Application of Special Assessment Rates for the Purchase of Hydrologic Instrumentation and Equipment To: "DC - All District Chiefs" cc: "A - Division Chief and Staff", "CD - All Data Chiefs", "AO - All Administrative Officers", "B - Branch Chiefs and Offices" cc: "Steven M Hindall, District Chief, OH, Columbus, OH ", "William G Shope Jr., Chief, Br. of Oper. Support, Reston, VA ", "Ernest F Hubbard Jr., Hydrologist (WAE), Reston, VA ", "Jilann O Brunett, Data Coordinator, Reston, VA ", "Eugene C Hayes, Chief, HIF, Stennis Space Center, MS ", "Dorothy E Greenwood, Secretary (OA), Stennis Space Center, MS ", "John F Harsh, Tampa Subdistrict Chief, Tampa, FL ", "Kathleen K Fitzgerald, Hydrologist, Reston, VA ", "Marvin O Fretwell, Asst. Reg. Hydr, Internal Pgms, Portland, OR ", "Peter E Hughes, Chief Supervisory Hydrologist, Middleton, WI ", "James H Barks, District Chief, Rolla, MO ", "jr. g. louis ducret, Supervisory Hydrologist, Denver, CO ", "James E Putnam, Supv Hyd, Lawrence, KS ", "Edward L Ford, HIF Operations Coordinator, Stennis Space Center, MS ", "Edward P Simonds Jr., Hydrologic Technician, Altamonte Sprg, FL ", "Mark A Hardy, Hydrologist (Limnology), Boise, ID ", "Ralph W Teller, Supervisory Hydrologic Tech, Rapid City, SD ", "Lee R Watson, Hyd (Geol), Indianapolis, IN ", "William D Wiggins, Supervisory Hydrologist, Tacoma, WA ", "Larry R Shelton, Hydro Tech, Sacramento, CA ", "James L Pearman, Supervisory Hydrologist, Montgomery, AL ", "Michael E Dorsey, SupvHydTech, Austin, TX ", "David D Graham, Hydrologist, Tucson, AZ ", "PO - Project Offices", "Alice C Dilandro, Secretary (S), Reston, VA ", "Carole Nethaway, Secretary (OA), Reston, VA " Subject: Application of Special Assessment Rates for the Purchase of Hydrologic Instrumentation and Equipment From: "Steven M Hindall, District Chief, OH, Columbus, OH " Date: Tue, 25 Aug 1998 13:02:44 -0400 Sender: "William G Shope Jr., Chief, Br. of Oper. Support, Reston, VA " In Reply Refer to: Mail Stop 405 MEMORANDUM August 25, 1998 To: District Chiefs From: Steven M. Hindall Chair, Instrumentation Committee Subject: Application of Special Assessment Rates for the Purchase of Hydrologic Instrumentation and Equipment The Instrumentation Committee (ICOM) has asked that I pass on to you additional guidance and clarification regarding the purchase of hydrologic instrumentation and equipment using the standard special assessment rates authorized by Water Resources Division (WRD) Memorandum No. 98.30. The ICOM has been very concerned about the effect that the previous assessment rates has had on purchases and rentals from the Hydrologic Instrumentation Facility (HIF). In a recent study conducted by the ICOM, it was found that, with the added assessments, the cost to the districts for purchases from the HIF could be more than two times greater than purchases from the private sector. This difference has caused many districts to purchase their instruments and equipment from the private sector, resulting in a decline in the HIF warehouse and rental program. WRD's Centralized Instrumentation Facilities (HIF, Federal Interagency Sediment Project (FISP), and the Hydraulics Lab) provide a high level of quality control on the instruments and equipment that they handle and distribute. Taking these faciliies out of the instrumentation acquisition loop has serious impacts on the quality of the hydrologic instrumentation and the data collected. A major portion of the additional cost to the districts for purchasing instruments and equipment from the HIF and FISP, pays for the Quality Assurance and Quality Control (QA/QC) of these items and, ultimately for maintaining the high quality of the data that WRD collects. The primary recommendation of the ICOM study titled "An Analysis of Reductions in the Hydrologic Instrumentation Facility (HIF) Warehouse and Rental Program," was for WRD to level the playing field with regard to assessment rates for purchases and rental of hydrologic instrumentation and equipment. The report can be accessed from the Committee's home page at URL - http://wwwhif.er.usgs.gov/uo/icom.html The ICOM feel that the policy for the application of standard special assessment rates presented in WRD Memorandum No. 98.30 is a step in the right direction. The ICOM encourages districts to take advantage of standard special rates (net assessment rate of 30 percent) for equipment, supplies and services purchased from other U.S. Geological Survey (USGS) cost centers and sources external to the USGS. Under the new policy, the ICOM feels that there is cost equity between purchases made from the HIF and the private sector when the value-added services provided by the HIF are factored in. These services include quality control, quick turn-around, ease in ordering, no procurement costs, user assistance, and quick replacement or repair should there be a problem. ICOM requested the WRD Administrative Officer to provide examples of how the standard special rates are to be applied for instrument and equipment purchases. The new policy allows a limited amount of flexibility in applying the rates, but does require consistency once the rates are applied to a specific class or type of instrument or piece of equipment. As an example, if a district decides to apply the standard special rates to the purchase or rental of data recorders and sensors, then the same rate must be applied to purchases or rentals from all sources (e.g., the HIF and/or the private sector). That same district may choose not to apply the standard special rate to the purchase of batteries and rental of data collection platforms. As is the case with the previous example, the same assessment rate must be then charged for purchases of batteries and rental of data collection platforms from USGS cost centers and sources external to the USGS. The ICOM's interest in cost equity between USGS cost centers and other sources of instrumentation and equipment, centers on issues related to QA/QC. The ICOM is currently working on a QA/QC Policy and Plan for Hydrologic Field Instrumentation. The WRD Centralized Instrumentation Facilities will play a key role in the quality assurance of all instruments and equipment. The plan recognizes that there are certain types of instruments that require quality control procedures including acceptance testing and calibrations that the districts cannot provide. Examples of these instruments include, but are not limited to, pressure transducers, water-quality and sediment samplers, and current meters. The ICOM recognizes that there may be apparent cost savings in purchasing these types of equipment from the private sector; however, these savings cannot outweigh the loss in quality assurance of the data. The ICOM strongly encourages you to obtain these types of instruments from a WRD Facility. The QA/QC Policy and Plan will address the requirements for acceptance testing and calibration in more detail. We will provide you more information on the Plan and Policy in fiscal year 1999. cc: Senior Staff Branch Chiefs and Offices Project Offices Data Chiefs Admin. Officers ICOM Members ITAS Members WRD General BOI Chron ATTACHMENT - WRD MEMO NO. 98.30 ----------------------------- In Reply Refer To: Mail Stop 442 July 31, 1998 WATER RESOURCES DIVISION MEMORANDUM NO. 98.30 Subject: Policy and Procedures for the Development and Application of Special Assessment Rates The U.S. Geological Survey (USGS) assessment policy as stated in Survey Manual Chapter 501.1, dated February 10, 1997, requires that each division issue the necessary supplemental policy and procedures required for implementation. This memorandum provides policy and procedures for the use and approval of special rates for all programs and agreements conducted in the Water Resources Division (WRD) and supplements the policy provided in WRD Memorandum No. 98.12, dated March 13, 1998. Definition: Special Rate. The use of a lower assessment rate for a specific type of activity because that activity, on a recurring basis, does not incur the same amount of indirect costs. Background: WRD Memorandum No. 92.21, Policy for Use of Water Resources Division District Common Services Accounts, issued in June 1992 and amended in February 1996, set definitive guidelines on costs that were required to be included in the indirect cost accounts and established reduced rates for laboratory services acquired from the National Water-Quality Laboratory (NWQL) and all contracts above $10,000. However, this guidance was implemented inconsistently in the division because districts found that the guidelines did not take into consideration their desire to lower assessment rates or differences in district management styles and structure. Additionally, some districts determined that the special rates offered on laboratory services acquired from the NWQL should also be extended to include other providers of laboratory services (such as the Ocala Laboratory). Also, WRD Memorandum No. 92.21 did not address the common services practices of other non-district organizational units (e.g., Branches). This new USGS assessment policy (referenced above) presented an opportunity to review these problems and devise a new policy that would address these concerns. The new bureau policy stipulates which costs can be included as indirect costs when determining assessment rates, but specifies that these costs must be directly charged to projects when this cost assignment can be accomplished in a cost effective and efficient manner. This policy change permits flexibility, encourages management determinations based upon the individual circumstances of the cost center, and recognizes that a one-sized assessment policy will not fit all organizational units. However, responsibility comes with this flexibility and management discretion. Cost center managers must review their cost assignment determinations on an annual basis and ensure that during a given fiscal year all project accounts are charged indirect costs on a consistent basis-in other words, a direct cost for one project must be a direct cost for all projects. Managers should also compare the benefits to be derived from offering a special rate against the costs of administrative work entailed in establishing, utilizing, and recording the special rate. WRD adhered to this bureau philosophy in determining this revised policy on special rates. There was concern, however, that complete managerial flexibility could result in a large increase in paperwork because of the requirement that the Division Chief approve all special rates. To avoid this problem, a set of standard special rates were developed by averaging the indirect costs of 6 districts and making general assumptions about the reduction in indirect costs that would result from the special rate activity. There was another concern that this change in special rate policy would result in a loss of consistency across the division; but it was concluded that managerial flexibility was more important than perceived consistency, considering that consistency had never actually been achieved under the previous policy. Policy: The use of special assessment rates is permitted at the cost center and/or division level and requires the approval of the Chief Hydrologist. WRD will pursue authority to re-delegate this authority after full implementation of the new assessment policies has occurred (i.e., at the start of FY 2000). In FY 1998, the two cost center special rates identified in WRD Memorandum No. 92.21 were grandfathered. They were: (a) cost center assessment of 10 percent on WRD National Water-Quality Laboratory (NWQL) analyses cost; (b) full cost center assessment on contracts up to $10,000 and zero cost center assessment on the amount of a contract above $10,000. These cost center special rates were continued in fiscal year (FY) 1998 because of the delay in finalizing the assessment policy and procedures. These special rates expire at the end of FY 1998. Special rates that were negotiated and incorporated into signed agreements prior to the issuance of this memorandum may be continued during FY 1999 but these special rates must be renegotiated prior to the start of FY 2000. For FY 1999 and subsequent fiscal years, the following standard special assessment rates have been approved by the Chief Hydrologist and may be used by cost centers without additional documentation or review. These standard special rates were determined by using cost center averages and are shown as aggregate net assessment rates with gross division and cost center assessment rates listed in parentheses. (The cost center averages for three of the categories shown below were similar enough to warrant combination into one special rate for ease of use. A copy of the analysis is available upon request.) A cost center may decide to implement all, some, or none of these standard special rates. Variances in the standard special assessment rates on the following four categories are permitted but must be documented in a manner similar to the one used in Attachment 1 and submitted to the Chief Hydrologist for approval. The approved standard special rates are: A. A reduced aggregate net assessment rate of 5 percent (4.8 percent gross based on division assessment rate of 3.8 percent and cost center assessment rate of 1 percent) on pass-through funding to external agencies or educational institutions where the only work the WRD cost center is performing is for the execution and administration of a purchase order, contract, cooperative agreement or grant. To be eligible for this special rate, all program work must be performed by the agency receiving the funding and WRD should not be responsible to the cooperator for either an accounting of the other agency's work or ensuring that the deliverables are received as agreed upon. B. A reduced aggregate net assessment rate of 30 percent (23.1 percent gross based on division assessment rate of 12.5 percent and cost center assessment rate of 10.6 percent) on: 1. Equipment, supplies and services purchased from other U.S. Geological Survey (USGS) cost centers, such as calibration of equipment, drilling services, laboratory analyses, and publication services where the servicing cost center is billing the receiving cost center a standard fee that includes the indirect costs associated with the service. This includes but is not limited to work performed by or equipment procurement from the Hydrologic Instrumentation Facility, the National Water-Quality Laboratory, the Ocala Laboratory, National Research Program service laboratories, sediment laboratories, drilling units, and publication units. 2. Equipment, supplies, and services from sources external to the USGS including other Federal or cooperating agencies, and the private sector when the entity providing the equipment and/or supplies is billing the WRD cost center a fee or price that includes indirect costs. Other special rates may be requested when the cost center can demonstrate that the actual indirect costs associated with the cost category do not consume the full indirect costs included in the cost center assessment rate. Special rate requests may not request a gross division assessment rate lower than 3.8 percent, the part that funds bureau-level costs in FY 1999. This exclusion is established in the USGS assessment policy. The part of the division assessment rate that funds bureau-level costs will be announced annually. Special rates must be consistently applied to similar types of costs within the cost center. A special rate request must be in writing and contain the following information: a. a brief description of the specified activity for which the special rate is requested and any programmatic benefits to be derived if the special rate is approved; b. a justification as to why the activity, for which the special rate is requested, does not incur the same amount of indirect costs as do other activities included in the cost center and/or division assessment rate; c. the rationale for how the special rate was derived (e.g., itemization of indirect costs not incurred by the activity); and d. a certification that the costs of the administrative work entailed in establishing, utilizing, and recording the special rate have been considered in determining the special rate. A special rate, once approved by the Chief Hydrologist, may remain in effect in subsequent fiscal years, in accordance with the provisions of the Chief Hydrologist's approval. Approved special rate requests will be placed on the intranet to facilitate development of requests by other cost centers. The Regional Hydrologists or appropriate member of the Senior Staff is responsible for reviewing cost center assessment practices on an annual basis to ensure consistency in the application of special rates and compliance with bureau and division policies. This policy does not address salary and other associated costs when program work is performed by another WRD cost center. The policy on intradivision assessment will be specified in a separate WRD Memorandum issued later this fiscal year. Procedures: A written request should be submitted to the Chief Hydrologist, through the Assistant Chief Hydrologist for Operations (ACHO), and through the appropriate Senior Staff member. The ACHO will discuss the request with the Chief Hydrologist. Attached is a sample special rate request (Attachment 1). All requests for special rates should be submitted in this format. If the Chief Hydrologist does not approve the special rate, the request will be returned through the appropriate Senior Staff member to the cost center with an annotation as to why the request was not approved. If the Chief Hydrologist approves the request, the request will be returned to the cost and copies sent to the Financial Operations and center with an approval, signature Reporting Section and the appropriate Senior Staff member. Your patience has been appreciated during our work to develop a special rate policy that provides both consistency and cost center flexibility. Additional issues and questions will need to be resolved as this new policy is implemented. Questions should be directed to the appropriate senior administrative officer. /signed/ Catherine L. Hill Assistant Chief Hydrologist for Operations DISTRIBUTION: A, B, DC, AO Attachment Attachment 1 Sample Special Rate Request MEMORANDUM To: Chief Hydrologist Through: Associate Chief Hydrologist for Operations Through: Regional Hydrologist, Western Region From: Derrill J. Cowing District Chief, Boise, Idaho Subject: Special Rate Request for the Idaho National Engineering and Environmental Laboratory The purpose of this memorandum is to formally request a special rate be established in accordance with U.S. Geological Survey (USGS) Manual 501.1.1.3F and Water Resources Division (WRD) Memorandum No. 98.30. Description of the activity and programmatic benefits: The Idaho National Engineering and Environmental Laboratory (INEEL) is located in southern Idaho and is one of the largest of the United States Department of Energy's (DOE) nuclear research facilities. The USGS, WRD project office is a major part of the Idaho District located on the DOE compound. This program supports 15 to 16 district employees. The INEEL program has been a part of the Idaho District program since FY 1988. That year, a cost center assessment rate of 4 percent was established; that rate was reduced to 3 percent in FY 1989 and has remained stable at that level through FY 1998. Funding for this DOE program has grown from $865,000 in FY 1988 to $2 million in FY 1998. This funding level is expected to decrease 4 to 5 percent over the next several years. Justification for the reduced cost center assessment rate: The INEEL program office operations are furnished space, utilities, and general office supplies by the DOE. The Idaho District office provides administrative and technical support services. Derivation of the special rate: The following analysis was completed in July 1998 to support a special net cost center assessment rate of 5 percent. Certification: The costs of the administrative work entailed in establishing, utilizing, and recording the special rate has been considered in determining this special rate. The support services are estimated and based on current workload subject to change based on the need of the DOE program. The Idaho District recognizes INEEL as a valid part of the program and the current support system is working very well. Based on these findings, the Idaho District requests that a special net cost center assessment rate of 5 percent be established indefinitely unless there is a dramatic decrease or increase in funding or the level of support provided to the INEEL program. Approval: Robert M. Hirsch, Chief Hydrologist Date Conditions of Approval: Special net cost center assessment rate of 5 percent is approved for FY 1999 and can be continued in subsequent years provided that there is no significant change in support services provided to the cooperator or level of funding. The division assessment is not reduced.