U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL

Improvements Needed in 

Estimating and Leveraging 

Cost Savings Across EPA 

Report No. 13-P-0028 October 22, 2012 

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about the EPA OIG. 
 

 

 

Report Contributors: Richard Eyermann 

 Mike Davis 

 Teren Crawford 

 Nancy Dao 

 Denise Darasaw 

 Alexandra Zapata-Torres 

 Debra Coffel 

Abbreviations 

ARRA American Recovery and Reinvestment Act of 2009 

CERCLIS Comprehensive Environmental Response, Compensation, and Liability 

Information System 

CFO Chief Financial Officer 

DOJ	 U.S. Department of Justice 

EPA U.S. Environmental Protection Agency 

FASAB Federal Accounting Standards Advisory Board 

FY Fiscal year 

IFMS Integrated Financial Management System 

IGCE Independent Government Cost Estimate 

OAM	 Office of Acquisition Management 

OARM	 Office of Administration and Resources Management 

OCFO Office of the Chief Financial Officer 

OECA Office of Enforcement and Compliance Assurance 

OIG Office of Inspector General 

OMB Office of Management and Budget 

ORD Office of Research and Development 

OSRTI	 Office of Superfund Remediation and Technology Innovation 

OSWER Office of Solid Waste and Emergency Response 

PRP Potentially responsible party 

Hotline 

To report fraud, waste, or abuse, contact us through one of the following methods: 

e-mail: OIG_Hotline@epa.gov write: EPA Inspector General Hotline 

phone: 

fax: 

1-888-546-8740 

202-566-2599 

1200 Pennsylvania Avenue NW 

Mailcode 2431T 

online: http://www.epa.gov/oig/hotline.htm Washington, DC 20460 
 

 

 

 

 

U.S. Environmental Protection Agency 

Office of Inspector General 

At a Glance

U.S. Environmental Protection Agency 13-P-0028

 October 22, 2012 Office of Inspector General 

At a Glance
 

Why We Did This Review 

Since 2009, the President and 

the Office of Management and 

Budget (OMB) have issued 

various memorandums and 

directives requesting agencies 

to identify ways to avoid costs 

and achieve efficiencies and 

savings. In August 2009, the 

U.S. Environmental Protection 

Agency’s (EPA’s) Office of 

Administration and Resources 

Management (OARM) issued 

an electronic memorandum 

titled “Management Reform 

Agenda” to request input from 

program offices and regions to 

identify efficiency projects. EPA 

program offices and regions 

identified 72 projects. 

We conducted an audit to 

determine whether: (1) EPA’s 

efforts to identify and realize 

savings have been effective, 

and (2) EPA savings reported 

to OARM were accurate and 

complete. 

This report addresses the 

following EPA Goal or 

Cross-Cutting Strategy: 

 Strengthening EPA’s 

workforce and capabilities 

For further information, contact 

our Office of Congressional and 

Public Affairs at (202) 566-2391. 

The full report is at: 

www.epa.gov/oig/reports/2013/ 

20121022-13-P-0028.pdf 

Improvements Needed in Estimating and 

Leveraging Cost Savings Across EPA 

What We Found 

Regions 4 and 7, which were the focus of our review, did not apply reliable 

methods for estimating savings and cost avoidances. Management is 

responsible for assuring efficient and effective operations and reliable financial 

reporting including development of savings or cost avoidance initiatives. 

No EPA policy and procedures existed for Regions 4 and 7 to follow when 

estimating savings or cost avoidances. EPA will not be able to accurately report 

the results of its efficiency initiatives and influence internal and external 

management decisions. 

While OARM took the initiative to lead the identification of potential savings and 

cost avoidances for all Agency programs and regions, it did not effectively follow 

up on implementation to ensure EPA achieved the desired results (i.e., 

efficiencies, savings, and cost avoidances) or to determine whether the Agency 

could realize greater savings by expanding results. Office of Management and 

Budget Circular A-123 states that program managers should ensure results are 

achieved. Sufficient follow-up did not occur because OARM and the Office of 

the Chief Financial Officer viewed the projects as merely ideas for possible cost 

savings. Nevertheless, without following up on the progress in achieving desired 

and expected savings and efficiencies, EPA may have missed opportunities to 

leverage and expand its cost-cutting efforts, apply best practices for gaining 

greater efficiencies, and realize significant savings and cost avoidances 

Agency-wide.

 Recommendations and Planned Agency Corrective Actions 

We recommend that the Chief Financial Officer develop a policy and procedures 

for identifying and estimating cost savings, efficiencies, and avoidances. We 

recommend that the Assistant Administrator for OARM develop a policy on 

estimating savings and cost avoidances relating to contracts. We recommend 

that Regions 4 and 7 recalculate identified cost avoidances based on prescribed 

guidance and report the data as appropriate. We recommend that the Chief 

Financial Officer determine whether significant projects from the 72 initiatives 

resulted in significant efficiencies and publicly report the results as appropriate 

for possible Agency-wide implementation. 

The Office of the Chief Financial Officer, OARM, and Regions 4 and 7 did not 

concur with the recommendations. Our recommendations remain unresolved.

 Noteworthy Achievements 

OARM took the initiative to involve EPA program offices and regions in 

identifying potential efficiencies and savings initiatives on 72 projects with 

potential estimated savings and cost avoidances of over $33 million—later 

reduced to $21 million. 
 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

THE INSPECTOR GENERAL 

October 22, 2012 

MEMORANDUM 

SUBJECT:	 Improvements Needed in Estimating and Leveraging Cost Savings Across EPA 

Report No. 13-P-0028 

FROM: Arthur A. Elkins, Jr. 

TO:	 See Below 

This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the 

U.S. Environmental Protection Agency (EPA). This report contains findings that describe the 

problems the OIG has identified and corrective actions the OIG recommends. This report 

represents the opinion of the OIG and does not necessarily represent the final EPA position. 

Final determinations on matters in this report will be made by EPA managers in accordance with 

established audit resolution procedures. 

Action Required 

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

report within 60 calendar days. You should include a corrective action plan for agreed-upon 

actions, including milestone dates. Your response will be posted on the OIG’s public website, 

along with our memorandum commenting on your response. Your response should be provided 

as an Adobe PDF file that complies with the accessibility requirements of Section 508 of the 

Rehabilitation Act of 1973, as amended. The final response should not contain data that you do 

not want to be released to the public. If your response contains such data, you should identify the 

data for redaction or removal. We have no objection to the further release of this report to the 

public. This report will be available at http://www.epa.gov/oig. 

If you or your staff have any questions regarding this report, please contact Melissa Heist, 

Assistant Inspector General for Audit, at (202) 566-0899 or heist.melissa@epa.gov; or 

Michael Davis, Product Line Director, at (513) 487-2363 or davis.michaeld@epa.gov. 

Addressees: 

Craig E. Hooks, Assistant Administrator for Administration and Resources Management 

Barbara J. Bennett, Chief Financial Officer 

Gwendolyn Keyes Fleming, Regional Administrator, Region 4 

Karl Brooks, Regional Administrator, Region 7 
 

 

 

 

 

 

Improvements Needed in Estimating and 13-P-0028 

Leveraging Cost Savings Across EPA 

Table of Contents 

Chapters 

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

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

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

 Noteworthy Achievements ........................................................................... 3 

 Scope and Methodology .............................................................................. 3 

2 Enhanced Methods Needed to Determine Savings 

and Cost Avoidances......................................................................................... 6
 

Improvements Needed in Determining Savings and Cost Avoidances ....... 6 

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

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

Agency Response and OIG Evaluation ....................................................... 11 

3 EPA Follow-Up Efforts Needed to Optimize Savings 

and Cost Avoidances......................................................................................... 13
 

Improvements Needed in Ensuring Results Are Achieved .......................... 13 

Conclusion .................................................................................................. 16 

 Recommendation ........................................................................................ 16 

Agency Response and OIG Evaluation ....................................................... 16 

Status of Recommendations and Potential Monetary Benefits.............................. 18
 

Appendices 

A Program Offices and Regions Submitting Results ......................................... 19 

B Agency Response to Draft Report and OIG Evaluation.................................. 20 

C Distribution ......................................................................................................... 30 
 

Chapter 1

Introduction 

Purpose 

In 2009, the U.S. Environmental Protection Agency (EPA) identified 72 

efficiency projects totaling over $33 million in savings or cost avoidances. EPA’s 

Office of Inspector General (OIG) conducted this audit to determine whether: 

 EPA’s efforts to identify and realize savings have been effective 

 Savings reported to EPA’s Office of Administration and Resources 

Management (OARM) were accurate and complete. 

Background 

In an April 2009 Cabinet meeting, President Obama called on Cabinet members 

to identify at least $100 million in collective cuts to their budgets, separate from 

those identified in their fiscal year (FY) 2010 budgets. To prepare for upcoming 

Presidential and Office of Management and Budget (OMB) initiatives, the 

Assistant Administrator for OARM, in an August 24, 2009, e-mail titled 

“Management Reform Agenda-Response Due September 17, 2009,” requested all 

program offices and regions to identify efficiency projects. The e-mail stated: 

As part of his Management Reform Agenda, the President 

continues to challenge agencies to identify cost-saving measures 

that will result in a more efficient and effective government. On 

July 27, 2009, the OMB Director issued a memorandum that 

identifies 77 cost-saving measures amounting to $243 million in 

savings through 2010. I encourage each of you to review and share 

with your senior leadership team the various projects identified by 

Federal agencies to see if similar projects could be initiated at 

EPA. In addition, I am once again asking each of you to look at the 

wide array of environmental programs you administer and identify 

3 efficiency projects you and your organization will undertake in 

support of the President’s Reform Agenda over the next year. 

These projects should be items initiated in 2009 or planned for the 

upcoming year. Please provide a brief, one paragraph description 

of each project that can be shared with OMB and the White House. 

Your submissions should also include the proposed or actual start 

date and expected timeframe of the initiative, a primary point of 

contact, as well as an estimate of projected dollar savings or cost 

avoidance and expected results. Each program and regional office 

13-P-0028 1 
 

 

 

should submit their three efficiency projects no later than 

Thursday, September 17, 2009. 

By September 2009, EPA program offices and regions had submitted 72 projects, 

which varied widely in scope and totaled over $33 million in anticipated savings 

and cost avoidances (see appendix A). Table 1 below summarizes data submitted 

in 2009. In January 2011, OARM provided an updated spreadsheet for the same 

projects that showed savings and cost avoidances over $21 million. 

Table 1: List of 72 cost-cutting projects as of September 2009 

No. of Projects Anticipated Savings/Cost Avoidances 

63 $400,000 and under 

3 $401,000 to under $1 million 

4 $1 million to under $2.5 million 

1 $2.5 million to under $19 million 

1 $19 million and above 

72 $33 million 

Source: OIG analysis of EPA data. 

According to OMB Circular A-123, Management’s Responsibility for Internal 

Control, program managers are responsible for achieving desired results through 

the efficient and effective use of resources. In addition, numerous internal and 

external memorandums and initiatives have continued to request agencies to 

identify efficiencies, savings, and cost avoidances. For the purposes of this audit, 

efficiencies include savings, cost avoidances, and other projects that operate with a 

high ratio of output (end product) to input (resources used). 

Superfund Projects Reported to OARM 

The Superfund program addresses contamination from uncontrolled releases at 

Superfund hazardous waste sites that threaten human health and the environment. 

The 72 cost-cutting projects included two Superfund initiatives identified by 

Regions 4 and 7 that totaled over $14 million in savings and cost avoidances. We 

chose to review these two projects because one represented the largest estimated 

savings and cost avoidances out of the 72 initiatives, and the other had a high 

reported dollar amount of savings and cost avoidances. 

Region 7’s FY 2011 Superfund budget totaled $116 million.1

 The Office of 

Superfund Remediation and Technology Innovation (OSRTI) encourages 

program staff, procurement offices, and the supporting contractors to use 

innovative technologies, approaches, and/or site-specific contracts (generally 

fixed-price type contracts) for remedial activities to minimize costs and streamline 

schedules. The Office of Acquisition Management (OAM), an office within 

1

 OIG extracted enforcement cost data from the Integrated Financial Management System database, February 2011. 

It includes these accounts: Hazardous Substance Superfund (T), Superfund Carry Over (TC), Superfund 

Reimbursables (TR & TR1), Superfund Special Account-Nonfederal Unearned (TR2), and Special Account Past 

Cost and Other (TR2B). 

13-P-0028 2 
 

 

OARM, is responsible for policies, procedures, operations, and support for the 

Agency’s procurement and contracts management program. In September 2010, 

OAM issued “An Acquisition Guide for Executives” that states one way to fulfill 

OAM’s primary purpose of providing functional direction and control over 

Agency acquisition is to use contract types that facilitate performance excellence 

and cost savings and minimize risk. In addition, OAM and the Office of Solid 

Waste and Emergency Response (OSWER) created a Superfund acquisition 

strategy with a focus on identifying and improving acquisition practices and 

processes to maximize cost efficiencies. During FY 2009, Region 7 reported cost 

avoidances of approximately $13.4 million based on the difference between the 

Independent Government Cost Estimates (IGCEs) and contract amounts awarded 

for construction activities at two sites. 

Region 4’s FY 2011 Superfund budget totaled $97 million.2

 Region 4’s Superfund 

program conducts assessment activities (i.e., preliminary assessments/site 

inspections, expanded site inspections, or removal site evaluations) on more than 

50 sites each year. Region 4 implemented a new enforcement strategy not to 

pursue cost recovery actions in cases where further federal or state action is 

determined unnecessary, thus allowing it to use its enforcement resources at sites 

warranting further action. The region reported that this new strategy resulted in 

estimated cost avoidances of $610,000, which included $380,000 in FY 2010 and 

a projected $230,000 in FY 2011. 

Noteworthy Achievements 

OARM took the initiative to involve EPA offices and regions in identifying 

potential efficiencies and savings initiatives and collected data in September 2009 

on 72 projects with potential estimated savings and cost avoidances of over 

$33 million. In January 2011, EPA offices and regions lowered their estimated 

savings and cost avoidances to $21 million. 

Scope and Methodology 

We conducted this performance audit in accordance with generally accepted 

government auditing standards. Those standards require that we plan and perform 

the audit to obtain sufficient, appropriate evidence to provide a reasonable basis 

for our findings and conclusions based on our review objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

We conducted the audit from January 2011 to September 2012. From the 72 

projects submitted by 21 program offices and regions, we selected two Superfund 

projects identified in the background section above for a detailed review. We 

2

 This total represents the same accounts listed in footnote 1, except the IFMS report did not include any funds for 

Superfund Reimbursable TR1. 

13-P-0028 3 
 

 

 

selected the two projects because they had reported high dollar savings and cost 

avoidances. We contacted representatives from the Office of the Chief Financial 

Officer (OCFO), OARM, OSWER, Office of Enforcement and Compliance 

Assurance (OECA), and Regions 4 and 7. For background purposes, we obtained 

overall Superfund budget information. 

We reviewed circulars, regulations, guidance, and other documents to gain an 

understanding of the requirements and processes used to estimate, manage, and 

report on savings and cost avoidances. The specific documents reviewed 

included: 

 OMB Circular A-123 

 U.S. Government Accountability Office’s report GAO/AIMD-00-21.3.1, 

Standards for Internal Controls in the Federal Government 

 Federal Accounting Standards Advisory Board (FASAB) Statements of 

Federal Financial Accounting Concepts and Standards 

 Federal Acquisition Regulation (FAR), Parts 13, 14, 15, and 36 

 Superfund Implementation Manual (OSWER 9200.3-14-1G-V) 

For benchmarking purposes, the U.S. Department of Justice (DOJ) provided us a 

copy of the memoranda to their agency heads titled “Department of Justice 

Savings and Efficiency,” dated June 4, 2009, and “Establishment of Attorney 

General, Advisory Council for Savings and Efficiencies (SAVE Council),” dated 

July 22, 2010, on its processes and procedures used to reduce department costs 

and improve efficiency. These memoranda assisted us in identifying similar best 

business practices for EPA. 

According to OMB Circular A-123, financial reporting includes financial 

statements, budgetary reports, and other significant internal and external financial 

reporting. We analyzed OMB and EPA guidance to determine financial reporting 

requirements. We discussed with OARM and OCFO staff their procedures to 

track whether EPA achieved the anticipated savings. To understand how the 

regions estimated the reported savings, we interviewed managers and directors in 

OSWER, OECA, and Regions 4 and 7. In addition, we obtained supporting 

documentation maintained at EPA Regions 4 and 7 to determine whether the 

regions achieved the savings and the amounts reported to OARM were accurate 

and complete. The supporting information for Region 7 included awarded 

contracts and IGCEs. 

We used the Comprehensive Environmental Response, Compensation, and 

Liability Information System (CERCLIS) and the Integrated Financial 

Management System (IFMS) databases3

 to determine whether the enforcement 

cost avoidances reported by Region 4 were accurate and complete. We did not 

assess the internal controls over CERCLIS and IFMS from which we obtained 

3

 On October 1, 2011, Compass Financial replaced IFMS. 

13-P-0028 4 
 

 

reports. Rather, we relied on the review of IFMS conducted during the audit of 

EPA’s FYs 2009 and 2010 financial statements for current Superfund cost data 

and a 20024

 audit of CERCLIS for site assessment data. We reviewed 

recommendations in the Management’s Audit Tracking System (last modified in 

2004) for the CERCLIS audit and verified that EPA took corrective action based 

on reviewing the Superfund implementation manual and CERCLIS data quality 

reports. 

Prior EPA OIG Reports 

The EPA OIG issued the following reports with findings related to estimating 

savings and CERCLIS data quality: 

	 Report No. 2011-P-0333, Office of Research and Development [ORD] 

Needs to Improve its Method of Measuring Administrative Savings, 

July 14, 2011. The report stated that ORD estimated that the 

Administrative Efficiencies Project would save up to $13 million in 

administrative staffing costs annually when fully implemented in 2012 and 

that the Information Technology Improvement Process saved $2 million in 

2007. OIG reported that ORD’s efforts to reduce its administrative costs 

are noteworthy, but ORD needs to improve its measurement mechanism 

for assessing the effectiveness of its initiatives to reduce administrative 

costs. ORD only completed two surveys on staff whose time was spent on 

administrative activities. The surveys only reported on a select number of 

ORD staff, not all ORD staff. OMB Circular A-123 states, “. . . reliable 

and timely information is obtained, maintained, reported, and used for 

decision making.” Without such reliable and timely information, ORD 

lacks an adequate measure of how its resources are actually used. 

	 Report No. 2002-P-00016, Comprehensive Environmental Response, 

Compensation, and Liability Information System (CERCLIS) Data 

Quality, September 30, 2002. The report stated that users of CERCLIS 

data did not have accurate and complete information regarding the status 

and activities of Superfund sites, which could adversely affect planning 

and management. These weaknesses were caused by the lack of adequate 

internal controls over CERCLIS data quality. The report included 

recommendations to improve controls over CERCLIS data quality. 

Recommendations included developing and implementing a quality 

assurance process for CERCLIS data and updating the CERCLIS policies 

and procedures. 

4

 In response to the OIG Report No. 2002-P-0016, Comprehensive Environmental Response, Compensation, and 

Liability Information Systems Data Quality, dated September 30, 2002, EPA completed CERCLIS corrective actions 

in 2004. Region 4’s cost avoidance calculations included CERCLIS-recorded site assessments completed during the 

time period after corrective actions took place. The site assessment time periods include FYs 2006, 2007, and 2008. 

13-P-0028 5 
 

Chapter 2

Enhanced Methods Needed to 

Determine Savings and Cost Avoidances 

While Regions 4 and 7 took the initiative to identify potential savings and cost 

avoidances, they did not use reliable methods to determine potential savings and 

cost avoidances. Management is responsible for assuring efficient and effective 

operations and reliable financial reporting including development of savings or 

cost avoidance initiatives. EPA does not have a policy describing what constitutes 

savings/cost avoidances and the methodology for calculating them. Without 

effective policies and procedures for estimating savings and cost avoidances, 

EPA will not be able to accurately report the results of its efficiency initiatives 

and influence internal and external management decisions. 

Improvements Needed in Determining Savings and Cost Avoidances 

OMB Circular A-123 states that management establishes and maintains internal 

control to achieve effective and efficient operations, reliable financial reporting, 

and compliance with laws and regulations. Financial reporting includes the annual 

financial statements and other significant internal or external financial reports. 

Other significant financial reports are any financial reports that could have a 

material effect on spending, budgetary, or other financial decisions or could be 

used to determine compliance with laws and regulations. The circular also states 

that information should be relevant, reliable, and timely. 

FASAB’s Statements of Federal Financial Accounting Concepts and Standards 

defines avoidable cost as a cost associated with an activity that would not be 

incurred if the activity were not performed. OMB memorandum M-09-25, dated 

July 2009, and additional clarifying guidance explained how the agency should 

establish savings. The additional guidance emphasized that for each identified 

initiative, the agency should establish savings by explaining the difference 

between what would have been spent in the absence of the savings initiative and 

what the agency expects to spend in pursuing the initiative. 

FAR requires preparation of an independent government estimate of construction 

costs. The estimate shall be prepared in as much detail as though the government 

were competing for the award. OAM guidance states that if there are significant 

differences between the IGCE and a proposal, responsible individuals should 

closely analyze the differences to understand why they occurred and how they 

may affect future estimates. 

13-P-0028 6 
 

 

 

Unreliable Method Used for Calculating Region 4 Savings 

In December 2008, Region 4’s Superfund Division issued a memorandum 

implementing its new strategy not to expend resources on enforcement activities 

for sites that did not warrant further state or federal action. Enforcement activities 

include searching for potentially responsible parties (PRPs), issuing demand 

letters, negotiating settlements, and preparing enforcement decision documents to 

write off costs associated with assessment activities. In September 2009, Region 4 

estimated the potential annual average cost avoidance of approximately $200,000 

for FY 2009, 2010, and 2011. In January 2011, Region 4 updated the estimated 

cost avoidance amount to $610,000 ($380,000 cost avoidance in FY 2010 with a 

projected additional cost avoidance of $230,000 in FY 2011). Figure 1 depicts 

how Region 4 estimated the cost avoidances: 

Figure 1: Region 4 formula for calculating cost avoidance 

Sites X Enforcement Cost X Discount Rate = Cost 

(Identified (Identified in (Region 4 avoidance 

in CERLIS) a report) judgment) 

Source: OIG analysis of EPA data. 

Region 4 based the potential cost avoidance estimates for site assessment and 

enforcement on outdated and incomplete information. 

Outdated Information 

The region used the PRP determination estimated cost identified in the 

September 2010 report titled PRP Search Benchmarking and Regional 

Practices Evaluation. The report identified $10,000 as the median cost for 

PRP determination based on FYs 1999 to 2005 IFMS data. 

Incomplete Information 

The report titled PRP Search Benchmarking and Regional Practices 

Evaluation, dated September 2010, used by Region 4 includes only the cost 

associated with PRP searches. However, Region 4’s memorandum “Recovery 

of Superfund Site Assessments Costs Strategy” describes other enforcement 

activities such as “issue demand letters, negotiate settlements, or prepare 

enforcement decision documents to write off the costs associated with 

assessment activities.” The cost associated with these other activities is 

missing from Region 4’s calculation, so the calculation of the cost is 

incomplete. 

13-P-0028 7 
 

Unreliable Method Used for Calculating Region 7 Savings on SiteSpecific Contracts 

During FY 2009, Region 7 reported that it awarded several site-specific contracts 

for construction activities at Superfund sites. Region 7 stated that these contracts 

have allowed it to realize cost avoidances of approximately $13.4 million. 

Region 7 based the estimate on the difference between the IGCE and contract 

amounts awarded for construction activities at two sites. 

The method Region 7 used to determine its potential savings and cost avoidances 

on construction contracts at specific Superfund sites was not reliable. Comparison 

of an IGCE to a contract award amount for a construction contract at a specific 

site does not assist in determining savings and cost avoidances as defined by 

FASAB and OMB. FASAB states that savings key elements include an activity 

that was not performed. OMB states that savings key elements include the 

difference between what would have been spent in the absence of the savings 

initiative and what was actually spent. Neither the IGCE nor the awarded contract 

identifies those key elements. The methodology for determining savings or cost 

avoidance should have compared the site-specific approach for Superfund 

construction to the method previously used. 

Although Region 7 stated it used historical data from prior contract(s) to create an 

IGCE, Region 7’s IGCE did not show the connection to the prior contract’s cost, 

improved initiative, or excluded requirements. In addition, according to the FAR, 

the IGCE shall be prepared on the basis of a detailed analysis of the required work 

as though the government were submitting a proposal. It would not include 

actions or requirements and their associated costs no longer needed. Therefore, 

EPA cannot determine cost avoidance and savings by merely comparing an IGCE 

to a contract award. Neither regulation nor guidance states that the differences 

between an IGCE and the contract price are savings or cost avoidances. 

No EPA Policy Describes the Procedure for Determining Monetary 

Efficiencies 

The Agency does not have policies defining savings, efficiencies, and cost 

avoidances. Given the quick turnaround for developing the efficiency projects, 

Region 4 relied on the benchmarking study and did not get current and complete 

enforcement costs from financial experts within the region. Policy should include 

a process for consulting with financial experts to assist in determining savings 

amounts. 

OAM officials stated that the ability to monetize the savings and cost avoidances 

from acquisition efficiencies is a challenge because no credible methodology 

exists to date. EPA needs to implement policy describing a more reliable 

approach that would include comparing the price for the prior contract with the 

contract award to identify savings. Comparing contracts would show the different 

13-P-0028 8 
 

actions taken and their associated costs. The OMB M-09-25 additional guidance 

also identifies this methodology. 

Reported Savings Methodology Used Could be Misleading 

Region 4 reported its savings to OARM. Claims of reported efficiencies may lead 

to others applying the same methods on other initiatives, and reporting such data 

may result in misstated amounts and inaccurate reporting. The misstated amounts 

and inaccurate reporting could affect the management decisions for site 

assessment in determining more cost effective and time efficient methods to 

assess sites. 

Region 7 also reported its savings to OARM. Claims of reported efficiencies may 

lead to others applying the same methods on other initiatives and reporting such 

methodology internally and externally (i.e., to OMB). Region 7 reported savings 

achieved in the IFMS database, EPA’s official accounting system used for 

financial reporting. Region 7 reported the following in the IFMS database, to 

explain returning $2.1 million in American Recovery and Reinvestment Act of 

2009 (ARRA) funds: 

Reprogramming ARRA funds back to headquarters. These funds 

are the result of site-specific contracts being awarded for less than 

EPA’s IGCE; thus realizing a cost savings. 

Even though Region 7 developed a site-specific contracting initiative for 

savings/cost avoidance, it was not reported to OMB. However, in November 

2010, OAM responded to the OMB memo dated July 2009 titled “Improving 

Government Acquisition” and reported to OMB savings and cost avoidances 

developed by other regions. An OAM report, “Achieving Contract Savings” 

stated that EPA competitively awarded a firm-fixed-price contract for remedial 

construction at two Superfund sites in other regions, saving close to $6 million. 

The amount saved was the difference between the IGCEs originally developed for 

acquiring these services and the final price of the resultant award. OAM reported 

that savings were determined by awarding contracts for less than EPA’s IGCE. 

This practice is contrary to FASAB and OMB guidance. In addition, OMB then 

highlighted OAM reported savings developed by the other regions in a 

congressional testimony dated July 15, 2010. In this instance, they should have 

used the prior contract instead of the IGCE to determine the savings amount. 

Conclusion 

EPA needs sound procedures for identifying savings resulting from its initiatives. 

An OMB memorandum for the Chief Financial Officers of Executive 

Departments and Agencies, dated June 28, 2011, stated that the federal 

government should take common sense, pragmatic steps to cut costs where 

possible and eliminate practices that are antiquated or unnecessary. According to 

13-P-0028 9 
 

the memo, government agencies should not hide these inefficiencies, but should 

rather examine them publicly and apply logical fixes that others can learn from 

and leverage. By using current and complete enforcement costs to determine 

estimated savings and communicating with regional budget and financial 

personnel to identify total costs saved, Region 4 could better estimate the cost 

avoidances. Comparing the prior contract with the resultant contract price is a 

more reliable approach for determining cost savings or avoidance because 

comparing the two would show the improved efficiencies, which include not only 

costs but actions not taken. 

Recommendations 

We recommend that the EPA Chief Financial Officer: 

1.	 Develop an Agency-wide policy that defines what the Agency considers 

cost savings, efficiencies, and avoidances. 

2.	 Develop an Agency-wide procedure for estimating savings, efficiencies, 

and cost avoidances to include requiring program offices and regions to 

consult with internal financial managers to obtain complete and up-to-date 

cost data. 

We recommend that the Assistant Administrator for Administration and 

Resources Management: 

3.	 Develop a policy on estimating savings and cost avoidances relating to 

contracts based on similar prior contract data that will show the actions not 

taken or improved operations as opposed to using the IGCEs. 

We recommend that the Regional Administrator, Region 4: 

4.	 Recalculate the cost avoidance based on current and complete 

enforcement cost data. 

5.	 Report the cost avoidance to OCFO and OARM. 

We recommend that the Regional Administrator, Region 7: 

6.	 For Region 7’s audited initiative, identify the improved activities or 

activities not taken in the awarded contract(s) associated with the original 

calculation to determine whether cost avoidance exists. 

7.	 Recalculate the cost avoidance estimate based on the difference between 

the awarded contract and similar prior contract prices. 

8.	 Report the cost avoidance to OCFO and OARM. 

13-P-0028 10 
 

Agency Response and OIG Evaluation 

We received draft report comments from OCFO, OARM, and Regions 4 and 7 on 

July 20, 2012. 

OCFO disagreed with our recommendations 1 and 2 and stated the Agency 

maintains that introducing formality into the early stages of idea generation would 

severely hinder innovation and creativity. We do not agree with the Agency 

response. The actual verbiage of the OARM e-mail, dated August 2009, did not 

describe projects as ideas. OMB Circular A-123 also states that internal controls, 

which include policies and procedures, help organizations achieve results and 

should be an integral part of the entire cycle of planning, budgeting, management, 

accounting, and auditing. Regardless of whether the projects are developed at the 

early stage of the idea generation, a clear definition of each estimating method 

and consistent estimating methods Agency-wide would help ensure accurate, 

proactive measurement and reporting of the desired results of achieving cost 

savings, avoidances, and/or efficiencies by program offices and regions. 

OARM disagreed with our recommendation 3. However, OARM believes that 

there is a government-wide need to establish and institutionalize standards and 

methodologies for determining cost savings and avoidances resulting from 

contracting initiatives and approaches that fall under formal processes. We found 

OMB already established guidance that identified a government wide standard 

and methodology on what is needed for determining cost savings and avoidances. 

OMB memorandum M-09-25, dated September 2009, and OMB additional 

guidance explain how the agency should establish savings. To implement the 

OMB additional guidance, EPA should have an Agency policy describing its 

prescribed method for estimating contract savings/cost avoidances to ensure 

consistency in measuring/estimating savings by program offices and regions. 

Region 4 disagreed with our recommendations 4 and 5. Region 4 stated that since 

this project was an idea and has not been fully examined, evaluated, or accepted 

by the Agency, the effort to recalculate the cost avoidance is not warranted. We 

do not agree with the Region 4 response. The Regional Director for Region 4 

already took action by issuing a memorandum that documented the new strategy 

implemented for this initiative, so the project is no longer an idea. 

Region 7 disagreed with our recommendations 6, 7, and 8. Region 7 does not 

believe that the OIG’s definition of cost avoidance applies to the submitted 

activities. The OIG definition only considers “activities not taken.” Cost savings, 

however, may arise as a result of contracting activities. Furthermore, based upon 

the OIG’s definition of cost avoidance or cost savings, the awarded contracts did 

not meet this definition. Therefore, there is no basis to recalculate the cost 

avoidance and report the corrected cost avoidance. We do not agree with the 

Agency response. The OIG does not disagree with the fact that the IGCE may 

have included historical costs. However, the IGCE had to have included other 

costs based on the new requirements. We used OMB additional guidance that 

13-P-0028 11 
 

 

included a methodology to determine savings. According to OMB M-09-25 

additional guidance, there are two important parts to developing the savings and 

cost avoidances: (1) cost reductions and (2) a description of the actions not taken. 

Comparing the IGCE with the awarded contract does not provide a description of 

actions not taken or identify where cost was reduced. A clear justification for why 

the awarded contract price is significantly lower was not provided, nor did it 

identify cost reductions or action not taken. Furthermore such cost discrepancies 

call into question the accuracy of the IGCE. OAM guidance states that if there are 

significant differences between the IGCE and a proposal, responsible individuals 

should closely analyze the differences to understand why they occurred and how 

they may affect future estimates. Had this been done, Region 7 may have been 

able to identify cost reductions and a description of the actions not taken to 

achieve cost savings. 

OCFO responded to recommendation 7. OCFO explained that the Agency allows 

local offices flexibility and does not mandate the use of Superfund site-specific 

contracts. In response to the “OCFO Note,” the issue is not with using the sitespecific contracting approach, it is with the methodology of comparing the IGCE 

to the newly awarded contract. We have not been given the explanation or support 

as to why site-specific contracting is the best contract approach to achieve cost 

savings. 

13-P-0028 12 
 

Chapter 3

EPA Follow-Up Efforts Needed to Optimize 

Savings and Cost Avoidances 

While OARM took the initiative to lead the identification of potential savings and 

cost avoidances for all Agency programs and regions, it did not follow up on 

implementation of the 72 efficiency projects reported to OARM during the period 

November 2010 through January 2011 to ensure that the projects actually resulted 

in savings, cost avoidances, and other efficiencies. OMB Circular A-123 requires 

program and financial managers to achieve desired outcomes (savings and cost 

avoidances). OARM did not follow up on these efficiency efforts because EPA 

viewed the projects as merely ideas for possible cost savings that did not require 

reporting, including to OMB. Nevertheless, without following up on the progress 

in achieving desired and expected savings and efficiencies, EPA may have missed 

opportunities to leverage and expand its cost-cutting efforts, apply best practices 

for gaining greater efficiencies, and realize significant savings and cost 

avoidances Agency-wide. 

Improvements Needed in Ensuring Results Are Achieved 

An OMB memorandum, titled “Campaign to Cut Waste,” dated June 28, 2011, 

stated: 

...[T]he federal government should take common sense, pragmatic 

steps to cut costs where possible and eliminate practices that are 

antiquated or unnecessary. Government agencies should not hide 

these inefficiencies, but should rather examine them publicly and 

apply logical fixes that others can learn from and leverage.... 

agencies should also leverage ideas from the federal workforce by 

reviewing and incorporating ideas.... 

This memorandum outlines a path forward for agency Chief 

Financial Officers (CFO’s) [sic] to promote such steps internally 

and work together to cut costs and drive efficiencies governmentwide. Execution of the steps outlined in this memorandum is an 

essential component of the recent executive order, in which the 

President called for a government that cuts waste and is fully 

accountable to the American public. As part of this executive 

order, the President charged federal CFO’s [sic] with ramping up 

efforts to identify, execute, and report on administrative cost 

savings within the agencies. 

13-P-0028 13 
 

 

OMB Circular A-123 states that internal controls—organization, policies, and 

procedures—are tools to help program and financial managers achieve results. 

Management should have a clear, organized strategy with well-defined 

documentation processes that contain an audit trail and verifiable results. The 

GAO report GAO/AIMD-00-21.3.1, Standards for Internal Controls in the 

Federal Government, November 1999, states that internal control helps 

government program managers achieve desired results through effective 

stewardship of public resources. 

For benchmarking purposes, we examined the DOJ follow-up policies and 

procedures implemented to ensure savings and efficiencies were achieved. In 

June 2009, DOJ implemented a pilot savings program calling for ideas to reduce 

department costs and improve efficiency. In his memorandum, the Attorney 

General required that lead officials participate in the department’s working group 

to implement the ideas. The memo also stated that the department’s performance 

improvement officer would track implemented initiatives through a quarterly 

status review process. In July 2010, DOJ established the Advisory Council for 

Savings and Efficiencies (the SAVE Council) to develop and review departmentwide savings and efficiency initiatives, and report on them. 

No Follow-Up on Projects’ Progress 

OARM requested efficiency projects from each program office and region that 

EPA could share with OMB and the White House. OARM’s request also stated 

that projects should include the proposed or actual start date and expected 

timeframe of the initiative, as well as an estimate of projected dollar savings or 

cost avoidances and expected results. In September 2009, EPA program offices 

and regions submitted 72 projects, which varied widely in scope and totaled over 

$33 million in estimated savings and cost avoidances (see appendix A). OARM 

did not follow up on these cost-cutting efforts to determine whether (1) the 

program offices and regions actually achieved the expected efficiencies, savings, 

and cost avoidances from these projects; and (2) the results could be expanded to 

achieve Agency-wide savings. 

We interviewed OARM before the audit began and again in January 2011 to 

understand what was done regarding the requested information. Because of our 

interest, OARM obtained an updated status of the 2009 reported results in January 

2011, but performed no other follow-up. The OARM e-mail request did not 

emphasize follow-up to ensure implemented initiatives resulted in savings and 

cost avoidances, and no other guidance was given to the program offices and 

regions to do so. 

OCFO staff serves a fiduciary role by monitoring and analyzing the Agency’s 

resource use, providing guidance to the Agency to ensure the proper use of 

resources, and responding to OMB initiatives on behalf of the Agency. During the 

audit, we interviewed OCFO staff to determine whether it had implemented 

13-P-0028 14 
 

follow-up efforts on the reported savings and cost avoidances. OCFO staff have 

processes and procedures to obtain efficiency initiatives from EPA program 

offices and regions. However, OCFO did not take the lead in this case, and there 

was a lack of coordination between OARM and OCFO on the 72 initiatives. 

EPA Treated the 72 Projects as Ideas for Potential Savings and 

Cost Avoidances 

OARM staff viewed the 72 projects as merely ideas to use for upcoming 

Presidential reform initiatives, but EPA did not send any of the projects to OMB 

and OMB did not request them. The OARM official we interviewed stated that 

had OMB required the submission of these efficiencies, OARM would have 

gathered more data and relied on program and regional managers to verify or 

validate savings and efficiencies. OARM stated that it does not have the official 

responsibility for oversight of these 72 projects. Consequently, no one was held 

accountable to determine whether program offices and regions realized expected 

savings and efficiencies from the implementation of the projects. 

The Deputy Director of the Office of Budget, an office within OCFO, categorized 

the 72 projects as merely ideas for cutting or avoiding costs. According to the 

Deputy Director, the projects are efficiencies that allow program offices and 

regions to reprioritize their funding resources to carry out their operations. The 

Office of Budget is not involved unless the savings reduce the budget or require a 

budget increase to obtain further savings in future years. The Deputy Director 

stated that OCFO identified other higher priority initiatives as part of each budget 

process, but not the 72 projects. During conferences and meetings with program 

offices and regions on the budget, the Office of Budget staff stated that they 

discussed efficiencies and savings initiatives for inclusion in the budget 

submission. Office of Budget staff also stated that monitoring and providing 

additional requirements for every initiative to ensure achieving savings and 

efficiencies would stifle innovation and creativity. Although the Office of Budget 

has budget oversight, the Deputy Director told us that the regions or program 

offices are responsible for achieving savings and efficiencies from their projects. 

OIG agrees that program offices and regions are responsible for achieving savings 

and efficiencies from their projects. However, OCFO needs to ensure that the 

program offices and regions achieve each significant savings and cost avoidance 

through periodic tracking and reporting of the results. 

Potential Agency-Wide Implementation 

EPA did not determine whether program offices and regions achieved the 

estimated $33 million in savings and/or cost avoidances (later reduced to 

$21 million) and whether the Agency could have achieved greater savings by 

implementing the projects in other offices and regions. Assessment of these or 

other cost-saving projects can further help EPA identify lessons learned, best 

practices, or successes for possible implementation Agency-wide for greater cost 

13-P-0028 15 
 

 

 

savings and efficiencies. This assessment would also demonstrate EPA’s 

commitment to being a good steward of taxpayer dollars. The June 28, 2011, 

OMB memorandum titled “Campaign to Cut Waste” provided specific criteria to 

use past actions that have resulted in broad and significant cost savings. Specifically, 

the memo stated: 

To begin the process of collecting and synthesizing Government 

practices that cut costs and improve efficiencies, I am requesting 

the following steps be taken by each CFO: 

1. Initiate within your agency the collection and inventory of 

existing examples, practices, and success stories of efforts to 

improve efficiency, avoid unnecessary expenditures, and cut costs. 

This should include cost-cutting initiatives completed in the past, 

those that are currently underway, and those that your agency is 

planning to launch. Examples should include efforts that are broad 

and have resulted in significant cost savings.... 

Conclusion 

Since 2009, OMB and the White House have required agencies to identify savings 

and cost avoidances in the form of efficiencies. In addition, the President charged 

federal CFOs with ramping up efforts to identify, execute, and report on 

administrative cost savings within the agencies. This process involves promoting 

steps to cut cost and drive efficiencies agency-wide. By assessing its 

implementation progress on projects identified, the Agency would be able to 

determine whether it is on track to achieve the anticipated savings and avoided 

costs and identify the challenges or greatest successes and best practices for 

potential Agency-wide implementation to further increase efficiencies. 

Additionally, the identified savings and efficiencies could serve as examples of 

successful Agency efficiency efforts for reporting to the CFO Council for 

potential implementation government-wide. 

Recommendation 

We recommend that the EPA Chief Financial Officer: 

9.	 Select significant projects from the 72 initiatives in light of the recent 

OMB memorandum “Campaign to Cut Waste” to determine if these 

efforts have resulted in significant savings and cost avoidances and 

publicly examine and apply logical fixes so that others can learn from and 

leverage cost savings for Agency-wide implementation. 

Agency Response and OIG Evaluation 

OCFO does not agree with recommendation 9 as originally presented. OCFO 

stated that the Presidential SAVE initiative evaluates ideas collected directly from 

13-P-0028 16 
 

 

federal employees and is not an appropriate reporting mechanism. The Agency is 

actively involved in pursuing efforts that contribute to the “Campaign to Cut 

Waste” and the Presidential SAVE Initiative and has already reported on ideas 

from the list of 72 ideas. We agree with the OCFO response to not report 

significant efficiencies through the Presidential SAVE initiative. OCFO identified 

ideas similar to the 72 initiatives developed as part of the Agency-wide effort to 

avoid costs and achieve savings and efficiencies. Even though the SAVE program 

may not be used, the concept addressed in the “Campaign to Cut Waste” memo 

states that agencies should publicly examine and apply logical fixes so that others 

can learn from and leverage cost savings for Agency-wide implementation. We 

revised recommendation 9 to include the modified OIG position. 

13-P-0028 17 
 

 

 

 

 

 

 

 

 

 

 

 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Planned 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Completion 

Date 

Claimed 

Amount 

Agreed-To 

Amount 

1 10 Develop an Agency-wide policy that defines what 

the Agency considers cost savings, efficiencies, 

and avoidances. 

U Chief Financial Officer 

2 10 Develop an Agency-wide procedure for estimating 

savings, efficiencies, and cost avoidances to 

include requiring program offices and regions to 

consult with internal financial managers to obtain 

complete and up-to-date cost data. 

U Chief Financial Officer 

3 10 Develop a policy on estimating savings and cost 

avoidances relating to contracts based on similar 

prior contract data that will show the actions not 

taken or improved operations as opposed to using 

the IGCEs. 

U Assistant Administrator for 

Administration and 

Resources Management 

4 10 Recalculate the cost avoidance based on current 

and complete enforcement cost data. 

U Regional Administrator, 

Region 4 

5 10 Report the cost avoidance to OCFO and OARM. U Regional Administrator, 

Region 4 

6 10 For Region 7’s audited initiative, identify the 

improved activities or activities not taken in the 

awarded contract(s) associated with the original 

calculation to determine whether cost avoidance 

U Regional Administrator, 

Region 7 

exists. 

7 10 Recalculate the cost avoidance estimate based on 

the difference between the awarded contract and 

similar prior contract prices. 

U Regional Administrator, 

Region 7 

8 10 Report the cost avoidance to OCFO and OARM. U Regional Administrator, 

Region 7 

9 16 Select significant projects from the 72 projects in 

light of the recent OMB memorandum “Campaign 

to Cut Waste” to determine if these efforts have 

U Chief Financial Officer 

resulted in significant savings and cost avoidances, 

and publicly examine and apply logical fixes so that 

others can learn from and leverage cost savings for 

Agency wide implementation.. 

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

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

U = recommendation is unresolved with resolution efforts in progress 

13-P-0028 18 
 

 

 

 

 

 

 

 

 

 

Appendix A 

Program Offices and Regions Submitting Results 

In September 2009, 10 regions and 11 program offices submitted projects with one-time and 

multiple-year savings, cost avoidances, and other efficiencies. The projects varied widely in 

scope of work and the anticipated savings and cost avoidances, as shown below. 

Initial spreadsheet dated September 2009 

 72 initiatives totaling over $33 million for savings and cost avoidances 

 10 of 72 projects with individual estimated annual and one-time cost avoidances or 

savings of $500,000 and greater 

 16 of 72 projects with estimated cost avoidances or savings each in the range of $100,000 

to $500,000 

 28 of 72 projects with estimated annual/one-time cost avoidances or savings under 

$100,000 

 Remaining 18 projects reported cost avoidances, savings, or other efficiencies as “to-bedetermined” or “unknown” 

Revised spreadsheet dated January 2011 

 72 projects but estimated savings and cost avoidance changed to over $21 million
 

 15 of 72 not implemented (postponed to 2011, insufficient funding, etc.) 

 57 of 72 implemented: 

o 26 had cost avoidances or savings quantified at $21 million 

o 31 could not quantify amounts or the cost avoidances or savings were not realized 

Top 10 projects (by highest reported amount of savings and cost avoidance)5 

Original Revised Office 

1. SF Construction Contracts $19 million $13.4 million Region 7 

2. Phone Service Cost $5 million same Region 3 

3. Contract Air City Pair $2.5 million $0 OCSPP 

4. Building Re-Commissioning $1.5 million same OARM 

5. Regional Recycle Program $1 million $628,000 Region 4 

6. Web Management System $1 million same OW 

7. Electric Power Reductions $705,000 same Region 2 

8. Direct Power Supply $626,000 same Region 9 

9. SF Site Assessment/Enf. $600,0006 $610,000 Region 4 

10. Strategic Sourcing Initiative $600,000 $800,000 Region 2 

5

 Abbreviated terminology used for this table includes Superfund (SF), Enforcements (Enf.), Office of Chemical
 

Safety and Pollution Prevention (OCSPP), Office of Administration and Resources Management (OARM), and 

Office of Water (OW).

6

 This savings is estimated $200,000 annually for the 3-year period 2009–2011. 

13-P-0028 19 
 

Appendix B 

Agency Response to Draft Report 

and OIG Evaluation 

MEMORANDUM 

SUBJECT: Agency’s Response to OIG Draft Report, Improvements Needed in Estimating 

and Leveraging Cost Savings Across EPA, Project No. 2011-124 

FROM: Maryann Froehlich 

Deputy Chief Financial Officer 

TO: Melissa Heist 

Assistant Inspector General for Audit 

The Office of the Chief Financial Officer (OCFO), the Office of Administration and Resources 

Management (OARM), Region 4, and Region 7 appreciate the opportunity to review and 

comment on the June 13, 2012, Office of Inspector General (OIG) draft report titled, 

“Improvements Needed in Estimating and Leveraging Cost Savings Across EPA.” 

The Agency has been committed to seeking efficiencies and cost savings for many years. The 

EPA actively participates in the Campaign to Cut Waste, SAVE Awards, and other efforts. The 

EPA adheres to all applicable requirements of Executive Orders calling for reduced spending, 

reform and efficiencies. The EPA’s past and ongoing efforts to identify, monitor and track costsaving measures have resulted and will continue to result in savings and cost avoidances to 

create a more efficient and effective government. 

The draft report reviews a list of ideas identified by program offices and regions for potential 

savings and cost avoidances. It recommends that a formal structure be implemented for 

calculating savings estimates, and that the existing estimates be recalculated. In addition, the 

report recommends leveraging items from among the list of ideas that was reviewed. The 

recommendations do not reflect the purpose for the exercise – essentially a brainstorming – and 

do not recognize the degree to which these and similar ideas were incorporated into more formal 

savings efforts as appropriate. Baselines and solid estimates are needed and developed at that 

point, rather than at the ‘idea generation’ stage. Innovative and creative ideas are the goal of the 

initial effort and a burdensome set of estimation procedures will inhibit the flow of ideas. 

There are a number of areas where the Agency has put structured procedures in place to continue 

to find savings and cost avoidances and follow through on results. For example, beginning with 

the FY 2010 President’s Budget continuing through FY 2013, the Agency has demonstrated our 

commitment by selecting, monitoring and reporting on a total of six Presidential SAVE projects. 

The projects include: (1) IT Infrastructure Streamlining, (2) Space Consolidation for Rent 

Savings, (3) Bundling Maintenance Agreements for Capital Equipment, (4) Electronic Emissions 

Reporting, (5) Reduce Travel Costs through Video-conferencing, and (6) Administrative 

13-P-0028 20 
 

Proceedings Paper Reduction. Also, in August 2011, the Agency submitted three ideas to OMB 

for the Campaign to Cut Waste: (1) IT Service Contract Restructuring, (2) Space Consolidation 

and (3) Strategic-Sourcing for Agency-wide supplies. Frequently these efforts build off of one 

another and are developed and sustained by ideas from across the Agency. While the ideas are 

offered under an informal process, a formal structure is developed when it is needed and 

appropriate. 

Contract spending has been another focus. Under the President’s Memorandum on Government 

Contracting (March 4, 2009) and OMB’s Memorandum on Improving Government Acquisition 

(July 29, 2009), the Agency reviewed our existing contracts and acquisition practices and saved 

over $96 million by the end of FY 2011 relative to baseline. This was followed by the November 

7, 2011 OMB guidance to reduce contract spending for management support services by 15 

percent by the end of FY 2012 and an additional 5 percent reduction to this type of spending was 

included in the recent Campaign to Cut Waste guidance. 

Another example would be energy savings. The EPA has considered and continues to look at a 

variety of ways to reduce energy and resource consumption and as a result, has received 

employee-generated ideas from the Agency; many of which are along the same lines as some of 

the 72 suggestions OARM obtained. These efforts vary in size and complexity and include: 

formal policies on mandatory commissioning on all projects that include laboratory mechanical 

systems; energy assessments at high-energy-intensity and large laboratories; the Agency’s 

advanced metering strategy to enable the Agency to measure, verify, and optimize performance; 

and equipment upgrades and replacements. 

Given the fiscal reality faced by the EPA, the Agency will continue to identify savings and cost 

avoidances to preserve funding for critical priority work. Success in this requires the freedom to 

think of how we may do our work differently- focusing on what is possible and not on how to fit 

ideas into existing structures and guidelines. 

Specific responses from OCFO, OARM, Region 4, and Region 7 to the OIG recommendations 

can be found in Attachment A. We also identified a number of technical inaccuracies in the draft 

report and included them in Attachment B. 

If you have any questions regarding this response, please contact Barbara Freggens of my staff at 

(202) 564-4906. 

Attachments 

cc: Craig Hooks 

Barbara J. Bennett 

 Gwendolyn Keyes Fleming 

Karl Brooks 

Joshua Baylson 

13-P-0028 21 
 

Response to Recommendations for OIG Report: Improvements Needed in Estimating and 

Leveraging Cost Savings Across EPA 

Recommendation No. 1: “Develop an Agency-wide policy that defines what the Agency 

considers cost savings, efficiencies, and avoidances.” 

OCFO Response: OCFO does not agree with this recommendation. The Management 

Reform Agenda exercise that the IG reviewed was designed to identify potential costsaving ideas that could result in a more efficient and effective government. During the 

audit meetings, the IG was informed that we develop guidance and templates for projects 

when the Agency formally accepts the cost savings idea. The measures reviewed by the 

IG were in response to a call for ideas and thus, were offered as options for further 

exploration. The Agency maintains that introducing formality into the early stages of idea 

generation would severely hinder innovation and creativity. 

Recommendation No. 2: “Develop an Agency-wide procedure for estimating savings, 

efficiencies and cost avoidances to include requiring program offices and regions to consult with 

internal financial managers to obtain complete and up-to-date cost data.” 

OCFO Response: Please see the response for recommendation number one. 

OIG Evaluation for Recommendations 1 and 2: 

We do not agree with the Agency response. The actual verbiage of an OARM e-mail in 

August 2009 did not describe projects as ideas. The e-mail requested that each program 

office and region look at the wide array of environmental programs administered and 

identify three efficiency projects, to include dates and projected dollar savings or cost 

avoidance, that the program office and regions will undertake in support of the 

President’s Reform Agenda over the next year that can be shared with OMB and the 

White House. In addition, OMB Circular A-123 states that agencies and individual 

federal managers must take systematic and proactive measures to develop and implement 

appropriate cost-effective internal controls for results-oriented management. The desired 

result of the Management Reform Agenda exercise was to obtain examples of projects 

that would achieve savings and cost avoidance. OMB Circular A-123 also states that 

internal controls, which include policies and procedures, help organizations achieve 

results and should be an integral part of the entire cycle of planning, budgeting, 

management, accounting, and auditing. Regardless of whether the projects are developed 

at the early stage of the idea generation, a clear definition of each estimating method, and 

consistent estimating methods Agency-wide, would help ensure accurate, proactive 

measurement and reporting of the desired results of achieving cost savings, avoidances, 

and/or efficiencies by program offices and regions. 

Recommendation No. 3: “Develop a policy on estimating savings and cost avoidances relating 

to contracts based on similar prior contract data that will show the actions not taken or improved 

operations as opposed to using the IGCEs.” 

13-P-0028 22 
 

 

OARM Response: OARM does not agree with this recommendation. However, OARM 

does agree that there is a Government-wide need to establish and institutionalize 

standards and methodologies for determining cost savings and avoidances resulting from 

various contracting initiatives and approaches that fall under formal processes. To that 

end, OARM is currently participating on OMB’s Federal Strategic Sourcing initiative 

workgroup to establish such standards and methodologies. 

OIG Evaluation for Recommendation 3 

We do not agree with the Agency response. OMB already established guidance on what 

is needed. OMB memorandum M-09-25 additional guidance explained how the Agency 

should establish savings. The additional guidance emphasized that for each identified 

initiative, the Agency should establish savings by explaining the difference between what 

would have been spent in the absence of the savings initiative and what the Agency 

expects to spend because of pursuing the initiative. The memorandum also identified the 

methodology to identify savings by comparing the price on the prior/existing contract 

with the newly awarded contract after implementing the new initiative. Comparing 

contracts would show the different actions taken and their associated costs. EPA should 

have an Agency policy describing the OMB memorandum M-09-25’s prescribed method 

on estimating contract savings/cost avoidances to ensure consistency in measuring/ 

estimating savings by program offices and regions. 

Recommendation No. 4: Recalculate the cost avoidance based on current and complete 

enforcement cost data. 

Region 4 Response: Region 4 does not agree with this recommendation. The purpose of 

the request was to identify projects that had the potential to reduce or avoid cost leading 

to a more efficient and effective government. Furthermore, as this idea has not been fully 

examined, evaluated or accepted by the Agency, the effort to recalculate the cost 

avoidance is not warranted. 

Recommendation No. 5: Report the cost avoidance to OCFO and OARM. 

Region 4 Response: Please see the response for recommendation number four. 

OIG Evaluation for Recommendations 4 and 5: 

We do not agree with the Region 4 response. The Regional Director of Superfund 

Division within Region 4 already took action by issuing a memorandum that documented 

the new strategy implemented for this initiative, so the project is no longer an idea. OMB 

Circular A-123 states that agencies and individual federal managers must take systematic 

and proactive measures to develop and implement appropriate cost-effective internal 

controls, identify needed improvements, and take corresponding corrective action. The 

effective internal controls include reporting reliable information that is accurate, 

complete, and timely. Region 4 managers still have a responsibility to take corrective 

corresponding actions to report reliable information based on the already implemented 

strategy. 

13-P-0028 23 
 

Recommendation No. 6: For Region 7’s audited initiative, identify the improved activities or 

activities not taken in the awarded contract(s) associated with the original calculation to 

determine whether cost avoidance exists. 

Region 7 Response: Region 7 does not agree with this recommendation. The purpose of 

the request was to identify projects that had the potential to reduce or avoid cost leading 

to a more efficient and effective government. In addition, Region 7 does not believe that 

OIG’s accepted definition of cost avoidance applies to the submitted activities. The OIG 

definition only considers “activities not taken.” Cost savings, however, may arise as a 

result of contracting activities. Savings submitted were calculated based on the difference 

of the contract award price and the Independent Government Cost Estimate (IGCE). Prior 

contract costs were factored into the formulation of the IGCEs. Past contracting costs 

along with experience in site cleanups ensures that IGCEs are well developed and 

accurate. 

OIG Evaluation for Recommendation 6: 

We do not agree with the Agency response. The OIG does not disagree with the fact that 

the IGCE may have included historical costs. However, the IGCE had to have included 

other costs based on the new requirements. For example, the one prior contract cost 

(provided by Region 7) totaled approximately $8 million and the related IGCE final cost 

totaled $16 million—the amount increased by 50 percent. The newly awarded contract 

valued at $11 million is closer to the prior contract cost than the IGCE. Based on the 

concepts described in FAR 13.106-3, 14.404-1, and 36.214, comparing the IGCE to 

proposals and prior contracts indicates how good the cost amount on the IGCE is. 

According to OMB memorandum M-09-25 additional guidance, there are two important 

parts to developing the savings and cost avoidances: (1) cost reductions and (2) a 

description of the actions taken. The OMB additional guidance provided the following 

example: “Bureau ABC spent $100,000 for express overnight delivery service in FY 09 

and was planning to spend $105,000 to meet its FY 10 needs. Instead of exercising an 

option under the existing agency contract in FY 10 for $105,000, the agency now plans 

to use a strategic sourcing vehicle and will pay $90,000 for the same services. Savings = 

$15,000.” Note: the example used an existing prior contract. Even though comparing the 

IGCE to the newly awarded contract showed that a cost reduction occurred, it does not 

describe any actions taken for efficient and effective government. Actions taken are 

important to provide the acquisition community processes used to develop savings to be 

further applied agency-wide. A clear justification on why the awarded contract price is 

significantly lower than the IGCE would further explain whether the estimate may have 

been inaccurate. 

Recommendation No. 7: Recalculate the cost avoidance estimate based on the difference 

between the awarded contract and similar prior contract prices. 

Region 7 Response: Region 7 does not agree with this recommendation. The purpose of 

the request was to identify projects that had the potential to reduce or avoid cost leading 

to a more efficient and effective government. Furthermore, based upon OIG’s definition 

13-P-0028 24 
 

of a cost avoidance or cost savings, the awarded contracts did not meet this definition. 

Therefore, there is no basis to recalculate the cost avoidance. 

OCFO Note: It should be noted that the idea of site–specific contracts for construction at 

Superfund sites was vetted under an Agency initiated workgroup, at the direction of the 

Administrator. Programmatically, there are a number of considerations that impact the 

selection of the best contract approach. As a result, the Agency allows flexibility for local 

offices and this idea is included as an option, but not mandated. 

OIG Evaluation for Recommendation 7: 

OIG does not agree with the Agency response. Region 7’s response shows differences 

about what methodology should be used to determine savings and cost avoidance. 

Improvements are needed with the methodology identified by Region 7 because the 

methodology is not backed by any guidance and the estimate itself may be inaccurate. 

There were no OIG definitions quoted in the report. We used OMB additional guidance 

that identified a methodology needed to determine savings. 

In response to the “OCFO Note,” the issue is not with using a site-specific contracting 

approach, it is about the methodology of comparing the IGCE to the newly awarded 

contract. We have not been given the explanation or support as to why site-specific 

contracting is the best contract approach. 

Recommendation No. 8: Recalculate the cost avoidance to OCFO and OARM. 

Region 7 Response: Please see responses to recommendations numbers six and seven. 

OIG Evaluation for Recommendation 8: 

OMB Circular A-123 states that agencies and individual federal managers must take 

systematic and proactive measures to develop and implement appropriate, cost-effective 

internal controls, identify needed improvements, and take corresponding corrective 

action. 

Recommendation No. 9: “Select significant projects from the 72 projects in light of the recent 

OMB memorandum “Campaign to Cut Waste” to determine if these efforts have resulted in 

significant savings and cost avoidances, and report significant efficiencies through the 

Presidential SAVE imitative. 

OCFO Response: OCFO does not agree with this recommendation. The Presidential 

SAVE initiative evaluates ideas collected directly from Federal employees. It is not an 

appropriate reporting mechanism. The Agency is actively involved in pursuing efforts 

that contribute to the Campaign to Cut Waste and the Presidential SAVE Initiative. The 

reporting of these efforts is conducted as specified by OMB. However, it should be noted 

that under the Management Reform Agenda, the EPA developed ideas similar to the areas 

in the list that are part of other cost avoidance programs such as: 

13-P-0028 25 
 

 

 

1.	 Design and implementation of an Agency-wide solution for voice communications 

using an integrated hybrid solution of Voice-over Internet Protocol (VoIP) and local 

PBX technologies. 

2.	 Using off-the-shelf software to enhance the design of the Great Lakes Initiative (GLI) 

Clearinghouse. Region 5 is re-configuring the GLI Clearinghouse into a more 

affordable solution. 

Some other examples, from the list of 72 ideas, that contribute to managing reduced 

travel resources include less frequent meetings, use of webinars and changing the format 

and attendance at state oversight meetings. Many ideas also contribute to reductions in 

printing and supplies costs, such as reducing paper copies, maximizing use of electronic 

media and improving sourcing for supplies. Energy efficiencies also are featured, such as 

upgrading lab equipment and installation and modifying and upgrading building 

infrastructure. 

OIG Evaluation for Recommendation 9: 

We agree with the OCFO response to not report significant efficiencies through the 

Presidential SAVE initiative. The EPA’s 72 initiatives included past, current, and future 

projects identified by regions and program offices for potential efficiencies. OCFO 

identified ideas above similar to the 72 initiatives that were developed as part of the 

Agency-wide cost avoidance programs and attributed savings and efficiencies. At the 

time the 72 initiatives were developed, a few initiatives had been implemented by some 

regions and program offices which then did not have actual cost data associated with their 

projects and others did not fully go as planned. Thus, the regions and program offices 

implementing projects with significant funding and expenditures should evaluate them to 

determine whether their own projects actually saved significant money, achieved 

efficiency as anticipated, and can be expanded Agency-wide to optimize 

savings/efficiencies. Even though the SAVE program may not be used, the concept 

addressed in the “Campaign to Cut Waste” memo is that agencies should publicly 

examine and apply logical fixes so that others can learn from and leverage cost savings 

for Agency-wide implementation. We revised recommendation 9 to include the modified 

OIG position. 

13-P-0028 26 
 

Technical Inaccuracies from the OIG Report: Improvements Needed in Estimating and 

Leveraging Cost Savings Across EPA 

Page 2 

“Region 7’s FY 2011 Superfund budget totaled $116 million1

”: This budget total could 

not be verified by the local office or by OCFO. 

OIG note: We obtained these figures from Compass as of February 2011 (see Footnote 1 

for details). They may have changed given that Compass is constantly changing. 

Page 3 

“Region 4’s FY 2011 Superfund budget totaled $97 million2

”: This budget total could not 

be verified by the local office or by OCFO. 

OIG note: We obtained these figures from Compass as of February 2011 (see Footnote 1 

for details). 

Page 6 

“Chapter 2, Enhanced Methods Needed to Determine Savings and Cost Avoidances”: 

The draft report suggests that EPA will not be able to accurately report the results of its 

efficiency initiatives and influence internal and external management decisions. In 

managing our resources, the Agency has identified and implemented a number of savings 

and cost avoidance projects over many years. 

For example, as a result of the President’s Memorandum on Government Contracting 

issued on March 4, 2009, and OMB’s Memorandum on Improving Government 

Acquisition issued on July 29, 2009, the Agency reviewed our existing contracts and 

acquisition practices, submitted a plan to OMB on November 9, 2009, and were able to: 

(a) save 7 percent of baseline contract spending, over $96 million, by the end of FY 2011, 

(b) reduce by 10 percent the share of dollars obligated in FY 2010 under new contract 

actions that are awarded with high-risk contracting authorities. 

OIG note: We cannot comment on the validity and accuracy of the already reported 

savings. However, based on the two savings projects we audited, we believe 

improvements are needed in the methodologies and approach used to ensure that savings 

and cost avoidances are accurate and reflect prescribed guidance. 

Page 7 

“Unreliable Method Used for Calculating Region 4 Savings”: The draft report indicates 

that Region 4 based its potential cost avoidance estimates for site assessment and 

enforcement on outdated, incomplete and unsupported information. In identifying a 

potential savings idea, Region 4 used the most readily available information to respond to 

OARM’s request. PRP Search Benchmarking and Regional Practices Evaluation 

(referenced in the report), is a valid source for producing cost estimates. 

13-P-0028 27 
 

OIG note: Region 4 could have obtained and used more current cost data from its 

financial staff, systems, and documents than the FYs 1999–2005 data it used to provide 

better estimates of costs savings. Timing is important to facilitate the reliability of all 

financial-reported data. Region 4 used FYs 1999–2005 data from the above 

benchmarking study for estimating savings for the period of 2009–2011. 

Page 8, 

“Unreliable Method Used for Calculating Region 7 Savings on Site Specific Contracts”: 

The draft report indicates that the method Region 7 used to determine its potential 

savings and cost avoidances on construction contracts at specific Superfund sites was not 

reliable. The Independent Government Cost Estimate (IGCE) is the Government's 

reasonable estimate of the resources and the projected costs that a contractor would incur 

in the performance of a contract. As Region 7 was identifying a potential savings idea, 

Region 7 used the most readily available information to respond to OARM’s request. 

Accordingly, the IGCE is considered a valid and reliable estimate to identify cost savings 

and cost avoidances. 

OIG note: An IGCE is an estimate to determine the price reasonableness of a contract 

proposal. 

Pages 9-10 

“Reported Savings Methodology Used Could be Misleading”: The draft report suggests 

use of the IGCE is contrary to FASAB and OMB guidance. The IGCE methodology is an 

accepted government practice which is widely used to determine price reasonableness. In 

fact, OMB highlighted the Agency’s reported savings in a congressional testimony of 

July 15, 2010, as mentioned in the draft report. 

OIG note: An IGCE methodology is an accepted government practice to determine price 

reasonableness of a contract proposal. 

Page 10 

“Develop a policy on estimating savings and cost avoidances relating to contracts based 

on similar prior contract data that will show the actions not taken or improved 

operations as opposed to using the IGCEs.” The draft report suggests, through 

recommendation number three, that using the IGCE as an estimation tool for assessing 

contracts is not valid. Using direct historical price comparisons between like goods and 

services is optimal for developing meaningful and supportable savings/avoidance 

determinations. However, given that IGCEs are based on prior historical cost/price 

information, IGCEs are a viable baseline for determining cost savings and avoidances 

particularly when the agency is acquiring similar, but not the same goods or services. The 

FAR cites that comparison between the Government estimate (IGCE) and offered price as 

a methodology for determining price reasonableness in Parts 13.106-3, 14.408-2, 15.404-

1(b), and 36.214. In these cites, the FAR recognizes that pricing is not an absolute 

undertaking and involves a significant amount of judgment. 

OIG Note: See OIG evaluation comments for recommendations 6, 7, and 8. 

13-P-0028 28 
 

Page 11 

Recommendation No. 6, “For Region 7’s audited initiative, identify the improved 

activities or activities not taken in the awarded contract(s) associated with the original 

calculation to determine whether cost avoidance exists.” Region 7 does not believe that 

OIG’s accepted definition of cost avoidance applies to the submitted activities. Your 

definition only considers “activities not taken.” Cost savings, however, may arise as a 

result of contracting activities. Savings submitted were calculated based on the difference 

of the contract award price and the IGCE. Prior contract costs were factored into the 

formulation of the IGCEs. Past contracting costs along with experience in site cleanups 

ensures that IGCEs are well developed and accurate. 

OIG Note: See OIG evaluation comments for recommendations 6, 7, and 8. 

Page 15 

Recommendation No. 9, “Select significant projects from the 72 projects in light of the 

recent OMB memorandum “Campaign to Cut Waste” to determine if these efforts have 

resulted in significant savings and cost avoidances, and report significant efficiencies 

through the Presidential SAVE initiative.” The Presidential Secure Americans’ Value and 

Efficiency (SAVE) Award initiative seeks ideas from federal employees to make 

government more effective and efficient and ensure taxpayer dollars are spent wisely. 

The ideas are then reviewed, ranked and recommended by the respective agencies for 

further consideration by OMB. The selected ideas are incorporated in the President’s 

Budget. The SAVE process is not designed for this type of reporting. 

OIG Note: See OIG evaluation comments for recommendation 9. 

13-P-0028 29 
 

 

Appendix C 

Distribution 

Office of the Administrator 

Assistant Administrator for Administration and Resources Management 

Chief Financial Officer 

Regional Administrator, Region 4 

Regional Administrator, Region 7 

Agency Follow-Up Coordinator 

General Counsel 

Director, Office of Budget, Office of the Chief Financial Officer 

Director, Office of Acquisition Management, Office of Administration and 

Resources Management 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for External Affairs and Environmental Education 

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

Audit Follow-Up Coordinator, Office of the Chief Financial Officer 

Audit Follow-Up Coordinator, Region 4 

Audit Follow-Up Coordinator, Region 7 

13-P-0028 30