Audit: DOE-OIG-24-13

March 11, 2024

Bechtel National, Inc.'s Compliance with Contract Terms Relating to Self-Performed Work and Subcontracting for the Waste Treatment and Immobilization Plant

To address the environmental risk posed by the waste stored at the Hanford Site Tank Farms, the Department of Energy is constructing a treatment facility called the Waste Treatment and Immobilization Plant (WTP).  WTP’s mission is to convert 56 million gallons of chemical and radioactive waste into a stable glass form for permanent disposal.  This waste is currently stored in 177 underground tanks, most of which are beyond their design life.  In December 2000, the Department awarded Bechtel National, Inc. (Bechtel) a $4.3 billion cost-reimbursement contract to design and complete the WTP.

Bechtel’s original WTP contract contained a clause requiring Bechtel to self-perform 40 percent of the work on the contract and to subcontract the remaining 60 percent.  Self-performed work includes work performed by the prime contractor, teaming partners, related entities, and affiliates.  The remainder of the subcontracted work should be performed through competitive procurements with an emphasis on fixed-price subcontracts.

We initiated this audit to determine whether Bechtel complied with contract terms relating to self-performed work and subcontracting for WTP.  Specifically, our audit determined whether Bechtel was on track to meet its self-performance objectives, billed unallowable subcontractor fees, and emphasized competitive subcontracts for work that was not self-performed.

We found that Bechtel did not achieve its contract objective relating to self-performed work and subcontracting for the WTP.  First, Bechtel is not on track to meet its self-performance 60 percent objective.  Second, Bechtel billed the Department for unallowable fees, which Bechtel later self-disclosed.  Third, Bechtel did not competitively award many of its subcontracts.

We attributed these issues to the Department’s need for additional oversight.  Specifically, the Department did not prioritize, accurately monitor, or coordinate with Bechtel on meeting the self-performance objectives.  In addition, we found that in the original contract, the Department agreed to a clause that only allows 7 days to review invoices as opposed to the typical 30 days allowed under the Prompt Payment Act, making it difficult for a thorough review to be performed; did not use the full 7 days allowed; and lacked the information needed to identify unallowable fees.  Finally, Bechtel was not giving vendors sufficient time to respond to solicitations.

This report contains eight recommendations that, if fully implemented, should help ensure that the Department is not billed for unallowable fees, and that more competitive subcontracting opportunities are available to other vendors.  Management agreed with our findings and recommendations, and its proposed corrective actions are consistent with our recommendations.