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Environmental Remediation Contracting: Summary of a Symposium (1994)

Chapter: REMEDIATION CONTRACTING -- CONTRACTOR'S PERSPECTIVE

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Suggested Citation:"REMEDIATION CONTRACTING -- CONTRACTOR'S PERSPECTIVE." National Research Council. 1994. Environmental Remediation Contracting: Summary of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/9266.
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REMEDIATION CONTRACTING —CONTRACTOR'S PERSPECTIVE

Bruce F. Miller

Perland Environmental Technologies, Inc.

INTRODUCTION:

Five topics impacting Remediation Contracting have been selected for discussion to explain how government contracting is working from the view point of a Remedial Action Contractor whose genesis is in the construction industry:

  • Preparation of the plan and specifications—working moderately well.

  • Procurement method—working very well.

  • Contract type—working moderately well.

  • Risk sharing—working poorly.

  • Protest procedures—working poorly.

PREPARATION OF PLANS AND SPECIFICATIONS:

Design packages prepared by the government are, in general, adequate and complete. Often, the designs are so detailed that little is left to the contractor's imagination and competition is limited to direct cost items such as material, labor, and equipment. Contractor innovations, which have traditionally provided the government with substantial value at a lower price, are usually limited. This may be the nature of a beast which is covered by a blanket of regulation. If the beast does not suffocate, the regulators greatly restrict its movement. Many of the technologies being selected are no longer innovative. The government should increase the use of performance standards over process requirements; innovation and cost reduction will result.

CONTRACTING METHOD:

The government's current blend of full-value contracting using Requests for Proposals and firm-fixed price bids has been about right. There is a movement to drive the procurement method away from full-value toward firm fixed-price bids using either one-step or two-step procurement procedures. This does not give the government the opportunity to obtain the best value. Even though technologies are more standard, the contractor 's approach to project execution varies. That approach should be well

Suggested Citation:"REMEDIATION CONTRACTING -- CONTRACTOR'S PERSPECTIVE." National Research Council. 1994. Environmental Remediation Contracting: Summary of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/9266.
×

understood before contract award. Evaluating personnel is important because today's expanding market is using up the capacity of contractors to adequately staff and execute contracts—with personnel experienced in both construction and hazardous waste management. The contractor 's record of performance on the safety and quality control standards should also be evaluated during the selection process. The evaluation should be a sliding scale, not pass or fail as in the two-step bid. An “A” and a “D” pass, but are not equivalent.

CONTRACT TYPE:

Remedial Action Contractors prefer fixed-price contracting. A combination of lump sum and unit price items should be negotiated before work begins. The large design/construct projects which are now being procured will be cost-reimbursable. Many Delivery Orders have Scopes of Work that are well defined and can be awarded with a firm fixed price. The design/construct contractor can also carve out scopes of work and compete with subcontractors. This will simplify the audits required for reimbursable contracts and permit increased participation by small, disadvantaged, and women-owned businesses. Competition by subcontractors does not mean award to the lowest price; evaluation would include price and other factors, such as a DBE or WBE classification, to determine a fair and reasonable price.

The government has traditionally led the way and set the example for risk sharing between the construction contractor and the owner. Industry has often reluctantly followed the examples of government. The shoe is now on the other foot. Private industry is leading the government in fair risk sharing between the owner and the Remedial Action Contractor. The three mechanisms for risk sharing—bonding, insurance and indemnification—must be balanced so that the playing field is level for all contractors.

  • Bonding. Bonds remain very difficult to get for Remedical Action Contractors. Bonding arrangements are unavailable for the vast majority of construction contractors who wish to enter the Remedial Action field because of the sureties' reluctance to issue a bond. For many, the premium is expensive if a bond is issued. The sureties' reluctance is based on their evaluation of the adequacy of indemnification and the availability of insurance.

  • Indemnification. CERCLA's immunity from strict liability is inadequate except for the Risk-O-Philes. Hazardous waste remedial contracting is the Risk-O-Phile's least risky business. The Risk-O-Philes are the contractors that own hazardous waste landfills, transport, treat, store and dispose of hazardous waste and are engaged in other businesses which are much more risky than the cleanup of a well-defined hazardous waste site. The immunity from strict liability does not cover the catastrophic third party liability suit. This is the traditional construction contractor' s worst nightmare. Indemnification to cover negligence authorized by SARA is not required in general construction, because adequate insurance coverage is readily available at reasonable costs to protect the contractor. This is not true for the Remedial Action Contractor. Government indemnification and insurance should complement each other. The insurance available on the market could be improved, but is

Suggested Citation:"REMEDIATION CONTRACTING -- CONTRACTOR'S PERSPECTIVE." National Research Council. 1994. Environmental Remediation Contracting: Summary of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/9266.
×

currently more comprehensive than the indemnification/immunity offered by the government. Insurance would be used before indemnification. Government indemnification would be used and is needed to cover the contractor's losses.

  • Insurance. The availability of only claims-made insurance in limited amounts is unsatisfactory to cover the acts of a Remedial Action Contractor. Project-specific limits of $25 million is the capacity of the current market; $20 million is the approximate limit for blanket coverage. After risk assessment, these coverages are judged inadequate by the traditional construction contractor. The price for his insurance is too high for the smaller contractor wishing to enter the remedial action market. Conversely, the Risk-O-Philes have managed to arrange insurance fronts which can issue insurance certificates at very little costs to them. Requiring Contractor's Pollution Liability written by a rated underwriter in each remedial action contract, supplemented by government indemnification adequate to cover the contractor's exposure, would open competition. Insurance underwriters would be qualified using a system similar to that for qualifying sureties under the Miller Act.

PROTEST PROCEDURES:

The cost of a stamp, 29 cents, plus the costs to pursue a bold protest are a very inexpensive way to prevent timely execution of government contracts. The protest procedure is very costly to the government and to the contractor who defends the protest. The costs to pursue protests are worth every penny and much more to a contractor who wins. The recent increase in protests from awards of remedial action contracts has incorrectly been explained by the use of the full value contracting method. Eliminating that method is not the answer. The answer is a procedure that makes the contractor think twice before mailing the protest. As an example, a bond of one percent of the contract price, which is given to the winning contractor after the protest has been decided, could be a way to make company executives ponder a little more carefully the validity of their case before mailing a letter. Other methods are available to eliminate protests based on such frivolous arguments as “my price was lower,” “misleading information was given during the Pre-bid Conference,” “there was a secret evaluation criteria,” or “no one explained each evaluation which was not a maximum. ” Reducing protests by moving from full value contracting to bidding is the wrong solution.

Suggested Citation:"REMEDIATION CONTRACTING -- CONTRACTOR'S PERSPECTIVE." National Research Council. 1994. Environmental Remediation Contracting: Summary of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/9266.
×
Page 30
Suggested Citation:"REMEDIATION CONTRACTING -- CONTRACTOR'S PERSPECTIVE." National Research Council. 1994. Environmental Remediation Contracting: Summary of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/9266.
×
Page 31
Suggested Citation:"REMEDIATION CONTRACTING -- CONTRACTOR'S PERSPECTIVE." National Research Council. 1994. Environmental Remediation Contracting: Summary of a Symposium. Washington, DC: The National Academies Press. doi: 10.17226/9266.
×
Page 32
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