Audit Report: OAS-M-13-03: Cost Transfers at the Department's Sodium Bearing Waste Treatment Facility Construction Project [open pdf - 452KB]
"The Department of Energy (Department) awarded the Idaho Cleanup Project contract to CH2M WG Idaho, LLC (CWI) in 2005. The contract scope primarily included environmental cleanup at Idaho National Laboratory, and also included the construction of the Sodium Bearing Waste Treatment Facility. The primary mission of this facility was to treat approximately 900,000 gallons of radioactive liquid sodium bearing waste. This facility had a Federal baseline construction cost of $461 million and was approved in December 2006, with a planned start of operations in July 2010. The facility was to treat the liquid waste for ultimate disposal at the Waste Isolation Pilot Plant. It was also to be designed to treat high-level radioactive waste, referred to as calcine waste, at an unspecified future point in time. Due to significant cost escalations, the Department revised the Federal project baseline to increase the total cost to $571 million with a completion date of August 2011. To minimize project costs charged to the line item project account, CWI reviewed its costs incurred on the project to determine whether the costs were appropriate. CWI identified a number of costs that it concluded were not directly attributable to the facility and ultimately decided to transfer approximately $13.1 million in costs for seven items to other operations accounts within the contract, reducing the amount charged to the line item project. The funding determinations for these cost transfers were made between April and November 2010. To ensure the cost transfers were in compliance with the Federal Acquisition Regulation (FAR), Cost Accounting Standards, Department Orders, and internal procedures, CWI had the transfers reviewed by an external legal team, Internal Audit and corporate managers, all of whom concurred with the transfers. In January 2011, the Energy Systems Acquisition Advisory Board agreed to make further changes to the project, and extended the estimated project completion date to December 2011, but kept the approved total project cost for the facility at $571 million. At that time, the Advisory Board stipulated that the Office of Environmental Management and the Office of Acquisition and Project Management1 would review the cost transfers. Upon review, the Office of Environmental Management considered the issue closed based on the Idaho Operation Office's conclusion that the cost transfers did not violate any laws, regulations or applicable accounting standards. However, the Office of Acquisition and Project Management questioned the appropriateness of the cost transfers stating that the transfers were contrary to project management best practices. The Office of the Chief Financial Officer then determined that an independent audit should be performed to determine whether the costs should have remained within the project based on the original project baseline established at Critical Decision 2, Approve Performance Baseline. Subsequently, the Department requested that the Office of Inspector General determine whether the transferred costs were direct project costs that should have remained with the project."
Department of Energy, Office of Inspector General, Office of Audits and Inspections, Report No. OAS-M-13-03
United States Department of Energy: http://energy.gov/