Poor performance appears set to cost Savannah River Nuclear Solutions all of the fee it has earned to date for the Waste Solidification Building project at the Savannah River Site. In a lengthy and sharply written June 12 letter, obtained by NW&M Monitor, the National Nuclear Security Administration accused Fluor-led SRNS of being “negligent” in its management of what was at one point expected to be a $345 million project, outlining a litany of significant performance concerns and warning the contractor that it would be directed to return all of the fee paid for the project. “I am interested in your view of why I should not conclude that SRNS’ repeated delay in taking prompt and effective corrective action to address obvious and serious delays in subcontract performance does not rise to the level of gross negligence or willful misconduct, warranting disallowance of costs,” an NNSA contracting officer wrote in the June 12 letter. SRNS did not respond to request for comment over the weekend.
The Waste Solidification Building is intended to process the waste streams from the Mixed Oxide Fuel Fabrication Facility being built at Savannah River to convert plutonium taken from U.S. nuclear weapons into commercial nuclear power plant fuel. The project is being managed by SRNS and performed under a subcontract with Baker Concrete Construction. In its letter last week, the NNSA outlined the results of two reviews conducted on the Waste Solidification Building earlier this year because of concerns of potential cost growth. “SRNS failed to address shortcomings in the design which resulted in inefficient execution of work and schedule delays. Your inefficiency and schedule delay is likely to lead to a substantial cost overrun for the project,” the letter says. The NNSA noted that SRNS had a year from when the design work was finished and it took over management of Savannah River to when it awarded Baker the subcontract for construction of the facility. “Our latest review of your records found evidence that issues with design arose in the first few months of construction, but SRNS failed to take adequate steps to resolve design problems promptly in advance,” the letter states, adding, “SRNS did not follow reasonably prudent management practices common within the construction industry to resolve the problems and get the Baker subcontract back on track.”
The NNSA accused SRNS of benefiting from its subcontractor’s performance issues because Baker’s schedule delays “obscured the effect” of late delays of specialty equipment for which SRNS had been responsible. “If you had taken adequate steps to ensure your subcontractor met its schedule requirements, SRNS would not have earned a significant amount of the WSB fee. If Baker was on schedule, SRNS’ late deliveries of the equipment would be critical path and under the terms of the PBIs [Performance-Based Incentives], SRNS would not have received fee on the late deliveries,” the letter says. “By allowing Baker to continue to fall further behind, SRNS avoided being the ‘direct’ cause of the delay. As a result, the NNSA paid fee in spite of missed milestones.”
SRNS came in for heavy criticism for its Earned Value Management System for the project, with the NNSA saying it “does not meet the industry standard” and likely painted an inaccurate picture of the project by having “artificially high” cost and schedule performance data. “NNSA’s review team found inadequate detail of schedule activities which demonstrated your poor project planning. Our review team further found an over use of milestones and ‘level of effort’ activity types that reduced the visibility of critical path activities,” the letter says. The NNSA also accused SRNS of failing to heed previously expressed concerns over its performance. While the federal project director for the Waste Solidification Building first identified concerns in August 2009, internal SRNS communications to the contractor president and Board of Directors did not include such concerns until late 2011, according to the NNSA letter. “I can only conclude from this failure to communicate NNSA’s concerns and expectations up the SRNS management chain that, at a minimum, SRNS did not take our feedback seriously and demonstrated an active disregard for NNSA’s goals and objectives for the project,” the NNSA contracting officer wrote.