Oversight, Senate Committee on Environmentand Public Works, Dec. 10, 1987. TWO contractor reports were discussed: Improvement Analysis, by CDM, July 1987, and Workloadand Resource Requirements for Preliminary Assessments, Site Inspections, and Ranking System Evaluations Under SARA, by

and Environment, October said, usc management consultants or other who are not nowimplementing its programs and who, therefore, may be able to offer more objective ways to improve efficiency.

contractor states its position in one of its advertisements: By building our engineering work on a solid foundation ofknow-how, is qualified like no other firm to provide with the most comprehensive hazardous and waste management servicesin the nation. Unlike other firms, we understand not only the technical engineering and aspects of hazardous waste management,but also the framework of regulatory requirements, enforcement, and public involvement in which our clients must operate.


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It is not enough that government workersretain final decisionmaking authority unlessthose government workers have the time, ex-perience, and technical expertise to under-stand and evaluate what contractors are

telling them, as well as create the key basicideas in the first place. That is, there is a dif-ference between contractors complementingor supplementing government staff and con-tractors replacing government staff. In boxB are brief examples, from several contractstatements of work, to illustrate current Su-perfund program support and policy-relatedwork performed by contractors. These seemthe kind of activities that people expectgovernment workers to do; some redundan-

cy is also illustrated.

Superfund: Five Years? TwentyYears? Or, More?

Today, few people consider the Superfundprogram to be one with an early sunset.Simple mathematics confirms that, using themost conservative number of sites to becleaned up of 2,000 and an optimistic pace of30 cleanups per year, the Superfund program

will be around for the next 60 years (until2050). Moreover, the cleanup programsoutside of Superfund (e.g., EPAs RCRAcorrective action program and those in theDepartment of Defense and Department ofEnergy) are growing rapidly and they com-pete for the same workforce.

Given the prospect of a long-termprogram, the policy question becomes: Whatkind of infrastructure should EPA bedeveloping to insure institutional movementup a learning curve to bring the program into

cost-effective and efficient operation? It isone thing for contractors to gather data onsite contamination and implement govern-ment cleanup decisions. However, in a num-ber of site case studies, OTA has seenevidence that contractors sometimes ex-plicitly or in a de facto sense decide whatsites pose significant enough threats to war-rant cleanup, what the cleanup goals shouldbe, what the community should be told, whatthe most feasible remedies are, whether the

field work is of sufficiently high quality, andwhen the cleanup has met its goals. Forthese critical activities, a lot of judgment isnecessary because technical data cannotsimply be plugged into equations to get theright answer.

Over the long term, OTA believes that theNation would be better served by an ex-perienced, competent technical governmentstaff to design, closely supervise, andevaluate the field technical services

provided by contractors. This is the criticalneed, more so than a cadre of governmentcontract managers. But, contract managersis what EPA is focusing attention on.


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BOX B.--Examples of Tasks in Current Policy Support Contracts

Booz Allen and Hamilton, support for SuperfundImplementation and Evaluation" (contract68-01-7376, $21.7 million):

. Perform quarterly monitoring and evaluationof system operations and procedures

q conduct reviews of and developrecommendations on the regional

management of the ERCS and TAT contracts

q evaluate environmental results achieved bythe removal program

q conduct workforce and training need

surveys and assessmentsq collect and analyze information, develop

reports and briefings on a variety of new

emerging waste management technologiesand innovations; recommendations shall be

required on how to best make suchinformation readily available to program

personnel as they plan and implement

cleanup objectives

q develop new policies and procedures toprovide sound financial management andoversight toward the success of the

Superfund programq define requirements for planning and

tracking of program strategic objectives,

milestones and accomplishments

q define information needs, identify datasources and develop guidelines for source

data collection

q develop issue papers, managementbriefings, user briefings andHeadquarters-regional communications

q determine if [office] technology transferactivities are effective as developed by the

program and whether, given the level of

resources devoted to this effort, such a

program can fulfill the need

CH2M Hill, Technical Support for Superfund PolicyFormulation (COMK468-W8-009@ $12.7 million):

qperform investigation of and makerecommendations for assisting minority,small business, other contractors, and

subcontractors in the Superfund program

ICF, Policy/Analytic Support for Superfund

Implementation (contract 6841 -7389,$11.3 million):

q analyze statutory provisions to determinethe need for new regulations, changes to

existing regulations (i.e., NCP), new policy,

and new guidance

q [for NCP] prepare regulatory impact

analyses and regulatory flexibility analysesq analyze SITE program issues and results

and make policy recommendations

q develop methods for technology transfer

ICF, "Analytical, Technical and Management

Services for OSWER" (contract 68-01-7481,$$7million):

q collect and analyze data and information,develop reports and brief the technologytransfer committee on a variety of newemerging technologies and innovations;recommendations shall be required on how

to best make such information readily

available to program personnel, includingthe Regions and States

q develop improved techniques for measuringperformance

q analyze design, develop and implementselected training in critical content areas

q estimate the economic, social, and

environmental costs and benefits of actualor proposed environmental regulations or

policies on industry and governmentq locate qualified experts

q assist in evaluating the economic andtechnical feasibility of various alternative

technologies

. provide technical support andrecommendations to EPA on management

of Superfund construction


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Fourth Key Issue:

Does the Extent of Superfunds Dependence OnContracting Reduce Environmental Effectiveness?

Quality in the Superfund program is--orshould be--measured by the environmentaleffectiveness of cleanup decisions and fieldactions. Reliance on contractors to performthe bulk of Superfund work exerts a numberof forces on the program that sometimes

jeopardizes the quality of that work. Amongthose forces are:

q the lack of development of internal EPA ex-

pertise, which results in poor contractmanagement and oversight;

q more interest in controlling contractor costs

than concern about the environmental per-

formance of contractors;

q a mobile workforce whose perspective on

quality, needs, and accountability can shift

as it moves from the government--a pur-

chaser of services--to and among contrac-

tors--a seller of services; andq conflicts of interest that arise because work-

ing for the government may affect futurework in the private sector.

Technical Problems

OTA has illustrated quality problems,such as technical mistakes, use of inaccuratedata, and poor quality control in its June1988 report Are We Cleaning Up?- 10 Super-

fund Case Studies. GAO also notedproblems with contractor performance in51percent of the cases they examined. 27 TheOTA finding that there were substantial

problems in the key RODS for sites (which

are based in large measure on contractorstudies and