Todd Jacobson
NS&D Monitor
3/27/2015
The National Nuclear Security Administration is already reaping the benefits of consolidating the management and operating contracts at the Y-12 and Pantex nuclear weapons plants, having already saved $80 million, NNSA Principal Deputy Administrator Madelyn Creedon said in a response to a Government Accountability Office report that raised questions about the cost of competing the two contracts. Creedon said in a letter that accompanied the report, released this week, that the savings have come from “award fee savings, approved benefits savings, and staff reengineering savings without having to conduct involuntary separations.”
In a cost-benefit analysis sent to Congress last year, the NNSA said it spent $3.3 million to compete the Y-12/Pantex contracts, for which new contractor Consolidated Nuclear Security has proposed $3.27 billion in cost savings. It said the cost effectiveness of the competition offset any employee morale issues that arose during the lengthy procurement, which included a pair of protests from incumbent Babcock & Wilcox. The GAO, however, criticized the NNSA for not including all competition costs, including more than $20 million in work by the new contractor during the four-month transition, and for not explaining “key assumptions and limitations, such as NNSA’s uncertainty about future costs over the life of the contract.” The GAO added: “Without describing all costs, key assumptions, and limitations, the report does not clearly and completely convey to Congress the costs of the contract competition or the factors that may affect these costs.”
Questions Raised About Cost Savings
The GAO also criticized the agency for not “clearly and completely” describing its analysis of the cost savings proposed by CNS, some of which were rejected by the agency. CNS is expected to propose new cost savings initiatives to replace the rejected cost savings proposals so that it can still meet its plan to generate $3.27 billion in savings over the 10-year life of the contract. “As a result, NNSA’s report does not convey that significant uncertainties exist with the contractor’s ability to fully meet its estimated cost savings,” the GAO said.
The GAO also took issue with the NNSA’s prediction that the consolidated contract would enhance mission performance, suggesting that the agency didn’t provide enough information in its report to back up that statement. “NNSA’s report does not specify what constitutes enhanced mission performance or how the consolidated contract will facilitate its stated benefits,” the GAO said. “Further, the report does not describe a key data limitation—that cited benefits will not be clear until NNSA finishes negotiating cost saving initiatives with the contractor. Without clear descriptions of the benefits and any limitations, NNSA’s report does not clearly and completely convey to Congress the agency’s expected benefits, how they will be achieved, or the associated uncertainties.”
