Bechtel National has failed to sufficiently review the costs of subcontractors supporting construction of the $17 billion Waste Treatment Plant at the U.S. Energy Department’s Hanford Site in Washington state, according to a recent agency audit.
Between December 2000 and June 2018, Bechtel paid nearly $2 billion for 392 subcontracts with flexible prices, such as cost-reimbursable time and material contracts, the Energy Department inspector general said in a report dated Nov. 12. Of the 110 Bechtel subcontracts worth at least $1 million, only 23 were subject to audits.
By not ensuring these subcontracts are audited, Bechtel increases the risk of passing on unallowable costs from its subcontractors to the Department of Energy, the IG found.
The Energy Department requires the prime contractor for a project to audit the costs of flexible-price subcontracts, the IG said. The Contract Disputes Act of 1978 has a six-year statute of limitations for the government to file overpayment claims against a vendor, so it is important Bechtel not lag too far behind on its audits, according to the report.
While Bechtel met a DOE-set goal of finishing at least 20 audits during 2018, the company did not focus on subcontracts that were getting close to the six-year deadline, the IG said.
The issues raised in the report have been largely addressed, Bechtel spokeswoman Staci West said in a Sunday email. The company has “implemented DOE’s direction regarding subcontract audits and made significant changes to its processes, including hiring additional staff to conduct subcontract audits,” West said. Two staffers were hired to help, she noted.
The inspector general’s report noted that starting in 2017 Bechtel started using third-party audit firms to catch up on its backlog. In July 2018, the final results of seven subcontract audits identified $1.1 million in questioned cost.
The company issued an updated version of its subcontract audit plan in August 2018, according to the inspector general.
The DOE Office of River Protection at Hanford has now incorporated subcontractor audits into Bechtel’s regular performance evaluation, the IG said.
Bechtel and the Energy Department hope to fully address the inspector general’s concerns by Jan. 31, 2020, according to an Oct. 9 memo included in the report package from DOE Senior Adviser for Environmental Management William (Ike) White.
Bechtel and its subcontractors are building the WTP to convert most of the 56 million gallons of radioactive and chemical waste, currently stored in Hanford’s underground tanks, into a more stable glass form for disposal. The tank waste is left over from decades of making plutonium for U.S. national defense.
