Department of Energy's Project to Clean Up Pit 9 at Idaho Falls Is Experiencing Problems
RCED-97-180: Published: Jul 28, 1997. Publicly Released: Jul 28, 1997.
Pursuant to a congressional request, GAO reviewed the: (1) Department of Energy's (DOE) basis for selecting a fixed-price contracting approach and a subcontract for the Pit 9 project at Idaho National Engineering Laboratory; (2) basis for awarding the subcontract to Lockheed Martin Advanced Environmental Systems; and (3) current status of the project and the potential for cost overruns.
GAO noted that: (1) DOE chose a fixed price approach for the project because Department officials believed a fixed price would help limit the project's total cost and provide an incentive for contractors to use efficient practices in carrying out the cleanup by shifting the risk of nonperformance to the contractors; (2) DOE officials believed they had a better chance of achieving these goals with a fixed-price approach than with a cost-reimbursement approach, even though uncertainties existed about the actual wastes in the pit; (3) DOE also directed its management and operating (M&O) contractor at the Idaho falls site to conduct the procurement process for the selection of a subcontractor and to oversee the project; (4) the M&O contractor awarded the subcontract to Lockheed Martin Advanced Environmental Systems on the basis of several key factors, including the adequacy of its technical proposal, its apparent technical and managerial expertise, its successful completion of the test phase, the price, about $200 million, and a guarantee of performance under which the company would return all payments received if its treatment system failed to work properly; (5) estimated completion of the project is at least 26 months behind the original subcontract schedule; (6) the waste retrieval and processing facilities are not ready, and no retrieval or treatment of wastes has begun; (7) instead, DOE has been assessed $940,000 in fines by its regulators, the state of Idaho and the Environmental Protection Agency, for failure to meet deadlines for submitting acceptable design documents; (8) Lockheed Martin Advanced Environmental Systems estimates that its costs have already exceeded the subcontract produce and has requested $257 million for its work through June 30, 1997, as well as a new cost-based subcontract to reimburse the company for all future costs; (9) discussions are continuing, and the outcome of the disagreement is uncertain; (10) meanwhile, because of these contract difficulties and the related legal implications, the M&O contractor has hired outside legal counsel for the Pit 9 project and, under the terms of the M&O contract, DOE is responsible for paying those legal fees; (11) whatever the outcome, the Pit 9 project, as originally conceived, is clearly a failure; (12) it simply cannot be completed in the time frame or within the price agreed to by the subcontractor; and (13) this has important future implications because DOE's planned investment in privatization cleanup projects is growing, the Department included over $1 billion in its fiscal year 1998 budget request for 11 such projects.