For immediate release February 10, 2022

Nuclear Agency releases 2021 contractor evaluations for LANL and other sites

Through the public relations smokescreen, significant problems are visible, signaling trouble ahead for LANL warhead "pit" production.

Contact: Greg Mello, 505-265-1200 office, 505-577-8563 cell

Permalink * Prior press releases

Albuquerque, NM -- The National Nuclear Security Administration (NNSA) today released short summaries of its fiscal year (FY) 2021 evaluations of the management and operating (M&O) contracts at its eight nuclear warhead design, testing, and production sites, the "Performance Evaluation Summaries" (PESs).

These current and prior-year evaluations can be found here.

Of note, since FY2019 NNSA's more detailed "Performance Evaluation Reports" (PERs) and its formal Fee Determination Letters establishing contract award fees and contract extensions have not been released absent Freedom of Information Act (FOIA) requests, and even then only in redacted form. This is apparently done to protect contractor interests, as for example in its FY2019 PER and Letter regarding management at Los Alamos National Laboratory (LANL), in which embarrassing material relevant to public policy decisions were deleted prior to public release.

In FY21, over 97% of NNSA's work was conducted by contractors (electronic p. 7). The book value of NNSA M&O contracts for nuclear warheads can easily exceed $20 billion (B) or even much more, making these M&O contracts among the largest let by the federal government and a bankable source of guaranteed cash for the contracting parties.

As a 2016 White House document prepared for Vice President Biden explains, NNSA's contractors have "captured the government." "In most agencies, the Feds manage the contractors; in NNSA, the contractors manage the Feds." For a variety of widely-understood reasons NNSA simply does not have sufficient power to properly oversee and manage its M&O contractors, especially the three nuclear warhead laboratories.

All eight sites are managed under the World-War-II-era "government-owned, contractor-operated" (GOCO) system, in which the contractors have little or no capital invested and assume essentially no financial risk. There are never any net penalties for non-performance. The only question is how much profit ("fee") will be allowed and whether these lucrative contracts will be extended into additional years after the base contract years have ended.

The total fee award often includes a large "fixed" fee which is awarded regardless of performance, plus an "at risk" fee adjusted in accordance with performance, as evaluated by NNSA.

In FY2021, NNSA awarded "at risk" fees in a relatively narrow percentage range, from a low of 86% (to Consolidated Nuclear Security, CNS, which operates the Y-12 and Pantex production plants in TN and TX, respectively) to a high of 95% (to Savannah River Nuclear Solutions, which manages NNSA's operations at the Savannah River Site, SRS, in SC).

Triad National Security, which manages LANL, received 87.3% of its at-risk fee for FY2021, near (but not at) the bottom of the pack. Including fixed fee, Triad received 93.3% or $46.7 million (M) of a possible $50.0 M management fee, despite the significant challenges briefly mentioned in NNSA's PES. Within this sum, Triad received $23.9M in fixed fee for FY2021.

Study Group director Greg Mello:

NNSA's abbreviated, opaque contractor evaluations provide only the smallest window into NNSA's highly-privatized operations. Even so they can be instructive.

Considering just the Triad evaluation, the list of "accomplishments" -- largely presented to make NNSA and Triad look good in the busy, distracted eyes of Congress and the public -- is padded with empty fluff. Some are darkly humorous, such as the "accomplishment" of cleaning up the serious cesium-137 contamination LANL's own lax management caused in Seattle.

Another unsettling entry is the "Sustainability Champion" award DOE gave Triad for its efforts in meeting "energy and water sustainability goals (absent of funding)." As noted a year ago, Triad's misnamed FY2021 "Site Sustainability Plan" revealed that Triad greatly exceeds, and has no plan to meet, DOE sustainability guidelines in virtually every category.

In another case, what does it mean that Triad "[e]ffectively responded to new administration evolving agenda, (ex) LANL is leading the 'Intermountain West Energy Sustainability & Transitions (I-West) initiative"? This apparently includes selling DOE's hydrogen agenda, which lacks any coherent scientific and engineering basis.

We could run down the entire list of vague "accomplishments" at LANL and ask, "What do any of these really mean?" Most of them refer to purely bureaucratic "accomplishments." Go ahead, read them, they are hollow in the extreme.

What does an evaluation that includes patently false information and pure bureaucracy really mean?

It means that NNSA is lying to itself, the public, and Congress. It means that any of the "accomplishments" mentioned may well be as objectively false as Triad's sustainability "accomplishments." This in turn means NNSA Administrator Jill Hruby, whom we believe to be highly competent and qualified, with the best will in the world, is being prevented from doing her job adequately, for the structural reasons once explained to now-President Biden. She is not sufficiently in charge.

Turning now to the "issues" NNSA identifies, we see some familiar themes:

• Triad "struggled with some production activities."
• There were "setbacks" in mission execution due to "a variety of upsets" leading to "challenges in maintaining an integrated and reliable cadence...impacting deliverables."
• The Surplus Plutonium Disposition mission appears to be significantly off-track, experiencing "difficulties executing small projects" and missing its oxide production target. This appears to continue the long-standing difficulties with this program, in which optimistic production targets have been repeatedly missed, as the Government Accountability Office noted in 2019. Importantly, this program is now to be housed in a brand-new multi-billion dollar nuclear facility, nominally to be located at LANL pending an analysis of alternatives currently in process ("NNSA proposes new plutonium processing facility at LANL," Aug 11, 2021). At LANL, failure can be lucrative.
  
• Triad experienced cyber/IT challenges in 2021.
  
• NNSA notes several instances where Triad has failed to maintain an adequate safety posture, particularly in its plutonium processing facility. There, a juxtaposition of construction, equipment installation, ongoing nuclear materials processing, research and stockpile surveillance, and production of sample warhead cores ("pits") are variously underway around the clock, contributing to a very challenging safety environment. 
• These "lapses in safety performance" didn't just affect workers but also "impacted" "[m]ission execution."
• As usual, operations have not been sufficiently "disciplined," contributing to these failures.
  
• Overall, Triad has "[s]truggled with the integration of multiple program activities and requirements to deliver products and deliverables on schedule, on budget, and within acceptance criteria."

What's important to realize is that these problems are occurring as Triad is attempting to ramp up a program of unprecedented scale and complexity, namely industrial pit production.

Pit production is the largest and most complex endeavor NNSA has ever attempted, and the most expensive warhead project since the end of the Cold War -- possibly, the most expensive ever. LANL's portion of the mission is expected to cost roughly six times what the Manhattan Project spent in New Mexico. It is by far the costliest project in the history of New Mexico.

Although today's evaluation, taken by itself, is far from providing a sufficient basis for any conclusion regarding the likelihood of success in pit production, we are increasingly confident this mission will fail at LANL.

We believe it is already clear to close observers that pit production at LANL will fail to meet the statutory requirement of producing 30 pits per year in 2026 and reliably continue production at that rate or higher.
There are just too many unresolved problems, some of which really can't be fixed, for LANL to produce pits reliably and in quantity.

Even a year ago, big projects necessary for pit production had published schedules that extended all the way through 2028 in one case, and through 2029 in another. Safety issues are increasing and may never be resolved. Waste handling issues are still an unsolved conundrum. Hiring is not going well. Transportation issues remain unresolved. Other issues could be mentioned.

By the time the current suite of difficult problems is fixed -- if that ever happens -- others will crop up. Pit production at LANL is dependent not on just one or two but nine key facilities, most of which are old, inadequate, or mismatched-to-mission. 

LANL is just a terrible place for an industrial plutonium mission and the new administration is in the process of finding that out.

Will NNSA admit these problems in congressional testimony this year? It's getting harder to cover them up.

Pit production at LANL has been driven by politics, not necessity -- and certainly not by good management or engineering, or budgetary prudence. All the money in the world will not solve the inherent problems of the LANL site, location, facilities, and institutional character. LANL has failed at this mission four times already. A fifth failure is underway.

***ENDS***