Cost ControlCost ControlDuring an Emergency ResponseDuring an Emergency Response

Floyd R. Permenter, CPA

281 610 4737

Objectives of TrainingObjectives of Training

• Prepare members of the Emergency Prepare members of the Emergency Response Team to manage the commercial Response Team to manage the commercial aspects of an OSRO contractaspects of an OSRO contract

• Identify contractual terms most often Identify contractual terms most often disputeddisputed

• Discuss ways and means that will assist in Discuss ways and means that will assist in maintaining reasonable and necessary costsmaintaining reasonable and necessary costs

• Validate the necessity of the Finance Section Validate the necessity of the Finance Section to gain support and develop a close working to gain support and develop a close working relationship with members of other Sections, relationship with members of other Sections, (especially the IC and Operations) to (especially the IC and Operations) to successfully perform the necessary duties successfully perform the necessary duties and responsibilitiesand responsibilities

The Cost Control ProcessThe Cost Control Process

During an incident, the highest priorities During an incident, the highest priorities include:include:

SafetySafetyContainmentContainment

Cleanup/Remediation Cleanup/Remediation

However, these priorities do not preclude However, these priorities do not preclude the Team from making sound business the Team from making sound business decisions relative to financial issues.decisions relative to financial issues.

• OSRO need to earn a reasonable profitOSRO need to earn a reasonable profit

• Finance Section must have support of IC and Finance Section must have support of IC and Operations Section, especially Division Operations Section, especially Division Supervisors, without becoming a burdenSupervisors, without becoming a burden

• The OSRO’s daily worksheet must be reviewed The OSRO’s daily worksheet must be reviewed daily by both the Division Supervisors and daily by both the Division Supervisors and Finance Section. Additionally, Finance Section Finance Section. Additionally, Finance Section must reconcile and resolve all significant must reconcile and resolve all significant discrepancies with OSRO’s on a daily basisdiscrepancies with OSRO’s on a daily basis

• All field negotiations with OSRO’s must be All field negotiations with OSRO’s must be documented in writingdocumented in writing

Cost Cost ControlControl ConsiderationsConsiderations

Topics of DiscussionTopics of Discussion• Daily Cost EstimateDaily Cost Estimate

• Daily OSRO meetingDaily OSRO meeting

• Division Supervisor’s review of OSRO dailiesDivision Supervisor’s review of OSRO dailies

• Application of ratesApplication of rates

• Equipment chargesEquipment charges

• Labor chargesLabor charges

• Source and price of materials and suppliesSource and price of materials and supplies

• Third-party rentalsThird-party rentals

• OSRO’s management structureOSRO’s management structure

• Decontamination proceduresDecontamination procedures

• Waste disposal financial considerationsWaste disposal financial considerations

• Final invoice reviewFinal invoice review

• Review of potential savings and items most Review of potential savings and items most often disputedoften disputed

Daily Cost Estimate

• OSRO Equipment charges OSRO Equipment charges

• OSRO Labor chargesOSRO Labor charges

• OSRO Material and supply chargesOSRO Material and supply charges

• Third party chargesThird party charges

• Material and suppliesMaterial and supplies

• Spill Management TeamSpill Management Team

• Waste disposalWaste disposal

• Federal, State and Local agenciesFederal, State and Local agencies

Excludes: Excludes:

Fines, penalties, legal , claims and NRDA costsFines, penalties, legal , claims and NRDA costs

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Daily OSRO MeetingDaily OSRO MeetingINFORM ALL OSROs THAT :INFORM ALL OSROs THAT :

• Unless specifically authorized by IC, all OSROs should Unless specifically authorized by IC, all OSROs should contract directly with RP to avoid a markupcontract directly with RP to avoid a markup

• RP must approve procurement of all resourcesRP must approve procurement of all resources• Daily documentation requirements include daily worksheet , Daily documentation requirements include daily worksheet ,

“tailgate safety” meeting sign-in sheet and per diem log“tailgate safety” meeting sign-in sheet and per diem log• Cap on time for charges of certain equipment after payoutCap on time for charges of certain equipment after payout• Labor charges limited to hours of operational period, unless Labor charges limited to hours of operational period, unless

RP pre approvesRP pre approves• Ratio of Supervisory ratios (depends on site conditions)Ratio of Supervisory ratios (depends on site conditions)• Transportation equipment ratiosTransportation equipment ratios• Source of material usage (Central Warehouse)Source of material usage (Central Warehouse)• One-time charges for hand tools and one-in and one-out One-time charges for hand tools and one-in and one-out

charge for boom and boat trailerscharge for boom and boat trailers• Personnel demob time limited to regular time ratePersonnel demob time limited to regular time rate• First eight hours of all shifts are charged at regular timeFirst eight hours of all shifts are charged at regular time

PROVIDE EACH DIVISION SUPERVISOR WITH A LIST OF AGREED ITEMSPROVIDE EACH DIVISION SUPERVISOR WITH A LIST OF AGREED ITEMS..

Division Supervisor’s Review Division Supervisor’s Review of OSRO Daily Worksheetof OSRO Daily Worksheet

• Sign the Dailies “subject to audit” only after Sign the Dailies “subject to audit” only after comparison to IAP resource requirements and comparison to IAP resource requirements and careful review and correction of the items actually careful review and correction of the items actually used onsiteused onsite::

– Equipment types and quantitiesEquipment types and quantities– Personnel head countsPersonnel head counts– Material and supply usageMaterial and supply usage– Rental equipment on siteRental equipment on site

• Prior to signing, correct the Daily ,and make notes Prior to signing, correct the Daily ,and make notes on the Daily , relative to all agreements on the Daily , relative to all agreements negotiated with the OSRO, discrepancies with negotiated with the OSRO, discrepancies with personnel head counts, material usage and personnel head counts, material usage and equipment on standby or inoperableequipment on standby or inoperable

Application of RatesApplication of Rates

• Daily (easier to document Daily (easier to document and most common)and most common)

• Weekly (financially the Weekly (financially the best)best)

• Standby (1/2 of daily rate)Standby (1/2 of daily rate)• Hourly (avoid , difficult to Hourly (avoid , difficult to

control)control)• Zero (for boom/boat Zero (for boom/boat

trailers, allow one day in trailers, allow one day in and one day out)and one day out)

• Pay out (esp. containment Pay out (esp. containment boom)boom)

Equipment ChargesEquipment Charges• Containment Boom (limit number of days after Containment Boom (limit number of days after

payout or obtain a significant rate reduction)payout or obtain a significant rate reduction)• Mobile command trailers (must be approved by Mobile command trailers (must be approved by

IC)IC)• Communication equipment (necessary & Communication equipment (necessary &

authorized)authorized)• PU as transportation vehicles (use vans /buses PU as transportation vehicles (use vans /buses

for personnel)for personnel)• ATV’s (excessive rates, consider purchase or ATV’s (excessive rates, consider purchase or

rental from local rental company)rental from local rental company)• One-time charge for hand tools, boom anchors, One-time charge for hand tools, boom anchors,

boom lights, computers, cell phones boom lights, computers, cell phones • Limit charges for boom and boat trailers to one Limit charges for boom and boat trailers to one

in and one out (0 $ rate for remaining on site)in and one out (0 $ rate for remaining on site)• Response vessels (size and determine if charge Response vessels (size and determine if charge

for crew is included in day rate)for crew is included in day rate)

Labor ChargesLabor ChargesCertain equipment rates include charge for Certain equipment rates include charge for

operator, i.e. vac truckoperator, i.e. vac truck

• PPE - negotiate a charge per man/day with no PPE - negotiate a charge per man/day with no charge for supervisors and admin personnelcharge for supervisors and admin personnel

• Limit time to operational period for all techs and Limit time to operational period for all techs and operators plus allowance for travel time if operators plus allowance for travel time if appropriateappropriate

• Per Diem – reduce OSRO charge by the value of Per Diem – reduce OSRO charge by the value of meals furnished by RPmeals furnished by RP

• Qualitative analysisQualitative analysis – Supervisor ratiosSupervisor ratios– Operators compared to equipment being operatedOperators compared to equipment being operated– PPE compared to field personnel PPE compared to field personnel – Number of cell phones and hand held radiosNumber of cell phones and hand held radios– Ratio of personnel to PU’s charged (vans should be used Ratio of personnel to PU’s charged (vans should be used

for transportation)for transportation)

Source and Price of Materials Source and Price of Materials and Suppliesand Supplies

• After the OSRO’s materials that they After the OSRO’s materials that they normally warehouse and initially deliver normally warehouse and initially deliver are depleted, and prior to the OSRO are depleted, and prior to the OSRO ordering truck loads of material from the ordering truck loads of material from the distributor for use onsite, the RP should distributor for use onsite, the RP should either:either:– Purchase materials and supplies directly from Purchase materials and supplies directly from

the manufacturer/distributor orthe manufacturer/distributor or– Solicit bids from the OSRO’s on a cost-plus Solicit bids from the OSRO’s on a cost-plus

basis (typically cost plus 15 %) and appoint the basis (typically cost plus 15 %) and appoint the successful bidder as sole source suppliersuccessful bidder as sole source supplier

• In any event, never allow OSRO’s to sell In any event, never allow OSRO’s to sell materials and supplies among each othermaterials and supplies among each other

Third-Party RentalsThird-Party Rentals

• Logistics Section personnel should arrange for Logistics Section personnel should arrange for local rental of all third-party rental equipment local rental of all third-party rental equipment for the account of the RP, otherwise:for the account of the RP, otherwise:

• OSROs will rent equipment locally, and at a OSROs will rent equipment locally, and at a minimum, mark up the invoice or charge rates minimum, mark up the invoice or charge rates based on their higher rate schedule if they have based on their higher rate schedule if they have the equipment listedthe equipment listed

• The RP Division Supervisor should identify and The RP Division Supervisor should identify and document on the OSRO’s Daily all third-party document on the OSRO’s Daily all third-party rental equipment on siterental equipment on site

OSRO Management OSRO Management Structure and Accounting Structure and Accounting

SystemSystem• Limit highest rate for OSRO management Limit highest rate for OSRO management personnel to supervisor rate, no project personnel to supervisor rate, no project mgrs, unless specifically approved by the mgrs, unless specifically approved by the IC, (RP is providing project mgrs thru the IC, (RP is providing project mgrs thru the SMT)SMT)

• Confirm with RP Safety Director that the Confirm with RP Safety Director that the number of OSRO safety personnel is number of OSRO safety personnel is reasonable and necessary (RP Safety might reasonable and necessary (RP Safety might not be aware of counts or hourly rates)not be aware of counts or hourly rates)

• Limit charges for OSRO personnel Limit charges for OSRO personnel offsiteoffsite• Ascertain that the number of personnel Ascertain that the number of personnel

required to administer the accounting required to administer the accounting system is reasonable (The OSRO personnel system is reasonable (The OSRO personnel might be simply be charging the RP to might be simply be charging the RP to prepare the OSRO’s invoice) OSRO should prepare the OSRO’s invoice) OSRO should not charge for systemnot charge for system

• Consider imposing a penalty on the OSRO Consider imposing a penalty on the OSRO for late daily worksheetsfor late daily worksheets

Participation in Decon Participation in Decon ActivitiesActivities

• Decontamination planDecontamination plan– Site(s)-negotiate rental of site earlySite(s)-negotiate rental of site early– Establish Security and Control for each item, Establish Security and Control for each item,

using check-in and check out system ( RP rep using check-in and check out system ( RP rep must maintain and monitor activity on site at all must maintain and monitor activity on site at all times)times)

– Establish priority, cleaning large dollar itemsEstablish priority, cleaning large dollar items first first

• Decontamination documentationDecontamination documentation– Accurate completion of forms by RP repAccurate completion of forms by RP rep– Document condition, including damage, if any, Document condition, including damage, if any,

with photos with photos – Notify owner when equipment deconned (sets Notify owner when equipment deconned (sets

the date charges cease, after allowing demob the date charges cease, after allowing demob time)time)

– Signature of owner or authorized rep for releaseSignature of owner or authorized rep for release

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Waste Disposal Financial Waste Disposal Financial ConsiderationsConsiderations

• Obtain estimated quantity and characteristic of waste Obtain estimated quantity and characteristic of waste productsproducts

• Determine what methods of disposal are permitted by RP Determine what methods of disposal are permitted by RP company policycompany policy

• Contract directly with disposal siteContract directly with disposal site

• Arrange for storage and transportation of both solids and Arrange for storage and transportation of both solids and liquids directly with owners of equipmentliquids directly with owners of equipment

• Contractual terms, especially indemnity clause, should be Contractual terms, especially indemnity clause, should be approved by legal staffapproved by legal staff

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Final Invoice ReviewFinal Invoice Review

• Invoice ReviewInvoice Review– Documents required to facilitate review of invoicesDocuments required to facilitate review of invoices– Invoice supportInvoice support– Area/Division Manager’s reviewArea/Division Manager’s review

• Invoice ReconciliationInvoice Reconciliation

• Release AgreementRelease Agreement

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• Based on size of spill, renegotiate rates considering Based on size of spill, renegotiate rates considering “payout” of equipment within the first three days“payout” of equipment within the first three days

• Require daily submission of complete Dailies, including Require daily submission of complete Dailies, including “tail-gate” safety meeting sign-in sheets and per diem “tail-gate” safety meeting sign-in sheets and per diem logs. Do not allow the primary OSRO to “stack” OSROs logs. Do not allow the primary OSRO to “stack” OSROs and charge a markup on subsand charge a markup on subs

• For large incidents, to reduce cost AND gain control of For large incidents, to reduce cost AND gain control of material and supplies used, the RP should purchase all material and supplies used, the RP should purchase all material and supplies directly from the manufacturer or material and supplies directly from the manufacturer or distributor (CENTRAL WAREHOUSE) or,distributor (CENTRAL WAREHOUSE) or,

• At a minimum, allow only one OSRO to furnish material At a minimum, allow only one OSRO to furnish material and supplies onsite based on a competitive cost plus bidand supplies onsite based on a competitive cost plus bid

• Identify items not requiring daily use and limit charges Identify items not requiring daily use and limit charges to one day in and one day out, esp., boom trailers, boat to one day in and one day out, esp., boom trailers, boat trailerstrailers

• Cap the number of days that charges are allowed, i.e. cell Cap the number of days that charges are allowed, i.e. cell phones, computers, boom anchors and lights, hand tools phones, computers, boom anchors and lights, hand tools

• All “local” equipment rentals should be procured through All “local” equipment rentals should be procured through Logistics for the account of the RP to avoid a markupLogistics for the account of the RP to avoid a markup

Review of Potential SavingsReview of Potential Savings

• Late, incomplete or unapproved daily worksheets Late, incomplete or unapproved daily worksheets

• Hourly rates, especially 24 hours per dayHourly rates, especially 24 hours per day

• No reduction of equipment rates after payoutNo reduction of equipment rates after payout

• OSRO personnel hours in excess of operational periodOSRO personnel hours in excess of operational period

• Personnel charges based on excessive supervisor ratiosPersonnel charges based on excessive supervisor ratios

• Number and definition of holidays and corresponding pay rateNumber and definition of holidays and corresponding pay rate

• Excessive charges for cost plus rental equipment (OSRO charges Excessive charges for cost plus rental equipment (OSRO charges rate schld vs. actual cost plus based on rental co. invoice) rate schld vs. actual cost plus based on rental co. invoice)

• Excessive no of pickup used for transportation vs. vansExcessive no of pickup used for transportation vs. vans

• Excessive charges for AVT’s - quantities and ratesExcessive charges for AVT’s - quantities and rates

• Duplicate charges for supplies –sale of same item among OSRO’sDuplicate charges for supplies –sale of same item among OSRO’s

• Charges for OSRO’s management structure. Limit the highest Charges for OSRO’s management structure. Limit the highest rate for OSRO personnel at their supervisor rate rate for OSRO personnel at their supervisor rate

• Meals paid by RP without reduction in OSRO per diem chargesMeals paid by RP without reduction in OSRO per diem charges

• Unauthorized charges for radios and command trailers Unauthorized charges for radios and command trailers

• Unreasonable markup chargesUnreasonable markup charges

• Unsupported third-party charges (require original invoices)Unsupported third-party charges (require original invoices)

• Charges for accounting system and admin personnel Charges for accounting system and admin personnel

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Review of Items Most Often Review of Items Most Often DisputedDisputed

The EndThe End