Washington Closure Hanford and the Department of Justice told a federal judge Thursday they had reached a settlement agreement in a civil lawsuit alleging the then-Hanford Site cleanup contractor knowingly awarded small business subcontracts to front companies.
They told the judge they would execute the agreement on Thursday, but had not filed it with the court by the close of business.
The notice to U.S. District Judge Sal Mendoza Jr. in Eastern Washington did not provide the settlement amount. The parties reached a tentative settlement in January, and Mendoza in recent months granted three stays in the case to allow them to finalize the agreement, but warned he would not stay the case beyond June 8. On Wednesday, with no settlement agreement filed, the judge ordered the parties to propose hearing and trial dates by noon Thursday in advance of a Friday hearing.
After the parties told the judge Thursday they had finalized the settlement agreement, Mendoza canceled the Friday hearing. He ordered parties to file a motion for dismissal by July 23. The settlement agreement resolves all remaining claims in the matter, with the exception of attorney fees and costs for the small business subcontractor that filed the original lawsuit.
Savage Logistics and owner Salina Savage filed the lawsuit in 2010, accusing Washington Closure, Federal Engineers and Constructors (FE&C), and Sage Tec of violating the federal False Claims Act. The Justice Department joined the case in part in 2013. Under the act, a whistleblower exposing fraud against the federal government may be eligible to receive a portion of any settlement.
Federal Engineers and Constructors settled allegations in August 2017 for $2 million, followed by a Sage Tec settlement for $235,000. Both vehemently denied wrongdoing, saying they settled to end expensive, protracted litigation.
Washington Closure’s contract for environmental remediation of the Hanford Site river corridor expired in September 2016 with most work completed. It was valued at almost $2.9 billion over 11 years. Its contract required it to subcontract some work to small businesses and to certain categories of small businesses, including those owned by women.
The Department of Justice accused Washington Closure of taking credit for awarding subcontracts to small, women-owned businesses that served as front companies. The companies relied heavily on FE&C for staff, equipment, insurance, and/or quality assurance programs, the agency said.
The three subcontracts at issue include a 2009 deal worth $4 million awarded to Phoenix Enterprises NW, which was not named as a defendant by the Department of Justice. The contract was for hauling contaminated material to the Environmental Restoration Disposal Facility in central Hanford.
The Small Business Administration ruled Phoenix was not independent of FE&C and not a small business subcontractor. Washington Closure agreed not to count the subcontract toward its small business subcontracting requirements, but then said it mistakenly counted part of the work. It blamed a computer program error for claiming $2.8 million of the subcontract as small business work.
Contracts worth a total of nearly $20 million were awarded to Sage Tec in 2010 and 2012 for digging up chromium contamination near C Reactor and cleanup of contaminated structures, soil, and pipelines in Hanford’s 300 Area. The Department of Justice alleged the company lacked relevant experience, equipment, and employees to perform the work. Washington Closure said Sage Tec had agreed to perform 26.8 percent of the work under the subcontract, which included a requirement that it perform at least 15 percent of the work. Sage Tec pointed out that it has successfully completed other Hanford subcontracts.
