United States General Accounting Office

GAO Report to Congressional Requesters

April 1999 SUPERFUND

Progress Made by EPA

and Other Federal

Agencies to Resolve

Program Management

Issues

GAO/RCED-99-111

GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-282170 

April 29, 1999

Congressional Requesters

This report addresses whether EPA and other selected federal agencies are setting risk-based

cleanup priorities under the Superfund law and whether EPA is recovering cleanup costs and

managing its cleanup contractors as efficiently as possible. We are making recommendations to

the Administrator of EPA designed to improve the agency’s information on and management of

cleanups of high-risk sites, maximize EPA’s recovery of cleanup costs, and help prevent EPA from

incurring unnecessary costs for contractors’ work.

We are also making recommendations to the Secretary of Defense and the Secretary of

Agriculture, to coordinate their efforts to address hazardous wastes generated by the

Department of Defense’s activities on National Forest System lands, and to the Secretary of the

Interior, to direct the Bureau of Land Management to develop a comprehensive strategy to

identify and clean up hazardous waste sites. We are sending copies of this report to the

Honorable Carol Browner, Administrator, EPA; the Honorable Dan Glickman, Secretary of

Agriculture; the Honorable Mike Dombeck, Chief, Forest Service; the Honorable William Cohen,

Secretary of Defense; the Honorable Bill Richardson, Secretary of Energy; the Honorable Bruce

Babbitt, Secretary of the Interior; the Honorable Tom Fry, Director, Bureau of Land

Management; and the Honorable Jacob Lew, Director, Office of Management and Budget.

Copies will also be made available to others on request.

If you or your staff have any questions please call me on (202) 512-4907. Major contributors to

this report are listed in appendix II.

Peter F. Guerrero

Director, Environmental

 Protection Issues
B-282170 

List of Congressional Requesters

The Honorable John H. Chafee

Chairman, Committee on Environment

 and Public Works

United States Senate

The Honorable Tom Bliley

Chairman

The Honorable John D. Dingell

Ranking Minority Member

Committee on Commerce

House of Representatives

The Honorable Michael G. Oxley

Chairman, Subcommittee on Finance

 and Hazardous Materials

Committee on Commerce

House of Representatives

The Honorable Bud Shuster

Chairman

The Honorable James L. Oberstar

Ranking Minority Member

Committee on Transportation

 and Infrastructure

House of Representatives

The Honorable Sherwood L. Boehlert

Chairman

The Honorable Robert A. Borski

Ranking Minority Member

Subcommittee on Water

 Resources and Environment

Committee on Transportation and

 Infrastructure

House of Representatives

Page 2 GAO/RCED-99-111 Superfund Program Management Issues
B-282170 

Page 3 GAO/RCED-99-111 Superfund Program Management Issues
Executive Summary

Purpose The magnitude of the nation’s hazardous waste problem calls for making

effective use of limited available funds. Current estimates indicate that

cleanups are expected to cost the federal government about $300 billion

and the private sector hundreds of billions more. Since the early 1990s,

GAO has identified several long-standing management problems with the

Environmental Protection Agency’s (EPA) Superfund program, created

under the Comprehensive Environmental Response, Compensation, and

Liability Act of 1980. These problems have hindered the agency’s ability to

effectively manage cleanups of the nation’s most hazardous sites.1

 This

report assesses (1) the efforts that EPA and the other federal agencies with

major cleanup responsibilities have made to set priorities for spending

limited cleanup funds at the sites posing the highest risks, (2) EPA’s actions

to recover its expenditures for cleanups from the parties that are legally

liable for the contamination, and (3) EPA’s efforts to better control

contractors’ cleanup costs.

Results in Brief For several years, GAO has included the Superfund program on its list of

federal programs that pose significant financial risk to the government and

potential for waste and abuse. Agencies have corrected some of these

problems, but those that remain are important enough to prevent GAO from

removing Superfund from the high-risk list. For example, four of the five

agencies GAO reviewed—EPA, Agriculture, Defense, and Energy—are

setting cleanup priorities on the basis of the relative risk that sites pose to

human health and the environment.2 EPA, Agriculture, and Defense set

nationwide priorities for most of their sites. However, EPA may not know

about all high-risk sites because states are taking on more cleanups and

deciding, often on the basis of factors other than risk, which sites, if any,

to refer to EPA for possible listing. Each Energy facility, such as a national

laboratory, considers risk and other factors when setting priorities among

its competing environmental management projects. However, cleanups at

one facility do not currently compete with those at another facility on a

nationwide basis. Energy maintains that because each facility is unique,

locally set priorities are more appropriate. Finally, Interior’s Bureau of

Land Management has not set nationwide cleanup priorities because it has

not yet developed an overall cleanup strategy or an inventory of its

hazardous waste sites, estimated to cost billions of dollars to address.

1

High-Risk Series: Superfund Program Management (GAO/HR-93-10, Dec. 1992; GAO/HR-95-12, Feb.

1995; GAO/HR-97-14, Feb. 1997; and GAO/OCG-99-17, Jan. 1999).

2

All federal agencies have agreed in principle to address their highest-risk sites first. Although each

agency employs its own methods to assess risks, each considers risks to human health and the

environment along with other issues, such as community concerns and cost-effectiveness, when

prioritizing cleanups.

Page 4 GAO/RCED-99-111 Superfund Program Management Issues
Executive Summary

Although EPA has succeeded in getting responsible parties to conduct 70

percent of long-term Superfund cleanups, it has been less successful in

recovering its costs from responsible parties when it conducts a cleanup.

EPA has lost the opportunity to collect almost $2 billion it spent on cleaning

up sites since the program began because it excluded large portions of its

indirect costs—the agency’s costs to administer the program—when it

calculated what costs to assess parties. While EPA has developed a new

method of calculating these costs that could increase their recovery, the

agency has not yet implemented it. Until it does so, it will continue to lose

funds that it could use for cleanups at additional sites. EPA also has not

established measures that compare the amount of costs recovered with

the amount that was potentially recoverable to better evaluate its overall

performance.

In response to GAO’s past concerns, EPA has eliminated almost all of its

backlog of 500 required Superfund contract audits, a key tool for helping

to deter contractors from fraud, waste, and abuse, and is trying to

complete new audits on time. However, some of EPA’s actions have been

slow and have not gone far enough to address GAO’s concerns that the

agency was not using its own estimates of what contract work should cost

to negotiate the best contract price for the government or to control

contractors’ program support costs, such as the costs for rent and

managers’ salaries. While EPA is now more frequently using its own

estimates of what cleanup actions should cost to negotiate contract prices,

some regional staff lack cost-estimating experience and training, as well as

historical site-specific data on actual cleanup costs, to help them develop

more accurate estimates and better negotiate contract prices. EPA took a

number of actions to reduce the amount of money it was paying to

contractors for program support costs instead of actual cleanup work.

However, its actions have not gone far enough, as indicated by the fact

that the program support costs for 10 of 15 new contracts exceed EPA’s

target of 11 percent of total cleanup costs. The program support cost for

the 10 contracts ranged from 16 to 76 percent, with a median of 28 percent.

As a result, less money is going toward the actual cleanup of high-risk

sites, and excessive amounts are still being spent on administrative

support costs.

This report contains recommendations to improve agencies’ consideration

of risk in setting funding priorities and EPA’s ability to recover and control

costs.

Page 5 GAO/RCED-99-111 Superfund Program Management Issues
Executive Summary

Principal Findings

Most Agencies Are Using

Risk as a Factor to Set

Cleanup Funding Priorities

EPA, Agriculture, Defense, and Energy have made progress over the years

and are setting priorities for their limited cleanup funds on the basis of

sites’ risks, among other factors, while Interior has not developed an

inventory of sites in order to set priorities among them.3 EPA funds

cleanups at those sites already on its National Priorities List according to

the risks that they pose, but it is not necessarily placing the riskiest sites

on its list. According to cleanup managers in 4 of EPA’s 10 regions, the

states are now deciding to address more of the sites that are risky enough

to be eligible for the federal Superfund program under their own state

programs. Furthermore, since 1995, EPA has been seeking concurrence

from a state’s governor to include a site on its list and has obtained such

concurrence for 123 sites but not for another 31 sites. As a result of this

trend toward more state cleanups, EPA expects that states will refer sites to

it for cleanup on the basis of difficulty and expense, rather than risk. For

example, EPA anticipates the referral of sites requiring many years of

groundwater cleanup and sites with no financially viable parties available

to pay for cleanup. The main problem EPA regions have with this trend is

that once a state begins managing a site’s cleanup, EPA has little or no

information on its status. A small subset of these sites are of great concern

to EPA because, for example, the contaminants are particularly hazardous,

responsible parties are recalcitrant, or local communities have come to

EPA with complaints and questions about cleanup. Most of the EPA regions

in this review would like the states to provide more information on the

status of these sites so that they can better plan their own workload in the

event that a state later seeks EPA’s involvement and so that they can be

more responsive to citizens’ inquiries.

Since February 1997, Agriculture—more specifically its agency with the

largest potential cleanup workload to date, the Forest Service—has taken

a number of actions to complete its inventory of sites, set priorities among

them nationwide, and obtain additional cleanup funding for them. Defense

has also further implemented its process to set risk-based priorities. The

Department has five primary components in its environmental cleanup

program—one for each of the three military services; one for all

Defense-wide agencies, such as the Defense Logistics Agency; and one for

formerly used Defense sites. Each component follows a process that the

Department established in order to request and allocate cleanup funds

3

The departments of Agriculture, Defense, Energy, and the Interior are responsible for the largest

number of federal facilities cleanups.

Page 6 GAO/RCED-99-111 Superfund Program Management Issues
Executive Summary

according to risk-based priorities for its nationwide backlog of sites. While

Defense formerly tried to set priorities across its components, it no longer

does so, in part because each component receives its own, separate

cleanup appropriation. Instead, Defense established department-wide

cleanup goals on the basis of risk and monitors to make sure the

components fund and achieve these goals. According to the Department’s

environmental budget examiner, the components have been receiving

sufficient funds each year to meet their goals for addressing high-risk sites.

At Energy, each field operations office or facility, such as a large

laboratory, uses its own methodology to set risk-based priorities for the

cleanup projects that it manages. In March 1995, we reported concerns

because the Department was not allocating funds across its field

operations offices on the basis of risk. To date, the Department has not

taken action in response to our recommendation that it set nationwide

priorities, stating that this would interfere with priorities already set with

local communities and other stakeholders at each of its facilities on the

basis of each facility’s unique contamination, activities, and cleanup

requirements. Furthermore, the agency stated that while it does provide

the same amount of environmental management funds to each facility

from year to year, the proportion of funds allocated to any one of its

facilities was based on the amount and type of work and the risks at that

site. Interior’s Bureau of Land Management has yet to complete an

inventory of its contaminated sites—a problem we first identified in 1987.4

The Bureau must complete this step in order to set priorities, estimate

necessary resources, and develop a cleanup strategy that considers using

Superfund authority as a tool to get private parties to help pay for some

cleanups. Until then, some Interior sites could continue to pose health and

environmental risks and increased cleanup costs for the government if

contamination spreads and responsible parties are no longer able to pay.

EPA Could Recover More

Costs and Adopt Better

Performance Measures

For the past several years, EPA has consistently succeeded in getting

responsible parties to conduct about 70 percent of long-term cleanups, one

of its main goals for the program. If EPA cleans up a Superfund site, its next

goal is to seek the recovery from responsible parties, where appropriate,

of 100 percent of the federal funds expended at the site. However, EPA has

lost the opportunity to recover about $2 billion from responsible parties

because the methodology it used to calculate the amount of indirect

costs—the administrative costs of operating the program—that it would

4

Superfund: Civilian Federal Agencies Slow to Clean Up Hazardous Waste (GAO/RCED-87-153, July 24,

1987).

Page 7 GAO/RCED-99-111 Superfund Program Management Issues
Executive Summary

charge these parties when settling cost recovery cases excluded a large

portion of these costs. Following federal accounting standards, EPA has

developed a new methodology that more accurately accounts for these

costs. Cost recovery program managers estimate that using the new

methodology could increase recoveries in cases yet to be settled by about

$629 million. The cost recovery program has not yet implemented the new

methodology because it is waiting for approval from EPA; the Department

of Justice, which litigates cost recovery cases; and an independent

accounting firm hired to review the methodology. Until EPA uses the new

methodology, it will continue to lose the opportunity to recover these

funds.

According to EPA’s cost recovery data as of the end of fiscal year 1998, the

most recent data at the time of GAO’s review, the agency had agreements to

recover a total of about $2.4 billion since the beginning of the program.

The agency spent a total of $15.9 billion in the Superfund program during

this same period, but not all of this amount is recoverable. At some sites,

for instance, there were no financially viable parties. Because EPA does not

have a cost recovery performance measure that compares annually the

amount of costs it recovers with the amount of costs it had the potential to

recover, the agency cannot determine how well it is performing its cost

recovery activities. The agency is concerned that developing such a

recovery rate might be misinterpreted by settling parties as a willingness

to settle for less than 100 percent of the recoverable costs in all cases and

could therefore jeopardize its negotiations. In addition, EPA notes that it

cannot control some factors that influence the amount of funds it can

recover, such as the percentage of cleanups with financially viable

responsible parties.

EPA Has Reduced Its Audit

Backlog and Improved

Some of Its Cost Estimates

but Still Does Not

Effectively Control

Contractors’ Cleanup

Costs

EPA relies heavily on private contractors to perform or manage its cleanup

activities. To deter and detect fraud, waste, and abuse by contractors, GAO

recommended in February 1997 that EPA reduce its backlog of more than

500 required Superfund contract audits—the primary tool the agency uses

to evaluate the adequacy of contractors’ policies, procedures, controls,

and performance. Depending on the size of the contractor and the amount

of EPA work that the contractor is to accomplish, either EPA’s Office of

Inspector General or the Defense Contract Audit Agency is to conduct an

audit within at least 2 years of EPA’s request. Since February 1997, both

agencies have eliminated almost all the backlog and are performing new

audits on time. Although GAO did not review the quality of these audits,

Page 8 GAO/RCED-99-111 Superfund Program Management Issues
Executive Summary

conducting them in a more timely manner helps ensure that important

records are maintained.

As GAO reported in February 1995 and 1997, EPA was not developing its

own estimates of what cleanup work should cost and was not using such

estimates to negotiate the best contract price for the government. In this

review, GAO tested a sample of 35 work assignments that EPA had issued to

contractors and found that the agency had generated its own estimates for

all 35 assignments. GAO also determined that about half of those estimates

closely matched the final price set for the work. However, EPA

overestimated costs for 6 of the remaining assignments by as much as

36 percent and underestimated costs for 11 of them by as much as

101 percent. Such variances, according to EPA’s own Financial Managers’

Financial Integrity Act report, can indicate problems with the quality of

the agency’s estimates. The EPA staff that prepared these cost estimates

said their lack of experience and access to detailed historical site-specific

cost data hinder their ability to develop accurate estimates. EPA has

established a workgroup to assess its cost-estimating procedures and to

design solutions to identified problems, including training options. The

agency has undertaken similar corrective measures in the past but has had

problems fully implementing and sustaining them over the long term.

While EPA is also collecting cost data as part of a new Superfund contract

management information system, several EPA cost estimators are

concerned that the system will collect aggregate cost data, not the

site-specific data they need to improve their estimates. Furthermore,

because cost data from prior work will not be entered into the system,

estimators will have to wait years for the historical data they need.

Finally, as GAO reported in the past, EPA was paying too high a percentage

of funds to contractors for program support costs, such as rent and

management salaries, leaving too small a percentage for cleanup work.

One major reason for the high percentage was that EPA retained all of its 45

Superfund contractors and continued to pay their program support costs,

even though it did not have enough cleanup work to give to all of the

contractors. In response, EPA reduced by half the number of contractors it

plans to retain as it authorizes its new round of Superfund contracts.

However, at the time of our review, 10 of 15 new contracts exceeded EPA’s

target of 11 percent for program support costs, ranging from 16 to

76 percent, with a median of 28 percent. The costs remain high, in part,

because EPA continues to retain more contractors than it needs and

continues to pay their overhead costs. Given that EPA expects its future

Superfund workload to decrease as states take on more cleanups, the

Page 9 GAO/RCED-99-111 Superfund Program Management Issues
Executive Summary

percentage of program support costs will continue to rise unless the

agency now takes the opportunity to make adjustments when deciding

whether to exercise the contract options to renew those contracts whose

base periods are expiring soon.

The recurring problems that GAO identified raise broader questions about

EPA’s contracting practices and the need for sustained management

attention to reforms. EPA currently has a “Contracts 2000” initiative to

consider, among other things, various contract management options that it

could use to address additional issues, such as the need to have contracts

and contract management staff in place in each of its 10 regional offices.

However, the agency could not provide GAO with documentation

describing the team’s (1) overall strategy for determining what options it

would recommend that the agency adopt and (2) time frames for

implementing them.

Recommendations GAO makes a number of recommendations in this report to improve

(1) agencies’ processes for ensuring that limited cleanup dollars go to the

sites posing the highest risks, (2) EPA’s ability to recover its cleanup costs

from the parties responsible for the contamination at sites, and (3) EPA’s

control of contractors’ costs.

Agency Comments GAO provided a draft of this report for review and comment to EPA and the

departments of Agriculture, including the Forest Service; Defense,

including the U. S. Army Corps of Engineers; Energy; and the Interior,

including the Bureau of Land Management. GAO met with or obtained

information from officials in each of these organizations responsible for

making cleanup funding decisions, implementing various portions of each

agency’s cleanup programs, and contracting for cleanup work. The

agencies provided updated information on and technical corrections and

clarifications to the draft report, which were incorporated as appropriate.

EPA, Agriculture, Defense, and Interior generally agreed with GAO’s findings

and recommendations. Energy agreed with GAO’s presentation of its

process for setting risk-based priorities for funding cleanups at individual

facilities, but continues to disagree with GAO’s long-standing

recommendation that it develop a nationwide risk-based system to set

cleanup priorities in order to achieve more cost-effective cleanup

progress. Energy maintains that locally set priorities are more appropriate,

given the unique characteristics of each of its facilities, and that all of its

facilities pose high enough risks to merit steady funding. GAO maintains

Page 10 GAO/RCED-99-111 Superfund Program Management Issues
Executive Summary

that developing nationwide cleanup priorities would help the Department

make informed budget decisions and analyze trade-offs among its

facilities. Additional discussions of the agencies’ comments and GAO’s

responses are provided in chapters 2, 3, and 4.

Page 11 GAO/RCED-99-111 Superfund Program Management Issues
Contents

Executive Summary 4

Chapter 1 

Introduction

14

Background on the Superfund Program 14

Prior GAO Work 19

Objectives, Scope, and Methodology 19

Chapter 2 

Most Agencies Are

Considering Risk in

Setting Cleanup

Priorities

22

EPA Funds Its Cleanup Actions According to Risk but Is Not

Adding New Sites to the National Priorities List Solely on the

Basis of Risk

22

The Departments of Agriculture, Defense, and Energy Have Set

Risk-Based Cleanup Priorities, but Interior Has Not Yet Identified

All Sites Needing Cleanup

28

Conclusions 40

Recommendations 42

Agency Comments 43

Chapter 3 

EPA Is Not Seeking to

Fully Recover Its

Indirect Costs or

Appropriately

Evaluating Its Cost

Recovery Efforts

45

EPA Continues to Lose Revenue by Excluding Some Indirect

Costs From Recovery

45

EPA’s Goals and Measures Do Not Fully Reflect Progress in

Recovering Costs

47

Improved Information and Financial Systems Will Enable EPA to

Retrieve Data More Efficiently and Accurately to Support

Recoveries

50

Conclusions 51

Recommendation 52

Agency Comments 52

Page 12 GAO/RCED-99-111 Superfund Program Management Issues
Contents

Chapter 4 

EPA Has Improved Its

Management of

Superfund Contracts

but Still Does Not

Effectively Control

Some Cleanup

Contractors’ Costs

53

Contract Audit Backlog Has Been Reduced 53

EPA Cannot Ensure the Best Possible Price for Contracted Work 54

EPA Is Still Experiencing Some Contract Management

Deficiencies

59

Conclusions 64

Recommendations 65

Agency Comments 66

Appendixes Appendix I: Objectives, Scope, and Methodology 68

Appendix II: Major Contributors to This Report 76

Tables Table 1.1: Number of Federal Facilities on the Docket and on the

National Priorities List as of September 1998

15

 Table 2.1: Summary of Steps Four Federal Agencies Have Taken

to Set Risk-Based Priorities

29

Figures Figure 1.1: Steps Toward Including a Site on EPA’s National

Priorities List

16

Figure 1.2: Cleanup Steps for Sites on the National Priorities List 18

Figure 2.1: Status of All Sites in EPA’s CERCLIS Database 27

Figure 3.1: Status of EPA’s Efforts to Recover $11 Billion in

Superfund Program Costs Through Fiscal Year 1998

46

Figure 4.1: EPA’s Estimate Compared With the Final Contract

Price for 35 Work Assignments

55

Abbreviations

BLM Bureau of Land Management

CERCLA Comprehensive Environmental Response, Compensation,

and Liability Act

CERCLIS Comprehensive Environmental Response, Compensation,

and Liability Information System

DCAA Defense Contract Audit Agency

EPA Environmental Protection Agency

NPL National Priorities List

OAM Office of Acquisition Management

OMB Office of Management and Budget

OSWER Office of Solid Waste and Emergency Response

Page 13 GAO/RCED-99-111 Superfund Program Management Issues
Chapter 1 

Introduction

The Environmental Protection Agency (EPA) administers the federal

program for ensuring the cleanup of abandoned hazardous waste sites that

pose significant risks to public health and the environment. EPA may

compel parties responsible for the contamination to conduct or pay for

these cleanups. EPA manages cleanups for a portion of these hazardous

sites through the Superfund program. Other federal agencies clean up sites

on their lands and can also compel parties responsible for the

contamination to conduct or pay for these cleanups. States generally

manage cleanups at sites that are not addressed in the Superfund program.

Estimates predict that the nation’s total investment in cleanups will

exceed hundreds of billions of dollars. This report assesses federal

agencies’ progress in solving several problems that hinder their ability to

protect this investment.

Background on the

Superfund Program

The Comprehensive Environmental Response, Compensation, and

Liability Act (CERCLA) of 1980, as amended, governs cleanups of both

federal and nonfederal hazardous waste sites. The program was originally

authorized for 5 years and has been reauthorized twice, in 1986 and 1990.

EPA evaluates contaminated sites and places those that qualify for

long-term cleanup on its National Priorities List. EPA may either order

parties responsible for the contamination to perform cleanups or clean up

sites itself and seek reimbursement from the responsible parties.1 EPA

relies heavily on private contractors to perform or manage cleanup

activities. CERCLA also established a trust fund (the Superfund trust fund)

to pay for cleanups and related activities, financed primarily by taxes on

crude oil and chemicals. The program’s authorization, and the taxes

financing the fund, expired in 1995. The Congress continues to fund the

program through annual appropriations from the Superfund trust fund and

general revenues.2

The federal government faces an even greater potential cleanup

investment than EPA alone. Federal agencies must report potential

hazardous waste sites on lands that they administer to EPA. Agencies clean

them up using funds from their own appropriations.3

 The agencies

potentially responsible for the most cleanups are the departments of

Agriculture, Defense, Energy, and the Interior. As of September 1998, EPA

1

Parties responsible for cleanups include waste generators, site owners and operators, transporters,

and persons who arranged for the treatment or disposal of hazardous wastes.

2

See Superfund: Status of the Superfund Trust Fund (GAO/RCED-98-152R, Apr. 16, 1998).

3

The costs of long-term cleanup actions at federal facilities are generally not eligible for funding from

the Superfund trust fund.

Page 14 GAO/RCED-99-111 Superfund Program Management Issues
Chapter 1 

Introduction

had included 2,104 of these agencies’ facilities on the federal facility

docket—the list of federally owned facilities that EPA is to consider for

placement on the National Priorities List—and had included a total of 173

of these facilities on the National Priorities List.4

 (See table 1.1.)

Table 1.1: Number of Federal Facilities

on the Docket and on the National

Priorities List as of September 1998 Agency Facilities on docket

Facilities on the National

Priorities List

Agriculture 182 3

Defense 974 141

Energy a 84 21

Interior 453 3

All others b 411 5

Total 2,104 173

Source: EPA’s Office of Solid Waste and Emergency Response.

aEnergy cleanup managers said that 3 of the Department’s 21 facilities on the National Priorities

List have now been transferred to the U.S. Army Corps of Engineers, within Defense.

bAgencies in the “All others” category include the Central Intelligence Agency, Commerce, EPA,

General Services Administration, Health and Human Services, Housing and Urban Development,

Justice, Labor, National Aeronautics and Space Administration, Postal Service, Small Business

Administration, Tennessee Valley Authority, Transportation, Treasury, and Veterans Affairs.

For a federal facility on the National Priorities List, EPA enters into an

interagency agreement under which the responsible federal agency cleans

up the facility. The agreement establishes penalties for failure to comply

with the schedule or terms of the cleanup.

In 1995, a group of representatives from federal agencies responsible for

cleanups under the Superfund program, the Federal Facilities Policy

Group, estimated that the total cost of cleaning up these federal facilities

ranges from $234 billion to more than $300 billion over a 75-year period.5

For fiscal years 1991 through 1999, the Congress appropriated to

Agriculture, Defense, Energy, and the Interior—the four agencies included

4

A “site” generally refers to a specific area of contamination and a “facility” to a geographically

contiguous area under an agency’s ownership or control within which a contaminated site or sites are

located.

5

The Federal Facilities Policy Group was convened by the Director of the Office of Management and

Budget and the Chair of the Council on Environmental Quality to review the current status and future

course of environmental response and restoration at federal facilities. The group included officials

from the departments of Agriculture, Defense, Energy, and the Interior; EPA; and other organizations.

Page 15 GAO/RCED-99-111 Superfund Program Management Issues
Chapter 1 

Introduction

in our review— a total of almost $33 billion for hazardous waste cleanups.6

EPA’s Site Cleanup Process Once a site has been identified, EPA includes it in the database it uses to

track hazardous waste sites, known as the Comprehensive Environmental

Response, Compensation, and Liability Information System (CERCLIS). The

next step in EPA’s cleanup process is to assess the site to determine

whether the contamination poses a large enough health or environmental

risk to qualify for a long-term cleanup under the Superfund program. (See

fig. 1.1.)

Figure 1.1: Steps Toward Including a

Site on EPA’s National Priorities List

6

The $33 billion includes approximately $18.2 billion for Defense, $13.8 billion for Energy, $0.5 billion

for Interior, and $0.2 billion for Agriculture.

Page 16 GAO/RCED-99-111 Superfund Program Management Issues
Chapter 1 

Introduction

For nonfederal sites, EPA or the state in which the potentially

contaminated site is located conducts the assessment. The responsible

federal agencies assess their own sites that are on the federal facility

docket. EPA then uses the data from these assessments to calculate a site’s

potential risks by using its hazard ranking system. This system assesses

potential risks to humans and sensitive environments, such as wetlands,

from exposure to contamination at the site through four “pathways”—

soil, groundwater, surface water, and air. Each site receives a score

ranging from 0 to 100, and sites that score above 28.5 in this system are

eligible to be considered for placement on EPA’s National Priorities List.

Only sites on this list may receive long-term cleanups financed by the

Superfund trust fund.

EPA, typically with a state’s concurrence, proposes that an eligible site be

placed on the agency’s National Priorities List. Once EPA places the site on

the list, it generally receives a more extensive investigation of the risks it

poses and an evaluation of alternative cleanup methods to address these

risks. After one or more cleanup methods are selected, the cleanup is

designed and implemented, either by EPA or by the responsible parties

under EPA’s oversight. (See fig. 1.2.)

Page 17 GAO/RCED-99-111 Superfund Program Management Issues
Chapter 1 

Introduction

Figure 1.2: Cleanup Steps for Sites on

the National Priorities List

Once the cleanup is completed and EPA considers that the site no longer

poses a risk to human health or the environment, EPA may remove the site

from the National Priorities List and delete it from CERCLIS.

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

the Superfund program, setting its policy and direction through the Office

of Emergency and Remedial Response. However, EPA’s 10 regional offices

award contracts for the cleanups in their jurisdiction that the agency has

decided to fund, manage cleanup activities at these sites, monitor private

parties’ and federal agencies’ cleanups, and determine when to propose

new sites for the program or delete completed sites.

Page 18 GAO/RCED-99-111 Superfund Program Management Issues
Chapter 1 

Introduction

Prior GAO Work In 1990, we identified a group of federal programs that could pose a

significant risk of waste, fraud, abuse, and mismanagement, as well as a

significant financial risk to the government. We included the Superfund

program in this group because of the anticipated large federal investment

and the extensive use of contractors to implement the program. In 1992,

we reported on key problems with the Superfund program and actions EPA

should take to decrease this risk.7 Specifically, we reported on the need

(1) for EPA and other federal agencies to give greater consideration to the

relative risks of sites when setting priorities for using their limited cleanup

funds; (2) for EPA to improve its limited recovery of cleanup costs from

responsible parties; and (3) for EPA to correct poor contract management

practices and inadequate controls over contractors’ costs. Since we issued

our initial report in 1992, we have reviewed the agencies’ progress in

addressing these issues every 2 years.8

 In 1997, we reported that

(1) several agencies had begun to implement systems that consider the

relative risks of sites when allocating cleanup funds, while other agencies

had not; (2) EPA had not resolved the cost recovery problems we had

identified; and (3) EPA still had to improve its use of independent estimates

to set the best contract prices for cleanups, its ability to control

contractors’ high program management costs, and its efforts to reduce a

significant backlog of Superfund contract audits.

Objectives, Scope,

and Methodology

Given EPA’s and other federal agencies’ uneven progress in responding to

the concerns about the Superfund program’s management that we raised

in our prior work, we initiated this review to determine whether the

agencies had now more fully addressed these concerns and, therefore,

reduced the government’s financial risks. Specifically, we wanted to assess

(1) the efforts that EPA and other federal agencies with major cleanup

responsibilities have made to set priorities for spending limited cleanup

funds at the sites posing the highest risks; (2) EPA’s actions to recover its

expenditures for cleanups from the parties that caused the contamination,

and (3) EPA’s efforts to better control contractors’ cleanup costs.

To respond to the first objective, we conducted interviews with EPA site

assessment managers in 4 of EPA’s 10 regions with the largest number of

sites that are awaiting consideration for the National Priorities List or have

already been listed – regions I (Boston), II (New York), IV (Atlanta), and V

(Chicago) – and the director, deputy director, and staff of the State,

7

High-Risk Series: Superfund Program Management (GAO/HR-93-10, Dec. 1992).

8

High-Risk Series: Superfund Program Management (GAO/HR-95-12, Feb. 1995; GAO/HR-97-14, Feb.

1997; and GAO/OCG-99-17, Jan. 1999).

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Tribal, and Site Identification Center within OSWER to understand the

agency’s approach to assessing and listing sites. We also interviewed the

chair and 4 of 10 regional representatives on EPA’s National Prioritization

Panel, which assigns nationwide priorities for all sites that are on the

National Priorities List and are ready to construct the cleanup. We

obtained and reviewed documents that describe the criteria and weights

the panel uses to score and rank sites. In addition, we examined the

panel’s funding decisions for fiscal year 1997, confirming that they were

based on the panel’s ranking. To understand EPA’s responsibilities and

overall approach to federal facility cleanups, we met with the associate

director of OSWER’s Federal Facilities Restoration and Reuse Office and

interviewed remedial managers who oversee federal facility cleanups in

regions IV (Atlanta), V (Chicago), VIII (Denver), IX (San Francisco), and X

(Seattle). We also conducted interviews with environmental cleanup and

budget officials at the headquarters of the departments of Agriculture,

Defense, Energy, and the Interior. As necessary, we visited regional offices

to test how field offices implemented these relative risk policies and used

relative risk to make cleanup funding decisions.

For the second objective—assessing EPA’s cost recovery program—we

interviewed and obtained data from cost recovery program managers in

EPA headquarters and two regional offices. In EPA headquarters, we met

with the director of the Policy and Program Evaluation Division in the

Office of Site Remediation and Enforcement, Office of Enforcement and

Compliance Assurance, as well as the chief of the Program and Cost

Accounting Branch in the Financial Management Division, Office of the

Comptroller, Office of the Chief Financial Officer. We reviewed EPA’s

proposed methodology on developing a new indirect cost rate to charge to

responsible parties to identify changes from the previous method. In

addition, we analyzed EPA’s 1999 annual plan for the Government

Performance and Results Act to determine the status of EPA’s goals and

performance measures. We also spoke with EPA enforcement, cost

recovery, and legal staff in regions IV (Atlanta) and V (Chicago), which we

selected because of their unique and large recovery efforts, respectively.

For the last objective—assessing EPA’s management of Superfund

contracts—we conducted work at EPA headquarters and three EPA regions.

At headquarters, we met with Superfund program managers in OSWER,

including the deputy director, Office of Emergency and Remedial

Response and the director and senior managers, Office of Acquisition

Management, to understand EPA’s contracting policies and procedures. We

also met with Superfund program and contracting managers in regions III

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(Philadelphia) and VII (Kansas City), because their Superfund contracts

had been in place for the longest time, and in Region V (Chicago), because

we had selected this region in our last review. To test the quality and use

of independent government cost estimates to set contract prices, we

conducted a detailed analysis of a total of 35 Superfund contract work

assignments initiated in the three EPA regions from January 1, 1997,

through September 30, 1997. We used this time frame because it was

similar to the time frame in our last review and would serve as a basis for

comparison. We also visited the U.S. Army Corps of Engineers in

Washington, D.C., to compare its cost-estimating practices with EPA’s. In

addition, we visited a private Superfund contractor in Region III to get a

general understanding of how contractors estimate costs for Superfund

cleanup activities. We also met with EPA’s Office of the Inspector General

in Washington, D.C, and officials from the Defense Contract Audit Agency

(DCAA) in Fort Belvoir, Virginia.9

For a more detailed description of our audit’s scope and methodology, see

appendix I. We conducted our work from May 1998 through April 1999 in

accordance with generally accepted government auditing standards.

9

EPA’s Office of the Inspector General audits the agency’s contractors when EPA is the primary

customer for the contractor. The Defense Contract Audit Agency conducts audits of EPA contractors

when EPA is not the primary agency providing work and funding to the contractors.

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EPA has made progress over the years in responding to our concerns that it

was not effectively using its limited cleanup dollars by setting funding

priorities on the basis of sites’ relative risks to human health and the

environment. “Relative risk” refers to the risk a site poses to human

health and the environment compared with the risks posed by other sites.

This comparison may also consider other important factors, such as

communities’ concerns and legal requirements. EPA now manages sites on

the National Priorities List according to a “worst sites first” policy.

However, EPA may not know about all high-risk sites because states now

increasingly decide which ones they will address under their own cleanup

programs and which ones they want EPA to address through the Superfund

program. Because states are managing these sites, EPA does not have

information on the status of their cleanups. Without this information, EPA

cannot assure local communities near high-risk sites that these sites are

being addressed. Nor can EPA plan its own work in the event that the states

require EPA’s assistance at these sites. Furthermore, because of the

significant federal investment still needed to clean up hazardous waste

sites on federal facilities and lands, it is important that other federal

agencies likewise use their limited cleanup dollars efficiently by

addressing the riskiest sites first. While the departments of Agriculture,

Defense, and Energy have begun using risk to set priorities for cleanups to

varying degrees, Interior, specifically the Bureau of Land Management

(BLM), has not completed the first step—developing an inventory of its

hazardous waste cleanup workload, estimated to cost billions of dollars.

EPA Funds Its

Cleanup Actions

According to Risk but

Is Not Adding New

Sites to the National

Priorities List Solely

on the Basis of Risk

For sites that EPA has already placed on its National Priorities List and

whose cleanup will be conducted or monitored by EPA, EPA provides

funding according to their relative risk. However, EPA is not using relative

risk as the primary basis for deciding what new sites to list. States are now

assuming more responsibility for high-risk sites—those that are risky

enough to be eligible for the National Priorities List. As a result, this

evolving relationship with the states has created a need for closer

coordination between EPA and the states with respect to sharing

information on the status of cleanups, deciding who should address sites,

and disseminating that information to the public. Currently, EPA cannot

ensure that some of the worst sites are being addressed first, if at all,

because some states may not be reporting all high-risk sites to EPA and,

therefore, EPA may not know the full universe of such sites. Furthermore,

states are not always recommending sites for EPA to address through the

Superfund program because the sites present the highest risk to human

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health and the environment, but rather because they are too difficult and

too expensive for the states to address.

EPA Uses Relative Risk to

Set Cleanup Priorities for

Sites on the National

Priorities List

Once EPA places a site on its National Priorities List for cleanup, the

agency uses relative risk to decide which ones to fund when priority

setting is needed. Even though EPA’s policy has been to address the worst

sites first since 1989, our prior work showed that the agency’s regions

were setting priorities for early phases of cleanup on the basis of other

factors, such as geographical considerations (e.g., funding equal numbers

of sites in each state). In 1997, we reported that EPA had begun to give

greater consideration to sites’ relative risks when setting priorities.1

Since then, EPA has continued to implement a nationwide process to set

risk-based funding priorities for sites ready to begin construction of the

cleanup method because it has had more sites to fund than dollars

available. EPA does not go through a similar process for sites in earlier

cleanup phases. Because it funds most of these sites so as not to delay

them from moving through the cleanup process, EPA officials told us that

they had a relatively small or no backlog of sites waiting to begin the

earlier cleanup phases; therefore, they did not have to set funding

priorities.

In order to distribute its fiscal year 1996 funds to the backlog of sites

awaiting construction, EPA created the National Risk-Based Prioritization

Panel. This panel, which is composed of regional and headquarters

cleanup managers, is to rank all of the sites ready to construct the cleanup

method nationwide, primarily on the basis of the risks they pose. The

panel uses five weighted criteria, four of which address health and

environmental risks and one of which addresses considerations such as

cost-effectiveness. The panel then ranks the sites and EPA, in turn,

allocates funding for these sites according to this ranking. The sites that

are not funded in one year can compete again for funding the following

year.

In our 1997 report, we determined that the panel used the ranking process

to allocate fiscal year 1996 funds. However, because the panel process was

new and the Congress did not pass EPA’s appropriations act until April of

that year, we decided to continue monitoring the agency’s use of the panel

process. We found that, in fiscal year 1998, EPA ranked 50 sites and funded

38 according to the panel’s ranking, at a value of more than $200 million.

1

High-Risk Series: Superfund Program Management (GAO/HR-97-14, Feb. 1997).

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EPA Does Not Fully

Control Which Sites Are

Identified and Included on

the National Priorities List

EPA does not know the universe of high-risk sites remaining to be

addressed. EPA has never had its own site identification program and relies

primarily on other entities, such as states and private citizens, to report

sites for possible inclusion in the Superfund program. Early in the

program, these entities referred tens of thousands of sites to EPA. Over

time, however, according to site assessment managers in all four regions

in our review, the states became reluctant to report sites because they

wanted to avoid what they saw as the long and costly Superfund cleanup

process. As a result, they currently do not necessarily report all high-risk

sites to EPA.

For those sites that are reported to EPA, the agency assesses the level of

potential risk posed to human health and the environment by applying the

hazard ranking system.2

 Sites scoring at least 28.5 are considered eligible

for the National Priorities List but are not automatically included. As state

cleanup programs have matured, the states have assumed a greater role in

determining which sites EPA will address under Superfund and which sites

the states will address under their own cleanup programs. Most states

have established enforcement programs similar to the Superfund program

and, more recently, have used EPA grants to help establish voluntary

cleanup programs. Consequently, many states prefer to use their own

programs to address sites, including sites with risks high enough to make

them potentially eligible for the National Priorities List. If a state does not

want to assume responsibility for a cleanup, it can turn the site over to

EPA.

The states also have a greater role in deciding which sites get listed

because EPA, as a matter of policy, seeks the relevant state governor’s

concurrence before listing a site. EPA was required to seek concurrence

under appropriations laws for fiscal years 1995 and 1996 and has since

continued the practice. According to EPA officials, some governors are

reluctant to concur, because placement on the list stigmatizes a site as one

of the worst in the country, thus discouraging development. As of

February 1999, governors had opposed the listing of 31 sites and

supported the listing of another 123 sites. Since 1995, EPA has proposed

only one site for listing without the relevant governor’s concurrence.3

2

EPA’s hazard ranking system assigns a score from 0 to 100 to evaluate the potential risks a site poses

to humans and sensitive environments from exposure through four pathways–soil, groundwater,

surface water and air. A site with a score of 28.5 or higher is considered eligible for placement on the

National Priorities List.

3

EPA proposed the Fox River, Wisconsin, site for listing in July 1998, over the governor’s objection,

because of concerns raised by EPA and other stakeholders about the lack of cleanup progress, given

the significant risks posed to wildlife and humans.

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Given increases in the states’ ability to address sites combined with EPA’s

policy of seeking the relevant governor’s concurrence, EPA does not

propose an eligible site for the National Priorities List until it enters into

negotiations with the state to determine whether the state plans to take

any action at the site through its own programs. If EPA anticipates that the

state will clean up the site, the agency usually assigns the site a low

priority for listing, according to cleanup managers from the four EPA

regions. In addition, the managers said that they typically do not take any

further action at these sites unless the state subsequently asks EPA to list

the site. Therefore, according to these cleanup managers, decisions to

propose sites for listing on the National Priorities List are not based

primarily on the sites’ relative risks. Instead, states turn sites over to EPA

for cleanup under the Superfund program when they have difficulties in

getting responsible parties to pay for the cleanup, for example, or when

they encounter a complex cleanup, such as one addressing groundwater

problems. Consequently, EPA cleanup managers expect that future

National Priorities List sites will be large, complex, and thus costly to

clean up or will have either recalcitrant or no financially viable responsible

parties to help pay for the cleanup. This trend could influence the future

number and types of sites on the list. In the late 1980s to early 1990s, EPA

proposed about 76 sites, on average, per year for listing. In the mid 1990s,

this number dropped to 28 because EPA decided to concentrate more on

completing cleanups for sites already listed. Although EPA has recently

stated that it expects to return to an average listing rate of about 40 sites,

this workload may depend on states’ concurrence.

EPA Lacks Information on the

Status of State Cleanups

As the states’ roles in cleaning up high-risk sites have increased, EPA

cleanup managers have noted that they do not know to what extent all

high-risk sites are being addressed and cannot respond to public inquiries

about the status of cleanups at the sites that the states are addressing. EPA

administers the federal cleanup of abandoned hazardous waste sites that

pose significant risks to public health and the environment. As the states

increasingly take responsibility for cleaning up these sites outside the

Superfund program, EPA must rely on the states to report on the sites’

status. Sometimes a state may later ask that EPA increase its involvement

at a state-run cleanup.

In order to plan their own workload and to respond to public inquiries,

three of the four EPA regions in our review said that they would like more

information on the status of state-led cleanups at certain high-risk sites

that posed particular concerns for the regions. For example, cleanup

managers in EPA’s Region I in Boston predicted that although only a

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handful of sites from their region would be placed on the National

Priorities List in the future, they plan to monitor about 50 additional

high-priority sites being addressed under state programs because of risks

posed by particular hazards, recalcitrant responsible parties, or

community concerns. Cleanup managers in Region IV in Atlanta expressed

similar interest in tracking the status of certain high-priority sites in their

region that are being cleaned up outside the Superfund program. Region II

in New York is already piloting a project to monitor the progress of state

cleanups to better plan its own Superfund workload if the state later

decides to turn sites over to EPA, as well as to provide better information to

the public on the status of these cleanups. Under the pilot project, EPA and

New York are trying to electronically link the state’s database on the status

of sites with EPA’s CERCLIS database so that EPA can better track sites.

According to these regional officials, one reason for New York’s

willingness to cooperate in this effort is that it could speed up the process

of eliminating sites from further consideration for the Superfund program.

On the other hand, cleanup managers in Region V said that they have

enough information on the status of cleanups and do not need a tracking

system because the states send letters to EPA notifying it that cleanups are

either under way or complete.

Lack of Communication and

Coordination Between States

and EPA Means That Some

High-Risk Sites Are Not

Addressed

In November 1998, we reported on the need for better communication and

coordination between federal and state officials to set priorities and

determine cleanup responsibilities for high-risk sites.4

 As of October 1998,

according to EPA, the agency had about 10,400 sites in CERCLIS—the

database EPA uses to track hazardous waste sites. Of these sites, 5,977

need further assessment or are candidates for removal from CERCLIS

because no further EPA action is required. About 1,400 sites are on the

National Priorities List.5,6 EPA classified the remaining 3,023 sites as

potentially eligible for listing on the basis of the hazard ranking system.

(See fig. 2.1.)

4

Hazardous Waste: Unaddressed Risks at Many Potential Superfund Sites (GAO/RCED-99-8, Nov. 30,

1998).

5

 As of Aug. 1998, EPA had deleted 175 of these sites from the National Priorities List upon

construction of the cleanup remedy.

6

 Of these 1,400 “sites,” 173 are federal facilities.

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Figure 2.1: Status of All Sites in EPA’s

CERCLIS Database

Source: GAO and EPA.

Of these 3,023 sites, we found that approximately 1,234 have ongoing or

completed cleanups outside of Superfund or are misidentified as eligible.

The disposition of most of the remaining 1,789 sites, 307 of which were

considered among the highest-risk sites, was uncertain. The state and

federal cleanup managers did not know who would address them, under

what programs, whether responsible parties would participate, or when

the cleanup actions would begin. As a result of our findings, we

recommended in November 1998 that EPA regions and the states

coordinate their efforts to ensure that the highest-risk sites are addressed,

assigning a lead agency as necessary. In response, the agency is planning

to further assess the 307 highest-risk sites to determine whether it needs to

take any immediate cleanup actions at these sites through its short-term

removal program.

For those sites that EPA and states have agreed should be placed on the

National Priorities List, EPA does not use relative risk to decide which ones

to list first. Although EPA initially uses its hazard ranking system as a

screening tool to determine a site’s eligibility for listing, other factors, such

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as a governor’s concurrence or EPA’s inability to identify a responsible

party willing to conduct the cleanup, will determine when EPA decides to

propose a site for listing.

The Departments of

Agriculture, Defense,

and Energy Have Set

Risk-Based Cleanup

Priorities, but Interior

Has Not Yet Identified

All Sites Needing

Cleanup

Three of the four federal agencies with the largest cleanup

workloads—the departments of Agriculture, Defense, and Energy—have

implemented systems to set cleanup funding priorities on the basis of the

relative risk sites pose. The Department of the Interior has not developed a

central database of hazardous waste sites, estimated the resources it

needs to address them, or developed an overall strategy to manage its

cleanup workload.

Given that current estimates predict federal agencies could spend more

than $300 billion to clean up contaminated federal facilities, it is

imperative that they spend this money effectively. Since 1995, we have

encouraged these agencies to set risk-based priorities for applying their

cleanup dollars to the backlogged sites waiting to be addressed.7

 In 1995,

the Federal Facilities Environmental Restoration Dialogue

Committee—consisting of representatives from federal, state, local, and

tribal governments, as well as citizens’ groups and labor

organizations—reached a consensus that risk should be a primary

consideration, among other factors, in setting cleanup priorities at federal

facilities.8

 These other factors include the cost-effectiveness of the cleanup

remedies and their responsiveness to any cleanup requirements and

concerns from the communities surrounding a facility. Likewise, in 1995,

the Administrator announced EPA’s intention to promote risk-based

priority setting at federal facilities and sites.9

 The federal agencies in our

review have responded to this call for setting risk-based cleanup priorities

to varying degrees. (See table 2.1.)

7

Federal Facilities: Consistent Relative Risk Evaluations Needed for Prioritizing Cleanups

(GAO/RCED-96-150, June 7, 1996), Federal Hazardous Waste Sites: Opportunities for More Cost

Effective Cleanups (GAO/T-RCED-95-188, May 18, 1995), and Superfund Program Management

(GAO/HR-95-12, Feb. 1995).

8

EPA chartered the Federal Facilities Environmental Restoration Dialogue Committee in 1992 to

develop a consensus on how agencies can make fair and consistent decisions about cleanup priorities

and funding.

9

In Aug. 1998, EPA issued a new policy, the “Interim Final Policy on the Use of Risk-Based

Methodologies in Setting Priorities for Cleanup Actions at Federal Facilities,” that provides guidance

for its regions to use to promote risk-based priority setting for cleanups at federal facilities and calls

for EPA regions to meet annually with the federal facility environmental staff in their areas to

negotiate cleanup priorities.

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Table 2.1: Summary of Steps Four Federal Agencies Have Taken to Set Risk-Based Priorities

Department

Does the agency have a system in

place to identify potential

hazardous waste sites and

characterize their risks?

Do individual locations within the

agency fund cleanups on the basis

of sites’ risk?

Does the agency allocate funds

across locations nationwide on

the basis of sites’ risks?

Agriculture a Yes Yes Yes

Defense Yes Yes No b

Energy Yes Yes No

Interior No No No c

aFor this table, Agriculture represents the programs within the Forest Service because it is

responsible for the most significant portion of the Department’s cleanups to date.

bAlthough the Department of Defense does not allocate funds nationwide on the basis of risk, it

has set nationwide cleanup goals for high-risk sites that are to be met by each of its five

environmental budget components—one for each of the three services, one for all Defense-wide

agencies, and one for all formerly used Defense sites. Each component sets priorities for its own

sites on a nationwide basis.

cAlthough the Department of the Interior does not set priorities for all sites across its bureaus on a

nationwide basis, it does use risk to set nationwide priorities for the small number of sites it

considers for funding from its Central Hazardous Materials Fund.

Agriculture’s Forest

Service Sets Risk-Based

Cleanup Priorities

In the early 1990s, Agriculture’s Forest Service, which has accomplished

the most significant portion of the Department’s cleanup activities to date,

implemented a process to rank and fund sites on the basis of their relative

risks. The Forest Service manages the National Forest System, including

remote public lands that have been contaminated by the activities of other

parties. However, in 1996, we reported that the Forest Service had made

limited progress in completing an inventory of its potential hazardous

waste sites, such as mining waste sites, a critical first step for effectively

establishing priorities.10 Since that time, the Forest Service has made a

concerted effort to identify its universe of sites and develop an inventory

of them. The Forest Service has also used the results of its inventory to

fund cleanups of the sites posing the most serious risks, while also

requiring the parties responsible for the contamination to pay for some of

the cleanups.

According to Agriculture’s coordinator for hazardous waste cleanups and

the Forest Service’s chief engineer in charge of cleanups, the Forest

Service, as of January 1999, had completed its inventory of underground

10Federal Land Management: Information on Efforts to Inventory Abandoned Hard Rock Mines

(GAO/RCED-96-30, Feb. 23, 1996).

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tanks, landfills, and abandoned hard rock mining sites.11 In completing the

mining site inventory, which encompasses the largest number of sites

remaining to be addressed, the Forest Service set standard procedures for

its regions to identify sites with the potential to release hazardous

substances and pose risks to human health and the environment. The

regions ranked each site as posing a high, medium, or low relative risk

depending on the presence of mining wastes or discharges; the site’s

proximity to sensitive environments, such as wetlands; and applicable

regulatory cleanup requirements. As a result of this nationwide inventory,

the Forest Service has identified a total of approximately 39,000

abandoned mine sites, of which an estimated 1,800, or about 5 percent, are

considered high priorities because they are or could be releasing

hazardous substances.

The Forest Service has not yet completed an inventory of sites

contaminated by Defense activities on its lands, such as sites containing

unexploded ordnance. This is mainly because the Forest Service has had

very little information about these sites, according to Agriculture’s

coordinator for hazardous waste cleanups. Defense and Agriculture have

not fully implemented a 1988 memorandum of understanding for

cooperation between the two agencies on this issue. Recently, Defense

provided the Forest Service with a list of sites that Defense had used in the

past and that the Forest Service now manages. However, the Forest

Service would like Defense, which may be a potentially responsible party

at these sites, to better identify its activities at those sites and the hazards

that may be associated with those activities. As a start, the Forest Service

would like to be included in Defense’s process for setting cleanup

priorities and standards when addressing sites on National Forest System

lands. In this way, Defense and Agriculture could begin to work together

to clean up sites on lands that Defense could have contaminated. To help

ensure that the federal agencies address these sites, EPA plans to establish

a workgroup in the spring of 1999, according to the associate director of

the Federal Facilities Restoration and Reuse Office. The workgroup will

initially consist of EPA representatives and, later, other federal agencies to

discuss how to accurately characterize the risks at these sites, set

priorities among them, and fund their cleanups. Furthermore, according to

a senior official in the Office of the Deputy Under Secretary of Defense for

Environmental Security, Defense, Agriculture, and Interior are in the

11Hard rock mining involves the extraction and preliminary processing of minerals such as gold, silver,

copper, and lead, typically for use in industrial applications. Abandoned hard rock mines could pose

physical safety hazards (e.g., open shafts or pits, unsafe structures, or explosives) or risks to the

environment and human health (e.g., through the drainage of hazardous substances into nearby

surface water or groundwater).

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process of finalizing a new memorandum of agreement to establish the

Inter-Agency Military Land Use Coordination Committee. The committee

consists of senior policy officials from Defense, Agriculture, and Interior

and has established five subgroups addressing issues such as the

contamination and cleanup of public lands.

The Forest Service has used its inventories to set cleanup goals, justify

requests for additional cleanup funds, and allocate the funds it receives.

On the basis of data from its inventories, the Forest Service has set a goal

to clean up all of its high-priority hazardous waste sites by 2045, at a cost

of approximately $2 billion. Funding for the Forest Service’s hazardous

waste program has increased in recent years from approximately

$7 million in fiscal year 1997 to approximately $12.5 million in fiscal year

1999. Furthermore, the administration has requested over a 70-percent

increase for Forest Service programs, to $21.5 million for fiscal year 2000.

This request is based on the Forest Service’s inventories of hazardous

waste sites.

To develop the Forest Service’s annual funding request, the regions select

sites to submit to a round table of regional and headquarters staff for

priority ranking. For example, the Forest Service’s regional office in Utah

forwards approximately 10 to 15 sites to the round table each year

depending on the relative risks the sites pose, the size of the cleanup

workload the region can manage, and the degree to which parties

responsible for the contamination are available and able to pay for the

cleanup. The round table then ranks the sites from all nine regions using

six factors, two of which specifically address risks to human health and

the environment. The remaining four factors address such things as the

cost-effectiveness of the proposed cleanup actions and any applicable

statutory or regulatory cleanup requirements. The Forest Service uses this

list to justify its cleanup budget requests to Agriculture and, eventually, the

Congress. Agriculture’s coordinator for hazardous waste cleanups

explained that once the Forest Service receives its cleanup budget, it

allocates funds to the regions according to their ranked list of priorities,

and the regions in turn spend the funds following these priorities.

To supplement its limited cleanup funds, the Forest Service places priority

on requiring responsible parties to clean up sites on its lands. In recent

years, with EPA’s assistance, the Forest Service and Agriculture have

negotiated and issued cleanup orders to these parties and sought

reimbursement for its cleanup costs from responsible parties under

CERCLA. For example, in fiscal year 1998, Agriculture estimates that the

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Forest Service was able to leverage its cleanup funding to produce more

than $100 million in cleanup work funded by responsible parties.

Defense Has a Risk-Based

Process for Setting

Cleanup Priorities

In 1994, Defense implemented a consistent process for identifying and

funding most sites according to risk within each of its five environmental

components—one for each of the three military services, one for all

Defense-wide agencies, and one for formerly used Defense sites.

Following detailed guidance from the Department’s Environmental

Security Office, each of the components evaluates its sites and categorizes

them into groups, depending on whether they pose high, medium, or low

relative risks to human health and the environment.12 These components

evaluate the nature and concentration of the site’s contaminants, the

possible pathways for the contaminants to move from the site, and the

opportunities for the contaminants to come in contact with humans. If the

service or agency does not have enough information to evaluate a site, it

must schedule the site for further study and conduct an interim cleanup

action to address any immediate threats to public health and the

environment.

The components use the results of their relative risk evaluations to

develop their budget requests and allocate funds accordingly. Each

Defense component has its own, separate appropriations account for

environmental restoration and decides for itself what percentage of its

high-risk sites it will fund in any given year. In 1997, the most recent year

for which data are available, Defense spent about 82 percent of its cleanup

dollars (on average, departmentwide) on high-risk sites, for those sites

evaluated.13

The Department does not set priorities for sites among its components,

and they do not compete against each other for environmental funding on

the basis of the relative risks at their sites. According to the manager

within the Department’s Office of Environmental Security in charge of

tracking cleanups, this has not been necessary because the components

have been receiving sufficient appropriations to conduct scheduled

12Defense has set risk-based priorities for formerly used Defense sites containing hazardous waste but

has not applied the priority-setting system to sites containing unexploded ordnance. According to an

EPA official, federal agencies currently disagree about how to characterize the potential risk

associated with unexploded ordnance. Defense is developing a risk-based priority system for

unexploded ordnance sites but has not yet developed goals for addressing them.

13Defense does not require relative risk evaluations for sites where it has already made cleanup

commitments; unexploded ordnance sites; sites requiring environmental cleanup as part of building

demolition; or sites where it lacks information for an evaluation.

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cleanups. This would also be somewhat difficult, according to Defense’s

environmental budget examiner, because once funds are appropriated, the

Department cannot transfer funds between two appropriations accounts

without obtaining statutory authority.

Even though the Department does not set nationwide priorities, it has

established a set of nationwide cleanup goals—to have cleanup remedies

in place at 50 percent of all installations’ high-risk sites in 2002 and at

100 percent of these sites in 2007. The Department requires each

component to annually certify that it is sufficiently funding its installations

to meet these goals and biannually reviews the components’ progress. If

the Department determines that a component has not included sufficient

funds in its annual budget request to meet its goals for that year, the

Comptroller will require the component to revise its request, according to

the Defense manager in charge of tracking cleanups.

In response to congressional concerns that the components were

identifying too many sites in the high-risk category when requesting

cleanup funding, in August 1997, the Office of Environmental Security

developed more precise criteria for classifying sites’ risks as high, medium,

or low. In 1998, we found that for more than 99 percent of the 6,000 sites

we analyzed, the components’ classifications were consistent with the new

definitions.14 We recommended, however, that the Department provide

more specific Defense-wide categories to aid in priority setting. The

Department’s Secretary for Environmental Security does not agree with

this recommendation, stating that more refined categories of risk are

currently being applied by individual installations.

Energy Sets Risk-Based

Priorities Within but Not

Among Facilities

In 1995, Energy developed procedures for considering the relative risks of

its environmental management activities to help its facilities, or operations

offices, establish cleanup funding priorities. Since then, Energy has

continued to set priorities for its cleanups on the basis of risk and other

factors at its operations offices. The Department’s Office of Environmental

Management requires its operations offices, in preparing their budget

requests, to rank all of their proposed environmental management

projects, which include CERCLA cleanups; activities required to maintain

safe operations related to nuclear materials; and activities required to

close, clean, and transfer property. Operations offices are to classify

proposed cleanup projects as high, medium, or low priorities considering,

14Environmental Cleanup: DOD’s Implementation of the Relative Risk Site Evaluation Process

(GAO/NSIAD-99-25, Oct. 7, 1998).

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at a minimum, seven core criteria, three of which relate to the level of risk

to workers, the public, and the environment. The Department’s Office of

Environmental Management also provides guidance for operations offices

to evaluate projects in four additional areas: (l) compliance with federal,

state, and local cleanup regulations; (2) support for crucial operations at

the site; (3) the potential for reducing costs; and (4) responsiveness to

local citizens’ concerns. Considering the results of the evaluations in these

seven areas, each field office uses its own priority-setting system to rank

its cleanup projects along with all of its other environmental management

projects and submits this combined list to headquarters as part of the

Department’s budget request. Once the operations offices receive their

budget allocations, they distribute the funds across projects according to

the rank-ordered list.

For example, Rocky Flats, a facility that is preparing for closure, has

assigned the highest priority to those environmental management projects

needed to maintain safety, such as security systems for the plutonium and

other special nuclear materials at the site. In its overall plan to close the

facility, Rocky Flats used its own system to qualitatively rank-order all

remaining projects, including CERCLA cleanup projects, and established a

time line to complete them. To develop the sequence of projects, program

managers considered the extent to which each one (1) reduces risks to

human health and the environment as well as costs, (2) helps the facility

progress toward closure, (3) cleans up the site, (4) complies with

regulatory requirements, and (5) improves contractors’ performance and

the site’s overall management. According to the risk expert at Rocky Flats,

the resulting rankings will remain relatively constant from year to year;

however, the time line or sequence for completing the projects may

change. Because EPA was concerned that CERCLA cleanups may not rank

high enough when compared to other efforts to clean up or manage

nuclear materials, Energy agreed to work with EPA’s federal facilities

manager for Rocky Flats to annually select and fund a maximum of 12 of

EPA’s highest-priority environmental cleanup projects. EPA’s federal

facilities manager then monitors to ensure that Rocky Flats completes

these projects in accordance with this cleanup agreement.

The Oak Ridge Operations Office, an active facility where CERCLA cleanups

compete with ongoing operations, also assigns the highest priority to

funding the environmental management activities needed for safety at its

facilities. To set priorities among the remaining environmental projects,

including the on-site treatment of waste, CERCLA cleanups, and the

demolition of contaminated buildings, Oak Ridge uses its own quantitative

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system to rank order these activities following Energy’s seven relative risk

areas. The Operations Office reviews and adjusts this ranking as necessary

two to three times a year. Using these rankings in accordance with their

1992 cleanup agreement, EPA and the Oak Ridge Operations Office are to

select their highest-priority environmental cleanup projects and set time

lines for completing them. Recently, however, EPA has not been satisfied

with its level of involvement in these decisions and is concerned because

fiscal year 1999 is the third consecutive year that Energy has postponed

funding some cleanup activities and asked EPA to extend the time lines of

its cleanup agreement. Consequently, EPA has begun the formal dispute

process provided for in the cleanup agreement with Energy. The

agreement establishes penalties and possible fines for failure to comply

with its schedule or terms.

Energy does not allocate funds across operations offices according to any

nationwide ranking of projects. We previously reported that Energy would

continue to make limited progress in cleaning up environmental problems

if it did not set national priorities for cleanups.15 Thus, we recommended

that Energy set national priorities and allocate its resources accordingly.

To date, the agency has not adopted this recommendation. According to a

senior official in charge of strategic planning, Energy prefers to allow local

decision-making when setting priorities among its environmental

management projects because of the unique requirements posed by local

regulations, community concerns, and the types and extent of

contamination. As a result, according to a senior analyst in Energy’s Office

of Budget and Planning, Energy continues to allocate an environmental

management budget to each operations office that is based on the extent

and nature of the work required at its sites and the risks they pose. The

amount of the environmental budget for each operations office varies very

little from year to year, but the amount that operations offices use for

CERCLA cleanups can vary substantially, depending on other competing

funding priorities at the facility. For example, a contractor’s unforeseen

costs at one facility resulted in delays of certain CERCLA cleanups agreed to

with EPA.

Energy also had previously stated that it could not adopt a nationwide

priority system because it did not have the necessary data to do so.

However, several of Energy’s senior environmental managers at Oak Ridge

and Rocky Flats and EPA’s federal facilities managers for Energy’s Hanford

facility and Idaho National Engineering and Environmental Laboratory

15Department of Energy: National Priorities Needed for Meeting Environmental Agreements

(GAO/RCED-95-1, Mar. 3, 1995) and Nuclear Weapons Complex: Establishing a National Risk-Based

Strategy for Cleanup (GAO/T-RCED-95-120, Mar. 6, 1995).

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stated that it is feasible for Energy to produce a national list of risk-based

cleanup priorities. Energy officials acknowledge that although it may be

technically feasible, it is not practical and could be counterproductive,

stating that altering agreements reached with local stakeholders to

accommodate a new national, risk-based prioritization scheme would

cause significant disruption and legal challenges.

Interior Cannot Fully Set

Priorities for Funding

Cleanups Until the Bureau

of Land Management

Develops an Inventory of

Sites and a Strategy for

Their Cleanup

As we reported in 1997, Interior—in particular, its bureau with the largest

number of potential cleanups, the Bureau of Land Management

(BLM)—does not have a comprehensive inventory of its hazardous waste

sites, an essential step for setting risk-based cleanup priorities.16 Early

estimates by BLM indicate that it faces a substantial cleanup workload,

potentially costing billions of dollars, yet it has not systematically assessed

the full extent of its cleanup problems. For example, in 1996, BLM

estimated, on the basis of available data from sources such as the U.S.

Bureau of Mines and the U.S. Geological Survey, that it had 70,000 to

300,000 abandoned mining sites on its lands. On the basis of sample field

tests, BLM further estimated that about 4 to 13 percent of these sites—a

range of 2,800 to 39,000 sites—may have contaminated material that poses

potential risks to human health and the environment and must be

addressed. Assuming that Interior would, at a minimum, conduct

short-term removal actions at these sites, which can cost up to about

$40,000 each according to the manager of BLM’s hazardous materials

program, the cost of cleaning up these sites could range from $112 million

to $1.5 billion, while more extensive cleanups could cost billions of

dollars. These estimates do not include the costs of cleanups at other BLM

sites, including landfills, illegal dumping areas, and underground storage

tanks.

BLM employs a reactive approach to cleanup by addressing hazards at sites

after they have been identified by other federal and state agencies.

Sometimes hazards are identified following injuries to citizens or

livestock. The resulting patchwork of information is insufficient to

develop an effective cleanup strategy for addressing the worst sites first.

Furthermore, by not getting responsible parties to perform or pay for

cleanups under CERCLA, BLM could cause the federal government to incur

greater costs in the long run.

16BLM has developed six priorities for funding hazardous materials activities in its Hazardous Materials

Management Manual. The first priority is for funding emergency removals to protect public health and

BLM’s natural resources. However, without a centralized database of sites requiring cleanup, these

priorities have limited usefulness in making risk-based cleanup decisions.

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Individual Field Offices Have

Developed Some Inventory

Data, but This Information Is

Insufficient for Developing an

Overall Cleanup Strategy

Cleanup managers differ on the need for an inventory. For example, the

manager of BLM’s hazardous materials management program has not

supported the development of a more comprehensive inventory of BLM’s

hazardous waste sites, stating that each of BLM’s 12 state offices has

already discovered most large hazardous waste sites.17 However, several

BLM hazardous waste specialists in the field disagreed, stating that some

field offices continue to find large, high-risk sites each year. These

specialists believe that a comprehensive database of known sites and a

process for identifying new sites would help the field offices better

identify high-priority sites, develop a cleanup strategy, and justify cleanup

budget requests.

Although BLM’s state offices have completed portions of inventories and

headquarters is beginning to electronically organize these portions, the

data constitute a patchwork of inconsistent information. Environmental

and abandoned mines specialists we talked with, representing six of BLM’s

state offices, have either attempted their own surveys or have relied on

joint efforts with other federal agencies and states. For example, BLM’s

Nevada office participated in a small pilot program to identify

environmental problems associated with abandoned mine sites but does

not have an inventory of other sites, such as landfills and illegal dump

sites.18

A lack of funds is the primary reason why BLM is reluctant to proactively

survey its lands, according to BLM environmental managers at headquarters

and in the field. The state field offices use much of BLM’s annual hazardous

materials budget—approximately $15 million in fiscal year 1998—to

conduct emergency removals of hazardous materials. According to BLM, it

accomplishes hundreds of such cleanup actions each year, ranging from

the removal of debris that has been dumped on public lands illegally to the

closure of water-polluting abandoned mines. As a result, developing an

inventory is often not a high priority. In comparison, however, the Forest

Service, with a similarly small environmental cleanup budget, was able to

complete its inventory by funding it over several years, leaving some

money for ongoing cleanups and removals on an annual basis.

Several of BLM’s state offices have leveraged state funds to complete

portions of inventories. For example, BLM’s state offices in Wyoming,

Colorado, and Montana have mine inventory data because the states paid

17BLM has 12 state offices, 11 in western states and 1 for the eastern states.

18Bureau officials said that BLM has started to fund a 5-year survey of California desert areas designed

to identify illegal activities and contamination.

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for surveys using a federal reclamation fund financed by coal-mining fees.

Some BLM state offices have been able to develop information on

abandoned mines by participating in several water quality initiatives.19 For

example, BLM works with other federal agencies and state and local

authorities to obtain funding under the administration’s Clean Water

Action Plan to clean up watersheds selected by the state. As part of this

effort, it is necessary to identify and survey surrounding abandoned mines

as possible sources of the watersheds’ contamination.

Another reason BLM is reluctant to identify potential hazardous substance

release sites, according to both the manager of the hazardous materials

management program and experts at BLM’s National Applied Resource

Sciences Center, is that BLM officials believe, once the sites are identified,

BLM may be held financially liable for thousands of abandoned sites that it

did not contaminate, particularly abandoned mine sites. Furthermore,

these officials worry that once the hazardous waste sites are identified,

EPA will place the sites on the federal facility docket and the sites will then

be subject to what the officials perceive as the burdensome and costly

requirements of a remedial action under CERCLA.

20

BLM Has Not Developed a

Comprehensive Cleanup

Strategy Using CERCLA as a

Tool for Completing Cleanups

BLM has no comprehensive strategy for managing the cleanup of its sites

and has been reluctant to seek reimbursement for cleanup costs or issue

orders to responsible parties to clean up sites under CERCLA as part of, or

in conjunction with, other cleanup programs.21 While the Forest Service

has used these CERCLA authorities to get responsible parties to pay for or

perform cleanups, BLM has not yet adopted a similar cleanup enforcement

strategy.

BLM managers gave several reasons for their reluctance to get responsible

parties to perform or pay for cleanups under CERCLA at more sites. First,

BLM officials do not see the benefit of expending large portions of their

19A task force of federal land management agencies developed the Interdepartmental Abandoned Mine

Lands Watershed Initiative in 1996 to address water quality problems caused by abandoned mines on

federal lands. A participating state sets priorities among its watersheds and selects the one with the

most serious water quality problems caused by abandoned mines. The federal agencies then take steps

to clean up or treat the mining site’s waste in order to meet the state’s water quality standards in the

watershed. In 1998, EPA and other federal agencies developed the Clean Water Action Plan, which

provides additional funding to support, among other things, this watershed initiative.

20Cleanup actions under CERCLA fall into two broad categories: removal actions and remedial actions.

Removal actions are usually short-term actions designed to stabilize or remove hazards, and remedial

actions are usually longer-term and costlier actions aimed at permanent remedies.

21Although Bureau officials acknowledged their reluctance to use CERCLA authorities to pursue

responsible parties, they emphasized that they comply with CERCLA’s procedures for reporting

hazardous spills and conducting removals and cleanups.

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small cleanup budget on what they describe as the expensive and

time-consuming investigations and analyses required for a remedial action

under CERCLA. Agency officials contend that, unlike the Forest Service, BLM

has less chance of finding responsible parties to pay the cleanup costs for

most of these mines because BLM’s mines are decades old.22

Second, BLM prefers to conduct short-term removals, rather than the

longer-term and generally more expensive cleanups sometimes required

for remedial actions under CERCLA, because in the vast majority of cases,

the managers contend, these are sufficient for the types of sites and the

level of risk they pose. While this could be true for a large portion of its

sites, early BLM estimates still indicate that BLM may have a number of

high-risk sites to address that may require more extensive cleanups.

Third, BLM has increased its use of watershed initiatives as the

programmatic vehicle for conducting cleanups because they involve fewer

detailed procedures and because funding is available for them. However,

the disadvantage of these types of cleanups, according to an EPA

environmental specialist for federal facilities, is that they focus on surface

water and may ignore other problems, such as contaminated groundwater.

In any case, BLM could still use its enforcement authority under CERCLA in

conjunction with watershed initiatives, as the Forest Service does, to

effectively get more cooperation from responsible parties, so that

taxpayers’ money can be more effectively used to clean up sites where no

responsible parties can be found.

Interior Funds a Small Number

of Risk-Based Cleanups at

Large, Complex Sites

Since 1995, Interior has set aside approximately $10 million annually to

fund relatively long-term and large-scale cleanup projects, and it allocates

these funds according to the relative risks posed by the sites. A technical

review committee consisting of staff from the Department and its bureaus

meets annually to review and rank the sites the bureaus submit and

monthly to monitor the cleanup progress at the sites that have been

selected and funded. The committee considers four factors: (l) the risks

posed to human health and the environment, (2) applicable legal and

regulatory cleanup requirements, (3) the potential for responsible parties

to participate in the cleanup, and (4) the estimated time and cost of the

cleanup. According to officials in Interior’s Office of Environmental Policy

and Compliance, once the Department receives its annual appropriation, it

allocates the $10 million to cleanup projects in accordance with priorities

set by the committee. Interior funded cleanups at nine sites in 1997 under

22Agriculture and EPA officials stated that many of the Forest Service’s sites are equally old and many

are close in proximity to BLM’s sites.

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this process. In 1998, the Department continued funding seven of these

sites and added three others.

Several BLM cleanup managers have not submitted sites to compete for

these funds because they either did not know that the funding was

available or had erroneous information about how the process works. For

example, some cleanup managers were discouraged from submitting sites

because they believed that most of the funds were already earmarked for a

handful of large, complex sites on EPA’s National Priorities List for several

more years in the future. Although senior environmental program

managers at Interior acknowledged that one National Priorities List site

did consume most of the funding for a few years, Interior’s cleanup

responsibilities at this site are ending. Consequently, according to these

managers, more funds are becoming available for other high-risk sites in

the future. In addition, BLM cleanup managers stated that they thought only

remedial cleanup actions qualified for funding and because the vast

majority of their cleanups are removals, they rarely, if ever submit

cleanups for consideration. Interior officials acknowledged that the

distinction is not clear but said that the Department has sometimes funded

large-scale removals.

Conclusions EPA is setting risk-based funding priorities for cleanups at sites on its

National Priorities List. EPA will not necessarily be listing the highest-risk

sites in the future, however, because states are more frequently deciding

which sites to ask EPA to list for Superfund cleanups and are basing these

decisions on factors such as the technical complexities of a cleanup and

the availability of responsible parties to share in the cleanup costs.

Currently, it is uncertain who will take responsibility for cleaning up

approximately 1,789 sites that are potentially eligible for the National

Priorities List, 307 of which are considered among the highest-risk sites.

Unless EPA regions work with their states to implement our earlier

recommendation to determine who is responsible for each site’s cleanup,

as well as to better share information on the status of certain high-risk

sites that were found eligible for the National Priorities List and are now

being addressed by the states, the agency cannot manage its own

workload in the event that the states seek EPA’s assistance in the future.

Nor can EPA respond to community and congressional inquiries about the

cleanup status of some of the riskiest sites.

Each of Defense’s services and agencies is also setting risk-based funding

priorities for its sites nationwide. The Department is no longer setting

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funding priorities nationwide across these services and agencies, in part

because each of them now receives its own cleanup appropriation and has

been receiving enough funds to complete planned cleanups in recent

years, according to agency budget officials. To some extent, Defense did

consider its nationwide priorities when it implemented its set of long-term

goals for completing cleanups at all of its sites. It is also considering these

priorities as it monitors its progress toward achieving these goals.

However, we did find that Defense may not have fully coordinated its

cleanup efforts with the Forest Service to address hazards that Defense

may be responsible for on National Forest System lands. Until it does so,

some federal waste sites may not be adequately addressed.

Energy has instituted a risk-based prioritization scheme for its operations

offices but does not set priorities nationwide among these offices.

Although the Department believes that local priority setting is more

appropriate because each facility has unique local regulations, community

concerns, and contamination problems, we continue to believe that unless

Energy sets nationwide priorities, it cannot make the most informed

budget decisions and support budget trade-offs among its facilities, as

necessary.

Until the Bureau of Land Management and, therefore, the Department of

the Interior, define the extent of their cleanup responsibilities, determine

the strategies they will use to pursue cleanups, and consider how to use

CERCLA as a tool in this strategy, they cannot present strong justification for

more cleanup funds or effectively set priorities for using their current

cleanup resources. As a result, thousands of sites on BLM lands could

continue to pose risks to human health and the environment, and federal

cleanup costs could rise if responsible parties are not found and made to

pay for the sites’ cleanup.

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Recommendations EPA

To help EPA regions better plan their cleanup workload and be responsive

to local communities’ concerns about hazardous waste sites in their areas,

we recommend that the Administrator, EPA,

• task the agency’s regional offices to work with the states in their regions

to determine how to share information on the progress of cleanups at

those sites of highest risk or concern considering any successful efforts

currently under way in the regions.

Defense and Agriculture

To ensure that all federal waste sites are being adequately addressed, we

recommend that the Secretary of Defense and the Secretary of Agriculture

direct the Deputy Under Secretary for Environmental Security and the

Chief of the Forest Service, respectively, to work together to clarify

cleanup requirements for lands with former or current Defense activities

that may pose risks to human health and the environment. Furthermore,

we recommend that the Department of Defense, in consultation with the

Department of Agriculture, work to ensure that these cleanup

requirements are met.

Interior

To more effectively use its limited cleanup funds and better leverage funds

from responsible parties to clean up its hazardous waste sites so as to

protect the public and the environment, we recommend that the Secretary

of the Interior direct the Assistant Secretary for Policy, Management and

Budget; the Assistant Secretary for Lands and Minerals Management; and

the Solicitor of the Interior to work together to ensure that

• the Bureau of Land Management (l) develops a national database for all of

its known hazardous waste sites and abandoned mine sites; (2) develops

and implements a strategy for updating its national database, which

includes collecting new information on potential hazardous waste sites

and abandoned mines in a consistent manner across all of its state offices;

(3) develops and applies a mechanism for setting cleanup priorities among

sites on a nationwide basis using risk and other factors, as appropriate;

(4) develops a comprehensive cleanup strategy, including specific goals

and time lines for cleaning up the sites, on the basis of their risk-based

priorities; and (5) develops nationwide procedures for conducting

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searches of potentially responsible parties and for using CERCLA

authorities, where appropriate, to get more responsible parties to perform

or pay for cleaning up contamination; and

• all of Interior’s bureaus and regional offices understand the purpose and

size of the Department’s Central Hazardous Materials Fund and the criteria

the Department uses to allocate dollars to cleanups, including both

remedial and removal actions.

Agency Comments We met with or obtained comments from cleanup program managers from

EPA, Agriculture, the Forest Service, Defense, Energy, Interior, and the

Bureau of Land Management, who generally agreed with our findings and

recommendations, with one exception. The agencies also suggested

several changes for technical accuracy and clarity, which we incorporated

where appropriate. EPA agreed with our findings and acknowledged that it

needed to work with the states to coordinate cleanups and obtain the

information needed to track the status of state cleanups. Agriculture and

Defense fully concurred with our findings and agreed to our joint

recommendation to their agencies to better coordinate their efforts to

clean up previously used Defense sites.

Energy disagreed that it needed to act on our earlier recommendation to

adopt a nationwide risk-based process for setting priorities among its

sites. The Department stated that all of its operations offices receive a

relatively stable budget that is based on the general needs and risks of

their environmental management activities. Once the operations offices’

receive their budgets, they determine their own priorities for cleanup.

Energy stated that local control of priority setting is preferable to a

national strategy because each site has unique regulatory requirements,

community concerns, and contamination. Nevertheless, we continue to

maintain that developing nationwide cleanup priorities would help the

Department to make informed budget decisions and analyze trade-offs

among its facilities.

Interior and its Bureau of Land Management generally agreed with our

findings and said they would develop a plan for addressing our

recommendations. However, BLM provided several points of clarification.

First, BLM did not think it was cost-effective to undertake a comprehensive

inventory of sites, stating that it currently has more cleanups than it can

fund and already knows its worst sites. We continue to maintain, however,

that BLM cannot effectively use its limited cleanup funding until it

determines the extent of its cleanup workload and sets risk-based

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priorities for its cleanups. Furthermore, we determined that BLM state

offices continue to find high-risk sites each year. Second, BLM stressed that

it uses other authorities besides CERCLA, such as the Mining Law of 1872, to

address some sites and has always had a policy that the polluter should

perform the cleanup work wherever possible. We acknowledged BLM’s use

of these other authorities in our report but continue to recommend that

the agency more effectively include CERCLA as one of the tools available for

obtaining the full cooperation of parties potentially responsible for

contamination in conducting and paying for cleanups. Third, BLM asked us

to acknowledge that it has taken actions such as removing debris at sites

and closing abandoned mines for safety reasons, and we added this

information to the report.

Finally, BLM stated that another reason it rarely, if ever, nominates sites for

funding from Interior’s Central Hazardous Materials Fund is because it

believes the proposed cleanup must be a remedial, not a removal, action.

However, Interior officials stated that large-scale removals sometimes

qualify for funding. We revised our report to include BLM’s reason for not

nominating sites for funding. However, we believe that BLM’s uncertainty

about whether removal actions qualify for funding underscores our finding

and recommendation that Interior needs to more clearly communicate the

criteria it uses to allocate cleanup funds.

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EPA Is Not Seeking to Fully Recover Its

Indirect Costs or Appropriately Evaluating

Its Cost Recovery Efforts

The federal government has lost the opportunity to try to recover up to

$2 billion from responsible parties because EPA has assessed them only a

portion of the indirect costs that it incurred in operating the Superfund

program. Although the ultimate goal of the program is to clean up sites,

EPA may recover its costs, including indirect costs, from responsible

parties. In response to new federal cost accounting standards, EPA is

revising its indirect cost rate to more fully account for costs, but the

agency has not applied the revised rate to parties for cost recovery

purposes. In addition, EPA cannot evaluate how well it is recovering costs

because it has not established performance measures that compare what it

could have recovered with what it actually recovered. Finally, the agency

is improving its information systems so that it can (1) better determine

costs and locate key supporting evidence and (2) better track the status of

recoveries.

EPA Continues to

Lose Revenue by

Excluding Some

Indirect Costs From

Recovery

EPA has met one of its primary goals—getting responsible parties to

pay—for more than 70 percent of the long-term cleanups conducted over

the past few years. However, EPA has had less success changing cost

recovery policies that exclude a significant portion of its indirect cleanup

costs from its cost recovery efforts. When EPA pays for the costs of

cleanups, it incurs both direct and indirect costs. Direct costs are those

that can be attributed directly to a site, such as the cost to pay a contractor

to remove hazardous waste from the site. Indirect costs are those that

cannot be attributed to an individual site and, thus, are prorated across all

sites, such as the administrative costs of operating the Superfund program.

EPA’s current method of calculating the indirect cost rate excludes

significant portions of the agency’s indirect costs.

EPA estimates that since the beginning of the Superfund program,

responsible parties have agreed to perform cleanups worth $15.5 billion1

and it has spent about $15.9 billion to clean up hazards caused by private

parties. EPA considers about $5 billion of its costs unrecoverable because,

for example, financially viable responsible parties could not be found or

the agency reached final settlements with responsible parties to pay less

than all of the past cleanup costs owed to the agency. Of the remaining

approximately $11 billion in Superfund expenditures, EPA had entered into

1

Data are as of the end of fiscal year 1998 and are the most recent available. According to EPA, its

estimated value of work conducted by responsible parties is based on cleanup cost estimates at the

time the cleanup method is selected, and it does not include any management, overhead, legal, or other

costs the responsible party may incur in addition to the actual cleanup.

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Its Cost Recovery Efforts

agreements to recover about $2.4 billion, or 22 percent, through the end of

fiscal year 1998.2

 (See fig. 3.1)

Figure 3.1: Status of EPA’s Efforts to Recover $11 Billion in Superfund Program Costs Through Fiscal Year 1998

Note: Dollars in billions.

Source: GAO’s presentation of data from EPA.

Although EPA has obtained settlements to recover $2.4 billion, it has lost

the opportunity to recover up to another $1.9 billion of indirect costs

because it did not revise its indirect cost rate to include all appropriate

costs. In the earlier years of the Superfund program, the agency took a

conservative approach to allocating indirect costs to private parties

because it was uncertain which indirect costs the courts would agree were

recoverable if parties legally challenged EPA. Starting in 1989, we

2

This 22-percent figure is higher than the 14-percent cost recovery figure in our prior report, High Risk

Series: Superfund Program Management (GAO/HR-97-14, Feb. 1997), because in the past we included

total Superfund expenditures in our calculation of this rate. Now, in response to EPA’s comments, we

have excluded from our calculation costs EPA has deemed unrecoverable.

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Its Cost Recovery Efforts

expressed concerns about this approach because of the substantial dollar

amounts EPA was not seeking to recover and return to the federal

Treasury.3 EPA recognized the need to revise this practice and, in 1992,

proposed a rule that would have allowed it to expand the types of indirect

costs it would attempt to recover. However, because it received so many

negative comments on this proposed rule, EPA did not publish a final rule

and did not increase its rate.

Now, however, EPA has the opportunity to address this issue. In response

to updated governmentwide accounting standards, EPA began to

implement a new cost accounting system. As part of this process, EPA’s

Financial Management Division developed a new indirect cost rate that

will better account for the agency’s indirect costs. The director of EPA’s

Program and Cost Accounting Branch, Financial Management Division,

believes that the new rates, if implemented, could significantly increase

the costs charged to responsible parties.

According to EPA’s cost recovery program managers, they are waiting until

the methodology used to develop the new rate is reviewed and approved

by EPA management, the Department of Justice, and an independent

accounting firm hired to review the methodology before adopting it for the

Superfund program. According to EPA, the methodology could be approved

by September 1999. If the program adopts the new rate, the agency could

increase its recovery of indirect costs. For example, according to EPA’s

estimates, through fiscal year 1998, the agency excluded about $1.3 billion

in indirect costs at sites where it had not yet agreed to a final settlement

with the parties. The agency estimates it could recover $629 million, or 49

percent, of these costs. EPA estimates it will not recover the remaining

$662 million, or 51 percent, because, for example, there may be no

financially viable parties at some sites. In addition, EPA regions may

decide, as is consistent with the agency’s policy, not to pursue recoveries

at sites where the total cleanup costs are less than $200,000 because such

efforts may not be cost-effective.

EPA’s Goals and

Measures Do Not

Fully Reflect Progress

in Recovering Costs

EPA’s existing cost recovery goals and measures do not facilitate

effectively evaluating and improving the agency’s cost recovery

performance. EPA’s cost recovery program managers stated that the

agency’s current goals for the program are to seek the recovery of all

funds expended at sites, where appropriate, and to take cost recovery

3

Superfund: A More Vigorous and Better Managed Enforcement Program Is Needed (GAO/RCED-90-22,

Dec. 15, 1989).

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actions at all cleanup sites before the agency’s authority to do so expires.

However, EPA cannot use these goals to effectively monitor its

performance because the goals do not fully reflect its progress in

recovering costs.

Need for Cost Recovery

Performance Measures

Since 1991, we recommended additional goals and measures for the cost

recovery program.4

 We and others, including EPA in its own past

management review of the program,5

 recommended that the agency better

track and compare the costs it actually recovers with the costs it could

have recovered. Establishing performance measures to better track the

outcome of cost recovery efforts is consistent with the Government

Performance and Results Act of 1993, under which agencies must set such

measures.6

 We also previously recommended that the agency establish a

goal to take earlier action on cases, rather than focusing just on taking

action before its authority expires, because early action reduces the

probability that a responsible party’s financial condition will decline,

making cost recovery more difficult.7

Although EPA reports the amount of funds it obtains in cost recovery

settlements in a given fiscal year, it does not compare this amount with the

total amount of funds it could have recovered from this set of settlements.

Such a comparison could allow the agency to better measure its

performance on a consistent basis. Tracking its rate of recovery over time

and the main reasons for fluctuations in the rate from year to year could

help the agency better understand how well it is achieving recoveries and

what improvements it could make in its recovery program.

In the past, we showed that it is possible to compute such a measure.8

 We

reported that in fiscal year 1989 (the most recent year for which data were

available at the time), responsible parties agreed to reimburse EPA for 59

percent ($116 million) of its program costs, leaving about $80 million in

4

Superfund: EPA Has Opportunities to Increase Recoveries of Costs (GAO/RCED-94-196, Sept. 28,

1994) and Superfund: More Settlement Authority and EPA Controls Could Increase Cost Recovery

(GAO/RCED-91-144, July 18, 1991).

5

A Management Review of the Superfund Program, EPA (Washington D.C.: June 1989).

6

Under this act, federal agencies must establish long-term strategic plans and set annual goals for

programs and measure the programs’ performance in achieving those goals.

7

Superfund: EPA Has Opportunities to Increase Recoveries of Costs (GAO/RCED-94-196, Sept. 28,

1994).

8

Superfund: More Settlement Authority and EPA Controls Could Increase Cost Recovery

(GAO/RCED-91-144, July 18, 1991).

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unrecovered costs. We recommended that EPA use this percentage as a

performance measure to show the extent to which EPA has been

reimbursed for its costs. However, the agency has raised two primary

concerns about doing so. First, EPA is concerned that if it develops the

percentage of dollars recovered, responsible parties may misinterpret the

figure as the percentage EPA is willing to accept and not agree to pay a

higher percentage during settlement negotiations. We believe that if EPA

has an appropriate negotiation strategy and is willing to issue orders or

pursue litigation when negotiations fail, then responsible parties’

knowledge of EPA’s performance measure should have little effect.

Second, EPA notes that an increase or decrease in the percentage of costs it

recovers each year may be based on factors outside its control. For

example, in a given year, EPA could have a proportionately larger number

of cases with insolvent parties, decreasing the percentage of recoveries

that year. However, we believe that tracking increases or decreases in the

percentage of recoveries compared with what EPA defines as potentially

recoverable costs would account for these fluctuations because factors

outside EPA’s control, such as insolvent parties, could be identified as not

recoverable by EPA and taken out of the calculation. Without

systematically tracking its rate of recovery and analyzing the reasons for

differences in these rates, EPA cannot determine if the differences are due

to internal factors that it can address, such as poor cost documentation or

inexperience on the part of its negotiators, or external factors outside its

control, such as the absence of financially viable parties.

EPA Does Not Track

Whether Regions Are

Taking Early Action on

Cost Recoveries

Under CERCLA’s statute of limitations, EPA must generally initiate cost

recovery actions within 3 years after it completes a removal action or

within 6 years after it begins the physical construction of a remedial

action. EPA’s goal is to take action on all cases with cleanup costs of

$200,000 or more within these time frames. EPA took cost recovery actions

before the limitations period expired at 100 percent of the sites in fiscal

year 1997 and at almost all sites in fiscal years 1996 and 1995 as well. EPA’s

guidance encourages the regions to take action on cost recovery cases

even earlier than this—either within 12 months after a removal action is

completed or within 18 months after the construction of a remedy is

initiated—but the agency does not regularly track how well the regions are

meeting this guidance. Taking early action on cases is useful because the

longer EPA waits to take an action, the greater is the likelihood it will lose

evidence, the financial condition of the responsible parties will

deteriorate, or the limitations period will expire.

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Improved Information

and Financial Systems

Will Enable EPA to

Retrieve Data More

Efficiently and

Accurately to Support

Recoveries

In 1995, we reported that limitations in EPA’s automated information and

financial systems prevented cost recovery staff from relying on these

systems to provide all of the data the agency needed to manage cost

recovery actions.9 EPA’s ability to recover costs can be impaired if

documentation of work performed and its costs cannot be located or if the

information is inaccurate. To ensure that the information supporting cost

recovery cases was accurate, staff had to perform excessively

time-consuming and inefficient manual searches and reconciliations. For

example, because EPA’s financial system could not record cleanup costs

for each subcomponent of a site, called an operable unit, EPA staff had to

assign costs to operable units manually. Also, although EPA had a system to

electronically capture and store certain financial documents, such as

invoices, showing the costs of work performed at sites, it did not have the

capability to electronically store documents showing the types of work

conducted at sites in all of its regions.

Recently, EPA has taken actions to address these two issues. First, EPA

updated its financial system in 1997. As a result, staff no longer have to

manually assign costs to operable units. However, staff still have to

manually assign costs entered into the system before the update. Second,

EPA is implementing an imaging system—called the Superfund Document

Management System—to electronically store and retrieve documents in all

of its regions. This action will reduce the labor-intensive manual process

staff use to compile hardcopy documents.

EPA also needs an accurate account of the costs it cannot recover, such as

those spent at sites with no financially viable parties, in order to judge the

success of its cost recovery efforts, forecast the amounts of future

recoveries, and establish its budget requirements for the Superfund

program. However, in 1994, we reported that the Superfund management

information system10 produced reports that did not present an accurate

picture of the costs that EPA cannot recover.11 In addition, we found that

EPA could not regularly produce reports on the status of recoveries

because the costs spent on cleanups were contained in the financial

management system while the costs recovered were contained in the

9

Superfund: System Enhancements Could Improve the Efficiency of Cost Recovery

(GAO/AIMD-95-177, Aug. 25, 1995).

10EPA’s Superfund information system is called the Comprehensive Environmental Response,

Compensation, and Liability Information System (CERCLIS).

11Superfund: EPA Has Opportunities to Increase Recoveries of Costs (GAO/RCED-94-196, Sept. 28,

1994).

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Superfund management information system and the two systems were not

compatible.

According to EPA cost recovery managers, the management reports that

EPA uses to forecast future recoveries and determine budget requirements

can understate the costs that EPA cannot recover at sites. When EPA regions

determine that costs at a site cannot be recovered, the regions enter these

costs as unrecoverable into the information system. Yet after making these

initial entries, EPA could still incur additional costs at the site. According to

cost recovery managers in EPA’s Policy and Program Evaluation Division,

regional staff do not always include these additional unrecoverable costs

in the system.

To fix this problem, EPA plans to use a link between the financial

accounting system and the Superfund management information system to

automatically update the unrecoverable costs expended at sites. Also,

according to EPA cost recovery staff, using the link between the two

systems will allow EPA to regularly produce cost recovery status reports as

needed. EPA cost recovery staff said that information on direct costs is

being transferred between the two systems, but the transfer of information

pertaining to indirect costs may not be completed until early in fiscal year

2000.

Conclusions EPA has not recovered billions of dollars because it has understated the

amount of indirect costs it charges to responsible parties. Until EPA adopts

a new method of allocating indirect costs to parties, it will continue to

forgo federal funds that it could, in turn, use to accomplish more cleanups.

Additionally, until EPA responds to our prior recommendation that it adopt

a more meaningful performance measure that compares what it recovers

with what it could have recovered in aggregate on an annual basis—tracks

the measure over time, determines the major causes of significant

fluctuations, and assesses the need for any actions to address identified

problems, the agency cannot demonstrate its progress in recovering costs.

Finally, EPA has responded to our past concerns and has modified its

information systems to decrease its reliance on inefficient manual

processes and provide better data on its recovery of costs. However, until

the agency fully completes the transfer of cost data on site cleanups from

its financial management system to its Superfund management

information system, expected in early fiscal year 2000, the agency will not

have all of the information it needs to determine the status of recoveries

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Its Cost Recovery Efforts

and unrecoverable costs and to accurately project future budget needs for

the Superfund program.

Recommendation To improve EPA’s ability to recover cleanup costs from private parties, we

recommend that the Administrator, EPA, ensure that the Superfund cost

recovery program applies the agency’s new indirect cost rate as soon as it

is approved as part of cost recovery settlements.

Agency Comments We met with EPA officials, including the Director of the Policy and Program

Evaluation Division within the Office of Site Remediation and

Enforcement and the Chief of the Program and Cost Accounting Branch in

the Financial Management Division, the offices responsible for managing

the cost recovery program, to obtain their comments on our discussion of

cost recovery issues. EPA generally agreed with the content and

presentation of information regarding its recovery of indirect costs and is

considering establishing a performance measure to better evaluate the

progress of the program. EPA questioned the need for a more formal goal to

take earlier action on cost recovery cases, however. The agency, in

conjunction with the Department of Justice, and an independent

accounting firm hired to review the methodology, expects to approve the

new methodology for computing indirect costs by the end of

September 1999. Subsequently, the agency could develop a new indirect

cost rate to charge indirect costs to responsible parties. In relation to

creating better performance measures to evaluate the program, the agency

noted that currently, the recovery program managers annually make an

estimate of the amount the agency expects to obtain as a result of cost

recovery actions. The agency agreed to consider whether this estimate

could serve as the basis of a performance measure for the program and

whether EPA could track the amount obtained against this estimate. In

addition, EPA provided us with more current cost recovery data through

the end of fiscal year 1998 and we revised the relevant figures in our report

accordingly. We also made several technical changes to the report based

on EPA’s comments.

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EPA Has Improved Its Management of

Superfund Contracts but Still Does Not

Effectively Control Some Cleanup

Contractors’ Costs

EPA has responded to our past concerns—that it was not completing

Superfund contract audits, using independent estimates to set the best

contract prices for the government, and controlling some contractors’

overhead costs. However, its actions have been slow and some have not

gone far enough to protect the government from exposure to unnecessary

costs. EPA has reduced its backlog of required contract audits and is more

frequently using its own estimates of what cleanup actions should cost to

negotiate contract prices. However, EPA regions have some poorly

prepared cost estimates and do not always effectively use them to

negotiate the best prices for the government, in large part because some

managers lack cost-estimating experience and training, as well as

historical data on actual cleanup costs to help them develop estimates. In

addition, while EPA has taken steps to reduce contractors’ high program

support costs, these costs continue to be high for a majority of EPA’s new

Superfund contracts. EPA is addressing some of these concerns through its

“Contracts 2000” improvement team, but it does not have a plan with

milestones for implementing corrective actions.

Contract Audit

Backlog Has Been

Reduced

At the time of our 1997 review, EPA had a backlog of more than 500

required Superfund contract audits. The purpose of these audits is to

evaluate the adequacy of contractors’ policies, procedures, controls, and

performance. The audits are necessary for effective management and are a

primary tool for deterring and detecting fraud, waste, and abuse. An audit

backlog increases the potential for problems to go undetected or

uncorrected, especially if, for example, a contractor goes out of business

before an audit is completed.

Since that time, both EPA’s Office of Inspector General, which is

responsible for periodically auditing the agency’s contractors, and the

Defense Contract Audit Agency (DCAA), which conducts audits of EPA

contractors when EPA is not the primary agency providing work and

funding to the contractor, have reduced their backlogs and are trying to

perform audits within defined time periods. For instance, staff within the

Office of Inspector General stated that the office has established a goal to

perform an audit within 2 years of when EPA requests it. For contractors

that submitted the necessary information, the office was able to perform

almost all of the audits within this time frame, and it plans to perform the

remaining audits during fiscal year 1999 to be in full compliance with this

goal. EPA is also working with the remaining contractors to obtain

complete information in a timely manner. DCAA officials said that the

agency began an initiative in the early 1990s to address its backlog and

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Contractors’ Costs

become current by 1997. It reached its goal and has been able to perform

audits within 1 year of when larger contractors submit complete

information and within 2 years of when smaller contractors do so. While

we did not review the quality of these audits, conducting them in a more

timely manner should help EPA to reduce the risk of fraud, waste, and

abuse in the use of Superfund contract dollars.

EPA Cannot Ensure

the Best Possible

Price for Contracted

Work

EPA is now generating independent estimates of what contract work

should cost and is using them to negotiate lower contract costs. However,

EPA’s estimates are still often lower than the final contract price agreed to

by EPA—an indication that the estimates are of poor quality, according to

the agency’s Financial Managers’ Financial Integrity Act Report. In a

number of other cases, the final contract price matched the contractor’s

estimate, an indication that EPA may not be negotiating for a better price.

EPA has only recently begun to address the two barriers to better cost

estimates that its contract managers identified: (1) their inexperience and

insufficient training and (2) the lack of a database of past actual contract

costs to help them better determine what future contracts should cost. EPA

is designing corrective measures for these barriers but has had past

problems in getting the regions to fully adopt such measures.

Regions Are Generating

Some Inaccurate Estimates

and Are Not Routinely

Using Estimates to Control

Costs

In our prior reports, we stated that EPA needed to develop its own

estimates of what the work intended for its Superfund contractors should

cost and use these estimates to negotiate the best contract prices for the

government. This is a practice the U.S. Army Corps of Engineers (the

Corps)—an agency with cost-estimating and contract management

expertise—uses to manage environmental cleanup costs. In subsequent

reviews of EPA’s contract management, we found that the agency had

begun to develop such estimates, but their quality and use varied among

the regions.

In 1997, we reviewed 26 work assignments that EPA had issued to

contractors and found that EPA had prepared cost estimates for 21, or

about 80 percent, but did not routinely use these estimates to negotiate

lower contract prices.1 EPA accepted the contractor’s estimate as the final

contract price for each of the 21 assignments. In our current review, we

found that EPA was using its estimates more effectively. We reviewed the

35 highest-dollar-value work assignments in three regions and found that a

1

Work assignments are the work plans EPA issues to contractors under large, previously awarded

regional contracts that specify statements of work for defined products or services.

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Contractors’ Costs

cost estimate had been prepared for all of the assignments and that EPA

had accepted the contractor’s estimate as the final price in 10, or

29 percent, of the cases.2

According to EPA’s criteria, a key measure of the quality of EPA’s cost

estimates is the closeness of the estimate to the negotiated final contract

price. As figure 4.1 illustrates, there was a close match (within 15 percent)

between EPA’s estimate and the final contract price for 18, or about half, of

the assignments. (Percentages do not add up to 100 percent due to

rounding.)

Figure 4.1: EPA’s Estimate Compared

With the Final Contract Price for 35

Work Assignments

For 11 assignments, EPA’s estimate was lower than the final price, and for 6

assignments, its estimate was higher. For 6 assignments, EPA

overestimated the final price by 17 to 36 percent and a total of $769,000.

For 11 assignments, EPA underestimated the final price by 15 to 101

percent and a total of about $2 million. EPA work assignment managers did

not always document reasons for the differences, as EPA requires, even

2

We reviewed work assignments that EPA issued from Jan. 1 to Sept. 30, 1997. We selected this time

period in order to be consistent with the methodology we used in our prior review. Most of these

assignments—20, or 57 percent—were for contractors to oversee cleanup work for EPA or to assess

the nature of contamination at a site. Another 7, or 20 percent, were for actual cleanup activities; 3, or

9 percent were to design a cleanup method; and the remaining 5, or 14 percent, were for study,

security, or support activities.

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Contractors’ Costs

though comparing and documenting differences could identify problems

with cost-estimating practices and alternatives for improvement.

EPA Does Not Have the

Staff Skills or Data Needed

to Accurately Develop Cost

Estimates

Of the 34 work assignment managers we interviewed, 15, or about

44 percent, said they lack sufficient experience to effectively and

accurately develop estimates.3

 As a result, these managers said, EPA’s

estimators omit the costs of key work tasks, underestimate the experience

and salary level of contractor personnel, and underestimate the extent to

which subcontractors will be used. Six managers said they rely heavily on

the contractors to determine what tasks should be included in a work

assignment and how much the work should cost. Fifteen managers held

the opinion that contractor personnel are better prepared and more

qualified to estimate contract costs. One of the managers said that the

contractor knows best and EPA will do whatever it takes to keep the

contractor happy because the agency needs the contractor to perform the

work. These attitudes raise questions about EPA’s willingness and ability to

ensure that the agency is paying the best price for the work performed.

These managers wanted more training on cleanups and cost estimating, as

well as access to experienced estimators who could help the EPA managers

improve their estimates. EPA’s internal reviews and our reports have also

identified the need to adequately train regional contracting personnel as

effective cost estimators and enhance their negotiation techniques.4

However, few of the managers we interviewed said they had received such

training. Instead, most were using on-the-job experience to fill this training

gap, but it was not effective because the managers develop only a few

estimates each year. The director of EPA’s Office of Acquisition

Management noted that in the past, some regions hired trained estimators

to develop cost estimates but had to discontinue this practice because of

budget cuts.

To compensate for their lack of experience and training, several work

assignment managers have worked as a team with both the EPA contract

manager and the cleanup project manager to develop estimates for sites.

Two of the three regions in our review had established such teams, and

their estimates were closer to the final contract prices than the third

3

We did not interview the manager for one work assignment because no significant problems were

found in the assignment and the manager was not available because of extended leave.

4

High-Risk Series: Superfund Program Management (GAO/HR-95-12, Feb. 1995; GAO/HR-97-14,

Feb. 1997), and Acquisition Management: OMB Requested Review of EPA Contracting

(OIG/E1SKF7-04-0037-7100301, Sept. 30, 1997).

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region’s estimates. In addition, some regions have made arrangements

with other collocated federal agencies, such as the Corps and the

Department of the Interior’s Bureau of Reclamation, to have their work

assignment managers seek assistance from staff at these agencies with

experience in developing cost estimates. More widespread use of this

resource by EPA regions could help managers gain the training and

experience they need to improve the quality of their cost estimates.

In addition to inexperience, all 34 work assignment managers cited a lack

of access to historical site-specific cost data as a problem that adversely

affected their ability to develop accurate cost estimates. As early as 1992,

an EPA contract management task force determined that the absence of a

database of historical information on the types of cleanup tasks conducted

at similar sites and the associated costs of those tasks hampered cost

estimators. The task force concluded that EPA should develop such a

database, and EPA’s Office of Inspector General reiterated this conclusion

in a 1997 study, recommending that the agency either develop such a

database or obtain access to similar databases from the Corps or private

agencies that conduct cleanups.5

To date, EPA has not established this database. When EPA awarded its

Superfund contracts, beginning in 1995, it created a contract management

information system. While the primary objective of the system was to

collect the current data needed to monitor the Superfund program’s

overall resources, the agency subsequently decided that the system could

also serve as the historical cost database that estimators need. However,

at the time of our review, EPA was testing the system and had not

determined how estimators would use it. In addition, EPA does not plan to

enter historical data into this database; instead, it plans to start collecting

data when the database becomes operational. Consequently, it will take

several years to gather enough baseline data to support cost estimates.

Furthermore, several work assignment managers noted that the system is

designed to collect only summary statistical cost data on the contracts and

not the detailed site-specific data they need for their estimates. According

to several regional contract management staff, they need both current and

historical site-specific task and cost information to develop quality

estimates. The director of EPA’s Office of Acquisition Management noted

that a limited EPA analysis had indicated that it might be too costly to

collect data at this level of detail.

5

Acquisition Management: OMB Requested Review of EPA Contracting (OIG/E1SKF7-04-0037-7100301,

Sept. 30, 1997).

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Corps Superfund program managers reinforced the need for historical

site-specific task information to support cost estimates. The Corps

includes such data in its cleanup database, but this database may not be

complete enough to meet EPA’s needs. For example, the Corps primarily

conducts construction activities at a cleanup, while EPA manages other

types of activities, such as overseeing the cleanup. In addition, the Corps

primarily uses fixed-price contracts for its cleanup work, so it is more

certain of the tasks the contractor will conduct and the costs it might

incur. EPA, on the other hand, has used primarily cost-reimbursable

contracts for cleanups, so it is less certain of the tasks to be covered and

the costs it will incur under such a contract. Nevertheless, the Corps

managers believe a historical database would help EPA better manage

these uncertainties and develop more accurate estimates.

EPA’s Plans to Improve

Cost Estimates May Not

Address Recurring

Problems Unless

Implemented Agencywide

EPA has taken two actions to identify problems with its cost-estimating

procedures and design corrective actions. First, in response to our reports

and the Office of Inspector General’s findings, in fiscal year 1998, EPA

declared Superfund contract management, including independent

government cost estimates, as an agency-level weakness to address and

established a workgroup to develop corrective action plans and

milestones. The group also identified other steps EPA could take, including

conducting more in-depth reviews of regions’ cost-estimating procedures,

designing solutions to any problems identified, sharing any lessons learned

from this review among the regions, and providing work assignment

managers with more training.

Second, to implement some of the corrective measures, EPA, in June 1998,

entered into an agreement with the Corps to conduct reviews of the

region’s cost-estimating practices and recommend potential

improvements. The Corps plans to evaluate EPA’s cost-estimating policies

and procedures, as well as the automated systems that could support cost

estimating, and assess the extent to which EPA’s 10 regions are in

compliance with these policies and procedures. As part of this effort, the

Corps plans to determine the training needs of EPA’s contracting personnel.

The Corps expects to submit a final report to EPA by early spring 1999, and

EPA hopes to begin implementing any recommendations in

September 1999. The agency is also waiting for the Corps’ report before it

decides what types of historical information cost estimators need, whether

and how to collect it, and how estimators can use it.

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While EPA has taken similar actions in the past, we continue to find the

same problems with some estimates, demonstrating that the regions do

not uniformly make improvements. According to the director of Superfund

Programs, the regions operate autonomously and do not always

implement headquarters’ directions in the same way. To illustrate, he

pointed out that the newly developed Superfund contract information

management system was created by the programmatic side of EPA, and

now the contracting side of the agency is developing its own contract

information management system. Because the two groups did not work

together, the agency has to try to link the two systems. The Superfund

Assistant Administrator also acknowledged that the regions may not

sustain improvements in their estimating practices.

EPA Is Still

Experiencing Some

Contract Management

Deficiencies

When EPA replaced its expiring Superfund contracts with the Response

Action Contracts it now uses for cleanup actions,6

 it wanted to correct

several contract deficiencies. In particular, it wanted to reduce both the

number of contracts it awarded and the high program support costs it was

paying to contractors for items such as managers’ salaries, rents,

computers, telephones, and reports.7

 In the past, EPA put too many

contracts in place and did not have enough work to give all of the

contractors. Even if the contractors were conducting relatively little

cleanup work, they were continuing to incur monthly program support

costs. As a result, a high percentage of the total contract costs was going

to cover these administrative expenses rather than actual cleanup costs.

Although EPA has awarded fewer new contracts, it may still have too many

contracts in place compared with the current and projected future

Superfund cleanup workload, and the program support costs for 10 of the

15 new contracts continue to be high.

These concerns, however, may be only symptoms of more systemic

questions about the ways in which EPA establishes contracts for Superfund

work. EPA’s current “Contracts 2000” initiative may begin to address some

of these questions. We are concerned, however, that EPA has not been able

to provide documentation that clearly describes overall strategies and time

frames for implementing changes from the initiative.

6

In September 1992, EPA’s Superfund Long-Term Contracting Strategy workgroup recommended

integrating the agency’s responsibilities to clean up sites or oversee responsible parties’ cleanups into

a single regional contracting mechanism–the Response Action Contract.

7

Program support cost percentages are calculated by dividing the total non-site-specific costs by the

total contract costs.

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The New Contracts’ High

Program Support Costs

Still Result, in Part, From

Insufficient Contractor

Workload

At the time of our current review, EPA had awarded 15 of its new Response

Action Contracts, valued at a total of more than $60 million.8

 When EPA

awards a contract, it specifies that the contractor will obtain up to a

certain dollar amount of cleanup work over a given time period. As the

contractor conducts work, it incurs costs—both direct costs that can be

attributed to an individual site and indirect costs that are not site specific.

EPA pays the contractor for both types of costs. EPA tracks the amount of

non-site-specific costs it pays as a percentage, or rate, of the total contract

costs that it covers.

In the past, we have expressed concern that contractors’ program support

costs, as a percentage of total contract costs, have been too high. Since the

mid-1990s, EPA has used 11 percent as its target for program support costs.

In our 1997 review, however, we found that the program support cost rates

for expiring Superfund contracts ranged from 15 to 22 percent over the life

of the contracts, in part because EPA did not control these costs in the

early years of the contracts. We also reported that some of the new

Response Action Contracts were continuing this pattern, with program

support costs of 21 to 38 percent of total costs, making it more difficult for

EPA to meet its target rate of no more than 11 percent over the life of these

new contracts. In August 1998, we reported that EPA Superfund

contractors were spending about 29 percent of their total contract costs

for program support.9

During our current review, we found that the program support cost rates

for a majority of the new contracts were still high. As of September 1998,

EPA reported that the rates for only 5 of the 15 contracts were below EPA’s

target of no more than 11 percent, ranging from about 7 to 10 percent. The

rates for the remaining 10 contracts ranged from about 16 to 59 percent of

total contract costs. One of the primary reasons for these high program

support cost rates continues to be that EPA has too many contracts in place

compared with the available cleanup workload. According to several EPA

contracting officers, the agency expects such high rates for new contracts

until the agency has had time to award enough work to all of the

contractors. The officials predict that as EPA awards more work

assignments, these program support cost rates should decrease. However,

our prior work demonstrated that although EPA made this same prediction

for its expired contracts, their rates remain high.

8

EPA plans to eventually award a total of 19 Response Action Contracts nationwide.

9

Superfund: Analysis of Contractor Cleanup Spending (GAO/RCED-98-221, Aug. 4, 1998).

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When EPA began replacing its expiring contracts with new contracts in

1995, it had to decide how many contracts to award. In September 1992, it

used the number of work assignments under its 45 expiring contracts to

project the number of work assignments it would have in the future.

Because the agency expected the number of work assignments to remain

steady, it believed that if it reduced the number of contracts it awarded, it

could give these contractors more work, and the program support cost

rates would decrease. EPA decided to reduce the number of contracts from

45 to 22. The agency had determined that it should have at least two

contracts in each region, and perhaps three in large regions so that, among

other things, contractors would have to compete for work, helping to keep

costs down. In reality, however, contractors do not compete for work

assignments; rather, EPA regional contracting officials attempt to distribute

the work assignments so that each contractor receives a fair share of the

work.

Subsequently, EPA decided to award only 19 of the 22 planned

contracts–three regions will have only one contract—because it no longer

thinks it will have the workload it originally predicted. However, EPA may

still have more contracts in place than it needs. While uncertainty exists

about how many sites will be included on the National Priorities List in the

future, the agency has been listing fewer sites in recent years. For

example, EPA proposed about 30 sites during fiscal year 1998, compared

with an average of about 75 sites in earlier years. Thus, the likely number

of cleanups will be significantly smaller than EPA originally estimated.

Although EPA headquarters program managers have said that the agency

hopes to add an average of about 40 new sites annually to the program

beginning in fiscal year 1999, the four EPA regions with the highest

Superfund workload indicated that, as the states take on greater cleanup

responsibilities, fewer sites will enter the program. With fewer sites,

contractors will have less work and EPA will have less chance to reduce its

program support cost rate.

EPA will soon have an opportunity to review the number of contracts it

should have in place. EPA designed the current Superfund contracts to last

5 years, with an option to renew them for another 5 years. Several of the

current contracts will soon be 5 years old, and EPA will have to determine

whether to renew them. A representative from EPA’s Office of Acquisition

Management said the office plans to consider a number of factors,

including the uncertainty over the number of sites that will be placed on

the National Priorities List, the contractor’s performance, and the Corps’

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involvement in cleanups when determining which contract options to

renew.

Actual Program Support

Costs Are Higher Than

EPA Reports

In the past, EPA classified as program support costs the start-up costs that

contractors incurred to prepare their personnel and administrative

systems to perform the projects under their contract. These start-up costs

are known as mobilization costs and are technically part of a contractor’s

overhead costs. Under the new contracts, EPA excluded reporting these

costs (a total of more than $1 million) in the program support category,

because it viewed them as one-time costs that should be tracked

separately. Nevertheless, these costs are program support costs, and when

they are included, the 15 new contracts have average program support

costs ranging from about 7 to 76 percent, rather than the 7 to 59 percent

reported by EPA. Several senior managers in EPA’s Office of Acquisition

Management agree that mobilization costs should be included in

calculations of program support costs. As noted, the program support cost

rate for 10 of EPA’s 15 new contracts exceeds EPA’s target rate of no more

than 11 percent. The rates range from 16 to 76 percent, with a median of

28 percent and an average of 36 percent.

New EPA Tracking and

Reporting Requirements

Increased Program

Support Costs

In part because of concerns about contractors’ high program support

costs, EPA has required the 15 contractors to provide more detailed

breakdowns of their costs to help the agency better monitor and control

costs. EPA has required the contractors to break down costs that it cannot

assign to any one site, such as program support costs, into defined

categories (e.g. program, administrative, and technical support) and track

the costs by these categories. In implementing this requirement, EPA

provided funds for the contractors to set up these categories and tracking

mechanisms, and in doing so, took some actions that were inefficient and

increased the support costs. First, rather than creating the software

needed to set up and track the categories and providing it to each

contractor, EPA paid each contractor to develop its own software. While

EPA did not track the dollars devoted to developing software, senior

officials in the Office of Emergency and Remedial Response told us that a

substantial portion of the mobilization costs was devoted to this effort.

Second, while several contractors have contracts in multiple locations, EPA

typically paid each location to develop its own software, rather than just

paying the parent contractor to develop one system and requiring the

contractor to distribute the system. In some cases, however, EPA required

the parent contractor to share the software it developed with its various

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regional offices. For example, Region III was able to save up to $90,000 on

one contract by requiring that the parent contractor, which had received

funds from another EPA region, to develop the software in that location,

and in turn, provide the software to its office within Region III.

Problems Raise Broader

Questions About

Superfund Contracting

That Could Be Addressed

Through EPA’s Contracts

2000 Initiative

While assessing EPA’s progress in correcting these past contract

management problems, we determined that the problems may be

symptoms of more systemic issues associated with EPA’s Superfund

contracting practices. The problems raise the following questions:

• Could the agency more quickly and aggressively test and implement

alternative types of contracts in addition to or instead of using

cost-reimbursable contracts as it now does? Cost-reimbursable contracts,

under which EPA agrees to pay all of a contrator’s allowable costs, place

most of the financial risk on the government because the work that needs

to be performed is, to varying degrees, uncertain. This uncertainty

prevents EPA from accurately predicting the costs involved in performing

the work. To a limited extent, EPA has effectively used fixed-price

contracts for clearly defined and more routine cleanup actions. These

contracts reduce the financial risk to the government because the parties

agree on a price for the contractor’s activities and the contractor bears the

risk of accomplishing the activities at this price. Because of its success to

date, according to the director of EPA’s Office of Acquisition Management,

the agency plans to use more fixed-price contracts in the future.

Meanwhile, the Office of Management and Budget has also been urging EPA

and other federal agencies to make a more concerted effort to use

performance-based contracts. These contracts establish a price structure

for a contractor’s services that rewards the contractor for superior

performance, allowing the government to better ensure the receipt of

high-quality goods and services at the best price. EPA has a few ongoing

performance-based demonstration contracts that appear to be achieving

positive results.

• Is it cost-effective for EPA to duplicate the infrastructure necessary to

manage contracts in each of its 10 regional offices?

• Are there new and more effective ways to build more competition into

EPA’s contracting process as a means to better control costs and ensure

quality, such as competing each work assignment?

• Has EPA lowered its costs by using the Corps for more of its cleanup work,

and, if so, how much of the cleanup workload should the Corps assume?

Because the Corps specializes in and conducts a significant amount of

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construction contracting for the federal government, it may be better

equipped than EPA to manage Superfund construction contracts.

EPA’s Contracts 2000 initiative—an outgrowth of the Long-Term

Contracting Strategy that the agency has been using to put in place

necessary contracts as well as to assess and update its contract

management practices—may address some, but not all, of these questions.

EPA has identified various contracting issues, including the type and

number of contracts used, that it needs to address. However, the initiative

does not consider opportunities for making more use of competition and

of the Corps, nor does it address the need for a contract management

office in each of the 10 regions. Furthermore, EPA has not been able to

provide us with documentation that clearly describes (1) the strategy for

evaluating these areas and (2) the time frames for implementing the

Contracts 2000 team’s decisions about improvements. As a result, we are

concerned about whether EPA will move quickly enough before it extends

the existing contracts for another 5 years and develops a strategy for

ensuring that any changes become permanent. Our progress reviews over

the years have consistently shown that without sustained high-level

management attention, EPA has not always succeeded in implementing and

sustaining past contracting reforms.

Conclusions EPA’s and DCAA’s progress in reducing the contract audit backlog will

reduce the government’s risk of contractor fraud, waste, and abuse of

Superfund dollars. EPA’s more frequent use of independent government

estimates to negotiate the final prices for contracted work should help to

ensure that the government gets the best possible prices for this work.

However, until EPA addresses its cost estimators’ lack of experience and

training in developing estimates, the government is at risk of paying too

much for some cleanup work. Enlisting the Corps to assess the EPA

regions’ cost-estimating practices and data needs and to recommend

training and other improvements has the potential to correct the recurring

problems that we find. Sustaining such improvements in the regions over

the long term has also been a problem. Unless EPA establishes some

system to monitor the regions’ implementation of such changes—by, for

example, routinely testing the regions’ cost-estimating and

price-negotiating practices during formal regional reviews—we may

continue to find problems.

Also, cost estimators still do not have access to historical site-specific cost

data, and until they do, they cannot generate the most accurate estimates

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possible. Because EPA’s contract management information system most

likely will not provide the detailed historical site-specific cost data

estimators say they need and will not be available in the near future, the

agency will have to consider other cost-effective alternatives for providing

these data. To generate estimates, broader use of regional teams that

include the cost estimator, contract manager, and program manager for a

site, as well as access to experienced estimators and historical databases

provided by other agencies within a region’s geographical area, could be

effective interim measures that the agency could take.

The agency has also taken important steps to reduce the program support

costs that it pays contractors, particularly reducing by more than half the

number of contracts that it has in place. However, without taking

additional steps, such as deciding not to renew some contracts because

the contractors have performed poorly or not enough work is available for

the remaining contractors, the agency will continue to pay these high

administrative expenses, making less funding available for cleanup.

Finally, EPA’s Contracts 2000 initiative offers the agency the opportunity to

assess and improve its overall contracting practices, allowing it to make

wider use of the Corps in cleanup work and enter into more fixed-price or

performance-based contracts. However, without an implementation

strategy with milestones to make needed improvements agencywide, EPA

will not establish and sustain better contracting practices.

Recommendations To build on EPA’s momentum to address the contract management

concerns we have identified, we recommend that the Administrator, EPA,

instruct the director of the Office of Acquisition Management to work with

the Assistant Administrator for Solid Waste and Emergency Response to

• develop procedures to ensure that the corrective actions EPA implements

in response to recommended actions from the Corps result in improved

cost estimates;

• periodically review whether the regions have consistently implemented

the corrective actions;

• identify a cost-effective method of providing estimators with access to the

detailed historical site-specific cost data they need to generate more

accurate estimates;

• complete a review of the number of contracts the agency needs to keep in

place, given the future cleanup workload, and do so before it loses the

opportunity to close out some of the contracts whose base periods are

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expiring, allowing the agency to choose whether to exercise its option to

renew these contracts for another 5 years; and

• ensure that the Contracts 2000 initiative results in a comprehensive

strategy, with specific tasks and milestones for their completion, for

improving the agency’s contract management practices.

Agency Comments We met with officials from EPA’s Office of Acquisition Management and

Office of Solid Waste and Emergency Response, including the director of

Superfund Programs and the director of Contract Management, who

generally agreed with the basic findings and recommendations of the

report. The agency provided various clarifying and technical corrections,

which we incorporated in the report as appropriate. EPA agreed with our

recommendations to periodically review the regions’ implementation of

cost-estimating corrective actions and noted that teams from both the

Office of Solid Waste and Emergency Response and the Office of

Acquisition Management could monitor implementation during their

regional reviews.

In response to our recommendation to use historical data to improve cost

estimates, EPA expressed concern that some estimators relied too much on

outdated historical data, leading to inaccurate estimates. The agency

stated that it was more critical to focus on helping estimators learn to

develop a more detailed breakdown of site-specific tasks and activities to

be conducted and to cost out these activities, rather than spending the

resources to build a nationwide database. We agree that EPA estimators

need to develop detailed site-specific tasks to improve their estimates

because our work demonstrated that they often leave out key steps when

developing their estimates, as we point out in this report. However,

because the estimators themselves and the Corps identified historical data

as a critical component for accurate cost estimating, we continue to call

on the agency to also provide historical data that estimators can use as a

baseline to cost out these specific tasks once estimators have developed

them. Furthermore, our recommendation calls on the agency to identify a

cost-effective method for providing these data but does not prescribe that

the agency build a nationwide database.

In regard to our concerns about contractors’ high program support costs,

EPA recommended that we exclude two relatively new Superfund contracts

from our analyses of program support costs because the agency has not

had enough time to assign work to these contracts. Including such

contracts makes program support costs high as a percentage of cleanup

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costs. EPA expects these percentages to decrease over time as contractors

obtain work assignments. We did not adjust our program support cost

analyses in response to EPA’s comments but did note the agency’s point

about new contracts in our report. We believe it is critical that EPA seek to

reduce contractors’ program support costs from the beginning of a

contract. As our 1997 report demonstrated, EPA was not able to meet its

target of 11 percent for many of the expiring Superfund contracts, in part

because the percentage of program support costs was so high for

contracts in the early stages and EPA did not have enough cleanup work to

award to contractors to decrease these costs over time. As we have noted

in this report, the likely number of future cleanups could be significantly

smaller than the number EPA originally estimated, making it difficult to

reduce the program support cost percentages for its current contracts over

time.

Finally, the agency agreed with our recommendation that it use its

Contracts 2000 initiative to improve contract management and provided

examples of various efforts the agency has undertaken. These included

(1) exploring the use of different types of contracts, (2) having each region

use a performance-based contract for a pilot Superfund cleanup project,

and (3) evaluating contractors’ performance before assigning them work.

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Objectives, Scope, and Methodology

Because the Environmental Protection Agency (EPA) has not always taken

actions to address the concerns about the Superfund program’s

management that we identified in our prior work, the objectives of this

review were to determine if the agency had more fully addressed these

concerns since we issued our last report. Specifically, we wanted to know

if the agency (1) uses relative risk factors to set cleanup funding priorities,

(2) is more effectively managing its cost recovery program, and (3) has

improved its efforts to manage cleanup contract management costs.

Objective 1: Assessing

How Agencies Use

Relative Risk to Set

Cleanup Funding

Priorities

To respond to this first objective, we conducted interviews with EPA site

assessment managers—officials responsible for assessing sites and

determining which ones to place on the National Priorities List—and

remedial managers–officials responsible for overseeing the cleanup

process—in 4 of EPA’s 10 regions: regions I (Boston), II (New York), IV

(Atlanta), and V (Chicago). We selected these regions because they have

the largest number of sites that are awaiting consideration for listing and

are already listed. To understand the agency’s overall approach and

priorities in assessing and listing sites, we interviewed and obtained

relevant documents from the director, deputy director, and staff of the

State, Tribal, and Site Identification Center within the Office of Solid

Waste and Emergency Response (OSWER). We also interviewed the chair

and 4 of 10 regional representatives on EPA’s National Prioritization

Panel—the panel that ranks all of the sites ready for construction of the

cleanup remedy nationwide for funding on the basis of their relative

risks—to understand how the panel uses relative risk to allocate funds

among these sites. We obtained and reviewed documents that describe the

criteria and weights the panel uses to score and rank sites. In addition, we

examined the panel’s funding decisions for fiscal year 1997, confirming

that they were based on the panel’s ranking. EPA provided us with updated

information on the panel’s decisions for fiscal year 1998.

To understand EPA’s responsibilities and approach to federal facility

cleanups, we met with the associate director of OSWER’s Federal Facilities

Restoration and Reuse Office–the office charged with responsibility for

working with federal agencies to facilitate fast, protective, and

cost-effective cleanups. To understand the role of EPA’s regions in the

federal facilities cleanup process and to learn whether and how the

regions could influence cleanup funding priorities at federal facilities, we

interviewed managers who oversee federal facility cleanups in regions IV

(Atlanta), V (Chicago), VIII (Denver), IX (San Francisco), and X (Seattle).

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We also met with officials of the departments of Agriculture, Defense,

Energy, and the Interior. We selected these agencies because they are the

agencies responsible for the largest number of federal facility cleanups.

First, to determine each department’s overall policies and procedures for

using relative risk in funding decisions, we talked with headquarters

personnel in charge of environmental cleanup programs. Then, as

necessary, we visited regional offices to test how field offices

implemented these relative risk policies and used relative risk to make

cleanup funding decisions.

Department of Agriculture To obtain information on overall policies and procedures for Agriculture’s

cleanup program and on the Department’s use of relative risk to set

cleanup funding priorities, we selected the Forest Service from among

Agriculture’s five services with sites on EPA’s federal facilities docket for a

more detailed review. The Forest Service has the largest number of

potential hazardous waste sites to date. We met with officials from the

Hazardous Waste Management Group in Agriculture’s Office of the Deputy

Under Secretary for Natural Resources Management and Environment. We

also met with the chief engineer for environmental restoration within the

Forest Service’s Engineering Office because the engineer oversees the

Forest Service’s ranking system for cleanup activities and is responsible

for allocating the Forest Service’s hazardous waste management budget to

its regional offices.

To test the Forest Service’s progress in using relative risks to set priorities

for funding decisions, we visited one of nine regions, the Intermountain

Region in Ogden, Utah. We selected this region because of its large

number of planned cleanup activities, hazardous waste management

budget, and potential number of abandoned mine sites. To assess the

Forest Service’s progress in developing an inventory of potential

hazardous waste sites and in characterizing the risks at those sites, we met

with the environmental engineer in charge of that region’s hazardous

waste cleanup program and a staff member in charge of developing an

inventory of abandoned mines. We also interviewed the engineer about the

priorities for cleanup activities in the region and reviewed relevant budget

and progress reports to determine the extent to which funding decisions

were based on a consideration of relative risk.

Department of Defense To gather information on Defense’s overall policies and procedures for

setting funding priorities for cleanups, we met with officials in the Office

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of the Deputy Under Secretary of Defense for Environmental Security.

These officials are responsible for the Defense Environmental Restoration

Program, which is designed to clean up hazardous substances associated

with past activities on the Department’s lands and on lands that the

Department formerly owned or used. We also reviewed relevant policies

and procedural documents, including ones addressing relative risk

evaluation procedures, data quality assurance plans, and management

guidance for the Restoration Program. To understand the Department’s

overall budgeting process for environmental restoration, we spoke to a

senior budget analyst in the Department’s Office of the Comptroller in

charge of reviewing all environmental budget submissions throughout the

Department of Defense.

To examine Defense’s progress in implementing its relative risk policies,

we reviewed the Restoration Program’s annual reports to the Congress.

We also incorporated data from our 1998 report on Defense’s

implementation of its relative risk evaluation process.1

 For this report, we

analyzed data on more than 6,000 sites from 97 installations and obtained

detailed information from an additional 7 military installations to

determine the usefulness of the relative risk data in setting priorities.

We also spoke to a senior program analyst in the Office of the Deputy

Under Secretary of Defense for Environmental Security in charge of

coordinating the Inter-Agency Military Land Use Coordination Committee

and reviewed documents provided to obtain information on the current

status of working agreements between Defense and the land management

agencies for coordinating cleanups on public lands that were previously

used by Defense.

Department of Energy For information on Energy’s overall policies on the use of relative risk to

set cleanup funding priorities, we met with officials responsible for

environmental budget management and the director of the Office of

Science and Risk Policy within the Office of the Assistant Secretary for

Environmental Management. To test Energy’s progress in using relative

risk to set funding priorities, we visited two facilities–Oak Ridge,

Tennessee, and Rocky Flats, Colorado. We selected these offices from

among Energy’s 11 field locations to represent two different types of

cleanups. Rocky Flats is operating on a “fast-track” to clean up and close

1

Environmental Cleanup: DOD’s Implementation of the Relative Risk Site Evaluation Process

(GAO/NSIAD-99-25).

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a nonoperating facility, while Oak Ridge is performing cleanups at an

active facility.

We met with staff who were responsible for risk determination and the

budget process from both facilities’ Environmental Management offices

and discussed the extent to which they used risk to establish cleanup

funding priorities. At Oak Ridge, we compared a sample of the top-ranked

cleanup projects for fiscal year 1999 with the project funded that year to

verify that the funding decisions considered projects’ risks. We conducted

a similar comparison at Rocky Flats. We also reviewed documents

describing both facilities’ methods of ranking risks and budget processes.

In addition, we met with regional EPA officials responsible for the

interagency agreements with these two sites to obtain their views on the

extent to which the priorities for projects established in these agreements

are based on relative risk and Energy is fulfilling these agreements.

Department of the Interior To determine Interior’s overall approach to setting priorities and funding

cleanups, we met with the director of the Office of Environmental Policy

and Compliance and officials responsible for setting guidance for the

Department’s solid and hazardous materials management programs. We

selected the Bureau of Land Management for a more detailed review

because it has the largest number of potential hazardous waste sites

among Interior’s eight bureaus and services. To obtain information on the

Bureau’s use of relative risk to set cleanup funding priorities, we met with

the manager of its Protection and Response Group and officials

responsible for the Bureau’s hazardous materials cleanup program.

We obtained information on the Bureau’s overall progress in developing an

inventory of its sites and cleaning them up from the Bureau’s National

Applied Resource Sciences Center, a support organization that does work

at the request of the Bureau’s field offices, supplying technical specialists

to aid with the development of an inventory and cleanup efforts.

To test the Bureau’s progress in using relative risk to set priorities for

funding decisions, we visited 1 of its 12 state offices, the Nevada state

office in Reno. We selected Nevada because the Bureau manages

approximately 63 percent of the lands in the state, as well as, cleanups on

these lands. Abandoned mines, illegal dumping, and formerly used

Defense sites represent the wide array of problems the Bureau must

address. To assess the Bureau’s progress in inventorying its hazardous

waste sites and characterizing the risks at those sites, we interviewed the

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Appendix I 

Objectives, Scope, and Methodology

environmental protection specialist in charge of the state office’s

hazardous waste cleanup program and the division chief of Minerals

Management, who was responsible for a past effort to develop an

inventory of abandoned mines in Nevada. In addition, we met with the

regional environmental protection specialist about priorities for the

cleanup program to determine whether cleanup funding priorities and

decisions were based on a consideration of relative risk.

To better understand joint efforts by EPA, Agriculture, and Interior to

develop an inventory of abandoned mine lands and clean them up, we

attended the Federal Mining Dialogue Conference, held in Frisco,

Colorado, on October 20-22, 1998. We met with EPA representatives from

Region VIII’s Superfund Remedial Response Program and from the

headquarters Office of Site Remediation Enforcement to discuss federal

facilities enforcement issues. Additionally, we met with environmental

protection or abandoned mine specialists from 6 of the Bureau of Land

Management’s 12 field offices to discuss their approaches to clean up

hazardous waste on their lands.

Objective 2: Assessing

EPA’s Cost Recovery

Program

To assess EPA’s effectiveness in managing its cost recovery program, we

met with and obtained data from cost recovery program managers in

headquarters and two of EPA’s regional offices. In EPA headquarters, we

met with the director of the Policy and Program Evaluation Division and

the chief of the Program Evaluation and Coordination Branch, within the

Office of Site Remediation and Enforcement, located in turn within the

Office of Enforcement and Compliance Assurance. Both the division and

the branch are responsible for monitoring the agency’s progress in

recovering costs, developing recovery policies, and overseeing regional

cost recovery actions. We obtained data on the amounts EPA has and has

not recovered, information on the status of improvements to information

systems supporting recovery actions, and EPA’s cost recovery guidance and

other related documents. In addition, to determine the status of EPA’s

efforts to implement a new indirect cost rate for recovering such costs, we

interviewed and obtained relevant documents from the chief of the

Program and Cost Accounting Branch of the Financial Management

Division, the office that is developing the new rate, and relevant staff

located in the Office of the Chief Financial Officer within the Office of the

Comptroller. Also, to determine EPA’s progress in implementing goals and

performance measures for the cost recovery program, we reviewed the

sections of EPA’s 1999 annual plan for the Government Performance and

Results Act and the Fiscal Year 1997 Audited Financial Statements report

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Appendix I 

Objectives, Scope, and Methodology

from EPA’s Office of the Chief Financial Officer, which contain EPA’s goals

and performance measures for the cost recovery program.

We also spoke with EPA officials in regions IV (Atlanta) and V (Chicago).

We selected Region IV because it is unique in pursuing cost recovery at

sites with cleanup costs below $200,000. According to EPA’s policy, the

regions have discretion in deciding whether to pursue cases with cleanup

costs under $200,000 because such cases may not be cost-effective to

pursue. Therefore, we wanted to test Region IV’s experiences. There, we

spoke with the director of the Regional Enforcement Division and the

section chief for Cost Recovery, who are responsible for overseeing cost

recovery actions, in order to determine the region’s role in recovering

indirect costs from responsible parties, tracking goals and performance

measures, and using information systems in cost recovery. We selected

Region V because it is one of EPA’s largest regions and has the largest

number of cost recovery actions. There, we spoke with the section chief

for Cost Recovery and Enforcement and relevant staff, attorneys in the

Office of Regional Counsel, who are the chief legal advisers and

negotiators in cost recovery cases, and staff in the Program Accounting

and Analysis Section, whose function is to manage financial information,

such as billings related to cost recovery actions.

Objective 3: Assessing

EPA’s Superfund

Contracts

Management

To respond to our third objective, addressing contract management issues,

we conducted work at EPA headquarters and three EPA regions. At

headquarters, we met with Superfund program managers in OSWER,

including the deputy director of the Office of Emergency and Remedial

Response—the office responsible for providing policy, guidance, and

overall direction for the agency’s solid waste and emergency response

program and the cleanup of hazardous waste sites. We also met with the

director and senior managers in the Office of Acquisition Management

—the office responsible for managing regional Superfund procurement

operations through contracts and grants. To test how regions were

implementing headquarters’ contract management policies and

procedures, we met with Superfund program and contracting managers in

regions III (Philadelphia), V (Chicago), and VII (Kansas City). We selected

regions III and V because we had included them in our prior contract

management review and could, therefore, determine their progress in

correcting problems and implementing improvements that we had

previously identified. We also selected regions III and VII because they

were among the first EPA regions to award the new Superfund contracts,

beginning in mid-1995. This selection allowed us to evaluate the extent to

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Appendix I 

Objectives, Scope, and Methodology

which these new contracts solved problems we had identified under the

old contracts, such as contractors’ high program support costs.

To test the quality and use of independent government cost estimates to

set contract prices, we conducted a detailed analysis of 35 Superfund

contract work assignments initiated in the three EPA regions, from

January 1, 1997, through September 30, 1997. We had used a similar

9-month time period in our prior reviews; the time period allowed us to

review a significant number of work assignments in order to identify

cost-estimating practices and potential problems. Under the new

Superfund contracts, in Region III, we analyzed all 7 work assignments

initiated; in Region V, we analyzed 15 of 32 assignments; and in Region VII,

we reviewed 7 of 20 assignments. We selected the cases with the highest

dollar value for our review. For one contractor in Region VII, we selected

only 2 of the 10 work assignments because the total dollar value for the

remainder was not significant. We also included all six assignments

awarded under the expiring Superfund contracts, all of which were in

Region V.

We used a structured data collection instrument to review the case file for

each assignment to determine the basis for the estimates, and we obtained

information on the contractor’s proposed and final approved price, as well

as the results of any price negotiations. For 34 cases, we also discussed

the basis for EPA’s cost-estimating decisions, the reasons for significant

differences between the contractor’s estimate and the final contract price,

and any noted errors with (1) the work assignment manager, who

develops EPA’s estimate; (2) the project manager, who reviews the estimate

and supervises the work assignment manager; and (3) the contracting

officer, who also reviews the estimate, leads the cost negotiations, and

awards the work assignment.2

We also met with the U.S. Army Corps of Engineers in Washington, D.C.,

to compare their cost-estimating practices with EPA’s. We met with the

Superfund program manager and other Superfund program officials and

reviewed relevant documents detailing the Corps’ effort to develop a

historical cost database and the EPA regional offices’ use of the Corps’

expertise. In addition, we met with a private Superfund contractor in

Region III to get a general understanding of how contractors estimate

costs for Superfund cleanup activities.

2

We did not contact one work assignment manager because we found no significant problems with the

estimates and the manager was on extended leave while we were conducting our audit work.

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Appendix I 

Objectives, Scope, and Methodology

To evaluate the extent to which EPA has taken action to reduce program

support costs; we met with EPA’s Office of Acquisition Management in

Washington, D.C., to discuss its policies, procedures, and practices. From

the responsible program officials, we obtained quarterly progress reports,

which report costs through September 1998 for each of the 15 Response

Action Contracts issued to that point. To calculate the program support

cost percentages, we divided the program support costs by the total

contract costs. We also included contractors’ start-up costs (mobilization

costs) in our definition of program support costs, even though EPA now

tracks them separately, because they are considered to be program

support costs and we had included these costs when calculating the

percentages in our prior reports.

To determine if the backlog of contract audits had been eliminated, we

met with officials in EPA’s Office of Inspector General in Washington, D.C.

We also met with the Defense Contract Audit Agency (DCAA) in Fort

Belvoir, Virginia, and discussed the backlog with the chief of Policy

Auditing Standards and DCAA audit officials. DCAA and EPA’s Office of the

Inspector General have responsibility for conducting audits of EPA’s

Superfund contractors. We also obtained data from both agencies

documenting the audits the agencies had completed to reduce the audit

backlog.

We conducted our work from May 1998 through April 1999 in accordance

with generally accepted government auditing standards.

Page 75 GAO/RCED-99-111 Superfund Program Management Issues
Appendix II 

Major Contributors to This Report

Resources,

Community, and

Economic

Development Division

Washington, D.C.

Peter F. Guerrero, Director

David G. Wood, Associate Director

Eileen Regan Larence, Assistant Director

Alan Rogers, Assistant Director

Karen L. Kemper, Evaluator-in-Charge

Stephen L. Jones, Senior Evaluator

Dena M. Owens, Evaluator

Elizabeth R. Eisenstadt, Communications Analyst

Chicago Office Willie E. Bailey, Senior Evaluator

Mary F. Nugent, Senior Evaluator

Catherine Anderson, Intern

Office of General

Counsel

Richard Johnson, Senior Attorney

(160443) Page 76 GAO/RCED-99-111 Superfund Program Management Issues
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