Pay for Performance Almost Two Decades Later – a South Carolina Story

Lee A. Monts, Manager, Corrective Action Section, UST Management Division, Bureau of Land & Waste Management

What are Pay for Performance Cleanups?

Pay for performance cleanups are an alternative way to contract for environmental cleanups. Pay for performance uses economic incentives and market forces to encourage cleanup contractors to keep cleanup expenditures under control and meet cleanup goals as soon as possible. In pay for performance cleanups, contractors are paid a set amount of money for reaching specific contamination reduction goals, which are predetermined by state cleanup experts. – EPA definition.

In Other Words…

No more

“Time and Materials”

approach

for establishing

cleanup costs!

• SC started its Pay for Performance Program in 1996.

• All Active Corrective Actions are advertised in South Carolina Business Opportunities.

• State Lead - handled through the Agency’s Bureau of Business Management and low bid contractor gets the award and an official contract is entered between DHEC and the Contractor.

• Owner/Operator Lead - bidding process establishes the amount and Owner/Operator selects the contractor who will do the work. No contract exists unless the Owner/Operator and the contractor enter into their own contract which DHEC encourages.

Over 650 PfP awards prior to 2012 (approximately 75% State Lead Contracts)

SC’s PfP Program was getting a little rusty…

Reasons: • No contract deadline or incentive to complete.

• Little progress after contractor achieved 90% - 100% milestone reduction payments leading to long term, open-ended contracts because the final 20% was not that important to them so closures were not being met.

• Corrective Action Plans were not getting implemented on time.

• Contractors were not restoring sites to preexisting conditions as required.

• Agency jointly liable for damages if our contractor caused damage at the site.

In 2011, A team of individuals was established to review existing contract language and make revisions. - Senior Technical Staff - Office of General Counsel - Program Management - Procurement Officer

Revisions were drafted and a meeting was conducted with key contractors who had been actively participating in the PfP Program. This meeting was crucial as the contractors provided valuable insight to the problems they encountered while implementing site activities.

Changes to the contract language were implemented in March 2012

The major changes were:

Payment Structure

• Formerly 40% of total award at startup; 40% over three payments (60%, 90% & 100% CoC reduction milestones); 20% at completion.

• Changed to 40% of total award at startup; 30% over three payments (60%, 90% & 100% CoC reduction milestones); 30% at completion.

Verification of Milestones

• 90% and 100% milestones must be maintained by contractor for two consecutive quarters as verified by Department staff prior to payment.

Timely CAP Implementation

• Contractors must implement CAP within 30 days of receipt of the notice to proceed. A penalty of $100 per day will be assessed if the CAP is not implemented within 30 days unless written approval from the SCDHEC is obtained.

Completion Time

• Contracts are now for a period of 5 years and all payment milestones must be achieved within the 5 years. Contract cannot exceed 5 years without written approval from SCDHEC.

Site Restoration

• Added a requirement of photos with date stamp to document site conditions prior to CAP implementation.

• Added liability clause where SCDHEC is not held liable for any damages caused by the contractor.

Sampling & Reporting Schedules

• Sampling and Reporting changed from Quarterly to Semiannually.

• Water Supply Well sampling remains Quarterly.

• Contractors may sample more frequently in order to document the achievement of milestones in order to seek payment.

Other PfP Notables

• Early Completion Incentive = 10% bonus for early completion if cleanup achieved within the Site Incentive Period established by the SCDHEC.

• Cancellation language: 1) unforeseen subsurface conditions as determined solely at the discretion of SCDHEC & 2) the identification of additional Chemicals of Concern from a confirmed release that occurs after the award of the contract and that adversely impacts the corrective action as determined by SCDHEC.

Other PfP Notables

• Define days as Calendar Days versus Business Days

• Area of Concern definition updated to be defined as the horizontal and vertical area in which concentrations of petroleum chemicals of concern have been quantified and/or can be relatively determined by actual data and subsequent interpretation using accepted scientific principles.

• PDF of technical file posted on the web for contractors to view.

Results To Date

• 57 awards since March 2012 in the amount of $9,695,594. Starting to get sites in final verification and close to closure.

• Additional contractors started bidding, meaning more competition and tighter bids in most cases.

• Typically receive between 3 and 8 bids.

• Awards have ranged from $22,768 - $655,000; Average Award = $170,098

Results To Date

• Five year limit has encouraged the use of aggressive and multiple cleanup technologies.

• Greater communication between contractor and Agency project manager.

• Site Incentive Program (started 2010) has boosted closures. To date 8 contracts have received site incentive bonuses totaling $94,970.

QUESTIONS?

Lee Monts (803) 898-0668 or montsla@dhec.sc.gov

Do you PfP?