Hanford contractor CH2M Hill changing its subcontractor policies

By Annette Cary, Tri-City HeraldJanuary 23, 2013 

CH2M Hill Plateau Remediation Co. is making major changes to its subcontracting policies that may reduce costs and increase competition.

The Department of Energy Hanford contractor announced Tuesday that more than half of subcontract workers may become employees of CH2M Hill. In addition, more work will be opened for bids from companies not on a list of 11 preselected subcontractors.

CH2M Hill became the contractor for central Hanford and groundwater cleanup in 2008. Its initial contract of five years has been extended for another five years beginning in October 2013.

Changes are being made to the subcontracting policy for the second five years of the CH2M Hill contract.

In a June 29 letter, DOE wrote that "the lack of price competition for teaming and preselected subcontracts significantly increases administrative burden associated with award and administration" by CH2M Hill and the federal government.

The letter also said competition is the preferred method for determining cost or price reasonableness.

Consent for CH2M Hill's teaming and preselected subcontracts was limited to the base period of the contract to give the company time to evaluate its subcontracting strategy and develop a plan "to address issues and optimize approach," the letter said.

In response to questions from the Herald, CH2M Hill characterized the letter as a "letter of expectation not a letter of direction."

CH2M Hill started its contract with 11 subcontractors as part of its team. They included large companies Fluor Federal Services and Areva Federal Services and small companies East Tennessee Materials and Energy Corp., ARES Corp., Babcock Services, GEM Technology International, Intera, EnRep, Ascendent Engineering and Safety Solutions, Cavanagh Services Group and Project Services Group.

For the next five years, 55 percent of the 535 workers for those companies assigned long-term to CH2M Hill will be offered continued employment as CH2M Hill employees if their skills are needed.

Under the previous policy, subcontract employees who worked longterm alongside CH2M Hill staff cost more because of overhead markup and payments to subcontractors.

Moving forward, work performed by 30 percent of the subcontracted work force will be put out for bids from any company.

In the next week, CH2M Hill is expected to request information from companies interested in about $250 million of work for surveillance and maintenance of inactive nuclear facilities such as Purex, Redox and B Plant. It's the largest subcontract expected to be opened to competition.

Other subcontracts that could be opened for bidding include training and development of procedures to control operations; short term staff augmentation in the areas of administration and quality and engineering; and construction management.

New subcontractors will be asked to hire current workers.

The final 15 percent of subcontracted work will not be changed because companies now doing the work bring key or difficult to find resources to CH2M Hill's environmental cleanup assignments.

Areva will continue doing work related to K Basin sludge, Intera will continue doing risk modeling work for environmental permitting and a variety of companies will provide nuclear safety engineering services that currently are difficult to find.

CH2M Hill told employees that it does not expect a change in the number of workers it employs, but there could be some changes based on the skills needed for the work.

CH2M Hill is predicting that the changes will reduce costs by $7 million to $9 million per year. In addition to savings from directly employing workers, costs could be reduced by putting more work out for bid.

Giving work directly to preselected subcontractors that are integrated into CH2M Hill is an approach the company has used before and was the foundation for ramping up to perform an additional $1.3 billion in work with Recovery Act money shortly after CH2M Hill was awarded its contract, said Vicki Bogenberger, CH2M Hill business services vice president.

CH2M Hill preselected subcontractors were told in a message Tuesday that the subcontracting strategy for the first five years of its contract had worked well and that team members had helped CH2M Hill complete more Hanford cleanup progress than ever before.

But for the next five years CH2M Hill "will move forward with more traditional subcontracting with task-based awards and incentives designed around efficiencies and safe work," Bogenberger said.

Allowing competition for more work will bring in fresh ideas, she said.

The last four years have demanded an incredible amount of flexibility and CH2M Hill's subcontracting strategy has allowed it to respond to demands, said Jenise Connerly, DOE contracting officer.

But this year and possibly future years will be marked by austerity and projects will be more limited, she said.

CH2M Hill will continue to meet its goal of subcontracting at least 17 percent of the value of its contract to small businesses, CH2M Hill said. It has been exceeding those goals, subcontracting 28 percent to 30 percent of its contract value to small businesses.

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