July 27, 2014

LANL Contract Mod Could Include Penalties for Cost Overruns

By ExchangeMonitor

Los Alamos National Laboratory contractor Los Alamos National Security, LLC, could soon be on the hook for cost overruns on major projects, according to documents obtained by NS&D Monitor. According to a March 25-28 construction review of the Transuranic Waste Facility project obtained through the Freedom of Information Act, NNSA’s Office of Acquisition and Project Management was in negotiations with LANS to create a “SubCLIN,” or sub-Contract Line Item Number, in its contract to “establish terms and conditions for a new cost incentive where the contractor will lose fee for overruns on capital line item projects.” The SubCLIN would impact the TWF project, which is believed to have recently achieved Critical Decision-3, allowing construction to start.

NNSA and LANS did not respond to requests for comment, and it’s unclear whether the negotiations have been completed, but such a strategy would codify the approach taken by the NNSA in the wake of the Nuclear Materials Safeguards and Security Upgrades Project. When that project had to be stalled in December of 2012 because it was going to breach its baseline, LANS agreed to pay $10 million—softening the blow of what was projected to be a $41 million cost overrun. The project was finished earlier this year at a cost of $243.2 million, about $1 million less than its $244.2 million cost cap.

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