Department of Energy
Contractor Litigation Costs Gao ID: GAO-02-418R March 8, 2002Under the Federal Acquisition Regulation and the Department of Energy's (DOE) acquisition regulations, DOE can reimburse its contractors for reasonable legal costs associated with cases brought against them in such matters as equal opportunity employment, radiation and toxic exposure, personal injury, and wrongful discharge. Such costs are not reimbursable if there is liability related to the contractor's willful misconduct, lack of good faith, or failure to exercise prudent business judgment. In practice, DOE reimburses its contractors for most of the legal costs. From fiscal year 1995 through the third quarter of fiscal year 2001, there have been more than 2,100 cases and DOE has reimbursed its contractors more than $290 million for associated litigation and disposition costs. The contractors have spent $13 million in their defense. In the same time period, there have been nearly 400 equal employment opportunity cases for which DOE reimbursed its contractors $53 million. The contractors spent $2 million.
GAO-02-418R, Department of Energy: Contractor Litigation Costs
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GAO-02-418R:
United States General Accounting Office:
Washington, DC 20548:
March 8, 2002:
The Honorable Jim Gibbons:
House of Representatives:
Subject: Department of Energy: Contractor Litigation Costs:
The Department of Energy (DOE) contracts with not-for-profit
universities and private companies to operate its facilities. As part
of the cost of operating these facilities, DOE can reimburse its
contractors for the legal costs associated with cases brought against
them. These cases involve such matters as equal employment opportunity,
radiation and/or toxic exposure, personal injury, and wrongful
discharge. In a letter dated May 26, 1998, you expressed concern that
the federal government might be subsidizing contractors that violate
the law. Specifically, you asked us to (1) determine what laws and
regulations provide for DOE to reimburse its contractors for the
litigation, settlement, and judgment costs in cases brought against
them; and (2) provide information on such cases, particularly those
involving equal employment opportunity, as to the number of cases and
the costs that DOE reimbursed its contractors and that contractors paid
themselves. On January 28, 2002, we briefed your staff on information
related to the legal basis for DOE‘s reimbursement of contractor
litigation costs and the number of, cost associated with, and
disposition of contractor litigation cases. At that time, your staff
requested that we transmit this information to you.
In summary, the Federal Acquisition Regulation”which governs
acquisitions by all federal executive agencies”and DOE acquisition
regulations”which supplement the Federal Acquisition Regulation”
provide for the Department to reimburse its contractors for reasonable
legal costs. (See enclosure I.) Such costs are not reimbursable if
there is liability related to the contractor‘s willful misconduct, lack
of good faith, or failure to exercise prudent business judgment. In
practice, DOE reimburses its contractors for most of the legal costs.
From fiscal year 1995 through the third quarter of fiscal year 2001,
there have been more than 2,100 cases involving various types of
complaints against DOE contractors and the Department has reimbursed
its contractors more than $290 million for litigation and disposition
(settlement and judgment) costs associated with these cases. (See
enclosures II through XI.) Conversely, the contractors have spent about
$13 million in their defense. In the same time period, there have been
nearly 400 equal employment opportunity cases for which DOE reimbursed
its contractors about $53 million while the contractors spent about $2
million.
The information presented in enclosures II through XI was developed from
data we obtained from the DOE system used to track contractor litigation
costs. We did not independently verify the accuracy of the data
contained in this DOE system. We discussed the data presented in this
report with the DOE official responsible for that system who attested
to the data‘s accuracy. We performed our work from August 2001 through
February 2002 in accordance with generally accepted government auditing
standards.
As arranged with your office, unless you release its contents earlier,
we plan no further distribution of this letter until 30 days after its
issuance date. At that time, we will send copies to interested parties.
This letter will also be available on GAO‘s home page at [hyperlink,
http://www.gao.gov]. If you or your staff have any questions regarding
this letter, please contact me at (202) 512-3841 or William Fenzel at
(202) 512-3156.
Sincerely yours,
Signed by:
(Ms.) Gary L. Jones:
Director, Natural Resources and Environment:
Enclosures - 11:
[End of section]
Enclosure I:
Legal Basis for DOE Paying Litigation, Settlement, and Judgment Costs
for Cases against Its Contractors:
Federal Acquisition Regulation (48 C.F.R. 31.205-47) and DOE regulations
(48 C.F.R. 970.5228-1) provide for the reimbursement of reasonable legal
costs.
DOE has issued guidelines on what legal costs are reasonable.
Legal costs include attorney fees and other litigation costs, and costs
of settlements and judgments.
These costs are not reimbursable if there is liability caused by the
contractor‘s willful misconduct, lack of good faith, or failure to
exercise prudent business judgment. DOE has defined ’prudent business
judgment“ as acting in the same manner as a prudent person in the
conduct of a competitive business. ’Willful misconduct“ and ’lack of
good faith“ are determined on a case-by-case basis by DOE.
[End of section]
Enclosure II:
Number and Type of Contractor Cases (FY 1995 through third quarter of
FY 2001):
Type[A]: Equal employment opportunity;
Number of cases closed, FY 1995: 34;
Number of cases closed, FY 1996: 67;
Number of cases closed, FY 1997: 56;
Number of cases closed, FY 1998: 58;
Number of cases closed, FY 1999: 62;
Number of cases closed, FY 2000: 44;
Number of cases closed, FY 2001: 20;
Ongoing: 40;
Total: 381.
Type[A]: Radiation and/or toxic exposure;
Number of cases closed, FY 1995: 4;
Number of cases closed, FY 1996: 3;
Number of cases closed, FY 1997: 1;
Number of cases closed, FY 1998: 1;
Number of cases closed, FY 1999: 3;
Number of cases closed, FY 2000: 0;
Number of cases closed, FY 2001: 28;
Ongoing: 11;
Total: 51.
Type[A]: Personal injury[B];
Number of cases closed, FY 1995: 23;
Number of cases closed, FY 1996: 16;
Number of cases closed, FY 1997: 18;
Number of cases closed, FY 1998: 21;
Number of cases closed, FY 1999: 19;
Number of cases closed, FY 2000: 18;
Number of cases closed, FY 2001: 12;
Ongoing: 27;
Total: 154.
Type[A]: Wrongful discharge;
Number of cases closed, FY 1995: 9;
Number of cases closed, FY 1996: 16;
Number of cases closed, FY 1997: 18;
Number of cases closed, FY 1998: 10;
Number of cases closed, FY 1999: 8;
Number of cases closed, FY 2000: 10;
Number of cases closed, FY 2001: 8;
Ongoing: 7;
Total: 86.
Type[A]: Whistle-blower;
Number of cases closed, FY 1995: 8;
Number of cases closed, FY 1996: 17;
Number of cases closed, FY 1997: 16;
Number of cases closed, FY 1998: 17;
Number of cases closed, FY 1999: 16;
Number of cases closed, FY 2000: 23;
Number of cases closed, FY 2001: 12;
Ongoing: 20;
Total: 129.
Type[A]: Worker compensation[B];
Number of cases closed, FY 1995: 12;
Number of cases closed, FY 1996: 65;
Number of cases closed, FY 1997: 72;
Number of cases closed, FY 1998: 100;
Number of cases closed, FY 1999: 87;
Number of cases closed, FY 2000: 100;
Number of cases closed, FY 2001: 46;
Ongoing: 186;
Total: 668.
Type[A]: Other[C];
Number of cases closed, FY 1995: 56;
Number of cases closed, FY 1996: 59;
Number of cases closed, FY 1997: 92;
Number of cases closed, FY 1998: 79;
Number of cases closed, FY 1999: 94;
Number of cases closed, FY 2000: 70;
Number of cases closed, FY 2001: 44;
Ongoing: 153;
Total: 647.
Total:
Number of cases closed, FY 1995: 146;
Number of cases closed, FY 1996: 243;
Number of cases closed, FY 1997: 273;
Number of cases closed, FY 1998: 286;
Number of cases closed, FY 1999: 289;
Number of cases closed, FY 2000: 265;
Number of cases closed, FY 2001: 170;
Ongoing: 444;
Total: 2,116.
[A] Some cases involved more than one legal issue but have been
categorized according to the primary basis for the case as listed in
DOE‘s contractor litigation tracking system.
[B] Worker compensation involves an employee who has suffered an injury
on the job whereas personal injury may or may not involve an employee
who may or may not have suffered an injury on the job.
[C] This includes various types of cases such as breach of contract and
Resource Conservation and Recovery Act cases.
Source: Developed by GAO based on DOE data.
[End of section]
Enclosure III:
Disposition of Contractor Cases (FY 1995 through third quarter of FY
2001):
FY closed: 1995;
Number of cases, Dismissed: 59;
Number of cases, Settlement reached: 74;
Number of cases, Judgment: 13;
Number of cases, Total: 146.
FY closed: 1996;
Number of cases, Dismissed: 94;
Number of cases, Settlement reached: 119;
Number of cases, Judgment: 30;
Number of cases, Total: 243.
FY closed: 1997;
Number of cases, Dismissed: 104;
Number of cases, Settlement reached: 151;
Number of cases, Judgment: 18;
Number of cases, Total: 273.
FY closed: 1998;
Number of cases, Dismissed: 118;
Number of cases, Settlement reached: 149;
Number of cases, Judgment: 19;
Number of cases, Total: 286.
FY closed: 1999[A];
Number of cases, Dismissed: 113;
Number of cases, Settlement reached: 147;
Number of cases, Judgment: 27;
Number of cases, Total: 289.
FY closed: 2000[A];
Number of cases, Dismissed: 96;
Number of cases, Settlement reached: 143;
Number of cases, Judgment: 25;
Number of cases, Total: 265.
FY closed: 2001;
Number of cases, Dismissed: 77;
Number of cases, Settlement reached: 85;
Number of cases, Judgment: 8;
Number of cases, Total: 170.
Total:
Number of cases, Dismissed: 661;
Number of cases, Settlement reached: 868;
Number of cases, Judgment: 140;
Number of cases, Total: 1,672[B].
[A] Fiscal year 1999 had two cases that were closed, but no final
dispositions were identified. Fiscal year 2000 had one such case.
[B] This total does not include 444 cases that are still ongoing.
Source: Developed by GAO based on DOE data.
[End of section]
Enclosure IV:
Disposition of Contractor Cases Involving Equal Employment Opportunity
(FY 1995 through third quarter of FY 2001):
FY closed: 1995;
Number of cases, Dismissed: 14;
Number of cases, Settlement reached: 17;
Number of cases, Judgment: 3;
Number of cases, Total: 34.
FY closed: 1996;
Number of cases, Dismissed: 26;
Number of cases, Settlement reached: 33;
Number of cases, Judgment: 8;
Number of cases, Total: 67.
FY closed: 1997;
Number of cases, Dismissed: 28;
Number of cases, Settlement reached: 21;
Number of cases, Judgment: 7;
Number of cases, Total: 56.
FY closed: 1998;
Number of cases, Dismissed: 28;
Number of cases, Settlement reached: 25;
Number of cases, Judgment: 5;
Number of cases, Total: 58.
FY closed: 1999;
Number of cases, Dismissed: 29;
Number of cases, Settlement reached: 27;
Number of cases, Judgment: 6;
Number of cases, Total: 62.
FY closed: 2000[A];
Number of cases, Dismissed: 15;
Number of cases, Settlement reached: 22;
Number of cases, Judgment: 6;
Number of cases, Total: 44.
FY closed: 2001;
Number of cases, Dismissed: 6;
Number of cases, Settlement reached: 10;
Number of cases, Judgment: 4;
Number of cases, Total: 20.
Total:
Number of cases, Dismissed: 146;
Number of cases, Settlement reached: 155;
Number of cases, Judgment: 39;
Number of cases, Total: 341[B].
[A] Fiscal year 2000 had one case that was closed, but no final
disposition was identified.
[B] This total does not include 40 cases that are still ongoing.
Source: Developed by GAO based on DOE data.
[End of section]
Enclosure V:
Cost of Contractor Cases Reimbursed by DOE (FY 1995 through third
quarter of FY 2001):
Litigation costs on open cases: $105,877,877;
Litigation costs on closed cases: $66,673,583;
Disposition costs on closed cases: $119,398,592;
Total: $291,950,052.
Source: Developed by GAO based on DOE data.
[End of section]
Enclosure VI:
Cost of Contractor Cases Paid for by the Contractor (FY 1995 through
third quarter of FY 2001):
Litigation costs on open cases: $1,855,807;
Litigation costs on closed cases: $9,359,142;
Disposition costs on closed cases: $1,738,509;
Total: $12,953,458.
Source: Developed by GAO based on DOE data.
[End of section]
Enclosure VII:
Cost of Contractor Cases Involving Equal Employment Opportunity
Reimbursed by DOE (FY 1995 through third quarter of FY 2001):
Litigation costs on open cases: $24,206,953;
Litigation costs on closed cases: $18,761,018;
Disposition costs on closed cases: $10,098,475;
Total: $53,066,446.
Source: Developed by GAO based on DOE data.
[End of section]
Enclosure VIII:
Cost of Contractor Cases Involving Equal Employment Opportunity Paid
for by the Contractor (FY 1995 through third quarter of FY 2001):
Litigation costs on open cases: 0;
Litigation costs on closed cases: $1,534,893;
Disposition costs on closed cases: $552,009;
Total: $2,086,902.
Source: Developed by GAO based on DOE data.
[End of section]
Enclosure IX:
Examples of Large DOE Reimbursed Judgment Costs on Closed Contractor
Cases[A]:
Case: HAMTC/Jurisdictional v. BHI;
Category: Labor relations;
DOE reimbursed litigation costs: $97,698;
DOE reimbursed judgment costs: $1,225,000;
Total DOE reimbursed costs: $1,322,698.
Case: Trumpp Bros v. SLAC;
Category: Bankruptcy;
DOE reimbursed litigation costs: $0;
DOE reimbursed judgment costs: $462,204;
Total DOE reimbursed costs: $462,204.
Case: Grant-Apollo v. ICF KH & FDNW;
Category: Contract – other;
DOE reimbursed litigation costs: $348,108;
DOE reimbursed judgment costs: $402,343;
Total DOE reimbursed costs: $750,451.
Case: Bott V. Rockwell;
Category: Whistleblower;
DOE reimbursed litigation costs: $69,232;
DOE reimbursed judgment costs: $309,077;
Total DOE reimbursed costs: $378,309.
Case: Cousins Construction v. MK-FERGUSON;
Category: Contract – other;
DOE reimbursed litigation costs: $19,703;
DOE reimbursed judgment costs: $252,061;
Total DOE reimbursed costs: $271,764.
Bradley, W.T. v. Wausau Insurance Companies;
Category: Worker compensation
DOE reimbursed litigation costs: $0;
DOE reimbursed judgment costs: $124,787;
Total DOE reimbursed costs: $124,787.
[A] The costs shown are for fiscal year 1995 through the third quarter
of fiscal year 2001. Some of the cases listed may also have had pre-
fiscal year 1995 costs, which are not included in the totals above.
Source: Developed by GAO based on DOE data.
[End of section]
Enclosure X:
Examples of Large DOE Reimbursed Settlement Costs on Closed Contractor
Cases[A]:
Case: Day ET AL. v. NLO, INC., ET AL.;
Category: Tort – radiation and/or toxic exposure;
DOE reimbursed litigation costs: $1,971,871;
DOE reimbursed settlement costs: $20,000,000;
Total DOE reimbursed costs: $21,971,871.
Case: Green V. MK-F;
Category: Breach of contract;
DOE reimbursed litigation costs: $874,764;
DOE reimbursed settlement costs: $13,379,869;
Total DOE reimbursed costs: $14,254,633.
Case: Martinez, Gloria v. UC Regents, Williams And McCorkle;
Category: Personal injury or liability/wrongful death;
DOE reimbursed litigation costs: $415,861;
DOE reimbursed settlement costs: $13,000,000;
Total DOE reimbursed costs: $13,415,861.
Case: OCAW v. MMES (Consolidated);
Category: Labor relations;
DOE reimbursed litigation costs: $161,594;
DOE reimbursed settlement costs: $4,350,000;
Total DOE reimbursed costs: $4,511,594.
Case: LMES (1) v. Ruth Johnson, Commissioner;
Category: Tax;
DOE reimbursed litigation costs: $0;
DOE reimbursed settlement costs: $3,632,737;
Total DOE reimbursed costs: $3,632,737.
Case: Optima Chemicals v. WSRC;
Category: Contract – other;
DOE reimbursed litigation costs: $43,930;
DOE reimbursed settlement costs: $3,532,946;
Total DOE reimbursed costs: $3,576,876.
Case: Hathaway V. Sandia;
Category: Contract – other;
DOE reimbursed litigation costs: $52,593;
DOE reimbursed settlement costs: $3,400,000;
Total DOE reimbursed costs: $3,452,593.
Case: Anderson (Sgt) v. Wackenhut Services;
Category: Fair Labor Standards Act;
DOE reimbursed litigation costs: $58,508;
DOE reimbursed settlement costs: $3,024,398;
Total DOE reimbursed costs: $3,082,906.
[A] The costs shown are for fiscal year 1995 through the third quarter
of fiscal year 2001. Some of the cases listed may also have had pre-
fiscal year 1995 costs, which are not included in the totals above
except for Day ET AL.
Source: Developed by GAO based on DOE data.
[End of section]
Enclosure XI:
Examples of Large DOE Reimbursed Litigation Costs on Open Contractor
Cases[A]:
Case: Cook v. Rockwell & Dow;
Category: Class action;
DOE reimbursed litigation costs: $25,564,478;
DOE reimbursed disposition costs: $0;
Total DOE reimbursed costs: $25,564,478.
Case: Dupont – Hanford Class Action.
Category: Class action;
DOE reimbursed litigation costs: $19,217,728;
DOE reimbursed disposition costs: $0;
Total DOE reimbursed costs: $19,217,728.
Case: Lott v. WSRC Equal Employment;
Category: Opportunity – Discrimination;
DOE reimbursed litigation costs: $17,085,157;
DOE reimbursed disposition costs: $0;
Total DOE reimbursed costs: $17,085,157.
Case: Lmitco v. Lmaes And Lockheed Martin Corporation;
Category: Contract – other;
DOE reimbursed litigation costs: $8,641,830;
DOE reimbursed disposition costs: $0;
Total DOE reimbursed costs: $8,641,830.
Case: Smith & Wray v. LMES, ET AL.;
Category: Tort – radiation and/or toxic exposure;
DOE reimbursed litigation costs: $4,843,262;
DOE reimbursed disposition costs: $0;
Total DOE reimbursed costs: $4,843,262.
Case: Meacham ET AL. v. Kapl ET AL.;
Category: Equal Employment Opportunity – Discrimination;
DOE reimbursed litigation costs: $2,800,205;
DOE reimbursed disposition costs: $0;
Total DOE reimbursed costs: $2,800,205.
Case: Boggs, Teresa, Et Al. v. Goodyear, Et Al.;
Category: Tort – radiation and/or toxic exposure;
DOE reimbursed litigation costs: $1,894,961;
DOE reimbursed disposition costs: $0;
Total DOE reimbursed costs: $1,894,961.
Case: Rainer (1), ET AL. v. UCC, ET AL.;
Category: Tort – radiation and/or toxic exposure;
DOE reimbursed litigation costs: $1,771,320;
DOE reimbursed disposition costs: $0;
Total DOE reimbursed costs: $1,771,320.
[A] The costs shown are for fiscal year 1995 through the third quarter
of fiscal year 2001. Some of the cases listed may also have had pre-
fiscal year 1995 costs, which are not included in the totals above.
Source: Developed by GAO based on DOE data.
[End of section]
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