Todd Jacobson
NS&D Monitor
10/17/2014
The National Nuclear Security Administration plans to continue to increase the use of firm fixed-price contracting for non-major capital projects as one of the strategies to improve its project management, the agency said in a report to Congress last month obtained by NS&D Monitor. The Congressionally mandated report notes that NNSA has made progress in improving project management over the past three years, completing $725 million in projects approximately $50 million under budget. The progress has come on smaller projects, with multi-billion-dollar projects like the Uranium Processing Facility, Chemistry and Metallurgy Research Replacement-Nuclear Facility and Mixed Oxide Fuel Fabrication Facility suffering massive budget and schedule increases, and the agency acknowledged while it is “delivering results” that “we still have work to do.”
However, the report focuses on the progress the agency has made in strengthening project management under its Office of Acquisition and Project Management through new contract approaches, new policies and greater federal oversight. The approach has worked, the agency said, with new leadership on UPF, the Nuclear Materials Safeguards and Security Upgrade Project at Los Alamos, and the equipment installation project for Los Alamos Radiological Laboratory/Utility/Office Building helping to improve the performance of those projects. NMSSUP, in particular, was completed just under its $244.2 million rebaselined cost estimate, but only after the major problems pushed the cost of the project $41 million higher than expected. Those projects “represent the cultural change NNSA is striving towards,” the report says.
NNSA Says It ‘Doesn’t Always Get a Contractor’s Best People’
The NNSA also noted that it completed the Security Improvement Project at Y-12 $20 million under its original budget of $72 million and the Test Capabilities Revitalization Phase 2 project at Sandia National Laboratories $4 million under budget. “NNSA builds some of the toughest projects in the world and has the best contractors as partners; however, the agency doesn’t always get a contractor’s best people,” the agency said. “NNSA needs the contractors’ best talent from the start in planning, estimating, and overall project management. NNSA has been focused on aligning contract vehicles and incentives with taxpayer interests, and when the right teams have been put in place and the Federal Government and contractor partners have shared responsibility and accountability for project execution, projects have delivered on or under budget.”
Fixed-Price Contracting on the Rise
The greater utilization of fixed-price contracts has helped on non-major projects, the agency said. The strategy was used for 20 percent of the total project dollars for non-major capital projects in Fiscal Year 2014, up from 3 percent in FY 2010, the agency said. Technology and design maturation, “upfront and robust funding,” and top project management talent is essential to shore up performance on major projects, the agency said. “NNSA will achieve this by appropriately sharing risk, utilizing the following principles: competition, firm-fixed price contracts, and contracts that include all at-risk fee or provisional fee based on satisfactory completion of work,” the agency said.
The NNSA said cost reimbursable contracts like the management and operating contracts at its various sites “do not motivate contractors to bring their best talent to the job because the Government bears the majority of performance and cost risks.” Fixed-price contracts, by contrast, motivate contractors to be efficient. “Under a fixed-price contract, contractor delays and inefficiencies are the contractor’s risk; thus, the construction firms naturally assign their best talent to these contracts. The almost exclusive use of cost-reimbursable M&O contractors also limited the opportunity for the Government to seek best value contract solutions for capital asset projects and did little to encourage competition between delivery agents,” the agency said. “Additionally, overreliance on the agency’s Lab/Plant partners resulted in a loss of the Federal expertise needed to credibly manage the design and construction projects.
NNSA to Continue to Lean on Army Corps of Engineers
The NNSA also said it will continue to increase the reliance on the Army Corps of Engineers until it adequately strengthens its federal project management ranks. Currently, the agency relies on federal, Army Corps and contractor support staff—it said it brought on approximately 25 Army Corps full-time equivalent employees since 2010 to help projects at Y-12, Los Alamos, Savannah River, and Pantex—but it said it wanted to be “self-sufficient” in managing its capital projects by 2019. The Arms Corps is also managing several projects, including the $65 million High Explosives Pressing Facility being built at the Pantex Plant and the $17 million Bear Creek Road sub-project of the Uranium Processing Facility. “In project locations where appropriately qualified Federal NNSA personnel were lacking, NNSA utilized the USACE to supplement its capabilities,” the NNSA said.
As part of its effort to increase federal oversight, the NNSA noted that it is creating Project Management Offices for all projects over $750 million; the Uranium Project Office is headed up by Tim Driscoll, and the NNSA said it has grown from seven employees to 40 employees. The agency also utilized technical service contracts to “fill key skill sets in construction management, electrical distribution and instrumentation & control, project controls, and senior process engineers,” including the Enterprise Construction Management Services contract won by a Parsons-led team in 2012. “Having the right policies, principles, processes, and procedures/tools in place is a prerequisite to project success; however, nothing is more important than having the right project leaders and teams in place to execute project delivery,” the NNSA said.
