For immediate release March 9, 2023

Warhead agency grades its contractors "very good" to "excellent," as schedules slide and cost overruns mount

Contact: Greg Mello, 505-265-1200 office, 505-577-8563 cell

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Albuquerque, NM -- This morning the National Nuclear Security Administration (NNSA) -- the semi-autonomous part of the Department of Energy (DOE) which designs and produces U.S. nuclear warheads -- released redacted versions of its fiscal year 2022 (FY22) performance evaluation reports (PERs) for its management and operating (M&O) contractors.

The Study Group and no doubt others had requested these documents under the Freedom of Information Act (FOIA).

NNSA is the most privatized agency in the U.S. government, with only 3% of its budget expended directly by the federal government (p. 7). Most of the rest is spent by NNSA's seven M&O contractors, which operate 3 laboratories, 4 production facilities (2 under the same contract), and a testing site. M&O contractors have no capital at risk and are paid a combination of fixed and "at risk" fees, the amount of the latter depending -- theoretically at least -- on performance.

Accompanying the PERs were NNSA's "fee determination letters," which tally how many millions of dollars each contractor received over and above expenses at each site.

This year, NNSA's seven M&O contractors received anywhere from 85.7% (Consolidated Nuclear Security, for operating Pantex and Y-12) to 91.2% (Lawrence Livermore National Security) of their respective "at risk" fees, a tight 5.5% spread.

Total fee awards ranged from $25.5 million (M) at the Nevada National Security Site (NNSS) to a whopping $69.8 M at Lawrence Livermore National Laboratory (LLNL).

Triad National Security, which manages Los Alamos National Laboratory (LANL), received 87% of its at-risk fee (the second-lowest) and $47.1 M overall. Study Group director Greg Mello:

"NNSA's grading criteria are often quite vague, and they are lax. The tone of these evaluations often verges on fawning, apparently to offset the bad news sprinkled in, only some of which is visible due to redactions.

"The vagueness of these evaluations is partly because much of the work is only loosely associated with any definite deliverable or tangible mission.

"Major NNSA programs could be on the verge of failure, for all that any reader of these evaluations would know. Some are.

"The many redactions in these evaluations decrease accountability. We believe they are illegal. We are in FOIA litigation now and expect the excessive redaction issue to be argued soon.

"One can tell from these documents alone that NNSA's contractors have captured their government paymasters. This is broadly true for the 97%-privatized NNSA, as White House staff wrote in 2016. [See: "Structural Features Making NNSA an Unusual Federal Agency," memo for VP Biden, 2016].

"Unfortunately, congressional oversight barely exists now, for a variety of reasons.

"Oddly, all these contractors are performing at the "Very Good" to "Excellent" level in every one of their contract goals, yet NNSA remains at "high risk" for waste, fraud and abuse for its largest projects, according to the Government Accountability Office (GAO).

For example, a crucial part of LANL's largest project, preparations to produce high-quality plutonium warhead cores, recently fell about four years behind schedule ("Installation of "Base" Capability to Produce 30 Plutonium Warhead Cores ("Pits") at Los Alamos To Be Delayed 4 Years, to 2030," Feb 3, 2023). Yet LANL still scored a "Very Good" 90% in its nuclear weapons work for NNSA last year. According to this evaluation, the LANL contractor did not even have a master schedule for its pit production work (p. 12). "The scope of work that can be accomplished within the [plutonium] facility does not consistently and broadly exist. Analysis does not currently account for transportation, shipping, personnel access, measurement and material flow [redacted]."

As of last month, NNSA had not yet been able to remedy LANL's lack of schedule clarity, according to NNSA Administrator Jill Hruby (54:28 to 56:19).

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