Staff photo by Doug Strickland/ Unit 2 senior manager of operations Tom Wallace points to a 3 megawatt backup diesel generator inside the flex equipment storage building, installed for disaster preparedness, at TVA's Watts Bar nuclear plant. The contractor Day & Zimmerman NPS helped build the flex building but TVA auditors claimed the company tried to overcharge TVA for the work.

One of the biggest nuclear contractors for the Tennessee Valley Authority has agreed to pay a $200,000 penalty to settle charges that the company tried to overcharge TVA for work at the Watts Bar Nuclear Plant near Spring City, Tennessee.

Based upon the findings of the TVA Inspector General, federal prosecutors alleged that Day & Zimmerman NPS had submitted false claims for its work at Watts Bar after TVA provided an extra $550 million to the company on top of its original $700 million in contracts with TVA during the plant's construction.

The U.S. Department of Justice, which announced the penalty and settlement this week, claimed that Day & Zimmerman (D&Z) "failed to correct mischarges that it knew or should have known were incorrectly applied" to its bills to TVA in 2013 and 2014. Day & Zimmerman paid the $200,000 penalty to the federal government to resolve all of its remaining contract disputes with TVA over its nuclear work at Watts Bar.

Under the terms of the seven-page settlement signed by Day & Zimmerman President Jason Dunaway, the contractor "agrees that the United States, at a minimum, shall be entitled to recoup from D&Z any overpayment plus applicable interest and penalties as a result of the inclusion of such unallowable costs on previously-submitted requests for payment." But officials with TVA's Office of Inspector General or the Department of Justice declined Friday to detail how much, if any, TVA has or will recover from the settlement for the alleged overcharges.


Day & Zimmerman settlement agreement


Day & Zimmerman provided staff and services for TVA to upgrade its safety and facilities following the 2011 Fukushima Daiichi nuclear disaster in Japan. The contractor helped build an elevated "flex" building to provide backup power and controls in the event of a flood or earthquake similar to what happened at the Fukushima accident that created a nuclear plant meltdown.

In 2006, TVA began power generation at the Unit 2 reactor at Watts Bar — the last commercial nuclear power unit to come online in the United States. The reactor was activated 43 years after construction first began on the unit.

TVA suspended work on the reactor in the 1980s when the plant's costs escalated and the demand for TVA power slowed. TVA reactivated the construction of Watts Bar Unit 2 in 2007 when TVA projected it would cost $2.5 billion to finish. But ultimately, the project took longer than expected and the completion cost swelled to $4.7 billion, including work done by Day & Zimmerman.

Federal authorities alleged that from January 2014 through May 2014, Day and Zimmerman knowingly shifted costs from various project codes that fell outside the scope of the Flex Project and improperly charged those costs against the Flex Project by falsely using improper codes.

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Staff Photo by John Rawlston The TVA Watts Bar Nuclear Plant in Spring City, Tennessee. One of the primary contractors that helped build the Unit 2 reactor, Day & Zimmerman NPS, paid a penalty under a settlement with the Department of Justice over allegations it submitted incorrect bills for its work to TVA.

"The United States relies on the companies with which it contracts to accurately represent their charges to the government, and government contractors have a duty to refund any overpayments they receive," Acting U.S. Attorney Francis M. Hamilton III said in a statement issued by his Knoxville office. "Our office will continue to pursue contractors who violate those duties and put at risk the fiscal integrity of government programs designed to ensure the safe operation of sensitive public energy facilities."

The settlement with Day & Zimmerman does not limit the contractor from doing additional work with TVA.

The overcharges were initially discovered in the contract reviews performed by TVA's Inspector General.

Jill Matthews, TVA's acting inspector general, said her office "is committed to identifying and investigating false claims and overpayments that negatively impact the ratepayers throughout the Tennessee Valley."

Contact Dave Flessner at or at 423-757-6340.

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Staff photo by John Rawlston/Chattanooga Times Free Press / The Flex building, right, designed to protect emergency equipment in the event of a disaster, is seen in front of one of the reactors at the Watts Bar Nuclear Plant near Spring City, Tenn.