Energy's Environmental Management office still struggling to manage contracts

Monday - 7/1/2013, 3:42pm EDT

By Cogan Schneier
Special to Federal News Radio

The Department of Energy is struggling to resolve major issues in managing contracts, especially within the Office of Environmental Management (EM).

Representatives from large contracting companies, including Bechtel, CH2M HILL and Parsons Corporation said in a hearing Thursday before the Senate Homeland Security and Governmental Affairs subcommittee on Financial and Contracting Oversight that EM needs to better define the true scope of its projects.

"This is an area of contract management that has not received enough attention from Congress … When hundreds of billions of taxpayer dollars are at stake, we need to make sure that those dollars aren't just being squandered," said Sen. Claire McCaskill, (D-Mo.), chairwoman of the subcommittee.

The Office of Environmental Management relies mainly on contractors to meet its mission, which is to safely clean up nuclear waste after decades of nuclear weapons research and development. DOE Inspector General Gregory Friedman said more than 40 prime contractors are involved in carrying out EM activities and that those contracts total more than $90 billion. McCaskill said the plans for these activities stretch into the future, beyond 2087.

Jack Surash, deputy assistant secretary of acquisition and project management at EM, said the waste treatment plant (WTP) at Hanford, Wash., and the salt-waste processing facility (SWPF) at Savannah River, S.C., have been two of EM's challenging projects.

Both sites experienced cost overruns in the billions. At Hanford, EM's spending increased by more than $10 billion, while at Savannah River, costs soared by more than $700 million. Much of the trouble in EM contracts comes from the large costs associated with different components that affect nuclear clean-up projects — safety, oversight and technology development, the witnesses said.

"We're dealing with are very complex, first-of-a-kind plants. Nobody's ever built these before. Nobody's ever put the components together," Surash said.

Surash said Energy needs to improve in upfront planning and address technology requirements before it begins a project. The difficulty arises when EM begins projects before they can learn everything about the technologies involved, Surash said. He added because the technology develops quickly, driving the cost of the project way over the projected baseline.

Surash said this has been a recurring problem within EM.

"This is part of this tug on getting on with work vs. doing it right. A pilot plant will actually cost a little bit more money upfront, it will take more time, but we've learned the hard way for first of a kind, nuclear, very complicated projects that we really need to do this or were asking for trouble-we're rolling the dice down the road," Surash said.

McCaskill said EM's heavy reliance on contracting is troubling, because DoE has been on the Government Accountability Office's High Risk List for contract management since 1990.

She said that though the cost-based contracts EM uses now are an improvement over large management and operation (O&M) contracts the department used to use, the cost overruns can be extensive. McCaskill said these contracts can be very risky because the government is responsible for cost overruns. EM's environmental cleanup is currently expected to cost $270 billion over the next several decades, McCaskill said.

Surash, Friedman and Defense Nuclear Facilities Safety Board member Joseph Bader agreed improvements must be made.

"Unfortunately for the taxpayer, for EM's large contracts, cost over-runs, schedule delays and technical failures are the rule, not the exception," McCaskill said. "We need to find a better way to do this, because we can't just afford the status quo anymore."

Witnesses from Bechtel, Parsons Corp. and CH2M HILL said they believe that EM has the internal expertise to oversee contracts effectively. Surash said EM will continue to learn from each project, and makes improvements along the way.

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