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For immediate release April 4, 2012
NNSA Releases Evaluation of LANL Performance
Bechtel-led Contractor “LANS” Awarded $76 Million in Fees, Rated “Very Good” Despite CMRR Cost and Schedule Overruns, Failure of $6 Billion Project
Contact: Greg Mello, 505-265-1200, 505-577-8563
Albuquerque – The Obama Administration rated the overall performance of Los Alamos National Security (LANS) LLC, which manages Los Alamos National Laboratory (LANL), as “very good” last year – even though LANS management of the CMRR project led to a 10-fold cost increase, a decade or more of delay, and the indefinite deferral of the main part of the project, the CMRR Nuclear Facility, after spending $465 million in design (to that date) on the now-deferred building. 
While the overall rating is not news, the details are. After numerous requests from the trade press, news media, members of Congress, and citizen organizations, the National Nuclear Security Administration (NNSA) has again begun to release the annual performance evaluation reports (PERs) for the management and operating (M&O) contracts at each of the agency’s eight sites.
These reports are the basis for awarding management fees as well as for extending the M&O contracts themselves in some cases, e.g. LANL. LANS’ FY2011 management fee of $76 million is dwarfed by one year of its operating budget, which is in the neighborhood of $2.2 billion – roughly 30 times greater. As this year’s PER blandly states, “[a]ward term is considered a higher-order incentive” than operating fee. The LANL contract now extends into FY2017.
The LANL contract is one of the very largest in government, worth more than $35 billion if extended, including the years so far.
The release process for the PERs is apparently gradual. LANL’s FY2011 PER is among the first to be released. This, and past PERs for LANL can be found here (pdf).  The FY2011 PER for the Y-12 site can be found here (pdf).
LANS’ “unsatisfactory” evaluations for “CMRR Delivery” and “Security Training Capabilities” were not enough to drop the overall LANS rating for the year below the “Very Good” range, resulting in a $76.15 million cash award.
Nevertheless the LANS rating was the worst in the nuclear weapons complex. The production plants were all rated “Outstanding” and the other two nuclear laboratories (Livermore and Sandia) were rated, like LANL, “Very Good,” but with higher scores.
Study Group Director Greg Mello: “A small group of site-specific and relatively specialized contractors run the nuclear weapons complex, control most of its crucial information, and hold its skills. They report directly to the President each year, certifying the reliability and operational safety of the nuclear stockpile. While on change-of-station assignments, contractor personnel study legislation and write policy. NNSA employees and congressional staff can enjoy large salary increases by switching their employment to the contractors they oversee. The site contractors make decisive political contributions and enjoy nearly unquestioned political power in the states where they operate.
“For these and other reasons, the large contractors largely run NNSA, not vice versa. Poor contractor performance is the primary reason NNSA and its predecessor Defense Programs have remained on the Government Accountability Office’s “Watch List” for waste, fraud, and abuse for 20 years. NNSA, that spends about 5% of the money directly, cannot control the other 95%, spent by the contractors, and instead writes contracts, with evaluation clauses – for example for pension fund solvency – that make it even easier for its contractors to “game the system. There is no accountability whatsoever. In fact Congress is frequently treated to the spectacle of the contractors blaming NNSA for all of their problems.
“It is therefore not surprising that NNSA grades its contractors with great leniency, as we see in this year’s evaluation at LANL. Even during the final year of the University of California’s LANL tenancy (FY 2006), UC was rated “Outstanding.” Yet NNSA chose another site contractor, incurring at least $200 million per year in added costs, including an order-of-magnitude larger fee, gross receipts taxes, and pension fund contributions.
“These contract evaluations are largely meaningless exercises. NNSA was set up to provide greater “independence” for the nuclear weapons program from the Department of Energy (DOE). A lack of ‘independence’ was never the problem. That plan has failed.
“Congress must now step in to provide the missing oversight, addressing a range of immediate and longer-term structural issues.
“Our preferred solution involves merging the nuclear weapons program back into the DOE, federalizing the nuclear weapons workforce, clarifying goals, and simplifying programs, as befits a nation faced with profound and converging crises that have nothing to do with nuclear weapons, nonproliferation, or naval reactors.”
 The Chemistry and Metallurgy Research Replacement (CMRR) project aimed to build two buildings, primarily to expand the capacity of LANL to manufacture plutonium warhead cores (“pits”). By the end of fiscal year 2011, $794 million had been expended on the project. By the end of the present fiscal year some $994 million will have spent on the project, with only the $363 million Radiological Laboratory, Utility, and Office Building (RLUOB) to show for it.
 We have requested, via the Freedom of Information Act (FOIA) and members of Congress, and we expect to receive, PERs for all the sites in the weapons complex for the past 4 years and Performance Evaluation Plans (PEPs) for FY2012, for all NNSA sites.