The Energy Department would not agree to increase the fees it plans to pay the next management and operations contractor for the Los Alamos National Laboratory (LANL), despite repeated complaints that they are too low to attract quality bidders.
The agency also confirmed this week that Bechtel, senior industry partner on the troubled LANL prime Los Alamos National Security (LANS), sent three representatives to one-on-one meetings with DOE officials in August to learn more about the next contract to run the storied New Mexico nuclear weapons lab. BWX Technologies and the University of California were represented as well, leaving AECOM the only partner on LANS not to attend.
The Energy Department’s semiautonomous National Nuclear Security Administration, which oversees Los Alamos, quashed any notion that it would raise the fees in a list of official answers to submitted questions about a draft solicitation for the M&O contract.
The draft solicitation for what is expected to be a 10-year deal, including options, capped fixed fees at 1 percent of estimated costs and proposed award fees at 0.5 percent of estimated costs. An anonymous questioner requested that the NNSA raise the allowable fixed fees to 1.5 percent and increase the award fee cap to 1 percent.
“Similar NNSA production sites have fees in the 4%-5% range,” the questioner wrote. “In short, the [draft request for proposals] is asking the winning bidder to perform at a higher level than has been demonstrated in recent history, for less than half the financial return.”
The argument did not prove persuasive. The NNSA said the fee limits in the draft solicitation were a response to a pair of congressionally chartered reports — one from 2015 on the effectiveness of the agency’s national labs, and another from 2014 that examined governing and management structures at the labs — both of which “emphasize[d] the public service model as opposed to fee being the main driver of performance.”
“Employing this model under the recent Sandia Labs competition still resulted in robust competition,” the NNSA wrote Wednesday.
This summer, the then-proposed and now-all-but-confirmed fee limits drew an outcry from the Los Alamos County government and the Regional Coalition of LANL Communities, both of which publicly called on DOE to revisit the caps.
The Sandia competition wrapped up last year when Honeywell’s wholly owned National Technology and Engineering Solutions of Sandia beat out teams led by Boeing and then-incumbent Lockheed Martin for a contract to manage and operate the lab through 2027. That includes options.
The National Nuclear Security Administration plans to solicit bids for the next LANL management pact late this month or early in October. The contract would include a five-year base and a five-year option period, if the period of performance included in the draft request for proposals makes it into the final solicitation.
In 2014, after a series of nuclear safety lapses, DOE decided not to pick up further options on the Los Alamos National Security’s management and operations contract awarded in 2006. The incumbent is led by longtime LANL manager the University of California, with senior industry partner Bechtel National and industry teammates AECOM and BWXT. The deal is worth about $2 billion a year and runs through Sept. 30, 2018.
The University of California and the University of Texas have already confirmed, or all but confirmed, that they will lead bids on the follow-on LANL contract. Both attended the August site visit for one-one-one briefings with DOE. The University of New Mexico, part of the Boeing-led runner up in the Sandia competition that wrapped up last year, has also confirmed interest in the contract, though it did not attend the August meeting at LANL.
The list of interested parties DOE released this week also shows Leidos, General Dynamics, and Huntington Ingalls Industries among the companies that attended the one-on-one meetings in August.
Meanwhile, the University of Texas this week took its first official step toward bidding on the management pact. The Austin-based university system’s Board of Regents approved $4.5 million in funding to prepare a bid package.
With DOE’s solicitation not yet on the street, no one is officially bidding on the deal, though practically speaking, the heavy lifting is already well underway.
All nine members of the UT System’s Board of Regents dialed in by telephone to the special meeting, held Monday in Austin and also webcast. Seven regents voted in favor of the funding, university spokeswoman Karen Adler said by email Tuesday.
Outgoing Board Chairman Paul Foster and Regent James Weaver attended the meeting but abstained from the vote, Adler said. Foster said during the meeting that he wished to avoid the appearance of a conflict of interest.
In an August meeting of the regents, Daniel David, UT deputy chancellor, said the university’s bid team needs the $4.5 million “to establish a secure bid preparation center, hire consultants who are experts in this type of bid, arrange for key personnel, think through and describe how we would execute the work, conduct considerable legal work, conduct due diligence, and conduct a myriad of other tasks.”
The University of Texas has not identified any potential bid partners. Neither has the University of California, though a member of the UC Board of Regents last week said the incumbent senior LANL management partner would seek a different set of industry partners from those who participate on LANS.
