EXCLUSIVE: Fifteen months after a report charged the Environmental Protection Agency with failing adequately to oversee Superfund cleanup efforts at some of the country’s most toxic waste dumps, the EPA’s internal watchdog and EPA management are battling over $1.5 million that the inspectors said in the probe was illegally overbilled between 2008 and 2012 by the clean-up contractor.

The EPA’s Inspector General Office wants EPA to get the money back. EPA management is balking, despite at least two “dispute resolution” meetings between the two sides in March and May.

Meantime, the contractor, a Colorado-based engineering and consulting behemoth named CH2M Hill, continues to operate under the disputed contract, which has a total potential value of more than $116 million before its final expiry in June 2016.

CH2M Hill’s total ongoing business with EPA amounts to ten times that amount: more than $1.16 billion through July 2014, according to EPA records.


Making the tug-of-war more piquant is the fact that CH2M Hill in March last year—only a month before publication of the disputed report-- paid $18.5 million to the Department of Justice to settle an overbilling fraud that allegedly  between 1999 and 2008 at another hyper-toxic cleanup site, the Department of Energy’s Hanford nuclear site, home of the world’s first plutonium production reactor.


Under the agreement, CH2M Hill also had to consent to a corporate monitor for three years at the Hanford site, pay $500,000 for unspecified  “accountability measures” to prevent further billing fraud, and cooperate in continuing fraud investigations.

The two cases are otherwise unrelated. In the current EPA internal dispute, the major sticking-point issue is not whether CH2M Hill engaged in fraud—no such claims have been made-- but whether EPA itself  ignored  federal contracting rules in favor of its own internal regulations  in allowing the alleged double-billing circumstances to arise.

A number of questions sent by Fox News to CH2M Hill earlier this week regarding contract EPS90804 had not been answered before this story was published.

But there is also a broader issue involved:  how EPA, an agency that has recently threatened to impose crippling fines on a rancher for building a small cattle pond on his property, actually carries out its job, including its financial responsibilities, at some of the biggest and most expensive pollution sites in the country, and how much it takes the word of contracting firms like CH2M Hill for their efforts in the process.

In other words, “how do you know you are doing what you are supposed to be doing?” said one EPA official familiar with the case. “It’s a major issue.”

Just how major—not only in terms of money but of the potential exposure of humans and wildlife to dangerous chemicals and their byproducts as a result-- is underlined in carefully cloaked bureaucratic prose in the Inspector General’s report of the disputed contract.

It said there “may be an EPA-wide problem” in how the agency handles contracts like the one  known as EPS90804, a three-year, renewable document that was originally signed in 2008 by the chief administrator of EPA’s region 9, a huge swath of territory that includes California, Arizona, Nevada, Hawaii, as well as various Pacific island territories and autonomous tribal areas in the south-west.


In the case of EPS90804, the aim was to clean up a variety of Superfund sites in the South-West and the Pacific through a cascade of separate “task orders” under the umbrella agreement, known in EPA parlance as a “remedial action contract,” or RAC. The contract was expected to expand over time to allow different sites to be added.

In 2008 the administrator was Wayne Nastri, a Bush Administration appointee. He was replaced in November 2009 by an Obama Administration selection: Jared Blumenfeld, previously director of San Francisco’s Department of the Environment under Demoractic then-Mayor Willie Brown, once the longest-serving speaker of the California State Assembly. Blumenfled is an attorney who, according to his official biography, “has worked for the Natural Resources Defense Council (NRDC), the Sierra Club Legal Defense Fund, and the International Fund for Animal Welfare.”

According to the EPA website, region 9 staff currently comprise “a talented and diverse team of more than 800 scientists, engineers, inspectors, environmental specialists, analysts, lawyers and administrative staff working to protect human health and the environment across eight time zones.”

At the time of the Inspector General’s report, EPA had issued 64 task orders worth $97.8 million under the contract. The Inspector General’s staff looked at only 18 percent of them —but they covered nearly two-thirds of the total spending.

The results of that year-long examination in 2013 were sobering. Among the mostly California venues that the Inspector General’s staff examined were nearly $40 million worth of work at the Iron Mountain Mine near Redding, a noxious gold and silver mining locale since the Civil War and a designated Superfund site since 1983; the Frontier Fertilizer site near Davis, CA, where many pesticides were dumped; and a site formerly known as the B.F. Goodrich site near Rialto, where rocket-fuel propellants, among other things, were tested.

All of those highly dangerous sites are close to important groundwater and drinking water sources for local residents and beyond.

When it came to supervising the “remediation” work under EPS90804, however, the report charged, among other things, that EPA employees who were supposed to monitor the contract:

--ignored federal rules that they verify that personnel for the contractor have the qualifications necessary to execute the contract, thus increasing the “risk of the contractor substituting lesser-qualified staff while EPA pays the rate for fully qualified individuals;”

--in some cases relied on the contractor’s work plans rather than the official scope of work of the various projects to determine what was supposed to be done;

-- ended up not being billed for 46 of 229 individuals originally identified as “key staff”  in work plans, but got bills for 846 people—82 percent of the total—who were not identified in the plans;

--often didn’t take notes or otherwise keep track of changes in “deliverables” in meeting with the contractor, thus relying on the contractor’s records;

--also failed frequently to document the quality of any of the “deliverables” received, and in two cases offered no documentation at all;

--in some cases, weren’t familiar with the overall contract, or hadn’t read it.

EPS90804 is what the federal government calls a “time and materials” contract, also known as a “fixed rate indefinite delivery/indefinite quantity award term contract,”  meaning that contractors bill for hours worked—with no specified ceiling-- at specified rates along with the cost of materials (which can include subcontracts, according to rules cited by the Inspector General).

(On the EPA’s website, it is now listed more vaguely as an “indefinite quantity” arrangement.)

According to one knowledgeable official, such time and materials contracts are “pervasive” at EPA—where the full extent of  required pollution clean-ups may not be known for years, as various layers of contamination are uncovered.  The contracts are also highly expensive, open-ended, and provide “no incentive to the contractor for cost control or labor efficiency,” according to the Inspector General’s  original report.

They are a device that President Barack Obama himself has been trying to discourage since 2009, when he issued a memo ordering agencies to minimize the risk and maximize the value of government contracts. They were further restricted by Congress the same year. EPA itself has been trying to discourage time and materials contracts as a cost-saving measure.

But EPA still wasn’t trying all that hard, according to yet another Inspector General’s report, issued just a month before the examination of EPS90804.  Despite the headquarters order to cut back on high-cost contracts, “flexibility” allowed EPA’s ten regions to use them virtually at their discretion. “The regions’ resistance to change is well documented through the years,” the Inspector General sardonically noted in March, 2013.


The resistance is apparently still operative.

While agreeing with many changes suggested in the  report on EPS90804 for ensuring that employees take notes and use verification procedures, both region 9 administrator Blumenfeld and senior EPA managers declared that they didn’t think that verification of the credentials of a contractor’s employees, as one example, was necessary or required.

One top manager went further. If EPA has a policy direct that the agency review credentials of all those working on tasks, the report relates that he said, “the requirement needs to be changed.”

And on the issue of alleged overbilling—involving a federal rule that forbids giving contractors a “profit” on materials included in the contract, which the Inspector General’s office declared that EPS90804 specifically and inexplicably violated--the administrators were equally adamant in refusing to ask for the money back.

How that issue, at least, is decided will ultimately depend on one of EPA’s topmost management—whoever that may turn out to be. Under dispute resolution procedures, after a “final” fruitless meeting held on May 29, the issue went to EPA’s Deputy Administrator, Robert Perciasepe, for a final decision.

Perciasepe was supposed to make the decision by July 15. This week, however, he ha announced that he will step down from his job next month.

According to an official in the Inspector General’s office, EPA has now asked for a delay in the final decision on EPS90804’s costly overbilling issue until August 15.

George Russell is editor-at-large of Fox News and can be found on Twitter @GeorgeRussell

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