U.S. ENVIRONMENTAL PROTECTION AGENCY 

OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

Audit Report 

EPA Can Improve Its Preparation 

and Use of Independent 

Government Cost Estimates 

for Superfund Contracts 

 Report No. 10-P-0065 

 February 16, 2010 
 

 

 

 

Report Contributors: Nancy Dao 

 Doug LaTessa 

 Kevin Lawrence

 Michael Petscavage 

Abbreviations 

CMM Contracts Management Manual 

EPA U.S. Environmental Protection Agency 

ERRS Emergency and Rapid Response Services 

ESAT Environmental Services Assistance Team 

FAR Federal Acquisition Regulation 

GAO Government Accountability Office 

IGCE Independent Government Cost Estimate 

OAM Office of Acquisitions Management 

OARM Office of Administration and Resources Management 

OIG Office of Inspector General 

OSRTI Office of Superfund Remediation and Technology Innovation 

OSWER Office of Solid Waste and Emergency Response 

QAP Quality Assessment Plan 

RAC Remedial Action Contract 

SOW Statement of Work 

START Superfund Technical Assessment and Response Team 

TDF Technical Direction Form 
 

 

 

U.S. Environmental Protection Agency 10-P-0065 

Office of Inspector General February 16, 2010
 

At a Glance 

Catalyst for Improving the Environment 

Why We Did This Review 

We conducted this audit to 

determine whether the U.S. 

Environmental Protection 

Agency (EPA) is preparing 

quality Independent 

Government Cost Estimates 

(IGCEs) that can be used to 

evaluate whether EPA receives 

the best value for dollars 

expended on Superfund 

contracts. 

Background 

An IGCE is a detailed estimate 

of what a reasonable person 

should pay to obtain the best 

value for a product or service. 

EPA’s training guide for 

IGCEs states that, “they are an 

integral part of any effective 

acquisition program.” IGCEs 

are used to plan costs for new 

contracts and new work under 

existing contracts. Once 

program personnel prepare the 

IGCE, the IGCE should then be 

compared to the contractor’s 

proposal to help determine 

price reasonableness. 

For further information, contact 

our Office of Congressional, 

Public Affairs and Management 

at (202) 566-2391. 

To view the full report, 

click on the following link: 

www.epa.gov/oig/reports/2010/ 

20100216-10-P-0065.pdf 

EPA Can Improve Its Preparation and Use of 

Independent Government Cost Estimates for 

Superfund Contracts 

What We Found 

EPA can improve its Superfund IGCEs and the corresponding cost estimating 

process. In 30 of the 42 cases we reviewed, EPA did not sufficiently document 

information in its Superfund IGCEs. Additionally, in 9 of the 42 cases, EPA did 

not update the IGCEs when significant changes occurred. In 8 of the 42 cases, 

EPA program staff accepted the contractor’s estimate without evaluating why it 

differed from the IGCE. Finally, in some cases EPA did not prepare an IGCE for 

actions with a potential value in excess of $100,000, the Federal Acquisition 

Regulation threshold for simplified acquisitions. These actions are contrary to 

the Government Accountability Office Cost Estimating and Assessment Guide 

and the EPA Contracts Management Manual. They occurred because there is an 

overall lack of emphasis by EPA management on the preparation and use of 

IGCEs. EPA limits its ability to negotiate a fair and reasonable price when it 

does not have a well-supported IGCE. 

What We Recommend 

We recommend that EPA place greater emphasis on IGCEs through training and 

tools for creating IGCEs. EPA should prepare IGCEs for all contract actions 

expected to exceed the simplified acquisition threshold and discontinue the 

practice of relying only on the contractors’ estimates. 

EPA agreed with all of our recommendations and provided a corrective action 

plan for most of the recommendations. EPA indicated it will provide its entire 

corrective action plan as part if its response to the final report. 
 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

February 16, 2010 

MEMORANDUM 

SUBJECT:	 EPA Can Improve Its Preparation and Use of Independent Government 

Cost Estimates for Superfund Contracts 

 Report No. 10-P-0065 

FROM: Melissa M. Heist 

Assistant Inspector General for Audit 

TO:	 Craig E. Hooks 

Assistant Administrator 

 Office of Administration and Resources Management 

Mathy Stanislaus 

Assistant Administrator 

Office of Solid Waste and Emergency Response 

 Karl Brooks 

Regional Administrator, Region 7 

This is our report on the U.S. Environmental Protection Agency’s (EPA’s) preparation and use of 

Independent Government Cost Estimates (IGCEs). This audit report contains findings that 

describe the problems the EPA Office of Inspector General (OIG) has identified and corrective 

actions the OIG recommends. This report represents the position of the OIG and does not 

necessarily represent the final EPA position. Final determinations on matters in this report will 

be made by EPA managers in accordance with established audit resolution procedures. 

The estimated cost of this report – calculated by multiplying the project’s staff days by the 

applicable daily full cost billing rates in effect at the time – is $449,120. 

Action Required 

In accordance with EPA Manual 2750, you are required to provide a written response to this 

report within 90 calendar days. You should include a corrective actions plan for agreed-upon 

actions, including milestone dates. We have no objections to the further release of this report to 

the public. This report will be available at http://www.epa.gov/oig. 
If you or your staff have any questions, please contact me at 202-566-0899 or 

heist.melissa@epa.gov; or Janet Kasper, Product Line Director, at 312-886-3059 or 

kasper.janet@epa.gov . 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPA Can Improve Its Preparation and Use of Independent 10-P-0065 

Government Cost Estimates for Superfund Contracts 

Table of Contents 

Chapters 

1 Introduction ........................................................................................................... 1 

Purpose .......................................................................................................... 1 

Background .................................................................................................... 1 

 Noteworthy Achievements.............................................................................. 2 

Scope and Methodology................................................................................. 2 

2 EPA Superfund Can Improve Its Independent Government Cost Estimates .. 5 

Superfund Staff Need to Better Document Rationale, 

 Assumptions, and Changes ................................................................. 5 

Superfund Staff Should Not Rely on Contractor Proposed Amounts ............. 6 

Superfund Staff Need to Prepare IGCEs for All Contract Actions 

 Over the Simplified Acquisition Threshold............................................ 7 

EPA Should Place Greater Emphasis on IGCEs............................................ 8 

Conclusion...................................................................................................... 9 

 Recommendations ......................................................................................... 10 

Agency Comments and OIG Evaluation......................................................... 10 

3 EPA Region 7 Improved Cost Management for Its ESAT Contract .................. 12 

Status of Recommendations and Potential Monetary Benefits................................. 13 

Appendices 

A List of Superfund Contracts Reviewed ............................................................... 14
 

B Agency Response ................................................................................................. 16
 

C Distribution ............................................................................................................ 19 
10-P-0065 

Chapter 1

Introduction 

Purpose 

The U.S. Environmental Protection Agency’s (EPA’s) Office of Inspector 

General (OIG) conducted this audit to determine whether the Agency is preparing 

quality Independent Government Cost Estimates (IGCEs) that can be used to 

evaluate whether it receives the best value for dollars expended on Superfund 

contracts. 

Background 

An IGCE is a detailed estimate of what a reasonable person should pay to obtain 

the best value for a product or service. It should include priorities and 

assumptions that exist at the time the estimate is made. In a training guide on 

IGCEs, EPA’s Office of Acquisition Management (OAM) states, “They are an 

integral part of any effective acquisition program.” OAM further states, “EPA’s 

goal for cost estimates is to achieve predictions that are as accurate as possible 

using the information available and the best estimating technique for a given 

situation. Both involve the use of any historical data available.” 

Quality cost estimates help EPA ensure it obtains fair and reasonable prices for 

desired goods and services. EPA’s Strategic Plan states, “EPA is committed to 

being a good steward of our environment and a good steward of America’s tax 

dollars. To provide the public with the environmental results it expects and 

deserves, we must operate as efficiently and effectively as possible....” 

EPA uses IGCEs to plan costs for new contracts as well as modifications, new 

work assignments, and task or delivery orders under existing contracts. EPA’s 

program offices are responsible for preparing IGCEs. In preparing the IGCE, the 

program office uses various methods to estimate the resources necessary to 

perform the activities detailed in the Statement of Work (SOW). The program 

office compares the IGCE to the contractor’s proposal to help determine cost 

reasonableness. According to the Federal Acquisition Regulation (FAR), the 

contracting officer’s responsibility is to provide necessary support for contractual 

issues, including assuring the reasonableness of costs. 

EPA’s Office of Solid Waste and Emergency Response (OSWER) oversees the 

Superfund program. Superfund is the name given to the environmental program 

established to address abandoned hazardous waste sites. It is also the name of the 

fund established by the Comprehensive Environmental Response, Compensation, 

and Liability Act of 1980, as amended. This law was enacted in the wake of the 

discovery of toxic waste dumps. It allows the EPA to clean up such sites and to 

1 
10-P-0065 

compel responsible parties to perform clean-ups or reimburse the government for 

EPA-led clean-ups. 

Noteworthy Achievements 

We identified noteworthy achievements in the form of a student guide and tools 

available to assist EPA personnel in preparing IGCEs. However, these resources 

need to be updated and re-emphasized. EPA made IGCE related resources 

available following previous OIG and Government Accountability Office (GAO) 

reports that cited issues regarding EPA’s preparation and use of IGCEs. 

In 1998, OAM developed a guide for preparing and using IGCEs. The guide 

details the importance of IGCEs and the important components that should be 

contained in IGCEs. The guide also specifies the potential uses of an IGCE. 

The Office of Superfund Remediation and Technology Innovation (OSRTI) 

developed a cost estimating toolbox. The toolbox is a database resource that 

provides comprehensive information for staff to use when preparing IGCEs for 

Remedial Action Contracts (RACs). It defines IGCEs and the associated cost 

elements and provides the purpose for developing IGCEs. Spreadsheet templates 

are provided for several phases of RAC contracts and can serve as a basis for staff 

to prepare their own IGCEs. The toolbox emphasizes the importance of 

documenting assumptions when preparing IGCEs. It also provides model SOWs, 

as well as IGCE checklists. 

Scope and Methodology 

GAO and the OIG have historically raised concerns regarding EPA’s preparation 

and use of IGCEs. In a report issued in 2007, the OIG discussed problems 

relating to EPA’s use and management of IGCEs. To address these concerns, we 

performed this audit from June 2008 to October 2009 in accordance with 

generally accepted government auditing standards issued by the Comptroller 

General of the United States. These standards require that we plan and perform 

the audit to obtain sufficient and appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

The scope of this report deals only with IGCEs for EPA Superfund contracts. We 

reviewed the active contracts listing to determine which to include in our sample. 

We judgmentally selected contracts based on factors such as contract type, region 

or area where the contract is located, dollar value, period of performance, etc. In 

total, we selected 17 Superfund contracts from Headquarters and Regions 2, 4, 5, 

and 7. For each contract we reviewed, we judgmentally selected multiple work 

assignments, task orders, and/or technical direction documents for further review. 

We reviewed the corresponding files for information relating to cost estimates. 

2 
10-P-0065 

Appendix A contains a complete list of the Superfund contracts we reviewed as 

well as the work assignments, task orders, and/or technical direction documents 

reviewed from each. 

We conducted site visits to each location within our sample. During the site 

visits, we reviewed the overall contract, SOW, and documents from the preaward 

file relating to cost estimating for each contract in our sample. We reviewed 

documents ordering work (i.e., work assignments, task orders, and technical 

direction documents) from each contract for information relating to cost 

estimating. We interviewed contracting officers and project officers associated 

with the contracts in our sample. In several instances, we also interviewed 

personnel at the level where work is ordered to gain a better understanding of the 

cost estimating and negotiation processes. 

We reviewed IGCEs to determine their overall quality. To measure the quality of 

IGCEs, we developed a list of the following five criteria that were taken from 

EPA’s Guide for Preparing Independent Government Cost Estimates and an 

exposure draft of GAO’s Cost Assessment Guide, which became final in March 

2009. 

•	 The task is clearly identified: Estimator must be provided with a clear 

description of the task, including ground rules, assumptions, and technical 

and performance characteristics relating to the task. The estimate’s 

constraints and conditions must be clearly identified to ensure the 

preparation of a well-documented estimate. A well-written SOW is 

integral to the development of an IGCE. 

•	 Relevant data is identified and used: To the extent possible, multiple 

sources of data should be used. The estimator(s) should determine the 

availability of historical data and use that which relates to the applicable 

task. 

•	 A defined/structured estimating process is used: The estimator(s) 

should determine and document the process for estimating prior to starting 

the process and document why the method was selected. The estimating 

process should be accomplished at the task level through the use of the 

work breakdown structure, created using either a bottom-up or top-down 

approach. 

•	 The cost estimate is revised as program changes occur because large 

changes that affect costs can significantly influence program 

decisions: Cost estimates need to be fluent and refined as work and 

planning progress. A fluent cost estimating process provides an allowance 

for uncertainties to be addressed as they become known. 

3 
10-P-0065 

•	 The assumptions for the IGCE are documented, and the IGCE is 

complete: The rationale for the IGCE should be documented and the 

IGCE should contain all required tasks. 

Related Audit Coverage 

While conducting this audit, we determined that EPA’s Acquisition Regulation 

contains language that requires EPA to provide total labor hour estimates to the 

contractor within work assignments. If this information is provided to the 

contractor prior to receiving the proposal, EPA jeopardizes the assurance of cost 

reasonableness and overall effectiveness of the estimating process. To address 

this issue, we issued a separate report, “EPA Should Stop Providing Estimates of 

Total Labor Hours to Contractors,” on September 9, 2009 (OIG Report No. 

09-P-0229). 

Internal Control Structure 

In planning and performing our audit, we reviewed management controls related 

to our objectives. Specifically, we examined EPA’s Contracts Management 

Manual (CMM), EPA’s Acquisition Regulation, the OAM guide for developing 

IGCEs, an Office of Federal Procurement Policy letter, and several OSWER 

Directives. We reviewed Quality Assessment Plans (QAP) from each program 

operating division. We also looked at OAM’s review of the QAPs. 

We reviewed documents EPA completed in compliance with the Federal 

Managers’ Financial Integrity Act. This included a review of numerous 

documents within EPA’s Office of Administration and Resources Management’s 

(OARM) Fiscal Year 2008 Federal Managers’ Financial Integrity Act Assurance 

Letter. EPA did not report any material or Agency weaknesses related to its 

preparation and use of IGCEs. 

4 
10-P-0065 

Chapter 2

EPA Superfund Can Improve Its 

Independent Government Cost Estimates 

EPA can improve Superfund IGCEs and the cost estimating process. Superfund 

program staff are not sufficiently documenting rationale, assumptions, and 

changes relating to its IGCEs. Program staff sometimes rely on the contractor’s 

cost estimates without evaluating why it differs from the IGCE. In some cases, 

EPA program staff do not prepare an IGCE for contract actions in excess of the 

simplified acquisition threshold. GAO and OAM guides address these issues by 

indicating that all aspects of cost estimating should be documented and IGCEs 

should be updated when significant changes occur. Further, the CMM requires 

project officers to submit IGCEs for all contract actions with a potential value that 

will exceed the simplified acquisition threshold of $100,000. A primary reason 

Superfund IGCEs need improvement is because there is an overall lack of 

emphasis by management on the preparation and use of IGCEs. The guide and 

other resources related to IGCEs are outdated and employees responsible for 

preparing and reviewing IGCEs are undertrained. As a result, the value of the 

IGCE as a tool for ensuring fair and reasonable contract prices is diminished. 

Superfund Staff Need to Better Document Rationale, Assumptions, 

and Changes 

Superfund IGCEs lacked documentation for the basis of the estimated costs for 

30 of the 42 contract actions we reviewed. OAM’s IGCE guide specifies that the 

reasons costs are included within IGCEs should be documented as well as any 

assumptions made that may impact costs. Documenting the rationale and 

assumptions associated with cost estimates will provide sound support to use 

during negotiations with the contractor. GAO’s Cost Estimating and Assessment 

Guide specifies that all aspects of cost estimates should be documented. 

Documentation supporting IGCEs should include information that will allow a 

cost analyst unfamiliar with the program to determine how the estimate was 

developed. 

The IGCEs were missing supporting documentation such as the reason for 

proposed labor hours, the labor mix, travel costs, etc. For example, one work 

assignment under a RAC contract was broken down into nine different tasks. The 

IGCE contained level-of-effort estimates by task and was developed using a 

template that factors in historical rates such as average labor category rates, and 

historical indirect rates. However, Superfund program staff did not document 

assumptions for specific level-of-effort estimates for the number of hours or other 

direct cost amounts included in the IGCE. As another example, a task order under 

an Emergency and Rapid Response Services (ERRS) contract contained a SOW 

5 
10-P-0065 

that clearly described 11 different tasks to be carried out. Even though the SOW 

clearly described the tasks, the IGCE did not explicitly document the 

assumptions, rationale, or historical basis (if any) for the number of hours 

estimated. GAO recommends that to the extent possible, multiple sources of data 

should be used when preparing an IGCE. GAO also recommends that cost 

estimators determine the availability of historical data and use that which relates 

to the applicable task. Without adequate documentation of the rationale, 

assumptions, or historical data to support cost estimates, the IGCE does not 

provide the information needed to evaluate the contractor’s proposed prices. 

For 9 of 42 contract actions, Superfund program staff did not update IGCEs to 

reflect significant changes to the scope of work. GAO’s cost estimating guide 

states that estimates should be updated to reflect changes, especially large 

changes, since they can significantly impact program decisions. However, nine 

IGCEs were not updated when significant changes occurred to the corresponding 

task order/work assignment. For example, one work assignment under a RAC 2 

contract underwent changes resulting in a substantial decrease in the cost 

estimate, but the IGCE was not updated. The initial IGCE, completed in June 

2006, estimated costs would range from $21 million to $31.5 million. After a 

third contract revision in March of 2008, the contractor’s estimate was approved 

for $15.8 million. For each revision, the contractor submitted a revised workplan. 

However, program staff did not revise the IGCE during a 21⁄2 year span of the 

work assignment. The only revised IGCE was completed in October 2008, 

one week prior to the OIG site visit. If IGCEs are not updated when significant 

changes occur, Superfund program staff may not have the necessary information 

to make important program decisions, such as distribution of resources and 

negotiation of contract price. 

Superfund Staff Should Not Rely on Contractor Proposed Amounts 

When there was a difference between the IGCE and contractor’s proposed price, 

Superfund program staff accepted the contractor’s price without additional 

analysis in 8 of 42 (19 percent) cases reviewed. The IGCE is a tool program staff 

use when reviewing the contractor’s proposed price. Program staff should 

compare the hours and rates contained in the proposal to those estimated within 

the IGCE. Such an analysis would allow program staff to determine whether 

proposals overstate or understate work, or whether prices are too high or low, and 

determine the fair and reasonable price for labor hours. Superfund program staff 

are not always using the IGCE to conduct this analysis. 

In eight cases, the final agreed-to price was the same as the contractor’s proposal 

and there was no evidence that program staff examined the reasons for the 

difference between the IGCE and proposed price (see Table 2-1 below). 

6 
10-P-0065 

Table 2-1: Examples where Superfund relied on contractor estimates 

Difference 

Between IGCE and 

Example IGCE 

Contractor 

Estimate 

Approved 

Amount 

Contractor 

Estimate 

1 $12,935 $64,988 $64,988 $52.053 

2 $71,383 $72,435 $72,435 $1,052 

3 $27,862,037 $14,845,475 $14,845,475 $-13,016,562 

4 $2,193,769 $2,332,238 $2,332,238 $138,469 

5 $109,789 $119,316 $119,316 $9,527 

6 $65,046 $48,151 $48,151 $-16,895 

7 $110,452 $117,335 $117,335 $6,883 

8 $111,948 $106,531 $106,531 $-5,417 

Source: OIG analysis of EPA data. 

Program staff sometimes accept the contractor’s proposal if it is within a certain 

percentage of the IGCE. However, the percentage used was not consistent and 

varied among those interviewed. For example, the program staff responsible for 

items 7 and 8 in Table 2-1 stated that they generally accept any proposed costs 

within 10 percent of the IGCE without further analysis. In the case of example 6, 

program staff stated that they generally accept any proposal within 20 percent of 

the IGCE without additional analysis. In this case, the program staff accepted the 

contractor’s proposal without additional analysis even though the proposal was 

26 percent less than the IGCE. Even though the amount proposed was less, 

Superfund program staff cannot be reasonably assured that some of the individual 

amounts within the proposal were not overstated. The costs may be significantly 

understated and relying on these amounts could impact the program’s ability to 

reasonably plan future work. By not analyzing why there was a difference in the 

price, or documenting the analysis of reasons for the difference, Superfund 

program staff diminished the value of the IGCE in determining the reasonableness 

of the final price. 

Superfund Staff Need to Prepare IGCEs for All Contract Actions Over 

the Simplified Acquisition Threshold 

Superfund program staff are not always producing IGCEs for work ordered with 

estimated costs expected to exceed the simplified acquisition threshold of 

$100,000. The CMM states that, “POs [project officers] shall submit IGCEs for 

all contract actions with a potential value in excess of the FAR threshold for 

simplified acquisitions.” The CMM further states that, “COs [contracting 

officers] may also require IGCEs for actions below the FAR threshold for 

simplified acquisitions” if deemed necessary and appropriate. However, for three 

contracts in our sample, POs did not prepare IGCEs as required. 

•	 The PO for the Region 5 Superfund Technical Assessment and Response 

Team (START) contract did not prepare IGCEs at the task order or 

technical direction level. This contract establishes large task orders that 

generally describe the work to be done in broad terms. These task orders 

act as a sort of overall budget for the task. During contract performance, 

7 
 

10-P-0065 

work is ordered under these task orders using technical direction 

documents. These technical direction documents specifically describe the 

work to be done (location, scope, etc.). The project officer indicated that 

she does not prepare IGCEs for the START contract because she does not 

believe they are useful. 

•	 Region 7 does not prepare IGCEs at the technical direction level for its 

Environmental Services Assistance Team (ESAT) contract. The ESAT 

contract uses 11 task orders that describe the work to be performed in 

broad terms. Under these task orders, work is later specifically defined 

and ordered using technical direct documents. However, Region 7 only 

prepares IGCEs at the broader task order level. For example, one of the 

task orders broadly directs work to be performed for Superfund program 

support. Later, specific descriptions of work to be performed are 

presented in a technical direction document, such as “Analyze 1 PT water 

sample for Selenium, by Region 7 approval methods. Process the data and 

prepare final data reports.” 

•	 Region 4 did not prepare an IGCE for one task order totaling almost 

$1.3 million under its ERRS contract. The task order was funded through 

the Coast Guard’s National Pollution Fund (but managed by EPA) and no 

IGCE was prepared. EPA staff informed us that the on-site coordinator is 

warranted up to $50,000 to respond to an oil spill emergency. Beyond 

that, approval must be given by the Coast Guard case officer. The initial 

award for this task order was for $150,000 and no IGCE was done because 

it was an emergency situation. However, the task order was amended 

three times, bringing the total approved cost ceiling to almost $1.3 million, 

and no IGCE was ever prepared. While we recognize that the initial 

emergency should be responded to without delay, we believe Superfund 

program staff should prepare an IGCE once the situation has stabilized 

and before it awards further funding. 

EPA Should Place Greater Emphasis on IGCEs 

A primary reason Superfund IGCEs need improvement is because management 

does not adequately emphasize the preparation and use of IGCEs. The OAM 

IGCE guide has not been updated since 1998. Additionally, training on IGCEs 

has been minimal and program office and regional reviews of the acquisition 

process do not directly address IGCEs. The lack of emphasis has resulted in the 

conditions identified in this audit and diminished the value of the IGCE as a tool 

for ensuring that contractor prices are reasonable. 

OAM and the Superfund program office developed tools and guidance relating to 

IGCEs more than 10 years ago. The CMM refers program staff to the student 

guide for guidance on preparing IGCEs. The guide has not been updated in the 

last 10 years, and does not include some current practices, such as using a 

8 
 

 

10-P-0065 

technical direction document to order work. Also, in March 2009, GAO 

completed a cost estimating guide. EPA’s guide needs to reflect the information 

contained in GAO’s cost estimating guide. 

Superfund program staff involved in the cost estimating process informed us that 

training relating to IGCEs has been minimal within the last 10 years. EPA does 

not have a specific training course for IGCEs. Project Officers receive some 

IGCE training as part of their Contracting Officer Representative training. 

However, IGCEs make up only a few pages of the training text. 

Additionally, some employees were not aware of the guidance and tools available 

to assist in preparing IGCEs. For example, OSRTI developed a cost estimating 

toolbox. It provides comprehensive information for staff to use when preparing 

IGCEs for RAC contracts. Six of the nine RAC project officers/work assignment 

managers interviewed were not aware of the toolbox. This toolbox is of little use 

for those employees who are not aware it exists. 

EPA also needs to better emphasize IGCEs in its QAPs. QAPs are management 

plans developed by EPA program offices and regions to help ensure an overall 

effective acquisition process. The QAPs for EPA program offices and regions did 

not address the preparation and/or use of IGCEs. 

Conclusion 

The IGCE is a tool that the Superfund program can use to evaluate the 

reasonableness of the contractor’s proposed price. A quality IGCE includes 

documentation of assumptions and reflects updates based on changed conditions. 

When Superfund prepares IGCEs, the assumptions and rationale are not always 

documented and updated. Additionally, Superfund does not always document the 

reasons for accepting the contractor’s price when it differs from the IGCE. 

Finally, IGCEs are not used for all contract actions. Superfund program staff 

should be preparing IGCEs and comparing the estimated hours and rates to those 

contained within the contractor’s proposal. This comparison will enhance the 

program‘s ability to determine whether proposals overstate or understate work, or 

whether prices are too high or low. Without a fully supported IGCE, Superfund 

program staff cannot conduct such an analysis. As a result, Superfund is 

diminishing the IGCE’s value as a tool to ensure fair and reasonable contract 

prices. 

9 
10-P-0065 

Recommendations 

We recommend that the Assistant Administrator for Administration and 

Resources Management: 

2-1 Require OAM to update its IGCE guide to address: 

•	 Technical direction documents that exceed the simplified 

acquisition threshold. 

•	 Emergency acquisitions. 

•	 The GAO Cost Estimating and Assessment Guide. 

2-2 After the OAM IGCE guide is updated, require EPA regions and program 

operating divisions to conduct a review to verify compliance with the 

updated guide. 

We recommend that the Assistant Administrator for Administration and 

Resources Management and the Assistant Administrator for Solid Waste and 

Emergency Response: 

2-3	 Eliminate the practice of accepting contractor estimates that differ from 

IGCEs without examining the reason for the difference. 

We recommend that the Assistant Administrator for Solid Waste and Emergency 

Response: 

2-4 Require the Superfund program to update, distribute, and maintain its 

supplemental tools and guidance used for IGCE preparation (e.g., 

OSRTI’s cost estimating toolbox). 

We recommend that the Assistant Administrator for Administration and 

Resources Management and the Assistant Administrator for Solid Waste and 

Emergency Response: 

2-5	 Instruct OAM and the Superfund program office to provide training to 

Superfund program staff on IGCE tools and databases, as well as OAM 

and Superfund IGCE guidance. 

Agency Comments and OIG Evaluation 

EPA agreed with recommendations 2-1, 2-4, and 2-5, and provided milestone 

dates for completion of the following items: 

•	 Revise OAM’s IGCE guide (June 1, 2010) 

•	 Update, distribute, and maintain Superfund’s supplemental tools for IGCE 

preparation (September 30, 2010) 

10 
10-P-0065 

•	 Provide training to Superfund staff on IGCE tools and guidance 

(September 30, 2010). 

The Agency’s response will address these recommendations. 

Regarding recommendation 2-2, EPA did not agree that it should incorporate 

compliance with the IGCE guide into its QAP because the QAP is an OAM tool 

and not a program tool. EPA stated that preparation of IGCEs is the 

responsibility of the program office. EPA believes that by updating the IGCE 

guide and providing training to the program office, IGCE quality will improve. 

At the exit conference, OAM officials agreed that a review to verify compliance 

was needed, but expressed a preference to not include that as part of the QAP. 

Based on the discussion, we revised the recommendation. EPA will need to 

provide an action plan, with milestone dates, for addressing the recommendation 

when responding to the final report. 

In response to recommendation 2-3, the Agency stated that the recommendation 

should be addressed to OSWER and that the offices will work together to update 

the IGCE guide and training. We revised the recommendation to include 

OSWER as suggested. At the exit conference, OAM officials clarified that the 

updated IGCE guide will address the practice of accepting contractor estimates 

that differ from IGCEs without examining the reason for the difference. With the 

clarification, the response addresses the recommendation. 

See EPA’s full response in Appendix B. 

11 
 

 

10-P-0065 

Chapter 3

EPA Region 7 Improved Cost Management 

for Its ESAT Contract 

Based on our audit work, EPA Region 7 took actions to improve the cost 

management of the ESAT contract. EPA Region 7 had not been reviewing and 

managing ESAT contract costs at the Technical Direction Form (TDF) level, 

which is the level where work is ordered. EPA’s CMM provides that it is the 

policy of the Government to review contract invoices thoroughly for cost 

reasonableness to facilitate payment of costs which are allowable, allocable, and 

reasonable. Adequate invoice reviews were not occurring because the Region 7 

ESAT contract gives the project officer the flexibility to determine the level of 

detail that needs to be contained in monthly financial reports. The PO did not 

require the contractor to provide cost data at the TDF level. Without detailed cost 

data broken out by TDF, the project officer could not determine the 

reasonableness of invoiced costs charged for specific work performed. 

During the audit, we discussed with Region 7 management and staff our concerns 

about the reporting under the ESAT contract. Region 7 believed that the invoices 

did contain all the necessary information to ensure charges were fair and 

reasonable. However, the Region did acknowledge that the information was not 

contained in an effective format for review and that efficiencies in the review 

process could be realized by requiring data at the TDF level in monthly reports. 

Therefore, Region 7 management and staff fully implemented our planned 

recommendation to require the contractor to include detailed cost breakouts by 

task order and TDF in its monthly invoices. Based on Region 7’s timely 

response, we determined no further recommendations are needed regarding this 

finding in this report. 

12 
 

 

 

 

 

 

 

10-P-0065 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Planned 

Completion 

Date 

Claimed 

Amount 

Agreed To 

Amount 

2-1 10 Require OAM to update its IGCE guide to address: 

• Technical direction documents that exceed 

the simplified acquisition threshold. 

• Emergency acquisitions. 

• The GAO Cost Estimating and Assessment 

Guide. 

O Assistant Administrator for 

Administration and 

Resources Management 

06/01/2010 

2-2 

2-3 

2-4 

2-5 

10 

10 

10 

10 

After the OAM IGCE guide is updated, require EPA 

regions and program operating divisions to conduct 

a review to verify compliance with the updated 

guide. 

Eliminate the practice of accepting contractor 

estimates that differ from IGCEs without examining 

the reason for the difference. 

Require the Superfund program to update, 

distribute, and maintain its supplemental tools and 

guidance used for IGCE preparation (e.g., OSRTI’s 

cost estimating toolbox). 

Instruct OAM and the Superfund program office to 

provide training to Superfund program staff on 

IGCE tools and databases, as well as OAM and 

Superfund IGCE guidance. 

U 

O 

O 

O 

Assistant Administrator for 

Administration and 

Resources Management 

Assistant Administrator for 

Administration and 

Resources Management and 

Assistant Administrator for 

Solid Waste and Emergency 

Response 

Assistant Administrator for 

Solid Waste and Emergency 

Response 

Assistant Administrator for 

Administration and 

Resources Management and 

Assistant Administrator for 

Solid Waste and Emergency 

Response 

06/01/2010 

09/30/2010 

09/30/2010 

1	 O = recommendation is open with agreed-to corrective actions pending; 

C = recommendation is closed with all agreed-to actions completed; 

U = recommendation is undecided with resolution efforts in progress 

13 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10-P-0065 

Appendix A 

List of Superfund Contracts Reviewed 

Region Contract WA/TO/TDD* Type of Contract 

Region 4 68-W-99-043 WA-015 RAC 

68-W-99-043 WA-648 RAC 

EP-S4-07-02 TO 0035 ERRS III 

EP-S4-07-02 TO 0035 - Mod 1 ERRS III 

EP-S4-07-02 TO-0035 - Mod 2 ERRS III 

EP-S4-07-02 TO-0035 - Mod 3 ERRS III 

EP-S4-07-02 TO 0039 ERRS III 

EP-S4-07-02 TO 0052 ERRS III 

EP-W-05-053 TO 001/TDD 026 START III 

EP-W-05-053 TO 001/TDD 049 START III 

EP-W-05-053 TO 003/TDD 041 START III 

Region 5 EP-S5-06-04 TDD-S05-0005-0609-067 START III 

EP-S5-06-04 TDD-S05-0001-0711-022 START III 

EP-S5-06-01 WA 021-RARA-1523 RAC 2 

EP-S5-06-01 WA 044-RDRD-B51Z RAC 2 

EP-S5-06-06 TO 3 ROC 3 

EP-S5-06-06 TO 8 ROC 3 

Headquarters EP-W-06-019 TO 3 Region 7ESAT 

EP-W-06-019 TO 10 Region 7 ESAT 

68-W-02-073 WA 7 OSRE2 

68-W-02-073 WA 19 OSRE2 

EP-W-05-060 WA 1-08 HW Methods Support 

EP-W-05-060 WA 1-11 HW Methods Support 

Region 7 EP-S7-05-06 TO 005 RAC II 

EP-S7-05-06 TO 0027 RAC II 

EP-S7-05-06 TO 0062 RAC II 

EP-S7-05-06 TO 0010 RAC II 

EP-S7-05-05 TO 0028 A&E Services 

EP-S7-05-05 TO 003 A&E Services 

EP-S7-05-05 TO 0010 A&E Services 

EP-S7-05-05 TO 015 A&E Services 

14 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10-P-0065 

Region Contract WA/TO/TDD* Type of Contract 

EP-R7-07-02 TO 0011 ERRS, Region 10 

EP-R7-07-02 TO 0013 ERRS, Region 10 

EP-R7-07-02 TO 007 ERRS, Region 10 

EP-S7-06-01 TO 0023 START III 

EP-S7-06-01 TO 0048 START III 

EP-S7-06-01 TO 0051 START III 

Region 2 EP-W-04-054 TO 0065 ERRS 

EP-W-04-054 TO 0057 ERRS 

68-W-98-214 153-RDRD-0291 RAC 

68-W-98-214 158-RARA-01G1 RAC 

EP-W-05-041 TO 0010 ROC III 

EP-W-05-041 TO 014 ROC III 

EP-W-05-048 WA 081 Site Assessment Team 2 

EP-W-05-048 WA 057 Site Assessment Team 2 

Source: OIG analysis of contract data. 

A&E Architect and Engineering 

HW Hazardous Waste 

OSRE Office of Site Remediation Enforcement 

ROC Regional Oversight Contract 

TDD technical direction document 

TO task order 

WA work assignment 

15 
10-P-0065 

Appendix B 

Agency Response 

December 17, 2009 

MEMORANDUM 

SUBJECT: Response to Draft Audit Report: EPA Superfund Can Improve its Preparation and 

Use of Independent Government Cost Estimates, Project OA-FY08-0255 

FROM: Craig E. Hooks 

Assistant Administrator 

TO: Janet Kasper 

Director, Contracts and Assistance Agreements 

Office of the Inspector General 

We appreciate the opportunity to comment on the draft report entitled “EPA Superfund 

Can Improve its Preparation and Use of Independent Government Cost Estimates,” dated 

November 13, 2009. Our comments on the report and recommendations are below: 

Specific Recommendations and Responses: 

Recommendation 2-1 - We recommend the Assistant Administrator for OARM 

require OAM to update its IGCE guide to address: 

• Technical direction documents that exceed the Simplified Acquisition 

Threshold 

• Emergency acquisitions 

• The Government Accountability Office's cost estimating guide 

Response - We concur with this recommendation. This will be a development process to 

fold in the three new areas above into the current IGCE guide. OAM will begin the 

development and stakeholder review process immediately with completion of guide 

revisions by June 1, 2010. 

Recommendation 2-2 - We recommend that the Assistant Administrator for 

OARM, after the OAM IGCE guide is updated, require EPA regions and program 

operating divisions to include compliance with the IGCE guide as part of their 

Quality Assurance Programs. 

16 
10-P-0065 

Response - While we agree that OAM will update the IGCE guide (see Recommendation 

2-1 response above) and work with OSWER to provide IGCE training to Superfund 

program staff (see Recommendation 2-5 response below), we do not believe that 

contracting offices should be required to modify their QAPs. Section 4.2 of the 

Acquisition Handbook states that QAPs shall contain oversight activities for "all primary 

contracting workload functions performed by the contracting organization." Page 1 of 

this report states that "EPA's program offices are responsible for preparing IGCEs." We 

do not believe that the QAPs need to be modified to specifically focus on primary 

activities which fall within EPA's program offices. 

The Contract Management Manual Section 7.3, "Procurement Initiation and Related 

Documentation," lists the Guide for Preparing IGCEs as a guidance source for program 

officials, in addition to providing an on-line link to this document. The updated guidance 

will be posted on the intranet by June 30, 2010. By updating the guide, assisting 

OSWER in providing IGCE training to program officials, and performing current QAP 

oversight activities related to reviewing procurement request packages, we believe OAM 

will help improve the quality of IGCEs prepared by its customers. 

Recommendation 2-3 - We recommend the Assistant Administrator for OARM 

eliminate the practice of accepting contractor estimates that differ from IGCEs 

without examining the reason for the difference. 

Response - We believe this recommendation should be directed to the Assistant 

Administrator of OSWER, as well as OARM. These Offices share IGCE responsibilities, 

and they will work together to update the guidance and provide training, which will 

effectively address this recommendation by June 1, 2010. 

Recommendation 2-4 - We recommend the Assistant Administrator for OSWER: 

require the Superfund program to update, distribute and maintain its supplemental 

tools and guidance used for IGCE preparation (e.g., OSRTI Cost Estimating 

Toolbox). 

Response - We concur with this recommendation. OSWER will work closely with OAM 

to complete this action by September 30, 2010. It should be noted that OSWER provided 

formal IGCE training at the Superfund National Association of Remedial Project 

Managers' (NARPM) annual training conference and the Superfund Project 

Officers/Contracting Officers' (PO/CO) annual conference in July 2009. 

Recommendation 2-5 - We recommend the Assistant Administrator for OARM and 

Assistant Administrator for OSWER instruct OAM and the Superfund program 

office to provide training to Superfund program staff on IGCE tools and databases, 

as well as OAM and Superfund IGCE guidance. 

17 
10-P-0065 

Response - We concur with this recommendation. OSWER will work closely with OAM 

(after guidance updates are completed) to complete the action by September 30, 2010. 

General Comments: 

Abbreviations - RAC stands for Remedial Action Contract, it is written as Response 

Action Contract in the report. This also needs to be corrected in Chapter 1, under 

Noteworthy Achievements. 

Chapter 1 - Scope and Methodology, page two, second paragraph, first sentence - We 

recommend listing the various types of Superfund contracts included in review (e.g., 

Removal, Lab, Remedial, Federal Facilities or Enforcement). 

Chapter 2 - Superfund Needs to Better Document Rationale, Assumptions, and 

Changes, page five, first paragraph, last sentence - We recommend changing the 

sentence to read, "Documentation supporting IGCEs should be included that will allow a 

cost analyst unfamiliar with the program to determine how the estimate was developed." 

18 
10-P-0065 

Appendix C 

Distribution 

Office of the Administrator 

Assistant Administrator for Administration and Resources Management 

Assistant Administrator for Solid Waste and Emergency Response 

Regional Administrator, Region 7 

Agency Follow-up Official (the CFO) 

Agency Follow-up Coordinator 

General Counsel 

Director, Office of Superfund Remediation and Technology Innovation, 

Office of Solid Waste and Emergency Response 

Acting Director, Office of Acquisition Management, Office of Administration 

and Resources Management 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for Public Affairs 

Audit Follow-up Coordinator, Office of Administration and Resources Management 

Audit Follow-up Coordinator, Office of Solid Waste and Emergency Response 

Audit Follow-up Coordinator, Region 7 

Acting Inspector General 

19