Imagine you have a contractor working on your house. They quoted you a price and told you the project would be done in no time. Sure, you realize costs will probably go up some and the schedule will slip due to an unexpected problem or two. But months turn into years, years turn into a decade, and now, 14 years later, you find that they’ve already spent five times their original estimate and they aren’t even halfway done!
That’s the situation the Department of Energy is facing with the contractor building a nuclear fuel facility in South Carolina. The Mixed Oxide Fuel Fabrication Facility, known as MOX, is a multi-billion dollar boondoggle that is behind schedule, is over budget, and will never be able to complete its mission. Now the Army Corps of Engineers has released an independent cost estimate for the project that reveals things are even worse than we thought.
MOX was originally conceived as part of an agreement between the United States and Russia in which each country pledged to dispose of weapons grade plutonium. But that was back in 2000. As cost overruns and the technical failure has become clear, the Department of Energy asked Congress to cancel the program this year. The South Carolina delegation, defending jobs in their districts, pushed back and claimed doing so would violate the agreement. Last week Russian President Vladimir Putin announced he would be withdrawing from the agreement.
Without Russia being party to the agreement, the last remaining pretense for this boondoggle is shattered.
Congress will soon be reviewing the budget for fiscal year 2018 and should ensure that funding for this project is ended once and for all.
The new independent cost estimate shows that finishing the construction of the MOX facility has gone from $1.6 billion to a staggering $17 billion—more than 10 times the original projection. And while the facility was supposed to be fully constructed in 2007, the Army Corps of Engineers stated that MOX won’t be finished and ready for operations until 2048—putting it 41 years behind schedule.
But even if Congress decides to accept spending $17 billion in taxpayer dollars and waiting 41 extra years for the facility, the project will never work.
MOX technology dates back to the 1960s and has caused experts to raise concerns about the technical viability of the U.S. facility should it ever be completed and become operational. In 2014, Energy Department experts concluded that U.S. implementation of MOX technology still remains a “significant risk.” Moreover, even if the facility were to work perfectly and produce the mixed oxide fuel as intended, there aren’t any commercial nuclear reactor companies interested in purchasing it. In 2008, the project lost its only potential customer and hasn’t been able to find a single replacement.
What is even more unbelievable is that $17 billion isn’t even the bottom line for this monstrosity. Other independent estimates have found that over the facility’s lifetime, which includes the costs of operating the plant for 20 years on top of construction costs, MOX will cost taxpayers $110 billion.
The fact that these cost estimates come from independent sources is important. For the last several years the contractor in charge of the MOX project, CB&I AREVA MOX Services, has been spreading misleading facts and figures about the project’s true costs.
These contractor statements have been proven wrong time and time again by the Department of Energy, independent sources, and reality. The new Army Corps analysis exposes just how the contractors’ optimistic estimates border on delusional. For example, the contractors stated earlier this year that finishing the job will cost $3 billion; the Army Corps found the contractors’ estimate should have come closer to $10 billion. The contractors’ calculation, they found, had serious problems which led to the inaccuracies. “The MOX Services estimate-at-completion is not credible because it was developed using unrealistic production and productivity rates, artificially low escalation, inappropriate allocation of management reserves and contingency that is not time phased across the project duration, and lack of escalation applied to these reserves,” the Army Corps’ report stated. Based on their calculations the MOX project is only 28 percent complete, not 48 percent as the contractor has asserted.
What CB&I AREVA MOX Services also seem to conveniently forget in its calculations is that the project is running on at least a 25 percent rework rate, meaning approximately a quarter of the work already done will have to be re-done—the project takes one step back for every four steps forward. This includes everything from walls that were installed incorrectly to piping that was ordered but didn’t meet specifications.
These kinds of mistakes led to CB&I AREVA MOX Services receiving only half of its possible contract award fee in 2015. “Overall performance is below the level needed for successful project completion, as culminated in cost overruns and schedule delays,” the government documents stated. They cited the contractor’s poor management of the project and failure to adequately perform random drug testing. Still, CB&I AREVA MOX Services received $4.33 million of the possible $8.86 million in bonuses for that year.
It may seem remarkable that CB&I AREVA MOX Services has managed to retain the contract after so many missteps, but it could be the result of a very successful lobbying effort. The two companies that make up CB&I AREVA MOX Services, Chicago Bridge & Iron Works (CB&I) and AREVA, spent a total of $2.4 million lobbying the government in 2015 on various issues including the MOX project. In the first two quarters of 2016 alone the groups have spent $1.4 million. That amount doubles when including other organizations, like the International Brotherhood of Electrical Workers, that listed MOX as a lobbying objective.
The contractor has effectively lined up several Senators and Representatives who have made sure that taxpayer dollars continue to flow to the MOX project, and thus to CB&I AREVA MOX Services. Senators Lindsey Graham (R-SC) and Tim Scott (R-SC), and Representatives Joe Wilson (R-SC), James Clyburn (D-SC), and Rick Allen (R-GA) have done their best to support MOX. During the budget process this year, Wilson wrote a letter to the House Committee on Appropriations Subcommittee on Energy and Water Development urging them to continue funding the MOX program. Clyburn and Allen also signed the letter. It comes as no surprise that Representatives Wilson and Clyburn as well as Senator Scott are among the AREVA Group’s top recipients for campaign donations. Also on the list are Representatives Mike Simpson (R-ID) and Marcy Kaptur (D-OH), the Chairman and Ranking Member of the Energy and Water Appropriations Subcommittee which determines annual funding for MOX. At this point the MOX project is nothing more than pork barrel politics.
“We are confident [the MOX project] is not feasible in this environment. We are going down a road spending money on something that will never happen. Unfortunately, that seems to us to be a very large waste of taxpayer money,’’ DOE Associate Deputy Secretary John MacWilliams told The State reporter Sammy Fretwell on a tour of the construction site.
MOX is unaffordable, 41 years behind schedule, and will never work. And now that Russia has withdrawn from the agreement, the United States would be the only ones trying to uphold it. Congress’s decision to continue funding this disaster was based on grossly inaccurate information about both the cost and performance of this project. But they have time to revisit this decision with unbiased facts and analysis before the next budget decisions need to be made. There are cheaper and faster ways to dispose of the plutonium, methods that the Energy Department is already exploring. There is no reason Congress should continue forcing taxpayers to fund such an obvious boondoggle.