About $8.5 million in contractor costs approved by the company that manages the Department of Energy’s Savannah River Site were initially deemed improper in a recent Department of Energy audit.
But in a manager response attached to the audit by the Department of Energy inspector general, the federal agency and the contractor, Savannah River Nuclear Solutions (SRNS), stated the costs were in fact allowable once item prices were factored into the approved invoices.
However, the inspector general was unable to confirm that position before the release of the report on May 8. The 10-page document addresses various issues in SRNS’ dealings with subcontractors. The company is tasked with purchasing quality products at reasonable prices.
The audit was conducted from June 2016 to March 2019, and reviewed invoices and other filings from the 21-month span covering October 2014 to June 2016. During that time, Savannah River Nuclear Solutions received more than $606 million in goods and services through its subcontracts.
But auditors said the contractor did not properly acquire some of those goods due to inadequate invoicing, lack of cost-efficient purchases, and failing to closeout subcontracts in a timely manner.
For example, one subcontractor, Virginia-based FOUR LLC, submitted nine invoices during the sample period that totaled $9 million. Savannah River Nuclear Solutions approved $8.5 million worth of those invoices, even though they did not include unit prices, a unit of measure that would help determines the cost-effectiveness of the purchases.
“For example, one invoice included various quantities of software subscriptions and tokens without unit prices or a breakdown of costs by item to allow visibility into the unit prices,” according to the DOE inspector general.
The IG recommended that SRNS review those $8.5 million in invoices and provide workers with training on file proper invoices and determine unit prices for materials.
An attached follow-up memo, signed by DOE Savannah River Manager Michael Budney, states that policy changes were implemented by SRNS during the audit, including a requirement to list unit prices on all invoices.
Once that was factored in, DOE and SRNS were able to backtrack and review the invoices from the sample period. They determined that that “there were no unallowable costs on prior invoices.”
The IG office wrote that it was not able to verify the accuracy of that assessment before the release of the report, but did say SRNS was planning corrective actions based on the agency’s recommendations.
In addition to the subcontract costs, the IG said the contractor did not adequately vet cost-effective options when deciding whether to lease or purchase equipment. For example, SRNS purchased 511 information technology servers at a price of $13,420 per server. But the contractor could have leased those servers at an individual rate of $5,400.
In an emailed response to questions, SRNS spokesperson Barbara Smoak said “all the concerns have been addressed and the costs deemed to be within the requirements of the M&O contract.”
Savannah River Nuclear Solutions (SRNS) is a partnership of Fluor, Honeywell, and Stoller Newport News Nuclear. The company’s one-year, $1 billion contract extension will expire on July 31, 2019. That follows the initial 10-year, $9.5 billion deal signed in 2008.