Former Hanford contractor may not go to trial. Possible settlement reached with DOJ

Washington Closure Hanford and the Department of Justice have reached a tentative settlement agreement in a lawsuit accusing the former Hanford nuclear reservation contractor of knowingly awarding small business subcontracts to front companies.

The other parties sued by the Department of Justice in the civil case have recently reached settlement agreements, but the claim against Washington Closure remains.

Motions by Washington Closure asking a judge to dismiss the case and by the Department of Justice to dismiss key elements of Washington Closure’s defense were scheduled to be heard in federal court Friday.

But U.S. Judge Sal Mendoza Jr. instead agreed to give parties 45 days to either dismiss the lawsuit or file a joint update with the court.

The parties notified the judge last week that they have reached an agreement in principle that, if finalized, would resolve the lawsuit.

“However, this proposed agreement in principle is subject to several specified contingencies and remaining issues that require further resolution between the parties,” according to a court document filed by the defense and plaintiffs.

Washington Closure held the DOE contract for cleanup along the Columbia River at Hanford until most work was completed and the contract expired in September 2016. As part of its contract, it was required to subcontract work to small businesses and to certain categories of small businesses, such as those owned by women.

The other defendants in the case, subcontractors Sage Tec and Federal Engineers & Constructors (FE&C), already have reached settlement agreements, denying any wrongdoing.

It was costing too much to fight the government in court, according to Sage Tec. FE&C released a similar statement, saying it needed to put the costly and complicated legal proceedings behind it.

Three subcontracts are at issue in the lawsuit.

A subcontract worth about $4 million was awarded by Washington Closure in 2009 to Phoenix Enterprises Northwest for hauling contaminated materials to a Hanford landfill.

The subcontract award was challenged by another bidder.

The Small Business Administration ruled that Phoenix, a small company formed just months before bidding by an FE&C employee, was affiliated with FE&C.

FE&C was not eligible to bid for the subcontract.

Rather than rebid the work, Washington Closure agreed not to claim the small-business credit for the subcontract.

However, as the subcontract was modified several times, Washington Closure then claimed small business credit for more than half the subcontracted work. Washington Closure said it was an error caused by a glitch in a computer program.

Phoenix was not named as a defendant by the Department of Justice.

The other subcontracts at issue in the lawsuit were awarded to Sage Tec and valued at nearly $20 million combined.

They covered work starting in late 2010 to clean up chromium contamination near Hanford’s C Reactor and work starting two years later for cleanup of contaminated structures, soil and pipelines in the Hanford 300 Area just north of Richland.

The Department of Justice again questioned whether Sage Tec was independent of FE&C and eligible to bid on the work as a small, woman-owned business.

The Department criticized the practice of small businesses relying heavily on FE&C for staff, equipment, insurance and/or quality assurance programs.

Dennis Houston, a former procurement manager for Washington Closure, said in a court document filed last month that it would be unreasonable to require small business subcontractors to meet the complex requirements of multi-million dollar nuclear remediation subcontracts on their own.

The practice of of using resources of another company that is on the subcontractor’s team is standard, he said.

This story was originally published January 14, 2018 at 4:50 PM with the headline "Former Hanford contractor may not go to trial. Possible settlement reached with DOJ."