March 17, 2014

DOE IG CRITICIZES LIVERMORE SUBCONTRACT MANAGEMENT

By ExchangeMonitor

In another report criticizing National Nuclear Security Administration contractors for poor contract management, the Department of Energy Inspector General raised questions yesterday about how Lawrence Livermore National Laboratory handles its time and materials subcontracts. The IG said that the lab did not fully justify six of seven time and materials subcontracts that it reviewed, potentially wasting hundreds of thousands of dollars on contracts that were not “in the best interest of NNSA.” In one instance, the IG said the lab did not perform market research or an adequate price analysis for a $2.7 million sole-source subcontract award for an unspecified chief of staff position. The IG suggested the lab could have saved $533,423 by hiring the chief of staff as an employee rather than as a subcontractor. “In our view, due to the lack of competition and a sufficient price analysis, Livermore may have paid rates that were not in the best interest of NNSA,” the IG said.

The IG also said that the lab did not perform an adequate price analysis on a National Ignition Facility construction subcontract, allowing a subcontractor to charge rates that were 25 to 34 percent more than comparable rates during Fiscal Year 2011. The IG said the subcontractor eventually lowered its rates by about 14 percent after a challenge by the lab, but the IG said the lab could have saved about $390,739 if it had initially performed a more thorough price analysis. Livermore also has no incentives its Performance Evaluation Plan or its Contractor Assurance System to drive improvements in its rate of competitively awarded time and materials subcontracts, the IG noted. It said that adding incentives “could help Livermore achieve a better value for services obtained on behalf of NNSA.”

In response to the IG’s recommendations that Livermore strengthen its management of subcontracts, the NNSA said it would review the issues raised by the IG by June 30, 2014. It also said it would evaluate by Oct. 1, 2013 whether to introduce contract incentives to spur the lab to reduce the rate of non-competitive time and materials subcontracts. In a statement, Livermore spokeswoman Lynda Seaver said the lab believed it “made the best possible decision using information made available at the time these subcontracts were awarded and administered.” She said the lab would work with the NNSA to implement any new guidance and corrective actions.

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