Audit Report: OAI-L-16-03

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November 25, 2015

Energy Savings Performance Contract Biomass Project at the Oak Ridge National Laboratory

In July 2012, the Oak Ridge National Laboratory (ORNL) Site Office (Site Office) authorized its contractor to commence operations on a new biomass gasification steam plant.  The biomass plant was the Site Office’s largest and most expensive endeavor in a series of energy conservation measures developed and financed through an Energy Savings Performance Contract (ESPC) with Johnson Controls Government Systems LLC (Johnson Controls).

After operating sporadically for a year, the Site Office shut down the biomass plant in September 2013 when it discovered dangerous corrosion in the gasifier walls.  Shortly thereafter, the Site Office notified Johnson Controls of the corrosion as well as other operational issues including degradation of the concrete beneath the conveyors and corrosion of the electrostatic precipitator.  The Site Office requested that Johnson Controls resolve all operational issues and continue to ensure an uninterrupted steam supply.  After months of negotiations, the Site Office and Johnson Controls agreed that the biomass plant would be demolished and replaced with a natural gas system.  In August 2014, the ESPC was modified to reflect this substitution, while the overall value of the ESPC’s delivery order remained unchanged.  We initiated this audit to determine whether the Site Office had effectively managed its ESPC biomass project.

The Site Office told us it had taken what it considered to be the best option to resolve the ESPC biomass plant issue.  We noted that the Site Office had considered several options to resolve operational issues and had worked with Johnson Controls to arrive at a long-term solution to supply steam for ORNL’s needs.  Although the Site Office was able to modify its ESPC with no increase to the value of the ESPC’s delivery order, we noted that an issue with the original terms and conditions of the ESPC could have complicated the resolution process.

Topic: Management & Administration