Washington Closure Hanford has asked a federal judge for summary judgment in the Department of Justice lawsuit accusing the former Energy Department cleanup contractor of falsely claiming credit for awarding three subcontracts to women-owned small businesses.
A hearing on the motion filed in U.S. District Court for Eastern Washington is scheduled for Jan. 12 at the federal courthouse in Richland, Wash., and a jury trial is set for June 25. A ruling in Washington Closure’s favor would keep at least part of the case from proceeding to trial.
Other plaintiffs named in the case recently have reached settlement agreements with the Justice Department.
In the motion, Washington Closure argues it did not knowingly claim credit under its DOE contract for subcontract awards to disadvantaged businesses the DOJ claims were actually fronts or pass-through organizations to a business ineligible for the subcontracts at the Hanford Site.
The Department of Justice argues Washington Closure falsely claimed credit for some subcontracts as being small and disadvantaged. Federal attorneys say that led DOE to believe the company was complying with its small business subcontracting plan, so the agency did not reduce fees that depended on subcontracting work to small and disadvantaged businesses.
The federal False Claims Act stipulates that a violation of the act must be intentional, according to Washington Closure. The company also said the subcontracts likely would not have affected its fee under the Hanford River Corridor Closure Contract, which expired after 11 years in September 2016 with the majority of the Columbia River corridor remediation completed.
The Department of Justice case focuses on two subcontracts awarded to Sage Tec, valued at about $20 million total, and $2.8 million of work order modifications to a subcontract awarded to Phoenix Enterprises Northwest. Both represented themselves as small, woman-owned businesses.
Phoenix was awarded a $4 million subcontract in 2009 to haul contaminated waste to Hanford’s Environmental Restoration Disposal Facility. The subcontract was challenged by another small, woman-owned business, Savage Logistics, and the Small Business Administration ruled that Phoenix, which was formed just four months earlier by an employee of Federal Engineers & Constructors (FE&C), was affiliated with FE&C and not eligible for the subcontract as advertised.
Washington Closure chose not to rescind the subcontract award, but did not claim a small business credit toward the goals set by its DOE contract. However, as the subcontract was modified on five occasions, computer software that tracked small business awards defaulted to Phoenix’s original designation of a small, woman-owned business. One of the errors was caught at Washington Closure Hanford and the designation changed, but the others were not revised until a DOE Office of Inspector General employee brought it to the attention of Washington Closure, the company said. It immediately changed the designation.
Washington Closure told the court that “DOE recognized that WCH had made an innocent mistake.” The DOE contracting officer sent an email to his colleagues saying he was “all for enforcement, but WCH would not have purposely made such claim just to make their stats on small business a nano percent better.” Washington Closure said in a subcontracting report that included the Phoenix subcontract modifications, it awarded 20.3 percent of subcontracts to small disadvantaged businesses, missing its goal of 22 percent through September 2011, but met its goal for women-owned small businesses. The reported percentages would have dropped by less than half a percent if the Phoenix modifications were not included, according to the company.
Sage Tec in 2010 secured a Washington Closure subcontract worth about $4.5 million to dig up chromium-contaminated soil and a $15 million subcontract two years later for general cleanup work in the Hanford 300 Area. Washington Closure said it relied on the self-certification both times by Sage Tec as a small, woman-owned business, a practice approved by DOE. In addition, the department signed off on the $15 million subcontract award, because of its size, Washington Closure said. It had no reason to doubt Sage Tec qualified as a small, woman-owned business because the owner, Laura Shikashio, was well known at Hanford, after working there for DOE and other contractors.
The Energy Department also knew that Sage Tec was relying heavily on FE&C for the subcontracted work, Washington Closure said in court documents. The 300 Area subcontract had required that the winning bidder directly perform at least 15 percent of the work and Sage Tec has said it would perform 26.8 percent, according to the company. The Department of Justice has accused Sage Tec of relying on FE&C employees to do most of the subcontracted work and of owning no equipment.
Sage Tec has vigorously denied the Department of Justice allegations, pointing out that it has been awarded other Hanford subcontracts and that Shikashio had decades of experience on environmental remediation projects before founding the company in 2009.
Sage Tec settled its portion of the federal civil case for $235,000, admitting no liability. FE&C settled the lawsuit for $2 million, saying it complied with all regulations and admitting no liability. It said it wanted to move past costly and complicated legal proceedings. The Department of Justice did not sue Phoenix.
