April 1, 2016

Management and Oversight of Information Technology Contracts at the Department of Energy’s Hanford Site

The Department of Energy’s Hanford Site (Hanford) supported the Manhattan Project and Cold War through the production of plutonium.  The weapons production processes resulted in the creation of solid and liquid wastes that pose a risk to the local environment.  To help remediate the environmental risks, the Richland Operations Office and the Office of River Protection oversee the cleanup work completed by seven prime contractors.  In 2009, the Richland Operations Office awarded Mission Support Alliance, LLC (MSA), the Hanford Mission Support Contract to provide support services to the Department and its contractors.  As part of this contract, MSA noncompetitively awarded the information technology (IT) support services work to its affiliate, Lockheed Martin Services, Inc. (LMSI).

The Office of Inspector General received a complaint expressing concerns with the Department’s oversight of IT functions at Hanford.  Our review largely substantiated that there were a number of problems related to the management and oversight of the IT contracts at Hanford.  While we did not substantiate an allegation regarding a conflict of interest, we determined that several MSA executives also held senior executive positions within Lockheed Martin Corporation and, as such, had inappropriately taken actions on excluded activities that resulted in the appearance of a conflict of interest.  We identified weaknesses related to contract awards and work scope, time and material task orders, and affiliate fee or profit.

The identified weaknesses occurred, at least in part, because MSA had not fully executed the Mission Support Contract in accordance with its terms.  In addition, the Richland Operations Office had not promptly acted to compel involved contractors to comply with requirements.  We also observed that Richland Operations Office and MSA officials had not ensured that incurred cost audits were conducted in accordance with Federal requirements, a key component of an effective monitoring and oversight program.

As a result, contracts may have been awarded that were not in the best interest of the Government and that the Department may have paid higher costs than were necessary and allowable.  The Department also may be paying unallowable costs related to inappropriate profit in an affiliate arrangement.  

Topic: Management & Administration