U.S. ENVIRONMENTAL PROTECTION AGENCY 

OFFICE OF INSPECTOR GENERAL 

Catalyst for Improving the Environment 

Audit Report 

EPA Needs to Improve 

Cost Controls for Equipment 

Used during Emergencies 

 Report No. 10-P-0047 

December 16, 2009 
 

 

 

Report Contributors:	 Andrés Calderón 

 Randy Holthaus 

 Les Partridge 

Abbreviations 

BPA Blanket Purchase Agreement 

ERRS Emergency and Rapid Response Services 

FAR Federal Acquisition Regulation 

MATS Management Audit Tracking System 

OAM Office of Acquisition Management 

OARM Office of Administration and Resources Management 

OSC On-Scene Coordinator 

OSWER Office of Solid Waste and Emergency Response 

RCMS Removal Cost Management System 

START Superfund Technical Assessment and Response Team 
 

U.S. Environmental Protection Agency 10-P-0047 

December 16, 2009 Office of Inspector General 

At a Glance 

Catalyst for Improving the Environment 

Why We Did This Review 

The Office of Inspector 

General (OIG) sought to 

determine whether the U.S. 

Environmental Protection 

Agency (EPA) had the 

controls and processes in place 

during its responses to 

Hurricanes Gustav and Ike to 

timely obtain goods and 

services it needed at 

reasonable prices. We also 

followed up on actions EPA 

committed to take after 

Hurricane Katrina. 

Background 

In 2006, the OIG issued a 

report titled Existing 

Contracts Enabled EPA to 

Quickly Respond to Hurricane 

Katrina; Future Improvement 

Opportunities Exist. 

Hurricanes Gustav and Ike 

made landfall in Louisiana and 

Texas in September 2008 and 

caused significant damage. 

For further information, 

contact our Office of 

Congressional, Public Affairs 

and Management at 

(202) 566-2391. 

To view the full report, 

click on the following link: 

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

20091216-10-P-0047.pdf 

EPA Needs to Improve Cost Controls for 

Equipment Used during Emergencies 

What We Found 

EPA did not monitor costs paid for equipment used during its responses to 

Hurricanes Gustav and Ike against average purchase prices. In our sample of 97 

equipment items, with usage charges of $4,399, EPA may have paid a total of 

$2,048 more than the average purchase price for 22 items. EPA did not require 

the contractor to submit average purchase price information as required in the 

contract. While EPA had controls to monitor equipment charges, it did not use the 

tools effectively. EPA could have mitigated the risk of excessive charges for 

equipment rentals by using the Removal Cost Management System for all 

emergency response contracts, and tracking equipment rental costs by contract. 

Improvements are needed so that EPA can better control equipment costs. 

Using lessons learned from Hurricane Katrina, EPA established additional 

emergency response contracting mechanisms to meet the Agency’s needs during 

future emergencies. EPA implemented the corrective actions it agreed to take in 

response to recommendations in our 2006 report on Katrina contracting issues. 

However, EPA never established a review board for Hurricanes Gustav and Ike; 

review boards can help improve future emergency contracting procedures. 

EPA did not notify the OIG as required that several corrective actions were going 

to be delayed by more than 6 months. This can impact the completeness and 

accuracy of reports to Congress. 

What We Recommend 

We recommend that EPA review equipment charges for Hurricanes Gustav and 

Ike for usage fees that exceeded average purchase price, negotiate new rates, and 

amend contract language. We also recommend that EPA develop a system or 

process to identify and prevent overcharges for all emergency response contracts, 

and notify the OIG when corrective actions are delayed more than 6 months. EPA 

agreed with our recommendations or proposed acceptable alternative corrective 

actions that, when implemented, should adequately address the findings. 
 

 

 

 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

INSPECTOR GENERAL 

December 16, 2009 

MEMORANDUM 

SUBJECT:	 EPA Needs to Improve Cost Controls for Equipment Used during Emergencies 

 Report No. 10-P-0047 

FROM:	 Melissa M. Heist 

Assistant Inspector General for Audit 

TO:	 Craig E. Hooks 

Assistant Administrator 

Office of Administration and Resources Management 

 Mathy Stanislaus 

Assistant Administrator 

Office of Solid Waste and Emergency Response 

Al Armendariz
 

Regional Administrator, Region 6 

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

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

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

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

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

established audit resolution procedures. 

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

applicable daily full cost billing rates in effect at the time – is $395,481. 

Action Required 

In accordance with EPA Manual 2750, the Office of Administration and Resources Management 

is required to provide a consolidated written response for the Agency within 90 calendar days. 

The response should include a corrective actions plan for agreed upon actions, including 
 

milestone dates. We have no objections to the further release of this report to the public. This 

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

If you or your staff have any questions, please contact Janet Kasper, Director, Contracts and 

Assistance Agreement Audits, at 312-886-3059 or kasper.janet@epa.gov. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPA Needs to Improve Cost Controls 10-P-0047 

for Equipment Used during Emergencies 

Table of Contents 

Chapters 

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

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

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

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

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

2 Improvements Needed to Ensure EPA Pays Reasonable Prices 

 for Equipment........................................................................................................ 4 

EPA Did Not Monitor Equipment Usage Costs Against Average 

Purchase Prices ........................................................................................ 4 

EPA Did Not Require Contractor to Comply With Contract Terms................. 5 

EPA Did Not Make Full Use of Available Internal Controls ............................ 6 

Conclusion...................................................................................................... 7 

 Recommendations ......................................................................................... 7 

Agency Comments and OIG Evaluation......................................................... 7 

3 EPA Incorporated Lessons Learned after Hurricane Katrina ........................... 9 

EPA Awarded Two BPAs and an Additional Logistics Support Contract ....... 9 

Enhancing Control Board Procedures Would Further Minimize Risk............. 9 

 Recommendation ........................................................................................... 10 

Agency Comments and OIG Evaluation......................................................... 11 

4 OIG Not Notified of Delays in Corrective Actions .............................................. 12 

EPA Manual Provides Guidance on Notifying OIG......................................... 12 

EPA Did Not Notify OIG of Delayed Corrective Actions ................................. 13
 

EPA Offices Unsure Who Is Responsible for Updating Tracking System ...... 13 

 Recommendation ........................................................................................... 14 

Agency Comments and OIG Evaluation......................................................... 14 

Status of Recommendations and Potential Monetary Benefits................................. 15 

- continued - 
 

 

EPA Needs to Improve Cost Controls 10-P-0047 

for Equipment Used during Emergencies 

Appendices 

A Details on Scope and Methodology..................................................................... 16 

B Equipment Spreadsheet ....................................................................................... 17 

C Corrective Actions Delayed More than 6 Months............................................... 18 

D Agency Response ................................................................................................. 19
 

E Distribution ............................................................................................................ 22
 
10-P-0047 

Chapter 1

Introduction 

Purpose 

The Office of Inspector General (OIG) reviewed how the U.S. Environmental 

Protection Agency (EPA) responded to Hurricane Katrina and in 2006 issued the 

report Existing Contracts Enabled EPA to Quickly Respond to Hurricane Katrina; 

Future Improvement Opportunities Exist (Report No. 2006-P-00038). In October 

2008, we began a follow-up review of EPA’s actions in response to our 2006 

report. The objectives of our review were to determine whether EPA: 

•	 Paid reasonable prices for equipment when responding to Hurricanes 

Gustav and Ike. 

•	 Established Blanket Purchase Agreements (BPAs) to provide emergency 

response technical support and logistical services and such agreements 

incorporated lessons learned from the Hurricane Katrina response and met 

the Agency’s needs when responding to Hurricanes Gustav and Ike. 

•	 Implemented the corrective actions it agreed to take in response to our 

2006 report on Hurricane Katrina regarding contract management. 

Background 

Part of EPA’s mission is to respond to emergencies that threaten our environment 

and human health. In September 2008, two hurricanes struck the Louisiana and 

Texas coasts. Hurricane Gustav made landfall in Louisiana on September 1, 

2008, triggering the largest evacuation in U.S. history; over 3 million people fled 

the oncoming hurricane. Hurricane Ike made landfall in Texas on September 13, 

2008. Ike was the third most destructive hurricane to ever make landfall in the 

United States, with damages estimated in 2008 at $22.4 billion. 

EPA’s role under the national response system is to respond to emergencies with 

respect to the release or threat of release of oil, hazardous substances, pollutants, 

contaminants, or fire or explosion hazard. To accomplish its role, EPA uses 

contracts with specialized contractors, including the following types of contracts: 

•	 Superfund Technical Assessment and Response Team (START). 

Typically, START contractors arrive at the scene of an emergency first. 

START contracts are used to provide technical support to EPA On-Scene 

Coordinators (OSCs) and other federal officials implementing EPA’s 

responsibilities. 

•	 Emergency and Rapid Response Services (ERRS). Next on the scene 

of an emergency typically are ERRS contractors. ERRS contracts are used 

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to provide responsive environmental clean-up services for releases of 

hazardous substances, wastes, contaminants, materials, and petroleum 

products that are harmful to human health and the environment. 

The START and ERRS contracts are (a) cost reimbursement, (b) indefinitedelivery indefinite-quantity, (c) fixed-rate, and (d) time-and-materials contracts. 

Time-and-materials contracts include materials at cost, including handling costs, 

fixed hourly labor rates plus general and administrative costs, and profit. If EPA 

needs goods or services from those contractors, EPA orders the goods using 

delivery orders, task orders, and/or technical direction documents. The contractor 

submits an invoice to EPA for reimbursement. 

Indefinite-delivery indefinite-quantity, time-and-materials contracts expose the 

government to risk and should be subject to strict controls to prevent contractors 

from overcharging. The Federal Acquisition Regulation (FAR) states, “A timeand-materials contract provides no positive profit incentive to the contractor for 

cost control or labor efficiency. Therefore, appropriate Government surveillance 

of contractor performance is required to give reasonable assurance that efficient 

methods and effective cost controls are being used.” 

A March 4, 2009, presidential memorandum to all federal agencies on contracting 

stated that excessive reliance on cost reimbursable contracts creates a risk that 

taxpayer funds will be spent on contracts that are wasteful, inefficient, subject to 

misuse, or otherwise not well designed. The memorandum calls on federal 

agencies to manage the risk associated with the goods and services being procured 

to ensure that taxpayer funds are not subject to excessive risk. 

Noteworthy Achievements 

EPA regional personnel initiated internal meetings after specific emergencies to 

identify and use lessons learned from responding to those emergencies. Regions 

called these "Hotwash" meetings, and the meetings included open discussions 

among managers and staff who directly participated in the emergency responses. 

The purpose was to respond more effectively to future emergencies. These efforts 

indicate EPA’s desire to continuously improve its processes for responding to 

emergencies. 

Scope and Methodology 

We conducted this performance audit in accordance with generally accepted 

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

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

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

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

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We performed audit field work from October 2008 to October 2009. We 

followed up on recommendations made in our 2006 report on Hurricane Katrina 

contracting issues. We also conducted Headquarters and regional interviews to 

determine how the emergency acquisition process is implemented and what 

controls are in place for emergency acquisitions. Regional interviews included 

officials in Region 6, which is responsible for both Louisiana and Texas. 

We reviewed the ERRS, START, and logistics contracts and the two BPAs 

available for emergency acquisitions on Hurricanes Gustav and Ike. We 

conducted analyses to determine whether the prices EPA paid were reasonable for 

particular items of equipment used during emergency operations. For additional 

details on our scope and methodology, see Appendix A. 

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Chapter 2

Improvements Needed to Ensure EPA Pays 

Reasonable Prices for Equipment
 

EPA did not monitor costs paid for equipment used during its responses to 

Hurricanes Gustav and Ike against average contractor purchase prices. In our 

sample of 97 equipment items, with usage charges totaling $4,399, EPA may have 

paid a total of $2,048 more than the average purchase prices for 22 items. EPA 

did not require the contractor to submit average purchase price information as 

required in the contract. EPA was using time-and-materials contracts and the 

FAR instructs federal agencies to closely monitor this type of contract to provide 

a reasonable assurance of effective cost controls. While EPA had controls to 

monitor equipment charges, it did not make full use of those controls. EPA could 

have mitigated the risk of excessive charges for equipment rentals by using the 

Removal Cost Management System (RCMS) for all emergency response 

contracts, and tracking equipment rental costs by contract. Improvements are 

needed so that EPA can better control equipment costs. 

EPA Did Not Monitor Equipment Usage Costs Against Average 

Purchase Prices 

In responding to Hurricanes Gustav and Ike, EPA may have paid more in usage 

fees for some equipment than the contractor’s average purchase price. Federal 

contracting regulations define a cost as being reasonable if it does not exceed that 

which would be incurred by a prudent person in the conduct of competitive 

business. EPA paid about $3.5 million to rent equipment to respond to 

Hurricanes Gustav and Ike. In our sample of 97 items with usage charges totaling 

$4,399, EPA may have paid contractors more than the average purchase price for 

22 of those 97 pieces of equipment (23 percent), representing a total overcharge 

of $2,048. See Appendix B for details. 

EPA agreed to limit charges on contractor-owned equipment in its response to our 

2006 report on Katrina contracting issues. EPA stated that the Office of 

Administration and Resources Management (OARM) and its Office of 

Acquisition Management (OAM) would review all current and future contracts to 

ensure that flow-down clauses are included to prevent contractor overcharging. 

The existing contract clause limiting equipment charges in the ERRS contracts 

(Section B.6(4)(a)) states that, “The maximum charge for each contractor-owned 

specific equipment item used on this contract shall not exceed the contractor’s 

average purchase price/average capital value for all pieces of equipment in that 

category in his inventory.” The clause goes on to say that if the average purchase 

price is reached, “[A] usage rate must be negotiated with the Contracting Officer 

before any additional costs are incurred.” That new usage rate is intended to 

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reimburse the contractor for operating costs such as maintenance, license, and 

insurance. 

Not all the equipment used in the hurricane responses was contractor-owned. For 

example, contractors rented items such as cameras, printers, and wireless cards. 

EPA told us that for this equipment the contract clause limiting charges to average 

purchase prices would not apply. Even if the contract clause limiting charges to 

average purchase prices would not apply to this equipment, FAR provisions on 

cost reasonableness would still apply. FAR 31.201-3 states a cost is reasonable if 

it does not exceed what a prudent person would incur in the conduct of a 

competitive business. 

The contractor is entitled to costs in excess of the average purchase price to 

compensate for maintenance of the equipment and indirect costs, but EPA has not 

computed what the additional costs would be. The contract allows the contractor 

to negotiate a maintenance fee once the usage fees exceed the average purchase 

price. Neither EPA nor the contractor negotiated maintenance fees for the items 

in our sample. EPA Region 6 staff said usage rates in the contract include general 

and administrative costs and profit. Region 6 and OAM stated that to obtain the 

actual purchase price the invoiced cost would have to be reduced by a percentage 

to reflect cost factors such as general and administrative fees and profit. They 

explained that those calculations would have to be made to make valid 

comparisons between total rental costs to average purchase prices. Since 

Region 6 has not made those calculations, Region 6 personnel stated that they are 

not sure whether they have paid more than the average purchase price for the 

equipment in our sample. 

EPA Did Not Require Contractor to Comply With Contract Terms 

The ERRS contractor for Region 6 did not submit average purchase price 

information until almost 2 years after the contract was signed. According to the 

contract, the contractor shall supply the contractor’s average purchase 

price/average capital value for all pieces of equipment that have fixed rates to the 

contracting officer. The ERRS contracts were signed in May 2007 but the 

contractor did not submit the average purchase price information until April 2009. 

Region 6’s Procurement Chief and her contracting staff acknowledged they had 

not obtained the data and it had been an oversight on the Region’s part. While the 

contract required the contractor to supply information on average purchase price, 

it did not include a timeframe for providing, or penalties for not providing, the 

information. Without average purchase price information, EPA could not enter 

the information into RCMS for the ERRS contracts.1 As a result, EPA could not 

determine whether the limit for rental charges on any particular piece of 

equipment was being approached or exceeded. 

1

 A separate EPA contractor in Edison, New Jersey, enters average purchase price information into RCMS. 

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EPA Did Not Make Full Use of Available Internal Controls 

EPA needs to strengthen its internal controls over equipment charges during 

emergencies. Internal controls are tools that program and financial managers use 

to safeguard the integrity of Agency programs. While EPA has controls that it 

could use to monitor equipment charges, it has not always used the tools 

effectively. Region 6 personnel told us that they believe the risk of being 

overcharged is low and that EPA can collect overcharges before contract closeout. Although EPA might be able to recover overcharges if it performs checks on 

invoices after the fact, relying on this method constitutes an ineffective and laborintensive method. 

EPA uses the RCMS for some but not all emergency response contracts. RCMS 

enables EPA to track equipment costs against average purchase prices for 

individual pieces of equipment. EPA requires ERRS contractors to input daily 

actual cost data to RCMS during emergency responses. However, EPA does not 

require START contractors and Region 6’s logistics contractor to use RCMS in 

that way or to provide average purchase price information. However, an OSC 

may elect to use RCMS for a START contract if the OSC believes it would be a 

cost-effective method of tracking equipment costs. 

RCMS is currently set up to track costs by task order, not by contract. As a result, 

contractors have the ability to spread equipment rental costs out over different 

task orders, and EPA will not be able to identify instances where the combined 

cost exceeded the average purchase price. For example, the pressure washer EPA 

rented appeared in two different task orders (042-003 and 045-003). If equipment 

rental charges are only tracked by task order, each time there is a new task order 

the equipment rental charge accruals start over. Region 6 officials told us that 

they are working with EPA’s RCMS expert to fix this problem. 

EPA reviewed affected contracts before April 7, 2007, but did not ensure that 

future procurement vehicles (such as Region 6’s logistics contract) contained the 

flow-down clause. The clause stipulates that maximum charges for contractorowned equipment “[Apply] to team subcontractors and tier subcontractors.” Not 

having flow-down clauses puts EPA at risk of being overcharged for equipment 

EPA contractors rent from subcontractors, and the clause gives EPA the legal 

grounds to recover overcharges. When we asked Region 6’s Procurement Section 

Chief in December 2008 about the flow-down clause, the Chief acknowledged 

that it was not in the logistics contract awarded in July 2008 and should have 

been. EPA modified the contract to include the flow-down clause effective 

May 8, 2009. EPA also modified one of the BPAs to include the flow-down 

clause effective July 14, 2009. 

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Conclusion 

Federal agencies should manage the risk associated with the goods and services 

being procured to ensure that taxpayer funds are not subject to excessive risk. 

Region 6’s START, ERRS, and logistics contracts are all cost reimbursable 

contracts. There are internal controls available to EPA to reduce the risk of such 

contracts – for example, the ability of the RCMS system to identify when contract 

charges exceed average purchase prices. However, EPA did not fully use these 

internal controls. As a result, EPA may have paid more to rent equipment than 

was reasonable and may continue to do so. 

Recommendations 

We recommend that the Regional Administrator for Region 6: 

2-1 Review all equipment charges for responding to Hurricanes Gustav and 

Ike and identify any items where the usage fees exceeded the average 

purchase price. For these equipment items, the contracting officer should 

negotiate maintenance rates for the equipment and then require the 

contractor to repay any charges in excess of negotiated rates. 

2-2 Amend the ERRS contract to require the contractor to provide average 

purchase price information within a specific timeframe. 

We recommend that the Assistant Administrator for Solid Waste and Emergency 

Response: 

2-3 Develop a system or process to identify and prevent overcharges for 

contractor-owned equipment for START and emergency logistics 

contracts. If RCMS is not used, provide policies and procedures for how 

to track equipment costs. 

2-4 Modify RCMS so that it tracks equipment charges by contract rather than 

just task order. 

Agency Comments and OIG Evaluation 

EPA concurred with Recommendations 2-1, 2-2, and 2-3. While it did not agree 

with Recommendation 2-4, EPA proposed an alternative corrective action. This 

corrective action would not modify RCMS, but would provide project officers and 

contracting officers with the ability to query the system. 

Regarding our audit finding related to overcharged equipment items, EPA 

requested that the OIG examine new data related to the pressure washer and 

generator. EPA explained that during our audit it initially provided inaccurate 

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data to us because the contractor “inadvertently reported” incorrect average 

purchase prices for those two items. We reviewed additional cost documentation 

that EPA provided and revised our report based on the new data. As a result, we 

are no longer including the pressure washer and generator in our list of items that 

had costs exceeding average purchase prices. 

In its response to Recommendation 2-1, EPA did not provide details on how it 

would address the finding. While EPA stated that it has started taking corrective 

actions, it also did not provide a completion date. When responding to the final 

report, EPA needs to provide details on how it would address the finding and 

provide a completion date. 

For Recommendation 2-2, in its response EPA stated that it had already 

implemented the suggested corrective action. EPA has required both ERRS 

contractors to provide average purchase price information in RCMS within 

60 working days after the initial award and on each anniversary date of the 

contract. Region 6 provided copies of the contract modifications that were 

approved for both of the ERRS contracts after our draft report was issued. We 

believe EPA’s actions adequately address our recommendation. 

For Recommendation 2-3, EPA agreed that either a system or process needs to be 

developed to prevent overcharging of rented equipment. EPA stated that to 

develop such a process will require coordination with all regional stakeholders. 

EPA plans to complete this corrective action by December 2010. EPA stated that 

until then, the regions will continue to perform invoice reviews to ensure the 

government is not overcharged for equipment. This corrective action will 

adequately address our recommendation. Upon completion of the action, the OIG 

requests EPA provide documentation of the new process. 

EPA did not agree with Recommendation 2-4. However, it proposed to train 

project officers and contracting officers on how to query RCMS by July 2010. 

These queries will enable project officers and contracting officers to capture 

individual equipment costs so that they can be tracked by contract, not just by task 

order. We believe EPA’s actions adequately address our recommendation. 

The full text of the Agency response is in Appendix D. 

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Chapter 3

EPA Incorporated Lessons Learned 

after Hurricane Katrina
 

Using lessons learned from Hurricane Katrina, EPA established additional 

emergency response contracting mechanisms to meet Agency needs during future 

emergencies. EPA developed and awarded two national BPAs and a logistics 

support contract that met Region 6’s needs during Hurricanes Gustav and Ike. 

EPA procedures require that OAM establish a review board to assess internal 

controls and the execution of contracts and purchase card actions for significant 

emergency responses, and discussions on convening a board began 5 months after 

the hurricanes made landfall. However, OAM never established a review board 

for Hurricanes Gustav and Ike. EPA can enhance its emergency contracting 

procedures to clarify when OAM is to establish the review board. 

EPA Awarded Two BPAs and an Additional Logistics Support Contract 

Following lessons learned from Hurricane Katrina, EPA developed two BPAs and 

a logistics contract for Region 6 that met EPA needs during emergency responses. 

One BPA required the vendor to provide housing/lodging services to support 

EPA’s OSCs and other federal officials implementing EPA’s responsibilities in all 

EPA regions. The other BPA required the vendor to provide an Incident 

Command Post and associated services to support Agency emergency actions. 

The logistics contract included providing and coordinating logistical support 

services that address Region 6’s immediate and high priority needs for lodging 

and support services. 

The BPAs addressed the OIG recommendation in our 2006 audit report that EPA 

establish advance agreements with vendors that are flexible and detailed for the 

items EPA used substantially during its Katrina response, such as housing and 

food services. The BPAs also specifically addressed prior OIG concerns 

regarding such issues as whether all office space needed to be under one roof and 

the definition of private bedroom areas. Personnel from the three EPA regions we 

spoke with believed they had more control and alternatives now to procure goods 

and services during emergency actions; they believe that there are mechanisms 

now in place to handle any kind of situation. 

Enhancing Control Board Procedures Would Further Minimize Risk 

EPA did not establish a control board to review contracts and purchase card 

actions for Hurricanes Gustav and Ike. According to Section 1.5.4.1 of OAM’s 

Emergency Contracting Procedures, a contract control review board comprised of 

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management level officials from OAM, the Office of General Counsel, and the 

Office of the Chief Financial Officer will assess the effectiveness of internal 

controls and execution of contracts and purchase card actions. Representatives 

from these three offices will ensure that emergency funds are used in support of 

the Agency’s mission and are protected from fraud, waste, and abuse. 

The Office of Federal Procurement Policy’s Emergency Acquisitions guide, dated 

May 2007, states: 

Agencies should consider the creation of a mitigation board to 

control the increased risks during an emergency. Such boards 

allow for increased communication, clear policy direction, and 

effective resource utilization. 

EPA’s response action for Hurricanes Gustav and Ike started in August 2008. 

Five months after the two hurricanes made landfall, EPA attempted to convene a 

review board but never did. According to the OAM Acting Director, Gustav and 

Ike were nowhere near the “magnitude” of Katrina and initially they were not 

even sure they would need to establish a contracts control board. OAM said that 

within 2 weeks of Gustav and Ike making landfall OAM was tracking purchases 

to stay on top of issues and was totally aware of what was happening. 

While EPA may have been tracking purchases, current Agency procedures require 

that a control review board be established. EPA established a control review 

board for Hurricane Katrina in 2005 while the response action was on-going, and 

it enabled EPA to reduce the risk of overcharging and manage problems as they 

occurred. 

EPA needs to clarify the emergency contracting procedures to specify for what 

type of emergencies the control board is to be established, how soon after the 

emergency it is to be established, and how long the board is to remain active. 

Updating the procedures will ensure that contract funds will continue to be 

safeguarded during future emergencies. 

Recommendation 

We recommend that the Assistant Administrator for Administration and 

Resources Management: 

3-1 Expand the Emergency Contracting Procedures to describe when EPA 

should convene a control review board, what offices should participate in 

board meetings, and how long the board should remain active. 

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Agency Comments and OIG Evaluation 

EPA concurred with Recommendation 3-1 and agreed to modify its emergency 

contracting procedures related to convening a contract control review board. EPA 

stated it will complete the revision by October 2010. This corrective action will 

adequately address our recommendation. Upon completion of the action, the OIG 

requests EPA to provide the OIG with documentation of the new process. 

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Chapter 4

OIG Not Notified of Delays in Corrective Actions
 

EPA did not notify the OIG when corrective actions were delayed more than 

6 months after agreed to milestone dates. EPA implemented the corrective 

actions it agreed to take in response to our 2006 report on Katrina contracting 

issues, but there is one effort that EPA still needs to complete. EPA Manual 2750 

requires the Agency to notify the OIG when EPA anticipates delays of more than 

6 months in implementing corrective actions. OARM acknowledged that it forgot 

to notify the OIG. When EPA does not properly notify the OIG of delays in 

corrective actions, EPA hinders communication with the OIG on the effectiveness 

of Agency programs and may impact the completeness and accuracy of reports to 

Congress. 

EPA Manual Provides Guidance on Notifying OIG 

Action officials (usually Assistant and Regional Administrators) and audit 

follow-up coordinators have specific audit management responsibilities, as shown 

in Table 4-1. According to EPA Manual 2750, one of the responsibilities of 

action officials is to notify the OIG when planned milestones for corrective 

actions are going to be delayed more than 6 months. 

Table 4-1: Audit Management Responsibilities 

Title Duties 

Action Officials 

• Ensures that corrective actions are documented, 

tracked, and implemented 

• Certifies that corrective actions are complete (or 

designates a certifying official to do so) 

Audit Follow-up 

Coordinators 

• Provides guidance and ensures that responses to OIG 

reports are complete and timely 

• Maintains official files containing the record of 

management decisions and certifications of completed 

corrective actions 

• Provides status reports to the Agency Audit Follow-up 

Coordinator on corrective actions and audit resolution, 

and tracks reasons for delay 

• Prepares reports to Congress 

Source: EPA Manual 2750. 

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EPA Did Not Notify OIG of Delayed Corrective Actions 

EPA was more than 6 months late implementing the corrective actions for eight 

recommendations and did not notify the OIG of the delays.2 For example, the 

Emergency Contracting Procedures document (in response to Recommendation 

2-1) was produced 11 months after the agreed-upon milestone date. The Incident 

Management Handbook document (in response to Recommendation 4-1, Bullet 1) 

was produced 9 months after the agreed-upon milestone date. See Appendix C 

for a list of all the actions that were delayed. 

During our audit, the Office of Solid Waste and Emergency Response (OSWER) 

finalized guidance related to the Response Support Corps into an EPA Order to 

address Recommendation 4-1, Bullet 2. The Order was effective August 4, 2009. 

EPA still needs to finish implementing one corrective action. In its response to 

our 2006 report on Katrina contracting issues, EPA pledged to deploy a national 

inventory tracking system by December 31, 2006. EPA personnel have told us 

that the roll-out is progressing and that the system should be fully deployed by the 

end of December 2009. OSWER is already tracking this corrective action as a 

result of an OIG report on emergency response equipment.3 

EPA Offices Unsure Who Is Responsible for Updating Tracking 

System 

EPA did not notify the OIG of delayed corrective actions regarding our 2006 

report on Katrina contracting issues because there was confusion between 

OSWER and OARM as to who was ultimately responsible for updating EPA’s 

Management Audit Tracking System (MATS). OARM was listed as the action 

official in MATS. The OAM Director signed a memorandum certifying that all 

corrective actions in response to the OIG’s 2006 report on Katrina contracting 

issues were completed by June 30, 2008. However, some of the actions where 

OSWER was taking the lead had not been completed. When we asked the audit 

follow-up coordinators about the dates in MATS, the audit follow-up coordinator 

for OSWER agreed to take the steps necessary to accurately update MATS. Not 

properly tracking corrective actions in MATS may adversely affect the 

completeness and accuracy of audit follow-up information and reports to 

Congress. 

2

 Recommendation 4-1 had five parts (bullets). We are counting each of those five parts as a separate, individual
 

recommendation requiring one corrective action each. 

3 EPA Plans for Managing Counter Terrorism/Emergency Response Equipment and Protecting Critical Assets Not 

Fully Implemented, Report No. 09-P-0087, dated January 27, 2009.
 

13
 
10-P-0047 

Recommendation 

We recommend that the Assistant Administrator for Administration and 

Resources Management and the Assistant Administrator for Solid Waste and 

Emergency Response: 

4-1 Notify the OIG when planned milestones for corrective actions are going 

to be delayed more than 6 months. 

Agency Comments and OIG Evaluation 

EPA concurred with Recommendation 4-1. EPA stated that it would comply with 

the requirements of MATS and EPA Manual 2750 for notifying the OIG of 

delayed corrective actions. OSWER also stated that it would check the status of 

milestones on a quarterly basis. We agree with EPA’s proposed corrective 

actions. 

14
 
 

 

 

 

 

 

 

 

 

10-P-0047 

Status of Recommendations and 

Potential Monetary Benefits 

POTENTIAL MONETARY 

RECOMMENDATIONS BENEFITS (in $000s) 

Rec. 

No. 

Page 

No. Subject Status1 Action Official 

Planned 

Completion 

Date 

Claimed 

Amount 

Agreed To 

Amount 

2-1 

2-2 

2-3 

2-4 

3-1 

7 

7 

7 

7 

10 

Review all equipment charges for responding to 

Hurricanes Gustav and Ike and identify any items 

where the usage fees exceeded the average 

purchase price. For these equipment items, the 

contracting officer should negotiate maintenance 

rates for the equipment and then require the 

contractor to repay any charges in excess of 

negotiated rates. 

Amend the ERRS contract to require the contractor 

to provide average purchase price information 

within a specific timeframe. 

Develop a system or process to identify and 

prevent overcharges for contractor-owned 

equipment for START and emergency logistics 

contracts. If RCMS is not used, provide policies 

and procedures for how to track equipment costs. 

Modify RCMS so that it tracks equipment charges 

by contract rather than just task order. 

Expand the Emergency Contracting Procedures to 

describe when EPA should convene a control 

review board, what offices should participate in 

board meetings, and how long the board should 

remain active. 

O 

C 

O 

O 

O 

Regional Administrator for 

Region 6 

Regional Administrator for 

Region 6 

Assistant Administrator for 

Solid Waste and 

Emergency Response 

Assistant Administrator for 

Solid Waste and 

Emergency Response 

Assistant Administrator for 

Administration and 

Resources Management 

10/20/09 

12/31/10 

07/31/10 

10/31/10 

4-1 14 Notify the OIG when planned milestones for 

corrective actions are going to be delayed more 

than 6 months. 

O Assistant Administrator for 

Administration and 

Resources Management 

and 

Assistant Administrator for 

Solid Waste and 

Emergency Response 

12/31/10 

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

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

U = recommendation is undecided with resolution efforts in progress 

15
 

1 
10-P-0047 

Appendix A 

Details on Scope and Methodology 

We analyzed the laws, regulations, and guidance pertaining to emergency response contracts. 

We reviewed internal controls related to planning, organizing, directing, and controlling 

acquisitions operations. We also reviewed controls for measuring, reporting, and monitoring 

emergency acquisitions. We gained an understanding of internal controls by performing the 

steps outlined below. 

•	 We interviewed OAM and OSWER managers and staff members in EPA Headquarters in 

Washington, DC. We also interviewed EPA acquisitions personnel in Regions 6, 7, and 

9; an OSWER Environmental Response Team RCMS equipment specialist in Cincinnati, 

Ohio; and an OARM program analyst in Research Triangle Park, North Carolina. 

•	 We examined the Region 6 START and ERRS contracts and a logistics contract available 

for emergency acquisitions during EPA’s responses to Hurricanes Gustav and Ike. We 

examined the two national BPAs that EPA awarded after Hurricane Katrina. 

•	 We judgmentally selected 25 equipment categories of non-expendable personal property 

that EPA rented during Gustav and Ike to determine whether the rental costs exceeded the 

average purchase price of those items. The audit team selected equipment items to 

review based on rental rates that seemed high and could likely be above purchase prices. 

The 25 categories of items in our sample of equipment represented 97 individual pieces 

of equipment rented under the START, ERRS, and Region 6 logistics contracts between 

September and December 2008. The sample represented about 10 percent of the 

equipment rented to respond to the Hurricanes. Our review focused on the costs for 

equipment only and not other emergency response cost categories. Because we used a 

non-statistical sample, the results of our review cannot be projected. 

•	 We reviewed relevant criteria documents, such as FAR Parts 16, 18, and 31; the Office of 

Federal Procurement Policy’s guidance on emergency acquisitions; and a presidential 

memorandum calling for less reliance on cost-reimbursable contracts. 

•	 We reviewed numerous documents related to EPA’s response to our 2006 report on 

Katrina contracting issues to gain an understanding of EPA progress in completing the 

related corrective action plan. We reviewed the MATS entry for that audit to determine 

whether EPA had used the system to appropriately track and finalize proposed audit 

response actions. 

•	 Besides the 2006 OIG Report No. 2006-P-00038, there was one other OIG report on 

contracting during emergencies. That was Report No. 2007-P-00015, New Housing 

Contract for Hurricane Katrina Command Post Reduced Costs but Limited Competition, 

issued March 29, 2007. The report did not contain any recommendations. 

16
 
 

 

10-P-0047 

Appendix B 

Equipment Spreadsheet 

Item Name 

Contract 

Type 

Average 

Purchase 

Price4 

Total 

Rental 

Cost 

Cost 

Overrun 

Price 

Range 

Camera (RFW21158) 

Camera (RFW23609) 

START 

START 

$323.23 

$323.23 

$361.53 

$355.77 

$38.30 

$32.54 

$237.90-497 

$237.90-497 

Camera (WSH00028) 

Camera (WSH00025) 

Camera (WSH00026) 

Camera (WSH00027) 

Camera (WSH00029) 

Camera (WSH00030) 

Camera (WSH00031) 

START 

START 

START 

START 

START 

START 

START 

$109.50 

$109.50 

$109.50 

$109.50 

$109.50 

$109.50 

$109.50 

$253.93 

$159.18 

$159.18 

$159.18 

$159.18 

$159.18 

$159.18 

$144.43 

$49.68 

$49.68 

$49.68 

$49.68 

$49.68 

$49.68 

$66-153 

$66-153 

$66-153 

$66-153 

$66-153 

$66-153 

$66-153 

Printer (WSH00048) 

Printer (WSH00049) 

START 

START 

$347.00 

$347.00 

$396.00 

$396.00 

$49.00 

$49.00 

$200-494 

$200-494 

Wireless Card 

(WSH00075) 

Wireless Card 

(WSH00077) 

Wireless Card 

(WSH00078) 

Wireless Card 

(WSH00074) 

Wireless Card 

(WSH00144) 

Wireless Card 

(WSH00076) 

Wireless Card 

(WSH00222) 

Wireless Card 

(WSH00223) 

Wireless Card 

(WSH00224) 

Wireless Card 

(WSH00225) 

Wireless Card 

(WSH00226) 

START 

START 

START 

START 

START 

START 

START 

START 

START 

START 

START 

$22.24 

$22.24 

$22.24 

$22.24 

$22.24 

$22.24 

$22.24 

$22.24 

$22.24 

$22.24 

$22.24 

$230.10 

$230.10 

$230.10 

$214.50 

$214.50 

$171.60 

$78.00 

$78.00 

$78.00 

$78.00 

$78.00 

$207.86 

$207.86 

$207.86 

$192.26 

$192.26 

$149.36 

$55.76 

$55.76 

$55.76 

$55.76 

$55.76 

$19.99-24.75 

$19.99-24.75 

$19.99-24.75 

$19.99-24.75 

$19.99-24.75 

$19.99-24.75 

$19.99-24.75 

$19.99-24.75 

$19.99-24.75 

$19.99-24.75 

$19.99-24.75 

Totals $2,351.60 $4,399.21 $2,047.61 

Source: OIG analysis of EPA and market data. 

4

 The contractors did not provide the average purchase prices for the START equipment items; as a result, we 

contacted vendors directly and did research via the Internet to obtain the purchase price data. The average purchase 

prices for START items are what it would have cost to purchase the item and do not include overhead and 

maintenance costs the contractor may incur. The average purchase prices for the wireless cards did not include 

airtime, which was included in the contractor’s fixed rate. 

17
 
 

 

10-P-0047 

Appendix C 

Corrective Actions Delayed More than 6 Months 

(from OIG Report No. 2006-P-00038) 

Recommendation # Recommendation 

Agreed-Upon 

Milestone 

Dates5 

Completion 

Date in 

MATS 

Actual 

Completion 

Date 

Recommendation 2-1 Develop a 

strategy/plan to 

deploy sufficient 

personnel to an 

emergency response 

area 

Document 

completed by 

December 2006 

December 6, 

2007 

November 7, 

2007 

Recommendation 2-3 Continue exploring 

advance agreements 

for support services 

BPAs 

developed by 

September 30, 

2006 

September 30, 

2006 

September 26, 

2007 and 

January 30, 2008 

Recommendation 3-1 Establish a policy 

and procedures for 

adequate invoice 

review 

Handbook 

completed by 

December 31, 

2006 

December 31, 

2007 

Handbook 

completed 

September 2007; 

Job Aid 

completed 

January 2009 

Recommendation 3-2 Make sure 

subcontractor 

limitation clauses are 

in contracts 

Insert flow-down 

clauses by 

December 31, 

2006 

April 7, 2007 May 8, 2009 

Recommendation 4-1, 

Bullet 1 

Centralize or reduce 

the number of 

locations for 

equipment receipt 

Handbook 

completed by 

December 31, 

2006 

December 31, 

2006 

September 2007 

Recommendation 4-1, 

Bullet 2 

Provide a sufficient 

number of property 

specialists to the 

emergency area 

Guidance 

document by 

December 31, 

2006 

December 31, 

2006 

August 4, 2009 

Recommendation 4-1, 

Bullet 4 

Develop a purchase 

log system 

Implemented in 

Fiscal Year 2007 

June 30, 

2008 

Deployed in June 

2008 

Recommendation 4-1, 

Bullet 5 

Establish a national 

custodial area in 

Fixed Asset System 

Deployed by 

December 31, 

2006 

December 31, 

2006 

Proposed 

implementation 

date December 

2009 

Source: OIG analysis of EPA data. 

5 Milestone dates are the dates EPA inserted into its response to OIG’s 2006 report on Katrina contracting issues. 

18 
 

 

 

10-P-0047 

Appendix D 

Agency Response 

November 5, 2009 

MEMORANDUM 

SUBJECT: Response to Draft Audit Report: EPA Needs to Improve Cost Controls for 

Equipment Used during Emergencies 

FROM: Craig E. Hooks 

Assistant Administrator 

TO: Janet Kasper 

Director of Contracts and Assistance Agreement Audits 

Thank you for the opportunity to comment on the draft report entitled, “EPA Needs to 

Improve Cost Controls for Equipment Used during Emergencies.” We are in general agreement 

with the findings and recommendations. However, we offer the following specific and detailed 

comments below. 

General Comments on Report/Findings: 

Report Title - The original report entitled, “EPA Is Better Prepared to Respond to Emergencies, 

Yet Areas for Improvement Exist,” does not have the negative impact the new title “EPA Needs 

to Improve Cost Controls for Equipment Used during Emergencies,” infers. We recommend 

using the original title. 

Chapter 2, Page 4 - Improvements Needed to Ensure EPA Pays Reasonable Prices for Equipment 

- Paragraph 2 states, “In our sample of 97 items, with usages charges totaling $15,399, EPA may 

have paid $4,532 more than the average purchase price of the equipment.” The language is 

misleading. We suggest changing the language to read, “In our sample of 97 items with usages 

charges totaling $15,399, EPA may have paid contractors more than the average purchase price 

for 24 of those 97 individual pieces of equipment (25 percent), representing a total overcharge of 

$4,532.” 

Comments on Recommendations: 

Recommendation 2-1: Review all equipment charges for responding to Hurricanes Gustav 

and Ike and identify any items where the usage fees exceeded the average purchase price. 

For these equipment items, the contracting officer should negotiate maintenance rates for 

the equipment and then require the contractor to repay any charges in excess of negotiated 

rates. 

19
 
 

10-P-0047 

Region 6 Response: We concur with the findings and have started taking corrective actions. All 

equipment charges for Emergency Rapid Response Services (ERRS) contracts have been 

reviewed and are being discussed with the contractors. Based on our review of recent data 

provided by the contractor, the pressure washer and generator identified in Appendix B of the 

report did not exceed the purchase price as stated in the report. The contractor inadvertently 

reported an incorrect purchase price of $5,885.38 for the pressure washer and $2,630.83 for the 

generator. The correct price for the pressure washer is $8,276.46 and $3,601.98 for the generator. 

We recommend that the OIG upon verification of the data reflect these changes in the final 

report. 

Recommendation 2-2: Amend the ERRS contract to require the contractor to provide 

average purchase price information within a specific timeframe. 

Region 6 Response: We concur with the finding and have implemented the suggested 

corrective action to require both ERRS contractors to provide average purchase price information 

in the Removal Cost Management System (RCMS) within sixty (60) working days after the 

initial award and on each anniversary date of the contract. 

Recommendation 2-3: Develop a system or process to identify and prevent overcharges 

for contractor owned equipment for START and emergency logistics contracts. If RCMS 

is not used, provide policies and procedures for how to track equipment costs. 

OSWER Response: Although we concur with the findings, the current Superfund Technical 

Assessment and Response Team (START) and National Logistics contracts do not contain 

contractor owned equipment. The contractors either rent or lease equipment from commercial 

vendors to support emergency efforts. We agree that either a system needs to be developed, a 

process indentified or RCMS utilized to prevent overcharging of rented equipment. Determining 

which system or process will be utilized will require coordination with all regional stakeholders 

and will be a focus for Headquarters and START contracts in FY10. We anticipate this effort 

being completed by December 2010. In the interim, the regions will continue to perform invoice 

reviews to ensure the Government is not overcharged for equipment. 

Recommendation 2-4: Modify RCMS so that it tracks equipment charges by contract 

rather than just task order. 

OSWER Response: The RCMS system has a data mining feature that enables users to query 

the system and capture individual equipment cost. While we do not concur with this finding, we 

will provide training on how to query the system at the On-Scene Coordinator Readiness 

Conference in February 2010 and the Superfund Project Officer/Contracting Officer Conference 

in July 2010. 

Recommendation 3-1: Expand the Emergency Contracting Procedures to describe when 

EPA should convene a Control Review Board, what offices should participate in board 

meetings, and how long the board should remain active. 

20
 
 

10-P-0047 

OAM Response: We concur with the finding and will modify the Acquisition Handbook, 

Chapter 18, “Emergency Contracting Procedures”, to address the requirements to convene a 

Control Review Board; who will participate; and how long the board will remain active. Draft 

procedures will be completed for internal review by November 2009 and the final revision will 

be completed by October 2010. 

Recommendation 3-1 [sic]: Notify the OIG when planned milestones for corrective actions 

are going to be delayed more than 6 months. 

OAM Response: We concur with the finding and will update and utilize the audit tracking 

system that is currently in place to ensure compliance with the Agency’s Management Audit 

Tracking System (MATS) and EPA Manual 2750 which requires the Agency to notify the OIG 

of anticipated delays of more than 6 months in implementing corrective actions. 

OSWER Response: We concur with the finding and will continue working with respective 

Audit Coordinators to ensure compliance with MATS and EPA Manual 2750 requirements for 

changing corrective action plans. We will also check the status of milestones on a quarterly basis 

and have the Audit Coordinators notify the OIG of any changes that are going to be delayed 

more than 6 months. 

We look forward to receiving the final report. Should you have any questions or 

comments, please contact John Gherardini, Acting Director, Office of Acquisition Management, 

at 564-4310. 

21
 
10-P-0047 

Appendix E 

Distribution 

Office of the Administrator 

Assistant Administrator, Office of Administration and Resources Management 

Assistant Administrator, Office of Solid Waste and Emergency Response 

Chief Financial Officer 

Regional Administrator, Region 6 

Agency Follow-up Official (the CFO) 

Agency Follow-up Coordinator 

General Counsel 

Associate Administrator for Congressional and Intergovernmental Relations 

Associate Administrator for Public Affairs 

Acting Director, Office of Acquisition Management, Office of Administration and Resources 

 Management 

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

Director, Office of Regional Operations 

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

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

Audit Follow-up Coordinator, Region 6 

Acting Inspector General 

22