New LANL Contractor Earns $58 Million Fee

By Raam Wong, Albuquerque Journal Staff Writer

Federal officials have determined that the contractor that now runs Los Alamos National Laboratory should be awarded a $58 million fee for its first year on the job.

The total includes a fixed $22 million management fee as well as a $36 million performance fee for meeting most— but not all— of its objectives for fiscal year 2007.

The lab manager, Los Alamos National Security, was eligible for more than $51 million in performance fees if it met all of the objectives in its contract for the fiscal year that spanned from October 2006 through September 2007.

The payouts were described in a 2007 Performance Evaluation Report. The National Nuclear Security Administration's report is the first such evaluation of the contractor since it took over in 2006.

"LANS has made some inroads to improve laboratory operations during FY07, while maintaining outstanding performance in NNSA's core mission areas," states the report, obtained by the Journal on Tuesday following a Freedom of Information Act request.

The U.S. Department of Energy responded to several embarrassing security and fiscal problems at the lab by announcing in 2003 that LANL's management contract would be up for bid.

LANS, a consortium of industrial and academic partners, won the contract and took over lab management in June 2006.

The contract awards LANS for meeting 170 milestones in 13 different areas, ranging from weapons programs to safety and health.

LANS received the highest marks and the biggest fees in the areas of weapons program execution, weapons quality assurance, threat reduction and support of operations across the nuclear weapons complex.

Among the places where LANS fell short was in the accurate reporting of injury rates. The report states that an NNSA audit found misclassification of injury cases, resulting in the under-reporting of certain injury rates. Overall, though, the report found safety and health improvements at the lab and a drop in injuries.

In another area, LANS' own self-assessment stated that it had successfully reduced the lab's facilities by 400,000 square feet. But NNSA officials had "serious questions about the validity" of that claim after they toured one of those facilities, an administration building, that accounted for about half of the closed square footage.

Additionally, the report found that in vacating some of the facilities the lab had abandoned some valuable equipment, such as telephones and a vertical drill press, and items with "potential security issues," such as diskettes and crypto cards.

Personnel was another concern. The report states that LANS brought in an "impressive set of players," who for the most part "aggressively set about integrating the laboratory and setting in motion culture change in security, safety, and business."

But only six months after the change in management, deputy director John Mitchell retired with only one month's notice, while "one of the key personnel individually led to the degradation of an already fragile relationship with state regulators."

LANS had a rocky start with state regulators. Andy Phelps, the former associate director for environmental programs, butted heads with the state Environment Department, while the agency repeatedly fined the lab for violations of a cleanup agreement.

"Building a solid working relationship with the regulators needs continued focused attention," the report states.