Nuclear Waste

The Department of Energy (DOE) spent about $3 million to buy 24 defective shipping containers intended to transport transuranic waste to storage sites in New Mexico. The containers were built under a subcontract with Westinghouse, DOE's managing contractor for the Waste Isolation Pilot Plant. While smoothing welded surfaces on the containers, the contractors ground the walls too thin to meet the Nuclear Regulatory Commission's (NRC) approved design. NRC later rejected the thin-walled containers. Concerned that the contractor might declare bankruptcy and jeopardize the opening of the plant, DOE allowed Westinghouse to enter into an agreement with the contractor to build 15 NRC-approved containers and purchase the defective ones. This report details several ineffective contracting practices that led to DOE's purchase of the defective containers. Ineffective oversight by Westinghouse and DOE exacerbated the situation. Historically, DOE has given its contractors wide latitude but has done little oversight. Although DOE is trying to improve its contract-management approach, instituting effective, lasting changes will be difficult.

GAO found that: (1) in the process of building 24 shipping containers for WIPP, the DOE subcontractor ground the walls of the containers too thin in spots; (2) the Nuclear Regulatory Commission (NRC) would not permit DOE to ship transuranic waste in those containers; (3) to meet the WIPP schedule, the DOE prime contractor, with DOE encouragement, negotiated a settlement with the subcontractor to fabricate and deliver 15 NRC-approved containers and to transfer ownership of production assets, the defective containers, and 17 completed trailers to the government; (4) the prime contractor inappropriately used a firm-fixed-price subcontract in procuring the containers, since the subcontract's significant research and development aspects precluded an accurate cost estimate; (5) the subcontract caused the government to assume greater financial risk because contract options for the purchase of additional containers at specified prices were tied to calendar dates, rather than NRC certification of container design or acceptance of a completely fabricated container; (6) ambiguous subcontract terms regarding the ownership of certain production assets weakened the government's position in the event of unsatisfactory subcontractor performance; (7) subcontract oversight was ineffective, since the prime contractor continued to make payments to the subcontractor even after NRC rejected its containers, and DOE approved the firm-fixed-price subcontract and had little involvement with container fabrication matters until NRC rejected the containers; (8) the DOE hands-off relationship with its nuclear facilities contractors has caused it to exercise insufficient oversight over its contractors and subcontractors; and (9) although DOE is making changes to improve its contract management approach, instituting effective, lasting changes will be difficult.