Millions wasted on Fernald buyouts

Inspector general's report blasts Energy Department, FERMCO

The Cincinnati Enquirer

Almost $16 million was wasted in employee buyouts at Fernald by the U.S. Department of Energy and the company cleaning up the nuclear site, according to a special investigation by the department's Inspector General.

Fernald Environmental Restoration Management Co. (FERMCO) refilled most of the terminated positions - actions never challenged by the Energy Department watchdogs at Fernald, according to the Inspector General report.

The taxpayer-funded buyouts are part of an Energy Department program used by FERMCO to reduce the work force and save labor costs. Despite the waste, FERMCO was given an ''excellent'' rating for its work force restructuring efforts and awarded $405,000 in performance fee by the Energy Department's Fernald staff, the report found.

The Inspector General's 18-page report on two buyouts since 1993 was released Friday.

''The funds spent on these restructurings, that provided little or no benefit to the department, cannot be recouped,'' the report stated.

''FERMCO's restructuring efforts have not accomplished the objectives. The first restructuring neither significantly reduced the staffing nor substantially changed the mix of workers' skills. The second restructuring, like the first, might neither reduce overall staffing nor change the mix of workers' skills,'' the report said.

The Inspector General's findings substantiate a Feb. 14 Enquirer article that brought the problem to light and questioned the practice. That story revealed the Energy Department authorized $12.9 million, or an average of $27,000, in severance to 476 salaried employees in January and February 1995. All terminated employees were guaranteed at least $15,000 in the buyout plan.

The Enquirer also reported that the Energy Department paid about $2.9 million to 255 employees in a similar 1993 FERMCO severance buyout, or ''work force reduction'' project. The article revealed how FERMCO had refilled many of the jobs and that the Energy Department's Fernald staff provided little oversight.

The newspaper also reported that similar Energy Department employee severance programs nationwide had cost taxpayers more than $350 million since 1993.

Shortly after The Enquirer article ran, both Energy Department and FERMCO officials said the newspaper ''failed to understand the severance program'' and called the story ''inaccurate and misleading.''

But the Inspector General's report not only confirmed The Enquirer findings, but found other problems as well.

For example, Inspector General investigators found that in some cases, FERMCO terminated employees who had been hired by its predecessor at Fernald, and replaced them with workers ''transferred in from other components of Fluor Daniel, Inc.,'' FERMCO's parent company.

Additionally, the Inspector General ''referred an allegation of improper benefit payments to specific workers'' to the Energy Department's Office of Worker and Community Transition. That investigation is ongoing.

According to the Inspector General report the Energy Department's Fernald staff ''agreed there were some deficiencies in the restructuring process,'' and agreed to make changes.

The Energy Department's director at Fernald blamed problems on ''budgetary fluctuations, work scope changes and labor relations developments.'' The director said his staff was taking corrective actions, according to the report.

FERMCO officials could not be reached for comment.

Poorly run program

The Inspector General Office started its investigation on January 12, 1995. According to the Inspector General's report, the Energy Department's Fernald staff authorized the 1993 and 1995 work force reductions ''to reduce staffing levels and to modify the mix of workers' skills in response to budget cuts, facility closures and changes in the Fernald Project's mission.''

But the Inspector General's investigators found the department's Fernald staff failed to ''require FERMCO to perform a skills analysis to identify which employees were needed to perform the Fernald Project's current (cleanup) mission.''

The Energy Department's Fernald staff also failed to ''effectively monitor FERMCO's restructuring efforts to ensure that the department's objectives were met,'' the Inspector General report stated.

In the first work force restructuring project, FERMCO terminated 255 employees in October 1993, but by Sept. 30, 1994, ''all but 14 of the employees separated were either rehired or replaced by new employees with similar skills,'' according to the report.

After the January - February 1995 reduction in which 476 employees were awarded severance packages, FERMCO hired 265 new employees by Sept. 30, 1995, the report showed. And current Energy Department and FERMCO records reveal that FERMCO has added about 100 employees to its work force since that time.

''Continuing to separate and replace employees with needed skills under the restructuring plan is, in our opinion, a material internal control weakness . . . ,'' the Inspector General report stated.

Public's money wasted

FERMCO's failure to conduct a required skills analysis of its employees, the Inspector General found, resulted in staff reductions of qualified employees who should have been retained.

''FERMCO separated employees with needed skills and hired new employees to replace those separated,'' the report said.

The report said FERMCO's reductions and rehirings include:

Terminating 14 secretaries during the first restructuring, but then hiring 19 new secretaries before the second restructuring.

Terminating 15 clerk typists in the first restructuring and subsequently hiring eight new clerk typists before the second restructuring. In the second restructuring, FERMCO identified nine clerk typists for termination, three of whom were hired after the first restructuring. Since announcing the second restructuring, FERMCO has hired 17 new clerk typists.

Terminating five procurement specialists during the first restructuring and subsequently hiring nine new procurement specialists before the second restructuring. Since announcing the second restructuring, FERMCO has hired four new procurement specialists.

Additionally, the Inspector General report said:

''FERMCO did not propose to identify critical skills needed to meet the Fernald Project's future mission nor to identify employees who could be reassigned or retrained rather than separated.

''The Fernald Area Office (Energy Department staff) should have determined that the restructuring plans did not meet the basic requirements of Section 3161 (Congress' rules for work force reduction at nuclear sites), especially the requirement to minimize layoffs. It should have required FERMCO to pursue opportunities for employee reassignments and retraining to avoid, or at least minimize, the number of layoffs.''

While criticizing both Fernald's Energy Department staff and FERMCO, the Inspector General report also warned of the potential for future waste of taxpayers' money because ''FERMCO still has not identified future staffing needs and continues to hire replacements for employees that it separates.''

The Inspector General report recommended that the Energy Department's Fernald director:

Require FERMCO to immediately perform a comprehensive skills analysis; review the skills of employees scheduled to be separated; and encourage employees with skills that are needed to retain their jobs.

Develop future restructuring plans based on comprehensive skills analyses in accordance with (Energy Department) guidance.

Monitor FERMCO's restructuring activities to ensure that the department's objectives are met.

Published May 19, 1996.