Weapons Complex Vol. 26 No. 40
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Weapons Complex Monitor
Article 2 of 16
October 23, 2015

EM Pushing for More Fixed-Fee Work and Longer Contracts

By Brian Bradley

Brian Bradley
WC Monitor
10/23/2015

AMELIA ISLAND, Fla. – The Energy Department’s Office of Environmental Management plans to award more contracts with a five-year minimum award term, and that incorporate increasingly more fixed-price work scopes, Jack Surash, EM deputy assistant secretary for acquisition and project management, said here yesterday. “I’m going to be looking for longer durations, not shorter,” he said. “You’re typically going to see five years at the shortest, and even if it’s the sort of contract that limits us to five, that can be waived, and you’re going to see longer duration of contracts.”

After companies told the office they’d prefer it to release fuller draft RFPs instead of EM’s previous standard approach of releasing slices of the drafts, the office now plans to release more substantial drafts, and is inviting more informal feedback to drive the final RFP and the rest of acquisition processes, Surash said in a presentation at the ExchangeMonitor’s Decisionmakers’ Forum. “We will typically have one-on-ones with that to get more info and feedback,” he said. “We’ll accept questions. We will not post questions. We will not post answers, but we will accept them. And that all works out to the final request for proposal, the RFP, and once we release that, now any questions and answers are all in the public, posted on the website.”

Surash also signaled that EM is increasingly looking for contractors to do more up-front design work for certain contracts, which could result in more synergy with different federal and state regulatory bodies, and in more accurate budget planning for out-years, he said. The information EM gathers through this increasingly front-weighted process might show that incorporating more fixed-price elements would be more appropriate in lieu of cost-reimbursable elements. “In the old days, we would’ve just bought this all at once,” and might not have even known what the solution was, Surash said. “It’s pretty mushy to go off and do [something like that] cost-reimbursable. It’[d be] high-risk to us and gosh, no wonder costs go up when we have something like that.”

Even if a cost-reimbursable contract is awarded instead of a fixed-price deal, it would incur far less risk if more design work is done up front, Surash said. “I think what this boils down to, is we want to take things in phases, rather than the whole thing at once, and we can attempt to drive that work,” he said.

During DOE’s first National Cleanup Workshop in Arlington, Va., last month, Amy Fitzgerald, director of government affairs and information services for the city of Oak Ridge, Tenn., said local regulatory agencies can be helpfully engaged in prioritizing risk in contracts. “The whole issue of risk prioritization is a very difficult subject because risk many times is in the eye of the beholder,” she said.

Surash said the cost-plus-award-fee contract at Oak Ridge’s East Tennessee Technology Park is the most successful current EM contract. In that cleanup contract for the former uranium enrichment site, performed by UCOR, the proportions of work to be subcontracted (60 percent) and set aside for small businesses (30 percent of the total) were negotiated up front. Surash said EM plans to implement a structurally similar plan for, and to put “teeth” into, the upcoming Los Alamos National Laboratory cleanup contract, to be awarded in 2016 or 2017.

Both Fitzgerald during last month’s DOE conference, and government contracting and litigation attorney Kenneth Weckstein of Brown Rudnick LLP during this week’s Decisionmakers’ Forum, pointed to the success of the award-fee contract for the Rocky Flats cleanup project, which Weckstein said was a “tremendous benefit to the government,” although it came with a $500 million price tag. He asked Surash whether he was considering imposing limitations on the losses that contractors could incur or on the fees or awards that could be achieved. Surash said he knows fixed-price scopes aren’t going to be “free,” as they can leave contractors financially exposed if, for example, a project’s cost spikes. “In general, we’ve got to be careful on that exposure,” Surash said. “Companies will do it, but the premium that they’re going to want to get exposed is really high, so typically, we’re going to avoid that.”

Surash said EM is refocusing the financial structure of its contracts because of current federal budget austerity. Previously, the office operated on a basis of “prayer and hope,” programming for receiving more funding than it expected to receive, Surash said. But now, the office is working to better adapt to budgetary realities by building more phased financial options into contracts. “If prayer and hope do happen, and every once in a while it does, it’ll be easy, because we’ll have competitively pre-priced options, and you can press the button, more or less, and put that extra award on the contract,” Surash said. “So that’s one of the approaches that I’m going to attempt to use … when we don’t have 100 percent alignment when it comes to funding.” As a hypothetical example, Surash said this philosophy could entail things such as breaking down a $700 million contract with no options into a $500 million base contract with potential add-ons totaling $200 million.

Kurion Board of Directors Chairman Ralph DiSibio at the conference said modifying unclearly defined contracts in midcourse can present a range of problems for the project and prime contractors. He highlighted the benefits and flexibility that a well-defined contract could bring, in terms of allowing a team to restructure and modify its subcontracting base. “[Let’s say] you want to bring on a specialized small business,” he said. “The problems in getting that done are insurmountable, because there are a thousand roadblocks and a thousand pieces of red tape that have to be cut.”

Kennewick, Wash., Mayor Steve Young, vice chairman of the Energy Communities Alliance, during a House Nuclear Cleanup Caucus event on Capitol Hill last month, said defining subcontracting plans up front could go a long way toward helping local economies.

“One of the things we’re seeing a lot of is [after] the work’s getting done, and all the sudden, [the prime contractor realizes], ‘OK, I’ve got my fee for the last three years, I’m going to send this subcontractor [away] and hire all that company’s people,’” he said. “It happens. It’s going on. What we’re saying is we want a plan that lives the term of the contract. Why? Because those small businesses, those local businesses, those subcontracting businesses, will either be a part of our community at the beginning of the contract, or will become a part of our community throughout the term of the contract.”

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NEW: Via public records request, I’ve been able to confirm reporting today that a warrant has been issued for DOE deputy asst. secretary of spent fuel and waste disposition Sam Brinton for another luggage theft, this time at Las Vegas’s Harry Reid airport. (cc: @EMPublications)

DOE spent fuel lead Brinton accused of second luggage theft.



by @BenjaminSWeiss, confirming today's reports with warrant from Las Vegas Metro PD.

Waste has been Emplaced! 🚮

We have finally begun emplacing defense-related transuranic (TRU) waste in Panel 8 of #WIPP.

Read more about the waste emplacement here: https://wipp.energy.gov/wipp_news_20221123-2.asp

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