Tri-Valley CAREs – 2013-03-13 01:42:02

Special to EAW

$44 Million Bonus and Contract Extension Unwarranted, Charge Watchdogs

(March 7, 2013) — As the nation faces sequestration and across the board budget cuts, one federal official has made “an adjustment to the recommended incentive fee” for the Limited Liability Company (LLC) that manages and operates the Lawrence Livermore National Laboratory for the US Dept. of Energy National Nuclear Security Administration (NNSA). The contractor, Lawrence Livermore National Security (LLNS), LLC, is a consortium made up of Bechtel National, the University of California, Babcock and Wilcox, the Washington Division of URS Corp. and Battelle.

The just-released NNSA Fiscal Year 2012 Performance Evaluation Report (PER) shows that the numbers were cooked to benefit the management contractor after the evaluation had been completed, allowing for an increased fee award and an extra year, non-competitive extension of the contract for the LLC. Nuclear watchdogs, including the Livermore-based Tri-Valley CAREs, are crying foul and calling for “greater oversight of taxpayers’ money and a more open and transparent contract process.”

According to Marylia Kelley, Tri-Valley CAREs’ Executive Director, “The Performance Evaluation Report clearly states that Livermore Lab management failed to reach the percentage necessary to reap the awards that were bestowed.” Kelley further characterized the contract extension and extra money as “inappropriate, if not technically illegal.”

The report states that the “Gateway to Award Term” requires a minimum score of “80% earned incentive fee.” The Livermore Lab management’s score is listed as “Fail (78%).” Therefore, the “contractor failed to qualify for an additional year of term [i.e., contract extension],” according to the PER.

The report contains an addendum that states in full: “It is noted that subsequent to the [internal] issuance of the PER that the NNSA FDO [Fee Determining Official] exercised her authority on December 5, 2012, making an adjustment to the recommended incentive fee, which resulted in the Contractor earning the award term.”

The one-paragraph addendum does not provide a rationale for the “adjustment,” nor does it disclose in which management performance category the bump up was bestowed. The Fee Determining Official in question is Ms. Neile Miller, the then-NNSA Deputy Administrator who has since been named as the agency’s acting Administrator.

The monetary award to the Livermore Lab management LLC is listed in a PER Summary document as $44 million out of a total possible fee of $50 million. This financial award is based on the LLNS, LLC achieving a score of 88% (a full ten percent higher than the actual score the contractor earned as documented in the PER).

Tri-Valley CAREs’ Staff Attorney, Scott Yundt, noted that the performance evaluation process “skews toward excessively high ratings, even without the FDO in Washington, DC cooking the numbers after the fact.” First, the management contractor performs its own evaluation.

Taking the contractor self-evaluation into account, the NNSA Livermore Site Office then produces its ratings in the Performance Evaluation Report, in this case giving Livermore Lab management the key “Gateway to Award Term” percentage of 78%, or “Fail”.

The 39-page Livermore Lab PER is rife with examples of management failures and potentially illegal practices. For example, the report notes “Office of Emergency Response issues” in which NNSA funding was given for one project at Livermore Lab but management chose to spend it on something else. “Funding… was used to perform work not within the project scope, which has caused delays in the projected completion date and aspects of the work to be reallocated to other laboratories,” states the PER.

The PER glosses over the failure to reach ignition at Livermore Lab’s biggest project, the National Ignition Facility. Yet, it did charge the LLNL, LLC with “a failure of institutional leadership,” and stated that scientific “discrepancies were left unresolved well after they became apparent to the Contractor.”

The report also noted “the transition to a [legally] compliant overhead rate structure” at the NIF. However, the report touts the “execution and completion of the National Ignition Campaign and a very good job transitioning NIF to routine facility operations.” Thus, the NIF’s over budget price tag and abject failure to achieve ignition resulted in a mere $1.3 million reduction in the maximum available award fee.

Yundt said, “Tri-Valley CAREs first broke the story of the illegal shifting of overhead costs from NIF to other projects at Livermore Lab in late 2009. While we applaud that this noncompliant practice is finally coming to an end, it is outrageous to think that it has taken more than three years to accomplish this change. Nor should finally coming into minimal compliance with the law be grounds for awarding millions of dollars in management fees and a contract extension.”

Kelley concluded, “It would be more appropriate for the contractor to repay the taxpayers for some of the $7 billion squandered on NIF rather than give any bonus whatsoever to the contractor for mismanaging it so egregiously over the years.”

Tri-Valley CAREs is joined in its critique of the PER process by Nuclear Watch New Mexico, a Los Alamos Lab watchdog that sued to obtain last year’s Performance Evaluation Reports. Nuclear Watch’s press release, also issued today, highlights that Ms. Miller likewise overrode the PER score earned by the Los Alamos management team to inappropriately offer them an unearned contract extension.

Both Tri-Valley CAREs and Nuclear Watch call on Congress to investigate the process leading to the FDO overrides and institute new provisions to increase transparency and accountability.

“Waivers and bump ups that result in additional fee awards and contract extensions must fully justified and documented in writing,” stated attorney Yundt. “A scant paragraph with zero rationale or analysis should not be the grounds on which management of the nation’s nuclear weapons labs is based,” he concluded.

The Livermore PER is at www.trivalleycares.org; the Los Alamos PER is at www.nuclearwatch.org
Marylia Kelley
Executive Director,

Tri-Valley CAREs
2582 Old First Street,
Livermore, CA 94550
Email: marylia@trivalleycares, or marylia@earthlink.net
Web: www.trivalleycares.org
Phone: (925) 443-7148

For further information, Marylia Kelley, Executive Director, or Scott Yundt, Staff Attorney, Tri-Valley CAREs, 925.443.7148