. COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON, D.C. 20548 B-166506 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 -..w.“.“_Y~^“.facilities _..I,_.“.. ___.. 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. PROJECT DELAYS 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 . B-166506 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.” 2 . B-166506 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 $4,100,000.” 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. INCREASED PROJECT COSTS 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 $2,761,200 B-166506 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. Inflation 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 inflation. Other An official of the consulting engineering firm told us that about $772,500 of the increased project cost had been 4 B-166506 due to a combination of increasing project scope and under- estimating the original project costs. He said that he could not segregate these costs. He told us also that the 1963 es- timate did not include all the items in the 1970 estimate, particularly legal and other administrative costs and inter- est during construction. FEDERAL COORDINATION Representatives of EPA, EDA, HUD, and the Farmers Home Administration are members of an interagency committee which meets once each month to coordinate and promote uniformity in providing Federal financial assistance for water, sewer, and waste treatment projects. The agencies have adopted a plan of operation and coordination which includes an agree- ment on the processing of grant applications. The agencies use a standard application form for financial assistance (1) to facilitate processing the applications and (2) as a de- vice for determining the appropriate Federal agency primarily responsible for a particular project. As part of an ongoing review, we are examining into the coordination between the various Federal agencies which provide assistance for sewer and waste treatment projects. At the conclusion of that review, we expect to issue a re- port on our findings to the Congress. We plan to make no further distribution of this report unless copies are specifically requested, and then we shall make distribution only after your agreement has been obtained or public announcement has been made by you concerning the contents of the report. Comptroller General of the United States The Honorable James C. Cleveland House of Representatives 5 APPENDIX I . GENERALACCOUNTING OFFICE CHRONOLOGYOF EVENTS LEADING TO FEDERAL APPROVAL OF A WASTETREATMENTPROJECT FOR THE TOWNOF LANCASTER, NEWHAMPSHIRE May 1959 to Nov. 1963--The town of Lancaster hired the firm of Anderson-Nichols I!$ 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. 1 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 $42,500. 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. 2 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- gram. 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 3 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 Hampshire, 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, 4 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 system, 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 FWPCA). 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 $2,053,700. 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 September. 6 APPENDIXII 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 SEWERS AND MANHOLES: 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 PUMPING STATIONS: Main 140,000 1,235,800 279,900 815,900 - 1,095,800 Other ; 14,000 ; 262,400 28,000 220,400 - 248,400 TREATMENT FACILITIES: 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 TECHNICAL SERVICES, CONTINGENCIES, AD- MINISTRATIVE COSTS, AND SITEACQUISITION 126.000 519,300 54,200 339,100 393.300 $706,000 -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 increases. b 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 construction.
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)