National Nuclear Security Administration Contracting: Review of the NNSA Report on the Nevada National Security Site Contract Competition

What GAO Found

National Nuclear Security Administration (NNSA) officials told us that they sought two major changes in competing the Nevada National Security Site (Nevada Site) management and operating (M&O) contract: lower costs to the government, including management fees, and better contractor performance driven by new contract terms and conditions.

Specifically, GAO identified that NNSA sought to achieve cost savings and improved contractor performance by including contract clauses that change how (1) fees are awarded to the contractor; (2) contractors' indirect cost rates are calculated; (3) new or revised contractor employee benefit plans are approved; (4) construction projects are managed and accounted for separately from the M&O contract; and (5) more descriptive, specific, and performance-based requirements in the statements of work are used to support management and the oversight of the contractor performance. For example, clauses in the new Nevada Site M&O contract reduce the available award fee to 4.4 percent of the contract value, down from 7 percent under the prior contract. NNSA estimates this will save $112 million over a 10-year contract term in comparison to the costs of extending the prior contract over this same period.

Under the National Defense Authorization Act for Fiscal Year 2013, as amended (Act), NNSA is required to submit a cost benefit analysis to the Congressional defense committees following the award of a new M&O contract. NNSA's report addressed one of five required reporting elements pertaining to costs, benefits, and delays or disruptions with detail but addressed the other four elements without detail. The required reporting elements related to the contract competition are (1) expected cost savings, (2) key limitations and uncertainties that could affect the cost savings, (3) costs of the competition and increased costs over the life of the contract, (4) disruptions or delays, and (5) other expected benefits. Table 1 summarizes the extent to which NNSA addressed each element.

Table 1: Summary Assessment of the Extent to Which NNSA’s Cost-Benefit Report for Competing the Management and Operating Contract for the Nevada National Security Site Addressed Required Reporting Elements

Source: GAO analysis of the National Nuclear Security Administration’s (NNSA) Cost-Benefit Analysis for Competition of Management and Operating Contracts for the Nevada National Security Site | GAO-19-349R

In addition, NNSA's report addressed one of two required elements on its decisions to compete the contract and the activities that should be covered under the M&O contract. NNSA found that all the considerations listed in the FAR for replacing an incumbent contractor for the use of an M&O contract applied and were met with respect to the operation of the Nevada Site. However, the NNSA report did not discuss an evaluation of which activities at the Nevada Site, if any, could be covered under a contract other than the M&O contract. 

Why GAO Did This Study

NNSA is responsible for the management of the nation's nuclear weapons programs, among other missions. NNSA relies heavily on contractors and M&O contracts. One of the facilities managed under an M&O contract is the Nevada Site. NNSA accepted proposals for a new Nevada Site M&O contract in November and December 2015; the contract was awarded in May 2017.

The Act requires NNSA to submit a cost-benefit report addressing a range of issues to the congressional defense committees after an award of a new M&O contract and to provide a detailed description of the analyses it conducted on each issue to reach its conclusion. The Act includes a provision for GAO to review each NNSA report. This report addresses (1) changes, if any, NNSA sought under the new Nevada Site contract, and how those changes are reflected in the new contract; (2) the extent to which NNSA's report addresses required reporting elements with respect to costs and benefits and potential disruptions or delays related to the competition; and (3) the extent to which NNSA's report addresses two required reporting elements pertaining to its decision to extend or compete the contract and the scope of activities to be covered under the M&O contract. To address these objectives GAO reviewed DOE documents and interviewed NNSA officials involved in preparing the cost-benefit report, among other things.