Fluor Daniel Wins Pact in Hanford Nuclear Cleanup

The Energy Department, taking a major step in reforming the long-troubled program to clean up the nation’s contaminated nuclear weapons sites, awarded contracts Tuesday worth $11 billion to teams headed by Fluor Daniel Inc. and Westinghouse Corp.

In its largest contract ever, worth $4.8 billion over five years, Irvine-based Fluor Daniel will take over responsibility for managing a cleanup at Hanford, Wash. The sprawling complex, half the size of Rhode Island, has 11 tons of potentially unstable plutonium and 65 million gallons of radioactive sludge in leaky underground tanks.

The two contracts awarded Tuesday rank among the largest environmental awards in history and are the biggest yet handed out under the energy program.

Fluor Daniel will head a consortium of six companies. The contract, which could be extended for up to five more years at an estimated $1 billion per year, is a boost to the once-troubled engineering firm. Under the contract, the Fluor-led consortium will provide jobs for 9,000 employees now working at Hanford. The award is expected to have little impact on employment in Southern California, however.

Fluor has targeted major projects like Hanford because it sees nuclear site cleanup as a growing worldwide market. The Department of Energy alone spends $6 billion a year on environmental cleanup, said Ron Petersen, president of Fluor Daniel’s government services operating unit.

While Fluor has vowed to stay diversified after being hurt by putting so much of its business into energy markets in the 1970s and ‘80s, the company also is chasing other government nuclear projects, Peterson said.

Fluor Daniel is bidding on a $2.1-billion project to construct an accelerator to increase the power of weapons-grade nuclear material. The company is also lead contractor on the $2.2-billion cleanup of the energy Department’s Fernald, Ohio, nuclear plant and is negotiating for a two-year, $2-billion extension of that contract.

“We want to be a major player” in both the cleanup of old sites and the construction of new nuclear facilities, Peterson said.

The contract awarded to Westinghouse calls for it to operate a cleanup at Savannah River, S.C., which has 35 million gallons of radioactive sludge and dozens of contaminated industrial structures.

Awarding such cleanup projects through competitive bidding is a cornerstone in the Energy Department’s efforts to improve a badly flawed and costly program to manage nuclear waste and fix the environmental damage resulting from four decades of sloppy practices in Cold War nuclear bomb production.

Roughly 50% of the $6 billion in annual nuclear weapons cleanup work has been put up for bid in recent years, and more competition is on the way, Energy Department officials said. They announced Tuesday that they will take bids on $8 billion of future work at the nuclear weapons complex at Oakridge, Tenn., and another $500 million of work at Mound, Ohio.

Fluor won the Hanford contract over bids submitted by teams led by Bechtel Corp. and Raytheon Corp. The contract will provide roughly $300 million in profits to Fluor and its subcontractors, if the firms meet all their performance objectives, according to Hank Hatch, president of the Fluor Daniel subsidiary operating the Hanford site.

Westinghouse went unchallenged in its bid to continue operating the site at Savannah River. Energy officials had hoped to see a team compete against Westinghouse, but officials said competitors believed that Westinghouse was too firmly embedded.

Westinghouse maintains its grip as the largest single contractor in nuclear energy cleanup with the $6-billion, five-year contract. Westinghouse started operations this year at its Savannah River vitrification plant, which is transforming radioactive sludge at the site to glass logs.

Until this year, the Energy Department had been spending more money on paper studies than on actual work to clean up contaminated sites. Critics have long charged that the agency was shoveling money out in a massive jobs program that accomplished little.

In an effort to improve the performance of private firms, the Energy Department not only put up contracts for competitive bidding but also made profits conditional on successful completion of the work.

“Before contract reform, DOE paid for simply showing up,” said Energy Secretary Hazel O’Leary. “Not anymore. If the contractors don’t deliver on their commitments, we don’t deliver on their fee.”

The new contracts at Savannah River and Hanford alone are expected to reduce cleanup spending by about $500 million a year from earlier estimates, mainly by accelerating the pace of the environmental work, energy officials said Tuesday.

Despite the improvements, taxpayers are facing a cleanup bill recently estimated by the Energy Department at $189 billion to $265 billion--easily the biggest environmental program in the world.

The job of cleaning up an estimated 9,000 radioactive production buildings, tank farms, burial pits, ponds and other sites across the nation has barely begun. So far, the agency has treated about 10,000 cubic meters of radioactive waste out of a staggering 225,000 at just three of its major sites.

Indeed, nuclear experts warn that the United States will have to monitor and protect many of its nuclear weapons sites for centuries because of radiation hazards.

Hatch, the Fluor chief, said the cost savings and reforms at the Energy Department are shortening the time needed to clean up Hanford, but he cannot foresee the day when the government could walk away from the site.

“This site will always have materials that warrant protection,” Hatch said.

When Hanford was shut down after the end of the Cold War, it had 11 tons of plutonium at its finishing plant in various forms that are potentially unstable. Energy officials are hoping that Fluor can put that material in a stable form within four years. Fluor will also be seeking to deactivate a plutonium reprocessing plant that contains large amounts of radioactive wastes by 2005.

Fluor also committed to creating 3,000 new private sector jobs, through a company-funded pool of venture capital, to help the Hanford region make the transition to a commercial economy as the nuclear site is shut.

Fluor’s team includes Lockheed Martin, Rust Federal Services, Kuke Engineering & Services and B&W; Federal Services Inc. The Westinghouse team includes Bechtel National Inc., B&W; Federal Services and BNFL Inc.