DOE Error Causes Contracting Redo

Losing bidders will get a second chance to win a $23 billion contract with the National Nuclear Security Administration (NNSA) for consolidation of maintenance and operations (M&O) at the Y-12 and Pantex nuclear facilities. The Government Accountability Office (GAO) recently sustained a bid protest on the grounds that the NNSA “failed to make meaningful assessments” of the proposed cost savings of any of the bids submitted. This decision highlights the inability of the agency to deal with the problem of skyrocketing costs (not to mention poor security) that has been endemic to these facilities that house the majority of the U.S. nuclear arsenal.

According to the GAO decision, NNSA stated that one of the primary goals of the contract is to “realize cost savings[,]” and the solicitation required that each bidder “propose identifiable cost savings” associated with their performance. The decision notes that an assessment of the proposed cost savings was one of the most important evaluation factors when awarding the M&O contract.

Despite the emphasis on cost savings in the solicitation, NNSA disregarded an evaluation of the size and feasibility of each bidder’s proposed cost savings performed by the agency’s cost savings advisory committee (CSAC). The CSAC and the source evaluation board (SEB) both rated the feasibility of proposed cost savings of each bid; the CSAC categorized the feasibility as either “reasonable,” “partially reasonable,” “not reasonable,” or “cannot determine,” while the SEB rated each proposal “excellent,” “good,” or “satisfactory.” The proposals did not receive the same ratings on the cost savings evaluation factor.

However, the source selection authority (SSA), without conducting any independent analysis, “considered all of the cost savings proposed by every offeror to be feasible – including cost savings that have been categorized [by CSAC] as ‘not reasonable.’” GAO found the SSA’s presumption that all proposed cost savings were feasible both inadequate and unreasonable.

The NNSA confirmed to the Washington Business Journal that it will reopen bidding on the contract, as the GAO recommends. A spokesperson for Consolidated Nuclear Security, LLC, the company that originally won the contract, told local news outlet Oak Ridge Today the $3.27 billion in proposed savings was credible, and “additional information [provided by the company to NNSA] will only go to reinforce that.”

Because the Department of Energy, NNSA’s parent agency, spends approximately 90 percent of its budget on contractors and capital improvement projects, it is troubling to see the NNSA failing to properly evaluate contractor bids. Y-12 has had problems with its contractors in the past, most recently firing WSI Oak Ridge, the security contractor, after an embarrassing series of security failures allowed three protestors to walk into the facility virtually unnoticed.

Furthermore, the GAO has determined that contract management of major NNSA programs is a high-risk area, finding several serious safety, security, and management problems. It is clear that the process of choosing these contractors as well as their daily operations requires careful federal oversight to avoid the needless waste of taxpayer dollars.