Final RFP for New Contract to be Issued in Two Weeks
Mike Nartker
WC Monitor
2/27/2015
In another attempt to assuage industry concerns and boost potential competition for the new Idaho Cleanup Project (ICP) Core contract, the Department of Energy unveiled late this week a new set of planned changes to the fee structure for the new contract. Such changes include making some of the fee ineligible to be taken back in the event of cost overruns, modifications to the set of planned performance incentives and the addition of “more specific objective measures” to fee criteria, according to a notice issued Feb. 26. DOE also said that it plans to issue the final Request for Proposals for the new contract within two weeks, with bids to be due “no less” than 60 days from when the final RFP is issued. DOE also plans to hold a pre-proposal conference and site tour within two-to-three weeks from when the final RFP is issued.
Industry Has Pushed Back Against DOE Plans for Contract
The new ICP contract is intended to replace the two current cleanup contracts at the Idaho site that are currently set to expire in September—one held by CH2M-WG Idaho that is responsible for the bulk of the cleanup work at the site; and one held by Idaho Treatment Group, LLC, to manage the Advanced Mixed Waste Treatment Project. The new contract is one of the major near-term business opportunities in the DOE cleanup program, and initially as many as four teams were believed to have formed to compete for the job. However, after DOE issued a draft RFP last fall, nearly all potential bidders made it clear that they could not bid on the contract as then outlined because of concerns over provisions that would make the winning contractor liable for costs above the target cost combined with uncertainties in the work scope to be performed.
In apparent response to industry concerns, DOE subsequently modified the draft RFP to remove a provision that would have made contractors responsible for all costs going forward once the target cost for the new contract had been exceeded by $150 million. But several other provisions in the draft RFP have continued to be a source of concern for industry officials, leading to continued questions over the actual level of competition DOE will see for the new contract.
Fee Can Be Kept, Despite Cost Overruns, If TRU Milestone Is Met
Among the changes DOE outlined this week is language that would reduce the amount of fee in the contract that is provisional. The Department had planned to the have the ICP Core contractor potentially lose fee tied to schedule milestones and performance incentives for breaching the cost in the contract performance ceiling. Now, the ICP Core contractor will be able to keep fee earned for meeting milestones associated with transuranic waste activities, even if the contract performance ceiling is exceeded, if it is able to meet an Idaho Settlement Agreement milestone to complete legacy transuranic waste removal from the Idaho site by the end of 2018.
In a letter sent last month to DOE, Fluor, seen as the most likely to bid on the new contract, had called on the Department to reduce the amount of fee that would be provisional, warning the issue could prevent it from going after the job. “If provisional fee clauses are too punitive, they create a significant barrier to a positive decision to bid,” the Fluor letter stated.
Key Personnel Performance Incentive Eliminated
DOE plans to modify one of the performance incentives in the new contract, Critical Failure, to reduce the number of areas where the contractor could lose fee for inadequate performance, to provide “additional detail” and to allow the contractor to potentially recover withheld fee if corrective actions are taken. Fluor also had singled out the Critical Failure performance incentive as another “significant barrier” to bidding on the new Idaho contract in its letter to DOE. “When the financial analysts of a potential bidder see a clause like this, it creates major concerns because there are no objective standards against which one could do any reasonable probability analysis of earning the available fee,” the Fluor letter stated.
DOE is also eliminating a performance incentive that would have required the contractor to keep all key personnel in place for the life of the contract to earn the associated fee. Fluor had warned the Department that, if maintained, the key personnel performance incentive could have had “unintended consequences,” such as some qualified personnel not wanting to serve in key positions because of the five-year commitment to earn the incentive.
The schedule milestones in the new contract will be modified to only have a maximum fee date and minimum fee date, with fee between the two dates to be calculated on a sliding scale basis, according to the DOE notice. Currently, the draft RFP has an early date, a target date and a minimum date for each schedule milestone.