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Feds slash management fee for LANL contractor

This aerial view shows the central technical area of Los Alamos National Laboratory. (Courtesy of Lanl/Richard Robinson)

This aerial view shows the central technical area of Los Alamos National Laboratory. (Courtesy of Lanl/Richard Robinson)

Copyright © 2014 Albuquerque Journal

SANTA FE – The federal government has cut the annual management fee to the private contractor that runs Los Alamos National Laboratory by nearly 90 percent due to the radiation leak from a drum packed at Los Alamos that forced the shutdown of the nation’s only deep geologic repository for nuclear waste.

The fee paid by the federal government to Los Alamos National Security LLC was reduced to $6.25 million, lab Director Charles McMillan told the staff in a memo obtained by the Journal.

That compares with $59 million-plus paid to the LANS consortium, which includes Bechtel Corp. and the University of California, in the previous two years. The contractor would have been allowed to earn as much as $63.4 million under the current contract if it had met all its incentive goals.

The fee portion of LANS’s performance-based contract represents a management fee paid on top of the about $2 billion the federal government provides for cost of operations at Los Alamos.

“Given the events surrounding our breached drum at WIPP and the severity of the issue, the Laboratory received a rating of ‘unsatisfactory’ in operations and infrastructure and a score of zero in that area which accounted for the significant reduction in fee,” McMillan’s memo said.

Federal officials said the February leak from a LANL drum that shut down the Waste Isolation Pilot Plant near Carlsbad constituted a “first-degree” performance failure.

It’s expected that reopening WIPP will cost at least a half-billion dollars, and when that will happen is uncertain.

Lab Director McMillan emphasized the positive in his message to lab employees Monday.

He said the National Nuclear Safety Administration’s annual performance evaluation for the fiscal year that ended Sept. 30 found “we performed well in the areas of our core nuclear weapons work, global security and science.”

He said that “our true value as a Laboratory should be measured by the contributions we make to national security.”

The NNSA has posted LANL fee determination documents on its website. A Dec. 18 memo from NNSA Principal Deputy Administrator Madelyn Creedon says that in addition to a zero score for operations and infrastructure, the lab also failed to meet goals in science, technology and engineering, with a score in this area of 30 percent; and leadership, also with a score of 30 percent.

But Creedon’s memo still called for paying LANS $41.6 million, or 66 percent of its potential total fee.

However, in a memo dated the same day, NNSA contracting officer Robert M. Poole cut the payment to $6.25 million, reducing the payment for NNSA work to zero. He approved only funding for work for other federal government agencies, such as the Department of Defense.

“The NNSA looks forward to working with LANS to improve the accountability for safe, secure, effective, efficient, and economical performance at the laboratory in 2015,” Poole added in his letter to McMillan.

The Los Alamos contractor also wasn’t granted any contract extension, and a one-term extension earned previously is withdrawn, the NNSA documents state.

LANS won the lab contract in 2006 after the University of California had run the Los Alamos facility since the World War II Manhattan project. The contract term is through fiscal 2017.

The huge fee reduction comes on top of fines recently levied by the New Mexico Environment Department for hazardous waste violations related to the WIPP leak. LANL’s state fines totaled $36.6 million, and WIPP was hit with $17.7 million.

Jay Coghlan, of the Nuclear Watch New Mexico watchdog group, said he was stunned by the fee cut and said the lab contract should be rebid now.

“LANL lives in a little bit of a fantasy world and their own echo chamber of how great they are,” he said. “This ought to be a real wake-up call.”

McMillan, whose total compensation including benefits comes to $1.5 million annually, said the latest performance review reinforced the lab’s “stature as one of the pre-eminent scientific institutions of the nation.”

“Although this was a very tough year for the Laboratory, I am optimistic that next year will be better,” he wrote. “I am determined to do all that I can do to make it so.”