Saturday, February 1, 1997
Fluor Daniel docked $4M
Penalty stems from troublesome pilot project

The Cincinnati Enquirer

The U.S. Department of Energy has once again penalized the company managing the cleanup of Fernald for poor performance, this time for almost $4 million, primarily due to ongoing problems with a pilot vitrification project.

The penalty represents almost 37 percent of the performance-based fee Fluor Daniel Fernald (FDF) was eligible to receive during its last six-month review period (April 1 through Sept. 30, 1996.)

Every six months, Fluor Daniel Fernald is eligible to earn $10.8 million in performance fee based on a point system tied to the company's success or failures on cleanup projects at the site.

J. Phil Hamric, the Energy Department's Ohio Field Office manager, didn't finalize the payment and penalty until December. The Energy Department provided The Enquirer the documents and statements this week.

Since Fluor Daniel Fernald (formerly FERMCO) was awarded the $2 billion cleanup contract in December 1992, it has been penalized more than $30 million by the Energy Department for various safety, cleanup, design, construction and off-site waste shipment problems.

During its previous six-month review period (Oct. 1, 1995 through March 31, 1996), Fluor Daniel Fernald was hit with a $5 million penalty for poor performance.

Since 1993 when the performance fee award system was set up, Fluor Daniel Fernald has received $34,580,769 out of a possible $64,800,000, according to Energy Department records. During the same period, the company also has received an additional $17,550,000 in base fee payments simply for being at the site.

The items that Fluor Daniel Fernald were penalized for in its most recent review period included:

  • Problems in reducing radiological (radiation) occurrences.

  • Poor evaluation of various FDF safety and health programs.

  • Poor effort in ''critical areas'' involving the site's ''least-cost, earliest and final cleanup program.''

  • Problems with a thorium (radioactive material) overpack project.

  • Ongoing problems with the site's advanced wastewater plant's filter system.

But the major problem cited by the Energy Department that resulted in the most substantial financial penalties involved the troubled vitrification pilot plant. The vitrification process is supposed to encapsulate radioactive wastes from silos on the site into glass-like pellets that then can be safely shipped elsewhere for burial.

Workers ran into continuing design, construction and operational problems with the pilot plant.

The problems became so bad, according to Mr. Hamric, that the company and the Energy Department missed a September > EPA-mandated milestone for testing the plant with non-radioactive material.

In his letter to Fluor Daniel Fernald President John Bradburne announcing the company's performance fee and penalties, Mr. Hamric said:

''The continuing problems with the vitrification pilot plant project are of serious concern to the Ohio Field Office. These problems have now led to missing a regulatory milestone and to informal dispute resolution with the (EPA). I expect FDF to focus management attention on this project over the next six months so that significant improvement will be evident in this area during the next evaluation period.''

Prior to Mr. Hamric's performance fee evaluation, the EPA cited the Energy Department and FDF for missing the September milestone.

As a result, the EPA officials say they could penalize the Energy Department millions of dollars for the missed completion date; order additional manpower, budget and accelerated completion dates for the project which would then affect other Fernald projects; or determine other financial penalties.

The issue is now being worked out during the informal dispute resolution with EPA. If an agreement cannot be reached, the matter could end up in court.

A new, related problem has added to FDF's and the Energy Department's woes.

On Dec. 26, the melter in the vitrification pilot plant sprung a leak, causing more than a ton of molten non-radioactive test material to pour out, causing small fires and the shutdown of the facility for an indefinite period.

Because of the ongoing problems, the EPA has scheduled meetings this spring to decide whether the vitrification project at Fernald should continue or be scrapped. So far, taxpayers have paid more than $70 million for the problematic project. If allowed to be completed, the project is estimated to cost taxpayers more than $250 million.

Energy Department officials say the most recent trouble is expected to cost Fluor Daniel Fernald millions of dollars more in penalties when the next six-month fee period ends March 31.

FDF's Mr. Hagin declined to comment on the possible profit penalties, saying, ''It would be premature to speculate at this point.''

FDF's Fernald contract with the Energy Department ends in December, but the government can extend it for up to three, one-year periods if it so chooses.

But Energy Department officials declined to comment on the contract, saying they are awaiting a U.S. General Accounting Office investigation report into a myriad of problems at the site.

An ongoing series of articles in The Enquirer that began Feb. 11, 1996, revealed numerous problems at Fernald, including financial mismanagement, safety problems and lack of Energy Department oversight.

Reacting to the newspaper reports, congressional leaders, including Congressman Rob Portman and U.S. Sen. Mike DeWine called for GAO (congress' investigators) to launch a probe. The GAO report is expected in March.