By George Lobsenz
In only the second management change in the 58-year history of the South Carolina nuclear weapons site, the Energy Department announced yesterday it has chosen a five-company team led by Fluor Corp. to take over most cleanup and defense operations at its Savannah River Site, which has been run for DoE since 1990 by a consortium led by Washington Group International Inc.
As in other recent contract awards, DoE officials provided virtually no public explanation for why it chose the new consortium, Savannah River Nuclear Solutions LLC (SRNS), over the incumbent contractor, Washington Savannah River Co., other than to say that SRNS’ bid was judged to provide more value to the government when cost, technical expertise and managerial experience of the two bidders was compared.
However, the five-year contract entailing an estimated $4 billion in work is indisputably a huge win for Fluor, the Texas-based engineering and project management contractor, and its two SRNS partners, Honeywell International Inc. [HON], and Newport News Shipbuilding, a Northrop Grumman [NOC] subsidiary. The team also includes as subcontractors Lockheed Martin Services Inc. [LMT] and Nuclear Fuel Services Inc.
Some insiders in the DoE contracting community believed Washington Group–which recently was bought by URS Corp.–was likely to retain the Savannah River contract, in part because it was an entrenched incumbent with longstanding ties to the local community. Washington Group officials also touted the safety expertise provided at the site by Washington Safety Management Solutions, another affiliate of Washington Group.
In addition, Washington Group and its partners at Savannah River–Bechtel, CH2M Hill and BWX Technologies, now known as Babcock & Wilcox Technical Services–have been dominant in other major DoE contract competitions in recent years, collectively winning the lion’s share of the deals.
Further, Washington Group Savannah River was not even challenged by another bidder when it won its last Savannah River contract in 2001, several years after Washington Group bought its predecessor, Westinghouse Savannah River Co. Westinghouse had been at the site since 1989, replacing Du Pont, which built Savannah River for the government starting in 1950.
This time around, some observers felt DoE again might be reluctant to change site management for fear of delaying several major projects now getting under way at Savannah River, including billions of dollars worth facilities to convert surplus weapons plutonium to commercial reactor fuel–some of which are already behind schedule.
As it was, the department did not see robust competition for the contract, even though it is one of its biggest.
To the contrary, it appears DoE had to considerably sweeten the terms of the contract in order to induce even one bidder to challenge Washington Group. The department initially offered a maximum available fee of $28 million a year in its draft request for proposals issued in October 2006. However, after contractors inquired in late 2006 about whether the department might consider raising the available fee “to better reflect anticipated work scope challenges,” as DoE put it, the department announced on Feb. 2 it would nearly double the available fee to $54.3 million annually.
But John Hopkins, group executive for Fluor in charge of its government contracting, said the increased fee was not as important as the opportunity the Savannah River contract offered to help open doors for Fluor to get more DoE work in the future.
While Fluor won praise from DoE officials for its recently completed accelerated cleanup effort at the department’s Fernald uranium site in Ohio, the company has not won many DoE competitions in recent years. Its largest current DoE contract, for site management and cleanup at the department’s Hanford site in Washington state, is going up for bid soon, with Fluor looking to bid on a successor nuclear cleanup contract there.
Hopkins said Fluor had not been briefed by DOE on why it was selected for the Savannah River contract, but that he believed the strength of the management team offered by SRNS was critical to the win.
While Washington Savannah River Co. and its subcontractors represented “an extremely strong team” with a long history at the site, he told sister publication The Energy Daily yesterday, “we were able to field a team of people that DoE is very comfortable with.”
The SRNS senior management team is led by President and Chief Executive Officer Chuck Munns, a former vice admiral in the U.S. Navy, where he was responsible for the U.S. submarine forces worldwide.
Asked whether he felt DoE wanted new blood at Savannah River, Hopkins said: “Having additional players and expanding the depth of competition is always a good thing. It provides more competition, and more competent competitors” for future DoE contract opportunities.
As the new operator of Savannah River, one of DoE’s largest facilities, Fluor and its partners will be responsible for highly sensitive nuclear material storage and processing operations involving tons of weapons-usable plutonium and high-enriched uranium and a wide variety of wastes, ranging from spent reactor fuel to volatile mixtures of radioactive and toxic residues left over from past nuclear weapons operations. The company also will decontaminate and decommission dozens of obsolete structures and clean up contaminated soil and groundwater.
In addition, it will operate tritium production operations for DoE’s nuclear weapons program and run the Savanna River National Laboratory, which is focused on development of new nuclear cleanup technology and hydrogen fuel research.
However, in documents describing the scope of the contract, the department said that tritium and other defense facilities to be operated by SRNS could be split off to another entity, depending on upcoming decisions on reconfiguring and downsizing the DoE nuclear weapons complex.
And in regard to the lab, DoE specified that it should be run as a distinct and separate entity in preparation for a possible future spin-off into an independent research facility.
SRNS also will manage one of three new facilities being built at Savannah River to dispose of surplus weapons plutonium—the Pit Disassembly and Conversion Facility. It will not be involved in the ongoing construction of the mixed oxide facility, which is to convert surplus plutonium to reactor fuel, or the waste solidification building.
Altogether, SRNS is expected to manage about $800 million of work annually under the five-year contract, and DoE could extend the contract for up to another five years through 2017 if the contractor performs well.
The transition period for the new contractor will begin January 24, with SRNS assuming full control of the site in April 2008.
DoE is expected to award another major contract at Savannah River soon, this one to dispose of millions of gallons of high-level radioactive waste stored in underground tanks at the site.
Another contractor, Parsons, is currently building major new facilities to treat that liquid waste for final disposal.