SUBJECT: Progress on PCS Modernization and Critical Need for FY 2007 Funding

Signed on February 16, 2007 by both.

MEMORANDUM

SUBJECT: Progress on PCS Modernization and Critical Need for FY 2007 Funding

FROM: Granta Y. Nakayama, Assistant Administrator

Office of Enforcement and Compliance Assurance

Molly A. O’Neill, Assistant Administrator

Office of Environmental Information

TO: Lyons Gray

Chief Financial Officer

In September 2003, we briefed then Deputy Administrator Steve Johnson on our efforts to modernize the Clean Water Act (CWA) National Pollutant Discharge Elimination System (NPDES) Permit Compliance System (PCS). Since that briefing we have made excellent progress, achieving a major milestone in FY 2006 with the first release of the new modernized system.

Our continued excellent progress is now in serious jeopardy due to critical funding gaps in FY 2007. Our success in this project is critical to improving the ability of EPA and the states to effectively manage the NPDES permitting and enforcement program. Without adequate funding, the Agency will not be able to meet its long promised commitments to our state partners to modernize PCS and use the National Environmental Information Exchange Network to reduce the data reporting burden on states. The PCS system has been an OMB recommended Agency level Federal Managers’ Financial Integrity Act (FMFIA) weakness since 1999. The completion of the modernization of PCS is the final corrective action needed to close this Agency FMFIA weakness.

We estimate our FY 2007 funding gap to be $3 million. This gap reflects our FY 2007 need for $8 million in extramural funding (which is less than our projection in the Agency’s September 2006 Capital Planning Investment Control (CPIC) submission to OMB) and our concern that our FY 2007 budget will reflect our FY 2006 reduced enacted budget of $5 million.

Background on PCS

PCS is the national system of record for permitting, enforcement and compliance for the CWA NPDES program. PCS is the Agency’s largest and most complicated regulatory information system, supporting the management of monthly discharge monitoring reports (DMRs) from approximately 46,000 facilities. DMRs are the single largest information collection at EPA, and the second largest in the federal government.

Modernization of PCS is critical to the Agency’s ability to manage the NPDES program, as PCS currently relies on outdated technology that is difficult to use, and does not support the expanding program needs of today’s NPDES program. As mentioned above, the completion of the modernization of PCS is the final corrective action needed to close this Agency FMFIA weakness.

Progress to Date and Plans

The Office of Compliance within OECA, with support from the Office of Water and the Office of Environmental Information, has been actively working to modernize PCS for five years. We have worked extensively and cooperatively with states and the regions to develop data requirements, design the new system, develop the software code, test the software, and prepare the data to be migrated from the legacy PCS system to the new system. We implemented the first release of modernized PCS (called the “Integrated Compliance Information System”- NPDES or “ICIS-NPDES”) in FY 2006. With the FY 2006 implementation, 21 states, two tribes and nine territories are directly using the system to manage their NPDES permitting and enforcement programs.

We are now working on the development of the final phase of PCS modernization, the “batch” component. The batch component will support the electronic submission (batch) of NPDES data from the remaining 30 states and regulated facilities into ICIS-NPDES through the Exchange Network and the Agency’s Central Data Exchange (CDX). OECA will continue to coordinate and work closely with OEI on ensuring that the ICIS-NPDES data flow through the Exchange Network and CDX meets OEI policies and guidance. OEI will continue to provide assistance and advice to OECA on implementing the batch component of ICIS-NPDES.

We have divided the batch component into three major releases. Our plan is to complete and implement the first batch release in FY 2008, which will move ten additional states from PCS to ICIS-NPDES. We have been working with these ten states for several months to help them clean up their PCS data so they can successfully move to the new system. In addition, OECA and OEI have initiated an Integrated Project Team (or IPT) with state representatives to assist us in the development and testing of the XML schema needed to flow ICIS-NPDES data through the Exchange Network.

Challenges

All large and complicated information system projects have challenges, and we have worked hard and collaboratively to manage these challenges. One of the biggest challenges for the PCS modernization project has been inadequate and uncertain funding levels from budget year to budget year to support the multi-year project. This funding challenge has resulted in delays in our progress and an increase in the project costs.

In FY 2007, our budget situation is very problematic. Our reduced FY 2006 enacted base of $5 million for this project is not adequate to support the current operation and maintenance of the new modernized system (ICIS) as well as the continued work to complete the batch component of PCS modernization. We need an additional $3 million dollars in FY 2007 to support this important work. Thus, our total extramural need for ICIS in FY 2007 is $8 million, which is less than the projection in the Agency’s September 2006 Capital Planning Investment Control (CPIC) submission to OMB for this project

The Office of Compliance has already taken a number of steps to reduce costs by trimming scope and closely monitoring the performance of the contractor. We have also moved some contractor tasks to our own staff, and reassigned staff within the Office of Compliance to cover this work. Combined, these efforts have reduced our FY 2007 extramural costs by $2.2 million.

Without sufficient extramural funding for this project in FY 2007, we will be forced to significantly extend the overall schedule for completing PCS modernization. This will have many negative consequences, including:

·  Without sufficient FY 2007 funding, EPA and states will be forced to continue to manage the NPDES permitting and enforcement program using the outdated PCS until end of FY2011. PCS does not support the current needs of the NPDES program, especially for the wet weather areas of the NPDES program. This will hinder EPA’s ability to effectively manage the NPDES permitting and enforcement program. For example, until all states have moved to the modernized system, the Agency is unable to identify all wet weather facilities or track their compliance status.

·  Without sufficient FY 2007 funds we will be forced to stop all work on the batch release in March 2007, and we will not be able to restart batch work until FY 2008. This delay will increase the overall cost of the project by $2.7 million and delay the schedule by one year.[1]

·  Insufficient FY 2007 funds will negatively impact multiple entities, including OECA, OW, OEI, the regions and states. For example, states are also making changes to their systems to get ready for modernized PCS and states will need to delay their work as well.

·  Without sufficient FY 2007 funds, our efforts on burden reduction will be significantly delayed. The batch release is critically important to our ability to reduce the burden on states, regions and facilities in reporting DMR data. Our states are demanding and counting on EPA to deliver this burden reduction as soon as possible. The batch release will enable states to electronically transfer data from their state systems to modernized PCS using the Exchange Network. The batch release also will enable facilities to electronically sign and then transfer their DMRs to modernized PCS. Many states will be forced to continue to use PCS for a longer time. These states will complain about the burden of double data entry, which the modernized system was designed to solve.

·  OECA, OEI and 12 states are working collaboratively to develop a national web tool for NPDES facilities to electronically report their discharge monitoring reports data into modernized PCS using the Exchange Network. The states are doing their part with an OEI Network grant. Without sufficient FY 2007 funding, OECA will no longer be able to keep up its part of the work. Texas is the lead state on this effort and the Executive Director of the Texas Commission on Environmental Quality has written to EPA urging EPA to fund its part of this effort. (See attached letter.)

·  EPA and our state partners have established a goal to move all regulatory data flows to the Exchange Network by 2010. The funding shortfall means modernized PCS will not be able to meet this deadline, which is a major loss for the Exchange Network since modernized PCS is the largest regulatory data system.

·  Without sufficient FY 2007 funding, the PCS system will continue to be an Agency FMFIA weakness and corrective action milestones reported by the Agency to be accomplished for the PCS modernization in FY 2007 and beyond will not be accomplished.

The table below highlights what will happen to our major milestones if our FY 2007 funding is at the reduced FY2006 enacted level.

Projections for Completing Major PCS Modernization Milestones[2] /
Major Milestones / With reduced FY 2006 enacted budget in FY 2007 ($5 million) (all work on batch assumed to stop in March 2007 and to not start until Oct 2007) / With sufficient FY 2007 budget ($8 million) /
2 pilot (hybrid) states move from PCS to ICIS / 2nd Quarter FY 2009 / 2nd Quarter FY 2008
Remaining 8 hybrid states move from PCS to ICIS / 3rd Quarter FY 2009 / 3rd Quarter FY 2008
Electronic DMRs from facilities using the national DMR tool implemented in ICIS / 4th Quarter FY 2009 / 4th Quarter FY 2008
First set of remaining 20 full batch states moved from PCS to ICIS / 4th Quarter FY 2010 / 4th Quarter FY 2009
Remaining full batch states moved from PCS to ICIS / 4th Quarter FY 2011 / 4th Quarter FY 2010
PCS shut down / 2nd Quarter FY 2012 / 2nd Quarter FY 2011

In closing, we have reached a critical juncture in the development of the modernized PCS. It is paramount that we maintain our current momentum if we are to meet the needs of our stakeholders, protect our existing investment, and address this long-standing Agency weakness. While we appreciate the many competing priorities the Agency must consider in developing its FY 2007 operating plan, we believe this is a unique and compelling situation that merits additional investment.

We appreciate your consideration of our request. If you have any questions, regarding this project, you may contact David Hindin, Director of OECA’s Enforcement, Targeting and Data Division, or Andrew Battin, Deputy Director of OEI’s Office of Information Collection. Questions concerning OECA’s budget to support this project, should be directed to David Swack, OECA’s ARMSS Director, on 564-9963.

Attachment

cc: Maryann Froehlich, OCFO

David Bloom, OCFO

Catherine McCabe, OECA

Mark Luttner, OEI

Andrew Battin, OEI

Michael Shapiro, OW

James Hanlon, OW

Michael Stahl, OECA

David Hindin, OECA

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[1] The cost increase and schedule delay is based on a variety of factors, including: re-planning the project; the loss of experienced contractor staff in FY 2007 and the subsequent need for assembling a new team in FY 2008 that will not have the experience and knowledge of the current team; and annual inflation adjustments to IT contract rates.

[2] These milestone projections are based on numerous assumptions about the future, including future year budgets. FY 2008 and beyond budget estimates for both scenarios are based on the September 2006 CPIC submission for ICIS. The milestones in the right hand “Sufficient” column are based on our September 2006 CPIC submission for ICIS, with adjustments to account for the budget uncertainties in FY 2007 that have already delayed our schedule.