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Audit Report: IG-0559

June 18, 2002

Privatization of Safety Management Services at the Savannah River Site

In January 1997, Westinghouse Savannah River Company, the management and operating contractor at the Savannah River Site, submitted a privatization proposal requesting approval to form a "spin-off" company to perform safety management services. The new company, Westinghouse Safety Management Solutions, Incorporated (WSMS), would be a wholly owned subsidiary of Westinghouse and would be largely comprised of Westinghouse personnel already performing safety management services at the site. To justify the spin-off, the management and operating contractor prepared a make-or-buy analysis indicating that by using WSMS the Department would save at least $11.5 million over 5 years. The Department approved the proposal and allowed Westinghouse to enter into a sole-source, cost-reimbursable agreement with WSMS beginning in Fiscal Year 1998.