PERMA-FIX OUTLINES ISSUES WITH SEC CONTRACTS

Perma-Fix Environmental Services’ recently completed acquisition of Safety and Ecology Corp. may be getting off to a rocky start, with the company now likely to have to address issues concerning a set of SEC’s contracts. In its most recent earnings report, filed Nov. 7, Perma-Fix outlined performance concerns on three of SEC’s projects. Although, Perma-Fix did not identify the specific contracts, SEC’s work has included a project to clean out a set of hot cells at a building at Oak Ridge National Laboratory that has experienced cost and schedule issues, as well as a previous subcontract at the Separations Process Research Unit (SPRU) D&D project. In one instance, Perma-Fix said in its filing, “The U.S. Department of Energy (“DOE”) has advised the subsidiary of SEHC [Safety and Ecology Holdings Corp] performing remediation work on a particular DOE project that there are substantial deficiencies and cost overruns by the subsidiary in connection with its performance on this project and that the subsidiary is substantially behind schedule on this project, resulting in the DOE indicating that the subsidiary’s performance on this project was unsatisfactory to DOE. Since our acquisition of SEHC and its subsidiaries, we are attempting to resolve these issues with the DOE relating to this project.” 

The filing goes on to say, “Another subsidiary of SEHC has been advised by the general contractor on a separate project of deficiencies and cost overruns by the subsidiary on that project. We believe, based on information provided to us by SEHC, that the deficiencies have been corrected. As a result of the cost overruns, as of the date of this report, the subsidiary has submitted a Request for Equitable Adjustment to the general contractor to recover up to approximately $5,000,000 of the cost overruns. Due to the occurrence of the deficiencies, however, the subsidiary may not recover all or a portion of these cost overruns.” In addition, on a third project, “There have been numerous deficiencies and cost overruns on this project by SEHC’s subsidiaries. The contract relating to this project with the SEHC’s subsidiary is terminating. We have agreed with [SEC’s parent company Homeland Capital Security Corp.} that if certain conditions are not met by December 31, 2011, regarding this project, we can recover from the escrow amount held under the Escrow Agreement executed in connection with the Purchase Agreement the sum of $1,500,000,” the filing says.