Hanford contractor agrees to pay $3M to settle federal fraud allegations

A former Hanford contractor has agreed to pay just over $3 million to settle allegations of fraud in its reports to the federal government on its small business subcontracts.

CH2M Hill Plateau Remediation Co. had its costs for environmental cleanup at the nuclear reservation reimbursed by the federal government but was eligible for incentive pay for awarding subcontracts to small businesses.

The incentives include requirements for awarding subcontracts to small businesses that the Small Business Administration designated as being in Historically Underutilized Business Zones, or HUBZones, and with 35% of workers living in a HUBZone.

Portions, but not all of the Tri-Cities, have been designated as HUBZones due to economic need.

CH2M also faced financial penalties if it fell short of HUBZone goals, according to the Department of Justice.

“Small business fraud not only harms the taxpayers and the vital cleanup mission at Hanford, but legitimate small disadvantaged businesses that do not have the opportunity to fairly compete for and perform subcontracts,” said Joseph Harrington, acting U.S. attorney for the Eastern District of Washington.

Jacobs Engineering, which purchased CH2M, including its Hanford contract in 2017, declined to comment.

It has not admitted liability and the Department of Justice did not say its claims are not well founded, according to the settlement agreement signed Thursday.

The agreement was reached to avoid the delay, uncertainty, inconvenience and expense of protracted litigation, according to the settlement agreement.

The investigation into CH2M’s small business subcontracting was the result of a 2014 lawsuit filed by Savage Logistics, a Richland small business now called Apogee Logistics, and owner Salina Savage.

Savage and her company will receive nearly $866,000 of the settlement under the federal False Claims Act, which rewards whistleblowers with a portion of money recovered.

CH2M also is required to pay Savage and her company about $1.3 million in legal costs, which is in addition to the $3 million settlement.

About half of the $3 million settlement is for restitution of costs to the federal government.

“This settlement affirms the OIG’s (Office of Inspector General’s) commitment to protecting the integrity of the Department of Energy’s procurement process to provide opportunities for small and disadvantaged businesses,” said Teri Donaldson, DOE inspector general.

Hanford whistleblower history

The Department of Justice initially declined to join the case, but then reconsidered after a fourth amended complaint was filed by Savage in August 2020.

The latest complaint in the lawsuit alleged that CH2M knew that two of its subcontractors were not HUBZone businesses when it issued contracts to them, but falsely reported to the Department of Energy that they were.

The subcontracts were awarded to Indian Eyes of Pasco and Phoenix-ABC, also based in the Tri-Cities area.

As recently as December, U.S. Judge Salvador Mendoza Jr. denied CH2M’s motion for summary judgment.

CH2M was the Hanford nuclear reservation’s environmental cleanup contractor for the center of the site, working on projects such as demolition of the Plutonium Finishing Plant and groundwater cleanup, for about 12 years until its contract expired early this year. It employed about 1,700 workers.

In its last annual evaluation CH2M earned $17.2 million in incentive pay. But DOE said it it needed to improve subcontract audits, as pointed out in a DOE Office of Inspector General audit report that found that taxpayers may have been overcharged for some work.

Hanford in Eastern Washington was used to produce about two-thirds of the plutonium from World War II through the Cold War for the nation’s nuclear weapons program.

Taxpayers are spending about $2.5 billion annually on environmental cleanup of the 586-square-mile site. Most work is done by large contractors hired by DOE, who subcontract out some of the work.

Savage and her company have previously been awarded money for other federal whistleblower claims involving alleged fraud related to small business subcontracting at Hanford.

In 2017 and 2018 they were awarded about $1.2 million from settlements totaling $5.5 million that were reached by former Hanford contractor Washington Closure Hanford and businesses Federal Engineers & Constructors and Sage Tec. All vigorously denied any fraud.

This story was originally published June 3, 2021 at 4:30 PM.