At least three companies linked by the Environmental Protection Agency to hazardous waste sites are being paid by the government to clean up their own sites, according to an investigation by the Center for Public Integrity.
While the EPA did not make all of its procurement records available, the Center found that the agency awarded contracts to Lockheed Martin Corp., Halliburton Company and a subsidiary of Tyco International Ltd. to work on four Superfund sites where at least one company was involved as a “potentially responsible party,” according to EPA documents.
The Center sent the firms copies of EPA documents showing the connections, and all three confirmed that each was possibly responsible for pollution at one site, and in one case at two sites. In all cases, other companies also are connected by the EPA to the sites as possible polluters.
The EPA said it is on the lookout for conflicts of interest. “As a regulatory agency, EPA has adopted a very strong position on conflicts of interest and monitors conflict issues both before and during contract performance and takes appropriate action as necessary,” Jennifer Wood, an EPA spokeswoman, said in a written response to the Center.
Most regional EPA records not made availableBut environmental watchdogs say that this practice deserves more scrutiny. “It doesn’t seem right to allow a company that polluted some site to then secure contracts that would earn them money from the taxpayers to clean up the same mess,” said Tyson Slocum, director of the energy program at Public Citizen, a nonprofit public interest group.
Lockheed Martin was the EPA’s top contractor overall from fiscal years 1998 to 2005, receiving almost $625 million, according to analysis for the Center by the National Institute for Computer-Assisted Reporting. EPA data show Lockheed has several contracts for work at 17 Superfund sites in the EPA’s Region 3. At least three of the contracts were for the Spectron Inc. site in Elkton, Md., and the Boarhead Farms site in Bridgeton Township, Pa., where Lockheed, through its subsidiaries, also is linked as one of many potential responsible parties. In all, the EPA links the company to 19 of the 1,304 active and proposed sites on the Superfund list.
In 1997, the EPA notified Lockheed Martin Tactical Systems Inc., a subsidiary of Lockheed Martin, that it considered the company a potentially responsible party for the pollution at the Boarhead Farms Superfund site. Contacted by the Center, Lockheed Martin officials confirmed being connected to the site but declined to comment on the cleanup contracts.
Halliburton is listed as a cleanup contractor at Fike Chemical Inc., a Superfund site in Nitro, W.Va. — the same site where the EPA says the company is possibly responsible for the pollution. In all, Halliburton is listed as a contractor on at least a dozen Superfund sites in the EPA’s Region 3.
In Tyco International’s case, its subsidiary, Earth Tech, is among the EPA’s top 10 contractors between 1998 and 2005. One site covered in one of Earth Tech’s contracts is the American Chemical Service site in Griffith, Ind. Three other Tyco subsidiaries are listed by the EPA as possible polluters on the site.
A spokesman for Earth Tech declined to comment.
It is not known whether companies other than Lockheed, Halliburton and Earth Tech are receiving contracts to clean up Superfund site pollution that they might have helped create. The Center filed a Freedom of Information Act request for Superfund documents from all 10 EPA regions, but EPA officials provided documents only for Regions 1, 2, 3 and 7. The Center’s FOIA was denied by Region 9, and the remaining five regions did not respond. (The FOI law generally requires a response within 20 business days.)
39% of EPA contracts are no-bid
Lockheed Martin also tops the list of companies that were awarded no-bid contracts by the EPA between 1998 and 2005. During that time, the prominent defense contractor received $500 million, or 80 percent of its $625 million in EPA contracts without full and open competition.
Halliburton also received a sizable share of EPA contracts, including $48 million in no-bid contracts between 1998 and 2005. The defense contractor received 68 percent of its EPA contracts without competition during that period.
Halliburton officials did not respond to requests for comment.
Overall, in the study period, the EPA awarded more than $3.5 billion in contracts without competitive bidding, according to a Center study of EPA contracting records provided by Investigative Reporters and Editors Inc.
Such no-bid contracts accounted for a total of 39 percent of all contracts awarded by the EPA during that period. By comparison, the Center found that the Department of Defense awarded about the same percentage of no-bid contracts, or 40 percent.
Federal law encourages competitive bidding in an effort to find the best products and services at the lowest cost. Experts agree that if the contracts are competitive, companies are forced to hold down costs.
“If there is no incentive to [hold down cost] as in no-bid contracts, it works the other way, where contractors feel ‘let’s see how we can make the most of this contract,’” said Charles Tiefer, a law professor at the University of Baltimore and co-author of the casebook Government Contract Law.
‘Cost-plus’ contracts encourage spending
According to EPA documents, at least five of the Lockheed Martin contracts that include sites where the company is linked by the EPA as a “potentially responsible party” are “cost plus” contracts.
A cost plus contract reimburses a contractor for expenses incurred while carrying out the contract plus a guaranteed set profit. Cost plus contracts can create an incentive for contractors to spend liberally since their profit will also increase. During the period of the study, the EPA gave out more than 60 percent of its contract dollars in cost plus contracts, the analysis made by the National Institute for Computer-Assisted Reporting found.
CH2M Hill, one of the EPA’s top 10 contractors, received more than $330 million in EPA contracts between 1998 and 2005, with 80 percent of its contracts being cost plus. Halliburton has received almost all of its contracts, worth close to $71 million, through cost plus contracts from the EPA.
‘Partnering’ with small businesses
Other companies are tapping into multimillion-dollar government contracts to clean up Superfund sites by taking advantage of partnerships with firms eligible for small business contracts with the EPA, which oversees the Superfund program.
In 1996, when Earth Tech, which specialized in environmental cleanup, was acquired by Tyco International, it was eligible to bid for small-business contracts.
But Earth Tech now employs at least 8,000 workers, far beyond the Small Business Administration’s 500-employee limit for these kinds of environmental remediation contracts. The SBA’s regulations have generally allowed companies to keep the valued “small business” designation for the length of existing contracts, in some cases for up to 20 years.
Although this is not illegal, experts such as Tiefer said it defeats the purpose of reserving contracts for small businesses. “There has been a general problem government-wide with the abuse of small business exceptions,” Tiefer said.
Earth Tech won EPA contracts worth $1.7 million in 2003 that were reserved for small, minority-owned or disadvantaged businesses. In all, the company received more than $260 million in EPA contracts between 1998 and 2005. Earth Tech’s parent company, Tyco, is linked as a polluter to at least 19 Superfund sites.
Lloyd Chapman, chairman of the American Small Business League, said Tyco is one of many large companies that use methods such as partnering or acquiring small businesses to take advantage of contracts reserved for small businesses. “Well over 50 percent in all federal [small business] contracts go to bigger businesses, and this is as recent as 2004,” he said.
Large Superfund contractors also sometimes partner with smaller firms to vie for small business contracts. For instance, last year, Tetra Tech, which received the third-largest amount of money in EPA contracts between 1998 and 2005, won two 10-year Superfund contracts reserved for small businesses. To receive the contracts — together worth almost $600 million — it partnered with smaller companies, such as Pacific Western Technologies Ltd and the Sullivan International Group.
Tetra Tech employed as many as 7,200 workers in 2005, according to its annual report.
“They call it ‘partnering.’ The word I would use is ‘front,’” Chapman said. In such cases the work is often done by the large business, and the small business gets a minuscule amount of the profit, he said.