Three years after Bechtel and a fellow contractor at the Department of Energy’s Hanford Site in Washington state paid about $58 million to settle fraud claims, DOE’s Office of Inspector General still lacks confidence in Bechtel’s cost estimates, according to a new report.
In an audit report out last week, DOE’s Office of Inspector General analyzed how Bechtel calculated its updated cost baseline proposal for the Waste Treatment and Immobilization Plant and found it lacking.
In September 2020, Bechtel and AECOM Energy & Construction, a predecessor to Amentum, admitted no wrongdoing but paid $57.75-million for overbilling DOE for work at the Hanford vitrification plant.
After a year-long audit, concluded in May 2022, DOE’s Office of Inspector General (IG) still is not sold on the reliability of the data Bechtel is using to estimate costs at the plant. In addition, IG said in the 32-page report it suspects key labor cost projections could be off anywhere from 3% to 47%.
“We identified several weaknesses related to Bechtel’s labor hour estimates,” the IG said. The labor hour estimates account for approximately $1.8 billion of the total proposed $4.5 billion project costs evaluated here. Bechtel’s plant construction contract, currently valued at $15.5 billion, started in December 2000 and is scheduled to run through December 2024.
The increased hours and costs occurred because DOE “did not ensure Bechtel’s methods were consistent with industry standards or best practices,” IG said in the report.
Bechtel used a so-called “Monte Carlo simulation” that employs a computerized system for risk analysis and probability, the IG said.
“We identified over 1 million direct labor hours added through Bechtel’s questionable application of Monte Carlo,” the IG report went on to say. “Bechtel did not test the accuracy of its Monte Carlo simulation despite the standard practice of testing simulation results to ensure accuracy, especially when systems are new or adjusted.”
“Finally, we found that Bechtel did not provide supporting documents to proposal reviewers in a timely manner, including during this audit,” DOE IG said.
The IG made eight recommendations designed to improve Bechtel cost estimates. DOE concurred with three, disagreed with four and partially concurred with one.
“As a result, and while DOE does not endorse the report’s conclusions that Bechtel National, Inc.’s (BNI) baseline and contract proposals were unreasonable or that BNI benefitted (improperly) or disadvantaged the taxpayer, DOE will use the assessment to continue to enhance contractor oversight in general,” DOE said.
Bechtel declined comment, other than pointing to the DOE comments attached to the report.
While DOE disagreed with much of the IG report, the agency “has largely addressed the recommendations prior to this report being issued,” DOE said in its formal comments.
