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Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
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Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
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Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
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Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
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Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
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Page 75
Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
×
Page 76
Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
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Page 77
Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
×
Page 78
Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
×
Page 79
Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
×
Page 80
Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
×
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Suggested Citation:"7 Contract Management Metrics." National Academies of Sciences, Engineering, and Medicine. 2021. Review of Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report. Washington, DC: The National Academies Press. doi: 10.17226/26000.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

7 Contract Management Metrics PERFORMANCE INCENTIVE IN DOE-EM CONTRACTS Overview of Contracts Having Performance Fees and Incentives The 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 clean-up 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 The Department 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 & 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 1 There has been an active economics literature on incentives and performance for decades, see, for example, Baker, Gibbons, and Murphy (1994), cited in 1808 papers as of December 2020, e.g., Bjornstad et al. (1998). Although their assumptions are too restrictive to apply to the situation of the 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. We discuss this specifically in “Performance metrics in PEMPs,” below. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-1

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. This 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 of a link between performance and reward. Only when it is not feasible to use objective measures of performance should 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 upon 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 award fee. Performance objectives for earning 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. 2 48 CFR 16.405-1. 3 48 CFR 16.306. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-2

 Firm-Fixed-Price (FFP) contracts requires “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 measured with contract criteria, determined by the DOE EM’s contract officer evaluation of the contractor’s 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. In each of EM’s incentive contracts—CPAF, CPIF, and CPFF contracts—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 in section 0, Performance Metrics in PEMPs. Incentive Ratings and Definitions in Performance Evaluation and Measurement Plans The committee spent time examining the contracts and performance evaluation measurement plans (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 following 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. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-3

TABLE 7.1 Award Criteria Used by the Hanford Tank Waste Treatment and Immobilization Plant Project % of Award Adjectival Rating 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). 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 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 appears 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”: PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-4

(1) 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 (2) 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% 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, EM (2018, p. J-4-1) states, “Objective performance outcomes are allocated at least 60% of the available fee, and subjective performance outcomes are allocated up to 40% 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 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 For example, Table 7.2 is 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). DOE-ORP (2017) states, “Incentive B.1 – Award Fee-Project Management – Satisfactory. The fee for Project Management is divided into five [six] award fee objectives (AFO) as follows” and lists these to include AFO2 through AFO7 in Table 7.3 below. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-5

TABLE 7.2 Bechtel National Inc. Hanford Tank Waste Treatment and Immobilization Plant Maximum Available Adjectival Calendar Year Fee 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 Maximum Adjectival Averaged Fee Award Fee Objective Fee Code Available Fee Rating Score 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):  US 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. See further discussion 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,” such that 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. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-6

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 Waste Treatment & 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% of its award, and Subjective Fee (Award Fee) Criteria, on which the contractor received 85% of its award. The WRPS contract was recently extended up to September 30, 2021.4 TABLE 7.4 Washington River Protection Solutions: Tank Operations Contract Maximum Fiscal Year 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 NOTE: * = No PBI breakdown was given. PBI = Performance Based Incentives. SEA = Special Emphasis Areas. SOURCE: DOE-ORP (2020). 4 U.S. Department of Energy Hanford Site, undated, “WRPS Contract Modifications.” Available at https://www.hanford.gov/page.cfm/DOE-ORPPrimeContracts/WRPSContractMods. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-7

Hanford 222-S Laboratory Analysis and Testing Services Finally, the committee compared these 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 review (DOE- ORP, 2019c), criteria were divided into two sections: Performance Based Incentives (PBI), on which it received 83% —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 (SEA), on which it received 98%— 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% 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% and the average score for SEA was 98%. The public version of this evaluation does not include much detail. TABLE 7.5 Wastren Advantage Inc. Hanford 222-S Laboratory Analysis Contract Maximum Adjectival Averaged Calendar Year Available Fee Rating 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). Recently Awarded Contracts and RFPs 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 seven years, there are 5 major contracts at Hanford: (1) The Mission Support Contract, 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.https://www.energy.gov/em/articles/doe-awards-contract-hanford- site-mission-essential-services-support-cleanup (2) 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. https://www.energy.gov/em/articles/doe-awards-hanford- central-plateau-cleanup-contract. A protest over the contract award filed by a Bechtel Corp.-led team was rejected by the GAO on May 13, 2020. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-8

(3) Tank Operations Contract awarded to WRPS, which, though originally set to have expired, was recently extended up to September 30, 2021.5 An end state Tank Closure Contract (TCC), had been awarded to Hanford Works Restoration6 on May 14, 20207 but DOE suspended the award in August 2020.8 (4) 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. (5) 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. TABLE 7.6 Recent Requests for Proposal (RFPs) at the Hanford Site Final RFP Max Code Mission Type Years Date Awarded Value HMESC Services, CPAF w/IDIQ 5 9/20/2018 12/15/2019 $4B Infrastructure, Contract Adm. CPCC Completion and IDIQ 10 2/14/2019 12/12/2019 $10B Closure (End State) w/FFP+CPIF TCC Dispose of Tank IDIQ 10 2/14/2019 5/14/2020a $13B Waste (End State) w/CPAF+CPIF 222-S LAB Operate Laboratory CPAF + CR 5 2/7/2019 not yet TBD Complex DFLAW Vitrify Low Activity Unknown NA RFI: not yet TBD Waste 4/12/2020 a DOE suspended the award in August 2020. See Mary B. Powers August 13, 2020, « US Energy Dept. Suspends $13B Hanford Nuke Waste Cleanup Award, » Engineering News Record. SOURCES: https://www.emcbc.doe.gov/About/CurrentAcquisitionWebsites Incentive Structures in Bundled Cleanup and Site Operations Contracts Since 1988, EM has had the responsibility of cleaning up 107 sites across the U.S. 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, IT 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.” 5 U.S. Department of Energy Hanford Site, undated, “WRPS Contract Modifications.” Available at https://www.hanford.gov/page.cfm/DOE-ORPPrimeContracts/WRPSContractMods. 6 A group including BWXT Technical Services Group, Inc. (Lynchburg, Virginia), Fluor Federal Services, Inc. (Greenville, South Carolina), INTERA, Inc. (Austin, Texas), and DBD, Inc. (Richland, Washington). 7 DOE Office of Environmental Management, May 14, 2020, “DOE Awards Hanford Tank Closure Contract” Available at https://www.energy.gov/em/articles/doe-awards-hanford-tank-closure-contract. 8 Mary B. Powers August 13, 2020, « US Energy Dept. Suspends $13B Hanford Nuke Waste Cleanup Award, » Engineering News Record. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-9

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 bundling9 and introduced legislation,10 and the Small Business Administration11 and OMB have taken efforts to restrict bundling to promote small and medium-sized business to increase competition. Finally, GAO has made observations in bid protest decisions that have implied the practice has a deleterious effect on competition.12 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 IDIQ13 contracts but identifies six situations in which agencies “should not” make multiple awards. It is stated in sub-section (ii)(B) that: The contracting officer must not use the multiple award approach if - (1) Only one contractor is capable of providing performance at the level of quality required because the supplies or services are unique or highly specialized. (2) 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. (3) The cost of administration of multiple contracts may outweigh any potential benefits from making multiple awards. (4) The tasks likely to be ordered are so integrally related that only a single contractor can reasonably perform the work. (5) The total estimated value of the contract is less than the simplified acquisition threshold; or (6) 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 (ESCM).14 9 page 161 of 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. 10 See https://www.congress.gov/congressional-report/113th-congress/house-report/410/1. 11 64 Fed. Reg. 2153 (Jan. 13, 1999). 12 Donahue Consulting, THE GOVERNMENT CONTRACTS LAW REPORT - https://attny.com/gcin/gci02992.html. 13 History and theory of IDIQs can be found at https://jocexcellence.org/wp- content/uploads/2017/02/UMD_09014_An-Evaluation-of-IDIQ-Contracts-for-Service_January-2012.pdf. 14 The ESCM is discussed further in Chapter 6. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-10

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 DOE-EM 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 Baker, G., Gibbons, R., and Murphy, K.J. 1994. “Subjective Performance Measures in Optimal Incentive Contracts,” The Quarterly Journal of Economics, Cambridge, Massachusetts. https://www.jstor.org/stable/2118358?seq=1DAU. U.S. Department of Defense, Defense Acquisition University (DAU). 2018. Guidance on Incentive and Other Contract Types. Arlington, Virginia: U.S. Department of Defense. DOE (U.S. Department of Energy). 1995. DOE Handbook: DOE Enforcement Program Roles and Responsibilities, DOE-HDBK-1085-95. (August) https://inis.iaea.org/collection/NCLCollectionStore/_Public/28/057/28057607.pdf DOE. 2008a. “General Guide to Contract Types for Requirements Officials. Chapter 16, Acquisition Guide (March). https://www.energy.gov/sites/prod/files/maprod/documents/AcqGuide16pt1.pdf . DOE. 2008b. “M&O Contractor Incentives – Fee, Rollover of Performance Fee, and Award Term,” Chapter 70.15, Acquisition Guide (September). https://www.energy.gov/sites/prod/files/2016/06/f32/PF2008-62a.pdf. DOE. 2012. “Performance Evaluation and Measurement Plans for Cost-Reimbursement, Non- Management and Operating Contracts,” Chapter 16.2 in DOE Acquisition Guide (July). https://www.energy.gov/sites/prod/files/DOE%20Acq%20Guide%20Chapter%2016-%202.pdfDOE. 2018. “Award Fee Determination Scorecard FY 2018. Los Alamos Legacy Cleanup Bridge Contract, Performance Evaluation Management Plan for 10/1/2017 – 03/31/2018.” https://www.energy.gov/sites/prod/files/2018/06/f53/Award%20Fee%20Determination%20Scorecard %20FY%202018.pdf. DOE-EM (U.S. Department of Energy-Environmental Management). 2018. “Attachment J-4: Performance Evaluation and Measurement Plan,” Hanford Mission Essential Services Contract – Final RFP, https://www.emcbc.doe.gov/SEB/HMESC/Documents/RFP/HMESC_J-4_FRFP.pdf. DOE-EM. 2020. “EM Contractor Fee Determinations.” https://www.energy.gov/em/em-contractor-fee- determinations. DOE-ORP (U.S. Department of Energy-Office of River Protection). 2017. “Award Fee Determination Scorecard: 2017 Performance Evaluation and Measurement Plan.” https://www.hanford.gov/files.cfm/2017_BNI_PEMP_Award_Fee_Scorecard.pdf. DOE-ORP. 2018. “Performance Evaluation and Measurement Plan, Incentive B – Award Fee Design, Construction, and Commissioning of the Hanford Tank Waste Treatment and Immobilization Plant, Contract No. DE-AC27-01RV14136, Evaluation Period January 1, 2018, to December 31, 2018 with Bechtel National, Inc., Richland, Washington Rev. 1” (May 21). https://www.hanford.gov/files.cfm/2018_PEMP_Rev_1_-_Final_5-10-181.pdf. DOE-ORP. 2019a. “2018 FEE DETERMINATION SCORECARD: Bechtel National Inc.” Available at https://www.hanford.gov/files.cfm/FINAL_-__CY2018_Fee_Scorecard_4-19-2019.pdf. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-11

DOE-ORP. 2019b. “Award Fee Determination Scorecard: Washington River Protection Solutions, LLC” Available at https://www.hanford.gov/files.cfm/FINAL_-- _FY_19_Award_Fee_Determination_Scorecard_docx.pdf. DOE-ORP. 2019c. “Award Fee Determination Scorecard: Wastren Advantage Corporation” Available at https://www.hanford.gov/files.cfm/2018-2019_Final_Scorecard.pdf. DOE-ORP. 2020. “DOE-ORP Prime Contracts” https://www.hanford.gov/index.cfm?page=713 GAO (General Accounting Office). 2019. Department of Energy Performance Evaluations Could Better Assess Management and Operating Costs, GAO-19-5 https://www.gao.gov/assets/700/697103.pdf. GAO. 2020. Hanford Waste Treatment Plant: DOE Is Pursuing Pretreatment Alternatives, but Its Strategy Is Unclear While Costs Continue to Rise, GAO-20-363 https://www.gao.gov/assets/710/706854.pdf. Hamel, W.F. 2017. “Key Incentive Features of Revised Contract,” in “Hanford Waste Treatment and Immobilization Plant – Rebaseline and Contract Modification Proposal Process,” presented at the Office of River Protection 2017 Project Management Workshop (March 22). https://www.energy.gov/sites/prod/files/2017/03/f34/Day%202- 201045_Hamel_WTP%20Rebaselining.pdf. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 7-12

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The U.S. Department of Energy (DOE) and its predecessor agencies have conducted activities to develop atomic energy for civilian and defense purposes since the initiation of the World War II Manhattan Project in 1942. These activities took place at large federal land reservations of hundreds of square miles involving industrial-scale operations, but also at many smaller federal and non-federal sites such as uranium mines, materials processing and manufacturing facilities. The nuclear weapons and energy production activities at these facilities produced large quantities of radioactive and hazardous wastes and resulted in widespread groundwater and soil contamination at these sites. DOE initiated a concerted effort to clean up these sites beginning in the 1980s. Many of these sites have been remediated and are in long-term caretaker status, closed or repurposed for other uses.

Review of the Effectiveness and Efficiency of Defense Environmental Cleanup Activities of the Department of Energy's Office of Environmental Management: First Report provides background information on the sites currently assigned to the DOE's Office of Environmental Management that are undergoing cleanup; discusses current practices for management and oversight of the cleanups; offers findings and recommendations on such practices and how progress is measured against them; and considers the contracts under which the cleanups proceed and how these have been and can be structured to include incentives for improved cost and schedule performance.

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