Superfund: Analysis of Contractor Cleanup Spending (Letter Report,
08/04/1998, GAO/RCED-98-221).
Since 1980, the Environmental Protection Agency (EPA) has spent more
than $14 billion on the Superfund program to address the potential
threats to human health and the environment posed by hazardous waste
sites. GAO reported last year that about half of the federal Superfund
expenditures for fiscal year 1996 went to contractors for cleanup work.
The rest went for other purposes, including administration and support;
federal efforts to compel private parties to clean up hazardous wastes
for which they are responsible; EPA salaries and expenses; and research,
development, and laboratory analysis. (See GAO/RCED-97-211, Sept. 1997.)
This report (1) updates the share of annual Superfund spending that went
for contractor cleanup work to include fiscal year 1997; (2) determines
the share of contractor spending for remedial actions that were managed
by EPA, other federal agencies, and the states during fiscal years 1996
and 1997; and (3) analyzes the share of spending that contractors
charged for the physical implementation of cleanup actions, as opposed
to other contractor charges.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-98-221
TITLE: Superfund: Analysis of Contractor Cleanup Spending
DATE: 08/04/1998
SUBJECT: Health hazards
Contract costs
Environmental monitoring
Waste disposal
Pollution control
Administrative costs
Cost analysis
Waste management
IDENTIFIER: Superfund Program
EPA National Priorities List
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GAO/RCED-98-221
Cover
================================================================ COVER
Report to Congressional Requesters
August 1998
SUPERFUND - ANALYSIS OF CONTRACTOR
CLEANUP SPENDING
GAO/RCED-98-221
Superfund Contractor Spending
(160413)
Abbreviations
=============================================================== ABBREV
EPA - Environmental Protection Agency
GAO - General Accounting Office
IFMS - Integrated Financial Management System
O&M - operations and maintenance
Letter
=============================================================== LETTER
B-280207
August 4, 1998
Congressional Requesters
Since 1980, the Environmental Protection Agency (EPA) has spent over
$14 billion on the Superfund program to address the potential threats
to human health and the environment resulting from hazardous waste
sites. The Superfund program focuses on cleaning up the nation's
worst hazardous waste sites through long-term comprehensive cleanup
actions (referred to as "remedial actions"). Superfund money may
also be used to address the immediate health threats from other
releases of hazardous substances through shorter-term measures
(referred to as "removal actions"). The actual implementation of
Superfund cleanup work is performed by private contractors. EPA may
directly hire and oversee these contractors or arrange to have these
functions performed by another federal agency or a state.
In September 1997, we reported that for fiscal year 1996, about half
of the federal Superfund expenditures went to contractors for cleanup
work--over 5 percent to study and design the cleanups and about 44
percent to manage and implement cleanup actions.\1 The remaining
expenditures went for other purposes: administration and support,
federal efforts to compel private parties to clean up hazardous
wastes for which they are responsible (referred to as enforcement),
EPA salaries and expenses (referred to as directly related costs),
and research, development, and laboratory analysis.
You asked us to follow up on our 1997 report by updating our work on
the composition of Superfund spending to include fiscal year 1997 and
by performing a more detailed analysis of the money charged to the
program by cleanup contractors for remedial action work. As agreed
with your offices, we (1) updated the share of annual Superfund
spending that went for contractor cleanup work to include fiscal year
1997; (2) determined the share of contractor spending for remedial
actions that were managed by EPA, other federal agencies, and the
states during fiscal years 1996 and 1997; and (3) for the contractor
spending for remedial actions that was managed by EPA or the U.S.
Army Corps of Engineers (the Corps), analyzed the share that
contractors charged for the physical implementation of cleanup
actions, as opposed to other contractor charges.
--------------------
\1 Superfund: Trends in Spending for Site Cleanups (GAO/RCED-97-211,
Sept. 4, 1997).
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
In fiscal year 1997, about 46 percent of total Superfund spending
went to the contractors who study, design, and implement cleanups,
compared with 49 percent that was spent on these functions during
fiscal 1996. A corresponding 3-percent increase occurred in EPA's
administrative and support costs for the program between fiscal years
1996 and 1997. EPA said that this increase can be attributed to
normal outlay fluctuations. The share of spending for other
Superfund cost categories remained about the same between the 2
fiscal years.
Contractor spending for remedial actions is managed by several
different entities, including EPA, the Corps, the Department of the
Interior, and about half of the states. Among these, the Corps
manages the largest portion of this spending--accounting for 65
percent during fiscal years 1996-97. The states collectively managed
about 17 percent of such spending during the past 2 fiscal years.
EPA managed about 13 percent of such spending during this period.
The Department of the Interior also managed a small portion of such
spending--accounting for 5 percent over the 2 fiscal years.
For the spending managed by EPA nationwide, about 71 percent of the
costs charged by contractors for remedial action work during fiscal
years 1996-97 was for the subcontractors who physically performed the
cleanups, such as earthmoving and constructing treatment facilities.
The remaining 29 percent went to the prime contractors for
professional work, such as construction management and engineering
services, and the associated travel, overhead, and administrative
costs and fees. For the two projects where detailed information on
contractor charges was available from the Corps, the share of
spending for the physical implementation of cleanups was about 69
percent.\2 Because these two projects accounted for only 16 percent
of contractor spending managed by the Corps during fiscal years
1996-97, we could not determine whether these results generally
represent the Corps' contractor spending.
--------------------
\2 Under EPA's contracting practices, contractors are reimbursed for
all allowable costs (under what are known as "cost-reimbursement"
contracts). Therefore, EPA's contractors must submit detailed
invoices of the costs they incur. Traditionally, the Corps has
negotiated a fixed price with contractors for the cleanup work (under
what are known as "fixed-price" contracts). These charges by
contractors are based on the portion of the work completed--not on a
detailed accounting of costs. Of about 70 remedial action projects
with significant charges from the Corps' contractors during fiscal
years 1996 or 1997, only two projects were being billed on a
cost-reimbursable basis.
BACKGROUND
------------------------------------------------------------ Letter :2
In 1980, the Comprehensive Environmental Response, Compensation, and
Liability Act created the Superfund program to clean up highly
contaminated hazardous waste sites. Under the act, EPA is authorized
to compel the parties responsible for the contamination to perform
the cleanup.\3 EPA may also pay for the cleanup and attempt to
recover the cleanup costs from responsible parties. When EPA pays
for the cleanup, the work is conducted by a private contractor who is
either directly hired by EPA, another federal entity, or a state.
Superfund contractors study and design cleanups, as well as manage
and implement physical cleanup actions. Physical cleanup actions
include both remedial and removal actions. Remedial actions are
long-term comprehensive cleanups at the nation's worst hazardous
waste sites (known as National Priorities List sites). Removal
actions tend to be shorter-term measures that usually occur at sites
not on the National Priorities List, such as a cleanup when a truck
spills hazardous wastes onto a highway. During fiscal years 1996-97,
about 65 percent of the funds spent on physical cleanup actions went
for remedial actions and the remainder went for removal actions.
When EPA administers a remedial action, it typically uses an
architect and engineering firm as the prime contractor to provide the
professional services needed to direct the cleanup. However, this
firm typically does not physically implement the cleanup, such as
moving soil or treating groundwater. Instead, the architect and
engineering firm hires subcontractors (referred to as "pool
subcontractors") to perform the physical cleanup work. In contrast,
when the Corps undertakes a remedial action, the prime contractor may
perform some of the physical cleanup.
Once the construction work on a remedial action is completed, the
site often requires subsequent operations and maintenance (O&M)
activities. When the remedial action has been paid for out of
Superfund money, EPA's regulations require that the states assume
responsibility for O&M activities.\4 As such, this analysis does not
focus on the costs for operating and maintaining Superfund sites.
--------------------
\3 According to EPA, at the end of fiscal year 1997, private parties
had committed to conducting cleanup work--with an estimated
cumulative value of almost $11 billion--at almost 70 percent of the
remedial action sites.
\4 The costs to operate and maintain Superfund sites will be
substantial. In our report Superfund: Operations and Maintenance
Activities Will Require Billions of Dollars (GAO/RCED-95-259, Sept.
29, 1995), we estimated that over the succeeding four decades, O&M at
Superfund sites will cost $32 billion.
CHANGES IN THE COMPOSITION OF
SUPERFUND SPENDING
------------------------------------------------------------ Letter :3
In September 1997, we reported that both the amount and share of
Superfund money paid to the contractors who perform the cleanup work
increased from fiscal year 1987 through fiscal 1996. However, in
updating this information, we found that both the amount and share of
spending for contractor cleanup work declined from about 49 percent
in fiscal year 1996 ($695 million) to about 46 percent in fiscal 1997
($664 million). Between fiscal years 1996 and 1997, EPA's Superfund
costs for administration and support activities increased by 3
percent of total Superfund spending--from about 21 percent ($299
million) in fiscal 1996 to about 24 percent ($355 million) in fiscal
1997. The relative share of spending for other Superfund cost
categories remained about the same between fiscal years 1996 and
1997. Figure 1 provides a comparison of the amount and share of
Superfund spending for various cost categories in the 2 fiscal years.
Figure 1: Superfund Spending
for Contractor Cleanup Work and
Other Program Activities,
Fiscal Years 1996-97, Dollars
in millions
(See figure in printed
edition.)
Note: In fiscal year 1996, contractor cleanup work accounted for
about 49 percent ($695 million) of the total Superfund spending of
$1.4 billion. In fiscal year 1997, contractor cleanup work accounted
for about 46 percent ($664 million) of the total Superfund spending
of $1.45 billion.
The cost categories used in figure 1 were derived from the codes that
EPA's Office of the Comptroller uses to account for the expenditure
of Superfund money. Costs shown in the "cleanup actions" category
consist of contractor spending to perform remedial and removal
actions. In fiscal year 1996, this spending included about $419
million for remedial actions and $196 million for removal actions.
In fiscal year 1997, this spending included about $360 million for
remedial actions and $228 million for removal actions. The costs
shown in the "study and design" category consist of contractor
spending to study and design remedial actions. Spending for other
program activities covers (1) "directly related" costs, for
activities such as EPA's salaries and travel for overseeing cleanups
and the costs associated with screening sites for inclusion on the
National Priorities List; (2) "enforcement" costs related to EPA
oversight of responsible parties' cleanups and costs for negotiating
and settling with responsible parties; (3) research and development,
and laboratory analysis (RD/Lab), including the costs of EPA's
scientists, innovative technology programs, and the evaluation of
hazardous waste samples; and (4) administration and support,
including indirect program costs, such as those for rent, utilities,
and accounting systems.
EPA stated that the increase in spending for administration and
support between fiscal years 1996 and 1997 can be attributed to
normal spending fluctuations for items such as rental payments and
other infrastructure needs, and to possible accounting changes. Our
review of Superfund spending over the last 11 years indicates that
spending for administration and support fluctuated between 18 percent
and 25 percent during fiscal years 1987-91. However, after declining
for 3 fiscal years to about 20 percent in fiscal 1994, this spending
has continued to increase during the 3 most recent fiscal years,
reaching over 24 percent in fiscal 1997.
ENTITIES ADMINISTERING
SUPERFUND SPENDING FOR REMEDIAL
ACTIONS
------------------------------------------------------------ Letter :4
Several different entities manage contractor spending for Superfund
remedial action projects. As figure 2 shows, the Corps managed the
largest portion of this spending during fiscal years 1996-97 (about
65 percent of the spending during the 2-year period). One reason for
this is that the Corps manages the more expensive projects. EPA's
policy is that remedial action projects estimated to have a total
cost of $15 million or more should generally be handled by the Corps
(because of its long experience in managing construction
contractors). Accordingly, most of the contractor spending managed
by the Corps is attributable to several large-dollar projects.\5
State governments collectively managed about 17 percent of contractor
spending during fiscal years 1996-97. EPA managed about 13 percent
of contractor spending during the 2 fiscal years. The Department of
the Interior managed a small portion of contractor spending (about 5
percent), primarily for mining cleanups.
Figure 2: Contractor Spending
for Remedial Actions During
Fiscal Years 1996-97, by
Entity, Dollars in millions
(See figure in printed
edition.)
Note: Because the Superfund spending managed by "other" entities
accounted for only about 1 percent of the total spending for the
2-year period, we did not determine the identity of these entities or
precisely how much spending they managed.
--------------------
\5 In essence, the Corps acts as a contractor to EPA by managing
cleanup work at Superfund projects. The Corps is reimbursed for its
costs, which it estimates are about 9 percent of the total remedial
action spending that it manages.
CONTRACTOR COSTS FOR REMEDIAL
ACTIONS MANAGED BY EPA OR THE
CORPS
------------------------------------------------------------ Letter :5
Nationwide, about 71 percent of contractor spending for remedial
actions managed by EPA during fiscal years 1996-97 went to the
physical implementation of the cleanups. The remaining 29 percent
was for prime contractor expenses related to managing and overseeing
the cleanups. For the two remedial action projects where information
was available from the Corps, about 69 percent of contractor spending
during fiscal years 1996-97 went to the physical implementation of
the cleanups. We could not determine if these results are typical of
the Corps' projects, however, because these two projects accounted
for only 16 percent of the Corps' spending for contractors during
fiscal years 1996-97. The information needed to divide contractor
spending for remedial actions between physical implementation of the
cleanups and other expenses was generally unavailable for the
contracts administered by the Corps. (See footnote 2.)
CONTRACTOR SPENDING MANAGED
BY EPA
---------------------------------------------------------- Letter :5.1
For the remedial action projects performed by EPA's contractors, we
found that, nationwide, about 71 percent of contractor spending
during 1996-97 went to the subcontractors who physically perform the
cleanup work. However, we found a wide range in the percentage of
contractor spending that went to the physical implementation of the
cleanups among EPA's 10 regions--from a low of 6 percent in region 1
to a high of 80 percent in region 6. We discussed these differences
with EPA's regional project officials to identify the reasons for the
wide range in the share of spending for the physical implementation
of the cleanups.
The EPA regional officials told us that the primary reason for this
wide range is the stage of the cleanup projects in the regions during
the 2-year period of our analysis. At the beginning and end of a
remedial action, administrative costs and fees are relatively high,
while physical implementation costs are relatively low. EPA's
regional project officials explained that at the beginning of a
remedial action, the prime contractor has to perform such tasks as
developing a work plan, a project budget, and a health and safety
plan. Also, the prime contractor has to hire the subcontractors who
will physically implement the work, which involves advertising the
work, as well as obtaining and analyzing bids. At the end of a
remedial action, according to EPA's project officials, the prime
contractor has to ensure that the subcontractors have satisfactorily
completed their work, and the prime contractor must comply with the
administrative requirements for the project's completion, such as
writing reports and preparing for the final financial audit of the
project. Additionally, once EPA has assessed the prime contractor's
performance in carrying out the remedial work, EPA pays final fees to
the contractor.
For example, spending for the physical implementation of cleanups was
low in EPA's region 1 during fiscal years 1996-97 because the
region's spending for remedial actions was for three projects that
were almost completed. For two of the projects, most of the spending
was for performance fees that EPA awarded the contractor at the end
of the project. For the third project, most of the costs were for
the prime contractor's administrative functions related to closing
out the project.
EPA's regional officials told us that over the life of remedial
action projects, the beginning and ending administrative costs are
balanced by the relatively high percentage of physical remediation
costs incurred during the middle phases of the cleanup. To verify
this explanation, we analyzed the cumulative remedial action spending
for the life of the projects included in our review (those with
spending of $10,000 or more in either fiscal year 1996 or 1997). We
found that, nationwide, 70 percent of the cumulative project spending
went to the physical implementation of the cleanups, about the same
share that went to physical implementation during fiscal years
1996-97. The individual regions that had relatively low percentages
of spending for physical implementation during fiscal years 1996-97
had much higher percentages of such spending over the life of their
projects, thus corroborating the explanation provided by EPA's
regional officials. For example, in region 1 while only 6 percent of
the spending had been for physical implementation during fiscal years
1996-97, 75 percent of the spending was for physical implementation
over the life of the same projects. (See fig. 3.)
Figure 3: Percentage of
Contractor Spending for
Remedial Actions Used for
Physical Implementation of
Cleanups, Cumulative Project
Life
(See figure in printed
edition.)
Because EPA regions 3 and 10 had the lowest cumulative shares of
contractor spending for the physical implementation of cleanups, we
discussed these results with project officials from these regions.
The officials told us that a couple of factors help to explain these
results. In some cases, the remedial actions were still in such an
early stage that even on a cumulative basis, little spending had
occurred for physical implementation. In other cases, the remedial
action project was to construct a groundwater treatment facility.
According to EPA's project officials, unlike soil remediation, which
involves massive construction work, the physical construction work
for a groundwater treatment facility is typically limited to the
installation of wells. While the physical implementation charges are
relatively lower for this type of project, the prime contractor
typically incurs significant charges for its engineers to oversee a
well's installation and ensure that the well will function properly.
While 71 percent of contractor cleanup charges in fiscal years
1996-97 went to pool subcontractors for physically implementing the
cleanup work, the remainder was retained by the prime contractors for
other expenses related to overseeing and managing the cleanups.
During fiscal years 1996-97, 29 percent of contractor spending for
remedial actions went for these other expenses, as follows:
-- Professional labor needed to oversee and manage cleanups (8
percent).
-- Travel associated with the professional labor (1 percent).
-- Fringe benefits associated with the professional labor (1
percent).\6
-- Overhead, such as rent and utilities for on-site space (7
percent).
-- General and administrative expenses, such as salaries for upper
management and corporate office costs (3 percent).
-- Fees, including money paid to the contractor to motivate good
performance (5 percent).
-- Technical assistance subcontractors who provide professional
expertise beyond the prime contractor's expertise (1 percent).
-- Other costs, such as office and technical equipment, reports,
and messenger service (3 percent).
Appendix I provides a further explanation of these cost categories
and a detailed account of EPA's contractor spending, by region.
--------------------
\6 Some of the contractors' invoices showed fringe benefits as a
separate line item, and other invoices did not. According to the
manager of EPA's Regional Contract Management Center, some
contractors include their fringe benefit costs under the overhead
line item.
CONTRACTOR SPENDING MANAGED
BY THE CORPS
---------------------------------------------------------- Letter :5.2
During fiscal years 1996-97, only 2 of the about 70 remedial actions
with significant charges by the Corps' contractors ($10,000 or more
in spending during either year) were billed on a cost-reimbursement
basis, thus allowing us to analyze the share of contractor spending
for physical cleanups. In managing Superfund cleanup contractors,
the Corps has traditionally used "fixed-price" contracts. Under this
type of contract, the Corps negotiates a firm price with the
contractor for the work to be performed. The contractor then charges
the government for completed portions of the work. However,
fixed-price billings do not yield the detailed accounting of costs
needed for the type of analysis we performed in this review.
The Corps' contractors charged almost $76 million for these two
projects during fiscal years 1996-97. Of this amount, about 69
percent (or $52 million) went to the physical implementation of the
cleanups. For the two projects individually, we found that 71 and 48
percent of the contractor charges, respectively, during the past 2
fiscal years went to the physical implementation of the cleanups. We
also found that the shares of spending that went to the physical
cleanups during the entire life of these remedial actions were 70 and
51 percent, respectively. (Both projects were almost complete at the
end of fiscal year 1997.) The Corps official managing these two
projects told us that the second project had a lower portion of
spending for physical cleanup because the project involved
groundwater remediation, which entails less construction work and
more prime contractor engineering services.
Appendix II provides a detailed accounting of contractor spending for
these two projects. However, because these two projects cover only
16 percent of the Corps' contractor spending, we could not determine
whether these projects generally represent contractor spending
managed by the Corps.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :6
We provided EPA and the Corps with copies of a draft of this report
for their review and comment. EPA said that the report's analysis is
sound. However, EPA also stated that our draft report defined
cleanup as removal and remedial actions, while EPA's definition of
cleanup includes many other types of activities (including EPA's
oversight of private party cleanups, site assessments, laboratory
analysis, community involvement activities, state/tribal activities,
engineering and technical analyses, and the Brownfields program).
This report's analysis was primarily focused on the Superfund
spending that goes for the physical implementation of remedial action
cleanups. Therefore, our analysis necessarily focused on contractor
cleanup spending because this is the only Superfund cost category
that includes physical implementation costs. We do not dispute the
fact that the other activities cited by EPA are related to the
cleanup process, but they do not encompass physical implementation of
site cleanups.
In addition, EPA attributed the increase in administration and
support costs to normal spending fluctuations. We revised the body
of the report to include this information. (See p. 6.)
Finally, EPA stated that it is important to clarify that the 29
percent of contractor spending that went for prime contractor costs
should not be confused with the percentage that contractors charge
for program management. Program management costs are separate
non-site-specific costs that the contractor charges EPA for
administrative, management, and technical work related to the
Superfund program, in addition to the site-specific costs discussed
in this report. We did not include information on program management
costs in this report because such costs were not the subject of our
work. However, we have reviewed Superfund contractor program
management costs several times in the past and most recently reported
on this issue in February 1997 in our report entitled High-Risk
Series: Superfund Program Management (GAO/HR-97-14). (The full text
of EPA's comments is provided in app. IV.)
The Corps did not have any comments on the draft report.
---------------------------------------------------------- Letter :6.1
We conducted our review from January through June 1998 in accordance
with generally accepted government auditing standards. See appendix
III for the details of our scope and methodology.
As arranged with your offices, we plan no further distribution of
this report until 30 days after the date of this letter unless you
publicly announce its contents earlier. At that time, we will send
copies to other appropriate congressional committees, the
Administrator of EPA, and the Commander of the U.S. Army Corps of
Engineers. We will also make copies available to others upon
request.
Should you need further information, please call me at (202)
512-6111. Major contributors to this report are listed in appendix
V.
Peter F. Guerrero
Director, Environmental
Protection Issues
Congressional Requesters
The Honorable Thomas J. Bliley, Jr.
Chairman, Committee on Commerce
House of Representatives
The Honorable Michael G. Oxley
Chairman, Subcommittee on Finance
and Hazardous Materials
Committee on Commerce
House of Representatives
The Honorable Bud Shuster
Chairman, Committee on Transportation
and Infrastructure
House of Representatives
The Honorable Sherwood C. Boehlert
Chairman, Subcommittee on Water Resources
and Environment
Committee on Transportation
and Infrastructure
House of Representatives
EPA CONTRACTOR CHARGES FOR
REMEDIAL ACTIONS, BY EPA REGION
=========================================================== Appendix I
This appendix provides detailed information on Superfund contractor
charges for remedial actions, by Environmental Protection Agency
(EPA) region. The information provided is for all remedial action
projects that had spending of $10,000 or more in either fiscal year
1996 or fiscal 1997, as reported by EPA's Integrated Financial
Management System. Columns 2 and 3 in table I.1 show charges for
these projects during fiscal years 1996-97. Columns 4 and 5 show
cumulative charges over the life of these same projects. The cost
categories shown below were derived from EPA contractor billings and
are defined as follows:
-- Prime contractor direct labor: Professional and technical labor
that the prime contractor uses in the management and oversight
of remedial actions.
-- Travel: Expenses that prime contractor staff incur in traveling
to manage and oversee Superfund remedial actions.
-- Fringe benefits: Expenses incurred to provide fringe benefits,
such as vacation, sick leave, and health benefits to prime
contractor staff.
-- Overhead: Expenses associated with managing a remedial action
project, such as rent and utilities of on-site space. Some
contractors include clerical labor under this category. Also,
some contractors may include fringe benefit expenses under this
category instead of showing them as a separate line item.
-- General and administrative costs: Expenses for the overall
management of a company, such as salaries for upper management,
accounting and legal expenses, rent and utilities for corporate
offices, etc.
-- Fees: Money paid to the prime contractor to provide a profit
and to motivate the contractor toward good performance.
-- Other prime contractor costs: Other costs incurred by the prime
contractor in performing the remedial action for such items as
computers, messenger service, postage, film, etc.
-- Team subcontractors: Costs that the prime contractor has paid
to subcontractors for additional technical expertise.
-- Pool subcontractors: Costs that the prime contractor has paid
to a subcontractor for the physical implementation of the
remedial action.
As shown in table I.1, the EPA contractor charges that we analyzed
totaled about $62 million for fiscal years 1996-97. EPA's financial
management system reported disbursements totaling about $97 million
for the same period. Part of the difference may be attributable to
the lag time between the submission and payment of billings. Another
reason for the difference is that about $26 million was charged to
the remedial action account for other related activities at Superfund
sites, such as removal actions, contractor oversight of private-party
cleanups, and adjustments to previous expenditures.
Table I.1
EPA Contractor Charges for Remedial
Actions by EPA Region
Costs charged as
Costs charged by a percentage of Amount charged
contractors, regional totals, as a percentage
fiscal years fiscal years Cumulative costs of cumulative
Cost categories 1996-97 1996-97 charged project costs
----------------- ---------------- ---------------- ---------------- ----------------
Region 1 (Boston)
-----------------------------------------------------------------------------------------
Prime contractor $44,757 15.2 $480,492 5.0
direct labor
Travel 303 0.1 41,326 0.4
Fringe benefits 0 0 0 0
Overhead 67,552 23.0 649,500 6.8
General and 4,411 1.5 132,184 1.4
administrative
costs
Fees 129,080 43.9 489,879 5.1
Other prime 11,785 4.0 225,567 2.4
contractor cost
Team 18,930 6.4 360,369 3.8
subcontractors
Pool 17,379 5.9 7,197,174 75.2
subcontractors
=========================================================================================
Subtotal $294,198 100.0 $9,576,491 100.0
Region 2 (New York)
-----------------------------------------------------------------------------------------
Prime contractor $899,660 7.1 $1,740,406 7.1
direct labor
Travel 81,177 0.6 167,870 0.7
Fringe benefits 118,747 0.9 278,436 1.1
Overhead 821,517 6.5 1,528,564 6.2
General and 606,940 4.8 887,765 3.6
administrative
costs
Fees 415,344 3.3 744,208 3.0
Other prime 238,708 1.9 576,578 2.3
contractor cost
Team 160,428 1.3 740,351 3.0
subcontractors
Pool 9,337,664 73.6 17,915,140 72.9
subcontractors
Subtotal $12,680,185 100.0 $24,579,316 100.0
Region 3 (Philadelphia)
-----------------------------------------------------------------------------------------
Prime contractor $227,188 10.2 $1,231,189 10.1
direct labor
Travel 32,790 1.5 176,963 1.4
Fringe benefits 251,346 11.2 331,341 2.7
Overhead 269,715 12.1 881,478 7.2
General and (75,749) -3.4 976,549 8.0
administrative
costs
Fees 132,507 5.9 518,594 4.2
Other prime 161,230 7.2 596,030 4.9
contractor cost
Team 217,163 9.7 564,076 4.6
subcontractors
Pool 1,021,234 45.6 6,969,287 56.9
subcontractors
=========================================================================================
Subtotal $2,237,424 100.0 $12,245,506 100.0
Region 4 (Atlanta)
-----------------------------------------------------------------------------------------
Prime contractor $1,331,401 10.5 $1,924,713 13.1
direct labor
Travel 282,533 2.2 389,284 2.6
Fringe benefits 81,633 0.6 106,355 0.7
Overhead 446,608 3.5 636,503 4.3
General and 424,172 3.4 581,818 3.9
administrative
costs
Fees 475,438 3.8 536,724 3.6
Other prime 198,434 1.6 248,645 1.7
contractor cost
Team 20,531 0.2 20,531 0.1
subcontractors
Pool 9,401,829 74.3 10,286,945 69.8
subcontractors
=========================================================================================
Subtotal $12,662,578 100.0 $14,731,518 100.0
Region 5 (Chicago)
-----------------------------------------------------------------------------------------
Prime contractor $814,843 8.5 $1,880,581 7.4
direct labor
Travel 169,800 1.8 372,251 1.5
Fringe benefits 254,307 2.7 254,307 1.0
Overhead 744,146 7.8 1,600,317 6.3
General and 289,379 3.0 861,221 3.4
administrative
costs
Fees 434,795 4.5 1,011,340 4.0
Other prime 300,456 3.1 635,953 2.5
contractor cost
Team 151 0 226 0
subcontractors
Pool 6,558,158 68.6 18,642,934 73.8
subcontractors
=========================================================================================
Subtotal $9,566,035 100.0 $25,259,130 100.0
Region 6 (Dallas)
-----------------------------------------------------------------------------------------
Prime contractor $203,244 5.5 $359,118 6.7
direct labor
Travel 37,105 1.0 61,912 1.2
Fringe benefits 0 0 0 0
Overhead 135,011 3.7 238,360 4.5
General and 58,997 1.6 115,207 2.2
administrative
costs
Fees 217,040 5.9 245,124 4.6
Other prime 73,076 2.0 129,025 2.4
contractor cost
Team 0 0 0 0
subcontractors
Pool 2,953,933 80.3 4,202,640 78.5
subcontractors
=========================================================================================
Subtotal $3,678,405 100.0 $5,351,385 100.0
Region 7 (Kansas City)
-----------------------------------------------------------------------------------------
Prime contractor $128,744 9.8 $157,507 10.4
direct labor
Travel 16,653 1.3 22,140 1.5
Fringe benefits 0 0 0 0
Overhead 176,391 13.5 198,332 13.1
General and (7,943) -0.6 342 0
administrative
costs
Fees 38,386 2.9 43,938 2.9
Other prime 39,832 3.0 77,133 5.1
contractor cost
Team 5,543 0.4 5,543 0.4
subcontractors
Pool 911,058 69.6 1,008,714 66.6
subcontractors
=========================================================================================
Subtotal $1,308,664 100.0 $1,513,650 100.0
Region 8 (Denver)
-----------------------------------------------------------------------------------------
Prime contractor $25,745 8.7 $451,567 9.5
direct labor
Travel 9 0 6,527 0.1
Fringe benefits 0 0 0 0
Overhead 29,552 10.0 560,192 11.7
General and 5,591 1.9 166,503 3.5
administrative
costs
Fees 91,016 30.9 266,902 5.6
Other prime 29,098 9.9 108,471 2.3
contractor cost
Team 0 0 86,689 1.8
subcontractors
Pool 113,391 38.5 3,131,130 65.5
subcontractors
=========================================================================================
Subtotal $294,402 100.0 $4,777,980 100.0
Region 9 (San Francisco)
-----------------------------------------------------------------------------------------
Prime contractor $589,340 6.0 $638,895 6.4
direct labor
Travel 52,919 0.5 $56,619 0.6
Fringe benefits 99,462 1.0 99,462 1.0
Overhead 484,427 5.0 520,528 5.2
General and 390,494 4.0 435,758 4.4
administrative
costs
Fees 350,942 3.6 355,482 3.6
Other prime 193,556 2.0 218,328 2.2
contractor cost
Team 0 0 0 0
subcontractors
Pool 7,596,547 77.9 7,604,826 76.6
subcontractors
=========================================================================================
Subtotal $9,757,688 100.0 $9,929,898 100.0
Region 10 (Seattle)
-----------------------------------------------------------------------------------------
Prime contractor $694,611 7.4 $1,605,291 9.3
direct labor
Travel 32,621 0.3 84,366 0.5
Fringe benefits 49,708 0.5 49,708 0.3
Overhead 886,756 9.4 1,526,834 8.9
General and 254,202 2.7 1,097,018 6.4
administrative
costs
Fees 606,501 6.4 819,101 4.8
Other prime 623,023 6.6 1,489,219 8.7
contractor cost
Team 0 0 0 0
subcontractors
Pool 6,279,628 66.6 10,527,447 61.2
subcontractors
=========================================================================================
Subtotal $9,427,051 100.0 $17,198,983 100.0
EPA-wide
-----------------------------------------------------------------------------------------
Prime contractor $4,959,533 8.0 $10,469,758 8.4
direct labor
Travel 705,910 1.1 1,379,258 1.1
Fringe benefits 855,204 1.4 1,119,609 0.9
Overhead 4,061,675 6.6 8,340,606 6.7
General and 1,950,494 3.2 5,254,365 4.2
administrative
costs
Fees 2,891,049 4.7 5,031,292 4.0
Other prime 1,869,199 3.0 4,304,950 3.4
contractor cost
Team 422,745 0.7 1,777,783 1.4
subcontractors
Pool 44,190,821 71.4 87,486,236 69.9
subcontractors
=========================================================================================
Total $61,906,630 100.0 $125,163,858 100.0
-----------------------------------------------------------------------------------------
Note: Totals may not add because of rounding.
CORPS CONTRACTOR CHARGES FOR
REMEDIAL ACTIONS
========================================================== Appendix II
This appendix provides detailed information on Superfund contractor
spending managed by the Corps at two large projects. These are the
only projects that were billed on a cost-reimbursement basis during
the period of our review and thus the only projects for which
detailed billing information is available. Columns 2 and 3 in table
II.1 show charges at these projects during fiscal years 1996-97.
Columns 4 and 5 show cumulative costs over the life of these same
projects. The cost categories shown below were derived from Corps
contractors' billings and are defined as follows:
-- Professional labor: The prime contractor's expenses for the
professional labor used to manage and oversee a remedial action.
-- Overhead on prime labor: The prime contractor's expenses for
professional staff's fringe benefits, such as vacations, sick
leave, and health benefits. This category also includes other
overhead expenses associated with professional staff, such as
rent and utilities for on-site space.
-- General and administrative: Expenses for the overall management
of the prime contractor's company, such as executive salaries
and rent and utilities for corporate offices.
-- Professional travel: Expenses that the prime contractor's staff
incur in traveling to manage and oversee a remedial action.
-- Professional subcontractors: Expenses that the prime contractor
has incurred for subcontractors who provided additional
technical expertise for the remedial action.
-- Fees: Money paid to the prime contractor to provide a profit
and to motivate the contractor toward good performance.
-- Equipment: Expenses for construction equipment used in the
remedial action, such as bulldozers and excavators. This
category also includes some expenses for office equipment used
in the remedial action because the contractor charges do not
separate office equipment costs from construction equipment
costs.
-- Other direct costs: Expenses for construction materials
directly used in the remedial action.
-- Craft labor: Expenses for labor from the plumbing, electrical
and other crafts from which the prime contractor has directly
hired workers for the remedial action.
-- Lower-tier subcontractors: Costs for physical implementation
work that the prime contractor paid to a subcontractor, such as
a trucking company.
Table II.1
Corps Contractor Charges for Remedial
Actions
(Dollars in thousands)
Costs charged as
a percentage of Amount charged
Costs charged by total remedial as a percentage
contractors, action costs, of cumulative
fiscal years fiscal years Cumulative costs remedial action
Cost categories 1996-97 1996-97 charged costs
----------------- ---------------- ---------------- ---------------- ----------------
Superfund cleanup site #1
-----------------------------------------------------------------------------------------
Professional $4,692.5 6.8 $5,033.1 7.1
labor
Overhead on 3,590.7 5.2 3,859.30 5.4
professional
labor
General and 2,864.5 4.2 3,018.30 4.3
administrative
costs
Professional 1,676.0 2.4 1,748.40 2.5
travel
Professional 2,362.4 3.4 2,362.50 3.3
subcontractors
Fees 4,768.9 6.9 4,946.10 7.0
=========================================================================================
Professional and $19,955.0 29.1 $20,967.7 29.6
associated
costs, subtotal
Equipment $15,396.0 22.4 $15,459.7 21.8
Other direct 11,956.4 17.4 12,601.7 17.8
costs
Craft labor 14,398.0 21.0 14,883.1 21.0
Lower tier 6,913.7 10.1 6,972.9 9.8
subcontractors
=========================================================================================
Physical cleanup, $48,664.1 70.9 $49,917.4 70.4
subtotal
=========================================================================================
Remedial action, $68,619.1 100.0 $70,885.1 100.0
total
Superfund cleanup site # 2
-----------------------------------------------------------------------------------------
Professional $676.5 9.3 $1,802.4 11.8
labor
Overhead on 796.5 11.0 1,910.4 12.5
professional
labor
General and 604.0 8.3 919.1 6.0
administrative
costs
Professional 90.1 1.2 343.3 2.3
travel
Professional 1,117.9 15.4 1,395.5 9.2
subcontractors
Fees 475.4 6.5 1,071.3 7.0
=========================================================================================
Professional and $3,760.4 51.7 $7,442.0 48.8
associated
costs, subtotal
Equipment $43.3 0.6 $79.4 0.5
Other direct 1,376.2 18.9 3,648.4 23.9
costs
Craft labor 182.9 2.5 997.8 6.5
Lower tier 1,905.3 26.2 3,080.5 20.2
subcontractors
=========================================================================================
Physical cleanup, $3,507.7 48.3 $7,806.1 51.2
subtotal
=========================================================================================
Remedial action, $7,268.1 100.0 $15,248.1 100.0
total
-----------------------------------------------------------------------------------------
SCOPE AND METHODOLOGY
========================================================= Appendix III
To update the share of annual Superfund spending that went to
contractor cleanup work to include fiscal year 1997, we obtained
information from EPA's Integrated Financial Management System (IFMS).
Working with officials from EPA's Office of the Comptroller, we
allocated Superfund expenditures for fiscal year 1997 into the same
spending categories established in our September 1997 report.\7
However, we did not analyze the reasons for changes in the percentage
of spending in each of the cost categories as part of this review.
To determine the share of contractor spending for remedial actions
administered by EPA, the Corps, the Department of the Interior's
Bureau of Reclamation, and the states, we also obtained information
from IFMS.
In a 1995 report on IFMS, we found instances of inaccurate and
incomplete data in the system.\8 While we did not consider these
instances to be representative of the overall integrity of IFMS data,
we recommended that EPA conduct statistical testing of the data,
which EPA has done. We confirmed the IFMS information with officials
from EPA's Office of the Comptroller and further verified the IFMS
information during our contacts with the appropriate EPA and Corps
officials.
To determine the portion of funds spent for the physical
implementation of remedial actions, as opposed to other
contractor-related expenditures, we analyzed contractor billings for
cleanup work in each of EPA's 10 regional offices and for appropriate
Corps cleanups billed in fiscal years 1996-97. Along with annual
cost information, these bills also included the cumulative costs for
each project. We used the latest contractor bill available (usually
for Sept. 1997) to analyze cumulative project costs. We reviewed
all Superfund remedial action projects that had spending of $10,000
or more in fiscal year 1996 and/or fiscal 1997, as reported by IFMS.
We used the contractors' bills as our primary data sources for this
analysis because, while EPA maintains information on the overall
remedial action disbursements for each Superfund site, the agency
does not maintain a breakdown by the cost categories. For the bills
we received from EPA's 10 regions, we classified the amount charged
for the construction (pool) subcontractors as the spending on
physical implementation for each site because the program officials
from all 10 EPA regions told us that the prime contractors did not
perform any of the physical cleanups for the Superfund projects in
our review. The money paid to these subcontractors does include
indirect costs, such as overhead, and general and administrative
expenses. However, these costs are not broken out on the bills
submitted to EPA for payment.
For the Corps of Engineers, only 2 of about 70 remedial actions
projects it managed that met the criteria for inclusion in our review
($10,000 or more in spending in fiscal years 1996 and/or 1997) were
being billed on a cost-reimbursable basis. The remaining projects
were being billed under fixed-price contracts, and the bills did not
provide the detailed information needed for the type of analysis we
conducted. For the two Corps projects included in our review, we
discussed the contractor's costs with the cognizant Corps project
manager in order to determine which charges represented the physical
implementation costs versus other costs because the Corps, in
contrast to EPA, had the prime contractor perform some of the
physical cleanup work. Finally, we verified with EPA's and the
Corps' payment offices that the billed amounts used in our analysis
were paid without significant modifications.
(See figure in printed edition.)Appendix IV
--------------------
\7 Superfund: Trends in Spending for Site Cleanups (GAO/RCED-97-211,
Sept. 4, 1997).
\8 Superfund: System Enhancements Could Improve the Efficiency of
Cost Recovery (GAO/AIMD-95-177, Aug. 25, 1995).
COMMENTS FROM THE ENVIRONMENTAL
PROTECTION AGENCY
========================================================= Appendix III
(See figure in printed edition.)
(See figure in printed edition.)
MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V
GAO/RCED-98-221
RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION
Charles Barchok, Assistant Director
Patricia J. Manthe, Evaluator-in-Charge
Donald J. Sangirardi, Evaluator
Allan Rogers, Assistant Director
OFFICE OF THE GENERAL COUNSEL
Richard P. Johnson, Senior Attorney
*** End of document ***