Wednesday, March 19, 1997
GAO on Fernald:
cleanup botched;
millions wasted

Congressmen want changes
before contract renewal

BY MIKE GALLAGHER
and TIM BONFIELD
The Cincinnati Enquirer

Government investigators say the cleanup of Fernald has wasted millions of dollars through mismanagement by the contractor and a lack of oversight by the U.S. Department of Energy.

A report by the U.S. General Accounting Office (GAO), released Tuesday, prompted members of Congress to say the contract of Fluor Daniel Fernald should not be renewed or extended unless major problems at the nuclear cleanup site can be fixed.

Ohio Sens. John Glenn and Mike DeWine and Reps. Rob Portman and John Boehner said the U.S. Department of Energy and Fluor Daniel Fernald also ''bear responsibility for the tens of millions of taxpayer dollars that have been wasted at Fernald over the past two years.''

The members of Congress called for the GAO investigation last March following a series of Enquirer articles that began Feb. 11, 1996, and revealed serious management, financial and safety irregularities at the site.

Included in the problems GAO investigators found at Fernald were a severe lack of Energy Department oversight; tens of millions of taxpayers' dollars wasted on fast-tracked and problem-plagued cleanup projects; unauthorized use of financial control and charge accounts; lack of safety procedures and training; and missing, non-existent or inadequate financial and safety documents and procedures.

The DOE agreed with GAO investigators that the problems found there also exist in energy department projects nationwide, according to the report. The Energy Department said it is ''implementing major reform efforts'' to address the problems throughout the nation.

The GAO also found that, in some cases, Energy Department and Fluor Daniel Fernald officials had tried to fix safety, financial and management problems, but that it was too early to determine whether those actions will work.

For example, the GAO report said: ''Weaknesses remain in DOE's safety oversight at Fernald. Although the Fernald Area Office's oversight programs have improved, they still have weaknesses that limit DOE's ability to ensure that Fluor Daniel Fernald is fulfilling applicable safety and health requirements.

''Problems include weak planning of assessment activities, slow progress in ensuring that some key oversight staff are properly qualified, and weak processes for ensuring that identified safety problems are adequately corrected.''

The problems identified by the GAO prompted Reps. Portman and Boehner and Sens. Glenn and DeWine to set up a meeting Thursday with DOE Under Secretary Thomas Grumbly to discuss management's lack of oversight at Fernald, said Mr. Glenn's spokesman Bryan McCleary. The lawmakers plan to request quarterly reports from the Fernald field office to the energy secretary to assure that the cleanup remains on schedule.

Mr. Glenn also plans to raise questions about Fernald Thursday to recently confirmed Energy Secretary Federico Pena at a Senate Armed Services Committee meeting, Mr. McCleary said.

Most serious problem

Fernald, on 1,050 acres about 18 miles northwest of Cincinnati, processed enriched, weapons-grade uranium during the Cold War. The plant ceased production in 1989, and a massive cleanup of the site was begun. Fluor Daniel Fernald, a subsidiary of Fluor Corp., of Irvine, Calif., won the $2 billion contract to manage the site in 1992.

According to the GAO, the most seriously mishandled piece of the project is a vitrification pilot plant, designed to test a process to encapsulate 20,000 pounds of radioactive material into glasslike pellets for disposal elsewhere.

Originally estimated to cost $14.1 million, the vitrification pilot project now is more than $56 million overbudget and 19 months behind schedule. DOE now has an independent review team studying whether the vitrification project should proceed or be scrapped.

Fluor Daniel Fernald and the Energy Department's inept handling and oversight of the vitrification project prompted the congressional leaders on Tuesday to recommend to DOE officials that they should consider taking the project away from Fluor Daniel Fernald and hire ''a contractor with a demonstrated record of success ... ''

The GAO report stated that despite the numerous problems at the site, investigators did not uncover any criminal wrongdoing or a willful pattern of fraud and deception on the part of Fluor Daniel Fernald.

But the GAO investigators stated in their report: ''The scope and objectives of our work, however, were not so broad that we could either validate or dismiss the conclusions drawn from the (Enquirer) allegations regarding workers' safety or the government being systematically cheated out of millions of dollars.''

The GAO report said: ''Although many of the safety and health allegations in The Cincinnati Enquirer overstated the situation at Fernald, the site did have serious problems.''

Overly optimistic

GAO auditors said Fluor Daniel Fernald's problems included underestimating the job it was hired to do; giving over-optimistic predictions of how fast it could recover from delays; and doing design and construction work at the same time.

The GAO investigation, headed by Victor S. Rezendes, director of Energy, Resources and Science Issues, was conducted from March 1, 1996, through Jan. 31, 1997.

Immediately after The Enquirer series, ''Fernald: Danger and Deceit'' began on Feb. 11, 1996, Fluor Daniel Fernald and Energy Department officials criticized the articles, repeatedly stating that the specific problems being cited either were ''non-existent'' or ''greatly exaggerated.''

Following release of the GAO report Tuesday, Energy Department officials stationed at Fernald, issued a written statement that said: ''The DOE welcomes the GAO review of the Fernald Environmental Management Project and the release of its final report.

''The report criticized management in some areas, but also noted improvement in both financial and safety management systems at the facility. The GAO makes two recommendations: that some improvements be made to the Fernald contract, and that DOE strengthen oversight in some areas. We agree with these recommendations and have already begun to implement them.''

The GAO was highly critical of Fluor Daniel Fernald and DOE's handling of the vitrification project and another project to clean up UNH, a radioactive liquid.

''DOE has not exercised adequate management and oversight of the vitrification and (UNH) projects or of the contractor's (Fluor Daniel Fernald's) safety and health activities. In addition, the contractor has not complied with some required procedures in maintaining its major performance and financial systems. As a result of these weaknesses, costs have increased, schedules have slipped and safety and health risks exist.''

In defending its actions, DOE officials said: ''On numerous occasions, DOE's site management at Fernald financially penalized (Fluor Daniel Fernald) for its performance on the pilot project and UNH project. For both projects, the department fully acknowledged problems and discussed them openly in public forums for the past two years.''

Fluor responds

In a written response to The Enquirer Tuesday, Fluor Daniel Fernald officials said they ''have previously acknowledged significant problems have been experienced in our efforts to construct and startup the vitrification pilot plant - a plant designed to provide data about the safe and efficient disposal of (radioactive waste).''

Fluor officials declined to comment on the recommendation by members of Congress to not extend the company's contract at Fernald until problems with the vitrification project were resolved. They also did not address the findings that the company and DOE ''wasted tens of millions of dollars'' of taxpayers' money.

Company officials did point out that the GAO found no ''criminal wrongdoing or a willful pattern of fraud and deception.'' The officials said they also felt the GAO report ''puts to rest the allegations of 'Danger and Deceit' as characterized by (The Enquirer).''

Fluor officials, in the press release, wrote: ''We are gratified that the Ohio delegation recognizes the success, progress and cost savings on the Fernald project.'' The company noted that Fernald's accelerated cleanup plan will cut more than a decade off the original schedule and may save taxpayers billions of dollars over the life the project.

''Also, five of the six major project areas - which include the decommissioning and deconstruction of the facilities formerly used for uranium feed materials production - are on or ahead of schedule and on budget,'' the Fluor statement said.

But Rep. Steve Chabot said Fluor Daniel Fernald's comments were misleading and self-serving. ''The GAO report confirms serious and ongoing problems with the Fernald cleanup involving both the Department of Energy and its contractor.

''I certainly agree with the GAO's statement that the November expiration of the contract with Fluor Daniel Fernald 'will provide a test of the implementation of DOE's contract reform initiatives.' DOE can demonstrate its commitment to a policy of full and open competition, and the effects of its training of DOE personnel, in performance-based contracting.''

Mr. Chabot also praised The Enquirer for revealing the problems at Fernald.

''Overall, the GAO's report makes it evident that the initial reporting in The Cincinnati Enquirer flagged some very serious issues. Although the report does not verify all of The Enquirer's allegations, the paper deserves praise for shining a spotlight on management and performance problems at Fernald.

''My colleague Congressman Portman has done a tremendous job thus far in following up on these very important concerns, and I look forward to working further with him, Senator Glenn, Senator DeWine, and Congressman Boehner in keeping the pressure on to improve cleanup operations for the benefit of our entire community.''

J. Phil Hamric, head of the Energy Department's Ohio Field Office, and Jack Craig, the department's Fernald Area Supervisor, declined repeated requests for interviews about the GAO report findings.

The cleanup contract comes up for renewal in November when Energy Department officials can decide to hire another company to supervise the site; award another long-term contract to Fluor Daniel Fernald; or renew the existing contract for a one-to-three-year period.

The Energy Department now estimates it could take another 13 to 15 years to complete the cleanup with an additional cost of more than $2.4 billion.

Detailed findings

The GAO report was compiled during an 11-month investigation that included dozens of interviews with DOE officials and employees and managers of Fluor Daniel Fernald and its subcontractors.

The result is a 90-page document citing specific problems with management, oversight, finance and safety. Among the findings:

  • DOE provided limited oversight during the early stages of the vitrification and UNH projects and did not prepare many of the required project management documents for the UNH project.

    ''These and other DOE oversight weaknesses contributed to a total of $65 million in estimated cost overruns and almost six years of schedule slippages for the two projects,'' the report said.

  • From 1993 to 1995, serious safety and health concerns were raised about DOE's ability to ensure Fluor Daniel Fernald's compliance with safety and health requirements.

  • Fluor Daniel Fernald's practices for maintaining the performance and financial systems made it difficult for DOE and the company to exercise effective control and oversight of Fluor's costs and activities.

    ''For example, the contractor's requests to change the cost and schedule baseline, on which the contractor's performance is based, do not always provide the required information for DOE's approval.

    ''In addition, charges are routinely made to closed financial accounts and the accounts are routinely reopened without the responsible managers' knowledge. Consequently, assurance that only appropriate costs are being charged to accounts is weakened.''

GAO

SUMMARY OF REPORT

COMPLETE REPORT


PDF FILE

GAO findings
confirm Enquirer investigation

  • Energy Department officials at Fernald have not exercised adequate management and oversight at the site.

  • There has been insufficient monitoring of Fluor Daniel Fernald's safety and health programs and procedures by Energy Department officials.

  • Fluor Daniel Fernald has not complied with required procedures in maintaining its major performance and financial systems.

  • Weaknesses in oversight at Fernald have resulted in increased costs, project schedule slippages, and safety and health risks.

  • Continued weaknesses in the Energy Department's oversight at Fernald limits its ability to ensure Fluor Daniel Fernald is adhering to safety and health requirements.

  • Inadequate monitoring procedures and weak planning of formal inspections by Fernald's Energy Department staff means the government cannot ensure that identified safety problems are adequately corrected.

  • Fluor Daniel Fernald's practices for maintaining the site's performance and financial systems make it difficult for them and the Energy Department to exercise effective control of Fluor's costs and activities.

    DANGER & DECEIT: ENQUIRER INVESTIGATION


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    Entire contents Copyright (c) 1997 by The Cincinnati Enquirer, a Gannett Co. Inc. newspaper.