Changing the structure of the contract for the Department of Energy’s Mixed Oxide Fuel Fabrication Facility would not necessarily help restrain the rising costs for building the plant that will eliminate stocks of nuclear weapon-usable plutonium, the Government Accountability Office (GAO) said in a report Wednesday.
The report does not include any recommended action, but rather reveals information gleaned from interviews with officials at organizations including DOE’s semiautonomous National Nuclear Security Administration (NNSA) and CB&I AREVA MOX Services, the contractor in charge of building the MOX plant at the Savannah River Site in South Carolina.
The MOX plant would convert 34 metric tons of plutonium into commercial nuclear fuel, per the terms of a 2000 U.S.-Russian arms control agreement.
When construction began in 2007, the Energy Department estimated it would cost $4.6 billion to build the 600,000-square-foot facility, with completion slated for September 2016. Now, the department believes it will cost $17.2 billion – including the $5 billion already spent – with completion anticipated in 2048. Overall, DOE projects the project’s life-cycle price tag at $51 billion.
In the fiscal 2017 National Defense Authorization Act (NDAA), Congress told DOE to work with the U.S. Army Corps of Engineers on a report assessing the MOX contract. The Corps in February advised DOE to convert the construction portion of the contract from a cost-reimbursed deal to a fixed-price incentive firm contract. The change would “reduce the level of risk to the government from the level currently experienced under the existing contract,” according to the Army report.
If the two sides could not agree to change the contract, the Army Corps said DOE should cancel the agreement.
But, according to the GAO report released Wednesday, such a change would not necessarily limit DOE’s expenses.
“[C]onverting the contract would limit the government’s risk of future cost increases but would take time and could add some costs,” the GAO said. Quoting MOX Services, the agency said the contractor would account for uncertainty and increased costs when it negotiated a contract proposal. That could drive up costs more than sticking with the current cost-plus system, GAO said.
Wednesday’s GAO report also addressed another controversial issue plaguing the MOX facility: for the last two years, the Energy Department has said construction is roughly 30 percent complete. The contractor’s parent company, however, puts the figure at about 70 percent.
The GAO said MOX Services’ completion estimate of about 74 percent is based on a 2012 estimate that does “not fully reflect the characteristics of a high-quality estimate and could not be considered reliable, in part because it was a proposal that was not reviewed and accepted by DOE.”
DOE’s estimate from 2016, meanwhile, “we found to be reliable,” GAO wrote in the report released this week.
MOX Services took issue with that, pointing out that DOE deemed the company’s 2012 estimate “to be of high quality,” and even paid the company a fee to calculate the figure. The company also complained, in its written reply to GAO’s latest report, that DOE padded its 2016 cost estimate with expenses that, according to the agency’s own rules, should not have been included.
The GAO provided copies of its latest report to DOE, the MOX contractor, and the Army Corps. The Energy Department and CB&I AREVA MOX Services submitted responses to the findings, while the Army did not.
The Energy Department believes the MOX project should be scrapped, and the federal government should proceed with downblending. The agency believes that venture would only cost $17 billion – the same amount as facility construction and a third of the total cost of the MOX project over its lifetime.
MOX Services said the actual costs of the project are “substantially less” than those estimated by the NNSA. The contractor believes the life-cycle cost of the project is $19 billion and that downblending would cost $20 billion.
If the federal government moves forward with MOX, something Congress is still debating, the Energy Department said it would look to change the contract as the Army Corps suggested.
