Los Alamos Science Complex

PEP Los Alamos’s conception of the proposed leased Science Complex.

Frank,
This note is in regard to the proposed Los Alamos Science Complex (LASC), a proposed $250 -$400 million (M) project planned for a 16-acre piece within TA-62, north of West Jemez Road. (Experience suggests it may be more realistic to modify this cost range to $300 to $500 M.)

Some 1,400 to 1,600 LANL workers are to be housed there.

This is to be a third-party-financed project built on government land. That is, a private developer would own the building and lease it to LANS, which would in turn bill the Department of Energy (DOE) within DOE’s operating funds for LANL.[1]

For the first time, a big hunk of LANL’s infrastructure would be owned by private real estate investors, about which more in a moment. The amount (and mission-critical quality) of space leased by LANL from private real estate interests, and DOE’s annual payments for same, would make a very big jump.

I am not sure whether it is DOE’s Office of Science, or NNSA itself, that would approve this lease – or from where exactly these funds would come each year. (Other approvals are also required.) It appears that annual lease costs would be in the general range of $28 M, the amount which would service a $400 M, 25-year mortgage at 5% interest.[2]

There would be three buildings in this complex: an office and laboratory building, a parking garage, and a secure area. A 3,332 sq. ft. office suite for the Associate Director for Science (currently, Terry Wallace) is included. There would be some 276,000 net square feet of unclassified space, 52,000 net square feet of secure space, and a parking space for everybody.

The April 11, 2008 RFP was posted here. Perhaps it still is. I don’t have it.

On or about May 6, 2008, LANS held a bidder’s conference.[3] On September 10 LANS announced its selection of Pacific Equity Partners (PEP) as the project developer.

Los Alamos National Security, LLC has selected Pacific Equity Partners Los Alamos Science Complex LLC (PEP) to develop the Los Alamos Science Complex in response to a request for proposal issued earlier this year.

LANS received a total of five bids from potential offerors to design, finance, construct, lease, and operate the proposed Science Complex -- comprised of two buildings and an adjacent parking garage at Technical Area 62 northwest -- located about a half mile west of TA-3….

"It is an honor and a privilege to be selected in a highly competitive process to build a world-class facility to advance science and technology for the United States of America," said Enrique Landa, managing partner of PEP…

Now that a developer has been selected, LANS will begin preparation of the final acquisition strategy plan for submission to NNSA. If all necessary approvals are secured, groundbreaking is projected in 2009. Construction is scheduled for completion in 2010 and researches are expected to begin moving into the new facility in 2011.

In October Terry Wallace described the LASC as “the poster child for the future of the Laboratory.”

Just last month (May 2009) LANS Director Mike Anastasio gave an upbeat assessment of LASC prospects.

“We’re well down the path on that process. We did an RFP, got bids and brought them forward for the science complex. We have support from the site office and NNSA. We’re getting really close. I can almost taste it,” he said.

Earlier this month (June 2009), we heard that Terry Wallace said he hoped to break ground on the LASC “before the end of this fiscal year.”
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Who is Enrique Landa and what is Pacific Equity Partners (PEP)? Who are their friends? How have they done business before?

(I am grateful to Darwin BondGraham for some of the following research. Remaining mistakes are mine.)

The Wall Street Journal described Landa as a

…Rancho Santa Fe, Calif., architect-turned-entrepreneur and son of a Mexico City architect. Messrs. Landa and [partner James] Simmons had put together packages of permits which they sold to construction companies to build a waste-treatment plant in Sonora state in Mexico [Agua Clara, LLC], and to upgrade treatment at a Mexico City plant.

Landa was also involved with a Tijuana maquiladora development, El Florido, and a golf course development in Maui. (See “Smelling money in sewage: Area firm hopes to sign no-bid deal with U.S. agency to treat Tijuana region's polluted water, then recycle it,” Mike Lee and Terry Rodgers, San Diego Union Tribune, November 13, 2005.)

Landa and Simmons created “Bajagua” out of Agua Clara, later adding partner Irwin Heller (a Boston lawyer, about which more below). Bajagua’s basic idea was to get the U.S. government to pay for building and operating a sewage treatment plant and associated conveyance infrastructure in Tijuana in order to prevent Tijuana sewage from polluting the ocean, especially after big rains.

There were no other bidders, in fact no bid at all. Creating that monopoly situation took a lot of money and influence applied in the right places over several years.

They paid to play.

Bajagua had major conceptual and engineering problems, such as failure to address a root cause of the sewage problem – lack of household plumbing in Tijuana.

In 2006 Nick Schwellenbach, then at the Project on Government Oversight (POGO), wrote a very good, in-depth review of Bajagua’s business methods, basically a sophisticated, broad-scale application of textbook techniques for corrupting government contracting.[4]

Landa and his colleagues were eventually stopped in California, just about the time they “won” the bid for the LASC. Bajagua cost Tijuana and San Diego years in the fight for clean water, however, because Bajagua-supported politicians held back all other more feasible options as favors to Landa, Simmons, Heller, and their friends.

The Wall Street Journal dissed Bajagua on January 29, 2007 (“Smell Test: How Politics Influenced A Big Clean-Up Deal", by Scot Paltrow). The WSJ didn’t pull punches: “Bajagua's tale shows how plans for federal public-works projects could be diverted by a small group of lawmakers, who were able to push contracts toward big campaign contributors.”

Paltrow says Bajagua

grew out of a partnership in the 1990s between James D. Simmons, a former San Marcos, Calif., city councilman who runs a consulting business, and Enrique Landa, a Rancho Santa Fe, Calif., architect-turned-entrepreneur and son of a Mexico City architect. Messrs. Landa and Simmons had put together packages of permits which they sold to construction companies to build a waste-treatment plant in Sonora state in Mexico, and to upgrade treatment at a Mexico City plant.

He describes Bajagua’s plumbing – expensive to build and to operate – like this:

Under Bajagua's plan to build a plant in Tijuana, 25 million gallons a day of raw sewage would continue to flow to the San Ysidro plant on the U.S. side where, as now, it would be treated only to primary standards. Then new pumps and pipes would send it back uphill into Mexico to the new Bajagua plant.

After treating the sewage there, Bajagua would send it downhill again, through yet another set of new channels, where it would cross the border a third time, to San Ysidro. Then it would be shunted into the ocean through the existing pipe. Eventually, the Bajagua plant would also treat an additional 34 million gallons of sewage directly from Tijuana, to be sent across the border to the ocean pipe.

Sewage was to be just the beginning. Bajagua’s really big profit center was apparently going to be a by-product of U.S. taxpayer investments, at least in part: drinking water, a scarce substance in Baja California.

By leveraging a U.S. government-funded wastewater treatment system pegged for Tijuana, developer Enrique Landa and consultant Jim Simmons aim to become the kingpins of recycled water in the parched state of Baja California.

(In a separate project, Landa also was and may still be pushing a desalinization project in southern California called “Nevagua.”)

The Bajagua scheme was apparently going nowhere until Landa and his associate James Smith traveled to Roswell, N.M., on October of 2002 to meet with Vice President Cheney and Republican contributor George Yates at a fundraiser.

In the years following this meeting, Bajagua spent over half a million dollars lobbying. They also discovered the civic benefits of repeated, large campaign contributions in key places.

One wonders what connections were made and what business opportunities later came to light among those who gathered at that Roswell fundraiser. When did the subject of the Los Alamos Science Complex come up? At that time or later, and with whom?
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PEP LASC’s incorporation file on the NM Sec. of State website lists three entities as limited liability partners: Pacific Equity Partners, LLC; Endol, LLC; and Enrique Landa.[5]

In addition to the for-profit PEP Los Alamos Science Complex LLC (PEP LASC), Landa has also created a nonprofit called the "PEP Los Alamos Fund.” (See also http://www.nmprc.state.nm.us/cgi-bin/prcdtl.cgi?4120929+PEP+LOS+ALAMOS+FUND). Nonprofits need not disclose donors. Under some conditions they can lobby. Visiting the executive branch isn’t even “lobbying” as the Internal Revenue Service uses the term in connection with nonprofits. What, exactly, are the purposes of this organization? Who are its funders if any?

The PEP Los Alamos Fund has Irwin Heller as a director, a Bajagua investor. Heller, we saw, is a Massachusetts lawyer, lobbyist – and a trustee of Tufts University (which is important, see below).

Like other Bajagua partners, Heller made maximum campaign contributions to several CA Reps. at opportune moments when Bajagua's no-bid contract was coming up for vote in the House.

He has also been giving money to NM politicians (Bingaman and Richardson) as well as to others, e.g. Sen. Murkowski (R-AK, Senate Energy and Water Committee) and Rep. Visclosky (D-IN, House Appropriations Subcommittee on Energy and Water Development).

He supported Richardson's presidential campaign. See http://www.campaignmoney.com/political/contributions/irwin-heller.asp?cycle=00: In fact Heller, then chair of the Tufts presidential search committee, once summoned then-DOE Secretary to his Boston law office, according to the Tufts Daily (“Sec. Richardson considered for presidential spot”).

Another thread is lobbyist David Godfrey, who has represented PEP LASC. His client list makes interesting reading, but perhaps the picture is already getting clear.
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I have quite a few questions about this complex, but this post is too long already. Some questions may have already occurred to you.

One question is however too important not to mention: why are Landa, Heller, and Co. in New Mexico and at Los Alamos? I believe we can be very sure they would not be involved in this project without the strong likelihood of monopoly rents.

How far might this particular concept – “rents,” in the expansive sense of the term – go, and where might it go? I think far, but I don’t know where.

I am personally of the view there is more to this than just three buildings. Merely winning bids to provide buildings is not what these folks have been about.

Good luck,
Greg Mello

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[1] NNSA’s contracts consume about 96% of its resources (See Competition - or Collusion? Privatization and Crony Capitalism in the Nuclear Weapons Complex: Some Questions from New Mexico (pdf) May 30, 2006). There is thus little fiscal space for further privatization of prime NNSA contracts. Overall business growth in NNSA services must occur either by growth of NNSA itself or by adding new layers of privatization, either “below” the ordinary prime contract (as we see in the case of the proposed LASC), or “above” it, as we see in the so-called “gorilla” weapons complex “integration” effort, where NNSA would basically pay a contractor to do what NNSA does now. In both cases overall business growth occurs by creating a market for goods and services not needed by NNSA before and in both cases agency and control pass from government and into private hands. (pdf) May 30, 2006). There is thus little fiscal space for further privatization of prime NNSA contracts, so overall business growth in NNSA services must occur either by growth of NNSA itself or by adding new layers of privatization, either “below” the ordinary prime contract (as we see in the case of the proposed LASC), or “above” it, as we see in the so-called “gorilla” weapons complex “integration” effort, where NNSA would basically pay a contractor to do what NNSA does now. In both cases overall business growth occurs by creating a market for goods and services not needed by NNSA before and in both cases agency and control pass from government and into private hands. The new “market” consists of new forms of overhead.

[2] DOE’s FY2010 request for LANL Office of Science activities is $68.1 M, a decrease from this year’s $74.4 M. If DOE’s Science account is going to pay for very much of this lease a significant costs must be shifted to it, or decreased somewhere else in the account by some means. An annual lease of $28 M is equal to the cost of about 180 LANL employees, fully burdened.

[3] “Lab makes another bid for new science complex,” Roger Snodgrass, Los Alamos Monitor, 5/4/08 or 5/5/08. This article is not available in the Monitor’s web archives.

[4] If you don’t want to read Schwellenbach’s extensive research article, RAW STORY provided the gist: “Whistleblowers allege influence peddling by members of Congress, VP in Mexico wastewater project,” by Miriam Raftery and Larisa Alexandrovna.

[5] We have not attempted to fully tease apart these companies and their partners.