Audit: Hanford project cost millions more than planned, despite appearances

Work to begin moving Hanford’s radioactive sludge has cost millions more than expected, but you wouldn’t know it from looking at project accounts.

A cost overrun of almost $18 million has not been transparent, according to a new audit report.

The Department of Energy Office of Inspector General on Tuesday released results of an audit of the project to remove the sludge in underwater containers at the Hanford K West Basin and send it to central Hanford for dry storage.

The K West Basin holds 35 cubic yards of highly radioactive sludge in underwater containers not far from the Columbia River.

Issues include construction of an annex that had a planned cost of $24.3 million. But at completion its cost was $11 million higher at $35.3 million, the report said. The annex will serve as a loading facility for the sludge.

The audit report found that funds called “management reserve” were used to meet the cost overrun and to reset the project’s cost projections to the higher amount after work was completed.

“Applying management reserve to the account effectively erased the cost variance of (negative) $11 million,” the report said.

A total cost overrun of $17.9 million was reset for the total project.

DOE and its contractor on the project, CH2M Hill Plateau Remediation Co., supplied no information about why costs increased or what costs the management reserve was used to cover in response to Herald questions on Tuesday.

The audit report said that management reserve is intended to be used for risks on work not yet started. For instance, it could be used if the cost of materials increased because unstable market prices caused expenses to rise after a budget was set but before work began.

“(CH2M) did not follow specific guidance required by the contract on the accepted use of management reserve,” the audit report said.

The K Basin sludge project is an unusual case because in March 2015 DOE switched the way it was managed from an operations project to a capital asset project. That caused some required management steps for a capital asset project to be completed later than usual.

“We are aware that the circumstances associated with this project were unique and are not likely to recur,” the audit report said. “However, we are concerned that (CH2M’s) performance on this project will be overstated.”

The audit was a followup to a 2011 audit that found project management concerns on the sludge project under a previous contractor. Those concerns have been addressed, the new audit report said.

DOE anticipates starting to move the sludge out of the basin next year.

This story was originally published April 18, 2017 at 7:59 PM with the headline "Audit: Hanford project cost millions more than planned, despite appearances."