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Audit Report: IG-0503

May 7, 2001

Incentive Fees for Bechtel Jacobs Company LLC

In December 1997, the Oak Ridge Operations Office (Operations Office) awarded a $2.5 billion performance-based management and integration contract to Bechtel Jacobs Company LLC (Bechtel Jacobs) for environmental remediation activities in Oak Ridge, Tennessee; Paducah, Kentucky; and Portsmouth, Ohio. The contractor was also responsible for uranium enrichment functions at Paducah and Portsmouth. Under this arrangement, the contractor is to receive incentive fees for accomplishing performance objectives negotiated before the start of the performance period, in this case prior to the beginning of each fiscal year. The performance objectives describe what the contractor is to accomplish and when the task is to be completed.