Mike Nartker
WC Monitor
1/23/2015
A new Department of Energy fee plan for the final 18 months of Fluor-B&W Portsmouth’s base contract for the Portsmouth D&D project, a copy of which WC Monitor obtained this week, continues DOE’s efforts to shift more risk to its contractors. Under the plan, FBP is now at risk of losing significant amounts of fee for potential cost overruns as the contractor–even performing at an exceptionally high level–appears to only be able to earn less than 70 percent of the available award fee under a best-case scenario. The plan ties a significant portion of the fee the contractor can earn to having one of the three former enrichment process buildings at the Portsmouth site ready for demolition before the end of next March—a goal FBP officials have previously said is all but impossible to be achieved given current and past funding levels. Neither the DOE Portsmouth/Paducah Project Office nor FBP responded to requests for comment on the fee plan this week.
DOE’s latest award fee plan for FBP covers Fiscal Year 2015 through March 28, 2016, when the contractor’s five-year base period as the D&D contractor at the Portsmouth Gaseous Diffusion Plant is set to come to an end. FBP is eligible to earn a total of approximately $18.9 million for work performed during the covered period, consisting of a maximum of approximately $13.3 million for FY15 and approximately $5.56 million for FY16. Seventy percent of each year’s fee is tied to a set of performance-based incentives covering various activities, while the remainder is tied to subjective evaluation factors.
For the first time, though, FBP can lose fee associated with the various performance-based incentives for exceeding estimated costs to perform those activities. For cost overruns of 1-10 percent, the contractor can lose the same percentage of fee. For cost overruns of 11-20 percent, FBP can lose 50 percent in fee, while cost overruns 21-30 percent would put the contractor at risk of losing 75 percent of fee. If FBP exceeds the estimated cost of a specific performance-based incentive by more than 30 percent, then the contractor would lose all associated fee, which could amount to millions of dollars.
Millions in Fee at Risk if Process Building Isn’t Ready for Demolition
The bulk of the work FBP will be incentivized to perform in the remaining 18 months of its base period centers on continuing to prepare Building X-326 for demolition. In FY 2015, the contractor can earn up to $3.55 million in fee for completing ‘cut and cap’ work to remove process gas equipment from up to 65 cells in the building, and approximately $2.2 million in fee for preparing and shipping the resultant waste off-site. FBP can also earn up to approximately $1.89 million in FY15 for removing and shipping off-site auxiliary process gas systems from X-326.
In FY16, FBP can earn up to approximately $1.2 million for removing and shipping off-site auxiliary process gas systems from X-326, and approximately $1.4 million for completing all remaining work to “establish criticality incredible conditions” in X-326. As a result of such work, the fee plan states, “X-326 will have been downgraded from a category 2 nuclear facility to a radiological facility, criticality incredibility will have been achieved and formally declared, and all external system connections will have been isolated (cold, tight, dark) and ready for demolition.” FBP is also eligible under the fee plan to earn approximately $15.3 million for a “super PBI” of completing the deactivation of Building X-326 by March 28, 2016.
Last November, though, FBP Site Project Director Dennis Car said that it was unlikely FBP would be able to have X-326 demolition-ready by the end of March 2016, saying the pace of the work is dependent on funding. “At this moment we can no longer accomplish that based upon the funding,” Carr told WC Monitor. “I don’t like giving away a day getting to cold and dark status on [the] 326 building, but obviously we can only do what we’re funded to do.” Carr said at the time that FBP would not able to proceed as fast as had been planned with non-destructive assay work on piping systems. “We’ve begun that work, but we cannot progress at the pace we wanted to progress on that,” Carr said. “We wanted to have a separate crew going at it in parallel with the process gas equipment removal, but since we really can’t do that based on the funding profile we are continuing our process gas equipment.”
FBP Had Proposed Different Incentives
Notably, DOE’s fee plan differs significantly from a set of performance-based incentives FBP proposed last summer, according to information WC Monitor obtained through a Freedom of Information Act request. FBP’s proposal included completing cut-and-cap work on a much smaller number of cells in X-326 in FY 2015, but also tied fee to several other activities, such as completing roof repairs on other site buildings, personnel relocation activities, 90 percent of the design of a planned on-site disposal cell and some “green and sustainable remediation activities.”
For FY16, FBP’s proposal called for additional cut-and-cap activities and waste shipments, along with relocating the “X-326 RCRA storage area” and achieving certification of an Earned Value Management System. “The suggested PBIs with associated costs are based on FBP’s understanding of the current funding profiles for FY ’15 and FY’16 and may be subject to change due to adjustments in actual available FY funding (and resequencing of the work to align with the actual FY funding),” FBP Government Contracts Director Mark Ashby wrote in a June 4, 2014, letter to a DOE contracting officer. DOE’s fee plan notes, “DOE reviewed the contractor’s proposed FY-15 and FY-16 PBIs, delivered on June 4, 2014, in developing the FY-15 and FY-16 award fee schedule.”
