Brian Bradley
NS&D Monitor
5/22/2015
The National Nuclear Security Administration this month submitted to Congress its response to a set of recommendations laid out by the Congressional Advisory Panel on the Governance of the Nuclear Security Enterprise. While NNSA agreed with much of the language and reforms outlined in the panel’s report, “A New Foundation for the Nuclear Enterprise,” it rejected a call to replace the existing award fee structure with a fixed-fee structure that would link incentives for maintenance and operations contracts to periods of performance. The 162-page panel report’s 19 main recommendations are aimed at repairing “inefficient and ineffective” NNSA problems that have festered over “decades of neglect.”
No ‘One Size Fits All’
Rather than conform to the panel’s recommendation to drive strong M&O performance through a fixed-fee model, NNSA still supports a tailored incentive approach, which would alternate between fixed and incentive fees depending on each unique mission. “NNSA must balance the incentives for the individual M&O partner against the need to optimize the incentives for enterprise success,” the agency said in its response. NNSA said it would apply uniformity wherever practical, but noted that even its three labs differ from one another. “NNSA will seek standardization in contract structure to the greatest extent practicable, while recognizing that one size does not fit all in the NNSA enterprise,” the agency said.
While NNSA also stopped short of endorsing the panel’s recommendation to convert existing contracts to fixed-fee arrangements, the organization stated its policy office would “look at” the incentive and management structures for M&O contractors at production facilities, labs and the Nevada National Security Site, adjusting terms where appropriate. “Change of this magnitude will take time, and the results of such change are not going to be immediately measureable,” the response states. “NNSA will remain dedicated to assessing, discussing, implementing and fine-tuning incentives tailored for each M&O contract.”
Award Fee Justification
NNSA largely justified its current award fee structure by contending that today’s award-based contracting structures naturally stem from a shift of the risk burden from government to the private sector after a precursor, the Atomic Energy Commission (AEC), assumed all programmatic risk and paid extremely low fees to M&Os. “Specific incidents” and changing views, “particularly with respect to transparency and accountability,” put risk with contractors, requiring more compensation, NNSA claims. “Achieving increased accountability and visibility for all aspects of performance including programmatic, cost, financial, security, and environmental management has indeed reduced the flexibility in many areas of the complex,” the response states. “On the other hand, returning to the attitudes and tolerance levels that existed in the early days of the AEC are neither practical nor possible.” The response also acknowledges that maintaining trustful partnerships while striking the right balance of incentive, competition and compensation “has and will continue to be a challenge.”
Audit Bureaucracy
Chaired by former Lockheed Martin CEO Norm Augustine and former U.S. Strategic Command chief Adm. Richard Mies, the panel report also found that the NNSA fee structure contributes to a bulky government fee evaluation bureaucracy, which in turn spawned a corresponding contractor bureaucracy to justify fee assessments. While agreeing with the panel that consolidating the audit process would enhance enterprise operations, NNSA highlighted existing mechanisms, including the Enterprise Assessment Office which manages safety and security assessments, the Site Integrated Assessment Planning process established “to de-conflict and eliminate duplicative assessments,” and the Contractor Assurance System.
NNSA stated that it plans to work to identify management practices that would help restore a Federally Funded Research Development Center (FFRDC) model. Steadily eroding, and sometimes adversarial, contractor-government relationships have “seriously impaired” the FFRDC model whereby labs play a supplementary role, offering mission advice to the government, the panel found. “[T]he trusted FFRDC special relationship has increasingly been replaced by one whereby the laboratories are perceived as profit-motivated contractors to be held at arm’s-length, rather than as trusted agents,” the panel report stated. “The Laboratory Directors have expressed their concern that the enterprise lacks an effective forum for strategic dialogue between NNSA leadership and their labs.”
‘DoD Is Not Our Customer’
In an attached letter to NNSA’s response, Energy Secretary Ernest Moniz sought to counter the panel report’s reappearing reference to the Defense Department as a customer of DOE. Moniz describes that stated notion as being “a root of some tension.” “The two agencies have synergistic responsibilities for supporting our country’s nuclear defense posture and the President and Congress ultimately have responsibility for allocating resources and maintaining our national security,” Moniz wrote.
Moniz also highlighted DOE’s mission as broader than deterrence, emphasizing nonproliferation, naval propulsion, intelligence and environmental cleanup. “None of this excuses either DoD or DOE from carrying out its responsibilities in the most cost effective fashion, but the framework for discussion should be optimization of our national security needs among several agencies with complementary capabilities,” Moniz wrote. “DoD is not our customer, and we are not a vendor; together we bear the serious responsibility to deliver a safe, secure and effective deterrent for the American people.”
More Communication Planned With Congress
Moniz also “emphatically” concurred with the panel’s recommendations that NNSA not become more autonomous—as that would “further isolate” the enterprise from Cabinet Secretary leadership—and that the organization increase its communication on Capitol Hill. Moniz’s letter cites a need to strengthen the communication by him, Deputy Energy Secretary Elizabeth Sherwood-Randall, and NNSA Administrator Frank Klotz with Congress, including briefing relevant leaders on progress in implementing the panel’s recommendations and on progress and challenges in mission execution “over short, intermediate and long time frames.”
