As House and Senate lawmakers this week debate whether to tighten congressional scrutiny of the National Nuclear Security Administration’s (NNSA) weapons production contract, the agency is pressing ahead on all cylinders with the deal, which was extended for two years just this spring.
The Senate’s 2019 National Defense Authorization Act, passed in June, mandates that the Government Accountability Office examine how much money the NNSA has saved by combining management of the Pantex Plant and Y-12 National Security Complex into a single contract held by the Bechtel-led Consolidated National Security (CNS). Since 2014, the government has spent about $10 billion on this contract.
The House’s 2019 National Defense Authorization Act did not call for investigating CNS’ contract. The two chambers began a bicameral conference Wednesday aimed at producing a compromise bill for President Donald Trump to sign. Negotiations were ongoing at deadline Friday for Nuclear Security & Deterrence Monitor. Sen. James Inhofe (R-Okla.), acting chair of the Senate Armed Services Committee, said Wednesday he hoped to wrap up negotiations by July 27.
Months before debate on the bill started, the agency on March 29 quietly picked up a two-year option to keep CNS on the job through June 30, 2021. That occurred about a year before the contract’s five-year base period expired. Consolidated Nuclear Security could earn up to roughly $110 million in fees over the two-year option period, according to the contract.
The total possible fee-take for the option covers roughly $80 million in performance incentive fees and nearly $30 million in cost-savings incentive fees, which the contractor earns if it saves the government a certain amount of money in each year of the option period.
About a week before the NNSA tapped CNS for two more years, the agency gave the company a green light to start building the bulk of the Uranium Production Facility at Y-12 under a subcontract to Bechtel. The next-generation uranium plant should be built at a cost of $6.5 billion by the end of 2025, the agency has said: more than a year after the final option on CNS’ prime contract is scheduled to expire.
Including two more options in addition to the one just exercised, the CNS prime contract would run through March 31, 2024.
The NNSA thought combining the previously separate Y-12 and Pantex contracts would eliminate redundancies such as financial reporting and administration, saving the government hundreds of millions of dollars over the life of the contract. The agency has not disclosed how much money CNS has saved the government in the base period of the contract.
The company was eligible for more than $90 million in cost savings incentive fees in the base period. However, the NNSA awards these fees one year at a time and has so far only tabulated awards for the first two years of the contract’s five-year base.
In the first two years of the base, CNS earned only about 60 percent of the available cost savings incentive fees: roughly $37 million of a possible $64 million. In the first year of the contract, CNS earned about $18.5 million of a possible $21 million, or roughly 85 percent of the total available. The company fared worse in the second year of the base, earning about $18 million in cost savings incentive fees, or a little more than 40 percent of the available $42 million or so.
