DOE contractor costs soar 44 percent due to pension losses

Introduction

An Energy Department contractor has an unusual explanation for a 44 percent cost overrun on a project to clean up millions of gallons of liquid radioactive waste — the recent financial crisis hurt its pension investments.

Savannah River Remediation LLC won a contract in December 2008 to empty, clean, and close 22 of the 49 underground storage tanks at DOE’s nuclear laboratory known as the Savannah River Site in South Carolina. Six months later, projected costs had climbed a surprising 44 percent, from $3.2 billion to $4.6 billion, according to a new report by the Government Accountability Office.

A significant part of that jump is due to the defined-benefit pension plan the contractor provides to its employees, initially estimated at $146 million. “However, the economic crisis that began in 2007 caused significant losses to the assets in which the Savannah River Site workers’ pension plans had invested,” the report said. In June 2009, the contractor estimated pension costs had soared to $762 million, the GAO said. Savannah River Remediation is run by engineering giant Bechtel along with partners URS Corp., CH2MHill, and Babcock & Wilcox Co.

More bad news: the Savannah River clean up project is behind schedule and faces more delays. Parsons Corp. has a separate contract to build a $1.3 billion facility for separating lower- and higher-activity waste. Construction delays for that unit would also postpone emptying the underground storage tanks, the GAO said.

FAST FACT: The most highly radioactive waste from the Savannah River Site will be “vitrified” by mixing it with molten glass and poured into metal canisters to harden as it cools. The canisters will be stored there indefinitely because the DOE lacks a permanent disposal site.

Other new reports released by agencies including the Government Accountability Office (GAO) and various federal Offices of Inspector General (OIG):

FINANCE

* Troubled Asset Relief Program (TARP) is so unpopular that some banks refused to participate for fear of losing customers, and that stigma could hurt future U.S. financial stability efforts (Congressional Oversight Panel).

* As several federal agencies plan for contractors to take over financial management systems, there are concerns that the changes may not achieve greater efficiencies (GAO)

HEALTH CARE

* In 2007, generic drugs saved roughly $24 billion for the Medicare Part D program and $9 billion for its enrollees (Congressional Budget Office)

NATIONAL SECURITY

* Homeland Security Dept. canceled an automated system to detect nuclear smuggling because the machines were too big to fit in U.S. Customs’ existing inspection lanes (GAO)

MISC.

* OSHA has not provided investigators in its whistleblower protection program with sufficient training and has not ensured that the program operates as intended (GAO). See Center for Public Integrity story.

* Education Dept recipients of economic stimulus funds have not consistently and reliably reported the number of jobs created or saved (OIG)

* Energy Dept. should be more efficient in responding to Freedom of Information Act requests (OIG)

* Most states and communities to some degree use competition to award funds from federal Community Development Block Grants (GAO)