Rather than reducing schedule delays and expense overruns, the Energy Department’s use of a cost cap at the Separations Process Research Unit (SPRU) cleanup project in upstate New York might have had the opposite effect, DOE’s Office of Inspector General said in an audit released Wednesday.
The Energy Department in February 2011 instituted what was essentially a $125 million limit on its financial responsibility and agreed with contractor URS to a December 2011 completion date for environmental remediation at the onetime Schenectady County research site on chemical separation of plutonium and uranium.
“Federal officials believed that, after the Department was no longer reimbursing D&D [decontamination and decommissioning] costs, the contractor worked at a slower pace than previously planned in an effort to conserve its monthly cash flow,” the IG said in the report dated March 23.
The contract’s cost to the department had risen to $180 million as of January 2018, due in part to changes in the scope of work, according to the audit. Due to unforeseen factors, such as extreme weather damage, DOE has agreed to pay costs beyond that original $125 million. But the agency and the contractor remain at odds over responsibility for most of the extra cost.
“We acknowledge a number of factors contributed to the schedule and cost increases, including factors beyond the Department and contractor’s control,” the IG said. Still, DOE needed to do a better job of managing the project, according to the report.
As of January 2018, cleanup at SPRU was expected to continue into July. Original contractor URS, which is now owned by AECOM, had as of January 2018 billed DOE for more than $427 million, and total costs were forecast to reach up to $460 million at project completion. While it has accepted $180 million in payments, DOE had not reimbursed nearly $250 million of the amount invoiced by the contractor.
The question of how much of the additional cost at SPRU should be borne by the contractor, and how much is DOE’s responsibility of, is the subject of an alternate dispute resolution proceeding between the two parties. There was no word this week on the status of that process.
In December 2007, DOE awarded the original $67 million cost-plus contract to URS Energy & Construction. The agreement called for the contractor to tear down and remove the SPRU buildings and equipment, dispose of resulting waste, and return the property at the Knolls Atomic Power Laboratory to the department’s Office of Naval Reactors. The initial target for completion was November 2011.
But the SPRU project encountered a number of bad breaks, including a 2010 radiological release and the 2011 hurricane that contributed to mudslides and delayed key decontamination and disposal operations for 16 months.
The Energy Department and the contractor never agreed upon a project baseline after the cost cap was put in place, the IG said. Because the two sides could never agree on who was responsible for the extra costs, they could agree upon a baseline to manage it, according to the audit. A project baseline is basically an agreed-upon set of facts on cost, schedule and performance. It’s also a contract requirement, the IG said.
In a financial filing in January, AECOM said it is still awaiting a decision in a $103 million claim filed against DOE in 2014 over denied SPRU expenses. According to the filing, AECOM has argued much of the extra expense should not be subject to the cost cap. It was instead “due to unanticipated requirements and permitting delays by federal and state agencies, as well as delays and related ground stabilization activities caused by Hurricane Irene in 2011.”
Michelle Anderson, DOE deputy inspector general for audits and inspections, recommended the department consider alternatives to meet schedule targets, such as milestone-based financial penalties.
In his formal response, James Owendoff, principal deputy assistant secretary for environmental management, said the Office of Environmental Management will look at such options. The EM official added that the office will distribute lessons learned from its experience with cost caps, which was another IG recommendation.
AECOM declined comment on the IG audit. Likewise, DOE declined to comment beyond Owendoff’s responses to the findings.
TRU Waste Could Remain Stored at SPRU for Years
The IG report also notes transuranic waste was discovered at the site during cleanup operations in 2015 and 2016 and will have to be stored at SPRU for years. The waste resulted from decontamination of the H2 and G2 buildings at the SPRU site.
Some of the material must be managed as remote-handled transuranic waste, because of its high radiation dose rates. But DOE does not expect its Waste Isolation Pilot Plant in New Mexico to start taking remote-handled TRU wastes any earlier than 2021.
“While we could not quantify costs given these unknowns, we noted that Environmental Management’s SPRU mission could continue as long as the transuranic waste remains on-site,” the IG said.
As a result, New York state drafted an administrative consent order, which DOE to apply for a state hazardous waste storage permit for the site. The Energy Department has previously indicated it expects to file the permit application, for 22 containers of waste, in April.
