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Audit Report: IG-0498

March 21, 2001

Bechtel Jacobs Company LLC's Management and Integration Contract at Oak Ridge

In December 1997, the Oak Ridge Operations Office entered into a $2.5 billion management and integration contract with Bechtel Jacobs Company LLC (Bechtel Jacobs) for environmental remediation activities at Department of Energy (Department) sites in Oak Ridge, Tennessee; Portsmouth, Ohio; and Puducah, Kentucky. A primary objective was to accelerate cleanup activities and maximize cost effectiveness. To this end, the Department chose a strategy in which the contractor was to rely on competitively-awarded, fixed-price subcontracts for much of the work. The Department, based on its experience, anticipated that the use of competitive, fixed-price subcontracts would result in improved performance and cost savings. In response to the request for proposals, Bechtel Jacobs stated that it would subcontract just over 90 percent of the work to be performed and reduce staffing by about 80 percent, through transitioning staff to subcontracts. This was to be achieved within two years of the contract award. These factors were, in large part, the basis of the award to Bechtel Jacobs. The objective of this audit was to determine whether Bechtel Jacobs met these commitments.