Pay-For-Performance Pay-For-Performance in Oklahomain Oklahoma

The Oklahoma ExperienceThe Oklahoma Experience

Presented by: Richard McKayPresented by: Richard McKay

Petroleum Storage Tank DivisionPetroleum Storage Tank Division

Do you have a stalled cleanup ?Do you have a stalled cleanup ?

We realized we had many…. We realized we had many…. and here’s how!and here’s how!

Conducted $100,000 Case ReviewsConducted $100,000 Case Reviews

The Football Field The Football Field analogy.analogy.

Paying out money Paying out money with little or no with little or no environmental results.environmental results.

Reviewed our Reviewed our accountability.accountability.

We looked at Pay-We looked at Pay-For-Performance.For-Performance.

ACCOUNTABILITYACCOUNTABILITY

As a Regulatory Agency As a Regulatory Agency we have a fiduciary we have a fiduciary responsibility:responsibility:

To safeguard public To safeguard public health, safety & the health, safety & the environment.environment.

To safeguard public To safeguard public money.money.

Why We Chose Pay-For-PerformanceWhy We Chose Pay-For-Performance

Needed a way to guarantee environmental results and Needed a way to guarantee environmental results and move away from time & materials projects. move away from time & materials projects.

Wanted a method to impose cost control so total costs Wanted a method to impose cost control so total costs would not exceed the $1.MM cap per site.would not exceed the $1.MM cap per site.

Wanted a way to reduce disallowances.Wanted a way to reduce disallowances. Wanted a way to focus on results...not paperwork.Wanted a way to focus on results...not paperwork. Wanted a way to shorten time to pay claims.Wanted a way to shorten time to pay claims. Needed way to better relations between the tank Needed way to better relations between the tank

owner, consultant and regulatory/fund.owner, consultant and regulatory/fund.

We Began to Sign P-F-P ContractsWe Began to Sign P-F-P Contracts We took a voluntary approach beginning in 1996 with Consultants willing to take a We took a voluntary approach beginning in 1996 with Consultants willing to take a

risk and willing to guarantee environmental results.risk and willing to guarantee environmental results.– Committed to 3 year contracts with a 2 warranty.Committed to 3 year contracts with a 2 warranty.

– Payments are made based on attaining milestone contamination reductions. Payments are made based on attaining milestone contamination reductions.

Tank Owners supported P-F-P because:Tank Owners supported P-F-P because:

– Site restoration money wasSite restoration money was encumbered.encumbered.

– They wanted Consultants who were willing to take a risk and guarantee their They wanted Consultants who were willing to take a risk and guarantee their work.work.

ResultsResults of P-F-P: of P-F-P: WinWin--WinWin--WinWin

Our difficult sites are being cleaned because:Our difficult sites are being cleaned because:– Better designed RA systems are being installed.Better designed RA systems are being installed.– Consultants are guaranteeing results.Consultants are guaranteeing results.

Site costs are coming down because: Site costs are coming down because: – Emphasis is on closing the site to make money rather than Emphasis is on closing the site to make money rather than

keeping site open to make money.keeping site open to make money. Attained cost control by using Tank RACER 99 to Attained cost control by using Tank RACER 99 to

negotiate a fixed price to remediate a site. negotiate a fixed price to remediate a site. Site remediation costs are encumbered.Site remediation costs are encumbered. Funds are paid Funds are paid onlyonly when milestones are achieved. when milestones are achieved.

P-F-P Program Results (cont’d)P-F-P Program Results (cont’d)

Consultant disallowances reduced to almost zero.Consultant disallowances reduced to almost zero. Tank owners do not have disallowances.Tank owners do not have disallowances. Paperwork has been substantially reduced.Paperwork has been substantially reduced. Time to pay has reduced to a few days.Time to pay has reduced to a few days. Achieved collaboration between all parties.Achieved collaboration between all parties. The Consultant can make a reasonable profit and The Consultant can make a reasonable profit and

take pride in a job well done.take pride in a job well done. The Tank Owner is happy - He knows the cost and The Tank Owner is happy - He knows the cost and

when he can get back to work.when he can get back to work.

Other Results … Not Counted OnOther Results … Not Counted On

Pre-approval process became mandatory.Pre-approval process became mandatory. UST Advisory Council composed of UST Advisory Council composed of Consultants and Consultants and

Tank Owners adopted:Tank Owners adopted:– Unit Costs for all work through site delineation.Unit Costs for all work through site delineation.– Tank RACER 99 to price site remediation.Tank RACER 99 to price site remediation.

Pre-approvals requested faster than money comes in.Pre-approvals requested faster than money comes in. Hold cooperative Consultant/State training sessions.Hold cooperative Consultant/State training sessions. Technical staff has more time to visit sites and track site Technical staff has more time to visit sites and track site

remediation progress.remediation progress.

How does the P-F-P process work?How does the P-F-P process work?

Set clean-up levels based on Tier I or Tier II report.Set clean-up levels based on Tier I or Tier II report. Submit Remediation Technology Report.Submit Remediation Technology Report. Submit final Remedial Action Plan.Submit final Remedial Action Plan. Submit Pay- For-Performance proposal.Submit Pay- For-Performance proposal. Look at clean-up cost in $ / ydLook at clean-up cost in $ / yd33.. Compare to similar sized systems & technology.Compare to similar sized systems & technology. Run Tank RACER 99 to determine reasonable cost.Run Tank RACER 99 to determine reasonable cost. Negotiate the final set contract price and terms. Negotiate the final set contract price and terms. Sign the Pay-For-Performance contract.Sign the Pay-For-Performance contract.

P-F-P Process Cont’d.P-F-P Process Cont’d.

Next ... the Consultant installs the RA system.Next ... the Consultant installs the RA system. Baseline groundwater samples are collected from pre-Baseline groundwater samples are collected from pre-

selected “Key Monitoring Wells” 2 weeks prior to system selected “Key Monitoring Wells” 2 weeks prior to system start-up.start-up.

Payments are made to the Consultant when decreases in Payments are made to the Consultant when decreases in groundwater contamination called “Milestones” are groundwater contamination called “Milestones” are achieved. achieved.

Once all Milestones are achieved Once all Milestones are achieved andand contamination levels contamination levels remains below “clean-up levels” for 6 months in all site remains below “clean-up levels” for 6 months in all site wells the final payment is made. wells the final payment is made.

Progress & ResultsProgress & Results

Milesone Attained Technology Summary TableTechnology Goal Attained Total

Start-up 25% 50% 75% 100%AS / SVE 8 2 7 19 8 44

Percentage 18% 5% 16% 43% 18% 80%Free Product 4 1 1 6

Percentage 67% 17% 17% 11%Bio-remediation 3 1 4

Percentage 75% 25% 7%Dig & Haul 1 1

Percentage 100% 2%

AS / SVE System ProgressAS / SVE System Progress

0

5

10

15

20

25

Nu

mb

er

of

Cas

es

1

Milestones

AS / SVE Remdiation Systems Milestones Attained

8 1972

Installed l 25% l 50% l 75% l 100%

80

5

10

15

20

Mo

nth

s

1

Milestones

AS / SVE Remediation Systems Ave. Time to Attain Milestones

6 8 11 19

25% l 50% l 75% l 100%

Key Well Benzene levels vs Time (064-1185)

0.1

1

10

100

1000

10000

100000

Nov-94 Nov-95 Nov-96 Nov-97 Nov-98 Nov-99 Nov-00

Ben

zene

(pp

b)

MW-2 MW-3 MW-5 MW-7 MW-8 MW-10 MW-11 MW-19

SSTL = 1,510 ppb

Start AS / SVE T&M Remediation System

P-F-P System Start-up 10/97

Key Well Benzene Levels vs Time (064-0872)

0.1

1

10

100

1000

10000

100000

Apr-92 Apr-93 Apr-94 Apr-95 Apr-96 Apr-97 Apr-98 Apr-99 Apr-00 Apr-01

Be

nze

ne

(p

pb

)

MW-11 MW-15 MW-16 MW-2 MW-21MW-29 MW-30 MW-31 MW-35 MW-37MW-38 MW-41 MW-56/36? MW-8

PFP System Start up 2/97

Installed T & M AS/SVE System

SSTL= 509 ppb

Key Well Benzene Levels vs Time (064-0826)

0.1

1

10

100

1000

10000

100000

Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00

Ben

zen

e (p

pb

)

MW-1J MW-2J MW-5J MW-6J MW-10J MW-11J MW-22J

SSTL = 146 ppb

Started FP SVE System

Removed FP System

Installed PFP 7/97

Benzene vs Time

0.1

1

10

100

1000

10000

100000

May-90 Sep-91 Jan-93 Jun-94 Oct-95 Mar-97 Jul-98 Dec-99

Time

Ben

zene

(PPB

)

KMW-1 KMW-IR KMW-2 KMW-3 KMW-4 KMW-5 MW-4

Signed P-F-P. Installed New AS/SVE System

Installed Pump & Treat with SVE

System

Installed AS/SVE System

SSTL 5 PPB

Fulfill P-F-P Contract In 22 Months

Potential Financial SavingsPotential Financial Savings

Summary: Cases with Excess Spending

Cases with Excess Cost Technique Total Savings

Ave Savings / Site

33 AS / SVE 5,027,219$ 152,340$ 6 Free Product 841,157$ 140,193$ 3 Bio- Remediation 760,668$ 253,556$

Total 6,629,044$

NOTE: This table shows potential savings to the Oklahoma UST Indemnity Fund Program if a Performance Program had been implemented from its inception. A total of $50,000 was used as a reasonable site assessment price.

Summary of Why We Chose Summary of Why We Chose Pay-For-PerformancePay-For-Performance

AACCOUNTABILITYCCOUNTABILITY H HASAS B BEENEEN E ESTABLISHEDSTABLISHED.. EENVIRONMENTALNVIRONMENTAL R RESULTSESULTS A ARERE

GGUARANTEEDUARANTEED A AND ND AARERE B BEINGEING A ACHIEVEDCHIEVED. . RREMEDIATION EMEDIATION CCOSTSOSTS A ARERE R REASONABLEEASONABLE.. TTANKANK O OWNERSWNERS A ARERE W WANTING ANTING IITT. .

TTHANKHANK Y YOUOU