Copyright © 2016 Albuquerque Journal
WASHINGTON – Competition for Sandia National Laboratories’ multibillion-dollar management contract is about to move into high gear.
The National Nuclear Security Administration is expected to issue its final request for proposals to run the sprawling nuclear weapons and research lab in Albuquerque any day now, and corporate and institutional jostling for the $2.9 billion management contract is likely to be fierce.
Defense contracting giant Lockheed Martin has operated the Albuquerque-based weapons and research lab for the past two decades and has signaled that it wants to retain the contract.
But the lucrative deal is open to competitors for the first time in years.
The Department of Energy first announced in 2011 that it planned to open the contract to new bidders but then granted a series of extensions.
And in 2014, the NNSA extended the agreement again as it engaged in a wide-ranging review of the management of its three defense labs, including Sandia and Los Alamos national laboratories. The other is Lawrence Livermore, in California.
A new Sandia contract must be in place by April 2017 under the current schedule. The NNSA issued a draft request for proposals in March that offered some clues as to what kind of management arrangement it seeks for the lab, and the secretive agency has signaled that release of the final request would likely occur this month.
NNSA officials declined to comment publicly about the bid process, saying that could compromise the integrity of the competition. Sandia spokesman Jim Danneskiold also declined to discuss the bidding but told the Journal that Sandia is well-positioned to continue its high-tech work no matter which organization is managing it.
“While any potential change causes concern, we believe the competition won’t have a disruptive effect on Sandia’s delivery of technical solutions to the nation,” Danneskiold said in a statement. “Sandia continues to receive outstanding ratings from the (NNSA) for its overall performance on its national security mission, and maintains strong relationships with its customers and partners. Sandia’s workforce receives regular updates on the contract completion and understands the importance of maintaining focus on their vital work.”
The NNSA’s most recent annual review of Sandia performance under Lockheed Martin, completed in 2014, rated Sandia as “very good” at managing its nuclear weapons mission and at performing its broader national security mission. The lab was rated “excellent” at science, technology and engineering. Lockheed Martin is considered the front-runner for the new contract, but a controversy that came to light two years ago could give federal officials pause.
The 2015 evaluation hasn’t been released, and the NNSA has not offered an explanation. The ratings usually are posted in January. Also still not released are the 2015 “fee determination” letters, setting out how much of a performance-based “award fee” Sandia would get on top of its contract amount.
The controversy involved a 2014 report by the Department of Energy’s Office of Inspector General that concluded Lockheed Martin wrongfully used federal funds provided to Sandia for lab operations to lobby for the no-bid contract extension it received several years ago. Sandia Corp. and its parent company, Lockheed Martin, paid the federal government a $4.8 million fine for using tax dollars to lobby Congress and federal agencies for renewal of its then-$2.4 billion Sandia contract with the Department of Energy in violation of federal law.
A 2013 inspector general’s report alleged Sandia had inappropriately paid former Rep. Heather Wilson, R-N.M., about $226,000 in consulting fees, beginning in January 2009, to lobby for Sandia to take on new assignments for the federal government. Sandia and Wilson have said no prohibited lobbying occurred.
However, Sandia reimbursed the government more than $226,000 for fees paid to the consulting company run by Wilson, who was not mentioned in the settlement agreement between the Justice Department and Sandia Corp.
In a statement provided to the Journal, Lockheed Martin signaled it would seek to retain its management of Sandia.
“We are reviewing the draft request for proposals now, and as with any proposal opportunity, we’ll make a final decision on bidding after we’ve received and completed a thorough review of the final RFP documents,” Lockheed Martin spokeswoman Jill Krugman told the Journal in a statement. “We previously expressed our interest in bidding to NNSA in response to their request for information in 2015. We’re proud of our long-standing partnership with Sandia and our support of its vital national security mission.”
For years, Albuquerque community leaders have speculated about a partnership that might pair a corporate manager such as Lockheed Martin with the University of New Mexico to run Sandia, much as Bechtel and the University of California manage Los Alamos National Laboratory in northern New Mexico.
But UNM officials offered no information about such a proposal.
“The University of New Mexico has a long history of collaboration with Sandia National Laboratories and is fortunate to have such a prestigious research lab right in our backyard,” UNM spokeswoman Dianne Anderson told the Journal in a statement. “We have enjoyed a strong working relationship with the lab and its researchers for decades. UNM is looking at the possibilities surrounding this rebid but has no definitive plans that can be discussed at this point.”
With headquarters at Kirtland Air Force Base, Sandia is one of the Albuquerque area’s largest employers, with more than 10,500 people on its current payroll and an annual budget of $2.9 billion. Sandia’s primary task is research, development and maintenance of U.S. nuclear weapons, but in the past decade its workload has broadened to include a range of other missions, including a growing amount of work for the Department of Defense and U.S. intelligence agencies.
Tyler Przybylek, a former chief counsel to the National Nuclear Security Administration during the administration of President George W. Bush, told the Journal that although the dollar figure attached to the Sandia management contract is immense, most staff and day-to-day operations are likely to be largely unaffected even if Lockheed Martin loses the contract to another bidder.
“In a change-out at Los Alamos, 22 key persons came in with the new contractors, and at Lawrence Livermore in California, it was a little less,” Przybylek said. “Sandia has in the low teens of key (management) personnel. Whoever wins the competition is not going to bring in hundreds of key people unless they need some kind of surge capacity.”
For most of the history of the nuclear weapons program, the labs were managed by entities that did the job for little money as a national service – the University of California in the case of Los Alamos and Lawrence Livermore labs and AT&T in the case of Sandia. The 1993 bidding competition for the Sandia management contract, won by Martin Marietta, which later became Lockheed Martin, marked the first step toward a more privatized model.
That move accelerated in the 2000s, when teams led by industrial giant Bechtel and the University of California won both the Los Alamos and Livermore contracts, with higher management fees and financial incentive packages as part of the bargain.
The operating contract for Los Alamos National Laboratory is also going out for bids in the near future. Current contractor Los Alamos National Security LLC is losing the contract because performance evaluations in recent years did not meet benchmarks for extensions. The new contract will begin in the fiscal year that begins in October 2018.
U.S. Rep. Michelle Lujan Grisham, a Democrat who represents Albuquerque, has been pressing for assurances that Lockheed Martin – or whoever the next Sandia manager is – will try to do more business with the local community.
“I think that Sandia has a huge opportunity to have a much greater impact,” Lujan Grisham said in a Journal interview. “Under their current contractual efforts and obligations, they do some small-business support … but it’s still not producing growth in economic industries related to the lab’s work in general, which is science and engineering. I really want this to be an opportunity to push that effort and put it in the management contract so they have a goal to reach.”
Lujan Grisham said she would consider legislative action if her concerns aren’t addressed in the final Sandia request for proposal or eventual management contract.
“If we don’t get the kinds of things that we think give the contractor the flexibility and the incentive to achieve that, then it is something I would work to get amended in any appropriate legislative vehicle,” the congresswoman said.
Democrats in New Mexico’s congressional delegation recently wrote to NNSA Administrator Frank G. Klotz urging him to “strongly consider the benefits of using New Mexico local businesses, and focusing on staff recruitment and retention, as it considers the next manager” of Sandia.
The lawmakers asked for “careful consideration” of five key areas in the development of the final RFP, including workforce recruitment and retention, local small-business procurement, tech transfer (moving government-funded technology to the private marketplace), regional university partnerships, and science, technology, engineering, math education.
Jay Coghlan, executive director of Nuclear Watch New Mexico, a nuclear weapons watchdog group, told the Journal the expectation that significant private-sector job growth can result from any new Sandia contract is naïve, especially given that the lab has been a part of the Albuquerque community for decades and the city’s economy is still sputtering.
“The lab does create jobs, of that there is no dispute, but there is a lot of economic propaganda that it has this multiplying effect,” Coghlan said. “I just don’t think it’s true.”
Coghlan also said although Sandia is “clearly better-run” than Los Alamos or Lawrence Livermore National Laboratory in California, he would prefer that Lockheed Martin be barred from receiving a Sandia contract.
“In my view, Lockheed Martin should be barred from competing because of its clearly illegal lobbying practices,” Coghlan said.