Environmental Cleanup

Public Law 85-804 authorizes the Defense Department (DOD) and other federal agencies to indemnify contractors against losses from unusually hazardous or nuclear risks. Any actions taken under the law must be reported to Congress annually. Reported actions can include specific contractors' claims for costs already incurred or the inclusion of indemnification clauses in contracts to protect DOD contractors from future risks. This report provides information on (1) how the military services used Public Law 85-804 to indemnify contractors for environmental cleanup in selected cases and (2) how DOD described the resulting actions in required reports to Congress.

GAO found that: (1) the Army and Navy have used the act to indemnify contractors' environmental restoration efforts at least twice and, in the cases examined, the Air Force has not used the act; (2) the Army has granted a $5-million indemnification for contractor environmental restoration efforts at the Eau Claire, Wisconsin, plant; (3) since the early 1990s, the Army has included indemnification clauses in contracts for environmental cleanup activities at 20 ammunition plants; (4) the presence of the indemnification clause in a contract does not mean that all of a contractor's environmental cleanup costs would be indemnified because such a determination must be based on the assessment of whether a claim is consistent with the definition of unusually hazardous risk contained in the clause; (5) although the Army estimates that cleanup costs at these ammunition plants will total $800 million, it has not determined the amount for which contractors will be liable; (6) the Navy has included indemnification clauses in its nuclear-related contracts and has obligated $5.8 million for its share of the cleanup in three contracts for low-level radioactive waste cleanup at its Maxey Flats, Kentucky, facility; (7) the Air Force is generally not in favor of indemnifying contractors against environmental cleanup costs; (8) DOD reports to Congress on its indemnification activities generally do not provide sufficient detail to determine whether the indemnifications are allowable or environment related; and (8) the Army is determining if a $5-million indemnification for cleanup at the Wisconsin plant was sanctioned under the act.