ML20127J605

Partially Deleted OIG Rept 91-73C Entitled, Potential Fraud Associated W/Nrc Construction Contract

ML20127J605
Person / Time
Issue date:	09/08/1992
From:	NRC OFFICE OF THE INSPECTOR GENERAL (OIG)
To:
Shared Package
ML20127J602	List: IA-92-400, Partially Deleted Oig Rept 91-73C Entitled, Potential Fraud Associated W/Nrc Construction Contract ML20127J599 ML20127J605
References
FOIA-92-400 NUDOCS 9301250189
Download: ML20127J605 (11)

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OFFICE OF THE MEMORANDUM REPORT INSPECTOR GENERAL CASE NO.91-73C TITLE: POTENTIAL FRAUD ASSOCIATED WITH NRC CONSTRUCTION CONTRACT .

l ALLEGATION On the morning-of July 9, 1991, NRC. Headquarters at One White-  ;

Flint North (OWFN), Rockville, MD was' evacuated"due to the  !

presence of strong fumes in the building. Following the evacuation, the fumes were linked to a. curing compound-applied the previous evening to the conference center floor. The i compound, allegedly used by-a construction subcontractor, was tentatively identified as EUCOCURE. Application.of this material i was not properly supervised, and the building wasinot ventilated' in accordance with the product's performance. specifications.

- Improper use of this product created severe adverse physical reactions for certain NRC employees who reported to work that day.

Subsequent to this incident, four NRC emplo'/ees received medical test results disclosing elevated levels of antibodies to . ._

isocyanates in their systems. Analyses of EUCOCURE failed to disclose the presence of isocyanates., Based on the. medical test results and a chemical analysis' of EUCOCURE, one NRC employee  !

questioned whether the curing. compound:used-'at OWFN was a product other than EUCOCURE. This question created the possibility that use. of a curing compound other than EUCOCURE containing i isocyanates or other'potentially hazardous substances'would constitute breach of contract, or contract fraud, by the general-contractor.

On September 26,'1991, the Office of the' Inspector General (OIG) was briefed by the Deputy Executive Director.for Operations on

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THIS REPORT IS THE PROPERTY OF THE OFFICE OF THE INSPECTOR-GENERAL. IT MAY NOT BE'PLACED IN THE PUBLIC-DOCUMENT. ROOM WITHOUT WRITTEN PERMISSION.

FREEDOM OF INFORMATION/ PRIVACY ACT EXEMPTION -(b) (5) (6) (7) (C) 9301250189 920908 ,

PDR FOIA SCHULZE92-400 PDR i

informanon la tus ccxd was deicted

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i this incident and was requested to investigate the following-issues:

1) What curing compound was used? ,

2) Was the same compound used in both applications?

3) If not EUCOCURE, what substance was applied?

4) Why was the reaction different for the second application?

5) Why did the contractor not use proper' ventilation precautions described on the Material Safety. Data Sheet?

DETATIS On September 26, 1991, OIG investigators met'with Deputy Executive Director for Operations Hugh THOMPSON and an NRC management team to discuss potentially fraudulen', behavior by. an NRC contractor during the performance of construction work at OWFN. Specifically, it was noted that on or about July 9, 1991, RONALD HSU CONSTRUCTION CO. (HSU), the general contractor, failed to properly supervise the curing of a concrete floor, resulting in the evacuation of OWFN due to strong fumes in the building. ~

The management. team advised that on the day of the evacuation and for several days thereafter, the NPC received complaints from certain employees reporting adverse reactions from the inhalation of fumes. It was reported that one employee was hospitalized on the advice of her physician.

Once the severity of this incident became apparent, NRC management identified an immediate need to chemically analyze the substance responsible for the fumes so that affected-NRC employees could receive proper medical treatment. On the day of

'the evacuation, lingering fumes in OWFN were attributed by the building contractor and the Montgomery County Hazardous Materials Team (HAZMAT) to the use of a concrete curing compound, EUCOCURE.

With the source of the odor presumably identified, the NRC requested a Material Safety Data Sheet (MSDS) for EUCOCURE from the general contractor in order to provide the NRC Health Jnit and specific NRC employees with critical health-related information.

During the September 23 briefing, OIG learned that following the incident, a 55-gallon drum allegedly containing the suspected curing compound was not secured and retained for evidentiary or analysis purposes. It was further disclosed that the general contractor was not present during application of the curing compound and was, therefore, unable to affirm that EUCOCURE was .

used by his subcontractor. It was noted that the concrete i

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3 subcontractor was no longer working on the OWFN construction

, project.

OIG was requested to obtain sworn testimony from the contractor in an attempt to identify the curing compound used at OWFN on

. July 9 and to determine why OWFN employees did not experience adverse reactions to an earlier application of the compound.

! It was mentioned in the briefing that an industrial hygienist-from the U.-S. Department of Labor, Office of Safety and Health Administration (OSHA) had been requested to sample the air at 4

OWFN to determine whether isocyanates or other toxic substances 4

might be present. Because other significant concerns were considered necessary for OSHA to review, the OIG requested an officjal OSHA inspectio ,,in a letter dated October 1, 1991, to j OSHA g T E % of Baltimore, MD (Exhibit 1).

i Tn PanrOIG MM intervi A% ,e w , hSUhh S M ) named

!Pof HWI CONSTRUCTION CO. , (HWI) as the j

a subcontractor responsible for couring, finishin , an curing the concrete floor at OWFN. %W HWI had performedpriorsbcontractwor$advisedtht. K for HSU. said M interaction with ,

during the Conference Center' work was i limited to negotiating a contract for the job and obtaining approval of the materials required (Exhibit 2).

f In a letter dated June 28, 1991,I inotified HWI that EUCOCURE had been approved as a concrete curing compound by SVERDRUP INC., the NRC's architectural contract firm.- According to approval of this compound was based on a review of 4

the manufacturer's performance data contained in a brochure (Exhibit 3). In a section of the brochure entitled " Precaution and Limitations," the following advisory information is provided:

Use with adequate ventilation and keep away from open

flame - contains aromatic solvent and is classified as l combustible.

! In contrast to this brochuro, the MSDS for EUCOCURE provides a detailed listing of hazards due to overexposure to this and other products manufactured by the EUCLID CHEMICAL COMPANY (Exhibit 4).

% % clained that while performance data information for a j product or raterial is routinely submitted for approval, MSDS are

! not provided by a contractor unless the client requests them (Exhibit 2).

( M said it is normal practice in the industry for a prime contractor's representative to be present during the performance of all subcontract wo .

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could not recall <hether this was discussed with as a requirement or whether it was a condition of contract. However, M confirmed that the HSU site superintendent was ultimately responsible for the

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1 supervision of all subcontracting work performed under this l contract. 1 During sworn testimony provi ed to the OIG, HSU M stated that in the early phase of OWFN construction, unilaterally chose to give the site's lock combination to certain subcontractors, includin HWI, for site access after normal working hours. M said decision was made in consideration of the compressed work sc edules available

- to the various subcontractors (Exhibit 5).

In recalli knowledge of events leading to the July 9 incident, said on July 1, HWI workmen prepared the conference center for the pouring of concrete. This effort included applicat on of a bonding agent, WELDCRETE, by the subcontractor, said on July 2, the pouring was scheduled for j 9:00 a.m., but contended that t was late in the day before work began.

remained at the job site to supervise the M

completion of HWI's activities until 7:00 p.m. that day. Since HWI was only able to pour one-half of the floor, the remaining concrete was cheduled to be poured at 1:00 p.m. on July 3, according to '

%Jobleports sai documented the submitted to oncrete work in a series of Daily employer. These reports include a brief description of eac s contractor's activity for a given date, the time projects were scheduled to begin, an he number of employees involved. In noted "two men... prep (sic) floor % forreport dated July 1, pour tomorrow." The fo owing day's report showed notations for "HWI .... concrete ... applying i bonding agent to floor.... pouring.. 1/2 of entire floor." On July 3, _ report stated, "HWI concrete... 2:00 (p.m)...

concrete." For both July 4 and July 5, M , % report reflected "No work. . Holiday" and "No work. . . ExtencTd Holiday. " A notation on the Daily Job Report dated July 8 merely indicated, " concrete (gaspowered) float...HWI concrete" (Exhibit 6).

W]testifiedthat on July 8, did not appear at the site i 'auring normal work hours to " apply the first coat of sealer (sic) . " M further maintained that on this date there was no indication HWI had previcusly applied a coat of curing compound to the floor. However, claimed that someone from HWI made a brief visit to the site what day tp drop off some fans in anticipation of the curing work. L M. said $ was not present when HWI finally applied curing compound on July 8 (Exhibit 5).

said when h reported to the site on the morning of July 9, l found the Montgomery County Fire Department at OWFN. M recalled noticing a strong odor in the conference center which .

did not immediately identify. When M was estioned about the source of strong fumes in the buildihg, ". said @ told NRC maintenance staff, "It looks and appears to me that our concrete

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i i guys came back late last night after I went home and put another coat of agent on the fl or. . . . " (In M sworn-testimony, %

originally stated t at first knowledge of any application of EUCOCURE was a f ter spoke to the NRC maintenance staff.) M said g assumed the fumes emanate from the concrete curing i

agent. At this time, % said checked the previously full barrel containing EUCOCURE and fou t to be lighter than when

. it was delivered the "ob site. immediately placed a

telephone call to who conf rmed having used EUCOCURE the i previous evening. said also admitted to having

applied an initial coa of EUCOCURE to the floor over the July 4th holiday.

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• % said area with immediately began to ventilate the conference room ans left at the site the previous day by I requested the delivery of additional fans from HSU. After

, te phone conversation with said g was cont cted i b directed that no other coats M According to of EUCOCURE be applied and emande that HSU remove the curing compound drum from the job site. said @ so notified ( M and the drum was removed by HWI on either the afternoon of July 9 or the next morning.

t prov)ded sworn tes imony to the OIG regarding l the July 9 incident. was awarded a contract to

perform concrete work ( M said at White Flint sometime in early June 1991 l for a bid of $10,350. ( M received from HSU a set of plans

. and technical specifications, to include the architect's l parameters for approved construction materials. In turn, M j provided submittals for the bonding agent and-the curing compound which were approved by the NRC architect '

r to the commencement of HWI's work. g % said submittals for these chemicals included copies of manufact rers' data sheets bu i not material safety data sheets (MSDS) (Exhibit 3). Al hou had often used other EUCLID CHEMICAL COMPANY products, f' remarked that the OWFN job was first occasion to use EUCOEURE i (Exhibit 7).

In describing activities at OWFN, @' recalled reporting i to work at 7: JD a.m. on July 2, at which time and seven j assistants cleaned the conference center floor, applied the

WELDCRETE bondi gent, and poured approximately 60% of the

! floor toppin said this work-was completed at 5:30 p.m.

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{IGMa W said returned the following day at 10:30 a.m. with l~ five et er employees to complete the ourin of concrete topping.

This was completed by 6:00 p.m., and - .

left that evening after finishing the floor at approximately 8:30 p.m.

l said HSU left the l

Oniteboth days,imate at appro ( @ ly 3:00 p.m. o carpool home to West irginia.

l said departure res 1ted in HWI's work being l

performed without supervision, confirmed that prior to l

6 commencing work, % provided with the combination to the construction site lock for after-hours access. M said there was no specific communication nderstanding between HWI and HSU regarding the supervision of work.

When asked whether the application EUCOCURE was discussed told beforehand with f M saidFourth of July tTat HWI would compound to the apply floor curing %

"over the holiday weekend. "

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]d to OWFN with an employee to apply EUCOCUREsaid that at app the floor.

This was done with a hand-held sprayer, according_ to and between 10-15 gallons of the compound was used. l said g ventilated the room by leaving the two external c oors open for approximately the EUC0 CURE two dissihours and did not use fans.ted within 30 minutes follo$ claime wing application, and neither @ nor employee noticed anything other than a slight aroma assoc ted with its use.

said k intended to apply the second coat prior to Monday, July .8, - but as oc upied with a personal move that weekend. As a result, E said it was after 4:00 p.m. on Jul 8 when % and the same emp oyee returned to the site.

{w % said % did not notify- of this visit, and On this occas ion,% work

%asacain-performedwithoutsupervision.

said M ap lied a second coat of EUCOCURE usin the approximate amount had applied on July 4. However, noticed "a little b t of odor" associated with this app ication, and % recalled that some of the compound pooled in low spots on .

the floor. M me lod of ventilating the room was ident' cal to the one used for jfirstapplicationofEUCOCURE, and said $ sec red the doors and departed the site at. approximately 6:30 .m. saidMdid not use fans on this occasion nor did leave fans at the site.

During an OIG interview, HWIemployee( stated 4 that there were no supervisors or other workers present when %

and % applied the curing compound, g also maintained that the compound was EUCOCURE, obtained from a barrel which remained on-site (Exhibit 8).

said that at approximately 6:30 eceivedanurgenttelephonecallfrom(a.m.onJuly9, there was a problem with the curing compound .aavi  % who advised g been used and "everyone is going crazy up here (OWFN) . " said @ was told by job site %to .

obtain After somesome rentin fansfan and report .immediately to thesaid @ arrive the site where M told M,of inability to mplete the ew h required to do so the applications previous over t)(Meekend, evening. w:

saldd cually removed the barrel of EUCOCURE from the job site at< direction. According to

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7 ef forts to ventilate the room with fans lasted

approximately three ays before the aroma was removed from the i

conference center. said g obtained a copy of an MSDS i i for EUCOCURE on July 10, 1991, from a local distributor, i

GREENWALD INDUSTRIAL PRODUCTS of Tuxedo, MD (Exhibit 7) .

3 f; According to NRC officials, M was requested on July 10 to provide a sample of the curing compound allegedly applied to the conference center floor in ord to have it chemically analyzed.

! Approximately 1-2 weeks later, delivered a partially-

filled 55-gallon drum o .EUCOCURE. maintained that it

was the same container used to apply _ curing compound to the l floor, also identified it as the same container based j on the packing la el marked "Eucocure," on its generally i weathered appearance, and on a dent in the base of the drum which i was allegedly made during unloading at OWFN in early July I

(Exhibit 5).

l NRC( g m ** Q ,' , " '.  % was interviewed by the OIG. said that initially served _as M

for e OWFN construction contract but continued as

! because of advised that, to % knowle% dge,construction no separate experience.

i safety conference was ever conducted between the general contractor and -

l- NRC staff even though a pre-construction conference included a discussion of general- safety ' considerations. % stated that l an Accident Prevention Plan was not prepared beforehand by the l general contractor. With j construction activit/, M, regard to potential said it is thehazards general posed by contractor's l responsibility to notify the Government of any hazardous

! materials or procedures (Exhibit 9).

f NRC )was interviewed by the OIG.

advised that SVERDRUP, the NRC's contract architectural firm,was  %

i responsible for reviewing HSU's submittal to determine whether a particular reduct or material.would do the job for which it was intended, added that the prime contractor, Ronald HSU Construction, was responsible for notifying an agenc of an j hazards posed by the use of construction materials. said

! that a " pre-construction meeting" was held between NRC sta and HSU employees in which safety was discussed prior to the

, commencement of construction, but an Accident Prevention Plan was not ared by HSU in advance of their work. M commented that considered the safety meeting to be an optional l cons 1 ation of the contracting staff (Exhibit 10).

was temporarily

etailed to the Division of fontracts and roperty Management

, (DCPM to serve in a liaison ca acit with the prime contractor.

l' In interview with the OIG, 'said this assignment l pr marily_ entailed observing the performance ' of work and l reporting any problems and questions from the prime contractor to l

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(Exhibit 11). With regard to the use of potentially l

Eazardous materials by the contractor, M said it was the responsibi of the NRC to ask the contractor for MSDS on these

< products. rovided the OIG with a copy of a r ress report prepared b on July 9, 1991. In the report, noted that prior to construction start-up, a review was made of the chemical materials and/or hazardous materials to bereviewed used at wasthe conference center (Exhibit 12). Among th mate ials report stated:

a " curing and sealing (sic) compound."

The above materials are considered to be chemical materials with an odor, not hazardous materials, therefore the (NRC)

Contracting Officer was not advised to request Material

. Safety Data Sheets on those items as he/she is authorized in the Safety and Health section 01546, part 2, sub section 2.02 entitled " Hazardous Materials."

i M stated that % considered EUCOCURE to be a " chemical with an odor not a hazardous material." $ added that M n,ot to request an MSDS for EUCOCURE based s

this on% advised assessment (Exhibit 11).

M had extensive experience in the building construction field nd other EUCO

during which products. time Based on $ @,became experiencefamiliar with EUCOCURE with EUCOCURE, said a strong odor would only develop whe th curing compound pooled or was absorbed slowly by concrete. stated that this was the situation g encountered on July 9 (Exhibit 11) .

In a document labeled " Project Manual for Conference Center, One White Flint North," dated April 12, 1991, the SVERDRUP

!. CORPORATION provided a listing of Government regulations that

applied to the construction at OWFN. In Division 1, Section j 01546 (Safety and Health), Part 1, subpart 1.03(A), commonly

encountered " hazardous materials" were listed as cleaning agents, paints, adhesives, strippers, solvents, and other chemicals. In subpart 1.04 (A) and (C) (1) of the same document, it is stated that the contractor must meet with the Contracting Officer and his/her representative to discuss the contractor's health and safety program prior to the commencement of work. This part also allows for the safety meeting to be held in conjunction with other meetings, contingent upon the Contracting Officer's approval. Subpart (C) (2 ) (a) states that the contractor shall comply with the accepted Accident Prevention Plan written by the prime contractor for the specific work, submitted to the Government, and reviewed by the Contracting Officer. Finally, subpart (C) (2) (b) states that prior to each major phase of work or where a new subcontractor is to perform work, an Activity

[ Hazard Analysis shall be prepared by the contractor. Work will not proceed until each phase analysis is approved by the i

Contracting Officer (Exhibit 13).

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9 During an OIG interview, NRC stated that never attende a pre-construction meeting with HSU employee  % or did g specifical re ire o t be sn attended a and conducted. % confirmed that both bu as uncertain of meeting in which safety was discuss sa % did not request the extent of this discussion. an etivity Hazard Analysis that an Accident Prevention Plan explained that because no be prepared by potentially hazardouthe contractor. materials or procedures were identified by the contractor or staff, g did not require the plan or the analysis (Exhibit 4).

hT [ 6 OCHA, provided a closing conference for NRC staff and the OIG on November 18, 1991, wherein the results of $ inspection were announced. Among %

findings, M noted that following the July 9 incident, air J sampling was not conducted in a timely manner to determine whether any material other than EUCOCURE was used on the

conference center floor. Furthermore, M pointed out that an MSDS must be on site for each hazardous material used during NRC failed to ensure that HSU construction. $ stated complied with this regulation. that th said the NRC will be cited by OSHA for this violation (Exhibit 15) .

During a telephone conversation with the OIG, % confirmed that HSU was ultimately responsible for the safety of its workers as well as OWFN employees during the period of construction.

However, g noted that the NRC cannot escape responsibility for its employees' safety during the performance of construction on agency premises.

U NDINGS

1. The OIG investigation developed no evidence to conclude that a product other than EUCOCURE was used as a curing compound.

Comparative chemical analyses of " pure EUCOCURE," of the ingredients listed in the prod"ct's MSDS, and from samples of the cured concrete floor provided a " strong possibility" that EUCOCURE was applied to the floor (Exhibit 16). Due to interrupted custody of the EUCOCURE and a lack of supervision at the construction site, there is no certainty that the curing compound applied on July 8 came from a specific container or that the curing compound was not tampered with before it was applied. While the OIG managed to obtain sworn statements from two Ronald HSU employees responsible for supervising this construction project, neither individual observed the application of EUCOCURE nor did they have continuous physical custody of the curing compound subsequent to the July 9 incident.

2. There is no evidence that a different compound was used to cure the concrete on the two separate occasions. In sworn

K lic $ g 10 testimony to the OIG, denied altering the i chemical composition of the EUCOCURE prior ~to, during, or after its applications to the conference Center floor. The only individuals k own to hav en resent during these i a lications were and mainta ned that UCOCURE was the only product used to cure the floor, and it was obtained from i the same -gallon drum $ delivered to FN prior to the commencement of work. Both M and said that on July 10, they washed the floor with two 0-ounce containers of Pinesol disinfectant to remove residual odors from the Conference Center.

3. There is inadequate information available to account for the different reactions to the July 4 and July 8 applications of l curing compound. Individuals with experience using concrete curing compounds theorized that the first application of EUCOCURE was quickly absorbed by the untreated concrete.

They agreed that the rapid absorption rate in a largely vacant building during a holiday weekend probably accounted for any fumes from the first application to have gone unnoticed. These individuals surmised that the second application of EUCOCURE emitted an odor because it pooled.

4. According to NRC officials interviewed by the OIG, it was the prime contractor's obligation to provide an MSDS to the NRC for each potentially hazardous material to be used.

This is confirmed in the NRC's Project Manual. However, an Office of Safety and Health Administration (OSHA) investigation concluded that the NRC could not escape

- responsibility for any hazards posed to its employees during a construction project on agency premises. As a result, i

OSHA announced its intention to cite the NRC for failing to ensure an MSDS was maintained on-site for each chemical or i potentially hazardous material used during construction.

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5. RONALD HSU CONSTRUCTION CO. failed to properly supervise the renovation work performed at OWFN. HSU's lack of

supervision and communication with a subcontractor, HWI,

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regarding the curing of concrete was primarily responsible 4 for the evacuation of OWFN on July 9, 1991. HSU's failure I to properly supervise this work was not apparent to NRC contract staff until the July 9 incident occurred. The general contractor's performance under the terms of its i contract did not constitute contract fraud based upon product substitution.

6. Ventilation precautions described in the EUCOCURE MSDS were

not adhered to by HWI during the performance of work. In using EUCOCURE, both HSU and HWI relied on their individual knowledge of EUCO products and on information contained in the manufacturer's performance data brochure (Exhibit 3) and

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• I M I 11 did not take the precaution of obtaining an MSDS for the l

product (Exhibit 4). The NRC architect, SVERDRUP, INC., and NRC contracting staf f did not anticipate potential problems

! associated with the use of EUCOCURE based on their review of j the manufacturer's brochure. The NRC and SVERDRUP INC.

i failed to require an MSDS for this product.

l 7. Adequate steps were not.taken by the NRC contract staff to i

protect employees from hazards posed by the construction at

! OWFN, and this staff failed to follow its own regulations l regarding safety. A " pre-construction" conference was held

prior to construction during which certain safety issues were discussed. However, there was no specific discussion l

about the use of potentially hazardous materials during the

!. performance of work. An Accident Prevention Plan was not

! prepared by the contractor nor did the contracting staff-l require one. An Activity Hazard Analysis was not prepared l by the general contractor prior to each major phase of work, i

and the contracting staff neglected to require submission of these analyses. Specifically, HWI was allowed to commence l

vork without an Activity Hazard Analysis having been

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approved by the Contracting Officer.

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