Since 1992, we have reported that the government could pay hundreds of millions of dollars to and on behalf of DOD contractors for cleanup resulting from their operations. In October 1992, we reported that DOD reimburses contractors for cleanup expenses at their private property in different ways, with wide variances in reimbursement decisions and in investigations into possible wrongdoing by contractors. In July 1994, we reported that DOD had also incurred cleanup expenses in cases where contractors and other private parties were involved in contamination of government property. DOD had inconsistent policies and practices for recovering costs from other responsible parties. In both reports, we recommended that the Secretary of Defense provide guidance to resolve the disparities. One of the principal laws governing responsibility for hazardous waste cleanup at federal facilities is the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980, as amended (42 U.S.C. 9601). This act, commonly known as Superfund, holds owners, operators, and other responsible parties, including federal agencies, liable for cleanup of past contamination. Cleanup at federal facilities is also subject to the legal requirements of the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. 6901), and applicable state laws. DOD’s Defense Environmental Restoration Program addresses identification, investigation, and cleanup of past contamination on DOD installations. Funding for the cleanup has come primarily through the Defense Environmental Restoration Account (DERA). The individual services and DLA are responsible for cleaning up their respective installations, while the Army Corps of Engineers is responsible for cleaning up formerly used DOD sites. In the absence of sufficient DOD guidance, the services have taken different approaches in asking parties associated with GOCOs to share the cost of cleaning up contaminated sites and wide disparities still remain. Since our 1992 report, the Air Force has issued guidance for dealing with other responsible parties at its facilities. The Air Force, the Navy, and the Army Corps of Engineers have policies or guidance in place to encourage cost sharing with contractor operators and other responsible parties, while the Army itself and DLA generally do not. Except for the Navy, each service has obtained some cost sharing at GOCO facilities with other responsible parties. However, only the Air Force and the Army Corps of Engineers have achieved cost sharing with contractors that operated government-owned facilities. The Army has no servicewide policy regarding cleanup cost sharing. However, in a series of actions, the Secretary of the Army approved indemnification of ammunition plant operators from financial liability for environmental cleanup. Army officials state that there has been no actual payment to operators under indemnification because the Army pays for the cleanups directly out of its own funds. In fiscal year 1994, Army ammunition plants accounted for $3.1 billion (86 percent) of the $3.6 billion in past and future cleanup costs reported by DOD. Pursuant to the Secretary’s approval, the Army authorized the inclusion of Public Law 85-804 indemnification clauses in its contracts with ammunition plant operators. These clauses indemnified the contractors against unusually hazardous risks, including environmental releases. According to Army officials, contingency clauses in the contracts also protect ammunition plant operators against environmental liability. The Army has not negotiated any cost-sharing agreements with contractor operators at the ammunition plants. However, the Army negotiated a cost-sharing settlement with a contractor who produced ammunition for the Army as a tenant at one plant we visited. Also, as discussed in our July 1994 report, the Army Corps of Engineers negotiated a cost-sharing settlement with contractors and other private parties at formerly used defense sites. Since 1989, Navy policy has required major command officials to immediately negotiate cost-sharing arrangements with contractors as soon as the need for cleanup is identified. The policy requires that past and current GOCO contractors pay “any and all” cleanup costs associated with their operation of Navy facilities. However, the Navy has not initiated timely requests for cost sharing or followed up. For example, although Navy’s 1989 policy required officials to begin negotiation on cost-sharing arrangements at the two facilities we visited, the Navy has not initiated timely requests for contractor participation in the cleanup. The Navy did not send a letter requesting contractor participation in cleanup at the Allegany Ballistics Laboratory in West Virginia until 1994, and has not begun as of March 6, 1997, the required negotiations with the contractor at the Naval Industrial Reserve Ordnance Plant in Fridley, Minnesota. Neither operator plans to pay any cleanup costs involving Navy property. Under the facilities-use contracts at these locations, GOCO contractors provide goods and services to the Navy, and the service does not directly manage their operations. Navy documents show that operational decisions, including those involving waste disposal, are made by the contractor. To date, the Navy has taken responsibility for cleanup costs. Navy officials said the Navy intends to clean up the facilities first and then decide whether to pursue contractors to recover a share of the costs. Cost-recovery decisions are to be based on evidence, litigation risk, the contractor’s level of responsibility, and other factors. However, Navy officials stated that the Navy is reluctant to pursue GOCO contractors because of concerns they will pass costs back to the government as an allowable expense or through overhead charges. They also said that a divisive liability issue could slow cleanup operations and hurt relations between the Navy and its contractors. In December 1995, the Air Force General Counsel’s office developed guidance that recognizes that past and present contractors, as generators of contaminants and operators at federal facilities, share the liability for environmental contamination. The guidance calls for sharing remediation costs, based on the facts of each situation. In commenting on this guidance, Air Force officials stated that the Air Force approved a practice similar to the Navy policy for cost sharing. Air Force officials stated that the practice is intended to share cleanup costs equally with operators unless conditions warrant otherwise. At the two locations we visited, the Air Force was paying all cleanup costs, but may later pursue other parties. However, at two other locations, the Air Force had agreed with the facility operators to share costs. According to Air Force officials, the settlement agreement prohibits the contractors from charging their environmental cleanup costs back to a government contract. Air Force officials also stated that the absence of federal guidance governing how to treat environmental cleanup costs, together with inconsistent treatments and allowances throughout DOD, have slowed cost-sharing negotiations with contractors. DLA’s policy requires current operating contractors to pay cleanup costs in cases of wrongdoing, but allows fuel customers to pay for past contamination through a surcharge. However, DLA does not have a specific policy for its fuel supply centers to address those cases in which parties other than contractors, such as lessees or tenants, are responsible for contamination. DLA has considered developing such cost-sharing guidance, but had not done so as of March 1997. The Norwalk center we visited has been negotiating for the recovery of costs. Officials are negotiating with a lessee to pay for most of the facility’s cleanup costs. However, the facility did not gather sufficient evidence to determine whether to seek recovery from another party for $10 million in environmental damage at an off-post location. Even though we recommended in 1992 and again in 1994 that DOD issue guidance to resolve disparities between DLA’s and the military services’ cleanup policies and procedures, DOD has not done so. In a letter dated January 9, 1995, responding to our 1994 report, the Deputy Under Secretary of Defense (Environmental Security) stated that DOD’s policy for cost sharing is to comply with the Federal Acquisition Regulation, which provides for the allowability of costs incurred by government contractors. However, the regulation only applies to costs incurred by contractors. It does not prescribe an approach for seeking contractor contributions to DOD cleanup efforts. The policies and practices for seeking contractor participation in cleanup efforts continue to vary widely among the services and DLA. Some variances, such as DLA’s policy to pay for old contamination (not from current operations) through a surcharge to customers, may be justified where no specific evidence identifies the responsible party or when other case-specific factors, such as frequent changes in contractors, may preclude assigning responsibility. However, we continue to believe that uniform guidance from DOD would help resolve disparities among DLA and service cleanup policies and practices. Following our July 1994 report that cleanup at GOCO plants would take longer and cost far more than DOD’s estimate, DOD increased its fiscal year 1993 estimate of $1.4 billion to $3.6 billion in fiscal year 1994. For example, in fiscal year 1993, DOD estimated the Twin Cities Army Ammunition Plant would be cleaned up by the year 2000 at a total cost of $154 million, which was not consistent with supporting data showing costs of about $600 million through 2052. DOD’s fiscal year 1994 report was more consistent with supporting data, showing estimated completion by 2080 at a total cost of about $773.2 million. Although DOD’s report to Congress and service estimates for our case studies were relatively close in total, table 1 shows significant differences for individual locations for fiscal year 1994. Some of the reasons for these cost differences include different estimating methodologies, an input error, and the inclusion of more accurate future cost estimates.