Hanford subcontractor payment disputed by Energy Department

RICHLAND – Hanford Nuclear Reservation contractor Mission Support Alliance improperly awarded $63.5 million in taxpayer money as profit to a subcontractor with which it shared ownership ties, allegedly allowing two Lockheed Martin-controlled organizations to earn money from the same work, according to a U.S. Department of Energy report.

Lockheed Martin is a principal owner of Mission Support Alliance. And Mission Support Alliance subcontracted some work to Lockheed Martin Services, according to a Department of Energy Office of Inspector General audit, the Tri-City Herald reported Thursday.

The audit not only looked at details of the profit payment that DOE is retracting, but also found other issues related to payment for information technology services at Hanford. Hanford for decades made plutonium for nuclear weapons, and now is engaged in a massive cleanup effort that is costing billions of dollars and will take decades to complete.

Mission Support Alliance holds the DOE contract to provide information technology and other services at Hanford. In turn, it awarded a subcontract valued at an estimated $232 million over five years, starting in 2010, to Lockheed Martin Services to provide information technology services at Hanford.

The Energy Department and Mission Support Alliance remain in dispute about the $63.5 million profit payment to Lockheed Martin Services – the difference between reported costs it incurred and what it was paid. Mission Support Alliance has brought the matter to the Civilian Board of Contract Appeals, which resolves federal contracting disputes. The board has yet to rule.

The Energy Department told auditors that it had made clear from the start of the Lockheed Martin Services subcontract that the subcontract was classified in a way that would prevent separate profit payments to the subcontractor. DOE officials said Mission Support Alliance ignored the directive.

The audit report found DOE partially to blame, saying it had not ensured costs incurred were appropriate and transparent to the federal government.

In another matter, the audit questioned why so much of the work done by Lockheed Martin Services was reimbursed according to time spent and materials used, an arrangement discouraged by federal regulations because it provides little incentive to control costs compared to other methods, such as fixed-priced contracts.

Mission Support Alliance had said that time and material task orders would only be used for services that were not performed regularly. The company also said they would be used for less than 12 percent of work. In fact, time and material task order costs were more than $120 million and accounted for almost 50 percent of the work.