Pursuant to a congressional request, GAO discussed the Environmental Protection Agency's (EPA) use of contractors to support its programs. GAO found that EPA has not: (1) monitored contractor activities to ensure that performance remains cost-effective; or (2) performed reviews to ensure that contractor employees are not establishing policy or performing other types of work traditionally reserved for federal employees. About 88 percent of EPA contracts are cost-reimbursable, which provides EPA maximum flexibility in accomplishing program objectives, but offers limited incentive for the contractor to control costs. GAO believes that EPA is missing opportunities to control costs through the increased use of fixed-price contracts. GAO also noted that EPA, contrary to its regulations, has directed contractors to perform work outside of the scope of their contracts and to award sole-source subcontracts to firms selected by EPA.