Superfund cost recovery: May the government recover all costs incurred under responsible contracts?
In United States v. Northernaire Plating Co, the court decided that a responsible party may prove that an expense is too costly to be consistent with the national contingency plan by showing that the Government's decision to incur that cost was arbitrary and capricious. In contrast, the test established in another case prevents meaningful judicial review of the costs EPA incurs in its actions. However, audits by the General Accounting Office and the EPA Inspector General have found that the Government has failed to determine whether contractors' costs are reasonable, has paid for defective work, has paid excessive award fees based on its evaluation of the contractor's performance, and has paid excessive amounts for underqualified personnel. EPA would place more emphasis on the proper management of contractor costs if courts were to begin denying costs that are incurred improperly. Applying the Northernaire test would also preserve crucial rights of the parties involved to have meaningful judicial review of the Government's costs.