Stand-Down of Los Alamos National Laboratory:

Total Costs Uncertain; Almost All Mission-Critical Programs Were Affected but Have Recovered

GAO-06-83: Published: Nov 18, 2005. Publicly Released: Dec 19, 2005.

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On July 16, 2004, the director of the Los Alamos National Laboratory (LANL) declared a suspension, or stand-down, of laboratory operations to address safety and security concerns. LANL is one of three laboratories that conduct nuclear weapons research for the National Nuclear Security Administration (NNSA) within the Department of Energy (DOE). In deciding to stand down operations, LANL's director consulted with senior officials from NNSA and the University of California, the management and operating contractor for the laboratory. GAO was asked to assess (1) the extent to which LANL's and NNSA's estimates capture the total cost of the stand-down, (2) the effect of the stand-down on LANL's major research programs, and (3) whether there was a reasonable basis for NNSA's decisions regarding the reimbursement of stand-down costs to the University of California.

Neither LANL's $121 million estimate nor NNSA's $370 million estimate, which it considers an upper bound, accurately captures the total cost of the LANL stand-down. LANL did not establish separate stand-down activity codes to track the actual time spent on stand-down activities, such as safety reviews and training. As a result, neither NNSA nor GAO can calculate actual stand-down costs. LANL's estimate used a formula-based approach to estimate this time and did not include most administrative and other support costs associated with stand-down activities. While both LANL's and NNSA's estimates include labor and other direct costs, NNSA's estimate also includes the costs of administrative and other activities that supported stood-down activities. NNSA officials said that while their estimate fully covers stand-down activities, it overstates actual stand-down costs because it does not take into account the sequenced resumption of activities. As a result of the stand-down, many mission-critical programs had to extend key milestones. In particular, the stand-down affected LANL's Nuclear Weapons Program, including the refurbishment of three nuclear weapons to ensure their reliability, because many of these activities were stood down longer. While LANL's Nuclear Weapons Program has changed only one major delivery date, it assumed additional risk of achieving its other major delivery dates by reducing the time available for scientists to analyze test data and to make design changes or run additional tests if initial tests yield unexpected results. However, LANL has not substantially reduced the scope of any of its efforts because of the stand-down and almost all programs had recovered from stand-down delays by the end of fiscal year 2005, according to LANL and NNSA program managers. LANL program managers said that the results of tests performed to date have confirmed predictive models, and thus far have not indicated that nuclear weapons programs' schedules will bear additional risk. The basis for NNSA's determination that almost all of the stand-down costs were allowable appears to be reasonable because (1) NNSA's contract for LANL authorizes stand-downs to address serious safety and security concerns, (2) NNSA found that almost all stand-down costs were consistent with the allowability and safety provisions of the contract, (3) NNSA personnel were substantially involved in stand-down and restart activities, and (4) NNSA concluded that the duration of the stand-down was reasonable. However, NNSA has not fully ensured that LANL will be held accountable for safe and secure future operations. Specifically, recent DOE management and operating contracts have given contractors the opportunity to earn extra years to their contract terms, primarily by achieving an overall rating of outstanding performance. For the new LANL contract to be awarded in December 2005, however, the contractor could earn additional years to the contract term by achieving a lower performance score.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To improve DOE's oversight of its management and operating contractors, the Secretary of Energy should require that all contractors establish activity codes within their accounting systems so that the costs of any future stand-downs can be tracked on an actual cost basis.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: In March 2006, the National Nuclear Security Administration notified Los Alamos National Laboratory and its six other major contractor-operated facilities in writing that it expects, when program operations are stood down, that separate cost codes are established to track and report the actual direct and indirect costs.

    Recommendation: To improve DOE's oversight of its management and operating contractors, the Secretary of Energy should require that all contractors include associated support costs when reporting on stand-down costs.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: In March 2006, the National Nuclear Security Administration notified Los Alamos National Laboratory and its six other major contractor-operated facilities in writing that it expects, when program operations are stood down, that separate cost codes are established to track and report the actual direct and indirect costs.

    Recommendation: To improve management and operating contractors' accountability, the Secretary of Energy should require that contractors achieve an overall performance rating of outstanding to be eligible to earn extra years to their contract terms.

    Agency Affected: Department of Energy

    Status: Closed - Implemented

    Comments: NNSA has implemented a two-step process for making award fee and contract extension determinations. Each year the contractor will be evaluated against predetermined performance evaluation criteria for its award fee. If the contractor receives an award fee score that exceeds the predetermined award term threshold score, the contractor will be evaluated against additional criteria that apply only for award term. After review of the Award Fee documentation and Performance Evaluation Report, as well as the additional evaluation criteria, NNSA's Administrator will determine whether an additional year will be awarded to the contract. Specifically, NNSA graded the performance of the Los Alamos Nuclear Security (LANS) contractor in the 70 percent range for fiscal year 2007. This rating, in and of itself, would have precluded NNSA from considering whether LANS had earned a 1-year award term. However, under the contract, fiscal year 2008 is the first year that LANS is eligible to receive award term.

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