Mike Nartker
WC Monitor
10/31/2014
AMELIA ISLAND, Fla.—A senior official in the Department of Energy’s Office of Environmental Management defended here last week EM’s use of cost caps on a set of troubled cleanup projects, though acknowledged that the best time to implement such measures was not in the middle of projects but rather more upfront. In recent years, DOE has modified contracts covering the Savannah River Site’s Salt Waste Processing Facility, the Idaho Integrated Waste Treatment Unit and the Separations Process Research Unit (SPRU) D&D project to put contractors on the hook for cost increases in response to performance concerns. Since the contracts were modified, though, the schedules for completing the projects are either uncertain or have significantly been pushed out into the future. “I’m thinking that if those deals would’ve remained cost reimbursable, we would not be in a better position than we are today. Frankly, I don’t see how transferring the cost risk slowed down the work at the site,” EM Deputy Assistant Secretary for Acquisition and Project Management Jack Surash said at this year’s Weapons Complex Monitor Decisionmakers’ Forum.
At the SPRU D&D project, in the wake of a set of contamination incidents that largely derailed work, in 2011 DOE modified URS’ contract to make URS fully responsible for covering all costs exceeding $145 million. Since then, however, a final price tag for the project has yet to be approved, and DOE now anticipates the project being completed by September 2018—almost seven years behind initial estimates and three years behind DOE’s last estimate. At the IWTU, intended to treat the remaining liquid waste at DOE’s Idaho site, the Department modified CH2M-WG Idaho’s contract to cap project costs at approximately $571 million, and as a result CWI has reportedly had to pay approximately $90 million out of its own pocket for the project. Due to a number of challenges encountered during the commissioning process, though, it remains to be seen when the IWTU will begin operation.
At the SWPF, DOE last summer modified Parsons’ contract to cap costs for completing construction at $540 million, with the contractor responsible for any overruns. DOE and Parsons have been unsuccessful so far on reaching an agreement on a new modification to cover commissioning and startup of the plant. A new baseline approved by DOE this fall for the project, though, puts startup of the facility occurring between the end of 2018 and early 2021—years behind a regulatory commitment of October 2015.
SWPF Modification ‘A Fair Deal,’ Surash Says
Speaking at last week’s meeting, Surash stressed the benefits of the cost cap for construction completion of the SWPF. “There is no doubt that Parsons is laser focused on that construction effort to an even higher degree than they were before. … It’s not like before they weren’t paying attention, but it was a cost reimbursable deal. Now they’ve got some skin in the game,” he said. “I think we came out with a fair deal. Hopefully they think that. If they didn’t think that, they shouldn’t have signed the contract modification because contract modifications actually have two signatures on them.”
Parsons Deputy SWPF Project Manager Frank Sheppard, though, suggested it may have been better for the project if one complete contract modification had been finalized. “If you would have focused just on … operations and throughput and you had the whole package and you aligned everything all at once, I think that would have been more ideal,” he said. “But we are working within this framework. We’re performing well. We’re working well with DOE through the construction phase and … I think at least on Parsons’ side, we’re hoping to get back to the negotiation table so we can put the focus on the end point.”
Parsons expects the cost for commissioning and startup of the SWPF to be more than the $99 million estimate in the current contract, Sheppard said. “We’ve given several proposals to DOE. We know they’ve done an independent government cost estimate. We believe none of those are aligned with the current costs. So there’s going to come a point where you have to address that issue. Currently, in CLIN 6, which is our testing and commissioning, it’s a $99 million cost. We think we’re going to be well above that. So at some point we’re going to have to address that issue,” he said. “We’re hoping that we’ll get back to the table with DOE at some point in the future as we approach the $99 million mark, or hopefully sooner than that, so that we can go back and align and make sure that we both have the right risk and reward on the second piece of the project moving forward so we do get to operations and we do make the plant as efficient as possible.”
