Nonprofit group wins LANL contract

By Mark Oswald / Journal Staff Writer
Published: Friday, June 8th, 2018 at 10:23am Updated: Friday, June 8th, 2018 at 10:41pm

Copyright © 2018 Albuquerque Journal

SANTA FE – A group that includes the University of California and Texas A&M University will be the new manager of Los Alamos National Laboratory, under a contract worth $25 billion over a decade.

The Department of Energy’s National Nuclear Security Administration announced Friday that it has awarded Triad National Security LLC the management and operating contract for the lab.

Department of Energy Secretary Rick Perry, the former Texas governor and presidential candidate, is a graduate of Texas A&M, whose regents include Perry donors and his personal attorney.

His alma mater is one of three partners in Triad, along with UC and the Ohio-based nonprofit Battelle Memorial Institute, a giant in scientific research and development that already is involved in management of several other national labs.

Perry “played no role in the evaluation or selection of the successful offer” for the LANL job, NNSA spokeswoman Lindsey Geisler said in an emailed statement. Perry famously listed the DOE, the agency he now heads, as one the federal agencies he wanted to get rid of during his unsuccessful 2016 presidential campaign.

The contract award comes as the Los Alamos lab has faced scrutiny and controversy over safety lapses, including improperly packing a drum of radioactive waste that burst in 2014 at the Waste Isolation Pilot Plant in Carlsbad. The resulting contamination shut down the nation’s only nuclear waste repository and cost LANL dozens of millions of dollars in fee reductions and a settlement with state government.

But the WIPP accident and other miscues didn’t keep the DOE from sticking with the University of California, which has had a role in running the lab since its creation as the Manhattan Project to develop the first atomic bombs during World War II.

“The contract awarded to Triad National Security LLC presented the best value to the government when all factors were considered, and will provide future stability for a period of 10 years if all options are exercised,” said a news release from the Energy Department and the NNSA, which oversees the national labs.

A spokesman for Texas A&M confirmed that Triad National Security, like its three member entities, is a nonprofit.

That status raises the question of whether under Triad the Los Alamos lab will pay New Mexico gross receipts taxes – a multimillion-dollar issue for state and local governments that receive GRT revenue. GRT does not apply to nonprofits under New Mexico’s tax code.

LANL’s current managing contractor is a private, for-profit consortium that includes UC, the Bechtel Corp. and two other companies. It has been paying gross receipts taxes – similar to sales taxes – since taking over the lab in 2006. Los Alamos National Security LLC, or LANS, paid $77 million in gross receipts taxes in 2015.

Earlier this year, with the possibility that a public university or other nonprofit could take over LANL, the Legislature passed a bill that would apply GRT to any nonprofit in charge of the lab. Gov. Susana Martinez vetoed the measure.

In her veto message, the governor acknowledged potential revenue loss as a concern, but said the loss “will be less than what it is claimed to be; if the prime contractor (at LANL) is a nonprofit, then the subcontractors become taxable.”

She also called the bill “yet another piecemeal attempt at tax reform” instead of the comprehensive reform package she wanted. The Governor’s Office had no additional comment Friday.

The DOE/NNSA announcement Friday said that Triad will get “support” in running the lab from Fluor Federal Services, Huntington Ingalls Industries/Stoller Newport News, Longenecker & Associates, TechSource, Strategic Management Solutions and Merrick & Company.

The NNSA never disclosed a list of bidders after putting out the LANL contract last year. Other publicly disclosed competitors included a partnership between Bechtel and Purdue University and a group including the University of Texas and Boeing.

The contract includes a five-year base with five one-year options, for a total of 10 years if all options are exercised. The estimated value of the contract is $2.5 billion annually.

Other bidders can protest the award to Triad. Battelle, UC and Texas A&M already are part of the management group at Lawrence Livermore National Laboratory in Northern California.

Terry Wallace, current director of LANL, said in a statement: “We are committed to working with the new management team to ensure a transition that is as seamless as possible. While the contract change will bring in a new team of parent companies, the laboratory’s mission remains the same: to serve the nation in the tradition of excellence that has defined Los Alamos for the last 75 years.”

Lab critic Greg Mello of Albuquerque-based Los Alamos Study group said of the contract award, “Unwarranted influence is being signaled by the retention of the University of California in the new management contract. Why should UC emerge unscathed, after all the mismanagement it has brought? The answer is political: Keeping UC is vital to maintaining political support in California.”

Jay Coghlan of Nuclear Watch New Mexico said UC “basically ditched Bechtel and went with a safe bet” with new partners after the safety lapses of the past several years.

UC’s tenure

Current contractor LANS has been running the lab since 2006, after the federal government took bids on LANL’s contract for the first time after UC’s six-decade tenure running the lab by itself. The contract was bid after scandals over a property embezzlement scheme and missing materials that held classified information.

In 2015, DOE decided to rebid the contract after LANS received inadequate performance reviews in recent years, particularly after the costly accident at WIPP.

Lisa E. Gordon-Hagerty, Department of Energy undersecretary for nuclear security and NNSA administrator, said in Friday’s news release about the new contract award, “The lab will continue to be a critical resource to ensure the future safety and security of the United States as we begin work on new endeavors, like the effort to recapitalize our plutonium pit mission (to make cores of nuclear weapons). I’m confident that Los Alamos’ world-class workforce will continue to answer the Nation’s call under (Triad’s) direction.”

The current contract held by LANS expires on Sept. 30 but will be extended to allow for a four-month transition period, Friday’s news release said.

Triad said in its own statement that it was “honored” by the contract award. “We are committed to building on the legacy of world-class research, unparalleled innovation, and service to public good that have been the hallmark of the laboratory since it was founded in 1943,” the statement said.

Battelle, which grew from the estate of a steel magnate, is known for several practical science innovations, including xerography, the compact disc, the computer bar code and car cruise control. It has long been involved in nuclear weapons programs, dating to uranium work during the Manhattan Project.

It gave up its tax-exempt status years go while under attack from Ohio state officials and the IRS but regained it in 2001. In 2008, the DOE recommended a $288,750 fine against Battelle for nuclear safety violations at the Pacific Northwest National Laboratory in Richland, Wash.

Reaction in New Mexico

U.S. Sens. Tom Udall and Martin Heinrich and Rep. Ben Ray Luján, all D-N.M., issued a statement Friday that said: “As we have stated throughout this process, our paramount concern for the management and operation of LANL is assuring the stability of the high quality workforce, including the safety and health of the employees – and the public – while ensuring the lab meets its crucial national security missions.

“We congratulate the Triad National Security team on its selection, and we look forward to working together with the new lab leadership to meet our shared goals of LANL’s success, which includes serving a positive role in northern New Mexico communities. We welcome their commitment to increase contracts with small businesses and hope to see that benefit New Mexico businesses.”