CH2M Hill Plateau Remediation: HUBZone Subcontract Reports and Contract Incentives

CH2M Hill Plateau Remediation agreed to pay more than $3 million to settle allegations of false HUBZone subcontract reports tied to contract incentives at Hanford. The government alleged that the cleanup contractor claimed credit for awards to businesses it knew lacked HUBZone status during the subcontracts. For someone who knows the subcontract awards, the status records or the reports sent to the Department of Energy, those details bear on whether the prime earned its HUBZone fee incentives.

What the Hanford Cleanup Contract Required

CH2M Hill Plateau Remediation’s contract tied HUBZone subcontracting performance to fee incentives and possible monetary penalties. Reporting who received the work was part of the financial bargain with the Department of Energy.

In 2008, the company was a Department of Energy prime contractor responsible for environmental remediation and cleanup of Hanford’s Central Plateau, including the Plutonium Finishing Plant and other former plutonium production facilities. The government fully reimbursed its costs, including hundreds of millions of dollars in subcontractor costs. The settlement was small beside that subcontract spending.

That purchasing power came with a commitment to small businesses. The contract required the company to make efforts to award a percentage of its subcontracts to small businesses, including businesses in Historically Underutilized Business Zones. It also required regular reports to the Department of Energy about its HUBZone subcontracting efforts.

The contract provided fee incentives for success in HUBZone subcontracting. It also provided monetary penalties if the company missed its goals and failed to make good-faith efforts to award HUBZone subcontracts.

The HUBZone program was meant to send contracting opportunities into economically distressed communities. The Congressional Research Service’s 2015 report, Small Business Administration HUBZone Program, explains its purpose as creating jobs and increasing capital investment in places with low incomes, high poverty or high unemployment.

We see a backward bargain in that allegation: credit for supporting HUBZone businesses, claimed for awards the prime allegedly knew did not qualify. Credit had a price.

The U.S. Attorney’s Office described the harm as reaching taxpayers, Hanford’s cleanup mission and legitimate small disadvantaged businesses denied a fair opportunity to compete for and perform subcontracts.

The Alleged HUBZone Reports

The government alleged that CH2M Hill Plateau Remediation falsely counted subcontract awards to Indian Eyes, LLC and Phoenix-ABC A Joint Venture as HUBZone awards. Its settlement announcement says the company knew both businesses lacked HUBZone status during the relevant subcontract periods.

The timing matters. The allegation concerns status during the subcontracts, so our assessment connects each reported award to the status that applied then and what the prime allegedly knew.

The Records Behind a Subcontracting Report

The useful government contract billing evidence connects the subcontract award, the status claimed for it, the report to the Department of Energy and the contract’s financial incentives. A status review, a certification question or an internal discussion about counting an award may explain what the prime knew when it claimed HUBZone credit. We examine those connections with the insider who understands what the records mean in the business.

What HUBZone Verification Had Already Exposed

The Congressional Research Service’s 2015 report describes a program in which certification checks had already failed undercover tests. Its account of a Government Accountability Office test reported in 2010 says investigators submitted fictitious employee information and false principal-office addresses to the Small Business Administration. The report describes the result:

The Hanford allegation brings the question back to the prime: what it knew about the subcontractors’ status when it reported them to the Department of Energy.

The same report describes efforts to strengthen verification. The Small Business Administration began requiring supporting documents such as leases, tax returns and payroll records after reports of applicant fraud. Its field offices also conducted site visits to check principal-office locations, and the report describes examinations of firms that had received HUBZone contracts in the previous fiscal year.

The report also recounts the Government Accountability Office’s criticism of how the program measured success. Counts of applications, recertifications, contract dollars and examinations showed program activity. They did not directly measure employment growth, capital investment or the effect on communities where the businesses operated.

A report giving a prime credit for HUBZone subcontracting already sits at a distance from the jobs and investment the program aims to create. According to the allegations against CH2M Hill Plateau Remediation, even the reported status of the businesses receiving the awards was wrong.

Can a Contractor Be a Whistleblower?

Yes. This case began with a whistleblower complaint from a Hanford-area small business and its owner. The Department of Energy Office of Inspector General conducted the investigation, and the U.S. Attorney’s Office for the Eastern District of Washington announced the settlement on June 3, 2021.

The complaint came from outside the prime contractor. Familiarity with the businesses seeking the work can give a small-business owner a view that the prime’s report does not.

How Much Money Can a Whistleblower Get From a Qui Tam Lawsuit?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The settlement announcement stated that the small business and its owner would receive a whistleblower reward as a result of the settlement.

The Hanford Subcontract-Credit Pattern

Washington Closure Hanford agreed to pay $3.2 million in a separate case about subcontracting credit. The Justice Department’s account of that matter described allegations involving small and woman-owned businesses used as pass-throughs while Federal Engineers and Constructors performed the work.

The same Hanford-area small business and its owner brought both cases. The Washington Closure Hanford case produced more than $5.5 million in announced settlements across the defendants, according to the government’s account. One local business helped challenge the participation reports of two cleanup primes.

In that case, the alleged mismatch concerned the business credited and the business doing the work. In CH2M Hill Plateau Remediation’s case, it concerned the HUBZone status the prime claimed for named subcontractors. Both show why we follow a participation report back to the award it counts and the business behind it.

Your View Inside Hanford Subcontracting

If you know why a subcontract was counted as HUBZone work despite information showing otherwise, talk with our whistleblower experts. We help turn your knowledge of the status, reporting and incentive decisions into your strongest HUBZone whistleblower case. We bring in government procurement whistleblower lawyers who understand subcontract-credit cases and stay beside you through the case.