Business Reforms Lead to Reduced Army Cleanup Costs

By Randy Cerar

BusinessReforms To expedite the cleanup of contaminated sites, the Army has instituted an array of management reforms that also are saving the service millions of dollars.

The Army’s installation restoration program for active and excess installations began approximately three decades ago with a goal to complete the cleanup of property that had been contaminated from past industrial practices.

The primary objective of the program is to ensure appropriate, cost-effective cleanup is performed so that Army property is safe for human health and the environment.

So far, the Army has achieved 91 percent of that goal at a cost of $5.3 billion.

Before 2003, estimates for completion of cleanup had increased each year and installations had been achieving only 67 to 70 percent of their objectives. The Army recognized that it needed to change its strategy in order to meet Department of Defense goals for completing cleanup at all sites by fiscal year 2014.

The consolidation of management from multiple organizations under a single agency — the U.S. Army Environmental Center — and the development of the Army environmental cleanup strategy in fiscal year 2003, established a clear vision and direction.

One of the benefits of the consolidated program approach was the elimination of layers of management that resulted in the reduction of program management costs. Since the consolidation, USAEC has reduced program management costs from $46.5 million in fiscal 2002 to $34.1 million in fiscal 2006.

The 27 percent reduction over the past four years has resulted in the redirection of approximately $35 million from program management to cleanup projects.

Consolidation of the program has permitted the introduction of new business methods. Performance-based contracting is a case in point. It is a contracting mechanism that requires the contractor to achieve specific remediation objectives, for a fixed price, and based on a performance work statement.

From fiscal year 2002 through 2005, the implementation of performance-based contracting resulted in cost avoidances of more than $215 million during the life of the contracts.

Based on the track record of performance-based contracting so far, USAEC estimates that a minimum of $45 million in costs will be eliminated from the projected contract awards for fiscal year 2006. Because performance-based contracts lock in the costs and completion schedules, they ensure that the Army will not continue to experience program cost escalation and schedule slippages.

USAEC also has made improvements in project execution. In fiscal 2003, the center began negotiating with Army Corps of Engineers districts over contract management and technical support costs that were previously based on set percentages.

The Corps and other executors of cleanup have reduced those costs from $47.5 million in fiscal 2003 to $34.9 million in 2006, which resulted in the reinvestment of $21 million into cleanup projects during the past three years.

Once sites cleanups have been completed, they are placed in “remedial action operations” or “long term management,” to ensure the cleanup efforts have succeeded. The cost to complete these efforts alone is $1.2 billion. There is an initiative under way to use performance-based contracts in these long-term initiatives. These contracts will emphasize long-term management and to ensure cleanup funds are used efficiently.

The objective of the installation restoration program is to complete cleanup of contaminated sites at active and excess installations and bring the program to a safe and effective conclusion.

Cost reductions alone are not efficiencies. Other measures of success are improvements in performance and the reinvestment of cost savings in the investigation and cleanup of contaminated sites.