Todd Jacobson
NS&D Monitor
1/17/2014
The Department of Energy and Shaw AREVA MOX Services are in negotiations to revamp the contractor’s contract to build the multi-billion-dollar Mixed Oxide Fuel Fabrication Facility, though the talks have recently hit a snag because DOE has pushed for the work on the facility to be completed under a fixed price deal, NW&M Monitor has learned. After slowing work on the MOX project and analyzing alternatives, DOE appears poised to complete work on the project as part of a deal struck with Sen. Lindsey Graham (R-S.C.) late last year. Part of that deal involved a restructuring of Shaw AREVA’s contract to build the facility, which is currently a cost-plus-award fee contract with performance-based incentives.
DOE, however, rejected Shaw AREVA’s initial contract offer last year and countered with an offer that would require the facility to be finished under a fixed price contract, according to officials with knowledge of the discussions and Congressional aides. Shaw AREVA is believed to favor a contract that would reward it for completing the project on schedule and budget and incentivize it to complete the work quicker, but would also include penalties for cost overruns and schedule delays. DOE is believed to be seeking a new contract as part of a new deal to complete the work on the MOX project so that it can demonstrate that it is holding the contractor accountable. Shaw AREVA MOX Services referred questions to DOE and the National Nuclear Security Administration, which declined to comment.
Exactly how far DOE is seeking to hold the contractor accountable remains an open question, as is how much risk Shaw AREVA will accept. “Nobody in their right mind would agree to a fixed price for this work, unless it was a huge fixed price,” one official told NW&M Monitor. “That wouldn’t be in the taxpayer interest either.” The official added: “If [Energy Secretary Ernest] Moniz decides to build it they’re going to have to reach an understanding. That’s got to be part of the deal.”
Decision on MOX Near
The MOX plant, under construction at the Savannah River Site, is set to dispose of 34 metric tons of surplus plutonium by converting it to fuel for nuclear reactors, part of an agreement signed with Russia in 2000. However, the project faces a nearly $3 billion cost increase and three-year delay in a provisional baseline released earlier this year, spurring the Administration to consider other ways to dispose of the material. The current estimate to complete the project is $7.7 billion. Last month, DOE Office of Acquisition and Project Management Director Paul Bosco said DOE was near making a decision. “The assessment is pretty much done. It’s being discussed at all of the highest levels. The assessment is a review of all of the other alternatives,” Bosco said, later adding: “It’s taking time because people are very serious, making sure we do the due diligence to make sure we get the right answer going forward.”
If DOE decides to move ahead with MOX after completing its assessment, National Nuclear Security Administration Associate Administrator for Acquisition and Project Management Bob Raines would request a baseline change proposal from contractor Shaw AREVA MOX Services, Bosco said. The project may also undergo an independent cost estimate from the Depart of Defense’s Cost Assessment and Program Evaluation group, which may work with Bosco’s office. “I will be charged to validate the new and improved performance baseline, if it’s MOX. We don’t know that yet,” Bosco said.
