Office of Inspector General

 Report of Audit

ACQUISITION MANAGEMENT

REVIEW OF PERSONAL SERVICES

E1BMF7-23-0012-8100251

September 29, 1998
Inspector General Division

 Conducting the Review: Northern Audit Division 

Program Offices Involved: Office of Acquisition

Management

Office of Air and Radiation

Office of Administration and

Resources Management

Office of Prevention,

Pesticides, and Toxic

Substances

Office of Research and

Development

Office of Solid Waste and

Emergency Response

Office of Water

Region 3

Region 6
MEMORANDUM

SUBJECT: Report of Audit No. E1BMF7-23-0012-8100251

Review of Personal Services

FROM: Elissa R. Karpf

Deputy Assistant Inspector General

 for External Audits

TO: Alvin M. Pesachowitz

Acting Assistant Administrator for 

 Administration and Resources Management

A copy of the subject final report is attached. This report contains findings that describe the

results of our review of personal services under EPA contracts. We hope that the results of our

review will be useful to you as you continue to work to assure personal services relationships

between EPA personnel and contractors are avoided.

This report represents the opinion of the Office of Inspector General. Final determinations on

matters in this report will be made by EPA managers in accordance with established EPA audit

resolution procedures. Accordingly, the findings described in this audit report do not necessarily

represent the final EPA position. We have no objection to the release of this report to the public.

Your response to our draft report is included as appendix 1. Based on the Office of

Administration and Resources Management’s response and discussions with our staff, we made

appropriate changes to this final report.

ACTION REQUIRED

In response to the draft report, you provided responsive action plans and milestone dates for

correcting our findings. As a result, and in accordance with EPA Order 2750, we find your

response to the report acceptable. Therefore, we are closing this report in our tracking system as 
2

of this date. Please track all planned actions and milestone dates in the Management Audit

Tracking System. Should you or your staff have any questions regarding this report, please

contact Leah Nikaidoh, Audit Manager, Northern Audit Division at (513) 487-2365.

Attachment
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i Report No. E1BMF7-23-0012- 8100251

EXECUTIVE SUMMARY

PURPOSE In 1997, we reviewed EPA’s progress since 1992 in addressing

contracts management deficiencies identified by the Agency’s

Standing Committee on Contracts Management (Standing

Committee). One of the seven problem areas identified by the

Standing Committee was personal services. During our 1997

review, 38 percent of the contracts we reviewed for personal

services showed indications of such relationships between EPA and

contractors. EPA personnel were co-located with contractors on

all of these contracts, and indications of personal services

relationships occurred throughout the Agency’s programs.

The objectives of this audit were to determine: (1) the extent EPA

contracts included personal services relationships, and (2) the

adequacy of the Agency’s controls to prevent personal services

contracts.

RESULTS IN BRIEF We found specific instances of personal services problems, or the

appearance of such, in over half of the contracts reviewed, and

among nearly all of the major program offices. In several instances,

the agency has taken action to correct the problems. We also found

indicators of personal services in two additional contracts (see

exhibit 1). Because of the number and distribution of such

instances across the Agency, the potential exists that personal

services is a continuing systemic problem. On-site contracts are

especially vulnerable to personal services situations because of the

potential for daily face-to-face interaction between EPA staff and

contractors. Program offices and contracting divisions each must

share the role of ensuring that personal services do not occur. 

Program offices, with the help of contracting offices, should

attempt to eliminate unnecessary interactions with contractors,

including shifting work off-site if possible. 

Instances of personal services, or the appearance of such, occurred

in 13 of 23 (56 percent) contracts, primarily because: (1) EPA

program office employees exercised excessive supervision of

contractor and subcontractor staff, (2) close working arrangements
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ii Report No. E1BMF7-23-0012- 8100251

existed, or (3) contract language and oversight needed

improvement (see chapter 2). EPA improperly treated contractor

staff as Government employees. Normally, the Government

directly hires its employees under competitive appointment or other

procedures mandated by civil service laws. Obtaining personal

services by contract, rather than by direct hire, circumvents those

laws and Office of Management and Budget personnel ceilings. 

Also, in some cases, contractors performed work outside the scope

of their contracts.

The Agency’s controls generally seemed adequate. However, EPA

personnel were not always committed to following the controls,

resulting in the above instances of personal services. Assigning

knowledgeable and committed project officers to monitor contracts

and awarding fixed-priced contracts, in some cases, significantly

reduced the risk of personal services.

RECOMMENDATIONS We recommend that the Acting Administrator for Administration

and Resources Management and the Agency Senior Resource

Officials:

1. Identify all contracts where EPA and contractors are colocated, and evaluate and document whether any on-site

contracts can be moved off-site.

We recommend that the Acting Administrator for Administration

and Resources Management:

2. Direct contracting divisions to incorporate a contract clause

similar to the one used by the Cincinnati Contracts

Management Division (“Government Contractor Relations”)

in all EPA contracts.

3. Direct Agency contracting officers to conduct a site visit at

least annually for all on-site contracts and document

whether personal services deficiencies were identified. If

deficiencies are identified, the contracting officer should

provide needed guidance or recommendations to the project

officer.
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AGENCY COMMENTS The Acting Assistant Administrator for Administration and

Resources Management provided a written response to our draft

report on September 4, 1998. The Acting Assistant Administrator

agreed with all recommendations in this report.

The Acting Assistant Administrator plans to: (1) coordinate with

EPA program offices to complete a review and analysis, within 90

days of this report’s issuance, determining whether contractors

working at EPA locations can be moved off-site; (2) develop an

Agency-wide contract clause to clarify allowable Government/

Contractor Relations; and (3) modify EPA’s Acquisition Regulation

to include the requirement to use this Agency-wide clause. 

Modification of EPA’s Acquisition Regulation is to be completed

by February 1999. Contracting officers will also perform site visits

for all on-site contracts, and contracting officers will discuss

personal services issues with project officers for such contracts on

an annual basis. The Office of Acquisition Management plans to

issue a memo to contracting officers informing them of this

requirement by December 1998.

We have included a summary of the Acting Assistant

Administrator’s comments in appropriate sections of this report. 

His entire response is included as appendix 1 to this report.

OIG EVALUATION The actions described above, when completed, and the actions

taken to date, will adequately address the findings and

recommendations in this report.
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v Report No. E1BMF7-23-0012- 8100251

Table of Contents

EXECUTIVE SUMMARY .................................................... i

ABBREVIATIONS ......................................................... vi

CHAPTERS

1 INTRODUCTION ..................................................... 1

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

Background .................................................... 2

Scope And Methodology .......................................... 5

Prior Audit Coverage ............................................. 6

2 INSTANCES OR APPEARANCE OF PERSONAL SERVICES

 UNDER CONTRACTS ............................................... 7

EPA Employees Exercised Excessive Supervision ........................ 8

Close Working Relationships Existed ................................ 12

Contract Language and Oversight Needed Improvement ................. 14

Two Contracts Were Managed Well to Prevent Personal Services .......... 18

Conclusion .................................................... 19

Recommendations .............................................. 20

Agency Comments .............................................. 20

OIG Evaluation ................................................ 21

EXHIBITS

1 Results of Review .................................................... 22

2 Personal Services Issues ................................................ 23

APPENDICES

1 Office of Administration and Resources Management Response .................. 25

2 Distribution ......................................................... 31
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Abbreviations

CMD-RTP Contracts Management Division-Research Triangle Park

DOPO Delivery Order Project Officer

EPA Environmental Protection Agency

FAR Federal Acquisition Regulation

OAR Office of Air and Radiation

OARM Office of Administration and Resources Management

OPPTS Office of Prevention, Pesticides, and Toxic Substances

ORD Office of Research and Development

OSWER Office of Solid Waste and Emergency Response

OW Office of Water

RTP Research Triangle Park

WED Western Ecology Division
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CHAPTER 1

Introduction

PURPOSE In 1992, EPA first declared contracts management as a

Presidential-level weakness under the Federal Managers’ Financial

Integrity Act. In June 1992, EPA’s Standing Committee on

Contracts Management (Standing Committee)--now called the

Resource Management Committee--made 40 recommendations to

correct longstanding weaknesses in contracts management. The

Standing Committee’s report identified seven problem areas, one of

which was that personal services were improperly occurring under

EPA contracts.

Since 1992, EPA has taken positive steps to address contracts

management deficiencies. However, in our review of the Agency’s

Contract Management Initiatives (EPA Report 7400070, dated

September 30, 1997), we recommended that the Acting Assistant

Administrator for Administration and Resources Management

continue to include contracts management as an Agency-level

weakness for fiscal 1997. We made that recommendation because

we found continued indications of potential vulnerabilities in three

of the seven areas, including personal services. Specific indicators

of personal services we found included:

 C 38 percent (5 of 13) of the contracts we reviewed for

personal services had indications of such relationships;

 C All 5 of those contracts had some type of on-site/colocation arrangements between EPA and contractor staff;

and,

 C Indications of personal services relationships occurred

throughout the Agency (in the regions, the Offices of

Administration & Resources Management, Research &

Development, and Policy Planning & Evaluation).

Personal services relationships can have several undesired effects. 

First, if unauthorized Agency personnel direct contractor staff, the

contractor might perform work outside the scope of the contract,
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2 Report No. E1BMF7-23-0012- 8100251

creating legal problems. Second, close relationships between EPA

and contractor personnel could give that contractor an advantage

during future contract awards and decrease the chance other

offerors have of receiving contracts. Third, normally the

Government directly hires its employees under competitive

appointment or other procedures mandated by civil service laws. 

Obtaining personal services by contract, rather than by direct hire,

circumvents those laws and Office of Management and Budget

personnel ceilings. Finally, personal services relationships--which

blur the roles of Government personnel and contractor staff--could

cause the public to seriously question whether the Government is

truly protecting the public’s interests.

The objectives of this audit were to determine: (1) the extent EPA

contracts include personal services relationships, and (2) the

adequacy of the Agency’s controls to prevent personal services

contracts.

BACKGROUND The Federal Acquisition Regulation (FAR) Part 37 on service

contracting discusses personal services contracts. A personal

services contract, by its written terms or as administered, makes the

contractor staff appear to be Government employees. Such

contracts are characterized by an employer-employee relationship

between Government and contractor personnel. The key indicator

of personal services is when contractor personnel are subjected to

continuous supervision and control of a Government employee(s). 

According to FAR 37.104(b), agencies are not permitted to award

personal services contracts, unless specifically authorized by

statute.

FAR 37.104 lists the following descriptive elements to be used as a

guide in assessing whether a proposed contract is “personal” in

nature and an improper contract relationship might exist:

 (1) Contractor performance of services is done on a

Government site;

 (2) The Government furnishes principal tools and equipment to

the contractor to execute the contract;
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 (3) Services are applied directly to the integral effort of the

agency in furthering its function or mission;

 (4) Comparable services, meeting comparable needs, are

performed in the same agency or similar agencies using civil

service personnel;

 (5) The need for the contractor-provided service can reasonably

be expected to last beyond one year; and,

 (6) The inherent nature of the service, or manner in which it is

provided, reasonably requires, directly or indirectly,

Government direction or supervision of contractor

employees in order to (a) adequately protect the

Government’s interest, (b) retain control of the function

involved, or (c) retain full personal responsibility for the

function supported in a duly authorized Federal employee.

EPA Order 1900.1A, Use of Contractor Services to Avoid

Improper Contractor Relationships (the Order), issued in April

1994, provides guidance related to avoiding improper contractor

relationships. The Order addresses five areas: (1) interaction with

contractor personnel, (2) identification of contractor personnel, (3)

contractor attendance at EPA functions and meetings, (4)

contractor employee conduct, and (5) physical space concerns. 

The Order states that EPA employees, other than the Project

Officer, Work Assignment Manager, or Contracting Officer, may

not assign tasks to a contractor unless they have specific authority

to do so. Technical direction must be issued in writing from the

Project Officer (or authorized designee) to the contractor’s point of

contact. Oral technical direction must be put in writing within five

calendar days.

According to the Order, “at all times, it shall be readily apparent

which organization employs an individual.” Contractor personnel

should wear appropriate badges identifying them as such. 

Contractors should also identify themselves and their employer in

all points of contact, including during meetings, and on Agency

voicemails and e-mails. Contractor personnel should never attend

meetings as the official representative of an EPA organization. 

Agency employees also shall not permit contractors to attend EPA

functions, including holiday parties, unless documented as required

for contract performance. To the extent possible, EPA staff shall
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be physically located in separate areas from contractor personnel,

and contractors’ areas should be identified as such. In cases where

both EPA and contractor staff must occupy or use a general area,

there must be physical separation and identification of space.

The Order also lists examples of prohibited personal services, such

as: 

(1) EPA employee routinely gives instructions and directions

directly to contractor staff.

(2) EPA employee recommends, or refuses to have, specific

contractor staff assigned to work.

(3) EPA employee sits in an interview for potential contractor

hirees and suggests who to hire.

(4) EPA employee invites contractors to attend EPA meetings

not related to the contract work.

(5) EPA employee enters a contractor's work area when no

contractor supervisor is present.

(6) EPA employee directly requests contractor personnel to

prepare a special report (not otherwise required by the

contract) from a database the contractor maintains.

The General Services Administration states that the following

factors also tend to characterize services as personal services:

(1) Government can obtain civil service employees to do the

job.

(2) Government assigns tasks to, and prepares work schedules

for, contractor employees.

(3) Government reserves the right to control the number of

people employed and the duties of individual contractor

employees.

(4) Contractor staff are used interchangeably with Government

staff to perform the same functions.

(5) Contractor personnel are integrated into the Government’s

organizational structure.
Audit of Personal Services

To maintain our independence, we excluded from our universe any contracts where the Project Officer 1

was an Office of Inspector General employee.

5 Report No. E1BMF7-23-0012- 8100251

SCOPE AND We reviewed 23 contracts for personal services issues (see exhibit

METHODOLOGY 1).

We discussed our proposed sampling methodology with Agency

officials in October 1997. We agreed that we would focus our

review on higher-risk, on-site contracts (that is, contractor staff and

EPA employees were co-located), and that we would cover

contracts from all major program offices. In October 1997, Agency

contracting officials in Headquarters, RTP, Cincinnati, and the

regions provided the Office of Inspector General with lists of the

on-site contracts they managed that were active as of fiscal year

(FY) 1996. These lists totaled 165 contracts. We reduced the 1

universe of 165 to 84 contracts by removing all contracts: (1) with

a low risk for personal services (janitorial, mail room, guard

services, etc.); (2) which expired on or before September 30, 1997,

and did not have a follow-on contract with the same contractor; or,

(3) that were recently awarded and were not follow-on contracts. 

We then selected 23 contracts from the list of 84; twelve of which

were randomly selected. Of the remaining 11, we selected 7

contracts because of the large dollar value ($50 million or more),

and 4 others because we were asked to review the contract.

For each contract, we reviewed contract file documentation,

including Statements of Work, work assignments or delivery orders

where applicable, technical directives, and contractors’ monthly

progress reports. We interviewed the contracting officer, the

project officer, work assignment managers or delivery order project

officers, and contractor staff. We also conducted site visits to EPA

space occupied by contractors to observe whether offices were

properly marked and contractor staff appropriately identified. We

visited EPA offices in Washington, D.C.; RTP, NC; Cincinnati, OH;

Edison, NJ; Philadelphia, PA; Dallas, TX; and Ada, OK.
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We performed our audit in accordance with the 1994 Government

Auditing Standards issued by the Comptroller General. We

conducted fieldwork from October 1997 to May 1998.

PRIOR AUDIT The Office of Inspector General issued a report on September 30,

COVERAGE 1997, which addressed EPA’s efforts since 1992 to correct

longstanding weaknesses in contracts management (EPA Report

No. 7400070). We found that although the Agency had taken

positive steps to address contracts management weaknesses,

potential vulnerabilities still remained in three areas, including

personal services. 

This specific audit of personal services was conducted as a result of

our prior findings in Report No. 7400070.
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7 Report No. E1BMF7-23-0012- 8100251

CHAPTER 2

Instances or Appearance of Personal Services

Under Contracts

Instances of personal services, or the appearance of such, occurred

in 13 (56 percent) of 23 contracts (see exhibit 1), primarily because:

(1) EPA program office employees exercised excessive supervision

of contractor and subcontractor staff, (2) close working

arrangements existed, or (3) contract language and oversight needed

improvement. As a result, EPA treated contractor staff as

Government employees and appeared to circumvent personnel

ceilings. According to the Federal Acquisition Regulation

37.104(b), “Agencies are not permitted to award personal service

contracts, unless specifically authorized by statute.” None of the

contracts reviewed were authorized as personal service contracts. 

(See exhibit 2 for a list of all personal services issues by contract.) 

We also found indicators of personal services in two additional

contracts.

The Agency’s controls generally seemed adequate to prevent

personal services. However, EPA personnel were not always

committed to following the controls, resulting in the instances or

appearance of personal services we identified. As evidenced in two

contracts we reviewed--one ORD and one OW contract--assigning

knowledgeable and committed project officers to monitor contracts

and awarding fixed-priced contracts can significantly reduce the risk

of personal services.

This report covers all instances of activities we found that were

contrary to personal services policies and regulations. Some

contracts exhibited more instances of personal services than others,

or more prevalent weaknesses. However, all these identified

instances, whether isolated or widespread, are worthy of

management attention and correction. We found instances of

personal services problems, or the appearance of such, in over half

of the contracts reviewed, and among nearly all of the major

program offices. Although program offices may view these cases as

isolated, the number and distribution of such instances across the
Audit of Personal Services

We found more than one of these four issues on some contracts. 2

8 Report No. E1BMF7-23-0012- 8100251

Agency increases the potential that personal services is a continuing

systemic problem.

EPA EMPLOYEES EPA employees exercised excessive control and supervision over

EXERCISED contractor and subcontractor staff on 13 of the 23 (56 percent)

EXCESSIVE contracts in the following ways :

2

SUPERVISION

(1) Unauthorized EPA employees directed contractor staff. 

(2) Project Officers/Work Assignment Managers directed

contractor staff.

(3) EPA employees interacted with and directed subcontractors.

(4) EPA staff recommended specific personnel be hired or

staffed on projects.

Unauthorized EPA Unauthorized EPA employees directed contractor staff to perform

Employees Directed tasks without the Project Officer’s knowledge and/or written

Contractor Staff authorization on four contracts. According to EPA Order 1900.1A,

only the EPA Contracting Officer, Project Officer or authorized

designee may communicate with the contractor. On all four

contracts (68C60074, ORD; 68C60082, ORD; 68W50008, OPPTS;

and 68C30330, OW), EPA employees directly contacted the

contractor and requested work to be done. For example, on

contract 68W50008, an EPA employee worked with the contractor

to complete data requests. The employee stated that he was

authorized to direct the contractor because he was an “unofficial”

Work Assignment Manager. In all four cases, the contractors

performed the requested tasks, and the EPA employees did not have

the authority to direct the contractor. Without specific designation

from the Project Officer and approved by the Contracting Official

via an EPA Form 1900-65, Nomination and Appointment of

Contracting Officer’s Representatives, an EPA employee may not

direct a contractor to perform any tasks. Unauthorized work

requests could, and did, result in the contractor performing work

outside the scope of the contract.

ORD took corrective actions on its two contracts. On contract

68C60074, an ORD Extramural Management Specialist and the
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9 Report No. E1BMF7-23-0012- 8100251

Project Officer advised the contractor’s Project Manager to direct

his staff not to perform work for EPA unless work requests are

approved by the Project Officer or Work Assignment Manager. On

contract 68C60082, the Project Officer held several training sessions

with EPA personnel to ensure that they were aware of the proper

way to interact with contractors. The Project Officer also instructed

the contractor to provide her with the names of any EPA staff who

directly request work to be done.

Project Officers/Work EPA Project Officers/Work Assignment Managers directed

Assignment Managers contractor staff, and did not always provide technical direction in

Directed Contractor Staff writing, on four contracts. EPA Order 1900.1A states that

technical direction should be provided, in writing, to the contractor’s

point of contact and, if the direction is given orally, technical

direction should be put in writing within 5 calendar days. In two

cases (68D60059, OAR; and 68C50008, ORD), the Project Officers

provided oral instructions on a regular basis. In both of these cases,

the contractor’s Program Managers were not located on-site at an

EPA facility. All work direction from the EPA must go through the

contractor’s Program Manager before the work can be started

(Work Assignment) or clarified (Technical Direction). Lack of an

on-site Program Manager increases the risk that EPA employees will

interact and communicate directly with the contractor staff, thus

creating personal services. ORD informed us that they are taking

action to correct problems identified on contract 68C50008. An

ORD Extramural Management Specialist stated that ORD is

planning to consolidate this contract into another on-site contract

where additional structural and administrative oversight and controls

should preclude the personal services vulnerabilities identified. 

On another contract (68D30024, ORD), the Project Officer

provided technical direction to the contractor via telephone calls. 

He stated that the information provided was simply clarification and

did not need to be put in writing. The contractor’s Project Manager

documented the information in memos to his files. Also, the Project

Manager stated that he occasionally went to lunch/dinner with the

Project Officer and discussed additional services his company could

provide under the contract. The Contracting Officer stated that the

telephone call information constituted technical direction and the

Project Officer should have put such direction in writing. The

Contracting Officer instructed the Project Officer to document
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future phone calls in writing, and the Project Officer agreed to do

so. The Contracting Officer also informed the Project Officer that it

is the responsibility of the EPA, not the contractor, to define the

Government’s requirements. 

On the fourth contract (68C30330, OW), we found the appearance

of a personal services contract. We issued a separate report on this

contract to the Office of Water (EPA Report No. 8100092).

EPA Employees EPA employees interacted with and directed subcontractors on four

Interacted with and contracts. According to FAR Part 42.505, “Government

Directed Subcontractors representatives must recognize the lack of privity of contract

between the Government and subcontractors.” In essence, the

Government has no contractual relationship with subcontractors. 

EPA employees are not permitted to provide direction to

subcontractor employees.

In two cases (68W10055, OARM; and 68S53002, Region 3), EPA

Project Officers and Work Assignment Managers interacted and

directed subcontractors because the contract was designed to permit

“dedicated team subcontracting.” This concept involves a closer

working relationship between the contractor and subcontractor than

is typical. Under these conditions, the subcontractor employees act

as, and are assigned to the contract as, employees of the prime

contractor. One of the contracts also had a subcontractor employee

designated as the Program Manager--typically EPA’s main point of

contact for contractor communications.

In the other two cases (68W40010, Region 3; and 68W40016,

Region 6), unauthorized EPA employees requested subcontractor

staff to perform various tasks. In all cases, according to EPA Order

1900.1A, EPA Project Officers and Work Assignment Managers

should communicate only with the prime contractor’s point of

contact.

Region 3 has taken corrective actions for contract 68W40010. 

Region 3 officials stated that they issued a memorandum

underscoring the importance of avoiding personal services. In

addition, they sent a message to Region 3 Project Officers and Work

Assignment Managers, reminding them that they should only interact

and have discussions with the prime contractor.
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Region 6 has taken corrective actions for contract 68W40016. 

Region 6 officials stated that they and the contractor instituted

procedures that should ensure that EPA personnel deal only with the

prime contractor’s Program Manager. Also, the Contracting Officer

and Project Officer started performing contract monitoring checks

during which they inspect work spaces for compliance with

contracting regulations.

EPA Staff Recommended EPA employees recommended that specific contractor personnel

Specific Personnel be be hired or staffed on projects, on three contracts. In one case

Hired or Staffed on (68C40045, OARM), an EPA Project Officer provided input to a

Projects follow-on contractor regarding which applicants should be hired. 

According to the Contracting Officer, the contractor’s owner stated

that he planned to contact the EPA Project Officer to decide which

employees should be hired. The Contracting Officer informed him

that he should not talk to the Project Officer or any other EPA

employee about staffing. Another representative from the contractor

said that it was normal for them to contact the Agency’s Project

Officer and ask who should be hired. The Project Officer met

personally with the owner and gave him a list of the prior

contractor’s employees and discussed the list with the incoming

contractor two weeks before the award and re-hiring of staff. The

new contractor did not contact representatives of the former

contractor to ask who their best employees were, which would be

common practice. The Cincinnati OARM Security and Safety

official stated that the OARM Senior Resource Official has arranged

for formal remedial training for all OARM Project Officers, Work

Assignment Managers, and Delivery Order Project Officers on

personal services issues.

Under a second OARM contract (68W10005, OARM), the

contractor’s Technical Project Leader indicated that EPA’s DOPO

sometimes asked for specific contractor staff to be placed on certain

tasks. 

In another case (68W40010, Region 3), an EPA Work Assignment

Manager directed the contractor to use a certain subcontractor

employee for a work assignment. A contractor representative stated

that the Work Assignment Manager liked the work of a particular

subcontract employee, and believed he was valuable to the

assignment. The Work Assignment Manager directed the contractor
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We did not review this contract but instead, with ORD’s concurrence, relied on the results from ORD’s 3

May 1998 Management Review report of ORD’s Western Ecology Division in Corvallis and Newport, OR.

12 Report No. E1BMF7-23-0012- 8100251

to use that employee, and the contractor personnel did not believe

they could refuse.

CLOSE WORKING Close working relationships existed on three contracts which lead

RELATIONSHIPS to personal services. If not properly monitored and supervised,

EXISTED close working environments make contracts vulnerable to personal

services.

Under one ORD contract (68C40002, ORD), problems occurred

with technical direction to contractors and with property

management. These problems resulted from a “one workforce” 3

environment--that is, EPA staff and contractors appearing to be one

organization--at ORD’s Western Ecology Division (WED). Fortytwo percent of the total on-site staff at Newport worked for various

contractors; 17 percent of the total staff were contractors under

contract 68C40002. ORD reported in its May 1998 Management

Review that some task directives were improperly issued to add or

delete deliverables, change deliverable due dates, and add or delete

tasks. These task directives were beyond the scope of the technical

direction clause in the contract and were not authorized by the

Contracting Officer. As a result, such actions demonstrated an

uncontrolled and improper personal services relationship between

EPA and the contractor. Technical direction may not be used to

change any of the express terms and conditions of work

assignments, including adding work, changing work that has been

ordered, changing the period of performance, or altering the cost of

the work. ORD’s WED, working with the Contracts Management

Division in RTP (CMD-RTP), took corrective actions to ensure that

work is assigned properly under the contract. For example, WED

instructed its Branch Chiefs, Project Officers, and Work Assignment

Managers to issue work assignment amendments when changes are

made to previously assigned work.

ORD also reported weaknesses with property management under

contract 68C40002. In general, ORD often informally provided
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13 Report No. E1BMF7-23-0012- 8100251

property to the contractor, and the contractor did not record, track,

or report the property. ORD routinely provided personal computers

and a hovercraft to the contractor prior to the Contracting Officer’s

authorization. Further, the hovercraft was purchased as a new

acquisition specifically for the contractor’s use, which is improper. 

EPA Procurement Policy Notice 96-03 prohibits the acquisition of

property with the intent to provide it to a contractor for use. The

contractor stated that its staff used all of the lab equipment

exclusively, too. The contractor also routinely acquired small

equipment items (cameras, binoculars, power drills, etc.) without the

Contracting Officer’s authorization, which was a breach of a specific

contract clause. Finally, the contract did not reflect all property held

by the contractor, and the contractor was not fulfilling its obligation

of recording and tracking the property. ORD also inappropriately

assisted the contractor in managing contractor-held property, and

assigned property to specific contractor employees. WED is

currently working with CMD-RTP to provide training to WED

employees on appropriate property management procedures.

Under the other two contracts (68W10055, OARM; and

68W40016, Region 6), EPA employees occupied, and worked out

of, space at the contractor’s or subcontractor’s own off-site offices. 

The Statement of Work for contract 68W10055 required the

contractor to provide an office facility to house the contractor,

subcontractor, and EPA employees. Personal services issues

identified on this contract included: EPA employees recommended

that specific contractor personnel be staffed on projects, and EPA

employees dealt directly with subcontractors. Close physical

working relationships allowed EPA personnel to interact with

contractor and subcontractor staff on a regular basis and facilitated

the personal services issues. 

The General Counsel, in an opinion dated December 18, 1996,

stated that an agency may direct a contractor to acquire leased

space, provided that the acquisition is “incident” (necessary) to

contract performance within the contract scope, and not intended to

acquire space for the Government’s use. According to a key Office

of Information Resources Management official, EPA program office

personnel did not need to be co-located with contractor or

subcontractor staff.
Audit of Personal Services

14 Report No. E1BMF7-23-0012- 8100251

A former Contracting Officer expressed concerns about why EPA

was requiring the contractor to lease office space for subcontractors,

and EPA staff. An Office of Acquisition Management Service

Center Manager expressed the same concern and revised the

Statement of Work for the follow-on contract to be awarded in fiscal

1999. The EPA-imposed leased space requirement was omitted in

the draft Statement of Work dated February 1998.

CONTRACT Personal services, or the appearance of such, occurred, in part,

LANGUAGE because Statements of Work contained language allowing

AND OVERSIGHT personal services. Contracting offices also generally did not

NEEDED conduct on-site reviews to determine if internal controls were in

IMPROVEMENT place and implemented to prevent personal services.

Statements of Work Personal services, or the appearance of such, occurred in 4 of the

Contained Language 23 (17 percent) cases because Statement of Work language allowed

Allowing Personal such activities. The Office of Acquisition Management and its

Services contracting divisions are responsible for ensuring that Statements of

Work are free of personal services language and tasks.

On one contract (68W10055, OARM), the Statement of Work

contained several instances of language indicating a potential for

personal services. Most notably, the contractor was tasked with

being the “institutional memory” for EPA’s information systems and

programs. The Statement of Work also required the contractor to

provide office space to house not only the contractor and

subcontractor staff, but also EPA staff. There is also language

indicating that the Contracting Officer, Project Officer, Delivery

Order Project Officer, or EPA Technical Manager had the ability to

demand removal of contractor personnel when these EPA staff

deemed the continued assignment of these personnel were in conflict

with the Government’s interest. According to EPA Order 1900.1A,

EPA officials are prohibited from intervening in the hiring or firing

of contractor staff.

The Office of Acquisition Management intends to award a follow-on

contract in December 1998. It has revised the Statement of Work

for the upcoming contract and eliminated all language requiring

coordination between the contractor and anyone other than
Audit of Personal Services

The Contracting Officer recently inherited responsibility for the contract due to a reorganization and was 4

not responsible when the contract was awarded.

15 Report No. E1BMF7-23-0012- 8100251

appropriate EPA officials. The Office of Acquisition Management

has also deleted the requirement that the contractor provide

permanent office space for EPA staff.

In another contract Statement of Work (68C60082, ORD), EPA

required that, “All contractor employees shall sign in and out each

day with the contractor’s Project Manager.” According to EPA

Order 1900.1A, “A personal services contract is a contract which,

by its terms or as administered, results in contractor personnel being

subject to relatively continuous supervision and direct control by a

Government official or employee.” The language in this Statement

of Work indicates an unnecessary level of supervision on EPA’s

part. The Project Officer stated that she liked the requirement

because she wanted to see the attendance information to make sure

the contractor is working the appropriate hours for the hotlines it

supports. Under this fixed-price contract, there is no need for EPA

to require the contractor staff to sign in and out. The contractor’s

Program Manager is responsible for the hours her staff works, not

EPA. The Contracting Officer also agreed that this language should

not be in the Statement of Work .

4

Another contract (68C40045, OARM) Statement of Work said that:

The security personnel excluding the on-site contract

supervisor are required to use a time clock provided

by EPA. It is also the responsibility of the security

personnel to monitor the use of the time clock by

other on-site contractor employees to assure that the

proper procedures are followed and that individuals

only punch their own cards.

Having the guards monitor other contractors is inappropriate, and

outside the scope of a contractor’s responsibility. The contract

specifically stated that the contractor should not be placed in a

position of command, supervision, administration or control over

personnel of other contractors.
Audit of Personal Services

16 Report No. E1BMF7-23-0012- 8100251

According to the Project Officer, the contractor did monitor the time

clock usage by other contractors. He said that the language was put

into the Statement of Work by a former manager who wanted

certain contractor’s time charging monitored. The Project Officer

stated that the contractor is no longer performing this task under the

follow-on contract. However, the Statement of Work for the

follow-on contract awarded in September 1997 contained the same

language. The Project Officer stated that he would coordinate with

the Contracting Officer to issue a modification to remove that

language from the new contract. The Contracting Officer agreed

that the language should be removed.

Cincinnati Contracts On a positive note, the Cincinnati Contracts Management Division

Division Incorporated routinely incorporated a specific clause (“Government Contractor

Contract Clause Into Relations”) into the on-site contracts it awarded. This clause

All On-Site Contracts delineates proper interactions between EPA and contractor

employees. The RTP and Headquarters contracting divisions did

not use a similar clause in their on-site contracts. The clause states:

(a) The Government and the Contractor understand

and agree that the services to be delivered under this

contract by the Contractor to the Government are

non-personal services and the parties recognize and

agree that no employer-employee relationship exists

or will exist under the contract between the

Government and the Contractor’s employees. It is

therefore in the best interest of the Government to

afford both parties a full and complete understanding

of their respective obligations.

(b) Contractor personnel under this contract shall

not:

(1) Be placed in a position where they are

under the supervision, direction, or evaluation

of a Government employee.

(2) Be placed in a position of command,

supervision, administration or control over

Government personnel, or personnel of other
Audit of Personal Services

Two of the 23 contracts reviewed were off-site contracts. Therefore, the Contracting Officers would not 5

conduct an on-site review.

ORD conducts management reviews of all of its Divisions on a routine basis. ORD has worked with the 6

Office of Acquisition Management to include a significant contracting officer presence on ORD’s 1997 and 1998

management reviews. This joint effort has been made to help increase the level of contracting officer oversight of

the effectiveness of ORD’s contract management controls, including those for personal services.

17 Report No. E1BMF7-23-0012- 8100251

contractors, or become a part of the

Government organization.

(3) Be used in administration or supervision

of Government procurement activities.

Contracting Officers Contracting Officers did not conduct on-site reviews for 16 of 21

Generally Did Not (76 percent) contracts. We found personal services issues, or the 5

Conduct On-Site appearance of such, on 10 of the 16 (63 percent) contracts.

Reviews Without conducting reviews of on-site contracts, Contracting

Officers have limited assurance that personal services are being

avoided. In general, Contracting Officers acknowledged that they

should visit the sites where EPA and contractor staff are co-located. 

Contracting Officers said they did not conduct reviews because they

did not have time given their workloads. However, in most of the

cases, the Contracting Officers were within five miles of the EPA

site, and some were even in adjacent buildings. EPA’s Contracts

Management Manual states that “The Contracting Officer is

responsible for performance of all necessary actions for effective

contracting, ensuring compliance with the terms of the contract, and

safeguarding the interests of the United States in its contractual

relationships.” This responsibility includes ensuring that laws and

regulations created to safeguard contracts against personal services

are implemented . 

6
Audit of Personal Services

18 Report No. E1BMF7-23-0012- 8100251

TWO CONTRACTS Two of the contracts we reviewed, one ORD and one OW, stood

WERE MANAGED out with regard to the steps taken to prevent or avoid personal

WELL TO PREVENT services. Under ORD contract 68W50065, valued at over $71

PERSONAL SERVICES million, the Project Officer was key to preventing personal services. 

The Project Officer was very knowledgeable of personal services

issues and, with the assistance of ORD’s Extramural Management

Specialist Network, established and implemented effective controls. 

The Project Officer:

 C Visits, at least every other year, each of the sites (in thirteen

cities) where about 250 contractor employees are co-located

with ORD staff on this contract. He inspects the site to

make sure that contractor space is separate and identifiable

from EPA space, and that badges are worn and phones are

answered properly. He also evaluates whether EPA staff

have supervised contractors.

 C Reviews all delivery orders and ensures that the orders are

approved by delivery order project officers (DOPOs) before

the contractor begins work.

 C Tracks the status of all delivery orders under the contract.

 C Reviews all contractor-submitted monthly progress reports

to evaluate whether the contractor conducted work outside

the scope of the contract.

 C Stresses to the DOPOs that they are to deal only with the

contractor’s designated on-site delivery order manager, and

not other contractor staff. 

 C Tracks all of the DOPOs’ training records to assure that the

DOPOs take required training as appropriate. 

The DOPOs we interviewed were also knowledgeable of personal

services issues and commended the Project Officer for keeping them

informed about the contract. The DOPOs also properly documented

all work requests issued to the contractor. The contractor’s offices
Audit of Personal Services

19 Report No. E1BMF7-23-0012- 8100251

in RTP and Cincinnati were also clearly marked as contractor

occupied space.

Under contract 68C60016, the Office of Water took steps to

alleviate prior personal services concerns under the contract. Prior

to October 1997, the contract was a cost-reimbursable, level-ofeffort contract and the contractor was located in the basement of

EPA’s Waterside Mall building. Without objective criteria on which

to base the contractor’s performance, the Project Officer stated that

she felt like she needed to monitor the contractor’s work schedules

and continually monitor what they were doing. The Project Officer

also said that when the contractor was located in the building, she

communicated with them directly and often.

OW, based on the Office of Acquisition Management’s

recommendation, restructured this requirement and the Cincinnati

Contracts Division awarded a fixed-priced, performance-based

contract, effective October 1, 1997. The contractor was also moved

off-site to McLean, VA. According to the Project Officer, this new

contract arrangement greatly reduced the potential for personal

services to occur. There is no incentive for the contractor to

perform extra tasks that might be outside the scope of the contract

because the contractor will not be paid for doing those tasks. The

Project Officer stated that this restructuring has helped EPA

maintain an “arms-length relationship” with the contractor. The

contract’s Statement of Work also was well-written and indicated an

awareness of the potential for personal services and established

controls to prevent such services. 

CONCLUSION Personal services activities, or the appearance of such, occurred in

over half of the contracts reviewed. On-site contracts are especially

vulnerable to personal services situations, because of the potential

for daily face-to-face interaction between EPA staff and contractors.

Program offices and contracting divisions each play an important

role in making sure that personal services do not occur. Program

office employees have the primary role in preventing personal

services because they are the personnel who work with contractors

to complete needed tasks. Contracting officials’ role, although

secondary, is key in providing oversight of the legal aspects of
Audit of Personal Services

20 Report No. E1BMF7-23-0012- 8100251

contract execution. Preventing personal services is a shared

responsibility between the program offices and the contracting

divisions. Program offices, with the help of contracting offices,

should attempt to eliminate unnecessary interactions with

contractors, including shifting work off-site if possible.

RECOMMENDATIONS We recommend that the Acting Assistant Administrator for

Administration and Resources Management and the Agency Senior

Resource Officials:

2-1 Identify all contracts where EPA and contractors are

co-located, and evaluate and document whether any

on-site contracts can be moved off-site.

We recommend that the Acting Assistant Administrator for

Administration and Resources Management: 

2-2 Direct contracting divisions to incorporate a contract

clause similar to the one used by the Contracts

Management Division-Cincinnati (“Government

Contractor Relations”) in all EPA contracts.

2-3 Direct Agency contracting officers to conduct a site

visit at least annually for all on-site contracts and

document whether personal services deficiencies

were identified. If deficiencies are identified, the

contracting officer should provide needed guidance

or recommendations to the project officer.

AGENCY COMMENTS The Acting Assistant Administrator agreed with the above

recommendations. Regarding recommendation 2-1, the Office of

Administration and Resources Management will coordinate with

EPA program offices to conduct a review and determine if current

on-site contractors can be moved off-site. This review will be

completed within 90 days of this report’s issuance.

Regarding recommendation 2-2, the Acting Assistant Administrator

plans to develop an Agency-wide contract clause specifying proper
Audit of Personal Services

21 Report No. E1BMF7-23-0012- 8100251

Government/Contractor relationships. He also plans to modify

EPA’s Acquisition Regulation by February 1999 to include a

requirement to use the Agency-wide clause.

Regarding recommendation 2-3, the Acting Assistant Administrator

agreed that additional oversight is needed to identify instances of

personal services under on-site contracts. EPA contracting officers

will be required to perform site visits periodically for all on-site

contracts. Contracting officers will also be required to discuss

personal services issues annually with project officers for individual

on-site contracts. The Office of Acquisition Management plans to

issue a memo to contracting officers by December 1998 instructing

them of the requirement.

OIG EVALUATION The proposed Agency actions described above, when completed,

will adequately address the findings and recommendations in this

report. 
Audit of Personal Services

22 Report No. E1BMF7-23-0012- 8100251

Exhibit 1

Page 1 of 1

Results of Review

No. Contract No Concerns Services Appearance of Program Maximum

Office Value

Personal Instances or 

Indicators Personal Services

 1 OPPTS 68W50008 $6,590,628 T

 2 OAR 68D40102 8,350,456 T

 3 OAR 68D60059 1,689,994 T

 4 OARM 68C70044 4,059,379 T

 5 OARM 68W10055 215,000,000 T

 6 OARM 68C40045 1,665,144 T

 7 OARM 68W20013 103,610,110 T

 8 OARM 68W20025 302,298,450 T

 9 ORD 68C30322 11,173,792 T

10 ORD 68C40002 3,272,018 T (Note 1)

11 ORD 68C50008 249,963 T

12 ORD 68C60074 2,044,618 T

13 ORD 68C60082 1,615,608 T

14 ORD 68D30024 1,061,661 T

15 ORD 68D50040 6,815,572 T

16 ORD 68W50065 71,107,726 T

17 OSWER 68C40022 166,621,457 T

18 OW 68C30330 7,196,198 T

19 OW 68C60016 860,636 T

20 OW 68C60040 3,726,029 T

21 REGION 3 68S53002 66,000,000 T

22 REGION 3 68W40010 50,000,000 T

23 REGION 6 68W40016 30,803,580 T

TOTALS $1,065,813,01 8 (35%) 2 (9%) 13 (56%)

Note 1: We did not review this contract but instead, with ORD’s concurrence, relied on the results of its November

1997 Management Review of the Corvallis and Newport, OR, laboratory.
Audit of Personal Services

23 Report No. E1BMF7-23-0012- 8100251

Exhibit 2

Page 1 of 1

Personal Services Issues

No. Contract # Program Contract Personal

Office Type Services Issues

 1 OPPTS 68W50008 Cost Plus 1

 2 OAR 68D60059 Cost Plus 2

 3 OARM 68W10055 Cost Plus 3,4,5,6

 4 OARM 68C40045 Fixed Price 4,6

 5 ORD 68C40002 Cost Plus 5

 6 ORD 68C50008 Fixed Price 2

 7 ORD 68C60074 Cost Plus 1

 8 ORD 68C60082 Fixed Price 1,6

 9 ORD 68D30024 Cost Plus 2

10 OW 68C30330 Cost Plus 1,2,6

11 REGION 3 68S53002 Cost 3

12 REGION 3 68W40010 Cost Plus 3,4

13 REGION 6 68W40016 Cost Plus 3,5

ISSUES

1. Unauthorized EPA employees directed contractor staff.

2. Project Officer/Work Assignment Manager directed contractor staff. 

3. EPA employees interacted with and directed subcontractors.

4. EPA staff recommended specific contractor personnel be hired, or staffed on

projects.

5. Close working relationships existed.

6. Statement of Work language permitted personal services to occur.
Audit of Personal Services

24 Report No. E1BMF7-23-0012- 8100251

(This page was intentionally left blank.)
Audit of Personal Services

25 Report No. E1BMF7-23-0012- 8100251

Appendix 1

Page 1 of 6

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, DC 20460

SEP 4 1998

OFFICE OF 

 ADMINISTRATION

 AND RESOURCES

 MANAGEMENT

MEMORANDUM

SUBJECT: Response to Draft Report of Audit No. E1BMF7-23-0012, Review of Personal

Services

FROM: Alvin M. Peasachowitz

Acting Assistant Administrator

TO: Elissa R. Karpf

Deputy Assistant Inspector General

Thank you for the opportunity to provide comments on the subject audit report. We agree

that personal services relationships are improper, illegal, and unallowable under EPA contracts. 

Although, we concur with many of the findings in the report, it should be noted that we have

made significant progress in avoiding and eliminating personal services. It should also be noted

that while we agree that the report contained some instances of personal services, some of the

activities discussed in the report lends itself more towards indicators of personal services that

requires management attention.

Detailed comments on the final report is provided and our responses are discussed by

subject in the order of appearance in the report.

If you have any questions or comments, please call me at 260-4600, or have your staff

call Betty L. Bailey, Director, Office of Acquisition Management, at 564-4310.

Internet Address (URL) • http://www.epa.gov

Recycled/Recyclable • Printed with Vegetable Oil Based Inks on Recycled Paper (Minimum 20% Postconsumer)

Note: The original response was signed by Alvin M. Pesachowitz.
Audit of Personal Services

26 Report No. E1BMF7-23-0012- 8100251

Appendix 1

Page 2 of 6

(1) Unauthorized EPA Employees Directed Contractor Staff 

OARM Response:

68C60074, ORD - We concur with this finding. The Contracting Officer (CO) has scheduled a

meeting for the week of August 24, 1998, to visit with the program office to conduct a personal

services review and counsel the program office concerning appropriate personnel authorized to

issue technical direction. The CO will also meet with the contractor during the same week to

discuss this issue. 

68C60082, ORD - We concur with this finding. During an all hands meeting held on 

July 31, 1997, the Project Officer (PO) discussed the management controls and operations

guidance as it relates to this finding with all laboratory personnel. The PO also issued

 instructions to laboratory personnel regarding proper procedures for interacting with contractors 

on April 7, 1997, June 23, 1997, August 20, 1997 and June 24, 1998. In addition, on 

May 21, 1998, the CO discussed the IG findings with the PO. The CO is assured that the PO is

familiar with the Agency’s responsibilities under the contract and will make every effort to comply

with the contract control procedures. 

68C30330, OW - The program office does not concur with this finding. A special flash report was

issued regarding this contract (Report No. 8100092). In OW’s response to the Flash Report, OW

responded that they did not believe this finding was a problem with respect to this contract

or other OW contracts. The OW and OAM is currently working on a PBSC SOW for the followon requirement which would resolve this issue. We will submit the IG an estimated completion

date of the SOW within one week. 

68W50008, OPPTS - We concur with this finding. However, we recommend that the draft report

be revised to acknowledge the fact that the EPA employee who interacted with the contractor at

the time of the review had completed the training required by OAM to be appointed a work

assignment manager. It was an oversight on the part of the Project Officer that the EPA 1900-65

(Nomination and Appointment of Contracting Officer’s Representative form) had not been

prepared. The form was completed July 24, 1998. 

 (2) Project Officers/Work Assignment Managers Directed Contractor Staff 

68D60059, OAR - Regarding the issues raised in the report, the following corrective actions have

been made. On January 26, 1998, the CO counseled the program office concerning personnel

authorized to issue technical direction, the proper "chain" for all technical direction and the

requirement that direction be provided/confirmed in writing. On July 8, 1998, the CO conducted

an on-site personal services review of contractor’s space. On July 15, 1998, the CO held a

discussion with the contractor's Program Manager regarding personnel authorized to issue

technical direction and the requirement that direction be provided/confirmed in writing.
Audit of Personal Services

27 Report No. E1BMF7-23-0012- 8100251

Appendix 1

Page 3 of 6

68C50008, ORD - We concur with this finding. During the week of August 12, 1998, the

Program Office scheduled a meeting with all parties involved to develop an action plan. We will

share the plan with the IG upon completion by ORD. 

68D30024, ORD - We concur with this finding. The CO informed the PO on February 19, 1998,

in writing of the need to reduce verbal technical direction, including clarifications, to writing

within five (5) days as required by the contract. In addition, OAM is planning to award a new

IDIQ contract on October 30, 1998; with more definitive task orders requiring less technical

direction. Some task orders are anticipated to be fixed price.

68C30330, OW - The program office does not concur with this finding. The OW and OAM is

currently working on a PBSC SOW for the follow-on requirement which would resolve this

issue. We will submit to the IG an estimated completion date of the SOW within one week.

(3) EPA Employees Interacted with and Directed Subcontractors 

68W10055, OARM - We concur with this finding. The CO met with the PO and all delivery

order project officers (DOPOs) in July 1998, to remind them that EPA employees are not

permitted to provide direction to subcontractor employees.

68S53002, Region 3 - We concur with this finding. In July 1998, the Assistant Regional

Administrator (ARA) sent a memorandum to all Region III Contracting Officer Representatives

(CORs) and supervisors of CORs underscoring the importance of avoiding personal services. A

fact sheet providing examples of personal service relationships was attached to the ARA’s

memorandum. The CORs have also been reminded by the CO that directions may only be given

to prime contractors and must be written. In addition, the Regional CO is planning to issue

multiple follow-on acquisitions by the third quarter of year 2000 with smaller, more discrete

work statements. Reducing contract size will increase the pool of companies competing for

awards and minimize the need for vulnerable team subcontractor arrangements.

58W40010, Region 3 - We concur with this finding. In July 1998, the ARA sent a memorandum

to all Region III CORs and supervisors of CORs underscoring the importance of avoiding personal

services. A fact sheet providing examples of personal service relationships was

attached to the ARA’s memorandum. The CO also sent a message in July 1998, to the CORs

reminding them to only interact with the prime contractor. In addition, the CO sent a message in

July 1998, to the WAM reminding the WAM that all future discussions must be with the prime

contractor. 

68W40016, Region 6 - We concur with this finding. Procedures were instituted in July and 

August 1997, by both EPA and the contractor. The procedures consist of internal

correspondence, training and meeting with the contractor’s senior level personnel, and more

closely monitoring of contractor’s performance. The procedures also assure that EPA personnel

only interact with the prime contractor’s Program Managers. The CO or Contract Specialist (CS)

will meet with the PO and the prime contractor’s Program Manager weekly to discuss activities

under the contract.
Audit of Personal Services

28 Report No. E1BMF7-23-0012- 8100251

Appendix 1

Page 4 of 6

Both the CO and PO will review the contractor’s monthly progress reports to ensure problems

are addressed and resolved promptly. Additionally, the CO and PO have initiated physical

contract monitoring checks. The Region also has bi-weekly meetings with the Work Assignment

Manager (WAM) to get feedback on the work assignments.

4. EPA Staff Recommended Specific Personnel be Hired or Staffed on Projects 

68C40045, OARM - Based on the issues raised in the report regarding this contract, the PO

 denied having discussed or recommended to the follow-on contractor, what employees the

contractor should hire. The program have scheduled training for all OARM project officers,

 work assignment managers, and delivery order officers. The training is scheduled for 

August 1998, and will focus on roles and responsibilities of program personnel.

68W10055, OARM - We agree with this finding. The CO met with the PO and DOPO in 

July, 1998, to discuss the audit finding and remind them not to discuss or recommend personnel

selection. 

68W40010, Region 3 - In July, 1998, the ARA sent a memorandum to all Region III CORS and supervisors

of CORS underscoring the importance of avoiding personal services. A fact sheet

providing examples of personal service relationships was attached to the ARA’s memorandum. 

The CO also sent a message in July, 1998, to the CORS reminding them to only interact with the

prime contractor.

5. Close Working Relationships Existed 

68C40002, ORD - We concur with this finding. The current contract expires 

September 30, 1998. The solicitation for the follow-on was issued June 22, 1998, and an award

is expected before the current contract expires. The original acquisition package contained

language in the SOW which legitimized technical directives issued by the PO as work ordering

mechanisms. However, the CO modified the SOW to remove all such references prior to issuing

the solicitation and has counseled the PO and his managers about the requirement for detailed

work assignments to be issued only by the CO. The CO scheduled a site visit to Newport and

Corvallis during the week of August 3, 1998, during which time, further personal services 

assessment was made. In addition to the personal services review by the CO, reiteration of

existing policies, guidance/instruction regarding avoidance of personal services and appropriate

management of government facilities were provided to the PO and WAMs. The CO also

discussed property issues with DCMC to ensure the contractor is adequately recording, tracking,

and reporting all government facilities in accordance with EPA policy. 

68W10055, OARM - We concur with this finding. As stated in the draft audit report, the

statement of work (SOW) for the follow-on for the MOSES contract has been revised to

 eliminate all language requiring coordination between the contractor and anyone other than

appropriate EPA officials. 
Audit of Personal Services

29 Report No. E1BMF7-23-0012- 8100251

Appendix 1

Page 5 of 6

The SOW has been changed to eliminate references to the leasing of space other than to say that

the contractor must be accessible in the Washington D.C. area, and the majority of the task

included in the SOW are performance-based.

68W40016, Region 6 - Regarding this finding, the program office did not have “offices” in the

contractor’s space. EPA personnel utilized the contractor’s space for a limited time and only for

purposes related to monitoring the work assignment and developing tasks for performance by the

contractor. Access to voluminous documents being handled by the contractor was necessary in

order to develop these incremental tasks. At times, prolonged access to the documents was

necessary in order to characterize the tasks. 

(6) Statement of Work Contained Language Allowing Personal Services 

68W10055, OARM - We agree with this finding. As stated in the draft audit report, the

statement of work (SOW) for the follow-on for the MOSES contract has been revised to

 eliminate all language requiring coordination between the contractor and anyone other than

appropriate EPA officials. The SOW has been changed to eliminate references to the leasing of

space other than to say that the contractor must be accessible in the Washington D.C. area, and

the majority of the tasks included in the SOW are performance-based.

68C60082, ORD - We concur with this finding. The CO issued a contract modification on

August 3, 1998, removing the inappropriate language from the contract.

68C40045, OARM - We concur with this finding. The CO issued a contract modification on

August 3, 1998, removing the inappropriate language from the contract.

Recommendation 2-1 

OIG: Recommend that the Acting Assistant Administrator for Administration and Resources

Management and the Agency Senior Resource Officials identify all contracts where EPA and

contractors are co-located, and evaluate and document whether any on-site contracts can be moved

off-site.

OARM Response: We agree with the OIG recommendation. However, we will need to coordinate

with our program offices any decisions to move contractors currently working at EPA locations. 

Within 90 days of issuance of the final audit report, we will complete our review and analysis of

whether contractors working at EPA locations can be moved off-site.
Audit of Personal Services

30 Report No. E1BMF7-23-0012- 8100251

Appendix 1

Page 6 of 6

Recommendation 2-2

OIG: Recommend that the Acting Assistant Administrator for Administration and Resources

Management direct contracting divisions to incorporate a contract clause similar to the one used

by the Contracts Management Division-Cincinnati (“Government Contractor Relations”)

contracts.

OARM Response: We agree with the OIG recommendation. The process of developing an

Agency-wide clause, including modifying the EPAAR, will take approximately 7 months

(February, 1999). 

 

Recommendation 2-3

OIG: Recommend that the Acting Assistant Administrator for Administration and Resources

Management direct Agency contracting officers to conduct a site visit at least annually for all onsite contracts and document whether personal services deficiencies were identified. If

deficiencies are identified, the contracting officer should provide needed guidance or

recommendations to the project officer.

OARM Response: We agree with OIG recommendation. Additional oversight is needed to

identify instances of personal services under on-site contracts. However, budget constraints may

preclude annual site visits, as many contracts are administered by COs in a different geographical

location from the on-site work. We recommend that the COs perform on-site visits periodically on

all on-site contracts, and if weaknesses are identified, the COs will perform annual visits. In 

addition, EPA will direct COs to discuss personal services issues with POs for individual on-site

contracts on an annual basis. OAM will issue a memo to the COs instructing them of this

requirement by December, 1998.
Audit of Personal Services

31 Report No. E1BMF7-23-0012- 8100251

Appendix 2

Page 1 of 2

Distribution

Office of Inspector General

Acting Inspector General (2410)

Deputy Assistant Inspector General for Internal Audits (2421)

Headquarters Offices

Acting Assistant Administrator for Administration and Resources Management (3101)

Agency Senior Resource Officials

Chief Financial Officer (2710)

Director, Office of Acquisition Management (3801R)

Director, Office of Policy and Resources Management (3102)

Special Assistant to Director, Office of Acquisition Management (3801R)

Audit Coordinator, Office of Acquisition Management (3802R)

Audit Coordinator, Office of Administration and Resources Management (3102)

Audit Follow-up Coordinator (2724)

Agency Follow-up Official (2710)

Audit Liaison, Office of Research and Development (8102R)

Audit Liaison, Office of Air and Radiation (6102)

Audit Liaison, Office of Enforcement and Compliance Assurance (2201A)

Audit Liaison, Office of Solid Waste and Emergency Response (5103)
Audit of Personal Services

32 Report No. E1BMF7-23-0012- 8100251

Appendix 2

Page 2 of 2

Audit Liaison, Office of Water (4102)

Headquarters Library

Regional Offices

Regional Administrators