Consolidated Nuclear Security, the managing contractor at the Y-12 and Pantex nuclear weapons plant, is scrambling to get its funding accounts back in order after a series of events created what has been described as an “imbalance.”
Even though CNS is reportedly within its budget and meeting production goals for the National Nuclear Security Administration, the federal contractor’s ratio between its “direct-funded” activities – such as site security and work on nuclear weapons – and its “indirect-funded” or overhead operations is not what it’s supposed to be.
Overhead spending is about where planned or even exceeding projected levels in the current budget year, while the direct-funded work is well below cost projections, and that has commanded a high priority on the CNS to-do list for the rest of fiscal 2016.
The NNSA would not say whether the situation could have been avoided or if it intends to punish the contractor for the funding imbalance.
“NNSA is working with CNS to address this imbalance,” Steven Wyatt, a spokesman at the NNSA Production Office, said in an email response to questions. “We are confident this will be resolved over the course of this fiscal year.”
Wyatt declined further comment.
The overhead-funded work includes areas such as as procurement; human resources; finance; and environment, safety, and health.
CNS is reportedly doing a number of things to try to draw down overhead or indirect spending, including putting limits on travel between the Oak Ridge, Tenn., and Amarillo, Texas, sites. In a message to employees last week, CNS President and CEO Morgan Smith said it did not appear that layoffs would be necessary to meet the challenges. But he indicated the company would take a number of actions to bring spending back in balance with government plans and projections.
In response to questions, CNS communications director Jason Bohne issued this statement: “CNS is meeting its production goals and working well within its federal funding allotment. We are, however, experiencing an imbalance in our direct and indirect costs. This is primarily the result of the significant increase in hiring at both sites and the prolonged security clearance process. This is not expected to impact the current workforce numbers or our actions to hire the people we need to perform our growing mission work. It is an accounting issue we are working to resolve in coordination with NNSA.”
Bohne declined to give the specific dollar figures involved, and the preferred ratio of spending was not available.
“We are taking several actions to mitigate the imbalance, such as extending or putting on hold some indirect-funded projects, programs and activities; evaluating indirect contracts and procurements; and moving personnel from indirect-funded to direct-funded work where possible,” he said via email.
Smith, in his message to Y-12 and Pantex employees, said the significant hiring program in recent months had impacted the cost plans. Many of the newly hired employees are still waiting on their security clearances, and they reportedly can’t do production work or be charged to direct-funded accounts until they’ve been cleared.
In the statement, Smith said, “Since the clearance process is now taking much longer than originally anticipated and the problem will not be resolved anytime soon, this clearly impacts our situation.”
Bohne said it is currently taking an average of seven to 10 months to get a clearance approved. The company has said it plans to hire about 300 new employees over a three-month period.
Smith said recent efforts to accelerate some cleanup projects at the site have also affected the spending ratio because much of that work is funded from overhead accounts. “While this is positive and necessary, it also has an adverse impact from a ratio perspective,” according to the CEO.
The CNS chief said some direct-funded projects might be placed on hold, and personnel could be shifted from indirect- to direct-funded projects “where we have the right skills mix and work scope.”
Smith explained how some of the work may change moving forward:
“While we will continue to hire the people we need to perform our growing mission work, we are modifying how we on-board the majority of our future employees to lessen indirect charges. Our plan is to on-board new employees only after they have their clearances approved unless we can use them on productive work or they have unique skills that we need to on-board immediately. In this manner, we can focus on the direct work challenges we have ahead of us in the next few years while maintaining the proper balance between direct and indirect expenditures.”
