PENTAGON IG FINDS PUEBLO FACILITY
COSTS MAY PUT CHEM-DEMIL AT RISK
The failure of the Army's Chemical Materials Agency to place life-cycle cost
controls in Bechtel's contract for the design of the Pueblo Chemical Agent
Destruction Pilot Plant allowed the contractor to design a facility that
is
much larger than originally planned and will not meet project milestones,
a
new report from the Defense Dept.'s Inspector General concludes. The report
specifically faults Mike Parker, director of the Chemical Materials Agency
and Program Manager for Assembled Chemical Weapons Alternatives, and the
contracting officer at the Pueblo Chemical Agent Destruction Pilot Plant
for
giving Bechtel "the opportunity to propose a larger, more heavily staffed
facility." The audit determined that Bechtel developed a design for the facility
that was not executable, and could put at-risk the ability of Pueblo to neutralize
2,600 tons of mustard-filled weapons by April 2012 as required by the Chemical
Weapons Treaty.
Costs for Pueblo Project Double in a Year
Cost estimates for the plant, which according to the report were one of the
top five reasons Bechtel was awarded the contract, increased from $1.5
billion in January 2003, to $2.65 billion in August 2004. The report faulted
Parker and the contracting officer for not emphasizing cost in the design
development. "As a result, Bechtel did not consider cost constraints in
designing the facility which caused the current life-cycle cost estimate
to
escalate," the report said. Because of the inflated cost as well as concerns
that the project may be "fiscally unexecutable," the Pentagon directed Parker
to pursue a revised design. In April Miretek Systems, a support contractor,
was hired to assess Bechtel's design. In turn, the National Research Council
will review Miretek's independent review. A final report is due in Fall 2005.
Army: Cost Not a 'Priority'
Officials in the Assembled Chemical Weapons Alternative program have
maintained that after the events of Sept. 11, 2001, they were told to
accelerate the destruction program because of terrorism fears and
consequently instructed Bechtel to build a larger facility that would handle
increased weapons neutralization. Parker wrote in a letter of response to
the IG report that cost was not one of the key factors in the program.
"While cost is always a consideration, safety, environment and schedule
remain the priorities," he wrote. "If cost is to be treated as a priority,
a policy
change and a revised Acquisition Decision Memorandum reflecting the same
are necessary." The IG recommended that Michael Wynne, Acting Under
Secretary of Defense for Defense Acquisition, Technology and Logistics
provide a revised memorandum to Parker "emphasizing that the Department
of Defense needs to keep the Pueblo project within the baseline costs as
certified to Congress so that it will remain affordable." Preparation of
a new
memorandum is underway, according to Wynne.
Wynne agreed with the IG report's concerns about cost escalations. "We are
taking action to evaluate a more cost effective design," he said. Last month,
work on the Pueblo facility was halted for nine months to review trade studies
to determine the efficiency of the design (HD&S Monitor Vol. 6 No. 19)."Upon
conclusion of the independent evaluation, a new certification to Congress
will be issued if the life-cycle cost estimate of the project cannot be
reduced to $1.5 billion," Wynne said in response to the IG's conclusion.
Parker, however, did not agree with how the term cost growth was used in
the
IG's report. "This current contract has incurred minimal growth; the systems
contractor has maintained cost and schedule within the negotiated tasks on
the
contract. The issue is why budget estimates have increased." Parker added
that
the IG review took too narrow a view of all the factors that brought the
Pueblo
project to where it is today.