Staff Reports
NS&D Monitor
1/15/2015

The managers of the Los Alamos National Laboratory lost their $2 billion a year contact by the narrowest of margins, leaving $20 billion or so on the table.

First came the news on Dec. 17 that the management contract for the Los Alamos National Laboratory would expire at the end of September 2017. The lab’s performance had improved compared to the previous year, but a “satisfactory” grade in operations and infrastructure in the National Nuclear Security Administration’s assessment for fiscal 2015 was not enough to earn another year of award term, said laboratory Director Charlie McMillan. In a memorandum that went out to all employees just before Christmas break, McMillan said he would get back to the staff with more information early in the new year.

At an all-hands meeting, late last week, McMillan added more details about how the contract was lost, and he presented two alternative timelines for a new contract competition. According to a communication describing the meeting that was obtained by the ExchangeMonitor, McMillan said the contract might be competed in time to begin on Oct. 1, 2017, when the current contract ends, or a new contract might be pushed back a year to begin in October 2018.

McMillan, who is also president and CEO of Los Alamos National Security LLC, the partnership that has managed and operated the laboratory for the Department of Energy since 2006, emphasized that the laboratory was bigger than the contract and that its future was bright despite current adversity. While the timeline for a new contract competition has changed, he indicated, the mission hasn’t changed and the lab’s priceless contributions to national security and world-class science are tied to the laboratory, not to its contract.

LANS is made up of the University of California, Bechtel, BWXT Government Group, and URS, a subsidiary of AECOM. The current LANS contract is for seven years with built-in incentives that had the potential to add as many as 13 additional years, in which case the contract could have endured another 10 years, until October 2026. Based on the current average budget of about $2.2 billion a year, the unrealized value of the terminated contract would be on the order of $17 billion to $19 billion.

During the meeting, McMillan revealed how close the margin actually was, between extending or ending the contract. In order to earn another year, LANL was expected to have ratings better than satisfactory in all six of its performance objectives for fiscal 2015. Five of the six came in better than satisfactory – one “good,” two “very good,” and two “excellent.” The only “satisfactory” evaluation was in the operations and infrastructure category, which came in at 49 percent while needing 51 percent or higher, to qualify for the bonus award term.

The less-than “good” evaluation was substantially higher than the previous year’s grade, which was zero percent. The “unsatisfactory” rating for operations and infrastructure in fiscal 2014 reflected LANL’s major failures in handling nuclear wastes and its causal responsibilities in the release of radiation at the Waste Isolation Pilot Plant in southern New Mexico. At the same time, the laboratory’s scores in the other five assessment categories all improved L

ANS in September also received a one-year cost-plus-award-fee “bridge” contract for cleanup at the lab with a maximum value of $309.8 million and two six-month options. At the end of the bridge, DOE will have separate contracts for management and operations and legacy nuclear cleanup at Los Alamos.

According to the laboratory communication, McMillan acknowledged shortcomings during 2015 in the operational areas, including a serious safety violation that took place on a Sunday in early May. During a routine maintenance operation at an electrical substation in the area of the Los Alamos Neutron Scattering Center, an electrical explosion caused burns and significant head injuries to an employee who was medically evacuated to a hospital in Albuquerque in critical condition. Another issue in this category resulted in the revocation of LANL’s Earned Value Management System certification in November 2014 for repeated deficiencies in planning, budgeting, and scheduling for large capital projects, including cost and schedule overruns on the Nuclear Materials Safeguards and Security Upgrade Project at the LANL Plutonium Facility. A fuller accounting of these deficiencies can be expected in LANL’s forthcoming performance evaluation report for last year.

As described in the laboratory’s account, McMillan sees a vibrant road ahead for Los Alamos in service to the nation, “particularly given the current global security climate,” but he warned the assembly of employees of the importance of keeping their eye on the ball. A change of management might be in the offing, but the current managers still have time remaining on the contract, whether that amounts to 21 or 33 months.

Robert Gibson, a retired physicist and former Los Alamos County councilor who has been through a few decades LANL’s ups and downs, said this week anxieties always accompany these kinds of directional shifts and that it is natural for employees to be concerned about the collateral effects from the changes now on the horizon “But they don’t need to be terribly concerned,” he said. “There is no need for panic.”