Nuclear clean-up work attracts big L.A. aerospace, environment firms.

Environmental engineering and aerospace companies in the Southland are in line to profit from the $150 billion to $200 billion in contracts the U.S. Department of Energy is expected to award over the next 30 years to clean up the waste generated by the nation's nuclear weapons manufacturing facilities.

On Aug. 12 officials at Pasadena-based Jacobs Engineering announced they had won the first big cleanup pact -- worth $2.2 billion -- in a partnership with Irvine-based engineering giant Flour Corp. The contract calls for the two companies to manage the cleanup of a weapons manufacturing plant in Fernald, Ohio.

In addition to Jacobs, there are a number of other Los Angeles County-based companies which could profit from the Energy Department program, industry experts say. Altogether there will be 70 sites across the nation which will be part of the 30-year cleanup, seven of which are multi-billion dollar projects, said Leon Duffy, Energy Department assistant secretary for environmental restoration and waste management.

A number of L.A.-area companies, including Pasadena-based Parsons Corp, Calabasas-based Lockheed Corp., and Torrance-based International Technology Corp., are among several companies that are up for an $800 million contract to begin cleanup on what Duffy called the worst environmental contamination problem in the country, the Hanford, Wash.-based nuclear weapons facility.

The first five-year leg of the Hanford contract is worth $800 million and will be awarded in early 1993. It is estimated that the 30-year cleanup of Hanford will cost the government between $25 billion and $50 billion, Duffy said. Contracts to begin clean up of a nuclear weapons facility in Rocky Flats, Colo. -- a $12 billion job -- may also be awarded in 1993, he added.

TRW Inc. and Lockheed had bid for the Fernald site work but did not make the so-called "short list" of three finalists. Both TRW and Lockheed have set up separate companies for the main purpose of bidding on Energy Department contracts, company officials said.

TRW Inc., which had 100 engineers at its Carson facility working on its failed bid for the Fernald contract, now is not going to bid for the Hanford site as planned. "We're still trying to figure out what we did wrong," said Mike Seton, manager of TRW's line of environmental business.

Al Frascella, spokesman for TRW's Systems Integration Group, said that the company's bid was a "systems integrated approach" when "what they were looking for was a simple stovepipe (engineering) approach."

Seton said he expects aerospace companies to get a lot of subcontract work if they don't win projects because the Energy Department cleanup involves developing new technologies, something at which aerospace companies excell.

In addition to TRW and Lockheed, aerospace giants Hughes Aircraft Co., Martin Marrietta Corp. and General Dynamics Corp. have reportedly been considering starting units to bid for the Energy Department contracts, Seton said.

Lorraine Parsons, associate editor of the Environmental Business Journal, said that before the Fernald list was announced defense contractors claimed their ties with Energy Department and Pentagon officials gave them the competitive edge over engineering firms and waste companies. However, that contention proved faulty, she noted.

In addition to the aerospace company interest in the work, environmental companies are seeking Energy Department contracts because they are "much bigger" than federal Superfund cleanup projects, which involve the cleanup of other types of hazardous waste sites but have an average price tag of only about $25 million, Parsons said.

Environmental companies have fallen on hard times as of late because of the recession and a loosened regulatory environment, she explained.

Industry experts contend the real future value of the cleanup contracts may be in the technology developed to clean up the sites.

Duffy noted the Hanford site has monumental environmental problems which have never been tackled before, such as the radioactive contamination of 400 million gallons of groundwater now migrating towards the Columbia River, a drinking source for the Pacific Northwest. "If they're smart they'll be on the inside track in developing technology that is going to make America competitive," Duffy said.

The environmental techniques to be developed most likely can be exported to the former Soviet Union, and Eastern Europe, which have even larger, more contaminated nuclear weapons sites than in the U.S., he noted.

Doug Templeman, senior vice president for business development of Parsons Environmental Services Inc., an arm of the Parsons Corp., noted that at Hanford "the clean up is made up of literally hundreds" of separate elements.

Parsons, the largest engineering company in L.A. County and the fourth largest in the U.S., did not bid on Fernald, because it is already working there, and it would be a conflict of interest, Templeman said.

Robert Clement, spokesman for Jacobs Engineering, said one reason the contracts are so actively sought is their built-in profit element.

In addition to contract value, management companies get an award fee, which is sheer profit, on the contracts, Clement said. In the case of Fernald, the award fee is $125 million for the first five years of the contract and $89 million for the three-year extension.

Leone Young, an environmental analyst with the investment firm of Smith Barney Harris Upham in New York, noted Jacobs Engineering stock got a big boost, from about $23 a share to $26 a share on news of the Fernald contract, while Flour stock saw a smaller, but still significant, rise.

"It's a new market for all of them," Young said. "How it plays out between the traditional engineering firms, the aerospace companies and the waste companies is yet to be seen."