[Final Audit Report on Selected Aspects of the Emergency Reclamation Program, Eastern Support Center, Office of Surface Mining Reclamation and Enforcement]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 96-I-634

Title: Final Audit Report on Selected Aspects of the Emergency
       Reclamation Program, Eastern Support Center, Office of
       Surface Mining Reclamation and Enforcement

Date: March 29, 1996

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U.S. Department of the Interior
Office of Inspector General



AUDIT REPORT

SELECTED ASPECTS OF THE
EMERGENCY RECLAMATION PROGRAM,
EASTERN SUPPORT CENTER,
OFFICE OF SURFACE MINING
RECLAMATION AND ENFORCEMENT

REPORT NO. 96-I-634
MARCH 1996 United States Department of the Interior
OFFICE OF THE INSPECTOR GENERAL

MEMORANDUM

TO:                 The Secretary

FROM:               Wilma A. Lewis
                    Inspector General

SUBJECT SUMMARY:    Final Audit Report for Your Information -
                    "Selected Aspects of the Emergency Reclamation
                    Program, Eastern Support Center, Office of Surface
                    Mining Reclamation and Enforcement" (No. 96-I-634)          
Attached for your information is a copy of the subject final audit report.

In response to a request we received from the Office of Surface Mining Reclamation
and Enforcement, we reviewed selected aspects of the emergency reclamation
program in operation at its Eastern Support Center. We concluded that the Support
Center was taking timely action to address mining-related emergencies but that
improvements were needed in internal controls over the award and administration
of contracts for emergency reclamation work and the approval of projects for
emergency reclamation funding.  Surface Mining concurred with our
recommendations to comply with contract award procedures, improve the project
design and cost estimation processes, provide more effective monitoring of
construction contracts, and provide sufficient documentation to adequately support
program eligibility determinations. Most of our findings were related to operations
of the Southern Appalachia Branch Office in Ashland, Kentucky.

Based on Surface Mining's response to our draft report and its initiation of
corrective actions in some of the finding areas before our fieldwork was completed,
we considered all the recommendations resolved.

If you have any questions concerning this matter, please contact me or Ms. Judy
Harrison, Assistant Inspector General for Audits, at (202) 208-5745.

Attachment



 
E-IN-OSM-O04-94

United States Department of the Interior
OFFICE OF THE INSPECTOR GENERAL
Washington, D.C. 20240

Memorandum

To:  Assistant Secretary for Land and Minerals Management

From:     Judy Harrison

Subject:  Final Audit Report on Selected Aspects of the Emergency Reclamation
        Program, Eastern Support Center, Office of Surface Mining Reclamation
        and Enforcement (No. 96-I-634)

This report presents the results of our audit of selected aspects of the Emergency
Reclamation Program of the Office of Surface Mining Reclamation and
Enforcement's Eastern Support Center. The objective of the audit was to determine
whether the Support Center and its field offices were administering the Program in
an efficient and effective manner.

Surface Mining's management had identified several potential problems with
emergency program projects, including disparities in abatement costs for similar
hazards and sites. As a result, Surface Mining officials contacted the Office of
Inspector General to request assistance in determining the scope and extent of the
problems. During the course of the audit, we conferred periodically with Surface
Mining officials over tentative findings. This cooperative effort led to Surface
Mining's initiation of additional inquiries and corrective measures, which are
presently under way.

We concluded that the Support Center was taking timely action to address mining-
related emergencies but that improvements were needed in internal controls over the
award and administration of contracts for emergency reclamation work and the
approval of projects for emergency reclamation funding. Specifically, we found that:
(1) appropriate contract award procedures were not always followed; (2) the project
design and cost estimation processes were inadequate; (3) construction contracts
were not monitored effectively; and (4) 4 of 50 project files we reviewed did not
contain sufficient documentation to adequately support program eligibility
determinations. Most of our findings were related to operations of the Southern
Appalachia Branch Office in Ashland, Kentucky.

To correct these weaknesses, we recommended that Surface Mining ensure that:
(1) expedited contract award procedures are used only when justified; (2) basic
design plans are prepared and independently reviewed for each project; (3) project

 
cost estimates are fully supported; (4) project oversight actions are fully documented
in the project files and project oversight reports are complete and prepared in a
timely manner; and (5) project eligibility determinations are adequately supported.

On October 12, 1995, we discussed a preliminary draft of this report with Surface
Mining officials, who generally agreed with our findings and recommendations. Also,
in previous discussions, Surface Mining officials stated that, based on their own
evaluation of the program and the results of this audit, actions had been taken to
improve Program operations as follows: (1) project inspectors and contracting
officers' technical representatives were trained; (2) field reports were prepared by
project engineers assigned to the Southern Appalachia Branch Office; (3) the
installation of cellular telephones in the vehicles of field personnel and the
contracting officer stationed at the Southern Appalachia Branch Office had improved
communications; (4) a series of interdivisional management meetings were initiated
by the Abandoned Mine Lands Division and the Administrative Services Division to
improve communications and establish "better teamwork"; (5) a formal Divisional
workplan for fiscal year 1995 had been developed that included the establishment of
formal goals and measurements of accomplishments for programmatic and customer
service activities; (6) a Technical Specification Improvement Team was established
to address the problems identified in our draft report; (7) peer reviews were
implemented of technical specifications on projects estimated to cost over $150,000;
and (8) a requirement was established for the Chief, Abandoned Mine Lands
Division, to approve all requests for the use of expedited bidding procedures based
on stated factors. We believe that these actions and other issues discussed at the exit
conference reflect Surface Mining's resolve to improve current operations. Based
on additional information provided at the exit conference, we modified our report
as appropriate.

Based on the March 26, 1996, response (Appendix 1) to the draft report from the
Director, Office of Surface Mining Reclamation and Enforcement, we consider one
of the report's nine recommendations resolved and implemented and the remaining
eight recommendations resolved but not implemented.  Accordingly, the
unimplemented recommendations will be referred to the Assistant Secretary - Policy,
Management and Budget for tracking of implementation, and no further response
to the Office of Inspector General is required (see Appendix 2).

The legislation, as amended, creating the Office of Inspector General requires
semiannual reporting to the Congress on all audit reports issued, actions taken to
implement audit recommendations, and identification of each significant
recommendation on which corrective action has not been taken.

cc: Director, Office of Surface Mining Reclamation and Enforcement

 
CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OBJECTIVE AND SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRIOR AUDIT COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FINDINGS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. CONTRACT AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. PROJECT DESIGN PLANS AND COST ESTIMATES . . . . . . . . . . .
C. CONTRACT MONITORING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D. ELIGIBILITY DETERMINATIONS . . . . . . . . . . . . . . . . . . . . . . . .

APPENDICES

1. OFFICE OF SURFACE MINING RECLAMATION AND
  ENFORCEMENT RESPONSE TO THE DRAFT REPORT . . . . . .
2. STATUS OF AUDIT REPORT RECOMMENDATIONS . . . . . . . . .

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INTRODUCTION

BACKGROUND

The Office of Surface Mining Reclamation and Enforcement was established by the
Surface Mining Control and Reclamation Act of 1977 to regulate surface coal mining
operations and to reclaim coal mine sites that were abandoned without adequate
reclamation before the Act was passed.  Title IV of the Act established the
Abandoned Mine Reclamation Fund and authorized the Secretary of the Interior to
use the Fund for the reclamation of eligible lands. The Fund's revenues, which total
over $200 million annually, are derived from reclamation fees paid by coal operators
on coal produced after September 30, 1977. Under Section 410 of Title IV, the
Secretary is authorized to expend monies from the Fund for the emergency
restoration, reclamation, abatement, control, or prevention of adverse effects of coal
mining practices on eligible lands. Emergency situations include burning refuse piles,
underground mine fires, hazardous mine openings, highwall failures, mine drainage,
subsidence, and landslides caused by previous mining.

Eligibility for emergency assistance under the Act requires that a condition constitute
a danger to public health, safety, or general welfare and not be subject to timely
correction by another person or agency. Surface Mining policy provides that in order
for a condition to be declared an emergency, it must be anticipated that the
emergency reclamation (excluding the revegetation of reclaimed land) can be
completed within 6 months of receipt of the emergency complaint. The objective of
emergency reclamation is to stabilize the problem and eliminate the danger to public
health, safety, and welfare. Complete reclamation is not required, and additional
reclamation work can be completed under other reclamation programs at a later
date.

Surface Mining's Eastern Support Center, located in Pittsburgh, Pennsylvania, is
responsible for conducting the Federal Emergency Reclamation Program in the
eastern United States. The Support Center's Administrative Services Division awards
and administers contracts for emergency construction projects, including contracts
for construction, architect and engineer services, geotechnical studies, exploratory
drilling, and on-site inspection. The staff of the Support Center's Abandoned Mine
Lands Division provide technical assistance in determining and abating
mining-related emergencies and serve as the contracting officers' technical
representatives for the Support Center on individual reclamation project construction
contracts. The Division also uses Support Center staff in branch offices in Ashland,
Kentucky (Southern Appalachia Branch Office), and Wilkes-Barre, Pennsylvania
(Anthracite Branch Office), to manage emergency reclamation projects.

 
OBJECTIVE AND SCOPE

We performed the audit at the request of the Office of Surface Mining Reclamation
and Enforcement, which expressed concerns regarding Emergency Reclamation
Program activities at the Eastern Support Center and the Southern Appalachia
Branch Office.  Surface Mining's management had identified several potential
problems with emergency program projects, including disparities in abatement costs
for similar hazards and sites. As a result, Surface Mining officials contacted the
Office of Inspector General to request assistance in determining the scope and extent
of the problems. During the course of the audit, we conferred periodically with
Surface Mining officials over tentative findings. This cooperative effort led to
Surface Mining's initiation of additional inquiries and corrective measures, which are
presently under way.

The objective of the audit was to determine whether the Support Center and its field
offices were administering the Emergency Reclamation Program in an efficient and
effective manner. Our review focused on emergency reclamation projects conducted
under emergency construction contracts issued during fiscal years 1990 through 1993.
During this period, the Support Center issued 970 emergency construction contracts,
totaling $34.4 million, for 757 projects; 161 contracts, totaling $2.4 million, for
architect and engineer services; and 386 contracts, totaling $2.0 million, for
inspection services on reclamation projects. As of June 3, 1994, the Support Center
had issued 1,437 contract modifications to those contracts, totaling $6.9 million.

To accomplish our objective, we reviewed 50 projects related to 50 emergency
construction contracts awarded during fiscal years 1990 through 1993 for work in
Pennsylvania (7 contracts) and Kentucky (43 contracts). Our sample included all
31 contracts for which the contract costs, including modifications, exceeded $300,000
and 19 other contracts awarded in fiscal years 1992 and 1993 at costs from $25,000
to $300,000. The 50 emergency reclamation projects, costing $18.2 million,l related
to landslides (36 projects, totaling about $14.4 million), land subsidence (9 projects,
totaling about $2.8 million), fires (3 projects, totaling about $780,000), highwall
failure (1 project for about $190,000), and mine drainage (1 project for about
$50,000). Because our sample selection of projects was based on the total Federal
cost of construction contracts and because most high cost construction contracts were
applicable to projects administered by the Southern Appalachia Branch Office, most
of the findings in this report relate to projects administered by the Southern
Appalachia Branch Office.

This performance audit was conducted at Surface Mining's headquarters in
Washington, D. C.; the Eastern Support Center; and the Abandoned Mine Lands

lProject costs include construction, architect and engineer (if applicable), and inspection costs.

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Division's Southern Appalachia Branch and Anthracite Branch. We also visited
Surface Mining's Lexington Field Office in Lexington, Kentucky; the Kentucky
Department of Surface Mining Reclamation and Enforcement in Frankfort,
Kentucky; and emergency reclamation project sites in Martin County and Pike
County, Kentucky.  In addition, we contacted Surface Mining inspection,
construction, and engineering contractors, as well as citizens who were affected by
emergency reclamation work.

The audit was made, as applicable, in accordance with the "Government Auditing
Standards," issued by the Comptroller General of the United States. Accordingly,
we included such tests of records and other auditing procedures that were considered
necessary under the circumstances. As part of our audit, we evaluated the system
of internal controls over the management of the Emergency Reclamation Program
to the extent we considered necessary to accomplish the audit objective. We found
weaknesses in Surface Mining's internal controls in the areas of contract award,
project design and cost estimating, contract monitoring, and project eligibility
determinations. These weaknesses and the recommended corrective actions are
discussed in the Findings and Recommendations section of this report. Our
recommendations, if implemented, should improve the internal controls in these
areas.

PRIOR AUDIT COVERAGE

During the past 7 years, the Office of Inspector General and the General Accounting
Office have each issued one report related to Surface Mining's Emergency
Reclamation Program as follows:

  - The Office of Inspector General report "Followup of Recommendations
Concerning the Abandoned Mine Land Program, Office of Surface Mining
Reclamation and Enforcement" (No. 91-I-622), issued in March 1991, recommended
that Surface Mining develop controls to ensure that the Government did not incur
excess costs because of unbalanced bidding on contracts.  We considered the
recommendation resolved and implemented based on Surface Mining's actions.

  - The General Accounting Office report "Surface Mining, Interior's Response
to Abandoned Mine Emergencies" (No. GAO/RCED-89-74), issued in January 1989,
concluded that sufficient information was not available in complaint case files to
track a complaint through the review process and to verify that emergency eligibility
criteria had been met.  The report recommended that Surface Mining develop
written criteria for structuring and documenting complaint case files and periodically
review complaint case files to ensure that all required information is included and
that timely action is taken to resolve the complaint. During our current review, we
found instances where eligibility determinations were not sufficiently documented,
as discussed in the Findings and Recommendations section of this report.

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FINDINGS AND RECOMMENDATIONS

A. CONTRACT AWARDS

Contracting officials did not ensure that technical personnel adequately protected the
Government's interest when they expedited2 contract awards to respond to
emergencies.  The Eastern Support Center used firm-fixed-price construction
contracts issued through competitive bidding to perform the work required to
complete emergency projects.  Guidelines established by the Support Center's
contracting section allow 13 days for pre-bidding meetings, receipt of bids, review of
bids, and award of emergency contracts. However, for 17 of the 50 construction
contracts we reviewed, the solicitation was issued and the pre-bidding conference and
bid opening were held on the same day. For 14 of these 17 contracts, the contract
was awarded on either the same day or the next day. As a result of the process used
to expedite contract awards, the Support Center had limited time to contact bidders,
and bidders had limited time (as little as one hour) to review the solicitation
packages and prepare their bids. The lack of adequate time to review the solicitation
package increased the economic risk to the potential bidders and, coupled with
design plans that did not clearly show the extent of the work to be performed (see
Finding B), could result in higher bids and excess costs to the Government.

Contracting personnel relied on technical personnel to determine whether expedited
award procedures were necessary without ensuring that such procedures were
adequately justified. Our review of the 17 contracts that used expedited procedures
identified 8 contracts for which the use of expedited procedures was questionable.
For example:

  - Expedited procedures were used on one project, even though 8 months had
elapsed since the incident was first investigated by Surface Mining. During this
period, a geotechnical investigation was performed, and work on the project was
halted because of funding restrictions. As soon as funding was available, the project
pre-bidding conference and the bid opening were held on the same day. The
following day, the contract was awarded for $231,102.

  - On another project that used expedited procedures after several months of
geotechnical investigation, the contractor did not mobilize equipment to the site until
over 2 weeks after the contract was awarded. The project was awarded to one of
only three bidders for $396,295 on the day following the pre-bidding conference and
the bid opening,

2Situations where pre-bidding conferences were held on the same day as bid openings and
contractors
were not provided project specifications before the pre-bidding conference.

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As discussed with Surface Mining officials at our exit conference, we believe that
expedited contracting procedures should be used only in situations where delays
could result in personal injury or further damage to the environment. In addition,
expedited procedures should not be used to address nonemergency aspects of a
situation (such as revegetation) unless this approach would be more cost effective
than using routine contracting procedures.

Recommendation

We recommend that the Director, Office of Surface Mining Reclamation and
Enforcement, ensure that expedited contract award procedures are utilized only
when adequately justified.

Office of Surface Mining Reclamation and Enforcement Response and
Office of Inspector General Reply

In its March 26, 1996, response (Appendix 1) to the draft report, the Office of
Surface Mining Reclamation and Enforcement concurred with the recommendation,
stating that additional justification for using expedited contract award procedures was
now required from project managers. Based on the response and our review of
documentation included with the response, we consider the recommendation resolved
and implemented (see Appendix 2).

 
B. PROJECT DESIGN PLANS AND COST ESTIMATES

The Eastern Support Center did not ensure that emergency projects were designed
adequately or that project cost estimates were reliable. Project files generally did not
contain overall design plans, and cost estimates were not supported by detailed
analyses of the work to be performed. Surface Mining Directive AML-4 and the
Federal Acquisition Regulation, Part 36, require that work that is to be performed
by contractors be presented clearly.  The Federal Acquisition Regulation also
requires that Government cost estimates be prepared in the same detail as though
the Government was competing for the contract. Support Center officials indicated
that the emergency nature of the projects did not allow sufficient time to prepare
"elaborate" designs and drawings and that some basic sketches may have been
prepared but not documented in the files. They also stated that computations and
cost information may have been prepared or obtained to support some of the project
cost estimates but that they were not formally documented or retained because there
was no requirement to do so.  As a result, the Support Center did not have
assurance that the projects would be completed properly and in an efficient and
cost-effective manner.

Project Design Plans

Overall design plans showing existing conditions and proposed corrective actions
were not in the project files for 45 of the 50 emergency construction projects
included in our sample. Technical specifications were prepared that delineated the
general types of work to be performed, such as excavation, construction of drainage
ditches and retaining walls, and revegetation, and sometimes included cross-sectional
drawings showing how these tasks should be performed. However, the specifications
included in the contracts were generic documents that did not specifically indicate
the location and dimensions of the proposed work in relation to the entire project
area. The specifications generally noted that the project manager or the project
engineer would establish the location and dimensions of specific tasks at the
appropriate time.

In our opinion, establishing the types of work that need to be performed without
showing how this work is to be integrated into an overall plan does not constitute
effective project design. We believe that without a basic plan that is appropriately
updated for changes in the original scope of work, the individuals involved in
performing and monitoring the projects, including project managers, contractors,
inspectors, Division management, and contracting personnel, cannot carry out their
responsibilities effectively.

Support Center officials indicated that the emergency nature of the program
prohibited the drafting of formal plans because Surface Mining was required by law
to act "expeditiously" to alleviate imminent public danger. However, the emergency

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reclamation procedures outlined in Directive AML-4 require that overall plans be
completed before construction contracts are awarded. The first step in the Directive
regarding implementation of emergency corrective action requires that the Support
Center or field office, "as appropriate," take the following action:

Prepare a set of detailed written specifications, or request a consulting
engineer contractor to prepare specifications that should at a minimum
include: (a) Detailed itemized work necessary to correct the problem.
(b) Any drawings necessary to make work required more clear. (c) An
itemized bid sheet showing each unit of work required with a space for
bid price on each unit. (d) The estimated cost by unit of work required.

In our opinion, these steps should be completed in all circumstances, although the
formality of presentation and the level of detail required may vary for different
projects. Considering the emergency nature of the work and the resulting time
constraints, we recognize that adequately labeled freehand sketches may be more
appropriate than formal engineering drawings in some instances and that handwritten
documents may have to be used in place of typewritten documents.

We also concluded that the lack of independent reviews of project designs and
specifications has contributed to the deficiencies noted in these documents.
According to Support Center officials, project managers were responsible for
reviewing the designs and specifications prepared by the project engineers. In our
opinion, project managers, as "team" representatives, are not sufficiently independent
to conduct these reviews. We believe that the preparation of overall design plans
and the independent review of such plans by technical personnel who are
independent of the direct performance team would help ensure that: (1) proposed
actions constitute the best available reclamation alternative; and (2) technical
specifications are sound. Without independent reviews, design errors or deficiencies
that result in increased project costs may not be detected and corrected.

We also believe that some of the deficiencies related to inadequate communication
and coordination among technical employees and between technical employees and
contracting employees (see Finding C) may have been prevented through the
preparation and maintenance of design plans providing tangible guidelines for the
actual work to be performed under the contracts.

Cost Estimates

The Support Center did not prepare cost estimates for emergency projects in the
detail required by the Federal Acquisition Regulation. Subpart 36.203 of the
Regulation states:

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An independent Government estimate of construction costs shall be
prepared and furnished to the contracting officer at the earliest
practicable time for each proposed contract and for each contract
modification anticipated to cost $25,000 or more.  The contracting
officer may require an estimate when the cost of required work is
anticipated to be less than $25,000. The estimate shall be prepared in
as much detail as though the Government was competing for award.

However, we found that 47 of the 50 cost estimates we reviewed included only a
delineation of the types of work to be performed and the estimated units, unit prices,
and total prices. The derivation of these amounts was not documented. Adequate
cost estimates could not be prepared because, as discussed previously, overall design
plans that included the necessary tasks and detailed specifications had not been
developed. Officials at the Southern Appalachia Branch Office indicated that the
supporting calculations were prepared but were not maintained in the project files
because there was no requirement to do so. These officials also stated that unit
prices included in the estimates were based on the preparers' undocumented
personal knowledge of current industry prices. Without documentation that cost
estimates are based on work determined to be necessary and on valid current
industry prices, the Government does not have assurance that cost estimates are
reliable, which would prevent contracting officers from effectively determining the
reasonableness of contractor proposals.

The need for overall plans and cost estimates to assist contracting officers in
evaluating proposed costs is illustrated by the significant variances in the contract
amounts for similar projects designed by two project engineers from the Southern
Appalachia Branch during fiscal years 1992 and 1993 as follows:

        Average     Average
No. of       Initial      Total
Contracts      Award     Project Costs*

Engineer A
Engineer B

46       $127,194     $138,746
33        66,252      73,811

*Includes all contract modifications

Southern Appalachia Branch officials indicated that these variances were not
attributable to the complexity of the projects assigned to each engineer because
projects were assigned in the order in which they occurred and the Branch did not
have a policy of assigning the more complex projects to a particular engineer.

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Instead, these variances appear to be attributable to differences in professional
judgment regarding the nature and extent of reclamation required to adequately
address the emergency situation. For example, a landslide project initially awarded
for $129,295 was reassigned to another project engineer 5 months into the project,
after the initial project engineer was transferred.  The new project engineer
recommended contract modifications totaling about $231,000, which the original
project engineer had believed were unnecessary to abate the immediate emergency.

Differences in professional judgment regarding the design of reclamation projects can
significantly affect project costs. To help ensure that reclamation projects are
designed properly and that the projects are performed in the most cost-effective
manner, clear overall project designs and detailed cost estimates should be prepared
and reviewed and approved independently.

Recommendations

We recommend that the Director, Office of Surface Mining Reclamation and
Enforcement:

  1. Require that emergency project construction contracts include basic project
designs which include the complete scope of work,

2. Require that project designs and specifications, including those applicable
to contract modifications, be independently reviewed by engineering personnel who
are not directly involved in the project.

3. Ensure that cost estimates for initial project work and subsequent changes
are supported by detailed analyses of work to be performed.

Office of Surface Mining Reclamation and Enforcement Response and
Office of Inspector General Reply

In its March 26, 1996, response (Appendix 1) to the draft report, the Office of
Surface Mining Reclamation and Enforcement concurred with the three
recommendations, stating that an Alternative Management Control Review will be
performed to further identify risks related to the preparation and review of basic
design plans and that controls would be established based on the results of the
review. Based on the response, we consider the recommendations resolved but not
implemented (see Appendix 2).

 
C. CONTRACT MONITORING

The Eastern Support Center did not adequately monitor emergency construction
contracts. Specifically, we found that: (1) project managers did not consistently
record, in the project files, instructions provided to contractors and the status of
work performed; (2) project managers and project engineers authorized changes to
contract terms and conditions without the documented approval of the contracting
officer; and (3) on-site project inspectors did not always provide timely and
informative reports to the contracting officers on the status of work.  Surface
Mining's Abandoned Mine Lands (AML) Project Manager's Handbook and
Procedures Manual requires that project managers document all relevant information
in the project files; the Federal Acquisition Regulation, Part 1, states that only
authorized contracting officers can authorize changes to contract terms; and
statements of work included in individual inspection contracts require that project
inspectors provide timely and comprehensive reports to contracting officers. We
concluded that these requirements were not always met because of: (1) inadequate
communication and cooperation among technical employees and between technical
employees and contracting employees stationed at the Southern Appalachia Branch
Office and the Eastern Support Center;3 and (2) the failure of contracting officers
to ensure that progress reports submitted by project inspectors were timely and
complete. As a result, technical and contracting personnel did not always function
effectively as a project team; unauthorized personnel approved the performance of
work by contractors, contributing to contractor claims for additional work totaling
about $450,000; and a contractor was overpaid approximately $24,000.

Emergency reclamation construction projects were monitored primarily by the
contracting officers and technical personnel. Project managers generally acted as the
contracting officer's technical representative and monitored construction projects by
visiting sites on a continual basis and by coordinating with project engineers and
project inspectors. Project engineers also visited job sites to evaluate construction
progress and compliance with specifications. Project inspectors, who were on-site on
a full-time basis, provided contracting officers and project managers with written
weekly reports of a contractor's progress. Contracting officers used the weekly
progress reports from the inspectors to monitor their projects.  Technical
representatives were required to keep the contracting officers informed of any
potential problems regarding contractor compliance with contract terms.

3The issues of inadequate communication and cooperation problems have been discussed with
Surface
Mining officials.

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Project Managers

Project managers serving as contracting officers' technical representatives were not
formally required to submit project oversight reports to the contracting officers on
a consistent basis.  However, Surface Mining's training course materials for
contracting officers' technical representatives state that technical representatives are
responsible for preparing and forwarding their on-site reports to the contracting
officer so that the contracting officer can ensure that contract terms and technical
specifications are being met. We found that 36 of the 50 project files reviewed did
not include any reports of site visits made by the project managers, and the reports
that were prepared were apparently not sent to the contracting officers. As a result,
contracting officers lacked assurance that the instructions given to contractors and
the subsequent work performed were in accordance with contract terms.

Project Managers and Project Engineers

Project managers and project engineers made changes to contract quantities and
specifications without the documented approval of contracting officers (as required
by the Federal Acquisition Regulation) in 25 of the 50 contracts in our sample.
Although most of the unauthorized work was ultimately approved after the fact by
contracting officers, two of the actions noted in our sample resulted in contractor
claims for payments totaling $450,000 as follows:

  - A contractor filed a claim for $406,976, which consisted of $182,701 for
additional work and $224,275 for downtime. The contracting officer stated that both
the project manager and the project engineer authorized work outside the scope of
the contract. The project manager stated that he believed that the contracting officer
had authorized the proposed changes and additional work. At the time of our
review, the contractor's claim had not been resolved.

  - A contractor filed a claim for $42,271 for additional work, stating that the
project manager and two project engineers directed him to perform work that was
outside the scope of the contract. The contracting officer said that he was not
notified by the technical personnel at the time the changes were made and that he
subsequently disallowed the contractor's claim on the basis that the claimed work was
clearly outside the scope of the contract. Although Surface Mining did not pay this
claim, this situation demonstrates the type of problems that may occur because of the
inadequate communication between the contracting officers and the technical
representatives.

Project Inspectors

Contracting officers did not ensure that progress reports submitted by project
inspectors were timely and complete. We found that project inspectors did not

11

 
submit required reports on contractor progress on time to the contracting officers for
8 of the 50 projects in our sample. We also noted that the reports for 20 of the 50
projects did not provide sufficient detailed information for evaluating contractor
performance, such as the following: (1) information on the contractor's progress in
completing required tasks, such as quantities of materials delivered, used, or moved;
(2) instructions provided to contractors by project managers and engineers regarding
work performed (constituting additional specifications); or (3) determinations as to
whether the work performed was in accordance with contract specifications.

The results of inadequate communication and cooperation between technical and
contracting personnel are illustrated in the following examples:

  - One contractor was overpaid about $24,000 because the contracting officer
did not verify, with the technical representative, the amount of quantities on the
contractor's invoices. The contracting officer stated that he submitted the invoices
for payment after repeated unsuccessful attempts to obtain verification of the
quantities by the technical representative. All work had been completed on the
project by October 7, 1992, and final payment to the contractor was approved by the
contracting officer on April 12, 1993. The technical representative's subsequent
review of final quantities indicated that the contractor had been paid for work not
performed. According to Surface Mining officials, the $24,000 overpayment was
collected from the contractor after completion of our audit fieldwork.

  - One contractor claimed reimbursement for work valued at approximately
$8,500 that a project manager and a project engineer may have authorized without
prior approval from the contracting officer. The project engineer stated that the
contracting officer had been kept informed of all changes to the contract, but this
statement could not be documented. The contracting officer stated that the claimed
work had not been authorized. This issue was brought to our attention by Surface
Mining and was unresolved at the time of our review.

Surface Mining officials agreed that increased cooperation between technical and
contracting personnel was essential for effective program performance and that
improved management oversight would have prevented some of these problems.

Recommendations

We recommend that the Director, Office of Surface Mining Reclamation and
Enforcement:

    1.  Ensure that information related to all changes and additions to work
performed under emergency construction contracts is appropriately documented in
the project files, with copies of the documentation provided to the contracting
officer.

12

 
  2.  Require contracting officers' technical representatives to report on the
status of emergency construction projects on a consistent basis.

  3.  Ensure that project inspectors submit their reports timely and that the
reports contain the information required in the scope of work of the inspection
contracts.

  4.  Ensure that managers and supervisors direct emergency project
personnel to cooperate in providing adequate oversight and assistance to project
team members. Within this context, consideration should be given to emphasizing
a team member's contribution to team effectiveness in appraising the individual
performance.

Office of Surface Mining Reclamation and Enforcement Response and
Office of Inspector General Reply

In its March 26, 1996, response (Appendix 1) to the draft report, the Office of
Surface Mining Reclamation and Enforcement concurred with the recommendations,
stating that some standards for project oversight had been placed in the Abandoned
Mine Lands Division's annual workplan and that timeliness of report documents was
being reviewed and would be considered when evaluating employee performance.
Based on the response, we consider the recommendations resolved but not
implemented (see Appendix 2).

 
D. ELIGIBILITY DETERMINATIONS

The Eastern Support Center's files for 4 of the 50 projects reviewed did not contain
sufficient documentation to support the determination that the emergency situation
resulted from mining activities that occurred prior to enactment of the Surface
Mining Control and Reclamation Act. All four projects were recommended for
approval by the Southern Appalachia Branch Office. Title IV of the Act requires
that emergency projects be related to land and water affected by coal mining
practices that occurred before August 3, 1977. In addition, Surface Mining Directive
AML-4 requires that the nature of problems qualifying as emergency projects be
specifically identified and documented, including "appropriate answers to when,
where, how, and why questions relative to the development of the problem(s); and
the causal relationship to the coal mining practices." However, the files did not
contain documentation showing that concerns regarding the eligibility of the projects
had been resolved. Consequently, we could not determine whether four landslide
projects, costing approximately $1.9 million, were eligible for emergency reclamation
program funding under the Act as follows:

  - According to Surface Mining personnel, the initial investigation for a
$549,168 project concluded that the primary cause of the slide was related to
excavation activities performed by the landowner subsequent to the mining activity
and that the project was therefore ineligible. However, the project was approved
based on a second investigation, which determined that the project met the eligibility
requirements of the Act. We found no documentation of the first investigation in
the project files and no information in the second investigation report to reverse the
original decision of ineligibility. The two principal investigators involved in the first
investigation and an engineer involved in the second investigation said that they
believed the project was ineligible.  The person responsible for the second
investigation no longer works for Surface Mining. The branch chief, who had visited
the project site, was unable to explain the discrepancy between the two investigations
except to state that there were differing views within Surface Mining regarding the
establishment of a direct causal relationship to pre-Act mining activities.

   A landslide project costing $503,448 was initially found to be ineligible by
the responsible field office but was reinvestigated by the branch office, which also
performed the project. Both pre- and post-Act mining occurred at the project site,
and a geotechnical investigation was performed by an engineering firm. Although
the engineering firm found the cause of the slide to be mining related, the firm did
not determine whether the slide was caused by pre- or post-Act activities. We found
no other information in the files to resolve this issue, and the briefing paper
prepared for project approval did not mention that post-Act mining had occurred in
the vicinity.

14

 
  - The files for a project costing $372,523 did not contain documentation
showing resolution of statements made by area residents that a slide was not caused
by pre-Act mining but by the undercutting of the site by the person residing on the
land. Technical personnel stated that the emergency condition was considered
mining related based on a previous engineering investigation conducted in the area.

   A project costing $521,584 was approved, even though a geotechnical
investigation was inconclusive as to whether the slide was caused by pre- or post-Act
mining. Hydrologic testing that could have resolved the issue was not performed,
although it had been requested by both the field office and the investigating
engineer. Although the project manager stated that hydrologic testing could have
provided conclusive evidence of eligibility, he believed that the project was eligible
and therefore did not conduct hydrologic testing.

At our exit conference, Surface Mining officials indicated that although written
resolutions of all comments pertaining to project eligibility were not prepared and
documented, all comments were considered. The officials also stated that Surface
Mining policy does not require that the relationship of the emergency situation to
coal mining be proven with "absolute certainty." However, we believe that because
Surface Mining consistently lacked adequate funding for emergency projects,
questions regarding project eligibility should be satisfactorily addressed and
documented in the files to ensure that ineligible projects are not funded. We also
believe that testing methods that are relatively inexpensive and timely should be used
when necessary to adequately substantiate that the emergency situation was mining
related.

Recommendation

We recommend that the Director, Office of Surface Mining Reclamation and
Enforcement, ensure that project files contain adequate support for project eligibility
determinations, including the resolution of all questionable issues.

Office of Surface Mining Reclamation and Enforcement Response and
Office of Inspector General Reply

In its March 26, 1996, response (Appendix 2) to the draft report, the Office of
Surface Mining Reclamation and Enforcement concurred with the recommendation,
stating that a checklist for eligibility criteria would be developed by August 1, 1996.
Based on the response, we consider the recommendation resolved but not
implemented (see Appendix 2).

15

 
APPENDIX 1   I
Page 1 of 2

United States Department of the Interior
      OFFICE OF SURFACE MINING
         Reclamation and Enforcement

Washington, D.C. 20240

Memorandum

This is in response to your February 6, 1996 memorandum and draft
audit  report  entitled  "Selected  Aspects of  the  Emergency
Reclamation Program,  Eastern Support Center, Office of Surface
Mining Reclamation and Enforcement (Assignment No. E-IN-OSM-O04-
94) .  We appreciate the opportunity to review the draft report and
to provide our comments.

As you are aware, the audit was conducted at our request after we
had identified several potential problems with AML emergency
program projects.  We recognized the valuable insight the Office of
Inspector General would bring in assisting us to further identify
and resolve operational problems with the emergency program.

We have completed our review of the draft report and concur with
its findings and recommendations.  Your February 6 memorandum
already reflects many actions OSM has taken to address programmatic
problems.  Our specific plans for implementing your remaining
recommendations are explained in the attachment.  Please note that
effective  with  OSM'S  May 1,  1995  reorganization,  the
responsibilities previously assigned to the Eastern Support Center
during the audit period have been reassigned to our Appalachian
Regional Coordinating Center in Pittsburgh, Pennsylvania.  The
Regional Director of that center will be the responsible official
for carrying out the implementation plan.

If you have any questions concerning our response, please contact
George Stone, Audit Coordinator, Office of Strategic Planning and
Budget, at (202) 208-7840.

Attachment

16

 
APPENDIX 1    
Page 2 of 2

       OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT
         IMPLEMENTATION PLAN - RECOMMENDATIONS RESULTING
         FROM AUDIT BY OFFICE OF INSPECTOR GENERAL
                AML EMERGENCY PROGRAM
The table below reflects the actions planned to implement the recommendations and
a projected target date for completion of those actions.  The official

responsible for plan implementation is the Regional Director, Appalachian
Regional Coordinating Center.

RECOMMENDATION         ACTION             PROJECTED
                                COMPLETION DATE
1.  Use expedited contract   Additional justification  Completed
award procedures only when  is now being required
justified.          from Project Manager for
              use of expedited
              contracting procedures.
              See attached
              documentation. *
2.  Ensure that basic     An AMCR will be       Complete AMCR by
design plans are prepared   completed to further    06/31/96;
and independently reviewed  identify risks.       Implement new
for each project       Controls will be      controls by
              established based on the  07/31/96
              results of the AMCR.
3.  Ensure that project    Develop review process.   09/30/96
cost estimates are fully
supported
4.  Ensure that project    Currently reviewing     Ensure employee
oversight actions are fully  timeliness of report    performance
documented in the project   documents.  Timeliness   standards are
files and project oversight  of this documentation    adequate and in
reports are complete and   will be considered in    place for the
prepared in a timely     employee performance.    1997 evaluation
manner.            Some standards for     year.  Complete
              performance have been    by 07/31/96.
              placed in Division's
              annual workplan.
5.  Ensure that project    Develop eligibility     08/01/96
eligibility determinations  criteria checklist.
are adequately supported.

Prepared:  March 22, 1996



* [NOTE:  ATTACHED DOCUMENTATION NOT INCLUDED BY OFFICE OF
INSPECTOR GENERAL. ]

17

 
APPENDIX 2

STATUS OF AUDIT REPORT RECOMMENDATIONS

Finding/Recommendation
   Reference       Status        Action Required

A. 1       Implemented.   No further action is required.

B.1-B.3; C.1-C.4;     Resolved; not   No further response to the Office
  and D. 1      implemented.   of Inspector General is required.
                  The recommendations will be
                  referred to the Assistant
                  Secretary for Policy,
                  Management and Budget for
                  tracking of implementation.

 
ILLEGAL OR WASTEFUL ACTIVITIES
   SHOULD BE REPORTED TO
THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:             Calling:

Within the Continental United States

U.S. Department of the Interior         Our 24-hour
Office of Inspector General           Telephone HOTLINE
1550 Wilson Boulevard            1-800-424-5081 or
Suite 402                 (703) 235-9399
Arlington, Virginia 22210

TDD for hearing impaired
(703) 235-9403 or
1-800-354-0996

Outside the Continental United States

Caribbean Region

U.S. Department of the Interior         (703) 235-9221
Office of Inspector General
Eastern Division - Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209

North Pacific Region

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. Flores Street
Suite 807, PDN Building
Agana, Guam 96910

(700) 550-7279 or
COMM 9-011-671-472-7279

 
Toll Free Numbers:
1-800-424-5081
TDD 1-800-354-0996

FTS/Commercial Numbers:
(703) 235-9399
TDD (703) 235-9403

HOTLINE

1550 Wilson Boulevard
Suite 402