Underground Storage Tanks
Pay for Performance
in the UST Program
EPA Region 4 UST Section is proud to announce the construction of this web page to keep state agencies and other interested parties up to date with progress reports, updates and news associated with Pay for Performance (PfP) programs in each of our states. Currently, Region 4 can boast as having the most states actively engaged in PfP contracting with a great deal of success in site closures and cost containment. If you are new to the concepts of PfP, this web page will assist with understand some of the basics of the program. If you wish to find out about a particular state PfP program, please contact that state and request additional information.
The Basic Elements of PfP Contracting
- Completed site assessment with pertinent hydrogeological data.
- Delineated dissolved and free product phase plumes
- State guarantees assessment
- Establish baseline concentration levels
- Analytical data should be current (six months or less)
- Analytical testing methods should be consistent throughout
- Determine rebound period (unless directed by statutes)
- Fixed Price for Remedial Action(s)
- No changes orders;
- Price is for remedial actions only;
- Estimating or determining a fixed price;
- Competitive bid solicitations;
- Cost proposals
- Estimating through cost build up methods
- Setting the fixed price
- Negotiated (between state and bidding party)
- Low bid wins the solicitation
- Escape Clauses Examples
- New release;
- Upgradient source encroaches;
- Statutory change in cleanup levels; and/or
- Site assessment incomplete
- Consultant/Contractor accepts more responsibility and Risk
- Performance is measured by the reduction of contamination;
- Performance is rewarded by faster payments once reduction milestones are reached;
- Performance is not hindered by regulatory interference; and
- Performance is rewarded by higher profit margins.
- Establish contaminate reductions milestones, using percentages that are
tied to a payment schedule; as an example
- Fixed Price of $200,000
- 40% payment upon installation and operation of the remedial system (200K * 0.4=80K)
- 20% payment for reduction of contaminate levels by 25%
- 20% payment for reduction of contaminate levels by 50%
- 10% payment for reduction of contaminate level by 70%
- Final payment once rebound period shows no increase above final cleanup goal (state dependent, average time - 3 qtrs.)
- Fixed Price of $200,000
- Confirmed target cleanup levels
- Use RCRA when possible
- Streamlined reimbursement payment schedule
- State must assure mechanism in place for quick pay
- One/two page invoice from consultant
- Establish a time line for cleanup
- Optional depending on state
- Determine if multiple bonding is available (one contractors engages in more than one PfP site cleanup)
- Incorporation the costs of a Corrective Action Plan (CAP)
- Either inclusive of PfP pricing and contract; and/or
- Exclusive using only approved portions of CAP
- States with two separate programs (Technical and Fund)
- Assure cooperative agreement on duties in place
- Assure smooth transfer of information exist between both agencies
- Work together to determine essential duties
- Select contacts from each program to monitor progress
Points to consider before beginning a PfP program
- Have the legal department review all contract language or memorandums of agreements prior to engaging in any pilot study;
- Keep the objectives/elements of PfP in focus;
- Work with the contractor/consultant if or when a problem arises; and develop a list of lessons learned.
- Payment mechanism for faster invoice turnaround must be in place prior to starting program.
- Establish the type of measurement method or technique to be used for baseline and milestone analytical testing.
- Make sure all parties understand the terms of the agreement and the ultimate goal that needs to be attained.
Frequently Asked Questions:
Q. What guarantees are in place that could or would minimize the potential
for a consultant or contractor to "walk" after receiving the bulk
of the payments?
A. Several mechanisms are available such as requiring a performance bond for the price of the project or having a policy that would ban future work for that particular entity.
Q. If a performance bond is required, will the state allow the cost
of the bond to be included in the fixed price?
A. South Carolina currently has this provision and does allow the bid to contain the price for the performance bond. This depends on procedural methods each state's contract office may have in place.
Q. What are the criteria for selecting Key Monitoring Wells?
A. There is no "set number" of wells to consider. Select wells that represent the expanse or spatial distribution of the plume.
Q. What are the criteria for baseline analytical data.
A. Baseline analytical data is the basis for which the PfP contract will be written. This is the concentration level starting point for establishing and measuring reduction of the plume. The data needs to be current, within six months before start of the active remediation.
Q. What wells should be used for baseline sampling?
A. At a minimum, the Key wells plus several non-detect wells upgradient and downgradient. If a PfP contract is written where there is a potential for on-site migration of contamination from an off-site source, make sure a well is positioned between this source and the on-site source.
Q. Should PfP be used for all sites?
A. No, sites that have complex geology, bedrock fracture zones, Karst formation, or other situations where delineation of the plume is marginal, PfP may not be an alternative. However, PfP can be used to perform specific scopes of work where a fixed price (lump sum) contract may be prepared.
Q. What site qualifies for PfP?
A. The key component for a site to be eligible for PfP contracting would be the complete assessment and delineation of the dissolved phase or free product plumes. Size of the plume or accumulation of free product does not hinder contractors from initiating the remediation processes.
Q. How will smaller companies compete with the larger firms that have
better cash flow reserves?
A. Actually, larger companies have to compete with smaller firms simply based on overhead costs. The potential hindrance may be bonding requirements if a smaller company is bidding or working on numerous sites.
Q. Why should consultants be saddled with any risk when the owner/operator
caused the release?
A. Actually, consultants do not take on any additional risks with the exception of setting a fixed price and living up to the contract requirements. Lets face it, petroleum cleanup projects have been ongoing from over 15 years and the technology has greatly increased the capabilities for achieving cleanup goals. Risk Based Decision making rules have also assisted with attaining cleanup goals. The risk the consultant must take now is in their workmanship to simply reduce the contamination levels and then receive payment.