Rocky Flats Closure
Context[1]
- Rocky Flats was a United States nuclear weapons plant located 15 miles (24 km) from central Denver, Colorado, at the time a city of approximately 3 million people.
- The facility manufactured plutonium detonators for nuclear weapons between 1952 and 1989. Production was halted in 1989 amid an investigation into Rockwell International, the plant's operator, for violations of environmental law.
- Closure and remediation of the site was estimated to take 65 years and cost more than USD37 billion. All buildings needed to be demolished and radioactive waste removed to ensure soils and water were remediated to prescribed clean-up standards for the creation of a future wildlife refuge on the site.
Problem[2]
- Closure and remediation of the site included the need to safely demolish and remove approximately 800 facilities and structures across a 385 acre industrial area. This included over 21 tons of weapons-grade nuclear materials (much of it improperly stored), more than 30,000 l of plutonium and enriched uranium solutions in ageing and sometimes leaking tanks and pipes, and over 550,000 m3 of radioactive waste
- One Rocky Flats building was called ‘the most dangerous in America’ - with four others in the top 10 list of most vulnerable within the US Department of Energy (DOE).
- Government agencies did not have the capability or capacity to close Rocky Flats as quickly as they desired, and many of the materials stored on site had no path for treatment and disposal. Additionally, the nature of the site and extent of the contamination and dangerous materials made the program difficult to manage and co-ordinate in a traditional manner.
Improvement
- To accelerate the program and minimise cost, strong performance incentives were provided to Kaiser-Hill, the joint venture consisting of ICF Kaiser International and CH2M Hill responsible for delivering the program of works.
- The Rocky Flats contract contained a schedule performance incentive, a cost performance incentive, and a performance gateway measure. The compensation schemes applied only if threshold performance metrics were achieved. Below this threshold, the contractor was ineligible for a fee and faced termination, while above the threshold, cost and schedule performance were measured using the Cost Performance Index (CPI) and Schedule Performance Index (SPI) calculated and certified by a third party.
- A significant element of the compensation structure was formed by stretch and super-stretch goals applied to the out-turn program cost and completion. Initially, Kaiser-Hill would earn a base fee plus standard and stretch performance measures. This structure was altered from 1997 to eliminate the base fee, with all compensation being earnt through the achievement of standard, stretch, and super stretch targets.
- When it became apparent that the contractor was going to achieve the maximum allowable performance incentive, the DOE further modified Kaiser-Hill’s performance structure that was based on achieving a lower total project cost. Under this arrangement, Kaiser-Hill would agree to take on additional scope earn of $0.20 for every dollar of savings earnt for DOE.
- The program was estimated to cost between USD4.1 billion and USD4.6 billion. If Kaiser-Hill delivered the program for USD3.95 billion to USD4.18 billion, they would be paid the standard fee of approximately USD350 million. Outside of this envelope, Kaiser-Hill and the DOE agreed an incentive / penalty structure whereby Kaiser-Hill financed $0.20 for every dollar over USD4.18 billion and received $0.20 of every dollar under USD3.95 billion. Incentives were capped at USD100 million, and penalties had a safety net that would engage once Kaiser-Hill had lost USD215 million of its fee.
Stakeholders
- Kaiser-Hill (ICF Kaiser International and CH2M Hill Joint Venture) – Contractor
- US Department of Energy (DOE)
Timeline
- April 1995 – Rocky Flats Closure and Remediation contract awarded to Kaiser-Hill
- October 2005 – Closure program completed
Results / impact
- The Rocky Flats project set new benchmarks with federal and state regulators for clean-up and closure projects.
- Closure of the site was initially estimated to take 70 years and cost more than USD36 billion, significantly greater than the final time and cost required.
- Underpinning the success of the Rocky Flats commercial arrangement was the use of a strong employee incentive structure that enabled the sharing of 20% of the fee earned on the program with employees. Kaiser-Hill negotiated with local labour unions to ensure that incentivisation was passed on to the hourly workforce in addition to management and non-bargaining personnel.
- Buildings once referred to as ‘the most dangerous in America’ by ABC News Nightline were converted into a wildlife refuge with pollution levels 13 times lower than the DOE standard.
- Complex work in a radioactive environment was completed with an employee lost workday case rate only 5% of the construction industry’s national average.
- The whole program considered caring about people, taking on people from DOE, retaining them to become more effective on the program, and retrained them for a new career. As a result, 90-95% of the workforce was placed into a new job by the end of the program.
Key lessons learnt
- Clear planning and highly structured governance, when paired with good performance management, can lead to an organisational mindset that identifies goals and drives the organisation to achieve them. The Rocky Flats closure program demonstrated the benefit of regular collaborative planning sessions throughout all functions within the project, where each function was working towards the same goal.
- It is important to foster a cooperative mindset and adopt the right performance incentives irrespective of infrastructure delivery model, as changes will eventuate over the course of a project’s delivery, especially for complex projects such as Rocky Flats.
Useful links and related resources
DOE report on Rocky Flats closure
Last Updated:
18 October 2021