Pay For Performance (PFP) Toolbox: 4. Expanding a PFP Program
How do I expand my PFP program?
States that have started pay for performance (PFP) so far have begun with a pilot program and have used interim successes (for example, quicker cleanup starts, big paperwork reductions, or lower, fixed price cleanups) to lead and justify increasing the number of PFP cleanups beyond the number in the original pilot. A pilot program gives the state, contractors, and responsible parties an opportunity to familiarize themselves with PFP and to customize it to unique local needs. There are different ways to expand PFP to become the standard operating procedure for doing UST cleanups. For example, South Carolina expanded a PFP pilot program into making PFP standard operating procedure in essentially one step. Florida, which has a relatively complex statutory basis for its UST cleanups, is expanding its PFP pilot program within parts of that statutory framework.
Expansion can be done in small steps. For example, a program can be expanded to include newly started cleanups if the PFP pilot encompassed only time-and-materials (T&M) sites converted to PFP. Or, expand to free-product removal (only) cleanups if the PFP pilot includes mostly longer-term cleanups. If the state has MTBE plumes that need to be cleaned up separately from the normal contaminants of concern (for example, at a re-opened BTEX release site) consider starting a set of MTBE cleanups on PFP terms.
Expansion of a PFP pilot program can be done in one step--provided a receptive climate exists. For example, if the governor has issued a mandate to use performance type contracts in state procurements wherever possible, and there is strong stakeholder support (for example, a strong responsible party, a state petroleum marketers or owners or contractors association) backed up by hard interim evidence that addresses the concerns of key stakeholders, the conditions could be ripe for PFP program expansion.
Use interim results rather than cleanup completions to build concrete evidence for expanding PFP. Because an UST cleanup can take from two or more years, it is usually not practical to wait until the cleanups in the original PFP pilot reach closure. As documented already PFP has been shown to be faster and less expensive than customary T&M cleanups.
More detailed descriptions for expanding a PFP pilot program into full-scale, standard operating procedure follow below.
Use PFP On Federal LUST Trust Funded Cleanups
Some states use part of their federal LUST Trust Fund monies for direct remediation. Cleanup sites eligible for LUST Trust Fund expenditures can be addressed on PFP terms. These are state-lead sites using federal monies; their cleanups may present good opportunities to fine-tune, as well as expand, the state's PFP approach.
Convert Emergency Responses To PFP When The Emergency Is Resolved
When a release poses an urgent and high risk to public health or the environment, such as imminent contamination of a community drinking water wellfield, PFP may be very effectively applied.
Convert Ongoing Site Cleanups To PFP Terms
Systematic review of ongoing T&M cleanups may identify:
- Cleanups that have operated three years or more without reaching closure, or all cleanups where contamination levels have failed to decline significantly and remain low for two sequential quarters;
- Cleanups that are nearing state maximum reimbursement amounts but not nearing contamination-level goals set for the site; or,
- Any on-going cleanup more than two or three quarters from reaching cleanup goals and closure.
Any one of these criteria may identify cleanup sites that are environmentally and fiscally ripe for conversion to PFP terms. As an added bonus, such reviews also give owners/operators fair notice of impending and perhaps unexpected costs they may be liable for if the cleanup fails to reach environmental goals before exhausting its state funding.
Apply PFP To Backlogged Release Sites
A state's backlog of unaddressed release sites can be tackled with PFP because PFP has proven to expedite the start of cleanup once the site characterization is completed. Such sites might even be bundled (that is, included in multi-site PFP cleanup agreements.) A state can score quick interim results by demonstrating that it has been faster in starting more cleanups.
Extend PFP Terms To More Types Of UST Cleanup Sites
Consider PFP contracting for different types of cleanups. For example, if PFP pilot sites are primarily free-product removals, extend PFP to full remediation at sites with new releases. Consider converting long-term monitoring-only sites to PFP terms by offering a fixed price (no more than the total monitoring cost estimated) to get the site cleaned sooner. An example of how to use PFP at monitoring-only sites can be found in the State of Florida's PFP program.
Cultivate A Competitive Set Of PFP Cleanup Contractors
In some states there are cleanup contractors who are strong advocates and marketers of PFP cleanup services. Some national contractors that are not currently doing PFP cleanups in a given state may have an office in another state doing PFP cleanups that could be leveraged. In responsible party-lead cleanups (PDF) (3 pp, 72K, About PDF), the contractor often has an already-established business relationship with the responsible party, especially in multi-site situations. Either the contractor can persuade the responsible party or the responsible party can persuade the contractor to try using PFP cleanup terms.
Through the use of PFP training workshops and administrative incentives (such as reduced required paperwork) more contractors can be recruited to compete for PFP cleanup jobs. One-day PFP training workshops for contractors provide a forum for the exchange of ideas and discussion of concerns. Expedited performance payments may also entice contractors to PFP cleanups.
Grant Only Individual Exceptions To Using PFP Agreements
If the state plans to expand its PFP pilot to encompass the entire scope of its UST cleanup program, make some exceptions that provide for continuing to initiate and use T&M cleanups. Avoiding inappropriate use of PFP agreements is important to gaining acceptance of their use, especially among cleanup contractors. However, the option to use T&M will be perceived as a loophole or reason to delay participation in the PFP pilot phase, unless tough common sense criteria are set to control continued use of T&M contracts. To avoid challenges to PFP contracting, limit T&M contracts to sites where:
- The plume cannot be defined;
- The source of the release/plume is unknown and uncontrolled;
- The cleanup contractor will not be able to assess the cleanup site;
- No attainable cleanup goal can be set for the site (not even an intermediate goal from which natural attenuation could proceed); or
- It is an on-going cleanup that can reach its goal within six months of the current date.
The more PFP contracting is used, the more savings will be realized. Rapidly scaling up the use of PFP, especially by conversion of sites where contamination reduction has stalled, can address concerns for more timely environmental success of cleanups. Contamination can spread at sites with stalled cleanups, increasing the potential for human health and environmental problems. PFP's fast, fixed-price, time-limited cleanups can help mitigate the prospect of third-party litigation stemming from uncontrolled releases and prolonged T&M cleanup work carried out adjacent to or within their property.
Some of the ways to expand a PFP pilot are probably more practical and quicker than others, depending on the state's program. For example, where a full-scale expansion of the PFP pilot would require action by the legislature to provide new statutory authority, it may be much more expeditious to expand PFP incrementally within existing authority in a way that also informs legislative issues. If there are no such barriers and there is strong support from key stakeholders, then expanding PFP from pilot to standard operating procedure should be relatively easy.