The contractor for the now-terminated MOX project at the Savannah River Site in South Carolina tallied more than $54 million in cost overruns through “inadequate” management of its subcontract with North Carolina-based Intermech, according to a June 2017 assessment from the Department of Energy’s semiautonomous National Nuclear Security Administration (NNSA).
The report further states that, while on CB&I MOX Services’ watch, Intermech took months longer than expected to deliver designs for HVAC duct work at the Mixed Oxide Fuel Fabrication Facility (MFFF).
“This singular, non-compliance was evaluated by NNSA to be a primary root cause of (MOX Services’) failure to deliver HVAC fabricated duct on scope, on schedule, and on budget,” NNSA Contracting Officer Lance Nyman wrote in the report, made public last week by the watchdog group Savannah River Site Watch.
Nyman submitted the findings to Rex Norton, vice president of contract and supply chain management at MOX Services.
At the time of the report, the MFFF was still being built for its intended purpose of converting 34 metric tons of surplus nuclear weapon-usable plutonium into commercial nuclear fuel under the U.S.-Russian Plutonium Disposition and Management Agreement.
The NNSA terminated the project in October 2018, after years of legal battles that included the state of South Carolina’s attempts to save MOX by suing the Energy Department. The federal government cited escalating expenses and delays in canceling the project, including projections that the MOX life-cycle cost would be three times the $17 billion estimate when construction began in 2007.
Some of those cost overruns were included in the 2017 assessment of Intermech’s $18.5 million subcontract, which was awarded on Sept. 17, 2009, and lasted until April 10, 2013. The company specializes in HVAC service, boiler installation and repairs, and piping, among other services.
In its subcontract with MOX Services, Intermech was supposed to provide “equipment, labor materials and services” for the facility’s HVAC system, including over 1.3 million pounds of sheet metal. However, costs ballooned at the MOX facility, pushing the contract value to $48.1 million, and the time frame to 83 months, according to the NNSA report. In addition, the subcontractor only provided about 1 million pounds of duct work.
The NNSA said Intermech changed its design for the duct system hundreds of times in the first couple years of the contract – so much so that 77 percent of its earned hours were spent on change work and only 23 percent on the original base scope of the award, the agency wrote in the agency wrote in the assessment. The NNSA also questioned MOX Services’ role in allowing these issues to persist: “In light of these numerous and ongoing design changes causing significant cost increases, MS’ Management did not take action to identify failures and suspend or stop fabrication efforts until design was completed.”
The agency added that, from March 2012 to September 2014, MOX Services modified its subcontract with Intermech 15 times without securing NNSA consent. Those modifications included $40,000 in equipment purchases and the $200,000 remodeling of an off-site facility.
The NNSA said those actions were “inappropriate,” because they weren’t within the scope of the contract. Furthermore, these costs should have been filed under a separate invoice to “avoid commingling them with the cost to fabricate HVAC Ductwork,” the agency wrote.
Agency spokesman John Daniel said by email this week the cost overruns were factored into a Aug. 2016 lawsuit MOX Services filed against the federal government. MOX Services claims the NNSA has failed to reimburse the company $2.2 million for costs associated with a request for equitable adjustment (REA). According to the complaint, MOX Services racked up the seven-figure sum by seeking outside legal help to make its reimbursement request. The REA was for costs MOX accrued in its subcontract with Intermech.
The NNSA has been fighting the suit, claiming those costs aren’t covered under its contract with MOX Services, meaning the agency shouldn’t have to pay. The case is still open.
“NNSA has significant concerns with the way MOX Services managed and oversaw its subcontracts, Those concerns are now involved in litigation with MOX Services and NNSA does not comment on ongoing litigation,” Daniel wrote.
MOX Services did not respond to questions by press time.
