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NNSA’s Management of the $245 million Nuclear Materials Safeguards and Security Upgrades Project Phase II at Los Alamos National Laboratory, DOE-IG report, Jan 2, 2014

Notification provided by NNSA to Congress re: NMSSUP II problems (10-24-2012?)

Nuclear Material Safeguards & Security Upgrades Project (NMSSUP) II

Background: The NMSSUP is a high-tech security fence and detection project (a PIDAS) designed to safeguard Category 1, Special Nuclear Material, at Los Alamos National Laboratory. The project was expected to cost no more than $213 Million and to be completed in June 2012. To accomplish the work, LANS (the Los Alamos M&O contractor) awarded five firm-fixed-price subcontracts. As early as May 2010, the NNSA advised LANS it was concerned that the project would not be completed on schedule or within the cost baseline.

On September 28, 2012, after numerous unsuccessful attempts to obtain an updated estimate to complete the project, the NNSA directed LANS to provide a NMSSUP project recovery plan, to address corrective actions to design and construction, and to identify how LANS will complete the project within approved project and cost baselines. LANS has not provided the requested information. However, on October 17, 2012, LANS notified NNSA that NMSSUP cannot be completed within available funds and requested emergency reprogramming of an undetermined amount. On October 18, 2012, LANS admitted in a meeting with NNSA that the likely overrun is between $21 and $25 Million.

NNSA has requested a rough order of magnitude estimate to complete the project, cost incurred to date, an outline of corrective actions that LANS will take against poor performing subcontractors, and actions LANS will take to bring the project to within available funding levels while achieving desired mission results. This information is due by October 24, 2012. Daily status meetings are held to maintain awareness of project impacts.

LANS brought in a team from Bechtel to assess the situation and to determine a path forward. The Bechtel team immediately determined that LANS is in danger of exceeding available funding. As a result, LANS suspended performance on all five subcontracts and repositioned its own project management personnel to other site work. This was done without consultation with NNSA.

In evaluating the project management systems and reporting tools, it appears that data received from LANS is outdated and unreliable. Further, their Earned-Value Management System, required by the contract, is insufficient to provide accurate and timely information.

Remedies and Ramifications:

LANS inability to complete NMSSUP puts NNSA in a higher cost profile for an undetermined period of time due to compensatory measures necessary to protect Special Nuclear Material. NNSA is pursuing all available contractual remedies to hold LANS accountable for poor project management of subcontractor performance and lack of cost control on the project overall. NNSA is dispatching a forensic team on October 29, 2012, to review the following: Financial status; cost reasonableness; subcontract management; and reporting to NNSA. Concurrently, NNSA is identifying potential sources of funding for reprogramming including fee decrements. A demand letter has been drafted and is expected to be issued today requesting full disclosure of project status and LANS’ plan to complete the project while maintaining full compliance with Category 1 required protections by October 31, 2012.

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