Fed Lawsuit Against SRNS, Fluor Rolls On

The top contractor at the Department of Energy’s Savannah River Site is looking for clarity on whether millions of dollars in “unallowable” expense filings in recent years were actually unallowable, as claimed by the federal government,

On March 18, the Department of Justice sued Savannah River Nuclear Solutions, the management and operations contractor for the facility in South Carolina, and Fluor, one of the contractor’s parent companies, claiming they overcharged the government $5 million by filing 573 unlawful reimbursement claims, spanning from Oct. 8, 2008, to Dec. 31, 2015. The lawsuit charges that the companies knowingly overcharged the federal government to pay for home office expenses and bid and proposal costs – a direct violation of the M&O contract and of the cost transfer agreement that says the reimbursement of home office costs is unallowable under the deal.

On Dec. 6, U.S. District Judge J. Michelle Childs granted SRNS’ request to dismiss the claim for “unjust enrichment,” meaning SRNS and Fluor wrongfully benefited from the contract. She also dismissed the claim for payment by mistake – in which the federal government alleged it was wrongly required to make payments to SRNS and Fluor for certain costs. At the same time, Childs denied SRNS’ request to dismiss the federal allegations on the home office expenses and bid proposals false claims.

However, she is honoring the federal contractor’s request to refer the home office and bid claims to the federal Civilian Board of Contract Appeals (CBCA) for an advisory opinion on the matter. The two parties were asked to file supplemental briefs explaining the questions they think Childs should ask the CBCA.

Both SRNS and the federal government hope the board will side with their interpretations of the contract. Filed Jan. 3, SRNS’ brief says the court should ask the CBCA if the costs in question are truly “unallowable.” According to the contractor, “if the costs challenged by the Government’s Complaint are allowable under the M&O Contract, the Government’s FCA claims fail as a matter of law. The Court should not request or impose any limitations on what the Board can or should consider in formulating its advisory opinion, as DOJ suggested.”

In the initial filing, the federal government outlined multiple incidents in which SRNS supposedly reported illegitimate claims. For example, in the first listed incident, workers from SRNS and Fluor submitted an incurred cost report for nearly $338 million for their 2008 services. But, according to the complaint, the report included $1.19 million in home office expenses and nearly $90,000 in bid and proposal costs, for a total of more than $1.2 million in unallowable expenses. Subsequent unallowable costs alleged by the federal government include $942,000 in 2009, $906,000 in 2010, $362,000 in 2011, $666,000 in 2012, $254,000 in 2013 and $481,000 in 2014.

The federal government wants a similar question answered, but says the CBCA should stick to the issues addressed in the original complaint. “Because the Complaint alleges Defendants in fact knew the costs were unallowable when allocated to the loaned employees, it would be inefficient and ineffective for the CBCA to answer a question based on the opposite premise: namely, that Defendants reasonably believed the challenged costs were allowable at the time of submission,” according to DOJ.

The feds added that, until the parties are able to discuss if SRNS knew it had allegedly committed fraud, “an inquiry beyond the Complaint’s allegations into the Defendants’ interpretation will only serve to delay this proceeding, and should be avoided.”

Both parties are expected to file responses to each other’s supplemental briefs.

Savannah River Nuclear Solutions is a partnership of Fluor, Honeywell, and Stoller Newport News Nuclear. Its missions at the Savannah River Site encompass cleanup, building deactivation and decommissioning, tritium production for nuclear weapons, and operation of the Savannah River National Laboratory. The current $9.5 billion M&O contract is scheduled to expire on July 31, 2018.