The Department of Energy’s Office of Nuclear Energy miscalculated during the selection process of its High-Assay Low-Enriched Uranium (HALEU) Demonstration Project, the Department’s Office of Inspector General found in an audit.
In a July 2 audit report the Office of Inspector General (OIG) found the Office of Nuclear Energy inappropriately limited competition during its pre-award process. The HALEU contract was awarded to a Centrus Energy affiliate despite the company’s “known financial risks at the time the contract was awarded.”
Under the Competition in Contracting Act of 1984, all procurements must be competed as full and open competition with limited exceptions identified in Federal Acquisition Regulation. The DOE office also failed to file a “Justification for Other Than Full and Open Competition,” according to OIG.
Competition was limited through overly restrictive language standards, OIG said. As a result, DOE’s Office of Nuclear Energy’s actions might have prohibited it from finding the best value for taxpayers.
American Centrifuge Operating, LLC, a subsidiary of Centrus, was awarded the sole HALEU production contract in May 2019. DOE later extended Centrus’s HALEU production contract for about $110 million on June 20 until June 30, 2026.
DOE entered into a memorandum of understanding (MOU) with Centrus in October 2018. While the MOU did not create any legally binding obligations for DOE or the company, the MOU included specific actions taken by the Office of Nuclear Energy and Centrus “which are prerequisites to parties to enter into a contractual agreement,” according to the audit.
Prior to the contract award, from 2012 to 2015 DOE invested nearly $397 million in the U.S. Enrichment Corporation (which became Centrus in 2014) to support a demonstration program for the large centrifuge technology at Centrus’s American Centrifuge Facility in Piketon, Ohio.
However, Centrus filed for Chapter 11 bankruptcy in 2015 and DOE withdrew funding from the project. In February 2016, Centrus made plans to demobilize it.
According to the finding, Centrus emerged from 2014 Chapter 11 reorganization during the time it signed the MOU with DOE and had a net income of $5 million in fiscal 2017.
Despite the Centrus’s financial struggles at the time, the MOU process seemingly limited competition for a future award to produce HALEU and “clearly indicated” the Office of Nuclear Energy had intentions to select Centrus for a HALEU production contract.
“According to a Department official, the Department knew from the beginning that ACO [American Centrifuge Operating] was the only entity that had the ability to construct the AC-100Ms because they were ACO’s design, and Centrus was the only entity that had an NRC license,” OIG reported.
“Because more than 6 years have passed since this procurement decision, we are not making any recommendations,” OIG said. “However, we encourage Nuclear Energy to consider our findings and observations during future procurements, with particular attention to potential sole source awards.”
The audit was performed to decipher whether the contracting of Centrus for the HALEU production by the Office of Nuclear Energy was done in the best interest of the federal government, given Centrus’s financial background. The audit was conducted from July 2021 to May 2025.
Centrus defended DOE’s contractual decision made in 2019 and said, “during the first Trump Administration, the Department recognized the need for a U.S. source of HALEU and, more broadly, the need to demonstrate a U.S.-owned, U.S.-origin uranium enrichment technology that could meet America’s long-term national security requirements,” a Centrus spokesperson told ExchangeMonitor.
As Centrus had U.S. centrifuge technology at its disposal, it said the contractual decision has paid off for the DOE and the United States, bringing forth a U.S. owned, U.S. technology enrichment plant for the first time in nearly 70 years, according to a Centrus spokesperson.
In recent years Centrus has found its financial footing. For the first quarter of fiscal 2025, Centrus made net earnings of $27.2 million on a quarterly revenue of $73.1 million.
