Hanford

Federal judge rules Hanford subcontracting lawsuit can continue

U.S. Judge Edward Shea has ruled a U.S. District Court lawsuit against Hanford contractor Washington Closure Hanford and other businesses paid to perform Hanford environmental cleanup work will go forward.
U.S. Judge Edward Shea has ruled a U.S. District Court lawsuit against Hanford contractor Washington Closure Hanford and other businesses paid to perform Hanford environmental cleanup work will go forward. Tri-City Herald

A federal lawsuit against Hanford contractor Washington Closure Hanford and other businesses paid to perform Hanford environmental cleanup work will go forward, U.S. Judge Edward Shea has ruled.

The lawsuit claims the companies agreed among themselves to establish a facade of small businesses that were awarded millions of dollars for work reserved for small businesses.

Instead, that work was done by businesses that didn’t qualify for the bid award, claims the suit. In one case, the winning subcontractor had no experience in handling nuclear waste, no equipment and no employees, according to the lawsuit.

The lawsuit was brought by Savage Logistics, a small firm seeking work at Hanford, and later joined by the federal government in much of the lawsuit questioning certain Washington Closure subcontracts.

The subcontracts were supposed to be awarded to small businesses, including those in certain categories recognized by the federal government as being disadvantaged, such as being owned by a woman.

The suit alleges the work was performed by Federal Engineers and Constructors, or FE&C, a Richland business that did not qualify for the subcontracts, according to the lawsuit.

“The old proverb ‘It’s not what you know but who you know’ is at the heart of the assertions,” Shea said in his ruling on motions to dismiss the lawsuit. “Plaintiffs allege that defendants took their personal connections a step too far in order to gain a financial benefit.”

The lawsuit said that Washington Closure in 2010 awarded environmental cleanup work worth more than $4 million to Sage Tec, a company formed by Laura Shikashio, the wife of an FE&C vice president of construction services. The work called for digging up contaminated soil down to 85 feet deep near Hanford’s C Reactor.

WCH knew that Sage Tec had no relevant experience in handling nuclear waste and no employees other than Shikashio, who has a degree in social sciences, according to the lawsuit.

Several FE&C personnel were listed by Sage Tec in its proposal as those who would hold management and supervisory positions if Sage Tec were awarded the work.

An email sent by a Washington Closure employee discussed the arrangement saying, “Sage Tec is proposing a 7.5 percent fee for passing through FE&C’s bid … I think it is reasonable to negotiate a lower rate since they are not adding any value to the contract other than a small business name.”

In 2012 Washington Closure awarded another subcontract to Sage Tec, which said it would be responsible for performing about 27 percent of the work with its own organization. Washington Closure knew that was false because Sage Tec lacked equipment and employees other than Shikashio, the lawsuit said.

The subcontract to clean up contaminated structures, soil and pipelines in the 300 Area just north of Richland, was valued at $15 million.

In another case, Washington Closure awarded a subcontract to haul contaminated materials to a Hanford landfill to Phoenix Enterprises Northwest four months after it was formed by an FE&C employee as a small, woman-owned business. Shortly after that the Small Business Administration ruled that Phoenix was affiliated with FE&C, which was not eligible for the bid as advertised.

Washington Closure left the work with Phoenix but did not count it toward the goals set in its Department of Energy contract for small business work.

However, the subcontract was later modified to add almost $2.8 million worth of work and Washington Closure claimed small business credits for those modifications, according to court documents.

FE&C has previously said that allegations in the lawsuit are without merit. Teaming arrangements by subcontractors are common and encouraged at Hanford, according to FE&C.

The judge ruled this month on six motions to dismiss various parts of the lawsuit without going to trial. He ruled in favor of dismissing some portions, including some claims brought against individuals by Savage Logistics.

But he did not dismiss claims made by the federal government and some of the claims made by Savage Logistics.

He also ruled that two trials would be held, starting with a trial for the claims made by the Department of Justice against Washington Closure, FE&C, Sage Tec and Shikashio. Then the remaining claims made only by Savage Logistics will be heard.

The parties have until Oct. 27 to proposed dates for trial.

Annette Cary: 509-582-1533; acary@tricityherald.com; Twitter: @HanfordNews

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