Small Hanford subcontractors cry foul amid contractor changes
It’s the suddenness that bothers Phil Gallagher, senior vice president of Babcock Services Inc., a longtime Hanford subcontractor.
No one had a chance to prepare for a major – albeit likely short term – change in how Hanford’s two biggest prime contractors handled many of their subcontractors.
In January, the U.S. Department Energy directed new prime contractors – Hanford Mission Integration Solutions (HMIS) for support services and Central Plateau Cleanup Company (CPCCo) for solid-waste cleanup – to terminate all subcontracts involving staffing services prior to Jan. 25 and replace them with managed-task subcontracts.
The move eliminated staffing service subcontracts that consisted of one, two or a small group of subcontracted experts being attached to the prime contractors for specific tasks.
These subcontracts involved specialized engineers, computer programmers, project management experts and other individuals to augment specific staffing needs of the prime contractors.
This is a basic bread-and-butter task for roughly 50 small- and medium-sized Tri-Cities firms totaling 500 to 700 employees, said Dave Reeploeg, vice president for federal programs at the Tri-City Development Council (TRIDEC).
There is an estimated six- to nine-month gap between Jan. 25 and when new managed-task subcontracts are expected to be lined up. Until then, the two prime contractors won’t be using the staffing services subcontractors.
However, HMIS and CPCCo still need the extra staff normally provided by the subcontractors and have been hiring many individuals away from the local staffing subcontractors.
Gallagher estimated he lost 15 of Babcock’s 65 employees to the practice, reducing the firm’s workforce to about 50.
All this raises concerns about some of the Tri-Cities’ smaller staffing support subcontractors surviving until the latter half of 2021. Local business interests believe the outlook for the staffing support subcontractors will start to improve in late 2021.
“Locals don’t have the employees, locals don’t have work, locals don’t have opportunities to compete for six to nine months. How do those small companies stay viable with a six- to nine-month gap of work,” Reeploeg said.
DOE officials would not discuss the issue on the record and referred to a discussion about the matter in a recent Hanford Advisory Board meeting covered by Weapons Complex Monitor, which tracks nuclear sites. The HAB meeting minutes were not publicly available by press time for this edition.
DOE is trying to fix issues raised in a 2020 report by its Office of Inspector General, which found some prime contractors “were trying to achieve their small business goals” by hiring small firms to do work the prime contractor should be doing, Hanford manager Brian Vance said at a Hanford Advisory Board meeting, according to the publication.
DOE is expected to release a formal response to the subcontractors. It had not been released by deadline for this edition.
The work gap is a problem, said Dave McCormack, executive director of the Tri-Cities Local Business Association.
“It’s a crevasse. It’s temporary, quite temporary. But for small businesses, it’s quite deep,” he said.
And when key employees leave to join the prime contractors, small businesses face long-term consequences.
“Once they have all your people, you don’t have anything to bid with. We have the ability to survive. But many of these companies don’t,” said Gallagher, of Babcock Services.
The lack of warning in the temporary subcontracting changes in January caught local companies flat-footed with no time to adjust. “We were not prepared,” Gallagher said.
McCormack added: “We’re just appalled at the process. DOE needs to treat the business community as another stakeholder in this process.”
Weapons Complex Monitor reported that DOE officials acknowledged that local subcontractors were caught off guard during an online radioactive waste symposium in March. The event was sponsored by Access Intelligence.
At a U.S. Senate confirmation hearing on David Turk, the Biden administration’s nominee for deputy energy secretary, he promised to look into the matter when Sen. Maria Cantwell, D-Washington, asked about the situation.
“In the long term, (the change) will probably be a positive thing, but in the short term we are seeing some loss of small businesses because of this,” he told her.
Gallagher, Reeploeg and McCormack agreed the subcontracting situation should improve for those firms that can survive the next several months.
The dilemma follows a July 2020 DOE Inspector General’s report that looked at how well the predecessors to the current contractors met subcontracting requirements of their contracts.
Mission Support Alliance, predecessor to HMIS, and CH2M Hill Plateau Remediation Co., predecessor to CPCCo, both were required to award work to small local subcontractors.
Specifically, they were required to limit in-house work to no more than 60% and to award at least 25% to small subcontractors, with the balance held for larger subs.
Mission Support Alliance saw its in-house work climb to 73% in 2018, while 21% went to small subcontractors.
The IG’s office said CH2M Hill Plateau Remediation Co. miscategorized some of its work, but it met the 60% and 25% targets for in-house and small contracts, respectively.
John Stang is a Federal Way-based freelance writer who has written about Hanford extensively.