Todd Jacobson
NS&D Monitor
8/22/2014
KANSAS CITY—Department of Energy, National Nuclear Security Administration and contractor officials formally dedicated the NNSA’s new Kansas City Plant today, unveiling a facility that has helped modernize the nation’s weapons complex but that officials also hope could renew a unique approach in paying for some of the infrastructure needs across the weapons complex. In a unique arrangement, the 1.5 million-square-foot facility, located eight miles south of the plant’s former Bannister Federal Complex home, was built by developer CenterPoint-Zimmer, financed by the Kansas City Council through the sale of $815 million in bonds, leased to the General Services Administration, and sub-leased to the NNSA for $61.6 million in annual rent. While officials dedicated the facility, they also formally changed its name to the NNSA’s National Security Campus.
The unique third-party financing strategy drew criticism at times for being too expensive and for using funds backed by the local government to support the deal, but officials today had nothing but praise for the approach, with Energy Secretary Ernest Moniz suggesting that the approach at Kansas City could signal more things to come across not only the weapons complex but DOE altogether. “We are looking actively at third-party financing opportunities,” Moniz told reporters after the dedication. “Some of those will be in the weapons complex. Some of them will be at other laboratories. We have used this historically going back to the ‘90s and I think this is one more reminder of what a successful approach this is. Especially given the budget constraints, it’s a very effective way of renewing our infrastructure.”
Setting an Example
Congress has begun to pay attention as well. Language in the House-passed Fiscal Year 2015 Defense Authorization Act instructed the NNSA to look at more opportunities to utilize third-party financing for infrastructure projects with budget belt-tightening ongoing around the nation. “We’d love to have this as an example that we can promulgate not only in our weapons complex but in our science laboratories as well,” Moniz said.
Over the 20-year life of the lease, the NNSA is expected to pay $1.23 billion, which is more than the $687 million estimated cost of the facility, but officials involved in the project have pointed out that the annual rent payments are significantly less than the $140 million a year the agency was paying to run the facility at the Bannister Federal Complex. In all, the NNSA said it expects to save about $100 million a year through the move in 2006 dollars (which translates to about $144 million in current figures). That includes savings on energy consumption as well as cost reductions enabled by new business practices.
How Applicable is the Approach?
The third-party financing approach has also been used successfully at the Y-12 National Security Complex to build the Jack Case Center and the New Hope Center, and while it’s not applicable everywhere, Honeywell Federal Manufacturing & Technologies President Chris Gentile said it could be utilized in more places than expected. “It would be difficult to do it at this scale but you think about what goes on in a business and what you spend your money on,” he said. “There is a lot that is more administrative in nature than it is your core business. Those types of buildings are immediately leasable-type buildings. If you said, ‘Hey, we can take 40 percent of our business and move it off site and it doesn’t need to be on site, you’re talking about a cost reduction.” The approach could even work at nuclear facilities, he said. “You don’t have to have people that have all this training to go into these nuclear facilities, you don’t have to have people that have clearances. There is a tremendous cost savings. I think it has applicability beyond this.”
Kansas City Site Office Manager Mark Holecek said the approach is getting more consideration by DOE and the NNSA. “I know the Department is looking at these options, putting more emphasis on them as part of the acquisition strategy process. When you look at a project and how you’re going to actually acquire a facility there are multiple ways to do that. In the past I think we’ve been pretty focused on the capital acquisition process through government essentially financing construction. Now I think there is more emphasis on what the alternate approach is. That’s not going to be applicable to every situation but at least there is more openness to that approach because of this.”
More Lessons For Weapons Complex
Other aspects of the approach to the facility, which was built with flexibility in mind, are also applicable across the complex as the NNSA figures out how to approach replacing its uranium and plutonium capabilities, Moniz said. “Given the huge budget requirements especially in the nuclear facilities we are actively working on things like plutonium and uranium facilities, changing the design to a more modular footprint-reducing design,” he said. “That’s part of a lesson we have from here.”
With the project coming in under budget and ahead of schedule, NNSA Administrator Frank Klotz called the effort a “remarkable achievement that exemplifies that the Department of Energy and the National Nuclear Security Administration are committed to transforming the nuclear security enterprise to a more cost effective and streamlined model.”
Move Expected $16 Million Under Budget
The initial budget for the move, including equipment installation, was $324.9 million, and Gentile said the contractor expects to come in at least $16 million less than the previous estimate. The move was also finished one month early. In all, about 40,000 moving crates took up about 2,600 semi-truck loads during the move. While the relocation is completed, officials are still in the process of completing production readiness reviews on six of 128 phases of the move. Those reviews are expected to be completed in October, and the requalification of all of the facility’s equipment is expected to be completed early next year.
Not everything always went smoothly. Gentile said he received a call the first night the move began to inform him that a lathe that had been used in production had been dropped. A day into the move, an expensive piece of equipment was broken. “I thought oh my gosh, this is going to be 19 months of this,” Gentile said. “But I never got another phone call about that.”
Officials involved in the move credit the partnership between NNSA and Honeywell as well as a detailed move plan for the success. Each move of capital equipment had a “playbook,” Gentile said, with intricate details on how to turn it off, how to relocate it, how to bring it back online, and a build-ahead strategy helped stockpile parts for the move and helped the plant maintain a 99.9 percent on-time delivery record of parts. About 275 unique parts covering about 20,000 components were part of the build-ahead strategy, officials said. “We might have even over-planned a little bit because it’s not something we’ve ever done before,” Gentile said, adding that general industry would not have gone to the level of detail in planning out a similar move. “They would say move it over the weekend and get it up and running, but due to the nature of our products we couldn’t do that,” he said.
