A revamped contract to manage Hanford's tank farms has won approval from the Department of Energy.

CH2M Hill Hanford Group's contract has been extended through Sept. 30, 2006.

"They've done excellent work in the last few years," said Harry Boston, manager of DOE's Office of River Protection.

CH2M Hill takes care of central Hanford's 177 underground tanks, which hold 53 million gallons of highly radioactive wastes -- arguably the nation's single worst environmental problem. The company is preparing to start sending wastes by 2007 to a glassification plant to be built by the newly hired Bechtel-Washington.

This contract began on Oct. 1, 1996, under Lockheed Martin Hanford Corp., a subcontractor of Fluor Hanford. DOE later reorganized Hanford to make Lockheed a prime contractor, and Denver-based CH2M Hill subsequently bought the Hanford company from Lockheed. The original contract was scheduled to expire Sept. 30.

A major reason for the contract modifications is that Boston's office estimates CH2M Hill will have to do about $2.5 billion worth of work between now and 2006. However, his office expects to get only $2.2 billion from Congress during that period, Boston said.

Consequently, the extended contract contains incentives for CH2M Hill to do $2.5 billion worth of work through 2006 with $2.2 billion, Boston said.

CH2M Hill will have six to nine major contractual milestones each year. At the end of each fiscal year, the Office of River Protection will pay CH2M Hill for each milestone met and not pay any money for each one missed -- essentially paying on a pass-fail system. Also, the office will grade CH2M Hill's safety and administrative efforts.

If CH2M Hill makes all its milestones and scores perfectly on its administrative and safety efforts, it can earn $106 million in profit during the contract, or almost $17 million a year.

Meanwhile, CH2M Hill will also be graded and paid on whether it saves $300 million to do the $2.5 billion worth of work. The company can earn almost $50 million by saving the entire $300 million.

The bottom line is that CH2M Hill can earn up to $166 million, but its risks increase because almost making a milestone translates to earning no pay.

"We've significantly raised the bar," Boston said.

Fran DeLozier, president of CH2M Hill Hanford Group, said: "It's going to be tough to clear 100 percent. But we earn more profit if we're able to do it."

CH2M Hill's graded work includes pumping wastes from the old, leak-prone 149 single-shell tanks to the 28 newer and safer double-shell tanks. So far, pumpable liquids have been removed from 129 single-shell tanks, with nine more being pumped. Since late 1999, CH2M Hill has transferred 1.2 million gallons of an estimated 3.5 million to 4 million gallons required to be moved by 2004.

Other graded work includes checking the sturdiness of the double-shell tanks, analyzing wastes, figuring what to do with the glassified wastes and ensuring all tanks remain safe. And CH2M Hill must ensure enough space remains in the double-shell tanks to hold all the wastes pumped from single-shell tanks.

Lockheed and later CH2M Hill consistently have earned good annual grades -- 89 percent to 91 percent -- since 1996. The company earned 89 percent of what it could have earned for fiscal 2000, which ended Sept. 30. That translated to $13 million to $14 million in awarded fees.