Friday, November 25, 2016

Contractors Pay $125 Million to Settle Safety Concerns

A DOE (Department of Energy) contractor and its primary subcontractor have agreed to pay $125 million to settle allegations that they charged the Government for materials and work that did not meet standards required for nuclear facilities and used Government funds to pay for lobbying expenses. Bechtel National will pay $67.5 million and AECOM Energy and Construction Inc. will pay $57.5 million. AECOM, for its part, is a successor in interest to URS Energy and Construction Inc.and maintains that the events leading to the settlement occurred prior to its acquisition of URS. We wonder if this liability was reflected in the purchase price of URS.

This settlement resolved a qui tam suit (whistleblowwer suit) brought by three former contractor and Government employees. It had been sealed until last week when the Government decided to enjoin that action. When the Government jumped in, the contractors quickly moved to settle. The settlement is not an admission of guilt, it only resolves the issues. Nevertheless, $125 million is a hefty price and the whistleblowers (and their attorneys) will receive a cut of the proceeds, possibly as much as $31 million.

The case involved the construction of a vitrification plant on the Hanford nuclear reservation. The "vit" plan, which began construction in 2002 will process 56 million gallons of radioactive waste into a stable glass form for disposal. According to the lawsuit, Bechtel and URS did not comply with nuclear quality requirements. Examples included the use of grout not formulated to withstand high radiation levels, the acceptance of piping without the required harness to withstand a severe earthquake, and welds and duct work that could not be shown to meet nuclear quality requirements.

Allegations of lobbying effort paid with Government funds included money to pay a lobbyist in 2009 and 2010 to downplay the significance of technical concerns raised by the Defense Nuclear Facilities Safety Board and using funds to secure an extra $50 million in federal money when the company was fearful that the $50 million was in jeopardy because of safety concerns.

You can read the Justice Department's press release here. A local account from the Tri-City Herald can be found here.

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