Todd Jacobson
NS&D Monitor
12/12/2014
The Congressional Advisory Panel on the Governance of the Nuclear Security Enterprise is recommending not only a major overhaul for the National Nuclear Security Administration, but a recasting of how weapons complex contractors are compensated. The 12-member panel this week released its long-awaited report, “A New Foundation for the Nuclear Enterprise,” revealing broad recommendations aimed at fixing what it called a “dysfunctional system” spoiled by “decades of neglect.”
The 186-page document is often scathing in its critique of the failings of the NNSA’s current governance structure, and the panel recommended that the Department of Energy reabsorb the semi-autonomous agency rather than calling for a shift toward more autonomy or a move to the Department of Defense. “The nuclear enterprise would be most effective in performing its missions if it were led by a knowledgeable, engaged Cabinet Secretary and if ownership of the mission were Department-wide,” said the panel, which was chaired by former Lockheed Martin CEO Norm Augustine and former Strategic Command chief Adm. Richard Mies.
More Autonomy Not the Answer, Panel Says
More autonomy for the NNSA would “only further isolate” the agency from senior level leadership, the panel said. As part of its recommendations, the panel called for a change to DOE’s name—to the Department of Energy and Nuclear Security—and a tenure of at least six years for the director of the Office of Nuclear Security, which is what the panel proposes calling the NNSA in its new spot in DOE. The panel also recommended strengthening the authority of the ONS director, giving the director the full authority to execute nuclear enterprise missions under policies established by the secretary, with mission-support staffs providing an advisory and assistance role to the director.
It also said that national security expertise should be a prerequisite for future leaders of the Department, and recommended that the Senate Armed Services Committee be given parallel authority of the secretary’s confirmation along with the Senate Energy and Natural Resources Committee. “It is recommended that Congress place the responsibility and accountability for the mission squarely on the shoulders of a qualified Secretary, supported by a strong enterprise Director with unquestioned authority to execute nuclear enterprise missions consistent with the Secretary’s policy direction,” the panel said.
If a move back to the Department of Energy doesn’t work, the panel said, an autonomous organization is the only choice left. “If for any reason the nation’s leadership is not prepared to require the Secretary to possess the qualifications demanded by the nuclear security mission, or to provide the Director the necessary mission execution authorities, then only one option remains: an autonomous organization to replace some or all of the functions of NNSA,” the panel said. “This is viewed by the panel as a clearly inferior choice.”
Panel Calls for Implementation Plan from Department Within Six Months
The panel emphasized that revamping governance of the weapons complex would be a challenge, and called on the Department to establish an implementation plan for its recommendations within six months. “The current senior leadership of the DOE has taken some important initial steps to rectify failings, but the enterprise as a whole continues to struggle to meet commitments and the underlying problems will not be fixed without major reform,” the panel said. “Given the fact that many of these problems are attributable to cultural shortcomings, the solution will not be easy and will inevitably transcend any one leadership team.”
Moniz Pledges to Address Panel’s Findings
Energy Secretary Ernest Moniz said he would work with NNSA Administrator Frank Klotz to address the issues raised in the report. “The panel’s report identifies ongoing leadership and cultural challenges confronting the Department and provides a wide-ranging list of recommendations, including that NNSA mission support functions be more integrated with those of the Department as a whole,” Moniz said in a statement. “As Secretary, with ongoing responsibilities as a steward of the DOE nuclear complex, I recognize these challenges as real and commit to working with NNSA Administrator Klotz, with Congress and with other stakeholders to address them in a comprehensive and forthright manner.”
Bechtel, which helps manage Los Alamos and Lawrence Livermore National Laboratories as well as the Y-12 National Security Complex and the Pantex Plant, welcomed the committee’s findings. “For us, mission execution and delivery remain first priority,” Bechtel spokesman Fred deSousa said. “A transformation that improves efficiency, welcomes best corporate practices, and embraces the [Federal Funded Research and Development Centers] model will bolster the mission.”
Move Away from Award Fee, Toward Extensions Recommended
The panel also said that award fees paid to management and operating contractors across the weapons complex have “diverted substantial energy and resources from mission execution” and it recommended award fees be replaced by “market-based” fixed fees that “fairly compensate” M&O contractors as well as award-term extensions to motivate strong performance. “The panel found that an unintended consequence of the award fee structure is that it contributes significantly to detailed, transactional oversight. It has contributed to the growth of a government bureaucracy responsible to track fee. This, in turn, has induced the M&O organizations to grow a corresponding bureaucracy to provide the assessments that justify their award fees,” the panel said.
Fixed fees should be determined by the risk exposure of parent organizations, the value of the parent organization’s investments in the nuclear enterprise, and the size and complexity of the contracting activity, the panel said. Determinations on award terms should be made based on mission performance, according to the panel. “The primary basis for the decision on contract extension should be mission performance, except in the case of extraordinary failures in supporting areas. Extension of the contract period of performance should be the foundational element of evaluation and, in turn, successful performance,” the panel said. “Award terms should be for multiple years to encourage continuity and high performance.”
Recent NNSA Move to Strategic Performance Evaluation Plans Not Enough
The panel applauded the recent shift to strategic Performance Evaluation Plans, where broad evaluation areas are considered when fee decisions are being made, but it said that approach still creates a “fee-driven, compliance” culture. While extensions provide a motivator for performance, the potential for termination of a contract, or a decision not to extend, provide a “powerful lever to punish poor performance,” the panel said. “It has been observed that at the Kansas City Plant’s reform efforts were driven importantly by the fear that the long-term future of the contract was at risk, and continuation required major cost savings.”
Suggestions by former acting NNSA Administrator Bruce Held earlier this year that the agency wanted to move toward a “public interest” contracting model were met by skepticism from the committee. It called the idea “inappropriately pejorative,” and said, “Although the details of this model have yet to be unveiled, the panel firmly believes that turning back the clock to the modern equivalent of the $1 per year public service arrangement of the Manhattan Project is neither practicable nor advisable.”
Contract provisions also should be standardized across the complex, the panel said, noting that security should be a responsibility of the management and operating contract to “avoid bureaucratic seams” like what occurred during the 2012 break-in at the Y-12 National Security Complex. “Standardization could also create greater equality in fixed fee, to avoid existing disparities such as seem to exist between the LANL/LLNL and Sandia contracts,” the panel said.
Panel Zeroes in on Oversight Methods
The panel also called on the secretary and director to reduce the number of audits, inspections and formal data calls that occur across the complex, noting that “regulation of the DOE nuclear security enterprise has over time become increasingly beleaguered with competing authorities, conflicting guidance, and costly but often ineffective oversight.” A zero-based review should be conducted to determine the value of various oversight activities, with a focus on minimizing the disruptions to operations. “The focus of internal reviews should shift toward mission success as opposed to compliance,” the panel said.
Eschewing transactional oversight, the nuclear security enterprise should also embrace other mechanisms for performing oversight, including parent organization practices, modern industry standards and using external experts for accreditation or certification. That includes the best practices of the Kansas City Plant oversight model, the panel said. First, insist on strong corporate cultures of the parent M&Os as the basis for achieving safe, secure operations,” the panel said. “Second, employ industry standards for non-nuclear operations, with exceptions applied only under extraordinary circumstances (such as processing beryllium). Third, transition to an alternative oversight model based on performance-based standards, rigorous accreditation/certification, and observed performance.”
Right-Sizing of Federal Staff Called For
With the potential for consolidating parallel headquarters organizations, federal staffing levels should also be “right-sized,” the panel suggested, calling for reviews of the size of the workforce across the complex as well as the value of the Department’s Germantown, Md., and Albuquerque, N.M., satellite offices. “Considerable cost savings should be realizable from this review and resultant restructuring,” the panel said. However, the panel said key synchronizing functions that had been conducted by the former Albuquerque Operations Office are needed, and it called for the creation of a clear line-management operating structure that “both synchronizes activities across programs, mission-support functions, and operating sites and provides leadership focus for key programs.”
The panel also said the secretary and director should strengthen the Department’s ability to develop independent cost and resource analysis capabilities, broadening the scope of the Office of Acquisition and Project Management to include warhead life extension programs as well as major capital construction projects. Construction management should also be beefed up through the introduction of disciplined management practices, the panel said.
