Pay-For-Performance in Oklahoma The Oklahoma Experience Presented by: Richard McKay Petroleum Storage Tank Division

Do you have a stalled cleanup ?

We realized we had many…. and here’s how!

Conducted $100,000 Case Reviews n The Football Field analogy. n Paying out money with little or no environmental results. n Reviewed our accountability. n We looked at Pay- For-Performance.

ACCOUNTABILITY As a Regulatory Agency we have a fiduciary responsibility: n To safeguard public health, safety & the environment. n To safeguard public money.

Why We Chose Pay-For-Performance n Needed a way to guarantee environmental results and move away from time & materials projects. n Wanted a method to impose cost control so total costs would not exceed the $1.MM cap per site. n Wanted a way to reduce disallowances. n Wanted a way to focus on results...not paperwork. n Wanted a way to shorten time to pay claims. Needed way to better relations between the tank owner, consultant and regulatory/fund. Needed way to better relations between the tank owner, consultant and regulatory/fund.

We Began to Sign P-F-P Contracts n We took a voluntary approach beginning in 1996 with Consultants willing to take a risk and willing to guarantee environmental results. –Committed to 3 year contracts with a 2 warranty. –Payments are made based on attaining milestone contamination reductions. n Tank Owners supported P-F-P because: –Site restoration money was encumbered. –They wanted Consultants who were willing to take a risk and guarantee their work.

Results of P-F-P: Win-Win-Win n Our difficult sites are being cleaned because: –Better designed RA systems are being installed. –Consultants are guaranteeing results. n Site costs are coming down because: –Emphasis is on closing the site to make money rather than keeping site open to make money. n Attained cost control by using Tank RACER 99 to negotiate a fixed price to remediate a site. n Site remediation costs are encumbered. n Funds are paid only when milestones are achieved.

P-F-P Program Results (cont’d) n Consultant disallowances reduced to almost zero. n Tank owners do not have disallowances. n Paperwork has been substantially reduced. n Time to pay has reduced to a few days. n Achieved collaboration between all parties. n The Consultant can make a reasonable profit and take pride in a job well done. n The Tank Owner is happy - He knows the cost and when he can get back to work.

Other Results … Not Counted On n Pre-approval process became mandatory. n UST Advisory Council composed of Consultants and Tank Owners adopted: –Unit Costs for all work through site delineation. –Tank RACER 99 to price site remediation. n Pre-approvals requested faster than money comes in. n Hold cooperative Consultant/State training sessions. n Technical staff has more time to visit sites and track site remediation progress.

How does the P-F-P process work? n Set clean-up levels based on Tier I or Tier II report. n Submit Remediation Technology Report. n Submit final Remedial Action Plan. n Submit Pay- For-Performance proposal. n Look at clean-up cost in $ / yd 3. n Compare to similar sized systems & technology. n Run Tank RACER 99 to determine reasonable cost. n Negotiate the final set contract price and terms. n Sign the Pay-For-Performance contract.

P-F-P Process Cont’d. n Next... the Consultant installs the RA system. n Baseline groundwater samples are collected from pre-selected “Key Monitoring Wells” 2 weeks prior to system start-up. n Payments are made to the Consultant when decreases in groundwater contamination called “Milestones” are achieved. n Once all Milestones are achieved and contamination levels remains below “clean-up levels” for 6 months in all site wells the final payment is made.

Progress & Results

AS / SVE System Progress

Potential Financial Savings

Summary of Why We Chose Pay-For-Performance n A CCOUNTABILITY H AS B EEN E STABLISHED. n E NVIRONMENTAL R ESULTS A RE G UARANTEED A ND A RE B EING A CHIEVED. n R EMEDIATION C OSTS A RE R EASONABLE. n T ANK O WNERS A RE W ANTING I T. T HANK Y OU