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Audit Report: IG-0739

September 20, 2006

Performance-Based Contract Incentives at the Hanford Site

In 2002. the Office of Environmental Management (EM) directed its field organization LO ensure thar the structure of environmental remediation contracts emphasized he completior~o f specific tasks. Many of these tasks were acknowledged to be a,,~ oressive and technologically challenging. As part of this initiative, EM'S field activities at the Hanford Washington site, the Richland Operations Office (Richland) and the Office of River Protection (ORP), incorporated results-oriented work scopes in the~cro ntracts and increased the potential fees that the contractors could earn for completing especially challenging work. Richland, for example, accelerated work on at least ten majrjor projects. It also increased the available fee pool of its contractor, Fluor Hanford, Inc., from approximately $127 million to $180 million for Fiscal Years 2003 - 2006. ORP took similar action by accelerating the schedule to cleanup waste tanks at the Hanford Site and included $72 million in performance incentives in its contract with CH2M HILL Hanford Group, Inc. (CH2M HILL) to accomplish this and other work.