‘Excessive’ Bonuses Given Hanford Firm

Two years ago, the U.S. Department of Energy changed the way it pays private nuclear contractors. The goal: to reward them for excellence, not just pay them to show up.

But the reforms didn’t work in the government’s 1995-96 Hanford cleanup contract with Westinghouse Hanford Co., a recent audit has revealed.

Westinghouse got “excessive” bonuses, including $410,870 for work it either didn’t perform or did poorly, the U.S. Department of Energy’s Inspector General said in a report released last week.

In one case, Westinghouse earned a $225,000 bonus to install a ventilation fan to reduce explosion hazards in a high-level nuclear waste tank - a job with a total project cost of $24,766.

Westinghouse also should have been fined $950,000 for work at Hanford’s dangerous nuclear waste tanks that was certified as finished, but wasn’t, the IG said.

Frederico Pena, the DOE’s new cabinet secretary, wants Westinghouse to pay back $1.8 million of the $11.48 million it received in bonuses in 1995.

“The mistakes made in the administration of the performance award in the Westinghouse Hanford contract are wholly unacceptable,” Pena said.

Pena also is demanding an investigation of all similar DOE contracts nationwide - including the 1996 contract with Fluor Daniel Inc. and six major subcontractors. They took over Hanford site management from Westinghouse last August - and are already $160 million in the red.

Westinghouse officials are negotiating with DOE about how much money should be returned, said company spokeswoman Mimi Limbach in Pittsburgh.

“We’re working cooperatively with the Energy Department,” Limbach said.

In 1995, former Energy Secretary Hazel O’Leary pledged to change DOE’s Cold War-era system of paying all costs to contractors with few questions asked.

Under the old system, DOE reimbursed contractors for all their costs of running U.S. weapons plants - and also offered them millions of dollars in bonuses for overall work quality.

The contract reforms were designed to tie bonuses to performance on specific jobs.

The contractors were supposed to draw bonuses from a “Performance Based Incentive Fee Pool” - which at Hanford in 1995 totaled $14 million in potential reward fees for 34 projects.

But Richland’s DOE office didn’t set up adequate controls to oversee and audit the incentive fees, the IG investigation found.

Westinghouse earned more bonuses than it would have qualified for under the old Cold War system. It even got reward money for work that wasn’t finished and for work completed before the incentive program began, the IG said.

“Substantial portions” of work that generated $821,870 in bonuses was actually performed before the bonus program existed, the IG concluded.

While attempting to change one of the air compressors in June 1996, Westinghouse fast-tracked the job and “compromised” worker safety in order to get an incentive fee, the IG said.

The embarrassing IG report was made public at a time when Hanford’s critics are scrutinizing the new DOE site contract with Fluor Daniel.

Cost overruns, including $16 million more than budgeted in “transition costs” to bring on the new Fluor Daniel team, have become an issue this month in regional Hanford budget hearings.

A Hanford advisory committee is unhappy about the cost overruns, which total $160 million halfway through the 1997 fiscal year.

For example, Fluor spent $8 million to relocate 150 new managers to Hanford last year while pledging major cost-savings, said Seattle attorney Gerry Pollett, chairman of the Hanford Advisory Board’s “Dollars and Sense” subcommittee.

“There are still no risks for these contractors. They blow the budget, and DOE says OK,” Pollett said.

“The contractors are getting their overhead while real cleanup is getting cut,” said Todd Martin of the Hanford Education Action League, a watchdog group based in Spokane.

Hanford managers are concerned about the Fluor Daniel cost overruns and are working with the contractor to bring them down, said Lloyd Piper, DOE’s deputy manager at Hanford.

“We want Fluor to reduce its costs,” Piper said at a recent hearing in Spokane on Hanford’s budget.

The financial abuses must stop, Pena said.

“We will ensure that performance-based management achieves its goal - to deliver more results at less cost,” he said.

, DataTimes MEMO: This sidebar appeared with the story: Bonuses included: $400,000 to transfer chemical waste at the defunct PUREX plutonium separations plant - a job substantially finished the year before. The “relatively minor” remaining 1995 work only cost $30,000, the IG said. $300,000 to help shut down the Fast Flux Test Facility - when much of the work was completed the year before. $225,000 to replace 10 air compressors near the nuclear waste tanks - although seven of the compressors had been installed in prior years.