Mike Nartker
WC Monitor
2/13/2015
With the competitive landscape for the new Idaho Cleanup Project (ICP) Core contract still in flux, the Department of Energy appears likely to push back the release of a final Request for Proposals for the new contract as it continues to work to address industry concerns that may ultimately lead to a low number of bidders. DOE had planned to issue the final RFP this month, but acting Assistant Energy Secretary for Environmental Management Mark Whitney indicated late this week that the schedule is now uncertain at a meeting the Energy Communities Alliance held in Washington. DOE is working to make sure “that we have fully understood all of the concerns that have been expressed to us by the community and by the business community as well,” Whitney said. “We want to put an RFP out on the street that actually will achieve some level of competition that makes us feel confident we’re getting value for the taxpayers’ money in completing the cleanup there.”
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. Initially, as many as four teams were believed to be interested in competing for the new contract, but 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 continue to be a source of concern for industry officials, such as DOE’s current plan to make all of the fee earned over the life of the contract provisional.
Fluor Outlines ‘Significant Barriers’ For Bid Decision
Despite the changes DOE has already made to the RFP for the new Idaho cleanup contract, “significant barriers” remain for Fluor to bid on the job, the company said in a lengthy letter sent to DOE last month, a copy of which WC Monitor obtained this week. The 43-page letter presents a detailed critique of the current provisions in the draft RFP, with one of Fluor’s main concerns being the proposed fee structure for the contract. “We support the concept of provisional fee for EM related work. It helps assure contractors work to the highest standards to achieve the goals and objectives of the contract and DOE. However, as set forth, the provisional fee construct is exceptionally punitive. We recommend that some of the fee earned by the Contractor be non-provisional,” the Fluor letter states.
Fluor questioned DOE’s current plan to reduce the new Idaho cleanup contractor’s fee by $0.20 for every dollar the contractor exceeds the proposed target cost, and to prevent the contractor from earning cost incentive fee and to begin reducing fee on a dollar-for-dollar basis if the contract performance ceiling is exceeded. “We are firmly committed to staying under the target cost,” the Fluor letter states. “As any potential bidder is evaluating whether or not to participate in a competition, the likelihood of earning fee is a critical element of the decision process. The potential of zero fee for 5 years of work is a significant barrier to participating in the competition.” Fluor also noted the challenges DOE’s proposed fee structure holds for publicly traded companies. “As currently configured, earnings declared in each of the first 4 years of the contract could be voided as the results of an unforeseen cost overrun experienced in the final year of the contract.”
Fluor also expressed concern over what it described as provisions “that increase the performance risk profile” of the new contract, such as “unrealistic waste throughputs to achieve fee criteria” and “unattainable” milestones, among others. “We recognize the desire by DOE to improve performance and not just accept the status quo as good enough. However, increases in processing rates and throughputs must be realistically achievable,” the Fluor letter says. “If the required throughput rates appear unachievable, a potential bidder does not consider that fee to be achievable, and therefore it is effectively unavailable to be earned. Hence, the potential financial upside is reduced. This negatively affects the attractiveness of the competition to a potential bidder.”
Another “significant barrier” for Fluor is a provision in the RFP that would give a DOE contracting officer the ability to withhold performance incentive fee based on a determination that performance was inadequate in one of several categories. “This provision enables the Contracting Officer to withhold all the Performance Inventive Fee based on what she/he very subjectively deems to be inadequate performance in any one of seven areas. With the lack of any objective criteria, a potential bidder has little assurance or certainty the Performance Incentive Fee will be attainable in this area,” the Fluor letter states. “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.”
Fluor Wants to See Four-Year Award Term Option
DOE currently plans for the new ICP Core contract to run for a five-year period, but Fluor has called on the Department to add a four-year award term extension. “With the duration of the contract limited to 5 years, the contractor is not financially incentivized to institute programs and innovations to assist DOE in meeting out-year milestones, which are so critical to regulators and other stakeholders,” the Fluor letter states. “If the contractor has not performed at the required level, DOE simply would not exercise an Award Term. However, if the contractor is performing well, progress can continue toward meeting out-year regulatory milestones without the disruption of a new acquisition process, and potentially a contractor transition.”
DOE Holds New Round of One-on-Ones This Week
It still remains to be seen how much competition the Department will ultimately get for the new Idaho contract. Fluor is believed to be the most interested in leading a bid, while Bechtel and AECOM each are also reportedly considering leading their own efforts. None of the three, though, have made a firm decision to compete for the contract, according to industry officials.
This week, DOE held a new round of one-on-one sessions with potential bidders via teleconferences. The Department declined to comment late this week, though, on which companies participated, how many sessions were held or what topics were discussed during the sessions, saying all such information is procurement sensitive.
