Nuke Agency Wasted Millions on Inappropriate Reimbursements

Taxpayers lost millions of dollars due to a government agency’s poor management of contractors at a troubled nuclear construction site, a federal Inspector General found.

A contractor for the National Nuclear Security Administration (NNSA) overbilled the agency by about $3.7 million from 2007 and 2011 in order to reimburse its subcontractors for living expenses they were not eligible to receive, according to a report by Gregory H. Friedman, Inspector General at the Department of Energy.

The contractor, Shaw AREVA MOX Services, was able to get away with collecting inappropriate reimbursements for almost five years because the NNSA “had not effectively monitored” the contractor, Friedman wrote. “As a result, NNSA unnecessarily paid as much as $3.7 million...that could have been devoted to other critical mission areas or, returned to the taxpayers,” he said.

Friedman found that Shaw AREVA MOX Services itself didn’t consistently enforce reimbursement eligibility requirements, and it lifted spending caps that could have kept costs down. For instance, the contractor reimbursed housing costs for subcontractors who lived too close to the construction site to be eligible for reimbursement. And the contractor changed a policy to allow reimbursement of subcontractors’ monthly plane tickets home when the previous policy only allowed less expensive modes of travel.

This isn’t the first time this project has encountered problems.

The nuclear construction site in question is the Mixed Oxide (MOX) Fuel Fabrication Facility. Mismanagement by the NNSA has left the troubled South Carolina facility years behind schedule and billions of dollars over budget, the Project On Government Oversight (POGO) previously reported. Moreover, the MOX facility is lacking a single customer for the nuclear fuel it would produce. As such, POGO has recommended for years that NNSA cancel this project.

Friedman expressed concerns about the MOX facility as early as 2005, when he found that the NNSA’s poor management of its contractors was costing the agency major money.

In his latest report, Friedman again recommended NNSA increase its oversight of Shaw AREVA MOX Services. In a written response included in the report, an NNSA official said that the agency “has already begun to take actions to address the Inspector General’s findings.”

How long will the MOX facility get a pass? President Obama’s latest budget request to Congress proposes slashing the facility’s budget while the NNSA looks for less expensive alternatives. This is clearly a step in the right direction, as far as this project is concerned.

However, the problem with the MOX facility is indicative of the NNSA’s larger problem of contractor mismanagement. Ultimately, contractors work for taxpayers, just like the NNSA does. Contractors need to be more accountable for their mistakes, and the NNSA needs to do a better job of protecting taxpayer dollars.