Lack of oversight

Agency failed to detect problems


BY MIKE GALLAGHER
The Cincinnati Enquirer

Despite its role as the public's watchdog at Fernald, the U.S. Department of Energy repeatedly has failed to uncover financial, reporting and safety problems involving the site's cleanup contractor, The Enquirer has learned.

Part of the problem stems from the contractor - Fluor Daniel of Irvine, Calif., and its on-site subsidiary, Fernald Environmental Restoration Management Co. (FERMCO) - purposely providing false information and reports to the Energy Department, according to Fluor Daniel - FERMCO and government records.

But internal Energy Department problems also have led to an inability to detect and uncover financial and performance improprieties by the company hired to clean up the 1,050-acre former uranium processing plant.

Some of the incidents that have been recently uncovered by The Enquirer during a six-month investigation include:

Internal Fluor Daniel - FERMCO memos and reports revealing that it was the companies' policy to purposely provide inaccurate financial and performance data to the Energy Department to hide budget overruns and work problems.

Hundreds of safety problems, including many radiation exposures, have been blamed on poor management by FERMCO, according to government records. The government later determined many of the violations occurred because FERMCO officials failed to adequately train workers; failed to conduct required safety studies; or used faulty, non-authorized equipment to remove radioactive waste.

FERMCO officials secretly modifying government-owned software so computers would spit out phony reports making the company eligible for millions of dollars in performance fees.

Fluor Daniel - FERMCO officials covertly charging the government for secret work to redesign a problem-plagued process that is supposed to encapsulate 20 million pounds of radioactive waste into glass pellets.

Jack Craig, the Energy Department's chief supervisor at Fernald, concedes that he does not have an adequate number of trained employees ''to do everything that probably should be done here.''

The Energy Department has a staff of 56 to oversee the cleanup of Fernald, according to J. Phil Hamric, head of the department's Ohio field office.

Additional government auditors, nuclear scientists, safety analysts and project experts would all be welcome at Fernald, Mr. Craig agreed. ''But you have to have the money to pay for those people.

''The (Energy) department has limited resources to hire the needed manpower,'' Mr. Craig said. ''Our budget is being reduced and that affects what we can and cannot do.

''You also have to realize that when we hire a contractor to do work for us, we have to assume they are being honest and will do the job the right way,'' he added. ''There has to be some level of trust on various things. We have to trust they'll do the right thing.''

The contractor's deceptions also went undetected by employees of Modern Technologies Corp., a Cincinnati-based company hired by the Energy Department to act as a ''secondary backup'' by performing independent financial, safety and performance audits and reviews.

Modern Technologies has a three-year $4.5 million contract to do the backup checks. The company has 12 employees at Fernald and its contract is up this year, said Gary Stegner, Energy Department spokesman at Fernald.

Rajesh Soin, president of Modern Technologies Corp., did not return telephone calls from The Enquirer for comment.

Mr. Craig confirmed that Modern Technologies Corp. employees were hired as a secondary ''back up'' to Energy Department auditors. Mr. Craig and his boss, Mr. Hamric, say despite occasional oversights, efforts are made to ensure Fluor Daniel - FERMCO is adhering to stringent rules and regulations.

''We conduct internal audits . . . and sometimes we will catch a problem that way,'' said Mr. Hamric. ''We also have an Inspector General's staff on-site to conduct investigations.''

Mr. Hamric and Mr. Craig conceded, however, that Energy Department auditors rely heavily on the financial, safety and performance reports prepared by Fluor Daniel - FERMCO as a basis to determine whether there are problems that need to be investigated.

''That's not to say we rely solely on their reports to tell us there is a problem,'' Hamric said. ''We are proactive as well.''

Mr. Craig agreed. ''We have people who are assigned to each project, to oversee what's going on. We also have people that review the documents provided us and then we make our own determinations based on our own data. But we can't be everywhere at once.''

A recent example of Fluor Daniel - FERMCO's deceptive practices that led to a nationally publicized rebuke by Thomas Grumbly, the Energy Department's current acting undersecretary, involved the companies' work on Fernald's pilot vitrification project.

Throughout 1995, FERMCO officials provided the Energy Department with monthly reports citing positive progress on the building of a pilot vitrification plant, designed to test the machinery and technology that will be used in a still-to-be-built, full-scale plant.

But an October 1995 Enquirer article revealed that the company had run into myriad equipment and technology problems that threatened to delay the completion of the pilot phase by up to 17 months. The article also revealed that the company had hidden the extent of those problems from the Energy Department.

Mr. Grumbly said then that the companies had deceived the government, and publicly chastised Fluor Daniel - FERMCO for its actions. He also warned Mr. Craig in writing that it was the Energy Department's job to keep on top of such things.

Only a few months later, The Enquirer has learned that FERMCO has been billing - and is being paid - by the government for secret work on the vitrification project that will hike its cost from an estimated $90 million to $240 million.

Fluor Daniel - FERMCO records reveal the companies for the past year secretly have been preparing conceptual designs and financial estimates on the project without proper notification or full, written authorizations from the Energy Department.

Last week, Mr. Craig said he knew nothing of Fluor Daniel - FERMCO's secret work. ''I did not know this has been going on and we are looking into it.''

On Friday, Mr. Craig said the Energy Department is now aware of the work, but could not say whether Fluor Daniel - FERMCO had the full authorizations to do it.

In another case, in late 1993, Fluor Daniel - FERMCO issued reports to the Energy Department stating they had successfully completed studies and tests and were prepared to begin removal of 200,000 gallons of a highly radioactive liquid from 18 leaky storage tanks.

Only weeks before the company was to begin removal work in January 1994, the EPA and Energy Department discovered various required tests and studies had not been performed as claimed in reports by FERMCO. Startup of the project was delayed until the work was done. Problems of mismanagement and misuse of taxpayers' money are not new to Fluor Daniel- FERMCO officials.

In 1993 and early 1994 the companies came under fire by U.S. Rep. John Dingell, D-Mich., then chairman of the House Energy and Commerce Committee.

Mr. Dingell had hearings on financial and safety problems at Fernald and a 1993 Energy Department audit found ''questionable uses'' of taxpayer money, including a $108,000 company picnic.

Mr. Dingell also produced numerous FERMCO memos suggesting the company wanted to figure out whether it could save money by violating health and safety regulations and paying fines if caught.

Because of those and other financial and safety problems uncovered by the congressman, Mr. Grumbly of the Energy Department, threatened to fire Fluor Daniel - FERMCO in 1994.

But after a management shakeup and the naming of a new FERMCO president in March 1994, the contract remained in place.

Published Feb. 14, 1996.