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Swords into bankshares.

It seemed like a government weapons contractor's worst nightmare: Energy Secretary James D. Watkins, the keeper of the nation's $12 billion nuclear weapons industry, announced this winter that he planned to permanently shut down at least four nuclear weapons factories, placing thousands of government and private weapons-contractor jobs at risk. The Department of Energy's (DOE) weapons production requirements had already been cut in half, and further reductions are expected. Gone is the Cold-War urgency that pushed leaky reactors and rickety bomb factories to pump out nuclear progeny under the veil of national security, and gone too are defense contractor's multibillion-dollar plutonium-processing contracts.

But as America's nuclear swords are beaten into plowshares, don't feel too sorry for Boeing and Westinghouse.

"Would you like to get a bigger share of the only growth industry in defense spending?" reads an ad for a new trade publication. The answer: "Defense waste cleanup! ... Discover how to profit from $400 billion in federal spending."

Just as the government spent billions to make bombs during the Cold War, it's now laying out breathtaking sums to clean up the byproducts of the munitions splurge: radioactive and hazardous waste spread over 3,150 square miles of earth. The commitment to cleanup is the good news. The bad news is to whom we're handing the broom.

The contractor charged with undoing the environmental disaster at Fernald, Ohio's Feed Materials Production Plant has a hell of a job on its hands: More than three million pounds of uranium dust were exhaled by the nuclear rod production plant into the surrounding area for more than 35 years. The first step is a 25-year scrubbing of the 1,050-acre site. But when the Department of Energy sought a contractor for this awesome billion-dollar project, it didn't look far. It selected a subsidiary of Westinghouse, the very firm that environmentalists blame for helping create the mess in the first place.

"At the time," says Ray Morrow, a Westinghouse spokesman, "we didn't have an environmental waste management firm. so we created one to clean up the plant." Playing corporate three-card monte, Westinghouse shuffled a few documents, offered a couple of management "retraining" courses, and voila, a cleanup giant.

But it's not just Westinghouse. In fact, almost all of DOE's 52 major contractors are doing some level of cleanup work at sites where they now produce, or once produced, nuclear weapons components. The cleanup packages are strictly for the heavy hitters of the defense world: companies such as Westinghouse (which leads with six such contracts), EG&G (four), Rockwell International (three), General Electric (two), Boeing, Bechtel, AT&T, and so on.

To the bureaucrats and the contractors chosen to do the cleanup, the thinking is perfectly logical: Those who made the mess should know best how to unmake it. Moreover, the contractors argue, they have the resources and the technoloyg to do the job right. "If our expertise is in cleanup, then I think there's not a problem. We do have the capability to take care of cleanup," explains Morrow.

But what Westinghouse and the government appear to ignore are the disincentives that such double-contracting implies--disincentives that promote precisely the kind of contract corruption that plagued the 40-year, spill-filled nuclear weapons buildup. To think that a contractor would deliberately dump toxins to bilk more millions in cleanup funds from Uncle Sam might be a little paranoid, but how much competitive interest is there in running the cleanest, most cost-effective production operation when you're also getting paid to manage the waste it churns out? It's like grading your own exam: Sure, you want to do the right thing, but there's plenty of temptation not to--especially when you know you won't get caught.

On that score Westinghouse and other contractors can rest easy, because DOE, plagued by a shortage of trained auditors for the burgoening cleanup program, relies heavily on the contractors' own "performance self-assessments" of how well they're mopping up. The result, the General Accounting Office (GAO) warns, is that, just a few years into the cleanup program, taxpayers may already have been billed millions in "unreasonable and unallowable" costs. The system is so lax, and the stakes so high, it's even chafing at Secretary Watkins, who has uttered plans to eliminate such double-dipping. Yet an examination of the agency's recnet actions suggests that cleaning up the program may be as difficult as cleaning up Fernald.

Double drippers

To DOE's cousins across town at the Environmental Protection Agency (EPA), the scenario probably sounds familiar. In 1980, Congress anointed the EPA to direct the massive, nationwide scouring of thousands of acres contaminated from decades of indiscriminate toxic waste disposal under a program optimistically labeled "Superfund." Ten years and more than $ 10 billion later, it was revealed that nearly 50 percent of the chemical companies hired to determine the scope of the cleanups had been involved in creating the messes they were evaluating. Sure enough, an investigation of these firms' practices found that some were cutting corners--advocating remedies far less stringent than those proposed by the government and other observers.

The results at a number of these partially cleansed dumps were even more threatening to the public than if nothing had been done at all. During the mid-eighties, for example, the EPA permitted Monsanto, a chemical company, to design a cleanup strategy for a Houston site it had helped pollute several years earlier. Shortly after the cleansing had been completed, rows of new homes were built over the former dumping ground. But Monsanto's cleanup plan proved woefully inadequate: By 1989, according to a report last year in the Los Angeles Times, the cancer, birth-defect, and illness rates in the neighborhood were abnormally high. By the end of the decade, residents were abandoning the neighborhood in droves.

Even though DOE contractors may not be inclined to cut corners to save a buck--after all, they get paid regardless of the cost of the cleanup--the same fundamental conflict exists. And to its credit, the DOE has at least acknowledged that the double-jobbing is a bad thing. Last year it created a program that on the surface appeared to eliminate the problem--namely, separating contracts for the production and waste management ends of running a DOE facility. The only problem with the new agenda is that the DOE has barely bothered to carry it out.

Energy Department officials say they won't apply the new strategy at any of the facilities expected to produce weapons in the future--which include most of the cleanup sites. Instead, they'll wait until those sites are permanently closed down, which might take years for some, decades for others. In the meantime, the new edict is about to take effect at just one of the country's 14 nuclear weapons factories, Ohio's Fernald plant, the first to stop producing bombs. Yet that doesn't mean Westinghouse can't keep collecting on the cleanup. The new plan is fitted with a loophole wide enough to guide a Trident sub through--a clause that allows production firms to work as subcontractors for whomever is eventually selected as the primary cleanup contractor.

And sure enough, just as there is only one example of the new plan in action--Fernald--there is already one example of the contractor planning to take advantage of the loophole. While Westinghouse, which has held the Fernald cleaning contract for years, has agreed to give it up, Christopher Newton, a company spokesman, says, "We still expect to be a subcontractor there."

"We wanted to avoid the appearance of conflict of interest," he adds. As for an actual conflict of interest between producing and cleaning up? "We don't have the controls in place to know what's going on," says Vic Rezendes, director of energy issues at the GAO. Rezendes's mystification is not surprising. Most information about how well contractors are spending the government's money comes from the contractors themselves.


Only about 19,000 of DOE's workers are civil servants; the rest--a whopping 141,000--are employees of private contractors. While there is a long and rational federal tradition of relying on contractors (the Pentagon's got 2 million of them), DOE's privatization might make even Ronald Reagan nervous. Major contractors routinely write budgets, inspect their own facilities, and even negotiate millions of dollars worth of agreements with subcontractors for DOE facilities work--tasks, in short, that should be the domain of the agency itself and not its hirees.

Perhaps the worst of this overreliance on contractors involves "performance self-assessments"--reports required by DOE twice a year. In these reports, which are DOE's primary source of information on individual sites, a contractor details its use of government money and its cleanup progress and lets the government know how well it's complying with the terms of the contract. The DOE then examines the written assessment--or at least it's supposed to. Unfortunately, DOE officials seldom go to the actual sites to determine if the self-assessments bear any resemblance to the company's books or the community's plutonium level. And it gets worse. If the company looks deep into its soul and discovers, hey, we're doing a terrific job, it stands to win millions of dollars in bonuses from the DOE. Last year, for instance, Westinghouse earned an extra $2.5 million for its own glowing report on the management of New Mexico's Waste Isolation Pilot Plant--despite a DOE finding not long before that Westinghout had billed the government for up to $400 million in questionable costs.

One reason in-house overseers aren't too adept at interpreting contractors' self-assessments is that they're still a little wet behind the ears. They, just like the contractors they're monitoring, were trained to create weapons, not clean up after them. DOE's solution has been to rapidly retrain its personnel in waste management, a field--like weapons production--that takes years, not weeks, to master.

Consider Ralph Lightner, a DOE headquarters employee best known for his work in the eighties on a bomb-making project involving isotope separation. The program was axed in 1990, but the DOE's Office of Environmental Restoration and Waste Management was hiring. With a wave of the personnel wand, weapons scientist Lightner now holds a high-ranking post overseeing the cleanup of uranium mill tailings. "What you've got is a lot of retreads," says Jim Werner, an environmental engineer with the Natural Resources Defense Council in Washington. "What does Ralph Lightner know about environmental restoration and waste management?"

In the wake of the Soviet collapse, it's a common bureaucratic problem. The CIA, for instance, is now trying to turn its Sovietologists into specialists in the Middle East. And it does make sense to retrain smart, capable people instead of handing them the pink slip. But in the meantime, the inexperience is showing. According to the GAO, DOE officials admit they have no idea how many competitively awarded subcontracts they have--let alone how the private companies are spending taxpayer money. Nervous? Well, the DOE's inspector general noted in 1990 that the agency can't ensure that its major contractors are "operating in the federal government's best interest." It simply doesn't have enough skilled, in-house manpower to do it. Nevertheless, it's managed to catch enough bookcooking to know that "government's best interest" isn't always the top priority at cleanup and operations sites.

The corporations running the Savannah River tritium plant, Westinghouse and Bechtel, hid cost over-runs by illegally switching tens of millions of dollars in and out of a $400 million account for construction. In addition, last March, the agency's inspector general reported that in 1990 Savannah River workers lost more than $8 million in construction tools--about a quarter of the plant's tool budget. (After DOE reacted by removing Savannah River's site manager, Westinghouse promoted the executive to a vice presidency at its Pennsylvania headquarters.)

In another recent example, Martin Marietta Energy Systems, the DOE contractor for the Oak Ridge, Tennessee, weapons facility, received about $1.4 billion from the DOE in 1990 but neglected to audit itself that year, the GAO reported. That same year the inspector general's office reported $600,000 in "unallowable costs" on Marietta's contract, mainly on overbilling for hourly labor.

Indemnity crisis

Of course, Marietta probably isn't hurrying to pay that money back: Historically, Uncle Sam has been slow to demand apology checks from contractors on either end of the defense mess. As far back as the Korean War, nuclear contractors have enjoyed, for the sake of national interest, the luxury of being virtually unaccountable for environmental accidents, and even absconded funds. For instance, the government not long ago picked up the tab for a $78 million judgment entered against the Houston-based NL Industries Inc.--the contractor that abandoned the Fernald uranium processing plant in 1985. The plaintiffs had originally sued the Energy department, but the agency at the time couldn't foot the bill, resulting in a suit against the contractor.

Like contractor double-dipping, liability is another murky area of the cleanup that Secretary Watkins has tromped right into, declaring in early 1991 that the private sector would be held accountable for questionable costs and environmental accidents. His approach had some carrot along with the stick: Companies would receive bonuses if they met their cleanup obligations in full and on time.

That declaration seemed to bring DOE up to par with the EPA, which was forced by Congress to revise its liability laws after disasters like Monsanto. Admittedly, the EPA's Superfund program is rife with mismanagement, but at least that agency's indemnification program levies strict limits on the government's liability. Yet, just six months after DOE's new policy went into effect, Watkins started flip-flopping on his own plan for contractor accountability.

Last August, the Energy secretary granted EG-G complete protection from any liability stemming from its work with hazardous wastes at the troubled Rocky Flats site, where EG&G handles both cleanup and operation. How did Watkins sidestep his new policy? He invoked a 1958 law that exempts contractors from government policy during periods of "national emergency" for the "prosecution of war" aimed at countering "the increasing menace of communist aggression." This, someone should inform Admiral Watkins, is 1992.

To Watkins, the Rocky Flats exemption was warranted by the bomb factory's unprecedented problems. The plant, run for years by Rockwell, is plagued with liabilities, including plutonium deposits in the air ducts. It would be unfair, DOE officials argue, to burden EG&G with legal responsibility for someone else's disaster. Nevertheless, cleanup contractors see Watkins' reversal not as a special case, but as a harbinger of future flips. The trade publication Defense Cleanup, which already advises contractors on "how to avoid personal and corporate liabilities stemming from hazardous and radioactive wastes," viewed the decision as an "open door" for other contractors with complaints. "It's the kind of thing that doesn't deviate from Admiral Watkins' philosophy," says Jeff Schwartz, a spokesman for EG&G in Colorado. "But what it wouldn't do is put a contractor in the position of putting its entire corporation at risk. It's a way a firm wouldn't have to bet the company to run one site."

Obviously, hazardous waste is a risky business; the possibility that employees or nearby citizens could sue for millions after a spill might keep firms out of the business of cleanup altogether (although with $5 billion contracts going around, it might not). Yet critics, who include members of Congress and EPA officials, say the EG&G indemnity clause sets an unnecessary precedent that could cost the country billions if adopted in future cleanup contracts. Lack of liability--like double-contracting--also means a total absence of incentive to do the best possible work, and, more than likely, a huge headache for the federal government.

Still, liability is what happens after the disaster. The government should make sure that disaster doesn't happen in the first place, that the controls are in place to ensure that our nuclear-production sites won't be quietly giving kids tumors or needlessly breaking the bank. But as DOE enters a new age of defense cleanup, it's woefully underequipped, both in manpower and attitude, to make sure that that epic task is done right. There's no excuse for that institutional failure these days, since the Cold War rationale for decades of contractor and government indifference to cleanup is emphatically obsolete. Perhaps it's time now for the DOE to transfer some of its vestigial paranoia to the cleanup conflicts at home.
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Title Annotation:nuclear weapons industry and radioactive waste clean-up contracts
Author:Hickox, Katie
Publication:Washington Monthly
Date:Mar 1, 1992
Previous Article:Oedipal wrecks: has a century of Freud bred a country of narcissists?
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