Department of Energy Richland Operations Office P.O. Box 550 Richland, Washington 99352

00-PRO-220

Mr. R. D. Hanson, President
Fluor Hanford, Inc.
Richland, Washington 99352

Dear Mr. Hanson:

CONTRACT NO. DE-AC06-96RL13200 - FEE DETERMINATION FOR THE PERIOD OF OCTOBER 1, 1998, THROUGH SEPTEMBER 30, 1999

This letter transmits the Fiscal Year (FY) 1999 fee determination for Fluor Hanford, Inc. (FHI) under the Project Hanford Management Contract (PHMC). My determination is based on the evaluations of 65 "Critical Few" objective performance incentives, and the U.S. Department of Energy, Richland Operations Office (RL)/Office of River Protection (ORP) Fee Administration Board Report for the more subjective "MEGA Incentive" detailed in the Performance Expectation Plan. FHI also met the minimum requirements as specified in Contract Clause H.47. As the Fee Determination Official for RL/ORP, I am pleased to inform you that FHI has earned $36,208,013 out of the available $42,300,000 (85.6% of the total available fee). Performance in FY 1999 showed considerable improvement over the previous two years and reflects FHI’s renewed focus on meeting the enormous challenges at Hanford.

Notable elements of performance under the "Critical Few" incentives for the PHMC include:

• Site Infrastructure Division: The two incentives established for these programs were met and 100% of the available fee was earned. Of note was the successful completion of Y2K implementation and compliance assurance activities.

• Waste Management Program: All incentives established for this program were met and 100% of the available fee was earned. Major areas of success included processing transuranic waste, processing waste through the Waste Receiving and Processing Facility, and conducting the 242-A evaporator campaign.

• Tank Waste Remediation System: All of the incentive fee tied to baseline workscope was earned and only three of the stretch incentives were missed, resulting in 98% of the available fee for this program being earned. Noteworthy results include removal of six feet of sludge waste from Tank C-106, initiation of interim stabilization of five single-shell tanks, and upgrades in the U-Farm.

• Facilities Stabilization Program: 83% of the available fee for this program was earned. Important results in this area included restarting the thermal stabilization process at the Plutonium Finishing Plant and removing B-Cell excess equipment.

• Spent Nuclear Fuel Project: 53% of the available fee for this program was earned. This is a substantial improvement from FY 1998, when no fee was earned. While FHI completed key construction projects on time, three performance incentives were not met. However, FHI has put new management systems in place to improve project performance. For example, while FHI did not earn the fee associated with the Cold Vacuum Drying Facility Project, FHI aggressively worked to recover several weeks of schedule in the latter part of the year, and is well positioned for success in FY 2000.

• Chief Financial Officer: FHI reduced indirect costs by 7.6%, earning 55% of the available fee.

FHI performance under the Performance Expectation Plan "MEGA Incentive" was rated "Excellent" with a dramatic improvement in the Spent Nuclear Fuels Project and Office of Environment, Safety, and Heath in the second half of the year. The excellent rating results in earnings of 89% of the fee available for the "MEGA Incentive," or $11,294,100.

Overall, I am pleased with the progress attained this past fiscal year, and the significant performance improvement over the past three years. I look forward to working with FHI to achieve the critical site outcomes I have identified - restoring the river corridor for multiple uses, transitioning the central plateau to support long-term waste management, and putting DOE assets to work for the future. If you have questions, please contact me, or your staff may contact

Sally Sieracki, Office of Procurement Services, at (509) 376-8948.

Sincerely,

/s/
Keith A. Klein
Manager

PRO:GFC

Attachments

1. Fee Determination for October 1, 1998 through September 30, 1999 [PDF Format]
2. RL Fee Administration Board Report [PDF Format]