One Lockheed Martin affiliate reaped more than $60 million in unallowable profits over four years under a dubiously permissible information technology subcontract with another Lockheed affiliate at the Energy Department’s Hanford Site in Washington state, the DOE Inspector General’s Office said in an audit report released Wednesday.
The IG said Lockheed-led Mission Support Alliance, prime support-services contractor for DOE’s long-running cleanup at the former plutonium production facility near Richland, Wash., was supposed to handle information technology services for the site’s main cleanup contractors under the Mission Support Contract it received from DOE’s Richland Operations Office in 2009, and which including options is worth up to $3.6 billion through May 25, 2019.
Instead, the IG said, the company awarded this work to Lockheed Martin Services Inc. in January 2010, giving the other Lockheed affiliate a five-year, $232 million deal for which no other company had a chance to compete.
Lockheed Martin Services subsequently, and in apparent violation of the Federal Acquisition Regulation that governs federal purchasing, priced profit into information technology support services it provided from 2010 through 2014 for both CH2M Hill Plateau Remediation Co. and Washington River Protection Solutions — respectively, DOE’s primary central plateau cleanup and tank farm contractors at Hanford.
Whether those fees were allowable hinges on whether the services Lockheed Martin Services provided were commercial in nature, as the Federal Acquisition Regulation defines that term. In 2010, before the subcontract went out, the Richland Operations Office told Mission Support Alliance the services were noncommercial, and therefore had to be provided at cost, under federal rules.
For reasons the IG’s report did not illuminate, the message did not get across.
The Richland Operations Office did eventually notify Mission Support Alliance it planned to claw back the $60 million or so in fees paid to Lockheed Martin Services. The agency and Mission Support Alliance are now negotiating whether, and how, that will happen in a dispute resolution process before the U.S. Civilian Board of Contract Appeals.
A Mission Support Alliance spokesperson said Wednesday the company is “working with DOE on the disallowed fee.”
