How Bechtel Limits Risk on Possible Big Plant-Vogtle Role
Georgia Power's new prime contractor on the costly project has a carefully outlined role
As Georgia Power created a plan to save its troubled, billions-over-budget Plant Vogtle nuclear expansion project and request five more years to finish it, the utility and its parent company relied on cost, schedule and risk analyses prepared by Bechtel, Black & Veatch and consultants that included Pegasus-Global Holdings Inc. and PricewaterhouseCoopers.
Ultimately, Georgia Power solicited cost-to-complete proposals from Fluor Corp. and Bechtel and chose Bechtel to oversee construction work as part of its plan. By no means, however, is the plan for Bechtel to provide turnkey services under a typical engineer-procure-construct contract. Its work and scope is carefully delineated so that Bechtel shoulders no risk if its scope increases or some of its calculations were based on incorrect information provided by the utility and have to be redone.
In a Georgia Public Service Commission-required document, titled “Georgia Power Co.’s 17th Annual Construction Monitoring Report for Plant Vogtle Units 3 and 4,” Bechtel appears prepared to perform about $4.4 billion worth of work under its control. The contract appears to be a non-at-risk pact to manage direct labor at the site near Waynesboro for a fee of about $240 million, according to documents filed with the state public service commission by Georgia Power. Additionally, Bechtel stands to earn an extra $120 million in incentive payments, according to Macquarie Securities. That unconfirmed figure was published in Macquarie’s latest analysis for investors in Southern Co., Georgia Power’s parent.
“The Bechtel estimate came largely in line with that of [Southern Co. and Georgia Power] though Bechtel’s schedule on average was six months shorter,” wrote Macquarie’s analysts. The incentive payment is owed if Bechtel “delivers on its ambitious schedule,” the company stated.
Bechtel referred questions about the terms of its agreement to Georgia Power, which referred the matter to a media manager at Southern Co. The company was busy preparing for Hurricane Irma and did not respond in time for ENR’s deadline.
|Source: Georgia Power Co.’s 17th Annual Construction Monitoring Report for Plant Vogtle Units 3 and 4|
Under its assessment of the task, Bechtel sized up responsibility for craft labor, field engineering, equipment, construction quality control and contract administration, among other duties. The company specifically didn’t evaluate subcontracts, design, engineering, and possible delays, defects or resulting rework. Nor did Bechtel assess procurement and site delivery and related rework, startup and commissioning, fuel-related issues, site security, or overall project integration and management.
Prime contractor Westinghouse brought Fluor Corp. on to the project as a non-at-risk white knight after The Shaw Group and then Chicago Bridge & Iron shed their at-risk contracts to escape mounting losses at Vogtle and its twin in South Carolina, the V.C. Summer project. Both jobs featured Westinghouse’s new AP1000 reactor design.Then, in March, Westinghouse filed for bankruptcy protection. And Fluor, working under Westinghouse, could not produce the hoped-for results. With Southern Co.’s nuclear unit, Bechtel appears poised to step in to oversee construction as the manager.
Georgia Power Lauds Bechtel
Speaking of Bechtel’s responsibility, Georgia Power stated it is “one of the most respected engineering, construction and project management companies in the world, will serve as the prime construction contractor.”
Bechtel already is at work on the project, although in a limited role, with 220 employees on the nuclear island. Georgia Power said Westinghouse, prior to its bankruptcy filing in March, brought in Bechtel in January for “leadership augmentation” to remove scope from Fluor and self-perform nuclear-island construction.
Under the plan, Unit 3 begins operation in November, 2021; Unit 4 will begin a year later. Both units will cost an additional $9.45 billion. Georgia’s PSC must vote to saddle ratepayers with a chunk of those costs and Westinghouse’s parent must cough up $1.4 billion, too. The companies that had been building Plant Vogtle’s South Carolina twin chose to shut it down rather than continue.
Depending on what Georgia’s PSC decides, Plant Vogtle could still meet the same fate.