Mike Nartker
WC Monitor
5/1/2015
The ongoing suspension of work at the Hanford Waste Treatment Plant’s Pretreatment Facility appears to be taking a toll on the project’s various suppliers of components and materials, which pose “significant risks” to the entire project, according to an internal report by WTP contractor Bechtel National made public this week. The report, released by Sen. Ron Wyden (D-Ore.), examines a set of 56 active purchase orders for equipment and materials for the Pretreatment Facility that have been suspended since 2012. “The ambiguity inherent in the unintended extend period of suspension is unprecedented for many of BNI’s vendors and their ability to support BNI’s mission has been hampered because of it,” the report says.
The Department of Energy stopped work at the WTP Pretreatment Facility—one of the main components of the entire vitrification plant—because of the need to resolve remaining technical issues. It remains uncertain when DOE will resume work on the Pretreatment Facility, or when it will be completed. The Bechtel National report states, “Although BNI’s commercial agreements contain considerations for short-term suspensions (typically less than six months), suspending orders for an indefinite period was never contemplated and has taken a toll on maintaining supplier relationships. Suppliers have voiced the desire to have the work completed and shipped to free up much needed shop space for their current active work.”
The suspension may also affect suppliers’ “financial viability,” the Bechtel National report says, “because the anticipated profit for the work was not able to be earned as originally planned and a payment date cannot be forecasted.” The report adds, “The supplier’s ability to take on new work is impacted in some cases due to storage of finished and unfinished work. Additionally, planned earnings and expenditures are limited by having indefinite suspensions in their facilities.” Noting that many of the suppliers are small businesses, the Bechtel National report also states, “Unlike larger businesses, they do not have excess cash flow readily available to buffer this risk.”
Bechtel Proposes Canceling Some Purchase Orders to Save Costs
To date, $181 million has been spent on the 56 purchase orders covered by the report, and Bechtel National said it would cost an additional $197 million to turn them all on and complete them immediately. “Ongoing suspension and escalation costs, both internal and external, of almost $5.3 million per year has resulted in a scenario that, if left unchecked, could result in new completion costs of over $276 million in as little as seven years,” the report says. “The $79 million in additional costs provide no added value to the Project; and, coupled with escalation, are responsible for potential exponential cost growth of the estimate at completion of the PTF at the WTP.”
To save costs, Bechtel National recommended in the report that DOE terminate 15 of the purchase orders immediately, some because of the cost of keeping the original purchase order open, others because the vendor may have gone out of business or because the items in the purchase order is no longer in the current design. Another 13 should be terminated if the suspension of work at the Pretreatment Facility is expected to last at least seven years, the report says. Six of the purchase orders should be completed immediately, while the remainder should remain in suspension, the report says. Bechtel National estimated that its recommendations would save DOE $66 million over seven years, and reduce annual suspension costs to $1.6 million per year. The report states that “all results of the model and analysis consistently point to one fundamental truth, delaying a decision is the most costly decision that can possibly be made.”
In a statement this week, Bechtel National spokeswoman Suzanne Heaston stressed the need to deal with suppliers fairly. “A strong and qualified vendor community is vital in nuclear facility construction,” she said. “The number of suppliers capable of meeting strict nuclear quality assurance standards is small. Many suppliers have limited ability to absorb a lengthy disruption in cash flow. We must manage the commercial relationship with our suppliers effectively and fairly. Otherwise, we risk impacts to the supply chain. Our letter to DOE seeks to analyze and mitigate those risks. Our recommendations provide prudent actions to consider.”
Senator Calls for DOE IG Investigation Into ‘Questionable Procurement Practices’
Wyden used the release of the Bechtel National report this week, though, to call for a DOE Inspector General’s Office investigation into what he has alleged are “questionable procurement practices” at the WTP. In a letter to DOE IG Gregory Friedman, Wyden said the Bechtel National report shows that “hundreds of millions of dollars have been misspent on components and services for just a single portion of the WTP due to questionable procurement practices by the contractor and inadequate oversight by the Department.” The senator added, “Millions of dollars more are at stake if the suspended purchase orders are not concluded.”
DOE is currently evaluating Bechtel National’s recommendations, a Department spokesperson said in a written response. For its part, Bechtel National believes its recommendations represent a “prudent” approach, the company said in a statement. “Bechtel uses the industry’s best practices to manage any project. After the Department decided to suspend work on the Pretreatment Facility, we performed an analysis of the financial impacts on existing purchase orders for equipment and materials affected by the Department’s decision to suspend. We believe our recommendations provide prudent actions for the Department to consider. We look forward to continuing to work with DOE on the most efficient ways to safely address Hanford’s tank waste,” Bechtel National said.
