Sen. Ron Wyden, D-Ore., is calling for an investigation into spending practices he sees as wasteful at the Hanford vitrification plant’s Pretreatment Facility, where construction was halted three years ago.
On Tuesday he asked the Department of Energy Office of Inspector General to look into $277 million worth of suspended purchase orders for work and equipment for the Pretreatment Facility.
“Continuing these purchase orders costs approximately $5.3 million a year simply to pay for the expenses associated with keeping them in place, such as storing components that were ordered but will never be used,” he said in a letter to DOE Inspector General Greg Friedman.
His concerns are based on a January letter from Bechtel National to DOE discussing what to do about the suspended purchase orders. The letter had not previously been made public.
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The Bechtel letter addresses purchases for only a portion of the vitrification plant, which is being built to turn up to 56 million gallons of radioactive waste left from past weapons plutonium production into a stable glass form for disposal.
But it “illustrates a range of questionable procurement and project management practices that are emblematic of problems with the project (that) have proven so costly to the taxpayers,” he said.
Wyden asked that the Office of Inspector General examine the purchases, the practices Bechtel followed as a DOE contractor in making the purchases and DOE’s role in allowing the purchases to be made. He also wants to know whether Bechtel earned pay for making the purchases and whether the pay was appropriate.
“The construction suspension of the Pretreatment Facility due to the technical issues resulted in freezing procurements for that facility,” DOE said in a statement in response to Wyden’s concerns.
But in its letter to DOE, Bechtel said that the purchase orders for equipment and material had been suspended “due to funding limitations.”
Bechtel prepared a case-by-case evaluation with recommendations to DOE on how each suspended procurement order should be handled. DOE is evaluating the recommendations, the DOE statement said.
“We believe our recommendations provide prudent actions for the department to consider,” Bechtel said in a statement Tuesday.
It considered factors for each order, including:
• how much companies were charging to store partially completed equipment,
• how much had already been paid for the equipment,
• how near completion orders were,
• what costs Bechtel remained obligated to pay,
• and the cost of starting over with a new order when the equipment is needed.
In some cases, the equipment could become obsolete after five years and before the plant would be ready to operate.
Equipment for the vitrification plant must be custom-made, often by the limited number of companies who are qualified to manufacture materials and equipment that meet nuclear quality standards. In some cases, Bechtel said that continued suspension of orders might jeopardize its relationships with or harm the financial viability of key vendors needed for other work to complete the vitrification plant.
“It is important to note that many of the suppliers are small businesses, for which the suspensions are especially detrimental,” Bechtel told DOE. “Unlike larger businesses, they do not have excess cash flow readily available to buffer this risk.”
Bechtel’s commercial agreements addressed suspensions of less than six months but “suspending orders for an indefinite period was never contemplated and has taken a toll on maintaining suppler relationships, Bechtel said. “Suppliers have voiced the desire to have the work completed and shipped to free up much needed shop space for their current active work,” Bechtel said.
Bechtel recommended that nine orders be terminated because equipment is no longer included in the facility’s changing design. Some others are recommended for termination because manufacturers have gone out of business. Wyden said some were being terminated because manufacturers could not meet quality standards.
For the rest, Bechtel made a range of recommendations, including keeping purchase orders in suspension for seven years; terminating orders because costs of keeping them active are too high; and paying for equipment that could be quickly completed and then storing it at Hanford until needed.
It calculated that its recommendations would result in immediate termination costs of $8.9 million and purchase order finishing costs of $4.6 million for a total cost of $13.5 million. However, the costs of suspended contracts would drop by $3.7 million per year.
“Bechtel uses the industry’s best practices to manage any project,” Bechtel said in its statement Tuesday.
Wyden called the procurements “an egregious waste of taxpayer dollars.”
“Millions of dollars more are at stake if the suspended purchase orders are not concluded,” he said in his letter to the inspector general.