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Policy Letter

POGO Letter to DOE Secretary Abraham concerning Los Alamos contract

Secretary Spencer Abraham

Department of Energy

1000 Independence Avenue, SW

Washington, DC 20585

Via Facsimile: (202) 586-4403

Dear Secretary Abraham,

I was saddened to hear of your decision to resign from your post at the Department of Energy (DOE). It has been a privilege to work with you to raise security standards in the nuclear weapons complex to their appropriate level. We can only hope that your successor will now work to implement your visionary initiatives. You can be assured that we will continue to watchdog the Department.

Before you leave, though, I would like to raise the issue of accountability with you concerning the shut down of Los Alamos Nuclear Laboratory. On July 16, the University of California, which has the contract to manage the lab, shut down operations at Los Alamos because of security and safety problems. The events leading up to the shut-down were only the latest stunning examples of the University's pattern of negligence and poor management.

I understand that since the stand down last summer, the DOE has paid the University of California well over $500 million for work that has not been performed under the Los Alamos contract. This amount will continue to rise given that nuclear and major hazardous operations are not even scheduled to begin until some time in December.

Furthermore, while DOE must reimburse the University for all allowable costs under the contract, given the shut-down, it would naturally follow that allowable costs should be kept to a minimum. Did DOE make it clear to the University that they should keep these costs to an absolute minimum? Has DOE audited the submitted costs to make sure they are allowable and reasonable? In the long term, I hope that the next contract will have provisions that limit the government's cost exposure if the lab is shut down again because of management failures.

It is also reasonable to assume that the University will not receive the $8 million performance award fee for FY 2004 from DOE, particularly in light of the half billion dollar loss to the taxpayer. It is our understanding that the contract requires the University to meet a series of milestones in order to receive this award fee. No milestones met, ergo no award fee.

Similarly, we hope that DOE is not planning to give Los Alamos another "excellent" rating as it did after the Los Alamos hard drives containing secret nuclear weapons design information were discovered behind a Xerox machine in 2000 (without any fingerprints or palm prints on them) or in the aftermath of the FY 2003 financial fraud scandal, when a senior lab employee went to jail. These past ratings cast a dark shadow of doubt over DOE's credibility as the overseer of the Los Alamos contract. We have, however, seen some significant improvement in oversight by DOE's Los Alamos Site Office, including their monitoring of the deinventorying of weapons-usable materials from TA-18.

The sad truth is that DOE has not established adequate provisions to deter major management failures by the University of California. Putting the contract up for bid was a strong step in the right direction. However, under the current contract, the University is not penalized at all for security violations, and because it's a non-profit does not have to pay penalties for safety or environmental violations, as for-profit contractors do. As a result, the University has avoided paying the millions of dollars in penalties leveled against it, no matter how dangerous the infractions. Without economic incentives to run a safe and secure facility, the University's record has been troubling. In 2004 alone, there were 45 major nuclear safety violations. Among the worst were a hydrogen build up in the SHEBA burst reactor at TA-18 that almost exploded, nearly sending radioactive material off site; and hoses coming loose in glove boxes at TA-55 and contaminating workers with plutonium. As a deterrent against shoddy security and safety, non-profits should be required to pay fines just as for-profit entities do.

While considering how to better protect the taxpayers' interest, DOE should review the exorbitant salaries paid to the University officials operating Los Alamos. While the amount the taxpayers are charged for the top five salaries are capped, the mid-level management salaries are not. I was astounded to learn the level of these salaries, which don't even account for bonuses or benefits, especially in light of the University's dismal performance. The Lab director makes about $348,000; the two deputy directors average $250,000 each; the eight associate directors average $240,000 each; the 13 deputy associate directors average about $183,000 each; and the 29 division leaders average $186,000 each; eight senior fellows average $191,000 each. Even the former lab director, John Browne, who was removed in disgrace in the middle of the financial fraud debacle, still makes $231,625 annually as "lab associate staff." And Sig Hecker, another former director, continues to make $230,000, as "senior fellow." This means there are nearly 60 people at Los Alamos getting higher salaries than federal cabinet secretaries who make roughly $175,000.

DOE could take a cue from the Pentagon in how to deal with Los Alamos. POGO has learned that during the shut-down Los Alamos tried to charge a Pentagon client for work not completed, but the Pentagon refused to pay. They informed Los Alamos officials that if they tried to pursue the payments, the Pentagon would cancel the contract and take its work elsewhere.

I know you share our goal of accountability. In your twilight as secretary, I hope you will move to anchor your legacy of improving security in the nuclear weapons complex by instituting new measures that will reverse the current trend of unaccountability.

I wish the best to you in your new career.


Danielle Brian

Executive Director