Getting work done ahead of schedule is paying off in a big way for Washington Closure Hanford and its workers.
The Department of Energy has paid Washington Closure Hanford a long-worked-for award of $31.2 million for completing environmental cleanup tasks early along the Columbia River at Hanford.
The company took a risk and agreed to a 10-year contract that covered its costs and provided a relatively modest amount of fixed annual profit payments.
The contract also included the opportunity for two large incentive payments, one for finishing work as early as possible and the other for keeping costs in check.
The Schedule Performance Incentive Fee, commonly called SPIF by workers, offered $32.8 million if most work was completed 22 months before September 2015.
Washington Closure earned most of that money by completing work a full 20 months early.
The last work to be completed for the award was lifting the underground 340 Vault, which weighed 1,100 tons, high enough Jan. 31 to allow a transport trailer to later be backed underneath it to haul it to a central Hanford landfill.
Washington Closure has cleaned out and demolished 284 buildings, some of them highly contaminated, and excavated 523 waste sites, some of them containing nasty surprises like pieces of irradiated nuclear fuel and waste that could catch fire when exposed to the air.
To earn the incentive money, Washington Closure had to complete about 800 cleanup tasks.
After the last task was completed, additional time was needed for DOE and, in some cases, DOE regulatory agencies to document and verify that the work had met all requirements.
Part of the payment will be shared with about 1,200 current and former employees.
Knowing they could share in the payment gave workers the same incentive as the contractor to complete work and do it safely, said Scott Sax, president of Washington Closure.
The payment to Washington Closure was contingent on safe operations.
"We're very pleased with the work done and how they performed," said Mark French, DOE director for Hanford work near the Columbia River.
Work also has been done under budget to date, putting Washington Closure in line for a cost performance fee as work is completed under its current contract next year.
Washington Closure now anticipates it will finish work about $250 million under budget on a $2.8 billion contract.
The contract allows Washington Closure to keep 20 percent of money saved at the end of the contract as an incentive payment, which could amount to a payment of about $50 million.
The rest of the cost savings are plowed back into cleanup, allowing more work to be completed.
The substantial savings shows that "this has been a very, very good contract mechanism for the taxpayer," French said.
It ensured that the taxpayers were not making payments for work that had cost overruns or that failed to be completed on schedule as the contract concluded, Sax said.
The schedule incentive fee originally included a possible $40 million payment.
That was reduced to a maximum of $32.8 million as some work was pulled out of the possible award amount as proposed funding for cleanup along the Columbia River was less than planned starting in 2012.
However, Washington Closure could earn another schedule award as additional cleanup is completed.
Work was both added and subtracted from the contract since work stared in 2005, and the value of the contract grew from $1.8 billion to an anticipated $2.8 billion.
Much of the increase is due to the discovery that far more waste needed to be excavated that estimated once digging began on burial grounds.
More waste also was disposed of at the Environmental Restoration Disposal Facility, a lined landfill in central Hanford for hazardous and low-level radioactive waste operated by Washington Closure.
Additional work was added when economic stimulus money became available in 2009.
A change in plans to allow Pacific Northwest National Laboratory to continue to use some Hanford buildings in the 300 Area just north of Richland also increased costs, because utilities had to be individually isolated to allow continued use, Sax said.
In other cases, buildings that were expected to continue to be used have been scheduled for demolition and added to the Washington Closure contract.
Work at the K Reactors was removed from the Washington Closure contract because the K West Reactor basin continues to hold radioactive sludge.
The 618-10 and 618-11 Burial Grounds and the 324 Building, which sits over a highly radioactive waste spill, are expected to be part of a contract extension for Washington Closure.
Talks on an extension of the Washington Closure contract past 2015 are under way and the issue should be resolved soon, Sax said.
-- Annette Cary: 509-582-1533; email@example.com; Twitter: @HanfordNews