Federal Financial Assistance Provided to Lancaster, New Hampshire, for Construction of Waste Treatment Facilities

Published by the Government Accountability Office on 1971-12-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             COMPTROLLER      GENERAL     OF THE      UNITED    STATES
                                            WASHINGTON,   D.C.     20548


4P Dear        Mr. Cleveland:

                In accordance with your request of May 26, 1971, we have
        examined into (1) the delays encountered by the town of Lan-
    I   caster,    New Hampshire, in obtaining             Federal financial              assis-   cP.fljj14
/       tance for the construction             of._waste treatment
                                                                                  ___..       and
        (2) the increase in project             construction        costs that occurred
        during the delays.         Our review included discussions                    with offi-
        cials of the Environmental  -s- ,*“,1, Protection     Agency     (EPA,);       the De-
        partment of Housing and Urban Development (HUD); the town of
        Lancaster;     the New Hampshire Water Supply and Pollution                         Con-
        trol    Commission; and Anderson-Nichols               6 Co., Inc.,         the con-
        sulting    engineering     firm for the town of Lancaster.                      We
        examined project       records at EPA headquarters               and its North-
        east Regional Office and at the offices                   of the consulting            en-
        gineering    firm and the Commission.


               In 1959 the town of Lancaster began planning for the
        construction    of waste treatment       facilities,       and in February
        1963 it submitted     final   plans to the Housing and Home Finance
        Agency (predecessor       to HUD) for a project        estimated   to cost
        $706,000.    In November 1963 Lancaster requested Federal fi-
        nancial assistance      for constructing        the facilities,    which were
        then estimated    to cost $766,900.        As of January 1970 the es-
        timated project     cost was $3,467,200.

               During the years 1959 through 1970, Lancaster requested
        financial    assistance  from the predecessor   agencies of EPA and
        HUD and from the Economic Development Administration        (EDA),
        Department of Commerce, and the Farmers Home Administration,
        Department of Agriculture.       Lancaster was awarded grants in
        the amount of $242,400 by EDA in June 1969 and in the amount
        of $2,053,700 by the Federal Water Quality Administration,
        Department of the Interior    --now the Office of Water Programs
        in EPA--in June and August 1970.        (See app. I for a chronol-
        ogy of events leading to Federal approval of a waste treat-
        ment project     for the town of Lancaster.)

                                     50TH   ANNIVERSARY               1921-    1971

          We found that a number of factors    had contributed to the
    delays in Lancaster’s    receiving Federal approval for finan-
    cial assistance,   as follows:

          --The inclusion    in Lancaster’s grant applications   of
             project costs considered as ineligible     for Federal fi-
             nancial assistance.

          --A lack of Federal funds for the HUD accelerated  public
             works and EDA programs at the time Lancaster submitted
             its applications.

          --The   increased   scope of the project       over   the years.

          --The necessity   for    Lancaster’s     dealing   with   several
             Federal agencies.

           An official      of the New Hampshire Water Supply and Pollu-
    tion Control Commission told us that the delays,               in large
    part,   had been caused by a lack of funds under the HUD ac-
    celerated    public works and EDA programs.           He said that HUD
    and EDA officials         had informed the Commission that,       although
    the project      appeared eligible       for Federal financial    assis-
    tance, funds had not been available             at the time that Lancas-
    ter submitted       its applications       but might be available    at a
    later date.        He stated that,     in view of the uncertainty       as to
    the future     availability      of funds under the HUD and EDA pro-
    grams, Lancaster officials          did not know whether they should
    seek alternative        sources of financing      and that consequently
    the project      was delayed.

          Although the Lancaster project    encountered a number of
    delays,   the consulting engineering  firm,  in a May 1970 report
    to Lancaster officials,   stated that the financial   assistance
    provided by EDA:

          I’*** together   with the probability   of increased fi-
          nancial participation    by the State and Federal Pol-
          lution   Control Agencies in other phases of the
          project   has reduced the net cost to the Town in com-
          parison with the benefits     to be gained.”



          The Commission, in a June 22, 1971, letter   to US, stated
    that the treatment   plant then approved for Lancaster was con-
    siderably  superior  to that originally planned.   The Commis-
    sion stated that:

          “Although we realize    the type of treatment      now ap-
          proved for Lancaster is considerably       superior   to the
          original  design, we must again point to the fact
          that the original   plans and specifications       were ac-
          ceptable at an estimated cost in 1964 of $1,050,000
          plus $321,000 more for replacement of sanitary          sewers
          and storm drains.

          “At today’s prices,     the total  of $1,471,000 in 1964
          would be at least $2,500,000,      and with added re-
          quirements,   redesign,    standby power and chlorination,
          we have arrived    at an estimated project    cost of

           In June 1971 a Commission official     told us that other
    projects    in the State had encountered delays similar      to those
    encountered by the Lancaster project.        Although he did not
    cite specific     examples of projects   that had encountered such
    delays,   the official    agreed to provide us with a listing     of
    such projects.      As of November 1, 1971, however, he had not
    furnished    us with the listing.


             The total  estimated cost of constructing        waste treatment
    facilities      for Lancaster increased from $706,000 in 1963 to
    $3,467,200 in 1970.         On the basis of our analysis       of the 1963
    and 1970 cost estimates        [see app. II) and our discussions
    with an official      of the consulting    engineering     firm which
    prepared both cost estimates,        we classified     the $2,761,200
    increase as follows:

               Increase    in project   scope          $1,447,300
               Inflation                                   541,400
               Other                                       772,500


The official   of the consulting engineering   firm           concurred
with the methods we used and our classifications               of the in-
creased costs.

Increased    scope

      As a result      of increased Federal and State requirements
and the addition       of facilities       to serve an industrial       park,
the project   as finally       approved differed      substantially      from
the project   initially      proposed by Lancaster       in 1963.       The Fed-
eral and State pollution           control   agencies required      that the
approved project       include the capacity        to handle storm-water
flows and standby generators            for all pumping stations        and
plant equipment.

       In addition,      the approved project     included the following
items that were not included in the original             proposal:   (11
sewer lines for the industrial           park, (2) a main pumping sta-
tion having a capacity of 26.5 million           gallons a day, rather
than 2.5 million        gallons a day as originally      proposed, and a
proportional       increase in the capacity of the second pumping
station,     (3) a third pumping station,       (4) a 36-inch-force
main line,      (5) chlorination    facilities,     and (6) weirs and
overflows     for storm water.


        According to the Engineering           News Record (which the con-
sulting      engineer told us was the best available            source for
determining       building-cost      increases),   the building-cost     index
increased about 43 percent between January 1963 and December
1969.      In addition,      an official     of the consulting    engineering
firm told us that the cost of pumping stations                 doubled during
the same period.          On the basis of this data, we estimate that
$541,400 of the increased project              cost can be attributed      to


        An official  of the consulting engineering   firm told us
that    about $772,500 of the increased project    cost had been


due to a combination      of increasing     project      scope and under-
estimating   the original    project    costs.      He   said that he could
not segregate these costs.        He told us also         that the 1963 es-
timate did not include all the items in the               1970 estimate,
particularly    legal and other administrative            costs and inter-
est during construction.


       Representatives     of EPA, EDA, HUD, and the Farmers Home
Administration      are members of an interagency           committee which
meets once each month to coordinate              and promote uniformity
in providing      Federal financial       assistance    for water,    sewer,
and waste treatment       projects.       The agencies have adopted a
plan of operation       and coordination        which includes an agree-
ment on the processing        of grant applications.          The agencies
use a standard application          form for financial       assistance
 (1) to facilitate     processing      the applications      and (2) as a de-
vice for determining       the appropriate        Federal agency primarily
responsible     for a particular       project.

      As part of an ongoing review, we are examining into
the coordination   between the various Federal agencies which
provide assistance    for sewer and waste treatment  projects.
At the conclusion    of that review, we expect to issue a re-
port on our findings     to the Congress.

      We plan to make no further   distribution    of this report
unless copies are specifically   requested,     and then we shall
make distribution  only after your agreement has been obtained
or public announcement has been made by you concerning        the
contents of the report.

                                      Comptroller  General
                                      of the United States

The Honorable James C. Cleveland
House of Representatives

                                                             APPENDIX I

                        CHRONOLOGYOF EVENTS




May 1959 to Nov. 1963--The town of Lancaster hired the firm of
           Anderson-Nichols    I!$ Co., Inc.,     to prepare prelimi-
           nary and final   plans for construction           of sewers and
           a waste treatment     facility.      The Housing and Home
           Finance Agency (HHFA) approved an advance of plan-
           ning funds in the amount of $35,000 for preparation
           of preliminary   and final      plans.    In February 1963
           final plans were submitted         to HHFA for a project
           estimated   to cost about $706,000.          Between Febru-
           ary and November 1963, Lancaster changed the pro-
           posed location   for the treatment        project    and the
           estimated   costs increased to about $766,900.

Nov. 19, 1963--HHFA acknowledged receipt      of Lancaster’s   ap-
           plication   dated November 17, 1963, for an accele-
           rated public works (APW) grant in the amount of
           $373,450 for a sewer project.       HHFA stated that
           grant funds requested in approvable applications
           totaled   more than authorizations    provided by the
           APW Act, that approval of this project       was there-
           fore doubtful,    and that it would notify    the town if
           the application    could be approved.

Dec. 2, 1963--HHFA returned      Lancaster’s     application     and noti-
           fied the town that applications          for grants to fi-
           nance projects     involving    interceptor      sewers, treat-
           ment facilities,      and pumping stations        must be sub-
           mitted to the Public Health Service (PHS) of the
           Department of Health,        Education,     and Welfare.    HHFA
           said that,     if APW funds were available,         it would
           consider a grant award for those parts of the sewer
           system not eligible       for PHS assistance,         HHFA
           stated again that, due to a lack of funds, ap-
           proval of this project        by HHFA was doubtful.

                                                             APPENDIX I

Jan.   10 to 15, 1964--Applications   for the construction    of
             Lancaster’s  waste treatment   facilities   were made
             to PHS for an APW grant in the amount of $308,650
             and to HHFA for an APW grant in the amount of

Jan.   20, 1964--PHS notified   Lancaster that its application
             was being reviewed and requested additional      infor-
             mation relating  to the project.

Feb. 7, 1964--HHFA notified   the New Hampshire Water Supply and
           Pollution  Control Commission that the Lancaster ap-
           plication  appeared to include all the costs related
           to the waste treatment   project.     HHFA asked the
           Commission to furnish   an application    including    only
           those costs not included in the application         to PHS.

Feb. 12, 1964--PHS reminded Lancaster that it had not re-
           sponded to PHS’s January 20, 1964, request for            ad-
           ditional  information.

Feb. 17, 1964--Lancaster furnished the information           requested
           by PHS on January 20, 1964.

Feb. 25, 1964--A meeting was held by PHS, the Commission, and
           the consulting        engineering   firm.   PHS took the po-
           sition     that certain     parts of the sewer system were
           ineligible        for Federal assistance    because some pro-
           posed sewer lines would replace existing            lateral
           sewers and others would allow bypassing of sewage
           without      treatment.     PHS stated that an eligible
           project     must result     in operable treatment     facili-
           ties,    or parts thereof.        PHS stated also that it
           would hold the application          pending further     clari-
           fication       from the applicant.

Mar.   2, 1964--PHS advised the Commission, by telephone,          that
             Lancaster’s      application   must be corrected  to comply
             with eligibility       requirements.    The Commission re-
             quested that the application         be returned.

Mar.   25, 1964--The Commission requested HHFA to defer further
             action on Lancaster’s   application    because the vot-
             ers of Lancaster had failed     to authorize  funds
             for construction  of the project.

                                                                  APPENDIX I

    Apr.    20, 1965--The Commission notified     HHFA that the town had
                  voted to proceed with construction        and asked HHFA
                  to reactivate  Lancaster's    application    for APW funds
                  if additional  appropriations    were made for the pro-

    May 26 to July 27, 1965--Correspondence passed between the Com-
               mission and PHS concerning the project     items consid-
               ered ineligible  by PHS. On July 27 the Commission
               requested PHS to return Lancaster's    application  so
               that it could be updated.

    Sept.    1, 1965--The Economic Development Administration (EDA)
                  was established by the Secretary of Commerce.

    Sept.    13, 1965--HHFA notified       Lancaster that APW funds      had
                  been exhausted for       more than a year.

    Oct.    2, 1965--The   Water Quality       Act of 1965 was passed.

    Nov. 9, 1965--HHFA became part of the Department            of Housing
               and Urban Development (HUD).

    Feb. 28, 1966--HUD forwarded Lancaster's      application   for Fed-
               eral aid to the Federal Water Pollution        Control
               Administration   (FWPCA) (formerly    within PHS) which,
               in turn, sent the application      to the Commission
               for necessary action.

    Apr.    13, 1966--Lancaster,      in response to an inquiry   as to the
                  status of the project,       informed HUD that it was
                  not proceeding with the project       because Federal
                  financial    assistance    had not been approved.

    June 10, 1966--FWPCA informed          Lancaster that EDA had assumed
               responsibility  for         the project   and that Lancaster
               should address all          further  correspondence  regard-
               ing the project   to        EDA in Washington, D.C.

    Apr.    25, 1967--Lancaster  inquired of EDA as to the status              of
                  its request for Federal assistance.

    May 4, 1967--EDA informed Lancaster that, if assistance   was
               desired for the sewer system, it should contact the
               EDA area office in Portland,  Maine, to obtain

                                                              APPENDIX I

             application    forms and assistance    in their prepara-
             tion l    Regarding the treatment   facility,      EDA sug-
             gested that Lancaster first      apply for FWPCAassis-
             tance through the Commission and that,         if the
             application    was approved and additional       funds were
             necessary,    Lancaster  could then apply to EDA for a
             supplemental     grant.

May 17, 1967--Lancaster     again advised HUD that it        was not pro-
           ceeding with the project      due to a lack       of Federal
           financial    assistance.

June 1967--The New Hampshire water quality   standards imple-
            mentation plan approved by the State in June 1967
            included the following  schedule for construction
            of the Lancaster waste treatment   facilities.

                      Preliminary  plan--March    1960
                      Final plan- -March 1963
                      Arrange financing--May     1969
                      Complete construction--May      1971

Nov. 13, 1968--The Commission recognized   that many communities
           were ready to proceed with construction     of waste
           treatment  projects but that sufficient    FWPCAfunds
           were not available,   The Commission approved the
           allocation  to the Lancaster project    of $600,000 of
           the $l,OOO,OOO of Federal funds available     to New

Nov. 18, 1968--Lancaster   applied to the Farmers Home Adminis-
           tration   for assistance   in funding new sewers to
           serve a proposed industrial      park. Total cost of
           the project   was estimated   to be $406,000.

Dec. 30, 1968--Lancaster     applied for an FWPCAgrant of
           $589,900 on the basis of an estimated        eligible
           cost of $1,474,800 for constructing      the Lancaster
           project.      (The application indicates   that it was
           received by FWPCAon March 19, 1969 .)

Mar,   24, 1969--FWPCA acknowledged receipt   of the Lancaster    ap-
             plication   and stated that funds were available    but
             that it needed more engineering    information   to de-
             termine whether the interceptor   sewer system was
             eligible  for Federal financial  assistance,

                                                             APPENDIX I

Apr.   1, 1969--The Commission sent FWPCAa copy of the specifi-
             cations and drawings for the Lancaster project          and
             stated that it was requiring    (1) standby power at
             pumping stations  and (2) chlorination      facilities.
             The Commission also said that,     since the prepara-
             tion of the plans and specifications,       the project
             had been expanded to include facilities        to serve
             the north end of the town.    The Commission added
             that it would submit additional     documents concern-
             ing these items at the earliest     possible     date.

May 1 to June 20,      1969--Correspondence    in the Commission’s
           files     indicated    that delays were encountered be-
           cause     of uncertainty    as to whether EDA would have
           grant     funds available    for the project.

June 20, 1969--EDA approved       a grant in the amount of $242,400
           to Lancaster for       sewer construction.

July   18, 1969”-FWPCA, in a letter    to the Commission, summa-
             rized its position   with regard to the eligibility
             of the Lancaster project.       FWPCAreferred     to the
             February 25, 1964, meeting of PHS, the Commission,
             and the consulting   engineering     firm,  during which
             major parts of the project      had been declared ineli-
             gible for Federal financial      assistance   by PHS and
             to a subsequent mutual agreement that further          proc-
             essing of the Lancaster application        was to be sus-
             pended until   an EDA application      had been acted
             upon.    FWPCAsaid that it had been advised of the
             EDA approval of a grant to Lancaster.         FWPCAstated
             that parts of the project     were still    considered in-
             eligible   and asked whether the application        should
             be processed as submitted or whether the town
             wished to revise it,

July   to Dec. 1969--The town had various contacts with the Far-
             mers Home Administration     regarding    its purchasing
             the town’s bonds for financing       the project.    Meet-
             ings were held with officials      of the Commission
             and the consulting    engineering    firm to resolve the
              the ineligibility  of certain    sections    of the sewer

Dec. 1, 1969--FWPCA returned the Lancaster application            to the
           Commission for updating and resubmission.
.                                                                      APPENDIX I

May 12, 1970--The consulting      engineering    firm submitted   to
           Lancaster a report      to be used as a basis for prepa-
           ration  of the final     project   plans and specifications.
           The report   indicated     that both storm-flow     and sani-
           tary wastes would be treated        at the facility    and
           that the effluent     would be chlorinated.

May 27, 1970--Lancaster       applied for a grant from the Federal
           Water Quality       Administration  (FWQA) (formerly

June 12, 1970--The FWQA’s Northeast Regional Office recom-
           mended approval of the Lancaster application.

June 26, 1970--FWQA awarded to Lancaster                 a grant     in the amount
           of $1,767,000.

June 29, 1970--The      Federal     grant   was increased          to $1,867,000.

Aug. 10, 1970--The Federal          grant   was further       increased     to

May 17, 1971--The Commission forwarded final   plans                   to the En-
           vironmental Protection  Agency (formerly                    FWQA).

June 8, 1971--The Environmental   Protection  Agency approved                       the
           plans and authorized    Lancaster to advertise  for                      bids
           for construction   of the project.

Aug. 5, 1971--Bids were opened and contracts                 were awarded for
           the construction of the project.

Sept.   1971--Construction        was started       during   the second week of


                                                                        GENERAL   ACCGUNIING            OFFICE

                                                                 ANALYSIS     OF 1963          AND 1970          COST

                                                           ESTIMATES       FOR A WASTE TREATMENT                   PROJECT

                                                                   FOR LANCASTER,             NEW HAMPSHIRE

                                                                                                                                     Classification         of
                                                                                                                                       cost increases

                                     1963 cost             estimate-         1970 cost          estimate                Infla-               Added       Other                        Total
     Construction        item         Quantity                  Cost         Quantity                Cd                  tion                SCOPE      (note           b)        increases

    Sanitary    and
        storm                          7,275       ft.       $ 61,700       13,795      ft.     $     293,800       $ 26,500             $   205,600    $        -            $          232,100
    Interceptor                      12,630        ft.        184.500       11,100      ft.           434,900         79,300                    -           171,100                      250,400

DIVERSION           CHAMBERS                   2                 8,100                                                                        -8,100               -                      -8,100

     Main                                                     140,000                               1,235,800           279,900              815,900               -              1,095,800
     Other                                     ;                14,000            ;                    262,400            28,000             220,400               -                 248,400

     Lagoons                           20 acres               150,000        20 acres                 380,000            64,500                             165,500                      230,000
     Chlorination                                                                                     169,400               -                169,400             -                       169,400
     Test pits                                 7                    700                                                                          -700                                        -700
     Outfalls                                                   21,000                                126,800               9,000                                965800                  105,800
     Weirs      and over-
        flows      for
        storm      water                                                                                44,800                   -             44,800               -                     44,800

  AND SITEACQUISITION                                         126.000                                 519,300             54,200                            339,100                      393.300

                                                              -2                                $3.467.200          $541,400             $1.447,300     $772.500
                                                                                                                                                         -                    $2.761.200

'Our     analysis      was discussed           with         an official   of      Anderson-Nichols                 6 Co.,  Inc., the engineering                             firm         which
  prepared        both cost estimates,                   and he concurred         with    the methods              we used and our classifications                                  of     cost

    Other       cost    increases    were due            to a combination        of     increasing     project        scope and underestimating     the orig-
    inal      project       costs which   could            not be segregated.             In addition,       the 1963 estimate      did not include      all
     the items        in the 1970 estimate,                 particularly      legal       and other    administrative        costs  and interest    during