7
Contract Management Metrics
PERFORMANCE INCENTIVE IN DOE-EM CONTRACTS
Overview of Contracts Having Performance Fees and Incentives
The U.S. Department of Energy (DOE) accomplishes its defense environmental cleanup activities through the work of contractors. The Office of Environmental Management (EM) has been attempting to finish the cleanup activities using many different contract vehicles. Some of the sites at which cleanup activities are now completed employed novel incentive schemes in their contracts. Further, the variety of cleanup activities—groundwater treatment, demolition, waste treatment and immobilization, etc.—and the varied path to disposal for the different atomic energy act materials, mixed waste and other descriptors suggests that incentives will vary. This chapter examines the metrics used for contract performance and the award incentives and fees.
As explained in DOE (2008b), DOE’s guiding principle is to obtain the maximum return from its contractors by offering a balanced mix of integrated, fair, and challenging incentives. The principles require the department to tie fees to contractor performance. In establishing appropriate incentives for contractors, the fee should be reasonable, reflecting effort (the complexity of the work and the resources required for contract performance), cost risk (the cost responsibility and associated risk the contractor assumes under the contract type and the reliability of the cost estimates in relation to the complexity of the task), and several other factors (e.g., support of federal socioeconomic programs, investment in capital, and independent development).
Linking the Performance Fee to Acquisition Outcomes
DOE has available to it a variety of contract types. The choice of contract type can depend in part on the purpose of the work to be accomplished in the contract. A cost-plus-award-fee (CPAF) contract is generally the appropriate contract type for a management and operating contract. The total available fee in this case is the sum of the base fee and the performance fee. The performance fee can comprise both objective and subjective fee components and must relate to clearly defined performance objectives and performance measures.1
A cost-plus-incentive fee (CPIF) contract is, as stated in the Federal Acquisition Regulation, a “cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs.”2 The CPIF vehicle is appropriate when the parties can negotiate a target cost and a fee adjustment formula that are likely to improve the management of the contract (DAU, 2018).
The cost-plus-fixed-fee (CPFF) contract “provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract.”3 The fee, although in principle fixed, may be adjusted as requirements change during execution. These contracts are often used in research or exploratory development (DAU, 2018).
In all the contracts described above, the performance objectives and measures should where feasible be expressed as desired results or outcomes. The specific measures used to determine the contractor’s achievement must be stated as concretely as possible. Following these principles will increase the probability that the contractor will only receive a performance fee for government negotiated acquisition outcomes.
These DOE sites have a designated officer for evaluating the contractor’s performance against its objectives and measures for subjective fee components. Using subjective fee components is less desirable than using objective fee components because there is not as clear a link between performance and reward. Only when it is not feasible to use objective measures of performance should
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1 There has been an active economics literature on incentives and performance for decades; see, for example, Baker, Gibbons, and Murphy (1994), cited in 1,808 papers as of December 2020. Although their assumptions are too restrictive to apply to the situation of the Department of Energy (DOE) managing environmental remediation contracts, the basic conclusions are relevant, “We also show, however, that in some circumstances objective and subjective measures are complements: neither an explicit nor an implicit contract alone yields positive [value], but an appropriate combination of the two does,” where explicit (objective) contract terms are those that have been written and implicit (subjective) contracts terms are those that are difficult to define, but are understood by both parties to a contract. Therefore, Baker, Gibbons, and Murphy show that it is important to have both objective and subjective criteria in the evaluation of a contractor’s performance. This is discussed specifically in “Performance Metrics in PEMPs,” below.
2 48 CFR 16.405-1.
3 48 CFR 16.306.
subjective fee components be used. For example, although it might be feasible, it is difficult to specify performance metrics for “environmental stewardship and compliance” and “worker safety, health, and safety culture.” If they are, they should be tied to identifiable interim outcomes, discrete events, or milestones to the maximum extent practicable. When using subjective fee components, it is especially important to ensure that the contract or award fee plan clearly defines how the government will measure the contractor’s performance. Fee payment must depend on only one thing—the contractor’s providing the acquisition outcomes for which DOE negotiated.
Rollover of Performance Fee
Some performance evaluation and measurement plans contemplate the rollover of unearned performance fee—typically the subjective fee component—from one period to another. Rollover is a fee not earned in an evaluation period available for payment in a subsequent period.
Award Term
An award term incentive provides a new dimension in contractor incentives. An award term incentive has similarities to award fees, with the major difference being that the contractor earns additional periods of performance instead of an award fee. Performance objectives for earning an award term should be distinct from those for earning award fees.
Major Cost Reimbursable Contracts Types Used by DOE
The document, General Guide to Contract Types for Requirements Officials (DOE, 2008a), describes various contract types as follows:
- Cost reimbursable (CR), bearing no fee, generally these contracts are parts of other contracts that are not associated with incentive fees, such as site benefit plans.
- Firm fixed price (FFP) contracts require “delivery of a product or services at a specified price, fixed at the time of contract award and not subject to any adjustment.”
- Cost-plus-fixed-fee (CPFF) contracts contain a fee that is fixed at the inception of the contract. The fixed fee will not vary with the actual costs that the contractor incurs but might be adjusted as a result of negotiated changes in the work to be performed under the contract.
- Cost-plus-award-fee (CPAF) is an incentive contract where the fee might include (1) a base amount that is fixed at the contract’s inception, and (2) an award amount the contractor might earn depending on performance
- Cost-plus-incentive-fee (CPIF) contracts may contain both performance and delivery incentives. CPIF contracts specify a (1) target cost, (2) a target fee, (3) minimum and maximum fee thresholds, and (4) a fee adjustment formula. The formula provides for an increase in the fee paid to the contractor above (below) the target fee when total allowable costs are less (greater) than the target cost.
measured with contract criteria, determined by the DOE-EM’s contract officer evaluation of the contractor’s performance.
In each of EM’s incentive contracts—CPAF, CPIF, and CPFF—there is a performance evaluation and measurement plan (PEMP) defining how the department will evaluate the contractor’s performance and determine how much of the maximum fee they will award. EM has released information relating to contractor fee determinations under its major cost-reimbursable contracts. Performance assessment summaries and fees earned under CPAF, CPIF, and CPFF contracts can be found in the “Scorecards” posted on the applicable DOE field office website, see, for example, DOE-ORP (2018), as discussed below, “Performance Metrics in PEMPs.”
Incentive Ratings and Definitions in Performance Evaluation and Measurement Plans
The committee spent time examining the contracts and PEMPs; see DOE (2012) for current and recent work at the Hanford Site. Cleanup activities for Hanford have been ongoing for some time and currently are managed by DOE as two geographical sites: the Office of River Protection (ORP) and the Richland Operations Office.
DOE-ORP (2018) describes the Performance Evaluation Measurement Plan for the Hanford Tank Waste Treatment and Immobilization Plant project. It contains the following seven award fee objectives (these are similar to those in all PEMPs):
- Project performance (cost, schedule, and efficiencies);
- System startup, commissioning, and plant management, and engineering performance;
- Construction, field, and resident engineering, occurrence reporting, and conduct of operations;
- Environmental, safety, health, and safety conscious work environment;
- Quality assurance program and quality of performance;
- Nuclear safety; and
- Pretreatment and high-level waste facilities.
EM rates each of these objectives (as well as those in other contract PEMPs) using the adjectives and percentage of award fee granted as described in Table 7.1. Each objective has a maximum award for the contractor and is given a specific percentage of the maximum award. These percentages are summed, and the total percentage is equal to the sum of the awards divided by the sum of the maximum awards.
Regarding the determination of the award fee percentages (DOE-ORP, 2018, p. 3),
ORP will compare the contractor’s actual incurred costs and schedule performance to the total estimated costs of that work and the planned schedule. The analysis of cost control performance considers changed programmatic requirements, changed statutory requirements, and sometimes changes beyond the contractor’s control. ORP relies on other objective or subjective (or both) cost and schedule performance elements, such as critical path and float analysis, to evaluate the contractor’s performance . . . [emphasis added]
Cost and Schedule Control – The contractor maintains cost and schedule control (i.e., actual costs incurred for work performed are equal to or less than the estimated costs for that work) and actively pursues cost containment and reduction through innovative approaches and management of resources. EM monitors cost control against the Performance Measurement Baseline for the Low-Activity Waste Facility, Balance of Facilities, and Analytical Laboratory, Direct-Feed Low-Activity Waste (DFLAW), and Project Services.
Performance Metrics in PEMPs
As noted, certain of the contracts evaluated by the committee—specifically, CPFF, CPAF and CPIF—include fees that the department can pay the contractor
TABLE 7.1 Award Criteria Used by the Hanford Tank Waste Treatment and Immobilization Plant Project
| Adjectival Rating | Percentage of Award Fee Earned | Definition: “Contractor has…” |
|---|---|---|
| Excellent | 91 to 100 | “exceeded almost all of the significant award-fee criteria”… |
| Very Good | 76 to 90 | “exceeded many of the significant award-fee criteria”… |
| Good | 51 to 75 | “exceeded some of the significant award-fee criteria”… |
| Satisfactory | ≤ 50 | “met overall cost, schedule, and technical performance requirements”… |
| Unsatisfactory | 0 | “failed to meet overall cost, schedule, and technical performance requirements”… |
SOURCE: Table 1 of DOE-ORP (2018, p. 1).
above and beyond any fixed price or reimbursable costs. Awarding of these fees contemplates measuring the contractor’s performance against performance metrics included in the PEMPs. The Department makes its determination on the awarding of fees using criteria.
There appear to be no guidelines to distinguish between objective and subjective award fee criteria. According to GAO (2019, p. 25) [emphasis added]:
Our review of DOE documents showed that the Site-Specific approach has a different process for determining incentive and award fees, depending on whether the fee is tied to objective or subjective performance criteria. According to agency officials and documents, the Site-Specific approach generally provides more money toward incentive fees tied to objective criteria than to award fees tied to subjective criteria—about 60 to 75 percent of available fee money goes to incentive fees. Incentive fees tied to objective performance criteria are awarded based on completion of the specific tasks or quantitative targets defined by the performance criteria.
For example, in DOE-ORP (2018, Appendix A) “Award Fee Rating Guide” under “Does not meet requirements”/”Failing or will fail”:
-
Objective items
- Clear (or high) risk of objectives not being achieved on time
- High probability of not achieving the outcome
- Expect to not meet or significantly miss cost, scope, or schedule
- Inadequate degree of transparency
-
Subjective items
- Overall, most key areas meeting or close to meeting requirements
- Inadequate percentage of key deliverables are satisfactory or better
- Inadequate percentage of sub or supporting areas are performing satisfactorily
- Too high a frequency of mid-level safety, security, or quality issues of note
- Major safety, security, or quality issue
- Less than approximately 75 percent of issues are self-identified and reported in a timely manner
- Inadequate degree of transparency
- Significant safety, fine, injury, security deviation(s) (see DOE, 1995),
- Significant deviations of Integrated Safety Management System practices, reporting, critiques, Emergency Operations Center reviews, multiple safety basis/Conduct of Operations/engineering deviations, or a significant deviation with nuclear safety or operational implications
Regarding the aggregation of performance metrics, DOE-EM (2018, p. J-4-1) states, “Objective performance outcomes are allocated at least 60 percent of the available fee, and subjective performance outcomes are allocated up to 40 percent of the available fee.” This corresponds roughly to the findings made by GAO (2019, p. 25) on the topic.
CURRENT INCENTIVE STRUCTURES IN EM CONTRACTS
Incentive Structures in Cleanup Contracts
The committee considered the fees earned by DOE contractors under the three types of contracts noted previously—CPFF, CPAF and CPIF. According to DOE-EM’s (2020) description of how it makes fee determinations, performance assessment summaries and fees earned under CPAF, CPIF, and CPFF contracts can be found in the “Scorecards” posted on applicable DOE field office websites.
Waste Treatment and Immobilization Plant
Table 7.2 is an example of a summary of information on fees awarded to Bechtel National, Inc. (BNI) for “Design, construction, and commissioning of the Hanford Tank Waste Treatment and Immobilization Plant,” Contract Number: DE-AC27-01RV14136, from 2014 through 2019.
To examine the 2017 performance evaluation more closely, consider Table 7.3, taken from DOE-ORP (2017), which states, “Incentive B.1 – Award Fee-Project Management – Satisfactory. The fee for Project Management is divided into five [six] award fee objectives (AFOs) as follows” and lists these to include AFO2 through AFO7 in Table 7.3 below.
TABLE 7.2 Bechtel National Inc. Hanford Tank Waste Treatment and Immobilization Plant
| Calendar Year | Maximum Available Fee | Adjectival Rating | Averaged Score | Fee Awarded |
|---|---|---|---|---|
| 2014-A | $6,300,000 | Good | 63.0% | $3,970,000 |
| 2014-B | $6,300,000 | Good | 65.0% | $4,095,000 |
| 2015 | $12,600,000 | Good | 66.0% | $8,310,000 |
| 2016 | $10,200,000 | Good | 71.0% | $7,242,000 |
| 2017 | $7,872,103 | Satisfactory | 48.3% | $3,805,961 |
| 2018 | $7,872,603 | Satisfactory | 47.9% | $3,767,815 |
| 2019 | $7,872,603 | Good | 63.6% | $5,003,178 |
SOURCE: DOE-ORP (2020).
TABLE 7.3 Bechtel National Inc. Hanford Tank Waste Treatment and Immobilization Plant, 2017
| Award Fee Objective | Award Fee Code | Maximum Available Fee | Adjectival Rating | Averaged Score | Fee Awarded |
|---|---|---|---|---|---|
| Project Performance | AFO1 | $1,400,000 | Satisfactory | 40.0% | $560,000 |
| System Startup, Comm., Eng. | AFO2 | $1,400,000 | Satisfactory | 40.0% | $560,000 |
| Environmental, Health, Safety | AFO3 | $1,100,000 | Good | 53.0% | $583,000 |
| Quality Assurance | AFO4 | $1,200,000 | Satisfactory | 40.0% | $480,000 |
| Nuclear Safety | AFO5 | $1,300,000 | Good | 52.0% | $676,000 |
| Pretreatment Facility | AFO6 | $900,000 | Good | 55.0% | $495,000 |
| High-Level Waste Facility | AFO7 | $572,103 | Very Good | 79.0% | $451,961 |
| Total Award Fee | $7,872,103 | Satisfactory | 48.3% | $3,805,961 |
SOURCE: DOE-ORP (2017).
Also, in the PEMP, DOE-ORP (2017) states, “Incentive B.2 – Award Fee-Cost – Satisfactory. The fee for Cost consists of one AFO as follows…” and gives information on AFO1 as in Table 3.3. The “Adjectival Rating” of BNI’s performance declined in 2017 involved Award Fee Objective #1: Project Performance (Cost, Schedule, and Efficiencies). According to DOE-ORP (2017, p. 1):
- DOE-ORP had concern with the performance trends as reported in calendar year 2017 that indicated completion of the commissioning milestones were at risk.
- The considerable number of trends, baseline change proposals, and realized risks is a significant concern, because BNI is using a significant amount of its management reserve (MR). The MR is being managed by questionable processes leading ORP to doubt BNI’s ability to commission the Direct-Feed Low-Activity Nuclear Waste (DFLAW) facility on time.
As further discussed in Hamel (2017): “Incentive structure emphasizes integrated cost and schedule performance; fee for completion milestones declines monthly to a minimum fee after defined period; and performance (award) fee criteria updated annually to emphasize current project phase and priorities.” Thus, the award would decline as a function of the project completion date from $179 million in March 2021 to $119 million between October 2021 and April 2022 to $0 after December 2022. At present, the plant is scheduled to start treating low-activity waste for disposal by the end of 2023 and EM is now looking for a contractor to operate the facility. Bechtel is expected to remain on the project through 2036 when the vitrification plant is expected to be fully operational.
Although there was little change in the percentage of the maximum award fee in 2018, the contract evaluator found BNI “aligned the baseline schedule with the forecast schedule. This was considered a necessary effort, given the large disparity between the two schedules at the beginning of the year” (DOE-ORP, 2019a, p. 1). By 2019 the rating improved to “good” with the comment, “BNI continued to establish and maintain tools for identifying, tracking, and communicating mitigation of DFLAW project threats, risks, opportunities, and barriers necessary to meet the contractual dates for startup and commissioning of the LAW Facility.” However, “to increase the project pace, BNI drove up overtime costs. Going forward, process and performance improvements will be needed to reduce costs to complete the project on budget.” Regarding the Hanford Waste Treatment and Immobilization Plant (WTP), GAO (2020, p. 29) concluded:
After nearly 20 years and with over $11 billion spent since EM awarded the contract to design and build the WTP, the WTP is not complete and has faced numerous technical challenges, cost overruns, and schedule delays. According to a recent study by the U.S. Army Corps of Engineers and EM’s Hanford Lifecycle Report, the largest and most complex portion of the WTP—the pretreatment facility—is unlikely to be completed as designed and scheduled.
Tank Operations Contract
The committee compared these awards for BNI with those made by the same office for Washington River Protection Solutions (WRPS), a limited liability corporation owned by Amentum and Atkins, with Orano as its integrated subcontractor. Table 7.4 summarizes information on fees awarded to WRPS for the “Tank Operations Contract,” Contract Number DE-AC27-08RV14800, from 2013 through 2019. In the fiscal year 2019 performance review (DOE-ORP, 2019b), EM divided criteria into two sections: Objective Fee (Performance Based Incentives) on which the contractor received 99 percent of its award, and Subjective Fee (Award Fee) Criteria, on which the contractor received 85 percent of its award. The WRPS contract was recently extended up to September 30, 2021.4
Hanford 222-S Laboratory Analysis and Testing Services
Finally, the committee compared these contracts with a much smaller and less complex contract for Wastren Advantage, Inc. (WAI), a company held by French-owned Veolia. Table 7.5 is a summary of information on fees awarded to WAI for “Hanford 222-S Laboratory Analysis and Testing Services,” Contract Number DE-EM0003722, from 2016 through 2019. In the 2019 performance
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4 DOE Hanford Site, “WRPS Contract Modifications,” https://www.hanford.gov/page.cfm/DOE-ORPPrimeContracts/WRPSContractMods.
TABLE 7.4 Washington River Protection Solutions: Tank Operations Contract
| Fiscal Year | Maximum Available Fee | Adjectival Rating | Averaged Score | Fee Awarded |
|---|---|---|---|---|
| 2013-SEA* | $7,994,699 | Very good | 81% | $6,483,701 |
| 2014-SEA* | $12,597,052 | Very good | 83% | $10,459,418 |
| 2015-SEA* | $15,600,000 | Very good | 88% | $13,782,000 |
| 2016-SEA* | $12,471,000 | Very good | 77% | $9,638,450 |
| 2017-SEA* | $13,355,000 | Very good | 89% | $11,890,000 |
| 2018-SEA | $15,417,500 | Very good | 83% | $12,797,845 |
| 2018-PBI | $35,905,500 | Excellent | 98% | $35,105,500 |
| 2018 | $51,323,000 | Excellent | 93% | $47,903,345 |
| 2019-SEA | $13,005,000 | Very good | 85% | $11,059,450 |
| 2019-PBI | $27,995,000 | Excellent | 99% | $27,615,000 |
| 2019 | $41,000,000 | Excellent | 94% | $38,674,450 |
NOTES: * = No PBI breakdown was given. PBI = performance-based incentives. SEA = special emphasis areas.
SOURCE: DOE-ORP (2020).
TABLE 7.5 Wastren Advantage Inc. Hanford 222-S Laboratory Analysis Contract
| Calendar Year | Maximum Available Fee | Adjectival Rating | Averaged Score | Fee Awarded |
|---|---|---|---|---|
| 2016 | $142,771 | Very good | 88% | $125,782 |
| 2017 | $191,743 | Excellent | 96% | $184,265 |
| 2018 | $217,055 | Excellent | 98% | $211,846 |
| 2019-PBI | $142,317 | Very good | 83% | $118,597 |
| 2019-SEA | $94,878 | Excellent | 98% | $92,743 |
| 2019-TOTAL | $237,195 | Very good | 89% | $211,341 |
NOTE: PBI = performance-based incentives; SEA = special emphasis areas.
SOURCE: DOE-ORP (2020).
review (DOE-ORP, 2019c), criteria were divided into two sections: Performance Based Incentives (PBIs), on which it received 83 percent—50 out of a possible 60 points—of its award: (1) delivery, (2) evaluations/proficiency tests, and (3) maintain holding times and special emphasis areas (SEAs), on which it received 98 percent—39.1 out of a possible 40 points—of its award: (4) business interfaces and efficiency, (5) analytical reporting and data quality, (6) environmental stewardship and compliance, and (7) worker safety, health, and safety culture. However, in the review, one of the key positives was, “WAI maintained
a 98.1 percent combined factor for the delivery, proficiency tests, and holding times performance based incentives,” whereas as just noted the average score for PBI was, in fact, 83 percent and the average score for SEA was 98 percent. The public version of this evaluation does not include much detail.
Recently Awarded Contracts and Requests for Proposals
During this past year, EM has awarded two major contracts at the Hanford site. Not considering the occupational medical services contract, awarded in 2018 for 7 years, there are five major contracts at Hanford:
- The Mission Support Contract, which expired in 2019, replaced by the Hanford Mission Essential Services Contract (HMESC), awarded December 15, 2019 (see Table 7.6), to HMIS LLC, including Leidos Integrated Technology, LLC (Gaithersburg, MD); Centerra Group, LLC (Palm Beach Gardens, FL); and Parsons Government Services, Inc. (Pasadena, CA), “replacing” the Leidos and Centerra Group.5
- The Plateau Remediation Contract, expired in 2019, replaced by the Central Plateau Cleanup Contract (CPCC), awarded December 12, 2019, to Central Plateau Cleanup Company LLC, members are Amentum (Germantown, MD), Fluor Federal Services, Inc. (Greenville, SC), and Atkins Nuclear Secured, LLC (Oak Ridge, TN), replacing the CH2M HILL Plateau Remediation Company, a subsidiary of Jacobs.6 A protest over the contract award filed by a Bechtel Corp.-led team was rejected by the GAO on May 13, 2020.
- Tank Operations Contract awarded to WRPS, which, though originally set to have expired, was recently extended up to September 30, 2021.7 An end state Tank Closure Contract (TCC), had been awarded to Hanford Works Restoration8 on May 14, 2020,9 but DOE suspended the award in August 2020.10
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5 DOE Office of Environmental Management (EM), 2019, “DOE Awards Contract for Hanford Site Mission Essential Services to Support Cleanup,” December 5, https://www.energy.gov/em/articles/doe-awards-contract-hanford-site-mission-essential-services-support-cleanup.
6 DOE EM, 2019, “DOE Awards Hanford Central Plateau Cleanup Contract,” December 12, https://www.energy.gov/em/articles/doe-awards-hanford-central-plateau-cleanup-contract.
7 DOE Hanford Site, “WRPS Contract Modifications,” https://www.hanford.gov/page.cfm/DOE-ORPPrimeContracts/WRPSContractMods.
8 A group including BWXT Technical Services Group, Inc. (Lynchburg, VA), Fluor Federal Services, Inc. (Greenville, SC), INTERA, Inc. (Austin, TX), and DBD, Inc. (Richland, WA).
9 DOE EM, 2020, “DOE Awards Hanford Tank Closure Contract,” May 14, https://www.energy.gov/em/articles/doe-awards-hanford-tank-closure-contract.
10 M.B. Powers, 2020, “US Energy Dept. Suspends $13B Hanford Nuke Waste Cleanup Award,” Engineering News Record, August 13.
TABLE 7.6 Recent Requests for Proposals (RFPs) at the Hanford Site
| Code | Mission | Type | Years | Final RFP Date | Awarded | Max Value |
|---|---|---|---|---|---|---|
| HMESC | Services, Infrastructure, Contract Adm. | CPAF w/IDIQ | 5 | 9/20/2018 | 12/15/2019 | $4B |
| CPCC | Completion and Closure (End State) | IDIQ w/FFP+CPIF | 10 | 2/14/2019 | 12/12/2019 | $10B |
| TCC | Dispose of Tank Waste (End State) | IDIQ w/CPAF+CPIF | 10 | 2/14/2019 | 5/14/2020a | $13B |
| 222-S LAB | Operate Laboratory Complex | CPAF + CR | 5 | 2/7/2019 | not yet | TBD |
| DFLAW | Vitrify Low Activity Waste | Unknown | NA | RFI: 4/12/2020 | not yet | TBD |
a The Department of Energy suspended the award in August 2020. See M.B. Powers, 2020, “US Energy Dept. Suspends $13B Hanford Nuke Waste Cleanup Award,” Engineering News Record, August 13.
SOURCE: U.S. Department of Energy, Environmental Management Consolidated Business Center, “Current Acquisition Websites,” https://www.emcbc.doe.gov/About/CurrentAcquisitionWebsites.
- 222-S Analytical Laboratory Services, to expire in 2020, to be replaced by the 222-S Laboratory (222-S Lab) contract, which has not yet been awarded.
- A new contract, the direct feed low activity waste (DFLAW) contract to operate the DFLAW facility, for which a Request for Information was issued on April 12, 2020.
Incentive Structures in Bundled Cleanup and Site Operations Contracts
Since 1988, EM has had the responsibility of cleaning up 107 sites across the United States. Many of these sites were small so EM grouped services across and within sites to achieve their mission efficiently. In 2020, only 16 sites remain, and most of these remaining sites are large in land area, scope, cost, remaining duration, and complexity.
Opportunities to group tasks together to create efficiencies exist horizontally and vertically for DOE and its contractors. For example, a task with similar technical requirements can be performed by one contractor across multiple sites. Likewise, tasks at a site that are unrelated may have a common subcomponent. For example, information technology network security or records retention for all activities at a site may be better grouped together as one contract. All the
existing sites’ contracts have a legacy structure that may predefine expectations on bundling and some support operations may be provided through “government furnished services which limit bundling benefits.”
None of the committee’s discussions with EM have focused on overlapping line items in contracts for cleanup and site operations. Still, there are always efficiencies to be found in every large, complex project. The EM field manager is the position charged with the responsibility to “integrate Site level activities for mission accomplishment” and to “Conduct periodic reviews for contracts with segment costs less than $200M.”
Despite the efficiencies that might be gained by combining smaller contracts into larger ones, there are regulations that apply in specific situations involving smaller business concerns. The Federal Acquisition Regulation, Section 2.101 defines bundling in federal procurement as “consolidation that combines two or more requirements for supplies or services, previously provided or performed under separate smaller . . . into a solicitation for a single contract, a multiple-award contract, or a task or delivery order that is likely to be unsuitable for award to a small business concern. Because small business concerns typically do not have the resources or size to bid on large integration projects, the bundling of contracts tends to limit their prime contracting opportunities. Congress has debated bundling11 and introduced legislation,12 and the Small Business Administration13 and OMB have taken efforts to restrict bundling to promote small and medium-sized businesses to increase competition. Finally, GAO has made observations in bid protest decisions that have implied the practice has a deleterious effect on competition.14 In FY16, for all the federal government, 12 contracts were approved for bundling, a relatively small number.
FAR 16.504(c)(1) establishes the general preference for multiple awards (multiple award contracts [MACs]) on IDIQ15 contracts but identifies six situations in which agencies “should not” make multiple awards. It is stated in subsection (ii)(B) that:
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11 See page 161 of U.S. House of Representatives, Subcommittee on Energy and Water Development, 2005, “Hearings Before a Subcommittee of the Committee on Appropriations, House of Representatives, 109th Congress, First Session: Subcommittee on Energy and Water Development.” Washington, D.C.: U.S. Government Printing Office. March 9.
12 See U.S. Congress, Contracting Data and Bundling Accountability Act of 2014, H. Rept. 113-410, 113th Congress (2013-2014), https://www.congress.gov/congressional-report/113th-congress/house-report/410/1.
13 64 Fed. Reg. 2153 (Jan. 13, 1999).
14 Donahue Consulting, The Government Contracts Law Report, https://attny.com/gcin/gci02992.html.
15 History and theory of IDIQs can be found at J.S. Gansler, W. Lucyshyn, and A. Carl, 2012, An Evaluation of IDIQ Contracts for Service, Center for Public Policy and Private Enterprise, University of Maryland, January, https://jocexcellence.org/wp-content/uploads/2017/02/UMD_09014_AnEvaluation-of-IDIQ-Contracts-for-Service_January-2012.pdf.
The contracting officer must not use the multiple award approach if -
- Only one contractor is capable of providing performance at the level of quality required because the supplies or services are unique or highly specialized;
- Based on the contracting officer’s knowledge of the market, more favorable terms, and conditions, including pricing, will be provided if a single award is made;
- The cost of administration of multiple contracts may outweigh any potential benefits from making multiple awards;
- The tasks likely to be ordered are so integrally related that only a single contractor can reasonably perform the work;
- The total estimated value of the contract is less than the simplified acquisition threshold; or
- Multiple awards would not be in the best interests of the Government.
The committee was not able to determine which of these criteria would apply to EM in making the single-award IDIQ in its end-state contracting model.16
FINDING AND RECOMMENDATION
FINDING: DOE-EM’s rating of contractor performance in Hanford cleanup contracts does not appear to be consistent either across multiple years in the case of a specific contract or across contracts in a specific year.
RECOMMENDATION 7-1: To increase transparency in contractor performance evaluation, the committee recommends that the U.S. Department of Energy’s Office of Environmental Management should ensure that the contracts it issues for cleanup work (1) create a consolidated set of unambiguous “subjective” criteria for similar types of cleanup activities, and (2) use these criteria in the evaluation of all contract performance across its portfolio.
REFERENCES
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